IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No HBC 110 of 2010

BETWEEN:

SCAN SYSTEMS INVESTMENTS PTY LIMITED a duly incorporated company having its registered office at 112 Main Street, Blacktown, NSW 2148, AUSTRALIA
Plaintiff

AND:

CRAIG MUDGWAY of New Zealand and of Lot 31 The Cove, Denarau Island, Nadi, Company Director
Defendant

Appearances:
Ms. Vasantika Patel for the Plaintiff
Mr. Peter Lowing for the Defendant

Hearing on the 16/2/2011.
Judgment reserved on 12/4/2011.
Judgment on 23/5/2011.

JUDGMENT

1)	This action was instituted by the Plaintiff Mortgagee under Order 88 of the High Court Rules (1988) by way of Originating Summons to obtain possession of the Mortgaged property from the Defendant Mortgagor.

2)	The Plaintiff has filed three affidavits in support of its Originating Summons and the Defendant has replied by an affidavit filed of a partner of the Defendants Solicitors. The Defendant has not filed an affidavit sworn or affirmed in opposition.

3)	The Mortgage entered in to bearing No.703258 registered on 1/5/2008 between Plaintiff as Mortgagee and Defendant as Mortgagor is not disputed. The property charged there under is described as "freehold property comprised in Certificate of Title No.34907 containing 1,102 square meters more or less situated in the District of Nadi in the Island of Viti Levu and being Lot 31 on Deposited Plan No.8880 together with all improvements thereon". 

4)	The Plaintiff has served a Notice of Demand dated 6/4/2010 demanding the principal sum of NZ$1,025000/00 together with interest installment payments due on 1/March/2010 and 1/April/2010 at NZ$5,979/00 per installment making a total of NZ$1,036,958/00. The affidavit of service is marked as "SVDK-5" and the Notice as "SVDK-6" with the 1st affidavit of Stan Van Der Kroef on behalf of the Plaintiff company in his capacity as a Director.

5)	The Plaintiff has served further notices demanding vacant possession dated 18/May/2010 on the Defendant and a notice on the occupants dated 19/May/2010. The affidavits of service are marked "SVDK-7" and "SVDK-8" with the copies of the notices marked as "A" and photographs of the pasting of the notices on the premises are marked as "B", with the aforesaid 1st affidavit of Stan Van Der Kroef.

6)	By the Originating Summons in this matter the Plaintiff seeks vacant possession of the property and an order to restrain the Defendant and his servants, agent, employee or occupant from interfering with the improvements on the said properties. 

7)	However the Defendant submits that; 

(a)	the said Mortgage No.703258 is defective in that it does not set out the date for payment of the Principal sum, and objects to a variation of the terms, and

(b)	that the Defendant has complied with the Notice of Demand and as such having fulfilled its purpose the Notice of Demand dated 6th April 2010 is functus and that the Plaintiff will have to serve a new Notice of Demand and a new application. The Defendant cited section 59 of the "Bailment Guarantee and Bailment Act", section 66 of the Land Transfer Act, sections 68, 72(1) and 77 of the Property Law Act in support of the above objections, and,

(c)	that the claim for costs by the Plaintiff is excessive, and cited sections 72(4), 77 and 81 of the Property Law Act in support, and,

(d)	that the communication of 26 February 2011 from the Defendants Lawyer is without prejudice though not stated so in the letter and as such should not be considered as setting out the date of payment of the principal, and cited a decision and comments of the Master in Chase Corporation Ltd v. Minister of Works and Energy [2010] FJHC 48 at paragraph 29 to 32, and

(e)	that the Summons be struck out, and that the Plaintiff may pursue the Defendant by a new notice under section 77 of the Property Law Act.

A. Whether the Mortgage No.703258 is "defective";
8)	The affidavit of Annabelle Lowing a Solicitor with the Defendants Solicitors on record marks as 'A' a true copy of an Agreement of Sale and Purchase and a letter from Lowing Nandan and Associates (Defendants Solicitors on record) as 'B' and other correspondence between parties as 'C', without any relief or facts otherwise urged.

9)	The Defendant does not dispute the principal sum of NZ$1,025000/00 in the Mortgage, nor the monthly installment of interest of NZ$5,979/00. Defendant's submission that the Mortgage is defective is on the basis and only on the basis that it does not specify the date of payment of the principal. It is true that the space where the date for payment of the principal could have been written is not filled up in the Mortgage No.703258. However the payment of the interest on the principal in installments is specified of which there is no dispute. The interest is 7% per annum and the monthly installment is a minimum of NZ$5,979/00 and payable from the date of the settlement of the Transfer being the 1st of May 2008, which is also the date of registration of the Mortgage, and thereafter on each and every 1st of every subsequent month.

10)	The Defendant does not dispute the liability to pay the Principal sum. He only disputes, that as the date is not indicated when the principal is payable the Plaintiff cannot demand the Principal, and to that extent it is defective and the Demand notice cannot demand the principal. The Defendant does not dispute that the Plaintiff is entitled to demand the interest installment and in fact submits that upon the said Demand Notice dated 6 April 2010 he has paid the interest installments up to 1st July 2010 by payment on or before 22nd June 2010 (in fact on 18th June 2010 as admitted by the Plaintiff in its submissions.). 

11)	When a contract is alleged to be silent in respect of a term, the contract must be read carefully to see whether the parties have on purpose opted to omit such a term or did not agree on such a term, or whether it is omitted by accident. First the Court must look at the other terms and the totality of the terms of the contract in writing to see whether the parties have provided for what is alleged to be omitted. The following terms of the Mortgage, this Court finds are relevant for such an examination;

 "I CRAIG MUDGWAY..................................................................." …."In consideration of NZ$1,025,000.00 (ONE MILLION TWENTY FIVE THOUSAND DOLLARS) being the amount due and owing under sale and purchase agreement dated 31st day of March 2008 in respect of Certificate of Title No. 34907 by the Mortgagor to SCAN SYSTEM INVESTMENTS PTY. LIMITED a duly …………. ……..DOTH HEREBY covenant with the mortgagee that he will pay to the mortgagee the sum of NZ$1,025,000.00 (ONE MILLION TWENTY FIVE THOUSAND DOLLARS) as follows;-""

 "Secondly that the mortgagor will pay interest on the said sum at the rate of seven percent(7%) per annum by minimum monthly installments of NZ$5,979.00 FIVE THOUSAND NINE HUNDRED SEVENTY NINE DOLLARS per month (hereinafter called the repayment). The first repayment shall be made on the day of settlement and further repayments on the same day of each and every month thereafter".

 "THIRDLY the mortgagor will continue to pay interest under this Mortgage after the expiry of this mortgage should the principal moneys hereby secured be not paid and any interest accruing due after such terms shall be deemed to be secured by the Mortgagee".

 "FOURTHLY the Mortgagor further agrees that all interest unpaid by him at due date shall be added to the principal sum and carry interest after the rate aforesaid provided always that nothing herein contained in this paragraph take away the powers of foreclosure for non payment of interest".

 "FIFTHLY the Mortgagee shall have the right to hold the title deeds of title hereby Mortgaged until all sums due by the Mortgagor to the Mortgagee fully paid up with interest".

 "SIXTHLY in the event of foreclosure and sale under this security if the property hereby mortgaged shall fail to realize the amount due for principal and at such dates together with the costs charges and expenses of such foreclosure Mortgagor will forthwith pay to the Mortgagee such balance of principal interest and costs charges and expenses as shall be required to pay the full".

 "TENTHLY that all acts and things which under all or any of the covenants and agreements herein contained or implied ought to be done by the Mortgagor or which the Mortgagor is hereby or by virtue hereof or by stature authorized or empowered to do may be done by the Attorney of the Mortgagor and the Mortgagor hereby irrevocably appoints the Mortgagee and also his assigns the Attorney by the Mortgagor for the purpose of aforesaid". 

 And the securing term (paragraph after the tenth term) reads thus;

 "And for the better securing to the Mortgagee the repayment in manner aforesaid of the principal sum and interest the mortgagor hereby mortgages to the mortgagee all his estate and interest in the said land above described".

12)	In the preamble to the Mortgage it is set out that " In consideration of NZ$1,025,000.00 …. being the amount due and owing under sale and purchase agreement dated 31st day of March 2008 in respect of Certificate of Title No. 34907 by the Mortgagor to SCAN SYSTEM INVESTMENTS PTY. LIMITED". The Mortgage too is a charge on the same Certificate of Title No.34907. SCAN SYSTEM INVESTMENTS PTY. LIMITED is the Plaintiff Mortgagee in this action. Therefore it is clear that this Mortgage had been executed to secure the payment of the purchase price of this property. This is not a Mortgage by a Mortgagor to borrow money in a time of need keeping his home and land as security. The Defendant has speculated so has the Plaintiff.

13)	The second term set out above refers to the monthly installment of NZ$5,979/00 as a "repayment" installment. The NZ$5,979/00 is the exact monthly interest on NZ$1,025,000.00 at the rate of 7% per annum. The said installment is defined as a minimum monthly installment as well in the same term. Therefore it clearly gives the Defendant the option of paying more than NZ$5,979/00 per month thereby paying part of the principal of NZ$1,025,000.00 monthly as and when possible. As such the Mortgage provides for the payment of the Principal sum of NZ$1,025,000.00 with the monthly repayment installments. The repayment of the principal in any lending is fundamental. It is a term that is too embedded in the agreement that it is presumed even if not mentioned. What requires mention is if the parties have agreed to any special method of payment. In this mortgage the special method is the payment with the monthly installment over the minimum of NZ$5,979/00. There would otherwise be no need for the use of the word "minimum" and the word "repayment". 

14)	In English Law the Debtor must seek the Creditor, and it is trite law, when there is no deferment in the repayment is agreed, it is due on demand. If the Defendant interprets that he need not pay the principal as there is no specific date set out in the Mortgage to pay the principal then it becomes due on demand, and on failure to pay on demand the Defendant is in default and the Plaintiff Mortgagee is entitled to the remedies available in law.

15)	However as long as the Defendant keeps paying the minimum installments the Plaintiff could resist an attempt by the Plaintiff Mortgagee to call the principal, that being what the Plaintiff Mortgagee has agreed to. If on the other hand the Defendant Mortgagor fails in paying the minimum monthly installment, then he is in breach of the agreement and the Mortgagee is entitled to the reliefs in law to secure its security, apart from any other repercussions that the parties may have agreed to in the Mortgage. If the repayment of the principal was agreed not to be due on demand, it is then and only then that such a provision should be recorded in the written agreement. There is no term in the Mortgage that the principal is not due on demand. Therefore it is clear that the principal becomes due on it being demanded by the Mortgagee Plaintiff.

16)	In any event as per the terms, the Plaintiff Mortgagee is entitled to its remedies on the Defendant failing to pay even one minimum monthly installment, as there is no term postponing the breach or the repercussions from it. The use of the following words in the FOURTH term; "that nothing herein contained in this paragraph take away the powers of foreclosure for non payment of interest", further confirms the Plaintiff Mortgagees rights on default in the interest by the Defendant Mortgagor.

17)	For giving the Defendant Mortgagor the advantage of only paying the interest as a minimum payment monthly, the Plaintiff Mortgagee too has secured itself by further provisions such as the TENTH term whereby the Plaintiff Mortgagee is appointed the Attorney of the Defendant Mortgagor irrevocably, and by the FIFTH term by which the Plaintiff Mortgagee retains the title deeds; "until all sums due by the Mortgagor to the Mortgagee fully paid up with interest".

18)	Therefore there is no merit in the Defendants submission that the Mortgage is "defective" on the basis that there is no specific date for payment of principal set out in the Mortgage. Therefore it is not necessary to consider whether the communication dated 26th February 2011 from the Defendants Solicitor to the Plaintiff is without prejudice or not, when it sets out the date for the payment of the principal, except to say that whether a letter is with or without prejudice is not determined only by the "without prejudice" adage, and that there can be facts that can be held against the writer which stands independent of his liability and the principle of estoppel could operate with full force. If there had been an agreed date for payment though it had not been mentioned in the Mortgage then it is a fact which if set out in a communication could create an estoppel against the writer. Freedom of negotiation even with the intention of settlement does not entitle a party to state a falsehood. To take every communication as a without prejudice communication merely not to discourage settlement encourages a worse dilemma; that of dishonest communication which undermines the very process of settlement. However whether the principal was agreed to be paid on any particular date is immaterial for the aforesaid and following reasons. 

B. Whether the Notice of Demand dated 6th April 2010 is "functus";
19)	The Latin term "functus" may not be the best term to convey the Defendants objection to the Notice of Demand dated 6th April 2010, however the logical submission would be that the Demand has been satisfied. On examining the said Notice of Demand "SVDK-6" it is clear that the Defendant Mortgagor is demanded not only the principal sum of NZ$1,025,000.00 but the interest installments not paid on 1st March 2010 and 1st April 2010 as well. The Mortgage was entered in to in 2008, there was no dispute as to date of payment of the principal till it was taken up in the submissions on behalf of the Defendant, after the letter in February 2011, even without an affidavit from the Defendant denying the obligation to pay the principal or alleging a different mode of payment. 

20)	The seventh term of the Mortgage states thus; 

 "SEVENTHLY it is hereby agreed that the time mentioned in section 77 of Property Act (18 OF 1971) shall for all purpose be reduced to seven days".

 Section 77 of the Property Law Act (Cap 130) states thus;

 "77. If default is made in payment of the mortgage money or any part thereof, or in the performance or observance of any covenant expressed in any mortgage or in this Act declared to be implied in any mortgage, and such default is continued for one month or for such other period of time as is in such mortgage for that purpose expressly fixed, the mortgagee may serve on the mortgagor notice in writing to pay the mortgage money or to perform and observe the covenants therein expressed or implied, as the case may be."

 "Mortgage money" is defined at section 2 of the said Act as; 

 "Mortgage money means all moneys, whether principal sum, annuity, rent charge or other periodical payment, interest or other moneys whatsoever, owing under or secured by a mortgage".

 Therefore it is clear that the Plaintiff Mortgagee is entitled to notice the Defendant in the event there is default in the payment of interest as well as any periodical payment under section 77, which the Defendant Mortgagor is bound by law to pay within the agreed period of 7 days agreed to in the Mortgage. In fact the Plaintiff Mortgagee served the notice after one month of the first default, and the payment (of only the interest till 1st July 2010) on the said demand was made 2months after the said demand. The said demand states " Any monies paid in partial payment of the sum owing to the Mortgagee will only be received absolutely without prejudice to this Notice of Demand …." Therefore it is clear that any payment shall be accepted without prejudice to proceed with the remedies available to the Mortgagee.

21)	As such the payment of any monies after two months of the Notice of Demand of 6th April 2010 does not satisfy the Demand as the Demand is for the principal sum as well, and payment of interest too had not been done within the agreed time, and as such does not render the said Notice of Demand "functus". Further more the Defendant Mortgagor has failed to pay the "interest" after 1st July 2010, and the Defendants submission that the Plaintiff should send another Demand Notice for the balance to be paid is too preposterous for this Court to consider.

22)	There are two other notices served by the Plaintiff Mortgagee on the Defendant and any occupier for vacant possession which are not denied or canvassed by the Defendant Mortgagor or any other. Therefore section 59 of the "Bailment Guarantee and Bailment Act" (Indemnity, Guarantee and Bailment Act), section 66 of the Land Transfer Act, sections 68, 72(1) and 77 of the Property Law Act in support of the above objection by the Defendant does not arise.

C. Whether the claim for costs by the Plaintiff is excessive;
23)	The "costs" the Defendant refers to in his submissions are the expenses the Plaintiff is said to have set out in its affidavit of 1st March 2011 which appears to be the last affidavit on behalf of the Plaintiff. Such are expenses that may increase or decrease and recoverable after application of section 81 of the Property Law Act (Cap. 130). That is a stage that is still to be reached as the property has not yet been sold at a Mortgagee sale. There is no counter affidavit by the Defendant contesting the affidavit evidence on behalf of the Plaintiff. What is sought by the Plaintiff Mortgagee in this Summons before Court is for vacant possession of the property mortgaged and the costs of this summons and nothing more. Therefore this Court will not rule on the expenses, which the Defendant is free to canvass in other proceedings.

D. Whether the communication of 26 February 2011 from the Defendants Lawyer is without prejudice;

24)	In view of what is set out in paragraph 18 above this submission is not decisive to the relief sought being vacant possession in this Summons. In the absence of any affidavit from the Defendant, denying the contents of the said letter or setting out the actual date if there was one or alleging that there was none or swearing that such letter was written without prejudice, this Court has only the sworn evidence by affidavit of the Plaintiffs Director which as such stands without contradiction. The default in the minimum monthly repayment (minimum being the interest) is by itself a default irrespective of the principal, and gives the Plaintiff Mortgagee the right to remedies in law to secure and recover dues charged on the property. The decision and comments of the Master in Chase Corporation Ltd v. Minister of Works and Energy [2010] FJHC 48 at paragraph 29 to 32 are obiter and in any event not binding on this Court. In the said case as well as in this case the Court is presented with affidavit evidence only, and the intention of the writer is not ascertainable or tested after cross examination and background evidence is not led or tested either, unlike at a trial, and as such a ruling on whether it is without prejudice or not, will be a pre determination of a fact before a trial.

Whether; "that the Summons be struck out, and that the Plaintiff may pursue the Defendant by a new notice under section 77 of the Property Law Act";

25)	This Court has held above that the Notice of Demand of 6th April 2010 is not functus, though submitted otherwise by the Defendant, and that the other two Notices for vacant possession stands without challenge, denial or contradiction. Therefore it is clear due to the aforesaid reasoning of this Court that the Plaintiff need not issue a new notice under section 77 of the Property Law Act to seek vacant possession in this action.

26)	The Plaintiff Mortgagee by the several affidavits on its behalf has substantially complied with the imperative provisions of the several Rules under Order 88 of the High Court Rules, and the Defendant Mortgagor too does not submit otherwise.

27)	 Section 75 of the Property Law Act (Cap.130) states thus;

 "Mortgagee may, after default, enter into possession.
75. A mortgagee, upon default in payment of the mortgage money or any part thereof, may enter into possession of the mortgaged land by receiving the rents and profits thereof or may distrain upon the occupier or tenant of the said land for the rent then due."

 As such the right to enter in to possession is by statute confirmed in addition to any common law right. In view of case law such as Vere v. NBF Asset Management Bank [2004] FJCA 50, Fiji Development Bank v. Endeavour Youth Investment Cooperative Society Ltd (2000) FJHC 63; HBC0337J.99S(5 May 2000), Wati v Pillay  [2009] FJHC 102; Civil Action No 310.2008 (7 April 2009), and the recent case of FIJI DEVELOPMENT BANK v. RATU TEVITA RAIVALITA KOMAISAVAI CIVIL APPEAL NO. ABUOO18 OF 2010 [High Court Action No; HBC 19 of 2010L], where there is default then this court has to permit the mortgagee (Plaintiff) to take possession of the property so as to secure its only security.

28)	Though the Defendant has filed an affidavit of a Solicitor being a partner of the firm of Solicitors appearing for him, still the documents therein filed are not urged in the Defendants submissions. In any event the purported sale and purchase agreement between the Mortgagor and a third party appears to be after the Notice of Demand on the Mortgage and in any event subject to the Mortgage. Therefore it is the view of this Court that such a transaction does not in any way affect the rights of the Plaintiff Mortgagee, and judgment ought to be entered for the Plaintiff to obtain vacant possession of the mortgaged property forthwith.

29)	The Plaintiff has sought an order to restrain the Defendant from interfering with the improvements on the said properties in any way so as to deplete its value. However such an order was not urged at the hearing and as such this Court shall not issue such an order. 

30)	The Defendant has caused the Plaintiff to file many affidavits and submissions and this Court summarily estimates a sum of $1000/00 or taxed costs which ever is higher as costs.

ORDERS ON JUDGMENT;

(a)	The Defendant, any others holding under him, his servants, agents or employees and/or any other occupants ARE HEREBY ORDERED TO FORTHWITH VACATE and deliver to the Plaintiff vacant possession of all that piece or parcel of land comprised in Certificate of Title No.34907 containing 1,102 square meters more or less situated in the District of Nadi in the Island of Viti Levu and being Lot 31 on Deposited Plan No.8880 together with all improvements thereon, as charged by the Defendant to the Plaintiff by Mortgage No. 703258 registered on 1st May 2008 to secure the money therein mentioned.

(b)	Plaintiff is awarded taxed costs or a sum of $1000/00 which ever is higher.

Hon. Justice Yohan Fernando.
JUDGE.

High Court of Fiji
At Lautoka
23rd May 2011.