Steven Naki v AGC (Pacific) Ltd (2005) N2782

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 04 February 2005
• Citation: (2005) N2782
• Court: National Court
• Year: 2005
• Judgement Number: N2782

Full Title: Steven Naki v AGC (Pacific) Ltd (2005) N2782

National Court: Cannings J

Judgment Delivered: 4 February 2005

N2782

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1256 OF 1999

STEVEN NAKI

Plaintiff

V

AGC (PACIFIC) LTD

Defendant

WAIGANI : CANNINGS J

6, 9 SEPTEMBER 2004, 4 FEBRUARY 2005

Contracts – chattel mortgage agreement – plaintiff filled out application for finance – proposal to purchase truck – submitted application to defendant finance company through car dealer – conditional approval given – finance company gave plaintiff contract and other documents to sign – plaintiff signed documents – documents received by defendant – finance company failed to execute the contract form – officer of defendant gave approval for release of truck – plaintiff took possession of truck – defendant decided not to go ahead with finance – failure to communicate decision to plaintiff – plaintiff used truck – plaintiff paid loan repayments to defendant – accepted by defendant – defendant refused to provide finance – issues for determination – whether a contract was formed – elements of a contract: agreement, intention to create legal relations, consideration – whether agreement made – identification of offer and acceptance – tests to apply – whether an intention to create legal relations existed – whether the consideration element satisfied – identification of terms of contract – whether contract breached – whether the contract was voidable – whether the plaintiff had induced defendant to enter into contract by misrepresenting his financial position – whether the defendant’s officer who approved release of truck had actual authority to do so – breach of internal procedures within defendant finance company – consequences of breach of procedures – promissory estoppel – decision on liability.

Cases cited

Maip Pty Ltd v Ambra Coffee Estates Pty Ltd [1995] PNGLR 25

Rainbow Holdings Pty Ltd v Central Province Forest Industries Pty Ltd [1983] PNGLR 34

Seafreight Pty Ltd v Bishop Shipping Services Pty Ltd [1976] PNGLR 22

The State v Keboki Business Group Inc and Morobe Provinsel Gavman [1985] PNGLR 369

Thiess Watkins (PNG) Ltd and Kumagai Gumi Company Ltd v Papua New Guinea Electricity Commission [1988-89] PNGLR 454

B Takin for the plaintiff

A Mana for the defendant

CANNINGS J:

INTRODUCTION

This is a case about an alleged breach of contract, a chattel mortgage agreement. The plaintiff, a businessman, says that he entered into the agreement with the defendant, a finance company. Finance was to be provided by the defendant for the purchase of a truck. The plaintiff says that after a few months, the finance company broke the contract. He lost the truck and lost business. He sues for damages. This judgment addresses the question of whether the finance company is liable to pay any damages.

BACKGROUND

Parties

The parties are:

·the plaintiff, Steven Naki, a businessman based in Kimbe, West New Britain Province. He operates a public motor vehicle (PMV) business.

·the defendant, AGC (Pacific) Ltd, a finance company, with offices in Port Moresby, Lae, Mt Hagen and Kokopo.

Plaintiff’s position

The plaintiff claims that he entered into a chattel mortgage agreement with the defendant. Because of that agreement he was able to acquire a truck. He had already negotiated two lucrative transport contracts. His plan was to use the truck for those contracts. Things went well for a couple of months. He was making his monthly instalments to the defendant. Then, he says, things went bad. He was told that AGC had cancelled their deal. He had to surrender the truck. He lost a lot of money, he says. He wants to be compensated.

Defendant’s position

AGC says that they only gave conditional approval for the loan. The plaintiff did not meet the conditions. His credit check was unsatisfactory. Some monthly repayments were received from the plaintiff. But that money was returned to him. They cannot be responsible for what happened. Even if there was a contract between them and the plaintiff, he misled them by not telling them about an earlier loan with another finance company. So they were entitled to cancel the contract.

Statement of claim

On 8 November 1999 Tamusio Lawyers of Kimbe filed a writ of summons on behalf of the plaintiff. The statement of claim attached to the writ claimed that the plaintiff and the defendant entered into a chattel mortgage agreement under which the defendant would provide finance for the purchase of an Isuzsu truck. The agreement operated for several months, during which time the plaintiff was making satisfactory repayments. Then the truck was repossessed, due to the chattel mortgage agreement being unlawfully cancelled. The plaintiff claims:

·K638,352.00 as losses due to lost contracts;

·damages;

·interest; and

·costs.

Defence and reply

On 28 March 2000 Goiye Gileng, a lawyer with Westpac Bank, filed a defence. This highlighted that the agreement was conditional upon a satisfactory credit reference. The defendant denied cancelling the agreement.

On 24 May 2000 the plaintiff filed a reply.

Representation

On 27 July 2001 Tamusio Lawyers ceased to act for the plaintiff and M R Mugarenang of Morobe Provincial Government commenced acting for the plaintiff.

On 12 November 2002 M R Mugarenang ceased to act for the plaintiff and BT Gobu & Associates commenced acting for the plaintiff.

In June 2003 Allens Arthur Robinson Lawyers of Port Moresby commenced acting for the defendant.

EVIDENCE

Three witnesses gave oral evidence. Two for the plaintiff and one for the defendant. Eight pieces of documentary evidence were tendered.

PLAINTIFF’S EVIDENCE

Steven Naki

In examination in chief the plaintiff stated that he is a small businessman running a PMV business, married with four children and living in Kimbe. He adopted an affidavit he swore on 18 December 2001. In early 1998 he was awarded two separate four-year contracts by Karato Limited, a landowner company at New Britain Palm Oil Ltd (NBPOL) estate. The contracts were for transporting oil palm seedlings and for pick-up and drop-off of NBPOL employees. The total value of the contracts exceeded K600,000.00.

He entered into an agreement with the defendant to finance the purchase of an Isuzu truck from Kimbe Kar Sales. He traded in his existing bus for K20,000.00 and paid an additional K8,620.00, leaving a balance of K29,819.65, to be financed by the defendant. He signed the original of the agreement, which was given to the defendant. They never gave him a copy of the executed agreement, though he requested it on numerous occasions. On 5 February 1999 AGC authorised Kimbe Kar Sales to release the vehicle. He took delivery of the vehicle on that day. Then immediately he started working on the two contracts.

He made payments totalling K4,000.00 from March 1999 to May 1999. In early June 1999 he went to Westpac Kimbe to make his next instalment. A bank officer, Mrs Pole Crompton, did not accept the instalment. She made a phone call to AGC in Kokopo, then told him the agreement was cancelled. She handed him another agreement to sign. But he refused to sign. Mrs Crompton told him that the agreement was cancelled as the defendant had forgotten to do a credit check on him prior to the release of the vehicle. In late June 1999 Kimbe Kar Sales repossessed the vehicle. Kimbe Kar Sales informed him that the defendant had cancelled the agreement and had not paid anything to them. AGC never informed him officially of the cancellation of the deal or the reasons for it.

The plaintiff was asked in cross-examination by Mr Mana, for the defendant, whether he had signed a chattel mortgage agreement in 1999 and read and understood the document. He replied, yes, although he did not speak or read English very well, someone from AGC took the time to go through and explain the document to him. AGC had helped him negotiate the deal with Kimbe Kar Sales for the purchase of the truck. The loan was to be repaid over a two-year period with monthly instalments.

At the time that he was negotiating with AGC, he already had a PMV truck. He had purchased it with a loan from Nambawan Finance Ltd. He had paid back that loan and then made the deal with AGC. He could not recall the date on which he obtained the loan from Nambawan Finance or when he paid it back.

He signed the chattel mortgage agreement with AGC on about 29 January 1999. On 5 February 1999 he picked up the truck. He paid K4,000.00 to AGC between March and May 1999. In March, he paid K2,000.00, in two instalments. In May, he paid another K2,000.00, again in two instalments. In April, there were heavy rains. No work was available from New Britain Palm Oil. So he couldn’t make any payments in April.

The contracts that he had negotiated through New Britain Palm Oil were not in writing.

In June 1999 the Westpac Manager at Kimbe told him that his deal with AGC was cancelled. Kimbe Kar Sales told him the same thing and he took the vehicle back to Kimbe Kar Sales.

In re-examination by Mr Takin, Mr Naki clarified that he had signed the chattel mortgage agreement on...