Avoi v Fiji Development Bank [2004] FJHC 224; HBC0145j.2003s (12 July 2004)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0145 OF 2003

Between:

PAULA DIKI AVOI
Plaintiff

and

FIJI DEVELOPMENT BANK
Defendant

Mr. S. Valenitabua for the Plaintiff
Mr. D. Sharma for the Defendant

JUDGMENT

The plaintiff instituted proceedings against the defendant by way of originating summons dated 9 April 2003 seeking the following reliefs:

1. A Declaration that the land described as C.T. 26666, Lot 13 on DP 6233, Belego and Qalatea (part of) is free of any mortgage as defined by law and equity
   
2. A declaration that the said land is currently not subject of security for any advances or loans purportedly made from the Defendant by the Plaintiff or by a third party.
   
3. An Order that the Defendant releases the title to C.T. 26666 to the Plaintiff within five (5) days after such order is made.
   

Thereafter upon an application by motion an interim injunction was granted on 29 April 2003 when the following Orders were made:

1. An Interim Injunction is granted restraining the Defendant whether by itself, its servants and/or agents, from proceeding further with the mortgagee sale of that land described as C.T. 26666, Lot 13 on D.P. 6233, Belego and Qalatea (part of) as advertised in the Fiji Times newspaper on Wednesday, March 12, 2003 until further Order of this Honourable Court.
   
2. An Interim Injunction is granted restraining the Defendant, whether by itself, its servants and/or agents, from interfering with the Plaintiff’s occupation and use of the said land until further Order of this Honourable Court.
   
3. The Defendant do file and serve an Affidavit in Reply within 14 days.
   
4. The Plaintiff do file an Affidavit In Response within 14 days thereafter, if necessary.
   

Background facts

The plaintiff is the registered proprietor of C.T. 26666 (the “land”) which was transferred to him on 22 August 1991. In 1997 he obtained a loan of $6000.00 from the defendant to commence farming on the land. As security he executed a mortgage on 24 June 1997; mortgage was initially numbered as mortgage No. 426193 and registered on 1 July 1997. This instrument was withdrawn and registered as Mortgage No. 449403 on 17 September 1998 with the plaintiff as the mortgagor and the defendant as the mortgagee.

According to the said mortgage No. 449403 the mortgage is over CT 26666 (the ‘land’) and a Memorial to this effect appears on the Title.

The defendant had advertised the land for mortgagee sale.

The plaintiff then obtained an interim order for injunction restraining the defendant from proceeding with the sale.

The issues

The issues for Court’s determination are:

(a) whether CT 26666 was and is security for the advance to Taukei Shipping Limited.

(b) whether the defendant should release CT 26666 to the plaintiff within five (5) days.

Plaintiff’s contention

The plaintiff contends that he has repaid the said loan of $6000.00 and has given particulars of repayments. He had asked the defendant to release his Title as the loan under the mortgage had been paid. However, in response the defendant says that the land was also allocated as security for an advance that was granted to Taukei Shipping Limited through guarantees that were executed by the plaintiff on 7 April 1994 and 8 June 1995 respectively. The plaintiff rejects the claim of the defendant.

In his affidavit the plaintiff states that the mortgage does not state the amount advanced and covered by the mortgage. He does not agree with the defendant that the land was “allocated as security for an advance granted to Taukei Shipping Limited and that this claim cannot be substantiated from the mortgage documents”.

The plaintiff says that he has paid the $6000.00 advanced to him under the security of the said mortgage. He refutes the defendant’s assertion that CT 26666 was neither mortgaged as security for a loan to Taukei Shipping Limited nor ‘would it have been the subject of any personal guarantee’ he is alleged to have given to the defendant.

Defendant’s contention

Through its Manager Legal Salote Tavainavesi, the defendant contends that the said mortgage was also “for all monies whether advanced or by way of loan or fixed term or provided by way of overdraft or otherwise now or hereafter to become owing or payable to the Bank by the plaintiff” (paragrah (a) of Mortgage No. 449403).

The defendant says that:

the Plaintiff signed two guarantees in favour of the Bank for Loans to Taukei Shipping Limited. Taukei Shipping Limited belonged to the Plaintiff. The Plaintiff still owes money to the Bank under his guarantees and it would appear that he has no intentions of paying any of the said monies. Mortgage No. 449403 secures all monies owing by the Plaintiff to the Bank.

The defendant says that the plaintiff owes the Bank about $211,000.00. The defendant does admit that one of the loans was the said $6000.00. It says that as long as the plaintiff owes monies to the Bank, the Bank is entitled to rely on its mortgage to recover its debt and in this regard it is not limited to the advance of $6000.00 which has been paid.

Determination of the issue

The issue is:

Is mortgage No. 449403 over C.T. 26666 security for advance to Taukei Shipping Limited?

The background facts pertaining to advance to Taukei Shipping Limited (the ‘company’) are that the plaintiff was the majority shareholder of the company and the Managing Director before it went into liquidation.

For advances made to the company, the plaintiff executed two guarantees on 7 April 1994 and 8 June 1995 respectively. The plaintiff still owes money to the defendant under the guarantees.

It is clear from the mortgage document that the Title in question, namely CT.26666 has been given as security under the mortgage for advances made by the defendant.

Although the plaintiff paid off the said specific loan of $6000.00, he has not paid the amount under the guarantees. He had also given mortgage over the said Title to the defendant to secure any other debts that the plaintiff may ‘now or hereafter’ owe ‘or payable’ to the defendant (as mortgagee) as is expressly stated in clauses (a) and (c) of the mortgage. These clauses read as follows:-

(a) all moneys whether advances by way of loan for fixed term or provided by way of overdraft or otherwise now or hereafter to become owing or payable to the Mortgagee by the Debtor and the Mortgagor or either of them alone or on joint or partnership account on any account whatsoever; (emphasis added)

(c) All moneys which the Mortgagee shall lend or pay or become liable to lend or pay or may have advanced or may advance the payment or prepayment of which the Mortgagor has guaranteed or may hereafter guarantee to the Mortgagee;

(b) The law

The case before me involves the interpretation of the said clauses (a) and (c) of the mortgage for which the plaintiff has given as security his C.T. 26666.

The classic description of a ‘mortgage’ was given by Lindley MR in Santley v Wilde [1899] UKLawRpCh 126; [1899] 2 Ch. 474 as follows:

‘A mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given.’

In this case the defendant is a secured creditor which in relation to the debtor means, inter alia, a person holding a mortgage. The security which constitutes the creditor a secured creditor must be on the property of the debtor and it is in such case that he/it is entitled to deduct the value of his/its security. That is the situation here and the above said clauses (a) and (c) enable the defendant to exercise its powers under the mortgage to recover the debt under the guarantees. The mortgagee owes a duty to the plaintiff as the guarantor of the mortgage debt (Tooth & Co Ltd v. Lapin (1936) 35 W (NSW) 224 at 225). The duty that is owed is expressed as one owed to creditors generally (Expo International Pty Ltd v Chant [1979] 2 NSW LR 820).

Conclusion

To sum up, in the present case the plaintiff as mortgagor has expressly by the said clauses (a) and (c) consented to secure his debts to the defendant by giving C.T. 26666 as security, he cannot now in the face of that fact seek the reliefs that he is now seeking.

In these circumstances if the defendant/mortgagee exercises its power of sale it will not be in breach of its duty to the plaintiff/mortgagor.

To conclude, on the evidence before me and on the authorities, in answer to the issue before me I hold that the Certificate of Title No. 26666 is security for the advance to Taukei Shipping Limited and which said advance has been guaranteed by the plaintiff.

In the outcome, for the above reasons, the plaintiff fails in his claims.

I therefore refuse to grant the said three reliefs sought by the plaintiff by his originating summons.

It is ordered that the interim injunction granted herein on 29 April 2003 be dissolved.

The plaintiff is ordered to pay costs to the defendant in the sum of $350.00 (three hundred fifty dollars) within 21 days.

D. Pathik
Judge

At Suva
12 July 2004