|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Supreme Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA 140 of 2012
BETWEEN:
BANK OF SOUTH PACIFIC LIMITED
Appellant
AND:
ROBERT TINGKE
Respondent
SCA 141 of 2012
BETWEEN:
BANK OF SOUTH PACIFIC LIMITED
Appellant
AND:
CASPER C.S. APUNDAMATIET
Respondent
Waigani: Salika, DCJ; Manuhu, Collier, JJ
2014: 30 June, 03 July
Cases cited:
Papua New Guinea cases
Augerea v Bank South Pacific (2007) SC 869
National Capital District Commission v Dademo [2013] PGSC 37 at [23],
Keimali v Akema [2010] PGSC 9 at [8],
Kimisopa, Minister for Justice v Paraka [2009] PGSC 29 at [22],
Yer, Secretary for Department of Finance v Yama [2009] PGSC 13 at [31].
National Executive Council v Williams [2005] PGSC 5
Kore v State [2011] PGSC 46
Alina Sarah Bean v Ian Maxwell Bean [1980] PNGLR 307
Jay Mingo Pty Ltd v Steamships Trading Pty Ltd trading as Steamships Property Division [1995] PNGLR 129
Brian John Lewis v. The Independent State of Papua New Guinea Unreported judgment No. SC178
Porgera Joint Venture v Kami [2010] PGSC 11 at [21]
Post PNG Ltd v Yama Security Services (unreported, 26 July 2001, SCA 80 of 2000
Breckwoldt & Co (NG) Pty Ltd v Gnoyke (No 2) [1975] PNGLR 195
Mapmakers Pty Ltd v Broken Hill Proprietary Company Ltd [1987] PNGLE 787
Joseph Peng v Phillip Craig Tangney (2009) SC 969
Hilary Signat v Commissioner of Police (2008) SC 910
Overseas Cases
House v. The King [1936] 55 C.L.R. 499 at pp. 504-5.20
Gronow v. Gronow (1979) 54 A.L.J.R. 243.21
L’Estrange v F. Graucob Ltd [1934] 2 KB 394 at 403,
Counsel:
Mr I Molloy, for the Appellant
No appearance, for the Respondents
03rd July, 2014
1. BY THE COURT: The appeals in SCA 140 of 2012 and SCA 141 of 2012 were heard together by this Court. Both appeals were from the same primary judge, and involve the same appellant, the same principles, and a similar substratum of facts. Indeed, in the Court below in the matter now the subject of appeal in SCA 141 of 2012 (WS No 318 of 2010) Counsel submitted (and his Honour accepted) that
2. As a result of this approach of his Honour – which is not disputed in these appeals – the reasons of his Honour in WS No 318 of 2010 were very brief. It followed that, in this Court, the submissions of the appellant were primarily directed toward the decision of his Honour in Tingke WS 56 of 2012 and the grounds of appeal raised by the appellant against the judgment of his Honour in that case.
Where necessary, it is both convenient and appropriate for us to adopt a similar approach.
Background
3. In both cases before us the appellant (“the Bank”) had entered into unsecured contracts of loan with the respondents on similar terms, and both respondents had defaulted on repayment of those loans. The Bank filed a writ of summons in the National Court in both instances seeking recovery of the respective loan amounts plus interest. It is not in dispute that the relevant writ of summons was served on the relevant respondent. Neither respondent filed a Notice of Intention to Defend nor a Defence as required under Order 7 rule 2 and Order 8 rule 4 of the National Court Rules Chapter 38.
4. Order 12 rule 32 (1) of the National Court Rules provides that whatever claims for relief are made by a plaintiff, where a defendant is in default, the Court may, on application by the plaintiff, direct the entry of such judgement against that defendant as the plaintiff appears to be entitled to on his writ of summons. It follows that Order 12 rule 32 (1) contemplates the exercise by the Court of its discretion in determining whether to order default judgment in any particular case. A defendant is deemed to be “in default” pursuant to Order 12 rule 25 where, inter alia, the defendant is required to file a defence and a defence has not been filed by the time nominated by the National Court Rules. Order 12 rule 27 makes provision for default judgements being entered in circumstances where the plaintiff’s claim for relief is in respect of liquidated damages.
5. On 10 July 2012, the Bank applied by way of notice of motion to the National Court for default judgment against Mr Tingke. A notice of motion in similar terms was filed by the Bank in respect of Mr Apundamatiet on 15 August 2012. Evidence filed in support of these notices of motion by the Bank included an affidavit of a bank officer deposing to the transaction, default in repayment by the relevant respondent, and indebtedness.
6. Neither the respondent took any part in the proceedings below, nor in the appeals in this Court. No material was filed by either respondent.
7. The primary judge heard the application in WS No 56 of 2012 on 13 August 2012, and the application in WS 318 of 2010 on 18 September 2012. His Honour gave judgment in both matters on 29 October 2012, and in both cases dismissed the Bank’s application for default judgment.
Consideration
8. The grounds of appeal set out in both notices of appeal are extensive. In summary, the Bank claims that, in declining to order default judgment in both cases pursuant to Order 12 rule 32 (1) of the National Court Rules, the discretion of the primary judge miscarried. Specifically, the Bank claims that his Honour erred in:
9. It is well-settled that where a Judge at first instance is required to exercise a discretion the Judge must exercise the discretion judicially, that is on proper principles of law : National Capital District Commission v Dademo [2013] PGSC 37 at [23], Keimali v Akema [2010] PGSC 9 at [8], Kimisopa, Minister for Justice v Paraka [2009] PGSC 29 at [22], Yer, Secretary for Department of Finance v Yama [2009] PGSC 13 at [31]. That this principle applies equally to the exercise of judicial discretion to enter default judgment on the application of a plaintiff is clear from the decision of this Court in National Executive Council v Williams [2005] PGSC 5 where their Honours said:
“So the appellants’ argument in this appeal in essence is that, the trial Judge should have refused to exercise his discretion to enter default judgment in favour of the respondent. This Court needs to ask, on what basis should the trial Judge have exercised his discretion in favour of the defendants in not granting default judgment? Whilst we agree with the appellants’ submissions that the trial Judge still has a discretion not to enter a default judgment even though the defendants had defaulted in filing a defence, we say such a discretion must be exercised judicially. The trial Judge must be satisfied that there are convincing or cogent reasons not to exercise his discretion in favour of granting the default judgment.”
10. Further, the approach of an appellate Court towards the prospective disturbance of a primary decision involving the exercise of judicial discretion by the Court is well-settled. As this Court observed in Kore v State [2011] PGSC 46:
5. [Relevant principles were] explained by Kapi J in the Supreme Court case of Alina Sarah Bean v Ian Maxwell Bean [1980] PNGLR 307, thus:
On matters of judicial discretion the High Court of Australia in House v. The King [1936] 55 C.L.R. 499 at pp. 504-5.20 said:
"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion . If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."
11. These principles have been recently approved in the case of Gronow v. Gronow (1979) 54 A.L.J.R. 243.21. The recent decision of the High Court of Australia is also referred to in the judgment of Mr. Justice Miles in Brian John Lewis v. The Independent State of Papua New Guinea Unreported judgment No. SC178, 29th August, 1980.22. All these principles have been adopted in numerous cases in this jurisdiction after Independence and they can be properly regarded as part of the underlying law of Papua New Guinea."
6. We shall be guided by these principles in our consideration of the appeal.
12. In this case we are satisfied that the grounds of appeal before the Court have merit, and that his Honour erred in exercising his discretion such that the orders at first instance in both cases ought be set aside. We take this view for the following reasons.
13. First, it is a fundamental tenet of contract law that, in the absence of vitiating factors including misrepresentation, non est factum, incapacity, mistake, or unilateral variation of the contract by the other party, a person who accepts an offer made in a written document by signing that document is bound by all the terms of that document, whether or not he has read them (Halsbury's Laws of England 5th edition (2012) Volume 22 paragraph 284, L'Estrange v F. Graucob Ltd [1934] 2 KB 394 at 403, Jay Mingo Pty Ltd v Steamships Trading Pty Ltd trading as Steamships Property Division [1995] PNGLR 129). It follows that, in this case, the starting point for his Honour in reviewing the contractual arrangements between the Bank and the respondents should properly have been that, in the absence of a vitiating factor known to law, the relevant loan contracts between the parties and the Bank was enforceable by the Bank.
14. Second, while his Honour noted at [18] and later at [67] that the Bank claimed breach of contract and clearly sought to enforce the contract, his Honour found at [67] that the plaintiff's claim:
[lacked] specific pleadings with sufficient particulars going into the fairness of the contract at the negotiation, agreement, performance or giving effect to the agreement stages and enforcement following default in repayments by Mr Tingke.
15. In our view to the extent that his Honour was influenced, in the exercise of his discretion, by considerations of pleading as set out at [67] of the primary judgment, his Honour erred.
16. The Bank submits that there was no obligation for a plaintiff, in respect of a claim for debt based on a loan agreement, to plead any of the matters to which his Honour referred. We agree. Again, it is a fundamental principle that in its statement of claim a plaintiff must plead all necessary facts and legal elements or ingredients to establish or prove that claim. So, for example, if in respect of a claimed breach of a loan contract a plaintiff sought interest, it would be incumbent on the plaintiff to plead the terms of the agreement including the principal loaned, facts upon which the plaintiff relied to support its claim that interest was payable, relevant dates and rates of interest. It is not for the plaintiff to plead that the interest claimed by the plaintiff pursuant to the loan contract, or actions taken by it in this respect, were "fair" or otherwise. Indeed we accept the submission of the plaintiff that it would be the responsibility of the borrower seeking to resist enforcement of the contract to raise issues relating to "fairness" should the borrower so choose.
17. Third, we consider his Honour erred in declining to enter default judgment in the circumstances of this case notwithstanding the failure of the respondents to file a defence because his Honour took the view (at [68]) that the respondents appeared "to have some good defence to the claim" against them, and because his Honour then speculated on what those defences could be.
18. Specifically, we note his Honour's observation in respect of Mr Tingke that:
He could raise the defences of say unfairness, not being on equal footing with the Bank and not being able to clearly understand the terms of the loan agreement and how they were going to work and the default provisions and actions based on that amounting to a penalty which is unenforceable.
19. In respect of these views expressed by his Honour:
20. Fourth, his Honour was clearly influenced – adversely to the Bank – by the view he took that the "effective interest rate" of 31.459% charged by the Bank was in the nature of a penalty, and unenforceable. At [28]-[35] of the judgment his Honour discussed the principles relevant to the doctrine of penalties, noting in particular the decision of the Supreme Court in Post PNG Ltd v Yama Security Services (unreported, 26 July 2001, SCA 80 of 2000). \
21. As the Supreme Court succinctly observed in Breckwoldt & Co (NG) Pty Ltd v Gnoyke (No 2) [1975] PNGLR 195 (citing Lopes J in Law v. Redditch Local Board [1891] UKLawRpKQB 219; [1892] 1 QB 127 at 132), a penalty may be distinguished from a genuine pre-estimate of damages for breach of contract in the following manner:
If the intention is to secure performance of the contract by the imposition of a fine or penalty, then the sum specified is a penalty; but if, on the other hand, the intention is to assess the damages for breach of the contract, it is liquidated damages.
22. In our view however the approach of his Honour, in construing the interest rate charged by the Bank in both cases as penalties, was misconceived. The material before the Court demonstrates that the parties agreed that 31.459% was the actual interest rate at which the respondents borrowed money from the Bank pursuant to the loan agreement between them. Stated simply, evidence of both Mr Bevan Clark and Mr Wallace before this Court establishes that:
23. The statement of claim of the appellants was in our view somewhat unfortunately expressed, in that a cursory glance at the particulars to paragraph 6 of the Statement of Claim could give a passing impression that the interest rate of 31.459% charged by the Bank was actually a penalty rate stipulated in terrorem of default. Closer examination of the evidence demonstrates, however, that this was not the case.
24. Fifth, we note that at [12] of his reasons his Honour said:
"Following service of the Writ of Summons on Mr. Tingke, he had until 05th April 2012 to file and serve his Notice of Intention to Defend. But Mr. Tingke did not do that. Conditional on him filing his Notice of Intention to Defend, he had until 19th Apil 2012 to file and serve his Defence on the Bank. That he did not also do. In the circumstances, the Bank was entitled to file its motion for default judgment and move it without first forewarning Mr. Tingke of its intention to do so. For forewarnings are only required where a defendant has filed and serve his or her notice of intention to defend"
25. In support of this proposition his Honour cited Mapmakers Pty Ltd v Broken Hill Proprietary Company Ltd [1987] PNGLE 787, Practice Direction No 1/1987, Joseph Peng v Phillip Craig Tangney (2009) SC 969 and Hilary Signat v Commissioner of Police (2008) SC 910.
26. This conclusion of his Honour was clearly correct. Accordingly, it is difficult to identify the rationale for his conclusion at [69]-[70] that the failure of the plaintiffs to ensure personal service on the respondents of the notice of motion seeking default judgment warranted an exercise of discretion against them and a refusal to order default judgment. Principles of natural justice, as asserted by his Honour, do not appear to be relevant in light of the – correct – finding that it was unnecessary for the Bank to serve Mr Tingke in light of his failure to file a notice of intention to defend. Further, while his Honour found at [70] that service of the notice of motion seeking default judgment was necessary from a case management view point, it could equally be said that such a requirement was inefficient from a case management view point given the apparent lack of interest or activity by the respondents in the litigation.
27. Sixth, while there was apparently a delay of almost three years by the Bank in commencing enforcement proceedings against Mr Tingke:
28. In our view this issue was irrelevant to the question whether the Bank was entitled to default judgment against Mr Tingke.
29. Seventh, we note his Honour's conclusion at [74] that:
"The Bank did not allow and ensured that, Mr. Tingke sought and secured independent legal advice as to the fairness of the terms of the loan and his obligations and the consequence that would follow if he breached the loan agreement."
30. No basis for this conclusion is apparent either from his Honour's reasons or the material before this Court.
31. Further, no basis is advanced by his Honour for the conclusion that the Bank was obliged to ensure that Mr Tingke sought and secured independent legal advice as to the fairness of the loan, his obligations, and consequences of breach.
32. In our view this was an irrelevant consideration, and an improper matter for his Honour to take into account in exercising his discretion.
33. Finally, we are not satisfied that Augerea to which his Honour referred at [22]-[27], [36], [41], [45] and [75] was relevant to the exercise of discretion in this case. Augerea concerned an application for summary judgment in respect of a loan, a mortgage and issues on clogs on the equity of redemption, and conflicts in the evidence presented by parties on both sides. In summary, Augerea raised issues of no relevance to an application for default judgment, which was the matter before his Honour.
Conclusion
34. In our view, in both cases, the appeal should be allowed, the orders below quashed and set aside, and judgment entered for the Bank.
35. We note that the Bank has also sought an order for costs against the respondents. As a general rule costs follow the event in the absence of reasons for the Court to depart from that rule. In this case neither respondent has played any part in the proceedings either before us or below. No responsibility can be attributed to the respondents for any views adopted by the primary judge, or this Court. We consider that it is appropriate in the circumstances for the respondents to pay the costs of the Bank in respect of proceedings in the National Court, however the costs of the appeal should be borne by the Bank.
IN SCA 140 of 2012 BANK OF SOUTH PACIFIC LIMITED V ROBERT TINGKE AND SCA 141 OF 2012 BANK OF SOUTH PACIFIC LIMITED V CASPER C.S. APUNDAMATIET
THE COURT ORDERS THAT:
_____________________________________________________________
Posman Kua Aisi Lawyers: Lawyer for the Appellant
No appearance for the Respondents
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/pg/cases/PGSC/2014/49.html