Brunet v Westpac Banking Corporation [2006] VUSC 12; Civil Case 10 of 2006 (20 February 2006)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 10 of 2006

BETWEEN:

PIERRE JEAN-MARIE BRUNET and CHRISTIANE MARIE BRUNET
Claimants

AND:

WESTPAC BANKING CORPORATION
Defendant

Coram: Mr. Justice H. Bulu

Counsels: Mr. Robert Sugden for the Claimants
Mr. Wade Roper for the Defendant

Date of Hearing: 16 February 2006
Date of Decision: 20 February 2006

DECISION ON THE APPLICATION FOR INTERLOCUTORY ORDERS BY THE CLAIMANTS FILED ON 13 FEBRUARY 2006

INTRODUCTION

History to the Dispute

1. In or about November 2000 Mr. and Mrs. Brunet (the Brunets) approached Westpac Bank (the Bank) to seek finance for the costs of the construction of the Grand Hotel (the Hotel) on title 11/OC22/042.
   
2. An agreement was reached and on 22 February 2001 the Brunets and the Bank executed an agreement for a loan of 364 million Vatu to the Brunets.
   
3. On 21 May 2001 following the execution of the Loan Agreement, the Brunets executed a number of mortgages in favour of the Bank as follows:-
   
   1. a mortgage over title 11/)C22/042 in favour of the claimant.
      
   2. a collateral mortgage over titles 11/OJ32/017, 11/OK34/006, 11/OJ32/020, 11/OJ32/021 and 11/OJ32/011 in favour of the Bank.
      
   100. a second ranking collateral mortgage over title number 11,OJ32/016 in favour of the Bank.
        
4. In early June 2001 the Brunets sought additional advances from the Bank taking their amount of indebtedness to VT477 million. As a result on 8 June 2001 the Brunets extended their variations of the mortgages in favour of the Bank.
   
5. On or about 25 April 2003, it was agreed between the Bank and the Brunets (April 2005 Agreement) that the amount secured under the mortgages, would be increased to vt.807 million together with interests thereon.
   
6. It was a term of the April 2003 Agreement that all monies outstanding thereunder and secured by the mortgages, would be repaid by the Brunets to the Bank on or before 31 July 2003.
   
7. The Brunets failed to comply with the April 2003 Agreement in that they failed to repay all monies owing to the Bank that were secured under the mortgages.
   
8. On 2 December 2003, the Brunets executed a Deed and Irrevocable Powers of Attorney in the Banks favour. As a result, the Bank allowed the Defendants additional time in which to locate a purchaser for the Hotel and withheld action under the mortgages accordingly. The time allowed expired on 1 March 2004. On 30 April 2004 the Bank served a letter on the Brunets together with Notices of Demand for interests then outstanding. Additional demands were served on 4 May 2004 for outstanding interests and again on 10 May 2004 for total outstanding.
   
9. In May the Bank agreed to allow the Brunets additional period in which to effect a voluntary sale of the Hotel to 24 May 2004.
   
10. The Brunets failed again, and the Bank notified them that it will be taking legal proceedings and will rely on the terms of the Deed and the Irrevocable Powers of Attorney provided to it.
    
11. Once it became clear to the Defendants that the Bank was proposing to proceed with a forced sale of the Hotel and had in fact acquired a purchaser to that end, the Brunets in direct contravention of the Deed and the Irrevocable Powers of Attorney, attended the Land Records Office and effected a Revocation of the same.
    
12. On 22 December 2004, the Bank commenced proceedings in Civil Case 237 of 2004 against the Brunets.
    
13. The Brunets failed to file within time any response to the claim filed by the Bank and served on them. Default judgment was entered in favour of the Bank on 24 January 2005.
    
14. The Brunets on 1^st March 2005 applied to the Court to have the Default Judgement set aside. The Supreme Court heard their application on 9 June 2005.
    
15. On 11^th August 2005, the Court issued its judgement refusing to grant the application to set aside the Default Judgement entered against the Brunets.
    
16. Following the Courts Decision on 11^th August 2005 refusing to set aside the Default Judgement entered on 24 January 2005, the Bank and the Brunets entered into a Deed dated 22 August 2005.
    
17. Paragraph O of the Citation of the Deed stated that “notwithstanding and without any admission as to the foregoing, the parties have agreed to resolve all matters and disputes between them on the terms and conditions hereafter appearing.”
    
18. The Deed stipulated time frames within which the Brunets will pay monies to the Bank to repay the loans the Bank had given them thus redeem the mortgages. Three instalment payments are envisaged under Clause 2.5 of the Deed, these being:–
    
    1. VT100,000,000 within 30 days of the execution of the Deed;
       
    2. VT100,000,000 on or before 1 September 2005;
       
    100. Either –
         
         • (i) VT755,755,321 with interest of 13% from 17 July 2005 on or before 30 September 2005;
           
         • (ii) VT761,400,932 with interest of 13% from 17 July 2005 on or before 17 October 2005.
           
19. Clause 2.4 provides that the “Brunets hereby covenant to foregoe absolutely any right to appeal the August ruling and will on the execution of this Deed, execute and provide Consent Orders to the Bank’s solicitors in the 2004 and 2005 proceedings.”
    
20. Following the execution of the Deed, sometime in late August 2005, the Brunets and the Bank reached agreements that the:-
    
    1. Brunets be estopped:-
       
       • (i) from raising any appeal in respect of the Court Orders of 11 August 2005;
         
       • (ii) from raising any objection, appeal or application in opposition to the Default Judgement of 24 January 2005;
         
       • (iii) from raising any objection, appeal or application in respect of any attempt by the Bank to enforce the Default Judgement of 24 January 2005; and
         
    2. the Bank is at liberty to apply for an enforcement warrant for possession of the properties the subject of the Judgement of 24 January 2005.
       
21. That Agreement in relation to Civil Case No. 237 of 2004 was submitted to the Court in the form of a Consent Order and was endorsed by the Court on 30 August 2005. This was done pursuant to clause 2.4 of the Deed.
    
22. Another Agreement was reached in relation to Civil Case No. 97 of 2005 in late August of 2005 also and submitted to the Court in the form of Consent Orders. These were endorsed by the Court on 1^st September 2005. Again this was done pursuant to clause 2.4 of the Deed.
    
23. The 1^st of September Consent Order provided that:–
    

“a) The Bank as Mortgagee be empowered to sell and transfer the leasehold properties contained and described in title numbers 11/OJ32/012 and 11/OJ32/008 (the properties) by such means and in such manner as it shall deem fit;

(b) Pending such sale and transfer the Bank, as Mortgagee, or any agent or agents duly authorised by it in writing, be empowered to enter on the properties and act in all respects in the place and on behalf of the proprietor of the leases, and to apply in reduction of the monies due and owing to the Bank all or any rent received in respect of the said properties.

(c) The purchase monies arising from the sale and transfer of the properties and the monies received (if any) by the Bank pending such sale and transfer shall be applied;

1. Firstly in payment of the expenses occasioned by the sale and transfer or going into and remaining in possession (as the case maybe), including the costs of this application;
   
2. Secondly, in payment of the monies then due and owing to the Bank as mortgages;
   
3. Thirdly, in payment of subsequent registered mortgages or encumbrances (if any) in order of their priority;
   
4. Fourthly, the surplus (if any) shall be paid into the Court pending further orders.
   
100. The Brunets are hereby estopped from raising any appeal of these orders and further they are estopped from raising any objection, appeal or application in opposition to any attempt by the Bank to enforce the same.
     

4. The Bank be at liberty to apply for an enforcement warrant for possession of the properties the subject of these Orders without the need to proceed to any enforcement and at any time following the date of these Orders.”
   

Application by the Brunets for Relief

24. On 13 February 2006, the Claimants in this proceeding applied urgently to the Court seeking the following orders:-
    
    1. “that the Bank be restrained from entering any agreement for the sale of the leasehold property known as the Grand Hotel and having registered title number 11/OC22/042 or otherwise dealing with or encumbering the said leasehold title until further order.”
       
25. The grounds that have been advanced in support of the application are that:-
    
    1. The Bank has obtained on 24/01/05 Orders to sell the Claimants leasehold property 11/OC22/042 pursuant to its mortgage over the said leasehold property.
       
    2. The Claimants are and have for some time been in a position to redeem the said mortgage by means of funds located partially overseas and partially within Vanuatu.
       
    100. The Defendant wrongly refuses to accept the Claimants funds and allow them to redeem the mortgage.
         
    4. The Defendant is in the course of exercising its powers pursuant to the Orders of 24/01/05 and is likely to enter a contract for the sale for the said leasehold property in the very near future.
       
    5. If the Defendant enters a contract for the sale of the said leasehold property the Claimants will probably lose their right to redeem the mortgage.
       

Submission by the Brunets

26. Mr. Sugden on behalf of the Brunets submitted that the right to redeem the mortgages by the Brunets continues to exist. And that if the Bank is allowed to sell the Hotel, the Brunets will lose their redeemable interest.
    
27. The reason why it is urgent to hear the Application by the Brunets is because, the Bank is proceeding to have the Hotel sold. The tender to sell the Hotel closes on 24 February 2006. The Brunets’ right to redeem arose in October 2004, when notices of demand to pay up the loan was served on them.
    
28. Mr. Sugden continued on behalf of the Brunets that, his clients were able to raise the necessary funds to redeem the mortgages. However, the Bank has been unreasonable in its approach. It refused to accept certain moneys that had been cleared by the ANZ Bank and the Financial Intelligence Unit. Mr. Sugden continued to submit that it is the Bank that had breached the Deed.
    
29. Mr. Sugden further submitted that this is an action for redemption. He went on to say that the Bank is fettering the right to redemption of the Brunets.
    
30. Mr. Sugden continued that the Brunets will be seriously disadvantaged if the Orders the Brunets are seeking are not granted as they will lose their right to redeem the mortgages.
    
31. Mr. Sugden submitted that the Orders made after the final judgment i.e. the Orders made on 30 August and 1^st September 2005 are ultra vires the powers of the Court. That on final judgment the Court does not have any powers to make such orders.
    
32. He submitted that those orders are void and he can continue with his application.
    

Submission by the Bank

33. Mr. Roper on behalf of the Bank submitted that the application by the Brunets be dismissed. The ground advanced for this application is that that application by Mr. Sugden on behalf of the Brunets is an abuse of process. In August and September 2005 Consent Orders were made that prevented such an application by the Brunets to be made. The Orders are valid and have the force of law and the only way to come to Court on matters the subject of the Court’s Orders is under the Civil Case No. 237 of 2004. Mr. Sugden needs to apply under that matter to set aside the orders made thereunder before he can raise the current application.
    
34. Mr. Roper submitted further that the right to redemption of a mortgage is a right that must be exercisable within a reasonable period of time. The right to redemption in this matter arose in October 2004. We are now in 2006. It is not a reasonable period of delay or time at all.
    
35. Mr. Roper further submitted that the Courts have held that when mortgagor come to Court he must be in a position to make good on his position. The Brunets must be able to show the Court that they have the money, to pay off the loan. Mr. Roper continued that what the Brunets are saying is essentially that they want more time.
    

ISSUES

36. Two main issues arise out of this proceeding for determination by the Court. Firstly, whether this is an abuse of process given the Supreme Court Orders of 24 January 2005 and 11 August 2005 and the Consent Orders of 30 August and 1^st September 2005. Secondly, that if the Court finds that it is not an abuse of process, whether the Applicant has a serious question to be tried, and the Applicant would be seriously disadvantaged if the order is not made. The second issue is basically the test that must be satisfied for the Applicants to be successful in their application.
    
37. As such the Court needs to deal with the former first as the answer to that will basically decide whether the Court needs to deal with the second issue.
    

First Issue

38. Can the Court entertain this Application in the face of its Orders of 24^th January 2005 and 11^th August 2005, and Consent Orders of 30^th August 2005 and 1^st of September 2005.
    

DISCUSSION

39. On 24 January 2005, the Supreme Court in Port Vila entered Judgment in favour of the Bank. The Orders of 24 January 2005 specifically empowered the Bank to sell and transfer the leasehold properties in titles 11/OC22/042, 11/OJ32/017, 11/OK34/006, 11/OJ32/020, 11/OJ32/021, 11/OJ21/011 and 11/OJ32/016.
    
40. The 11^th August 2005 Judgement refused the Application by the Brunets to set aside the Default Judgement of 24 January 2005. It thus in effect reconfirmed the orders made in the 24 January 2005 decision empowering the Bank to sell certain properties mortgaged in favour of the Bank, one of which is title 11/OC22/042 (the Hotel)
    
41. On or about 30 August the Bank and the Applicants reached agreements and formulated them as consent orders in relation to Civil Case No. 237 of 2004 which the Court endorsed. Paragraph 1 of the Consent orders states:-
    

"1. The First and Second Defendants are hereby estopped from raising any appeal in respect of this Court’s Orders of 11 August 2005 dismissing the Defendants’ Application to set aside the Judgement of 24 January 2005 and further the Defendants are estopped from raising any objection, appeal or application in opposition to the Default Judgement of 24 January or in respect of any attempt by the Bank to enforce the same.”

42. The Deed of 22^nd day of August 2005 in essence gave the Applicants (the Brunets) an opportunity to redeem the various mortgages entered into in favour of the Bank. The time frame within which to do that is very clear. These are set out in Clause 2.5 of the Deed. The latest by which the Brunets were given to repay their loans or redeem the mortgage in relation to the Hotel was 17 October 2005.
    
43. Clause 2.4 makes it very clear that the Brunets had agreed to forego absolutely any right to appeal the August 2005 ruling and will on the execution of the Deed, execute and provide consent orders to the Banks’ solicitors in 2004 and 2005 Proceedings.
    
44. Mr. Sugden on behalf of his clients submitted that the Consent Orders are ultra vires the powers of the Court. That they are void and he can continue with his application. He submitted that after Judgement has been entered the Court ceased to have powers to deal with the same matter, and especially in the nature of the Consent Orders.
    
45. Mr. Roper submitted that the Court has powers to make orders of the kind made on 30 August and 1^st September 2005.
    
46. Mr. Sugden maybe correct in his submissions on this point. However, in my view, whether the order is valid or not, it is an order of the Supreme Court, and has the force of the law until declared otherwise by a Superior Court. And while it remains everyone must confirm to its terms.
    
47. The nature of the relief being sought by the Brunets is to restrain the Bank from selling the Hotel. That runs contrary to the Orders of the Court especially the Consent Orders. It is an application which attempt to and, if granted, will restrict the Bank from exercising its rights under these Orders of the Court.
    
48. The Brunets have agreed not to challenge the right of the Bank to sell the Hotel. That agreement had been endorsed by the Court.
    

FINDINGS

49. Reading Clause 2.4 of the Deed, the Consent Orders and the decision of the Court, I fail to see how this proceeding can be maintained.
    
50. It is my view that this application must fail. The proper way for the Brunets to approach this issue is to apply under the Civil Case No. 237 of 2004 challenging the Orders made thereunder.
    

Second Issue

51. Given the Courts finding on this issue, there is no point in trying to deal with the second issue.
    

ORDERS

52. The formal Orders of the Court are:-
    
    1. The application by the Brunets to restrain the Bank from entering any agreement for the sale of the leasehold title known as the Grand Hotel and having registered title number 11/OC22/042 or otherwise dealing with or encumbering the said leasehold title until further orders of this court, is refused.
       
    2. Costs in favour of the Bank on the standard basis to be paid by the Brunets as agreed or to be taxed.
       

DATED at Port Vila, this 20^th day of February 2006.

H. BULU
Judge.