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Tonga Development Bank v Taumoepeau [2024] TOSC 54; CV 32 of 2024 (2 August 2024)

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


CV 32/2024


[1] TONGA DEVELOPMENT BANK
[2] LATAANGA KAVA
Plaintiffs


-v-


[1] TANIELA TAUMOEPEAU
[2] TATAFU MOAEAKI
[3] NATIONAL RESERVE BANK OF TONGA
Defendants


ORDERS MADE BY : COOPER J
DATE OF ORDER : 2 August 2024


THE COURT ORDERS THAT:

  1. The application for leave to commence judicial review is refused.

REASONS


  1. Filed on 11 July 2024 was an ex parte application for leave to commence judicial review proceedings, pursuant to Order 39 Rule 1, et seq, Supreme Court Rules.
  2. The following material was filed in tandem with the application, the Memorandum and proposed Statement of claim as well as
  3. Following an ex parte hearing of 18 July 2024, which adjourned part-heard to 19 July 2024, further material was served later that same day:
  4. The above material along side the proposed Statement of Claim sets out its history.

Background

  1. On 2 November 2023 the Tonga Development Bank (TDB) held a Special Board Meeting[1] and resolved to implement a 5 year strategic plan. Said by Mrs. Emeline Tuita’s (CEO TDB) to stem from that meeting was the proposal the new position of COO be created.[2] Though the Board Memorandum of 2 November 2023 does not mention this role.
  2. Mrs. Tuita deposed that the office of COO would report directly to her as CEO.
  3. Mrs. Tuita’s affidavit continued (paragraph 3)

I appointed [Mrs. Kava] to the role of COO on or about 2 or 3 November, having gone through a fit and proper assessment as required under PS8 and TDB’s Fit and Proper Policy for Responsible Persons.

  1. PS8 is a reference to National Reserve Bank of Tonga Prudential Statement no.8 Revised 2014[3] (PS8). In the introduction to PS8 it sets out

This Statement is issued in terms of Section 15 (3) Financial Instructions Act 2004 (the Act)

  1. Section 15 (3) of the Act mandates NRBT to :

...issue in writing prudential statements, guidelines, directives, and other acts on regulatory and supervisory matters, including requirements for licensing, ownership and management of licensed financial institutions.

  1. Broadly speaking, PS8 sets out the framework for the manner a Licensed Financial Institution (LFI) must comply with appointing people with managerial authority, also specifically (paragraph 9 d.) those that report directly to the CEO. It includes the criteria for judging whether a person is fit and proper (paragraph 12) for the post and the manner and timing for informing NRBT of a person nominated to such a role (paragraphs 18-20).
  2. Further, PS8 provides for the removal of any such person so appointed (paragraphs 23-25).
  3. It states :

23. Notwithstanding the emphasis on institutional self assessment in respect of fit and proper requirements, the Reserve Bank may, in terms of section 33 of the Act, direct a LFI to remove an auditor, director or manager where it finds that such a person is disbarred in terms of the legislation or it has concerns about fitness and propriety.

  1. Section 33 of the Act, of which paragraph 23 of PS8 refers, is entitled

Penalties and Remedial Actions

  1. It states

(1) The Reserve Bank may impose any of the measures in this section where –

(a) a licensed financial institution or any of its officers, directors or shareholders contravenes any provision of this Act or any directive, prudential statements, or any act or decision, issued in accordance with this Act or any other relevant Act; or

(b) in the opinion of the Reserve Bank, a licensed financial institution conducts unsafe or unsound activities including any action, or lack of action, which is contrary to international sound practices and standards of banking operation, the possible consequences of which, if continued, would result in risks to itself, its customer or to the financial system.

  1. The remaining subsections, (2) to (6) are steps that NRBT may take in the event that an LFI (as above, at my paragraph 14)

(a) ...contravenes any provision of this Act or any directive, prudential statements, or any act or decision, issued in accordance with this Act or any other relevant Act; or

(b) in the opinion of the Reserve Bank, a licensed financial institution conducts unsafe or unsound activities including...

(emphasis added)

  1. On 19 April 2024 TDB wrote to NRBT to state that Mrs. Kava had been appointed COO[4] after the 3 November 2024 Board Meeting when the new Strategic Plan was decided upon. The letter went on to explain that Mrs. Kava had been assessed as compliant with PS8 and that she was to report directly to TDB CEO.
  2. It is convenient at this point to note that TDB had written to NRBT on 5 April 2024, 26 April 2024, 13 May 2024, 7 June 2024[5]; each time Mrs Tuita was away abroad, to inform them that Mrs. Kava was filling the role of Acting CEO of TDB, on each occasion.
  3. Moving on, 11 June 2024 NRBT wrote to Mr. David Kaufusi, the Compliance Manager at TDB, informing him (the Objection)

RE: Appointment of Mrs. Lataanga Kava as Chief Operating Officer and Acting Chief Executive Officer


I refer to your letter dated 19th April 2024.


Please be advised that after a thorough review of the information submitted, the NRBT hereby objects to the appointment of Mrs. Lataanga Kava as the Chief Operating Officer (COO). The decision is in accordance with the Banking Act 2020, Section 31. This also extends to the appointment of Mrs. Kava as the Acting Chief Executive Officer since 'Emeline Tuita's absences from office.

We look forward to your ongoing cooperation to ensure TDB remains compliant with the Reserve Bank's requirements.


  1. According to the proposed Statement of Claim (paragraph 14) a letter was sent by Mr. Kaufusi to the Assistant Governor - Policy of NRBT questioning this decision and requiring clarification, including under which statutory provision the decision had been reached. (I have not been provided with a copy of that letter.)
  2. In any event, there was a meeting between a number of the parties involved in both NRBT and TDB on 17 June 2024. There are notes of that meeting annexed to Penisimani Vea’s affidavit at “E”.
  3. In the fourth line of those notes it states that they are the record of that meeting and “...the content was ‘without prejudice.’ ”
  4. There then followed a letter from the first Defendant, Mr. Daniel Taumoepeau, again to Mr. Kaufusi, dated 18 June 2024[6]

Dear David,


RE: Appointment of Mrs. Lataanga Kava as Chief. Operating Officer and Acting Chief Executive Officer


I refer to your letter dated 14th June 2024 and thank you for meeting us on the 17. June2024. As discussed during the meeting, please be advised that the objection to the appointment of Mrs. Lataanga Kava was in accordance with the Banking Act 2020, Section 31(1)(j) which sfates “No person shall be appointed or elected as a director or to the management of a bank who falls under such criterion or criteria as may be established by the Reserve Bank in a directive, prudential statement or other acts or decisions" (emphasis added) in conjunction with Prudential Statement (PS) 8 Fit and Proper Requirements” paragraphs 10 to 13.


Furthermore, the objection was specifically for the appointment of Mrs Kava to Chief Operation Officer and Acting Chief Executive Officer. Please note that paragraph 19 states that “The Reserve Bank reserves the right to require the proposed appointment to be overtumed if the Reserve Bank is of the opinion that the person is not a fit or proper person to occupy the position for which they are being considered."


However, PS 8 paragraph 23 to 25 state that TDB may request that the Reserve Bank review such a decision but that the "onus is on the person or institution to demonstrate that he or she Mrs Kava] is fit and proper to carry on the business concerned, or exercise the responsibility proposed? If so inclined, paragraph 26 dictates that "Applications for review of the fitness and propriety of an individual should be directed to the Governor, National Reserve Bank of Tonga."


I hope that this clarifies our position and we look forward to your ongoing cooperation to ensure TDB remains compliant with the Reserve Bank's requirements.


  1. The Objection, it is deposed in the further material filed 18 July 2024, had more to it than just a nominal pronouncement.
  2. Alekisio Pahi[7] is the Acting Chief Financial Officer (ACFO) at TDB. His role includes reporting to NRBT on such matters as TDB’s Daily Cheque Exchange Settlement (CES) and Monthly Financial Institutions Divisions (FID).
  3. These reports are required to be signed off by both him and COO, Mrs Kava.
  4. On 27 June 2024 he received a phone call from Taufa Lutui at NRBT advising him that NRBT no longer recognised Mrs. Kava as a signatory and later that day in another phone call that she, Mrs. Kava, had to be replaced as a signatory to these reports.
  5. The Plaintiffs thereby argue the Objection actually amounts to a decision by NRBT to effectively remove Mrs. Kava from her role of COO at TDB.

The Statement of Claim

  1. This divided the claim into 4 separate areas; in summary
    1. Depriving the Plaintiff of Natural Justice.
  2. the Objection was sent not to Mrs Kava but to Mr. Kaufusi, whereas it directly concerned her.
  3. Mrs. Kava did not have an opportunity to respond to the Objection.
  4. No reasons were given.
  5. Further, the failure to provide reasons meant Mrs. Kava and TDB were unable to respond.
    1. Incorrect Legal Provisions
  6. The objection is unlawful as it was made under the incorrect legal provision. Section 31 Banking Act only applies to barring, removing or overturning appointments.
  7. The first point, it is alleged, was referable to events that took place in the meeting 17 June 2024.
  8. The next in respect of the letter sent 18 June 2024; that the reference in the letter 18 June 2024 to NRBT’s ability to overturn a proposed appointment, stated therein to be within the scope of paragraphs 23 to 26 PS8 is incorrect. That is because those paragraphs deal with “Removal of Persons” as the heading to that section of PS8 makes clear.
    1. Manifestly unreasonable
  9. No reasonable decision maker could properly make such a decision.
    1. Improper Motive
  10. These actions are motivated out of a wish for, as I put it, the statement of Claim does not, revenge for

Discussion

Legal principles

  1. The First Defendant is NRBT’s Assistant Governor - Policy, The Third Defendant is a public body, the second its Governor. The regulatory role of NRBT as set out in section 4 and 4 A (a) to (q) National Reserve Bank of Tonga Act make it quite clear it functions as a public body.
  2. Particularly by virtue of section 4 (1)

The principal objectives of the Bank shall be to maintain internal and external monetary stability.

  1. Further, section 4 A (e) and (f).

determine and implement financial stability policy, and oversee the maintenance of the stability of the financial system as a whole;


regulate as required the supply, availability and international exchange of money;


  1. Moving on
  2. Therefore I turn to whether there is an arguable case in respect of the claims[9].
  3. The appointment of Mrs. Kava to a Managerial role in TDB was a process that was engaged with through PS8.
  4. To that end, TDB informed NRBT of their decision, in writing on 19 April 2024, setting out in brief, her years of service with TDB (36) and that she had been assessed as fit and proper pursuant to PS8. They enclosed her curriculum vitae and stated that she had taken up the role as of 2 November 2023.
  5. The announcement of Mrs. Kava’s appointment did not comply with the correct process. It ought to have only been her nomination to the role that TDB was permitted to make. PS8 , paragraph 19 makes it clear the nomination must be notified to TDB 10 business days before appointment.
  6. If the decision to create the role of COO was made on 2 November 2023, then notice to NRBT of the intention to appoint Mrs. Kava to that post had to be made at that time.
  7. To notify NRBT of the decision over 5 and half months later, on 19 April 2024, was an entirely incorrect procedure.
  8. On the face of it, that of itself means the appointment procedure was invalid.
  9. It seems to me, to complain about a lack of reasons or that the letter of 18 June 2024 from NRBT never, allegedly, stated the correct statutory authority for refusing to allow Mrs. Kava to hold the post of COO, can not be sensibly maintained when the process for her nomination and appointment was not properly followed. Thereafter those arguments are all beside the point.
  10. Another factor in all of this is that there were “without prejudice” discussions on 17 June 2024 meeting.
  11. It should be no surprise that as soon as I saw those words at the top of that document I read no more and any reference to that meeting in submissions or statement of claim I declined to entertain, nor read what was stated.
  12. I note that I invited Counsel for the Plaintiff to address me as to how I could proceed otherwise, but no argument was put forward.
  13. The effect is this Court is left with a hole when looking at what went on, in terms of the parties’ discussions as to Mrs. Kava’s appointment. Though, nothing much may turn on this, given the broader point.
  14. The application is based on equitable remedies. I can not see how any complaint that natural justice was not followed, nor the appropriate legal provisions engaged, moreover any question as to the reasonableness of the decision or, an allegation of improper motive, can be sustained, when the basic procedural steps TDB ought to have taken were completely flawed. In my view, those complaints must all wither away when the true position is revealed.
  15. TDB never properly nominated Mrs. Kava to the role pursuant to PS8. They announced that they had appointed her 5 ½ months (169 days) after she purportedly started in the role.
  16. They needed to seek the approval of NRBT 10 (business days) before she commenced.
  17. Judicial review: a process described as, securing obedience to law. R (Haralambous) v Crown Court at St Albans (2018] UKSC 1 [2018] UKSC 1; [2018] AC 236 at paragraph 56 (Lord Mance: "Judicial review ... is in origin a development of the common law, to ensure regularity in executive and subordinate legislative activity and so compliance with the rule of law")[10].
  18. Compliance with the Prudential Statement is required pursuant to Section 15 (3) of the Act.
  19. That NRBT seemingly did not rely on this basic error in their later reasons when objecting, must be beyond the point. The Court’s role in reviewing the legality of a decision, must mean it can not overlook the fundamental mistake in the way the second Plaintiff’s appointment was made.
  20. To put it another way, there was a substantial failure by TDB to comply with the rules, in force and subordinate to the relevant legislation, that was binding upon them, in the manner of appointing Mrs Kava to Chief Operating Officer of the Tonga Development Bank.
  21. If the claim was also meant to encompass any retroactive orders in regards to the objection to the appointment of Mrs. Kava as Acting CEO of TDB between 1 April 2024 and 30 June 2024, this I also refuse.
  22. To engage with decisions in the past is to contemplate academic or an hypothetical argument.
  23. R (Smeaton) v Secretary of State for Health [2002] EWHC 886 (Ad-min) | 2002|2 FLR 146 at para 420 courts

exist to resolve real problems and not disputes of merely academic significance

  1. R (Heathrow Hub Ltd) v Secretary of State for Transport [2020] EWCA Civ 213 at 208

Courts should not opine on academic or hypothetical issues in public law cases other than in exceptional circumstances


Conclusion

  1. I am bound to refuse the application on every head of claim for the above reasons.
SUPREME COURT
NUKU ‘ALOFA
2 AUGUST 2024
COOPER J

[1] Affidavit Mrs. Tuita, annex D.
[2] Mrs. Tuita’s affidavit paragraph 2.
[3] Mrs. Tuita’s affidavit, annex A.
[4] Affidavit Tuita, Annex “G”
[5] Affidavit Tuita, Annex “G”
[6] Affidavit Mrs. Kava 18 July 2024, Annex “B”.
[7] Affidavit filed sworn and filed 18 July 2024
[8] CV 24/2024 [1] Tonga Development Bank [2] Emeline Tuita [3] Penisimani Vea v [1] Tatfu Moeaki [2] National Reserve Bank of Tonga
[9] As Per Lewis CJ; Holani v Kingdom of Tonga [1997] TOLawRp 46; [1997] Tonga LR 264 (16 September 1997)

[10] The Judicial Review handbook, Seventh Edition, The Honourable Sir Michael Fordham.

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