Kappo No 5 Pty Ltd v Wong [1997] PGSC 26; [1998] PNGLR 544 (23 May 1997)

[1998] PNGLR 544

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

KAPPO NO 5 PTY LIMITED; AND
JENNY CHUN HAU, CHARLES CHAN CHO YAU

V

JAMES CHI KUNG WONG; AND
KUEN MI WONG

WAIGANI: KAPI DCJ; LOS, SALIKA JJ
11 March and 23 May 1997

Facts

The respondents were managers of the first appellant and were authorized signatories to the first appellant’s bank accounts. The respondents were authorized to sign and cash cheques upon the authority and direction of the Board of Directors of the first appellant. The respondents were alleged to have signed and cashed a cheque to the value of K142,508.42 without authority from the first appellant’s Board of Directors. The first appellant then brought an action to recover the money in question.

The respondents filed their defence and a cross-claim against the appellants. The cross-claims were for a debt against the first appellant and a claim based on fraud against the second appellants.

The respondents thereafter moved for summary judgement on the basis of an admission by one of the appellants that the first appellant owed the respondents a sum of K500,000.00. A summary judgement was entered against the appellants for the said sum. The appellants appealed.

Held

1. Where there is evidence of the facts proving essential elements of the claim and the plaintiff or some responsible person gives evidence that in his or her opinion there is no defence, the plaintiff is entitled to obtain a summary judgment under O 12 r 38 of the National Court Rules. Tsang v Credit Corporation [1993] PNGLR 112 referred to.
   
2. In relation to a cross-claim, a cross-claimant is entitled to apply for summary judgement under O 12 r 39 of the Rules.
   
3. Where a defendant admits the facts to a claim, this may constitute a basis for an application for summary judgment under O 12 rr 38 and 39 of the Rules. Dep International Private Limited v Ambogo Sawmill Pty Limited [1987] PNGLR 117 cited. However the appropriate procedure would be to apply for and obtain summary judgment under O 9 r 30 of the Rules, where there is admission of facts. Samson Kai & Others v The State (Unreported judgment) N1079 dated 26th June 1992) cited.
   
4. Where a claim is based on fraud, and in the absence of an unambiguous admission to fraud by a defendant, an application for summary judgment is not applicable under O 12 r 37 of the Rules. Dep International Private Limited v Ambogo Sawmill Pty Limited (supra) referred to.
   
5. Summary judgment against first appellant upheld and judgment against second appellants quashed and remitted for trial.
   

Papua New Guinea cases cited

Dep International Private Limited v Ambogo Sawmill Pty Limited [1987] PNGLR 117.

Samson Kai & Others v The State (Unreported judgment) N1079.

Tsang v Credit Corporation [1993] PNGLR 112.

Other cases cited

Briggs v James Hardie & Co Pty Ltd & Others (1989) 7 ACLC 841.

Salomon v Salomon & Co Ltd [1897] AC 22.

Counsel

D Lightfoot, for the appellants.
G Shepherd, for the respondents.

23 May 1997

BY THE COURT. This is an appeal from a decision of His Honour Mr Justice Sheehan dated 28 February 1996 in which he entered summary judgment. The background to the entry of judgment is as follows. Kappo No 5 Pty Ltd (hereinafter referred to as the first appellant) is a company incorporated in Papua New Guinea under the provisions of the Companies Act (Ch. No. 147). Mr James Chi Kung Wong (hereinafter referred to as the first respondent) and Mrs Kuem Mi Wong (hereinafter referred to as the second respondent) are citizens of Hong Kong carrying on business in Papua New Guinea. They entered into a business arrangement whereby they were designated Managers of the first appellant and were also signatories to the first appellant’s accounts which were established and kept at the Waigani Branch of ANZ Bank Ltd. They were authorised to sign and cash cheques upon authority and direction given by the Board of Directors of the first appellant. It is alleged that the respondents signed and cashed a cheque to the value of K142,508. 42 without the authority of the Board of Directors of the first appellant. The first appellant issued a writ of summons against the respondents for the recovery of the money in question.

On 19 January 1996 the first appellant obtained an order in the National Court retaining the amount of money in question at the Waigani Branch of ANZ Ltd.

On 30 January 1996 further orders were made by the National Court directing the respondents to pay to the Court K142, 508. 42. On the same date further orders were made to join other parties in the proceedings: Jenny Chun Yuk Hau as first Cross-defendant; Charles Chan Cho-Yau as Second Cross-defendant (hereinafter referred to as the Second Appellants); Abel King Investments (PNG) Pty Ltd as third Cross-defendant; and Kappo No 5 Pty Ltd as Fourth Cross Defendant (First Appellant). These orders were made before the defence and cross-claim was filed.

On 15 February 1996 the respondents filed their defence and cross claim. In so far as is relevant to the present appeal, the respondents in paragraph 21 to 24 claimed that the amount of money particularised in paragraph 16 was held in trust for the first respondent. The respondents have made alternative claims; claim of debt in paragraphs 27 to 32 and a claim based on fraud in paragraphs 33 to 43. The respondents make a cross claim for K413,000.00 and HKS1, 130,000.00.

On 20 February 1996 the respondents filed notice of motion for summary judgment in respect of the respondent’s cross claim. On 28 February 1996 summary judgment was entered against the first and second appellants in the sum of K500,000.00.

The appellants have appealed against this decision. The grounds of appeal raise questions relating to the proper application of O 12 r 38 of the National Court Rules (hereinafter referred to as "the Rules"):

"38.Summary judgement

(1) Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff:

(a) there is evidence of the facts on which the claim or part is based; and

(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed, the Court may, by order, direct that entry of such judgement for the plaintiff on that claim or part, as the nature of the case requires.

(2) Without limiting Sub-rile (1), the Court may under that Sub-rule direct the entry of judgement for the plaintiff for damages to be assessed.

(3) In this rule, ‘damages’ include the value of goods."

The principles relating to the application of this rule are well settled in this jurisdiction. It is sufficient to refer only to a decision of the Supreme Court. In Tsang v Credit Corporation [1993] PNGLR 112 at 117 the Court said:

"There are two elements involved in this rule:

(a) evidence of the facts proving essential elements of the claim; and

(b) that the plaintiff or some responsible person gives evidence that in his belief there is no defence.

In this case, there is no issue in relation to the first element.

As to the second element, the plaintiff must show in absence of any defence or evidence from the defendant that, in his belief, the defendant has no defence. If a defence is filed or evidence is given by the defendant, as in this case, the plaintiff must show that, upon the facts and/or the law, the defendant has no defence. The plaintiff will not be entitled to summary judgment if there is a serious conflict on questions of fact or law. Whether a case should go to trial on these issues will be determined on the facts of each case. However, the authorities show that the summary jurisdiction should only be invoked in a clear case; Chief Collector of Taxes v T A Field Pty Ltd [1975] PNGLR 144."

This rule applies to plaintiffs in a cause of action. However, under O 12 r 39, a cross claimant is entitled to apply for summary judgment in respect of a cross claim.

Counsel for the appellants argued that the application for summary judgment was based on an admission by Jenny Chun Yuk Hau (one of the second appellants) that the first appellant owes K500,000.00. This is reflected in the trial judge’s ruling. The trial judge set out the relevant evidence of Hau and then said:

"It was from these passages the application for summary judgment arose. It being argued for defendants Wongs that there was an acknowledgement on oath that the moneys were owing and defendants could have it back."

Counsel for the appellants conceded and we think rightly so that the judgment against the first appellant was proper on the basis of the admission of Jenny Chun Yuk Hau that the first appellant owes this money. There is support for the proposition that where a defendant admits the facts this may form the basis of an application for summary judgment: see Dep International Private Limited v Ambogo Sawmill Pty Limited [1987] PNGLR 117.

Where there is admission of facts, there is a separate procedure to enter judgment under O 9 r 30 of the Rules. The respondents could have obtained the same judgment using this procedure. Such an application was made under this rule in Samson Kai & Others v The State (Unreported judgement of Woods J N1079 dated 26 June 1992).

We therefore uphold the entry of judgment against the first appellant.

Counsel for the appellants further submitted that the trial judge erred in joining the second appellants in the entry of judgment. He relied on several grounds.

The first is that the respondents have an alternative claim against the second appellants as directors of the first appellant based on fraud. Where a claim is based on fraud, it was submitted that the summary judgment procedure is not applicable under O 12 r 37 of the Rules. This rule clearly states that where there is a claim based on fraud, summary procedure is not applicable. It is clearly intended that such allegations must be dealt with at the substantive trial. We find that the trial judge made no reference to this rule in his judgment. If his attention was drawn to the rule he may not have entered judgment against the second appellants. We find that the trial judge erred in this regard.

The second ground relied upon by counsel for the appellants was that there was no admission by the second appellants that there was any fraud involved in their dealings with the respondents. He submitted that the admission made by Jenny Chun Yuk Hau with regard to the K500,000.00 was only in relation to the first appellant. He was making an admission as a Director of the first appellant.

We find that the admission by Jenny Chun Yuk Hau relates simply to the amount of money owed by the first appellant. This is clearly revealed through the following questions and answers given by Jenny Chun Yuk Hau at page 206 of the appeal book:

"Q. Is there any reason he can’t get his money back now?

1. No. If he wants to pull out - its ok, but if he wants to challenge local business I can’t. Wong wanted to pull out.
   
17. Can he have his K500,000.00 back?
    
1. If he assigns all the shares back to me. It depends how much is left [sic]. I say we should have a shareholders meeting and discuss it.
   
17. But Kappo owes K500,000.00?
    
1. Yes."
   

These admissions do not and cannot be said to be unambiguous admissions to fraud by the second appellants. In Dep International v Ambogo Sawmill [1987] PNGLR 117 at 118 Woods J said:

"The principles here are that if a defendant makes admissions sufficient to support the claim against him the plaintiff may apply for judgment based on the admissions. These admissions may be based either on formal admissions in the pleadings or on informal admissions. For judgment to be entered under this rule the defendant’s admissions must be strong and unambiguous."

Counsel for the appellants further submitted that the only way the second appellants could be found liable is by what has been described as lifting the "corporate veil".

Counsel for the respondents on the other hand has submitted that the admission by Jenny Chun Yuk Hau was sufficient to find them liable as agents/servants of the first appellant.

These arguments were not put to the trial judge and there was no reference to this issue in the ruling. It is not necessary to discuss the law in this respect in any great detail in this case. It is sufficient for our purposes to simply state that the starting point is the doctrine laid down in Salomon v Salomon & Co Ltd [1897] AC 22. There has been a lack of judicial unanimity with regard to the general principles about the circumstances in which the corporate veil may be lifted: see Briggs v James Hardie & Co Pty Ltd & Others (1989) 7 ACLC 841. We do not have to go into these issues here. These arguments involve questions of fraud and deception. We have already held that the second appellants have not made any such admission and that summary judgment is not applicable where there is allegation of fraud (O 12 r 37 of the Rules). We are of the opinion that this matter should not be the subject a summary judgment.

We would allow the appeal and make the following orders:

1. that the decision of the His Honour Mr Justice Sheehan of the 28 February 1996 is quashed;
   
2. that judgment be entered for the first respondent against the first appellant in the sum of K500,000.00 in respect of the cross claim;
   
3. that the Statement of Claim and the Cross Claim with respect to the second appellants be remitted back to the National Court for a date to be fixed for trial;
   
4. that the respondents pay the appellant’s cost of the appeal.
   

Lawyers for the appellants: Carter Newell Lawyers.
Lawyers for the respondents: Maladina Lawyers .