Dempsey v Project Pacific Pty Ltd [1985] PGSC 3; [1985] PNGLR 93 (15 May 1985)

Papua New Guinea Law Reports - 1985

[1985] PNGLR 93 - Anthony Nicholas Dempsey v Project Pacific Pty Ltd 

[1985] PNGLR 93

SC291

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

DEMPSEY

V

PROJECT PACIFIC PTY LTD

Waigani

Pratt Amet Woods JJ

1 November 1984

15 May 1985

PRACTICE AND PROCEDURE - Judgment by default - Claim for liquidated sum - What is “liquidated claim”.

PRACTICE AND PROCEDURE - Judgment by default - Setting aside - Affidavits in support - Time for making - Affidavit of search incurably defective - Judgment must be set aside.

APPEAL - Costs of appeal - Issue first raised on appeal - Issue successful - No award of costs.

PRACTICE AND PROCEDURE - Affidavits - Affidavit of search in support of application - Time for making.

Held

N1>(1)      For the purpose of signing judgments by default, a claim is liquidated when it is ascertained or is capable of being ascertained by a simple calculation, as when there is no element of assessment on judgment.

Alexander v Ajax Insurance Co Ltd [1956] VicLawRp 5; [1956] VLR 436 at 445, followed.

N1>(2)      A claim for a specified sum of money alleged to be owing as a result of the defendant, a director of the plaintiff company, being involved in dealings, in breach of fiduciary duty, in shares in property owned by the plaintiff company, was not a claim for liquidated damages.

N1>(3)      The affidavit of search in support of an application for the signing of judgment by default cannot be made until after midnight on the last day allowed for the filing of the defence or other relevant pleadings.

N1>(4)      A judgment by default entered on the basis of an incurably defective affidavit of search filed prematurely must be set aside.

N1>(5)      Where an appellant succeeds before the appellate court on an issue not fairly put or decided in the court below, he should not, as a general rule, be allowed his costs of the appeal.

Cases Cited

Alexander v Ajax Insurance Co Ltd [1956] VicLawRp 5; [1956] VLR 436.

Anlaby v Praetorius [1888] UKLawRpKQB 55; (1888) 20 QBD 764.

Chard v Jervis [1882] UKLawRpKQB 7; (1882) 9 QBD 178.

Cook v Deeks [1916] UKPC 10; [1916] 1 AC 554.

DPC Estates Pty Ltd v Grey and Consul Development Pty Ltd [1974] 1 NSWLR 443.

Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646.

Dye v Dye [1884] UKLawRpKQB 111; (1884) 13 QBD 147.

G L Baker Ltd v Barclays Bank Ltd [1956] 1 WLR 1409.

Gamble v Killingsworth [1970] VicRp 22; [1970] VR 161.

Goddard v Jeffreys (1882) 46 LT 904.

Green & Co Pty Ltd v Green [1976] PNGLR 73.

Hussey v Horne-Payne (1879) 4 App Cas 311.

Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443.

Lagos v Grunwaldt [1909] UKLawRpKQB 183; [1910] 1 KB 41.

Luckie v Bushby [1853] EngR 697; (1853) 13 CB 864; 138 ER 1443.

NRMA Insurance Ltd v B & B Shipping & Marine Salvage Co Pty Ltd [1947] NSWStRp 10; (1947) 47 SR (NSW) 273.

Papua New Guinea; The Government of and Davis v Barker [1977] PNGLR 386.

Paterson v Wellington Free Kindergarten Association Incorporated [1966] NZLR 468.

Post & Telecommunications Corporation v Takoa Pastoral Pty Ltd [1985] PNGLR 44.

Shaw v Holland [1900] UKLawRpCh 127; [1900] 2 Ch 305.

Smeeton v Davara House Pty Ltd [1979] PNGLR 324.

Appeal

This was an appeal from a decision of McDermott J refusing to set aside a judgment obtained in default of filing pleadings.

Counsel

I Molloy and J R Steele, for the appellant.

C J Coady and C Diacos, for the respondent.

Cur adv vult

15 May 1985

PRATT J: The first and major ground of appeal on this matter claims that the motion judge wrongly refused to set aside judgment entered by default against the appellant. Entry of judgment arose from a failure by the appellant to comply with an order of McDermott J to “make, file and serve an affidavit of documents”, within fourteen days, failing which “the defendant’s defence to be struck out”. Judgment in the sum of K169,625, the amount claimed in the writ, was entered on 3 April 1984. I would agree with Bredmeyer J that the judgment was entered not so much because of a failure to observe the order of McDermott J, but because such failure led to a position where there was in effect no defence filed — in short, judgment was entered following failure to plead to and deny the matters contained in the statement of claim.

The appellant says that the respondent/plaintiff should have applied for judgment under the National Court Rules, O 12, r 32, which provides for entry of judgment by the court in accordance with the entitlement of the party making application. The plaintiff, it is said, could not apply under O 12, r 27, because the claim was not liquidated, nor under O 12, r 31, because there were no claims in the statement which came within O 12, rr 27-30. What this submission amounts to is really a further assertion that there was no proper basis upon which to make a claim for a liquidated demand and the Registrar in entering judgment as for a liquidated demand did so in circumstances which did not permit such a claim to be mounted.

In reply the respondent asserts that the nature of the claim was properly one entitling judgment to be entered for a liquidated demand in the sum claimed. Further, says the respondent, if the judgment had been wrongly entered, then the judgment itself should not be set aside but only that part which deals with quantum.

The principles upon which the courts may set aside a judgment by default are covered most adequately in the National Court decision of Green & Co Pty Ltd v Green [1976] PNGLR 73 and by the Supreme Court in The Government of Papua New Guinea and Davis v Barker [1977] PNGLR 386. The principles are similar to those developed in most other common law jurisdictions. So far as concerns the present appeal, it is conceded that if judgment were wrongly entered because the claim was not for a liquidated demand but should have been a claim for general damages, then that part at least of the judgment which covered the amount claimed should be set aside “ex debito justitiae and without terms — except as part of the condition of an order as to costs” (Green at 75 where O’Leary AJ cites from a number of English authorities). There is some argument however as to whether or not both the judgment and the sum entered against the defendant should be set aside or whether the court should simply sever that part of the judgment which deals with the award of damages from the main part which enters judgment against the defendant and substitute for the award an order for assessment of damages. I shall deal with this aspect a little later on. For the time being suffice it to say that there is a straightforward and direct conflict between the parties. The one says entry is correct because the amount claimed was an amount representing a liquidated demand. The other says that this is not the case, and that the nature of the dispute precludes any claim for a liquidated demand.

LIQUIDATED DEMAND

The facts upon which the appellant relied in his statement of claim to establish a liquidated demand allege a fiduciary duty in the defendant in relation to his dealings with the plaintiff. This is said to have arisen whilst the defendant was a director and in control of a company to which the plaintiff company transferred its title and interest in land and dwellings thereon constructed by them some time earlier. The company was incorporated to “give effect to a corporate strata title scheme”. It is further alleged that the defendant failed to transfer the appropriate shares to the plaintiff. Indeed the defendant took them in his own name for a sum of K5,375 and then sold them for K175,000 thereby failing to account to the plaintiff, it is said, for the balance of K169,625.

I would pause here to mention that a number of aspects must come into operation before one could state that the sum of K175,000 represented the value of the property transferred. Further, if the property were overvalued or undervalued, then additional difficulties emerge quite apart from the problem as to what, if any, relationship existed between the plaintiff and the defendant, and to what extent that relationship was connected with the value of the shares and the value of the dwelling which those shares represented.

As often occurs within the law one can think of examples which on the one side represent a clear liquidated demand and on the other represent a clear claim for damages to be assessed. It is where the two areas overlap however that difficulties occur, as in the present situation before us. It is obvious that in order to establish whether the appellant falls on one side or other, it is necessary to attempt some sort of definition as to what constitutes a liquidated demand.

In the 1982 Annual Practice, par 6/2/4a, the definition of liquidated demand which has been used for many years still appears in these terms:

“A liquidated demand is in the nature of a debt, i.e. a specific sum of money due and payable under or by virtue of a contract. Each amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a ‘debt or liquidated demand’ but constitutes ‘damages’.”

There is no doubt that as a statement of general principle what is set out in the Annual Practice is a very excellent rule of thumb. But from time to time criticisms have been levelled against the statement on the basis that it is too restrictive and fails to take into account first and foremost, that somewhat peculiar action in the English common law “quantum meruit”. For example, in Paterson v Wellington Free Kindergarten Association Incorporated [1966] NZLR 468 at 471, Barrowclough CJ, after doubting that the sum must be calculable by pure arithmetic only, without some sort of investigation, goes on to say:

“But in my opinion there can be no doubt that, in deciding whether demand is liquidated, important factors are that it be capable of arithmetical calculation and that no investigation of the amount claimed should be necessary other than inquiry as to well-established scales of charges, etc.” [My emphasis.]

His Honour goes on to illustrate by way of agent’s commission with charges under the Real Estate Institute and doctor’s fees for regular visits to patients or legal fees chargeable in accordance with the conveyancing scale of costs.

If there had been any doubt as to whether “quantum meruit” came within the meaning of the term liquidated demand, it was put to rest in the oft-cited case of Lagos v Grunwaldt [1909] UKLawRpKQB 183; [1910] 1 KB 41 at 48 where Farwell LJ agreed with the Court of Appeal that the “quantum meruit” cases did come within the term “debt or liquidated demand”, and gives an explanation as to how both the accounts known as “quantum meruit” and “quantum valebant” had fallen into disuse, being superseded by the general application of indebitatus counts.

The fact that the parties may agree on certain matters and more particularly may agree to take any damages to be at a particular sum does not convert an ordinary action into one for a liquidated demand. Such conversion by mere agreement is not permitted (Luckie v Bushby [1853] EngR 697; (1853) 13 CB 864 at 878). Nor can one convert into a claim for a liquidated demand an action which is essentially one for account. Such actions are taken “to ascertain the ultimate amount which, on consideration of a number of debits and credits, one litigant owes to another, and arise most frequently in actions for the administration of trusts ...”, and are essentially actions for equitable relief (Atkins Court Forms, Vol 1, at 172). An action for account expressed as an alternative gave rise to difficulties which were resolved by the Court of Appeal in G L Baker Ltd v Barclays Bank Ltd [1956] 1 WLR 1409 where the court overruled the judge of first instance on the basis that there was a claim for a “liquidated demand” as well as a claim which could not be described in such terms namely, for “property of the plaintiffs traceable in ‘equity’ (to) be repaid respectively by the defendants to the plaintiffs” (Birkett LJ at 1414). The authority however is of no assistance to the appellant in this case because the resolution of the dispute depended very much on the English Rules which do not have an exact counterpart in our own Rules. The parties are thus denied any opportunity to sail between the Scylla and Charybdis mentioned by Lord Evershed.

For a most comprehensive and erudite dissertation on the concept of liquidated demand it is not possible to go past Sholl J in the Victorian case of Alexander v Ajax Insurance Co Ltd [1956] VicLawRp 5; [1956] VLR 436. His Honour rejects the Annual Practice definition as suitable for all occasions, especially as the definition does not cover the counts for payment of goods and labour, or work and labour done, where no price or rate has been fixed by the parties. I would respectfully adopt his Honour’s conclusion (at 441) that:

“The application of the rule cannot be limited to such claims only as those where the jury would be bound by the figures or the calculations adopted by the parties’ agreement. For example, the case of a claim on a common count before a jury for the reasonable price of goods would involve an assessment by the jury, upon evidence, as to what was reasonable, and yet that would for historical reasons be a ‘liquidated demand’.”

I continue to adopt his Honour’s words when he sums up an old definition of the term, being just as relevant today. At 445 his Honour’s definition runs; any claim:

N2>“(a)    for which the action of debt would lie;

N2>(b)      for which an indebitatus (or ‘common’) count would lie — including those cases formerly covered by the quantum meruit or quantum valebant counts, notwithstanding that the only agreement implied between the parties in such cases was for payment at a ‘reasonable’ rate;

N2>(c)      for which covenant, or special assumpsit, would lie, provided that the claim was for a specific amount, not involving in the calculation thereof elements the selection whereof, was dependent on the opinion of a jury.”

If one applies the above definition to the facts before us it is difficult indeed to see the claim in terms of a simple money count or of one which would involve a mere arithmetical calculation with only superficial investigation.

The action revolves around the value of certain shares. If one were discussing shares as they appear on the stock market, then there may well be no dispute as to value. It would be necessary merely to adduce evidence of the stock exchange figures in order to establish the value of an individual share and consequently, the value of any group of shares on a particular day and if necessary at a particular time. Just as in the case of Barclays Bank where a fixed amount had been deposited by the plaintiff with the defendant in that case (despite the alternate claim for accounts) then in the case of shares on the stock exchange the value of any parcel of shares is a mere mathematical calculation although the question of what value should be placed on any bundle of shares, is undoubtedly a question for the tribunal of fact to determine. Where the shares are purchased through a broker, for example, the broker may then tender an amount to his client for the exact expenditure outlaid by him in order to purchase the shares. In the case of shares in a private firm, however, many factors in determining value are not public knowledge and undoubtedly depend on various elements which would require a close scrutiny before allowing one well versed in these matters to determine with any degree of certitude the value of the assets and therefore the value of any shares. A court investigation may indeed take a considerable amount of time and is normally covered, where there is any sort of fiduciary relationship, by the ordinary equitable suit for account. It is not to be lost sight of that such alternate remedy is asked for by the plaintiff in the present case. So it is one which he concedes is a possibility. In my view I am unable to appreciate the disputation which has arisen between the plaintiff and the defendant in such simple terms as one of money had and received.

The respondent has further argued in this appeal that even if the amount of K175,000 is incorrect it is nevertheless the sum which has come into the possession of the appellant and is a sum certain like that referred to by their Lordships in the Barclays Bank case (supra). Such an approach presumes a great deal indeed. Unlike the Barclays Bank case this is not simply a matter of one party depositing with another, certain sums of money. Rather the relationship between the parties at the time certain alleged sums came into the possession of one of them is something which of itself could give rise to much argument. Upon resolution of this area may depend what part if any of the sum claimed should be paid. I would adopt the submissions of counsel for the appellant in this area and agree that directors who enter into arrangements which are highly favourable to themselves leave themselves open to an action for account in that they have deprived their company of certain equities (Cook v Deeks [1916] UKPC 10; [1916] 1 AC 554). The case of Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 emphasises that in addition to an action for account the director may be at law subject to an action for damages. More specifically where an allotment is made by the directors to themselves in clear breach of a fiduciary duty, then they are liable to account for any profits obtained thereby (Shaw v Holland [1900] UKLawRpCh 127; [1900] 2 Ch 305 and the more recent decision of DPC Estates Pty Ltd v Grey and Consul Development Pty Ltd [1974] 1 NSWLR 443). The statement of claim is necessarily one for accounting and payment over of net profits if the plaintiff proves his case. It is certainly not a claim for a liquidated demand.

THE PREMATURE AFFIDAVITS

Before I go on to deal with the question of whether there should be any severability between the entry of judgment and the entry of the amount of judgment, there is one point which I believe has some bearing on my approach to the matter. I refer to the question of whether or not the plaintiff in the action had prematurely filed his affidavit of search in relation to the failure by the defendant to file the necessary affidavit of documents. The submission by counsel for the plaintiff/respondent is one which I emphatically reject. I think it may be fairly summed up as follows: whether or not the affidavit was filed before time and whether or not the facts averred to in the affidavit were strictly speaking correct, the actual outcome of events shows quite clearly that no affidavit of documents was filed the day following the last day for such filing or on any other day. That is to say, even if the plaintiff had “jumped the gun” by filing his affidavit of search just prior to the afternoon closing time at the Registry Office on the last day upon which the defendant could file his affidavit as required by McDermott J’s order, this matters not, because in fact the defendant has never filed that affidavit and has been at all times in breach of the judge’s order. I reject this contention for two reasons:

N1>1.       The affidavit contains an untruth in that it states the period of fourteen days “have elapsed”. That could not be so until midnight on 2 April. What the plaintiff is really asking this Court to do is to rule that despite the fact that an untruth is contained in the affidavit, such untruth going to the very crux of the matter with which it deals, the court should disregard such factor and proceed upon a different set of facts which could be covered by a subsequent affidavit if such were required (namely no affidavit of documents has ever been filed). This is asking the court to accept as part of its record a document which contains a demonstrable untruth. I do not believe the courts should in any way encourage such course of conduct. Further, it happens only too readily in this jurisdiction, in my view, that the party who has filed the inaccurate affidavit is the very one who is waiting on the doorstep of the court to have the affidavit acted upon by the Registrar in order to have judgment entered at the first available opportunity, and if he is that anxious then his case must be perfected.

N1>2.       Secondly, the argument completely ignores the fact that until midnight of the last day, a party is entitled to approach the Registrar and upon payment of a special fee to have the registry office open. Now the fact that this indeed did not happen I do not think affects the issue. A claim in an affidavit made at five minutes to four, that the records have been searched, that no document has been found filed in compliance with the order, and that consequentially, the order be invoked in favour of the applicant is immediately proved to be false and wanting simply because such claim cannot be made until after midnight. The proper and only course to follow, where the party is so keen to get judgment entered in his favour, is to wait at the court office as its doors open the next morning and then, having conducted the search, swear out the affidavit. I do not think this Court should lend itself to any course of conduct which would encourage the turning of a blind eye to the content of an affidavit for the sake of convenience and speed. I take the view that a party making such an affidavit and acting upon such an affidavit leaves a great deal to be desired. It is a course which can deserve only judicial condemnation.

THE EFFECT ON JUDGMENT

The more pertinent aspect of the deficiency contained in the affidavit is the effect it has on my approach to setting aside the judgment. The suggestion has been that we should sever. I do not think it is necessary for us to discuss at length the question of severability. We are not faced with the much simpler position resolved recently by McDermott J for example, in Post & Telecommunications Corporation v Takoa Pastoral Pty Ltd ([1985] PNGLR 44 following Saldanha J in Smeeton v Davara House Pty Ltd [1979] PNGLR 324 and allowing the judgment for “X” Kina to remain whilst quashing the order as to interest. What we are concerned with is a situation where the whole judgment has been irregularly entered. It is difficult to see how one can sever an irregularly entered judgment merely by cutting out the amount. The judgment of course consists of two parts, namely, judgment in favour of or against “A” for the amount of “X” Kina. There are two distinct areas involved, liability and quantum. But if the judgment is irregularly entered, that is irregularly entered because the claim is misconceived in the first place, it is difficult in my view to see how one can merely say it is irregularly entered in relation to part only. It was never suggested in Gamble v Killingsworth [1970] VicRp 22; [1970] VR 161 for example that severance would meet the requirements of setting aside. In that case the court set aside the judgment, and the assessment of damages by the Prothonotary, and the taxing of costs and the writ of fi fa. Further, the court ordered that the time fixed for compliance with a specific order be enlarged, to allow the defendant an opportunity to do what he should have been given time to do in the first place. The writ in Anlaby v Praetorius [1888] UKLawRpKQB 55; (1888) 20 QBD 764, like the one before us, was specially endorsed, but it was never suggested that the party disadvantaged by the plaintiff’s wrongful act should not be returned to his former position on the pleadings.

There is however an additional reason operating in this case. Judgment was irregularly entered not only because the amount was not a liquidated demand but further because there was no proper affidavit on file. The affidavit placed before the registrar was not a true statement of facts as at the time the affidavit was sworn. It was incurably defective, and in my view completely cuts the ground from under the respondent’s feet. On this ground alone the appellant/defendant has a right to set aside judgment, however much one’s sympathies may lie with the respondent because of the appellant’s conduct in this particular case.

In my view the appeal should be upheld and the whole of the judgment set aside. It must follow as a necessary ancillary order that the writ for levy of property issued under the judgment of 3 April 1984 be also set aside and further that the order by McDermott J made on 9 March 1984 for filing and serving an affidavit of documents be enlarged by seven days from the date of judgment herein. To avoid any possibility of misunderstanding, the date of judgment herein is today’s date and not the date in which the judgment is entered before the registrar.

COSTS

At the time this appeal was being argued I did not appreciate that the question of whether or not the claim was properly for a liquidated sum, had been argued before the motion judge. It is clear now however, from reading the judgment of his Honour and from a report which we called for under O 11, r 24 of the Supreme Court Rules (a copy having been furnished to both parties), that the setting aside of the judgment ex debito justitiae on the grounds that the claim for liquidated demand was without foundation was argued for the first time only before this Court.

No point was taken on the issue by respondent’s counsel. The question of whether or not the appellant should be allowed to argue the matter for the first time before us was not argued and therefore was not called upon for determination. This does not dispose of the question as to costs however, be they on the appeal or before the motion judge. I propose to call upon counsel to address the court on this aspect in a moment, but I draw the following matters to their attention.

In Dye v Dye [1884] UKLawRpKQB 111; (1884) 13 QBD 147 Fry LJ for the court made no order as to costs on the appeal because although the plaintiff did not argue the point below he was successful on the appeal: see also NRMA Insurance Pty Ltd v B & B Shipping & Marine Salvage Co Pty Ltd [1947] NSWStRp 10; (1947) 47 SR (NSW) 273. Nevertheless Lord Jessel MR in Goddard v Jeffreys (1882) 46 LT 904 pointed out that where an appellant is successful in an appeal on a point not raised or decided in the lower court, the general rule is that he will not be allowed his costs. Usually the successful appellant will obtain at least his costs of the court below even though he does not obtain his costs on the appeal: Hussey v Horne-Payne (1879) 4 App Cas 311 (a decision of the House of Lords). Even so however, the conduct of the appellant is still a relevant factor to bear in mind as emphasised by Lord Jessel in Chard v Jervis [1882] UKLawRpKQB 7; (1882) 9 QBD 178 at 183. I certainly agree with the observations of the learned motion judge that the conduct of the defendant/appellant was such as to make one wonder whether he would take any notice at all of court orders. His Honour was satisfied that “the defendant or his office also returned the order of McDermott J when served upon him”. His employee has acted either on “general or specific instructions”. It was conduct worthy of criticism by the learned motion judge.

I would give counsel the opportunity to address us now on this question of costs.

AMET J: I have had the advantage of reading his Honour Mr Justice Pratt’s judgment in draft with which I am in general agreement. I agree that the appeal should be upheld and the whole of the judgment be set aside.

WOODS J: This is an appeal from an order of the National Court dismissing the appellant’s application to set aside a default judgment. The major ground of appeal is that the motion judge wrongly refused to set aside a judgment entered by default against the appellant. A judgment in default of defence had been entered for the respondent by the registrar in the sum of K169,625. Interest was also allowed on the sum.

The appellant submits that the respondent/plaintiff was not entitled to have judgment entered under the National Court Rules, O 12, r 27, because his claim was not liquidated and further that if the judgment had been wrongly entered then the whole judgment has been wrongly entered and therefore the whole judgment should be set aside.

For the purposes of signing judgments in default a claim is liquidated when it is ascertained or is capable of being ascertained by a simple calculation, as when there is no element of assessment on judgment: see Alexander v Ajax Insurance Co Ltd [1956] VicLawRp 5; [1956] VLR 436 at 445. That case traces the history of the phrase “debt or liquidated demand in money” from the reference by the Common Law Commissioner to cases being in respect of well-known and admitted demands and where in the vast majority of cases the defendant knew perfectly well what the claim was and the writ operated to compel immediate payment from a necessitous or backward debtor of a known and admitted debt: Alexander v Ajax Insurance Co Ltd (at 443). This led to the procedure of special endorsements which started off by covering debts and then spread to cover the concept of claims for money due upon legal liabilities or upon simple contracts, express or implied and upon contracts under seal or of record, whenever the demand is for a sum certain or is capable of being readily reduced to a certainty. It may be supported on a contract to pay so much per load for wood, the quantity of which was not then ascertained; or on quantum meruit for work where there was reference to a reasonable rate: see Alexander v Ajax Insurance Co Ltd (at 445). Claims for indemnity where the amount was clearly ascertainable or fixed somewhere in the agreement but not just a maximum figure came within this area. However, where, under an indemnity or insurance contract the damages are not pre-assessed this is a claim for unliquidated damages.

The object of having the special endorsement or what we call the liquidated demand is to allow a procedure whereby a plaintiff who has a clear debt type of action with a clearly ascertainable claim can overcome the natural reluctance of courts to allow claims in the absence of the defendant and can get a speedy justice in the face of a delaying or difficult defendant. It has a prompt and summary effect in favour of the plaintiff.

Because it allows a final judgment to be signed against a defendant in the complete absence of the defendant it is a right which must be carefully applied to ensure no possibility of injustice being done. That is why the rules allow for a prompt application to the court to set aside a judgment by default.

This means that the court should look closely to see whether a claim really does come within the class of liquidated claims and ensure that what should really be treated as unliquidated claims do not get treated as liquidated ones. It is all too easy just because the plaintiff comes to his own assessment of his claim and puts in a sum certain to then treat it as a liquidated claim and there have been a number of situations before the National Court this year where this has happened.

It is not as though it is too difficult to obtain judgments for unliquidated claims where the defendant defaults in answering to the writ. The procedure in O 12 for entering judgment for damages to be assessed is still quite straightforward.

Where there is any doubt as to whether the claim is for a sum that is ascertained or certain as against whether it requires some investigation by the court, lawyers and the court should peruse their claim carefully.

In ascertaining whether the claim is a liquidated demand the pleadings will be important.

In this case the statement of claim refers to the defendant being a director of the plaintiff company and the defendant being involved in dealings in shares in property owned by the plaintiff company. It is alleged that the defendant dealt in certain shares on his own behalf instead of in the name of the plaintiff company and thus was acting in breach of his fiduciary duty to the plaintiff. Certain figures are mentioned. Can it be said they are in the nature of a debt, a specific sum of money due and payable under or by virtue of a contract? The plaintiff might say it is an amount to which the plaintiff is entitled as it can be ascertained by calculation or fixed by “a scale of charges” or other positive data and, therefore, it is liquidated: see Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646 at 649.

But what is the positive data here? Is by saying the defendant sold the shares for K175,000 sufficient positive data to find it is a liquidated amount. It seems to me that we are on the borderline between liquidated and unliquidated and this claim is trying to extend the category of liquidated claims too far.

It is not as though the figure here is the exact amount of money held by the defendant for the plaintiff as in the case of G L Baker Ltd v Barclays Bank Ltd [1956] 1 WLR 1409.

In the case before us it is a figure supposedly related to the value of some shares.

Normally shares are valued according to some positive quotation. Here we have no positive base point, no quotation per share. Instead we are just given figures of K5,375 and K175,000 for what appears to be a parcel of 1,500 shares called class B shares. It is not my job to go behind the legal fiction of 1,500 shares and find that in reality they appear to represent one townhouse. If the claim referred to a number of shares at a certain quotation with allowance made for the time gap of between 1979 and 1981 then perhaps one could see it as a liquidated amount. The line has to be drawn somewhere and I find that in this case the claim is definitely not within the category of liquidated claims.

I therefore find that the requirements of O 12, rr 25 and 27, have not been satisfied and that the judgment was signed in default in error and should, therefore, be set aside.

At this stage the question arises whether there can be any severability between the entry of judgment and the entry of the amount of judgment. In other words can the judgment be allowed to stand and an order for damages to be assessed and for costs be made. Without going into whether a judgment that is irregularly entered because the whole claim was misconceived cannot yet be severed into the two parts of the judgment and the quantum, in this case when the judgment was entered it was done so on the basis of a defective affidavit. The affidavit dated 2 April 1984, in support of the judgment, contains an untruth in that it states the period of fourteen days had elapsed. However, that could not be so until midnight on 2 April, yet the affidavit appears to have been made well before midnight on 2 April. The defendant could clearly not be in default under the order of McDermott J until after midnight on 2 April, in other words until 3 April.

The untrue affidavit reinforces the defect in the whole signing of the judgment. No question of severability can arise when no acceptable affidavit in support is filed.

The appeal should be upheld and the whole of the judgment set aside.

Appeal upheld. Judgment and ancillary orders set aside

Costs reserved for further argument

Counsel make submissions on the appropriate order the court should make as to costs on the appeal.

RULING ON COSTS (FOLLOWING SHORT ADJOURNMENT)

PRATT J: In this matter, we have reserved the question of costs on the appeal for the purpose of hearing submissions from counsel.

The preliminary matters are mentioned in the judgment already handed down (at 100) and I will not traverse them again, except to say this: criticism has been made of Project Pacific Pty Ltd in relation to its premature filing of an affidavit of search in relation to an affidavit which had to be filed by the appellant/defendant. In addition to that, whilst there is no criticism as such levelled against the respondent as to the form of action which it chose to take, it is obvious from the end result of the court’s reasoning that this was a case which should never have been the subject of a specially endorsed writ in the first place. So it is not as if the respondent is entirely lily white. Consequently, we cannot accept counsel’s submission in toto.

However, we do make an order (if I can anticipate the agreement of my brothers) that each party will pay their own costs on this appeal. We will not give costs to the successful appellant. We have taken this course because in our view the major point on appeal was not raised in the lower court. We are prepared to accept that reference was made to the question of form of writ and judgment by Mr Steele before the motion judge. But it was made in such a way that clearly it did not impress itself upon his Honour’s mind, so that he felt he had to deal with the point. Nor did he deal with the point. The authorities do seem to favour in such circumstances that costs be divided between the parties. In the upshot in this particular appeal before us, weighing all the factors that I have mentioned, I believe such an approach would be the most just course to follow here. We will not interfere with the costs awarded by the motion judge in the matter originally before him. His Honour’s order on costs will stand. Of course the question of the ultimate costs on the action will obviously follow the event.

AMET J: Yes, I too agree with the orders proposed.

WOODS J: I also agree with the orders proposed.

Cost on the appeal — Each party to pay own costs

Lawyer for the appellant: Warner Shand Wilson & Associates.

Lawyer for the respondent: Kirkes.