Extreme Business Solutions (Fiji) Ltd v Bank of Baroda [2014] FJMC 160; Civil Action 373.2012 (10 December 2014)

IN THE FIRST CLASS MAGISTRATES COURT
AT SUVA
CIVIL JURISDICTION
Civil Action No. 373/2012

BETWEEN:

EXTREME BUSINESS SOLUTIONS (FIJI) LIMITED
a limited liability company having its registered office at Lot 34 Knolly Street, Suva in Fiji
PLAINTIFF

AND:

BANK OF BARODA
a body duly incorporated under banking Act Cap 212 having its principal Place of business at Mark Street, Suva in Fiji
DEFENDANT

Counsels: Mr. Chand for the Plaintiff
Ms. Devan for the Defendant

JUDGMENT

INTRODUCTION

1. The Plaintiff filed a writ of summons on 25th July 2012 against the defendant seeking following orders inter alia:
   
   • (i) Judgment in the sum of $11,513.00
     
   • (ii) Interest on the sum from the date of the cause of the action
     
   • (iii) Cost
     
   • (iv) Such further reliefs and orders as this honorable Court deems fit in the circumstances.
     
2. The basis of the plaintiff's claim was the defendant bank charging a sum of $11,513.00 from the plaintiff's account after the defendant withdrew a loan offer.
   
3. The defendant filed his statement of defence on 23rd October 2010 in which they pleaded that this sum was charged for bank charges for loan process, credit service fees, inspection and document handling charges. Therefore the defendant prayed this claim to be dismissed with cost.
   
4. In his reply to defence filed on 08th April 2013 the plaintiff admitted that the offer and acceptance signed by the parties contained provisions for bank to charge this sum but only after the loan being processed and credited to his account.
   
5. Minutes of Pre- Trial conference filed on 20th May 2013 reads as follows:-
   

AGREED FACTS

1. THAT the Plaintiff is a limited liability company having its registered office at Lot 34 Knolly Street, Suva in Fiji.
   
2. THAT the Defendant is a body duly incorporated under banking Act Cap 212 having its principal Place of business at Mark Street, Suva in Fiji.
   
3. THAT the Defendant is a Commercial Bank originally incorporated in India and s engaged in providing banking services in its authorized branches Fiji wide.
   
4. THAT on or about 6th December 2010 via its letter of offer the Defendant offered the Plaintiff a Demand Loan in the amount of $1,090,300.00 (One Million, Ninety Thousand Three Hundred Dollars) which the Plaintiff accepted on or about 7th December 2010.
   
5. THAT the loan was approved for a term of 12 months and was to be paid on monthly installments of $18,432.00 for 7 years at an interest of 10.00% per annum.
   

DISPUTED FACTS

1. Whether the Defendant is liable to charge the amount of $11,513.00 being the processing, credit fee, inspection and document handling charges before the loan is processed and securities being inspected or after the appropriate securities being inspected, the loan being processed and upon the loan amount being credited to the Plaintiff's account?
   
2. Whether the Defendant had authority to withdraw the amount of $11,513.00 without any authorization or prior notice from the Plaintiff's Bank Account?
   
3. Whether the Defendant is liable to refund the $11,513.00 deducted from the Plaintiff's Bank Account?
   
4. Whether the Defendant has refunded a sum of $3,135.75 to the Plaintiff and whether only the balance of $8,377.25 has been retained by Defendant?
   
5. Whether the Plaintiff had breached any terms and condition of the offer letter?
   
6. Whether the Defendant had breached any terms and condition of the offer letter?
   
7. Whether the Plaintiff sent numerous reminders to the Defendant to pay the said amount of pay the said amount of $11,513.00?
   
8. Whether the Plaintiff sent a Demand Notice to the Defendant to pay the said amount of $11,513.00?
   
9. Whether the Plaintiff is liable for Interests and costs?
   
6. The hearing was conducted on 20th August 2014 in which Yogendra Sharma (director of the plaintiff company) and Usha Narayn( Bank Manger) gave evidence. At the end of the hearing even though both parties opted to file closing submissions. Only the defendant filed their submission up to now. Therefore I have considered only that for my Judgment.
   

PLAINTIFF'S CASE

7. For the plaintiff Mr.Yogendra Sharma gave evidence. He said that he is a director of the plaintiff company (Extreme Business Solutions) and applied for a loan from the defendant bank. On 06th December 2010 the bank offered a letter saying the loan was approved subject to fulfilling certain terms. The witness deposited a sum of $12,013.00 in to an account and after 3-4 days the loan was declined. The reason given was that he did not fulfill the loan criteria . The plaintiff marked the offer letter as PE-01. Later the bank refunded only $3,135.75 to the plaintiff and the bank statement was marked as PE-02. PW1 further said that the offer letter was given as the bank has gone through his documents and he provided all the security for the loan. The plaintiff through his solicitor sent a demand letter dated 03rd August 2011(PE-03) and got a reply dated 16th August 2011 (PE-04).
   
8. In cross- examination PW1 said he was familiar with the bank process and applied for this loan to refinance an exciting debt and to purchase another company. PW1 requested the loan on 24th November 2010 (MFI-01) and the bank offered the letter of offer on 06th December 2010 (PE-01). PW1 also agreed that the loan was offered subject to terms and conditions in the letter. The bank had to carry out a credit assessment and in the offer letter the bank informed him to deposit $11,513.00 . The defendant also told that the bank asked him to pay $12,013.00 and agreed that the bank carried out inspection and visited his premises for that. The defendant also admitted that on 27.12.2010 he sent an email (MFI-02) to the bank asking them not to process with his loan application. He also agreed that the bank did not withdraw the offer and tried to assist him by asking for further securities. The bank also refunded him $3,135.75 and when inquired about the balance was told that was for process fees. PW1 also accepted the offer letter. In re- examination the witness said that he provided all the securities as the bank requested and the bank did not make a diligent search. As for the email he sent that after the loan was rejected by the bank.
   

DEFENDENDENT'S CASE

9. The defendants called Ms. Narayan as a witness. She is the manager of Suva branch of the defendant bank. On 06th December 2010 the plaintiff opened an account in the bank and made a written request for a loan. This was marked as DE-01. The purpose of the loan was to refinance an exciting debt and to purchase a new business. The bank obtained all the information and supporting documents from the plaintiff and the main consideration was the repayment ability of the customer. The bank had a meeting with PW1 on 06th and 07th November and the offer letter was issued and this was accepted by the plaintiff. The processing fees was charge incurred by the bank for an applicant once the application for loan goes through all approval assessment and the credit service fee would apply once the loan was given to the customer. The plaintiff was required to open a bank account with a minimum balance of $500.00 and as soon as the customer accepted the loan, processing fee would be recovered by the bank. The bank carried out the inspection of the premises (DE-03) and after their solicitors advised them about the problem with the security the bank requested the plaintiff for an alternative security. The bank refunded the plaintiff some amount after PW1 instructed them to stop processing the loan application and in re- examination said there was no clause for refund of processing money if the loan was withdrawn.
   
10. In her detailed submission the learned counsel for the defendant argued that by accepting the offer letter the plaintiff agreed for the conditions in that offer letter and the bank was entitled to recover fees and charges according to that. And also the bank withdrew the offer letter after the plaintiff gave the instruction to stop processing the loan and there were no clause in the offer letter to refund the money. Therefore the defendant submitted that the plaintiff was bound by an agreement and not entitled to recover this amount.
    

ANALYSIS

11. The crux of the plaintiff case is that as the loan offer was rejected the bank should refund all the money that was deducted from his account. The plaintiff argued that the bank being satisfied offered the loan and later without any notification rejected that.
    
12. But PW1 admitted in the cross examination he told the bank to stop processing the loan application. Also even though the plaintiff was claiming $11,513.00 in his writ he admitted during cross- examination before instituting this action the bank refunded him $3,135.75 which leaves balance of $8,177.25 that need to be refunded.
    
13. Therefore only issue to be determined in this case is whether the plaintiff is entitled to be reimbursed with this amount ($8,177.25). The position taken by the bank is that by accepting the offer letter there was a valid contract between the parties which I also agree with. Therefore the parties are bound by that contract.
    
14. The relevant clause in that offer letter is clause 11(VI) which states that:
    

' A processing/credit service fee together with inspection/document handling charges of $11,513/- will be recovered from your account upon acceptance of offer latter'.

15. Based on this clause the bank deducted this amount from the plaintiff. Also PW1 agreed with the suggestion made by the learned counsel for the defendant in the cross- examination that the bank did not withdrew this loan and they tried assisting him with the loan. In fact it was the plaintiff who sent an email (DE-02) and asked the bank to stop processing the loan.
    
16. Banks have to incur expenses in processing loans and they can recover this from the customers. This is a normal practice and in this case also I find that the bank recovered these expanses from the plaintiff as processing fees. Banks like any other business institute need to cover their expenses. Also when the loan is rejected there is no provision in the offer letter which oblige the bank to refund this amount back.
    
17. As the bank did not disburse the loan and no inspection were carried out these amount ($3,175.75) was refunded to the plaintiff. They retained only the sum that was for processing fees and the bank has no duty to refund this amount. Therefore I find that the plaintiff has failed to prove on balance of probability his claim.
    
18. Accordingly I order as follows:
    
    1. The Plaintiff's statement of the claim is dismissed
       
    2. Cost of $1000.00 summarily assessed to be paid to the defendant bank by the plaintiff.
       
19. 30 days to appeal.
    

10th December 2014

H.S.P.Somaratne
Resident Magistrate, Suva