N11172

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 187 OF 2021

BETWEEN:
BERNARD PHILIPAE
Plaintiff

AND:
MARRIANNE URAIWA in her capacity as the General Manageress of National Development Bank.
First Defendant

AND:
NATIONAL DEVELOPMENT BANK
Second Defendant

MADANG:  NAROKOBI J
1 JULY 2024; 11 MARCH 2025

PRACTICE AND PROCEDURE – Adequacy of Pleadings – Whether pleadings, when read as a whole disclose a reasonable cause of action.

PRACTICE AND PROCEDURE - Liability – Whether liability should be confirmed before assessment of damages.

DAMAGES – Breach of equitable right of redemption  – Appropriate quantum of damages.

The Plaintiff obtained default judgment against the Defendants with damages to be assessed. The basis of the claim as can best be understood from the pleadings and the evidence was that the Defendants failed to afford the Plaintiff as mortgagor, his equitable right to redeem his mortgage otherwise commonly known as the mortgagor’s right of redemption. 

Held:

(1)	The pleadings are deficient to a certain extent but when read as a whole disclose a reasonable cause of action (Kuman v Digicel (PNG) Ltd (2013) SC1232), that is the mortgagee breached the mortgagor’s right of redemption (Augerea v The Bank South Pacific Ltd (2007) SC869).

(2)	A cursory review of the pleadings would therefore confirm the default judgment entered against the Defendants (Mel v Pakalia (2005) SC790).

(3)	Taking into account the circumstances of this case and comparable cases, the Plaintiff is entitled to damages composed of the depreciated value of the bus seized by the Defendants as collateral (K45,500.00), general damages (K10,000.00) and exemplary damages (K5,000.00), a total of K60,500.00.

(4)	All other claims are refused due to the inadequacy of pleadings.  

Cases cited

Augerea v The Bank South Pacific Ltd (2007) SC869
Harding v. Teperoi Timbers Pty Ltd [1988] PNGLR 128
Kuman v Digicel (PNG) Ltd (2013) SC1232
Ibi Enei v. Rimbunan Hijau Limited (2011) N4402
Mel v Pakalia (2005) SC790
PNG Aviation Services Pty Ltd v. Geob Karri (2009) SC1002
Potane v National Development Bank (2013) N5099
Rimbunan Hijau (PNG) Ltd v. Ina Enei (2017) SC1605

Counsel

Joseph Lai for the plaintiffs
Johnny Kolkia for the defendants

DECISION

1.	NAROKOBI J: This is a decision after a contested trial on assessment of damages after default judgment was entered against the Defendants on 23 February 2023. 

Background

2.	The Plaintiff filed proceedings claiming that the Defendants unfairly seized his PMV bus that he had bought from a loan from them, kept it under their custody for four months, and then sold it at an undervalued price, and this caused him to suffer loss and damages. The Plaintiff is now here before the court seeking damages after he secured liability in his favour through default judgment.  

Issues

3.	The issue in my view is twofold – firstly to confirm that liability should stand, and this includes a consideration of the pleadings and secondly, if liability is confirmed, then what damages should the Plaintiff be entitled to?

Evidence

4.	The Plaintiff filed an affidavit on 5 July 2023 setting out the following series of events, which I summarise. On 4 October 2013 the Plaintiff approached the National Development Bank or NDB for a loan to purchase a 26-seater Toyota Coaster bus. He was informed of the lending requirements. The loan must be adequately secured with appropriate insurance cover which will be at the mortgagor’s expense. A loan proposal was submitted to the NDB, Madang branch on 13 October 2013 enclosing a projected cash flow. On 25 February 2014 the loan application was approved. Following the successful application the Plaintiff raised a bank cheque of K47, 948. 55 made payable to Ela Motors Madang as his equity contribution for the loan. NDB paid K87, 048. 95 to Ela Motors as it's part of the loan agreement. Several other fees were also paid by the Plaintiff. Three of the Plaintiff’s buses were then pledged as security for the loan. The Toyota Coaster 26-seater bus was used to operate on route 100 between Mount Hagen and Porgera. Its monthly intake was estimated to be K30,000.00.

5.	An irrevocable standing authority of K5, 357.00 was placed on the Plaintiff’s account for the loan repayment. The loan repayment is to be executed and lodged with NDB. Loan repayments were made between K5,000.00 to K12,000.00 per month depending on monthly operational costs of the bus.

6.	Between May 2014 to May 2016 more than 70% of the loan had been repaid. After May 2016 the bus started to develop mechanical problems and was unable to carry out its normal operations. This had a major impact on the Plaintiff's ability to repay the loan. Subsequently he wrote several letters to NDB advising them of the problems he was going through and asked the NDB to reduce the irrevocable standing order authority, also seeking an extension of the repayment period. His requests to refinance his loan account so that he can fix the bus and continue to repay the loan until completion did not receive any response.

7.	Despite the Coaster 26-seater Bus being grounded loan repayments continued from the takings made from his other bus, a 15 seater Toyota Hiace, operating on route 6C between Madang Town and Newtown. This went on until 17 July 2017.

8.	On 28 July 2017, the bank repossessed his only operating bus, a 15-seater Toyota Hiace, bus registration number – P-0913E. According to the Plaintiff, the loan arrears remaining was K17,842.00.

9.	After four months the bus was sold without any further communication from the Defendants. He says this was poor customer service and he was not afforded the opportunity to buy his bus back, through the “right of redemption.” It was sold for K15,000.00 by the bank on public tender. This was at a very low price, and it was done without a proper valuation report of the value of the bus at the time of the sale. In 2014 the bus was valued at K65,000.00 when it was listed as collateral for his loan for the coaster PMV bus. He says that the bank must pay for the difference of K25,000.00.

10.	The Plaintiff further claims that his 15-seater bus makes K300.00 per day, with a monthly takings of K8,400.00. In 74 months this would be K613,200.00. His 25-seater bus was making K30,000.00 a month, which would be K2,610,000.00 in 87 months.

11.	Proceedings initiated by the Defendants in the District court for the arrears of the loan was dismissed on the basis that the Plaintiff had paid more than what he owed the bank.

12.	The bank directly purchased insurance premiums from Southern Cross Assurance Ltd and debited his account. This increased the interest component of his loan repayment, when added on to the balance outstanding. His loan was K87,048.95, but he says that because of NDBs predatory banking techniques, his loan was increased to K140,401.95, a figure not intended to.

13.	The Plaintiff claims costs that he has expensed in pursuing the case and asked that his name be removed from the Credit Data Bureau as a defaulter.

14.	The Defendants on the other hand deposes to two affidavits by one of its officers, Jesse Isafe. The first affidavit was filed on 19 July 2023, and the second one on the same date. What his affidavit essentially state is as follows. He is a loans officers with the Second Defendant.

15.	On 25 February 2018, the Plaintiff entered into a loan agreement with NDB. The terms of the loan agreement was that the Plaintiff obtained a loan of K111,880.00 which was to be repaid over a period of 24 months at K5,357.00 per month with interest at 6.5% per annum on a reducing balance. The security for the loan were three PMV buses. One of them was the 25-seater Coaster PMV bus and the other was the 15-seater Hiace PMV bus. The details of the PMV bus that was purchased with the loan was a new Toyota Coaster 25 seater bus, white in colour, with registration as MAF 546, Engine No. 14B-1870211 and chassis number – JTGFY418102015970.

16.	Normal repayment were made in the first 12 months. After May 2014, the payments became irregular – some months were missed and in some instance, the amount paid was less than the agreed monthly repayment term.

17.	The security deposit of K6,881.25 was applied to the loan, and the loan was referred to NDB’s asset management as the repayment was not assured. On 7 December 2016, NDB issued a letter of demand for K26,362.96, which he personally served on the Plaintiff at 8.39am on15 December 2016 in the Newtown suburb of Madang. The letter of demand was not satisfied, and as a result the unsuccessful attempts were made to locate the secured motor vehicle. According to Jesse Isafe, the bus was taken to Wabag to avoid repossession. The other blue 15 seater bus used as security was involved in an accident and could not be repossessed, as it was damaged beyond repair.

18.	On 28 July 2017, the third security vehicle for the loan, a white Toyota Hiace 15-seater, registration No. P0913E, Engine No. 5L-6155891 and Chassis no. 600017949 was repossessed. It was tendered for sale in the National newspaper on Friday 11 August 2018 and Monday 14 August 2018. I note that the year “2018” may have been an error on the part of the deponent, because the bus was sold in 2017. Jesse Isafe could have meant 11 August 2017 and 14 August 2017. 

19.	On 17 November 2017, the PMV bus advertised was sold to a Paul Akun, for K15,000.00, and the proceeds applied to the outstanding loan balance. K7,425.10 was the residual loan balance, and this was communicated to the Plaintiff on 20 November 2017.

20.	As to the insurance, Jessie Isafe states that the Plaintiff is required to keep his property insured during the term of the loan. In the event he cannot do that the bank will pay the insurance premium, and seek reimbursement from the client with interest.

21.	Letters from the bank informing the Plaintiff of his outstanding loan payments did not meet a favourable response, and as a result, the Plaintiff’s security deposit of K6,881.25 was forfeited to offset his arrears.

22.	 After the advertisement on 11 August 2017 and 14 August 2017, three persons placed their bid. The highest bidder did not come good on his offer, and person who was able to meet his offer of K15,000.00 was sold the vehicle. After the sale, there was still an outstanding amount of K7,425.10.

The Law

23.	Generally, the principles on assessment of damages, which I consider in this matter are stated in the case of Mel v Pakalia (2005) SC790. I quote these principles from that case:

•	The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person’s case, that person has the onus of proving the allegation. (Yooken Paklin v The State (2001) N2212, National Court, Jalina J.)
•	Corroboration of a claim is usually required and the corroboration must come from an independent source. (Albert Baine v The State (1995) N1335, National Court, Woods J; Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331, National Court, Lenalia J.)
•	The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim. (Peter Wanis v Fred Sikiot and The State (1995) N1350, National Court, Woods J.)
•	The same principles apply after default judgment is entered and the trial is on assessment of damages even when the trial is conducted ex parte. A person who obtains a default judgment is not entitled as of right to receive any damages. Injury or damage suffered must still be proved by credible evidence. (Yange Lagan and Others v The State (1995) N1369, National Court, Injia J.)
•	If the evidence and pleadings are confusing, contradictory and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing. (Obed Lalip and Others v Fred Sikiot and The State (1996) N1457, National Court, Injia J.)
•	Where default judgment is granted, for damages to be assessed on a given set of facts as pleaded in a statement of claim, the evidence must support the facts pleaded. No evidence will be allowed in support of facts that are not pleaded. (MVIT v Tabanto [1995] PNGLR 214, Supreme Court, Kapi DCJ, Hinchliffe J, Sevua J; Waima v MVIT [1992] PNGLR 254, National Court, Woods J; MVIT v Pupune [1993] PNGLR 370, Supreme Court, Kapi DCJ, Jalina J, Doherty J; Tabie Mathias Koim and 28 Others v The State and Others [1998] PNGLR 247, National Court, Injia J.)
•	The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages. Where precise evidence is available the court expects to have it. However, where it is not, the Court must do the best it can. (Jonathan Mangope Paraia v The State (1995) N1343, National Court, Injia J.)

24.	 I apply these principles when deciding the issues I have referred to above, which I believe the facts raise.

Considerations

25.	The Defendants raise the issue of pleadings. To a certain extent, I agree with the Defendants that the cause of action was poorly pleaded. The gist of the Plaintiff’s case was the manner he was treated under the loan agreement he had with the Defendants – essentially a cause of action in either contract law or negligence should have been clearly pleaded. However, it only became apparent that this was a case for breach of a fundamental term of the loan agreement after I read the pleadings as a whole and considered the evidence. 

26.	I have taken the approach the Supreme Court took in the case of Kuman v Digicel (PNG) Ltd (2013) SC1232, and find that reading the pleadings as a whole, the Plaintiffs claim is essentially that he was not fairly treated under the loan agreement. I have had further regard to the case of Augerea v The Bank South Pacific Ltd (2007) SC869. In that case it was emphasised at [20] that the right of redemption is a fundamental term of a mortgage agreement and that the mortgagee must not act in a way that defeats the right of redemption. In my view the fact that the bus was kept for four months without being used and insurance premium was charged on the Plaintiff without his consent, made it difficult for the Plaintiff to exercise his right of redemption. There is no explanation why there was no valuation done to the bus before it was sold.

27.	The Defendants say that after they sold the bus, an outstanding balance a little in excess of K7,000.00 remained. However, the Plaintiff said that when the Defendant sought to enforce its arrears in the District Court, the claim was dismissed on the basis that the Plaintiff had fully repaid his loan. No rebuttal was provided by the Defendants against this piece of evidence. I therefore accept that the Plaintiff has no outstanding arrears with the Second Defendant at the time the bus was sold.

28.	From the foregoing I would confirm liability and the pleadings as being adequate.

29.	As to assessment of damages, this is where the pleadings prevent the Plaintiff from being awarded everything that he asked for. The Plaintiff is entitled to the value of the bus at the time it was valued as a security, because the Defendant did not afford him his right of redemption. Essentially it was a breach of contract and the Plaintiff is entitled to be restored to the position prior to the breach (PNG Aviation Services Pty Ltd v. Geob Karri (2009) SC1002). He will be entitled to the value of the bus when it was offered as a security for the loan, less 30% for contingency and depreciation. K65,000.00 was the value of the PMV at the time it was offered as security, so less 30% will result in an award of K45,500 for the PMV. No award will be made for loss of business due to insufficiency of pleadings.

30.	General damages is awarded for the inconvenience, pain and suffering endured by the actions of the offending party in a claim for breach of contract (Harding v. Teperoi Timbers Pty Ltd [1988] PNGLR 128 at 132). Here the Plaintiff suffered greatly because he was not accorded his right of redemption under the mortgage contract. He lost his business, and livelihood as a result of the rash and thoughtless actions of the Defendants and her officers. There is some evidence to suggest he had to get medical treatment. There was however no permanent medical impairment. It is only fair that the Plaintiff is adequately compensated in general damages. Potane v National Development Bank (2013) N5099) is a similar case, where K8,000 was awarded in general damages. I believe a sum of K10,000.00 is fair.

31.	Exemplary damages are awarded to penalise a party for its egregious conduct, awarded at the discretion of the court (Ibi Enei v. Rimbunan Hijau Limited (2011) N4402, confirmed on appeal in Rimbunan Hijau (PNG) Ltd v. Ina Enei (2017) SC1605). In my view, the unfair conduct of the Defendants warrants an award of exemplary damages, so that in future, it should comply with a mortgagor’s right of redemption. Mortgagors are really at the mercy of the banks, and it behoves them to ensure that they fully comply with the terms of the loan agreement, and do not exploit their customers. I award a further sum of K5,000.00 in exemplary damages having regard to comparable cases (Potane v National Development Bank).

32.	All other claims by the Plaintiff are refused due to the insufficiency of pleadings, leaving a total award of damages of K60,500.00.

33.	Interest on the judgment sum of K60,500.00 will be awarded at 8% pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act 2015, from the date the proceedings were filed to the date of judgment. 

34.	I will also award costs against the Defendants, such costs to be taxed if not agreed. 
 
Conclusion

35.	The Plaintiff has confirmed liability on the basis that his right of redemption under the mortgage was breached and as a result he should be compensated a reasonable sum, which I assess to be K60, 500.00 composed of the depreciated value of the bus, general damages and exemplary damages.

36.	Since the First Defendant was sued in a vicarious capacity as an employee of the Second Defendant, the Second Defendant shall pay the damages, interests and costs.  

Orders

37.	On account of my considerations and findings, I make the following orders:

1.	The Second Defendant shall pay the Plaintiff a judgment sum of K60,500.00.
2.	The Second Defendant pays the Plaintiff interest on the judgment sum of K60,500.00 at 8% from the date the proceedings were filed to the date of judgment.
3.	The Second Defendant pays the Plaintiff costs, such costs to be taxed if not agreed.
4.	The matter is considered determined, and the file is closed.
5.	Time for entry of the orders is abridged.

Judgment and orders accordingly.    

Lawyers for the plaintiffs: Pilisa Lawyers
Lawyers for the defendants: Johnny Kolkia Lawyers