China paid the company nearly $US50 million between 2008 and 2011 so it could keep a satellite in Tonga's orbital space.
Prime Minister 'Akilisi Pohiva and the Public Service Association are suing Tongasat, claiming the money should have gone to the government.
The company is now appealing an August Supreme Court ruling that the payments were unlawful.
Lord Sevele, who was Tonga's prime minister at the time both payments were made, said the court ignored key evidence that was submitted.
He said he and former Finance Minister Lord Matoto can prove the payments were lawful.
"Everything that he and our government did was according to law and according to the agreement with the Chinese government and the Chinese company and Tongasat," Lord Sevele said.
In his ruling, Lord Chief Justice Owen Paulsen said there was evidence US$25.4 million paid in 2011 to Tongasat as the second tranche was not paid into a separate trust account, which would have been required by law if the monies were trust funds intended for the government.
But Lord Sevele said the Supreme Court had been provided with correspondence between Lord Matoto and the Chinese Government and Reserve Bank of Tonga discussing the setting up of a trust account.
This was one of several "critical errors of law" made in the judgement that was cited in the appeal made last month, Lord Sevele said.
The appeal, which calls for a retrial and for fresh evidence to be heard, also claims the payments to Tongasat were the result of a negotiated commercial transaction between Tongasat and its Chinese counterpart and there were government agreements approving the transactions.
The parties said the money was not aid or grant money and was always intended to compensate Tongasat.
The appeal has been signed by Matoto, Sevele, the former Secretary of Finance 'Aisake Eke and another former Finance Minister, Sunia Fili.