ANZ Bank (Vanuatu) Ltd v Heihei [2012] VUSC 137; Civil Case 17 of 1999 (19 March 2012)

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

Civil Case No: 17 of 1999

BETWEEN:

ANZ BANK (Vanuatu) Limited
Claimant

AND:

MARKSON HEIHEI
First Defendant

AND:

RASA LOUIS of Vanuatu
Second Defendant

Mr Justice Oliver A. Saksak
Mrs Anita Vinabit - Clerk

Ms Jennifer La'au for the Claimant
Mr Eric Molbaleh for the First Defendant
Mr Collin Bright Leo for the Second Defendant

Dates of Hearing: 14th, 15th and 28th February 2012.
Date of Judgment: 19th March 2012.

JUDGMENT

History And Chronology of Events - Part One

1. This case has a long and winding history. It started back on 23rd February 1999 when the first affidavit was filed. However the originating summons dated 16th May 2000 was filed only 17th May 2000. A defence and Counterclaim was filed by the First Defendant on 28th March 2001. The originating summons was amended and filed on 6th June 2001. The Court held a Conference hearing on 20th July 2001. Direction Orders were issued on 1st August 2001. On 4th October 2001 the Court issued a ruling on the Claimant's application for strike out of defence heard on 2nd October 2001. On 25th July 2002 the First Defendant filed for Judgment in Default of Appearance. On 19th November 2002 the Court issued further directions. On 10th February 2003 an application was filed seeking powers of sale. On 14th February 2003 the Order for Power of Sale was granted. On 14th April 2003 the Court issued an Enforcement Warrant which expired on 31st December 2003. On 12th March 2004 the First Defendant applied for leave to appeal out of time and for an Order to suspend the Enforcement of the Power of Sale dated 14th February 2003. Leave was refused. The First Defendant appealed to the Court of Appeal on 3rd June 2004. His appeal was allowed by the Court of Appeal on 11th June 2004. The Court of Appeal issued the following Orders :-

"(1) Leave to appeal is granted and the appeal is allowed.

(2) The judgment of 14th February 2003 is set aside including the orders as to costs.

(3) Leave is granted for the appellant to file his defence and counterclaim out of time under the new rules. This must be done by 1st July 2004. Within the same time the correct entitling must be attended to.

(4) A conference should be convened in the Supreme Court as soon as possible thereafter to determine the future conduct of the hearing.

(5) Each party to meet their own costs."

That is the first leg of the history.

Part Two

2. Now for the second leg, no defence and counterclaim were filed by the First Defendant on 1st July 2004 being the expected date of the Court of Appeal Order. On 26th July 2004 Ridgway Blake Lawyers wrote to the Registrar seeking a relisting. On 28th July 2004 the Registrar responded advising counsel their file was being transferred to Santo. On 23rd August 2004 counsel wrote to the Registrar in Santo to enquire about the matter. There being no response counsel wrote follow-up letters on 3rd September 2004, 21st December 2004, 24th March 2005, 7th June 2005 and 20th July 2005. On 21st September 2005 the Registrar issued a Notice of Conference returnable on 3rd October 2005. On 3rd October 2005 the Court sat and issued further directions requiring the First Defendant to file his defence and counterclaim within 14 days. On 28th October 2005 counsel filed a Reply and Reply to the Defendant's Counterclaim. On 5th December 2005 the Court issued further directions requiring the Claimant to file sworn statements within 21 days and allocated a return date for 20th February 2006. On that date the Court sat and fixed the hearing date for 6th April 2006 and ordered the parties to pay for their trial fees. On 27th February 2006 both parties paid their trial fees of VT15,000 each. The Court files do not held any record of what occurred on 6th April 2006 and the intervening period until on 29th May 2008 when the Claimant filed a Reply to the Amended Defence and Counterclaim. On 17th June 2008 the Registrar issued a further Notice of Hearing returnable on 9th July 2008. On that date the First Defendant filed his sworn statement in response to the sworn statement of Dudley Wai dated 28th March 2008. There was a hearing on that date and further directions were issued returnable on 7th October 2008. This hearing was vacated at the request of the Claimant made in their letter of 6th October 2008. The Court responded by letter dated 7th October 2008. Claimant's counsel wrote further letters on 14th and 22nd October 2008 and 5th November 2008 seeking trial dates. The last letter they wrote in 2008 was on 15th December 2008 expressing listing difficulties and seeking a listing in April 2009. Counsel wrote again on 18th March 2009 seeking a listing on 4th May 2009. On 31st March the Registry issued Notice of Mention returnable on 4th May 2009. On that date the Court sat and adjourned the matter for trial to 4th August 2009. Counsel wrote letters on 29th and 31st July 2009 concerning the listing on 4th August 2009 as they were having difficulties reaching the Second Defendant Rasa Louis and sought for the matter to be stood over. Our files do not hold any record of what occurred on 4th August 2009 and in the intervening period until 17th February 2011 the Court on its own motion issued a Notice of Pre-trial Conference returnable for 26th April 2011. The Public Solicitor wrote a letter on that date seeking an adjournment. The Court sat on that date without the defendants or their counsel and adjourned the conference to 18th May 2011. On 24th March 2011 Mr. Leo informed counsel for the Second Defendant he had entered appearance on behalf of Rasa Louis. On 29th March 2011 Mr. Leo was served by Mr. Johnny La'au with a number of documents. Mr. La'au filed sworn statement as to service on 16th May 2011. On 17th May 2011 Mr. Leo filed a defence on behalf of the Second Defendant, and on 18th May 2011 counsel filed a sworn statement by his client Mr. Rasa Louis. On 18th May 2011 the Court sat. The First Defendant was not present either personally or by counsel. Further directions were issued and the case was adjourned to 15th June 2011. On that date neither the defendants nor their counsel were present. Mr. Morrison, counsel for the Claimant proposed to draft a timetable order and submit it to the Court for endorsement. No such draft order was ever submitted. The Court then again on its own Motion issued a Notice of Mention on 14th October 2011 returnable on 9th November 2011. This listing was vacated. The matter was next called by the Court on 14th February 2012 when trial started. The Second Defendant and his counsel were not present therefore the trial was adjourned part-heard to 21st February 2012 to allow Mr. Leo and his clients to appear. On 28th February 2012 the trial continued when the First and Second Defendants presented their defences and evidence. At the end of the trial Mr. Leo indicated he would file written submissions. Counsel for the Claimant and the First Defendant were to present oral submissions on 1st March. However on 1st March 2012, in the absence of Mr. Leo's written submissions and for the judge having had to convene a Parole Board Meeting that day, it was mutually agreed that all counsel be allowed time to do written submissions and to submit them by 12th March 2012 (for the Defendants) and responses (by Claimant) by 15th March 2012. Despite those directions the Claimant filed their written submissions on 1st March 2012 and the First Defendant filed his written submissions on 6th March 2012.

3. From February 1999 to 11th June 2004 when the Court of Appeal allowed the First Defendant's appeal, the case had journeyed for some 5 years. And from June 2004 to 28th February 2012 it has been some 8 years. Altogether the matter has taken some 13 years from February 1999 to February 2012.

The Facts

4. The facts that gave rise to this case are quite simple and I state them as follows:

(a) In 1996 the First Defendant applied for a personal loan in the sum of VT1,000,000 from the Claimant. This was to assist him with the purchase of kava plants. This loan was approved in June 1996 and a letter of offer stating the terms and conditions of the loan was accepted by the First Defendant and endorsed by him on the same date.

(b) In 1997 the First Defendant applied for an additional loan in the sum of VT1,700,000. The purpose of this additional loan as stated was to assist him with further development on kava farm. This loan was approved in March 1997 and another letter of offer stating the terms and conditions of the loan was accepted by the First Defendant and endorsed by him on 17th March 1997.

(c) When he applied for an additional loan of VT1,700,000 the First Defendant had repaid VT500,000 of his first loan leaving the balance of VT500,000. Adding this to the additional loan the total was VT2,200,000.

(d) The First Defendant gave security for this loan comprising of –

(i) Registered mortgage over leasehold title 03/OJ74/004;

(ii) Letter of Charge over Term Deposit (Direct).

(e) Leasehold Title 03/OJ74/004 is registered jointly in the name of the First Defendant and Second Defendants.

(f) The First Defendant mortgaged to the Claimant all his interest as registered proprietor in Leasehold Title No. 03/OJ74/004 on 9th December 1999 to secure the repayment of VT2,200,000 advanced by the Claimant.

(g) Under the term of the Letter of Offer dated 13th March 1997 the First Defendant was to make repayments in the sum of VT75,000 per month. He made 9 payments between 30th June 1997 and 1st June 1998. However he made other payments between 19th June 1997 and 18th September 1998 in lesser amounts than VT75,000. On two occasions he made payments of more than VT75,000. On 12th March 1998 a payment of VT79,752 was made and on 11th August 2008, a payment of VT98,000 was made.

(h) Despite those payments the First Defendant had fallen into arrears so that by 1st November 1998 his arrears were in the sum of VT1,526,491.

(i) On 11th November 1998 the Bank issued a Notice of Demand for the payment of the sum of VT1,526,491 in full failing which the Bank would exercise its rights, powers and remedies under the mortgage.

(j) The First Defendant failed or omitted to pay the arrears as demanded. The Bank then instituted proceedings by way of an Originating Summons under the Old Civil Procedure Rules.

(k) As a result of that failure and/or omission, the arrears have accumulated in interests and costs to the sum of VT14,747,006 as at 3rd January 2012 and continuing to accrue daily.

Reliefs Sought by the Bank

5. The Claimant Bank seeks powers of sale over leasehold title No. 03/OJ74/004 pursuant to Clause 2.1 if the First Schedule of the Mortgage Agreement dated 8th December 1999 in order to recover the arrears of VT14,747,006.

Defences of the Defendants

6. The First Defendant asserts that:-

(a) He had paid off the first loan of VT1,000,000 in full therefore denying he had a balance of VT500,000 as at 13th March 1997.

(b) Of his second loan of VT1,700,000 he accepts the default in repayments however asserts that in the year 2000 the Bank had confiscated his two vehicles and sold them off without disclosing the sale prices or value. He further asserts that had such disclosure been done it would show that he has paid off his loan of VT1,700,000, and as such he has no arrears.

(c) He denies liability for the total sum of VT14,747,006.

7. The Second Defendant asserts that:-

(a) He never consented to the Mortgage agreement dated 8th December 1999.

(b) He claimed signing any document at the Claimant Bank to indicate he agreed to mortgage the property in leasehold title 03/OJ74/004.

(c) His signature to a letter dated 25th October 1999 was forged.

(d) He denies any liability for the repayment of the First Defendant's loan and for the sum of VT14,747,006.

Burden and Standard of Proof

8. It is common knowledge that in civil cases he who asserts a fact has the burden of proof on the balance of probabilities. In this case the Bank has that general burden of proof. That burden shifted to the First Defendant in light of his counter-allegations and to the Second Defendant in light of the counterclaims he raises in his defences.

Issues

9. The Claimant Bank raised the following issues for the Court's considerations:-

(a) Whether the First and Second Defendants executed the Third Party Mortgage with the Claimant over leasehold title 03/OJ74/004?

(b) Whether the First and Second Defendants defaulted under the terms of the Third Party Mortgage dated 8th December 1999?

(c) Whether the Second Defendant knew he and the First Defendant were indebted to the Claimant under the Mortgage?

(d) Whether the Claimant gave sufficient Notice of Demand under the Mortgage to the First and Second Defendants of their indebtedness to the Claimant?

The Claimant urged the Court to answer these issues in the affirmative.

Discussions

10. The validity of the Third Party Mortgage dated 8th December 1999 is under challenge in particular by the Second Defendant on grounds that he was never made aware or told about the mortgage at any time in 1999. Further that he had never signed any such mortgage or letter of offer or any other relevant document that may have been required or produced by the Claimant.

11. The First Defendant however admitted he signed the Third Party Mortgage in the presence of Mr. Peter Robin Jones. However he was not sure or certain whether or not the Second Defendant was present at the time and that it was he who had signed the document.

12. The Claimant produced evidence from Mr. Samson Tari and from Elizabeth David. However their evidence fall far short of proving that the Second Defendant was present during the signing and that it was he who signed the mortgage.

13. The only person who could confirm signatures would have been Mr. Jones but he has long left the jurisdiction and he could not possibly be available. No other person or bank officer could produce that evidence.

14. There are some aspects of the Mortgage that contribute to its uncertainty and validity as follows:-

(a) It is dated 8th December 1999;

(b) However it also dated 27th October 1999 in its third and second to last page;

(c) Mr. Peter Robin Jones was the Branch Manager of the Bank at the time but he signed as a witness and purportedly as a commissioner for oaths when there is no evidence he was an appointed commissioner for oaths at the time.

Had this been certified by a properly appointed commissioner for oaths, this uncertainty would have easily been avoided.

(d) On the second to last page Mr. Jones again signed as a witness.

(e) The Bank's attorney, Judith Ann Whiteman signed on behalf of the Bank as mortgagee and this was done on 11th November 1999.

(f) This signature was properly certified by a Commissioner for Oaths, Mr. John Albert. Neither Ms. Whiteman nor Mr. Albert produced any evidence, however that portion of the mortgage does not appear to be in issue.

15. There is no diary note by Mr. Jones in evidence to show he had met with the First and Second Defendants on 27th October 1999. The only documentary evidence there is is the diary note dated 22nd October 1999. But on that date it appears from his notes, the mortgage had not yet been prepared.

16. The letters of offer dated 26th June 1996 and 13th March 1997 clearly names the applicant only as "Markson Hehei". The facility provided was "personal loan". The amount of loan was -

"VT50,000 existing loan;

VT1,700,000 additional loan;

VT2,200,000 total loan".

The letter of 13th March 1997 bears the signature of a Mr. A. J. Wilson, as manager.

17. On the bank statements produced by Elizabeth David in relation to the VT2,200,000 loan as annexure ED6 the amount of loan approved is VT2,116,805 which is inconsistent with the amount on the letter of offer being VT2,200,000. Then in the second column immediately under the figure VT2,116,805 there appears a figure "42,336" which is stated as loan approval fee which again is inconsistent with the amount of loan approval fee in the letter of offer which is stated at "VT40,000". The differences in both amounts appear to be of small significance however the amounts that were agreed to were VT2,200,000 and VT40,000 and not VT2,116,805 and VT42,336.

According to the case of ANZ Bank v. Lulum [2000] VUCA 7, the Court cannot rewrite the mortgage. However on the other hand Courts cannot give effect to or enforce a mortgage agreement which contains uncertain terms and conditions.

18. The First Defendant conceded that by September 1999 he had an unpaid loan balance of VT1,751,899. However he asserts in his submissions that in 2000 the Claimant had seized two of his motor vehicles operated as public transport. One vehicle was sold for VT350,000 which he asserts was under value. The other vehicle was sold for VT2,600,000. This vehicle, he asserts was bought with the additional loan he obtained in 1997 to assist in his kava project on Pentecost. Having sold the vehicle at that value, the bank would have already recovered the arrears of VT1,751,899 and as such, there is nothing in arrears he is obligated to pay to the bank under the mortgage.

19. Counsel for the Claimant argued that the motor vehicle was purchased under a separate lease agreement and did not have any relevance to the mortgage issue. Counsel therefore objected to Mr. Leo's request to cross-examine Mr. Dudley Wai in relation to his statement that provides evidence to the motor vehicle lease agreement. Mr. Wai was therefore not called as a witness for the Claimant in this case.

20. The objection and the omission by the Claimant to produce evidence by Mr. Dudley Wai was a gross mistake on their part. Once the First Defendant had pleaded a defence about the sale of his vehicle without proper valuation and that the vehicle was bought with the additional loan of VT1,700,000, it was encumbent upon the Bank to produce evidence to show (a) the lease agreement with terms and conditions; (b) whether it was properly valued before sale; (c) how much it was sold for and; (d) to produce bank statements showing the repayments made by the First Defendant in relation to the motor vehicle lease agreement.

21. Paragraph 8 of Elizabeth David's evidence in her sworn statement dated 10th February 2012 is clear indication that the additional loan facilities provided by the Bank to the First Defendant on 13th March 1997 was for the purchase of a motor vehicle to further assist with the First Defendant's kava project. That confirms the First Defendant's evidence and assertion.

22. That being the evidence, the Claimant Bank has failed or omitted to include in its evidence its bank records and statements showing a separate payment by the First Defendant in respect to the motor vehicle lease agreement. In the absence of a separate statement the Court can only conclude that the statements provided by Elizabeth David as Annexure ED6 (Exhibit C1) is the only conclusive evidence by the Bank in relation to the First Defendant's repayment of his personal loan facility approved on 13th March 1997 for the sum of VT2,200,000.

23. The statement records the sale of the second vehicle of the First Defendant for the sum of VT350,000 entered on 14th August 2000. By that date the First Defendant had reduced his arrears down to VT1,571,181. The date 14th August 2000 should therefore be the cut-off date or alternatively 30th June 2004 when the Court of Appeal gave judgment.

24. Mr. Samson Tari confirms at paragraph 5 of his statement dated 10th February 2012 (Exhibit C3) it was due to the First Defendant's poor performance in repayment that the Bank had to repossess the motor vehicle and sell it. However he does not provide any evidence as to how much it was sold for. In the absence of that evidence the only evidence about the price of the vehicle was given by the First Defendant, that the vehicle was sold to John Tamata of Pentecost at the price of VT2,600,000 (see sworn statement dated 27th February 2012 – Exhibit FD1 – 3). That evidence has not been rebutted by the Bank.

25. Therefore in all probability the First Defendant has shown that having an arrears of VT1,517,181 on 14th August 2000 and the Bank having sold the vehicle for VT2,600,000 in the same year, he has discharged the burden of proof shifted on him on the balance of probability that he had paid off all his arrears by August 2000, or even earlier. In fact it appears from calculations that from that sale price of VT2,600,000 the sum of VT1,028,819 would be owing to the First Defendant by the Claimant Bank.

26. The First Defendant's counter-claimed against the Claimant in excess of the sum of VT11,000,000. However he did not produce any evidence to substantiate these amounts. His counter-claim must therefore be dismissed.

The Primary Issue

27. The primary issue for the Court to consider and determine is whether the Third Party Mortgage dated 8th December 1999 is valid? All the other issues raised by all counsel hinge on this issue. From the foregoing discussions, it is clear to the Court that the Third Party Mortgage dated 8th December 1999 was and is invalid and is if no legally binding effect. Despite that fact, the First Defendant and the Bank performed in accordance with its terms and conditions. And having so performed albeit unlawfully, the First Defendant had discharged his obligations under the mortgage by repaying his loan of VT2,200,000.

28. Having answered the primary issue in the negative, it is not necessary for the Court to answer all the other issues raised by Counsel for the Claimant or by Counsel for the First and Second Defendant in their written submissions.

Conclusions and Orders

29. The Court reaches the following conclusions:

(a) The claims of the Claimant fail in their entirety and are hereby dismissed;

(b) The counter-claims of the First Defendant fails and are hereby dismissed;

(c) The Second Defendant succeeds in his defence and counter-claim but only in so far as persuading the Court to find the Third Party Mortgage to be invalid and of no legal effect;

(d) The Second Defendant is not entitled to any damages but only to costs. He was unnecessarily dragged into the case at its late stage. But having done so he has succeeded. But his only remedy is costs awarded in his favour against the Claimant on the standard basis as agreed or taxed. Costs relate only to the period immediately prior to filing of his defence and counter-claim until the date of trial and judgment;

(e) As for the Claimant and the First Defendant, costs must lie where they fall. The Court of Appeal said this case "is a mess" but even after 1st July 2004 when a defence and counter-claim were to have been filed by the First Defendant, the case was still a mess and continued to be, even at trial. It is under those circumstances that their costs must lie where they fall. In fact from the statement (Annexure ED6) all fees (including interests) and legal costs of the Claimant from 19th June 1997 to 14th August 2000 have been paid by the First Defendant.

30. That is the judgment of the Court.

DATED at Luganville, this 19th day of March, 2012.

BY THE COURT

OLIVER A. SAKSAK
Judge.