Fiji Development Bank v Chute [1996] FJHC 87; Hbc0547j.94s (4 January 1996)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 0547 OF 1994

Between:

FIJI DEVELOPMENT BANK
Plaintiff

- and -

CHARLES BROOKS CHUTE
Defendant

Mr. V. Kapadia for the Plaintiff
Mr. D. Jamnadas for the Defendant

JUDGMENT

On the 30th of June 1995 in the absence of a Statement of Defence the plaintiff bank entered 'default judgment' against the defendant for monies lent and advanced to the defendant and secured by a Bill of Sale granted by the defendant over various fishing vessels.

By an inter parties motion issued on the 31st July 1995 the defendant through his solicitors sought the setting aside of the 'default judgment' and a stay of execution.

The affidavit sworn by the defendant on 28th July 1995 deposed inter alia to the delay (of almost 4 months) on the part of the plaintiff bank's solicitors in furnishing various 'particulars' sought by the defendant's solicitors, and the latter's written indication of 23 May 1995 that a Statement of Defence would be served shortly.

I note however that over a month had expired after the necessary 'particulars' were supplied to the defendant's solicitors and before 'default judgment' was entered by the plaintiff bank. Quite clearly the defendant's solicitors had not moved with any expedition in the matter. There is little merit in this complaint which is not decisive anyway.

Then the defendant deposes that he has 'a good defence' to the action and annexes a proposed Statement of Defence in which the following relevant matters are pleaded:

"(3) The Defendant says that the Plaintiff by way of an arrangement and agreement dated the 8th of February 1988 transferred the debt owed by the Defendant to a Third Party namely one Masi Rova.

(5) Pursuant to the said Agreement, the Defendant released the two fishing vessels to Masi Rova the said vessels being the chattels secured by the Bank under the Bill of Sale ...; and

(6) That the Plaintiff had failed to either insure the vessels or repossess the same under the said Bill of Sale. The Defendant in the meantime was deprived of the said vessel."

The plaintiff bank in opposing the defendant's application provided a copy of 'the agreement' and deposed through its Assistant Manager Legal that (as to paras 3 and 5 above):

"... the agreement dated 8th February 1988 did not transfer the debt owed by the defendant to a Third Party. The Defendant had leased the said two fishing vessels to one Masi Rova who was to supply fish products to the defendant."

and (as to para.6) it was deposed (without contest):

"The defendant did between December 1986 and December 1992 pay a sum of $13,731.07 for insurance in respect of the said vessels. The vessels were eventually seized in 1993 and sold by private treaty for $3,000.00 in January 1994. The vessels had deteriorated considerably."

Counsel for the defendant in support of the application submitted that the 'leasing arrangement' between the defendant and the third party was agreed to and even witnessed by an officer of the plaintiff bank but more than that Counsel submitted, that the plaintiff bank was negligent in not monitoring the third party's performance under the arrangement and in failing to repossess the boats in good time and also in selling the boats (which apparently cost $13,000 each) , at a gross undervalue of $3,000.

It is common ground however that the plaintiff bank was not an actual party to the defendant's 'leasing arrangement' albeit that its rights as the holder of a Bill of Sale over the leased fishing vessels appears to have been safeguarded in it. Furthermore the 'leasing arrangement' recognises the defendant's ownership of the fishing vessels which is later confirmed in the defendant's unqualified assertion in his letter of 1st June 1988 where he writes: "I, as owner of the two fishing vessels you presently lease from me, ..."

In the circumstances it appears somewhat incongruous to expect the plaintiff bank to be responsible for monitoring the third party's performance much less, can the plaintiff bank seek to repossess fishing vessels that it does not own. Needless to say counsel's submissions sits very uncomfortably with the defendant's assertion in para.7 of his letter (op.cit) where he states: "... I will have no option but to repossess my boats and handle my own commitments."

In my view the submission fails to differentiate between the rights of the plaintiff bank as Bill of Sale holder and the rights of the parties to the 'leasing arrangement'. In this latter situation the plaintiff bank has no rights whatsoever and in the former, the plaintiff bank's rights exist only against the defendant and are exercisable only after a proper demand for payment is not met by him.

No authority was cited by counsel for the defendant to support the existence of any 'duty of care' owed by a Bill of Sale holder to a debtor nor was the same conceded by counsel for the plaintiff bank albeit that it: "... acknowledged the arrangement as it would have enabled the Defendant to meet repayments to the Plaintiff."

Upon being pressed however counsel for the defendant sought to equate the plaintiff bank's duty to that existing between a 'mortgagor' and a 'mortgagee' exercising a power of sale where it is settled law that a mortgagee exercising such a power is obliged to take reasonable care to obtain whatever is the true market value of the goods at the time he chooses to sell them.

If I may say so however, the existence of such a duty does not extend to imposing a time frame upon a mortgagee within which he must seize and exercise his power of sale, yet that would be precisely the effect of accepting the submission of counsel for the defendant. I cannot agree.

Even assuming that the holder of a Bill of Sale owes a similar duty to the borrower/grantor, the parameters of the duty are clearly set out in the judgment of Cross L.J. in the leading case of Cuckmere Brick Co. v. Mutual Finance Ltd. (1971) Ch. D. 949 when he said at p.969:

"A mortgagee exercising a power of sale is in an ambiguous position. He is not a trustee of the power for the mortgagor for it was given him for his own benefit to enable him to obtain repayment of his loan. On the other hand, he is not in the position of an absolute owner selling his own property but must undoubtedly pay some regard to the interests of the mortgagor when he comes to exercise the power.

Some points are clear. On the one hand, the mortgagee, when the power has arisen, can sell when he likes, even though the market is likely to improve if he holds his hand and the result of an immediate sale may be that instead of yielding a surplus for the mortgagor the purchase price is only sufficient to discharge the mortgage debt and the interest owing on it."

(my underlining)

No mention whatsoever is made as to when? the power must be exercised (if at all) nor is there the slightest suggestion that the duty arises before the exercise of the power of sale so as to include demand, seizure or repossession nor in my view, is there any warrant for extending the duty to such preliminary steps.

In light of the foregoing I am firmly of the view that the defendant's proposed 'Defence' is insupportable in law and raises no triable issue. The application is accordingly dismissed with costs to be taxed if not agreed.

(D.V. Fatiaki)
JUDGE

At Suva,
4th January, 1996.

HBC0547J.94S