| Fiji Islands - Seng Mi Commercial Company v John Y Singh & Company Ltd (Ruling) - Pacific Law Materials |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION NO. 0018 OF 1997
BETWEEN:an>
SENG MI COMMERCIAL COMPANY
Plaintiff
AND:
1. JOHN Y. SINGH & COMPANY LIMITED
2. JOHN YOGENDRA SINGH
3. A.N.Z. BANKING GROUP LIMITED
Defendants
Mr. W. Clarke and Ms. R. Lal for the Plaintiff
Mr. .T. Gates for the 1st and 2and 2nd Defendants
Mr. N. Billimoria for the 3rd Defendant
RULING
This is an application by the 1st and 2nd defendants ('the applicants') to vary a 'maximum sum' mareva injunction granted against the defendants by the Court on 16th December 1998 in the following terms:
'That the (defendants) or their agents, servants and bankers ... be hereby restrained from removing, transferring or assigning or further encumbering any
of the (defendants) assets or properties including all monies in the (defendants) bank accounts up to a sum equivalent to US$98,000.00 until further order of this Court.'
The variation sought is as follows:
'... that the 3rd respondent, ANZ Banking Group Limited do discharge its Mortgage No: 380971 given by the 1st respondent over Certificate
of Title No.26808 to enable the 1st respondent to sell all that freehold land together with all the improvements thereon to a purchaser
and that all of the proceeds from the said sale be paid to the 3rd respondent's prior loan.'
If I may say so the above mandatory orders directed as they are to the 3rd defendant bank (to discharge its mortgage) and to the 1st
defendant company (to pay all proceeds of sale) do not on the face of them amount to a 'variation' of the terms of the mareva injunction granted by the Court.
Be that as it may the circumstances that precipitated this application and the unusual form of variation sought, may be summarised
as follows: The 1st respondent company owing to financial difficulties has defaulted on its loan repayments to the 3rd defendant
bank ('the bank') which has threatened to exercise its rights as a mortgagee unless the 1st defendant is able itself to sell the property, and, whilst
the bank is agreeable to the proposed private sale by the 1st defendent it requires the entire proceeds of sale be paid to it and
'be applied in reduction of the loan debt'. The bank has not agreed however to discharge its mortgage registered over the property in question since 1995.
In support of the application counsel for the applicants relied extensively on the judgment of Lloyd J. at first instance in Oceanica Castelana v. Mineralimportexport (1983) 1 W.L.R. 1294 where his lordship in allowing the variation sought in that case by third party banks, as interveners, held:
'That banks were in the same position as any other third party, ... and as creditors, were entitled to a variation of the mareva injunction
so as to enable them to exercise rights of set-off in connection with facilities granted before they received notification of the
injunction, to include interest accruing both before and after notification.'
In the course of his judgment Lloyd J. made the following observations which are relied upon by counsel for the applicants. When he said at p.1300:
'It is now firmly established that a defendant who is subject to a mareva injunction can apply to the court to vary the injunction,
so as to enable him to pay his ordinary debts as they fall due. If the defendant can thus in a suitable case, draw on his bank account
to pay his ordinary creditors, notwithstanding a Mareva Injunction, why should he not be free to pay his bank?'
and later, in rejecting a submission that in calculating the amount which is not caught by the mareva, banks ought to include provision
for the amount mentioned in the Mareva Injunction, his lordship said at p.1301:
'It is true that the (amount) subject to the mareva injunction would then gradually be reduced as the bank exercised its right of set-off in the future. But this
is an inevitable consequence of a defendant who is subject to a 'maximum sum' mareva ... and who has no free assets, being allowed
to pay his debts as they fall due.'
Finally in deprecating the usual wording of a 'maximum sum' mareva injunction and the 'unsatisfactory' consequence of banks having to seek a variation, his lordship said at p.1302:
'In order to avoid the necessity of them coming back for variations, and in order to save court time, it is desirable that in future
all Mareva injunctions which are intended to be served on banks should contain a suitable proviso.'
If I may say so this Court has no difficulty with those observations but, in the particular circumstances of this case, the most relevant
observation in my view, is that to be found at p.1300E where his lordship said:
'There is a world of difference between a defendant who is seeking to vary a mareva injunction and a third party, such as a bank,
which is exercising its ordinary rights and remedies in the ordinary course of its business.'
I say 'most relevant' because, unlike in the Oceanica case, the applicant for variation in this case is the defendant and not the third defendant bank as might be expected were it desirous of exercising its rights as a mortgagee.
Secondly and related to the above, is the fact that the bank is not seeking 'to exercise its ordinary rights and remedies in the ordinary course of its business' rather, it is the applicants who are seeking the 'extraordinary' discharge albeit conditionally, of the bank's mortgage under the guise of an application to vary the terms of an injunction granted in favour of the
plaintiff.
Needless to say the mareva injunction does not directly affect the bank's mortgage or its rights thereunder, it merely attaches to the land which although encumbered, remains the applicant's asset, and,
whilst the injunction as worded, may temporarily impede the bank's exercise of its rights as a mortgagee by restraining the transfer of the land in a mortgagee sale by the bank, that is no reason to order the mandatory discharge of its mortgage over the land at the behest of the mortgagor, or to vary the mareva injunction so as to permit the applicants as mortgagor, in effect, to exercise the bank's right under the mortgage to sell the land.
Thirdly, and despite counsel's valiant attempts to draw a parallel between the applicants and a defendant applying to the Court to vary a
mareva so as to permit him 'to draw on his bank account to pay his ordinary creditors', the bank in this case is not an 'ordinary creditor' but a secured one, and, the defendant is not seeking 'to draw on his bank account' to meet 'ordinary debts as they fall due'. Indeed in counsel's own words the variation is sought to enable the applicants 'to avoid a forced sale'.
Fourthly, if the application is granted, as prayed, and the land is sold unencumbered by the bank's mortgage, then the proceeds of such sale by the applicants (as registered proprietor not 'as mortgagee'), represents to my mind, the liquidation of an unencumbered asset and itself forms an asset to which the mareva injunction immediately
attaches. It cannot be, as applicants' counsel submits, that the proceeds of such a sale are the result of realising a security (which
has already been discharged) when plainly it is not.
For the foregoing reasons this case is plainly distinguishable from the Oceanica case. The application is accordingly dismissed with costs to the plaintiff.
D.V. Fatiaki
JUDGE
At Suva,
16th April, 1999.
Hbc0018d.97s
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/fj/cases/FJHC/1999/27.html
