Singh v Rao [2011] FJHC 666; HBC20.2010 (24 October 2011)

IN THE HIGH COURT OF FIJI AT LAUTOKA
CIVIL JURISDICTION

Civil Case No. HBC 20 of 2010

BETWEEN:

UDAY SINGH son of Bahadur Singh of Drasa.
Vitogo, Lautoka, Businessman.
Plaintiff.

AND

DINESHWAR RAO son of Gyaneshwar Rao of
Tomuka, Lautoka, Businessman.
Defendant.

Appearances;
H. A. Shah for the Plaintiff,
Ms. Latianara for Faiz Khan Lawyers for the Defendant.

JUDGMENT IN INTERLOCUTORY APPEAL.

1. The Defendant appeals for leave to appeal from the conditional part of the Masters Ruling dated17 November 2010 setting aside the default judgment (of 19th April 2010) against the Defendant on the condition that the Defendant deposits in to Court within 21 days (of the Ruling) the sum of $153,000.
   
2. On the 31st of August 2011, the Counsel for the Plaintiff stated that he is not filing written submissions and that the Court may make a suitable order on the written submissions of the Defendant, and for Court to consider the leave to appeal application and if leave is granted, consider the appeal as well in these proceedings, and make suitable orders.
   
3. The Plaintiff does not seek leave to appeal from the Masters Ruling setting aside the default judgment. Therefore it is the imposition of the condition by the Master, that the Defendant should deposit the sum of $153,000/= within 21 days of the Ruling, that is in issue in appeal.
   
4. The sum of $153,000/= is the total claim of the Plaintiff against the Defendant in this action. Before a condition is imposed first the Court should decide the issue whether the default judgment should be set aside. Though setting aside a default judgment regularly entered is primarily an exercise of the discretion of Court, when the Defendant shows that he has a meritorious defence it persuades the Court to exercise its discretion in favour of setting aside a default judgment, so as to avoid an injustice. Even when there is no meritorious defence disclosed still a Court could set aside a default judgment if the default is due to circumstances beyond the control of the defendant, or when the default judgment is obtained by the abuse of the process of Court, irregularly or when the Court considers it in the interest of justice to do so or to prevent an injustice.
   
5. It is fundamental that litigants must be given the benefit of the maxim "audi alteram partem", that is both sides to be heard before judgment. Generally default judgments may be categorized as irregularly entered and regularly entered. In an irregularly entered default judgment it should be set a side as of right. However before that right is restored in a regularly entered default judgment the defaulting defendant needs to persuade the Court to exercise its discretion to do so.
   
6. Once the Court has been persuaded to restore that right in setting aside the default judgment, the Court should forthwith do so, or where the Defendant falls short, the Court may subject to a condition set aside the default judgment. However, even after the Defendant has met the threshold of a meritorious defence, there are times when the Court is confronted with evidence of oppressive or delaying tactics, on the part of the Defendant and the Court may subject the setting aside to an appropriate condition. The Court may exceptionally test the bona fides of the defence by a condition to deposit what is at stake or the amount claimed in Court, after care is taken that such a condition will not by itself frustrate the principle of audi alteram partem. In other words if the condition to deposit the particular amount or the period within which it is to be deposited is such that the condition is rendered impossible of performance, given the status of the Defendant, then such a condition ought not to be imposed. Otherwise the very purpose of setting aside the default judgment would be negated.
   
7. Though the Defendant alleges that the $150,000/= was given as a partnership contribution, except the Defendants allegation to that effect in his affidavit and the document annexed as "DR1" to the Defendants affidavit in support, there is no other evidence to suggest that there was a partnership afoot or at least that there was a contract to be entered in to with the Fiji Sugar Corporation as alleged by the Defendant. No correspondence with the Fiji Sugar Corporation is submitted by the Defendant.
   
8. Though the Plaintiff and the Defendant may have a special relationship (nature of which is not disclosed to Court) making it plausible for the Plaintiff to give the Defendant $150,000/= without any record or correspondence, still there ought to be some documentary evidence of the alleged contract with the Fiji Sugar Corporation or even some correspondence of it. It appears as if both parties are withholding the true nature of their transaction, at this interlocutory stage.
   
9. To set aside a regularly entered default judgment it is persuasive to disclose a meritorious defence by the defaulting party. On the need for the Defendant to disclose a meritorious defence the Learned Master considered the following case law;
   
   1. Fiji Sugar Corporation Limited v Ismail [1988] FJCA 1; [1988] 34 FLR 75 (8 July 1988),
      
   2. Wearsmart Textild v General Machinerhinery Hire Ltd [1998] FJCA 26; Abu0030u.97s (29 May 1998)
      
   3. in Alpine Bulk Transport Co. Inc. v Saudi audi Eagle Shipping Co. Inc., The Saudi Eagle [1986] 2 Lloyd's Rep. 221,
      
   4. in Allen v Taylor [1992] P.I.Q.R. 255,
      
   5. Suva City Council v Tabu [2004] FJCA 42; ABU0055.2003S (16 July 2004),
      
   6. Covec (Fiji) Ltd v Singh [2008] FJCA 81; ABU0083.2007S (7 November 2008),
      

And the Learned Master held as follows;

"(30) Applying the principles, I am of the view that the defendants affidavit discloses a defence on the merits which carries some degree of conviction.

(31) Accordingly, I order that the default judgement be set aside."

10. Thereafter the Learned Master Considered the submission of the Plaintiff as set out in his Ruling as follows;
    

"(32)Ms Khan asks the court to impose a condition on the setting aside. She highlights that the defendant is a flight risk and is also insolvent. For these reasons, she seeks that the condition for setting aside default judgement be that the defendant be required to deposit in court the sum of $153,000 – 00 (one hundred and fifty three thousand dollars) as security."

The Learned Master summarized the Defendants submission in reply as follows;

"(33)Mr. Khan submits that the trend these days is that the courts have shied away from imposing conditions if they would unduly stifle the pursuit of a defence on the merits. Although Mr. Khan does not say so directly, his submissions hint at the suggestion that an insolvent defendant who has a meritorious defence should not be deterred from pursuing his case by a condition that effectively suffocates him."

11. On the discretion of Court to impose a condition in setting aside a default judgment (especially a default judgment regularly entered), the Learned Master considered the following Rules, case law and writings;
    
    1. Order 13 Rule 10 and Order 19 Rule 9 OF THE High Court Rules (both confer upon the Court... "on such terms as [the Court] thinks fit". ),
       
    2. MV Yorke Motors v Edwards [1982] 1 WLR 444 HL,
       
    3. O'Hare and Hill: Civil Litigation, 5th edition, 1990, Longmans at page 234),
       
    4. L & M Specialist Construction Limited v Wo Hing Construction Company Limited Civil Appeal No. 147 of 2000, (Hong Kong Court of Appeal judgment),
       
    5. Rahmani –v- Heng [2010] SADC 81, (South Australian District Court case),
       
    6. Edwards v. Wallace (1986) 42 SASR 308 at 315,
       
    7. Lau v. Citic Australia Commodity Trading Pty Ltd (1999) VSCA 34 at (6)-(8) cf. Gajic v. Poysner (2007) VSCA 175,
       
    8. Gao v. Zhu (2001) VSC 500,
       
    9. Graywinter Pty Ltd v. Rodway (1998) VSC 117,
       
    10. Saunders v. Esanda Finance Corporation- Unreported decision of Lander J (31/5/96) BS 9602273.
        

And the Learned Master held as follows;

"(41) In the case before me, the defence raised is far from shadowy. However, there is some concern that the defendant is a flight risk. To reiterate, I record here again that in his argument in Court – Mr. Khan was adamant that his client is not impecunious. That – and also taking into account that it is common ground between the parties in this case that a large sum of money was paid by the plaintiff to the defendant, I am of the view that it would be correct in principle for this Court to order that – as a condition for setting aside default judgement, the defendant is to pay into Court within 21 days the sum of $153,000 – 00 (one hundred and fifty three thousand dollars) as security."(emphasis & underlining mine).

And the Learned Master set out his Orders finally as follows;

(i) "the default judgment entered on 19th April 2010 in the sum of $153,000-00 (one hundred and fifty three thousand dollars) be set aside on the condition that the defendant deposits into court within 21 days of the date of this judgement the sum of $153,000-00.

(ii) the defendant to pay the plaintiff's costs within 21 days which I summarily assess at $450-00 (four hundred and fifty dollars).

(iii) the defendant is to file and serve within 21 days a statement of defence.

(iv) this case adjourned to 15th of December 2010 at 9.00 a.m. for mention to check on compliance."

12. The Defendant commendably admits the receipt of the $150,000/= from the Plaintiff and that a further sum of $3000/= is due to the Plaintiff. The Defendant admits signing and executing "DR1". The Defendant further admits that "US1" was submitted for signature by the Plaintiff which he declined to sign. "DR1" refers to a partnership and "US1" does not. The Plaintiff has signed "DR1" which is captioned as an "Agreement between.." the parties. The assertion by the Plaintiff that there was no partnership and the reference to one in "DR1" is sought to be explained by the Plaintiff by his need to obtain some acknowledgment of the receipt of the $150,000/= by the Defendant, as there appears to be no other correspondence or reference to it between parties.
    
13. The Plaintiff is somewhat silent as to when the monies were so given to the Defendant and the Court could assume at least as against the Plaintiff that it was given between September 2008 and March 2009 as set out in the unsigned document of the Plaintiff "US1". In other words according to the Plaintiff the money had been given on loan (in installments?) over a period of 7 months.
    
14. The Plaintiff does not set out the rate of interest on the loan he alleges to have given the Defendant, nor does "US1" make any reference to any interest. The tenor of "US1" in the use of the words "The said monies being payable on demand and demand having been made I am unable to pay the same" and included admittedly by the Plaintiff and submitted to Defendant to sign, appears to suggest as if the primary intention of obtaining "US1" is to "write off" the debt than to recover it. Such or other reasons may have prompted the Master to comment that the Defence is far from shadowy and proceed to set aside the default judgment, though not so stated in his Ruling, all of which is not of any consequence now, as parties do not appeal that part of the Masters order and all that is left to be determined is whether the condition imposed by the Master is impossible of performance given the status of the Defendant.
    
15. The Plaintiff too in his affidavit of 13th July 2010 states at paragraph 10 therein that the Defendant is presently insolvent and unable to pay his debts. This affidavit the Plaintiff filed in opposition to setting aside the default judgment. The Master no doubt considered the said affidavit, and the insolvent state of the Defendant urged by the Plaintiff, nevertheless he has considered the strong stand and submission of the Defendant's Counsel Mr. Khan before him, that his client is not insolvent, in preference over the affidavit of the Plaintiff, in imposing the condition to deposit $153,000/= within 21 days of his ruling. Such a condition the Defendant may be incapable of performing according to the Plaintiff, however the Master with his experience appears to be of the view that Mr. Khan's assessment of his client's solvency is more reliable.
    
16. The Plaintiff at the early stages of this case (9th February 2010) moved for a writ of Ne Exeat Civitate Ex parte to restrain the Defendant from leaving the Island which was refused by this Court. This Court then observed a writ of Ne Exeat Civitate (originally Ne Exeat Regno –derived from the authority of the King) does not issue after the Judicature Acts in England, and restricted to section 6 of the Debtors Act in England, and not granted by Court as of right. The Plaintiffs Counsel then did not submit any authorities to the contrary. No Mareva injunction was pursued by the Plaintiff either. The Defendant in his own affidavit in the current application under appeal has stated that he went overseas to New Zealand thereafter and returned. Hardly the circumstances of an insolvent litigant. In an Ex parte application the Court may give the benefit of a doubt to the party yet to be heard, however the same benefit such a party cannot expect after an interparte (represented) hearing.
    
17. Therefore having heard both the Counsel extensively the Master may well have made a correct exercise of his discretion in deciding to impose a condition. If there was a strong indication, reason or evidence for the Master to conclude that the Defendant is willfully defaulting payment, in spite of his capacity to pay, in fraud of his creditor, then the Master may have rightly imposed such a condition to deposit the full amount.
    
18. However the reason the Master gives for imposing such a condition, is that he considers the Defendant to be a "flight risk" as submitted by the Plaintiff's Counsel Ms. N. Khan. A litigant can be solvent, being well within his capacity to pay his debts, and still be a "flight risk" if there is evidence urged that the Defendant is about to leave the Island. The term "flight risk" is inappropriate in civil proceedings, as the additional element of disposing of assets in fraud of creditors or the non-availability of assets to recover is equally required, as it is the recovery of money or particular assets of the litigant that are relevant and not the incarceration of the individual, the exception being when specific performance requiring personal attendance is sought.
    
19. The Master may well have considered the aspect of the possibility of the Defendant being willfully in default and disposing his assets in fraud of his creditors, in using the term "flight risk", and this Court ought not to interfere in appeal with the findings of the Master, lightly.
    
20. The Masters decision to impose a condition appears to be after consideration of relevant case law and an analysis of the facts as well as his observations in the conduct of the case before him by the respective Counsel. However the terms of the condition may be reviewed by Court to bring it within admitted performable limits.
    
21. The Defendant alleges a partnership but does not set out his contribution to the partnership or the ratio of sharing profits. Therefore in the absence of such terms the partners share loss or profit in equal share. Though the Defendant does not disclose how he expended the moneys admittedly received, at least half of such monies received he should hold for recovery by the Plaintiff even according to his defence.
    
22. The Plaintiff was not responsible for the default judgment, the Defendant is. It being a regularly entered default judgment, and without interfering with the due exercise of the Masters discretion thereof, this Court considers the reduction of the Moneys to be deposited in Court to be reduced to half the monies received so as to render the condition performable and within the admissions of the Defendant. As such the condition is varied to deposit a sum of $75,000/= within 28 days. (The sum of $3000/= is admittedly not monies received but a debt due and as such not considered for the purpose of deposit.)
    
23. As such this Court sees fit to grant leave to appeal to the Defendant and allow the appeal against that part of the Masters Ruling imposing the particular condition to set aside the default judgment of 19th April 2010, only in varying the said condition in reducing the amount to be deposited to $75,000/= and to be deposited within 28 days of this judgment.
    
24. As such that part of the Masters order imposing a condition to deposit $153,000/= within 21 days of his ruling is varied and as such the default judgment (entered on 19th April 2010) to be set aside subject to deposit of $75,000/= in to Court within 28 days of this judgment by the Defendant. However I see no reason to interfere with the Masters orders as to costs before him, and parties shall bear their costs in respect of this application for leave to appeal before this Court.
    
25. Upon compliance with the condition to set aside the default judgment the Defendant to file and serve within 21 days (or as extended by Court) of such compliance a statement of defence. This matter to be mentioned after 28 days of this judgment on the 23rd November 2011, to verify compliance with the aforesaid varied condition to set aside the default judgment, and for further directions.
    

Hon. Justice Yohan Fernando.
JUDGE.

High Court of Fiji
At Lautoka
24th October 2011.