Anim Agai Motoi v Nationwide Microbank Ltd

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 05 February 2016
• Citation: (2016) N6177
• Court: National Court
• Year: 2016
• Judgement Number: N6177

Full : WS No 117 of 2014; Anim Agai Motoi v Nationwide Microbank Limited and Paul Laho (2016) N6177

National Court: Cannings J

Judgment Delivered: 5 February 2016

N6177

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 117 OF 2014

ANIM AGAI MOTOI

Plaintiff

V

NATIONWIDE MICROBANK LIMITED

First Defendant

PAUL LAHO

Second Defendant

Madang: Cannings J

2015: 22 June

2016: 5 February

CONTRACTS – Loan agreement between customer and licensed financial institution – Whether first defendant entitled to repossess vehicle secured by bill of sale – First defendant’s duty of fairness – whether first defendant committed breach of contract – Whether customer entitled to damages.

The plaintiff entered into a loan agreement with the first defendant under which it advanced the plaintiff K90,295.01 to purchase a bus to use as a public motor vehicle (PMV) and to arrange comprehensive motor vehicle insurance on the bus. The loan was secured by a bill of sale over the bus and by a letter of set-off against K47, 000.00 held by the plaintiff in a savings account with the first defendant. Ten weeks after the plaintiff took possession of the bus it was involved in an accident, rendering it unroadworthy. The plaintiff then failed on several occasions to meet his monthly repayment obligations and the first defendant took possession of the bus, told the plaintiff that he would have to settle the balance of his loan account within seven days, failing which the bus would be sold. The plaintiff did not comply with the first defendant’s request and the bus was sold. The plaintiff commenced proceedings against the first defendant seeking damages for breach of the loan agreement by the first defendant, on the grounds that at the time of repossession he was not in material default and that the first defendant acted unfairly and contrary to his equity of redemption.

Held:

(1) At the time of repossession of the bus, the plaintiff was not in significant default and the first defendant acted contrary to its duty of fairness in the conduct of the loan account (a duty imposed on it under the Fairness of Transactions Act 1993, which is an implied term of the loan agreement) and contrary to the plaintiff’s equity of redemption.

(2) A cause of action was established in breach of contract and the plaintiff was entitled to damages.

Cases cited

The following cases are cited in the judgment:

Bank of PNG v Derick Sakatea Niso (2004) N2664

Bank of South Pacific Ltd v The Public Curator (2003) N2320

Credit Corporation (PNG) Ltd v David Nelson (2011) N4368

Golobadana No 35 Ltd v Bank of South Pacific Ltd (2002) N2309

Madang Cocoa Growers Export Co Ltd v National Development Bank Ltd (2012) N4682

Negiso Investments Ltd v PNGBC (2003) N2439

PNGBC v Pala Aruai (2002) N2234

Rage Augerea v Bank South Pacific Ltd (2007) SC869

Stephen Asivo v Bank of South Pacific Ltd (2009) N3754

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

STATEMENT OF CLAIM

This was a trial on liability for breach of contract

Counsel

A A Motoi, the Plaintiff, in person

Y Wadau, for the Defendant

5th February, 2016

1. CANNINGS J: The plaintiff, Anim Agai Motoi, commenced proceedings against the defendants, Nationwide Microbank Ltd and its Madang branch manager, Paul Laho, seeking damages for breach of contract. A trial on liability has been conducted.

2. The contract in question is a loan agreement under which the first defendant (a licensed financial institution) advanced the plaintiff K90,295.01 to purchase a 15-seater bus to use as a public motor vehicle (PMV) and arrange comprehensive motor vehicle insurance on the bus. The loan was secured by a bill of sale (a type of mortgage) over the bus and by a letter of set-off against K47,000.00 held by the plaintiff in a savings account with the first defendant. Ten weeks after the plaintiff took possession of the bus it was involved in an accident, rendering it unroadworthy. The plaintiff then failed to meet his repayment obligations and the first defendant took possession of the bus, told the plaintiff that he would have to settle the loan account, within seven days, failing which the bus would be sold. The plaintiff did not comply with the first defendant’s request and the bus was sold.

3. The plaintiff argues that the defendants breached the loan agreement by unfairly repossessing and selling the bus, contrary to his equity of redemption.

ISSUES

a) What are the facts? What are the circumstances in which the first defendant took possession of the bus and sold it?

b) Did the first defendant act unfairly? Was the plaintiff deprived of his equity of redemption?

c) Has the plaintiff established a cause of action in breach of contract?

1 WHAT ARE THE FACTS?

4. On 29 May 2012 the parties entered into the loan agreement. The amount of the loan was K90, 295.01, repayable in monthly instalments, including interest, of K3, 738.89 over 36 months. The purpose of the loan was to purchase a new Toyota Hiace 15-seater bus for the value of K78, 000.00 and to arrange comprehensive motor vehicle insurance on the bus, for K12, 925.01. The loan was secured by a bill of sale over the bus, a letter of set-off regarding the plaintiff’s savings of K47,000.00 held with the first defendant and a guarantee (the guarantor was a party to the loan agreement).

5. On 2 July 2012 the plaintiff took possession of the bus, which was registered in his name. He operated it as a licensed PMV between Madang town and the Transgogol area of Madang District. On 17 September 2012 the bus was involved in an accident, rendering it unroadworthy (though it could be driven, with some difficulty). On 18 September 2012 the plaintiff went to the first defendant’s Madang branch. He informed the first defendant of the accident and sought assistance in lodging an insurance claim. He was told that that was his responsibility. He obtained two repair quotes, one for K23,783.75, the other for K20,494.46.

6. The evidence is not entirely clear as to what happened in the period between 18 September 2012 and 7 January 2013, when the first defendant formally notified the plaintiff that his loan account was in arrears. This is because the plaintiff’s evidence does not clearly indicate what attempts, if any, he made to make a claim on his insurance policy, which was with MMI Pacific Insurance Ltd, and the defendants produced no evidence at all for the trial. I find, by inference, that, for some unknown reason, the plaintiff made no claim on his insurance policy, the bus remained unroadworthy and, as a result of the bus being the plaintiff’s primary income-earning asset, the plaintiff had difficulty meeting his monthly repayment obligations.

7. On 12 October 2012 the first defendant took the bus into its possession, evidently as a way of encouraging the plaintiff to regularise his loan repayments. The bus was released to the plaintiff, upon his making a repayment, on 9 November 2012.

8. The same thing happened again in the period from 29 December 2012 to 4 January 2013: the first defendant took possession of the bus, then released it when the plaintiff made a repayment.

9. On 7 January 2013 the first defendant’s then Madang branch manager, Mr Poka, wrote to the plaintiff. He acknowledged the plaintiff’s payment of K3, 000.00 received on 4 January 2013 but pointed out that his loan account was still K1,364.02 in arrears. Mr Poka continued:

As a first warning, we kindly remind you to clear these arrears within 14 days from the date of this letter. And please take note that another repayment of K3,726.67 falls due on the 23rd of this month, thus total amount equates to K5,093.57 due. [sic]

Failure to comply by the due date will result in the first defendant taking appropriate recovery action to recoup the amount due and payable.

Please treat this as a matter of priority and don’t let your family suffer as a result of your negligence.

10. On 13 February 2013 the first defendant again took possession of the bus and then returned it, after a loan repayment, on 8 March 2013.

11. On 25 February and 6 March 2013 a friend of the plaintiff, Panu Wagum, wrote letters to the first defendant, on the plaintiff’s behalf, urging a restructuring of the loan or a grace period so that the plaintiff could arrange to have the bus repaired and back on the road, earning income. There was no response to these letters.

12. On 1 April 2013 the first defendant took possession of the bus for the fourth time. On 16 April 2013, the first defendant’s new Madang branch manager, Paul Laho (the second defendant), wrote to the plaintiff in the following terms:

This letter serves to inform you that your 15-seater Toyota Hiace bus which was repossessed by the bank on the 1st April 2013 will be up for sale.

You are given 7 days of notice from the date of delivery of the letter to settle your loan outstanding amount of K111,628.00. If you not settle your outstanding loan within seven days of notice given, the bank will take action by selling your motor vehicle to pay off your outstanding loan.

13. As to what happened after...