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Khan v Habib Bank Ltd [2005] FJHC 731; HBC0659D.1998S (29 April 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0659D.98S

BETWEEN:

MOHAMMED SAHIK KHAN (f/n Hir Khan) of Nadi, Businessman.
1ST PLAINTIFF

AND:

SHEIK’S RENT-A-CAR LIMITED a duly registered Limited Liability Company having its registered office at Raggs Martintar, Nadi.
2ND PLAINTIFF

AND:

HABIB BANK LIMITED of Suva.
1ST DEFENDANT

AND:

MOHAMMED AFZAL KHAN (f/n Mohammed Yakub Khan) of Suva, Solicitor.
2ND DEFENDANT

Counsel for the Plaintiff: G.P. Lala : G.P. Shankar & Co.
Counsel for the 1st Defendant: Ms B. Narayan: Lateef & Lateef

Date of Decision: 29 April, 2005
Time of Decision: 9.30 a.m.

DECISION

The 1st Plaintiff is the registered proprietor to 2 properties known as Certificates of Title Numbers 22470 and 20468 and more particular described as Lots 2 and 21 on DPs 5581 and 5144 respectively, and located at Ragg Street, Martintar, Nadi.

Over them, he had granted mortgages Nos. 365539, 365945, 372000, and 373001 in 1994 to secure a loan of $220,000.00 from the 1st defendant. The 2nd defendant a solicitor had acted as a go between and had introduced the 1st plaintiff to the 1st defendant. The mortgage documents that were the result of the loan above, were prepared by the 2nd defendant. The latter also prepared a Third Party Debenture over the 2nd plaintiff’s assets and a Bill of Sale over the 1st plaintiff rental cars that were operated through the 2nd plaintiff.

According to the 1st defendant the 1st plaintiff began defaulting in his payments right from the beginning. It adds, that even after formal demands for payments were made in October 1995, the accounts remained outstanding. As a result of non-payment the 1st defendant begun its action to sell by mortgagee sale, the 1st plaintiff’s properties in an attempt to recover the debt.

On 23 December 1998, the 1st plaintiff filed his Writ of Summons. The Writ claimed that there had been delay in the release of the loan to pay off the 1st plaintiff’s debts with the other financial institutions and which had resulted in losses and damages to him and his business. In the matter of his debt owed to National MBf, the 1st plaintiff claims that there was no payment at all made by the defendants. In all, the 1st plaintiff alleges negligence by the defendants.

The defendants filed their defences on 22 January 1999. The plaintiff’s reply to the 1st defendant’s statement was filed on 11 February 1999 and to the 2nd defendant’s on 8 April, 1999. There followed a period of inaction including the 1st plaintiff’s notifying the Court on 19 December 2000, that he was acting in person. Subsequently on 11 February 2002, G.P. Shankar & Company, filed the plaintiff’s Notice of Appointment to act for the plaintiffs together with Notice to Proceed.

On 21 November, 2002 the plaintiff filed its Summons seeking:

"a) For leave to further amend the Statement of Claim by adding a prayer:-

That mortgage No. 365539, 365945, 372000, and 372001 are false fraudulent, null and void and/or unenforceable.

b) For an injunction restraining the 1st defendant whether by its servants, agents or other from exercising its powers of sale under Mortgage No. 365539, 365945, 372000 and 372001 and/or from selling, transferring or entering into contract for sale of Plaintiffs’ property under Mortgage No. 366539, 365945, 372000, and 372001."

In its affidavit in support of the Summons, the 1st plaintiff argued, in respect of his application to further amend his claim, that the 2nd defendant was at all times acting as agent of the 1st defendant and by false and/or fraudulent representation had induced the plaintiff to sign the mortgage documents. As to the injunction relief being sought the 1st plaintiff further claims that the 1st defendant had already advertised the sale of properties under mortgage, and unless restrained the 1st defendant will go ahead and exercise his mortgage sale.

Application to Amend Claims

First on the application for leave to further amend the Statement of Claim. The plaintiff’s application is made pursuant to Order 20 of the High Court Rules, the inherent jurisdiction of the Court, and under common law.

Order 20 r.5 of the High Court Rules states:

"(5) An amendment maybe allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment."

The general principles under which the Court may grant leave to amend is well settled in law. Jenkins L J in G.L. Baker Ltd. v. Medway Building and Supplies Ltd. [1958] 1 WLR 1216 summarised it as follows, at p. 1231:

" .....it is a guiding principle of cardinal importance on this question that, generally speaking, all such amendments ought to be made as maybe necessary for the purpose of determining the real questions in "controversy between the parties."

In an earlier decision: Cropper v. Smith [1884] UKLawRpCh 91; (1884) 26 Ch.D, 700 Bowen L J said at p.710,

" Now, I think it is a well established principle that the objects of the Court is to decide the rights of the parties, and not to punish them for the mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their right ... I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party ..."

The 1st plaintiff in this case submits that in addition to the allegations already contained in its Statement of Claim filed on 23 December 1998, there were also overdraft facilities to be provided including a sum of $500,000.00 promised to him by the 1st defendant for the purpose of constructing and operating a motel. These did not come through. Further, the 1st plaintiff now asserts that the 2nd defendant at all material time of the negotiation of the loan, was acting as agent of the 1st defendant. The 1st plaintiff also raises the question of fraud alleging that the defendants had made false representation to him and induced him to sign all the security documents. These additional facts, the 1st plaintiff contends, are amendments to his claim that ought to be allowed so that the real substantial question can be raised between the parties.

As to the application of O.20 r.5, the plaintiff says that the new cause of action namely the allegation of fraud, arises from the same transaction. In any case, according to him, while fraud per se had previously not been specifically pleaded, there were sufficient description of fraudulent conduct involving element of untruthfulness, dishonesty, moral turpitude and misrepresentation with knowledge of fault on the part of the defendants contained in his amended claim of 29 October 2002, that no new cause of action would arise as a result of the Court allowing the plaintiff’s amendments.

The 1st defendant argues that the amended claim filed on 29 October 2002 was done without leave of the Court and should be disregarded. At any rate, the subsequent amendments being sought in the present application are substantial. The amendments raises new allegations and specifically fraud against the 1st defendant. The plaintiffs had also put in a new claim in the sum of $500,000.00, in addition to the original one. This represented a new cause of action, altogether and cannot possibly arise out of the same facts as already relied upon by the plaintiffs in the original action.

The 1st defendant also submits that the new claims are over 8 years old and are statute-barred under the Limitation Act.

The Court’s power to grant leave are both prescribed and inherent. Leave to amend maybe given at any stage of the proceedings either of its own motion or on the application of any party to the proceedings. The general principles that guide the Court in the exercise of this power are set out in G.L. Baker Ltd. (supra) and Cropper v. Smith [1884] UKLawRpCh 91; (1884) 26 Ch. D 700, cited above. Generally an amendment will be allowed if it can be made without injustice to the opposite party and if it can be compensated for by costs. Leave maybe refused however where there will be prejudicial delay in making the application, or where the application is not made in good faith, or if the application includes allegation of fraud.

In this case, the plaintiffs’ original Statement of Claim had been amended by leave of the Court on 22 August, 2002. This amendment was subsequently filed into Court on 29 October, 2002. Contrary to the views of the 1st defendant, according to the Court record, when the matter came before Pathik J on 22 August 2002, the Court not only granted leave to the defendants to amend their defence within 4 weeks, but also granted leave to the plaintiffs to amend their "Statement of Claim if need be within 3 weeks thereafter." The substantive amendments that the plaintiff claim had been made without the Court’s authority and leave, had in fact been duly obtained.

There remains however the amendment further sought by the plaintiff in its present Summons asking for an additional prayer alleging that all the four (4) mortgages "are false, fraudulent, null void and/ unenforceable."

The defendants correctly points out that in this latest application, the 1st plaintiff for the first time is alleging fraud against the 1st defendant. This effort comes 8 years after the parties had entered into the Agreement. In Bentley & Co. v. Black (1893) 9 TLR 580, the Court said:

"It had for a long time been the universal practice, except in the most exceptional circumstances, not to allow an amendment for the purpose of adding a plea of fraud where fraud had not been pleaded in the first instances."

It is not in this case, a simple matter of the 1st plaintiff being remiss or forgetful or careless. The solicitors for the plaintiffs have acted, except for a short period between December 2001 and February 2002, for them throughout. They had already amended their claim in August 2002. According to the defendants, the plaintiffs’ present application to amend by alleging fraud only acts to delay the hearing of the case and is in effect an attempt to restrain the defendant from its exercise of mortgagee sale. There is furthermore no evidence that there has been any fraudulent misrepresentation made by the 1st defendant in the mortgage transactions.

For the 1st plaintiff to succeed in his claim of fraud he must prove that the 1st defendant had made representation that was not only false but fraudulent and furthermore negligent. There is no or insufficient evidence pleaded before this Court to support the allegation. The allegation of fraud against the 1st defendant in respect of the negotiations and execution of the four (4) mortgagees do not, from the evidence before me, show any misrepresentation by the 1st defendant. The 1st defendant is as a lending institution. The 1st plaintiff is a businessman who wished to borrow money from the 1st defendant to pay off some of his outstanding debts. The money was lent with conditions know and fully understood by the 1st plaintiff. Where is the evidence of fraudulent misrepresentation?

I am satisfied that there are no exceptional circumstances that would favour this Court allowing the plaintiffs to add an additional prayer alleging fraud to the plaintiff’s claim at this late stage. There is certainly some credence in believing that the application is deliberately made with the view of delaying further the case and at the same time thwarting the 1st defendant’s exercise of its rights to mortgagee sale.

Leave to further amend the Statement of Claim is refused.

Injunction Application

In the first instance, the defendants submit that the plaintiffs are guilty of non-disclosure of material facts, in that they had failed to disclose to the Court that they had previously applied and obtain an injunction at the Lautoka High Court in April 1997 against the 1st defendant in respect of the same mortgages. The injunction was subsequently dissolved on 4 July 1997 after the Court had heard arguments from Counsel of both parties. Counsel for the defendants refer to R v. Kensington Income Tax Commissioners {1917} 1 KB 486 in which the Court: per Lord Cozens-Hardy MR, at p. 504, 504, quoting from Daglish v. Jarvie 2 Mac. & G.231, 238 said:

"It is the duty of a party asking for an injunction to bring under notice of the Court all facts material to the determination of his right to that injunction; and it is no excuse for him to say that he was not aware of the importance of any facts which he had omitted to bring forward."

The law is clear. The application for injunction is governed by the same principles which govern any other type of applications that came to the Court for relief. They have to show good faith, uberrima fides. They are required to put every material fact before the Court.

The Lautoka CA No. HBC 20/1977 between the 1st plaintiff and the 1st defendant as correctly stated by the defendant Counsel, dealt with an interim injunction granted by the Court against the 1st defendant restraining it from exercising its power of sale under the same securities (mortgages) over the same properties (CT. 22470 and CT. 204468), as exist in this case.

There is merit in the defendants’ submission. It is inconceivable, in the Court’s view, that the plaintiffs have not thought it important to bring to the notice of the Court the Lautoka High Court action. The facts are material to the issues before this Court and the plaintiffs appear to be clearly in breach of the rule against non-disclosure. In CA. 20/77, the Court had dissolved the interim injunction after deciding that the damages to the plaintiff would have been adequately compensated, by the 1st defendant. These were material facts to the consideration before this Court. The non-disclosure by the plaintiff this Court considers a serious matter indeed. Under the circumstances, it has no alternative but to dismiss the plaintiff’s application of an interim injunction.

But even if the Court were minded to overlook the serious issue of non-disclosure, then let me consider briefly the merits or otherwise of the current application

The governing principles as settled by American Cyanamid Co. v. Ethicon Ltd. [1975] UKHL 1; [1975] AC 396 and reiterated in the Fiji Court of Appeal in Cobwebb Co. Pty. Ltd. v. Ratu Kavekini Nakelia & Or. CA No. 46 of 1990 makes clear that the plaintiff needs only to establish that a serious issue arises. After that the governing consideration is the balance of convenience. To ascertain it, the Court assesses whether the plaintiff could be adequately compensated by damages if refused the injunction, or whether the defendant could be adequately compensated in damages if an injunction were granted.

The gist of the plaintiffs’ claim is premised on misrepresentation made by the 2nd defendant allegedly on behalf of the 1st defendant, and inducement. It is not for the Court at this juncture to embark upon anything resembling a trial of the action based upon conflicting affidavits in order to ascertain the strength of each party’s case. The position is set out in the Supreme Court Practice (White Book) 1985 Ed. O.29/1/2:

"It is sufficient to show that there is a serious question to be tried. Unless the material available to the Court shows that the plaintiff has no real prospect of succeeding in his claim at the trial, or the Court is satisfied that the claim is frivolous or vexatious, the Court must go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief sought."

The Court in this case having taken into considerations the issues and principles applicable, must give the benefit of any doubt to the plaintiffs and grant that there are serious questions of law and disputes of facts to be tried.

The balance of convenience, after consideration of all the issues and facts submitted by the parties, clearly, in my view, favours the defendants. The 1st defendant is an international lending institution of repute that is more than capable of compensating the plaintiffs fully for any damages. As Lord Diplock stated in the American Cyanamid case (supra), at p.400:

"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."

The ability of the 1st defendant to compensate tilting the balance in its favour was, as noted above, the same reason why the Court in CA.20/77 ruled in favour of the defendant in dissolving the injunction.

There is finally the issue of the right of a mortgagee to exercise his power of sale under the mortgage. It is settled law that the Court will not, except in exceptional cases, interfere with the exercise of the power of sale of a mortgagee. The right of the 1st defendant as a mortgagee to sell the 1st plaintiff’s properties for default in payment of the loan is recognised in equity as well as by law (section 79 Property Law Act). As Kermode J. said 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, exception exceptional case, restrain a mortgage from exercising power of sale conferred on him under a mortgage unless the mortgagor offers to pay all moneys claimed by the mortgagee into Court."

The 1st plaintiff has not indicated his willingness to pay the full amount owed under the mortgages into Court. This Court will not in the absence of any exceptional circumstance, restrain the 1st defendant as mortgagee from exercising its power of sale.

In the end this Court finds no merit in the plaintiffs’ application. Its Summons to amend its claim and its application for interim injunction against the defendants are dismissed.

Costs of $400 is awarded to the defendant.

F. Jitoko
JUDGE

At Suva
29 April 2005