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Tu'ivai v Tonga Development Bank [2009] TOLawRp 41; [2009] Tonga LR 329 (10 July 2009)

IN THE COURT OF APPEAL OF TONGA
Court of Appeal, Nuku'alofa

AC 06, 09, 16 of 2009

Tu'ivai

v

Tonga Development Bank

Burchett, Salmon, and Moore JJ
2 July 2009; 10 July 2009

Practice and procedure – application for leave to appeal out of time – leave refused

Mr Tu'ivai and others borrowed money from the Tonga Development Bank ("the Bank"). They did so pursuant to a loan agreement for which security was pledged which included mortgages over two tax allotments. The money was not repaid and in March 2006, the Bank commenced proceedings against Mr Tu'ivai and the other debtors. Further proceedings were commenced by the Bank against Mr Tu'ivai and the other debtors. All three proceedings were referred to as "the Proceedings". In the Proceedings the Bank alleged that there had been loan agreements between it and Mr Tu'ivai and the other debtors, the loans had been secured, the money had been lent to Mr Tu'ivai and the other debtors and the money had not been repaid in accordance with the loan agreements. In their defence Mr Tu'ivai and the other defendants put the Bank to proof of its claims. Additionally they raised a defence that the Bank was a statutory authority and was bound to act fairly and had not. Also, Mr Tu'ivai and the other defendants raised a counterclaim to the following effect. The money the Bank lent was to finance an agricultural venture by Mr Tu'ivai and others to grow squash in 2004. It was alleged that the agricultural venture was undertaken under the auspices of the Friendly Islands Marketing Cooperative ("FIMCO"). It was also alleged that the loan application by Mr Tu'ivai and the other defendants was supported by FIMCO. The counterclaim went on to allege that an employee of the Bank (the lending manager) and the general manager of FIMCO entered an illicit and corrupt agreement whereby they would take advantage of a portion of the squash export quota managed by FIMCO and, in order to do so, reduce the loan payments to, or terminate the loan agreement of, Mr Tu'ivai and his other co-venturers. It was further alleged that Mr Tu'ivai's agricultural venture in 2004 failed because of the activities of the lending manager of the Bank and the general manager of FIMCO. Even though Mr Tu'ivai participated in a number of interlocutory skirmishes during November 2008 in the Proceedings, he did not participate in the trial. It follows that Mr Tu'ivai did not take up the opportunity presented by the trial of testing the evidence of the Bank and giving his own evidence or the opportunity of making whatever submissions he wished to the trial judge and jury in support of his defence and his counterclaim.

Held:

1. The Court dealt firstly with the question of leave to appeal out of time against the order upholding the Bank's claim of "privilege". The touchstone for determining whether documents should be provided through the process of discovery was whether the documents were relevant to the proceedings. Courts were attempting to control and limit the discovery process. Discovery could be extremely expensive, very time consuming and very intrusive. Courts often insist upon being satisfied that the documents sought by the discovery process were truly relevant. The documents sought by Mr Tu'ivai were arguably relevant but only in a very general sense. The Court was correct in upholding the Bank's claim that it did not have to produce the documents. For that reason alone, leave to appeal out of time against the interlocutory order of 28 September 2007 should be refused.

2. There was another reason why leave should be refused. Mr Tu'ivai provided no evidence that explained the delay in seeking leave to appeal. He left it for over a year to challenge the discovery decision and did so only when the trial was imminent. That was far too late.

3. The complaint in the grounds of appeal that the Court allegedly only came to know of the defence and counterclaim on the eve of the trial was without substance. The defence and counterclaim became irrelevant because of the non-appearance of Mr Tu'ivai (save to the extent that the defendants' pleadings contained admissions by the defendants which narrowed the scope of what the Bank had to prove to establish its case). A judge was not obliged to consider a defence or counterclaim if the party raising the defence or pursuing the counterclaim did not appear at the trial. The participation of the party at the trial was necessary to give life to the defence or the counterclaim.

4. Leave to appeal out of time against the order of 28 September 2007 should be refused and the appeal should be dismissed with costs.

Statute considered:

Court of Appeal Act (Cap 9)

The appellant appeared in person
Counsel for the respondent : Mrs Vaihu

Judgment

[1] Before the Court of Appeal are a number of applications and an appeal by Mr 'Amini Tu'ivai and others.

[2] Mr Tu'ivai and others borrowed money from the Tonga Development Bank ("the Bank"). They did so pursuant to a loan agreement for which security was pledged which included mortgages over two tax allotments. The money was not repaid and in March 2006, the Bank commenced proceedings against Mr Tu'ivai and the other debtors. Those proceedings became CV197/2006. Further proceedings were commenced by the Bank against Mr Tu'ivai and the other debtors which became CV198/2006 and CV 199/2006. We will refer to the three proceedings as "the Proceedings". It appears that in the Proceedings the Bank alleged that there had been loan agreements between it and Mr Tu'ivai and the other debtors, the loans had been secured, the money had been lent to Mr Tu'ivai and the other debtors and the money had not been repaid in accordance with the loan agreements.

[3] In their defence filed on September 2006, Mr Tu'ivai and the other defendants put the Bank to proof of its claims. Additionally they raised a defence that the Bank was a statutory authority and was bound to act fairly and had not. Also, Mr Tu'ivai and the other defendants raised a counterclaim to the following effect. The money the Bank lent was to finance an agricultural venture by Mr Tu'ivai and others to grow squash in 2004. It was alleged that the agricultural venture was undertaken under the auspices of the Friendly Islands Marketing Cooperative ("FIMCO"). It was also alleged that the loan application by Mr Tu'ivai and the other defendants was supported by FIMCO. The counterclaim went on to allege that an employee of the Bank (the lending manager) and the general manager of FIMCO entered an illicit and corrupt agreement whereby they would take advantage of a portion of the squash export quota managed by FIMCO and, in order to do so, reduce the loan payments to, or terminate the loan agreement of (it is not clear from the pleading which is alleged), Mr Tu'ivai and his other co-venturers. It was further alleged that Mr Tu'ivai's 100 agricultural venture in 2004 failed because of the activities of the lending manager of the Bank and the general manager of FIMCO.

[4] The counterclaim also alleged similar corrupt activities in 2005 (for which a further loan was, it appears, provided to Mr Tu'ivai and others) and alleged that the Bank seized Mr Tu'ivai's property (including a tractor and vans) in 2006 (apparently to satisfy the debt arising from the earlier loans) thereby frustrating his attempts to grow and export squash in 2007. In the counterclaim Mr Tu'ivai repeated the allegation that the Bank had to act fairly and also alleged the Bank had engaged in corrupt practices which involved treating him differently to other customers to whom large loans had been made and which had not been repaid or, alternatively, had been forgiven. It was also alleged that loans were made to customers (apparently including Mr Tu'ivai and his co-venturers) in circumstances in which the Bank knew the loans would not be repaid unless the Bank provided further finance for the customers' business activities. Specific complaints, which are unnecessary to summarise, were made about the Bank's lawyers and its legal fees. The defence was amended in October 2006 to allege that the loan agreements were unenforceable as they were tainted by illegality.

[5] The Proceedings then moved down the path to final hearing. On 2 March 2007, Chief Justice Ford made a number of procedural orders concerning the final hearing and also gave Mr Tu'ivai "leave to take out discovery against the plaintiff". Discovery is dealt with by Order 18 of the Supreme Court Rules 2007. The Order makes provision for discovery in the orthodox way. That is, a party required to give discovery must make a list of relevant documents in their possession custody or power, provide the list to the opposing party and subsequently give the opposing party an opportunity to inspect the documents in the list (unless there are claims of privilege). In the present case, the order of the Chief Justice was complied with in a slightly different way.

[6] Mr Tu'ivai prepared a list of documents he wished to inspect which he forwarded to the Bank or its legal representative on or about 22 June 2007. Mr Tu'ivai prepared a further list which he forwarded on about 2 July 2007. Some of the documents (which were described as files) in the first list obviously were relevant to the Proceedings because they related to the loans to Mr Tu'ivai and the other defendants. It was not obvious that other documents sought (again described as files) were relevant because they only related to transactions between the Bank and other customers. There is nothing before us which suggests that Mr Tu'ivai filed any evidence at that time (or later) establishing how (even arguably) the files concerning other customers were relevant to the Bank's claim against him and the other defendants. It is true that in the defence and counterclaim Mr Tu'ivai and the other defendants alleged corrupt conduct and unfair dealings on the part of the Bank and others but those allegations were made only in a very generalised way.

[7] The dispute about discovery came to the Supreme Court because the Bank objected to producing many of the documents sought by Mr Tu'ivai, arguing that the files of other customers were irrelevant and were confidential. Its objection was initially in a letter to the Registrar dated 26 June 2007 and later in a notice of objection dated 24 August 2007 which was apparently filed with the Court. The notice of objection was accompanied by an affidavit which asserted the irrelevance of many of the documents both to the Bank's claim and the defendants' counterclaim. Mr Tu'ivai filed in Court, it appears, a document which was a reply to the notice of objection. In that notice, Mr Tu'ivai asserted, in a very general way, how the documents he sought were relevant to his case. There was no affidavit in support even outlining the basic facts supporting his allegations in the counterclaim about the Bank's conduct (corruption and preferential treatment).

[8] The dispute was dealt with by Andrew J who made an order on 28 September 2007 upholding the Bank's claim of "privilege" in relation to the disputed documents. While, strictly speaking, the Bank's objection was not based on privilege but on relevance, the effect of his Honour's order was clear. Mr Tu'ivai could not pursue his request for the production of files and other documents concerning other customers and the other material which had been requested which did not relate to his loans. Though the procedures which had been adopted were somewhat unorthodox, it is clear that by September 2007 a point had been reached where Mr Tu'ivai could not obtain all documents he had sought which he contended supported his defence and counterclaim.

[9] The trial date of 1 December 2008 was fixed on 3 April 2008. The trial was to be before a jury. In November 2008, Mr Tu'ivai sought leave to appeal out of time against the interlocutory order made in September 2007 concerning discovery. Andrew J made an order on 24 November 2008 refusing leave to appeal out of time. Several other applications were made in November 2008 challenging either directly or indirectly the September 2007 discovery order and seeking to have the Proceedings stayed until the question of discovery had been resolved at an appellate level. It is unnecessary for us to detail precisely what each application was and whether it was made to the Supreme Court, on the one hand, or the Court of Appeal on the other and whether any particular application was competent. It is unnecessary because we are prepared to proceed on the basis that this Court of Appeal can entertain an application by Mr Tu'ivai challenging the order of 24 November 2008 of Andrew J (and any similar orders) refusing leave to appeal out of time against the September 2007 order and also consider ourselves whether leave should be given and whether the September 2007 order should have been made. We also can consider and determine the appeal against the final orders made in the trial of the Proceedings on 1 December 2008.

[10] At the trial before a jury, the Bank was successful. Orders were made in the Proceedings (separate orders were made in CV197/2006, CV198/2006 and CV199/2006) giving judgment in favour of the Bank for a nominated amount of money together with orders authorising the Bank to sell property of Mr Tu'ivai which had been provided as security for the loans. Even though Mr Tu'ivai participated in a number of interlocutory skirmishes during November 2008 in the Proceedings, he did not participate in the trial (we were informed that he attended at the very beginning but then left). It follows that Mr Tu'ivai did not take up the opportunity presented by the trial of testing the evidence of the Bank and giving his own evidence or the opportunity of making whatever submissions he wished to the trial judge and jury in support of his defence and his counterclaim.

[11] We deal firstly with the question of leave to appeal out of time against the order of Andrew J of September 2007 upholding the Bank's claim of "privilege". On the material before us, there is little reason to doubt the correctness of the decision of Andrew J. upholding the Bank's claim of "privilege".

[12] The touchstone for determining whether documents should be provided through the process of discovery is whether the documents are relevant to the proceedings. A document can be relevant because it is directly relevant to the proceedings. It can be directly relevant in two ways. The first is because the document supports or assists the case of the party to whom discovery is given (that is, the party who is given the list of documents in the possession custody or power of the opposing party and who can inspect the documents). The second is because the document damages the case of the opposing party giving discovery (that is, the party who is in possession, custody or power of the documents, prepares the list and who must make the documents available for inspection) or another opposing party. A document can be relevant (and therefore must be discovered) in a more indirect way. That is because the document points to a line of enquiry that the party being given discovery (that is, being provided with a list of documents in the possession, custody or power of the opposing party and then inspecting them) might undertake to obtain further material supportive of its case or damaging of the opposing party's case or the case of another opposing party.

[13] However, in many parts of the common law world, Courts are attempting to control and limit the discovery process. Discovery can be extremely expensive, very time consuming and very intrusive. Often Courts insist upon being satisfied that the documents sought by the discovery process are truly relevant in the way discussed in the preceding paragraph. Parties are now often required to justify (and often with evidence) that the documents are relevant before an order for discovery is made (either an order for general discovery or discovery of specific documents or classes of documents). There is no reason why such an approach should not be taken by the Courts in Tonga so that categories of documents can be excluded and need not be provided in the discovery process.

[14] The documents sought by Mr Tu'ivai in this matter, were arguably relevant but only in a very general sense. They may have been relevant to the case he pleaded in the counterclaim against the Bank (of unspecified acts of corrupt and discriminatory conduct on the part of the Bank) but no evidence was provided of which we are aware in September 2007 which would have justified requiring the Bank to produce the files of a number of its customers (which were obviously confidential) and similar or related information. In our opinion it would have required something more than the bare general allegation in the pleadings (Mr Tu'ivai's defence and counterclaim) to have justified requiring the Bank to produce the files it objected to concerning other customers. Some evidence would have been necessary to establish that the pleaded allegations had substance. There was none. In those circumstances, Andrew J was correct in upholding the Bank's claim that it did not have to produce the documents. For that reason alone, leave to appeal out of time against the interlocutory order of 28 September 2007 should be refused.

[15] However there is another reason why leave should be refused. Mr Tu'ivai has provided no evidence explaining the delay in seeking leave to appeal. It appears, from some of the documents in the file, that Mr Tu'ivai may have been in prison at the time the dispute arose about discovery. His address for service in the lists prepared in June and July 2007 was Hu'atolitoli Prison. However his address for service in his reply to the Bank's objection filed in September 2007 was a residential address in Kolomotu'a. Even if Mr Tu'ivai was in prison in September 2007, it is not apparent to us that he could not have forwarded the documentation to the Court seeking leave, within time, to appeal against the interlocutory order of Andrew J. He left it for over a year to challenge the discovery decision and did so only when the trial was imminent. That was far too late.

[16] We turn now to consider the appeal against the final orders made in favour of the Bank at the trial on 1 December 2008. We can put to one side a number of grounds which raise procedural issues (including the effect of clause 94 of the Constitution) about what Andrew J did in November 2008 concerning the September 2007 order. We can put them to one side because we are prepared, as we earlier indicated, to deal with Mr Tu'ivai's application for leave to appeal out of time against the September 2007 discovery order as well as deal with the appeal. However, we should make one comment about Mr Tu'ivai's reliance on the fact that he had, immediately before the trial, made an application for a stay of the Proceedings. It would have been clear to Mr Tu'ivai at the time the trial was held during the day on 1 December 2008, that no stay order had been made. Mr Tu'ivai was not entitled to assume that because he had applied for a stay order, it was unnecessary for him to appear at the trial to test the evidence of the Bank, advance his own evidence and make submissions to the judge and jury. It was necessary for him to do so in order to protect his own interests.

[17] Mr Tu'ivai cannot now complain about the findings of fact which must have been made by the jury to justify the ultimate findings made at the trial in favour of the Bank. Mr Tu'ivai's complaint (embodied in some of the grounds of appeal) that Andrew J proceeded with the trial on 1 December 2008 notwithstanding that an application had been made to the Court of Appeal for a stay, is entirely without merit. In the absence of a stay (or in the absence of a successful application for an adjournment which Mr Tu'ivai never made), Andrew J was under a duty to proceed with the trial which had been fixed several months earlier.

[18] Also, it appears to be suggested in Mr Tu'ivai's grounds of appeal that Andrew J was biased because of what he had done when dealing with Mr Tu'ivai's attempts to obtain leave out of time to appeal against the September 2007 order. Again, this argument is without merit. In November 2008 Andrew J was confronted with a barrage of applications by Mr Tu'ivai concerning the September 2007 order. They were being made on the eve of a trial and many months after the interlocutory order was made. Those applications clearly had the appearance of being a delaying tactic. It may possibly be that his Honour should not have dealt with applications that were apparently filed or sought to be filed in the Court of Appeal rather than the Supreme Court. However we immediately note that s 10(1)(a) of the Court of Appeal Act (Cap 9) empowers a Supreme Court judge to deal with an application for leave to appeal from an interlocutory judgment of that judge which would, if leave was given, be heard by the Court of Appeal. No question of bias arises, in our opinion, from these circumstances in which Andrew J was endeavouring to ensure that, subject to any legitimate application Mr Tu'ivai might have made, the trial fixed for hearing would proceed.

[19] Similarly the complaint in the grounds of appeal that Andrew J allegedly only came to know of the defence and counterclaim on the eve of the trial is without substance in relation to Mr Tu'ivai's challenge to the final orders made on 1 December 2008. If it is true (which we are prepared to assume for present purposes) that Andrew J only came to know of the defence and counterclaim shortly before the trial, it is a fact of no consequence in relation to the final orders. It obviously would have been important for Andrew J to be aware of the defence and counterclaim (and the terms on which they were pleaded) if Mr Tu'ivai had appeared and had pursued his defence and counterclaim by challenging the Bank's evidence, giving his own evidence and making submissions. But that did not happen. The defence and counterclaim became irrelevant because of the non-appearance of Mr Tu'ivai (save to the extent that the defendants' pleadings contained admissions by the defendants which narrowed the scope of what the Bank had to prove to establish its case). A judge is not obliged to consider a defence or counterclaim if the party raising the defence or pursuing the counterclaim does not appear at the trial. The participation of the party at the trial is necessary to give life to the defence or the counterclaim.

[20] For the preceding reasons, leave to appeal out of time against the order of 28 September 2007 should be refused and the appeal should be dismissed with costs.