Merchant Finance & Investment Company Ltd v Khan [2016] FJHC 328; HBC01.2011 (27 April 2016)

IN THE HIGH COURT OF FIJI AT LABASA
CIVIL APPELLATE JURISDICTION

CASE NUMBER: HBC 01 of 2011

BETWEEN:

MERCHANT FINANCE & INVESTMENT COMPANY LIMITED
APPELLANT

AND:

AIYUB KHAN
RESPONDENT

Appearances : Mr. A. Sen for the Appellant.
Mr. Young for the Respondent.
Date/Place of Hearing : Wednesday 13 April 2016 at Labasa.
Date/Place of Judgment : Wednesday 27 April 2016 at Suva.
Coram : The Hon. Madam Justice Anjala Wati.

JUDGMENT

Catchwords:
APPEAL – Master's Decision – Application struck out under s. 9 of the BA as leave of the Court not obtained to bring proceedings against the debtor in respect of whom exists a receiving order – Is the striking out order of the Master interlocutory and leave therefore required to appeal the same? Whether proceedings brought in contravention of s. 9 of the BA a nullity and ought to be struck out?
Cases:
Vinod Raj Goundar v. Minister for Health [unreported] Court of Appeal of Fiji Islands Civil Appeal Case Number: ABU 0075 of 2006S.

Legislation:
The Bankruptcy Act Cap. 48. ("BA"): s. 9.
The High Court Rules 1988 ("HCR"): Order 59 Rule 8(2).

Cause

1. On 9 October 2015 the Master of the Court struck out the substantive case between the parties on the grounds that a receiving order was made against the respondent on 18 October 2002 and due to that the action cannot be sustained against him.
   
2. The appellant appeals against the said order for striking out. It is averred that the Court erred in law and in fact in striking out the matter:
   
   • (i) when there was no formal application before the Master to make the order;
     
   • (ii) when the Master exceeded its jurisdiction in striking out the matter;
     
   • (iii) when the Master did not provide the appellant with a fair opportunity to be heard;
     
   • (iv) when the respondent had waived its right to raise an objection based on s. 9 of the BA; and
     
   • (v) when the Master failed to give reasons for striking out the action and failing to state the provision of the law under which the application was struck out.
     
3. In respect of the ground that the Master did not give the appellant an opportunity to be heard, it was agreed by the parties that that opportunity would be provided in the appeal hearing and the appellant can raise any submissions it wishes. This would mean that the appellant's arguments, which it said it could not raise before the Master, would be considered by the appellate Court.
   

Submissions

4. The appellant's counsel submitted that the day on which the application was struck out was done on a mention day without a formal application. If there was a formal application, the appellant would have prepared its case and argued its position. The act of hearing the issue of striking out on a mention day deprived the appellant of natural justice. The appellant was bereft of raising a defence to the application. Since the proper procedure was not followed, the orders of the Master are not correct in law.
   
5. It was further argued that if the respondent was interested in raising s. 9 of the BA, it should have pleaded the same in his defence and the fact that that was no pleaded basically indicates that he had waived his right to raise the same.
   
6. The Master did not even state the provision of the law under which the matter was struck out. More so, the reasons for the striking out were not given which makes the order bad in law.
   
7. Mr. Sen argued that this appeal is prematurely brought without leave of the Court. He argued that Order 59 Rule 8(2) of the HCR states that "no appeal shall lie from an interlocutory order or judgment of the Master to a single Judge of the High Court without the leave of a single judge of the High Court which may be granted or refused upon papers filed".
   
8. Mr. Sen stated that the decision of the Master of the High Court of 9 October 2015 to strike out the matter was an interlocutory decision and any appeal against such a decision ought to be made only after leave is granted. He relied on the case of Vinod Raj Goundar v. Minister for Health [unreported] Court of Appeal of Fiji Islands Civil Appeal Case Number: ABU 00752006s.
   
9. On the merits of the appeal, Mr. Sen submitted that s. 9 of the BA is mandatory in that no action can be commenced without the leave of the Court. Since the action was a nullity, it cannot be cured by a subsequent leave application. Even if a formal application was made to strike out, the appellant would not be in any better position than the day on which the matter was struck out. The proceeding is a nullity and cannot be revived.
   
10. Mr. Sen submitted that the appellant at all times knew that there was a receiving order against the respondent and it was an abuse of the process of the Court to have filed an action in the first place. There is no issue of waiver of the right to raise s. 9 of the BA, as the leave had to be obtained first to institute the proceedings.
    

Law and Analysis

11. There are basically two issues before the Court. Both the issues relate to leave. The first is whether the appellant should have obtained leave to appeal against the decision of the Master pursuant to order 59 (2) of the HCR. In order to determine that, I have to first analyse whether the decision of the Master was an interlocutory decision or a final one.
    
12. In the case of Vinod Raj Goundar (supra) the correct position of the law on what is a final decision and what is interlocutory is made clear in paragraphs 37 and 38:
    

" 37. This is the position. Where proceedings are commenced in the High Court in the Court's original jurisdiction and the matter proceeds to hearing and judgment and the judge proceeds to make final orders or declarations, the judgment and orders are not interlocutory.

38. Every other application to the High Court should be considered interlocutory and a litigant dissatisfied with the ruling or order or declaration of the Court needs leave to appeal to that ruling order or declarations. The following are examples of interlocutory applications:

1. an application to stay proceedings;

2. an application to strike out pleadings;

3. an application for extension of time in which to commence proceedings;

4. an application for leave to appeal;

5. the refusal of an application to set aside a default judgment;

6. an application for leave to apply for judicial review"

13. The application before the Master was for the proceedings to be struck out for want of leave having been obtained under the BA. The proceeding was struck out and the order thus is interlocutory in nature and leave ought to have been applied for to appeal the decision of the Master.
    
14. I have said time and again and I feel that it needs to be repeated that the requirement for leave is not a cosmetic rule. It has profound purpose and non -compliance will render the proceedings a nullity.
    
15. The counsel for the appellant did not wish to address the Court on the reason why no leave was sought despite Mr. Sen's vigorous objection that this appeal is prematurely filed and should not be entertained.
    
16. The second issue on leave stems from s. 9 of the BA. The section states that once a receiving order is made, the official receiver becomes the receiver of the property of the debtor and that no creditor shall have any remedy against the debtor or his property or shall commence any action or other legal proceedings without the leave of the Court. It is not disputed that no leave was obtained from the Court to institute the substantive cause against the respondent.
    
17. The relevant provision of the BA reads:
    

"9 (1). On the making of the receiving order the official receiver shall be thereby constituted receiver of the property of the debtor, and thereafter, except as directed by this Act, no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings, unless with the leave of the court and on such terms as the court may impose.

(2). But this section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with if this section had not been passed".

18. Since the appellant had not taken any leave to institute the proceedings, the action is a nullity and cannot be sustained or revived. The requirement of the leave is mandatory and a pre-requisite for the proceedings to be filed.
    
19. At the appeal hearing, the appellant did not say why the leave was not obtained and how the defect could be cured or what would its position have been if it were given a chance to argue the matter. The appellant was given a chance to raise all the argument during the appeal and show to the Court why the matter was struck out improperly. I did not find that any tenable argument was raised to convince the Court that the Master's decision was in error of the law.
    
20. The appellant also states that a formal application was necessary. The issue before the Master was on a statutory provision and on the right of the appellant to bring the proceedings against a debtor in respect of whom exists a receiving order. There was no need for a formal application to be filed and if there was, the appellant would not have been in any better position than what the appellate court granted it to argue its cause on s. 9 of the BA.
    
21. The appellant raised that the respondent ought to have pleaded s. 9 in its defence and since it did not, it has waived its right to raise the same now. I find the appellant's argument void of any merits. The appellant ought to have obtained leave first before filing the action. If that leave is not secured, the action is not valid. The fact that the defence does not plead s. 9 of the BA, does not validate the plaintiff's claim for want of leave.
    
22. The requirement of leave under s. 9 of the BA is a statutory one and that cannot be waived by a party even if they have not raised it in the defence. It affects the root of the claim and cannot be resurrected because a party raises it late in the day.
    
23. It is obvious that the issue under consideration before the Master was s. 9 leave requirement under the BA. If the matter was struck out it is obvious that it was done so under the same section for want of leave. There was no need for the Master to give reasons as the section is very clear and is indicative of why a matter would be struck out under that provision.
    
24. I finally find that the Master's decision was an interlocutory one in nature and to appeal from that decision, leave was required. I further find that the Master was correct in striking out the matter under s. 9 of the BA because the action was a nullity in that no leave was obtained before commencing the action.
    

Final Orders

25. In the final analysis, I find that the appeal is prematurely brought and that it does not have any merits either. I therefore dismiss the appeal.
    
26. The respondent shall have costs of the proceedings in the sum of $1,500 to be paid within 21 days.
    

Anjala Wati
Judge
27.04.2016

To:

1. Maqbool & Company for the Appellant.
2. Reddy & Nandan Lawyers for the Respondent.
3. File: Labasa HBC 01 of 2011.