Westpac Banking Corporation Ltd v RD & Sons Commercial Development Ltd [2000] SBHC 54; HC-CC 157 of 1999 (15 December 2000)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 157 of 1999

WESTPAC BANKING CORPORATION

–V-

R D & SONS COMMERCIAL DEVELOPMENT LTD AND OTHERS

High Court of Solomon Islands
(Kabui, J)

Date of Hearing: 14th December 2000
Date of Judgment: 15th December 2000

John Sullivan for the plaintiff
Defendants not in Court

JUDGEMENT

(Kabui J): By a Specially Indorsed Writ of Summons filed on 30 April 1999, the Plaintiff claims against Defendant the sum of $511,455.00 plus interest at the rate of 20.5% per annum as from 10 December 1998 until judgement. The Plaintiff also claims costs. There was a long delay of over a year on the part of the Defendants to respond to the Plaintiff’s Writ of Summons. They had not responded to the Plaintiff's Writ of Summons though served on them by the Plaintiff so that the Plaintiff by Notice of intention to proceed under Order 64, rule 9 of the High Court (Civil Procedure) Rules 1964, (the High Court Rules) filed on 7 June 2000 informed the Defendants of its intention to proceed with its case against them one month from the date of that Notice being 2 June 2000.

The Plaintiff having decided to proceed, filed a Notice of Motion against the Defendants on 6 November 2000 claiming the following orders -

"As against the First Defendant:

1. Judgment be entered for the Plaintiff in the sum of $511,455.00 together with interest thereon at the rate of 20.5% per annum from 10 December 1998 until payment;
   
2. The Plaintiff have leave to sell the First Defendant’s Fixed Term Estate in Parcel Numbers 097-005-76 and 098-012-59 and directions in respect of such sale.
   
3. The First Defendant immediately deliver vacant possession of Fixed Term Estate in the above lands to the Plaintiff;
   
4. The First Defendant, its servants, agents, invitees, licensees or others entering the above lands under the authority of the First Defendant immediately vacate same and remove all their chattels from same;
   
5. The Provincial Police Commander at Gizo, Western Province and all Police Officers under his direction immediately upon receipt of any order made pursuant to paragraph 4 hereof attend and enforce the said order using such force and as is reasonably necessary for such purpose;
   
6. The charge over Fixed Term Estate in Parcel Number 098-012-59 be registered under the Land and Titles Act (Cap 133) nunc pro tunc.
   

As against the Second Defendant

1. Judgment be entered for the Plaintiff in the sum of $511,455.00 together with interest thereon at 20.5% per annum from 10 December 1998 to payment as monies due and owing by the Second Defendant pursuant to a Guarantee;
   
2. The Plaintiff have leave to sell the Second Defendant’s Fixed Term Estate in Parcel Number 098-012-60 and directions in respect of such sale;
   
3. The Second Defendant immediately deliver vacant possession of Fixed Term estate in Parcel Number 098-012-60 to the Plaintiff;
   
4. The Provincial Police Commander at Gizo, Western Province and all Police Officers under his direction immediately upon receipt of any order made pursuant to paragraph 4 hereof attend and enforce the said Order using such force as is reasonably necessary for such purpose.
   

As against the Third, Fourth and Fifth Defendants:

1. Judgment be entered for the Plaintiff in the sum of $511,455.00 together with interest at 20.5% from 10 December 1998 until payment as monies due and owing by the Third, Fourth and Fifth Defendants pursuant to Guarantees.
   

As against all the Defendants:

1. Costs;
   
2. Such further or other relief as to this Honourable Court shall seem meet."
   

The Notice of Motion had also been served upon the Defendants.

The Facts

The Plaintiff is the Westpac Banking Corporation whose office of business is P. O. Box 466, Honiara. The 1^st Defendant is R. D. & Sons Commercial Development Limited whose office of business is P. O. Box 70, Gizo, Western Province. The 2^nd Defendant is Sunil Prakash Dhari, the 3^rd Defendant is Renate Dhari, the 4^th Defendant is Suresh Dhari and the 5^th Defendant, Silvia Dhari. They all appear to be members of the same family, the Dhari family.

By an Agreement dated 8 February 1995, the 1^st Plaintiff trading as Zekolo Timber Millings obtained from the Plaintiff a loan being an overdraft of $427,702.17 plus a loan of $30,000 at the interest rate of 17.75% but in the case these facilities being in arrears, the penalty interest rate would be 20.5% per annum. The other conditions of the loan were that a registered second mortgage over fixed-term parcels 098-012-60 and 098-011-19 to remain in place, an unlimited debt and interest guarantees be provided by Suresh Dhari, Silvia Dhari, Renate Dhari and Sunil Dhari and a mortgage debenture over all the assets and uncalled capital of the 1^st Defendant be in place. First mortgage of fixed-term parcels 097-004-49, 097-004-50, 097-005-76 and 097-005-77 would also be taken as security for the loan in addition to the foregoing conditions/securities. The Guarantee/Mortgage for the indebtedness of the 1^st Defendant was signed on 3 November 1994 by Sunil Dhari and Renate Dhari. The second Guarantee was signed by Suresh Dhari and Silvia Dhari on 6 December 1994. The third Guarantee was signed by the Directors of the 1^st Defendant on 15 June 1995. It would appear from these documents that all the Defendants were Directors of the 1^st Defendant in 1995. The Mortgage Debenture was executed in favour of the Plaintiff on 24 November 1994. The charge over parcels 098-012-60 and 098-011-19 was executed in favour of the Plaintiff on 24 November 1994. The charge over parcels 097-004-49, 097-004-50 and 097-005-76 was executed in favour of the Plaintiff on 13 June 1995. Likewise, the charge over parcel 098-012-59 was executed in favour of the Plaintiff on 20 July 1995.

By letter dated 10 December 1998, the Plaintiff demanded the 1^st Defendant to pay up within 14 days $511,455.00 or else legal proceedings would be instituted by the Plaintiff against the 1^st Defendant. Also, by letter of that same date, the Plaintiff demanded from each of the Guarantors the payment within 14 days of $511,455.00 with the threat of legal proceedings being taken against each of the Guarantors. As of 6 November 2000, none of the Defendants had paid any money to the Plaintiff in satisfaction of the debt of $511,455.00 plus interest. The sum of $511,455.00 still remained outstanding against the Defendants plus interest thereon on the date of the hearing of the Plaintiff's Notice of Motion.

The Plaintiff's Case

The Plaintiff's case is that the Defendants are liable to it for the repayment of the loaned money plus interest and costs. There being no formal appearance on the part of the Defendants nor the filing of a defence by the 1^st, 2^nd and 3^rd Defendants, the Plaintiff is therefore entitled to judgement in default of appearance or defence, the Plaintiff's claim being a liquidated sum. In the case of the 4^th and 5^th Defendants, they too had not filed appearance although they sent a letter together with documents to the Registrar as being their defence. The Plaintiff nevertheless proceeded to prove its claim in the absence of the Defendants under Order 38, rule 6 of the High Court (Civil Procedure) Rules 1964. (the High Court Rules)

The 1^st, 2^nd and 3^rd Defendants' Case

By letter dated 3 June 1999, the 2^nd Defendant wrote to Sol-Law in Honiara in which he notified the High Court of Solomon Islands of his intention to enter appearance and thereafter file defence either through Mr Andrew Radclyffe, Barrister and Solicitor or Andrew Nori, Barrister and Solicitor. This letter was copied to the Chief Justice of the High Court of Solomon Islands. This letter was written on behalf of the 1^st, 2^nd, 3^rd and 5^th Defendants. Suresh Dhari the 4^th Defendant was excluded. No formal appearance or defence was ever filed by anyone on behalf of all the Defendants following this letter. I do not consider this letter as anything other than telling Sol-Law and the Chief Justice that the Defendants were aware of the case against them and would enter appearance and file defence in due course. Nothing more was ever said or done by the 1^st, 2^nd and 3^rd Defendants in terms of defending the case against them. Even after having been served with copies of the Plaintiff's Notice of Motion. They are in default of appearance and have not filed a defence, if any. I find that they are liable to the Plaintiff for the repayment of $511,455.00 plus interest at the rate of 20.5% per annum and costs.

The 4^th and 5^th Defendants' Case

By letter dated 12 December 2000 faxed to the Registrar of the High Court, the 4^th and 5^th Defendants informed the Registrar of their defence. The letter itself alleges "undue influence" and "duress". The letter together with the documents attached to it were not formally filed as documents filed in Court nor do they bear the official stamp of the Court.

Appendices A and B attached to that letter constitute the particulars of the Statement of Defence. This is supported by the affidavits of 4^th and 5^th Defendants. The content of these two affidavits is the same. The Statement of Defence is very confusing indeed. However, what I can make of it is that the 4^th and 5^th Defendants are complaining about the Bank Officer, an employee of the Plaintiff and the 2^nd Defendant who were involved in the execution of the Guarantee executed by them on 6 December 1994. They say the Bank officer and the 2^nd Defendant had not been fair to them in terms of explaining the implications of the Guarantee that they executed based upon the conditions of the Loan Agreement executed by the Plaintiff and the 2^nd Defendant on 8 February 1995. That is, the 4^th and 5^th Defendants were misled or persuaded to execute the Guarantee without full willingness on their part.

The other complaint is that the Plaintiff, the 2^nd Defendant and the 3^rd Defendant had failed to acknowledge that Zekolo Timber Milling was not the 1^st Plaintiff and therefore had no security to offer for the repayment of the loan. They say that the effect of these complaints is that the Guarantee executed by them on 6 December 1994 is null and void. It has no effect in law. It means they are not liable to be called upon as guarantors to repay the loan granted to the 1^st Defendant by the Plaintiff.

Two points arise. Firstly, do they have a defence in law. Secondly, are they hopelessly out of time. As regards the first point, the complaint by them must be taken and considered in the proper context of this case. As of 20 January 2000, the Directors of the 1^st Defendant are still the 4^th and 5^th Defendants. The 2^nd and 3^rd Defendants had resigned as of 30 July 1996. The 1^st Defendant is obviously a family company. The Loan Agreement executed by the 1^st Defendant, the Guarantee/Mortgage executed by the 2^nd and 3^rd Defendants, the Guarantee executed by the 4^th and 5^th Defendants and the Mortgage Debenture executed by the 1^st Defendant were all executed in 1994. The Guarantee by the 1^st Defendant was executed in 1995. All these transactions were, I assume, done when the 2^nd and 3^rd Defendants were still Directors of the 1^st Defendant. The 4^th and 5^th Defendants were included in the Loan Agreement in 1995 as being two of the persons to provide unlimited debt and interest guarantees as security for the loan money approved by the Plaintiff for the use of the 1^st Defendant. As Directors of the 1^st Defendant, it was the duty of the 4^th and 5^th Defendants to know what was going on in the 1^st Defendant and be answerable for the conduct of the 1^st Defendant in its business activities. It is common practice by lending institutions that adequate security is provided for the repayment of loan monies. The Plaintiff is no exception to that practice. The Plaintiff was simply providing a service that the 1^st Defendant needed at a cost. It was not the concern of the Plaintiff that the 4^th and 5^th Defendants should know what they were in for in terms of the Guarantee they executed on 6 December 1994. They as Directors of the 1^st Defendant wanted the loan from the Plaintiff and having accepted the loan and its conditions were obliged to provide the Guarantee. They had no choice as Directors on this score. To say now that they were misled by the Plaintiff and the 2^nd and 3^rd Defendants is ludicrous to say the least. If there is anything at all in the allegation of unfairness, it should be directed at the 2^nd and 3^rd Defendants but certainly not against the Plaintiff. It may well have been bad judgement on the part of the 2^nd and 3^rd Defendants that has resulted in the 1^st Defendant’s indebtedness but such would be a matter between the Directors themselves. As regards allegations that Zekolo Timber Milling was a separate entity, I do not see the relevance of that in this case. It may well be that the Dhari family had incorporated more than one family company with the same Directors or controlling company and one of them is Zekolo Timber Milling. That is another matter and is irrelevant to the question of their liability for the Plaintiff's loan.

On this point, Mr Sullivan, Counsel for the Plaintiff, did point out that this complaint could well constitute a defence on the part of the 4^th and 5^th Defendants. If so, it is a defence against the Plaintiff’s claim. That is to say that the Plaintiff had failed to explain the implications of executing the Guarantee or at least giving the 4^th and 5^th Defendants the chance to seek professional advice before they could execute the Guarantee. Mr Sullivan pointed out that in Australia, the position could well be in favour of the 4^th and 5^th Defendants. Mr Sullivan later kindly provided authorities on this point to the Court. As I have said, the letter and the documents attached thereto faxed by the 4^th and 5^th Defendants on 12 December 2000 above were not filed formally or bear the stamp of the Court. That is not the fault of the 4^th or 5^th Defendants. They are lay persons and as far as they are concerned, they had told the Registrar what defence is in this case. These documents were filed in the Court File and brought to my notice immediately by the Registrar on receipt. I feel that I must look at them and say whether it is a defence or not though technical it may be. In my view, the complaint of undue influence or duress or anything to that effect would constitute a defence in law (see Ross Mining (SI) Limited and Gold Ridge Mining Limited –v- Willie Roni and David Thuguvoda (Civil Case No. 294/97). This defence however is a defence against the current claim by the Plaintiff in its Writ of Summons and Statement of Claim. As against the 2^nd and 3^rd Defendants, that is another matter. In the result, find that the 4^th and 5^th Defendants do have a legitimate defence. They are not now liable to pay to the Plaintiff the sum of $511,455.00 plus interest at the rate of 20.5% and costs. They will if their defence fails at trial, or struck out earlier by the Plaintiff. For now, I make the following orders. That is to say, I order that –

1. Judgment be entered for the Plaintiff against each of the First, Second and Third Defendants in the sum of $511,455.00 together with interest thereon at the rate of 20.5% annum from 10 December 1998 until payment;
   
2. The Fourth and Fifth Defendants have unconditional leave to defend, subject to advising the Court and the Plaintiff’s solicitors of an address for service (other than a post box) within the Honiara central business district;
   
3. The Plaintiff have leave to –
   
   • (a) enforce its charge over First Defendant’s Fixed Term Estate in Parcel Numbers 097-005-76 and 098-012-59;
     
   • (b) enforce its charge over the Second Defendant’s Fixed Term Estate in Parcel Number 098-012-60;
     
   • (c) advertise each of the said land parcels for sale by public tender notwithstanding that its charge over the said Parcel Number 098-012-59 may not have been registered;
     
   • (d) proceed, to the extent necessary, with registration of its charge over the said Parcel Number 098-012-59.
     
4. The Plaintiff shall seek the leave of the Court before accepting any tender or executing any contract for sale of any of the said parcels.
   
5. The First and Second Defendants and their servants, agents, invitees, licensees or any others claiming under their authority within 30 days of the date of this order deliver vacant possession of each of the said lands to the Plaintiff.
   
6. The First and Second Defendants and their servants, agents, invitees, licensees or any others claiming under their authority shall within 30 days of the date of this order vacate remove all their chattels from same.
   
7. The provincial Police Commander at Gizo, Western Province and all Police Officers under his direction upon receipt of a copy of this order attend and enforce the same using such force as is reasonably necessary for such purpose.
   
8. The First, Second and Third Defendants pay the costs of and incidental to the action to be taxed if not agreed.
   
9. Costs as between the Plaintiff and the Fourth and Fifth Defendants be costs in the cause.
   

I am grateful for Mr Sullivan who in advancing his client's case also took time to raise points in favour of the Defendants, particularly in respect of the 4^th and 5^th Defendants, all of whom were not present in Court. This is the proper thing to do and is an example of a good and impartial advocate being also fair to the other side. It is also helpful to the Court. I hope the other lawyers in this jurisdiction do learn from Mr Sullivan and do likewise.

F.O. Kabui
Judge