Home | Databases | WorldLII | Search | Feedback Court of Appeal of Tonga

Moehau v Westpac Bank of Tonga [2013] TOCA 9; AC17 of 2012 (17 April 2013)

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

AC 17 of 2012
[CV 120 of 2011]

BETWEEN:

1. SOSAIA MOEHAU
2. EPIC INTERNATIONAL LTD
- Appellants

AND :

WESTPAC BANK OF TONGA
- Respondent

Coram : Salmon J
Handley J
Blanchard J

Counsel : Mr. S.J Stanton SC and Mr. O. Pouono for the Appellants
Mr. R. Stephenson for the Respondent

Date of hearing : 10 April 2013
Date of judgment : 17 April 2013

JUDGMENT OF THE COURT

[1] Mr. Moehau and Epic International Ltd appeal against a decision of the Lord Chief Justice ordering summary judgment against each of them in favour of Westpac Bank of Tonga for sums of TOP$985,077.59 and TOP$929,397.44 respectively together with interest and costs.

[2] Westpac's claim against Mr. Moehau was for recovery of an amount lent to him under a loan agreement entered into on 23 April 2009 (for a loan of TOP$939.925.00 plus interest and costs). Its claim against Epic was under a guarantee given on the same day in respect of that loan but limited under the terms of the guarantee to TOP$921,000 plus interest and costs. At that time Mr. Moehau was the sole director and shareholder of Epic and executed the guarantee on its behalf as its director/secretary.

[3] The relationship between Mr. Moehau and the bank goes back further than April 2009, for in September 2007 the bank had lent him or persons associated with him, a sum in excess of TOP$2 million. Evidently difficulties had arisen in respect of that transaction but by April 2009 a part of the TOP$2 million had been repaid. After negotiation with the bank, during which Mr. Moehau had the advantage of advice from his counsel, Mr. Stanton, it was agreed that the balance outstanding should be restructured as the new advance and guarantee previously described.

[4] It was a term of the new loan agreement that any consolidation of previous borrowings was to be governed by the terms of the new loan. Mr. Moehau also acknowledged in the loan agreement that he relied upon his own judgment and not on any representation or advice given by the bank. He further acknowledged being advised by the bank to obtain independent advice and agreed to absolve the bank from any liability for any misrepresentations or negligent advice by the bank or its officers.

[5] The new loan too fell into arrears and after making several successive demands for payment the bank sued the appellants for the debts said to be respectively owed by them.

[6] The application for summary judgment was resisted in the Supreme Court on several grounds some of which have been raised again in this Court. The bank of course had to satisfy the Supreme Court that Mr. Moehau and Epic had no defence to the claims against them or any part thereof (Order 15 rule 2). The appellants say that summary judgment should not have been entered for several reasons:

(a) That in their statement of defence and/or affidavits they had put in issue arguable matters of fact which were not capable of proper resolution in a summary judgment application.

(b) That there was an arguable defence that because of certain representations said to have been made by officers of the bank to Mr. Moehau the bank was estopped from relying upon Mr. Moehau's admitted failure to make repayment of the loan advance in accordance with the terms of the loan agreement. In summary, it is contended for the appellants that Mr. Moehau was orally assured (before or during the negotiations leading to the restructuring) by bank officers that:

1. In view of the of the difficult financial situation prevailing in Tonga and elsewhere (the so-called global financial crisis) Mr. Moehau would not be held strictly to the repayments required under the loan agreement but could instead pay the bank "only what he can afford to pay";
   
2. Mr. Moehau would not be personally sued by the bank which would, instead, take over certain valuable leasehold properties in respect of which security for the restructured loan advance was to be given; and
   
3. The guarantee would be treated as limited to a single amount of TOP$500,000 to be recovered only from the proceeds of sale by Epic of its interest as lessee in Lease No. 2934.
   

(c) That the bank had acted unconscionably in relation to the restructuring of the loan (contrary to its internal policy manual) and in making demand and seeking to enforce the terms of the loan agreement, in particular by lending recklessly to Mr. Moehau and inducing in him a belief that it would not enforce the loan or call on the guarantee without giving reasonable time or allowing a moratorium; and

(d) That the bank had been under a duty to the appellants to act in good faith and had breached that duty, in particular by treating some other borrowers more favourably than Mr. Moehau.

[7] The Lord Chief Justice considered that none of these assertions raised an arguable defence. He observed, as is the case, that Mr. Moehau did not deny entering into the loan agreement of April 2009 or failing to meet his repayment obligations. Mr. Moehau also admitted receiving demands for repayment.

[8] The Chief Justice said that the issues raised of unconscionability and good faith (and an allied allegation that Mr. Moehau had not been afforded a sufficient opportunity of obtaining legal advice on the loan documentation) could be treated together. Dealing with the question of legal advice, the Chief Justice made reference to passages in Mr. Moehau's affidavit in response to the summary judgment application and to certain letters written to the bank by or for Mr. Moehau. He concluded that "Mr. Stanton was intimately and actively concerned in the detailed negotiations between the Bank and the First Defendant [Mr. Moehau] which were taking place with a view to reaching an acceptable restructuring of the First Defendant's debt to the Plaintiff." He said that it was clear that Epic's position was also under consideration by Mr. Stanton.

[9] The Chief Justice was satisfied that Mr. Moehau was a professional and experienced businessman who employed the services of a competent legal adviser to advise him in connection with his dealings with the bank and that he did not enter into the loan restructuring agreements suffering from any form of bargaining disadvantage.