IN THE FIRST MAGISTRATE'S COURT AT NADI
CIVIL JURISDICTION

Civil Action No. 184 of 2009

BETWEEN:

FIJI DEVELOPMENT BANK
a body corporate duly constituted under the Fiji Development Bank Act, Cap. 214
and having its principal office at 360 Victoria Parade, Suva in Fiji ("FDB")
PLAINTIFF

AND:

NAICILI INVESTMENTS LIMITED
a duly incorporated company
having its registered office at Wailoko, Sabeto, Nadi.
1ST DEFENDANT

AND:

NARIKA VEISAUNAGAUNA LEWAQAI AND ERONI LEWAQAI
both of Wailoko, Sabeto, Nadi, Company Directors.
2ND DEFENDANTS

Messrs Nands Law for the Plaintiff
Messrs Esesimarm & Co for the Defendants

RULING

BACKGROUND

1. On 23 September 2009 the plaintiff filed an Ex-PARTE NOTICE OF MOTION seeking the following prayers: 

I.	An Order that the Defendants disclose the location of the Vehicle Registration No CU 671 and the Tractor to the Plaintiff and or its agents and allow the Plaintiff and/ or its agents to enter into the premises of the Defendants to seize possession of the vehicle registration number CU 671 and 1 only Tractor and the Plaintiff be allowed to seek police assistance if need be;

II.	The Defendants pay the reminder of the mortgage arrears in the sum of $20, 137.00 (Twenty Thousand One Hundred Thirty Seven Dollars) together with interest at the rate of 8% per annum.

III.	An injunction against the Defendant or any of its agents or servants restraining them from selling, attempting to sell or disposing the vehicle registration number CU 671 and 1 only Tractor or removing any of its vehicle parts whatsoever.

IV.	General Damages;

V.	Interests;

VI.	Costs;

2. The plaintiff has filed the following documents:

(a) Ex-Parte Notice of Motion dated 21st September 2009
(b) Affidavit in support of support of Salote Tavainavesi sworn on 16th September 2009
(c) Supplementary Affidavit of Salote Tavainavesi sworn on 5th October 2009
(d) Writ of Summons filed on 23rd September 2009
(e) Affidavit in Reply of Salote Tavainaversi sworn on 23rd April 2010
(f) Reply to Statement of Defence filed on 9th April 2010

3. The Defendants have filed the following documents:

(a) Affidavit of Eroni Lewaqai sworn on 9th December 2009
(b) Statement of Defence and Counterclaim filed on 18th December 2009.

ISSUES

4.	(a) Whether the Credit Consumer Act is applicable to the Loan agreement obtained by the Defendants and subsequently also applies to the Bill of Sale and the Guarantee executed by the defendants?

(b) Whether the Plaintiff can take action against the Guarantor without first taking action against the Debtor?

(c)	Whether the Plaintiff should be granted an injunction?

(d)	Whether the Plaintiff will suffer irreparable harm if injunction is not granted.
 
THE LAW

5.	In the case of Council of the Fiji Institute of 	Technology v Anania Cara and Joney Tawaketini and Aminiasi Tabuakula [2003] FJHC 300; 	HBC0258R.2002S 97 may 2003) it has been stated that;

'it is not a requirement that a guarantor be notified of the principal debtor's default. In the absence of stipulation to the contrary, the guarantor becomes liable at the instance of default' and it is not necessary for the Creditor, before proceeding against the Guarantors, to demand payment from the first defendant as the principal debtor, unless it is expressly stipulated for in the Contract".

6.	Under Section 80 of the Consumer Credit Act it provides that:

"A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless the debtor is in default under the credit contract and –

(a)	 The credit provider has given the debtor, and any guarantor, a default notice, complying 	with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and 

(b)	 The default has not been remedied within that period".

APPLICATION FOR INJUNCTION

7.	The Court has in its discretion to grant an interlocutory injunction however in order to do so the party applying for the Injunction must satisfy the court in accordance to the principles laid out and established in the case of AMERICAN CYANAMID CO. v ETHICON LTD (1975) A. C. 396 The House of Lords there decided that in all cases, the Court must determine the matter on a balance of convenience, there being no rule that an applicant must establish a prima facie case. The extent of the court's duty in considering an interlocutory injunction is to be satisfied that the claim is "not frivolous or vexatious", in other words, "that there is a serious question to be tried".

In CYANAMID (supra) at page 406 LORD DIPLOCK stated the object of the interlocutory injunction thus:

" … to protect the plaintiff against injury by violation of his rights for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resoled in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been 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".

8.	A similar view was expressed by McCARTHY P NORTHERN DRIVERS UNION v KUWAU ISLAND FERRIES (1974) 2 NZLR 61 when he said:

"The purpose of an interim injunction is to preserve the status quo until the dispute has been disposed of on a full hearing. That being the position, it is not necessary that the Court should have to find a case which would entitle the applicant to relief in all events: it is quite sufficient if it finds one which shows that there is a substantial question to be investigated and that matters ought to be preserved in status quo until the essential dispute can be finally resoled …" (ibid, 620)

"it is always a matter of discretion, and … the Court will take into consideration the balance of convenience to the parties and the nature of the injury which the defendant, on the one hand, would suffer if the injunction was granted … and that which the plaintiff, on the other hand, might sustain if the injunction was refused …" (ibid, 621)

9.	In the appeal case of Fiji Development Bank v Lutunatabua [1993] FJHC 95; Hbc 0014j.93s (18 	October 1993 Bryne J reaffirmed his previous decision that the mandatory injunction to 	continue as per the previous decision but since the Plaintiff had seized the chattels in question it 	should be prevented from dealing with these chattels until at least after the trial of this action.

THE DEFENDANT'S SUBMISSION

10.	A summary of the Defendants submissions is that:

(a)	The bill of sale on which the plaintiff relies is null and void hence is unenforceable.

(b)	Alternatively, if the bill of sale is enforceable, which is denied, the defendants are entitled to rely on relevant provisions of the Consumer Credit legislation, for assistance by the Court.

(c)	Plaintiff not entitled to injunction.

(d)	Reliance by the plaintiff on the guarantee is premature.

THE PLAINTIFF'S SUBMISSION

11.	A summary of the Plaintiff's submissions is as follows:

(a) The loan was for the purpose of purchase of the Truck for hire purpose. The loan was of a business nature hence the Consumer Credit Act 1999 does not apply.

(b)	The Guarantee was executed to secure the Business Loan Agreement hence the Guarantee is for a business purpose and not a personal security for a personal loan hence the Consumer Credit Act 1999 does not apply.

(c)	The Plaintiff relies on section 6 (1) (b) of the Consumer Credit Act 1999.

(d)	Alternatively the Plaintiff submitted that if the Consumer Credit Act 1999 does apply to the Bill of Sale then the Defendants had in their disposal section 66 of the Consumer Credit Act 1999 whereby the Defendant needed to only make an application with the Plaintiff to vary the terms of the Loan Agreement on the grounds of hardship. However the Defendant did not do so and only raised this issue when the Plaintiff caused to issue claim against them.

(e)	The Plaintiff holds a Bill of Sale as security which contains certain provisions under which the Plaintiff upon default of payment has powers to take enforcement proceedings.

DETERMINATION

12.	The Plaintiff instituted this action against the Defendants for the recovery of $20,137.00 being the balance monies owed to the Plaintiff for monies lent and advanced to the Defendants, also for an order for the Defendants to disclose the location of the items under the Bill of Sale and an application for injunction against the Defendants restraining them from selling the items under the Bill of Sale.

13.	Does the Consumer Credit Act (the Act) apply to the Bill of Sale and the Guarantee executed by the Defendants on 17th October 2005? The Defendants argue that the Act does apply to the Bill of Sale. However the Plaintiff argues that the Act does not apply.

14.	Section 6 (1) of the Act provides provisions of credit to which the Act applies. This section states as follows:

6. (1) This Act applies to the provision of credit (and to the credit contract and related matters) if, when the credit contract is entered into, or, in the case pre-contractual obligations is proposed to be entered into-

(a)the debtor is natural person ordinarily resident in the Fiji Islands, or is a body corporate or unincorporate formed in and under the law of the Fiji Islands.

(b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes;

(c) a charge is or may be made for providing the credit; and

(d) the credit provider provides the credit in the course of a business providing credit or as part of or incidentally to any other business of the credit provider.

(2) If not all the debtors under a credit contract are persons or corporation to whom or which subsection(1)(a) applies this Act applies only if credit is first provided under the contract in the Fiji Islands.

(3) This Act applies to the provision of credit (and to the credit contract and related matters)-

(a) whether or not it takes place in the Fiji Islands; and

(b) even though the debtor ceases to be ordinarily resident in the Fiji Islands.

(4) For the purpose of this section, investment by the debtor is not a personal, domestic or household purpose.

(5) For the purposes of this section, the predominant purpose for which credit is provided is-

(a) the purpose for which more than half of the credit is intended to be used; or

(b) if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which goods or services are intended to be most used.

15.	Section 7. (1) of the Act contains provision of credit to which the Act does not apply. This section states as follows:

7. (1) This Act does not apply to the provision of credit limited by the contract to a total period not exceeding 62 days.

(2) This Act does not apply to the provision of credit without prior agreement between the credit provider and the debtor.

(3) Subject to subsection (4), this Act does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided.

(4) This Act applies if the charge referred to in subsection (3) is of a nature prescribed by the regulations for the purposes of this subsection or if the charge exceeds the maximum charge (if any) so prescribed.

(5) This Act does not apply to any part of a credit contract under which both credit and debit facilities are available, if and to the extent that the contract or any amount payable or other matter arising out of it relates only to the debit facility.

(6) This Act does not apply to the provision of credit arising out of a bill facility, that is, a facility under which the credit provider provides credit by accepting, drawing, discounting or endorsing a bill of exchange or promissory note, unless the regulations otherwise provide.

(7) This Act does not apply to the provision of credit by an insurer for the purpose of the payment to the insurer of an insurance premium by instalments, even though the instalments exceed the total of the premium that would be payable if the premium were paid in a lump sum, if on cancellation the insured would have no liability to make further payments under the contract, unless the regulations otherwise provide.

(8) This Act (other than sections 70 to 72) does not apply to the provision of credit by a pawnbroker in the ordinary course of a pawnbroker's business.

(9) This Act (other than sections 70 to 72) does not apply to the provision of credit by the trustee of the estate of a deceased person by way of an advance to a beneficiary or prospective beneficiary of the estate.

(10) This Act (other than this Part, Division 3 of Part 4, Divisions 4 and 5 of Part 5 and Part 7) does not apply to the provision of credit by an employer, or a related body corporate (within the meaning of the Companies Act) of an employer, to an employee or former employee, whether or not the credit is provided to the employee or former employee with another person.

(11) For a credit provider that provides credit in the course of business of providing credit, this Act applies to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to persons who are not employees or former employees of the credit provider or a related body corporate.

(12) The regulations may exclude, from the application of all or any provisions of this Act, the provision of credit of a class specified in the regulations and in particular (but without limiting the generality of the foregoing), the regulations may so exclude the provision of credit if the amount of the credit exceeds or may exceed a specified amount or if the credit is provided by a credit provider of a specified class.

16.	Further, section 11 of the Act contains provisions regarding presumption relating to application of the Act. This section states that:

11. (1) In any proceedings, whether brought under this Act or not, in which a party claims that a credit contract, mortgage or guarantee is one to which this Act applies, it is presumed to be such unless the contrary is established.

(2) For the purposes of this Act, credit is conclusively presumed not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business purposes or investment purposes or for both purposes.

(3) A declaration under subsection (2) is ineffective for the purposes of this section if the credit provider or any other person who obtained the declaration from the debtor knew, or had reason to believe, at the time the declaration was made, that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes.

(4) A declaration under this section is to be substantially in the form, if any, required by the regulations and is ineffective for the purposes of this section if it is not.

17.	Interestingly, subsection 1 of section 11 states that "in any proceedings, whether brought under this Act or not, in which a party claims that a credit contract, mortgage or guarantee is one to which this Act applies, it is presumed to be such unless the contrary is established." (Emphasis is added).

18.	In these proceedings the Defendants claim that the Act applies to the credit/loan agreement entered into between the Plaintiff and the Defendants on 17th October 2005. Basically the application of the Act to the credit agreement is presumed by operation of section 11 (1).

19.	Subsection (2) of section 11 states that "for the purposes of this Act, credit is conclusively presumed not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit to be applied wholly or predominantly for business purposes or investment purposes or for both purposes".(Emphasis added).

20.	Subsection (4) of section 11 states that "A declaration under this section is to be substantially in the form, if any, required by the regulations and is ineffective for the purposes of this section if it is not"(Emphasis added).

21.	In terms of section 11 (2) two preconditions must be met in order to have the presumption contemplated. Firstly, 

(a)	A declaration by the debtor that the credit to be applied wholly or predominantly for business purposes or investment purposes or both purposes. Secondly,

(b)	The declaration must be in the prescribed form.

22.	In this case the plaintiff has failed to establish these elements to claim the presumption contemplated under section 11 (2) of the Act. There is nothing in the supporting affidavit of the Plaintiff to say that the first Defendant made such declaration before entering into the credit contract. I therefore hold that the Act applies to the credit agreement executed between the Plaintiff and the Defendants on 17th October 2005.

23.	Can the Plaintiff take action against the Guarantor without first taking action against the Debtor? 

24.	(1) The first Defendant being Naicili Investments Limited under a Bill of Sale agreement (A) purchased a truck registration number CU 671, engine number ND 6086229 and chassis number UG78043592 and 1 only tractor with loan facilities granted by the Plaintiff in the sum of $20, 137.00 on a/c number 16596. 

(2) As further security for the loan the 2nd and 3rd Defendants executed a Deed of Guarantee dated 17th October 2005 (B) in favour of the Plaintiff to secure the loan facility to the first Defendant.

(3)The Defendants are in mortgage arrears with the bank in the sum of $20,137.00 including interest at the rate of 8% per annum.

(4) On 29 June 2009, the Plaintiff issued a Demand and Seizure Notice (C) through the Bank's Bailiff, Mr. Vijendra Pratab onto the 2nd Defendant and the 3rd Defendant refused to acknowledge the service of the Demand and Seizure Notices by the bank's bailiff.

(5) Under Section 80 of the Consumer Credit Act it provides that:

"A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless the debtor is in default under the credit contract and –

(c)	 The credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and 

(d)	 The default has not been remedied within that period".

(6) As was decided in the case of Council of the Fiji Institute of Technology v Anania Cara and Joney Tawaketini and Aminiasi Tabuakula (supra) it is not a requirement that a guarantor be notified of the principal debtor's default. In the absence of stipulation to the contrary, the guarantor becomes liable at the instance of default' and it is not necessary for the Creditor, before proceeding against the Guarantors, to demand payment from the first defendant as the principal debtor, unless it is expressly stipulated for in the Contract.

(7) In this case the first Defendant in the debtor. The 2nd and 3rd Defendants executed a personal Guarantee as an additional security. These facts are not disputed by the Defendants.

(8) There has been no stipulation in the loan agreement that the creditor should, before proceeding against the Guarantors, should demand payment from the first defendant as the principal debtor. 

(9) Notices of Demand (annexure C) have been issued onto the 2nd and 3rd Defendants. However, the 3rd Defendant has refused to acknowledge the service.

(10) I therefore answer affirmatively to the issue whether the Plaintiff can take against the Guarantor without first taking action against the debtor. 

25.	In the current case the total loan advanced to the Defendant was in the sum of $20,137.00 and as at 31st May 2009 the debt balance stood at $15,505.55 (C). Hence the amount owed under the credit contract is in more than 25% of the amount of credit. In the circumstances, section 83 of the Act has no application. Section 83 provides that:

83. (1) A credit provider must not, without the consent of the court, take possession of mortgaged goods if the amount currently owing under the credit contract related to the relevant mortgage is less than 25% of the amount of credit provided under the contract or $2,000, which-ever is the lesser.

(2) The restriction in subsection (1) does not apply -

(a) to a continuing credit contract; or
(b) if the credit provider believes on reasonable grounds that the debtor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider's permission or that urgent action is necessary to protect the goods.

(3) A credit provider that contravenes subsection (1) commits an offence.

(4) In any proceedings in which it is established that a credit provider has taken possession of mortgaged goods contrary to subsection (1), the burden of establishing that the possession of the goods was lawfully taken by virtue of subsection (2) lies on the credit provider.

(5) Nothing in this section prevents a credit provider from accepting the return of goods under section 78.

26. 	The arrears in this case exceed 25% of the amount credit provided under the contract or $2000.00. Hence there is no necessity for the Plaintiff to seek consent of the court before taking possession of mortgage property. 

27.	The loan was granted to the Defendants in 2005 for a term of 3 years and should have been fully paid off by September 2008 (paragraph 13 of the Affidavit in Reply of Salote Tavainavesi).

28.	If the injunction is not granted the Defendant may deal with the vehicle and dispose of and they may later say they have no means to settle the loan or to satisfy the judgment. Thus irreparable loss may be caused to the Plaintiff.

29. 	The Plaintiff has disclosed all material facts relating to the case. The Defendants could not pinpoint any material non disclosures that would affect the decision of the court.

30. 	There is no sufficient evidence to identify the tractor. In Affidavit in Support of Salote Tavainavesi, he states that 1 only tractor (paragraph 3). The Plaintiff was unable to provide registration number or chassis number of the tractor hence court cannot order for its re-possession or sale.

31.	The argument advanced by the Defendants that the Bill of Sale is invalid and unenforceable is untenable as there is no mandatory requirement to register the Bill of Sale.

32.	Having analyzed the affidavit evidence and the exhibits before me and considering the submissions of counsel for the parties and applying the principles stated in the cases cited above, I hold that there is sufficient ground to grant injunction. However, injunction is refused regarding the tractor as it not sufficiently identified. 

ORDERS

33.	1. There will be injunctions as prayed for in ( I) and (III) of the prayers in the EX-PARTE NOTICE OF MOTION dated 21st September 2009 and filed in court on 23rd 	September 2009.

2. There will be no injunctions in respect of the tractor.

3. The Plaintiff is entitled to cost which is fixed summarily in the sum of $500.00 for professional cost plus disbursements.

M H Mohamed Ajmeer
Resident Magistrate
20 March 2012
At Nadi