The Court of Appeal of Tonga on 16 March 2017 overturned a decision by the Supreme Court that a 2007 tenancy agreement for a commercial property at Haveluloto was unconscionable.

The Appeal Case was between the tenant, Mrs Yuzhen Yang the appellant, and the land owners ‘Olioni Manoa and his wife Matelita Manoa, the respondents.

The Court of Appeal on 16 March 2017 declared that Mrs Yang's appeal is allowed and that the defence of unconscionability fails. It ordered for the respondents to perform their obligations under the tenancy agreement signed on 29 October 2007 according to its terms.

The appellant was awarded costs.

The respondents are jointly and severally liable for the costs and for such disbursements as are ordered by either Court to be paid to the appellant.

The Manoa's as landlords were enjoined from taking any steps either personally or by their contractors or agents to prevent or interfere with access to the building by Mrs Yang or her sub-tenant during the tenancy.

The tenancy agreement was signed by Mrs Yang and Mrs Manoa on 29 October 2007.

Mrs Manoa was signing the tenancy agreement on the behalf of her husband ‘Olioni Manoa who was in Hawaii at the time.

The October 2007 agreement demanded an advance rent of $35,000, and for payment to be made “right away immediately after the agreement is signed”.

The respondents told the court that, in fact, Mrs Yang paid Matelita only $19,000, but Mrs Yang claimed that Matelita owed her $16,000 for goods she supplied on credit.

The term of the 29 October 2007 tenancy agreement was for 10 years starting from 9 June 2013, when a 2005 agreement would expire.

Sub-tenant

In 2005 Mrs Yang had become a sub-tenant of a Mr Meng Sen Tsay.

On 29 June 1999 ‘Olioni Manoa agreed to rent his retail store to Meng Sen Tsay. The term of the 1999 tenancy agreement was for nine years from 2 June 1999 until 1 June 2008.

After Mrs Yang became a sub-tenant of Meng Sen Tsay in 2005, Yang  approached ‘Olioni by telephone in Hawaii with a proposal for her to build an upper storey above the store. She asked for a new tenancy agreement to take effect from when Tsay’s tenancy expired in 2008.

A tenancy agreement was prepared and signed on 9 June 2005 by Mrs Yang and Mrs Manoa.

Confusion

The confusion arose because the Manoas argued that the agreement with Yang to build the upper storey was not connected to their tenancy agreement with Meng Sen Tsay for their retail store and was to be expired by 2008.

But taking into account that Mrs Yang was a sub-tenant of Men Sen Tsay in 2005 and she was running the retail store and that the 9 June 2005 tenancy agreement was to come into effect when the Manoas and the Meng Sen Tsay tenancy agreement expired in 2008, it was clear that Mrs Yang had taken over from Men Sen Tsay.

On 1 June 2009 Mrs Yang sublet the ground floor retail store to Zhufu Wei.

Dispute over the tenancy agreement emerged after ‘Olioni Manoa returned to Tonga in 2010. He was not happy that Mrs Yang had sublet the ground floor retail store to Zhufu Wei and he wanted to end the tenant agreement with her.

In June 2013 ‘Olioni boarded up the shop and had the water supply to the building disconnected.

Mrs Yang took the case for specific performance on the 2007 agreement in the Supreme Court in June 2014. Justice Scott found that the 2007 agreement was illegal, it was against Section 13 of the Land Act.

This decision was reversed  by the Court of appeal in 2015.

The case came back before Scott J for another full trial. He delivered his judgment on 14 October 2016.

“The form of the agreement was unsatisfactory. To be fair to and binding on the parties this type of agreement should be drawn up in proper and adequate form, should be properly understood by both parties and should be the subject of independent legal advice.

“All these fundamentals were missing in this case and in my opinion it would be unconscionable to uphold these agreement”.

There was also a concern that the parties to the tenancy agreement did not fully understand the agreement which was in English.

Scott J. declined “to order specific performance.”

The legal counsel  for the appellant was L. M. Niu SC. For the respondents were S. Fonua for the first respondent, ‘Olioni Manoa; and counsel Mrs P. Taufaeteau for the second respondent, Matelita Manoa.