Home Finance Company Ltd v Sogotubu [2011] FJHC 267; HBC343.2010 (13 May 2011)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

Civil Action No. 343 of 2010

IN THE MATTER of Mortgage No: 421274 given by
AMINIO SOGOTUBU and MERESEINI SOGOTUBU
both of Bulei Road, Laucala Beach Estate, Nasinu
over the residential property comprised in Crown Lease No. 12152.

BETWEEN:

HOME FINANCE COMPANY LIMITED
a limited liability company having its registered office at 371 Victoria Parade, Suva, Fiji.
PLAINTIFF

AND:

AMINIO SOGOTUBU and MERESEINI SOGOTUBU
both of Bulei Road, Laucala Beach Estate, Nasinu
DEFENDANT

BEFORE: Master Deepthi Amaratunga

COUNSELS:NANDS LAW for the Plaintiff
KOMAI LAW for the Defendants

Date of Hearing: 10th May, 2011
Date of Ruling: 13th May, 2011

RULING

1. INTRODUCTION
   

1. The Plaintiff has filed an application under Order 88 of the High Court Rules of 1988 seeking for an order against the Defendants for delivery of Vacant possession of all that property comprised and described in Crown Lease No. 12152 being Lot 9 on SO1878 LD ref 4/16/7010 having an area of more or less 851 square meters together with all the improvements thereon situated in the District/Naitasiri and Province /Island.
   

B. FACTS

2. The Defendants are the registered proprietors who are currently occupying the said property. By Mortgage No. 42174 registered on 14th March 1997 made between the Plaintiff and the said Defendants, the said property was charged to secure repayment to the Plaintiff of all loans, advances, charges, interest and other banking accommodation made by HFC to the Defendants.
   
3. On or about 2nd December 2009 the Plaintiff had issued and served Demand Notice under the Mortgage demanding payment of the mortgaged money in the sum of $1,213.43 outstanding as at 30th November 2009.The Defendants defaulted in paying the mortgage monies therefore the Plaintiff as Mortgagee called for tenders for the sale of the property. On or about 8th February 2010 the Plaintiff notified the Defendant its intention to accept an offer of $142,000.00 from a prospective buyer and gave the Defendants final 7 days to pay the total debt but the Defendants neglected to make payments and on or about 12th May 2010 the Plaintiff entered into a Sale and Purchase Agreement with the successful tenderer and completed all relevant documents in readiness for settlement to be effected.
   
4. On or about 13th August 2010, the Plaintiff, on a request made by the Defendants, agreed to allow the Defendants time till 19th August 2010 to clear the arrears and produce letter of offer for refinance of this debt. The 2nd Defendant also signed the said re-scheduling of the Debt. In terms of the said arrangement entered between the Plaintiff and the Defendants, dated 13th August, 2010 there was an outstanding arrears to the tune of $10,000.00 and that sum had to be settled immediately and the time granted for that was till 19th August, 2010. The Defendants failed to clear the arrears.
   
5. There was a further condition in the said arrangement that required a letter of offer to takeover the debt by Housing Authority and the Defendants have failed to produce any offer letter satisfactory to Plaintiff and on or about 24th August 2010 the Plaintiff wrote and informed the Defendants that since they have defaulted their arrangement, the Plaintiff would proceed with the Sale of the property.
   
6. On or about 26th October 2010 the Plaintiff issued Eviction Notice to the Defendants to deliver Vacant possession of the property. The Defendants failed to give Vacant possession of the said property and this action was filed in terms of Order 88 of the High Court Rules.
   
7. The Defendants filed their Affidavit of Opposition. The said affidavit in opposition of Mereseini Sogotubu (the Second Defendant) filed on 9th March 2011 states that they have not been given an opportunity to remedy the arrears as was done in previous years and also states that they did not receive the demand notice from the Plaintiff as they have closed their Postal Box to which the letter was sent.
   

100. LAW
     

8. The Plaintiff has filed this application under Order 88 of the High Court Rules of 1988.
   
9. Order 88 Rule 3 of the High Court Rules expressly provides that the affidavit in support of the originating Summons; must
   

(2) ............exhibit a true copy of the mortgage and the original mortgage;

(3) Show the circumstances under which the right to possession arises and...............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 payment required to be made;
(c) The amount of any interest or installments in arrears at the date of the issue of the Originating Summons and the date of Affidavit; and
(d) The amount remaining due under the mortgage.

10. Original Mortgage was presented to the court on the date of the hearing for perusal and the Affidavit complied with all the requirements as stated in Order 88 Rule 3.
    
11. The procedure under Order 88 was stated in case of National Bank of Fiji –v- Abduk Kadeer Hussain (supra) where Fatiaki J. (as he was then) held as follows:-
    

"Order 88 of the High Court rules only deal with action relating to Mortgage. It gives Mortgagees the right to claim possession without being registered proprietor with or without foreclosure. To that extent Order 88 is available to him nothing can inhibit him from utilizing Order 88".

12. Section 75 of the Property Law Act[ Cap 130] provides that:
    

"A Mortgagee upon default in payment of the Mortgage money or any part thereof, may enter into possession of the mortgaged land by receiving the rents and profits thereof or may distains upon the occupier or tenant of the said lands for the rent then due."

13. Section 79 of the Property Law Act gives the Mortgagee the right to sell the Mortgaged property where there is default in payment of the mortgage money or in the performance of any covenant in the mortgage and where such default continues for one month after a service of Notice under Section 77 of the said Act.
    
14. Mortgage No. 421274 that was entered between the Plaintiff and the Defendants reads as follows;
    

Clause 11 of the said Mortgage

"That the covenants powers conditions and provisions implied in Mortgages by virtue of the Property Law Act 1971 and any amendment thereof shall for the purpose hereof be negatived or varied so far only as the same are varied by or shall be inconsistent with the terms and provisions hereof and subject to any such negation or variation the Mortgagee shall be entitled to all rights powers and remedies conferred on mortgagees by the said Act and any amendment thereof".

Section 79 (1) of the Property Law Act, Cap 130 provides that:

If default in payment of the mortgage money or in the performance or observance of any covenant continues for one month after the service of the notice referred to in section 77, the mortgagee may sell or concur with any other person in selling the mortgaged property, or any part thereof, either subject to prior leases, mortgages and encumbrances or otherwise, and either together or in lots, by public auction or by private contract, or partly by the one and partly by the other of those methods of payment of the purchase money or otherwise as the mortgagee thinks fit, with power to vary any contract for sale and to buy in at any auction or to vary or rescind any contract for sale and to resell without being answerable for any loss occasioned thereby, with power to make such roads, street and passages and grant such easements of right of way or drainage over the same as the circumstances or the case require and the mortgagee thinks fit, and may make and sign such transfers and do such acts and things as are necessary for effectuating any such sale. (emphasis is added]

15. Inglis and another –v- The Commonwealth Trading Bank of Australia 126 CLR 161 at Page 165 Chief Justice Barwich said;
    

"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 a injunction to restrain, until they have been determined, the exercise by a Mortgagee of the remedies given to him by the Mortgage".

It is clear that even in a case of a debtor has made a claim for damages against the mortgagee the courts would not grant a stay of sale being executed between the mortgagee and third party buyer. The rationale being that the interest of the Mortgagee being paramount to enable viable commercial environment in the world of commerce.

16. According to the above finding a court would not interfere with the enforcement of the security even if the Debtor has filed an action for damages against the Creditor on the mortgagee sale.
    

National Bank of Fiji –v- Hussein (1995) FJHC 29, referred to the case of: Western Bank Ltd –v- Schindler (1997) 1 Ch1; where Buckley, L.J. Goff said;

"A legal mortgagee's right to possession is a Common law right which is an incident to his estate in the land. It should not be lightly treated at abrogated or restricted. Although it is perhaps most commonly exercised as a preliminary step to an exercise of the Mortgagee's power of sale, so that the sale may be made with Vacant possession, this is not its only value to the Mortgagee. The Mortgagee may wish to protect his security.................he might wish to take possession for the purpose of carrying out repairs or to prevent waste".

Accordingly, a mortgaged property can be possessed by the mortgagee even without a sale of that.

17. The Plaintiff has deposed in the Affidavit filed in Support of the Summons that the Defendants have defaulted under the Mortgage and the Defendants refusal to give vacant possession of the property is interfering and prejudicing its rights as mortgagee. Furthermore, in its Affidavit in Support of the Plaintiff deposed that it accepted an offer to purchase the mortgaged property and have entered into a Sales and Purchase Agreement and has signed the Transfer documents have been duly stamped by the Stamp Duties Office but the settlement is pending as the Plaintiff could not give vacant possession.
    
18. The Defendants in their Affidavit in Opposition have raised basically two major issues. Firstly, that the Plaintiff failed to served a copy of the Default Notice onto the Defendants and secondly that they had not been granted sufficient time to settle the arrears.
    
19. The Second issue raised is the Plaintiff failed to give the Defendant enough opportunity to redeem the mortgage debt. It is clear from the Document marked "c" to the affidavit in opposition filed by the Defendant demonstrate that Defendants had not acted with due diligence in this matter. The said letter dated 14th October, 2010 written by the Housing Authority to the Defendants states as follows:
    

"Despite continuous reminder through phone calls/mobile calls regarding the above nothing have been provided to date. I have also given you ample time to visit the office concerned for assistance since then you have also failed to provide evidence."

[emphasis is mine]

20. It clearly shows the behaviour of the Defendants are self explanatory. This letter was filed by the Defendants to substantiate their position of insufficient time being granted by the Plaintiff and it amply demonstrates the way in which Defendants have acted and needs no further explanation.
    
21. In accordance to Section 77 of the Property Law Act Cap 130 it provides:
    

"If default is made in payment of the mortgage money or any part thereof, or in the performance or observance of any covenant expressed in any mortgage or in this Act declared to be implied in any mortgage, and such default is continued for one month or for such other period of time as is in such mortgage for that purpose expressly fixed, the mortgagee may serve on the mortgagor notice in writing to pay the mortgage money to perform and observe the covenants therein expressed or implied, as the case may be."

22. The Plaintiff has given 30 days of notice in compliance with the Consumer Credit Act 1999 and that all necessary actions were taken to serve the Defendants a copy of the default notice. It is clear from the Affidavit evidence of Aiyaz Latif sworn on 13th December 2010 that a copy of the Default Notice was also fast posted to the Defendants address. The Default notice was served onto the Defendant both by way of service at the registered property of the Defendants and to the registered Post Office Box of the Defendants.
    
23. Clause 19 of the said Mortgage states as follows:
    

"THAT a notice or demand for payment of the moneys hereby secured or any of them signed by or on behalf of the Mortgagee shall be a good and sufficient demand pursuant to this Mortgage if it shall be served on the Mortgagor in the manner provided for the giving of notices by section 128 of the said Act".

Section 128 of the Property Law Act Cap 130 provides as follows:

"Subject to the provisions of the Land Transfer Act, any notice required or authorized by the provisions of this Act to be served on the proprietor of any estate or interest in land registered under the provisions of that Act may be served on him (Cap. 131.)

(a) By delivering the same to him personally;
(b) By posting the same to him by registered letter addressed to him at his address as appearing in the register in which case such notice shall be deemed to have been serviced at the time when the registered letter would be delivered in the ordinary course of post; or
(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".

24. It is evident that Plaintiff has taken all the steps in accordance with the law to deliver the demand notice and in fact it was delivered to the Defendants according to the law.
    
25. According to the affidavit filed on behalf of the Plaintiff, the Default Notice was served onto the Defendants by way of leaving a copy with the Defendant's son's at the registered property and in addition to the Default Notice was served by the way of Fast Post to the Defendant's last known postal address being PO Box 10648, Laucala Beach Estate, Nasinu. The 2nd Defendant states that he did not receive the notice and that cannot be believed. He is the person who had signed a reschedule arrangement of the Debt on 13th August,2010 and both the Defendants have prior to this had written to the Plaintiff regarding this outstanding debt and upon their request the said arrangement was made on 13th August, 2010. Even as late as 13th August, 2010 the address of the Defendants remained the same and the postal box indicated has not been changed. If the postal box has changed or not available it is the duty of the Defendants to inform it to the Plaintiff and they have not only failed to do so but has also misled the plaintiff by signing the said agreement dated 13th August 2010, where the address of the Defendant remained P.O. Box 10648, Laucala Beach Estate, Nasinu.
    
26. If the demand notice has not been received how have they requested and obtained a reschedule of the debt under certain conditions by the agreement dated 13th August, 2010 needs to be explained by the Defendants. They have admitted that arrangement and had further alleged that they were denied of independent legal advice before committing to said arrangement. This clearly proves that not only a demand but also an opportunity was given to the Defendants to settle the arrears but they have failed to do so and the reasons given in their affidavit cannot be accepted.
    
27. In accordance to Section 79 of the Property Law Act Cap 130 it provides that:
    

"(1) If default in payment of the mortgage money ........ continues for one month after service of the notice referred to in section 77, the mortgagee may sell or concur with any person in selling the mortgaged property....."

28. In the case of Vere v NBF Asset Management Bank [2004] FJCA 50; ABU0069. 2003S (11 November 2004) the Court of appeal upheld the Trial Judge's decision in applying the decision in Property and Bloodstock Limited v. Emerton [1968] 1 Ch 94 whereby it was held, once a contract of sale is entered into by a mortgagee, in exercise of its power of sale, the mortgagor's right of redemption is extinguished in this matter as a contract was still on foot and settlement would occur once vacant possession is attained.
    
29. The above case was distinguished from the case of Mohammed Isaq Khan v. Fiji Development Bank Ca 149 of 1998 whereby there was only a mere acceptance of an offer and there was no existence of an agreement for sale.
    
30. In the case Inglis and another –v- The Commonwealth Trading Bank of Australia 126 CLR 161 which has been followed frequently in Fiji and cited in a number of case authorities where Mortgagees claim is for Vacant possession, the following rule as it affects the exercise by a mortgagee of the power of sale is generally cited:
    

"The Mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has commenced a redemption action, 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". (emphasis is mine]

4. CONCLUSION
   

31. In the circumstance the order of this court is that the defendants to deliver the Plaintiff vacant possession of all the property comprised in mortgage registration No 421274 registered on 14th Marc, 1997 described in Crown Lease No 12152 being Lot 9 on SO 1878, LD ref 4/16/ 7010 having an area of more or less 851 square meters together with all the improvements thereon situated in the District/Naitasiri and Province/Island immediately.
    

The Plaintiff is also granted a cost of $1,500.00 assessed summarily against the defendants jointly and or severally.

Dated at Suva this 13th day of May, 2011

........................................
Mr Deepthi Amaratunga
Acting Master of the High Court
Suva