Poia v Australia & New Zealand Banking Group (PNG) Ltd [2001] PGNC 146; N2049 (12 January 2001)

N2049
PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS 1046 of 1995

BETWEEN

MATHEW POIA

First Plaintiff

AND

AMATO ALIK for and on behalf of
RAVARIAOL/JAMEN CLAN

Second Plaintiff

AND

MICHAEL UAIZ for and on behalf of

KOEFA/INAPEL CLAN

Third Plaintiff

AND

AUSTRALIA & NEW ZEALAND BANKING GROUP (PNG) LTD

Defendant

Waigani : Sevua, J
2000 : 7th November
2001 : 12th January

BANKERS – Money in Trust Account – Payment of money from Trust Account – Fiduciary relationship – Whether bank breached fiduciary duty.

EQUITY – Fiduciary relationship – Trusts – What is a Trust – Essence of Trust – Fiduciary’s duty or obligation – Principles of Trust and Fiduciary relationship.

Counsel:
S. Soi for Plaintiffs
D. Lightfoot for Defendant

SEVUA, J : The plaintiffs are claiming the sum of K33,700.00, and damages for breach of fiduciary duty in respect of the amount now claimed which was held in a Trust Account by the defendant.

The facts are these. Sometimes in January, 1994, the then Post and Telecommunications Corporation purchased land known as "Zarima" or Mt Yule from its traditional owners at Goilala District, Central Province for a Repeater Station. On 11th January, 1994, a cheque for the sum of K33,700.00 was deposited into an account styled "Zarima Landowners Trust Account", No. 38-591248-30, at the Port Moresby Branch of the defendant bank. The account was operated by Mathew Poia, Chairman, Amato Aliki, Vice Chairman, and Gizoria Uaiz, Secretary. After the account was opened, a dispute arose amongst the landowners as to who was entitled to the money.

In late February, 1994, the authorised signatories to the account were changed. On March, 1994, the defendant’s Port Moresby Branch closed the account and paid the money out to Zarima Landowners. A new account was opened at the defendant’s Waigani Branch where the money was deposited, but operated by a different group of landowners. It seems that the money had since been paid out to various landowners on various dates.

The plaintiffs therefore brought this action against the bank claiming that the bank had breached its fiduciary duty by paying the money out without their express authority.

The plaintiffs’ evidence is this. Negotiations between Post and Telecommunications Corporation and the landowners in respect of the purchase of Zarima Land or Mt Yule, for Post and Telecommunication Corporation to construct a Repeater Station, occurred in 1977 and 1978. A land investigation had been carried out to identify the land and its customary owners. On 2nd November, 1978, the Government paid the sum of K250.00 for the land, however, the purchase documents never reached the Department of Lands. Following that payment, more landowners were laying claims for ownership and compensation.

In 1993, another land investigation was carried out by Department of Lands and Physical Planning. It was revealed that eight (8) clans jointly owned the Mt Yule Repeater site. The eight clan leaders who were selected to present their claims in this matter were Mathew Poia, Aliki Amato, Francis Amapia, Abel Amanea, Aeoliau Ianau, Michael Uaiz, Amapia Donai and Andrew Atei. There was no dispute then as to ownership between those clans.

The relevant purchase documents and the payment were executed on 10th January, 1994. The documents were executed by the representatives of the eight clans. On 29th January, 1994, a cheque for the sum of K33,700.00 being payment for the Mt Yule land was collected by the landowners representatives.

On 11th January, 1994, an account styled, "Zarima Landowners Trust Account" was opened at the Port Moresby Branch of the defendant. The cheque for the sum of K33,700.00 was deposited into that account, being number 38-591248-30. The signatories to the account were the plaintiffs. After that transaction, a group of landowners led by Abel Amanea began to dispute the ownership of the Mt Yule land. Attempts to resolve the dispute between the landowners did not succeed.

On 23rd March, 1994, the defendant’s Branch in Port Moresby released the sum of K33,700.00 to the group led by Abel Amanea, who opened a new account at the defendant's Branch at Waigani and deposited the money into. It is alleged that this money has been misappropriated by Abel Amanea and his group, but that is not the issue before this Court.

In essence that is the case for the plaintiffs. I have purposely excluded in this judgment, reference to evidence of a land mediation at Kwikila and other competing interests as to ownership and entitlements to the sum of K33,700.00. The reason for this is simple, these matters are not relevant to the issue before this Court, as the Court is not dealing with customary ownership of Mt Yule land.

The defendant’s evidence is as follows. On January 28, 1994, Bank of Papua New Guinea cheque number 66045 in the sum of K33,700.00 was deposited into the defendant’s Port Moresby Branch, account number 591248 by the first plaintiff. The account was styled "Zarima Landowners Trust Account". The three plaintiffs were signatories to that account. The money was payment from Post and Telecommunications Corporation to Zarima landowners for the Mt Yule Repeater Station land.

Following the opening of the account, various groups disputed entitlement to the money. On 24th February, 1994, the signatories to the account were changed. Messrs Korui Zarumai, Abel Amanea, Jahae Dominic Moina, Arao Abel Zarimai, John Aisi, Peter Haniaman and Peter Zarumai became the new signatories to the account. On 3rd March, 1994, the plaintiffs together with other landowners attended at the bank. After discussions with the defendant’s accountant, Mr Bumalom, as to who should be the recognised signatories to the account, an argument developed between the landowners.

On 23rd March, 1994, the defendant closed the account and drew a bank cheque in the sum of K33,700.00 payable to "Zarima Landowners". The cheque was deposited into a new account, No. 131501, at the defendant’s Waigani Branch the same day. That account was styled, "Zarima Landowner Group". The signatories to that account were Peter Aelai (Clan leader), Abel Arao Zarumai (Clan leader), Korui Zarumai (Chairman), Abel Amanea (Secretary) and John Aisi (Vice Chairman).

Between 24th March, 1994 and 14th October, 1993, various amounts were drawn from the Waigani account. The account was closed on 10th October, 1994 when the sum of K26,060.76 was withdrawn.

Apart from the dispute as to the authenticity of the Kwikila Local Land Court Order and the actual proceedings in that Court, which I have not canvassed, I accept the evidence of both the plaintiffs and the defendant. In essence, the evidence which I have canvassed are quite consistent. As I alluded to earlier, the ownership of Mt Yule land is not the issue here, therefore the Court is not concerned with the dispute regarding ownership between the plaintiffs and the other landowners.

The issue before this Court is one of law, that is, whether the defendant has breached its fiduciary duty to the plaintiffs. If I find that the defendant has breached its fiduciary duty, the plaintiffs will be entitled to damages. On the contrary, if I find that there has been no breach, the plaintiffs will not be entitled to any damages.

At this juncture, I should say that, perhaps, the defendant’s Branch in Port Moresby should not have acted the way it did, whilst the disagreement as to who should be the authorised signatories, was not yet resolved. It would have been prudent for the defendant to refrain from dealing with the money in Account 38-591248-30. But that is not to say that it released the money without authority, depending on who has authority to operate the account.

I can see where the plaintiffs are coming from. They claimed they represented the eight clans who owned the Repeater site at Mt Yule, thus they were the authorised signatories to the account conducted at the Port Moresby Branch of the defendant. There is no dispute that the plaintiffs held the money in trust for the traditional landowners. The style of the account clearly confirms this. The money was held in a Trust Account. It therefore involves a trust.

On the other hand, the defendant is saying, it acted in good faith in closing the account and paying the money out to the landowners. The authority came from the landowners led by Abel Amanea.

Having heard submissions from both counsel, I do not think the facts are really in dispute, although the plaintiffs’ counsel submitted that the Court should not accept the facts relied upon by the defendant. I see no difficulty in the facts as substantiated by the evidence of both parties and I see no need to highlight any particular facts.

In order to determine if the defendant had breached its fiduciary duty, I consider that it is necessary to appreciate the law in respect of the nature and structure of trusts, the different types of trusts and the principle of fiduciary relationship, even if I only refer to these aspects briefly.

As to the nature of the structure of trusts, trusts are ancient devices (going back to the 19th century) originally providing for the preservation of family assets, avoidance of taxes and maintenance of widows and orphans. Their revival in modern business law is in fact consistent with their original use, and tax planning and limitation of legal liability to creditors.

There are different classification of trusts but in general, trusts, inclusive of family trusts and trading trusts can be classified as express and non-express trusts and private and public trusts. Some examples of express trust are; discretionary trusts, fixed trusts, executed trusts, executory trust, etc, etc. Non-express trusts examples are implied trust, resulting trust, constructive trust etc. Private trusts are basically trusts established for the benefit of private individuals, which may be express or non-express. Public trusts are those that benefit public purposes or public welfare such as a trust for the benefit of specific charitable institutions.

Some texts which are relevant in understanding the various trusts are: Pettit, P.H., Equity and the Law of Trusts, London, Butterworths, 5th ed. 1984; Parker, D.B; and Mellows, A.R., The Modern Law of Trusts, London, Sweet and Maxwell; 5th ed. 1983; Meagher, R.P., and Gummow, W.M.C., Jacobs Law of Trusts in Australia; Sydney, Butterworths, 5th ed. 1986.

I think for our purpose, we need to see what definition is relevant to trusts. A trust is an obligation contained in a relationship whereby a person called the Trustee, holds property transferred by another person called the settlor, for the benefit of, or in trust for other persons known as beneficiaries. Perhaps the definition in the Principles of Law of Trusts, Ford, H.A.J; Sydney, The Law Book Co., 1983 at p.3, will assist. There the learned author says:

"A trust may be defined as an obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of another person (the beneficiary) or for the advancement of certain purposes....a trustee may be one of several beneficiaries or a beneficiary may be one of several trustees."

A trust then involves a fiduciary relationship in which the trustee is the holder of an interest in property, but is subject to an equitable obligation to use or to keep that property for the benefit of the beneficiaries. The CCH Macquarie Concise Dictionary of Modern Law defines "fiduciary" as:-

"a person occupying a position of trust vis-à-vis another person, such that he/she is bound in equity not to abuse that trust by making unauthorized profits by virtue of his/her position or by allowing self interest to conflict with duty. It is well settled that trustees owe a fiduciary duty to beneficiaries.........."

The essence of the trust therefore is the fiduciary relationship, that is, the relationship between the trustee and the beneficiary. The trustee is accordingly bound to exercise rights and powers and to act in good faith and in the interest of the beneficiaries. This means that the trustee has a duty of confidence, honesty and responsibility to act for the benefit of the beneficiary. This fiduciary relationship is breached if the trustee acts for his own advantage or for the advantage of a person or persons who are not beneficiaries where the action of the trustee results in some disadvantage to, or detriment suffered by the beneficiaries. A court of equity would not permit a person in a fiduciary position to make a personal profit or to be placed in a conflict of interest situation.

Given that brief summation of the legal position on trusts and fiduciary relationship, I now turn to the submissions made by both counsel in this case.

If I understood Mr Lightfoot correctly, he submitted that the defendant bank has not breached its fiduciary duty to the landowners. He also submitted that the defendant has not acted negligently, but in accordance with its duty to the beneficiaries when it paid out the sum of K33,700.00. He asked, if the defendant was considered negligent, what wrong has the defendant done and what is the loss or damage caused to the plaintiffs.

The defendant submitted that the payment of the money to the beneficiaries led by Abel Amanea was made in accordance with the decision of the Kwikila Local Land Court given on 17th August, 1994, which the defendant was advised of. Furthermore, the bank seemed to have acted in accordance with the "authority to operate", which contained the names and signatories of Peter Aelai Zarumai, Abel Arau Zarumai, Korui Zarumai, Abel Amanea and John Aisi, who in that document, described themselves as executives of the Zarima Landowner Group.

Mr Soi, counsel for the plaintiff submitted that the defendant owed a duty of care to the plaintiffs. Such a duty was to take care of the interests of the plaintiffs. Due to its negligence, the defendant allowed monies to be siphoned out of the passbook account. He therefore submitted that the defendant had breached its fiduciary duty to the plaintiffs, therefore the plaintiffs have suffered loss in the sum of K33,700.00.

I consider that the principles in relation to trusts and fiduciary relationship that I have briefly adverted to, do not support the position taken by the plaintiffs. I am of the view that the plaintiffs are the trustee of the Zarimai Landowners, who were the beneficiaries of the sum of K33,700.00, the trust property. The defendant is not the trustee of the plaintiffs in that sense. The plaintiffs therefore have an obligation to the Zarimai landowners. That obligation stems from the principles that I have alluded to.

Likewise, I consider that the other group of landowners led by Abel Amanea are in the same position as the plaintiffs. They are the trustee of the K33,700.00 and they hold such money in trust for the benefit of the Zarima landowners. They too have that obligation to the landowners who are the beneficiaries.

Mason, J in Hospital Products Ltd v. United States Surgical Corporation [1984] HCA 64; (1984) 58 ALJR 587 at 608; (1985) 59 ALJ 670, said:

"The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense...."

However, the fiduciary relationship is not limited to the relationship which exists between the trustee and the beneficiary. It is also applicable (though different) in the relationship between principal and agent, eg. solicitor/client, accountant/client, bank/client; between the company promoter and the company.

In Lawson & Ors v. The Commercial Bank of South Australia Limited, [1888] SALawRp 18; (1888) 22 SALR 74, the Full Court of the Supreme Court of South Australia held per curiam:

"Bankers are not justified in paying to one of two or more trustee depositors money deposited by all of them as such trustees without the consent of the other trustee or trustees to such payment."

That decision is authority for the propositions that: (a) a bank may not pay to one of several trustees moneys deposited by all of them without the consent of the others; (b) a bank that pays a trustee’s cheques, knowing that they are drawn in breach of trust, will be liable to the beneficiaries of the trust; any benefit to the bank arising from an alleged breach of trust is cogent evidence of the bank’s privity to the breach.

The principle enunciated in that case is very good law and I agree with it. However, the facts of the present case take this case outside of the principle and therefore the principle is not applicable.

I am saying, I am not discounting the fact that a bank can be a trustee or a fiduciary therefore having a fiduciary relationship with its clients. The defendant bank can also be the trustee of the money in question. However, in my view, the facts are such that the defendant could not be held liable in damages to the plaintiffs for breach of a fiduciary duty.

I think the problem in this case really is with the landowners. It is a dispute which relates to who are the true landowners and who should be the authorised signatories to the landowners’ account. These disputes are not matters that can be adjudicated in this Court, as it is not the appropriate forum. At the end of the day, it is the landowners who receive the money from the defendant. If there were to be any claim for breach of a fiduciary duty, a claim should be made against Abel Amanea and his group, not the defendant. Accordingly, I find that the defendant is not liable in damages for breach of a fiduciary duty.

The plaintiff’s claim is therefore dismissed with costs.

In respect of Mr Lightfoot’s submission that the second plaintiff’s claim against the defendant should be dismissed and the plaintiff’s lawyer pay the defendant’s costs because the second defendant had died prior to issuing the writ, I consider that an order is not necessary in the light of the conclusion I have reached.
___________________________________________________________________________
Lawyer for Plaintiffs : Soi & Associates
Lawyer for Defendants : Pacific Legal Group