IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No. 153 of 2021

BETWEEN:
HOME FINANCE COMPANY LIMITED registered office at 371 Victoria Parade, Suva.
PLAINTIFF

AND:
RONAL RAKESH NAND aka RONALD RAKESH NAND t/a WESTWOOD SAWMILL having its
office located at Wairabetia, Lautoka.
FIRST DEFENDANT

AND:
RON’S WOOD SHAVING PTE LIMITED a limited liability company having its registered office
Wairabetia Road, Lautoka.
SECOND DEFENDANT

Appearances: Mr. Singh and Ms. Swamy for the Plaintiff
Mr. D. S. Naidu for the Defendants
Date of Hearing:	21 March 2022
Date of Ruling:	23 March 2022

R U L I N G

INTRODUCTION

1.	The full background to this case is set out in two Rulings which were delivered on 01 March 2022 (Home Finance Company Ltd v Nand [2022] FJHC 102; HBC153.2021 (1 March 2022)) and on 10 February 2022 (Home Finance Company Ltd v Nand [2022] FJHC 98; HBC153.2021 (10 February 2022)).

2.	Following the 01 March 2022 Ruling, Patel Sharma Lawyers sealed the Orders on 02 March 2022 for and on behalf of the plaintiff as follows:

(1)	that the general lien in question is a valid floating charge

(2)	that the said floating charge crystalized at the point of the Demand Notice

(3)	that upon the crystallization of the General Lien, the vehicles in question, namely, FD 409, JU 677, CP 185, FW 785, HD 695, FE 514, JJ420, HF 024, FX 923, and FJ 222 became fixed. This means that Nand should not have dealt with them by transferring them to RWSPL.

(4)	that accordingly, HFC is entitled to an order to recover the said vehicles from RWSPL in order to realize its (HFC’s) security over the said vehicles

(5)	that the said vehicles shall be released to HFC for the above purpose.
3.	There is also an order that the defendants pay costs to the plaintiff which was summarily assessed at $2,500 to be settled within fourteen days.

4.	On 3 March 2022, Pillay Naidu & Associates filed a Summons under Order 29 of the High Court Rules 1988 seeking the following Orders:

(1)	that the plaintiff release and give up delivery of vehicle registration no: FD409, JU677, CP185, FW785, HD695, FE514, JJ420, HF024 and FJ222 presently in their possession to the second defendant at the plaintiff’s expense.

(2)	that vehicle RD King (FX923) remain in the possession and custody of the defendants. 

(3)	that the plaintiff is not entitled to costs assessed at $2,500 by the Court. 

(4)	that the first and second defendants each be awarded costs of $2,500 (two thousand and five hundred dollars) each payable within 14 days. 

5.	The Summons is filed pursuant to Order 29 of the High Court Rules 1998 and under the inherent jurisdiction of this Court and is supported by an affidavit sworn by Ronal Rakesh Nand on 02 March 2022.

NAND’S AFFIDAVIT

6.	Nand deposes as follows in his affidavit:

(1)	at all material times, he was trading under the name and style of Westwood Sawmill until the plaintiff called in its securities. 

(2)	he is a director and shareholder in Ron’s Wood Shaving Pte Limited (“RWSPL”) the second defendant which is a limited liability company and the assets of this company are not secured to either the plaintiff or any third party. 

(3)	RWSPL has the following ten (10) vehicles registered under its name since 12 March 2021. 

(4)	nine (9) of the vehicles in question are in the possession, control and custody of the plaintiffs whilst vehicle No: FX923 which now has a personalized number plate is in his custody and possession. 

(5)	on 01 March 2022, this Court delivered a Ruling on the plaintiffs application. 

a)	on page 2 of the said Ruling at line 5, the following is stated:-

“On 20th April 2021 Patel & Sharma Lawyers issued a Demand Notice to Nand seeking repayment of the arrears failing which the entire debt of $3,576.499.65 shall become payable immediately”.

b)	on page 7 in its conclusion, this Court then stated:-

a)	That the General Lien is a valid floating charge and 
b)	That the floating charge crystallized at the point of the Demand Notice. 

(6)	the plaintiff’s solicitors by email dated 01 March 2022, demanded possession of vehicle FX923 with the personalized registration RD King. The defendants’ solicitors have responded. 

(7)	according to the ruling , only vehicles transferred to the second defendant by the first defendant after 20 April, 2021 being the date of service of the Demand Notice, remain the property of the first defendant over which the floating charge has crystallized.  However, in this case, the vehicle referred to were transferred on 12 March 2021 and not after 20 April 2021. 

(8)	he is advised by his solicitors and verily believe that the plaintiff is not entitled to retain possession of the nine (9) vehicles presently in its possession and should return the same to the second defendant at its expense and for an Order that he retains vehicle RD King (FX923).

(9)	that he further seeks a stay of the order for costs of $2,500 (Two Thousand and Five Hundred Dollars) made against the defendants in light of the fact that no vehicles are caught by the Ruling of this Court and that instead I and the second defendant be awarded costs of $2,500.00 each.

(10)	he seeks order in terms of my summons filed herein. 

7.	On 11 March 2022, Pillay Naidu & Associates filed an Amended Summons by which they added the following prayer at paragraph 5:

(5)	that the Orders made by this Honorable Court on 1st of March 2022 be stayed until determination of this application. 

8.	On 15 March 2022, Pillay Naidu & Associates filed a Second Amended Summons by which they amended prayer five (5) as follows:

(5)	that the Orders made by this Honorable Court on 1st of March 2022 be stayed until determination of this application. 
…………………………..
This application is made pursuant to Order 20 Rule 10, Order 29, Order 45 Rule 10 of the High Court Rules 1988 and Section 18 (1) of High Court Act and under the Inherent Jurisdiction of this honorable Court. 

9.	On 17 March 2022, at the hearing of the Summons, Mr. Singh raised the following preliminary points. 

10.	First, Mr. Singh submits that the defendants are in continuous contempt of the Orders granted on 02 March 2022. He submits that, until the defendants discharge or purge the contempt, this Court cannot, as a matter of principle, grant them audience on their current application. Second, he submits that this court is functus officio.  Mr. Singh points out that by their very nature, the Orders sought by the defendants all seek to set aside the Orders of this Court granted on 02 March 2022.

CONTINUOUS CONTEMPT

11.	The first defendant currently has possession of FX923. He simply refuses to give up possession of this vehicle to the plaintiff, in spite of the Orders of this Court. Instead, he has filed the current application.

12.	Mr. Singh argues that he is in continuous contempt of the Order of this Court, He relies on the following passage from the English Court of Appeal decision in  Hadkinson v Hadkinson (1952) 2 AL ER 567

It is plain and unqualified obligation of every person against, or in respect of, whom an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged. The uncompromising nature of the obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void. Lord Cottenham LC said in Chuck v Cremer (1 Coop temp Cott 342):

“A party, who knows of an order, whether null or valid, regular or irregular, cannot be permitted to disobey it... It would be most dangerous to hold that the suitors or their solicitors, could themselves judge whether an order is null or valid ... whether it was regular or irregular. That they should come to the court and not take upon themselves to determine such a question. That a course of a party knowing of an order, which was null or irregular, and who might be affected by it, was plain. He should apply to the court that it might be discharged. As long as it existed it must not be disobeyed”.

Romer L.J. also observed as follows;

Such being the nature of this obligation, two consequences will, in general, (follow from its breach. The first is that anyone who disobeys an order of the court (and I am not now considering disobedience of orders relating merely to matters of procedure) is in contempt and may be punished by committal or attachment or otherwise. The second is that no application to the court by such a person will be entertained until he has purged himself of his contempt.

13.	Mr. Naidu however cites the decision in Munishi v Munaf  FJHC 583, Civil Action No. 8 of 2009 (29 June 2016) where the Court had refused to follow Hadkinson.

14.	In Munishi, the defendant had appeared in Court to oppose a Summons for Assessment of Damages. At the time of his appearance in Court, the defendant had yet to comply with an earlier Order of the same Court, in the same proceedings. These Orders were that (i) the defendant do  give vacant possession of the land at issue in that eviction proceeding and (ii) to pay costs which the court had assessed against him. 

15.	Mr. Justice Nanyakarra first considered the principle which Mr. Singh relies on and then went on to consider the following comments of Denning LJ in the same case:

I keep well in my mind the classical exposition of the scope and the width of the rule given by Denning L.J.;

It is a strong thing for a court to refuse to hear a party to a cause and it is only to be justified by grave considerations of public policy. It is a step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his compliance. In this regard I would like to refer to what Sir George Jessel, M.R. said (46 L.J. Ch. 383) in a similar connection in Re: Clements & Costa Rica Republic v. Erlanger
“I have myself had on many occasions to consider this jurisdiction, and I have always thought that necessary though it be, it is necessary only in the sense in which extreme measures are sometimes necessary to preserve men’s rights, that is, if no other pertinent remedy can be found. Probably that will be discovered after consideration to be the true measure of the exercise of the jurisdiction.”

Applying this principle, I am of opinion that the fact that a party to a cause has disobeyed an order of the court is not of itself a bar to his being heard, but if his disobedience is such that, so long as it continues, it impedes the course of justice in the cause, by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear him until the impediment is removed or good reason is shown why it should not be removed.

16.	In Munishi, Nanyakarra J went on to hold that Hadkinson did not apply to the facts that he was dealing with as the plaintiff had other effective means of securing the compliance of the order of the Court dated 17th November 2015’. 

17.	I accept Mr. Singh’s argument that there need not be a contempt proceeding on foot before the principle in Hadkinson v Hadkinson can apply. I also take heed of the cautionary approach of Denning LJ which Nanyakarra J had referred to above. While I am mindful that it is indeed a strong and a serious matter to deprive a person of a hearing to a cause, there is a grave public policy consideration applicable in the circumstances of this case which dictate that I apply Hadkinson.

18.	The public policy in question underlies the principle of finality which was described by Lord Wilberforce in  Ampthill Peerage  (1976) 2 WLR 777 as follows:

English law .... place(s) high in the category of essential principles that which requires that limits be placed upon the right of citizens to open or to reopen disputes. [It]...is the same principle as that which requires judgments in the courts to be binding, and that which prohibits litigation after the expiry of limitation periods. Any determination of disputable fact may, the law recognises, be imperfect: the law aims at providing the best and safest solution compatible with human fallibility and having reached that solution it closes the book. The law knows, and we all know, that sometimes fresh material may be found, which perhaps might lead to a different result, but, in the interest of peace, certainty and security it prevents further inquiry. It is said that in doing this, the law is preferring justice to truth. That may be so: these values cannot always coincide. The law does its best to reduce the gap. But there are cases where the certainty of justice prevails over the possibility of truth (I do not say that this is such a case), and these are cases where the law insists on finality. For a policy of closure to be compatible with justice, it must be attended with safeguards: so the law allows appeals: so the law, exceptionally, allows appeals out of time: so the law still more exceptionally allows judgments to be attacked on the ground of fraud: so limitation periods may, exceptionally, be extended. But these are exceptions to a general rule of high public importance, and as all the cases show, they are reserved for rare and limited cases, where the facts justifying them can be strictly proved."

19.	This brings us to the second point raised by Mr. Singh.

FUNCTUS

20.	The issues which the defendant is raising by this application have already been determined finally by this Court. There is nothing subsisting following my ruling.

21.	A court is functus officio once it has delivered its final decision. A Court is said to finally dispose of a matter before it when the court has no residual discretion to review its own final orders. The general common law position is that a Court may still recall or review its judgment which is yet to be passed and entered and not yet drawn up.

22.	The Canadian Supreme Court case of Chandler v Alberta Association of Architects, [1989] 2.S.C.R 848 at pages 861 – 862 aptly places the state of finality at that point when there is:

“..nothing to be judicially determined or ascertained thereafter, in order to render it effective and capable of execution, and is absolute, complete and certain”. (George Spencer Bower and A. K. Turner, The Doctrine of Res Judicata, 2nd ed. (London: Butterworths 1969), at page 132, as cited in Judicial Review of Administrative Action in Canada).

23.	That state of finality is reached at the point when a decision maker is barred from revisiting the decision, other than to correct clerical or other minor errors under the slip rule being Order 20 Rule 10 of the High Court Rules. 

24.	At common law, that point happens when the judgement is perfected – that is – when it is formally drawn up (see Scutt J's Ruling in Naigulevu v National Bank of Fiji (No. 2) [2009] FJHC 65; Civil; Action 598.2007 (10 March 2009), see also Pitatails & Ors v Sherefettin [1986] QB 868 cited by Scutt J in Naigulevu).

See also Merchant Finance & Investment Co. Ltd v Lata Court of Appeal Case No. ABU0034 of 2013, Almeida Guneratne JA who relied on Jowitt’s Dictionary of English Law (2nd ed, 1977).

COMMENTS

25.	One thing that must be spelled out here, and which was merely alluded to in my 01 March 2022 Ruling, is that the first defendant had ceased trading as a going concern for quite some time. In the said Ruling, I had set out that:

(i)	the vehicles in question are all subject to the General Lien in question. This Lien creates a floating charge over the said vehicles.

(ii)	the first defendant had been in default of his loan repayments with the plaintiff company for quite some time. He continued in default even after having exhausted a repayment holiday given by the plaintiff company.

(iii)	RWSPL is a “shelf” company owned by the first defendant. The company has not engaged in any trade or commercial activity since incorporation. The only activity which it has ever engaged in is to receive the vehicles in question from the first defendant.

(iv)	the body of evidence strongly suggest that the transfer of the vehicles from the first defendant to RWSPL was carried out rather underhandedly by the first defendant in order to insulate the said vehicles from HFC’s threatened recovery action under the General Lien.

(v)	RWSPL was not a bona fide purchaser for value. Rather, it is a volunteer.

(vi)	a “volunteer interest” is one which has not been created for valuable consideration. As a general rule, a volunteer interest will not prevail over a competing equitable interest created out of valuable consideration (see Hughman’s Solicitors v Central Stream Services Ltd – In Liquidation & Stephen Hunt [2012] EWHC 1222 (Ch); United Bank of Kuwait plc v Sahib [1997] Ch 107).

26.	The above findings of fact must be contextualized against the general law as follows. Again, firstly, the vehicles in question are subject to the floating charge created by the General Lien. 

27.	Secondly, flowing from that, the first defendant, as chargor, is allowed to deal freely with the vehicles in question in the ordinary course of its business. There is no requirement in law that the first defendant must obtain the consent of the chargee (i.e. the plaintiff) before he could deal with the vehicles in the ordinary course of business. 

28.	Thirdly, the crystallization of a floating charge is governed by two branches of the law (a) by contract law, which will involve the construction of the particular clause in the charging instrument, and (b) general law (see Malayan Banking Bhd v Bakri Navigation Company Ltd [2020] SGCA 41, the Singaporean Court of Appeal discussion on this).

29.	In my ruling of 01 March 2022, I only dealt with crystallization by construing and applying clause 8 of the General Lien because that was the only point raised by counsel. As I have said, a floating charge may also crystalise as a matter of law when the chargor’s business ceases to be a going concern. Once a chargor ceases to be a going concern, the chargor is no longer free to dispose of its assets under the floating charge.

30.	In Malayan Banking Bhd v Bakri Navigation Company Ltd [2020] SGCA 41, the Singaporean Court of Appeal stated inter alia as follows:

73 We accept that there exists a category of crystallising events which relates to the crystallisation of a floating charge on the occurrence of an event which is incompatible with the continuance of trading by the chargor company as a going concern: Roy Goode and Louise Gullifer, Goode and Gullifer on Legal Problems of Credit and Security (Sweet and Maxwell, 6th Ed, 2017) (“Goode”) at para 4-32. This category is also known as crystallisation “as a matter of law”. Despite that nomenclature, there is no mandatory rule of law which precludes a charge from continuing to float when a company ceases trading. It is merely the law’s response to the unlikelihood of the debenture holder intending to allow the charge to continue to float when the chargor ceases to be a going concern. Hence the law implies a term providing for crystallisation on events denoting cessation of trading as a going concern (Goode at paras 4-33 to 4-35). Once the chargor ceases trading as a going concern, the rationale for the freedom to dispose of its assets under the floating charge disappears (Goode at para 4-36).

31.	As to what denotes a “cessation of trading” as a going concern, the Singaporean Court of Appeal went on to say as follows:

74 There are two types of events denoting cessation of trading as a going concern that can bring about “crystallisation as a matter of law”. These are: (a) Winding up of the company. (b) De facto cessation of trading. This includes disposal of, in substance, the whole of a company’s undertaking or trading assets with a view to cessation of trading (see Gough at p 136; Re Lin Securities (1988) 2 MLJ 137 at 150; Fire Nymph [70] supra at 371). 75 From the texts and the authorities, it is clear that crystallisation by operation of law occurs when the chargor ceases trading as a going concern. This was also recognised by the Judge who explained the rationale for this position at [119], [121]–[122] of the Judgment.
 
32.	The evidence in this case suggests that the first defendant ceased trading as a going concern following the covid-19 situation. He simply failed to recover from that.  In addition to that, the evidence is unrefuted that the first defendant transferred the vehicles in question at a time when it was no longer a going concern. In any event, the vehicles were not transferred in the ordinary in the first defendant’s course of his business. I say this because: (1)  he was no longer trading at the time as the evidence suggests and (2) regardless of anything else, he was simply transferring the vehicles to his company RWSPL which was a volunteer and not a bona fide purchaser for value. As such, one can only infer that the intention behind the transfer was to insulate the vehicles from the threat of any recovery action by the creditor-plaintiff.

33.	In the circumstances, when one looks at things either from the point of view of contract (clause 8 of General Lien) or by operation of law (Malayan Banking Bhd) – it is hard to see how RWSPL should be entitled to retain the vehicles in question. Yet, as I must agree with Mr. Singh, the issues are res judicata and I am functus office. The only option open to the defendants is to appeal my Ruling.

CONCLUSION

34.	I uphold Mr. Singh’s preliminary objections. Accordingly, I dismiss the defendants’ application. I grant costs to the plaintiff which I summarily assess at $500-00 (Five hundred dollars only).

…………………………….
Anare Tuilevuka
JUDGE
Lautoka

23 March 2022