Rahman v Credit Corporation (Fiji) Ltd [2011] FJHC 189; HBC289.2010 (25 March 2011)

IN THE HIGH COURT OF FIJI ISLANDS
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBC 289 of 2010

BETWEEN:

ABDUL RAHMAN aka ABDUL REHMAN
Plaintiff

AND:

CREDIT CORPORATION (FIJI) LTD
1st Defendant

SUMAN LATA ALI
2nd Defendant

Counsel: Plaintiff In Person.
Ritesh. K. Naidu for the 1st Defendant.
2nd Defendant In Person.

Date of Judgment: 25th March, 2011

JUDGMENT

[1] By Notice of Ex parte Motion dated 15.10.2010, the plaintiff sought an injunction to restrain the 1st defendant from exercising its powers under mortgage No 706450 until final determination of this action.

[2] Subsequently, it was ordered to be heard inter partes and the defendants were served notices to file affidavits.

[3] In support of the injunction, an affidavit was filed by the plaintiff. The facts of the plaintiff's affidavit can be summarised as follows;

[4] Sakira Bibi was the mother of the plaintiff who died on 9.4.2010 at Suva. On 09.06 2008, she had executed a Last Will naming the plaintiff and his brother Zainul Abid as beneficiaries, in respect of the property comprised in Certificate of Title No 10155. Plaintiff's brother Akbar Ali and plaintiff's brother in law Mohammed Asin are the executors and trustees name in the Will. The plaintiff resides in CT-10155. The 1st defendant is the mortgagee in respect to the above property.

[5] On 2.7.2008, Sakira Bibi gave the above property as security to the 1st defendant to secure advances in the total sum of $227,250.00 pursuant to a 3rd party mortgage No 706450. The 2nd defendant is the borrower and married to the plaintiff's brother Akbar Ali.

[6] Since the 2nd defendant has defaulted in her payment, the 1st defendant has advertised the mortgaged property for sale.

[7] The plaintiff's position is that his mother, Sakira Bibi was uneducated and illiterate, and was not made aware of the consequences of her property being given as security upon the request of the second defendant and neither was she aware of the amount that was being secured. The plaintiff further states that if an injunction is not granted the said property will be sold to another and the plaintiff would lose his inheritance.

[8] Opposing the plaintiff's application, Neelam Kavita Sharma, the General Manager Legal of the 1st defendant has tendered an affidavit. In that affidavit, it is stated that the plaintiff's mother had obtained legal advice from a solicitor before signing the mortgage and that solicitor witnessed her signature on the mortgaged document. It is further stated that due to the second defendant's default in payment of the monthly instalments, the 1st defendant proceeded to exercise its powers under the mortgage and called for tenders for the sale of property.

[9] The first defendant's position is that the grant of the injunction would amount to an ongoing breach of the loan contract between the 1st defendant and the 2nd defendant and therefore the 1st defendant will not be able to realise its security.

[10] The 2nd defendant in her affidavit, states that the property in question was bought by the 2nd defendant and was only registered under the plaintiff's mother's name. She further deposes that the plaintiff's mother was very well explained the full content and effect of the mortgage document by the solicitor, who witnessed the said mortgage document before having it executed by the plaintiff's mother.

[11] The plaintiff in his affidavit in reply states that his mother was not aware of the consequences of her property been taken as security.

[12] When the affidavits filed by the plaintiff are considered, it appears to this court that plaintiff's main grounds for this application are as follows;

[13] The plaintiff's mother was 82 years old, illiterate and uneducated and was not explained the consequences of her property been taken as a security and therefore, was not in a position to understand the nature of the mortgage.

[14] The 2nd defendant and her husband has some other properties but avoided offering any securities of her own to the first defendant and both the defendants have used a third party's property to secure the loan.

[15] The plaintiff's mother never executed any legal documents by way of her left thumb impression but by her own handwriting and if the property in question is sold by the 1st defendant, the plaintiff will lose his inheritance.

[16] 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

[17] The 3 matters to which the court must address itself in respect of the present application are, per American Cyanamid;

1. Is there a serious question to be tried
   
2. Is the damage an adequate remedy
   
3. If not, where does the balance of convenience lie
   

[18] The House of Lords decided that in all cases, the court must determine the matter on a balance of convenience.

[19] 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.

[20] 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."

[21] 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."

[22] I consider the main issues of this application in the light of above legal principles.

[23] Here the question of paramount importance is whether in the circumstances of this case the court should injunct the first defendant which is a mortgagee from selling the land. The question regarding restraining a mortgagee from selling a property is stated in Halsbury's Laws of England 4th edition Volume 32 at paragraph 725 as follows;

'The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute or mortgagee 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 is due to him.'

[24] 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.

[25] In Inglis v. Commonwealth Trading Bank of Australia (1972) 126 C.L.R 161 at 164 Walsh J expressed the powers of the mortgagee as follows:

'A general rule has long been established, in relation to applications to restrain 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 into Court.

The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury Laws of England 3rd Edition Volume 27, page 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..."

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 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 claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed.

In my opinion the fact that such claims have been brought provides no valid reason for the granting of an injunction to restrain, until they have been determined, the exercise by a mortgagee of the remedies given to him by the mortgagee.

[26] Barwick C.J. ibid at168-169 expressed the same opinion in these words;

I have not heard anything, nor been referred to any authority, which causes me in the least to doubt the correctness of the refusal of Walsh J. to grant the interlocutory injunction sought by the appellant or the reasons which he gave for that refusal. I find no need to discuss the arguments offered, and the authorities referred to, by the appellant. Such of them as were relevant are sufficiently answered in his Honour's reasons.

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 mortgagee 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.

[27] It was held in Property and Bloodstock Ltd v. Emerton (1968) 1 Ch. 94,that the entry into a contract for sale, by a mortgagee exercising a power of sale, whether conditional or unconditional, extinguish the mortgagors right of redemption so long as the contract was still subsisting.

[28] In this case there is a relationship of mortgagor (2nd defendant) and mortgagee (1st defendant). The second defendant fell into arrears under the mortgage and the mortgagee is clearly entitled to exercise its powers of sale when there has been a continuous default in payment on the part of the 2nd defendant under the mortgage.

[29] It appears from the Last Will also that the plaintiff's mother had used her left thumb impression while executing legal documents. The said Last Will was executed on 09.06.2008. The mortgage was signed by her on 02.07.2008, almost one month after signing the Last Will. Therefore, in contrary to what the plaintiff states in his affidavits, it appears that the plaintiff's mother used to put her thumb impression also, during the last stage of her life.

[30] If the plaintiff's mother is illiterate and uneducated as alleged by the plaintiff she could not have executed the Last Will which was written in English and also explained to her in English. It clearly shows that the plaintiff mother could understand English as well as Hindusthani language. In my view, the matters raised by the plaintiff do not establish fraud entitling the court to intervene. Therefore, the plaintiff has failed to establish that there is a serious question to be determined hence, his argument on that ground would fail.

[31] Only in exceptional circumstances would a court interfere with a mortgagee exercising his power of sale; for example if there were male fide in the exercise of power of sale or if there was exercise of fraud by the negligence in the execution of service. However, in this action the plaintiff has failed to establish such exceptional circumstances.

Adequacy of damages as a remedy for the plaintiff:

[32] In an application of this nature it is incumbent on the plaintiff to show that damages will not be an adequate remedy. In this action the subject matter is a land which can be valued. Hence, damages can be assessed and damages would be an adequate remedy.

[33] Furthermore, the plaintiff has not given any undertaking as to damages nor he produced any reliable evidence to prove that he has adequate means to pay damages if the 1st defendant succeeded.

[34] The requirement of giving an undertaking as to damages has been stressed in following authorities;

[35] In Natural Waters of Viti Ltd v. Crystal Clear Mineral Water (Fiji) Ltd ABU 11of 2004

'Applicants for interim injunctions who offer an undertaking as to damages should always proffer sufficient evidence of their financial position.'

[36] In Sailosi Saqalu & Another v. Arula Investment Company Limited ABU 67 of 2000

'A party giving an undertaking as to damages needs to provide evidence of its financial position with reasonable particulars or run the risk of its undertaking will not be regarded seriously.'

[37] 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".

[38] As to balance of convenience the court should first consider whether if the plaintiff succeeds at the trial, they would be adequately compensated by damages for any loss caused by the refusal to grant an interlocutory injunction. The balance of convenience clearly favours the 1st defendant because if an injunction is granted it would amount to an ongoing breach of the loan contract. Hence, this is not a case for the grant of an interlocutory injunction however strong the plaintiff's case appears to be, at this stage.

[39] For the reasons expressed in my factual findings I find there is no serious question to be tried. There is little merit in the plaintiff's case. I find that the issues raised by the plaintiff have no substance in fact or in law.

[40] Further, I do not see any exceptional circumstances in this case to interfere with the mortgagee's right under the mortgage. The plaintiff can still proceed with his action and have the issue determined. If he is successful he can be compensated for in damages. The defendant is in a position to pay damages but the plaintiff is not.

[41] Accordingly, I consider that this is a case in which the appropriate remedy is not interlocutory injunction but an award of damages and the defendant would be in a financial position to pay them.

[42] For the above reasons, I make following orders:

1. The plaintiff's interim application for injunction is refused.
   
2. Costs will be in the cause.
   

Pradeep Hettiarachchi
JUDGE