Goundar v Sen [2014] FJCA 176; ABU0032.2010 (29 May 2014)

IN THE COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT

Civil Appeal No: ABU 0032 of 2010
(High Court of Fiji No: HBC 061 of 2005)

BETWEEN:

KIRSTAMMA GOUNDAR
First Appellant

AND:

HARI KRISHNA GOUNDAR
Second Appellant

AND:

MOHAMMED SAMSUDEEN SAHU KHAN as SAHU KHAN AND SAHU KHAN
Third Appellant

AND:

CHANDAR SEN
Respondent

Coram : Basnayake JA
Amaratunga JA
Corea JA

Counsel : Mr. S. Nacolawa for the third Appellant
Mr. V.M. Mishra for the Respondent

Date of Hearing : 12 May 2014
Date of Judgment : 29 May 2014

JUDGMENT

Basnayake JA
[1] This is an appeal filed by the 1st, 2nd and 3rd appellants (1st defendant/mortgagee/1st garnishee, 2nd defendant/mortgagee/2nd garnishee and 3rd garnishee) to have the judgment in the garnishee proceedings of 10 August, 2010 set aside. A notice of appeal was filed on 23 August 2010 by the 3rd garnishee in respect of the 1st and 2nd defendants and the 3rd garnishee. The 3rd garnishee had been the solicitor for the 1st and 2nd defendants.

[2] On 26 September, 2011 an amended notice of appeal was filed by Messrs Anil J Singh Lawyers, as solicitors for the 1st and 2nd defendants. At the hearing the 1st and 2nd defendants were absent and unrepresented. The learned counsel for the respondent (purchaser at the mortgage sale and judgment creditor) submitted that the 1st and the 2nd defendants have discontinued their appeal (vide written submissions of the respondents dated 3 May 2014, in paragraphs 25 and 58). What is now remaining is the notice of appeal filed by the 3rd garnishee (3rd appellant). This notice is in respect of the 1st and 2nd defendants and the 3rd garnishee. However with the discontinuation of the appeals of the 1st and 2nd defendants, this notice is considered as far as it is applicable to the 3rd garnishee.

The garnishee order
[3] The 1st defendant had sold the property in this case to the plaintiff (mortgagor and judgment debtor), who took out a mortgage for the balance payment. The plaintiff defaulted payments and the mortgage was put in suit. The respondent purchased the property at the sale. The plaintiff obtained an injunction restraining the mortgagees (1st and 2nd defendants cum 1st and 2nd garnishees) from taking possession. The respondent got himself added as a party to these proceedings as the 4th defendant. The respondent filed a counter claim. On 9 April, 2010 judgment (pg. 486 of the Record of the High Court (RHC)) was entered in favour of the respondent on the counter claim, in a sum of $277,400.00 together with interest against the plaintiff. This sum was awarded due to the injunction being obtained by the plaintiff wrongfully, causing loss to the respondent.

[4] The respondent had paid a sum of $650,000.00 in to the trust account of the 3rd garnishee in the purchase of this property. After deducting the dues, the 3rd garnishee admits to having received $631,513.00. It is the position of the 3rd garnishee that the whole sum received by him namely, $631,513.00, was paid to the mortgagees who were the 1st and 2nd appellants (they were also the 1st defendant/1st garnishee and 2nd defendant/2nd garnishee).

The amount due on the mortgage
[5] As per the affidavit dated 12 April 2010 of the respondent (pgs. 404 - 406 of the RHC) the amount due on the mortgage to the mortgagees (1st and 2nd defendants) was $428,652.45.

[6] When this amount is deducted from $631,513.00, $202,861.44 remains. Thus this sum ($202,861.44) was considered as the surplus which was liable to be paid to the mortgagor (plaintiff) by the mortgagee's solicitor who is the 3rd garnishee. The respondent claims that the 3rd garnishee is holding the sum of $202,861.44 in the trust account after the settlement of the mortgaged dues and is liable to be seized under the garnishee order.

[7] The question in this case is whether there was a surplus and if so, whether that was paid to the mortgagor. If that surplus was not paid to the mortgagor, the learned Judge held that the garnishee order should be made absolute.

[8] The learned counsel for the 3rd garnishee submitted that the sum of $631,513.00 was paid to the mortgagees on the instructions of the mortgagees.

The procedure to follow in a mortgage sale
[9] The purchase money arising from a sale by the mortgagee of any property shall be applied as follows:-

(a) First in payment of the expenses of and incidental to the sale etc.

(b) Secondly in payment of the moneys which are due and owing under the mortgage.

(c) Thirdly in payment of subsequent mortgages if any etc.

(d) Fourthly, the surplus if any shall be paid to the mortgagor (Section 81 of the Property Law Act Cap 130).

[10] Considering the procedure that should be followed the learned Judge raised the following questions as issues to be determined, namely:-

1. What was the amount of the purchase money arising from the sale?
2. What were the payments made under s. 81 (a), (b) and (c) of the Property Act?
3. What was the surplus?
4. Was it paid to the mortgagor?
   

[11] The learned Judge held that if there was such surplus the garnishee order should be made absolute. It is not disputed that the amount received in to the trust account after deductions was $631,513.00. With regard to the payments made to the mortgagees, the learned counsel for the 3rd garnishee submitted that the entire sum of $631,513.00 was paid.

[12] Admittedly no payment was made to the mortgagor on account of surplus. The position of the 3rd garnishee was that there was no surplus remaining in their trust account at the time of garnishee order nisi.

[13] The learned Judge held that "the 3rd garnishee has a burden to show cause on the garnishee order nisi, as to the $202,861.44 that is statutorily due to be paid to the plaintiff from the proceeds of $631,513.00 admittedly received into the solicitor's account". "There is a statutory debt that arose in the solicitor's trust account in his custody, in favour of the plaintiff (mortgagor) and there lies a burden not discharged as to the absence or whereabouts of the surplus of $202,861.44 which was lost in his solicitors trust account under his control" (pgs 21 & 22 of the RHC).

[14] The learned Judge held therefore that the 3rd garnishee has not shown cause to set aside the garnishee order nisi against him and he is liable for the surplus of $202,861.44. He thus made the order absolute.

Grounds of appeal
[15] (i). That the learned judge has erred in making the garnishee order absolute against the 3rd garnishee when the respondent made it clear that he was not seeking any orders against the 3rd garnishee. The respondent sought orders against the 1st and 2nd garnishees.

(ii). All the proceeds of the mortgage sale received by him as solicitors were paid out from the account kept in the year 2008, which was well before the garnishee proceedings commenced in 2010 and order nisi made.

Submission of the learned counsel for the 3rd garnishee (3rd appellant)
[16] The learned counsel submitted that the affidavits filed on behalf of the 3rd garnishee vouched for the fact that the sum of $631,513.00 was the debt payable to the 1st defendant/garnishee. These were the proceeds of the mortgage sale. Accordingly the 3rd garnishee was bound by law to pay out all such monies received on account of the 1st defendant/garnishee to the same person, namely, the 1st garnishee/mortgagee. These monies were paid on specific instructions received from the 1st garnishee. By 31 December 2008, no part of the purchase money was held by the 3rd garnishee on account of the 1st defendant/1st garnishee (mortgagee). This fact was verbally informed by the 3rd garnishee to the solicitor of the respondent Mr. V. M. Mishra followed by a letter dated 15 April 2010 (pg. 497 of the RHC). In view of the above fact no garnishee order could be made against the 3rd garnishee.

[17] The written submissions tendered on behalf of the respondent by the learned counsel on 10 June 2010 (pgs. 542-548 of the RHC) had categorically stated that the respondent is seeking an order absolute only against the 1st and the 2nd garnishees. The learned counsel for the respondent further stated that the 3rd garnishee has no money in his trust account. The learned counsel for the 3rd garnishee submitted that the learned Judge has erred in law and in fact by making the order absolute against the 3rd garnishee although accepting and noting that the respondent was not seeking the final order absolute against the 3rd garnishee thereby causing a miscarriage of justice.

Submission of the learned counsel for the respondent
[18] The learned counsel submitted in the written submissions that the 3rd garnishee has failed to bring necessary parties to the appeal and hence this appeal should be dismissed. This is a garnishee order proceedings. The plaintiff in this case is the mortgagor and the judgment debtor. The judgment creditor is the respondent. He was the purchaser at the mortgage sale. It is the case of the respondent that the purchase price was much more than the debt the plaintiff owed to the mortgagees. The mortgagees were the 1st and the 2nd garnishees. They were the 1st and the 2nd appellants as well. The 3rd garnishee is the solicitor of the 1st and the 2nd defendants. The garnishee order was issued against the 1st, 2nd and 3rd garnishees. The garnishee order was obtained by the respondent. The garnishee order is to compel the garnishees to pay the excess money to the mortgagor, after settling the mortgage debt. The plaintiff was a party to the garnishee proceedings. However the plaintiff had not been made a party to the appeal. The learned counsel submitted that the plaintiff should have been made a party on the basis that he was an affected party.

[19] The learned counsel relied on section 15 (4) of the subsidiary legislation to the Court of Appeal Act (Cap 12) which states thus: "A notice of appeal shall, in addition to being filed in the Court of Appeal, be served upon the Registrar of the Supreme Court and upon all the parties to the proceedings in the Court below who are directly affected by the appeal; and subject to the provisions of rule 21 it shall not be necessary to serve the notice on parties not so affected". Halsbury's Laws of England Vol 37 pg. 527 para. 687 which states thus; the notice of appeal must be served on all parties to the proceedings in the court below who are directly affected by the appeal (see also Orders on High Court Pleadings and Practices pg. 398).

Necessary parties to an appeal
[20] The necessary parties are those who are directly affected by the appeal. Which are the parties directly affected? The garnishees are the parties against whom an order has been made. The garnishees are seeking to have the order absolute set aside. In the event the order is set aside who is affected? That is the respondent. The garnishee order has been issued on his application. The garnishee order was issued to recover any excess money left after settling the mortgage. The plaintiff never made a claim to any money as due to him even during the garnishee proceedings. If any money is left, that money would be paid to the respondent and not the plaintiff. Therefore I am not inclined to consider the submission of the learned counsel that the plaintiff is an affected party to the appeal.

Did the respondent abandon his claim against the 3rd garnishee?
[21] The learned counsel for the 3rd garnishee submitted that the respondent had abandoned his claim against the 3rd and the 4th garnishees. Submissions had been made that all the monies received were paid to the mortgagees in settlement of the mortgage. This was done in the year 2008. The garnishee application was made long after, in 2010. At the time of making the garnishee application the 3rd garnishee was left with no funds in his trust account. Therefore he submitted that the issuing of the garnishee order against the 3rd garnishee was irregular. The learned counsel for the 3rd garnishee further submitted that for these reasons the respondent had abandoned the claim against the 3rd and the 4th garnishees. The respondent opted to proceed only against the 1st and the 2nd garnishees.

[22] The learned counsel for the 3rd garnishee submitted that the learned counsel for the respondent in the written submissions filed on 10 June 2010 categorically stated that the respondent is proceeding for an order absolute only against the 1st and the 2nd garnishees. The learned counsel for the respondent states in his written submissions filed on 10 June 2010 as follows:

"Thus neither the 3rd nor the 4th garnishees (4th garnishee was the solicitor for the plaintiff/judgment debtor) have monies in their trust accounts. The 1st and the 2nd garnishees have not filed any affidavits in reply and the orders that we seek to be made absolute are against these two garnishees. These two garnishees who have taken all the monies under the mortgage and not paid out to the mortgagors are liable and we seek orders against them (para. 2.7 at pg 543 & 544 of the RHC). "We ask that an order absolute be made against the 1st and 2nd garnishees; that they jointly and/or severally pay the sum of $202,861.44 and costs to the 4th defendant (respondent in this case) and there be judgment accordingly" (Para 3.14 at pg. 548 of the RHC).

[23] Reference was made to this fact of abandonment in the judgement at page 20 where the learned Judge states thus under the heading 3rd Garnishee: "The 4th defendant in his written submissions dated 10th of June 2010 at the last paragraph moves for the order absolute to be made against the First and the second Garnishees. I note it does not move to make order nisi absolute against the 3rd Garnishee".

[24] The learned Judge However appears to have gone beyond what is asked for by the respondent by making the order absolute against the 3rd garnishee as well. The learned judge stated thus:" At times a court has to rise above the submissions of both counsels, in its duty to ascertain the truth and achieve justice"(pg. 20).

[25] This appears to have created a problem for the learned counsel for the respondent. The learned Judge had now granted something that the learned counsel for the respondent had not asked for or abandoned in writing. This is how the learned counsel meets this problem.

[26] The learned counsel for the respondent discretely refrained from addressing this issue in open court at the hearing and allowed the court to take a decision on what had said in his written submissions dated 3 May 2014. In the written submissions the learned counsel had said that he only sought to terminate the proceedings against the 4th garnishee and not the 3rd. It appears that the learned counsel attempted a summersault?

[27] If the garnishee order was made absolute only against the 1st and the 2nd garnishees, what would be the position? Would the respondent have appealed against that order? That would have been impossible due to the categorical position the learned counsel for the respondent had taken in his written submissions dated 10 June 2010. What the learned Judge did was to make an order in favour of the respondent that he had not asked for or abandoned. Should the learned counsel for the respondent cover up and reverse his position?

[28] Could court grant relief not asked for and/or abandoned? I do not think so. In this case it is abundantly clear that the respondent had abandoned the relief claimed against the 3rd garnishee. Therefore the court cannot grant relief when the party who seeks the relief opts to abandon it. I am of the view that the learned Judge has erred by granting the relief by making the order nisi absolute. Therefore I allowed the appeal and the order absolute made against the 3rd appellant is set aside with costs fixed at $5000.00 payable by the respondent to the 3rd garnishee.

Amaratunga JA
[29] The facts of the present case have already been set out in the judgment of my brother Judge Basnayake JA. I agree with the said findings. I would be guilty of repetition if I were again to explain the background of the case and the grounds of appeal succinctly dealt by his lordship's judgment. What I propose to do is to refer to the relevant facts as I come to consider the main issue in the case. I have equally adapted abbreviations used in his lordship's judgment here. The issue is whether the court should make an order absolute against the 3rd garnishee (the 3rd Appellant), the solicitor who maintained the trust account that received money in the mortgagee sale in excess of the amount owed by the mortgagor when no order absolute was sought against the 3rd Appellant. In terms of the Section 81 of the Property Law (Cap130) any surplus of amount received from the mortgagee sale after settlement of the expenditure incurred in the mortgagee sale and any settlement of charges registered, should be paid to the mortgagors. The solicitor for mortgagors' were the 4th garnishee in this proceeding and already been allowed to withdraw from garnishee proceeding in court below.

[30] The judgment creditor had obtained judgment for a sum of money, against the said mortgagor for a sum of $277,400 together with interest as provided by the court below on 9th April, 2010. The garnishee proceedings by the judgment creditor (Respondent) was a result of non settlement of the said sum by the judgment debtor. The garnishee proceedings instituted to claim surplus money after the settlement of debt to the mortgagees in the mortgagee sale. The mortgagees were 1st and 2nd garnishees and 4th garnishee was the solicitor for mortgagor.

[31] The 3rd garnishee was the solicitor, who obtained the sale proceeds from mortgagee sale and he admitted the receipt of money to the value of $631,513 to his trust account after the deduction of the only charge of the property, namely the unpaid rates to the city council.

[32] In the court below the judgment creditor obtained an order nisi against all the garnishees including 3rd garnishee and upon the service of the said order an opportunity was given to the garnishees to submit their evidence in summary manner, through affidavits. The hearing was on 11th June, 2010 and judgment was pronounced on 10th August, 2010 making the garnishee order nisi against the 1st 2nd and 3rd garnishees an absolute.

[33] 1st and 2nd garnishees were made parties to the proceedings on the basis that they held money in excess of debt owed by the mortgagor of the property. At the hearing in court below no orders were sought against 3rd and 4th garnishees by the Respondent.

[34] The Respondent in his written submission to the court below had not sought garnishee order absolute against the 3rdgarnishee, but the court below had made absolute order against 3rd garnishee (3rd Appellant) it in the judgment dated 10th August, 2010, in contravention of orders sought by the Respondent.

[35] The counsel for the Respondent was the counsel for judgment creditor in the court below as well. Mr. V. Mishra, the counsel for Respondent, in his written submission filed in the this court at paragraph 41 in page 15 (in fact it should have been correctly numbered as paragraph 69 as pointed out in the hearing) admitted that they had not moved for an order nisi to be made absolute against the 3rd garnishee in the court below, at the hearing on 11th June, 2010.

[36] This appeal should be considered on the status before the court below at the conclusion of garnishee proceedings and when the judgment creditor had informed the court below, on the day of the hearing that he did not wish to seek an order absolute against the 3rd and 4thgarnishees, it was wrong for the court below to make an order absolute against the 3rd garnishee.

[37] A fortiori, it was inappropriate for the same counsel to deny this fact and contest this appeal as his oral submission to court below was recorded on p 1278 of the RHC below, which states as;

'Counsel's submission

Not seeking order absolute against Third and Forth Garnishee, only seeking order absolute against First and Second Garnishees.

Lagendra Law has made an application to withdraw as solicitor.........' (emphasis is mine)

[38] This position was further substantiated by the written submissions filed in the court below by Mr. V. Mishra for the Respondent who was the applicant in the garnishee proceedings in the court below. If the said judgment creditor did not seek an order absolute against 3rd and 4th garnishees the matter should rest at that point.

[39] The position remained unaltered till the judgment was pronounced on 10th August, 2010. It should be borne in mind that only 4th garnishee was allowed to withdraw upon application. The 3rd garnishee was not withdrawn and no such application was made, but it remained that no order absolute was sought against 3rd garnishee (3rd Appellant). The effect of withdrawal of 4th garnishee and not seeking order absolute against 3rd garnishee was that court below could not have made an order absolute against both garnishees.

[40] Now the Respondent is estopped from deviating his position in this court, after he had made an unconditional request to the court below that he was not seeking order absolute against the 3rd and 4th garnishees, at the hearing on 11th June 2010.

[41] In paragraph 2.7 of the written submissions filed by the Respondent in court below (p543 of the RHC) it stated

"Thus neither the Third nor the Fourth Garnishees have monies in their trust accounts. The First and Second Garnishees have not filed any Affidavit in Reply and the orders that we seek are absolute are against these two Garnishees. These two Garnishees who have taken all the monies under Mortgage and not paid out to the Mortgagors are liable and we seek orders against them."

[42] In the submissions filed for the Respondent in this court at paragraph 41 in page 15 stated as follows:

'41. The written submissions we had given were dated 10th June, 2010 and the last affidavit of Prem Chand was not with us at that time. The hearing was on the 11th of June, 2010. That was only given the next day which is why in the written submissions we did not ask for an order that day against the Third Respondent (Sic). We were still awaiting to see if the Trust Account details would show that payments were made out lawfully and as per Section 81 of the Property Act.'(emphasis added)

[43] There is no 3rd Respondent in this appeal and reference to that above, was presumably regarding the 3rd garnishee who is the 3rd Appellant in this action. This contention in the above mentioned paragraph in the written submission filed, on the eve of the hearing of this appeal, should be analyzed carefully. The Respondent admitted that he did not seek order absolute against 3rd garnishee on the day of the hearing (i.e. 11th June 2010). Hearing in court below concluded on the same day and matter was adjourned for judgment. There was no evidence to show that said standpoint was altered by the Respondent in the court below before the pronouncement of the judgment.

[44] If the counsel for the Respondent desired to change his position, as stated above, from the already informed position to court below in his opening oral submission to court on 11th June, 2010 and also further substantiated in his written submissions tendered to court below he had ample time to do it before pronouncement of judgment on 10th August, 2010, but strangely did not do so even after receipt of the second affidavit of 11th June, 2010 which he had mentioned as the reason for alleged change of mind, in this appeal.

[45] According to the above submission filed before this court, the Respondent was not served with the second affidavit filed by Mr. Prem Chand on the day of the hearing when hearing was concluded. Why did Mr. V. Mishra consent to hearing in such a scenario? The logical conclusion is that he did not seek an order absolute against the 3rd garnishee at the hearing, irrespective of the unseen affidavit filed on the day of the hearing. At the hearing this fact was revealed and he was aware of this affidavit yet to be issued by registry at that time. The counsel admitted the receipt of the said affidavit on the following day of the hearing. If that affidavit filed on 11th June 2010, contained materials contrary to what he had indicated to court, he should have immediately informed that fact to the court and would have sought variation of his position against 3rd garnishee, but he selected not to do so. After the pronouncement of judgment he cannot jettison his position, and to proceed against 3rd garnishee for an order absolute. This contention in the appeal is an afterthought and needs to be rejected.

[46] The Respondent at the hearing in court below admitted that Appellant had disbursed all the receipts of mortgagee sale to 1st and 2nd garnishees and sought order absolute only against them. If so logically no order absolute should be made against 3rd and 4th garnishees. At the time of order nisi the Respondent would have been uncertain as to retention of surplus money from mortgagee sale and order nisi against all four garnishees were sought, but at the time of hearing, the Respondent abandoned garnishee order absolute against the 3rd and 4th garnishee, and entire surplus amount was sought against 1st and 2nd garnishees so there cannot be a residu of surplus money from mortgagee sale to claim from 3rd and or 4th garnishees. On that basis, the order absolute against 3rd garnishee should be set aside, too.

[47] In the judgment dated 10th August,2010 at page 20 of the record of the court below it was held:

'3rd Garnishee:

The 4th defendant in his written submissions dated 10th June,2010 at the last paragraph moves for the order absolute to be made against the First and second Garnishees. I note it does not move to make order nisi absolute against 3rd Garnishee.

At times a court has to rise above the submissions of both counsels (sic),in its duty to ascertain the truth and achieve justice.'

[48] I do not agree with court below that court can make an order absolute against a party whom such orders were not sought at the conclusion of the hearing. Since the Respondent did not move to make order nisi absolute against 3rd Garnishee court was wrong to grant such an order against 3rd garnishee (the Appellant). I do not wish to deal with other grounds of appeal that deals with the merits of the case as it would become academic. It will not be necessary to consider the merits of the Appellant, when the Respondent had indicated to court below that Respondent was not moving for an order absolute against the Appellant. Logically, Respondent could not have sought order absolute in court below for reasons given before in this judgment, as upon the show cause, the Respondent was convinced that 3rd garnishee had disbursed entire sale proceeds to 1st and 2nd garnishees.

[49] In the circumstances this appeal should be allowed and order absolute made against the Appellant is set aside.

Corea JA

[50] I agree with the reasons and conclusions of Basnayake JA and Amaratunga JA.

The Orders of the Court are:

1. Appeal of the 3rd appellant is allowed.
2. The order absolute entered against the 3rd appellant on 10 August 2010 is set aside.

3 Costs fixed at $5000.00 payable by the respondent to the third appellant.

Hon. Justice E. Basnayake
JUSTICE OF APPEAL

Hon. Justice G. Amaratunga
JUSTICE OF APPEAL

Hon. Justice M. Corea
JUSTICE OF APPEAL