Westpac Bank of Tonga v Toloke [2015] TOSC 36; CV99.2013 (10 August 2015)

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

CV 99 of 2013

BETWEEN:

WESTPAC BANK OF TONGA
Plaintiff

AND:

MARYANNE TOLOKE
First Defendant

SOLOMONE VA'A TOLOKE
Second Defendant

BEFORE LORD CHIEF JUSTICE PAULSEN

Date of Hearing: 24 July 2015
Date of Ruling: 10 August 2015
Appearances: Mr. R. Stephenson for the plaintiff
Mrs. F. Vaihu for the defendants.

RULING

[1] These are opposed applications by the plaintiff for summary judgment and to strike out the defendants' counterclaim (the applications).

A preliminary issue

[2] At the hearing of the applications Mr. Stephenson sought leave to file a late affidavit Ms Siu'ivahamoana Latu, which produced a variation of mortgage document (a public record) that the plaintiff had recently located amongst its files. Mrs. Vaihu did not object to the admission of the affidavit but asked for seven days for the defendants to file any reply to the affidavit. I gave the defendants that time. No further evidence was filed but I have now had placed before me a letter from Mrs. Vaihu asking for a three week extension for the defendants to respond to the affidavit. The letter is dated 5 August 2015 but was not put before me until today. Notably, the letter does not state that any issue is taken with the content of Ms. Latu's affidavit. The extension of time is sought so that the defendants can "check out the statement of accounts regarding all the payments they have made as well as the interests that were charged to their account". Mr. Stephenson opposes the application and points out that the defendants have only been granted leave to respond to Ms. Latu's affidavit and that such leave does not extend to the filing of further evidence as to the amount claimed as set out in the plaintiff's statement of account.

[3] I am not prepared to grant the defendants an extension of time for the following reasons. First, Mr. Stephenson is correct that no leave was granted to file further evidence other than strictly in reply to Ms. Latu's affidavit. Secondly, there was no suggestion at the hearing that the defendants might want to file further evidence and no explanation provided in Ms. Vaihu's letter as to why they have not done so till now. Mrs. Toloke has filed five affidavits in opposition to the summary judgment application and has had plenty of time to put all of the defendants' evidence before the Court. Thirdly, I asked Mrs. Vaihu at the hearing what the issues were that the defendants relied upon in defence of the summary judgment application. I have set those out later in this ruling. They did not include a challenge to the plaintiff's interest charges. Fourthly, there is no suggestion that the defendants dispute the evidence in Ms. Latu's affidavit. Fifthly, the plaintiff's evidence was meticulous and included setting out how interest was charged. I have reviewed the evidence and find no fault with it. The defendants had every opportunity to respond to that evidence if they considered it incorrect in any material respect. Finally, if the defendants were now allowed to file further evidence the plaintiff would be entitled to respond and then to make submissions. That would cause considerable delay and expense in circumstances where it is quite apparent that the defendants have no defence to this claim.

The plaintiff's claim

[4] The plaintiff seeks judgment for a debt said to be jointly and severally owing by the defendants. The plaintiff says that the facts entitling it to judgment are the following.

[5] On 26 February 2008 the plaintiff provided the defendants with a term loan facility up to an amount of $2,521,000. The purpose of the term loan facility was to restructure existing debt and to allow for further advances for the construction of a restaurant, bar and accommodation at 'Umusi, Ma'ufanga. The terms of the facility were set out in a loan offer letter dated 14 February, a written loan agreement dated 26 February 2008 and loan terms and conditions dated 26 February 2008. All of these documents were signed by the defendants on 26 February 2008.

[6] The defendants made drawdowns on the loan facility from time to time. The amounts and dates of the drawdowns are detailed in paragraphs 5 and 11 of the amended statement of claim. There were also some variations agreed to the terms of the loan agreement from time to time, the details of which are set out in paragraphs 7 and 8 of the amended statement of claim. These variations involved extending the term of the loan facility and reducing the monthly repayments to accommodate the circumstances of the defendants.

[7] By July 2009 the total loan facility had been drawn down except for an amount of $295,000 which the defendants requested be released to them. The plaintiff refused that request, relying on a term of the loan agreement entitling it, in its sole discretion, to refuse disbursement of any amount of the loan. This was because, it says, the defendants were in substantial default of the terms of the loan agreement in a number of respects.

[8] The defendants missed a number of repayments and ceased making regular repayments altogether from October 2011. The plaintiff made written demand on 30 January 2013 for the arrears amounting to $304,800. When that sum was not paid, on 30 March 2013 the plaintiff exercised its power to call for payment of the full amount owing under the loan agreement in the sum of $2,386,404.36. That sum was not paid in full or part. In December 2013 the plaintiff exercised its power of sale of a leasehold property at Kolovai, over which it held a mortgage as security for the loan. Once the net proceeds of sale were applied to the loan the balance owing to the plaintiff was $2,260,222.89. The plaintiff now seeks judgment for the sum of $2,260,222.89 plus interest at the contractual rate of 12.5% per annum and costs.

The defence

[9] The defendants filed an amended statement of defence and counterclaim dated 16 June 2014. In addition, there are five affidavits of the first named defendant, Maryanne Toloke, in opposition to the application for summary judgment.

[10] Order 15 Rule 5(2) of the Supreme Court Rules 2007 requires a defendant's affidavit in opposition to a summary judgment application to state clearly what the defence is, and what facts are relied upon to support it. Mrs Toloke's affidavits do not do that in any coherent fashion but at the hearing Mrs. Vaihu advised me that the following matters were advanced in defence of the summary judgment application:

[10.1] That the defendants never signed the loan documents of 26 February 2008 or the mortgage of the leasehold property at Kolovai.

[10.2] That the defendants did not get all the money that the plaintiff says was advanced to them.

[10.3] That the plaintiff acted in an unreasonable manner in not assessing the defendants' standing to repay the loan and in failing to accept building materials which it could have sold to repay the loan.

[10.4] That the defendants have a counterclaim against the plaintiff for losses they suffered as a result of the plaintiff's refusal to allow them to drawdown the full amount of the loan, which would have been used to complete the defendants' project and repay the loan

[11] In addition, I note there is an allegation that the sale of the Kolovai leasehold property was illegal under the Land Act because the money advanced under the mortgage was used to 'improve other lands'. Mrs. Vaihu did not advance any argument on this ground but I will deal with it.

Summary judgment principles

[12] The principles governing summary judgment applications are well known. In Westpac Bank of Tonga v Moehau CV 120 of 2011, 26 October 20112 Scott CJ quoted with approval from the White Book as follows:

The purpose of [the Rule] is to enable a plaintiff to obtain summary judgment without trial if he can prove his claim clearly and if the defendant is unable to set up a bona fide defence or raise an issue against the claim which ought to be tried. When the judge is satisfied not only that there is no defence but no fairly arguable point to be argued on behalf of the defendant, it is his duty to give judgment for the plaintiff (Anglo-Italian Bank v Wells (1873) 38 L.T. 197)

[13] The onus is on the plaintiff to establish that there is no real doubt or uncertainty as to his entitlement to summary judgment. Where the evidence is sufficient to show that there is no defence the defendant will need to respond if the application is to be defeated.

[14] The Court will not normally seek to resolve conflicts of evidence or assess the credibility of witnesses but the Court will not accept uncritically evidence that is "inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents and other statements by the same deponent or is inherently improbable". Krukziener v Hanover Finance Limited [2008] NZCA 187at [26] and Eng Mee Yong v Letchmanan [1980] AC 331, 341. The Court may take a robust and realistic approach when the facts warrant it. Bilbie Dymock Corp Ltd v Patel [1987] NZCA 193; (1987) 1 PRNZ 84 (CA).

[15] The plaintiff has established all the elements of its cause of action to recover the debt. The issue is whether the plaintiff has also satisfied the onus upon it to establish that neither the matters raised by the defendants in defence nor the counterclaim are worthy of trial.

Did the defendants sign the loan documents and security documents

[16] Mrs. Toloke denies that she and her husband signed the loan documents of 26 February 2008 or the mortgage of lease of the Kolovai property. By way of illustration of her evidence, at paragraph 7 of her affidavit of 6 March 2015 in reply to Ms. Siu'ivahamoana Latu's affidavit, she says "That I call for the originals ...to examine how it is shown that we did sign these documentation...as we never signed any loan agreements before 2009".[1] She goes on to state, at paragraph 28 of the same affidavit, that three loan agreements were signed in 2009 as follows, "That, in connection with the mortgaging of the Good Samaritan Beach Resort we signed in May or June 2009 for the first time separate loan agreements one for Good Samaritan Inn Beach Resort, one for 'Umusi project...and one for Toloke Enterprises". In an affidavit of 24 April 2015 Mrs. Toloke says, at paragraph 9, "That, in February of 2008 there was no loan restructure of $2.5m as the application for the loan to build the hotel at Umusi was not applied for until April of same year". Mrs. Toloke's evidence is patently incorrect. It is totally at odds with all the contemporary documents, is entirely implausible and is uncorroborated by documentary evidence that Mrs. Toloke could reasonably be expected to provide if her evidence was correct.

[17] Ms. Latu, the Relationship Manager for the plaintiff, in her affidavit of 11 September 2014, states that she was present when the loan documents of 26 February 2008 were signed by the defendants. The loan documents of 26 February 2008 are exhibited to her affidavit as exhibits A, B and C. She confirmed that she was present when the loan documents were signed at paragraph 4 of her affidavit of 2 April 2015. Mr. Peni Fakava, the Business Development Manager for the plaintiff, in paragraph 4 of his affidavit of 26 March 2015, confirms that the plaintiff entered into no loan agreements with the defendants after 26 February 2008.

[18] The memorandum of mortgage of the lease of the Kolovai property is exhibit J1 to Ms. Latu's affidavit of 11 September 2014. It was provided by the defendants in 2006 as security for existing and future advances. The defendants' signatures appear on that document. Their signatures also appear on a letter from the plaintiff to the Minister of Lands dated 28 December 2006 applying for the mortgage. In her affidavit of 27 July 2015, Ms. Latu has exhibited an application to the Minister of Lands for the variation of the mortgage by increasing the amount secured from $1,303,000 to $2,521,000. That is entirely consistent with the terms of the loan of 26 February 2008 upon which the plaintiff now relies. The application for variation of the mortgage was also signed by the defendants and, again, in Ms. Latu's presence.

[19] Contrary to Mrs. Toloke evidence, that no loan agreements were signed with the plaintiff until some unspecified time in 2009, the plaintiff has exhibited five separate loan agreements, as well as other related bank and security documents, signed by the defendants between March 2005 and February 2008. These are exhibited to Ms. Latu's affidavit of 11 September 2014.

[20] If three loan agreements were signed in 2009, as Mrs. Toloke says, then she could be expected to either produce them or provide some explanation as to why she cannot do so. Mrs. Toloke does neither. She cryptically, and unsatisfactorily, states at paragraph 9 of her affidavit of 6 March 2015 in reply to the affidavit of Ms Latu, "I have not seen the plaintiff exhibiting these loan agreements signed in 2009". In paragraph 7 of her affidavit of 24 April 2015 Mrs. Toloke ambiguously states "That, I have submitted the document that we still keep". She attaches no relevant documents to the affidavit.

[21] The evidence of Mrs. Toloke as to the nature of her dealings with the plaintiff prior to 2009 is entirely implausible. In paragraph 4 of her affidavit of 6 March 2015 in reply to Mrs. Latu's affidavit, Mrs. Toloke says that her first dealing with the plaintiff occurred in around March 2005 when she had a meeting with the Manager of the Bank, Mr. Sika, who handed her $250,000 in cash to purchase the Good Samaritan Resort. She says "I never signed with them any papers about this transaction ...". At paragraph 9 of her affidavit of 6 March 2015, in reply to the affidavit of Mr. Sika, she says that Mr. Sika approved a loan to the defendants of $1million and "...it got approved straightaway by Mr. Sika. No loan documentation or mortgage documentation were ever prepared about this loan". It defies belief that the Manager of a large bank would hand to a new customer $250,000 in cash, or agree to a loan of $1million for that matter, with no supporting documentation and it is clear that this is not what happened. The plaintiff has produced the defendants' complete loan account statement for the period March 2005 to December 2013 which shows that an initial advance was made by the plaintiff to the defendants in around March 2005 for $303,000. This advance was supported by a loan agreement signed by the defendants dated 8 March 2005. That loan agreement is part of exhibit N to Ms Latu's affidavit of 11 September 2014. The plaintiff has also produced a number of other loan agreements in relation to the later advances made to the defendants which are shown in the loan account statement.

[22] In addition to this, the defendants made payments to the plaintiff as required by the 26 February 2008 loan agreement. The initial terms required monthly repayments of $40,000. The defendants commenced making those payments. Contrary to the evidence of Mrs. Toloke, at paragraph 10 of her affidavit of 6 March 2015 in reply to the affidavit of Ms Latu, "That we never agreed to repay $40,000.00 per month and no document shows that.." the loan account statement produced by the plaintiff shows that the defendants' loan account was credited with sums totaling $40,000 in May 2008 and June 2008. The loan repayments were reduced to $33,500 per month from April 2009. This was recorded in a letter dated 16 March 2009 from the plaintiff's General Manager to the defendants which refers to term loan No 2000388617 (the number corresponding to the loan in issue) and the amount owing of $2,179,042.17. Those payments of $33,500 per month were regularly made between June 2009 and October 2010.

[23] I note also that in February 2012, Mrs. Toloke wrote to the plaintiff requesting further revised repayment terms. The letter was annexed as exhibit G2 to Ms. Latu's affidavit of 11 September 2014. Whilst the letter does not expressly refer to the loan agreement of 26 February 2008, what Mrs. Toloke was requesting was the deferral or waiver by the plaintiff of the terms of that agreement. Mrs. Toloke would not have written such a letter had she not signed the loan agreement and considered herself bound by its terms.

[24] For these reasons, I do not accept Mrs. Toloke's evidence that the defendants did not sign the loan documents of February 2008 or the mortgage of the registered lease. The evidence that the defendants signed the loan and security documents is overwhelming. I reject this defence.

That the defendants did not get the advances

[25] In her affidavit Mrs. Toloke denies that certain drawdowns were made or received. At paragraph 6 of her affidavit of 6 March 2015, in reply to Mrs. Latu's affidavit, she says that a drawdown of $684,780 on 13 May 2005 was never received. In paragraph 6 and 7 of her affidavit of 6 March 2015, in reply to Mr. Henson's affidavit, and paragraph 14 of her affidavit of 6 March 2015, in reply to Mrs. Latu's affidavit, she says that $850,000 that the plaintiff says was drawn down on 9 June 2008 was not received. She also says that she does not recall getting three separate draw downs of $50,000 in July and August 2008 and denies knowledge of a payment of $9,862.50 paid as stamp duty on the variation of mortgage over the Kolovai lease. Again I reject Mrs. Toloke's evidence. It is contradictory, inconsistent with all of the documents before the Court and inherently improbable.

[26] As I have noted, the plaintiff has annexed the full loan account statement for the period March 2005 to December 2013. These are exhibit A of Mr. Henson's affidavit of 21 January 2015 and exhibit D of Ms. Latu's affidavit of 11 September 2015. Mr. Henson, who was the Head of Business Banking with the plaintiff, at paragraph 4 of his affidavit of 30 March 2015 confirms the accuracy of the loan account statement. In contrast, Mrs. Toloke has failed to put before the Court any documents to support her contention that the sums she has identified were not received by the defendants. At paragraph 3 of her affidavit of 6 March 2015 Mrs. Toloke says "Anyway I do have a copy of Bank statements given by the plaintiff but is different from the one now exhibited and I attach marked "A" a copy of my bank statements". No bank statements are attached to that affidavit. In a later affidavit, Mrs. Toloke does exhibit a bank statement from the defendants' business cheque account but it casts no doubt on the evidence of the plaintiff of the sums advanced to the defendants. However, importantly for present purposes, the business cheque account statement shows payments debited from the defendants' business cheque account and there are corresponding credit entries in the loan account statement, thereby confirming the accuracy of the plaintiff's records.

[27] The first amount Mrs. Toloke says was not received was $684,780. The plaintiff's loan account statement shows that this was drawn down on 13 May 2005, which is well before the loan agreement of February 2008 that is the subject of this claim. It is relevant because it forms part of the defendants' existing debt that was restructured under the 26 February 2008 agreement. When that sum was drawn down the debit balance in the defendants' loan account increased from $299,040 to $983,820. The plaintiff has exhibited a letter from Ms Latu to the defendants dated 29 August 2005, which is part of exhibit N to Mrs. Latu's affidavit of 11 September 2014, which records that the loan amount owing by the defendants was then "$992,000 (no change)" and that the defendants were to repay the loan at the rate of $13,000 per month. That letter was signed by the defendants and the loan account statement confirms payments by the defendants in the amount of $13,000 per month commencing from October 2005. Clearly then, contrary to Mrs. Toloke's evidence, the $684,780 was received by the defendants and acknowledged by them as received in the letter of 29 August 2005.

[28] Mrs. Toloke denies the disbursement of $9,862.50 for the stamp duty on the variation of mortgage but, as I have noted above, she and he husband signed the application for the variation which was submitted to the Minister.

[29] Whilst Mrs. Toloke denies receipt of the drawdown of $850,000 in June 2008 she has acknowledged receiving and spending $600,000 on purchasing materials for the project that was the subject of the loan. She states at paragraph 7 of her 6 March 2015 affidavit, in reply to Ms. Latu's affidavit, that "Our loan was for $1 million and $600,000 was initially disbursed for the acquirement of building materials". This is again referred to at paragraphs 12 and 13 of her affidavit. I note also, that in apparent contradiction of this evidence, the defendants plead in their counterclaim that $700,000 was disbursed to them on the approval of the loan to acquire building materials.

[30] As far as the three separate draw downs of $50,000 in July and August 2008 are concerned, Mrs. Toloke acknowledges in paragraph 22 of her affidavit of 6 March 2015, in reply to the affidavit of Mrs. Latu, that in addition to the $600,000 spent on building materials the defendants incurred "freight of $50,000 plus and duty of $30,000 plus and packing costs". This may well account for the additional drawdowns in July and August 2008.

[31] As I noted earlier, on 16 March 2009 the General Manager of the plaintiff wrote to the defendants recording that the amount owing to the plaintiff was then $2,179,042.17 and advising that the amount of the loan repayments would be $33,500 per month from 30 April 2009. The letter was written following a discussion with the defendants as the letter states "I refer to our discussion/meeting of even date...". As the business cheque account statement that Mrs. Toloke has annexed to her affidavit confirms, the defendants did make monthly payments in accordance with this arrangement. They would not have done so if they disputed the amount that was owing. Then the plaintiff served upon the defendants a notice of demand dated 28 February 2013 for the arrears under the loan agreement which stood at $304,800. No challenge was taken to that demand and the defendants admit, at paragraph 13 of their amended statement of defence, that the arrears were owing. On 14 March 2013 the plaintiff served upon the defendants a notice of demand for the full amount owing under the loan agreement which was then $2,521,000. There is no evidence that the defendants challenged that demand. In April 2015 the plaintiff had served upon the defendants notices under section 109 Land Act which stated that the amount owing to the plaintiff then stood at $2,406,360.53. There is no evidence that any challenge was taken to that demand either. Importantly also, the defendants apparently took no steps to challenge the plaintiff's sale of the Kolovai leasehold property. All of this shows an acknowledgment by the defendants that the amounts claimed by the plaintiff were owing.

[32] I am left in no doubt that the plaintiff's records accurately record the amounts advanced to the defendants and that the amount claimed is correct. I reject this ground of defence.

That the plaintiff acted in an unreasonable manner

[33] The defendants argue that the plaintiff was unreasonable in not assessing their standing to repay the loan and in failing to accept building materials which it could have sold to repay the loan. I reject this defence also for the following reasons.

[34] There is no room for the imposition of a duty on the plaintiff to assess the defendants' ability to repay the loan, and protect them from the consequences of their own decision to borrow, in a case such as this where the defendants are very experienced business persons with a number of business interests and valuable assets, a history of borrowing large sums from the plaintiff on the same or similar terms and where they signed an acknowledgment that they should obtain advice before accepting the loan (refer page 7 of the signed terms and conditions of 26 February 2008 which is exhibit C to the affidavit of Ms Latu). Lloyd's Bankplc v Cobb (UK Court of Appeal, 18 December 1991 cited in Tyree's Banking Law in New Zealand at 4.8, p 132. Even if such a duty existed there is no evidence before that Court that the plaintiff failed to make reasonable enquires and, in any event, it is the defendants' case that they could have repaid in full had the plaintiff advanced the entire loan to them.

[35] I was referred to nothing in the terms of the loan agreement nor any principle of law that would require the plaintiff to accept building materials as payment and I do not consider any such obligation existed. As one would expect the loan agreement requires payment in pa'anga.

That the defendants have a counterclaim

[36] The defendants have counterclaimed against the plaintiff. The subject matter of the counterclaim is difficult to identify from the amended statement of defence which contains no discernible cause of action. What I understand from Mrs. Vaihu is that the defendants are alleging that they have suffered losses as a result of the plaintiff's refusal to allow them to draw down the full amount of the loan. The losses claimed are $400,000 expended on reclaiming and preparing groundwork for their project, $600,000 for the loss of the Good Samaritan leasehold land and $200,000 as general damages.

[37] There is no dispute that in or around July 2009 the plaintiff refused to allow the defendants to draw down the balance of the loan. At paragraph 15 of her affidavit of 24 April 2015, Mrs. Toloke says that the amount involved was more than $300,000. In the same paragraph she alleges that the reason the plaintiff took this stance was because it wanted to get security over her son's land at 'Umusi which the defendants refused to provide. The plaintiff says that the amount involved was $295,000 but that subsequently it allowed the defendants to draw down a further $56,257.50 to permit them to settle a lawsuit (which Mrs. Toloke acknowledges). (Refer to paragraphs 10 and 11 of the Amended Statement of Claim). The plaintiff also says that the reasons why it refused the further draw down were that the defendants were already in default under the loan agreement (paragraph 16 of Mrs. Latu's affidavit of 11 September 2014), the defendants had failed to comply with the mortgage security requirements of the loan agreement (paragraph 11 of Ms Manu's affidavit of 11 September 2014), the defendants had failed to disclose to the plaintiff significant borrowings to the ANZ (in respect of which they defaulted and judgment has been entered against them for $1,178,000 by the Supreme Court in 2014 under CV 7 of 2012), the plaintiff had cause to doubt that money advanced to the defendants had been used for authorized purposes and the defendants had undertaken unauthorised land reclamation work (paragraphs 7 to 14 of Mrs. Manu's affidavit of 2 September 2014). There is before the Court internal memos of the plaintiff dated 29 July 2009 and 4 August 2009 confirming the matters that the plaintiff took into consideration when deciding not to make the further advance to the defendants (exhibits F and G1 of Ms. Latu's affidavit of 11 September 2014).

[38] By clause 4.1 of the Loan Terms and Conditions document (page 2 of exhibit C of Ms Latu's affidavit of 11 September 2014) it is provided as follows:

Disbursement shall be made in the manner and at the times at which the Bank in its sole discretion considers appropriate and the Bank at any time may refuse to make any disbursement or cancel any amount of the Loan which has not been disbursed.

[39] In Westpac Bank of Tonga v Moehau at paragraph 16, to which Mr. Stephenson referred me, Scott CJ considered that motives of parties seeking to enforce a contract are generally irrelevant, so that an allegation of ill-will towards a defendant by one of the plaintiff's bank managers was considered irrelevant to the question of whether the defendant had any defence to an action by the bank. I would generally agree with that view, but, clause 4.1 provides the plaintiff with a unilateral contractual power. There is a well recognised default rule that where a contract confers a discretionary power on one contracting party, that party must not exercise the discretion arbitrarily, capriciously or in bad faith, or unreasonably in the sense that no reasonable contracting party could have so acted. Abu Dhabi National Tanker Co v Product Star Shipping Co Ltd (No 2) [1993] 1 Lloyd's Rep 397 (CA) at 404 per Leggatt LJ and see also the article by Hon Justice Stephen Kos "Constraints on the Exercise of Contractual Powers" [2011] VUWLawRw 3; (2011) 42(1) Victoria University of Wellington Law Review 17. In his article Kos J notes that the Courts have identified two limits to the default rule. First, the party in whom the contractual discretion is reposed is not obliged to justify objectively the exercise of its power. Second, that party is not obliged to prefer the interests of the other contracting party to the detriment of its own. Each limit is subject to clear words to the contrary in the contract.
[40] In this case, the plaintiff was clearly entitled to refuse to make any further advances to the defendants in reliance upon clause 4.1. It has set out in detail why it acted as it did. It did not act capriciously or in bad faith but entirely reasonably in the circumstances. In so far as Mrs. Toloke is critical of the plaintiff for wanting security over the land at 'Umusi, this was security that the defendants had agreed to provide by the terms of the loan agreement and were in breach of the loan agreement by their failure to provide it. Clause 4.1 is a complete answer to the defendants' counterclaim.

[41] The fact that a counterclaim has been filed is one factor to be taken into account when deciding whether or not to grant or refuse summary judgment. When a defendant has set up a bona fide counterclaim arising out of the same subject matter and connected with the ground of defence the court will generally give the defendant leave to defend. In this case I am satisfied that the counterclaim raised by the defendants is not bona fide and is without any merit whatsoever. The fact that an entirely unmeritorious counterclaim is raised will not prevent the plaintiff from obtaining its judgment.

Was the mortgage of the lease illegal

[42] It is alleged that the mortgage of the registered lease was illegal as the money advanced was not intended to be used to improve the Kolovai property. This submission appears to be based on an erroneous reading of section 100(1)(iii) of the Land Act which relates only to the mortgage of allotments and not leasehold interests. The conditions that apply to the mortgage of a registered lease are contained in section 99 of the Land Act not section 100. Section 99 contains no equivalent to section 100(1)(iii). This ground of defence must fail also.
Resolution of the summary judgment application

[43] For the reasons given the plaintiff has discharged the onus upon it to satisfy me that the defendants have no triable defence or counterclaim and that it is entitled to summary judgment for the sum claim.

Striking out the counterclaim

[44] The plaintiff applies to strike out the counterclaim on the basis that it is frivolous, vexatious, an abuse of the process of the Court and is likely to delay a fair trial. The counterclaim is entirely unsustainable and in its present form there is nothing pleaded that is recognisable as a cause of action. I also consider that the matters raised by the defendants, whether by way of defence or counterclaim, are simply a tardy and insincere attempt to avoid paying the plaintiff what they clearly owe. In those circumstances the only proper course is to strike out the counterclaim. (See White Book 1998 at 18/19/15 and the cases referred to).

THE RESULT

[45] The defendants' application for an extension of time to file further evidence is refused.

[46] The plaintiff's application for summary judgment is granted. Judgment is entered for the plaintiff against the defendants in the sum of $2,260,222.89 together with interest at the rate of 12.75% per annum from 13 April 2014 to the date of payment.

[47] The plaintiff's application to strike out the defendants' counterclaim is granted.

[48] The plaintiff is entitled to its costs on its claim and the counterclaim which if not agreed are to be fixed by the Registrar.

O.G. Paulsen
LORD CHIEF JUSTICE
10 August, 2015.

NUKU'ALOFA

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^[1] I am advised by Counsel that the originals of the loan documents were made available for inspection.