IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

CV 202/09

Kava

v

Australia and New Zealand Banking Group Limited

Shuster J 
14-16 September 2009; 21 September 2009 

Companies – application to put liquidation orders aside – failed to establish it would be just and equitable – application refused 

On 12 and 13 May 2009 the Supreme Court ordered that Hottsie Anne Company Limited ("Hottsie Anne") be placed into liquidation. This was pursuant to an application by the ANZ Banking Group Limited ("Respondent") after a Statutory Demand under the Companies Act 1995 was served on Hottsie Anne and went unanswered. The debt claimed by the Respondent was for the sum of $1,215,000 and arose through various loan advances made to Hottsie Anne. The applicant, a shareholder of the company, sought to terminate the liquidation. 

Held: 

1. Section 259 of the Companies Act 1995 gave the Supreme Court a discretionary power to terminate the liquidation of a Company if the Court was satisfied that it was just and equitable to do so bearing in mind all the facts of the particular case. 

2. The Court found that the Respondent and its officers always acted in good faith throughout their course of their dealings with Hottsie Anne. There was no direct evidence put before this Court to establish fraud or impropriety. 

3. The Court found that all loan agreements between Hottsie Anne and the Respondent had been properly executed by Mr. Kitekei'aho as a Director of the Company with the actual authority to do so. There was no evidence put before the Court to establish that Mr. Kitekei'aho lacked any such authority. 

4. The Court preferred the evidence of the Respondent and found the Applicant failed to establish that it would be just and equitable for the Court to set aside the liquidation orders. Accordingly the Application was refused. 

Cases considered: 
Bell Resources Holdings Pty Ltd v Commissioner for ACT Revenue Collections (1990) 8 ACLC 533 
BNZ v Fiberi Pty Ltd (1992) 10 ACLC 1557 
Brick and Pipe Industries v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253 
Hely Hutchinson v Brayhead [1968] 1 QB 549 
Lyford v Media Portfolio Ltd (1989) 7 ACLC 271
Northside Developments Pty Ltd v Registrar General & Ors (1990) 2 ACSR 161 

Statutes considered:
Companies Act 1995
Evidence Act (Cap 15) 
Stamp Act (Cap 70) 

Counsel for the applicant : Mr Corbett 
Counsel for the respondent : Mr Stevenson 

Ruling on an application under section 259 of the Companies Act 1995 for the termination of the liquidation of Hottsie Anne Co Ltd

1.0 Background

1.1.1 The Applicant seeks an order from this Court terminating the Supreme Court's orders of May 12 and 13 - placing the Hottsie Anne Company Limited ("Hottsie Anne") into liquidation - signed by Ford CJ. 

1.1.2 The order placing Hottsie-Anne into liquidation was granted pursuant to an application by the ANZ Banking Group Limited ("Respondent") after a Statutory Demand under Section 298 of the Companies Act 1995 ("the Act") was served on Hottsie Anne Ltd, by the Respondent Bank and, the Statutory Demand went UNANSWERED.

1.1.3 The debt claimed by the Respondent Bank under the Statutory Demand pursuant to Section 289 of the Companies Act was for the sum of $1,215,000.00. The debt owed to the Bank - arose through various loan advances made to Hottsie Anne Ltd, under agreements advanced to the Company between 2003 and 2008 by the ANZ Bank. 

1.1.4 The Applicant in the case - is Atelaite Kava; a shareholder of the company and under the Act, is a party entitled to make application for the termination of the liquidation of the Company — under Section 259 (2) of the Act. 

2.0 Grounds for the Application 

2.1 The grounds for seeking the termination of the liquidation order by the Applicant - are as set out in the First Application notice filed on 24 August 2008 the "First Termination Application (FTA) and are:- 

(a) The debenture executed by Hottsie Anne on 22 April 2008 and registered with the Companies Registry on 14 August 2008 (the "Debenture") and which are the principal security for the debt owing to the Bank is invalid - because it has not been properly executed: and 

(b) The buildings constructed with the loan funds of $860,000 were structurally unsound, and or unsafe; and 

(c) The Respondent was negligent in approving loans to Fuka Kitikeiaho knowing he does not have authority to apply for, or draw down loans; and 

(d) That the loans, above the initial amount borrowed by Hottsie Anne Ltd in February of 2003 of $155,000 were void and illegal, because the Companies shareholders did not approve the borrowing - pursuant to Section 128 of the Companies Act 1995. 

2.2 The Applicant filed a Second Application - to terminate the liquidation of the Company on the 28 August 2009 "the Second Termination Application (STA) the grounds contained in the STA - were based on allegations of fraud and impropriety - in relation to the said loan agreements. Further the Applicant states certain statutory obligations under the Stamp Act had not been complied with. 

2.3 The Respondent however confirmed in Court the loan agreements which were produced in court, together with the affidavit of Mr. Yeoman were signed loan agreements which had remained in the Bank's possession following the destruction of the Bank's premises during the riots of 16 November 2006, upon which the Respondent relied. Mr. Kitekei'aho was the signatory to those agreements for Hottsie Anne, and he deposed they were the loan agreements he signed, and his signature appeared on each agreement. 

2.4 The Respondent says it relied on the presumption - as to "the proper signing and sealing of documents" (section 47 of the Evidence Act (Cap 15)) which provides: 

• "When any document is produced before a court purporting to be a document which by any Act at any time is admissible in evidence if signed or stamped or sealed or otherwise authenticated as required by this Act, the Court shall presume, until the contrary is shown – 

(a) That the signature, stamp, seal, or other authentication of the document - is genuine; and 

(b) That the person signing, stamping, sealing or otherwise authenticating it had at the time he did so the official or other position which he purported to have" 

• The Respondent submitted - the contrary has not been shown via any evidence from the Applicant. Indeed, they say under cross-examination, Mr. Kolo freely admitted his allegations of fraud and impropriety – were based upon supposition, and upon his misinterpretation of both facts and law. 

2.5 The Respondent's position and contention, based on the STA, and the affidavit of Mr. Kolo in support of allegations of fraud, they say were nothing more than allegations; because the Applicant provided no evidence whatsoever to substantiate his serious allegations to the court. The presumption under s 47 of the Evidence Act Cap 15 per the proper signing and sealing of documents applied, and the Applicant has failed to provide any direct evidence to rebut that presumption. 

3.0 Grounds for Termination under the First Application  

The Respondents addressed the grounds in the FTA as follows: 

3.1 THE INVALIDITY OF THE DEBENTURE

3.1.1 The Respondent's position whether the Debenture was properly executed which the Respondent contends it was; was of no relevance to the liquidation of Hottsie Anne Co, because, the Respondent says its officers did not rely on the Debenture as the basis for its application to place Hottsie Anne into liquidation. Accordingly the Debenture and any question regarding its validity would only be relevant in the context of Receivership, not to an application for liquidation. 

3.1.2 The Respondents says the issue in relation to the execution of the Debenture was essentially whether a debenture, under the laws of Tonga is required to be executed as a deed. The Respondent could find no authority [in law] to support a proposition that a debenture must be executed as a Deed, and no such authority had been provided to the Court by the Applicant. However, if a debenture is a document that is required to be executed as a Deed, then the execution of the Debenture by one director alone may not be sufficient for valid execution unless that Director had a specific power of attorney from the company to do so - under the provisions of Section 189(1)(a) of the Act. If a Debenture is not required to be executed as a Deed, then the provisions of Section 189(1)(5) would apply and the execution by one director with express or implied authority to do so would be valid. It was submitted by the Respondent - these considerations were academic in the present context, given the fact the Respondent Bank did not rely upon the Debenture in its application to place Hottsie Anne Company into liquidation; and I agree.

3.2 THE BUILDINGS 

3.2.1 The Applicant asserted the buildings were structurally unsound and unsafe, and this had a detrimental effect on the business. Mr Woods' report was attached as Exhibit 'J" to Mr. KoloTs affidavit of 28 August, 2009 filed in support of the STA which report stated the Davina Night Club - was of unsound construction. 

3.2.2 Mr. Woods gave no direct testimony on this matter and the report attached to Mr. Kolo's affidavit was undated and unsigned. The Respondent's contention was the unsubstantiated allegations regarding the building did not directly relate to the issue of whether or not the liquidation should be terminated; but instead, raised possible issues of liability of third parties, including the builder in tort. The Applicant may have a cause of action against third parties and she was free to pursue those avenues if she wished, but those issues were not germane to the issue of whether or not the liquidation of Hottsie Anne should be terminated by this court today; and I agree.

3.3 INVALIDITY OF AUGUST 28 AGREEMENT 

3.3.1 The Applicant alleges this loan agreement was invalid - because a person - Atu Ngaue signed the document as an authorized signatory of Hottsie Anne, when in fact he held no office or shares in Hottsie Anne. The loan agreement Exhibit "H" to Mr. Kolo's affidavit 5 August 2009; was filed in support of the FTA. 

3.3.2 The Respondent says a closer inspection of the loan agreement Exhibit H, revealed Atu Ngaue signed the loan document as a witness to the signature of Hottsie Anne director Kitekei'aho. He was not signing in a capacity as an officer or shareholder of Hottsie Anne and the Applicant has not provided evidence why the loan agreement was otherwise not properly executed. 

3.3.3 The Applicant's only challenge - to the validity of the August 28 loan agreement in the FTA, was the alleged execution of the loan agreement was by Atu Ngaue - as an officer of Hottsie Anne. Under cross examination, Mr. Kolo admitted Atu Ngaue had in fact signed the document as a witness and not as an officer of the Hottsie Anne as he had alleged. Mr. Kolo also admitted to inconsistencies within his own affidavit of 28 August 2009. In paragraph 26 of that same affidavit he went on to describe Atu Ngaue as signing as a witness to Mr. Kitekeiaho's signature. The Respondent says given the clear documentary self explanatory nature of Atu Ngaue's signature on the loan agreement as a witness; the admission of this fact, in the absence of any other grounds advanced by the Applicant in the FTA, that the loan agreement was invalid, then the Respondent contended the loan agreement was valid and enforceable in all respects. They said the Applicant has provided no grounds or evidence, as to why it should otherwise be found to be invalid; and I agree. 

3.3.4 Mr. Kolo, in paragraph 13 of his affidavit of 5 August 2009 - in support of his STA, asserted the signature of Atelaite Kava was required on the loan agreement of August28 - in order to 'legalize the loan". The Respondent says the meaning of "legalize" and the basis for this assertion was unclear. The Respondent's position was Ms. Kava's signature on the document was initially sought by the Bank -in her personal capacity — but as a guarantor of the loan. That requirement was subsequently waived by the Respondent - something which the Respondent was clearly legally entitled to do- that requirement being solely to the benefit of the Respondent, and was not required in order to provide efficacy to the loan itself. The background to waiver was set out in Mr. Yeoman's affidavit of 25 August, 2009, and reaffirmed in his evidence — even under cross examination. 

3.3.5 The Respondent says it was unclear from the wording of paragraph 5 of the PTA - in the event the Applicant was asserting the execution of the loan agreement by Mr. Kitekei'aho himself was invalid, the Respondent addressed that issue as follows:- 

4.0 Approval of the Loans to Fuka Kitekei'aho 

4.1 The Applicant, in paragraph 5 of the PTA, alleges the Respondent was negligent in approving certain loans, specifically: "The Respondent through its loan officers was negligent in approving loans to Fuka and, allowing him to draw funds knowing he did not have authority to apply for the loans, nor draw any money in relation to those loans". 

4.2 The Respondent argued - the Applicant's stated grounds for the termination of the liquidation of Hottsie Anne were in relation to loans made by the Respondent to "Puka". 

They say the reference to "Fuka" was to Mr. Fuka Kitekei'aho. However, they say it was clear any loan arrangements which the Respondent may have approved or, made to Mr. Kitekei'aho in his personal capacity, had no bearing whatsoever on the subject matter of the present application(s) -which was - the liquidation of Hottsie Anne. On that basis the Respondent says no further consideration of this point is required. 

4.3 The Respondent said the Applicant has only challenged the validity of one of the Hottsie Anne loan agreements with the Respondent - the Loan Agreement of 28 August 2008. The Respondent says the grounds for termination as pleaded by the Applicant in paragraph. 5 of the FTA - did not establish a sufficient basis for termination of the liquidation of Hottsie Anne, for all the reasons outlined. 

5.0 The Authority of Fuka Kitekei'aho 

5.1 The Respondent said based on a plain reading of the grounds contained in paragraph 5 of the FTA - it did not appear the Applicant was challenging the authority of Fuka Kitekeiaho in relation to the loans made by the Respondent Bank to Hottsie Anne, but - in the event Mr. Kitekei'aho's authority to apply for and, draw to loans to Hottsie Anne - was challenged by the Applicant- then the Respondent made the following submissions on the assertion. 

5.2 MANAGEMENT OF COMPANY 

5.2.1 There could be no issue that Mr. Fuka Kitekei'aho - was at all relevant times a Director and the Secretary of Hottsie Anne, until he was removed from office on 24 November 2008: - when Mr. Kolo, took his place as the Director and the Secretary of Hottsie Anne because- this was affirmed in evidence by both Mr. Kitekei'aho and Mr. Kolo and I agree.

5.2.2 The Applicant maintains she is and was at all material times also - a Director of Hottsie Anne, whether or not this is the case - is not entirely clear from the evidence before the court. The destruction of the Official Companies Record's Office in November of 2006 leaves this an - open question. The Applicant produced some evidence to the court to suggest Ms. Kava was a Director, yet it was Mr. Kitekei'aho's recollection - that he was the only director; this issue seems open to question. What was admitted and ascertained via Mr. Kolo in his evidence and under cross examination — and in addition via his own admission, was that - Mr. Kolo had been Ms. Kava's financial advisor and her business partner since 2004. Mr. Kolo has been the Director and Company Secretary of Hottsie Anne since 24 November 2008), and Mr. Kolo also admitted the following in evidence: 

(i) Ms. Kava had been receiving audited financial statements for Hottsie Anne; and 

(ii) Ms. Kava had known about the loans to Hottsie Anne by the ANZ - as the Loans had been disclosed as term liabilities in the financial statements - which Ms. Kava had received. 

5.3 POWER OF ATTORNEY 

5.3.1 The Applicant contends the first loan agreement between the Respondent and Hottsie Anne - for the sum of $155,000 was executed by Hottsie Anne under a purpose - specific Power of Attorney granted to Mr. Kitekei'aho, by Ms. Kava in her capacity as majority shareholder in Hottsie Anne. A letter dated December 2002 purportedly from Ms. Kava, written to the General Manager of the ANZ Bank was produced as - Exhibit "F" Kolo's affidavit of 05 August. 

5.3.2 The Applicant claimed a copy of a Power of Attorney, was received by the Respondent sometime in December 2002, or early 2003. By way of further affidavit of Mr. Kolo of 11 September 2009, the Applicant produced correspondence from Mr. Kieron Ward, ANZ Relationship Manager – dated 10 January 2003, addressed to Ms. Kava. The correspondence acknowledged receipt of a Power of Attorney - allowing Mr. Kitekei'aho to sign loan documents on her behalf. (Exhibit "D" of the affidavit). The Respondent said it was not clear from the letter exactly what form that Power of Attorney took or, what it provided no date was referenced. The Power of Attorney might have been a broad or General Power of Attorney. It was simply not known for certain by the Court and I agree. 

5.3.3 The Respondent said the Applicant also produced a letter addressed to the General Manager of the ANZ Bank dated 30 December 2002 which authorized Mr. Kitekei'aho to sign a loan of $ 170,000, the letter signed under a name "Atelaite Kava, - as proprietorship, Hottsie Anne". The Respondent acknowledged - this may be the letter Mr. Ward referred to in his correspondence, but, in the absence of direct testimony from Ms. Kava - or Mr. Ward this cannot be known for certain. 

5.3.4 What was also uncertain on the evidence was whether the signatures appearing on the Power of Attorney are authentically those of Ms. Kava. Mr. Kolo gave no direct testimony he witnessed Ms Kava sign the letter. Mr. Kolo acknowledged in paragraph 6 of his affidavit 28 August, he met Ms. Kava in late 2003, after the event transpired. The Respondent says while a number of documents produced to the Court are purportedly signed by Ms. Kava, and they include the stamp of a notary confirming Ms. Kava signed the document, the powers of attorney do not contain independent verification. They also submit - under s 52 of the Evidence Act - the Court may presume due execution of a Power of Attorney produced if it is - duly notarized. The respondent says the Power of Attorney dated 30 December 2002 alleged to have been signed by Ms. Kava - is not notarized. 

5.3.5 The Respondent says it was possible other powers of attorney may have followed subsequently, but this could not be known for certain. The Respondent has no record of the receipt of other Powers of Attorney. Following the riots of November 2006, and the destruction of the Respondent's premises in Tonga, most if not all of the Respondent's documents and records - relating to Hottsie Anne Co, were destroyed. After November 16, the Respondent no longer has any record of that Power of Attorney or any other Power of Attorney that might have been subsequently received to refer to. Mr. Yeoman in his evidence a member of staff advised him, he recalled the Bank had held a Power of Attorney for Mr. Kitekei'aho from Ms. Kava' but the Respondent says - that document is not in evidence, and the staff member has not given evidence. The court must conclude the Power of Attorney, if held, and in whatever format, was lost by fire on 16 November 2006 and I agree. 

5.3.6 The respondent went on to say - under the headings "Implied Authority" and "Implied Actual Authority' the existence of and receipt by the Respondent, of the initial Power of Attorney, was not critical to the validity or to the enforceability of the subsequent Loan Agreements, and I agree. 

5.4 LOAN AGREEMENTS THE FIRE 

5.4.1 Because some of the original loan agreements between Hottsie Anne and the Respondent could be produced to the Court, because they were lost when the Respondent's offices were burned during the riots of November 2006 evidence was given of the fire in the affidavit of Esei Tu'ipulotu dated 15 September, 2009. Mr. Tu'ipulotu was the project manager in the Operations Department of the Respondent Bank, with experience in IT matters. He affirmed -only very limited account information, such as account names, numbers and balances - was recoverable from the Bank's computer systems following the November 2006 fire - this evidence was not challenged.

5.4.2 It is not in dispute the first loan agreement for an amount of $155,000 was entered into shortly after the incorporation of Hottsie Anne, in January 2003. How the loan agreement was executed cannot be known for certain, because the Respondent's executed copy has - been lost by fire and the Applicant produced an unsigned copy - Exhibit "E" Kolo's affidavit of 05 August 2009. 

5.4.3 Respondent says - over a period of 6 years, the initial loan to Hottsie Anne increased through a number of loan facilities and agreements - to $1,215,000, the loan agreements were signed by Mr. Kitekei'aho - acting in his capacity as Director and Company Secretary of Hottsie Anne. 

5.4.4 The following loan agreements were produced to the Court as Exhibits A - F - Mr. Yeoman's affidavit. 

Date of loan agreement 	
Description of facility 	
How executed 	
19 April 2004 	Increase of existing loan of $153,462 by $96,000 to a total of $249,462 	Signed by Fuka Kitekei'aho as Director and as Company Secretary 	
7 June 2007 	Increase of total lending by an amount of $15,000 to a new total of $414,739.00 	Signed by Fuka Kitekei'aho as Director and as Company Secretary 	
24 August 2007 	Restructuring existing Overdraft and Term Loan into one Term Loan of $420,000 – no effective increase in lending 	Signed by Fuka Kitekei'aho as Director and as Company Secretary 	
4 March 2008 	Providing a new additional overdraft facility 	Signed by Fuka Kitekei'aho as 	

Date of loan agreement 	
Description of facility 	
How executed 	
	of $10,000 bringing total lending to $428,000 	Director and as Company Secretary 	
6 March 2008 	Increasing the overdraft limit by $30,000 and the term loan by $700,000 bringing total lending to an amount of $1,145,000.00 	Signed by Fuka Kitekei'aho as Director and as Company Secretary 	
28 August 2008 	Providing an additional facility of $130,000 and combining overdraft and term loan into one term loan, bringing total lending to $1,255,000.00 	Sole Signature of Fuka Kitekei'aho is witnessed by Atu Ngaue, Bar Manager of Hottsie Anne 	

5.4.5 The Respondent affirms all- loan agreements produced in evidence to the Court by the Respondent have been duly stamped as required by Section 5 of the Stamp Act. The Respondent also says - pursuant to Section 11 of the Stamp Act, there is no restriction or, constraint placed upon the time when a document must be stamped, provided that the appropriate duty is paid at the time the document is so stamped. The amount increases after passage of time. 

5.4.6 The question is whether or not the ANZ loan agreements have been validly executed under the terms of the Act and the Hottsie Anne's Constitution. With regard to Hottsie Anne's Company Constitution it was apparent that - because of the destruction of the Companies Office records in the riots of November 2006 it cannot be known for certain what format the Company's constitution took, but, in the absence of evidence to the Court otherwise, it can/should presumed to be to the standard Constitution under the Act. Further Mr. Kolo, the new Company Secretary, produced no copy of the Constitution to the Court. 

5.4.7 To fully address the issue of the validity of the execution of the loan agreements, the respondent says it is necessary to look at Section 189 of the Companies Act 1995, which addresses the method(s) of contracting by companies. 

5.4.8 Section 189(1)(a) of the Act has already been addressed earlier in relation to the execution of the Debenture by Mr. Kitekei'aho on behalf of Hottsie Anne. Section 189(1)(a) by its terms applies to contracts or obligations which, if entered into by a natural person, would, by law, be required to be by deed. However the Respondent argues the loan agreements referenced would not, under Tongan law, be required to be entered into by Deed and therefore they submit that Section 189(1)(a) does not apply. If it did however, Mr. Kitekei'aho, as Director and Secretary of Hottsie Anne could validly execute the agreements in those capacities under Section 189(1)(a)(ii) of the Act. 

5.4.9 The respondent says it follows - Sections 189(1)(b) or (c), which relate to the execution of agreements which if entered into by a natural person would (under subsection (b)) or would not (under subsection (c)) - be required to be in writing, must be applicable. 

5.4.10 The agreements are in writing, so the respondent said it would simply rely on the language of Subsection (1)(b) which states: "An obligation which, if entered into by a natural person, would, by law, be required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company's express or implied authority". The issue then becomes - was Mr. Kitekei'aho acting under Hottsie Anne's express or implied authority when executing the various loan agreements? 

5.5 ACTUAL (EXPRESS) AUTHORITY TO SIGN 

5.5.1 Mr. Kitekei'aho attested he was the Managing Director and Secretary of Hottsie Anne Company Limited on its incorporation. 

5.5.2 Mr. Yeoman attested it was his understanding from Mr. Kitekei'aho that Mr. Kitekei'aho was the sole Director and the Company Secretary at the time Hottsie Anne applied for - a $700,000 loan in March 2008. 

5.5.3 The Respondent argued if it was accepted Ms. Kava was a also Director at that time, then Mr. Kitekei'aho would still be imbued with actual authority to sign the loan agreements as long as Ms. Kava, as the other Director and Shareholder, authorized him. Mr. Kitekei'aho gave direct testimony that Ms. Kava did authorize him to sign the loan agreements. Ms. Kava has not appeared before the Court to refute Mr. Kitekei'aho testimony. I must say I found Mr. Kitekei'aho - to be a convincing witness. 

5.5.4 When approving the loan in March 2008, the respondent argued Mr. Yeoman could only practically rely on Mr. Kitekei'aho advice regarding the company structure, because both the Respondent's records and the Companies Registry records regarding - Hottsie Anne had been destroyed by fire in the riots. Mr. Yeoman understood Mr. Kitekei'aho was the sole Director of the Company and in the circumstances Mr. Yeoman had and was entitled to rely upon this assertion. The surviving loan agreements bore only Mr. Kitekei'aho signature as - Company Director and Secretary. What was left of the Bank's records indicate Mr. Kitekei'aho was the only signatory to the company's bank account. With all other official company records destroyed, there was no further inquiry Mr. Yeoman could reasonably make - he had to rely on Mr. Kitekei'aho, who also affirmed in court - he informed Mr. Yeoman that:- 

(i) He was both the Director and Secretary of Hottsie Anne Co Ltd; and 

(ii) Mr. Kitekei'aho partner Ms. Kava, and their three minor children all reside in America, and they are the only shareholders; and

(iii) Hottsie Anne was a family company, and Kitekei'aho deposed he advised Ms. Kava, of his plans to renovate the building and apply for further funding from the ANZ of $700,000 to facilitate that; and  

(iv) Ms. Kava had agreed to the further loan funding. 

The Respondent said the Applicant - Mr. Kolo had also given evidence in court that Ms. Kava had received - audited financial statements for Hottsie Anne and as such she was fully aware of all the loans.

5.6 IMPLIED AUTHORITY TO SIGN 

5.6.1 The Respondent says even if Mr. Kitekei'aho did lack actual authority to enter into the loan arrangements there was no evidence before the court establishing that this was the case, then the question was - did he have implied authority to do so - for the purposes of Section 189(1)(b) of the Act? 

5.6.2 The respondent says a Director or Agent of a Company has the implied authority to do those things which experience shows — is usually completed by a Director or Agent of the business. 

5.6.3 The Respondent drew the courts attention to the case of Hely Hutchinson v Brayhead [1968] 1 QB 549 where the court found that notwithstanding the absence of an express agreement between the parties, the principal and the agent, they may conduct themselves in such a way that it is was proper to infer that the relevant authority has been conferred on the agent. Where the question is whether the agent has implied authority to act in a particular way, the court should direct its attention to the conduct of the parties in order to decide whether inference of authority should be drawn. 

5.6.4 They argues in the present case under the scenario where if Ms. Kava is taken to be a Director, it was argued it was clear Mr. Kitekei'aho - was the only Director of Hottsie Anne actually residing in Tonga - and he was also the Company Secretary. As a result, Mr. Kitekei'aho — his authority went well beyond the role of a "normal" director — the Respondent says he was conferred the powers of a "Managing Director". Mr. Kitekei'aho had given evidence that it was always understood, that he had the authority to run everything to do with the said company. 

5.6.5 The Respondent argues the Standard Constitution for a Tongan company does not actually include provision for the appointment of a Managing Director (although the Constitution of Hottsie Anne may have done so), but it does include provision for the delegation of the powers of the Directors - to a third party, such delegation is also permitted under the terms of Section 129 of the Act. Clearly the respondent says this is what occurred in the circumstances of the present case, and as such, Mr. Kitekei'aho was effectively a Managing Director. The extent of the powers of the Managing Director turn on the circumstances of the case and the nature of the company involved. Given the offices he occupied as both Director and Secretary of Hottsie Anne and the fact that he was the only officer of Hottsie Anne physically present in Tonga, it was submitted that there was ample evidence to conclude that Mr. Kitekei'aho authority extended to the application for and acceptance of all loans to Hottsie Anne, including the $700,000 construction loan facility in March 2008, and the subsequent loan of $130,000 in August of 2008 and I fully agree. 

5.6.6 Following on, the respondent says it would also be helpful to look at the history of the loans made to Hottsie Anne, as evidenced by the loan agreements produced to the Court — although without copies of all loan documents it will not be possible to know accurately what purpose the loans were applied - for: 

• It was acknowledged by the parties, the original loan of $155,000 in early 2003 was for the initial purchase of the bar by Hottsie Anne, and this loan was authorized by the shareholders. 

• The 19 April 2004 loan as stated in the loan agreement was to be an increase of $96,000 to the operating overdraft, taking the total borrowing to $249,963.00 which the respondent says could properly be said to be within the ordinary course of the company's day to day business. 

• The next loan agreement is 7 June 2007, at this stage the loan had been converted to a term loan of $349, 739 with an overdraft of $50,000 equating a total borrowing of $399,739— an increase of $99,776.00 in the intervening 3 years. The respondent says this borrowing could also quite properly and reasonably be said to have been within the ordinary course of the company's day to day business. The June 7 facility was a small increase to the overdraft of$15,000, so it could be also reasonably be assumed to be within the course of day to day business. 

• The next loan facility agreement 04 March 2008. The existing lending at this point was $418,000 - there has apparently been a relatively small increase in the lending under the prior agreement, by an amount of $18,261.00. The 04 March facility was for a $10,000 overdraft, again the respondent says it's a borrowing within the ordinary course of the company's day to day running business. 

• The next loan facility 06 March 2008 was for $700,000, a term loan - for the extension and refurbishment of the bar/night club. The Respondent argues this loan, in the circumstances of this case, continues to be in the ordinary course of the company's business - for the following reasons. The plans, relate to the expansion of the existing bar, and the plans were made at a time when almost every hospitality business, if not every business in Tonga, was raising and spending money to expand and/ or refurbish their operations - in anticipation of the influx of business for HM the King's coronation and related celebrations in August 2008 - attested by Mr. Kitekei'aho. In the context of the business environment at the time and because of the nature of the Company's business, it was submitted by the Respondents that this loan transaction was still within the ordinary course of business of Hottsie Anne at the time - and I fully agree. 

5.6.7 The Respondent said given the acquiescence of Ms. Kava to the prior borrowings, which Mr. Kolo, her financial advisor and business partner had advised the Court she was aware of- a strong inference of implied authority could in the circumstances quite properly be- drawn. Mr. Kitekei'aho also gave clear evidence to the Court he had advised Ms. Kava of the renovations and the borrowing and he said - she agreed as such he had actual authority to execute the loan agreement. The respondent pointed out - Ms. Kava has not appeared before the Court to dispute testamentary evidence. 

5.7 IMPLIED ACTUAL AUTHORITY TO SIGN 

5.7.1 Even in the event Mr. Kitekei'aho lacked both actual and implied authority, the Respondent submits that Mr. Kitekei'aho was nonetheless authorized to enter into the loan agreements with the Respondent on behalf of Hottsie Anne - under the doctrine of Implied Actual Authority.

5.7.2 The Respondent - cites Fords Principles of Corporations Law (13th edition at para.13.030) which states: 

• "where a person who has not been appointed agent nevertheless assumes to act as agent for a principal and over a period the principal, knowing what is going on, acquiesces in the agent continuing to act for the principal in new transactions, the conduct of the principal gives authority for the new transaction. The authority so given can amount to actual authority, at least where the question is between the principal and the third person." 

The authors go on to state at para.13.040 that: 

•  It was stated earlier that implied actual authority could be given where a person stood by while an agent acted as if authorized and the person acquiesced in the assumption of authority. Once that acquiescence appears, persons thereafter transacting business with the agent can have a contract with the principal on the basis of there being actual authority. Hence it can happen that a person transacting with the agent can make a contract with the principal even without knowing of the previous acquiescence. But if there has been no history of acquiescence, then for a third party transacting with a person whom he or she supposes to be an agent to obtain a contract with the alleged principal depends on proof of a representation made to the third party by the alleged principal".

5.7.3 The Respondent also submitted Hottsie Anne, through its Board of Directors, again noting that under the Act the Board can delegate their powers to third parties, or for that matter its Shareholders, acquiesced to the entering into of the loan agreements by Mr. Kitekei'aho, which acquiescence was communicated through their words or conduct (including standing by while Mr. Kitekei'aho acted as if authorized). So they argue implied actual authority has been conferred on Mr. Kitekei'aho and under the doctrine of implied actual authority, the execution of the loan agreements by Mr. Kitekei'aho met the requirements of Section 189(b), as he had actual authority implied by acquiescence. 

5.7.4 Mr. Kitekei'aho had given direct evidence to the Court that he advised Ms. Kava, (whether in her capacity as a Director and/or Shareholder of Hottsie Anne) of the borrowing and the renovation plans, and indeed of all prior activities and borrowing entered into by the company. Having given actual authority to Mr. Kitekei'aho for the prior borrowing, or having consented to it by her acquiescence, Ms. Kava in her capacity as the majority Shareholder and for as a Director granted implied actual authority to Mr. Kitekei'aho to enter into subsequent loan agreements for / on behalf of Hottsie Anne. 

5.7.5 Mr. Koto also gave evidence to the Court that Ms. Kava was aware of the loans from the ANZ bank - she had been receiving audited financial statements for Hottsie Anne - and thus implied actual authority could then be imputed from that knowledge and acquiescence, even if Mr. Kitekei'aho had not informed her any of the loans himself although, Mr. Kitekei'aho gave unrefuted testimony, that he did. 

5.7.6 The Respondent says there was no direct evidence before the Court that Ms. Kava took any action prior to November 2008 to question any of Hottsie Anne's activities, or to remove Mr. Kitekei'aho as a Director, which she could have done at any time had she been dissatisfied with the company's affairs. 

5.7.7 Furthermore, the respondent argues in relation to the granting of this implied actual authority to Mr. Kitekei'aho, even if it were to be argued that Ms. Kava was unaware of the renovations and the construction borrowing in March 2008 (which it was submitted is somewhat hard to believe in all the circumstances), then it was submitted that by her conduct in relation to the prior borrowing she has nonetheless conferred implied actual authority on Mr. Kitekei'aho to enter into those "construction loan obligations" on behalf of the company and I fully agree.

5.7.8 The loans by the Respondent to Hottsie Anne were drawn over a period of years from 2003 through 2008. Over that 5 year period of time, Ms. Kava must have - or at the very least should have - been aware in her capacity as a Director (if she was a Director) or at the very least in her acknowledged capacity as a majority Shareholder, of what was going on within the company and I fully agree. 

5.8 RESPONSIBILITIES OF DIRECTORS AND SHAREHOLDERS UNDER THE ACT 

5.8.1 The Respondent's refer to Part XI of the Companies Act – regarding Accounting records and audit. 

5.8.2 Section 203 requires the Board of Directors of a company to maintain proper accounting records that correctly record and explain the transactions of the company, including a record of the assets and liabilities of the company - failure to do so is an offence under the Act. 

5.8.3 Under Section 204 of the Act, the Company need not keep its accounting records in Tonga although copies of certain records must be sent to, and be kept here.

5.8.4 Section 205 of the Act requires that a company at each annual meeting of the company, which applies to Ms. Kava whether or not she was a Director, since there was no issue over her being a shareholder - shall appoint an auditor to audit the financial statements of the company. An exception is provided for in subsection 2, in that a company need not appoint an auditor if at or before the meeting, a unanimous resolution is passed by the company that no auditor be appointed. The Respondent says the Applicant has produced no evidence to the Court that such resolutions that no auditor be appointed were passed and - indeed Mr. Kolo has informed the Court that an auditor was consistently appointed. 

5.8.5 Assuming accounts were prepared, and an auditor appointed, and Mr. Kolo in his evidence affirmed this was the case, Ms. Kava as a Director and/or Shareholder of Hottsie Anne would, or at least should, have known of the loans entered into by Hottsie Anne- with the Respondent Bank. That being the case, the Respondent argues - Ms Kava has again clearly acquiesced to all such loans by taking no action over a period of 6 years - to either direct the Respondent that Mr. Kitekei'aho lacked authority to so bind the company, or to take direct steps to prevent him from being able to do so- i.e. - by removing him as a Director and Secretary (prior to late November 2008), or by taking other appropriate legal action against him, and I fully agree. 

5.8.6 The respondent argued the above is so, even in the event that it were irrefutably established that the Respondent had received the initial power of attorney as alleged by the Applicant. The imputation of actual authority by acquiescence to the continued borrowing would still arise with the ongoing loans over the passage of time, notwithstanding that Ms. Kava's initial authority as the major shareholder to the first loan was granted under that Power of Attorney. 

5.8.7 As a final point in this regard, the Respondent argued- in his affidavit filed with the STA -28 August, Mr. Kolo asserted in paragraph 7 Ms. Kava had verbally agreed to transfer to him "half the shares of the business". Neither Mr. Kolo, nor the Applicant produced any evidence to the Court of the consummation of that transaction (e.g. a Directors' Resolution approving the transfer, signed share transfer forms and / or entries in the share register as required under Section 85 of the Act. At no other point in his prior affidavits has Mr. Kolo alleged or claimed to have any interest in Hottsie Anne, other than by his appointment as a Director and Company Secretary in November 2008. It was submitted by the Respondent - as there was no evidence before the Court supporting Mr. Kolo's assertion; his claim cannot be viewed as proven or valid. However, even if it were established Mr. Kolo was a shareholder in Hottsie Anne, since late November 2004, the same comments regarding shareholder's duties would similarly apply to Mr. Kolo. In relation to this assertion I found Mr. Kolo to be evasive, and further he had no evidence to support his assertion that he held half shares in the business. 

6.0 Section 128 of the Act - Major Transactions 

6.1 A further ground advanced by the Applicant to justify the termination of the liquidation of Hottsie Anne is that various loans from the Respondent to Hottsie Anne are in rendered void - by the operation of Section 128 of the Act. 

6.2 This section 128 of the Act provides that - a company shall not enter into a major transaction, unless the transaction is approved by special resolution (as defined by Section 2 of the Act, a resolution approved by 75% or more of the shareholders entitled to vote). The Respondent states that as the three children of Mr. Kitekei'aho and Ms. Kava - who are also shareholders in the company and were all minors at the relevant times, by reference to the birthdates as evidenced in Mr. Kitekei'aho affidavit 25 August, it was submitted Ms. Kava's authorization, and indeed that of Mr. Kitekei'aho for all purposes in these submissions would be imputed - to the children. 

6.3 In this regard, the Respondent said the unrefuted evidence of Mr. Kitekei'aho - that he advised Ms. Kava of all loans that were entered into by the company with the ANZ, and that he testified she approved them, it was submitted in effect therefore, on the evidence, the approval of all of the shareholders was given to all the loans, and consequently, Section 128 of the Act has been complied with, and I agree. 

6.4 In evidence the Respondents says Mr. Kolo informed the court Ms. Kava received audited financial statements for the company so she was aware of the loan arrangements and therefore, at the very least she subsequently ratified the borrowing - by acquiescence. Section 128(2)(c) defines a major transaction as including a transaction which has, or is likely to have, the effect of the company incurring obligations or liabilities equivalent to more than half of the value of the assets of the company before the transaction. 

6.5 In order for the Applicant to succeed on this ground, the Respondent claims the Applicant would need to establish that the Respondent's lending to the company constituted a major transaction. In order to do so, it would be necessary to establish the value of the assets of Hottsie Anne at the time of the execution of each of the Loan agreements. Neither - the Applicant herself as the major shareholder, nor Mr. Kolo who describes himself as an Accountant and the Company Secretary have provided any evidence of this to the Court whatsoever - and in the absence of such evidence, the Respondent says they have failed to establish that the terms of Section 128 of the Act are applicable and, I fully agree. 

6.6 The respondent also argues even if Section 128 of the Act were applicable to all or part of the Respondent's lending to Hottsie Anne, and shareholder approval had not been granted, the effect of the failure to comply with Section 128 does not necessarily render the loan illegal, void and unenforceable as has been asserted by the Applicant. There was no evidence before the Court that the borrowing prior to the $700,000 loan in March of 2008, was in amounts giving rise to the operation of Section 128, nor that the loan of $130,000 in August of 2008 would have triggered the application of that particular section. The Applicant has produced no evidence whatsoever as to the value of the company's assets in this regard, and I agree.

6.7 The respondent argued in point of fact, and - quite critically, the Applicant has failed to provide any evidence to the Court to establish that Hottsie Anne is or was in fact solvent. This, if established, might well be a valid reason for the termination of liquidation. However, the Applicant has offered no evidence of a financial nature whatsoever to the Court to establish the company's ability to pay any debts - whatsoever, let alone a debt of $1.2 million and I agree. 

6.8 Section 296 of the Act states that, 

"Unless the contrary is proved, and subject to Section 297, a company is presumed to be unable to pay its debts if: (a) the company has failed to comply with a statutory demand" The Respondent argues it was an undisputed fact that Hottsie Anne was placed into liquidation - due to the failure by the company to comply with a Statutory Demand under Section 298 of the Act, and yet the Applicant has made no effort in her application(s) to terminate the liquidation, nor via Mr. Kolo's supporting affidavits, to rebut the presumption and establish Hottsie Anne's ability to pay its debts, and thus establish its solvency, by the provision of any financial statements or -records to the Court. Even in the event that the provisions of Section 128 were triggered, and was not complied with, the Respondent asked what the effect in terms of the Act was. The Applicant asserted a company's failure to comply with the terms of section 128 renders the transaction in question illegal, void and unenforceable. The Respondent submitted that the Applicant's assertion in this regard was incorrect and I agree.

6.10 The Respondent says the effect of a failure to comply with Section 128, pursuant to Section 184 of the Act, is to deem the action or conduct undertaken by the Company in breach of Section 128 to be unfairly prejudicial to the shareholders or former shareholders of the company. Under Section 183 of the Act, an aggrieved shareholder may make application to the Court for such orders in respect of the transaction as the Court thinks fit, which (under the terms of subsection 2 of that section) may include setting aside the action taken by the company in breach of the Act or the Constitution. In other words, a transaction under Section 128 is voidable upon application to the Court by an aggrieved shareholder at the Court's discretion (and the Court is certainly not required or mandated to void the transaction upon such an application). Failure by a company to comply with Section 128 cannot have been intended by the legislature to make such a transaction void ab initio, as effectively asserted by the Applicant, as this would effectively render the provisions of Section 183 and 184 redundant.

6.11 At the time the Application for an Order Appointing a Liquidator of Hottsie Anne was filed by the Respondent, and at the time the Order appointing a liquidator was made on May 12, 2009, no application to set aside the transaction had been brought by any shareholder of the company under Sections 183 and 184 of the Act, and no such application has since been made. The company - and its shareholders did not raise it as a dispute or bring an action under Sections 183 and 184 of the Act during the statutory period of response to the Notice of Demand under Section 298. 

6.12 The Respondent submitted- a breach of Section 128 of itself does not render the Respondent's loans to Hottsie Anne invalid or unenforceable to any degree - unless and until an order is made by the Court to that effect. As no such order had been made when the Company was placed into liquidation (or since) the loans were then, and are now, due and payable in full, and must be properly accounted for in determining the company's solvency. This being the case, Hottsie Anne is, it was respectfully submitted, is and was unable to pay its debts as they fall due and as such, is hopelessly insolvent. As a result, it was in fact -just and equitable that the liquidation of Hottsie Anne not be terminated - and I fully agree. 

7.0 Section 22 of the Act - The Indoor Management Rule 

7.1 The respondent argues even if Section 128 were applicable and it were proved that no shareholders' resolution approving the loan had been passed, the Respondent is nonetheless afforded protection by Section 22 of the Act, which is the statutory codification, or extension, of the Indoor Management Rule, or as it is often referred to - the rule in Turquand's case. In essence this rule provides that persons dealing with a company - in good faith may assume that acts within its constitution and powers have been properly and duly performed and are not bound to inquire whether acts of internal management have been regular. 

7.3 It is necessary to look specifically at the wording of Section 22 itself and relevant case law and at all the circumstances of this case, to determine whether or not the Respondent can rely upon the rule - in the event that it should be necessary to do so. 

7.4 Section 22 (insofar as it is relevant to this matter) provides; 

"A company or guarantor of an obligation may not assert against a person dealing with the company or with a person who has acquired property, rights or interests from the company that – 

(a) This Act or the constitution of the company has not been complied with; and 

(d) A person held out by the company as a director, company secretary, employee or agent of the company with authority to exercise a power which a director, company secretary, employee or agent of a company carrying on business of the kind carried by the company customarily have authority to exercise, does not have authority to exercise that power:- unless the person - has or ought to have by virtue of his position with or relationship to the company, knowledge of the matters referred to in any of paragraphs (a) to (e) as the case may be. 

7.5 The Respondent's first submission in this regard was that it has not been proven that the series of loans made prior to 06 March 2008 (including the 04 March loan of $10,000) fall within the scope of Section 128, because no evidence has been provided to the Court, that the loans exceeded 50% of the value of the assets at the times the loans were made. In fact, the Applicant has provided no evidence to the Court in relation to the 06 March 2008 loan and financial position. For these reasons, and acknowledging the size of the 06 March loan, it was submitted the operation of Section 22 might only need to be applied, if at all, to the 06 March loan of -$700,000. 

7.6 The Applicant alleges the Respondent had actual knowledge that a shareholder's resolution authorizing the loans had not been passed. The respondent says this was not the case. Obviously, the Respondent could only know this at the time the loan was processed -if Ms. Kava told them. This issue was not even raised until November 2008, when a formal demand was being made for repayment of the loan. The respondent says the evidence now shows in point of fact Mr. Kolo has now informed the court in evidence that Ms. Kava was aware of the loans, and Mr. Kitekei'aho also give unrefuted evidence he had informed her of all company loans and she approved them and I agree. 

7.7 The respondent argued in any event and by contrast, under Section 22(a) the Respondent as a lender is entitled to assume that the Act and the Constitution of Hottsie Anne has been complied with, i.e.: that if a Shareholders Resolution was required, it has been passed. This makes the provisions of Section 128 a shareholder's shield, as opposed to a sword, despite the Applicant's apparent attempt to employ it as the latter, and I fully agree. 

7.8 The Respondent is not entitled to make this assumption however if, by virtue of its position with or relationship to the company, the Respondent had knowledge, or ought to have had knowledge that the relevant Shareholder's Resolution had not been passed. 

7.9 To address this issue it is necessary to turn to relevant case law. There are a number of Australian cases arising from corporate collapses in the late 1980's and early 1990's which are relevant. Although the wording of the Australian legislation at the times in question was not identical to the Tongan Act, the relevant wording is sufficiently close to make the principles applied legitimate.

7.10 The respondent says there are in fact two lines of judicial authority in this regard. The first, as espoused by Nicholson J., in Lyford v Media Portfolio Ltd (1989) 7 ACLC 271 invokes a narrow interpretation of the requirement for imputed knowledge, holding that this refers to knowledge that a person ought to have by reason of their connection or relationship with the company, and not to knowledge that the person ought to have because of the circumstances of the transaction itself Hence a Director or Secretary of the Company, (or possibly even a solicitor accountant or other professional advisor to the company) would be deemed to have knowledge of irregularities in the company's affairs (such as the failure to have the shareholders ratify a transaction when required by the Act and Constitution to do so), but a Bank as a lender would not. This view was affirmed by Jenkinson J. in the case Bell Resources Holdings Pty Ltd v Commissioner for ACT Revenue Collections (1990) 8 ACLC 533. 

7.11 The other line of authority -has held that a third party may be imputed with knowledge, i.e. the third party ought to have known, due to the nature of the transaction involved. The essence of the decisions in this regard are that if there was something in the nature of the transaction itself which should have put the third party on notice, then the third party cannot rely on the indoor management rule. Examples of this are where no benefit is derived to the company itself from the transaction, or where the transaction has no relation to the company's business, or the provision of a third party guarantee and security (BNZ 1060 v Fiberi Pty Ltd (1992) 10 ACLC 1557, Brick and Pipe Industries v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253, and Northside Developments Pty Ltd v Registrar General & Ors (1990) 2 ACSR 161). 

7.12 In the case of the $700,000.00 loan to Hottsie Anne of 06 March 2008, it is the Respondent's position that there was nothing in the nature of the transaction itself that would have put the Respondent on notice that the Shareholders of Hottsie Anne had not approved the transaction. Although the loan is for a significant amount, that is not the only fact which is to be taken into account. The loan is for a legitimate purpose related to the business of the company (being the expansion and refurbishment of the company's bar premises at a time when most all hospitality related companies were so doing in anticipation of the coronation celebrations in August 2008) and it was personally guaranteed by (i) the company's known principal Fuka Kitekei'aho, and (ii) another company controlled by Mr. Kitekei'aho, Tevoi Investments Limited, which owned the leasehold land that the bar premises were constructed upon. 

7.13 The Bank may have known of the requirement for a Shareholder's Resolution due to the size of the loan, but is nonetheless entitled to assume that the necessary resolution was duly passed. 

7.14 As a result, the Respondent seeks to invoke Section 22 of the Act which prevents Hottsie Anne (or its shareholders) from asserting that the loan is void or voidable due to their having been no shareholder approval of the borrowing. This would also be equally true, of course, of the other smaller loans made previously and after the 06 March 2008 loan. 

7.15 Section 22(1)(d) applies in relation to the issue of Mr. Kitekei'aho's execution of the loan agreement itself— although it is the Respondent's position that reliance on section 22(1)(d) is unnecessary in this regards given that Mr. Kitekei'aho nonetheless had actual authority (or at worst, implied actual authority) as required under Section 189(1)(b) of the Companies Act, for the reasons previously provided.

7.16 However, were Section 22(1)(d) to be relied upon in this regard, the issue is whether or not the entering into of the loans by Mr. Kitekei'aho on behalf of the company was something which an agent in his position would customarily have - the authority to do. The Respondent relied on the same principles and submissions which have already been outlined in relation to the issue of implied authority in paragraphs 5.7 and 5.7 above which are, in essence, that due to; 

• The particular circumstances of this case;

• The nature of the company's business (hospitality), and the unique business environment at the time (the coronation and related celebrations); 

• The special position held by Mr. Kitekei'aho as sole and/or Managing Director of the Company, and Company Secretary; 

• The familial structure of the company and the business; 

• The shareholders' acquiescence to the prior borrowing of $420,000; 

Mr. Kitekei'aho as an agent - in Mr. Kitekei'aho's unique position would in the respondents view, customarily have the authority to enter into the loan agreements on behalf of the Applicant company and I agree. 

7.17 The Respondent submits that for these reasons the entering into of all the loans, including the March 2008 loan for the renovation of the company's premises was something that an agent of the company in Mr. Kitekei'aho's unique position would customarily have authority to do, and that the provisions of Section 22(1)(d) would apply. 

8.0 Conclusion and Ruling

8.1 I have considered everything that has been said to me in Court in connection with this particular case CV202/2009, concerning a formal application - to terminate the liquidation of the company known as Hottsie Anne Ltd, which Company had been placed into liquidation on the 12th May 2009 by Order of Ford CJ. 

8.2 I have considered the affidavit evidence -the exhibits, and have perused the relevant case law forwarded by counsel, over the past weekend. I have also read and have incorporated in my ruling, the very helpful written submissions from both the Applicant — and the Respondent's counsel. 

8.3.1 An Application to terminate the Liquidation of Hottsie Anne had been brought in reliance upon section 259 of the Companies Act 1995. Section 259 of the Act gives the Supreme Court, a discretionary power to terminate the liquidation of a Company:- "If the Court is satisfied that it is just and equitable to do so". These fourteen [14] words appear to be the operative words for this particular case- "If it is just and equitable to do so" — along with a caveat — "bearing in mind all the facts of the particular case" 

8.3.2 Throughout the proceedings, the Respondent made very strong submissions to prove that the Applicant has failed to establish - any just or equitable grounds for the termination of the liquidation of Hottsie Anne Company Ltd, and has also failed to provide the Court with any scrap of evidence, that the Company was solvent thus enabling the court to invoke its discretionary powers to terminate the Order.

8.3.3 In my view the case focuses upon the truthfulness and or the accuracy of the affidavit evidence of the Applicant witness Mr. Koro and the knowledge of the majority shareholder Ms Kava of the operation of Hottsie Anne Co Ltd. The Respondents questioned the truth, the sincerity, the accuracy and the motive for the Applicant's request for termination of the Order - at this late time. 

8.5 The Respondent's submissions were focused as follows: 

8.5.1 The Applicant's allegations of fraud and impropriety were simply allegations - and they have not been supported by any evidence. I entirely agree with the respondent on that point, and I find as a fact - the Respondent and its officers have always acted in good faith throughout their course of their dealings with the Hottsie Anne Company and for over six years. There was no direct evidence put before this Court to establish otherwise. 

8.5.2 The Applicants assertions regarding the validity of the Debenture are in my view not relevant to this - the liquidation process. The evidence revealed the Debenture was simply not relied upon by the ANZ Bank - when they issued the Statutory Demand Notice — seeking to place Hottsie Anne into liquidation. The Applicant Company Hottsie Anne chose not to respond to the Formal Demand Notice and as a result FORD CJ signed the notice for liquidation on the 12 May 2009. 

8.5.3 Upon hearing the evidence I find as a fact all Loan agreements placed before me, between Hottsie Anne and the Respondent Bank had each been properly executed by Mr. Kitekei'aho as a Director of the Company- with the actual authority to do so, pursuant to the terms of Section 189(1)(b) of the Act. There was no evidence put before the court to establish that Mr. Kitekei'aho - lacked any such authority. 

8.5.4 I also fully accept the evidence that Mr. Kitekei'aho had provided direct testimony to the Court testifying that he informed Ms. Kava of all Hottsie Anne's loan arrangements with the Respondent Bank and that she had knowledge of all such loans. His evidence was not contradicted in any way shape or form. More importantly - not one shred of evidence has been put forward to show that the applicant company is or was solvent in May 2009. 

8.5.5 For all the reasons put forward in this case – I prefer the evidence of the Respondent in this case. I find the Applicant has failed to establish that it would be just and equitable for this Court to set aside the Court Orders of May 12, 13 2009 signed by FORD CJ which Order placed the Company known as Hottsie Anne into liquidation. Accordingly the Application is refused.