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Igor v Narodetsky [2004] FJHC 321; HBC0459.2004 (13 December 2004)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBC0459 OF 2004

BETWEEN:

ZAIKIN IGOR
1st Plaintiff

WAINIBASOGA & COMPANY LIMITED
2nd Plaintiff

-v-

EUGENE NARODETSKY
1st Defendant

THE REGISTRAR OF TITLES
2nd Defendant

Counsel: Mr. Nawadra – for the Plaintiffs
Mr. R. Singh – for the Defendants

Hearing: 8th December, 2004
Judgement: 13th December, 2004

JUDGMENT

Background

The plaintiff lent US$120,000.00 to the first defendant. In return the 1st defendant pledged full real and personal property in Fiji under his name or control to secure the loan. This included property in the name of his trust the Narodetsky Family Trust which principally owned property at Pacific Harbour, Deuba (CT 15625).

The first defendant defaulted in his loan repayment. The plaintiff lodged a caveat against the Pacific Harbour property. The Court extended that caveat on the plaintiff’s ex-parte application. Subsequently the defendant applied to dissolve the extension order by way of injunction.

Preliminary Arguments

The matter came on before me under urgency. The first defendants filed skeleton submissions and drew my attention to 2 preliminary arguments that would effectively dispose of the proceedings in their favour.

The pledge made to secure the loan was recorded in writing. It was apparent from the face of the documents that they had not been stamped. This was in breach of Section 29(1) of the Stamp Duties Act (Cap. 205). The section requires that all instruments be stamped with duty for the various distinct matters contained in the document. If the document is not stamped then Section 41 provides that no instrument or agreement is admissible at law or equity unless and until it is duly stamped. The Act goes on in Section 100(1) to provide that any document which ought to be stamped shall be invalid unless it is properly stamped. The Courts are prohibited from allowing any unstamped documents into evidence.

The practical effect of this argument is obvious. My original order extending the caveat was based on an annexure in an affidavit made by the plaintiff. That annexure was the written but unstamped pledge. At the time of making the ex-parte order the fact that the document was not stamped was never drawn to my attention. The first defendant’s counsel accepted responsibility for this inadvertent error.

The second issue was less technical but more substantial in my view. Counsel for the first defendant submitted that the pledged security was unenforceable as it breached Section 3(1) of the Exchange Control Act. This Act provides that no person in Fiji may deal that is buy or borrow any foreign currency except with the permission of the Minister.

It was argued that a breach of the provisions of the act leaves the parties to the security with an unenforceable and illegal contract that is void ab initio (cf. Steven Singh v Martin Mining Ltd, High Court of Fiji 261/1997 per the Hon Justice Madraiwiwi).

Again and reluctantly the first defendant had to concede this point.

These preliminary issues were raised at the first hearing of the matter on Monday the 29th of November. When it became obvious that the plaintiff had difficulties he requested a short adjournment to obtain further instructions. In a co-operative and responsible manner his learned friend consented and the matter was adjourned part heard for resumption on Monday the 6th of December.

At the resumed hearing counsel for the plaintiff filed additional submissions. He had by then cured the defect under the Stamp Duties Act. The plaintiffs had stamped their documents. I found they were admissible, properly annexed to the affidavit and that the Court could take their content into consideration.

However, counsel could not convince me that the Minister had granted his consent to the raising of the pledge to secure lending of foreign currency in Fiji. The plaintiffs accepted they were dealing in US dollars and admitted that they had breached the Exchange Control and Trustee Act. Arguments were raised that I should use my equitable jurisdiction to estop the defendants from avoiding their contractual obligations. In my view it would be inappropriate to do so. This arrangement was void ab intio. The security was never a proper document upon which to lodge or maintain a caveatable interest against property owned or controlled by the first defendant.

Conclusion

For these reasons the first defendants application must succeed and I accordingly grant his application on the 19th of November 2004 and order the dissolution of the caveat lodged over the Certificate of Title No. 15628.

Costs are fixed for the first defendant on this application at $500.00.

Gerard Winter
JUDGE

At Suva
13th December, 2004