IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBC 70 of 2008

Between:

FRANK BERNARD SHAW
Plaintiff

And:

FIJI DEVELOPMENT BANK
Defendant

Before: Master Udit

Counsel: Mr. Pal for the Plaintiff/Respondent
Mr. E Sharma with Mr. Nand for the Defendant/Applicant 

Date of Hearing: 17 June, 2008
Date of Decision: 22nd July, 2008

DECISION

Introduction

[1]	On 13th March, 2008 the Defendant (Bank) filed an application under Order 18 rule 19 of the High Court Rules 1988 and the Inherent Jurisdiction of this Honourable Court inter-alia seeking the following orders:-

(a)	An order that the above action be stayed pending the determination of the Bank’s summons to strike-out.

(b)	That this action be struck-out.

(c)	Costs against the plaintiff on an indemnity basis.

[2]	The application is supported by an affidavit of Yvonne Fatiaki, Manager Legal Services, employed by the Bank. 

[3]	Although the plaintiff opposes this application, he opted not to file any evidence in rebuttal to challenge the contents of the affidavit of Yvonne Fatiaki.

Documents relied upon

[4]	The plaintiff relies upon the following documents:-

(a)	Writ of Summons filed on 3rd March, 2008.

(b)	Written Submissions tendered in Court on the day of the hearing although it was ordered to be filed well before that.

[5]	On the other hand the Bank relies on the following documents:-

(a)	Summons filed on 31st March, 2008.

(b)	Affidavit in Support of the Summons of Yvonne Fatiaki sworn on 28th and filed on 31st March 2008.

(c)	Written submissions filed on 6th June, 2008.

The facts

[6]	Briefly, the plaintiff brings this action as a customer of the Bank. He obtained a loan from the Bank. For security the plaintiff mortgaged his land comprised in Certificate of Title No. 13981 being Lot 3 on DP No. 3440 and situated at Queens Road, Wainadoi, and Navua. The said property was acquired by the plaintiff with the intention of further sub-division and development. Unfortunately, the plaintiff defaulted in the repayment of the loan. Consequently, the Bank exercised the right to realise the security by calling-up the mortgage. 

[7]	 A demand notice was duly issued to the Plaintiff on 13th November, 2000. The Notice demanded the plaintiff to pay the debt within 30 days of the service of the Notice. That did not eventuate. Consequently the Bank proceeded to a mortgagee sale. On 7th February, 2001 the bank informed the plaintiff that it has received an offer from a bidder to purchase the mortgaged property at Wainadoi for a sum of $29,000-00. In addition the plaintiff was informed that the Bank was intending to accept the offer and thereafter will pursue the recovery of the balance sum against the plaintiff personally, which at the material time stood at over $7,000-00. It was made apparent that in the event of the plaintiff’s inability to settle the total outstanding amount within 14 days of the date of the letter, the bank would to proceed to accepting the offer and sell the property. Enigmatically, the plaintiff defaulted. As a result of which the bank sold the property for $29,000-00.

[8]	A lackadaisical assertion of the property being sold at a grossly undervalued price is made by the Plaintiff. Whilst this allegation emerges in the statement of claim, no reference to any actual or anticipated market price, in an objective or subjective sense of it, is pleaded by the Plaintiff. Such an important fact must be pleaded in the Statement of claim, so that the Bank is put on notice, prompting a response. In addition to the Bank’s aforesaid alleged breach of the duty as a mortgagee, the plaintiff claims the property was sold due to a misrepresentation by the staff of the Bank. Further, it is alleged Sections 54 and 55 of the Fair Trading Decree 1992 is contravened by the Bank by proceeding to sell the property by way of a mortgagee sale. By way of relief, the plaintiff seeks a number of declarations and damages. 

[9]	Mr. Pal appearing for the plaintiff submitted the claim is in fraud, misrepresentation and breach of the Fair Trading Decree 1992. On the other hand on behalf of the Bank it is comprehensively submitted that this action ought to be struck out strictly on the procedural point but failing which on a meritorious one. I will now turn to the submissions of the Counsels.

Consideration 

[10]	Mr. Sharma opened his submissions by seeking an order that the writ be struck out for abuse of the Court process. He submitted that there was an action filed in respect of the incidence of the selling of the property by the Bank being Suva High Court Civil Action No. 548/2005. It was not pursued to finality. On 1st October, 2007 it was struck out on repeated failure on the part of the Plaintiff to comply with the directions of the Court. 

[11]	Mr. Sharma submitted that this action is an abuse of the Court process in that the plaintiff has no right to institute this action once the earlier action was struck out. Elaborating on the submissions, he stated that the only option open to the plaintiff after the action was summarily struck-out was to file an appeal against the order 

[12]	 As a matter of fact, which I can take a judicial notice that the earlier action was struck-out on 1st October, 2007 due to the plaintiff’s continued failure to comply with the orders and directions given by the Court. Where an action is struck out for repeated non-compliance of the rules of the Court, such a conduct is contumelious. In addition, Mr. Sharma submitted that the plaintiff neglected to pay the costs earlier awarded to the Bank. This is hitherto another aggravating factor which materially questions the proprietary of the plaintiff’s commencement of this action. 

[13]	It is trite law that where an action is struck out for want of prosecution either under the first or second limb (save for orders made in the absence of the party) of Brickett –v- James [1977] 2 ALLER 801, the proper recourse is to file an appeal against such an order. The Court of Appeal (Ward P, Barker JA, Scott JA) in Trade Air Engineering (West) Limited –v- Laisa Taga & Ors Fiji Court of Appeal Civil Appeal No. ABU0062/2006 (9th March, 2007) at paragraph 13 of the judgment held:-

"….although the judge rejected the appellant’s submission he did give leave for them to apply for the action to be reinstated. Mr. Hanif was unable to refer us to any provision in the Rules granting the Court power to re-instate an action struck out in these circumstances. Generally, parties only remedy following the striking out of its appeal or its action is appealed. Exception to this general rule such as Order 13, Rule 10, Order 14, Rule 11, Order 24, Rule 17 or Order 22, Rule 6 have no application to Order 25" 

(emphasis added)

[14]	When Civil Action No: 548/2005 was struck-out, Mr. Pal and Mr. Sharma appeared for the plaintiff and Bank respectively. No attempt was made by Mr Pal to distinguish Trade Air Engineering (West) Limited –v- Laisa Taga & Ors (supra). I am bound by the authoritative decision of the Court of Appeal. It follows this action must be struck out on this preliminary point only.

[15]	However, if am wrong in my conclusion, Mr. Sharma again made pertinent submissions in respect of the other aspects of the pleading. 

Equity of redemption extinguished
 
[16]	It was submitted that the claim is statute barred. The allegations in the statement of claim relates to the exercise of the mortgagee’s power to realise the security. He referred me to a decision of His Lordship Mr. Justice Scott in Ram Dutt Prasad -v- Australia & New Zealand Banking Group Limited [1999] 45 FLR 101 where His Lordship said:-

"The High Court of Fiji has for many years followed the long established rule that: 

"The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute or because the mortgagor has begun a redemption action or because the mortgagor objects the manner in which the sale is being arranged. You will be restrained however ever if the mortgagor pays the amount claimed into court, that is the amount which the mortgagee claims to be due to him" 

(emphasis added)

[17]	The position was re-iterated by Court of Appeal in WBC -v- Adi Mahesh Prasad [1999] 45 FLR 1.

[18]	There is no dispute in respect of this well established rule of law in this country; Rauzia Zaweed Mohammed v. ANZ Banking Group [1984] 30 FLR 136. Mr. Sharma submitted that the Bank was merely exercising its powers under the Mortgage instrument which the plaintiff duly executed. Only way the plaintiff could possibly have restrained the exercise of the power was to pay the debt. Of course with that need for payment entails, "payment under protest". He could have filed an action and deposited the debt claimed by the Bank into Court. Thereafter, he was free to pursue with a suit to redeem the property. 

[18]	However, he did not bring the aforesaid contention to a close. He went a step further to say that once the property was sold the mortgagor lost the right of the equity of redemption. This is the material part of his submissions going to the root of the limitation defence. I agree with Mr. Sharma’s submission that the mortgagor lost the right to redeem once the property was sold. The mortgaged property was advertised well in advance of the offer which the Bank had intended to accept. Despite that, and I must note in that letter the Bank stated; "we therefore advise you that if you do not settle the total debt together with interest and other cost owed by you to the Bank within the next fourteen days, the bank will proceed to accepting the said offer and have the property sold". This was a unique opportunity offered to the plaintiff. When the Plaintiff failed to take any remedial action, the only available option to the bank was to accept the offer and sell the property. 

[19] Once a secured creditor enters in to a contract (conditional or unconditional) with a prospective purchase of a secured property in exercise of its power as a mortgagee, as long as the contract is subsisting, the equity of redemption extinguishes; Property and Bloodstock Limited v. Emerton (1968) 1 Ch 94. At page 114 -115 it was held:- 

"The actual decision of CROSSMAN, J., in Lord Waring's case was: (i) that a mortgagee's exercise of his power under s. 101(1) (i) of the Law of Property Act, 1925, to sell the mortgaged property by public auction or private contract is binding on the mortgagor before completion unless it is proved that he exercised it in bad faith; 

…………

In my opinion, CROSSMAN, J.'s decision in Lord Waring's case was plainly correct and cannot be successfully assailed."

(emphasis added)

[20]	In Naipote Vere and Esita Takayawa Vere –v- NBF Asset Management Bank Fiji (supra) the Court of Appeal had this to say:- 

"We were also informed in the course of the oral arguments that the contract is still on foot, and will be settled once vacant possession is given. In those circumstances, His Lordship was not in error in applying the decision in Property and Bloodstock Limited v. Emerton, and in holding that the equity of redemption was incapable of exercise." 

(emphasis added)

[21]	I will pause here to refer to Mr. Pal’s submissions on this point. He submitted that the property was sold for an undervalued price. The mere (ii) … fact that a contract for sale was entered into at an under-value is not by itself enough to prove bad faith; Property and Bloodstock Limited v. Emerton (1968) 1 Ch 94 at 115. In this instant there is no cogent evidence to demonstrate that the property sold at an undervalued price. Mr. Pal candidly accepted that there was no answering affidavit filed by or on behalf of the Plaintiff to rebut the evidence adduced by the Bank. He relied on the pleadings alone. Faced with this difficulty, I cannot disregard but simply to accept the evidence of the Bank relying on Jai Prakash Narayan v Savita Chandra Court of Appeal Civil Appeal No. 37 of 1985. The Court of Appeal unambiguously stated:-

"Of course he did have to respond. In our view, the course events have taken and the consequences, if he did not respond, rendered it a matter of prudence that he should reply if indeed, he had a reply. And in the circumstances of the case in the absence of a reply, we hold the inference inescapable that what the Respondent has said to be true." 

(emphasis added)

[22] 	Whatever may have been the response but the answer to the attainment of a market price is to be found in the decision of Ram Dutt Prasad –v- New Zealand Banking Group Limited (supra) where His Lordship said:-

"When exercising a power of sale, the mortgagee is required to act in good faith when owes the mortgagor a duty to take reasonable care to obtain a proper price" Cuckmere Brick Co Ltd -v- Mutual Finance Ltd [1971] Ch 949: Alexandra –v- New Zealand Breweries Ltd [1974 1NZ LR 497]. The charge of this duty requires the property to be adequately and sufficiently advertised and where an auction take place it must be held in reasonable condition….." 

[23]	In this instance, the appropriate time for the Plaintiff to have intervened was when the Bank opted to exercise its power under the mortgage. Anyway, even if he had for any reason let the opportunity slip away, he was fortunate to be given a second chance to redeem the mortgaged property prior to the acceptance of the offer by the Bank. He let that opportunity parish away, and with that opportunity gone he was left with no other recourse to redeem the property. 

Limitation

[24]	The issue of the equity of redemption is also material to the issue of limitation. Mr. Sharma submitted the limitation period for the commencement of this action begins to run from the time the offer was accepted by the bank. That was on 27th February, 2001. He submitted that once the Bank accepted the offer, the mortgagor’s right of redemption in law was a foregone conclusion. That is not the correct statement of law. As stated above, as soon as contract is entered between the Mortgagee and intending purchaser, the equity of redemption is lost, thus time begins to run therefore. That period to expired. Mr. Pal concedes the limitation point raised by the Bank. Accordingly any cause of action against the Bank should have been filed within 6 years of the entering of any such contract. That time expired on 26th February, 2007. This action was filed on 7th March, 2008. 

[25]	Since this action is filed outside the limitation period it is statute barred. The Bank is entitled to rely on a defence of statutory limitation. In Riches –v- Director of Public Prosecutions [1973] 2 ALL ER 935 at 939, Davies LJ said:- 

"I do not want to state definitely that in a case where it is merely alleged that the statement of claim discloses no cause of action, the limitation objection could prevail. In principle, I cannot see why not. If there is any room for an escape from the statute well and good; it can be shewn. But in the absence of that, it is difficult to see why a Bank should be called on to pay large sums of money and a plaintiff be permitted to waste large sums of his own or somebody else’s money in an attempt to pursue a cause of action which was already been barred by the statute of limitation and must fail". 
 
(emphasis added)

[26]	 In Reed –v- New Zealand Trotting Conference [1984] 1 LZ LR 8 at pg 9 the New Zealand Court of Appeal said, "…the justification for the extreme step of staying a prosecution or striking out a statement of claim is that the court is obliged to do so in order to prevent the abuse of its process". The Bank simply seeks to bring an end to this proceeding, which is not merely an abuse of the process of the Court because it should not have been filed, but more so it is statute barred. 

[27]	Mr. Sharma brought to my attention the case of Uluinayau -v- National Bank of Fiji Suva High Court Civil Action No. HBC 175/94 which coincidentally also involved a mortgagee sale. In that case there was only a summons filed to strike out the action for want of prosecution. There is no similarity in the two actions. Facts are different. The decision in that case in my view has no relevance as such is distinguishable. Here an action was earlier filed and struck-out. 

[28]	 Mr. Pal, trying his best next submitted that there is a claim for fraud for which the statutory limitation period is suspended. He relies on Sections 15 and 16 of the Limitation Act (Cap 25). Fraud is pleaded in paragraph 24 of the Statement of Claim. It is reproduced in full below:-

"24 – The Plaintiff claims that the Bank acted in a fraudulent and negligent manner under the mortgage and by proceeding to sell the property at an under value".

Particulars

(a)	The Bank failed to observe the obligation upon it and namely to take reasonable care to ensure that the best purchase price which could reasonably have been obtained: 

(b)	Accept a Purchase price of $27,000-00 and allowing a third party to purchase a mortgage property at a gross value under value.

(c)	The Bank failed to give the Plaintiff reasonable opportunity to comply with the demand under the Mortgage Sale.

(d)	Failing to allow the plaintiff a fair opportunity and to take steps to redeem the mortgage".

[29]	On the aforesaid particulars, I asked Mr. Pal to identify the precise allegation of fraud. He conceded there is a remarkable lack of particulars to constitute a cause of action in fraud. The transcript shows:-

Court:  what are the ingredients of fraud?
Pal: Do not know
Court: Anything in paragraph 24 (particulars) which shows fraud?
Pal: No, sir. Para 25 of the statement of Claim. Particulars of discovery. Client would have come to know of it in 2000 
 
[30]	In any event, prima-facie the cause of action in fraud has no prospect of success. Prior to disposing the property by a sale, the Bank amply informed the Plaintiff of its intention to do so. I have already alluded to this in detail. It is difficult to imagine as to how an allegation of fraud can be derived especially, prior to acting under the mortgage instrument the Bank actually informed the Plaintiff. In other words at all material time, the plaintiff was conscious of the acts or omission of the Bank. Any untoward act or omission of the Bank should have been met with upfront resistance expeditiously and not belatedly once the cause of action is expired or the equity of the redemption is extinguished.
 
[31]	Be that as it may, even if there was any accusation of fraud, the Plaintiff should have acted with promptness to shield the property. Given the facts of this case, any alleged fraud perhaps was within the knowledge of or with reasonable diligence could possibly have been detected. The limitation period commences to run from the time the fraud was actually known or with due diligence the fraud was capable of being detected; NBF Asset Management Bank v Graham Southwick Suva High Court Civil Action No. HBC 114 OF 2004 (25 January, 2007).
 
[32]	On the issue of misrepresentation, Mr. Pal conceded that any misrepresentation could have been on the date on which the letter was written. Once again there is difficulty with the concession made. The limitation period accordingly runs for 6 years from there. 

[33]	On the whole, Mr. Pal yielded to the fact that this action comes within the ambit of the Limitation Act. Equally so, Mr Pal conceded on the procedural point taken by Mr. Sharma. 

Conclusion 

[34]	Having considered all the facts and submissions by counsels, I am of a firm view that this action is an abuse of the court process. Firstly this action should not have been re-filed in this court. Appeal is the appropriate procedure. No appeal is filed. Already he is well out of time now. Secondly the cause of action at large is statute barred. Accordingly, I will have to dismiss the action.

[35]	 However before I do that, Mr. Sharma submitted that due to the conduct of the Plaintiffs in this matter the bank is entitled to a cost of $1,700-00being the indemnity costs incurred by the Bank in the legal proceedings. Mr Sharma’s legal fee for this action is $1,700-00. I have considered the conduct of the Plaintiff in this action. The bank is put to unnecessary expenditure by defending this action. Accordingly under the indemnity principle the bank needs to be fully compensated for the loss it has made owing to this action. I have no hesitation in awarding a cost of $1,700-00 to the Bank being the indemnity costs. 

ORDER 

(a)	This action is struck-out for the reasons fully set out in this decision.

(b)	The Plaintiff is to pay an indemnity cost of $1, 7000-00 to the Bank, that being the fees which the Bank is paying to its Solicitors.

Accordingly, so ordered.

J. J. Udit
Master