Tarley Consultancy Services Ltd v Ninngi [2023] PGNC 422; N10369 (30 March 2023)

N10369

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 73 OF 2023

BETWEEN
TARLEY CONSULTANCY SERVICES LIMITED
Plaintiff/ Respondent

AND
HONOURABLE PILA NINNGI
First Defendant/Applicant

AND
JOSEPH TIMOTHY
Second Defendant/ Applicant

AND
IMBONGU DISTRICT DEVELOPMENT AUTHORITY
Third Defendant/Applicant

Waigani: Sambua, AJ.
2023: 3^rd & 30^th March

PRACTICE AND PROCEDURE - Claims By and Against the State Act 1996 - S. 5 Notice of intention to make a claim – Application for extension of time – Sufficient cause – Relevant considerations – Reasonable cause of action.

PRACTICE & PROCEDURE – failure to give notice of intention to defend - failure to file Defence within time under the National Court Rules - proposed defence has merits and demonstrated with evidence – application for leave to file defence out of time granted.

Cases Cited:
Alina Sarah Bean v Ian Maxwell Bean [1980] PNGLR 307
Rawson Construction Ltd v Department of Works (2005) SC777
Ovoa Rawa v Motor Vehicles Insurance (PNG) Trust (1994) N1276

Counsel:
Miss E Ngomba, for the Applicant/Defendant
Mr D Levy, for Respondent/ Plaintiff

30^th March 2023

1. SAMBUA, AJ: This is a decision on an application by the Defendants seeking Leave of the Court to file their defence out of time pursuant to Order 7 Rule 6(2) of the National Court Rules.
   
2. In support of this application for leave of court to file their defence out of time, they relied on a Notice of Motion filed on 9^th February 2023 and the following Affidavits:
   
   1. Affidavit in Support by Joseph Timothy filed on 9^th February 2023.
   2. Affidavit in support by Elizabeth Ngomba filed on 9^th February 2023; and
   3. Affidavit of compliance by Elizabeth Ngomba filed on 9^th February 2023.
      

Brief Background

3. The Plaintiff had alleged that on the 15^th of March 2020, the defendants engaged his 11 months old motor vehicle described as a Toyota Land Cruiser Ten-Seater Trooper, Reg no LBV 686, Brown/Beige in colour, to carry out the District’s Covid 19 awareness campaign.
   
4. The motor vehicle was first hired from the 15^th of March 2020 to the 31^st of July 2020 and then re- hired from the 1^st of September 2020 to the 7^th of January 2021. The motor vehicle was allegedly hired for a total of 268 days at a rate of K880.00 per day.
   
5. There was not legally binding contractual agreement signed between the Plaintiff and the Third Defendant for the hire of the said motor vehicle. It was verbal in nature.
   
6. As a result, the Plaintiff invoiced the Third Defendant for a total amount of K235, 840.00 inclusive of GST. The Third Defendant had made a part payment of K122, 320.00 in two separate cheques and the balance of K113, 520.00 remained outstanding.
   
7. The Plaintiff also claimed for loss of business and repair costs for the damages done to the motor vehicle.
   
8. The defendants however did not file their Notice of Intention to Defend and their Defence within the period stipulated under the National Court Rules. Hence this application to file their defence out of time pursuant to Order 7 Rule 6 (2) of the National Court Rules.
   

The Laws

9. Order 7 Rule 6(2) of the National Court Rules states:

Late notice.

(1) A defendant may give a notice of intention to defend at any time without leave.
(2) Where a defendant gives a notice after the time limited for doing so, he shall not, unless the Court otherwise orders, be entitled to file a defence or do any other thing later than if he had given a notice of intention to defend within that time.

10. In Joseph Andreas Kauba – vs - Morris Bais (2011) N4447, His Honour Ipang AJ (as he then was) held:
    

"14. In order to successfully move the motion to seek leave of the Court to file their Defence out of time, the Defendants must satisfy three (3) requirements. The three (3) requirements the Applicants/First Second and Third Defendants must satisfy the Court are:

1. The applicants must explain why the applicant did not file their Defence in time.
   
2. Applicants must show a Defence on the merits. A draft Defence on merits should be attached. An Affidavit in support should also be filed.
   
3. The application must be made promptly.
   

15 These are three (3) requirements that need to be satisfied in order for leave to be granted for the Defence to be filed out of time. It is mandatory for the applicant to seek leave of the Court. There are number of Judgement's clearly expressing this mandatory requirement. Refer to Thai Itao v Elias Kamara & Others (2009) N3757; Luke Tai v. Australian and New ZEALAND Banking Group (ANZ) Ltd (2000) N1979; Kumba v Pagalio (2010) N4089 & Motor Vehicles Insurance Ltd v Joe (2010) SC 863".

11. In the recent case of Akipe v Parkop [2021] PGNC 279; N9114, Narokobi J added two more requirements to the list that must be satisfied by the Applicant for leave to be granted to file its defence out of time. The requirements are outlined as follows:
    
    1. The applicant must provide a reasonable or valid explanation for failing to file his or her defence within time.
    2. If there had been a delay in making the application, the applicant must provide a reasonable or valid explanation for the said delay.
    3. The applicant must demonstrate with evidence that there is a defence on merit.
    4. Who will suffer prejudice if the extension is granted or otherwise?
       

Which party does the interest of justice favour? (Nambawan Super Ltd v. Paul Paraka (2020) adopted)"

Issue

12. Whether or not the Court should grant leave to the Defendants to file their Notice of Intention to Defend and their defence out of time?

The Applicant/ Defendant’s case.
14. The Applicant/Defendants submitted that there is sufficient cause and that they have a cause of action and that the Plaintiff will not be prejudiced if the extension is granted.

Defence on merits

15. The Defendants submitted that they have a good defence on merits and raise valid legal defence and is not a general denial defence. The second Defendant Joseph Timothy on behalf of the First and Third Defendants deposed in his affidavit file on 9.02.2023, had stated amongst other things that:

1. There was no legally binding contractual agreement in place for the hire of the said motor vehicle.
2. There was no record of a Resolution authorizing Mr John Opi and Mr Bruce Kamuge to hire the Plaintiff’s motor vehicle for the purpose of Imbongu District Covid 19 Awareness Campaign by the Highway Patrol 17 and for transporting goods, pigs, and fuel drums for Imbongu District.

100. Mr John Opi and Bruce Kamuge were not authorized by the Imbongu District Development Authority, and they acted on a frolic of their own when they facilitate the illegal engagement of the Plaintiff’s motor vehicle.

4. There was no section 5 notice served on the State; and
5. Alternatively, even if there was an illegal contract, the Defendants said that the part payment of K 122, 320.00 is more than enough to compensate the Plaintiff on Quantum Meruit basis as further engagements was not for any business related to the Third Defendant’s function.
6. The damage to the vehicle was not within the scope of obligations of the Defendants;
7. The business loss pleaded was not an obligation of the Defendants;
8. The part payments were made by the former Chief Executive Office of IDDA through undue influence by John Opi and Bruce Kamuge who are related to Mr David Levy.
9. The Defendants have a counter claim against the Plaintiff for the sum of K122, 320.00 wrongfully paid to the Plaintiff for an illegal contract for attending to matters that are not beneficial to the Third Defendants.
   

16. The Defendants therefore submitted that leave should be granted for them to file their defence out of time.

Reasonable explanation for the delay

17. In his affidavit filed on the 9^th of February 2023, Mr. Joseph Timothy stated the following:

1. that the IDDA was unable to engage the professional services of a law-firm as the Ombudsman Commission made a blanket direction to all Provincial Governments and District Development Authorities nationwide that funds in their accounts must not be accessed and used due to the National General Elections.
   
2. there was an ethnic clash between Southern Highlands and Western Highlands, so I was unable to travel freely to Mount Hagen to seek legal representation.
   
3. After the election and swearing in of DDA members, I sought legal assistance from Tamutai Lawyers on 14^th October 2022.
   
4. Mr. Tamutai then advised that the IDDA being a State body, the firm must be properly briefed out by the Attorney General. On 31^st October 2022, I wrote to the Attorney General to formally brief out to Tamutai Lawyers.
   
5. On 3^rd November 2022, the formal brief-out was given. If there was any delay, it was not intentional.

18. Therefore the Applicants/Defendants say that they have reasonable explanation in seeking this application to file their defence outside of the prescribe time under the National Court Rules
Application made promptly.

19. The Defendants submitted that they have acted promptly to file this application for leave to file defence out of time.

20. The Defendants say that they were of the view that because they were out of time to file their defence, they will file an appropriate application seeking leave to file the defence pursuant to Order 7 rule 6 (2) of the National Court Rules.

21. The National Court Rules also provide that by consent of parties, a defence can be filed out of time. They wrote to the Plaintiff’s lawyer to file their defence with his consent but they did not receive any response and it contributed to the delay. This explanation appears to be reasonable in the circumstances to grant leave to the Defendants to file their Defence out of time.

Who will suffer prejudice?

22. The Defendants submitted that if the application seeking leave to file defence out of time is not granted, the Defendants especially the third Defendant, will be adversely affected as they have a good defence on merits and if the court refuses this application, then the people of Imbonggu District will be affected as their District funds which can be used to bring in much needed services will be paid to the Plaintiff for the use of his Hire Car company which did not benefit the people of the district.

23. These are public funds which must be budgeted and appropriated properly for the greater benefit of everyone and not just a few individuals with dubious claims.

24. The Defendants further submitted that in this case, the Plaintiff will not be prejudiced at all and therefore urged the court to grant the Defendants leave to file its defence out of time which will assist the Court in determining the real legal issues.

Interest of justice
25. Finally, with respect to the fifth requirement, it is the Defendants' submission that interest of justice favours the grant of leave to file defence out of time. Since reasonable explanation has been advance for the delay, it has been brought to the attention of this court that there was not legally binding contractual agreement between the parties. Therefore, in the interest of justice, I considered that the interest of justice will be better served if leave is grant to the Defendants to file their defence out of time and for this court to hear full arguements from both parties on the merits of this case.

The Respondent/Plaintiff’s case

26. It was submitted at the outset that the requirements to be met by the Defendants for leave to file Defence out of time are not applicable in this case because it is no longer an issue of seeking leave to file defence out of time, taking this as a first application of such a nature.

27. The Plaintiff argued that proper application would have been an application seeking extension of time to fully comply with the Court Orders of 21^st September 2022 or 13^th December 2022. Be that it may, it will still be filing out of time.

28. The application and consideration of the principles on leave to file defence out of time have been covered when the orders were granted on 13^th December 2022. They made an application by motion seeking extension of time to file their defence out of time and the Court on 13^th December 2022 granted extension to file their defence by 13^th January 2023. They still failed to comply with those orders.

29. The Plaintiff made reference to the case of Kerry Lerro v Philip Stagg (2006) N3050, His Honour Kandakasi J (as he then was) said:

"However, the earlier delayed period of almost fifteen (15) months have not been explained in any satisfactory. 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.

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.

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.

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 1 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.

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 bv 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.

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",
Reason for Decision

30. Mr Joseph Timothy on behalf of the Defendants in his affidavit filed on the 9^th of February 2023, stated the following:

6. that the IDDA was unable to engage the professional services of a law-firm as the Ombudsman Commission made a blanket direction that to all Provincial Governments and District Development Authorities nationwide that funds in the account must not be accessed and used due to the National General Elections.
   
7. there was an ethnic clash between Southern Highlands and Western Highlands, so I was unable to travel freely to Mount Hagen to seek legal representation.
   
8. After the election and swearing in of DDA members, I sought legal assistance from Tamutai Lawyers on 14^th October 2022.
   
9. Mr. Tamutai then advised that the IDDA being a State body, the firm must be properly brief out by the Attorney General. On 31^st October 2022, I wrote to the Attorney General to formally brief out to Tamutai Lawyers.
   
10. On 3^rd November 2022, the formal brief-out was given. If there was any delay, it was not intentional.
    

31. This in my view, this may have contributed to the delay in the Defendants not filing their Notice of Intention to Defend and the nature and particulars of their Defence as prescribed by the National Court Rules.
    
32. Furthermore, the year 2022 was the National General Elections year. The First Defendant who was and is the current sitting Member for Imbonggu Electorate, Southern Highlands Province in the National Parliament and the Chairmen of the Imbonggu District Development Authority (IDDA), had a constitutional right under section 50 of the Constitution of Papua New Guinea to contest the National General Election 2022 to defend the seat he won in the 2017 National General Elections. He had to go out to campaign to defend his seat for the Imbonggu Electorate in the Southern Highlands Province.
    
33. The Writ of Summons was taken out against him and the second and the third Defendants in March of 2022 and was served via a Postal Service in or around June 2022 that would have been during the National General Elections 2022.
    
34. In my view, the 2022 National General Elections also contributed to the delay in the Defendants not filing their Notice of Intention to Defend and the nature and particulars of their Defence as prescribed by the National Court Rules. Hence, I find that there is a reasonable and justifiable explanation for the delay by the Defendants.
    
35. In respect to the Applicants/ Defendants submissions on the merits of their defence, there appears to be a valid defence raised in the affidavit of Joseph Timothy filed on 9^th February 2023 (document # 22):
    
    1. There was not legally binding contractual agreement in place for the alleged hire of the vehicle.
    2. There was no record of a Resolution authorizing Mr John Opi and Mr Bruce Kamuge to hire the Plaintiffs vehicle for the purpose of Imbongu District Covid 19 Awareness Campaign by the Highway Patrol 17 and for transporting goods, pigs, and fuel drums for Imbongu District.
       
    100. Mr John Opi and Bruce Kamuge were not authorized by the Imbongu District Development Authority, and they acted on a frolic of their own when they facilitate the illegal engagement of the Plaintiff’s vehicle.
         
    4. There was no section 5 notice served on the State.
       
36. In my view, the Applicants/Defendants have satisfied this requirement and will therefore exercise my discretion to allow this matter to proceed past this stage and to hear full submissions on this issue on non-binding contractual agreement between the parties, during the substantive hearing.
    

37. On the issue or the criteria on who is or will be prejudice by the decision of the court in not granting this application, I am of the view that the Defendants especially the third Defendant, will be adversely affected as they have a good defence on merits and if the court refuses this application, the people of Imbonggu District will be affected as their District funds which can be used to bring in much needed services will be paid to the Plaintiff for the use of his Hire Car company that did not benefit all the people of the district.

38. These are public funds which must be budgeted and appropriated properly for the greater benefit of everyone and not just a few individuals with dubious claims. Hence, this criteria has been satisfied.

39. And finally, with respect to the interest of justice requirement, and since there is a reasonable explanation on the delay and that there is a meritorious defence by the defendants, I am satisfied that the Applicants/Defendants have satisfied this criteria.

40. The granting of leave to file defence out of time is a discretional matter. In the case of Cletus v Patiliu [2006] PGNC 51; N3056 (12 April 2006), a Kokopo matter heard by His Honour Lenalia,J. In that case Lenalia, J said that the power of this court to extend time to file a defence out of time comes from O.7 r.6 (2) which reads:

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

There are other general provisions such as O.1 rr.7 and 15 (1) (2) & (3) of the National Court Rules which give this court discretionary power to dispense with compliance with the requirement of the Rules either before or after the occasion for compliance arises. Order 1 r.7 reads:

"7. Relief from Rules.

The Court may dispense with compliance with any of the requirements of these Rules, either before or after the occasion for compliance arises".

In addition to the above proviso, Rule 15 (1) (2) of O.1 states:

"15. Extension and abridgment.

(1) The Court may, on terms, by order extend or abridge any time fixed by the Rules or by any judgment or order.
(2) The Court may extend time under Sub-rule (1) as well after as before the time expires whether or not an application for extension is made before the time is made.
(3) The period within which a person is required by these Rules or by any order to serve, file or amend any pleading may be extended by consent without an order for extension."

In case of two applications like the two before me where there is one seeking orders for default judgment and one to extend time to file defences out of time, unless there is a clear case of a matter being a liquidated claim without any cross claim, an application to extend time is a discretionary consideration for the court.

The application by the defendants is not an application to set aside a judgment entered by default. It is an application to extend the time to file the defence out of time. The parties have the right to come to court to litigate and let the court on the hearing proper alone decide and determine if there is evidence against the defendants. This court will not act as a committal court to decide if there is evidence on the merits so I could grant the application by the defendants.

In the application before me, I am of the strong view that, this is a discretionary matter which the court will consider on the strength of the evidence showing the reasons why the defendants have defaulted.

If a defendant gives a reasonable explanation as in these proceeding why it took their department sometime to file intentions to defend and defences to defend the claim then there is no reasons why leave should be granted to them to extend time to file documents as required by the rules.

...........Even if there were no specific provisions in the Rules giving this court discretionary powers to file a notice to defend or a defence such as Order 1 r.7, 15 (1) (2) (30) or O.7 r.6 (2) of the National Court Rules, this court would have the power under s.155 (4) of the Constitution to do justice in the circumstances in a particular case.
41. The reasoning behind His Honour Lenalia, J (as he then was) decision in the abovementioned case equally applies to this case and therefore adopt it as part of this judgement.

42. Therefore, after hearing submissions from both parties and considering the evidence that was presented before this court, I am of the view that the applicant/defendant’s case appears to have more substance and therefore in the exercise of my discretion, I am inclined to grant leave to the Applicants/Defendant to file their defence out of time and the matter proceeds to full hearing of the claim file by the Plaintiff in a Writ of Summons filed on the 16^th of March 2022.

Orders of the Court.

43. The Court orders that:

1. Leave is granted to the Defendants to file their defence out of time.
   
2. The Parties to bear their own cost of this proceedings.
   
3. The parties shall file and serve on each other affidavits of all the evidence they respectively rely upon by no later than 16^th June 2023 for the Plaintiff and 23^rd June 2023 for the Defendants.
   
4. Unless the affidavits already do so, the parties shall by 23^rd June 2023 give discovery to each other of the documents pleaded in their respective pleadings or they will be relying upon at the trial.
   
5. The Plaintiff shall draft and forward to the Defendants, a Statement of the relevant Facts and Issues for Resolution (Statements) by 23^rd June 2023 to which the Defendants shall respond by 30^th June 2023.
   
6. The Statement shall be in the form of a table having three columns, with the first one containing paragraphs, the second stating the relevant facts chronologically guided by the questions of who did what to whom, when, where, how and consequences that followed but without stating any arguments, submissions, conclusions, opinions or law, with the final column indicating where appropriate any disputed fact with a statement of the alternative narrative and concluded with a statement of the issues presented for resolution immediately below the table.
   
7. The parties are at liberty to discuss settlement out of Court and return to Court with draft consent orders finalizing the proceedings earlier.
   
8. The matter is adjourned to 30^th June 2023 for Status Conference and to get a trial date.
   
9. The time of entry of these orders is abridged to take place forthwith upon the court signing the orders.

___________________________________________________________
Manase & Co Lawyers: Lawyer for the Plaintiff/Respondent
Tamutai Lawyers: Lawyer for the Defendants/Applicants