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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
TST HOLDINGS PTY LIMITED (IN PROVISIONAL LIQUIDATION); AND
TIN SIEW TAN
V
THOMAS JOHN PELIS; AND
PELTON INVESTMENTS PTY LIMITED
WAIGANI: SHEEHAN J
10 August 1999; 7 September 2000
Facts
The first plaintiff (TST Holdings) and the second plaintiff (M. Tin) seek to set aside the judgement of the National Court against them in WS 67 of 1993 given on 17 March 1995, in favour of Thomas John Pelis (Mr. Pelis) and the second defendant Pelton Investments Pty Ltd (Pelton Investments) on the grounds that the judgement was obtained by fraud.
Held
Counsel
M Cooke, QC & J Varitimos, for the first and second plaintiffs.
J Aisa, for first and second defendants
10 August 1999
SHEEHAN J. This matter arises from dispute between the parties over the purchasing, financing and a development of a property at Section 9 Lot 4 Boroko. The issues in these have been the subject of extensive litigation in both the National and Supreme Courts and indeed the present action to set aside was itself the subject of a Supreme Court appeal.
This property was initially purchased by Mr. Pelis in 1985 under a scheme enabling Public Servants to acquire house properties from the State. The following year the development of the property was undertaken by construction of eight rental units. This was achieved by Mr. Pelis joining with Mr. Tin and a Mr. Fong in a development company, Pelton Investment Pty Limited which purchased the property from Mr. Pelis and was then mortgaged to the ANZ Bank to secure the finance for construction. The share holding in the company was divided 50% to Mr. Tin and 25% each to Mr. Pelis and Mr. Fong. These share proportions were to reflect the major contribution to financing by Mr. Tin who paid off the State’s agreement for sale and purchase with Mr. Pelis, and on the transfer of the property to Pelton Investments, arranged the bank financing.
But the venture was not successful. Because mortgage commitments were not met, the ANZ Bank called in its security selling the property to recover its loans. Mr. Tin (who with TST Holdings was also a guarantor of the bank loan) was the successful bidder on the mortgage sale of the property.
Mr. Pelis aggrieved at this commenced proceeding against Mr. Tin and TST Holdings alleging fraud. He complained that Mr. Tin had breached his duty to account for rental received by him in respect to the property, resulting in the bank foreclosure.
Mr. Pelis succeeded at trial, obtaining judgement for himself and Pelton Investment with orders the title to the property transferred upon the mortgage sale be returned to Pelton Investments and an order for damages and interest in sum of K1, 475, 808.22.
After subsequent appeals and a review application were dismissed by the Supreme Court, TST Holdings against which company, judgement had also been obtained as a guarantor of the Pelton Investments bank mortgage, went into provisional liquidation. During the course of that liquidation, the Liquidator and Mr. Tin learnt of further bank accounts operated by Mr. Pelis in respect of Pelton Investment funds and commenced these proceedings. The plaintiffs in this action contend that the evidence given by Mr. Pelis in the trial of WS 67 of 1993 in support of the case pleaded by him in the statement of claim and supported by submissions of counsel, was false and known to be false by him at that time. Accordingly the judgement of the Court which accepted that evidence was a judgement obtained by fraud.
The defendant has denied these claims, maintaining that his evidence given at trial was true that he had in fact acknowledged the fact of other bank accounts before the learned trial judge, and accordingly Plaintiff’s cannot now succeed.
In the determination of this claim it is necessary and appropriate that the Court examine the statement of claim in WS 67 of 1993 to establish the cause of action pleaded; to consider the evidence given and submissions made in support of that cause of action, and the judgement of the Court to establish just what reasons were significant in the Court deciding as it did.
Mr. Pelis’s statement of claim in those proceedings, WS 67 of 1993 is recorded in full to show all causes of action pleaded. Brackets and emphasis have been added to indicate pleadings in respect of rental. (Mr. Pelis).
"1. The first plaintiff at the material times was and is Managing Director of the second plaintiff from about November 1989 and was owner of the property described in the Leasehold Title Volume 18 Folio 9485 situated at Section 9 Allotment 4 Boroko, National Capital District
(a) that he had manifestly misrepresented and indirectly defrauded the first and second plaintiff by agreeing to become a director of the second plaintiff and executing the articles and memorandum of association.
(b) that by taking the (50 %) share he had by way of misrepresentation and fraud intended to possess the demised premises of the first plaintiff and the second plaintiff and to convert it to his own use and to the use of the second defendant.
(c) That the first defendant had by way of fraud and misrepresentation promised the first and second plaintiffs 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 plaintiff.
(d) That the first defendant by way of misrepresentation and fraud agreed with the first and second plaintiffs that the first defendant and second defendant were guarantors of second plaintiff in the mortgage loan of K580,000 plus bank interest taken out under the name of the second defendants.
(e) That the first defendant by misrepresentation and fraud agreed with the first and second defendant as guarantors to the K580,000 taken out by memorandum of mortgage would be paid by 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 the first defendant by way of misrepresentation and fraud had not deposited the monies from rents collected on behalf of the first and second plaintiffs in the second plaintiff’s bank account at ANZ Bank, Waigani Branch for a period of twenty two (22) months.
(g) That the first and second defendants had misrepresented to the first and second plaintiffs that as guarantors they would discharge the mortgage loan of K750,000. Instead the said loan of K750,000 was not paid and a new memorandum of mortgage was obtained under the second defendant for the same amount in order to purchase the demised premises.
(h) That the first and second defendants had misrepresented to the first and second plaintiffs that as guarantors they would discharge the mortgage loan of K750,000. Instead the said loan of K750,000 was not paid and a new memorandum of mortgage was obtained under the second defendant for the same amount in order to purchase the demised premises.
(i) The first defendant 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) That the first defendant by misrepresentation and fraud had registered caveat against the demised premises alleging that he held fifty percent (50%) of the shares and further that he had contributed K200,000 towards the financing 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 first defendant had by way of fraud misrepresented the first and second plaintiffs to transfer the demised premises from the second plaintiff to the second defendant by executing the contract of sale and transfer documents with the ANZ Bank, Waigani.
(l) That the first defendant by misrepresentation to the Register 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.
(a) Loss of property in a State Lease Volume 18 Folio 9485 situated at Section 9, Allotment 4, Boroko originally registered under first plaintiff’s own name.
(b) The loss of original house owned by first plaintiff, which was demolished in order to erect a new townhouse consisting of 8 units for the second plaintiff.
(c) The loss of property registered under 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) The first and second plaintiff have lost substantial amount of money by being deprived of by the first defendant for monies coming in rent from 1987 – 1993.
(e) Loss of viable and commercial property containing a two house and 8 units, which should not have been lost had the first defendant paid rents collected and banked them under the second plaintiff’s account with ANZ Bank, Waigani.
(f) Economic loss since 1987 and the loss of future economic loss, because the plaintiff was not able to operate its business with loss of its rents income, which were collected by the first defendant.
(g) Loss of monies from 1987 to now and future loss of salaries because of repossession by ANZ Bank, Waigani by the defraud of the first defendant in the lack of proper management and accountability of the second plaintiff’s rent monies, the first plaintiff had been deprived of regular salaries from 1987 to 1993.
In evidence before the learned trial judge Salika, J. Mr. Pelis confirmed the contentions therein set out. As to how the flat rentals were to be collected, he told the Court:
"Q. How was money to be collected?
In written submissions his Counsel stated as follows:
"the court is requested to ask as to why for about 18 months or more the first defendant had not paid any rent monies to the bank accounts of Pelton Investment Pty Limited to reduce the loan when in fact the (defendant) was solely responsible in collecting rents. It is our submission that the Tin Tan had hidden motive to allow the loan and interest to escalate, to a point of K728,712.25. This hidden motive was that because the two directors Pelis and Fong did not have the capacity and capabilities to discharge the loan whereas Tin Tan was capable do so he could eventually own the demised premises. Mr. Tin Tan had not taken steps to advise Pelis and Fong on the status of the outstanding loan and why it was not being reduced. He was in fact evasive and avoiding them and refused to attend any more of the directors meetings despite numerous requests and notices. Only K28,6000.00 was deposited from November 1987 to about May or June 1989. Why was Tin Tan doing this? Where did all the rent monies go to?"
In his judgement Salika, J. found facts as follows:
"Mr. Pelis gave further evidence that since Mr. Tin Tan was doing everything for Pelton he was to collect the rentals. Tenants were to pay K450.00 per week per unit. He said Tim Tan had organized with Tamarua Real Estate but did not bank it in the Pelton accounts. He said as a result of non-payment of the rentals into Pelton accounts Pelton was not able to reduce the loan. In late 1989 Mr. Pelis took over the management of Pelton. He tried to reduce the loan but the interest on the loan kept escalating and the principal loan was never reduced....
The first part of paragraph 28 of the claim has been made out by virtue of my finding in relation to paragraph 16. I concluded that the first defendant had collected the rentals from Tamarua Real Estates. Evidence in relation to the second part of paragraph 28 from Mr. Pelis and Mr. Fong was that not all the monies were deposited into Pelton account to reduce its loan. Whether or not there was an 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 my view is that Mr. Tin Tan had the obligation and the duty as Managing Director of Pelton Investment to pay the rental to the bank on behalf of Pelton Investment to reduce the loan. I find that paragraph 28 has been made out ... .
In relation to paragraph 32 the plaintiffs alleges that there was fraud and misrepresentation by Mr. Tin Tan in that while he was the Managing Director and shareholder of Pelton Investment he collected rental payments from Tamarua Real Estate but that he never paid the rental monies to the Pelton Investment account held at the ANZ Bank Waigani. There is no direct evidence of fraud and misrepresentation in most of the allegation except the allegations contained in paragraph 31(j). The only thing I say there is that as I have found that he collected rentals and he did not deposit the rentals into the Pelton account. The only reasonable conclusion I come up with is that he misappropriated Pelton monies ...
In summary I have found that Mr. Tin Tan did collect 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 result of the non-payment by Mr. Tin Tan, the loan account of Pelton escalated. There is no evidence of fraud on the part of Mr. Tin Tan as to income. However I find that there was a fraudulent misrepresentation by Mr.Tin Tan when he took out a caveat restricting the sale of the property by Mr. Pelis."
In the result, the learned trial Judge found for Mr. Pelis and Pelton Investments and made the orders sought. Those orders are set out in this action where the plaintiff TST Holdings and Mr. Tin in their statement of claim say:
"5. On or about 30th June 1993 the first defendant Mr. Pelis and the second defendant Pelton Investments commenced an action in the National Court against the second plaintiff Mr. Tin and the first plaintiff TST Holdings, by causing Writ of Summons No. 67 of 1993 to be issued.
(a) In WS No 67 of 1993 the first defendant Mr. Pelis was the first plaintiff, the second defendant Pelton Investments was the second plaintiff Mr. Tin was the first defendant; and the first plaintiff TST Holdings was the second defendant.
(b) In action WS No. 67 of 1993 the plaintiffs sought the following orders;
(A) "A" declaration that the Sale and Transfer of the Title of the demised premises registered under the name of the second plaintiff from ANZ Bank, Waigani by way of mortgage sale to the first and second defendants was by way of misrepresentation and fraud, and was therefore illegal, null and void initio and of no effect.
(B) An Order of the Title of the said premises be reverted to the first and second plaintiffs, or alternatively the present value of the property for K1,537.500.00.
(C) An order that monies obtained by way of rent payments for the 8 units of the second plaintiff from September 1987 to November 1989 be paid to the first and second plaintiffs being the sum of K377,600.00.
(D) An order that monies obtained by way of rent for the first and second plaintiff between 30th April 1990 to 30th June 1993 be paid to the first and second plaintiffs being the sum of K592,800.00.
(E) An order that monies obtained by the first defendant by way of mortgage loan on behalf of the first and second plaintiffs with ANZ Bank, Waigani be paid to the first and second plaintiffs being K580,000.00.
(F) An order that the first defendant pays to the first plaintiff K6,000.00 for original house total K3,093.00.
(G) Damages as contained in the particulars of claim be assessed and paid to the first plaintiff.
(H) Eight percent (8%) interest as per statutes be allowed
(I) The costs of these proceedings.
(J) Any other orders as the court deems fit."
The said Judgment in favour of the defendants was obtained by fraud.
Particulars
The first defendant Mr. Pelis, on his own behalf and on behalf of the second defendant Pelton Investments, testified or submitted in the trial before His Honour Justice Salika:
(i) that he took over management of the subject property in or about October 1989 or November 1989, whereas in true fact the first defendant Mr. Pelis took over management of the subject property in or about September 1988 alternatively not later than in or about January 1989;
(ii) that there was no bank account into which rental from the property was paid other than at ANZ Bank as disclosed to the Court whereas in truth Mr. Pelis opened in the name of Pelton Investments a bank account at Westpac Bank Boroko into which he paid rental receipts of K110,000.00 approximately and utilized those funds for his own purposes and did not pay them to the ANZ Bank property loan account;
(iii) that Mr. Tin had received rentals from the property in 1988 and 1989 and failed to pay the same to the ANZ Bank loan account;
which testimony and submissions the first and second defendants knew to be false when it was given by the first defendant Mr. Pelis in the trial of action WS No. 67 of 1993, and which testimony was accepted by His Honour the trial judge Justice Salika, and the acceptance of which caused the trial judge to give judgment in favour of the plaintiffs in action WS No. 67 of 1993 who are the defendants in this action.
The plaintiffs’ evidence before the Court was based on that of Mr. David Wardly the Provisional Liquidator appointed by the Court for TST Holdings. His investigations into the finances of that company and subsequent disclosure of a Westpac Bank account opened by Mr. Pelis on 30 December 1988 are set out in his affidavit and annexures. The essence of his findings are set out in paragraphs 6, 7,8 of his affidavit of 5 February, 1998 as follows:-
"6 My investigation has shown that contrary to the evidence of Mr. Pelis in the National Court proceedings WS No. 67 of 1993 that he took over management of the Pelton Investments property at Allotment 4 Section 9 Boroko in late 1988. Mr. Tin Tan was dismissed by Mr. Pelis as a Director of Pelton Investment in September 1988 and it would appear that Mr. Tin Tan had no involvement with the collection of rentals for the Pelton Investments property from that time onwards. I have not been able to trace the sum of K24,459.95 being the net rentals recovered by Tamarua Real Estate for the period of June to December 1988 but it is apparent that Mr. Pelis who made inquiries in respect to the same in 1989 is well aware and stated on at least two occasions that he was satisfied that Mr. Tin Tan and TST Holdings had not collected that money.
"7. My investigations show that the commencement of 1989 that Mr. Tom Pelis collected all of the rentals from the property at Allotment 4 Section 9 Boroko and paid K109, 087.57 into the Pelton Investments account at the Westpac Bank PNG Limited. On inspection the transcript in the National Court proceedings WS 67 of 1993 it is apparent that Mr. Pelis did not disclose to the Court the existence of the Westpac Bank account and did not disclose to the Court that he collected and deposited the rental monies for Pelton Investments into the account. The statement by Mr. Pelis in the National Court proceedings WS 67 of 1993 that he did not take over management of the Pelton property until October 1989 is clearly wrong on the basis of the above material and my investigations.
When this evidence was put to Mr. Pelis he at first denied the realities of Mr. Wardly findings but in the end accepted the truth of them though he professed to be mystified as to what significance the fact of his collection of rentals from, at least November/December 1988 and payment into an undisclosed bank account could have had on his claim in WS 67/93.
I am satisfied beyond doubt that the plaintiffs have established that the judgement in WS 67/93 was obtained by fraud and that standard of proof being obtained is recorded here to emphasis the conclusiveness of the plaintiff’s case in this Court and the absence of credibility in that of the defence.
The plaintiffs’ whole case in WS 67/93 rested on the alleged fraudulent behaviour of Mr. Tin as being the person solely responsible for collection of Pelton Investments rentals during 1987 – 1989 and his supposed failure to account for them. That contention was fraudulent. Mr. Pelis was well aware that such was not the case. He had himself collected rentals of over K100,000.00 (not less than K108,000.00) for at least a year before the November 1989 date that he told the Court in WS 67/93 was when he assumed responsibility. It was he, Mr. Pelis who failed to account for those rentals. Had these facts been before the Court in WS 67/93 it would have been open to that Court to conclude that rather than Mr. Tin being responsible for the ANZ Banking foreclosing, it was Mr. Pelis himself. Such a conclusion on the ultimate responsibility for the Bank foreclosing is not necessary for this action. The major issue is whether the decision in WS 67/93 was obtained by fraud of Mr. Pelis. That has clearly been established.
I am satisfied – again beyond reasonable doubt – that Mr. Pelis was aware of those vital facts regarding collection of rentals at the time of the trial of WS 67/93 and concealed them. Equally he was aware of the significance of these facts before the Court in this action.
His manner of giving evidence was one of embarrassment, evasion and denial. Only when faced with the incontrovertible evidence of the Westpac account and the clear evidence of his own payment into that account of Pelton Investment rentals that he compelled to acknowledge the truth of the plaintiffs’ assertions.
Accordingly the judgement of this Court is that the judgement in favour of the plaintiffs in WS 67/93 was obtained by fraud and is wholly set aside. The plaintiffs will have their costs of this action.
Lawyers for the first and second plaintiffs: Henaos Lawyers.
Lawyers for the first and second defendants: JF Aisa & Associates.
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