Niugini-Lloyds International Bank Ltd v Sakora [1987] PGNC 53; [1987] PNGLR 275; N606 (6 August 1987)

N606

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

NIUGINI-LLOYDS INTERNATIONAL BANK LTD

V

SAKORA

Waigani
Hinchliffe J

15 April 1987
6 August 1987

CONTRACT - Statutes of Frauds - Promise to answer for debt, default or miscarriage of another - Distinction between primary and secondary liability - Acknowledgement of wife’s debt not guarantee of liability - Writing not required - Statutes of Frauds and of Limitations Act (Ch No 330), s 5.

GUARANTEE - Distinction between guarantee and primary liability - Acknowledgement of debt not guarantee of liability for debt.

INFERIOR COURTS - District Courts - Practice and procedure - Cause of action - Jurisdiction confined to what stated in summons or complaint - Where incorrect cause of action pleaded - Powers of National Court on appeal - District Courts Act (Ch No 40), ss 133(1), 137.

APPEAL - Practice and procedure - Appeal from District Court - Incorrect cause of action pleaded in District Court - Powers of National Court - District Courts Act (Ch No 40), ss 133(1), 137.

Section 5 of the Statutes of Frauds and of Limitations Act (Ch No 330) provides:

"No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt default or miscarriages of another person ... unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised."

The defendant’s wife was indebted to the plaintiff Bank in the sum of K7,499.52 which was the subject of a judgment and of a garnishee order. So that the defendant’s wife might be allowed to leave the country the defendant, at the airport, signed a document in which he "acknowledge(d) the debt of my wife ... in the amount of ...".

The Bank sued the defendant as "guarantor of payment of a judgment debt ... such guarantee having been given" at the airport.

On appeal from the dismissal of the proceedings in the District Court because there had been non-compliance with the provisions of the Statutes of Frauds and of Limitations Act (Ch No 330),

Held:

(1) Section 5 of the Statutes of Frauds and of Limitations Act (Ch No 330), applies when the promisor assumes a secondary liability and agrees to be answerable if the principal fails to meet his liability, but it does not apply where a promisor assumes a primary liability.

Pearce v Blagrave (1855) 3 CLR 338 and Davys v Buswell [1913] UKLawRpKQB 9; [1913] 2 KB 47, considered and applied.

(2) In the circumstances, the promise made by the defendant was not a guarantee but an original promise by which the plaintiff agreed to meet the liability for the debt himself and without regard to his wife’s liability.

(3) Where a plaintiff has proceeded on an incorrect cause of action in the District Court where the powers of the Court are confined by the provisions of s 133(1) and s 137 of the District Courts Act (Ch No 40) to the "cause of action stated in the summons" the National Court has no power to amend those proceedings on appeal.

(4) In the circumstances, the appeal should be dismissed notwithstanding that the reasons for dismissing the complaint in the District Court were erroneous but because the plaintiff had failed to prove its cause of action stated in the summons.

Cases Cited

The following cases are cited in the judgments:

Chuck v Cremer [1846] EngR 924; (1846) 1 Coop T Cott 205; 47 ER 820.
Davys v Buswell [1913] UKLawRpKQB 9; [1913] 2 KB 47.
Hadkinson v Hadkinson [1952] P 285; 2 All ER 567.
Ley v Hamilton (1935) 153 LT 384.
Pearce v Blagrave (1855) 3 CLR 338.
Yap v Tan [1987] PNGLR 227.

Appeal

This was an appeal from a decision of the District Court dismissing a claim for moneys owing under a guarantee.

Counsel:

S Golledge, for the appellant.
D Roebuck, for the respondent.
Cur adv vult

6 August 1987

HINCHLIFFE J.: This is an appeal from a decision of a District Court magistrate, of 11 September 1986.

The appellant/complainant had issued and served a default summons upon a complaint for a civil debt on the respondent/defendant.

The particulars of demand included the following:

"2. The Defendant is the guarantor of payment of a judgment debt given by this Court on the 12 September 1985 against one Rosalyn Gay Sakora being the wife of the Defendant to the extent of K7,499.52 such guarantee having been given on the 15th day of February 1986 at the Jacksons Airport in the National Capital District."

In his notice of special defence the defendant pleaded:

"1. That he was never indebted to the Complainant in the amount claimed or at all.

2. That the Complainant’s allegation that the Defendant gave the Complainant an oral guarantee of the debt of another, which the Defendant denies, may not be the basis of this or any other action and the Defendant will rely on the Statutes of Frauds and Limitations Act Chapter No 330."

Section 5 of the Statutes of Frauds and of Limitations Act (Ch No 330) provides inter alia:

"No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt default or miscarriages of another person ... unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized."

After a hearing in the District Court the complaint was dismissed by the magistrate.

In the amended notice of appeal (undated in the appeal book) the appellant said:

"1. The Magistrate erred in law by taking into account, when making his decision, irrelevant considerations, namely:

(a) The validity of the Garnishee Order obtained by the Appellant.

(b) The alleged negligence of the Appellant in loaning money to the wife of the Respondent without proper security.

2. That the magistrate erred in law:

(a) In finding that the agreement between the Appellant and the Respondent was covered by the Statutes of Frauds and Limitations Act Chapter 330 Section 5 and was, thus, unenforceable unless supported by a Memorandum or Note signed by the Respondent.

(b) Alternatively, in ruling that Exhibit ‘B’ did not satisfy the requirements of Section 5 of that Act.

3. That the magistrate erred in law to the extent that his decision was based on a misinterpretation of the Statutes of Frauds and Limitations namely his finding that a contract of guarantee could not be an oral agreement but had to be wholly reduced to writing."

My task in this appeal has not been made any easier by the fact that the learned magistrate did not make any findings as to whether or not the respondent offered to repay his wife’s debt at the rate of K300 per month on the condition that his wife and children be allowed to leave the country and travel to England.

Generally speaking, what had occurred was that the respondent together with his wife and children had arrived at Jacksons Airport on 15 February 1986. Mrs Sakora and the children were, that day, to leave for the United Kingdom and Mr Sakora was at the airport to farewell them. Unbeknown to the respondent and his wife there was a garnishee order in existence because she was indebted to the appellant in the sum of K7,499.52. The judgment debt had been in existence since 12 September 1985. It is clear that efforts by the appellant to recover the moneys prior to 15 February 1986 had failed.

The garnishee order was made on 14 February 1986 naming Air Niugini as garnishee and in effect because of this order, Air Niugini felt obliged not to allow Mrs Sakora to travel overseas on that day.

It seems to me that whether or not the garnishee order was valid at the time was irrelevant. I have discussed the obligation to obey a court order in a recent case of Yap v Tan [1987] PNGLR 227. That case involved civil contempt of court proceedings and I saw fit to follow and adopt Hadkinson v Hadkinson [1952] 2 All ER 567 and Chuck v Cremer [1846] EngR 924; (1846) 47 ER 820. Those two English decisions basically say that a court order must be obeyed until it is varied by another court order.

It is clear from the evidence presented in the District Court that the respondent was anxious that his wife and children be permitted to leave the country.

At p 19 of the appeal book, in answer to the question: "In that condition you would be prepared to sign almost anything?, he said: "In those conditions and atmosphere in that part of the building, yes I would sign almost anything."

And at p 24 of the appeal book the question was asked in cross-examination: "In your situation at that time you would have done anything to allow your wife and children to travel, what would you say on that?" He answered: "Yes."

From the evidence I am satisfied that the respondent did say, at the airport, that he would meet the debt of his wife and pay it off in monthly instalments of K300 over a period of two years.

Mr Boardman, the Assistant General Manager of the appellant, said at p 11 of the appeal book that:

"... Mr Sakora offered to repay his wife’s debt at the rate of K300 per month if we allowed his family to travel. He acknowledged his wife’s debt in writing and to date he has made no payment at all."

At p 11 of the said book the witness said: "That the acknowledgement of debt in writing by Mr Sakora was the reason for us allowing the children to travel."

At p 22 of the appeal book the questioning of the respondent went as follows:

"Q. Did you at any time promise the complainant to pay you wife’s debt?

A. No because I wouldn’t be able to and I wouldn’t be able to because I have my obligations to my bank, amongst other things.

Q. Is it true, never at any time, did you promise to be responsible for the debt?

A. That is correct.

Q. It is true that the bank did not execute the garnishee order on the representation made by you on 15th February 1986 that you would be personally responsible for the debt?

A. No."

At p 23 in cross-examination the respondent was asked:

"Can you recall telling me and Mr Boardman that you would settle the debt and that you wanted your wife to leave with the children?

A. I could have said that considering the situation I was in at the time."

Then further on p 23:

"Q. Can you also remember during the negotiation you approached me and made an offer K300 per month, with the debt to be concluded in 2 years which I communicated to Mr Boardman prior to your signing Exhibit ‘B’, what would you say on that?

A. You are mistaken.

(i) K300 per month would not be discharged for obvious reasons.

(ii) Such an offer could not be made because I am no banker and how would I know K300 would be discharged in 2 years.

(iii) Why did Mr Morris write to me and make an offer in letter dated 26 March 1986."

Exhibit "B" was written and signed by the respondent and reads as follows:

"I, Benard Berekia Sakora, of the Law Faculty, UPNG, do acknowledge the debt of my wife, Rosalyn Gay Sakora, to Niugini-Lloyds International Bank Ltd., in the amount of Seven Thousand Four Hundred and Ninety-Nine Kina and Fifty-Two Toea (K7,499.52)

Dated this 15th day of February, 1986."

It is clear from the evidence that the respondent did make the offer to pay. I do not accept his denial and I feel confident in making that finding, in particular when the respondent was so anxious for his wife and children to leave and also that he agreed that he "would have done anything" to allow his wife and children to travel.

It is only logical that the appellant would want a firm commitment from the respondent and a mere acknowledgement of the debt would not be sufficient. It must not be overlooked that Mrs Sakora was leaving the jurisdiction and that she was indebted to the appellant for a considerable sum of money. It had attempted on a number of occasions to recover the debt but had failed and therefore it would need a firm commitment from another person before allowing the judgment debtor to leave the jurisdiction. It is reasonable to infer that the appellant would have grave fears that Mrs Sakora would not return. Indeed it seems to me that the appellant understood that the respondent would take over the debt completely because there appears to be no discussion as to when Mrs Sakora would return to Papua New Guinea. That discussion of course would not be necessary if the respondent was to take over the debt absolutely. The agreement was to have immediate effect and there is no suggestion that from that time on anyone else would satisfy the debt except the respondent. He himself knew that his wife was not going overseas for a brief visit because at p 15 of the appeal book in answer to the question: "You knew that your wife and children were going to England for a considerable spell?," he said: "Yes."

Therefore on those facts I must look at the type of promise made by the respondent. I am satisfied that it was not a guarantee made by him but it comes under the heading of an original promise. Original promises, as distinguished from collateral, conditional or accessory promises are outside the Statute of Frauds, because original promises bind the promisor to do something independently of, and without regard to, another’s liability: see Pearce v Blagrave (1855) 3 CLR 338.

In Davys v Buswell [1913] UKLawRpKQB 9; [1913] 2 KB 47 at 53-54, Vaughan Williams LJ said:

" ‘... but the fair result seems to be, that the question, whether each particular case comes within this clause of the statute or not, depends, not on the consideration for the promise, but on the fact of the original party remaining liable, coupled with the absence of any liability on the part of the defendant or his property, except such as arises from his express promise.’ "

Section 5 of the Statutes of Frauds and of Limitations Act applies when the promisor assumes a secondary liability and agrees to be answerable if the principal fails to meet his liability, but it does not apply where the promisor assumes a primary liability.

It seems to me in this instance that the respondent is not agreeing to meet Mrs Sakora’s liability for that liability has gone; he is agreeing to meet a new liability which is his alone, and s 5 of the said Act does not apply. I say that, because on the facts I am satisfied that the respondent did not foresee his wife being involved any further with the debt and that it was on the basis of his taking over the responsibility that the appellant did not pursue the due execution of the said garnishee order.

Because of my findings I must now go to the complaint and the particulars of demand filed in the District Court. In both, the complainant alleged a "guarantee" and there was no claim in the alternative.

Section 133(1) of the District Courts Act (Ch No 40) provides:

"Concise particulars of the Complainant’s demand with dates, items and prices or value shall be endorsed on or annexed to the summons on a complaint made in respect of a debt recoverable before a Court and shall be deemed to be part of the summons."

Section 137 of the same Act provides:

"Evidence of a demand, or cause of action shall not be given on behalf of the Complainant on the hearing of a complaint other than a demand or cause of action stated in the summons issued on the complaint, or in the summons as amended."

It seems to me therefore that the appellant/complainant proceeded on an incorrect cause of action in the District Court and it would be wrong of me now to make any amendment in the National Court. I might add that there has been no application by the appellant to amend the particulars of demand.

Ley v Hamilton (1935) 153 LT 384 at 385, went so far as to say that when counsel has had ample opportunity of considering two alternative claims and decided to pursue the one, an appellate court should be very chary of allowing the other to be substituted.

Of course in this matter there was not even a claim in the alternative.

I am satisfied therefore that at the District Court level the appellant/complainant did not prove the "guarantee" and even though the learned magistrate dismissed the complaint for different reasons I find that it was correct that the complaint was dismissed. It follows that this appeal must also fail and it is now up to the appellant to decide whether or not to issue fresh proceedings on the basis of Mr Sakora having made an original promise.

I formerly order that this appeal be dismissed.

Appeal dismissed

___________________

Lawyers for the appellant: Kirkes.
Lawyer for the respondent: D Roebuck.