Merchant Finance & Company Ltd v Ali [2003] FJHC 267; HBC0063d.2003s (31 October 2003)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0063 of 2003

Between:

MERCHANT FINANCE & COMPANY LIMITED
Plaintiff

and

1. BHADUR ALI
s/o Jamal-Ud-Dean

2. MUKTAR ALI
s/o Bahadur Ali

3. ALI’S CIVIL ENGINEERING LIMITED

4. VALEBASOGA QUARRIES LIMITED

5. VAEBASOGA ARTESIAN WATERS (FIJI) LIMITED
Defendants

Mr. J. Apted for the plaintiff
Mr. R.P. Singh for the 1st to 4th Defendants
Mr.V. Kapadia for the 5th Defendant.

DECISION
(Interlocutory Injunction)

By Notice of Motion dated 9^th April 2003 the plaintiff is seeking orders as follows pursuant to Order 15 Rule 6(2) and Order 29 of The High Court Rules, 1988:

(a) An interlocutory injunction restraining the Third, Fourth and Fifth Defendants by themselves and/or by or through their servants and/or agents from hindering for interfering in any way with the Plaintiff’s exercise of its rights to take possession of assets that are subject to a bill of sale or hire purchase agreement between the Plaintiff and variously the Third, Fourth or Fifth Defendant;

(b) An interlocutory injunction restraining the Third, Fourth and Fifth Defendants by themselves and/or by or through their servant and/or agents from concealing, altering, dismantling, removing, transferring, disposing of, selling or in any way threatening or diminishing the valve of any asset that is subject to a bill of sale or hire purchase agreement between the Plaintiff and variously the Third, Fourth or Fifth Defendant;

(c) An Order that the Third, Fourth and Fifth Defendants, their servants and/or agents do forthwith hand over to the Plaintiff and its agents and servants possession of all of the assets that are in their possession or control and that are subject to a bill of sale or hire purchase agreement between the Plaintiff and the Third, Fourth and Fifth Defendant;

(d) Such further and other orders as to this Honourable Court may seem just; and

(e) The costs of this application be costs in the cause

Background

In support of the motion the plaintiff filed affidavits of Lepani Makubuna sworn on 13^th, 21^st, 27^th February 2003 and 20^th March 2003.

The plaintiff is now not seeking any orders against the fifth defendant in these interlocutory proceedings.

As for the other defendants, although Mr. W. Archibald is their counsel on record, Mr. R.P.Singh now appears on the hearing of this motion and says that he would file change of solicitors and is counsel for defendants (1^st to 4^th).

Although the motion was filed 9 April 2003, the then counsel for the defendants sought adjournment of the hearing from time to time in the hope of coming to some settlement and to arrange for payment of the debt.

Time went by and nothing eventuated and a hearing date for the motion was set for 1^st October 2003 and it was heard when both counsel handed in to Court their written submissions. I might mention at this stage that no affidavit in reply to the plaintiff’s affidavits were filed by the defendants.

In this case, interlocutory injunctions were on 3 April 2003 already granted against the 1^st and 2^nd defendants personally.

When the motion came before me for hearing, it was not disputed by the defendants that substantial amounts are owed following defaults under the security documents herein. Details regarding arrears are outlined at page 7 in item 2.36 to 2.41 of the plaintiff’s written submissions.

Defendants’ submission

The only ground on which the defendants rely on in opposing the motion is that the ‘majority of securities given by the defendants to the plaintiff were by way of Bill of Sale executed and registered in terms of Bills of Sale Act, Cap. 225 (the ‘Act’) and that the Bill of Sale expired on 10 September 2002 as the five-year period has expired for the document was executed on or about 10 September 1997.

Mr. Singh relies on sections 14 and 7 of the Act which provide:

Section 14

“The registration of a bill of sale must be renewed, or further renewed, as the case may be, at least once every five years, and, if a period of five years elapse without such renewal or further renewal the registration shall become void”

Section 7

7. Every bill of sale to which this Act applies shall be duly attested, and shall be registered, within seven days after the making or giving thereof if made or given in Suva, or within twenty-one days if made or given elsewhere than the city of Suva, and shall set forth the consideration for which such bill of sale was given; otherwise such bill of sale shall be deemed frudulent and void:

Mr. Singh argues that since there is no evidence of renewed Bill of Sale, all the Bills of Sale are void and therefore the plaintiff is precluded from exercising any of the powers of the mortgagee contained in the Bills of Sale. He submits that once it is held that the Bills of Sale are void, then the plaintiff does not have any legal grounds to ask for the orders as prayed and therefore the action should be struck off.

Plaintiff’s submission

In response to Mr. Singh’s argument on this point of law, Mr. Apted submits that under s98(2)(c) of the Companies Act, Cap 247 no registration is required under the Bills of Sale Act where the plaintiff is a company which is governed by the Companies Act. The said s98 provides (in so far as it is relevant):

98. – (1) Subject to the provisions of this Part, every charge created after the fixed date by a company registered in Fiji and being a charge to which this section applies shall, so far as any security on the company’s property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the original or a copy certified in the prescribed manner of the instrument, if any, by which the charge is created or evidenced, are delivered to or received by the registrar for registration within 42 days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured, and, when a charge becomes void under this section, the money secured thereby shall immediately become payable.

2. This section applies to the following charges:-
   

(a) .....

(b) .....

(c) charge created or evidenced by an instrument which, if executed by an individual, would require registration as an instrument under the Bills of Sale Act; (Cap. 225.)

(d) .....

(e) .....

(f) .....

(g) .....

(h) .....

(i) .....

Consideration of the issue

The background to the case is contained in the written submission of the plaintiff and I do not intend to reiterate it here except to state a few salient features.

The Writ of Summons was issued on 13 February 2003. Initially D1 and D2 were defendants and subsequently the D3, 4 and 5 were joined as parties as defendants.

On 14 April 2003 the plaintiff filed the amended writ of summons and a statement of claim pleading against ACEL, Quarries and Artesian, various causes of action including breach of contract and the torts of conversion and detinue.

By the present motion the plaintiff seeks injunctions against D1 to D4 restraining them from preventing the plaintiff from recovering possession of its assets, and order for delivery of possession. It also seeks damages.

Counsel for the plaintiff has set out in his submission how the plaintiff financed the defendants by way of loan. These loans were secured by various Bills of Sale over specified assets. Under their terms ACEL, Quarries and Artesian in consideration of the moneys advanced, transferred, assigned, released and assured to the plaintiff, title in the assets. The effect of the bill of sale was therefore that the plaintiff became the legal owner of the subject assets subject to the right of ACEL, Quarries and Artesian to retain possession of the assets but only for as long as each complied with its various obligation (including repayment) under the bills of sale.

Defaults in payments under security documents

There have been continuing and significant defaults in honouring and accommodating the defendants since October 2002 whereupon the plaintiff
instructed its bailiffs to seize the relevant assets at the companies’ premises in Suva and Labasa on 12 February 2000.

This action was taken pursuant to clause 15 of standard form bills of sale and clause 7 of the hire purchase agreement.

The plaintiff’s bailiffs were obstructed in the performance of their duties to seize the subject securities by the defendants and their agents.

In the circumstances the majority of the plaintiff’s secured assets remain in the possession or control of ACEL and Quarries and their debts and that of Artesian to the plaintiff (whether under the original terms or in the accommodation) have grown larger. In the meantime, ACEL and Quarries have continued to use the plaintiff’s assets having made only sporadic payments.

The plaintiff did not proceed with its application for injunctions and the defendants because of a proposal for settlement. But no progress was made in this regard and it therefore now seeks injunctions against D3 & D4 for their failing to surrender possession despite demand.

Application of law to facts

As I stated earlier there is no affidavit in reply from the defendants on the plaintiff’s affidavit in support for injunction.

To give a background to the issue before the Court I have stated hereabove the facts and circumstances leading to the exercise by the plaintiff of its powers of seizure.

Counsel for the defendants has not denied that the defendants have not defaulted. The only ground on which the motion is opposed is as I have stated above that the Bills of Sale in question have expired and therefore the plaintiff cannot exercise its powers of seizure under them.

I have considered this motion for injunction applying the principles laid down in the leading case of American Cyanamid Co v Ethicon [1975] UKHL 1; [1975] AC 396.

There is a ‘serious question to be tried’. The plaintiff has a good cause of action in contract and tort against the defendants. The plaintiff has under the terms of the Bills of Sale and Hire Purchase Agreements a real prospect of succeeding on its claim for breach of contract and possession.

As for ‘damages’, on the evidence before the Court, it would not be an adequate remedy for the plaintiff but on the other hand if the plaintiff does not succeed at the substantive hearing, damages would be an adequate remedy for the defendants and that the plaintiff is in a position to pay. There is clear evidence that the defendants are in substantial default, and this is not disputed, to pay the plaintiff the arrears and current amounts due let alone the total amounts outstanding.

On ‘balance of convenience’, as stated in Cyanamid (supra) at 408E Lord Diplock stated:-

“It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises.”

As stated, since damages would be an inadequate remedy for the plaintiff but an adequate one for the defendants there is no need for the Court to consider the broader question of balance of convenience. I find, however, that the scale tips in favour of the plaintiff in this regard.

Is Bills of Sale Act, Cap. 225 applicable?

It is Mr. Singh’s argument that the Bills of Sale Act applies in this case. Since five years have expired after execution the bills of sale are null and void and hence they cannot be enforced.

Mr. Apted’s argument is to the contrary and he relies on s98 of the Companies Act, Cap. 247 which does not require a bill of sale to be registered under the Bills of Sale Act.

I uphold Mr. Apted’s argument which has support not only in s98 but the case law has also settled the issue.

A ‘bona fide hire purchase contract is not subject to the Bills of Sale Act’. (Helmore’s Personal Property and Mercantile Law in New South Wales 9^th Ed at 213).

The Hire Purchaser Agreements in this case are not ‘bills of sale’ for it is stated in Halsbury 4^th Ed para 211 Vol 22 that:

A bona fide agreement in writing for the bailment or sale of goods which are not to become the property of the bailee or buyer unless and until the last instalment of the stipulated payments is made, and providing for the right of the owner or seller to retake possession in default of payment, is not a bill of sale, and does not require to be registered under the Bills of Sale Acts. This is because no property is conveyed by such an agreement to the hirer or buyer during the effective currency of the agreement, and, therefore, the hirer or buyer not being the owner of the goods, the licence to seize only empowers the owner or seller to retake possession of his own goods.

These bills of sale are not required to be registered under the Bills of Sale Act 225 and I refer to Halsbury 4^th Ed. Vol 4 para 655 which states:

“since the courts have held that quite independently of that express exception any instrument of charge or other security issued by a company which requires to be registered in the register of charges maintained by the company is outside the mischief against which the Bills of Sale Acts are aimed.

In re Standard Manufacturing Company [1891] UKLawRpCh 26; (1891) 1 Ch 627 C.A., the Court held:

“that the mortgages and charges of any incorporate company for the registration of which statutory provision has already been made by the Companies Clause Act, 1845 or the Companies Act, 1862, are not, upon the true construction of the Bills of Sale Act, 1878, Bills of sale within the scope of that Act.”

Such is the situation in the case before me. Section 98 of our Companies Act provides for the registration by companies of the mortgages and charges specifically affecting their property.

In Staffs Motor Guarantee, Limited v British Wagon Company, Limited (1934) 2 K.B. 305 which involved a hire-purchase agreement as in the present case it was held:

“...that the agreement between them as to the letting of the lorry was a valid hire-purchase agreement and could not be treated as a bill of sale to secure the re-payment of a loan by the defendants to it.

Conclusion

To conclude, for the above reasons and on the authorities the plaintiff succeeds in its application for injunction against the defendants. The Bills of Sale Act does not apply in this case and hence no question of the bills of sale herein expiring arises after five years and section 98 of the Companies Act makes this quite clear.

It is therefore ordered that the third and fourth defendants be restrained by way of injunction as prayed in items (b) and (c) of the motion referred to hereabove.

The costs are to be costs in the cause.

D. Pathik
Judge

At Suva
31 October 2003