Mirupasi v Australia New Zealand Banking Group (PNG) Ltd [2020] PGNC 177; N8394 (19 June 2020)

N8394

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1206 OF 2019 [COMM] & OS (JR) No. 856 of 2019

BETWEEN:
VINCENT MIRUPASI
First Plaintiff

AND
COURTABELLE INVESTMENTS LIMITED trading as HOTEL HODAVA (In Receivership)
Second Plaintiff

AND
AUSTRALIA NEW ZEALAND BANKING GROUP (PNG) LIMITED
First Defendant

AND
DAVID JOESPH MURRAY Receiver and Manager to COURTABELLE INVESTMENTS LIMITED
Second Defendant

Waigani: Miviri J
2020: 06^th & 12^th June

PRACTICE & PROCEDURE – Writ of summons – Mortgage – Mortgagee duty of – Mortgagor rights duty of – clogging & fettering – evidence not made out – ground dismissed – costs follow event.

PRACTISE & PROCEEDURE – Companies Act Sections 283 – Court Supervision of receiver – Section 284 court may terminate or limit receivership – relationship in law – privity to – evidence not made out – discretion to exercise denied on both grounds – costs follow event.

PRACTISE & PROCEEDURE – Interim restraint sale of – secured property – whether to maintain or discharge – balance of convenience – evidence in favour – balance discharged – interim restraint discharged forthwith – costs follow event.

Cases Cited:

Fly River Provincial Government v Pioneer Health Services Ltd [2003] PGSC 4; SC705

Golobadana No 35 Ltd v Bank of South Pacific Ltd [2002] PGNC 36; N2309

Bank of Papua New Guinea v Niso [2004] PNGLR 24

Augerea v The Bank South Pacific Ltd [2007] PGSC 12; SC869
Counsel:

M. Pokia, for Plaintiffs
E Anderson & M Tusais, for Defendants

DECISION

19^th June, 2020

1. MIVIRI, J: This is the decision on the Writ of Summons dated the 21^st October 2019 with the amended Statement of claim filed by the plaintiffs, consolidated with the originating summons upon which it is the plaintiffs’ contention that under section 284 (1)(a) and (3) of the Companies Act Termination or limitation of the receiver. Plainly he seeks the removal or retirement of the second defendant as the receiver/Manager of the second plaintiff. He must demonstrate that the purpose of the receivership has been satisfied. That the circumstances no longer demonstrate for continued engagement.
   
2. This challenge and questions the relationship at law that has been entered into by the first defendant with the second defendant. Because the former has engaged and appointed the services of the latter to recoup what moneys he loaned to the second plaintiff of which the first plaintiff is a director. Whilst the receiver owes a duty of care to the mortgagor and mortgagee, his primary duty is to exercise his powers to repay the secured debt. He has been appointed by the first defendant tasked for all intent and purposes to administer and 'receive' (i.e. liquidate) the company's assets so the secured creditor, which is the first defendant can recoup its’ money loaned to the second plaintiff. Which is the mortgage a loan in which property or real estate is used as collateral here the properties. The borrower/plaintiff entered into an agreement with the lender Australia New Zealand Banking Group (PNG) Limited wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full. The facts here have led to default in the repayment and so engagement of a receiver/manager after all other attempts to recover have failed.
   
3. Relevantly by the admission of evidence, exhibits P1 to P6 in the case of the plaintiff, exhibits D1 to D8 in the case of the defendant, the first plaintiff is a private lawyer of over 29 years of experience and practise and principal of the firm Mirupasi Lawyers. And the second Plaintiff owns and operates the Hotel Hodava in Port Moresby of which the first plaintiff is a director and shareholder, holding shares for himself and in trust for his children. The first defendant the Australia New Zealand Banking Group (PNG) Limited,“ the Bank” entered into an initial loan Fully Drawn Advance Facility (FDA No. 1) agreement with the Second Plaintiff, “the Borrower” on the 1^st October 2014 for the sum of K 11, 100,000.00 to refinance the Borrowers loan with the Westpac Bank and assist with the repayment of various creditors. The agreement documents were standard coupled with the lending terms and conditions. Materially the agreement included facility limit of K 11, 100,000.00. And termination date was five years from the draw down 10^th November 2019. And repayment was monthly principal and interest of K 119,000.00. It was to be amortised over a notional term of 15 years with interest rate at 9.95%.
   
4. The loan was varied by a variation letter of offer of 29^th June 2015 by the Bank including a further loan of K200, 000.00 (FDA No. 2) to the borrower which was for Insurance Premium Funding. It reduced the facility limit from K 11, 100, 000.00 to K 10, 791, 000.00. Further facility that was sourced and attained from the First defendant was overdraft facility with limit of K200, 000.00 in October 2015. And the securities accorded for the facilities were Registered Mortgage debenture over the Second Plaintiff company’s undertaking and all assets, both present and future without limitation. First Registered Mortgage over the lease registered in the register of leases as Volume 78 Folio 203 of Allotment 10 section 2 Boroko Port Moresby. And first registered mortgage over the lease registered in the register of Leases as volume 5, folio 1149 allotment 11 section 2 Boroko Port Moresby. And first registered mortgage over the lease registered in the register of leases as Volume 2 Folio 65 alloment 12 section 02 Boroko Port Moresby.
   
5. Common and undisputed between the parties on either side is the fact of the loans as set out above. And which has been paid yet to be settled as agreed and outstanding against the plaintiffs. Plaintiffs do not deny, nor do they dispute that they owe that money to the defendants which they have secured in the way set out above. It is an obligation be filling them in law to repay. That since May 2017 they have been in default which they have admitted starting from 8^th May 2017 a notice of event default was issued to the Borrower. Again, on the 16^th May 2017 then on the 16^th June 2017 Letter of offer cover note setting out events of default. Yet again on the 30^th August 2017 notice of event of default was issued to the borrower. Again, on the 20^th November 2017 yet again a notice of event of default was issued to the borrower. Hotel Hodava is on the land Allotment 10, 11, and 12 Section 2 Boroko Port Moresby National Capital District. This is the secured property that is the subject of the loan security which has been intended to be sold to recoup the moneys due and outstanding to the defendants from the second plaintiff.
   
6. The plaintiffs dispute and contend against the sale of the secured property. They obtained interim restraining orders against its sale current and estopping. They argue that the purpose of the receivership has been satisfied and the circumstances are that it is no longer necessary for its continuation. The earnings revenue of the second plaintiff is defeated by the continued engagement and payment of the receiver/manager. Which they say is from the funds they repay towards the loan outstanding. That with the retirement of the receiver/manager this money saved will be used to continue to pay and settle the loan obtained and the release of the secured property. They contend that the engagement of 4 expatriates, a national and five G4S security guards is not necessary. Because that is running the costs of the receiver/manager which is sourced from the second plaintiff over and above the repayment of the loan.
   
7. This contention is without the benefit of evidence in support. In particular it does not have the benefit of the fees that are charged either by the production of a balance sheet of payment evidencing that it is drawn from the money paid as repayments to the loan. In any case this is a relationship at law between the first and second defendants any accounts or consideration between will be theirs and not of the plaintiffs, the court will not write in what is not there: Fly River Provincial Government v Pioneer Health Services Ltd [2003] PGSC 4; SC705 (24 March 2003). The courts discretion under 283 of the Companies Act to review or fix the renumeration of the receiver manager here is without the evidence. And in all fairness the discretion will not be invoked in the plaintiff’s favour without. This ground is not sustained and refused.
   
8. The first plaintiff by his affidavit sworn the 25^th November 2019 deposes that the first defendant, ANZ bank has received K1, 359, 263.00 from the second Plaintiff the hotel between 29^th August and the 20^th November 2019. And that the income at the hotel has continued to increase substantially from around K 580, 000.00 to K 770, 000.00 currently from the refugees such that there is enough to pay the monthly loan instalments of K 122, 500.00, run the business and have more left over. These assertions do not have the benefit of the account name and number at the Bank where the account of the second plaintiff is maintained to verify that indeed this is the balance in the account of the Second Plaintiff. The assertions by the first Plaintiff are self-serving and would be more substantive with independent verification from the bank. It does not sit well with his evidence on oath and under cross examination. He was unimpressive as a witness and very evasive. He argued more than give evidence. He did not advance his cause. His evidence does not come hand in hand with independent verification instances here pointed out.
   
9. In that affidavit he also deposes that the receiver has stopped payments for rent for his children who are the shareholders and their three mothers two in Port Moresby and one in Brisbane. And the latter have been evicted and the children in Port Moresby have been warned with eviction with 2 months rental of K6000 each outstanding. Their medical expenses here at Dr. Mola’s and in Brisbane at Redcliffe have been closed. Other moneys for lunch, excursion bus fare have been stopped. School fees also have not been paid. Two at the Port Moresby International School in grades 11 were told not to attend because they were absent more than the minimum required and so were withdrawn. Two others in the same school in grade 10 were told the same. Other younger children in primary school in grades 6, 4, 3, and 1 at Korobosea International school were told to stay away because the sum of K15, 000.00 owed for the quarter could not be paid. The plaintiff been given by the receiver K6000.00 as food money for the shareholders every fortnight which has been stopped as of the 25^th November 2019.
   
10. He deposes further that food and drink orders at the hotel are very slow apart from the refugees who really have no choice, we have lost all our other customers built over many years because purchases are very slow and customers specific food and drinks orders at the restaurant and bar are not available or missing on some days, for example barramandi fish, T-Bone steak, Lamb shank, black label whiskey, red wine and so on.
    
11. Further the purchases of chemicals and repair material is also very slow. And reliable employees are giving up. The cleaning or maintenance work cannot be done which is a setback for the proper maintenance and upkeep of the hotel. On the 11^th November 2019 three of the power fuses in the change room over switch between the standby generator set and the PNG power short circuited and were burnt. Block A which accommodates majority of the 44 refugees were disrupted. The fuses costs less than K200 but moneys could not be accessed immediately so the maintenance manager purchased with his own funds and yet to be reimbursed.
    
12. This is evidence in his own admission that looms that the financial life blood is not all as he paints of growth and prosperity for the business rather it is the contrary. And all the more reason for the upkeep and the maintenance of the receiver/manager to ensure that the moneys owing are indeed retrieved and paid where they are due to the first defendant. The argument for the removal of the second defendant in this light does not sustain but the contrary is clear. Because after two years fruitless in recovery on the 2^nd October 2019 first defendant appointed the second defendant as receiver manager of the second plaintiff. Even then the outstanding loan stood at K 13, 948, 853.56 and come 28^th October 2019 it stood at K 14, 715, 964,21 which was even higher on the 31^st January 2020 K 15, 287, 329.56.
    
13. On the 18^th September 2019 this court presided by Justice Makail granted an interim injunction granting restraint against the second defendant as Receiver/Manager from taking steps to or towards selling the land described as Allotment 10, 11, and 12, section 2, Hodava Avenue which is pending the determination of this proceedings. Effectively the plaintiffs have to satisfy on the balance of probabilities that earnings and revenue of the second plaintiff is such that loan obtained details set out above will be paid off. That there is strength in the evidence now against the sale of the secured properties.
    
14. To pursue the plaintiffs, rely on the affidavits of the first plaintiff marked out as exhibits P1 to P6. Annexure F of the affidavit of the first plaintiff dated the 2^nd October 2019 is invoice dated the 1^st June 2019 for the sum of K85, 002.46, then invoice No: HH-002509/2019 dated the 25^th September 2019 is for the figure K94, 811.20. The latter is made out to Program Support PNG & Cambodia, Regional Processing and Resettlement, Department of Home Affairs. It has the inscription full payment to be made upon the quotation. Previous to this is a similar quotation No: HH-001809/2019 dated the 18^th September 2019 for the figure K94, 360.20. Then there is Invoice No. HH-001049/2019 dated the 04^th September 2019 is for the figure K81, 474.80. It is made out to Program Support PNG & Cambodia, Regional Processing and Resettlement, Department of Home Affairs.
    
15. The invoices are not supported in each case by verification of corresponding deposit into the account of the second plaintiff. A bank statement bearing the account name and number of the second plaintiff with current balance of the account depicting the deposit is not before the court. This is important evidence that will independently verify the evidence of the first plaintiff. He being part and partial of the dispute before the court. He has an integral interest in the outcome of the dispute at hand. It will shift the balance in his favour but that is lacking here. The end result is that the evidence he relies upon does not sway the balance in his favour. Applied to the law here section 283 (2) of the Companies Act that the Second defendant’s fees or bill be sanctioned before it is paid including payment of costs of the receiver/manager by the first defendant. He has not demonstrated a case for the exercise of the discretion of the court. The required balance has not been tilted in his favour and this ground fails and is refused.
    
16. Next the plaintiffs contend Statutory tort by virtue of sections 67 (1)(a) and 68 (1) of the Land Registration Act 1981 arising from the same set of facts set out above in the wrongdoing alleged. Both sections of that Act are in the following terms: “

NOTICE OF DEFAULT.

(1) Where default is made–

(a) for the period of one month in payment of any secured money the creditor may give to the debtor written notice to pay the money then due or owing; or

(b) in the observance of a covenant binding on the debtor by virtue of a provision expressed or implied in a mortgage or charge the creditor may give to the debtor written notice to observe the covenant.

(2) The notice referred to in Subsection (1) may be given to the debtor–

(a) in person; or

(b) by leaving the notice on the land subject to the mortgage or charge; or

(c) by leaving the notice at the usual or last-known address in the country of the debtor or other person claiming to be entitled to the secured land.

68. SALE OF PROPERTY BY MORTGAGEE, ETC.

(1) Subject to Section 72, where the default referred to–

(a) in Section 67(1)(a), continues for a further month from the date of the notice referred to in that subsection; or

(b) in Section 67(1)(b), continues for a month from the date of the notice referred to in that subsection,

the creditor may sell the land the subject of the mortgage or charge or a part of that land.

(2) For the purpose of effecting a sale under this section the creditor may execute any document.

(3) The land may be sold in the following ways:–

(a) altogether or in lots.

(b) by public auction or by private contract or partly by public auction and partly by private contract.

(4) The creditor may sell the land subject to any conditions of sale which he thinks fit.

(5) On a sale under this section the creditor may buy in and resell without being liable for loss occasioned by that purchase or resale.

(6) The purchase money arising from a sale under this section shall be applied–

(a) firstly, in payment of the expenses occasioned by the sale; and

(b) secondly, to the extent that money remains after the payment specified in Paragraph (a)–in payment of a registered mortgage or charge taking precedence to the mortgage or charge to which the power of sale was exercised and to which the sale was not subject; and

(c) thirdly, to the extent that money remains after the payment specified in Paragraph (b)–in payment of the creditor; and

(d) fourthly, to the extent that money remains after the payment specified in Paragraph (c)–in payment in order of priority, of registered mortgages or charges that are subsequent to the mortgage or charge in relation to which the power of sale was exercised; and

(e) finally, to the extent that money remains after the payment specified in Paragraph (d)–in payment to the debtor.”

17. Section 67 by the evidence produced here is not in favour of the plaintiff’s cause. He has defaulted in the mortgage in the repayments stipulated particulars of which are set out above. Primarily this is more than two cases of default. Notice to that effect has been given both in accordance with this section and also section 68 particulars which are set out above. The defendants have in this regard discharged the minimum required by both sections. They are prevented from effecting sale of the secured property because of a pending restraining order. Which is subject to this determination being the substantive matter. Since that restraint as observed above the situation has not improved for the better to maintain.
    
18. Here the issue is whether or not the balance of convenience favours extension of that restraint or damages would be an adequate remedy bearing in mind that here there is no arguable merit in the matter given all the finding set out above: Golobadana No 35 Ltd v Bank of South Pacific Ltd [2002] PGNC 36; N2309 (11 November 2002). Given the findings set out above it has not been demonstrated to the required balance by the plaintiffs that the interim restraint be maintained. Rather that the interim restraint will be discharged forthwith, and the subject secured property be placed on sale in accordance with section 68. And that is the ruling here the restraint is discharged forthwith the property is accorded liberty to the defendants the right of sale to be exercised in all in stances in accordance with sections set out above.
    
19. The mortgagee’s power of sale is subject to default and notice of default requirements and a number of other encumbrances imposed in equity by the courts. The mortgagee is under a duty to make a real sale and not to sell the property to itself, act in good faith and ascertain and sell at the true market value: Bank of Papua New Guinea v Niso [2004] PNGLR 24 (18 October 2004). In my view by the evidence set out above the plaintiffs have not countered way beyond the required balance. Hence their prayer to deny is not made out. Defendants on the contrary have satisfied by the material they have produced that this be granted in their favour. They will in accordance with section 68 of the Act effect the sale of the secured property here given in good faith at true market value. So that what is rightfully due to them is theirs to collect and any due to the plaintiffs be accorded to them.
    
20. Further under the Fairness of Transactions Act 1995 sections 4, & 5 of that Act Fairness described by that section is just and equitable distribution amongst the parties as is the case here because both are parties to the transaction, defendants lended their funds and the plaintiffs borrowed on the condition that they will pay back that amount plus the interest associated. The totality of the relationship by the evidence is that the plaintiffs have failed, and defendants have persisted by process of law to no avail. That in my view is compliance with that Act. And given the facts set out above there is no room to allow the contention of the plaintiffs to sustain. Accordingly, that ground also fails and is refused.
    
21. The plaintiffs contend further that in this regard its attempts at repayment have been frustrated by the illegal actions of the defendants acting in contravention of the loan agreements to insert fees and charges under guise of moneys lawfully owing to clog and the fetter the efforts by the plaintiffs in the repayments. That effectively over the 36 months since the agreement and the draw down it has had to repay K4, 410, 000.00 but the loan K 11, 100,000.00 has only been reduced by K 437, 984.35 and the sum paid by it of K 3, 972, 015 remains unaccounted and outstanding against the first defendant. After all repayments, the figure outstanding still of the loan yet to be settled is K10, 710, 578.09. By this it cannot be argued and maintained that the secured property be sold because plaintiffs have to a large extent in material terms shown by their actions that they have discharged their obligations and will eventually if allowed continue and discharge what is due to the defendants in the loan agreement. Its sale will devastate or demolish what the plaintiffs have had to built over the years in business. If it is to be sold it ought to be done so at market value and not in haste to recover moneys owing and due. That the buyers offering be to this end but not simply to wedge off what is due to the first defendant leaving the plaintiffs unjustified and denied unlawfully.
    
22. This is sufficiently addressed above suffice to say that the Plaintiffs have not honoured their part of the agreement and cannot make the defendants wait on what is due to them without drawing out the illegalities they allege by evidence. On the facts and materials before me the plaintiffs’ allegation about the repayments is not consistent with the analysis of the credits and debits on the loan account. There is no evidence to support what is asserted. The borrower did not make repayment for 36 months from October 2014 to April 2017. Repayments were made in December 2014 to March 2017 for a total of 28 months. And further the borrower did not make monthly repayments of K122, 500.00 throughout the 28 months. It made monthly repayments of K119, 000.00 for the first 8 months from December 2014 to July 2015 and monthly repayments of K122, 500. 00 for 20 months from August 2016 to March 2017. Which ran up the total repayments by the borrower K3, 401, 500.00.
    
23. In the light of these it would not be clogging and fettering on the equity of redemption because the changes were made in accordance with the terms of the loan agreement and increases in the interest rate were as a result of the Borrowers defaults. And the increases in the rate were not unreasonable because the changes were communicated to the Plaintiffs and all were on the loan account in the statement of the account provided to them. There were no hidden charges. Because the relationship is legally binding and enforceable and should be acceded to here. The law is well set out that the redeeming right of a mortgagor is fundamental because that is the essence of that relationship by their nature. It is inherent unto that relationship. And equity will in what it is guard against its abuse and decay heedlessly. It will not by its limbs allow methods or means designed to prevent or impede redemption: Augerea v The Bank South Pacific Ltd [2007] PGSC 12; SC869 (13 September 2007).
    
24. Applied that is not the situation here for the plaintiffs they have not discharged this to succeed in their cause of action. Meaning that the Asset Management Agreement is enforceable. And coupled with all set out above the aggregate is that this action by the plaintiffs in the amended Statement of Claim dated the 21^st October 2019 from grounds 1 to 12 and the originating summons No. 856 of 2019 fails on all grounds pleaded and are refused with costs to follow the event.
    
25. The amended writ of summons with the amended Statement of Claim dated the 21^st October 2019 is dismissed on all grounds pleaded 1 to 12.
    
26. The originating summons No. 856 of 2019 is also dismissed.
    
27. Judgement in all the circumstances is refused against the first and second plaintiffs on all actions instituted as set out above.
    
28. Cost will follow the event
    

Orders Accordingly.

__________________________________________________________________

Mirupasi Lawyers: Lawyers for the Plaintiff Applicant

Dentons PNG: Lawyer for the Defendants