Porgera Freighters Ltd v Bank of South Pacific Ltd [2004] PGNC 119; N2662 (8 October 2004)

N2662

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE AT LAE]

WS NO. 553 OF 2003

Between:

PORGERA FREIGHTERS LIMITED
-Plaintiff-

And:

BANK OF SOUTH PACIFIC LIMITED
-First Defendant-

And:

JACK LUKE
-Second Defendant-

And:

MAPAI LIMITED
-Third Defendant-

Waigani: Injia, DCJ
2004: April 28th
October 8th

CIVIL – PRACTICE AND PROCEDURE – Summary judgment on liability for damages to be assessed -Claim based on fraud – Judgment entered inter partes – Judgment entered by another judge – On trial on amount of damages before another judge - Judgment irregularly entered – Part-heard assessment of damages declared mistrial – Parties to seek judicial review of irregular judgment.

Counsel:
A. Baniamai for the Plaintiff
I. Vere for the Defendant

8th October 2004

Injia, DCJ: This is a trial on assessment of damages following entry of summary judgment for damages to be assessed in relation to part of the Plaintiff’s claim in the sum of K290,086.25 by another judge at Waigani During the trial, the issue was raised by the defendants’ counsel as to whether the summary judgment conclusively determined the issue of liability. This was in the context of the defendants’ cross-examination of the plaintiff’s Managing Director Mr Yanis Polopa on matters pertinent to the issue of liability in respect of the claim for this amount. Both parties made written and oral submissions before me on the issue. I have read them and considered them.

The Plaintiff’s claim pleaded in the Statement of Claim is as follows. The Plaintiff claims damages for breach of a Management Contract Agreement between the Plaintiff and the Second and Third Defendants. The Plaintiff was involved in the business of trucking services. It won a Contract with Placer (PNG) Ltd ("Placer") to freight supplies for various locations to Porgera. The payments made by Placer were to be collected by the Second and Third Defendants.

The Second Defendant is the Managing Director of the Third Defendant. The Second and Third Defendants were then to open a joint bank account with PNGBC at Mt Hagen where the payments would be paid into. The Account was to "facilitate the receipt of payments for services rendered and the settlement of debts owing by the Plaintiff". The account was opened immediately. The Second and Third Defendants received three lots of payment from Placer in cheques payable to the Plaintiff, totalling K54,958.38 plus other amounts totalling K290,086.25. The particulars of the three (3) cheques for K54,958.38 were pleaded whereas the particulars of the K290,086.25 were not. In para 9 of the Statement of Claim, it is pleaded that in breach of the agreement, the Second and Third Defendants received the cheques made in favour of the Plaintiff, had the same deposited into the "Plaintiff’s" account, then raised cheques against the "Plaintiff’s" account and paid them into the Third Defendant’s bank account and used them without the knowledge and consent of the Plaintiff.

Subsequently, when the actions of the Second and Third Defendants came to the Plaintiff’s knowledge, a meeting was convened between the Plaintiff and the Defendants which resulted in a new account being opened for the Plaintiff and the Management Agreement was terminated. Even after this, the Second and Third Defendants retained cheques payable to the Plaintiff and continued to have them paid into the Plaintiff’s account and cheques made out and paid into the Third Defendant’s account.

The Plaintiff alleged fraud on the part of the Second and Third Defendants. The Plaintiff also claimed fraud and negligence on the part of the First Defendant in facilitating the fraudulent transactions and breached its duty to protect and safeguard the Plaintiff’s interest. In para 11 of the Statement of Claim, the Plaintiff pleads particular of breach of duty as follows:

"Particulars of failure of duty.

(a) At all material times, the officer of the First Defendant were parties to the fraudulent transactions described under para 9 above.

(b) At all material times, the officers of the First Defendant were aware of the actions of the Second and Third Defendants but failed to notify the Plaintiff until after the sum of K290,086.25 was removed from the Plaintiff’s account.

(c) At all material times, the officers of the First Defendant failed to ascertain from the Plaintiff whether the transactions described under paragraph 9 above were done with the knowledge and approval of the Plaintiff."

In para 23 of the Statement of Claim, the Plaintiff pleads:

"as a result of the negligence of the Defendants and fraud deemed in paragraphs 21 – 22," the Plaintiff lost further sum of K54,958.38."

On 6 August 2003, the Plaintiff applied for summary judgment against the "Defendants or alternatively against the First Defendant only". His Honour, in granting the summary judgment against the First Defendant only, said as follows:-

"His Honour: All right. So summary judgment by consent, or unopposed for the Plaintiff in the sum of K54,958.38. The balance of that will go for assessment of damages. ...

"His Honour: Yes, that is against the First Defendant. Once again summary judgment for the Plaintiff as against the First Defendant in the sum of K54,958.38. That is also summary judgment on liability against the First Defendant in relation to the other arguments of the Plaintiff’s claim but it will go to an assessment of damages."

In my view, the claim is primarily based on fraud on the part of the First Defendant’s officers and the Second and Third Defendants. The question is whether summary judgment is available in an action based on fraud. This issue was not addressed before me by both counsels in the present case but I do not consider it necessary to hear from counsels because the rules of court and principles are clear. The summary procedure in Order 12 rule 38 is applicable in an action based on fraud: see Order 12 r 37 of the National Court Rules; Kappo No. 5 Pty Ltd v Wong [1998] PNGLR 544.

In my view, it was not open for His Honour to enter summary judgment on liability in respect of both amounts, as they were both based on fraud. The issue of fraud must be proved and established before the Court can assess damages.

The evidence given so far by the Plaintiff’s Managing Director Mr Polopa, shows some evidence of fraud. Cheques were issued in the name of the Plaintiff. The payee is described as "Pogera Freighters Pty Ltd In Mapin Pty Ltd, P.O. Box 1318 Mt. Hagen, WHP." The cheques are "not negotiable" cheques. How the cheques paid into the Plaintiff’s bank account by the Third Defendant and the monies used by him raises questions of fraud, on the part of the Second and Third Defendants first and foremost and also on the part of the bank’s officials. These are matters of fact which require proof. All parties including the Second and Third Defendants may have to explain. The Plaintiff too should explain because the Second and Third Defendants are not complete strangers – they were introduced into the banking transactions by the Plaintiff under the Management Agreement. Since the Plaintiff has discontinued proceedings against the Second and Third Defendants, they may be required to give evidence by either party. When the issue of fraud is still outstanding, summary judgment should not have been entered against the First Defendant.

I accept Mr Baniamai’s submission on the general principle that when the issue of liability has been settled by a summary judgment, the case on liability cannot be re-opened: Dep. International Private Ltd v Ambogo Sawmil Ltd [1987] PNGLR 117. But it is a general principle which is subject to the proviso that the issue of liability must be properly determined. In the present case, the issue of fraud was not considered by His Honour perhaps because it was not pointed out to him by both counsel. The pleadings were also not adverted to by His Honour. I am satisfied that the issue of liability was not properly determined.

In these circumstances, in the exercise of my discretion I decline to proceed further with assessment of damages. I declare the trial on assessment of damages so far before me a mistrial. But I do not think I have the jurisdiction to quash or set aside the judgment of His Honour because it was made inter partes and the judgment took effect already.

I also accept Mr Baniamai’s submission that the proper avenue for the First Defendant to adopt was to appeal against the decision to quash the summary judgment. But the time limited for appeal has already expired. Alternatively, since the First Defendant has lost his appeal rights, it may consider seeking judicial review of His Honour’s decision. I suppose this could be avoided if parties opted to settle on an order setting aside His Honour’s decision and proceed with the trial on the issue of liability and damages. In relation to costs, I order that each party bear their own costs of the proceedings before me.
_______________________________________________________
Lawyer for the Plaintiff : Stevens Lawyers
Lawyer for the First Defendant :