Finance Corporation Ltd (trading as FINCORP) v Delphi Management Consultants Ltd) v Samson [2020] PGNC 347; N8558 (2 October 2020)

N8558

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 481 OF 2018

BETWEEN:
FINANCE CORPORATION LIMITED trading as FINCORP
Plaintiff

AND
DELPHI MANAGEMENT CONSULTANTS LIMITED
First Defendant

AND
GEORGE PERA, MANAGING DIRECTOR
Second Defendant

Waigani: Manuhu J.
2020: 21^st September & 2^nd October

CONTRACTS – Loan Agreement and Mortgages –Mortgagee in default – Vacant Possession – Whether Court can extend time to enable mortgagee to settle arrears.

PRACTICE AND PROCEDURE – Summary judgment - No notice of intention to defend – No defence – Admission of liability.

Case Cited:

Bank of PNG v Muteng Basa [1992] PNGLR 271

Counsel:

Mr Kent Pato, for the Plaintiff
Mr George Pera, In Person for the First Defendant and himself.

2^nd October, 2020

1. MANUHU J: This is the ruling on the Plaintiff’s application by way of a notice of motion dated 28 November 2018 for summary judgment against the First Defendant (“The Company”) and George Pera, Managing Director of the company.
   
2. The notice of motion seeks the following orders:
   
   • Summary judgement be entered against the defendants in the sum of K549,909.35 pursuant to Order 12 Rule 38 of the National Court Rules.
     
   • Summary Judgement or Judgement be entered in favour of Fincorp against the defendants and /or their servants, agents, associates to deliver up or give vacant possession of the property/land described as Allotments 103 and 104 Section 16,Bomana, National Capital District pursuant to Order 12 Rule 38 of the National Court Rules and/or Order 12 Rule 1 of the National Court Rules.
     
   • The defendants and /or their servants, agents, associates deliver up or give vacant possession of the property/land described as Allotment 103 and 104, Section 16, Bomana, National Capital District to the Fincorp within fourteen (14) days commencing upon the date of service on the defendants of this judgment pursuant to Order 12 Rule 1 of the National Court Rules and /or Section 155 (4) of the Constitution.
     
   • Fincorp be granted leave to issue a Writ of Possession of the property/land after the expiration of the fourteen (14) days upon the defendants and/or their servants, agents, associates deliver up or give vacant possession of the property/land described as Allotment 103 and 104, Section 16, Bomana, National Capital District pursuant to Order 12 Rule 1 of the National Court Rules and/or Section 155 (4) of the Constitution.
     
   • Fincorp be at liberty to exercise its rights of foreclosure and to sell the property/land pursuant to Order 12 Rule 1 of the National Court Rules and/or Section 155 (40) of the Constitution.
     
   • Cost of the proceeding.
     
   • Time for entry of orders sought be abridged to the date of settlement by the Registrar which shall take place forthwith.

3. The company was and is the registered proprietor of two portions of land, Allotment 103 and Allotment 104, Section 16, Bomana, National Capital District. On 15 September, 2017, the defendants applied to Fincorp for a commercial loan. On 27 September, 2017, Fincorp and the defendants entered into and executed a mortgage deed, under which Allotment 103 was pledged by the defendants as security for a loan facility. They also entered into and executed a second mortgage deed under which Allotment 104 was pledged by the defendants as security for the same loan facility.
   
4. Under the mortgage deed, the defendants were required to repay the loan with interest and if the defendants defaulted, Fincorp was entitled to give a letter of demand and statutory notice of default and for the defendants to repay the loan in full, failing which Fincorp will exercise its rights of foreclosure and repossess the mortgaged properties.
   
5. On 29 September, 2017, the plaintiff and the defendants entered into and executed a loan agreement under which Fincorp agreed to lend monies to the defendants in the aggregate amount of K495, 000.00 with interest. The loan was advanced under a Drawing Notice dated 29 September 2018, and the key terms of the loan were:
   

KEY TERMS
Commencement Date	29 September 2017
Termination Date	29 September 2024
Term of Loan	7 years
Principle Loan Amount	K495,000.00
Purpose for Loan	To purchase blocks of land at Bomana, National Capital District; pay outstanding development costs; build infrastructure and site work for office units; furnishing and landscaping of development property; and purchase of office equipment and systems
Interest Rate	15.75% per annum
Security	Existing security in the form of the mortgages
Monthly Repayment Amount	K9,761.59
Total Number of Monthly Repayments	84

6. On 29 November 2017, when the first monthly repayment was due, the defendants defaulted. On 19 February 2018, Fincorp issued a Letter of Demand notifying the defendants that their loan account had fallen into arrears and demanded for the arears to be settled within 10 days. The defendants did not settle the arrears and continued to default.
   
7. On 12 March 2018, Fincorp issued a Statutory Default Notice pursuant to section 67 of the Land Registration Act to the defendants. The section provides:
   

“67. 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.”

8. By 12 May 2018, the defendants had paid K39,523.18 which settled some of the arrears, but on 15 May, 2018, they defaulted again. In the ensuing weeks, Fincorp would have made the decision that the defendants could not be trusted any more. On 20 July 2018, Fincorp filed this proceeding. The reliefs sought in the originating process are:
   
   • An order that the defendants and/or their servants, agents or associates shall forthwith give vacant possession to the plaintiff of both land described as Allotments 103 and 104, Section 16, Bomana, National Capital District subject to State Lease Volume 47 Folios 71 and 72 pursuant to Section 74(l)(c) of the Land Registration Act 1981.
     
   • An order that the defendants and/or their servants, agents or associates shall give vacant possession to the plaintiff within fourteen (14) days commencing upon the date of service by the plaintiff on the defendant of this judgment pursuant to Section 74(l)(c) of the Land Registration Act 1981.
     
   • Leave be granted to the plaintiff to forthwith issue a Writ of Possession for the land after the expiration of the fourteen (14) days upon the defendant giving vacant possession to the plaintiff pursuant to Order 13 Rule 3(l)(a) and 3(2) of the National Court Rules.
     
   • An order that the plaintiff as the mortgagee be at liberty to exercise its right to foreclosure and sell the two land and property described as Allotments 103 and 104, Section 16, Bomana, National Capital District subject to State Lease Volume 47 Folios 71 and72 which is under the registered mortgage deeds pursuant to Section 68 of the Land Registration Act 1981.”
     
9. Presently, the loan arrears and interests continue to accrue and accumulate as each month passes. The defendants have not settled the debt or offset their monthly arrears. To any lender or financial company, this is regarded as a loss.
   
10. The defendants did not deny that there has been a default in repayment of the loan. George Pera, who is a registered accountant, asked the Court to extend time by 2 to 3 months to enable them to repay the loan after they receive payments from their clients for professional services. The Court was notified that funds owing to the defendants by the government and Hela Transitional Authority is forthcoming and that, should there be an extension of time, the defendants should be able to settle their debt. And that within the proposed extension, if the defendants fail to settle the arrears in full, Fincorp can proceed to obtain summary judgment.
    
11. The submission by the defendants for extension of time was opposed by Fincorp. Fincorp submitted that the defendants have been given sufficient time to settle their arrears. It was submitted that after the Letter of Demand and Statutory Default Notice were served on the defendants, they have not made any attempt to settle their debt. The only payment made so far is K39,523.18. My calculation shows that if the defendants have only paid K39,523.18 since 29 September 2017, the outstanding monthly repayment arrears would have exceeded K300,000.
    
12. In any case, it was pointed out that the process of foreclosure takes time. The process will involve sale of the two allotments. Until a buyer is found, the defendants are at liberty to settle the debt and keep the allotments. Thus, notwithstanding the summary judgment, the defendants still have the opportunity to redeem themselves. In relation to the forthcoming funds, there is no evidence from responsible officers of the government or Hela Transitional Authority to show or guarantee payment of funds owing to the defendants.
    
13. Fundamentally, the court does not and cannot rewrite or introduce new terms into a contract. When a contract is executed, the parties are bound by their terms of the contract. In Bank of PNG v Muteng Basa [1992] PNGLR 271, Brown, J made this clear in his response to Dr. Marat’s submission on his client’s change of circumstances:
    

“While Dr Marat attempted to mount an argument on the basis of the unfortunate effect his cessation of employment had on his client, his subsequent employment and more recent unemployment has adversely affected the defendant’s ability to both service the loan and seek refinance, and thus unilaterally he seeks to avoid the existing agreement with the bank in this fashion. From the defendant’s point of view this argument is not available to him. He continues to be bound by the terms of the Mortgage Agreement notwithstanding a change in his personal circumstance.”

14. Any variation or extension of time is a private matter between the parties to discuss, settle and formalise, but there is no such variation given the apparent breach of trust by the defendants. It is not for the Court to decide on extension of time which term is not provided for in the contract. It would be an abuse of judicial power to unilaterally introduce a term or condition into a contract.
    
15. I am satisfied therefore that Fincorp has satisfied the requirements for summary judgment and, conversely, the defendants have failed to persuade the Court to refuse the application. The application is upheld and the orders sought in the notice of motion are granted, including costs.
    

Orders accordingly.
___________________________________________________________________
Posman Kua Aisi Lawyers: Lawyer for the Plaintiff