Hassan v Westpac Banking Corporation [1997] FJHC 233; Hbc0152.87l (23 September 1997)

IN THE HIGH COURT OF FIJI
(AT LAUTOKA)
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0152 OF 1987L

BETWEEN:

AHMAD HASSAN
PLAINTIFF

AND:

WESTPAC BANKING CORPORATION
1st DEFENDANT

THE ALEEMS TEAM RENTAL CARS LIMITED
2nd DEFENDANT

Ms Patel for the Plaintiff
Mr Young for the 1st Defendant
for the 2nd Defendant

Date of Hearing: 22nd September 1997
Date of Judgment: 23rd September 1997

JUDGMENT

Before handing down my ruling in this matter, I will deal with a preliminary concern.

During the course of the Plaintiff's evidence herein, it became apparent that, by implication, serious allegations were raised against a previous solicitor of the Plaintiff, Mr HAROON ALI SHAH. As Barristers and Solicitors are officers of the Court then, just as it is necessary for the Courts to take action against those who breach the rules, it is just as necessary to take action to ensure that no unfounded or unfair allegations are raised against Legal Practitioners.

In response to the implied allegations I did, at the conclusion of the Plaintiff's evidence, raise certain matters with him. As a result of the answers given I am in no doubt at all that nothing in the nature of a serious irregularity (if in fact, any irregularity) occurred in Mr SHAH's running of this case in its early stages. In the circumstances I felt it important to put this on record.

I turn now to the matter at hand.

The Plaintiff is the registered owner of Crown Lease 5913. He had a son; MOHAMMED ALEEM who unfortunately passed away in 1988.

Prior to his decease, MOHAMMED ALEEM was the Managing Director of the 2nd Defendant. To fund the 2nd Defendant's enterprise a third party mortgage is said to have been entered into between the Plaintiff and the 1st Defendant (the Bank) to secure the advancement of certain funds to the 2nd Defendant.

The 2nd Defendant appears to have stumbled upon some difficulty and in or about 1987, the 1st Defendant bank took recovery proceedings in respect of monies advanced to it.

Despite the bank having a wide range of security, most of it seems to be worthless when meant to cover the 2nd Defendant's, by then burgeoning debt.

In the midst of this, the Plaintiff issued the writ herein on or about the 23rd March 1987. In this Writ the Plaintiff sought various declarations contesting the enforceability and validity of the Third Party mortgage.

The Plaintiff subsequently filed an amended Statement of Claim. This document encompasses a far wider range of allegation than its predecessors. For all of that, the evidence led by the Plaintiff brings the matter down to a very narrow issue - did the Plaintiff have knowledge of and actually sign the Third Party mortgage. There is a further legal point to be decided in respect of the applicability of Section 13(1) of the Crown Lands Act (Cap 132).

The Plaintiff's evidence on the former issue can be succinctly summarised. He said that he had no knowledge of the Third Party mortgage and only came to know about it when, sometime after it had been effected, he went with his son to find his actual lease document. He thought this document was with the ANZ Bank. He had a small mortgage with the Bank of New Zealand which, around that time, merged with ANZ. He said the ANZ Bank directed him to the Westpac Banking Corporation. On going there, his son, without saying what the WESTPAC BANKING CORPORATION had his deed for, told him that the WESTPAC BANK did in fact have the deed and that he (i.e. the son) would "sort it out."

The Plaintiff all through his evidence stuck fast to his claim that he had never executed the mortgage. This viva voce evidence was directly in conflict with the Affidavit evidence presented by the Plaintiff in the course of this matter and as was used in support of certain interlocutory steps. These Affidavits were tendered as Exhibits before the Court.

In that Affidavit material the Plaintiff is in no doubt that he executed the mortgage. When faced with this in cross examination, the Plaintiff denied that the Affidavits had been readily explained to him. He said that he just signed them because his son said so. He was also most uncertain as to which of the signatures on the Affidavit were actually his. He most certainly avoided committing himself to positively identifying the signatures as his own.

The Bank, whilst unable to present precise evidence that the mortgage was signed, gave evidence via Mr VERMA and Mr SHARMA that, at the relevant time, procedures were in place to ensure the person signing knew what it was they were putting their hands to and, presumably, that the mortgagee was actually the person signing. On this last point, Mr VERMA properly conceded that he most likely did not check the identification because, as he put it, when witnessing Bank documents he operated under the assumption that the Bank knew their own clients.

In the face of this conflicts of evidence (even the Plaintiff's own conflict), I took special care to observe the Witnesses in the Witness Box whilst they were presenting their evidence.

The Defendant's witnesses gave their evidence in a straight forward manner and I had no hesitation in accepting it. I do note, however, that it was general evidence only, and thus appropriate weight must be given to it.

My observance of the Plaintiff in the Witness Box, however, left me with the indelible impression that, when giving his viva voce evidence, the truth was a stranger to his lips. I found him to be evasive and his answers such that I can place little value on his evidence. He was at his most unconvincing in respect of those crucial questions regarding the identification and confirmation of his signature on the various documents and, in particular the Affidavits.

On balance, I do not accept the viva voce evidence of the Plaintiff. I am satisfied that the Affidavit evidence is that which I should accept. I find that the Plaintiff did in fact sign the Third Party Mortgage on the 10th July 1986.

Further and consequently, I accept Mr VERMA's evidence that, on the balance of probabilities, the terms of Mortgage were explained to him. In my mind he well understood the nature of the mortgage. He most certainly had previous experience with such a document.

Given my finding that he signed the mortgage, I turn to the second limb of the argument - the enforceability as regard Section 13(1) of the Crown Lands Act.

Section 13(1) of the Crown Land Act is well known.

It reads:

"Whenever in any lease under this Act there has been inserted the following clause:

"This lease is a protected lease under the provisions of the Crown Lands Act"

(hereinafter called a protected lease) it shall not be lawful for the lessee thereof to alienate or deal with the land comprised in the lease of any part thereof, whether by sale, transfer or sublease or in any other manner whatsoever, nor to mortgage, charge or pledge the same, without the written consent of the Director of Lands first had and obtained, nor, except at the suit or with the written consent of the Director of Lands, shall any such lease be dealt with by any court of law or under the process of any court of law, nor, without such consent as aforesaid, shall the Registrar of Titles register any caveat affecting such lease.

Any sale, transfer, sublease, assignment, mortgage or other alienation or dealing effected without such consent shall be null and void."

The Section, and a similar section in the Native Lands Trust Act, have been litigated several times in Fiji.

The submissions for Counsel for Plaintiff is straight forward. The mortgage in question was signed by the parties on the 10th July 1986. At that time there was no consent under Section 13(1) from the Director of Lands. The consent was subsequently applied for by the application dated the 10th July 1986 (the same day as the mortgage was signed). It was granted on the 15th July 1986.

The first limb of the Plaintiff's argument is that by signing the mortgage, the parties had breached the provisions of section 13(1) - they had, or to put it in terms of Section 13(1) - the lessee (Plaintiff) had, pledged or mortgaged the subject land without the Director's consent. Thus, it is argued, the mortgage is null and void.

Counsel for Defendants submitted that the Bill of Mortgage although signed, was nothing more than a inchoate agreement subject to the Director's consent. The parties had done nothing to render the mortgage agreement operative until after they received the Director's consent. This argument follows the reasoning the Court of Appeal in D.B. WAITE (Overseas) LTD -v- WALLATH [1972] 18 FLR 141 and JAI KISSAN SINGH -v- SUMINTRA 16 [1970] FLR 165.

On my reading of the authorities on these sections, the common thread necessary to bring about a finding of illegality is that there must be more than a mere agreement. There must be some element of performance prior to the grant of consent (see WAITE -v- WALLATH SUPRA PER GOULD VP at p 145 discussing HARNAM SINGH & ANOTHER -v- BAWA SINGH [1958] 6 FLR 31).

There is no doubt that a mortgage is a dealing in land which would attract Section 13(1) (See DIRECTOR OF LANDS AND ANOTHER -v- ABDUL RAZAK & ANOTHER Court of Appeal 10/93 Bound volume 93 at p.350). The question is, to my mind whether by merely signing the mortgage documents and in the absence of any other act of performance, has the section been breached.

Although the cases cited above (with the exception of RAZAK's case) deal with Section 12 of the Native Lands Trust Act, I consider the reasoning applied therein (and in particular DB WAITES' case) to be equally applicable here.

To my mind discussions between a mortgagee and a mortgagor must of necessity reach some agreement. This, in the case where a Crown Lease is offered as security, would be an agreement to deal with the land. Prudence and commercial practice and necessity would tend to show that this agreement would be reduced to writing. Even if it were not (and bear in mind Section 13 refers only to an agreement whether in writing or not), there would be an agreement to deal with the land nonetheless.

To adopt the phraseology of GOULD VP ((SUPRA) at p.45), it would be an "absurdity to say that an agreement" to mortgage would be a dealing in the land. By its very contractual nature, until such time as monies are advanced thereof, a Bill of Mortgage is nothing more than a preliminary agreement containing all the essential ingredients (as per MARSACK J. in DB WAITE p.149). It is inchoate and not effective until the Director's consent is obtained.

To reason otherwise would lead to an absolute absurdity. It would mean that a lessee desirous of a mortgaging his land would have to obtain the Director's consent to enter negotiations with the proposed Mortgagor because the natural consequences of these negotiations would be that an agreement would be reached on the Plaintiff's argument, the mere reaching of this agreement would render the agreement null and void. Hence you could never have agreement and thus never have a mortgage. This is plainly absurd.

In my view, unless there has been some act which puts the agreement into operation (in part or otherwise), the signing of the Bill of Mortgage does not infringe upon Section 13(1).

The Plaintiff alleged that there was some prior performance but offered no evidence of it. This matter was clarified when the Defendant's witness, Mr SHARMA, gave evidence.

Mr SHARMA told the Court that on the 14th July 1986 the sum of $10,967.00 (TEN THOUSAND, NINE HUNDRED AND SIXTY SEVEN DOLLARS) plus bank fees was advanced to the 2nd Defendant (ALEEMS TEAM RENTAL CARS LIMITED). He said that this sum was advanced by way of taking security over a term deposit of a Mr WELLINGTON. This security was also signed on the 10th July 1986 and is Exhibit 12 now before the Court. I accept Mr SHARMA's evidence. It was uncontested.

Thus I can find no evidence that there was any act which could be said to put the mortgage into operation such as would have had the agreement caught by Section 13(1).

The final question raised related to the endorsement on the Bill of Mortgage by the Director of Lands of the 15th July 1986 that his consent was "subject to the principle sum not exceeding $60,000.00 (SIXTY THOUSAND DOLLARS)."

Counsel for the Plaintiff submits that either the bank have breached the terms of consent by advancing more than that sum thus invalidating the consent or, alternatively, the Bank should be restricted to recovery of only $60,000.00 plus interest.

This argument stems from Exhibit 11 whereby the plaintiff signed a consent to variation form. Figures mentioned at the foot thereof total $104,578.49 (ONE HUNDRED AND FOUR THOUSAND, FIVE HUNDRED AND SEVENTY EIGHT DOLLARS AND FORTY NINE CENTS). It is argued that the Bill of Mortgage is, by virtue of Exhibit 11 extended to cover a principal of the above amount.

Counsel for the Defendant argued that nowhere in the Crown Lands Act is the Defendant able to give a conditional consent. The Director either consents or he does not. Any condition consent is thus ultra vires the Director's powers and of no effect.

I consider the argument of the Defendant to be the correct approach. As I read Section 13(1), the consent given cannot be conditional. The Director has no such power and any condition so imposed must therefore be void and of no effect.

As was further argued, there is no satisfactory evidence as to the breakdown of the amount of $104,518.49. (ONE HUNDRED AND FOUR, FIVE HUNDRED AND EIGHTEEN DOLLARS AND FORTY NINE CENTS). It could well be comprised of a principal amount of $60,000 (SIXTY THOUSAND DOLLARS) or less, plus interest, or some other components. In any event, as I read Exhibit 11 together with Exhibit 3 (the mortgage) the mortgage secures all advances. Exhibit 11 seeks to obtain the Third Party Mortgagee's consent to further advance monies to the 2nd Defendant. As I read the document and judging by the Plaintiff's footnote thereon, this consent was clearly withheld. I do not interpret that document as a consent to vary the principal advanced under the Mortgage. It is, as I read it, a document which advises the Plaintiff, the full extent of the liability then existing under the Mortgage, being components of principal and interest and seeking the Plaintiff's consent for the Bank making or continuing to make advances to the 2nd Defendant. This consent was not given as I have said.

As it stands, the matters just referred to are perhaps of little consequence and are put in this ruling for completeness. As I have said, I am of the view that the Director of Land has not power to impose a condition on a Section 13(1) consent and conditions so imposed must be held to be void and of no effect.

For all the foregoing reasons, I find the Plaintiff has not proven his case against the 1st Defendant. I thus dismiss his claims against the 1st Defendant Bank.

The Plaintiff is to pay the Defendants' costs of an incidental to this action to be taxed if not agreed.

JOHN D. LYONS
JUDGE

HBC0152.87L