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Fiji Development Bank v Crown Cork (Fiji) Ltd and Others [2011] FJHC 5; HBC96.2001L (24 January 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 096 of 2001L

BETWEEN :

FIJI DEVELOPMENT BANK,
Incorporated under the Fiji Development Bank Act
with its Head Office at Suva, Fiji.
Plaintiff

AND :

CROWN CORK (FIJI) LIMITED, a limited liability company incorporated in Fiji
with its registered office at 7 Nagaga Street, Lautoka
1st Defendant

AND :

ROBERT YANG a.k.a ROBERT YOUNG and
ALFRED YANG a.k.a ALFRED YOUNG both of Lautoka,
Company Directors
2nd Defendant

AND :

SIMON YANG a.k.a SIMON YOUNG
of Lautoka, Company Director
3rd Defendant

FINAL JUDGMENT

Judgment of : Ms. Dias Wickramasinghe J.

Counsel : Davanesh Sharma for the Plaintiff
No appearance for the Defendants

Solicitors : R Patel Lawyers for the Plaintiff

Date of Hearing : 21st September 2010
Date of Submissions : 15th November 2010
Date of Judgment : 24th January 2011

[1] Plaintiff is a statutory body, empowered under section 18 (2) (b) of the Fiji Development Bank Act Chapter 21 to lend money on such terms and conditions as it may determine. By Writ of Summons, the Plaintiff seeks inter alia for judgment against the First and Second Defendants in the sum of $257,663.56 and against the Third Defendant in the sum of $150,000.00 as outstanding payments on money lent to the First Defendant.

[2] The First Defendant, Crown Cork (Fiji) Limited (Crown Cork), is a limited liability company with its primary business being manufacturing corks. The Second and Third Defendants are its Directors. As per the terms and conditions set out in the agreement dated 10th May 1979 the Plaintiff had loaned a sum of $150,000 on a 10 year term to Crown Cork to purchase equipment for its business. (ABOD Document 242 Volume 2).

[3] The aforesaid loan was secured upon (i) a first debenture over all the company's assets; (ii) personal Guarantees of the Defendants with a limit of $150,000; and (iii) Comprehensive insurance cover over the machinery and stock. [Vide (ABOD) Documents 242 Volume 2]. Thereafter, by Agreement dated 10th February 1994, the Second Defendant's liability was agreed to be unlimited. [Vide (ABOD) Document 244 Volume 2]. The Third Defendant's liability was not varied, thus it remained at $150,000. On 23rd August 1994, the Second Defendant also executed Mortgage Bond No 363955 and provided as collateral, the secondary mortgagee rights over leased property No.203460. [Vide Exhibit 6] The same property had been earlier pledged to the Plaintiff in 1983 by the 2nd Defendants to secure personal loan advances. [Vide (ABOD) Document 73 Volume 1/ Exhibit 5].

[4] The causes of action against the Second and Third Defendants are based on the aforesaid securities.

[5] The Defendant by an inter-parte summons dated 28th November 2008, made an application to this court to adjourn indefinitely the hearing of this action until a related civil action HBC 407 of 2000 is ready for trial. The said application of the Defendants was dismissed on 11th of February 2009 by the learned High Court Judge who heard this case at that time.

[6] When the matter was taken up for trial before me, the Plaintiff was represented by counsel; but, the Defendant was absent and unrepresented. When the case was mentioned on 7th December 2009 to fix date of trial, Mr Nacolawa had obtained the date of trial on behalf of the Defendant. I therefore did not see any justification to postpone this action which had been initiated in 2001. Subsequent to recording the reasons in the case record, I ordered the Plaintiff to continue with the trial, in the absence of the defendants or their counsel. Needless to state that even in the absence of the Defendants or their counsel, the Plaintiff must prove its case on a balance of probability.

[7] The Plaintiff led the evidence of Mustahib Hafiz Ali, the Senior Business Manager of the Plaintiff's Bank and produced and marked in evidence 2 bundles of Documents as Volume 1 and 2. Volume 1 consists of documents 1 to 124 and Volume 2 consists of documents 125 to 248. The Plaintiff also produced and marked in evidence Exhibits 1 to 7.

[8] Since Crown Cork's loan account continued to be in default, the Plaintiff had appointed a Receiver [Gardiner Whiteside] to manage Crown Cork on 8th September 1997. [vide ABOD, Documents 140 & 172 Volume 2]
[9] By letter of 17th March 1997, Crown Cork advised the Plaintiff that the plant and machinery of its company was badly damaged due to cyclone, wind and water and that as a result, heavy corrosion had set in. [ABOD, Document 133 Volume 2]. Subsequently, the Receivers had sold the plant and machinery for $18,000 after advertising same. The sale proceeds have been credited to the First Defendant's loan account [ABOD, Documents 159, 160 & 162 Volume 2].

[10] The evidence also reveals that consequent to obtaining a valuation report and several attempts of advertising for sale, the leased property that was mortgaged to the Plaintiff was also sold for $332,500. [ABOD, Documents 188, 189, 193 & 194 Volume 2].

[11] From the sale proceeds of $332,500 of the leased land, the Plaintiff had settled in full the First Mortgage (the personal loan of second Defendant) which on 2nd October 2000 stood at $132,650.35 [Exhibit 7]. The balance sum of $199,977.86 of the sale proceeds have been credited to the First Defendant's loan account. Accordingly, as at 30th November 2000, the Defendants owed the Plaintiff a sum of $257,530.56 [Exhibit 4] as claimed in this case.

[12] At the trial, counsel for the Plaintiff informed court that he would limit its claim to $257,530.56 although the Writ of Summons specifies a figure of $257,663.56.

[13] I have considered the evidence before this court and am satisfied that the Plaintiff had loaned a sum of $150,000 on 10th May 1979, to the First Defendant's Company on the securities of the Second and Third Defendants as stated above. The Plaintiff has also served demands on the Defendants as required by the guarantees. The Demand Notices were produced before this court marked as (ABOD) Documents 184,185,237, 238, 239 & 240 of Volume 2.

[14] I am also satisfied that the account balance of the First Defendant as at 31/03/1999 stood at $448,235.24 and after apportioning the sale proceeds of Plant & Machinery, leased land and the insurance recoveries, the debt as at 31st December 2000 stood at $257,663.56.

[15] Let me now consider the defences raised by the Defendants in the Statement of Defence. The main defenses are that:

• (i) the guarantees have not been signed by the Defendants;
• (ii) the demand notices were not served on the Defendants; and
• (iii) the property, plant and machinery were sold at undervalued prices;
  

[16] A consideration of the pre-trial minutes reveals that the Second and Third Defendants had admitted at the pre-trial conference that they had signed the Guarantees. Copies of the Guarantees were produced in evidence. The defence that no demand notices had been served was also refuted by the Plaintiff in its evidence. Documents (ABOD) Documents 184,185,237, 238, 239 & 240 of Volume 2 were produced by the Plaintiff to prove demand was made. Letter of 9th December 1992 sent by the 1st Defendant clearly admitted the debt. [ABOD, Document 89 Volume 1]. The Submissions that the properties, plant and machinery were sold at undervalued prices was also refuted by evidence, in that the Defendants had themselves admitted that the plant and machinery had been rusted and damaged due to floods. The plant and machinery had been duly advertised and then sold for $18,000.00. I am also unable to accept that the property that was sold for $332,500 is grossly undervalued. Mr Ali in his evidence said that a Valuation of the property was obtained from Rolle [ABOD, Document 197 Volume 2] who valued the property at $365,000. However the Plaintiff then accepted an offer to sell the mortgaged property for $332,500.00 [ABOD, Documents 209 & 210 Volume 2]. Mr Ali in his evidence informed court that the sale was carried out with much difficulty after advertising on several occasions at great expense to the Plaintiff, and the property needed substantial repairs and had many problems. He also informed that the Defendants did not take any action to prevent the sale of the land although it was advertised several times.

[17] I accept Mr Ali's evidence that the Defendants could have sought legal remedy before the sale, had they in fact, truly believed that the properties were sold far below the market value. I therefore hold that the defences stated in the statement of Defence have no basis.

INTEREST

[18] The Sum loaned to the First Defendant was $150,000. Exhibit 4 reveals that opening balance as at 30th December 1999 was $439159.86. At the trial, Mr Sharma who appeared for the Plaintiff, informed court that the interest was frozen from 1997. I then asked the question whether, before the interest was frozen, the Plaintiff was entitled to claim an interest in excess of the principal sum lent in view of the legal limitation stipulated in the Moneylenders Act Chapter 234. Mr Sharma filed helpful written submissions on the point.

[19] Section 22 [4] of the Moneylenders Act (Act) states as follows:

In no case shall interest at any time be recoverable by a moneylender of an amount in excess of the sum than due as principal unless a court, having regard to all circumstances, otherwise decrees.

[20] However, the definition of moneylender in section 2 (a) of the Act, excludes the application of Moneylenders Act to Body Corporate engaged in the business of lending money. Mr Shrama therefore submits that Section 22(4) does not apply to the Plaintiff and the Plaintiff is thus entitled to recover whatever monies that are owed to it pursuant to its Loan Agreement and other lending documents. The Plaintiff and the First Defendant in this case entered into a Loan Agreement whereby both parties had agreed to the terms and conditions set out therein. (ABOD Document 242 Volume 2)

[21] I am inclined to agree with the submissions of Mr Sharma on the point. I also find the interest agreed between the parties in the loan agreement is 10.5% pa. I therefore hold that the Plaintiff being a Body Corporate can impose interest in excess of the principle amount lent and in any event, the interest of 10.5% is a reasonable interest.

COSTS

[22] The Plaintiff's Counsel did not seek costs on an indemnity basis but moves for costs of $1,800 as being reasonable costs. I summarily assess costs at $1800.

ORDERS

[23] I therefore Order as follows.

• (A) Judgment is entered in favour of the Plaintiff in the sum of $257,530.66 against the First and Second Defendants and $150,000 against the Third Defendant.
  
• (B) The Defendants shall pay the Plaintiff's cost of $1800 within 21days hereof.
  

Ms. D. Dias Wickramasinghe
Judge