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Petueli v Home Finance Company Ltd [2003] FJHC 252; HBC0046.2003 (12 January 2003)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBC0046 OF 2003

BETWEEN:

PHILIP JOHN PETUELI & ANNA PETUELI
PLAINTIFFS

AND:

HOME FINANCE COMPANY LIMITED
DEFENDANT

Mr. K. Muaror - For the Plaintiffs
Mr. D. Sharma - For the Defendant

DECISION

The plaintiffs are registered proprietors of freehold property comprised in CT 16138. The property was mortgaged to the defendant corporation to secure a loan. The loan was $68,061.00.

The plaintiffs fell into arrears in payment of their instalments so the defendant exercised its power of sale under the mortgage.

On or about 13^th September 2001 the defendant entered into a sale and purchase agreement with one Jitendra Kumar Mohan for sale of the mortgaged property for $81,000.00. The sale and purchase agreement provided that the Vendor that is the defendant should provide vacant possession of the property to the purchaser.

By letter dated 28^th November 2001 the defendant advised the plaintiffs that the subject property had been sold under mortgagee’ sale.

On 30^th November 2001 a transfer in terms of the Sale and Purchase Agreement was executed and it was stamped on 7^th December 2001. Copies of the Sale and Purchase Agreement and Transfer were annexed to affidavit filed on behalf of the defendant.

On 26^th January 2002 the defendant initiated civil action HBC 272 of 2002 for vacant possession presumably under Order 88 and judgment was delivered on 31^st October 2002. Justice Pathik ordered vacant possession and execution was stayed till 31^st December 2002.

On 3^rd February 2003 Court Sheriff removed the plaintiffs from the property. The plaintiff are saying that they now have deposited sufficient funds with their solicitors and should be allowed to exercise the mortgagors right to redeem because the transfer to the purchaser has not been registered at the Title’s Office.

On 4^th February I had granted interim injunction (ex-parte).

There is no allegation of bad faith on part of the defendant or that the defendant has sold the property at gross undervalue. The plaintiff are relying on Section 72(1) of the Property Law Act Cap 130 in support of their contention that a mortgagor’s equity of redemption is not extinguished until the transfer is registered at the Title’s Office. Section 72(1) of the Property Law Act reads as follows:

“A mortgagor is entitled to redeem the mortgaged property at any time before the same has been actually sold by the mortgagee under his power of sale, on payment of all moneys due and owing under the mortgage at the time of payment.”

The plaintiffs are relying on Mohammed Isaq Khan v. Fiji Development Bank C.A. 149 of 1998 in support of their contention. That case is unlike the one before me now. In Mohammed Isaq Khan there was no evidence of correspondence with the tenderer, no deposit receipt, no sale and purchase agreement and no transfer documents. In the present case, copies of correspondence, Sale and Purchase Agreement and stamped transfer are before me.

Additionally in Mohammed Isaq Khan the mortgagor was offering the mortgagee the full amount then due under the mortgage but the mortgagee was attempting to sell it for an amount less then what was due to it. In Mohammed Isaq Khan Justice Fatiaki as he then was had grave doubts whether the mortgagee had taken “reasonable precautions to obtain the true market value of the mortgaged property.” There is no such allegation in the case before me now.

I am of the view given the facts of Mohammed Isaq Khan the plaintiff has expressed the ratio too widely. Justice Fatiaki in my view was expressing the view that a mortgagor can at any time before the registration of transfer exercise the right to redeem and open a transaction between a mortgagee and the prospective purchaser if he can show lack of good faith on part of the mortgagee in exercise of its powers. It is not an unconditional right to redeem.

Justice Scott in Ram Datt Prasad v. Australia and New Zealand Banking Group Limited (1999) 45 FLR 101 at 106 succinctly expressed the legal position as follows:

“It is clear that the Court will only intervene on behalf of a mortgagor to prevent completion of contract of sale, where it is satisfied that the contract was brought by want of good faith on part of the mortgagee Warring v. London and Manchester Assurance Co. 1935 1 Ch. 310; Property and Bloodstock Limited v. Emerton [1968] 1 Ch. 94”

The learned writer Edward Sykes in his book The Law of Securities 4^th Edition page 121 expressed the position as follows:

“the mortgagors right of redemption notwithstanding default continues, it is universally agreed, at any rate until the mortgagee purporting to exercise power of sale enters into a contract of sale with the purchaser. It is clear that the effectuation of an unconditional sale precludes a right of redemption pending completion though the redemption right will become operative again if the sale comes off.”

The learned writer cites the two cases referred to by Justice Scott in his judgment in support of the above proposition.

In Honson and Another v. Little and Another 1948 NZLR 1073 the mortgagee had entered into a sale and purchase agreement having exercised powers of sale under the mortgage. The agreement was subject to the consent of Land Sales Court. Before that consent was given, the mortgagor tendered to pay and redeem. It was held that despite the fact that the agreement was conditional and consent of Land Sales Court had not been obtained, the defendant had entered into a binding agreement to sell from which they could not withdraw and therefore the tender was too late for plaintiff to redeem.

From authorities cited it appears that the position in case of mortgagee's sale is as follows:

1. The mortgagor has a right to redeem at any time before the property has been actually sold – Section 72(1) of the Property Law Act
   
2. That right to redeem is not an unconditional right as it can be lost
   
3. That right to redeem is extinguished once a mortgagee in exercise of his/her powers of sale enters into a valid sale and purchase agreement or accepts a tender
   
4. The mortgagee in exercising his/her powers of sale must act in good faith and take reasonable care to obtain a proper price
   
5. Failure on part of the mortgagee to comply with condition (4) above may result in court intervening on behalf of the mortgagor to restrain the sale.
   

In support of ex-parte motion, the plaintiffs had deposed that they had fallen into arrears of instalment because of the events of May 2000 that caused a downturn in their business. However copies of accounts tendered by the defendant show that as at 1st May 2000 the plaintiffs’ instalments were $10,256.77 in arrears. Further a letter dated 28th November 2001 from the defendant to the plaintiff had not been disclosed. That letter informed the plaintiffs that the land had been sold. The plaintiffs ought to have disclosed these facts. They had a duty to disclose all material facts when asking for ex-parte orders.

Justice Pathik’s decision dated 31st October 2002 also referred to the fact that Home Finance Company had found a prospective purchaser who requires vacant possession.

The only reason the transfer was not registered was because the plaintiffs would not vacate. The defendant has its obligations under a Sale and Purchase Agreement. The plaintiffs are now no longer in occupation of the property having been removed by Court Sheriff. The defendant and the prospective purchaser are acting in happy unison to complete the transaction. The plaintiffs are the disturbing intruders.

The balance of convenience in such circumstances firmly dictates that there be no further extension of the interim order. If the plaintiffs feel that they are entitled to damages, they are at liberty to pursue that remedy. For the avoidance of any doubt, I order that the interim injunction granted herein be discharged. I also order that the plaintiff pay defendants cost which I summarily fix at $275.00.

[ Jiten Singh ]
JUDGE

At Suva
12^th January 2003