Fiji Development Bank v Kumar [1997] FJHC 200; Hbc0358d.95s (6 March 1997)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 358 OF 1995

Between:

FIJI DEVELOPMENT BANK
Plaintiff

and

1. SWANI KUMAR
s/o Hari Dayal
2. NIRBHAY CHAND alias
NIRBHAY CHAND MAHARAJ
alias HARI DAYAL s/o Ram Singh
Defendants

Mr. H.A. Shah for the Applicant/Defendant
Mr. V. Kapadia for the Respondent/Plaintiff

DECISION

This is the defendants' Summons seeking an order that the default judgment entered against them on 21 November 1995 be set aside and that they be granted leave to defend the Plaintiff's claim as is disclosed by the proposed Statement of Defence annexed to the affidavit in support and for a further order that all execution and/or enforcement of the said default judgment be stayed pending the determination of this application.

The defendants' argument

It is the defendants' contention as contained in the affidavit of SWANI KUMAR sworn 14 February 1996 that the Plaintiff in the exercise of its powers under the mortgage over C.T. 7997 sold the said property at an under value.

They therefore say that the Plaintiff was negligent in accepting a much lower sum which they say "jeopardised us by way of indebtedness in the sum of approximately $85,000". The defendants have annexed to the said affidavit their proposed defence which they say raises "valid and triable issues".

The Plaintiff's reply

In opposing the application the Plaintiff in Reply to the said affidavit, inter alia, states that it was a proper sale after obtaining a valuation after advertisement and that the defendants failed to file Statement of Defence; judgment by default was then entered.

Consideration of the issue

It is the defendants' contention that in the absence of a Court having adjudicated upon the matter on the merits of a case it will allow a default judgment to be set aside. (EVANS v BARTLAM (1937) AC 473 at 489, F.S.C. LIMITED v MOHAMMED ISMAIL (F.C.A. No. 27/87), MOTOR GROUP OF FIJI LTD v CIR (FCA No. 48/87).

Whereas the Plaintiff submitted that all that the mortgagee is required to do is to take reasonable care to obtain a proper price but at the same time a mortgagee is not a trustee of the power of sale for the Mortgagor as the mortgage has been given to the mortgagee for its own benefit to enable the Mortgagee to obtain repayment of the loan. Mr. Kapadia referred the Court to two cases in which the duties of the Mortgagee in the conduct of the sale are set out (CUCKMERE BRICK CO. LTD v MUTUAL FINANCE LTD [1971] EWCA Civ 9; (1971) 2 All.ER 633 MOHAMMED SHAMSHU DEAN AND OTHERS v JAI NARAYAN (C.A. 245/71, High Court).

The Plaintiff says that it obtained the best possible price and that the defendants had shown no merits on the Defence. The Plaintiff states that it was not negligent.

The situation in short in this case is that after the mortgagee's sale of the said property there was a shortfall and the Plaintiff made a claim for it in this action.

The defendants now say that it was sold at an undervalue and they want to contest the action but for some reason which has not come out in the affidavit failed to say as to why no statement of defence was filed by them resulting in judgment by default against them.

No doubt it is in this action that they can raise the matters which they now raise in their proposed defence. I find that they are entitled to raise these issues which they could not have raised before the mortgagee's sale. It is not an unmeritorious defence. The only thing is that they failed dismally to act in time and they are themselves to be blamed for judgment having been entered against them.

Most of the matters raised by the parties are matters which could be brought up in the trial of the action.

The sole issue for my determination is whether in the circumstances I ought to set aside the default judgment and grant leave to the defendants to defend the action.

The setting aside of a regular judgment is in the discretion of the Court. To enable the Court to do so there must be an affidavit on 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) and as stated in the Supreme Court Practice 1993 Or 13 r9 p.137-138:

"... 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) 83L.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 as LORD DENNING M. R. 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."

The defendants have annexed a proposed Statement of Defence in which they have raised defences, but it is not for me at this stage to resolve these issues between the parties but merely to satisfy myself that the defendants have shown a bona fide defence involving triable issues.

The defendants' only have 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 All.ER p.646 at p.650 is pertinent on the subject of the principle 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."

The defendants no doubt have delayed in making the application. However on the subject of delay EVANS v BARTLAM (supra) at p.656 states that the "Court, while considering delay, have been lenient in excluding applicants on that ground" and further stated 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."

In the circumstances of this case, bearing in mind the facts of this case particularly when the Plaintiff will not be prejudiced if the application was granted, and in the exercise of my discretion I consider that I ought to let the defendants in to defend this action.

To conclude, further to what I have stated above, I would like to adopt the following passage from DAVIES v PAGETT (1986) 10 FLR 226 quoted in the judgment of MILES C.J. in RYAN v ADAMS (1993) 112 FLR 474 at 477:

"The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only by necessity to avoid prejudice to the interests of some other party, occasioned by misconduct, in this case, of the party upon whom the limitation is sought to be imposed."

In the outcome, bearing in mind the guiding principles in a case of this nature I set aside the default judgment herein of 21 November 1995 conditional upon the defendants filing and serving their Statement of Defence within 28 days of this decision. In the event the defendants fail to comply with this order the order setting aside the said default judgment shall stand dismissed and the default judgment shall remain and be of full force and effect.

It is also ordered that the defendants pay costs of this application to the Plaintiff to be taxed if not agreed.

D. Pathik
Judge

At Suva
6 March 1997

HBC0358D.95S