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TST Holdings Pty Ltd v Pelis [2000] PGNC 42; N1994 (7 September 2000)

N1994


PAPUA NEW GUINEA


[IN THE NATIONAL COURT OF JUSTICE]


WS 101 OF 1998


BETWEEN:


TST HOLDINGS PTY LIMITED
(In Provisional Liquidation)
First Plaintiff


AND:


TIN SIEW TAN

Second Plaintiff


AND:


THOMAS JOHN PELIS
First Defendant


AND:


PELTON INVESTMENTS PTY LIMITED
Second Defendant


Waigani : SHEEHAN, J.
1999 : 10 August
2000 : 7 September


FRAUD – claim that judgement in National Court action obtained by fraud – writ to set aside judgement.


Counsel:

Mr M. Cooke QC & Mr J. Varitimos for the 1st & 2nd Plaintiffs.

Mr J. Aisa for 1st & 2nd Defendants


DECISION


The First Plaintiff (TST Holdings) and the Second Plaintiff (Mr Tin) seek to set aside the judgement of the National Court against them in WS 67 of 1993 given on 17th March 1995 in favour of Thomas John Pelis (Mr Pelis) and the 2nd Defendant Pelton Investments Pty Ltd (Pelton Investments) on the grounds that the judgement was obtained by fraud.


The disputes between the parties arise from 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 shareholding 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 mortgagee sale of the property.


Mr Pelis aggrieved at this commenced proceedings against Mr Tin and TST Holdings alleging fraud. He complained that Mr Tin had breached his duty to account for rentals received by him in respect of the property, resulting in the banks foreclosure.


Mr Pelis succeeded at trial, obtaining judgement for himself and Pelton Investment with orders that the title to the property transferred upon the mortgagee 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 guarrantor 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 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 Defendants 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 are recorded in full to show all causes of action pleaded. Brackets and emphasis has been added to indicate pleadings in respect of rentals. (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 the owner of the property described in the Leasehold Title Volume 18 Folio 9485 situated at Section 9 Allotment 4 Boroko, National Capital District.


  1. The first Plaintiff had acquired the title of the said property through a Government Housing Sales Scheme known as Morgan Scheme on or about the 9th may 1985. The property was then valued at K15,000.00.
  2. The Second Plaintiff is a company incorporated under the Companies Act (Chapter 146) and is capable of suing and being sued was its own Corporate name and style and had its registered office at Allotment 2 Section 143, Tokarara, National Capital District.
  3. The first defendant (Mr Tin) was the Managing Director of the second plaintiff from about October 1987 to November 1989. He held 50% of the shares in the second plaintiff. He was at all the material times a director, shareholder and owner of the second defendant.
  4. The second defendant (TST Holdings) is a company Incorporated under the Companies Act and is capable of suing and being sued under its own corporate name and style.
  5. On or about October 1987 by implied terms the first plaintiff a Mr Peter Foung and first defendant all agreed to become Directors of the second plaintiff.
  6. By way of a general 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 plaintiff and that the first plaintiffs house located on the property be demolished and two houses (flats) containing 8 units be erected on the property for the purpose of commercial renting for and on behalf of the second defendant.
  7. It was further resolved at that meeting that the first defendant be the Managing Director of the second plaintiff of a Mortgage over the property in order to construct the town houses.
  8. It was further resolved that a bank loan be taken out under the name of the second plaintiff and that signatories to the bank account held in ANZ Bank at Waigani Branch be in the name of the three Directors with any two to sign for a cheque or for any withdrawals of funds for the construction of the town houses and for the general management of the second plaintiff.
  9. It was further agreed at that meeting that when the town houses were completed all proceeds of the takings made from the rents would be paid into the account of the second plaintiff held at the same ANZ bank Waigani towards discharge of the bank Mortgage.
  10. On or about the 13 November 1986 and thereafter the first defendant negotiated a Mortgage loan of K530,000 and a further K50,000 with the ANZ Bank Waigani for the three directors of the second plaintiff, the first defendant and the second defendant.
  11. The construction of the town houses was started by B&T Engineering but was completed by another construction company between August and September, 1987.
  12. It was agreed that when all the 8 units were fully furnished the rent for each unit be K450 per week and K1,950 per month. The first tenants moved in or about November, 1987.
  13. The first defendant appointed Tamarua Real Estate as Managing Agents for the second plaintiff who had responsibility to collect and pay rentals on behalf of the second plaintiff.
  14. The first defendant was responsible for collecting the monthly payments which were to be banked at the second plaintiffs bank account at the ANZ Bank, Waigani.
  15. Between November 1987 and November 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.
  16. On or about 24th February, 1988 the First Plaintiff caused to make enquires at the Office of Tamarua Real Estate regarding copies of documents relating to the collection of rents on behalf of the Second Plaintiff. The Tamarua Real Estate advised him to contact his Managing Director the First Defendant to obtain necessary information and documents he required.
  17. The first Plaintiff enquired with the first defendant in respect of the monies from Tamarua Real Estate. The defendant became annoyed saying that he had provided the finance for the construction of the said town house and therefore was not accountable to him to provide the information on rent collection that he took from Tamarua Real Estate.
  18. Further the first defendant 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 the second plaintiff but the first defendant did not respond to Notice of Meetings issued nor did he attend any meetings of the Directors at all.
  19. On or about November 1989 the 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.
  20. The first plaintiff discovered that the loan account had gone from initial loan of K580,000 to K600,000 with interest accruing. The first plaintiff further 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 paid K28,000 for the second plaintiff.
  21. On or about November, 1989 the first defendant was dismissed as a Director for failing to attend the three (3) consecutive meetings and for not briefing the first plaintiff and the Director Mr Fong on the loan repayments with ANZ Bank, Waigani Branch on behalf of the second plaintiff from the rents collected for the 8 units.
  22. The first plaintiff and Mr 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.
  23. The first plaintiff had taken over from November, 1989. By that time it was almost impossible to discharge loan and interest which accrued from the non payments made by the first defendant in the previous twenty six (26) months from the rent taking. The first plaintiff tried to reduce the loan for six (6) months but each time the bank interest was increasing higher and higher.
  24. The ANZ Bank at 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.
  25. The first defendant who is the Director of the Second Defendant and who were both guarantors to the original mortgage loan of K530,000 and further K50,000 bidded to purchase the property on tender.
  26. The first and 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, and for which the first and second defendants were still guarantors and had the demised premises transferred by said bank to the second defendant. The property was registered under the name of the second defendant.
  27. Between November, 1987 to November 1989 and at material times the first defendant by collecting monthly rents on behalf of the first and second plaintiffs had failed to deposit the said rents into the second plaintiff’s bank account held at ANZ Bank at Waigani. The first defendant had therefore breached an implied terms of orgal agreement that all rents collected by the first defendant must be paid into ANZ Bank, Waigani on behalf of the second plaintiff and for its account.
  28. 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 with the memorandum of mortgage entered executed by both the first and second 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.
  29. By paying the sum of K750,000 to ANZ Bank by the first and second defendants as guarantors they had therefore discharged the original mortgage loan taken out under security of the second plaintiff. The property was therefore still vested with the second plaintiff. Any future sales to the first defendant or to the second defendant should have been negotiated by the first defendant and first plaintiff with one Mr Fong. The sale of the demised premises to the second defendant amounts to a breach of implied term of oral agreement that first and second defendants were guarantors.
  30. The first defendant had therefore intended and did commit serious breaches of the terms of contract either expressly or by implication amounting to misrepresentation and fraud.
  31. That the first plaintiff and second plaintiff therefore had suffered substantial damages in the following:

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?

  1. Since Tin Tan was doing everything we took it for granted that he would collect the money. Since he was collecting payments we accepted it. Rents were to be paid into Pelton Investments account.
  2. When was first rentals made
  3. First tenants moved in about October 1987.
  4. How much was rent?
  5. K450 a week per unit. K1.950 per month per unit. 8 units for K450 per week would be K15,800.
  6. Did he deposit any rentals to Pelton account?
  7. No.

Q. Did you check the bank?

  1. Yes I did get a bank statement. I found that the figures were all in the red.,,,,,,

In October of 1989 when I enquired about the financial affairs of Pelton Investments the loans were not repaid.

Q. Any deposits made at all?

  1. Only 2 deposits made after K14,300 deposited into the loan account. I took it that those were.
  2. In 1989 did you check both accounts?
  3. Yes.
  4. Any payments made?
  5. No.
  6. did you as director enquire about rental payments/
  7. Yes I did but every time I called him he was not there and when I left messages he never called
  8. Did you take over as manager?
  9. November 1989.
  10. Did you reduce the loan?
  11. Yes the monies were then transferred from cheque account to loan account. Interest kept escalating the principal loan was never reduced.
  12. Witness shown Post Courier – public notice.
  13. Why were you or Pelton not able to repay the loan?
  14. I was a Public Servant then and I was not really involved in the company. Tin Tan was given management and take care of loan at the time. I was never involved.
  15. Why was the loan not repaid?
  16. I do not know.
  17. Why was Pelton not getting money?
  18. Pelton could not make repayments because rents weren’t going into Pelton Investment Cheque account where in turn the monies would be taken out.
  19. When did Mr Tan stop?
  20. In 1989 when I took over Management of property.

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 Investments 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 to 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 K28,600.00 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 organised with Tamarua Real Estate to manage the property; a fact that him and Mr Fong did not know until later. Mr Pelis alleged Mr Tin Tan collected rentals from Tamarua Real Estate but did not bank it in the Pelton Accounts. He said as a result of non payment of the rentals with 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 findings in relation to paragraph 16. I concluded that the first defendant had collected the rentals from Tamarua Real Estate. 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 Investiments 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 rentals 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 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. 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 the rentals and that he did not deposit the rentals into the Pelton account the only reasonable conclusion I come up with is that he misappropriated Pelton’s 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 30 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. l 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, 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:-

The said Judgement 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 utilised 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 judgement in favour of the Plaintiffs in action WS No. 67 of 1993 who are the Defendants in this action.


The Plaintiffs’ evidence before this Court was based on that of Mr David Wardly the Provisional Liquidator appointed by the Court for TST Holdings. His investigation into the finances of that company and subsequent disclosure of a Westpac Bank account opened by Mr Pelis on 30th 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 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 Investments 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.


  1. My investigations show that from 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 of 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 that 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.
  2. I have been shown an assessment of the building costs of the project at Allotment 4 Section 9 Boroko by Craigie Kingston & Partners which verifies that the costs could not have been less than K580.000. I am informed by Mr Tin Tan and verily believe that Mr Tan paid architectural fees of K40,000, paid K15,000 to Tom Pelis for the purchase of the land, K120,000 for furniture fittings and white goods for each of the 8 units, paid K30,000 for the perimeter block wall fencing, paid K10,000 for the landscape and concrete drive, paid K20,000 for 2 swimming pools and paid K5,000 for legal costs in respect to the transaction. Accordingly, Mr Tan has provided to me evidence that he contributed K250,000 to the construction and equipping cost of the Pelton Investments property."

When this evidence was put to Mr Pelis he at first denied the realities of Mr Wardly findings but in th 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.


Relevant points of his evidence before this Court are as follows:


"Q. You opened your Westpac account on 29th December 1988 with the deposit of K7,800.

  1. That was from other monies from tenants.
  2. How did you get that money?
  3. Got those from letters I send to the tenants.
  4. But the K7,800.00 you got was from Pelton tenants?
  5. Yes.
  6. And it’s a multiple of 4 units at K1,950.00?
  7. Yes that right.
  8. From exhibit 3 page 10.9 and 11 (Transcript WS 67/93) you say TST collected rents to 1989 and bank them elsewhere. That was false.
  9. No.
  10. You never told Salika, J. you collected rents in 1988?
  11. It was an human error.
  12. You never told Salika, J. you collected rents in 1988?
  13. No.
  14. You told Salika, J. that you took over in November 1989?
  15. Yes,. what differences does that make
  16. K216,000 of rentals collected by you, you went to Court on the basis you only took over in November 1989 and prior to that TST collected everything and didn’t pay it to Pelton account but in fact paid it elsewhere?
  17. Yes.
  18. Paragraph 16 of the Statement of Claim no doubt about it that was your case?
  19. Could have been.
  20. Not could have been! Was!
  21. Yes.
  22. Claim was for rents for the whole of the period?
  23. Claim was made for what rentals have been paid to TST.
  24. You claimed he collected rentals for the whole of 1987 – 1989 even though you knew you collected rents yourself?
  25. At that time yes.
  26. All hearing before the judge went to support that contention?
  27. At that time yes.
  28. In the record of interview you had with the Police you said at Q. 42 that you took over in 1989?
  29. Yes.
  30. Even before the Police you were still maintaining that story?
  31. That was a lapse of memory.
  32. Was it also a lapse that caused you to forget about third account at the ANZ Bank.
  33. No.
  34. You also made no mention of the third ANZ Bank account?
  35. I took that the first account had been closed.
  36. You never mentioned it in examination in chief that a third account had been open in your evidence before Salika, J.?
  37. No.

Q, There were question about the loan and the bank account but it was not until a bank officer mentioned a third account that you were obliged to acknowledged a third account?

  1. I don’t recall.
  2. You do recall?
  3. When the first current account was closed and the third opened by me I assumed there was only one loan account and one current account. There is only two accounts.
  4. You were challenged in further evidence?
  5. Yes.
  6. You were ask by Mr Sheppard why you hadn’t told the Court of the third account?
  7. As I said after the current account for Pelton Investment was closed, the one I opened meant there was only two account.
  8. Exhibit 3 para 42 why didn’t you tell the Court of third account. You say that you didn’t think it was necessary?
  9. That’s true. Counsel didn’t elaborate which account was being referred to?
  10. You were referred to the specific loan and current accounts and asked about them?
  11. Yes.
  12. Page 12 of the transcript do you have any other bank statements? You said no that was a lie.
  13. No. As I said that account was not necessary at that time.
  14. What didn’t you tell the Court you had received rents and paid them into a rent account?
  15. there had been arrangement with the ANZ Bank that only K11,000.00 will go to that ANZ and rest will go Pelton Investments.
  16. When did you have discussions with Wilesmith of ANZ?
  17. I can’t recall. Soon after the first letter of demand.
  18. Was that May of 1989?
  19. It was in 1988.
  20. 1988, Do you have the notice of demand and when did you get the demand?
  21. It was after I notified the bank I was taking over.
  22. Bank gave you the notice of demand on the 28th of November 1989?
  23. That was a second notice.
  24. Your list of documents refers only to the demand of 28th November 1989?
  25. It was the second demand.
  26. There is no other demand discovered by you in this action, how much earlier was it?
  27. It was in 1988 as soon as directors meeting was called, I wrote to tenants and the bank advising me of change.
  28. Have you any copies of letter?
  29. My documents were lost when I was locked out at my office.
  30. You can’t identify the date of the first letter of demand?
  31. Yes.
  32. So Wilesmith who manager the ANZ Bank which gave you the letter of demand let you pay monies into another bank?
  33. Mr Tanove and I saw him and told him how we would finance the business. Wilesmith wrote saying K11,000.00 had to be put into Peltons account and whatever balance was to be used for maintenance could be kept.
  34. Pelton had K600,000.00 loan outstanding on current account what arrangement were made to pay up the No: 1 current account.
  35. K11,000.00 had to be paid into the current account.
  36. I thought you said K11,000.00 would pay off the loan account?
  37. K11,000.00 to go into the current account for the loan.
  38. Did you open the No. 3 account after your discussion with Wilsmith?
  39. I think it was before I saw Wilesmith.
  40. You opened it before seeing Mr Wilesmith?
  41. Yes.
  42. It was opened in May 1989 which is six months after you opened the Westpac account.
  43. I don’t know about that.
  44. If you open the third account before your discussions with Wilesmith and it was opened in May 1989 then it must be after that date.?
  45. I don’t understand the question.

Shown Exhibit 27 Statement of the Third Account with the ANZ Bank. These statements starts in May 1989 about the time you opened it.

  1. No, the account was opened earlier then that.
  2. Shown pages 2 – 6 of the ANZ Bank third account.?
  3. Yes I see that.
  4. Page two refers to the balance of the last statement of 3rd of May 1989 that is it must have been page 1.
  5. Yes it would be.
  6. If it was issued in May it would be reasonable that’s when the account started.
  7. Could be.
  8. You say your conversation with Wilesmith was after these, that is after the account was opened?
  9. I say it was before.
  10. How long before?
  11. I can’t say.
  12. March or April?
  13. Could be.
  14. Any thing to get you off the hook?
  15. No.
  16. I suggest the conversation with Wilesmith had nothing to do with the opening the Westpac account?
  17. No.
  18. Why did you go to Westpac?
  19. There were accounts on a day to day bases.
  20. The Liquidator has analysed all accounts, you’ve been in Court and heard what has had to say
  21. Yes I have.
  22. His analysed all the account. the ANZ Loan Account, the ANZ current account and Westpac and it is clear from December 1988 some payments were paid into ANZ current account till May of 1989, then after that to the second ANZ or that is the third current account.
  23. Did you bank monies into the loan account?
  24. Yes.
  25. No transfer of money was made by you or any one else from Westpac Bank account to the ANZ Bank account?
  26. Westpac bank account was purely to run for day to day expenses.
  27. Were there any transfers from Westpac to ANZ Bank?
  28. No.
  29. Wardley says over K108,000.00 in rent from Pelton Investments flats were paid into Westpac account.
  30. I agree. But not all the rentals came from that Pelton property.
  31. Exhibits 28 did you have an account with Westpac in the name of Pelton Real Estate?
  32. Yes.
  33. A separate account from Pelton Investments?
  34. Yes.
  35. Why were these additional payments then paid into the Pelton Investments Westpac Account? Did you have a trust account a licences?
  36. I didn’t have a licences but I treated the account as a trust account........
  37. Why was money put into Pelton account if it had nothing to do with Pelton Investment?
  38. It was for safe custody.
  39. Why not in Pelton Real Estate?
  40. It had other property. The person who owns that other property personally asked for safe custody
  41. I put to you that it was rental money from Pelton units.
  42. I say no .....
  43. There is an entry on 7th of April 1989 showing K1,950.00 rent from one of the units.
  44. Yes that’s correct.
  45. And again the next payment of K1.950.00 was on 23rd of February 1989?
  46. Yes.
  47. 19th of March 1989 another K1950,00?
  48. Yes I presume so.
  49. Next page 4th of April 1989 K3,900 rental?
  50. Yes.
  51. 18th of April 1989 K1950.00 Pelton Investment again?
  52. Yes.
  53. 12th April 1989 K3745.00 rental for Pelton
  54. Could be.
  55. 8th May K1950.00 Pelton?
  56. Yes.
  57. 5 July 1989 K1950.00 Pelton same day K600.00 Pelton?
  58. The K1950.00 yes and K600 is from Real Estate activities.......
  59. K3,900.00 rental Pelton July 1989?
  60. Yes.
  61. 4th August 1989 K1950.00 Pelton K8589 1970 Pelton?
  62. Yes to the first, second is or should be K1950.
  63. What was it for?
  64. Some of these deposits came in – I can’t recall them now. The obvious ones are the K1950 payments ....
  65. It is clear than that you have banked a substantial amount to the Westpac account?
  66. As I said before the rentals collected from Pelton were paid to ANZ for so much and rest to Westpac.
  67. Do you have any Westpac cheque butts?
  68. No unfortunately.
  69. We can see from the statement that they are all in small amounts and in round figures of K30 to K200?
  70. This was a running account for Pelton.
  71. Suggest to you that it was for your personal use?
  72. No.
  73. How do you explain that you never mentioned this account?
  74. It was not necessary. The money for the rental was paid into the ANZ account.
  75. You knew it was a major issue where the rents were going?
  76. Yes, it was a unlucky lapse by me.
  77. It meant judgement for millions against Mr Tin and TST Holdings?
  78. If I had said I had been collecting rentals since 1988 would it have made any difference?
  79. The fact concealed is the reason judgement was given?
  80. Yes that’s right.
  81. And you only put on K5,000.00 into this project?
  82. The house was only K15,000.00 under the home ownership scheme. A private value would have made it realise a lot more.
  83. You were in Court when the submissions were made?
  84. Yes.
  85. Did you see the written submissions before the Court or did Counsel discuss them with you?
  86. He may have question.
  87. You were there in Court though?
  88. Yes.
  89. In separate paragraph 2.1. "only K28,000.00 has been paid from 1987 to 1989 on loan" That was wrong wasn’t it – not less than K108,000 was paid into a secret Westpac account?
  90. It wasn’t a secret account.
  91. In 3.2 of Counsel’s submission for you, he states "the evidence of Tom Pelis was I discovered only two payments had ever been made since 1987, that was totally wrong wasn’t it?
  92. No.
  93. In paragraph 6.1 of the submissions your counsel submitted that between 1987 no rents were paid to Pelton Investments account at the ANZ Bank. That’s an error isn’t it, that error was perpetuated in your statement of claim, your evidence and in Counsel submissions and you never corrected it?
  94. No.
  95. Do you accept as a fact you collected a considerable amount of Pelton rents from the end of 1988.
  96. Yes, for Pelton Investments.
  97. And Mr Tin had nothing to do with collection of rent after November 1988 in any way.
  98. That’s so.
  99. Do you now accept you deposited a considerable amount money to Westpac account to which you and your wife was the only signatories.
  100. My wife shouldn’t be involved in this she was just a signatory, there was another signatory, Tom Hihi.
  101. Do I take it you were signatory to that account?
  102. I never signed the loan, Tom Hihi also signed.
  103. You never disclosed your Westpac account to Mr Tin?
  104. No.
  105. Nor did your disclose it to your Counsel?
  106. He was aware of it but it was not disclosed because it was not necessary.
  107. No one has asked. But if they had you would have said yes?
  108. Yes.
  109. But if they didn’t know you weren’t about to let on?
  110. Why would I.
  111. The whole of the case before Salika, J. was a fraud because you knew that the claim was not correct.
  112. No.

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 emphasise the conclusiveness of the Plaintiffs’ 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 (not less than K108,000) 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 Bank 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 Investments rentals was 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.


Lawyer for the 1st & 2nd Plaintiffs - Henaos Lawyers
Lawyer for the 1st & 2nd Defendants - JF Aisa & Associates

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