Beecroft No 51 Ltd v Seeto [2004] PGNC 220; N2561 (10 June 2004)

N2561
PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE AT WAIGANI]

WS 322 of 2004

BETWEEN:

BEECROFT NO. 51 LIMITED trading as RONNIE’S HOT BREAD
Plaintiff

AND:

NEVILLE SEETO
First Defendant

AND:

BARRY TAN
Second Defendant

AND:

STEPHEN TAN
Third Defendant

AND:

TST 4 MILE LIMITED
Fourth Defendant

AND:

JOHN MADDISON
Fifth Defendant

AND:

BANK SOUTH PACIFIC LIMITED
Sixth Defendant

Waigani: Davani, .J
2004: 7, 10 June

PRACTICE AND PROCEDURE – Application for default judgment – requirements of service of originating process upon a company, discussed – search of company register and results of search of register must be deposed to in affidavit.

PRACTICE AND PROCEDURE – application for default judgment – court has discretion to enter or refuse application

Cases cited:
Kante Mininga v the State and 2 Others N1458
Bela Kitipa v Vincent Uali and 3 Others N1773

Counsel:

D. Dotaona for the Plaintiff/Applicant

R. Lindsay for the First and Fourth Defendants

RULING

(Application for default judgment)

10th June 2004

Davani .J: The plaintiff moves for default judgment by way of Notice of Motion filed on 20th May 2004. Default judgment is sought to be entered against the first and fourth defendants with damages to be assessed on the value of the banking equipment and other assets. Default judgment is also sought to be entered against the first and fourth defendants with damages to be assessed in relation to damages for trespass to goods and unlawful detention of goods, conversion, general damages, exemplary damages, special damages and punitive damages.

The application is opposed by the first and the fourth defendants.

The application

The application is supported by the affidavit of David Dotaona sworn on 20th May 2004. In that affidavit, Mr Dotaona refers to personal service of the Writ of Summons and Statement of Claim (‘Writ’) upon the first defendant. Service was effected on the first defendant personally by Mr Canisius Karingu on 5th April, 2004 at 4.20pm. This was done in compliance with O. 6 R. 2 (1) of the National Court Rules (‘NCR’) which states that originating process shall be served personally on each defendant.

As the service upon the fourth defendant, Mr Dotaona refers to service upon the fourth defendant’s registered office by a Mr Geoffrey Szeto. Mr Szeto swore an affidavit on 19th May, 2004 to which he deposed that he served copy of Writ of Summons and Statement of Claim on the fourth defendant’s registered office Dabill Management and that Dabill Management received and signed for it. Although Mr Szeto states that Dabill Management is the defendant’s registered office, I do not have before me a company search showing that Dabill Management is the fourth defendant’s registered office. I say this relying on s. 167 (2) of the Companies Act 1997 which states that the address for service of a company may be the company’s registered office or another place but that it shall have a readily identifiable street address and that it shall be a place that is readily accessible during normal business hours. S. 167(3) of the Companies Act also states that a company’s address for service at any particular time is the place that is described as its address for service in the register at that time. The register in the interpretation provisions of the Company’s Act means the register kept pursuant to s. 395 (1) of the Companies Act. S. 395 (1) of the Companies Act states that the Registrar of Companies shall ensure that a register of companies, both registered or deemed to be registered is kept in Papua New Guinea and that this is kept by means of records or electronically stored information.

This therefore means that the search clerk should have attended at the company’s office and conducted a search of the Companies register to obtain details of the fourth defendants registered office and to then effect service upon it. Having effected service, the search clerk or lawyer should then file an affidavit to which he should attach a copy of the company search results showing the registered office of the company and also depose to details of service upon that registered office. In this case this was not done. I find service upon the fourth defendant was irregular.

Another issue that arises is the fourth defendant’s correct title or description. It may be that it is described as another entity in the Companies register. However no objections have been raised by the plaintiff as to the name of the fourth defendant.

However, before filing an action against the company, the person suing must firstly conduct a search of the Companies register to obtain the correct company name because as is common knowledge and as is provided in s. 16 of the Companies Act, a company is a separate legal personality, a legal entity in its own right, separate from its shareholders and continues in that capacity until de-registered. If the fourth defendant is not sued in the correct name, then it should object or raise objections. But it has not done that.

In relation to the application for default judgment against the first defendant, I note that Gaden’s Lawyers filed Notice of Intention to Defend on 4th May, 2004 for and on behalf of the first and fourth defendants. The plaintiff through its lawyer forewarned the first and fourth defendants of the intended application for default judgment, and that such was done by letter dated 7th May, 2004 which was delivered to Gadens Lawyers on the same day. In that letter, Mr Dotaona requested that Gadens Lawyers file a Defence for an on behalf of the first and fourth defendants by 5.00pm on Monday, 17th May, 2004 failing which the plaintiff would move for default judgment without further notice. In response to that letter, Mr Lindsay for the first and fourth defendants, sent letter dated 17th May, 2004 to Dotaona Lawyers requesting a further 7 days within which to file his clients’ Defence for the reason that he had just recently received documents from his client and was perusing the same to enable him to then prepare and file the defences. However Mr Dotaona did not respond to that letter and proceeded to file the application for default judgment.

Evidence and the law

Before embarking on discussions as to whether default judgment should be entered, it is appropriate at this time to refer to the defences filed on behalf of fifth and sixth defendants. The fifth defendant was at the date of the filing of their Writ of Summons and Statement of Claim, in the sixth defendant’s employ within its assets management division. The sixth defendant is a bank. In their Defences, the court notes that the Jimm Trading Limited who was the registered proprietor of the property, had entered into a loan agreement with the sixth defendant. The Defence pleads that if the plaintiff had leased the premises from Jimm Trading Limited then this was in breach of that loan agreement entered into between the sixth defendant and Jimm Trading Limited. It pleads further that Jimm Trading Limited was contractually bound to seek the sixth defendant’s approval to then enter into the arrangement which the plaintiff alleges it had entered into with Jimm Trading Limited and which is pleaded in pargraph No. 9 of the plaintiff’s Statement of Claim. The sixth defendants plead that because Jimm Trading Limited did not seek this approval, that the arrangement between Jimm Trading and the plaintiff is void and unenforceable as against the sixth defendant. The fifth defendant admits that he did give permission to the first, second, third and fourth defendants to enter and occupy the premises and that this was done to secure the premises and was within the contract of sale entered into between the first, second and fourth defendants and the sixth defendants with respect to the premises. The Defence pleads that the sixth defendant was not a party to a consent order, as claimed by the plaintiff, and could not at law be bound in its terms.

The Defence filed for an on behalf of the fifth and sixth defendant show that there was a mortgage between the sixth defendant and Jimm Trading Limited and that if the plaintiff were to lease those premises, it would have had to do so with the mortgagees consent. Because this was not done with the mortgagees consent, that the sixth defendant then entered into possession of those premises.

As to the draft defence filed by the first and fourth defendants, there is an affidavit sworn by a Neville Seeto on 3rd June, 2004 which deposes that the fourth defendant offered to tender for the property described as Allotment 11 Section 387 Hohola. The tender included the sale of property, assets and stock including the bakery equipment. This bid was put along with others and was successful. The sixth defendant then entered into a contract with the fourth defendant for the sale of the property including assets and stock located on the property. After execution and exchange of the contract of sale, the fourth defendant was allowed access into the property.

The fourth defendant deposes that at no time was it advised that the plaintiff had a lease on the property. To that affidavit is attached a draft of the first defendant’s Defence and the draft of the fourth defendant’s Defence and Cross-Claim. The first and fourth defendants Defence and the Cross-Claim pleads the same matters raised in Mr Seeto’s affidavit. However in the Cross-Claim, the fourth defendants claim is in indemnity or full settlement against the plaintiff’s claim and the defendants costs in defending this action and the costs of the third party proceedings on the grounds that the plaintiff had held out to the fourth defendant that it had proper title and right to sell the property including all stock, assets including the bakery equipment to the fourth defendant Further, that it was the plaintiff who had requested the fourth defendant to tender their bid for the property. The fourth defendant pleads in the cross-claim that it did tender a bid for the property inclusive of the stock, assets and property including the bakery equipment and that its bid was successful after which the plaintiff entered into a contract of sale with the fourth defendant for the purchase of the property and equipment. The fourth defendant pleads that he was only acting upon the plaintiff’s instructions that he could enter and take possession of all stock, assets and property on the premises.

It was at this time that the plaintiff’s lawyer referred me to a Supreme Court order taken out on 28th March, 2003 in SCA No. 8 of 2002 between the PNGBC Limited as the appellant against the Jimm Trading Limited and the Privatisation Commission. The Supreme Court order is to the effect that the PNGBC Limited or the Bank of South Pacific is restrained from exercising its power of sale over the property now the subject of these proceedings. It also ordered that the PNGBC or Bank of South Pacific Limited return assets confiscated or removed from Jimm Trading Limited.

Conclusion

Having reviewed all material before me I note and remind myself that a court has the discretion whether or not to grant or refuse default judgment. On review of the material before me it is obvious that this matter has a long history which has been complicated somewhat by various events and which has resulted in several court proceedings being filed involving all parties in these proceedings and other related parties.

I consider that this is a matter that should not be determined by default judgment which in itself is a very draconian procedure, but that it should go to a proper trial to be determined on the merits. I say again that this because this court has a very wide discretion to enter default judgment. As Injia .J said in Kante Mininga v the State and 2 Others N1458 of 1996;

"O. 12 R. 32 of the NCR gives the court a wide discretion to enter default judgment. Even when proof of due service of process on a defendant and proof of the default is established by the Plaintiff/Applicant, the court still has a discretion to refuse to enter default judgment."

In Bela Kitipa v Vincent Uali and 3 Others N1773, Injia .J categorized situations where applications for default judgments can be refused. These were;

1. The effect of the default judgment would prejudice the rights of other co-defendants; or
2. The pleadings are so vague or do not disclose or reasonable cause of action; or

3. The default judgment cannot be sustained in law.

In this case, if this court were to give default judgment to the plaintiff, that it want prejudice the rights of the other co-defendants in that their defences are that the defendant bank had advertised by tender as a Mortgagee and on that basis, they purchased, clearly a similar defence to that of the First and Fourth defendant. I should also add that considering the nature of this matter, that this court has a duty to ensure that litigation is not compounded but is progressed to completion.

I will give leave to the first and fourth defendants to file their defences and that the Defences must be filed and served within 14 days from today.

Court’s formal orders

1. The plaintiff’s application for default judgment is refused;

2. The first and fourth defendants have leave to file and serve their Defences within 14 days from today;

3. Time is abridged to time of settlement to take place forthwith;

4. The first and fourth defendants shall pay the plaintiff’s costs of the application to be taxed if not agreed.

___________________________________________________________________

Lawyer for the Plaintiff/Applicant : Dotaona Lawyers

Lawyer for the First and Fourth Defendants : Gadens Lawyers