Home | Databases | WorldLII | Search | Feedback High Court of Fiji

Chand v Australia and New Zealand Banking Group Ltd [2002] FJHC 210; HBC0039d.2001b (26 February 2002)

IN THE HIGH COURT OF FIJI
AT LABASA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0039 OF 2001

Between:

PARMOD CHAND
s/o Vishnu Prasad
Plaintiff

and

1. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
2. VISHNU HOLDINGS LIMITED
Defendants

Mr. A. Sen for Plaintiff
Mr. H. Lateef for 1st Defendant
Mr. A. Kohli for 2nd Defendant

DECISION

By Summons dated 10th October 2001 the plaintiff applied for an Order restraining the first defendant (the >ANZ= ) whether by itself, its servants and/or agents from dealing in whatsoever manner and in particular from advertising for sale or calling for tender of the property comprised in Native Lease No. 13989 and C.T. No.12841 upon the grounds set out in the affidavit of the plaintiff filed herein.

On 25th October 2001 the matter was called at High Court Labasa when counsel for Plaintiff and ANZ appeared and by consent interim injunction in respect of CT.12841 was dissolved.

It was then ordered that both parties file written submissions within 7 days and if need be, plaintiff to file a Reply within 7 days thereafter and decision was to be given on notice. Thereafter I proceeded on leave and counsel were notified of this and did not resume work until 28 January 2002. At the time of making this decision Mr. Lateef for 1st defendant had filed his submission in time but no submission has been filed by the plaintiff. So I decided to write my decision and considered the submission filed by the 1st defendant.

Plaintiff=s contention

The plaintiff=s affidavit set out the facts pertaining to the dealings between the parties. The Bank (ANZ) made a demand for payment of the full amount but the plaintiff and D2 were unable to meet the demand. However, they were making arrangements with other lending agencies for loan to pay off ANZ.

First Defendant=s contention

For ANZ, Christopher Robin Griffiths, Head of Asset Management, in reply to the plaintiff=s affidavit stated, inter alia, that it was the plaintiff=s responsibility to repay loan account No. 2 and he undertook to do it but has failed to do so. The plaintiff advised ANZ that repayments on loan account 2 would commence from 1 October 2001 and the arrears in repayments would be cleared by 31 December 2001 but this was unacceptable to ANZ.

The plaintiff has been in default under the mortgage and despite several reminders by ANZ and despite his assurances to remedy the same he has failed to do so. The Bank is no longer in a position to allow the debt to drag on any further. The Bank is saying that arranging of refinance is merely an excuse trying to restrain the Bank as mortgagee exercising its power of sale.

For ANZ, Mr. Iqbal Khan, Relationship Manager, in his affidavit stated, inter alia, that at the material time he was ANZ=s branch manager in Labasa and had approved the loans to the plaintiff. In addition to loan I, the plaintiff applied for the loan (loan 2) for himself to assist him in the purchase of a freehold residential property in Savusavu, Vanualevu being C.T. No. 12841. As security for loan 2 the plaintiff had agreed that the securities provided for loan I were also to secure loan 2 and in addition he had offered the said CT No. 12841 as additional security. The applicant had C.T. No. 12841 transferred to his name to facilitate loan 2 and to enable him to provide the same as security for loan 2 as shown in the >loan agreement=. Mr. Khan denies that the loan was for the benefit of the second defendant.

Consideration of the issue

On the issue before me I have a very helpful and comprehensive written submission from Mr. H. Lateef the learned counsel for the first defendant (ANZ), but none from the plaintiff/applicant, although ordered, and also from the second defendant.

No submission either oral or written having been put before the Court, it can be taken for granted that the statement of facts contained in the two affidavits filed on behalf of ANZ are not disputed by the plaintiff.

The law pertaining to the issue before me has been so well presented in Mr. Lateef=s written submission that I can do no better than to adopt it in its entirety in this decision.

Interlocutory injunction

The principles governing interlocutory injunction are laid down in the oft-quoted case of American Cyanamid Co. v Ethicon Ltd (1975) 1 All E.R. in particular the speech of Lord Diplock at p.407.

In this case there is no serious question to be tried. Upon reading the affidavit evidence before me I find that the plaintiff=s allegation are frivolous and unmeritorious. I accept the response of ANZ to the allegation and reject the plaintiff=s assertion.

The plaintiff can be adequately compensated for in damages should he succeed in his action as the defendant Bank is in a sound position to pay same.

Here I find that damages as a remedy is sufficient. On a balance of convenience on the facts an injunction is not appropriate to prevent the defendant as mortgagee exercising its power of sale.

It is also a well settled law that the Court will not interfere with the mortgagee=s power of sale unless the mortgagor pays the full mortgage amount into Court. (See: Inglis and Another -v- Commonwealth Trading Bank of Australia (1972) 126 C.L.R. 161 and Ramesh Bhai Maisuria & Usha Ben Maisuria Civil Action 299 of 2001. The Applicant has not paid the amount outstanding under the mortgage, hence extension of the interim injunction should be refused.

Mortgagee=s power of Sale

It was stated by the plaintiff that if the properties were sold now they will not fetch the right price because of the economic situation.

Be that as it may, the mortgagee is not a trustee of the power of sale for the mortgagor and he was only under a duty to take reasonable care to obtain whatever was the true market value of the mortgaged property at the moment he chose to sell it. (Cukmere Brick Co. Ltd. v. Mutual Finance Ltd [1972] All E.R. 633) and as I said in Ramesh Bhai Maisuria & Usha Ben Maisuria (supra)

>... it did not prevent the mortgagee from enforcing the security if there was default in payment and if market conditions were deteriorating and the value of the security was decreasing.=

In the absence of allegation of fraud, the Court will not interfere with the mortgagee=s power of sale on the facts and circumstances of this case.

Consumer Credit Act 1999

In response to the allegation that the defendant Bank cannot proceed to sell Native Lease No. 13989 since the default in Loan I, has been remedied pursuant to s.81 of the Consumer Credit Act (the >Act=) all it needs to be said is that the Act has no retrospective effect. It came into operation on 7 May 1999 and the credit contract and the mortgage in respect of loan I was executed prior to when the Act came into operation. The Act itself is silent on the >retrospective= operation.

The common law position on the Aretrospective@ application of the legislation is well settled as stated by Scarman J quoting a passage from Maxwell On

Interpretation of Statutes in the case of Carson v Carson and Stoyek [1964] 1 All ER 681 at 686

AUpon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation.... They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect be clearly intended. It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication.@

Mortgage is an >on demand facility=

In this case Loan I is an >on demand facility= and the Applicant by executing the mortgage over Native Lease No. 13989 in favour of the 1st Defendant has expressly agreed to pay the 1st Defendant the principal sum secured by the mortgage and any interest and charges accrued on the principal sum >on demand= of the 1st Defendant even if there has been no default made on the payments.

On >on demand= Upjohn J in Lloyds Bank Ltd v Mangoli=s (1954) 1 All E.R. 734 at 738 said and it is apt:

AIn my judgment where there is the relationship of banker and customer and the banker permits his customer to overdraw on the terms of entering into a legal charge which provides that the money which is then due or is thereafter to become due is to be paid >on demand=, that means what it says. As between the customer and banker, who are dealing on a running account, it seems to me impossible to assume that the bank were entitled to sue on the deed on the very day after it was executed without making a demand and giving the customer a reasonable time to pay.@

The statutory legal position with regard to payment on demand is confirmed by Section 78 of the Property Law Act Cap.130 which provides that:

AWhere money secured by a mortgage is made payable on demand, a demand in writing pursuant to the provisions of the mortgage shall be deemed to be the notice in writing to pay the money owing provided for by section 77, and no other notice shall be required to create the default in payment mentioned in section 79'

It is clear that the reason the 1st Defendant is exercising its rights under the mortgage is because the plaintiff has not complied with the Defendant=s demand for update of arrears on Loan 2 which is also secured by Native Lease No. 13989. The plaintiff subsequently provided assurances to the 1st Defendant to clear the entire debt with the 1st Defendant and despite time given by the 1st Defendant the same remains outstanding todate.

Furthermore it has been held that a mortgagee is entitled to pursue any or all of his remedies against the debtor or the debtor=s assets not only upon the default of the mortgagor in payment of the mortgage debt but also as soon as there is some other breach of the terms of the mortgage where the mortgage so provides (Palmer -v- Hendrie [1859] EngR 902; (1859) 27 Beav 349 at 351.

The plaintiff defaulted in his repayments on both Loans 1 and 2 although arrears on Loan I was updated only after service of default notice. Arrears on Loan 2 has still not been updated and this breach enables the defendant Bank to withdraw the facility for Loan I and demand payment of the full debt as per certain agreed conditions.

The plaintiff also failed to clear the entire debt despite providing assurances through his solicitors since 7 May 2001.

Bank and customer relationship

The defendant was in these circumstances left with no alternation but to proceed with enforcement action against the plaintiff. It had no faith in maintaining the plaintiff as its customer. On banker/customer relationship see the judgment of Byrne J in Krishna Prasad Vilash and Broadway Muffler Manufacturing Co. Ltd v Australia and New Zealand Banking Group Limited HBC 0230 of 2001. There Byrne J said:

AI am satisfied that the Plaintiffs never kept numerous promises either to refinance their loan or sell the properties in question. The Defendant contends in these circumstances it has the right to sell the Plaintiffs it no longer wishes them to be its customers.@

His Lordship then referred to Paget=s Law of Banking 9th Edition at pages 70-72 where at p.70 the authors say:

AThe relationship of banker and customer is one of contract, though for long this way of looking at the matter seemed not to have attracted much attention in the Courts.@

It is worthy of note in the context of this case what His Lordship said while refusing to grant the injunction in Vilash (supra). He said:

A...In Prosperity Limited v Lloyds bank Limited (1923) TLR 372 McCardie J held that in the absence of special stipulation a banker can close his customer=s banking account in credit only on giving him a reasonable notice, dependent on the nature of the account and the facts and circumstances of the case. In the instant case I am satisfied that more than adequate notice was given to the Plaintiffs of the Bank=s insistence that they repay their debt. On their failure to do so I am satisfied that as a matter of law the Bank was entitled to refuse to have them as its customers any longer. Accordingly I refused to grant the injunction.@

Conclusion

For the above reasons and on the authorities, the defendant Bank was not only entitled to terminate the bank-customer relationship with the plaintiff as he failed to pay the entire debt outstanding in his account or arrange refinancing when more than reasonable notice has been given by the defendant (D1), but also to rightfully and within its power under the mortgages to demand full payment and exercise its power of sale under the security documents.

In the outcome the Summons for injunction is dismissed and the interim injunction granted ex parte is dissolved with costs against the Plaintiff in the sum of $400.00.

D. Pathik
Atg. Judge

At Labasa
26 February 2002