N7684

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1256 of 2012

BETWEEN:
ESSO HIGHLANDS LIMITED
Plaintiff

AND:
QUINTEN WILLIE
First Defendant

AND:

SINGHE INDUSTRIES LIMITED
Second Defendant

AND:
SATHYAGITH HEWA MUNASINGHE
Third Defendant

Waigani: Hartshorn J.
2017: 12th May
2018: 2nd August

Cases Cited:
Papua New Guinea Cases

In re O’Dwyer (2007) N3226
John Alman v. Bank of South Pacific Ltd (2010) N6639
Post PNG Ltd v. Hubert (2004) N2656
William Maki v. Michael Pundia [1993] PNGLR 337 

Overseas Cases

William Derry v. Sir Henry Peek (1889) 14 A.C. 337 

 Counsel:

Mr. K. Imako, for the Plaintiff 
Mr. T. Imal, for the Second and Third Defendants 

Trial

2nd August, 2018 

1.     HARTSHORN J: The plaintiff Esso Highlands Limited, commenced this proceeding on 22nd November 2012 claiming amongst others, repayment of the sum of K1,172,841.59 which the plaintiff alleges was fraudulently paid to the second defendant Singhe Industries Ltd, as a result of collusion between the first defendant Quinten Willie and the third defendant Sathyagith Munasinghe. Prior to the events giving rise to this proceeding, the plaintiff had a contractual relationship with the second defendant in which the second defendant supplied certain specified goods to the plaintiff from time to time which were used by the plaintiff’s employees in its operations.

2.   The second and third defendants failed to file their defences and were refused leave to do so out of time. No evidence was admitted on behalf of the second and third defendants to be relied upon at trial. The first defendant has not made any appearance in this proceeding. No defence has been filed by him and no evidence was admitted on his behalf to be relied upon at trial.

3.    The statement of claim sets out the plaintiff’s allegations of fraud and collusion between the defendants resulting in an estimated loss to it of K1,172,841.59. This figure has now been adjusted to K1,084,293.54.

4.    The evidence relied upon by the plaintiff at trial is amongst others:

a)	That investigations were made by Mr. Robert K. Endsley, in his role at the material time as the plaintiff’s PNG LNG Project Controller, and his team, into a number of payments made by the plaintiff to the second defendant. It was discovered that the number of these payments had been inflated as a result of fraudulently altered invoices and payment requests;

b)	That it was discovered that the first defendant fraudulently altered a number of payment authorities, in collusion with the second and third defendants, resulting in a loss to the plaintiff, calculated at the time to be K1,172,841.59;

c)	Of the relationship between the plaintiff and the second defendant, the internal administrative process within the plaintiff concerning the receipt of invoices from vendors and the approval of payments, and that a total of 121 payments were made by the plaintiff to the second defendant for goods provided during the contract period between 7th June 2010 and 7th November 2010;

d)	That the fraud was detected on 13th November 2012 when anomalies were discovered by the plaintiff’s staff in respect to the tax invoice dated 24th August 2012 issued by the second defendant for K335,450.00. The goods received from the second defendant in respect of the invoice did not match the invoice amount. It was then discovered that the payment request prepared by the first defendant had been altered from K35,450.00 to K335,345.00;

e)	That the first defendant admitted to altering payment authorities for invoices submitted by the second defendant after he established a relationship with the third defendant. The second defendant would receive inflated payments and the first defendant would receive kickbacks;

f)	Initially, three fraudulently altered invoices were discovered resulting in inflated payments to the second defendant totaling K398,310.00;

g)	Of the transcript of the interview with the first defendant conducted on 19th November 2012 containing admissions, of email correspondence confirming that the first defendant had received K50,000.00 into his Bank South Pacific bank account and that the payment was from the second defendant, that the K50,000.00 payment coincides with the fraudulent payment from the plaintiff to the second defendant of K335,450.00, the confirmation of the first defendant’s admission that the first defendant received money from the second and third defendants to facilitate fraud against the plaintiff;

h)	Of the first defendant’s Bank South Pacific bank account and of 14 large deposits from undisclosed sources;

i)	 Of analysis and conclusions of the investigations of Mr. Festus Lebile as to the fraudulent transactions, a concession from the second and third defendants lawyers that invoice No. SI 2010087 for K19,745.00 was a fraudulently altered invoice and a final assessment of the revised total sum defrauded from the plaintiff in the sum of K1,084,293.54.

5.    The plaintiff submits that its cause of action pleaded is one of fraud and arising out of the fraud allegations are allegations of collusion and receipt of money obtained as a result of fraud.

6.    The second and third defendants submit amongst others, that the evidence relied upon by the plaintiff lacks credibility and should not be relied upon by the court, the first defendant who was employed by the plaintiff has not been criminally charged or prosecuted for the alleged fraud, the plaintiff merely seeks to pass liability for its own deficiency or the first defendant’s negligence to the second and third defendants, that this is an abuse of process, and that the plaintiff has not proven its case on the balance of probabilities.

Consideration

7.   As there is no evidence of any of the defendants to disprove the claims of the plaintiff, the evidence given on behalf of the plaintiff is uncontested. Further, in the absence of defences from the defendants, the claims of the plaintiff are undefended.

8.   The plaintiff is still required to prove its case to the civil standard, being the balance of properties. As to the requisite burden of proof, in John Alman v. Bank of South Pacific Ltd (2010) N6639, I stated at [10]:

“This standard of proof was considered by Sheehan J in Haiveta v. Wingti (No 1) [1994] PNGLR 160, when he said:

“The standard of proof is the civil standard of proof on the balance of probability. Though not as onerous as the standard in criminal cases, the evidence must nonetheless be convincing commensurate with the seriousness of the matter in question. The evidence must therefore be real and substantial.”

11.    These remarks are in similar vein to those of Wilson J in Alan Arthur Morris v. PNG Associated Industries Ltd (1980) N260 (L) where he said:
“In considering the standard of proof in a case such as this….., I have borne in mind the words of Lord Denning LJ (as he then was) in Bater v. Bater  [1951] P 35 at pages 36 	to 37:

“…….It is of course true that by our law a higher standard of proof is required in criminal cases than in civil cases. But this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard.

As Best CJ, and many other great judges have said, “in proportion as the crime is enormous, so ought the proof to be clear”. So also in civil cases, the case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject matter. A civil court, when considering a charge of fraud will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so higher degree as a criminal court, even when it is considering a charge of a criminal nature; but still it does require a degree of probability which is commensurate with the occasion.” ”

9.   For fraud to be proved, I refer to the classic statement of Lord Herschell in William Derry v. Sir Henry Peek (1889) 14 A.C. 337 at 374:

“First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states.”

10.   This statement has been reproduced and referred to with approval in Post PNG Ltd v. Hubert (2004) N2656 and In re O’Dwyer (2007) N3226.

11.   In regard to the pleading of fraud, while noting Order 8 Rule 30 National Court Rules which requires amongst others, that particulars of any fraud be given, in William Maki v. Michael Pundia [1993] PNGLR 337 at 338, Woods J said:

“An allegation of fraud is a very serious allegation, and the courts have required strict adherence to requirements for pleadings in such cases. Courts have never allowed general allegations of fraud. Courts have required that a person pleading fraud should set out the facts, matters, and circumstances relied on to show that the party charged had or was actuated by a fraudulent intention. The acts alleged to be fraudulent must be stated fully and precisely with full particulars. It is not enough just to say that the person lied or swore a false affidavit. The facts, matters and circumstances which make such statements lies must be particularised.”

12.   From a perusal of the statement of claim, I am satisfied that the cause of action of fraud is adequately pleaded.

13.   From a consideration of the evidence, there is an admission that the first defendant intended to defraud the plaintiff together with the second and third defendants. There is uncontested evidence of substantial payments made to the first defendant by the second and third defendants for no legitimate reason. I am satisfied on the balance of probabilities, that the second and third defendants’ involvement in the fraud was intentional, as submitted by the plaintiff.

14.   Further, there is evidence of the second defendant receiving fraudulent payments together with the second and third defendants paying K50,000.00 to the first defendant. This evidence is not rebutted.

15.   I am satisfied that the plaintiff has proved that the defendants obtained a material advantage as a result of their fraudulent activity as submitted by the plaintiff and that the plaintiff has satisfactorily proved its case against the defendants on the balance of probabilities to the degree required that is commensurate with the allegations made against the defendants by the plaintiff.

Orders

16.  It is ordered that:

a)	Judgment is entered and awarded against the defendants and it is 	ordered that:

i)	the sum of K1,084,293.54 (principal sum) shall be repaid by the defendants jointly and severally to the plaintiff;

ii)	the defendants shall pay the plaintiff interest on the principal sum pursuant to the Judicial Proceedings (Interest on Debts & Damages) Act Chapter no. 52;

iii)the defendants shall pay the plaintiff’s costs of and incidental to this proceeding, on an indemnity basis;

b)	Time is abridged.	
_____________________________________________________________
Allens Lawyers:      Lawyers for the Plaintiff                               
Begisegil Legal Services:   Lawyers for the Second and Third Defendants