Bank of South Pacific Ltd v Pakena [2022] PGNC 38; N9488 (4 March 2022)

N9488

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 248 OF 2020

BETWEEN

BANK OF SOUTH PACIFIC LIMITED
Plaintiff

AND
ANTON PAKENA
Defendant

Waigani: Linge A J
2022: 24^th February, 4^th March

CONRACT – breach of loan agreement –Mortgagor-guarantee and indemnity- right of redemption –enforcement of Guarantee.

PRACTICE AND PROCEDURE – Striking out defence - summary Judgment -- judgement on admissions

A loan was obtained from the plaintiff by Apare Properties Limited for K1,300,000.00 to finance its existing debt and to assist with purchase of Allotment 3 Section 100, Boroko NCD. The loan was guaranteed by the defendant who owned Apare Properties Limited. The borrower defaulted and the plaintiff sued the defendant under the Guarantee and Indemnity entered between the defendant and the plaintiff.

Held

The defendant is liable to the plaintiff under the Guarantee in the sum of K1,300,000.00 and interest of K569,320.46.

Cases Cited:

National Provident Fund Board of Trustees v Maladina (2003) N2486
Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112
Ampaoi v Tauriko (2012) SC1166
Lerro v Stagg [2006] N3050
PNG Forest Products Pty Ltd & Inchcape Berhad [1992] PNGLR 85
Hornibrook Constructions Pty Ltd v Kawas Express Corporation Pty Ltd [1986] PNGLR 301; [1986] PGNC 25
Iarafawe v Riyong (1999) N1915
Akipa v Lowa,[1990] PNGLR 502
Rural Development Bank Ltd v Kuri [2001] PGNC 101
Alfred Alan Daniel v Pak Domoi Ltd (2009) SC970

Counsel:

Mr S. Ahabh, for the Plaintiff
Ms. Balos, for the Defendant

RULING ON MOTIONS

4^th March, 2022

1. LINGE A J: Ruling on two (2) Motions one filed by the Plaintiff on the 31 January 2022 seeking to strike out defence and for summary judgement in the sum of K 1, 869, 320.46 be entered for the Plaintiff pursuant to Order 8 Rule 27 (1), Order 8 Rule 28and Order 12 Rule 38 (1) of the National Court Rules.

2. In the alternate, Plaintiff seeks entry of judgment on admissions in the sum of K 1, 869, 320.46 against the Defendant pursuant to Order 9 Rule 30 of the National Court Rules.

3. The other application is that filed by the Defendant on the 17 February 2022 pursuant to Order 1 Rule 15 (1) of the National Court Rules and Section 155(4) of the Constitution to dispense with service and for an order that the Amended Defence filed on the 9 September 2021 to be taken to have been filedthe same within 44 days commencing from 5 May 2021.

4. I heard both applications on the 16 February 2022, the Defendant’s Motion first followed by that of the plaintiff, and this is my ruling on both applications.

Facts

5. Apare Properties Limited (hereinafter “Apare Properties”) obtained a bank loan from the plaintiff’slending facility referred to as “Loan Property Investment Loan” in the total sum of K1,300,000.00 to assist in refinancing existing debt with Fincorp and to assist with the purchase of property identified as Allotment 3, Section 100, Boroko, National Capital District contained in State Lease Volume 22 Folio 5724.

6. The term of the loan was for 25 years from the date of drawdown and to be repaid on a monthly instalment rate of K11, 585.00 covering the principal and interest in accordance with the terms of the Loan Facility Agreement.

7. The defendant is the sole director and shareholder of Apare Properties and as such on the 17 February 2017 had provided limited guarantee and indemnity for the loan also dated 17 February 2017. Effectively, the defendant is the Mortgagor and Guarantor of property owned by Apare Properties described as Allotment 3 Section 100, Boroko, National Capital District.

8. After two (2) Letters od Demandsand despite of these letters of demand to the Defendant (in accordance with the terms of the Guarantee) on the 18 July 2018 and 9 October 2018, Apare Properties continue to default on the loan and on the 31 July 2019 `failed to make payments on the sum demanded or of any sum and thus resulting in the Defendant becoming liable in the total sum of K1, 407,237.30 under the Guarantee.

9. On the 20 March 2020 the plaintiff commenced this proceeding against the Defendant as the Guarantor in the sum of K 1,551,402.49.

Leave to amend the Plaintiff’s Notice of Motion

10. Leave is granted to the Plaintiff to amend his Notice of Motion to delete the second limb of the order for possession of property described as Allotment 3 Section 100, Boroko.

11. The main order sought in the Plaintiff’s Notice of Motion to strike out the Amended defence of the Defendant and to enter judgment and the alternate order for judgment on admission for the sum of K1,869,320.46 plus interest to be paid on the Plaintiff’s Variable Property Investment Loan rate in the sum of K 1, 869, 320.46 are intact.

Leave to file Defendant’s Amended Defence

12. Leave is granted to the Defendant’s Amended Defence filed on the 9 September 2021 to be deemed to have been filed the same within 44 days commencing from 5 May 2021.

Evidence for the Plaintiff

13. Plaintiff seeks to rely on the affidavit of Moa Sevua filed on 31 January 2022, affidavit of Samul Ahabh filed on 31 January 2022 and affidavit of Makeshwa Madho filed on 27 October 2020.

Affidavit of Moa Sevua

14. Moa Sevua deposes that he is employed by the plaintiff as Senior Recovery Manager, Asset Management Business Unit, and has control over the carriage and conduct of the Bank’s recovery process.

15. He also deposes that the amount due and owing to the plaintiff by the defendant under the Guarantee as of 01 January 2022 is K1,869,320.46.

16. He further deposes that on the 26 March 2021, plaintiff changed its name from Bank South Pacific Limited to BSP Financial Group Limited (hereinafter” the Bank”).

17. At paragraph 6 of his affidavit Moa Sevua deposes that in his belief the defendant does not have a defence to the plaintiff’s claim.

Affidavit of Makeshwa Madho

18. The deponent is the Head of Asset Management Business Unit and has control over the Bank’s carriage and recovery process against the defendant.

19. He deposes that on the 15 February 2017 Apare Properties pursuant to the Bank’s General Terms and Conditions – Lending, obtained a loan from the Bank a Residential Property Investment Loan for K1,300,000.00 to assist in the refinancing of property described as Allotment 3 Section 100, Boroko otherwise State Lease Volume 22 Folio 5424.

20. The terms of the Residential Property Investment Loan included repayment of K11,585.00 per month, interest at 9.75%, commitment fee of 2.50% per annum, charged quarterly as undrawn amount and the facility is for 25 years from date of drawdown.

21. He deposes that the Deed of Guarantee dated 17 February 2017 bestowed on the defendant the obligation as the guarantor of the liabilities of Apare Properties Limited. The Guarantee was limited.

22. He also deposes that the defendant was and is the sole director and shareholder of Apare Properties Limited.

23. In his affidavit Mr. Madho deposes that by Letter of Demand dated 18 July 2018, which is annexed to his affidavit, the Bank demanded full payment of the Defendant’s indebtedness to the Bank under or by virtue of the Guarantee and Indemnity of 17 February 2017.

24. He further deposes that the liability to the Bank was disclosed as:

“Residential Property Investment Loan Account No. 7009780375, One Million FourHundred Seven Thousand Two Hundred Thirty-Seven Kina and Thirty Toea (K1,407,237.30) plus interest accruing at the Bank’s prevailing indicator Lending Rate (currently 11.2% per annum) plus a margin of 2% per annum, compounded monthly, together with Bank fees and costs until payment thereof.”

25. Makeshwar Madho also deposes at paragraph 15 that in his belief the defendant does not have a defence to the plaintiff’s claim.

Evidence for the defendant

26. The Defendant relies on the affidavit of Anton Pakena filed on the 17 February 2022 who deposes that on the 24 September 2021 and 8 October 2021 he wrote to the plaintiff proposing settlement but that there was no response to the proposal.

27. He also deposes that he had undertaken valuation of his property on the 2 February 2022 and from that valuation his property is now worth K4 Million.

28. He further deposes and acknowledges that the Borrower, Apare Properties Limited had defaulted and that in his capacity as Guarantor he is willing to settle the outstanding mortgage.

29. Mr. Pakena deposes and admits that pursuant to the Letter of Guarantee and Indemnity of 17 February 2017 his liability is K1.3 million plus Interest of K569,320.46.

Submission For the Plaintiff

30. Leave has been granted to the Bank prior to its Counsel submissions for the deletion of that part of the application seeking possession of property described as Allotment 3, Section 100, Boroko, National Capital District.

31. In relation to Order 8 Rule 27 (1) and Order 8 Rule 28 of the National Court Rules, Counsel relies on the case of National Provident Fund Board of Trustees v Maladina (2003) N2486, in which the plaintiff’s pleading detailed the relevant terms of the contract including how the payment of moneys was secured, how the proceeds were dealt with and who ultimately received them. The defendant in that case generally denied the claim without providing reasons for the denials.

32. The Court found that the requirements for summary judgment were satisfied and the Court in its discretion and in the interest of saving unnecessary costs and delay ruled accordingly by striking out the defendant’s defence and judgment in the sums claimed was entered for the plaintiff with interests and costs at the normal rates as claimed in the notice of motion. No orders were made for punitive damages as such was not sought nor made out.

33. In this case Counsel refers to paragraphs 3 and 4 of the Amended Defenceand submits that the Defendantpleads only general denials rather than pleading particulars of the denials to each paragraph 9 and 10 of the Amended Statement of Claim which contains 15 numbered paragraphs which I will consider later in my ruling.

34. Mr. Ahabh submits that the defendant failure to specifically plead his denials with particularity in his Amended Defence, and his further failure to respond to the Request warrants his Amended Defence to be struck out and summary judgment be entered against him.

35. In relation to the order for summary judgement pursuant to Order 12 Rule 38 (1) of the National Court Rules, Counsel refers me to Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112, which sets out the criteria that must be establish by the plaintiff and these are:

(1) the evidence of the facts proving the essential elements of the claim; and

(2) that there is evidence given by the plaintiff or by some responsible person that, in their belief the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed.

36. Counsel submits that in this case two (2) responsible officers of the Bank, Mr. Mukeshwar Madho, and Mr Moah Sevua, both natural persons deposing on behalf of the Bank, that in their respective beliefs the Defendant does not have a defence to the Bank’s claim.

37. Mr. Ahabh further submits that there is evidence of elements of claim as deposed to in Mukeshwar Madho’s affidavit which was also referred to in Moah Sevua’s affidavit setting out the claim being in breach of loan under Guarantee as follows:

“(a) the Borrower enter into a contract with the plaintiff.

(b) the defendant guaranteed the obligations and liabilities of the Borrower. The Guarantee is limited, but for the fraudulent misrepresentation of the defendant, the Guarantee now becomes an unlimited Guarantee.

(c) the Borrower defaulted on its loan repayment thereby breach the loan contract.

(d) the plaintiff demanded the defendant repayment of the loan under guarantee.

(e) the defendant failed to fulfil its obligations as guarantor.”

38. Counsel thus submits that the Defendant has breached the Guarantee as has been proven by evidence, and also the Amended Defence has not particularised its pleading apart from the general denials.

39. In reference to Order 9 Rule 30 of the National Court Rules, in which the plaintiff is seeking order for judgment on admissions, Counsel refers to the Amended Defence and submits that the defendant made several admissions as follows:

(a) Paragraph 1 of the Amended Defence expressly admits the allegations pleaded in paragraph 1-7 and paragraph 11 of the Amended Statement of Claim.

(b) Paragraph 2 of the Amended Defence, whilst the defendant denies the mortgage debt value recoverable and assets the defendant’s right of redemption, it effectively admits his (defendant’s) liability to the mortgage debt and admits the Bank’s power of sale of the Mortgaged Property.

(c) Paragraph 4 of the Amended Defence effectively admits the existence of its liability under the Guarantee which is the subject of his claim.

(d) Paragraph 6 of the Amended Defence, by expressing the debtor’s amenability to satisfy its obligations under the primary liability of debt, (of which the defendant is the guarantor), it is an admission of the primary liability of the debtor, subsequently the defendant is effectively admitting his liability as the guarantor.

40. He submits therefore that the defendant’s pleadingsin Paragraphs 1, 2, 3, 4 and 6 of the Amended Defence are clear admissions by the defendant of the Bank’s claim.

41. He concludes that the admissions are strong and unambiguous and do not raise serious issues of law and fact. He cites Ampaoi v Tauriko (2012) SC1166, in support of his submission for an alternate order for entry of judgment admissions.

Mr. Ahabh for the Bank submits that upon his identification of the flaws in the defendant’s pleading, he requested for further and better particulars of the pleading by filing a Request for Further and Better Particulars on the 1 December 2021 (“Request”), to which the defendant had not responded.

Submission for the Defendant

42. Leave is granted to the Defendant for its Amended Defence filed on the 9 September 2021 to be taken to have been filed the same within 44 days commencing from 5 May 2021.

43. Mr. Balos of Counsel for the Defendant introduced four (4) issues which formed the basis for his submission. These are:

(a) whether or not the Plaintiff is entitled to claim both the K1,869,320.46 and the property worth more than K4,000,000.00.

(b) whether or not the summary judgment can be entered notwithstanding a fair trial proper on the allegation of fraud pleaded in the amended statement of Claim and the Defendant’s denials pleaded in his amended Defence.

(c) whether or not the issue /allegation that the Defendant limited liability of K 1,300.00 under the Guarantee & Indemnity dated 17 February 2017 had been rendered unlimited requires a proper trial.

(d) whether or not the 2021 contains general defence. Defendant’s Amended Defence filed on 9 September

(e) whether or not, in the interest of justice the Defendant‘s Amended Defence filed on 9 September 2021 be validated.

44. In respect of the first issue, Mr. Balos of Counsel for the Defendant submits that the plaintiff is not clearly entitled to both the K1,869,320.46 and the property worth more than K4,000,000.00.

45. As to the second issue, he submits that the allegations of fraud are serious. The defendant had denied each and every allegation in his Amended Defence. These allegations must be properly tried.

46. The third issue relating to the allegation that the Defendant’s limited liability of K 1,300.00 under the Guarantee & Indemnity dated 17 February 2017 had been rendered unlimited, Counsel submits that this requires a proper trial.

47. On the fourth issue, Mr. Balos submits that the Amended Defence is not general. The pleading in the Amended Defence is that “the defendant denies each and every allegation contained in Paragraphs 8 to 10 of the Statement of Claim”. He submits that Order 8 Rules 8 and 9 of the National Court Rules requires pleading to be in brief or summary form and not evidence or general pleading. General pleading must be distinguished from brief pleading.

48. Here lies on Lerro v Stagg [2006] N3050 and the proposition highlighted that our judicial system should never permit a plaintiff or a defendant to be “driven from the judgement seat” in a summary way, “without a Court having considered his right to be heard”. A party has a right to have his case heard, as guaranteed by the Constitution and the laws of the land. The Rules are designed to enhance those rights and to ensure the prompt and fair disposal of matters coming before the Court. That right cannot be lightly set aside. Counsel also relies on Augerea v Bank of South Pacific Limited [2007] SC 869 and the recent decision in Essacu v Pue, [2021] N9412.

49. Finally, Counsel submits that the court must never lose focus of its primary duty to do justice as required by Section 155 (4) of the Constitution. That in the interest of justice, given the substantial amount of money involved, the Defendant must be given an opportunity to defend the claim.

Legal Consideration

50. The plaintiff primarily relies on Order 8 Rule 27 (1) of the National Court Rules seeking an order for striking out defence and for summary judgment.

51. Order 8 Rule 27 (1) of the National Court Rules provides:

“Where a pleading – discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleadings; or

(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or

(c) is otherwise an abuse of process of the Court, the Court may at any stage of the proceedings, on terms or otherwise, order that the whole or any part of pleadings be struck out.”

52. In specific reference to the striking out of the defence, the issue is to what the extent can the Court in the exercise of its discretion assess the defence as pleaded, and herein is the issue whether this is an appropriate case for striking out the Amended Defence.

53. The jurisdiction of the Court under Order 8 Rule 27is discussed in PNG Forest Products Pty Ltd & Inchcape Berhad v The State, [1992] PNGLR85, and that “is to see if the pleadings plead an almost incontestable bad cause of action which cannot possibly succeed and cannot be cured by amendment. And assuming the truth of the facts pleaded in the statement of Claim as in Iarafawe v Riyong (1999) N1915per Kirriwom J, and to a lesser extent, in defence as explained by evidence adduced on the application solely for the purpose of explaining the pleadings. It is not a demurrer procedure and should not be applied where the pleading is arguable but, on evidence, the chances of success are slight.”Cited in Civil Procedure in National Court Papua New Guinea, by Sir Salamo Injia, at p.144.

54. In my view as the law requires a pleading in the statement of claim to disclose all of the necessary facts which give rise to the form of action, likewise, a defence must disclose all of the necessary facts or particulars in response to the matters pleaded in the statement of claim so that the Court is properly informed of the precise nature of the pleadings.

55. Order 8 Rule 28 of the National Court Rules, provides “A party shall not plead the general issue.”

56. In Akipe v Lowa, Minister for Minerals and Energy v Akipe [1991] PNGLR 265 per Kapi DCJ, His Honour in reversing his position in Hornibrook Constructions Pty Ltd v Kawas Express Corporation Pty Ltd [1986] PNGLR clarified that the prohibition on pleading general issue in O8 r 28 as not a prohibition on pleading a general denial of pleaded facts, which is permitted under O8 r 21 (2); it is a prohibition on stating a conclusion like “not indebted” or “not liable” from the denials which are not pleaded as matters of fact.

57. The previous position held by Kapi DCJ in Hornibrook Constructions Pty Ltd v Kawas Express Corporation Pty Ltd (supra) a case in which the Statement of Claim in 7 numbered paragraphs pleaded the terms of the contract and the alleged breaches by the defendant. The defendant pleaded relevantly in defence the following:

“(2) The Defendant does not admit the allegations contained in paragraph 3 to 20 of the Statement of Claim.

(3) Save as aforesaid, the defendant denies each and every allegation contained in the Statement of Claim.”

58. His Honour considered at the time that “the purpose of O 8 R 28 is to prevent a defendant from making a general denial without specifically denying the facts or basis upon which the plaintiff’s cause of action is based and so informing the plaintiff and the court of the precise nature of the defence.”

59. When O 8 r 28 is read together with O8 r 21, it is clear that a general denial to each allegation is not the same as pleading the general issue. General denial to each allegation is clearly within the rules whereas a general denial of the whole claim in one breath could be pleading the general issue as can be seen in the Hornibrook’s case (supra).

60. In National Provident Fund Board of Trustees v Maladina (supra) the defendant generally denied the claim without providing reasons for the denials. The Court held that although O8 r 21 (1) permits a general denial as opposed to pleading the general issue which is prohibited by O 8 r 28, a party is nonetheless required to specifically plead to specific matters pleaded against him or her with particulars where that party is a party to the contract or the facts giving rise to the claim.

61. The Court also held that a defendant is also required to verify its defence under O 8 r 24, where the claim is liquidated or is certain and or is easily ascertainable. A failure to do so may amount to an embarrassment or have a tendency to delay or otherwise cause prejudice to the other party and may attract application of O8 r 27 and in the case of verification under O 12 r 25 (c). It also enables the Court to know exactly what issues are between the parties that the court is required to hear and determine.

62. In this case paragraphs 3 and 4 of the Amended Defence, the Defendant responded to paragraphs 9 and 10 which contains 15 numbered paragraphs pleading inter alia the particulars of fraudulent misrepresentation resulting in the fraudulent registration of a replacement title to Allotment 3 Section 100, Boroko otherwise State Lease Volume 22 Folio 5424 thus rendering voidable the Owners Copy of Title which was not lost but in the hands of the Defendant.

63. In his Amended Defence the defendant pleads:

“The defendant denies paragraphs 9 and 10 of Statement of Claim in totality”

The defendant did not plead the allegations against it specifically with particulars and/or reasons as to why it was denying the claims of fraudulent misrepresentation.

64. In my view the defendant pleaded a general denial rather than pleading particulars of the denials to each paragraph 9 and 10 of the Amended Statement of Claim. Although O8 r 21 (1) permits a general denial as opposed to pleading the general issue which is prohibited by O 8 r 28, the defendant is required to specifically plead to the allegation of fraud and misrepresentation pleaded against him with particulars to enable the Court to know exactly what issues are between the parties for the Court‘s determination.

65. The second issue for my determination is whether this is an appropriate case for entry of judgment against the Defendant pursuant to Order 12 Rule 38 of the National Court Rules.

Order 12 Rule 38 (1) of the National Court Rules, stipulates:

“1. Where on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff –

(a) there is evidence of the facts on which the claim or part is based; and

(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed,the Court may, by order, direct the entry of such judgement for the plaintiff on that claim or part, as the nature of the case requires.”

66. The law is settled in this jurisdiction by the Supreme Court in Tsang v Credit Corporation (PNG) Pty Ltd [1993] PNGLR 112 as affirmed in Curtain Brothers (Qld) Pty Ltd & Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285, wherein the Supreme Court stated in each cases p 117 and 288 respectively the two (2) elements to be satisfied:

“(1) Evidence of the facts proving the essential elements of the claim;

and

(2) The plaintiff or some responsible person gives evidence that in his belief there is no Defence”

67. In this case there is evidence given by two (2) senior managers from the Bank that in their beliefs the defendant has no defence and their evidence also confirms the elements of their claim.

68. The Plaintiff also seeks an alternative order pursuant to Order 9 Rule 30 of the National Court Rules for judgment to be entered based on admissions.

69. In Rural Development Bank Ltd v Kuri [2001] PGNC 101, Kandakasi J ordered judgment against the defendant, he held that Order 9 Rule 30 of the National Court Rules is the procedure to use where there is an admission of the facts or the matters pleaded. It is a separate procedure to that under Order 12 Rule 38 of the National Court Rules, which pertains to application for summary judgment.

70. In Alfred Alan Daniel v Pak Domoi Ltd (2009) SC970 the Supreme Court held that “for judgement on admissions to be granted, an applicant must show a clear and unanswerable case, or the admissions must be strong and unambiguous.”

71. The Supreme Court in Ampaoi v Tauriko [2012] PGSC 3; SC 1166 reaffirmed the separate procedures provided under Order 9 Rule 30 and 12 Rule 38 of the National Court Rules and held “judgement may be entered against a party where admissions are made by the party in his pleadings or otherwise. The phrase “otherwise” covers other circumstances where admissions are made by the party such as affidavits, letters or answers to interrogatories.”

72. In his tendered affidavit evidence, the Defendant admits and acknowledges that Apare Properties Limited had defaulted and that in his capacity as Guarantor he is willing to settle the outstanding mortgage.

73. Further, the Defendant gave evidence admitting that pursuant to the Letter of Guarantee and Indemnity of 17 February 2017 his liability is K1.3 million plus Interest of K569,320.46.

74. In my view the admissions by the Defendant are clear, unanswerable, strong and unambiguous and this Court must take this into its consideration.

Conclusion

75. The Plaintiff has satisfied the elements and requirement for the main orders sought in terms of Order 8 Rule 27, Order 8 Rule 28 and Order 12 Rule 38 of the National Court Rules.

76. I have expressed my view in respect of the alternate order pursuant to Order 9 Rule 30 of the National Court Rules.
Order

77. In the end I order as follows:

1. The Amended Defence filed on the 9 September 2021 is struck out.
   
2. Summary Judgment is entered for the Plaintiff of K1, 300, 000.00.
   

3. Interest in the amount of K569,320.46 to be paid by the Defendant to the Plaintiff.

4. Cost follows the cause.
   

5. Time is abridged.
______________________________________________________________
Bank South Pacific Legal Services: Lawyers for the Plaintiffs
Korerua & Associate Lawyers: Lawyers for the Defendants