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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS. NO. 1375 OF 2003
BETWEEN:
KERRY LERRO trading as HULU HARA INVESTMENTS LTD
AND:
PHILIP STAGG as Chairman of CENTRAL TENDERS BOARD
AND:
VALENTINE KAMBORI as the Secretary for NATIONAL PLANNING AND RURAL DEVELOPMENT
Second Defendant
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant
Waigani: Kandakasi, J.
2006: 10 and 16 March
20 April
PRACTICE & PROCEDURE – Application to dismiss proceedings for failure to disclose reasonable cause of action - Whether failure to plead with particulars amounts to failure to disclose reasonable cause of action – Failure to disclose reasonable cause of action distinct and separate from failure to plead with particulars and or evidence – Separate consequences follow – Abuse of the Court’s process to apply to dismiss proceedings for failure to disclose reasonable cause of action when the basis for the application is based on lack of particulars and or evidence.
PRACTICE & PROCEDURE – Applicant seeking to set aside default judgment entered inter parte – Applicant neither opposing nor consenting to application for default judgment – Effect of – Orders by consent – Whether National Court has jurisdiction to entertain application – National Court has no jurisdiction.
PRACTICE & PROCEDURE – Application seeking to set aside default judgment and further extension of time to file and serve defence out of time – Earlier exercise of discretion in favour of applicant not made use of – No application for extension of time made within extended time – State having far more time to file defence than all other defendants – Effect of – No reasonable explanation provided for unreasonable delay and failure to comply with Court orders – Excuses of relocating office without explaining how it affected the giving of instructions and filing and serving of defence not reasonable explanation - Duties and responsibilities of employees of the State considered.
Papua New Guinean Cases Cited:
Jack Livinai Patterson v National Capital District Commission (05/10/01) N2145
PNG Forest Products v The State [1992] PNGLR 85
Kiee Toap v. The State & Ors (26/11/04) N2731
Pius Nui v. Senior Sergeant Mas Tauda & Ors (21/12/04) N2765
Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915
Eliakim Laki and 167 Others v. Maurice Alaluku and Others (10/11/00) N2001
Ronny Wabia v. BP Exploration Co Ltd & Ors [1998] PNGLR 8
Mesia Novau v. Nimrod Mark & Electoral Commission [1992] PNGLR 229
Polling v. Motor Vehicles Insurance (PNG) Trust [1982] PNGLR 228
Bank of South Pacific Limited v PNG Nambawan Trophy Holdings Limited & Ors (12/11/04) N2717
Papua New Guinea Banking Corporation v. Jeff Tole (27/09/02) SC694
The Independent State of Papua New Guinea v. Barclay Bros (PNG) Ltd (02/04/04) N2507
Fly River Provincial Government v. Pioneer Health Services Limited (24/03/03) SC705
Keboki Business Group Inc. v. The State & Morobe Provincial Government [1984] PNGLR 28
Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285
Green & Company Pty Ltd (Receiver Appointed) v. Green [1976] PNGLR 73
Christopher M Smith v. Ruma Constructions Ltd (11/10/02) SC695
William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (14/04/04) N2526
Bank of South Pacific Limited v. PNG Nambawan Trophy Holdings Limited & Ors (12/11/04) N2717
MVIT v. James Pupune [1993] PNGLR 370
MVIT v. Salio Tabanto [1995] PNGLR 214
Paul Torato & Anor v. Sir Tei Abel & Ors [1987] PNGLR 403
Peter Lipsey v. The Independent State of Papua New Guinea [1993] PNGLR 405
Coecon Limited (Receiver/Manager Appointed) v. The National Fisheries Authority of Papua New Guinea and The Independent State of Papua
New Guinea (28/02/02) N2182
Simon Mali v The State (03/04/02) SC690
Re Peter Naroi [1983] PNGLR 176
Joseph Kupo v Steven Raphael, Secretary for the Department of Defence Force (28/05/04) SC751
Lupi Iohoi v. Motor Vehicle Insurance (PNG) Trust [1993] PNGLR 366
Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Ors (08/10/02) N2289
Andrew Baing v PNG National Stevedores Pty Ltd (23/02/00) SC627
Overseas Cases Cited:
Dyson v. Attorney General [1910] UKLawRpKQB 203; [1911] 1 KB 410
Nagle v Feilden [1966] 1 All ER 689 at 697 [1966] 2QB 633
Allen v Gulf Oil Refining Ltd [1980] UKHL 9; [1981] 1 All ER 353; [1981] AC 1000
Attorney General of the Duchy of Lancaster v. London and North Western Railway Co. [1892] UKLawRpCh 134; [1892] 3 Ch 274
Read v. Brown [1888] UKLawRpKQB 186; (1888) 22 QBD 128
Hubbuck & Sons Ltd v. Wilkinson Heywood & Clark Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86
Counsel:
Mr. M. Kombri, for the Defendant/Applicants
Mr. D. Kop, for the Plaintiff/Respondent
20th April 2006
1. KANDAKASI J.: Before me is an application by the defendants seeking to dismiss the plaintiff’s claim for failure to disclose a reasonable cause of action and that the claim is frivolous, vexatious and an embarrassment within the meaning of O.12 r.40 and O.8 r.27 of the National Court Rules (the Rules). Alternatively, they are applying for a set aside of a default judgment entered against them and for extension of time for them to file and serve their defence out of time pursuant to O.12 r.35 of the Rules. The Court signed the default judgment after hearing both the defendants and the plaintiff following the defendants further default in filing and serving their defence within further time extended by the Court.
2. The plaintiff opposes the application. For the first part of the application, the plaintiff argues that his pleadings disclose a reasonable cause of action. As for the second part of the application, he argues that the defendants are at no liberty to make their application particularly when the Court had already granted further time for them to file and serve their defence out of time and that they appeared at the hearing of the plaintiff’s application for default judgment and were heard before the decision to enter default judgment against them. Further the plaintiff argues that, even if the defendants were at liberty to bring their application, they have not offered any reasonable explanation for allowing judgment to go in default and have delayed without any reasonable explanation in making the application since the signing of the default judgment against them.
Relevant Issues
3. These arguments and therefore the application, raise the following issues for determination by the Court:
4. The last two (2) issues are separate and distinct from the first issue. I will deal with the first issue first. Thereafter I will turn to deal with the second and third issues in that order.
5. In order to properly understand and determine the application before the Court, it is necessary to understand the relevant background. I therefore turn to the relevant background which starts on 24 September 2003, with the plaintiff filing his writ of summons. On 26 September 2003, he served the writ of summons on the third defendant and on the first and second defendants on 7 October 2003. On 29 October 2003, the Solicitor General filed a notice of intention to defend for and on behalf of all the defendants.
6. Following default in a filing and serving of the defendants’ defence, the plaintiff filed a motion for default judgment on 18 May 2004, which he amended on 20 May 2004. The defendants responded with a cross motion filed on 20 May 2004, seeking a dismissal of the proceedings for not disclosing reasonable cause of action and in the alternative, an extension of time for them to file and serve their defence out of time. The Court heard these motions on 19 November 2004 and decided to decline the plaintiff’s application for default judgment and granted the defendant’s further time until 17 December 2004, to file and serve their defence. The defendants did not file and serve their defence within the time extended by the Court. That resulted in the plaintiffs filing on 22 December 2004, a motion for default judgment. The Court heard that motion inter partes on 9 February 2005, and decided to sign judgment in default against the defendants.
7. On 28 January 2005, Paraka lawyers filed notice of change of lawyers for the defendants and took over the carriage and conduct of the defendants’ defence from the Solicitor General. Paraka Lawyers filed on 30 May 2005, a notice of motion initially returnable on 15 June 2005. That motion was adjourned for various reasons until it came before me for hearing on 16 March 2006.
Failure to Disclose Reasonable Cause of Action, Frivolousness and Vexatiousness
8. The first relief sought and issue raised is the claim that the plaintiff’s statement of claim discloses no reasonable cause of action and or that it is frivolous, vexatious and a harassment of the defendants. This I note is a re-activation of an issue the defendants raised in their motion of 20 May 2004, which the Court heard and declined on 19 November 2004. I therefore consider the issue is res judicata. However, the plaintiff did not take that point up and the issue was not fairly raised during the hearing before me. Accordingly, I wish not to take the point any further.
9. Moving then onto the merits of the first issue before me, I note that the defendants argue in their submission that, the plaintiff’s statement of claim does not disclose any reasonable cause of action in law "on the basis that there was no breach of contract as there was no contract in existence or executed by the Defendants/Applicants and the Plaintiffs/Respondents" because the basis for the alleged contract and its breach are not pleaded. They also refer to the Public Finance (Management) Act, 1996 (PF(M)A) and argue that the requirements of that Act were not complied with in terms of tendering, acceptance of tender and execution of a contract. Further, they argue that the plaintiff’s claim:
"is frivolous and vexatious on the basis that the claim cannot possibly succeed, it amounts to harassment of the Defendants/Applicants and as a result the Defendant/Applicants are put to the trouble and expense of defending a claim which has no legal basis at all. The Defendant’s are having difficulty in identifying the real cause of action, whether it be breach of contract, breach of duty or whether the Plaintiff is claiming for quantum meruit. There is a real problem in identifying the cause of action."
10. From page 2 to 3 of the defendants’ written submissions, they clearly spell out what they understand to be the nature of the plaintiff’s claim against them. They point out without any difficulty that, the plaintiff’s claim is for damages for breach of an alleged building and maintaining of houses contract secured through the tender process. This is consistent with the imports of the plaintiff’s pleadings in its statement of claim from paragraphs 5 to 26. He also pleads with some particular acts of negligence or wrongful conduct on the part of the defendants and damages allegedly following on from that.
11. The provisions of the Rules relied upon by the defendants for this part of their application is as already noted O.12 r.40 and O.8 r.27 (1). These provisions respectively read:
"40. Frivolity, etc
(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings -
(a) no reasonable cause of action is disclosed;
(b) the proceedings are frivolous or vexatious; or
(c) the proceedings are an abuse of the process of the Court,
the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.
(2) The Court may receive evidence on the hearing of an application for an Order under Sub-rule (1)."
"27. Embarrassment, etc. (15/26)
(1) Where a pleading—
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or
(c) is otherwise an abuse of the process of the Court,
the Court may at any stage of the proceedings, on terms or otherwise, order that the whole or any part of the pleading be struck out.
(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1)."
12. I considered O.12, r.40 in the case of Jack Livinai Patterson v. National Capital District Commission.[1] There, I noted that there are numerous cases on this rule, starting with the decision of the judgment of Sheehan J. (as he then was) in PNG Forest Products v. The State.[2] Since that judgment and my decision, there have been a number of other National Court judgments mainly by Cannings J., in the cases of Kiee Toap v. The State & Ors[3] and Pius Nui v. Senior Sergeant Mas Tauda & Ors.[4] Prior to these recent judgments, there are the judgments of Kirriwom J., and Sevua J., respectively in Gabriel Apio Irafawe v. Yauwe Riyong[5] and Eliakim Laki and 167 Others v. Maurice Alaluku and Others.[6]
13. These long list of cases clearly set out the relevant guiding principles when an application is made under O.12 r.40 and or O.8 r.27(1) of the Rules. As far as I am able to tell, the principles emerging from these lines of cases are as follows:
"every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise of every piece of evidence which is necessary to prove each fact, but every fact is necessary to be proved."[13]
14. To these principles I had that, the pleadings must be so bad and or vague and is not a case of lack of particulars or a lack of better pleading which cannot be cured by a request and or orders for further and better particulars and or amendment respectively under O.8, rr. 36, 50 or 51 of the Rules. Lack of particulars or lack of better pleadings is distinctly separate from a failure to disclose a reasonable cause of action or an action that is frivolous, vexatious or harassment. As such, clear and separate consequences follow. There is provision under the rules for requesting and or orders for further and better particulars or better pleadings as opposed to a right in a defendant or an opposing party to apply for a dismissal straightaway. A party must be careful not to ask for and the Court must stop to ensure that it is not being asked to dismiss a claim because of lack of particulars or lack of proper pleading which can be cured by appropriate amendments to the pleadings. Regard must also be had to the fact that the Rules are not an end in themselves but a means to an end and by reason of which a strict compliance of the Rules can be dispensed in the interest of doing justice in accordance with O.1, r.7 of the Rules[18] in appropriate cases.
19. Applying these principles to the case before me, the first question for me to ask and resolve is; Does the plaintiff’s statement of claim fail to disclose a reasonable course of action?
20. Although I agree that the pleadings fail to reveal good draftsmanship, and are therefore poor, the plaintiff’s statement of claim does disclose that his cause of action is founded on contract and the tort of negligence. The statement of claim also discloses the fact that, there was an invitation for tender for a road construction project in the Southern Highlands Province. The plaintiff tendered for it and its tender was initially rejected but later was accepted and awarded the contract though at a reduced prize, following a termination of the contract initially awarded to a different bidder.
21. The plaintiff further pleads that, the contract between itself and the State was to be formalized with a written letter of acceptance from the defendants. In the meantime, he proceeded to mobilize personal, equipment and material to perform the contract but refrained from commencing the construction as he did not yet receive the formal letter of acceptance from the first and second defendants.
22. The plaintiff goes on to plead that, the negligence (particulars pleaded) of the first and second defendants unnecessarily delayed commencement of the agreed construction. That unnecessarily exposed the plaintiff’s tools, equipment and material mobilized for the project and he did loose them to criminal elements, suspected to be the agents of the unsuccessful bidders of the contract. This, the plaintiff alleges caused consequential loss to his business and other damages and pleads an estimate of his damages.
23. As noted, the defendants have had no difficulty in identifying the plaintiff’s claim as one being based on contract. They argue however, that there was no contract and that there was no breach of any contract. Reliance is placed on ss.45 and 47 of the Public Finance (Management) Act as amended. These provisions provide that once notice of acceptance of a tender has been communicated to the successful bidder, notice of acceptance must be sent to all the other bidders and published in the National Gazette. The necessary instruments evidencing the contract may be executed by either the Head of State acting on advice, or the relevant Minister or the chairman of the Tenders Board, depending on the value of the contract.
24. It is now settled law that, the requirements of the PF(M)A are mandatory and must be met before there can be a valid contract for supply of any goods and services to the State or any of its instrumentalities. I took that view initially in the Jack Livinai Patterson v. National Capital District Commission,[19] and so did the current Chief Justice, Sir Mari Kapi., (then DCJ) in The Independent State of Papua New Guinea v. Barclay Bros (PNG) Ltd.[20] The Supreme Court cited this view with approval in the case of Fly River Provincial Government v. Pioneer Health Services Limited.[21]
25. The above Supreme Court decision is also authority for the proposition that, when an illegal contract has been part performed, the innocent party is entitled to damages on the basis of quantum meruit. The Supreme Court discussed that principle in its earlier decision in Keboki Business Group Inc. v. The State & Morobe Provincial Government.[22] That decision is relevant and is on point to the extent that the plaintiff alleges that he was awarded the contract and the only problem was the failure of the first and second defendants to confirm that by providing him with a letter of acceptance. The Supreme Court in that case held that, what mattered was that a decision has been made to award the contract to the appellant who relied on it and proceeded to perform the contract even though the then chairman of the Central Supply and Tenders Board did not sign and forward the appellant the relevant acceptance letter.
26. In the present case, the plaintiff claims he went through the public tender procedure in accordance with the provisions of the PF(M)A. Therefore he says he had a valid contract, which he relied on and proceeded to take steps to fully perform his part of the contract. The only problem he claims was that he was not provided promptly with the appropriate acceptance letter which was due to the negligence of the first and second defendants. The decision in Keboki Business Group Inc. v. The State & Morobe Provincial Government,[23] in my view provides support for the plaintiff’s claim that he had a valid contract even though he did not receive a formal letter of acceptance.
27. The defendants are clearly through this application, asking this Court to find summarily that the plaintiff was not one of the bidders in the initial tender and that the defendants did not issue any letter of acceptance and that a contract was not executed in accordance with the requirements of the PF(M)A and further that, they did not instruct the plaintiff to mobilize for the purposes of performing the alleged contract. Therefore, in their submission there was no valid contract and that there is no basis for the quantum meriut claim.
28. In my view, these are matters, that go beyond a simple examination of the pleadings of the plaintiff to determine whether a cause of action is disclosed or not. They instead require a consideration of the relevant evidence and facts emerging from the evidence. No findings of fact on a contested matter can be made summarily and without a proper trial in the normal way.[24] Here, the plaintiff’s evidence appears to support his claim while the defendants have filed affidavit evidence seeking to rebut the plaintiff’s claim. Clearly this is a matter for trial rather than summary determination.
29. As for the question of whether, the plaintiff’s claim is frivolous and vexatious, the test for frivolousness is as already noted, is the claim has to be so obviously untenable that it cannot possibly succeed or that the claim or defence is bound to fail if it proceeds to trial. The test for a vexatious claim is as also noted, distinct from frivolousness in that it provides that if the claim or defence to a claim amounts to a sham or one which cannot succeed and is one that amounts to harassment of the opposite party who is unnecessarily put to the trouble and expenses of defending or proving the claim. In both instances, either of the conclusions could clearly be arrived at only in the clearest of cases. A clear case of a claim being frivolous and or being vexatious would be for example a case where the issue raised has already been decided by a court of competent jurisdiction or that the action pleaded lacks essential elements such as consideration or an offer and acceptance in the case of a contract, or where a condition precedent has not been met such as the requirement for notice of intention to make a claim against the State[25] in the case of a claim against the state or the Motor Vehicle Insurance Trust.[26]
30. Here, the defendants submit that the plaintiff’s claim is frivolous and vexatious because the claim cannot succeed as it has no legal basis at all. They also submit that they are having difficulty in identifying the real cause of action, whether it is breach of contract, breach of duty or the plaintiff is claiming quantum meruit.
31. The first part of the defendants’ contention can only relate to and arise out of their argument that the requirements of the PF(M)A have not been followed. I discussed that issue already and have already ruled that the statement of claim clearly pleads the plaintiff’s alleged contract being arrived at in accordance with the requirements of the PF(M)A, except only for the formal letter of acceptance which is not fatal to the plaintiff’s claim. With regard to the second part of the contention, I find this contradicts what they understand to be the plaintiff’s claim. They have clearly identified that the plaintiff’s claim is for damages for breach of a construction contract which has all of the elements of a valid contract such as offer and acceptance and valuable consideration passing from one party to the other.
32. As noted, the provisions of O.12, r.40 and O.8 r.27 (1) are available as a summary procedure only in the clearest of cases where no reasonable cause of action or defence is disclosed on the pleadings and or the claim is frivolous, or vexatious, or amounts to harassment of the defendant.
33. What the defendants are trying to do in this case is to get this Court to consider their evidence to the exclusion of the plaintiff’s and summarily dismiss the plaintiff’s claim without properly making a case out for the statement of claim failing to disclose a reasonable cause of action and or the claim disclosed is frivolous and vexatious. Clearly therefore, both of the defendants’ contentions are without any merit. Instead, they are misconceived and an abuse of the Court’s process both on the merits and to the extent that the application is a repeat of what was heard and determined by the Court on 19 November 2004.
34. Based on the matters set out above, I am of the view that the defendants’ application is misconceived. It is not a proper application in my view under O.12, r.40 and or O.8, r.27(1) of the Rules. The application of the defendants is itself nothing short of an abuse of the process of the Court. It is more so when the same issue was before the Court on 19 November 2004, which appears to have been declined. There is no explanation as to the basis on which the defendants have resurrected issues that appear to have been already dealt with.
35. It has become common ground for many lawyers mainly from Paraka Lawyers to make this kind of applications in a large number of cases, resulting in substantial wastage of the Court’s time and unnecessary costs to the State and plaintiffs. No doubt, this kind of conduct is in breach of the lawyers’ profession conduct rules that require lawyers to avoid unnecessary wastage of the Court’s time and not to unnecessarily incur costs for the client.[27] Accordingly, this kind of conduct must now stop immediately to avoid further unnecessary wastage of the Court’s time and costs to the State and other parties.
36. In short, I find that the defendants’ application seeking to dismiss the plaintiff’s claim based on their claim that no reasonable cause of action is disclosed and or the cause of action disclosed is frivolous and vexatious or amounts to an harassment of the defendants is without merit and is an abuse of the process of the Court. Accordingly, I dismiss this part of the defendants’ application.
Set Aside of Default Judgment and Extension of Time to File and Serve Defence out of Time
(a) Jurisdiction
37. I now turn to the defendants’ alternative application for a set aside of the default judgment entered against them and for leave for them to file and serve their defence out of time.
38. As noted already, on 18 May 2004, the plaintiff filed a notice of motion seeking default judgment which the plaintiff amended on 20 May 2004. On the same day, the defendants filed a motion seeking a dismissal of the proceedings for not disclosing a reasonable cause of action and alternatively extension of time to file and serve their defence out of time. On 19 November 2004, the Court dismissed plaintiff’s application and gave the defendants until 17 December 2004 to file and serve their defence. The defendants did not make use of the extended time and fell into further default but this time after the further time extended by the Court. So on 22 December 2004, the plaintiff filed a motion for default judgment. After hearing the parties, the Court entered default judgment for the plaintiffs on 9 February 2005.
39. Three (3) months later on 30 May 2005, the defendants through Paraka Lawyers filed a notice of motion seeking amongst others, a set aside of the default judgment signed on 9 February 2005. That motion had the initial return date of 15 June 2005. However, the motion was not heard on 15 June 2005 and was adjourned several times for various reasons until 16 March 2006, when I heard the arguments of the parties on the motion and reserved for a decision.
40. Clearly, this is not a usual application for a set aside of a default judgment signed in default of a notice of intention to defend or a defence. Instead, it is an application seeking to set aside a judgment entered by the Court in default of filing a defence within further time extended by the Court and more so, after a default judgment signed after hearing the defendants and the plaintiffs on the latter’s application for default judgment. Given that, the line of case authorities commencing with Green & Company Pty Ltd (Receiver Appointed) v. Green[28] cited and relied on by the defendants are, in my view, inappropriate and irrelevant.
(i) Relevant Principles and Authorities
41. In my view, however, the proper line of authorities are those that start with the Supreme Court judgment in Christopher M Smith v. Ruma Constructions Ltd[29] particularly in relation to the National Court’s jurisdiction to deal with an application to set aside default or summary judgments. In that case, the National Court entered summary judgment against the respondent in its absence. The respondent appealed to the Supreme Court against the judgment. There was some delay in prosecuting that appeal resulting in an application seeking to dismiss the appeal for want of prosecution by the respondent. The Supreme Court declined that application and directed the appeal be progressed to a hearing. Subsequently, the respondent withdrew its appeal and sometime later applied for a set aside of the summary judgment. The National Court heard and granted that application. On appeal the Supreme Court of which I was a member held at pp. 6 and 7:[30]
"The approach taken by the trial judge with respect is fundamentally wrong. In essence the learned trial judge reviewed the decision of Woods J. The trial judge had no jurisdiction to do this under an application to set aside judgment under O 12 r 8 of the Rules. This power belongs to the Supreme Court under the Supreme Court Act or s 155 (2) (b) of the Constitution. ... In fact in the present case, the respondent filed an appeal against the decision of Woods J.
...
The respondent could not seek to review the decision of Woods J after having abandoned their right to review the decision in the appeal to the Supreme Court. As I already pointed out the National Court has no jurisdiction to review a decision on summary judgment under O 12 r 8."
42. I followed that decision in at least two (2) of my own decisions. The first was in William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National".[31] There, sitting in the National Court, I had two applications. One was by the plaintiff for judgment in default of the defendant’s defence. The other was an application by the defendants for leave to file and serve their defence out of time. I declined the application for extension of time and entered judgment in default against the defendants.
43. The defendants lodged an appeal to the Supreme Court against my decision. That appeal was pending before the Supreme Court. In the meantime, the defendants applied in the National Court for a set aside of the default judgment. In refusing that application, I held that:[32]
"By the present application, the defendants are in effect asking this Court to reconsider the very arguments and principles already considered and applied in the application for leave. This can only happen before the Supreme Court on appeal. There, the defendants will be entitled to a rehearing of the application but on the record. That means they will not be at any liberty to introduce any new evidence except based on "fresh evidence." Even that, would be on the basis of any such evidence meeting the test of the evidence not being available and could not be secured and tendered in the Court below."
I expressed that view after noting earlier that:[33]
... [T]he principles that apply to an application for a set aside of a default judgment equally applies to an application for leave to file and serve a defence out of time. Then applying those principles, to the application then before me, I refused the application on being satisfied that, the [applicant not meeting the] requirements for disclosing a defence on the merits and a reasonable explanation for allowing the prescribed time limits for the filing of their defence to expire.
44. My second decision was in the case of Bank of South Pacific Limited v. PNG Nambawan Trophy Holdings Limited & Ors.[34] There, the plaintiff applied for default judgment in default of the defendant’s defence. The defendants responded with an application for extension of time to file and serve their defence out of time. I dealt with both of the applications starting with the application for extension of time. The Defendants did not satisfy the Court as to why they allowed the time limits for their defence to expire, the need for them to disclose by affidavit evidence a defence on the merits and provide an explanation for the delay in bringing the application. I therefore, declined the application for extension of time. Thereafter, I heard the application for default judgment. The Defendants did not contest that application. On being satisfied that there was default within the meaning of the rules, I ordered judgment in default against the Defendants.
45. Subsequently, the Defendants filed an application seeking a set aside of the default judgment. At the same time, they filed an appeal to the Supreme Court against the decision refusing extension of time for them to file and serve their defence out of time. This raised at the outset the question of the Court’s jurisdiction to deal with the application.
46. I considered and applied the principles enunciated in the judgment of the Supreme Court in Christopher M Smith v. Ruma Constructions Ltd[35] and my decision in William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National".[36] I said and ruled as follows:[37]
"In the present case, this Court already heard and determined the issues of whether Defendants have a reasonable explanation for allowing the time limits for them to file and serve their defence to expire and disclosing a defence on the merits. It also heard and determined the reasonableness or otherwise of the reasons provided for the delay in bringing the application. All of these took place in the context of the application for extension of time for the Defendants to file and serve their defence. The Defendants argue however that, they did not provide all of the relevant facts or evidence disclosing a defence on the merits. They are now able to do that, which has the effect of disclosing a defence on the merits of the case. Given that, they submit that, it is only just and fair that, the Court should hear them and grant the relief they seek to do justice.
The judgment of the Supreme Court in Christopher M Smith v. Ruma Constructions Ltd ... operates against this application. This authority says effectively that, it does not really matter, whether there is a defence on the merits or not. What matters is whether the Court has the necessary jurisdiction to deal with the matter and do justice. If the Court is without jurisdiction, justice is secondary because jurisdiction is a pre-requisite. Apart from the fact that, this Court is bound by that decision, the Defendants did not persuade me with any authority to the contrary. Accordingly, I reject the submissions put forward by the Defendants."
(ii) Present Case
47. The present case is similar to William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National"[38] and Bank of South Pacific Limited v. PNG Nambawan Trophy Holdings Limited & Ors.[39] The Defendants were in default of their defence. Consequently, the plaintiff applied for default judgment against them to which they responded with an application for extension of time to file and serve their defence out of time. The Court in the exercise of its discretion, decided to refuse the application for default judgment and extended time up until 17 December 2004, for the defendants to file and serve their defence. They did not make good use of that and went into further default.
48. The plaintiff again applied for default judgment. This time it was not only a default within the meaning of the Rules but a failure to comply with a Court order. The defendants did make appearance at the hearing of the application. Counsel then representing the defendants neither opposed nor consented to the application of the plaintiff. After having heard the parties, the Court decided to enter default judgment against the defendants on 17 November 2004.
49. As far as I am able to tell, the defendants had two (2)different occasions on which to inform the Court of the reasons for their default in filing their defence and to demonstrate to the satisfaction of the Court that they have a defence on the merits. The first was when the plaintiff made his first application for default judgment on 19 November 2004, and the defendants applied for extension of time and for leave to file and serve their defence out of time. The second opportunity was when the plaintiff applied for default judgment the second time on 9 February 2005. On the second occasion, the defendants had the opportunity to disclose a defence on the merits and show cause as to why the Court should further exercise its discretion in their favour by refusing to grant default judgment and allow them to file and serve their defence out of the time already extended by Court. Instead of doing that, they decided to simply take a position of neither opposing nor consenting to judgment being entered against them.
50. During the course of hearing the defendants’ present application, I asked their counsel as to what was the effect of their client’s then counsel’s attitude at the hearing of the plaintiff’s application for default judgment. Counsel arguing the case for the defendants before me was not able to answer that question. Hence, in the absence of a clear response, I intimated that such a response could amount to no objection to the judgment or orders sought and thereby render the granting of the relief or judgment sought as one by consent. Counsel for the defendants said he had no submission to make leaving me with the suggestion I made, which I now maintain. This view is fortified, in my view, by authorities like that of MVIT v. James Pupune[40] and MVIT v. Salio Tabanto.[41] This line of cases make it clear that a judgment or a relief granted to a party without any objection from the opposing party cannot be readily overturned on appeal. The situation in my view, is akin to a consent order which can not be set aside or appealed against easily[42] except only in the very limited instances in which a party could apply for a set aside on grounds of error on the face of the record, procedural irregularity,[43] and fraud or misrepresentation leading to the consent order.[44]
51. Until the decision of the Supreme Court in Simon Mali v. The State,[45] the earlier authorities speak of no power in the National Court to entertain applications for either a variation or a set aside of consent orders once it has been signed and entered. This is so for a very good reason. The consent order finalizes the matter as between the parties and that constitutes a final judgment of the Court. The Court is thus functus officio. The only power or discretion left in the Court is to enforce the judgment when called upon. The authorities on point are the judgments of Sheehan J., in Peter Lipsey v. The Independent State of Papua New Guinea,[46] and Bredmeyer in Paul Torato & Anor v. Sir Tei Abel & Ors,[47] which I followed in my judgment in Coecon Limited (Receiver/Manager Appointed) v. The National Fisheries Authority of Papua New Guinea and The Independent State of Papua New Guinea.[48] There is also the judgment of Andrew J., in Re Peter Naroi.[49]
52. The earlier authorities make it clear that the proper procedure is for a person seeking to set aside or vary a consent order once entered and finalized, to bring a fresh action on the grounds of say fraud or mistake and or apply for review by the Supreme Court as was done in the case of Joseph Kupo v. Steven Raphael, Secretary for the Department of Defence Force.[50]
53. The decision in Simon Mali v. The State,[51] held that there is inherent power in the National Court to hear and determine applications to set aside consent orders, by virtue of s.155(4) of the Constitution. The appellant presented a strong case against the eventual holding of the Supreme Court with the support of the earlier local and overseas authorities for the reasons the earlier authorities give. Although the Supreme Court did note the appellant’s arguments, it did not have any regard to the rational behind the earlier authorities’ view as to the proper procedure to adopt when applying for a set aside or variation of a consent order once it has been entered. Instead, it is clear that the Court was more concerned with procedural irregularities and error patent on the face of the record, which it held that the National Court had an inherent jurisdiction to correct.
54. Without any clear indication from the Supreme Court as to what it was doing with the earlier authorities on point particularly considering the rational behind them, it seems that the Supreme Court has created an exception to the principle that, only on a fresh action based on fraud or mistake or on a successful review application to the Supreme Court, can there be a set aside or a variation of a consent order. This exception applies only in cases where there are errors patent on the face of the record and or serious procedural irregularities leading to a consent order is shown. So far, only the decision of Cannings J in Pius Nui v. Senior Sergeant Mas Tanda & Ors[52] has adopted and followed this procedure. That judgment did not have regard to any of the earlier decisions and in particular the rational or principles behind those judgments.
55. In the case before me, neither of the parties assisted me with any sound submissions on the issue of this Court’s jurisdiction to entertain the application before it. The onus was on the defendant applicants to convince the Court. They failed in that duty by failing to make out a case under the exception created by the Simon Mali v. The State[53] if they were applying to correct an error patent on the record or that there were procedural irregularities leading to the order now they seek to set aside. If however, their application is under some other authority it was incumbent upon them to refer the Court to that authority and make a case for this Court to entertain their application and decide in their favour. They failed to make out a case on neither of these fronts. What is apparent is that, they are trying to have a third go at applying for leave of the Court to file and serve their defence out of time after participating in an application that has led to the judgment which has been otherwise regularly entered against them without their objection. There is ample authority for the proposition that an applicant in the shoes of the defendants before me must provide convincing reasons for the Court to exercise further discretion in their favour once they fail to make good use of an earlier exercise of discretion in their favour.[54] If they were not able to come within the time extended by the Court, it was incumbent on them to apply for a further extension within the currency of the extended time but they failed. By their conduct, they allowed for their further default and for the plaintiff to apply again for default judgment and get that relief without any opposition. Despite all of that, they are now through the present application, trying to get this Court to revisit its orders of 19 November 2004, as if it was entered ex parte and as if they were not given the opportunity to be heard on the application that led to the judgment or orders, the subject of the present application.
56. When this Court decided to order judgment against the defendant for failure to file and serve their defence within the further time extended by the court for that purpose, it was final. The Court from the date it made those orders became funcutus officio. That concluded any right in the defendants to ask for and receive further extension to file and serve their defence out of time, subject only to their right of appeal or a review or fresh action against the decision of the National Court based on the recognized grounds like fraud and or mistake.
57. In view of all of the foregoing reasons, I am of the firm view that, I have no jurisdiction to hear and determine the application of the defendants seeking to set aside the orders of 19 November 2004, and for leave for them to file and serve their defence within a further extended period.
(b) On the Merits
58. Assuming I am wrong in arriving in the above decision (which I say am not), it is necessary to consider the merits of the application. The decision of the Supreme Court in Christopher M Smith v. Ruma Constructions Ltd[55] is one of the latest on the relevant principles and issues for the Court to consider and determine in an application seeking to set aside a default judgment, although that was in the context of an ex parte default judgment which equally applies with the necessary modifications to suit an application such as the one before me now. There, speaking as a member of the Court I said:[56]
"Before a judgment or order of a Court obtained in default or in the absence of the other party could be set aside, the Court must be satisfied that:
In my view, these are the principles that govern and should guide a Court hearing an application to set aside an ex parte judgment or order. The issue for determination for the Court would be in terms of whether the applicant:
59. Allowing myself to be guided by these principles on the issues in the present case, I asked the defendants’ counsel to address each of these factors to the Court’s satisfaction. He tried to do that by submitting that, his clients particularly, the first defendant was relocating office with changes to telephone and facsimile numbers and did not have the time to attend to giving instructions to the lawyers to prepare and file the defendants’ defence within the time period provided for under the Rules of the Court and the Claims By And Against the State Act (CBASA). He also submits that, the relevant documents may have been misplaced in the process. Further, the defendants submit that the then lawyers for the defendants did not take any step to have any audience with the first and second defendants to receive and settle upon the relevant instructions and file and serve the defendants’ defence.
60. No specifics in terms of days, dates and time as well as the particular documents they did not have are given in the affidavit material the defendants have filed in support of their application. A clear example of this, is the lack of any specification of the date and time when the relocation of office took place for the first defendant and when was that concluded. Similarly, no information is provided as to what documents were required and when and where those documents were located. They do not even spell out what steps in particular the first and the second defendants took to ensure that their lawyers were placed with the necessary instructions for theirs and the defence of the State, after they were personally served with the writ of summons on 26 September and 7 October 2003 respectively.
61. At the same time, there is no evidence of what steps, if any, the then lawyers for the defendants took to ensure that the first and second defendants placed them with the necessary instructions, apart from writing only one letter to the first defendant on 17 November 2003, which was followed up on 11 February 2004. Following the grant of a further extension of twenty-eight (28) days to 17 December 2004, for the defendants to file and serve their defence, the lawyers did only two (2) letters to the first and second defendants on 22 November 2004 and 12 January 2005 and no more.
62. People in responsible positions as the first and second defendants as well as the Solicitor General are employed by the State to protect and promote the interest of the State. Some of the employees of the state are on terms and conditions far better than some of the employees in the private sector. They have a motor vehicle and an office staffed with a whole range of workers to make the ultimate discharge of their duties and responsibilities easier. The offices of the Solicitor General and the first and second defendants are not far apart. They are all within the National Capital District. If the telephone and facsimile facilities were not working at the relevant time, there was nothing preventing them from travelling to and from the respective offices for giving of instructions and filing and serving of theirs and the States defence. No explanation is provided as to why they could not do that, given the substantial amounts of money involved in this claim.
63. It is apparent from the material that is before me that the first and second defendants and the lawyers for the State took a casual approach and attitude to the claim against the State. Nothing concrete and meaningful was done about getting the State’s and the other defendant’s defence filed within the time periods stipulated by the Rules. As I noted in the course of the hearing of the application, the State unfairly has a total of ninety (90) days from the date of service of a writ of summons to file and serve their defence compared to all other defendants who only have a total of forty-four (44) days. There is certainly no evidence and I could not possibly imagine that, the first defendant took up to or more than ninety (90) days to relocate office. Even then, from the date of the service of the writ of summons toward the end of 2003, the defendants allowed five (5) months to pass before the plaintiff filed his first motion for default judgment on 20 May 2004. That motion was not moved until 19 November 2004, when it was denied and the defendants were given a further 28 days for them to file and serve their defence. By that time, the defendants have had eleven (11) months. Thereafter, the defendants allowed a further one (1) month to pass before the plaintiff filed its second application for default judgment on 22 December 2004, which was heard and determined in the plaintiffs favour resulting in the signing of the default judgment on 9 February 2005. A further three (3) months were allowed to pass before the defendants filed the application now before me, which was not heard until 16 March 2006. That saw a further period of thirteen (13) months pass.
64. There is some explanation of the passage of the last thirteen (13) months which is attributable to the Court registry staff not being able to manage the Court file properly resulting in an inability to fix the motion for hearing at an earlier time. However, the earlier delayed period of almost fifteen (15) months have not been explained in any satisfactory manner. The excuse of relocating office without more as noted is, in my view, no reasonable explanation. This is serious in my view particularly when an application for default judgment was properly made and the Court in the exercise of the discretion vested in it, declined to sign default judgment the first time around and granted the defendants until 17 December 2004, to file and serve their defence. I have said else where before that a failure to comply with court orders can be fatal.[57]
65. The evidence before me and or the lack thereof, clearly demonstrates that the first and second defendants as well as the Office of the Solicitor General, failed in their respective duties to act in the best interest of the State. They have chosen to ignore orders of the Court, which was an exercise of discretion in the defendants’ favour. This is not the first time there has been such failure. In almost all of the matters in which the State is a party, the relevant departmental heads and other responsible employees of the State continue to demonstrate such failure on a day to day basis. The end result of that are far too many default judgments and costs running into millions and millions of kina. It is about time, people like the first and second defendants and others similarly failing in their duties be made to pay for their actions. The onus is on the Solicitor General or those acting for the State to ensure that appropriate steps are taken to make these kinds of careless people on the States payroll answerable and pay for their failures rather than continuously allow for the people through the State to bear the consequence of such failures unnecessarily. This is necessary because, failures of lawyers and people like the first and second defendant are no excuse or good reason to prevent a plaintiff from getting to judgment without unnecessary delay and costs.
66. In these circumstances, I find that the defendants have not provided this Court with any reasonable explanation for allowing the further time extended by the court for them to file and serve their defence to expire. Also, on the evidence before me, I find that the defendants delayed making this application by three (3) months, which delay they have also failed to offer any reasonable explanation for.
67. This now leaves me to deal with the question of disclosing a defence on the merits. I note that the authorities say that, of the three (3) requirements that must be met by an applicant in an application seeking to set aside default judgment, the requirement to disclose a defence on the merits is a very important and critical one.[58] I note that the affidavits of the first and second defendants filed in support of their application appear to disclose a defence on the merits. Whether or not that will succeed is a different consideration. At this stage however, it appears clear to me that the defendants do have a defence on the merits. That would warrant a set aside of the default judgment. However, there is a serious complication and impediment to that.
68. As already noted, this is not a straight forward application seeking to set aside a default judgment. Instead, the judgment the subject of the proceedings, was signed both for being in default of the defendants filing their defence within the time periods provided by the Rules and the CBASA as well as for non compliance of the orders made by this Court on 19 November 2004. Whether the defendants had a defence on the merits and whether or not they should be allowed to bring in their defence out of time was already heard and determined in their favour on 19 November 2004. Accordingly, I am of the view that, having a defence on the merits should not be viewed in isolation but in association with what steps the defendants took to ensure that their defence was filed within the time extended by the Court and even before that when they had much time.
69. As noted, the defendants have not provided any explanation for allowing the time the court extended to pass without good reason. That was a repeat of the position they were in when the Court decided to extend time on 19 November 2004. They had already been in serious default but were given one more chance. They did not make use of that chance for no apparent good reason but for the failures and negligence of the first and second defendants and the defendants’ lawyers. If indeed the defendant had the kind of defence they set out in the affidavits of the first and second defendants, they should have taken the necessary and appropriate steps to have it filed and served on the plaintiff but they failed to do that without good reason. By their conduct, they decided to forego their defence. It is now too late to talk about having a defence, particularly when the Court had already extended time in their favour and the plaintiff has by now incurred much cost and has a legitimate expectation that liability has been resolved in his favour. In these circumstances, having a defence on the merits is not in itself good enough to warrant a set aside of the orders of 9 February 2005.
70. In the end I am not persuaded that I should grant the defendants application for a set aside of the judgment regularly and entered inter partes on 9 February 2005.
Summary
71. In summary, I determine the issues presented before me as follows:
72. Consequently, I find that the defendants applications are without merit and amounts to an abuse of the Court’s process. I therefore order a dismissal of the application with costs. I however reserve for further hearing the issue of whether the defendants or their lawyers should pay the costs of the application now dismissed given the finding that the application of the defendants is in itself an abuse of the Court’s process.
73. Having heard the defendants’ lawyers on the issue of costs, I am not persuaded that I should order costs of the application against the defendants. Instead, I am persuaded that the lawyers should personally bear the costs of the application because it is the lawyers that determine the appropriateness of making the kind of application they have now unsuccessfully made, especially in the absence of any evidence showing that the defendants insisted on the application despite the lawyers considered advice. I consider such an order is necessary given the conduct of the lawyers as I have already noted in the course of this judgment. These costs shall be agreed if not taxed.
The formal orders of the Court are thus:
___________________
Nandi & Co Lawyers: Lawyers for the Plaintiffs
Paul Paraka Lawyers: Lawyers for the Defendants
[1] (05/10/01) N2145.
[2] [1992] PNGLR 85.
[3] (26/11/04) N2731.
[4] (21/12/04) N2765.
[5] (1996) N1915.
[6] (10/11/00) N2001.
[7] Per Fletcher Moulton LJ in Dyson v. Attorney General [1911] I KB 410 at 414, 419 cited in PNG Forest Products v. The State (supra note 2). For similar comments or statements see Nagle -v- Feilden [1966] I AII ER 689 at 697 [1966] 2QB 633, per Salmon LJ at page 651 and Lord Wilberforce in Allen -v- Gulf Oil Refining Ltd [1980] UKHL 9; [1981] 1 All ER 353 at page 355; [1981] AC 1000 at 1010 — 1111.
[8] PNG Forest Products v. The State (supra not 2).
[9] Per Lindley LJ, in Attorney General of the Duchy of Lancaster v. London and North Western Railway Co. [1892] UKLawRpCh 134; [1892] 3 Ch 274, at 277, in the context of the then English Rules, Order 25 Rule 4 of the 1883 English Rules of the Supreme Court (similar to ours)
[10] Per Lopes LJ in Attorney General of the Duchy of Lancaster v. London and North Western Railway Co. (supra) at 277.
[11] Per Suva J.in Ronny Wabia v BP Exploration Co Ltd & Ors [1998] PNGLR 8 cited by Canning J. in Pius Nui v. Senior Sergeant Mas Tauda & Ors (supra note 4).
[12] Per Kirriwom J. in Gabriel Apio Irafawe v. Yauwe Riyong (supra note 5).
[13] Per Lord Esher MR with whom Fry LJ and Lopes LJ agree at p.131 in Read v. Brown [1888] UKLawRpKQB 186; (1888) 22 QBD 128 in Gabriel Apio Irafawe v. Yauwe Riyong (supra note 5).
[14] Per Cannings J. in Kiee Toap v. The State & Ors (supra note 3) and my decision in Jack Livinai Patterson v. National Capital District Commission (supra note 1).
[15] Per Kirriwom J., in Gabriel Apio Irafawe v Yauwe Riyong (supra note 5).
[16] Per Sevua J., in Eliakim Laki & Ors v. Maurice Alaluku & Ors (supra note 6).
[17] Per Lindley, MR; in Hubbuck & Sons Ltd v. Wilkinson Heywood & Clark Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86 at pp. 90-91; [1895-9] AII ER Rep 244 at 247, cited in PNG Forest Products v. The State (supra note 2).
[18] Mesia Novau v. Nimrod Mark & Electoral Commission [1992] PNGLR 229; Polling v. Motor Vehicles Insurance (PNG) Trust [1982] PNGLR 228; Bank of South Pacific Limited v PNG Nambawan Trophy Holdngs Limited & Ors (12/11/04) N2717 and Papua New Guinea Banking Corporation v. Jeff Tole (27/09/02) SC694.
[19] Opt Cit note 1.
[20] (02/04/04) N2507.
[21] (24/03/03) SC705.
[22] [1984] PNGLR 28.
[23] [1984] PNGLR 28.
[24] Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285.
[25] S.5 of the Claims By And Against the State Act.
[26] S.54(6) of the Motor Vehicle (Third Party) Insurance Act.
[27] See ss.15(4)(b) and 8(6)(a) of the Professional Conduct Rules 1989 for example.
[28] [1976] PNGLR 73.
[29] (11/10/02) SC695.
[30] Per Kapi DCJ., as he then was with whom I agreed (pp. 7 and 12).
[31] (14/04/04) N2526.
[32] at p 14 of the judgment.
[33] at the top of page 14.
[34] (12/11/04) N2717.
[35] Opt Cit Note 25.
[36] Opt Cit Note 27.
[37] At p. 9.
[38] Opt Cit Note 27.
[39] Opt Cit Note 29.
[40] [1993] PNGLR 370.
[41] [1995] PNGLR 214.
[42] Paul Torato & Anor v. Sir Tei Abel & Ors [1987] PNGLR 403 at p. 413; Peter Lipsey v. The Independent State of Papua New Guinea [1993] PNGLR 405 and Coecon Limited (Receiver/Manager Appointed) v The National Fisheries Authority of Papua New Guinea and The Independent State of Papua
New Guinea (28/02/02) N2182.
[43] Simon Mali v The State (03/04/02) SC690, (per Hinchliffe J, Sakora J and Batari J).
[44] Opt Cit note 36.
[45] Opt Cit note 37.
[46] Opt Cit note 36.
[47] Ibid.
[48] Ibid.
[49] [1983] PNGLR 176.
[50] (28/05/04) SC751 (per Salika, Sawong and Gavara-Nanu JJ.)
[51] Opt Cit note 37.
[52] (21/12/04) N2765.
[53] Opt Cit note 37.
[54] Lupi Iohoi v. Motor Vehicle Insurance (PNG) Trust [1993] PNGLR 366
[55] Opt Cit Note 25.
[56] At pp. 10 and 11.
[57] Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Ors (08/10/02) N2289.
[58] Christopher Smith v Ruma Constructions Ltd (supra note .. ; Andrew Baing v PNG National Stevedores Pty Ltd (2000) SC627.
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