Empire Autoparts Ltd v National Bank of Fiji [2012] FJHC 1401; HBC335.2011 (31 October 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBC 335 of 2011

BETWEEN:

EMPIRE AUTOPARTS LIMITED
[1st Plaintiff]

AND:

ABDUL SAMAD, NAZRA BIBI & ABDUL FAIYAZ
[2nd Plaintiff]

AND:

NATIONAL BANK OF FIJI trading as
COLONIAL NATIONAL BANK
[Defendant]

Counsel : Mr. S. Valenitabua for the Plaintiffs
Ms. B. Narayan for the Defendant

Date of Judgment: 31st October, 2012

INTERLOCUTORY JUDGMENT

[1]. The plaintiffs filed summons dated 23. 04. 2012 seeking the following orders inter alia:

• An interim injunction to restrain the defendant from calling or advertising for tenders or proceeding further with mortgage sale or dealing with the property comprised in Caveat Lease No. 14013; and,
  
• That summary judgment be entered against the defendant on the plaintiff's claim.
  

[2]. In support of the summons, the plaintiffs rely on affidavits filed by Abdul Faiaz on 23. 04. 2012 and 15. 05. 2012.

[3]. Opposing the plaintiff's application, the defendant has filed an affidavit sworn by Jonathen Stevens on 08.05.2012. The defendant also filed a supplementary affidavit sworn by Jonathen Stevens on 28.05.2012. I carefully considered all the affidavits and its annexures.

Background facts

[4]. On or about 15.09.2010, pursuant to a credit contract, Autoparts Ltd, the 1st plaintiff and 2nd plaintiff were granted two different credit facilities i.e. an overdraft facility and a loan facility by the defendant bank.

[5]. The repayment arrangement for the overdraft facility in accordance with the loan contract was interest payment only, while the term loan facility repayment was structured for monthly principal and interest repayment of $13,468.00 over a term of 120 months or until expiry of the term which was for 5 years. These facts are not disputed.

[6]. The plaintiffs alleged that the defendant bank has acted in breach of the said loan agreement. The plaintiffs commenced proceedings against the defendant by writ filed on 07.11.2011.

[7]. In the plaintiff's affidavit in support, it is deposed that the defendants without the knowledge and consent of the plaintiff credited the term loan facility account number 5565448 with $41,324.46 and also the defendant by its statement of the term loan facility account number 5565448 for June and July 2011 claimed that the $41,324.46 is made up of transfer advance of $30,000.00 and credit interest adjustment of $11,324.46.

[8]. It is further deposed that consequent to the defendant's breach of contract the plaintiff suffered losses and damages.

[9]. The defendant's solicitors issued the 1st plaintiff with a demand notice pursuant to the contract demanding payment of an amount totalling $1,232,017.04.

[10]. Annexure 'A' to the defendant's 1st affidavit is a letter sent by Abdul Faiyaz to the defendant bank. In that letter, the plaintiff admitted their inability to repay the loan due to the downturn of the business and also requested a time frame of two weeks to settle the same.

[11]. The plaintiffs though deposited $38,000.00 on 01.07.2011 in the overdraft account $30,000.00 was transferred by the defendant to clear the arrears amount of $22,326.00 in the term loan account.

[12]. After the said payment was made by the plaintiff, no further payment was made by the plaintiffs into the term loan account. 'JS4' and 'JS5' show that the arrears in the term loan account up to April 2012 was $153,097.00 while the excess portion in the overdraft account was 116395.81.

[13]. 'JS 4' and 'JS 5' annexed to the defendant's supplementary affidavit are copies of the statement of the overdraft account number 5475345 and the amalgamated term loan account number 5569448.

[14]. The email from Mr. Naushad shows that the increase in repayment was automatically picked up by the computer system. It must be noted that though the defendant bank internal computer system had increased the monthly interest rate due to the arrears position in the term loan account, it did not increase the repayment amount to $25,823.00 and the repayment amount remained as $13,468.00.

[15]. The plaintiffs have not denied owing the arrears on the accounts; instead have made an attempt to escape from their financial obligations towards the defendant by making use of a computer error which was subsequently rectified by the defendant bank, which in my view should not be allowed given the nature of the contract the plaintiff had with the defendant.

[16]. The defendant submitted that the credit contract clearly sets out the terms and conditions on which the plaintiffs were granted the credit facilities but the plaintiffs in their affidavit failed to disclose a copy of the contract thus failed to disclose material facts.
[17]. Granting of an injunction is an equitable relief which is granted at the discretion of the court. Hence, a paramount duty is cast upon the applicant to make a full and frank disclosure of all the material to the injunction application.

[18]. In the present case, the plaintiff have failed to disclose some material facts namely the letter dated 28.02.2011 sent by the defendant to the plaintiff, the letter dated 01.03.2011 by which the plaintiffs admitted the arrears in their accounts and had suggested to negotiate the same through sale of 2 vehicles belonged to the plaintiffs.

[19]. Moreover, the affidavit evidence before me clearly shows that despite the bank having warned the plaintiff of recovery action if the arrears in their overdraft and the term loan account were not cleared, the plaintiffs failed to settle their arrears, which shows that the plaintiffs were in default repayment, thus, the bank has every right to exercise its power under the mortgage.

[20]. 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.

[21]. 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.

[22]. 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."

[23]. 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."

[24]. Interlocutory injunctions shall not be granted to prevent a person from exercising his legal rights in terms of a valid contract unless it is proved that an irreparable and irremediable damage would be caused to the applicant if the injunctive relief is not granted.

[25]. The law of the rights of a mortgagee is well settled and the court will not, except on exceptional circumstances, interfere with the exercise of the power of sale of a mortgagee.

[26]. Exercise of the power of sale of a mortgagee was articulated in Inglis v. Commonwealth Trading Bank ofAustralia (1972) 126 C.L.R. 161 at 164 by Walsh J as follows:

A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular 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 in to court.

The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury's Laws of England, 3rd ed., vol. 27, p. 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, unless, on the terms of the mortgage, the claim is execssive."

In that case Walsh J further said:

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 not 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 claimed for damages against the mortgagee of the remedies given to him by the mortgage.

Barwick C.J also expressed thesame opinion at page 169:

"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 mortgage 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 rights under the mortgage.

[27]. In the present action, one of the injunctive reliefs sought by the plaintiff is to prevent the defendants from exercising its rights under the mortgage. To justify their application the plaintiffs have highlighted the computer error caused by the defendant bank's automated system. However, the defendant bank rectified that error as soon as it came to know it. The plaintiffs failed to tender any evidence to show that any damage was caused to them due to that error nor did they produce any evidence to demonstrate any breach of the loan contract on the part of the defendants which warranted the plaintiffs to terminate the contract unilaterally.

[28]. More importantly, the bank statements show that the increased interest amount was subsequently reversed by the defendant bank, which further confirms the fact that no prejudice was caused to the plaintiffs. Therefore, it is obvious that the plaintiffs had no reasons whatsoever to terminate the contract and also to dishonour their repayment obligations under the mortgage.

[29]. 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.'

[30]. In the present case no attempt was made by the plaintiffs to repay the loan despite challenging the breach of the contract by the defendants nor did they propose to deposit the amount due pending the determination of the substantive action. Hence, the grounds advanced by the plaintiffs to terminate their loan contract with the defendant are far from satisfactory and cannot be accepted. Thus, it is my view that this is not a fit and proper case to restrain the defendant who is the mortgagee from exercising its rights under the mortgage.

[31]. Furthermore, I do not see any exceptional circumstances in this case to interfere with the mortgagee's right under the mortgage. The plaintiff can still proceed with his action and have the issue determined. If he is successful he can be compensated for in damages. The defendant is in a position to pay damages.

[32]. Further, the plaintiffs have failed to show that an irreparable damage would be caused to them in the event the injunction is refused to grant. The affidavit evidence before me shows that the defendant is a financial institution and therefore, the plaintiffs could be compensated by damages for any loss caused by the refusal to grant an interlocutory injunction.

[33]. Accordingly, I consider that this is a case in which the appropriate remedy is not interlocutory injunction but an award of damages and the defendant would be in a financial position to pay them.
[34]. The balance of convenience also favours the defendant because if an injunction is granted it would amount to a breach of the loan contract the plaintiffs had with the defendant.

[35]. Upon consideration of the above, I dismiss the plaintiff's application for injunction.

[36]. Now let me consider the plaintiff's application for summary judgment. The law relating to summary judgment are well settled and court does not grant summary judgment until it is plain and obvious that the defendant has no arguable defence.

[37]. The basic principle governing the granting of summary judgments was stated as follows in Dummer v. Brown [1953]1QB 710.

"Actions for damages for negligence are suitable for procedure under O 14 only if it is clearly established that there is no defence as to liability."

[38]. The following authorities would also provide some useful guidelines with regard to the above issue.

As a general principle, where a defendant shows that he has a fair case of defence, or reasonable grounds for setting up a defence, or even a fair probability that he has a bona fide defence, he ought to have leave to defend. Saw v. Hakim (1889) 5TLR 72.

Leave to defend must be given unless it is clear that there is no real substantial question to be tried. Codd v.Delap (1905) 92 L.T.510, HL

A complete defence need not be shown. The defence setup need only show that there is a triable issue or question or that for some other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law such as could have been raised on the former demurrer to the plea and no possibility of a real defence on the question of fact. Jacob v. Booths Distillery Co. (1901) 85 L.T.262

Where there is a fair probability of a defence unconditional leave to defend ought to be given. Ward v. Plumbley (1890) 6 T.L.R.198

It sometimes happen that the defendant may not be able to pin point any precise issue or question in dispute which ought to be tried, nevertheless it is apparent that for some other reason there ought to be a trial. Manger v. Cash (188) 5 T.L.R 27

[39]. The requirements to be satisfied in order to obtain a summary judgment are enunciated as follows in S. v. Gloucestershire county council [2000] 3 All ER 346.

'For an application for summary judgment to succeed where a strike out application would not, the court first needs to be satisfied that all substantial relevant facts which are reasonably capable of being before the court are before it, that those facts are undisputed or that there is no real prospect of successfully disputing them and that there is no real prospect of oral evidence affecting the court's assessment of the facts .'

[40]. Therefore, in an application for a summary judgment court has to satisfy that all the relevant issues can be addressed and disposed in a summary way. To explain further, the judge must be satisfied that all the issues are mirrored by the affidavit evidence, and no oral evidence is required to determine the plaintiffs' claim against the defendant

[41]. In the present case when the pleadings are considered it is very difficult if not impossible to come to such a conclusion. More importantly, the statement of defence and the documents annexed to affidavits of the defendant when perused clearly shows that the defendant have a bona fide defence and also there are issues which cannot be disposed by way of summary procedure.

[42]. On the above premise, I dismiss the plaintiffs' application for a summary judgment.

[43]. Accordingly, I make following orders:

• (a) The plaintiffs' application for an interim injunction is dismissed.
• (b) The plaintiff's application for a summary judgment is dismissed.
• (c) Costs shall be in the cause.
  

Pradeep Hettiarachchi
JUDGE