Miller v National Bank of Vanuatu [2006] VUCA 1; CAC 33-05 (26 May 2006)

IN THE COURT OF APPEAL OF
THE REPUBLIC OF VANUATU
(Appellate Jurisdiction)

CIVIL APPEAL CASE No.33 of 2005

BETWEEN:

JOHN DICK MILLER
Appellant

AND:

NATIONAL BANK OF VANUATU
First Respondent

AND:

THE ASSET MANAGEMENT UNIT
Second Respondent

Coram: Justice John von Doussa
Justice Daniel Fatiaki
Justice Patrick Treston

Counsel: Mr Hillary Toa for the Appellant
Mr Abel Kalmet for the First Respondent
No Appearance of the Second Respondent

Date of hearing: 26th May 2006
Date of decision: 26th May 2006

JUDGMENT

This is an appeal from a decision of the learned Chief Justice given on the 26th October 2005. The Chief Justice struck out proceedings which had been commenced by the Appellant on 22nd October 2002 claiming a variety of remedies against the Respondents. Those remedies in substance amounted to claims for damages based on an allegation that the National Bank of Vanuatu (the Bank) had misapplied a cheque for VT 270,000 which the Bank had received from the Public Works Department on or about 5 August 1994.

The Appellant seeks to bring this appeal as of right alleging that the two grounds on which the Chief Justice decided the proceedings are erroneous.

In our opinion, where an order is made striking out proceedings, even if that order has the practical effect of bringing the proceedings to an end, it is nonetheless an interlocutory order. It follows that leave to appeal is required. In our opinion leave to appeal should be given as we are persuaded that the two grounds on which the Chief Justice actually decided the application cannot be sustained. It is necessary to say a little about the facts before turning to those grounds.

The Appellant in 1993 had an account with the Bank. He was indebted to the Bank to the extent of some hundreds of thousands of Vatu. In late 1993 he wanted to borrow money to carry him over the expenses of Christmas, and in early 1994 he wanted to borrow further monies to enable him to continue his construction business. In particular he wanted to continue work under a contract that he had with the Public Works Department to refurbish a school.

In early 1994, the Bank required him to give a mortgage over his matrimonial home and at the same time required him to establish a separate Bank account which would relate to his construction business, Pele Koma Constructions. Such an account was established in early 1994 and advances were made on that account to the Appellant to enable him to pay wages and to acquire equipment necessary for the work on the school. The loan applications indicate that the monies borrowed would be repaid from the Appellant’s "salary". We think that there is some significance in that, which will appear shortly.

In about April 1994, the Public Works Department sent a letter to the Appellant’s Bank indicating that the Public Works Department would be paying money due to the Appellant to the Bank.

At the end of July 2004, a payment in relation to the work done on the school was processed. The cheque was for VT 270,000. It was delivered by the Public Works Department to the Bank, after showing the cheque to the Appellant. The Bank applied the cheque to the business account, held in the name of "J.D. Miller T/A Pelecoma Cons". That Account was at the time in debit for slightly in excess of VT800,000. That indebtedness was reduced by the amount of the cheque.

The Appellant has later contended that the money should not have been applied to that account. He says that because it was applied to that account he was not able to borrow further money, he was not able to pay wages and the alike, and his business collapsed with substantial losses to him.

In 1998, the Bank applied for an Order for sale in respect of the mortgage on his home, such an order being required by section 59 of the Land Leases Act. It appears from the voluminous papers that we have that no defence was filed. The matter came on for hearing on 26 March 1998. Mr Toa appeared for the Appellant and made submissions about the hardship the Appellant would suffer. But as there was no defence on the file, the learned Judge made orders for the sale of the property and for the application of the monies received on sale.

Not long after that, a series of applications were commenced by the Appellant where he sought to set aside the Order for sale. It appears that in about 1999, at one of the hearings, the learned Judge who had made the Order for sale indicated to the Appellant and his legal adviser that he would not allow a counterclaim to be raised for damage relating to the alleged misapplication of VT 270,000 in the proceeding relating to the mortgage. The Appellant says the learned Judge informed him that it would be necessary to start separate proceedings claiming damages.

Proceedings claiming damages were commenced on the 22 October 2002, some 3 years later. Those proceedings were eventually listed for trial before the Chief Justice. The trial was set for some days and was to commence on 25 October 2005. The day before the trial was due to start, an application was taken out by the Bank to have the proceedings struck out. The application raised three grounds.

The first was that the true party that had suffered the loss alleged was Pele Koma Constructions Ltd, an incorporated company in which the Appellant was a shareholder and Director.

The second ground was that the Appellant was estopped by the principle of res judicata from raising the issues which he sought to raise in the action before the Chief Justice because those issues could have been dealt with in the proceedings in which the Order for sale was made.

The third ground was that it would be an abuse of process to allow the proceedings to continue. As we understand that ground, it rested on a plea by the Second Respondent that the claim was barred by The Limitation Act, No.4 of 1991.

The Chief Justice accepted the first two contentions, and in the circumstances did not move on to consider the question of whether to allow the proceedings to continue would be an abuse of process.

In the course of hearing this appeal, we have spent considerable time going through a mountain of papers which has accumulated in Court files over many years, and we have identified evidentiary material in the files which was not brought to the attention of the learned Chief Justice. We have reached the conclusion that the learned Chief Justice was given an inadequate and incomplete picture of the facts and circumstances of the litigation, and that this has led him to reach conclusions which are erroneous.

On the question of standing, it is now clear that there never was an incorporated entity Pele Koma Constructions Ltd. The Appellant registered a business name Pele Koma Constructions in November 1993. If damage was caused to the Appellant’s business in the way that he alleges by the activities of the Bank, he would be the appropriate person to bring that claim.

On the second ground, although the Chief Justice said that he considered the principle of res judicata applied, it is clear that he was using the expression in its broad sense to cover not only a situation where particular issues are distinctly raised in pleadings and determined at a trial, but also to include a situation where other issues could have been raised by a party at a trial, but were not, and a party later seeks to raise those issues in separate proceedings. That principle stems from the very old decision in Henderson v. Henderson [1794] EngR 2014; [1843] 73 ER 319 and has more recently been recognized in The Port of Melbourne Authority v. Anshun Pty Ltd [1981] 174 CLR 589.

In the present case the Order for sale was made under the specific statutory provision in Section 59 of the Land Leases Act. No defence was filed to that application. There was no trial. There can be no question of there having been issues determined at an earlier trial and the res judicata principle in the strict sense can have no application.

Further, we do not think that in the absence of a trial it is realistic to assert that the issues raised by the Appellant in the present proceedings could have been tried in the earlier proceedings. Moreover, as the earlier proceedings were in relation to a specific statutory remedy by a mortgagee it would not have been appropriate in those proceedings to raise the complex factual issues which the Appellant seeks to agitate in the present proceeding. On the contrary, a mortgagee is entitled, in the absence of a tender of the mortgage monies, to obtain an order for sale with the minimum of interference from collateral issues raised by the mortgagor.

For these reasons, we have reached the conclusion that the two grounds on which the Chief Justice struck out the Appellant’s proceedings cannot be supported.

The Appellant must however confront the third ground on which the Bank sought to have the proceedings struck out, namely that they are an abuse of process.

To allow proceedings that are plainly out of time to go ahead is an abuse of process as the proceedings put the Respondent and the Court to an unnecessary waste of time and expense, and, of particular importance, put the Appellant to unnecessary expense and emotional stress in pursuing a claim which must inevitably fail. In the present case it is clear that the substance of the Appellant’s claim is for damages in tort and for breach of contract in respect of the conduct of the Bank on or about 5th August 1994 when it received the Public Works Department cheque for VT 270,000. The relevant time for such a claim to be filed under section 3(1)(a) of The Limitation Act is 6 years. It was more that 8 years after the alleged cause of action arose that these proceedings were commenced. They are plainly out of time.

In reaching the conclusion that the proceedings should be struck out as an abuse of process, we have also had regard to the evidence which relates to the merits of the claim which the Appellant seeks to pursue.

The Appellant had two accounts with the Bank, a personal account and a second business account styled "J. D. Miller T/A Pelecoma Cons". On the second account which was opened in early 1994 he borrowed monies specifically for the purpose of his business, in particular to buy material and pay wages. He said that the borrowings would be repaid from his "salary". The only income that he would have received from his business would have been by way of contract payments from the Public Works Department. The cheque for VT 270,000 given to the Bank as part payment for the refurbishment of the school by the Appellant was applied by the Bank to the Appellant’s business account. That seems to us to be an entirely regular transaction on the part of the Bank. We cannot follow how the Bank can be said to have acted wrongfully in applying the cheque to the account which it did.

In any event, both the accounts which the Appellant held with the Bank at that time were significantly in debit. Under the general law the Bank has the right to exercise a lien over monies coming into its possession, and to apply those monies to reduce the indebtedness of its customer in whichever of the accounts it chooses to credit. The rights of the Bank are discussed in Paget’s "Law of Banking", 9th Edition, at Chapter 9.

Whilst we do not doubt the sincerity of the Appellant’s belief that his troubles were caused by the Bank applying the cheque to his indebtedness, we are unable to detect any real cause of action which the Appellant would have in relation to the conduct of the Bank. If the proceedings had been commenced within time, they were doomed to fail.

In our opinion the Bank has made good its contention that the proceedings should be struck out as an abuse of process.

Even though we are of opinion that the Order made by the Chief Justice striking out the proceedings cannot be sustained on the two grounds he relied on, the Order itself is nevertheless supported by the conclusion that the proceedings are an abuse of process.

For these reasons we consider the Order striking the proceedings should remain, and the appeal should be dismissed.

The formal Orders of the Court are as follows:

1. Leave to appeal granted.
2. Appeal dismissed.
3. Appellant to pay the Respondent’s costs of the appeal.
   

DATED at PORT-VILA this 26th day of May 2006

BY THE COURT

John von DOUSSA J
Daniel FATIAKI J
Patrick Treston J