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Ali's Civil Engineering Ltd v Habib Bank Ltd [2004] FJHC 176; HBC0035.2004 (5 February 2004)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBC0035 OF 2004

BETWEEN:

ALI’S CIVIL ENGINEERING LIMITED
First Plaintiff

AND:

BAHADUR ALI
Second Plaintiff

AND:

HABIB BANK LIMITED
Defendant

Counsel for the Plaintiffs - Mr. Singh
Counsel for the Defendant - Ms B. Narayan

JUDGMENT

Introduction

This application seeks to restrain the defendant from exercising its power of sale under a mortgage held over the plaintiffs land.

The plaintiff alleges the wrong property at Nokonoko Road was advertised in the mortgagee Sale Notice. The property advertised they claim is not subject to any bank mortgage. Further in respect of certain land at Labasa it is claimed the defendant bank gave undertakings to discharge the subject mortgage.

In reply the defendant argues the first plaintiff and its prime officer have frequently acknowledged the mortgage debt and security but with equal frequency defaulted in promises and payment arrangements. The bank claims it is therefore entitled to proceed.

The two plaintiffs filed their writ on the 27th of January 2004 together with an ex-parte application for interim relief seeking injunction. I directed this be brought inter parties. That injunction sought:

An order restraining the defendant from the exercise of its powers or purported exercise of its powers as mortgagee of the plaintiff’s property.

The Evidence

The second plaintiff is a director of two companies. Ali’s Civil Engineering Limited (the first plaintiff “Ali’s”) and Valebasoga Tropikboards Limited (in receivership “Valebasoga”). The defendant bank advanced Ali’s and Valebasoga various sums of money now totalling some $1.6 million. This debt is acknowledged by the plaintiffs. They do not argue that they and Valebasoga are in complete default.

As security for the loan advanced to Ali’s the plaintiffs provided to the bank:

(a) A first registered mortgage number 464128 over Crown Lease number 194232 executed by the second plaintiff

(b) A personal unlimited guarantee dated 15 March 1999 by the second plaintiff and Jaibul Nisha (his wife). They are directors of this company.

As security for the loan advanced to Valebasoga the following securities were provided to the bank:

(a) A first registered mortgage number 6993 over LD 60/511.

(b) A personal unlimited guarantee dated 3 August 1999 and 21 June 2000 by the second plaintiff and Jaibul Nisha (his wife).

The course of this lending arrangement has not been a happy one for the bank. They have exercised great patience with the plaintiffs default. A series of promises by the second plaintiff to repay outstanding debts were not kept. Certainly by mid 2002 the bank found it necessary to serve demand.

As a result further promises were made to restructure or repay the debts. These were promises accepted by the defendant bank in good faith. The bank on several occasions instructed its solicitors to withhold further enforcement action. A measure of the bank’s patience is displayed by the fact that as at September 2003 the overdue portion of interest alone totalled some $255,000.00.

The bank understandably became concerned and served fresh demands for repayment of these loans on the 12th of November 2003.

The defendant bank then proceeded to exercise its right under the securities and advertise both properties for mortgagee sale.

Even at this late stage the second plaintiff proposed yet another arrangement to repay the debt. However as a result of his consistent failure to honour similar arrangements the bank remains determined to proceed and clear the debt as best it can.

This background saw the proceedings come to court.

I record that the proceedings were not accompanied by the usual undertaking for damages. I also record that during the course of my hearing plaintiffs counsel advised that the plaintiffs had no genuine prospect of retrieving the situation financially. The fact of the matter is that the plaintiff is simply unable to raise sufficient money to pay the full mortgage amount into court.

Plaintiffs Argument

The plaintiff alleges the defendant bank when it advertised the mortgagee sale of the subject land did not accurately describe the property secured under the mortgage. Certainly on the face of the mortgage documents (exhibit P2 defendant’s affidavit 2 February 2004) that appears to be so. He then argues on behalf of himself and the first plaintiff that the bank can’t sell that to which it has no title. Regrettably the court was not provided with the full background and reasons for this anomaly.

During the course of argument counsel both agreed that the pattern of lending was such that loans under this original mortgage were at some time extended. The bank anxious to preserve its security made an arrangement with the second plaintiff and his company to extend the mortgage security over additional land.

The bank’s paper records fall short of recording those arrangements particularly for the purposes of this hearing.

The plaintiff in his affidavit completely neglected to address this issue squarely. His counsel did not have full instructions. Despite the absence of evidence I must still find that there is a serious question to be tried on this issue. However the seriousness of that question is wiped out by the bank’s ability to re-advertise the mortgagee sale confining its description to the land shown on the face of the mortgage record. I do not order the bank to proceed in this way but common sense would seem to indicate that is a desirable course of action.

It would then be for the bank to bring separate proceedings to resolve that serious question. In those circumstances it would not be appropriate for me to express an opinion about the correct form or extent of the security provided by the plaintiffs.

Labasa Land

The plaintiff then argues that the defendant is estopped from exercising its power of sale over lease 194232. He says that he agreed to pay the defendant $400,000.00 in reduction of the mortgage and provided further security over a separate lease number 71564. It is claimed these arrangements were in return for a discharge of the subject mortgage number 464128.

The defendant bank contends that it has no record of such an arrangement. It quite valuably comments that even with the repayment of $400,000.00 there was still an outstanding balance in excess of $500,000.00 in that loan account. The bank argues it would in those circumstances never enter into any arrangement for discharge of the mortgage.

The defendant also quite correctly points out that the plaintiff has been quite economical with the truth if not misleading in its affidavits. It correctly argues that the plaintiff cannot be relied on.

I am not satisfied on the evidence before me that any promise was made by the bank to discharge this mortgage 464128.

The correspondence relied on by the plaintiff was suspect. There was too much at risk for the bank to discharge such a valuable security. The plaintiff did not tell everything he should in his affidavit. For the purpose of this hearing I accordingly specifically reject the argument by the plaintiff in this regard.

Material Non-Disclosure

The need for a plaintiff applying for urgent relief to “make full disclosure to the court” has been stressed in numerous cases. See for example Douglas and Williams v. Cammock (unreported NZHC Hamilton: CP48/99: 4/8/99 Penlington J).

It has been further noted that where a party misleads the court by not providing the fullest information that ground alone may lead to the setting aside of any relief granted or indeed the denial of relief. The decision of Votualailai Limited v Capitals FNPF Board and Others Lautoka Civil Action No. 272 of 1998 is appropriate. Sadal J summarised the effect of material non-disclosure in this way:

“The non-disclosure of material facts, even if it is innocent or inadvertent, is enough to avoid the injunction. In cases of material non-disclosure as in this case the ex parte injunction is liable to be dissolved on that ground alone, without any enquiry into the merits of the case.”

I find that the second plaintiff deponent was economical with the truth in his affidavit filed in support of the ex-parte injunction application. I find that economy to be a non-disclosure of material facts pertaining to this matter. I accept the defendants arguments in that regard.

The Injunction

This court is being asked to restrain the defendant from the exercise of its powers or purported its powers as mortgagee of the plaintiff's property. That is a bold and wide reaching application to make. It was not refined during the course of hearing, so I come to deal with the request to grant such interim relief based on that prayer. The principles governing interlocutory injunctions were not argued before me in great detail. They are well known and accepted commencing with the often quoted case of American Cyanamid Co v. Ethicon Limited [1975] UKHL 1; [1975] AC 396, 405, 406.

It is also well settled law that the court will not interfere with the mortgagee’s powers of sale unless the mortgagor pays the full mortgage amount into court see Inglis & Another v. Commonwealth Trading Bank of Australia [1972] 126 C.L.R. 161 and Ramesh Bhai Maisuria & Usha Ben Maisuria Civil Action 299/2001. The applicant cannot and will not pay any amount outstanding under the mortgage into court.

In this case I find there may be a serious question to be tried on the question of the extent of the security available in respect of the Nokonoko lease properties. I emphasise the word may as the defendant bank still has the ability to re-advertise its mortgagee sale using the non-contentious description in the original security. This would leave the bank free to pursue other action against this plaintiff to determine the correct extent of the security provided under that mortgage.

It must also be remembered that the plaintiffs have conceded they do not dispute the debt and apart from extent do not take issue with the security.

Decision

I find there is no serious question to be tried. I accept the response of the defendant bank to the plaintiff's allegations. I find against the plaintiffs credibility. If there is factual conflict I prefer the defendant’s version.

I find that the balance of convenience favours the defendant bank. The bank has granted the plaintiffs a three year grace period to set their financial affairs in order. The plaintiffs have failed to do so. There is nothing in the evidence or plaintiffs argument that demonstrates any genuine prospect for the plaintiffs retrieving the situation financially. The plaintiffs cannot and will not pay any amount outstanding under the mortgage into court.

For these reasons the balance of convenience must heavily favour the defendant bank. The court will not interfere with its power of sale as it attempts to realise at least some money from the security remaining.

In my view the plaintiffs can be adequately compensated for in damages should they succeed in any action. The defendant bank is in a sound position to pay out on any judgment. Damages would provide an adequate remedy.

Conclusion

For the above reasons and on the basis of the affidavits and argument presented to me I find the defendant bank is entitled to pursue its remedies by way of a mortgagee sale.

In the outcome the summons for injunction is dismissed with costs against the second plaintiff in the sum of $400.00.

[ G. Winter ]
Judge

At Suva
Thursday 5th February, 2004