Gaigo v Manager, Rural Development Bank Boroko Branch [2005] PGDC 23; DC159 (1 January 2005)

The defendants repossessed a motor vehicle to wit a PMV (3 tonne) Mitsubishi Truck Reg. No. P287 R, the property of the Kouderika Village Community without right and proper consultation with the complainants. And the complainants seeks orders for the return of the vehicle and to reimburse the overpayment monies in the sum of K7,052.88.

The RDB then granted a loan of K21,390.12. the loan was to be repaid over the period of two (2) years with interest of 22.0% per year. The loan is to be repaid at the rate of K1,110.00 on the first day of each month commencing on 1st January 1997.

The 22% interest per annum still apply for the extended period. The complainants loan account number for this Hire Purchase Agreement was 11/AFO2-101149J. The account number was later changed to 101-11-101149J as Bad & Doubtfull Debt account when the complainants defaulted in their monthly loan repayment commitment. These were the only two (2) accounts the complainants’ loan repayment were to be posted to.

The evidence for an on behalf of the complainants is received from the witnesses Dairi Gaigo, and Momo Gaigo who gave sworn evidence and were cross-examined.

	Home \| Databases \| WorldLII \| Search \| Feedback Papua New Guinea District Court

The evidence for the defendant are received from the witness Mr. Raymond Eliakim and Kes Undah both Recoveries Officers from the Rural Development Bank (RDB). Their affidavits were tendered in Court by consent of the complainant who elected not to Cross-examine the deponents.

The complainants Mr. Dairi Gaigo, Mr. Vasiri Seri and other filed joint affidavits dated 5th October 2004, 15th November 2004 and 18th February 2005. Their evidence was presented by Mr. Dairi Gaigo who was cross-examined in Court.

In his Affidavit dated 5th October 2004, Mr. Dairi Gaigo deposed that the total cost of the Mitsubishi Truck was K42,782.12 less the trade in value of K15,392.00 plus a cash deposit of K6,000.00 less the total loan paid the sum of K28,443.00. He claims that they have overpaid the defendant (RDB) the sum of K7,052.88.

He deposed that the complainants are not new to securing loans from the RDB (the Bank) and they understood the process of repossession the property in the vehicle. He says that when such events occur the RDB serves a written letter in advance to the customer informing of the outstanding arrears and the due date of payment. If the customer fails then the Bank takes its next course of action to repossess the property and locks it up in the Bank’s custody allowing the customer to repossess if upon payment of the outstanding arrears. The entire repossession exercise carried out by the second and third defendants (Raymond Ehirkir and Kess Undah) was totally verbal, unconstitutional and unacceptable.

The deponents also stated that they discovered that there had been costing errors made by the Bank, the RDB in some of the payments made by the complainants. Their loan repayment Account Number as per the contractual agreement is 11/AF02-101149J, later it was changed to 101-11-101149J. They discovered that some of their payments were charged or posted to wrong accounts as follows:-

*Account No.*	*Amount*	*Receipt No.*	*Date Paid*

11/AF02-101165J	K 310.00	482678	17/12/96
101-11-101149950	K 500.00	515153	08/12/97
101-011-101149	K 242.00	528331	14/04/98
101-011-101149	K 550.00	558585	14/08/02
101-11-101165J	K 300.00	485677	19/12/96
101-11-101149	K4,050.00
101-11-101141J	K 471.00	515653	25/02/98
101-11-101149	K 500.00	501048	28/04/97
101-11-10149	K 500.00	514738	14/10/97
"	K 300.00	515369	07/01/98
"	K 200.00	531855	04/02/99
"	K 200.00	531899	15/02/99
"	K 770.00	558978	09/08/99
"	K 770.00	559101	06/09/99
"	K 300.00	559808	21/02/00
"	K 190.00	558550	14/04/00
"	K 320.00	560329	30/05/00
Total	K6,423.00

As per the Affidavit sworn on 15th November 2004 the witness Dairi Gaigo and other jointly deposed that the defendants have not responded to their claim of K6,423.00 costing errors by the Bank. And they claim the Bank to reverse the money and charged to their proper account. The witness deposed also that the defendant have sold the vehicle to one Petrus Tangopa while they seek Orders for the return of the vehicle and the reimbursement of the overpayments of K7,052.88.

And in the Affidavit sworn on the 18th February 2005 the deponent Mr. Dairi Gaigo deposed that the Ex Parte Order dated 15th December 2004 to be upheld for the reasons that the defendants were never present in Court except by their lawyer. The defendant to comply to that Order and pay them K8,000.00 as ordered.

The witness Momo Gaigo stated that the loan repayment by the complainants was on schedule and that they have fully repaid the loan. However the Bank (RDB) claimed that there was a loan arrears of K4,000.00. That a total payment of K6,000.00 was posted by the Bank (RDB) to different accounts.

Basically the complainant’s evidence is that they have fully repaid the loan and even made over payments of K7,052.88. And that some of their loan repayment totalling to K6,000.00 were erroneously posted to wrong accounts by the defendants.

The evidence for the defence are based on the Affidavits of the defendants Raymond Ehirkir (Eliakim) and Kess Undah. Their affidavits were tendered by consent of the complainant. They were not called for cross-examination, though the complainant earlier intended to cross-examine them.

The defendants do not dispute the paragraphs 1 to 4 of the Brief Facts stated above. The defendants however dispute the paragraph 5 of the Brief Facts, that is on overpayment and costing errors.

The defendant Raymond Ehirkir deposed in his affidavit sworn on 20th October 2004 that even after the Bank (RDB) has extended the loan repayment period from two (2) years to three (3) years from May 1997 to April 2000) and also decreased the monthly repayment from K1,110.00 to K770.00 per month, the complainants were not able to keep up with their loan repayment commitment. So on 19th November 1997 a letter of demand was served on them. They made some payments but was not sufficient.

On 8th May 1998 the vehicle was repossessed by the Bank but later released to them when the president of the Hiri Local Government Council assisted them with K2,400 payment. Thereafter the complainants made less or nil payments, which led to further service of letters of Demand on 4th July 2000 and 12th July 2001. By then the vehicle broke down and not repaired making it difficult for the Bank to exercise its right of repossession from the village. The loan account fell into arrears and was transferred from being a current loan account to a "Bad and Doubtful Debt Account" (BDD) which resulted in the loan account number been changed from 11/AF02-101149J to 101-555-101149J at about the end of 2001.

The claim of overpayment by K7,052.88 is the actual interest charged on this loan account at the rate of 22% per year. In fact the interest is well over K7,052.88 which remains outstanding. That as of the 21st October 2004 the outstanding loan balance remains at K2,975.31.

Defendant Kess Undah deposed in his affidavit and denied that the defendants had gone to Kouderika village on Saturday 3rd July 2004 as it was a non-working day. That the 1st and 2nd defendants went to the village on 8th July 2004 by themselves. It was on the 14th July 2004 the defendants were accompanied by five (5) Police personnel to assist them in the repossession exercise due to the complainants negative responses. Also the successful bidder went with them with the two mechanics to tow the vehicle. The villagers were screaming and shouting, so the Police step into calm them down. The Police were unarmed.

Issue No. 1: Whether the complainants have breached or defaulted in the terms of the Loan Agreement.

The complainant made a loan of K21,392.12 from the defendant (RDB). They are to repay this loan with flat interest of 22% per year over a period of two (2) years at a rate of K1,110.00 per month. Paying the loan at this rate the total amount they would have paid would be K26,640.00 with the interest, if their monthly commitment was up to date.

In the first 3 to 4 months the complainant were not able to keep to their monthly payments. In January 1997 they only paid K710.00, in February K740.00 and for March only K400.00. Clearly the complainants defaulted in the loan repayment. The complainants requested for extension of the loan repayment period. The Bank (RDB) granted their request and extended the period to three (3) years from May 1997 to 1st April 2000 and reduce ed the monthly instalment payment to K770.00. On this extension and at this rate the complainant would be expected to pay a total of K27,720.00 inclusive of the interest at 22% per year.

From the evidence and the records shows that for some months the complainant had made nil payments particularly for the months of November and December 1999 and March 2000. And in the other months they made less payments for instance February 1997 (K740.00), September 1997 (K300.00), October 1997 (K500.00), in 1998, February (K471.00), March (K310.00), April (K502.00), February 1999 (K200.00), March (K200.00), July (K510.00), October (K380.00), January 2000 (K660.00) and February (K300.00).

The loan was expected to be completed by1st April 2000. The repayment was never completed on the scheduled time. The payments continued after the deadline and the last payment was made on 14th August 2000 with the sum of K550.00. The defendants evidence is that the balance of K2,000.00 as of October 2004 is still outstanding.

Although in some monthly payments the complainant made overpayment such as in December 1997 K2,680.00, May 1998 K2,400.00 there is overwhelming evidence before this Court that the complainant was in breach of the loan agreement.

Issue No. 2: "Whether the defendants have the power to repossess the vehicle and sell it?"

For this loan agreement the parties have signed a "Bill of Sale". Paragraph 6 sub-paragraph (a)(i)(ii) and (c)(vi) of the Bill of Sale required that if the Grantor (Complainant) makes default in payment of the principle amount of the loan, and he fails or neglects to perform, observe, fulfil or keeps all or any of the covenants provisions conditions and agreement, the Grantee (the Bank) has a lawful absolute discretion without further or other authority to enter with force, if necessary, into the Grantor’s premises where the mortgaged property is kept to seize and take possession of the mortgaged property to either sell and dispose of it or to purchase the mortgage property by public auction or private contract. The bill of Sale was signed by the complainants. There can be no doubt that the complainants were aware of the terms and conditions and the consequences that would follow upon the breach of the loan agreement. The complainants were well aware of the content of the "Bill of Sale" they signed.

The "Bill of Sale" gave the defendants the power to repossess the mortgaged property and dispose it by selling either by public auction or private contract. I find that on the basis of the "Bill of Sale" the defendants have the power to repossess and dispose the mortgaged vehicle.

Issue No. 3.: "Did the Bank (Defendant) make posting errors of the loan repayments to the complainant’s account?"

The complainant evidence show that between the 17th December 1996 to 30th May 2000, the complainant made number of payments totaling to K6,423.00. These payments were posted to wrong accounts. The defendant’s did not dispute this claim nor gave an explanation as to whether these monies were actually paid into the complainants proper loan account. The defendants even failed to produce the copies of the Statement of Account of the complainants loan repayment. The Letter of Demand do not provide sufficient detail information of the progressive statement of account.

I find that the defendants did make posting error on a number of payments totaling to K6,423.00 by posting those payments to the wrong accounts other than the Accounts No. 11/AF02-101149J or N. 101-11-101149J. There is no evidence that the complainant had other loans for other projects beside this loan for the vehicle. I find that the defendants did make those posting errors.

However when a comparison is drawn between the total payments made, which is K28,443.00 and the outstanding balance of only K2,000.00, I find on the balance of probabilities that the monies posted to wrong accounts have actually been posted to the complainants proper account on this loan. I find that the defendants could not be held liable for the posting errors in any way. The total payment of K28,443.00 includes the payments for the posting errors.

The complainants claimed that the vehicle they purchased valued K42,782.12. They said K21,392.00 as deposits and made a total loan of K21,392.12.

In repaying the loan they paid a total of K28,443.00 and they claim that they made an over-payment of K7,052.88. The complainant failed to realize that on top of the principle loan of K21,392.12 they have to pay 22% interest on it per year.

It is not clear how the interest of 22% per year was added to the loan. Was the interest calculated for the total period of the loan and then add the total interest to the principle amount loaned or whether the interest was calculated on the balance outstanding at the end of each month. Suppose that the interest was calculated for the total period of the loan then the total interest would be:

So the total loan to be repaid would be K21,392.12 + K9,412.53 = K30,804.65 which was to be paid over the two years. The complainant only paid K28,443.00 which leaves them the outstanding balance of K2,361.65. On top of this the Bank charges penalty fees for later or less payments per day. This penalty fees would have increased the amount as well.

Suppose the interest of 22% per year was added to the balance outstanding at the end of each month, the interest would have been far greater than the interest calculated in the first option. In whatever formula or method was opted by the Bank on the interest, the complainant did not seem to take note of that including the penalty fees.

I find that the complainants still have the outstanding balance of loan to be paid and that the complainants are not entitled to any reimbursement.

Issue No. 5: "Did the repossession occur after the complainant had paid the loan in full?"

The complainant claim that the loan was fully paid in August 2000 and the defendant exercised the power of repossession on 14th July 2004 some four (4) years later. The defendant claim that at the time of the repossession the complainant had their outstanding loan of K2,000.00 or more if properly calculated.

The evidence is precisely clear. The complainant failed to take or add the 22% interest to the principle loan of K21,392.00. This human error led them to believe that the loan was fully paid. They also failed to take into account of the late or less payment penalty fees charged by the Bank at the rate of K2.45 per day for the unpaid monthly loan. In the last "Demand for Payment" dated 16th August 2001 the outstanding balance was K4,222.63. The Bank repossessed the vehicle on 14th July 2004. The Statement of Account dated 21st October 2004 showed that the loan outstanding being K2,975.31. The evidence strongly established that at the time of the repossession there was unpaid outstanding loan. The complainant never fully paid the loan before the repossession occurred.

The complainants claim for the reimbursement of the over-payments and or for the return of the motor vehicle must fail. The Bank has exercised its power of the repossession and disposal under the "Bill of Sale". And I find that the defendants are not liable.

Accordingly this Court orders that the case be dismissed and the defendants discharged with cost.

Principle Loan x	22% x period of the loan
	100

K21,392.12 x	22% x 2 years = K9,412.53 Interest
1	100

Papua New Guinea District Court

Gaigo v Manager, Rural Development Bank Boroko Branch [2005] PGDC 23; DC159 (1 January 2005)