Pulusi v Tuvalu National Provident Fund [2012] TVHC 6; Civil Appeal 1 of 2011 (24 January 2012)

IN THE HIGH COURT OF TUVALU
AT FUNAFUTI

Civil Appellate Jurisdiction

HC. Civil App. 1/11

Between:

Kata Pulusi
Appellant

v

Tuvalu National Provident Fund
Respondent

BEFORE THE CHIEF JUSTICE

K Muaror for appellant
K Ulika for respondent

Hearing: 20 January 2012
Judgment: 24 January 2012

Judgment

[1] The appellant is the President of an unincorporated association, the Taloafenua Development Group (the Group) on Nanumea. The Group negotiated with the Development Bank of Tuvalu (DBT) in 2006 for a loan. They were successful and the loan agreement was signed on 26 February 2007 .

[2] The appellant signed on behalf of the Group as the borrower. Two members of the Executive Committee were named as guarantors and the appellant also signed on behalf of the two guarantors under a power of attorney made on 14 December 2006.

[3] The Group defaulted on its repayments and, it appears, continues to do so.

[4] On 15 October 2008, the appellant wrote a Certificate of Intention to the Tuvalu National Provident Fund (the Fund) advising that, from that day, he intended permanently to retire from employment. He was, therefore, entitled to his retirement benefit which, at that time, totalled $2,555.15.

[5] It appears that the Fund, in such cases, will then write to the banks sending a pro forma Loan Status Notification Letter for the bank to use. The National Bank of Tuvalu reported an outstanding loan of $1,198.85 which was already secured against the appellant's retirement benefit.

[6] A similar form was returned from the DBT reporting that the appellant had no loans outstanding with them. However, it bears a hand written note from the General Manager of the DBT adding:

"Please be advised that Kata Pulusi does not have any personal liability with the Bank. However he is committed to a loan under the Talaofenua Development Group [of] whom he is the President."

[7] It would appear that the reference, in that note, to the appellant's commitment to a loan was based on a letter signed by the appellant and addressed to the Manager, Tuvalu Provident Fund dated 27 February 2007:

"Re: Retirement Benefit in the name of Kata Pulusi [the name is in handwriting]:

This irrevocable authority is to be retained as security, when or should for whatever reason, my retirement benefit become payable during any period of indebtedness to the Development Bank of Tuvalu, you are hereby authorised to pay such sums to the Bank as is necessary to extinguish such indebtedness.

This authority is to take precedence of any subsequent authority or claim against my retirement benefits."

The letter is then endorsed, "The above authority is hereby acknowledged" followed by a signature "for Tuvalu Provident Fund". It is copied to the DBT.

[8] There appears to be no challenge to the appellant's indebtedness to the National Bank and the court below was shown an undated letter from the Fund addressed to the General Manager of the Tuvalu National Bank:

"Please find enclosed is a cheque ... in the amount of $2,555.15 being Mr Kata Pulusi's Provident Fund.

We would be grateful if you can clear his debt within your Institution and to transfer the balance into members loan at DBT."

That letter was copied to the appellant and the DBT.

[9] The appellant brought a claim in the Senior Magistrate's Court against the Fund in which he challenged the Fund's right to authorise payment of the balance of his retirement benefit to the DBT. After a lengthy hearing, the learned magistrate dismissed the claim.

[10] The appellant has filed lengthy grounds of appeal raising three main issues which can be summarised as:

1. That, having signed as president of the Group, he was neither borrower nor guarantor of the loan agreement nor liable in any way under the agreement.
   
2. That the magistrate was wrong in accepting that the loan agreement made all Executive Members of the Group guarantors.
   
3. That the Irrevocable Authority only related to personal liability as stated in the note of the Manager of the DBT.
   

[11] The parties produced a number of documents in the lower court and the case hinged on the meaning and effect of some of them, in particular the Letter of Offer and the loan agreement both made in February 2007. In order to explain or justify them, the evidence appears to have ranged well beyond the pleaded case. It is helpful to identify them to understand the appellant's case.

The Documentary Evidence

The First Agreement

[12] It appears that the Group entered into negotiations with the DBT in late 2006 and a loan agreement was made on 13 December 2006. The parties were stated to be the DBT, the Group as Borrower and two members of its Executive Committee, Tauleka Malaki and Tapu Pepeuga as guarantors.

[13] The agreement states at paragraph 6.1:

"The Borrower will execute the securities specified in the Schedule of Particulars, such securities to be in forms approved by the Bank".

[14] In the Schedule, under the heading 'Security' is printed:

"Security already held (if any)

Together with;

IBWS over:" and then, added in manuscript is 'OBM, Boat, Computer and

Accessories'.

"Personal Guarantee by" followed, in manuscript by, "Tauleka Malaki and Tapu Pepeuga".

The next heading is 'Special Conditions'. There are five printed conditions.

[15] The agreement was signed by the appellant for the Borrower under the Group's seal. He also signed for the guarantors under a power of attorney made, it would appear, the next day, 14 December 2006.

[16] The significance of this agreement appears to be as a comparison with the second agreement in respect of the manuscript additions to the latter.

The Letter of Offer

[17] It is not clear on the papers before this Court whether an application was made by the Group for a further loan or whether the previous loan was to be re-negotiated. However, the Group received a letter, via the appellant, dated 26 February 2007 advising of the DBT's approval of a loan in a slightly lesser sum than that in the first agreement. It briefly sets out the principal conditions which are generally similar to the first agreement.

[18] Under the heading 'Securities' it is printed, "Security over" and then it is added, again by hand, the same items as in the first agreement but with the addition:

"Lien over Executive's members PF (members who guarantee the loan)".

This is followed by the same names as guarantors.

[19] Under 'Special Conditions' there are three numbered, printed conditions followed by two handwritten ones:

"iv. Executive members to agree to use their PF savings [as] security

v. Provision for operational expense to be monitored to the satisfaction of the Bank".

[20] The appellant signed the acceptance of the terms and conditions of the loan offered for the Group on 27 February 2007.

The Second Agreement

[21] The agreement was drawn up and dated 26 February 2007, one day, in fact, before the appellant signed his acceptance of the Letter of Offer. The terms accord with the Letter of Offer although under 'Security', the reference to the Executive Members Provident Fund has been reduced to "Lien over Executive members PF" and the first of the extra bullet points under 'Special Conditions' has also changed to, "Executive members PF to use as security." It is once again signed by the appellant for the Group and for the two guarantors.

The Irrevocable Authority

[23] This, in the terms set out in paragraph [7] (above), was also dated 27 February 2007.

The Deed of Variation

[24] As time passed, it appears there were difficulties with the guarantors who were resident on Nanumaga and so, in April 2008, a Deed of Variation of the loan agreement was made substituting Irata Pulusi and Tofiga Paitele as guarantors. That document also was signed by the appellant for the borrower.

The Hearing before the Senior Magistrate

[25] The appeal file contains no copy of the pleadings but the terms are set out in the judgment of the Senior Magistrate. The relevant passages in the claim are:

3. On or about 7 November 2008 the defendant transferred the plaintiff's retirement fund of $1356.30 without the plaintiff's authority or approval to the National Bank of Tuvalu to use the fund to repay the plaintiff's alleged debit to the DBT.

4. The plaintiff is not liable for any debit to the DBT alleged by the defendant and now suffers loss of his retirement.

[26] The defence is a denial of paragraphs 3 and 4 of the claim. Paragraph 4 of the defence specifies:

3. The defendant denies the claim under paragraph 4 of the Statement of Claim and liability for loss of the plaintiff's retirement fund of $1,356.30.

[27] The record of the evidence in the lower court is not clear but suggests that the plaintiff denied any responsibility for the Group's liability and claimed that the special condition which refers to the Executive Members' PF was not on the agreement when he signed it. The inference must clearly be that it was added subsequently without his knowledge.

[28] The Senior Magistrate refers to that evidence but does not appear to make a finding on it. It is, in fact, an allegation of fraud and as such should have been pleaded if it was to be relied upon. I assume that was the reason the magistrate made no finding on it.

[29] It was similarly stated in evidence by the appellant that, when he signed the Irrevocable Authority on 27 February 2007, his name was not on the letter so, presumably, the space clearly provided for the name of the person offering the security was blank. A similar subsequent, fraudulent addition must be inferred from that allegation. That also was not pleaded and, again, although the magistrate referred to the evidence, he made no finding.

[30] The manner in which the magistrate reached his decision suggests clearly that he rejected both allegations of fraud made by the plaintiff and accepted the two documents as exhibited in the hearing. In his judgment he refers to the Irrevocable Authority and to the note appended to the letter to the National Bank. He then concludes:

"The Court finds the Irrevocable Authority speaks for itself so the instruction given in the letter to the General Manager of the National Bank of Tuvalu is valid. That means the plaintiff's retirement has to be hold-on as security to put out his loans at the DBT. The above Irrevocable Authority does not expressly refer to the plaintiff's personal loans but to security. Broadly speaking, it refers to whatever loan the plaintiff has accepted himself to act as security. ...

The Court finds that when the plaintiff signed the second Loan Agreement and the Letter of Offer on the 26 and 27 February 2007, there exists enough information in the document for the plaintiff to know. So there is a contract being entered between the DBT and the Group and the plaintiff to act as security.

So, the defendants instructed the National Bank of Tuvalu to pay the plaintiff's retirement to the DBT with authority from him. Therefore, Court refuses claim."

The Appeal

[31] At the hearing of the appeal, Mr Ulika, for the respondent, submitted that, as the Group is an unincorporated association, the executive members (in this case the members of the Executive Committee) are, therefore, liable for the Group's default. He relies, in particular, on the judgment of Scott LJ in Bradley Egg Farm Ltd v Clifford [1943] 2 All ER 378. Whilst I accept the force of that submission, I do not think it was the basis on which the lower court made its decision. The decision in the present case did not relate to the general liability of an officer signing of behalf of an unincorporated body nor to the overall liability of its members but to the special condition that required executive members to agree to pledge their Provident Fund savings as security. It was clearly a requirement for security for the loan and not part of, or relevant to, any question of the general liability the appellant and the executive members may have held for the Group.

[32] Although that requirement was written three times in different forms, Mr Muaror, for the appellant, points out that the Senior Magistrate only quotes one of the three passages in his judgment, namely the second reference to it in the second agreement, "Executive members PF to use as security". Counsel points out that the inclusion of such a commitment would require the specific agreement of each executive member before he would be bound. The need for such agreement was clearly anticipated, he submits, when it is stated in Special Condition (iv) of the Letter of Offer, "Executive members to agree to use their PF savings [as] security".

[33] I accept that, although the loan agreement acknowledges that this is a condition, each individual member of the executive committee would have to agree to that term before he or she would become liable. However, I consider there is evidence of agreement by the appellant to that requirement by his acceptance of the terms of the Letter of Offer and his signature to the loan agreement in which the term is again written. Similarly his signature on behalf of the guarantors under the power of attorney indicates their acceptance of the condition.

[34] The magistrate accepted the validity of the Irrevocable Authority and I accept that the fact it was signed on 27 February 2007, the day the appellant signed acceptance of the terms of the letter of offer, indicates a clear understanding that the appellant was accepting that the commitment of his retirement benefit was necessary as security under the loan agreement.

[35] The appellant protested in the lower court that the officers of the DBT never pointed out to him the possibility he was making a personal commitment in respect of the Group. I note he gave his occupation as "Banker" and has previously held the position of General Manager of the Tongan Development Bank. It seems inconceivable to this Court that a man with his experience and knowledge would fail to understand his obligations under an agreement he was entering of behalf of the Group or would sign an Irrevocable Authority on which the space for the name was blank

[36] That was clearly the basis of the learned magistrate's decision. He gave no finding on the matter raised by Mr Ulika in respect of the liability of the executive members of an unincorporated association; nor did he need to. He, correctly, saw this as an implementation solely of a specific commitment as part of the security for the loan. He clearly also found that the Irrevocable Authority showed conclusively that the appellant understood the nature of that commitment and intended the Fund to implement it.

[37] The appeal is dismissed.

[38] Before leaving this matter I would like to refer to one aspect raised with some force by Mr Muaror. The loan agreements are contracts and should be treated as such. Although they contain numerous additions and amendments to the printed text, none has been initialled or acknowledged in any way by the parties. Such a failure may be critical in a future case.

Dated 24th day of January 2012

_______________
Hon. Gordon Ward
CHIEF JUSTICE