IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

ACTION NO. HBC0328R OF 2003S

BETWEEN:

SCUBAHIRE LIMITED
PLAINTIFF

AND:

HOME FINANCE COMPANY LTD.
DEFENDANT

Counsel for the Plaintiff: P. Mc Donnell: Cromptons
Counsel for the Defendant: D. Sharma, R. Patel & Co.

Date of Ruling: 5 September, 2003
Time of Ruling: 9.30 a.m.

RULING

On 8 August 2003, the Plaintiff filed an ex-parte notice of motion seeking an Order to restrain the Defendant from selling through a mortgagee sale, the Plaintiff’s property contained in Native Lease 9094 being Lot 2 Nukuvatu sub-division at Lami, Suva. The motion was made inter-partes by Order of Court and submissions by Counsel of both parties heard on 18th August.

The Plaintiff purchased the above-described property in January 1991 with a loan from the Australia and New Zealand Banking Group (ANZ), secured with a mortgage over the property. In March 1998, Home Finance Company Limited assumed the mortgage. The consideration was $141,819.00.

The property in question, is equipped with facilities including scuba training pool, that had been built with the money obtained from the Home Finance loan. The Company is in fact in the business of training diving instructors for, what the Court presumes, the Fiji tourist industry employing graduates in hotels and resorts, as well as other businesses involving water and water safety.

Business took a downturn following the political turmoil of 2000, and this according to the Plaintiff, had a flow-on-effect. By 2002 last year, the Plaintiff had to sub-lease part of the property to keep itself afloat. When finally business picked up, the Plaintiff was already 90 days in arrears in its payments to the Defendant. As of 31 July 2003 the balance of the loan stood at $141435.30, with the monthly repayment arrears of $8,307.00.

According to the affidavit of David Anthony Evans, one of the Directors of the Plaintiff Company, there followed a period of negotiations with first the Defendant and later with the Defendant’s solicitors, exploring ways to save the premises and continue with the existing financial arrangements. The Plaintiff had even put forward proposals including renting out of additional floor space of the building and as well as “additional 50% of the monthly repayments,” as means of overhauling the arrears. The increase of interest rate on the loan, the Plaintiff claimed, did not help.

As a consequence the Plaintiff’s continuing default, the Defendant is now calling up its mortgage. The property was advertised for sale (Mortgagee Sale) on 14th, 21st and 27th June 2003. Subsequent negotiations to avoid the sale, broke down. The latest valuation on the property places the leasehold value at $330,000.00.

INTERIM INJUNCTION

The principles is well settled since American Cyanamid v. Ethicon Ltd. [1975] AC 396 and I need not discuss them in details. It is adequate to refer to Lord Diplock’s often quoted statement on injunction, when he said (at p.399):

“The object of the interlocutory injunction is to protect the Plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the Plaintiff'’ need for protection must be weighed against the corresponding need for the Defendant to be protected against the injury resulting from having from being prevented from exercising his own legal rights for which he could not be adequately compensated under the Plaintiff’s undertaking in damages if the uncertainty were resolved in the Defendant’s favour at the trial. The Court must weigh one need against another and determine where the balance of convenience lies.”

The Fiji Court of Appeal in Cobwebb Co. Pty Ltd. v. Ratu Kavekini Nakelia & Or. (CA 46 of 1990) applying the principles of American Cyanamid sets out the following criteria or tests to be applied:

1.	Is there a serious issue to be tried?
2.	Are damages an adequate remedy?
3.	Where does the balance of convenience lie?
4.	Are there any special factors?

It is sufficient that the Plaintiff establish that a serious issue arises and that the claim is not frivolous or vexatious. Once this is satisfied, thereafter the governing consideration is the balance of convenience. More often the exercise involves assessing whether the 

Plaintiff could be adequately compensated for damages if the injunction is refused or alternatively whether the Defendant could be adequately compensated in damages, if an injunction is granted.

Addressing the question of the balance of convenience, Lord Diplock in American Cyanamid said (at p.400):

“As to that, the governing principle is that the Court should first consider it whether if the Plaintiff were to succeed at the trial in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the loss he would have sustained as the result of the Defendant’s continuing to do what was sought to be enjoyed between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the Defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the Plaintiff’s claim appear to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the Plaintiff in the event of his succeeding at the trial, the Court should then consider whether, on the contrary hypothesis that the Defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoyed, he would be adequately compensated under the Plaintiff’s undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the Plaintiff would be in a financial position to pay them, there would be no reason on this ground to refuse an interlocutory injunction.” (emphasis added)

COURT’S CONSIDERATION

The first question is whether there is a serious question to be tried. The Defendant is exercising its rights under a mortgage. The Plaintiff is, by this application, trying to restrain the Defendant from exercising its alleged right. But for the Plaintiff to succeed, it must show that there are substantial grounds for doubting the existence of such right: Sparrow v. Oxford, Worcester and Wolverhampton Ry Co. (1852) 2 De GM & G 94. The right of the Defendant under a mortgagee sale is not disputed by the Plaintiff. Its affidavits and submission of Counsel do not deny this. What however, is contended by the Plaintiff to be questioned are the alleged facts that has led to the Defendant’s exercising its power of sale under the mortgage. The Plaintiff, while conceding that it had defaulted in its payments of the loan, explains that it had continuously tried to re-organise itself in its efforts to meet its financial commitments to the Defendant. Further it had consulted continuously with the management of the Defendant seeking compromises and ways to keep its repayment scheme buoyant and on schedule. At the end, the Plaintiff as a final pitch, is pleading for more time promising new monies from abroad.

Unfortunately for the Plaintiff, its dire financial position does not in effect amount to a serious question that would tend to challenge the rights of the Defendant in law as a mortgagee, to sell the Plaintiff’s property for default in payment of the loan. It is a right recognised in equity and as well as by law (S.79 Property Law Act). As Kermode J stated in Rauzia Zaweed Mohammed v. ANZ Banking Group (1984) 30 FLR 136, at p.140

“…. The long line of authorities and what must be taken as well established rule that a Court will not except in exceptional case, restrain a mortgagee from exercising power of sale conferred on him under a mortgagee unless the mortgagor offers to pay all moneys claimed by the mortgagee into Court."

The Plaintiff has not indicated its willingness, nor do I believe it is in a position, to pay the full amount due under the mortgage, into Court.

As to the Plaintiff’s allegations of discrepancies in the Defendant’s receipts of some of its payments into its account, the Defendant has clarified to the Court’s satisfaction the actual receipts and crediting of such payments. Equally the issue of higher interest rates alleged by the Plaintiff to have been applied by the Defendant has also been satisfactory explained in the Defendant’s affidavits in reply.

All in all, having considered the evidence before it as well as submissions of Counsel, this Court does not believe that there is any serious question either of law or fact to be tried in here at all. The Plaintiff does not have any real cause of action against the Defendant. It fails the first hurdle under the American Cyanamid tests.

But even if the Plaintiff was able to establish a serious issue to convince the Court to advance to “second base,” the balance of convenience consideration, as fully explored by Lord Diplock in the extracts cited above from American Cyanamid, would I believe, still favour the Defendant. While the Plaintiff has given its undertaking as to damages, its financial position does not engender any confidence in the Defendant or convince this Court, that it is adequately provided for to cover for any damages, should the Defendant succeed at the hearing. The fact that the property’s latest valuation placed the value at more than double the total amount of debt, is not a guarantee that such amount will be realised if the Defendant sells tomorrow. The mortgagee must take the market as it finds it provided it has done all it can to ensure that the best price reasonably obtainable maybe obtained. Should there be surplus after the sale, then the provisions of S.81 of the Property Law Act comes into play. On the other hand the Defendant is a leading financial lending institution and is more than adequately positioned to pay for damages should the Plaintiff succeed.

Finally, the Defendant had alleged that there were non-disclosure of material facts by the Plaintiff. Having considered this in the light of the submission by Counsel and the affidavit of its Director, David Evans, I am satisfied, that there was no intention by the Plaintiff not to disclose any material facts nor was there attempt to deliberately mislead the Court by their non-revelation. I believe the omissions and certain assertions made by the Plaintiff resulted purely from its haste without a proper and careful examination of the details.

In the result, the Court dismisses the Plaintiff’s application.

I award costs of $200 to the Defendant.

F. Jitoko
JUDGE

At Suva
5th September, 2003