DC114

PAPUA NEW GUINEA
[IN THE DISTRICT COURT OF JUSTICE]

CASE NO 110 of 2003

AGC PACIFIC LIMITED

AND

KOBALE KALE

Mt. Hagen

M Pupaka
14 January 2004

Civil Claim - Contractual relationship - Chattel mortgage - Default in repayment - Repossession under Chattel Mortgage Agreement - Sale of chattel - Proceedings to recover shortfall in monies due under Agreement.

Civil Claim - Chattel mortgage - Quick repossession upon only second default - Hasty sale of repossessed chattel - Duty to sell chattel at fair price - Sale at price way below real value - Could have sold at better price - Breach of duty - Negligence - Recovery suit not fair when defendant's right to residual value unfairly prejudiced - No chance of success in the circumstances - Summary dismissal of proceeding with cost.

Counsel
Complainant, Mr. H. Bae by Leave of Court
Defendant, Ms. Konge

19th January 2004

M. M. PUPAKA: -This matter comes before me again since 3rd December 2003 when it was directed that the complainant give or disclose particulars of how it re-valued and sold a vehicle it repossessed from the defendant on the bases of default upon certain loan arrangements over a chattel mortgage agreement. That direction was repeated on 5th January 2004. The defendant had filed a discovery notice around that time, however he really needed to have requested for further and better particulars. He seems to have done that now though. However the previous Court direction still stands. Considering the particular circumstances of this case, especially the pleadings and other affidavit materials on file from both sides, I thought it imperative to direct the complainant to give up and disclose information on the valuation and sale of the repossessed vehicle.

An affidavit evidence of one Tanya Drost dated 7th November 2003 is now on file in compliance with the Court's directive of 3rd December 2003. In the light of this affidavit, it is now imperative to recount the factual background of the case, which incidentally is common ground between the parties.

On or around the 12th of February 2002, by a Chattel Mortgage Agreement of even date, the defendant's purchase of a motor vehicle for K10, 000.00 was partly financed by the complainant through a loan of K6, 000.00. As per the agreement the vehicle was liable to be repossessed and sold by the complainant if the defendant were to default in his repayments. The repayments were agreed at K669.39 per month.

The defendant defaulted in making the first payment when it became due on 12th March 2002. The second monthly payment (plus the first month's outstanding arrears) became due on 12th April 2002. The complainant also defaulted on the second month's payment. Consequently the complainant issued 'several' requests and demands for payment. However it did not wait for the third month's default. It proceeded to repossess the chattel (vehicle), which it did on 10th May 2002. The complainant repossessed the vehicle two months after the signing of the Chattel Mortgage Agreement.

After repossessing the vehicle the complainant engaged its own 'repossession agent' to have it inspected and a condition report done. The repossession agent consequently valued the vehicle at K15, 000.00 after his inspection of it. Thereafter the complainant advertised the vehicle for sale in the daily newspaper, 'Post Courier', on June 2002. Subsequently the complainant accepted the "highest" bid of K4, 000.00 and sold it at that price to the bidder.

The sale price of K4, 000.00 was well below the real value of the chattel, which was K15, 000.00. The reason disclosed to court now for this obvious under-sale is that "the market's best offer was significantly lower than the sum the repossession agent anticipated". It is also said that the general down turn in the economy and lack of money in the country generally was the reason for the low offer.

However apart from the advertisement in the newspaper the complainant did not properly extend its efforts for publicity. There is no discloser as to whether it decided on any public auction sale through a registered or other preferred auctioneer locally, so I must accept that nothing of the sort was done. There is no discloser as to whether the newspaper advertisement was run for an appropriate length of time so I must accept that it was run only once - on 6th June 2002.

A standout feature in this matter is the complainant's quick move to assert upon the repossession clause of the pertinent agreement. Whilst it was always within its rights to secure its interests by acting quickly, it failed to give the benefit of the doubt to the defendant. Perhaps one or two more months would not have been overly prejudicial to its interests. If the complainant thought it appropriate to sell the vehicle at K4, 000.00, due to the down turn in the economy and lack of money in the country, it should have thought it only fair to allow the benefit of the same circumstances to the defendant first. Further, and more importantly, the complainant just did not do enough to sell the repossessed chattel at a relatively fair price, at a price close to its real value. It should have extended publicity of the sale but did not. Its quick repossession may not have been improper, but its hasty sale with only minimal publicity was. Its failure, particularly in the latter regard, is negligence on its part. The actual loan to the defendant was K6, 000.00, and only two months old. If the repossessed chattel were sold at or close to its real value (of K15, 000.00), there would have been residual money left. The defendant is entitled to all such residual value of the vehicle. In the circumstances it seems clear, even at this early stage that the defendant was prejudiced in that the complainant did not adequately protect his rights to recover on the residual value of the chattel.

If the complainant had suffered any further losses after the repossession, it was due to its own fault. Not enough chance was given to the defendant to repay arrears. Where the complainant may have been only merely too quick to repossess upon minimal default, it was negligently over hasty in concluding an undervalued sale of the repossessed chattel to the obvious detriment of the defendant, not to say itself as well. The complainant cannot, at law, profit from its own neglectful conduct. In the light of the all too obvious it is evident the complainant's suit cannot possibly succeed.

Consequently the complainant's suit against the defendant ought to be summarily dismissed and I do so order. Costs, which are to follow the event, and are to be taxed, if not agreed to between the parties.

AGC Pacific Limited Legal Unit: Complainant
Kopunye Lawyers: Defendant