Paraia (trading as Paiam Kumbipara) v Mountain Catering Ltd [2017] PGSC 58; SC1687 (30 October 2017)

SC1687

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 49 OF 2015

BETWEEN
JONATHAN PARAIA TRADING AS PAIAM KUMBIPARA
Appellant

AND
MOUNTAIN CATERING LIMITED
Respondent

Waigani: David, Collier & Frank JJ
2017, 30th October

PRACTICE & PROCEDURE – application to rely on new ground of appeal – respondent not previously notified – prejudice to respondent – no merit in proposed ground of appeal

PRACTICE & PROCEDURE – writ of summons not personally served on defendant in National Court proceedings – no objection by defendant to method of service – notice of intention to defend filed by defendant – Order 6 rule 2 (1) and (3) National Court rules

Cases Cited:
Kanturk Ltd v Kawage (2016) N6330
Isaac Lupari v Sir Michael Somare (2010) SC2071
Rimbunan Hijau (PNG) Ltd v Ina Enei SCA 126 of 2011, delivered 31 August 2017 (Salika DCJ, Kandakasi & Toliken JJ)
Urban Giru v Luke Muta (2005) N2877

Counsel:
Mr LA Jurth and Mr D Levy, for the Appellant instructed by Manase & Co Lawyers
Mr S Kesno, for the Respondent instructed by Kesno Lawyers

30^th October, 2017

1. THE COURT: This is an appeal from a decision of a Judge of the National Court on 17 April 2013, where the Court made the following orders:
   1. The defendant’s defence and cross claim be struck out
2. Default judgment be entered against the defendant for K1,108,528.10 plus interest at 8% per annum from the date of filing the writ
3. Costs be awarded to the plaintiff
2. The appellant had also filed an application for leave to adduce fresh evidence in the appeal, however that application was abandoned at the hearing before us.
3. At the hearing of the appeal, Mr Jurth for the appellant informed the Court that the appellant was not pressing the grounds of appeal set out in the appellant’s notice of appeal filed on 17 May 2013. The appellant sought leave to rely on only one new ground of appeal, articulated by Mr Jurth as being that the respondent’s writ of summons was never properly served on the appellant in accordance with Order 6, Rule 2(1) of the National Court Rules (the Rules), his Honour was misled by the respondent into believing that the appellant had been properly served, and therefore his Honour’s judgment was fundamentally flawed.
4. In submissions Mr Jurth conceded on behalf of the appellant that, other than this technical issue, there was no flaw in the primary judgment.
5. Before turning to the question whether the Court ought grant the appellant leave to rely on this new ground of appeal it is useful to summarise the background facts.
6. By writ of summons and statement of claim filed 7 August 2012 the respondent in these proceedings pleaded that Mr Paraia was an adult male carrying on business as Paiam Kumbipara Holdings and Paiam Bakery in Porgera, Enga Province. The respondent pleaded further that in or about 2008 it entered into an agreement that it supply certain goods and services on credit to the appellant, with the appellant receiving 30 days credit to pay and the respondent providing the appellant with invoices from time to time. The writ identified the appellant as “Jonathan Paraia trading as Paiam Kumbipara Holdings”.
7. The statement of claim particularised the supply of goods and services by the respondent to the appellant, and invoices sent to the appellant, totalling K4,120,510.51.
8. The respondent pleaded that the appellant had sold bakery products to it on credit for K3,011,982.50, which amount would be offset against the total owed by the appellant, leaving a balance of K1,108,528.01 payable by the appellant.
9. Accordingly, the respondent claimed the sum of K1,108,528.01, with interest and costs.
10. On 13 February 2013 the respondent filed an affidavit of service in respect of the service on the appellant of the writ of summons and the statement of claim. The affidavit of service, sworn 11 February 2013, was by Inspector David Kongua of Paiam, Porgera. The Inspector deposed as follows :
    1. I am the Police Station Commander of Paiam Police Station, Porgera, Enga Province.
    2. On the 25^th day of October 2012 at about 6.00am at Paiam, Porgera, Enga Province, I served a copy of Writ of Summons No. 771 of 2012 on Jaytho Paraia, who is known to me as Jonathan Paraia’s wife. She accepted service on behalf of her husband and I only served her when she said she was authorised by her husband to accept service on his behalf.
    3. ...
11. The appellant filed a notice of intention to defend on 13 November 2012 and served the notice on the respondent’s lawyers on 14 November 2012. The appellant subsequently filed a defence and cross-claim on 21 January 2013. In his defence the appellant pleaded that :
    • he operates a business known as Paiam Kumbipara Holdings t/a Paiam Bakery (paragraph 2), and therefore did not know and could not admit paragraphs 3,4,5,6 and 7 of statement of claim;
    • on this basis the respondent was not entitled to the relief sought in the statement of claim.
12. The appellant cross-claimed that he entered an agreement with the respondent whereby the appellant would carry on with the business of providing bakery goods and services, that he would supply bakery goods to the respondent on credit and that the respondent would not takeover or operate any bakery businesses in Porgera, Enga Province or any other local businesses. The appellant claimed that the respondent had breached this agreement. The appellant pleaded that he had demanded settlement of outstanding accounts in the amount of K6,386,575.945, which the respondent had failed to pay and which it owed the appellant. The appellant admitted that he owed the respondent K4,030,748.03 for outstanding accounts, but claimed that this amount would be offset against the amount owed by the respondent, such that the respondent was liable to pay the appellant the balance outstanding of K2,355,827.91.
13. The respondent filed a reply on 13 February 2013 in which it pleaded, inter alia, that “Paiam Kumbipara Holdings Ltd” was not a registered company, and denied the claims of the appellant in the cross-claim.
14. On 20 February 2013 the respondent filed a notice of motion seeking the following orders:
    1. The Defendant’s Defence and Cross-Claim be struck out –
       1. As it was filed out of time and without leave of the Court pursuant to Order 2 Rule 3 of the National Court Rules.
       2. The Defence filed was not verified pursuant to Order 12 Rules 24(1) and (2) of the National Court Rules.
2. Pursuant to Order 12 Rule 25 (c) Order 12 Rule 27 of the National Court Rules, Default Judgment be entered against the Defendant/Cross-Claimant in favour of the Plaintiff Cross-Defendant for K1,108,528.01 plus interest at 8% per annum mpursuant to the Judicial Proceedings (Interest on Debts and Damages) Act, Chapter 52 calculated from the date of filing the Writ be awarded to the Plaintiff/Cross-Defendant.
3. Costs of these proceedings be awarded to the Plaintiff/Cross-Defendant.
4. Such other orders the Court deems fit.
15. On 9 April 2013 the appellant filed a notice of motion seeking the following orders:
    1. Pursuant to Order 8, Rule 50 (1) of the National Court Rules, the Defendant be granted leave to file and serve an Amended Defence and Cross-Claim within 14 days from the date of Order.
    2. Pursuant to Order 2, Rule 7 of the National Court Rules, the Affidavit Verifying Defence filed out of time on the 8^th March 2013 be deemed to have been filed within the time stipulated under Order 8 Rule 24 (2) of the National Court Rules.
    3. Costs be in the cause
    4. The entry of these Orders be abridged to the time of settlement which shall take place forthwith.
    5. Any other Orders this Court deems fit.
16. Extensive materials were filed in support of these applications by both parties, including a draft Amended Defence and Cross-Claim upon which the appellant sought leave to rely.
17. The respondent’s application for strike-out and default judgment and the appellant’s interlocutory application came before the primary Judge on 10 April 2013. His Honour delivered judgment a week later.
18. His Honour commenced the primary judgment by summarising the applications before him and setting out a chronology of relevant background events. His Honour noted that, notwithstanding directions given on 20 March 2013 for the parties to file written submissions and for the appellant to file and serve affidavits in reply by 28 March 2013, the appellant had failed to comply with those directions (at [5]).
19. His Honour then turned to the application for default judgment. His Honour noted the terms of Order 8 rule 24 and Order 12 rules 25 and 27 of the National Court Rules.
20. His Honour emphasised the words “the defendant shall verify his defence, that is to say, he shall, within the time limited for filing his defence” in rule 24 (1).
21. Order 12 rules 25 and 27 provide :

25. Default

A defendant shall be in default for the purposes of this Division—

(a) where the originating process bears a note under Order 4 Rule 9, and the time for him to comply has expired but he has not given the notice; or

(b) where he is required to file a defence and the time for him to his his defence has expired but he has not filed his defence; or

(c) where he is required under Order 8 Rule 24 to verify his defence and the time for him to verify his defence in accordance with that Rule has expired but he has not so verified his defence.

...

22. His Honour noted that Counsel for the appellant conceded that the defence filed was not verified, and as such the appellant had defaulted pursuant to Order 12 rule 25 of the National Court Rules.
23. His Honour also noted that the appellant had filed its defence during the Court vacation without that filing being directed by a Judge pursuant to Order 2 rule 3 of the National Court Rules, with the result that the appellant’s defence was not properly before the Court. His Honour observed that even if the Court were to dispense with Order 2 rule 3 the defence remained unverified. His Honour continued :

9.... There are good reasons for the plaintiff asking for the defence to be verified. The claim is a million kina claim and the plaintiff wants the defendant to swear that his defence is true in substance and in fact. The defendant had ample opportunity to verify his defence but has failed to do so. There is no explanation by the defendant before the court to explain the reasons for failing to verify the defence.

24. At [10] the primary Judge then examined principles relevant to the exercise of his discretion to enter default judgment, and had regard to principles set out by Cannings J in Urban Giru v Luke Muta (2005) N2877.
25. His Honour then considered the issue of whether the appellant had a defence on the merits. His Honour noted an unverified defence had been filed without leave or direction of the Court on 22 January 2013, and two affidavits in support which were filed in breach of the orders of 20 March 2013. His Honour observed that he had read the pleadings and noted that the appellant admitted owing the respondent the sum of K4,030,748.03 for goods and services provided to him on credit, but said he was concerned that there was no explanation to indicate why the defence was not verified especially in view of the fact that the appellant was cross-claiming millions of kina (at [13]).
26. The primary Judge observed at [15] that the respondent’s claim for K4,120,541.51 was very specific, and the appellant admitted that claim, although the appellant also makes a cross-claim. His Honour observed that the existence of the cross-claim by the appellant was not in dispute – what was disputed was the amount. His Honour noted that no summary of the appellant’s claimed invoices was attached to the relevant affidavit, and his Honour was unable to say that claimed invoices had been issued (at [16]). His Honour noted that no details of the alleged invoices of the appellant had been provided, there was no indication of how the figures had been arrived, and particulars of the appellant’s accusations of mismanagement, fraud and attempted takeover were either not stated or vague.
27. His Honour concluded that he was unable to agree that the appellant had a defence on the merits or a cross-claim amounting to K6,386,575.04.

Ground of appeal

28. We noted earlier in this judgment that the appellant had abandoned grounds in his filed notice of appeal, and sought leave to rely on only one new ground of appeal. It is common ground that the issue the appellant proposed to rely on was not raised before the primary Judge.
29. The irregularity inherent in the application to raise a new ground of appeal at this very late stage of the proceedings was compounded by the submission of Mr Kesno to the Court that the respondent had received no notice of this application for leave to rely on this new ground of appeal until just prior to the hearing of the appeal when a copy of the appellant’s submissions in the appeal had been provided to Mr Kesno.
30. We granted the appellant leave to rely on the submissions he filed for the purposes of his application to rely on the new ground. However, in our view it is proper to refuse the appellant leave to rely on the proposed new ground of appeal, and to dismiss the appeal with costs. We take this view for the following reasons.
31. First, we consider that the conduct of the appellant – or perhaps more accurately his lawyers – in seeking to rely on this new ground of appeal, at this extremely late stage in the proceedings, is outrageous. The appellant has at no time sought to formally amend his notice of appeal. The first time the Court became aware of the prospect of a new ground of appeal was when the appellant filed a three page extract and outline of submissions on 27 October 2017, namely the business day before the hearing of the appeal. Even then the appellant did not pursue this application formally – his Counsel was left to make oral application for leave in Court before us this afternoon.
32. Second, there is a strong body of authority in the Supreme Court that a party will not be allowed to raise a legal point on appeal without first having raised it in the National Court. This principle was recently reiterated by the Supreme Court in the unreported case of Rimbunan Hijau (PNG) Ltd v Ina Enei SCA 126 of 2011, delivered 31 August 2017 (Salika DCJ, Kandakasi & Toliken JJ). In that case the Court observed that the law in this respect is now well-settled (at [9]), and referred to the earlier decision of a 5-member bench of the Supreme Court in Isaac Lupari v Sir Michael Somare (2010) SC 2071 where the Court took that view. We agree that this is the correct approach in relation to applications by parties to raise previously unaddressed legal issues.
33. Third, although the appellant claims (in summary) that there is a significant amount of money involved, and that he is a personal litigant who is entitled to his “day in Court” with a proper defence, the appellant has had every opportunity through his appointed lawyers to properly defend and cross-claim in these proceedings.
34. Fourth, the prejudice to the respondent in permitting the appellant to raise this new ground of appeal, at the opening of the appeal and without any notice, is extreme, and will not be tolerated by this Court. The prejudice to the respondent is only exacerbated (if possible) by such scandalous submissions by the appellant as that the respondent misled the primary Judge in the National Court proceedings.
35. Fifth, and in any event, we consider that there is absolutely no merit to the proposed ground of appeal in respect of which the appellant seeks leave.
36. Counsel for the appellant submitted that the decision of the primary Judge was invalidated by the absence of proper – that is, personal – service on the appellant. In particular, the appellant submits that pursuant to Order 6, Rule 2(1) of the National Court Rules originating process must be served personally on the defendant. The new ground of appeal suggests that the primary Judge erred in making the orders for default judgment where the appellant had not been personally served with the writ of summons, but where the summons was apparently served on his wife.
37. The appellant further submitted that pursuant to Order 12, Rule 34 of the Rules, judgment by default shall not be entered unless an affidavit is filed by or on behalf of the plaintiff proving due service of the writ of summons or notice of the writ on the defendant.
38. Order 6, Rule 2(1) states that:

Subject to any Act, and to these Rules, originating process shall be served personally on each defendant.

(Emphasis added)

39. However, Order 6 rule 2 (3) provides that:

Where a defendant to any originating process serves a notice of intention to defend under Order 7, the originating process shall be taken to have been served on him personally on the date on which that notice is filed or on such earlier dates as may be proved.

40. The appellant never, at any time, complained, or raised as an issue at any stage of the National Court proceedings, the alleged absence of service of the writ and statement of claim on him. By his conduct we are compelled to conclude that the appellant waived the requirement that he be personally served with the writ of summons in accordance with Order 6 rule 2 (1). Alternatively, the fact that it was only at this stage of the proceedings that the appellant has raised this issue as a complaint leads us to the conclusion that the appellant had authorised his wife to receive personal service on his behalf and now seeks to retract that authorisation. Indeed we note in the transcript of proceedings before his Honour of 10 April 2013 pages 13-14 that Mr Aisi for the appellant had the following exchange with his Honour, whereby Counsel for the appellant conceded in Court that the appellant had been properly served on 25 October 2012:

HIS HONOUR : Okay, now, when does the time run; when does time run? From 13 November or from the date that you were served?

MR AISI : No, the date he was served. The date was served. He was served on the 25^th and the time runs from there. Your Honour, in this situation, it should be – what I am trying to say is that, the time runs in this – if – let me put it this way. The time runs from 25 ---

HIS HONOUR : Okay, you give me the timeline that you say ought to have applied in your situation : timelines, your timelines?

MR AISI : Your Honour, 25 October 2012, it was mentioned by my friend that the documents were served, the writ of summons were served. We then filed our notice of intention to defend on 13 November. From the 25^th to the 13^th is about 18 days.

41. In addition, in the Outline of Plaintiff’s Submissions filed by the respondent before his Honour on 20 March 2013 the respondent at page 3 submitted “Even if service was not personally served on the Defendant it was ... authorised by the Defendant. The Defendant had filed a Notice of Intention to Defend without applying to set aside”. At no point can it be said that the respondent misled the primary Judge as was scandalously submitted by the appellant.
42. Further, in Kanturk Ltd v Kawage (2016) N6330, Hartshorn J considered the operation of these rules and found that by virtue of Order 6 Rule 2(3), the filing of a notice of intention to defend waived any irregularity in how the writ was served. His Honour noted that Order 6 Rule 2(1) which provides for personal service, is subject to “these Rules”, which includes Order 6 Rule 2(3).
43. The main thrust of Mr Jurth’s submission was that because the primary Judge refused to accept the defence for filing as it was filed during the Court vacation, Order 6 Rule 2(3) does not deem the appellant as being properly served. However, Mr Jurth conflated the notice of intention to defend with the defence itself. The notice of intention to defend was filed by lawyers for the appellant on 13 November 2012. On 5 December 2012, an affidavit was filed by Tanakai Samson, a delivery clerk employed by lawyers for the appellant, in which Mr Samson deposed that a sealed copy of the notice of intention to defend was served on the lawyers for the respondent on 13 November 2012. Accordingly, the notice of intention to defend was filed and served by the appellant during normal Court sitting time – not the Court vacation period as Counsel for the appellant appeared to believe.
44. We agree with Hartshorn J that the Rules operate such that the filing of a notice of intention to defend waives any irregularity in this case in how the writ was served. The writ had clearly come to the attention of the appellant and he had instructed lawyers to respond.
45. Finally, we observe that it would be an absurd outcome if litigation that commenced over five years ago and has been litigated fully by both parties would now be invalid by the operation of these Rules.

Conclusion

46. In the circumstances we refuse the application for leave to rely on the ground of appeal raised in the appellant’s extract of submissions filed on 27 October 2017. We also dismiss the appeal. The costs of the respondent should be paid by the appellant.

The Orders

47. The terms of the orders will be:
    • 47.1 The application for leave to rely on the ground of appeal raised in the appellant’s extract of submissions filed on 27 October 2017 is refused.
    • 47.2 The appeal is dismissed.
    • 47.3 The costs of the respondent be paid by the appellant.

________________________________________________________
Manase & Co Lawyers: Lawyers for the Appellant
Kesno Lawyers: Lawyers for the Respondent