Elema v Pacific MMI Insurance Ltd [2007] PGSC 52; SC1321 (27 June 2007)

SC1321

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 79 0F 2005

BETWEEN

SALAMO ELEMA, INSURANCE COMMISSIONER
Appellant

AND

PACIFIC MMI INSURANCE LIMITED
Respondent

Waigani: Batari J, Mogish J, Cannings J
2006: 29 June,
2007: 27 June

PRACTICE AND PROCEDURE – application to set aside ex parte order – order for dismissal of proceedings for want of prosecution – duty of lawyer moving motion ex parte to alert primary judge to peculiar background of matter – proceedings before the National Court must take full account of all previous orders.

A National Court Judge made an order setting aside an ex parte order made by another Judge. The ex parte order was to dismiss a case for want of prosecution. The Judge who set aside the order did so as the Judge who made the ex parte order was not alerted to the fact that another, third, Judge had ordered that nothing further be done in the case without the leave of the Court. The Court had not granted leave for the application to dismiss the case, to be made. This was an appeal to the Supreme Court against the decision to set aside the ex parte order.

Held:

(1) The National Court has power to set aside an order it has previously made ex parte, irrespective of whether the ex parte order was made by the Judge hearing the motion to set it aside.

(2) The power to set aside an ex parte order is a matter of discretion. Considerations relevant to the exercise of discretion include whether the judge making the ex parte order was aware of all previous orders concerning the conduct of the proceedings.

(3) A lawyer moving a motion ex parte has a duty to alert the presiding Judge to all facts relevant to the matter, especially whether there are any existing orders concerning the conduct of the proceedings.

(4) In the present case, the lawyer did not alert the presiding Judge to the earlier National Court order that required leave of the Court to be given before the defendant took any further action against the plaintiff; and leave had not been given.

(5) The Judge who set aside the ex parte order properly found that the Judge making the ex parte order was not alerted to the previous order; and that was a good reason to set aside the ex parte order.

(6) The Judge who set aside the ex parte order made no errors of law. The appeal was dismissed and the matter remitted to the National Court for trial.

Cases cited

The following cases are cited in the judgment:

Christopher Smith v Ruma Constructions Ltd (2002) SC695
MVIT v Joseph Bure (1999) SC613
Pacific MMI Insurance Ltd v Salamo Elema, Insurance Commissioner OS No 636 of 2002, 08.07.05

APPEAL

This was an appeal from an order of the National Court setting aside an earlier order of the National Court made ex parte.

Counsel

R Raka, for the appellant
J Aisa, for the respondent

27th June, 2007

1. BY THE COURT: This case concerns orders made by three different judges in the National Court: Kandakasi J, Injia DCJ and Davani J.

2. Kandakasi J's order was made first, in 2002. Injia DCJ's order was next, in 2004. Davani J's order was the last, in 2005. This is an appeal against Davani J's order (Pacific MMI Insurance Ltd v Salamo Elema, Insurance Commissioner OS No 636 of 2002, 08.07.05).

3. Davani J set aside Injia DCJ's order, which had been made ex parte (ie in the absence of one of the parties), for two reasons. First, it was contrary to Kandakasi J's order. Secondly, the principles about setting aside ex parte orders favoured setting it aside. The parties agree that Davani J had power to set aside Injia DCJ's orders but disagree about whether her Honour properly exercised her discretion to do so. The issues are:

• Did Davani J misinterpret Kandakasi J's order?
  
• Did Davani J misapply the principles about setting aside ex parte orders?
  

4. Before addressing those issues we will explain how the dispute between the parties came to court.

DISPUTE BETWEEN INSURANCE COMMISSIONER AND PACIFIC MMI LTD

5. The appellant is the Insurance Commissioner, Salamo Elema. He is a statutory office-holder and leader, appointed under the Insurance Act 1995. The respondent is Pacific MMI Ltd, an insurance company licensed under the Insurance Act. Pacific MMI has had an ongoing dispute with the Commissioner about the extent of his powers to investigate their business affairs. The events that led to the dispute occurred several years ago when the company that runs the Kanudi Power Station near Port Moresby, Hanjung Company Ltd, made a K20 million insurance claim against Pacific MMI over damage to its generators. Pacific MMI rejected the claim and Hanjung complained to the Commissioner. The Commissioner issued a summons against Pacific MMI under the Insurance Act, requiring information to explain their rejection of Hanjung's claim. Pacific MMI refused to comply with the summons. Their position was that rejection of Hanjung's claim was a commercial matter that was none of the Commissioner's business, ie the Commissioner was acting in excess of his powers.

6. The Commissioner commenced prosecution proceedings against Pacific MMI in the National Court, arguing that Pacific MMI committed an offence by not complying with the summons. Pacific MMI responded by challenging the Commissioner's power to prosecute and applying for leave to seek judicial review of the Commissioner's actions. The case then went before three different Judges.

Proceedings before Kandakasi J

7. The matter came before Kandakasi J in the National Court on 25 October 2002. His Honour held that the Commissioner did not have the power to prosecute. As to judicial review, his Honour made the following order:

1. The plaintiff [Pacific MMI] be granted leave to apply for judicial review.
   
2. The plaintiff's substantive application be adjourned sine die [indefinitely].
   
3. The defendant [the Commissioner] be restrained from taking any further action against the plaintiff in respect of the matters the subject of these proceedings without the leave of the court. [emphasis added]
   

8. The last order is the crucial one. It is the order that Davani J concluded was later not brought to Injia DCJ's attention.

Proceedings before Injia DCJ

9. After a period of apparent inactivity, the Commissioner in 2004 filed a motion to dismiss Pacific MMI's application for judicial review, for want of prosecution. Injia DCJ heard the motion ex parte on 18 November 2004. His Honour noted the substantial delay and granted the motion. Pacific MMI's application for judicial review was therefore dismissed.

Proceedings before Davani J

10. Pacific MMI then brought a motion before Davani J to set aside the order of Injia DCJ. This motion was based on Order 12, Rule 8(3)(a) of the National Court Rules, which states:

The Court may, on terms, set aside or vary an order ... where the order has been made in the absence of a party, whether or not the absent party is in default of giving a notice of intention to defend or otherwise in default, and whether or not the absent party had notice of motion for the order. [emphasis added]

11. Davani J upheld the motion on 8 July 2005 and set aside Injia DCJ's order. Her Honour gave two reasons for doing so. First, Injia DCJ's order was contrary to the crucial part of Kandakasi J's order, which was that the Commissioner was restrained from taking any further action against Pacific MMI without the leave of the court. Her Honour pointed out that the lawyer who argued the motion before Injia DCJ, Mr Elemi, did not inform Injia DCJ of the existence of Kandakasi J's order. The lawyer failed in his duty to inform the court of that important fact. For that reason alone Pacific MMI was entitled to have the order set aside ex debito justitae (as required in the interests of justice). Secondly, her Honour applied the principles that are conventionally taken into account when deciding whether an ex parte order should be set aside. She concluded that Pacific MMI gave a reasonable explanation for their non-attendance before Injia DCJ, that they made their application to set aside Injia DCJ's order promptly and that they had a good argument for not having the substantive proceedings dismissed.

THE APPEAL

12. The Commissioner argues that Davani J made two errors of law. First, misinterpreting Kandakasi J's order. Secondly, misapplying the principles about setting aside ex parte orders.

13. The case at this stage has nothing to do with the initial dispute between Pacific MMI and Hanjung. Nor does it have much to do with the nature and exercise of the Commissioner's powers under the Insurance Act; issues to be resolved in the judicial review that Pacific MMI still wants to pursue. The case at this stage only concerns issues of practice and procedure, things like interpretation of previous orders and the circumstances in which ex parte orders should be set aside. Everyone accepts that the National Court has power to set aside an order it has previously made ex parte, irrespective of whether the ex parte order was made by the same Judge hearing the motion to set it aside or a different Judge. The power to set aside an ex parte order is a matter of discretion.

THE TWO ISSUES

1 Did Davani J misinterpret Kandakasi J's order?

14. We refer again to the crucial part of Kandakasi J's order: the Commissioner was "restrained from taking any further action against [Pacific MMI] in respect of the matters the subject of these proceedings without the leave of the court". The Commissioner argues that that meant that the Commissioner was restrained from taking further action against Pacific MMI under the Insurance Act, ie the Commissioner could not issue another summons, conduct a raid on Pacific MMI's premises or refer a complaint to the Police. It was the exercise of those powers that was the subject of the judicial review proceedings. The restraining order has to be interpreted in that context. Davani J gave the order a much broader and unwarranted interpretation by saying that the Commissioner had to obtain the leave of the court before moving a motion for dismissal of the proceedings.

15. We do not agree with the Commissioner's argument. We can see that there is an element of ambiguity about the crucial part of Kandakasi J's order. Was his Honour saying that the Commissioner could not even bring a motion to dismiss the judicial review proceedings without the leave of the court? Her Honour Davani J answered the question 'yes'. She gave the matter through consideration, examined the complex background of the case and concluded that Kandakasi J had, in fact, ordered that no steps be taken by the Commissioner – in court or outside court – without the leave of the court. We consider that that was the proper interpretation of Kandakasi J's order.

16. We also agree with Davani J that when the Commissioner's lawyer, Mr Elemi, appeared before Injia DCJ to move the motion for dismissal of the judicial review, he had a duty to inform Injia DCJ of the existence of Kandakasi J's order. It was clearly an important matter. The lawyer was obliged to alert the presiding Judge to it, even if he believed that the order should be given the sort of narrow operation that the Commissioner wanted it confined to.

17. All lawyers are officers of the court. Their paramount duty is to the court. They must bring all relevant matters of fact and law to the attention of the court, even, and especially, matters that do not or might not favour their client's cause. This duty is acute when the proceedings are heard ex parte and where there are existing orders concerning the conduct of the proceedings. We agree with Davani J that Mr Elemi's failure to alert Injia DCJ to Kandakasi J's order gave rise to a serious flaw in the proceedings. It was a sufficient reason to set aside the ex parte order. Her Honour rightly said that Section 155(4) of the Constitution gives power to the National Court to set aside an order "where common justice requires that this be done". Davani J did not misinterpret Kandakasi J's order and properly concluded that the failure of Injia DCJ to consider it was a good reason to set aside the ex parte order.

2 Did Davani J misapply the principles about setting aside ex parte orders?

18. The Commissioner submits that the principles that allow the National Court to set aside its own orders are well settled but Davani J did not follow them. The Commissioner submits that the leading case Christopher Smith v Ruma Constructions Ltd (2002) SC695, in which the Supreme Court followed its decision in MVIT v Joseph Bure (1999) SC613. When deciding whether to set aside an order or judgment made ex parte, the considerations to take into account are the same as those applying to an application to set aside a default judgment. The Court must be satisfied that:

(1) there is a reasonable explanation for allowing the order to be made ex parte; and

(2) the application is made promptly or if there is a delay there is a reasonable explanation for it; and

(3) there is a defence or valid argument affecting the merits of the case.

19. The Commissioner concedes that Pacific MMI may have had a defence on the merits, given that Kandakasi J had already found that there was an arguable case for judicial review. However, he submits that Davani J erred by concluding that Pacific MMI had a reasonable explanation for allowing the order to be made ex parte and for their delay in applying to have Injia DCJ's order set aside. The Commissioner points out that Injia DCJ's order was made on 18 November 2004 and Pacific MMI did not file their notice of motion to set it aside until 23 May 2005. That was an inordinate delay – six months – and Pacific MMI gave no proper explanation for it.

20. We agree with the Commissioner that the leading case is Christopher Smith v Ruma Constructions Ltd. We also agree that a Judge hearing a motion to set aside an ex parte order must apply the three considerations or principles set out above. However, we do not agree that Davani J misapplied them.

21. Her Honour listed the three considerations and applied them systematically. There was an affidavit by Pacific MMI's lawyer, Mr Mana, as to why he was not present when the case was called. There was a mix-up over the date and time of the hearing, he had to fly to Kokopo and left the matter in the hands of another lawyer of his firm who did not show up. Her Honour concluded in all the circumstances that it was not a case of negligence on the part of Pacific MMI's lawyers. There was a reasonable explanation for their non-appearance, ie for allowing the motion to be heard ex parte. As to the six-month delay, there was a reasonable explanation for that too, given the complex background of the matter and the fact, as her Honour found, that the court file went missing for a while. We conclude that Davani J did not misapply the principles about setting aside ex parte orders.

ORDER

(1) The appeal is dismissed.

(2) The order of the National Court of 8 July 2005 in OS No 636 of 2002, setting aside the order of the National Court of 18 November 2004, is confirmed.

(3) The respondent shall forthwith take all steps necessary to have the substantive judicial review proceedings in OS No 636 of 2002 set down for hearing.

(4) The appellant shall pay the costs of these proceedings on a party-party basis to be taxed if not agreed.

Judgment accordingly.
________________________________________________
Elemi Lawyers: Lawyers for the Appellant
Allens Arthur Robinson: Lawyers for the Respondents