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Australia and New Zealand Banking Group Ltd v Crystal Properties Ltd [2013] FJHC 7; HBC290.2011 (17 January 2013)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBC 290 of 2011S

IN THE MATTER
of the Land Transfer Act 1978, Section 109

AND

IN THE MATTER
of an application to remove Caveat No. 747504 lodged by Crystal Properties Ltd against Certificate of Title No. 10153, the property of Rameshwaran Nair and Raajeshwaran Nair.

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED a duly constituted banking corporation having its registered office in Melbourne, Australia and carrying on business in Suva and having branches throughout Fiji.
APPLICANT

AND:

CRYSTAL PROPERTIES LTD
a duly incorporated company having its registered office at Suva.
RESPONDENT

BEFORE : Master Deepthi Amaratunga

COUNSEL: Mr. B. Narayan of Lateef & Lateef Lawyers for the Plaintiff
Mr. Sharma P. of R. Patel & Co. for the Defendant

Date of Hearing: 14th March, 2012
Date of Decision: 17th January, 2013

DECISION

1. INTRODUCTION
   

1. The Plaintiff being the mortgagee of the property is seeking to remove the caveat lodged by the Defendant. Defendant and the Plaintiff entered into a sale and purchase agreement after the offer of the Defendant was accepted by the Plaintiff in a mortgagee sale. The Plaintiff states that the said sale and purchase agreement was a conditional agreement and seeks to rescind the said agreement to sell the property, but the Defendant do not accept the Plaintiff's proposition and had sought for specific performance of the said sale and purchase agreement and the issue is whether the caveat lodged by the Defendant in pursuant to the sale and purchase agreement between the Plaintiff and Defendant should be removed, without any fault on the part of the Defendant. The Plaintiff state that the sale and purchase agreement entered between the parties was terminated in terms of the said agreement.
   

2. FACTS
   

2. Plaintiff is the mortgagee of the property and the mortgagors are a third party to this action who had defaulted the payments and the property was advertised for a mortgagee sale. The Defendant's offer for the said mortgagee sale was accepted and a sale and purchase agreement was entered between the Plaintiff and Defendant.
   
3. The sub heading 'Other Covenants or Conditions' and Clauses (b) and (c) of the Sale Agreement states as follows:
   

"(b) If prior to settlement, the mortgagors is able to pay off the debt owed under the Mortgage or if an action is instituted against the Bank regarding the mortgagee sale of the subject properly then the Bank reserves the sole right to cancel and/or terminate the sale of the property, whereupon the deposit paid in account will be refunded to you without interest. However, the Bank will not be under any obligation to compensate or refund you for any stamp duty, consent fees expense, disbursements or solicitors legal fees (either your own or the Bank's) incurred or paid directly or indirectly on account of the transaction contemplated herein.

(c) When the Bank cancels or terminates the agreement for sale of the property, neither party will have any rights against the other and the agreement will be deemed to be void and of no effect." (emphasis added)

4. The clause (c) relates to cancellation or termination of the agreement in terms of the said agreement and cannot be taken in isolation. So, any illegal termination by the Plaintiff cannot seek refuge under the said clause and if so there is no need to have any conditions in the agreement!
5. The sale and purchase agreement was entered on 17th September, 2010 in pursuant to an earlier letter of acceptance of the offer of the Defendant. The said acceptance of the Defendant's tender was made on 7th July, 2010.
   
6. On 20th July, 2011 the solicitors for the Plaintiff had written a letter informing the Defendant's solicitors that the Plaintiff was withdrawing from the mortgagee sale in terms of the abovementioned clauses (b) and (c) and by that time the Defendant had safeguarded its interest by lodgment of a caveat to the property and the Plaintiff also requested the Defendant to remove the said caveat. The Defendant did not accept the unilateral withdrawal of the Plaintiff from the sale and purchase agreement and also proceeded with an action for specific performance. The Plaintiff made the present application in pursuant to Section 109(2) of the Land Transfer Act for the removal of the caveat lodged by the Defendant.
   

100. ANALYSIS
     

7. Section 109 [2] of the Land Transfer Act states as follows
   

"109. –(1) Upon the receipt of any caveat, the Registrar shall give notice thereof to the person against whose application to be registered as proprietor of, or as the case may be, to the registered proprietor against whose title to deal with, the land, estate or interest, the caveat has been lodged.

(2) Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, by summons, call upon the caveator to attend before the court to show cause why the caveat should not be removed, and the court on proof of service of the summons on the caveator or upon the person on whose behalf the caveat has been lodged and upon such evidence as the court may require, may make such order in the premises, either ex parte or otherwise as to the court seems just, and, where any question of right or title requires to be determined, the proceedings shall be followed as nearly as may be in conformity with the rules of court in relation to civil causes."

8. The Plaintiff is making this application as the mortgagee of the property, but this is not expressly stated in this application. The Plaintiff relies on two clauses (conditions) in the said sale and purchase agreement that are quoted above in paragraph 3.
   
9. They are contained in the sale and purchase agreement, and the Plaintiff is purportedly resorting to said clauses in order to rescind the said agreement and states in its letter to the Defendant's solicitor as follows
   

'.... Is withdrawing from the mortgagee sale since the Mortgagors are able to pay off the debt owed under the Mortgage and have also instituted an action against the Bank regarding the Mortgagee sale in Suva High Court Civil Action No 200 of 2010' (emphasis added)

10. Prima facie there are two grounds stated in the purported letter of termination dated 20th July, 2011, for the termination of the sale and purchase agreement, and they are, the institution of an action by the mortgagors against the mortgagees and mortgagors ability to settle the debt (redemption).
    
11. The said action which the Plaintiff relied upon to rescind the sale and purchase agreement, was expressly mentioned in the said letter and it was Action No 200 of 2010 which was filed on 5th July, 2010 and this fact was known to the Plaintiff when it entered in to sale and purchase agreement on 17th September, 2010.
    
12. So, this fact was available to the Plaintiff when it entered into a sale and purchase agreement with the Defendants and in the said case, the application for interim injunction seeking stay of the mortgagee sale was rejected by the court.
    
13. The said action was filed by a mortgagor, prior to the entering in to sale and purchase agreement between the Plaintiff and Defendant and Defendant state that Plaintiff being fully aware of the said action and also being the Defendant in said action who successfully defended the application for interim injunction by the mortgagor, cannot use the already existed factor at the time of the execution of the sale and purchase agreement, as a reason for the termination of the same. If the Plaintiff is relying on this ground which already existed at the time of the execution of the sale and purchase agreement, it was not done in good faith.
    
14. The second ground stated in the said letter for the purported termination of the sale and purchase agreement was that Mortgagors were able to pay off the debt owed under the Mortgage. I do not have evidence before me to test the veracity of the said ground for termination. Whether there is a redemption or not depends on the facts as well as the law and Plaintiff's unilateral interpretation cannot be accepted by a court of law. This is specially so in the light of the other ground for termination, which I have discussed above.
    
15. In any event, since the Defendant's action for specific performance is pending before the court I cannot decide the merits of that action. The position of the Plaintiff is that the right to redemption by the mortgagor is a condition in the sale and purchase agreement; hence the sale and purchase agreement can be terminated any time before the settlement of the transfer on that ground.
    
16. The Defendant's counter argument is that there is no evidence of redemption by the mortgagors and what the plaintiff intends to do is a restructure of the mortgagors accounts by the Plaintiff who is the mortgagee and also state that this collusion between the Plaintiff and the mortgagors cannot be considered as redemption. At the same time as an additional ground the Defendants argue that the right to redemption by the mortgagor was extinguished when the sale and purchase agreement was entered between the Plaintiff and Defendant.
    
17. The Plaintiff as the mortgagee advertised the said property for sale and the Defendant's offer was accepted though an action was instituted by the mortgagors inter alia seeking to stay the mortgagee sale. The said interim injunction was successfully defended by the Plaintiff in the said action filed by a mortgagor and the sale and purchase agreement was entered between the Plaintiff and the Defendant. Plaintiff is now seeking to terminate the said sale and purchase agreement on the basis of the said action and the clause (b) which stated 'if an action is instituted against the Bank regarding the mortgagee sale of the subject properly'. This factor existed at the date of the sale and purchase agreement and resorting to this for termination clearly raises an issue of 'bona fides' of the reasons mentioned by the Plaintiff, for termination of the sale and purchase agreement.
    
18. As regard to the right to redemption of the mortgagors, there are triable issues raised by the Defendant. One such issue is whether there is an actual redemption by the mortgagors. I have not been presented with any such evidence to decide on this issue. The purported letter of termination of the sale and purchase agreement stated'.......................... that there is no restructure of the existing account. It is Rameshwaran Nair (one of the mortgagors) who is paying off the debt by restructuring his finance (and not both the existing mortgagors/current owners of the property). The existing Mortgage is therefore being paid off and mortgagors have exercised their equity of redemption'. This is the Plaintiff's interpretation that needs to be verified by evidence by a court of law.
    
19. The method of repayment of mortgage described in the said letter needs closer examination and this cannot be done in this proceedings and this can be done in the action for specific performance filed by the Defendant. There are evidence to show that Plaintiff has agreed to finance the Defendant for the purchase of this property and had also approved a loan to the Defendant to that effect.
    
20. I cannot decide whether the purported termination of the sale and purchase agreement is valid on the evidence before me. This is the scope of the pending action for specific performance which will be tried before a judge at the hearing. Admittedly, the sale and purchase agreement was entered between the Plaintiff and Defendant and the Defendant is relying on the said agreement and lodged this caveat and also instituted an action for specific performance. Since the sale and purchase agreement is an admitted fact there is a caveatable interest to the Defendant till the issues regarding the termination of that agreement is resolved by a court of law. The balance of convenience also lies with the Defendant. If the caveat is removed and the Plaintiff can proceed with the dealings of the property and this would invariably make the specific performance of the sale and purchase agreement nugatory and also make the issues before the court more complex.
    
21. The Plaintiff also contends that right to redemption do not extinguish by the execution of the sale and purchase agreement. I do not wish to address that issue as the redemption has to be established first.
    
22. Justice Pathik held in Civil Action No 162 of 2004 Chattar Singh Vs Pravina Lata Lal stated as follows
    

'As far as the removal of caveat is concerned, I find the affidavit evidence before me that the plaintiff has a caveatable interest in the property. There are also triable issues.

The defendant's counsel has made very useful legal submissions and has referred to a number of authorities in support of his argument.

On this application I cannot delve into the merits or demerits of the defendant's submissions as they are more for the trial of the action. Without a hearing it will not be possible to determine the issues.' (emphasis added)

4. CONCLUSION
   

23. The ratio of the above Chattar Singh Vs Pravina Lata Lal can be applied to this case since the sale and purchase agreement between the Plaintiff and the Defendant is admitted. The reasons given for the purported unilateral termination needs to be examined more carefully in the action for specific performance filed by the Defendant. The balance of convenience lies more favourably to the Defendant. If the caveat is removed at this stage the Plaintiff will proceed with the purported 'redemption' of the debt with a mortgagor who will also be financed by the Plaintiff hence the action for specific performance will be nugatory as the subject matter will no longer available for sale. In the circumstances I refuse this application for the removal of the caveat and assess the cost of this application summarily at $1,500 to be paid by the Plaintiff to the Defendant within 21 days.
    

5. FINAL ORDERS
   

1. The application for removal of caveat is struck off.
   
2. The cost of this application is assessed summarily at $1,500.
   

100. The Plaintiff is directed to pay the cost to the Defendant within 21 days.
     

Dated at Suva this17th day of January, 2013.

Master Deepthi Amaratunga
High Court, Suva