N8128
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1471 OF 2018

BETWEEN

KADA POROMAN MICRO FINANCE LIMITED
Plaintiff/Cross Defendant

AND
HOTEL KOKOPO LIMITED
Defendant/Cross Claimant

Kokopo: Susame, AJ
2019: 4th, 5th September & 01st November

ASSESSMENT OF DAMAGES – liability admitted – claim of K203 287.83 for outstanding loan balance – plaintiff is required to prove by evidence each claim

Cases Cited:

Nil

Counsel:

Ms. Samantha MKiene, for the Plaintiff
Mr. Kenneth Pora, for the Defendant

DECISION
01 November, 2019

1.	SUSAME AJ: This was trial on assessment of damages. Liability is not in contention. It has been determined in May 2019. Assessment of damages was deferred and hearing was conducted on 5 September 2019.  This is the reserve judgment of the court on damages.

Background

2.	Facts are canvassed in Juliette KalagoTabali’s affidavit sworn on 11th February 2019 (document 12) which Ms. Kiene captured in her submission. 

3.	Plaintiff is a Microfinance Company operating in Kokopo, East New Britain Province (ENBP). Defendant Company is a Hotel based also in Kokopo, ENBP. On 27 July 2015, defendant Company submitted an application with the plaintiff for a loan of K300 000.00 repayable over period of 24 months. On 12 August 2015 after special consideration by the Board of Directors of the Plaintiff Company the application was approved subject to certain conditions contained in the loan agreement (Annexure ‘A’ attached to Juliette’s Affidavit) set out below.

(i)	Defendant to pay anestablishment fee of 3%, which was K9 000.00 of the loan amount drawn. 
(ii)	Loan was repayable with interest of 25% per annum over period of 24 months.
(iii)	Defendant to pay Monthly payments of K18 750.00. 
(iv)	Total amount repayable inclusive of interest was K450 000.00
(v)	     Payment to commence on 12 September 2015 as first instalment. 
(vi)	Defendant agreed to allow the plaintiff company to off-set its Bungim Deposit Account or repossess any of its movable asset at any time in the event of default if loan falls into arrears and that defendant to pay K5.00 penalty fee if his deposit is to be off-set.
 
4.	If monthly payments were consistent loan was to be fully settled by 12 September 2017.

5.	Proceeding is for recovery of the remaining balance of the loan break up of which is:

i.	Outstanding loan balance                               K183 000.00
ii.	Accrued late payment fees (K375 x 23)          K   8 625.00
iii.	Regular interest after maturity                       K   2 769.33
iv.	Accrued legal fees to date of filing                  K   8 343.50
K203 287.83

6.	Matter came before the court after failed attempts by the parties to reach an amicable settlement on the amount due and payable. Amount remains unpaid is the basic issue for determination.  There were further challenges on payment of establishment fee on the loan, interest payable and late payment charges. 

Issues

i.	What is the remaining loan balance?
ii.	Whether the establishment fee has been paid?
iii.	Whether defendant is required to pay K2 769.33 interest after maturity of the loan?
iv.	Whether defendant is required to pay late payment fees? 
v.	Who should pay the cost of proceedings?

Contentions

7.	Plaintiff relies on three separate affidavits of Julie KalagoTabali sworn on 14 February 2019, 21 February 2019, and9 May 2019.  

8.	According to Julie’s affidavit of 9 May 2019 defendant has repaid a sum of K266 775.34. Payments in cheque totaled K154 275.34 and K112, 500.00 were drawn from Bungim Savings Passbook Account. The amount remains unpaid is K203, 287.83 inclusive of late payment fees, late interest and legal cost, the computation of which is:

(i)	Outstanding balance                        K183 550.00.
(ii)	Late payment Charges      (K375 x 23) K   8 625.00
(iii)	Interest charged after  maturity K   2 769.33
(iv)	legal fees to date of filing           K   8 343.50

9.		Defendant contested it owed the plaintiff sum of   K203, 287.83. It relies on Sir Sinai Brown’s affidavit sworn on 4 April 2019.  Sir Brown deposed plaintiff deducted K150 000.00 from their Bungim Savings Account. He provided a table of payments made in cheque totaling K107 825.34 and three payments made from their Nambawan Quarries Ltd company account totaling K50 000.00.Further payments came from deductions of their Bungim Savings Account in the sum of K150 000. 00 which brings the total payments made to K307 825.34. That leaves a balance of K142 174.66.  Sir Brown further stated the loan agreement does not allow for charge of compound interest. Defendant argues further establishment fee has been paid and that late payment charges is not a condition of the loan agreement. 

10.	Defendant filed an additional affidavit and Notice to Reply on 3 and 4 September 2019 respectively and served on the plaintiff’s lawyer on 4 September 2019. Objection was made by, Ms. Kiene for the documents not to be accepted and struck out on the grounds that they were filed late when the matter has been set down for trial.   Objections was upheld and documents struck out for reason that it would amount to an abuse of process of the court for such documents to be accepted when matters have been set down for trial except with the leave of the court. No leave of Court was granted for defendant to file additional affidavits and notice to rely on. 

Finding

Issue No1: What is the remaining loan balance?

11.	I have thoroughly considered the evidence before me.  Plaintiff has not provided as evidence copies of cheque paid and received or schedule of payments received for the benefit. It was incumbent upon the plaintiff to provide such evidence especially when parties are in contention over paymentsmade and received. It is not enough for the plaintiff to say defendant has so far repaid K266 775.34. That figure must be substantiated by evidence of payments received and for the court to verify. 

12.	In her submission Ms. Kiene confirms three late payments were received after the loan expired. These are; cheque number 921859 dated 15 August 2017 for K10000.00, cheque no. 1517 dated 4 September 2017 for K10000.00 and cheque no. 1225 dated 15 November 2017 for K5 000.00. These payments appear in the schedule of payments defendant provided in evidence. 

13.	Defendant has provided evidence of schedule of payments made. Payments made in cheque total K157 825.34 three of which were cheque drawn from Nambawan Quarries Ltd company account.
 
14.	From the Bungim Savings Account copy of transaction details of the account tendered into evidence by the plaintiff shows as of 13 August 2015, K150 000.00 was the closing balance. Deductions towards repayment of loan balance after the loan expired commenced on 26th November 2015. Thereafter, there were four other deductions which brought the total deductions to K112, 500.00 and not K150 000.00 as asserted by the defendant.  As of 05 December 2017 the account had a remaining balance of K37 480.00.  There is no evidence of further deductions from that account towards repayment of the loan balance. 

15.	From the facts established by evidence I find cheque payments totaled K157 825.34 and deductions from the Bungim Savings Account totaled K112, 500.00 which brings the total repayment to K270 325.34.

16.	Thus, the remaining balance of the loan is: K450 000.00 – K270 325.54 = K179 674. 66.  This finding resolves the first issue. 

Finding

17.	Issue N0.2: Whether the establishment fee has been paid?

18.	In the statement of claim paragraph 8 (d) sum of K9 000.00 was claimed for the loan establishment fee.  Mr. Pora argued that establishment fee had been paid when the loan was released.  At the hearing that amount was never seriously pursued by the plaintiff. In her rebuttal Ms. Kiene submitted the establishment fee has not been included in the balance of K203 287.83 that was claimed. The implication of that is the amount is not being claimed by the plaintiff, perhaps for reason the establishment fee had been paid.  If the amount was owing and unpaid there is no evidence from the plaintiff in the affidavits filed by Juliette KalagoTabali stating no payment of that amount. Unless that fee was paid loan would not have been paid.

19.	Therefore, it can safely be inferred the establishment fee had been paid in order for the loan to be released.

Finding

20.	Issue No .3: Whether defendant is required to pay K2769.33 interest after maturity of the loan?

21.	On this issue parties are in agreement was a special loan agreement. They are in contention over interest payable. Plaintiff maintains that loan of K450 000.00 inclusive 25% interest factored into itwas repayable in monthly payments of K18, 750.00 over period of 24 months. This was condition of the loan agreement. Plaintiff is claiming a sum of K 2 769.33 for regular interest payable after maturity of the loan. 

22.	Defendant’s argument is that interest being claimed is not chargeable as it was a special loan with interest payable at a flat rate of 25% per annum for two years. 

23.	As I understanding correctly defendant’s argument is that no additional interest should be claimed after expiry of the loan as total interest chargeable had already been factored into the loan. 

24.	Ms. Kiene rebuttal was that although the late payment fees is not a condition of the loan agreement it should apply because it was a commercial loan and by commercial practice it should apply, including the interest due and the overdue interest because the loan is overdue.

25.	I have read the copy of the loan agreement. Nowhere in the agreement is a clause stating defendant shall pay additional interest on an overdue loan.  

26.	I should think such a condition should be stipulated in future the loan agreements or if it a policy of any financial institution the lender should make it his business to communicate that to the borrowerto bind the borrower in all fairness rather than taking him by surprise. Secondly, there is no evidence from the plaintiff the requirement for payment of late payment fees was communicated to the defendant when the agreement was signed and executed. It is not enough for the plaintiff to say such fees are chargeable on commercial loans as it is a commercial practice.  Thirdly, K2 769.33 is being claimed under this head. Needless to say plaintiff has not given evidence how it had arrived at that figure by computation. You just cannot state a figure and expect the court to accept that amount. You are require to prove it. Of the forgoing discussions, this claim has not been proved and must be dismissed. This basically answers the issue No. 3.

Finding

27.	Issue No.4: Whether defendant is required to pay the late payment fees of K8 625.00?

28.	Same arguments advanced on issue No.3 apply in this issue, 

29.	The amount being claimed was arrived at using this computation: K375 X 23 = K8 625.00.

30.	I endorse my discussions on issue No. 3 above. I should think sucha term should to be stipulated in future loan agreements or should be communicated to any borrower at the signing of the contract to bind the borrower. 
Secondly, the formula used had not been explained in evidence by the plaintiff.  

31.	My query is: How was the sum of K375 computed or arrived at?  What does 
23 represent?  Days? Weeks? Months?  At least there should have been some explanation for the benefit of the court.

32.	It is for these two reasons the claim under this head must fail. The answer to this issue is in the negative. 

Legal fees accrued to date of filing of writ

33.	Under this head plaintiff claims a sum of K8, 343.50. There has not been any challenge by the defendant on this claim. The claim of K8,343.50 shall be allowed under this head.

Cost

34.	Awarding of cost is discretionary. In most instance award of cost usually follows the event. In this case defendant should pay plaintiff’s cost. 

35.	Court has heard arguments for and against.  Mr. Pora’s argument is that court had earlier on ordered parties to reach an amicable settlement on damages after liability was determined. Plaintiff has been unreasonable in not agreeing to the defendant’s proposed settlement causing the matter to go to trial. For that reason plaintiff should bear the cost. Ms. Kiene’s argued otherwise on the basis that unreasonableness was on the part of the defendant. Defendant had defaulted in repaying the loan on agreed terms. That is the reason matter ended up in court. They had admitted liability and they were to agree on a figure and have the matter settled out of court. They did not and matter returned to court for assessment of damages. 

36.	I concur with Ms. Kiene, unreasonableness was on the part of the defendant proceedings commenced for the recovery of the unpaid balance of the loan and not accepting the proposed out of court settlement on damages offered by the defendant.  Judgments have been entered for the plaintiff in both proceedings. Naturally cost should follow the event.  Judgment has been entered for the plaintiff, defendant should pay cost of proceeding. 

Judgment Award

i.	Defendant shall pay K179 674. 66 balance of the unpaid loan.
ii.	Defendant shall pay an interest of 8% per annum which shall be from the date of commencement of proceedings to the date of full settlement of the judgment award pursuant to Judicial Proceedings (Interest on Debts and Damages) Act.
iii.	Defendant shall pay sum of K8,343.50 for legal fees.
iv.	Defendant shall pay plaintiff’s cost to be taxed if not agreed. 
v.	Judgment of the court is abridged to the date of settlement by the Assistant Registrar which shall take place forthwith.  

__________________________________________________________________
South Pacific Legal Services: 	 Lawyer for the Plaintiff
Warner Shand Lawyers: 		 Lawyer for the Defendant