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Bank of New Zealand v Baswaiya [1992] FJHC 30; Hbc0027j.89b (5 August 1992)

IN THE HIGH COURT OF FIJI
At Labasa
Civil Jurisdiction

CIVIL ACTION NO. 27 OF 1989

Between:

BANK OF NEW ZEALAND
(Sub.nom Australia and New
Zealand Banking Group)
Plaintiff

- and -

MAVIS JUDITH BASWAIYA
d/o Victor Hamilton Prasad
& 10 OTHERS
Defendants

Mr. V. Parshuram for the Plaintiff
Mr. V. Parmanandam for the Defendants

JUDGMENT

This is an application for summary judgment under Order 14 of the High Court Rules.

The action was first instituted in August 1989 and purported to be based on a guarantee signed by the defendants guaranteeing payment on an account styled 'Labasa Farmers Club Co-operative Thrift & Credit Society Limited' (hereafter referred to as the 'Thrift & Credit Society').

In their Statement of Defence the defendants merely denied that they had made any request for advances from the plaintiff bank to the above-mentioned account. They also denied giving any guarantee as alleged.

The particular guarantee document adverted to in the Statement of Claim is dated the 26th of September 1985. In it the 'principal debtor' is described as:

"Labasa Farmers Club Co-operative Thrift and Credit Society Limited a duly constituted body under the provisions of the Co-operative Societies Act."

On the face of it the action appeared to be fairly straightforward but in an amended Statement of Claim the plaintiff bank acknowledged that the guarantee, the basis of its claim, "... erroneously referred to the debtor as the Labasa Farmers Club Co-operative Thrift and Credit Society Limited", whereas it should have been the "Labasa Farmers Club Co-operative Society Limited" (hereafter referred to as the 'Co-operative Society').

The plaintiff bank nevertheless maintains that the defendants (3 of whom were authorised signatories to the account) knew that the 'Thrift and Credit Society' had never been in-corporated; knew all along that the loan facilities requested had been provided to and was utilised by the 'Co-operative Society'; and whatsmore the defendants had always intended that the only guarantee (which they themselves provided) would be an effective security for the plaintiff bank in respect of the over-draft facilities it provided on the account being operated. In effect the plaintiff without in so many words raises the equitable doctrine of estoppel.

Learned counsel for the plaintiff also submits that there is no room for misunderstanding nor is this a case where "technicalities" (whatever that may mean) should be allowed to the defendants to avoid their liabilities and he asks rhetorically:

"Should the plaintiff be made to suffer from an obvious mistake after the defendants had taken advantage of the facility provided?"

Learned counsel for the defendants on the other hand raises 2 grounds in opposing the application. Firstly it is said that the application was precluded by the filing of a Statement of Defence and secondly the plaintiff's amended claim was such that it did not require an affidavit in reply. Put simply, the money was loaned to account 'A' and the plaintiff claims on a guarantee given for account 'B'.

As to the first ground I am satisfied that the filing of a Statement of Defence before an application for summary judgment does not preclude the application being made nor does it prevent summary judgment being granted if the Court is of the view that there is no defence to the claim.

(See for example: McHardy v. Slateum (1890) 2 Q.B. 504)

The defendants' second ground however can only be explained by a strict reliance on the terms of the guarantee. There is no affidavit in reply to that filed by the Labasa branch manager of the plaintiff bank and hence no denial of the numerous facts deposed therein which included assertions as to the state of the defendants' knowledge and understanding of the bank account and more particularly the guarantee in question.

Learned counsel for the defendants' cited from the 'White Book' the dictum of Bramwell L.J. in Lloyds Banking Co. v. Ogle [1876] UKLawRpExch 43; (1876) 1 Ex. D. 262 where the learned judge said at p.264:

"In my opinion, it ought to be a general rule that, where there is no acknowledgment of the debt by the defendant or anything else to show that the defence is for mere purposes of delay, in the case of a guarantor or surety like the defendant, he should not be prevented from going to trial."

But in the same case Cleasby B. said at p. 245:

"My impression would have been that, if a man induces a banker to advance money by giving a guarantee, then, on affidavit by the manager that the sum is due, a defendant setting up no defence should be called on to give security when he can say no more than that he does not know of his indebtedness."

I note also that unlike in this case the defendant in that case filed an affidavit denying any knowledge of the debt nor receiving any statement of account from the plaintiff showing the particulars of their claim against the principal debtor.

More particularly in this case the defendants could have filed affidavits explaining their knowledge and understanding of the operations of the bank accounts and the circumstances in which the guarantee was furnished. They have chosen instead to say nothing nor have they filed an amended defence as they are quite entitled to.

I am satisfied that estoppel does apply in this case and would respectfully adopt the exposition of the doctrine by Denning M.R. in Amalgamated Property Co. v. Texas Bank (1982) 1 Q.B. 84 when he said at p. 122:

"When the parties to a transaction proceed on the basis of an underlying assumption either of fact or of law -whether due to misrepresentation or mistake makes no difference - on which they have conducted the dealings between them - neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the Court will give the other such remedy as the equity of the case demands."

In this case the underlying assumption upon which the parties conducted their dealings was that the guarantee was a binding and effective document that secured the 'Co-operative Society' account being operated at the plaintiff bank and in my view the equity of this case demands that judgment be entered for the plaintiff.

Accordingly the plaintiff's application is granted to the extent of $25,000 together with interest thereon at the rate of 7% p.a. with effect from the 9th of July 1991.

(D.V. Fatiaki)
JUDGE

At Labasa,
5th August, 1992.

HBC0027J.89B