Pravin Gold Industries Ltd v The New India Assurance Company Ltd [2003] FJHC 298; HBC0250d.2002s (4 February 2003)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0250 OF 2002

Between:

PRAVIN GOLD INDUSTRIES LIMITED t/as
GOVINDA VEGETARIAN RESTAURANT
Plaintiff

And

THE NEW INDIA ASSURANCE COMPANY LIMITED
Defendant

Ms. Prem Narayan for the Plaintiff
Mr. A.K. Narayan for the Defendant

DECISION

By summons The New India Assurance Company Limited (the ‘defendant’) has applied to Court for the following orders:-

[a] for an order that the Judgment on liability entered herein against the defendant in default of filing Defence be set aside.

[b] that the defendant be granted leave to defend the plaintiff’s claim.

[c] that there be a stay of execution of judgment pending the hearing of this application.

The grounds on which the application is made are:

(a) Judgment has been sealed for more than the claim on the writ.

(b) The plaintiff has not discontinued other prayers for relief.

The application is made under Or.2 r.2 and Or.13 r.10 of the High Court Rules 1988 which provide respectively as follows:

Or.2 r.2

2. – (1) An application to set aside for irregularity any proceedings, any step taken in any proceedings or any document, judgment or order therein shall not be allowed unless it is made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity.

(2) An application under this rule may be made by summons or motion and the grounds of objection must be stated in the summons or notice of motion.

Or.13 r.10

10. 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.

Background facts

The plaintiff’s business premises were insured by the defendant for the sum of $70,000.00. On 19 May 2000 the said premises and chattels were destroyed by fire. On 12 June 2002 a writ of summons was issued herein by the plaintiff to recover the sum insured under the policy of insurance for the alleged loss suffered by it.

The writ was served on 12 June and an acknowledgement of service was filed on 19 June 2002. The default judgment herein was entered on 19 July. The sealed judgment stated that the “defendant pay the plaintiff the sum of $70,000.00 (Seventy Thousand Dollars) together with costs in the sum of $170.00, particulars of costs as follows:

(i) Filing fees for writ 100.00

(ii) Service fees 10.00

(iii) Solicitors costs 50.00”

The present application to set aside the said default judgment was made on 29 July 2002 supported by an affidavit. The plaintiff opposes the application.

Principles for setting aside judgment

Under the said Or.13 r.10 the Court may set aside or vary a ‘default judgment’ unconditionally or on terms.

The Court has a very wide discretion in an application of this nature but it is also guided by certain well known principles.

One of the principles 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”. (per Lord Atkin in Evans v Bartlam [1937] A.C. 473)

The basic principles applicable to setting aside judgments in the exercise of Court’s discretion are set out in Halsbury's Laws of England Vol 37 4^th Ed. Para 403, inter alia, thus:

“In the case of a regular judgment, it is an almost inflexible rule that the application must be supported by an affidavit of merits stating the facts showing that the defendant has a defence on the merits,... For this purpose it is enough to show that there is an arguable case for a triable issue.”

There it is further stated:

“There is no rigid rule requiring the applicant to explain why he allowed judgment to go by default, but nevertheless, at least in the case of a regular judgment, such explanation is obviously desirable to enable the court to exercise its discretion, especially as to any and if so what terms should be imposed.”

This was a ‘regular’ judgment obtained in default of defence. The defendant does not have a right to have it set aside but it is a matter for the exercise of discretion by the Court.

It is stated in The Supreme Court Practice 1993 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) 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 of his defence and the way in which the Court should exercise its discretion.”

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 1 at 142 which I have considered 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 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.

There it is further stated:

“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 setting aside default judgment, in Davies v Pagett (1986) 10 FCR 226 at 232 a Full Court of the Federal Court of Australia said as follows and I concur and 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.”

Consideration of the application

I shall now consider the application to set aside bearing in mind the background facts of the case and applying the principles applicable to it.

As stated above to enable the Court to properly exercise its discretion there are certain basic preconditions which have to be fulfilled by an applicant. They are: (i) reasons why judgment was allowed to be entered by default, (ii) application must be made promptly and without delay and (iii) an affidavit deposing to facts that show that the defendant has a defence on the merits. (Pankaj Bamola & Anor v Moran Ali FCA 59/90).

As far as (i) & (ii) above are concerned, the learned counsel for the applicant has given reasons why Statement of Defence was not filed.

In a nutshell counsel is saying that if a reply was sent by plaintiff’s counsel for extension of time it may have been ‘deleted’ as ‘they were having problems with virus’ in their computer.

In all the circumstances I do not consider it to be a plausible enough reason to accept the explanation for the delay in filing Statement of Defence. Be that as it may, however short the delay, namely just ten days after the default judgment was entered, it would be unjust to use it as a strong enough ground on its own to reject the application. There is no doubt that the application was made promptly. In this case the safest course would be to treat the matter as a misunderstanding or as one having arisen from some sort of a slip.

It is (iii) above which has to be given serious consideration. I have already referred to authorities bearing on this aspect of the matter. As already stated, 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 application given by him is false’. And as Lord Denning M.R. said in Burns v Kondel (1971) 1 Lloyd’s Rep. 554 at 555:

“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 find on the affidavit evidence before me and on a consideration of all the material put to Court, that there is a substantial and meritorious defence disclosed. The defence is contained in the affidavit of Mohammed Kasim sworn 26 July 2002 and marked as annexure KY-3 (vide paragraph 8). The Court has a discretion in the matter in the case of a regular judgment where a defence on merits has been shown. If the judgment is set aside, the Court may award costs payable by the defendant and upon other terms.

I adopt what Chapman J said in Maclaurin v Little (1906) G.G.L.R. 348 in an application similar to this when he set aside the judgment on terms. The headnote reads:

“Where judgment by default was entered by the plaintiffs, and it appeared that a slip had been made as to the time within which a defence ought to have been filed, and the affidavit filed by the defendant showed a good defence to the action, the judgment was set aside at defendant’s cost, defendant to have liberty to file a defence within four days, failing which the judgment was to stand.”

In the outcome, in the exercise of my discretion and applying the principles and authorities stated above within which the defendant has brought itself, the judgment ought to be set aside. As I said, the delay is not such which should bar the defendant’s application or cause the Court to refuse to exercise its discretion. The plaintiff will not be prejudiced in any way and it will be able to recover payment of any judgment as it cannot be said that the defendant is not able to meet its obligations if judgment goes against it.

I have noted that the defendant has also in its application raised the grounds that (a) it was an irregular judgment because the judgment was sealed for costs in excess of what was endorsed on the writ and (b) that the plaintiff ‘has not discontinued other prayers for relief’.

Since I have dealt with the application on other grounds, particularly holding that there is a defence on the merits, I do not consider it necessary to deal with the arguments on the ground of ‘irregularity’.

The judgment is ordered to be set aside with costs against the defendant in the sum of $300.00. The defendant has liberty to file a Statement of Defence within 14 days from the date of this Order, failing which, the judgment will stand.

D. Pathik
Judge

At Suva
4 February 2003