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Home Finnace Company Ltd v Ram [2002] FJHC 242; HBC0333j.2001s (8 February 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0333 OF 2001

IN THE MATTER of Mortgage No. 449589 given by CHANDRA WATI RAM (f/n Lala Lajpath Rai), ALVIN VIKASH RAM (f/n Jai Ram) and VEDNA RAJESHNI DEVI NAND (f/n Jai Ram) all of Lot 31, Vesivesi Road, Caukuro, Kinoya, Company Directors in favour of Home Finance Company Limited over the property being Housing Authority Sub-Lease No. 168235.

AND

IN THE MATTER of an application under Order 88 of the High Court Rules, 1988 by letter dated 25th June, 2001

Between:

HOME FINANCE COMPANY LIMITED
Plaintiff

and

CHANDRA WATI RAM
(f/n Lala Lajpath Rai)
ALVIN VIKASH RAM
(f/n Jai Ram)
VEDNA RAJESHNI DEVI NAND
(f/n Jai Ram)
Defendants

Mr. A. Tikaram for Plaintiff
Mr. R.K. Naidu for Defendant

JUDGMENT

This is the plaintiff=s (hereafter called the >HFC=) application by way of Originating Summons under Order 88 of The High Court Rules 1988 seeking the following main Orders:

1. That the Defendants deliver to the Plaintiff vacant possession of ALL THAT piece or parcel of land situated in the District of Naitasiri in the Island of Viti Levu and comprised and described in Housing Authority Sub-Lease No. 168235 being Lot 31 on Deposited Plan No. 3894 and situated at Lot 31 Vesivesi Road, Caukuro, Kinoya TOGETHER WITH all improvements thereon, as charged by the Defendants to the Plaintiff by Mortgage No. 449589 dated 7th August 1998 to secure the money therein mentioned.
   
2. That the Defendants, their servants, agents or employees be restrained from interfering with the improvements on the said property in any way so as to defeat the Plaintiff=s interest, claim and title in the said property and/or in any way deteriorate its value.
   

The following affidavits have been filed by the parties and as ordered, comprehensive written submissions were also filed:

(i) Affidavit of Kiran Nath in support of the application sworn on 24th July, 2001.

(ii) Affidavit in Answer by Vedna Rajeshni Devi Nand sworn on 6th September, 2001.

(iii) Affidavit in Reply by Kiran Nath sworn on 24th September, 2001.

(iv) Affidavit in Reply by Vedna Rajeshni Devi Nand sworn on 1st October, 2001.

Plaintiff=s submission

The facts are outlined in Kiran Nath=s Affidavit in Support of the Summons. Some of the salient facts are: (a) that by Mortgage No. 449589 dated 7 August 1998 on the land in question the defendants mortgaged to HFC in respect of all banking advances, charges, interest and other banking accommodation made by HFC to the defendants from time to time on terms and conditions as therein contained; (b) the defendant defaulted under the mortgage from early mortgage period and numerous correspondence took place between the parties; (c) subsequently after the threats of mortgagee sale and the discontinuance by the defendant of the civil action against the plaintiff, a Consent Order was entered into dated 18 May 2000; (d) the defendants defaulted under the Consent Order; (e) because of the continued default the plaintiff on a number of occasions advertised the property for mortgagee sale; pursuant to mortgagee sale notices the plaintiff on 12 April 2001 entered into an agreement with a Mr. Joseph Williams for the sale of the property for valuable consideration and executed a Transfer of the property to Williams in readiness for settlement; (g) however, two of the defendants= father lodged a caveat No. 494221 against the property; (h) Notice to Quit has been served on the defendants but despite that they have failed to vacate and are still in occupation of the property; (i) under the Sale and Purchase Agreement with Williams it is the plaintiff=s responsibility to arrange vacant possession of the property for settlement and (j) the amount in arrears as at 31 May 2001 was $89,739.12 and interest accrues at the rate of $22.13 per day from 1 January 2001.

On the above facts the plaintiff is seeking immediate vacant possession and an injunction restraining the defendants from interfering with the improvements on the property in any way howsoever.

Defendant=s Reply to Affidavit in Support

In her affidavit in Reply sworn 6 September 2001 the second defendant on behalf of herself and first and third defendants, stated, inter alia: (a) she admitted there was the said mortgage and they fell into arrears due to financial difficulties; (b) various correspondence ensued; (c) demand notice was sent for $77,230,56; (d) the defendants tried to solve their problem about payment in various ways; they approached Westpac Banking Corporation to refinance the mortgage; (e) On 16 May 2000 Shameem J made certain Consent Orders; (f) the defendants allege fraudulent, negligent, misleading, deceptive and unconscionable conduct on the part of the plaintiff that resulted in the High Court Action No. 58/2000 against the plaintiff; (g) that the Consent Order was made without their consent; (h) the plaintiff sold the property at a gross under value price of $86,000.00 when the correct market value of the property is about $185,000.00; (i) the plaintiff has acted in a fraudulent manner under the mortgage and by proceeding to sell and transfer the property to Joseph Williams; (j) there the plaintiff has also acted in a negligent manner; and (k) that the plaintiff has acted in a misleading, deceptive and unconscionable manner in breach of section 54 and 55 of the Fair Trading Decree 1992 by proceeding to sell and transfer the property to Joseph Williams.

In her further affidavit in Reply to plaintiff=s affidavits, the third named defendant stated, inter alia, that: the plaintiff=s actions defeated the whole purpose behind allowing them to include and register her father Jai Ram as a co-mortgagor. She says that the plaintiff failed to give them reasonable opportunity to comply with the demand and the mortgagee sale and to allow them a fair opportunity and take steps to redeem the mortgage.

Grounds of defendants= opposition to summons

The defendants oppose the plaintiff=s application on the following basis (as stated in their written submission):

(a) That the Plaintiff cannot proceed with mortgagee sale purusant to the consent order entered by Madame Justice Shameem as the order was made without the Defendants consent.

(b) The mortgage debt is genuinely disputed.

(c) The Plaintiff is in breach of its duty of care it owes to the Defendants.

(d) The Plaintiff has acted in a fraudulent manner under the mortgage.

(e) The Plaintiff has acted in a misleading, deceptive and unconscionable manner under the mortgage.

Determination of the issues

Or.88 under which this application is made requires under Or.88 r3(2), (3),(4),(5), (6) and (7) certain procedural requirements to be fulfilled. This I find the plaintiff has complied with in this case.

Under the said Order the plaintiff is seeking vacant possession. There is no dispute that the defendants did fall into arrears of payment under the mortgage in question and I do not wish to repeat the history of the dealings between the parties for they are contained in the various affidavits filed herein. The plaintiff very rightly under the powers vested in it under the mortgage exercised its power of sale and entered into a Sale and Purchase Agreement with one Joseph Williams to whom it is required to give vacant possession of the property. Vacant possession cannot be given unless the defendants vacate the property. Therefore to get possession the plaintiff has rightly resorted to the provisions of Order 88.

For the reasons given by the defendants as outlined in the affidavits filed by them and as contained in the written legal submissions they want this application to be dismissed. In effect the defendants= arguments amount to this, that the mortgagee should be restrained from exercising its power of sale on the facts and circumstances of this case. There is no writ action pending in regard to the allegations against the plaintiff to restrain it from proceeding to sell under the mortgage. However, it is noted that there was an action - but it was discontinued followed by the parties entering into a Consent Order made by Shameem J although the defendants are now alleging that they are not aware of any such Consent Order. In any case no steps had been taken to set that Order aside although it was indicated in one of their affidavits that they intended to instruct their Solicitors to apply to do so. However, it is alleged that the defendants even defaulted in payment under the said Consent Order and hence the mortgagee as empowered under the said Order proceeded to exercise its power of sale.

Mortgagee=s right to possession

The written submission of counsel in law on mortgagee=s rights have been very helpful in determining the issue before me.

In regard to some of the arguments raised by Mr. Naidu for the defendants in his written submission, the following passage in Halsbury=s Laws of England 4th Ed. Vol 32 para.725 supplies the answer and is apt:

>The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute or because the mortgagor has begun a redemption action or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained however if the mortgagor pays the amount which the mortgagee, claims to be due to him.= (emphasis added)

It is not to be forgotten by the defendants that as mortgagors they have given very wide powers to the mortgagee under the Mortgage document. The efffect of these powers are well set out in Matthie v Edwards 73 RR. 776 at 779 where it is stated:

>Now those powers so given may undoubtedly, be often used for purposes of oppression. They are however, powers which the party having a power of the property thinks proper to confer on the individual from whom he borrows the money; it is a bargain; one party parts with his money, and he has to pay himself out of the property upon which it is charged; and it is for the other party, who creates the mortgage, to consider whether he has not given too large a power to the individual with whom he is dealing. But when once it is given, the party advancing his money is perfectly entitled to execute the power which such a contract gives him .. however if the power is sought to be exercised for exorbitant purposes, without a due regard to the interest of the parties concerned, this Court will interfere under certain circumstances, and, like other pledges, if the individual comes and deposits the money, the Court will, under certain circumstances prevent a party from exercising that power arbitrarily, but not without the actual deposit of the sum which the other party is entitled to.

Now it is quite clear, that the interests of society (and more particularly financing institutions) require, and the justice of such a case requires that those powers, when they do not come within the (above) principles on which the Court has acted, should not be interfered with; it is merely a power which the individual has given.=

It is pertinent to note that it is not that the Court will not interfere in dealings between the mortgagor and mortgagee. In appropriate circumstances it will but this is not such a case where it will interfere. If it does, then as stated in the above passage, it will do so on condition that the mortgagor deposits moneys into Court. The affidavit evidence before me is not such as to convince me that the mortgagee has blatantly disregarded the principles governing mortgagees power of sale. So many wild allegations have been made without sufficient proof. If the defendants as mortgagees are really serious about the allegation they had made then they should have taken concrete steps against the plaintiff and no doubt as is the law at present the Court would have required deposit of the amount alleged to be due to be deposited in Court. There is no offer in the defendants= affidavits that they are prepared to deposit money into court.

Be that as it may, the mortgagee=s common law right to possession has been well established as borne out by the judgment of Goff L.J. in Western Bank Ltd v Schindler (1977) 1 Ch 1 where it is stated:

AIt has for a very long time been established law that a mortgagee has a proprietary right at common law as owner of the legal estate to go into possession of the mortgaged property. This right has been unequivocally recognised in a number of modern cases: see for example, Four Maids Ltd v. Dudley Marshall (Properties Ltd. (1957) Ch. 317. ... It has nothing to do with default: See per Harman J. in the Four-Maids case where he said, at p.320:

The mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted out of that right.@

In this case the plaintiff has also the right to claim possession under clauses 11 to 14 of the said mortgage No. 449589. As stated earlier there was an injunction application (being Suva High Court Civil Action No. 58 of 2000) wherein the defendants were unable to produce any prima facie evidence of >unconscionably handling= in support of their application for injunction eventuating in the said Consent Order of 16 May 2000. The Order in so far as it is relevant is, inter alia, as follows and I agree with Mr. Tikaram, it basically reasserted the status quo under the mortgagee=s rights:

A(vi) That in the event the Plaintiffs failed to comply with any one or more of the said Orders, and the default continues for not less than fourteen days, the Defendant shall be at liberty to exercise all or any of its rights as mortgagee under mortgage No. 449589 with respect to the property comprised in Housing Authority Lease No. 168235 and described as Lot 31 on Deposited Plan No. 3894.@

This aspect of the matter has been succinctly dealt with by Fatiaki J in National Bank of Fliji and Abdul Kadeer Kuddus Hussein (Civil Action No. 0331 of 1994) and I have drawn heavily on the authorities referred to by His Lordship and for ease of reference and completeness, I set out some of them in this judgment.

As stated by Jayaratne J in A.N.Z. v Shantilal (Civil Action 265 of 1990).

AOrder 88 of the High Court Rules only deal with actions relating to mortgages. It gives mortgagees the right to claim possession without being the registered proprietors and with or without foreclosures. To that extent Order 88 is available to him. Nothing can inhibit him from utilising Order 88'.

Similarly in Schindler (supra at p9) Buckley L.J. expressed his view on the usefulness and availability of such a remedy as in s.88 thus:

AA legal mortgagee=s right to possession is a common law right which is an incident to his estate in the land. It should not be lightly treated as abrogated or restricted. Although it is perhaps most commonly exercised as a preliminary step to an exercise of the mortgagee=s power of sale, so that the sale may be made with vacant possession, this is not its only value to the mortgagee. The mortgagee may wish to protect his security ... He might wish to take possession for the purpose of carrying out repairs or to prevent waste.@

Conclusion

To summarise, the plaintiff is well within its rights to invoke the provisions of Order 88 of The High Court Rules in this case. I find that after the discontinuance of the said civil action seeking injunction on the grounds similar to the ones raised in the present mortgage action, in their affidavit, the defendants entered into the said Consent Order made by Shameem J which said Order now they deny having agreed to, a statement which does not seem to have a ring of truth in it.

It is abundantly clear that the defendants were never in a position to meet their obligation under the mortgage and having given the very wide powers which they had to the mortgagee they cannot now complain and attempt to hinder the mortgagee from exercising its rights under the mortgage. And in this case the facts and circumstances do not warrant the Court=s interference with the mortgagee=s rights. It was said in Cheltenham and Gloucester plc v Krausz and Another by Lord Justice Phillips (The Times Law Reports 20.11.96 p.655 at 656 C.A.) that:

AThe mortgagee=s right to possession should not be curtailed. That right entitled the mortgagee to exercise its power of sale in the manner it chose and in the confidence that it could offer the purchaser vacant possession.@

While on this aspect of the matter I might mention here that as a single Judge of Court of Appeal in Edmund March v Bank of Hawaii, John Howard, Puran Sundarjee & Ors. (Civil Appeal No. ABU0025.2001), I stated that:

AHad the Appellant applied for injunction when the property was advertised for sale, the Appellant would have been required in law to deposit the amount due and owing into Court and failure to do that would have meant that the mortgagee would not be restrained from exercising his or its power of sale under the mortgage.@

Here, as already stated, there was an application for injunction but was discontinued and a Consent Order made. The defendants cannot now have two bites at the cherry.

In Edmund March (supra) a similar situation with similar allegation arose in the High Court before Byrne J where his Lordship made an order for possession.

For these reasons I conclude that the defendants have not convinced me on the facts and authorities that I ought to make an order in their favour. The plaintiff therefore succeeds in its application and I grant the orders sought referred to hereabove with costs against the defendant in the sum of $400.00.

D. Pathik
Judge

At Suva
8 February 2002