Baing v PNG National Stevedores Pty Limited [2000] PGSC 1; SC627 (23 February 2000)

Unreported Supreme Court Decisions

SC627

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

SCA NO. 18 OF 1999
THE HONOURABLE ANDREW BAING
FIRST APPELLANT
AND: THE INDEPENDENT STATE OF PNG
SECOND APPELLANT
-V-
PNG NATIONAL STEVEDORES PTY LIMITED
FIRST RESPONDENT
AND: BANK OF SOUTH PACIFIC LIMITED
SECOND RESPONDENT

Waigani

Sheehan Sawong Kirriwom JJ
23 November 1999
23 February 2000

APPEAL - Application for leave to Appeal under Supreme Court S.14 (3) (b) - proper principles for exercise of discretion.

PRACTICE AND PROCEDURE - Conditional Orders - Applications to strike out defence - and enter judgment. Order 9 r 25 (1) (b) National Court Rule

PRACTICE AND PROCEDURE - Irregular judgments - setting aside irregular judgments. Order 1 r 9 National Court Rules

FACTS

The first respondent proceedings against the Appellants and the PNG Harbours Board claiming it had suffered financial loss as a result of a change in Government policy relating to the grant of stevedoring licences. In their defences, the appellants and the PNG Harbours Board pleaded that no cause of action was disclosed. During pre-trial proceedings, the respondent obtained orders for discovering of documents. These were served on the appellants. The Appellants did not comply with the orders for discovering. Consequently on 13 September 1996, Salika, J made conditional consent orders. Subsequently on 17 September 1996, pursuant to the said conditional orders the respondent, filed an affidavit with the registrar of the National Court and obtained orders, striking out the Appellants defence and entering judgement in favour of the respondent.

Some 16 months later the appellants, applied to the National Court to have the orders set aside. The Deputy chief Justice refused this application. This appeal lies from that refusal.

Held

1. The registrar of the Court has no jurisdiction to strike out a party’s defence and entering a judgment.

2. Only the Court has such a jurisdiction.

3. A conditional order, by its very nature, necessitates the exercise of further judicial function of determining whether the condition had been satisfied or not at the specified time.

Cases Cited

Yakam v Meriam,Unreported Supreme Court Judgment, November 1997

Chan v Ombudsman Commission of PNG, Unreported Supreme Court Judgment, 25 June, SC607

FAI General Insurance Co Ltd v Southern Cross Exploration [1988] HCA 13; [1988] 165 CLR 268

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

Wong v Haus Bilas Corporation (PNG) Pty Ltd [1988-89] PNGLR 42

Credit Corporation (PNG) Ltd v Gerard Lee [1988-89] PNGLR 11

Keram v Warum & other [1994] PNGLR 130

Re Mune v Poto

Bank of South Pacific Ltd v Spencer [1983] PNGLR 239

Post & Telecommunication Corporation v Takoa Pastoral Co Pty Ltd [1985]PNGLR 44

Counsel

I. MOLLOY, for the First & Second Appellants.

G.J. SHEPPARD, for the First Respondent.

B. NEILL, for the Second Respondent.

23 February 2000

SHEEHAN SAWONG KIRRIWOM JJ: This was an application for leave to appeal against an order of the National Court made on 9^th April 1998 refusing an application by the First and Second Appellants to set aside interlocutory judgments against them, for damages to be assessed.

BACKGROUND

In order to appreciate the arguments put forward, it is necessary to set out the background of this litigation.

The first respondent brought a claim against the appellants and the PNG Harbour Board claiming it had suffered loss as a result of a change in Government policy in relation to the granting of stevedoring licences. Subsequently there were further amendments to its statement of claim. It is not necessary to state those for the present purposes.

In their defence, the appellants and the PNG Harbours Board pleaded that no cause of action was disclosed.

Subsequently during pre trial proceedings, the respondent obtained orders for discovery of documents. The Appellants did not comply with Orders of the Court for discovery of documents. As a consequence on 13 September 1996, a conditional consent orders was made by Salika J. The terms of the said Orders were:

“1. That the First and Third Defendants make file and deliver a List of Documents verified by Affidavit within forty-eight hours (48) of the making of this Order.

2. That in default of compliance with this Order and on the filing of an Affidavit of non compliance the Defence be struck out and interlocutory judgement be entered for the Plaintiff against the First and Third Defendants.

3. That the First and Third Defendants pay the Plaintiffs cost of incidental to this application in any event”.

Pursuant to that Order, on 17 September 1996, an affidavit was filed before the registrar for the Appellants defences to be struck out and an interlocutory judgment for damages to be assessed be entered. The registrar accepted the affidavit and struck out the Appellant’s defence and entered judgement against it.

The Appellant did nothing on this aspect until some 16 months later when they made an application to set aside the orders of 17 September 1996. This was refused.

It was this refusal by the Deputy Chief Justice to set aside the said orders which has led to the Application for leave to Appeal and the Appeal before us.

APPLICATION FOR LEAVE TO APPEAL.

Section 14 (3) (b) of the Supreme Court Act, Ch 37 provides that “no appeal lies to the Supreme Court without leave of the Supreme Court from an interlocutory judgment made or given by the National Court....”. There is no doubt in our minds that the refusal by the Deputy Chief Justice to set aside the interlocutory judgment was itself interlocutory.

It is now settled that the requirement to apply for leave separately from the hearing of the appeal is prerequisite. This has arisen since the decision of the Supreme Court in Yakam v Meriam (Unreported Supreme Court Judgment, November 1997).

In Chan v Ombudsman Commission of Papua New Guinea (Unreported Supreme Court, 25 June 1999, SC 607) the majority said at p 21:

“So to obtain leave to appeal an interlocutory judgment, it is not simply a matter of asserting there is an arguable case; that there has been some error. It is not the case that every error will affect the outcome of the substantive proceedings. What must be shown is, not only that there has been some patent error, but that the error affects a party’s substantive rights or will prevent the determination of the issues. That is, there is an error in the interlocutory judgment that goes to jurisdiction.”

In this case the application for leave was made on two principal grounds. The grounds were that

(a) it would be an injustice not to allow the Appellants to defend the Plaintiffs’ claim

(b) substantially the same grounds, as are set out in the Notice of Appeal.

THE ORDER OF 13 SEPTEMBER 1996.

The Deputy Chief Justice found that the Order made on 13 September 1996 were by consent. He found that that being the case he had no jurisdiction to set it aside.

But what is equally clear is that said orders were conditional orders. We say they were conditional orders because the terms of it were conditional upon the happening of some event in the future. The event was that the Appellants were to “make file and deliver a list of documents verified by affidavit within forty eight hours (48) of the making of this Order..” This meant that if the appellants did not comply with the terms of the order, the respondent had to come back to the Court and an appropriate application to the Court. Thus, this required further judicial function to be exercised in determining that the condition had not been satisfied at the specified time.

In FAI General Insurance Co Ltd v Southern Cross Exploration [1988] HCA 13; [1988] 165 CLR 268 the High Court of Australia considered, inter alia, the meaning and effect of conditional orders. The facts of that case were as follows, (from the head notes)

In the course of a long trial in the Supreme Court of New South Wales the judge made an order that “the proceedings be and stand dismissed ... unless on or prior to 30 May 1986 the plaintiff’s provided certain particulars and security for costs. On 30 May 1986 the plaintiffs applied for an extension of time for compliance with the order. The application was dismissed. On the same day they furnished the requisite security and provided a document which they later contended complied with the order. The plaintiff later applied for a declaration that the proceedings had not been dismissed and an extension of the time for the delivery of particulars. The judge dismissed both applications, holding that because the order was self-executing the proceedings had been terminated and that the Court had no power to extend the time. The Court of Appeal allowed an appeal and held, assuming that the document filed on 30 May 1986 had not complied with the order, that the Supreme Court Rules 1970 (N.S.W.), Pt2, r. 3 empowered the Court to extend the time for complying with a self-executing order after the period for compliance had expired, whether or not the proceedings were pending.

Gaudron J at 289, said, “A conditional order, of its nature, necessitates the exercise of the further judicial function of determining that the condition was not satisfied at the specified time”. Thus it is clear, that a conditional order by its very nature requires further judicial function of determining that the condition was not satisfied at the specified time.

In the present case as the orders of the 13 September 1996 were conditional orders, there was therefore a need for further judicial function to determine whether the condition had been satisfied or not at the specified time.

This then leads to the examination of the circumstances of obtaining the interlocutory judgment on 17 September 1996.

INTELOCUTORY JUDGMENT OF 17 SEPTEMBER 1996.

The appellant say that as the judgment was irregularly made and entered it should now be set aside. The respondents submit that the judgment was entered regularly pursuant to the consent orders of 13 September and therefore it ought not to be set aside. In respect of these submissions two things may be said.

First, it is now settled law that if a judgement is irregularly made or entered, then the defendant is entitled to have it set aside : Green & Co Pty Ltd v Green [1976] PNGLR 73, Wong v Haus Bilas Corporation (PNG) Pty Ltd [1988 - 89] PNGLR 42.

Secondly, as we have said earlier, as the orders of the 13 September 1996 were conditional orders, the very nature of those orders necessitated the exercise of further judicial function of determining whether the conditions were satisfied or not at the specified time. This meant, in our view, that upon expiration of the specified time the First Respondent ought then to have applied by way of notice of motion to the Court under Order 9 r 25 (1) (b) NCR to have the appellants’ defence struck out and judgment entered.

This would require the Court to exercise further judicial function to determine if the condition had been satisfied or not at the specified time.

Even though the orders of 13 September were by consent, nevertheless the orders were conditional orders requiring further judicial function to be performed. Therefore it meant that the respondent had to come to the Court, for the Court to exercise further judicial function to determine whether the conditions had been satisfied or not at the specified time.

Order 9 r 25 (1) (b) reads:

(1) Where a party makes default in compliance with an order under Rule 21 or 24 to file or serve a statement or affidavit, the Court may make such order as it thinks fit, including-

(a) -

(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 judgement be entered accordingly.

There are no Supreme Court decisions on these particular provisions. However these provisions have been judicially considered by the National Court in Credit Corporation (PNG) Ltd v Gerard Lee [1988-89] PNGLR 11, Keram v Warum & other [1994] PNGLR 130, at 131.

The facts of the first case were that the Plaintiff applied to the Court to have the defendant’s defence struck out and judgment entered for the Plaintiff because the defendant had defaulted in replying to a notice for discovery.

There the court heard the application, found that the defendant was indeed in default, struck out the defendants defence and entered judgment in favour of the Plaintiff. The significance of these cases are that, the Court heard the application and made the orders. The applications was not dealt with by the registrar. A similar procedure was applied in the latter case, cited above.

We consider that the decisions in these cases, although not binding on this court, nevertheless are of persuasive value. We consider that the procedures that were adopted and applied in those cases are correct in law.

In the present case the appellants did not comply with the terms of the conditional orders of 13 September 1996. That being the case, the First Respondent ought to have then applied to the Court in accordance with Order 9 r 25 (1) (b) of the National Court Rules to have the appellants’ defence struck out and judgment entered. The term “Court” is defined in the rules to mean “a Judge or acting judge of the National Court”. See S.6 NCR. Thus under this provision only a judge has the jurisdiction to strike out a defence and order that a judgment be entered. The definition does not include the Registrar or anyone else. The Registrar therefore had no jurisdiction to make any orders under Order 9 r 25.

In this case no court made the Orders of the 17 September 1996. The Respondent did not apply to the Court to firstly determine whether the conditional order had been satisfied or not at the specified time. Further when the conditional order had not been satisfied the Respondent ought to have applied to the Court by a appropriate notice of motion pursuant to Order 9 r 25 (1) (b). In the present case the Respondent did not do that. In other words it did not comply with the procedural law set out under Order 9 r 25 (1) (b). Instead of complying with this procedure it filed an affidavit and had the Registrar make the Orders. This was not regular. The registrar had no jurisdiction to make the orders on 17 September 1996. He simply had no jurisdiction to do so. It follows from these that the interlocutory judgment made on 17 September by the Registrar was irregular as having being made without jurisdiction.

As the judgment was clearly irregular, and was made without jurisdiction, it ought to have been set aside as a matter of law. See Order 1 r 9 NCR.

Consequently, on this basis alone we would grant leave and allow the appeal and set aside the interlocutory judgment of 17 September 1996. In case we are wrong on this point we consider the other grounds of the submissions.

The second line of the arguments before the National Court to set aside was the conventional one based upon explanation of delay, no prejudice to the plaintiff and more importantly disclosure of a good defence on the merits of the plaintiff’s claim.

In the submissions before us, considerable emphasis was put on the important issue of the appellants’ good defence on the merits of the plaintiffs’ claim. It was submitted that the defence of the appellants’ as pleaded and (which had been struck out) showed clearly a defence on the merits to plaintiffs’ claim, in that the statement of claim disclosed no cause of action in law. On this issue the trial judge said:

“I find that this is not a ground on which the National Court may exercise its inherent jurisdiction to set aside a judgment. In fact setting aside of a cause of action for not disclosing a reasonable cause of action is provided for by the National Court Rules. And in this case the 1^st and 3^rd defendants could have made their application to the National Court before judgment to dismiss the cause of action for the statement of claim does not disclose a reasonable cause of action. They failed to do this. This case has moved on, a judgment has been entered.

I find that this is not a ground in Common Law under which I may exercise my discretion to set aside a judgment on that ground. It is a separate issue and rules provide for different procedures to be dealt with.

I find that even on this ground, the other statutes give the 1^st and 3^rd defendants the right to deal with such a point of law. Firstly under the Supreme Court Act, 1^st and 3^rd defendants could have appealed to the Supreme Court to correct the judgment that has been entered on the basis that there is no reasonable cause of action However in this case, I observe that as this was a consent judgment under Section 14 (2) of the Supreme Court Act, there cannot be an appeal against the consent judgment. I should also observe that the time in which to appeal against the judgment entered has long since expired.”

In our view the trial judge also fell into errors on several areas in his decision which we have set out above. First it is quite settled law that in considering whether to set aside judgment, the paramount consideration is whether there is a disclosure of a good defence on the merits of the plaintiff’s claim. It is quite clear from his Honour’s reasoning that he gave little or no consideration to this issue, that is whether the defence disclosed a defence on the merits of the plaintiff’s claims.

In our view the defence pleaded clearly disclosed a defence on the merits of the plaintiff’s claim. The defence that was pleaded was clearly a legal one which went to the heart of the plaintiffs’ claim. Whether the Appellants ought to have applied to the National Court to have the plaintiffs’ claim struck out was not the issue, the issue being whether the defence disclosed went to the merits of the plaintiffs’ claim. In our view, the defence pleaded clearly went to merits of the plaintiffs’ claim.

Furthermore we do not consider that in setting aside the interlocutory judgement the respondents would have been prejudiced.

The trial judge also fell into an error when he relied on the common law to refuse to exercise his discretion to set aside the judgment on the basis of the defence on the merits of the plaintiffs’ case. In our view this is quite incorrect for a number of reasons. The National Court’s inherent jurisdiction stems from the Constitution and not according to Common Law authority. See Re Mune v Poto (Unreported, Supreme Court judgment, 27 September 1997, Chan v Ombudsman Commission of Papua New Guinea (Unreported, Supreme Court judgment, 5 June 1998).

Secondly, the court had jurisdiction to set aside the judgment because it was irregular, as the Registrar had no jurisdiction to make the Orders under Order 9 r 25 (1) (b) of the National Court Rules. The jurisdiction to make orders under Order 9 r 25 remains with the Court.

Thirdly, as the judgment was irregular, the Court had jurisdiction under Order 12 r 8 (2) (b) or (3) of the National Court Rules to set it aside. Finally, as the judgment was irregular, it ought to have been set aside as a matter of law. See Order 1 r 9 National Court Rule. See Green & Co Pty Ltd v Green (Supra), Bank of South Pacific Ltd v Spencer [1983] PNGLR 239, Post and Telecommunication Corporation v Takoa Pastoral Co Pty Ltd [1985] PNGLR 44.

For these reasons, we would grant leave to appeal and would allow the appeal. We make the following orders.

1. Leave to Appeal is granted to the Appellants.

2. Appeal is allowed.

3. The decision of the National Court dated 9 April 1999 be quashed.

4. The Appellants’ defence be reinstated.

5. The respondents to pay the Appellants’ Costs, to be taxed, if not agreed.

Lawyer for the First & Second Appellants: MR. I. MOLLOY

Lawyer for the First Respondent: G.J. SHEPPARD

Lawyer for Second Respondent: B. NEILL