Resolution Trust Corporation v Bortles [1997] FJHC 215; Hbc0458d.93 (27 June 1997)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 0458 OF 1993

Between:

RESOLUTION TRUST CORPORATION
Plaintiff

- and -

1. LEINANI K. BORTLES
2. LARRY LYNEL BORTLES
Defendants

Mr. M. Daubney for the Plaintiff
Mr. R. Smith for the Defendants

RULING

This case was the subject-matter of an earlier ruling delivered on the 14th of September 1994 rejecting the defendant's inter partes application to vary the terms of a 'mareva injunction' granted ex parte against the defendants on 25th August 1993.

The relevant limb of the 'mareva injunction' for present purposes restrains the defendants:

"... from transferring, dealing with, charging, mortgaging, assigning disposing of ... the properties being described as Certificate of Title 6684 and Native Lease 8720 ..."

The variation sought by the defendant's was: "the deletion ... of the words 'the properties being described as Certificate of Title 6684 and' ..." They also sought a declaration that various of the 'Lots' comprised within Certificate of Title 6684 "... are the property of Fiji Pacific Partners a Hawaii Limited Partnership."

The effect of the variations sought was summarised in the Ruling at p.2 as being:

"... designed specifically to exclude C.T.6684 and ... 10 Pacific Harbour Lots from the ambit of the injunction on the sole ground that both sets of properties are held 'in trust' by the second defendant for the benefit of two (2) limited partnerships registered in Hawaii under the names 'Fiji Marine Partners and Fiji Pacific Partners' respectively."

In rejecting the variation sought this Court said inter alia (at p.4 of its Ruling):

"Quite simply on the face of the Transfer and C.T. 6684 the second defendant is the sole registered proprietor of an indefeasible estate in fee simple of the land comprised in the title."

and later in distinguishing two (2) authorities cited by defence counsel this Court said at p.9:

"In neither case was the applicant for the variation or discharge of the injunction the defendant itself as is the case before me, now has it been clearly demonstrated how and to what extent the rights of innocent third parties (if any) was or is being prejudicially or adversely affected (if at all) by the grant or continuation of the injunction as was graphically demonstrated by the intervener in the above authorities."

More particularly, this Court said in dismissing the defendant's application's (at p.10):

"... having regard ... to the relative novelty of the concept of a 'limited partnership' and the nature of the rights and liabilities of the partners thereunder (upon which no specific submissions were made), this Court is unable to decide the matter on affidavit evidence alone."

The matter rested there until the defendants solicitors issued a summons five (5) months later on 15th February 1995 seeking inter alia the joinder of two named individuals 'as Defendants' and resurrecting in similar or identical terms the 'variation' of the ex parte 'Mareva injunction' earlier rejected by the Court in its above-mentioned Ruling.

I can deal quite quickly with the 'joinder' application which was effectively conceded by counsel for the plaintiff company. Very briefly, the named applicants depose to being registered holders of various interests in two (2) earlier mentioned 'limited partnerships' formed under Hawaiian legislation and which clearly shows that they and other limited partners are:

"the equitable owners of the land comprised in Certificate of Title 6684 ..."

(per Mitchell Guy in his affidavit)

and also:

"equitable owners of the land identified by the vendors in their agreements for sale of their Pacific Harbour Subdivision"

(i.e. 'the Pacific Harbour lots' per Alan C. Beall in his affidavit)

The affidavit evidence of the applicants is undisputed and clearly shows that they are financially and beneficially interested in the 'limited partnerships' of which the second defendant is the appointed 'general partner' and further, that they are persons on whose behalf the second-named defendant claims he holds the land 'as nominee and Trustee'.

In TSB Private Bank International v. Chabra (1992) 2 ALL E.R. 245, Mummery J. in allowing a similar application to join as a defendant, a company in which the defendant held the majority shares:

"Held: where the presence of a third party before the court was necessary to ensure that all matters in a dispute were effectively dealt with, the court was entitled to join the third party to the proceedings pursuant to R.S.C. Ord. 15 r.6(2)(b)(ii) even though there was no cause of action against the third party."

Furthermore in Mercantile Group A.G. v. Aiyela and Others (1993) 3 W.L.R. 1116 the Court of Appeal (U.K.) in approving the 'Chabra case' and in confirming the joinder of the defendant's wife into whose bank account stolen monies had allegedly been paid, said at p.1123 (per Hoffmann L.J.):

"T.S.B. Private Bank International S.A. v. Chabra (1992) 1 W.L.R. 231 was a case of a pre-judgment Mareva. The plaintiff bank sued Mr. Chabra on a guarantee and obtained a Mareva against him. It later appeared that a company which he controlled, but against which the bank had no substantive cause of action, held assets of which Mr. Chabra was arguably the beneficial owner. Mummery J. ordered the company to be joined as a defendant under R.S.C., Ord. 15 r.6(2)(b)(ii) and granted a Mareva against the company as well. Mr. Mann argued that this case was wrongly decided but in my view the judge was right."

The application to join A. Mitchell Gay and Alan C. Beal is accordingly granted and it is hereby ordered that they be joined as second and third defendant respectively.

As for the remaining Orders sought in the summons both applicants depose in identical terms in their affidavits (para. 8):

"... that the effect of the injunction in preventing (the second-named first defendant) from being able to deal with (the properties in question) is a severe impediment to the partnership's current business obligations and that the limited partners thereof who are not involved in any way with (the plaintiff's) claims against (the 1st defendants) are seriously and adversely affected by the injunction herein."

Counsel for the applicants also forcefully submits that there is no suggestion that the applicants were 'part of a vast conspiracy' to hide or launder the defendant's assets therefore it would not be reasonable to doubt their evidence.

Furthermore the applicant's claim to beneficially own the land in question and the second-named defendant admits and acknowledges that claim and confirms his contractual capacity as the 'general partner' of the limited partnership.

In those circumstances counsel submits that the plaintiff has no right to interfere with the admitted contractual relationship between the second-named defendant and the applicants.

Counsel concedes however that the applicant's equitable interest in the land might be better protected by the lodgement of a caveat but such a course "... would be wholly inconsistent with the intention of the partnership agreement."

No attempt has been made however in counsel's submissions or in either affidavit to elaborate upon or give details of the nature of the 'severe impediment' being suffered by the partnership or what particular 'current business obligations' were being affected by the continuation of the injunction. There was no suggestion that 'contracts of sale' had been executed for the land in question or that the applicants owned any particular identifiable lot or delineated parcel of land which they wished to have transferred or dealt with.

Indeed in the words of counsel for the plaintiff company: (assuming that the land is equitably owned as claimed)

"the limited partnerships are twenty (20) years old and (they) have done nothing except own the land beneficially."

Furthermore counsel submits that the nature and extent of the applicant's claim under the 'limited partnership agreement' is a matter now to be determined by the court after their joinder and also its 'priority' over the plaintiff's judgment debt.

With all due regard to the submissions of counsel for the applicants this Court is not obliged to take judicial notice of Hawaiian legislation nor to enforce agreements based on such legislation where the agreements prima facie contradict the principle of indefeasibility of title inherent in our system of land registration where the Certificate of Title is said to be 'everything'.

In my view since my Ruling in September, 1994 and apart from the joinder of the applicants, the circumstances and evidence has not altered to such an extent as to require me to dissolve the injunction.

In the result the 'joinder' application is granted but the application seeking the variation and a declaration is dismissed. Costs will be in the cause.

(D.V. Fatiaki)
JUDGE

At Suva,
27th June, 1997.

HBC0458D.93