Nair v Westpac Banking Corporation [2011] FJHC 686; HBC236.2010 (4 October 2011)

IN THE HIGH COURT OF FIJI ISLANDS
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBC 236 of 2010

BETWEEN:

SHALENDRA NAIR & LALITA NAIR
Plaintiffs

AND:

WESTPAC BANKING CORPORATION
1st Defendant

CHANDAN PRASAD
2nd Defendant

Counsel: Plaintiffs in Person.
Ms. R. Lal for the 1st Defendant.
2nd Defendant in Person

Date of Judgment: 4th October, 2011

JUDGMENT

1. The plaintiffs filed originating summons seeking following relief:
   
   1. The defendant be restrained from selling, disrupting or in any dealing with the said property until the hearing of and determination of the case; and
      
   2. That the purported sale by the defendants be nullified on the ground of fraud and misrepresentation.
      
2. In support of the summons, an affidavit was filed by the 1st named plaintiff. According to the affidavit the 1st named plaintiff bought the property at lot 17 in Sydney Street Verata, Nausori, obtained a loan from the Housing Authority and built a house.
   
3. Thereafter, the plaintiffs applied to refinance $50,000.00 from the 1st defendant and $ 77,000.00 was approved for a monthly payment of $ 525.00. It is deposed that the bank has increased the monthly payment to $ 824.00.
   
4. The plaintiffs admit that they have six months arrears with the 1st defendant bank.
   
5. Subsequently, the 1st defendant advertised the property for sale due to the non payment of instalments by the plaintiffs.
   
6. In response to the plaintiff's affidavit, an affidavit was filed by Amelia Sawau, the Manager Consumer Credit Control of the 1st defendant.
   

The facts of the affidavit can be summarised as follows

7. The plaintiffs were the registered proprietors of CT 30575 being lot 17 on the deposited plan No 126. A true copy of the title marked as 'A' is annexed to the affidavit. On or about 30th September 2004 the 1st defendant offered to lend the sum of $ 65,000.00 to the plaintiffs and the offer was accepted by the plaintiffs on various terms and conditions.
   
8. Subsequently the offer was varied increasing the amount to $77,000.00 which was also accepted by the plaintiffs. The security for the loan was a first registered mortgage over the plaintiff's property being CT 30575 and a Bill of Sale over a motor vehicle.
   
9. The loan repayments were initially $ 640.00 per month but were increased to $ 865.00 per month. It was also informed to the plaintiffs and accepted by them.
   
10. The plaintiffs failed to make payments due. The 1st defendant reminded the plaintiffs to clear the arrears but the plaintiffs failed to do so. Subsequently, the 1st defendant made demand against the plaintiffs for the debt.
    
11. The property was advertised on 31.01.2009, 06.02.2009 and 14.02.2009. However, in the meantime, the plaintiffs managed to settle the arrears in full but on or about 18.08.2009, the plaintiffs again fell into arrears and as a result, the 1st defendant notified the plaintiff that it would commence mortgagee sale proceedings again.
    
12. The property was advertised again and the 1st defendant had accepted the offer made by the 2nd defendant for a sum of $ 70,000.00 and as a result the 1st defendant transferred the property via mortgage sale to the 2nd defendant.
    
13. Settlement took place on 10th of June 2010, and the transfer was lodged with the office of the Registrar of Titles. A copy of the lodgement slip marked as 'AS 14' was annexed to the affidavit.
    
14. The plaintiff in his affidavit in reply, stated that the procedure of arriving at the tender by the 1st defendant was contrary to the bank policy and the 1st defendant further punished the plaintiff by colluding with the second defendant in offering the tender.
    
15. While this action was pending the plaintiffs filed an inter-partes notice of motion seeking a restraining order against the 2nd defendant and court granted the same, pending the determination of the originating summons matter.
    
16. In this matter, the 1st defendant is the mortgagee. The plaintiffs, although filed 2 affidavits, have failed to disclose a cause of action against the defendants. The plaintiffs admit that they were in arrears for six months with the bank. The relief sought by the plaintiffs in their originating summons are of injunctive nature.
    
17. Therefore, it is incumbent on the plaintiff to satisfy the court that an irreparable and irremediable damage would cause to them if orders were not granted in terms of the summons.
    
18. The principles to be followed in considering the granting of injunctions are set out in the leading case of American Cyanamid Co. v. Ethicon Ltd (1975) 1 ALL ER 509
19. The 3 matters to which the court must address itself in respect of the present application are, per American Cyanamid:
    
    1. Is there a serious question to be tried
       
    2. Is the damage an adequate remedy
       
    3. If not, where does the balance of convenience lie
       
20. The House of Lords decided that in all cases, the court must determine the matter on a balance of convenience.
    

In that case Lord Diplock stated the object of the interlocutory injunction as follows:

"..The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The court must weigh one need against another and determine where the balance of convenience lies.

21. In Hubbard & Another v. Vosper & another (1972) 2 WLR 389 Lord Denning gave some important guidelines on the principles for granting an injunction, where he said:
    

"In considering whether to grant an interlocutory injunction, the right course for a judge is to look at the whole case. He must regard not only to the strength of the claim but also to the strength of the defence, and then, decide what is best to be done. Sometimes it is best to grant an injunction so as to maintain the status quo until the trial. At other times, it is best not to impose a restrain upon the defendant, but leave him free to go ahead. For instance, in Fraser v. Evans (1969) 1 QB 349, although the plaintiff owned the copyright, we did not grant an injunction, because the defendant might have a defence of fair dealing. The remedy by interlocutory injunction is so useful that it should be kept flexible and discretionary. It must not be made the subject of strict rule."

22. In Hounslow London Borough Council v. Twickenham Garden Development [1971] Ch 233 Megary J stated as follows:
    

"Equity will not assist a man to break his contract. Here, the Borough is in effect, saying to the court, you should grant an injunction to evict the contractor even if in so doing, you would be helping me to break my contract. I do not think it does not matter whether or not he is breaking his contract than one is avowedly doing so."

23. I consider the main issues of this application in the light of above legal principles.
    
24. Here the question of paramount importance is whether in the circumstances of this case the court should injunct the 1st defendant which is the mortgagee from selling the land. Further, the 2nd defendant is the purchaser under the mortgage sale. What the plaintiffs ask the court is to restrain the 2nd defendant also from entering the property and interfering with the plaintiff's possession.
    
25. The question regarding restraining a mortgagee from selling a property is stated in Halsbury's Laws of England 4th edition Volume 32 at paragraph 725 as follows:
    

'The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute or mortgagee objects to the manner in which the sale is being arranged. He will be restrained however if the mortgagor pays the amount which the mortgagee claims is due to him.'

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

"A general rule has long been established, in relation to applications to restrain the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid, or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into Court.

The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury Laws of England 3rd Edition Volume 27, page 301:

The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained however, if the mortgagor pays the amount claimed into court, that is, the amount which the mortgagee swears to be due to him..."

In my opinion, the authorities, which I have been able to examine establish that for the purposes, of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has been actually paid, the court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due.

The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed.

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

27. Barwick C.J. ibid at 168-169 expressed the same opinion in these words:
    

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

The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgagee instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's right under the mortgage.

28. It was held in Property and Bloodstock Ltd v. Emerton (1968) 1 Ch. 94, that the entry into a contract for sale, by a mortgagee exercising a power of sale, whether conditional or unconditional, extinguish the mortgagors right of redemption so long as the contract was still subsisting.
    
29. In this matter the plaintiff has asked an injunctive relief to restrain the 1st defendant from exercising his lawful right as a mortgagee to recover the loan, but the mortgage property has already been sold to the 2nd defendant.
    
30. The plaintiffs further seek to get the mortgage sale nullified on the ground of fraud and misrepresentation.
    
31. Order 5 rule 2 (b) of the High Court Rules reads:
    

2. subject to any provisions of an Act, or of these Rules, by virtue of which any proceedings are expressly required to be begun otherwise than by writ, the following proceedings must, notwithstanding anything in rule 4, be begun by writ; that is to say, proceedings-

(a). In which a claim made by the plaintiff is based on an allegation of fraud; ......

32. It must be emphasised that if an action is based on fraud, it has to be instituted by way of writ of summons. The plaintiffs have commenced this action by way of originating summons, which shows that the procedure followed by the plaintiffs in instituting this action itself is wrong in law and cannot be maintained.
    
33. The affidavit evidence and the documents before me clearly evince that the 1st defendant is the mortgagee of the property. The plaintiff admits that his account was in arrears. The document 'AS 7' clearly shows that the 1st defendant was duly informed by the 1st defendant to clear the arrears.
    
34. The annexure 'AS 8' and 'AS 11' are the copies of demand notices sent by the 1st defendant to the plaintiffs. The document 'AS 14' shows that the property was transferred via mortgage sale to the 2nd defendant and the transfer was lodged with the office of the registrar of Titles.
    
35. Therefore, it is evident that the 1st defendant as a mortgagee had exercised its rights under the mortgage to recover the loan.
    
36. In this case there is a relationship of mortgagor (plaintiffs) and mortgagee (1st defendant). The plaintiffs fell into arrears under the mortgage and the mortgagee is clearly entitled to exercise its powers of sale when there has been a continuous default in payment on the part of the plaintiffs under the mortgage.
    
37. Although the plaintiffs in their originating summons prayed that the sale by the defendants be nullified on the ground of fraud and misrepresentation, the plaintiffs have failed to substantiate the said allegation and no evidence was tendered to that effect.
    
38. Upon consideration the above, I conclude that no fraud or misrepresentation occurred when the property was transferred to the 2nd defendant by the 1st defendant, and hence there is no serious question to be tried.
    

Adequacy of damages as a remedy for the plaintiff

39. In an application of this nature it is incumbent on the plaintiff to show that damages will not be an adequate remedy. In this action the subject matter is a land which can be valued. Hence, damages can be assessed and damages would be an adequate remedy.
    
40. Furthermore, the plaintiff has not given any undertaking as to damages nor he produced any reliable evidence to prove that he has adequate means to pay damages if the 1st defendant succeeded.
    
41. The requirement of giving an undertaking as to damages has been stressed in following authorities:
    

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

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

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

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

42. On the above premise, I conclude that the plaintiffs have shown no cause of action against the defendants and therefore, the plaintiffs cannot maintain this action against the defendants.
    
43. For the above reasons I make following orders:
    
    1. The plaintiffs originating summons is dismissed.
       
    2. The restraining order granted on 15.10.2010 is also dissolved.
       
    3. Cost is summarily assessed in the sum of $ 300.00
       

Pradeep Hettiarachchi
JUDGE

04.10.11