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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
OS NO 46 OF 2025 (COMM-IECMS)
WESTPAC BANK – PNG - LIMITED (1-5295)
Plaintiff
V
REMDY INVESTMENTS LIMITED (1-56391)
Defendant
WAIGANI: ANIS J
14, 27 NOVEMBER 2025
INTERLOCUTORY – Seeking leave to file cross-claim in response to proceeding commenced by way of originating summons – Order 4 Rule 31 and 34 (1) – National Court Rules – whether leave should be granted – whether meritorious claim demonstrated – what are the requirements? - leave to complete a contract of sale with third party – Order 14 Rule 33 and 34(5) – National Court Rules – whether leave should be granted – whether the purpose of the request is directly relevant to claim – whether the purpose would achieve a reasonable or fair outcome – other considerations – whether court should exercise inherent jurisdiction in the interest of justice - considerations - ruling
Cases cited
Ning’s Trading Pty Ltd v. ANZ Banking Group (PNG) Ltd (1998) N1700
Papua New Guinea Banking Corporation v. Barra Amevo and Ors (1998) N1726
Westpact Bank (PNG) Ltd v. Jenny Kopia and 1 Or (2021) N8851
Varika v. Mendikwae Ltd (2016) N6228
Counsel
M Tumul, for the plaintiff
T Elemi, as company representative of the defendant
DECISION
1. ANIS J: This was an application moved by the defendant seeking leave of the Court to file a defence and cross-claim and to sell a property which is the subject of a mortgage. The application was contested, and it was heard on 14 November 2025.
2. I reserved my ruling thereafter to a date to be advised.
3. This is my ruling.
BACKGROUND
4. The brief background of the matter is this. In 2008, the defendant and its related businesses, including TE Services Ltd (hereinafter referred to as defendant), entered into a loan facility called Fully Drawn Advance (FDA) with the plaintiff. With the arrangement, the plaintiff advanced K534,000 to the defendant. The defendant provided, as security for the FDA loan facility, its property which is described as Allotment 1, Section 86, Boroko, National Capital District (First Property).
5. On 14 April 2014, the parties (i.e., the plaintiff and the defendant) agreed to amalgamate the FDA loan facility with another or new loan arrangement. The new agreement was called Business Finance Agreement (BFA). Under this new arrangement, the plaintiff advanced K1,440,000 to the defendant. The money was used to purchase a property which is described as Allotment 7, Section 80, Korobosea, National Capital District (Second Property). [Both properties are referred to herein as the 2 properties.]
6. The plaintiff claims that as of November of 2020, the defendant began to default in its loan repayments. On 16 July 2025, the plaintiff commenced this proceeding. It claims that it has complied with relevant default provisions under the BFA loan agreement and processes including provisions under the Land Registration Act Chapter No. 191 (LRA) and thus is in the process of exercising its rights as mortgagees over the 2 properties under s.67 of the LRA. According to its Originating Summons filed 16 July 2025 (OS), the plaintiff has opted to exercise its rights and obtain vacant possession of the First and Second Properties. Consequential orders are also sought in the OS.
7. In general, compliance with the processes for securing vacant possession or foreclosing on a property may be contested, especially the requirement to establish default as required by law, which is why in most instances, mortgagees would apply to the Court to seek declaratory orders and leave of the Court, to assert their rights and confirm that they have complied fully with the requirements for default. See cases: Ning’s Trading Pty Ltd v. ANZ Banking Group (PNG) Ltd (1998) N1700, Papua New Guinea Banking Corporation v. Barra Amevo and Ors (1998) N1726 and Westpact Bank – PNG – Ltd v. Jenny Kopia and 1 Or (2021) N8851. A primary reason why financial institutions would prefer seek Court intervention in these types of proceedings, is to get clarity, confirmation or assurance from the Court that they have or had followed the due processes that are stipulated under their contracts including the mandatory provisions that are provided under the LRA, to assert or enforce their contractual rights against mortgagors.
8. The substantive matter is pending at this juncture.
NOTICE OF MOTION
9. The relief sought in the NoM are as follows:
......
ISSUES
10. The main issues, in my view, are as follows, (i) what do the pleadings say in terms of the right of a defendant to file a defence and cross-claim in a proceeding that is filed under an originating summons, (ii), whether leave should be granted to the defendant to file a defence and cross-claim; what are the requirements for that?, (iii), whether the defendant may be permitted under the circumstances to sell one of its properties namely the Second Property and secure K2,000,000 of the proceeds of sale and have that paid into the National Court Trust Account pending settlement or conclusion of this proceeding; whether the rule that is relied upon, namely, Order 14 Rule 33, permits the Court make such an order, and (iv) regardless, whether the proposal by the defendant to permit it to sell one of the properties is not unreasonable and if so, whether the Court should make orders in that regard or favourably towards the defendant.
SOURCE
11. The applicable sources relied upon in the NoM are Order 4 Rules 31, 34 and 35 and Order 14 Rules 33 and 34, of the National Court Rules (NCR). I set them out herein,
ORDER 4
......
31. Directions. (5/7)
(1) The Court may exercise its powers under this Rule at any time after the commencement of the proceedings.
(2) The Court shall give such directions as are convenient for the just, quick and cheap disposal of the proceedings.
(3) Without limiting the generality of Sub-rule (2), the Court may—
(a) make orders for defining the issues by pleading or otherwise; and
.....................
34. Cross-claim. (5/10)
(1) A defendant may, with the leave of the Court, cross-claim for any relief which the Court may grant.
(2) A defendant who wishes to cross-claim shall, at as early a stage as is practicable, tell the Court the nature of the cross-claim.
(3) A cross-claim shall be made in such manner as the Court may direct under Rule 31 or 35. or under Order 8 Rule 37(2).
35. Continuation on pleadings. (5/11)
(1) The Court may order that the proceedings continue on pleadings.
(2) The Court may, on or after making an order under Sub-rule (1)—
(a) order that any affidavits stand as pleadings; or
(b) make orders for the filing of a statement of claim or other pleadings.
(3) The provisions of these Rules concerning proceedings commenced by writ of summons shall, except as far as the Court otherwise orders, and except so far as the context or subject matter otherwise indicates or requires,
apply to proceedings ordered under this Rule to continue on pleadings.
......
ORDER 14
33. Power to order sale. (30/2)
In proceedings relating to land, other than proceedings for possession of land, the Court may, at any stage of the proceedings—
(a) order that the whole or any part of the land be sold; and (b) order that any party in receipt of the rents or profits of the land or otherwise in possession of the land deliver possession to such person as the Court may direct.
......
[Underlining mine]
34. Manner of sale. (30/3)
(1) This Rule applies where the Court has made an order under Rule 33 that land be sold.
(2) The Court may appoint a party or other person to have the conduct of the sale.
(3) The Court may permit the person having the conduct of the sale to sell the land in such manner as he thinks fit.
(4) The Court may direct any party to join in the sale and conveyance or transfer or in any other matter relating to the sale.
(5) The Court may give such further directions as it thinks fit for the purpose of effecting the sale, including directions—
(a) fixing the manner of sale, that is to say, whether the sale is to be by contract conditional on approval of the Court, by private treaty, by public auction, by tender, or by some other manner; or
(b) fixing a reserve or minimum price; or
(c) requiring payment of the purchase money into Court or to trustees or other persons; or
(d) for settling the particulars and conditions of sale; or
(e) for obtaining evidence of value; or
(f) fixing the remuneration to be allowed to any auctioneer, real estate agent or other person.
CONSIDERATION
12. Let me address issues 1 and 2 together.
13. The proceeding commences by way of an originating summons, thus, Order 4 Rules 31 and 34(1), in my view, have been correctly invoked by the defendant. See case: Varika v. Mendikwae Ltd (2016) N6228.
14. However, that is just the beginning because there are a number of hurdles that I see that have to be met.
15. Order 4 Rule 34(2) appears to state a pre-requisite that a leave Court may consider, which is that a defendant who wishes to cross-claim shall, at as early a stage as is practicable, tell the Court the nature of the cross-claim. I find and consider that to be a requirement or test. The exercise of the Court’s power is discretionary, so in addition to meeting the said requirement, the Court would also be required to consider the nature of the cross-claim. I also will regard that as a requirement for considering leave. That said, I observe that a main characteristic of proceedings commenced by way of an originating summons is that the material facts are not so much in dispute or disputed. As such, a further consideration for the leave Court to consider, in my view, should be whether the intended draft defence or cross-claim may give rise to substantial disputes on the material facts. If the answer is affirmative, then leave may be granted to an applicant. I will apply these 3 requirements as a guide to consider whether I should grant the first relief that is sought in the NoM.
16. I note the submissions of the parties on the 2 issues.
17. I begin my consideration with these observations:
(i) I refer to Annexure D to Mr. Elemi’s affidavit filed 6 October 2025 which attaches a copy of the draft Defence and Cross-Claim (D&CC);
(ii) In the proposed D&CC, I observe that, except for para. 1 which contains a general denial, paras. 2 to 26 contain allegations of facts and assertions made against the plaintiff; I observe that such cannot be regarded as pleading in regard to a defence; pleading of a defence are restricted to responding to a pleading whether it be to a statement of claim or otherwise;
(iii) But I do note that this is a case where the proceeding is commenced by the plaintiff by way of an originating summons;
(iv) In regard to the proposed cross-claim, I observe that it is pleaded as a continuation of assertions made in the proposed defence;
(v) I observe that the defendant intends to seek (i) relief under the Fairness of Transactions Act 1993 (FTA), (ii), declaratory relief for an order for restitution, damages for breach of contract, discharge of mortgages over its various properties, damages for loss of business opportunities and costs.
(i) its claim is made only against the defendant and is premised on 2 out of the 7 facility arrangements that were the subject of the BFA; the 2 facilities relate to monies that had been advanced to the defendant initially under the FDA loan to purchase the First Property, and secondly, monies advanced in regard to the purchase of the Second Property;
(ii) the First Property and the Second Property were expressly secured as securities for the 2 facilities in the BFA; and the OS is commenced in that regard, that is, to secure these 2 properties premised on alleged defaults committed by the defendant under the terms and conditions of the 2 facilities and the mortgages that have been executed;
(iii) the OS is not commenced against the other related subsidiaries or businesses of the defendant; all the monies that had been borrowed by these related business entities or persons have been fully repaid.
18. Premised on these, I must come to the conclusion that although I find that the defendant did not delay in its application for leave to file its draft D&CC, I am not persuaded that it has met the other 2 requirements. I am not satisfied that the nature of the cross-claim is similar to the OS. I am also not satisfied that the intended claim is related or responds directly to the purpose of the OS. For example, the defendant does not appear to dispute the alleged defaults, and it did not take steps to address that by filing proceedings against the notices of defaults at the material time in 2019 or 2020; It is also not sought in the draft D&CC. I conclude that there appears to be no serious contests on the facts premised upon which the OS was filed. I also note significant differences or disconnect in the two pleadings and claims, that is, between the OS and the draft D&CC.
19. In regard to the element substantial dispute, for the reasons I have stated above and in my considerations, I am not convinced that this requirement has been met. There is nothing stopping the defendant to file separate proceedings that are not related to what is being sought in the OS. However, there appears to be want of merit as observed in the cross-claim in its current form. But the main reason is this. I observe that the arguments and evidence filed by the defendant do not join substantive issues on the default and in relation to the plaintiff’s right as a mortgagee over the 2 properties. I also find that this requirement may not apply given that what the plaintiff is pursuing in the OS is different to what the defendant intends to pursue in its draft D&CC.
20. For these reasons, I decline relief 1 of the NoM.
LEAVE TO SELL
21. I now turn to the 3rd issue. Should I grant leave to the defendant to sell the Second Property?
22. The starting point, in my view, is to consider the source that is relied upon by the defendant. Order 4 Rule 34(1) begins with this In proceedings relating to land, other than proceedings for possession of land, the Court may, at any stage of the proceedings. I also observe that Rule 35, which follows thereafter, may be implemented or invoked only after the Court makes an order to sell a land under Rule 34.
23. As stated, OS was commenced for possession of land by the plaintiff under its statutory and contractual rights.
24. As such, I find that Order 4 Rule 34(1) disqualifies the defendant from relying on it to apply to the Court to seek leave to sell a land which in this case is the Second Property. Thus, I also decline to grant this relief.
OTHER CONSIDERATION
25. The other consideration which is relevant in the exercise of my discretion is the interest of justice. I will take that into account.
26. Court rules are there to assist the parties and the Court set the road map for delivering justice. Courts, in my view, should always be reminded of that and be wary; a court should caution itself not to be drawn deeply into the Rules of Court to avoid loss of track or sight of its purpose.
27. I observe that the intention of the defendant to sell one of its properties that may substantially reduce the full loan areas by about 8O% to 90%, is a reasonable one. I observe that the primary purpose of the plaintiff’s action, that is, in exercising its right as a mortgagee, is to recoup its monies that had been loaned to the defendant with interest and cost. It may decide ultimately to sell the Second Property at some point in time. I observe that evidence adduced by the plaintiff do not suggest that the plaintiff does not intend to sell the 2 properties. Evidence adduced do not also contest the sale amount of the Second Property to say whether it is below market value etc. I also consider the interest component that may be applicable and continue to accrue to the alleged debt as evident in the Further Affidavit of Ms. Lakoro filed 13 November 2025 and note that the action by the defendant appears pragmatic or reasonable; the proposed action has the real potential to reduce the interest payments that are currently charged on the accrued loan amount. The defendant appears to be taking realistic steps towards addressing the matter. Mr. Elemi provides in his affidavit filed on 11 September 2025 details of a contract of sale that had been signed been the defendant and a third party. The contract of sale was executed on 24 July 2025 and is pending settlement, and the delay of completion of the sale is because of the refusal by the plaintiff to allow the sale to proceed and this proceeding. The defendant intends to sell the Second Property for K2,400,000. With the proceeds of the sale, the defendant intends to pay into the National Court Trust Account K2,000,000 to be held pending the finality of this proceeding. Finally, I observe that the defendant has furnished evidence, through the affidavit of Rachael Mileng filed 14 October 2025, that it has in total 4 properties (including the 2 properties) which appears to demonstrate that the defendant may be capable of settling the alleged defaulted sum that is relied upon by the plaintiff to seek leave to acquire vacant possession of the 2 properties. The alleged debt, according to the recent Affidavit of Ms. Lakoro filed 13 November 2025 stood at K2,292,473.05.
28. Therefore, and given the above scenarios, I conclude and find that if the Court refuses to permit the sale as intended by the Defendant, it may be seen as acting irrationally or unfairly.
29. Under the circumstances, I am minded to, using my inherent power, issue orders directing the plaintiff to reconsider its position on the intention of the defendant to sell the Second Property to the third party. I will direct the parties to return to Court on a specific date to see if the parties have agreed for the sale of the property to occur. I may issue orders for sale of the property thereafter after hearing from the parties and if the matter is not resolved.
30. There is also a real possibility that, if the matter is not resolved or regardless of what may be agreed between the parties in regard to the sale of the Second Property, I may refer the matter to mediation.
SUMMARY
31. In summary, I will dismiss the NoM, and in its stead, make orders for the parties to resolve the issue on the sale of the Second Property by the defendant.
COST
32. Since this matter will return at the next return date, that is, premised on the orders that I will make, I reserve my ruling on cost of the NoM at this stage.
ORDERS
33. I make the following orders:
The Court orders accordingly
________________________________________________________________
Lawyers for the plaintiff: Tumul Legal
Lawyers for the defendant: Remdy Investments Ltd representative
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