Westpac Bank PNG Ltd v John Sambeok

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 04 November 2014
• Citation: (2014) N5810
• Court: National Court
• Year: 2014
• Judgement Number: N5810

Full : OS NO 796 OF 2013; Westpac Bank PNG Limited v John Sambeok & Evelyn Sambeok (2014) N5810

National Court: Cannings J

Judgment Delivered: 4 November 2014

N5810

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS NO 796 OF 2013

WESTPAC BANK PNG LIMITED

Plaintiff

V

JOHN SAMBEOK & EVELYN SAMBEOK

Defendants

Waigani: Cannings J

2014: 22, 24 October, 4 November

MORTGAGES – claim by mortgagee for possession of land secured by mortgage – alleged default of mortgagors – interests of persons in occupation of land – death of mortgagor.

The plaintiff bank commenced proceedings by originating summons against the occupiers of land over which it held a registered mortgage. The plaintiff claimed that it was entitled to take possession of the land and sell it, as the mortgagor company and its director (now deceased) had defaulted on the loan agreement that was secured by the mortgage. The plaintiff claimed that it had already entered into a contract for sale of the land to a third party and under that contract it was obliged to provide vacant possession. The defendants claimed that they were occupying the land with the permission of the Public Curator, the administrator of the estate of the deceased mortgagor, and that they had entered an agreement with the Public Curator to buy the land and paid a deposit for that purpose.

Held:

(1) A mortgagee who makes a claim for possession of property pursuant to a mortgage must substantiate its claim by proving the existence of the loan agreement under which the mortgage has been executed, the nature and extent of the default of the mortgagor, adherence to the procedure provided by the mortgage or by law for it to exercise the power of possession and sale of the property and compliance with its duty as mortgagee to act in good faith regarding the mortgagor’s interests and make a reasonable effort to sell the property at market value.

(2) Here, the plaintiff failed to provide sufficient evidence of all of those matters: the loan agreement was not adduced in evidence, the identity of the mortgagors was unclear, there was no evidence of the nature and extent of the alleged default or any notice given to the mortgagors under the mortgage or the Land Registration Act; and there was no evidence that the plaintiff had acted in good faith and complied with its duties as mortgagee regarding the mortgagor’s interests. Furthermore, there was uncertainty over the identity of the administrator of the deceased’s mortgagor’s estate, and there was no evidence that the plaintiff had given notice to that person of its proposed possession of the land.

(3) Furthermore the jurisdictional basis of the orders sought by the plaintiff was unclear and there were other inadequacies in the plaintiff’s case which meant that the plaintiff had failed to prove its case.

(4) All relief sought by the plaintiff was refused and costs ordered against it but rather than dismissing the proceedings the Court ordered mediation of all issues in dispute.

Cases cited

The following cases are cited in the judgment:

Air Niugini v Elizabeth Talum [1992] PNGLR 296

Anego Company Ltd v Finance Corporation Ltd (2013) N5391

ANZ Banking Group (PNG) Ltd v Kila Wari (1990) N801

Bank of Papua New Guinea v Muteng Basa [1992] PNGLR 271

Bank South Pacific Ltd v Dennis Pundia (2012) N4747

Bank South Pacific Ltd v Public Curator (2003) N2320

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

Esther Torato v PNG Home Finance Ltd (2012) N4583

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

Magiten v Moses, Anawon, Tovea and Rural Development Bank Ltd (2006) N5008

Max Umbu v Steamships Ltd (2004) N2738

Negiso Investments Ltd v PNGBC (2003) N2439

Pija Grannies Ltd v Rural Development Bank Ltd (2011) SC1327

PNGBC v Bara Amevo [1998] PNGLR 240

PNGBC v Pala Aruai (2002) N2234

Rage Augerea v Bank South Pacific Ltd (2007) SC869

Samuel Aiye Nema v Rural Development Bank Ltd (2012) N5317

Samuel Aiye Nema v Rural Development Bank Ltd (2013) SC1243

Walter Perdacher v PNGBC (1997) N1637

Westpac Bank PNG Ltd v Miai Suve Larelake (2008) N3247

ORIGINATING SUMMONS

The plaintiff, claiming mortgagee rights of possession, sought orders for possession of property against the defendants.

Counsel

A Warokra, for the plaintiff

W Mapiso, for the defendants

4th November, 2014

1. CANNINGS J: At the centre of this case is a residential property in Tokarara, Port Moresby: Section 140, Allotment 4. It is presently occupied by the defendants, John Sambeok and Evelyn Sambeok. The plaintiff, Westpac Bank PNG Ltd, applies by originating summons for orders for possession of the property.

2. The plaintiff says that it holds a registered mortgage over the property granted to it by the company to which it lent money to purchase the property, the registered proprietor, A & A Homes Ltd. The plaintiff says the mortgagor, A & A Homes Ltd, and its director, Jonathan Ninkama (deceased), defaulted on their loan obligations and that it is exercising its power as mortgagee to take possession of the property and sell it. It has already entered into a contract to sell it to a third party. The plaintiff says that the defendants have no right to stay on the property. Mrs Warokra, for the plaintiff, submitted that the plaintiff was exercising its mortgagee rights under Section 74 of the Land Registration Act Chapter No 191.

3. The defendants say that they have occupied the property since 2012 with the consent of the Public Curator, the administrator of the estate of the late Jonathan Ninkama. They say that the late Mr Ninkama was the sole director and shareholder of A & A Homes Ltd and that Mr Ninkama’s widow agrees with their occupation of the property. They say that they have entered into an agreement with the Public Curator to purchase the property for K280,000.00 and have paid a 10% deposit and spent more than K200,000.00 improving the property on the understanding that title would be transferred to them. Mr Mapiso, for the defendants, submitted that the Court should refuse to grant the orders sought by the plaintiff, which was failing to recognise the defendants’ equitable interest in the property and refusing to take a human approach to the problem.

TESTING A MORTGAGEE’S CLAIM FOR POSSESSION OF PROPERTY

4. There have been many cases in which mortgagees have made successful applications for the type of orders being sought by the plaintiff, eg Bank of Papua New Guinea v Muteng Basa [1992] PNGLR 271, PNGBC v Bara Amevo [1998] PNGLR 240, Bank South Pacific Ltd v Public Curator (2003) N2320, Max Umbu v Steamships Ltd (2004) N2738, Bank South Pacific Ltd v Dennis Pundia (2012) N4747, Samuel Aiye Nema v Rural Development Bank Ltd (2013) SC1243. These cases show that a mortgagee which seeks orders for possession of property pursuant to a mortgage must prove its claim by first specifying the jurisdictional basis of the orders being sought, and then providing evidence of the following:

1 The existence of the loan agreement that gave rise to the mortgage.

2 Identity of the mortgagors.

3 The nature and extent of the default of the mortgagors.

4 Adherence to the procedure provided by the mortgage and/or by legislation for it to exercise the power of possession and sale of the property.

5 Compliance with its duty as mortgagee to act in good faith regarding the mortgagor’s interests and make a reasonable effort to sell the property at market value.

6 Adequate notice, of the intention to take possession of the property and sell it, and of the court proceedings, has been given to not only the mortgagors but other persons who may have a genuine interest in the property.

THIS CASE

5. I refuse to make the orders sought by the plaintiff for three reasons:

· it has failed to clarify the jurisdictional basis of the orders it seeks;

· it has failed to provide sufficient evidence in support of its application;

· there are other inadequacies in the plaintiff’s case that make it inappropriate to grant the orders sought.

Jurisdictional matters

6. By the originating summons the plaintiff seeks five orders:

1. An order that the Defendants give vacant possession to the Plaintiff of land described and known as Allotment 4, Section 140, Hohola, National Capital District (the Property) being subject of State Lease Volume 42 Folio 77.

2. An order that the Defendants to give vacant possession of the Property to the Plaintiff within 14 days of the date of judgment.

3. An order that leave be granted for a Writ of Possession to be issued for the Property.

4. An order that the plaintiff’s costs of the proceedings be paid by the Defendants on an indemnity basis.

5. Any other or further order as this Honourable Court deems appropriate.

7. Numbers 1, 2 and 3 run together and are the primary relief sought. Mrs Warokra submitted that these orders should be granted under Section 74 (mortgagee may enter and take possession, etc) of the Land Registration Act, which states:

(1) Where default is made in...