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Tai v National Development Bank Ltd [2025] PGNC 176; N11309 (5 May 2025)

N11309

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO 408 OF 2012 (CCI)

BETWEEN
LUCAS TAI
Plaintiff

AND
NATIONAL DEVELOPMENT BANK LIMITED
First Defendant

AND
JACOB MORO, SOLOMON KIAGE & CHARLES EVI
Second Defendants

AND
TAISON ASIZO, REGISTRAR OF TITLES
Third Defendant

AND
ROMILY KILA PAT, SECRETARY FOR LANDS AND PHYSICAL PLANNING
Fourth Defendant

WAIGANI: MAKAIL J
24 JULY 2024; 5 MAY 2025

NEGLIGENCE – Exercise of power of sale – Duty of mortgagee – Alleged duty to sell property to highest bidder – Breach of duty – Proof of – Fairness of Transaction Act, 1993 – Section 5

MORTGAGE – Default by mortgagee – Repayment of loan – Exercise of power of sale by mortgagor – Whether sale of property unfair to mortgagee – Fairness of Transaction Act, 1993 – Section 5

HUMAN RIGHTS – Breach of human rights – Unjust deprivation of property – Conduct constitutes harsh and oppressive – Proof of – Constitution – Sections 41 & 53

PRACTICE & PROCEDURE – Mode of proceedings – Proceedings commenced by originating summons – Proceedings continued or progressed to trial by pleadings – Whether proceedings amount to abuse of process – National Court Rules – Order 4, rule 35

Cases cited
Lewin v Westpac Bank PNG Limited (2020) N8318
Kim Tai v Bank South Pacific (2020) SC1941
Asivo v Bank of South Pacific (2016) N6518
Papua New Guinea Banking Corporation v Amevo and Bari Investment [1998] PNGLR 240

Counsel
Lucas Tai plaintiff in person
Mr J Biar for first defendant
No appearance, for second, third & fourth defendants

JUDGMENT

1. MAKAIL J: The plaintiff took a commercial loan from the first defendant and mortgaged his property described as Section 319, Allotment 134, Volume 96, Folio 164, State lease, Gerehu Stage 6, Hohola NCD (“the property”) as security for the loan.
   
2. The plaintiff defaulted and the first defendant foreclosed on the plaintiff’s property and sold to recoup the arears.
   
3. The plaintiff filed these proceedings by an originating summons on 6 July 2012 seeking inter alia declarations and he is the rightful owner of property and sought injunctions against the defendants from selling and transferring ownership of the property.
   
4. His then lawyers from the Office of the Public Solicitor requested the Court to withdraw the matter and file a Writ of Summons because the plaintiff is alleging fraud and negligence in his evidence. The plaintiff’s lawyers were directed to file a proper application to discontinue the proceedings commenced by originating summons.
   
5. Instead of discontinuing the originating summons proceedings, the plaintiff applied to the court to amend its statement of claim. The Court granted the plaintiff’s application.
   
6. The plaintiff filed a statement of claim and subsequently filed an amended statement of claim on 22 August 2014.
   
7. The matter was dormant for more than 10 years and the office of the Public Solicitor, who represented the plaintiff for almost 10 years, closed the file and stopped representing the plaintiff.
   
8. The amended statement of claim alleges, inter alia, negligence and sought declaratory relief that the court review the sale of the mortgaged property between the first and second defendants under the Fairness of Transaction Act 1993.
   

EVIDENCE

9. The plaintiff relies on his affidavit sworn and filed on 6 July 2012.
   
10. The first defendant relies on the following affidavits mentioned in Section 35(1) Notice under the Evidence Act 1975 filed on 10 October 2016:
    
    • affidavit of Solomon Kiage sworn on 8 October 2013 and filed 9 October 2013,
    • further affidavit of Solomon Kiage sworn and filed on 19 November 2013, and
    • supplementary affidavit of Azaria Gabara sworn on 28 September 2016 and filed on 29 September 2016.
      

COMMON FACTS

11. On 21 February 2002, the plaintiff requested the first defendant to obtain a loan of K30,030.00.
    
12. In August 2002, the first defendant approved a commercial loan to the plaintiff in the sum of K23,193.17.
    
13. The plaintiff signed the loan application form dated 4 July 2002 and agreed to make repayments of K1,160.00 per month.
    
14. The plaintiff agreed to mortgage his property, register a bill of sale and assigned K3,000.00 IBD at Maybank, as security for the loan.
    
15. Since obtaining the loan, the plaintiff started going into default by not paying the full agreed repayment amount.
    
16. On or around July 2003, the plaintiff advised the first defendant that his trade store was raided by armed criminals and that K10,000.00 worth of goods were stolen. Because of this, it adversely affected his ability to repay his loan.
    
17. At the time of robbery, the plaintiff had a balance outstanding of K16,884.94. He had been making cash loan repayments below the agreed repayment amount of K1,160.00.
    
18. It was stated on the crime report that there was no money taken. Only store goods.
    
19. The first defendant’s officers visited the plaintiff’s store and agreed to vary the loan repayment from K1,160.00 per month to K650.00. Despite the variations, the plaintiff failed to repay the loan. In a letter from the plaintiff to the first defendant, he promised to repay the loan through sale of betel nut while waiting a Court decision with ANZ Bank.
    
20. The first defendant had discussions with the plaintiff regarding his loan account and his poor state of his loan account.
    
21. The first defendant then issued a letter of demand dated 1 June 2009 to the plaintiff for overdue sum of K35,087.76 with accrued interest.
    
22. There was no respond from the plaintiff. The first defendant then issued a second letter of demand on 18 June 2009 for the sum of K35,087.76.
    
23. Prior to that, in 2003, the plaintiff informed the first defendant that he will sell his house, but the first defendant did not agree because the mortgage was still with BSP Bank. The mortgage was transferred to the plaintiff on 18 May 2009 and on the same date, the first defendant registered its mortgage over the property.
    
24. The first defendant did not receive any good respond from the plaintiff. On 21 October 2009, the first defendant advertised the property by public tender and received three bids and offered the property to the highest bidder. The tender closed on 28 October 2009. The second defendant Jacob Moro was the highest bidder. On the next day 29 October 2009 in a letter, the first defendant made an offer to the second defendant Jacob Moro. He accepted it, and the property was sold to him for K20,000.00.
    
25. The plaintiff was advised of the sale in a letter dated 3 November 2009 and was given an opportunity to redeem the property. The plaintiff did not act on his right of redemption. Thus, the property was transferred to the second defendants.
    
26. The plaintiff by a letter dated 15 December 2009 wanted to settle the loan for K15,689.86 but it was below the amount owed which is K36,483.43. Further, the plaintiff was in arrears for a very long time from December 2003 to September 2009 hence cast doubt on his ability to repay the loan if refinanced.
    
27. The plaintiff also requested to restructure the loan, but the first defendant refused because of:
    

a) his inconsistency and his inability to repay loan promised,

b) the plaintiff failed to take insurance cover over his store and business,

and,

c) there were no proper cash flow records.

ISSUES

28. The issues are:
    
    • whether this proceeding should be dismissed for being abuse of process,
    • whether this proceeding is time barred under s11(1) of the Fairness of Transactions Act.
      
    • whether the first defendant was negligent in selling the property to the second defendants.
      

ABUSE OF PROCESS

29. As to the question of whether this proceeding should be dismissed for being abuse of process, the first defendant submits that the plaintiff’s lawyers failed to discontinue the originating summons before filing an amended statement of claim.
    
30. Secondly, the amended statement of claim is in accordance with Form 5 of the National Court Rules, which is the Form for Writ of Summons.
    
31. Thirdly, the plaintiff alleges negligence at paragraph 19 of the amended statement of claim while labelling the amended statement of claim as originating summons OS No. 408 of 2012 which, offends against Order 4 Rule 2 (a) (b) and (c) which states that:
    

“(1) Proceeding shall be commenced by write of summons –

1. where a claim is made by the plaintiff is based on an allegation of fraud; and
2. Whether a claim is made by the plaintiff for any relief or remedy for any tort; and

100. where a claim is made by the plaintiff for damages for breach of duty whether the duty exist by virtue of a contract or of a provision made by or under an Act or independently of any contract of any such provision), and the damages claims consist of or include damages in respect of the death of any person or in respect of personal injuries to any person in respect to damage to any property.
     

(3) Sub-rule (1) does not apply to proceedings commenced by a person who desires to apply for:

a declaration of right ; or

b. an immediate in junction; or

c. an immediate appointment of a receiver, or

d. immediate orders under Order 14 rule 10 (the preservation of property)”

32. Fourthly, the plaintiff in the same amended statement of claim crossed out the other parties namely the two second defendants, the third defendant, and the fourth defendant without making proper application to Court under order 5 rule 9 of National Cour Rules which states that:
    

“Removal of parties, where a party –

a) has been improperly or unnecessarily joined; or

b) has ceased to be a proper or necessary party, the Court, on application by any party or of its own motion, may, on terms, order that he cease to be a party and make orders for the further conduct of the proceedings.”

33. It relies on Lewin v Westpac Bank PNG Limited (2020) N8318 where an application was made by the plaintiff to the Court to remove the third defendant from the proceeding.
    
34. In the present case, the Court Order on 19 August 2014 and entered on 22 August 2014 that granted leave for amended statement of claim did not make specific orders for removal of parties because there was no formal application made to the Court.
    
35. The sixth reason is, there is a great disparity between the relief sought in the originating summons and the relief in the amended statement of claim.
    
36. The seventh reason is the originating summons names all the parties and sought relief against all of them. The original originating summons names the Registrar of Titles as the Third Defendant, and the Secretary for Lands and Physical Planning as the fourth defendant. Both are agents/officers of the State were:
    
    1. the State was not named as a party
    2. The plaintiff did not issue section 5 Notice under the Claims by and Against the State Act 1996
    3. there are no pleadings against those defendants.
       
37. For the above reasons, it is submitted that the entire proceeding be dismissed for being an abuse of Court process.
38. The short answer to the seven grounds on the proceeding being an abuse of proceeding is that they are overcome by the application of Order 4, rule 35 of the NCR. This is because the procedure established under order 4, rule 35 (supra) allows a proceeding commenced by originating summons to continue or progress to trial by pleadings where a statement of claim and a defence are filed in an appropriate case as ordered by the Court on its own initiative or an application by a plaintiff.
    
39. Secondly, by operation of Order 4, rule 35 (supra), it is irrelevant whether the plaintiff is required to discontinue the originating summons and file a writ of summons, and retained the defendants in the proceedings following the filing of an amended statement of claim and it is not necessary to seek leave from the Court to remove them from the proceeding under Order 5, rule 9 (supra).
    
40. Thirdly, by operation of Order 4, rule 35 (supra), it is open to the plaintiff to plead and rely on negligence in the conduct and/or actions of the first defendant to sell the property and seek additional relief in the statement of claim.
    
41. For the foregoing reasons, the first defendant has failed to establish that the proceeding is an abuse of process.
    

FAIRNESS OF TRANSACTION

42. The first defendant relies on and made detailed submissions in support of the defence of time-barred under Section 11(1) of the Fairness of Transaction Acts 1993 (“FoT Act”) and lack of pleadings in relation to the loan agreement and its actions being unfair and breached the FoT Act. However, it is not necessary to decide them because the plaintiff does not contest the first defendant’s defence that he defaulted in his loan repayment and owed money to the first defendant. As to the sum owing, the plaintiff does not contest it.
    
43. On the other hand, the plaintiff provided an explanation for his default which was an ethnic clash by the Goilalas in Gerehu, Port Moresby which resulted in his store being destroyed and store goods ransacked and a total loan balance of K17,139,54 remained outstanding on 16 August 2005.
    
44. However, since then he has not been able to recover and consistently repaid the loan balance. Even the first defendant reached out to him and renegotiated the repayment sum by agreeing to allow him to repay a reduced sum from K1,160.00 per month to K650.00 per month, but still, it did not make any significant progress in reducing the loan balance. The plaintiff continued to default, and it reached a point where the loan balance inclusive of accrued interest stood at K36,483.43 and this sum was put to him in a notice of demand for payment on 18 June 2009.
    
45. Where the plaintiff alleges breach of Section 5 of the FoT Act, he bears the onus to prove the breaches. Section 5 states:
    

Review of Transactions, grounds, etc

1) A transaction to which this act applied 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 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 portion (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 affection 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 extend adverse to his interest that he could not reasonable be held responsible for such consequences.

46. Given this, I find that by operation of Section 5 (supra) it has not been established by the plaintiff that the first defendant was in dominant position (economically, socially, personally, or otherwise), that prevented the plaintiff from exercising his true freedom of choice regarding the transaction. The plaintiff exercising, his true freedom of choice regarding the transaction applied for the loan. He was not disadvantaged in any way. While the plaintiff asserts that he was told that the office file for the loan was missing and he was unable to verify the accuracy of the loan balance, it is not sufficient to establish that the first defendant withheld any information prior to the plaintiff signing the loan contract and obtaining the loan.
    
47. Moreover, the plaintiff has failed to establish that he was mistaken or miscalculated the likely consequence of the transaction, and this mistake or miscalculation was significantly adverse of his interests, and he could not reasonably be held responsible for the consequences. .
    
48. Finally, I uphold the first defendant’s submission that the plaintiff is a businessman. From the way he carried himself, managed his business, corresponded with the bank, and pursued this case, it is evident that he was not in any disadvantaged position when he signed the loan contract. He was fully aware of his obligations. Therefore, it cannot be said that the contract he entered into with the first defendant was not genuinely mutual. The plaintiff has not shown that the contract was manifestly unfair to him, or he was in a disadvantaged position.
    
49. And the plaintiff’s claim that the sale of his property was in breach of a caveat and at great speed is without merit because a caveat is a non-litigation remedy available for a temporary period to preserve the status quo of an interest in property and will lapse by a certain time which the plaintiff has not explained and that it may appear suspicious but not uncommon in mortgage sale for a mortgagor to expedite a sale of a mortgage property to recover its outstanding loan.
    
50. It follows that the action under the FoT Act is dismissed.
    

NEGLIGENCE

51. The next issue for determination is whether the first defendant was negligent in selling the property to the second defendants. The allegations of negligence are set out at paragraphs 16-19 of the amended statement of claim. The first defendant submits that the claim of negligence should fail because the duty of the mortgagee exercising a power of sale is governed by the equitable principles of good faith rather than the principles of negligence law. In the Supreme Court case of Kim Tai v. Bank South Pacific (2020) SC1941, it was held amongst others that “The duty of mortgage exercising a power of sale arises under equitable principles of good faith, not the law of negligence. No breach of duty had been proved in relation to the exercise of power of sale in respect of the Gordons property.”

52. I uphold the first defendant’s submission that the account outlined at [43] to [49] supra clearly demonstrates a breach of the loan agreement by the plaintiff and the first defendant’s last resort was to exercise its power of sale under the mortgage to sell the plaintiff’s property which he gave as security for the loan: see Kim Tai case (supra). Because of this, I reject the plaintiff’s strong submission that the first defendant was negligent when it allegedly undervalued and sold the property which resulted in him missing out on the surplus of the proceeds of sale had it been sold at a higher price.

53. For the foregoing reasons, the action in negligence is dismissed forthwith.

UNJUST DEPRIVATION OF PROPERTY

54. Finally, the plaintiff alleges at paragraphs 24 and 25 of the amended statement of claim that the first defendant unjustly deprived him of his mortgaged property by not advising him of the sale and not affording him the opportunity to redeem it. The first defendant submits that the plaintiff is misleading the Court because the first defendant by a letter to the plaintiff dated 3^rd November 2009 was advised of the sale and he was given the opportunity to redeem his property.

55. It refers to the case of Asivo v Bank of South Pacific (2016) N6518 and submitted that it is a case like the present case where the plaintiffs sued BSP Bank regarding the restricting of their loan. The case went to mediation, after which the plaintiffs sued based on the mediated agreement. His Honour determined that, concerning the claim a right under Section 53 of the Constitution, the plaintiffs failed to demonstrate how the bank had compulsorily taken possession of their property in violation of Section 53 (supra). The Court held that:

“Under Section 53 of the Constitution every person has a general right of protection against compulsory taking of their property. Nothing that the defendant did amount to compulsory taking of the plaintiff’s property, so there was no breach of the plaintiff’s human rights in the manner alleged.”

56. I uphold the first defendant’s submissions outlined above. In addition, I accept its further submissions that its right to repossess the plaintiff’s mortgaged property is legally supported by the contract between the parties and is not unjust under Sections 53 of the Constitution nor does it’s conduct as described above, harsh and oppressive under Section 41 of the Constitution.

57. Moreover, I am not satisfied that the plaintiff has demonstrated a violation of any rights under Section 53 of the Constitution by the first defendant, which exercised its lawful right to reclaim the property due to the plaintiff’s failure to meet loan obligations. The plaintiff was given a chance to redeem his property, but he failed to do so. In the case of Papua New Guinea Banking Corporation v Amevo and Bari Investment [1998] PNLR 240 the Court held that:

“the mortgagor’s impecuniosity does not preclude the mortgagee bank from exercising its right under the terms of the mortgage and the statutory rights conferred by the Lands Registration Act Ch. No. 191.”

58. Accordingly, the plaintiffs’ reliance on breach of human rights under Sections 41 and 53 of the Constitution is dismissed.

CONCLUSION

59. None of the causes of actions relied upon by the plaintiff has been proved. It follows that the proceeding is dismissed in its entirety with costs.

ORDER

60. The orders I make are as follows:

1. The proceeding is dismissed in its entirety.

2. The plaintiff shall pay the first defendant’s costs of the proceedings, to be taxed, if not agreed.
   

3. Time shall be abridged.
________________________________________________________________
Lawyers for first defendant: Namani & Associates