Anego Company Limited Trading as Klinki Lodge v Finance Corporation Limited and Moses Venapoe and Henry Wasa, Registrar of Titles (2013) N5391

• Jurisdiction: Papua New Guinea
• Judge: Yagi J
• Judgment Date: 10 October 2013
• Court: National Court
• Judgement Number: N5391

Full Title: Anego Company Limited Trading as Klinki Lodge v Finance Corporation Limited and Moses Venapoe and Henry Wasa, Registrar of Titles (2013) N5391

National Court: Yagi J

Judgment Delivered: 10 October 2013

N5391

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS. NO. 361 OF 2013

BETWEEN:

ANEGO COMPANY LIMITED TRADING AS

KLINKI LODGE

Plaintiff

AND:

FINANCE CORPORATION LIMITED

First Defendant

AND:

MOSES VENAPOE

Second Defendant

AND:

HENRY WASA, REGISTRAR OF TITLES

Third Defendant

Goroka: Yagi J

2013: 23rd September & 10th October

PROPERTY LAW – Sale of Property - Mortgagee Sale – Exercise of Power of Sale - Land Registration Act, ss. 67 and 68 – Requirement to give notice of demand – Whether the notice under s. 67(1) has lapsed or expired – Duty of a Mortgagee – Principles considered and applied - duty to take reasonable precaution – duty to act in good faith – onus on the mortgagor to prove breach of duty.

Cases Cited:

Papua New Guinea Cases

Esther Torato v PNG Home Finance Limited & 3 Others (2012) N4583

Papua New Guinea Banking Corporation v Pala Aruai and Freeway Enterprise Limited (2002) N2234

Bank of Papua New Guinea v Derrick Niso (2004) N2664

Australia New Zealand Banking (PNG) Limited v Kila Wari (1990) N801

Overseas Cases

Cuckmere Brick Company Limited v Mutual Finance Limited [1971] 2 All ER 633

Clyde Properties Ltd v Tasker [1970] NZLR 754

Lord Waring v London and Manchester Assurance Co Ltd [1934] All E.R. Rep 642

Property and Bloodstock Ltd v Emerton [1967] 3 All ER 321.

Tse Kwang Lam v Wang Chit Sen [1983] 3 All ER 54.

China and South Sea Bank Ltd v Tan Soon Gin (alias George Tan) [1989 3 All ER 839.

Downsview Nominees Ltd v First City Corporation Ltd [1993] 3 All ER 626.

Tse Kwong Lam v Wong Chit Sen (1983) 3 All ER 54.

Counsel:

K. Rema, for the Plaintiff

M. Goodwin, for the First Defendant

K. Pilisa, for the Second Defendant

No appearance by or for the Third Defendant

DECISION

10th October, 2013

1. YAGI J: The plaintiff company is seeking in this action, amongst others, principally a declaration to nullify the sale of its property including its business undertaking between the first and second defendants under a mortgagee sale. In essence this is a case of a registered lessee of a State Lease challenging the mortgagee's power or right to sell his property pursuant to a registered mortgage.

2. An interim injunction was issued on 02nd August 2013 which effectively maintained the status quo pending the determination of the current proceeding. There is also a related proceeding in OS. No. 344 of 2013 instituted by the second defendant against Mr. Albert Wamiri and the plaintiff company for possession of the property on the basis that it has now acquired legal rights and interest over the subject property pursuant to a contract for sale he entered into with the first defendant. The parties have agreed to park away that proceeding for the time being until the determination of this proceeding.

Preliminary Issue – objection to amended originating summons

3. A preliminary objection was raised by the first defendant at the beginning of the trial as to the regularity of the amended originating summons filed by the plaintiff company.

4. The first defendant submits that the amended summons was filed without leave and therefore should be struck out. The plaintiff company did not make any submission in response to the objection it appears preferring to leave the issue at the discretion of the Court.

5. The amended summons was filed on 06th September 2013. This was done after the proceeding had progressed to an advanced stage where the court had made orders, such as filing of affidavits for use at trial by the parties and fixing a trial date. As a matter of fact on 26th July 2013 the trial date was fixed by the Court. The trial was fixed on 23rd September 2013. The amended originating summons was filed on 06th September 2013, approximately 2½ weeks prior to trial.

6. Order 8 Rule 50 of the National Court Rules grants a general power in respect to amendments. The rule states:

"Division 4.—Amendment.

50. General. (20/1)

(1) The Court may, at any stage of any proceedings, on application by any party or of its own motion, order, on terms that any document in the proceedings be amended, or that any party have leave to amend any document in the proceedings, in either case in such manner as the Court thinks fit.

(2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect or error in any proceedings, or of avoiding multiplicity of proceedings.

(3) Where there has been a mistake in the name of a party, Sub-rule (1) applies to the person intended to be made a party as if he were a party.

(4) This Rule does not apply to the amendment of a minute of a judgement or order."

7. It is clear from this rule that the Court has power to amend documents at any stage of the proceedings. Any amendments must serve the purpose in ensuring the real issues or questions are determined or to remove any defect or error in the proceedings or to avoid multiplicity in proceedings. See The Papua Club Inc v Nusaum Holdings Limited & Ors (2002) N2273.

8. However, a party is not at liberty to amend a document as of right especially where proceedings have been served and substantial steps have been taken by the parties. The rule also requires that an application be filed and supported by appropriate affidavit setting out the grounds. Amending an originating process after it being served and especially where steps have being already taken in the proceeding affects the rights of other parties and in many instances may cause prejudice or injustice to the party. A party must therefore apply for leave from the Court. An amendment without leave constitute abuse of process. For the reason that no leave to amend was granted by the Court the amended originating summons was filed irregularly and is therefore struck out.

Primary Facts

9. The primary facts are not in dispute and the following facts give rise to the issues for determination.

10. At all relevant times the plaintiff company was the registered proprietor or lessee of a leasehold land situated within the City of Lae which is described as Section 80 Allotment 7 Lae Morobe Province contained in State Lease Volume 41 Folio 111 (the property).

11. The plaintiff company operates a hospitality business on the property. It contains a 2 level Guest House with 10 guest rooms on the ground level and 13 guest rooms on the top level. Other facilities include the office/reception area, a kitchen, a conference room and other building structures including staff accommodation. The business is known as the Klinki Lodge.

12. The first defendant is a finance company whose principal business, amongst others, includes lending money to customers. On 26th January 2012 the first defendant advanced an amount of K494,000.00 as loan to the plaintiff company and obtained a registered mortgage over the property including the Klinki Lodge as security for the financial advance. The loan was advanced pursuant to a Loan Agreement dated 11th January 2012 (the agreement). The mortgage was registered on 04th May 2012.

13. The plaintiff company failed to meet its obligation under the agreement in terms of making regular monthly installment payments towards the loan. The first defendant therefore exercised its powers as the mortgagee and advertised for sale by tender of the property including the Klinki Lodge.

14. The second defendant submitted a tender bid in respect to the mortgagee sale and was successful. Consequently, the first defendant entered into a contract for sale with the second defendant. The contract for the sale and purchase of the property including the Klinki Lodge is for the price of K2,005,555.55. The settlement of the contract took place on 4th June 2012 where the second defendant paid to the first defendant the full contract price and obtained from the first defendant relevant title documents, including deed of title to the property and the discharge of mortgage. However, the registration process in respect to the transfer of title and discharge of mortgage are pending due to the litigations currently pending before the Court.

Issues

15. The parties have agreed to the issues for trial. A statement of agreed and disputed facts and legal issues, was tendered in Court at trial on 23rd September 2013. However, the statement of issues does not accurately reflect the keys issues before the Court. In my view the following issues arise for determination in the proceeding:

(i) Whether a statutory notice under s. 67(1)(a) of the Land Registration Act (LRA) was given to the plaintiff company prior to the sale of the property.

(ii) Whether the first defendant failed in his duty as a Mortgagee in respect to the sale of the property

Evidence

16. The...