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Papua New Guinea District Court |
PAPUA NEW GUINEA
[In the Civil Jurisdiction of the District Court at Wabag]
DC No 01 of 2015
Between:
JOE YAPAO trading as MACKENZIE LAWYERS
(Complainant)
And:
THE MANAGER – BANK SOUTH PACIFIC – WABAG BRANCH
(First Defendant)
And:
BANK SOUTH PACIFIC
(Second Defendant)
Wabag: C Inkisopo
2015: 13th April, 7th May & 28th July
Legislation - District Court – a creature of Statute; District Court Acts Chapter No 40 –
Practice & Procedure at District Court – procedure at District Court set out and jurisdiction & powers defined by Act – parameters of application of powers demarcated by Act –
Business Names Act – legal practice trading under registered business name – limitation of subscriber's liability in business name & vice versa – effect of' 'corporate veil' principle in business name as in incorporated company – separate legal personalities - business name and proprietor; separate legal persons? -
Practice & procedure – whether named defendants legally recognized personalities capable of being made parties in legal suits - propriety and appropriateness of employees being named defendants – ''The Manager' is title of office – not a legally recognized name on its own as defendant in a legal suit –
Legislations/Authorities Consulted & Referred to:
1: Business Names Act, Chapter No 145
2: Companies Act 1997
3: District Courts Act, Chapter No 40
4: Lawyers Act 1986
5 Lawyers (Trust Account) Regulation 1990
PNG Cases
1: Jim Trading Ltd -vs- John Madison & 7 Ors (2006) N3174
Appearances:
1: Mr Joe Yapao; Complainant for Himself
2: Mr Michael Henao; for Defendants
Held:
1: The named purported Defendants are not legally recognized persons for purposes of this or any legal suits in Courts of law.
2: Mackenzie Lawyers as a business name is not immune or covered from its proprietor Joe Yapao's personal liabilities as they are not separate legal personalities but only one individual trading as Mackenzie Lawyers.
3: Bank South Pacific Limited trading as Bank South Pacific Wabag Branch's conduct in debiting the account styled "Mackenzie Lawyers" bank account No 1000412283 to service Joe Yapao's outstanding personal loan account was not illegal or unlawful in nature.
4: This proceeding is misconceived and is therefore dismissed entirely.
5: The interim Restraining Order of this Court of 16th February, 2015 hereby dissolves.
6: As costs would normally follow the event, and it also being a matter for judicial discretion; given the particular background and circumstance of this case, I order each party to bear own costs of the proceeding.
July 28th, 2015
JUDGMENT
C Inkisopo:: The Complainant Mr Joe Yapao trading as Mackenzie Lawyers issued this proceeding against the named Defendants claiming and alleging that the Second Defendant (the Bank) did through a subordinate "without lawful justification debit an amount of K3, 184.85 from Mackenzie Lawyers "Trust Account" number 7000412283 on 10th February 2015 and credited an existing personal loan account held by and under Mr Joe Yapao that had then run into repayment arrears.
Background Facts
2: The backdrop setting the background impetus for this case shows that in about May or June, 2014 the Complainant sought and obtained a personal loan from Bank South Pacific Limited Wabag Branch in the amount of K23, 000.00. The Complainant was at the time employed with the Office of the Public Solicitor serving as a senior legal officer. From that employ, Complainant was servicing his loan repayment at the rate of K642.65 per fortnight. About that time and soon thereafter, he ceased employment with the Office of the Public Solicitor intending rather to go into private business. At the cessation of his employ, he naturally was put off the payroll but he said he still continued to meet his periodic loan repayment commitment from his own sources.
3: He then registered and set up his own private legal practice trading sub-nom Mackenzie Lawyers of Old BSP Building, 2nd Floor, of P O Box 317, WABAG, Enga Province. He then sought and opened up a bank account with the Second Defendant for his law firm under the law firm's registered business name of Mackenzie Lawyers.
4: On 10th February, 2015 (Complainant alleged) he discovered the Defendants through subordinate, a Mr John Imbuni debited the Mackenzie Lawyers bank account of an amount of K3, 184.85 and credited same to service loan arrears created on an existing loan account held by the Complainant Joe Yapao.
5: The Complainant upon discovering the said debit of Mackenzie Lawyers account took immediate issue with the Bank's lending section Officers insisting for the return of the debited sum and also telling the lending officers of the serious legal consequence of their action in effecting the debit of his legal firm's bank account.
6: As a result of the alleged unlawful debit of his firm's bank account, he said he suffered stress and pain including loss of precious time making enquiries resulting in loss of business. He therefore claims;-
A: The immediate return to Mackenzie Lawyers account the debited amount of K3, 184.85,
B: Damages and loss of business to the sum of K2, 800.00,
C: A further amount of K1, 500.00 being damages for unnecessary pressure and pain he was made to encounter during the immediate aftermath of the debiting of account.
D: And a permanent restraining order issued against the defendants, their servants, agents or whoever from dealing with or interfering with the Complainant Mackenzie Lawyers bank account number 7000412283 in any manner or form.
7: On the back of that claim, the Complainant procured and obtained an Interim Ex-Parte Restraining Order against the named Defendants, their servants and agents from dealing in and interfering with the Complainant Mackenzie Lawyers bank account.
8: The interim orders together with all supporting documentations and the originating process and supporting documents were ordered served on the named purported defendants and matter ordered returnable on 4th March, 2015 at 9:30am for an inter parte hearing.
9: The said Defendants through their in-house lawyer, Mr Michael Henao on 6th March, 2015 filed and served the Defendants' Notice of Intention to Defend the proceeding and also did file and served a Notice of Motion in which he sought the following reliefs;-
1: Dismissal of the proceeding generally,
2: Removal of the First Defendant as a party to the proceeding.
10: However, the matter did not next return to Court as per the original adjourned date of 4th March, 2015 due largely to a number of factors;-
1: The original Court return date not being convenient to both Counsels as being in conflict with their other pre-arranged engagements elsewhere,
2: The presiding Magistrate's non-availability on adjourned date from progressing the matter; hence it somewhat stagnated.
11: After much effort and a marathon communication exercise between Counsels and the Court through the Office of the Clerk of Court, an interim consensus was reached for the matter to formally return to Court on 8th May, 2015 at 9am when Counsels will both be making their respective representations to the Court on their respective cases.
12: However, 8th May 2015 did not fall convenient to the Defendants' Counsel whose counter proposal for 7th May, 2015 at 1:30pm was accepted as being convenient to all concerned. On the 7th of May, 2015 at 1; 30pm Mr Yapao for himself and Mr Henao for the said Defendants argued the substantive cause of the matter before me. The parties' arguments raised a number of issues that needed proper consideration and ruling so the Court undertook to deliver a ruling in writing and this is that Written Ruling.
13: However, as the Parties will appreciate, I do not have the luxury of having at my disposal an up-to-date legal resource material to help me deal with the issues raised by both parties in submission; so much so and as well as I would really have wanted to; but I will do my honest best to consider and address the legal issues raised and operate within the ambit of the resource limitation besetting me and arrive at a determination thereon.
14: Mr Yapao speaking for himself relied on two affidavits he filed and served in support of his claim; the first dated 12th February, 2015 and the second, filed in response to the defence affidavits first by a Mr John Madison and the second by a Mr John Imbuni both filed and dated 6th March, 2015.
Complainant's Case
15: The gist of the Complainant's claim is that the named Defendants encroached upon his 'company' Mackenzie Lawyers' bank account held with the Second Defendant by debiting an amount of K3, 184.85 to service an existing personal loan account held under an account styled Joe Yapao.
16: Complainant took immediate issue with the Defendants' lending Section Officers on 10th February, 2015 upon discovering the debit on his company's bank account insisting that the deducted amount be returned immediately which he laments fell on deaf ears; so he claims in his supporting affidavit of 12th February, 2015.
17: Complainant in paragraph 12 therefore claims; "I state here that the Defendants actions of encroaching into my firm's trust account in debiting the aforesaid amount were illegal and unlawful in nature" (sic). He took that concern further in his second affidavit filed in response to the defence affidavits by stressing that his company's bank account is a "trust account" notwithstanding the fact that the term "Trust Account" or symbol T/A is not shown on the account itself.
18: He explained further in paragraph (4) of his second affidavit that when he first opened his company account, he told the bank officer opening the account that it is a 'lawyer's trust account' that he was opening. He expressed that he was not aware of the absence of the term 'Trust Account' or symbols 'T/A' after the title Mackenzie Lawyers until after the Defendant Bank debited his company account when the subject lapse dawned on him. Complainant put this lapse down squarely as failure on the part of the bank officer who initially helped open the account for his company by omitting the term 'Trust Account' and/or the symbols 'T/A' after the account style 'Mackenzie Lawyers'.
19: Having have opened his 'company's' bank account, Complainant said he always had the impression and operated his business on a firm understanding that his 'company's' bank account was a lawyer's 'trust account'; and why wouldn't he harbour that impression? Mackenzie Lawyers is indeed a law firm. To give further credence to his point, Mr Yapao annexed copies of letters he issued to his clients instructing them to pay their fees, charges, deposits and other payments into 'Mackenzie Lawyers Trust Account'.
20: Mr Yapao concluded his presentation by surmising that; if the bank was to deduct to service his outstanding loan account, it should do so from any one or two of his personal accounts in accord with Clause #8 of the Loan Agreement and not from Mackenzie Lawyers' Trust Account.
21: He submitted therefore that the Defendants should immediately reverse enter the debited amount back to 'Mackenzie Lawyers Trust Account' together with damages and payment for loss of business as pleaded in his originating process.
Defendants' Case
22: Mr Henao for the Defendant argued and pressed for the entire proceeding to be dismissed on grounds that;-
i: The proceeding did not disclose any reasonable cause of action known to or at law
ii: The named purported Defendants are not legally recognized persons and entities known to law for purposes of legal suits
23: Mr Henao in advancing his clients' case referred to and relied on two (2) lots of affidavit materials filed for the Defence; one by a Mr John Imbuni and another by a Mr John Madison both of which were filed and dated 6th March, 2015. Mr Madison deposed to in his affidavit that he is employed by Bank South Pacific Limited (the Bank or BSP) as Senior Manager Legal and attached to the Banks' Head Office in Port Moresby. He annexed to his affidavit extracts of two Investment Promotion Authority (IPA) registered entities relevant to this proceeding. The first is an annexure extract of a registered corporate entity by the name of 'Bank South Pacific Limited' and the second being that of 'Mackenzie Lawyers'.
24: Mr Madison next annexed to his affidavit a scanned copy of the Bank's Customer Record Card for an account styled "Mackenzie Lawyers bearing account number 7000412283 held with Bank South Pacific Limited, Wabag Branch. The Defendants' second affidavit is that of Mr John Imbuni filed dated 6th March, 2015. Mr Imbuni deposed that he is employed by Bank South Pacific Limited for over seven (7) years at its Wabag Branch as Lending Officer.
25: Mr Imbuni deposes that the Complainant conducts several bank accounts with the Bank including an existing personal loan account No 7000045364 that had by then fallen into regular repayment arrears. He also deposes that the Complainant conducts and operates a cheque account with the Bank under an account styled 'Mackenzie Lawyers' with the account number being 7000412283. He next attaches other bank documents relevant to the Complainant's bank accounts especially his existing personal loan account along with related other set of documents and records extracted from the Customer Record Card held at the Bank's Wabag Branch Office. He continues to state that the Complainant Joe Yapao fell into arrears in his regular loan repayment schedule which had at all relevant and material time exceeded the allowable sixty (60) day grace period.
26: As a result of the sixty (60) day lapse on the loan repayment schedule, Mr Imbuni says that the Bank exercising its rights under Clause #8 of the Loan Agreement debited Mackenzie Lawyers account to the sum of K3, 184.85 and credited the Complainant's loan account to service his loan arrears.
Assessment of the Parties' Respective Cases
27: From the Parties presentations of their respective arguments, the following issues emerge:
1: Are the named Defendants proper legal personalities known to law for purposes of legal suits?
2: Was the Defendants' act of debiting Complainant Mackenzie Lawyers account to credit Joe Yapao's outstanding loan account illegal and unlawful in nature?
3: What is the exact nature and type of Mackenzie Lawyers bank account; Trust Account or non-Trust Account?
Legal Personalities of named Defendants
28: Mr Henao took issue as his first point the question of whether the parties named as Defendants herein are persons legally recognized to be made parties in legal proceedings such as the instant case. As I understand Mr Henao; he contends that there are no such persons or entities recognized and known at law to be made parties in legal suits such as "The Manager" and "Bank South Pacific" as being so named by the Complainant. On the face of it, I consider this argument to have merits.
29: In my humble view, the term "The Manager" is a title of office ascribed to someone who manages or whose job it is to manage others, organizations, corporations, businesses etc. The Cambridge Advanced Learner's Dictionary, in its 3rd Edition of 2008 defines the term "manager" as noun; "...the person who is responsible for managing an organization". It would therefore be safe to conclude that the term "The Manager" is not a name of an individual capable of being made a defendant or complainant or a party to any legal proceeding. In my humble view, the exception to this perception would be where the term "The Manager" is preceded or prefixed by the name of the human person who at the material time is occupying or holding that office or position such as for our instant case it would legally have been acceptable in my mind to have addressed the named first defendant as being the current occupant of that office "Theresa Pilamp – the Manager..." The current first Defendant so named in this proceeding I consider is legally flawed thereby and I must but agree with Mr Henao's contention.
30: Connected to this and impinging upon the issue of the Defendants' legal personalities for purposes of legal suits concerns the named Second Defendant "Bank South Pacific. Mr Henao took issue and stressed that there is no such entity as "Bank South Pacific" known to or at law to properly name as a legal Defendant and be sued under that title. In raising that contention, Mr Henao made reference to Annexure "A" of the affidavit of Mr John Madison which is a copy of an extract of an IPA registered profile of a corporate entity called "Bank South Pacific Limited." In my view, the only entity recognized at law to have a legal personality for the purpose of being made a party in a legal suit such as in this case cannot have been any other than "Bank South Pacific Limited." On the basis of the above discussion, I find myself having little choice but to agree with Mr Henao's point as having substance.
31: From the above discussions, the conclusion I am able to reach on the issue of the instant case is in the affirmative: Yes; the named purported Defendants in the instant case are persons not known in law as being capable of being made Defendants in the instant proceeding.
32: Connected to this again, Mr Henao argued that employees or officers such as the named First Defendant herein need not be named as party but only the principal or the employer; if the employee incurs liability in performing and pursuing the business purpose or interest of the employer. He cites in support of this proposition the case authority of Jim Trading Limited -vs- John Madison & 7 Ors (2006) N3174 (per Kandakasi J).
33: That was a case in which Jim Trading Limited sued Bank South Pacific Limited together with several of its employees and officers who were actively involved in the execution of properties and assets of Jim Trading Limited under the Bank's registered charges as a result of Jim Trading Limited defaulting in repayments of substantial loans advanced to it by the Bank. The Court per Kandakasi, J in ruling that employees and officers need not be named as Defendants in legal suits said the following on p. 33 of its judgment:
"This means that where an employee or an officer pursuing his employer's or principal's business or interests and incurs liability, then liability becomes that of the company or the principal and not the employee or the officer, however if the employee or the officer goes out on a frolic and detour of his own and incurs liability, that employee becomes personally liable and is therefore the correct party to be named and not the company".
34: The Court then proffered a qualification to what it said above when it said:
"What I have just said applies in a case where the company or employer knows or has reasons to know what its officers and/or employees should and are doing from time to time in furtherance of the employer's business interests. However, in the case of very large employers like the State, it may be next to impossible for the employer to know each of the employee or officer as well as their activities on a day to day basis. In such a case, it may be appropriate to have the relevant officer or employee for whose actions it is being sued to give his response on the allegations against him or his employer. This is necessary because an employer can be held liable in damages to the Plaintiff".
35: On the strength of this case authority, it is obvious to me that the First Defendant herein styled as "The Manager – Bank South Pacific Wabag Branch"; notwithstanding the above discussion and conclusion, should not have been named as a Defendant at all in the first place.
36: This discussion brings me to the conclusion that the whole scheme of the choice made by the Complainant in issuing this proceeding in its current manner and form are legally flawed and by that fact alone this case should terminate forthwith and the Defendants each and severally non-suited. I will however not stop here; as the parties have raised issues relevant to this case that I'd wish to deal with fully and make appropriate determinations thereon.
37: The residual fundamental issue that remains to be addressed and resolved is the Complainant's claim that the Defendants' act of debiting his company's account to credit an existing loan account under Joe Yapao was illegal and unlawful in nature.
38: In my humble view, in order to consider the legality, lawfulness and/or otherwise of the Defendants' such alleged act, it is necessary to consider and establish the nature and status of the subject bank account #1000412283 held under the account style Mackenzie Lawyers at the Wabag Branch of Bank South Pacific Limited.
Trust Account or non-Trust Account
39: The Complainant claimed in two (2) of his supporting affidavits as well as in his oral argument that his company or firm's account was a "lawyers trust account" and none other.
40: The account he opened was but a 'trust account'; opened for the sole business of his newly registered legal firm of Mackenzie Lawyers. The Complainant said that when he initially opened the account, he instructed the bank officer serving him open the account that it was a 'lawyer's trust account' he was opening. He claimed that he was all the time under the impression that this was a trust account so conducted his legal business under that impression; oblivious to the fact that the said account was not styled "Mackenzie Lawyers Trust Account" as he had been assuming all along. He claimed that it was not until when the account was debited that he realized the ominous reality with his firm's bank account.
41: From records furnished as per annexure "E" of Mr John Imbuni's affidavit, it is clear that the Complainant opened his firm's bank account on 26th June, 2014. This is a current/cheque account conducted by Joe Yapao himself as its sole owner on an 'only one-to-sign' basis.
42: The Complainant alleged and claimed that it was all the fault of the bank officer who initially served him open up his firm's bank account who left out the term 'trust account' or the symbol 'T/A' after the name Mackenzie Lawyers resulting in the said account remaining a "non" trust account. He therefore insisted that his firm's bank account has been a 'trust account' through and through and that the Defendants should not have debited the firm's trust account to credit his personal loan account; as he stressed that his firm's account is separate from his personal accounts.
43: From evidentiary material available to this Court, I am able to make the following observations to help me address this point about Complainant being unaware all through that Mackenzie Lawyers account did not have the important suffix "Trust Account" behind the account name Mackenzie Lawyers. I note that this account was opened in June, 2014, some eight (8) months before the date of the subject debit of account to service Joe Yapao's existing personal bank loan. This account being a current/cheque account, monthly account statements would ordinarily have been issued by the Bank to the Complainant as is the normal banking practice for cheque account customers.
44: For the past eight (8) months, there would have been eight (8) or so bank statements issued that would have operated to afford the Complainant prime opportunities to discover the anomaly pertinent in the account style and title that he now appreciates and raises issues on. With a little more prudence and diligence, Complainant would have discovered the pertinent anomaly and would have taken steps to rectify what he now appreciates as his firm's account mess up. Even then, it was incumbent upon the Complainant to make it his responsibility to ensure that the account he'd opened for his firm is indeed a 'trust account' and none other; for it is a mandatory requirement for him to open and maintain an account that shall include the words "trust account" or the word and symbols trust A/C. (See s 3 (2) of the Lawyers (Trust Account) Regulation, 1990) He just cannot have left it up to mere conjectures and guesswork or on other people's accuracy or otherwise in keeping and maintaining records.
45: On the material before me I am unable to find that the Complainant's Mackenzie Lawyers' bank account not being made a 'trust account' was the fault of the said Bank Officer who initially served him open the subject account. Even if the bank officer did make that initial mistake (which I find not), the Complainant took no issue at all for the past eight (8) or so months that the account was operating and in existence thereby implying that there was nothing amiss or wrong with the account name and style; and I so find!
Was the debiting of Mackenzie Lawyers' bank account to credit Joe Yapao's personal loan account illegal & unlawful in nature?
46: In my view, to answer this question is to consider the different characteristics of registered business names and registered companies. I must admit, my limited access to legal resource material does little to put me on an adequate legal threshold to assist me make an in-depth discussion of the law and the legal principles I would have liked to cover but doing my honest best from my rusting and receding memory bank, I will give my best shot in discussing and resolving those issues.
47: It is trite company law principle that an incorporated company is for all intents and purposes a separate legal personality from its owners who are its shareholders. The owners or the shareholders of the registered corporate entity are limited to the extent of their shareholding in the registered entity's liabilities or vice versa; that is, the registered entity will not be held liable for its owners' or shareholder' liabilities. The 'corporate veil' principle applies to cover both the registered entity and its owners or shareholders from each others' liabilities. This is basic company law principle that I believe is the law in this jurisdiction; (See s 16 of the Companies Act, 1997) but I stand corrected if I have misconceived this principle.
48: For our immediate purpose, I will proceed to deal with this matter on the premise that my appreciation of the company law and principles as alluded to above is the correct position of the law as at present. Therefore the questions I pose are:
A: "Are Mackenzie Lawyers and its proprietor Mr Joe Yapao separate legal persons with limits to each other's liabilities?"
B: Is Mackenzie Lawyers' bank account a "Trust Account or NOT a Trust Account"?
C: Is the Defendants' act in debiting Mackenzie Lawyers' bank account illegal and unlawful in nature?
49: From the evidentiary material on file, it is obvious that Mackenzie Lawyers is a registered 'business name' under the Business Names Act Chapter No 145 and effectively is not a separate legal person from its proprietor who is in effect simply trading under that registered business name. The proprietor does not enjoy a limit to the business name's liability nor does the business name enjoy a limit to its proprietor's liability. See s 28 of the Business Names Act, Chapter No 145.
50: Liability question in relation to a Business Name and its proprietor is unlimited unlike that of the relationship between a registered company limited by shares and its owners or shareholders who are at law separate legal persons. In our present case, as Mackenzie Lawyers is only a business name, its liability with its proprietor Mr Joe Yapao is unlimited; in that Mackenzie Lawyers and Joe Yapao are not separate legal persons and do not enjoy limits to the liabilities of each other; nor are they covered by the 'corporate veil' principle that affords protection from each others' liability as in the case of a registered company and its shareholders.
Findings of Fact
51: From the above discussions, I make the following findings of fact that I consider will help determine this case:
A: The named purported Defendants are not known to law to be proper and legally recognized persons capable of being made parties in legal proceedings,
B: Mackenzie Lawyers and Joe Yapao are not separate legal persons but are one and same; in that it is simply Joe Yapao trading as Mackenzie Lawyers,
C: Mackenzie Lawyers bank account held with bank South Pacific Limited Wabag Branch is not styled Trust Account,
D: The named purported Second Defendant Bank South Pacific Limited Wabag Branch acted within its rights under Clause #8 of its Loan Agreement with Joe Yapao to execute the subject debit on Mackenzie Lawyers' bank account to credit Joe Yapao's existing personal loan account that had then fallen into repayment arrears,
E: The named purported Defendant Bank South Pacific Wabag Branch debiting Mackenzie Lawyers' bank account is not illegal and unlawful in nature.
Formal Orders of the Court
52: Following on from the above findings, the Court orders as follows;-
1: The named purported Defendants are not legally recognized persons for purposes of this or any other legal suits in Courts of Law.
2: The Complainant Joe Yapao is not immune from Mackenzie Lawyers liability just the same as Mackenzie Lawyers not being immune from its proprietor, Mr Joe Yapao's personal liabilities.
3: Bank South Pacific Limited Wabag Branch's conduct in debiting Mackenzie Lawyers' bank account to credit Joe Yapao's existing personal loan account was not illegal and unlawful in nature.
4: This claim is misconceived and is therefore dismissed entirely.
5: The existing interim Restraining Order of 16th February, 2015 dissolves and is discharged forthwith.
6: As cost is a matter for Judicial Discretion; and given the particular facts and circumstance of this case, each party shall bear own costs.
Orders accordingly.
Lawyers:
Mr Joe Yapao of Mackenzie Lawyers for Self; Wabag
Mr Michael Henao of BSP Legal Services Division; Port Moresby
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