Australia and New Zealand Banking Group Limited v Funga 'Atele Trading Home (Faith) Limited [2013] TOSC 40; CV 76 of 2009 (30 September 2013)

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

CV 76 of 2009

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED
Plaintiff

AND:

FUNGA 'ATELE TRADING HOME (FAITH) LIMITED
Defendant

Mrs P. Tupou for the Plaintiff
T. Fakahua for the Defendant

JUDGMENT

[1] The Plaintiff claims that in March 2005 the Defendant (properly named Funga 'Atele Trading Home Co. Ltd) entered into a loan agreement. This agreement was superceded by a second loan agreement on 12 August 2006. It is said that by this date the amounts advanced to the Defendant had reached $477,000.00 and that it was agreed that a further $9,000.00 would be advanced raising the Defendant's total indebtedness to $486,000.00. This sum was to be repaid by monthly repayments of principal and interest over a term of 10 years.

[2] The Plaintiff claims that the repayments due from the Defendant fell into arrears with the consequence that in May 2009 demand for repayment of the whole sum due was made. The Plaintiff says that since service of the demand letter no repayments have been received from the Defendant and that the amount due to the Plaintiff as at 23 April 2009, when the writ was issued, was $434,385.95 with interest accruing at the rate of 13%.

[3] On 4 November 2011, after numerous interlocutory applications and adjournments, an amended Statement of Defence was filed. The Defendant pleaded that it was unaware of a loan agreement between the parties entered into in May 2005. According to the Defendant it "only existed as convenient tool for the only shareholder of the Defendant Company, Mr Lynath Liou to use in promoting his other businesses." According to the Defendant its directors never met and never agreed to enter into a loan agreement with the Plaintiff.

[4] As to the 12 August 2006 agreement, the Defendant's case is that it does not know of the agreement: "The defendant company was never operated as a company from its incorporation to the date when it stopped paying the loan installment". In paragraph 9 of the Statement of Defence the Defendant admits receiving the letter of demand. It is however pleaded that "Secretary/Director Mr Sione Vuna Fa'otusia had requested the plaintiff to allow him to continue to pay his part of the loan for the refinancing of his business housing loan".

[5] The trial began on 18 September 2012 however for various reasons, including the discovery on the second day of the trial that the Defendant had been deregistered, inclement weather and ill-health, was not concluded until 27 August 2013.

[6] The only witness was Siosefo Halahingano (Siosefo) who is a member of the Plaintiff's Asset Management Unit. Siosefo explained that he was not able to produce all supporting documentation as many of the Plaintiff's records were destroyed in the Nuku'alofa riots of 2006. After the first day's hearing concluded, a further search of the Plaintiff's store at Pahu was carried out and several additional documents were located.

[7] Siosefo produced an unsigned copy of an "offer of banking facilities to Funga 'Atele Trading Home Co Limited" dated 6 May 2005. He also produced an unsigned copy of a "letter of Offer-Funga 'Atele Trading Home Limited" dated 12 August 2006 together with a photocopy of what he stated was a signed copy of the same agreement obtained from one of the two named guarantors of the agreement, Feletiliki Fa'otusia and Chuan Liou, aka Liou Chuan (named in the agreement, paragraph 6 as company directors).

[8] Siosefo produced copies of statements of account for what he explained were two different bank accounts, a term account and an overdraft or current account (Exhibit A1) both in the name of "Funga 'Atele Trading Home Co. Limited". Both these bank statements showed that substantial sums had been advanced to the Defendant Company; the final amount owed on 16 January 2009 was $424,969.41.

[9] Exhibits A2, A3, A4 and A5 were a photocopy of customer images (copies of authorised signatories for Funga 'Atele Trading Home Co. Limited being Feleti Fa'otusia and Liou Chuan) and three original cheques in the amounts $12,000, $95,000 and $100,000 each of which appeared to bear both signatures. Each cheque also appeared to bear the signature of Feleti Fa'otusia on its reverse. Given the substantial values of these cheques Siosefo was questioned about the procedures required to be followed by the Plaintiff when large cheques were presented; his belief was that these cheques would not have been honoured until they had been thoroughly vetted by the supervisor and the accounts unit. Reference to the three cheques can be found on the first page of Exhibit A1.

[10] In cross examination, Siosefo conceded that according to a deposit slip attached to Exhibit A3, the proceeds of the cash cheque had been deposited in another account, Phoenix Enterprises of which Mr Liou Chuan was, as he understood, also a director.

[11] Among other documents produced by Siosefo were an undated letter marked "received 16-3-07" headed "Funga 'Atele Home Trading Co. Limited" addressed to the Plaintiff and referring to Account Number 1482947 (Exhibit A1).

[12] On 27 August 2013 Mr Fakahua made oral submissions on behalf of the Defendant. He suggested first, that the debt had not been proved. According to Mr Fakahua, his notes showed that Siosefo, was asked whether the amount $425,019.41 included in the Plaintiff's letter of the demand of 15 January 2009 was in fact the correct amount, answered "I don't know". This being the case, Mr Fakahua suggested that the debt to the Plaintiff had not been proved. As has already been seen the defence, as pleaded, did not deny that the sums claimed were advanced to the Defendant, it merely stated that the advances were not within the Defendant's knowledge and therefore could not be admitted. Neither Mrs Tupou's notes nor my own in fact suggested that Siosefo gave the answer claimed by Mr Fakahua but, giving Mr Fakahua the benefit of the doubt, even if he did so answer, it is my opinion that lack of personal knowledge, wholly usual in cases of this kind, does nothing to undermine the evidential value of the bankers books produced by Siosefo. These suggest (page 40 of the produced documents) that as at 16 January 2009 the amount owed was $424,969.40. It may be that by the time the letter of demand was sent further interest had accrued. If necessary, an account can be taken to put the correct figure beyond doubt. The claim for $434,885.95 included in paragraph 9 of the statement of claim was not denied. I find that nothing placed before me at the trial casts any doubt on the Plaintiff's claim to have advanced these amounts (including interests) to the Defendant.

[13] Mr Fakahua next suggested that the loans were "illegal" since the loan agreements were not signed. In my view, the evidence on the balance of probabilities shows that the agreement of 12 August 2006 was signed by both of the Defendant's directors. Furthermore, the letter of about 16 March 2007 would not, in my view, have been sent by the Defendant company if it did not acknowledge that the account number 1482947 was in its name. The three cheques produced A3, A4 and A5 appear to me to bear the signatures of the Defendant's two directors. The argument that the Defendant was unaware that had in the account with the Plaintiff all was unaware that it regarded its relationships with the Plaintiff as "illegal" is in my opinion unarguable.

[14] Mr Fakahua next submitted that by the time the cheques were presented, Mr Feleti Fa'otusia had ceased to be a director of the Defendant and that the remaining sole director Chuan Liou had since passed away. Beyond Mr Fakahua's assertion, there was no evidence in support of this submission. It is noted that Mr Feleti Fa'otusia described himself as a "General Manager" of the Defendant in March 2007, a little under two years after the three cheques were cashed, while in August 2008 (Document p.45) both Mr S.V. Fa'otusia and Mr Chuan Liou stated that they have been paying off the loan to the Defendant from the Plaintiff "for the last four years". This submission fails.

[15] Mr Fakahua's final argument was that the defendant's removal from the register of companies on 16 November 2009 had the effect of terminating the legal proceedings against it. Mr Fakahua appears to have overlooked the fact that the Defendant was restored to the register by order of the Court on 31 October 2012 under the provisions of Section 338 (1)(a)(ii) of the Companies Act and that pursuant to Section 339 the Defendant was then "deemed to have continued in existence as if it had not been removed from the register". This submission fails.

Result:

I am satisfied that the Plaintiff has proved that advances as pleaded were made to Funga 'Atele Trading Home Co. Limited, that they remain substantially unrepaid and that interest has accrued upon them. There will be judgment for the Plaintiff in the amount claimed with interest upon the judgment debt accruing under rate of 10% from the date of the issuance of the writ until satisfaction of the judgment debt. Plaintiff's costs to be taxed if not agreed.

CHIEF JUSTICE

Dated: 30 September 2013