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Lateef v National Bank of Fiji Ltd [2001] FJHC 132; Hbc0525j.2000s (26 October 2001)

IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 525 OF 2000S

Between:

PREMILA WATI LATEEF
(f/n Phul Singh)
Plaintiff

and

NATIONAL BANK OF FIJI LIMITED
Defendant

S.R. Valenitabua for the Plaintiff
H. Lateef with Ms. B. Narayan for the Defendant

JUDGMENT

On 13 May 1999 the Defendant (the Bank) confirmed approval of a loan to the Plaintiff and her late husband by way of mortgage to purchase a house. A copy of the letter of approval is Exhibit PWL 4 to the supporting affidavit.

On page 2 of the letter there is a paragraph which reads as follows:

“Other Condition:

The Bank will debit your loan account on 31 December annually being premiums for mortgage protection. You may enquire with your branch for the rate of calculation of premiums as they may vary from time to time.”

On 7 February 2000 the Plaintiff’s late husband died. By Originating Summons issued on 22 November 2000 the Plaintiff seeks a number of reliefs. It is not in dispute that the central question to be decided is whether the mortgage protection condition is a valid term of the contract entered into between the Plaintiff and her late husband on the one hand and the Bank on the other. If it is then the Plaintiff’s difficulty in repaying the loan will be solved. The Bank’s case is that it is not bound by this term since it only appeared in the offer letter by mistake, a mistake which the Plaintiff and her late husband must have known had occurred.

This submission is advanced in recognition of the well understood rule that contracts are to be construed objectively (see e.g. Woodhouse A.C. Israel Cocoa Ltd S.A. v. Nigerian Products Marketing Co. Ltd. [1972] AC 741) but that a mistake as to a term of the contract, if known to the other party may avoid the contract (see e.g. Hartog v. Colin and Shields [1939] 3 All ER 566.)

The Bank in a careful and well presented submission prepared by Ms. Narayan advanced 6 arguments in favour of the proposition that the Plaintiff and her late husband must have realised that the Bank had mistakenly forgotten to delete the mortgage protection clause as was averred on behalf of the Bank by its Manager, Collection Services, Mr. Michael Lee.

First, it is said that the approval letter was in a standard form and that the Plaintiff and her late husband must have realised that the mortgage protection term could not apply to them since no “special arrangement” had been entered into pursuant to the granting of such protection.

I do not find this argument persuasive. Absent familiarity with the Bank’s procedures I can see nothing to suggest that the recipient of an offer in the style of PWL 4 would realise that this was a standard form. Forms usually contain boxes and dotted lines and other spaces to be completed. PWL 4 contains none of these and on its face appears to be a personalised letter. The wording of the paragraph in question does not make any mention of any “Special Arrangement” and indeed conveys the impression that the borrower need do nothing further in order to benefit from the mortgage protection policy, the premiums for which would be debited annually on each 31 December.

The next suggest is that the Plaintiff and her late husband did not qualify for mortgage protection since such protection was only available as part of a Group Finance Scheme which did not embrace them. Once again, my view is that there is nothing to suggest that the Plaintiff and her late husband knew that this was the case. There is no reference to any Group Finance Scheme in the letter. Whether or not the Plaintiff and her husband were eligible for inclusion in a Group Finance Scheme is not the point. It is their knowledge of the facts which is relevant.

The third argument advanced is to the effect that the Plaintiff and her late husband knew or ought to have known that the mortgage protection policy did not apply to them since no premium had been deducted from their account and they had at no time asked why. As already seen, the loan was approved in May 1999. The first premium was not due to be deducted until the following December and therefore no omission to deduct had occurred. The discovery of a mistake subsequent to the formation of a contract cannot avoid the Contract. Only a mistake known at the time that the Contract was being formed can afford a ground for relief. This argument fails.

The fourth and sixth suggestion is that the Plaintiff and her late husband would have become aware that the Bank had made a mistake on or about 19 November 1999 when the Bank wrote to them inviting them to take out a mortgage protection policy. As already pointed out however it is the state of parties' knowledge at the time of the formation of the Contract which is relevant, not knowledge acquired subsequently.

The 5^th and final argument advanced by the Bank refers to correspondence in February and October 2000. For the reason already given this correspondence can have no bearing on the issue now before me.

The law of the avoidance of Contracts on the ground of unilateral mistake is well settled. At least one consideration is the desirability of encouraging parties clearly and carefully to spell out their undertakings. In my opinion the Bank has only itself to blame for the negligent manner in which this contract was drawn up. But negligence cannot in my opinion afford the Bank a ground for reneging on its clearly spelled out obligations. I find nothing to suggest that the Plaintiff and her late husband knew that the Bank had made a mistake. In these circumstances the Bank must be held bound.

Since there was agreement between Counsel as to the nature of the central issue before me I did not hear argument on the question of the Plaintiffs late husband’s FNPF funds referred to in paragraphs (c) and (d) of the Originating Summons. I however grant declarations (a) and (b). I find that the Plaintiff is entitled to the benefit of a mortgage protection policy whether or not the Bank in fact took out such a policy on their behalf. On the circumstances it is not necessary to grant the relief sought in paragraph (e) of the Originating Summons.

M.D. Scott
Judge

26 October 2001