IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 33 OF 1992

Between:

HOUSING AUTHORITY
Plaintiff

- and -

ATTORNEY GENERAL OF FIJI
Defendant

Mr. V. Maharaj for the Plaintiff
Mr. Amani Rokotinaviti for the Defendant

JUDGMENT

This is a claim by the Plaintiff against the Defendant for payment of the sum of $9399.00 under a guarantee in the form of a Deed dated 25 October 1971 (hereafter referred to as "the guarantee") together with interest thereon at the rate of 11.5% per annum from 1 January 1992 until judgment.

The facts

As admitted by the learned counsel for the defendant, the facts in this case are not in dispute and they are fully set out in the Statement of Claim and in counsel's written submission as follows:-

"(a)	One Sereo Ligica at the material time was a Civil Servant and employed in the Ministry of Finance.

(b)	Whilst so employed he applied for a loan from Housing Authority to erect a house for him and his family in his village at Muana in the district of Nakelo.

(c)	Sereo Ligica confirmed that he was a member of Mataqali "NAVORARA" of Muana Village and he had the authority from his Mataqali to erect a house for himself in the said village.

(d)	Sereo Ligica did not qualify for a loan in the amount he sought from Housing Authority based on his salary at the time.

(e)	In order to assist Civil Servants in a position of Sereo Ligica the Government of Fiji on 25th day of October, 1971 entered into an agreement with the Housing Authority whereby the Minister of Finance at the time, on behalf of the Government of Fiji signed a Deed guaranteeing loans to all Civil Servants to a certain limit on terms and conditions contained in the said Deed (see Exhibit 2). The relevant part of the Deed on Page 1 reads:-

"AND WHEREAS the Housing Authority is prepared to make to Civil Servants housing loans of greater amount than the authority would otherwise make in the normal course of its business provided that the Guarantor guarantees the repayment to the authority of such portion of each housing loan made to a Civil Servant with the approval of the Guarantor as may be in excess of the usual lending limits of the authority...." (emphasis is mine).

1.2 Pursuant to the aforesaid Deed, on 17th day of December, 1975 the Permanent Secretary of Finance (see Ex 5 Document 14) confirmed in writing that the Government would guarantee a Housing Loan of $10,000.00 (Ten thousand dollars) to Sereo Ligica.

1.3 In addition to the above Sereo Ligica himself personally signed a guarantee (see Ex 18 Document 1) in which he agreed to indemnify the Government against any pecuniary loss which the Government of Fiji may sustain or incur by reason of its entering and giving such guarantee as aforesaid.

1.4 That following the execution of guarantees by the Government and Sereo Ligica as aforesaid, the Plaintiffs advanced a loan to Ligica in the total sum of $9,399.00 (Nine thousand three hundred and ninety nine dollars) for him to erect his house.

1.5 Evidence was lead by Manager Legal Jagdish Prasad that the above sum was paid to Ligica in progress. Sereo Ligica confirmed in his evidence that the house had been completed and he resides in it. He further confirmed that the total debt inclusive of interest todate stands at $37,199.49 (Thirty seven thousand one hundred and ninety nine dollars and forty nine cents) (see Ex 4).

1.6 It is also to be noted that Ligica's application for loan of $9,399.00 (Nine thousand three hundred and ninety nine dollars) was accepted by the Housing Authority on 26th day of March, 1976. (see Ex 1) on terms and conditions stipulated in the said document - essential terms were:-

(a)	Loan amount was $9,399.00

(b)	Purpose to build house - by way of "Self Building"

(c)	Premises to be erected at Muana Village, Nakelo

(d)	Repayment was agreed at $89.50 per month

(e)	Interest 8 1/2 per cent per annum.

1.7 Housing Authority secured the loan by a Bill of Sale over the chattels. Evidence was given by Jagdish Prasad and confirmed by Ligica that demand under Bill of Sale but the payment was made by Ligica.

1.8 Via letter dated 12th day of January, 1977 (see Ex 7 document 12) the Government guaranteed a further loan of $1,260.00 to Ligica but the Plaintiff did not pay the same despite the guarantee as the additional payment would have taken the total loan to beyond Ligica's capacity to pay. Amendment to Paragraph 6 of the Statement of Claim was made to delete the sum of $1,500.00 which was granted.

1.9 The Plaintiff gave first written warning to Ligica via its letter dated 11th day of April, 1978 (see Ex 6) to complete the works expeditiously failing which security would be realised and also that the Plaintiff would take action against Government.

1.10 The Defendant (Government) was given notice to pay $10,659.00 (Ten thousand six hundred and fifty nine dollars) under the terms of guarantee (see Ex 8).

1.11 Via letter dated 10th day of August, 1984 the Defendant advised the Plaintiff to take all steps to recover the debt even to the extent of making Ligica Bankrupt before Government would honour the Deed (see Ex 10 Document).

1.12 Ex 11 and Ex 12 shows that following assurances given by the Defendant the Plaintiff took action for recovery of debt from Ligica and he was subsequently adjudged Bankrupt. The Defendant was subsequently advised of the same (see Ex 13).

1.13 Via letter dated 21st day of October, 1988 (see Ex 14) the Defendant made commitment to the Plaintiff to pay the said sum but neglected to do so.

1.14 When the Defendant failed to honour its commitment in terms of the guarantee the Plaintiff took the present action."

The issue

The issue for the Court's determination is whether the defendant is liable to pay the said sum of $9399.00 under the guarantee.

As required, after the hearing, both counsel made written submissions. 

Plaintiff's submission

Briefly, the plaintiff submits that under the said Deed the defendant guaranteed the debt the subject of this action under the following provision in the Deed:

"..... that the Guarantor guarantees the payment to the authority of such portion of each Housing Loan made to a Civil Servant with the approval of the Guarantor ...."

In these circumstances, Mr. Maharaj submits that in the case of a simple guarantee, which in essence this is, the lender/creditor is at liberty after service of the appropriate notice to seek indemnity from the guarantor. (MOSCHI v LEP AIR SERVICES LTD & ORS. 1973 A.C. 331 and ESSO PETROLEUM CO., LTD., v ALSTONBRIDGE PROPERTIES 1975 1 WLR 1474).

He further submits that apart from liability under the guarantee the defendant is estopped from denying liability and that the doctrine of estoppel applies.

In answer to the argument put forward by the defendant that the plaintiff's claim is void for lack of consent of the Native Land Trust Board, Mr. Maharaj submits that lack of consent was never specifically pleaded by the defendant in his Statement of Defence. He said that even if the defendant had sought an amendment to his defence and raised the question of consent, he would not have succeeded in any event as lack of consent or otherwise is not an issue; what is being sued on is a right in personam pursuant to the guarantee and not a right in rem. He further submitted that assuming the amendment was requested and lack of consent was pleaded, it would have been on the defendant to establish by evidence not only the need but the requirement of Native Land Trust Board's consent on a Reserve Native Land.

The defendant's submission

On the Deed, the learned counsel for the defendant argues that the Deed of Guarantee is not binding on the defendant.

He submits that the contract is void for non-compliance with the terms of the guarantee by the plaintiff. In this regard he makes particular reference to the following clause (4)(a) of the guarantee and states that the plaintiff has not demonstrated that the mortgaged property has "for any reason ceased to be security for the loan by reason of realisation thereof by the Authority pursuant to its rights, powers or remedies vested in the Authority as mortgagee":

"The guarantor shall become directly and immediately liable as guarantor to this Authority only if and when the mortgaged property shall for any reason have ceased to be security for the loan whether by reason of the realisation thereof by the Authority pursuant to any right power or remedy vested in the authority as mortgagee or by reason of the loss or destruction of the mortgaged property or by reason of the loss or release or discharge thereof from any mortgage, charge or security held by the authority or otherwise howsoever". (underlining mine for emphasis).

Mr. Amani further argues that the defendant is not liable under the Bill of Sale for it does not know whether the plaintiff has exercised its powers under clause 4 of the Bill of Sale or not which deals with the mortgagee's power to seize and sell the mortgaged property. In essence he says that the plaintiff has not satisfied the pre-condition of the guarantee as in said clause 4(a) to render the defendant liable.

Mr. Amani raised the issue of lack of consent of the NLTB and says that the consent given by the owners of the land was null and void.

He further submits that the security must be satisfactory and adequate ab initio. Here he says that the liability of the defendant does not arise because the Bills of Sale are only effective against "chattels". Therefore the concrete house in this case cannot be the subject of a Bill of Sale.

Mr. Amani maintains that for the above reasons the guarantee is not enforceable against the defendant.

Determination of the issue

I have considered the submissions of both counsel.

Mr. Maharaj is relying mainly on the guarantee and I am in full agreement with the arguments put forward by him in support of his claim.

The defendant knew what he signed for, that is, that it was a guarantee for the amount claimed and to be paid for in circumstances provided for, inter alia, under the said clause 4(a) of the guarantee.

The learned counsel for the defendant admits that a Bill of Sale on the concrete house could not have been taken as security for the loan. That is the correct position in law. The effect of that in this case is that, in the words of said clause 4(a), the "mortgaged property" has "ceased to be security for the loan whether by reason of the realisation thereof or otherwise howsoever" (underlining mine for emphasis). With this argument the defendant has dug his own grave which is all the more reason that the defendant is liable to pay the amount claimed. I therefore reject the defendant's argument that because the security is "inadequate from the word go" the defendant's liability "does not arise" under the guarantee.

There is one other reason why defendant is liable. It is because of clause 6 of the guarantee which provides:

"6.	THE Guarantor shall not be released from any direct or contingent liability to the Authority under these presents in respect of any loan by reason of the borrower ceasing to be a civil servant or dying or becoming bankrupt or by reason of any change in the constitution of the Guarantor or in any other manner whatsoever save as expressly provided by these presents." (underlining mine for emphasis).

In this case the borrower became a bankrupt. Hence the defendant cannot escape liability for the debt under the said clause 6. In exhibit 10 the defendant suggested "steps be taken to have Mr. Logica declared a bankrupt and only then we will consider honouring the guarantee given in 1975 and 1977". The defendant was informed of the borrower's adjudication in bankruptcy (Exhibit 13). In response the defendant replied that "arrangements are now in hand to realise Government's commitment as soon as possible" (exhibit 14 - letter dated 21.10.88).

The defendant undertook to pay but he did not and hence this action.

For the above reasons I reject the defendant's argument that the Plaintiff cannot proceed under the guarantee. I find that the defendant could give the guarantee and he did. The Plaintiff can enforce the guarantee.

The learned counsel for the defendant has raised an interesting argument regarding the absence of consent of the Native Land Trust Board. Since this has been raised I should consider it even though it had not been specifically pleaded by the defendant. As was said in ALEXANDER v RAYSON (1936 1 K.B. 169 at 190):-

"The moment that the attention of the Court is drawn to the illegality attending the execution of the lease, it is bound to take notice of it, whether the illegality be pleaded or not."

It is my view that this was not a 'dealing' and hence it did not require consent. There was only the permission to build the concrete house in question on a portion of the Mataqali land for which the owners gave permission (exhibit 19). In any case the question of consent was not an issue and to start off with it was not even pleaded. However, having raised it the defendant ought to prove by evidence that consent is required which it failed to do. The court is left with just the evidence of the plaintiff. In such a situation, as was said in TAJIM ALI s/o Dean Mohammed and THE NATIONAL INSURANCE COMPANY OF FIJI LIMITED. (Civ. App. 6/82 F.C.A. Vol 1984 p.585):

"It was for the respondent not the appellant to have called someone from the Native Land Trust Board if illegality was to be established. This it failed to do."

I therefore reject the defendant's argument that the guarantee is void because of the absence of consent. The defendant agreed to advance on the concrete house on the said land for which permission was obtained in writing (exhibit 19). Just as in SURUJ NARAYAN and BRIJ RAM (Civ. App. 45/92 FCA 1993 Vol. p.168) the defendant was bound to pay in a situation where money was advanced for the purchase of a Crown Lease and no question of consent was raised there, the defendant is bound to pay under the guarantee. Again in MISTRY AMAR SINGH and SERWANO WOFUNIRA KULUBYA (1964 A.C. 142 P.C) where no consent was obtained for leasing of certain property by the Respondent nevertheless, because he was the registered proprietor of the said property, although the transaction was illegal and the appellant was in illegal occupation of the property, he succeeded in obtaining possession. The respondent did not require aid from the illegal transaction to establish his case. It was held inter alia, that "it was sufficient for him to show that he was the registered proprietor of the lands and that the appellant ... was in occupation without the consent of the Governor, and accordingly had no right to occupy". Similarly, in the case before me, the plaintiff has the guarantee in its favour and therefore the alleged lack of consent cannot in any way affect the guarantee to prevent the Plaintiff pursuing its claim under it.

To summarize, since I have held that the ground of absence of consent holds no water, the decision in this case rests entirely on the meaning and effect of the guarantee.

For the reasons I have given I find that the defendant is under a liability to pay the amount claimed. The parties to the guarantee had agreed as stated therein which they were free to do. In terms of the guarantee, immediately upon the debtor becoming bankrupt, the defendant became liable to pay. It is the words in which the parties have expressed themselves that the guarantee attracts the legal consequences giving rise to liability to pay for the debts of the debtor.

In the outcome, I find that the defendant is bound by the said clauses in the Deed. The liability to pay on the part of the defendant has been established.

There will therefore be judgment for the plaintiff against the defendant in the sum of $9399.00 together with interest thereon at the rate of 11.5% p.a. from 1st January 1992 with costs to be taxed if not agreed.

D. Pathik
Judge

At Suva
31 May 1996
HBC0033J.92S