IN THE SUPREME COURT OF TONGA

Pekipaki

v

Tonga Development Bank anors

Supreme Court, Ha'apai
Webster C J 
CV 308/2004

28 and 29 November, 1 December 2005; 4 January 2006 

Civil claim – defendant declined loan application – plaintiff must establish case on balance of probabilities – plaintiff failed 

The plaintiff claimed that the Tongan Development Bank and some of its officers had led him to believe in late 2003 that if he repaid his existing loan the bank would give him a new loan for the purchase of a fishing boat.  He contended that he repaid the loan but the bank refused his new loan thus breaching its agreement with him.  He claimed damages of $10,000 for the loss of the fishing boat along with certain other expenses and $2000 for loss of reputation and future profit.  The defendants claimed that the plaintiff's decision to clear his loan balance was his decision alone but they admitted declining the plaintiff's loan application in December 2003.  They claimed that subsequently the bank did approve a loan of $30,000 to finance handicraft and weaving of mats but after dispersing $10,000 they found that progress reports on the status of the handicraft project was unsatisfactory and further disbursement of the loan funds was cancelled. In issue were the merits of the plaintiff's claim. 

Held:

1. The plaintiff's claim was lacking in merit with more of an air of wishful thinking than reality and it was not established. 

2. In a civil claim it was up to the plaintiff to establish his case on the balance of probabilities and he could not rely on the defendants to do so for him.  That in turn depended on credible and reliable evidence to establish the essential facts of the claim.   

3. The plaintiff had the burden of proving both the fact and the amount of damage before he could recover substantial damages.  This followed from the general rule that the burden of proving a fact was upon the person who alleged it and not upon him who denied it, so that where a given allegation forms an essential part of a person's case the proof of such fell on him.  Even if the defendant failed to deny the allegations of damage or suffered default, the plaintiff must still prove his loss -- MacGregor on Damages (15th edition 1988) para 1779. 

Case considered: 
Makoni v Koloamatangi & Filipe [1990] Tonga LR 50 (PC) 

Statute considered: 
Evidence Act (Cap 15) 

Counsel for plaintiff: Mr Kengike
Counsel for defendants: Mrs Vaihu 

Expanded Written Reasons for Oral Decision given on 2 December 2005

Preliminary 

The Plaintiff, Mr Siosaia Pekipaki of 'Uiha, Ha'apai, claimed that the Defendants, the Tonga Development Bank and some of its officers, led him to believe in late 2003 that if he repaid his existing loan the 1st Defendant would give him a loan for the purchase of a fishing boat. He said he did that, but the 1st Defendant then refused his new loan on 3 December 2003, thus breaching its agreement with him. He claimed that the 2nd, 3rd, and 4th Defendants, on behalf of the 1st Defendant, had by their words or conduct wilfully endeavoured to cause him to believe in that state of 50 things, which they knew to be false, and he had believed and acted on that belief. He therefore claimed under section 103 of the Evidence Act that the Defendants were now estopped from averring that such a state of things had not in fact existed. The Plaintiff claimed that he suffered loss and damage in the loss of the fishing boat ($10,000.00); expenses for lifting the boat out of the water and leaving it on land ($139.00 + $391.00); loss of deposit for boat engine ($400.00) and loss of reputation and future profit ($2,000.00). 

The Defendants denied the Plaintiff's principal allegations and said that the loan application by him and a co-borrower for $74,550.00 was for fishing and weaving purposes. They said that he was advised of the Bank's policy of requiring existing loan balances to be cleared, which would assist in the overall deliberation of whether to decline or approve an application for a further loan; but the Plaintiff's decision to clear his loan balance was his decision alone. They admitted that the Plaintiff's loan application was declined on 3 December 2003, but said that subsequently, in relation to the same loan application and after discussion with him, the 1st Defendant decided to approve a loan of $30,000.00 to finance handicraft and weaving of mats. After disbursing $10,000.00 or so of that loan, further disbursements awaited a progress report on the status of the handicraft project, which was unsatisfactory and the 1st Defendant decided to cancel further disbursement of the loan funds. 

Evidence and submissions

The Plaintiff gave evidence himself (for a whole day); and led evidence from Mr Siaosi Hurrell, Fasi, owner of the fishing boat the Plaintiff wished to buy; his brother Mr Tevita U Pekipaki; and his sister Ms 'Ofa Pekipaki. The Defendants led evidence from Mr Hiva Tatila, the 1st Defendant's Legal Officer; the 2nd Defendant Mr Sailosi Tupou, now Senior Loan Officer in the 1st Defendant's Risk Management Division; and Mr Simione Sefanaia, the 1st Defendant's Deputy Managing Director. Both sides also filed exhibits. 

On conclusion of the evidence oral submissions were made for both sides in support of their cases. 

The Plaintiff was evasive in evidence and seldom gave a straight answer to a question in cross-examination. He was also vague about some aspects, especially dates, and changed his evidence when confronted with his own productions. Therefore I regret that I found him not entirely credible and reliable. The evidence of his brother Tevita had the appearance of making it up as he went along to suit the questions; and his sister 'Ofa's evidence was also incredible and unreliable, for similar reasons. In particular they contradicted each other, especially about dates. In any event 'Ofa's evidence was not relevant to much of the claim, except about searching for the boat engine. 

Mr Hurrell is now 73 and unfortunately his recollection of details, especially dates, was not good, so in certain respects I could not find him a reliable witness.

By contrast I found the Defendant's witnesses generally credible and reliable, so where there was a conflict of evidence I preferred the evidence for the Defendant. 

Grounds of decision 

Essentially the documents exhibited by the Plaintiff and the documents exhibited by the Defendants, together with the evidence of the Defendants' witnesses, did not support the Plaintiff's account, which was confused and particularly vague in relation to dates (which were of importance in this case), so I therefore found that Plaintiff had not established his case on the balance of probabilities. 

In a civil claim it is up to the Plaintiff to establish his case on the balance of probabilities and he cannot rely on the Defendants to do so for him. That in turn depends on credible and reliable evidence to establish the essential facts of the claim: 

"The plaintiff has the burden of proving both the fact and the amount of damage before he can recover substantial damages. This follows from the general rule that the burden of proving a fact is upon who alleges it and not upon him who denies it, so that where a given allegation forms an essential part of a person's case the proof of such allegation falls on him. Even if the defendant fails to deny the allegations of damage or suffers default, the plaintiff must still prove his loss." 

McGregor on Damages (15th ed 1988) para 1779

This passage underlines the legal position that it is for a plaintiff to establish his case – and a plaintiff cannot expect a defendant to cooperate and give evidence to assist the plaintiff's case. 

Any counsel for a plaintiff must take that as the starting point in a civil claim. 

To go into some more detail about the reasons for the Court's decision, it was clear from the evidence that in business terms the Plaintiff had set about the whole process of establishing a fishing business, or a better fishing business, back to front. 

He started with the engine and paid a deposit of $400 for that in July 2003 [Exhibit A4]. Then he looked for a boat and settled on Mr Hurrell's fishing boat in August/September 2003. The Plaintiff wanted to get the boat out of water to change the engine, but Mr Hurrell said 'No' until the 1st Defendant had approved the loan. Mr Hurrell understood that he was phoned by a Bank officer in Ha'apai to say the loan was approved, but given the 1st Defendant's procedure it is extremely unlikely that a Bank officer would tell him that, and Mr Hurrell accepted in evidence that it could have been someone else who phoned him. 

It is clear from the invoice and receipt [Exhibit A3] (although the numbering of the Plaintiff's exhibits was confused) that the boat was taken out of the water on 15 September 2003, so the Plaintiff may well have spoken to the Bank in Ha'apai by then. But his own evidence was contradictory, as, if he was told he had to repay his existing loan first, it was even more unlikely that someone from the Bank would say the loan was approved at that stage. 

But it seems likely that the Plaintiff did have discussions with the 1st Defendant at Ha'apai at that stage and a loan form may have been completed, as according to Sailosi Tupou by the time the Plaintiff came to see him at Nuku'alofa in September 2003, the Ha'apai Branch already had a loan form for the Plaintiff. 

The Plaintiff was obviously very keen to progress with the boat and it is probable he got ahead of himself and with wishful thinking imagined a loan was approved, when it was not. Given the way he did not listen to questions in cross-examination, it would not be surprising if he misunderstood the position about his loan.

It was very clear that the Plaintiff then got the Ha'apai Branch to submit the loan application form [Exhibit D1] to Head Office at the end of November 2003, but without even basic supporting documents such as quotations for the boat and engine and a business plan [Exhibits D2 & D3]. 

It is clear from the comments by the 1st Defendant's Managing Director on the Plaintiff's letter of complaint dated 5 December 2003 [Exhibit D4] that he considered the handling of the loan request was a complete mess, but that has to be viewed against the undoubted pressure which I inferred that the Plaintiff was placing on the 1st Defendant's officers such as Uesi, and going to other people in the 1st Defendant's Head Office such as Sailosi Tupou.

But I do not find it established that at that stage or any other stage the Plaintiff was told that his loan was approved. His own letter of 5 December 2003 [Exhibit D4] is very important as it was written at the time, immediately after the loan was refused, and so did not contain subsequent afterthoughts. In the letter he was clear that the loan had not been approved because there is no record of his trading store, nor of his fishing, that at $75,000 it was too much, and that the market for his handicrafts was uncertain. That letter does not say that he had been told earlier that the loan had been approved, as he says now. It is also important that the letter does not include the unsustainable allegation that he had been told that if his existing loan was repaid he could get any loan he needed – what it says is that he was told that his existing loan balance of $18,000 "has got to be cleared before my loan for a fishing boat can be released and any other loan I may need", which is quite a different thing: even if that had been said, clearly general words such as that were not intended to bind the 1st Defendant without it having all the details. The letter also refers to the Plaintiff being "very hopeful" about the loan he was seeking, which is inconsistent with the assurance of that loan he now alleges. In the letter the Plaintiff does not say he was told he would get the loan, but he says he was told that the work would take to 2 December, which is not the same as he said in his evidence. 

So in terms of section 103 of the Evidence Act, it was not established that any of the Defendants wilfully or by culpable negligence led the Plaintiff to believe in a state of things which did not exist, so the Plaintiff's claim of estoppel cannot succeed. In any event estoppel is a shield and not a sword: Makoni v Koloamatangi & Filipe [1990] TLR 50 (PC). 

The Plaintiff must have known from previous loans that a loan is not finalised until all the documents are signed. This was to be a loan for a large amount and I found that the 1st Defendant's officers would not lightly say it had been approved. 

It is also relevant to the Plaintiff's general credibility that later, when he had the chance to use the loan approved for handicrafts to purchase the boat [Exhibits D10 & D11] after the Bank had subsequently approved that, on 6 February 2004 he informed the Bank [Exhibit D12] that he had changed his mind regarding his situation and did not wish to take up the loan for the fishing boat. The boat was not put back into the water until March 2004 [Exhibit A2], ie after the Plaintiff had in February declined that subsequent offer of loan, at which time he could still have progressed matters if he had taken the loan. 

Overall I believe that to a large extent what happened was the result of the Plaintiff rushing to push the loan and misunderstanding the words said to him as approval of the loan (mirrored in cross-examination when he did not listen to the questions). He thought he heard what he wanted to hear. Also the shortcomings in the initial application arose because he was trying to push things along too fast. 

So on the balance of probabilities the Plaintiff has not established his claim.

Even if the Plaintiff's claim had been established, his consequent claim for damages was not made out. I am not satisfied that the amount claimed of $10,000 is the right measure for what turned out to be the loss of the chance to buy the fishing boat, especially as, with the way things turned out, the Plaintiff did not pay Mr Hurrell anything for it. 

The deposit for the boat engine was clearly made in July 2003 [Exhibit A4], long before any transaction or approach to the 1st Defendant (which on his own pleadings and evidence was in September 2003 at the earliest – while his letter of 5 December [Exhibit D4] refers to him talking to Sailosi Tupou in July 2003, that was not supported by the evidence of the Plaintiff or Sailosi), so it was not established that the deposit was paid in reliance of what any of the Defendants had said to him. 

There was no evidence of any loss of reputation of the Plaintiff; and any loss of future profit was not sufficiently established. 

But in any event the Plaintiff had the chance to mitigate his loss by accepting the subsequent offer of loan on 12 January for the fishing boat [Exhibit D10] but turned it down on 6 February [Exhibit D12], only 2 months after the initial declinature on 3 December, so he did not mitigate his losses, so would not have been awarded any damages. 

I regret to record that in general I found that the Plaintiff's claim in this action was lacking in merit, with more of an air of wishful thinking than reality, and it was not established. 

As the Plaintiff's claim has not succeeded it is therefore dismissed, with costs as agreed or taxed to the Defendants.