Tonga's Land Court ruled that a private money lender, the Wallaces, had no legal interest in the lease or in the proceeds of sale of a property lease held by Lucy Ana Ilaiu. In making the ruling the President of the Land Court, Lord Chief Justice O. G. Paulsen warned that it is not open to persons to use legal processes, such as the procedure for lodging caveats, unreasonably or for improper purposes.

The Land Court decision brought to the end a case between the Applicant ANZ Bank and the Respondents Graeme McLean Wallace and Valerie Isobel Wallace (the Wallaces).

The Applicant, ANZ, in its capacity as mortgagee of the Lease, was awarded costs by the Land Court on 27 November 2017, after the Wallaces withdrew a caveat.

The ANZ has a registered mortgage of a Lease no. 6314 held by Lucy Ana Ilaiu. On 8 September 2017 the Wallaces lodged a caveat against the lease, after the ANZ made it known that it had the intention to sell the mortgage of a lease. The caveat alleged that the Wallaces were the lender of funds borrowed by Ms Ilaiu and that the guarantor of the loan was HRH Princess Salote Maile'o Pilolevu Tuita.

Counsel for the ANZ bank, Mr R. Stephenson entered into correspondence with counsel for the Wallaces, Mr L. Niu, and stressed the point that the Wallaces did not have a caveatable interest. He requested for the caveat to be withdrawn. Mr Stephenson also requested a copy of the documents evidencing the alleged loan and guarantee referred to in the caveat.

The Wallaces refused to disclose any documents, but on 14 November 2017 Mr Niu advised that the Wallaces would withdraw the caveat only subject to a number of conditions, including that he would approve the terms of any sale and purchase agreement. He was also seeking that after the repayment of the monies owing under the mortgage to the ANZ Bank that any balance of the sale proceeds be disbursed to his clients.

The ANZ Bank then filed the case with the Land Court to summon the Wallaces to show cause why the caveat should not be withdrawn.

However, on 28 November when the Wallaces were summoned to appear in the Land Court, Mr Niu advised the court that the caveat had been withdrawn on 24 November 2017, and that the only issue outstanding was whether the ANZ was entitled to costs.

The ANZ's position was that the Wallaces never had any interest in the lease which would support a caveat and that they did not withdraw the caveat. As a consequence the ANZ was forced to issue the proceeding to remove the caveat and was entitled to costs. The ANZ argued that the Wallaces were not entitled to impose any conditions upon the ANZ.

Mr Niu's submissions, arguing against the ANZ position, were not accepted by Lord Chief Justice Paulsen.

"On the information before the court the Wallaces are owed a debt by Ms Ilaiu but that alone gave them no right to lodge a caveat."

The judge stated that there was absence of any reasonable justification for lodging of the caveat on legal grounds. He also stressed that "It is not open to persons to use legal processes, such as the procedure for lodging caveats, unreasonably or for improper purposes...Law practitioners must realise that they cannot be party to the improper use of legal processes either...where he or she has not made reasonable enquiries."

Lord Chief Justice Paulsen also referred to Rule 6.04 of the Rules of Professional Conduct for Law Practitioners, and said that these obligations were not widely understood.

He rejected Mr Niu's submission that the Wallaces had agreed to withdraw the caveat subject to reasonable conditions.

"In my view the conditions were not ones that the Wallaces were entitled to impose nor were they reasonable. The Wallaces had no legal interest in the lease or in the proceeds of the sale of the lease. Furthermore the ANZ could never have been expected to agree to conditions which would render the exercise of its power of sale subject to the agreement of the Wallaces..."

Lord Chief Justice Paulsen ordered for the ANZ to be awarded its reasonable costs on the usual basis, which are to be fixed by the Registrar if not agreed.