Rage Augerea & Maureen Augerea v The Bank South Pacific Limited (2007) SC869

• Jurisdiction: Papua New Guinea
• Court: Supreme Court
• Date: 13 September 2007
• Citation: (2007) SC869
• Docket Number: SCA 70 OF 2005
• Year: 2007

Full Title: SCA 70 OF 2005; Rage Augerea & Maureen Augerea v The Bank South Pacific Limited (2007) SC869

Supreme Court: Salika, Jalina and Kandakasi, JJ

Judgment Delivered: 13 September 2007

BANKS AND CUSTOMERS—Duty of bank—Banks have duty to be transparent and fair with their clients, keep accurate and correct records of their clients accounts and render accurate monthly statements—Where errors appear on the accounts, banks under duty to satisfactorily explain and correct them with no penalty to client unless it is the clients doing—When negotiating and entering into an agreement with a client banks under a duty to ensure clients get independent legal advice.

JUDGEMENTS AND ORDERS—Entry of Summary Judgment—Discretionary matter for the Court—Court must exercise discretion with care and caution—Discretion can be exercised in the clearest of cases where there is no serious contest and issue or conflict on the facts or the law—Where one of the parties is not legally represented court under duty to carefully consider all issues raised—Inappropriate to sign summary judgment where there is serious conflict in the facts and the law.

MORTGAGES—Nature of mortgages—Mortgages are mortgages only—Mortgagor has right of redemption until contract of sale signed with a third party—Right of redemption can not be clogged or fettered—Higher interests rates and charges and unreasonable or unexplained action on mortgagees leading to exercise of mortgagee right of foreclosure could amount unjust enrichment and a clog or fetter on mortgagor’s right of redemption—Provisions allowing for higher interest rates and charges amount to a clog or fetter on mortgagors right of redemption and are unenforceable—Inequality in bargain power leading to a mortgage may render mortgage unenforceable.

Cases Cited

Papua New Guinean Cases

Provincial Government of North Solomons v. Pacific Architecture Pty. Limited [1992] PNGLR 145; PNG Forest Products and Inchcape Berhad v The State and Jack Genia, Minister for Forests [1992] PNGLR 85; Bruce Tsang -v- Credit Corporation (PNG) Ltd [1993] PNGLR 112; Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285; Kora Gene v. Motor Vehicles Insurance (PNG) Trust [1995] PNGLR 344; Gabriel Apio Irafawe v Yauwe Riyong (1999) N1915; Ronny Wabia v BP Exploration Operating Co Ltd [1998] PNGLR 8; Ning’s Trading Pty Ltd v. ANZ Banking Group (PNG) Ltd (1998) N1700; Eliakim Laki v Maurice Alaluku, Secretary Department of Lands [2000] PNGLR 392; Patterson v NCDC (2001) N2145; Golobadana No 35 Ltd v. Bank of South Pacific Limited (formerly Papua New Guinea Banking Corporation) (2002) N2309; Negiso Investments Limited v. PNGBC Limited (2003) N2439; Pius Nui v Senior Sergeant Mas Tanda (2004) N2765; Kerry Lerro trading as Hulu Hara Investments Ltd v. Philip Stagg, Valentine Kambori & The State (2006) N3050; Dr. Florian Gubon Trading as Gubon Lawyers v. Pacific Mobile Communication Limited (2006) N3104.

Overseas Cases

Crickmore v. Freestone [1870] 40 L.J. Ch. 137; Read v. Brown (1888) 22 QBD 128; Attorney General of the Duchy of Lancaster v. London and North Western Railway Co. [1892] 3 Ch 274; Fitzgerald’s Trustee v. Mellersh [1892] 1 Ch. 385; Booth v. The Salvation Army Building Association (Limited) (1897) 14 T.L.R. 3; Hubbuck & Sons Ltd v. Wilkinson Heywood & Clark Ltd [1899] 1 QB 86; [1895-9] AII ER Rep 244; Nokes & Core Ltd v. Rice [1902] A.C. 24; Seton v. Played (1902) 7 verse Jun. 265, at 273; E.R. 108; Reeve v. Lesly [1902] A.C. 461; Dyson v. Attorney General [1911] I KB 410; Fairclough v. Swan Brewery Co. Ltd [1912] A.C. 565; Kreglinger v. New Patagonia Meat & Cold Storage Stores Co. Ltd. [1914] A.C. 25; Nagle v. Feilden [1966] I AII ER 689 at 697 [1966] 2QB 633; Wanner v. Caruana [1974] 2 N.S.W.L.R. 301; Re. Supreme Court Registrar to Alexander Dawson Inc. [1976] 1 N.Z.L.R. 612; Allen v. Gulf Oil Refining Ltd [1981] 1 All ER 353.

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1. BY THE COURT: On Friday 31 August, 2007 we announced the decision of the Court, upholding the appeal by Rage and Maureen Augerea and consequential orders and undertook to publish our reasons in full, which we now do.

2. Rage and Maureen Augerea are appealing against the National Court entering summary judgment against them in favour of Bank South Pacific Limited out of a mortgagor and mortgagee relationship. The Augereas’ say they seriously contested the basis for the judgment in terms of their alleged default, amount of default and total outstanding on an initial housing loan of K25,000.00, which suddenly increased to K128,380.99 and the alleged issuance of more than one default notice. They also say that, they took serious steps toward repaying the total owing on the loan so as to redeem their property but the bank ignored them and proceeded with its mortgagee powers. They further argue that the learned trial judge did not address these issues properly and erred in entering summary judgment against them when there was serious factual and legal conflict that could only be properly resolved by a trial. The bank argues to the contrary.

Relevant Issues

3. It is clear to us that the main issue for us to determine is whether the National Court was correct in signing summary judgment when there was a serious contest on the facts and the law. The application and in particular the pleadings and the arguments put before the National court gave rise to a number of issues which we consider are subsidiary to the main issue. Some of the issues we can identify are:

(1) When did the Augerea’s default and if so by how much?

(2) How much was correctly and reasonably due and owing to the Bank?

(3) Did the Bank serve any default notice on the Augereas and if so, how many and when?

(4) Did the bank give the Augereas a fair and reasonable opportunity to redeem their property? and

(5) Were the rates at which interests and charges were calculated and added onto the Augereas’ account fair and reasonable and not in effect a penalty and a clog or fetter on the Augereas’ right of redemption of their property as mortgagors?

4. The subsidiary issues can be covered in our consideration and determination of the main issue. These...