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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO 279 OF 2010
STEPHEN ASIVO
Plaintiff
V
BANK OF SOUTH PACIFIC LIMITED
Defendant
Madang: Cannings J
2010: 20 August,
2011: 15 April
JUDGMENT
JUDGMENTS AND ORDERS – giving effect to previous order that a bank and its customer attempt to reach settlement – recall of matter upon failure of parties to settle – alternative dispute resolution – whether to order mediation – ADR Rules, Rule 5 (ordering mediation) – National Court Act, Part IIA (mediation).
In previous proceedings between a bank (the defendant) and its customer (the plaintiff) the court ordered specific performance of
a loan agreement (which required the bank to make available the balance of a loan facility) and damages against the bank. The court
also ordered the parties to attempt to reach settlement on a revised agreement or reach agreement on the state of the loan account,
failing which the court would recall the matter for appropriate directions and orders. The bank complied with the order for specific
performance and damages but the parties failed to settle or agree on the prescribed matters, so the plaintiff applied to the court
by motion for an order that the terms he proposed for a revised agreement be endorsed and made the subject of a court order. He also
sought interest and costs in respect of the previous proceedings. The bank argued that the motion was procedurally defective and
an abuse of process and should be dismissed but if entertained, that the bank’s offer as to the terms of a revised agreement
should be endorsed.
Held:
(1) Though the motion had come to the court via an unusual route and in novel circumstances it was not an abuse of process and should be entertained as it was a genuine attempt by a party to give effect to a previous court order.
(2) The evidence adduced by the parties as to the state of the loan account was insufficient to allow the court to draft an appropriate order and in such circumstances it was appropriate to consider whether to order mediation, having regard to the matters prescribed by Rule 5 of the ADR Rules.
(3) Mediation was considered the best option as it would not result in prejudice to the rights of either party and it would minimise the amount of the court’s time that would need to be devoted to resolving the proceedings and result in a quicker and simpler outcome that would reduce the likelihood of further litigation.
(4) An order for mediation was accordingly made under Rule 5 of the ADR Rules and Section 7B of the National Court Act.
Cases cited
The following cases are cited in the judgment:
Polem Enterprise Ltd v Attorney-General (2010) SC1073
Steven Asivo v Bank of South Pacific Ltd (2009) N3754
William Duma v Yehiura Hriehwazi (2004) N2526
NOTICE OF MOTION
This was a motion seeking to give effect to an order of the National Court in related proceedings.
Counsel
S Asivo, the plaintiff, in person
M Koimo for the defendant
15 April, 2011
1. CANNINGS J: This is a ruling on a motion by the plaintiff, Steven Asivo, for an order that would set the terms of a revised loan agreement between him and the defendant, the Bank of South Pacific Ltd. The motion arises out of previous court proceedings involving the same parties.
HISTORY
2. In August 2006 Mr Asivo and his wife entered into a loan agreement with the bank to enable them to purchase a property in Newtown, Madang. The first drawdown on the facility occurred on 10 October 2006 when the bank provided K30,000.00. Shortly afterwards the bank discovered what it regarded as a previous bad debt Mr Asivo had with the bank, which he had not disclosed in his loan application. The bank, on 28 November 2006, wrote to Mr and Mrs Asivo demanding full and immediate payment of their indebtedness to the bank, which then stood at K34,437.57, failing which it would take such steps it considered necessary to recover the amount due, including exercising its powers as mortgagee over the land and house. In February 2007 the bank wrote to Mr Asivo advising that he owed K92,975.65 on his previous loan and that he needed to arrange regular payments by the end of that month, failing which the bank would have no option but proceed with further recovery action. In December 2007 the bank served Mr and Mrs Asivo with a notice under the mortgage, demanding payment of K32,038.86 within 14 days, failing which the bank would be at liberty to sell the property. In November 2008 the bank served them with a notice to vacate the property within seven days failing which action would be taken to enforce eviction. Such action was eventually stayed by order of the National Court.
3. Mr Asivo in 2009 commenced court proceedings, OS No 290 of 2009, against the bank, for breach of contract, and sought an order for specific performance of the loan agreement and damages. The bank defended the proceedings, a trial was conducted and on 2 October 2009 I, as the presiding Judge, handed down judgment in favour of Mr Asivo (Steven Asivo v Bank of South Pacific Ltd (2009) N3754).
4. I held that the bank was guilty of a breach of contract and ordered specific performance of the loan agreement (which meant the bank had to make available the balance of the loan facility, K28,700.00) and damages of K20,000.00. I also ordered that:
The plaintiff and the defendant shall attempt to reach settlement on a revised agreement or reach an agreement on what the state of the loan account is and file within 30 days after the date of entry of this order an appropriate document in the National Court Registry at Madang for endorsement by the Court; failing which the Court will recall the matter for appropriate directions and orders.
5. The bank filed a notice of appeal to the Supreme Court against those orders but the appeal has not yet been heard. It applied to stay the orders of 2 October 2009 but on 1 March 2010 its application was refused by Injia CJ, sitting as a single Judge of the Supreme Court.
6. By the beginning of June 2010 the bank had still not complied with the orders of 2 October 2009, so on 7 June 2010 Mr Asivo commenced the proceedings, OS No 279 of 2010, under which the present motion is being brought. His initial purpose was to prosecute the bank and its officers for contempt of court by reason of the failure to provide the balance of the loan facility and pay the damages (which the court had ordered be paid within 30 days).
7. The bank complied with the 2 October 2009 orders, belatedly, on 8 June 2010: it made available the balance of the loan facility and paid the damages, interest and costs awarded against it in both the National Court and the Supreme Court.
8. In June and July 2010 there was an exchange of correspondence between Mr Asivo and the bank about the terms of a revised loan agreement. But no agreement was reached. Mr Asivo was still intent on prosecuting the bank and its officers for contempt. However, when the matter came before me on 22 July 2010 I suggested that that would not seem to be a productive exercise and ordered the parties to continue to attempt to settle on a revised agreement.
9. Still, they failed to settle and on 6 August 2010 Mr Asivo filed the motion that is now before the court. It was mentioned before me on 13 August 2010 and I set it down for hearing on 20 August 2010. Mr Asivo seeks the following orders:
PRELIMINARY ISSUES
10. Before dealing with the issue of whether the court should make an order concerning the revised loan agreement in the terms proposed by Mr Asivo, there are two preliminary issues to dispose of.
11. First, the bank argues that the motion is an abuse of process as it should have been filed in the previous proceedings, OS No 290 of 2009, not in OS No 279 of 2010 which are contempt proceedings. This is a useful technical point and I suppose the bank’s counsel, Mr Koimo, was within his rights to raise it (even though he did so belatedly in his closing submission). However I agree with Mr Asivo’s response, which was to say ‘he is arguing technicalities, I am arguing fairness’. This dispute has progressed to the stage where all concerned should be focussed on resolving it – not arguing technicalities. Besides that, my order of 2 October 2009 stated that failing settlement the court would ‘recall the matter for appropriate directions and orders’. My orders of 22 July and 13 August 2010 were directions about the procedures that should be adopted to get the matter resolved. The fact that they were given in proceedings that commenced as contempt proceedings and not in the proceedings that determined the bank’s liability is neither here nor there. The parties are the same and no one is prejudiced by having the motion dealt with in this way. Though the motion has come to the court via an unusual route and in novel circumstances it should be entertained as it is a genuine attempt by a party to give effect to a previous court order. There is no abuse of process in the manner contended for by the bank.
12. Secondly the bank argued that the claims Mr Asivo is agitating in paragraphs (8) and (9) of his notice of motion are misconceived and another abuse of process. Unfortunately these arguments were made not in a written submission but in an affidavit by the bank’s counsel, Mr Koimo, which is improper. An affidavit is not a vehicle through which a lawyer makes submissions on the law (William Duma v Yehiura Hriehwazi (2004) N2526). An affidavit must contain statements of fact, not opinion, unless it is expressed to be expert opinion. Its contents must not be scandalous, irrelevant or otherwise oppressive (National Court Rules, Order 11, Rule 28). Mr Koimo offended against these principles by including in his affidavit emotive, opinionated (and ungrammatical) statements such as the following:
The claim by the plaintiff in paragraph 8 of the motion is misconceived and does not have any basis at all. The plaintiff claim is morally seen as another continues attempt to unjustly enriched from the Bank. [sic]
The claim again by the plaintiff in paragraph 9 of the motion is again a total abuse of the courts process when the court has already ordered cost and that the cost went for taxation and a certificate of taxation was filed. [sic]
13. Putting aside for a moment the professional lapses by the bank’s counsel, do the arguments have merit? Yes and no. The claim in paragraph 9 of the motion – where Mr Asivo seeks K41,570.70 for costs and losses – is subsumed within the award of damages and costs (which were taxed) under the orders of 2 October 2009, and will be dismissed. As for the claim in paragraph 8 for interest, it is not misconceived. Mr Asivo is seeking interest on the amount of the judgment debt of K20,000.00 from the time it was ordered to be paid (30 days after the date of entry of the orders of 2 October 2009) to the actual date of payment (June 2010). This would seem to be a reasonable claim for post-judgment interest under Section 3 (interest on debt under judgment or order) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52 (see Polem Enterprise Ltd v Attorney-General (2010) SC1073). So this part of the motion will not be dismissed.
THE MAIN ISSUES
14. There are two: What is the state of the loan account? What should the terms of a revised loan agreement be? The second is really dependent on the first and I would have thought that the state of the loan account would be a simple question of fact to determine. But that has turned out not to be the case. The statement of account, dated 23 June 2010, annexed to the affidavit of Sonya Malori, Recovery Officer in the Bank’s Asset Management Division, has some curious aspects. For example:
THE MEDIATION OPTION
15. The court needs answers to those questions before it would be in a position to determine what the terms of a revised loan agreement should be. That means that if this case continues on its present course I would need to recall the parties, direct the preparation and filing of more affidavits and hold another hearing to hear argument on the new issues that would inevitably arise. This would cause further delay. So I have decided to consider other options. The one that presents itself as the most beneficial – and the one that the parties, especially the bank, and, indeed, the court, should have thought of before – is obvious: mediation.
16. The ADR Rules, made by the Judges in 2010 under the new Part IIA of the National Court Act Chapter 38, implore and require the parties and the court to be vigilant about the prospects of a dispute being more expeditiously dealt with through ADR (alternative dispute resolution) and mediation rather than by allowing proceedings to follow their more conventional and usually slower course through interlocutory processes, motions and trial under the National Court Rules. Sections 7B(1) and (2) of the National Court Act provide that the court can order mediation on its own initiative with or without the consent of the parties:
(1) In addition to the jurisdiction vested in the Court by Section 166 of the Constitution, and any other law, the Court—
(a) may order a resolution of a dispute or a matter before it by mediation for an amicable resolution of the dispute; or
(b) may order or direct a proceeding or any part of the proceeding to be inquired into and resolved by an appropriately qualified and experienced person or an expert in the issue.
(2) At any stage of a proceeding, the Court may, whether with or without the consent of the parties, order that the proceeding or a part of the proceeding before it be referred to mediation.
17. I point out that neither party applied for mediation. It was not raised at the hearing of the motion that I am now ruling on. Nevertheless it is something that must be carefully considered in light of Rule 5 (ordering mediation) of the ADR Rules, which states:
(1) At any time following commencement of proceedings the parties may agree to participate in a mediation of the issues to which the proceedings relate.
(2) The Court shall on the request of all parties to a proceeding or on the application of any party to a proceeding or on its own motion order mediation for
(a) a resolution of all or any parts of the proceedings; or
(b) failing settlement, identify and limit the real and meritorious issues in the proceedings that warrant judicial consideration and determination; and or
(c) enable the parties to reach consensus on the conduct of litigation.
(3) At the time of considering whether or not to order mediation, the Court shall have regard to the following factors:
(a) whether the mediation will result in prejudice to the rights of any of the parties;
(b) whether it is reasonably within the ability and the power of a party to comply with an order for mediation having regard to matters such as any urgency in the proceedings, costs, multiplicity of parties or lack of resources;
(c) whether the mediation will require substantial work which could be better directed to preparation for trial;
(d) the nature of the relief sought and the suitability of a mediation result;
(e) the timing of the mediation including by reference to the status of the pleadings, discovery and the alternatives of when trial is likely and the length and costs of trial;
(f) the attitude of the parties to mediation though not significant;
(g) whether mediation was earlier attempted and whether any good purpose will be served by an order for further mediation;
(h) the appropriateness of deferring any final decision on a application for orders for mediation; and
(i) what the interest of justice in the particular circumstances of the case require.
(4) If the Court decides to make an order for mediation, the Court shall ensure to incorporate in its order for mediation the:
(a) matters specified in Section 7B (4) of the Act; and
(b) make an order in terms similar to one in Form 3 in Schedule 2.
(5) Making an order for mediation does not:
(a) automatically operate as a stay of the proceedings; and
(b) imply any authority for the mediator to impose a decision on the parties.
(6) The Court may revoke or vary an order for mediation at anytime but before the conclusion of the mediation.
18. I have considered the matters in Rule 5(3) and concluded that mediation is the best option. It is, I consider, the best, fairest and most efficient way of getting answers to the questions raised about the current state of the account and settling on a revised loan agreement. It will not result in prejudice to the rights of either party. It should reduce the amount of court time needed to resolve the case. It should lead to a quicker and simpler outcome and reduce the likelihood of further litigation. It will allow the parties to communicate more effectively in a calmer and less combative atmosphere than that which has pervaded the proceedings to date.
REMARKS
19. Before I pronounce the order of the court I will offer some comments that might assist the parties reach agreement and assist the mediator in facilitating a settlement.
20. It seems that Mr Asivo is overlooking the fact that the sum of K8,904.00 that he has to date paid to the bank (according to the statement dated 23 June 2010), which amount he contends should be entirely deducted from the amount of the loan, is not all referable to the principal. A large component of early repayments, such as those he has paid, is in respect of interest, not the principal. During the life of a loan such as this one, the mix changes. Towards the end of the loan period most of the repayments are going towards reduction of the principal. Another thing that Mr Asivo needs to appreciate is that the court did not by its orders of 2 October 2009 waive interest on the revised loan.
21. As for the bank, it needs to appreciate that it was found in the previous proceedings to have not only committed a breach of contract but to have treated its customers in a shabby and insensitive way and used bullying tactics against them, culminating in their threatened eviction from the property that they had purchased with the bank’s assistance. Its internal procedures broke down and it blamed its customers for its own mistakes. I am not sure that the bank appreciates that it was found so clearly to have been in the wrong. The submissions made in court by its counsel suggest a lack of preparedness to accept that errors have been made. This appears also to be borne out by the bank’s letter of offer to Mr and Mrs Asivo dated 19 July 2010 (annexed to the affidavit of Sonya Malori) which proposes a loan of K65,740.00, repayable at K718.55 per month over 12 years. This differs markedly from Mr Asivo’s proposal of 1 July 2010, which proposes a loan of K58,700.00, repayable at K596.00 per month over 16 years. Another curious aspect of Sonya Malori’s affidavit is that it gives the impression (in paragraphs 7 and 19) that the bank and its credit committee are different institutions. In paragraph 7 she states “the bank further ... reviewed the loan agreement and with approval from the credit committee issued a letter of offer ...”. Para 19 states that “the bank was still in the process of seeking confirmation from Credit and to issue its position when the plaintiff filed this application”. This also conveys the impression that the defendant bank has not grasped the importance of the need to make firm and timely decisions on this case and to resolve its differences with its customers and settle this matter expeditiously. The bank needs to change its attitude.
22. As for the subject matter of the mediation it should focus, of course, on the terms of a revised loan agreement, which would seem to depend, as I have explained, on reaching agreement on what the current state of the loan account is. However, it would be beneficial to address all other areas of dispute, including Mr Asivo’s claim for post-judgment interest, to minimise the possibility of further litigation. I look forward to the prospect of the mediator filing a report of the mediation under Section 7D of the National Court Act, notifying the court of settlement, which could with the consent of the parties be embodied in a consent order disposing of the proceedings. If settlement is not reached, however, the matter will return to court and proceed to trial.
COSTS
23. As I am ordering mediation, and even though I have again been critical of the bank’s approach to this case, I will order that the parties bear their own costs.
ORDER
(1) In relation to the plaintiff’s notice of motion filed on 6 August 2010:
(a) the plaintiff’s claim for relief in paragraph 9 is dismissed; and
(b) the plaintiff’s claims for relief in paragraphs 1 to 8 and all unresolved matters in these proceedings and the related proceedings, OS No 290 of 2009, shall be referred to mediation by a mediator pursuant to Rule 5 of the ADR Rules, who shall, by separate order, be appointed by the Court.
(2) The purpose of the mediation is for the parties to make genuine and good faith attempts to:
(a) resolve all remaining parts of the proceedings, OS No 290 of 2009 and OS No 279 of 2010, and in particular to reach settlement on a revised loan agreement and reach an agreement on what the state of the loan account is;
(b) failing settlement, identify and limit the real and meritorious issues in the proceedings that warrant judicial consideration and determination; and/or
(c) enable the parties to reach consensus on the conduct of litigation.
(3) The mediation shall be conducted no later than 1 May 2011 and concluded no later than 31 May 2011.
(4) If no settlement is reached at the conclusion of the initial mediation, the matter shall return to the Court on 3 June 2011 for a case management conference to consider the most economic and effective means to bring the proceedings to trial expeditiously.
(5) At the case management conference:
(a) the parties shall demonstrate to the satisfaction of the Court the existence of any serious and meritorious issue which can only be heard and determined by the Court; and
(b) on such a case being made out, the Court may make such other orders and/or further directions as are necessary to have the matter tried expeditiously.
Judgment accordingly.
_____________________________
Lawyers for the plaintiff: Self-represented
Bank South pacific Limited Legal Services Division: Lawyers for the Defendant
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URL: http://www.paclii.org/pg/cases/PGNC/2011/363.html