Speculation and controversy surrounds a proposal to construct a luxury centre on royal land in Tonga.
It has been claimed that a proposal was first raised last year by the Low Company, which sought funding from the Tongan Development Bank. However, the owners of the Cost Low supermarket are in now dispute with the Tonga Development Bank since the project at Tufumāhina, where the king has an estate, has apparently stalled.
Now the TDB has announced the construction of a luxury resort on royal land at Polata’ane. It did not say who was going to construct the project, but the TDB appears to be claiming credit for the project.
According to a report by the Tongan Independent the Cost Low Company has filed an application for an Injunction on a Mortgage Notice issued by Tonga Development Bank.
The dispute appears to date from a meeting in March last year between Tonga Development Bank CEO Emeline Tuita and the head of Royco Group, owners of Cost Low, Charlotte Cocker Tu’i’ile’ila. Cost Low had secured a government construction contract in Tufumāhina. It is understood Cocker wanted to refinance Cost Low, requiring financial support from TDB.
The Independent reported that the proposal involved merging the Royco Group’s debts into a new entity for the project with the bank owning 80% and Cost Low owning 20% to clear Costlow’s debts. The Independent said the decision was officially confirmed in a letter from TDB’s CEO to Royco Group’s directors on March 20.
On March 26, TDB invested $2.184 million into Cost Low. However, on March 27, an unexpected delay occurred when Mrs. Cocker’s accountant came to execute share transfer documents for the new SPV. There was still no progress by April.
Cocker claimed there had been a serious breach of confidentiality related to Cost Low’s banking affairs. She claimed a third party has been making enquiries regarding the contract held by Cost Low.
Cost Low’s legal representative sent letters to the Reserve Bank on April 12, alerting them to the confidentiality breach.
The independent claimed there had been no official response, but on August 8 the Development Bank issued a Mortgage Notice, alleging defaults on securities and saying it intended to take possession of Cost Low’s property.
An internal National Reserve Bank of Tonga document seen by Kaniva News appears to show it was concerned at the amount of the TDB’s exposure to debt totalling $TP6.6 million through the Cost Low loan.
It said the TDB’s liquidity rate had fallen for, among other reasons, the acquisition of Cost Low assets and development rights at the Tufumāhina property.
The NRBT report said decisions around the Cost Low loan had been taken “without due diligence to protect TDB’s interests.”
According to the former editor of Kele’a newspaper, Mateni Tapueluelu, Cost Low has taken legal action against TDB’s CEO Emeline Tuita. Cost Low has accused the bank and CEO Tuita of failing to perform their duties under an agreement to process a loan to fund the Special Project Vehicle (SPV) to consolidate the Cost Low and Royco businesses.
Tapueluelu named the first plaintiff is Cost Low director Charlotte Jane Cocker Tu’i’ile’ila, and the second plaintiffs are Cost Low Company Limited, Tuapasio Nufahu Tu’i’ile’ila and Royco Developments Limited.
Tapueluelu said that according to the statement of claim, Cocker submitted her business plan to the TDB and told the bank the royal estate agent had approved in principle the company’s application to lease lands at the king’s estate at Matatoa for 70 years. The lease value was $TP6 million and this was part of the company’s loan.
It was alleged that the bank had paid the $TP6 million lease to the king from the bank and not from Cost Low, which had applied for the loan. Tapueluelu said the kings’ agent said the payment should have come from Cost Low, not the bank.
It also showed CEO Tuita of the bank insisted the payment was still from Cost Low but since the bank would have shares of 80 percent in the SPV the bank could issue the payment directly to the king.
However, lawyer Edwards for the plaintiffs argued that the Cost Low loan was no longer being processed. He said the plaintiffs had told the bank the project would be in three phases including three two – storey buildings and, in another phase, a convention centre and other accommodations to be leased out to the government.
However, the TDB’s lawyer, Teimumu Tapueluelu, said the deal had not been approved and the bank has a legal obligation to seize any securities or properties to cover overdue debts.
The plaintiffs’ lawyer has argued the agreements and mutual understanding between the bank and the plaintiffs caused the plaintiffs to begin working on the project and that should be regarded as a mutual agreement.
This month the Tongan Development Bank announced plans to build a luxury centre at Polata’ane, in the royal estate.
The bank said the project would include a conference centre, a restaurant, two luxury villas with 23 apartments and a swimming pool and bar.
The TDB describes the centre as a turnkey project due to be completed by June 2024. It has not said who will build the project, but appears keen to take credit for it.
The bank’s press release said: “The fence has been erected and the timbers have been put up! They show that great work is imminent.”