Lama v NDB Investments Ltd [2014] PGNC 249; N5970 (7 July 2014)

N5970

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 858 of 2011

BETWEEN:

JIMMY LAMA & LILLY LAMA
First Plaintiff

AND:

BIBRA TRADING LIMITED
Second Plaintiff

AND:

NDB INVESTMENTS LIMITED
First Defendant

AND:

NATIONAL DEVELOPMENT
BANK LIMITED
Second Defendant

Waigani: Hartshorn J.
2013: 22nd October,
2014: 7th July

Trial

Cases cited:

PNGBC v. Barra Amevo [1998] PNGLR 240
John Manau v. Telikom (PNG) Ltd (2011) SC1146
Soka Toligai v. Julius Chan and Anor (2012) N4842

Counsel:

Mr. T. Tingnni, for the Plaintiffs
Mr. I. R. Shepherd, for the Defendants

7th July, 2014

1. HARTSHORN J: The first plaintiffs Mr. and Mrs. Jimmy and Lilly Lama, were operating a trade store in Madang under the "Stret Pasin Stoa" Scheme (SPS Scheme). This scheme was supervised by Retail Management Services Ltd (RMS). The property in which the trade store was located was owned by the second plaintiff Bibra Trading Ltd. Pursuant to the SPS Scheme, Mr. and Mrs. Lama were to repay a loan that was advanced by the second defendant the National Development Bank Ltd (NDB) to Bibra Trading.

2. Mr. and Mrs. Lama claim that in or about August 2005, Bibra Trading was alleged to be in arrears on its payments to NDB and the property was advertised for sale by tender. The property was then withdrawn from tender when the Lamas' claim they borrowed from Mr. Abanam Wadau, a relative by marriage, and paid K100,000 in September 2005 in settlement of the amount owing by Bibra Trading to NDB. The mortgage to NDB was then discharged and ownership of the property remained with Bibra Trading.

3. The Lamas' further claim however, that in April 2008 the defendants NDB Investments Ltd (NDBIL) and NDB, released the owner's copy of the title to the property to Abanam Wadau who subsequently changed the ownership of the property from Bibra Trading.

4. The plaintiffs, the Lamas and Bibra Trading, claim a breach of contract. They also claim that NDBIL and NDB were negligent in the management of the loan account of the Lamas and Bibra Trading and in releasing the title to the property to Abanam Wadau, and that they have suffered significant losses as a consequence. General, special and exemplary damages are sought.

5. NDBIL and NDB contend that:

a) RMS was an entity that is now deregistered. NDBIL was never known as RMS and is a separate legal entity. Any action based upon a breach of contract made between the plaintiffs' and RMS in either 1994 or May 1996 must fail.

b) there is no evidence that NDBIL entered into any agreement with the plaintiffs or that it held shares in or was a subsidiary of RMS.

c) NDBIL and NDB were not parties to either the 1994 or the 1996 contracts and so pursuant to the doctrine of privity of contract they are not liable.

d) as to the claims in negligence, NDBIL and NDB deny that they were negligent. They contend that there was a family arrangement in or about September 2005 between the Lamas and Abanam Wadau. Abanam Wadau was to take ownership of the property either in his own right or as owner of the shares in Bibra Trading in consideration for his K100,000 payment. Pursuant to this arrangement, NDB did transfer the shares in Bibra Trading to Abanam Wadau and did release the title to the property to him.

e) as Jimmy Lama wanted the property, he then fraudulently transferred the shares in Bibra Trading back to himself before realising that Abanam Wadau had title to the property and not Bibra Trading

f) there are no financial statements or other records produced to substantiate any claim for mismanagement of the plaintiffs' account and no evidence of an independent expert to support such a claim.

6. The plaintiffs' submit that there are three legal issues raised:

a) whether or not there was a contract between the plaintiffs and defendants?

b) if there was a contract, was there any breach of it?

c) was there negligence in the performance of the contract by the defendants?

Whether there was a contract between the plaintiffs and defendants

7. The plaintiffs' submit that there was an agreement dated 30th November 1994 between Jimmy Lama and RMS. What is pleaded though is that there was an agreement in or about May 1996 with NDBIL and the Lamas. The plaintiffs' further plead that the name of NDBIL was changed from RMS to NDBIL. This is denied by NDBIL and NDB. Further, NDBIL denies entering into an agreement with the plaintiffs in May 1996.

8. RMS is not a party to this proceeding. Pursuant to evidence tendered on behalf of NDBIL and NDB, a current extract from the Register of Companies merely records RMS but nothing more apart from a company number 7-2025. RMS has no shares, shareholders, directors, addresses or charges. A current extract for NDBIL records that its company number is 1-6129, that it was incorporated and registered on 4th May 1976, and that its previous name was NDB Investments Limited. This evidence is not rebutted.

9. I am satisfied that NDBIL did not change its name from RMS and that NDBIL and RMS are separate entities, if indeed RMS continues to exist.

10. Given this, there is no evidence before the court that NDBIL entered into any contract with the plaintiffs. Consequently any action of the plaintiffs for breach of contract against NDBIL, whether it be a contract in 1994 or May 1996, must fail.

11. There is also no evidence that NDB entered into any such contracts with the plaintiffs and so any claim for breach of contract against NDB, if indeed there is such a claim made, which is not clear from the pleading, whether it be a contract in 1994 or May 1996, must fail.

12. Further, although it was not specifically raised on behalf of the plaintiffs, I agree with counsel for NDBIL and NDB that if the "corporate veil" was lifted in an attempt to make NDB liable as a shareholder of NDBIL, this would not be successful as there is no evidence that NDBIL entered into any contract with the plaintiffs or that it held shares or was a subsidiary of RMS.

13. In addition, as neither NDBIL nor NDB were parties to either the 1994 or May 1996 contracts, the doctrine of privity of contract would preclude any action against them. In this regard I refer to the cases of PNGBC v. Barra Amevo [1998] PNGLR 240, John Manau v. Telikom (PNG) Ltd (2011) SC1146 and Soka Toligai v. Julius Chan and Anor (2012) N4842.

14. As I have found that there was no contract as claimed between the plaintiffs and defendants, it is not necessary to consider the second legal issue that the plaintiffs' submit is raised.

Was there negligence by the defendants?

15. The third legal issue, submit the plaintiffs' is whether there was any negligence in the performance of the contract by the defendants? As I have found that was no contract as claimed between the plaintiffs' and defendants', there could not be negligence in its performance.

16. I will however consider the plaintiffs' claims of negligence that are pleaded in respect of the title to the property and for allegedly failing to keep records.

17. In respect of the title to the property, the plaintiffs' plead that the defendants' were negligent in releasing the owners copy of the title deed of the property to unknown persons, (who are named) without consulting the plaintiffs'.

18. NDB contends that it did release the title to Abanam Wadau and also did transfer the shares in Bibra Trading to him. The evidence of Ms. Maryanne Uraiwa, a branch manager of NDB, tendered on behalf of the defendants' without objection by counsel for the plaintiffs' is that amongst others, on 22nd April 2008, the title was released to Abanam Wadau, who is now deceased, who Ms. Uraiwa understands was related by marriage to Jimmy Lama. Annexed to her affidavit is an executed contract of sale and an executed Department of Lands Transfer between Bibra Trading and Abanam Wadau to the effect that the property was sold to Abanam Wadau for K100,000.

19. In cross-examination, after initially denying the fact, Jimmy Lama confirmed that the signatures on the contract and the transfer on behalf of Bibra Trading were his. He also stated that the Bank got him to sign.

20. At this juncture, I refer to the affidavit of Young Wadau sworn 29th May 2013 and filed on behalf of the defendants. Counsel for the plaintiffs' objected to its use pursuant to s. 35 (2) Evidence Act and notice of the objection had been given. I reserved my decision on whether this affidavit would be allowed into evidence.

21. Objection was taken to the affidavit on the ground that most of it was hearsay. Counsel for the defendants' conceded that some of the affidavit was hearsay. He further submitted however that the affidavit should be allowed as one of the annexures to it was a copy of an affidavit of Abanam Wadau deceased in another National Court proceeding. The content of that affidavit was relevant to this proceeding and it was the best evidence available of a relevant meeting. Further, s. 44 Evidence Act permitted such evidence. Counsel for the plaintiffs' submitted that the evidence should have been given by Ms. Charity Wadau as Ms. Wadau had transferred title to the property. Counsel for the plaintiffs' did not make any submissions concerning s. 44 Evidence Act.

22. Section 44 (b) and (d) Evidence Act relevantly provide that evidence of an affidavit, pleading or legal document filed in a Court of Papua New Guinea may be given in a Court by the production of a document purporting to be a copy of it and (d), purporting to be sealed with the seal of the court.

23. In this instance, the annexure that purports to be the affidavit of Abanam Wadau is filed in proceeding OS 307 of 2006 National Court Madang and has a seal of the National Court of Madang affixed. There is also a filing stamp dated 11th May 2006. I am satisfied that the affidavit of Abanam Wadau meets the requirements of s. 44 (b) and (d) Evidence Act.

24. I also take into account a common law exception to the hearsay rule that where a witness is dead, it may be better to admit evidence of what he said than to deprive the court of all proof: Phipson on Evidence 16th ed para 30-47.

25. As to the submission that Ms. Charity Wadau should be the one to give evidence, Ms. Charity Wadau was not at the meeting deposed to by Abanam Wadau. Given that Abanam Wadau has died, that from a perusal of his affidavit, the content of it is relevant to issues in this proceeding, that it is the best evidence of Abanam Wadau's recollection of events to which he deposes and that it meets the requirements of s. 44 (b) and (d) Evidence Act, I will allow it into evidence. As to the affidavit of Young Wadau I will allow it into evidence apart from paragraphs 10, 12, 13 and 15 and apart from the other affidavit that is annexed, on the basis that I will decide what weight if any should be given to the evidence contained therein.

26. The evidence of Abanam Wadau deceased is that Jimmy Lama agreed with him that if he paid K100,000, then the title of the property would be transferred to him. Further, that there was a meeting at the Head Office of the Rural Development Bank (a previous name of NDB), between various persons including Abanam Wadau, Jimmy Lama and the then Managing Director of the Rural Development Bank, Richard Maru. At the meeting, Richard Maru agreed to reduce the debt owing of K113,000 to K100,000 by Bibra Trading on payment of a bank cheque of K100,000 and on payment of that bank cheque, Richard Maru agreed to the transfer of the land to Abanam Wadau and his wife following the verbal agreement to this effect between Abanam Wadau and Jimmy Lama.

27. Given this evidence and that of Ms. Uraiwa, I am satisfied that there was an agreement between Jimmy Lama and Abanam Wadau for the property to be transferred to Abanam Wadau upon payment by him of K100,000. This was agreed to by NDB by its then Managing Director and this is what occurred. In such circumstances, I am not satisfied that NDBIL and NDB were negligent in releasing the title to Abanam Wadau as they did.

28. As to the plaintiffs' claim that the defendants' failed to keep records, there are no financial statements or other records in evidence to substantiate any claim for mismanagement of the account of the plaintiffs' and no evidence of any independent expert to support such a claim.

29. The plaintiffs' sue NDBIL and NDB for damages. From a perusal and consideration of the evidence given on behalf of the plaintiffs' I agree with the submissions of counsel for NDBIL and NDB that:

a) the plaintiffs' claim approximately K80,000 "overpayment" plus interest. It is not clear though how this amount has been calculated. Jimmy Lama refers to him only drawing down K30,000 of a loan of K50,000. This means that he only borrowed K30,000 and not K50,000.

b) Jimmy Lama claims K100,000 being the amount which was paid by Abanam Wadau in 2005 and he claims interest on that amount. There is no explanation however as to why he should be entitled to this money.

c) the plaintiffs' claim "loss of private enjoyment of the property". The plaintiffs' however do not own the property and I have found that there was the agreement that it be transferred to Abanam Wadau and his wife.

d) the plaintiffs' claim loss of salary without any explanation and without any documentary support for such a claim.

e) the plaintiffs' claim damages for stress without any medical evidence or any other evidence to support such a claim.

f) the plaintiffs' claim loss of business without any financial statements, income tax returns or any other evidence to support such a claim.

g) the plaintiffs' also claim the current value of the property, although there is no basis for any such claim. Any claim that the plaintiffs' may have concerning the property is against the Wadaus' for presumably, breach of contract, if it is alleged that the agreement with them was breached.

h) it is the case that almost all of these claims have not been properly pleaded with full particulars and in the absence of any supporting evidence they all must fail.

i) further, the plaintiffs' have not given any evidence as to how they have attempted to mitigate their losses and in the absence of any such evidence the claims for economic loss must fail.

30. Consequently as the plaintiffs' have failed to prove the breach of contract and negligence claims made in the statement of claim and have failed to prove their losses and to produce evidence of mitigation of their losses, their entire claim must be dismissed with costs.

Orders

31. The formal Orders of the Court are:

a) the plaintiffs' claims are dismissed,

b) judgment is entered for the defendants against the plaintiffs,

c) the costs of and incidental to the proceeding are to be paid by the plaintiffs to the defendants.
___________________________________________________________
Kimbu & Associates Lawyers: Lawyers for the Plaintiffs
Ashurst Lawyers: Lawyers for the Defendants