Smith v Ruma Constructions Ltd [2002] PGSC 13; SC695 (11 October 2002)

SC695

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE AT WAIGANI]

SCA No. 48 of 2000

BETWEEN:

CHRISTOPHER M. SMITH
Appellant

AND:

RUMA CONSTRUCTIONS LTD

Respondent

Waigani: Kapi DCJ., Los J., Kandakasi J.
1st, 11th October 2002

APPEAL – Appeal from National Court exercising discretionary powers.

PRACTICE AND PROCEDURE – Application to set aside summary judgement – Principles applicable – This does not include the power to review the decision to enter summary judgement.

Counsel:
R. Radshaw for the Appellant
B. Frizzell for the Respondent

11th October 2002

KAPI DCJ: This is an appeal against a decision of the National Court which set aside a summary judgment. Application for leave to appeal was granted on 22nd February 2002 and the appeal has come before us for determination.

It is necessary to set out the relevant facts giving rise to this appeal. On 27th May 1997, Christopher Smith (Appellant) filed a writ of summons with the National Court seeking specific performance of an agreement for the sale of land or in the alternative, claims damages against Ruma Constructions Limited (Respondent).

On 8th October 1997, the appellant filed notice of motion seeking summary judgment against the respondent under O 12 r 38 of the National Court Rules (Rules). The motion came on for hearing before Woods J on 10th November, 1997 and summary judgment was entered on liability with damages to be assessed in absence of the respondent or it’s lawyers.

The respondent filed an application for leave to appeal as well as a notice of appeal against the entry of summary judgment on 19th December 1997 (SCA No. 86 of 1997). On 21st May 1998, application was filed to dismiss the appeal for want of prosecution. On 4th June 1998 Supreme Court directed that the Appeal Books to be filed within 14 days of the order.

Application for leave to appeal was heard on 22nd and on 25th March 1999 the Court ruled that the summary judgment was final in nature and the notice of appeal on foot should proceed to hearing on the merits (see Unreported Judgment of the Supreme Court dated 25th March 1999, SC600).

Several months later on 13th August 1999, the respondents discontinued the appeal.

The summary judgment remained in place and the appellant filed notice of motion on 11th November 1999 for directions to set the matter down for assessment of damages. On 17th December 1999 the National Court directed the appellants to file affidavits by 16th February 2000 and the respondents to file affidavits in reply by 29th February 2000.

On 12th January 2000, the appellant filed affidavit of Mark Kelep in support of assessment of damages. On 8th February 2000, the appellant filed his own affidavit. There is no record of any affidavits in reply by the respondent. The matter was finally fixed for assessment of damages on 11th May 2000.

The matter did not proceed to trial because the respondent filed a motion on 19th April 2000 seeking to set aside the summary judgment. This motion was heard by Sakora J on 19th July. On 2nd August 2000, he set aside the summary judgment and gave leave to the respondent to file its defence. This has led to this appeal.

The grounds of appeal may be summarized as follows:

1. That the trial judge erred in concluding that Woods J had evidence demonstrating the existence of real and serious issues of fact and law.
2. The trial judge erred in applying the principles relevant to an appeal from the summary judgment of Mr Justice Woods dated 10th November 1997 rather than the principles to set aside a summary judgment.
3. The trial judge erred in not having regard to the delay of the respondent in applying to set aside the summary judgment of 10th November 1997.
4. The trial judge erred in law in failing to have any regard to the failure of the respondent to explain how it allowed the summary judgment to be entered in its absence on 10th November 1997.
   

Ground 1

The trial judge concluded that Woods J had before him the following situation:

"1. There was no appearance by or on behalf of the defendant.

2. Two Notices of Intention to Defend on behalf of the defendant.
   
3. The affidavit of the Managing Director of the defendant company, Mr Des Bogaart, sworn 21 October 1997 adverting to and dealing with each of the factual issues (assertions) in the plaintiff’s Statement of Claim.
   

Thus the learned judge had before him real and serious issues of fact and law. The circumstances here, therefore, could hardly be said to have presented to the Court a ‘clear’ case for granting, let alone entertaining, the plaintiff’s application pursuant to O 12 r 38 NCR"

Was there any pleading before Woods J which put in issue matters on fact or law? It is not disputed that the respondent did not file any defence although two notices of intention to defend were filed on its behalf by its lawyers. It follows from this that the respondent did not put in issue matters of fact and law by way of pleading.

Was there any evidence disclosing disputed matters of fact and law alleged in the Statement of Claim? General Manager of the respondent, Des Bogaart swore to an affidavit on 21st October 1997 and was filed on 22nd October 1997. However, the respondent or his lawyers did not appear on the hearing of the motion on 10th November 1997, and this affidavit was not led in evidence. Therefore, this affidavit was not before Woods J. Consequently, the trial judge erred in concluding that Woods J had this evidence before him.

Ground 2.

The application to set aside summary judgment is said to be made pursuant to O 12 r 8 (2) (b) of the Rules. The trial judge dealt with the appropriate principles in the following passage:

"Mr Payne suggests that O 12 r 6 (2) (b) NCR does not distinguish between a default judgment or a summary judgment. This, in my opinion, is not correct, because Sub-rule (2) (a) does in fact specifically deal with default judgments. Therefore, Sub-rule (2) (b) must only envisage the situation such as this facing the defendant following the Court’s exercise of power under r 38 of this Order. In any case, there is also a specific rule covering default judgments: r 35 (supra).

Thus, the principles governing the entry of default judgments and their setting aside are different from those relating to summary judgments, just as the rules for these are different."

Counsel for the appellant submits that the trial judge fell into error in coming to this conclusion.

So far as entry of default judgment under O 12 Division 3 of the Rules and summary judgment under O 12 r 38 are concerned, the basis upon which the respective judgments may be entered are different. The former is dependent upon satisfaction of default on the part of the defendant. Whereas the latter is dependent upon satisfying the court firstly that there is evidence of facts on which the claim is based and secondly that there is evidence given by the plaintiff or some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim. The trial judge was correct in his conclusion to this extent

However, it does not follow that the principles for setting aside either type of judgments are also different. This calls for close examination of O 12 r 8:

"8. Setting aside or varying judgment or order.

(1) The Court may, on terms, set aside or vary a judgment –

• (a) where the judgment has been entered pursuant to Order 12 Division 3 (default judgment) or
  
• (b) where the judgment has been entered pursuant to a direction given in the absence of a party, whether or not the absent party had notice of trial or any motion for the direction; or
  
• (c) where the judgment has been entered in proceedings for the possession of land pursuant to a direction given in the absence of a party and the Court decides to make an order that the person be added as a defendant.
  

3. The Court may, on terms, set aside or vary an order –
   

(a) whether the order has been made in the absence of a party, whether or not the absent party is in default of giving notice of intention to defend or otherwise in default, and whether or not the absent party had notice of motion for the order; or

(b)..."

It is evident from this provision that the discretion to set aside a judgment under O 12 r 8 is the same whether a party is seeking to set aside a judgment under r 2 (a) (default judgment), (b) (judgment pursuant to a direction in absence of a party (c) (judgment for possession of land) or to set aside an order under r 3 (a) (any order made in absence of a party). The words "The Court may, on terms, set aside or vary a judgment" are applicable to application to set aside all categories of judgments and orders set out above.

The discretion to set aside default judgment is also provided for under Order 12 r 35. The discretion to set aside under this provision is couched in identical terms to O 12 r 8 (2) and (3). It follows from this that the principles governing the exercise of discretion would be the same.

These principles are now well settled in Green & Co. v Green [1976] PNGLR 73; PNG v Baker [1977] PNGLR 386; George Page Pty Ltd v Balakau [1982] PNGLR 140. The onus is on the applicant to satisfy the Court:

(1) Why the judgment was allowed to be entered in absence of the applicant.

(2) If there is a delay in making the application to set aside, a reasonable explanation as to the delay.

(3) That there is a defence on the merits.

The trial judge made reference to these principles in the submissions by counsel for the appellant. However, he failed to apply them in the present case.

The trial judge devoted a major part of his judgment to principles applicable to an application for summary judgment under O 12 r 38. He traced the development of these principles in the English and Australian case law and concluded his investigation with Tsang v Credit Corporation [1993] PNGLR 112 and The Chief Collector of Taxes v TA Field Pty Ltd [1975] PNGLR 144.

The trial judge then proceeded to review the decision of Woods J. He concluded:

"Thus the learned judge had before him real and serious issues of fact and law. The circumstances here, therefore, could hardly be said to have presented to the Court a ‘clear’ case for granting, let alone entertaining, the plaintiff’s application pursuant to O 12 r 38 NCR. All of the well-recognized constituent elements of a legally binding agreement (offer, acceptance and consideration) were in dispute.

Applying the principles that have been enunciated in the case law discussed here, it is abundantly clear to me that the learned judge fell into error in proceeding t hear the application and granting the summary relief sought."

The approach taken by the trial judge with respect is fundamentally wrong. In essence the learned trial judge reviewed the decision of Woods J. The trial judge had no jurisdiction to do this under an application to set aside judgment under O 12 r 8 of the Rules. This power belongs to the Supreme Court under the Supreme Court Act or s 155 (2) (b) of the Constitution. In Tsang v Credit Corporation (supra) the decision to enter summary judgment was appealed to the Supreme Court under the Supreme Court Act.

In fact in the present case, the respondent filed an appeal against the decision of Woods J on 19th December 1997. The relevant grounds relating to summary judgment were:

"3. Grounds

(a) His Honour erred in fact in finding as he did that there was no defence to the statement of claim such that summary judgment be issued.

(b) His Honour erred in fact in not relying on the affidavit of Des Bogaart sworn 21 October 1997 which affidavit set out a defence to the statement of claim.

(c) His Honour erred in fact in finding that the affidavit of Des Bogaart sworn 21 October 1997 disclosed no defence to the statement of claim.

(d) His Honour erred in fact in finding that the affidavits of Christopher Smith sworn 27 May and 1 October 1997 deposed to the fact that there was no defence to the statement of claim when they did not."

I will come back to the history of how this appeal progressed in another context but for the present purposes, the appeal was discontinued on 19th August 1999. The respondent could not seek to review the decision of Woods J after having abandoned their right to review the decision in the appeal to the Supreme Court. As I have already pointed out the National Court has no jurisdiction to review a decision on summary judgment under O 12 r 8. I would allow this ground of appeal.

Ground 3

It follows from the conclusion I have reached that the learned trial judge failed to apply the applicable principles on setting a judgment aside. The only time the learned trial judge had any regard to the proper principles was a reference to the submissions made by counsel for the appellant on pages 41-42 of the Appeal Book. He did not consider them nor did he deal with them. This is apparent on the face of the record or judgement.

With respect the trial judge failed to make any reference to the long delay in bringing the application to set aside the summary judgment. The period of delay is about 2 years 6 months when the application was filed to set aside summary judgment on 19th April 2000.

No explanation was given why no immediate action was taken by the respondent or its subsequent lawyers to set aside the summary judgment. As noted on 19th December 1997, the respondent filed an application for leave to appeal and notice of appeal against the entry of summary judgment. The respondents was not diligent in prosecuting the appeal. The application for leave and the notice of appeal were not served until 6th February 1998. Application was made on 21st May 1998 to dismiss the application for leave and notice of appeal for want of prosecution. The application for leave was finally heard on 25th March 1999 and granted. The appeal was discontinued on 13th August 1999.

There is no explanation for the long delay between summary judgment and the date when the application to set aside was made. The respondent cannot rely on the delay due to the appeal they were pursuing. That was the alternative avenue they had to dismiss the summary judgment. This amounted to nothing because the respondent discontinued the appeal.

By now it is some 5 years since the summary judgment was entered. In the circumstances, the long delay would prejudice the interest of the appellant if it is permitted to reopen this matter after such a long delay.

Ground 4

The learned trial judge failed to deal with any explanation why summary judgment was entered in absence of the respondent or its lawyers. In the narrative of the chronology of events, the trial judge made reference to the fact that the then lawyers for the respondent on the same day the appellant filed application for summary judgment, Notice of Ceasing to act for the respondent. The trial judge remarked that this may not have satisfied the requirements of O 2 r 39 of the Rules. This does not in any way explains the failure to appear. If anything the lawyers may be negligent for not taking appropriate steps to protect the interests of the respondent. That is no reasonable explanation (see PNG v Colbert [1998] PNGLR 138 in the context of failure of lawyer to file a notice of appeal within time).

It was argued that the affidavit of Des Bogaart discloses merits on the facts and law. Whilst this may be so, I cannot ignore the fact that the defence on the merits on the basis of this affidavit was the subject of the appeal lodged by the respondent (SCA No. 86 of 1997). However, this was discontinued and that to my mind undermines the validity of any defence on the merits. This matter was drawn to the attention of the learned trial judge by counsel for the appellant in the application to set aside the summary judgment. The learned trial judge failed to consider the submission and in my view fell into error. In the circumstances, it would be unjust to allow the respondent to question the summary judgment after such a long delay.

In the result, I would allow the appeal, quash the decision of the learned trial judge and reinstate the summary judgment. I would also direct that the matter be fixed for hearing on assessment of damages. Further I would order that the respondent pays the appellant’s costs of the appeal.

KANDAKASI J: I have read the draft judgement of the Deputy Chief Justice, Sir Mari Kapi, and I agree with the conclusions and the orders he proposes for the reasons he gives. But I offer a few comments.

First, the learned trial judge had before him an application for a set aside of a summary judgement that was entered ex parte on the 10th of November 1997. That application was made after the respondent had gone to the Supreme Court on an appeal against the summary judgement. The Supreme Court in its written judgement delivered 25th March 1999 (unreported judgement number SC600) held that that judgement was final and granted the respondent leave to proceed with its appeal.

Instead of proceeding with the appeal, the respondent discontinued the appeal on the 13th of August 1999. Since then the respondent did nothing about the matter. In the meantime, the appellant took steps to have his claim listed for hearing for an assessment of his damages. Following applications to the National Court resulting in a number of orders and directions, the matter was finally listed for hearing on the 11th of May 2000.

The trial was aborted because, the respondent filed on the 19th of April 2000, its application for a set aside of the summary judgement. That application was heard and granted on the 2nd of August 2000.

The law on an application to set aside an ex pate order is clear. Order 12, r. 8 (3) grants the National Court power to set aside an order made in the absence of one of the parties. This Court in Motor Vehicles Insurance (PNG) Trust v. Joseph Bure (unreported judgement) SC613, said the principles governing the application of a set aside of a default judgement applies in the context of an application for a set aside of an ex parte judgement in an originating summons. The judgement did not consider O 12 r 8 but as the Deputy Chief Justice reasons in his judgement, by reason of placing default judgements and ex parte judgements or orders in the same rule, the same principles apply. Even if that were not the case, I am still of the view that by virtue of s. 155 (4) of the Constitution, I would adopt those principles and apply them. The reason for that is simple. Before a judgement or order of a Court obtained in default or in the absence of the other party could be set aside, the Court must be satisfied that:

1. There is a reasonable explanation for allowing judgement to go in default or ex parte;
2. The application is made promptly or if there is a delay there is a reasonable explanation for it; and
3. That there is a defence or there is valid argument affecting the merits of the case.
   

In my view, these are the principles that govern and should guide a Court hearing an application to set aside an ex parte judgement or order. The issue for determination for the Court would be in terms of whether the applicant:

1. Has provided reasonable explanation for allowing judgement to go in default or ex parte;
2. Is making his application promptly or if there is a delay in that he has provided reasonable explanation for it; and
3. Has disclosed a defence or an arguable case on the merits?
   

In the present case, the learned trial judge has not satisfied himself that the applicant, now respondent in this appeal, had provided a reasonable explanation for allowing judgement to go ex parte. The only explanation provided by the respondent was that, its then lawyer ceased to act for it on the day the application for summary judgement was made as he was acting for Mr. Smith. But the respondent did not demonstrate, why it could turn up in Court and ask for an adjournment on the basis of its then lawyers ceasing to act.

There was a considerable period of time lapse between the period the 10th of November 1997, when the summary judgement was given and 19th April 2000, when the application for its set aside was made. That saw more than 2 years pass. The judgement of the learned trial judge does not say what reason or explanation was offered by the respondent for the delay and was accepted by the learned trial judge. In fact the learned trial judges says nothing about this point.

In the respondents submission reference has been made to the appeal to the Supreme Court and its eventual discontinuance. The inference from there is that it took up all the time to pursue the appeal but had the appeal withdrawn to pursue an application to set aside the summary judgement. Indeed counsel for the respondent, Mr. Frizzelle, argued before us that is in fact what the respondent did, as it could not put evidence disclosing a defence on the merits before the Supreme Court. But when this is put against what actually happened, this argument has not basis.

The appeal was discontinued on the 13th of August 1999. Nothing was done about the summary judgement. This was despite steps being taken to have the matter progressed towards a hearing of the matter. Only when the matter had a trial date allocated, the respondent filed its application for a set aside of the summary judgement. The application in my view was an attempted at aborting the trial. It was not a genuine application for a set aside given the lapse of about 8 months since the discontinuance of the appeal. Instead it was a step that was taken in abuse of the Court’s process.

Secondly, this Court on the respondent’s application granted leave for it to proceed to an appeal against the summary judgement on the basis that the summary judgement was a final judgement. When this Court said that, in my view, nothing could be done about the summary judgement except to appeal against it. So the only avenue open to the respondent was to pursue its appeal. If it was faced with difficulties putting its evidence disclosing a defence on the merits into Court for the purpose of the appeal, it had the opportunity to ask the Supreme Court to give such directions or make such orders as were necessary to bring them into Court. No such application was made.

When faced with these facts or chronology of events, it was important that the National Court address them and provide reasons as to why it consider itself as still having the jurisdiction to deal with the application at the first place even before getting into the merits of the application. The learned trial judge with the greatest respect did not address this point in his deliberations and more importantly his judgement. In my view, the National Court was without any jurisdiction to entertain any application questioning the summary judgement after this Court had ruled that the summary judgement was final and that the respondent should pursue its appeal. With greatest respect, I am of the view that, the learned trial judge fell into error in this regard.

Thirdly, the final issue for a Court hearing an application for a set aside of an ex parte judgement or order to consider is the requirement for a disclosure of a defence on the merits or a good cause of action to be pursed. Most of the authorities say that of the three requirements that must be met, this is an important one: See for example the case of Andrew Baing & Anor v. PNG National Stevedores Pty Limited & Anor (unreported judgement) SC627.

The affidavit of Mr. Des Bogaart for the respondent did disclose a defence on the merits. If this was a straightforward application for a set aside, I would have no hesitation in upholding the decision of the National Court adopting the kind of principles this Court has recently adopted in the case of Papua New Guinea Banking Corporation v. Jeff Tole (unreported judgement) SC694. However, the respondent in choosing to appeal against the summary judgement complicated its application. As I noted earlier, this Court was asked to determine whether or not the summary judgement was final and that appeal against the judgement should be allowed. This Court in a written and numbered judgement decided that the summary judgement was final and that the respondent should pursue its appeal.

As the Deputy Chief Justice says, when the respondent discontinued its appeal, it chose to abandon the appeal and the grounds of appeal in the absence of any order or agreement to the contrary. The grounds of the appeal went to the respondent’s defence on the merits of the claim, which was essentially what was put before the learned trial judge. The discontinuance meant also an abandonment of those grounds of the appeal. The respondent was therefore at no liberty to raise them again once it abandoned them and that the time period for appeal had long expired.

Finally, I note that the summary judgement resolved only the issue of liability with damages to be assessed. The respondent therefore still has the opportunity to show that the appellant is not entitled to any damages even though liability was found in the appellant’s favour. If however, the respondent is order to pay any damages to the appellant, it has in my view, a recourse against its lawyers for not pursuing the appeal or failing to apply for a set aside of the ex parte judgement first.

For these reasons I would uphold the appeal and quash the judgement orders of the National Court the subject of this appeal. I would then order a reinstatement of the summary judgement and direct that matter to be listed for trial on damages. I would order costs of this appeal against the appellant.

Lawyers for the Appellant : Blake Dawson & Waldron
Lawyers for the Respondent : Warner Shand