BPT (South Sea) Company Ltd v Sharma [1996] FJHC 113; Hbc0445j.95s (10 May 1996)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 445 OF 1995

Between:

BPT (SOUTH SEA) COMPANY LIMITED
Plaintiff

- and -

ASHWIN DUTT SHARMA
s/o Suresh Dutt Sharma
Defendant

Mr. P. Knight for the Applicant/Defendant
Mr. J. Howard for the Respondent/Plaintiff

JUDGMENT

This is the defendant's application for an order that the judgment entered against him in default for failure to give Notice of Intention to Defend on 2 November 1995 be set aside on the ground that he has a good defence to this action and that he be at liberty to defend the action.

In support of his application his Solicitor Mr. Knight himself filed an affidavit on 19 February 1996 followed by an Affidavit by the defendant on 23 April 1996 on the eve of the hearing of the summons.

In opposition to the application I have before me affidavits of GOPAL KRISHNA, a clerk employed by the Plaintiff's solicitors and ALAN BEAGRIE the General Manager of the Plaintiff Company both filed 21 March 1996.

The gist of Mr. Knight's said affidavit is that after service of the Writ of Summons herein in Sydney on 17 October 1995 the defendant wrote to Howards, solicitors for the Plaintiff on 20 October 1995, inter alia, disputing the claim but there was no response to it. The next thing the defendant knew of the proceedings was when he was served on 4 February 1996 with a Notice of Registration in the Supreme Court of New South Wales of the judgment entered in the proceedings on 2 November 1995. Mr. Knight further said that on the basis of the said letter to Howards the defendant "has a good defence on the merits to the claim herein both as to liability and as to quantum".

In his said affidavit the defendant states, inter alia, that after service of documents relating to registration of the judgment on 4 February 1996, he swore an affidavit on 19 February and filed it in the Supreme Court of New South Wales Registry. Therein, he states, inter alia, that "I did not seek legal advice, at the time I was served with the Writ of Summons referred to in paragraph 4 hereof as I did not believe it was necessary nor did I understand that a default judgment could be entered against me in my absence and in any event I believed that the Plaintiff's solicitors would respond to my letter of 20 October 1995 before any further action was taken against me". For the first time, a day before the hearing of this Summons, the defendant discloses his proposed Defence.

The Plaintiff in Reply stated through Mr. Gopal Krishna that the defendant's alleged letter of 20 October to Howards was not received until 13 February 1996 (that is, after the said judgment was entered). He said that search revealed that there is no business listed by the name of Rekvin Enterprises Limited, nor is the defendant a director or member of it but that one Ms. Shanti Devi Rekha who holds 100% of the issued shares had asked the company to be struck off the register and that the three months' notice to strike off on 11 December 1995 was issued. It was further revealed that the said Rekha, whose name appears in the defendant's affidavit, does "not know and had never heard of any Ashwin Dutt Sharma (f/n Suresh Dutt Sharma)".

The annexures to ALAN BEAGRIE'S said affidavit include a copy of the defendant's authority and request to the plaintiff to finalize a Bill of Sale securing the Plaintiff's advance to the defendant dated 8 August 1994 (annexure 'C'), the defendant's "Application to Purchase Motor Vehicle (Personal Finance)" dated 28 June 1994 (annexure 'D') and a true copy of the registered Bill of Sale executed by the Defendant and dated 16 August 1994 (annexure "E").

Both counsel made oral submissions before me and I have considered them very carefully.

It is Mr. Knight's submission that the defendant has shown a defence on merits. He referred the Court to the principles involved in the setting aside of a regular judgment with reference to the notes to Or 13 of Supreme Court Practice. He said that the proposed Defence is based on alleged breaches of sections 54, 55 and 56 of Fair Trading Decree 1992. He said that the Defendant paid no deposit and that there are suspicious circumstances surrounding this transaction.

Mr. Howard submits, inter alia, that the defendant's said letter of 20th, which was not received until fairly late, shows what transpired and in effect the defendant says that he has a third party claim. The defendant admits executing the Bill of Sale. He says that the defendant's name is not mentioned in the Company Register which is in contrast to what he says in his said letter. Mr. Howard says that the Writ of Summons clearly sets out in bold letters what steps the defendant is required to take after service of same. It is therefore surprising that he did not read the first page. He says that the defendant executed the Bill of Sale after the contents were read out to him by a solicitor. Also there is the last clause 22 in the Bill of Sale which clearly states that the vehicle in question has been inspected by the defendant and "is fully satisfied as to the condition in which the same is being sold". Mr. Howard further submits that anything that the defendant says now is a third party matter; despite the fact that he himself executed the Bill of Sale he purports to "Cross-Claim" which this jurisdiction does not recognize without seeking any relief.

As to the proposed Defence Mr. Howard submits that it is a "fictitious document" and "last ditch effort" adopted for the purpose of these proceedings.

On Fair Trading Decree he said that this should have been specifically pleaded. At no time before did the defendant do that, nor is there anything in his said letter of 20th about "unconscionable conduct" on the part of the plaintiff.

Mr. Howard submits that the defendant's application should for the above reasons fail. He summed up by saying that the defendant failed to follow instructions in the Writ, not sufficient explanation was given why he did not respond, it was a regularly obtained judgment and there is no offer to pay the disputed amount into Court. He said that to set aside a registered bill of sale there have to be exceptional circumstances; here he says the defendant is attempting to set aside a judgment in favour of a registered mortgagee in the face of clause 22 of the Bill of Sale which he says throws "cold water on his allegations".

So much for the facts of this case and counsels' submissions and now the law.

This was a regular judgment.

In the case of a regular judgment, the defendant does not have a right to have it set aside but it is a matter for the exercise of discretion of the Court. The guidelines in the exercise of this discretion are set out in the case of ALPINE BULK TRANSPORT COMPANY INCORPORATED v SAUDI EAGLE SHIPPING COMPANY INCORPORATED (The Saudi Eagle) (1986) 2 LLoyd's Rep. (C.A.) p.221 at p.223.

A useful summary of the factors to be taken into consideration is to be found under notes to Or 13 r 9 of THE SUPREME COURT PRACTICE 1995 VOL. I at p.142 and which is, inter alia, as follows:-

"The purpose of the discretionary power is to avoid the injustice which may be caused if judgment follows automatically on default. The primary consideration in exercising the discretion is whether the defendant has merits to which the court should pay heed, not as a rule of law but as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence, and because, if the defendant can show merits, the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication. Also as a matter of common sense the court will take into account the explanation of the defendant as to how the default occurred. The foregoing general indications of the way in which the court exercises discretion are derived from the judgment of the Court of Appeal in Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc., The Saudi Eagle [1986] 2 Lloyd's Rep. 221, C.A., at p.223, where the earlier cases are summarised. From that case the following propositions may be derived:

(a) It is not sufficient to show a merely "arguable" defence that would justify leave to defend under Order 14; it must both have "a real prospect of success" and "carry some degree of conviction". Thus the Court must form a provisional view of the probable outcome of the action.

(b) If proceedings are deliberately ignored this conduct, although not amounting to an estoppel at law, must be considered "in justice" before exercising the court's discretion to set aside."

It has been said that to enable the Court to set aside a regular judgment:

"it is an (almost) inflexible rule that there must be an affidavit of merits i.e. an affidavit stating facts showing a defence on the merits (FARDEN v. RICHTER [1889] UKLawRpKQB 79; (1889) 23 Q.B.D 124)" The Supreme Court 1993 Or 13 r.9 p. 137). "At any rate where such an application is not thus supported, it ought not to be granted except for some very sufficient reason" per HUDDLESTON, B ibid p. 129.

It is further stated in the Supreme Court Practice (ibid) p. 137-138 that:

"... the major consideration is whether the defendant has disclosed a defence on the merits, and this transcends any reasons given by him on the delay in making the application even if the explanation given by him is false (VANN v AWFORD (1986) 83 L.S GAZ. 1725, THE TIMES, APRIL 23, 1986 C.A.). The fact that he has told lies in seeking to explain the delay, however, may affect his credibility, and may therefore be relevant to the credibility of his defence and the way in which the Court should exercise its discretion."

Also on the subject of the affidavit stating facts showing a Defence on the merits LORD DENNING MR in BURNS v KONDEL (1971) 1 Lloyd's Rep. 554 at p.555 said:-

"We all know that in the ordinary way the Court does not set aside a judgment in default unless there is an affidavit showing a defence on the merits. That does not mean that the defendant must show a good defence on the merits. He need only show a defence which discloses an arguable or triable issue."

Order 13 of the High Court Rules deals with Failure to Give Notice of Intention to Defend. Rule 1 of that order gives the power to sign judgment where the claim is for a liquidated demand; but Rule 10 states:

"Without prejudice to rule 8(3) and (4), the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order."

The defendant only has to "establish a prima facie defence" and that a "draft defence is not necessary, what is required is the affidavit disclosing a prima facie defence" (THE FIJI SUGAR CORPORATION LIMITED and MOHAMMED ISMAIL Civ. App. No. 28/87 F.C.A. at p.9 Cyclostyled judgment). The following passage from the judgment of LORD ATKIN in EVANS BARTLAM (1937) 2 AER p.646 at p.650 is pertinent on the subject of the principles on which a Court acts where it is sought to set aside a judgment arising out of a failure to comply with the rules:-

"I agree that both R.S.C. Ord. 13, r.10, and R.S.C., Ord. 27, r. 15, gives a discretionary power to the judge in chambers to set aside a default judgment. The discretion is in terms unconditional. The courts, however, have laid down for themselves rules to guide them in the normal exercise of their discretion. One is that, where the judgment was obtained regularly, there must be an affidavit of merits, meaning that the applicant must produce to the court evidence that he has a prima facie defence. It was suggested in argument that there is another rule, that the applicant must satisfy the court that there is a reasonable explanation why judgment was allowed to go by default, such as mistake, accident, fraud or the like. I do not think that any such rule exists, though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the court will have regard in exercising its discretion. If there were a rigid rule that no one could have a default judgment set aside who knew at the time and intended that there should be a judgment signed, the two rules would be deprived of most of their efficacy. The principle obviously is that, unless and until the court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has been obtained only by a failure to follow any of the rules of procedure." (underlining mine for emphasis).

As I said before, the defendant has delayed making the application. On the subject of delay in such cases EVANS v BARTLAM (1937) 2 AER p.646 at p.656 states that the "Court, while considering delay, have been lenient in excluding applicants on that ground" and further said as follows:-

"The primary consideration is whether he has merits to which the Court should pay heed; if merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication. This point was emphasized in Watt v. Barnett [1878] UKLawRpKQB 28; 3 Q.B.D. 363 ...................................... He has been guilty of no laches in making the application to set aside the default judgment, though as Atwood v. Chichester, [1878] UKLawRpKQB 4; 3 Q.B.D. 722 and other cases show, the Court, while considering delay, have been lenient in excluding applicants on that ground. The Court might also have regard to the applicant's explanation why he neglected to appear after being served, though as a rule his fault (if any) in that respect can be sufficiently punished by the terms as to costs or otherwise which the Court in its discretion is empowered by the rule to impose. The appellant here has an explanation, the truth of which is indeed denied by the respondent, but at this stage I see no reason why he should be disbelieved on what appears to me to be a mere conflict on affidavits."

From the affidavits and the submissions of counsel for the defendant as outlined hereabove there is no doubt that the defendant knew the contents of the Bill of Sale as it was properly explained to him by a solicitor and prior to that he had given instructions for its preparation. It appears to me that he thought that he can get away from liability in respect of the amount alleged to be owed by him while he is away overseas, but when he discovered that judgment was registered against him in New South Wales he realized he could not get out . It was then that at the last moment he starts running around. All this excuse why he did not seek legal advice when served with Writ of Summons or did not take appropriate step apart from writing a letter which was received after judgment was entered holds no water.

Now that he has raised some arguable defence, belated though it is, in the circumstances of this case, applying the principles stated above and exercising the Court's discretion I consider that I ought to let the defendant in to defend and set aside the judgment but on terms under the said Order 13 r.10.

As already stated, the giving of leave to come in and defend the action is discretionary and the court can impose terms (COCKLE v JOYCE [1877] UKLawRpCh 278; (1878) 7 Ch.D. 56) such as ordering the money to be brought into court (RICHARDSON v HOWELL (1892) 8 T.L.R. 445, VIJAY PRASAD and DAYA RAM CIV APP 61/90 FCA; SUBODH KUMAR MISHRA s/o Ramendra Mishra and CAR RENTALS (PACIFIC) LTD CIV APP 35/85 FCA). The said Order 13 does not lay down any basis upon which the discretion is to be exercised. In GARDNER v JAY (1885) 29 Ch.D. 52 at p.58 BOWEN L.J said on this aspect that:

"... when a tribunal is invested by Act of Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view to indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not fetter the discretion of the Judge why should the Court do so?"

In my view this is a proper case in which terms ought to be imposed by ordering payment into Court.

In the outcome, therefore I ORDER that the defendant pay into Court the sum of $25,000.00 within 28 days of this decision to abide the outcome of this action or until further Order of this Court AND upon payment as ordered the default judgment will be set aside and the defendant is ORDERED to file and serve a Statement of Defence within 28 days after payment into Court AND FURTHER failure to comply with the said Order for payment the default judgment shall stand AND IT IS FURTHER ORDERED that the defendant pay to the Plaintiff the costs of this application which is to be taxed unless agreed.

D. Pathik
Judge

At Suva
10 May 1996

HBC0445J.95S