Mataure Rabaul Microfinance Ltd (1-78764) v Bale [2018] PGNC 182; N7283 (6 June 2018)

N7283

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No. 1065 of 2017

BETWEEN:
MATAURE RABAUL MICROFINANCE LIMITED (1-78764)
Plaintiff

AND:
MARGARETH BALE
Defendant

Kokopo: Anis J
2018: 11^th May & 6^th June

DEFAULT JUDGEMENT APPLICATION – Order 12 Rule 25(b) and Order 12 Rule 32(1) of the National Court Rules – default in defence – no contest on default - evidence suggests plaintiff may not have a licence to operate as a financial institution within the requirements set in the Banks and Financial Institutions Act 2000 – whether that reason alone is sufficient to warrant the court not to exercise its discretion and enter default judgment – exercise of discretion discussed

Cases cited

Jackson Walaun v. Royal Wilson (2016) N6272

Luke Tai v. Australian and New Zealand Banking Group (PNG) Ltd (2000) N1979

Lina Kewakali v. The State (2011) SC 1091
Agnes Kunton & Ors v John Junias & Ors (2006) SC929
Lambu v. Torato (2008) SC953
Bank of PNG v. Eddie Oruba Mai (2007) SC862)
Keith Reid v. Murray Hallam and Allcad Pty Ltd (1995) N1337
Counsel:

Ms J. Marubu, for the Plaintiff
Mr E. Paisat, for the Defendant

RULING

6^th June, 2018

1. ANIS J: The plaintiff applied for default judgment on 11 May 2018. The plaintiff alleged that the defendant had failed to file her defence within the required time stipulated under the National Court Rules. The defendant did not give any reasons to explain herself of the delay except to point to a legal argument. The defendant submitted that the plaintiff did not have standing to file the proceeding in the first place.

2. I heard the plaintiff’s motion on 11 May 2018. Because information regarding the plaintiff’s standing was presented late, I ordered the parties to file supplementary submissions before or by 14 May 2018. I also ordered reservation of my ruling thereafter to a date to be advised.

3. Parties have been notified so I will rule on it now.

MOTION

4. The plaintiff seeks default judgment pursuant to Order 12 Rule 25(b) and Order 12 Rule 32(1) of the National Court Rules. The plaintiff says that the defendant was out of time to file her defence. Consequently, it says that the defendant has defaulted and it asks that judgment be entered against her for the sum that is claimed in the statement of claim, which is K24,544 plus interest and costs. The plaintiff relies on the affidavit of Ms Marubu filed on 12 April 2018. The affidavit deposes that the writ of summons and statement of claim was personally served on the defendant on 24 October 2017. The defendant had 44 days from that time to file her notice of intention to defend and defence. Ms Marubu deposes that the last day for the defendant to file her defence was on 7 December 2017. Ms Marubu deposes that the defendant did not file her defence within the 44 days limitation period. Ms Marubu attaches to her affidavit under Annexure A, a forewarning letter which is dated 23 February 2018 which had been sent by her firm to the defendant requesting the defendant to take steps to apply for leave to file her defence out of time within 14 days. Ms Marubu deposes at paragraph 9 of her affidavit that she had conducted a file search on the Court file on 9 April 2018 and noted that the defendant did not file her notice of intention to defend or defence. She attaches evidence of her search on that day as Annexure B. She concludes at the end of her affidavit by deposing that the defendant has therefore defaulted on filing her defence.

5. The defendant did not contest the alleged default against her. She only raised a legal argument which I will get to in a minute. But for this case, let me say this. I am satisfied that the defendant has defaulted in that she has failed to file her defence within the stipulated time frame as provided under Order 8 Rule 4(1) of the National Court Rules. The defendant had 30 days to file her notice of intention to defend. Had she filed her notice of intention to defend within the said 30 days period, she would have had an additional 14 days to file her defence. It seems quite clear here that she has failed on both these two (2) occasions. See cases: Jackson Walaun v. Royal Wilson (2016) N6272; Luke Tai v. Australian and New Zealand Banking Group (PNG) Ltd (2000) N1979. I uphold the plaintiff’s submission that the defendant had 44 days from the time she was served with the writ of summons and statement of claim, to file her notice of intention to defend and defence. I find as a matter of fact that the defendant did not file the two (2) documents within the stipulated time-frame or ever. I find evidence that the defendant had been warned to take steps to apply for leave to file her defence out of time but that she has failed to adhere to the warning and take the necessary steps. I am satisfied that the plaintiff has met all the requirements in a default judgment application.

6. Now, even if the Court is satisfied that a default case has been made out, its decision to grant or refuse to grant default judgment remains discretionary (See cases: Lina Kewakali v. The State (2011) SC 1091; Agnes Kunton & Ors v John Junias & Ors (2006) SC929 and Lambu v Torato (2008) SC953). Should I exercise my discretion and grant default judgment in favour of the plaintiff? Before I consider that and make my decision, let me consider the legal argument that was raised by the defendant.

DEFENDANT’S EVIDENCE

7. The defendant relies on one (1) affidavit. It is the affidavit of Mr Paisat, her counsel which was filed on 11 May 2018. I note that despite submissions opposing the use of the said affidavit, the plaintiff’s counsel did not object when Mr Paisat had sought leave of the Court to tender and rely on his affidavit. It was on that basis that I had overruled the objection when it was belatedly raised by the plaintiff’s counsel in her submissions at the hearing.

8. In Mr Paisat’s affidavit, he attaches a notice by the Bank of Papua New Guinea (the Central Bank) dated 22 January 2018. The notice effectively informs the public that the plaintiff is not licenced by the Central Bank as a registered financial institution to operate. The defendant submits that this therefore means that the plaintiff does not have locus standi to commence this proceeding. Before I look at the argument, let me ask myself this. Was the plaintiff licenced by the Central Bank as a financial institution? Was it required to be registered as a financial institution? I recall posing the question to counsel for the plaintiff. I note that counsel did not give a direct answer. Counsel instead said that the plaintiff was simply required to prove default judgment. Counsel said that that was all that was required of the plaintiff and that the plaintiff has done that. Again, I will shortly get to the arguments but before that, let me briefly look at the relevant law that governs banking and finance when dealing with licenced or registered financial institution. The relevant statute of course is the Banks and Financial Institutions Act of 2000 (BFI Act).

9. The Central Bank in my view has unlimited or absolute power under the BFI Act to regulate or govern banks and institutions in Papua New Guinea that operate under the Act. Its powers and functions are stipulated under PART II such as sections 5 and 6 of the BFI Act. It also has prosecutorial powers under section 56, that is, to prosecute persons or companies either criminally or in civil proceedings, that try to operate outside or in breach of the provisions of the BFI Act. See the case: Bank of PNG v. Eddie Oruba Mai (2007) SC862. I will not get into detailed discussions on the provisions of the BFI Act nor the case law as they were not raised by the defendant’s counsel at the hearing. The BFI Act or its provisions were also not cited by counsel in his submissions, and the parties, particularly the plaintiff, was not given the opportunity to prepare and argue the issue. But what I can say is this. If the Central Bank believes that the plaintiff has breached the BFI Act, it would be up to it to investigate and prosecute the plaintiff. The evidence disclosed by the defendant, that is the notice which had been issued by the Central Bank out to the public concerning the plaintiff, is one such measures the Central Bank may take. Does the evidence provide a good reason for this Court to refrain itself from exercising its discretionary power despite the defendant’s default? My conclusive view is that whatever actions the Central Bank may take on the plaintiff, would be a separate matter that would be within the Central Bank’s exclusive jurisdiction under the BFI Act. The defendant, in my view, does not have the mandate under the BFI Act to raise direct or implied arguments or allegations against the plaintiff directly to the Court concerning possible breaches of the provisions of the BFI Act. Only the Central Bank has that mandate and as stated above, there are processes within the Act for that to happen before a matter may reach the Courts’ attention for either prosecution or by way of a civil suit. And it would seem that unless and until a party is successfully investigated and prosecuted with a final guilty verdict to the offence to which the person or party is charged under, it would be wrong to make assumptions or pass judgments or opinions before-hand. So without any evidence of the plaintiff being found guilty of an offence prescribed under the BFI Act or of a civil suit whereby the Court has found the plaintiff liable, I cannot see how this evidence can assist the defendant’s cause and in return convince me to refrain from exercising my discretionary power in favour of the plaintiff. That is not the only reason.

10. Let me come back to the defendant’s argument. She argues that because of the said notice that was issued by the Central Bank, it means that the plaintiff has no locus standi or sufficient interest to commence proceedings. I find the argument misconceived as well as baseless. In my view, the plaintiff does have sufficient interest in the matter. The defendant, it seems, has forgotten that she had borrowed K20,000 from the plaintiff and had defaulted which was why the plaintiff has filed this proceeding, that is, to recover its money. In the statement of claim, the plaintiff pleads at paragraph 1(a) that it is a company incorporated under the Companies Act 1997.....and is able to sue and be sued in its corporate name. This plus the rest of the pleadings therein, in my view, discloses a reasonable cause of action for breach of contract. I make this finding based on the established court precedents. In the case of Keith Reid v. Murray Hallam and Allcad Pty Ltd (1995) N1337, Kapi DCJ, as he then was, said and I quote:

What then is the effect of a default judgment? A writ of summons should disclose a cause of action in law. That is to say it should allege matters of fact which gives rise to a cause of action in law. In this case the statement of claim alleges a valid contract of employment, breach of that contract and claims damages based on the terms of the contract.

11. Also and in Lina Kewakali v. The State (supra), the Supreme Court said these at paragraph 23:

23. In applications for default judgment, the applicant is saying that the defendant has not complied with the Rules of Court and that therefore, the plaintiff is, as of right, entitled to default judgment. A Court hearing an application for default judgment, should not just ‘tick the boxes’ so to speak but must also review the Statement of Claim to see if the action is one where default judgment can be entered. O.12 R.32 of the National Court Rules gives the Court a wide discretion to enter or not to enter, default judgment. Even when proof of due service or process on a defendant or proof of the default is established by the plaintiff/applicant, the Court still has a discretion to refuse to enter default judgment in cases where, for instance, the effect of the default judgment would affect the rights of other co-defendants or do not disclose a reasonable cause of action or that the default judgment cannot be sustained in law. (Kante Mininga v. the State (1996) N1458; Anton Kaluni v. Aiyale Warole (2001) N2114; Beecroft No. 51 Ltd v. Neville Seeto (2004) N2561; Urban Giru v. Luke Muta (2005) N2899).

12. The present claim is for breach of contract, or to be precise, breach of a loan agreement. The pleading states as follows. The plaintiff and the defendant entered into the loan agreement on 28 February 2014. The plaintiff loaned the defendant K20,000. The interest rate charged as per the agreement was 20% over the principle loan amount. The term of the loan was for 1 year and the defendant was required to pay K2,000 per month for 12 months commencing on 28 March 2014. The defendant made one instalment payment of K400 to-date, which was said to be in breach of the loan agreement. The plaintiff has now sued under the loan agreement for its money back plus interest and costs. I find in conclusion that the statement of claim filed herein sufficiently pleads facts that constitutes a cause of action that is recognised in law.

SUMMARY

13. I will exercise my discretionary power and enter default judgment in favour of the plaintiff for the sum of K24,544.

INTEREST

14. The plaintiff seeks interest at the rate of 8% per annum. The said rate has not been contested. The new Judicial Proceedings (Interest on debts and damages) Act 2015 allows the Court to, except for matters against the State where interest is fixed at the rate of 2% per annum, determine an appropriate interest rate [sections 4(1) and 6(1)]. I will apply the interest rate as sought by the plaintiff which is 8% per annum.

15. I will calculate interest based on the date when the cause of action accrued. For this purpose, I find that the cause of action accrued in May of 2017, which was the date when the plaintiff sent its second letter of demand to the defendant. This is pleaded at paragraph 18 of the statement of claim. The date of judgment is 6 June 2018. So that will be a period of 1 year and 6 days. Eight (8) percent of K24,544 is K1,963.52. K1,963.52 divide by 365 days equals K5.38 per day. K5.38 multiply by 6 days equals K32.28. So K24,544 plus K1,963.52 plus K32.28 equals K26,539.80

16. The plaintiff will therefore be entitled to a judgment of K26,539.80.

COST

17. Determining cost in this case is discretionary. The plaintiff’s application for default judgment is successful so I will order cost in its favour. Cost will be awarded on a party/party basis which may be taxed if not agreed.

REMARK

18. I note from the Court file that the plaintiff filed an additional affidavit after the hearing had closed on 11 May 2018. The said affidavit was the Affidavit of one Sammy Narawagin filed on 14 May 2018. I had not granted leave or made any orders warranting the filing of that affidavit or of any affidavits by the parties on 11 May 2018. As such, no regard was given to it in my judgment.

THE ORDERS OF THE COURT

19. I make the following orders:

1. Default judgment is entered in favour of the Plaintiff for the sum of K26,539.80.
2. Unless the judgment sum of K26,539.80 is settled within 30 days from the date of this order, post-judgment interest shall accrue at 8% per annum on the judgment sum to the date when it is settled in full.
   
3. Cost of the proceeding is awarded to the plaintiff on a party/party basis which may be taxed if not agreed.
   
4. Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly.

__________________________________________________________________

Marubu Lawyers: Lawyers for the Plaintiff
Daniels & Associate Lawyers: Lawyers for the Defendant