Supreme Court Voids Guarantors Agreement

Apia, Samoa – 22 May 2025: Chief Justice Satiu Simativa Perese has voided a Guarantee Agreement (GA) between the Kingsun Development Industries (Kingsun) and the Guarantors Fuatino A’i and Petronella Fepulea’i.

The guarantee was established to ensure that the Guarantors will live up to the GA of paying the rental arrears owed by Temukisa Apulu to Kingsun.

The Plaintiff was Kingsun and the Defendants were the Guarantor, and Temukisa who owns the debt/arrears was not a party to the hearing.

The case involves the interpretation of the two documents that allegedly record guarantees given by Fuatino and Fepuleai for rental arrears. One is signed by both Guarantors, and the other is signed only by Fepuleai.

Two questions that require determination were:

(a) Did the Defendants give guarantees to the Plaintiff under one or both documents?

(b) If there are guarantees, are they supported by fresh or new consideration and therefore enforceable against the Defendants?

BACKGROUND
Temukisa was a tenant of Kingsun and had rented a space at the Lotemau Centre and since 2012.

In 2014, Temukisa’s rental payment was in default and the arrears had reached the sum of $55,527.16. She could not pay the arrears and in May 2016, she was committed to Tafaigata prison for 6 months.

According to Kingsun Account Manager, Anufesaina Mary Grace Chan Mow, the Guarantors with counsel Leota Tima Leavai visited her office and entered into a “transaction as a guarantor in consideration for the release of Temukisa from prison.”

“This was when and where the defendants (Guarantors) attended to my office personally requesting a special arrangement for the release of Temukisa,” said Ms. Chan Mow.

On 8 July 2016, Fuatino who is Temukisa’s sister-in-law met with Ms. Chan Mow asking Kingsun to consider the release of Temukisa from prison and offered herself as a guarantor. Fuatino’s concern was Temukisa’s newborn baby and how unhealthy it was for the baby to be taken daily to prison to be breastfed.

When Kingsun realised the dilemma with the arrears, they re-entered the lease, and the copy of the lease being re-entered was not provided during the court hearing.

THE AGREEMENT
Two documents were presented to the court. One, an Acknowledgement of Payment for Rental Arrears Agreement (APRA) dated 8 July 2016 and the undated Guarantee Agreement (GA).

The court noted that there were different amounts of debts in the Statement of Claim, the APRA and the GA.

“The APRA refers to the outstanding balance of ST$65474.46 payable in monthly instalments of ST$200. The indebtedness in the GA is expressed as ST$57,73602 with monthly instalments of ST$250.00. The Statement of Claim seeks recovery of yet another sum of ST$96,906.86,” cited CJ Perese.

The APRA presented before the court were signed copies of the agreement and conditions of payments signed by Fuatino.

The GA provides the Deed of Guarantee by Leota and Fepuleai who will undertake payments for Temukisa’s ST$57,736.02 debt and the Plaintiff agreed to withdraw the warrant of execution.

THE DOCUMENTS
The documents in question are the APRA and GA and how they came about.

Ms. Chan Mows evidence was that she discussed the terms of the APRA and GA with Fuatino who signed it then went to find someone as a second or additional guarantor with a reliable source of income.

When Fuatino returned for a second visit, she was accompanied by Fepuleai who had first sought legal guidance from Leota who signed the GA copy presented by Fepuleai to Ms. Chan Mow.

Ms. Chan Mow said in court that the GA was countersigned by the Financial Controller of Chan Mow Company Limited.

“It is not clear how and why Chan Mow Company Limited is even named in the GA, let alone as the creditor. Chan Mow Limited was not a party to the lease agreement giving rise to the debt. It may be that there are intercompany arrangements between Kingsun and Chan Mow Ltd, but the court is not aware of when and how the debt might have been assigned to Chan Mow Ltd,” said CJ Perese.

He said Temukisa does not owe a debt on account or rental arrears to Chan Mow Limited.

“It follows there is no debt capable of being the subject of a guarantee to Chan Mow Ltd. In my view this is the end of the matter in so far as the GA is concerned,” he said.

THE PRICE THE DEFENDANTS PAY?
Fepuleai and Fuatino gave personal guarantees to pay Temukisa’s debt which benefits Kingsun.

Perese said it could reasonably be described as a windfall because, the guarantors gave their agreement to a financial burden that has no finite term.

“The lack of a term may be for good reason, the debt is never able to be paid without a significant increase in the level of monthly instalments,” he said.

He then did the math and came down to:

1) The Guarantors are required to make monthly payments of ST200. If they did, they would pay an annual amount of ST2,400;

2) However, at the end of every month until full settlement, the debt is subject to compound interest at a rate of 0.67, (which I take to mean 0.67 of 1%, rather than 67%). This would mean that for a debt of ST65,474.46, the compound interest charge would be around ST4,386.79;

3) The difference between the amount the Defendants are required to pay, and the sum of the compound interest charged over the same period, is almost ST2,000.

“The debt cannot be paid unless the Guarantors doubled their monthly payments. If they are unable to meet that level of servicing, they will have signed up to a debt for life. If they were, for arguments sake, able to double the monthly instalments, it would take them about 27 years to pay off the debt,” said CJ Perese.

He acknowledged Kingsun action to release Temukisa as decency and humanity.

DECISION
At the beginning Chief Justice Perese identified two questions:

(a) Did the Defendants give guarantees to the Plaintiff under one or both documents?

(b) If there are guarantees, are they supported by fresh or new consideration and therefore enforceable against the Defendants?

• In answer to (a)

The Guarantors gave guarantees under the APRA. However, Fepulea’i did not give Kingsun under the GA. Kingsun did not prove Temukisa was indebted to Chan Mow Ltd. Without a primary debt upon which a guarantee could be given by Fepuleai, the GA agreement is void and set aside.

• In answer to (b)

The guarantee under the APRA is not supported by consideration because the Plaintiff did not pay a price for its agreement to Temukisa’s release from prison. In so far as the GA is concerned, as a simple agreement to give a guarantee for a past debt, the GA does not disclose new consideration for Leota and Fepuleai’s promises, and it is therefore set aside for want of fresh or new consideration.

Costs should follow the event and counsel are asked to discuss.

“If no agreement can be reached, the parties are to file memoranda within 3 weeks of today’s date. I confirm that the matter involved hearing time equivalent to half a day. I also record that it was unnecessary for me to hear evidence from the defendants,” said CJ Perese.