Peters v Fiji Development Bank [2005] FJHC 194; HBC0419J.2003S (22 July 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 419 OF 2003

Between:

LAGI and IVA PETERS
Plaintiffs

and

FIJI DEVELOPMENT BANK
Defendant

Mr. N. Nawaikula for the Plaintiff
Ms. Y. Fatiaki for the Defendant

Date of judgment: 22 July 2005

JUDGMENT

By originating summons the first plaintiff on behalf of himself and his wife the second plaintiff seeks the following orders and declaration supported by an affidavit:

(i) A Declaration that the Plaintiff is not indebted to the Defendant for the sum claimed by the Defendant.

(ii) An Injunction restraining the Defendant from selling the Plaintiff’s property or dealing with it in any manner whatsoever until the final determination of this matter.

(iii) An order under s68 of the Consumer Credit Act adjusting the terms of the Plaintiffs’ contract by waiver of interest charged.

(iv) An order under s68 of the Consumer Credit Act postponing the Defendant’s enforcement proceedings until the final determination of this matter.

The defendant through Pita Tamanikaisawa, its Manager, Nausori Branch filed an affidavit in reply. As ordered both counsel filed written submissions.

Plaintiffs’ submission

The facts surrounding the plaintiffs’ case are set out in the said affidavit.

They say that their ‘ordeal’ started in 1987 when the defendant granted the first plaintiff (P1) a loan of $27,000 to repair two fishing vessels and security given was a bill of sale and mortgage over the family property.

The first plaintiff says that the main reason for bringing this action is out of fear that they might lose their family house under Mortgagee sale. The house is of deep sentimental value and the ‘last thing’ they want to see is to ‘loose it unnecessarily’.

He outlined to Court his difficulties in repayment of the loan. Numerous requests by him to the defendant were refused and the defendant has threatened to sell the family property under mortgagees sale. He requested the defendant to waive interest but the defendant refused.

The plaintiff says that his inability to meet his commitments were due to circumstances beyond his control of which the defendant was well aware.

He ‘requests the court to postpone the defendant’s enforcement proceedings under s.86 of the Consumer Credit Act’ and that he is ‘willing to pay off the capital sum or the lease amount’.

Defendant’s submission

The defendant submits that because of the default in repayment to the Bank the powers of the mortgagee were exercised.

The security for the loan were the two fishing vessels and 2nd Mortgagee over Native Lease No. 16751 given by the 1st plaintiff. The plaintiffs agreed to pay interest at 8% p.a. on the first $20,000.00 and 13.5% p.a. on any excess.

The defendant in its affidavit set out in great detail the history of this case. The plaintiffs had all along been in difficulties in meeting their obligations regarding repayment despite opportunity being given from time to time to pay by instalment.

The defendant says that ‘no insurance was applied to reduce the plaintiff’s debt as the insurance claim was rejected by the insurance company.’

The loan repayments by the second plaintiff ‘have been insufficient to prevent the mortgage continuing in default’.

The defendant says that ‘the consumer credit Act is not applicable in this case as the said Act came into force in 1999 whilst the loans granted to the plaintiffs were in the years 1985 and 1986.’

Consideration of the issues

I have considered the affidavit evidence and the helpful submissions from both counsel.

The plaintiffs seek a declaration that they are not indebted to the defendant for the sum claimed or any sum at all.

I am satisfied on the affidavit evidence that the plaintiffs were all along in great difficulties in keeping up with their obligations under the security documents.

The defendant had from time to time acceded to the plaintiff’s request to accept a higher sum for repayment but they were unable to keep up with that arrangement.

The plaintiffs attempted to raise loan from other sources but they were unsuccessful. The defendant waited for these applications while they were being processed. Nothing eventuated that left the defendant with no alternative but to exercise their powers of sale.

The evidence reveals quite clearly that the plaintiffs were definitely not in a position to meet their payments under the securities they gave. I feel that they should have thrown the towel in a long time ago to save the debt mounting up to the present figure. It is their own fault.

The counsel for the plaintiffs referred the Court to a number of authorities on the powers and duties of a mortgagee. These I find are not applicable to the facts and circumstances of this case.

I therefore cannot declare that the defendant was negligent in dealing with the difficult situation that plaintiffs found themselves in.

The plaintiffs are seeking an injunction among other orders on the ground that it has to be determined whether or not they are indebted to the defendant.

I agree with counsel for the defendant that by executing the mortgage in favour of the defendant the plaintiffs had expressly agreed to pay the defendant the principal sum secured by the mortgage and pay interest and charges accrued on the principal sum on demand by the defendant.

This is not a case where injunction ought to be granted particularly on a balance of convenience it appears to Court that the party seeking injunction relief can be adequately compensated in damages. Here the defendant is a substantive Bank and is capable of compensating the plaintiffs fully for any damages that may be awarded against it by the Court in the substantive action (Vimla Wati Prasad v Hemant Raniga & Ors HBC0034 of 1996L, Mohammed Sahib Khan v Habib Bank Limited C.A. No. HBC0070 of 1997L, Hirdesh Chand Dass v Shell Fiji Limited C.A. No. HBC0059r/99, American Cyanamid v Ethicon Ltd [1975] 1 All E.R. at 510).

Another fatal aspect of this case is that for the purposes of injunction there is here no undertaking as to damages. The following passage from Tucker v New Brunswick Trading Co. of London [1890] UKLawRpCh 60; (1890) 44 Ch.D. 249 at 252 is pertinent:

“It is the usual practice of the court to require that the usual undertaking as to damages be given as a condition of the granting of an interlocutory injunction. The defendant may require an undertaking as a condition of an undertaking by him. The court has no power to compel the plaintiff to give an undertaking as to damages but, if it is not given, an order for an injunction will not, in practice, be made.” (underlining for emphasis)

Furthermore, before a mortgagee can be restrained from exercising its powers under a mortgagee, the sum of money outstanding under the mortgagee is ordered to be paid into Court by the mortgagor. (Daven Prasad & Others v Shell Fiji Limited HBC00389.1999L, ANZ Banking Group Ltd v Ram Dutt (C.A. HBC0121.1999).

For these reasons the application for injunction is refused.

The plaintiffs alternatively seek an order under section 68 of the Consumer Credit Act (the ‘CC Act’) that interests (all or part of it) is to be waived.

The grounds on which this application is made are set out in the plaintiff’s said affidavit.

The counsel for the plaintiffs pleads to the Court for an order on the facts and circumstances of this case. He says that ‘it is just, fair and reasonable’ that your Lordship should order that the accumulated interest on the original debt of $6000 is to be waived under s.68 of the C.C. Act.

This is a case of claim under the said mortgage and the defendant has its lawful rights as mortgagee and is able to pay damages that may be awarded against it for the wrongful exercise (if any) of its rights under the mortgagee. In March 2004 the debt was in excess of $19,000.00.

The plaintiffs have not challenged the validity of the mortgage.

In the circumstances of this case I hold that the Consumer Credit Act does not apply and I agree with the defendant’s counsel submissions in this regard for the following reasons (as stated by him):

(a) The said Act came into force in Fiji on the 7th of May 1999.

(b) The credit contract was entered into between the Plaintiffs and the Defendant in 1985 and in 1986.

(c) The mortgage granted by the Plaintiffs in favour of the Defendant was executed on the 8th of May 1985.

(d) The Defendant had issued a number of Demand Notices for payment, which were served on the Plaintiffs well before the Act came into force.

It has also been held that this Act cannot have any bearing on mortgages or demand notices that were executed before the passing of the Act [NBF Asset Management Bank v John Thomas Low & Anor. (HBC0477.1999) and in ANZ Bank v Amit Kumar & Sandhya Laxmi (HBC0307.2002). Singh J decided along similar lines on the issue concerning application of the Act on mortgages executed prior to the passing of the Act.

I also accept the defendant’s argument that section 6(1)(b) of the Act applies to credit which is provided wholly or predominantly for personal, domestic or household purpose. This was not the case here; it was for a fishing project and hence this Act is not applicable to the plaintiff’s case.

Even if we were to take s66(2) of the Act the credit provider has a discretion to make changes to the terms of the contract ‘without a change being made to the annual percentage rate or rates.’

In the outcome I find that the plaintiff has not satisfied the court that he is entitled in law to the reliefs sought by him.

The defendant has followed the procedures laid down in the Property Law Act. There was default on the part of the plaintiffs and notice was given but they plaintiff failed to satisfy the demand and hence enforcement proceedings were taken which the defendant is entitled in law to take.

The plaintiffs’ summons is therefore dismissed with costs in the sum of $350.00 to be paid within 14 days.

D. Pathik
Judge

At Suva
22 July 2005