Fiji Electricity Authority v Pal [2012] FJHC 897; Civil Action 524.2007 (27 February 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. 524 of 2007
[Magistrates Court Action No. 31 of 2011]

BETWEEN:

FIJI ELECTRICITY AUTHORITY a body corporate under the Electricity Act, Cap 180 and its head office located at 2 Marlow Street, Suva.
PLAINTIFF

AND:

MUKESH PAL an ex employee of Fiji Electricity Authority, Live Wireman, formerly of Lot 30 Ura Place, Valelevu, Nasinu, Suva now residing in 13 Colbert Cl, Victoria Pt, Queensland 4156, Australia.
1ST DEFENDANT

AND:

RAYMOND ROUNDS former employee of Fiji Electricity Authority and residing at 33 Hutson Street, Suva point, Suva.
2ND DEFENDANT

BEFORE: Master Deepthi Amaratunga

COUNSEL: Mr. Lajendra for the Plaintiff
Mr. Bale A for the 2nd Defendant

Date of Hearing: 25th November, 2011
Date of Ruling: 27th February, 2012

RULING

1. INTRODUCTION
   

1. The Plaintiff has obtained the default judgment against both Defendants. The claim is for money due on non performance of bond by the 1st Defendant and 2nd Defendant is the guarantor of the said bond. The 2nd Defendant has filed an application to set aside the Default Judgment that was obtained by the Plaintiff against him on 17 March 2010. The alleged two grounds for the setting aside are irregularity in the default judgment, and merits of the proposed defence.
   
2. The 2nd Defendant states that the Default Judgment is irregular and should be set aside unconditionally on the basis that the Default judgment contains a cost of $5,000.The judgment was obtained regularly, but for the inclusion of a cost of $5.000. That itself would not be a ground for setting aside default judgment as it can be rectified by the court as it is a waste of time and energy to allow a unmeritorious defence as it would invariably face a strike out or application for Summary Judgment by the Plaintiff. The decision of Bank of Credit and Commerce International (Overseas) Ltd (in Liquidation) v Habib Bank Ltd [1998] 4 All ER 753 held that a court would not set aside a default judgment which suffered from irregularities if there was sufficient evidence before the court from which it was able to conclude that the substantive content of the judgment is correct. Further, where the amount in the default judgment was wrong, the court would vary the judgment to the correct amount.
   
3. In the alternative, the 2nd Defendant states there is sufficient reason for it to be set aside as he has arguable defence. The alleged defence is that he did not sign the said bond as a guarantor. This he raised for the first time in in his proposed statement of claim and obviously contradicts with his own statements in the analysis and held it as unmeritorious and no realistic prospect of success.
   

2. FACTS
   

4. The action is filed against the 1st Defendant for the failure to comply with the conditions contained in a bond that was entered between the Plaintiff and 1st Defendant, when he was provided with certain training overseas and the 2nd Defendant is the guarantor of the said bond.
   
5. The first Defendant did not comply with the stipulated condition of minimum time period of work under the Plaintiff after returning from the overseas training and the claim is to recover the amount stated in the bond.
   
6. Though the writ and statement of claim were served to the Defendants, both of them chose not to file an acknowledgment and or file a statement of defence.
   
7. Plaintiff obtained default judgment against both defendants for the amount stated in the statement of claim ($15,000) and also for a cost of $5,000.
   
8. 2nd Defendant filed this summons for setting aside of the default judgment against him.
   

100. ANALYSIS
     

9. The 2nd Defendant has raised the argument that by awarding cost of $5000.00 it makes the Default Judgment irregular.
   
10. High Court Rules allows for costs to be included in the Default Judgment. The relevant provisions in the High Court Rules are contained under Order 13 rule 1 and Order 19 rule 2. Since this is a Default Judgment entered after there was a failure on the part of the 2nd Defendant to give notice of intention to defend, the relevant provision in respect of cost is Order 13 rule 1. Order 13 rule 1 states:
    

"Where a Writ is indorsed with a claim against a Defendant for a liquidated demand only, then, if that Defendant fails to give notice of intention to defend, the Plaintiff may, after the prescribed time enter final judgment against that Defendant for an amount exceeding that claimed by the Writ in respect of the demand and for costs, and proceed with the action against the other Defendants, if any." (emphasis is mine)

11. Therefore it is evident that there are provisions to allow for costs to be part of Default Judgment. In Sodexo Laos PVT Sole Co v Dewan, Civil Action No. HBC 220 of 2010, at page 11 of judgment said as follows:
    

"The Plaintiff has obtained Judgment for costs of the action on a full indemnity basis in the Default Judgment. Order 19 rule 2(1) as stated above in this decision states 'enter final Judgment against that Defendant or a sum not exceeding that claimed by the Writ in respect of the demand and for costs ......' expressly indicating that Judgment in Default can be entered with costs included. In terms of the provision contain in Order 19 rule 2 (1) the inclusion of cost is clearly not an irregularity. The Statement of Claim has clearly prayed for indemnity cost in prayer (iv) of the Statement of Claim dated 21st July, 2010. So it is clear that the Order 19 rule 2 (1) empowers the Plaintiff to seek costs in the Default Judgment and it is not an irregularity as stated by the Defendant. The Defendant was amply notified of the Claim and the request for indemnity cost. The Defendant's argument is that it has not been fully ascertained and because of that cost cannot be included in the Default Judgment. Clearly, if that interpretation is given, one cannot understand how a party to an action is going to make use of the provision contained in Order 19 rule 2 (1) where it clearly state that costs can be claimed in default judgment and such an express provision would be made nugatory if the Defendant's contention is accepted. The costing of an action in term of Order 62 of the High Court Rules and cannot be included as to a certainty till is determined and in this default judgment no amount is specified, but has stated that cost would be on indemnity basis, as prayed in the statement of claim."

12. Therefore it follows that whilst the Default Judgment can include an award of costs but the actual amount of cost cannot be included with certainty as it still needs to be determined by the costing officer in accordance with Order 62 of the High Court Rules save for the filing fees which can be easily ascertainable without any judicial intervention as those expenses are fixed. Hence the need for assessment of cost pursuant to Order 62 precludes awarding of cost of a precise amount in the Default Judgment, except for fixed payments like filing fees.
    
13. The question that whether including a specific amount as cost in the Default Judgment makes the entire Default Judgment irregular in substance and ought to be set aside wholly. This I answer in negative for the reasons given below.
    
14. In the Court in Bank of Credit and Commerce International (Overseas) Ltd (in Liquidation) v Habib Bank Ltd [1998] 4 All ER 753, where Park J held on Page 757 as follows:
    

"Assume a case where the Writ and the Judgment did suffer from some irregularities. Nevertheless assume also that, by the time that the application to set the Judgment aside comes to beheard, time has passed and almost certainly a great deal of information about the case, verified by affidavits, will be before the Court. If, from the affidavits and exhibits, the Court concludes that, even though there were irregularities in the Writ or the Judgment or both, the substantive content of the Judgment is right, the Court will not set the Judgment aside. The only effect if it did would be to put the parties to further expense and delay to reach a regular Judgment for the same amount."(emphasis is mine)

15. Further at page 757, Park J had this to say:
    

"Further it is same in principle if the Court is satisfied from the affidavits and exhibits that, although the amount in the Default Judgment was wrong, it (the court) knows what the correct amount was. The Court will not set the incorrect Judgment aside and make the Plaintiff start again. It will vary the Judgment to the correct amount.

Of course, if the material before the Court shows that the Judgment was or might have been wrong but the Court cannot, without a trial, be confident of what the correct Judgment should have been, it will set the Judgment aside."

(emphasis is mine)

16. In Sodexo Laos PVT Sole Co v Dewan, (supra), after observing the comments of Pain J in Bank of Credit and Commerce International (Overseas Ltd (in Liquidation) v Habib Bank Ltd, stated as follows:
    

"In light of the said Judgment it is clear that if the error can be corrected and the Default Judgment can vary to rectify the amount if the error is only as to the amount. But I do not think that this can be extended to a case where irregular procedure was adopted since the irregularity is at the root of the Default Judgment rather than on some arithmetic or other calculation or mere slip or omission on the form of the Default Judgment, which can be corrected if the substantive content of the Default Judgment is correct."

17. In this case the claim against the 1st Defendant is for a sum of $15,000.00. The 1st Defendant had executed a bond for the said sum. The 2nd Defendant had guaranteed the said bond. It is not in dispute that the 1st Defendant had breached the said bond. Judgment has been obtained against the 1st Defendant which has not been set aside and there is no application to set aside the default judgment against 1st Defendant.
    
18. The Default Judgment against the 2nd Defendant is pursuant to the guarantee he gave to the Plaintiff in regard to the said bond. With respect to what the 2nd Defendant has submitted to show to the Court that he has a bona fide defence, there is clear documentary evidence to show that the 2nd Defendant had executed the guarantee and in view of the breach of bond condition by the 1st Defendant, the 2nd Defendant becomes liable pursuant to the guarantee. The Default Judgment in substance is for the sum of $15,000.00. The ancillary part of the Default Judgment is the award of interest and cost. Whilst there is no doubt that interest and cost can be included in the Default Judgment, the only problem that stems out of the Default Judgment is awarding a specific amount of $5,000 as cost.
    
19. Bearing in mind the comments of Park J in Bank of Credit and Commerce International (Overseas Ltd (in Liquidation) v Habib Bank Ltd, it is clear that there is enough evidence to support the substantive content of the Judgment in the sum of $15,000.00. If the entire Default Judgment is set aside only due to the award of a specific amount of cost, the effect would be that the parties, in particular the Plaintiff will be put to further expense and delay to reach a regular judgment.
    
20. Therefore in view of the case authority of in Bank of Credit and Commerce International (Overseas Ltd (in Liquidation) v Habib Bank Ltd, this is a matter where the ends of Justice demands that the Default Judgment be varied to exclude the award of cost as a specific amount.
    
21. Again the power to vary the judgment is contained under Order 13 rule 10 which states:
    

"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."

22. Therefore in this case the Default Judgment can be varied to remove the cost in the amount of $5,000.00. Cost can still be awarded without it being quantified in the Default Judgment and then the provisions of Order 62 of the High Court Rules will apply.
    

4. WHETHER THERE IS A BONEFIDE/ARGUABLE DEFENCE
   

23. The 2nd Defendant has raised some matters which he argues raises a bona fide or arguable defence for which reason he should be allowed to contest the proceedings. In a summary, the 2nd Defendant alleged that he had an arrangement with Manager Legal of the Plaintiff, that if he cooperated to provide the address of the 1st Defendant, the Plaintiff will not pursue him for the claim. This clearly contradicts his position that he did not sign the bond as guarantor. Even if one considers that there was such an agreement not to pursue that is clearly unenforceable, illegal contract as this would clearly to the detriment to the Plaintiff which is a statutory body and has a distinct legal personality from its employees including any officer irrespective of their standing in the organization, unless approved by the board. No such approval was produced and no such arrangement was evidenced from the materials before me.
    
24. This is clearly a fanciful defence where two contradictory positions has been taken and I do not need any more evidence to come to conclusion that the defence is unmeritorious and fanciful considering the facts already before me from the statements contained in the proposed statement of defence.
    
25. The 2nd Defendant submits that he had not signed the guarantee documents and therefore has been improperly made a Defendant in this action but he admitted signing the bond to "assist" the 1st Defendant. The denial by the 2nd Defendant to have not executed the guarantee to the bond signed by the 1st Defendant is inconsistent with the argument raised by the 2nd Defendant about him making an arrangement with the former Manager Legal of the Plaintiff to not pursue the claim against him, provided he cooperated in giving the address of the 1st Defendant. If he did not sign the bond as guarantee why he was chosen to find out the whereabouts of the 1st Defendant needs further elaboration and why he chose to provide the address of 1st Defendant to the Plaintiff to locate the 1st Defendant, needs explanation and in the absence of such facts it can be safely deduced that he was the person signed as the guarantor.
    
26. If the 2nd Defendant had not guaranteed the bond then why he would need to make arrangement with the former Manager Legal of the Plaintiff to not to pursue him, is nothing but a fanciful proposition. It shows that the 2nd Defendant has made inconsistent statements in an attempt to justify to the Court that he has an arguable defence which raises tribal issues.
    
27. The 2nd Defendant has not shown any arguable defence on which in the interest of justice there is a need to set aside the Default Judgment to allow him the opportunity to defend the matter.
    
28. On that basis if the Default Judgment is set aside the Plaintiff submits that it will not be able to enforce the Judgment that it has obtained against the 2nd Defendant. The 2nd Defendant is also making all kinds of allegations including that there was an agreement not to pursue the 2nd Defendants even though no agreement has been produced. If the Default Judgment is set aside the Plaintiff will unnecessary incur expenses in the futile effort of the 2nd Defendant that there was no agreement between the parties and this is doomed to fail.
    
29. In ED&F MAN LIQUID PRODUCTS LTD V PATEL & ANR [2003]EWCA Civ 472 Lord Justice Potter analysed the law relating to the setting aside of default judgment and the summary judgment and the burden of proof relating to both provisions of law. In both provisions the words read as "no real prospect of successfully defending the claim or issue"
    
30. In Lord justice Potter's judgment ED & F MAN LIQUID PRODUCTS LTD V PATEL & ANR [2003]EWCA Civ 472 it was held as follows Paragraph 10
    

'...However, that does not mean that the court has to accept without analysis everything said by aparty in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporary documents. If so, issues which are dependent upon those factual assertions may be susceptible of disposal at an early stage so as to save the cost and delay of trying an issue the outcome of which is inevitable: ....'

Paragraph 11

'I would only add that, where there is a claim or judgment for monies due and issues of fact are raised by a defendant for the first time which, standing alone would demonstrate a triable issue, if it is apparent that, with full knowledge of the facts raised, the defendant has previously admitted debt and/or made payments on account of it, a judge will be justified in taking such acknowledgements into account of it, a judge will be justified in taking such acknowledgements into account as an indication of the likely substance of the issues raised and the ultimate success of the defence belatedly advanced.' (emphasis is added)

31. The Plaintiff has stated that he was assured of dropping the intended civil action by the legal officer of the Plaintiff if he corporate with the Plaintiff. This is an admission that he was an intended defendant at that time. The only basis he could be a Defendant is that he had signed as the guarantor and denial of that for the first time in the proposed statement of defence is not only contradicts with his own statements, but a fanciful and unrealistic defence.
    
32. In Three Rivers District Council v Governor and Company of The Bank of England [2001] UKHL 16; [2001] 2 All ER 513 Lord Hope of Craighead held in deciding on a summary judgment application (where the same rule applies) as follows
    

At paragraph 95

'....For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be that that view and resort to what is properly called summary judgment.

33. If the 2nd Defendant did not sign the bond as the guarantor, why he chose not to state so in the first occasion by acknowledgment of the writ and filing a statement of defence has not been explained. It is evident that he knew before this aciton was instituted that the Plaintiff was going to institute an action to recover the amount stated in the bond against both Defendants and admittedly the 2nd Defendant has tried to help the Plaintiff to locate the 1st Defendant. So, the allegation of not signing the bond as a guarantor cannot be accepted and nothing but a fanciful defence.
    
34. In ED & F MAN LIQUID PRODUCTS LTD V PATEL & ANR [2003] EWCA Civ 472
    

'3. In the Saudi Eagle, when comparing the test to be met by a defendant under R.S.C Order 14 ('an arguable case'), with the standard laid down in Evans v Bartram (H.L.)[1937] A.C 473 in respect of a defendant seeking to set aside a regular judgment signed in default, the Court of Appeal (per Sir Roger Ormrod) said:

"......Evans v Bartarm... clearly contemplate that a defendant who is asking the court to exercise its discretion in his favour should show that he has a defence which has a real prospect of success...

Indeed it would be surprising if the standard required for obtaining leave to defend (which has only to displace the plaintiff's assertion that there is no defence) were the same as the required to displace a regular judgment of the court and with it the rights acquired be the Plaintiff. In our opinion, therefore to arrive at a reasoned assessment of the justice of the case the court must form a provisional view of the probable outcome if the judgment were to be set aside and the defence developed. The "arguable" defence must carry some degree of conviction"

35. In Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc [1986] 2 Lloyd's Rep 221, it was held that in order to set aside the default judgment, the proposed defence advance "must carry some degree of conviction" and this principle was further advanced in judgment of Moore-Bick j in International Finance Corporation UtexafricaS.p.r.l (2001) CLC 1361 at p 1363 it was held
    

"A person who holds a regular judgment even a default judgment, has something of value, and in order to avoid injustice he should not be deprived of it without good reason. Something more than merely arguable case is needed to tip the balance of justice to set the judgment aside. In my view, therefore Mr. Howard is right in saying the expression "realistic prospect of success" in this context means a case which carries a real conviction." (emphasis is added)

36. So, it is clear that in 21st century the House of Lords have evolved the burden of proof of the allegations in statement of defence to a realistic prospect of success or that it must carry some degree of conviction this is clearly higher than an arguable case. These cannot be ascertained without analyzing the facts before the courts, and on the facts before me I am more than convinced that the defence lacks any merit and can be considered as a sham defence and there is no prospects of success if this matter is proceeded to trial that would only result delay and cost to parties as well an extra burden to the limited resources of the courts where a time for one case without any hope of success would invariably delay another matter. This is the rationale in the 21st century, where the House of Lords has held that the threshold for arguable defence at a higher level and defined it as "realistic prospect of success". I need not say more as the facts in the case before me will not even establishes an arguable defence for the reasons I have given before in this ruling.
    
37. If the default judgment is vacated, the plaintiff would be prejudiced as it would invariably delay the recovery of the amount stated in the bond as the 1st Defendant cannot be located to recover the amount in the bond. The whole purpose of having a guarantor is to recover the amount in the bond from the guarantor in a situation similar to the one before me and this should be done as there is a default judgment already entered against both the Defendants.
    
38. Considering that the default judgment already entered contained an excessive $5,000 as cost and this makes the default judgment defective,though it can be corrected, without setting aside the whole of the judgment on the irregularity. This is clearly a mistake by the Plaintiff and I will not award a cost to Plaintiff for this application considering this factor and other circumstances of the case.
    

5. CONCLUSION
   

39. That the Default Judgment is defective as to the including of the amount of cost as $5,000. The awarding of a specific amount as costs can be cured by varying the Default Judgment. The variation will remove the specific amount stated as cost and will only award costs without quantifying an amount. Costs will be assessed pursuant to Order 62 of High Court Rules.
    

6. FINAL ORDERS
   

1. The summons for setting aside of default judgment against 2nd Defendant is struck off.
   
2. The inclusion of cost as $5000 in the default judgment is varied and deleted off and should be read as cost to be assessed.
   

100. Considering the circumstances of the case no cost is awarded for this application though it is struck off.
     

Dated at Suva this 27th day of February, 2012.

Mr. Deepthi Amaratunga
Master of the High Court
Suva