Westpac Bank PNG Ltd v Tondopan [2021] PGNC 127; N8896 (30 June 2021)

N8896

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) NO. 897 OF 2019

BETWEEN:
WESTPAC BANK PNG LIMITED
Plaintiff

V

WILLIAM TONDOPAN
First Defendant

AND:
CECILIA TONDOPAN
Second Defendant

Waigani: Anis J
2021: 9^th, 21^st & 30^th June

ENFORECMENT & MORTGAGEE’S RIGHT – rights under statute and agreement – s. 74(1)(c) & (3) – Land Registration Act Chapter No. 191 – clause 13(a) – Memorandum of Mortgage – request for an order for defendants to give vacant possession – consideration - ruling

Cases Cited:

Reference by the East Sepik Provincial Executive (2011) SC1154
Ayleen Bure and Ors v. Robert Kapo (2005) N2902
Michael Pundari v. Niolam Security Limited (2011) SC1123
New Britain Oil Palm Ltd v. Vitus Sukuramu (2008) SC946.
Ume More v The University of Papua New Guinea [1985] PNGLR 401
Steven Charles Pickthall v Lae Plumbing Pty Ltd [1994] PNGLR 363
Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694
Madiu Andrew v Mineral Resources Development Company Ltd (2004) N2601
Herman Gawi v. PNG Ready Mixed Concrete [1984] PNGLR 74
Tony Yandu v Peter Waiyu (2005) N2894
Ruth Don v Comfort Tours & Travel Ltd (2014) N5730

Counsel:

E. Noki, for the Plaintiff
M Wangatau, for the Defendants

RULING

30^th June, 2021

1. ANIS J: The trial for this matter was conducted on 9 June 2021. Presentation of closing submissions was heard on 21 June 2021. I reserved my decision after that to a date to be advised.

2. Parties have been notified of today’s hearing so I will give my decision.

BACKGROUND

3. This is an enforcement proceeding commenced by the plaintiff. The plaintiff, in exercising its right as a registered mortgagee, requests the Court’s assistance in terms granting orders that would permit the plaintiff to secure a property described as Unit 2 of allotment 45, section 12, Boroko, NCD (the property). The property is one of 2 properties that were mortgaged by the defendants to the plaintiff to secure a loan agreement on 2 May 2011 (the loan agreement). Upon default by the defendants to the loan agreement, the plaintiff exercised its rights, and the other property, which is described as allotment 16, section 274, Hohola, NCD (the other property), was sold for K792,940.66. The money was used to partly off-set the loan arears, which then left an outstanding balance of K505,528.69 as of 20 June 2017.

4. Despite that, the defendants, according to the plaintiff, continue to default and as of 17 March 2021, the total loan arrears increased to K726,735.37. The plaintiff claims that the sum continues to accrue.

EVIDENCE

5. The plaintiff relies on the following evidence:

(i) Affidavit of Jenny Lakoro filed on 9 December 2020; and

(ii) Affidavit of Jenny Lakoro filed on 18 March 2021.

6. The defendants rely on the following evidence:

(i) Affidavit of William Tondopan filed on 6 May 2021; and

(ii) Affidavit of Cecilia Tondopan filed on 6 May 2021.

AMENDED ORIGINATING SUMMONS

7. The main relief sought in the Amended Originating Summons filed on 30 September 2020, are as follows:

1. That pursuant to Section 74(1)(c) and (3) of the Land Registration Act (Chapter No. 191) and Clause 13(a) of the Memorandum of Mortgage, an order that the Defendants give vacant possession of the property described as Unit 2 of Allotment 45, Section 12, Boroko, National Capital District being State Lease Volume 29 Folio 191 (the Property) to the Plaintiff after 14 days of the date of service of this judgment on the Defendants.
   
2. An order that any member of the Royal Papua New Guinea Constabulary be at liberty to enter onto the Property and evict the Defendants and their agents, servants, family members and occupants of the Property.
   
3. In the alternative to (2) above, an order that leave be granted for the issuance of a Writ of Possession of the Property on the Defendants at the expiration of 14 days after the date of service of this judgment on the Defendants.
   
4. An order for costs of this court proceeding be borne by the Defendants.
   

COMMON GROUND

8. There is no issue in regard to default of the loan agreement by the defendants.

9. The defendants’ complaint, however, relates to purported breach of s. 59 of the Constitution. They claim that the plaintiff did not consider nor gave its reasons, for disallowing their request to refinance and restructure their loan agreement before and or after the sale of the other property. As such, they claim that they were not treated fairly by the plaintiff.

ISSUES

10. The main issues are, (i), whether the refusal by the plaintiff to agree to re-negotiate or re-finance the loan, amounts to breach of natural justice or of the right to be treated fairly under the Constitution, and, (ii), subject to the first issue, whether it is open for the defendants to seek a relief where there is no foundation for it in the pleadings, (iii), whether relief 1 is only available under the Summary Ejectment Act before the District Courts, and if not, (iv), whether to require police assistance to conduct eviction of the defendants from the property as sought in relief 2, may be regarded as breach of the defendants’ right to be treated fairly or breaches of their rights to natural justice, and whether it would also be regarded as harsh and oppressive, and if so, whether relief 2 should be refused.

COMMERCIAL TRANSACTION

11. Let me address the first issue. The dealings between the parties are commercial in nature. Parties have agreements in place where they had signed or entered into upon their own free will. When I say that, I of course refer to the loan agreement and the memorandum of mortgage that the parties entered into in 2011. These are all in evidence that are adduced before this Court, and they are not disputed. The defendants have defaulted in their loan repayments, and the plaintiff is exercising its rights under the mortgage. The plaintiff’s rights are, in contracts which is the loan agreement and the Memorandum of Mortgage including clause 13(a) therein, and under statute, which is s. 74(1)(c) & (3) of the Land Registration Act Chapter No. 191 (LRA). These rights or provisions are not disputed so it is not necessary for me to elaborate further.

12. It is not only the plaintiff’s rights that are secured by these agreements, but also the defendants’ or by the parties to these agreements which are captured therein and under s. 74(1)(c) & (3) of the LRA. And the agreements are private commercial agreements or transactions.

SECTION 59 - CONSTITUTION

13. Section 59 of the Constitution states:

59. Principles of natural justice.

(1) Subject to this Constitution and to any statute, the principles of natural justice are the rules of the underlying law known by that name developed for control of judicial and administrative proceedings.

(2) The minimum requirement of natural justice is the duty to act fairly and, in principle, to be seen to act fairly. (Underlying mine)

14. Section 59 expressly refers to the underlying law which includes the common law as adopted by the Constitution under Schedule 2.2 immediately preceding 16 September 1975.

15. The principles of natural justice, as expressly stated under sub-paragraph 1 of s.59, were developed to control judicial and administrative proceedings. This was restated in the submissions of Ron Webb SC, in Reference by the East Sepik Provincial Executive (2011) SC1154. Paragraph 778 of the decision begins with, and I quote, Mr. Webb SC of counsel for the Second Intervenor on the other hand had argued that s. 59 of the Constitution does not apply in the circumstances of this case because the rules of natural justice as stated in s. 59 are meant for the control of judicial and administrative proceedings.

16. In private settings, it is settled that the only scenario where a right to be heard may be afforded is where the terms of the contract or the agreement, including rules and regulations which may form part of the agreement, provides for such opportunity (i.e., a right to be heard or respond). See cases: Ayleen Bure and Ors v. Robert Kapo (2005) N2902, Michael Pundari v. Niolam Security Limited (2011) SC1123, and New Britain Oil Palm Ltd v. Vitus Sukuramu (2008) SC946.

CONSIDERATION

17. I turn to the complaint. The defendants contend that their rights to be heard was not afforded to them by the plaintiff in relation to their bid or pleas for the plaintiff to consider refinancing or restructuring their loans before and or after the other property was sold to partly settle the loan arears. The plaintiff submits, amongst others, it was entitled to recover the full payment of the loan arears, and that it was at will, pursuant to the default under the loan agreement, clause 13(a) of the Memorandum of Mortgage, and s. 74(1) (c) and (3) of the LRA, to obtain vacant possession. It also submits that the defendants do not have a valid defence to prevent it from obtaining vacant possession of the property.

18. I uphold the submissions by the plaintiff. I note that the defendants did not point to a provision whether it be in the loan agreement or the Memorandum of Mortgage, that entitles or makes it mandatory that in such a situation, that the mortgagee shall consider and respond to the mortgagors’ request for refinancing before the mortgagee may proceed further to sell other assets of the mortgagors that are secured by the mortgagee, which is the plaintiff, for the loaned money. There appears to be no such provision and I find that to be the case.

19. None of the case authorities cited by the defendants are relevant or are on point, and as such, I give no regard to them in relation to the issue at hand.

20. Without any clauses or agreement of such mandatory right to be heard in regard to loan re-financing or re-structuring by the parties, the defendants’ submission or complaint is therefore misconceived and without merit. I also included misconceived as a reason because the agreements herein consist of private transactions or dealings that the parties have or have had, which they were or are bound by. To put it simply, the plaintiff was not bound under any express provisions of the agreements, in relation to complaint that the defendants raise.

ALTERNATIVE CLAIM

21. The defendants submitted in the alternative this. They say that if the Court rejects their main contention, then the Court should, pursuant to s. 73 of the LRA, give them 3 months to sell the property as they please or to a buyer of their preference. The plaintiff opposed this argument, and I have considered the submissions of the parties on this. Sections 73 and 68(1)(a) & (b) states:

73. Power to vary period before mortgagee sale.

(1) A mortgage or charge may provide that the period specified in Section 68(1)(a) or (b) shall be extended or reduced and the period shall be varied accordingly.

(2) Subject to the express provisions of a variation referred to in Subsection (1), the same covenants, rights, powers and obligations are implied under the mortgage or charge against the debtor and against the creditor as if no variation had been made.

......

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.

22. I reject the defendants’ submission. The first reason is this. Their stated reason for seeking an extension of 3 months for them to sell the property under s.73 is misconceived. The section does not give a mortgagor the right to make such claim by invoking it. And the event or events that would have permitted extension of a further month had already lapsed or had gone by, thus making the argument futile. Thirdly, I find the argument the same as trying to seek a separate relief. As such, it has to be properly pleaded like for example in the crossclaim made against the plaintiff. If, so, it must be pleaded with the said relief included as part of the relief in the crossclaim or in a separate cause of action. See cases: New Britain Oil Palm Ltd v. Vitus Sukuramu (supra), Ume More v The University of Papua New Guinea [1985] PNGLR 401, Steven Charles Pickthall v Lae Plumbing Pty Ltd [1994] PNGLR 363, Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694, and Madiu Andrew v Mineral Resources Development Company Ltd (2004) N2601. This is not so in the present case.

23. For these reasons, I dismiss the alternative argument by the defendants in regard to the first relief that is sought in the Amended Originating Summons.

RELIEF 2

24. The defendants raise 2 arguments in regard to relief 2. They firstly claim that the relief is incompetent because that is something that should be properly sought by filing proceeding under the Summary Ejectment Act. I do not wish to spend much time on this argument. In my view, it is baseless. The National Court, pursuant to s. 155(3) & (4) of the Constitution has inherent jurisdiction to hear matters filed in this fashion or manner, and such has been the practice for many years now. Further, this is not a case where the plaintiff has title to the property. The plaintiff’s interest is registered but limited as security pursuant to the provisions of the Memorandum of Mortgage and s. 74 and the other related and relevant provisions of the LRA. As such, the District Court would not have jurisdiction to deal with the matters and issues that may be involved such as this case. See cases: Herman Gawi v. PNG Ready Mixed Concrete [1984] PNGLR 74, Tony Yandu v Peter Waiyu (2005) N2894, and Ruth Don v Comfort Tours & Travel Ltd (2014) N5730.

25. The defendants’ second argument for relief 2 is this. They claim that relief 2 breaches their rights to natural justice and that the relief may be termed as harsh and oppressive. I note that the defendants’ written submissions on these 2 matters were brief and without any case authorities on point.

26. I make these observations. The assertions appear, in my view, as claims or allegations, and as such, proper pleadings or separate cause of action may be necessary, that is, for the issues to be centralized and be presented for arguments and determination by the Court. I would dismiss them for this reason alone. But I will say this in further answer. The relief where it requires police assistance is not an unusual relief for such matters as this. And it is usually sought, as the Court had sought clarity on the matter and confirmed with counsel for the plaintiff during the hearing, as the last or second resort, that is, after the stated time in the Court Order lapses, which is how it is sought under relief 1 in the Amended Originating Summons. If the defendants prove difficult to vacate the premises, then the plaintiff would have the second relief readily available to it to take. And perhaps it may be that the defendants are making the arguments too early or without proper facts or basis. If for example, they feel that their rights were infringed after or during the time of execution of relief 2, they would still have their opportunity to come back to Court in a separate proceeding to make their claim or claims.

SUMMARY

27. In summary, I will grant the relief the plaintiff seeks in its originating summons, namely, relief 1 and 2. In so doing, I dismiss the defendants’ arguments.

COST

28. An award of cost is discretionary. I will order cost to follow the event on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

29. I make the following orders:

1. That pursuant to Section 74(1)(c) and (3) of the Land Registration Act (Chapter No. 191) and Clause 13(a) of the Memorandum of Mortgage, the Defendants shall give vacant possession of the property described as Unit 2 of Allotment 45, Section 12, Boroko, National Capital District being State Lease Volume 29 Folio 191 (the Property) to the Plaintiff after 14 days of the date of service of this judgment on the Defendants.
   
2. An order that any member of the Royal Papua New Guinea Constabulary be at liberty to enter onto the Property and evict the Defendants and their agents, servants, family members and occupants of the Property.
   
3. Cost of the proceeding shall be borne by the defendants on a party/party basis which may be taxed if not agreed.
   
4. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly
________________________________________________________________
Bradshaw Lawyers: Lawyers for the Plaintiff
Ace: Lawyers for the Defendants