The National, Tuesday, June 7th 2011
THE National Development Bank and all other commercial banks must consider carefully how they treat their customers, Justice David Cannings says.
He made the comment last Friday while ruling the NBD had breached its contract with Stephen Asivo by repossessing and selling vehicles it had helped Asivo buy.
In a scathing indictment of the bank contract, Cannings said: “I must confess I could not bring myself to read it through from beginning to end for fear of its effect on my soundness of mind.
“It is, with respect to its drafters and to the bank which chose to foist it on its customers, and despite its ostensible grammatical correctness, a piece of turgid, incomprehensible gobbledegook.”
Asivo, who represented himself in the proceedings, took the bank to court over what he described as unfair treatment under a loan agreement.
Asivo is seeking K1.7 million in damages.
Asivo, the executive director of Madang Cocoa Growers Export Company Ltd, had on Jan 28 applied for a loan of K300,000 to buy two Toyota LandCruisers for the company.
The loan was approved at 12% per annum interest for seven years with a monthly repayment of K5,296.
Court documents said Asivo failed on several occasions to meet the monthly repayment obligations and the bank repossessed the two vehicles twice at different times.
The court heard that Asivo made a catch-up payment of K26,700 while the debit balance of the loan account was K295,530.55, reducing the loan balance to K268,830.55.
The bank returned the vehicles on Feb 8 but seized them again eight months later.
Both vehicles were sold to a single buyer for K86,524.
The loan was offset as having a credit balance of K7,851.32.
But Cannings ruled that despite the mortgage and loan agreement and the customer’s erratic payments, the bank took possessions of the vehicles only 17 months into a scheduled 84-month loan.
He said the bank took drastic steps in confiscating vehicles it helped the customer to buy and that was “oppressive and unfair”.
Not tendered in court as evidence was the loan agreement or any representation by the bank.
Instead a 31-page fixed and floating charge report was tendered that Cannings found to be “a piece of turgid, incomprehensible gobbledegook”.
Cannings held that Asivo was not in material default and that the bank acted contrary to its duty of fairness under the Fairness of Transactions Act 1993.
Both parties will appear before the court next month on the question of damages.
The costs of the proceedings to be paid by the defendant.