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Korau v Credit Corporation Finance Ltd [2022] PGNC 562; N10076 (25 November 2022)

N10076

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 234 OF 2022

BETWEEN:
JOSEPH EVOREA KORAU JR
First Plaintiff

AND:
TWODOT BUSINESS SOLUTIONS LIMITED
Second Plaintiff

AND:
CREDIT CORPORATION FINANCE LIMITED
Defendant

Waigani: Tamade AJ
2022: 24^th November & 25^th November

MORTGAGES – mortgagers default – mortgagor seeking interim orders for extension of time to offset loan arrears – statutory rights – equitable rights – equity follows the law – no identifiable cause of action

CONSTITUTION – Section 155(4)

Cases Cited:

Bluewater International Limited v Mumu [2019] PGSC 41
Chief Collector of Taxes v Bougainville Copper Limited [2007] PGSC 1; SC853
Employers Federation v Waterside Workers (1982) N393
Iangalio v NDB [2016] PGSC 15
Robinson v National Airlines Corporation [1983] PNGLR 476
Malewo v Faulkner [2009] PGSC 3; SC960

Counsel:

Ms Mercy Yaipupu, for the Plaintiffs
Mr Steward Thoke, for the Defendant

25^th November, 2022

1. TAMADE, AJ: The Plaintiffs brought to the attention of the Court an urgent application seeking immediate interim injunctions as against the Defendant to restrain the Defendant from acting on a guarantee given by the First Plaintiff over a loan obtained by the Second Plaintiff. The Plaintiffs essentially are seeking orders that the Court restrain the Defendant from putting up for tender the First Plaintiff’s matrimonial home given under a guarantee to the Third Defendant for a loan in favour of the Second Plaintiff. The matter was set down for hearing yesterday and Ms Yaipupu and Mr Thoke both appeared for the parties.
   
2. Before Ms Yaipupu proceeded to move her application by way of Notice of Motion filed on 18 November 2022, Mr Thoke of the Defendant also informed the Court that he had also an application to dismiss the proceedings for disclosing no reasonable cause of action and for being frivolous and vexatious and an abuse of the process of the Court pursuant to Order 12 Rule 40(1)(a)(b) and (c) of the National Court Rules. Ms Yaipupu objected to the application by Mr Thoke as being short served however Ms Yaipupu had also given short notice of the application as she is seeking to move an urgent application. I overruled the objections on the basis that Mr Thoke’s application is in response to the application for interim injunctions as it goes to the argument of whether or not the Plaintiff has a meritorious case warranting the grant of injunctions. Mr Thoke’s application was only by way of a Notice of Motion and no supporting affidavits opting to rely on submissions of law and responding to the Affidavit of the Plaintiff. This was no prejudice to the Plaintiffs and therefore I heard both applications.
   
3. In the Originating Summons filed by the Plaintiff’s on 18 November 2022, the Plaintiff seeks interim injunctions pending the determination of these proceedings to restrain the Defendant from entering and taking possession of the First Plaintiff’s matrimonial home and claiming allegations of bad faith on the part of the Defendant to sell the First Plaintiff’s house as part of a guarantee given by the First Plaintiff to secure a bank loan to the Second Plaintiff. The Plaintiff basically alleges that the property the subject of the guarantee is not the subject of a loan from the Defendant and is registered to the name of the First Plaintiff and not the Defendant. The First Plaintiff is in essence attempting to untie itself loose from a binding commitment it made as a guarantor to the loan taken out by the Second Plaintiff from the Defendant. The Plaintiff claims that the Defendant should assess the value of the Second Plaintiff and realise any asset of the Plaintiff to offset the loan arrears before attempting to realise the asset the subject of the guarantee.
   
4. In the Affidavit of the First Plaintiff, Mr Joseph Evorea Korau Jr filed on 18 November 2022, he states that the Second Plaintiff is a company involved in the printing industry and provides paper and merchandise printing service to its clients. On 10 October 2019, the Second Plaintiff obtained a loan of K1 496 986 from the Defendant to refinance an existing loan of K512 515.67 with Fincorp, and K819 452.33 to acquire Printing Machines and other assets and K150 000 as working capital. The term of the loan was for 120 months with a monthly repayment of K22 351.34 and interests. Mr Korau Jr states that to secure the loan, the company pledged all of its’ present assets and the directors of the company being Mr Korau Jr and his wife also entered into a Deed of Guarantee with the Defendant. Mr Korau Jr states that he had no choice to but to pledge his matrimonial house as the Second Plaintiff was in dire need of finance. The business weathered due to the covid19 pandemic with the Defendant giving a loan holiday of 3 months from April to June of 2020 during the country wide lockdown. The Plaintiff states that the business again was affected by the Russia-Ukraine war as it relies on supplies from China and due to the global situation and due to covid, the Second Plaintiff company again suffered in the business and defaulted in its monthly repayment to the Defendant. The Second Plaintiff was not able to repay its loan between May 2022 to July 2022 and states these arears were eventually paid in August of 2022 and November of 2022.
   
5. October’s repayment could also not be repaid, and the Defendant took action in November to give notice to the Plaintiffs that it was going to act upon the guarantee given by the First Plaintiff by putting up the property for tender to offset the loan. The Plaintiffs’ however have sought assistance from Kina Bank to refinance their loan and pleaded with the Defendant to give them more time to repay the loan. The proceedings before the Court as submitted by Ms Yaipupu seeks the indulgence of the Court to grant some time to the Plaintiffs to repay the loan and not to put up the matrimonial home of the First Plaintiff as part of the guarantee for public tender.
   

Principles for the grant of an injunction

6. Ms Yaipupu has referred the Court to the case of Chief Collector of Taxes v Bougainville Copper Limited^[1], which sets out the requirements for the grant of injunctions which is an equitable relief:
   
   1. an undertaking as to damages has to be given by the Applicant
   2. the Applicant must demonstrate that there is a serious question to be tried or establish a meritorious case that warrants the Court’s jurisdiction
   100. the Applicant must demonstrate that damages is not an adequate remedy. If damages will suffice, injunctions should not be granted.
   4. the balance of convenience must favour the grant of the injunction.
      
7. The interest of justice principle has been also added to the above list in many cases. Other considerations as to the Undertaking as to damages is, is the Defendant adequately protected by the Plaintiff’s undertaking as to damages and when all other things are considered, the status quo should be preserved.^[2] A court is therefore tasked to consider these principles according as to each case presented before the Court. I find that the Plaintiffs bear the onus to prove that it has a meritorious case before the Court that warrants the Court’s jurisdiction. What is the right that the Plaintiffs assert needs to be protected by the Court? An injunction will not be granted in a vacuum or on a vexatious claim having no foundation in law or equity. This is where I turn to consider the objections raised by Mr Thoke that the Court should assess the pleadings in the Plaintiffs’ Originating Summons to ascertain the nature of the Plaintiff’s claim.
   

Is there a serious question to be tried in this matter and does the Plaintiff have a serious and not a speculative case which has a real possibility of ultimate success?

8. Order 4 Rule 3 of the National Court Rules gives an option for a matter to commence by way of an Originating Summons where there is unlikely to be a substantial dispute of fact etc where the Orders sought are in the nature of declarations. Mr Thoke submits that the Originating Summons pleads a claim on bad faith by the conduct of the Defendant in realising the asset the subject of the guarantee that was put forth by the First Plaintiff and his wife. Mr Thoke further submits that the element of bad faith is not on a foundation of a breach of the agreement of the Deed of Guarantee or the loan agreement or a foundation in law nor in equity wherein the Defendant can adequately respond to. Perhaps the Plaintiffs should have proceeded by way of a Writ of Summons and or a Statement of Claim to succinctly state the nature of the case which will allow the Defendant to respond to the allegations be it of bad faith etc.
   
9. From hearing Ms Yaipupu, the Plaintiffs only want a temporary relief, they want time to pay the outstanding arears, their intent does not go to the foundation of the claim, they concede to an extent that perhaps there is no legal right and or that the law should give in to their plea. I am of the view that the principles of equity comes in to smooth the harshness of the law however equity always follows the law. The Plaintiffs have the onus to prove how equity as part of our Underlying law, as part of section 155(4) of the Constitution, what are the demarcations and or the foundations that these can work for the Plaintiff, I have not heard nor received convincing submissions from the Plaintiffs as to these.
   
10. In analysing the Plaintiff’s Originating Summons, I find that the Plaintiffs substantive claim of acting in bad faith is lose and unhinged on any foundation of law or equity. In Bluewater International Limited v Mumu^[3] where the Court said:
    

“In order to come to its decision on the appeal, the Court had regard to the decision in Karl Paul v. Aruai Kispe and 2 Ors (2001) N2085, where the Court said:

“The Court has wide powers to control the conduct of proceedings before it, subject to jurisdictional limitations fixed by Statute. It is in the inherent jurisdiction of the court to take firm control of the proceedings to ensure that the business of the Court is conducted in an orderly and fair and timely manner and to ensure that justice is done in the particular case. To this end, it is within the inherent jurisdiction of the Court to scrutinize the form and contends of documents before it...

There is a wide discretion vested in the Court by the NCR to screen and weed out claims which do not disclose a reasonable cause of action, are frivolous and vexatious or an abuse of process of the Court, (O12 r 40), or the documents filed in Court are scandalous irrelevant or otherwise oppressive (O2 r 29), or the ground of irregularity. That discretion is normally exercised upon application by an interested party. Nevertheless, it goes without saying that the Court may exercise that discretion on its own initiative. It is open to the Court to raise and determine.”

11. The following passage from the Supreme Court case of Malewo v Faulkner^[4] gives a clear explanation of what the Court is tasked with to analyse the Plaintiffs pleadings and whether it disclosed a reasonable cause of action in law:
    

“...Besides the poor grammar (which makes it difficult to make sense of what is being claimed), this paragraph is defective as it seeks, in effect, a four-pronged declaration without disclosing the legal basis or justification for the court making such a declaration. As Cannings J pointed out in Kiee Toap v The State and Others (2004) N2766 whenever a person brings a case to court, the originating document must demonstrate that the plaintiff has a cause of action. The document must clearly set out:

- the legal ingredients or the elements of the claim; and

- the facts that support each element of the claim.

If the plaintiffs originating document does that, there is a reasonable cause of action. If not, it does not disclose a reasonable cause of action. If we apply that test to paragraph 1, it fails to demonstrate that there is a clear legal basis underlying the claim for a declaration. The plaintiffs are seeking four declarations without spelling out the legal ingredients or the elements of the cause of action. It is not until towards the end of the originating summons, in paragraph 34, that some indication is given of what the causes of action might be: the plaintiff claims an order that the first and third respondents are guilty of:

(i) Private nuisance
(ii) Public nuisance
(iii) Trespass
(iv) Breach of absolute and or reasonable duty of care
(v) Violation of domestic and international law.

These claims are, in themselves, rather vague. What does "breach of absolute and or reasonable duty of care" mean? "Violation of domestic and international law" is tantamount to saying that something is unlawful. But, how and why is it unlawful? Subparagraphs 34(iv) and (v) clearly do not disclose any cause of action. They are so vague as to be meaningless. Subparagraphs 34(i), (ii) and (iii) do, at least, refer to recognisable causes of action. Private nuisance, public nuisance and trespass are torts. But subparagraphs 34(i), (ii) and (iii) do not relate in any discernable way to any of the preceding paragraphs, least of all paragraph 1.

12. It should be asked then in this case, what is the legal foundation for the conduct of bad faith as claimed by the Plaintiffs? Is it a breach of any agreement, is it a breach of a duty in common law? The pleadings are vague and do not hinge on a proper cause of action in law. It follows that there is no reasonable cause of action or no serious question to be tried that warrants the Court’s jurisdiction. An injunction can not operate in a vacuum.
    
13. Mr Toke has raised other objections that perhaps the Plaintiffs should have pleaded a breach of the Fairness of Transaction Act if they take issue with unwillingness of putting up their matrimonial home as a guarantee to the loan if they feel they were coerced in some manner by the Defendants. Mr Thoke goes at length to make submissions on if the Plaintiff’s claim is premised on equity. I am of the view that to venture down this path is to speculate on what the Plaintiffs case should have been or what they out to plead and this Court will not get into a guessing game. What is before the Court is a claim that is vague and falls short of a meritorious claim, it is void of a right that needs to be protected by the Court. The Defendant is entitled to act on the guarantee as is the legal word given by the First Plaintiff and his wife as guarantors within the perimeters of the Deed of Agreement. If the First Plaintiff can not honour his word as a guarantor, the Plaintiffs’ Undertaking as to Damages is therefore an empty paper Undertaking.
    
14. The Defendant submits that pursuant to the case of Iangalio v NDB^[5], the Defendant is not obliged to exhaust its remedies against a debtor prior to commencing action against a guarantor. I accept those submissions.
    
15. The Court, therefore, makes the following orders;
    
    1. The Plaintiffs’ Notice of Motion filed on 18 November 2022 is dismissed.
    2. These proceedings are dismissed pursuant to Order 12 Rule 40 of the National Court Rules.
    3. The Plaintiffs shall meet the costs of the Defendants to be taxed if not agreed.
       

Orders accordingly.

______________________________________________________________
Suntin Lawyers: Lawyers for the Plaintiff
Credit Corporation Finance Limited In-house Counsel: Lawyers for the Defendant

^[1] [2007] PGSC 1; SC853 (2 February 2007)

^[2] Employers Federation v Waterside Workers (1982) N393 and Robinson v National Airlines Corporation [1983] PNGLR 476
^[3] (2019) PGSC41
^[4] [2009] PGSC 3; SC960 (13 March 2009
^[5] [2016] PGSC 15