Foremost Construction Pty Ltd v Concrete Engineering Pty Ltd [1996] PGDC 2; DC3 (13 March 1996)

Unreported District Court Decisions

[1997] PNGDC 6 - FOREMOST CONSTRUCTION PTY LTD V CONCRETE ENGINEERING PTY LTD

[1997] PNGDC 6

PAPUA NEW GUINEA

[DISTRICT COURT OF JUSTICE]

CASE NO 282 OF 1995

FOREMOST CONSTRUCTION PTY LTD

DEFENDANT / APPLICANT

V

CONCRETE ENGINEERING PTY LTD

COMPLAINANT / RESPONDENT

Port Moresby

Vagi ADCM

8 March 1996

13 March 1996

PRACTICE AND PROCEDURE - District Court - Application to set aside exparte default judgment - Warrant of execution - Applicant undertook to pay debts of another Company.

Cases Cited

Green and Co. v Green [1976] PNGLR

Counsel

Mr Manase for the Defendant / Applicant

Mr Hartshorn for the Complainant / Respondent

RULING

13 March 1996

VAGI ADCM:  This is an application by Foremost Construction Pty Ltd  (hereafter, defendant / applicant)  for an order to set aside a default judgment entered on 2nd January 1996 and the Warrant of Execution issued on 29th January 1996 and the motor vehicle Toyota Dyna, Longleed, white, with the registration No. JAA  498  impounded by Boroko Traffic Police be released to the defendant/applicant forthwith.

A further order has been sought to have the matter set down for mention at a time convenient to the Court and the parties.

On 5th March, 1996, when this application first came before me, the defendant/applicant took me through the motion with its supporting affidavit, and due to the urgency of the matter, had asked for urgent ruling so that the vehicle which the Police had impounded and which was in their custody be immediately released.  The Complainant/Respondent through its Manager, then Karl Roos, had objected to the motion stating that he had in his possession certain documents which he wished to tender then, but because I thought Mr Ross was making a reply not in an affidavit form pursuant to Section 159 (3) of the District Courts Act,  I then directed him to tender those documents, he had referred to, as Annexures to his answering affidavit.  I adjourned the application to 8th March, allowing Mr Ross time to prepare his affidavit.

On the 8th March, Mr Manase indicated that he had filed further affidavits in support of the application.  The complainant/respondent’s counsel Mr Hartshorn  has also indicated that he had filed an answering affidavit with annexures.

Further to the written submissions in support of the application, Mr Manase argued that the summons was not properly served to the defendant / applicants at its registered address.  I find this to be quite regular pursuant to section 47 (1)(c) (iii) of the District Courts Act when the complainant / respondent served the summons by post.  This argument must, therefore, fail.

When this matter first came before this Court on the return date on 7th December 1995 a judgment was entered for the Complainant/Respondent in the sum of K9,611.48 payable forthwith. Mr. Maurice Laufa who was to appear for the Defendant/Applicant was unable to obtain a Practicing Certificate for 1996 legal year and therefore would not appear.  I see on file no Notice of Intention to defend was filed.

The judgment was on that basis regularly entered.  To set aside as default judgment regularly entered, the law is well settled in this jurisdiction.  For the court to exercise its discretion to set aside its default judgment, the applicant must satisfy the following requirements as set out by O’Leary AJ in Green and Company Pty Ltd -v- Green [1976] PNGLR 73 and adopted in Baker v  The Government of Papua New Guinea [1976] PNGRL 340, approved by the Supreme Court in the Government of Papua New Guinea and Davis - v- Baker [1977] PNGRL 386:

N2>1.       That the application must be made promptly and within a reasonable time; and

N2>2.       That there be a reasonable explanation why judgment was allowed to go by default; and

N2>3.       That there must be an affidavit stating facts showing a defence on the merits.

The defendant/applicant submitted that the failure of the defendant’s lawyer to appear on the return date has resulted in the entry of the default judgment.  But it has not been shown that, if there was a defence, why could not the lawyer filed a notice of intention to defend so that the Court would have given an option to the lawyer that after having obtained his practicing certificate, he would appear to defend the claim.  I do not find this to be the case here.

After the entry of the default judgment and followed by the issuance of the warrant of execution, it took about 56 days for the defendant/applicant to file this application.  This application was filed after the police, in execution of the warrant, impounded the defendant/applicant’s motor vehicle.

An explanation has been made as to why judgment was allowed to go by default.  The defendant/applicant relied on its lawyer, after having received instructions, to appear on its behalf and to defend the action on the basis that the debt owed is by another Company namely Kone Marine Pty Ltd (here after, Kone).

Before I would go into any depth, I should recite briefly how the Complainant/Respondent had obtained a default judgement to recover debt owing to it.  At first Kone was a Company engaged in Construction work.  Following the loss of its General Manager Mr Stanley Efstathis, a new Company Foremost Construction Pty Ltd, the Defendant/Applicant took over Kone’s remaining activities since November/December 1994.

On 16th February 1995, the defendant/applicant by its Chairman Harold Farapo and a director Dadi Toka wrote to the General Manager of the Complainant/Respondent.  In the letter the two officials have expressed their desire to continue the relationship that they have enjoyed with the Complainant/Respondent over the past years.  It was also expressed in the letter that the defendant / applicant’s Acting General Manager David Thompson would discuss matters of mutual interest including arrangements for payment of any outstanding accounts that they have decided to take over.

In another letter dated 31st May 1995, the Chairman Farapo wrote to Karl Roos that his Company was prepared to assist with payment of K2,000 per month commencing from middle of June 1995 until review at the end of December, 1995.  In another letter subsequently written on 2nd June 1995, in which Mr Farapo reiterated that his Company would pay K2000 every month from mid - June 1995 to December 1995.

Following the letter of the 31st May 1995 by Mr Farapo, Mr Roos on 1st June 1995 wrote back to Mr Farapo, in which letter he rejected Mr Farapo’s suggestion on the basis that Mr Farapo had not signed a prepared written contract.  He then gave instruction to commence legal action.  The letter written by Mr Farapo on 2nd June 1995 was in reply to Mr Roos letter of 1st June 1995.  On the same day Mr Roos wrote back to Mr Farapo in which he said that the parties have to sign the contract that has to be registered at the Registrar’s Office.  When this did not eventuate, and that no payments were forthcoming, the complainant / respondent commenced proceedings.

Mr Manase, for the defendant/applicant, argued why the judgment should be set aside.  He said the defendant/applicant later appeared on the scene and for the purpose of establishing a good reputation with a potential supplier, it voluntarily agreed to pay Kone’s debt, but there was no contract.  Further, the Statute of Fraud and Limitation Act, Section 6 provides consideration for guarantee need not be in writing.

“Where:

N2>(a)      a person promises to answer for the debt, default or miscarriage of  another from; and

N2>(b)      the promised is in writing signed:

(i)       by the person making the promise; or

(ii)      by some other person lawfully authorised for the purpose, that promise is valid to support on action, suit or other proceedings to enforce the promise notwithstanding that:

(c)      the consideration given in respect of the promise is not in writing; or

(d)      the consideration cannot be inferred from a written document.”

Counsel further argued that there is no consideration and therefore the Statute of Fraud can not help the complainant/respondent.  He submitted that, there was a similar case in the National Court where the court found in the similar circumstances when BHP sued the defendant/applicant.  BHP sought to wind up the defendant/applicant alleging that it had guaranteed to pay the debt of Kone.  The Court found there was no consideration (See MP No 381 of 1995 as per Brown J).

John Bray, the lawyer, who appeared for the defendant/applicant in the National court, deposed to his affidavit that the National  Court dismissed BHP’s petition on the basis that there was no consideration.  That is the defendant/applicant never said in writing to BHP, as if you continue to supply us, we with pay Kone’s debt.

I have read the marked annexures to Bray’s affidavit.  The annexure “B” is a letter to the BHP by Mr Farapo in which he has expressed the desire to settle outstanding debt owed by Kone.  He also proposed to settle by instalment every second Friday until final payment.  In the same letter Mr Farapo advised that they would be purchasing more steel for their new projects.  Mr Farapo in two subsequent letters to BHP dated 7th and 23rd March 1995 respectively, mentioned the similar proposals on the method of payment.  In the letter of the 7th March, Mr Farapo stated that Kone and the defendant/applicant were still in the stages of transformation which I would take to mean that Kone had not completed wound up its operation.  If it did, all the assets would have been transferred to the defendant/applicant.  In my opinion the two companies perhaps were  going into a merger under the name of the defendant/applicant.  But why would a company just walked out like that because it general manager had died.

Mr Hartshorn for the complainant/respondent has made some reference on the adequacy of consideration by Cheshire and Fifoot on Law of Contract, Third Edition at pages 76, 77 and 78.

The parties are presumed to be capable of appreciating their own interests and of reaching their own equilitism.  It was said that, “when a thing is to be done by the plaintiff, be it ever so small, this is a sufficient consideration to ground an action and this rejection of quantitative that has been constantly reiterated”.  In Thomas v Thomas [1842] EngR 260; (1842) 2 QB 851; 114 ER 330.

“The plaintiff’s husband had expressed the wish that the plaintiff, if she survived him, should have the use of his house.  After his death the defendant, his executor, agreed to allow her to occupy the house:

(a)      because of the husband’s wish; and

(b)      on payment by her of one pound a year.”

The Court declined to be influenced by the husband’s wishes:  motive was “ not the same thing with consideration”.  But they accepted the plaintiff’s promise to pay one pound  a year as affording consideration for the defendant’s promise, and the defendant’s counsel admitted that he could not rest any argument upon its manifest inadequacy.

Implicit promise to use is sufficient.  There need not be an express promise either to compromise or forebear, if such an undertaking can be inferred from the circumstances or from the negotiation between the parties.

With some assistance from these academic advice, I now consider the requirements as set out in Green v Green (supra).

First, was the application made promptly and within a reasonable time.  It has been shown that the application was made after 56 days from the date of the entry of the judgment.  It was made after the police, in execution of the warrant of execution, impounded the defendant/applicant’s motor vehicle.

Secondly, is there a reasonable explanation why judgement was allowed to go by default.  The defendant/applicant relied on it for lawyer Maurice Laufa to make appearance.  But because he has no Practising Certificate he could not.

Thirdly, his the defendant/applicant shown a defence in merit.  It argued that the debt owned by another company and not by it.

For the first and second requirements I do not accept the defendant/applicant’s explanations.  And for the third requirement, there was an undertaking by its management to meet the debt owing by Kone so as to maintain its relationship with the complainant/respondents.  There is sufficient documentary evidence from which to infer that such was an understanding between the parties.  In the commercial community, ones reputation must be maintained and guarded so as to carry on.

In the circumstances I should not grant this application.  The application is therefore refused accordingly.

Orders accordingly.

Lawyer for the defendant / applicant:  Pato Lawyers

Lawyer for the complainant / respondent:  Shepherd Lawyers