Hotel Kokopo Ltd v National Development Bank [2013] PGNC 86; N5111 (19 March 2013)

N5111

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 28 of 2013

BETWEEN:

HOTEL KOKOPO LIMITED
First Plaintiff

AND:

MRS BUNGTABU BROWN
Second Plaintiff

AND:

NATIONAL DEVELOPMENT BANK
First Defendant

Kokopo : Maliku, AJ
2013 : 21st, 25th February &
01st, 5th & 19th March

CIVIL JURISDICTION - Plaintiffs initiated proceeding by Originating Summons and filed Notice of Motion to obtain ex parte order which restrained the defendant from entering and or take possession of the Property Section 35, Allotment 10, KOKOPO State Lease, Volume 15, Folio 9 pending the hearing and determination of this proceedings or further Orders from the Court pursuant to Order 14, Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.

CIVIL JURISDICTION:- Defendant filed Notice of Motion to set aside Order made against him on the 1st of February 2013 pursuant to Order 12 Rule 1 and Rule 8 (3) (a) and (4) National Court Rules.

RELEVANT SOURCES OF AUTHORITY- Order 4 Rule 3 Sub rule (2) (a) and (b) of the National Court Rules; Motion (Amendment) Rules of 2005

Cases Cited:
Papua New Guinea Cases

National Housing Corporation-v- Yama Security Services Pty Ltd ( 2000) N1985
Golobadana No. 35 Ltd –v- Bank South Pacific Ltd (2002) N2309
Mainland Holding Ltd –v- Paul Stobbs (2003) N2522
Mark Ekepe –v- William Gaupe (2004) N2694
Wamena Trading-v- Civil Aviation Authority (2006) N3058
Kaiya Dick-v- Peter Lok (2007) N3205
Sioti Bauf and Lovoi Nadai –v- Poliamba Pty Ltd [1990] PNGLR 278

Overseas Cases

American Cyanide Company –v- Ethicon Ltd [1975] UKHL 1; [1975] All ER 504

Counsel:

Mr R. Asa, for the Plaintiffs
Mr F. Cherake, for the Defendant

19th March 2013

1. MALIKU, AJ: The plaintiff commenced this proceeding by an Originating Summons with a Notice of Motion filed on the 30th of January 2013 seeking the following Orders from the Court.
   
   1. The Applicant/Plaintiff is granted leave of the Court to dispense with the requirements of service pursuant to Rule 5 (2) of Motion (Amendment) Rules of 2005.
      
   2. The defendant and its employees, servants and agents are restrained from entering and or taking possession of the property, Section 35, Allotment 10, KOKOPO, State Lease, Volume 15 Folio 9 pending the hearing and determination of this proceedings or further Orders from the National Court pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
      
   3. The defendant and its employees, servants and agents are restrained from tendering, selling, dealing, contracting or disposing of with any interest to a third party in any manner, the property, Section 35, Allotment 10, KOKOPO, State Lease, Volume 15 Folio 9 pending the hearing and determination of this proceedings or further Orders from the National Court pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
      
   4. The Office of the Registrar of Titles and its employees and agents are restrained from registering or effecting any transfer of title or interest in the subject proper, Section 35, Allotment 10, KOKOPO, State Lease, Volume 15 Folio 9 pending the hearing and determination of this proceedings or further Orders from the National Court pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
      
   5. The defendant and its Managing Director produce to the Court and the Plaintiff the Owner's Copy of the title of the subject property, Section 35, Allotment 10, KOKOPO, State Lease, Volume 15 Folio 9, Copy of the Mortgage Deed, and the relevant instrument executed for the registration of the Mortgage within 14 days of this Order pursuant to Order 14 Rule 10 and Order 4 Rule 31 of the National Court Rules.
      
   6. The proceeding be converted into pleadings and the Plaintiffs are required to file and serve their Statement of Claim on the defendant within 21 days from today and the pleading continue thereon in accordance with the Rules pursuant to Order 4 Rule 31 of the National Court Rules.
      
   7. The Plaintiff are required to serve all documents relating to these proceedings on the defendant within 21 days of this Order and the matter returnable in Court on the 15th of February 2013, being the first Motions date for 2013 at 9.30am for inter parties hearing.
      
   8. Time to be abridged to the time of settlement which shall take place forthwith and
      
   9. Costs to be in the cause.
      
2. The Plaintiffs were granted these Orders on the 1st of February 2013.
   

Background

3. The Plaintiffs entered into a Loan Agreement with the defendant. The defendant agreed to loan to the Plaintiffs an amount in the sum of Two Million Kina (K2, 000,000.00). In return, the Second Plaintiff as a Director of the company offered her property, Section 35, Allotment 10 as a security.
   
4. The amount was appropriated to the Plaintiffs on the 10th of March 2011 for the construction of a hotel on a parcel of land described as Section 35, Allotment 10, KOKOPO, State Lease, Volume 15, Folio 9.
   
5. It was agreed that the repayment of the loan will be on a monthly basis in the sum of K31, 972.00 inclusive of interests. All went well until the Plaintiffs began to fall in their monthly repayment and continued to fall in their repayment to this day.
   
6. The defendant extended the repayments deadlines on several occasions in order for the Plaintiffs to re adjust them and be able to meet their loan dues. This arrangement did not materialise as anticipated to this day.
   
7. The defendant then issued Letters of Demand and the Notice of Default to the Plaintiff to settle their arrears or it will foreclose on the property and tender it as it did based on an equitable mortgage.
   
8. On the 19th of January 2013 the defendant issued a Notice to Vacate and with its agents on the 20th of January 2013 attempted to take possession and control of the property.
   
9. On the 25th of January 2013 the defendant published a Public Tender

Notice "Mortgagee Sale" in the National Paper purportedly exercising power of mortgage to sell the property.

Preliminary Submission by Counsel

10. Prior to me hearing submissions from both counsel today a couple of preliminary matters were raised by both counsel.
    
11. Mr Cherake for the defendant submitted that because counsel for the Plaintiff failed to appear in Court on the 25th of February 2013 in order to make further application to extend the Interim Restraining Order the subject of the application, the said Interim Restraining Order did lapse on the 25th of February 2013 and therefore he saw no need for him to address the Court on the Plaintiff's Motion seeking an extension of the Interim Restraining Order.
    
12. Mr Asa for the Plaintiff argued that the Court on its sitting on the 25th of February made no orders regarding the said Interim Restraining Order and therefore the law is that the said Interim Restraining Order was still valid and was still in force. Mr Asa did file an Amended Motion to extend the said Interim Restraining Order to the next sitting day.
    
13. I rejected that submission because Mr Cherake did not raise this issue to the Court on the 25th of February 2013 knowing that the said Interim Restraining Order did expire on the 25th of February and that counsel for the Plaintiff failed to appear but sought further adjournment on behalf of both counsel to allow both counsel to file Written Submissions as directed by this Court on the 21st of February 2013 which I granted and adjourned the matter to the 3rd of March 2013 to hear submissions from both counsel.
    
14. On the 3rd of March 2013 both counsel appeared in Court and informed the Court that they had filed their Written Submission but the Court was not ready to hear submissions.
    
15. The matter was adjourned to the 5th of February 2013 at 9.30am for counsel to address the Court on their submissions.
    
16. In view that Mr Cherake for defendant did not raise this issue with the Court; I made no orders regarding the Interim Restraining Order on the 25th of February 2013. In doing so and when the matter came before me on the 3rd of March I held the view that the Interim Restraining Order was still in place and further extended the said Interim Restraining Order to the 5th of March 2013 the day I was to hear submission from both counsels.
    
17. To sum up what is said here is to say; Failure by counsel for the defendant in not raising the expiry of the said Interim Restraining Order of the 25th of February before today's hearing was against him and that he cannot hack back on it because he did not raise it for consideration.
    
18. The second preliminary matter raised before me today is the non filing on a Notice of Intention to Defend by counsel for the Defendant by Mr Asa for the Plaintiff. Mr Asa submitted that to file a Notice of Intention to Defend is a must and counsel for defendant had failed to do so and therefore should not be allowed to appear for the defendant or that the application by defendant to set aside the Interim Restraining Order by this Court on the 1st of February be disallowed.
    
19. My reaction was that it is too late to raise this issue at this point of time because I was now suppose to hear submissions from both counsel on whether or not the Interim Restraining Order was to be further extended pending the hearing and determination of this proceedings or further orders from the Court pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
    
20. Mr Cherake for the defendant objected to his issue raised at this point of time and submitted that it is an issue that should have been raised and determined during first appearance in Court by counsel on the 01st of February 2013 or in the next sittings and not today. Mr Cherake however submitted that he had filed a Notice of Appearance and should be accepted to be as well as a Notice of Intention to defend by this Court.
    
21. Mr Cherake relied on Order 1 Rules 7 of the National Court Rules which says; "The Court may dispense with compliance with any of the requirement of these Rules, either before or after the occasion for compliance arises." and Rule 8 which says; "Non compliance with any of these Rules or with any rule of practice for the time being in force shall not render any proceedings void, unless the Court so directs, but proceedings may be set aside, either wholly or in part, as irregular, or may be amended or otherwise dealt with, in such a manner, and on such terms, as the Court thinks fit."
    
22. I rejected Mr Asa's objection and allowed Mr Cherake to appear because Mr Cherake did file Notice of Appearance on the 6th of February 2013 which in my view was sufficient Notice by him to appear for defendant and defend the defendant.
    

Motion by Defendant:

23. I now turn to the Notice of Motion filed by the Defendant/Applicant on the 15th of February 2013. The Defendant filed a Notice of Motion Numbered No. 8 seeking the following Orders:
    
    1. Pursuant to Order 12 Rule 1 and Rule 8 (3) (a) and (4) of the National Court Rules, the ex parte Restraining Order of this Court made and entered against the defendant on the 1st of February 2013 be set aside.
       
    2. Upon grant of order sought in paragraph 1, the substantive claim be dismissed pursuant to Order 12 Rule 1 of the National Court Rules.
       
    3. Plaintiffs to pay the cost of the proceedings.
       
    4. Such other or further orders this Court deems just in the circumstances of this case.
       
24. The Defendant relied on the affidavits of Mr Solomon Kiage dated 22nd

of February 2013 and filed on the 25th of February 2013 Numbered No.15 and Annexure "A"; a letter to Mr Brown Sinai dated 10th of March 2011 subject "Offer of Loan.", and the affidavit of Mr Moses Liu dated 21st of February 2013 and filed on the 25th of February 2013 Numbered No. 17.

Cross Motion by Plaintiffs

25. In reply to the Defendant Motion to set aside the Court Order granted to the Plaintiffs on the 1st of February 2013 the Plaintiffs filed a Notice of Cross Motion on the 22nd of February 2013 Numbered No.13 seeking the following Orders:
    
    1. The matter be referred for Alternative Dispute Resolution (ADR) for negotiation and mediated and the parties to report to Court of the progress within 30 days pursuant to Rules Relating to Accreditation, Regulation and Conduct of Mediators (ADR Rules) and National Court Act as Amended 2008 Sections 7A and 7E;
       
    2. The restraining order of the 1st of February 2013 be further extended to preserve the property pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
       
    3. Costs to be in cause; and
       
    4. Any other Orders as the Court deems fit.
       
26. The Plaintiffs relied on the affidavits of Mr Asa dated 22nd of February 2013 and filed on the 22nd of February 2013 and Annexure "A" and "B."
    
27. The matter was never referred to Alternative Disputes Resolution for mediation even though it was requested to be by the Plaintiffs in their Cross Motion.
    

Amended Motion by Plaintiffs:

28. On the 26th of February 2013 the Plaintiffs filed an Amended Notice of

Motion and relied on the affidavits of Mr Asa also filed on the 26th of February 2013. This Amended Notice sought the following:

1. The Interim Orders of the 1st February 2013 be reinstated and or extended to preserve the property the subject of the proceedings until the hearing and final determination of the substantive proceedings pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
   
2. The defendant and its employees, servants and agents are restrained from entering and or taking possession of the property, Section 35, Allotment 10, KOKOPO, State Lease, Volume 15 Folio 9 pending the hearing and determination of this proceedings or further Orders from the National Court pursuant to Order 14 Rule 10 of the National Court Rules and Section 155 (4) of the Constitution.
   
3. The matter be referred for Alternative Dispute Resolution (ADR) for negotiation and mediated and the parties to report to Court of the progress within 30 days pursuant to Rules Relating to Accreditation, Regulation and Conduct of Mediators (ADR Rules) and National Court Act as Amended 2008 Sections 7A and 7E. The matter was again not referred to Alternative Disputes Resolution for mediation.
   

The Evidence of Mr Sinai Brown:

1. Mr Sinai Brown identifies himself as the First Plaintiff Company and is aware of the facts and issues surrounding this proceeding because he was personally involved in the negotiation of the Loan with the Defendant Bank.
   
2. The defendant has not withdrawn the tender sale published in the National Paper on the 29th of January 2013.
   
3. There has not been any information from the defendant whether verbally or in writing or seen in any newspapers publication withdrawing the tender notice.
   
4. The title search conducted by the Plaintiffs on the Office of Registrar of Titles on the 11th of February 2013 confirms the defendant does not have a registered mortgage entered against the title or property at Section 35, Allotment 10, Kokopo and therefore has no right in law to exercise the purported power of sale (see annexure Marked (A– State Lease).
   
5. There is no guarantee that the property in question will not be sold by the defendant because with its corporate might the defendant had shown that it can disregard laws by putting the property on tender while it did not have the authority in law to do so.
   
6. The defendant could choose to disregard the law if the Interim Restraining Orders of the 1st of February 2013 are set aside.
   
7. The defendant had failed to comply with Order No. 5 which required them to produce to the Court relevant Owners copy of the Title, Mortgage deed and other instruments within 14 days even though they were served with a copy of the Order of the 1st of February 2013 on the 6th of February 2013 at the defendant's head office.
   
8. It is in the best interest of the parties that the property has to be preserved while the case is proceeding in Court.
   
9. The defendant paid little attention to our advice to them of the existence of the first mortgage registered with BSP but chose to deal with the property. It is a public record which could easily be ascertained by conducting a title search at the office of the Registrar of Titles of Lands at Waigani.
   
10. The defendant's reckless and premature publication of the tender notice purportedly acting under a power of mortgage had defamed and caused immense business and reputational loss and damage to the Plaintiff company and its directors.
    

The Evidence of Mrs Bungtabu Brown:

1. She is the Second Plaintiff in these proceedings and a Director of the First Plaintiff Company.
   
2. In 2009 the First Plaintiff applied for a business loan from the Defendant Bank with their business proposal - see Annexure "A"- a true copy of the Company Certificate and extract.
   
3. The Plaintiff company initially applied for a principal loan of K 3.6 million but its business proposal and discussion with the Bank, it offered K1.07 million worth of equipment, support vehicles, generator, furniture, white good and other hotel good to kick start the new "HOTEL KOKOPO" development project. The total cost of our proposal for the Hotel Kokopo business project was in excess of K5 million.
   
4. In March of 2012 the Bank approved the Plaintiff Company loan application and sent an offer through its Kokopo Branch Office. The principle loan approved or offered was for K2 million and the loan agreement required a monthly principal and interest repayment of K31, 972.00 – see a true copy of the Loan Agreement marked "B".
   
5. The Plaintiff used the K2 million to hire workers and construct and develop the hotel at Section 35, Allotment 10, Kokopo.
   
6. The second Plaintiff, Mrs Bungtabu Brown is the legal Owner and proprietor of this property which was required by the Bank as a mortgage over the loan advanced – see a true copy of the title document marked "C".
   
7. The Plaintiff complied with the loan repayment terms until July, 2012 when the First Plaintiff fell into arrears. On the 4th of September 2012 the defendant issued a Notice of Default demanding payment within 7 days of the principal loan with all accrued interest totalling K2, 099,194.13 see Annexure "D" a true copy of a Letter of Demand.
   
8. The Plaintiff and the defendant entered into negotiations and agreements exchanged correspondences to that effect with the view to rearranging or varying the terms of the loan repayment – see Annexure marked "E"- (a letter from Mrs Bungtabu Brown to Mr Lui Masti- Regional Manager – National Development Bank, dated 26th September 2012), "F – (a letter of acknowledgement to Mrs Bungtabu Brown dated 5th October 2012) and "G"- (a letter to Mrs Bungtabu Brown dated 29th of November 2012 by Mr Moses Liu acknowledging Mrs Bungtabu Brown's letter of 27th September 2012).
   
9. The Plaintiff through one of its directors, Mr Sinai Brown met with the Executive Manager Lending, Mr Trevor Cain on the 26th of September 2012 and agreed to a varied repayment plan as set out in his letter dated the 26th of September 2912 – see Annexure "H" a letter from Mr Trevor Cain to Mrs Bungtabu Sinai.
   
10. Due to delay in receiving expected funds from the sale of our other properties the Plaintiffs were not able to keep up with the varied repayment terms as agreed with the Bank on the 26th of October 2012.
    
11. The Second Plaintiff wrote a letter to the defendant on the 12th and 17th of December 2012 through its Managing Director to justify the use of the loan and the increase of cost associated with the construction of the Hotel and further setting out the Plaintiff's contribution to the development of the Hotel with request for consideration of a further increase in the loan.
    
12. This resulted in a further extension was granted up until December 2012 however the additional loan request was made difficult by the defendant's unreasonable demand for acquittals – see Annexure "I" and "J".
    
13. On the 19th of January 2013 the defendant issued a 24 hours Notice to Vacate the Hotel premises or Section 35, Allotment 10, Kokopo being the property subject of these proceedings delivered to the Second Plaintiff on the 20th of January 2013 – see Annexure "L".
    
14. The Plaintiff' instructed its lawyer to inform the Bank that the Eviction Notice and its purported exercise of its mortgagee power was unlawful and illegal and not in accordance with the terms of the Loan Agreement, the Notice of Default requirements and mortgagee powers under the Land Registration Act.
    
15. The letter of advice to the defendant was sent to the defendant on the 24th of January 2013 and a conversation also took place between the Plaintiff's lawyer and Mr Desmond Yaninen on the 23rd of January 2013 informing him that the Bank was acting illegally. Mr Yaninen responded by saying that he will advise his legal team and he was to get back to the Plaintiff's lawyer see Annexure "M" dated 22nd of January 2013.
    
16. Despite of that letter on Friday 22nd January 2013 the Defendant purportedly exercised its powers published in the Newspapers a Mortgagee Sale Tender Notice inviting bidders to tender for the subject property see Annexure "N" dated 25th January – a true copy of the National Newspaper Advertisement.
    
17. The Plaintiff fear that if the Defendant is not restrained the Defendant will sell and dispose of the property which the subject matter of these proceedings. This will clearly prejudice this proceeding which is to preserve the property until the parties' rights in the property are determined or dispute is resolved by the Court.
    
18. The Loan Agreement prepared by the Bank and signed between the parties does not state the exact notice period. The Bank issued the last Default Notice on the 14th of January 2013 and was served on the Plaintiffs on the 15th of January 2013. In the absence of a specific default notice in the Loan Agreement the 30 days statutory default notice applies and the 30 days notice period has not expired. It will expire on the 14th of February 2013.
    
19. The Defendant's and its agent's notice to vacate was issued on the 19th January 2013 and served on the 20th of January 2013 is not only improper and unfair, it is unlawful because it was issued before the 30 days default applies and the 30 days notice period did not expire.
    
20. More importantly the Defendant's tender notice published on the 25th of January 2013 to sell the property purporting to exercise its mortgagee powers is improper and unlawful because it relies on a default notice for which 30 days statutory default period has not yet expired.
    
21. Also the Loan Agreement particularly Clauses 3 and 8 (d) and (f) requires the Bank to conduct annual and quarterly reviews and that the loan is payable on demand however it is subject to the annual review. In this instant no annual or quarterly reviews for 2012 and 2013 were conducted prior to the Bank issuing its demand through its default notices. This is another reason why the Notice of Default demanding repayment of the principal plus interest is improper or unfair is because it is in breach of the review provisions in the Loan Agreement.
    
22. The Loan Agreement was drawn up by the Bank based on its own terms and conditions. It was only revealed to the Plaintiffs during the time of signing. The Plaintiffs had little input in it. The Plaintiffs had little or no time to obtain advice. As a result it now appears that many of the fundamental terms in the contract have been left out or omitted to favour the Defendant. Whether it was deliberately done or not is only known to the Bank. Such Clauses for Notice period termination, foreclose, right of redemption, alternated disputes resolution among others. The loan amount applied for was significantly reduced and the Plaintiffs and it directors were not informed until at the time of signing. The Plaintiffs needed the money to develop the project and there was nothing much they could do, but the Bank did not act in good faith and was unreasonable and unfair all throughout.
    
23. The Defendant and its agents also failed to inform and ensure that the Plaintiffs and the directors obtained independent legal advice as to the terms of the loan and the mortgage and its practical implications especially given the nature of this large loan facility and more particularly when the Second Plaintiff was expected to offer her property as a third party mortgage before accepting the loan. In other words the term loan agreement was not fairly negotiated and arrived at between the parties.
    
24. For the last couple of month since June 2012 the Plaintiffs have incurred substantial amount of money totalling more than K250, 000.00 to pay workers as well as to continue to develop the property. The property now valued at K3, 531, 600.00. The purported sale if not prevented will result in the Plaintiffs suffering enormous financial burden and business loss – see Annexure "O" dated 2nd October 2012, a true copy of the Valuation Report.
    
25. The Plaintiffs and its directors especially me as the First Plaintiff being the third party mortgagor was not informed of my rights to particularly with regards to what would happen to my property in the event that the First Plaintiff defaulted or one of the terms of the loan was breached. Simply put the Bank given its position of power and commercial acumen failed to ensure that the term of the loan agreement and mortgage was understood and accepted by the Plaintiffs and its directors so as to ensure that the parties were on equal footing at the time of negotiations and signing of the loan and mortgage agreements.
    
26. In all the Defendants and it servants and agents conduct, action and omission in the circumstance has been and continues to be manifestly unfair, unconscionable, and unreasonable. Even the default notices and procedures and review provisions prescribed by the loan agreement and the statutory provision have not been complied with.
    
27. The Defendant is a creature the State and is established by Parliament and one of its main functions is "to mobilise savings and provide credit and other banking and financial services to the people of Papua New Guinea." It is funded annually by Government grants. These Government grants are pumped in to the Development Bank by the Government with the view that the Bank lend out these monies on fair and reasonable term to indigenous citizens and business so that it can stimulate
    
28. business activities and grow the economy at large. Such premature and unlawful recovery actions of the Defendant and its servants lose sight of the real intent and purpose why the Defendant was established in the first place. Furthermore the Defendant's actions, conduct and inactions in this particular circumstances flies in the face of it's much talked about and adored "indigenous business summit" and "women is business" scheme. One thing is very clear, the name says it all. The Defendant is a "Development Bank" and not necessarily a "Commercial Bank".
    
29. It therefore should act as such because it is getting free hand outs from the Government every now and then for the purpose of providing credit to Papua New Guineans for the sole purpose of furthering the Governments "development" agenda as opposed to a strictly commercial agenda.
    
30. As a result of the Defendant's unlawful conduct, actions and inactions the Plaintiffs and it directors will suffer irreparable damages including substantial financial loss, future business loss and possible loss of property if the Defendant is not restrained from selling the property the subject of this proceedings. Most importantly the Plaintiff's right to preservation and protection of its property and the future conduct of proceedings will be prejudiced if the property is sold or disposed of.
    

Evidence of Defendant:

29. I will now deal with the evidence of the Defendant. As stated earlier the

Defendant relied on the affidavits of Mr Solomon Kiage dated 22nd of February 2013 and filed on the 25th of February 2013 Numbered No.15 and Annexure "A"; a letter to Mr Brown Sinai dated 10th of March 2011 subject "Offer of Loan.", and the affidavit of Mr Moses Liu dated 21st of February 2013 and filed on the 25th of February 2013 Numbered No. 17.

The Evidence of Mr Solomon Kiage:

1. Mr Solomon Kiage had personal knowledge about the fact and issues surrounding these proceedings.
   
2. Mr Solomon Kiage is the Manager in the Asset Management Division of the Defendant Company and reiterates the facts deposed in paragrap1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,17,19,20,21,22 and 23 of his earlier affidavit sworn on the 13th of February 2013
   
3. Further to my affidavit sworn on the 13th of February 2913 and filed on the 15th of February 2013, the Loan Agreement was accepted and signed by the Plaintiffs on the 10th of March 2011 – see Annexure "A" a true copy of the Loan Agreement between the Plaintiffs and the Defendant.
   
4. The Defendant's Lawyer advised that the Defendant does not have a registered mortgage and therefore the Defendant does not have rights arising out of the mortgage. The Defendant therefore cannot deal with the subject property in any manner.
   
5. The Defendant had adhered to the legal advice and has not dealt with the property whether tendering, selling or disposing of it in any manner at all. I am aware that the Defendant has not dealt with the subject property in any manner at all to date.
   
6. I understand particularly Order 5 which required the Defendant and/or it's to provide the Court and the Plaintiffs the Owner copy of the Title, Mortgage Deed and other relevant instrument. As deposed at paragraph 22 of my earlier affidavit, the Defendant simply could not produce these documents because it does not have them in its possession.
   
7. I understand the Clause 6 (a) and 7 (d) are Conditions of the Loan Agreement that required the Plaintiff to surrender such Title as security for the Loan to be advanced. However for reasons only known to the Plaintiffs to this date, the Defendant has never been passed on the Owners copy of the Title, the Mortgage Deed and other relevant instruments.
   
8. The Defendant through its Kokopo Branch Manager had fairly negotiated the Loan Agreement with the Plaintiffs. I do not recall of any undue influences and duress placed on the Plaintiffs from the time of negotiation up to the signing of the Loan Agreement.
   
9. The Defendant's position is clear as deposed on above and in my earlier affidavit. The serious factual issues that needed to be tried and which the Plaintiff sought to declare are crystal clear in the Defendant's evidence.
   

Evidence of Moses Liu:

30. I now turn to the Evidence of Mr Moses Liu. Mr Moses Liu's evidence is by affidavit dated 21st of February 2012 and sworn on the same date. It was filed on the 25th of February 2013 and numbered No.17. Mr Moses Liu's evidence is in the following:
    
    1. Mr Moses Liu is the Acting Manager Director of the Defendant National Development Bank at Waigani, Port Moresby, National Capital District.
       
    2. He has personal knowledge of the facts he deposed in his affidavit and believes it to be true.
       
    3. On the 21st of February 2013 I sighted the affidavit of Mr Sinai Brown, GCL, OBE filed on the 20th of February 2013. I am aware of the details of this matter. I note in particular paragraph of the said affidavit.
       
    4. I crave to refer to Affidavit In Support of the Bank's Assets Manager, Solomon Kiage, sworn on the 13th of February 2013 and filed on the 15th of February 2013.
       
    5. I confirm from the Bank's records the Bank did not register a mortgage of the property at Section 35, Allotment 10, Kokopo, East New Britain Province other than having and equitable mortgage.
       
    6. Furthermore the Bank does not have in its possession the original Owner's Copy of the Title to the said property.
       
    7. I t was unfortunate that due to miscommunication amongst the Bank staff, the tender was advertised.
       
    8. On the 28th of January 2013, following a meeting with my key staff and it was clear the Bank could not proceed with the sale. Contrary to Mr Brown's assertion at paragraph 5 of his affidavit, the Bank cannot sell for obvious reasons.
       
    9. I, on behalf of the Bank, am therefore unable to furnish the original Owner's Copy of the title for the said property as per Clause 4 of this honourable Court's Order dated 1st of February 2013.
       
    10. I have noted paragraph 3 of Mr Sinai Brown's affidavit in particular the Annexure "A" which shows the copy of the title to the said property. On inspection of the document, it indicates that the Bank of South Pacific Limited has registered First Mortgage over the said property.
        
    11. The First Plaintiff is trying to avoid its loan repayment obligations under the Loan Agreement and is in arrears of more than 90 days.
        

Submissions by both Parties:

31. Having outlined the evidence of both parties I will now deal with the

Submission of both parties which I set out below.

Submission by Defendant:

32. Mr Cherake began by submitting the brief facts of the matter. He then

outlined briefly the terms of the Interim Restraining Order. Having done that Mr Cherake then went on to deal with the Defendants Notice of Motion. Mr Cherake submitted that on the 1st of February of 2013, after the granting of the interim injunction, his honour Lenalia J also indicated that the Defendant was at liberty to apply and set aside the interim injunction. The Defendant responded by filing its Notice of Motion and an affidavit in support sworn by Mr Solomon Kiage on the 15th of February 2013. The terms of the Motion are:

1. Pursuant to Order 12 Rule 1 and Rule 8 (3) (a) and (4) of the National Court Rules, the ex parte Restraining Order of this Court made and entered against the defendant on the 1st of February 2013 be set aside.
   
2. Upon grant of order sought in paragraph 1, the substantive claim be dismissed pursuant to Order 12 Rule 1 of the National Court Rules.
   
3. Plaintiffs to pay the cost of the proceedings.
   
4. Such other or further orders this Court deems just in the circumstances of this case.
   
33. Mr Cherake submitted that the evidence that the Defendant relies on is from the:
    
    1. The affidavit of Mr Solomon Kiage sworn on the 13th of February 2013.
       
    2. The affidavit of Mr Solomon Kiage sworn on the 22nd of February 2913
       
    3. The affidavit in reply of Charles Evi sworn on the 24th of February 2913.
       
    4. The affidavit in reply of Moses Liu sworn on the 21st of February 20123.
       
34. Mr Cherake submitted that the relevant evidence in support of the

Defendant Notice of Motion is contained in Mr Solomon Kiage first and second affidavit. Mr Cherake submits the evidence deposed by Mr Solomon Kiage in his first affidavit clearly shows the Defendant's position in regard to the subject property. It can be best summed up in the following:

1. After receiving legal advice from our lawyers, the Defendant decided not to deal with the property in any manner.
   
2. Due to some miscommunication with the staff of the Defendant, the tender notice was released to the media subsequently it was published.
   
3. The Defendant had written to the Plaintiffs advising them that the property will not be sold under the purported mortgage.
   
4. The defendant had not dealt with the property in any manner since it became aware of it legal position over it.
   
5. I, as Manager, Asset Management of the Defendant depose that Order 5 of this Honourable Court made on the 1st of January 2013 cannot be complied with because the Owners Copy of the Title to the property mentioned therein is not in the custody of the Defendant.
   
6. The Defendant has information that the subject Title is with BSP which is the Second Plaintiff miserably failed to disclose to the Defendant when applying for the loan. The other facts are covered in paragraph 8 to 21 which relates primarily to issues of repayment and deadline.
   
35. Mr Cherake submits that the second affidavit of Mr Solomon Kiage sworn on the 22nd of February 2013 and filed on the 25th of February 2013 clearly shows the following evidence.
    
    1. I am the Manager in the Asset Management Division of the Defendant Company and I reiterate the facts deposed to in paragraph 2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22, and 23 of my earlier affidavit sworn on the 13th of February 2013 and filed on the 15th of February 2013.
       
    2. Further to my affidavit sworn on the 13th of February 2013 and filed on the 15th of February 2013, the loan agreement was accepted and signed by the Plaintiffs on the 10th of March 2013 – see Annexure "A" a true copy of the Loan Agreement between the Plaintiffs and the Defendant.
       
    3. The Defendant's lawyer advised that it (the Defendant) does not have a registered mortgage and therefore the Defendant does not rights arising out of the mortgage. The Defendant therefore cannot deal with the subject property in any manner.
       
    4. The Defendant had adhered to the legal advice and has not dealt with the property whether tendering, selling or disposing of it in any manner at all. I am aware that the Defendant has not dealt with the subject property in any manner at all to this date.
       
    5. I understand particularly Order 5 of the Restraining Order required the Defendant and or its Management to provide to the Court and the Plaintiffs the Owners Copy of the Title, Mortgage Deed and other relevant instruments. As deposed in paragraph 22 of my earlier affidavit the Defendant simply could not produce these documents because it does not have them in its possession.
       
    6. I understand that in Clauses 6 (a) and 7 (b) are conditions of the loan agreement that required the Plaintiffs to surrender such Title as security for the loan to be advanced. However, for the reasons only known to the Plaintiffs to this date, the Defendant has never been passed on the Owners Copy of the Title, the Mortgage Deed and other relevant instruments.
       
    7. The Defendant through its Kokopo Branch Manager had fairly negotiated the loan agreement with the Plaintiffs. I do not recall of any undue influence and duress placed on the Plaintiffs from the time of negotiation up to the signing of the loan agreement.
       
    8. The Defendant's position is clear as deposed in my earlier affidavit. The serious factual issues that needed to be tried and which the Plaintiffs sought to declare are crystal clear in the Defendant's evidence.
       
36. Mr Cherake further submitted the Defendant also relied on the evidence of Mr Charles Evi sworn on the 22nd of February 2013 and filed on the 25th of February 2013. The evidence of Mr Charles Evi clearly shows the following:
    
    1. On the 21st of February 2013 I sighted the affidavit of Mr Sinai Brown, GCL, OBE, filed on the 20th of February 2013. I noted paragraph 3 of the said affidavit. In particular, the Annexure "A" which shows the copy of the said property. On inspection of the document, it indicated the Bank South Pacific (BSP) has a registered First Mortgage over the said property.
       
    2. I confirm that the Bank's record shows that the Bank did not register mortgage of the property at Section 35, Allotment 10, Kokopo in East New Britain Province. Although the Bank has an equitable mortgage because the Original Owner's Copy Title Deed was still held by BSP until full clearance of debt and surrender of the title to National Development Bank (NDB). Mr Cherake referred the Court to Annexure "A" of the witness's evidence.
       
    3. As such, the Bank does not have in its possession the original Owner's Copy of the title for the said property as per Order 5 of this Honourable Court' s Order of the 1st of February 2013.
       
37. The Evidence from the Defendant is an admission by the defendant to making a mistake on the 19th of January and 25th of January of 2013 as well as that the Defendant did not have a registered mortgage at the time the property was advertised for sale on the National News papers.
    

Submission by Plaintiff:

1. The Plaintiffs obtained a loan through loan agreement with the Defendant in April.
   
2. In return, the Second Plaintiff as a director of the company offered her property being Section 35, Allotment 10, Kokopo, herein referred to as the property as a security.
   
3. All went well until on the 4th of September 2012 the Defendant issued a Notice of Default and demanded full payment with interest.
   
4. Following that the parties negotiated to amicably resolve the dispute with exchange of communication and correspondence with each other.
   
5. On the 14th of January 2013 the Defendant issued another Default Notice and demanded payment of the principal with interest of K2, 176, 173.45.
   
6. On the 19th of January 2013 the Defendant issued a Notice to Vacate and with its agents on the 20th of January 2013 attempted to take possession and control of the property.
   
7. On the 25th of January 2013 the Defendant published a Public Tender Notice "Mortgagee Sale" in the National News paper purportedly exercising power of mortgage to sell the property.
   

The Law on Interim Injunction:

38. Mr Cherake for the Defendant submits that the granting of an interim

injunction rests in the principles enunciated in the leading case of American Cyanide Company –v- Ethicon Ltd [1975] UKHL 1; [1975] All. ER 504 which were summarized by his honour Kandakasi J in the case of Golobadana No. 35 Ltd –v- Bank South Pacific Ltd (2002) N2309 in the follows:

1. Is this action not frivolous or vexatious?
   
2. Is there a serious question to be tried?
   
3. Is there a real prospect that the applicant will succeed in the claim for an injunction at the trial?
   
39. Mr Cherake's submission on the principles that govern the granting of an Interim Restraining Order is irrelevant in the present proceeding because they are principles this Court obviously took into account when it considered the Plaintiffs application for an Interim Restraining Order granted on the 1st of February 2013.
    
40. Further to that I am not hearing an application to grant or refuse an Interim Restraining Order but I am hearing an application by the Defendant to set aside the Interim Restraining Order already granted of the 1st of February 2013 against the Defendant. Therefore the principles submitted by Mr Cherake are in my view not relevant in the proceedings to set aside the Interim Restraining Order granted to the Plaintiffs.
    
41. Mr Asa's submission on paragraphs 26, 27, 28, 29, 30 is not so a concern because the Defendant in its application to set aside the Interim Restraining Order of the 1st of February is not challenging the processes adopted by the Court when it granted the said Interim Restraining Order on the 1st of February 2013. I will deal with the reasons I think had prompted the Defendant's application to set aside the Interim Restraining Order granted by this Court on the 1st of February 2013 later.
    
42. Mr Asa on the other hand submits the principles governing an application to set aside an Interim Injunctive Order is provided for under Order 12 Rule 8 of the National Court Rules and is also well settled by case authorities.
    
43. Mr Asa referred me to the case of Wamena Trading-v- Civil Aviation Authority (2006) N3058 and Kaiya Dick-v- Peter Lok (2007) N3205 which set out the relevant considerations that the Court have taken into account in dealing with applications to set aside Interim Restraining Orders such as:
    
    1. Where the conditions or stipulations of the Order have not been not been met and the Order is no longer necessary.
       
    2. If it is subsequently discovered by the Court that the Interlocutory Order was founded on wrong principles.
       
    3. Changes in relevant circumstances, including failure of the party enjoying the Order to act responsibly after obtaining it.
       
    4. It is shown that the party obtaining the Order had not come to the Court with clean hands. Mr Asa relies on the case of Mainland Holding Ltd –v- Paul Stobbs N2522; Injia DCJ (as he was then).
       
    5. Where the Plaintiffs failed to prosecute its' action after obtaining an injunction- see National Housing Corporation-v- Yama Security Services Pty Ltd N1985 Sevua J.
       
    6. If the Court finds hat it was misled on the earlier application – see Mark Ekepe –v- William Gaupe N2694 Cannings J.
       
    7. On an ex parte interlocutory application there has been a failure to make a full disclosure of relevant materials both for and against the applicant case – see Sioti Bauf and Lovoi Nadai –v- Poliamba Pty Ltd [1990 ] PNGLR 278 also Golobadana No.35 Ltd-v- Bank South Pacific Ltd N2390 Kandakasi J.
       
44. These grounds are settled and either party will succeed if they are established to have existed when one of the parties seeks to have an injunction order set aside.
    
45. Mr Asa submits that in the present case the Plaintiffs did disclose all relevant facts to the Court at the relevant time the application was made. The Defendant's lawyer was present in Court when the Plaintiff's lawyer made the application before Lenalia J on the 1st of February 2013 and that no issues have been raised as to any failure by the Plaintiff's lawyer to disclose any information to the Court. He therefore submits that none of the above conditions have been satisfied by the Defendant in order to set aside the interim injunction orders of the 1st of February.
    

Reasons for Defendant's application to set aside Interim Injunction

46. I said earlier that I will deal with the reasons for which the Defendants have come to this Court to have the Order of the 1st of February 2013 set aside or revoked. I will now do so. Firstly the Defendants were exercising their rights as directed by his honour Lenalia J that they were at liberty to apply to this Court and have the interim injunction set aside or revoked.
    

The Defendants are in Court seeking an order to set aside or revoke the interim injunction order granted against them on the 1st of February 2013 after they had received legal advice from their lawyers about the actions taken by them against the Plaintiffs.

47. These actions are:
    
    1. Issuing a Notice to Vacate and attempt to possess the said property at Section 35, Allotment 10, Kokopo on the 19th of January 2013 without a title to the said property; and
       
    2. Publishing a Tender Sale Notice in the National Newspapers on the on the 25th of January 2013 purportedly exercising powers of mortgagee to sell the said property.
       
48. To qualify their reasons they say that after receiving legal advice from their lawyers they realised that they made a mistake and have adhered to the legal advice rendered to them; such that they will comply with the Court Orders and will not do anything to the said property.
    
49. They further qualify their reason by submitting that despite no proper withdrawal of the Tender of Sale published on the National Newspapers on the 25th of January 2013, they have corrected that by a letter advising the Plaintiffs that they will not sell the said property.
    
50. The Defendant further qualify their reasons by saying that the Plaintiffs need not fear about them selling the said property, and they were unable to produce the original Owner's Copy of the Title because they simply did not have it, and did not have a registered mortgage on the property.
    
51. The Defendants obviously realized that they made a mistake, however it was a legal mistake because it fell short of the requirement of Sections 62, 67, 68 and 70 of the Land Registration Act.
    

Is the Defendant's reasons fall under the grounds to set aside Interim Orders?

52. It seems to me that the law provides only for the above grounds upon which a party is to rely on in an application to set aside an injunction order. These are:
    
    1. Where the conditions or stipulations of the Order have not been not been met and the Order is no longer necessary.
       
    2. If it is subsequently discovered by the Court that the Interlocutory Order was founded on wrong principles.
       
    3. Changes in relevant circumstances, including failure of the party enjoying the Order to act responsibly after obtaining it.
       
    4. It is shown that the party obtaining the Order had not come to the Court with clean hands. Mr Asa relies on the case of Mainland Holding Ltd –v- Paul Stobbs, N2522; Injia DCJ (as he was then).
       
    5. Where the Plaintiffs failed to prosecute its' action after obtaining an injunction- see National Housing Corporation -v- Yama Security Services Pty Ltd, N1985; Sevua J.
       
    6. If the Court finds that it was misled on the earlier application – see Mark Ekepe –v- William Gaupe, N2694; Cannings J.
       
    7. On an ex parte interlocutory application there has been a failure to make a full disclosure of relevant materials both for and against the applicant case – see Sioti Bauf and Lovoi Nadai –v- Poliamba Pty Ltd [1990 ] PNGLR 278 also Golobadana No.35 Ltd-v- Bank South Pacific Ltd, N2390; Kandakasi J.
       
53. I accept Mr Asa's argument that the fact that the Defendant did not have a

registered mortgage is a fact that is in the Plaintiffs favour. The Defendant in publishing the tender for sale in the newspapers purported to exercise a power that they did not fall under by Section 62 and 68 of the Land Registration Act.

54. Secondly there is no evidence whether verbal or written showing the

Defendant had withdrawn the Tender for Sale which leaves this Court to draw its conclusion of facts when it does not have the evidentiary facts.

Serious Questions to be tried

55. Both counsel have made brief submissions on this issue however, I do

not wish to dwell on it during this proceeding because they may be legal and factual issues which needs to be tried and cannot be resolved at this stage but when parties have complied with Order No. 6 and 7 of the Interim Restraining Orders granted to the Plaintiffs on the 1st of February 2013.

The Change of Circumstance

56. Mr Cherake submitted that the change of circumstance has been demonstrated by the Defendant's evidence that the Defendant was acting on a mistaken belief or presumption that the Defendant had a legally registered mortgage over the subject property.
    
57. Mr Asa on the hand argues that there was never any change of circumstance because the actions taken by the Defendant was unlawful.
    

Alternative Disputes Resolution (ADR)

58. The Plaintiffs submitted that the matter should be referred to Alternative Disputes Resolution (ADR) for an amicable solution however, the defendant does not favour that and argues that it will serve no good purpose and only will waste the Court's time. Since the Defendant disagrees with the referral of the matter to Alternative Disputes Resolution, I do not intend to refer the matter to Alternative Disputes Resolution for mediation.
    

Conclusion

59. I do not think what is being submitted by counsel for the Defendant as grounds to set aside the order of the 1st of February 2013, amounts to a change of circumstance. It is my humble view that the change of circumstance must fall within the perimeter of grounds that are available for the Defendant and the Plaintiffs founded in the case of: Mainland Holding Ltd –v- Paul Stobbs (2003) N2522; Injia DCJ (as he then was); National Housing Corporation-v- Yama Security Services Pty Ltd ( 2000) N1985 Sevua J; Mark Ekepe –v- William Gaupe (2004) N2694 Cannings J; Sioti Bauf and Lovoi Nadai –v- Poliamba Pty Ltd [1990 ] PNGLR 278 and Golobadana No.35 Ltd-v- Bank South Pacific Ltd (2002) N2309 Kandakasi J.
    
60. I conclude that the Defendant's actions on the 19th and 25th of January 2013 is not a change of circumstance. They were wrong in law and were unlawful acts. Be that to be in my view, cannot be said to be a change of circumstance.
    
61. For this reason the Defendant's application to set aside the Interim Restraining Orders granted on the 1st of February 2013 to the Plaintiffs is refused and dismissed.

________________________________________
Warner Shand Lawyers: Lawyer for the Plaintiffs
Namani Lawyers: Lawyer for the Defendant