Moel Trading Co Ltd v King Holdings Ltd [2019] KIHC 60; Miscellaneous Application 51 of 2019 (14 June 2019)

IN THE HIGH COURT OF KIRIBATI 2019

MISCELLANEOUS APPLICATION NO. 51 OF 2019
(ARISING FROM HIGH COURT CIVIL CASE NO. 47 OF 2018)

[MOEL TRADING CO LTD
[TEKAEWANITI KUM KEE APPLICANTS
[
BETWEEN [AND
[
[KING HOLDINGS LTD
[KING KUM KEE RESPONDENTS

Before: The Hon Chief Justice Sir John Muria

5 June 2019

Mr Banuera Berina for Applicants
Ms Kiata Kabure for Respondents

JUDGMENT

Muria, CJ: This is an application for setting aside a default judgment entered against the applicants/defendants on 14 September 2018. If granted, the defendants seek an order granting the leave to file defence, a draft of which is attached to the papers filed with this application.

Brief Background

2. The brief background of this case is that the plaintiffs and defendants entered into an agreement on or about 20 May 2009 whereby the second defendant would rent the first plaintiff’s warehouse in Betio. The first defendant did rent the plaintiff’s warehouse and paid rents. However the defendants defaulted in payments of the rents, resulting in outstanding rents for the years 2012-2017 in the sum of $216,000.00. The plaintiffs now claim the sum of $216,000.00 outstanding rent and 20% interest in the sum of $112,797.76.

3. The Writ was served on the defendants on 13 August 2018. Memorandum of Appearance was entered for the defendants on 31 August 2018. No Defence had been filed and on 14 September 2018, a Judgment in default of Defence was entered for the plaintiffs.

4. Enforcement proceedings were commenced against the defendants with a Writ of Fieri Facias issued on 16 October 2018. The plaintiffs later took out garnishee proceedings on 12 February 2019 which proceedings were adjourned to 23 April 2019. The garnishee proceedings were again adjourned to
20 May 2019 and again to 27 May 2019. In the meantime, on 22 May 2019, the defendants filed their application for setting aside. On 27 May 2019, the garnishee proceedings were adjourned pending the determination of the defendants’ application for setting aside.

Issues

5. There are two (2) issues commonly raised for the Court’s determination in cases of setting aside default judgment. The first is: whether the default judgment was regularly or irregularly entered. Secondly, whether default judgment should be set aside or not.

Legal Principles

6. The legal principles which the courts apply in cases of setting aside default judgment are well established. In Kiribati those principles are affirmed in the various case law authorities dealt with by the courts.

7. The case of Waysang Kum Kee –v- Abamakoro Trading Co Ltd [2001]
KICA 9 is the authority in Kiribati on the principles to be applied in an application for setting aside default judgment. That case has been followed in a number of subsequent cases including Teretia Korieta –v- Broadcasting and Publications Authority (BPA) [2012] KIHC 51; Civil Case 8 of 2011 (29 October 2012);
Riteri –v- Betio Shipyard [2013] KIHC 30; Civil Case 146 of 2011 (31 July 2013); and Public Utilities Board –v- Kakarawa [2016] KIHC 13; Miscellaneous Application No. 59 of 2016 (Arising from Civil Case 25 of 2016) (28 November 2016).

8. The Court of Appeal, in Waysang Kum Kee –v- Abamakoro expressed the principles to be followed in an application for setting aside default judgment in the following words:

“The Court has unfettered discretion to set aside a judgment obtained in accordance with the Rules. In determining the essential question whether there may have been a miscarriage of justice, and where the overall justice lies, three considerations have long been considered of dominant importance: whether the defendant has a substantial ground of defence to the plaintiff’s claim, whether the defendant’s failure to take any steps, or to appear at the hearing, was excusable, and whether the plaintiff will suffer irreparable harm if the judgment is set aside; Alpine Bulk Transport Company Inc. v Saudi Eagle Shipping Company Inc. The Saudi Eagle [1986] 2 Lloyd’s Rep. 221, 223 (CA), Paterson v Wellington Free Kindergarten Assn Inc. [1966] NZLR 975, 983 (CA). The onus of establishing a substantial ground of defence is on the defendant. The defendant must show a defence of sufficient substance to justify delaying the plaintiff in obtaining the fruits of the judgment”.

9. The underlying principle at the heart of such application as this is for the Court to ensure that no injustice is done to either party when it comes to exercising its discretion to set aside the judgment. To assist the Court in exercising its discretion, the three considerations set out in Waysang Kum Kee
–v- Abamakoro are of paramount importance.

Application of principles in present case

10. Mr Berina of Counsel for the applicants submitted that the applicants have a substantial defence in this case, a draft of which has been filed and attached to the application. In their draft defence the applicants raised the defence of undue influence and estoppel. Both defences are alleged to have risen out of the agreement entered into between the second plaintiff (second respondent) and second defendant (second applicant).

11. The particulars of the alleged undue influence are set out in the draft defence. Likewise the particulars of the alleged estoppel are also set out in the draft defence. Both defences are serious in nature and the applicants must establish the basis for such defences. In this regard, the affidavit filed on behalf of the applicants becomes an important source in demonstrating the basis of the defences which the applicants are now relying on. See Korieta –v- Broadcasting and Publications Authority (above).

12. The affidavit of Tekaewaniti Kum Kee deposed to the fact that an intimate relationship developed between the second respondent and herself. She stated that the agreement now relied upon by the respondents came about following that relationship and ensuing arrangement between the second respondent and the applicants. Ms Tekaewaniti Kum Kee assured in her affidavit that the facts giving rise to the defences now relied upon are true.

13. On the evidence shown by the affidavit of the second applicant, I think there can be found some basis for the defences that the applicants are now raising. As such an arguable defence has been raised by the applicants. Whether the defences will succeed or not is not an issue at this stage. That is a matter to be decided at the trial. It is important only at this stage that a basis is demonstrated for the defences to be raised. I am satisfied that the applicants have shown the basis of an arguable defence in this case.

14. Further, the relationship between the applicants and respondents is contractual. There are terms and conditions which the parties are bound by. Any breach of those terms and conditions cannot be simply absolved by default judgment. See Public Utilities Board –v- Kakarawa [2016] KIHC 13. The applicants/defendants’ defences of undue influence and estoppel put the relationshjp between the defendants and plaintiffs in issue. They have to be resolved by evidence properly tested at trial.

15. The second consideration is whether the applicants have shown reasonable excuse for the delay in filing defence. I return again to the second applicant’s affidavit to ascertain whether the failure to take steps to file defence was excusable.

16. In paragraphs 2, 3 and 4, the second applicant attempts to give her explanation for the failure to file defence to the plaintiff’s claims. Paragraphs 2, 3 and 4 are as follows:

“2. Unfortunately I have spent most of my time in New Zealand since last year as I needed to be near my children who are attending school in New Zealand.

3. It has therefore not been easy for me to try and locate documents dating back to 2006 and to consult with my lawyer who had also been travelling a number of times last year.

4. I have now just managed to compile the relevant documents to enable me to recall what happened over ten years ago between me and the Second Defendant”.

17. The chronology of events set out in the respondents’ submission shows that the applicants were served with the Writ of Summons on 13 August 2018 and the applicants entered Appearance on 31 August 2018. The applicants had not taken any steps at all in the matter until 22 May 2019 when they filed the present application to set aside the default judgment entered against them on
14 September 2018. The respondents/plaintiffs on the other hand took out proceedings to enforce the judgment on default against the applicants. These include taking out a fieri facias on 16 October 2018, garnishee proceedings filed on 12 February 2019 which was adjourned twice.

18. It should be mentioned that the applicants do not dispute that they were served with the Writ of Summons and that they entered an appearance. There is no evidence to suggest that the applicants had taken or instructed Counsel to take any action from the time the Appearance was filed on 31 August 2018 until the moment the setting aside application was filed on 22 May 2019.

19. A businesswoman in the position of the second applicant, coupled with the fact that she has been represented by Counsel, I find the reasons for the failure to file defence in time, not convincing. The onus is on the applicant to justify the failure which in the present case was not justified.

20. The third consideration is whether the respondents will suffer prejudice if the default judgment is set aside. For a period of nine months the respondents were deprived of the enjoyment of the fruit of their judgment. That is the prejudice that the respondents will suffer if the default judgment is set aside. As such some measure of balance must be taken to minimise the prejudice which the respondents are likely to suffer if the judgment is set aside.

21. Mr Berina suggested that any inconvenience suffered by the respondents as a result of setting aside the default judgment can be compensated by costs. While payment of costs is useful in this case, I feel that payment of costs is not enough to offset the prejudice which the respondents would suffer in this case if the default judgment is set aside.

22. The applicants have succeeded in showing that they have an arguable defence in this case. For that reason, the Court will exercise its discretion and grant the order setting aside the default judgment entered against the applicants/defendants on 14 September 2018. However, to assist the respondents in minimizing any prejudice caused to them by the setting aside order, it is appropriate that an order be also issued that as a condition for the setting aside of the default judgment, the judgment sum in this case of $216,000.00be paid into Court to abide by the decision of the Court after trial.

ORDER

1. Judgment in default dated 14 September 2018 is set aside.
   
2. The sum of $216,000.00 to be paid into Court by the applicants by
   15 July 2019 to abide by the outcome of the proceedings in this case.
   
3. Costs of this application to be paid to the respondents by the applicants to be taxed if not agreed.
   

Dated the 14^th day of June 2019

SIR JOHN MURIA
Chief Justice