Bank South Pacific Limited v Robert Tingke (2012) N4901

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi J
• Judgment Date: 29 October 2012
• Court: National Court
• Docket Number: WS NO. 56 of 2012
• Judgement Number: N4901

Full Title: WS NO. 56 of 2012; Bank South Pacific Limited v Robert Tingke (2012) N4901

National Court: Kandakasi, J

Judgment Delivered: 29 October 2012

N4901

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 56 of 2012

BETWEEN

BANK SOUTH PACIFIC LIMITED

Plaintiff

AND:

ROBERT TINGKE

Defendant

Waigani: Kandakasi, J.

2012: 13th August

2012: 29th October

BANKING LAW – Banker and Customer - Personal loan - Penalty doctrine – Definition of – Freedom of contract – Genuine pre-estimate of damages for breach of contract permissible but not penalty to force compliance – Need to consider substance rather than form - Default in repayment – Default interest rate at 31.4590% – Whether that interest rate is penalty?

BANKING LAW - Person loan agreement - High interest rates – Similar rates previously struck down – Parties not in equal bargaining position - Fairness of terms and conditions of – Bank has duty to ensure client understand terms and conditions of any contract through independent legal advice – Breach of duty – Effect of - Unfair and unenforceable contract - Interest rates – Need to be reasonable – High interest rates could amount to penalty and unenforceable - Application of the relevant provisions of the Fairness of Transactions Act - Terms and conditions not reflecting binding Court decisions – Effect of –Unenforceable contract.

CONTRACTS – Freedom of contract – Law will generally uphold the free agreements of the parties – Exceptions – Doctrine of penalty – Application of - Unequal bargaining positions – Terms not explained and understood by disadvantaged party – High interest rates and penalty clause – Unenforceable contract.

EQUITY - Personal bank loan – High interest rates - Terms not reflecting relevant judicial pronouncements – Unequal bargaining position – Bank not ensuring customer seeking and securing independent legal advice and understanding of the terms of the contract – Defaulting in loan repayments – Bank delay acting on default – Interest and costs continuing to run beyond amount lent and agreed interest – Effect of – Unjust enrichment – Bank not entitled to gain from own failure.

PRACTICE & PROCEDURE – Default judgment - Application for – Two parts – Technical or procedural and discretionary – Factors for consideration - Disclosure of cause of action and sufficiency of pleadings – Claim inclusive of high interest rates and costs allowed to built up against defendant - Plaintiff duty bound to act promptly - Need to expedite final disposition of cases - Delay in bringing application for default judgment and delay generally - Effect of.

PRACTICE & PROCEDURE – Motion for default judgment seeking judgment beyond amount pleaded – Need for service of – Interest of justice requires service - Good practice to avoid future wastage of time and resources.

Cases Cited:

Papua New Guinea Cases

Mapmakers Pty Ltd v. Broken Hill Proprietary Company Limited (N588)

The Government of Papua New Guinea and Richard Harold Davis v. Stanley Barker [1977] PNGLR 386

Hilary Singat v. Commissioner of Police (2008) SC910

Otto Benal Magiten v. Bernadette Beggie (No 1) (2005) N2880

Heroauka No 2 Land Group Inc v Frontier Holdings Ltd (2010) N4096

John Kunkene v Michael Rangsu and The State (1999) N191

Urban Giru v. Luke Muta (2005) N2877

Kante Mininga v. The State & Others (1996) N1458

Mapmakers Pty Ltd v. Broken Hill Proprietary Company Ltd [1987] PNGLR 78

Joseph Peng v Phillip Craig Tangney (2009) SC969

Hilary Singat v. Commissioner of Police (2008) SC910

Lina Kewakali v The State (2011) SC1091

Lepanding Singut v Kelly Kinamun (2003) N2499

Pius Sankin v Papua New Guinea Electricity Commission (2002) N2257

Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694

Philip Takori v. Simon Yagari (2008) SC905

MVIT v James Pupune [1993] PNGLR 370.

MVIT v John Etape [1994] PNGLR 596

Michael Pundari v Niolam Security Ltd (2011) SC1123

Rage Augerea v. Bank South Pacific Ltd (2007) SC 869

Credit Corporation (PNG) Limited v. David Nelson (2011) N4368

Golobadana No 35 Ltd v. Bank of South Pacific Limited (formerly Papua New Guinea Banking Corporation) (2002) N2309

Post PNG Ltd v. Yama Security Services Ltd (unreported and unnumbered judgment delivered on 26th July 2001) SCA 80 of 2000.

Teio Raka Ila v Wilson Kamit (2002) N2291

The Central Bank of PNG v. Gabriel Tugiau (2009) SC1013

Negiso Investments Limited v. PNGBC Limited (2006) N3104

Dr. Florian Gubon Trading as Gubon Lawyers v. Pacific Mobile Communication Limited (2003) N2439

Kora Gene v. Motor Vehicles Insurance (PNG) Trust [1995] PNGLR 344

The Papua Club Inc v Nusaum Holdings Ltd (No 2) (2004) N2603

Overseas Cases

Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656.

Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co Ltd [1915] AC 79

AMEV-UDC Finance Ltd v Austin [1986] HCA 83; (1986) 162 CLR 170

Andrews v. Australia and New Zealand Banking Group Ltd [2012] HCA 30

Lloyds Bank Ltd v. Bundy [1974] 3 All ER 757

Counsel:

K.R. Kawat, for the Plaintiff/Applicant

No Appearance, for the Defendant/Respondent

29th October, 2012

1. KANDAKASI J: Facts and Background: The Bank South Pacific Limited is seeking by notice of motion for default judgment in default of notice of intention to defend and defence to recover from one of his former customers Robert Tingke a sum of K12, 665.75 out of a personal loan of K5, 500.00. The Bank granted the loan on 27th February 2008 on terms including an 18% per annum interest rate and an “Effective Rate of Interest of 31.4590 % per annum with monthly repayments of K311.08. Mr. Tingke made repayments at the agreed rate until 17th March 2009, when he fell into arrears.

2. The Bank did nothing about the default until about 2 years later on 18th April 2011, when it issued a letter of demand requiring Mr. Tingke to repay an amount of K8, 559.79 in full or make alternative arrangements to repay the outstanding loan within 21 days or face court action. After a lapse of almost 9 months from 18th April 2011, on 31st January 2012, the Bank issued this proceeding claiming in the writ K10, 816.02. The Bank’s pleading do not disclose, how much was repaid and how much was owed when Mr. Tingke defaulted save only to note a balance of K4, 264.55 in debit carried over from somewhere when the account was placed with the Banks recovery unit.

3. Following service of the writ on him on 05th March 2012, Mr. Tingke failed to file and serve his notice of intention to defend and his defence. The deadline for Mr.Tingke to do so expired on 19th April 2012. Though the Bank was entitled, it did not apply for default judgment soon thereafter until the passage of a further more than 2 months, after which the Bank filed its application for default judgment on 29th June 2012 and sought to move it on 10th July 2012.

Relevant Issues

4. At the hearing of the Banks application the following main issues were presented:

(a) Is Mr. Tingke in default of filing and serving his notice of intention to defendant and or defence?

(b) If the answer to the first question is yes, should the Court in the exercise of the discretion vested in it, sign default judgment in favour of the Bank?

(c) If the above questions are answered in the affirmative, should the default judgment be for a specific amount or should it be default judgment with damages to be assessed?

5. We will address each of these issues in the order presented. However, we will deal with the first two questions as one under the broad heading of whether default judgment should be entered in favour of the Bank. Then if need be, we will deal with the last question. Otherwise a determination of the first two questions, especially if they are determined against the application, there will be no need for the Court to consider that issue. Accordingly, it will simply be left out. Accordingly, we turn to a consideration of the first two questions.

Whether Default Judgment should be signed for the Bank?

- The relevant principles

6. Whether default judgment should be entered is dependent on the following factors of whether or not:

(a) the writ of summons with a statement of claim endorsed thereto has been duly served on the defendant; and

(b) the time period for filing of the defendant’s defence has expired; and

(c) the defendant has not filed and served his or her defence; and

(d) a search of the court file has been carried out at the expiry of the deadline for the filing of the defence which has revealed no defence being filed; and

(e) the plaintiff has forewarned the defendant of the plaintiff’s intention to apply for default judgment where a notice of intention to defend has been filed,.

Mapmakers Pty Ltd v. Broken Hill Proprietary Company Limited (N588). See also The Government of Papua New Guinea and Richard Harold Davis v. Stanley Barke...