N2738

PAPUA NEW GUINEA

[In the National Court of Justice]

WS 499 OF 2003

Between

MAX UMBU
Plaintiff

And

STEAMSHIPS LIMITED
Defendant

WAIGANI: SALIKA, J
16, 22 June, 03 December, 2004

Mortgages – Mortgagers default – Claim to possession under Mortgagee – Statutory Rights

Constitution – Section 41 of Constitution not applicable 

Cases Cited:
Tarere v ANZ Banking Group (1988) PNGLR 201,
ANZ Banking Group v Kila Wari (1990) N801,
Bank of Papua New Guinea v Muteng Basa (1992) PNGLR 271,
Papua New Guinea Banking Corporation v Barra Amevo v Ors (1998) PNGLR 240, 
Papua New Guinea Banking Corporation v Pala Aruai and Freeway Enterprises Limited (2002) N2234
Bank of Papua New Guinea v Muteng Basa (1992) PNGLR 271.

Counsel:
Mr E Waifaf for Plaintiff
Mr I Sheppard for Defendant

03 December, 2004

The plaintiff is a former employee of the Defendant company who was made redundant on 3 December 2002 following the down sizing of the Defendant’s various businesses, including its Merchandise Division where the plaintiff was formerly employed. The plaintiff graduated with a Bachelor of Economics from the University of Papua New Guinea, Waigani Campus in 1998 and in May of that year began employment with Ela Motors at its Port Moresby Head Office. In November 1999 the plaintiff won a position as System and Administration Manager for the Defendant Automotive Division in Lae. He served a 3 months probationary period and was confirmed thereafter on a permanent basis. He served the Defendant in that capacity until it became known that the Division was going to be closed. Pending the closure of the Defendants Automotive Division throughout the Country the plaintiff successfully applied and won the position of Inventory Audit Manager with the Defendants Merchandise Division in Port Moresby. The plaintiff took up this position on or about 26 August 2002 upon acceptance of a written offer from the Defendant.

The plaintiff says that without prior knowing the defendants plan to close the operations of its Automotive Division throughout the Country he made enquiries about joining the Defendants Home Ownership Scheme. He was informed that he was eligible to join the scheme. The plaintiff identified a property on Section 106, Allot 13, Wagtail Street, Lae, Morobe province as the property he wanted to purchase under the scheme. Approval was granted to the plaintiff to buy the property. In February 2002 the plaintiff entered into a contract of sale between Glen Ming Chen and Chun Ming Huang to buy the property from them for K95,000.00

In the meantime following the Defendant\s approval for the plaintiff to purchase the property the plaintiff entered into an agreement between himself and the defendant to secure a loan of K46,200.00 from the Defendant to purchase the property. 

In so doing he executed with the defendants the following documents in order to secure the loan:-

(a)	Steamships Home Ownership Scheme Deed

(b)	The Deed of Priority executed between himself, the Defendant and the ANZ Bank.

(c)	Memorandum of Mortgage – quite apart from the ANZ Bank Mortgage.

(d)	Irrevocable Authority to deduct from his Salary – quite apart from the one for ANZ Bank.

The Plaintiff also executed a memorandum of Mortgage with the ANZ Bank to secure the balance of the purchase price for the property through a separate loan in the sum of K49,800.00. The plaintiff says that since settlement on the 11 March 2002 he has been duly repaying the loans without any difficulty until 25 October 2002 when the Defendant through it’s Divisional Manager Brian Walstenholme terminated him from his employment for no particular reason. From this termination he was reinstated until 2 December 2002 when he was advised that he had been made redundant and put off the payroll.

On the 3rd December 2002 the plaintiff wrote to the defendant to inquire about his continued employment with the defendant but got no response. He wrote again on 20 January 2003 making the same inquiry but received a negative response. Then on 13 March 2003 the plaintiff went to see the Defendant’s Human Resource Manager Chris Taukuro who issued him the letter of cessation of his employment but back dated the termination to 2 December, 2002.

The plaintiff alleged he was terminated unfairly and unlawfully without regard to principles of natural justice.

In the meantime because the plaintiff ceased getting paid on 2 December 2002 his loans from Steamship and the ANZ Bank started to become delinquent. He sought some assistance from the Defendant but the defendant demanded full repayment of its loan to the plaintiff within 21 days. The plaintiff was not able to meet the defendant’s demand.

On 14 April 2003 the defendant wrote to the plaintiff to vacate the property at Section 106 and Allotment 13, Wagtail Street in Lae.

The plaintiff says that the actions of the defendant in trying to evict him after displacing him from employment and refusing to re-employ him and demanding full payment of the loan money, is harsh and oppressive and that by virtue of Section 41(1) of the Constitution an unlawful act which is enforceable under s.155(4) and S.23 of the Constitution.

The plaintiff alleged that he has suffered damages and faces the possibility of loosing his property in Lae. He seeks the following reliefs:-

(a)	Damages for breach of Contract of Employment.

(b)	A declaration that the Defendants actions to claim his property is unlawful pursuant to Section 41(1) of the Constitution.

(c)	An order that the loan amount of K46,200.00 advanced by the Defendant to the plaintiff under the Home Ownership Scheme be deemed sufficient compensation to the plaintiff taking into account his particular circumstances pursuant to s.23 and s.155(4) of the Constitution.

(d)	An order that the Defendant be restrained from seeking out the plaintiffs property under mortgage.

(e)	Alternatively, that the plaintiff be given liberty to repay the loan over the balance of the 7 year period remaining and without interest or at an interest rate the court sees fit.

(f)	An order for special damages.

(g)	Interest.

(h)	Costs, and

(i)	Such other orders the Court deems fit.

The defendant filed a defence and a cross-claim to the plaintiffs claim. The defendant admits that the plaintiff was employed as it’s Systems and Administration Manager. The defendant also admits that the plaintiff did enter the Home Ownership Scheme to purchase a house on Allotment 13 Section 106, Wagtail Street, Lae.

The plaintiff on his own behalf gave evidence orally and also tendered into evidence an affidavit by himself. The defendant called Lologa Gerega who was called to tender an affidavit he swore.

The claim by the plaintiff is in two parts. The first part of the claim is for breach of contract of employment. The second part of the claim is in relation to the property on Allotment 13 Section 106, Wagtail Street, Lae, Morobe Province.

In relation to the first part of the claim that there was a breach of contract of employment, no evidence was led by the plaintiff that there was a breach of contract of employment. All that the plaintiff says is that he was terminated unfairly and or unlawfully without any regard for his basic dignity as a human being and in breach of the basic principles of natural justice or in breach of minimum requirements for termination notice. The plaintiff did not specifically say that there was a breach of his contract of employment by defendant. One of his prayer for relief is damagers for breach of contract of employment. It was not pointed out to the Court what clause or part of the employment contract was breached. The plaintiff has failed to prove any damages in relation to this part of the claim.

The second part of the claim is in relation to the property he acquired through the Home Ownership Scheme. It is not disputed that the plaintiff acquired the property on Allotment 13 Section 106 Wagtail Street, Lae through the housing scheme while employed by the Defendant. He obtained 2 separate loans – one from the defendant in the sum of K46,200.00 and one from the ANZ Bank in the sum of K49,800. After the plaintiff was terminated from his employment he was not able to meet the loan repayment to both the defendant and the Bank. The defendant was not able to deploy the plaintiff to other Division of the company and thus not able to further employ him. As the plaintiff was not able to meet the loan repayments the defendants moved to have the plaintiff evicted from the property through a number of letters it wrote to the plaintiff. The plaintiff in turn took out these proceedings.

As it has turned out the whole fight now is about the property on Allotment 13 Section 106, Wagtail Street, Lae. As the Plaintiff was not able to meet the loan repayments the defendant wanted to foreclose under the Mortgage Agreement and the Section 74(1)(c) of the Land Registration Act chapter 191. The defendant has been temporarily restrained from ejecting the plaintiff from the property pending the decision in these proceedings.

The law in this regard in this country has been stated in the cases of TARERE V ANZ BANKING GROUP (1988) PNGLR 201, ANZ BANKING GROUP V KILA WARI (1990)N801, BANK OF PAPU ANEW GUINEA V MUTENG BASA (19920 PNGLR 271, PAPUA NEW GUINEA BANKING CORPORATION V BARRA AMEVO V ORS (1998) PNGLR 240, PAPUA NEW GUINEA BANKING CORPORATION V PALA ARUAI AND FREEWAY ENTERPRISES LIMITED (2002) N2234 unreported judgement. The facts of this case are somewhat similar to the case of BANK OF PAPUA NEW GUINEA V MUTENG BASA (1992) PNGLR 271. In that case the defendant obtained a staff housing loan at a concessional interest rate from the plaintiff. The defendant met the repayments whilst employed until he resigned from the Bank. When he started to default he was asked to refinance the housing loan through another institution but he failed to do so. His principle arrears together with interest went up to K36,665.00 and was accruing at 10% per annum the bank moved to foreclose. The defendant in his defence said the bank in exercising its powers to foreclose under the terms of the mortgage did so unfairly, unseasonably and without due regard to the defendant’s livelihood and to his past services to the bank.

In this case the plaintiff says the same thing saying that the defendant is trying to foreclose on his property unfairly, unreasonably and without due regard for his livelihood. He also says that the defendants actions are contrary to S.41 of the Constitution. In the TARERE and BASA cases the Courts held that the provisions of s.41 of the Constitution are inapplicable and not available as the contractual relationships of the parties did not impinge on their Constitutional rights.

The same can said in relation to the facts of this case. The relationship between the plaintiff and the defendant is a contractual one in that the plaintiff got a housing loan from the defendant and the plaintiff after some time was not able to meet the loan repayments. Under the terms of the mortgage agreement the defendant was entitled to foreclose when the plaintiff fell into arrears. That is what happened in this case. The plaintiff fell into arrears. The right to foreclose is also conferred by Section 74 of the Land Registration Act. In circumstances where the plaintiff defaulted on making the repayments the defendant was at liberty to exercise its right under the mortgage and under the Land Registration Act to sell the property and have vacant possession of the property. As Sevua J said in PNGBC v BARRA AMEVO & ORS (1998) PNGLR 240 the defendant is entitled under the mortgage and by law to enforce its right to foreclose. The plaintiff under those circumstances has no cause to try and hang on to the property without making the repayment. Moreover, he cannot rely on s.41 of the Constitution. That is not open to him. In this case the plaintiff is now employed by Post PNG. Is he now making any repayments to the defendant. I also note that the plaintiff is renting the property in Lae. Is he making any repayments to the Defendant from that rental income. There is no evidence that he has been making repayments from his new salaried job or that he has been making repayments from the rental income. That is what he should have been doing instead of taking court action. The plaintiff should have started the loan repayments through his salary deductions and from the rental income. That is a matter now for negotiation if that avenue is still open. I will leave that to the parties. In the event that negotiations are closed and the parties do not settle then the orders made relating to the Counter claim will automatically come into play.

In the circumstances the plaintiff has no basis to seek the reliefs that he claims in his writ of summons.

In relation to the cross claim the defendant cross claimant pleads the terms of the mortgage agreement. The terms are that the plaintiff was to pay off the loan advanced by the defendant – cross claimant. The plaintiff has failed to repay the loan. As he has failed the defendant has the right of foreclosure. In the circumstances the defendant is awarded K46,200 as the principle and interest to the date of judgement. The defendant is also awarded vacant possession of property described as Allotment 13 Section 106, Lae Morobe Province. The plaintiff is to pay the defendants cost of the proceedings.

Lawyer for the Plaintiff:	Warner Shand
Lawyer for the Defendant:	Blake Dawson Waldron.