Kina Finance Limited v Morne Industries PNG Limited (2007) SC985

• Jurisdiction: Papua New Guinea
• Judge: Hinchliffe, Jalina & Gabi, JJ
• Judgment Date: 22 June 2007
• Court: Supreme Court
• Citation: (2007) SC985
• Docket Number: SCA NO. 01 OF 2005
• Year: 2007
• Judgement Number: SC985

Full Title: SCA NO. 01 OF 2005; Kina Finance Limited v Morne Industries PNG Limited (2007) SC985

Supreme Court: Hinchliffe, Jalina & Gabi, JJ

Judgment Delivered: 22 June 2007

SC985

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 01 OF 2005

BETWEEN

KINA FINANCE LIMITED

Appellant

AND

MORNE INDUSTRIES PNG LIMITED

Respondent

Waigani: Hinchliffe, Jalina & Gabi, JJ

2007: 22 June

INSTRUMENTS ACT – Sections 4, 5, 8 & 10 – Construction and Application – Validity of Bill of Sale – Registration and Consideration to be truly set out – Meaning of “truly set out the consideration” – Non-compliance as to form does not invalidate bill of sale between the parties, but may invalidate it against third parties.

Cases Cited

Papua New Guinea Cases:

Anna Wemay v Tumdual [1978] PNGLR 173

JH Rayner v The Chief Collector of Taxes [1993] PNGLR 416

Tendi v MVIT [1996] PNGLR 379

Overseas Cases:

Charlesworth v Mills [1892] A.C. 231

Davies v Goodman (1880) 5 C.P.D. 128

Davis v Burton [1983] QBD 537

Graham v Hart [1917] 1 K.B 201

Hughes v Little [1886] 18 QBD 32

Lee v Official Assignee (1903) 22 N.Z.L.R. 747

National and Grindlays Bank Limited v Dharamshi Vallabhji and others [1967] 1 AC 207

Olsen v General Credits Limited [1985] 2 Qd.R. 506

Pettit v Lodge [1908] 1 K.B 744

Reg v Dibb Ido (1897) 15 N.Z.L.R. 591

Te Aro Loan Company v Cameron (1896) 14 N.Z.L.R. 411

Text

Professor Sykes, The Law of Securities (2nd Edition), The Law Book Company (1973)

Counsel

V Bull, for the Appellant

T Elemi, for the Respondent

DECISION

22 June, 2007

1. BY THE COURT: Introduction: This is an appeal against the decision of His Honour Kandakasi J. given on 26th November 2004, that the registered Bill of Sale No. BS3525/01 dated 29th June 2001 (hereinafter the “Bill of Sale”) is void and ineffective for: (i) failing to truly set out the consideration; (ii) the witnesses’ failure to insert their place of residence and occupation; and (iii) the failure to describe the parties as grantor and grantee.

Background

2. On 29th June 2001, the respondent obtained a loan of K120, 000 from the appellant. As security for the loan, Mr. Greg Neville, a director of the respondent provided a personal guarantee and indemnity as evidenced by a Deed of Guarantee and Indemnity dated 29th June 2001 and the registered Bill of Sale over certain chattels was given by the respondent.

3. The respondent made a total of nine (9) irregular payments totaling K31, 087.70. On or about 8th October 2002, the respondent stopped making payments altogether. Consequently, the appellant issued two (2) notices for payment to the respondent and Mr. Greg Neville. The respondent failed to pay. On 29th February 2003, the appellant’s lawyers sent out a final letter of demand for payment, which had not been complied with. On 9th June 2003, the appellant issued two (2) repossession notices to the respondent under the Bill of Sale. On 9th and 10th July 2003, the appellant repossessed all the timber milling and dressing equipment the respondent had put up as security for the loan.

4. On 20th July 2003, the respondent issued proceedings WS No. 1026 of 2003 claiming that the Bill of Sale is invalid pursuant to ss 4, 5, 8 and 10 of the Instruments Act (hereinafter “the PNG Act”). On 26th November 2003, His Honour Justice Kandakasi gave judgment and held that:

(a) under s 4 of the PNG Act, to truly set out the consideration requires a precise statement of the specific amount of moneys advanced, the number and the amount of installment repayments, and the rate and amount of interest payable, failing which the bill of sale is void.

(b) under s 10 of the PNG Act, a bill of sale must be signed by a witness who must add his place of residence and occupation, failing which it is void.

(c) under s 8 of the PNG Act, the bill of sale must describe the parties as grantor and grantee and not in any other way, failing which it is void.

(d) the Bill of Sale was void and ineffective for:

(i) failing to set out the consideration; and

(ii) the witnesses’ failure to insert their place of residence and occupation; and

(iii) the failure to describe the parties as grantor and grantee.

The grounds of appeal

5. The grounds of appeal and the orders sought are:

GROUNDS

“(1) His Honour Justice Kandakasi erred in finding that the requirement of Section 4 of the Instruments Act Chapter 254 to truly set out the consideration for which a bill of sale was given, requires a precise statement of the amount of the advance, agreed interest thereon and the specific amount of periodical or installment payments.

(2) His Honour erred in finding that the English Bills of Sale Act (1878) Amendment Act 1882 and English cases based on that Act were applicable to the interpretation of the Instruments Act Chapter 254.

(3) His Honour erred in failing to give effect to Section 4 of the Instruments Act Chapter 254, in particular the requirement to truly set out the consideration for which a bill of sale was given, according to the ordinary meaning of the words used in the Section.

(4) His Honour erred in finding that a statement in registered bill of sale no. BS3525/01 dated 29 June 2001 that the consideration for the bill of sale was advances and accommodation from the appellant to the respondent to purchase and acquire the chattels described in the schedule to the bill of sale, did not satisfy Section 4 of the Instruments Act Chapter 254 and rendered the bill of sale void and ineffective.

(5) His Honour erred in finding that in order for an instrument to qualify for registration under the Instruments Act Chapter 254 the names of the parties would have to be “grantor” and “grantee”.

(6) His Honour erred in finding that the terms of the loan agreement dated 29 June 2001 between the appellant and the respondent were a defeasance, condition or declaration of trust that was not contained in the body of the bill as required by Section 5 of the Instruments Act Chapter 254.

(7) His Honour erred in finding the prescribed form for a crop lien was relevant to the requirements of Section 4 of the Instruments Act Chapter 254.

(8) His Honour erred in finding that the absence of the witnesses’ place of residence and occupation from the attestation clause in registered bill of sale no. BS3525/01 rendered the bill of sale void and ineffective.”

ORDERS SOUGHT

6. The appellant seeks the following orders:

“1. The decision of His Honour Justice Kandakasi given on 26 November 2004, insofar as it declares registered bill of sale no. BS3525/01 void and ineffective, be set aside.

2. That in lieu thereof, it be ordered that:

(a) the respondent’s claim in WS No. 1026 of 2003 be dismissed insofar as it relates to register bill of sale no. BS3525/01; and

(b) the chattels referred to in the schedule to registered bill of sale no. BS3525/01 be delivered to the appellant.

3. The respondent pay the appellant’s costs of and incidental to the hearing in the National Court and this appeal.

4. Such further or other orders as the Court sees fit.”

7. The relevant provisions for our purposes are sections 4, 5, 8 and 10 of the PNG Act. We set them out in full hereunder:

“4. Requirements of bills of sale.

(1) A bill of sale shall –

(a) be registered in the manner prescribed by this Part; and

(b) truly set out the consideration for which it was given.

(2) A bill of sale has no effect as to chattels comprised in it, whether as between the parties to it or as against any other person, unless –

(a) it is registered within 60 days after the day on which it was executed; and

(b) the consideration is truly set out in it.

5. Manner of registration of bills of sale

(1) Each bill of sale, together with each schedule that is annexed to it or referred to in it, or a true copy of each bill of sale and of every attestation of its execution, shall be registered by being filed in the Registry.

(2) If a bill of sale is made subject to a defeasance, condition or declaration of trust not contained in the body of the bill, the defeasance, condition or declaration –

(a) forms a part of the bill of sale; and

(b) shall be written on the same paper or parchment before the registration.

(3) The registration of a bill of sale that does not comply with Subsection (2)(b) is void…..

8. Register of bills of sale

“(1) The Registrar shall cause –

(a) each bill of sale registered under this Part to be numbered; and

(b) the bill of sale, or the filed copy of the bill of sale, to be marked with the date of registration and the number; and

(c) particulars of the bill of sale to be entered in a register to be kept for the purpose in the prescribed form; and

(d) An index of the names of grantors and grantees of bills of sale to be kept with reference to the entries in the register of the bills of sale given by each grantor.

(2) The index referred to in Subsection (1)(d) shall be arranged in divisions corresponding with the letters of the alphabet, so that all grantors and grantees whose surnames begin with the same letter (and no others) are comprised in one division, but the arrangement within each division need not be strictly alphabetical.

(3) Where a bill of sale is made or given by a person under or in the execution of a process of a court –

(a) the name, residence and occupation of the person against...