Singh v Fiji National Provident Fund [2003] FJHC 65; HBC0073D.2002S (28 October 2003)

IN THE HIGH COURT OF FIJI
AT LABASA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC.0073D.2002B

BETWEEN:

JITEN SINGH
father’s name Shanti Lal of
Auckland, New Zealand, Businessman.
PLAINTIFF

AND:

FIJI NATIONAL PROVIDENT FUND
DEFENDANT

Counsel for the Plaintiff: A. Sen, Maqbool & Co., Labasa
Counsel for the Defendant: G.P. Lala, G.P. Lala & Associates

Date of Decision: Tuesday 28 October, 2003
Time of Decision: 9.30 a.m.

DECISION

On 25 October 2002 the Plaintiff obtained, on an ex-parte application, an injunction restraining the Defendant from exercising its power of sale under Mortgage No. 394330 over the property described as Housing Authority Lease No. 234576 Lot 48 on DP. 4524 situated at Tuatua Housing Authority, Labasa. This is an application by the Defendant to dissolve the injunction.

The facts can be briefly summarised as follows. The Plaintiff was an employee of the Defendant when in 1995 he applied and was granted a loan under the Defendant’s Staff Housing Loan to purchase the above-named property. The property was originally owned by the Plaintiff’s brother, one Suresh Chand, and their father Shanti Lal. According to the evidence the Plaintiff had, prior to the loan, acquired his brother’s share in the property. The loan of $34,000.00 which was approved in February 1996 was intended to pay off the then existing loan of $16,500.00 to ANZ and the balance of $16,000.00 to enable the Plaintiff to purchase Shanti Lal’s (Plaintiff’s father) share in the property. The actual date of the transfer of the property is not ascertained, although the affidavit of Suresh Chand in support of the Plaintiff’s ex-parte application mentions at paragraph 4 that his half share of the lease was transferred to the Plaintiff, on 27 April 1994. The property was already owned as to one half by the Plaintiff two (2) years before he applied for a loan to the Defendant to purchase the other half. The loan was secured by a mortgage (Mortgage No. 394330) over the property.

The terms of the mortgage states as follows:-

“IN CONSIDERATION of the sum of $34,000.00 (THIRTY FOUR THOUSAND DOLLARS) this day lent and advanced to the Mortgagor (the receipt of which sum the Mortgagor doth hereby admit and acknowledge) by THE FIJI NATIONAL PROVIDENT FUND BOARD a body corporate established under the provisions of the Fiji National Provident Fund Act and having its registered office at Grantham Road, Suva, Fiji (hereinafter with its successors and assigns called (“the Mortgagee”) DOTH HEREBY COVENANT with the Mortgagee as follows:-

FIRSTLY - That subject as hereinafter provided the Mortgagor will pay to the Mortgagee at Suva clear of all deductions interest on the said principal sum of $34,000.00 (THIRTY FOUR THOUSAND DOLLARS) at the rate of $3.75 (THREE DOLLARS AND SEVENTY FIVE CENTS) per centum per annum computed from the 29th day of March 1996, subject to annual review.

SECONDLY - That the Mortgagor will repay to the Mortgagee at Suva clear of all deductions the said principal sum of $34,000.00 (THIRTY FOUR THOUSAND DOLLARS) together with interest thereon at the rate aforesaid UPON DEMAND and until demand by weekly equated instalments of $46.48 (FOURTYSIX DOLLARS AND FOURTY EIGHT CENTS) comprising principal moneys and interest at the rate aforesaid each such instalment shall be paid in the last day of each and every week during the term hereof, the first such instalment being due and payable on the 29th day of March, 1996.

This loan is for a term of 20 years.”

For just over 2 years, the Plaintiff complied with the payment scheme under the mortgage, but by 16th July 1998, he had begun to default in his repayments. While the Plaintiff had made clear in his application of loan that he personally was going to occupy the property, it subsequently was revealed that one of the previous owners, his brother Suresh Chand, and his mother remained living together with their families on the property. In the meantime the Plaintiff continued to default on his repayments. He also during this time moved to New Zealand leaving the property in the hands of his brother.

On 12 February 2002, the Defendant served its Demand Notice on the Plaintiff giving him 30 days to pay the full amount of the debt, failing which the Defendant would exercise its powers as Mortgagee. The Plaintiff then attempted to negotiate new terms with the Defendant to avoid the sale of the property. His efforts came to nought.

Pursuant to its powers under the mortgage the Defendant advertised the property for sale between April and May 2002 and tenders received from which one was accepted. On 28th June 2002, a Notice to Vacate the property was served on the Plaintiff’s brother, Suresh Chand. This elicited a response via Mr Chand’s solicitors, who stated that Mr Chand was willing to redeem the mortgage although he was not the Mortgagor. The Defendant’s solicitors, while informing Mr Chand that he was not legally entitled to redeem the mortgage, nevertheless gave him the opportunity to do so. But according to the Defendant, despite several exchanges of correspondence including clarification as to the amounts owed, the said Suresh Chand failed to follow up on his offer. Subsequently, the Defendant proceeded with its Mortgagee sale and entered into a sales agreement with the new purchasers. The transfer documents have been executed and stamped ready to be registered but for the caveat.

PLAINTIFF’S SUBMISSIONS

The Plaintiff’s submissions revolves around the single issue of law and specifically the equity of redemption. In support, the Plaintiff relies on the affidavit of his brother Suresh Chand. It is the same affidavit that was filed in support of the ex-parte injunction application which the Court granted on 25 October 2002.

According to the Plaintiff, he is entitled to redeem the mortgage and Mr Suresh Chand has produced and annexed to his affidavit, a letter of offer in the amount of $33,668.00 from the Colonial National Bank, which he argues, would be sufficient to redeem the mortgage. Furthermore, on the authority of Mohammed Isaq Khan v. Fiji Development Bank Suva CA.149/98, the fact that the Defendant may have already entered into a sales agreement with a third party, does not affect the rights of the Plaintiff to redeem the mortgage.

DEFENDANT’S SUBMISSIONS

In reply the Defendant argues that the right to redeem can only be made by the Mortgagor. In this instance, Suresh Chand, the brother of the Plaintiff and Mortgagor, is the one who is claiming the right to redeem the mortgage.

Contrary to the Plaintiff’s contention, the Defendant further argues that the Plaintiff’s right to redeem ceased once the Defendant had accepted the third party’s tender and given its Notice of Sale. Counsel referred to Islam Ali v. Westpac Banking Corporation CA.475/1999 where the Court held that a property is deemed sold for the purpose of s.72 of the Property Law Act once a binding sale and purchase agreement had been entered into. Counsel also referred to Laisenia Uluinayau & Or v. National Bank of Fiji CA.175/1994 that supports this principle of law. The only way the Court will intervene after a contract of sale has already been entered into, is when the Mortgagee is found not to have acted in good faith in relations to the sale (see: Waring (Lord) v. London and Manchester Assurance Co. Ltd. (1935) 1 Ch.310).

COURTS’ CONSIDERATION

The right of redemption in the Courts of equity recognised the Mortgagee’s estate as being subject to the right normally referred to as the equity of redemption. This allowed the Mortgagor to recover the property even though he had defaulted in his payment. This is contrary to the position at common law where default and/or non payment results in the Mortgagee’s estate becoming absolute and irredeemable.

Section 72(1) of the Property Law Act (Cap. 170) recognises to a certain extent the existence of such a right. It states:

“72(1) A Mortgagor is entitled to redeem the mortgaged property at anytime before the same has been actually sold by the mortgagee under his power of sale, on payment of all moneys due and owing under the mortgage at the time of payment.”

(emphasis added).

As what stage in a transaction is a property deemed to be “actually sold” for the purposes of S.72(1), seem to attract somewhat differing views of the Court. In Islam Ali v. Westpac Banking Corporation (supra), Scott J held that once a binding sale and purchase agreement has been entered into the property has been “sold” within the meaning of section 72 of the Act. In Laisenia Uluinayau & Or. V. National Bank of Fiji (supra) the Court (per Byrne J) held that the unconditional acceptance of a tender in a Mortgagee sale gives rise, as a matter of law, to a contract and at which juncture, the Mortgagor’s right to redeem, is extinguished. In both cases the Court agree that the property is “actually sold” when a contract or a sale & purchase agreement has been entered into.

However in Mohammed Isaq Khan v. FDB (supra) the Court (per Fatiaki J) after having considered the case law in as many jurisdictions on the rights of the Mortgagor to redeem or set aside a Mortgagee sale, concluded (at p.18):

“.... the Plaintiff retains his statutory right to redeem the mortgaged land until such time as a transfer of the mortgaged land has been registered by the Defendant bank pursuant to its power of sale.”

It is very much upon this pronouncement, that the Plaintiff in this case, is basing his arguments that his right to redeem exists still.

However, in the view of this Court, Mohammed Isaq Khan case can be distinguished from the other 2 cases on its own facts. It will be recalled that in the Mohammed Isaq Khan case, the Mortgagor had already begun the process of sub-dividing the property and had actually received a higher offer equivalent to his total debt than any of those received by the Mortgagee in its public offer. The Mortgagor was willing to redeem the mortgage throughout and had actually produced a cheque in the amount of the debt which the Court had then ordered to pay into Court. Finally, the Court itself in reaching the conclusion it did, added the following as proviso:

“I hasten to add however, that no findings have been made regarding the Defendant’s bank’s actions in exercising its “power of sale” in this instance, or the enforceability or otherwise of the “contract of sale” entered into with the successful tenderer who remains unknown at this stage.”

As far as this case is concerned, the right to redeem mortgage No. 394330 belongs to the Plaintiff, Jiten Singh as Mortgagor and no other. The attempt by his brother Suresh Chand to redeem the mortgage on the ground that the property in question has always remained a matrimonial home for him and his wife, is an action that is misconceived in law. While the Defendant may have endeavoured to assist the Plaintiff by entertaining the initial offer made by his brother Suresh Chand, this concession does not translate into empowering the latter with a status equivalent to the registered owner of the leasehold, the Mortgagor. But even if Suresh Chand was entitled to enforce the right to redeem his brother’s mortgage, such right would have expired at the time when the Defendant had accepted the tender from the third parties. And contrary to the finding of facts in Mohammed Isaq Khan’s case the successful tenderers in this case have been identified. Furthermore, the transfer documents had been executed between the Defendant and the third party, and stamp duties paid.

On the evidence before me, I find that the equity of redemption cannot be relied upon by Suresh Chand. It would have been available to the Plaintiff, but this right had been extinguished upon the acceptance of the successful tenderer by the Defendant.

On the question of the affidavit in support being filed by the Plaintiff’s brother, the Defendant argued that without a power of attorney, the affidavit should not be admitted or relied upon by the Court. The Court does not find anything improper in any person swearing affidavit in reply or in assistance to any application before the Court, so long as the contents of the affidavits sworn are relevant to the matters and issues before the Court. Whenever a party is in doubt, Court assistance should be sought for leave to file such affidavits.

There remains the question of the interim injunction that the Plaintiff had successfully sought and is in place restraining the Defendant from selling or otherwise disposing of the property.

The Court can only be guided by the American Cyanamid principles in deciding whether to extend or dissolve the injunction. Firstly, on whether there is a serious question to be considered, this Court concludes that there is not. The pertinent and central issue is whether there is anything, equitable or otherwise, that can stop the Defendant from exercising its power of sale. On the evidence presented, this Court finds nothing to prevent the Defendant as Mortgagee from exercising its power of sale. Second consideration is whether damages would be adequate remedy. The answer is yes. The Defendant is a large financial institution that is more than able to compensate for any damages if the Court were to find in favour of the Defendant. Any such damages so found would be more than adequate to compensate the Plaintiff for any losses he may suffer. On the other hand, the Court entertains grave doubt that the Plaintiff, who is a resident of New Zealand, would be in a position to pay damages to the Defendant should the injunction continue and the matter when finally resolved, favoured the Defendant.

In the end in weighing the balance of convenience of the parties as between the Plaintiff’s need for protection against the corresponding need of the Defendant to exercise its legal rights for sale, the Court is left in no doubt that it favours the Defendant.

There is finally, the matter of the Caveat. According to Mr Suresh Chand, the Caveat was lodged by his wife to prevent any dealings in the property, which he claims is the matrimonial property belonging to him and his wife. However the leasehold remains owned by the Plaintiff and there is no evidence to prove that Mr Suresh Chand and his wife have become its new owners or indeed have any “Caveatable interest” in the property. The lodging of the Caveat by Mr Chand’s wife, in the circumstances of this case and given the rights of the Mortgagee with prior registration, would tend to suggest possible abuse of the system. The shortcomings that prevail in this area of law and the recommended solution is fully explored in Scott J’s decision in Ram Dutt Prasad v. ANZ Banking Group CA.012/99. This Court is in total agreement with the views expressed therein. In this case, it is sufficient to hold that the Caveat lodged by Suresh Chand’s wife cannot be permitted to remain. Neither he nor his wife have satisfied the Court on the evidence, that they have Caveatable interest in the property to sustain the granting of the interlocutory injunction.

In the end the Plaintiff’s remedy if any, can only be in action for damages. The interim injunction is hereby dissolved. Costs of $200 is awarded against the Plaintiff.

F. Jitoko
JUDGE

At Labasa