Wahgi Savings and Loan Society Ltd v Bank of South Pacific Ltd

• Jurisdiction: Papua New Guinea
• Judge: Kearney DCJ, Andrew J, Kapi J
• Judgment Date: 25 November 1980
• Court: Supreme Court
• Judgement Number: SC185

Supreme Court: Kearney DCJ, Andrew J, Kapi J

Judgment Delivered: 25 November 1980

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

S.C.A. NO. 1 OF 1980

BETWEEN: WAHGI SAVINGS AND LOAN SOCIETY LIMITED

APPELLANT

AND: BANK OF SOUTH PACIFIC LIMITED

RESPONDENT

Waigani

Kearney DCJ Andrew Kapi JJ

31 March 1980

1 April 1980

25 November 1980

APPEAL — objection to competency on basis leave not sought to raise questions of fact — whether objection competent when taken late — leave not required to argue that inferences of fact not open, or on mixed questions of law and fact.

(Per Kapi J): basis of application of common law, considered.

(Per Kearney DCJ and Kapi J): underlying law — tortious liability for purely financial loss inflicted by negligent mis-statements, considered.

Cases Referred To

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1964) A.C. 465

SCM (United Kingdom) v. W. J. Whittall & Son Ltd. (1970) 3 All E.R. 245

Woods v. Martins Bank Ltd. (1959) 1 Q.B. 55

Morrison Steamship Ltd. v. Greystoke Castle (Cargo Owners) (1947) A.C. 265

Mutual Life and Citizens' Assurance Co. Ltd. v. Evatt (1971) A.C. 793

Brian John Lewis v. The Independent State of Papua New Guinea (Unreported) judgment No. SC178 of 29 August 1980

Hayes v. Federal Commissioner of Taxation 96 C.L.R. 47

British Launderers' Research Association v. Central Middlesex Assessment Committee and Hendon Rating Authority (1949) 1 All E.R. 21

Dillingham Corporation of New Guinea Pty. Ltd. v. Constantino Alfredo Diaz (1975) P.N.G.L.R. 262

Edwards (Inspector of Taxes) v. Bairstow and Another (1956) A.C. 14

Instrumatic Ltd. v. Supabrase Ltd. (1969) 1 W.L.R. 519

Lombardo v. Federal Commissioner of Taxation 28 A.L.R. 574

Patel v. Comptroller of Customs (1966) A.C. 356

Comptroller of Customs v. Western Lectric Co. Ltd. (1966) A.C. 367

Hopgood v. Brown (1955) 1 All E.R. 550

Booth v. Booth 53 C.L.R. 1

Murray v. Brown River Timber Company Limited (1964) P. & N.G.L.R. 167

The State v. Bisket Uranguae Pokia (Unreported) judgment No. N248 dated 20th June 1980

McInerny v. Lloyds Bank Limited (1974) 1 Lloyd's Rep. 246

Esso Petroleum Co. Ltd. v. Mardon (1976) Q.B. 801

Argy Trading Development Co. Ltd. v. Lapid Developments Ltd. (1977) 3 All E.R. 785

Anns and Others v. Merton London Borough Council (1978) A.C. 728

Howard Marine and Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd. (1978) 2 W.L.R. 515

Order

That the appeal be allowed; that the judgment of the National Court herein of 7 January 1980 for the respondent (plaintiff) be set aside; that judgment be entered for the appellant (defendant).

KEARNEY DCJ: One Lela Leven obtained a loan of K10,000 from the respondent Bank. He ultimately repaid only part of that loan. Mr. Leven was later imprisoned. As a result, the Bank is out-of-pocket to the extent of K2831.52. It sued to recover that sum from the appellant Society, as damages for negligent mis-statements allegedly made by the Society in a letter to the Bank dated 30th March 1977, concerning the financial affairs of Lela Leven.

In January this year the learned trial Judge found for the Bank. The Society's appeal from that decision was part-argued at the end of March; written submissions were received in May and July.

As a preliminary point, the Bank submitted that certain grounds as laid in the Notice of Appeal were incompetent, in that they:

a) involved only questions of fact;

b) could therefore only be argued if leave was granted by the Court — Section 14 (1) (c) of the Supreme Court Act 1975; but

c) the appellant had never applied for leave; and

d) it was now too late to apply for leave — Section 16 of the Supreme Court Act 1975.

The Society riposted that it was too late for the Bank to object to competency. It is true that the Bank failed to comply with Rule 23 of the Supreme Court Rules 1977. However, I think the better view is that failure to comply with Rule 23, and to take objection at a hearing, while it puts a respondent very much at risk as to costs — because, if successful, he has unnecessarily put the appellant to the expense of preparing for the hearing — does not go further than that. An objection to competency is really an objection to the jurisdiction of a Court to entertain the point, and objections to jurisdiction may be made at any time.

However, I consider that the grounds of appeal as laid and argued are competent. The Bank's submission turned upon an inaccurate reformulation of the Society's arguments. I do not consider that the Society's grounds as argued involved questions of fact alone; and therefore leave was not required.

The letter of 30th March 1977, the surrounding facts, and the findings of the learned trial Judge are set out in the judgment of Andrew J.

The learned trial Judge found that the purported signature of the Society's manager on the letter of 30th March 1977, was not in fact his signature. That was a crucial finding on the evidence placed before the Court, but His Honour gave it no weight on the basis that:

"...clerks often sign for superiors."

There was no evidence before His Honour that such a practice obtained in this Society, or whether this Society employed any staff at all, Mr. McNamara was an auditor; Mr. Sullivan was the Managing Director of the Federation of Savings and Loan Societies. In the circumstances, it appears to me, with respect, that it was not open to infer that some unknown clerk of the Society had signed the letter for Mr. Simbil.

His Honour found in the alternative that the letter of 30th March 1977 and a letter of 22nd August 1977 (clearly signed by Mr. Simbil):

"...were clearly Society letters, whoever signed them. There is internal evidence in these letters which clearly indicates this."

His Honour went on to set out this "internal evidence"; see the extract quoted in the judgment of Andrew J. at page 7, 8. And His Honour considered that:

"the overall picture is not puzzling at all. It is abundantly clear that the defendant knew what was going on."

The evidence was documentary in nature and not in dispute. Primary facts not being in doubt, His Honour was in no better position that this Court to decide which inference should be drawn. But the determination of the proper inference to be drawn is a determination of fact, and cannot be attacked on this appeal (leave not having been sought), unless it is not supported by the evidence. The question of whether there is evidence to sustain the finding, is one of law.

The appellant contends that the inference was not open on the "internal evidence", and in my opinion, with respect, that is correct. The letter of 30th March 1977, falsely purporting to be signed by the Society's Manager, set out false information which was in the possession of the man who bore it to the Bank, Lela Leven. The letter of 22nd August 1977 was signed by the Society's Manager, and falsely states the amount standing to the credit of Leven's account with the Society. That letter was written long after the Bank had made its initial loan to Leven, on 14 June; as was the payment to the Bank by the Society of K3648.18 on 24th August. Mr. McNamara was the Society's auditor and notes in his handwriting endorsed on various documents cannot found a conclusion that he was aware of the swindle perpetrated on the Bank.

It is of course apparent that the Society was "grossly negligent", as His Honour found, in not finding out the true state of affairs after receiving communications from the Bank. The Society's affairs appear to have been in shocking disorder, and it has suffered heavy loss in this matter — witness the letter of 22nd August and the payment to the Bank of K3648.18 on 24th August. But that is another matter.

In the result, in my opinion, there was no evidence before His Honour which warranted the conclusion that the Society had made the mis-statements to the Bank which induced it to make the loan to Leven. The onus lay on the Bank to establish that the Society made the mis-statements. It follows that in my opinion the appeal must be allowed, the judgment and verdict for the Bank quashed, and verdict and judgment entered for the Society.

It is unnecessary to go further to consider whether, assuming the mis-statements had been made by the Society, the Society could be liable to the Bank. In deference to the submissions made, I will however set out my opinion.

The question whether there can be recovery for pure financial loss consequent upon a negligent mis-statement, is to be found in the underlying law.

No material was put before the Court to suggest that there were any customary rules on the subject.

The next enquiry, then, under Schedule 2 of the Constitution, is as to the common law of England as at 16th September 1975.

The common law of England as at that date on the subject was in a state of some uncertainty. The landmark decision in 1963 in Hedley Byrne & Co. Ltd. v. Heller and Partners Ltd. (1964) A.C. 4651 changed the pre-existing common law that liability in negligence...