Albright Ltd v Mekeo Hinterland Holdings Ltd [2014] PGSC 40; SC1400 (2 May 2014)

SC1400

PAPUA NEW GUINEA
IN THE SUPREME COURT OF JUSTICE

SCA 150 OF 2013

Between:

ALBRIGHT LIMITED
Appellant

And:

MEKEO HINTERLAND HOLDINGS LIMITED
First Respondent

And:

LUCAS DEKENE, MINISTER FOR LANDS AND PHYSICAL PLANNING
Second Respondent

And-:

ROMILLY KILA PAT, SECRETARY FOR LANDS AND PHYSICAL PLANNING
Third Respondent

And:

INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Respondent

Waigani: Salika, DCJ; David, Yagi JJ
2014: 29 April; 02 May

SUPREME COURT – Practice and Procedure – setting aside of default judgment – Order 12 Rule (2)(a) and Rule 35 of National Court Rules – Default judgment regularly entered – circumstances in which regularly entered default judgment may be set aside.

Cases Cited:

Lerro v Stagg (2006) N3050
Green & Co Pty Ltd v Green [1976] PNGLR 73,
Barker v The Government of Papua New Guinea & Ors [1976] PNGLR 340;
The Government of PNG & Davis v Barker [1977] PNGLR 386;
George Page Pty Ltd v Malipu Bus Balakau [1982] PNGLR 140;
Provincial Government of North Solomons v Pacific Architecture Pty Ltd [1992] PNGLR 145;
Hannet and Hannet v ANZ Banking Group (PNG) Ltd (1996) SC505;
Leo Duque v Avia Andrew Paru [1997] PNGLR 378;
Danny Totamu v Small Business Development Corporation (2009) N3702
Yamanka Multi Services Ltd v National Capital District Commission (2010) N3904.

Counsel:

Mr R Saulep, for the Appellant
Mr K O'gut, for the First Respondent
Mr E Geita, for the Second, Third and Fourth Respondents

02nd May, 2014

1. BY THE COURT: Introduction: The appellant was the plaintiff in Proceedings WS N0 258 of 2012 – Albright Limited v Mekeo Hinterland Holdings Limited and Others ("the primary proceedings").

Background

2. On or about 30th November 2007, the Second, Third and Fourth Respondents, their agents and or servants, issued to the First Respondent, a Certificate of Title for a Special Purpose Agriculture and Business Lease ("SPABL" or "Portion 45C Omeri") over 116,400 hectare of rural customary land known as Portion 45C, Omeri, Yule, in the Central Province, pursuant to Section 11 and 102 of the Land Act 196 (hereinafter referred to as the Lease).

3. On account of the Certificate of Title being indefeasible, the Appellant and the First Respondent entered into various written agreements to enable the Appellant to develop to the lease, giving exclusive rights to the Appellant to conduct agro-forestry projects within the said lease for a period of 98 years.

4. On or about 21st December 2010, the National Court of Justice in another Court Proceedings OS (JR) No 400 of 2009 declared that the Certificate of Title over Portion 45 Omeri, Yule, Central Province, issued to the First Respondent as the Landowner Company was null and void ab initio and was therefore illegal.

5. On 22nd March 2012, Albright Limited (as Plaintiff) as a result of National Court proceedings in OS 400 of 2009 commenced legal proceedings in WS No 258 of 2012 seeking damages against Mekeo Hinterland Holdings Limited (First Defendant), Lucas Dekene as Minister for Lands and Physical Planning (Second Defendant), Romilly Kila-Pat as Secretary for Lands (Third Defendant) and The Independent State of Papua New Guinea (Fourth Defendant).

6. The appellant alleged that prior to the issue of the Lease, and unknown to the Appellant, the First, Second, Third and Fourth Respondents, their servants and agents failed to comply with the requirements of Section 10, 11 and 102 of the Land Act 1996, in that no proper land investigation report ("LIR") was done or conducted prior to or immediately before the grant of the lease to the First Respondent.

7. The Appellant further alleged that before it entered into the various written agreements to develop the SPABL it had no knowledge that the Certificate of Title issued was defective. It relied upon the indefeasibility of the Title to its detriment. Furthermore, it was argued that the "guarantee" given by the fourth respondent (State) under clause 1.10 of the Instrument of Lease dated 16th November 2007 that the Lease instrument was issued in accordance with all relevant laws induced the Appellant into investing substantial amounts of money in the project. It argued the inducement was negligent misrepresentation and otherwise false.

8. In its statement of claim the appellant Albright Limited alleged that the second, third and fourth respondent owed it a duty of care in ensuring that the Certificate of Title it issued to the First Respondent (which the Appellant/Plaintiff relied upon to its detriment and which the State, through its various entities knew the Appellant would be relying upon) was legal and not defective, by complying with Sections10, 11 and 102 of the Land Act 1996.

9. The appellant alleged that the failure to comply with Sections 10, 11 and 102 of the Land Act 1966 constituted a breach of Statutory Duty owed to the Appellant by the Respondents individually or jointly. It alleged that as far as the State was concerned, it was liable for the negligent acts of its instrumentalities and persons therein.

10. The appellant alleged that by reason of the Court declaration of 21st December 2010 that the transactions in relation to Portion 45C Omeri was a nullity, the various Legal Agreements entered into between the Appellant as the Developer and the First Respondent as the Landowner Company, could not be performed and were therefore rendered unenforceable, resulting in significant loss of business to the Appellant as the investor. It sued for damages exceeding K129 million in WS 258 of 2012.

11. The proceedings were duly served on all the defendants in accordance with the rules of the National Court pertaining to Service. Proof of such service were filed by way of Affidavits of service.

13. The respondents failed to file their defences in accordance with the National Court Rules and Claims by and against the State Act 1996. They did not provide any reasons or excuses. As a consequence, and following the Rules of the National Court, the appellant applied for default judgment.

14. On 24th October 2012, after an inter partes hearing, His Honor Sawong, J held that the relevant grounds were made out and granted Default Judgment.

15. On 11th July 2013, some 9 months after the granting of the Default Judgment, the Fourth Defendant, through the Office of the Solicitor General (appearing for the Second, Third and Fourth Respondents) applied to set aside the default judgment granted by Sawong, J.

16. On 24th July 2013, the parties argued inter partes the motion to set aside the default judgment. Amongst other grounds, the appellant argued that:

(a) There was no reasonable explanation why the State its servants and agents did not file a defence.

(b) The default judgment hearing was heard inter partes and the State defendants were required to present their whole case concerning a defence on the merits and the delay in filing a defence. If they did not argue those points at the default judgment hearing, they were stopped from arguing those points now. Further, if they did argue those points they were stopped from arguing them now.

(c) The default judgment hearing was inter parte and the court had given its decision. Such a decision could only be challenged on appeal to the Supreme Court and not by way of an application to set aside the default judgment.

(d) The setting aside application was not made promptly but some 9 months later, which the State admitted to and gave no reasons in any supporting affidavit why it took so long or why they failed to file the defence in the first place.

(e) The State and its servants and agents did not disclose a defence on the merits.

17. On 30th September 2013, Hartshorn J ruled in favour of the Motion to set aside the default judgment of Sawong J granted 24th October 2012, holding that:

(a) The default judgment of Sawong J granted 24th October 2012 be set aside.

(b) He did have the jurisdiction to hear the matter and thus the discretion to hear and set aside the default judgment, even though the default judgment itself was obtained regularly; and

(c) Granted leave to the State, its servants and agents to file a defence within 14 days of the granting of leave to do so; and

(d) The fact that the claim involved such a large sum of money was a relevant consideration for the exercise of his discretion.

18. The Appellant was aggrieved by His Honor Hartshorn J's decision and sought leave to appeal that decision. Leave was granted by Makail J on 22 November 2013, thus giving clearance for this appeal to be heard substantively.

Grounds of appeal.

19. By its supplementary Notice to Appeal the grounds of appeal are:

1. His Honor made an error of law when he assumed and exercised Jurisdiction in hearing the second, third and fourth defendants application to set aside the default judgment of the court made 24th October 2012 ("the default judgment") on the further grounds that:
   
   • (a) The National Court lacked or it no longer had jurisdiction to hear such as application to set aside a default judgment and his Honor should have refused to hear it; and
     
   • (b) Proceeding to hear the application to set aside the default judgment that had been heard and argued in inter parte, was conducive to reviewing a decision of the National Court.
     
   • (c) The power to review the correctness or wrongness of a decision of a National Court, even a decision granting default judgment after an inter parte hearing belongs to the Supreme Court.
     
   • (d) A National Court judge sitting along does not have jurisdiction to review the correctness or wrongness of decision of another National Court judge sitting alone, where the matter before the judge is one which has been argued inter parte and which default judgment was not obtained irregularly.
     
2. Whilst the power to set aside a default judgment is provided for under the National Court Rules (under O.12 r.8(2)(a) and O.12 r.35), His Honor's decision to set aside the default judgment of the court granted on 24th October 2012, was nevertheless, not one that a tribunal or court, having regard to all the evidence and the law, could or would have reasonably and fairly made or reached, in that:-
   
   • (a) At law, the National Court (his Honor) no longer had jurisdiction to deal with such an application because the decision sought to be reversed was one reached after an inter parte hearing. This means that the principles of res-judicata apply. That being the case, the discretionary powers granted under O.12 r.8(2)(a) and O.12 r.35 which his Honor relied upon in granting the setting aside application, were irrelevant, redundant and could no longer apply; and
     
   • (b) To the extent that his Honor relied upon such discretion (which no longer applied) to justify his decision to set aside the decision of another Judge of the National Court, such reliance constituted an error of Law on the face of the record.
     
   • (c) The grant of default judgment on 24th October 2012 was the result of an inter parte hearing where all parties were given equal opportunity to put their case. His Honor erred in law when he granted the second, third and fourth defendants to, in effect, re-argue their case when the principles of res-judicata should have applied.
     
3. In the alternative, even if his Honor did have jurisdiction, his Honor nevertheless wrongly and unreasonably exercised his discretion and therefore committed and error of Law in failing to dismiss the application of the second, third and fourth respondents to set aside the default judgment on the further grounds the that:-
   
   • (a) The learned trial judge had established as a fact that the State Defendants had conceded that they did not have a reasonable explanation for why default judgment was ordered against them.
     
   • (b) The learned trial judge had established as a fact that the State Defendants had not filed a defence and that there was no valid explanation for this failure.
     
   • (c) The learned trial judge had established as a fact that the State Defendants had not explained why they did not apply for extension of time; and
     
   • (d) The learned trial judge had established as a fact that the matter of defence on merits was not raised at the hearing of the matter on 24th October 2012.
     
   • (e) The learned trial judge had established that the State failed to apply immediately for setting aside of the default judgment. Instead, it took 9 months to do so.
     
   • (f) The learned trial judge had established that the default judgment was argued inter parte and was not irregular.
     
   • (g) Therefore that the weight of evidence and the law was against the exercise of judicial discretion in favour of the granting of such application to set aside the default judgment.
     
4. The learned trial judge erred in law when he, in his final orders set aside the default judgment of Sawong J, made 24th October 2012, only in so far as it applied t the second, third and fourth respondents (defendants) but not the first respondent (defendant) when such default judgment, was granted against all the defendants, not just the second, third and fourth defendants (respondents).
   
5. The earned trial judge erred in fact, when he consistently and repeatedly referred to the appellant as the first respondent (first defendant "Mekeo") when the appellant was the plaintiff and not a defendant and that the appellant was Albright Limited ("Albright") not Mekeo Hinterland Holdings Limited ("Mekeo").
   

Orders Sought

The appellant seeks the following orders:-

1. That the whole of the decision of Justice Hartshorn made 30th September 2013, be uplifted to this Honourable Court and quashed.
   
2. That the decision of the National Court to grant default judgment against all the defendants on 24th October 2012 is re-instated or restored.
   
3. That this matter is remitted to the National Court for assessment of damages before a Judge other than the Primary Judge whose decision is appealed from.
   
4. Costs of this appeal is to paid by the State Defendants (namely the second, third and fourth respondents) to be taxed if not agreed.
   
5. Such further or other order(s) as to the court deems meet.
   
6. Time is abridged in accordance with the Supreme Court Rules.
   

20. While the grounds of appeal appear to be lengthy the threshold issues are reduced to three which are:-

(a) Whether the National Court had jurisdiction to set aside a default judgement regularly entered.

(b) Whether the decision of Hartshorn, J on 30 December 2013, was res-judicata in setting aside the decision of Sawong, J made on 24 October 2012 in WS 258 of 2012.

(c) Whether the court fell into error by allowing the respondents to raise their defence at that stage.

21. We note that the contentions before Hartshorn J are the same contentions that are before us in that the appellant, Albright contends that the default judgment was wrongly set aside for the reasons that:-

(a) There was no reasonable explanation as to why the 2nd, 3rd and 4th respondents failed to file a defence,.

(b) The default judgment hearing was inter partes and the second, third and fourth respondents failed to raise their arguments on defence on the merits and why they failed to file their defence. As they failed to raise those points they were estopped from raising them before Hartshorn, J.

(c) They argued that the respondents ought to have appealed to the Supreme Court from Sawong, J's decision.

(d) In any case the second, third and fourth respondents had admitted liability in their proposed defence.

22. The second, third and fourth respondents contended that the National Court in Hartshorn J had jurisdiction to set aside the default judgment entered by another National Court in Sawong J.

23. They further contended that Hartshorn J had correctly exercised the discretion of the court in that in the first place the appellant had no reasonable cause of action against the second, third and fourth respondents and that justice was served.

24. The National Court on 30 September 2013 invoked O.12 r.8(2)(a) and O.12 r.35 to set aside the orders of another National Court ordered on 24th October 2012.

Order 12 r.8(2)(a) reads:-

8. Setting aside or varying judgement or order.
   

(2) The Court may, on terms, set aside or vary a judgement—

(a) where the judgement has been entered pursuant to Order 12 Division 3 (default judgement); or

Order 12 Rule 35 reads:

Setting aside judgement.

The Court may, on such terms as it thinks just, set aside or vary a judgement entered in pursuance of this Division.

There was no dispute that the default judgments in this case before Sawong J was entered under Division 3 of Order 12.

25. There is nothing in the said rules that state that they only apply in respect of a judgment made ex parte or in the absence of a party or person. We agree with Hartshorn, J on this point.

26. Reliance by Albright on the authority of Smith v Ruma Construction (2000) N1982 is misconceived because in that case the decision sought to be set aside was obtained in the absence of the defendant. Moreover it is misplaced because the application to set aside was an application to set aside a summary judgment under O.12 r.2(b) of the National Court Rules, quite distinct from a default judgment ordered after an inter partes hearing, as was the case here.

27. Reliance by the appellant on another National Court case authority of Lerro v Stagg (2006) N3050 for the proposition that the National Court has no jurisdiction to set aside a default judgement inter partes. Again reliance on this case authority is misconceived in that nowhere in that decision is O.12 r.8(2)(a) discussed. Only O.12 r.35 is mentioned. Moreover this case is distinguished from that case in that this case does not concern an application for a further extension of time to file a defence as was the case in Lerro v Stagg (supra). Furthermore, the reliance is on a National Court case authority which this court is not bound by.

28. There are ample case authorities in this jurisdiction that relate to setting aside of regularly entered judgments. The same case authorities that were cited before the National Court in this case are relevant. They are:-

Green & Co Pty Ltd v Green [1976] PNGLR 73, Barker v The Government of Papua New Guinea & Ors [1976] PNGLR 340; the Government of PNG & Davis v Barker [1977] PNGLR 386; George Page Pty Ltd v Malipu Bus Balakau [1982] PNGLR 140; Provincial Government of North Solomons v Pacific Architecture Pty Ltd [1992] PNGLR 145; Hannet and Hannet v ANZ Banking Group (PNG) Ltd 91996) SC505P; Leo Duque v Avia Andrew Paru [1997] PNGLR 378; Danny Totamu v Small Business Development Corporation (2009) N3702 and Yamanka Multi Services Ltd v National Capital District Commission (2010) N3904.

All the above case authorities support the proposition that the court has jurisdiction to set aside default judgments even where it is regularly entered. This position thereby throws out the res judicate argument.

29. Hartshorn, J discussed the case authorities in Green v Green (supra) and
Totamu v Small Business Development Corporation (supra) with much detail which cases refer to the decision of the House of Lords in Evans v Bartlam (1937) AC 473 – 2 All ER 646. Lord Wright in that decision at para 488 quoted the statement of Bowen CJ in Gardner v Jay (1835) 29 Ch 50 at p.59.

"When a tribunal is invested by Act of Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view of indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not fetter the discretion of the Judge why should the court do so?"

Then at p.489 Lord Wright said:-

"A discretion necessarily involves a latitude of individual choice according to the particular circumstances, and differs from a case where the decision follows ex debito justitiae once the facts are ascertained In a case like the present there is a judgment, which, though by default, is a regular judgment, and the applicant must show grounds why the discretion to set it aside should be exercised in his favour. The primary consideration is whether he has merits to which the court should pay heed; if merits are shown the court will not prima facie desire to let a judgment pass or which there has been no proper adjudication".

30. In the course of hearing of this appeal it became apparent to us that the appellants relationship with the second, third and the fourth respondent was not clear. The appellant did not state in its grounds of appeal its relationship with the second, third and fourth respondents.

31. On what basis did the appellants take the second, third and fourth respondents to court. In other words what cause of action has the appellant has against the second, third and fourth respondents. Is it based on contract or agency or what? The Notice of Appeal does not plead that aspect nor was it pleaded in the Statement of Claim.

32. The default judgment was set aside with that background. The respondents may have a cause of action against the first respondent. This is where reference should be made to what Jordan CJ said in Vacuum Oil Pty Ltd v Stockale (1942)42 SR (NSW) 239 at pp 243-4 where he said:

"The question is whether, upon the material that has been placed before us, there is a real likelihood that it would be unjust to the defendant to allow the judgment to stand. If so, it should be set aside on such terms as will minimize the possibility of injustice to the plaintiff. If not, we should not interfere."

33. Given the background information the question must be asked as to whether the exercise of the discretion by Hartshorn, J was erroneous. We do not think the learned judge erred.

34. Accordingly we would dismiss the appeal with costs to the respondents.
______________________________________________________________
Saulep Lawyers: Lawyer for the Appellant:
Ninai Lawyers: Lawyer for the 1st Respondent
Solicitor General: Lawyer for the 2nd, 3rd and 4th Respondents