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Remnant AJ Group Ltd v Bank South Pacific Financial Group Ltd [2025] PGNC 154; N11288 (14 May 2025)

N11288

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 36 OF 2025

REMNANT AJ GROUP LIMITED
Plaintiff

v

BANK SOUTH PACIFIC FINANCIAL GROUP LIMITED
Defendant

WAIGANI: KARIKO J
19 MARCH, 14 MAY 2025

PRACTICER & PROCEDURE – applications for interim relief to restrain bank from taking possession of mortgaged property - whether notice of motion competent – whether interim injunction should continue

The plaintiff registered for internet banking services provided by the defendant bank. The plaintiff’s managing director nominated his personal mobile number and email address to be registered for online banking linked to the plaintiff’s business account. The plaintiff alleged that a number of transactions done via internet banking were unauthorized and fraudulent and these caused the plaintiff to default in repaying its loans with the bank. When the bank sought to recover property mortgaged to the bank for the loans due to default in repayments, the plaintiff filed for damages and sought to injunct the bank from taking possession of the mortgaged property. An interim injunction was issued ex parte, and it returned for determination if it should continue.

Held

(1) Applications for interim relief made pursuant to the National Court Rules O12 r 1 for interim injunctions and O14 r10 for preservation of property, are properly before the court.

(2) Damages are an adequate remedy for loss the plaintiff may suffer as a result of the injunction and there is no evidence that the defendant would not be able to meet an award of damages.

(3) Interim injunction earlier granted is dissolved.

Cases cited
Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853
Craftworks Niugini Pty Ltd v Allan Mott (1997) SC525
Independent Public Business Corporation of Papua New Guinea v Motor Lovika v Malpo (2020) SC1916
McHardy v Prosec Security [2000] PNGLR 279
PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126
Robinson v National Airlines Commission [1983] PNGLR 478
Vehicles Insurance Ltd (2015) N6584

Counsel
I Opahi for the plaintiff
M Numi for the defendant

1. KARIKO, J: The plaintiff company (Remnant AJ) was granted interim injunctive orders ex parte relating to its notice of motion filed 24 February 2025.
   
2. The defendant bank (BSP) has opposed the continuation of the interim relief.
   

BACKGROUND

3. The plaintiff a customer of BSP with whom it maintains two accounts at the Vision City Branch – Business Account No. 7015515625 and Operations Account No. 0000633698.
   
4. Andy Minok is the sole director and shareholder of Remnant AJ and operates it as its managing director.
   
5. The plaintiff entered into several loan agreements with BSP pursuant to a Credit Contract & Disclosure Statement and a Loan & Chattel Mortgage. The bank advanced four different loans for the purchase of machinery and equipment for the plaintiff’s business. Four Credit Contracts were entered into by the parties with respect to each loan - L11905, L12502, L12436 and L12684.
   
6. At different times between July 2022 and April 2024, the plaintiff started to default in making the monthly payments due under each of the loan agreements.
   
7. In August 2024, Minok discovered that 143 unauthorized payments were made between March and August 2024 from Account No. 7015515625. The transfers were internet banking transactions made via the bank’s Online Banking Channel.
   
8. Mr Minok wrote on 14 August 2024 to BSP and alleged the payments were fraudulently made and requested BSP to investigate the complaint.
   
9. BSP responded on 30 September 2024 stating that its investigations revealed that the one-time-password for the disputed transactions were successfully sent to the nominated mobile number and email address registered for online banking linked to the plaintiff’s business account. The mobile number and email address belonged to Mr Minok personally, and the investigations did not determine suspicious activity on the account.
   
10. The plaintiff took steps to terminate employees involved in defrauding the company including lodging a criminal complaint in December 2024 with the Police for fraud and theft.
    
11. In January 2025, BSP issued a letter of demand to the plaintiff to fully repay the loan arrears.
    
12. When the arrears continued despite some payments by the plaintiff, the bank issued a letter to the plaintiff dated 17 February 2025 demanding that the plaintiff surrender various plant and equipment mortgaged in favour of BSP under the loan agreements and pursuant to the Personal Property Security Act.
    
13. These proceedings were filed on 24 February 2025 in which plaintiff claims that the defendant:
    
    • (1) breached its obligations under the Terms and Conditions relating to the internet banking service;
    • (2) breached its statutory obligations under the Banking and Financial Institutions Act 2002; and
    • (3) the duty of care owed to the plaintiff, as a customer, to ensure the client’s account is monitored and safeguarded against fraud being committed on it,
      

which resulted in loss and damages to the plaintiff, including causing the plaintiff to default in repaying its loans.

14. The following damages are sought as relief:
    
    • (1) The amount of the fraudulent transactions – K270,605.00
    • (2) K90,000.00 withdrawn from the plaintiff’s Account No. 0000633698 due to default in repaying the loans
    • (3) Damages for loss of business
    • (4) General Damages
    • (5) Special Damages
      

COMPETENCY OF APPLICATIONS

15. The defendant first objects to the competency of the notice of motion submitting that the plaintiff failed to state the concise jurisdictional basis for the motion.
    
16. The notice of motion cites s 155(4) of the Constitution and O12 r1 of the National Court Rules for the interim injunctions and O14 r10 for the stay order.
    
17. While this court has an inherent power under s 155(4) to make orders, including orders in the nature of prerogative writs, necessary to do justice in a particular case, this power should only be applied where the applicant has no other remedy available: Lovika v Malpo (2020) SC1916.
    
18. Order 12 r 1 is a general provision that allows this court the power relevant in applying for interim injunctions while O14 r10 allows orders for detention, custody and preservation of property.
    
19. While s 155(4) is not appropriate to apply, I am satisfied that the applications made pursuant to O12 r 1 for interim injunctions and O14 r10 for preservation of property are properly before the court: Independent Public Business Corporation of Papua New Guinea v Motor Vehicles Insurance Ltd (2015) N6584.
    
20. I do not consider the notice of motion incompetent.
    

ISSUE

21. The main question to decide is whether the interim injunction should continue?
    

CONSIDERATION

22. The ex parte injunction I issued effectively restrained the defendant from taking steps to deal with the mortgage property subject of the surrender notice of 17 February 2025.
23. An applicant for interim injunctions must show that there are serious questions to be tried and that an arguable case exists; an undertaking as to damages has been given; damages would not be an adequate remedy if the interim order is not granted; and the balance of convenience favours the granting of the interim order: Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853.
    
24. On the question of whether there is a serious question to be tried, the Court must be satisfied the issue to be tried is not a frivolous matter and the party seeking the injunction has good prospects of success in the proceeding; see Craftworks Niugini Pty Ltd v Allan Mott (1997) SC 525. In Robinson v National Airlines Commission [1983] PNGLR 478 Andrew, J stated that:
    

What the Plaintiff must prove is that he has a serious, not a speculative case which has a real possibility of ultimate success...

25. The plaintiff alleges that BSP breached its duties/obligations:
    
    • (1) under the defendant’s Internet Banking Terms and Conditions;
    • (2) under Schedule 2 of the Banking and Financial Institutions Act 2020; and
    • (3) under common law duty of care owed to the plaintiff as a customer.
      
26. It is first noted that the plaintiff has not pleaded in the statement of claim the provisions of the Terms and Conditions claimed to have been breached nor has he produced a copy of the Terms and Conditions. The statutory duties referred to in the Banking and Financial Institutions Act 2020 are for the regulator of the Act, the Bank of PNG. In respect of the common law duty of care, it is alleged the bank was negligent in ways that are very similar to the alleged breaches under the Act, which I stress again, are matters for the Bank of PNG.
    
27. These further points are noted:
    
    • (1) Evidence from the plaintiff suggests the alleged unauthorized withdrawals were made by the plaintiff’s own employees who used the mobile number or email address which belonged to Mr Minok and which he registered with BSP for the internet banking service. BSP states that the One-Time-Passwords for the transactions were successfully sent to the registered mobile number and email address, that is, to Mr Minok.
    • (2) Contrary to the plaintiff’s assertion that the alleged fraudulent transactions on its Account No. 7015515625 (made between March and August 2024) caused it to default in repaying the loans, the bank statement shows that loan repayments were made during the period on 7 March 2024, 29 April 2024, 2 May2024, 16 May 2024 and 27 May 2024.
    • (3) Contrary to the same assertion, the defendant has produced evidence that the defaults commenced as follows in respect of the different loans:
      

L11905 - in or about July 2022,

L12502 - in or about September 2023,

L12436 - in or about November 2023, and

L12684 - in or about April 2024.

28. In the circumstances, I am not satisfied the plaintiff has a serious case with good prospects of success.
    
29. Even if there is a serious question to be tried, the next consideration is whether the plaintiff would be adequately compensated in damages, and if that is answered in the affirmative, interlocutory injunctive relief should be refused: PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126 at [30]. Put differently, if damages are an adequate remedy for loss suffered because of the injunction and the defendant can pay the damages, an interim injunction should not be granted.
    
30. The plaintiff’s claim clearly lies in damages and there is no evidence that the defendant, a major commercial bank, would not be able to meet an award of damages.
    
31. It is appropriate to note that the considerations of arguable case and whether damages would be a sufficient remedy are also relevant in considering stay applications: McHardy v Prosec Security [2000] PNGLR 279.
    
32. For the foregoing reasons, the interim injunction granted earlier should not continue.
    

ORDER

33. The Order of this court is:
    
    • (1) The relief sought in the notice of motion of the plaintiff filed 24 February 2025 is refused.
    • (2) The interim relief earlier granted is dissolved.
    • (3) The plaintiff shall pay the defendant’s costs of and incidental to the said notice of motion.
    • (4) Time is abridged.
      

________________________________________________________________
Lawyers for the plaintiff: Manase & Co, Lawyers
Lawyers for the defendant: BSP Legal Services