N11125

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 652 OF 2007

BETWEEN:
JIM TAPAKO
Plaintiff

AND:
RURAL DEVELOPMENT
BANK LIMITED
Defendant

WAIGANI: HARTSHORN J
18 FEBRUARY 2019

FRAUD –allegation of fraud and negligence by defendant – allegation of fraud by defendant who purportedly forged plaintiff’s signature on the mortgage deed – default by plaintiff’s joint-owner of property resulting in defendant exercising its rights as mortgagee – whether plaintiff’s cause of action in fraud has been adequately pleaded and proven - no facts, matters and circumstances set out that are capable of showing that the defendant through its bank officer was actuated by a fraudulent intention 
NEGLIGENCE – allegation of negligence by defendant in its dealings with the plaintiff in its sale of the joint property - whether the defendant bank was negligent - no pleading that defendant owed any duty to the plaintiff or how or on what basis or when any duty was created -  no pleading that defendant had a duty to the plaintiff – negligence not proven - plaintiff has not satisfactorily proved his case against the defendant to the requisite standard – proceedings dismissed
Cases cited 

AP-Fonden v. Bank of New York Mellon SA/NV & Ors [2013] EWHC 3127 (Comm) 
In re O’Dwyer (2007) N3226
John Alman v. Bank of South Pacific Ltd (2010) N6639 
JP Morgan Chase Bank & Ors v. Springwell Navigation Corporation [2008] EWHC 1186 (Comm) 
Kiluwa Trading Ltd v. Bank South Pacific Ltd (2012) Unreported, Unnumbered, Thompson AJ 18/1/12
Pierce v. Canada Trustee Mortgage Company (2005) 254 DLR 79 
Post PNG Ltd v. Hubert (2004) N2656
Sogeram Development Corporation Ltd v. Som (2014) N5874
William Derry v. Sir Henry Peek (1889) 14 AC 337
William Maki v. Michael Pundia [1993] PNGLR 337

Counsel

Mr. E. Komia for the plaintiff
Mr. S. Tanei for the defendant

TRIAL

1. HARTSHORN J. This is a decision on a claim against the defendant bank in which fraud and negligence are claimed.

2. The plaintiff, Mr. Jim Tapako, claims amongst others that the property that he jointly owned, (joint property), was mortgaged to the defendant without his consent, as security for a loan from the defendant to a company owned by his fellow joint tenant. The plaintiff alleges that his purported signature on the mortgage deed to the defendant was forged. 

3. There was default in repayment of the loan and the defendant as mortgagee, sold the joint property. The plaintiff claims that the defendant committed fraud and was negligent in its dealings with the plaintiff and its sale of the joint property.

Consideration

4. In regard to the pleading that the defendant committed fraud through one of its bank officers, for fraud to be proved, I refer to the classic statement of Lord Herschell in William Derry v. Sir Henry Peek (1889) 14 AC. 337 at 374:
“First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states.”

10. This statement has been reproduced and referred to with approval in Post PNG Ltd v. Hubert (2004) N2656 and In re O’Dwyer (2007) N3226.
11. In regard to the pleading of fraud, while noting Order 8 Rule 30 National Court Rules which requires amongst others, that particulars of any fraud be given, in William Maki v. Michael Pundia [1993] PNGLR 337 at 338, Woods J said:
“An allegation of fraud is a very serious allegation, and the courts have required strict adherence to requirements for pleadings in such cases. Courts have never allowed general allegations of fraud. Courts have required that a person pleading fraud should set out the facts, matters, and circumstances relied on to show that the party charged had or was actuated by a fraudulent intention. The acts alleged to be fraudulent must be stated fully and precisely with full particulars. It is not enough just to say that the person lied or swore a false affidavit. The facts, matters and circumstances which make such statements lies must be particularised.”

12. In this instance, when the pleading in the statement of claim concerning fraud is considered, there are no facts, matters and circumstances set out that are capable of showing that the defendant through its bank officer was actuated by a fraudulent intention. Further, the acts alleged to be fraudulent have not been stated fully and precisely. The plaintiff’s cause of action in fraud has not been adequately pleaded to enable a finding of fraud to be made.
13. In regard to the pleading that the defendant was negligent, there is no pleading that the defendant owed any duty to the plaintiff or how or on what basis or when any duty was created, or specifically what the nature of any duty was. There is no pleading to the effect that the defendant had a duty to the defendant to take more steps than it did to verify that the person who signed the mortgage deed was in fact the plaintiff and not someone else and how that duty arose. Putting aside the allegation that the plaintiff’s signature was forged, the relationship between the plaintiff and the defendant in regard to the mortgage of the joint property, is contractual. The relationship between a financial institution lender and a customer borrower is a commercial relationship of creditor and debtor and does not give rise to any fiduciary obligation or relationship or duty of care unless there are specific provisions to that effect in the agreement: Pierce v. Canada Trustee Mortgage Company (2005) 254 D.L.R. 79 at 85; JP Morgan Chase Bank & Ors v. Springwell Navigation Corporation [2008] EWHC 1186 (Comm) at para 574 and AP-Fonden v. Bank of New York Mellon SA/NV & Ors [2013] EWHC 3127 (Comm) para 173. These are Canadian and English authorities which are persuasive in this jurisdiction.
14. In the absence of pleadings as referred to, the plaintiff’s cause of action in negligence is not able to succeed. In this regard I refer to the case of Kiluwa Trading Ltd v. Bank South Pacific Ltd (2012) Unreported, Unnumbered, Thompson AJ 18/1/12. See also Sogeram Development Corporation Ltd v. Som (2014) N5874. 
15. Further, although trite, it is necessary in my view to make mention of the plaintiff’s responsibility in proving his case to the civil standard, being the balance of probabilities. As to the requisite burden of proof, in John Alman v. Bank of South Pacific Ltd (2010) N6639, I stated at [10]:
“This standard of proof was considered by Sheehan J in Haiveta v. Wingti (No 1) [1994] PNGLR 160, when he said:

“The standard of proof is the civil standard of proof on the balance of probability. Though not as onerous as the standard in criminal cases, the evidence must nonetheless be convincing commensurate with the seriousness of the matter in question. The evidence must therefore be real and substantial.”

11.    These remarks are in similar vein to those of Wilson J in Alan Arthur Morris v. PNG Associated Industries Ltd (1980) N260 (L) where he said:

“In considering the standard of proof in a case such as this….., I have borne in mind the words of Lord Denning LJ (as he then was) in Bater v. Bater  [1951] P 35 at pages 36 to 37:

“…….It is of course true that by our law a higher standard of proof is required in criminal cases than in civil cases. But this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard.

As Best CJ, and many other great judges have said, “in proportion as the crime is enormous, so ought the proof to be clear”. So also in civil cases, the case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject matter. A civil court, when considering a charge of fraud will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so higher degree as a criminal court, even when it is considering a charge of a criminal nature; but still it does require a degree of probability which is commensurate with the occasion.” 

16. In this instance, given amongst others, the inadequacy of pleading, the evidence, some of which was rebutted, and the absence of any cross examination of either of the witnesses, the affidavits of whom were tendered into evidence, I am not satisfied that the plaintiff has satisfactorily proved his case against the defendant to the requisite standard. 
Orders
17.   The Court orders that:
a)	This proceeding is dismissed;
b)	The plaintiff shall pay the costs of the defendant of and incidental to this proceeding to be taxed if not agreed otherwise;
c)	Time is abridged.
__________________________________________________________________
Lawyers for the plaintiff:  Chesterfield Lawyers
Lawyers for the defendant:  National Development Bank Ltd