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High Court of Fiji |
IN THE HIGH COURT OF FIJI ISLANDS
AT SUVA
CIVIL JURISDICTION
Civil Action No: HBC 187 of 2010
BETWEEN:
GEORGE NIUMATAIWALU
Plaintiff
AND:
ANZ BANKING GROUP LIMITED
1st Defendant
IAN PATRICK NG & DALE NG
2nd Defendant
Counsel: Mr. K. Muaror for the Plaintiff
Ms. B. Narayan for the Defendants
Date of Interlocutory Judgment: 28th July, 2010
INTERLOCUTORY JUDGMENT
The plaintiff by way of an ex parte motion sought following orders:
However, the plaintiff's application was ordered to be heard inter partes and defendants were served notice to file their affidavits.
The plaintiff has filed 2 affidavits in support of his application and relevant parts of those affidavits can be summarized as follows.
The plaintiff and the second defendant are the registered proprietors as tenants in common in equal shares in the property in dispute.
The first defendant is a banking institution and conducting the business of banking in Fiji. In October 2001 the plaintiff and the second defendant had acquired the said property through a loan of $150000.00 with one Home Financing Company Ltd.
In December 2003, the first defendant Bank approved a refinance loan relating to the property and issued a loan offer to the plaintiff and the second defendant. The loan was paid out in May 2004.
The plaintiff claims that there was a personnel arrangement between himself and the 2nd defendant as to the mode of repayment of the loan.
According to the said arrangement the second defendant was to pay one third of the installment and the plaintiff was to pay the balance two third.
Later, the plaintiff came to know that the second defendant had defaulted in payment despite their repayment arrangement. As a result of that the 1st defendant has advertised the property for sale.
The main argument advanced by the plaintiff is that though he has complied with his loan repayment component of the said loan account, because of the 2nd defendant's default in payment, the 1st defendant bank has proceeded to sell the property even without serving him a demand notice and therefore, the conduct of the bank was in breach of the Fair Trading Decree and also in breach of the provisions of the Consumer Credit Act.
The plaintiff further stated that it was the 2nd defendant who defaulted in making repayments, the 2nd defendant's spouse is an employee
of the 1st defendant bank and the bank was also aware of the fraudulent act of the second defendant or corroborated in the fraudulent
act against the plaintiff through the loan account.
It was submitted that the landscaping on the property was also done by the plaintiff and the mortgaged property has a unique view
of the harbour and therefore, if it is sold by the mortgagee the plaintiff would lose a land with that unique view and it would be
an irreparable loss to the plaintiff.
Mohid Deen the Assistant Manager of the 1st defendant Bank filed an affidavit, opposing the plaintiff's application for injunction.
According to the affidavit of Mohid Deen the bank has noted the proportionate payment of one third and two third of the installment by the second defendant and the plaintiff respectively but there is no such condition contained in the mortgage deed.
However, the bank denied plaintiff's allegation in respect of the nonpayment of the installment by the second defendant. The 1st defendant's contention is that since there is a default of payment under the mortgage it has a right to recover the loan by selling the mortgage property. Furthermore, the 1st defendant bank is not concern of any personnel arrangement between the plaintiff and the 2nd defendant but to recover the loan granted to the plaintiff.
According to the 1st defendant, the monthly repayments of principal and interest required to be made towards Home loan 1 is $ 1510.66.
Documents marked as MD 1 MD 2 and MD 3 show that the 2nd defendant constantly made 1/3 of the payments from July 2004 to July 2009, whereas the plaintiff says that only he was making payments.
Although the plaintiff is claiming fraudulent conduct on the part of the 2nd defendant the plaintiff failed to produce any evidence of such allegation.
The 1st defendant's counsel submitted that there was no condition attached to the mortgage that on what proportion the payments should
be made by the plaintiff and the 2nd defendant.
It was further submitted that the 2nd defendant defaulted from Aug 2009 and the plaintiff defaulted in Oct 2009.
The principles to be followed in considering the granting of injunctions are set out in the leading case of American Cyanamid Co. v. Ethicon Ltd (1975) 1 ALL ER 509
The House of Lords decided that in all cases, the court must determine the matter on a balance of convenience.
In that case Lord Diplock stated the object of the interlocutory injunction as follows:
"..The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The court must weigh one need against another and determine where the balance of convenience lies.
In Hubbard & Another v. Vosper & another (1972) 2 WLR 389 Lord Denning gave some important guidelines on the principles for granting an injunction, where he said:
"In considering whether to grant an interlocutory injunction, the right course for a judge is to look at the whole case. He must regard not only to the strength of the claim but also to the strength of the defence, and then, decide what is best to be done. Sometimes it is best to grant an injunction so as to maintain the status quo until the trial. At other times, it is best not to impose a restrain upon the defendant, but leave him free to go ahead. For instance, in Fraser v. Evans (1969) 1 QB 349, although the plaintiff owned the copyright, we did not grant an injunction, because the defendant might have a defence of fair dealing. The remedy by interlocutory injunction is so useful that it should be kept flexible and discretionary. It must not be made the subject of strict rule."
In Hounslow London Borough Council v. Twickenham Garden Development [1971] Ch 233 Megary J stated as follows:
"Equity will not assist a man to break his contract. Here, the Borough is in effect, saying to the court, you should grant an injunction to evict the contractor even if in so doing, you would be helping me to break my contract. I do not think it does not matter whether or not he is breaking his contract than one is avowedly doing so."
I consider the main issues of this application in the light of above legal principles.
In this matter the plaintiff has asked an injunctive relief to restrain the 1st defendant from exercising his lawful right as a mortgagee to recover the loan. Therefore it is incumbent on the plaintiff to satisfy the court that an irreparable and irremediable damage would be caused if the injunction is not granted.
Although the plaintiff contended that the 2nd defendant has not complied with the repayment agreement and fraudulently acted with the 1st defendant bank, the plaintiff has failed to produce any substantial evidence to show such collusion between the bank and the 2nd defendant.
The mere fact that the second defendant is an employee of the 1st defendant bank does not establish any fraud against the bank. In any event the 1st defendant is trying to recover the debt not only from the plaintiff but also from the 2nd defendant who is an employee of the bank. In fact the plaintiff himself has admitted that the second defendant is in default of payment.
It is quite evident that there is a dispute between the plaintiff and the 2nd defendant as to the mode of repayment of the loan but from the bank's point of view both loan accounts are in arrears .There was no condition attached to the mortgage that on what proportion the payments should be made by the plaintiff and the 2nd defendant. Hence in the absence of any such condition in the mortgage deed, the bank is not required to find whose non-payment it and is legally entitled to proceed with the mortgage sale so long as there is a default of payment. It makes no difference whether the default was by the plaintiff or by the 2nd defendant.
Thus under the mortgage deed the 1st defendant is legally entitled to protect his own interest in obtaining payment of the debt if there was a default in payment.
It is apparent that the whole purpose of the plaintiff's application for interlocutory injunction is to restrain the 1st defendant from exercising his rights pursuant to the mortgage until the plaintiff resolves his dispute with the second defendant.
Apart from that the plaintiff failed to advance any sound argument in support of the application for injunction.
It is noteworthy, that in the plaintiff's affidavit it was stated that he had fully complied with his loan repayment component of the loan.
However, in the email dated 05.06.2010 the plaintiff has admitted his default in payment.
In that email the plaintiff stated that he purposely withheld two repayments in order to trigger the mortgage sale with the intention
of concluding the co-ownership of the property. A copy of the said email marked as MD6 is annexed to the affidavit of Mohid Deen. This was not denied by the plaintiff.
Hence, it is evident that the plaintiff was well aware of his default in payment and was also anticipating the mortgage sale.
However, in contrary to that the plaintiff has stated in his affidavit that he was taken by surprise when the advertisement of the property for sale appeared in the Fiji times.
Even in his affidavit in reply the plaintiff has not denied the arrears in loan account nor has he indicated his willingness to pay the full amount owed under the mortgage in to court.
Plaintiff further averted that he has not received the default notice from the 1st defendant but according to the 1st defendant the default notice was posted to the plaintiff's last known postal address. That notice was not returned unclaimed. That address was not denied by the plaintiff in his affidavit in reply.
Interlocutory injunctions shall not be granted to prevent a person from exercising his legal rights in terms of a valid contract unless it is proved that an irreparable and irremediable damage would be caused to the applicant if the injunctive relief is not granted.
The law of the rights of a mortgagee is well settled and the court will not, except on exceptional circumstances, interfere with the exercise of the power of sale of a mortgagee.
Exercise of the power of sale of a mortgagee was enunciated in Inglis v. Commonwealth Trading Bank of Australia (1972) 126 C.L.R. 161 at 164 by Walsh J as follows:
A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid in to court.
The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury's Laws of England, 3rd ed., vol. 27,
p. 301:
"The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, 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 claimed into court, that is, the amount which the mortgagee swears to be due to him, unless, on the terms of the mortgage, the claim is excessive."
In that case Walsh J further said:
In my opinion, the authorities which I have been able to examine establish that for the purposes of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has not been actually paid, the court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due.
The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claimed for damages against the mortgagee of the remedies given to him by the mortgage.
Barwick C.J also expressed the same opinion at page 169:
"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 rights under the mortgage."
In the present case although the plaintiff alleged that there was a personnel arrangement between him and the second defendant as to the mode of payment, it was not included in the mortgage deed.
Therefore, the court should not allow the remedy of an injunction to be used as a device in curtailing the mortgagee from exercising his rights, when the mortgagor has failed to honor his obligations under the mortgage bond.
Furthermore, an interlocutory injunction is a discretionary relief granted on the principle of equity. Hence, it is incumbent on the party who seeks an injunction to come to courts with clean hands. In other words he is required to make a full and frank disclosure of all the facts material to the injunction application.
However, in this case the plaintiff has failed to disclose facts which are very material to the injunction application namely the nonpayment of loan installment by him in order to trigger the mortgage sale.
Hence, there was material non disclosure of facts on the part of the plaintiff and this ground alone is sufficient to refuse the injunction.
As to balance of convenience, the court must weigh one need against another and determine where "the balance of convenience lies". The mortgagee is intending to exercise a statutory power under sale and the plaintiff has adduced no proper grounds why the court should interfere with the exercise of such a power by granting an injunction. I am not convinced that there is a serious question to be tried.
In considering the balance of convenience I would highlight the following paragraph by Lord Diplock in American Cyanamid v. Ethicon Ltd [1975] 1 ALL ER 510.
"As to that, the governing principle is that the court should first consider whether if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the second defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted however strong the plaintiff's claim appeared to be at that stage".
So the court should first consider whether if the plaintiff succeeds at the trial, he would be adequately compensated by damages for any loss caused by the refusal of granting of an interlocutory injunction.
In this case the 1st defendant is a banking institution which has substantial financial resources and quite competent to pay any award of damages if ordered by the court. On the other hand the plaintiff is a private individual and has not produced any evidence to show his financial status.
Having analyzed the affidavit evidence before me and considering the submissions made by both counsels I am of the view that the appropriate remedy is not interlocutory injunction but an award of damages if the plaintiff succeeded, and the defendant being a bank is in a financial position to pay.
Further I hold that there are no serious questions to be tried to grant an injunction restraining the 1st defendant from exercising its powers under the mortgage deed.
For the above reasons, I make the following orders:
Pradeep Hettiarachchi
JUDGE
At Suva
28th July 2010
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