Bravos Ltd v Laga [2024] WSDC 4 (4 September 2024)

IN THE DISTRICT COURT OF SAMOA
Bravos Ltd v Laga & Ors [2024] WSDC 4 (04 September 2024)

Case name:	Bravos Ltd v Laga & Ors
Citation:	[2024] WSDC 4
Decision date:	04 September 2024
Parties:	BRAVOS LTD (Plaintiff) v FETUFOU SETU LAGA and MAKERETA LENE (First Defendants) and BEAUTYLELEPA VISAN (Second Defendant)
Hearing date(s):
File number(s):
Jurisdiction:	District Court - CIVIL
Place of delivery:	District Court of Samoa, Mulinuu
Judge(s):	Judge Mata’utia Raymond Schuster
On appeal from:
Order:	Having regard to the nature of the contract discussed above, the conduct of the parties and the period of time from the initial contract to the date of my judgment, I will take two thirds from the plaintiffs claim of $17,800.04. The plaintiff is awarded $11,866.69. This award is inclusive of the cost of legal fees claimed of $2,199.60. I reject the amount suggested by the second defendant as fanciful and not representative of her commitment and intention to be legally bound by the contract. Not being the first case of this kind but, nevertheless, a warning: prospective personal guarantors beware.
Representation:	Ms Hazelman for the Plaintiff Mr Lemisio for the Second Defendant
Catchwords:	Damages – costs
Words and phrases:
Legislation cited:	Financial Institutions Act 1996; Central Bank of Samoa Act 2015.
Cases cited:	Fiso v Reid [2002] WSCA 2; Misc 70 2002 (2 December 2002); Stanley v Vito [2010] WSCA 2 (7 May 2010); McCarthy v Samoa National Provident Fund [2020] WSSC 41 (24 July 2020); MMI v IPL [2024] WSSC 5 (8 March 2024). ALCC Brown Enterprises Ltd v Savaiinaea [2009] WSSC 2 (30 January 2009); Commonwealth of Australia v Stevenson [1993]; WSSC 30; CP 246-93 (15 October 1993); Ausi v Isaako [2007] WSSC 38 (30 April 2007).
Summary of decision:

IN THE DISTRICT COURT OF SAMOA
HELD AT MULINUU

BETWEEN

BRAVOS LIMITED, a duly incorporated company having its registered office situated at Matafele, Apia, Samoa

Plaintiff

AND

FETUFOU SETU LAGA and MAKERETA LENE of Lufilufi near Apia, Samoa

First Defendants

AND

BEAUTYLELEPA VISAN of Vaoala, Apia, Samoa

Second Defendant

Counsel: Ms Hazelman for the Plaintiff

Mr Lemisio for the Second Defendant

Date of decision: 4^th September 2024

RESERVED DECISION ON DAMAGES AND COSTS

1. Following the determination on the issue of liability in favour of the Plaintiff, the parties were encouraged to enter into negotiations on the issue of quantum and costs.
2. The parties have not been able to come to a mutual agreement on their own and now provide separate itemised submissions on quantum and costs. The spectrum of the submissions are so extreme that it leaves little room for a compromise.
3. The law as to the principles relating to the assessment of quantum and costs is well settled in this jurisdiction^[1].
4. The plaintiff claims:
   1. $13,600.40 being the balance of the outstanding debt as at 17^th June 2022
   2. Interest and late fees to the date of judgment
   100. $865.00 legal costs
   4. $20 for Court costs of the Ordinary Summons
   5. And any such relief the Court deems just and equitable
5. The plaintiff prays for the total sum of $20,000 being $17,800.04 of the outstanding amount inclusive of late fees as of 17 May 2024 and $2,199.60 for legal fees.
6. The Second Defendant submits she only owes $1,718.81. This amount is obtained as such:
   • $11,437.62 Principal loan
   • -$ 8,000.00 Security
   • $ 3,437.62 Total 2 (1^st and 2^nd Defendants) = $1,718.81
7. When parties have ordered their affairs voluntarily and with intent through a binding contract, the law is strongly inclined to respect their agreement, and will only interfere upon a strong showing that dishonoring the contract is required to vindicate a public policy interest that would override freedom to contract. This is a free-market principle that exists in most if not all democratic societies. It is a basic part of being free agents and the general liberty to pursue material comfort and/or wealth in a free market society.
8. Along with this principle is the general rule, recited by courts for well over a century, that the adequacy or fairness of the consideration that adduces a promise or a transfer is not alone grounds for a court to refuse to enforce a promise or to give effect to an agreement.
9. However, this principle has not precluded courts, on occasion, from striking down contracts or transfers with some circumstance that amounts to inequitable, oppressive or unreasonable conduct. That is, the “rule” that courts will not interfere or assess the wisdom of bargains has not fully excluded the opposite proposition, that at some point, courts will do so even in the absence of actual fraud, duress, incapacity or unconscionability.
10. This principle that the courts, on occasion, can consider circumstances amounting to inequitable, oppressive or unreasonable conduct, duress or incapacity in my view should also prevail even after determination of liability in a contract dispute to review and determine the issue of quantum of damages and costs. The parties to an agreement need not be hostages to the agreement being an impediment to the positive outcome both parties envisaged and entered into the agreement in the first place, i.e., the second defendant to help guarantee a friends’ loan and for the plaintiff in providing a profitable financial service.
11. The contract term “revolving facility” is discussed in the judgement of 17 May 2024. There is no specific or implied term of expiration or termination but premised on a default provision that would activate the right of the plaintiff to call in the loan. Clause II promises advances to the first defendants until 12 January 2022, the date presumably the first defendant has to start repaying the loan. The first defendant may borrow, prepay and reborrow so long as the amount borrowed does not exceed $8,000.
12. A term to suggest an expiration period would be a fixed payment amount and at such intervals notwithstanding clause II that the second defendant may seek (for what I term as) “top-ups” so long as it does not exceed $8,000.
13. The first default is noted on the 19 January 2022 in Annexure “H” of Exhibit P1, the sworn affidavit of Taualai Fonoti. On the 11 February and 22 of July 2022, the First Defendant made a $2,000 and $4,000 repayment respectively. The plaintiff deducted $3,000 from the principal amount after selling the security but this was adjusted to $7,500 to reflect the full security amount pursuant to my written judgement of 17 May 2024.
14. The history of these proceedings began 6 September 2022 with the filing of the plaintiff’s statement of claim. It prolonged due to several factors not entirely that pertaining to the conduct of the parties. The second defendant contested the claim and the matter was referred to mediation on 21 February 2023. Unfortunately for the parties, mediation was not successful and the matter was adjourned to 21 September 2023 for hearing. However, when called on the 21 and 22 September 2023 for hearing, the second defendant indicated that they wanted new counsel as Mr Tufuga did not represent their interests in the case.
15. Mr Lemisio came in as new counsel on 26 September 2023 and the matter was scheduled to 8 December 2023 for hearing. The matter proceeded as scheduled and my written decision was completed on 17 May 2024 despite the hope that it may be available on an earlier date.
16. This time period has certainly impacted on the late fees charged to the first defendants’ account which commenced on 19 January 2022. I take judicial notice the first defendant was then sometime in 2023 caused to serve an imprisonment term either from this matter or unrelated to this. In saying that, I note that a Warrant of Committal was sealed on the 16 August 2023 for 7 weeks imprisonment should the first defendant fail to make summary judgment payment of $670.59 every fortnight for the principal balance of $17,435.40. There is no further payment made so far as annexure “H” indicate and there is no evidence to show whether it was this warrant that placed the first defendant in prison or a different matter.
17. The bulk of the plaintiffs’ claim is based on the late fees. It is fortunate for the second defendant that the plaintiff had opted to charge $100 for late payment every 7 days which was the lesser charge of the two options in Part 8 of the agreement. The legal fee is an associated cost carried by the plaintiff for recovering its monies but that is an issue that is discretionary in the courts determination.
18. The second defendant claims that the amount of $20,000 is extravagant, exorbitant and unconscionable. She insists that the $6,000 paid by the first defendant and the $3,000 received from the selling of the security is fair and reasonable compensation for the plaintiff. On top of that, she estimates her fair contribution for settlement along with the first defendant to be $1,718.81 and each party to be responsible for their own legal fees.
19. Given the uncertainty as to the expiration term of the contract though not to be presumed indefinite, the inference that a default may call in the loan and activate the termination process in motion, and the fact that this is an unregulated financial market, the question of damages and cost requires some robust and rigorous consideration. It will be without a doubt that every case that fall within this type of contract will have its own particular circumstances and this by no means sets in stone a precedent but a guide for similar cases.

Discussion

20. Can the court imply a duty on the parties to a contract, where no duty was initially specified, to act reasonably in a situation of escalating charges and costs and, if so, when? The nature of the contractual relationship, including the balance of power between the parties, inter alia, are also relevant to consider the question.
21. To be recoverable the losses suffered by a claimant must satisfy the usual remoteness tests. The losses must have been reasonably foreseeable, necessarily within the contemplation of the parties, and is directly related to the defendant’s breach of contract^[3]. The second defendant concedes liability and the foreseeable losses therefore necessarily follow. The only question the second defendant asks is as to quantum or what are the plaintiff’s losses attributed to the second defendants breach.
22. The plaintiff has capped the losses and costs sought at $20,000 of an initial $8,000 loan knowing that to be the maximum civil jurisdiction of the District Court. Clearly, that is a reasonably foreseeable outcome of the contract given the manner it was drafted with no specific expiration term. However, I would not venture to suggest that it necessarily followed that the parties reasonably envisaged, foresaw and intended for this outcome. This would make for unreasonableness and absurdity in law and in financial lending practice that charges and/or interests may be allowed to escalate without hindrance given the vagueness of the contract.
23. In such a case, it may very well end up in the Supreme Court but for the plaintiff making a strategic decision, as in this case, to cap the escalating charges. The strict application of rights and obligations in contract law may suggest that the parties have every right to pursue their claim to its just end. However, this may offend against the juris principle of finality, timeliness, the expectation of parties to act reasonably and common sense.
24. This type of contract cannot be compared to the regulated financial lending institutions. The latter are usually guaranteed by real property, they have a fixed period, interest rates are regulated, penalty interest are fixed upon judgment and regulated by legislation^[4]. The parties therefore, acting reasonably, enter with reasonable contemplation and foreseeability that the real property securities would be sufficient at any point to guarantee recovery of the lenders’ monies upon a breach.
25. It is not clear from the evidence what the parties reasonably contemplated at the time of the contract to be the extent of the losses arising from a breach of the contract. This is bearing in mind that the second defendant was not part of the initial lending contract but became aware of the terms of the loan agreement when she came in to guarantee the first defendant’s loan.
26. In total, the amount claimed comes to $26,800.04 inclusive of the $6,000 payment made by the first defendant and $3,000 recovered from the sale of the security being the first defendant’s vehicle. The plaintiff stands to gain roughly 70.15% after recovering the initial amount disbursed to the first defendant.
27. The second defendants contest of the claim was, given the facts that I have found and her own concession, futile. She, as an experienced bank officer herself, understood what the personal guarantee was for and by signing the guarantee effectively bound her to the terms of the loan agreement knowing that it would be legally enforceable.
28. Being well aware of the default sometime in late January 2022, the second defendant was notified and she made contact with Daniel Ah Fook (the plaintiffs loan manager at the time) but no effort was made to repay the loan then and up to the date of the claim being filed on 6 December 2022.
29. I am of the view that the losses suffered by the plaintiff were reasonably foreseeable and contemplated by the second defendant as a consequence of a default by the first and second defendants. The only issue is whether the parties acted reasonably to mitigate the losses. I am satisfied the plaintiffs acted reasonably to recover its losses as earnestly possible but perhaps thought it wholly unfettered not to cap the escalating costs until it was unavoidable to do so given the maximum civil jurisdiction of this court.
30. I find, as to the question, that the court can imply a duty on the parties especially the plaintiff/lender to act reasonably in relation to the question of escalating charges and costs arising from a financial lending agreement. This is particularly so where no declaration was initially made as to the contracts expiration. The only remaining question is, to what degree shall the successful party receive its award?
31. There is no hard and fast formula for assessing damages and costs for each case is determined on its own merits. In saying that, it should be noted that it is no justification to allow a claimant to excessively profit from his/her loss^[5]. This is especially so with regard to the nature of this type of financial agreement.

Conclusion

32. Having regard to the nature of the contract discussed above, the conduct of the parties and the period of time from the initial contract to the date of my judgment, I will take two thirds from the plaintiffs claim of $17,800.04.
33. The plaintiff is awarded $11,866.69. This award is inclusive of the cost of legal fees claimed of $2,199.60.
34. I reject the amount suggested by the second defendant as fanciful and not representative of her commitment and intention to be legally bound by the contract. Not being the first case of this kind but, nevertheless, a warning: prospective personal guarantors beware.

JUDGE MATA’UTIA RAYMOND SCHUSTER

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^[1]2 Fiso v Reid [2002] WSCA 2; Misc 70 2002 (2 December 2002); Stanley v Vito [2010] WSCA 2 (7 May 2010); McCarthy v Samoa National Provident Fund [2020] WSSC 41 (24 July 2020); MMI v IPL [2024] WSSC 5 (8 March 2024).
^[3] ALCC Brown Enterprises Ltd v Savaiinaea [2009] WSSC 2 (30 January 2009); Commonwealth of Australia v Stevenson [1993] WSSC 30; CP 246-93 (15 October 1993)
^[4] Financial Institutions Act 1996; Central Bank of Samoa Act 2015
^[5] Ausi v Isaako [2007] WSSC 38 (30 April 2007)