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Tadrau v Colonial National Bank [2002] FJHC 29; Hbc0066j.2002s (19 September 2002)

IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 066 OF 2002S

Between:

KAIAVA TADRAU
and
SELAI TADRAU
Plaintiffs

and

COLONIAL NATIONAL BANK
First Defendant

and

NBF ASSET MANAGEMENT BANK
Second Defendant

S.R. Valenitabua for the Plaintiffs
W. Clarke for the First Defendant
Ms. J. Singh for the Second Defendant

JUDGMENT

On 4 January 1993 the Plaintiffs deposited $15,000 with the Savusavu branch of the National Bank of Fiji for a term of 36 months at an interest rate of 10% per annum. A copy of an acknowledgement of the deposit is exhibit KT6 to the first Plaintiff’s supporting affidavit.

The term of the deposit was renewed in January 1996 and again in January 1999. According to the undisputed evidence of the first Plaintiff the renewed term of the deposit expired on 7 December 2001.

On 5 December 2001 the Plaintiffs, through their solicitors, sought repayment of the principal together with interest due on 7 December.

On 20 December 2001 the first Defendant declined to comply with the Plaintiffs’ request for repayment. Referring to a previous letter dated 30 November the first Defendant’s Group General Counsel wrote:

“We are unable to release funds without the written consent of [the second Defendant] or as directed by the Court since [the second Defendant] has placed us on notice claiming an interest in the term deposit. Mr. And Mrs. Tadrau have been advised on numerous occasions of these circumstances.”

Following receipt of this letter the Plaintiffs commenced these proceedings on 13 February 2002. The principal relief sought is an order that the first Defendant release the Plaintiffs’ deposit and pay them the interest due.

On 7 May 2002 the first Defendants’ Group General Counsel filed an affidavit in answer to that filed by the Plaintiffs. In paragraph 4 of the affidavit Mr. Sayed-Khaiyum wrote:

“the position of the Defendant is that there is a dispute between the Plaintiffs and the Second Defendant. The First Defendant does not have a position on the deposit at issue and will abide by whatever decision this Honourable Court deems just.”

Having stated that the first Defendant had “no position on the term deposit” Mr. Sayed-Khaiyum then went on to say in paragraph 5 that:

“the First Defendant maintains that where ownership of funds are disputed the monies are to be held by the first Defendant until the parties resolve the matter or an order of the Court is produced to the first Defendant.”

On 13 September 2002 (long after, it may be noted in passing, the 28 days provided by RHC O 28 r 2 (4)) Sara Bulavakarua, the second Defendant’s Manager Rehabilitation also filed an affidavit in answer.

In paragraph 5 of her affidavit she stated:

“the Plaintiffs held a term deposit with the second Defendant. However under the current restructure of the second Defendant the term deposit is now being held by the first Defendant.”

No evidence of any term deposit by the Plaintiffs held with the second Defendant was produced. Ms. Bulavakarua went on to depose:

“I am not in a position to plead to the details of the term deposit as all pertinent documents relating to the said (deposit) are in the custody of the Police Department.”

Why these documents had not been inspected and copies obtained was not explained. According to exhibit KT 13 a police investigation into a letter of set off claimed by the Plaintiffs to be a forgery was concluded in October 2001.

In paragraph 9 of her affidavit Ms. Bulavakarua deposed that:

“the term deposit forms part of various securities for a term loan held by the first Defendant. Furthermore the Plaintiffs are in substantial arrears with their term loan ....... Therefore the second Defendant is not in a position to release the term deposit as it is currently held by the first Defendant.”

In 1995 the National Bank of Fiji collapsed with debts in excess of $200 million. In August 1996 the National Bank of Fiji Restructuring Act was passed. Under Section 13 of the Act the National Bank of Fiji was continued in existence. Under the Section 24 of the Act the second Defendant was established. Under Section 11 (1) (a) of the Act:

“on approval of the principal restructuring plan by the Minister – all assets and liabilities of the [National bank of Fiji] at the expiry of the day before the restructuring day other than those assets and liabilities that the principal restructuring plan states are to remain with the [National Bank of Fiji] shall, by virtue of this Act vest in [the second Defendant] with effect from the commencement of the restructuring day.”

Part V of the Act deals with the proposed corporatisation of the National Bank of Fiji and in due course the National Bank was sold and began trading as the Colonial National Bank, the first Defendant.

Mr. Valenitabua’s submission was simple and straightforward: the Plaintiffs have deposited funds with the first Defendant for a term which has now expired. In the absence of any good reason to the contrary they were entitled to the return of their funds at the expiry of the term of the deposit plus interest accrued.

As has been seen the first Defendant declined to release the Plaintiffs funds on the ground that the second Defendant had placed it on notice that it was “claiming an interest” in the term deposit and that this interest was being advanced as the good reason why the Plaintiffs were not entitled to payment out.

When, however, I asked Ms. Singh what the nature of this interest was she was quite unable to explain it.

As is well known where a customer has an overdraft which he fails to pay off a bank has a right, prima facie, to liquidate the amount owing to it, either wholly or partially by brining into account a credit balance or balances on other accounts which the customer has with the Bank, even at a different branch. This right is known as the bankers right of “combining accounts” (see Halesowen Pressworks Ltd v. Westminister Bank Limited [1972] AC 785, 818).

So far as I can understand paragraph 9 of Ms. Bulavakarua’s affidavit she appeared vaguely to be asserting some kind of right by the second Defendant to combine the Plaintiff’s accounts but how this right arose was not explained either by Ms. Bulavakarua or by Ms. Singh. Given that the first and second Defendants are distinct legal entities it is hard to see how the right to combine could arise.

It is apparent that the second Defendant may have been aware of the difficulty since in October 2000 it wrote to the Plaintiffs seeking their “consent to have access to the account” held with the first Defendant. The Plaintiffs refused. In November 2000 the second Defendant then explained that it was “merely seeking you consent to direct the term deposit to reduce your existing debts”. If the second defendant was at all confident that it had a right to combine then it would not been necessary to seek the Plaintiffs consent.

At various points in the papers the letter of set off already mentioned is referred to. The second Defendant appeared to hold the view that it improved its position as against the Plaintiffs. A copy of the letter is exhibit KT10 and as has been noted the Plaintiffs claimed it to be the forgery. It was admitted by the first Defendant to have been prepared in breach of the bank’s procedures, to have been undated until a date was inserted much later in 2001 and to have been unsigned by a bank official. The letter does not include an account number or an account name. In any event, even if genuine, it cannot avail the second Defendant for the simple reason that it only extends to the combination of accounts held by the Plaintiffs with the first Defendant. The second Defendant was not a party to the agreement.

While I do not exclude the possibility that the second Defendant has some form of interest in the Plaintiffs deposit account with the first Defendant arising from some provision of the 1996 Act no attempts to explain the nature of this interest was made, indeed I was not referred to the 1996 Act by Counsel at all. Banks and other financial institutions cannot come to Court and expect interests which are merely asserted but not explained to be upheld. There will be an order in terms of paragraph (b) of the Originating Summons.

M.D. Scott
Judge

19 September 2002