IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

C 901/00

Pacific Royale Hotel Ltd

v

Teta Tours

Ward CJ 
1, 2, 19, 20 November 2001; 28 November 2001 

Creditors’ remedies – proof of debt – counterclaim  

The plaintiff company owned and ran the Pacific Royale Hotel in Tuafa'ahau Road in Nuku'alofa (the Hotel) and the defendant company (Teta) provided tourist services. In about 1981 the two companies entered into an oral agreement under which the Hotel supplied accommodation to tourists on the instructions of Teta. Teta would pay the cost of that accommodation and the Hotel was to send Teta a statement of account from time to time of the amount due. The plaintiff claimed a total of $7,936.16 for accommodation provided for Teta's customers by the Hotel. A number of specific debts were set out. The defendant denied some of the claim but admitted all the remainder apart from two debts. In a counter claim, Teta claimed total payments of $5,000 between January and November 1998 and also sought payment of a total of $666 from the Hotel for airport transfers it had provided for the hotel's clients from June to September 1999. The plaintiff admitted the payments of $5000 but denied the sums for airport transfers. 

Held: 

1. The plaintiff's evidence alone did not satisfy the burden of proving the debt carried forward from 1997. However, the evidence of the payments and the dates and sums in which they were paid satisfied the Court on a balance of probabilities that they were paid because of the outstanding balance and had to be paid to ensure the Hotel continued to take Teta's clients. The court held that there was an outstanding sum due and carried forward from 1997 of $3050.19, that the defendant had accepted its liability for that sum, and part of the $5000 paid in 1998 was to satisfy it. 

2. As to the remainder of the sums in the statement of accounts for 1998, the Court did not accept that the plaintiff established any apart from those supported by the letter of 11 March and those for Yokio, Noriko, and Kaneko. Those were all admitted by the defendant and totalled $3088.52. Together with the $3050.19, the total sum owed by Teta up to the end of 1998 was $6138.71 towards which Teta paid $5000 leaving an outstanding liability for that period of $1138.71. 

3. As to the debts under paragraphs 6 to 19, the defence admitted all but the two for which there were no vouchers. The two denied by the defendant total $347.88 and have no voucher to support them. The plaintiff offered no other evidence to support them and so they were not proved. The total claimed for paragraphs 6 to 19 was $5593.68 and when the sums not supported by vouchers was taken away that left a total of $5245.80 for which the defendant was liable. 

4. With respect to the counterclaim the burden was on the defendant to prove that. The defendant could not produce vouchers to support the claim of $666 for airport transfers so that claim failed. 

5. The defendant's pleadings, by simply denying the sum in paragraph 5 of the claim, did not adequately disclose the extent to which it was admitted. Had that been disclosed at an early stage, the case may have settled. In the circumstances the parties should bear their own costs. 

Counsel for plaintiff: Mr Kaufusi 
Counsel for defendant: Mr Vaipulu 

Judgment

The plaintiff company owns and runs the Pacific Royale Hotel in Tuafa'ahau Road in Nuku'alofa (the Hotel) and the defendant company (Teta) provides tourist services. 

It is agreed that in about 1981 the two companies entered into an oral agreement under which the Hotel would supply accommodation to tourists on the instructions of Teta. Teta would pay the cost of that accommodation and the Hotel was to send Teta a statement of account from time to time of the amount due. 

It appeared on the evidence that this arrangement has had its problems and there was reference to a court case between the parties that was brought in 1993 for debts due under this agreement. 

This claim is for a total of $7,936.16 for accommodation provided for Teta's customers by the Hotel. The statement of claim sets out a number of specific debts. They fall into two groups. The first (paragraph 5) is for a total of $2,341.53 but amended during the trial to $2,474.24 "for accommodation services rendered in accordance with the agreement up to" 1 December 1998. Most of those were bookings for a group who arrived by air in late April 1998 to join a cruise ship. The second group was for various guests at the Hotel for the period from 21 December 1998 to 25 November 1999 (paragraphs 6 to 19) which totalled $5594.63. The total with the amended sum under paragraph 5 became $8,068.87. 

The defence filed denied the money due under paragraph 5 but admitted all the remainder apart from the two debts averred in paragraphs 14 and 15. In a counter claim, Teta claimed total payments of $5,000.00 between January and November 1998 (paragraphs 1 to 5) and also sought payment of a total of $666.00 from the Hotel for airport transfers it had provided for the hotel's clients from June to September 1999 (paragraph 6). 

The plaintiff admits the payments of $5000.00 but denies that the sums for airport transfers. 

The plaintiff's case was that, at the end of 1997, there was an outstanding sum due from Teta of $3,050.19. There had been some problem with payments but the operating manager of the Hotel, Mrs Ramanlal, told the court that Teta had agreed the outstanding sum and so the Hotel continued to take Teta's guests in 1998. In the first half of that year, from 23 January to 20 July, they took a number of guests most of whom were the members of the cruise group. The plaintiff has produced a letter from Teta dated 11 March 1998 listing the names of the cruise group and the dates they were to be provided with accommodation. 

The amount due for the balance carried over from 1997 and the first seven months of 1998 was set out in a statement of accounts which the plaintiff sent to Teta. It was not paid. 

Included in that statement and debited from the total sum owing are the sums listed in paragraphs 1 to 5 of the counter claim and admitted by the plaintiff. Those payments, as shown on the statement of accounts, were as follows: 

19.01.98           $1,000 
27.04.98           $2,000 
10.06.98           $1,000 
29.09.98           $500 
12.11.98           $500 
                — a total of $5,000. 

They were deducted from the total sum on the statement of account leaving an outstanding sum of $2474.24. 

This account was not paid and so the Hotel stopped taking Teta's clients after July 1998 but, by the end of the year, the part payments were such that the Hotel started taking guests again on 21 December 1998 and through 1999. Those guests are referred to in paragraphs 6 to 19 and are largely admitted by the defendant. 

Mrs Ramanlal told the court that there was a voucher system used between Teta and themselves. A guest who arrived with a voucher for his accommodation would give it to the Hotel staff who retained it. When the invoice was sent to Teta, the voucher was attached. 

The invoices for 1999 were sent with a copy of the voucher but those for 1998 had no such voucher with one exception. Mrs Ramanlal said that was because the hotel had returned the only copy and they were therefore unable to produce them. It would be fair to say that their accounting system in 1998 appears to have been less than satisfactory. 

Teta's attitude to the account for 1998 has been that it will pay any sums for which it has vouchers. As has been stated, there is only one for $506 under the name of Kaneko. However, Mr Vaipulu, for the defendants, has also agreed that they accept liability for any which correspond to the names of the cruise group in the letter of 11 March. 

The defendant denies it has ever admitted the sum carried over from 1997 or that there was any debt left unpaid from that time. Mr Vaipulu points out that there is no evidence of the basis of that debt apart from the plaintiff's own statement of account. The plaintiff points out that, when Teta was sent that statement, it did not question it. The plaintiff cannot produce any evidence to support it except to assert that it was orally admitted by the defendant. The burden is on the plaintiff and I need more evidence before I can accept this figure. 

The Hotel accounts for 1998 appear to be muddled and inconsistent. The manager of the Hotel, when asked about the earlier accounts, tended to resort to guesswork and speculation to try and explain any discrepancies in the accounts revealed in cross-examination. The Hotel's reception supervisor was also called and I am bound to say that she also was not clear about the accounts and similarly prone to resort to guesswork when she was unsure. 

The operations manager of Teta, Mr 'Aho, also gave evidence and it would appear his company's accounts were, in 1998, in no better state than those of the Hotel. He came to court to explain his case without having looked at his accounts. After an adjournment, he was able to agree that, in addition to Kaneko and the cruise group bills that were supported by the 11 March letter, he also found documents to support the bills for Yokio and Noriko. That means that, of the total sums claimed for 1998, the defence admit $3088.52. 

As has been said, during that period Teta paid $5000 and its case is that that sum was to pay the debts they admit for 1998 and future debts. If that is the case, they had overpaid by $1911.48 by the end of 1998. 

Much turns on the reason for those payments of $5000. 

The plaintiff suggests that the payments were made to clear the $3050.19 carried over and part of the fresh debts incurred in 1998. Teta says that, as they are not liable for any sum from 1997, the $5000 was solely for the 1998 debt. 

Mr 'Aho explained that the first $1000 was a payment made to Soane Ramanlal, with whom the original arrangement for the cruise group had been made, to pay for guests who had already been accommodated in 1998 and was paid because Soane told him he had a problem with the Hotel's bank account. It was nothing to do with the $3050.19 because there was, he claimed, no such outstanding sum due. He later changed that to say the first $1000 was required by Soane as a deposit for guests that were due to come in 1998 including Yokio and Noriko. It was, he said, to ensure there would be rooms available. 

He said the next $2000 was to pay for the cruising group and the subsequent sums were for other guests at the hotel and those which were to come in the future. He was largely paying to help Soane out and he kept no check although he realised he had probably overpaid a little and, indeed, hinted to Soane that he believed he had. Soane did not give evidence. 

I find considerable problems with his explanation. If there was no balance brought forward from 1997, when he paid the first $1000 there had not been any Teta guests accommodated at the Hotel. The first were due 4 days later. By the time the next $2000 was paid, the cruise group's bills were known and amounted to $2050. If the second payment was specifically for them, why not pay the actual amount? However, by that time, as he agreed after looking at his accounts and accepting the debt for Yokio and Noriko, the total due was $2582.52. Why did he overpay at that stage by more that $400? On the other hand, if his suggestion that the first $1000 was a deposit is correct, it would have already been deducted and the total bill presented for payment would have been $1582.52. 

As has been pointed out, he only admits liability for one more payment in 1998 after the cruise group, that of Kaneko of $506. He had already paid $417 of that as a result of his earlier overpayment. All that was needed to clear his whole indebtedness at that time was a payment of $89. Why then would he go on and pay a further $2000 that year? Teta's record of payments had caused problems with the hotel in the past yet he tells the court that he was happy to go on paying these sums against possible future guests. Although he realised he was paying too much, he did not even bother to check how much. 

If the final $2000 was paid against future guests, it is remarkable that this was at the time the Hotel had again stopped taking his guests because of failure to pay. On his case, he was in credit at that time in the sum of nearly $2000. 

I have stated that the plaintiff's evidence alone did not satisfy the burden of proving the debt carried forward from 1997. However, the evidence of these payments and the dates and sums in which they were paid satisfy me on a balance of probabilities that they were paid because of the outstanding balance and had to be paid to ensure the Hotel continued to take Teta's clients in time for the cruise group. I accept, therefore, that there was an outstanding sum due and carried forward from 1997 of $3050.19, that the defendant had accepted its liability for that sum and part of the $5000.00 paid in 1998 was to satisfy it. 

As to the remainder of the sums in the statement of accounts for 1998, I do not accept that the plaintiff has been able to establish any apart from those supported by the letter of 11 March and those for Yokio, Noriko and Kaneko. Those are all admitted by the defendant and total $3088.52. Together with the $3050.19, the total sum owed by Teta up to the end of 1998 is therefore $6138.71 towards which Teta has paid $5000 leaving an outstanding liability for that period of $1138.71. 

The debts under paragraphs 6 to 19 can be dealt with very shortly. The defence has admitted all but the two for which there are no vouchers. Whatever the shortcomings of the billing system in the hotel in 1998, it is clear they had been solved in 1999 so that each invoice was accompanied by a copy of the voucher. As a result the plaintiff could produce further copies of the vouchers to support its claim. The two denied by the defendant total $347.88 and have no voucher to support them. The plaintiff could offer no other evidence to support them and so I do not find them proved. The total claimed for paragraphs 6 to 19 is $5593.68. Taking away the sums not supported by vouchers leaves a total of $5245.80 for which the defendant is liable. 

Thus on the claim I find the defendant is liable for a total sum of $6384.51. 

The plaintiff also claimed interest at the rate of 20% on any unpaid sum. It was pleaded that the agreement in 1981 included such a provision but the evidence of Mrs Ramanlal was that is was simply a policy they had in relation to any bills which had remained unpaid for three months. There was no evidence to support the suggestion that it was part of any agreement and it is refused. 

The defendant counterclaimed on the basis that it had paid the $5000 towards the admitted debts in paragraphs 6 to 19. It also claimed a total of $666 for the costs of airport transfers undertaken for the hotel's guests. After deduction of the total sum of $5666 from the admitted part of the claim, it sought payment of a balance of $419.25. 

I have already found on the evidence that the $5000 was payment also for the outstanding debt from 1997. The plaintiff denies liability for the airport transfers on the basis that the charges were all paid. 

Mr 'Aho explained that his company bus would sometimes pick up passengers at the airport who were staying at the hotel. This was sometimes because the hotel bus was not there or there were too many passengers. When that happened they would leave a voucher with the hotel afterwards. They then sent an invoice to the hotel. He produced invoices sent at the beginning of July, August, September and October 1999 which total $666 which he says were not paid. 

The evidence of Mrs Ramanlal on this was unclear. She appeared to agree that they did occasionally arrange for Teta to bring their guests and she insisted they had paid those charges. She also stated that, if ever Teta brought anyone, it was up to the driver to collect the charge from the passenger. Her defence was that all the sums had been paid. When she was shown the invoices she said she had not seen them but agreed they may have gone to another member of her staff. 

The burden is on the defendant to prove the counterclaim. Mr 'Aho referred to vouchers but produced none. On the same basis that I have not allowed sums unsupported by vouchers in the case of the Plaintiff's claim, I am unable to find these debts proved in the absence of any other evidence. The defendant's claim for the $666 for airport transfers fails. 

I have not allowed the plaintiff's claim for interest under the alleged term of the agreement but I allow interest at the rate of 10% from the date of the filing of the writ. 

I was advised by counsel for the defendant that he had offered $2000 in addition to the admissions in the pleadings in an attempt to settle this case. It was not accepted. 

The total sum admitted on the pleadings is $5245.80. The result of three days trial has been to establish the defendant's liability to a further $1138.71 which is well under the sum offered in settlement. In such circumstances, the court may consider whether to order the successful party to pay the costs of the other side notwithstanding its success in the action. Had the defendant also paid the admitted and offered sum into court at the time, I should undoubtedly have ordered the plaintiff to pay the defence costs thereafter but that was not done. 

I also consider that the defendant's pleadings, by simply denying the sum in paragraph 5 of the claim, did not adequately disclose the extent to which it was admitted. Had that been disclosed at an early stage, this case may have settled. In the circumstances, I feel the proper order is that the parties shall bear their own costs.