Tonga Development Bank v Pasili [2004] TOSC 27; C 1024 1999 (7 June 2004)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU’ALOFA REGISTRY

NO. C.1024/1999

BETWEEN:

TONGA DEVELOPMENT BANK
Plaintiff

AND:

1. MAILE PASILI
2. MELE PASILI
Defendants

Counsel: Mrs Vaihu for judgment creditor
Mr. Piukala for judgment debtor

Date of Hearing: 17 May 2004.
Date of Judgment: 7 June 2004.

JUDGMENT

In September 1999, the judgment creditor filed a claim for repayment of a bank loan taken out by the judgment debtor in April 1998. No defence was filed and so judgment in default was obtained on 28 August 2000 in the sum of $34,425.44 and interest as specified in the agreement of 11.5% from 16 September 1999.

A number of attempts to hold an oral examination of the judgment debtor were unsuccessful mainly because he was abroad. Eventually it was listed for 26 May 2003 in Vava’u.

On that day, counsel for the judgment creditor advised the Court that the parties had reached agreement and filed a document headed ‘Memorandum of Judgment by Consent’ dated 21 May 2003 and signed for the plaintiff and by the judgment debtor. I set it out in full:

"TAKE NOTICE that the parties to the above stated action (plaintiff and first defendant) hereby agree to settle the debt in this case and subject of the Oral Examination application to be heard on the 26th day of May, 2003 during the Vava’u Circuit by the supreme court and jointly request this Honourable Court to enter judgment by consent upon the following terms -

The debt in this case as of the 30/4/2003 is $40,034.76 together with interest thereon at the rate of 8% p.a. from the 30/4/2003 until paid.

The first defendant undertakes to the Court that he will pay off the debt in paragraph 1 hereof as follows -

$2,000.00 between the 30th day of September 2003 and the 31st day of December 2003.

$10,000.00 per annum to be paid on or before the last day of each quarter month in the sum of $2,500.00 until the debt plus interest, bank charges and costs is fully paid. The first of such payment to be made on or before the last day of March quarter in the year 2004.

In default of any one of the above payments the plaintiff shall be delivered by the first defendant all items pledged by him as security to the loan agreement and already ordered by the Court Judgment dated the 28th day of August, 2000.

Costs in favour of the plaintiff in the sum of $300.00.

The fist defendant will be liable for contempt of court should he fail to make the payments he is undertaking to make on this matter."

No payment was made and so the judgment creditor applied to the Court for committal. At that time the judgment debtor was in default of the payment in paragraph 2 (i). By the time the case was heard in Vava’u, he was further in default because the first of the payments in paragraph 2 (ii) was also unpaid.

The legal officer of the bank gave evidence that he and the judgment debtor met in Nuku’alofa on 20 May 2003 shortly before the examination was to be heard. The judgment debtor suggested he be given four years to pay the debt and that was not accepted by the bank. Equally the bank’s counter proposal that he pay it off by quarter payments of $10,000.00 was not possible for the debtor. It was suggested he should make a first payment of $2,000.00 and then pay the rest by instalments. Finally it was agreed at the debtor’s request that the payment should be made as stated in the agreement.

Once agreement was reached, he was asked to return the next day to give time for a written agreement to be drawn up for signature by the parties. On the 21 May 2003 he came and the document was signed. Counsel for the bank then went to Vava’u and filed the agreement in court on the day set for the oral examination.

The judgment debtor also gave evidence in the contempt hearing. He admitted he attended the meeting in the bank offices at Nuku’alofa but denied the agreement had been with the officer who gave evidence. He said he discussed it with another officer although the officer who gave evidence was present. He also agreed that he returned the next day and signed the agreement.

However, he insists that the agreement reached on 20 May was simply that he would repay the total sum in four years and, if he failed to pay them, the bank would apply for a writ of distress. He was, he said, told nothing about contempt of court or of the terms which later appeared in the written document. The next day he attended the bank and was simply told to sign. Although he told the court he had retired as a senior police officer having served for 32 years in the force and could read English very well, he did not read the document neither did he notice that the contents were different from the agreement reached the previous day.

His counsel, in his final submissions, alleged bluntly that the bank had acted fraudulently in the manner in which it drew up this document and then induced the debtor to sign. That was never put to the bank witness but I accept that must be the basis of the bank’s actions if the judgment debtor’s evidence is correct.

Regrettably, bearing in mind the judgment debtor’s previous occupation, I have no doubt whatsoever that he had lied in his account of the meeting and the signing of this document. I do not believe his account that the bank agreed to give a further four years and talked of a writ of distress as the remedy if, after that time, there was further default. Neither do I believe that a man in the position of the debtor with his background would have signed a document without realizing it was totally different from the agreement of which it was meant to be a record.

However careless he was, however he trusted the bank to act professionally as he told the court was the case, he could not have failed to notice the contents of the agreement included a series of figures and dates. As his account is that it was simply to agree to leave the debt for another four years, those would have undoubtedly alerted him to the fraud being carried out against him.

The truth, I am satisfied beyond doubt, is that the agreement was accurately recorded in that document and when the judgment debtor signed it on 21 May 2003 he knew perfectly well what he was signing.

Counsel for the judgment debtor did not raise any challenge to the right of the Court to commit for contempt in case such as this. The Debtors Act 1869 (which applied as a statute of general application at the time of this agreement) was enacted to prevent the imprisonment for debt with a number of exceptions. However, I do not consider this is such a case. There has been judgment against the judgment debtor and the order to pay that debt does not fall within the exceptions to the Debtors Act and cannot be enforced by committal. In this case, the parties have returned to court with an agreement to pay in a certain manner. Their request was that the agreement should be registered in the court as an undertaking by the debtor to repay in the manner agreed. His failure to abide by the terms of that agreement amount to a failure to obey an order of the Court and is covered by Order 26 rule 3 of the Supreme Court Rules under which a failure to do an act ordered by the Court within the time specified is contempt punishable by an order of committal.

Rule 3 (2) (i) of that Order requires personal service of the Order on the person to whom it is directed in sufficient time to allow him to comply with it and endorsement with a notice that he may be liable to committal or other executive if he disobeys.

Counsel for the judgment debtor complained that he had asked for and received from the Bank’s lawyer a copy of the Order by facsimile and the second page did not come through. The form of the Order is such that it should have been clear to any lawyer who received it that it was incomplete. Mr. Piukala made no request for the document to be sent again. Had that been the only objection, I would have no hesitation is rejecting it.

The point the Court might have expected counsel to raise was the fact that O26 r 3 (2) requires personal service on the person to whom the order is directed. There is no evidence before the court of service and counsel for the judgment creditor candidly admits there was no such service. She explained that it had not been considered necessary because the judgment debtor knew of the contents including the reference to contempt and it had been explained to him at the time the agreement was reached.

Failure to effect personal service is fatal to the application for committal unless it is saved by rule 3 (3) (ii):

"(ii) Subparagraph (i) shall not apply if the court is satisfied that the person against whom it is sought to enforce the judgment or order is aware of it by reason of his presence when it was made, or otherwise."

The judgment debtor was not present when the Order was made on 26 May 2003 because he had remained in Tongatapu when counsel for the bank attended on the date set for the oral examination. The failure of the debtor to attend for his examination would normally result in the issue of a warrant but counsel for the bank explained about the meeting a few days before and its result when she filed the Memorandum.

I am satisfied beyond any doubt on the evidence I have heard that the judgment debtor was fully aware of the terms of the agreement and understood the reference to and significance of contempt. I accept the evidence of the bank witness that it was clearly explained to him at the meeting when agreement was reached and I have no doubt that he also fully understood from his background in the police force.

When the application for committal was filed on 26 February 2004, the court ordered that notice should be served on the judgment debtor to show cause on 3 May 2004. I have no doubt the judgment debtor knew the reason for that notice because I am satisfied beyond any doubt that he knew the terms of the Order and that he had failed comply in any manner.

The contempt is proved and I order that the accused shall be committed to prison for six weeks but that order shall be suspended on the condition that the judgment debtor pays the sum of $2,000 which fell due for payment by the 31 December 2003 within one month of this order i.e. by 7 July 2004.

Although, by the time of the court hearing, there was unchallenged evidence of failure to pay the sum due by the end of March 2004, that sum had not fallen due for payment at the time the application for committal was filed. No application was made to include the second sum and so the order of the court is limited as stated above. However, it should be noted that this order of committal and suspension does not interfere with or alter the obligation under the order of 26 May 2006 to pay that sum or, as it will also have fallen due by the time stated in this order, the payment due at the end of June 2004.

NUKU’ALOFA: 7 June, 2004.

CHIEF JUSTICE