Finance Corporation Ltd (trading as FINCORP) v Motor Vehicle Insurance [2025] PGNC 15; N11138 (28 January 2025)

N11138

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

O.S. NO. 143 OF 2024

BETWEEN:
FINANCE CORPORATION LIMITED trading as FINCORP
Plaintiff

AND
MOTOR VEHICLE INSURANCE
First Defendant

AND
ROAD TRAFFIC AUTHORITY
Second Defendant

AND
JOSHUA MOLE
Third Defendant

AND
JONNY NAPO
Fourth Defendant

LAE: DOWA J
20, 28 JANUARY 2025

CHARTEL MORTGAGES - Mortgagor's default - Claim to possession of collateral by secured party of registered secured chattel mortgage - Statutory rights under section 14 and 98 of the Personal Property Security Act 2011-Whether transfer of secured collateral by the debtor to a third party is valid- held any transfer of undischarged secured collateral under a loan agreement is null and void- Plaintiffs’ application granted.

Cases cited

Bank of Papua New Guinea v Muteng Basa [1992] PNGLR 271
Papua New Guinea Banking Corporation v Bara Amevo [1998] PNGLR 240
Max Umbu v Steamships Limited (2004) N2738
Bank of South Pacific Ltd v Dennis Pundia (2012) N4747
Samuel Aiye Nema v Rural Development Bank Ltd (2013) SC1243

Counsel

P. Kepiniu for the plaintiff
J Langah for the first defendant
J. Fongemale for the third defendant

RULING

1. DOWA J. This is a decision on the Plaintiff’s application for various reliefs sought in the Originating Summons.
   

Brief Facts

2. The plaintiff is a financial company. On 29^th April 2021, the fourth defendant entered into a loan agreement with the plaintiff by signing a Credit Contract & Disclosure Statement and a Commercial Loan & Chattel Mortgage. The plaintiff advanced a loan of K271,561.95. Inconsideration for the loan, the fourth defendant agreed to repay the loan at K11,616.83 per month for 36 months. The fourth defendant also pledged the vehicle Toyota Landcruiser, 5 door Wagon, Reg No. JAD 290 plus two other vehicles as security for the loan.
   
3. In March 2024, the plaintiff became aware that the collateral Toyota Land Cruiser JAD 290 was seized by the Sheriff of the Courts in Lae to settle an unrelated judgment owed to a third party by the fourth defendant. After a series of attendances and correspondences with the Office of the Sherriff, the vehicle was finally released to the plaintiff. However, the plaintiff then came to learn that the fourth defendant had transferred the registration of the collateral to the third defendant, Joshua Mole. The plaintiff alleges that the change of ownership facilitated by the Road Traffic Authority and MVIL was improper as the plaintiff retains ownership of the vehicle by virtue of registration of its interest under the Personal Property Security Act 2011.
   
4. The fourth defendant defaulted on his loan repayments and by June 2024 the loan arrears stood at K347,992.98. The plaintiff wants to sell off the vehicle to recover part of the loan but is now hindered by the transfer of registration to Joshua Mole, a third party. The plaintiff therefore filed these proceedings seeking declaratory orders for ownership and consequential reliefs.
   

First Defendant’s preliminary application.

5. Prior to hearing the substantive matter, Mr. Langah, counsel for the first defendant, applied for the removal of his client on the basis that there was no cause of action disclosed in the proceedings. Although the consequential orders sought in the OS have a bearing on its regularity function and it remains a nominal defendant, the counsel insisted that it be removed from the proceedings. The Court granted the application but cautioned that if the Plaintiff succeeds, the orders directed against the first defendant to perform its statutory functions will be granted as a matter of course. And the issue of costs was reserved.
   

Substantive matter

6. The plaintiff by Originating Summons, filed 17 July 2024 seeks following reliefs:
   

1..Pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the Plaintiff and the Fourth Defendant, a declaration that the Plaintiff has legal interest, legal ownership and perfected security interest over the vehicle described as Toyota Landcruiser 5 Door Wagon White bearing registration number JAD – 290, Engine No: 1HZ – 0975786, Colour: White/Gray, Serial/ VIN No: JTEEB71J20F012563.

2.Pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the Plaintiff and the Fourth Defendant, a declaration that the Third Defendant is not a Bonafide purchaser of the Collateral and does not have any legal interest nor security interest over the Collateral.

3.Pursuant to Sections 2, 14, 24, 30, 50, 98 and 99 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the Plaintiff and the Fourth Defendant, an order that the Plaintiff is entitled to sell the Collateral and apply the proceeds of sale to the loan account

4.Pursuant to Section 155 (4) of the Constitution, Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the Plaintiff and the Fourth Defendant and the Court’s inherent jurisdiction, an order that the Third Defendant and the Fourth Defendant and their servants, agents, relatives or whomsoever are restrained from dealing with the Collateral in any way, including dealing with the First Defendant and/or the Second Defendant regarding registration of the Collateral, communicating with the Plaintiff or its lawyers about the Collateral or coming into physical contact with the Collateral

5.An order pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011, Section 1 of the Motor Traffic Act Chapter 243, Section 3 of the Road Traffic Act 2014 and Section 25 of the Road Traffic Rules – Registration of Motor Vehicles 2017 that the First Defendant and/or the Second Defendant within their relevant powers and functions give effect to the Plaintiff’s legal and security interest over the Collateral, as declared under Term 1 of these orders

6.An order pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011, Section 1 of the Motor Traffic Act Chapter 243, Section 3 of the Road Traffic Act 2014 and Section 25 of the Road Traffic Rules – Registration of Motor Vehicles 2017 that the certificate of registration over the Collateral issued to the Third Defendant on 9 February 2024 be cancelled forthwith by the First Defendant and/or the Second Defendant

7.The Third Defendant and his lawyers, jointly and severally, pay the Plaintiff’s costs of and incidental to this proceeding on a full indemnity basis.

8.Such further or other orders as this Honourable Court deems fit.

9.The time for entry of the Orders be abridged to the time of settlement by the Registrar, which shall take place forthwith.”

7. The plaintiff relies on the following Affidavits in support of the application.
   

1. Affidavit of Pokup Kepiniu, sworn and filed 17 July 2024
2. Affidavit of Helanie Onzem, sworn and filed 17 July 2024

8. The third defendant, Joshua Mole, opposes the application. He relies on his own affidavit sworn and filed 19^th December 2024. He deposes that he is the owner of the subject vehicle Toyota L/Cruiser, JAD 290. He deposes sometime in 2022, he engaged the fourth defendant, to arrange for the hire of his vehicle, a Toyota Land Cruiser, Registration No. HAT 875 by the Morobe Provincial Government. He signed an agreement with the Morobe Provincial Government on 29^th September 2022. During the hire, his vehicle, HAT 875 got involved in an accident and was damaged beyond economic repairs.
   
9. He deposes, the Morobe Provincial Government through the Governor Ginson Saonu promised to buy a replacement vehicle. The monies for the replacement vehicle were paid to the fourth defendant’s account. The fourth defendant purchased the vehicle JAD 290 but registered it under his own name. When fronted up at the Governor’s office, the former Governor, Ginson Saonu, directed that the vehicle be confiscated and delivered to him. While the vehicle was at his residence, the Sherriff’s office seized the vehicle from him under a Writ of Levy of Property to satisfy a National Court judgment against the fourth defendant. When he explained that he is the legitimate owner, the fourth defendant was forced to transfer ownership to him with the assistance of the office of Traffic Registry and MVIL. The vehicle is now registered in his name, and he says he is the rightful owner.
   

Issues

10. The main issues for consideration are:
    

i. Whether the transfer of the registration of the vehicle, Toyota Land Cruiser, 5 Door Wagon, Registration No. JAD 290 from the fourth defendant to the third defendant is valid and lawful.

ii. Whether the plaintiff is entitled to the reliefs sought in the Originating Summons.

1. Whether the transfer of the registration of the vehicle, Toyota Land Cruiser, 5 Door Wagon, Registration No JAD 290 from the fourth defendant to the third defendant is valid and lawful.
   
11. I have carefully considered the evidence presented by the third defendant, Joshua Mole, and reject his claim of ownership of the motor vehicle, Toyota L/Cruiser, 5 door, Wagon, Reg. No. JAD 290 for the reasons below.
    
12. The third defendant’s evidence is contradictory, inconsistent, unreliable, and possibly concocted. The third defendant deposes in paragraphs 4, 5 and 6 of his Affidavit, that in September 2022, he entered into a hire agreement with the Morobe Provincial Government to hire his vehicle, a L/Cruiser, 5 door Wagon, Reg. No. HAT 875. A copy of the Hire agreement annexed to his Affidavit shows the agreement was signed on 29^th September 2022. During the hire, his vehicle, HAT 875 was damaged beyond repairs in a road accident. He says the subject vehicle JAD 290 is a replacement vehicle bought by the Morobe Provincial Government for him. This story is ludicrous and unacceptable in the light of documentary evidence presented by the plaintiff which show the subject vehicle JAD 290 was registered and owned by the fourth defendant earlier in time in 2021, more than 12 months ago. The vehicle JAD 290 was pledged by the fourth defendant as a collateral in a loan he obtained from the plaintiff in April 2021. The plaintiff registered the collateral, JAD 290, on the Personal Property Security Register under the Personal Property Security Act 2011 in September 2021.
    
13. The next inconsistency is this. The third defendant deposes that the hire agreement and the ensuing accident involving his vehicle HAT 875 took place during the reign of Ginson Saonu as Governor of Morobe Province. Annexure “H” to his affidavit is a letter purportedly written by Governor Saonu. The letter is dated 3^rd March 2022. Governor Saonu states in that letter that he hired the third defendant’s vehicle, HAT 875, in 2018 and was involved in a car accident. That is inconsistent with evidence contained in paragraph 6 of the affidavit and Annexure “C” to that affidavit that the hire agreement was signed on 29 September 2022 and the accident involving the third defendant’s vehicle HAT 875 took place sometime after September 2022. It is also a common fact that Ginson Saonu was not the Governor of Morobe in September 2022. The whole story does not make sense.
    
14. Thirdly, if vehicle HAT 875 was damaged beyond economic repairs at the hands of the Morobe Provincial Government and needed replacement, why is it still registered in the name of the third defendant up to June 2024 as shown in annexure “A” of his affidavit. There is no explanation why the vehicle is still on the road. Is it because it was never damaged beyond economic repairs. Or is it because it was not involved in an accident at all!
    
15. Fourthly, the third defendant deposes facts on damage to his vehicle HAT 875 and the payment cheque from the Provincial Government. However, the annexures “D” (photograph of damaged vehicle HAT 875) and annexure “F” (copy of cheque from Provincial Government) referred to in the affidavit of the third defendant were not annexed. The two annexures are critical and important documents to add probative value to the third defendant’s evidence and claim of ownership, and it is open to argument that the omission could mean they don’t exist at all.
    
16. Furthermore, the third defendant says the subject vehicle was purchased by the fourth defendant from funds paid by the Provincial Government to the fourth defendant on his behalf. Is it a legitimate practice of the Provincial Government to bypass all financial and administrative guidelines to dish out cash to a third party on behalf of the third defendant. Why was the third defendant not informed of this. Did it really happen. There is no documentary evidence to prove this. It is incredible.
    
17. Finally, the third and fourth defendants are friends, and they know each other well. Why didn’t the fourth defendant inform the third defendant earlier. Why did the third defendant wait for more than three years to challenge ownership and the transfer of registration of the vehicle. It defies common sense and logic.
    
18. In my view, the recent developments in transferring registration of JAD 290 from the fourth defendant to the third defendant are orchestrated tactically to avoid the vehicle being seized by the Sheriff of the Court under a Writ of Levy of Property to satisfy a judgment debt against the fourth defendant. The third defendant is not telling the whole truth.
    
19. Apart from that the subject vehicle is subject of a chattel mortgage registered in favor of the plaintiff for a loan the fourth defendant has with the plaintiff. The mortgage is undischarged and undischarged secured interest is not transferable to a third party under the Personal Property Security Act.
    
20. I conclude from my findings that the recent transfer of ownership from the fourth defendant to the third defendant is a sham and a nullity.
    
21. I would also recommend that the third and fourth defendants be investigated for possible perjury charges.
    

ii. Whether the plaintiff is entitled to the reliefs sought in the Originating Summons

22. The relevant law is Sections 14 and 98 of the Personal Property Security Act 2011. They read:

14. ATTACHMENT OF SECURITY INTEREST TO COLLATERAL AND PROCEEDS.

(1) A security interest attaches to collateral and is enforceable against the debtor and third parties as provided in this Act, when –

(a) value is given;

(b) the debtor has rights in the collateral or power to transfer rights in the collateral to a secured party; and

(c) one of the following conditions is met –

(i) the debtor has signed a security agreement that provides a description of the collateral; or

(ii) the collateral is in the possession of the secured party and is of a type that may be perfected by possession; or

(iii) the collateral is in the control of the secured party and is of a type that may be perfected by control.

98. SECURED PARTY'S RIGHT TO TAKE POSSESSION AND DISPOSE OF COLLATERAL.

(1) Subject to Sections 69, 71, and 73 and any rule of law requiring prior notice, on default under a security agreement -

(a) the secured party has, unless otherwise agreed, the right to take possession of the collateral or otherwise enforce the security agreement by any method permitted by law; and

(b) where the collateral is goods of a kind that cannot be readily moved from the debtor's premises or of a kind for which adequate storage facilities are not readily available, the secured party may seize or repossess the collateral without removing it from the debtor's premises in any manner by which an execution officer acting under a writ of execution may seize without removal, if the secured party's interest is perfected by registration; and

(c) where Paragraph (b) applies, the secured party may dispose of collateral on the debtor's premises, but shall not cause the person in possession of the premises any greater inconvenience and cost than is necessarily incidental to the disposal; and

(d) if the collateral is a document of title, the secured party may –

(i) proceed either as to the document of title or as to the goods covered by it; and

(ii) a method of enforcement that is available with respect to the document of title is also available, with any necessary modification, with respect to the goods covered by it.”

Consideration

23. The plaintiff’s rights conferred by Section 98 of the Personal Property Security Act are akin to proceedings under Section 74 of the Land Registration Act 1981 in relation to mortgages over land. The law in that regard is settled in 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 240, 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) SC 1243.
    
24. Turning to the present case, the plaintiffs evidence is not disputed. The plaintiff is a financial company. On 29^th April 2021, the fourth defendant entered into a loan agreement with the plaintiff by signing a Credit Contract & Disclosure Statement and a Commercial Loan & Chattel Mortgage. The plaintiff advanced a loan of K271,561.95. Inconsideration for the loan, the fourth defendant agreed to repay the loan at K 11,616.83 per month for 36 months. The fourth defendant also pledged the vehicle Toyota Landcruiser, 5 door Wagon, Reg No. JAD 290 as collateral plus two other vehicles as security for the loan.
    
25. On 3^rd September 2021, the plaintiff’s security interest over the Collateral (Motor vehicle JAD 290) was registered on the Personal Property Security Register under the Personal Property Security Act 2011.
    
26. The fourth defendant has defaulted on his repayments and the loan arrears stand at more than K 347,000.00.
    
27. The plaintiff, as the secured interest holder in the collateral, is entitled to immediate possession by virtue of Clauses 9 and 12 of the Loan & Security Agreement and Section 98 of the Personal Property Security Act 2011.
    
28. The plaintiff’s interest and rights in dealing with the collateral is contested by the third defendant. As I have found, the third defendant’s contention lacks credibility. On the other hand, the plaintiff has a better and more secure interest over the third defendant by virtue of its registered interest under Sections 2, 14, 24 and 30 of the Personal Property Security Act.
    
29. Although the current Registration Certificate of JAD 290 shows the third Defendant as owner, that is not conclusive evidence of ownership. The evidence shows the original owner is the fourth defendant who tendered the vehicle to the plaintiff as security for the loan since April 2021. By virtue of the registration of the secured interest, real ownership is vested in the plaintiff and will remain until the perfected interest is discharged.
    
30. The plaintiff’s business relation is akin to hire-purchase agreements. Under Section 25 of the Road Traffic Rules issued under the Motor Traffic Act, a person who has possession of a vehicle under a hire purchase agreement shall not transfer ownership without the consent of the owner. In the present case, the transfer from the fourth defendant to the third defendant took place without the knowledge and consent of the plaintiff and without the plaintiff’s registered interest discharged. The transfer is, therefore, a nullity. The fourth defendant’s loan with the plaintiff is still outstanding. The plaintiff has exercised or is entitled to exercise its rights as the secured interest holder to take possession and deal with the secured property to recover the debt under Section 98 of the Personal Property Security Act.
    

Conclusion

31. In the end I have reached a conclusion that the plaintiff remains the owner of the subject vehicle JAD 290 under the terms of the loan agreement between the plaintiff and the fourth defendant and its secured interest registered under the Personal Property Security Act. The recent transfer of registration of vehicle JAD 290 from the fourth defendant to the third defendant is invalid and a nullity for the reasons given in the judgement. I will grant the orders sought in the Originating Summons with minor modifications.
    
32. For the plaintiff to deal with the secured property by way of sale and transfer of ownership, it is necessary to grant consequential orders against MVIL and the Road Traffic Authority to facilitate transfers and registration of owners in the performance of their respective statutory and regulatory duties.
    
33. Apart from the reliefs sought, there should be a recommendation for the police to carry out an independent investigation with a view to laying criminal charges for perjury against the third defendant and others who signed statutory declarations annexed to the affidavit of the third defendant filed 19^th December 2024.

Costs

34. The plaintiff is seeking costs on an indemnity basis against the third defendant and his lawyers. Indemnity costs are punitive in nature. This case warrants costs to be awarded on an indemnity basis for the reasons given in the ruling. However, costs will be awarded against the third defendant only and not his lawyers.
    
35. The first defendant has been removed from the proceedings. The issue of costs was reserved. Counsel for the first defendant submits that his client was unnecessarily dragged into the proceedings and thus costs be paid. Counsel for the plaintiff argues that the first defendant is a necessary nominal party, and it was not required to appear in Court and thus no costs be awarded. It is a discretionary matter. In my view, a party named in a Court proceeding has a right to appear and defend if he chooses to. I will therefore award costs in favor of the first defendant. In the interest of justice, I will further order that any cost paid by the plaintiff to the first defendant shall be indemnified by the third defendant.
    

Orders
36. The Court orders:

1. By way of a Declaration, that the plaintiff has legal interest, legal ownership and perfected security interest over the vehicle described as Toyota Landcruiser 5 Door Wagon White bearing registration number JAD – 290, Engine No: 1HZ – 0975786, Colour: White/Gray, Serial/ VIN No: JTEEB71J20F012563 pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the plaintiff and the fourth defendant.
   
2. By way of a Declaration, that the third defendant is not a Bonafide purchaser of the Collateral, the Toyota Land Cruiser, Reg No JAD 290 and does not have any legal interest nor security interest over the Collateral pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the plaintiff and the fourth defendant.
   
3. That the plaintiff is entitled to sell the Collateral and apply the proceeds of sale to the loan account pursuant to Sections 2, 14, 24, 30, 50, 98 and 99 of the Personal Property Security Act 2011 and the Chattel Mortgage, signed 29 April 2021 between the plaintiff and the fourth defendant.
   
4. That the third defendant and the fourth defendants and their servants, agents, relatives or whomsoever are restrained from dealing with the Collateral in any way, including dealing with the first defendant and/or the second defendant regarding registration of the Collateral, communicating with the plaintiff or its lawyers about the Collateral or coming into physical contact with the Collateral.
   
5. That the first defendant and/or the second defendant within their relevant powers and functions give effect to the Plaintiff’s legal and security interest over the Collateral, as declared under Term 1 of these orders pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011, Section 1 of the Motor Traffic Act Chapter 243, Section 3 of the Road Traffic Act 2014 and Section 25 of the Road Traffic Rules – Registration of Motor Vehicles 2017.
   
6. That pursuant to Sections 2, 14, 24, 30 and 50 of the Personal Property Security Act 2011, Section 1 of the Motor Traffic Act, Section 3 of the Road Traffic Act 2014 and Section 25 of the Road Traffic Rules – Registration of Motor Vehicles 2017 that the certificate of registration over the Collateral issued to the third defendant on 9 February 2024 be cancelled forthwith by the first defendant and/or the second defendant.
   
7. The third defendant pay the plaintiff’s costs of and incidental to this proceeding on a full indemnity basis.
   
8. The plaintiff shall pay the first defendant’s costs which shall be indemnified by the third defendant.
   
9. The third and fourth defendants are referred to the Police Force for criminal investigation for perjury.
   
10. For the purposes of Order 9, the Assistant Registrar shall make available a copy of this Ruling and relevant documents to the police.
    
11. The time for entry of the Orders be abridged to the time of settlement by the Registrar, which shall take place forthwith.

_______________________________________________________________
Lawyers for the plaintiff: Posman Kua Aisi Lawyers
Lawyers for the first defendant: Albright Lawyers
Lawyers for the third defendant: Jaku Lawyers