Liu v Emoto [2009] PGSC 31; SC1032 (20 April 2009)

SC1032

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 91 of 2008

BETWEEN:

RAYMOND LIU & ANOTHER
Appellants

AND:

DAUL EMOTO & 23 ORS
Respondents

Waigani: Injia, DCJ
2009: 20th April

PRACTICE AND PROCEDURE – application for leave to appeal against an interlocutory ruling of National Court – nature of ruling is refusal to set aside default judgment on liability for damages - main test is whether applicant has shown there is a prima facie case that the decision was wrong and that substantial injustice will be done by leaving the erroneous decision unrevised - whether defence on the merits was disclosed in the proposed Defence – relevant considerations

PRACTICE AND PROCEDURE – respondents object to competency of leave application - decision was final and leave is incorrectly sought - basis of objection - test to be applied is whether judgment or order is final – respondents objection to competency dismissed - no substantial injustice will be caused to appellant by allowing the judgment to stand - arguable case has not been demonstrated – application dismissed with costs to respondent

Cases Cited:

Papua New Guinea Cases
Baing v PNG Stevedores Pty Ltd (2000) SC627,
Boyepe Pere v Emmanuel Ningi (2003) SC711
Breckwoldt v Gronoyke [1974] PNGLR 106,
Rimbink Pato v Anthony Manjin [1999] PNGLR 6
Sir Julius Chan v Ombudsman Commission of Papua New Guinea [1999] PNGLR 240
Breckwoldt & Co. (N.G.) Pty Ltd v Groyke [1974] PNGLR 106
Curtain Brothers (PNG) Ltd v UPNG, (2005) SC788.
La Jarden Collected Agency Pty Ltd v Richard Hill & Ors (1998) SC597
Matiabe Oberia v Police and the State (2005) SC801
NCDC v PNG Water Ltd & Ors (1999) SC624)
NCDC v Namo Trading Ltd (2001) SC663,
Electricity Commission of NSW v Lapthorne [1971] HCA 11; (1971) 124 C.L.R. 177

Overseas Cases
Australia Coal and Shale Employees’ Union v The Commonwealth (1956) 94 C.L.R.

Counsel:

Mr Kaore, for the Appellants
Ms Mugagia, for the Respondents

20th April, 2009

1. INJIA, DCJ: This is an application for leave to appeal against an interlocutory ruling of the National Court made on 18th July 2008 in refusing to set aside its default judgment on liability for damages to be assessed, entered on 16th April 2008. Before I deal with the merits of the application, I deal first with a number of threshold procedural issues.

2. The respondents object to the competency of the application for leave on the basis that the decision was final and leave is incorrectly sought. I am of the view that the application for leave is competent because the decision to dismiss the application to set aside the default judgment is interlocutory and not final. The effect of the decision is that the default judgment still stands and the question of damages is yet to be litigated. The question of liability and damages in the circumstances of this case, are inseparable and only a decision on quantum of damages would put the seal of finality in the judgment.

3. The test to be applied in judgments of this type is whether the judgment or order is final in that it "finally disposes of the right of the disputing parties" or "there is no substantive issue(s) a foot that remains to be tried" (La Jarden Collected Agency Pty Ltd v Richard Hill & Ors (1998) SC 597), or "because the order results in the rights of the parties in those proceedings being terminated or extinguished" ( NCDC v PNG Water Ltd & Ors (1999) SC 624). In NCDC v Namo Trading Ltd (2001) SC 663, the Supreme Court dealt with the question of finality of a summary judgment but what was said in passing in relation to default judgment on liability for damages to be assessed is relevant. The Supreme Court adopted the majority view in the case of Electricity Commission of NSW v Lapthorne [1971] HCA 11; (1971) 124 C.L.R. 177, where Barwick CJ said at 184 -185:

"But the question remains whether so regarding the order of the Court of Appeal as a judgment (entered for the Plaintiff with damages to be assessed) of the Supreme Court, it was a final judgment of that Court. In my opinion, so regarded, it was relevantly to be described as an interlocutory judgment, an appeal from it being competent only by leave of this Court. It did not dispose of the action nor of any part of it. Where damages are of the gist, liability cannot relevantly be divorced from the damages as a separate and independent matter.

Finally, it seems to me that in a common law system such as prevailed at the relevant time in New South Wales, a judgment entered for the plaintiff in default of appearance or of defence in an action for unliquidated damages is the classical example of an interlocutory judgment. Only after assessment of damages could a final judgment, as upon verdict, be entered. I am unable to accept the conclusion, if applied to such a situation, that because an order for the assessment of damages was intended to be a judgment for the plaintiff for damages to be assessed, the order was a final order within the meaning of s.35 of the Judiciary Act".

4. For this reason, I dismiss the respondent’s objection to competency.

5. It is necessary to determine if the application for leave remains competent in terms of compliance with the requirements of an application for leave set out in O 7 Div. 1 (rr 1-3) of the SCR. An application for leave must be in accordance with Form 7 which shall, inter alia, "2(c) state the nature of the case, the questions involved and why leave should be given". In the present case, the application for leave contains the nature of the case but does not contain the other two requirements. Instead it contains the proposed grounds of appeal. The proposed grounds of appeal may be part and parcel of the nature of the case and the issues may be apparent from the proposed grounds of appeal but the issues and reasons why leave should be given must be explicitly spelt out in the application. In his submissions, counsel for the appellant identifies two issues raised by the grounds of appeal but identification of issues in submission is also no substitute for setting out the issues in the application itself. This is an issue of competency which goes to the jurisdiction of the Court and although it was not raised in Court before me, this Court is entitled to deal with the point as it comes to hand. The application in the present case lacks compliance with the mandatory requirements of O 7 r 2 (c) and therefore must fail. Notwithstanding this conclusion, I go on to consider the merits of the application for purpose of completeness.

6. The short facts for purpose of this application are as follows: The appellant is a Forest Developer operating in the Awowota Forest area of Oro Province and the respondents are local / forest resource landowners of the forest area. On 16th October 2007, the respondents filed an action in the National Court claiming damages for breach of a certain Timber Agreement entered into between them. The Writ was duly served on the appellant. The appellant defaulted in filing its Notice to Defend and Defence. On 27th March 2008, the respondent filed a Motion for default judgment which was heard and granted on 16th April 2008. On 27th May 2008, the appellant filed a motion to set aside the default judgment and for leave to file Defence out of time. A draft Defence was annexed to the affidavit filed in support of the application. On 18th July 2008, this motion was heard and dismissed.

7. I have considered the submissions made by counsel representing each party.

8. The appeal relates to exercise of discretion on a procedural matter within the Court’s jurisdiction in a civil case. The main issue to be determined is whether there was an error in the exercise of discretion. When the Court is determining an application for leave to appeal against such decision, it is important for the judge dealing with the application to be reminded of the ultimate test to be applied in an appeal of this nature. It is pertinent to be reminded of the strong presumption of correctness which attaches to the decision involving exercise of discretion in a civil case on a procedural matter within the Court’s jurisdiction. Such an applicant does have a harder roe to hoe, so to speak, compared with an applicant who seeks leave to appeal against error of law as to jurisdiction or exercise of statutory power and the like. The applicant must demonstrate that the exercise of discretion on the face of the record is manifestly unreasonable, or so unreasonable or plainly unjust: These principles are well established: see a statement of this principle by Kitto J in the Australian High Court case of Australia Coal and Shale Employees’ Union v The Commonwealth [1953] HCA 25; (1956) 94 C.L.R. 621 at p. 627, which was adopted by Clarkson J in Breckwoldt & Co. (N.G.) Pty Ltd v Groyke [1974] PNGLR 106 at p.112. Also see Curtain Brothers (PNG) Ltd v UPNG, (2005) SC 788.

9. The principles on grant of leave to appeal are canvassed in a recent judgment of Lay, J in Matiabe Oberia v Police and the State (2005) SC 801. Justice Lay discussed the main authorities on grant of leave including decisions of the pre-independence Supreme Court: Breckwoldt v Gronoyke [1974] PNGLR 106, Sir Julius Chan v Ombudsman Commission of Papua New Guinea [1999] PNGLR 240, Rimbink Pato v Anthony Manjin [1999] PNGLR 6, Baing v PNG Stevedores Pty Ltd (2000) SC 627, Boyepe Pere v Emmanuel Ningi (2003) SC 711. The main test is whether the applicant has shown that there is a prima facie case that the decision was wrong and that substantial injustice will be done by leaving the erroneous decision unrevised. In determining this test, the relevant considerations stated in question form are:-

1. Is there an arguable or prima facie case demonstrated that the trial judge was wrong?
   
2. Does the appellant have recourse in the Court below?
   
3. Was the ruling within the discretion of the Court? Has it been shown that its exercise was manifestly unreasonable, exercised on wrong principle or a mistake of fact?
   
4. Does the decision have any bearing on the final determination of the issues between the parties? Will it affect the primary rights of the parties or prevent the determination of the issues?
   
5. Will substantial injustice be caused by allowing the decision to stand?
   
6. Has cause been shown that the trial process should be interrupted by an appeal?
   

10. I adopt these principles and apply them to this case in the following manner.

11. The arguable nature of the case on appeal should in my view be determined by considering the matters required to be pleaded in the application for leave by O 7 r 2 (c). These are: (1) the nature of the case- a description of the nature of the decision sought to be appealed; (2) the issues involved - This may involve setting out the issues in the form of proposed grounds of appeal.; and (3) the reasons why leave should be given – an explanation on the importance of the issues raised which have merit or reasonable chance of success. These should be clearly, concisely and adequately pleaded such that the error alleged and the issues raised by them should on the face of the pleading disclose a clear challenge to the exercise of jurisdiction, statutory power or exercise of judicial discretion. This should be accompanied by a clear statement of reasons why leave is sought to appeal against the error alleged. If the pleading of these matters lack sufficient particularity and substance in terms of disclosing a reasonable ground of appeal, or are meaningless or raise issues which are not available at law or frivolous in nature, leave may be refused for this reason alone. A close scrutiny of the matters pleaded should be conducted by the Court to ensure the pleading meets this test and badly pleaded matters which fail this test are weeded out in order to maintain a high standard of litigation before the highest Court in the land.

12. Further even if the requirements of r2(c) are sufficiently pleaded to meet this test, upon consideration of material produced in support of the application or in opposition to those material, such as the transcript of proceedings of the court below, judgment and other material disclosed in affidavits, do not support an arguable case, leave may be refused for this additional reason.

13. The proposed grounds of appeal set out in the application for leave are as follows:

"His Honor did not use his discretion properly, when he refused leave pursuant to Order 12 Rule 35 of the National Court Rules to set aside an Ex Parte default judgment Order and grant leave for an extension of time to the plaintiff to file their defence out of time in an interlocutory Application filed by the applicant on the 27th of May 2008.

On the grounds that;

(a) The Order was granted ex parte in the absence of the Applicant, by law such Oder can be set aside.

(b) Since the respondent applied for default judgment outside the period required under the rule they should have given Notice to the Applicant, which was not done.

(c) There was an arguable defence on merit filed by the applicant in particular that there was evidence of harvesting extra logs authorized by the landowners, when they wrote to the PNG Forest Authority authorizing the Applicants to harvest surplus of logs to make way for the oil palm plantation in order to avoid wastage.

(d) The agreement was made outside the Original Contract which has been performed, the respondents erroneously used the original contract to sue the Applicants.

(e) Royalty payments were not the applicant’s responsibility to pay the landowners, payments are made to the forestry Authority from the Applicants, the forest Authority then pays the Land owners, since the applicants have paid all their royalties to the forestry office they cannot sue.

(f) Finally his honor did not consider the hardship that the applicants encountered in filing their court documents especially when the Applicants were operating in Popondetta and the proceedings was filed here in Port Moresby."

14. Applying the above test and principles alluded to above, I determine the application before me in this manner. Grounds (a) & (b) were not pursued at the hearing. In any case, these grounds fail the test above and would have been dismissed.

15. Of the grounds pursued, ground (f) can be disposed off easily. The difficulty posed by geographical isolation seeking legal assistance outside of Oro is not a valid reason or excuse for not complying with the requirement of the rules. Several months lapsed since the appellant was served the Writ and the appellant took no steps to seek leave to file defence out of time until default judgment was entered and served. This proposed ground has no merit.

16. I agree with Mr Kaore that the real issue to be considered arise from grounds (c), (d) & (e). That is, whether defence on the merits was disclosed in the proposed Defence as supported by the affidavit of Mr Lim. The trial judge’s reasons for decision and transcript of proceedings are not before me to determine if there was an error made. Also the evidence before me is scarce on the original agreement and the further agreement made outside the original agreement. Therefore I am unable to ascertain the precise nature of the contractual obligations of the parties as to payment of royalty for harvest of logs covered under the original agreement and the subsequent agreement. These two grounds appears to be a statutory defence raised whereby under the Forestry Act the developer is required to make payment of royalty to National Forest Authority as the administering authority for royalty payments, who then pays to the landowners. This Defence should have been clearly and sufficiently pleaded in the draft Defence to demonstrate to the court a defence on the merits. The onus was on the applicant and it appears the applicant failed to discharge it before the National Court. The situation has not improved at the appellate level. Some provisions of the Forestry Act was referred to me by Mr Kaore upon my request but submissions from the bar table cannot cure a material defect in the pleading of the requirements of the rule. I am also satisfied that the appellant has not completely lost its right to defend the action. The appellant has a right to contest the quantum of damages in the trial on assessment of damages which will follow. It has the right to contest damages based on the agreement. If payment of royalty under the agreement have been properly made to any NFA as claimed, the National Court may, in its assessment of damages, properly find that the appellant is not liable to pay that component of damage. I am also satisfied the trial on assessment of damages should be allowed to proceed and reach final decision. If the appellant is aggrieved by the final decision, he can appeal against the default judgment on liability and quantum of damages as one final judgment, as of right. I am satisfied in the circumstances no substantial injustice will be caused to the appellant by allowing the judgment to stand and allow trial on assessment of damages to proceed without interruption. In all the circumstances I am not persuaded that the exercise of discretion was wrong and that an arguable case has been demonstrated.

16. For these reasons, I dismiss the application with costs to the respondent.

_________________________________

Kaore Lawyers: Lawyer for the Appellant
Mugagia Lawyers: Lawyer for the Respondents