Australia and New Zealand Banking Group Ltd v Palu [2011] FJHC 608; Civil Action161.2011 (29 September 2011)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. 161 of 2011

IN THE MATTER of Mortgage Number 553274given by
MACIU TAMANI PALU in favour of
Australian and New Zealand Banking Group Limited
over property being Certificate of Title No. 23233 being Lot 23 on DP. No. 5070.

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
a duly constituted Banking Corporation having its registered office in Melbourne, Australia and carrying on business in Suva and having branches throughout Fiji.
PLAINTIFF

AND:

MACIU TAMANI PALU aka MACIU TAMANIBOLA PALU
of Lot 23, Maqbool Road, Nadera, Nasinu, in the Republic of Fiji.
DEFENDANT

BEFORE: MASTER DEEPTHI AMARATUNGA
COUNSEL: Ms B. Narayan for the Plaintiff
The Defendant in person

DATE OF HEARING: 22nd August, 2011
DATE OF RULING: 29th September, 2011

RULING

1. INTRODUCTION
   

1. The Plaintiff has filed this application by way of originating summons in terms of under Order 88 of the High Court Rules of 1988 and also Section 109 of the Land Transfer Act, for vacant possession and for removal of caveat that was placed on it by the Defendant. The Defendant's main contention is that he has demolished a substantial building on the premises on alleged request of the Plaintiff, and has sought damages in another civil action filed, where his request to stay the Plaintiff from proceeding with the mortgagee sale was refused. Defendant state that status quo should be maintained till the determination of alleged appeal. There is no appeal at the moment of this hearing and there is only an application for extension of time for the appeal against the order of the court refusing the injunctive relief sought.
   
2. 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.

The Defendant admitted the fact of signing the mortgage and no allegations of duress or fraud are being made against the Plaintiff regarding the execution of the said mortgage that is attached to the affidavit in support.

3. The procedure under Order 88 was stated in case of National Bank of Fiji –v- Abdul 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".

4. 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."

5. 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.
   
6. Mortgage No. 553274 that was entered between the Plaintiff and the Defendants reads as follows;
   

"Effect of legislation

Legislation that imposes an obligation on mortgagers, or gives rights or protects to mortgagees, is part of this mortgage unless it is inconsistent with something else in this mortgage.

However, legislation (and anything done under legislation), to the extent that it might limit ANZ's rights under this mortgage, will not apply unless a law says that a mortgage or agreement cannot stop it from applying.

Mortgage provisions implied in this mortgage by section 68 of the Property Law Act shall not apply to the extent they limit the ANZ's rights under this mortgage."

So the clauses of the mortgage instrument has to be read in conjunction with the relevant statutory law.

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]

7. Inglis and another –v- The Commonwealth Trading Bank of Australia126 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 an 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 is paramount to enable viable commercial environment in the world of commerce. If a party who is claiming damages is successful in the end, it can always claim the award of damage granted by the court this should not be a reason for staying or refusing the rights of the mortgagee to sell and recover money for the mortgaged property. This is a well established principle and this has weathered the test of time and it is more appropriate in a global recession that has been predicted by financial institutions including IMF. A financial institution when it lends money secures it against some security and that is to insure its risk against a defaulting customer and if the security is a property it should not be considered differently from other securities as to the form of recovery of debt in a default. Having a considerable bad debt is not healthy for a financial institute and specially when there is a security (as in a mortgage) it should be recoverable and a filing of a damages suit against the Plaintiff should not prevent any exercise of Plaintiff's right to recover the debt due to the default of the Defendant by proceeding with the mortgagee sale and for recovery of the possession of the property to finalize the transfer of the property to enable the Defendant to recover the maximum amount of money possible and any order to the contrary would eventually lead a financial institute saddled with a property which is less liquid compared to money, which they need for their existence.

8. 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 as 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.

9. 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 an agreement and has signed the said written offer, thus making it a written agreement between the Plaintiff and the prospective buyer. The caveat placed on the property is preventing the actual transfer.
   
10. 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."

11. 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 Jai Chand the Manager of the Asset Management Unit, sworn on 27th May, 2011 that a copy of the Default Notice was annexed as 'c' to the said affidavit.
    
12. Though the relevant paragraph (paragraph 8) regarding the service of the notice in the affidavit in support is not admitted the averments states in response to the said notice does not state why he did not receive it, instead the response does not indicate non receipt of the notice, but rather deals with the contents of the said default notice indicating that it was received and the issue was regarding the contents. Even the submissions of the Defendant did not indicate that the default notice was not received by the Defendant and in the circumstances the averments contained in the paragraph 8 of the Plaintiff's affidavit in support can be accepted
    
13. 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".

14. The Defendant did not state that he did not receive the default notice, instead he state that he knowingly allowed the mortgagee sale and also demolished a building on the property to facilitate the said sale.
    
15. In paragraph 12 of his affidavit in opposition the Defendant has stated that:
    

'I do not agree with paragraph 9 of the Plaintiff's Affidavit and further state that due to discrepancy in my account it was very difficult for me to response to any Demand Notices.'

Upon the service of the notice the Defendant has filed an action for damages and for an injunctive relief against the Plaintiff and in the said affidavit in support at paragraph 19 the Plaintiff has admitted that he defaulted payments of the loan for six months.

16. 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....."

17. 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 Ch94 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.
    
18. 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.
    
19. In paragraph 15 of the affidavit in support of Jai Chand, state as follows:
    

'.....The Plaintiff has accepted a tender on the property and has entered into a written agreement dated 16/03/11 with the successful tenderer, one Sakiusa Kete...'

The said sale and agreement is also annexed to the affidavit in support of Jai Chand marked as 'F'.

20. In the case Inglis and another –v- The Commonwealth Trading Bank of Australia126 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]

21. In the circumstances the contention of the Defendant that application under Order 88 should not proceed because of his pending Civil Action 349 of 2010 against the Plaintiff Bank for damages cannot be accepted. The other argument that has been forwarded by the Defendant is his appeal to the Court of Appeal from the refusal of the injunctive relief. The said appeal is out of time and the Defendant has to obtain the leave of the court to submit an appeal to Court of Appeal outside the time period specified in law and that has not been granted. So, there is no appeal at the moment of hearing of this application and what is before the court is only a request for extension of time period for lodgment of appeal. It is clear that under the circumstance Defendant's contention cannot be accepted, to refuse the Plaintiff's request for possession.
    

The Removal of Caveat

22. The Defendant has lodged an caveat and the Plaintiff is also seeking for a removal of that caveat in terms of Section 109(2) of the Land Transfer Act which reads as follows:
    

'(2) Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, by summons, call upon the caveator to attend before the court to show cause why the caveat should not be removed, and the court on proof of service of the summons on the caveator or upon the person on whose behalf the caveat has been lodged and upon such evidence as the court may require, may make such order in the premises, either ex parte or otherwise as to the court seems just, and, where any question of right or title requires to be determined, the proceedings shall be followed as nearly as may be in conformity with the rules of court in relation to civil causes.

23. The Plaintiff has exercised its option of not making an application to the Registrar in terms of Section 110 of Land Transfer Act .The affidavit of service was filed on 15th June, 2011 and that clearly indicate that the originating summons along with the supporting affidavit was served on the Defendant. The originating summons clearly indicate the request for the removal of the cavet as well.
    
24. It is to be noted that caveat is lodged in terms of Section 106 of the Land Transfer Act which states as follows:
    

"106. Any person-

(a) claiming to be entitled or to be beneficially interested in any land subject to the provisions of this Act, or any estate or interest therein, by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise howsoever; or

(b) transferring any land subject to the provisions of this Act, or any estate or interest therein, to any other person to be held in trust,

may at any time lodge with the Registrar a caveat in the prescribed form, forbidding the registration of any person as transferee or proprietor of, and of any instrument affecting, such estate or interest either absolutely or unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat."

In FNPF v Vivrass Hldgs Ltd [2004] FJHC 18 it was held:

'Under the Torrens system, a caveatable interest amounts to a proprietary interest in land. In Municipal District of Concord v Coles [1905] HCA 35; (1906) 3 CLR 96, Griffiths CJ said at p 107:

"it is only a person who has a legal or equitable interest in land, partaking of the character of an estate in it or equitable claim to it. Who can lodge a caveat?"

This is further elaborated in the case of Guardian Trust and Executors Co of NZ Ltd v Hall [1938] NZLR 1020 at 1025:

'A caveat is the creature of statute and may be lodge only by a person upon whom a right to lodge it has been conferred by the statute. It is not enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the Caveator. He must bring himself within s.146 of the Land Transfer Act.'

25. So, it is clear that the factors to be considered in the lodgment of the caveat is different from the factors to be considered in the removal of the caveat. It was held in the case of Guardian Trust and Executors Co. of NZ Ltd v Hall [1938] NZLR 1020 at 1025 that it is not enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the Caveator. He must bring himself within Section 106 of the Land Transfer Act which is equivalent to the New Zeland Section 146 that was quoted in the said judgment. So, the Defendant cannot claim the continuation of the caveat merely because he has instituted an action for damages against the Plaintiff where his request for injunctive relief was also rejected and the time for appeal has also lapsed. So at the moment there is a request for the extension of time that has to be determined by Court of Appeal.
    
26. In the case of Daniel Murray v Samuel Morgan HCAction 63 of 1996 decided on 7th August, 1997 where justice Pathik held:
    

'The right to lodge a caveat is a creature of statute and certain rights are conferred upon a person to lodge it. The provision relating to 'caveats' are contained on Part XVII of the Land Tranfer Act Cap 131. The caveator must bring himself within s 106 of the Act.'

27. In the said case justice Pathik further held:
    

'In any case, as stated by Mr. Yong, damages would be an adequate remedy for the Plaintiff should be succeed in his claim under the Writ in this action. .......

In conclusion, in the circumstance and on the facts of this case, the defendant, who is the registered proprietor of the property and who has a ready buyer for it should be free to sell his property free from encumbrances. The defendant has already been hampered in dealing with the property as a result of the said application before the Tribunal which dismissed the action. He has refused to vacate the property and now unlawfully persists in wanting to let the caveat remain...'

28. In the case before me the Plaintiff, though he is the owner of the land has mortgaged the land and interms of the mortgage, when he defaulted the loan the property was sold by mortgagee sale and the Defendant do not allege any fraud or duress and has allowed the mortgagee sale to proceed, but has lodged a caveat and has filed an action for damages against the Plaintiff Bank. So as Justice Pathik held in Daniel Murray v Samuel Morgan HC Action 63 of 1996 decided on 7th August, 1997, the damages would be the remedy if the Defendant succeeded in that action.
    
29. In Inglis and another –v- The Commonwealth Trading Bank of Australia126 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", and the rules of granting and removal of caveat and the grant or refusal of injunction being the same, the said judgment is clear that the Plaintiff's request for the removal of the caveat should be granted.

2. CONCLUSION
   

30. The Plaintiff is the mortgagee and has exercised its rights that derived from the mortgage. The Defendant admittedly defaulted the loan and he was fully aware of the mortgagee sale, and has allegedly demolished a building on the land to facilitate the mortgagee sale. The Defendant is claiming damages for the demolition of the building, which according to him was done at the instigation of the Plaintiff, in order to attract buyers and or to obtain a better price. The Plaintiff has already accepted an offer and has also signed a written agreement with the prospective buyer who tendered a successful tender at the mortgagee sale. In the circumstances the Plaintiff should not be prevented from proceeding with the mortgagee sale and in order to complete that the caveat placed by the Defendant should be removed with immediate effect and the order for vacant possession should also be granted to complete the said transaction. The Plaintiff is also granted cost of this application in the sum of $750 assessed summarily.
    

The Court Orders as follows:

1. The Caveat Placed on the property by the Defendant is removed immediately;
   
2. The Defendant is ordered to hand over the possession of the premises immediately without making any damages to the premises.
   

100. The Plaintiff is also granted the cost of this application assessed summarily at $750.
     

Dated at Suva this 29th Day of September, 2011.

.....................................
Mr D. Amaratunga
Master of the High Court
Suva