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Dean v Australia and New Zealand Banking Group Ltd [2011] FJHC 477; HBC156.2000L (29 August 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 156 of 2000L

BETWEEN:

NAZIRUD DEAN
Plaintiff

AND:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
1st Defendant

AND:

SHIU KUMAR & SARITA DEVI KUMAR trading as S. S. IMPORTERS & EXPORTERS
2nd Defendant

AND:

THE ATTORNEY GENERAL
3rd Defendant

FINAL JUDGMENT

Judgment of: Inoke J.

Counsel Appearing: Ms N Khan (Plaintiff)
Mr K Kumar (1st Defendant)
Mr M Nand (2nd Defendant)

Solicitors: Natasha Khan Assocs (Plaintiff)
Young & Assocs (1st Defendant)
Vijay Naidu (2nd Defendant)

Dates of Hearing: 23, 24 June 2011

Date of Judgment: 29 August 2011

INTRODUCTION

[1] This is a claim for damages and other relief for alleged misuse of the powers of the mortgagee bank.

[2] This is my judgment after open court trial.

CASE HISTORY

[3] The original writ of summons and statement of claim was filed on 26 April 2000. The coup that followed probably explained why the case remained inactive until August 2001. The summons for directions was filed on 13 August 2001. On 14 September 2001, the third defendant applied to have the claim against it struck out. That was followed by an application by the plaintiff to amend his statement of claim. Subsequently, on 4 December 2001, the plaintiff filed an amended statement of claim. Not much happened between 2001 and 2004 other than the parties changing solicitors. A further summons for directions was filed on 6 April 2005 and orders granted by consent on 22 April 2005. Still the matter did not proceed any further probably because of the 2006 coup so a further summons for directions was filed on 14 January 2008. The orders on the summons were made on 6 February 2008. The matter was set down for hearing on 10 July 2008 but was adjourned because counsel for the plaintiff had to go overseas. Several court appearances followed and the matter was again set down for hearing on two further dates in 2009 but could not proceed because of the political upheaval in that year. It was eventually set down for hearing on 10 March 2010 but again did not proceed because the plaintiff was living overseas. It was reset for 3 and 4 November 2010, 6 and 7 June 2011 but again did not proceed eventually came for hearing before me on 23 and 24 June 2011. After the hearing, both counsels were given 14 days to file written submissions with a right to reply within 7 days thereafter and judgment to be delivered on notice.

THE STATEMENT OF CLAIM

[4] According to the amended statement of claim, the plaintiff was the registered proprietor of NL No 21609. He mortgaged his land to the first defendant bank in December 1994. Built on the land was a concrete building consisting of a dwelling house and shop premises and a lean-to shop at the rear which were built wit the approval of the Lautoka Rural Local Authority. The concrete building was completely destroyed by fire on 29 January 1998 except for the concrete structure. The building was insured with National Insurance Company of Fiji Limited (now Tower Insurance). The insurance company offered to rebuild the building on the existing structure but the Lautoka Rural Loacl Authority considered it unsafe to build and rejected the proposal on 26 February 1998. The bank went ahead and advertised for mortgagee sale of the plaintiff's land. The debt owed by the plaintiff to the bank was $62,092.89. It was sold for $30,181.91 to the second defendants in October 1999. The plaintiff claims that his land was worth $143, 600.82 at the time of the sale. He alleges that the bank did not fully disclose the details of the property in its advertisements. The plaintiff also alleged that it was coerced and forced into surrendering his life policy to the bank.

[5] The plaintiff alleged fraud and breach of fiduciary duty but before the trial the claim was abandoned so the matter went to trial only as between the plaintiff and the bank. The third defendant was joined as a nominal defendant and the claim against it was also abandoned because the plaintiff's claim became simply one for damages and no longer a claim for re-conveyance.

THE BANK'S DEFENCE

[6] The bank admits that the plaintiff was the registered proprietor of the land with those improvements and which was mortgaged to it but says that it was not aware that they were built with the approval of the rural authority. It was aware of the fire and the rejection of the rebuilding proposal by the local authority. It admits the mortgagee sale of the property but denies that it owed a fiduciary duty to the plaintiff, and even if it did, it did not breach it. The bank also denies fraud and not fully disclosing the property details in the advertisements. The bank received from the Court $45,089.18 on 10 January 2002 from the money paid into Court in respect of the plaintiff's action against the insurer. It denies that the property was of the value alleged by the plaintiff when it was sold.

THE AGREED FACTS

[7] Apart from the allegations which were admitted in the pleadings, the parties agreed that the property was advertised on 27, 31 March 1999 and 10 June 1999 in the Fiji Times. The property was sold for $30,000 and the bank also received the settlement sum of $45,086.18 paid by the insurer into the Court.

THE TRIAL

[8] The parties tendered an agreed bundle of documents as the documentary evidence. The plaintiff gave evidence. The second defendant gave evidence on behalf of the bank. His evidence was on the state of the property and buildings when he bought them. The bank's senior credit manager also gave evidence

[9] I do not think I need to go into the evidence in detail because, as counsel for the plaintiff submitted in her opening, and with which I agree, this case involves a very narrow issue, and that was, whether the bank breached its duty as mortgagee to the plaintiff by selling under the circumstances that it did. A summary would be sufficient. There were only two issues which are relevant, in my view. Firstly, whether the bank did not fully disclose the details of the property when it placed the advertisements in the Fiji Times, and, secondly, whether the sale was at a gross undervalue.

[10] The plaintiff gave evidence at length that he was having some difficulties at the time leading up to the mortgagee sale with his wife being ill and the rural authority not giving him permission to re-build on the remaining structure but I think those difficulties were beyond the control of the bank. He also gave evidence that the bank accommodated him in restructuring his loan but in the end he could not keep up with his repayments. I do not think the plaintiff could complain that he was treated unfairly before the bank decided to exercise its rights as mortgagee and advertised for mortgagee sale.

[11] I accept the bank manager's evidence that there were no responses to the first lot of advertisements in March 1999. I do not accept that the lack of response was due to any omissions or misdescriptions in the advertisements for the following reasons. In accordance with the bank's solicitor's practice, a draft copy of the advertisement was first sent to the plaintiff for his comments which he did not take advantage of before the advertisements were placed. The advertisements simply described the property as comprising of "Temporary house built (lean-to house) with al usual amenities available". No reference was made to the concrete building. At this time of course, the building had been gutted by the fire which happened on 29 January 1998. According to the second defendant who bought the property, the buildings were in very bad repair which he had to extensively repair and the yard was littered with broken bottles which he had to bury and remove. The lean-to was not in fit state for habitation and the fence was rusted and broken in places. His tender was for $25,750. The bank said it was too low and asked him to increase to $30,000 which he agreed to and bought at that price. He bought the property to rebuild for his family home but his children migrated overseas so it was not worth him rebuilding and he sold it.

[12] I also accept the bank's evidence that about $20,000 of the plaintiff's loan had to be written off.

[13] As to the value of the property, the plaintiff's claim is based on valuations by the firm of insurance loss assessors, Toplis and Harding, and construction cost consultants, Rawlinsons. According to Rawlinsons, the re-instatement cost of the building was $83,600. According to Toplis and Harding, the indemnity adjusted for depreciation (15%) was $71,060 and the rebuilding cost less depreciation was $125,800. The sum insured was $80,000. They recommended a settlement sum of $45,089.18 which the plaintiff rejected. The plaintiff valued the burnt structure as $80,600.82 and the lean-to as $28,000 and fenced compound as $35,000 giving a total of $143,600.82.

[14] Taking into account the evidence of the second defendant and the above valuation which I have great doubts as to its correctness, I am unable to agree that the value of the property was worth that much when the bank sold it.

[15] Even assuming that the property was worth that much, is it sufficient to show that the bank breached its duty to the plaintiff?

THE LAW

[16] I have previously referred to what I believe is the applicable law in Whittaker v National Bank of Fiji Ltd [2009] FJHC 180; HBC155.2009L (31 August 2009) which I now reproduce:

[17] Kay J in Warner v. Jacob [1882] UKLawRpCh 61; (1882) 20 Ch D 220, at 224 said:

"...a mortgagee is strictly speaking not a trustee of the power of sale. It is a power given to him for his own benefit, to enable him to better realize his debt. If he exercises it bona fide for that purpose, without corruption or collusion with the purchaser, the court will not interfere even though the sale be very disadvantageous, unless the price is so low as in itself to be evidence of fraud."

[18] This statement was cited with approval by the Privy Council in Haddington Island Quarry Company Limited v. Hudson [1911] AC 727 @ 729, an appeal from the Court of Appeal of British Columbia. Subsequent cases and legal writers have referred to this rule as the "good faith" standard.

[19] What is meant by 'good faith'? Isaacs J in Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676 at 699-701 said:

"But what is included in 'good faith'? Lindley LJ in Kennedy v. De Trafford [1897] UKLawRpAC 13; [1896] 1 Ch 762 at 772 said: 'It is not right, or proper, or legal, for him, either fraudulently, or willfully, or recklessly, to sacrifice the property of the mortgagor'. Lord Herschell in the House of Lords ([1897] AC 180 at 185) said that was all included in good faith.

APPLICATION TO THIS CASE

[17] It seems to me that even assuming that the sale was at a gross undervalue, the plaintiff cannot complain that under the facts and circumstances of this case as I have found them, he was treated in bad faith. The sale was not fraudulent, willful or reckless nor negligent. The plaintiff's claim therefore fails and is dismissed.

COSTS

[18] The defendant succeeds and is entitled to its costs which I assess based on the history of attendances that I have outlined above as $2,500.

ORDERS

[19] The orders are therefore as follows:

• (a) The plaintiff's claim is dismissed.
  
• (b) The plaintiff shall pay the first defendant's costs of $2,500 within 28 days.
  

Sosefo Inoke
Judge