Kaumb v Papua New Guinea Banking Corporation [1997] PGNC 83; N1594 (16 July 1997)

Unreported National Court Decisions

N1594

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS NO. 85 OF 1996
BETWEEN
PAUL KAUMB - First Plaintiff
And
JOHN KEWA - Second Plaintiff
And
PAPUA NEW GUINEA BANKING CORPORATION - Defendant-Cross Claimant
And
PAN ASIA PACIFIC ASSURANCE PTY LTD - Cross-Defendant

Mount Hagen

Lenalia AJ
1 July 1997
16 July 1997

CIVIL JURISDICTION - Practice - Application by Cross-Defendant to set aside judgement by default - Irregularity in obtaining judgement - cross - defendant must have gefence on the meritserits - Whether affidavit shows defence on the merits - Irregularity of proceedings - Defence on the merits - Principles applicable -Absence of evidentiary proof - Application granted.

Cases Cited:

The following cases are cited in the judgement:

Green and Co Pty Ltd v Green [1976] PNGLR 73

Barker v The Government of Papua New Guinea [1976] PNGLR 340

The Government of Papua New Guinea and Davies v Barker [1977] PNGLR 386

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

Application To Set Aside

This is an application on notice by the Cross-defendant seeking orders to set aside a judgement entered against them on 7th day of March 1997.

Counsel:

P Korowi for the Plaintiffs

P Dowa for the Defendant/Cross-Claimant

P Koeya for the Cross-Defendant

16 July 1997

LENALIA AJ: This is an applon pursuantsuant to O. 12 r 8 subrule (3) (a) of the National Court Rules to set aside a default judgement allegedly entered by consent against the two defendan 7th of march, 1997. On that daly the lawyers rers rers representing the plaintiffs and the Defendant/Cross Claimant appeared. No representative appeared for the Cross-Defendant. The defencsed by the lawyelawyer for the applicant is that his client was not served with the notice of process pursuant to O8 r 42 which provides for service of documents in cross-claims.

BACND

The backgrounground history of this case is this. On the 26th day of January, 1996 the plaintiffs filed a Writ of Summons claiming damages against the only defendant named in the Writ of Summons as Papua New Guinea Banking Corporation. icula negligence included ided in the pleading was failure lure to declare the full insurable value of a Toyota Hiace 15 Seater Bus wvehicle full insurable valuewas placed at K28,000.00 but the defendant/cross claimant falsefalsely declared the insurable value at K20,000.00. The applicant&#8 lawyer arer argued that they have a good defence on the merits and thus I should set aside my own consent orders made on 7th of March, 1997. I set out in full Statementement of Claim in order to understand the full facts of this litigation.

STATEMENT OF CLAIM

1. &##160; A60; At all materime tio t to this n:

(a) ـ Th0; The Firs First Plaintiff was and is a subsistence farmer from Kuga village, Mount Hagen i Westighlarovince anaboutears of age.

(b)&>(b) #1660; Th0; The Second Pond Plaintlaintiff was and is a subsistence farmer from Kuga Village, Mount Hagen in the Western Highlands Province and is about 45 years of age.

(c) ـ&#1hendanendant bank bankrporateorated undd under ther the Companies Act Chapter 146 of the Revised Laws of Papua New Guinea and carries on the business of ba throt Papua New Guinea and is capable of suing and bend being sing sued in tis corporate name, style and capacity.

2. &ـ O60; On the the 4th August, 1995 the Plaintiffs obtained a loan from the Defendant’s Mount Hagen Branch in um of388.00 to purchase a new Toyota Hiace 15 Seater Bus at Ela Motors, Mt Hagen valuevalued at d at K28,000.00 and in addition to the loan K2,000.00 for comprehensive insurance.

3. &ـ T6e Plae Plaintiffntiffs accepted the terms and conditions of the loan and signed the 2 approval letter of 4th August, 1995 of the Relieving Mount Hagen Branch Manager, one Mr KE Drosd

40;҈ < &160; Defendant en the 8th Augustugust, 1995 took a Comprehensive Insurance cover with the Pan Asia Pacific Insurance (PNG) Pty Limited and declared the value of the vehicle at K20,000.00 when in fact the insurable value was K28,000.00 and the Defendant only paid a premium of K1,547.00.

5. ;ټ A60; A bill bill of sale signed by the Plaintiffs provided under clause C. 6 that the Grantor (Plaintiffs herein) will ensure and keep insured against loss or damage by fire or otheres inr full full insurinsurable value with some insurance officeffice the mortgaged property.

6. The Defendantewaive thigabligation of the Plaintiffs to insure the Toyota Hiace 15 Seater Bus by taking out a comprehensive ince c costwhich to baid b Plaintiff.

7. #160;&#160 #160; The; The; The said said Toyota Hiace 15 Seater bus registration No. P722 S was purchased by the plaintiffs and after a few days was involved in an accident on the 19th August, 1995 whilst being driven by one Kewa nd was damaged beyond repairepair.

8. & When the Plaistiffs checkehecked the Defendant on the comprehensive Insurance cover they discovered that the said vehicle was only insured at K20,000.00 and not at K28,000.00 being the insurvalueefore, the Defendefendant&#ant’8217;s Mount Hagen Branch was negligent.

Particulars of Negligence of the Defendant

(a) Failing to declare the full insurable value of the Toyota Hiace 15 Seater Bus being K28,000.00 when it falsely declared the full insurable value at K20,000.00.

(b) ҈ adsle thng the Plai Plaintiffs in its letter of the 4th August, 1995 that comprehensive insurance cost was K2000.00 which was sufficient premium for the value of the said bus when it actupaid K1,54premiumemium not not suffisufficient to cover the said vehicle in its full insurable value.

9. & A60; re alt ou the negligegligence of the Defendant the Plaintiffs were deprived of a replacement vehicle for which the comprehe inse wasosed ver aey (Plaintiffs herein) continue to suffer hardship ship and band busineusiness loss loss foss for which the Defendant is liable.

The Writ of Summons was served on the Defendant/Cross-Claimant on the 19th of February but the affidavit of service was filed on 27th of June 1996. Thendant/Cross-Claimant fint filed a Notice of Intention to Defend as early as 5th of March and a formal defence was filed on 10th of July, 1996. In their defenceDefendant/dant/Cross-Claimant (herein referred to as PNGBC) admitted that the plaintiffs took out a loan agreement with them but denies all other allegations by the two plaintiffs in their stat of claim. A reply tply to thence wase was filed on 17th of July, 1996. This time on the replthe Dthe Defence the name of the applicant was added to the notice of reply to the defence. As 60; how the name of thef the applicant was added as a partyhe current proceedings is not clear from the records. #160; Nor is thention in thin the file endorsements how the applicant camee added a party or whether ther the applicant was properly added as a party to the proceedings as required by O. 5 rr 2 & 4 of thes regarding joinder of cauf causes of action and parties. Foll the plaintiffs reply eply to the defence a notice of motion was filed on 7th of February 1997 orders in the following terms:

1. ; T60 Defendant/Cross-ant&#ant’s Defence be stru struck out; and

2. ҈ D60; Default judgement berentered against the Dent/Crlaima the f 28,0 with interest at t at 8% fr8% from thom the date date of e of issue of the Writ of summons to the date of this judgement; and

3.&ـ҈ T60; The Dehe Defendaoss-coss-claimant be indemnified by the Cross-defendant as to Order No. 2 above; and

4. & T60; The Defendant/cross-claimant and Cross-defendant to pay the Plaintiffs’ taxed costs; and

. ; Generalgdamands and economconomic loss to be assessed; or<; or

6. ҈ T60; The Cross-dantsfnd tpon taintid Defendant/Cross-defendant its Notice of Intentionntion to D to Defendefend and and defendefence to the Cross-claim within 14 days.

7.;ټ & Any other orders thrs the Cthe Court ourt deemsdeems appropriate; and

8. &##160;; T60 tore tor entryentry at this order be abridged to the date of assessment of damages which shall take plke place forthwith.

In support of the aption on b of the two plaintiffs, Mr Korowi deposdeposed ined in his his affidavit that despite PNGBC filing their intention to defend and their eventual formal defence, the Applicant had not filed theirs yet. In his letters dated 2d 20nd 20th September 1996 (see anns. “C” and “D”) to PNGBC Loans Management at Waigani, Mr Korowi indi that he was to press ress rders in his motion seeking a con sent order against PNGBC NGBC but PNGBC was to be indemnified by the Cross-Defendant. A noticsearc filed by Hotl Hotley Pora in the employ of Kunai &amp & Co. Lawyers testifying that he conducted a search at the Mount Hageistry Office and could only find a defence filed by PNGBC but not the Cross-Defendant.&#160 Thentiffs’ motion waon was fixed for hearing on 7th of March 1997. An affidavit of service o the same was caused to be posted to PNGBC ordinary postaless through Mr Jacobus Kewa Puringi - Loans Management, PNG, PNGBC PO Box 295, Waigani.

In the course of their dealings, the piffs lawyer secured an agre agreement with the Principal Legal officer of PNGBC to have a consent order. Mr Franklyn B Artihulagnedigned the proposed consent orders. This proposed order was aled as well as being tendered to the Court sitting on the the consent orders were made. Afterconsent orders were oere obtained they were serveserved on all parties including the applic#160; Following grant of thof the consent orders the plaintiffs further filed yet another motion on 30th May 1997 seeking leave of the Court to serve a Garnishee Notice pursuant to O. 13 r 56 of the National Court Rules. By consthe notice seeking king leave for a garnishee proceedings was stood over generally awaiting outcome of the applicant’s motion.

The Cross-Defendant eeks orders in terms of their motion to set aside orders nurs number 4 and 5 entered against them on the 7th of March this year. They seek a further order directing them to file a defence to the cross-claim within 14 days and an order for the Defendant/Cross Claimant to pay the applicant’s costs incidental to this application.

Evidence relied on by the applicant is contained in an affidavit deposed to by Mr Terry Ward in the employ of the Cross-Defendant as a Finance and Administration Manager. Mr Ward says that upon receipt of a sealed copy of the consent orders posted to them with a covering letter from Kunai & Co. Lawyers, he conducted a thorough search of the defendant’s business records kept by the applicant in relation to documents, letters, legal proceeding files and facsimile or otherwise, he found no such records of the current proceedings. Mr Ligh informed the depondeponent that, the former had enquired with an agent at their Mt Hagen office who obtained information fhe Mtn Registry Office that, there was no such affidavfidavit of service of the cross-claim file filed nor was there any document to show that the applicant was aware of the proceedings. Mr Lightfdmitted receivingiving a copy of an unsealed affidavit of service from the defendant/cross claimant’s lawyer on the 27th of May 1997. I note that annexur220;A�A” to Mr War17;s affidavit is a copy ofpy of an affidavit of service only in relation to the Defence “and other relevant documents in relato the above proceedings” without specifying what thes these documents were.

Mr Dowa for the Defendant/Cross Claimant argued that there is no way the Cross-Defendant could deny service of the process being served on them because Mr Lightfoot accepted service through their agent John Tomun and the Court must accept that admission by Mr Lightfoot should be deemed to be sufficient service.

The issue is whether service was effected on the Cross-Defendant. It il settled law that in t in order for this Court to exercise its discretion in favour of the applicant, he must establish to the Court by evidence why the defaulgement regularly entered ought to be set aside. To doTo do that applicant cant must by affidavit evidence advance reasonable explanation as to why judgement was allowed to go by default. An nation as to why there here was delay (if there was one) inging the application (or otor otherwise show that the application was made promptly) and material adverting to the defence on the merf their application: 160; GreenCo. Pty Ltd v Gr v Green [1976] PNGLR 73: see also Barter v Thernmenrnment of Papua New Guinea and Buy [1976] PNGLR 340; The Gment of Papua New Guiw Guinea and Davis v Barker [1977] PNGLR 386; George Page Pty Ltd v MaBus Balakau [1982] PNGLR 140.

Mr Koeya advances one one valid argument in favour of his client that the Writ of Summons was not served on their client otherwise a defence would have been f By carefcareful perusal of all documents in this proceedings I find that there was an irregularity involved in the way the writ of Summons was drawn. I said e outset of my diio diion the instillation oion on the Writ of Summons does not bare tare the name of the Cross-Defendant nor have I sighted any documents in the suggesting to me if the Cross-Defendant was ever added a ed a party to the proceedings pursuant to O. 5 of the National Court Rules. How did the Defendant/crlas claimant expect the Cross-Defendant to know about the facts of the cross-claim without proper pleading being served on the applicant. Service referred to bDowa Dowa would seem to be service of the defence filed by PNGBC which in my view was quite inappropriate to define pleading filed by the parties. The StatemenClaim should huld have beened on the cross-defendant.&ant. The se of pleadings has beas been said to define the issues of facts or of law. The centrle that thcess plss plays is well summarized in an article icle “The present importance of pleadings” (1966) by Master 1 H Jac 171 it says:

“Moreover, pleadings do not only define the issues between the pthe parties for the final decision of the court at the trial; they manifest and exert their importance throughout the whole process of the litigation. They contain articulars orrs or the allegations of which further and better particulars may be requested or ordered, which help still furtherarrow the issues or reveal more clearly what case each party is making. They limit thit the ambd rand range of the discovery of documents and the interrogatories that may be ordered. They sh their face whetherether a reasonable cause of action or de is disclosed. They provide a guide he prhe proper moer mode of trial, and particularly for the trial of preliminary issues of r fact. They demonstronstrate upon which party the burden of proof lies, and who has the right to open the case. They act as a measor compacomparing the evidence of a party with the case which he has pleaded. They determine thge of thef the admissible ece which the parties should be prepared to adduce at the trial. Theymit the reli relief whef which the court can award. Trovide thes for the defendefence of res judicata in subsequbsequent proceedings by reference to the record in the earlier proceedings21;&#(emphasis added).ded).

Mr Koeya further argued that the requirement to serve a crosscross-claim on the cross-defendant was not complied with in that the process was not served on the applicant pursuant to O. 8 r 42. how cross-claims are comm commenced Division 3 of O. 8 specifies the mode of commencement in relation to Cross-Claims. Rules 3say this:

37

37.&##160; Application of Division 3.

(1)&#16) ; This Divisioniapplies to s to proceedings commeby writ of summons.

(2) &#160 This Division appliesroceeroceedings commenced by originating summons to suchnt anh sucifications aons as thes the Cour Court may direct.

38. Commencement.

(1) ҈ A partyparty against whomaa claim is made in proceedings and who claims relief by way of counter-claim, cross-action, set-off, third party claim or otherwi60; mke hiim by filing a pleading by g by way of cross-claim in those proceedineedings.

(2) &#16cross-claimant may file file a cross-claim within the item fixed for filing his defence.

39. ـ Fop>

>

(1)&#11) 0;ossll form 20 m 20 or 21 r 21 as the case rese requirequires.

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(2) &#1 cross-claim shall be I be I intituled e prongs wn addition s howing the names of the parties to t to the crhe cross-coss-claim.

(3) ҈ Where aere a cross-claimalts-claolelynst a party arty who cwho claimslaims in the proceedings against the cross-claimant, the cross-claimant may add the cross-claim to his def

)ټ Where ther twoeorwo ore more more more cross-claims, the second cross-claim to be filed shall be called the second cross-claim, the third to be filed shall be called the third cross-claim, and so on.

(5) & subjectbject to Rule 27 (embarrassing pleadings and the like), a cross-laimant may, in his cross-claim, plead all or any of the facts on whicreliereferto thor pleadings in the proceedineedings.

(6) &#A 0; A cr A cross-clss-claimant shall, in addition to pleading any other facts on which he relies, plead the facts showing that the claim is one which may be made in the proceedings.

(70;҈ < 160; OrderOrder 4 Rule 7 mclaims for relief in originating process) applies to a cross-claim whether or not the cross-claim is an originating process.

The proceedings required the Defendant/Cross Claimant to service the Writ on the applicant. The manner of service is also regulated by O. 8 r 42 in the following words:

(1) ;ټ Where aere a defendefendant to a cross-claim has, on the date of filing the cross-claim, an address for service in the proceedings, the cross-claimant , on date, serve the cross-claim on that defendant to t to the cthe cross-claim.

(2) ҈& Where aere a defendefendant to cross-claim has an address for service in the proceedings, personal service of the cross-claim on him is not required.

)ټ Order 6 Rule 14 (cases wher where file filing operates as service) does not apply to the service of a cross-claim.

Conduct of proceedings in cross claims is regulated by O. 8 r 44 and r 45 regulates default of defendants to cross-claim. Theses say:

44.&#16. &##160;uct of prof proceediceedings generally. (6/6)

(1) &ـect to t to this Diis Division, the proceedings on a cross-claim shall follow as nearly as may be thee the course of proceedings on a writ of summons.

(3) ټ sub-rulb-rules (1) and (2) apply as if:

(a) &ـ the croe cross-clas-claim were a writ of ns; and

(b) & the croe cross-claimant were a plaintiff; and

(c) the deft to ross- were aede a defe defendant.

(4) A plaintiff in a writ writ of summons need not give notice of intention to def crosim insame eding>

(5) &#160 ;&#100 <&#160 160; A notice of iion to d to defend given by a pto the proceedings shall,hall, on service ofoss-con him, operate as a notice of intention to defend the cross-claim.

(6)&#16) < Su to this Division trial rial and all other steps teps in the proceedings on the cross-claim shall as far as practicable be carried on together with the trid simstepshe prings e writ of summons.

45.p>45.&#160  ҈ lt ault of defendanendant to cross-claim. (6/7)

Where a defendant to a cross-claim does not give notice of an intention to defend the cross-claim or file a defence as required by tRulesdoes not file a de a defencefence in accordance with an order to do so, a judgement (including a judgement by default or by consent) or decision (including a decision by consent) on any claim, question or issue in the proceedings on the writ of summons or on any other cross-claim in the proceedings shall, unless the Court otherwise orders, be binding as between the cross-claimant and the defendant to the cross-claim so far as the judgement or decision is relevant to any claim, question or issue in the proceedings on the cross-claim.

Having purused the file, I cannot find any affidavit of service to suggest that the Applicant was served with the Writ. The offidavit of service oice of the process I find is the one filed by the plaintiff himself on 27th of June 1996 which was effected on the Defendant Cross-Claimant. There is no other proof of service of the Writ of Summons on anyone else.

Is there a defence on the merit shown by the affidavit filed by and on behalf of the applicant. The ruat thlicant must shot show a “defence on the merits&#its” requires the applicant to show his defence on the merits is cle160; It must be by affidavit evidence disclosing a defence on the merits. Such an affn affidavibe cobe considered as showing a defence on the merits must set out statement of material facts, sufficient to satisfy the Court that the applicant has a prima fdefence and that it is reasonable that the applicant shouldhould be allowed to raise that defence: see Supreme Court decision in The Government of Papua New Guinea and Davis v Barker [1977] PNGLR 386. The applicant has quiparenparently satisfied thirt that there is a defence on the merits and I hold that it was incumbent upon the Defendanendant/Cross-Claimant to serve the cross-cupon the applicant. This Court ower under O. 8 O. 8 r. 8 r 46 to set aside a judgement entered by default. Failure to serve onCross-Doss-Defendant can only amount to an holding that the orders granted on 7th of March this year were irregularly obtained.& I must therefore order that any orders made against the applicant on the 7th of March this this year must be set aside. I diree Cross-Defendant tont to file their defence within 14 days. I order the Defendant/Cros/Cross-Claimant to meet the costs os Application.

Lawyer for the Plaintiffs: Kunai & Co Lawyers

Lawyer for tfor the Defendant/Cross-Claimant: Paulus Dawyers

Lawyer for thor the Applicant Cross-Defendant: Carter Newell Lawyers