Fiji Development Bank v Naivau [2011] FJHC 217; HBC0071.2010 (18 April 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No HBC 0071 of 2010

BETWEEN:

FIJI DEVELOPMENT BANK of 360 Victoria Parade, Suva in Fiji.
Plaintiff

AND:

MANASA NAIVAU of 10 T Place, Rifle Range, Lautoka, Resort Director.
Defendant

Appearances:

For the Plaintiff : Mr. Shailend Krishna O/I R.Patel Lawyers
For the Defendant : Mr. K Qoro

Date of Hearing; 22nd February 2011.

JUDGMENT

1. Plaintiff commenced this action by Originating Summons against the Defendant seeking possession and an injunction preventing the Defendant from interfering or removing the improvements on the subject property in any way so as to deplete its value, under Order 88 Rule 1(d) of the High Court Rules (1988). The Plaintiff is the Mortgagee and the Defendant the Mortgagor.
   
2. Order 88 Rule 1(d) reads thus;
   
   • (1) This Order applies to any action (whether begun by writ or originating summons) by a mortgagee or by any other person having the right to foreclose or redeem any mortgage, being an action in which there is a claim for any of the following relief's, namely –
     

(a) ..................

(b) ................

(c) ...............

(d) delivery of possession (whether before or after foreclosure or without foreclosure) to the mortgagee by the mortgagor or by any other person who is or is alleged to be in possession of the property.

3. However for such an application to be entertained by Court compliance with the requirements set out in Order 88 Rule 3(3) appears to be mandatory.
   
4. Order 88 Rule 3 reads thus;
   

"3.-(1) The affidavit in support of the originating summons by which an action to which this rule applies is begun must comply with the following provisions of this rule.

This rule applies to a mortgage action begun by originating summons in which the plaintiff is the mortgagee and claims delivery of possession or payment of moneys secured by the mortgage or both.

(2) The affidavit must exhibit a true copy of the mortgage and the original mortgage or, in the case of a registered charge, the charge certificate must be produced at the hearing of the summons.

(3) Where the plaintiff claims delivery of possession the affidavit must show the circumstances under which the right to possession arises and, except where the Court in any case or class otherwise directs, the state of the account between the mortgagor and mortgagee with particulars of –

(a) the amount of the advance,

(b) the amount of the periodic payments required to be made,

(c) the amount of any interest or installments in arrear at the date of issue of the originating summons and at the date of the affidavit, and

(d) the amount remaining due under the mortgage.

(4) Where the plaintiff claims delivery of possession, the affidavit must give particulars of every person who to the best of the plaintiff's knowledge is in possession of the mortgaged property.

(5) If the mortgage creates a tenancy other than a tenancy at will between the mortgagor and mortgagee, the affidavit must show how and when the tenancy was determined and if by service of notice when the notice was duly served.

(6) Where the plaintiff claims payment of moneys accrued by the mortgage, the affidavit must prove that the money is due and payable and give the particulars mentioned in paragraph (3).

(7) Where the plaintiff's claim includes the claim for interest to judgment, the affidavit must state the amount of a day's interest."

(Emphasis mine)

5. It should be noted that in some prints of the High Court Rules two sub rules namely "(6)" and "(7)" appear after Rule 3 (3), which is an obvious error, and (a) to (d) again printed thereafter. The said sub rules appear to be that of Rules 2(6) and 2(7) of Order 88.
   
6. What is material to this case is Rule 3(3) and (4) of Order 88, as this action is only to claim possession and as such Rule 3 (6) and (7) do not apply as no claim is made for payment of moneys or interest. However it must be born in mind that even in an action for possession such as this case, the minimum account particulars mandated under Order 88 Rule 3(3) (a) to (d) are material.
   
7. (A).The Plaintiff has filed the affidavit of Salote Tavainavesi in support of its Summons and sets out the particulars mandatory under Order 88 Rule 3(3), at paragraph 6 of the said affidavit, as follows;
   

" 6. PURSUANT to Order 88 Rule 3 (3) the circumstances which give rise to Home Finance's right to claim delivery of possession are as follows:

(a) The state of the loan account between the Bank and the Mortgagor is as follows:

The amount of advance

(i) $87,483.00 advanced to the Defendant on or about 14th December 2007 at the interest rate of 10.25% per annum. A copy of the Loan Agreement is exhibited and marked with the "B" (sic.)

Amount of periodic payments required to be made

(ii) The Defendant was required to make monthly payments of $840.00 for a period of 50 years.

Amount of any interest or instalment in arrears at the date of issue of the Originating Summons and the date of the Affidavit

(iii) The amount of instalment in arrears as at the date of issue of the Originating Summons and the date of this Affidavit was $7,825.55 (as at 28th February 2010). A copy of the Loan Account printout is exhibited and marked with the letter "C"

Amount remaining due under the Mortgage

(iv) The amount due and owing under the said mortgage as at the date of issue of the Originating Summons and the date of this Affidavit was $99,158.00. Interest accrues on this amount at the rate of 10.25% per annum ($27.85 per day).

(b) By Mortgage Registration No. 701778 ("the said Mortgage") made between the Bank and the Defendant, the Defendant charged the said property to secure repayment to the Bank of all the loans, advances, charges, interest and other financial accommodation made by it to the Defendant from time to time and on terms and conditions contained therein. A true copy of the said Mortgage is exhibited and marked with the letter "D". The duplicate original of the said mortgage will be relied upon and handed into Court at the hearing of this application.

(c) The said Mortgage allows the Bank to sell the said property in the event the Defendant defaulted under the terms of the said Mortgage.

(d)The Defendant defaulted in his repayments under the said Mortgage and on 21st August 2009, the Bank issued Demand Notice under the said Mortgage against the Defendant, a copy of which is exhibited and marked with the letter "E".

(e) The Defendant failed to rectify the default within the time frame set out under the Demand Notice or at any material time thereafter and the Bank therefore exercised its powers of sale under the Mortgage and advertised the property for sale.

(f) There have been few enquiries and the prospective purchasers want to inspect the said property prior to putting in their tenders. Since the Defendant and his family are occupying the said property, it has not been possible to show the said property to the prospective purchasers which is delaying mortgagee sale process."

(B).It is with some concern this Court notes the following underlined words at the beginning of the above quotation of the Plaintiff's 1st Affidavit in support; " 6. PURSUANT to Order 88 Rule 3 (3) the circumstances which give rise to Home Finance's right to claim delivery of possession are as follows:....". The Plaintiff in this action is not "Home Finance", but Fiji Development Bank. Even the "Loan Offer Letter" marked as Exhibit "B" is in the letterhead of "Choice Home Loans" and signed simply as "Business Manager Lautoka". There is no letter of acceptance of this offer too.

8. The said affidavit of Salote Tavainavesi sets out the particulars mandatory under Order 88 Rule 3(4), at paragraph 5 & 9 of the said affidavit, thus;
   

"5. ERECTED on the said property is a single storey concrete dwelling house and to the best of my knowledge the Defendant and his family are occupying the same."

"9. PURSUANT to Order 88 Rule 3 (4), to the best of my knowledge, the said property is presently occupied by the Defendant and his family."

9. Paragraph 6-9 of the said affidavit of Salote Tavainavesi was replied by the following paragraphs of the Manasa Naivau (Defendant) affidavit filed on the 22/ 06/2010, thus;
   

" 9. As for paragraph 6, I admit the contents of Order 88 Rule 3(3) but deny that the circumstances give rise to right to claim delivery of possession as I have been advised by my Solicitor Qoro Legal that the said transaction is unjust under the Consumer Credit Act."

"10. I admit paragraph 6(a) (i) of the said affidavit."

"11. I admit paragraph 6(b) (ii) of the said affidavit. But the said payment arrangement is unjust because for a monthly repayment of $840 for 50 years will result in me paying over $504,000 (five hundred four thousand dollars) at the end of the term. To put it in mathematical terms;

$840 per month x 12 months = $10,080 (ten thousand and eighty dollars)- Amount due for 1 year.

$10,000 per year x 50 years = $504,000(five hundred four thousand dollars)

At the end of the 50 year term, I would have paid $504,000 to the Plaintiff Bank for a loan of $87,483 advanced to me on or about 14th December 2007 at the interest rate of 10.25%.

Further for a loan of $87,483 for 50 years, my repayment ought to be $1749.66 (one thousand seven hundred forty nine dollars and sixty six cents). It follows that my monthly repayment ought to be $145.80(One hundred forty five dollars and eighty cents). This of course excludes interest rate.

To put it in mathematical terms:

$87,483 / 50 years = $1749.66 per annum.(exclude interest)

$1749.66 / 12 months = $145.80 (exclude interest)

There is a big difference in monthly repayment which the Plaintiff Bank required me to do and they knew or ought to have known that I would not be able to meet repayment with the current arrangement.

I have raised this concern with Plaintiff Bank at its Lautoka Branch but they did not assist me.

12. With the current arrangement, I deny the amount outstanding was $7825.55. In any event such arrangement or transaction is unjust. If I were to pay $145 per month, then there would be no arrears. The transaction is unjust. Paragraph 6(iii) is denied. I repeat paragraph 11 hereof.

13. With the current arrangement, I deny the amount outstanding was $99158.00. In fact, the Plaintiff Bank did not pay me the total loan of $87,483. It held back$3357 which ought to be the final payment to complete my said house. In any event such arrangement or transaction is unjust. If I were to pay $145 per month, then there would be no arrears. The transaction is unjust. Paragraph 6(iv) is denied. I repeat paragraph 11 hereof.

14. I admit paragraph 6(b) of the said Affidavit.

15. I admit paragraph 6(c) of the said Affidavit.

16. I deny paragraph 6(d) of the said Affidavit. The transaction is unjust. I repeat paragraph 11 hereof.

17. I deny paragraph 6(e) of the said Affidavit. The transaction is unjust. I repeat paragraph 11 hereof.

18. I do not know and can not admit paragraph 6(f) of the said Affidavit.

19. I admit paragraph 7 of the said Affidavit in so far it is contained in the provision of the Mortgage document.

20. I deny paragraph 8 as the demand was not sent to me in my post no. 3959, Lautoka.

21. I admit paragraph 9 of the said affidavit.

22. I deny paragraph 10 of the said Affidavit.

23. I deny paragraph 11 of the said Affidavit.

24. Further, I was not provided any proper legal advice about the said mortgage. I was only told by the staffs of the Plaintiff Bank in Lautoka to have our signatures on the said mortgage witnessed by a Justice of Peace. Pusp Raj who is a Justice of Peace witnessed our signatures but did not explain or provide any legal advice as to my obligation and liabilities under the said mortgage.

25. I therefore pray that the Plaintiff's application be dismissed."

10. Therefore by the said affidavit of the Defendant he admits the Loan Offer Letter dated 14th December 2007 marked as exhibit "B", and the Mortgage marked exhibit "D" with the 1st Affidavit on behalf of the Plaintiff. The Defendant further admits the amount of $87,483/= advanced, and the repayment by monthly installments of $840/= for a period of 50 years. (In admitting paragraph 6 (a)(i) and (ii) of the 1st Affidavit on behalf of the Plaintiff as above.) The Defendant has admitted the Housing Authority Sub Lease Marked as Exhibit "A" with the Plaintiffs said 1st Affidavit of Salote Tavainavesi by admitting paragraph 4 of the said Affidavit.
    

On being questioned by Court at the hearing whether the consent of the Housing Authority had been obtained for the Mortgage as per clause 2 of the said sub Lease, the Defendants Counsel submitted in the affirmative.

The Defendant has admitted the provisions in the Mortgage bond that entitles the Plaintiff to possession on default, in admitting paragraph 7 of the Plaintiffs 1st Affidavit by paragraph 19 of the Defendants Affidavit. During the hearing the Defendants Counsel submitted that it is admitted that there was a default.

11. The Defendant disputes the particulars submitted by the Plaintiff under Order 88 Rule 3(3) (c) and (d), in denying "the arrears" and the "amount remaining due under the Mortgage", on the strength of what he had been advised by his Solicitor (as stated in his own affidavit) that the transaction is unjust under the Consumer Credit Act, and by the calculation he sets out in paragraph 11 of his affidavit, as above reproduced.
    
12. The Defendant further denies the default notice and denies the receipt of the Plaintiff's Solicitors letter demanding vacant possession on the basis that it was not posted to "my post no.3959, Lautoka".
    
13. The Plaintiff filed an affidavit in reply by it's Acting Manager Legal Salimoni Davelevu Theophilus Karusi, urging lack of particulars in respect of the defence mentioned under the Consumer Credit Act, and pointing out that one of the documents admitted by the Defendant being Exhibit "B" (Loan Offer Letter) had also been addressed to P.O Box 3593, Nadi, and that the Solicitors letter demanding vacant possession (Exhibit "F") too was posted to that same address. The said affidavit set out sections 80 and 81 of the Consumer Credit Act, and marked as Exhibit "G" print outs of 4 separate sets of accounts (in snapshot format), on the face stating to be for the Financial years 2008, 2009, 2010 and 2011. The account for the year 2008 starts with 11th March 2008, for the year 2009 starts with 31stJuly 2008, the account for 2010 starts with 3rd July 2009 while the 2011 account starts with 31st August 2009.
    
14. However the material notice under the Consumer Credit Act is the Demand Notice for payment which is marked as Exhibit "E" to the Plaintiffs 1st Affidavit by Salote Tavainavesi. On examining this document this Court observed a hand written note at the bottom left corner, signed and stating that it was "served on the property" and "As Mansa is away in Nadi". The said default notice does not set out the Defendants Post box number any where in the document. The said default notice is dated 21st August 2009. Therefore this Court is compelled to observe that the default notice under section 80 of the Consumer Credit Act has not been served on the Defendant personally. Section 80 (2) and 80 (2) (a) of the Consumer Credit Act statutorily restrains the Plaintiff from commencing enforcement proceedings to take possession of, unless a default notice is given to the Defendant. The said Section 80 (2) reads thus;
    

" 80. (1)..................

(2) A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due, or to take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless the mortgagor is in default under the mortgage and-

(a) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and

(b)the default has not been remedied within that period." ..........

15. Are these enforcement proceedings commenced by the Plaintiff to take possession, without giving the default notice on the Defendant under Section 80(2) of the Consumer Credit Act?
    

In this respect section 128 (c) of the Property Law Act (Cap.130) appears to be relevant and states thus;

" (c) in the case of a notice to be served on a lessee or mortgagor if there be no such address by leaving the same on the land the subject of such lease or mortgage."

However there is an address given by the Defendant being a post office box to which the demand for possession too was sent subsequently. Therefore the service even if under the Property Law Act is irregular, and this Court finds that the default notice under section 80(2) of the Consumer Credit Act has not been given to the Defendant. However this Court shall examine the other aspects of this case before ruling on the consequence of the said finding at the end of this judgment.

16. At the hearing of this matter this Court queried from the Plaintiffs Counsel as to the interest component and the Capital component of the loan of $87,483/= spread over 50 years but the Counsel was not in a position to inform Court of the said components as he had not been provided such details by his client, on the premise that this action is not to recover monies, but possession. The Plaintiff was not able to provide this Court the basis on which the $840/- monthly payment was arrived at. The Defendant has clearly questioned this aspect of the transaction, and the Plaintiff as the keeper of the accounts has failed to answer that. Whether the interest is calculated on a reducing balance or otherwise was not disclosed by the Plaintiff. However Order 88 Rule 3(3) requires certain minimum account particulars to be given making it obvious that the Court is required to look in to at least the default particulars, and Order 88 Rule 3(3) should not be taken as a blind checklist.

17. Even if the Plaintiff does not obtain possession it is not deprived of the Security. The House or the land is not going to 'abscond'. The Plaintiff has the best security that a lender could have- land and building. The monetary loss to the Plaintiff in the worst case scenario is $99,158/- and interest. However it is depriving a family of a roof over their heads which they built and considered their own house and home, that defies monetary valuation.

18. The other relevant provisions being sections 70 to 73 under the Consumer Credit Act (1999) which the Plaintiff and especially the Defendant (who alleges an unjust transaction) did not submit to Court are as follows;

Section 70 to 73 of the Consumer Credit Act reads as thus;

"Court may re-open unjust transactions"

"70. (1) A court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage, guarantee or change was unjust, re-open the transaction that gave rise to the contract, mortgage, guarantee or change.

(2) In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, a court must have regard to the public interest and to all the circumstances of the case and may have regard to the following-

(a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee;

(b) the relative bargaining power of the parties;

(c) whether or not at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation;

(d) whether it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change;

(e) whether any of the provisions of the contract, mortgage or guarantee (before and after any change) impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee;

(f) whether the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition;

(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed;

(h) whether, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor;

(i) the extent to which the provisions of the contract, mortgage or guarantee (before and after any change) and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood the provisions and their effect;

(j) whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;

(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transactions and, if so, the adequacy of those measures;

(l) whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry of the debtor at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship;

(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider;

(n) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases;

(o) any other relevant factor.

(3) For the purposes of subsection (2) (f), a person is taken to have represented a debtor, mortgagor or guarantor if the person represented the debtor, mortgagor or guarantor, or assisted the debtor, mortgagor or guarantor to a significant degree, in any negotiations before or when the credit contract, mortgage or guarantee was entered into or changed.

(4) In determining whether a credit contract, mortgage or guarantee is unjust, a court must not have regard to any injustice arising from circumstances that were not reasonably foreseeable when the contract, mortgage or guarantee was entered into or changed.

(5) In determining whether to grant relief in respect of a credit contract, mortgage or guarantee that if finds to be unjust, a court may have regard to the conduct of the parties to the proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed.

(6) This section does not apply to –

(a) a change in the annual percentage rate or rates payable under a contract, or to an establishment fee or charge or other fee or charge, in respect of which an application may be made under section 72; or

(b) a change to a contract under this Division.

(7) In this section, "unjust" includes unconscionable, harsh or oppressive.

Orders on re-opening of transactions

71. A court may, if it re-opens a transaction under this Division, do anyone or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation-

(a) re-open an account already taken between the parties;

(b) relieve the debtor and any guarantor from payment of any amount in excess of any amount the court, having regard to the risk involved and all other circumstances, considers to be reasonably payable;

(c) set aside either wholly or in part, or revise or alter, an agreement made or mortgage given in connection with the transaction;

(d) order that the mortgagee takes all steps necessary to discharge the mortgage;

(e) give judgment for or make an order in favour of a party of such amount as, having regard to the relief (if any) which the court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee;

(f) give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person;

(g) make ancillary or consequential orders.

Court may review unconscionable interest and other charges

72. (1) A court may, if satisfied on the application of a debtor or guarantor that –

(a) a change in the annual percentage rate or rates under a credit contract to which section 59 (1) or (5) applies;

(b) an establishment fee or charge;

(c) a fee or charge payable on early termination of a credit contract; or

(d) a fee or charge for a prepayment of an amount under a credit contract,

is unconscionable, annul or reduce the change or fee or charge and may make ancillary or consequential orders.

(2) For the purposes of subsection (1), a change to the annual percentage rate or rates is unconscionable if and only if it appears to the court that –

(a) it changes the annual percentage rate or rates in a manner that is unreasonable, having regard to any advertised rate or other representations made by the credit provider before or at the time the contract was entered into, the period of time since the contract was entered into and any other consideration the court thinks relevant; or

(b) the change is a measure that discriminates unjustifiably against the debtor when the debtor is compared to other debtors of the credit provider under similar contracts.

(3) In determining whether an establishment fee or charge is unconscionable, a court is to have regard to whether the amount of the fee or charge is equal to the credit provider's reasonable costs of making a decision on an application for credit and the initial administrative costs of providing the credit, or is equal to the credit provider's average reasonable costs of those things in respect of that class of contract.

(4) For the purposes of this section, a fee or charge payable on early termination of the contract or a prepayment of an amount under the credit contract is unconscionable if and only if it appears to the court that it exceeds a reasonable estimate of the credit provider's loss arising from the early termination or prepayment, including the credit provider's average reasonable administrative costs in respect of such a termination or prepayment.

Time limit

73. (1) An application (other than an application under section 72) may not be brought under this Division more than 2 years after the relevant credit contract is rescinded or discharged or the credit provider writes off the relevant debt, whichever occurs first.

(2) An application under section 72 may not be brought more than 2 years after the relevant change takes effect or fee or charge is charged under the credit contract or the credit provider writes off the relevant debt, whichever occurs first."

19. The Defendant states in its affidavit at paragraph 25 thus;

24. Further, I was not provided any proper legal advice about the said mortgage. I was only told by the staffs of the Plaintiff Bank in Lautoka to have our signatures on the said mortgage witnessed by a Justice of Peace. Pusp Raj who is a Justice of Peace witnessed our signatures but did not explain or provide any legal advice as to my obligation and liabilities under the said mortgage.

However such circumstances cannot be judged by affidavits alone, and if such was the case as the Defendant alleges then the Defendant ought to have commenced proceedings by writ of summons to reopen the transaction. At the same time this Court is mindful that a mortgagor who is financially unable to service his loan will not be in a position to embark on preemptively aggressive litigation. Even the last notice alleged to have been given is dated 24th March 2010 and these proceedings were filed on 13th April 2010, within less than a month, and the Defendant denies receipt of that notice too. It is strange that there had been no correspondence between the Loan Offer Letter (Exhibit "B") of 14th December 2007and the Demand Notices in 2009 and 2010 at least from the Plaintiff to the Defendant, with so many payment defaults alleged.

20. It is situations such as these that legislation such as the Consumer Credit Act endeavors to prevent. Unless the lending (credit) terms are sustainable by the borrower there is the inevitable risk of default. It is sustainable lending that prudent lenders must practice. Home loans were regarded worldwide as low risk lending and carried low interest rates spread over long periods of time, and attracted many investors to hedge on such portfolios, and when such loans are not sustainable due to apparent incapacity of the borrower, over lending or the ambitious terms, a financial crisis could occur as it did in the United States of America during 2007-2010. It is therefore timely that such lending ought to be made only on sustainable terms, otherwise not only could it lay a foundation to a future financial crises, it could also seriously erode the essential unit of a nation; the progressing human family.

When default occurs the rehabilitation mode must precede the recovery mode. This Court noted the lack of assistance from the staff of the Plaintiff, complained of by the Defendant at the end of paragraph 11 of his affidavit.

Money does not grow in the vaults of Banks. It needs borrowers to make it multiply by paying interest. The borrower too equally deserves protection, for the financial well being of a nation as well as for the continuity of the lender. Home mortgagors are generally first time mortgagors while the lender is a professional with experience and resources, and must share some responsibility if it lends on ambitious terms beyond the sustainable capacity of the borrowing mortgagor.

21. The Plaintiff Bank has contracted for two rates of interest ( 9.5 % & 10.25%) the lesser rate for the first two years and the higher rate for the balance 48 years. The Plaintiff failed to submit the interest component, and whether the calculation was on a reducing balance or not, though called for by this court at the hearing. The Defendant complains that at the end of 50 years he would end up paying $504,000/---.-- It is his capacity to pay at the time of the lending that the parties have not given proof of or even submitted. The only clue is that he is described as a "Resort Director", and that depends on the Resort! Before the transaction the Plaintiff ought to make an assessment of the Defendants capacity to pay.

At the same time if the Defendant is to urge the transaction as unjust under the Consumer Credit Act, then he must particularize the circumstances that make it an unjust transaction as vividly set out in section 70(2) of the Consumer Credit Act, reproduced above. The Defendant cannot expect the Court to proceed on a fishing expedition to discover the circumstances or the particular category the Defendant fits in to, in the scheme set out in the said section 70(2).

However it must be noted that this particular mortgage has the hallmarks of a "sub-prime mortgage" (subprime mortgage), which the "U.S. Financial Crisis inquiry Commission" findings reported in January 2011, found, was one of the major factors responsible for the 2007-2010 U.S financial crisis which had global ramifications.
[The U.S. Financial Crisis Inquiry Commission is a ten member Commission created by section 5 of the Fraud Enforcement and Recovery Act of 2009(Public Law 111-21)- also known as the Angelides Commission after it's Chairman Phil Angelides. Such a Commission was last appointed to investigate the Great Depression in the 1930's which was known as the Pecora Commission.]

22. Sub-prime Mortgages bring in their wake foreclosures that drive the real estate value down, and give a negative index to investor confidence. The result is, even, prime mortgages suffer an equity loss, in that they find that they are paying more for their mortgage than the value of the property. The resulting default in prime and sub-prime mortgages seriously affects lender liquidity, forcing lenders to resort to harsher recovery strategies that drive the real estate market further down, accelerating default in hitherto unaffected mortgages. It is no longer a theory, it is more than foreseeable, and it came to pass.

Warnings of this vicious cycle was scoffed at within the financial sector, as mortgage fraud thrives in the company of sub-prime mortgages, and direct and indirect beneficiaries of such fraud, being those necessarily within the financial sector, felt their interests were threatened. As early as 2004 the Federal Bureau of Investigations (U.S) warned of an "epidemic" in mortgage fraud. No warning is too early in the case of an 'iceberg', and sooner such sub-prime mortgages are identified, isolated and managed the more chances of avoiding the 'iceberg'. I hope this case is not the tip of an iceberg but an isolated case.

23. When sub-prime mortgages fail it is not entirely the fault of the mortgagor, as it ought to have been to the knowledge of the lender mortgagees that they are destined and foreseeable to fail from the very beginning. Purely numerical thinking needs to be overlapped by conceptual thinking. How ever as stated earlier such issues cannot be decided by affidavits alone within the Originating Summons procedure.

24. Previous judicial precedents did not have the benefit of an insight in to the financial mischief and human misery that is caused by sub-prime mortgages, whether motivated by fraud or otherwise, and may require judicial and legislative re-thinking. What is currently under investigation in the U.S. is more the fraud on the part of lender mortgagees and their individual officers rather than individual mortgagors. The modus operandi of white collar crime are more often copied in to jurisdictions with less means of regulation, than from where they are originally detected.

25. As the Law stands, in view of case law such as Fiji Development Bank v. Endeavour Youth Investment Cooperative Society Ltd (2000) FJHC 63; HBC0337J.99S(5 May 2000), Wati v Pillay [2009] FJ2; Civil Action Nion No 310.2008 (7 April 2009), and the recent case of FIJI DEVELOPMENT BANK v. RATU TEVITA RAIVALITA KOMAISAVAI CIVIL APPEAL NO. ABUOO18 OF 2010 [High Court Acto; HBC 19 of 2010L], where here the Defendant admits default then this court has to permit the mortgagee (Plaintiff) to take possession of the property so as to further secure its only security, and recover the monies lent, subject to terms so as to address the human aspect of such transactions.

26. It would be unjust to eject the Defendant and his family without providing him the mandatory benefit and protection provided by statute by virtue of section 80(2) of the Consumer Credit Act, in view of the observations of this Court, and even otherwise this Court has no choice but to give effect to clear statutory provisions. In the given scenario it is not the Plaintiff or the Defendant who gains but the subsequent buyer. On the sale of the property the Plaintiff at least has the prospect of recovering the arrears and what it lent, but the family disruption that results from loss of possession is irreparable. As such the Plaintiff having failed to give the statutory notice of default under section 80(2)(a) of the Consumer Protection Act to the Defendant as held at paragraph 15 above, it is restrained by statute under Section 80(2) of the said Act from beginning this action for possession, and as such this action of the Plaintiff stands statutorily prohibited ab initio and as such is dismissed, without prejudice to the Plaintiffs right to file proceedings after due notice.

27. The injunction sought by the Plaintiff was not urged at the hearing and as such I shall make no such order. Even if such orders had been made they would stand dissolved ab initio due to the statutory prohibition above referred to. This Court cannot make any orders in this action even in favour of the Defendant due to the very same reason and can only make orders as to costs, therefore the dismissal of this action is without prejudice to the Defendants right to agitate the defenses in this action in another action and as such not to operate as res judicata between parties.

ORDERS ON JUDGMENT;

1. Plaintiffs Action dismissed without prejudice to the right of both parties to file fresh actions after due statutory compliance.
   
2. Parties to bear their costs.
   

Hon. Justice Yohan Fernando.
PUISNE JUDGE.

High Court of Fiji
At Lautoka
18th April 2011.