Westpac Bank (PNG) Ltd v Sovereign Real Estate Ltd [2021] PGNC 347; N9189 (1 September 2021)

N9189

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 566 OF 2019

BETWEEN:
WESTPAC BANK (PNG) LIMITED
Plaintiff

AND:
SOVEREIGN REAL ESTATE LIMITED
First Defendant

AND:
PADDY TOLNGA
Second Defendant

Lae: Dowa J
2021: 09^th July & 01^st September

MORTGAGES - Mortgagor's default - Claim to possession by mortgagee of registered mortgage - Statutory rights under section 74 of the Land Registration Act for writ of possession.

Cases Cited:
Bank of South Pacific Ltd -v- Dennis Pundia (2012) N4747 and
Bank of Papua New Guinea -v- Muteng Basa [1992] PNGLR 271
Max Umbu -v- Steamships Limited (2004) N2738,
Papua New Guinea Banking Corporation -v- Bara Amevo [1998] PNGLR,
Samuel Aiye Nema -v- Rural Development Bank Ltd (2013) SC 1243.

Counsel:

E. Noki, for the Plaintiff
Tolnga in person, for himself and the Defendant

DECISON

01^st September, 2021

1. DOWA J: This is a ruling on an application for an order to enter and take possession of a mortgaged property and other consequential orders.

2. The Plaintiff seeks, inter alia, the following orders pursuant to its OS:

(i) An order pursuant to Section 74(1)(c) & (3) of the Land Registration Act 1981 Chapter 191 and clause 13(a) of the Memorandum of Mortgage, an order that the Second Defendant give vacant possession of the Property described as Allotment 37 Section 22, Lae, Morobe Province subject of State Lease Volume 17 Folio 206 to the Plaintiff within 14 days.

(ii) 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 servants, family members and occupants if they fail to give vacant possession of the Property to the Plaintiff within 14 days.

(iii) In the alternative to (2), pursuant to Order 13 Rule 3 of the National Court Rules, an order that the Plaintiff be granted Writ of Possession of the Property.

(iv) An order that costs of this court proceeding be borne by the Defendants.

3. The Plaintiff relies on the following documents filed in these proceedings:

(i) Amended Originating Summons filed 2 June 2020 (Court Doc No. 10) (OS);

(ii) Sworn Affidavit of Jenny Lakoro filed 1 August 2019 (Court Doc No. 2);

(iii) Sworn Affidavit of Jenny Lakoro filed 8 April 2021 (Court Doc No.17);

(iv) Sworn Affidavit of Eunice Noki filed 8 April 2021 (Court Doc No.18);

And

(iv) Affidavit of Jacqueline Simon.

Summary of Facts

4. The facts are not disputed. On or about August 2014, the Defendants obtained loans for working capital and to finance its operations for contracts held with the Department of Works. The Plaintiff agreed to offer loan to the Defendants under their facilities known as the Fully Drawn Advance (FDA) and Overdraft Facility (the OD). The above loans were offered to the Defendants under an agreement called the Business Finance Agreement (the BFA). On or around 15 August 2014, the Defendants accepted the BFA and executed it.

5. Amongst others, it was a term of the BFA that:

(a) the Plaintiff agreed to advance the sum of K530,000 to the Defendants, being:

i. K200,000 under the OD; and

ii. K330,000 under the FDA.

(b) the Defendants agreed to repay the FDA in monthly loan repayments of K7,290.74 per month for 60 months (5 years); and

(c) interest on the FDA would accrue at 11.7 per cent per annum.

6. In consideration for and as security for the loans, the Defendants offered registered mortgage over the Property described as allotment 37 section 22, Lae Morobe Province and registered equitable mortgage over the First Defendant’s capital and assets.

7. In or around October 2015, the Defendants started defaulting in their loan repayments. Following the Defendants default, the Plaintiff’s lawyers, served numerous letters of Demand and Notice to Quit on the Defendants. The Defendants continue to default which resulted in the current proceedings. After the commencement of these proceedings, the defendants have made several requests to the Plaintiff to delay the proceedings so they could raise alternative funding to repay the outstanding debt. The defendants, however, could not settle the debt within the extended period.
   

Issue

8. The issue for consideration is whether the Plaintiff is entitled to vacant possession of the Property.

Submissions of Counsel

9. Ms Noki, counsel for the Plaintiff made helpful submissions on the issue which I adopt in this ruling.

The Law

10. Section 74 of the Land Registration Act, 1981 (LRA) provides:

74. MORTGAGEE MAY ENTER AND TAKE POSSESSION, ETC.

(1) Where default is made in payment of any secured money, a creditor may-

(a) entered into possession of the mortgaged or charged land by receiving the rents and profits of the land; or

(b) distrain on the occupier or tenant of the land under the power to distrain conferred by Section 75; or

(c) bring an action of ejectment to obtain possession of the land.

(2) The creditor may bring an action under Subsection (1)(c) before or after exercising a remedy-

(a) referred to in this section; or

(b) conferred by Section 68.

(3) A creditor is entitled by action or other proceedings in the Court to foreclose the right of the debtor to redeem the mortgaged or charged land.

11. It is trite law that a mortgagee can exercise its right to take possession of the property (subject of mortgage) where the mortgagor has defaulted in the loan repayment. Refer: Bank of Papua New Guinea -v- Muteng Basa [1992] PNGLR 271, Papua New Guinea Banking Corporation -v- Bara Amevo [1998] PNGLR, Max Umbu -v- Steamships Limited (2004) N2738, Bank of South Pacific Ltd -v- Dennis Pundia (2012) N4747 and Samuel Aiye Nema -v- Rural Development Bank Ltd (2013) SC1243.

12. In Muteng Basa’s case (supra), the Defendant was an employee of the Plaintiff Bank. He obtained a staff housing loan at a concessional interest rate from the Bank. He fell into arrears. Justice Brown (as he then was) held that:

“The mortgagor’s impecunious state does not preclude the mortgagee bank from exercising rights to possession found in the mortgage document and supported by the Land Registration Act Ch 191.”

13. In Barra Amevo’s case (supra), Justice Sevua (as he was then) held that:

“[b]y law, and under the terms of the mortgage, the plaintiff, as the mortgagee, has the right to foreclosure because, the First Defendant, as the mortgagor, had defaulted in his obligations. Sections 68 and 74 of the Land Registration Act, Ch191 confers a statutory right or power to the Plaintiff mortgagee to sell the property or take possession.”

14. Similarly, in Max Umbu’s case (supra), Justice Salika (as he then was) held that:

“[t]he right to foreclose is also conferred by Section 74 of the Land Registration Act. In circumstances where the Plaintiff defaulted on making the repayments the Defendant was at liberty to exercise its right under the mortgage and under the Land Registration Act to see the property and have vacant possession of the property.”

15. Applying the above principles, the Plaintiff is entitled to the reliefs sought in the Originating Summons. The Defendants have defaulted in repaying their loan. The defendants have no defence. The Second Defendant has conceded their indebtedness at the hearing. The matter was adjourned several times at the defendant’s request to give them time to raise funds to repay the outstanding loan. However, the defendants have not come up with alternative funding in time to repay the loan.

16. I note from an Affidavit filed by the Second Defendant on 25^th August 2021, that they made a payment of K30,000.00 on 23^rd August 2021. Whilst this shows a genuine commitment by the defendants, the amount, nevertheless, falls short of reducing the loan which stands more than K 230,000.00 from the loan balance shown in the Affidavit of Jenny Lakoro, filed in these proceedings. In the end, I am inclined to grant the orders sought by the Plaintiff.

Orders

The Court orders that:

(i) Pursuant to Section 74(1)(c) & (3) of the Land Registration Act 1981 Chapter 191 and clause 13(a) of the Memorandum of Mortgage, an order that the Second Defendant give vacant possession of the Property described as Allotment 37 Section 22, Lae, Morobe Province subject of State Lease Volume 17 Folio 206 to the Plaintiff within 30 days.

(ii) 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 servants, family members and occupants if they fail to give vacant possession of the Property to the Plaintiff within 30 days.

(iii) Time be abridged

(iv) The Defendants shall pay the costs of the proceedings to be taxed if not agreed.

______________________________________________________________________
Bradshaw Lawyers : Lawyers for the Plaintiff
Paddy Tolnga: In person for himself and the Second Defendant