The Supreme Court has adjourned a case between the Pacific International Commercial Bank and the Tongan Reserve Bank until September 29 so that both parties can agree on a security deposit.

Lord Chief Justice Paulsen, presiding, said PICB should pay a security deposit for costs before the PICB’s challenge to the Reserve Bank’s decision proceeds.

The hearing was the latest in a series of appeals and hearings that began when the Reserve Bank withdrew PICB’s operating license on July 26, 2016.

The judge said the kernel of PICB’s case was that it was entitled to be given 10 working days to respond to the Reserve Bank’s intention to revoke its licence.

It said the Reserve Bank’s notice was unlawful and of no effect because it did not afford to PICB the prescribed period for a response.

The PICB launched its first action against the Reserve Bank on August 2, 2016, asking that the decision be quashed and ordering the reserve Bank to allow the PICB a chance to submit reasons why its license should be cancelled.

It also asked for TP$10 million in general damages and TP$5 million in punitive  damages.

He said the PICB sought interim relief from the Reserve Bank’s orders, but abandoned the application.

The PICB also argued that the Reserve Bank owed PICB a duty of care to supervise its operations carefully and reasonably.

The PICB argued that the Reserve Bank had failed in its duty by failing to give PICB a reasonable opportunity to submit reasons why its license should not be revoked.

In his commentary on the hearing Lord Chief Justice Paulsen said that in revoking a banking licence, the Reserve  Bank  was concerned with the prudential supervision and public confidence in the operation   and  stability   of  the  financial   system  ‘and  to   protect  the interests of client’s, investors  and  general  public  depositors.

“To impose on the Reserve Bank a common law duty of care as alleged  in this case would be inconsistent with the performance by the Reserve Bank’s of its supervisory functions and its duty to protect clients, investors and general public depositors,” the judge said.

He said it might also  discourage the performance of the Reserve Bank’s duties for fear of civil liability.

The PICB argued that it was vulnerable and had no way of protecting itself from the negligent decision  of  the  Reserve Bank to revoke its licence.

However, Lord Chief Justice Paulsen said that PICB was a substantial commercial enterprise concerned with making profits from providing banking  services.

“It was  well  able  to  protect itself by conducting its operations  prudently  and  carefully  in  accordance with the requirements  of the  Act and its  licence,” the judge said.

“I can see no tenable argument that the Reserve Bank owed PICB a duty of care.”

The main points

  • The Supreme Court has adjourned a case between the Pacific International Commercial Bank and the Tongan Reserve Bank until September 29 so that both parties can agree on a security deposit.
  • Lord Chief Justice Paulsen, presiding, said PICB should pay a security deposit for costs before the PICB’s challenge to the Reserve Banks decision proceeds.
  • The hearing was the latest in a series of appeals and hearings that began when the Reserve Bank withdrew PICB’s operating license on July 26, 2016.

For more information 

Reserve Bank says shutting down Pacific International was in best interests of Tonga

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