|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
ACTION NO. HBC0494J OF 2003S
BETWEEN:
FIJI DEVELOPMENT BANK
of 360 Victoria Parade, Suva in Fiji.
PLAINTIFF
AND
BAHADUR ALI
(father’s name Jamalu Dean)
C/- Kohli & Singh, Barristers and Solicitors, Suva in Fiji.
DEFENDANT
Counsel for the Plaintiff: D. Sharma: R. Patel & Co.
Counsel for the Defendant: Dr Sahu Khan: Sahu Khan & Sahu Khan
Date of Judgment: 22 July 2004
Time of Judgment: 9.30 a.m.
JUDGMENT
This is the Plaintiff’s originating summons seeking an order for the removal of the Defendant’s Caveat (Caveat No. 531997) registered against land described as Crown Lease No. 12023, being Naiyaca Subdivision Lot 1 on SO 3021, in the district of Labasa (“the property”).
The land above described is owned by Valebasoga Tropikboards Limited (“the mortgagor”). The Defendant is the Managing Director of the mortgagor. In September 1993, the mortgagor was granted loans and advances by the Plaintiff. As security for the provisions of these facilities, the Plaintiff obtained a mortgage (Mortgage No. 344611) over the property. As a result of default in the mortgagors’ repayments, the Plaintiff on 7 March 2001, issued its demand notice for the payment of the full balance of the loan, failing which the Plaintiff will, pursuant to its powers both under the mortgage instrument and statute, exercise its power of sale.
The mortgagor had earlier on 5 April 2002 lodged a caveat (Caveat No.507658) against CL 12023. The Court on 4 November 2002 ordered the removal of the said caveat.
The Defendant subsequently, on 6 October 2003, lodged Caveat No. 531997 against the said property, claiming “an interest or estate as equitable owner by virtue of making contributions towards Valebasoga Tropikboards Limited through buildings and improvements in the land."
The Plaintiff had in fact begun to exercise its powers of sale as mortgagee, but is now prevented by the Defendant’s caveat from proceeding any further.
In support of its application for the removal of the Caveat, the Plaintiff relies on the following grounds:
Legal Capacity of Defendant to Lodge Caveat
The Defendant concedes that the mortgagor is the registered proprietor of the property. He is the Managing Director of it and together with his wife and Ali’s Civil Engineering Limited, are the shareholders. The Defendant and his wife in turn are the shareholders of Ali Civil Engineering Limited. However, following the issuance of Demand Notice of 7 March, 2001 referred to above, and the registered proprietor’s failure to comply with the demand therein, the Plaintiff appointed Receivers and Managers to run the Company pursuant to the powers vested in it in the Mortgage debenture. The Court had earlier ruled in Ilaitia Boila and Chirk Yam as Receivers and Managers for Valebasoga Tropikwoods Limited v. Fiji Development Bank & Ors. CA No. HBC0183.2001 (per Pathik J.) that the Receivers and Managers had been properly appointed under the mortgage debenture, dismissing the Defendant’s application for the revocation of their appointments.
The Plaintiff submitted that the Defendant does not have a registerable interest in the land per se, to support the lodging of a caveat. Counsel referred to Griffith CJ’s judgment in Municipal District of Concorde v. Coles (1905) 3 CLR on who can lodge a caveat, in which he stated:
“I am of the opinion that it is only a person who has a legal or equitable interest in land, partaking the character of an estate in it, or an equitable claim to it, who can lodge a caveat.”
In Navalaqua Land Purchase Co-operative Society Ltd. v. Shri Chand: CA No. HBC0226.1993, the Court (per Scott J.), in ordering the removal of a caveat, found that the Caveator’s claim was personal, and did not amount to an interest in land, against the registered proprietor.
In this case, the Plaintiff argued that at best, the Defendant may have a contingent claim in persona against the registered proprietor of the land. There had not been any prior judgment in the Defendant’s favour against the registered proprietor, before the latter granted the Plaintiff mortgage No. 344611. Neither, the Plaintiff claimed, had the Defendant produced any agreement between himself and the Company and consented to by the Director of Lands, which permitted him to deal with the land. The Plaintiff also referred to S.59 of the Indemnity Guarantee and Bailment Act (Cap 232) which states that all dealings in land must be in writing.
Counsel for the Defendant submitted that a person does not need to have a registered interest in land to lodge a caveat. Section 106 (a) of the Land Transfer Act clearly entitles any person with beneficial interest in any land or deriving equitable interest through any unregistered agreement, or under any trust, to lodge a caveat. The Defendant referred to the Deed of Settlement between the mortgagor and the Plaintiff and his family, as evidence of the existence of beneficial and/or equitable interest in land in favour of the Plaintiff. The terms of the Deed gave the Defendant and his family the option to purchase the land, which created a contingent interest in land; which interest, in turn is adequate to support a Caveat. Counsel cited Courts Brothers (Furnishers) Limited v. Sunbeam Transport Limited (1969) 15 FLR 206, as authority for this proposition.
This Court in the Fiji National Provident Fund v. Vivrass Holdings Limited & Or. HBC 325J/2002 recently reviewed the law on caveat, and specifically what amounts to a caveatable interest, under the Torrens land system. It examined both the Australian and New Zealand authorities and the Fiji Court of Appeal decision in Cambridge Credit (Fiji) Ltd. v. W.F.G. Ltd. (1975) 21 FLR 182, as well as the statute law.
First, section 106 (a) of Fiji’s Land Transfer Act and referred to by Counsel for the Defendant in his submission, describes the qualification of a person entitled to lodge a caveat as:
“claiming to be entitled or to be beneficially interested in any land subject to the provisions of this Act, or any estate or interest therein, by virtue of an unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise howsoever.”
In Staples & Co. v. Corby and District Land Registrar [1900] NZGazLawRp 157; [1900] 19 NZLR 517, the New Zealand Courts interpreted their equivalent of our section 106 (c) above as follows (per Stout CJ at p. 536):
“Before a person can caveat under this section he must be a person who claims to be entitled to the land, or any estate or interest to the land, or to be “beneficially interested” in the land, or in any estate or interest in the land, and the person in either event must claim “by virtue of any unregistered agreement” or other “instrument or transmission” (“transmission” meaning acquirement by title or estate consequent on death, will, intestacy, bankruptcy, etc) “or of any trust expressed or implied or otherwise howsoever.”
In Cambridge Credit (Fiji) Ltd. (supra), our Court of Appeal after endorsing Stout CJ’s statement in Staples & Co. above, added, at p. 185:
“Section 106 of the Fiji Act is designed to protect unregistered instruments in land. For instance an agreement for sale and purchase, an unregistered mortgage or an option to purchase land are just a few examples of unregistered instruments which are capable of being protected by the lodging of a caveat.”
In this case, it is for the Defendant to bring himself within the provisions of section 106. In order to do so, he must satisfy this Court on the following tests set down in the Cambridge Credit (Fiji) Limited case, namely, (at p. 184):
“1. That it is a person claiming to be entitled to or to be beneficially interested in any land estate or interest under the Act; and
In respect of these tests, the Defendant pointed to a Family Settlement Agreement of 24 June 1994. The Agreement provided for inter alia, the transfer of the C.L. 12023 to the Defendant, his wife and their two children upon the “payment of the sum of $3,070,750.00 being the amount stated in the said mortgage No. 344611.”
Family Settlement Agreement
The Agreement dated 24 June 1994 is between Ali the Defendant, his wife and 2 sons Mukhtar and Niwaz Ali on the one hand, and the mortgagor (Valebasoga Tropikwood Limited) and Ali’s Civil Engineering Limited on the other. The shareholders in the mortgagor are the Defendant, his wife and Ali’s Civil Engineering Limited.
Under the terms of the Agreement, the Defendant and his wife will hold 50 per cent shares in the mortgagor company in trust on behalf of themselves and their other children, whilst the remaining 50 per cent of 25 per cent each they held on behalf of their 2 sons above-named. A similar understanding of shareholding capacity applied in the case of Ali's Civil Engineering. In respect of C.L. 12023 owned by the mortgagor, the parties agreed that "the Company will when time comes will take all steps necessary to have the property transferred to the father and mother 50% and each son 25% each.” Again a similar understanding applied to C.L. 2999 held and owned by Ali’s Civil Engineering. According to the Agreement, the transfer is to take place upon payment of the specific amount of $3,070,750.00 that is owed under mortgage No. 344661.
The Agreement if valid, would certainly meet the requirements and the tests laid down by the Fiji Court of Appeal above. This therefore means that the Defendant does indeed possess the legal capacity to lodge a caveat against the property in question.
There are however certain matters raised by the Plaintiff that goes to the issue of the genuineness of the Family Settlement Agreement brought in by the Defendant. In the first place, the Plaintiff pointed to the glaring omission of any reference to the alleged Agreement in the Defendant’s Caveat. The caveat was lodged by the Defendant on the ground that he was “an equitable owner by virtue of making contributions towards Valebasoga Tropikwoods Limited through buildings and improvements in the land.” There is no mention anywhere equitable or beneficial interest arising from a Family Settlement agreement, such as the one that is being displayed by Defendant to now support his arguments.
The Plaintiff also submitted that the Agreement had not been stamped arguing that an instrument purporting to create an interest in land and especially where the intention is to create a Trust as Clause 10 of the Agreement, clearly stipulated, must be stamped at execution. This was not done. There are also the question of the validity of the affixing of the Company seal by only one of its officers as well as the registration of the document.
The fact that the said Agreement is unregistered does not in any way affect its validity. Section 106 of the Act is intended to protect and provide for unregistered instruments in land, such as options to purchase as this one appears to be.
There are nevertheless some disquieting aspects of the Agreement that this Court views with some concern. First, the specific mortgage sum of $3,070,750.00. Mortgage 344611 of 3 September 1993, in addition to granting the mortgagor the above-said amount, also secured to the mortgagor, further advances or accommodation. Further financial accommodation by means of additional loans were obtained by the mortgagor in October 1994 for $3,924,119.00, and June 1995 for a further $1,566,659.00. These additional loan agreements were reached through letters of offer and acceptance, with both parties signing. The mortgagor’s common seal with the signatures of two of its directors, including the Defendant’s, were affixed to the documents. There cannot be any doubt whatsoever, that the Defendant knew full well the extent of the mortgagor’s liability to the Plaintiff. After all he was its managing director and signatory to all the loan documents between the mortgagor and the Plaintiff. If, therefore he was fully conversant with the state of financial affairs between the Plaintiff and the mortgagor, it would seem that to proceed regardless and notwithstanding the already existing Family Settlement Agreement with its specific and limited amount of $3,070,750.00 to discharge the mortgage, calls into question the actions of the Defendant himself and/or the validity or otherwise of the Agreement.
There is also the argument raised by the Plaintiff on the existence of the Agreement itself. For whatever reason, there were no reference made to the Agreement or its existence in the Defendant’s caveat document. It merely stated that the interest which supported the caveat was by virtue of his being “equitable owner” of an estate or interest in the land because of contributions towards the mortgagor “through buildings and improvements in the land.” Yet a direct reference to the existence of the Agreement giving the Defendant the option to purchase the land, would have provided a much firmer ground in law to his claim. It seems therefore quite extraordinary that the Defendant had not found it until now to make reference to the existence in writing of the option to purchase the land.
Additional Loans and Upstamping of Security Document
The alternative argument advanced by the Defendant is that unless and until the additional loans are reflected in the original memorandum of mortgage registered and held by the Registrar of Titles, there can be no priority accorded to it over the Deed. In other words, upon the full payment of the loan sum $3,070,750-00, which the Defendant argued he had accomplished, the Deed takes priority over any other interest including further loans by the Plaintiff, which had not been recorded in the original mortgage held by the Registrar.
The law and indeed the practice of upstamping of a mortgage is as correctly set out in the Plaintiff’s Counsel submissions. However in this case, the Deed of Debenture is the principal security and it is the Debenture that was upstamped while the mortgage stamped as collateral. The two additional advances, had been duly consented to by the Director of Lands as shown by his stamp and signature on the duplicate copy of the mortgage. As to the status of such duplicate copy, the decision of the Court in ANZ Banking Group Ltd v. Amit and Sandhya Patel HBC0307.2002, is authority enough for the proposition that a duplicate or second executed copy of a mortgage registered under the Act, is equally an original. Counsel for the Plaintiff has referred to the publication “The Stamp Duty Book NSW” by Frank Zipfinger and Nuncio D’Angelo where they said (at p. 285):
“If the original mortgage is held by the LTO or ASC or any other public office in which registration is effected, any duplicate or counterpart of the original may be stamped with additional duty required under section 84(3).”
Counsel for the Defendant’s main contention is not that the duplicate is not an original but that the two further advances or loans amounted to a variation of mortgage No. 344611 and such variations should have been entered as dealings in the original memorandum of mortgage held by the Registrar. In support of this, Counsel argued that under the Torrens system, registration is everything.
The primary purposes of registration under the Torrens system are twofold. First, is the protection it affords the mortgagee’s interest. Secondly, it warns any interested third party of existing encumbrances. The concept of indefeasibility of title is founded on the principle that unless a purchaser had knowledge of the existence of a prior interest in the land, he is assured of taking a good title. That is why registration is absolutely necessary. It is the beneficiary of an interest’s protection against the world.
However, the more relevant question in addressing the Defendant’s submission is whether the two further advances amounted in law to variations of mortgage No. 344611. I am of the view that they are not. Section 66(a)(i) of the Property Law Act states that a variation occurs inter alia, when “the amount secured by the mortgage” is increased or decreased. But the amount secured by the mortgage in this case is not limited to $3,070,750.00 only. The mortgage agreement includes further advances and accommodation. Further the advances as was done in this case were drawn on the same current account. They therefore became and formed still the “principal sum” agreed to by the parties. In other words, there were no increase in the amount secured by the mortgage, as the result of further advances. The advances therefore granted by the Plaintiff to the mortgagor did not amount to variations of the mortgage. Section 71 of the Property Law Act clearly lends support to this interpretation.
But even if the further advances were to be deemed as variations of the mortgage the question is whether the Plaintiff is obliged to register such a variation. The proviso to section 66(a) of the Land Transfer Act states:
“Provided that it shall not be necessary for a mortgagor to execute a memorandum of reduction, or for the mortgagee to execute a memorandum of increase, of the mortgage debt or of the rate of interest payable under a mortgage.”
Where however a memorandum of variation is prepared section 66 (c) of the Land Transfer Act merely states that:
“the memorandum may be registered in like manner as the original mortgage” (underlining added)
In my view so long as stamp duty is paid within the required time and reflected in the “original” copy held by the mortgagee, there the statutory obligation rests. Whether to continue on and register the memorandum of variation of mortgage with the Registrar of Titles, is at the pleasure of the mortgagee. He however runs the risk of subordinating his claim to a later interest should he fail to register it.
In this case, as the Court has already noted, the upstamping was made on the principal security being the Deed of Debenture. The memorandum of mortgage was collateral and duly stamped as such. However, the same principle would apply.
There is furthermore, in this case, the fact that there is no innocent or third party interests affected by the non-registration of the variation even if the Court were to agree to the Defendant’s arguments. The question therefore posed by Counsel for the Defendant of someone else relying on the basis of what appears on the registration of mortgage, in this case is academic. Here the situation is very simple. Mortgage No. 344661 provided additional advances and accommodation to the mortgagor which it utilised on two separate occasions. The Defendant, one of the directors, signed and affixed the mortgagor’s seal on the documents on both occasions. The Defendant is now trying to get the mortgagor’s out of its financial obligation to the Plaintiff by arguing that there was a legal requirement to register with the Registrar of Titles the variation of mortgage and as if there was an innocent third party in play. This Court does not agree. It is clear that mortgage No. 344661 not only secured the principal sum of $3,070,750.00 but also further advances of $3,924,119.00 and $1,566,659.00 respectively. The mortgage remains valid. As far as this Court is concerned the mortgagor is yet to pay off its loan, including the two additional advances.
Does the Defendant Have a Caveatable Interest
While the Family Settlement Agreement may have given legal capacity to the Defendant to lodge a caveat, the question whether he does in fact have or possess a caveatable interest depends on the nature of interest claimed. The Defendant’s interest under the Agreement amounts to an option to purchase in the future when certain conditions are fulfilled. These include the payments of loans under mortgage No. 344661. As such, this requirement becomes a condition precedent to the coming into existence of the category of interests that is sufficient to lodge a caveat. In The Fiji National Provident Fund Board v. Vivrass Holdings Limited HBC0325 of 2002, this Court held the view, adopting Young J’s decision in Piper Industries Ltd. v. Hemphill (Unreported NSW Supreme Court decision) that an option holder does not have a caveatable interest in land until the conditions precedent is met. In this case the condition precedent is the Defendant’s exercise of his option to purchase under the Agreement. But to enable him to do so, the mortgagor must first pay off the loan from the Plaintiff. This Court has found, as a matter of law and fact that the mortgage in question covers all the moneys advanced to the mortgagor, including further loans in the sums of $3,924,119.00 and $1,566,659.00, contrary to the Defendant’s arguments. The mortgagor there is still indebted to the Plaintiff for moneys advanced, including the two further loans above. This being the position, it follows that the condition precedent under which the Defendant’s option to purchase is triggered, has not eventuated. Until and unless this happens, the Defendant does not have a caveatable interest. In essence this is the gist of the Fiji Court of Appeal decision in Court Bros (Furnishers) Ltd. v. Sunbeam Transport Ltd. 1969 FLR Vol. 15 209, cited by Counsel for the Defendant.
It is not necessary for the Court to address the Plaintiff’s third ground on the question of priority, having decided that the Defendant does not have a caveatable interest.
The Defendant had in addition raised other matters which had already been examined and decided upon by the Court elsewhere. It is not my intention to indulge the Court in them including the question of the validity or otherwise of the mortgage and other documents. At the very least, it would be totally inappropriate for this Court to deal with them again.
In the result, this Court finds that the Defendant has no caveatable interest in the land and therefore failed to show cause why his caveat should not be removed.
Order is made for the caveat to be discharged forthwith.
Costs of $200.00 is awarded against the Defendant.
F. Jitoko
JUDGE
At Suva
22 July 2004
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/fj/cases/FJHC/2004/333.html