Avoi v Fiji Development Bank [2006] FJCA 11; ABU0047.2004S (10 March 2006)

IN THE COURT OF APPEAL FIJI ISLANDS
ON APPEAL FROM THE HIGH COURT OF FIJI

CIVIL APPEAL NO. ABU0047 of 2004S
(High Court Civil Action No. HBC145 of 2003)

BETWEEN:

PAULA DIKI AVOI
Appellant

AND:

FIJI DEVELOPMENT BANK
Respondent

Coram: Tompkins, JA
Scott, JA
Wood, JA

Hearing: Tuesday, 7 March 2006, Suva

Counsel: Mr S.R. Valenitabua for the Appellant
Mr N. Lajendra for the Respondent

Date of Judgment: Friday, 10 March 2006, Suva

JUDGMENT OF THE COURT

[1] This is an appeal from the judgment of Justice Pathik, dismissing the originating summons filed by the appellant, and dissolving an interlocutory injunction which had earlier been granted.

Facts

[2] On 7 April 1994, the appellant Paula Avoi and his wife, Vasemaca Avoi, executed a mortgage in favour of the respondent Bank, by way of security for a guarantee which had been given by the appellant and his son, Mosese Ba Avoi, on the same date, in relation to advances made, or to be made by the respondent to Taukei Shipping Limited. That mortgage was over a parcel of land at Vitilevu, CT17767, and it was registered No. 359321 ("the Vitilevu Mortgage"). The Taukei Shipping Limited was named in the mortgage as "the Debtor."

[3] The same guarantors executed a second guarantee in favour of the Bank on 8 June 1995, also in relation to advances made, or accommodation given, to Taukei Shipping Limited.

[4] In 1997, the appellant obtained a personal loan of $6,000 from the respondent for development of his farm at Savusavu, Vanualevu. It was secured by a mortgage in favour of the respondent, dated 24 June 1997, over the farm land CT 26666 and it was executed by the appellant as registered proprietor (the "Savusavu mortgage"). It was registered on 1 July 1997 number 426193, but was later withdrawn and re-registered, on 17 September 1998, No.449403.

[5] It was expressed to have been given "for the purpose of securing to the mortgagee the payment in the manner hereafter mentioned of the moneys hereunder described namely:

(a) all moneys whether advanced by way of loan for fixed term or provided by way of overdraft or otherwise now or hereafter to become owing or payable to the mortgagee by the debtor and the mortgagor or either of them either alone or on joint partnership account or any other account whatsoever;

(b) ... (not relevant)

(c) all moneys which the mortgagee shall lend or pay or become liable to lend or pay or may have advanced or may advance the payment or repayment of which the mortgagor has guaranteed or may hereafter guarantee to the mortgagee.

(d) ... (not relevant)

(e) ... (not relevant)

(f) ... (not relevant) "(emphasis added)

[6] The appellant repaid the sum of $6,000 advanced under the Savusavu mortgage, together with accrued interest and charges. On 28 January 2003, his solicitors wrote to the respondent asking for the discharge of the Savusavu mortgage, and the release of the lands secured by it.

[7] The respondent refused this request, asserting that the appellant remained indebted to it pursuant to the guarantees which had been given in relation to the Taukei Shipping Limited loan. By that time, the land which had been secured by the Vitilevu mortgage had been sold by the respondent, in the exercise of its power of sale, but a shortfall in excess of $200,000 remained.

The Issue

[8] The issue for determination, was whether the Savusavu mortgage could be relied upon as security for the indebtedness of the appellant arising under the guarantees for the Taukei Shipping Limited loan, or had only ever been available to the respondent as security for the $6,000 farm loan. Justice Pathik decided that issue in favour of the respondent.

[9] This decision is challenged upon appeal, it being submitted that it was never intended that the Savusavu mortgage should secure more than the $6,000 loan. In essence it was submitted that the two transactions, and the separate securities taken, were independent of one another, and that the trial Judge was in error in holding that, as a matter of construction, clauses (a) and (c) of the Savusavu mortgage were sufficiently broad to bring within their reach the appellant’s liability under the Taukei Shipping Limited guarantee.

[10] The case is not one where the respondent sought to rely upon the equitable doctrine of consolidation, by which a person in whom two or more mortgages are vested has a right to refuse to allow one mortgage to be redeemed unless the other or others are also redeemed.

There are several reasons why it did not, and could not, rely on this doctrine.

[11] First, s.87 of the Property Law Act (Cap.130) provides:

"87 A mortgagor seeking to redeem any one mortgage shall, by virtue of this Act, be entitled to do so without paying any amount due under any separate mortgage made by him or by any person through whom he claims, on property other than that comprised in the mortgage that he seeks to redeem."

This provision had the effect of making the equitable doctrine or right of consolidation no longer available in Fiji.

[12] Secondly, even if the right of consolidation was available, then it could not have been used in this case, since it was contingent upon the legal date for redemption of each mortgage having passed. That followed from the circumstance that, in seeking redemption, equity required the borrower or mortgagor to do equity, that is to settle each mortgage: Megarry & Wade The Law of Real Property 4th ed. at 927; and Cummins v. Fletcher [1880] UKLawRpCh 166; (1880) 14 Ch.D 699.

[13] Thirdly, it was a requirement for consolidation that each mortgage be given by the same mortgagor: Sharp v. Rickards (1909) 1 ch.109; & Thorneycraft v. Crockett [1848] EngR 827; (1848) 2 H.L.C. 239. That would not have been the case here.

[14] Although the appellant submitted that Cummins v. Fletcher was authority for a more general principle, that would bar the respondent from relying on the Savusavu mortgage, it is a decision which did no more than recognise the limitation on the doctrine of consolidation previously mentioned. It does not support the contention which was advanced that it rendered clauses (a) and (c) of the Savusavu mortgage unlawful.

[15] Neither that decision, nor s.87 of the Property Law Act, stands in the way of the respondent in this case. It falls to be decided by reference to the terms of the covenant contained, in particular, in clauses (a) and (c) of the Savusavu mortgage, earlier mentioned, which defined the nature and extent of the indebtedness that was secured by that mortgage.

[16] These clauses were expressed in terms that were sufficiently wide to embrace not only personal loans made to the appellant, but also any other indebtedness which he incurred to the respondent, including any debt arising under a guarantee. There is no occasion to read them down as confined to the $6,000 loan.

[17] When the Savusavu mortgage was taken the appellant was at least contingently liable to the respondent under the guarantee. That liability crystallised once Taukei Shipping Limited defaulted and demand was made upon the appellant.

[18] The appellant sought to avoid this conclusion by referring to the fact that the Vitilevu mortgage contained a clause that was missing from the Savusavu mortgage. It was as follows:

"26. It is further declared that the mortgage is intended to be collateral to a debenture of even date given by the debtor to the mortgagee to secure the same monies as is thereby secured." (emphasis added).

[19] It was suggested that the "debenture..... given by the debtor ", referred to in this clause, was the guarantee given by the appellant, and that this provided some indication that any indebtedness arising under it was only ever intended to be secured by the Vitilevu mortgage.

[20] There are two difficulties with this submission. First, it is by no means clear that the debenture contemplated was the guarantee. The expression "debenture ... given by the debtor would more appropriately describe a fixed or floating charge given by Taukei Shipping Limited, as a debtor to the respondent, than it would describe a third party guarantee. That company was in fact named in the mortgage as "the debtor."

[21] Secondly, and more fundamentally, there is no occasion to read down the subsequent Savusavu mortgage by reference to the provisions of the Vitilevu mortgage. The Savusavu mortgage stands alone, and it is to be construed on its own terms. They were wide enough, as Justice Pathik correctly found, to embrace any indebtedness of the appellant to the respondent including that arising under the guarantee, at the time that its redemption was sought.

[22] Error has not been shown. The appeal is dismissed and the appellant is ordered to pay the respondent’s costs, in the sum of $500.

Tompkins, JA
Scott, JA
Wood, JA

Solicitors:
Valenitabu S. R. Esq. Suva for the Appellant
Messrs. R. Patel and Company, Suva for the Respondent