N11362

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 168 OF 2024

BETWEEN
LONCIE KOROFA
Plaintiff

AND
CHERUM URUM as Loans Officer
First Defendant

AND
JESSY ISAPE as Senior Loans Officer
Second Defendant

AND
JEROLINE MANIURA as Loans Officer
Third Defendant

AND
NATIONAL DEVELOPMENT BANK LIMITED
Fourth Defendant
MADANG: NAROKOBI J
13 JUNE, 8 JULY 2025
PERSONAL PROPERTY– Personal Property Act 2011 – whether Defendants breached agreement not to repossess property under s 98(1)(a) of the Act.
Facts

The Plaintiff, a village lady engaged in small business, obtained a loan of K75,000.00 from the National Development Bank, the Fourth Defendant, and with her own equity contribution of K60,000.00, purchased a PMV truck. She fell into arears after paying back K44,000.00 and the Bank repossessed the truck, sold it and paid back the balance of K6,683.10 after recouping the outstanding loan amount. She says they had agreed not to repossess the vehicle and allow her to fix it, and after that, re-commence her loan repayment. 
Held:
(1)	The Loan Agreement between the Plaintiff and the National Development Bank, the Fourth Defendant is subject to the Personal Property Act 2011 under s 10 of the Act as the transaction created a security interest.
(1)	The Personal Property Act states relevantly at s 98(1)(a) that “…the secured party has, unless otherwise agreed, the right to take possession of the collateral or otherwise enforce the security agreement by any method permitted by law.”
(2)	A plain reading of the phrase, “...unless otherwise agreed,” means, that if the parties agree, there would be a deferral of the repossession of the secured property, under certain terms and conditions.
(3)	Section 98(1)(a) of the Personal Property Act, forms part of the terms and conditions of the Loan agreement, by virtue of s 10 of the Act.
(4)	The Defendants have not refuted the Plaintiff’s claim that there was an agreement not to repossess the vehicle.
(5)	There was therefore a breach of the Loan Agreement when the Defendants breached their undertaking not to repossess the truck, and in the circumstances the Plaintiff is entitled to general damages for distress, frustration and inconvenience in the sum of K60,000.00, less the amount recredited to her account, giving a judgment sum of K53,316.90.
(6)	The claim for exemplary damages, and loss of business are refused. 
(7)	Interests and costs will also be awarded to the Plaintiff.

Cases cited

Finance Trading Corporation Limited (trading as FINCORP) v Motor Vehicle Insurance (2025) N11138
Guard Dog Security Services Ltd v Mathews (2019) SC1861)
PNG v Muteng Basa [1992] PNGLR 271
Rodao Holdings  Ltd v Sogeram Development Corporation Ltd (2007) N5485).

Counsel

Mr D Nilkare for the plaintiff
Mr J Kolkia as town agents for the defendants

DECISION

1.	NAROKOBI J: The Plaintiff, a village lady engaged in small business entered into a Loan Agreement with the Fourth Defendant, the National Development Bank, on 8 August 2018, whereby the National Development Bank will provide additional funding to her of K75,000.00 to her own K60,000.00 to purchase a PMV truck. The loan agreement had a term of two years, with the Plaintiff repaying K4,233.02 per month.

2.	By February 2019, the Plaintiff defaulted on her loan, and the National Development Bank issued letters of arrears to the plaintiff dated 19 February 2019, 19 March 2019 and 28 March 2019.

3.	The Plaintiff did not pay the arrears, and a notice of demand dated 20 May 2019 was served on the Plaintiff on 22 May 2019. This was a demand by the bank to pay the full amount of the loan.

4.	On 20 July 2020 the National Development Bank repossessed the truck and sold it for K60,000.00. After recouping its outstanding loan arears, an amount of K6,683.10 was paid back to her.

5.	The Plaintiff submits that there was no breach of the Loan Agreement as she was still paying off the loan, and had already paid off K44,000.00, and K47,000.00 was still outstanding when the truck broke down and COVID-19 restrictions occurred, which placed her in an awkward position.

6.	The Plaintiff further submits that the First, Second and Third Defendant allowed her to fix the truck, and not to repossess the truck.

7.	The Defendants submits that their actions were consistent with s 99 of the Personal Property Act 2011 and Clause 15 (Event of Default) and Clause 17 (Enforcement Costs) of the Loan Agreement. The Plaintiff had defaulted, and the National Development Bank was at liberty to do what it did.

8.	The Defendants also relies on the case authorities of Finance Trading Corporation Limited (trading as FINCORP) v Motor Vehicle Insurance (2025) N11138, which makes the point that a secured party’s interest is akin to proceedings under s 74 of the Land Registration Act 1981, in relation to mortgages over land.

9.	The Defendants further submits relying on PNG v Muteng Basa [1992] PNGLR 271 that the mortgagor’s impecunious state does not preclude the mortgage bank from exercising its rights over the mortgaged property.

10.	I have read s 98 (Secured Party’s Right to Take Possession and Dispose of the Collateral) of the Personal Property Act which states relevantly at s 98(1)(a) that “…the secured party has, unless otherwise agreed, the right to take possession of the collateral or otherwise enforce the security agreement by any method permitted by law.” I emphasise the phrase “unless otherwise agreed.”

11.	The cases that the Defendants relies on does not address this aspect of the law. What does “unless otherwise agreed” mean? I have taken a plain reading of the provision to mean, that there would be a deferral of the repossession of the secured property, under certain terms and conditions.

12.	At paragraph 14 of the Plaintiff’s affidavit, she states that the First and Second Defendant agreed with her that she would fix the car and re-commence repayment of the loan. To that end she engaged a contractor who would fix the truck and hire it from her. At paragraph 19, the Third Defendant who took over from the First Defendant as a loans officer, at their Madang branch also agreed that the Plaintiff could fix her truck.

13.	Clause 15 of the Loan Agreement is clear that if the borrower fails to repay the facility, the National Development Bank can require the borrower to make immediate payment of the outstanding loan.

14.	Under the Loan Agreement, the National Development Bank would have acted properly and quite legitimately. However, the Loan Agreement is subject to the Personal Property Act. Section 10 of the Personal Property Act makes it clear that an agreement that creates a security interest is subject to the Act. Section 98(1)(a) allows the parties to agree for the secured party, that is the National Development Bank here, not to take possession of the collateral (see s 2(2) (Interpretation) of the Personal Property Act for definition of “secured party”). I find on the facts that the Defendants have not refuted the Plaintiff’s claim that there was an agreement not to take possession of the vehicle. The affidavit of Samson Rolgang relied on by the Defendants does not refute this fact.

15.	I find that the Defendants after agreeing with the Plaintiff had a duty to make clear what they agreed to with the Plaintiff. This would be for instance to give her a specific period, rather than just to leave it open-ended to her. I give the Plaintiff the benefit the benefit of the doubt on this aspect.

16.	The First, Second and Third Defendant were acting as agents of the Fourth Defendant. They are the employees of the Fourth Defendant, and their actions bind the Fourth Defendant, the National Development Bank. They did not do anything beyond the scope of their duties for the Fourth Defendant not to be vicariously liable (Guard Dog Security Services Ltd v Mathews (2019) SC1861).

17.	When the vehicle was repossessed, the Defendants acted contrary to their agreement with the Plaintiff. This agreement is sanctioned by s 98(1)(a) of the Personal Security Act. It is trite law that contracts of any nature are subject to their enabling legislation, for example in a private employment contract, the terms and conditions of employment must not be inferior to what is in the Employment Act 1978. The provisions of the law would form part of the contract entered. In this case, s 98(1)(a) of the Personal Security Act would form part of the Loan Agreement between the Plaintiff and the Fourth Defendant, the National Development Bank.

18.	In the circumstances of the case, although I find that there was a breach of the Loan Agreement when s 98(1)(a) of the Personal Property Act was not complied with, it will not be proper to award the other reliefs claimed by the Plaintiff, as there was a default by her under Clause 15 of the Loan Agreement. The Defendants will be liable for general damages for the distress, frustration and inconvenience caused to the Plaintiff, for breaching the undertaking made to her and it will be assessed at K60,000.00, the value the truck was sold for, less the amount that was paid back to her (K6,683.10) which equates to K53,316.90 in general damages. General damages for breach of contract is a proper award to make (Rodao Holdings  Ltd v Sogeram Development Corporation Ltd (2007) N5485).

19.	All other claims by the Plaintiff are refused. Costs follow the event so the plaintiff will be entitled to her cost to be taxed, if not agreed.

20.	The final orders of the court are as follows:

1.	The Fourth Defendant shall pay the Plaintiff general damages of K53,316.90 for breach of its agreement with the Plaintiff under s98(1)(a) of the Personal Security Act 2011.
2.	The Fourth Defendant shall pay interest on the judgment sum of K53,316.90 at 8% from the date the proceedings were filed to the date of judgment pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act 2015.
3.	All other relief claimed by the Plaintiff are refused.
4.	The Fourth Defendant shall pay the Plaintiff’s costs, to be taxed if not agreed.
5.	Matter is considered determined, and the file is closed.
6.	Time is abridged.

21.      Judgment and orders accordingly.

Lawyer for the plaintiff: Public Solicitor 
Lawyer for the defendants: National Development Bank LTD Inhouse Counsel