John R. Giheno Holdings Ltd v City Pharmacy Ltd [2021] PGNC 587; N9441 (10 December 2021)

N9441

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 365 OF 2021

BETWEEN:
JOHN R. GIHENO HOLDINGS LIMITED
Plaintiff

AND:
CITY PHARMACY LIMITED
First Defendant

AND:
TONY TOREA in his capacity as the Property
Manager
Second Defendant

Goroka: Mugugia, AJ
2021: 10^th December

PRACTICE AND PROCEDURE – Plaintiff’s application for default judgment - failure to file defence - National Court Rules, Order 12, Rule 25(b) – whether default judgement should be entered against the Defendants – considerations – exercise of discretion - default judgement entered against the Defendants.
Cases Cited:

Giru v. Muta (2005) N2877
Bank South Pacific Ltd v Tingke (2012) N4901

Counsels:

D. Wayne, for the Plaintiff
No appearance for the Defendants

RULING

10^th December, 2021

1. MUGUGIA, AJ: This is my ruling on the Plaintiff’s motion for default judgment against the First and Second Defendants (Defendants) filed on 9 September 2021. The motion was on foot since 14 October 2021. I had adjourned this particular motion on 15 October 2021 to the National Court registry because the writ of summons filed on 23 June 2021 was not served on the Second Defendant. I made an order for the Plaintiff to effect personal service of the writ of summons on the Second Defendant, and to file an affidavit confirming service. I made a further order that the Plaintiff’s lawyer is at liberty to relist his client’s motion filed on 9 September 2021 for hearing. Sufficient notice of the hearing date was to be given to the Defendants. The Plaintiff’s lawyer attended to all these.

2. Despite being advised of the hearing date, there was no appearance by the Defendants or their legal representatives at the hearing of the Plaintiff’s motion for default judgment on 10 December 2021. I allowed the Plaintiff’s lawyer to make his client’s application because I was satisfied that the motion before me and the affidavit in support were served on both Defendants, and the Plaintiff’s lawyers advised them of the hearing date in their recent letter dated 7 December 2021.

BACKGROUND

3. The Plaintiff owns a property described as Section 6, Allotment 13, Goroka, Eastern Highlands Province (property). It commercially leases the property out to interested entities. On 1 February 2017, the First Defendant entered into a Commercial Lease Agreement with the Plaintiff for a period of three (3) years with the option to renew. On 18 November 2020, the Second Defendant notified the Plaintiff through a letter of the First Defendant’s intention to vacate the property by 21 December 2020, and that the option to renew would not be utilised. On 8 December 2020, the Plaintiff acknowledged the First Defendant’s intention not to renew the Commercial Lease Agreement. The Plaintiff notified the First Defendant that its electricity arrears totaling K78,097.69 remained outstanding. An electricity Consumer Statement of Accounts was forwarded to the First Defendant. The Plaintiff claims that on 24 July 2021, the First Defendant made a cheque payment of K65,577.63 to the Plaintiff for the electricity arrears. There is a shortfall of K12,520.06, and electricity arrears continue to be held against the property. The Plaintiff filed its writ of summons on 23 June 2021, claiming general damages, special damages, interest and costs.

ISSUE

4. The issue for determination is whether default judgment should be entered against the Defendants.

THE LAW

5. Order 12 Rule 25(b) of the National Court Rules reads:

“25. Default.

A defendant shall be in default for the purposes of this Division—
......

(b) where he is required to file a defence and the time for him to file his defence has expired but he has not filed his defence; or”

6. The case of Giru v. Muta (2005) N2877 sets out six (6) pre-conditions that should be considered in an application for default judgment. These pre-conditions are:

1. Proper form.

2. Service of notice of motion and affidavits.

3. Default.

4. Warning.

5. Proof of service of writ.

6. Proof of default.

7. In this case, Cannings J held that if all items on the checklist are satisfied, the matter is ripe for entry of default judgment. However, a plaintiff is not entitled to default judgment as of right. Entry of default judgment is a matter for the discretion of the court.

8. In Bank South Pacific Ltd v Tingke (2012) N4901, Kandakasi J (as he then was) stated at paragraph 6 of his decision, and I quote:

“Whether default judgment should be entered is dependent on the following factors of whether or not:

(a) the writ of summons with a statement of claim endorsed thereto has been duly served on the defendant; and

(b) the time period for filing of the defendant's defence has expired; and

(c) the defendant has not filed and served his or her defence; and

(d) a search of the court file has been carried out at the expiry of the deadline for the filing of the defence which has revealed no defence being filed; and

(e) the plaintiff has forewarned the defendant of the plaintiff's intention to apply for default judgment where a notice of intention to defend has been filed; and

(f) the defendant has not filed and served his or her defence.”

PLAINTIFF’S SUBMISSIONS

9. The Plaintiff’s lawyer Mr Wayne moved on his client’s motion filed on 9 September 2021, relying on Order 12 Rule 25(b) of the National Court Rules. Mr Wayne relied on his submissions filed in Court on 13 October 2021. His submissions were as follows:

• The Plaintiff/Applicant sues the Defendants for outstanding electricity arrears for a property subject of a commercial lease agreement. The electricity arrears remained outstanding since July 2017 to October 2020 when the Defendants elected not to renew the commercial lease agreement.
  
• The outstanding electricity arrears were held against the property hence the Plaintiff/Applicant was unable to lease it to interested entites. No entity was willing to acquire the Defendants’ electricity liability.
  
• As a result, the Plaintiff/Applicant incurred business losses for rentals and sues the Defendants as a consequential loss. Attempts to resolve the matter through negotiation/mediation was unsuccessful as there was no response from the Defendants.
  
• The Plaintiff’s writ of summons was filed on 23 June 2021, and served on the Defendants on 7 July 2021. The Affidavit of Service of Max Uyasi sworn on 8 September 2021 and filed on 9 September 2021 confirms service.
  
• The Defendants had not filed a notice of intention to defend nor a defence. Sufficient forewarning notice had been given. The Defendants were also made aware of today’s hearing date.
  
• The documents in support of the application for default judgement are:
  

i) Affidavit in Support of Malcolm Giheno sworn and filed on 9 September 2021;

ii) Affidavit of Service of Max Uyasi sworn on 8 September 2021 and filed on 9 September 2021;

iii) Affidavit of Service of Max Uyasi sworn on 15 September 2021, and filed on 20 September 2021; and

iv) Affidavit of Search of Douglas Wayne sworn and filed on 9 September 2021.

• The principles for entry of default judgement were discussed by Justice Cannings in Giru v. Muta [2005] PGNC 83; N2877 where a checklist containing six (6) requirements to be satisfied were listed as follows:
  

1. Proper form.

2. Service of the notice of motion and affidavits.

3. Default.

4. Warning.

5. Proof of service of the writ.

6. Proof of default.

10. Mr Wayne adopted and relied on the considerations formulated by Cannings J, and submitted that the 6 requirements had been satisfied by his client as follows:

Proper form: Plaintiff’s notice of motion filed on 9 September 2021 is in proper form, and is supported by the affidavits in support of the application for default judgement.

Service of the notice of motion and affidavits: Service confirmed by the Affidavit of Service of Max Uyasi sworn on 15 September 2021, and filed on 20 September 2021.

Default: Service of the writ of summons was effected on 7 July 2021. No defence was filed. Reference was made to the Affidavit of Service of Max Uyasi sworn on 8 September 2021 and filed on 9 September 2021.

Warning: Forewarning letter was given on 9 August 2021. Reference was made to Annexure “H” in the Affidavit in Support of Malcolm Giheno sworn and filed on 9 September 2021.

Proof of service of the writ: Relied on the Affidavit of Service of Max Uyasi sworn on 8 September 2021 and filed on 9 September 2021.

Proof of default: Relied on the Affidavit of Search of Douglas Wayne sworn and filed on 9 September 2021 to show proof of default. Furthermore, the forewarning letter and proof of service of the writ are sufficient to show that the Defendants are in default.

11. Mr Wayne further submitted that the pleadings are sufficient to establish a cause of action for breach of contract/agreement by the Defendants, and its consequential losses.

12. In conclusion, Mr Wayne submitted that granting of default judgements is at the discretion of the Courts. Even if the prerequisites are met, the Courts still have the discretion to grant or refuse default judgement applications. Mr Wayne contended that part payment of the electricity arrears is sufficient proof that liability is admitted, and default judgment should be entered in the following terms:

(i) A sum of K12,520.06 shall be paid by the First Defendant to the Plaintiff within fourteen (14) days as full and final settlement of the electricity arrears;

(ii) Costs of the application to be paid by the Defendants; and

(iii) Time is abridged.

CONSIDERATION

13. I adopt the statements made by the learned judges in Giru v. Muta (2005) N2877 and Bank South Pacific Ltd v Tingke (2012) N4901, and the principles enunciated in the cases, and apply them in this particular case.
14. In the present case, I find that the six pre-conditions on the check-list that should be considered in an application for default judgment have been fully satisfied by the Plaintiff. I find that:

1. The Plaintiff’s motion was supported by an affidavit of Malcolm Giheno filed on 9 September 2021, deposing to the Defendants’ default. The notice of motion for default judgment is in the proper form. It is supported by affidavit.

2. Both the motion and affidavit in support were served on the Defendants.

3. A search of the court file has been carried out by the Plaintiff. No defences have been filed by the Defendants. The Plaintiff filed the Affidavit of Search of Douglas Wayne sworn on 9 September 2021 to confirm that the Court file search was done. On 6 December 2021, before the hearing of the application for default judgement, Mr Wayne made a request to the Civil Track Officer at the National Court registry for a copy of the Document Index. Mr Wayne confirmed this in his Affidavit of Search sworn and filed on 8 December 2021. He also confirmed that on 7 December 2021, a copy of the Document Index was emailed to him, and no application for extension of time, or notice of intention to defend or defence was filed by the Second Defendant.

4. The Defendants are clearly in default because no defences were filed.

5. The Plaintiff’s lawyers warned the Defendants. A forewarning letter dated 9 August 2021 was given to the Defendants. The letter is Annexure “H” in the Affidavit in Support of Malcolm Giheno sworn and filed on 9 September 2021.

6. The Plaintiff’s writ of summons was served on both Defendants. The Plaintiff has done what is required under Order 12, Rule 34(a) of the National Court Rules.

7. As at 7 December 2021, no notices of intention to defend or defences or applications for extension of time have been filed by either of the Defendants.

CONCLUSION

15. This is a case where the Defendants are in default because they were required to file their respective defences but they had not filed their defences. The basis on which the application was made is on account of their default under Order 12 Rule 25(b) of the National Court Rules. The Defendants have clearly defaulted.

16. I am convinced that the Plaintiff has made out a case for default judgment to be entered against the Defendants for failure to file their defences. I will not enter default judgment in the terms submitted by the Plaintiff’s lawyer. (See paragraph 12(i) and (ii) above). I exercise my discretion and enter default judgment against the Defendants, with damages to be assessed. The Second Defendant is named in his capacity as the Project Manager of the First Defendant. I will therefore award costs against the First Defendant.

FORMAL ORDERS:

17. I make the following orders:

1. Default judgement is hereby entered against the First and Second Defendants.

2. Costs is awarded against the First Defendant.

3. Time for entry of these orders is abridged to the date and time of settlement of these orders by the Registrar which shall take place forthwith.

The Court orders accordingly.
________________________________________________________________

D. Wayne: Lawyer for the Plaintiff