Australia and New Zealand Banking Group Ltd v Bulewa [2004] FJHC 280; HBC0233j.2002s (10 March 2004)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0233 OF 2002

Between:

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
Plaintiff

and

KELEMEDI RAKUVE BULEWA
Defendant

Mr. H. Lateef for the Plaintiff
Defendant in Person

JUDGMENT

By Originating Summons dated 7 June 2002 the Australia and New Zealand Banking Group Limited (the “plaintiff”) in a ‘ mortgage action’ seeks the following relief and/or remedies against Kelemedi Bulewa (the “defendant”)under Order 88 of the High Court Rules 1988:

1. That the Defendant and/or any other occupant deliver to the Plaintiff vacant possession of ALL THAT piece or parcel of lands known as “Davuilevu” and “Na Calia”, containing areas of two hectares four hundred twenty seven metres (2.042 ha) and two hectares one hundred and ninety three square metres (2.0193ha) situated in the District of Naitasiri and Islands of Viti Levu and being C.T. No. 30693 being Lot 5 on Plan No DP.7191 and C.T.No. 30694 being Lot 6 on DP 7191 together with all improvements thereon, as charged by the Defendant to the Plaintiff by Mortgage Number 428174 registered on 2 September 1997 to secure the money therein mentioned.
   
2. That the Defendant, his servant, agent or employee be restrained from interfering with the improvements on the said properties in any way so as to deplete its value.
   

100. Costs of the action.
     

An affidavit in support was filed. The defendant responded by filing an affidavit on 14 August 2002 to which the plaintiff replied by affidavit sworn 9 September 2002 followed by a reply thereto by the plaintiff through his affidavit of 9 March 2003. There was a further response filed by the plaintiff on 17 March 2003.

As ordered, Mr Lateef counsel for the plaintiff filed his submission on 4 February 2003, but because Mr Bulewa was too sick for some months his submission was not filed until 24 March 2003.

Plaintiff’s submission

This application is made under Order 88 Rule 3 of the High Court Rules 1988. The learned counsel for the plaintiff submits that the provisions of Order 88 have been complied with in making this application. These are fully set out in the plaintiff’s written submission (at page 2).

The plaintiff is the first registered mortgagee of C.T.NO.30693 being Lot 5 on D.P.NO. 7191 and C.T.NO. 30694 seeing Lot 6 on DP NO. 7191 (the “properties”). It is seeking an order for vacant possession of the properties.

The facts are that under the Mortgage a demand was made by the plaintiff on 13 November 2000 for the outstanding amount on the Housing Loan Account and various other accounts of the defendant. The defendant has been in default of repayment so the plaintiff exercised its rights under the mortgage by issuing the demands.

The Defendant was served with notice to vacate on 5 March 2002 in accordance with s.75 of the Property Law Act. The defendant does not deny that he was served with such a demand. In the circumstances counsel submits that the plaintiff is legally entitled to enter into procession of the mortgaged property.

Counsel further submits that under Clause 12 of the Mortgage document the plaintiff is specifically empowered as mortgagee to enter into procession and if necessary to bring an action for ejectment to obtain possession. The plaintiff therefore exercised its power under the mortgage by bringing this action.

Defendant’s submission

The defendant who appeared in person sets out in his written submission the law pertaining to the issue before the Court.

He submitted that the procedure followed by the plaintiff in these proceedings is inappropriate and there are a number of irregularities such as (inter alia):

1. There is a total denial by him of arrears in payments giving rise to a default over which the plaintiff can invoke his entitlement given by the law.
   
2. There are serious procedural irregularities. There is no proper affidavit of service of the demand.
   

100. There is material non-disclosure of facts by the plaintiff.
     

4. There are factual errors in the affidavits of plaintiff.
   
5. The law relating to deeds only permits the payment of Bank fees and charges; unauthorized charges or fees are unjustified.
   

The defendant submits that the proceedings by way of originating summons is not the correct procedure and asks that the Summons should either be dismissed or an order be made under Order 28 of the High Court Rules 1988 for continuation of proceedings as if cause or matter begun by writ.

Consideration of the issue

This is the plaintiff’s application under Order 88 of the High Court Rules 1988 in respect of the said properties.

In an application under Or. 88 the plaintiff has to comply with certain requirements as stated in that Order particularly Or. 88 rules 2, 3(2), 3, 4, 5, 6 & 7. This I find the plaintiff has done.

Although the defendant vigorously disputes the claim he is considerably in arrears of payment of his debt to the plaintiff and has defaulted in payment leaving the Bank with no option but to exercise its powers under the security document herein.

The defendant is in possession of the properties. I find that demands have been properly made by the plaintiff. Under the powers contained in the mortgage document the plaintiff is empowered to obtain possession as therein provided. The right to possession arises in this case because of the default in payment to the plaintiff.

The defendant’s argument in effect suggests that for the reasons advanced by him the Bank be restrained from exercising its power of sale under the mortgage. If the defendant wants an injunction in this regard then he has to move the Court. On this aspect the law is very clear and I refer to the following passage in Halsbury’s Laws of England 4th Ed. Vol.32 para 725 which supplies the answer and is apt:

“The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute or because the mortgagor has begun 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 which the mortgagee claims to be due to him.” (emphasis added)

This is not a case where the Court will interfere with the mortgagee’s rights under mortgage for it has complied with the provisions of Order 88. The defendant as mortgagor has vested the Bank with wide powers under the mortgage document. The effect of these powers have been fully set out in the following passage from the judgment in Matthie v Edwards 73 ER 776 at 779:

‘Now those powers so given may undoubtedly, be often used for purposes of oppression. They are however, powers which the party having a power of the property thinks proper to confer on the individual from which he borrows the money; it is a bargain; one party parts with his money, and he has to pay himself out if the property upon which it is charged; and it is for the other party, who creates the mortgage, to consider whether he has not given too large a power to the individual with whom he is dealing. But when once it is given, the party advancing his money is perfectly entitled to execute the power which such a contract gives him. However if the power is sought to be exercised for exorbitant purposes, without a due regard to the interest of the parties concerned, this Court will interfere under certain circumstances, and, like other pledges, if the individual comes and deposits the money, the Court will, under certain circumstances prevents a party from exercising that power arbitrarily, but not without the actual deposit of the sum which the other party is entitled to.

Now it is quite clear, that the interests of society (and more particularly financing institutions) require, and the justice of such a case requires that those powers, when they do not come within the (above) principles on which the Court has acted, should not be interfered with; it is merely a power which the individual has given.’

Further, the mortgagee has a common law right to possession and this is well established as borne out by the judgment of Goff L.J. in Western Bank Ltd v Schindler (1977) 1 Ch where it is stated:

“It has for a very long time been established law that a mortgagee has a proprietary right at common law as owner of the legal estate to go into possession of the mortgaged property. This right has been unequivocally recognised in a number of modern cases: see for example, Four Maids Ltd v. Dudley Marshall (Properties Ltd. (1957) Ch. 317. ... It has nothing to do with default: See per Harman J. in the Four-Maids case where he said, at p.320:

The mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted out of that right."

On the affidavit evidence before me it is not that money is not owing by the defendant. The defendant does not say how much he owes nor does he say what amount is disputed. The defendant has had dealings with the Bank for sometime and he must have been furnished with Bank statements of account from time to time. He cannot now be heard to just say that he is not satisfied with the accounts supplied to him and therefore he will stop paying under the mortgage. There is no question of waiver of terms and conditions of the security documents arising here because of some dispute to alleged insufficiency of particulars relating to accounts.

As required under the said 0.75 the plaintiff served a notice to vacate on 5 March 2002 and there is no denial that this demand has actually been served. Having complied with this requirement it enables the plaintiff as mortgagee to legally enter into possession of the mortgaged properties.

Furthermore, clause 12(3) of the mortgage document specifically empowers the Bank as mortgagee to enter into possession of the mortgaged property and if necessary to bring an order for ejectment to obtain possession of it. Hence the Bank has exercised its powers pursuant to the mortgage.

The Law

There are two cases to which I will particularly refer in dealing with the issue for my determination for there their Lordships Jayaratne and Fatiaki (now Chief Justice) respectively dealt in detail with the law on the subject of Order 88. The cases are Australia and New Zealand Banking Group Limited v Shanti Lal f/n Harkissan Chnibu (Civil Action No. 265/90 - judgment 12.4.91- Jayaratne J) and National Bank of Fiji v Abdul Kadeer Kuddus Hussein s/o Kadir Hussein (Civ Action No. 331/94 - Fatiaki J - judgment 9.2.95).

Mortgagee’s right to possession

On the subject of a mortgagees’ right to possession of the mortgaged property I have already stated hereabove what Goff L. J in Western Bank Ltd v Schindler (1977) 1 Ch ar 20 has said. That is the Bank’s common law right but there is also ample statutory powers to enter into possession and this is provided in Section 75 of the Property Law Act Cap 130 which states:

“... mortgagee upon default in payment of mortgaged property or any part thereof may enter into possession of the mortgaged land by receiving rents and profits thereof or may distrain upon an occupier or tenant of the said land for the rent then due.”

Again Buckley L.J in Schindler (supra) said at p9 as follows recognising the usefulness of the remedy under Order 88:

“A legal mortgagee’s right to possession is a common law right which is an incident to his estate in the land. It should not be lightly treated as abrogated or restricted. Although it is perhaps most commonly exercised as preliminary steps to an exercise of the mortgagee’s power of sale, so that the sale may be made with vacant possession, this is not its only value to the mortgagee. The mortgagee may wish to protect his security ... He might wish to take possession for the purpose of carrying out repairs or to prevent waste.”

I agree with the plaintiff’s submission that in attempting to justify its position the defendant has raised a number of issues but these are not in anyway relevant to the Bank’s (as mortgagee) right to possession of the mortgaged properties. The issues raised by the defendant have been answered by Mr Christopher Griffiths in his affidavit sworn 9 September 2002.

On the issue of the operation of the Consumer Credit Act 1999 (“CCA”) raised by the defendant I agree with counsel that there is no provision in the CCA specifically stipulating that the Act is retrospective. Therefore s5 (1) of CCA would apply and make the Act operational from the date the Act was gazetted, namely, 7 May 1999.

Hence in this case the Act will not apply to the securities given the Bank by the defendant.

The support for the argument that the CCA is not retrospective is to the found in the a decision given by Jiten Singh J in the case of ANZ v Amir & Sandhya Laxmi (HBC0307.2002) where he said:

“A mortgage is a contract between a mortgagee and mortgagor. The terms of mortgages vary infinitely depending on what the parties agree to. There is nothing in the Consumer Credit Act to show that legislature intended to streamline enforcement procedures to mortgages which already existed.”

Mortgagee’s right to possession

Mr. Lateef has dealt quite fully with this aspect in his written submission and I agree with him in the light of the authorities referred to by him.

The Court will not interfere with the mortgagee’s right to possession and its power of sale under the mortgage unless the mortgagor pays the amount due into Court. (Barwick C J in Inglis & Another v Commonwealth Trading Bank of Australia 126 C.L.R. 161 ar 168; vide also Joe Colati v Fiji Development Bank (HBC0060.1998 - Scott J) and Daulat v J. Santaram (Stores) Limited (HBC0455.1997), Votualailai Ltd v FNPF (unreported) HBC0272.1998 - Sadal J). On this aspect I should refer to the statement of Byrne J in NBF Asset Management Bank v Donald Thomas Pickering and Ellen Pickering (HBC0170.1999) at page 2 where he said:

“In Action No. HBC0097 of NBF Assets Management Bank v Bulivakarua in my unreported judgement of the 30th November 1999 I stated at page 2 that it was surprising that actions by Mortgagees against defaulting Mortgagors were frequently before the Courts in Fiji because of the fact that the law governing them is well settled. That law put simply is that failing payment into the Court of the amount sworn by the Mortgagee, no restraint should be placed on the exercise of the Mortgagee’s powers of sale under the Mortgage.”

Conclusion

To conclude, for the reasons given and on the authorities the plaintiff will be entitled to the relief sought in the originating summons.

The defendant has failed to give any reasons in law to enable the Court to restrain the plaintiff from exercising its powers under the mortgage.

As the action stands, with a large sum of money owing to the Bank and default in payment under the mortgage there is nothing before the Court to prevent the plaintiff from exercising its powers requiring vacant possession of the mortgaged property.

I conclude with the remarks of Barwick C. J in his judgment in Inglis (supra) at 169 when he said:

“The case falls fairly, in my opinion within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee’s right under the mortgage”.

In the light of the law in the matter of restraining a mortgagee in exercising his/its powers under the mortgage, it is ordered, that subject to deposit of the full amount due under the security document in question into court within 30 days, the defendant is to deliver to the plaintiff vacant possession of the properties described the item A of the Originating Summons. It is further ordered that the defendant, his servants, agents or employees be restrained from in any way damaging removing or interfering with the improvement on the said properties in any way so as to diminish their value. I award costs against the defendant in the sum of $400.00 to be paid within 28 days. Liberty reserved to parties to apply generally.

D Pathik
Judge

At Suva
10 March 2004