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Arun v Prasad [2008] FJHC 304; HBC147.2008 (9 October 2008)

IN THE HIGH COURT OF FIJI
AT LAUTOKA

CIVIL ACTION HBC NO 147/2008

BETWEEN:

CHANDRESH ARUN
f/n Shiu Prasad
Plaintiff

AND:

SHAILENDRA SUMAN PRASAD
f/n Shiu Prasad
1st Defendant

AND:

WESTPAC BANKING CORPORATION
2nd Defendant

AND:

REGISTRAR OF TITLES
3rd Defendant

AND:

ATTORNEY GENERAL OF FIJI
4th Defendant

Sahu Khan & Sahu Khan for the plaintiff
No Appearance for the 1st defendant
Young & Associates for the 2nd defendant
Office of the Attorney General for the 3rd & 4th defendants

RULING

[1] There are two applications before me. The first is by motion dated 12 August 2008 filed by the plaintiff for the following orders:

(i) an order restraining the second defendant, its servants/agents/solicitors

from accepting any tender and/or selling the property comprised in Certificate of Title Number 18230 until the determination of this action or until further order of the court

(ii) an order that the third defendant do not register any dealing in respect of Certificate of Title Number 18230 until the determination of this action or until further order of the court

(iii) such further or other relief as to this Honourable Court seems just.

[2] The second application is by summons dated 20 August 2008 filed by the second defendant, Westpac Banking Corporation (Westpac) for an order that the plaintiff’s statement of claim against Westpac be struck out with costs on the grounds that it is frivolous and vexatious and/or an abuse of the court process.

The strike out application

[3] When this application was filed, the plaintiff’s claim against Westpac was confined to an allegation that Westpac’s mortgage had not been properly registered with the Registrar of Titles and as such Westpac had no rights and/or powers to sell the property comprised in Certificate of Title 18230 (the property). After Westpac filed its application, the plaintiff filed a comprehensive amended statement of claim. The amended statement of claim dated 8 September 2008 claims against Westpac that mortgage number 463638 registered against the property in favour of Westpac is fraudulent, null and void in as much as:

(a) Westpac had been acting in collusion with the first defendant in having the property mortgaged to it in respect of the accommodation and facilities made available by Westpac to the business of the first defendant and his company known as ALPHA Holdings Limited when Westpac was very well aware of the interest of the plaintiff and other beneficiaries referred to in paragraphs 3 and 6 herein and in particular the widows referred to in paragraph 6 herein;

(b) in the dealings between the plaintiff and Westpac relating to the plaintiffs own business and including his company namely Western Land Development and Investments Company Limited over whose title Westpac holds a mortgage and in its dealing with the plaintiff Westpac was fully informed and was aware of the interest of the plaintiff in the property;

(c) Westpac in spite of request made as to the amount owing in respect of the property and the second property separately for reasons best known to it has refused to inform the plaintiff of the amounts owing even after the institution of the original writ of summons herein and the notice of motion for injunction;

(d) the second defendant took the purported mortgage in respect of the property with the full knowledge of the interest of the plaintiff and the other beneficiaries including the said Sahodra Prasad the mother of the plaintiff in the said Estate of the Deceased.

[4] In earlier proceedings brought by the plaintiff against the first defendant herein and others, namely Civil Action HBC 369 of 2000, which was not disclosed by the plaintiff in these proceedings and which was brought to my attention by Mr. Young in the course of the hearing of the application on 1 September, the plaintiff had claimed that the first defendant had wrongly transferred the property to himself and had mortgaged the property to Westpac. Clearly the plaintiff was aware of Westpac’s mortgage over the property eight years ago. In the earlier proceedings, no claim of fraudulent conduct, tainting the mortgage was made against Westpac.

[5] The only evidence relied on by the plaintiff in the interlocutory applications herein, in support of his allegations of collusion between Westpac and the first defendant, is the fact that the first defendant and Westpac have declined to give him the amount owing under the mortgage to Westpac in respect of the property. The plaintiff also deposed in his affidavit sworn on 22 September that the first defendant and Westpac want the property sold first, that is, before sale of the Ragg Avenue property, at the expense and detriment of other beneficiaries who the plaintiff claims also have an interest in the property. The latter allegation is mere speculation unsupported by any credible evidence at all. Westpac has disclosed that it is unable to divulge any information regarding the amount outstanding under the mortgage over the property unless it is authorized to do so by the first defendant who has declined to give Westpac permission to divulge this information. Westpac’s reliance on its contractual obligations with the first defendant regarding disclosure does not amount to fraudulent conduct. "Fraud" under the Torrens system has a specialized meaning which was enunciated by the Privy Council as long ago as 1905. In Assets Co. Ltd. v Mere Roihi[1] their Lordships stated:

"...by fraud in these Acts is meant actual fraud, i.e., dishonesty of some sort, not what is called constructive or equitable fraud – an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud. Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered proprietor for value ... must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shown that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him." [emphasis added]

[6] The plaintiff having been aware of Westpac’s mortgage in 2000 has been careful in these proceedings not to disclose any relevant dates in regard to the allegations of collusion and fraudulent conduct made against Westpac and his knowledge of these matters which are now raised in the amended statement of claim. The mortgage in issue was registered on 16 June 1999. The amended claim against Westpac, premised on allegations of collusion between Westpac and the first defendant, when considered in the relevant period, that is, 16 June 1999 and before that date while discussions concerning the mortgage and property would have been on foot between Westpac and the first defendant prior to execution of the mortgage contract and registration thereof, is clearly and obviously unsustainable. The action against Westpac is now statute barred by virtue of section 4 (1) of the Limitation Act (Cap 35). The plaintiff having been aware of Westpac’s mortgage when he filed the earlier proceedings in 2000 ought to have claimed against Westpac then. As submitted by Mr. Young, the plaintiff ought to have caused the necessary Title search years ago to discover the registration of the mortgage which he seeks to now impeach. It is inconceivable that the Title searches were not done prior to institution of the earlier action in 2000 given that the statement of claim in that action acknowledged that the first defendant had mortgaged the property to Westpac. In my view the amended claim against Westpac being so obviously unsustainable for being out of time, so to speak, is also not a bona fide claim and constitutes an abuse of the process of the court. It is an abuse of the process of the court to raise in subsequent proceedings matters which could and should have been litigated in earlier proceedings.[2]

The injunction application

[7] Having found in Westpac’s favour in the strike out application, this application also fails. However given the submissions made, for completeness I set out my reasons for refusal of the injunctive relief sought.

Validity of Westpac’s mortgage

[8] The plaintiff has challenged the validity and enforceability of Westpac’s mortgage. Westpac holds a registered mortgage over the property albeit with the same registration number as that of the mortgage given by one Jitendra Singh in favour of the Fiji Development Bank (FDB). The FDB mortgage was cancelled on 28 July 2004. Westpac’s mortgage continues to exist as registered. The registration of a mortgage under the Torrens system not only protects the mortgagee’s interest in the land but also the mortgagee’s right to sell and the right to preserve the security from deterioration.[3] As submitted by Mr. Young in Frazer v Walker,[4] the Privy Council held that a forged document purporting to confer title to a person ignorant of fraud, nevertheless gave that transferee or purchaser registered ownership immediately upon registration. Even a mortgage not properly executed but subsequently registered acquires indefeasibility on registration of the mortgage under section 39 of the Land Transfer Act, except in the case of fraud. Section 38 of the Land Transfer Act provides:

"No instrument of title registered under the provisions of this Act shall be impeached or defeasible by reason or on account of any informality or in any application or document or in any proceedings previous to the registration of the instrument of title"

[9] The ‘informality’ here is the endorsement on Westpac’s mortgage of a registration number that was the same as that contained in the mortgage given by Jitendra Singh to FDB. By virtue of section 38, such informality does not render the mortgage impeached or defeasible. The plaintiff’s submission in this regard fails.

Restraining mortgagees powers of sale

[10] In Joe Colati v Fiji Development Bank,[5] His Lordship Justice Scott outlined the relevant principles for consideration as follows:

"The principles governing the granting of injunctions to restrain Mortgagees from exercising their powers of sale have been repeatedly restated by this Court; in the absence of wholly exceptional circumstances and in the absence of an offer to pay the whole sum owed into Court injunctive relief will not be granted (see Deo Narayan v Ram Raji HBC 77/94S)"

[11] That the plaintiff’s mother resides in the property and may have been deprived of a life interest in the property by her son, the first defendant herein, could be viewed as exceptional. However she is not a party to these proceedings and any claim she may have against Westpac is also time barred. Moreover the plaintiff has not offered to pay the whole sum owed under the mortgage over the property into court. The plaintiff suggests instead that an interim injunction should be granted at least until the Ragg Avenue property is sold following which this application could be reviewed. He deposed that he was very positive that there will be ‘a very little balance left (if any)’ of the debt owed under the mortgage to Westpac in respect of the property. He has been informed by his solicitor that arrangements have been made with a financier that ‘once the Ragg Avenue property is sold the financier will give him a loan to save the Ba property upon the necessary guarantees given by him and his company, Western Land Development and Investment Company Limited, as referred to in paragraph 4 of his affidavit sworn and filed on 15 August’. That does not satisfy the threshold requirement of offering to pay the whole sum owed into court. If such offer was forthcoming, orders could have been made requiring Westpac to disclose the outstanding mortgage debt owed in respect of the property. Having found that Westpac’s power of sale is exercisable and the issue raised by the plaintiff in this regard is without merit, the plaintiff was required to satisfy the test set out by Justice Scott in Joe Colati.

[12] The principles set out in American Cyanamid v Ethicon Limited6do not assist the plaintiff either. The plaintiff does not meet the first threshold requirement of satisfying the test of having established that there is a serious question to be tried against Westpac. Nor has he established damages not being an adequate remedy. His claim against Westpac is statute barred and his affidavits in support of his application do not meet the evidentiary basis of particulars tending to establish fraud or at least a prima facie basis of fraud required in an interlocutory application. In the circumstances his application for injunctive relief in the terms prayed for fails.

Orders

(i) The notice of motion dated 12 August 2008 is dismissed with costs to Westpac and the Attorney General, each in the sum of $750.00

(ii) Order in terms of the summons dated 20 August 2008 with costs to Westpac in the sum of $750.00.

Gwen Phillips
Judge

At Lautoka
9 October 2008

^[1] [1905] UKLawRpAC 11; [1905] AC 176 at 210
^[2] Yat Tung Investment Co. Ltd. v Dao Heng Bank Ltd. [1975] AC 581
^[3] Whenuapai Joinery (1988) Pty Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406 at 411
^[4] [1967] NZLR 1069
^[5] High Court at Suva, Civil Action No. HBC 60 of 1998, (28 April 1998)