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Kopyoto v No. 12 Neyapu Ltd [2024] PGNC 379; N11050 (23 October 2024)

N11050

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 15 OF 2024 (COMM)

BETWEEN:
MOSE KOPYOTO
Plaintiff

V

NO. 12 NEYAPU LIMITED
First Defendant

AND
PAGA HILL DEVELOPMENT COMPANY (PNG) LIMITED
Second Defendant

AND
GUDMUNDUR VIDAR FRIDRIKSSON
Third Defendant

Waigani: Anis J
2024: 15^th & 23^rd October

ASSESSMENT OF DAMAGES – Summary judgment entered with damages to be assessed – trial on assessment of damages – claim premised on breach of contract and recovery of debt with fixed interest – written contract with express terms – money loaned to the first defendant – promise to pay within 6 months with fixed interest sum – as security, the first defendant surrendered its title to a property to the plaintiff to keep – it was agreed that failure to pay the full sum with interest within 6 months will permit the plaintiff to sell the property – six months lapsed and payment was not forthcoming – plaintiff did not sell the property but filed court proceedings – total sum due under the contract was K3,000,000 inclusive of interest which was fixed at K1,000,000 – defendants paid K950,000 – how much of the principal sum is due? – whether interest fixed and whether plaintiff bound by the agreed sum, or whether plaintiff can seek additional interest at 8% per annum outside the terms of the contract and within the provisions of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 – consideration - ruling

Cases Cited:
National Capital District Commission v. Dademo (2013) SC1260

Counsel:
R Saulep, for the Plaintiff
S Liria, for the Defendants

JUDGMENT ON ASSESSMENT

23^rd October 2024

1. ANIS J: This was a trial on assessment of damages. The claim was for breach of contract of a personal loan agreement between the plaintiff and the first defendant, for a sum of K2,000,000. The agreement was signed on 27 May 2019 (LA) whereon the plaintiff loaned the first defendant a sum of K2,000,000. It was agreed that the first defendant would settle the loan within 6 months of receipt of the money. Interest was fixed at K1,000,000 which was to be paid together with the principal sum within the said 6 months. The security for the LA consisted of the property of the first defendant. It is described as State Lease, Section 27, Allotment 51, Graville, Port Moresby (Property). The Title to the Property was handed over to the plaintiff on the date of execution of the LA. The parties agreed that if first defendant defaults to fully repay the loan amount together with the fixed interest, the plaintiff shall sell the Property to recoup his money together with the interest and return the balance of the proceeds of the sale to the first defendant.

2. The first defendant defaulted, and the plaintiff, instead of selling the Property to recover his debt as per the terms of the LA, commenced this proceeding. On 8 July 2024, this Court entered summary judgment in favour of the plaintiff. Damages was reserved for assessment.

3. The trial on assessment was conducted on 15 October 2024. I reserved my ruling to a date to be advised.

4. This is my ruling.

EVIDENCE

5. Parties tendered their evidence which were given exhibit numbers. The evidence were admitted without the benefit of cross-examination.

COMMON GROUND

6. The plaintiff has abandoned his claim for general damages which was acknowledged by the parties at the start of the trial. The parties also agree that a total sum of K950,000 has been paid by the defendants to partly settle the outstanding debt and interest that is owed under the LA.

ISSUES

7. The main issues concern interest, that is, (i), whether the plaintiff is entitled to claim interest outside of what had been agreed upon in the LA, or regardless, (ii), whether the Court could still exercise its discretion and award interest applying the rate of 8% per annum as sought by the plaintiff, and if so, (iii), when should interest accrue?, and (iv) what is the final calculated interest sum that should be awarded with the remaining outstanding debt?

LOAN AGREEMENT

8. Copies of the LA were adduced in the evidence of both parties, that is, at Annexure MK1 to Exhibits P2 and Annexure GVF 1 to Exhibit D1 respectively.

9. The relevant clauses are clauses 3 and 4, which are in the following terms:

3.0 AMOUNT OF LOAN

(1) Subject to repayment conditions in Clause 4 and this loan agreement, the Lender hereby agrees to lend and the Borrower hereby agrees to borrow, the sum of K2 Million.

(2) The sum of K2 Million shall be paid by the Lender to the Borrower, in cash, on the day of execution of this agreement.

4.0 SECURITY & REPAYMENT CONDITIONS

4.1 The loan shall be secured and repaid in the following manner:

(1) Upon execution of this agreement and delivery of a cash amount of K2 million, the Borrower shall hand over to the Lender the Original State Lease Title to Section 27 Lot 51, Graville, as security until the loan is discharged, and/ or dealt with in accordance with this agreement.

(2) Interest Chargeable and agreed repayment period

(a) A flat rate of interest in the sum of K1 Million will be paid by the Borrower to the Lender, within 6 months of the date of this Loan agreement.

(b) However, if the loan is not repaid within 6 months, then the parties consent to sell State Lease Section 27, Lot 51, (Vol. 69 Folio. 242) Graville at the prevailing commercial rate and the proceeds shall be distributed as follows:

(i) K3 Million to the Lender to discharge the loan (inclusive of the agreed flat rate of K1 Million interest); and

(ii) The balance, shall be paid to the Borrower or its nominee.

10. At the hearing, I had indicated to counsel for the plaintiff that the interest component of the LA appeared as expressed or fixed. I then asked counsel whether the Court can vary the terms of the LA to cater for interest as per counsel’s submission. I also asked counsel to present case authorities that will assist me to make an award for interest outside what had been agreed between the parties under the LA. Counsel was, however, unable to assist in that regard. I also note that no written submission was provided by the plaintiff to assist the Court.

11. The defendants similarly did not assist with case authorities or written submission. However, counsel submitted that the interest component was fixed under clause 4, and that the plaintiff could not seek interest beyond what had been agreed between the parties. Counsel also submitted that the real reason why his clients had stopped payment was because of the plaintiff’s insistence on them to pay interest at exorbitant rates. Counsel referred to various correspondences that were admitted into evidence under Exhibit D2 to support their said claim.

CONSIDERATION

12. In National Capital District Commission v. Dademo (2013) SC1260, the Supreme Court sets out various factors a Court may consider when determining the issue of interest, as follows:

4. The award of interest is discretionary having regard to all relevant considerations including the following:

(1) whether the judgment sum for damages is of a kind which should attract award of interest;

(2) the whole or a part of the period calculated from the time the cause of action arose and the date the judgment is given;

(3) whether interest should be awarded for the whole amount or a part thereof;

(4) gross or undue delay in the prompt disposition of the case attributed to either of the parties;

(5) gross or undue delay by the Court in a timely disposition of the case, in particular in delivering a deferred judgment within the three (3) to six (6) months timeline set out in the Judicial Policy on Delivery of Reserved Judgments issued by the office of the Chief Justice on 18 August 2008;

(6) the appropriate interest rate for the particular type of damage awarded; and

(7) The interest of justice, fairness and equity.

13. I must qualify the above decision and add that the decision was made under the old Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52. This Act has been repealed. The new Act has the similar name, and it is called Judicial Proceedings (Interest on Debts and Damages) Act 2015 (2015 Act). That said, the considerations in National Capital District Commission v. Dademo (supra) are made in a broader sense thus are valid and applicable when considering interest.

14. The relevant provisions in the 2015 Act for this purpose, are ss. 4(1), 5(a)(b), and 6(1) and (3). They read as follows:

4. PRE-JUDGMENT INTEREST ON DEBTS AND DAMAGES.

(1) Subject to Section 5, in proceedings in a court for the recovery of a debt or damages, the court may order a rate as it thinks proper to be applied to the sum for which judgment is given interest, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

......

5. INTEREST ON INTEREST, ETC.

Nothing in Subsection 4(1) –

(a) authorises the awarding of interest on interest; or

(b) applies in relation to a debt on which interest is payable as of right, whether under an agreement or otherwise, except a debt on which interest is payable as of right against the State; or

......

6. POST-JUDGMENT INTEREST ON DEBTS AND DAMAGES.

(1) Subject to Subsections (2) and (3), where judgment is given or an order is made for the payment of money, interest shall, unless the court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on such of the money as is, from time to time, unpaid.

......

(3) Where, in proceedings on a common law claim, the court directs the entry of judgment for damages and the damages are paid within 30 days after the date that the direction is served, interest on the judgment debt shall not be payable under Subsection (1) unless the court otherwise orders.

[Underlining mine]

15. When applying the facts of this case to the 2015 Act and in particular, to s.5(b), the 2015 Act expressly precludes this Court from exercising its discretion in the manner as requested by the plaintiff. This is because of the fact that the LA contains express condition for interest to apply. In this case, interest was fixed and regarded as owing within a specific timeframe. The LA also provides express condition that the parties shall invoke if there is default in payment of the principal sum and interest. Pursuant to the LA, interest for the loan amount of K2,000,000 was fixed at K1,000,000 which was set to be due together with the principal sum, in 6 months’ time, which was on 2 April 2019. When that time lapsed, the defendants did not pay the full amount with the fixed interest. Interest in this case and pursuant to clause 4 of the LA, was fixed at K1,000,000 which was payable as of right. That therefore means, in my view, that provision of interest in the present case qualifies with (or meets) the exception that is provided for under s.5(b) of the 2015 Act.

16. In summary, I decline to make awards for interest in the matter within the provisions of the 2015 Act, as per the submissions of the plaintiff. The Court’s discretionary power that is exercisable under the 2015 Act, to award pre-judgment and post judgment interest awards are hindered because of the qualification that is set by ss.4(1) and 5(b) whereby or upon which the plaintiff qualifies.

ASSESSMENT

17. The sum that is due under the terms of the LA, and the amount that has been paid by the defendants to the plaintiff to date, is not disputed. The K2,000,000, which is the principal sum plus the K1,000,000 fixed interest, add to K3,000,000. So, the principal sum of K2,000,000 shall be reduced to K1,050,000, that is, after deducting the K950,000 payment that had been made by the defendants. I will add that to the fixed interest of K1,000,000 as prescribed under clause 4 of the LA, which will increase the total outstanding sum with interest, to K2,050,000.

18. The plaintiff is therefore entitled to a judgment sum (inclusive of interest) of K2,050,000.

19. Both parties have agreed in their closing submissions, that orders for payment of the judgment debt and interest, once determined by this Court, should be made in a manner that would allow the defendants a period of 1 month to settle the judgment sum. The parties also agree that if there is failure to satisfy the judgment sum as ordered by the Court within a month, then the Property shall be sold and the proceeds recouped to pay off the judgment debt, interest and costs.

SUMMARY

20. In summary, I will make a final award in the sum as assessed, together with consequential orders to follow in the manner as proposed by the parties.

COST

21. An award for cost is discretionary. I am minded to order cost to follow the event on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

22. I make the following orders:

1. A judgment sum (inclusive of interest) of K2,050,000 is awarded to the plaintiff against the defendants jointly and severally.
   
2. The defendants are ordered to settle the judgment sum within 1 month from the date of service of this Court Order on the defendants through their lawyers Liria Lawyers and Forensic Services.
   
3. If the judgment sum remains unsatisfied in full or in part after the expiry of 1 one month as per term 2 of the Court’s Order, the plaintiff shall be at liberty to exercise his rights in accordance with clause 4.1(2)(b) of the Loan Agreement.
   
4. If clause 4.1(2)(b) of the Loan Agreement is invoked, the defendants shall assist where required to ensure that the sale of the property described as State Lease, Section 27, Lot 51 (Vol. 69 Folio 242), Graville, Port Moresby proceeds without hinderance and delay, or assist in any way reasonable to ensure the smooth transition of the property to its new buyer or owner.
   
5. Cost of the proceeding is awarded to the plaintiff against the defendants jointly and severally on a party/party basis which may be taxed if not agreed.
   
6. I refuse the other relief sough in the Writ of Summons and Statement of Claimed filed 22 April 2024.
   
7. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly
________________________________________________________________
Saulep Lawyers: Lawyers for the Plaintiff
Liria Lawyers and Forensic Services: Lawyers for the Defendants