Fiji Development Bank v Faiyaz [2013] FJHC 8; Civil Action 424.2009 (18 January 2013)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
Civil Action No: 424 of 2009.

BETWEEN:

FIJI DEVELOPMENT BANK
a body corporate having its head office at 360 Victoria Parade, Suva Fiji.
PLAINTIFF

AND:

MOHAMMED FAIYAZ
of Lot 2, Wailoku Road, Tamavua, Suva, Distribution Manager.
1ST DEFENDANT

AND:

SAMUELA SILI YACO SAVOU
of 38 Fletcher Road, Suva Point Suva, General Manager.
2ND DEFENDANT

AND:

NILESH CHAND MAHARAJ
of 38 Fletcher Road, Suva Point Suva, General Manager.
3RD DEFENDANT

BEFORE: Master Deepthi Amaratunga

COUNSEL: Mr. Nand M. for the Plaintiff
Ms. Vaurasi L. S. R. M for the 3rd Defendant

Date of Hearing: 24th October, 2012
Date of Ruling: 18th January, 2013

RULING

1. INTRODUCTION
   

1. The Plaintiff being a financial institution filed this action against 3 defendants in pursuant to a personal guarantee they had provided to a loan obtained by a company where they were directors. Plaintiff obtained default judgment against all three Defendants and the 3rd Defendant seeks to set aside the default judgment against him. He states that he resigned from the post of director of the company and also states that his guarantee is a limited guarantee and the maximum sum he is liable is the limit on the guarantee.
   

2. FACTS AND ANALYSIS
   

2. The Plaintiff being a financial institute in its usual activities of business granted a loan to a company by the name Naviti Hire Services Limited where the three defendants being the directors of the said company, provided personal guarantee for the loan granted on 1st March, 2005. The resignation of 3rd Defendant as a Director of the Company is irrelevant. The amount of the loan was $23,170 and the three Defendants being guarantors to the said amount signed a joint guarantee and limit of an individual was limited to $23,170. The guarantee document stated inter alia as follows
   

'....

Limit of My Liability is 23,170....

The amount of credit provided or to be provided to the Debtor under the Loan Agreement shall be up to a limit of $23,170.00... with interest payable at the rate of ......

3. A further loan was granted to the Naviti Hire Services Limited and a subsequent guarantee was signed by all the Defendants on 2nd February, 2006 and it stated as follows:
   

'Re Our Guarantee Dated 1st March 2005

This is to confirm that our above Guarantee is still current and secures advances and further advances made to Naviti Hire Services Limited a duly incorporated Company having its registered office at Valelevu Plaza, Lot 4, Saqa Street, Nasinu and will continue to secure past present and future advances made to Naviti Hire Services Limited including the further loan facility of $30,000 (Thirty Thousand Dollars) approved as per the loan letter dated 31st January, 2006 increasing the total indebtedness to $49,122 (Forty Nine Thousand One Hundred Twenty Two Dollars and Ten Cents)

Dated .......' (emphasis added)

4. The Plaintiff has obtained the default judgment against the 3rd Defendant for a sum of $59,297.39. As per guarantee signed on 1st March, 2005 3rd Defendant's liability is limited to FJD $23,170. Though the loan outstanding to the company increased to $49,122 in 31st January, 2006, the same guarantee that was signed on the 1st March, 2005 was used as the guarantee for this additional sum and it is clear from the words '...This is to confirm that our above Guarantee is still current..'. There is no indication that the limit of the guarantee was increased though the loan amount was increased.
   
5. From the evidence before me I cannot come to a different conclusion and the amount stated in the default judgment is manifestly wrong. No default judgment could be obtained for $59,207.39 against 3rd Defendant. The default judgment is irregular.
   
6. The issue is whether the said irregularity is sufficient to set aside the default judgment. In Bank of Credit and Commerce International (Overseas) Ltd (in liquidation) v Habib Bank Ltd [1998] 4 All ER 763 it was held that 'the court would not set aside a default judgment which suffered from irregularities if there was sufficient evidence before the court from which it was able to conclude that the substantive content of the judgment was right. Further, where the amount in the default judgment was wrong, the court would vary the judgment to the correct amount rather than set it aside.'
   

Bank of Credit and Commerce International (Overseas) Ltd (in liquidation) v Habib Bank Ltd [1998] 4 All ER 763 Park J held at page 757 as follows

'Assume a case where the wirt and the judgment did suffer from some irregularities. Nevertheless assume also that, by the time that the application to set the judgment aside comes to be heard, time has passed and almost certainly a great deal of information about the case, verified by affidavits, will be before the court. If, from the affidavits and exhibits, the court concludes that, even though there were irregularities in the wirt or the judgment or both, the substantive content of the judgment is right, the court will not set the judgment aside. The only effect if it did would be to put the parties to further expense and delay to reach a regular judgment for the same amount.' (emphasis is added)

(At paragraph d on page 757)

'Further, it is the same in principle if the court is satisfied from the affidavits and exhibits that, although the amount in the default judgment was wrong, it (the court) knows what the correct amount was. The court will not set the incorrect judgment aside and make the plaintiff start again. It will vary the judgment to the correct amount.

Of course, if the material before the court shows that the judgment was or might have been wrong but the court cannot, without a trial, be confident of what the correct judgment should have been, it will set the judgment aside.'

7. The judgment obtained was for a sum of $59,297 and this is irregular upon the materials before me in this application. The Plaintiff's contention is that from the guarantee document dated 2nd February, 2006 the limit to the guarantee was removed. If so why it was not stated has not been explained by the Plaintiff.
   
8. The letter dated 31st January, 2006 where the Plaintiff granted further loan to the company where the Defendants were directors, contained certain additional conditions in order to provide a further sum of $30,000 and under condition 3 which deals with the Security inter alia states as follows
   

'....

B) Fresh Security

4. Fresh Joint & Several Guarantee given by the Directors/ Shareholders of the company for the total liability.'

9. In the fresh security document signed on 2nd February, 2006 expressly refers to the guarantee signed on 1st March, 2005 and further states that 'This is to confirm that our above guarantee is still current and secures existing advances and further advances made to Naviti...' (emphasis added)
   
10. The words are unequivocal application of earlier guarantee which clearly had a limit for the liability for $23,170 for an individual guarantor. Without further evidence on this issue I am not in a position to arrive at a conclusion regarding the interpretation of the fresh security document. If the counsel for the Plaintiff admitted the limit of $23,170 I could have applied the principles enunciated in Bank of Credit and Commerce International (Overseas) Ltd (in liquidation) v Habib Bank Ltd [1998] 4 All ER 763, but since he insisted for the sum stated in the default judgment which is $49,122 (Forty Nine Thousand One Hundred Twenty Two Dollars and Ten Cents) I cannot adjust the amount in the default judgment to read $23,170 which is the limit of the liability in the guarantee document signed on 1st March, 2005 which was also being referred to in the fresh guarantee signed on 2nd February, 2006. In the circumstances I set aside the default judgment against 3rd Defendant as it is irregular. I will not order any cost considering the facts of the case.
    

100. FINAL ORDERS
     

1. The default judgment entered against 3rd Defendant is set aside.
2. The Third Defendant is granted 7 days to file and serve its statement of defence.

100. No cost.

4. The matter to take normal course
   

Dated at Suva this 18th day of January, 2013.

Master Deepthi Amaratunga
High Court, Suva