New India Assurance Company Ltd v Raghwan Construction Company Ltd [1999] FJHC 84; Hbc0387d.97s (13 August 1999)

Fiji Islands - The New India Assurance Company Ltd v Raghwan Construction Company Ltd - Pacific Law Materials

IN THE HIGH COURT OF FIJI

AT SUVA

CIVIL JURISDICTION

CIVIL ACTION NO. 387 OF 1997

BETWEEN:

THE NEW INDIA ASSURANCE COMPANY LTD
Plaintiff

AND:

RAGHWAN CONSTRUCTION COMPANY LTD
Defendant

Mr V Kapadia for the Plaintiff
Mr V Maharaj for the Defendant

DECISION

By a Motion filed on 8 September 1998 the defendant has prayed for the following orders on the grounds stated in the affidavit sworn 8 September 1998 by Vijay Raghwan, a director of the defendant company:

(a) stay of execution of the default judgment obtained against the defendant on 8 April 1998;

(b) the setting aside of the said default judgment; and

(c) that leave be granted to file Statement of Defence unconditionally.

Background Facts

A writ of summons was issued against the defendant on 11 September 1997 in which the plaintiff claimed the sum of $25,983.03 being premium for various insurance policies issued by the plaintiff to the defendant at its request and due and owing by the defendant to the plaintiff as at 30 April 1997 together with interest at the rate of 13.5% per annum.

Judgment by default was obtained on 8 April 1998.

pan lang=EN-GB style="font-font-size:12.0pt;font-family: "Times New Roman";mso-ansi-language:EN-GB">Defendant's contention

In his said affidavit Raghwan states that it was his former solicitor Sam Matawalu & Associates who failed to file a Statement of Defence and hence the default judgment was entered against his company.

The defendant only came to know of the judgment when Notice of Demand to wind up the company was served on it on 31 July 1998. The defendant says that it has a good and a valid defence and has attached to the said affidavit a proposed Statement of Defence.

Plaintiff's contention

The plaintiff says that it waited for five months approximately before entering judgment and the defendant had ample opportunity to file its defence.

It says that the defendant does not have any defence to the claim. The amount claimed, which is the balance, relates to numerous insurance policies taken out by the defendant for the year 1996 covering full construction work, public liability, burglary, worker's compensation, marine cases and motor vehicles. Hence, it says, it is clear that the balance sum of $25,933.03 is not premium in respect of just the motor vehicle CU575, which figures in the dispute, but covers all kinds of insurance policies issued to the defendant.

The plaintiff says that the Defendant has neither a defence nor a set off (as alleged) to this claim.

Determination of the application

I have before me for my consideration a number of affidavits filed by both parties as well as written submissions by counsel.

The principles governing the setting aside of a default judgment are well-known. This was a regular judgment. Setting aside is a mater of discretion by the Court. The principles governing the exercise of this discretion are set out in the judgment of the Court of Appeal in Alpine Bulk Transport Company Incorporated v Saudi Eagle Shipping Company Incorporated (the Saudi Eagle [1986] 2 Lloyd's Rep. 221 (CA) at p.223.

A useful summary of the factors to be taken into consideration in an application of this nature is to be found under notes to Or.13 r9/14 of the Supreme Court

Practice 1995 Vol.I at p. 142. There it is stated that:

"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 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."

Also on the subject of default judgment in Davies v Pagett (1986) 10 FCR p. 226 at p. 232 a Full Court of the Federal Court of Australia said as follows which I have borne in mind in considering this matter:

"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 the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct, in the case, of the party upon whom the limitation is sought to be imposed. The temptation to impose a limitation through motives of professional discipline or general deterrence is readily understandable; but, in our opinion it is an erroneous exercise of the relevant discretion to yield to that temptation. The problem of delays in the courts, egregious as it is, must be dealt with in other ways; for example, by disciplinary actions against offending practitioners and by a comprehensive system of directions hearings or other pre trial procedures which enable the court to supervise progress and, more pertinently, non-progress in all actions."

From the affidavit evidence before me it appears that the defendant was let down by its solicitors when they failed to file a Statement of Defence resulting in the said default judgment being entered against it. However, there was plenty of time for the defendant to ascertain from its solicitors as to what was happening about its case. This the defendant evidently did not do. To throw the blame entirely on the solicitors, on the facts of this case, is not a sufficient enough reason for not complying with the rules of Court. In regard to weight to be attached to mistake on the part of a legal adviser, I refer to the following passage from the judgment of Lord Greene MR in Gatti v Shoosmith (1939) 1 ALL E.R. 916 at 919 CA) which is apt:

"the fact that the omission to appeal in due time was due to a mistake on the part of a legal adviser, may be a sufficient cause to justify the court in exercising its discretion. I say 'may be' because it is not to be thought that it will necessarily be exercised in every set of facts. Under the law as it was conceived to be before the amendment, such a mistake was considered to be in no circumstances a sufficient ground. What I venture to think is the proper rule which this court must follow is: that there is nothing in the nature of such a mistake to exclude it from being a proper ground for allowing the appeal to be effective though out of time; and whether the matter shall be so treated must depend upon the facts of each individual case. There may be facts in a case which would make it unjust to allow the appellant to succeed upon that argument.

The discretion of the court being, as I conceive it, a perfectly free one, the only question is whether, upon the facts of this particular case, that discretion should be exercised."

I am not satisfied with the defendant's explanation that it was entirely the solicitor's fault that judgment was entered by default. I have considered the affidavit in support of the motion and the proposed Statement of Defence (annexure D) and find that it has raised matters of fact and law.

In the case of a regular judgment such as this:

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

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

"....the major consideration is where 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 C.A.). The fact that he has told lies in seeking to explain the delay, however, may affect his credibility of his defence and the way in which the Court should exercise its discretion."

On the subject of 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."

I have carefully considered Mr Maharaj's submission and find that as required the proposed Statement of Defence does show a defence on merits and raises triable issues. In the light of the authorities the defendant has only to "establish a prima facie defence" and that a 'draft' defence is not necessary and, as stated above, what is required is an affidavit disclosing a prima facie defence. (The Fiji Sugar Corporation Limited v Mohammed Ismail, Civil Appeal No. 28/87, FCA at p.9).

The following passage from the judgment of Lord Atkin in Evans v Bartlam (1937) 2 ALL E.R. 646 at 650 is pertinent on the principles on which a Court acts where it is sought to set aside a judgment from 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."

On the facts and circumstances of this case I consider that the defendant ought to be let in to defend the action. As stated already, the giving of leave to defend the action is discretionary. The court can impose conditions (Cockle v Joyce (1878) 7 Ch.D.56). In the case before me there has been a breach of procedural rules by the defendant and it is an appropriate case in which I would require as a condition to the setting aside of the judgment the payment into court of a portion of the claim pending the hearing and determination of the action.

Conclusion and order

For these reasons, bearing in mind the guiding principles on an application of this nature and in the exercise of the Court's discretion, I order that the said default judgment entered against the defendant on 8 April 1998 be set aside on condition that the defendant pay into Court the sum of $12,000 within 28 days of this decision. In the event that the said sum is not paid within that time the said judgment and any proceedings taken thereunder shall stand. It is further ordered that the defendant file and serve a Statement of Defence within 28 days of this decision and thereafter the action to take its normal course. The defendant is also ordered to pay the plaintiff costs of this application which I fix at $200.00 to be paid within 28 days.

D. Pathik
Judge

At Suva
13 August 1999

Hbc0387d.97s