Australia and New Zealand Banking Group Ltd v Moala [2013] TOSC 10; CV273 of 2009 (9 July 2013)

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

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
PLAINTIFF

AND:

1. PAEA MOALA
2. PULI TUITA
DEFENDANTS

BEFORE THE HON. JUSTICE CATO
Mrs. Tupou for the plaintiff
Mr. Niu for the defendants

JUDGMENT

[1] The plaintiff sought the sum of $72, 759.50 plus 16% interest from the 31st October, 2009 until paid alleged to be owing on a loan, and further judgment in the sum of $1361.10 plus 16.59% interest from 31st October 2009 until paid alleged to be owed to the bank for a mistaken credit to the defendant's cheque account.

[2] I find the loan was initially was advanced for the acquisition of two motor vehicles acquired from a car dealer New Millennium Motors in or about June, 2005. Pursuant to further arrangements with the bank, Mr Moala was allowed to make a further drawdown of $21, 311.00 on the 3rd November 2005 and a later draw down of $16,500.00 on the 10th November 2005, making a total principal sum advanced of $66,938.57. This, with interest, meant that an outstanding sum claimed of $72, 759.50 was owing at the 28th November 2009 when action was commenced to recover the money. The moneys outstanding may be described as having derived from the loan account held by the defendant Mr Moala with the bank.

[3] In so far the second sum in concerned, this arose from a mistaken payment by the bank of $6386.70 credited to the defendant withdrew $6000.00. Later, he acknowledged that he had withdrawn the money knowing that he was not entitled to it in a written document. At trial, he seemed to suggest that he had thought it was payment for product he had sold which he is reported as having initially said to the bank also; however, I do not accept this and I find that he knew full well he was not entitled to this money. In any event, he agreed to pay the money back to the bank and although he did not do so immediately following the arrangement he had entered into with the bank, all but $1361.10 was repaid when the claim by the bank was made in November, 2009.

[4] The principal claim is for the loan advanced initially for the purchase of two motor vehicles. It seems that chattels securities for the two vehicles were taken by the bank over the cars, and later a security was taken over a town allotment Mr Moala had in Vava'u.

[5] Initially, the motor vehicles were acquired by the defendant from Millennium Motors, a dealer in Nuku'alofa. Mr Moala, although living in Sydney for many years had a business at the relevant time in Nuku'alofa selling washing and associated products. It seems he used to visit Tonga regularly. The acquisition of the first vehicle a Mitsubishi Delica in or about the 31st May, 2005 was for $17,700.00. Although some of the dealings the defendant had with the car firm in relation to the Delica may have been with a principal of the firm Lesieli Namoa, the actual transaction took place through it would seem another sales person who signed the agreement. I am satisfied Mr Moala purchased and remained the owner of this vehicle.

[6] He paid an initial deposit but I am satisfied that he could not meet instalments on this vehicle of $15,700.00 which he was required under the agreement to pay in June and July of 2005. Although he said he signed the agreement in blank and denied any obligation to pay the instalments, I do not accept his evidence. I find that he did obligate himself to pay these instalments, and later when he could not meet these and other obligations in relation to a second vehicle he also had acquired from the dealer, a bank loan was arranged for him to finance the cars. This was arranged for him through Lesieli Namoa, a shareholder in New Millennium who also guaranteed the loan.

[7] On the 25th June a second vehicle, a Nissan Terrano, was acquired by the defendant from the dealer through a sales woman by the name of May Schaff for $17,000. Mr Moala paid $2000.00, and was required to pay instalments of $2500.00 over a period of 6 months. Again he seemed to dispute this obligation although he signed the agreement. I do not accept he did not know about his obligation to pay instalments, and I accept the evidence of May Schaff that he did enter into a written agreement to pay a deposit and later instalments. Generally, I observe I found the evidence of Mr Moala unconvincing and unreliable.

[8] The Terrano, I find, was purchased by Mr Moala and the sales agreement was with him. However, having heard evidence from Mr Moala I am satisfied, either at the time of purchase or shortly after, he had agreed to purchase or sell this vehicle on behalf of, or to this brother in law, a person known as Lisiate Kolopeaua although the dealer did not at the time appreciate this. It seems that he did this in the expectation of receiving a container of yams from Lisiate which he would sell in Sydney to recoup the purchase price of the vehicle. Unfortunately, the yams were fumigated and the consignment was damaged. Consequently, the yams were sold for a much reduced profit. Exhibit 91, a document showing the delivery of the car a few days after the contract had been is in Lisiate's name as the purchaser when the car came to be released by the dealer. May Schaff gave evidence that she did not appreciate that Lisiate was in fact the purchaser but did thought he was merely receiving the car for Mr Moala. I accept that this was so and that the dealer did not appreciate the true position until it came to receive instructions from the plaintiff in March 2009 to repossess the two cars after Mr Moala had defaulted in repayment of the loan instalments. Likewise, the bank did not appreciate that its security was worthless until much later.

[9] I accept that the defendant Mr Moala, as Lesieli Namoa said in her evidence, did not meet instalments on the vehicles. Accordingly, it seems she approached the bank on behalf of Mr Moala to advance $30,000 to him to reduce his indebtedness over the cars. New Millennium were it seems also a customer of the bank. Mrs Namoa does not seem to have informed the bank that he had not been meeting his obligations to the dealer, and nor did Mr Moala. Rather surprisingly, Lesieli agreed to personally guarantee the loan. I can only infer that New Millennium saw this as the only possible way of obtaining the money they were owed, and Mrs Namoa, a shareholder in the company with her husband, did not perhaps sufficiently appreciate the risk she was undertaking if Mr Moala defaulted. Perhaps, she was so eager to be paid that the guarantee was entered into blindly trusting that Moala would be more accommodating with the bank, than with New Millennium but, if so, this proved to be wrong. She also said Mr Moala had prevailed upon her husband to assist him, they having been at school together.

[10] The various loan and related documents such as collateral chattel securities over the motor vehicles I was informed had been lost in the fires during the Tonga riots in 2008. All that remained was the signed guarantee with Mrs Namoa which was produced in evidence. I am satisfied, however, the bank did enter into a loan agreement with Mr Moala and with Lesieli Namoa as guarantor. I am also satisfied that the bank pursuant to this arrangement on or about the 15th August 2005 allowed Mr Moala to draw down $30,000 to extinguish the debt on the cars. I also am satisfied that he must have entered into chattel securities over both vehicles because they were later both subject to registration on the 3rd November, 2005 jointly in the name of Mr Moala and the Bank. I was informed by counsel that in Tonga the registration of a chattel security over a motor vehicle is effected in this way.

[11] The bank was plainly concerned, when, after November 2006, Mr Moala fell into arrears. Later, the bank sought to restructure the loan. A document described as a restructuring agreement was intended to be entered into by the bank and Mr Moala in August, 2007 but was not it seems signed by the guarantor or the second defendant. A further letter of offer and loan restructure was, however, signed by both Mr Moala and the second defendant on the 7th January 2008.

[12] It is plain that by the 30th January 2009, the bank had grown very tired of Mr Moala's failure to pay off the debt. He had, according to the bank, in a file note defaulted on 21 payments in the 41 months he had the loan. He had, since the last restructure, fallen into arrears which together with the current month's arrears amounted to $9000.00. The bank recorded a meeting with him in a diary note cited the 30th January 2009, in which it is recorded that the bank informed Mr Moala, if he should fail to make the scheduled repayment (that is the February repayment) and effect clearance of the $9000.00 arrears, demand would be made on the guarantor. Further, although it did not record that this action was heralded to Mr Moala, it was the recommendation of the loan officer that if there had not been made full clearance of arrears and monthly payment the vehicles should be seized as security for delivery to new Millennium Motors for sale to reduce Mrs Namoa's obligation under the guarantee and service of a notice of demand should be made on the borrower and on the guarantor for repayment of the loan.

[13] As a consequence of meeting between the bank, Mr Moala and the guarantor, the nature of which was recorded in the diary note of the 30th January 2009, the defendants received a noticed of demand on or about the 4th March 2009 calling up the loan and further advising that, if unpaid, resort would be made to sell up the securities Mr Moala paid to the bank $9000.00 on the 17th March 2009.

[14] About this time, the bank seems to have discovered that it had wrongly credited Mr Moala's cheque account which had only $9.29 in it with the sum of $6386.70, and consequently reversed the credit on the 16th March 2009. Because Mr Moala, by then, had withdrawn $6000.00, the account was significantly in deficit. Later on the 23rd April, Mr Moala signed an acknowledgment that he had taken the funds mistakenly paid to him "with full knowledge that the funds did not belong to him." He agreed to repay the money by $1000.00 payments commencing in May. He had paid most of this debt off leaving a balance of about $1361.10 in October 2009.

[15] The bank did not accept the Mr Moala had reduced all the money he owed it by way of unpaid arrears when he paid in the $9000.00 because the instalment owing for February had not been paid. The bank had meantime ordered New Millennium Motors to seize the vehicles. This Mitsubishi was apparently in the possession of Mr Moala's sister and when repossessed the value placed on it by the dealer was $8000.00. It had some damage to a door. Mr Moala said he thought it would be about $10,000; but, given there were no buyers for the vehicle at $8000.00 and I was informed the vehicle had still not been sold some years later, I fix the value at the time of repossession as $8000.

[16] As for the Terrano, although the evidence was conflicted between Lesieli Namoa and May Schaff on this point, I prefer the evidence of the later that the vehicle was repossessed but later released after the wife of Lisiate's, Eseta, had asserted that, after her husband's death, she had become the owner of the vehicle. This was emphasized in a letter to the car firm from Eseta's lawyer on the 13th May 2009.

[17] I find the dealer and agent for repossession and sale, having initially attempted to sell the Torrano to a relative of the wife for $9000.00, did not proceed with this transaction but released it without the authority or knowledge of the bank to the wife.

[18] I am also satisfied that Mr Moala was not the owner of this vehicle and had misled the bank when he executed the chattel security over the Terrano. By consent, a copy of a chattel security in force by the bank at the time these securities were entered into was produced to the Court. Mr Moala was in breach of clause 9 of the security in that he could not have warranted that he had good title to the vehicle at the time he entered into the mortgage of it. It had already been sold by him or acquired by him on behalf of Lisiate in exchange for the yams. Accordingly, the security was worthless and the bank had no right to seize the vehicle.

[19] The defendant claimed by way of defence additional to proof of the debt, that the plaintiff was estopped from proceeding to recover the amount of principal and interest on the outstanding loan because it was agreed that if the sum of $9000.00 were paid to reduce arrears the vehicles would be returned, and that further payments had been made in relation to April and May with instalments paid up to September. It was also claimed that there had been no statement tendered to show how much had been received on the vehicles and that if the value of the vehicles was taken onto accounts claimed to be $36,000, the defendants would not be in default.

[20] I reject these defences. First, I find that it was not a condition for the return of the vehicles that Mr Moala pay the $9000 arrears. According to the file note of 30th January 2009, which recorded a meeting with the bank, Mr Moala and Namoas, if he had not paid, action would have been taken for repayment of the advance plus interest and charges. Mr Moala also had defaulted in the February payment. The loan was not reduced by any resale of the Mitshubishi vehicle and he was not the owner of the Terrano. He was served with notice on 16th June 2009 and on the 21st July 2009 (the July notice was not produced in evidence), to repay the loan and charges and, although at that time, he may not have been in arrears with repayments, by the time of the issue of these proceedings in November 2009, he had been since about August, 2009. It seems from an undated file not, however, produced in evidence that what had finally motivated that bank to seek repayment of the loan in June was that they had discovered that the Terrano belonged to a third party and they been subject of deceptive conduct by Mr Moala over that vehicle. This constituted a default in the opinion of the bank and its approach is evidenced in correspondence between the bank and its solicitors dated 15th July, 2009 which was produced. It would seen if clause 10 of the December 2007 restructure facility is considered, the bank was on strong ground. There, a ground for calling up the loan is that any representation or warranty or statement given by a borrower proves to be untrue or would be untrue if reiterated on any date whilst sums remain outstanding that the bank was on good ground to call up the loan. In my view, a representation that he owned the Terrano when he did not rendering worthless the chattel security would have amounted to cause to call up the loan. Further, by then they had discovered the mistaken payment of which Mr Moala had also sought to take advantage. Later, it appears from the letter of the 15th July 2009, a meeting was called by the bank with Mr Moala and his wife and, after being allegedly threatened by Mr Moala, it was decided to advise the police and terminate any further contact with him. The bank's solicitors were instructed to issue a further demand to call up the loan and did so in July.

[21] I also reject any claim for the balance owing of $1361.00 on the mistaken payment can be avoided as the defendant claimed because of the banks' negligence. Mr Moala, I find, well knew that he was not entitled to this money, and the bank is entitled to recover it as a mistaken payment and charge interest appropriate to the account for any shortfall. Since the account was virtually in deficit when the money was paid in, I consider the bank is entitled to claim $1361.00 less the sum of $9.29 which was the amount the account was in credit when the mistaken payment was made.

[22] The defendant also counterclaimed for damages for unlawful detention and conversion of the vehicles. I consider that Mr Moala had no right to enter into a mortgage of the Terrano because he was not the owner. As for the Mitsubishi, the bank was perfectly entitled to exercise its powers under the chattel security to seize that car and sell it. Having seized it, Mr Moala, in my view, is entitled to a credit for the value of the car taken at its market price when it was seized and I allow him the sum of $8000.00 for that. The bank seems to have taken no action to instruct the sellers to sell it at a reduced price within a reasonable time of seizure and so I allow Mr Moala the full price. If within a reasonable time the vehicle had sold for a lesser price, then that would have been the amount Mr Moala would have been credited with in repayment of the debt. I consider it reasonable to allow Mr Moala the full market value because neither the bank not its agent did anything to sell the car at a reduced price within a reasonable time of its seizure. I was asked to allow reduced interest on this sum, and do so by reducing the interest for the period March to November 2009, at 16% of the value of the vehicle when seized being $854.00. I do not find that the defendant has any claim for damages for conversion or wrongful institution of proceedings, however, of either car. He will be allowed the sum of $8854.00 as a set off on the principal and interest claimed. Nor do I find there is any claim for damages established relating to wrongful institution of the bank's claim for repayment of the loan. For reasons I have given I consider the bank was within its rights to call up the loan.

[23] As for interest, the plaintiff claims interest to the date of payment at the rate of 16%. Under the terms of the restructured debt document, I note that the interest rate is a flexible indicator. Whist I accept the interest of 16% is appropriate under the terms of the letter of offer of 24th December to the date of proceedings in November, 2009, I allow only 10% interest on both claims for from that date until the date of judgment.

[24] As for the second defendant, she did not take any steps to defend the proceedings, although the defence and counterclaims are on behalf of both defendants. Since she was also a party and signed the letter of offer of the 24th December 2007 on the 7th January 2008, which led to the bank extending its facilities, she obviously intended to bind herself by the terms of the loan. She has not in any way chosen to resist the loan other than in relying on defences and claims raised by Mr Moala. I see no reason not to order judgment against her also for the sum claimed on the loan account. However, I am not prepared to order judgment against her for the balance of the mistaken payment which is unrelated.

Judgment

1. Accordingly, I grant judgment against Paea Moala in the sum of $65,540.50 being $64,189.50 on the loan account and $1351.71 for the unpaid balance on the mistaken payment.
   
2. I grant judgment against Puli Tuita in the sum of $64,189.50.
   

100. Interest is awarded on the respective sums against both defendants from the 25th November, 2009 to the date of judgment at the rate of 10% pa.
     

4. Costs on the sums above are the costs of the plaintiff and are to be fixed by the Registrar on the application by the plaintiff and paid by Paea Moala on the sum of $65,540.50 and in relation to Puli Tuita on the sum of $64,189.50.
   

DATED: 9 JULY 2013
J U D G E