IN THE COURT OF APPEAL OF TONGA
AN APPEAL FROM THE SUPREME COURT
OF TONGA,
NUKU'ALOFA REGISTRY

CA. NO. 17/98

BETWEEN

BANK OF TONGA
Appellant

AND

LANGOIA TULIKIHAKAU
Respondent:

Coram:
Ward CJ, Burchett J, Tompkins J.

Counsel:
Ms Tapueluelu for Appellant
Mr Piukala for Respondent

Date of Hearing: 22 July 1999
Date of Judgment: 23 July 1999

JUDGMENT OF THE COURT

This appeal is of a rare kind. It concerns the doctrine of duress and the tort of intimidation. Quite special, and, fortunately, not common, circumstances are required to make out such a case. Various kinds of pressure, even rigorous pressure from competitors and others, must be accepted as part and parcel of a free enterprise society. But, in exceptional situations, where unlawful means are used to apply pressure to force someone to "agree" to some demand, the tort of intimidation may be committed, and any contract concluded as a result may be avoided on the ground of duress. The classical case is a threat of violence, as in the extraordinary duress decision of the Privy Council Barton v Armstrong [1976] AC 104, where there was a threat to murder. But the modern decisions allow account to be taken also, in some cases, of illegitimate pressure amounting to economic duress.

In Fleming on The Law of Torts (7th ed., 1987) at 661, it is stated that "the House of Lords in Rookes v Barnard [1964] AC 1129 ... confirmed beyond all doubt as a tort, commonly known as intimidation, to coerce a person by unlawful threats into doing or abstaining from doing something that he would otherwise have every right to do, like firing a particular employee or ceasing to do business with an old customer”. More recent authorities have refined the notion of unlawful threats. McHugh JA (as he then was), in a judgment which received the approval of four of the law lords in Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 at 165 - 166, said in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45:

"The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock."

And he added (at 46):

"The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress."

In Dimskal Shipping Co Lord Goff of Chieveley (with the agreement of Lord Keith of Kinkel, Lord Ackner and Lord Lowry said (at 165-166):

"We are here concerned with a case of economic duress. It was at one time thought that, at common law, the only form of duress which would entitle a party to avoid a contract on that ground was duress of the person. The origin for this view lay in the decision of the Court of Exchequer in Skeate v. Beale (1841) 11 Ad. & El. 983. However, since the decisions of Kerr J. in Occidental Worldwide Investment Corporation v. Skibs A/S Avanti (The Siboen and The Sibotre) [1976] 1 Lloyd's Rep. 293, of Mocatta J. in North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705, and of the Judicial Committee of the Privy Council in Pao On v. Lau Yiu Long [1980] A.C. 614, that limitation has been discarded; and it is now accepted that economic pressure may be sufficient to amount to duress for this purpose, provided at least that the economic pressure may be characterised as illegitimate and has constituted a significant cause inducing the plaintiff to enter into the relevant contract (see Barton v. Armstrong [1976] A.C. 104, 121, per Lord Wilberforce and Lord Simon of Glaisdale (referred to with approval in Pao On v. Lau Yiu Long [1980] A.C. 614, 635, per Lord Scarman) and Crescendo Management Pty. Ltd. v. Westpac Banking Corporation (1988) 19 NSWLR. 40, 46, per McHugh J.A.). It is sometimes suggested that the plaintiffs will must have been coerced so as to vitiate his consent. This approach has been the subject of criticism: see Beatson, The Use and Abuse of Unjust Enrichment (1991), pp. 113-117; and the notes by Professor Atiyah in (1982) 98 LQR 197-202, and by Professor Birks in [1990] 3 LMCLQ. 342-351. I myself, like McHugh J.A., doubt whether it is helpful in this context to speak of the plaintiffs will having been coerced."

However, precisely, the effect of the pressure should be stated, it is clear that it must have been, as Lord Goff put it, "a significant cause inducing the plaintiff”. In Barton v Armstrong, the Privy Council held that, once a serious threat was shown, the onus lay on the defendant to prove it had no effect, and the Court need only conclude it was a reason, not necessarily the only reason, for the plaintiffs action.

We turn to the facts of the present case. The respondent was employed by the appellant bank as a bank officer in Vava'u. He was offered employment at a higher salary by a bank referred to as MBf. On 30 June 1994, he wrote to the appellant a letter of resignation "to be effected on 30th July, 1994". But apparently MBf wanted his services as soon as possible. It agreed to "take over his outstanding personal and housing loan of about T$15,000.00 from Bank of Tonga" and to pay 15 days pay to the Bank of Tonga for his release in mid July. The respondent wrote accordingly to his employer on 14 July asking it to confirm to MBf the amount to be paid by it and to "deduct T$198.00 from my Retirement Fund proceeds [for a necessary adjustment] and balance to credit to my S /A ... under advise [sic] to myself'”. He politely sought "prompt action". A reply was sent the next day, informing the respondent "your last day of duty to be today 15 July 1994".

However, the Retirement Fund payment was withheld. MBf also delayed in taking over the loan.

On 9 September, the appellant's Manager Management Services wrote to the respondent about MBf’s delay. She suggested the respondent should "lodge your Retirement Fund to your loans", the bank to "reimburse your total Retirement Fund" upon the loan being taken over. The respondent did not agree. He wrote on 14 September that MBf would complete the loan "soon". He added:

"I would appreciate if you only deduct the arrears of $368 due to you from my Retirement Funds and I shall continue to pay the instalment until full redemption on the outstanding is receive[d] from MBf Bank Limited and henceforth remit the balance of my Retirement Fund to me." The appellant replied the same day that this was "acceptable", but did nothing about paying the Retirement Fund moneys.

On 7 October, the respondent wrote to the appellant's General Manager seeking payment of the Retirement Fund moneys. He wrote "I really need it for my family needs" and to pay for labour for pollination of a family vanilla plantation. The trial judge accepted the reality of this need, which the Bank did not deny. But the General Manager's response, sent on 11 October, was :"If your loans with us are not refinanced within one month I will apply all of your Retirement Fund in reduction of the Personal Loan".

The General Manager's threat was not carried out, but on 15 December the loans were paid off by MBf, with a minor unexplained shortfall of T$274.23. But, while this was being arranged, the Manager Management Services wrote on 13 December to the General Manager of the appellant seeking approval to lodge the Retirement Fund moneys to the respondent's loan account, a course to which she quite wrongly (on the trial judge's findings, confirmed by the correspondence) suggested he had agreed. She added:

"On receipt of the settlement of his total debt from the MBf, we can negotiate with [the respondent] on the amount to be further lodged to his father's debts”. Beneath this proposal, the General Manager wrote, on the same day, "Declined".

The General Manager's rejection of the proposal was, of course, proper. The Bank had no right to continue to withhold the respondent's money in order to "negotiate ... on the amount to be further lodged" to pay a debt that was not his. The memorandum's language shows clearly an intention that a sum will be extracted - it is the amount of it which is to be negotiated. The respondent's position was such that this confidence was justified. He needed some money, as he had made clear two months before. On the very day of settlement of the loans, 15 December, he wrote asking payment "to credit to my Saving Account", and followed this letter up the same day by telephone.

Despite the rejection of her proposal to the General Manager, the Manager Management Services wrote an extraordinary letter to the respondent on 16 December, as follows:

"I'm pleased to advice all your debts have been cleared.

Further to our phone conversation today which you requested the balance of your Retirement Fund to be made available to reduce the arrears in your fathers vehicle account. I was expecting say half of the $2,106.83 towards the vehicle loan. You were reluctant to my request. Langoia as you are aware of your family's obligation over $121,000. All these loans you were the major player in disbursing of funds and your family were relying on you for advice even at the state where your family in New Zealand misused funds received from sales of the proceeds.

To ask for such an amount to assist your own family debts - to me is reasonable especially you know the whole situation.

To be fair to both parties I have spend a lot of time trying to negotiate your loan (even that is part of my duty) but I was counting on you for a fair deal.

In the meantime I will wait and hope for a special favour and consideration on your part.

I await your response."

The first sentence of the second paragraph is just wrong, and the trial judge, who heard and saw both persons, described it as "a mistake". The judge found the respondent "never wanted to agree to deductions to pay his father's debt", but he was under pressure "because he needed money". The pressure was clearly illegitimate in some sense, since the respondent had been entitled to the money since the previous July. At the time the letter of 16 December was written, there was not the flimsiest excuse not to pay him.

On 30 December, the respondent replied agreeing

"to deduct the amount of T$600.00 from my retirement fund and credit to my father's loan account .... . Kindly forward the remaining balance by Bank Cheque to myself ...

I hope that this letter may satisfy your requirements."

(The last word is significant as to how the respondent understood the position.)

There was, however, only further delay, followed by a letter dated 24 January 1995 from the Manager Management Services to the respondent:

"Thank you for your respond to my letter about your Retirement Fund. You offered $600 towards your father's debt. I would like to bring to your attention that if we were to continue deducting your normal repayments towards your loan we would have deduct $445 to your personal and $415 towards your housing loan, a total of $860. If this amount is added to the $600 you offered it would make a total of $1,460.

We intend to take the so called arrears mentioned above even [though] it is now all cleared plus the $600. Langoia I would not mind reducing the amount with $1,100.00. Please confirm."

It will be seen that this letter states an intention to deduct moneys which were certainly not due to the Bank, and then invites a counter-offer. In argument, counsel for the appellant relied on the obvious unlawfulness of the action the Bank said it would take as a reason to conclude the respondent was not compelled to agree. But the respondent had now been kept out of money he needed for 7 months, and to sue the Bank was not an inviting course. He was clearly under pressure. In those circumstances, he yielded on 10 February 1995, agreeing to a deduction of $1,000 towards repayment of his father's loan.

Within six months, the respondent consulted a lawyer who demanded payment of the $1,000 by the respondent. The Bank relied on the consent it had obtained.

The Bank attempted to defend its early failure, in late July 1994, to pay out the respondent's moneys by reference to a clause in the loan agreement:

"3. That the bank will transfer credit fund in accounts of debtor to set off debt (towards clearance of debt) if loan is in arrears or repayment in default".

But the loan was not in arrears when the request for payment of the retirement entitlement was made in July. More importantly, that entitlement was not in an account of the debtor ; it was a separate entitlement of his as an employee.

Once the settlement of the loan occurred on 15 December, there was, of course, no colour of right for the continued retention of the respondent's money for almost a further three months.

It has been repeatedly said that, where a judge has accepted or rejected oral evidence, and particularly if his estimate of the person is relevant to the conclusion, an appellate court cannot in general interfere. In this case, the trial judge accepted the respondent, and his measure of the man must have been relevant to the finding of duress. In our opinion, it was also open to his Honour, having heard the evidence of the respondent and of the Manager Management Services of the Bank, to conclude that illegitimate pressure, within the meaning of the authorities, was brought to bear by an implied threat to continue to withhold the respondent's money. Of course, that threat became express, at least when the letter of 24 January 1995 was written. His Honour's conclusions of fact should not be disturbed.

The grounds of appeal do not include any challenge to the quantum of the award. The judge awarded, in addition to the sum of T$1000, damages of T$4000, which, of course, included damages in the nature of interest over a substantial period.

As there has been no appeal and no argument directed to the issue of quantum, it should be understood that the decision cannot be regarded as an authority on the measure of damages appropriate to such a case. Very often, restitution of the sum extorted by duress, together with interest expressed as a rate over a period, will be the appropriate order.

An argument was raised that the respondent had affirmed the deduction by his delay in bringing a claim. The delay was not long, and a claim against a bank is a serious matter. We think the true bearing of delay is on the finding that duress, was a cause of the respondent's consent. So viewed, the argument must fail since the judge who heard the evidence believed the respondent was caused to consent against his will.

Having regard to the findings of fact in this very unusual case, the appeal must be dismissed with costs.

NUKU’ALOFA: 23 JULY 1999

Ward J, Burchett J, Tompkins J.