Habib Bank Ltd v Raza [2011] FJHC 503; Civil Action 53.2005 (6 September 2011)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.53 OF 2005

BETWEEN:

HABIB BANK LIMITED a limited liability company incorporated under the laws of Fiji and having its registered office in Suva, Fiji
PLAINTIFF

AND:

MEHBOOB RAZA f/n Tazim Raza of 17 Howell Road, Suva, Barrister and Solicitor/Businessman
1ST DEFENDANT

AND:

MOHAMMED SAHID ALI f/n Mohammed Ali of 31 Sawani Street, Suva (last known address) Businessman
2ND DEFENDANT

AND:

MEHBOOB RAZA & ASSOCIATES, Barristers and Solicitors, Commissioners for Oath and Notary Public and having its registered office at 176/184 Renwick Road, Suva, Fiji Islands.
3RD DEFENDANT

AND:

HORIZON TRAVELS LIMITED a limited liability company incorporated under the laws of Fiji and having its registered office in Suva.
4TH DEFENDANT

BEFORE: MASTER DEEPTHI AMARATUNGA
COUNSELS: Mr Muaror K. for the Plaintiff
Mr. V. Maharaj for the 1st Applicant and 3rd Defendants

Date of Hearing: 13th May, 2011
Date of Ruling: 6th September, 2011

RULING

1. INTRODUCTION
   

1. The 1st and 3rd Defendants seek to amend their statement of defence. The proposed statement of defence is annexed to the affidavit of Hemant Kumar dated 18th November, 2008 and accordingly there are two main amendments to the statement of defense and one is regarding the alleged transactions of undisclosed account between the bank and the principle debtor the 4th Defendant. The 1st and 3rd Defendants allege that without their knowledge some moneys were credited to an undisclosed account of the principle debtor and by doing that they have incurred a loss. Secondly, the said Defendants also state that the Plaintiff has obtained some concessions due to the bad debt of the principle debtor from the Fiji Island Revenue and Customs Authority (FIRCA) and because of that this action cannot proceed. It seems that the second amendment regarding the FIRCA granting some concession for bad debts is purely a statutory revenue issue and that cannot be an issue in this case and has to be rejected in limine. The Tax and Revenue policies of the government has no effect on the liability of the debtor, as those are purely independent to the cause of action of the Bank, against any defaulter, irrespective of receiving tax benefits for their bad loans including writing off of certain debts as bad debts, for purely accounting and regulatory purposes and or a matter of policy of revenue collection.
   

2. LAW AND ANALYSIS
   

2. Order 20 rule 5(1) of the High Court Rules states as follows:
   

"Subject to Order 15, rules 6, 8 and 9 and the following provisions of this rule, the Court may at any stage of the proceedings allow the plaintiff to amend his or her writ or any party to amend his or her pledging, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct."

3. It is clear that an amendment to pleading can be granted at anytime, before the judgment is delivered, but that courts have through years by way of decisions relating to amendments laid down principles in regarding the application of the law relating amendments to pleadings.
   
4. According to the proposed statement of defence that is annexed to this summons seeking leave of the court to amend the statement of defence on behalf of 1st and 3rd Defendants the proposed amendments are insertions that are proposed in paragraphs 42A to 42E and they are reproduced here for easy reference:
   

"42A. That unknown to the 1st Defendant the Plaintiff secretly and/or unlawfully and/or fraudulently had other account(s) operating in the 4th Defendants name:

Particularly of unlawfulness and/or fraud:

1. Unknown to the first Defendant the Plaintiff was depositing funds payable to the 4th Defendant in account(s) other than the official or the only account known to the 1stDefendant for its sole use and benefit;
   
2. The Plaintiff failed and/or neglected to give credit to the Defendants for the monies paid into or deposited into the or those other account(s);
   
3. That the Plaintiff failed to advise and/or inform the Defendants of the existence of other account(s).
   

42B. That as a result of the unlawful and/or fraudulent actions of the Plaintiff set out in paragraph 43 herein and other related matter the 1st Defendant and for that matter all the Defendants suffered prejudice, loss and damages.

42C. That further and/or in the alternative the Plaintiff continued to unlawfully and/or illegally deal with the 4thDefendant after it was wound up.

42D. That the Plaintiff wrote the present alleged debt and, or alleged amounts due and owing to it as a bad debt with the Fiji Inland Revenue and Customs Department to obtain tax benefits.

42E. That in view of the contents of paragraph 46 herein the Plaintiff is estopped from proceeding and further with these proceedings." (emphasis is added)

5. From the above paragraphs, 42 D deals with alleged tax benefits that were granted to the Plaintiff due to the bad debt that is in issue of this action. Clearly, that cannot be an issue to this cause of action to recover the said debt. It is clear that due to fiscal policies of the regime, certain concessions are given in the Inland Revenue Law and the same law will have to specify, what has to be done in case of a recovery of a bad debt, if it is recovered after obtaining tax benefit, and if there is no such provision in the tax law that granted such tax benefit, it has to be considered that the legislation has granted the tax benefit irrespective of any recovery of the bad debt, subsequent to the grant of the tax benefit.
   
6. It is also clear, the policies of the government in revenue collection, cannot have an effect on the liability of the Debtors. The Debtors has to honor their debts irrespective of their debt being transferred to bad debts account, or written off from the books of accounts depending on the accounting principles and the regulations governing bad debts. Specially, after the sub-prime debt defaults in major economies of the world and the economic downturn many countries prompted certain financial regulations that require the writing off of bad debts within a six month time period of default for accounting purposes, in order to depict a clearer and transparent future financial status of a Bank, for regulatory purposes. This cannot be in anyway give an indication that the Bank, is precluded from recovering the same debt that has been written off for accounting purpose and or due to regulatory purposes. It is also clear that any tax benefit granted on such a written off debt or bad debt cannot in anyway extinguish the creditor's right to recover the debt and any amendment that seeks to bring such measures to cover up their loan liability will be sure to fail. In the circumstances the amendment sought in relation to the tax benefits should not be allowed as that is an amendment will not assist either party to determine the issue before the court. It is also clear that such an amendment regarding tax benefit will deviate from the main issue of the cause of action and the counterclaim. So the amendment sought and contained in the paragraphs 42D of the proposed amendment annexed to the affidavit of Hemant Kumar is rejected and disallowed.
   
7. Reddy Construction Company Ltd v. Pacific Gas Company Ltd 26 FLR 121

In the said Judgment pages 125 reads:

"....The grounds of defendant's counsel's defence to the first application clearly show that strong opposition was based on the short time available before trial to meet the new allegation. It is also clear that Williams J. went as far as he could to grant amendments to put the contest properly in issue by allowing an amendment which raised questions of architect's error without elevating it to a claim of fraud. Indeed this was probably as much as was required for the plaintiff's intended attach and yet it did not require the defendant to face a completely new allegation of fraud. It was the compromise decision of a judge giving some concession to enable reasonable ventilation of the real cause without prejudicing a defendant with the late raised cry of fraud."

In the said Judgment pages 126 reads:

".....An interesting example of the Court of Appeal granting leave is to be found in Tildesley v Harper [1878] UKLawRpCh 284; 1876 10 Ch. D. 393. As here the proposed amendment was to introduce an allegation of bribery and application was made before trial to correct an evasive Statement of Defence and thereby avoid it being construed as an admission. The application was late and Fry J. at first instance had doubts about bona fides refused the amendment and gave judgment as on an admission without a trial. Nevertheless, the Court of Appeal allowed the amendment, despite lateness and carelessness to allow the real issue to be tried."

8. In the case of Peter Sujendra Sunder & Anor V. Chandrika Prasad Civil Appeal ABU 0022 of 1997. The Plaintiffs had lodged an application for amendment 6 weeks before the trial date and at the beginning of the trial sought leave to amend. Scott Justice refused leave and an appeal was made. Appeal was allowed. It went to Supreme Court but was unsuccessful.

9. In Judgment of the Fiji Court of Appeal delivered on 15th May 1998 pages 8, 9, and 10 read:

"Scott J. stated in his judgment that he refused leave to amend at that stage because the application "was quite unnecessarily made at the very last minute and, if granted, would have entailed the pleadings being reopened and the trial being adjourned". He also gave his reasons for refusing to grant leave after the parties had closed their cases. He said that the application was made necessary be reason of the variance between the Statement of Claim and the evidence at the trial and should have been made before the defence case was opened. He commented that the trial dates had been set in November 1996, so that there had been ample time to seek leave for the amendment before the trial. He could "see no justification" for granting leave at that late stage of the trial."

"Scott J. had discretion whether to grant leave. Generally, it is in the best interest of the administration of justice that the pleadings in an action should state fully and accurately and factual basis of each party's case. For that reason amendment of pleadings which will have that effect are usually allowed, unless the other party will be seriously prejudiced thereby (G.L. Baker Ltd. V. Medway Building and Supplied Ltd [1958] 1 WLR 1231 (C.A.). The test to be applied is whether the amendment is necessary in order to determine the real controversy between the parties and does not result in injustice to other parties; if that test is met, leave to amend may be given even at a very late stage of the trial Elders Pastoral Ltd v. Marr [1987] NZCA 18; (1987) 2 PRNZ 383 (C.A). However, the later the amendment the greater is the chance that it will prejudice other parties or cause significant delays, which are contrary to the interest of the public in the expeditious conduct of trials. When leave to amend is granted, the party seeking the amendment must bear the costs of the other party wasted as a result of it."

"In the present case the application for leave to amend the Statement of Claim was made on 14 June 1996, just over six weeks before the dates set for the trial of the action. The proposed amended Statement of Claim was annexed to the summons. Whereas in the original Statement of Claim it was stated that the plaintiffs had been and remained willing to pay the purchase price of the property, in the proposed amended Statement of Claim it was stated that Sundar and Prasad had entered into a later agreement by which the outstanding balance of the purchase price was "converted into a loan". When Prasad was cross-examined at the trial, he admitted that there was a second agreement, although he disputed what its terms were. Prasad's solicitors had six weeks to obtain instructions from him regarding the second agreement. Even though they were in Fiji and he was in Sydney that was ample time for them to have provisionally prepared an amended defence in case the Court granted leave to amend the Statement of Claim. In those circumstances we cannot see any reason why it should have been necessary to adjourn the trial on 30 July 1996 if the Statement of Claim had been amended or how Prasad would have been prejudiced by leave being granted."

"It was undoubtedly most unsatisfactory that the plaintiffs' solicitors had not ascertained the real basis of their clients' case – or at least had failed to take action to bring their pleadings into line with it - until nearly three years after the action was commenced and seven months after the action had been listed for trial when supposedly the parties were ready for it to be tried. However, as the trial should not have been delayed by the amendment and the other party would not have been prejudiced, leave should have been given to amend the Statement of Claim. In the event, even though leave was not granted, evidence was presented by the plaintiffs which tended to establish the facts stated in the proposed amended Statement of Claim and not those stated in the original, and subsisting, Statement of Claim. However, the real issues in dispute were not before the Court for determination; as a result the hearing was unsatisfactory and the judgment of the Court did not determine the real controversy between the parties".

10. The recent case of Ambaram Narsey Properties Limited v. Mohammed Yakub Khan & Ors HBC 139 of 1996L.

11. This was a case where Plaintiff's case was concluded. The trial had reached the stage where the First Defendants were presenting their case and had completed lengthy evidence of two of their witnesses.

12. In Judgment delivered by Justice Anthony Gates (as his Lordship then was) on 17th April 2001 page 3 reads:

"Counsel for the 2nd Defendant objected to this amendment. He said it was made mala fide and precluded the joining of the builder because the limitation period had expired. He also pointed to the fact that the 1st Defendants in their former pleadings had admitted that they were responsible for building the building".

This in turn caused an injustice to the 2nd Defendant. All preparation for the case had centered around the builder being employed by the 1st Defendants and not acting as an independent contractor. This presented difficulties over interrogatories and discoveries. It changed the whole of the 1st Defendants defence, which defence would have been abundantly obvious to the 1st Defendants solicitors at the outset.

Mr B C Patel for the Plaintiff adopted all of Mr Anu Patel's counter arguments. He conceded both he and Mr Anu Patel should have objected earlier when this issue was raised in the 1st Defendants case. He said the amendment was an ingenious way of avoiding liability. It also smacked of being an afterthought.

In Cropper v. Smith [1884] UKLawRpCh 91; (1884) 26. Ch. D. 700 at p.710 Bowen L J. said:

"Now, I think it is a well established principle that the object of Courts is to decide the rights of the parties and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights.

Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error of mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters of controversy, and I do not regard such amendment as a matter of favour or of grace."

13. Page 4 of the same judgment reads:

"and his Lordship added at p. 711:

"it seems to me that as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it corrected, if it can be done without injustice, as anything else in the case is a matter of right."

....Amendment may be allowed "at any stage of the proceedings" which includes during a trial. The Duke of Buccleuch [1892] P.201, at p.211 per Lord Esher MR: G.L. Baker Ltd v Medway Building and Supplies Ltd. [1958] 1 WLR 1216. With some reluctance the trial judge was prepared to allow the statement of claim to be amended in Loutfi v. C Czarnikow Ltd (1952) 2 All E.R. 823 as late as after the close of the case but before judgment.

14. Page 5 of the same judgment reads:

"In the trial before me not much was raised on this issue in chief. However, the terms of the builders engagement were gone into at length in cross-examination by both the Plaintiff's counsel and also by the 2nd Defendant's counsel. As a result the apparently unpleaded issue became an issue in controversy between the parties, (see G.L. Baker Ltd supra at p. 1231; as applied in FEA v Balram [1972] Fiji LR 203; see too comments of House of Lords in Farrell v Secretary of State [1980] 1 All E.R. 166 at 173]."

"On the issue of ambiguity perhaps Dr. Sahu Khan is on weaker ground. If allowed this would be the Third Amendment of the 1st Defendant's Defence. The Defence had previously referred to the reliance on professional advisers in matters of the drawing of plans and specifications. Why not a reliance on the builder for a large 4 storey building for the central business district of Lautoka? The facts of course must be proved in evidence, but it would not have been surprising if the Defence had intended to plead to include the builder."

15. Page 6 of the same judgment reads:

I have come to the view that there has been no mala fides here, but rather a genuine mistake. At the outset the proposed defence regarding independent contractor should have been pleaded. It was not done. In Brickfield Properties Ltd. V Newton [1971] 3 All E.R. 328 at p 336B Sachs LJ. said:

"Legal proceedings are serious matters in which the parties seek and are entitled to justice – so far as possible they should not be treated as a minute or game in which the courts are astute to exclude a party from the floor or field by reason of a technically false step taken through a genuine and excusable mistake of their advisers."

"....In considering whether to allow a late amendment of the pleadings a court must consider what prejudice might be caused to the other parties. Here the Plaintiff and 2nd Defendant had elected to cross-examine the builder at length on his terms of engagement. How that the matter is specifically pleaded and the witness is to be recalled after discovery no prejudice will occur to the litigants in meeting the 1st defendant's claim in their respective cases. Inevitably this case must go part heard again. Such interval will provide further time for the 2nd Defendant to consider what evidence to adduce in challenging the claim clarified by the amendment. Time to meet the amended claim as a result of an abandoned trial hearing date was significant reason for allowing the appeal and thus the amendment in Reddy Construction Co. Limited v. Pacific Gas Company Ltd [1980] Fiji LR 121 at p. 126H."

16. Page 7 of the same judgment reads:

"In considering who to sue or who to blame, any or the parties could have sued or joined the builder long before this trial commenced. Each one chose not do so. If their respective claims are now barred by limitation they cannot lay that at the door of the 1st Defendant for the way they chose to frame their initial Defences, and such claims existed quite independently of the 1st Defendants' pleadings. The availability of a cause of action against the builder was a matter that would have been abundantly obvious both to the 1st Defendant as also to the Plaintiff at the time of filing of pleadings or at least several months prior to the commencement of this trial. Hipgrave v. Case [1885] UKLawRpCh 46; (1885) 28 Ch. D 356 at p. 361. Though there was found to be lateness and carelessness in bringing forward the real issue or issues to be tried, the Court of Appeal allowed amendment in Tildesley v. Harper [1878] UKLawRpCh 284; (1876) 10 Ch. D. 393."

"Much will depend of course on the quality of the evidence and credibility of the witnesses on the issue. It would not be proper to penalize the 1st Defendants for failing to include the builder in the line of defence already pleaded that the 1st Defendants relied on the advice and work of persons of competence professional advisers, in their development of the site."

"It could have been pleaded that there was negligence on the part of persons other than the four soldiers. Any such allegations would have to have been properly formulated, and if such a case had been pleaded and presented, then the question whether any and if so what duty of care was owed to persons reasonably suspected of attempting to commit or of committing a serious crime would have arisen for consideration.'

"The Plaintiff had failed to plead the others. NCOs and directing officers other than the 4 soldiers had been negligent by virtue of their planning and control of the operation."

17. Page 8 of the same judgment reads:

"Lord Edmund-Davies observed at 173j;

"It is therefore unnecessary to consider what should have been done had useful admissions been elicited, save to say that latitude extended by a trial judge in relation to cross-examination does not per se broaden the pleaded issues, though it may give rise to a successful application for leave to amend if such cross-examination proves fruitful."

"In the result, the 1st Defendant is given leave to file an amended statement of defence as proposed in the summons. Leave is given to the Plaintiff and to the 2nd Defendant to have any relevant witness recalled for further cross-examination on the issue now unambiguously pleaded. Leave is also given to the Plaintiff to re-open its case to call or recall witnesses on the same issue. The Plaintiff and 2nd Defendant are to have their costs occasioned by this amendment, which are to be borne by the 1st Defendants."

18. It is clear that an amendment can be made even during the trial and in this case the trial has not begun. So, the proposed amendment will not preclude the parties from presenting their respective positions and answers to the allegations contained in the proposed amendment and more particularly contained in paragraphs 42A, 42B, 42C and 42E of the said proposed amended statement of defence.

19. The first and 3rd Defendants have signed the guarantee in relation to any debt that 4th Defendant will incur without specifying a particular account or perticulaer loan and in such a situation other accounts and remittances will be an issue in this case, if the allegations are proved correct so the issues relating to undisclosed account should be granted in order to deal with the issues of this case fully and comprehensively.

20. The said guarantee bond states as follows:

'In consideration of Habib Bank Limited (hereinafter called 'the Bank') accepting and acting on this guarantee and of all or any loans advances credits or other banking accommodation now or at any time hereafter made or afforded by the Bank (where by way of overdraft or otherwise however) to for or on account or at the request of Horizon Travel Limited .......(hereinafter called 'the principal debtor') or any one or more of them if more than one on private or on joint or partnership account or on any other account whatsoever or to any or any of them if more than one or on any guarantee bond bill.......' (emphasis is added)

21. It is clear that the guarantee was not confined to a particular sum or particular loan or overdraft account, but covers all the debts that are specified in the said guarantee document. If there were undisclosed accounts the guarantors liability be affected through them and that is an issue that can be determined in this proceedings. So the proposed amendment seeking claims on alleged undisclosed accounts of the 4th Defendant can be allowed, subject to a cost as it has taken a long time from the statement of claim.

100. CONCLUSION
     

22. In the circumstances the amendments sought in paragraphs 42A, 42B, 42C and 42E of the said proposed amended statement of defence is allowed. Considering the long delay in bringing this amendment at the time it had concluded all the pre trial stages and the delay that would be inevitable due to said amendment I will order a cost of $2000 to be paid by the 1st and 3rd Defendants to the Plaintiff within 14 days.

The Court Orders as follows:

1. The amendments proposed in the paragraphs 42A, 42B, 42C and 42E of the said proposed amended statement of defence is allowed.
   
2. The amendment sought in the paragraph 42D is disallowed.
   

100. The 1st and 3rd Defendants to file and serve the amended statement of Defence within 14 days.
     

4. The 1st and 3rd Defendants to pay a cost of $2000 to the Plaintiff within 14 days.
   

Dated at Suva this 6th Day of September, 2011.

Mr D. Amaratunga
Acting Master of the High Court
Suva