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Home Finance Company Ltd v Temo [2010] FJHC 118; HBC279.2009 (8 April 2010)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO: HBC 279 of 2009

BETWEEN:

HOME FINANCE COMPANY LIMITED
Plaintiff

AND:

PHILIP ANTHONY TEMO
Defendant

Mr. M Nand - for the Plaintiff
Ms L Vaurasi - for the Defendant

Date of Judgment: 8th April 2010

JUDGMENT
[Removal of Caveat – Mortgagee’s Power of Sale]

[1] By Originating Summons dated 1 September 2009 the Plaintiff seeks an order that Caveat No. 720336 against Certificate of Title No. 29947 lodged by the Defendant be removed immediately.

Background Facts

[2] The Plaintiff Home Finance Company Limited is the registered mortgagee under Mortgage No. 548112 given by Erami Baleiwai Mavoa and Emmaline Bui Mavoa as Mortgagors [hereinafter referred as ‘Mortgagors’] over the said CT 29947 [hereafter referred to as the ‘property’].

[3] There was default in repayments by the Mortgagors as a result whereof the Plaintiff exercised its rights under the mortgage and entered into an agreement dated 3 August 2009 to sell the property to one Suresh Hansji [Purchaser] for the sum of $770,001.00.

[4] On 11 August 2009 a transfer document was executed in favour of Hansji and during the process of arranging settlement the Plaintiffs solicitors discovered that there was a caveat against the Title lodged by the defendant Philip Anthony Temo herein. The caveat was lodged on or about 22 June 2009.

[5] The defendant lodged the caveat to protect his interest as equitable Mortgagee by virtue of payment of deposit of $40,000.00 which the defendant says was paid to the owners/ Mortgagors of the property when on 8 July 2006 he entered into a Sale and Purchase Agreement with the owners to purchase the property together with one other property described as CT 14160 for the price of $700,000.00.

[6] In May 2009 the defendant discovered that the Plaintiff was proceeding to exercise its power of sale under the mortgage he therefore lodged the said caveat on 22 June 2009.

[7] According to the defendant’s counsel’s submission that pursuant to the Sale and Purchase Agreement, the defendant commenced an action for specific performance against the registered proprietors [the owners of the property] and has also sued the Plaintiff for bad faith, unconscionable conduct and breach of duty of care. He has obtained a default judgment against the owners.

Consideration of the issues

[8] The issues for Court’s determination inter-alia are whether the defendant has a caveat-able interest in the mortgaged property. The answer is in the negative.

[9] It is abundantly clear from the facts that there is no privity of contract between the plaintiff/mortgagee and the defendant.

[10] The defendant is a complete stranger to the dealings between the plaintiff and the mortgagor [the owners of the property].

[11] The defendant asserts even as ‘equitable mortgagee’, on the facts of this case it constitutes ‘caveatable interest’ in the mortgaged land. He brought an action against the owners [the mortgagors] and has obtained a default judgment for the dealing in respect of which he has lodged the caveat. He has not submitted any unregistered mortgage in support of his claim as equitable mortgagee.

[12] I entirely agree with Mr. Nand’s submissions in regard to this aspect of the matter.

[13] Whoever advised the defendant to enter into a Sale and Purchase Agreement with the mortgagors in the face of the mortgage to the plaintiff should have known that this cannot be done. Hence the defendant has been ill -advised. A proper search should have been done before the defendant entered into the Agreement and allegedly paid the deposit of $40,000.00.

[14] The plaintiff as the registered mortgagee has every right to exercise its power of sale under the mortgage without the concurrence of the caveator (the defendant) on the facts and circumstances of the case. In fact the defendant has no locus standi in the matter vis a vis the plaintiff.

[15] I agree with Mr. Nand that while section 113 of the Land Transfer Act prohibits absolutely any registration or dealing as long as a caveat remains on the Title, a Transfer from a mortgagee exercising the power of sale is an exception to the prohibition against registration [Ram Dutt Prasad –v- ANZ Banking Group Ltd C.A. 121/99]

[16] The defendant’s caveat is subject to the plaintiffs Mortgage number 548112.

[17] An interest created by a Mortgagor [as here] cannot prevail over the statutory rights of the plaintiff/mortgagee to exercise its power of sale [National Bank of Fiji –v- Jung Mook Jan and Registrar of Titles [Civil Action No. HBC 0043 of 1996]. In this NBF case where the defendant there lodged a caveat over freehold land which had been subject of a Sale and Purchase Agreement, Scott J in ordering the removal of the caveat said:

"The first Defendant’s interest is purely equitable [Galvasteel Pty –v- Monterey Building Pty Ltd [1974] 10SASR176 and in my view can neither prevail over the mortgages which are properly registered nor, in the absence of anything to suggest that the mortgagee Banks powers are being abused, over the mortgagee’s statutory rights of Sale [see Property Law Act Cap. 130 Section 79 and generally Karabee Park Pty Ltd –v- Daley [1978] 2 NSWLR 222, Laweberg –v- Firect Acceptance Corp Ltd [1981] VicRp 36; [1981] VR 344.

[18] In this case there was nothing to prevent the mortgagee/plaintiff from exercising its power of sale under the mortgage where there is a default in payment of the mortgage money.

[19] The following passage from the judgment of Kermode J in Rauzia Zaweed Mohammed –v- ANZ Banking Group Ltd [1984] 30 FLR 136 at p140 is pertinent:

"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 its power of sale conferred on him under a mortgage unless the mortgagor offers to pay all moneys claimed by the mortgagee into Court."

[20] In this case the mortgagors are in no position to deposit moneys in court. It has been held as good principle that failure to make payment into court of the whole sum owed under the mortgage, a mortgagee will not be restrained from exercising its power of sale under the mortgage [Westpac Banking Corporation Limited –v- Adi Mahesh Prasad [1999] 45 FLR 1]. .

[21] I find that the defendant has no leg to stand on in regard to the caveat. The caveat has to be removed to enable the plaintiff to register the transfer document to the purchaser under the mortgagee’s sale. Hence the present application by the plaintiff.

Conclusion

[22] To conclude, on the facts and circumstances of this case and in law on the grounds stated hereabove I hold that the defendant has no caveatable interest against the property to prevent the registration of the transfer document by the mortgagee. The caveat has no value as far as the plaintiff as mortgagee is concerned.

[23] The answer to the issue before the court is to be found in the case of Property & Bloodstock Ltd –v- Emerton and Bush & Another –v- Property & Bloodstock Ltd & Others [1968] Ch.D 94 [CA].

[24] There the point was whether it was still open to a mortgagor [or borrower] to redeem when the mortgagee has entered into a contract for the sale of the mortgaged property as in present case.

[25] The lower Court’s decision in Emerton [supra at p.112] was upheld by Dankwerts LJ when he said ‘that the mortgagor’s right of redemption was not available, and I may say, at once, that in my opinion he reached a right conclusion’.

[26] Irrespective of the caveat, I would like to refer to certain passages from the judgments in Emerton case [supra] in regard to the position in the case before me where the mortgagee has already entered into a Sale and Purchase Agreement and has an executed Transfer document which is ready for registration.

[27] Sellers L.J said [at p123] that:

"The law, as I see it, is correctly stated in the headnote to Waring [Lord] –v- London & Manchester Assurance Co. Ltd, [1935] Ch 310 which seems to be the only case which is strictly relevant on the issues which have come before this court. The headnote, as far as it is material, reads as follows:-

"The court will not grant to a mortgagor tendering the moneys due under the mortgage an injunction restraining the mortgagee from completing by conveyance a contract to sell the mortgaged property in exercise of his power of sale unless it is proved that the mortgagee entered into the contract in bad faith."

[28] Sellers L. J goes on to say [at p.124] that the grounds of Crossman J’s judgment are cogent. He said [at p.317]:

"After a contract has been entered into, however, it is, in my judgment, perfectly clear ... that the mortgagee [in the present case, the company] can be restrained from completing only on the ground that he has not acted in good faith and that the sale is therefore liable to be set aside ... In my judgment, section 101 of the Act, which gives to a mortgagee power to sell the mortgaged property, is perfectly clear, and means that the mortgagee has power to sell out and out, by private contract or by auction, and subsequently to complete by conveyance; and the power to sell is, I think, a power by selling to bind the mortgagor."

[29] In Emerton it was summed up when Sellers L.J said [at p.125] that:

"... the immediate effect of that contract was to preclude redemption pending completion so long as that contract was subsisting."

Orders

[30] For the above reasons the plaintiff succeeds in its application to remove the caveat lodged against the property. There is no legal basis on which the caveat can remain. It is ordered that Caveat No. 720336 be removed forthwith.

I award costs against the defendant in the sum of $750.00 to be paid within 14 days.

D. Pathik
JUDGE

At Suva
8th April 2010