Dragon Seafood Company (Fiji) Ltd v Seamech Ltd [1996] FJHC 119; Hbc0246d.95s (12 June 1996)

IN THE HIGH COURT OF FIJI
(AT SUVA)
CIVIL JURISDICTION

ACTION NO. HBC0246 OF 1995

BETWEEN:

DRAGON SEAFOOD COMPANY (FIJI) LIMITED
a limited liability company having its
registered office at Nausori
Plaintiff

AND

SEAMECH LIMITED
a limited liability company having its
registered office at Suva
Defendant

S. Matawalu for Plaintiff
G. Prasad for Defendant

Dates of Hearing: 2nd February, 14th March, 30th April 1996
Date of Interlocutory Judgment: 12th June 1996

INTERLOCUTORY JUDGMENT

The Defendant applies by Summons dated 30th of October 1995 for orders:

1. That the Judgment by Default entered against the Defendant in this action on 5th October 1995 by the Plaintiff and all proceedings thereunder may be set aside;
   
2. That the Defendant be at liberty to defend the claim unconditionally;
   

100. An order for costs.
     

The Application is made under Order 19 Rule 9 of the High Court Rules 1988 and is supported by two affidavits filed on behalf of the Defendant by one Ross Brodie a Director of the Defendant sworn respectively on the 22nd of January and 19th of February 1996 and an Affidavit in Reply sworn by Qing Li, Managing Director of the Plaintiff on the 8th of February 1996.

By a Writ issued on the 15th of May 1995 against the Defendant the Plaintiff claims a sum of $30,000 and costs of the action for alleged financial loss and expenses following the alleged failure by the Defendant to supply to the Plaintiff a fishing vessel named "Vatunawa" on which the Defendant installed certain materials and equipment for deepsea fishing. The Plaintiff alleges that the Defendant failed to deliver the vessel with the materials duly installed on the agreed date.

To understand the nature of the present application it is necessary to set out the relevant chronology of the present proceedings.

(a) The Writ of Summons was taken out by the Plaintiff on 15th May 1995.

(b) A copy of the Writ of Summons was served on the Defendant on or about 23rd May 1995.

(c) The Defendant through its solicitors filed an `Acknowledgment of Service' giving its intention to defend the proceedings on 24th May 1995.

(d) A copy of Acknowledgment of Service was served on the Plaintiff's former solicitors, Messrs Kato & Co. on 30th May 1995.

(e) The Plaintiff filed Notice of Change of solicitors on 5th October 1995.

(f) On 30th October 1995 the Defendant issued its Summons seeking to set aside the default judgment.

The first affidavit by Ross Brodie sets out in some detail the history of this matter todate. Mr. Brodie says that at the time the Plaintiff commenced these proceedings against the Defendant on 15th May 1995 there were Winding-up proceedings before this Court in Action No. 143 of 1995 by the Defendant against the Plaintiff.

On 26th October 1994 through its solicitors, the Defendant issued a Demand Notice pursuant to Section 221 of the Companies Act seeking payment of $3,169.45 from the Plaintiff. The sum claimed was allegedly the balance owing by the Plaintiff to the Defendant as at 15th October 1994 plus interest thereon in respect of the manufacture on or about 17th March 1994 of certain fishing equipment carried out at the request of the Plaintiff.

Notwithstanding the service of the Demand Notice the Plaintiff failed to pay the money claimed or make any satisfactory arrangement for payment of it to the Defendant.

On 20th December 1994 the Defendant presented a Petition for Winding-up the Plaintiff. The Winding-up Petition was set down for hearing in Court on 28th April 1995. On 27th April 1995 the Defendant's solicitors filed the Memorandum of Due Compliance in Court.

By then two other creditors had filed Notice of Intention to appear at the hearing in support of the Winding-up Petition - a person named Johannes George Petri who appears to have been a former director of the Plaintiff or at least "some sort of financier and intermediary" (to use the words of Fatiaki J. in his judgment delivered on 9th of February 1996 to which I shall refer again later).

Following the filing of the Memorandum of Due Compliance the Plaintiff filed an affidavit in opposition of the Winding-up proceedings by one Qing Li. By 10th May 1995 two other creditors John and Margaret Hill who were jointly owed $14,000.00 by the Plaintiff filed a Notice of Intention to appear in support of the Winding-up Petition.

On 8th August 1995, following a series of adjournments by the Court, Mr. Justice Fatiaki heard legal argument in support and in opposition to the Winding-up proceedings against the Plaintiff and then reserved judgment. On 9th February 1996 His Lordship delivered his judgment and ordered the Plaintiff to be wound-up.

According to Mr. Brodie a perusal of the Demand Notice, the Winding-up Petition and the various affidavits filed both in support of and in opposition to the Winding-up proceedings clearly show that the facts and issues which arose there are same as those in the present proceedings. This appears to be at least tacitly admitted by the Plaintiff in paragraph 17 of Qing Li's affidavit.

Mr. Brodie then proceeds to give reasons why the Defendant did not apply earlier to have the Default Judgment set aside. He says that he was advised by his solicitors that a ruling in the Winding-up proceedings would be of much assistance to the parties in understanding their respective legal positions and perhaps resolve the dispute that existed between them. Further, to pursue separate proceedings before the Court gave its judgment in the Winding-up proceedings which dealt with the same facts and issues would only create duplicity of Court proceedings resulting in wastage of valuable Court time, unnecessary expenses costs and inconvenience.

Mr. Brodie finally states that he was informed by his solicitors and believed that the delay in filing a Statement of Defence was simply because the Defendant was still awaiting the decision by Fatiaki J. in the Winding-up proceedings before deciding its next course of action in the matter.

After the Plaintiff changed its solicitors and the judgment by default was entered by its new solicitors there were discussions between the Defendant's solicitors and the Plaintiff's new solicitors during which, according to Mr. Brodie, but denied by the Plaintiff, the Plaintiff's present solicitors indicated they might consent to an application to set aside the default judgment.

THE LAW:

Order 19 Rule 9 of the High Court Rules gives the Court a very wide discretion to set aside or vary any judgment entered pursuant to the order and principles governing applications to set aside are now well settled. Evans v. Bartlam (1937) A.C. 473 is generally cited in applications of this nature. At p.480 Lord Atkin said:

"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 only been obtained by a failure to follow any of the rules of procedure."

In Fiji Forests Industries Ltd v. Timber Holdings Ltd & Ors. (Suva HC CA No. 117/94S) Scott J. in his unreported judgment of 4th August 1994 said at p.8:

"This of course does not mean that I should attempt to resolve the issues between the parties now, that I should decide whether I think that the proposed defence is likely to be successful. All I have to decide is whether I am satisfied that the Defendants have put forward a bona fide Defence giving rise to triable issues."

It is clear that to succeed on an application to set aside judgment the Applicant must give a satisfactory explanation as to why judgment was entered in default and must disclose merits of a defence either in fact or in law or both. The test is whether it is just in all the circumstances to set aside the judgment. In deciding this considerations such as whether the Defendant's failure to set aside the judgment was excusable and whether the Plaintiff would suffer irreparable injury if the judgment was set aside are relevant - see Russell v. Cox (1983) NZLR 654.

In Fiji a practice has developed apparently during the last 20 years whereby a party intending to search for defence usually warns his opponent of such intention. This was referred to by Tuivaga J. as he then was in Bula Limited v. Geelong Holdings Ltd No. 173 of 1977 thus:

"I think it is fair to record that a practice appears to have developed at the bar in this country whereby counsel for one party would as a matter of good conscience give notice to the other side of any intended step to enter judgment by default and calling upon the other side to move in the matter if it desires to defend the action.

This practice seems particularly desirable where it appears that the other side has not for one reason or another had sufficient time to organise itself into a position where it could take appropriate steps in the matter or where from the nature of the case it seems likely that the other side would want to contest the action on merits."

In Fiji Forests Industries Ltd v. Timber Holdings Ltd & Ors (supra) Scott J. at p.7 also referred to this practice when he said:

"There is also the matter of the usual warning to be considered. By the usual warning I mean the warning usually given to the other side by solicitors intending to search for Defence. Although there is no Rule requiring such a warning to be given the giving of a warning is accepted sensible and proper practice in the legal professions in the United Kingdom, Australia and New Zealand. It is also accepted as the better practice in the legal profession in Fiji. In my view it should henceforth be accepted as being the proper practice."

With respect I adopt both those comments.

It is submitted on behalf of the Defendant that in any event the judgment was entered irregularly by the Plaintiff. The Plaintiff claims that it has suffered financial loss and expenses to the extent of $30,000.00 but it has failed to disclose and provide particulars of such loss and expenses. Hayward v. Pullinger and Partners Ltd (1950) 1 All E.R. 581 held that a breach of contract entitles the other party to nominal damages but no more unless special damages are pleaded and proved.

In this case it appears from the material before me that the alleged breach by the Defendant could have only arisen in contract and in the absence of particulars of special damage in my view the judgment was irregularly entered.

In the absence of any special damages in my judgment the Plaintiff could only obtain an interlocutory judgment for unliquidated damages and not a final judgment. This is clear under Order 19 Rule 3 which reads:

"Where the plaintiff's claim against a defendant is for unliquidated damages only, then, if that defendant fails to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these Rules for service of the defence, enter interlocutory judgment against that defendant for damages to be assessed and costs, and proceed with the action against the other defendants, if any."

If the Plaintiff wished to obtain a final judgment then the proper course was to have its claim assessed by the Court.

On page 4 of his judgment in the winding-up proceedings Fatiaki J. remarked:

"At best Dragon's dispute is one based on breach of contract for late, incomplete and unsatisfactory work if proved, would sound in an award of unliquidated damages. True an unsubstantiated figure of $30,000.00 is mentioned but that can only be a matter of pure conjecture bearing in mind that the fishing vessel was still being reconstructed and had never been operated commercially."

The Plaintiff has filed written submissions but in my view they are more notable for their abuse of the English language than for providing persuasive argument as to why I should refuse the Defendant's application. Thus I am told that the Plaintiff's chronology is a "timorous sequence of the events in question". I regret to say that I can find nothing fearful or timid in the Defendant's claim although the Plaintiff apparently does. I am told:

"The explanation when distilled of the rhetoric and the meandering through the menagerie of meaningless matter that have been recanted in a titanic like defence was both deliberate and tactically so. In short he wanted the Plaintiff to be corporately liquidated before he would reveal his hand. This is not a Defendant caught out by the events that have occurred - or overtaken because his attorneys have recently been engaged. In these circumstances, they should not be let in to defend - at least not on all issues."

As an example of alliteration this statement might pass muster in an elementary school but in my view there is no evidence to persuade me that the failure to file Defence was both deliberate and tactical. I consider this comment pure speculation.

Likewise the assertion by the Plaintiff that the Defendant wanted the Plaintiff to be corporately liquidated before it would reveal its hand.

As another example of the incomprehensibility of much of the Plaintiff's submissions I quote this sentence in paragraph 3.2 of the submissions:

"The Affidavit of Qing Li is marred on devoid of the material that is conjectural and literally permeates the Affidavit of Mr. Brodie."

Whatever that means in the English language I have no idea but it is an insult to the Court to make submissions which:

(a) abuse the English language; and

(b) in the process are meaningless.

Despite all the bluster in what is understandable of the Plaintiff's submissions it seems to me that in paragraph 3.5 the Plaintiff's advisers recognise the real truth of the matter here at the present time when they say:

"Rather what is in issue is the assessment of the damages which can be determined on the imposition of directions between the parties."

I agree. In my judgment damages here have to be assessed by the Court; there is nothing in the material currently before me to show that those damages are $30,000.00.

To summarise my conclusions, I am of the opinion that the Defendant has provided a satisfactory explanation for the delay in filing its Defence. I consider that the observations of Fatiaki J. in the Winding-up proceedings are pertinent to the present action and assist me in deciding the instant application. I also consider that the failure of the Plaintiff's new solicitors to inform the Defendant's solicitors of their intention to enter judgment by default is contrary to the practice in Fiji and is to be deplored.

I am also satisfied that the Draft Defence submitted by the Defendant is bona fide and gives rise to triable issues.

Finally I am satisfied that there is no evidence before the Court that the Plaintiff would be in any way prejudiced by my setting aside the default judgment.

I therefore order that the default judgment entered against the Defendant on 5th October 1995 be set aside and that the Defendant be at liberty to defend this claim unconditionally. I further order that the Defendant deliver its defence to the Plaintiff's solicitors within 14 days and that the costs of this application be in the cause.

JOHN E. BYRNE
JUDGE

Authorities referred to in Judgment:

RHC O.19 R.9
Bula Limited v. Geelong Holdings Ltd C.A. No. 173 of 1977 - unreported judgment of Tuivaga J.
Evans v. Bartlam (1937) A.C. 473.
Fiji Forests Industries Ltd v. Timber Holdings Ltd & Ors. (Suva HC) C.A. No. 117/94S - unreported judgment of Scott J. of 4th August 1994.
Hayward v. Pullinger and Partners Ltd (1950) 1 ALL E.R. 581.
Russell v. Cox (1983) NZLR 654.
Companies Action No. 0143 of 1994 Seamech Limited v. Dragon Seafood (Fiji) Ltd - unreported judgment of Fatiaki J. dated 9th February 1996.

The following additional cases were cited in argument:

Atwood v. Chichester [1878] UKLawRpKQB 4; 3 Q.B.D. 722.
Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd (1951) 1 ALL E.R. 873.
Beale v. MacGregor (1886) 2 TLR 311.
Fiji Sugar Corporation v. Ismail FCA 28/87.
Howvell v. Ngakapa (1895) NZLR 298.
Krishna v. Singh FCA 35/82.
Sharda Nand v. Ian Roderick Campbell Chute (Suva HC) C.A. 139/91.

HBC0246D.95S