Waizepa v Bank of South Pacific Ltd [2007] PGDC 24; DC523 (19 April 2007)

DC523

PAPUA NEW GUINEA
[IN THE DISTRICT COURT OF JUSTICE
SITTING IN ITS CIVIL JURISDICTION]

DCCi 11 of 2000

BETWEEN

ENAPE WAIZEPA
Complainant

AND

BANK OF SOUTH PACIFIC LIMITED
Defendant

Goroka: M Gauli
2007: February 02, 28; March 13; April 03, 19

CIVIL - Claims damages – Cost for purchase price of a vehicle – Bill of Sale – Vehicle repossessed on bill of sale of a third party.

Cases Cited
1. Reference No. 1 of 1983 – Re Michael Pondros N425 Tribunal Hearing

References
1. Goods Acts, ss. 1 (2), 21, 22, 23, 25, 13

Counsel
Mr. Kamo Pilisa - For the Complainant
Mr. R. Otto - For the Defendant

19 April 2007

DECISION OF THE COURT

M Gauli: The Complainant Mr. Enape Waizepa sued the defendant the Bank of South Pacific Limited, hereafter the Bank and claims damages including the loss of property namely a bus valued K7, 000.00 plus interest and costs.

2. The brief facts are as follows. The Complainant is the registered owner of a motor vehicle towit a Toyota Hiace 15 seater bus a PMV registered as P9265 which operated within Goroka town. He bought the bus from one Russell Fepo without the knowledge that there was a Bill of Sale signed between Russell Fepo and the Bank. On or about 21 January 2000, the Bank’s predecessor namely the Papua New Guinea Banking Corporation Limited by its servants or agents engaged the police who confiscated and impounded the said bus from the Complainant. Initially the Complainant filed proceedings in the District Court at Goroka to recover the bus. On 29 August 2000, the proceedings were dismissed. He then appealed to the National Court. And on 21 October 2005, entered on 28 April 2006, the National Court in Goroka upheld the appeal and referred the matter to the District Court for retrial which the matter has then come before me. That appeal arose from the dismissal of the complaint on a motion moved by the defendant.

3. The facts above are not in dispute. What is in dispute are whether the complainant has a good title to the subject vehicle and whether the Bank is entitled to repossess that vehicle which is the subject of a registered Bill of Sale.

4. The Complainant’s evidence is that he bought the subject bus from one Russell Fepo for a sum of K7, 000.00 on 17 September 1998. The complainant then registered the said bus under his own name as a PMV bearing the registered number P. 926S and operated it on route number three (3) within Goroka town until it was confiscated and impounded by police on 21st of January 2000. He had no idea that the Bank had a bill of sale over the subject vehicle. And he now claims for the value of the bus plus interest and costs. The engine number been 2L – 4022731 and chassis number 002397.

5. The defendant’s evidence came from the only witness Mr. Noko Uvovo, the employee of the Bank at its Goroka branch as a supervisor in the loan section. He is in the employment with the Bank for three years. He was previously employed by the former Papua New Guinea Banking Corporation (PNGBC) for some years. He then left and worked with another finance company before being employed by the current Bank (the BSP) in Goroka. He has 18 years of experience behind him. His evidence is mainly from the Bank records as he was not privy to the Bill of Sale.

6. His evidence is that one Mr. Russell Fepo obtained a bank loan of K19, 244.00 to clear his existing loan and for working capital requirement. As his security for his loan he put up two of his vehicles, one a Isuzu truck and the other the Toyota Hiace 15 seater bus registered number HAE 438 blue in colour having the engine number 2L – 4022731 and the chassis number 0022397. He then applied for additional loan and with the interest his loan had increased to K22, 000.00. He defaulted with his loan repayment and was in arrears. The vehicle which is the subject of this proceedings was one of the two vehicles registered under the Bill of Sale signed between the defendant Bank and Russell Fepo. When Russell Fepo is in arrears with its loan repayment he cannot sell the vehicle. The complainant has never obtained a good title to the subject vehicle and the defendant repossessed the vehicle under the Bill of Sale. After the subject vehicle was repossessed by the Bank the vehicle was sold by tender to Mr. Heri Vano at the price of K12, 000.00 in March 2001. That is the defendant’s evidence.

7. There are three main issues to be considered and these issues are:-

1. Whether or not the complainant had a good title to the subject vehicle.

2. Whether the defendant Bank is entitled to repossess the subject vehicle under the registered Bill of Sale.

3. Is the complainant entitled to the damages he claims.

8. Issue No. 1: Whether or not the complainant had a good title to the subject vehicle.

There is no dispute that the complainant was no a privy to the Bill of Sale over the subject vehicle entered between the former owner Mr. Russel Fepo and the defendant Bank when the complainant bought the vehicle from Mr. R. Fepo. The Counsel for the complainant in his submission relied on the provisions in the Goods Act, Chapter 251, particularly to Section 1 (2); 21, 22 and 25 and submitted that the complainant purchased the subject vehicle in good faith therefore he had a good title. These provisions states and I quote:

“1 (2) : A thing shall be deemed to be done in good faith within the meaning of this Act when it is done honestly whether or not it is negligently”.

“21 Sale by person not the owner.

(1) Subject to this Part where goods are sold by a person who -

(a) is not the owner; and

(b) does not sell them under the authority or with the consent of the owner,

the buyer acquires no better title to the goods than the seller has unless the owner of the goods is precluded by his conduct from denying the seller’s authority to sell.

(2) This part does not affect –

(a) the provisions of Part III or any enactment enabling the apparent owner of goods to dispose of them as if he were the true owner of the goods; or

(b) the validity of a contract of sale under –

(i) a special, common law or statutory power of sale; or

(ii) an order of a Court”.

“22 Sale under voidable title.

Where the seller of goods has a voidable title to the goods but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods if he buys them in good faith and without notice of the seller’s defect of the title”.

“25 Seller or buyer in possession after sale.

(1) Where a person who has sold any goods is in possession of the goods or of the documents of title to the goods, the delivery or transfer by him, or by a merchantile agent acting for him, of the goods or documents of title under a sale, pledge or other disposition of the goods to a person receiving them in good faith and without notice of the previous sale has the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make it.

(2) Where a person who has bought or agreed to buy any goods obtain, with the consent of the seller, possession of the goods or of the documents of title to the goods, the delivery or transfer by him or by a merchantile agent acting for him, of the goods or documents of title under a sale, pledge or other disposition of the goods to a person receiving them in good faith and without notice of lien or other nights of the original seller in respect of the goods has the same effect as if the person making the delivery of transfer were a merchantile agent in possession of the goods or documents of title with the consent of the owner”.

9. The counsel for the complainant submitted that the Bank’s rights are limited by the operation of the law. The complainant was the bona fide purchaser of the vehicle from Russell Fepo and bought it in good faith and with honesty. And he acquires an indefeasible title which cannot be overridden by the Bill of Sale which he is not a privy to it. At the time he bought the vehicle, both the vehicle and its registration and insurance papers were on Russell Fepo’s possession or custody and the vehicle was registered under Russell Fepo’s name.

10. The counsel for the defendant submitted that the Goods Act ch. 251 only applies to goods sold in market overt. The Act does not apply to the Registered Bill of Sale. The subject vehicle was not sold in a market overt. The exchange of money and the subject vehicle took place on the streets in Goroka town. The sale was private and secret and not done in a market overt therefore the complainant cannot acquire a good title to the good. The counsel did not refer the Court to any provisions in the Goods Act to support the basis of his submission.

11. However Section 23 of the Act may be relevant to this agreement by the defence counsel. That provision states and I quote:

“23 Market Overt

(1) Where goods are sold in market overt according to the usage of the market, the buyer acquires a good title to the goods, if he buys them -

(a) in good faith

(b) without notice of any defect or want of title on the part of the seller.

(2) This section does not affect the law relating to the sale of cattle”.

12. The provision of Section 1 (2) and Section 23 of the Act must be read together to give its true meaning and the effect. The Section 1 (2) cannot stand alone on its own because of the phrase: “- - - within the meaning of this Act - - - -“. And so when we read Section 1 (2) together with Section 23 of the Goods Act, the application of good faith applies only to those goods that are sold in Market overt. The good faith does not apply to goods sold on the street or under some private arrangement. Under Section 21 (1) of the Act if a person sells good and the seller is not the owner or the seller has not obtained the authority of the owner to sell the good, the buyer does not have a good title to the good. There is no doubt that one Russell Fepo was the original registered owner of the subject vehicle and that he was in possession of both the vehicle and that he was in possession of both the vehicle and the registration document that were under his name. However when he mortgage the vehicle under the Bill of Sale as security over his bank loan, the ownership of the vehicle is deemed to have transferred to the Bank. Mr. Russell Fepo merely have the possession of good in the vehicle and or the registration document. The ownership of the vehicle remains in the Bank until Russell Fepo settles his bank loan obligation. And there is evidence that Russell Fepo failed to settle his bank loans and so the Bank retains the ownership of the vehicle through the Bill of Sale.

13. The Section 21 (2) of the Goods Act relates to Part III of that Act. And this Part III (ss. 59 – 69) relates to merchantile agents, consignees and bills of lading that is good sold on market overt. It does not apply to goods sold on the streets or on private arrangement. The complainant therefore could not rely on Section 21 (2) nor could he rely on under Section 1 (2) of the Goods Act.

14. Under Section 22 and Section 25 of the Act it would appear that the complainant having bought the vehicle in good faith and without notice of the defect had acquired a good title. However under Section 13 of the Act, Mr. Russell Fepo must show that he has the right to sell the vehicle. This provision is in these terms:

“13 Implied undertakings as to title, etc.

Unless the circumstances of the contract are such as to show a different intention, there is a contract of sale -

(a) an implied condition on the part of the seller -

(i) in the case of a sale – that he has a right to sell the goods; and

(ii) in the case of an agreement to sell – that he will have a right to sell the goods at the time when the property is to pass; and

(b) an implied warranty that the buyer will have enjoy quiet possession of the goods; and

(c) an implied warranty that the goods are free from any charge or incumbrance in favour of a third party who is not declared or known to the buyer before or at the time when the contract is made”.

15. Mr. Russell Fepo is well aware the subject vehicle was under a Bill of Sale and that the Bank was the owner of the vehicle until Mr. R. Fepo discharged his bank loan obligation. That being the situation as it was Mr. R. Fepo does not have the right to sell the said vehicle to the complainant - Section 13 (a) (i) of the Act. And the seller Mr. R. Fepo knew that the buyer, the complainant will not enjoy the quiet possession and or use of the vehicle – (Section 13 (b) of the Act), and Mr. R. Fepo also knew that there was a charge in the form of a Bill of Sale over that vehicle which he had not made it known to the complainant.

16. From the reasons and finding I have alluded above I find that: (1) Mr. Russell Fepo did not have the right to sell the said vehicle as it is a subject of a Bill of Sale; (2) The sale and purchase of the vehicle was not done in a market overt but either on a street in Goroka town or by private arrangement therefore the complainant cannot be said to have bought the vehicle in good faith under the relevant provisions of the Goods Act. And so I find on the balance of probabilities that the complainant does not have a good title to the subject vehicle.

17. Issue No. 2: Whether the defendant Bank is entitled to repossess the subject vehicle under the registered Bill of Sale.

There is no dispute that the subject vehicle was registered under a Bill of Sale by the defendant Bank as a security over Mr. R. Fepo’s bank loan. When a bill of sale is executed and registered the ownership of the property in a chattel passes to the grantee, in this case the Bank while the grantor retains mere possession of the good. In the case of Reference No. 1 of 1983 – Re: Honorable Michael Pondross N425 – Tribunal Hearing, it was said that:

“Both Bills of Sale were duly registered. It is not necessary to discuss in detail what a Bill of Sale is. It is sufficient if we say that when bill of sale is executed and registered the property in chattels assigned passes to the grantee. The grantor retains mere possession of them subject to conditions stipulated in the Bill. In other words in this case the Bank becomes the owner of the buses until Mr. Pondros fulfilled his obligation to repay the amount of money borrowed. Mr. Pondros retains possession of the buses - - - -.”

18. By the above case law, there cannot be any doubt that in the present case now before this Court, the defendant Bank is the owner of the subject vehicle while Mr. Russell Fepo merely have the possession of the vehicle until he pays off all his bank loan obligation. And so if grantor defaults in his loan repayment the grantee the Bank has the right to repossess the chattel in the bill of sale which is in the possession of the grantor.

19. However where the chattel has been sold to a third party and the third party is in possession of the good while the grantor has defaulted his loan repayment, the Bank, the grantee is entitled to repossess that property under the registered Bill of Sale. The counsel for the complainant submitted that is not possible for the reasons that the Bill of Sale is governed by the Instrument Act while the registration of the motor vehicle is registered under the Motor Traffic Regulation. And that the Instrument Act does not set out and specify and cover the rights and interest of a third party as in this case therefore the Bill of Sale is not of a much assistance. The counsel for the defendant submitted that the Bank, under a valid registered Bill of Sale, can use that bill against the third party to repossess the subject good.

20. One must understand that a Bill of Sale is an agreement or a contract entered between the Bank and the borrower or the grantor. And the effect of that agreement is that borrower/ grantor will not dispose of that particular vehicle until he settles all his bank loan obligations. And where the borrower breaches the Bill of Sale conditions, the Bank or the grantee has a right against the third party, as much as it has the right against the grantor/ borrower, to repossess the goods under the Bill of Sale to recoup the money still owing to it by the grantor. And so my answer to the second issue is YES, the Bank has the right to repossess the good from a third party which is the subject of a bill of sale.

21. Issue No. 3: Is the complainant entitled to the damages he claims.

The complainant is claiming in damages a sum of K7, 000.00 being the purchase value of the vehicle against the defendant Bank. When the complainant bought the vehicle from one Russell Fepo, the Bank had a valid registration Bill of Sale over that vehicle. The Bank had the power to repossess that vehicle under the Bill of Sale. Mr. Russell Fepo did not have a legal title to the vehicle to sell it to the complainant. The complainant is therefore not entitled to recover the purchase price of the vehicle from the defendant Bank as damages. He is not barred to recover that from the person who sold the vehicle to him.

22. For the foregoing reasons as explained above I find that the defendant Bank is not liable to repay the complainant’s purchase cost of the vehicle. The case be dismissed with costs in favour of the defendant.

For the Complainant – Mr. Kamo Pilisa of Pilisa Lawyers
For the Defendant – Mr. R. Otto