National Bank of Vanuatu v Kaluat [1998] VUSC 19; Civil Case 174 of 1997 (10 June 1998)

IN THE SUPREME COURT OF

THE REPUBLIC OF VANUATU

LUGANVILLE, SANTO

CIVIL JURISDICTION

CIVIL CASE NO. 174 of 1997

BETWEEN:

NATIONAL BANK OF VANUATU

Plaintiff

AND:

REECE KALUAT

1st Defendant

AND:

MOSES MOLI

2nd Defendant

Coram: Mr Justice Oliver A Saksak

Mr William Lory - Clerk of Court

Mr Mark Hurley for the Plaintiff

Mr Reece Kaluat in person unrepresented

Mr Moses Moli in person unrepresented

JUDGMENT

The Plaintiff institutes proceedings by way of Writ of Summons specially endorsed filed on 8th December 1997. The Plaintiff sought tracing and restraining Orders by Ex Parte Summons on 10th December 1997 as to usage of funds. None of the tracing orders have been complied with by the Defendants. The Plaintiff has asked that the Court grants final declarations and orders.

Mr Hurley for the Plaintiff Bank submitted that the Defendants had no defence because they failed to enter appearance and file defences. He referred the court to affidavits of service of the Originating Summons. The Court accepts that no appearances or defences have been filed by the Defendants.

There are 2 parts to the claim. The first consists of funds loaned to the First Defendant under a Mortgage Agreement signed between the First Defendant as the Mortgagor and the Plaintiff as the Mortgagee. The mortgage Agreement was signed and dated 25th April 1995. It is annexed to the affidavit of Ben Dick Dali as Annex "A". The First Defendant mortgaged title No.03/0191/069 as security for the funds advanced to him by the Plaintiff. Initially the loan advanced was VT2.000.000. By a Variation dated 29th August, 1995, the sum of VT2.000.000 was increased to VT6.000.000.

The First Defendant failed to make repayments in accordance with the terms of the Mortgage Agreement. The Plaintiff, pursuant to clause 1 of the Mortgage Agreement issued a Notice of Demand (Annex "C") dated 10th June 1996. There was no compliance with such a demand and the plaintiff claims recovery of the sums outstanding.

Mr Hurley tendered an update of accounting statements showing balances outstanding against the First Defendant as at 9th June 1998 to be as follows:-

(a) Loan Account - VT1.620.589

(b) Housing Loan - VT10.257.314

The total amount submitted as owing to the Plaintiff from the First Defendant is therefore VT 11. 895.903.

The First Defendant and the Second Defendant were not represented. They spoke for themselves. The First Defendant admitted that the sums of VT11.895.903 were outstanding in his name. He told the court that he could not pay because he was dismissed and he was unable to obtain a job although he had tried to seek employment opportunities at several places.

On the First Defendant's admission and his failure to enter an appearance and file a defence, the court hereby makes the following orders:-

(1) That the First Defendant pays to the Plaintiff the sums of VT 11.895.903.

(2) That the First Defendant pays interests as and from 9th June 1998 at the rate of 16% per annum on the loan Account and at the rate of 9% on the Housing Account.

(3) That the First Defendant pays the costs of an incidental to this proceeding, to the taxed if not agreed.

Turning now to the Plaintiff’s second claim it is against both the First and Second Defendants. The Plaintiff seeks three declarations and two orders in their Originating summons.

In his submission Mr Hurley tells the Court that the Plaintiff was prevented from proceeding under the normal mortgage and power of sale proceedings. The circumstances under which all these happened were that under the Mortgage Agreement dated 25th April 1995 the security mortgaged was land title No.03/0191/069. However when the First Defendant obtained the loans from the Plaintiff he did not build his house on the said title. Instead by some negotiation the Second Defendant gave a plot of his customary land to the First Defendant on which to build his house. The land given by the Second Defendant to the First Defendant is not registered. That being so the Plaintiff is unable to register the mortgage between them and the First Defendant. The Plaintiff says therefore that they have been denied their equitable rights. The Plaintiff submits that the Defendants are the constructive trustee for the Plaintiff as far as the unencumbered value of the rural land is concerned. He submits further that the First and/or Second Defendant have been unjustly enriched by the improvements to the rural land to the detriment of the Plaintiff legal and equitable right to its security as contemplated at the time when the Mortgage dated 25th April 1995 as varied on 29th August, 1995 were entered into. And the Plaintiff submits that the moneys advanced by the Plaintiff Bank to the First Defendant can be traced to the Second Defendant's land. The Court was referred to Annexures "D" and "E" of Ben Dick Dali's affidavit in support of this submission. It is clear by these evidence that the moneys advanced by the Plaintiff to the First Defendant are traced to the Second Defendant's land. The First Defendant and the Second Defendant both admit this to be so.

The Plaintiff through Counsel submits the legal authority for their submission by referring to the case of Boscawen and Others v Bajwa and Another [1996] A.C. WLR 328. I was referred to the speech of Millet LJ at p.334 paragraph 4 which reads:-

"If the plaintiff succeeds in tracing his property, whether in its original or in some changed form, into the hands of the defendant, and overcomes any defences which are forward on the defendant's behalf, he is entitled to a remedy........."

The court accepts this case as good law. There is no defence available to the defendant here since they both have admitted that the house built on the Second Defendant's land was built out of the moneys advanced to the First Defendant by the Plaintiff. That being so, the Plaintiff is entitled to the declarations and remedies requested. The Court is satisfied that the First and Second Defendants held the rural land given to the First Defendant by the Second Defendant as constructive trustee for the Plaintiff. Further the Court is satisfied that the First and Second Defendants have been unjustly enriched by the improvements to the rural land given to the First Defendant by the Second Defendant to the detriment of the Plaintiff and the Plaintiff is entitled to a remedy.

The Plaintiff further submits that the First Defendant did not have a registered negotiator certificate as required under the provisions of the Land Reform Act [CAP. 123], section 6. By subsection (3) the discretion to refuse to approve an agreement or to agree to approve lies with the Minister responsible for land matters. Base on this provision the Plaintiff seeks an order of specific performance on the Defendant to obtain the Minister's approval on their agreement to enable the land to the registered and the Plaintiff’s Mortgage secured by registration.

The First Defendant openly admitted that he did not build a house on the title as shown in the Mortgage Agreement. He says that that land is not suitable as it has cliffs which would be too expensive for him to improve. He says that he approached the First Defendant and asked for a plot of land to build his house. He says that the Second Defendant agreed to give him a plot of land on which the house in question now stands. He owns that house and he is living in it with his family. The land belongs to the Second Defendant. Mr Moli, the Second Defendant confirms what the First Defendant says.

With all that has been pleaded by the Plaintiff and the submissions of the Defendants I find in favour of the Plaintiff. I am satisfied that the Defendants have no defence and that the Plaintiff is entitled to the declarations and orders they seek which follow.

DECLARATIONS AND ORDERS

IT IS HEREBY DECLARED THAT -

(1) The First Defendant and Second Defendant hold the rural land given to the First Defendant by the Second Defendant as constructive trustee for the Plaintiff save in so far as the unencumbered value of the rural land exceeds the Plaintiffs variation of a Terms of a mortgage dated 29th August 1995 plus interest and costs.

(2) The Plaintiff holds an equitable mortgage over the rural land given to the First Defendant by the Second Defendant save in so far as the unencumbered value of the rural land exceeds the Plaintiffs variation of a Terms of a Mortgage dated 29th August 1995 plus interest and costs until such time as the Plaintiff holds a legal mortgage pursuant to the Land Leases Act No.4 of 1983 [CAP. 163]

(3) The First and/or the Second Defendant have been unjustly enriched by the improvements to the rural land to the detriment of the Plaintiff’s legal and equitable right to its security as contemplated at the time when the mortgage dated 25th April 1995 and the Variation of Terms of Mortgage dated 29th August 1995 were entered into.

Upon the declarations made above, IT IS HEREBY ORDERED THAT:-

(1) The First and Second Defendants take all necessary steps to register the rural land given to the First Defendant by the Second Defendant, including, without limiting the generality of the foregoing, obtaining a registered survey plan and obtaining the Minister's consent to the said registration.

(2) Where the First and Second Defendants within a period of 2 months from the date of this Order have defaulted in compliance with Order 1 above, the Plaintiff be at liberty to take all necessary steps to effect registration at the expense of the First and Second Defendant.

(3) The First and Second Defendants will pay the Plaintiffs costs of and incidental to this suit, to the taxed if not agreed.

DATED at Luganville this 10th day of June, 1998.

BY THE COURT

OLIVER A SAKSAK

JUDGE OF THE SUPREME COURT