PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1654 OF 2004

NIUGINI CIVIL & PETROLEUM LTD
Plaintiff

v

WEST NEW BRITAIN DEVELOPMENT CORPORATION LTD
First Defendant

MICHAEL GIBSON
Second Defendant

WEST NEW BRITAIN PROVINCIAL GOVERNMENT
Third Defendant

Kimbe: Cannings J
2006: 22 June, 7 July

RULING ON MOTION

PRACTICE AND PROCEDURE – application to file defence out of time –considerations to take into account when deciding whether to grant application.

The plaintiff had a contractual dispute with the defendants and commenced court proceedings against them. The defendants did not file a defence within the time permitted by the National Court Rules but filed a motion to stay the proceedings and refer the dispute to arbitration. That motion was refused, then some months later the defendants filed a motion seeking leave to file their defence and cross-claim out of time. This is a ruling on that motion.

Held:

(1)	Four considerations are relevant when the court decides whether to grant leave to file a defence out of time:

(a)	does the defendant appear to have a good defence?

(b)	is the delay in filing a defence relatively brief?

(c)	are there good reasons for the delay?

(d)	do the interests of justice favour granting leave?

(2)	None of the considerations favoured the granting of leave in the present case, so leave was refused.

Cases cited:
The following cases are cited in the judgment:

Graham Rundle v Motor Vehicles Insurance (PNG) Trust (No 1) [1988] PNGLR 20
Joe Tipaiza v James Yali (2006) N2971
New Zealand Insurance Co Ltd v Chief Collector of Taxes [1988-89] PNGLR 522
Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd and Others (2005) N2909
Quan Resources Pty Ltd v Australia and New Zealand Banking Group (PNG) Ltd (1996) SC509

Abbreviations:
The following abbreviations appear in the judgment:

CJ – Chief Justice
Co – company
DCJ – Deputy Chief Justice
J – Justice
K – Kina
Ltd – Limited
N – National Court judgment
NGI – New Guinea Islands
No – number 
PNG – Papua New Guinea
PNGLR – Papua New Guinea Law Reports
Pty – proprietary
SC – Supreme Court published judgment
v – versus
WS – writ of summons

NOTICE OF MOTION

This was an application to file a defence and cross-claim out of time.

Counsel:
G Linge, for the plaintiff
G Gileng, for the defendants

INTRODUCTION

1. CANNINGS J: This is a ruling on an application by the defendants to file a defence out of time.

BACKGROUND

2. In 2001-2002 the plaintiff, Niugini Civil & Petroleum Ltd, entered into three construction contracts with the first defendant, West New Britain Development Corporation Ltd. The second defendant, Michael Gibson, is the first defendant's executive director. The third defendant is West New Britain Provincial Government. It owns and controls the first defendant.

3. Disputes arose over each contract. The plaintiff commenced separate court proceedings against the defendants for money allegedly due under each contract. The details of the court proceedings and the contracts they relate to are shown in the table below.

TABLE 1: COURT PROCEEDINGS AND CONTRACTS

WS No	Contract date	Description of works	Amount claimed due	
1418/2004	10.01.02	Upgrading and extension work on the outpatient department, accident and emergency wing and antenatal clinic, Kimbe General Hospital.	K267,437.66 + K200,000.00 + damages	
1548/2004	03.12.01	Kimbe town roads.	K63,047.05 + damages	
1654/2004	30.04.02	Kimbe-Kandrian Highway, stage 1.	K171,542.85	

PROCEDURAL HISTORY

4. The present case, WS No 1654 of 2004, concerns the Kimbe-Kandrian Highway stage 1. Its procedural history is shown in table 2.

TABLE 2: PROCEDURAL HISTORY

Date	Action	
2 December 2004	Plaintiff commenced proceedings.	
12 January 2005	Plaintiff filed a notice of discontinuance re the third defendant.	
18 January 2005	Defendants filed a conditional notice of intention to defend.	
14 February 2005	Defendants filed a notice of motion to strike out the proceedings – however this motion has not been moved.	
12 August 2005	Defendants filed a notice of motion to stay the proceedings and refer the dispute to arbitration pursuant to clause 13 of the contract and Section 4 of the Arbitration Act Chapter No 46.	
15 August 2005	Defendants served notice of motion to stay proceedings and refer dispute to arbitration on plaintiff.	
23 September 2005	Motion to stay proceedings heard in Kimbe.	
7 October 2005	Motion to stay proceedings refused.	
13 February 2006	Defendants filed a notice of motion, for leave to file their defence and cross-claim out of time – this is the motion now before the court.	
20 March 2006	Defendants served notice of motion for leave to file defence and cross-claim out of time on plaintiff.	
22 June 2006	Hearing of motion.	

5. The present case came before me in September-October 2005 – together with the other two cases – as a motion to refer the disputes to arbitration. I refused the motion and ruled that a stay of proceedings was not warranted and that none of the disputes would be referred for arbitration (Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd and Others (2005) N2909).

THE MOTION

6. The defendants' motion is moved under Order 7, Rule 6 (late notice) of the National Court Rules, which states:

(1)	A defendant may give a notice of intention to defend at any time without leave.

(2)	Where a defendant gives a notice [of intention to defend] after the time limited for doing so, he shall not, unless the Court otherwise orders, be entitled to file a defence or do any other thing later than if he had given a notice of intention to defend within that time. [Emphasis added.]

7. The motion is supported by an affidavit of 17 March, 2006 by Michael Gibson, the second defendant. He is Executive Director of the first defendant. He says that in his opinion the defendants have a good defence. The plaintiff's case is based on the first defendant's failure to pay late payment penalty interest under the contract. He concedes that the first defendant was late paying but says that when the payments were made the plaintiff accepted the money and raised no concern about penalty interest.

8. As to the cross-claim, he says that the defendants want to claim a refund of K135,933.41, paid to the plaintiff under the contract in respect of a bridge over Uko Creek. The bridge was never built and the components for its construction were recovered by the plaintiff's sub-contractor, Hornibrooks NGI Ltd. Yet the plaintiff has been paid for it. 

9. As to the delay in filing a defence Mr Gibson says the delay was caused by the hearing of last year's motion to stay the proceedings and refer the dispute to arbitration. After the decision on the motion was handed down on 7 October 2005 he spent most of his time with the PNG Incentive Fund to secure a grant for the second stage of the Kimbe General Hospital development. He understands that the court vacation ran from 20 December 2005 to 31 January 2006. He was also preparing his end-of-year report on the first defendant's business. That left him little time to attend to the matter before he went on Christmas holidays. He was making the application at the first available opportunity in the new legal year.

THE DEFENDANTS' SUBMISSIONS

10. The defendants are the applicants for the purposes of this motion. Mr Gileng, for the defendants, first referred to the matters deposed to in Michael Gibson's affidavit to argue that leave should be granted.

11. First, there was a defence on the merits, as when the plaintiff received the principal amounts due under the contract, it gave no indication it would claim penalty interest even though the payments were received well outside the times stipulated by the contract. There was a legitimate cross-claim over the bridge that was paid for but never delivered.

12. Secondly, there was a legitimate explanation for the delay in filing a defence. It was due to the motion to refer the matter for arbitration. Though it was refused, it was necessitated by the plaintiff's commencement of court proceedings despite the contract providing for referral of disputes to arbitration. The defendants acted promptly after the motion was refused, given the court vacation and other pressing matters referred to in Michael Gibson's affidavit.

13. Furthermore, Mr Gileng argued, the plaintiff's statement of claim does not disclose a cause of action. The total amount claimed, K171,542.85, is comprised of two claims: K130,083.52 for "the amount owing to the plaintiff under the contract" and K41,459.33 for "penalty interest". Neither amount was particularised so the defendants and the court do not know how those figures were arrived at. The vagueness of the statement of claim means that the interests of justice require that the matter be allowed to progress to trial.

THE PLAINTIFF'S SUBMISSIONS

14. The plaintiff is the respondent for the purposes of this motion. Mr Linge, for the plaintiff, submitted that the defendants were guilty of undue and protracted delay in filing a defence. They could not use the motion for arbitration as an excuse, as it was their motion and it was refused by the court. As to the statement of claim, Mr Linge argued that it is clear what the plaintiff is claiming. Leave to file a defence and cross-claim should be refused.

SHOULD LEAVE BE GRANTED?

15. In Joe Tipaiza v James Yali (2006) N2971 I identified four considerations to take into account when deciding whether to grant leave to file a defence out of time. I will modify them for present purposes. They are:

(1)	does the defendant appear to have a good defence?

(2)	is the delay in filing a defence relatively brief?

(3)	are there good reasons for the delay?

(4)	do the interests of justice favour granting leave?

16. They are framed so that an affirmative (yes) answer to any one will weigh in favour of granting leave. A negative (no) answer weighs against granting leave. The more affirmative considerations, the more likely it is that leave will be granted. The more negative factors present, the more likely it is that leave will be refused. However, the court's decision remains a discretionary process. When a factor is marked as affirmative or negative it does not mean necessarily that it is given the same weight as another affirmative or negative factor. I apply the considerations as follows.

1 Does the defendant appear to have a good defence?

17. The proposition that the plaintiff accepted late progress payments without asking for penalty interest is not, in my view, a clear defence. The defendants have not pointed to any provision of the contract that required the plaintiff to signal its claim for penalty interest at the time it received the payments.

18. As for the cross-claim over the missing bridge, that seems an arguable point. But it is not by itself a defence.

19. I am not persuaded by the proposition that the statement of claim does not disclose a reasonable cause of action. The cause of action is pleaded sufficiently: it is breach of contract. I agree with Mr Gileng's criticism of the statement of claim as being vague and, arguably, lacking in particulars. However, that has not rendered it defective and incapable of founding a cause of action.

20. I conclude that no, the defendant does not appear to have a good defence.

2 Is the delay in seeking leave to file a defence relatively brief?

21. It is important to identify precisely the extent of the delay. Neither counsel quantified the delay exactly but on my reckoning the time for filing a defence expired on 16 March 2005. I have fixed that date by considering:

-	The date of service of the writ is unclear. There is no affidavit of service on file but it was served at some time between the date of filing (2 December 2004) and the date of filing of the conditional notice of intention to defend (18 January 2005). I will fix the notional date of service as 19 December 2004, one day before the commencement of the court "vacation".

-	The defendant then had forty-four (44) days to file a defence (National Court Rules, Order 4, Rule 11(b)(i); Order 8, Rule 4(1)(a)).

-	The court vacation period, from 20 December 2004 to 31 January 2005, is not counted when calculating the time for filing a defence or any other pleading (National Court Rules, Order 2, Rule 3(iii)). (Note, however, that that rule does not apply when calculating the time allowed by statute for filing an appeal, which continues to run during the court vacation: Graham Rundle v Motor Vehicles Insurance (PNG) Trust (No 1) [1988] PNGLR 20 Supreme Court, Kidu CJ, Bredmeyer J, Amet J; New Zealand Insurance Co Ltd v Chief Collector of Taxes [1988-89) PNGLR 522, Supreme Court, Bredmeyer J, Amet J, Barnett J; Quan Resources Pty Ltd v Australia and New Zealand Banking Group (PNG) Ltd (1996) SC509, Supreme Court, Amet CJ, Kapi DCJ, Los J.) 

-	Forty-four (44) days after 1 February 2005 (the first day after the end of the vacation) is 16 March 2005.

22. The starting point for calculating the delay is 17 March 2005. The end-point is the date of serving the notice of motion for leave to file the defence and cross-claim out of time, 20 March 2006. The prima facie delay is one year and three days. From that period it is reasonable to deduct two periods:

-	The period between service of the notice of motion to stay the proceedings and refer the dispute to arbitration (15 August 2005) and the court's decision on that motion (7 October 2005): one month and 22 days.

-	The period of the court's 2005-2006 vacation (20 December 2005 to 31 January 2006): one month and 11 days.

23. That is, a total deduction of two months and 33 days; say, three months and three days.

24. Thus the total 'net' delay is nine months [(one year + three days) – (three months + three days)]. That period comprises:

-	Four months and 29 days from the starting point (17 March 2005) to the date of service of the notice of motion to stay the proceedings and refer the dispute to arbitration (15 August 2005).

-	Two months and 12 days from the date of the decision on that motion (7 October 2005) to the last day of the 2005 legal year (19 December 2005).

-	One month and 19 days from the first day of the legal year (1 February 2006) to the date of service of the motion seeking leave to file the defence and cross-claim out of time.

25. I conclude that no, the delay in seeking leave to file a defence – nine months – is not relatively brief. It is a lengthy delay, being about six times the period (44 days) allowed by the Rules.

3 Are there good reasons for the delay?

26. I cannot see any. Almost five months lapsed before the notice of motion to stay the proceedings and refer the dispute to arbitration was served. Then, a further four months passed after the ruling on that motion was delivered. 

27. Michael Gibson's reasons for not doing anything – he was busy with the PNG Incentive Fund and he had to do an end-of-year report and go on Christmas holidays – are lamentable and irrelevant. He would have been better off not saying those things in an affidavit. Those who should be explaining this part of the delay are the defendants' lawyers, Blake Dawson Waldron. Why was two months and 12 days allowed to pass after the handing down of the ruling and the start of the court vacation? The notice of motion could have been filed during the court vacation. There was no need to wait until the start of the legal year. The Kimbe Registry was open in January 2006. Nothing was done until 13 February 2006. Then more than a month passed before the notice of motion was served. This seems dilatory conduct on the part of the defendants' lawyers.

28. I conclude that no, there are no good reasons for the delay.

4 Do the interests of justice favour granting leave?

29. In Joe Tipaiza v James Yali (2006) N2971 I granted leave to file a defence out of time though the defendants were guilty of substantial and protracted delays, for which there was no proper explanation. I did so as there appeared to be a defence on the merits, and the defendants were, in effect, the People of Papua New Guinea and the amount of the claim was in excess of K4 million. The interests of justice favoured the granting of leave. That case was very different to the present one. As I remarked in my ruling on the motion to stay the proceedings and refer the dispute for arbitration, this is a commercial dispute between parties represented by competent counsel. The interests of justice and sound commercial practice require these sorts of cases to be tried immediately. 

30. I conclude that in the circumstances the interests of justice do not favour the granting of leave.

Conclusion

31. None of the four considerations favour the granting of leave, so I will refuse leave, with costs.

Order

32. The order of the court is that:

(1)	the defendants' application to file a defence and a cross-claim out of time is refused; and

(2)	costs of these proceedings shall be paid by the defendants to the plaintiff on a party to party basis, to be taxed if not agreed.
____________________________________________

Linge & Associates: Lawyers for the plaintiff
Blake Dawson Waldron: Lawyers for the defendants