Aviat Social & Sporting Club (Lae) Inc v Anthony Meehan Ltd [2001] PGNC 118; N2071 (8 March 2001)

N2071

PAPUA NEW GUINEA

[IN THE NATIONAL COURT JUSTICE]

APP CIA NO 240 of 2000

BETWEEN:

AVIAT SOCIAL & SPORTING CLUB (LAE) INC.

Appellant

AND:

ANTHONY MEEHAN LIMITED

Respondent

LAE: KANDAKASI,J.
2001: January 25th
March 28th

INFERIOR COURTS – PRACTICE & PROCEDURE - District Court Set-offs - District Courts creature of Statute – Procedure provided for set-offs by the District Courts Act need to be strictly followed – Failure to follow procedure amounts to no valid set-off or claim for set-off.

SET-OFF EXCEED DISTRICT COURT LIMIT – District Court has no jurisdiction – No error in striking out cross-clam (set-off) claimed not in accordance with prescribed procedure and amount claimed exceeding District Courts monetary limit – District Courts Act (Chp. 40) ss.21, 24, 153 and 154.

INFERIOR COURTS – Appeals from District Courts – No error by District Court demonstrated – Appeal dismissed.

Cases cited:
The Senior Stipendiary Magistrate, Ex parte The Acting Public Prosecutor [1976] PNGLR 344 at 349
Kiau Nekints v. Moki Rumints [1990] PNGLR 123
ABCO Transport Pty Ltd v. Timothy Sakaip (unreported but numbered judgement of Injia J) N1577
William Moses v. Otto Benal Magiten (01/12/00) N2023
Rabaul Shipping Limited v. Rita Ruru (08/12/00) N2022.
Bean v, Bean [1980] PNGLR 307

Counsel:

M. Mumure for the Appellant
J. Unido for the Respondent

28th March 2001

KANDAKASI, J: This is an appeal against a decision of the Lae District Court given on the 17th of August 2000. That decision ordered judgement in default in the sum of K10, 000.00 to be entered against the appellant. It also ordered interest at 8% on the judgement sum and K722.60 for costs against the Appellant. The main issue therefore for determination is whether the District erred in its judgment.

Grounds of Appeal

The grounds on which the Appellant appeals are set out in the Notice of Appeal. They are as follows:

1. That the Learned Magistrate erred in law in dismissing the Appellants Cross-Claim when the said Court had yet to adjudicate on the same.
   
2. The Learned Magistrate erred in law in exercising jurisdiction over the matter when the Defendant’s Cross-Claim had exceeded the jurisdictional powers of the District Court.
   
3. The Learned Magistrate erred in law by not applying Section 24 of the District Courts Act to have the matter transferred to the National Court as the Respondents Cross-Claim totalling K33, 000.00 had exceeded the jurisdiction of the District Court.
   
4. Such other grounds that may become apparent when the Court transcript becomes available.
   

Relevant Chronology

To appreciate the background leading to the judgement appealed against and the grounds for the appeal, I consider it appropriate that the relevant chronology of events leading to the orders of the District Court is relevant. I therefore set out hereunder the same:

• 29th May 2000, Complaint and Default Summons filed claiming damages for breach of a management agreement.
  
• 14th July 2000, default judgment was entered against the Defendant (Appellant).
  
• 21st July 2000, ex parte order for attachment of savings in a bank account was taken out.
  
• 25th July 2000, Default judgment set aside and leave granted to the Appellant to file its defence together with orders staying any execution of the judgement set aside.
  
• 4th August 2000, the Appellant filed its Defence to the Complaint and Summons, claiming breach of the management agreement by the Complainant by reason of which, it was not entitled to the damages claimed.
  
• 9th August 2000 the matter was mentioned and both parties agreed to conduct the trial by affidavit and the matter was adjourned to the 11th of August 2000 for parties to indicate their final positions
  
• 10th August 2000, the Respondent filed two affidavits, one by George Sellar and another by Anthony Meehan both sworn on the same day in support of its claim
  
• 11th August 2000, parties agreed to a close of pleadings and the matter was adjourned to the 14th of August 2000, for parties to indicate their positions.
  
• 14th August 2000, the Appellant indicated in court that it will file one affidavit later the same day and a cross-claim and the Respondent informed the court that it was ready for hearing. The court adjourned the proceedings to the 15th of August 2000 at 1:30pm to enable the Appellant to file its affidavit
  
• 15th August 2000, the Appellant had not filed its affidavit and asked the court for a further adjournment and was granted despite the Respondent’s objection, to the 16th of August 2000.
  
• 16th August 2000, the Appellant file an affidavit by a Paul Guy admitting the Respondents claim and at the same time claimed that the Respondent had obtained some money from the Appellant fraudulently by way of a set-off. A formal cross-claim totalling up to K33, 000.00 was filed at this time as well.
  
• 17th August 2000, both parties were back in court and the Appellants counsel informed the court that his client as no defence to the claim against it but was making a cross-claim by way of a set-off. The Respondent thereupon applied for summary judgment and pointed out that the Appellant had failed to comply with the mandatory requirements of s.153 of the District Courts Act (Chp. 40) (hereinafter "the Act") in respect of its set-off. On that basis the Respondent asked the District Court to strike out the cross-claim or set-off.
  

The court granted the Respondent’s Application and ordered judgement in the sum of K10,000.00 plus interest at 8% and costs of K722.60 against the Appellant.

• 18th August 2000, the Appeal was filed.
  

I now proceed to deal with each of the grounds of appeal. I do so by going in the order in which the grounds appear in the Notice of Appeal.

Ground 1

In my view the Appellant is saying in this ground of its appeal that the learned magistrate erred in dismissing it’s cross-claim without a proper hearing of the cross-claim. What actually transpired in the Court below renders no support for this ground of appeal. As noted in the chronology of events, the District Court, only granted an application for a strike out of the cross-claim of the Appellant on the basis that the strict requirements of s. 153 of the District Courts Act were not complied with. Indeed the actual words employed by the learned magistrate reads, "Ct further order that cross-claim be struck out and file at N/Ct – as this Ct has no jurisdiction."

This ground therefore, has no merit and it should be dismissed for a number of reasons. Firstly, the Court below did not make any order "dismissing" the Appellant’s cross-claim. The Court only ordered a strike out of the cross-claim following submissions based on s. 153 of the District Courts Act. Secondly, the amount claimed in the cross-claim exceeded the District Court’s monetary limit of K10, 000.00. Consequently, the Court could not hear the matter and make a decision. Hence, the Court was correct in its decision to strike out the cross-claim and suggest it be pursued before the National Court. Thirdly, by virtue of ss. 153 and 154 of the District Courts Act the cross-claim was not correctly before the court and as such it could not be correctly maintained as against the Respondent’s by way of a set-off or a cross-claim on its claim against the Appellant.

Sections 153 and 154 are the only provisions in the Dsitrict Courts Act that deal with the issue of set-offs. They read as follows:

153. Special defences to be notified to complainant.
     

(1) Without the permission of the Court, the defendant in a complaint for a debt recoverable before a Court shall not—

(a) set-off a debt or demand claimed or recoverable by him from the complainant; or

(b) set up by way of defence and claim and have the benefit of illegality, infancy, coverture, or a Statue of Limitations or of his discharge under a law relating to bankrupt or insolvent debtors,

unless, a reasonable time before the hearing of the complaint, written notice of his intention to so set-off or to set up that defence, as the case may be, has been given to the complainant personally or by post or by causing it to be delivered at his usual or last-known place of abode or business or at his address for service set out in the summons on the complaint.

(2) The defendant shall produce on the hearing a copy of the notice given under Subsection (1), and, unless it is admitted, shall prove that it was given in accordance with that subsection, and in default of that proof no set-off or defence specified in that subsection shall be set up except by consent.

154. Where defendant's set-off exceeds complainant's claim.
     
     • (1) Subject to Subsection (2), in a complaint in which the defendant is allowed to set-off a debt or demand claimed or recoverable by him from the complainant, the defendant may recover in the complaint the amount (if any) by which the debt or demand so set-off exceeds the debt or demand claimed and proved by the complainant, and shall have an order for that amount.
       
     • (2) If a set-off referred to in Subsection (1) exceeds the amount in respect of which the Court has jurisdiction, and the Court is satisfied that the set-off is claimed bona fide and the defendant does not abandon the excess, no order shall be made on the complaint.
       

My reading of these provisions makes it apparent that a defendant to a debt or money claim has no right to set-off a debt or demand as against a complainant unless –

(a) he has first obtained the permission of the District Court; or
(b) he has first given written notice of his intention to do so to the complainant within a reasonable time before the hearing of the complaint against the person seeking to set-off; or
(c) the Complainant consents to the set-off.

If the party seeking to set-off goes for option (b), then he must serve the notice personally on the complainant or send it by post or have it delivered to his usual or last known place of abode or business or at his address for service set out in the summons on the complaint. Proof of that being done must then be produced to the court at the time of hearing the complaint.

If the amount of the permitted set-off exceeds the amount claimed in the complainant’s complaint and summons, the defendant is entitled to an order for a payment of the amounts that exceed the amounts claimed in the complaint and summons. If however, the amounts claimed in the permitted set-off exceeds the District Limit of K10, 00.00 and the defendant does not abandon the excess, the court is precluded from making an order on the complaint, provided the court is satisfied that the set-off is claimed bona fide.

Quite a number of cases have now made it very clear that, District Courts are creatures of statute. Their powers and functions are thus defined by their enabling legislation, the District Courts Act. This means the provisions under that Act has to be followed for a valid exercise of power. A failure to confirm with what is provided for in the Act renders any decision arrived at or any step taken before a District Court null and void and of no effect: See The Senior Stipendiary Magistrate, Ex parte The Acting Public Prosecutor [1976] PNGLR 344 at 349; Kiau Nekints v. Moki Rumints [1990] PNGLR 123 and ABCO Transport Pty Ltd v. Timothy Sakaip (unreported but numbered judgement of Injia J) N1577; William Moses v. Otto Benal Magiten (01/12/00) N2023 and Rabaul Shipping Limited v. Rita Ruru (08/12/00) N2022.

In the present case, during arguments, Mr. Mumure of Counsel for the Appellant conceded that no notice of his clients intention for the set off was given in accordance with s.153 (1) of the District Courts Act. Consequently, no proof in accordance with s. 153(2) was produced before the District Court. He also conceded that there was no consent in favour of his client’s claim for a set-off. Thus, it should naturally follow from this that, the Appellant did not validly raise or sought to set-off the claim against it. As a result, the provisions of section 154 could not and did not come into application for the Appellant.

In any case there is no procedure under the District Courts Act for the filing and serving of a cross-claim. The only provisions that may come closer are sections 133 and 145. These provisions in relevant parts read:

133. Particulars of demand and set-off

....

(2) Concise particulars of the defendant's set-off (if any) with dates, items and prices or value shall be endorsed on or annexed to the written notice of the set-off.

....

145. Statement of defence, etc, to be in writing.
     
     • (1) Where the defendant is required to give, and gives, a statement of his defence and the points on which he relies, the Court shall—
       
       • (a) cause the statement and points to be taken down in writing; and
         

(b) preserve the writing.

A combined reading of these provisions make it clear that, only if a defendant is required to give a statement of his defence he must do so and the Court is required to take the statement down in writing and preserve it as part of the court’s record. To the extend that a defendant wishing to claim a set-off is required to give notice of his intention for a set-off "within a reasonable time", in writing to the complainant, he could quite appropriately file and serve his notice for the set-off "within a reasonable time". But that has to be after having notified the complainant and with the permission of the Court. Doing that in my view, can not be the same as filing and serving a cross-claim, having regard to the provisions of ss. 133(2) and 153 of the District Courts Act and in any case, just a day before the date set for a hearing of the complaint. Filing and serving a cross-claim in much the same way before the National Court, is in my view not a procedure available under the District Court, but there is provision for a claim for a set off. A set-off can only be claimed in accordance with s.153 of the District Courts Act. Filing and serving a cross-claim would therefore, amount to an abuse of process and is liable for a strike out on that basis. The learned magistrate was therefore, right in deciding to strike out the cross-claim.

Ground 2

In this ground the Appellant is saying in effect that, by virtue of having before the Court, the Appellant’s cross-claim which exceeded the District Court’s monetary limit of K10, 000.00, the District Court did not have the jurisdiction to deal with the matter. That in my view, proceeds on the basis that the cross-claim was correctly on foot. I believe this ground follows on from the first ground, which I found to be without merit.

The Respondent’s claim was up to the District Court’s monetary limit of K10,000.00 for an alleged breach of contract. The claim was therefore, within the jurisdiction of the District Court. The cross-claim filed very late by the Appellant on the 16th of August 2000, was for K33, 000.00 which exceeded the District Court limit. If the District Courst Act allowed for the filing of cross-claims and was filed correctly, it would have exceeded the District Court’s jurisdictional limit and would have given a good basis for this ground of appeal. But, has I have found in the context of the first ground of appeal, there was no proper or valid cross-claim before the District Court. Consequently, there was correctly no issue on the District Court’s jurisdiction in relation to the Respondent’s claim against the Appellant.

The learned magistrate decided not to entertain the Appellants cross-claim on the basis that the requirements of s.153 of the District Courts Act were not met and in any case the amount claimed in the cross-claim exceeded the District Court limit. On the basis of the principles and reasons discussed above, the learned magistrate did not fall into any error.

If however, the learned magistrate proceeded to hear the cross-claim and than make a decision on it, he would have fallen into error. Instead, he only struck out the cross-claim, leaving the Appellant with the option of taking up the essence of its cross-claim up to the National Court where the merits of the claim could be tried and decided upon. Indeed, that is a cause of action still open to the Appellant now if it wishes to pursue it.

Just for argument sake, if the cross-claim was correctly before the District Court, it was still obliged by s. 154(2) of the District Courts Act to be "satisfied that the set-off is bona fide" and in due compliance of the requirements or procedure under s.153. If the Court was so satisfied, it would then have been obliged to decline to make an order on the complaint. As the Appellant conceded to not having complied with the requirements under s. 153, there was no bona fide set-off. Thus the decision to strike it out was a correct decision and not an exercise of power erroneously, which would require this court’s correction.

For these reasons, this ground of appeal is also without merit and is dismissed.

Ground 3

In this ground of appeal the Appellant is saying that the learned magistrate erred in not ordering a transfer of the proceedings to the National Court in the light of its cross-claim of K33, 000.00. This ground of appeal requires an examination of the provisions of s.24 of the District Courts Act.

Section 24 stipulates that:

24. Transfer of proceedings.
    
    • (1) Where proceedings have been commenced in a Court, the Court may, at any time before judgement, with or without an application from an interested person for that purpose, for reasons that shall be recorded, make an order staying the proceedings and, on such terms as to it seem just transferring the proceedings for hearing and determination by some other District Court or, if the proceedings are such that they could have been instituted before the National Court in the first instance, by the National Court.
      
    • (2) The National Court may at any time before verdict or judgement, with or without an application from an interested person in that behalf, make an order staying proceedings before a District Court and ordering that the proceedings be taken before the National Court, if the proceedings are such that they could have been instituted before the National Court in the first instance.
      

This section uses the operative "may". This means whether or not a matter should be transferred to the National Court is a matter that is within the discretion of the District Court or a magistrate. It is well settled in our jurisdiction that an appellate court should be very slow to interfere with the exercise of a discretionary power of a court below unless very good reasons are advanced justifying intervention by the appellate court. In Bean v, Bean [1980] PNGLR 307 the Supreme Court stated that position although, in the context of a custody case, in these terms:

The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight. It follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge’s discretionary decision on grounds which only involve conflicting assessments of matters of weight.

In the present case there is no demonstration of how the learned magistrate erred in the exercise of the discretion vested in him. In my view it is not good enough to allege the Court below erred in the exercise of its discretion without demonstrating how the court erred and the error is one that is open to correction by this Court on appeal.

This ground of appeal proceeds in my view, on the basis that the cross-claim was correctly before the court below. However, has I have already found above, that purported cross-claim was not validly before the court. It was therefore, correctly struck out. That being the case, there was no basis for a transfer of the proceedings to the National Court pursuant to s. 24 of the District Courts Act. Besides, it was within the discretion of the learned magistrate whether or not to transfer the proceedings depending on his determination of whether the cross-claim was correctly before it. After having determined that, it was not correctly before it, there was no obligation on the District Court and there was no need for a transfer of the proceedings to the National Court. Even if the learned magistrate was wrong in not deciding to transfer the proceedings, there is no demonstration of how the learned magistrate may have erred and the error is one, which is open for correction by this Court on appeal.

In the upshot I am not satisfied that this ground of appeal has been made out. I am however satisfied that this ground of appeal was misconceived for the reasons stated above. Accordingly, this ground of apple is also without merit and is dismissed.

Ground 4

This is not a ground of appeal. Instead it is an indication that, if after a perusal of the transcript, new or other grounds for appeal come to light the Appellant will take up those grounds as its grounds of appeal.

First let me say that this is not a recognised ground of appeal. The Appellant did not advance any argument under this purported ground of appeal.

Secondly, I note in any case, that the transcript of the proceedings before the District Court has been received and the appeal book has been compiled thereafter. The Appellant has not pointed out to any additional ground of appeal.

Thirdly, appeals can not be lodged without know the grounds for appeal. If an appellant does not know his or her grounds of appeal at the time of lodging the appeal, the appeal is without merit and an abuse of process. Even if some additional ground come to light after the receipt of the transcript, an appellant has no automatic right of appeal on such grounds unless the relevant appeal period has not yet run out and the appellant is entitle to appeal on such grounds as of right.

This purported ground of appeal is also dismissed both for abuse of process and having no merit and basis in law.

Generally

Having dismissed all of the grounds for appeal, it remains for me to order a dismissal of the entire appeal. That is on the basis that the Appellant has not demonstrated any error of fact or law on the part of the learned magistrate warranting this Court’s correction. I thus order and re-affirm the decision of the District Court. The Appellant shall pay the Respondent’s costs of the appeal and any stay of execution of the judgment appealed against shall be lifted forthwith with the Respondent being at liberty to enforce compliance of the District Court judgement and or orders.
____________________________________________________________________
Lawyer for the Appellant: Gamoga & Co. Lawyers
Lawyer for the Respondent: Warner Shand Lawyers (Lae)