N11024
					
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 349 OF 2019

BETWEEN:
MOSE KOPYOTO
Plaintiff

AND
NATHAN PIARI
First Defendant

AND
KONAN CONSTRUCTION LIMITED
Second Defendant

AND
58 API TRADING LIMITED
Third Defendant

Waigani: Wood J
2024: 22nd February, 3rd October

DAMAGES – assessment of unliquidated damages – different heads of damages – the plaintiff sought interest at the rate of 100% in the event of non-payment of the principal loans by certain dates, plus further interest at 8% per week – the rates of interest sought by the plaintiff were manifestly unfair –the award of interest at a particular rate is a discretionary matter – notwithstanding the defendants did not attend the hearing, the Court has an inherent power to do justice in the circumstances, which includes determination of whether there is a proper factual and legal basis to determine what rate of interest should be charged on a loan - interest on the loans was instead awarded at the rate of 8% per annum 

The claim for loss of business and the claim for pain and suffering were not sufficiently pleaded with particulars, nor was sufficient evidence adduced by the plaintiff in support of those claims 

Cases Cited:
Augerea v The Bank South Pacific Ltd [2007] SC869
Finance Corporation Ltd v Yapati [2019] N8136
Steven Naki v AGC, (Pacific) Ltd (2005) N2782

Legislation and Rules
Fairness of Transactions Act 1983
Judicial Proceedings (Interest on Debts and Damages) Act 2015
National Court Rules 2012

Counsel:
Mr B Isaac, for the Plaintiff
No appearance for the Defendants

JUDGMENT

3rd October 2024

1.	WOOD J: PRELIMINARY ISSUES: The proceeding was listed before me on 22 February 2024 for the trial on the assessment of the plaintiff’s claim for unliquidated damages.

2.	At the hearing on 22 February 2024, I was satisfied that there are a number of affidavits of service on the Court file, which demonstrate that several court Orders were served at the first defendant’s residence, however, it is apparent that he and the other defendants chose not to comply with those Orders, including to file any affidavits in support of any defence by them in the proceeding.  I am also satisfied by the affidavit of service of Constable Samson Ipara that was filed on 21 February 2024 that the defendants were informed that the trial on the assessment of damages was scheduled for hearing at 9.30 a.m. on 22 February 2024, however, they chose not to attend.  The documents on the Court file show that they have not appeared in the proceeding and they have not filed any documents in defence of the proceeding.  For these reasons, I granted leave to the plaintiff to proceed with the trial that morning.

Background

3.	The background to the proceeding is that the plaintiff commenced the proceeding by filing a Writ of Summons and Statement of Claim on 9 April 2019 (the Claim), in which he claims that pursuant to four different loan agreements, he loaned five amounts of money to the defendants between  26 April 2013 to 12 July 2013, namely the amounts of K20,000, K50,200, K50,500, K101,000 and 121,200.  The plaintiff claims the total amount loaned to the defendants was K342,900. 

4.	In the Prayer for Relief in the Claim, the plaintiff seeks the following relief, namely:

1.	Special Damages in the liquidated amount of K342,700.00 plus 100% interest as agreed to between the parties at the sanctioning of the agreements in the amount of K8,780,288.00 at the time of filing of this Writ of Summons and accruing:
2.	General Damages for loss of business;
3.	General Damages for pain and suffering;
4.	Interest at eight percent (8%) per annum pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act;
5.	Costs of the proceedings; and
6.	Such other or further Orders the Court deems proper.

5.	On 5 May 2022, Acting Justice Linge ordered summary judgement in favour of the plaintiff against the defendants in the amount of K342,900.  His Honour also ordered that costs of that application shall be borne by the defendants and the balance of the unliquidated claim be set down for an assessment at a later date.

The plaintiff’s evidence

6.	At the hearing on 22 February 2024, the plaintiff relied on two affidavits, namely:

a)	the affidavit of Mose Kopyoto sworn and filed on 21 August 2020; and
b)	the affidavit of Mose Kopyoto sworn and filed on 12 April 2022.

7.	While there is some repetition in the plaintiff’s affidavit filed on 12 April 2022 in relation to the affidavit filed on 21 August 2020, including the documents annexed to both affidavits, I am satisfied from the plaintiff’s evidence that he and the defendants entered into five loan agreements on four different dates, which I summarise below:

a)	by a written agreement dated 26 April 2013 (the Agreement dated 26 April 2013), it was agreed that the plaintiff had loaned the defendants the amount of K20,000, which amount was given to the defendants on or about 8 April 2013.  In the Agreement dated 26 April 2013, it was also agreed that the plaintiff would loan the defendants the amount of K50,200.  It was also agreed that the defendants would repay the amount of K70,200 (ie K20,000 and K50,200) before 13 May 2013, failing which the defendants would pay the plaintiff the amount of K140,200 for those two loans, plus interest at the rate of 8% per week;

b)	by a written agreement dated 10 May 2013, it was agreed that the plaintiff would loan the defendants the amount of K50,500.  It was also agreed that the defendants would repay the amount of K50,500 by 27 May 2013, failing which the defendants would pay the plaintiff the amount of K100,100 for that loan, plus interest at the rate of 8% per week;

c)	by a written agreement dated 3 June 2013, it was agreed that the plaintiff would loan the defendants the amount of K101,000.  It was also agreed that the defendants would repay the amount of K101,000 before 17 June 2013, failing which the defendants would pay the plaintiff the amount of K202,000 for that loan, plus interest at the rate of 8% per week; and

d)	by a written agreement dated 12 July 2013, it was agreed that the plaintiff would loan the defendants the amount of K121,200.  It was also agreed that the defendants would repay the amount of K121,200 before 2 August 2013, failing which the defendants would pay the plaintiff the amount of K242,400, plus interest at the rate of 8% per week. 

8.	Further to the above mentioned issues, the below table is extracted from paragraph 9 of the Claim.  It should be noted that there is one minor typographical error in the table, which I raised with the plaintiff’s lawyer at the trial, in which the plaintiff’s lawyer confirmed that the total amount loaned to the defendants was K342,900 and not K342,700.   

      TABULATION OF LOANS PLUS INTEREST

	    A	    B  	      C	      D	     E	        F	      G	      H	       I	
NO	Loan Amount
(KINA)	Loan
Date	Interest	Due Date of Repayment	Payment with 100% Interest	Default Interest at 8% Weekly (8% x A)	Weekly Default from (Dates)	Amount of Interest on Default (F x G)	Payment Default (amount of Interest on Default + Payment with 100% Interest (H + E)	
1	
70, 200.00 (K20,000 & K50,200)	
26,4.13	
 100%	
  13.5.13	
140,400.00	
8% of 70,000.00 = 5,600.00	
(13.5.13 – 31.3.19) = 304 wks	
1,702,400.00	
1,842,800.00	
2	 
50,500.00
	
10.5.13	
 100%	
27.5.13	
101,000.00

8% of 50,500.00 =4, 040.00	
(27.5.13 – 31.3.19)
306 wks	
1,236,240.00	
1,337,240.00	
3	

101,000.00	   

03.6.13	
 
100%	

27.6.13	

202,000.00	
8% of 101,000.00
= 8,080.00	
(27.6.13 – 31.3.19
=299 wks	 
2,415,920.00	
2,516,920.00	
4	

121,200.00	

12.7.13	

100%	

02.8.13	

242,400.00	
8% of 121,200.00 =9,696.00	
(02.8.13 – 31.3.19)
=293 wks	

2,840,928.00	

3,083,328.00	
T
O
T
A
L	

342,700.00				

685,800.00	

27,416.00		

195,488.00	

8.780,288.00	

                                                                                       GRAND TOTAL 8,780,288.00         

9.	I am satisfied from the evidence that the plaintiff and the defendants did indeed enter into the above mentioned agreements and that the plaintiff did loan the defendants the above mentioned amounts, which are referred to in paragraph 7.  This is also reinforced by the fact that Acting Justice Linge previously ordered summary judgement in favour of the plaintiff against the defendants in the amount of K342,900.

Assessment of damages

10.	 The effect of the above mentioned agreements was that it was agreed the defendants would pay back the loans, plus interest at the rate of 100%.  In other words, the defendants would pay back double the amount they borrowed, which I shall refer to as the ‘Payment with 100% interest’.  If the defendants failed to pay the Payment with 100% interest, it was also agreed that they would pay interest at the rate of 8% per week on the Payment with 100% interest.

11.	 As at the date of the filing of the Claim on 9 April 2019, it can be seen from the above table that the plaintiff claimed the value of the loans, plus interest in the amount of K8,780,000.  At the trial before me, the plaintiff relied on those same calculations, whereby the plaintiff claimed principal and interest on the loans in the total amount of K27,563,895.

What amount of interest should be awarded to the plaintiff?

12.	 The question for determination on this issue is whether the Court should award the plaintiff interest on the loans on the basis of the terms he agreed with the defendants or at some other rate.  This should also be considered in the context that the plaintiff loaned the defendants the amount of K342,900 from April to July 2013.  As at 22 February 2024, he now seeks the amount of K27,563,895.

13.	 Notwithstanding that judgment has been entered, and noting that the defendants have elected not to appear at the assessment of damages, it is essential that the Court consider whether there is a factual and legal basis that warrants the amount of interest being sought by the plaintiff in this matter.   In this regard, I note that section 4 of the Judicial Proceedings (Interest on Debts and Damages) Act 2015, (the Act) provides as follows:

(1) Subject to Section 5, in proceedings in a court for the recovery of a debt or damages, the court may order a rate as it thinks proper to be applied to the sum for which judgment is given interest, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

14.	 In other words, the Act confers a discretion upon the National Court to award a rate of interest which it ‘thinks proper’.  

15.	 It should also be noted that Order 12 Rule 6(1) of the National Court Rules 2012 provides as follows:

‘(1)Where the court to directs the entry of judgment for the payment of money and makes an order for the payment of interest under the Judicial Proceedings (Interest on Debts and Damages) Act 1962, interest shall, unless the order otherwise provides, be payable on so much only of the money as is from time to time unpaid. 

(2) The rate of interest for the purposes of Sub-rule one is 8% yearly.’

16.	 Section 5 of the Fairness of Transactions Act 1983 provides as follows:

‘REVIEW OF TRANSACTIONS, GROUNDS, ETC.

(1) A transaction to which this Act applies may be reviewed by a court on the application of any party, if the Court is satisfied that the transaction was not genuinely mutual or was manifestly unfair to a party.

(2) Without limiting the generality of Subsection (1), unless the Court is satisfied that the transaction was entered into on an equal footing in all material respects, a transaction shall be deemed not to be genuinely mutual or manifestly unfair if a party to the transaction complaining unfairness shows–

(a) that he did not understand the transaction and no genuine effort was made to explain its terms to him prior to entering into the transaction; or

(b) that the other party was in such a predominant position (whether economically, socially, personally or otherwise), that an ordinary person with the background of the complainant was not likely to exercise a true freedom of choice in relation to the transaction; or

(c) that the other party had or should have had at the time of entering into the transaction or immediately thereafter information affecting the fairness of the transaction which was not disclosed to the complainant; or
(d) that he was mistaken in or had miscalculated the likely consequences of the transaction and the mistake or miscalculation was to such an extent adverse to his interests that he could not reasonably be held responsible for such consequences.’

17.	 In the plaintiff’s written submissions, he relied in part on the decision in Finance Corporation Ltd v Yapati [2019] N816 and cited the following extract, ‘In contract law where there is a breach of contract, damages would ordinarily flow from the breach.’

18.	 The plaintiff also relied on the decision in Steven Naki v AGC (Pacific) Ltd (2005) N2782 and cited the following extract, ‘Where it is evident that, parties entered into a written agreement which consists of a chattel mortgage, it is a legally binding and enforceable contract. Hence parties are thus bound by the terms of the contract.’

19.	 In Finance Corporation Ltd v Yapati (supra) there was no mention by the Court of any rates of interest, and in any event, the trial Judge stated, in part,
‘… there will be no award of statutory interest under the Judicial Proceedings (Interests on Debts and Damages) Act 2015 because the plaintiff does not seek it in the originating summons or in submissions.’  

20.	In the Steven Naki decision (supra), the circumstances in that case did not require the Court to consider the issue of what rates of interest were applicable on a loan.  This is reinforced by the fact that one of the orders made by the Court in that case was that, ‘The defendant is liable to the plaintiff for damages, which will be assessed by the Court after a hearing on that issue are very different to the facts in this case.’ 

21.	 In the circumstances, I consider that the plaintiff’s reliance on the above two cases is misguided and also that the facts in those two cases are very different to the facts in the proceeding before me.

22.	 In the plaintiff’s submissions, he also relied on the decision in Augerea v The Bank South Pacific Ltd [2007] SC869, where the Supreme Court stated at paragraph 25 as follows:

‘24. Further we do not consider that the Bank and the Augerea’s were in an equal bargaining position at the time of signing the initial loan agreement and the subsequent variations thereto up to even the date of the summary judgment against them. There was a serious imbalance between the parties. The Bank had its legal and experience loan or lending team working for it and advancing its cause whilst the Augereas were mere employees with no independent legal advice. There is no evidence of the Bank requiring and in fact ensuring that the Augereas were legally represented or did have legal advice on the terms of the loan before accepting the loan from the Bank. Even if they had legal advice, that would not have made any difference because reality of the situation was that the Augerea’s were in a no win position because the banks usually set the interest rates and terms of the loan and are usually not flexible. A customer would therefore have no choice but to accept such terms. If that was not the case, the burden was on the Bank to provide evidence of a fairly negotiated loan and mortgage, but it did not provide any such evidence.

25. Fairness and equality in all negotiations leading to any agreement has now become a concern of Parliament and it has enacted the Fairness of Transactions Act 1993. That Act has been considered with some detail in one case and was considered and applied in another case. The first case to do that was in the case of Negiso Investments Limited v. PNGBC Limited and the second was in the case of Dr. Florian Gubon Trading as Gubon Lawyers v. Pacific Mobile Communication Linited. The Act allows for a review of agreements or contracts that are considered unfair. As was observed in the second case, the Act did not introduce something that was new. It merely reinstated and reaffirmed the position at common law which has already been adopted and applied by the courts in our jurisdictions as in the case of Kora Gene v. Motor Vehicles Insurance (PNG) Trust. Appling those principles the Courts have already struck down agreements that were considered unfair because of inequality in the bargaining powers of the parties.’

23.	 One of the issues which arises in the Augerea decision (supra) is that the Supreme Court held that the burden was on the Bank to provide evidence of a fairly negotiated loan and mortgage, but it did not provide any such evidence.  Furthermore, given the high rate of interest, which the plaintiff was attempting to charge, I consider it only reasonable that in order to demonstrate that the terms of the loans were fair, that the plaintiff in this case should have provided evidence to demonstrate that the defendants had the opportunity to seek independent legal advice prior to agreements.  The plaintiff did not do so in this proceeding.

24.	 Based on that reasoning in Augerea (supra), I consider the same requirement arises in this case that the plaintiff would provide all relevant evidence that the loans were fairly negotiated, especially in circumstances where such a high rate of interest was charged by the plaintiff.

25.	 While I note that section 5 of Fairness of Transactions Act 1983 provides that a transaction to which that Act applies may be reviewed by a court on the application of any party, and while also noting that section 11 of that Act provides three and six year limitation periods in certain circumstances to review certain transactions under that Act, the overriding consideration is that section 155(4) of the Constitution confers an inherent power upon the National Court to make, in such circumstances as seem proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case.

26.	 So, notwithstanding that the defendants did not appear at the trial of the assessment of damages (whereby there was no application made by the defendants under section 5 of the Fairness of Transactions Act 1983, it is essential that I consider whether there is a proper factual and legal basis to award the rate of interest being sought by the plaintiff in this case.  In this regard, the plaintiff’s evidence shows that the full amount of the above mentioned loans were repayable in full, within two to three weeks of the money being loaned, plus interest being charged on the principal amount at the rate of 100%.  If the defendants failed to pay those loans by the due dates, then on the plaintiff’s evidence, the defendants were required to pay the ‘Payment with 100% interest’, plus default interest at the rate of 8% weekly.

27.	 I am satisfied that had the defendants received independent legal advice in this matter, they would have realised that unless they could satisfy the ‘Payment with 100% interest’, then they had no realistic prospect of repaying any of the loans.  For the reasons stated above, I consider the interest rates which the plaintiff sought to charge on the above mentioned loans was manifestly unfair.  Therefore, I consider there is no lawful basis for the plaintiff to charge those rates of interest, whereby those terms of the agreements are set aside.

28.	 While I note that numerous National Court decisions have awarded interest at various rates, including at the rates of 2%, 4 % and 8% per annum, it is important to note that each case must be decided on its own set of facts and legal issues.  In the circumstances, I consider it appropriate and fair that interest on the above loans be awarded at the rate of 8% per annum from the date that those loans were repayable.  

29.	For the avoidance of doubt, interest at the rate of 8% per annum is payable on the amount of K342,900 on the terms referred to in the below Orders, noting that the National Court in this proceeding ordered summary judgment against the defendants on 5 May 2022.  Also for the purpose of this judgment, it should be noted that the amount of K342,900 is made up of those loan amounts, which are referred to in paragraph 7 above.

Claim for loss of business

30.	 I note the plaintiff alleges he suffered lost business opportunities in paragraph 20 (ii) of the Claim and he makes a general claim in the Prayer for Relief in the Claim for loss of business, however, he did not plead any particulars or other facts in support of that claim.  Nor did he provide any evidence on that issue at the trial before me on the assessment of the plaintiff’s claim for unliquidated damages.  In this regard, the claim for damages for loss of business is refused.  

Claim for pain and suffering

31.	 I note the plaintiff alleges he suffered pain and suffering in paragraph 20 (iii) of the Claim, however, I consider those details fall well short of the particulars which are required under Order 8 Rule 33 of the National Court Rules 2012.  I also note he makes a general claim in the Prayer for Relief in the Claim for pain and suffering, however, he did not provide any evidence on that issue at the trial before me on the assessment of the plaintiff’s claim for unliquidated damages.  In this regard, any claim for damages for pain and suffering are refused.

Orders

1.	In relation to the amount of K20,000, which the defendants borrowed from the plaintiff under the written agreement dated 26 April 2013, the defendants shall pay interest (individually and severally) on that amount of K20,000 at the rate of  8% per annum, commencing on 8 April 2013 and up to the date of payment of the amount of K20,000.

2.	In relation to the amount of K50,200, which the defendants borrowed from the plaintiff under the written agreement dated 26 April 2013, the defendants shall pay interest (individually and severally) on that amount of K50,200 at the rate of  8% per annum, commencing on 27 April 2013 and up to the date of payment of the amount of K50,200.

3.	In relation to the amount of K50,500, which the defendants borrowed from the plaintiff under the written agreement dated 10 May 2013, the defendants shall pay interest (individually and severally) on that amount of K50,500 at the rate of  8% per annum, commencing on 11 May 2013 and up to the date of payment of the amount of K50,500.

4.	In relation to the amount of K101,000, which the defendants borrowed from plaintiff under the written agreement dated 3 June 2013, the defendants shall pay interest (individually and severally) on that amount of K101,000 at the rate of  8% per annum, commencing on 4 June 2013 and up to the date of payment of the amount of K101,000.

5.	In relation to the amount of K121,200 which the defendants borrowed from plaintiff under the written agreement dated 12 July 2013, the defendants shall pay interest (individually and severally) on that amount of K121,200 at the rate of 8% per annum, commencing on 13 July 2013 and up to the date of payment of the amount of K121,200.

6.	The defendants shall pay the plaintiff’s costs of and incidental to the proceeding on a party/party basis, which shall be taxed, if not agreed. 

7.	Time is abridged.

Tangua Lawyers: Lawyers for the Plaintiff
No appearance for the Defendants