Kiribati Ports Authority v Shipping Agency of Kiribati [2019] KICA 4; Civil Appeal 2 of 2019 (21 August 2019)

IN THE KIRIBATI COURT OF APPEAL ] Civil Appeal No. 2 of 2019
CIVIL JURISDICTION ]
HELD AT BETIO ]
REPUBLIC OF KIRIBATI ]

BETWEEN KIRIBATI PORTS AUTHORITY APPELLANT

AND SHIPPING AGENCY OF KIRIBATI RESPONDENT

Before: Blanchard JA

Handley JA

Heath JA

Counsel: Elsie Karakaua for appellant

Taoing Taoaba for respondent

Date of Hearing: 16 August 2019
Date of Judgment: 21 August 2019

JUDGMENT OF THE COURT

The appeal
[1] Kiribati Ports Authority (the Authority) appeals against a judgment of Commissioner Eberi given on 24 May 2019, by which she set aside a judgment that it had obtained against Shipping Agency of Kiribati (Shipping Agency) in August 2016, in the sum of $78,848.68. The appeal is opposed by Shipping Agency.

Background
[2] In 2011, the Authority brought a claim against Shipping Agency in the sum of $80,272.77, made up of outstanding unpaid invoices for wharfage, dockage, stevedoring and berthing, all of which are services provided by the Authority at Kiritimati Island as long ago as 2006. Although Shipping Agency was named as defendant in the proceeding, that is a trading name used by Mr Tekaai Mikaere.

[3] No steps were taken to defend the proceeding. On 3 November 2011, a default judgment was entered in the sum of $80,273.77. Execution processes were commenced immediately, but the judgment was set aside on
28 December 2011, with costs of $150.00. Subsequently, Shipping Agency acknowledged that it owed the sum of $7,814.68. On 23 July 2013, an order was made for the payment of that sum, with the balance adjourned for a full hearing.

[4] Eventually, the claim was set down for hearing in the High Court on
21 June 2016. For reasons we go into later, Shipping Agency’s lawyer,
Mr Berina, was unable to attend Court on that day. Zehurikize J proceeded to hear the case ex parte in Shipping Agency’s absence. The hearing did not conclude that day. Rather, it was adjourned until 29 June 2016, when counsel appeared for Shipping Agency, though not Mr Berina. An adjournment of the hearing was sought. That was refused and the Court continued to hear the case.

[5] Closing submissions were scheduled for 16 August 2016. At that stage they were adjourned until 19 August 2016 because counsel for the Authority was ill. The Authority closed its case on 19 August 2016. At that stage, there was an adjournment at Mr Berina’s request and he then made application for permission to cross-examine the Authority’s witness. Counsel’s explanation for this change of position was that reference was made during her submissions by Ms Karakaua, for the Authority, to evidence about the names of vessels and he believed that this must have come from oral evidence given in his absence on 21 June 2016. He said he then realised that he needed to cross-examine an Authority witness. But that application was refused. Mr Berina did not make closing submissions. Zehurikize J found in favour of the Authority and entered judgment in the sum of $78,848.68, together with interest and costs.

[6] On 23 August 2016 – only four days later - Shipping Agency applied to set aside the judgment. When the application notice is examined it is noticeable that it was in fact directed to “a default judgment made against [Shipping Agency] on 21^st June 2016 whereby the Court ordered that the hearing proceeded ex parte”. However it appears to have been processed by the Court and regarded by the parties as, in effect, directed to the judgment of 19 August 2016. We will so regard it. The application was called initially before Commissioner Eberi on
18 August 2017 and adjourned for hearing on 15 February 2018.

[7] On 24 May 2019, the Commissioner made an order setting aside the judgment. It is from that order that the Authority now appeals.

General principles
[8] No challenge is made to the grant of an extension of time for Shipping Agency to apply to the High Court to set aside the judgment. Indeed, if the application is treated as directed to the judgment of 19 August 2016 none is needed. Therefore, it is necessary to focus only on the principles that apply when an application to set aside a judgment is made. The Commissioner proceeded on the basis that the following elements were required to be proved:

(a) There must be a reasonable explanation for the failure of the applicant to attend the original hearing;

(b) The application to set aside judgment must be made promptly in the circumstances;

(c) It must be shown that there is an arguable case on the merits of the substantive case.

[9] In the context of the present case, we consider that two significant issues will inform whether it was appropriate for the High Court to exercise a discretion to set aside the judgment:

(a) The first is whether there was a right to apply to set aside the judgment entered after counsel for Shipping Agency had entered an appearance and to some extent participated in the hearing.

(b) The second is whether a satisfactory defence has been demonstrated on the evidence. Coupled with that is whether such a defence was demonstrated too late for it to be taken into account.

[10] Order 38 rule 7 of the High Court Rules 1964 confers a broad direction on the Court:

7. Any verdict or judgment obtained where one party does not appear at the trial may be set aside by the Court upon such terms as may seem fit, upon an application made within twenty-one days after the trial.

[11] The discretion given to the Court by this rule (“may be set aside”) has been said to be “unrestricted” save as to the time limit: Russell v Cox [1983] NZLR 654 (NZCA) at 657. The leading case is the decision of the House of Lords in
Evans v Bartlam [1937] AC 473; [1937] 2 All ER 646. Lord Atkin said that although the discretion was expressed “in unconditional terms”, the courts had laid down rules for their own guidance in the normal exercise of their discretion. One such rule was that where the judgment was obtained regularly there must be an affidavit of merits meaning that the applicant must produce to the court evidence of a prima facie defence. But Lord Atkin said that this rule could, in no doubt rare but appropriate cases, be departed from. He also said that there was no rule that the applicant for setting aside had to satisfy the court that there was a reasonable explanation why judgment was allowed to go by default, “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”.
(p. 480).

[12] Lord Atkin continued:

“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 only been obtained by a failure to follow any of the rules of procedure”.

[13] And in the same case Lord Russell of Killowen said:

“It was argued by counsel for the respondent that before the Court or a judge could exercise the power conferred by this rule, the applicant was bound to prove (a) that he had some serious defence to the action and (b) that he had some satisfactory explanation for his failure to enter an appearance to the writ. It was said that until those two matters had been proved the door was closed to the judicial discretion; in other words, that the proof of those two matters was a condition precedent to the existence or (what amounts to the same thing) to the exercise of the judicial discretion.

For myself I can find no justification for this view in any of the authorities which were cited in argument; nor, if such authority existed, could it be easily justified in face of the wording of the rule. It would be adding a limitation which the rule does not impose.

The contention no doubt contains this element of truth, that from the nature of the case no judge could, in exercising the discretion conferred on him by the rule, fail to consider both (a) whether any useful purpose could be served by setting aside the judgment, and obviously no useful purpose would be serve if there were no possible defence to the action, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained, to which he could have set up some serious defence. But to say that these two matters must necessarily enter into the judge’s consideration is quite a different thing from asserting that their proof is a condition precedent to the existence or exercise of the discretionary power to set aside a judgment signed in default of appearance”.

[14] The New Zealand Court of Appeal has concluded in Russell v Cox (see [11] above) that in deciding whether it is just to set aside a judgment the court will, as a matter of convenience and practice, generally regard three matters as important:

(a) That the defendant has a substantial ground of defence;

(b) That the defendant’s delay in applying is reasonably explained; and

(c) That the plaintiff will not suffer irreparable injury if the judgment is set aside.

But there is no general rule that an application to set aside a judgment must satisfy these conditions as a necessary pre-requisite to the exercise of the discretion:

“The test against which an application to set aside a judgment should be considered is whether it is just in all the circumstances to set aside the judgment and the several factors mentioned in [Evans v Bartlam and other judgments] should be taken not as rules of law, but as no more than tests by which the justice of the case is to be measured, in the context of procedural rules whose overall purpose is to secure the just disposal of litigation”: Russell v Cox at 659 per McMullin J.

This case
[15] There are two unusual features of this case. The first is that the then counsel for Shipping Agency, Mr Berina, seems to have actually been present when Zehurikize J delivered orally the judgment which Commissioner Eberi has set aside. The Commissioner records having been told that counsel requested the right to make final submissions and, there being no objection, was granted that right. The Commissioner records what happened next:

“After such submissions, counsel for the applicant then asked for a short period to prepare to reply and on returning to the Court applied for permission to cross-examine the witness (for the Authority) instead of making closing submissions. It was at that point that the Judge upheld the objection of counsel for the respondent and proceeded to deliver judgment”.

[16] As we understand it, counsel for Shipping Agency did not make any submissions and took no further part in the hearing after he was denied permission to cross-examine. Although counsel for the Authority has not taken the point, we should consider whether the fact that at the earlier stages of the hearing before Zehurikize J the Shipping Agency was represented must mean that his judgment cannot be considered to be a default judgment. Order 38 rule 7 allows an application to set aside only in respect of a judgment “where one party does not appear at the trial”. In this case the “trial” effectively began on
21 June 2016 when there was an ex parte hearing in the absence of Mr Berina. Closing submissions were made on 19 August 2016 as described in [15] above. It appears from this that once counsel for Shipping Agency had been refused permission to cross-examine he played no further part in the hearing, although he seems to have remained in the courtroom.

[17] We are of the view that Shipping Agency should not be denied the right to invoke Order 38 rule 7 ; it should not be regarded as having appeared at the trial. Its counsel was not present for the first part of the hearing on 21 June 2016 and present only to request, unsuccessfully, an adjournment on 29 June 2016. Nor was it appearing once its counsel was no longer participating on
19 August 2016 although, it seems, physically present when the Judge delivered his decision.

[18] The second unusual feature is that when the application to set aside was made it was not accompanied by any affidavit evidence showing that Shipping Agency had a prima facie defence. However, as Lord Atkin made clear (see [11] above), exceptions can be made. An indication was given at the time of the filing of the application that an affidavit of Mr Mikaere would soon be filed and would show that there were triable issues. Two affidavits were in fact filed – one the very next day 24 August 2017 and the second on 27 February 2018. Both demonstrated arguable defences to the various claims made by the Authority.

[19] We can move now to matters that more usually fall to be considered on an application to set aside. The first is whether Shipping Agency has a prima facie defence or what Lord Russell called a serious defence. We are satisfied from the affidavits of Mr Mikaere that it has.

[20] Secondly, Mr Berina has given detailed and satisfactory reasons for his failure to attend the hearing on 21 and 29 June. He was obliged to visit Kuria in his capacity as its Member of Parliament in order to resolve a serious social dispute. He has outlined the difficulties – travel and otherwise – that he encountered and the fact that he attempted in vain to have the hearing of the present case deferred. He has also given an explanation for what occurred on
19 August in relation to the refusal of cross-examination.

[21] The third matter is any delay in applying to set aside. There was none.

[22] The fourth matter is the question of whether the Authority will suffer irreparable damage if the judgment is set aside. It is true that the claim relates to events that happened about 13 years ago and that this was the second time the Authority had obtained a default judgment. But it is immediately noticeable that the Authority itself delayed bringing its claim for about five years, until 2011, so it cannot have had any particular urgency. Nor was it astute to progress matters after the setting aside of the first default judgment in December 2011. A further 4½ years elapsed before the events of 2016. If the Authority felt that it was suffering prejudice – in a case that appears primarily to depend on its documentation – it surely would have pressed hard for an earlier hearing. It is unsatisfactory that the Authority must, as it were, go back to square one, but we have not been satisfied that it will be significantly prejudiced by the additional elapse of time that now has occurred and will occur before trial.

[23] For these reasons, we do not disturb the Commissioner’s exercise of her discretion in setting aside the judgment. We do however impose a condition. The Authority, through no fault if its own, has been put to what the Commissioner described as considerable costs and there have now been further costs associated with this appeal which the Authority as the “innocent” party should not have to bear. The Commissioner made her order setting aside judgment conditional on Shipping Agency paying costs of $750 into Court before any fixture was given or further case management directions authorised.

[24] We see no reason why those costs, which Shipping Agency has regrettably neglected to pay, plus the further sum of $1,250 for the respondent’s costs of this appeal (a total of $2,000) should not immediately be paid to the Authority.

[25] We therefore make dismissal of this appeal conditional upon payment. We set aside the costs order made in the High Court and in its place we order Shipping Agency to pay costs of $2,000 to the Authority no later than
4 September 2019, time being strictly of the essence. If that payment is timeously made the appeal will be dismissed. If it is not so made, the appeal will be allowed and the default judgment of 19 August 2019 restored.

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Blanchard JA

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Handley JA

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Heath JA