Vasuturaga v Vuruya [2011] FJHC 721; HBC213.2011 (10 November 2011)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC 213 of 2011

BETWEEN:

APISAI VASUTURAGA, of 16 Vunakece Road, Namadi Heights, Suva, Customs Officer.
PLAINTIFF

AND:

MANUELI VURUYA, of Vunisea, Kadavu, Businessman.
DEFENDANT

BEFORE: Master Deepthi Amaratunga

COUNSEL: Mr. Lajendra of Lajendra Law for the Plaintiff
Mr. Valitabua of Gordon & Chaudhry Lawyers for the Defendant

Date of Hearing: 28th October, 2011
Date of Ruling: 10th November, 2011

RULING

1. INTRODUCTION
   

1. This is a summons filed by the Plaintiff for vacant possession of the premises described in the summons in terms of Section 169 of the Land Transfer Act. The Plaintiff has obtained the transfer in pursuant to a mortgagee sale. The Defendants were the mortgagors, who had defaulted on the mortgage that resulted the mortgagee sale. The Defendants are alleging collusion and corruption on the said mortgagee sale. The main allegation is that the property was sold to an undervalued price and also relies on a letter issued by the bank which allowed the Defendants to redeem the mortgage any time before the transfer of the property. The Defendant allege that on the same day of the said letter a letter was dispatched by the Bank to the Plaintiff making an offer for the said land and the said offer was also accepted by the Plaintiff subsequently . The contention of the Defendant was that they were not given sufficient time to redeem the mortgage. No effort was made by the Defendant to redeem and there is no evidence of any request for redeeming the mortgage. There is no evidence of any collusion between the Plaintiff and the Bank, and the Defendant relies entirely, on the same date appearing on the said two letters that were sent by the Bank to the Plaintiff and to the Defendant, and that cannot be accepted as an act of collusion. Though the Defendant was also informed of the said offer price which the Plaintiff paid at the end and the intended settlement with the Plaintiff, the Defendant has not made any effort to redeem the mortgage, and the Plaintiff obtained the transfer. The Plaintiff has also obtained a mortgage from another financial institute to purchase this property and suffers from continuing loss of income from this property due to continuance of the possession of the Defendant.
   

2. FACTS
   

2. The Plaintiff obtained the transfer in pursuant to a mortgagee sale from the mortgagee Bank and he had also obtained a loan mortgaging this property to another financial institute to purchase this property from the mortgagee sale.
   
3. The Defendants were the mortgagors under Fiji Development Bank (ex-mortgagee) and they have defaulted the said mortgage and a mortgagee sale was conducted and the Plaintiff purchased the property from that.
   
4. On 9th February,2010 a letter was sent by the 'Manager Tender' of the Bank, to the Defendant, which is annexed as TV 3 to the affidavit in opposition filed by the Defendant under the heading 'SUB: SALE OF PROPERTY ON PRIVATE SALE –CL44020, LD 4/5/32 LOT 2 DP4028, BIANA NO 2' which stated that 'In order to retain ownership of your property you may exercise your equitable right of redemption by paying the total debt outstanding at any time before settlement is effected.'
   
5. The same letter also states as follows
   

'We hereby advise that we have received an offer in the sum of $150,000 for the purchase of your property comprised in CL 445020, LD 4/5/32, Lot 2 on DP 4028 Biana No 2, Tvuki, Kadavu.'

6. On the same day a letter was written by the same person address to the Plaintiff which is marked TV 3 to the affidavit in opposition (there are two documents in TV 3) which was under the heading 'Re: PRIVATE SALE- PURCHSE OF CL445020,LD 4/5/32, LOT 2 DP 4028 BIANA NO2' and the offer price in the said letter was $150,000 and the 4th condition contained in the said offer is as follows
   

'4. Sale will be subject to dissolution of any Court Order that may be obtained by the present owner or any other party restraining the Bank from selling the property or upon the removal of any caveat that may be registered on the said property and the mortgagor's right to redeem the mortgage at any time before the settlement.'

7. The Defendant did not make any effort to redeem the property as per the letter dated 9th February, 2010 but state that they were not granted sufficient time for redemption as a letter of offer to the Plaintiff was also sent on the same day.
   
8. The Defendant has filed an action against the said ex-mortgagee Fiji Development Bank, on 27th April, 2011 and after the filing of the statement of defence the Plaintiff has sought to add the Defendant for that action as the 2nd Defendant on 11th July, 2011 and the ruling on this matter is pending.
   

100. LAW & ANALYSIS
     

9. The Plaintiff is the last registered proprietor according to the certificate of title and he has obtained the transfer on 31st December, 2010.
   
10. Since the ownership is undisputably with the Plaintiff according to the title the burden is shifted to the Defendant to prove a right to remain in the property.
    
11. Section 172 of the Land Transfer Act states that "if a person summoned appears he may show cause why he refuses to give possession of such land and, if he proves to the satisfaction of the judge a right to the possession of the land, the Judge shall dismiss the summons with costs against the proprietor and he may make any order and impose any terms he may think fit provided that the dismissal of the summons shall not prejudice the right of the plaintiff to take any other proceedings against the persons summoned to which he may be otherwise entitled." The burden is shifted to the Defendant to satisfy the court that she has a right to possession of the land in dispute. In Morris Hedstrom Limited – v – Liaquat Ali CA No: 153/87, the Supreme Court of Fiji described the scope of the said provision.
    
12. In the case of Morris Hedstrom Limited –v- Liaquat Ali CA No: 153/87, the Supreme Court said that:-
    

"Under Section 172 the person summonsed may show cause why he refused to give possession of the land if he proves to the satisfaction of the Judge a right to possession or can establish an arguable defence the application will be dismissed with costs in his favour. The Defendants must show on affidavit evidence some right to possession which would preclude the granting of an order for possession under Section 169 procedure. That is not to say that final or incontrovertible proof of a right to remain in possession must be adduced. What is required is that some tangible evidence establishing a right or supporting an arguable case for such a right must be adduced."

13. The Defendant has filed an action against the previous mortgagee namely Fiji Development Bank and has also made an application for addition of Plaintiff as a 2ndDefendnat in that action.
    
14. In Santa Wati et al v Ambika Prasad Civil Action No 44 of 1992 decided on 28th April 1995 Justice Pathik held that another proceeding before the Court would not in itself be a ground to resist eviction and whether the Plaintiff is added to the said action or not the position would not change, because of that. Justice Pathik held in that case as follows
    

'The fact that there are other proceedings before the Court is not in itself a ground to resist the S 169 summons for one has to look at each case on its own facts. It is a matter entirely in the discretion of the Court. In Shyam Lal v Erick Martin Schultz 18 FLR FCA p 152 Gould VP said

"That I am in sympathy with the proposition that complicated question of fact (particularly where there are allegations of Fraud) cannot adequately be investigated and dealt with on a summary proceedings in Chambers. The present case, however, involved initially no contested relevant fact and the Learned Judge in my opinion rightly entertained and dealt with it."(emphasis is added)

15. So, it is clear that merely because fraud is alleged against the ex-mortgagee and the Plaintiff is not a ground for me to dismiss this summary application for possession. If this is held otherwise a person can resort to a bare allegation of fraud with flimsiest reason or even without a reason and that can have serious consequences on the Torrens system where the indefeasibility of the title is paramount where the exception to that indefeasibility is the fraud. The Plaintiff as well as Defendant were informed on the same day about the intended mortgagee sale with the price of the offer by the mortgagee and this cannot be considered a fraud and by sending those two letters on the same day the mortgagor has in fact provided both parties with all relevant information at the same time, which can be considered as equal treatment and this cannot be an act of fraud.
    
16. Though collusion and fraud was alleged the letter dated 9th February, 2011 state 'We hereby advise that we have received an offer in the sum of $150,000' and this clearly gives an indication of the situation regarding the mortgagee sale including the sale price. Would anybody who act in collusive manner and intends to indulge fraud would divulge the sale price to the mortgagor, even before it was offered and accepted by the Plaintiff? The answer is obviously be in negative and the simultaneous dispatching of the offer letter to the Plaintiff also reveals that both the Plaintiff and the Defendants were treated equally and the transaction was done in a transparent way, though it was a private sale. The Fiji Development Bank would have done so in order to refute any allegation of fraud, since it was a private sale. Private sales are not prohibited in mortgagee sales and it was held in Waring (Lord) v London and Manchester Assurance Company Limited and others [1935] 1Ch 310 at p 317 by Crossman J and stated that public auctioning and private sale are two options that the mortgagee can exercise. It should also be noted that it is common knowledge that in mortgagee sales the bidders are aware of the urgency of the sale and consideration is recovery of the debt to the financial institution, and low prices are bidded under such environment. In such a mortgagee sale priority is given to obtain quick sale over the best price that can be obtained in a private sale.
    
17. In the circumstances if the Defendant had another buyer for a higher price he could have informed the Fiji Development Bank, or intended to redeem he could have done so before the settlement. There is no evidence of even an effort being made to redeem the property and there was no correspondence between the Defendant and the said mortgagee after 9th February, 2010 regarding the said sale to the Plaintiff. The mortgagee has done more than he was required by indicating the sale price and the Defendant had sufficient notice of the sale including the sale price. So, now the Defendant cannot allege any fraud or collusion and expect the court to prevent the successful purchaser from obtaining possession of this premises.
    
18. Section 39 and 40 of the Land Transfer Act deals with the indefeasibility of the title and states as follows
    

Estate of registered proprietor paramount, and his title guaranteed

39.-(1) Notwithstanding the existence in any other person of any estate or interest, whether derived by grant from the Crown or otherwise, which but for this Act might be held to be paramount or to have priority, the registered proprietor of any land subject to the provisions of this Act, or of any estate or interest therein, shall, except in case of fraud, hold the same subject to such encumbrances as may be notified on the folium of the register, constituted by the instrument of title thereto, but absolutely free from all other encumbrances whatsoever except-

(a) the estate or interest of a proprietor claiming the same land, estate or interest under a prior instrument of title registered under the provisions of this Act; and

(b) so far as regards any portion of land that may by wrong description or parcels or of boundaries be erroneously included in the instrument of title of the registered proprietor not being a purchaser or mortgagee for value or deriving title from a purchaser or mortgagee for value; and

(c) any reservations, exceptions, conditions and powers contained in the original grant.

(2) Subject to the provisions of Part XIII, no estate or interest in any land subject to the provisions of this Act shall be acquired by possession or user adversely to or in derogation of the title of any person registered as the proprietor of any estate or interest in such land under the provisions of this Act.

Purchaser not affected by notice

40. Except in the case of fraud, no person contracting or dealing with or taking or proposing to take a transfer from the proprietor of any estate or interest in land subject to the provisions of this Act shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such proprietor or in any previous proprietor of such estate or interest is or was registered, onto see to the application of the purchase money or any part thereof, or shall be affected by notice, direct or constructive, of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding, and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.

19. In Waring (Lord) v London and Manchester Assurance Company Limited and others [1935] 1Ch 310 at p 317 Crossman J held
    

'In my judgment, s 101 of that Act, which gives to a mortgagee power to sell the mortgaged property, is perfectly clear, and means that the mortgagee has power to sell out and out, by private contract or by auction, and subsequently to complete by conveyance; and the power to sell is, I think, a power by selling to bind the mortgagor. If that were not so, the extraordinary result would follow ....'

At page 319 cited the case of Warner v Jacob [1882] UKLawRpCh 61; 20 Ch. D. 220,224 and stated as follows

'The law, as stated by Kay J in Warner v Jacob is perfectly clear. The learned judge there says power of sale. It is a power given to him for his own benefit it bona fide for that purpose, without corruption or collusion with the purchaser, the Court will not interfere even though the sale by very disadvantageous, unless indeed the price is so low as in itself to be evidence of fraud." In my judgment it is impossible on the facts of this case to conclude that the price is so low as in itself to be evidence of fraud. It is true that there is some suggestion that the Yorkshire Company is willing to advance on mortgage an amount larger than that of the purchase money, which implies, presumably, that the value which the Yorkshire Company puts upon the property must also be considerably larger. I do not consider, however, that that in itself is evidence of fraud. In my judgment there must be something far beyond the mere fact of under –value.'

20. The Fiji Development Bank has informed about the offer price to the Defendant on 9th February, 2010 and the transfer of the property was effected only on 31st December, 2010 and if the offer price was so low the owner would have lodged a caveat on the property to secure it. There is no correspondence of even of an allegation of fraud or collusion to the Fiji Development Bank, till they finalized the sale though the Defendants were given notice of the said transfer for more than 9 months. So, it is clear that the price Plaintiff paid was the best price that was obtainable at that time, though it was estimated at a higher value. It is also noteworthy that the valuation of any fixed asset is only a guide and cannot be conclusive as to the market value of the same property. The sale to the Plaintiff though lower than the valuations that were obtained, cannot be considered as so low as to impute fraud for the reasons given above.
    
21. In the said case of Waring (Lord) v London and Manchester Assurance Company Limited and others [1935] 1Ch 310 at p 317 there were evidence of another company who were willing to advance a higher amount to the mortgagor than the sale price of the mortgagee sale, but Crossman J held that itself is not a sufficient ground even to grant an injunction stalling the proceeding of the mortgagee sale, which was for a lower amount, that the mortgagor was able to pay to the mortgagee, if the right of redemption was granted to the Plaintiff in that case. In that case there was evidence of another financial institution that was willing to provide a higher mortgage to the Plaintiff in that case, in fact the mortgagee would have obtained a higher amount if that deal was allowed stalling the mortgagee sale of that case, but the court did not grant the injunction to stop the mortgagee sale to the lower amount. So, it is clear that if the ratio of that judgment is to be considered, the case before me the Plaintiff should not be prevented from obtaining possession since he has already obtained an indefeasible title. A mere allegation of fraud will not affect the indefeasibility of the Plaintiff.
    
22. In Property & Bloodstock Ltd v Emerton [1968] 1Ch 94 Danckwerts L.J at p 114 held
    

'Mr. Price contended that that case (Waring (Lord) v London and Manchester Assurance Company Limited and others) was wrongly decided and that we should overrule it. The decision has stood for 32 years without (so far as I know) any criticism. This I would suppose is a discouraging start for Mr. Price's arguments, but Mr. Price is certainly entitled to distinguish the case from the present one.'

23. The above passage of Danckwerts L.J shows the authority that the said judgment in Waring (Lord) v London had regarding the mortgagee sale and I could not find any authority that had criticized the ratio of the said case though nearly 80 years have passed and its validity in Fiji is equally recognized as Fiji Court of Appeal has also referred to the said judgment in Vere V NBF Asset Managements Bank [2004] FJCA 50 ABU0069.2003s(11 November 2004)
    
24. In Property & Bloodstock Ltd v Emerton [1968] 1Ch 94 Danckwerts L.J at p 113 it was further held
    

'It is difficult to think of wider powers that could be conferred on a person having power to sell, and it has been held that the mortgagee is not a trustee in respect of his powers of sale for the borrower, and even a sale at an undervalue cannot be impeached if the mortgagee is not acting in bad faith. Successful attacks upon the exercise by a mortgagee of his power of sale have been very rare indeed."

25. No bad faith can be imputed to Fiji Development Bank on the available evidence. It is clear from the evidence that is submitted by the Defendant the said bank has given more than 9 months notice to the Defendant of their intention of the sale of the property which also included the offer price clearly excluding any bad faith. The Defendants have not even requested for a higher price though they had in their possession higher valuations at that time, clearly indicating that the price offered by the Plaintiff was the best price obtainable at that time, though the valuations were higher than this price.
    
26. It is to be noted that above cases ( Waring (Lord) v London and Manchester Assurance Company Limited and others and Property & Bloodstock Ltd v Emerton) were decided before the execution of the transfer on applications for injunctive relief, but the courts in England has held unequivocally the power of the mortgagor the deviation form that position is done rarely. So this clearly strengthens and infers the indefeasibility of the title to the purchaser from the mortgagee sale. The mortgagee sale need not be an Public auction and the mortgagor is free to obtain private sales and the mere fact it was a private sale would not indicate any fraudulent act. The Plaintiff in this case obtained the transfer only on 31st December, 2010. The Defendant was informed of the sale price and he was granted time 'till the settlement' but failed even to respond to the said letter dated 9th February, 2010 which granted the right of redemption. So, it is clear that mere allegation of fraud and or collusion and or corruption was only another method to delay the possession to the Plaintiff. The Plaintiff was also informed of the right of the redemption that was granted to the Defendant by the letter dated 9th February, 2010 that was sent to him. So, the Fiji Development Bank has not concealed any material fact from both parties and has been very forthright in this sale, though it was a private sale. The indication of the sale price to the Defendant in the month of February clearly shows the transparency of their offer to the Plaintiff and the Defendant was not kept in dark about the intended sale including the intended sale price.
    

4. CONCLUSION
   

27. The Plaintiff is the last registered proprietor and has established that he has a right to eject the Defendant and or its servants and or licencees. The Defendants were unable to show any recognizable right to remain in the possession. The mere allegation of fraud is not sufficient to prevent the Plaintiff from obtaining possession. The Plaintiff is granted the possession to the property described in the certificate of title that he has an end to this application. The Plaintiff is also granted a cost of $1000 assessed summarily to be paid within 21 days.
    

5. FINAL ORDERS
   

1. The Plaintiff is granted the vacant possession as indicted in the summons.
   
2. The Plaintiff is also granted a cost of $1000 and the Defendant is ordered to pay the said amount in 21 days.
   

Dated at Suva this 10th day of October, 2011.

Mr. Deepthi Amaratunga
Master of the High Court
Suva