IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY

CV 24 of 2024

BETWEEN:
[1] TONGA DEVELOPMENT BANK
[2] EMELINE TUITA
[3] PENISIMANU VEA
- Plaintiffs/Applicants

AND:
[1] TATAFU MOEAKI
[2] NATIONAL RESERVE BANK OF TONGA
- Defendants/Respondents

RULING
EX-PARTE APPLICATION FOR AN INTERIM INJUNCTION 

BEFORE:       HON. LORD CHIEF JUSTICE MALCOLM BISHOP KC 

Date:                19 September 2024
To:                    Ms T. Tapueluelu for the Plaintiffs
                         Mr T. ‘Aho for the Defendants

1.	This is a dispute between two banks the Tonga Development Bank and the National Reserve Bank of Tonga. The ultimate controlling interests of both entities are vested in the government of this Kingdom. The functions of the Tonga Reserve Bank are set out in the Tonga Development Bank Act 2020 as amended and include the following: to promote the expansion of the economy of Tonga for the economic and social advancement of the people of Tonga by giving financial and advisory assistance in its discretion to any enterprise operating or about to operate in Tonga.
2.	The National Reserve Bank of Tonga has all the functions of a central bank which includes important regulatory powers. Although the controlling interest of the Reserve Bank is the government it is a separate and distinct body from the Development Bank which has the same controlling interest, i.e. the government. 
3.	By section 6 of the Tonga Development Bank Act states: “the Minister with the consent of cabinet may issue to the Board written policy directives necessary to give effect to the achievement of statutory objectives of the bank as specified under Section 7(1) and (2) of this Act.” 
4.	It is to be noted that by section 6(2): “the Minister and the Board shall endeavour to reach agreement, where there is a difference of opinion between them about whether a policy is appropriate to the achievement of the Bank's statutory objectives.” 
5.	I have seen nothing which suggests that this sensible stipulation has been heeded by either party. 
6.	Although they are two distinct entities the government has the controlling interest in each. The Development Bank now seek an interlocutory mandatory injunction restraining the National Reserve Bank from enforcing directives 1,2,3 and 4. 
7.	Those directives are as follows:
(i)	TBD not to engage in any economic development activities (joint development agreements without the prior approval of the NBT.
(ii)	TBD CEO Emeline TUITA is permanently barred from holding any position within the TDB pursuant to section 39 (4) of the Banking Act.) This is a power to “attach any condition to the bank's license to the extent required to remedy any violation.”
(iii)	TDB is required to remove TDB board chairman Mr. Pennisimani Vea pursuant to section 39 (4) of the Banking Act and
(iv)	that any acting CEO appointment must be affirmed by the national Reserve Bank of Tonga
8.	Taken together these directives require the Tonga Development Bank to be closely controlled by the Reserve Bank and to in effect give the Reserve Bank a veto on any of that bank’s development activities. 
9.	To ensure that this is carried into effect the Reserve Bank ask that the CEO and chairman be removed from their posts and their successors affirmed by the Reserve Bank.
10.	The Development Bank in its application sets out a large number of reasons why they say these directives would hobble the future activities of the bank to the detriment of its customers and shareholders. 
11.	These detriments are set out in detail at paragraph 15 of the application now before me which I have considered, but do not think necessary to repeat in this ruling. 
12.	It is asserted in paragraph 18 of the application that under its current leadership the TDB CEO has successfully driven profitability from a target of 1.2 million for the year 2022 /23 to 2 million and for the following year a target of 1.8 million resulted in an actual profit of 2.3 million (albeit these figures are unaudited).
13.	The plaintiffs have said that if continued these directives would cause serious and indeed catastrophic consequences. This plainly establishes a serious question to be tried. Whether that turns out to be ultimately correct depends on the findings of a trial, but I must take these assertions as credible and I do so.
14.	The next question is whether damages would be an adequate remedy although there could be no question of either bank not having the resources to meet any damages order.
15.	I accept that the consequential damages flowing from implementation of the directives are difficult if not impossible to evaluate and including significant and perhaps fatal reputational damage. 
16.	Furthermore, I have to consider the interests not only of the parties to this litigation but those who may be affected by it, including but not limited to, depositors, shareholders, creditors and account holders. 
17.	I am therefore persuaded that the damages would not be an adequate remedy on the basis of the plaintiff's case. However, I have before me an affidavit from the Deputy Governor of the National Reserve Bank which raises some important matters of concern.  
18.	At paragraph 6 the deputy governor deposed, “it is my belief that counsel [at the ex parte hearing ] indicated that a substantial sum had been withdrawn on account of the actions taken by the First and Second applicants”
19.	 He continues at paragraph 7  “I can confirm to this Honourable Court that upon that matter being made known to me, I undertook searches of the bank records insofar as I am aware in my capacity as Deputy Governor, that if there are deposits of a considerable sum withdrawn from many banks, they will be reflected in the daily bank banking settlement records, and the monthly return submitted by all commercial banks in Tonga, and which the NRBT has access to. Moreover, there was no record of any major deposit being withdrawn either before, or shortly after, 10th June 2024 in circumstances explained to this Honourable court by Counsel for the Plaintiffs and in respect of which this Honorable court was so moved to act upon. If those statements were made, they were not true in that regard” 
20.	The Development Bank refutes this serious allegation, but at this stage it is neither necessary nor fruitful to decide where the truth lies.
21.	Further it is alleged that the application was made ultra vires in the sense that TDB is a  statutory body bound by articles of association which provide for a Board of Directors who are responsible for the business and affairs of the bank, and it did not constitute meeting of the board of directors of the TDP and no resolution was passed authorizing a duly constituted board meeting the institution of these proceedings. This is also a matter that remains unresolved.  
22.	There is a further allegation of nondisclosure which again on its face discloses a matter of considerable concern. The plaintiffs assert that all is well with the Tonga Development Bank but the defendants in paragraph 19 to 23 of the reserve bank’s deputy governor affidavit paints a different picture. 
23.	Surprisingly part of the material for the defendants’ concerns is gleaned from a report prepared by those now representing the plaintiff. In this sensitive matter it is and helpful for the court at this stage to recite the minutiae of the submissions made about the plaintiffs conduct and any warnings which may or may not have been given. 
24.	I must proceed on the basis of the untested information now before me. This in my judgment establishes first that there is a serious question to be tried namely the dismissal of the CEO's and the chairman and the imposition of restrictions on the activities of the bank which the plaintiffs allege was undertaken unlawfully in that no justification arose and it was procedurally irregular in that the dismissals took place without warning.
25.	These allegations are comprehensively refuted and so I repeat there is certainly a serious question to be decided in due course. I am also satisfied for the reasons I have already indicated that damages here would not be an adequate remedy. 
26.	What I have struggled with is to evaluate the balance of convenience in this matter I am in the doleful position of concluding that whatever order I make some harm will irreparably follow. If I restore the CEO and the chairman there is inevitably a danger of friction and unfavourable working conditions; if however, I refuse the regulatory directives and the concerns of the defendants prove well founded then great damage to the interests of subscribers customers and the people of this country generally will be unavoidable. 
27.	Thus, what I have to consider is not the balance of convenience but the balance of inconvenience. What is the least worst solution?
28.	On the one hand, we have the concerns that I have already indicated which either side allege in their favour will flow from the granting or refusing of relief. 
29.	There is the additional issue of whether the resolution of the Development Bank to bring these proceedings was authorized or not.
30.	There is the further allegation that those acting for the Development Bank are in breach of their duty to the court in that there has been material non-disclosure.
31.	I am on the current state of the evidence and material before me not persuaded that the supervisory role of the reserve bank excludes supervision of the economic activities of the Development Bank. 
32.	I accordingly order that will be the basis that the CEO and chairman continue in place pending the resolution of this matter at trial.  
33.	I am entirely conscious of the fact that this may make for friction and difficulty but that responsible people, as I accept those in the employ of the Development Bank and the National Reserve Bank are, will be dealt with in a grown-up way. I am told that an acting CEO has been appointed, that is unfortunate but there it is. 
34.	Directives 2 and 3 are set aside, Directive 1 continues in full force and Directive 4 is no longer relevant. 
35.	The parties must prepare draft orders, and I will consider them later today before they are perfected, which must include the usual cross-undertakings as to damage, an undertaking insofar as this has not already occurred to serve a sworn statement dealing with the allegations of non-disclosure, lack of authorization and the assertion of a substantial withdrawal of funds. 

      NUKU’ALOFA		        HON. MALCOLM BSHOP KC	
   19 September 2024		             LORD CHIEF JUSTICE