Chandra v Merchant Finance & Investment Co Ltd [2012] FJHC 1132; HBC96.2012 (25 May 2012)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

ACTION NO. 21 of 2012

BETWEEN:

JITESH NEIL CHANDRA of 31 Namena Road, Suva.
(Occupation: Clerk at Save the Children Fiji)
1st Plaintiff

HUNTS OF THE PARADISE a limited liability company having it registered office at 2nd Floor Harbour Front Building Usher Street, Suva.
2nd Plaintiff

AND:

QUEST SERVICED APARTMENT LIMITED
a limited liability company having its registered office at 1 Dominion House Thomson Street, Suva Central Building Renwick Road & Pratt Street, Suva.
3rd Plaintiff

AND :

HUNTS TRAVEL SERVICE LIMITED a limited liability
company having its registered office at 1 Dominion House Thomson Street, Suva.
4th Plaintiff

AND:

MERCHANT FINANCE & INVESTMENT COMPANY LIMITED
a duly registered company having its registered office at Level 9 Gorden Street, Suva.
Defendant

Before : Susantha N Balapatabendi, J
Counsel : Mr. A Singh for Plaintiff
Mr. S Lateef for Defendant

Date of Hearing: 12 April 2012
Date of Decision: 25 May 2012

DECISION

1. The 2nd to 4th Plaintiffs by their Notice of Motion dated 26 January 2012 sought injunctive relief to restrain the Defendant from pursuing the Sale of Vehicle Reg. No FM 250 and Vehicle Reg. LT 4764.
   
2. In support of the injunctive relief, 2nd to 4th Plaintiffs filed an Affidavit sworn by Rajnesh Pal dated 23 January 2012.
   
3. Court granted an interim injunction, inter partes, on 27 January 2012 and extended till 3 April 2012.
   
4. On 5 April 2012, 1st Plaintiff filed Summons for consolidation of actions and sought injunctive relief against Defendant in pursuing the Sale of property contained in certification of Title No. 10064.
   
5. The 1st Plaintiff filed Summons for consolidation of actions based on the fact that 1st Plaintiff was the mortgagor of the property contained in the Certificate of Title No: CT 10064.
   
6. Summons for consolidation was numbered as 96 of 2012 and supported by an affidavit of the 1st Plaintiff, Jitesh Neil Chandra sworn on 5 April 2012.
   
7. This Court on, 10 April 2012 permitted the consolidation of actions and extended the interim injunctions.
   
8. On behalf of the Defendant, two affidavits in oppositions were filed. Both affidavits were sworn by Napolioni Balimula, General Manager of the Defendant sworn on 2 February 2012 and 11 April 2012, respectively.
   
9. The Defendant has repossessed the Vehicle Reg. No. FM 250 and issued Demand Notice for the Sale of Property C.T 10004, both are securities for the Loan Agreements with Defendant by the 2nd and 3rd Plaintiffs.
   
10. The Plaintiffs, their Directors, guarantors and 1st Plaintiff as a 3rd party mortgagor have not denied the arrears in the loan accounts and default to defendant on their loan agreements.
    
11. This matter was set down for hearing on 12 April 2012, and both Counsel, for Plaintiffs and for the Defendant made Oral Submissions and filed Written Submissions, extensively on the same day.
    
12. The matter before me is now to determine whether the interim injunction already granted should be continued or dissolved.
    
13. It is important to state that the Counsel for the Plaintiff submitted to Court in his oral and Written Submissions that his Submissions are mainly to restrain the Sale of Security given by the 1st Plaintiff as a 3rd party mortgagor to the Defendant and not the other securities given by other Plaintiffs for the purpose of loan facilities.
    

Grounds/Submissions in Support

1. The 1st Plaintiff in his Affidavit sworn on 5 April 2012 deposed as follows:-
   
   1. Some considerable pressure was exerted on him to give the security to Bank by Sanjeev Pal, Director of 3rd and 4th Plaintiff, who is husband of the 1st Plaintiffs sister, for the purpose of a loan for 3rd and 4th Plaintiffs. He further deposed in his Affidavits as follows:-
      

"I was informed the Bank had agreed to finance my brother-in-law's companies and there was a shortfall in the securities and by me giving the mortgage over the property, the Bank will proceed to advance the moneys to Hunts and Quest. I agreed."

2. Lack of knowledge of the documents executed by the mortgagor, the 1st Plaintiff, and copies of mortgage documents were not given to the mortgagor.
   
3. At the time of the execution of the mortgage, 1st Plaintiff was only registered as a trustee de bonis for the late father and could not have signed as a proprietor of CT 10064, and thereby there is no valid mortgage for enforcement.
   
4. The Defendant registered the mortgage on 18 February 2010 although the mortgage was executed on 24 November 2008. The property in the certificate of Title 10064 was transferred to mortgagor only on 18 February 2010, the date the Defendant registered the mortgage. 1st Plaintiff believes and the manner in which the Defendant registered the mortgage was the tantamount to a misleading and deceptive conduct.
   
5. The Defendant failed to disclose material information to the 1st Plaintiff such as the State of Accounts maintained by the Defendant in respect of 3rd and 4th Plaintiffs, accounts of Plaintiffs were subsequently restructured and restructuring was done without the consent of 1st Plaintiff etc.
   
6. The 1st Plaintiff did not have the advantage of Independent Legal, and Financial advice prior to the execution of the mortgage.
   
7. Property subject of mortgage was the inherited property from parents.
   
8. Current valuation of the property by the Defendant is higher than the valuation at the time of execution and redemption was only subject to payment the current valuation.
   
9. Conduct of the Defendant is in violation of Section 75 of the Commerce Decree 2010.
   
10. The 1st Plaintiff was not the beneficiary of the facilities granted but only a 3rd party mortgagor who has not derived every benefit and thereby the conducts of the mortgagees are unfair and unconscionable.
    

Law and Analysis

The principles in relations to granting of injunction and the test that should be applied are set out in the case of American Cyanamid Co v Ethicon Ltd. (1975) 1 All ER 504.

Matters to be considered in granting or dissolving injunction as per the above case are as follows:

(a) The court must be satisfied that the claim is not frivolous or vexatious; in other words that there is a serious question to be tried.

(b) Whether the balance of convenience lies in favor of granting or refusing the injunction that is, it is to be considered and whether damages would be an adequate remedy of the relief sought.

In the case of Westpac Banking Corporation Ltd v Adi Mahesh Prasad Civil Appeal No. ABU0027 of 1997S the Fiji Court of Appeal at p. 7 said:

"Authorities to be referred to show that it is an extremely serious step to interfere with the exercise of a mortgagee's power of sale. The authorities show that it is quite unusual to grant an interlocutory injunction, let alone an ex parte injunction, to restrain the power of the mortgage except in very special circumstances.... We add that, if in any case, whether it be a case involving a restraint on a mortgagee's power of sale or a different kind of cases, the Court sees fit to grant and ex parte injunction, the matter should be adjourned for no longer than a day or so. A period of six weeks, which was the period in this case, was far too long". (emphasis ours)

I will now consider in line with the guidelines set out in the above cases to ascertain whether there are any special circumstances for the Court to interfere with power of Sale of mortgagee.

I am not inclined to accept that 1st Plaintiff mortgaged the property to Defendant due to his ignorance and with due to the pressure exerted by the wife's brother. Plaintiff in his Affidavit deposed that he is a Clerk in the Project Office of the Save the Children Foundation in Fiji and furthermore he is a person who has reached the sufficient maturity to understand the consequence of a mortgage of a property to the Defendant and in the event if the borrowers defaults the repayment.

The 1st Plaintiff in other words attempts to rely on the Doctrine of non est factum.

Non est factum will not lightly be allowed when a person of full age and capacity has signed a written document embodying contractual terms. This was obtained from Barker JA, Tompkins JA and Scott JA's judgment in Hewitt v Habib Bank Ltd Civil Appeal No. ABU0007 of 2004S where they relied on the decision of Fiji Development Bank v Raqona [1977] FamCA 81; (1984) 30 FLR 151.

In addition to this, Hewitt v Habib Bank Ltd Civil Appeal No. ABU 0007 of 2004S provided the general rule is that a party of full age and understanding is bound by his/her signature to a document irrespective of whether he/she read the document.

Singh J in Habib Bank Ltd v the Charcoal Chicken Ltd (supra) went on to cite Blomley v Ryan [1956] HCA 81 at p. 401 were Fullager J outlined the general application of the common law rule of non est factum:

"Comparatively, rare class in which a man's faculties whether from age or natural infirmity or drink or any other cause, are so defective that he really does not know what he is doing – that his mind does not have with the deed. In such a case his instrument is void even at Law – non est factum (emphasis ours)

Considering the above judgments, I am satisfied that the 1st Plaintiff had the sufficient maturity and knowledge to understand the consequences of mortgaging a property and thereby 1st Plaintiff is bound by the signature and the Terms and Conditions of the mortgage documents.

It is important to state that the date on which the mortgage was registered was the date that the 1st Plaintiff acquired the title of the mortgage property and became the legal owner. Even if the 1st Plaintiff did not have the capacity to execute his mortgage document on 28 November 2008, upon receiving the ownership of the property, the 1st Plaintiff has not taken any steps to repudiate the mortgage contract and thereby the mortgage document is enforceable and liable on terms and conditions set out therein. Furthermore at the time of registration of the mortgage documents by M.A. Khan, Solicitor, the 1st Plaintiff acquired the ownership and therefore I conclude that 1st Plaintiff had the ownership on the effective date of mortgage documents.

The 1st Plaintiff also took up the position that there is no Independent Legal advice afforded to him by the Defendant prior to the execution of the mortgage. In my view, what is important is to afford an opportunity to seek Independent Legal advice which mortgagor could waive his rights to seek Independent Legal advice. On perusal of the affidavits of Napolioni Bulimula clearly demonstrates that mortgagor was given two opportunities to seek advise which he opted not to. There is no evidence placed before court to decide that the

Defendant prevented the opportunity of independent legal advise or failure to obtain such advise was detriment to his interest. Hence, the Defendant has not breached its obligation and duty prior to execution of the mortgage agreement.

Non disclosure of material information by the Defendant to the 1st Plaintiff was another ground in support of continuation of the interim injunction.

Whether there is a duty on the Defendant to disclose material information to the mortgagor or not, has been decided in the following cases.

In Habib Bank Ltd v the Charcoal Chicken Ld (supra, it was held that:

"There is no general rule on a banker to disclose everything within a Bank's knowledge which is material to the formation of a judgment as to whether it is prudent to enter into a guarantee".

In Hamilton v Watson 1845 EngR 867 as 1343 where he stated that if there was such a rule that required a banker to disclose everything within a bank's knowledge:

"........... it would be indispensably necessary for the bankers to whom the security is given, to state how the account is being kept, whether the debtor was in the habit of overdrawing; whether he was punctual in his dealings; whether he performed his promises in an honorable manner; for all these things are extremely material for the surety to know. But unless questions are particularly put by the surety to gain this information, I hold that it is quite unnecessary for the creditor to whom the surety ship is to be given to make any such disclosure". (emphasis ours)

In the certificate of M. A. Khan Solicitor, it is demonstrably clear that mortgage document had been explained to the 1st Plaintiff in the Hindustani language. Therefore I am satisfied that the Defendant has not failed in their duty at the time of entering into the Mortgage Agreement.

The fact that the property subject to mortgage is a inherited property from parents, 1st Plaintiff is a 3rd party mortgagor and not derived any benefit of the loan facilities are not exceptional circumstances to consider to prevent the exercise of mortgagee's right of sale.

I am also satisfied that the conduct of the Defendant does not amount to misleading and deceptive on examination of the Affidavits filed by the Plaintiff and the Defendant.
The 1st Plaintiff also has taken up the position that the Demand Notice sent by the Defendant after the Order made by the Court granting the interim injunction amounts to a contemptuous conduct and the Defendant is precluded from appearing in this unless Defendant purge the contempt of court. It is noted that 1st Plaintiff has not taken up this position in the Affidavit filed in Court but taken up only in the Submissions. However it is my considered view that proof of contempt having been committed is a separate matter that should be dealt with in separate proceedings.

Having considered all the aforementioned circumstances I considered that there are no exceptional circumstances to interfere with the right of Sale of the Mortgagee and as a result it is ordered that the interim injunction granted on 27 January 2012, subsequently extended to 1st Plaintiff as well, be discharged on 30 May 2012.

I Order that the costs of the Application be costs in the Cause.

Susantha N Balapatabendi
JUDGE

25 May 2012
At Suva