Guru v National Development Bank Ltd [2016] PGNC 3; N6162 (15 January 2016)

N6162

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 672 OF 2007

SIMAUL GURU
First Cross-Claimant

SAM KANAM KASAN
Second Cross-Claimant

NENA MAUSA
Third Cross-Claimant

BEGA DOLON
Fourth Cross-Claimant

KERAG SALAT
Fifth Cross-Claimant

KEKU MANULAI
Sixth Cross-Claimant

LABOK GORU
Seventh Cross-Claimant

JEFFERY NEGES MERMER
Eighth Cross-Claimant

V

NATIONAL DEVELOPMENT BANK LIMITED
Cross-Defendant

Madang: Cannings J
2015: 16 March, 16 June
2016: 15 January

TORTS – negligence –bank-customer relationship – duty of care – whether bank breached duty of care – allegedly negligent advice – proof of breach of duty – need for plaintiff to prove when, where, how, by whom allegedly negligent advice was given.

The cross-claimants, cocoa growers, formed a business group which entered into a loan agreement with the cross-defendant bank. The loan was secured by mortgages over the cross-claimants' land. The business group defaulted on the loan and the bank in 2007 commenced proceedings against the cross-claimants, seeking repossession of their land. The bank in 2011 discontinued its claim against the cross-claimants, but they maintained a cross-claim by which they sought damages against the bank for the tort of negligence. The cross-claimants' case was that the bank gave them negligent advice regarding the variety of cocoa they should plant and, as a result of following that advice, their crops failed and they incurred losses. This was the trial of the cross-claim.

Held:

(1) The bank owed a duty of care to the cross-claimants but the cross-claimants failed to prove that the bank failed to take reasonable care and therefore their case failed.

(2) The cross-claimants' case was vague and inadequate as it begged too many questions, such as: Who gave the allegedly negligent advice? When was the advice given? Where was the advice given? In what form was the advice given? Was it reasonably expected to variety allegedly suggested would be unsuitable in the area?

(3) The cross-claim was accordingly dismissed.

Cases cited

The following cases are cited in the judgment:

David Nelson v Credit Corporation (PNG) Ltd (2011) N4368
Magiten v Moses, Anawon, Tovea and Rural Development Bank Ltd (2006) N5008
Pija Grannies Ltd v Rural Development Bank Ltd (2011) SC1327
Rage Augerea v Bank South Pacific Ltd (2007) SC869
Richard Manui v ANZ Banking Group (PNG) Ltd (2008) N3405

CROSS-CLAIM

This was a trial on liability for negligence.

Counsel

Y Wadau, for the cross-claimants
S Tanei, for the cross-defendant

15 January, 2016

1. CANNINGS J: Simaul Guru and seven other cross-claimants, who are cocoa growers in Madang District, have brought an action in the tort of negligence against the cross-defendant, National Development Bank Ltd. They are cross-claimants as the bank, as plaintiff, sued them in 2007 for breach of a loan agreement to the value of K129,007.00 that was entered into in the mid-1980s between the bank and an incorporated business group constituted by the cross-claimants.

2. The bank, in 2011, discontinued its claim, which had been aimed at repossessing the cross-claimants' cocoa blocks, which had been used to mortgage the loan. The cross-claimants maintained their cross-claim, which had been filed together with their defence, and there has been a trial of the cross-claim.

CROSS-CLAIMANTS' CASE

3. Their case is that once their business group entered into the loan agreement the bank took over management of their cocoa blocks by engaging an agricultural management company, Ancodev Pty Ltd. They say that they were advised by the bank to dig up their conventional cocoa trees and replace them with a hybrid variety called SG1, which had been developed specifically for use in volcanic soils such as those in Rabaul District, East New Britain. The new variety was successful in Rabaul but a complete flop in Madang.

4. The cross-claimants say that their crops failed, they earned no income for a long time, their business group was unable to meet the loan repayments, they were threatened with repossession of their blocks, they have never recovered from this setback and that this was all caused by them following the negligent advice of the bank.

FAILURE TO PROVE CASE

5. The cross-claimants' case must fail as that they have failed to prove on the balance of probabilities that the bank was negligent. I have no problem in accepting that the bank owed a duty of care to the cross-claimants (Rage Augerea v Bank South Pacific Ltd (2007) SC869, Pija Grannies Ltd v Rural Development Bank Ltd (2011) SC1327, Magiten v Moses, Anawon, Tovea and Rural Development Bank Ltd (2006) N5008, Richard Manui v ANZ Banking Group (PNG) Ltd (2008) N3405, David Nelson v Credit Corporation (PNG) Ltd (2011) N4368).

6. Nor do I have a problem in finding on the evidence – which is not seriously contested by the bank – that a decision was made to remove conventional cocoa trees and replace them with the new variety, and that decision was the wrong decision because the crops failed and that caused losses to the cross-claimants. However the cross-claimants have pleaded the tort of negligence against the bank, so they must prove that the elements of the tort, the second of which is that the bank was negligent, ie that the bank failed to discharge its duty to take reasonable care in its dealings with the cross-claimants.

7. The cross-claimants' case breaks down at that point. It begs too many questions, such as:

• Who advised them to replace their trees?
• When was the advice given?
• Where was the advice given?
• In what form was the advice given?
• Was it reasonably expected to be known that the hybrid variety would be unsuitable in Madang?
  

8. The cross-claimants have made it difficult for themselves by only one of them, Simaul Guru, giving evidence. There is no evidence from the seven others. Mr Guru's evidence is vague. In one affidavit he makes the bold statement that "the Bank destroyed our cocoa when it introduced the hybrid cocoa from Rabaul". In another affidavit he states: "I remember that Mr [Yarrang Biyapenu] was the project manager. We all worked hard under his guidance and supervision. We cut bushes and cleared the land. We removed old cocoa trees and made way for new hybrid cocoa that was to be purchased and replaced the old cocoa trees". This creates the impression that Mr Biyapenu, who at the time was employed by Ancodev and was the manager of the cross-claimants' cocoa project, was the one who advised them to plant the SG1 variety.

9. That Mr Biyapenu was involved in giving the allegedly faulty advice is confirmed by his affidavit, which was the only other evidence for the cross-claimants. He states: "The [cross-claimants] were told to remove their old cocoa trees and replace them with new hybrid [seeds]. So I ordered and purchased SG1 cocoa seeds from the Cocoa Coconut Institute in Rabaul and replaced the older cocoa trees". Mr Biyapenu does not say who told the cross-claimants to plant SG1; and what does he mean by "told". Were they ordered to do so or advised to do so? Or was it just a suggestion?

10. I cannot find, on this evidence, that it was the bank or an officer of the bank who gave the advice or order to the cross-claimants. The evidence suggests that it was Mr Biyapenu, perhaps acting on instructions from his superiors, who gave the advice. Perhaps the cross-claimants should have sued Ancodev. All of this is very speculative, of course, and that underlies the defects in the cross-claimants' case. They have failed to prove that the bank was negligent.

CONCLUSION

11. The cross-claim must be dismissed. I will allow the parties to bear their own costs as I consider that it was the conduct of the bank in unnecessarily commencing the primary proceedings that led the cross-claimants to commence this fruitless cross-claim. Other costs orders made in the course of the proceedings will remain intact.

ORDER

(1) The cross-claim is dismissed.

(2) The parties shall bear their own costs of the cross-claim.

(3) Other costs orders remain in force.

(4) The file is closed.

Orders accordingly,
__________________________________________________

Young Wadau Lawyers: Lawyers for the Plaintiff
Legal Division, NDB: Lawyers for the Defendant