National Bank of Fiji v Tabuya [2012] FJHC 1277; HBC372.2009 (6 August 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CASE NUMBER: HBC 372 OF 2009

BETWEEN:

NATIONAL BANK OF FIJI trading as COLONIAL NATIONAL BANK
PLAINTIFF

AND:

WILISONI DUIKORO TABUYA, RAVESI TABUYA, WILISONI TABUYA JUNIOR, MARICA TABUYA and JOSEVATA TABUYA
DEFENDANTS

Appearances: Mr. R. Nand for the Plaintiff.
Mr. Valenitabua for the defendants.

Date / Place of Judgment: Monday 06th August, 2012 at Suva.

Coram: The Hon. Justice Anjala Wati.

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JUDGMENT

CATCHWORDS:-

Mortgage action – mortgagee exercises its powers of sale- defendants' refuse to give vacant possession-mortgagee brought action for vacant possession- defendants' plead that mortgage contract is frustrated because coup de'tat in Fiji affected the financial capacity of the defendants' to pay the mortgage debt-service of demand notice also contested- finding made as to whether demand notice was served and whether contract frustrated- vacant possession ordered.

LEGISLATION:
High Court Rules, 1988("HCR"): Order 88Rule 1(1) (d).

CASES REFERRED TO:

Alanbert Pty Ltd. v. Butler Pty Ltd. [2000] NSWSC 261.
Davis Contractors Ltd. v. Fareham UDC [1956] UKHL 3; [1956] AC 696.
Codelfa Construction Pty Limited v. State Rail Authority of NSW (1982) 149 CLR 337.
Westpac Banking Corporation v. Bickley [2001] NSWSC 756.

___________________________________________________________________________

1. The plaintiff, as the mortgagee, seeks an order for vacant possession under Order 88 Rule 1(1) (d) of the HCR of all that property comprised and described in Native Lease Number 254964 being Lot 11 on SO 3850 situated at Savunawai Subdivision, Nadi together with all improvements thereon.
   
2. The mortgagee also seeks an order to restrain the defendants and/or their agents from interfering with the improvements on the said property so as to deplete its value and costs of bringing the action.
   
3. The mortgagee says that the defendants are the registered proprietors of the subject land. The property was secured to the bank by a mortgage registration number 587764. The security was given for loan advances made to the defendants'. There is a concrete wooden and iron dwelling house on the land occupied by the defendants'. On or about 30 December 2005, the plaintiff advanced to the defendants' a sum of $145,950 at the interest rate of 7.40% per annum for the first 12 months and 9.25% per annum variable. The defendants' were required to make monthly payments of $1,389.00 for a period of 25 years.
   
4. The defendants' fell in arrears of payment and as at the issue of the originating summons the arrears was $10,812.00. The total amount due and owing under the said mortgage as at the date of issue of the originating summons was $153,725.62 . Interest accrues on this amount at the rate of $38.85 per day.
   
5. On 12 August 2009 the bank issued default notice against the defendants' which were served on the defendants' by delivery at 79 Rokosawa Road, Tacirua Plains, Stage 4 as allowed under clause 11.1 of the mortgage. They failed to rectify the default. The bank therefore exercised its powers of sale under the mortgage and advertised the property for sale.
   
6. On 23 September 2009 the bank caused notices to quit to be issued and served on the defendants'. The property is occupied by the defendants', their family and relatives. The defendants' have refused to give vacant possession of the said property. That is interfering and prejudicing the bank's rights as a mortgagee.
   
7. The bank says that it believes that the defendants' may remove and/or damage the valuable attachments which form part of the improvement to the said property since they have refused to co-operate with the bank.
   
8. The defendants' say that they did not receive any default notice but only a notice to quit. It was argued that the mortgage number 587764 is now frustrated by the events of 5 December 2006 and onwards. The coup de'tat, it was argued, led to redundancies, job losses, pay cuts and non-availability of tenants at the property.
   
9. The defendants' argue that a mortgage is a contract which could be frustrated. This contract between the parties was frustrated when the events occurred causing a radical or fundamental alteration in the situation envisaged by the parties.
   
10. The defendants' say that when they signed the mortgage contract No. 587764 on 10 May 2006, they did not envisage that those who were employed at the time would lose their respective jobs late in 2006. They did not envisage that there was going to be a coup de'tat on 5 December 2006.
    
11. The bank responded by saying that the mortgage debt went into arrears in 2009. Everyone in Fiji was affected and the events of 5 December 2006 do not negate the mortgage and the defendants' obligations under the mortgage. The security still exists and the bank can recover from the existing securities.
    
12. The defendants' are basically saying that the bank cannot exercise its rights under the mortgage because:
    
    • (a) It failed to serve them with the default notice.
      
    • (b) The mortgage is frustrated by the events of 2006, the coup de'tat, resulting in job losses and loss of tenants from the mortgaged property.
      
13. I will deal with the aspect of notice first. Clause 11.1 of the contract stipulates how a notice could be served on the defendants'. It includes service of notice to the address given or leaving it at the home address. The notice was delivered at the home address of 79 Rokosawa Road, Tacirua Plains, State 4, Suva. This is where the property is located. I find the service to be proper.
    
14. On the aspect of the contract being frustrated, I find that the defendants' understanding on the law of frustration to be misconceived. The defendants' have to show that the loan contract that it entered into became fundamentally different from that originally contemplated for them to successfully rely on the doctrine of frustration. I do not find that the defendant's obligation had changed at all. They were obliged to pay the principal and the interest and in default to surrender the property that was mortgaged. That obligation remained throughout. The loss of jobs, reduced working hours and loss of tenants from the property could only be said to have made the defendants' obligation onerous. The doctrine of frustration therefore does not apply to his contract.
    
15. In Alanbert Pty Ltd. v. Butler Pty Ltd. [2000] NSWSC 261, Justice Hamilton at paragraph 44 stated that the modern doctrine of frustration may be taken to be stated by Lord Radcliffe in Davis Contractors Ltd. v. Fareham UDC [1956] UKHL 3; [1956] AC 696 at 728-729, where Lord Radcliffe states:-
    

"...frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do. There is however, no uncertainty as to the materials upon which the court must proceed. 'the data for decision are, on the one hand, the terms and construction of the contract, read in light of the then existing circumstances, and on the other hand the events which have occurred' (Denny Mott & Dickinson Ltd v. James B. Fraser & Co Ltd [1944] AC at 275., per Lord Wright). In the nature of things there is often no room for elaborate inquiry. The court must act upon a general impression of what its rule requires. It is for that reason that special importance is necessarily attached to the occurrence of any unexpected event that, as it were, changes the face of things. But even so, it is not hardship or inconvenience or material loss itself which calls the principles of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be different thing from that contracted for".

Underlining is Mine.

16. In Codelfa Construction Pty Limited v. State Rail Authority of NSW (1982) 149 CLR 337, Justice Mason stated that the defendant has to show that the loan contract became "fundamentally different from that originally contemplated". His honour stated:
    

"...so significantly changes the (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulation in the new circumstances". (Per Lord Simon of Glaisdale in National Carriers Ltd v. Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 at 700 (cited with approval of Aickin J in Codelfa at 378).

17. Even if the doctrine applied, there is no evidence provided to state that the defendants' have suffered job losses, pay cuts and loss of tenants because of the coup de'tat. The mortgage payments went into arrears in 2009 when the coup de'tat occurred in 2006. Even without a coup de'tat people can suffer loss of jobs and tenants on the property. That is foreseeable in any country and with that the defendants' opted to take the loan and the risk so now they cannot renege on the contract which is binding and enforceable.
    
18. The facts of this case are related to that of the case of Westpac Banking Corporation v. Bickley [2001] NSWSC 756. In this case, a builder had a mortgage with the bank with his house as a security. The builder failed to make payments on the loan, due to downturn in his industry. The bank sought to enforce its charge over the property. The builder claimed that the contract of mortgage was unenforceable because of the introduction of GST which frustrated the contract. Master Harrison in that case held, and I also agree with his verdict that:-
    

"....the introduction of the GST did not make the mortgage contract fundamentally different from that originally contemplated. The contractual obligations for repayment did not alter because of the introduction of GST. Rather the defendant's ability to pay became more onerous. The doctrine of frustration is clear. It does not apply in these circumstances ..."

19. The defendants' still have a security to cover the debt and that is what they have to tender to the bank now. I order them to deliver vacant possession of the property without interfering with any improvements on the same.
    
20. The plaintiff is entitled to cost of the proceeding in the sum of $1500.
    
21. Orders accordingly.
    

Anjala Wati
Judge

06.08.2012