Papua New Guinea Banking Corporation v Amevo and Bari Investments [1998] PGLawRp 753; [1998] PNGLR 240 (26 May 1998)

[1998] PNGLR 240

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

PAPUA NEW GUINEA BANKING CORPORATION

V

BARRA AMEVO & BARI INVESTMENTS T/A KAINANTU PHARMACY

LENNIE APARIMA & ORITO APARIMA

WAIGANI: SEVUA J
24 March and 26 May 1998

Facts

This is an application by the plaintiff seeking an order for possession of land described as Section 5 Allotment 15 Ubank Road, Kainantu, Eastern Highlands Province. The plaintiff also sought leave for a writ of possession to be issued forthwith.

Dr Bara Amevo, is the registered proprietor of the property, Section 5 Allotment 15, Kainantu, the subject of this matter. The University of Papua New Guinea previously owned the above property, which is State Lease, Volume 51, Folio 96. It was transferred to Dr Amevo on 26th August 1994. The plaintiff holds a registered mortgage over this property, which was registered on 6th December 1994. There is no dispute over the plaintiff’s registered legal interest over this property.

The second defendants have been drawn into these proceedings because of an "arrangement" between them and Dr Amevo. Orito Aparima, who is married to Lennie Aparima, is Dr Amevo’s sister. Lennie Aparima is therefore Dr Amevo’s brother-in-law. It is through that relationship that Mr & Mrs Aparima currently occupies the property.

The University of Papua New Guinea allocated the property in question to Dr Barra Amevo whilst he was undergoing post-graduate training in Kainantu. In 1991, when Dr Amevo moved to the Medical Faculty in Port Moresby, he asked the second defendant to move into the property. On or about June or July 1991, the University of Papua New Guinea decided to sell the property through tender. On 6th August 1991, the University Tenders Board accepted Dr Amevo’s offer of K20,000.00 and requested full payment by bank draft within 21 days. On 29th August, 1991, the second defendant obtained a Westpac Bank cheque for the sum of K20,000.00 and Mr Aparima hand delivered the cheque to Dr Amevo in Port Moresby to purchase that property. Receipt No. 015540 was issued by the University of Papua New Guinea to Dr Amevo for the purchase.

Held

1. The mortgagor’s impecuniosities does not preclude the mortgagee bank from exercising its right under the terms of the mortgagee bank under the terms of the mortgage and the statutory rights conferred by the Lands Registration Act Ch. No. 191.
   
2. The second defendant’s interest which is not legal and unregistered, does not preclude the plaintiff from exercising its right to foreclosure under the terms of the mortgage and the provisions of the Land Registration Act Ch. No. 191 to possess or sell the property.
   
3. The second defendant, is not a party to the mortgage contract therefore has no valid claim in law against the plaintiff. The doctrine of privity of contract confers no right or imposes no obligation to the second defendant.
   
4. The second defendant is not entitled in law to specific performance of a contract, which he is not a party to. The arrangement between the first and second defendant did not constitute a legally binding contract enforceable in law.
   
5. The second defendant’s interest is only an equitable interest, which does not entitle him to the legal title of the property without a formal contract of sale and transfer.
   
6. The plaintiff, by law, and pursuant to the terms of the mortgage is entitled to foreclose on the property and has rights conferred by statute and the terms of the mortgage to possession and sale.
   

Papua New Guinea case cited

Bank of Papua New Guinea v Muteng Basa [1992] PNGLR 271.

Counsel

L Brew, for plaintiff.
P Ame, for second defendant.

26 May 1998

SEVUA J. This is an application by the plaintiff seeking an order for possession of land described as Section 5 Allotment 15, Ubank Road, Kainantu. The plaintiff also sought leave for a writ of possession to be issued forthwith.

The first defendant, Dr Barra Amevo did not appear and was not represented although he was served. His callous attitude and conduct which, in my view, amounted to unjust enrichment at the expense of the second defendant, directly led to the predicaments of the second defendant. What he did amounted to the worst form of spivving by a doctor that I have come across. The second defendant appeared at the hearing and defended its interest.

Dr Barra Amevo, is the registered proprietor of the property, Section 5, Allotment 15, Kainantu the subject of this matter. The University of Papua New Guinea previously owned the property, which is State Lease, Volume 51, Folio 96. It was transferred to Dr Barra Amevo on 26th August 1994. The plaintiff holds a registered mortgage over this property, which was registered on 6th December 1994. There is no dispute over the plaintiff’s registered legal interest over this property.

In fact, the property was mortgaged in consideration of a fully drawn loan of K35,000.00 for working capital purpose lent to Dr Barra Amevo and Bari Investments Pty Ltd. Loan repayment was set at K1,620.00 per month over 24 months. Repayment of the loan were made for a period of only one year when the loan account fell into arrears and the first defendant has ignored and neglected its legal obligation.

Strictly speaking, the first defendant has no defence and the plaintiff is entitled, in law, to enforce its right under the mortgage. The plaintiff’s rights stems from the terms and conditions of the mortgage itself and from statute.

However, the second defendant had been drawn into these proceedings because of an "arrangement" between them and Dr Barra Amevo. Orito Aparima who is married to Lennie Aparima, is Dr Amevo’s sister. Lennie Aparima is therefore Dr Amevo’s brother in-law. It was through that relationship that Mr & Mrs Aparima currently occupies the property and I will discuss this more fully from Mr Aparima’s evidence.

The University of Papua New Guinea allocated the property in question to Dr Barra Amevo whilst he was undergoing postgraduate training in Kainantu. In 1991, when Dr Amevo moved to the Medical Faculty in Port Moresby, he asked the second defendant to move into the property. On or about June or July 1991, the University of Papua New Guinea decided to sell the property through tender. On 6th August 1991, the University Tender Board accepted Dr Amevo’s offer of K20,000.00 and requested full payment by bank draft within 21 days. On 29th August 1991, the second defendant obtained a Westpac Bank cheque for the sum of K20,000.00, and Mr Aparima hand delivered the cheque to Dr Amevo in Port Moresby. Receipt No. 015540 was issued by the University of Papua New Guinea to Dr Amevo for the purchase.

I accept Mr Aparima’s evidence that, at the time the University Tender Board offered the property to Dr Amevo, Dr Amevo did not have the money to purchase the property. I also accept Mr Aparima’s evidence that he and his wife lent the sum of K20,000.00 to Dr Amevo to purchase the property from the University of Papua New Guinea. The "arrangement", as Mr Aparima testified, was that after the title to the property had been transferred to Dr Amevo, he (Dr Amevo) would transfer the property to the second defendant.

On that understanding, Dr Amevo asked for and received from the second defendant a further sum of K8,000.00 in various amounts and at different times.

In addition, the second defendant undertook renovations, extensions and improvements to the property at a cost of approximately K15,000.00, which included replacement of external fibro wall linings. According to the second defendant, the current market value, is estimated at K70,000.00.

Because of the "arrangement" between the first and second defendants, the second defendant claimed they have interest over the property and they own the property, therefore, title should be transferred to them. The second defendant therefore submitted the following - there was a valid contract between the defendants; the second defendant is the owner of the property; the plaintiff is privy to the contract between the first and second defendants; the contract between the first and second defendants is enforceable in law; the second defendant is entitled to specific performance and finally, the first defendant has unjustly enriched himself.

It is my view that most of these submissions have no basis in law and are therefore misconceived.

Firstly, under the mortgage, there is a valid contract between the plaintiff and the first defendant. The terms and conditions and the rights and obligations of the parties are stipulated in the mortgage. The second defendant does not dispute this.

The second defendant is not a party to that contract. The doctrine of privity of contract is that, as a general rule, a contract cannot confer rights or impose obligations arising under it on any person except the parties to it. The scope of the doctrine means only that a person cannot acquire rights, or be subjected to liabilities, arising under a contract to which he is not a party.

Given this legal doctrine, I hold that the second defendant is not a privy to the contract between the plaintiff and first defendant. Accordingly, that contract conferred no right to the second defendant, just as it imposed no obligation to the plaintiff, in so far as the second defendant is concerned. Privity of contract excludes the second defendant from claiming any legal right over the property.

By law, and under the terms of the mortgage, the plaintiff, as mortgagee, has the right to foreclosure because, the first defendant, as mortgagor, had defaulted in his obligations. Sections 68 and 74 of the Land Registration Act (Ch. No. 191) confers a statutory right or power to the plaintiff mortgagee to sell the property or take possession. Clauses 4E(2) & (3), 15 and 16 of the mortgage confers rights to the plaintiff. There can be no dispute therefore, to the rights of the plaintiff mortgagee. The second defendant’s claim therefore cannot supercede the plaintiff’s legal rights. The plaintiff has pleaded the mortgage in its originating summons, the mortgage is in evidence before me and I am satisfied that the first defendant has defaulted in payment as envisaged in the mortgage. Accordingly, I find that the plaintiff is entitled to an order for possession under s 74(l)(c) of the Land Registration Act, (Ch. No. 191).

I agree with the Court in, Bank of Papua New Guinea v Muteng Basa [1992] PNGLR 271, that the mortgagor’s impecunious state does not preclude the mortgagee bank from exercising rights to possession found in the mortgage document and supported by the Land Registration Act, (Ch. No. 191). I also hold that the second defendant’s interest, not legal and not registered, does not preclude the plaintiff from exercising its right of foreclosure conferred by the mortgage and the Land Registration Act. The plaintiff has both statutory right and right conferred under the mortgage to sell the property or possess it.

I cannot see how the second defendant can succeed in its claim that there is a contract, enforceable in law, between it and the first defendant.

This submission has no basis and flies in the face of the law. No contract of sale and transfer instrument was executed between the first and second defendants. How can there be an enforceable contract? This submission must fail. Similarly, the second defendant’s submission that it is entitled to specific performance must fail. The second defendant has no contractual relationship with the plaintiff therefore, specific performance, as a remedy in contract, is not available to the second defendant. How can an order for specific performance be made when the second defendant acknowledges that it has no contractual relationship with the plaintiff? I rule that specific performance is not available to the second defendant in the circumstances.

Finally, whilst I sympathise with the predicaments faced by the second defendant, there is nothing much the Court can do. It seems obvious that the first defendant has unjustly enriched himself from money given him by the second defendant. The "arrangement" he made with the second defendant contravened Clause C1 & 2 of the mortgage, as he did not obtain the plaintiff’s consent. Although the second defendant may have an equitable interest in the property, the very nature of equitable interest, speaks for itself, that is, such interest does not extend to the legal title. All I can say is that the second defendant could negotiate with the plaintiff since I have already found that the second defendant’s interest does not preclude the plaintiff mortgagee from exercising its right to foreclose on the property. The first defendant mortgagor, has not exercised its right of redemption, therefore the plaintiff mortgagee is entitled to exercise its statutory right and right under the mortgage.

I order that the second defendant give vacant possession to the plaintiff of the property, the subject of these proceedings, after 14 days from today. I order that the writ of possession shall issue at the expiration of 14 days from today. Either party is at liberty to apply upon giving three days notice. The plaintiff shall have its costs of the entire proceedings, however, I order that such costs be paid by the first defendant mortgagee.

I further order that he pays the costs of the second defendant. The orders for costs are made on the basis that, it is the first defendant who had put the parties to unnecessary expenses in these proceedings, whilst he opted not to appear in Court despite being served.

Lawyer for plaintiff: Gadens.
Lawyer for 2nd defendants: Ame Lawyers.