Lihir Civil and Construction Ltd v New Ireland Provincial Government [2005] PGLawRp 14; [2005] PNGLR 165 (24 June 2005)

[NATIONAL COURT OF JUSTICE]

LIHIR CIVIL AND CONSTRUCTION LIMITED

V

NEW IRELAND PROVINCIAL GOVERNMENT

KOKOPO: LENALIA J

21 January; 24 June 2005

PRACTICE AND PROCEDURE – Application to set aside default judgment – Discretion – Applicable principles – Promptness of application – Defence on the merits – Explanation for default – Application granted.

Facts

The plaintiff in this claim is a duly incorporated company in accordance with the laws of Papua New Guinea. It sued the New Ireland Provincial Government for damages in relation to breach of a contractual agreement and the consequential loss amounting to a sum of K3,294,144.72.

The Writ was filed on 4 November 2003 and was served on Mr. Robinson Sirambat, the Provincial Administrator on 26 day of the same month. On 12 February 2004, Mr. Lidgett of counsel for the plaintiff conducted a search at the Kokopo National Court Registry office found that no Intention to Defend had been filed and not even a Defence.

Following the above search, the plaintiff's lawyers filed a notice of motion on that same date seeking default judgment. On 13 February 2004, the motion was moved and the Court entered default judgment for the portion of the claim for an aggregated sum of K676,472.72 for liability and quantum. The next portion involving a sum of K2,622,672.00 was entered to be assessed and verified on a later date.

A little over nine months since the default judgment was entered, the defendant's lawyers filed a notice of motion on 15 November of last year in which they sought the following orders:

1. That the default judgment entered against the defendant on 13 February 2004 be set aside.

2. That leave is granted to the defendant to file its defence out of the time required by the Rules.

3. That the defendant pays the plaintiff's costs thrown away as a result of the defence's failure to file its defence within the required time.

The application by the defendant was argued before this Court on the 21 of January this year and the Court directed counsels to file submissions. The plaintiff's counsel filed their written submissions on the 1 February, but the defendant's lawyers only filed theirs on the 9 March 2005.

Held

1. The law in this jurisdiction is well settled which states that in order for this Court to exercise its discretion in favour of the applicant, the onus is on defendant/applicant to satisfy the Court on the balance of probabilities the following factors:

2. There must be evidence to explain the reasons why judgment was allowed to be entered by default.

3. If there has been a long delay in applying to set aside the default judgment, it must be fully explained why there was such a long delay.

4. There must be a defence on the merits which must be supported by affidavit evidence. See, Green and Company Pty Ltd v Green [1976] PNGLR 73, see also Barker v The Government of Papua New Guinea and Davis and Bux [1976] PNGLR 340, George Page Pty Ltd v Malipu bus Balakau [1982] PNGLR 140, Map Makers Pty Ltd v Broken Hill Proprietary Ltd [1987] PNGLR 78

The Proceedings in this Court are regulated by the National Court Rules of 1983.

5. An application to set aside must be made promptly. The applicant must produce evidence to show that he/she has a defence to the claim.

6. The applicant has established on the balance of probabilities that there is a defence on the merits.

7. Justice demands therefore that, the default judgment ought to be set aside.

8. The Court also grants leave to the defendant to file a notice of intention to defend and a defence out of time. It is also ordered that the defendant shall pay for the plaintiff's costs thrown away as the result of its failure to file an intention to defend and a defence within the time required by the procedural rules together with the costs of this application.

Papua New Guinea cases cited

Barker v The Government of Papua New Guinea & 2 Others [1976] PNGLR 340.

Dumm v Sigere & 1 Other (1997) N1721.

George Page Pty Ltd v Malipu Bus Balakau [1982] PNGLR 140

Green & Company Pty Ltd v Green [1976] PNGLR 73.

Motor Vehicles Insurance (PNG) Trust v Viel Kampu (1998) SC587.

Peter Donigi v Base Resource Ltd [1992] PNGLR 110.

Rabaul Shipping Ltd v Rita Ruru (2000) N2022.

Counsel

D. Lidgett, for the plaintiff.
T. Boboro, for the defendant.

24 June 2005

Lenalia j. The plaintiff in this claim is a duly incorporated company in accordance with the laws of Papua New Guinea. It sued the New Ireland Provincial Government for damages in relation to breach of a contractual agreement and the consequential loss amounting to a sum of K3,294,144.72.

The plaintiff was a successful tenderer for a tender by Notice put out by the defendant Tender No. PGRP – MVVC – 10/2002. The defendant's estimated cost for the proposed scope of work was K930,523.00 as provided for in the contract documents. Such contract was agreed to and entered between the plaintiff and the defendant on 22 March 2002. The scope of the contract related to road construction between Metewoi village and the Lavongai Health Centre being a 9.6 kilometers road commonly referred to in the contract as "New Hanover Ring Road Project".

The contract was executed and was commenced on or about 30 April 2002 and was completed on 2 September of that same year. There were certain variations to the contract for an additional 0.6 kilometers of road and such variations were agreed to and endorsed by parties on 14 November 2002.

The plaintiff now claims for the balance owing to them under the payment schedule on the contract as agreed amounting to K48,059.57.

They also claim an amount of K59,909.40 for the variation agreed to covering an extra 0.6 km of road. The defendant also failed to pay the plaintiff an additional amount for the balance of extra volume of cut/fill in the sum of K409,449.60. It appears from the plaintiff's pleading that, under the contract, the defendant was supposed to meet the cost of transporting the plaintiff's equipment machinery to and from the project site. The defendant did not meet the costs of repatriating equipment back to Lihir Island. The plaintiff claims K154,054.15 for shipment costs. The biggest component of the claim is K2,622,672.00 being for the loss suffered for working hours for the plant and equipment.

The writ was filed on 4 November 2003 and was served on Mr. Robinson Sirambat, the Provincial Administrator on 26th day of the same month. On 12 February 2004, Mr. Lidgett of counsel for the plaintiff conducted a search at the Kokopo National Court Registry office found that no intention to defend had been filed and not even a defence.

Following the above search, the plaintiff's lawyers filed a notice of motion on that same date seeking default judgment. On 13 February 2004, the motion was moved and the Court entered default judgment for the portion of the claim for an aggregated sum of K676,472.72 for liability and quantum. The next portion involving a sum of K2,622,672.00 was entered to be assessed and verified on a later date.

A little over nine months since the default judgment was entered, the defendant's lawyers filed a notice of motion on 15 November of last year in which they sought the following orders:

1. That the default judgment entered against the defendant on 13 February 2004 be set aside.

2. That leave is granted to the defendant to file its defence out of the time required by the Rules.

3. That the defendant pays the plaintiff's costs thrown away as a result of the defence' failure to file its defence within the required time.

The application by the defendant was argued before this Court on the 21 January this year and the Court directed counsels to file submissions. The plaintiff's counsel filed their written submissions on the 1 February, but the defendant's lawyers only filed theirs on 9 March 2005. For all your written submissions, I am so grateful.

Mr. Boboro of counsel for the defendant argues in his submissions that the power to set aside a default judgment is discretionary and given the reasons explained in the affidavit of Mr. Robinson Sirambat, the Provincial Administrator of the defendant Provincial Government, and due to the fact that there is defence on the merits, the Court should set aside its own orders dated and entered on the 13 February 2004.

For the plaintiff, Mr. Lidgett submitted that the current case is distinguishable from cases cited by Mr. Boboro which the Court shall refer to some of them later, in that in the instant case, the defendant has always been represented by its Provincial Legal Officer and there cannot be any excuses by the defendant. Secondly, the plaintiff's counsel argues that it is not sufficient to raise evidence of dispute in relation to the terms of the default judgment, but that the defence must have a "fairly and reasonably arguable defence".

The law in this jurisdiction is well settled which states that in order for this Court to exercise its discretion in favour of the applicant, the onus is on defendant/applicant to satisfy the Court on the balance of probabilities the following factors:

1. There must be evidence to explain the reasons why judgment was allowed to be entered by default.

2. If there has been a long delay in applying to set aside the default judgment, it must be fully explained why there was such a long delay.

3. There must be a defence on the merits which must be supported by affidavit evidence. See, Green and Company Pty Ltd v Green [1976] PNGLR 73, see also Barker v The Government of Papua New Guinea and Davis and Bux [1976] PNGLR. 340, George Page Pty Ltd v Malipu bus Balakau [1982] PNGLR 140, Map Makers Pty Ltd v Broken Hill Proprietary Ltd [1987] PNGLR. 78

The proceedings in this Court are regulated by the National Court Rules of 1983. My reading of o 12 r 8 of the rules is that this Court has discretion to either set aside or vary its own orders. The exercise of such discretion ought to be exercised according to the principles stated in the cases quoted above which principles I have paraphrased into three basic principles.

Order 12 r8 of the rules state:

"(1) The Court may, on terms, set aside or vary a direction for entry of judgment where notice of motion for the setting aside or variation is filed before entry of the judgment.

(2) The Court may, on terms, set aside or vary a judgment –

(a) where the judgment has been entered pursuant to Order 12 Division 3 (default judgment); or

(b) where the judgment has been entered pursuant to a direction given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the direction; or".

Rule 35 of o 12 carries the same idea in that it says that the Court may set aside or vary a judgment entered as it thinks just. In my view, the word "just" in o12 r35 makes allowance for the principle that where an applicant wishes to apply to set aside or vary a default judgment, he must explain by evidence why he let the judgment to be entered by default. An application to set aside must be made promptly and he must produce evidence to show that he has a defence to the claim.

I distinguish the facts of the instant case with that of Peter Dickson Donigi v Base Resource Ltd [1992] PNGLR 110, since that case concerned a review and although reference is made to the failure of the applicant's lawyer in not lodging the notice of appeal on time, it was held that failure by a lawyer to lodge an appeal within the time required does not provide special circumstances for exercise of discretion to review the decision of the National Court, and the merits of a review may establish cogent and convincing grounds and exceptional circumstances in favour of the grant of a review, which consideration may outweigh reasons for failure to lodge a notice of appeal on time.

The above case may be read out of context in the sense that where there is negligence on the part of a lawyer to act diligently, such failure ought to be brought onto the lawyer's client. That, in my view, would be tantamount to injustice to valued clients who come to Courts to settle their disputes amicably, as well as seeking justice in the judicial system.

The claim before this Court is partially liquidated and unliquidated in terms of o12 rr. 27 and 28 of the rules. It is a claim for breach of a well documented contract as appears from the evidence of both parties. I have read all the evidence put in support of the application to set aside the default judgment. Mr. Robison Sirambat alleges in paragraph 11 of his affidavit in trying to explain the reasons why the default judgment was allowed to be entered by default, that there was difficulty getting the cooperation of the public servants in the Province because of political alliances which had become entrenched in the public service, and so certain officers in the department were not able to expedite the process even including the Provincial Legal Officer.

In their explanation on the delay in applying to set aside the default judgment, the defence once more says there was no co-operative effort by the staff in the Department of New Ireland despite specific instructions to forward the files to the defendant's lawyers; such files were not dispatched in time.

On the same token, Mr. Charles Lamangau's affidavit contains denials to amounts claimed in the Statement of Claim in the writ of summons. The same states that the contract was governed by its terms and under those terms the plaintiff would have been claiming twice for certain amounts already paid for by the defendant.

Perhaps the strongest argument on behalf of the defendant is that if there is defence on the merits of the case, the default judgment ought to be set aside. Applying the principles stated in the cases I have cited and other cases such as Dumm v Sigere (1997) N1721, Rabaul Shipping Ltd v Ruru (2000) N2022 or that of Papua New Guinea Banking Corporation (PNGBC) v Jeff Tole (2002) SC694, where does the defendant's case fall in this current proceedings.

Based on the foregoing discussion, I am convinced on the balance of probabilities that there is a defence on the merit and the parties need to come back to Court to try the total claim. The contract between the parties being well documented because the parties intended to be bound by those terms in the contract, they signed it and if I am right was either fully or partially executed, it would be only fair that the parties ought to come to Court in order for the defendant to refute allegations by the plaintiff.

Justice demands therefore that the default judgment ought to be set aside. It is the judgment of this Court therefore that the application to set aside the default judgment entered on 13 February 2004 be granted. The Court also grants leave to the defendant to file a notice of intention to Defend and a Defence out of time. It is also ordered that, the Defendant shall pay for the plaintiff's costs thrown away as the result of its failure to file an Intention to Defend and a Defence within the time required by the procedural rules together with the costs of this application.

Lawyer for the plaintiff: Warner Shand Lawyers.
Lawyer for the defendant: Allens Arthur Robinson Lawyers.