Ali Civil Engineering Ltd v Habib Bank Ltd [2007] FJHC 102; Civil Action 94.2006 (29 March 2007)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 94 OF 2006

BETWEEN

1. ALI'S CIVIL ENGINEERING LIMITED
2. VITIANA TIMBERS (FIJI) LIMITED
Plaintiffs

AND

1. HABIB BANK LIMITED
2. CHALLENGE ENGINEERING LIMITED
3. NATIONAL BANK OF FIJI t/a COLONIAL NATIONAL BANK
4. DIRECTOR OF LANDS AND SURVEYOR GENERAL
5. REGISTRAR OF TITLES
6. ATTORNEY GENERAL OF FIJI
Defendants

Dr. S. Sahu Khan for Plaintiffs
Mr. S. Lateef for the 1^st Defendant
Mr. D. Sharma with Mr. P. Sharma for 2^nd & 3^rd Defendants
Mr. Z. Sahu Khan for 4^th, 5^th & 6^th Defendants

Date of Hearing: 27. 3. 07
Date of Decision: 29.3.07

DECISION

By summons dated 23 March 2007 the plaintiffs have applied for an order that the Orders made by this Court on 16 March 2007 be stayed until the determination of the Appeal herein in terms of the Notice of Appeal filed in the Fiji Court of Appeal on 22 March 2007.

The hearing of the summons was set down for argument on 27 March 2007. Counsel appeared for their respective clients. All of them made their submissions and I have given them due consideration.

The following are the orders which I made (p. 17 of Decision):

"The balance of convenience in this case lies with the plaintiffs. For the above reasons, it is ordered that the interim injunction continue until the determination of this action subject to the plaintiffs paying into Court the full amount owed by them under the mortgage within 14 days from the date of this decision and failure to do so will result in the injunction being dissolved without the need to come to Court I further order costs against the defendants to be taxed unless agreed."

In gist it is Dr. Sahu Khan's argument that this is not a case in which an order for payment into Court should have been made. He distinguished between a disputed case in a mortgagee's sale and one where the validity of a mortgage which is alleged to be obtained by means of a fraud. He referred the Court to a number of cases in this regard. Reference was made to the following passage from the judgment of the Fiji Court of Appeal in Westpac Banking Corporation Limited v Adi Mahesh Prasad 45 FLR p.1 at p.9:

"This matter had earlier been the subject of a decision by Sugerman J (later President of the NSW Court of Appeal) of the NSW Supreme Court in Harvey v McWaters [1948] NSWStRp 58; (1948) 49 SR (NSW) 173. Sugerman J said that, where a mortgagor sought an interlocutory injunction to restrain his mortgagee from selling, there was a distinction with respect to the terms that would be imposed as to payment into court between a case in which the power of sale was admittedly exercisable and the only dispute was as to the amount due or the mode in which the mortgagee proposed to exercise the power, and a case in which the very matter in dispute was whether the power of sale was exercisable at all.

Sugerman J said (at 176) that the real dispute in the case before him was whether the power of sale was presently exerciseable at all. The plaintiff's claim was that she had already paid more than sufficient to satisfy the instalments which had become due upon the terms that it was to be set-off in discharge of those instalments as they became due and that there was therefore no default. That claim was disputed and the amount was said by the defendant to have been paid on another account. His Honour said that the real nature of the dispute was not what amount was payable, there being an undisputed default, but whether a case for the exercise of the power of sale had arisen at all. After referring to some additional authorities, Sugerman J decided that he should require a lesser payment into court than would have been required if the ordinary rule had applied."

Counsel further argued that the First Defendant (Habib Bank) is not prejudiced in any way as the full amount has been paid by the Second Defendant (the purchaser on mortgagee sale). If it is held that the sale was not proper then it will be a matter of payment of damages by the Bank to the Purchaser.

Dr. Sahu Khan submitted that if the stay is refused then the appeal will be rendered nugatory (Wilson v Church [1879] UKLawRpCh 233; 1979 12 Ch D. 454).

Counsel seeks an order for stay pending the hearing of the appeal against my said Decision for he is of the view that I have erred in law in the numerous grounds outlined by him in the Notice of Appeal. On this I say that it is for the Court of Appeal to decide on those grounds and not for me to comment or consider them.

There was violent opposition by the defendants to this application by the plaintiffs.

Mr. S. Sharma for the 2^nd and 3^rd defendants said that the applicants have appealed against that part of the Decision of the Court which Ordered the plaintiffs to pay the mortgage debt into Court. In all other aspects of the orders Dr. Sahu Khan agrees and has no complaint.

He said that on the facts, inter alia, there is no dispute that moneys were owing by the plaintiffs to the mortgagee and that they were in default and not paid. Hence mortgagee exercised its power of sale and sold the property.

Mr Sharma argues that the plaintiffs now challenge the validity of mortgage No. 8465 which has been in existence since 1999 and only filed its application for an injunction after the property was sold and the mortgage discharged. Even the Director of lands who is the ultimate owner of the land consented to the sale of the land to the 2^nd Defendant (the purchaser). The Director of Lands also consented to Mortgage No. 8465.

Counsel referred to cases where courts have ordered payment into Court (Inglis & Anor. v Commonwealth Trading Bank of Australia [1972] 126 C.L.R. 161).

He even referred the Court to a case involving the same property when an application was made by Ali's Civil Engineering Limited and Bahadur Ali v Habib Bank [2004] FJHC 176 where Winter J made a finding of fact that "the Plaintiffs could not and were unwilling to pay debt outstanding under the mortgage into Court."

Mr. Sharma also referred the Court to a number of other cases relating to situations where a mortgagor is challenging the validity of the mortgage (Harvey v McWaters [1948] NSWStRp 58; [1945] 49 S.R. (N.S.W.) 173; National Australia Bank Limited v Allesandro Zollo and Jolanda Zollo No. SCR G93/179; Young Men's Christian Association v NBF Asset Management Bank & Others HBC 474 of 2001).

Counsel further submits that the plaintiffs have not shown that they are in any position to pay damages or even deposit any moneys into Court.

He says that the Orders made by the Court have been properly made.

Finally he submitted that the Plaintiffs have not suffered any prejudice and have not shown any loss. They have had the benefit of the loan since 1999 without ever paying the monies back. The 1^st Plaintiff had consented to the sale on 29 December 2005.

They did not take any steps to prevent the sale before the offer was accepted and the property was sold. It is the 2^nd and 3^rd Defendants who are prejudiced in that they are out of pocket, not secured and are incurring substantial losses on a daily basis.

The counsel Mr. Lateef for the 1^st Defendant and Mr. Z. Sahu Khan for the 4^th, 5^th & 6^th Defendants supported the arguments put forward by Mr. Sharma.

Mr. Lateef says that there has never been any admission of forgery and that there is no case for 'stay' in this case. Damages is an adequate remedy and the Bank is in a position to pay. Refusal will not render the appeal nugatory.

Mr. Z. Sahu Khan says that all necessary consents were granted by the Director of Lands. He referred to various passages from the affidavit of B. Lal. There was no injunction of any kind when consent was granted.

Counsel asks that the status quo remain and that his clients will abide by the said Decision of the Court herein.

Consideration of the summons

As I stated earlier this application for stay is vigorously opposed by the defendants' counsels on the grounds given by them in their submissions.

In my decision I have sufficiently outlined the facts of the case and have given my reasons for the conclusion I reached culminating in the said orders having being made.

I am not at all convinced with the grounds advanced by Dr. Sahu Khan for a stay. If I have erred in law and facts in many respects as counsel says in his Notice of Appeal then that is for Court of Appeal to decide and it is not for me to comment thereon on the application before me. In application for injunction it is not for the Court to go into merits of the case but merely to apply the principles set out in the American Cynamid case on the facts and circumstances of this case and this is exactly what I have done and have exercised my discretion to do justice between the parties.

The way Dr. Sahu Khan has been insisting on granting a 'stay' by hammering the commission of fraud he assumes that his allegation of fraud has been proved or is blatantly obvious. Whether there is fraud or not it is a matter for hearing in the substantive action.

After analysing all the facts in this case I find that the only way the plaintiffs can protect their property is by payment into Courts as I have ordered.

Dr. Sahu Khan insists that the order should not have been made. He told the Court, when asked, that he is not asking for more time to pay into Court but is against the order for payment into Court.

It is quite clear that the plaintiffs do not want to pay the amount due under the mortgage despite admitting that they were in default and despite agreeing to sell the property in question.

In this case the Bank (D1) exercised its power of sale on the facts and circumstances of this case about which there is no dispute. This action came about after the horse had bolted so to say and for reasons best known to the plaintiffs they delayed taking any steps at the proper time to prevent the sale.

The law as to action by mortgagee against defaulting mortgagors is well settled. Simply put it is this that failing payment into Court the amount due and owing under the mortgage, there should be no restraint on the mortgagee exercising the power of sale under the mortgage [Byrne J. in NBF Asset Management Bank v Donald Thomas Pickering & Eileen Pickering Action No. HBC 0170 of 1999; Inglis & Anor v. Commonwealth Trading Bank of Australia (1972) 126 C.L.R. 161].

I hold that the plaintiffs have no hope of succeeding in the Appeal. There is no question of Appeal rendered nugatory if stay is refused. The remedy in damages is available to them.

Conclusion

After considering all the arguments, I am of the view that the defendants, particularly D1, 2 & 3, will suffer greater prejudice if stay is granted than the plaintiffs.

The balance of convenience favours maintaining of status quo conditional upon by payment into Court as I have ordered rather than granting stay as prayed.

I am not satisfied that the appeal will be rendered nugatory or substantially so if stay is refused. I refer to the following passage in Wilson v Church (supra)

"Where an unsuccessful party is exercising an unrestricted right of appeal, it is the duty of the court in ordinary cases to make such orders for staying proceedings under a judgment appealed from, as would prevent the appeal, if successful, from being nugatory. But the court will not interfere if the appeal appears not to be bona fide, or there are other sufficient exceptional circumstances."

I would conclude with the following statement of Fatiaki J (now Chief Justice) in his judgement at p.6 in National Bank of Fiji v Hussein HBC0331 of 1994 with which I agree:-

"Furthermore if the plaintiff bank were required to await the outcome of the defendant's claim in Civil Action No. 97/92, the Court would, in learned counsel's submission, in effect, be restraining the bank from exercising its powers and rights as a mortgagee without the usual protection afforded a mortgagee under such an order i.e. by payment into Court of the amount claimed by the bank."

For the above reasons the application for stay is refused and is dismissed with costs against the plaintiffs payable to the defendants' solicitors the sum of $500.00 each within 7 days. Since the application for stay has come so close to the expiry of time for payment into Court as ordered, in the interests of justice, I vary my said decision of 16 March 2007 by extending the time for paying into Court by 14 days from today expiring on 13 April 2007 otherwise the rest of the said order stands.

D. Pathik.
Judge

At Suva
30 March 07