Ali v Bank of Baroda [1998] FJCA 67; ABU0005U.1993S (27 February 1998)

IN THE FIJI COURT OF APPEAL
CIVIL JURISDICTION

CIVIL APPEAL NO: ABU0005 OF 1993S
(High Court Civil Action No. 702 of 1986)

BETWEEN:

MUSTAQ ALI
MOHAMMED YUSUF
SAIRA BI
IMAN-UD-DEAN
Appellants

AND

BANK OF BARODA
Respondent

Dr. M.S. Sahu Khan for the Appellants
Mr A. Singh for the Respondent

Date and Place of Hearing: 17 February, 1998, Suva
Date of Delivery of Decision: 27 February, 1998

JUDGMENT OF THE COURT

This appeal is against a summary Judgment delivered at Lautoka on 27 November 1991. The Judgment was against four defendants, three of whom filed notice of appeal. The first defendant Iman-ud-Dean has by consent been included in this appeal as the 4th appellant.

Background

Tavua Buses Limited arranged finance accommodation with the respondent Bank in 1981 secured by a general debenture, a registered bill of sale, and a personal guarantee by its then directors. In or about August 1983 the second and third appellants took over the operations of Tavua Buses Limited. The respondent Bank required and obtained new substituted securities by way of a general debenture, a registered bill of sale over a bus No. BJ 504 and a guarantee executed by the four appellants. These documents were all executed on 15 November 1983.

On 17 December 1985 the respondent exercised its rights under the bill of sale and seized bus No. BJ 504. Before a mortgagee sale could be completed the bus was severely damaged by fire; was subsequently sold to the second appellant for $2,700; and the sum of $16,500 was recovered by way of insurance.

On 19 February 1993 the respondent obtained a ruling in its favour from the High Court at Lautoka in proceedings commenced by the 2nd appellant. He had $25,156.15 to his credit in a deposit account with the respondent which was payable on demand. The respondent had fore closed this account. The ruling from the High Court was to the effect that the respondent was entitled to retain that sum of $25,156.15 as a set off against the Judgment of 27 November 1991 the subject of this appeal.

No evidence was produced to us as to when the respondent received the insurance funds of $16,500. It would seem likely that the $25,156.15 originally belonging to the 2nd appellant was appropriated by the respondent in October 1992.

The funds so far received by the respondent therefore total $44,356.15. When these proceedings were initiated by the respondent on 12 November 1986 the total amount owing to it was stated to be $60,141.00.

The Guarantee

The four appellants and their company executed the standard printed form of Bank guarantee on 15 November 1983. Clause 9 of this guarantee in so far as it is relevant provides that -

“................ the total amount payable hereunder by the Guarantor shall not exceed the sum of $43,000.00 ........ together with a sum equal to one years interest on the said sum at the rate aforesaid (the sum of which two amounts is hereinafter called “the stated sum”) and the costs charges and expenses of obtaining or attempting to obtain payment............ and interest on the stated sum at the rate aforesaid.......... until payment of the total amount payable hereunder by the guarantor.”

Based on that clause the Judgment now appealed against stated as follows:-

“(a) The sum of $43,000.00 (FORTY THREE THOUSAND DOLLARS) being the claim in respect of a guarantee dated 15th November, 1983;

(b) $300.00 (THREE HUNDRED DOLLARS) being the expenses incurred in attempting to obtain payment pay for the defendant;

(c) $5,805.00 (FIVE THOUSAND EIGHT HUNDRED AND FIVE DOLLARS) being a sum equal to one (1) year’s interest on $43,000.00 (FORTY THREE THOUSAND DOLLARS) at $13.50 (THIRTEEN DOLLARS AND FIFTY CENTS) per centum per annum;

(d) Interest payable on guarantee on $49,105.00 (FORTY NINE THOUSAND ONE HUNDRED AND FIVE DOLLARS) at the aforesaid rate of $13.50 per centum per annum calculated from the date of service of demand until the date of payment.

(e) Costs of this application in this action.”

The Judgment purports to “be entered against each of the Defendants” Counsel for the appellants submitted that implied individual liability of the amount awarded for “each” of the appellants. We do not accept that submission and the Judgment represents the total liability of the four appellants based on the guarantee upon which the proceedings were founded.

Grounds of Appeal

Counsel for the appellants relied on two principle grounds of appeal.

The first ground is -

(1) That the learned trial Judge failed to properly scrutinize the affidavits filed and in particular the affidavits on behalf of the appellants which clearly raised triable issues.

That submission relies solely on the order made on 27 November 1991 which states:

“No submission having been received from defendants as ordered the application by plaintiff under summons dated 15.12.86 is granted and orders are made as sought.”

Counsel for the appellants put it this way -

“Thus from that it is clear that the judgment was given not because the learned Judge was satisfied that judgment ought to be given for the respondent on the merits of the application but only because no submission was received from the appellants.”

We find no justification for that assumption and no merit in that submission. The respondent filed its submissions on 1 December 1987. It is conceded by the appellants that they failed to file any submissions. However, it is correct as Mr Singh reminded us, that in his comprehensive submissions to the High Court all the issues raised by the appellants in their affidavits were fully canvassed. As a result, so he submitted with justification, the learned judge had the advantage of taking into account his comprehensive submissions which also dealt with issues that had been raised by the appellants. We cannot accept Counsels submission “..... that the learned Judge has merely penalised and/or punished the appellants rather than giving Judgment on the merits of the application of the respondent.” There is no justification for such a submission.

As part of this ground of appeal Counsel referred to the appellants claims that the guarantee was signed on condition that the respondent would exhaust its remedies under the other securities viz. the bill of sale and the debenture. However the appellants acknowledge that the respondent did take action under the bill of sale; and as the manager of the respondent Bank Manojit Guha deposed in his affidavit. “In any event I am informed and verily believe that Tavua Buses Limited does not have any other assets.” There is no evidence in any of the affidavits and no submissions were made to us as to what further action if any could have been taken under those other securities.

In any case the provisions of Clause 7 of the debenture were not answered by Counsel for the appellants. That clause provides

“(1) THAT this guarantee shall not affect or be affected by any other or further security now or hereafter held or taken by the Bank or be affected by any loss by the Bank of any collateral or other security or by the Bank failing or neglecting to recover by the realization of any collateral or other security or otherwise any of the moneys hereby secured or by any other laches acts or ommissions or mistakes on the part of the Bank or by the release discharge abandonment or transfer either in whole or in part and either with or without consideration of any security now or hereafter held by the Bank from the debtor or from the Guarantor or from any other person.”

The second ground of appeal is -

(2) The appellants had shown in their pleadings and affidavits that there were arguable defences to the claim.

In support of the second ground of appeal Counsel identified what he submitted were “important matters.”

(i) The basis on which the guarantee was signed;

(ii) The effect of the condition of the guarantee as alleged by the Appellants;

(iii) Whether the respondent was negligent as regards the safety of the bus;

(iv) The value of the bus at the time of the fire;

(v) There were contentions issues that needed to be resolved by trial proper;

(vi) There were triable issues of fact and law.

The allegation of negligence in respect of the bus and the challenge to its value at the time of the fire are issues which were fully canvassed in the affidavit of Manojit Guha dated 25 March 1987. He explained how the bus was held in premises patrolled by a full time watch man; that the police were still investigating the incident; and that the bank had insured the bus against fire. As to the question of value he deposed that the applicants claim to a pre accident value of $55,000 did not relate to its purchase price of $52,468 in 1981 some 4 years earlier and the Insurance assessment of its pre accident value of $19,000.

In our opinion none of these matters provide a defence to this action. Nor are we satisfied that they are issues or questions in dispute which ought to be tried in these proceedings. They may be, and probably could be with appropriate supporting evidence, “important matters” in relation to the appellants’ counter claim which is still current and pending in the High Court.

The application for summary Judgment under Order 14

Order 14 sets out the procedure to obtain a summary Judgment when a “..... defendant has no defence to a claim included in the writ........” The dual purpose of this
procedure was referred to by the Court of Appeal in Pemberton v. Chappell (1987) 1 NZLR.1. (C.A.) as follows:-

“While the desirability of eliminating the frustration and delays which can be caused by unmeritorious or tendentious defence needs no emphasis, it is important to pay proper regard to the defendant’s interest and to be wary of allowing the rule to become an instrument of oppression or injustice in the laudable interest of expediting litigation. It is true that ‘justice delayed is justice denied’, but not at the expense of a fair hearing for both parties, unless the Court is sure there is no real defence. It is unlikely to reach this conclusion if the affidavits disclose disputed questions of fact, the resolution of which depends on an assessment of credibility or reliability of witnesses.”

The writ and statement of claim which initiated these proceedings was filed on 12 November 1986. The statement of defence was filed on 10 December 1986. The application for summary judgment under Order 14 was filed on 15 December 1986. This commendable alacrity displayed by counsel for both parties up to this stage then fades into oblivion. It was not until 27 November 1991 some 5 years later that the summary judgment now appealed against was delivered; and sealed on 1 February 1993 - a total of 7 years from when the application was first filed?

Whether the appellants have a meritorious defence which raises questions of fact upon which the outcome of the case may turn, is fundamental to whether the summary judgment procedure is appropriate.

In the present case the respondent relies solely on the guarantee executed by the appellants. In their statement of defence they allege that “Tavua Buses Limited after the said fire and damage to the said bus No. BJ 504 assigned to the 3rd and 4th defendants all its rights powers titles and cause of actions against the plaintiff in respect of the loss and damages to the said bus as aforesaid.” However no evidence of this assignment was produced or exhibited to any of the affidavits filed by the appellants in the High Court. Nor did counsel refer us to any such assignment. We draw attention to the provisions of s.113 of the Property Law Act (Cap. 130).

In their statement of defence the appellants acknowledge and admit -

1) That they had by a guarantee dated 15 November 1983 guaranteed the payment when demanded in writing of all monies advanced to Tavua Buses Limited;

2) That the limit under the guarantee was $43,000;

3) That they had been served with demands under the guarantee and that they had failed and/or neglected to pay the same.

Those admissions effectively establish that in so far as the guarantee is concerned the appellants concede liability - and that they have no defence. However they allege in their amended statement of defence that the respondent was negligent in the ways therein described and that as a result they are therefore entitled to a set-off or counter-claim, against the respondent for a sum greater than they concede is owing under the guarantee.

This raises the issue as to whether such a set-off or counter-claim can support a defence to an application for summary judgment. This requires consideration of what may be referred to as overlapping facts giving rise to either equitable set-off or counter-claim. If the factual overlap is significant then summary judgment may not indeed be justified. If the factual overlap is not significant then summary judgment may be appropriate with or without conditions which may also in certain circumstances include a stay of execution.

The Fiji legislation, unlike that applying in New Zealand, adds another factor to the above formula. Order 14 (3) provides –

“3 (1) Unless on the hearing of an application under rule 1 either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against that defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed.

(2) The Court may by order, and subject to such conditions, if any, as may be just, stay execution of any judgment given against a defendant under this rule until after the trial of any counter claim made or raised by the defendant in the action.”

This order requires the defendant to show cause to the contrary once a plaintiff’s application is properly constituted. It is thus for a defendant to establish why judgment should not be given against him. Apart from generalised allegations of negligence, the appellants in this case have not in our opinion established the facts upon which they rely for a set off and counter claim, which as a result do not overlap the claim based on the guarantee and which itself is admitted by the appellants.

For those reasons the appeal is dismissed with costs to the respondent. As indicated earlier the counter claim is current and pending in the High Court.

We have been advised that following the High Court Ruling on 19 February 1993 the second appellant's savings account containing $25,348.53 was appropriated by the reent on 29 March 1993. That amount is to be credited to the the liability of the appellants under their guarantee. Interest under the quarantee at the rate of $13.50 per centum per annum shall be payable on $49,105.00 from 1 May 1986 the date of demand to 29 March 1993; the balance then outstanding shall be reduced by the appropriated sum of $25,348.53; interest aforesaid shall be payable on the reduced amount from 29 March 1993 until the date of payment; such interest to be calculated by the Registrar if and, be.

Sir Moti Tikaram
President
FIJI COURT OF APPEAL

Sir Maurice Casey
JUDGE OF APPEAL

Mr. Justice J.D. Dillon
JUDGE OF APPEAL