Papali'i v Kwan [1993] WSSC 13; CP 395-92 (6 July 1993)

IN THE SUPREME COURT OF WESTERN SAMOA
HELD AT APIA

CP 395/92

IN THE MATTER of the Supreme Court (Civil Procedure) Rules 1980 Rule 184)

AND

IN THE MATTER of
an action commenced on the 23rd December 1992 wherein
AFA PAPALI'I of Vaivase-uta, Chief Accountant
for and on behalf of the Agriculture Store Corporation Staff Association is the Plaintiff and
RUTH KWAN of Motootua, Unemployed is the Defendant

Counsel: R. Drake for Plaintiff
P.A. Fepulea'i for Defence

Hearing: 25 June 1993
Judgment: 6 July 1993

JUDGMENT OF SAPOLU, CJ.

This is a representative action brought in the name of the plaintiff on behalf of all members of the Staff Association of the Agriculture Store Corporation which is a quasi-government statutory body. The defendant was at all material times the assistant accountant in the Corporation and 3 member as well as treasurer of the said association. The present action claims from the defendant certain sums of money alleged to have been borrowed and misappropriated by the defendant from the association.

Dealing first with the plaintiffs claim for the amount owed by the defendant on her loan from the association, there is no dispute that the defendant borrowed $1,500 from the association at an interest rate of 10% per annum. So on the loan alone the defendant's initial indebtedness was $1,650.00. It appears from supplementary sheet No.4 annexed to the revised statement dated 27 November 1992 prepared by the Chief Accountant for the Corporation that the defendant made repayments totalling $200 towards her loan. Subtract that amount of $200 from the defendant's total loan indebtedness and a balance of $1,450 remains. The defendant's final pay of $276.12 was also paid into her loan indebtedness thus leaving an outstanding balance of $1,173.88. Accordingly I find that the amount of $1,173.88 is the amount for which the defendant is indebted to the plaintiff for her loan with the association.

As to the claim for funds alleged to have been misappropriated by the defendant from the association's loan scheme, the real difficulty here is the absence of the appropriate financial records and it is clear that the defendant was fully responsible for the absence of those records including the loan book. The Court does not accept the defendant's evidence that she left the records of the association loan schemes, because there were 2 loan schemes in her office before she left the employment of the Corporation. The evidence for the plaintiff clearly shows that a search of the defendant's former office failed to discover any records.

The defendant's conduct in failing to attend the general meeting of the association held on 28 November 1992 even though she was asked by the General Manager to attend to explain her treasurer's financial statement to the meeting, her failure to provide supporting documents for her financial statement and the manner in which she left the employment of the Corporation without telling any person of the whereabouts of the association's records all go to make her assertion that she left the association's records in her former office most suspicious as not to be believed.

Having said that, the fact that the cashier of the Corporation was not called to give evidence to substantiate the allegation, denied by the defendant, that the defendant cashed some of the cheques intended for the loan scheme with the Corporation's cashier and failed to pay the amounts of those cheques into the association's bank account do not make matters any less difficult. The cheques alleged to have been cashed with the Corporation's cashier by the defendant were also not produced in evidence to prove the allegation.

Turning to the actual amount alleged to have been misappropriated by the defendant, a substantial part of that amount is represented by 'outstanding loans of $6,180'. How the plaintiff arrived at the figure of $6,180 is by saying that, since the figure of $1,562.70 is shown for interest in the defendant's financial statement, therefore the principal which earned that interest must be $15,627.00 as the interest on loans made to the members of the association was 10% per annum. By adding together the amount of interest shown and the assumed amount of principal and subtracting the amount of $11,009.70 for loan repayments shown to have been actually received, the balance is $6180. And the defendant had failed to account for that amount and therefore she must have misappropriated it.

Given the nature of the loan schemes in this case, the Court cannot without more cogent proof accept that because the amount of interest is shown as $1,562.70, then the principal which was lent out to earn that amount of interest at 10% per annum must be $15,627.00. I do not believe that in this case an amount of $15,627 was lent out at 10% per annum interest and the accrued interest was $1,562.70. What happened with the present loan scheme was that small loans at 10% per annum interest were made to members of the association who wanted to borrow money from the scheme. Repayments of these loans were lent out again if there is another member who wanted a loan. And loan repayments must include not only part of the principal but also part of the interest. So when monies from loan repayments are lent out again, interest is not only charged on the original principal amounts but on interests earned from lending out those amounts of principal. So what we have here seems to be a revolving fund and the amounts earned from interest are not kept separately from the amounts of the principals but are lumped together and are available for relending. So if for instance $100 is lent out at 10% per annum interest and one month later $50 is repaid. If that $50 is lent out again at 10% interest before the full principal of $100 is repaid then the same principal of $100 will earn interest of $15 when the first and second loans are repaid. If one were then to assume that the amount of principal that earned the interest of $15 is $150 that will be wrong.

The Court is not satisfied on the evidence that the plaintiff has proved on the balance of probabilities that the defendant misappropriated $6,180 from outstanding loan. In fact even on the evidence produced by the plaintiff, I cannot find that an amount of principal monies totalling $15,627 was lent out. According to the defendant she obtained the amount of $1,562.70 from a piece of paper given to her when she was appointed treasurer of the association. Whilst her evidence is rather suspicious on this point about the piece of paper, I do not find that the plaintiff has proved this part of his claim.

As to the other part of the claim for misappropriated funds against the defendant, the Court is again not satisfied on the evidence that the plaintiff has proved on the balance of probabilities that the defendant misappropriated an amount totalling $3,263.96.

Accordingly judgment is given for the plaintiff in the amount only of $1,173.88. There is no order as to costs.

CHIEF JUSTICE