DC882

PAPUA NEW GUINEA
[IN THE DISTRICT COURT OF JUSTICE
SITTING IN ITS CIVIL (GRADE FIVE) JURISDICTION]

GFCi 04 of 2009

BETWEEN:

NANA FINANCE
Complainant

AND:

ANDREW P AMBERE
Defendant

Goroka: G Madu
2009: March 10, 17
May 20
June 15, 26
July 17

CIVIL- Debts – Monies paid as personal loan by Financial Company to defendant – Loan agreement duly signed by complainant – Terms of agreement explicitly stated – No dispute at the time of agreement – Defendant failed to pay the loan – Amount to breach of agreement – Judgement entered for complainant.

Cases Cited: Nil

References: Nil

Counsel:
Willie Awi, for the Complainant
Andrew Ambere, for the Defendant

17th July 2009

REASONS FOR DECISION

G.Madu PM: The complainant is taking civil suit against the defendant for a debt in the amount of K9,488.88 which was borrowed.

2. The complainant is a legal entity and registered under the Laws of Papua New Guinea and can sue and be sued under its corporate name and style.

3. The defendant is an individual who is employed as a security guard by the National Judicial Staff Service and attached to the National Court in Goroka.

4. The complainant company involves in the business of lending money to people and to make an income for profit.

5.The facts are the defendant applied for the first loan of K500.00 and was paid on 18th March 2008. The loan was for the children’s school fees and educational expenses. The defendant made some payments but was left with balance of K612.70. This loan balance was outstanding when the second loan of K2,300.00 was approved and paid to the defendant. The terms of the agreement were explicitly stated in the following forms:

 - Loan Application and Agreement – Form 1

 - Authority to Deduct - Form 2

 - Statutory Declaration - Form 3

 - Loan Repayment Table - Form 4

 - Authorisation to Stop Account Should I Default on repayment. 

The defendant did not dispute the terms of the agreement regarding the loan payment

The defendant again applied for the second loan from the complainant whilst the first loan balance of K612.70 was still outstanding. However evidence show that the first loan was fully paid when K612.70 was credited from the second loan of K2300.00. The loan was for bride price payment . The complainant paid the defendant K2300.00 in cash on 18th March 2008 at the Faniufa Service Station between 5.30pm – 6.00pm. This was an additional loan the defendant got which is the subject matter in this proceeding.

6. The defendant disputed the base interest rate of 20% and 3% per fortnight. He argues that the rate should be based on yearly and not on fortnightly as claimed by the complainant. He argued that by paying 23% interest fortnightly the loan amount would have been inflated.

7. The issues are:

- Whether the interest calculated and imposed on the defendant was excessive.
- Whether the defendant breach the loan agreement when he failed to continue the payments by instalment.

8. The complainant and defendant provided evidence by affidavit and did not call other witnesses. They also file document as part of their evidence. The cross- examination could not proceed because complainant was not present in court. 

9. The court could not adjourn because the complainant did not give any reason for not turning up. He was fully aware of the hearing date yet he did not show up instead filed his affidavit after the court instructed the complainant to do so. The defendant applied to the court to proceed and make a decision given the fact that the complainant’s affidavit was filed and was part of the court file. I granted the application and adjourned to consider the evidence.

10. On the issue of whether interest calculated and imposed was excessive very much depend on the terms of the loan agreement. The complainant provided copies of the loan application and agreement form, authority to deduct, statutory declaration and loan repayment table. On loan repayment table it is stipulated that interest is calculated on a base rate of 20% and 3% per fortnight. Complainant would have explained what was meant by base rate and why 3% per fortnight was applied. The complainant’s representative was not available to explain to court about the two interest rates used. In normal commercial or business transactions, interest rates per annum will be assessed on principal amount paid as loan. 

11. There are two different rates given in which the interest had been charge twice, 20% which I presume is charged per annum and 3% per fortnight. The complainant imposing these two different interest rates obviously accumulated defendant’s repayment to K7,188.88 for the loan of K2,300.00. I have also noted on Loan Repayment Ledger 30% interest had been indicated. This is quite opposite to the information given on the loan repayment table. The complainant has also imposed a 10% penalty for every default payment.

12. I am of the view and also in agreement with the complainant that the he is entitled to get the principle amount paid as loan plus interest from the defendant but at the same time it must ensure that its client can be able to afford repayment within the given time frame. 

13. The fact of the matter is that the complainant paid the defendant K2300.00 as requested and the defendant’s legal obligation under the agreement was to make payment on fortnightly instalment of K175.15. The defendant after three payments discontinued up to this time. He wrote a letter to NJSS salaries to stop any transaction to ANZ account No1238280 Goroka branch and to channel all transactions to BSP account No. 1001388322 Goroka. The reason is unknown but it appears that the defendant’s loan repayments of K175.15 per fortnight would be paid from the ANZ Account according to the complainant records. However by instructing the NJSS salaries to effect changes to the bank accounts frustrated the agreement made between both parties and this is a clear breach of the agreement. In a normal loan agreement, interest would be charged for failing to pay the loan when payment is due. In this case what matters is not so much of what interest rate is acceptable because what has been stipulated in the terms of the loan agreement was being agreed to by the defendant including the interest rate. The argument advanced by the defendant is not logical for claiming the interest rate to be high and therefore must fail. 

14. On the issue of whether the there was a breach of the agreement by the defendant when he failed to pay his fortnightly instalment my response is yes. The defendant in his affidavit admitted that he got an additional loan of K2300.00. The evidence is all very clear that the loan application was signed by the defendant. When he signed the loan application he was agreeing to all the terms of the agreement. These included amount of instalment payments, interest and the period of payment. Evidence does not show that the defendant disputed the terms of the agreement.

15. The defendant only disputed the interest rate applied after he received the loan. The loan repayment ledger shows that the defendant made only three payments on 18/03/08-K175.15, 27/03/08-K175.15, K180.00 and did not continue payment thereafter until he was served with the letter of demand and eventually with the summons. This is clear breach of the agreement. He stated that he did not continue because the interest was calculated on a base rate of 20% and 3% each fortnight which was not reasonable and would end up paying the amount in excess of K2300.00. Although he had reasons not to pay loan repayments however was in breach as he agreed in the first instant to all the terms of the loan agreement when he sign the application form and receiving the cash of K2300.00 from the complainant on 18th March 2008. Defendant also fully understood the terms of loan by responding to certain question asked and therefore is liable to pay his debts based on interest of 20% per annum and 3% per fortnight on the outstanding balance and10% penalty for defaulting payment.

16. The loan application and agreement document filed by the complainant indicated that the total amount of repayment is K4, 553.90. I do not intend to base my calculation on the interest rates but wish to exercise discretion in arriving at an amount that the complainant is entitled to. The defendant is claiming K9, 488.88 which includes the interest and penalty rate. What then is the probable amount that the defendant should pay as loan repayment. Having considered all the arguments presented, judgement is entered in complainants favour in principal sum of K2, 300.00, interest of K529.00 and damages for breach of contract of K2, 000.00. The defendant is ordered to pay total sum of K4, 829.00 to the complainant. Parties ordered to meet their own costs.

__________________

Lawyer for Nana Finance Willie Awi(Rep)
Lawyer forAndrew Ambere In Person