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Davisco Pineapple Industries Company Ltd v Vakavelo [2003] TOLawRp 6; [2003] Tonga LR 34 (11 March 2003)

IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

C 96/2002

Davisco Pineapple Industries Company Ltd

v

Vakavelo

Ford J
27 November, 3 December 2002 and 7 March 2003; 11 March 2003

Land law – charging order nisi – over interest in land – made absolute

On 3 October 2002 a charging order nisi was issued in favour of the plaintiff company over the defendant's tax and town allotments at Kolonga. The plaintiff sought to have that order made absolute. The defendant opposed the application and claimed that in Tonga it was not possible for a charging order to be issued over any interest in land apart from leasehold interests. That was the issue before the court.

Held:

1. A charging order was a statutory, not an equitable, remedy. Charge holders needed to be aware that the available enforcement options would need to be adapted to accommodate the unique land tenure structure in the Kingdom.

2. The burden of showing cause as to why a charging order nisi should not be made absolute was on the judgment debtor. The only ground in opposition advanced by the defendant in the present case was the legal issue which the court disposed of. Apart from that, the defendant (judgment debtor) took no steps in the proceedings and he had not sought to defend any part of the plaintiff's claim.

3. The charging order nisi was made absolute. The plaintiff was entitled to the costs of this application to be agreed or taxed. The said costs were to be added to the judgment debt.

Cases considered:

First National Securities Ltd v Hegerty [1984] 3 All ER 641

Intracor Trading Co (NZ) Ltd v Finau [1990] Tonga LR 133 (CA)

OG Sanft and Sons v Tonga Tourist and Development Co Ltd [1981] Tonga LR 1981 -- 88, 26

Roberts Petroleum Ltd v Bernard Kenny Ltd [1981] EWCA Civ 10; [1982] 1 All ER 685

Counsel for plaintiff: Mr Tu'utafaiva
Counsel for defendant: Mr Etika
Counsel for the Minister of Lands: Mr Kefu

Judgment

On 3 October 2002 a charging order nisi was issued in favour of the plaintiff company over the defendant's tax and town allotments at Kolonga. The plaintiff now seeks to have that order made absolute. The defendant opposes the application and claims that in Tonga it is not possible for a charging order to be issued over any interest in land apart from leasehold interests. That is the issue before the court.

Spyridon Katsandridis, a Greek citizen, is the managing director of the plaintiff company ("Davisco"). It is alleged in the pleadings that on 25 September 2001 Davisco and the defendant entered into a lease agreement under which the defendant agreed to surrender his tax allotment at Kolonga so that, subject to Cabinet approval, it could be leased by Davisco for 20 years. Davisco paid the defendant $6000 on the day of the agreement and undertook to pay a further sum of $6000 one year later on 25 September 2002. It was said to be an implied term of the agreement that if Cabinet did not approve the lease agreement then the defendant would have to refund the $6000 to Davisco.

Cabinet did not give its approval to the transaction and the defendant did not repay the money. Davisco issued these proceedings to recover the sum of $6000 on 12 February 2002. The defendant did not take any steps to defend the claim and on 28 March 2002 Davisco obtained judgment in default of defence. No payment was made under the judgment and Davisco then obtained an order for oral examination as to the means of the defendant (judgment debtor). It was, nevertheless, necessary for Davisco to instigate committal proceedings in order to have the defendant appear in court for the oral examination. That interlocutory hearing took place before me on 19 August 2002. It is fair to say that Mr Katsandridis has been diligent in actively pursuing the case on behalf of Davisco since the issuance of the writ.

The court was told that this is the first occasion, apparently, when it has been called upon to issue a charging order absolute over land other than leasehold land. Mr 'Etika for the defendant accepted that, on the authority of the Court of Appeal decision in Intracor Trading Co (NZ) Ltd v Finau [1990] Tonga LR 133, the Charging Orders Act 1979 (UK) applied in the Kingdom. Counsel, however, submitted that a charging order is an equitable remedy and the Privy Council in OG Sanft and Sons v Tonga Tourist and Development Co Ltd [1981] Tonga LR 1981 -- 88, 26, made it clear that, "equitable principles can apply only to leasehold interests after they had been validly granted."

Mr Tu'utafaiva took issue with that proposition and submitted that a charging order is a statutory, not an equitable, remedy.

Mr Tu'utafaiva's submission is clearly correct and, on the authority of the Intracor case, I would have thought that it was now beyond argument that charging orders are an available remedy in the Kingdom against any interest in land.

Charge holders need to be aware, however, that the available enforcement options will need to be adapted, as maybe necessary, to accommodate the unique land tenure structure in the Kingdom. That situation was touched upon in the Intracor case where the Court of Appeal said:

"As for remedies available to a charge holder, that would be a matter for the court if enforcement proceedings were commenced. It is not for us to decide at this stage but the court might restrict the remedies to those available to mortgagees, namely, the right to occupation or sub-lease for the remainder of the term of the lease, or might authorise sale of the lease ...."

Having ruled, therefore, that there is nothing in principle to preclude the court from issuing the charging order sought by the plaintiff, I turn now to consider whether it is appropriate to grant such relief in the circumstances of the present case.

Halsbury 4th edition, Vol 17 para 550 states:

"The second stage of the proceedings to obtain a charging order on land or an interest in land is the further consideration of the matter at the date and time specified in the order nisi. On such further consideration the court must, unless it appears, whether on the representation of the judgment debtor or otherwise, that there is sufficient cause to the contrary, make the order absolute with or without modification. Where it appears to the court that the order should not be made absolute, it must discharge the order. The court's power to enforce a judgment debt by imposing a charging order on land or an interest in the land of the judgment debtor is a discretionary power, similar to the discretionary power to make garnishee orders absolute."

The court is obliged to the Hon Minister of Lands who, although not a party to the litigation, at the court's invitation, instructed Crown counsel to present submissions on his behalf in the present case. Crown counsel's submissions were both practical and helpful. The Minister accepts that a charging order over the debtor's interest in land is an available remedy to judgment creditors in the Kingdom. Crown counsel continued:

"The court is therefore seen as the Guardian of the land holders' rights enshrined under the Constitution and Land Act . . . . It is also respectfully submitted that in considering applications for charging orders the court should take considerable care in deciding the appropriateness of granting charging orders over registered or licensed land as most often such land is subsistence land. If the land is used for commercial purposes, it may be the only source of income for most land holders. Such applications should therefore always be considered inter partes to allow the judgment debtor to provide the court with accurate information on the use of his land. On the other hand, it is respectfully submitted that the courts should uphold payment of debts, specially debts legally endorsed by the courts."

The relevant principles for determining whether it is appropriate to make a charging order absolute were admirably summed up by Lord Brandon in Roberts Petroleum Ltd v Bernard Kenny Ltd [1981] EWCA Civ 10; [1982] 1 All ER 685 and 690 and accepted by the House of Lords (see [1983] 2 AC 192 at 207. They were subsequently also endorsed by Stephenson LJ in First National Securities Ltd v Hegerty [1984] 3 All ER 641, 647. I will not repeat the seven principles enunciated by Lord Brandon but I take them into consideration in the present case.

Significantly perhaps, Lord Brandon specifically made the point that his seven principles did not extend to cover the situation where there is "an allegation of conduct amounting to trickery on the part of the judgment creditor." I venture to suggest that this observation could well have special relevance in Tonga because of the intricacies of the Kingdom's land tenure. The court may need to be vigilant to guard against any abuse of the charging order procedure which might defeat the codified framework in which the Land Act operates. If abuse of that nature is apparent at the charging order nisi stage then the court should decline to make the order absolute.

In the present case, counsel for the plaintiff has submitted that, when it comes to enforcement, possession of the land should be given to the plaintiff. That may or may not be an appropriate form of relief. If such an order were made it could conceivably effectively cancel out Cabinet's rejection (for whatever reason) of the plaintiff's application to lease the land. The court will need to give very careful consideration, therefore, to all relevant factors before determining the appropriate form of any enforcement order.

The burden of showing cause as to why a charging order nisi should not be made absolute is on the judgment debtor. The only ground in opposition advanced by the defendant in the present case is the legal issue which I have already disposed of. Apart from that, the defendant (judgment debtor) has taken no steps in the proceedings and he has not sought to defend any part of the plaintiff's claim.

The charging order nisi is made absolute. The plaintiff is entitled to the costs of this application to be agreed or taxed. The said costs are to be added to the judgment debt.