Rural Development Bank v Laka [2007] PGSC 35; SC897 (2 November 2007)

SC897

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 35 of 2006

BETWEEN

RURAL DEVELOPMENT BANK LTD
Appellant

AND

MARIA LAKA
Respondent

Waigani: Batari, Lay and Hartshorn JJ.
2007: 30 October and 2 November

SUPREME COURT- civil appeal - National Court Rules Order 9 rule 15 - failure to give agreed supplementary discovery - whether failure attracts jurisdiction under rule - whether striking out appropriate first response of Court to default.

Facts

The respondent obtained judgment for damages to be assessed against the appellant on an ex parte application when the appellant failed to file a supplementary list of documents and produce further documents agreed upon if they were available. There was no evidence before the judge that the motion for judgment had been served. The appellant applied to set aside the judgment, which application was refused, the judge holding that there was an undertaking by counsel for the appellant which the court should enforce, and that there was evidence of service of the motion for judgment and the judge hearing the application for judgment was satisfied as to service.

Held

1. An agreement to provide further discovery is not discovery required by Order 9 Rule 15 or production required under Order 9 Div.1. Consequently a breach of such an agreement does not give the court jurisdiction to strike out pleadings and enter judgment under that rule;
   
2. A court may only proceed to hear a motion in the absence of a party if satisfied that the motion was duly served on that party, unless the conditions set out in Order 4 rule 38(2) are shown to exist;
   
3. An affidavit in proof of service should be filed the day prior to hearing of the motion;
   
4. Striking out should not be the first response of the Court if compliance with the requirement for discovery can be achieved by other orders in a manner which will facilitate a fair trial.
   

Cases Cited

PNG Cases Cited
Curtain Bros (PNG) Ltd v UPNG (2005) SC789
SCA No. 11 of 1991 Westpac Bank-PNG-Limited and Bank of South Pacific Ltd v Hugo Canning Co Pty Ltd, unnumbered an unreported 20th December 1991

Overseas Cases Cited
Logicrosce Ltd v Southend United Football Club (The Times, 5 March 1988)
Arrow Nominees Inc v Blackledge, [2000] EWCA Civ 200; 2000 All ER (D), 854

References
National Court Rules

Counsel
R. Bradshaw, For The Appellant
B. Nouairi, For The Respondent

2 November, 2007

1. BY THE COURT: The respondent was an employee of the appellant and was terminated from her employment. She then commenced proceedings for wrongful dismissal against the appellant. After close of pleadings the respondent sought discovery. There was a delay of some six weeks by the appellant in giving discovery, after which the respondent filed a motion for judgment. On the eve of hearing the motion, the appellant filed and served its list of documents. The motion for judgment was dismissed with costs to the respondent.
   
2. After inspection of documents the respondent contended to the appellant that further documents ought to be discovered which she considered central to certain grounds of her claim. The appellant's response was:
   

"We also advised that we are seeking instructions from our client with a view to preparing a supplementary list of documents to include the documents your client requested and will file and serve the same shortly." (letter of the 19th of May 2005 appellant's lawyers to respondent's lawyers appeal book page 42).

3. On the 28 July, 2005, the lawyers for the respondent gave notice that if the respondent had not received the required documents by 4 August 2005, she may move for default judgment. That letter referred to "... the supplementary list of documents disclosing documents regarding the appointment of former managing director... will in due course be filed and served on us... your advice that the particular document requested by our client regarding her approved annual leave, is yet to be obtained from your client, and there is undertaking that once this is done a copy will be forwarded". On the 12 September, 2005, lawyers for the appellant advised that they had been instructed to issue a cross claim.
4. On the 4th of October, 2005, the respondent filed a notice of motion seeking inter alia, an order that the appellant's defence be struck out and default judgment entered. The application was heard ex parte and granted. The appellant applied to set aside the order, which application was refused. It is from that refusal that the appellant now appeals.
   
5. The first two grounds of appeal are related and are that:
   
   1. The trial judge erred in not giving due weight and consideration to the evidence of non service of the application for default judgment provided by the Appellant and relied heavily on evidence of service that was provided by the respondent after the respondent had obtained default judgment and after the appellant raised the issue of service;
      
   2. The trial judge, erred in assuming that the trial judge at the hearing of the application for default judgment had been satisfied with the evidence of service (if any) provided at the hearing of the default judgment application on 17 October 2005 when there was no evidence before him that that was the case.
      
6. The respondent concedes that when the application for default judgment filed 4 October 2005 was heard, no affidavit of service had been filed in Court. The respondent contends that the National Court Rules do not require an affidavit of service to be filed before the hearing of a motion for judgment, that Order 4 rule 43(2) is confined to situations contemplated by Rule 43(1) i.e., service on persons who have not given a notice of intention to defend and who are not in default in giving that notice. Further the respondent submits that the court may be moved without previously filing or serving a motion pursuant to Order 4 rule 38(2).
   
7. It is clear from Order 4 rule 46 (b) that the court may only dispose of a motion in the absence of a party where that party has been duly served. Order 4 rule 43 provides:
   

" SERVICE

(1) Where notice of the motion is to be served on a person who has not given a notice of intention to defend and is not in default in giving a notice, the notice of motion shall be served personally.

(2) An affidavit of service of the notice of motion shall be filed not later than the day before the day on which the motion is to be made.

8. Sub-rule 2 is not included in the New South Wales rules from which our rules were derived. It is a local addition. We do not agree with the proposition that rule 43(2) is confined to situations envisaged by rule 43(1). In our view the two sub rules are rules of general application as to service and proof of service. Where it is necessary to prove service of the motion then that proof must be provided in accordance with rule 43(2). To proceed ex parte there must be proof of due service on the absent party. Therefore in our view the judge hearing the application for judgment fell into error in proceeding when there was no affidavit before him proving service and there were no circumstances of urgency bringing the matter within Order 4 rule 38(2). Counsel's assurances, absent in this case, are not sufficient to fulfil the requirements of the rules.
   
9. The respondent submits that on the application to set aside the judgment the judge fully appreciated the position which applied at the time of the application for default judgment and there was then, on the application to set aside, evidence that the motion and affidavit in support had been served on the lawyers for the appellant.
   
10. On the application to set aside the judge was faced with two affidavits, one from an officer of the court swearing that his firm had not been served, based on his perusal of the inward document register kept by the firm's receptionist, a typed copy of which was provided. On the other hand he had an affidavit sworn by a clerk in the employ of the respondent which was sworn just under a month after he said service was effected. What was noticeable about that affidavit was that it did not make reference to or attach any document or note made by the deponent created contemporaneously with service, from which he would be able to refresh his memory.
    
11. The court made a strong point of the fact that an officer of the court, referring to counsel for the respondent, would be very unlikely to mislead the judge. However, the judge did not note that as service was purportedly affected by counsel's clerk, anything that counsel told the judge was hearsay because counsel's knowledge would be restricted to what his clerk told him that he did. Nor did the judge note the point which we have just made, that the clerks affidavit was sworn almost a month after service. As he served a number of documents on that day his role was obviously at least in part to serve documents and in a month he would have served other documents giving rise to the possibility of mistake in recollection.
    
12. There was a danger in relying too heavily on an affidavit sworn so long after the putative date of service when nothing on its face suggested that the deponent was able to refresh his memory from contemporaneous notes or documents.
    
13. Further, a perusal of the transcript of proceedings before the judge dealing with the application for default judgment shows that no consideration at all was given to the issue of service (see transcript at appeal book pages 162-168). There was no basis for the conclusion by the judge hearing the application to set aside the default judgment (at page 157 line 30) that the judge hearing the application for judgment was satisfied with counsel's submissions on service; there were no such submissions. There was also no consideration by the judge as to whether or not he should proceed in the absence of the appellant. We are satisfied that the judge hearing the application to set aside judgment fell into error in concluding that the judge who entered judgment had been satisfied on the issue of service.
    
14. The third ground of appeal is that:
    

"the Trial Judge erred in not giving due weight and consideration to the fact that the Appellant had complied with the Notice of Discovery initially served on it by filing a List of Documents in response. Thus, the application for default judgment under Order 9 Rule 15 of the National Court Rules had no basis except for an agreement which was merely to file a supplementary list listing two further documents which the Respondent claimed had not been listed in the Appellant's List of Documents

15. We are satisfied that the transcript of proceedings before the judge hearing the application to set aside judgment shows that his Honour did not note that Order 9 Rule 15 had been complied with, in that the appellant had filed and served a list of documents and there had been discovery and inspection of some 50 documents. Had His Honour noted that fact he may have been more inclined to look more closely at the words of the rule to ascertain what was the jurisdiction that the judge granting judgment was exercising and whether the factual situation had arisen in order for him to exercise it. For the reasons we set out at [25] we do not consider the factual situation had arisen for the jurisdiction provided by Order 9 rule 15 to be exercised.
    
16. Ground 3(d) is that:
    

The Trial Judge erred by giving undue weight to the purported agreement between parties for the Appellant to file a Supplementary List of Documents when there was evidence that:

1. the agreement was for the Appellant to file a list of documents upon locating such documents, and
   
2. the reason the Supplementary List was not filed was that the Appellant did not have in its possession or power the documents sought by the Respondent.
   

18. The trial Judge found "An undertaking was given to counsel following inspection that a supplementary list of documents would be provided". The only basis for finding that there was an undertaking is the exchange of correspondence set out at paragraphs 2 and 3 above. It is quite clear from that exchange that the only basis for finding that there was an undertaking is the qualified undertaking recorded in the correspondence from the respondent to the appellant's lawyers, that once the appellant's lawyers had the document from their client they would provide it to the respondent's lawyers.
    
19. His Honour placed considerable emphasis on the alleged failure of the appellant to fulfil the undertaking and it is clear from his reasons that he believed the undertaking was "that a supplementary list of documents would be provided". We find that there was no undertaking to file and serve a supplementary list. We find that the trial judge fell into error in holding that there was such an undertaking.
    
20. Order 9 rule 15 of the National Court Rules is in the following terms:
    

15. Default. (23/15)

(1) Where a party makes default in filing or serving a list of documents or affidavit or other document, or in producing any document as required by or under this Division, the Court may make such order as it thinks fit, including—

(a) if the party in default is a plaintiff—an order that the proceedings be stayed or dismissed as to the whole or any part of the relief claimed by him in the proceedings; or

(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 judgment be entered accordingly.

(2) Where a party has a solicitor—

(a) an order under any of the Rules of this Division need not, for the purposes of enforcement of the order by committal or sequestration, be served personally; but

(b) if the order has not been served personally, the order shall not be enforced by committal of any person or by sequestration of the property of any person if that person shows that he did not have notice or knowledge of the order within sufficient time for compliance with the order.

(3) Where a party has a solicitor, and an order under this Division against the party is served on the party by leaving a copy of the order at the office of, or posting it to, the solicitor or his agent, the solicitor shall, if he fails without reasonable cause to notify the party of the order, be guilty of professional misconduct.

21. In the case of SCA No. 11 of 1991 Westpac Bank-PNG-Limited and Bank of South Pacific Ltd v Hugo Canning Co Pty Ltd, unnumbered an unreported 20th December 1991, (Kapi DCJ, Hinchcliffe J. and Sheehan J.) the court made the following points with respect to the application of the rule:
    
    1. The remedies that the Court may impose include the dismissal of the offending party from the action, but it is only one of the options open to the Court; not necessarily the first course of action that the Court should take;
       
    2. other courses include the obvious imposition of costs; in an appropriate case, the exclusion of documents not disclosed; and, or conditional orders rendering greater or lesser penalties, in the event discovery is not made within a fixed time, including once again the option of dismissal of action or defence;
       
    100. dismissal of a party from the action for failure to give discovery, can only be justified when the Court finds that the failure or refusal can be seen as a tactic to abort the trial;
         
    4. "if when pleadings are completed an action is ready to be heard, it is indeed a serious and the severest penalty to strike out a defence so that a party suffers judgment without trial";
       
    5. "the only justifiable pursuit of a motion to strike out, is to either enforce discovery or, in a case of refusal, where there has been blatant avoidance, for the purpose of delaying or avoiding trial, to recognise the refusal by closing out the offending party's case";,
       
22. In Curtain Bros (PNG) Ltd v UPNG (2005) SC789 (Injia DCJ, Jalina J. and Sevua J.) approved the principles that the power to strike out and enter judgment should only be exercised:
    
    1. after full consideration of the facts and circumstances of the case, including the prejudice to the party allegedly in default;
    2. and if the failure of the defaulting party is repeated, verging on chronic; or,
    100. discovery was deficient rendering a fair trial almost impossible;
    4. if the applicant shows it will be prejudiced in the conduct of its case by the default.
       
23. The following passage from the judgment of Mr Justice Millett in Logicrosce Ltd v Southend United Football Club (The Times, 5 March 1988) and approved by Chadwick LJ, with whom Ward and Roch LJJ agreed,in Arrow Nominees Inc v Blackledge, [2000] EWCA Civ 200; 2000 All ER (D), 854 at para 53-54 expounds on the application of those principles:
    

"the object of the rules as to discovery is to secure the fair trial of the action in accordance with due process of the court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules - even if such a disobedience amounts to contempt or defiance of the court - if that object is ultimately secured, by 'for example' the late production of a document which has been withheld.

But where a litigant's conduct puts the fairness of the trial in jeopardy, where it is such that any judgment in favour of the litigant would have to be regarded as unsafe, or where it amounts to such an abuse of the process of the court as to render the further proceeding unsatisfactory and to prevent the court from doing justice, the court is entitled - indeed, I would hold bound - to refuse to allow that litigant to take further part in the proceeding and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court's function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as means of achieving injustice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke."

24. The first paragraph of the passage illustrates the wide degree of tolerance that the court should exercise before striking out an action or defence, if proper discovery for a fair trial can be achieved by some other order.
    
25. It could not be said that the appellant's default was chronic, nor that lack of discovery threatened the trial as the respondent had not set the matter down for trial. Prejudice to the respondent was delay which it could have circumvented by obtaining an order for specific discovery. On the other hand the prejudice to the appellant was the complete loss of an opportunity to challenge the respondent's case. The appellant had already given one lot of discovery and had promised another. There was nothing to suggest in those facts that the appellant would not be compliant to an order of the court to produce the additional documents required by the respondent; or that proper discovery for the respondent could not be achieved before trial. In our respectful view this was a case where the striking out of the appellant's defence was not the first course of action which the court should have taken.
    
26. We would enter a cautionary note that the power to enter judgment under Order 9 rule 15 derives from a default in discovery required by the rule or in producing a document required under division 1 of Order 9. In our view the rule has no application to supplementary lists which may be agreed upon by parties. If there is default in providing a supplementary list agreed-upon, then the proper course for the party alleging the default is to apply to the court for specific discovery, not to apply for judgment in circumstances where there has been no judicial finding that the initial discovery was deficient or that there are further relevant documents which the allegedly defaulting party has not produced.
    
27. Overall we consider that properly directed, the trial judge would have found that there was no undertaking to provide a supplementary list of documents, that discovery had been given by the appellant; that Order 9 rule 15 did not give jurisdiction to the court to strike out a defence and enter judgment against a party defaulting in providing agreed discovery as distinct from discovery required by the rule or production required by the division. He would also have found that evidence of proof of service of the motion for judgment was required by the rules to be filed by affidavit one-day prior to hearing of the motion, that there was no such evidence and that the judge hearing the application for judgment did not direct himself to the issue of service. Further, in the face of an affidavit from an officer of the court that service had not been affected, he would have been cautious to rely upon the affidavit of the respondent’s clerk sworn almost a month after the alleged service. For these reasons we consider that the appeal is allowed.
    
28. Lest it be considered that we are being hypercritical of the judges at first instance, we hasten to say from our own experience that we fully appreciate the pressures on a motion judge with limited time to hear a large number of matters. However this case points up the need for additional care when considering an application which has the effect of taking away the rights of a party to a trial.
    
29. ORDERS:
    
    1. the appeal is upheld;
    2. the default judgment entered on the 17 October 2005 is set aside;
    100. the respondent will pay the appellant's costs of this appeal and of the two applications in the National Court.

_______________________________

Bradshaw Lawyers: Lawyers for the Appellant
Bill N. Nouairi Lawyers: Lawyers for the respondent