Fiji Development Bank v Endeavour Youth Investment Co-operative Society Ltd [2000] FJHC 63; HBC0337J.99S (5 May 2000)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO: HBC 337 OF 1999

BETWEEN:

FIJI DEVELOPMENT BANK
Plaintiff

AND:

ENDEAVOUR YOUTH INVESTMENT
CO-OPERATIVE SOCIETY LTD.
1st Defendant

AND:

ILIESA DUVULOCO & KELERA DUVULOCO
2nd Defendants

Counsel: Mr D. Sharma for Plaintiff
: Mr R. Singh for 1st and 2nd Defendants

Hearing: 28th April 2000
Judgment: 5th May 2000

JUDGMENT

This is an application for vacant possession under Order 88 of the High Court Rules. The application was made by summons and affidavit on 27th July 1999.

The affidavit of Salote Tavainavesi sworn on 23rd July complies with Order 88 Rule 3 of the High Court Rules. The facts of the case are that the first Defendant is a registered proprietor of CT No. 6708 at 277 Princes Road, Suva. The second Defendants are directors of the first Defendant, which is a registered co-operative.

On 8th July 1992, the property was mortgaged to the Plaintiff Bank. The initial amount advanced was $120,000 in 1989. In 1992, a further advance of $450,000 was agreed to. Monthly instalments were to be $6,680.00. The interest charged was 8% per annum on the first $200,000 advanced and 11% per annum on the balance from 1st January 1997.

Clause 6 of the Mortgage reads as follows:

“That upon the power of sale becoming exercisable hereunder it shall be lawful for the Mortgagee at any time and from time to time without giving to the Mortgagor any notice to do all or any of the following:

To enter upon and take possession and/or enter into receipt of the rents and profits of all or any of the said land and to manage the same and to pull down, rebuild, alter and add to any of the existing buildings or improvements and to do all such things as the Mortgagee may deem necessary to manage and efficiently carry on the said land or to obtain income therefrom and for any such purposes to employ managers, workmen and otherwise to act in all respects as the Mortgagee in its absolute discretion may think fit.”

The Plaintiff says that the first Defendant defaulted in its payments and the Plaintiff issued a Demand Notice on 31st January 1997. The Plaintiff advertised the property for sale. However in July 1999, the second Defendants moved into the property and have refused to vacate.

The Plaintiff asks for vacant possession, an order restraining the Defendants from damaging the property, and costs.

The Defendants say that they have paid the full amount due to the Plaintiff, that the Demand Notices were wrongly issued, that they disagree with the accounts of the loan account provided by the bank, that the Minister for Co-operatives had not consented to the 11% interest rate charged by the Bank, and that the Plaintiffs should provide full and detailed accounts to the court.

In reply, in an affidavit sworn on 14th February 2000 Salote Tavainavesi provided another set of accounts, this time based on an 8% per annum interest rate, which shows that the first Defendant was still in default to the tune of $347,727.00. She states that in any event the Defendant agreed to pay interest at 8% on the first $200,000 and 13.5% thereafter, in an agreement with the Plaintiff dated 4th May 1992 (Annexure C).

In a final affidavit sworn on 9th March 2000 the second Defendant says that he disputes the accounts and that he had made a payment of $80,000.00 that was not shown in the accounts.

The application was heard on 28th April 2000. Both counsel were helpful in their submissions. Counsel for the Plaintiff submitted that a dispute on the total due was not relevant in an Order 88 application for vacant possession, unless the power of sale and re-entry was not exercisable because there was no default at all. Counsel for the Defendants said that the Defendants were not in default at all, that the accounts were inaccurate and that there should be an open court hearing and evidence heard.

On a perusal of all the affidavit material before me, I am satisfied that, whichever interest rate was chargeable on the principal sum, the first Defendant is in default. Although the Defendant disputes part of the accounts, and claims that it paid a sum of $80,000 which is not accounted for, the sum disputed is not in excess of $100,000. The Defendant is therefore still in default. A trial on the amount owed is therefore unlikely to make any difference in that respect.

Nor do I consider the Demand Notices to be invalid simply because the Defendant disputes the interest rate charged. In any event, after the demand notices were served, the Defendants have not appeared to take any steps to challenge the interest charged, to provide evidence of lack of default, or to provide any accounts of their own.

I am satisfied therefore that the Defendant is in default, and that the power of entry and sale has become exercisable by the Bank. The Defendant has raised the issue of the consent of the Minister of Co-operatives to the terms of the loan.

The Co-operative Societies Act Cap. 250 provides by virtue of section 34, that a registered co-operative society shall receive loans under certain prescribed conditions. Regulation 43 of the Co-operative Societies Regulations Cap. 250, provides:

“A registered society, may, with the consent of the Minister, raise capital by the issue of shares or by the issue of debentures either singly or in a series or by charging or encumbering the present or future assets of the society by way of lien mortgage or other form of charge or security.”

In this case, the consent of the Minister was obtained before the mortgage was executed. In a letter dated 19th June 1992, the then Minister wrote to the Plaintiff in the following terms:

“In accordance with the provision of Regulation 43 of the Co-operative Societies Act Cap 250, I endorse the application by the Endeavour Youth Investment Co-operative Society Ltd. to raise additional capital amounting to $450,000.00 at the interest rate of eight per cent (8%) per annum a rate that may be charged at the discretion of the Fiji Development Bank. Furthermore, I give my consent to allow the society to charge any or all of its assets to the Fiji Development Bank as security for the purpose of raising the above mentioned loan.”

This consent was given before the execution of the mortgage (which is of course silent on advances and interest rates) but after the second Defendant had signed an agreement with the Plaintiff, that the interest rate after the first $200,000, would be up to 13.5%.

The inference is that the Minister did not consent to an interest rate higher than 8% on the amounts advanced. However, I have already found that even if the Bank was not entitled to charge 11% on the amount advanced beyond $200,000, the Defendant is still in default. The question, therefore of whether or not the total amount owed is the correct amount, is not an issue for an Order 88 application.

The mortgage is valid, because the Minister consented to it before it was executed. The mortgage does not purport to specify interest rates. Under that mortgage the Plaintiff may exercise its power of re-entry and sale on default. That right is also protected by statute (section 75 of the Property Law Act Cap 30.)

I am satisfied that Order 88 has been complied with and I order vacant possession accordingly.

Counsel for the Defendants did not explain the 2nd Defendant’s presence in the property. In a letter to the Bank on 12 July 1999 (Annexure H to Salote Tavainavesi of 23rd July 1999) the second Defendant wrote:

“For your information I have personally moved into the property yesterday and we will never vacate the premises until we are assured of an offer above $450,000 so that we may recover a fraction of our total investment.”

In that letter, which is expressed in intemperate terms, the second Defendant does not say that he has become a tenant, or that he has any legal right to occupy the property. It is interesting that this letter does not suggest that the first Defendant was not in default under the mortgage.

I have not found any evidence that the second Defendants have any right to occupy the property in question. Order 88 Rule 1(1) (d) allows the court to order delivery of possession of the property by any person who is in possession.

Accordingly, I order in terms of the Plaintiff’s summons of 27th July 1999. Costs are to be taxed if not agreed.

Nazhat Shameem
JUDGE

At Suva
5th May 2000