Piunde Ltd v Ward [2012] PGNC 142; N4858 (19 October 2012)

N4858

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 157 OF 2011

PIUNDE LIMITED
First Plaintiff

AND

HOMELAND JOINT VENTURE LIMITED
Second Plaintiff

AND

GREY HARRISON-WARD
First Defendant

AND

TERRY KONEGA
Second Defendant

AND

BANK SOUTH PACIFIC LIMITED
Third Defendant

Goroka: Ipang AJ
2012: 7, 21 September
& 19 October

Cases Cited

Ace Guard Dog Security Services Ltd and Yama Security Services Ltd v Lindsay Lailai & Telikom (PNG) Ltd N2459 (7 August, 2003)
Credit Corporation (PNG) Limited v Gerald Jee [1988-89] PNGLR 11
Kunton v Junias (2006) SC 929
Kerry Lerro t/a Hulu Hara Investments Ltd v Philip Stagg, Valentine Kambori & Independent State of Papua New Guinea (2006) N3950
Philip Takori v Simon Yagari (2008) SC905

Counsels

Mr. G. Gendua, for the Plaintiffs

Mr. K. Peri, for the Defendants

JUDGEMENT

21 September, 2012

1. IPANG AJ: The Plaintiffs moved before this Court their amended motion filed on the 13th April, 2012. In this amended motion, the Plaintiffs' seek for the following orders;
   
   1. Default judgment be entered against the Defendants pursuant to Order 9 Rule 15 (1) (b) and Order 12 Rule 1 of the National Court Rules for failing to give Discovery or List of Documents to the Plaintiffs.
      
   2. Alternatively, and or in addition, an order striking out the Amended Notice of Intention to Defend and the Amended Defence, both filed on the 23rd February, 2012, and that default judgment be entered against the Defendants pursuant to Order 8 Rule 56, Order 8 Rule 57, Order 8 Rule 58 of the National Court Rules.
      
   3. In the further alternative, an order striking out the List of Documents the Defendants filed on 02nd March, 2012 and the Defence filed on the 12th April, 2012 and or the Amended Defence filed on the 23rd February, 2012 and pursuant to Order 12 Rule 38 (1) (b) of the National Court Rules, enter Summary Judgment for the Plaintiffs
      
   4. Defendants to pay the Plaintiffs' cost
      
   5. The time for entry of these orders be abridged to the time of settlement by the Registrar which shall take place forthwith.
      
   6. Damages to be assessed
      
   7. Any such other or further orders as the Court deems necessary
      
2. Plaintiffs had previously filed a motion on the 7th December, 2011. Plaintiffs sought for Default Judgment to be entered against First and Second Defendants, the Third Defendants Defence to be struck out and/or alternatively enter Summary Judgments for the Plaintiffs. On the 14th February, 2012, Yagi, J delivered his ruling on the Plaintiffs' motion.
   
3. Mr. G. Gendua of counsel for Plaintiffs from the outset prior to moving plaintiffs' next motion filed on the 29th February, 2012 said there was a change in circumstances that required his clients to file this motion on foot. The main crux or ground that Mr. Gendua referred to is as contained in his further Supplementary Affidavit sworn and filed on the 13th April, 2012.
   
4. At that time the Plaintiffs filed and moved their motion dated 7th December, 2011, they have not received the List of Documents. Plaintiffs said after receiving the Defendants' List of Documents filed on the 2nd March, 2012 it prompted them to file the current motion.
   
5. Plaintiffs said the Defendants' List of Documents cannot be relied upon as materials are not worthy in defending the Plaintiffs' claim. They submitted that the basic material the Defendants would be expected to have in their custody would be the File of the Plaintiff which would contain various documents or records involving the parties. However, under Schedule 2 of their List of Documents, Defendants say or declare that they no long have the Plaintiffs' File in their possession or custody. Plaintiffs say this is an admission that they have no defence.
   
6. Plaintiffs therefore submitted that the Defendants' Defence filed on the 12th April, 2012 or the amended Defence filed on the 23rd of February, 2012 is worthless as the actual defence is not shown in the List of Documents they filed on the 2nd of March, 2012. Because of this, Plaintiffs submitted that Summary Judgment be granted in their favour.
   
7. Plaintiffs rely on the following documents in moving their motion. The affidavit of Gabriel Gendua sworn and filed on the 29th of February, 2012, the Supplementary Affidavit of Gabriel Gendua sworn and filed on the 12th of March, 2012, further Supplementary Affidavit of Gabriel Gendua sworn and filed on the 13th of April, Affidavit of Peter Kama sworn and filed on 13th of April, 2012, Supplementary Affidavit of Peter Kama sworn and filed on the 04th of May, 2012 and Plaintiffs' submission filed on the 15th June, 2012.
   
8. Plaintiffs initially filed WS No.157 of 2011 proceedings against the Defendants claiming:
   
   • (i) Breach of verbal or oral contract in that the Defendants failed or refused to release a loan facility agreed upon;
     
   • (ii) For breach of duty of care, the Defendants owed to the Plaintiffs when they failed to give the Plaintiffs the loan facility approved and further failed to inform the Plaintiffs within reasonable time of their refusal, whatever, the reasons were, to loan the money approved.
     
9. The brief background to this proceeding is as follows:
   
   • (i) The First Plaintiff's Claim is a breach of agreement made by the Defendants on the 24th August, 2007 to fund its 20 years exclusive liquor distribution business in Chimbu Province for K900, 000.00 in various types of facilities with their commercial rates as approved and necessary securities as provided. On the 23rd November, 2007 the First and Second Defendants travelled to Kundiawa and confirmed he loan approval in two business conferences among the officers of the First and Second Plaintiffs including Provincial Government Lawyers.
     
   • (ii) The Directors of the Second Plaintiff were directed to sign a contract constructed by the Second Defendant in which its various loan facilities are amalgamated under one fully drawn loan with fixed repayment schedule secured by various securities (mortgages and personal guarantees) in exchange for the drawdown of K900, 000.00 funding for the First Plaintiff. The contract was signed on the 02nd June, 2008 in BSP Office in Kundiawa.
     
   • (iii) Plaintiffs claimed been in the inferior position performed all obligations as demanded, however, the Defendants in their predominate position as the financier breached its contract on the 11th September, 2008 when it refused to fund the niche business of the First Plaintiff knowing that the Plaintiff relied on the promise of the loan to protect its niche business and continue trading of the Second Defendant.
     
10. The plaintiffs are seeking an order for default judgment pursuant to Order 9 Rule 15 (1) (b) and Order 12 Rule 1 of the National Court Rules for the Defendants failure to give Discovery or List of Documents to the Plaintiffs.
    
11. The Order 9 Rule 15 (1) (b) states:
    

"Default;

(1) Where a party makes default in filing or serving a list of documents or affidavit or other document, or in producing any document as required by or under this Division, the Court may make such order as it thinks fir, including –

(b) if the proceedings were commenced by Writ of Summons and the party in default is a defendant – an order that his defence be struck out and that judgment be entered accordingly."

12. The plaintiffs also rely on the general relief provision under Order 12 Rule 1 of the National Court Rules which provides;
    

"The Court may, at any stage of any proceedings, on the application of any party, direct the entry of such judgment or makes such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in any originating process."

13. In the case of Ace Guard Dog Security Services & Yama Security Services Ltd v Lindsay Lailai & Telikom (PNG) Ltd N2459 (7 August, 2003) Sakora, J considered 3 issues that need to be satisfied in order for a default judgment to be entered against the Defendants for failing to give discovery of documents to the Plaintiffs.
    
14. The three (3) issues considered in the Ace Guard Dog's case (supra) were as follow:
    
    • (i) Whether there was default on the part of the Defendants in complying with Plaintiffs' Notice for Discovery according to the National Court Rules;
      
    • (ii) If so; whether the default provision of the National Court Rules ought to be enforced against the Defendants; and
      
    • (iii) In the alternative, if discovery is found to have been made in accordance with the Rules, whether such discovery was sufficient and adequate.
      
15. I will consider each of the issues to determine the outcome of the Plaintiffs' application.
    
    • (i) Whether there was default by the Defendants in complying with the Plaintiffs' Notice for Discovery according to the National Court Rules.
      
      1. On the 19th December, 2011 a Notice of Discovery with Verification was filed by the plaintiffs.
         
      2. The Notice for Discovery required the Defendants to give discovery of documents or materials they had in their control, possession or power within 14 days:
         
      3. The Notice for Discovery was served personally by Fred Kerpi on the Defendants through their lawyers at their Mt. Hagen Office on 20th December, 2011.
         
      4. The 14 days period lapsed on or about 03rd January, 2012 and no List of Documents was served on the Plaintiffs within this period.
         
      5. On 30th January, 2012 the Defendants' lawyers by a letter dated 30th January, 2012 sent to the Plaintiffs' Lawyers via facsimile gave undertaking that they would obtain instructions from their clients, file and serve Plaintiffs with the List of Documents.
         
      6. Between 31st January, 2012 and 15th February, 2012 the Defendants' lawyers did not serve any List of Documents on the Plaintiff's lawyers.
         
      7. On the 16th February, 2012 Plaintiffs' lawyers wrote a letter to the Defendants' lawyers giving them 7 days extension, within which period to file the List of Documents and serve.
         
      8. Plaintiffs' lawyers letter of 16th February, 2012 also contained the necessary forewarning that if the Defendants fail to file the List of Documents within the extended time period of 7 days the Plaintiffs would apply for default judgment.
         
      9. On 17th February, 2012 Defendants' lawyers by letter sent to the Plaintiffs lawyers via facsimile requested for 21 days extension to file the List of Documents.
         
      10. On the 22nd February, 2012 the Plaintiffs' Lawyers sent a letter dated 22nd February, 2012 by facsimile to the Defendants request for extension of 21 days.
          
      11. On the 27th February, 2012 Plaintiffs' Lawyer conducted a file search at Goroka National Court Registry and noticed that no List of Documents was filed by the Defendants.
          
      12. On the 13th of March, 2012 the Plaintiffs' Notice of Motion filed on the 29th February, 2012 was served by Fred Kerpi on the Defendants' Lawyers in Mt. Hagen.
          
16. In order to establish whether there was a default on the part of the defendants in complying with Plaintiffs Notice for Discovery we need to consider appropriate facts surrounding this issue. First to consider is the Plaintiffs Counsel's letters of 16th February, 2011. In this letter to the Defendants Lawyers, Mr. Gendua of Counsel for the Plaintiffs wrote and I quote;
    

"We now on instructions advise that you have had sufficient time to respond to our request. Therefore, we now give you seven (7) days from the date of this letter is served on you within which to file and serve us your clients' List of Documents.

As a matter of courtesy this letter also serves as a notice to you that should you fail to provide us with the List of documents within the time frame as started above, we will proceed to apply for default judgment without further notice."

17. Defendant's Lawyers on the letter dated 17th of February, 2012 responded to Plaintiffs Lawyer's letter of 16th February, 2012. I quote:
    

"We refer to the above matter and to your letter dated 16th February, 2012 which we received together with judgment of Justice Yagi handed down on the 14th of February, 2012. We advise the 7 days ultimate you have given is insufficient. We require 21 days extension."

18. On the 22nd February, 2012, Mr. Gendua of Counsel for the Plaintiffs responded and stated;
    

"We refer to your letter of 17 February, 2012. We advise we have put the content of your letter to our clients and their instructions are that we proceed with our intended application should your clients still fail to furnish to us the list of Documents within the extended period. Our clients are therefore reluctant to allow you further extension of time."

19. In their letter dated 22nd February, 2012 Plaintiffs through Counsel Mr. Gendua argued the request for 21 days extension was not given but the 7 days extension. That would mean the 7 days extension would have expired on the 24th of February, 2012. However, the Defendants through Counsel Mr. Peri argued that by the approval of letter dated 22nd February, 2012, the 21 days extension would run from 17th February, 2012 and would have expired on the 15th of March, 2012. So, Defendants say they have filed the list of Documents within the extended period.
    
20. The issue is one of how one can read in to or construed how Mr. Gendua's letter of 22nd February, 2012 was drafted out. Certainly the letter was in direct response to Mr. Peri's letter of 17th February, 2012. In Mr. Peri's letter of 17th February, 2012 he (Mr. Peri) specifically stated that 7 days extension was insufficient and requested for 21 days extension. When Mr. Gendua responded on the 22nd February, 2012, the response in my view was not specific on the period of extension. Was he referring to 7 days extended period or the 21 days extension requested by the Defendants. That is as I said, the response was not specific on which extended period and it was broad. The letter was poorly drafted and so it's confusing.
    
21. It is rationale that Defendants took it as their request for 21 days has been the extended period and so that period would have expired on the 15th of March, 2012. Because of the style, the texture or composure of the letter, I take it that the 15th of March, 2012 is the extended period.
    
22. Having now decided and ruled that the defendants have complied with Plaintiffs Notice for Discovery, the Plaintiffs submitted in the alternative whether such discovery was sufficient and adequate. In this regard Plaintiffs' Counsel referred this Court to the case of Credit Corporation (PNG) Limited –v- Gerald Jee [1988 – 89] PNGLR 11 at p.12. This case justified the core function of discovery process. The Court stated:
    

" ... The function of the discovery of documents is to provide the parties with the relevant documentary material before the trial so as to assist them in appraising the strength or weakness of their respective cases, and thus to provide the basis for the fair disposal of the proceedings before or at the trial or to adduce in evidence at the trial relevant documentary evidence material to support or result the case made by aor against them, to eliminate surprise at or before the trial relating to documentary evidence and to reduce the costs of litigation ..."

23. In Aisip Duwa -v- Ronald Moyo Senge [1995] PNGLR 140 Sakora, J had this to say:
    

"And one of the most important processes of the pre-trial procedure employed in an endeavor to achieve those aims (the guiding principles for rules of procedure which would best serve the needs of society) is that of discovery. In ordinary parlance, discovery is the ascertainment of that which was previously unknown. In procedure law, it is one of those pre-trial 'devices' that can be used by one party to obtain facts and information about the case from the other party in order to assist the party's preparation for trial. Black's Law Dictionary. In actions begin by Writs, lists of documents must be served by each party after the close off pleading, and any party entitled to have discovery may serve a notice requiring and affidavit verifying the list of documents. Osborn's Concise Law Dictionary."

24. In Plaintiffs' submission on pp. 12-16, Counsel for the Plaintiffs raised arguments on the issue of full discovery. Mr. Gendua of Counsel for the Plaintiffs quoted a text in David Bamford, "Principles of Civil Litgation, Law Book Co. 2010 Ed. at p.176. I find useful at this juncture to quote:
    

"At the core of discovery are the rules that determine whether a documents needs to be disclosed. In general terms, documents that are or have been in the party's possession that are relevant to the dispute must be discovered. There are really three critical parts to determining is a document needs to be discovered – the definition of "documents" possession and relevancy and the question of how broadly each of these are to be interpreted."

25. At pp.176 – 177 D. Bamford (supra) gave the definition of "Documents, Possession and Relevancy."
    
    1. Documents: The term "documents" is given very wide definition by the rules and the Acts Interpretation Acts. Virtually any medium which records information constitutes a "documents" for discovery purposes. .... Film, photos, discs, tapes, and even stone tablets with hieroglyphics would appear to fall within the definition .... The development of electronic records has further extended the concept of documents..."
       

The Rules (Supreme Court Rules) and the Acts Interpretation Acts referred to are those of some Australian States like South Australia and Queensland.

In our jurisdiction, Order 1 Rule 6 of the National Court Rules offers the definition to are those of some Australian States like South Australia and Queensland.

2. Possession: The Concept of possession of documents in the context of discovery is different from the legal concepts found in property law. While almost all the rules relating to discovery refer to "possession" many rules also use other concepts like "custody" "power" and "control." This is because civil litigation process designers have usually sought to bring as many documents as possible within the scope of discovery. So documents owned by someone other than the party but in the party's possession are required to be discovered. Documents which are not in the part's physical possession but are controlled by the party or documents over which the party has an enforceable right may also be subject to disclosure.
   

It is important to note that possession is not limited temporally to the time discovery is made. It includes documents that were in possession of the party, including those that may have been destroyed.

3. Relevancy: In most jurisdictions documents must be relevant to issues raised by the pleadings. ..... Even if the documents would be inadmissible at trial they are still required to be disclosed if they are relevant. Traditionally, relevance has been given a very wide interpretation. The relevancy test, often described as the Peruvian Guamo test, includes both documents that directly affected the case and documents that were not directly related to the case but which would nevertheless lead to a "train of inquiry" that would produce such information. The test, in subsequent cases, has been stated in very broad terms – a party must discover any documents which will "throw light on the case."
   

26. Plaintiffs submitted therefore that they expected Defendants to have in their possession the following documents.
    
    1. Loan Documents
    2. Loan Agreement
    3. Bank Statements of Loan Repayment
    4. Trading Bank Statement: deposits and cheque payments.
    5. Car Lease Purchase Documents
    6. Mortgage Documents
    7. Guarantee Documents By Plaintiff Company
    8. Travel literary of Grey Harrison Ward and Terry Konega for 23.11.2007
    9. Property Purchase by Plaintiffs.
    10. Loan Submissions and all correspondences relative between the parties.
    11. All other c correspondences the parties exchanged.
        
27. Mr. Gendua of Plaintiffs Counsel submitted that because such relevant documents have not been discovered, such discovery is insufficient and inadequate that Defendants Defence has no support of any material documents. As a consequence of this Plaintiffs submitted that Defendants Defence be struck out pursuant to Order 12 R1 of the National Court Rules and default judgment be entered in favour of the Plaintiffs.
    
28. There is in my view a proper remedy out of this instead of been quick to jump to seek default judgment. In Philip Takori -v- Simon Yagari PGSC 3;SC905 (29th February, 2008) the Supreme Court made this observation:
    

"The National Court often hears a lot of applications and readily grants aimed at correcting the kinds of deficiencies we speak of or order compelling a plaintiff (or a defendant) to take corrective measures. These kinds of orders are made with a view to doing justice on the substantive merits of the case at less costs and delay to the parties. Hence, the practice of the National Court that we are aware of is often one of slow to finally shutting out a party except in the clearest of cases and where there is deliberate and inexcusable failure to comply with Court orders or the Rules of the Court, only as a last resort and only if no measures of amendment will do."

29. The entry of default judgment is not a matter of right. There are certain preconditions that have to be satisfied but even when all are satisfied, the decision whether to enter default judgment is a matter for the discretion of the Judge under Order 12, Rule 32 (general) of the National Court Rules (NCR)
    
30. In the Supreme Court case of Kunton –v- Junias [2006] PGSC 34; SC 929 (28 September, 2006) the Supreme Court considered wide range of preconditions. The list is not exhaustive and include the following:-
    
    • Whether the statement of claim raises serious allegations of fraud or deceit, in which case the interest of justice may require those allegations fto be proved by evidence in a trial before judgment is given on merits (Bala Kitipa v Vincent Auali, Supply and Tender Board of Western Highlands Provincial Government and Others (1998) N1779 );
      
    • The extent of the default by the defendant (John Kunkene v Michael Rangsu and The State (1999) N1917):
      
    • Whether the defendant appears to have a good defence (Kunkene):
      
    • Whether the statement of claim amounts to an abuse of process (Eliakim Laki and 167 Others v Maurice Alaluku and Others (2000) N2001):
      
    • Whether the pleadings are vague ie whether the statement of claim discloses a reasonable cause of action (Eliakim Laki and 167 Others v Maurice Alaluku and Others (2000) N2001):, Urban Giru v Luke Muta and Others (2005) (N2877);
      
    • Whether the plaintiff has prosecuted his case diligently (Tiagad Bomson v Kerry Hart (2003) (N2428):
      
    • Whether the entryf of judgment would prejudice the rights of co-defendants (Kante Miningad v The State & Others (1996) N1458, Beecroft No 51 Ltd trading as Ronnie's hot bread v Neville Seeto and Others (2004) (N2561);
      
    • Whether the interests of justice would be served by the entry of default judgment (Urban Giru v Luke Muta and Others (2005) (N2877).
      
31. The proper approach to be taken by the Plaintiffs in my view is for the Plaintiffs to seek formal orders off the Court to compel the Defendants to provide further and better particulars of the discovery. Plaintiffs to consider Order 9 Rules 5, 6 and 7 of the National Court Rules. In the event of non – compliance then Plaintiffs can seek enforcement of it.
    
32. The interest of justice would not be served by the entry of default judgment. See Urban Giru –v- Luke Mata & Ors (2005) N2877. In Yagi, J's ruling on the 14th of February over the Plaintiffs motion especially at paragraph 41, His Honour made the following findings:
    

In this case there is no written agreement. It appears from the statement of claim that the contract was made orally. The plaintiffs say that the contract was entered into during a meeting between the first and second defendants on behalf of the third defendant and the representatives of the plaintiffs on 23rd November 2007. It is not clear from the statement of claim what was the exact terms and conditions of the contract. The defendants have denied the existence of the contract. Therefore the issue of whether a legally binding contract was entered into between the parties needs to be determine at the trial. This issue is seriously disputed and the evidence is insufficient to show the exact terms of the contract and assuming if there were, that was a clear breach. On this basis alone I am satisfied that there are serious issues of fact and law that require determination at the trial proper. This is not a proper case where summary jurisdiction should be exercised.

33. Applying the preconditions set out in Kunton –v- Junuas (supra) it is my view that this matter should proceed to trial proper where matters can be argued on merits. Having arrived at this ruling, I find it is not crucial to consider the first alternative submission by Plaintiffs seeking to strike out the Amended Notice of Intention to Defend and the Amended Defence filed on the 23rd of February, 2012 and for the default judgment to be entered for the plaintiffs. Also for the further alternative order for the Summary Judgment under Order 12 Rule 38 (i) (b) of the National Court Rules. Secondly, I consider these two (2) alternative submissions were either directly or indirectly considered by Yagi, J in his ruling on the 14th of February, 2012.
    
34. In totality, I refuse the relief sought by the Plaintiffs by dismissing the motion and order that costs be in cause.
    

_________________________________

Gendua Lawyers: Lawyers for the Plaintiffs
Warner Shand Lawyers: Lawyer for the Defendants