Pelis and Pelton Investments Pty Ltd v Tinsiew Tan and TST Holdings [1995] PGNC 12; N1307 (17 March 1995)

Unreported National Court Decisions

N1307

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS 67 OF 1993
THOMAS PELIS & PELTON INVESTMENTS PTY LTD
v
TINSIEW TAN & TST HOLDINGS>

Waigani

Salika J
17 March 1995

JUDGMENT

PROPERTY - Agreement to develop property to build town houses - Bank loan obtained - Loan to be reduced by rentals from the town houses - Rentals paid but not paid to reduce loan - Bank issues notices - Guarantors fail to meet demand of Bank - Bank forecloses - Bank sells to a guarantor - Title obtained through fraudulent means.

Cases Cited:

Paulus Pawa v The State (1981) PNGLR 478

Emas Estate v Mea (1993) PNGLR 215

Counsel:

Mr J Aisa for the plaintiffs

Mr G Sheppard for the defendants

17 March 1995

SALIKA J: The plaintiffs make a claam against the defendants by way of a Writ of Summons. The Stat of Claim pleads tads the following:

1. & ټ The Filst plaintiffntiff at the material times was and is Managing Director otor of the Second plaintiff from about Nov 1989was tner of the property described in the Leasehold Title Volume 38 Folio 9485 si85 situatetuated at d at Section 9 Allotment 4 Boroko, National Capital District.

2. The first plafntif ahadirequired the title of the said property through a Government Housing Sales Scheme known as Morgan Scheme on or abut the 9th May 1985. The property was then va5, K15,0.

4. &ـ T6e fire first deft defendant was the Managing Director of the second plaintiff from about October 1987 to November 1989. He heldof the shares in thin the second plaintiff. He was at all the mal time times a director, shareholder and owner of the second defendant.

5. &ـ T6e sece second dend defendant is a company Incorpo under the companies Act and is capable of suing and being eing sued under its own corporate name and style.

6. ҈&&#160or aboutabctt Octt October,ober, 1987 by implied terms the first plaintiff a Mr Peter Fong and First defendant all agreed to become Dors o second plaintiff.

7. ҈ B60; By way of a gene ge mral mral meeting of the second plaintiff it was resolved that the first plaintiffs property described in 1 above be transferred and registered under the name of the second plaintif thatFirstntiffs iffs househouse loca located on the property be demolished and town houses (flats) containing 8 units be erected on the property for the purpose of commercial renting for and on behalf of the second defendant.

8. It was furtheo res avedhat that meeting that the first Defendant be the Managing Director of the second plaintiff to negotiatenk lo way memor of agage the property in order to construct the tohe town hown houses.uses.

9.

9.&#160 ټ I60; It was further resolhed that a bank loan be taken out under the name of the second plaintiff and that signatories to the bank account in Ank atani B be in the name of the three hree Directors with any two to sign for a or a chequcheque or e or for any withdrawals of funds for the construction of the town houses and for the general management of the second plaintiff.

10. It watheuragre d at that mhat meeting that when the town houses were completed all proceeds of the takings make from the rents would id ine accof thond plaintiff held at the same ANZ bank Waigani towards dischdischarge arge of thof the bane bank Mortgage.

11. ҈ about tout the 13 e 13 November 1986 and thereafter the first Defendant negotiated a Mortgage loan of K530,000 and a furth0,000 the ANZ Bank Waigani for the three directors of the second plaintiff. The The guaraguarantors tere the First plaintiff, the first defendant and the second defendant.

12. ; Thetruction ofon of the tthe town houses was started by BT Engineering but was completed by another construction comn company between August and September, 1987.

13. ; It greed when ahentall thll the 8 ue 8 units were fully furnished the rent for each unit be K450 per week and K1,950 per month. The firnantsd in out Ner 1ber 1987.

14. &&#160 first deft defendafendafendant apnt appointpointed Tamarua Real Estate as Managing Agfor the second plaintiff who had responsibility to collect and pay rentals on behalf of thef the second plaintiff.

15. ; Thet defendantndant was rwas responsible for collecting the monthly payments which were to be banked at the second plaintiffs accou the ank, Waigani.

16. &&#160ween NovemNovember 19er 1987 1987 and Nand Novembovember 1989 the first defendant was the sole person who collected rental cheques for the 8 units from Tamarua Real estate on behalf of the second plaintiff.

17. ;&#16 or about 2out 24th Feth February, 1988 the First Plaintiff caused to make enquires at the Office of Tamarua Real Estates ring c of documents relating to the collection of rents on behalf of the Second Plaintiaintiff.&#ff. amarua Real estate advisedvised him to contact his Managing Director the First Defendant to obtain necessary information and documents he required.

18.&##160; The First Plaintiffienquwied with the Fire First Defendant in respect of the monies from Tamarua Real Estate. The Defenwas not willing ting to advise him. The First Defendant became annoyed saying that he had provided the finance for the contion of the said town house and therefore was not accountable to him to provide the informaformation on rent collection that he took Tamarua Real Estate.

19. Further the FDrst dafenreqt requested by the First Plaintiff and Mr Fong another Director to attend to Director’s meetings regarding management and rents collected by the First Defendant for thend Plff bu First DefenDefendant dant did ndid not respond to Notice of Meetings issued nor did he attend any meetings of the Directors at all.

20. Onbout November 1989 the Fthe First Plaintiff caused to make enquires at the ANZ Bank, Waigani Branch into the status of the loan so far and to ascertain whether the First Defendant had made any payments from the rents collected from the Second Plaintiff.

21. ;&#16e First Plat Plaintiffntiff discovered that the loan account had gone from initial loan of K580,000 to K600,000 with interest accruing. The First Plaintiff furdisr discovered that the First Defendant had paid no monies at all for the reduction of the original loan taken out by mortgage. And by 22nd November, 1989 it had gone up to K728,712.25.; The First Defendant only only paid K28,000 for the Second Plaintiff.

22. about November, 1989 irst irst Defendant was dismissed as a Director for failing to a to attend the three (3) consecutive meetings and for not briefing the Firaintid thector ng on the loan repayments wits with ANZh ANZ Bank Bank, Wai, Waigani Branch on behalf of the Second Plaintiff from the rents collected for the 8 units.

23. The First Plaintiff and Mg Fong decided that the First Plaintiff should take over the Management and collect rents to ensure that the payments were made to the said Bank with the view to reduce the loan

260;&##160; 160; The FThe First irst Plaintiff had taken over from November, 1989. By that time it was alimpo impossible to discharge loan and interest which accrued from the non payments made byt he First Defendant in the previous twenty six (26) months from the raking. The First Plaintiff triereto reduce the loan foan for six (6) months but each time the bank interest was increasing higher and higher.

25. ;&#16e ANZ Bank Bank at Wait Waigani then took over the property and advertised it for sale by public tender after the notice was served on the First Plaintiff and the First and Second Defendants.

26. Thst Defendant who is the the Director of the Second Defendant and who were both guarantors to the original mortgage loan of K530and fr K50biddepurchase the property on tender.

27. #160; The; The Firs First and Send Second Defendants paid ANZ Bank, Waigani the sum of K750,000 which was the amount of loan that was outstanding and owing by the First and Second Plaintiffs, an whic Firs Second Defe Defendantndants wers were still guarantors and had the demised premises transferred by said bank to the Second Defendant. The property was registered the name oame of the Second Defendant.

28. & BetwovemNer, 1er, 1987 to87 to November 1989 and at material times the First Defendant by collecting monthly rents on behalf of the First and Second Plaintiffsfailedepose said rents into the second Plaintiff'tiff's Bans Bank Acck Account held at ANZ Bank at Waigani. The First Defendant had therefore breached an implied terms of oral agreement that all rents collected by the First Defendant must be paid into ANZ Bank, Waion behalf of the Second Plaintiff and for its Account.

29. T60; The First Defendant was still shareholder holding fifty percent (50%) shares in the Second Plaintiff and the payment of K750,000 paid in ANZ Bank was in accordance wie memum ofgage ed executed by both the FirstFirst and and SeconSecond Plad Plaintiff, and the First and Second Defendant and the ANZ Bank and therefore the property in question should not have been transferred to the Second Defendant.

30. By patheg um os K750,000 t000 to ANZ Bank by the First And Second Defendants as guarantors they had therefore discharged the originalgage takenunderrity of the second plaintiff. Toperty was thereforreforeefore stie still vell vested sted with the Second Plaintiff. Any futures to the Frist Dist Defendant or to the Second Defendant should have been negotiated by the First Defendant and First Plaintiff one Mr Fong. The sale of the dd premiseemises to the Second Defendant amounts to a bo a breach of implied term of oral agreement that First and Second Defedants were guarantors.

31. & The First Deft Defendant had therefore intended and did commit serious breaches of the terms of contract either expressly or by implication amounting to misrepresentation and frau>

60;&##160;< That he anifestifestly mily mily misrepresented and indirectly defrauded the First and Second Plaintiffs by agreeing to become a Director of the Second Plaintiff and executing the articles and memorandum of Association.

b) ;ټ That byat by takintaking the fifty percent (50%) share he had by way of misrepresentation and fraud intended to possessdemisemisethe First Plaintiff and the Second Plaintiff and to convert it to his ohis own uswn use ande and to the use of the Second Defendant.

c) ـ That trs First Defendant hant had by way of fraud and misrepresentation promised the First and Second Plaintiff that he was providing the finance when in fact in the memorandum of mortgage the loan of K580,000 taken out with ANZ Bank, Waigani was made solely in the names of First and Second Plaintiffs.

d) ;ټ That that the Firs First Defendant by way of misrepresentation and fraud agreed with the First and Second Plaintiffs that the First Defendant and Seconendane guars of Second Plaintiff in the mortgage gage loan loan of K5of K580,000 plus bank interest taken out under the name of the Second Defendants.

e) ҈& T60; That that the First Defendant by misrepresentation and fraud agreed with the First and Second Plaintiffs that he himself (The First Defendant) and Second Defendant as guarantors to the K580,000 taken out by memorandumorgage would be paid by himy himself and the Second Defendant from the Rent monies collected by the First Defendant for Second Plaintiff or in the event that the loan is not discharged.

f) That ths Firfe Dent da wayy way of misrepresentation and fraud had not deposited the monies from rents collected on behalf of the First and Second Plaintiffshe SePlains banount Z Banigani Brai Branch fnch for a or a perioperiod of d of twenttwenty two (22) months.

g) ҈ T60; That by not doong s Fthe First Defendant by way of misrepresentation and fraud had intended to defraud the First plaintiff who was a guar to tan of,000 would not be able to diso discharge the loan and that the ANZ Bank Bank Waig Waigani wani would repossess it and it sell it by public tender.

h) ҈ T60; That the FirstSand d cond Defendants had misrepresented to the First And Second Plaintiffs that as guarantors they would discharge the mortgage loan of K750,000. Instead the said of K750,0750,000not pnd a emorandorandum ofum of morg morgage was obtained under the Second Defendant for the same amount in order to purchase the demised prem

i) ҈ That that the First Defendefendant had by fraud and misrepresentation to the Plaintiffs applied again under the name of the second defendant to buy the demised premises on tender from ANZ Bank, Waigani.

j) &##160; That the First Defendant bant by misrepresentation and fraud had registered caveat against the demised premises allethat ld fiercen%) ofshares and further that he had contributed K200,0000,000 towa towards trds the fihe financinancing of the town house under the name of Second Plaintiff, when the said First Defendant paid no monies or for the Second Plaintiff.

k) & That the Firse Defendant hant had by way of fraud misrepresented the First and Second Plaintiffs to transfer the demised ses fhe SePlainto thond defendant by executing the Contract of Sale ande and tran transfer sfer documdocuments ents with the ANZ Bank, Waigani.

l) &##60;& T60; thatFirs Defe Defendant by misrepresentation to the Registrar of Titles had fraudulently transferred the Title of the property registered under the name of the Second Plaintiff and had it registered under the name of the Second Defendant.

32. &#That irs FPlai Plaintiff tiff and Second Plaintiff therefore had suffered substantial damages in the following:

a) ټ&#L60; ofss of propeproperty in a State Lease Volume 38 Folio 9485 situated at Section 9 Allotment 4, Boroko originally registered under First Plaintiffs own name.

b) & T60;lose of o iginal hous house owned by First Plaintiff which was demolished in order to erect a new townhouse consisting of 8 units for the Second Plaintiff.

c);ټ&##160;; The loss of propeproperty rrty registegistered ered underunder the name of Second Plaintiff originally built at the value of K580,000 in 1987 and which value together with the land would value now at more than One Million Kina (K1,000,000) in 1993.

d) Tre Findt aconSePlai tiff tiff have lost substantial amount of money by being deprived of by the First Defendant for moniew coming in rent from 1987 - 1993.

e) &##160;; L60s ofss of viablviable and commercial property containing a town house and 8 units, which should not have been lost had the First Defendant paid rents collected and banked them under econdntiffcount wunt with Aith ANZ BaNZ Bank, Waigani.

f) ҈& E60; Economionomic loss since 1987 and the loss of future economic loss, because the Second Plaintiff was not able to operate its business with loss of its rents income, which wereectedhe Fiefendanendant.

g) &##160; #160; Losm of s niem 1987 to nowo now and future loss of salaries because of repossession by ANZ Bank, Waigany by the defraud of the First Defendant in the lack of proper management and accountability e Secaintirent mont monies,nies, the the First Plaintiff had been deprived of regular salaries from 1987 to 1993.

The Plaintiff called evidence in the form of the first plaintiff Mr Tom Pelis, Mr Peter Fong who was 25% shareholder of Pelton Investments and a director, Mr Lindsay Gideon Registrar of Titles, Mr Kila Kalo, property manager and accounts Clerk with Tamarua Real Estate and Mr Leslie Wungen an accountant. The defendants elected not to call evidence.

EVIDENCE

Mr Pelis the first plaintiff gave evidence that he was a public servant at the time he acquired title to the property in the leasehold as Volume 38o 9485 situated at Section tion 9 Allotment 4, Vaivai Avenue, Boroko National Capital District. He had acquired title through a Government Housing Sale Scheme known as the Morgan Scheme. He evidence that after titr title to the property had transfero him Mr Tin Tan and himself decided to build town houses over that property. Mr Peli Pelis was intrd to d to Mr Tin Tan by Mr in 1986 at Tokarara. 160; It was at introductiouction meeting at Tokarara that it was decided that as Mr Pelis had land Mr Tin ould provide finance to put up town houses on the property.erty. Anomeeting was organised wsed with an accountant Mr Wong. At that ng were Mr Wong, Mng, Mr Peter Fong, Mr Tin Tan and Mr Pelis. A meeting, Mr Fong, Mr Tinr Tin Tan and Mr Pelis were ated dors. Mr Tinr Tin Tan was also appointed Managing Director while Mr Fong was appointedinted Secretary. Share issue was alscussed at this meeting wher whereby it was agreed that Mr Tin Tan would hold 50% shares, Mr Fong 25% and Mr Pelis 25%. Earlier Mr Pead inrated Peed Pelton Investment with Mr Noah Tonobe as one of the Directors. Howeveowever Mr Tonob left left and so Mr Tin Ta Mr Fong were appointed Directors of Pelton Investments.

It was agreed at the meetineeting that Mr Pelis would transfer the tio the property under his name to Pelton Investment. T60; This wne. AfterAfter that had been done Mr Pelis vacated the property and Mr Tin Tan engaged a construction firm B&T Engineering to do demolition and excavation work. New town houses builthe ptoperty.&#16. They were complet Septembetember 1ber 1987 and the first tenants moved into the flats in about October 1987.

In the meantime the Directors of Pelton agreed to secure a bank loan. Mr Tin Tan wTan who was one of the Directors of Pelton negotiated a mortgage loan of K530,000 initially and later another K50,000 from ANZ Bank at Waigani. The first plaintiff, the defendant and second defendant were to be the guarantors oors of the loan. Mr Pelis gave evidence thet the additional K50,00 las not authorised by all the Directors.

Mr Pelis gave further evidence that since Mrce Mr Tin Tan was doing everything for Pele was to collect the rentals. Ts were to pay K45y K450.0450.00 per week per unit. He said Tin ad organised wsed with Tamarua Real Estate to manage the property, a fact that him and Mr Fong did not know until later. Mr Pelleged Mr Tin Tan coln collerentals from Tamarua Real Estate but did not bank it in then the Pelton Accounts. He said as a resulnon paym payment of the renwith Pelton accounts Pelton was not able to reduce the loan loan. In 1989 Mr Pelis took over over the management of Pelton.&#16 tried to reduce the loan but the int on the loae loan kept kept escalating and the principal loan was never reduced.

Thk then sent a letter of demf demand. The guarantors were not able to do anything and so the bank took possession under the mortgage agreement. The property was the up foup for the sale on public tender and TST Holding the second defendant was the successenderer. TST Holdingsdings paid K750,000 to the bank and became the new proprietor of the property.

When it became obvious that Pelton was not capable of discharging the loan Mr Pelis had tried to sell the property through a private sale but he could not sell the property because Mr Tin Tan had taken out a caveat on the property restricting the sale.

The plaintiffs also called Mr Lindsay Gideon the Registrar of Titles. He gave evidenat the regisregistered proprietor of the property at Allotment 4 Section 9 Boroko was originally National Housing Corporation. ship was transferred to Thto Thomas Pelis on the 21/9/86.&#It was subsequently transfeansferred to Pelton Investments. Mr Gideoo gave evidence thce that there was a mortgage registered ohe property. He also also gave evidef a of a caveat being lodged by Tin Tan on the 12/2/90. He also evidence of a fu t fu transfer of ownership of t of the property from ANZ Bank to TST Holdings on the 11 August 1992. TST execanother mortgage wage with NZ Bank on the 13/5/91. The Registrale on the prhe prhe property is an exhibit before the court.

Mr Fong the other direcf Pelton gave evidence and he supports the evidence of Peli Pelis. H the one who introduced Pced Pelis to Mr Tin Tan in 1986. He waered 25% share holdinolding in Pelton by Tom Pelis. He agrees whe evidence of e of Mr Pelis concerning the property glly.

He gave evidencidence that the arrangement was that Mr Tin Tan would organise a bank loan loan and that Mr Tin Tan was to be the Ma while Mr Fong was to be thbe the Secretary. He said he was awa the fire first loan that was obtained but not of the second one. Mr Fong also gave evidence of the arrangement that the loan would be serviced by rentals from the 8 units. He said first sucments wers were mere made on the 24/9/87. In relation to the repaymepayments Mr Fong said the arrangement was that Mr Tin ould appoint a real estate agent to manage the property and that the rentals would service vice the loan. He gave evidence thatin Tan was to collect the rthe rentals. Mr Fong was of the view that the venture was not profitable because the rentals were nod to reduce the loan. He further wento say that that the administration and managemengement of the company was in the hands of n Tan and Mr Tin Tan did noid not advise him and Mr Pelis (the other directors) of what was going on in the company.

Kila Kalo was the other witness called by the plaintiffs. He was the pro manager andr and accounts clerk employed by Tamarua Real Estate. He was responsible for managing the properties entrusted to Tamarua Real Estate. He also manthe accounts ofts of Ta Real Estate. He knoe knows both Mr Pelis and Mr Tin Tan. He agreed thalooked after fter the property belonging to Pelton locon Vaivai Avenue at Boroko. He agreed tha first irst rrst rental was made in either August or September of 1987. He said the aements forentyment were made made by Dr Tamarua and Mr Tin Tan.

He could not remember paying out any money out on behalf of Pelton Tin Tan. He however agreed thaTin TTin Tan would come to them to ask if tenants had had paid their rentals. He also gave evi that Mr T Mr Tin Tan did advise that he would collect rent for Pelton every month. The witness said they neve never paid oney out on behalf of Pelton and suggested that Pelton's money could still be in the trust rust account of Tamarua Real Estate.

The defendants exercised their rights not to call any evidence. They deny the ations in thin the plaintiffs statement of claim and relied on their defence they filed in the proceedings.

The unchallenged findings of the court on factatters as pleaded in the statement of claim are these:

I find that paragraphs 1 to 15 of the statement of claim have been made out without challenge. There is ample evidence adduced by the plaintiffs relating to allegations contained in those paragraphs.

Paragraph 16 is a claim which is disputed. Trst defendant denies he c he collected rentals from Tamarua Estate. Evidence froe from Mr Pelis and Fong is that Mr Tin Tan appointed Tamarua Real Estate as the property Managers. Kalo confihat Tamarua arua arua Real Estate managed the property on behalf of Pelton Investments. Mr Tin as the Managing Dirg Direct Pelton Investments. There is also ece that Mr t Mr Tin Tan did go to Tamarua Real Esal Estate and spoke to Dr Tamarua. Mis said he to Tamarua Reaa Real Estate to make enquiries abes about rental payments and was told to go and see Mr Tin Tan. Kila Kalo evidthat the rene rental money may still be in the Tamarua Trust Account. Should I ad I accept that from the witness?

P Investment was in desperate need for the money. Notices of demand went by t by the Athe ANZ Bank to Mr Tin Tan. TST and lis as guars.&#160 This Evidence is contain t in the the Registrar of Titles File. Crown Lease 38/9485.; One One would thougat Mr Tin Tan as n as Managing Director would have required Tamarua Real Estate to release ease the rental monies upon receipt of the noti demand. In any case Pelton Invnt went was required tred to service its loan. Mr Tin Tan as Mag Director ctor was by virtue of his position required to ensure that Pelton loan was serviced and reduced. For that reason he have tave to collect the r cheques from Tamarua Real Estate. Idid not then then he was was being negligent in his duties as Managing Director. Mr also gaveence that aftt after he had gone to Tamarua Real Real Estate about the rentals he was told to go and see Mr Tin Tan about it.&#1e then went to see Mr Tin Tan but Mr Tin Tan was not there. He it was difficult cult ault at the time to see him. He had left ges for Mr Tinr Tin Tan to call him but Mr Tin Tan never called him. There is also some evidence from Mr Kila Kalo they haued some cheques ques to Mr Tin Tan. Mr Kalo also gave evidence that Mr Tin Tan came came to check if tenants had paid their re.

For Mr Kila Kalo to suggest that the rental moniesonies belonging to Pelton Investment might still be with Tamarua Real Esta in my view a remote possibossibility. From all the evidence bemere me I am of the view that the money is not there. I come toview from inferenferences I draw. The inference I draw from all the evidence is that Mr Tin Tan collected the rentalsehalfelton Investmentsments and so I conclude on the balance of probabilities that he did collecollect the rentals. After all he wasmanagirectirector of Peltonelton, he knew rentals for Pelton were going to Tamarua Real Estate and he did pay some money to the Peltoount on a number of occasions. uld be reasonably inferrederred that he paid those amoe amounts out from the rentals he received.

I point out at this stage that Mr Tin Tan is the only person who has any knowledge of the whereabouts of the rentals. marua the only other persoperson who might have known is dead. Mr Tin Tan has elected not to give evidence. Thidence is cruci his defe defence where he generally denies collecting the rentals. In0; In criminal cases the Supreme Court heler al the of Paul Paulus Pawa v The State (1981) PNGLR 478 478 that where an accused person fails tols to give evidence or call witnesses to st his case, any inferences to be drawn must be determined bned by common sense having in mind that failure to give evidence is not an admission of guilt but that it may strengthen the State case leaving it uncontradicted or unexplained on vital matters. Ang the principle in this this civil case, while I agree that Kila Kalo’s evidence somewhat contradicts the plaintiffs allens that Mr Tin Tan collected the rentals Mr Kalo’s evidence is suspect in that in my n my own assessment of his evidence he was really guessing when he said the rentals are still with Tamarua Real Estate. He did not khat went on beon between Dr Tamarua and Mr Tin Tan. He was evasn answering queg questions about the rentals. I find that he di tell thel the Court tuth about where the rental monies were.

I could not not accept his evidence as the whole truth. Tole truth is only knowMr owMr Tin Tan. What happened to the renisls is a vital qtal question in this case. The evidence that hen addu adduced in rel to who might have collected the rentals is substantially clly circumstantial. There are two possible explanations: either Mr Tin Talected them or they are still in the Tamarua Trust Account.ount. I hiscounted the latter poer possibility as being remote.&#160mon sense dictates that the inference I draw must be that Mhat Mr Tin Tan collected the rentals.

In relation to paragraph 17 o statement of claim there iere is some evidence that the first plaintiff did make inquiries at Tamarua Real Estate and so I find that has been made out.

Paragraph 18 of the claim has not been made out. The only evideefore the cohe court is that on the occasions Mr Pelis went to see Mr Tin Tan, Mr Tin Tan was not available and that he was hard to get even though messages had left for him to call Mr Pelis.

Paragraphs 19-27 in 7 in my view have been made out. The adequate evidence from from Mr Pelis and Mr Fong on the allegations contained in those respective paragraphs whic has not been contradicted by other evidence.& I therefore find that those allegations have been made oute out.

The first part of paragraph 28 of the claim has been made out by virtue of my findings in relation to paragraph 16. I uded that the first defe defendant had collected the rentals from Tamarua Real Estate. Evidenceelation to the sece second part of paragraph 28 from Mr Pelis and Mr Fong was that not all onies were deposited into Pnto Pelton account to reduce its loan. Wh or not there was an oran oral agreement for Mr Tin Tan to pay the rentals to ANZ Bank Waigani on behalf of Pelton Investments is not vital. What is vital in mw is thas that Mr Tin Tan he obligation and the duty auty as Managing Director of Pelton Investment to pay the rentals to the bank on behalf of Pelton Investmen reduce the loan. I find that paph 28 has beas been meen made out.

In relation to paragraphs 29 and the payment of K750,000 by the first and second defendants to the ANZ Bank this was done after the Bank had foreclosed and the Bank by then was exercising its powers under the mortgage to sell the property. Evidis that Mr Tin Tan wasn was still a shareholder and a guarantor. However the bank was entitled to do what it did, sell the property. The property was put on syle by public tender.& The Plaintiffs argue that that because Mr Tin Tan and TST Holdings were guarantors to the loan taken out by Pelton Investments from the Ank they should have stepped into the shoes of Pelton Investnvestments and reduce or discharge the loan. I acknowledge and accept Mhat Mr TinTan and TST Holdings were both guarantors but they elected not to step into the shoes of Pelton Investments. all tarantors failed to heto help Pelton Investment the Bank by virtue of the mortgage beca became the mortgagor in possession and tio the property passed to the bank and it was in my view duty bound to sell the property.&#1y. Bs time the obligations ofns of the guarantors was extinguished. I am therefore of the view that the contentions raised in paragraphs 29 and 30 are not mad in the circumstances. As to the tit the propertopertoperty I am of the view that there was fraudulent misrepresentation by Mr an to register a caveat.&#1t. Becausthat misrepresentatintation Mr Pelis could not do anything on behalf of Pelton Investment. I wiscuss the fraudulent ment misrepresentation when I dela with paragraph 31 (j) of the claim.

In relation to paragraph 31 taintiffs alleges that there was fraud and misrepresentation by Mr Tin Tan in that while he e he was the Managing Director and shareholder of Pelton Investment he collected rentals payment from Tamarua Real Estate but that he never paid the rental monies to the Pelton Investment account held at the ANZ Bank Waigani. Ths no direct evidence of e of fraud and misrepresentation in most of the allegation except the allegations contained in paragraph 31 (j). The only thing I say tis t is that as I have foun he collected the rentals aals and that he did not deposit the rentals into the pelton account the only reasonable conclusion I come th is that he misappropriated Pelton’s monies.

In paragraph 31 (j) the plaintiffs allege that the first defendant by misrepresentations and fraud had registered a caveat against the demised premises alleging that he held 50 percent of the share and further that he had contributed K200,000 towards the financing of the town houses under the name of the second plaintiff. The caveat was registered on the 7th February, 1990. The ent is now an exhibit ibit and speaks for itself.

Evidence on this aspect from Mr Pelis is that he asked the bank if he could sell the property. He saidad a potential inte interesuyer lined up and that nego negotiations were gong on but that the prospect of the private sale was discontinued because of the caveaistered by Mr Tin Tan.

In relation to the caveat itst itself and the reasons for taking out the caveat there is no evidence from Mr Pelis, Mr Fong or Mr Tin Tan about giving a personal loan of K200,000 to Pelton Investments. In my view that is a clisr misrepresentation. The onlyence of money goin going to Pelton Investments account are the two loans of K530,000 and th,000 a total of K580,000. There is ndence of Mr Tin Tin Tan giving or lending K200,0200,000 to Pelton Investment. I am satisfied iown mind oind on the balance of probabilities that the misrepresentation was made for the purpose of securing the caveat and ultly to stop Mr Pelis from selling the property.

I also note that in securing the cave caveat Mr Tin Tan had said that he had personally guaranteed the repayment of the Bank loan of K600,000. As events turned out that guarantee turned out to be nothing but Mr Tin Tan got his caveat.

On the evidence I am satisfied on the balance of probabilities that Mr Tin Tan in securhe caveat fraudulently misrepresented himself and effectivectively stopped Mr Pelis from negotiations to sell the property. By stage the Bank had sent sent out its notices of demand to the guarantors. The guarantors did nopond pond favourably to the and so a sale to discharge the loan was one option available. I alsd on the evie evidencidence, that the relationship between lis and Mr Tin Tan had gone sour by that point in time.&#16. They wet seeing each otherother eye to eye and yet both were direcof a Company which was in a in a serious financial dilemma. Perhaps n Tan should have have asked Mr Pelis what was going on.&#1e instead took out a caveataveat whereby he misrepresented himself. ght have been entitled to d to take out a caveat but not fo reasons he presented.&#160 I considis event to be thee the cause of Mr Pelis and Pelton Investment totally loosing out. s from thant on that that that the Bank moved in as the Mortgagor in possession and exercised its power of sale.

As I have found onevidence that Mr Tin Tan had fraudulently taken out a caveat it follows then that the subsesubsequent sale to TST Holdings and the transfer of Title by the Bank must be affected. While I agret the Bank hadk had the right to sell the property to whoever was the highest bidder I also am mindful of the rights of Tom Pelis and Pelton Investments. The Piffs might not have bave be that position had Mr Tin TTin Tan not fraudulently misrepresented himself and taken out a caveat. H Tin Tan told the trute cute caveat might not have been registered and Mr Pelis might ight have been able to sell the property. As it turned out a caveat egistered because of a fraudulent misrepresentation Mr Tin Tin Tan had decided not to give evidence to help the court why he said thhings to register a caveat.

In my view the whole transaction by the Bank selling theg the property is affected. The Regiion of the propertoperty under the name of TST in my view is affected. I reiterate what I said e the case of EMAS Estate (1993) PNGLR 215 at page 228. In thse I said: “I a0;I agree, in principle, tha, that where a title has been registered uones name, it is not capable of being annulled, except wher where title has been acquired by fraud”.

In this case there is evidence of fraud which has not been contradicted. Had it non for the fraud taud things might have been different. I therefind that the titletitle acquired by TST Holdings is not properly acquired and declare it null and void.

The title inpropen my view revertsverts to Pelton Investments. The Bank still ha right ofht of forecloreclose. ruling in effect restores ores the Status quo up to the time before the bank took possession of the property and before the caveat was registered by Mr Tin

summary I have fave found that Mr Tin Tan did collect the the rentals from Tamarua Real Estate and that he had failed to pay the rental monies to the Pelton Investments Account so as to reduce its loan. I find that as a r of the the non payment by Mr Tin Tan, the loan account of Pelton escalated. There is no evidef fraud oaud on the part of Mr Tin Tan as to why he neglect reduce the loan from the rental income. However I fi I find that there was a fraudulent misrepresentation by Mr Tin Tan when hk out a caveat restricting ting the sale of the property by Mr Pelis.

As a result of that I am satisfied that the plaintiffs huffered damages as containetained in their particulars to claim of the statement of claim.

I accordingly award the following claims:

(a)	The amount of rent per unit per month at K1,950 each for 8 units for a period from September 1987 to November 1989 less K28,000.00	K377,600.00
(b)	The amount of rent per unit per month at K1,950 for 8 units from 30th April 1990 to date of judgement	K920,400.00
	Total	K1,298,000.00

I award costs of the proceedings to the plaintiff.

Lawyer for Plaintiffs: Joseph & Co Lawyers

Lawyer for Defendants: Maladina & Co Lawyers