Supreme Court rules $2.1 million lawsuit should be heard in NZ [1]
Friday, May 4, 2018 - 18:56. Updated on Friday, May 4, 2018 - 18:59.
The Tonga Supreme Court has set aside a default judgment in a $2.1 million civil lawsuit against a Tongan business woman Lucy Anna ‘Ilaiu, stating that the case should be heard in New Zealand and not in Tonga.
Lord Chief Justice Paulsen ruled on 13 April that the case should be heard in New Zealand because almost all of the alleged dealings for the disputed loan agreements occurred in New Zealand.
However, he made it a condition that the defendants Lucy Anna ‘Ilaiu and a trustee, HRH Salote Mafile'o Pilolevu Tuita, provide a written agreement that they would submit to judgments of a New Zealand court concerning the lawsuit.
Yesterday, the Nuku'alofa Supreme Court confirmed that the agreement to submit to judgments of a New Zealand court had been filed by the defendants in April.
Plaintiffs
The plaintiffs, a New Zealand couple Graeme McLean Wallace and Valerie Isobel Wallace, were seeking to recover $2,104,822 (NZD) allegedly owed to them by Ms ‘Ilaiu, as first defendant, under a term loan agreement dated 24 May 2016.
Lord Paulsen set aside a default judgment obtained by the Wallaces against Ms. 'Ilaiu on 27 February 2018, after the court found Ms 'Ilaiu's failure to oppose the Wallaces' claim was reasonably explained. He also dismissed an application by the Wallaces to vary the default judgment.
The second defendant in the lawsuit, HRH Salote Mafile'o Pilolevu Tuita and third defendants, HRH Salote Mafile'o Pilolevu Tuita and Lucy Anna 'Ilaiu as trustees of the HRH SMPT Family Trust, were sued as guarantors of Ms 'Ilaiu's obligation.
The applications revealed that there were a series of linked term loan agreements between the parties. Between 2011 and 2016, Ms ‘Ilaiu entered into three loan agreements with a company owned by the Wallaces called International Produce Limited (IPL). It did business in Tonga. The first loan was to Global Trading Company Ltd, (GTCL) in which the defendants had shareholdings.
"As will become apparent, loan fees charged by the Wallaces are the kernel of the dispute between the parties," stated Lord Chief Justice Paulsen in his ruling of 13 April.
On 7 December 2017, the Wallaces filed action against Ms. ‘Ilaiu in Tonga to recover $2,104,822 and on 21 February this year, the Wallaces applied for judgment by default (failure by the other party to take action). The amount outstanding was stated to include Principal and Advances of over 1.426 million with interest charges of over $1.670 million, less receipts of $992,071.
On 1 March this year, the Wallaces applied for charging orders against registered leases of land at Neiafu and Kolomotu'a, in which they contended Ms. ‘Ilaiu had an interest with HRH Princess Pilolevu.
Both defendants are Tongan nationals. "They had owned properties in New Zealand but they have now been sold."
Defendants
The defendant Ms 'Ilaiu challenged not only the loan fees but also interest charged on them.
Lord Chief Justice Paulsen noted that it was arguable that the third loan agreement was oppressive.
The loan fees were large both in dollar terms and as a percentage of the advances (up to 150%). The interest rates were very high (typically 3% per month).
"The loan fees were very large; bewilderingly so. I have never come across a case where such fees have been charged let alone on a repeated basis over a period of years," stated Lord Chief Justice Paulsen. "The Wallaces do not offer a satisfactory justification for the loan fees."
The judge also stated that the nature of the relationship and other dealings between the parties would be relevant. "I have no clear idea what their relationship was and no way of assessing its implications."
New Zealand
Lord Chief Justice Paulsen stated: “I am firmly of the view that New Zealand is the proper and most convenient forum for resolving this dispute.”
“The parties’ relevant dealing with each other took place over a period of years almost entirely in New Zealand.”
Justice Paulsen determined that the case would suffer from complications with defining New Zealand law in a Tongan courtroom.
“The legal issues that arise will be unfamiliar to a Tongan lawyer… It is likely that if the case is heard in Tonga the parties will call expert evidence to prove New Zealand law.”
“I am satisfied that New Zealand is the natural and proper forum to hear the Wallace’s’ claim that there are no special circumstances by reason of which justice requires the action to be heard in Tonga.”
“To put the matter beyond doubt this court can make it a condition of granting stay that the defendants provide their written agreement that in respect of the Wallace’s’ claim they will submit to the jurisdiction of the New Zealand courts…”
Lord Chief Justice Paulsen’s final orders in his ruling on 13 April 2018, were:
“The default judgment obtained against Ms 'Ilaiu on 27 February 2018 is set aside.”
“The Wallaces' application to vary the default judgement is dismissed.”
“This action is permanently stayed subject to a condition that within the period of 14 days the defendants are to provide to the Wallaces and to the court their written agreement that in respect of the subject matter of the Wallaces’ claim they submit to the jurisdiction of the New Zealand courts.”
“The order of this court of 5 March 2018 granting charging orders over registered leases 4940A, 6244 and 6827 is discharged.”
Counsel for the plaintiffs were Mr Laki Niu SC and Dr. J Turner.
Mr W. Edwards represented the defendants at the hearing which took place on 27 March 2018.