National Bank of Fiji v Ali [1997] FJHC 69; Hbc0080j.96s (10 June 1997)

Fiji Islands - National Bank of Fiji v Ali - Pacific Law Materials

IN THE HIURT OF FIJI

At Suva

Civil Jurisdiction

CIVIL ACTION NO. 0F 1996

BETWEEN:

NATIONAL BANK OF FIJI
Plaintiff

AND:

SULTAN ALIman">
Defendant

Mr. M. Narsey for the Plaintiff
Mr. T. Fa for the Dant

JUDGMENT

On the 26th February 1996, solrs acting for the plaintiff bank issued a Writ of Suof Summons out of the High Court, Suva claiming from the defendant a sum of $250,000 together with interests thereon. The claim was based upon a personal Guarantee given by the defendant in which he guaranteed the repayment on demand, of a sum of $250,000 for advances and other facilities provided to Group Investments Limited of which the defendant was a shareholder.

The Writ was served on the defendant onsame day and an Acknowledgement of Service wab> was filed by the defendant's solicitors on 8th of March 1996. Almost three (3) weeks later the bank's solicitors filed a praecipe searching for a defence and in the absence of any defence, default judgment in the sum of $330,002.19 was entered against the defendant. A Bankruptcy Notice based upon the default judgment was subsequently served on the defendant in about the middle of April 1996.

By Notice of n dated the 30th of April 1996 the defendant now seeks the setting aside of e of the default judgment. The application is supported by the defendant's affidavit in which he provides some background information regarding Group Investments Ltd., its development plans, and financial position. There was also annexed to the affidavit, some correspondence with the plaintiff bank and a copy of the defendant's personal guarantee.

In the affidavit the defendant deposed to his belief that he hab>'valid defence' to the bank's claim based upon upon various verbal discussions and 'understanding' reached between himself and the then Chief Manager of the plaintiff bank concerning both the extent of his liability under the guarantee and the circumstances under which that liability would arise. In particular the defendant deposed to his sincere belief that the guarantee would only be:

"... invoked if and when:

(a) Group Investments Ltd. has refused or failed to pay (the debt oebt owed by it to the plaintiff bank);

(b) that loan of $US200 million that Mr. Taha was raising woul be available;

(c) When the Plaintiff bank had made availabe (requested) overdraft fact facilities that remain unpaid to Group Investments Ltd.

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(d) The other securities had been placed on mortgagee sale."

In his proposed Statement of Def/u> annexed to the affidavit, the defendant admits the the guarantee and his liability under it to the tune of $250,000 but denies the right of the plaintiff bank to enforce the guarantee on the ground that:

"(a) the tiff bank is estopped in law (because of) its failure to mato make available the full overdraft facilities of $1,710,000 it had agreed to give Group Investments Ltd;

(b) the plaintiff bank hasto date called the other securities which it was obliged toed to do before invoking the Guarantee;

(c) the plaintiff bank had agreed not to invoke the Guarantee until the loan by Mr. Taha of US$200 million was realised."

In reply a General Manager of the plaintiff bank deposed that after service of the >Demand Notice on h on him, the defendant sought time to make arrangements to pay the debt; that "... at no time did the Defendant refute the claim against him"; and further, "that the matters raised by the Defendant now are frivilous and do not raise proper and justifiable defences against the plaintiff's claim."

Order 19 r.9 of the High Court Rules whb> which deals with judgments entered in default of pleadings provides:

"The Court may, on such terms as it thinks just, set aside or vary udgment entered in pursuancsuance of this Order."

The Order is in almost identical terms to the wording of Order.10 which deals with jith judgments entered in default of appearance by the defendant and as the White Book plainly recognises cases on Order 13 'are equally applicable' under Order 19.

In this latter regard Lorning M.R. said in Burns v. Kondel (1971) 1 Lloyds Rep. 554 at t p.555:

(See also: FNPF v. Shri Datt (1988) L.R. 67)

I turn then to consider the various matters raised in the defendant's affidavit and proposed Statement of Defence to see if it "... discloses an arguable or triable issue".

The defendant's personal ntee is before the Court. It is on the face of it a fairly straightforward transaction of a of a common kind whereby on a standard form a person associated with a private company guarantees the company's present and future indebtedness to its bank.

In terms of tarantee the defendant guaranteed inter alia:

"... to pay to the Bank on demand ... the monereinafter mentioned or so r so much thereof as may be specified in each such demand that is to say:

(a) all moneys (including moneys advanced by way of loan for fixed term or provided by way of overdraft) now or hereafter to become owing or payable to the Bank by the Debtor ... (Group Investments Ltd.); also

(h) interest on ach moneys as aforesaid or on so much thereof as shall for tfor the time being be due or remain unpaid at the rate or respective rates agreed upon in writing if any ..."

At the outset I note that the defendant not only admits signing the guarantee fo also admits "(hot;(he) knew what (he) was doing ..." at the time. Plainly no issue or plea of 'non est factum' is raised nor, having regard to the defendant's profession, could such an issue arise. Whatsmore the guarantee document itself contains a signed certificate to the effect that the nature, meaning and effect of the guarantee was fully explained to the guarantors.

Indeed as already highlighted the defendant's 'defence' is solely based on unrecorded verbal discussions and understandings that the guarantee was "a part of an overall agreement by the Plaintiff bank to allow Group Investment Limited the sum requested in my letter of 13th November 1992 which was $1,710,000".

This immediately raises questionut the admissibility of 'parole evidence' in interpreting written contracts, cts, where the general principle is stated by Lord Morris in Bank of Australasia v. Palmer [1897] UKLawRpAC 44; (1897) A.C. 540 when his lordship said at p.545:

"Parol testimony cannot be received to contradict, vary, add to or subtract from the terms of a written contract or the terms in which the parties have deliberately agreed to record any part of their contract."

In any event the bank's letter of 29th December 1992 addressed to the Managing Director, Group Investments Ltd. and clearly in response to the defendant's letter of 13th November 1992 seeking an "overdraft for the amount of $1,710,000" not only refers to 'recent discussions' with the bank's then 'Chief Manager' but it also confirms "approval of an overdraft facility of $500,000 (Five hundred thousand dollars only)" for various purposes including:

". Develop first stage of Michelle Estate.

. Advertise and sell on paper eighty eight 3-bedroom uof the developmelopment in  ance.">

Furthermore part of the security sought for the overdraft facility included a:

"Per Guarantee of Mr. Sultan Ali limited to $250,000."

and finally, the letter concluded with a signature portion which red the defendant to signify his acceptance of the terms anms and conditions offered by the Plaintiff bank and, although unsigned, the defendant explains he was abroad at the time the letter was written.

Quite plainly in my view the bank's letter firmly lays to any suggestion by the defendant that it had agreed to proviprovide an overdraft facility for the full amount requested in the defendant's letter of 13th November 1992.

Needless to say, if the bank's letter did not correctly reflect the defendant's rstanding' at the rthe relevant time, then it is somewhat surprising that he did not see fit to immediately contradict the bank's letter in writing. Certainly the defendant has not produced such a letter nor has he deposed that he verbally raised the matter with the bank's Chief Manager at the time. His then solicitor's letters of 8th and 15th February 1993 are of no assistance either in this regard.

The defendant's letter of 1st February 1993 does however, specifically refer to the <"... submission on behn behalf of Group Investments Limited (for) an overdraft facility of $1,700,000 for the development of Michelle Estate at Qaui Lami", but nowhere in the letter is it suggested that approval in full was understood to have been given to the submission. Indeed the last paragraph of the defendant's letter suggests that approval for the full amount had NOT in fact been given in so far as there is a "... request for ... additional facilities for it to commence its development project." Needless to say if approval for the full amount requested had already been given, why then was it necessary to seek "additional facilities".

Furthermore if, as claimed, the bank had apprand intended to provide an overdraft facility for the full full amount requested by Group Investments Ltd., then it is equally surprising, that the bank's letter of the 29th December 1992 was written at all, and that the company despite its 'understanding' to the contrary, should nevertheless, accept and fully utilise the overdraft facility approved in the letter which was less then one third of the total amount allegedly approved.

There is, in my view no merit at all in paragraph 6b> of the proposed Statement of Defence whichwhich incorrectly dated the guarantee as 15.12.96, or in para. 24(c) of the defendant's affidavit.

I turn next to consider the second 'defence' raised by para.6(b)Statemtatement of Defence read with paras 24(a) and (d) of the defendant's affidavit which are to the effect that the plaintiff bank would first pursue its debtor and realise its other securities before seeking to enforce the defendant's guarantee.

This 'understanding', assuming that verbal evidence in support of it would missible, is nowhere recordecorded in the guarantee document or in the various correspondence annexed to the defendant's affidavit, but in any event, is directly contrary to Clause 12 of the guarantee which reads:

"The Bank shall not be under any obligation to resort to any other guarantee or secr security it may hold for payment of the moneys hereby secured in priority to this or any other guarantee or security."

Furthermore in China & Soua Bank Ltd. v. Tan Soon Gin [1989] UKPC 38; (1990) 1 A.C. 536 the Privy Council in rejecting a similar argument raised by the guarantor in that case said at p.545:

"The creditor had three sources of repayment. Teditor could sue the debtorebtor, sell the mortgaged securities or sue the surety. All these remedies could be exercised at any time or times simultaneously or contemporaneously or successively or not at all ..."

It is also noteworthy in this contexobserve that the security by way of mortgage offered by they the borrower is a second and not a first mortgage.

There iserit either in this second ground of 'defence' which does not raise 'any argu arguable or triable issue'.

The laound that the defendant seeks to raise in his 'defence' is expressed as follows in paragraph 16 of his affidavit where he deposes inter alia:

"(b) that I would only be called upon to pay if the loan thror. Zohair Ibrahim Taha fail failed ... We all had the view at the time that the loan of US$200 million from Mr. Taha was available at any time but none of us knew exactly when it would become available."

On this aspect it is not entirely cleam the defendant's affidavit and annexures how the $US20$US200 million 'Taha loan' is in any way connected to Group Investments Ltd. or its proposed development of the Michelle Estate. Indeed neither the amount or the name is anywhere mentioned in the defendant's 3-page application letter of 13th November 1992 nor is it listed as one of the 'purposes' for which the overdraft facility was being sought. (cf. with defendant's letter of the same date concerning an overdraft request for Viti Properties Limited.)

I acceat the bank's offer letter of 29th December 1992 does refer to 'Disbursement ment to offshore lenders to finalise offshore loan for funding of various projects' as being one of the 'purposes' of the approved overdraft facility, but that very general purpose can only have arisen from 'discussions' held prior to the letter and in any event cannot and does not alter the actual amount which was approved subsequent to such 'discussions' nor can it negate the more specific 'purposes' for which the request was made and granted i.e. the development of the Michelle Estate.

Furthermore the fact that within a month of the overdraft facility being approved it was "fully utilised", for what is not disclosed, and before any works had commenced on the Michelle Estate development project which was the sole or principal 'purpose' initially advanced for the requested overdraft speaks volumes about the company's submission and the defendant's 'understanding' of the actual amount that was approved by the bank.

In my view the 'Taha loan' is a 'red-herring'. If accepted it would effectively render the defendant's guarantee unenforceable. The uncertainties surrounding the availability of the 'Taha loan' would transform the defendant's guarantee from being one payable 'on demand' to one where the defendant's liability was postponed indefinitely and without any consideration flowing from the defendant. That cannot be right.

Here again I find that thereo merit in paragraph 6(c) of the defendant's proposed Statement of Defencee or paragraph 24(b) of his affidavit.

The defendant's application is accordingly refused with costs to the plaintiff bank to be taxed if not agreed.

D.V. Fatiaki
JUDGE

At Suva,
10th June, 1997.

Hbc0080j.96s