IN THE HIGH COURT OF FIJI
AT SUVA

HBA No. 21 of 2011

BETWEEN:

Australia and New Zealand Banking Group Limited
Appellant
(Original Plaintiff)

AND:

Abdul Samim and Farizah Bibi
Respondents
(Original Defendant)

Appearances: Ms Bhavna Narayan for the appellant
The respondents absent and unrepresented

Date of hearing: 22nd June, 2012

JUDGMENT

1.	This appeal has been filed on the following grounds of appeal, which provide that the Master erred :

1)	when he directed the respondents to file a counterclaim and/or set off when in fact there cannot rightfully be a counterclaim or set off to an action in which a default judgment has already been entered and the application to set aside the default judgment has been refused.

2)	in directing the respondents to file a counterclaim and/or set off when no such application for a proposed counterclaim or set off was made by the respondents.

3)	when on the one hand he held that the respondents do not have any valid defence to this action but on the other hand, considered the Respondent's line of argument as constituting a valid ground for a counterclaim and/or set off.

4)	in finding that the respondent's argument that the subject property was valued at $510,000.00 but the appellant however sold the property for only $200,201.00 which did not clear the debt in full may constitute a valid ground for a counterclaim and/or a set off when there was ample undisputed facts and evidence before the Court that the property was adequately and sufficiently advertised and the appellant had taken all reasonable steps and made all efforts to obtain a proper market price of the property at the material time it chose to sell it thereby discharging its lawful duty to the mortgagors (that is, the respondents). Also there was no allegation by the respondents that the appellant in any way acted in bad faith.

2.	 The background to this appeal 

2.1	The appellant had filed a claim for the recovery of a loan debt in the sum of $ 185,936.25. The following facts are undisputed, namely;

•	The respondents were provided credit facilities by the appellant in the sum of $190,674.00 on loan account no. 7554713 and $307,593.00 on loan account no. 853100.The respondents had provided securities in favour of the appellant to secure both loans.

•	 The respondents had defaulted in their repayments towards both loans.

•	The appellant had placed advertisements in the daily newspaper for the sale of the mortgaged property being CT no. 1888. The appellant had accepted the respondent's buyer and the property was sold for $260,000.00 .The amount of $260,000.00 was firstly utilised by the appellant to pay off the debt outstanding in loan account no. 7554713 and the balance was credited towards loan account no. 8538100 (the loan account in dispute).

•	The other mortgaged property CT No. 17399 was sold by the appellant under mortgagee sale for the sum of $200,201.00 .The said sum was also credited towards reduction of loan account no. 8538100.

2.2	The appellant, in its statement of claim, had claimed the balance outstanding on loan account no. 8538100. Judgment by default had been entered against the respondents, since no defence had been filed. The respondents had filed a motion to set aside the judgment entered by default together with an affidavit in support. The affidavit provided that the solicitor in carriage of this case had left the firm of Qoro Legal,(solicitors for the respondents), after the acknowledgement of service was filed. The principal contention of the respondent, as set out in the affidavit, was that mortgaged property CT No. 17399, which was valued at $ 510,000 was sold by the appellant under mortgagee sale for the sum of $200,201.00, after the appellant's agent Jai Chand had advised the defendant that this property would be sold to clear their outstanding debt. It was also contended that the appellant had "failed to act in good faith in exercising their power of sale".

The respondents, in their subsequent affidavit in response, had stated that property CT No. 17399 was valued at $ 510,000.00, in terms of a valuation report provided to the appellant. The valuation report has been attached to the affidavit. It was averred that this property could have been sold at a better price by the appellant, by way of private sale. The submissions filed by the respondents, before the Master, provided that they disputed the amount of monies owed to the appellant .

2.3	The Master, in his Ruling dated 17 June, 2011, found that the respondents had not presented a valid defence, but had presented valid grounds for a counter-claim and/or a set off. He held further that in his " view, to set aside a default judgement on the basis of a proposed counter-claim and/or set off even if they do carry some degree of conviction such as in the present case, and where no defence on the merits is disclosed, would be against principle,(and) that the ideal way to deal with such a situation and avoid any derogation from principle is to simply order that the default judgment remains but that its execution be stayed until determination of the counter-claim and/or setoff that the ( respondents) are to file".

The Master made the following directions in his Ruling:

i.	the defendants are to file and serve a counterclaim and/or set off in 14 days (ie: by Friday 01 July 2011).

ii.	The plaintiff is to file and serve a defence to the counterclaim and/or setoff in 14 days thereafter (ie: by Friday 15 July 2011).

iii.	the defendant's reply is to be filed 14 days thereafter (ie: by Friday 29 July 2011).

iv.	the defendants' motion to reinstate the summons to set aside is dismissed.

v.	the defendant's summons to set aside default judgement is also dismissed.

vi.	there is to be a stay on execution of the default judgment against the defendants until such time as the defendant's counterclaim and/or set off is determined or until further orders of the court, in case of any further default on the part of the defendants.

vii.	Costs to the plaintiff is in the sum of $500.00.

2.4	An inter partes summons to file leave to appeal out of time the Master's Ruling was filed by the appellants on 7th July,2011. I allowed the application. Notice and grounds of appeal were then, filed on 3rd August,2011.

3.	The determination

The first to the third grounds of appeal take issue with the Master directing the respondents to file counter-claim, when the Master had found that the respondents had not presented a valid defence to set aside the default judgment. 

Under the fourth ground, it is argued that the property was adequately and sufficiently advertised and the appellant had taken all reasonable steps and made all efforts to obtain a proper market price.

The issue before me is whether the Master was correct in directing a counter claim to be filed. In reaching this decision, he founded himself on the accepted proposition of law that a mortgagee will be exposed to a suit for damages by a mortgagor,if it exercises its power of sale improperly or irregularity or in an unauthorised manner. He relied on Section 79(3) and 81 of the Property Law Act Cap (130) and Whittaker v National Bank of Fiji (2009) FJHC 180, where Mr Justice Inoke had resonated the common law position that a mortgagee exercising a power of sale under a mortgage owes a duty to act in good faith in exercising that power .

In order to set aside a default judgment, the respondents are required to "establish a prima-facie defence": South Pacific Recordings Ltd v Ismail, (1994) FJHC 134 citing in support Fiji Sugar Corp Ltd v Mohamed Ismail,(Civil Appeal No 28/87). 
In Carpenters Fiji Ltd v Joes Farm produce Ltd, (2006) FJCA 60 it was held that a monetary cross claim for a debt due from the plaintiff, is a defence . The Court stated: 

 "where a defendant sets up a bona fide counter claim arising out of the same subject matter of the action, and connected with the grounds of defence, the order should not be for judgment on the claim subject to a stay of execution pending the trial of the counter claim but should be for unconditional leave to defend, even if the defendant admits whole or part of the claim. Morgan and Son Ltd v. S Martin Johnson Co (1949) 1 KB 107(CA). (emphasis added)

It seems to me that the respondents in the present case, had presented an arguable defence. In my judgment, the Master should have granted the respondents unconditional leave to defend. To that extent, I agree with the appellants that the Master's direction to file counter-claim, is inconsistent with his finding that the respondents had not presented a valid defence to set aside the default judgment. 

The Master had directed the respondents to file and serve a counterclaim by 1st July, 2011. This was not complied with by the respondents, nor was an extension of time sought. On this ground, I set aside the stay of execution of the default judgment. 

4.	Orders

I set aside the stay of execution of the default judgment made by the Master. The appellant is entitled to costs of this appeal summarily assessed in a sum of $ 1000 payable by the respondents to the appellant . 

23rd November, 2012
A.L.B.Brito-Mutunayagam Judge