Skerlec v Tompkins - Interlocutory Judgment [2012] FJHC 1111; HBC111.2008 (26 April 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBC 111 of 2008

BETWEEN:

ANDREW SKERLEC
[1st Plaintiff]

AND:

ANDREW SKERLEC

[2nd Plaintiff]

AND:

ANDREW SKERLEC

[3rd Plaintiff]

AND:

UNION MANUFACTURING AND MARKETING COMPANY LIMITED
[4th Plaintiff]

AND:

SOMOSOMO DEVELOPMENTS LIMITED
[5th Plaintiff]

AND:

CHARLES DWIGHT TOMPKINS
[1st Defendant]

AND:

BARCLAYS (PACIFIC) LIMITED
[2nd Defendant]

AND:

TIDAL FLOWS LIMITED
[3rd Defendant]

AND:

REGISTRAR OF TITLES
[4th Defendant]

AND:

REGISTRAR OF COMPANIES
[5th Defendant]

AND:

ATTORNEY GENERAL OF FIJI
[6th Defendant]

Counsel: Ms. M. Muir for the plaintiff
Mr. S. Singh for the 1st and 2nd Defendants
No appearance for the 3rd, 4th, 5th and 6th Defendants

Date of Judgment: 26th April, 2012

INTERLOCUTORY JUDGMENT

[1]. This is the 2nd and 3rd defendants' application to set aside the default judgment entered on 14.09.2010. By summons dated 21.12.2010, the 2nd and 3rd defendants sought following orders. They are:

1. The orders made ex-parte on 24.09 2010 be set aside;
2. The 2nd and 3rd defendants have leave to defend the plaintiff's claim;
3. Direction be given for further conduct of the proceedings; and,
4. Costs.
   

[2]. In support of the summons, an affidavit was filed by Martha Smith, a director of the 2nd and 3rd defendant-companies.

[3]. According to the affidavit, she came to know the ex-parte orders on 24.09.2010. The solicitor, Mr Archibold, who appeared for the respondent earlier, was a director of the 2nd and 3rd defendant-companies until 19.11.2020. He retired from practice in June 2010. It is further deposed that no communication whatsoever was received by the 2nd and 3rd defendants prior to 24.09.2010 to the effect that a writ and statement of claim had been filed or that the plaintiff had intended to apply for default judgment in the absence of a defence.

[4]. Furthermore, it is stated that if the defendant had any notice of the intended application for default judgment, they would have ensured a defence to the statement of claim filed.

[5]. It is further stated that many of the aspects in dispute and the subject of the present proceedings were subject of a judgment by Fatiaki J in Civil Action No 52 of 94 and it either resolved or could have resolved all current matters in dispute.

[6]. It is further deposed that since the 1st defendant is elderly and unwell and resides in New Zealand, it was unlikely that he received any notice of the writ and statement of claim and the application for the judgment.

[7]. Opposing the 2nd and 3rd defendants' affidavit, an affidavit was filed by Alfred David Appleton, the appointed legal attorney of the 1st, 2nd, and 3rd plaintiffs. In the affidavit he challenged the appointment of Martha Smith as the company director and the secretary of the 2nd and 3rd defendant companies. It is further deposed therefore that she has no authority to swear the affidavit on behalf of the defendants.

[8]. The 2nd ground of opposition by the plaintiffs is that the order made by the court on 5.07.2010 converting this action to a writ action and removing Mr. Archibold as solicitor for the 2nd and 3rd defendant was served on the registered offices of 2nd and 3rd defendants and affidavit of service was filed on 8.8.2010.

[9]. Hence, it is stated that both the 2nd and 3rd defendants and Parshotam & co., solicitors for the defendants, are and have been on notice that Mr Archibald ceased acting for the 2nd and 3rddefendants; neither Parshotam & Co nor any other solicitor has served the plaintiff with notice of appointment of solicitors for the 2nd and 3rd defendants.

[10]. It is further stated that since Mrs Margrat Archibold has not deposed any affidavit on her own and also in the absence of an affidavit from Mr Archibold, contents of paragraph 4 of the defendant's affidavit are hearsay and should be rejected.

[11]. The annexure ADA 5 clearly shows that the application for conversion to writ action and removal of Mr Archibold as a solicitor was served on Mr Archibold's office and Parshotam Co.

[12]. In the defendant's affidavit it is deposed that Mr Parshotam informed him that he received no notice concerning service of the writ and statement of claim or of any application for default judgment from the plaintiff. The annexures ADA 8 is in proof of service of the writ of summons on Prashotam Co.

[13]. In reply to the affidavit in response of the plaintiff, Martha smith filed another affidavit. In that affidavit, a copy of minutes of a meeting of directors of Barkley (Pacific) Ltd is annexed marked as 'A'. A copy of the minutes of the meeting of directors of Tidal Flowers Ltd marked as 'C' is annexed to the affidavit.

[14]. However, neither Mr Archibold, the 2nd defendant, nor the 3rd defendant appeared at the hearing of the plaintiff's notice of motion on 05.07.2010.

[15]. Therefore, it is evident that the writ of summons and the statement of claim were served on the 2nd and 3rd defendant on their registered addresses and both the 2nd and 3rd defendants had been well aware of the claim against them.

[16]. The plaintiff filed an ex-parte Summons dated 12.08.2010, to enter default judgment pursuant to Order 19 rule 7 of the High Court Rules. On 14.09.2010, court granted the default judgment

[17]. The principles governing the setting aside of default judgment are well settled and are very clearly stated in the Supreme Court Practice 1999 Volume 1 at 157 as follows:

Regular Judgment- if the judgment is regular, then it is an (almost) inflexible rule that there must be an affidavit on merits i.e. an affidavit stating facts showing a defence on the merits.

[18]. The following passage by Huddleston B in Farden v. Richtor [1889] UKLawRpKQB 79; (1889) 23 Q.B.D 124, throws some light on this issue.

1. ''the application to set aside must be taken to have been met on the threshold by the objection that the defendant had not made any affidavit suggesting that he had a defence on the merits. During the argument I was inclined to doubt whether such an affidavit could be always necessary. But in Smith v. Dobbings the present Master of Rolls appears to have stated that it was "an inflexible rule" that a regular judgment properly signed could not be set aside without such an affidavit, and there are statements in the manuals of practice to much the same effect. The expression is perhaps strong, but, where there is no such affidavit, it is only natural that the court should suspect that the object of the applicant is to set up some mere technical case. At any rate, when such an application is not then supported, it ought not to be granted except for some very sufficient reason."
   

[19]. For the purpose of setting aside a default judgment, the defendant must show that he has a meritorious defence. For the meaning of this expression see Alpine Bulk Transport Co. Inc v. Saudi Eagle Shipping Co. Inc: The Saudi Eagle (1986) 2 Lloyd's Rep 221,CA

[20]. Vann. V. Awford (1986) 8 L.S.graz. 1725; The times, April 23, 1986, C.A).

On the application to set aside a default judgment the major consideration is whether the defendant has disclosed a defence on the merits; and this transcends any reasons given by him for the delay in making the application even if the explanation given by him is false.

[21]. In Grimshaw v. Dunbar [1953]1Q.B 416, Jankins L.J. stated as follows;

'be that as it may, a party to an action is prima facie entitled to have it heard in his presence; he is entitled to dispute his opponent's case and cross examine his opponent's witnesses and give his own evidence before the court.'

[22]. The following extract from Dick v. Piller [1953]KB 497 also laid down some important principles on this issue.

1. 'Prima facie that is his right, and if by some mischance or accident a party is shut out from that right and an order is made in his absence, then common justice demands, so far as it can be given effect without injustice to other parties, that litigant who is accidently absent should be allowed to come to the court and present his case-no doubt on suitable terms as to costs as was recognised in Dick v Piller[1953] KB 497'
   

[23]. In Burns v. Kendal (1971) 1 Lloyd's Report 554 it was held by Lord Denning, M.R., Fenton Atkinson L J and Sir Gorden Willmer that:

1. 'That a defence on the merits does not mean a defendant must show a good cause of defence but need only to show one which discloses an arguable or triable issue.'
   

[24]. In addition to that I further consider the following extract from the judgment of Lord Wright in Evans v. Barlam (1937) 2All E.R.656, where it says;

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.

[25]. It is with these legal principles in mind, I consider the defendant's application.One of the arguments advanced by the defendants is that the judgment entered by the plaintiff was irregular on the basis that the plaintiff's application was made under Order 19, rule 7, and therefore, it was required to be served upon the defendants. In support of the argument the defendants cited Supreme Court Practice footnotes 19/7/7 and 19/7/8 and the English case of Intense Investments Limited v. Development Ventures Limited [2005] EWHC 1726 (TCC.

[26]. The defendants argued that since the application for default judgment was not served on the 2ndand 3rd defendants, the default judgment entered is irregular and therefore, the defendants have the right to have it set aside.

[27]. The defendants further rely on Order 1 rule 7 of the High Court Rules, which provides for the practice and procedure of the English High Court to be followed where no express provision is made by the Fiji High Court Rules.

[28]. However, the plaintiffs opposed that and rely upon the case of Kumari v. Dass [1999] FJCA 22.The plaintiffs argued that the service upon the defendant is not required in respect of an application under Order 19 rule 7.

[29]. In light of the above arguments court has to first decide whether the default judgment entered against the 2nd and 3rd defendants was irregular because if the judgment was irregular the defendants are entitled to have it set aside as of right, whereas if the judgment is regular the defendants are required to file an affidavit stating facts showing a defence on the merits. In other words much more merit was required when the judgment is regular.

[30]. In deciding whether the default judgment is irregular or not, the true construction of Order 19 rule 7 is of paramount importance.

[31]. Order 19 rule 7 reads:

1. (1). Where the plaintiff makes against a defendant or defendants a claim of a description not mentioned in rule 2 to 5, then, if the defendant or all the defendants (where there is more than one) fails or fail 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, apply to the court shall give such judgment as the plaintiff appears entitled to on his statement of claim.
   

(2). Where the plaintiff makes such a claim as is mentioned in paragraph (1) against more than one defendant, then, if one of the defendants makes default as mentioned in that paragraph, the plaintiff may,

(a). If his claim against the defendant in default is severable from his claim against the other defendants, apply under that paragraph for judgment against that defendant, and proceed with the action against the other defendants; or

(b). set down the action on motion for judgment against the defendant in default at the time when the action is set down for trial, or is set down on motion for judgment, against the other defendants.

(3). an application under paragraph (1) must be by summons or motion.

[32]. Order 19 rule 7 does not specify that service is required on the defendant in default nor does it state that service is not required or that the application can be brought ex-parte.

[33]. The defendants contended that since the above rule does not say how the application ought to be made, court has to adopt English rules of procedure in terms of Order 1 rule 7 of the High Court Rules.

[34]. Further, the defendants argued that according to Order 32 rule 7, summons must be served on the defendants. However, under Order 19 rule 7, it is not mandatory to make the application by summons. It can be made even by way of motion. Therefore, it is not necessary to apply Order 32 rule 7.

[35]. The defendants submitted that the Fiji Rules require the service of an application made under Order 19 rule 7 on the defendant because the rules do not expressly state that an application can be made ex-parte.

[36]. However, I am not inclined to accept that argument because a default judgment is entered only when the defendant has failed to serve a defence on the plaintiff within the prescribed time period stipulated in the Rules. In other words, the default judgment is entered when a defendant has not taken any interest on his case and has failed to act in accordance with the directions given by court.

[37]. If the defendant has failed to act as ordered by court, I do not see any requirement to inform or remind the defendant it again when an application is made by the plaintiff to get the default judgment entered.

[38]. The defendant laid great stress on the applicability of Order 1 rule 7 of the High court rules.

Order 1 rule 7 is in the following terms:

Practice where no express provision in the Rules (Order 1 rule 7)

1. 'where no express provision is made by these rules with respect to the practice or procedure in any circumstances arising in any cause or matter, then the jurisdiction of the High Court shall be exercised in conformity with the practice and procedure being adopted in the like circumstances in Her Majesty's High Court of Justice in England.'
   

[39]. According to the above, practice and the procedure of English courts shall be adopted only when there are no express provisions made by the Fiji High court Rules. Order 19 rule 7 clearly states that an application under paragraph (1) must be made by summons or motion; hence there is no impediment on the plaintiff to make the application ex-parte.

[40]. More importantly, the plaintiff is entitled to get a default judgment when there is no opposition from the defendant. Hence, I cannot see any rationale behind the requirement of serving the application for default judgment on the defendant when the defendant has already abstained from filing his statement of defence, because it would give the defaulting defendant another opportunity to delay the relief to the plaintiff, which in my view would frustrate the whole purpose of Order 19 rule 7.Thus, I am unable to construe that the objective of Order 19 rule 7 is to contemplate such a situation.

[41]. Even if the Order 19 rule 7 does not state as to the manner in which the application for default judgment ought to be made, it is my considered view that such an application can be made ex-parte. Therefore, the first argument advanced by the defendant that is the default judgment is irregular, fails.

[42]. It is to be noted that the 2nd and 3rd defendants had filed a striking out application but it was dismissed. Therefore, it was the duty of the defendants to take necessary steps to defend the claim against them.

[43]. However, knowing that their application to strike out the plaintiff's claim was dismissed, the defendants did not make any attempt to file a statement of defence, which shows the lacklustre attitude on the part of the defendants.

[44]. Once the judgment is regular the defendant has to show that he has a meritorious defence and he is also not guilty of laches.In other words, the defence must show a real prospect of success.
[45]. Let me now consider whether the defendants have shown a real prospect of success in their proposed defence. The defendant's proposed statement of defence marked as 'A' is annexed to the affidavit in support.

[46]. As can be seen from the proposed statement of defence, the basis of the 2nd and 3rd defendants defence is the want of locus standi of the plaintiff. In addition to that the defendants have pleaded estoppels and laches.

[47]. However, it could be observed that the defendant's plea of lack of locus standi of the plaintiff is based on res judicata, and its applicability to the plaintiff's action. Therefore, it is pertinent to discuss the principle of res judicata and its applicability and extents. Res judicata is a principle when a matter has been finally adjudicated upon by a court of competent jurisdiction, it may not reopen or challenge by the original parties or their successors in interest. It is also known as action estoppels. It does not preclude an appeal or a challenge to the jurisdiction of the court.

[48]. Estoppel is a rule of evidence or a rule of law that prevents a person from challenging the truth of a statement he has made or from denying the existence of facts that he has alleged to exist.

[49]. Estoppel by records prevents a person from reopening questions that are res judicata i.e. that have been adjudicated upon by a court of competent jurisdiction.

[50]. The defendants submitted that the same issues have been litigated in Suva High Court Civil Action 52 of 1994 by the same parties and on 19.05.2009; a judgment was given against the 1st defendant only for $ 938000.00. The defendants further argued that almost after 10 years, the plaintiffs tries to re-litigate the same issues which were decided in case No 52 of 1994, and therefore, the principle of res judicata applies to the present action.

[51]. As can be seen from the judgment No 52 of 1994, it concerned the circumstances surrounding the transfer and acquisition of the shares in the plaintiff-companies namely Union Manufacturing and Marketing Company Ltd and Somosomo Development Ltd. Action No 52 of 1994 was brought by Frank Sebesy Skerelec, a retired businessman who also claimed to be the majority share holder of the plaintiff company. The defendants in 52 of 1994 were Charles Dwight Tompkin and Barclay Pacific Ltd.

[52]. The allegations levelled against the defendants in 52 of 1994 as stated in the judgment were as follows:

• That Tompkins was motivated by fraud in his dealings with Skerelec and Union and another third party associated with these dealings right from the time he offered, through Stinson to be introduced to Skerelec as a genuine prospective purchaser of Union Business and assets and Skerelec's interest therein.
  
• That throughout his dealings with Skerelec and Union Tompkins manipulated situations, people and organisations in his pursuit to defend Skerelec and Union for the purpose of acquiring as much as may be possible through losing as little as possible out of the said dealings with Skerelec and Union.
  

[53]. In his judgment Justice Fatiaki stated that 'furthermore, given that the plaintiff's shares in Union and Somosomo have been transferred to the 2nd defendant company and given the undeniable fact that no monies were ever paid to Skerelec as the vendor under the 'Fiji agreement', I conclude that Skerelec is entitled to an award of damages for breach of contract as follows.............'. In the present case the 2nd defendant company is Barkleay (Pacific) Ltd who was also the second defendant in case No 52 of 1994.

[54]. It could be observed that one of the reliefs sought in the plaintiff's originating summons dated 21.04.2008, is similar if not identical to the above award. In the originating summons the plaintiff seeks a declaration that any purported transfer of the Frank Sebesy Skerlec's shares in Union Manufacturing and Marketing Ltd to Barclay (Pacific) Ltd is null and void and therefore unenforceable for reasons of the failure of consideration. The finding of Fatiaki J in 52 of 1994 also relates to the transfer of shares to the 2nd defendants without a consideration, hence, the defendants' argument, that is, the issues in the present case are res judicata appears to have some merit. Not only that most of the relief sought by the plaintiff in the present case involve the transfer of shares of Frank Sebesy Skerlec's to the 2nd defendant Barclay (Pacific) Ltd which further confirms the fact that the defendants have an arguable defence and have prospect of success.

[55]. Therefore, it is evident that the degree of defence required to be shown in an application of this nature has been shown adequately by the defendant.

[56]. On the above premise, I set aside the judgment in default entered on 14.09.2010 against the defendants.

[57]. The defendants are granted 30 days to file their statement of defence and further 14 days granted for the plaintiff to file reply to defence if any.

[58]. Action shall take its normal course.

[59]. Cost shall be in the cause.

Pradeep Hettiarachchi
JUDGE

At Suva
6th April, 2012