Tora v Australia and New Zealand Banking Group Ltd [2002] FJHC 317; HBC0177.2001L (11 October 2002)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC 0177 OF 2001L

BETWEEN:

FERETARIKI TORA
Plaintiff

AND:

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
Defendant

Mr. M.K. Sahu Khan for the Plaintiff
Mr. Ronald Gordon for the Defendant

Date of Hearing: 16 August 2001
Date of Decision: 11 October 2002

DECISION

The Plaintiff seeks to restrain the Defendant bank from exercising its powers of sale under the mortgage it holds over the Plaintiff’s property. Because of the circumstances of this case the Plaintiff alleges such a step would be inequitable, oppressive and unconscionable. In reply the Defendant argues that the Plaintiff has been in frequent default with its payments, and when repayment in full was promised using the Plaintiff’s FNPF funds, only partial payment was in fact made. The bank claims it is therefore entitled to proceed to enforce its rights.

The Plaintiff filed a writ on 25 June 2001 together with an inter partes summons of the same date. The summons sought an injunction:

“That the defendant and/or its servants and/or agents and/or solicitors be restrained from exercising its powers of sale under the Mortgage number 287003 over the land known as Valele (Part of) Lot 1, DP 4260 in the Island of Vitilevu and the District of Ba and having an area of 1 rood and 1.7 perches contained and comprised in Certificate of Title No. 17400.”

Two affidavits were filed for the Plaintiff and two for the Defendant. A Defence was filed on 12 July 2001.

The Evidence

The Plaintiff used to work for the Defendant bank. He did so for 20 years. He has a freehold property at Yalalevu, Ba of which he is the registered owner. In 1990 he executed a mortgage over the property in favour of the bank. He was required to make repayments of $320 per month.

The Plaintiff retired from the bank because of ill health in January 1999. As a result the bank no longer extended its staff privileges on loans towards the Plaintiff. From 29.1.2000 the preferential staff interest rate no longer applied, and the Plaintiff was to pay the normal customer rate. Similarly the monthly repayment sum went up from $320 to $410 per month. The Plaintiff could not keep up his payments, and defaulted either by paying less than required in a month or by making no monthly repayment at all.

In a letter of 7 December 1999, the Defendant wrote to the Plaintiff: “Your response to call into the bank for discussion remains long outstanding and the bank will now look at this matter critically.” A Notice of Default letter was issued on 11 December 2000. The letter informed the Plaintiff that his account was in arrears by $3,480 and referred to two previous letters. A schedule of arrears was provided. He was told the penalty interest rate was being applied. He was asked to rectify the situation. He was warned if default were not rectified within 7 days, “We will have no alternative but to enforce our rights under the security as abovementioned and issue you with required formal demand notice. You would appreciate the situation is not acceptable and you have had adequate time to correct the default.”

The Plaintiff was warned that failure to comply with the notice would mean that the bank’s Asset Management Unit would commence legal proceedings. The letter concluded with an invitation for him to contact one of 2 named persons at the bank to discuss the matter further, and he was asked to give the matter his urgent attention.

On 27 December 2000 the bank sent a further letter informing the Plaintiff that the account was being put under the control of the Nadi Asset Management Unit because of the large arrears situation. Again he was asked to give the matter his urgent attention.

The Plaintiff says that sometime in November 2000 he called upon and informed Bharat Kumar, the bank’s Asset Management Officer at Nadi that “he had already applied to the FNPF for the transfer of funds and which is to be applied towards the mortgage debt to which he agreed”. In his affidavit in opposition of 11 July 2001, Bharat Kumar says he only spoke to the Plaintiff in January 2001, not November. In view of the bank’s letter of 27 December 2000, Mr. Kumar’s account would appear more likely. Similarly no evidence has been presented by the Plaintiff of any correspondence with FNPF in November 2000, only a letter from FNPF of 15 February 2001 acknowledging the Plaintiff’s loan application for which the letter fails to provide a date. But it is likely to have been sent in February 2001.

On 19 April 2001 the bank’s lawyers issued and served on the Plaintiff a Default Notice. The notice was set out in a tabulated and easy to read form. Two paragraphs were significant:

“Action necessary to remedy the default

To remedy the default you must pay an amount of $4,610.00 within (30) days from the date of service of this notice on you together with the costs of this notice as indicated hereunder.

Failure to remedy the default

If you cannot remedy the default then all of the monies owed under the abovementioned accounts will become immediately due and payable by you. However, we recommend that if you cannot pay contact us to discuss the alternative arrangements.”

There was no evidence that the Plaintiff took up this offer and contacted the bank’s officers. On 30 April 2001 the Plaintiff owed the Defendant $35,743.71. He made a cash repayment of $410 on 11 May 2001. The only other payment he had made up till then for the year 2001 was of $100 on 6 March 2001.

On 21st May 2001 the Defendant received an FNPF cheque for $20,480.00 sent by FNPF to the Defendant on behalf of the Plaintiff. This left a balance on the housing loan account in May 2001 of $14,853.71. The Plaintiff deposes to the value of the property being approximately $100,000 though no professional valuation was exhibited in support. The Plaintiff’s estimate was disputed by the Defendant. No alternative value range was put forward.

The Defendant says the time given in the Default Notice for remedying the default was not complied with, and so all of the monies owing then became due. In addition, April’s payment after the Service of the Default Notice was not paid, though the Plaintiff did make the payment for May. The Defendant’s solicitor issued another letter on 26 May 2001 pointing out these matters, stating the $20,480 had been received without prejudice to the bank’s “right to exercise mortgagee sale as the said payment was received after the due date of the Default Notice”. The letter required therefore full payment of the remaining balance owing forthwith.

The Default Notice

To his second affidavit the Plaintiff exhibits a letter from FNPF to the Defendant’s Marks Street Branch enclosing the FNPF cheque for $20,480. This letter is dated (overwritten in hand) 16 May 2001. The exhibit seems to be an office copy from the FNPF file. It is indorsed in hand at the bottom right hand corner “cheque sent by Fastpost 17/05/01", and the indorsement is signed and dated the same date. For an unexplained reason, the letter arrived only on 21.5.01; the cheque was deposited and receipted the next day on 22.5.01. Mr. Kumar for the bank said the normal procedure was for non-bank cheques to be processed in that way, i.e. credit given on day after receipt.

The final day of the 30 days allowed, from date of service of the Default Notice [19 April 2001] to the date by which remedy of the default was required was 18 May 2001, a Friday. The bank received the FNPF cheque from FNPF on the following Monday, 21st May 2001. The Defendant was correct in arguing that there was a failure by the Plaintiff to comply strictly with the terms of the Default Notice. He was a day late. I shall return to this issue further on.

The Plaintiff complains that the Default Notice was not signed by the mortgagee itself. Mr. Sahu Khan referred to Section 77 of the Property Law Act, which states:

Mortgagor in default

If default is made in payment of the mortgage money or any part thereof, or in the performance or observance of any covenant expressed in any mortgage or in this Act declared to be implied in any mortgage, and such default is continued for one month or for such other period of time as in such mortgage for that purpose expressly fixed, the mortgagee may serve on the mortgagor notice in writing to pay the mortgage money or to perform and observe the covenants therein expressed or implied, as the case may be.

There is nothing in the section confining the power to serve notices, to a personal power accorded to the mortgagee solely. Notices can be signed and served by the mortgagee himself, or by his agents or by his solicitors.

A similar argument was raised before me in a winding up case, In the Matter of Kim Industries Ltd (unreported) Lautoka High Court civil Action HBF0036 of 1999L; 7 July 2000. The full reasoning is set out between pp 5-9 of the ruling. Section 221 (a) of the Companies Act had referred to a creditor making “a demand under his hand”. It was argued the petitioning creditor company should have signed through its company secretary, a director, or other principal officer of the company, and not by the petitioner’s solicitor.

At page 6 of the judgment I had said:

“There is no prescribed form under the Rules for framing the Section 221 Notice. The issuance of the notice is a preparatory step taken prior to the filing of a petition. The Notice is not a Court form.

The Creditor, or someone with his authority, would appear to be the persons contemplated as being able to sign and to issue such a notice. The common law rule was “qui per alium facit, per seipsum facere videtur” [He who does anything by another is deemed to have done it himself]. Quain J in Re Whitley Partners Ltd [1886] UKLawRpCh 94; [1886] 32 Ch.D 337 at 340 said: “We ought not to restrict the Common Law Rule,......, unless the statute makes a personal signature indispensable.” Here Section 221 does not insist on a personal signature.”

And at pages 8-9:

“No papers were filed authorising the solicitors for the petitioner to issue a demand notice. However, this was not necessary. Indeed a solicitors authority cannot be disputed at trial. In re New Zealand Gum Machines (supra) at 95 where the proper course for such challenge was indicated to be a motion for stay.

In Re Whitley Partners Limited (supra) at 339 in interpreting the meaning of “shall be signed by each subscriber in the presence of and attested by one witness at least.” Cotton LJ had this to say:

“The appellant contends that as nothing is said in the statute about signature by an agent, these expressions must mean that the signature is to be affixed by the subscriber himself... I think it would be wrong to hold that an enactment simply referring to signature is not satisfied by signature by means of an agent.”

In Bateman Television Ltd. & Anor. v Coleridge Finance Co. Ltd. [1969] NZLR 794 at 819 Macarthy J said:

“If I had any doubt, which I have not, I would lean strongly in favour of the efficacy of an agent’s signature. The practical advantages of that view of the situation are obvious and in a procedural matter such as this are entitled to weight.”

I conclude therefore that no procedural advantage attaches to a narrow legalistic approach to the signing of the Demand Notice. Common sense also dictates that it should be open for the notice to be signed either by the Creditor himself or by his authorised agent, and a creditor could make his Barrister and Solicitor his authorised agent for such purposes. After all a company has to appear at court by a barrister and a solicitor. If a barrister and a solicitor can properly sign a Notice of Appeal for a company it follows that there could be nothing improper in a barrister and solicitor signing a Section 221 Notice, if so authorised. Solicitors should ensure that they hold such authority.”

There appear to be no prescribed forms either for demands to be made under the Consumer Credit Act 1999. Section 174 (1) of that Act provides:

“It is sufficient compliance with a requirement under this Act for a document to be signed by a person if the person’s signature is written on the document by another person by or under the authority of the person required to sign.”

I am satisfied for the purposes of this ruling that the issuance of the notice by the Defendant’s solicitors was authorised, as was its service. All other issues in connection with the Notice can be raised at the trial.

Authorisation for making affidavits

Mr. Sahu Khan complains that Mr. Kumar failed to exhibit an authorisation showing that he was duly authorised by the Defendant to make his two affidavits on behalf of the Defendant.

Solicitors would do well to maintain on file written authorisation from their litigant client for a witness to depose to affidavits on behalf of the litigant, whether that litigant be an individual person or a corporation. This practice may be of importance where there is conflict within a litigant’s own ranks, such as where shareholders and directors fight within a company. Oral authorisation is sufficient in straightforward cases. As long as there is authorisation, and it is stated in the body of the affidavit to have been given, there is no necessity for it be exhibited.

In Chirgwin v Russell & Anor. [1910] 27 TLR 21 Vaughan Williams LJ said:

“He hoped it would not be supposed that as a matter of practice, when an affidavit was made in support of a summons under Order XIV by a person other than the plaintiff, it was not necessary to show that the person making the affidavit was duly authorized to make it and further what means he had of knowing the facts he deposed to.”

In Ba Town Council v Fiji Broadcasting Commission & Others [1976] 22 Fiji LR 91 at pp 93-94 Kermode J said:

“None of the affidavits indicate that the Town Clerk was authorised by the plaintiff to make the affidavit.”

A similar point was picked up by the Court of Appeal in John Alexander Bish v Bish Limited (unreported) Fiji Court of Appeal Civil App. No. 68 of 1984; 22 March 1985 pp 6-7. In all of these cases there had been a failure of the deponent to express the fact of authorisation by the litigant for him to depose in the affidavit on the litigant’s behalf. The better practice would see a deponent referring to such authorisation to depose on each occasion when he swears to an affidavit, which would include a second affidavit in the same proceedings.

In straightforward cases, where challenge is not anticipated to that authorisation, the authorisation need not be in written form nor exhibited with the affidavit. But the deponent needs to mention due authorisation in every affidavit he makes for a party.

Was there compliance with the Default Notice?

Assuming that leeway could be given for a payment made a day late but in other respects in conformity with the remedial action required by the Default Notice, what would be the effect of such payment? Section 81 of the Consumer Credit Act provides for re-instatement of the mortgage “and any acceleration clause cannot operate” if the other requirements of the section are met by the mortgagor “within the period specified in the notice”. It would be an issue for the trial however whether there had been “a subsequent breach of the same type” [Section 81 (2)], which would prevent re-instatement.

It is plain that for alleviation of the effects of default to be successful there must be compliance with the terms of the remedy as required in the Notice. Once there has been a failure to comply by the mortgagor, even to the extent of being out by a single day of the time stipulated for remedial action, the decision to continue the mortgage contract apart from redemption remains with the bank. It will make a commercial decision whether to permit continuance or whether to proceed to sell.

I have not been informed of the bank’s commercial reasons for calling in the loan, bearing in mind the Plaintiff’s special circumstances, other than that the bank intends to rely upon its legal rights. It may be open to the Defendant to proceed along more than one avenue of enforcement under the Property Law Act, [Sections 77, 78, 79] the Consumer Credit Act, and the mortgage document itself. The Plaintiff has argued that it would be unconscionable for the bank to seek to enforce its powers of sale.

There is an issue here as to whether the Plaintiff said he would remedy his defaults by repaying the entire remaining balance owing or whether he promised Mr. Kumar only a substantial repayment as was in fact made. It may be inferred the bank did not wish to continue with the mortgage arrangement because of the Plaintiff’s history of defaults. But it held its hand thinking it was to be paid in full via the Plaintiff’s FNPF funds. I do not consider unconscionability has been shown at this stage, nor do I consider there is a serious issue to be tried.

Power to restrain mortgagee sale

The position is summarised in Halsbury’s Laws of England 3rd Edit. Vol. 27 at p 301:

“The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has commenced a redemption action, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount claimed into court, that is, the amount which the mortgagee swears to be due to him, unless, on the terms of the mortgage, the claim is excessive.”

This passage was approved by Walsh J. who came to dismiss an application for an interim injunction in Inglis v Commonwealth Trading Bank of Australia [1971-72] 126 CLR 161 at p 164. The judge’s decision was upheld subsequently by the Full Court.

The necessity of paying into court the balance sum owed under the mortgage has few exceptions; one is where the debt itself for which the mortgage purports to be security is said not to have been incurred at all: Piggott v Williams (1821) 56 E.R. 1027. That is not the case here. In Rauzia Mohammed v ANZ [1984] 30 Fiji LR 136 at p 140 Kermode J. said it would require “an exceptional case” before a court would restrain a mortgagee from exercising a power of sale. The power of sale being properly subject to challenge could be an exception: Westpac Banking Corporation v Adi Mahesh Prasad [1999] 45 Fiji LR at p 9 citing Sugerman J’s judgment in Harvey v McWatters [1948] NSWStRp 58; (1948) 49 SR (NSW) 173; and the want of bona fides in the sale: Murad v National Provincial Bank (1966) 198 Estates Gazette 117. These exceptions do not apply here.

If the bank proceeds to exercise its rights beyond the issuance of a demand notice, and its platform or prerequisite tackle is out of order at that time, it will be open for the Plaintiff to re-apply for an injunction to restrain the bank. Meanwhile the Defendant is in a position to meet any subsequent award of damages, if claimed and ordered, in this or a separate action.

This application is declined with costs to the Defendant summarily assessed at $500.

A.H.C.T. GATES
JUDGE

Solicitors for the Plaintiff: Messrs M.K. Sahu Khan & Co, Ba
Solicitors for the Defendant: Messrs Gordon & Co, Lautoka