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International Metropole Corporation Co Ltd v Ministry of Land and Natural Resources [2022] TOSC 104; CV 38 of 2022 (18 November 2022)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION

NUKU'ALOFA REGISTRY


CV 38 of 2022


BETWEEN:

INTERNATIONAL METROPOLE CORPORATION CO. LTD Plaintiff

-and-
[1] MINISTRY OF LAND AND NATURAL RESOURCES
[2] GOVERNMENT OF TONGA Defendants


SAMISONI TALIA’ULI Third Party


Application for judicial review


JUDGMENT


BEFORE: LORD CHIEF JUSTICE WHITTEN KC
Appearances: Mrs S. Ebrahim with Mr J. Huang for the Plaintiff
Ms J. Sikalu for the Defendants
Mrs A. Mailangi for the Third Party
Trial: 10, 11 November 2022
Judgment: 18 November 2022


Introduction

  1. By leave granted on 11 April 2022, the Plaintiff (“IMC”) seeks judicial review of a decision by Cabinet to increase the annual rent on a lease of land held by the Third Party (“Samisoni”) as lessor and subsequently transferred to IMC as lessee, from $100 to $3,000 (“the decision”).
  2. The proceeding raises, for apparently the first time, important issues in relation to the statutory framework, basis for and approach by which Cabinet conducts rental reviews of leases in the Kingdom.

Background

  1. From the pleadings and evidence filed for the trial, the following uncontroversial facts may be recited.
  2. On 17 October 2001, Samisoni was registered as the holder of a 773.1m2 town allotment at Fangaloto.
  3. Between then and 2009, Samisoni borrowed various sums from the ANZ and Westpac Banks. The loans were secured by successive mortgages over the allotment. The loans were used primarily for the construction of a large two storey concrete block house on the allotment. The loans from the ANZ were discharged.
  4. By July 2009, Samisoni’s indebtedness to Westpac had grown to $1,068,000 which he could not repay. On 3 July 2009, Samisoni entered into a deed of settlement whereby Westpac released Samisoni from the debt, in consideration for which, Samisoni agreed to grant the bank a lease of the allotment for a term of 50 years, for residential purposes, at an annual rent of $100.
  5. On 15 June 2011, the application for lease, in those terms, was approved by Cabinet pursuant to ss 19(3) of the Land Act (“the Act”).[1]
  6. On 26 July 2012, deed of lease No. 8223, in the statutory standard form,[2] was granted and registered to Westpac. Relevantly, the provisions of the lease included, relevantly:

And the Lessee covenants for himself, his heirs, and representatives, that he will pay the sum of $100 in legal currency on the 26th day of the month of July in each and every year to the Lessor or his successors because of this Lease. And will make the first payment of the same on the execution of this Deed. And the Lessee for himself, his heirs, and representatives, hereby covenants that he will comply with the regulations made by the King and the Legislative Assembly and Government: .... And the Lessee further covenants for himself, his heirs and representatives that he will not grant a sub-lease of, or transfer this lease without the consent of Cabinet beforehand obtained; and furthermore, the Lessee Covenants for himself, his heirs and representatives that in respect of the land hereunder leased, he will not —

(a) abandon, neglect or fail to use it for any period or periods of altogether 3 years; or

(b) use or permit any person or persons to use it for any purpose other than that upon which application and approval have hitherto been made.

If any of the above covenants are not complied with by the lessee, his heir or representative, then Cabinet may at its discretion terminate the lease.

But it shall be lawful for the Lessee, his heirs or those that represent him to remove all houses and improvements which may have been built on the said land. And it is hereby agreed by these presents if at the expiration of twenty-one (21) days from the day the rent becomes due by the Lessee, his heirs, or his representatives, to the Lessor or his successors because of this Lease, as is recorded in this Deed, the rent hereby reserved or any part of it should remain unpaid, it shall be lawful for the Lessor or his successors to take possession of all or parts of the lands herein leased by this Deed, or to sell by auction the houses or house or anything which may be on this land, to the amount of rent owing by the Lessee, his heirs or representatives, because of the rent of his land or to take civil proceedings in a court of competent jurisdiction of the Kingdom for the recovery of the said rent.

  1. The lease also contained the following covenant imported by Form 10 of Schedule IX to the Act:

“FORM OF ADDITIONAL COVENANT TO EVERY LEASE

And it is agreed by and between the parties hereto that the rent payable under the conditions of this lease shall be subject to revision by mutual agreement between the parties at the termination of each 5 years from the date hereof and if the parties shall fail to agree the rent shall be determined by the Cabinet and any such revision shall be endorsed upon this lease and duly authenticated.”

  1. On 14 November 2012, Westpac ‘sold’ the lease to Litia and Trevor Simpson for $130,000. On 1 February 2013, Cabinet approved the transfer of the lease to the Simpsons. On 17 April 2013, the transfer was registered.
  2. On 4 August 2016, the Simpsons agreed to transfer the balance of the lease to IMC for $190,000, which sum was paid. On 28 October 2016, Cabinet approved the transfer of the lease from the Simpsons to IMC.[3] However, as will be seen below, the transfer was not registered until late 2018.
  3. On 13 July 2017, Samisoni wrote to and asked the Minister to either cancel the lease or increase the rent from $100 to $15,000 per annum on the alleged basis that the property was being used for commercial purposes. Samisoni explained his position as follows:
“... The mortgage was taken out to construct the residential property but the bank gave all the money to the construction company and that was where the problem arose was when they took all the money and ran away without finishing the construction. I did not get any money from that mortgage. This is how the land and house was repossessed by the bank.
The bank leased (lease 8223A) the property to Litia and Trevor Simpson for residential purposes from 26 July 2012 to 25 July 2062 with $100 rental fee per annum. This was breached when they let the property and allowed ‘Epeli and Lupepau’u to rent the property long term and also at a higher amount.
When ‘Epeli and Lupepau’u moved from the property, the property was then operated as a motel and guests were charged per room and there was a board advertising it as a bed and breakfast.
On 28 October 2016, the couple then transferred the lease to International Metropole Ltd.
Honourable Minister the owner of this company is a millionaire who is a naturalised Tongan and to my knowledge this company has acquired several Tongan allotments due to repossession of properties by the bank and other reasons.
My plea is whether it is ENOUGH that the first lessee has violated the conditions of the lease which was to be used solely for residential purposes and not for commercial gains. The second lessee also started to let out the property for commercial purposes as well as for profit gains ...
1. Cancel the lease
2. It has been 5 years since this small lease that the bank has punished me for with 50 years in which is benefiting only the rich. Please give me $15,000 per annum and in one lump-sum payment.
Honourable Minister, I have spoken with the lessee to see whether this issue can be settled without the cancellation of the lease but to negotiate instead. However, he has the greater bargaining power and he does not want to hear my plea.
Please consider my plea. Whichever option you choose from the above as long as it is enough for my family to survive on. As long as the rich does not solely benefit from the assets of the poor for a long time until I die, but as long as I am able to benefit from my property."
  1. On 25 July 2017, the then Deputy CEO of the Ministry, Seli Taufa, forwarded Samisoni’s request to Mr Ming Sen Tsai, IMC’s sole director. Mr Taufa added:
“Every lease is subject to revision every five [years] pursuant to Schedule IX (Form No. 10) of the Land Act thus the lessor’s request to increase rental from $100 to $15,000 with effect from 26 July 2017. ...”

Mr Tsai was asked to consider the request and respond within 10 working days otherwise the Ministry would “proceed to Cabinet with the lessor’s request for their consideration”.

  1. On 31 July 2017, IMC’s then lawyer, Mr Fakafofonga Lao of the law firm of Samiu Kuita Vaipulu (the current Minister for Justice and Prisons), responded. He denied that IMC had used the property as a hotel, nor that it advertised it is a bed and breakfast and he confirmed that the property was only being used for residential purposes as per the lease conditions. Mr Lao concluded:
“Therefore, I suggest that since it has been five years the rental increase should be from $100 to $500 per annum and not $15,000 per annum and for it to continue being reviewed every five years as per the condition of the lease."
  1. On 8 March 2018, Mr ‘Atalasa Pouvalu wrote on behalf of Samisoni to the Minister repeating Samisoni’s request for the rent to be increased to $15,000 per annum. Mr Pouvalu added that Samisoni wanted the rent increased because:
“... 5 years of the lease has been completed. If the new lessee does not accept this, then we will proceed to cancel the lease based on the breach by Trevor and Litia of the terms and conditions of the lease. Additionally, there is no legal standing of the agreement which was the basis of why Cabinet has approved this lease.
Based on what we have stated above, we recommend that no further action will be taken to register the lease of International Metropole Corporation Ltd until they accept the new rental lease fee that Samisoni wishes for.”
  1. On 17 May 2018, Samisoni wrote again to the Minister. After repeating the history of the matter and his request for the rent to be increased to $15,000 per annum, Samisoni stated:
“Honourable Minister, it has been from 2016 to 2018 International Metropole Ltd has been using my land for illegal purposes and they have not paid any rent because their lease has yet to be registered.
I ask you this, because this matter and the damage has been going on for too long that I have been waiting and the 2nd lease has been used by Chinese managers of a tobacco company to live and rent there. This is how it was understood by them as a result of the communication made with International Metropole Corporation.
They have brought some Tongan people to stay at the home and look after it in order to hide their illegal use of the home for tenancy purposes.
The quality of the building will be damaged by the people living in and looking after the home but in all, it would be illegal for International Metropole Ltd to continue.
Who will pay all the damages if legal work is to proceed on this matter.
Honourable Minister, above is the damages and a long time I have been waiting for an answer from your office in respect of my lease allotment.
I hope that there will be a speedy response to my concerns as raised in order that we can move forward in terms of this lease."
  1. On 9 July 2018, Samisoni wrote yet again to the Minister. After again repeating the history of the matter, he explained how he had attended the Ministry office and spoken with Ms Savelina Pale on a number of occasions who told him that the lease transfer to IMC was yet to be registered. He stated that Savelina told him that “the house would be valued again to be taken to Cabinet for a final decision because they have not agreed to the increase of the annual rental payment". He then referred to a valuation from Westpac that he gave Savelina which formed part of the deed of settlement between him and the bank which showed a valuation of $638,400 in 2008. He believed therefore that, in 2018, the value would be higher. He then stated that Savelina explained to him that "the valuation is on the land itself” which Samisoni then described as being “a big question mark to me if this matter proceeds". Samisoni concluded:
“... The poor and rich are nowhere close to each other when there is a breach of the decisions of your Honour and the Cabinet. And this is my record for any corrective actions to be taken in future."
  1. On 11 July 2018, Seli Taufa of the Ministry wrote to Mr Vaipulu on behalf of IMC advising that since both parties had failed to agree on the amount, the new rental would be determined by Cabinet. Seli then stated:
“The Ministry has performed an independent valuation of the land and will recommend to Cabinet to increase the rental to $3,000 per annum.
We will submit to Cabinet the request from the landholder, the amount the lessee offered and the Ministry’s valuation for their consideration and direction.
Should you require clarification on the matter, please do not hesitate to contact the Ministry before we proceed with the submission for the Cabinet meeting on Friday, the 20th of July 2018."

[emphasis added]


  1. The valuation was performed by Ms Savelina Pale who is the Deputy Chief Executive Officer (Land Administration Division) at the Ministry of Lands and Natural Resources. At no time prior to the commencement of this proceeding was the Ministry’s valuation ever provided to either IMC or Samisoni because the Ministry regarded its valuation as ‘confidential’ and only for internal purposes. It was only through its pleaded defence (referred to further below) and subsequent discovery during the proceeding that the valuation was disclosed.
  2. On 23 August 2018, Lord Ma’afu, the former Minister of Lands and Natural Resources, approved and signed a briefing paper prepared by a case officer which contained a brief background of the matter. The paper also referred to the “independent valuation by the valuation section of the Ministry” showing that “the rental for the land should average around $3,000”. The valuation itself was not included with the briefing paper. The paper concluded with a recommendation that the new rental for the lease be increased to $3000 per annum with effect from 26 July 2017, and that the recommendation be submitted to Cabinet.
  3. Curiously, on 1 August 2018 (the date the briefing paper was first prepared), the then Minister, who was of course a member of Cabinet, submitted the recommendation to Cabinet for its approval. The analysis section of the submission set out the same details as contained in the briefing paper including reference to the independent valuation performed by the Ministry. There was no evidence that the valuation was included with the submission.
  4. On 31 August 2018, Cabinet resolved to defer the application for review.
  5. For reasons never explained, the indenture for transfer of the lease to IMC was not registered until 4 December 2018. The indenture provided, relevantly:
“To hold the same unto the INTERNATIONAL METROPOLE LIMTED, his heirs, and his successors, for the residue now unexpired of term of the said an extra lease, subject to the rent reserved by the said deed of lease, and the covenants and conditions of the said lease which henceforth on the part of the Lessee, his heirs and representative ought to be observed and performed.”
  1. On 5 December 2018, Seli Taufa issued a letter addressed “To Whom It May Concern” advising that Cabinet had deferred the review application and that the Ministry was “currently finalising necessary paperwork before resubmitting the lease rental revision request” for Cabinet’s reconsideration. Any such further ‘necessary paperwork’ was never produced or explained during the proceeding.
  2. Meanwhile, earlier in 2018, Samisoni commenced proceedings LA 27 of 2018 in the Land Court against the Simpsons and IMC seeking cancellation of the lease on the alleged ground of unlawful purpose.[4] On 16 December 2019, Niu J dismissed Samisoni’s claim: Talia'uli v Simpson [2019] TOLC 10.
  3. On 12 August 2020, Samisoni wrote again to the Minister, this time requesting that the rental be increased to $8,600 per annum "to be in line with the lease no. 7888 of Kisione Fakafanua of Ma’ufanga, which is located facing the seaside at Faua Wharf”.
  4. On 4 February 2021, Samisoni wrote again. He described his letter as “following up the annual rental review in accordance with the policy of [the] Ministry”. He repeated his request for the rental to be increased to $8,600 per annum and added that if that was approved, he would no longer pursue cancellation of the lease.
  5. On 20 July 2021, Mrs Ebrahim, on behalf of Mr Tsai and IMC, wrote to the CEO of the Ministry (Mrs Rosamond Bing), albeit the letter was also marked for the attention of Ms Savelina Pale. Mrs Ebrahim requested the release of all documents in relation to the lease and asked the Ministry to provide “the formula/equation for rental review”.
  6. On 16 August 2021, Ms Pale responded with a brief summary of the history of the matter and the various exchanges of correspondence. She referred to both parties being notified on 11 July 2018 of the Ministry’s valuation and recommendation to Cabinet to increase the rental to $3,000 per annum. She also noted that on 13 December 2018, the Minister approved the resubmission of the rental revision application but that it was put on hold awaiting the ruling in proceeding LA 27 of 2018. The chronology ended with the latest request from Samisoni on 12 August 2020 in which he reduced his request for an increase in the rental from $15,000 to $8,600. Ms Pale concluded that the Ministry would await Mrs Ebrahim’s reply (presumably to Samisoni’s amended request) before resubmitting the application to Cabinet.
  7. On 20 August 2021, Mrs Ebrahim replied, in summary, that:
  8. On 29 September 2021, Ms Pale prepared a further briefing paper for the then Acting Minister (now Hon. Prime Minister Hu’akavameiliku). In it, the history of the matter was updated and Ms Pale recommended that the Acting Minister approve resubmission of the rental revision application with the requests from both parties and the recommendation from the Ministry. On 25 October 2021, the Acting Minister approved and signed the further briefing paper.
  9. Curiously again, on 30 September 2021 (i.e. before his approval of the further briefing paper), the Acting Minister resubmitted the application for review to Cabinet. The content of the submission was substantially consistent with the further briefing paper. However, a section on the document headed “Annexes” was left empty, which was consistent with the Ministry’s valuation never being provided to Cabinet.
  10. On 27 October 2021, Cabinet approved the Ministry’s recommendation to increase the rental from $100 to $3,000 per annum with effect from 26 July 2017.[5]
  11. On 29 November 2021, Ms Pale advised Mrs Ebrahim of Cabinet’s decision and that a total of $14,500 (being the arrears of the increased rent from 26 July 2017) was payable to the Ministry.
  12. On 14 March 2022, Mrs Ebrahim replied, in summary, that:
  13. That same day, Samisoni wrote again to the Minister with various complaints, including, that:

Samisoni concluded:

"Despite all of this, the fastest and shortest way of resolving this will depend on your Honours suggestions and reasonable advice and to avoid us reaching a point where we are in conflict and that we are able to resolve this freely and reasonably to be in line with this era of 2022 and the resurrection of our salvation and to bring us true to our prayers for the benefit of ourselves, our children, family, country and our nation and above all God and Tonga are my inheritance."

In a postscript, Samisoni referred to a lawsuit against Westpac bank “as there was no records (bank statements online agreements of $1.06 million they had given that the allotment was advertised to $130,000 for 50 years. So, they had created an agreement to settle the loan (one-sided) ...”. As at the date hereof, the Court Management System does not contain any record of any such proceedings.

Pleaded positions

  1. The principal parties’ pleaded positions may be summarised as follows.[6]
  2. IMC alleged that Cabinet’s decision should be quashed because it:[7]
  3. The Ministry and the Government denied IMC’s claims on the following bases:[8]

For example:

Year 2017- CPI 105

Year 2022- CPI 115

(115-105)/105 equals 9.52% therefore rental for year 2022 should be increased by 9.52%. In this case, rental in 2017 is $3,000 so the new rental in 2022 should be $3,000 x 1.0952 = $3,285”;

(i) “the initial agreed rental amount in 2012 which was $100 does not reflect the calculation explained above (i.e. 5% of the market value of the land)”;
(j) “the $100 rental fee is the documented fee and the most standard amount that most landholders would put down on their application forms especially when they intend to transfer their rights over an allotment to another person for good”;
(k) “this $100 fee does not depict the actual value of the land nor the amount that the landholder transferred his rights to the land for”;
(l) “it is a common practice that landholders indicate a small amount of rent on the application form (i.e. $100) and receive a larger sum of money (i.e. $30,000) for the land in an outside dealing [to which the Ministry] is not privy”;
(m) “landholders normally do this for two reasons, firstly, to evade tax, and secondly, because selling of land is prohibited...”;
(n) the amount of debt owed by Samisoni “had nothing to do with the valuation of his land”;
(o) “it could be inferred that although [IMC] only registered the lease in December 2018, they had already acted on and assumed responsibility under the lease in 2017”;
(p) IMC was provided with sufficient information to make an adequate response and this is confirmed in paragraph 18 of the court ruling in LA 27 of 2018 where it states:
“Mr Tsai stated in evidence that when the land office advised his counsel, Mr Vaipulu, that it would recommend that the annual rent be increased to $3000, he instructed Mr Vaipulu that that annual rent was OK with him.”;
(q) on 16 August 2021, IMC was informed “of all relevant information” and notified of the intention to resubmit the rental renewal application to Cabinet; and
(r) although the Ministry's valuation report was confidential, “it did not bar [IMC] from submitting its own valuation report to justify its reasons for wanting to increase the rental fee to $500 per annum”.
  1. In reply, IMC contended, in summary, that:

Evidence filed for trial

  1. IMC filed a brief of evidence from Mr Tsai and an expert report from Mr Viliula Mafi, a property valuer. [9]
  2. The Defendants filed a brief evidence from Ms Pale and her separate comments on Mr Mafi’s report. They did not adduce any evidence from the Minister or any other member or representative of Cabinet.
  3. Samisoni did not give or call any evidence. Mrs Mailangi appeared at the trial and cross-examined the valuers.
  4. Further to the above background, the witnesses gave the following evidence in their respective briefs.
  5. Mr Tsai explained that:
  6. Mr Mafi opined, in summary, that:
  7. Further to the matter recited from the Defence above, in her briefs of evidence, Ms Pale stated that:[10]
“[8] The practise of valuation in the Ministry of Lands started in the early 1980s when the first few graduates from New Zealand and Papua New Guinea returned and established the valuation section. The most common valuation methodology used by the Ministry is the Sales Comparison Approach.
[9] The main purpose of this approach is to use comparable sales, and in Tonga's case, comparable gifts to derive an indicated market value. It is an attempt to predict what the most likely selling price would be within the basic valuation principle of bona fide sales concept. Once a rate is determined, it is adjusted to best reflect the subject land and it is applied to determine the market value or total land value.
[10] The annual lease rental equals to 5% of total land value and that has been the common practice that the Ministry used since the establishment of the valuation section of the Ministry.
[11] Since I started with the Ministry as a land valuer in 2010, I have conducted approximately 20 valuations of similar nature as this case and each valuation recommendation was accepted and approved by Cabinet.
[12] The latest valuation of the same nature was conducted in 2019 involving the same plaintiff and a different landholder, Mr Kisione Fakafanua. The same method was used to determine the annual rental and it was approved by Cabinet to be increased from $100 to $8,600 per annum.”
  1. Ms Pale’s evidence in this regard culminated with her recitation of the formula set out in paragraph 39(h) above. She also confirmed that her valuation did not take into account the building on the land.
  2. In response to Mr Mafi’s report, Ms Pale opined that:

Issues for trial

  1. Prior to the commencement of the trial and having regard to the novelty and significance of the issues raised in the case, a proposed, non-exhaustive list of issues was circulated to counsel so that the parties could consider and be heard on them. Broadly speaking, the main issues were stated as:
  2. Counsel were invited to make any comments on the identification, relevance and/or articulation of the issues, as well as to raise any additional or differently framed issues. At the commencement of the trial, all counsel agreed that the list accurately encapsulated all the issues to be considered and determined.[11] That concurrence then also focussed the cross-examination at trial.

Further evidence at trial

  1. Mr Tsai was not required for cross-examination and therefore his brief of evidence was tendered by consent, and he was not called.
  2. In what appears to have been another first in Tonga, the parties agreed with the Court’s suggestion that both valuers give evidence concurrently. The practice, known colloquially as ‘hot tubbing’, is commonplace in other major jurisdictions where more than one expert of like discipline is to give evidence.[12]
  3. There were no objections to either valuer’s stated expertise.
  4. Mr Mafi served for 30 years in the Ministry before retiring in 2006. He was educated in property valuation in New Zealand and Papua New Guinea in the 1970s and 80s. He opined that the principles of valuation are the same around the world and are not dependent on a particular county’s land system. He also confirmed that:
  5. However, it was the cross-examination of Ms Pale upon which the case turned. She testified and/or conceded, in summary, that:

Submissions

  1. Mrs Ebrahim submitted that the evidence at trial had established IMC’s pleaded bases for review of the decision, and further or in particular:
  2. At the conclusion of the evidence, Ms Sikalu conceded (quite correctly, with respect) that the decision was unlawful and could not stand. In her written submissions, she helpfully elaborated, in summary, that:
  3. Ms Sikalu indicated that the above position was consistent with advice given to the Defendants prior to trial but that she had been instructed to have the matter determined by the Court to “provide an opportunity to enact specific legislation or regulation to govern the revision of rentals”.
  4. Mrs Mailangi joined in the Defendants’ concession.

Consideration

  1. It remains therefore for the Court to explain why the conclusion reached by the parties is legally and undoubtedly correct.
  2. Pursuant to Order 39 rule 1 of the Supreme Court Rules, judicial review is available in any action against an inferior Court, tribunal or public body (including an individual charged with public duties) in which the relief claimed includes an order of mandamus, prohibition or certiorari, or a declaration or injunction. Here, the relief sought by IMC, quashing of the decision, was in the nature of certiorari.
  3. Depending on the nature and subject matter of the decision, the exercise of prerogative powers (i.e. common law powers of the Crown which have no statutory source) are amenable to review. Similarly, administrative decisions by statutory authorities, which affect the rights of individuals, are also justiciable: Flyniu v Ata [2006] Tonga LR 10.[14]
  4. More specifically, it has been held that whenever called upon to determine the legality of decision-making powers exercised under the Land Act, this Court should apply the same tried and tested judicial review principles that the courts in other jurisdictions apply when confronted with similar challenges. The legality of a statutory authority's decision to increase rent will generally be susceptible to judicial review: Tafa v Viau [2006] Tonga LR 125 at [51], [52].[15]
  5. Judicial review allows the court to exercise a supervisory role over, inter alia, public bodies and tribunals, to ensure that public powers are exercised lawfully. However, judicial review proceedings do not provide an appeal on the merits of the subject decision, but a review of the lawfulness of the procedure followed, including the lawfulness of the taking into account of matters considered: Touliki Trading Enterprises Ltd v Fakafanua [1996] TOCA 1.[16]
  6. In 'Atenisi Institute Inc v Tonga National Qualifications and Accreditation Board [2019] TOSC 45, the nature and ambit of review proceedings was summarised as:
“[91] Judicial review is not the same as an appeal. The Court is not concerned with reviewing the merits of the findings and conclusions of the statutory decision-maker. ‘The purpose of the remedy of judicial review is to ensure that the individual is given fair treatment by the authority to which he has been subjected. It is no part of that purpose to substitute the opinion of the judiciary or of individual judges for that of the authority constituted by law to decide the matter in question. The duty of the court is to confine itself to the question of legality. Its concern is with whether a decision-making authority exceeded its powers, committed an error of law, committed a breach of the rules of natural justice, reached a decision which no reasonable tribunal could have reached or abused its powers.’: Karalus v Royal Commission of Inquiry into the sinking of the MV Princess Ashika [2010] Tonga LR 133 at [3].[17]
[92] The grounds upon which administrative action is subject to judicial review have been conveniently classified as ‘illegality’, ‘irrationality’ and ‘procedural impropriety’: Pekipaki v Fifita [2018] TOCA 19 at [29].[18]”
  1. The principal grounds for judicial review may also include constructive failure to exercise jurisdiction, failure to afford procedural fairness, apprehended bias, acting for an improper purpose, taking an irrelevant consideration into account or failing to take a relevant consideration into account: Vergara v Chartered Accountants ANZ [2021] VSC 34.
  2. Material mistake as to an established fact is also an accepted ground of review. Where, for instance, the information the decision-maker acted upon was clearly incorrect, or where there is a 'misunderstanding or ignorance’ of an established and relevant fact, the decision may be susceptible to being set aside when those conclusions are so clearly insupportable as to amount to an error of law. Further, the decision-maker, in making its evaluation and drawing its conclusions, must proceed upon a correct interpretation of relevant law. To fail in any of these respects is an error of law: Rotomould (Pacific) Ltd v Ministry of Meteorology, Energy, Information, Disaster Management, Environment, Climate Change and Communications [2020] TOSC 114 at [11].[19]
  3. The instant proceeding involves, whether by express pleading or implicitly from the evidence (and ultimate concession by the Defendants), most of the above grounds.

Relevant statutory framework

  1. The starting point is a brief excursion through the existing statutory framework relevant to leases of land in Tonga and revisions of their annual rent.
  2. The Constitution prohibits the sale of land but permits leases of it (clause 104). Cabinet is empowered to determine the terms (i.e. number of years) for which leases shall be granted but no lease shall be granted for more than 99 years without the consent of His Majesty in Council. Cabinet is also empowered to determine the amount of rent for all Government lands (clause 105). The forms of deeds of leases, transfers and permits are as from time to time sanctioned by His Majesty in Privy Council (clause 106). All leases must be signed and sealed by the King or the Minister of Lands, and countersigned and sealed by a Cabinet minister. No lease or transfer will be considered valid or recognised by the Government unless registered in the office of the Minister of Lands (clause 110). No lease, sub-lease or transfer of either shall be granted without the prior consent of Cabinet where the term is 99 years, or less, or the prior consent of the Privy Council where the term is over 99 years (clause 114).
  3. The Land Act also prohibits the sale of land (ss 6 and 12). The term used in s 6 is "out-and-out sale". That term represents a modification of the term ‘sale’ used in the Constitution. As Ford J observed in Fonohema v Piukala [2001] TOLC 8, the term "out-and-out sale" is not defined in the Land Act but ‘it would cover a transaction purporting to be an absolute or outright sale of an allotment’. In any event, s 34 of the Interpretation Act requires every Act to be read and construed subject to the Constitution.
  4. The Minister is appointed under the Land Act as the representative of the Crown in all matters concerning the land of the Kingdom (ss 19(1)). The Minister’s powers are prescribed and include the power to grant leases with the consent of Cabinet (and subject to the consent of His Majesty in Council where the period exceeds 99 years) (ss 19(3)). The Minister is also empowered to collect the rents for all allotments on Crown land, and all leases (including sub-leases) and permits. Where the land leased is part of any hereditary estate or an allotment, the Minister is required to pay the lease rent to the Treasury and then issue a voucher in favour of the holder of the estate or allotment for that amount of rent less 10 per cent (ss 19(7)).
  5. Section 22 empowers the King with the consent of the Privy Council to make regulations for the administration of the Act or as may be necessary or expedient to carry out its objects and purposes (which are, in fact, not defined in the Act). Regulations may also be promulgated where there is no provision or no sufficient provision in the Act in respect of any matter or thing necessary or expedient to give effect to the Act, including, among other things, prescribing and defining the manner of doing or performing any act or thing under or for the purposes of the Act, and the time when or within which it shall be done or performed; prescribing forms of documents and instruments, and the conditions to be inserted or implied in grants, leases, permits, and other instruments; defining the duties of officers; and regulating the procedure in applications to the Minister of Lands.
  6. Section 56 permits the registered holder of a town or tax allotment to grant a lease over the whole or part of his town or tax allotment, provided, relevantly, that the consent of Cabinet has been obtained and where the lease is in respect of a tax allotment, the period shall not exceed 20 years.
  7. Section 57 provides that the rental payable in respect of a lease of a tax allotment shall be calculated at the rate of $10 per acre, provided that His Majesty in Council may from time to time by Order alter that rate (ss (1)).[20] The amount of rental payable in respect of a lease of a town allotment shall be as agreed between the parties thereto (ss (2)). Subsection (3) repeats ss 19(7) whereby the Minister is to collect the rents for all leased allotments, pay them into the Treasury and then issue a voucher in favour of the holder of the tax or town allotment for that amount of rent less 10 per cent thereof.
  8. Section 89 repeats s 56 by also requiring the consent of Cabinet before any lease may be granted. Section 90 permits any Tongan subject of full age who does not hold a tax allotment to apply to the Minister for a lease of a parcel of bush land. Section 92 provides that any lease granted under section 90 (or 91 - leases to occupiers of land in excess of statutory area) shall be in the form prescribed in Schedule IX, shall not exceed 50 years, and shall be renewable upon such conditions as to rent and methods of cultivation as may be ordered by regulations made under the Act. It is convenient to note here that despite the power to make regulations under s. 22, the only relevant regulation under the Act (as displayed in the Attorney General’s website of legislation in the Kingdom) appears to be the Rent of Leases to Tongans Regulation[21] which sets the rent of any lease issued under s. 90 (within Part V of the Act) at no more than 40 seniti per acre per annum. The lease here was not one granted pursuant to s. 90 (as suggested by Mrs Ebrahim in her submissions).
  9. Part VIII of the Act provides for registration of title. Specifically, ss 124(1) mirrors clause 106 of the Constitution by specifying that all applications, leases, sub-leases, transfers and permits shall be in the forms prescribed in Schedule IX with such variations as circumstances may require. Subsections (3) and (4) reflect clauses 99 and 110. Section 126 also provides that no lease, sub-lease, transfer or permit shall be effectual to pass or affect any interest in land until registered in the manner prescribed by, in the case of leases and transfers, ss 126 and 128 respectively.
  10. Schedule IX to the Act, which contains, inter alia, the standard form of a deed of lease (Form 3) and the additional covenant providing for five yearly rent revisions (Form 10) have been recited at paragraphs 8 and 9 above.

Observations on the statutory framework

  1. It may be observed at the outset that across that legislative landscape there is not one substantive provision in relation to revisions of lease rentals. Prior to the introduction of Form 10, the legislation did not provide for, or even contemplate statutory revisions of rent. In other words, as ss 57(2) expressly provides, the amount of rental payable in respect of a lease of a town allotment was entirely a matter of agreement between the parties to the lease. Notably, s 57 was inserted by Act 18 of 1976. Form 10 was inserted into Schedule IX[22] by the Land (Amendment No. 2) Act of 1953.[23] However, the amending Act relevantly contained nothing other than the terms of the covenant. The inducing provision, s 124(1) of the principal Act, sheds no light on the subject other than to require leases, transfers and permits to be in the forms provided in Schedule IX.[24]
  2. In Quensell v Minister of Lands [1962-1973] Tonga LR 25, Roberts J considered, in reliance upon an 1882 authority, that the wording of a specimen form in a Schedule to an Act cannot restrict or enlarge a provision in the Act itself, so that whatever conditions are in the form of lease in the Schedule must be subject to the provisions in the main body of the Act.[25] Here, as noted, there are no provisions in main body of the Act to support rent revisions as stipulated in Form 10.
  3. Since the decision relied upon in that case, s 8 of the Interpretation Act has been enacted to provide that a Schedule to an Act shall, together with any notes thereto, be construed and have effect as part of the Act. Similarly, at common law, it has been held that a Schedule to an Act is to be construed, by virtue of the functional construction rule,[26] as an adjunct to the main body of the Act but nevertheless fully a part of it.[27] Any conflict between the inducing section (or any other section of the Act) and the Schedule is to be resolved without regard to the fact that some of the relevant words are contained in the Schedule rather than in a section: IRC v Gittus [1920] 1 KB 563.
  4. As there was no challenge to the validity of the rent revision covenant in Form 10 raised in this case, I leave that question open.
  5. Therefore, as the legislation presently stands, and notwithstanding that Form 10 has been in effect for almost 70 years,[28] there is no statutory guidance, within the text of any relevant enactment, explanatory memoranda or otherwise, as to the purpose or reason lease rentals may be revised nor as to any of the circumstances, criteria, relevant considerations, method or formulae by which annual rentals, as originally agreed by the parties to a lease, may or should be altered by Cabinet, and if so, why, how and by how much. The legislation is so devoid of any substantive or operative provisions in this regard that it is not possible to interpret or imply any of those features to the task of a rent revision by Cabinet.

Lack of reasons for the decision

  1. It is also impossible to know the process or bases upon which Cabinet reached its decision to approve the Ministry’s recommendation in this case because the decision was not accompanied by any reasons. Even where, as here, there is no statutory requirement, a requirement to provide reasons may arise where the nature and impact of the decision itself is such that reasons be given as a routine aspect of procedural fairness and as being essential to allow effective supervision by the courts: Public Service Commission v Public Service Tribunal [2020] TOSC 58.[29] When any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals, the requirements of fairness will depend on the character of the decision-making body, the kind of decision it has to make and the statutory or other framework in which it operates. Further, it is well established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness: Tu'ipeatau v Kingdom of Tonga [1999] TOSC 50.[30]
  2. My provisional view, for the benefit of any future legislative work on this matter, is that the character of Cabinet as the apex decision-making body within the Executive Government, the nature of the power to determine disputed rent revisions, the potentially significant financial impacts on the parties to a lease (seen here in the decision to increase the annual rent from $100 to $3,000), the dearth of guidance for rent revisions within the current statutory framework within which Cabinet was required to operate, and to ensure effective supervision by the Court, all militate in favour of the view that reasons for the decision should have been provided. Any tension between the administrative law requirement of fairness and the confidentiality required by clause 137 of the Cabinet Manual of His Majesty's Cabinet[31] is a matter best resolved by the Legislature. However, again as this issue was not raised by any of the parties to the proceeding, I refrain from expressing any further or concluded view on it.

Lack of statutory bases

  1. In the absence of reasons for the decision, the text and amount of the Ministry’s recommendation and the approval of that amount in the decision supports a reasonable (and arguably the only) inference that Cabinet’s decision was based solely on the Ministry’s submission and recommendation. There was no evidence to the contrary. The above survey of the relevant legislation makes plain that there was no statutory basis for Cabinet requesting a recommendation from the Ministry, considering it or determining the review application in reliance upon or in accordance with it. In that event, the decision was therefore ultra vires. Further, without some statutory basis for making the Ministry’s recommendation relevant to the revision, the decision was also infected by Cabinet taking into account and acting upon an irrelevant consideration.
  2. Similarly, there was no statutory basis for the Minister to provide Cabinet with the recommendation for an increase to the annual rent. The Minister’s powers as conferred by the Act do not extend to providing recommendations based on a purported valuation of the leased land prepared internally by the Ministry, particularly where the details, assumptions, approach and calculations for which were never disclosed to Cabinet. Section 9 of the Interpretation Act provides that when in any Act, regulation or proclamation, power is given to any person to do or enforce the doing of any act or thing, all such powers shall be understood to be given as are reasonably necessary to enable any person to do or enforce the doing of the act or thing. However, here, the Land Act does not confer on the Minister any power to be involved in any manner in rent revisions by Cabinet required by Form 10. The Minister’s statutory power in relation to private leases of land is limited to granting, registering and administering the collection of rents payable under them. The Minister therefore acted beyond power. In turn, Cabinet’s decision based on the Minister’s recommendation was infected by the same error.
  3. Further, there was no stated or statutorily recognized basis for Samisoni’s original demand for an increase to $15,000 per annum (and his subsequent request for $8,600 per annum based on a different lease to which IMC was a party was totally irrelevant) any more than there was in IMC’s willingness to pay $500.

Ministry’s failure to provide and Cabinet’s failure to consider the valuation report

  1. Insofar as the decision was based on the Ministry’s purported valuation, the failure by Cabinet to request, and for the Ministry to provide, the underlying details of the valuation, resulted in Cabinet failing to take into account a most relevant consideration. Had Cabinet done so, and considered the assumed facts, approach, methodology and calculations of the valuation, in light of the reasons further below as to the legal errors and other shortcomings in the valuation, Cabinet would have had the opportunity at least to appreciate that the information it was acting upon was clearly incorrect, and that the Ministry’s valuation suffered from 'misunderstandings or ignorance’ of established and relevant facts, such that the conclusions therein were so clearly insupportable as to amount to an error of law.

The Ministry’s valuation ‘practice’

  1. As Ms Pale and Mr Mafi explained, the decision to ‘value the lease’ and the approach taken to the valuation exercise had developed and, until this case, continued to develop as a practice within the Ministry. The term ‘practice’ is necessary because of the lack of any statutory foundation for such valuations. As noted above, a statutory power will be construed as impliedly authorising everything which can fairly be regarded as incidental or consequential to the power itself. Therefore, a statutory decision-maker may develop a policy or practice to guide the exercise of a discretionary power. However, a policy or practice does not enjoy the status of legislation or regulation made under an Act. The Ministry's policy or practice therefore cannot create or confer on itself any power which is not provided for by the Act or Regulations: Jones Business Services Ltd v Kingdom of Tonga [2020] TOSC 101.[32] As the Minister here had no power under the relevant legislation to value leaseholds for the purpose of Cabinet’s revision of their rents, the Ministry’s practice of conducting valuations for that purpose was invalid.
  2. While it was never explained, the original decision by the relevant Minister commencing the practice of valuations for lease rent revisions and every decision to continue the practice since was infected by the same error of law.

The Ministry’s valuation report

  1. We come now to the valuation itself.
  2. The approach taken by the Ministry to the valuation exercise was infected by numerous errors of law. In light of the frank evidence of Ms Pale and Ms Sikalu’s concessions as outlined above, those errors may be succinctly stated.
  3. The sales comparison approach was derived from overseas jurisdictions which have systems of land law marked by the arch-principle of freehold title which may be bought and sold. Tonga’s land system does not.
  4. By definition, the sales comparison approach conflicts with Tonga’s statutory prohibitions against the sale of land.
  5. The term ‘lease’ is not defined anywhere in the legislation examined above. Even the standard deed of lease only refers to the lessee ‘holding’ the land for a specified period. A lease is an agreement whereby a holder of land (lessor) vests in a lessee an estate or interest in land based on a legal entitlement to exclusive possession of specified land (or other property such as buildings) for a specified period of time in return for the payment of specified rent.[33] In Tonga, the purpose or use to which the demised land may be put is also a requisite term of the parties’ agreement. Also, in Tonga, before a lease may be granted and take legal effect, the consent of Cabinet is required and the lease must be registered.
  6. The concept of ‘land value’ in the context of leaseholds being equivalent to the amount of a ‘gift’ or upfront payment a lessor is prepared to receive and a lessee is prepared to pay, in addition to whatever annual rents are agreed (or revised by Cabinet in the event of disagreement) for the balance of the term of the lease, does not have any basis in Tonga’s written law nor is it consistent with the sales comparison approach.
  7. Upfront payments for leases are not ‘gifts’ as described by Ms Pale. A gift is property voluntarily and gratuitously transferred by a donor to a donee without receiving consideration and with no intention that the property will be returned to him: Hausia v 'Otukolo [2022] TOSC 71 at [103].[34] Upfront payments for leases are very rare in other common law jurisdictions. Even the standard deed of lease in Form 3 to Schedule IX of the Land Act only provides for the payment of annual rents. At common law, where there is an additional consideration, such as a fine or premium, it is proper to state it in the premises to the lease, to ensure the due operation of the deed and to ascertain the proper stamp duty or other tax.[35] Accordingly, in my view, upfront payments for leases in Tonga ought be regarded as forming part of the total consideration paid by a lessee and received by a lessor in exchange for the granting of the lease.
  8. The lack of any Government controlled or independently curated database or record system for upfront payments rendered the approach taken by the Ministry – of asking anyone who might be prepared to disclose what they paid for a lease of similar property – inherently unreliable, subjective and arbitrary. There was no sound evidential basis for the assumed value of the subject land.
  9. The value of any lease will depend on, among other things, the use to which the parties agree the land may be put. For instance, land which may be used for commercial or industrial purposes is likely to fetch a higher ‘price’ than land which can only be used for residential purposes. So too, will any improvements by the lessor on the land be likely to affect the terms upon which the parties agree. The situation may be different where it is the lessee who subsequently constructs improvements on the land[36] during the term of the lease. While the general principle in Tonga on improvements being personalty and separate to the land remains,[37] and subject to any relevant terms of their agreement, the lessee will be entitled to remove those improvements at the end of the lease.[38]
  10. However, even if it be assumed (in the absence of any clear expression of intention in the legislation) that the so-called ‘value’ of a lease is relevant for the purposes of considering whether the annual rent should be altered on a five yearly revision, then the total consideration (i.e. financial or other benefit) the lessor agrees to receive, and the lessee agrees to pay over the life of the lease, must be taken into account. As noted, the total consideration must include both any upfront payment and the annual rent. In the instant case, the agreement by Westpac to forgive Samisoni’s debt constituted a financial benefit to Samisoni of over $1 million in exchange for the lease. That benefit should have been taken into consideration.
  11. The Ministry’s approach of basing lease land value on upfront payments but at the same time disregarding what was ‘paid’ in this case by Westpac to Samisoni was legally irrational. It also constituted a failure to take into account a relevant consideration. The Ministry’s other practice of not requiring (or at least requesting) parties to disclose the amount of their upfront payments constituted a failure to take into account a relevant consideration.
  12. The revenue status of upfront payments is also unclear. As noted, the concept of paying usually very substantial amounts upfront for a lease is not something recognised in the relevant Tongan legislation (including the forms) outlined above. The only payments recognised are the annual rents. By comparison, s 2 of the Income Tax Act defines “rent” as any consideration for the use or occupation of, or the right to use or occupy any land or building, including any premium, fine, or like amount.[39] That would suggest that upfront payments for leases may be characterised either as capital payments (akin to a purchase price) for the right to lease the relevant property at the subsequent annual rental amount/s or as accelerated rent payments which might be treated, for tax purposes, as either a lump sum in year one or apportioned over the term of the lease. There was also no clear, admissible or reliable evidence as to any legal requirement (or even custom) for lessors to declare upfront payments to the tax authorities. In the absence of evidence to the contrary, and the fact that the amounts are not disclosed to, nor required to be disclosed by, the Ministry of Lands, it is reasonable to assume that in the majority of cases, those payments are not declared and therefore, not taxed. There was no evidence that the Ministry and, by extension, Cabinet, ever considered any of those matters.
  13. The Defendants’ other pleaded rationale for the recommendation and decision to increase the rental thirty-fold from $100 to $3,000 was effectively to curb tax evasion. It was asserted to be commonplace (i.e. “everybody knows that”) for lessors to insert small annual rents in the relevant lease documents to minimise the amount the Government deducts through the Minister’s collection and voucher system. There was no admissible evidence adduced during this proceeding to prove that supposition.
  14. However, even if that mischief is assumed to be the case, and even though the modern attitude of the courts is that the revenue from taxation is essential to the running of the state, and that the duty of the judiciary is to aid its collection while remaining fair to the subject,[40] there is simply no legislative power whatsoever to use the Form 10 rent revision procedure for that purpose. The lack of any substantive provisions in the Act (or the amending Act) also precludes the court from giving effect to the presumption that where an enactment is to remedy a particular mischief, the legislature intends that the court, when considering the enactment, should find a construction which applies the remedy provided by it in such a way as to suppress that mischief.[41]
  15. On that basis, again, the decision was ultra vires and for an improper purpose. In the absence of any proper evidence on the point, potential tax evasion was also an irrelevant consideration. The rationale posited on behalf of the Defendants is also irrational because while an increase in rent may benefit the lessor, and indirectly, Government revenue, it is an impost on the paying lessee who is unlikely to be a party to any tax evasion by a lessor recipient of the money. That consideration is also consistent with the general disinclination on the part of the courts to allow a party to a contract to take advantage of its own wrongdoing: Kacific Broadband Satellites International Ltd v Registrar of Companies [2021] TOSC 93 at [73].[42]
  16. There was also no logical reason for not taking into consideration the payment made by IMC to the Simpsons for the transfer of the remainder of the lease. Even though that money was not to Samisoni’s benefit, in considering whether the annual rent payable by IMC should be increased, the amount IMC paid for the transfer was, at least, a relevant consideration.
  17. For the same reasons explained in relation to the Ministry’s purported ‘practice’ in paragraph 91 above, there was no statutory basis for the adoption of the 5% of purported value methodology to determine annual rents (particularly in the face of the $100 agreed by all the parties to this lease throughout) nor for the application of the consumer price index for future rents. As it was referred to in the evidence, the website of the Tongan Statistic[43]Department43 explains, relevantly, that:
“The Monthly Consumer Price Index (CPI) published by the Statistics Department is accepted as the official measure of inflation in Tonga. The CPI measures the changing price of a fixed basket of goods and services purchased by Tongan households. The selection and relative importance of the goods and services in the CPI basket represents the overall expenditure pattern of Tongan households.
The CPI is used by ministries and other agencies for monitoring economic performance and by the National Reserve Bank of Tonga to help set monetary policy.
...
There are 156 items in the Tonga basket classified to twelve major groups. ...”

None of those items include annual rents for leases of land.

Interference with common law rights

  1. Perhaps the most serious vice in the decision and the process by which it was made is that it had the effect of Cabinet re-writing the terms of the parties’ respective agreements. Freedom of contract is one of the most fundamental common law rights. It is a well-established principle of statutory interpretation, designed to avoid cases of doubtful penalisation,[44] that Parliament is presumed not to have intended to limit fundamental rights, unless it indicates that intention in clear terms.[45] Although, of course, Parliament may abolish, modify or displace any common law rule,[46] there is a general presumption that it did not intend to make changes to the common law except expressly or by necessary implication.[47] The courts should not impute to the legislature an intention to interfere with fundamental rights. Therefore, an Act should not be construed so as to interfere with, or prejudice established private rights under contracts or title to property unless it is clearly intended to do so. Such an intention must be clearly manifested by unmistakable and unambiguous language.[48] This presumption constitutes a substantial level of protection as “an aspect of the principle of legality which governs the relations between Parliament, the executive and the courts. The presumption is not merely a common sense guide to what a Parliament in a liberal democracy is likely to have intended; it is a working hypothesis, the existence of which is known both to Parliament and the courts, upon which statutory language will be interpreted. The hypothesis is an aspect of the rule of law”.[49]
  2. Firstly, in the present case, Samisoni agreed to receive the benefit of over $1 million in debt being forgiven, and Westpac agreed to forgive the debt, in exchange for the 50-year lease at an annual rental of $100 (or a total rental of $5,000 over the term of the lease). They were the main terms of those parties’ agreement. Similarly, IMC agreed to pay the Simpsons $190,000 for a transfer of the remainder of the lease but again only at an ongoing annual rent of $100. In both cases, by operation of the Form 10 covenant, the annual rent was agreed to be subject to revision every five years from the date of the original lease. However, by reason of the deficiencies in the legislation referred to above, the way in which that revision was to operate, including any determination by Cabinet if the parties disagreed, was entirely uncertain. For that reason, the covenant, as a term of the lease, was arguably unenforceable: Vunipola v Tonga Rugby Union Incorporated [2021] TOSC 141.[50]
  3. Secondly, the effect of the decision, if left to stand (and assuming no further significant increases over the balance of the term of the lease), would have been to increase the rent to be received by Samisoni, and to be paid by IMC, by 3,000%. At the time of his agreement with Westpac, having regard to the size of the upfront financial benefit he received, Samisoni could only have legitimately expected to receive a total of $5,000 in annual rent over the term of the lease. Conversely, when IMC entered into the transfer agreement with the Simpsons, it had a legitimate expectation, having regard to the amount it paid up front for the transfer, that it would only have to pay $100 per year for the balance of the term. As Ms Pale explained, that appears to be the case in the vast majority of leases where the annual rents either remain the same or are adjusted by mutual agreement. It is also the case with most Government leases, although that seems to be the product of a purported exercise of discretion by the Minister which is not found anywhere in the relevant legislation.
  4. Thirdly, had any of the paying parties to the lease here been told at the time of entering their respective agreements, that upon the first five yearly revision, the annual rent would be increased by 3,000%, it is highly unlikely, in my view, that any of them would have agreed to pay the amount of the upfront payment that they did. There is no clear language within the relevant legislation to permit such interference with contractual rights. Accordingly, for that further reason, the decision was ultra vires.
  5. Fourthly, it is a principle of legal policyForward_fnref__1_68616C735F73746174757465735F69755F373131_ID0ESBAC_REF that law should be just and fair, and that court decisions should further the ends of justice. The court, when considering, in relation to the facts of the case before it, which of opposing constructions of an enactment would give effect to the legislative intention, should presume that the legislator intended to observe this principle. The court should therefore strive to avoid adopting a construction that leads to injustice or unfairness.5[51]A further principle of legal policy is that law should be certain, and therefore predictable; so that the court should therefore strive to reach a construction which was reasonably foreseeable by the parties concerned.5[52]In my view, any construction of the Form 10 covenant which validated the process and approach taken by the Ministry and Cabinet in this case would be inimical to both those principles.
  6. Fifthly, the approach taken, without a valid statutory or factual basis, and the resulting overwhelming increase in the rent, rendered the decision manifestly unreasonable such that no reasonable decision maker could have arrived at the decision: Moala v Public Service Commission [2012] TOCA 14 at [12].[53]

Backdating the increase

  1. The decision to effectively backdate the increased rent to 2017 resulted in the Ministry demanding that IMC pay $14,500 in arrears. As an additional covenant to every lease, Form 10 was intended to be incorporated in the standard deed of lease, as was physically the case here. The covenant provides for a revision “each 5 years from the date hereof”. As a term of the deed of lease, there can be no doubt that the “date hereof” refers to the date of the deed of lease. Therefore, a revision is to occur every five years from the date of the original lease, which here, was 26 July 2012.
  2. However, the decision to backdate the increase failed to take into account, and was inconsistent with, s 126 of the Act. The effect of that provision was that until the transfer to IMC was registered in December 2018, it was ineffectual to pass or affect any interest in the land to IMC. If, therefore, IMC had no enforceable right or interest in the land until that later date, it could not be liable for any arrears of increased rental prior to that date. The intervening delay was the product of decisions by the Ministry to defer registration (in order, it was said, to await the outcome of the Land Court proceedings even though judgment in that case was delivered in December 2019) and by Cabinet to defer consideration of the review application (for reasons which were never explained in the evidence).

Natural justice

  1. Where Parliament confers a statutory power to destroy, defeat or prejudice a person's rights, interests or legitimate expectations, Parliament is taken to intend that the power be exercised fairly and in accordance with natural justice unless it makes the contrary intention plain. This principle of interpretation is an acknowledgment by the courts of Parliament's assumed respect for justice: Kingdom of Tonga v Tapueluelu [2009] Tonga LR 86.[54]
  2. The repository of a power, such as Cabinet, has an obligation to adopt a reasonable and fair procedure before exercising the power. A court will intervene to ensure that Cabinet follows a proper process in making its decision: Kaufusi v Veatupu [2020] TOCA 7.[55] The ultimate touchstone is fairness: Latu v Magistrates Court of Tonga [2020] TOSC 81.[56] When the Minister or Cabinet has acted in breach of natural justice to an affected person, the decision may be unlawful: Manu v ‘Aholelei [2015] Tonga LR 135.[57]
  3. It is clear law that a person whose rights, interests or legitimate expectations are imperilled by an official's consideration of some other person's application will generally be entitled to a fair opportunity to be heard before a decision adverse to him or her is made: Tafa v Viau [2006] Tonga LR 125.[58] An opportunity to be heard must be preceded by full and sufficient notice of the complaint and, where appropriate, of the decision being considered.[59] That would ordinarily require the party affected to be given the opportunity of ascertaining the relevant facts and to be informed of the nature and content of adverse material, or directing his mind to the critical issues or facts on which the decision is likely to turn unless the recognition of the issue was, from the material with which he was provided, an obvious and natural conclusion to draw: 'Atenisi Institute Inc v Tonga National Qualifications and Accreditation Board [2019] TOSC 45 at [271]. There are many situations where the principle of natural justice, which is a principle of fairness, requires quite detailed information to be furnished to a person who may be affected by a decision, and may even, perhaps, require the provision of an opportunity to have a full hearing: Tukuafu v Kingdom of Tonga [1999] Tonga LR 127 (CA).
  4. In the present case, both Samisoni and IMC were clearly entitled to be provided with the Ministry’s valuation report and any other information upon which it was based (e.g. details of the persons to whom Ms Pale said she spoke about how much they paid for their lease nearby). There was nothing confidential about the valuation, especially when the conclusion in it was to be the recommendation to Cabinet. Without the full valuation, neither party could understand the basis for the Ministry’s recommendation nor make any informed decision about his/its position in respect of the recommendation. As such, the opportunity purportedly afforded by the Ministry for them to be heard was futile, while they remained effectively ‘in the dark’. The problem was further compounded by the lack of any statutory guidance on, firstly, the basis for rent adjustments, so that the parties themselves could understand the intended framework within which their negotiations might be conducted; and secondly, if they could not agree, how rent revisions were to be considered and determined by Cabinet.
  5. Accordingly, the Ministry and Cabinet breached the requirements of natural justice and procedural fairness.

Result

  1. For those reasons, Cabinet’s decision on 27 October 2021 to increase the annual rental for lease No. 8223A was unlawful.
  2. Accordingly, the decision is quashed and set aside.
  3. Samisoni’s application for rental revision is to be remitted back to Cabinet for reconsideration and determination in accordance with law and these reasons for judgment.
  4. By consent, the Defendants are to pay the Plaintiff’s costs of the proceeding, to be taxed in default of agreement.
  5. Mrs Mailangi sought an order that the Defendants also pay Samisoni’s costs. Ms Sikalu opposed that order. After hearing from the parties, I am satisfied that while Samisoni’s (repeated) requests for an increase in the annual rental initiated the process by which the Ministry prepared its valuation of the property and recommendation to Cabinet, he did not have anything to do with the approach adopted and process undertaken by the Ministry, and by extension, Cabinet, in arriving at the decision. However, once the proceedings commenced, Samisoni adopted an effectively neutral stance. He therefore ought to have abided the decision of the Court and thereby would have obviated the costs of any appearances by counsel during the proceeding and at the trial. While Mrs Mailangi’s participation in the trial was of assistance, it was not reasonably necessary in order to defend Samisoni’s neutral interests. Of course, those costs could also have been avoided or significantly reduced had the Defendants conceded the claim much earlier. In all the circumstances, I consider it appropriate to order that the Defendants pay half of Samisoni’s costs of the proceeding, to be taxed in default of agreement.
  6. Finally, it is hoped that these reasons will assist the Legislature in reviewing this aspect of land law in Tonga. It is clear that, notwithstanding that the Form 10 covenant for five yearly rent revisions for leases has been in force for almost 70 years, ‘all the implications have not yet been worked out’[60] and that remedial legislative reform and clarity are urgently required.



NUKU’ALOFA
M. H. Whitten KC
18 November 2022
LORD CHIEF JUSTICE

[1] Decision No. 516.

[2] Schedule IX, Form 3.

[3] Decision No. 1180.

[4] LA 27 of 2018.

[5] Decision No. 1059.

[6] Samisoni filed a defence but did not raise any discrete issues.

[7] Statement of Claim, 6 April 2022.

[8] Joint Statement of Defence dated 17 May 2022.

[9] Dated 29 July 2022.

[10] Brief of evidence, 19 August 2022 and “Addition Comments” in response to Mr Mafi’s report, 25 August 2022.

[11] At that time, it was not clear from the copy of the original lease between Samisoni and Westpac in the court book whether the lease contained the Form 10 covenant. During the trial, Ms Pale produced the original lease which did contain the Form 10 covenant. The original documents also showed that the indenture of transfer did not contain the Form 10 covenant. Accordingly, issues 1.1 to 1.3 were answered.

[12] For example, see the UK Civil Procedure Rules, Part 35 and Practice direction 35 section 11; Rule 23.15 of the Australian Federal Court Rules 2011; “Using the ‘Hot Tub’ - How Concurrent Expert Evidence Aids Understanding Issues”, by Hon. Steven Rares of the Australian Federal Court, 12 October 2013; “Concurrent expert evidence – a gift from Australia”, lecture by Lord Justice Jackson at the London Conference of the Commercial Bar Association of Victoria on 29 June 2016; Powerco Limited v The Commerce Commission and anor [2006] NZHC 662.

[13] For example, in Victoria, see the Retail Leases Act 2003 and the Residential Tenancies Act (VIC) 1997; and in New Zealand, see Part 8 of the Land Act 1948 and Part 2 of the Residential Tenancies Act 1986.

[14] Citing Council of Civil Service Unions v Minister for Civil Service [1983] UKHL 6; [1984] 3 All ER 935 (HL) and R v Secretary of State for Foreign & Commonwealth Affairs ex p Everett [1988] EWCA Civ 7; [1989] 1 All ER 655 (CA) at 660.

[15] Citing Wandsworth London Borough Council v Winder [1984] UKHL 2; [1984] 3 All ER 976, followed in Doyle and others v Northumbria Probation Committee [1991] 4 All ER 294.

[16] Citing Poananga v State Services Commission [1985] 2 NZLR 385 at 410; cf Minister for Aboriginal Affairs v. Peko-Wallsend Limited (1986) 162 CLR 24 at 39 - 42.

[17] Referring to Halsbury’s Laws of England, vol 1(1), p.60.

[18] Referring to Lord Diplock in Council of Civil Service Unions v The Minister for the Civil Service [1985] AC 374, 410.

[19] Citing Tafa v Viau [2006] Tonga LR 125 at [62]; Kautoke v Public Service Commission [2019] TOCA 9 at [43], [44].

[20] The text of the provision states “in respect of a lease, a tax allotment” and appears to have typographically omitted the word “of” where the comma appears. By Order at G. 302/78, His Majesty in Council ordered that the rental be such as is agreed between the parties.

[21] CAP. 20.01.06, 19th September 1930.

[22] Then Schedule VIII.

[23] Act No. 16 of 1953.

[24] The condition “with such variations as circumstances may require” may arguably be a basis for permitting parties to contract out of the Form 10 covenant as Ms Pale observed in some leases (although again what those circumstances might be is not elucidated by the provision).

[25] Citing Dean v. Green (1882) referred to in Maxwell’s Interpretation of Statutes 10th Edition on page 163.

[26] An enactment must be construed so that significance is given to each component of the Act containing it according to its legislative function as such a component: Bennion, Statutory Interpretation (7th Edn, 2017) Section 11.1.

[27] R (on the application of the Crown Prosecution Service) v Bow Street Magistrates' Court [2006] EWHC 1763 (Admin), [2006] 4 All ER 1342.

[28] As referred to in decisions such as Fotofili v Free Wesleyan Church (No. 2) [1995] Tonga LR 101, The Church of Jesus Christ of Latter Saints in Tonga Board v Fepale [2011] TOLC 2 and Australia and New Zealand Banking Group Ltd v Tatola [2011] TOLC 3.

[29] Citing R v Higher Education Funding Council, ex parte Institute of Dental Surgery [1993] EWHC Admin 5; [1994] 1 All ER 651; R (on the application of CPR Kent) v Dover District [2018] 2 All ER 121.

[30] Applying the dictum of Lord Bridge in Lloyd v McMahon [1987] UKHL 5; [1987] 1 All ER 1118 at 1161 as cited by Lord Donaldson MR in R v Civil Service Appeal Board ex p. Cunningham (1991) All ER 310 at 318f (CA).

[31] CAP. 01.01.2

[32] Referring to ‘Atenisi Institute Inc v Tonga National Qualifications and Accreditation Board [2019] TOSC 45, citing Re Minister for Resources; ex parte Cazaly Iron Pty Ltd [2007] WASCA 175 and Vai v 'Uliafu [1989] Tonga LR 56.

[33] E.g. Cocker Enterprises Ltd v McCarthy (trading as Le-Ata Fashion Boutique & Gift Shop) [2021] TOSC 1 at [75].

[34] Citing Tauelangi v Hemaloto [2016] TOSC 22. See also Kalaisi v Maile [2016] TOLC 8 at [66], [67].

[35] Halsbury’s Laws of England, fourth edition, volume 27, paragraph 106.

[36] For town allotments, with the consent of the Minister as required by the additional covenant in Form 7.

[37] See the discussion in Lopeti v Lopeti [2022] TOLC 7 at [62] to [64].

[38] As provided in the Form 3 standard Deed of Lease.

[39] See also ss 60(9) which provides that rent shall be Tongan-source income if it is derived from (a) the lease of land in Tonga; or (b) the lease of a building or other structural improvement to land in Tonga.

[40] See e.g. IRC v Berrill [1982] 1 All ER 867.

[41] Heydon's Case [1584] EngR 9; (1584) 3 Co Rep 7a which continues to be cited e.g. Blackwell v England [1857] EngR 906; (1857) 8 E & B 541 through to Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] UKHL 2; [1975] AC 591 and since. See also Bennion, Statutory Interpretation (7th Edn, 2017) Section 10.5.

[42] Citing Gnych v Polish Club Limited [2015] HCA 23; (2015) 255 CLR 414 at [45].

[43] https://tongastats.gov.to/statistics/economics/consumer-price-index/

[44] Sheffield City Council v Yorkshire Water Services Ltd [1991] 2 All ER 280; TW Logistics Ltd v Essex County Council [2021] UKSC 4, [2021] AC 1050.

[45] Allen v Thorn Electrical Industries Ltd [1967] 2 All ER 1137, CA; Fifita v Fakafanua [1998] TOCA 1; Director of the Assets Recovery Agency v Green [2005] EWHC 3168; [2005] All ER (D) 261 (Dec) at [43]: Volume 44(1) of Halsbury's Laws of England 4th edn, para 1464.

[46] E.g. the Consumer Protection Act 2001.

[47] Zuberi v Lexlaw Ltd (General Council of the Bar of England and Wales intervening) [2021] 4 All ER 494 at [31], citing Bennion on Statutory Interpretation (7th edn) paras 25.6, 25.8.

[48] Coco v The Queen [1994] HCA 15; (1994) 179 CLR 427 at 437.

[49] Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40; 221 CLR 309 at [21], citing Lord Steyn in R v Home Secretary; Ex parte Pierson [1997] UKHL 37; [1998] AC 539 at 587, 589.

[50] See also e.g. Dhanani v Crasnianski [2011] EWHC 926 (Comm), [2011] 2 All ER (Comm) 799.

[51] E.g. Miles v Wakefield Metropolitan District Council [1985] 1 All ER 905, CA; on appeal [1987] UKHL 15; [1987] 1 All ER 1089, HL.

[52] E.g. Corby District Council v Holst & Co Ltd [1985] 1 All ER 321–327, CA.

[53] Also known as legal or ‘Wednesbury unreasonableness’ from the decision in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223.

[54] Citing Gleeson CJ in Jarratt v Commissioner of Police for New South Wales [2005] HCA 50; (2005) 224 CLR 44.

[55] Citing Tafa v Viau, ibid, and Kioa v West [1985] HCA 81; (1985) 159 CLR 550 at 627.

[56] Citing DHP19 v Secretary of the Department of Health [2019] FCA 1451.

[57] Cited in Kaufusi v Veatupu, ibid, at [38], [39].

[58] Citing Hakeai v Minister of Lands & ors [1996] Tonga LR 142, 143.

[59] Latu v Magistrates Court of Tonga, ibid, at [89], citing Utah Construction and Mining Company v Watson [1969] NZLR 1062 (CA); Y v M [1994] 3 NZLR 581.

[60] An expression of the Court of Appeal in Mangisi v Koloamatangi [1999] TOCA 9 on the related topic of the legal status of buildings and fixtures on land in Tonga.

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