Koi v Mainland Holdings Ltd [2019] PGSC 87; SC1860 (1 November 2019)

SC1860

PAPUA NEW GUINEA
[IN THE SUPREMECOURT OF JUSTICE]

SCA NO 93 OF 2016

BETWEEN
WORINU KOI
Appellant

AND
MAINLAND HOLDINGS LIMITED
Respondent

Waigani: Cannings J, Koeget J, Berrigan J
2019: 29^th October, 1^st November

PRACTICE AND PROCEDURE – discovery and inspection of documents – National Court Rules, Order 9, Division 1 –default in filing and serving list of documents in response to notice of discovery – entry of judgment against defendant under Order 9, Rule 15(1)(b) –exercise of discretion whether to enter judgment against a defaulting defendant.

APPEALS – circumstances in which it is appropriate for appellate court to interfere with a discretionary judgment on a procedural matter within a primary judge’s jurisdiction – need to show identifiable error or that the resulting judgment is unreasonable or unjust.

The appellant was the defendant in National Court proceedings commenced against it by the respondent regarding alleged unauthorised occupation by the appellant of the respondent’s land. The respondent served a notice of discovery on the appellant requiring discovery within 15 days. The appellant failed to provide discovery and 22 months after serving the notice of discovery the respondent filed a motion, seeking entry of judgment against the appellant under Order 9, Rule 15(1)(b) of the National Court Rules, which provides that “Where a party makes default in serving a list of documents ..., the Court may make such order as it thinks fit, including ... 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.” The National Court granted the orders sought and entered judgment for the respondent. The appellant appealed to the Supreme Court against the decision of the National Court, arguing that the primary judge erred in fact and law in exercising the discretion to order judgment for the respondent.

Held:

(1) An appellate court will not interfere with a discretionary judgment on a procedural matter within a primary judge’s jurisdiction unless the exercise of that discretion is clearly wrong, due to an identifiable error having occurred in the exercise of discretion or where there is no identifiable error, but the resulting judgment is unreasonable or plainly unjust.

(2) The decision to order judgment against a defendant for lack of discovery is a very serious one with severe consequences, to be taken only after a full consideration of the facts and circumstances of the case, having regard to the nature of the defaulter’s conduct, the prejudice to the other party resulting from the default, the alternative remedies available and prejudice to the defaulter of making such a decision.

(3) There was identifiable error in the exercise of the primary judge’s discretion as sufficient weight was not given to all the facts and circumstances of the case, including that the substantial period that lapsed between service of the notice of discovery and hearing the motion for judgment under Order 9, Rule 15(1)(b) involved an agreement by the parties to discontinue the proceedings. Further, the Appellant’s default was not chronic or a deliberate tactic to abort a trial, the lack of discovery did not make the trial impossible and the Respondent did not demonstrate any prejudice. On the other hand, the prejudice to the Appellant was grave, resulting in the complete loss of opportunity to defend a case he understood had already been discontinued.

(4) Identifiable error having occurred in the exercise of discretion, it followed that the decision of the National Court to enter judgment for the Respondent should be quashed. The appeal was allowed, with costs against the Respondent.

Cases Cited

Curtain Bros (PNG) Ltd v UPNG (2005) SC788
Rural Development Bank v Laka (2007) SC897

Counsel

J Haiara, for the Appellant

1^st November, 2019

1. BY THE COURT: This is an appeal against the decision of the National Court in WS No 1164 of 2013 entering judgment for the Respondent for the Appellant’s failure to comply with a notice of discovery. At the hearing of the appeal, the Respondent made no appearance.
   
2. On 6 June 2016 the primary judge heard two motions.The first, filed by the Respondent on 22 April 2016,sought orders that the Appellant was in default for failing to file a list of documents, and that the Appellant’s defence filed on 20 November 2013 be struck out and judgment entered accordingly, pursuant to Order 9, Rule 15(1)(b) of the National Court Rules, which provides:

“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 ... 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.”

3. In reply the Appellant filed a notice of motion on 12 May 2016 seeking leave to file his list of documents out of time pursuant to Order 1, Rule 15 of the National Court Rules.
   
4. The background is as follows:
   
   • On 5 June 2014 the Respondent served a Notice of Discovery on the Appellant requiring discovery within 15 days.
   • On 18 June 2014 the Respondent’s lawyers wrote to the Appellant’s lawyers reminding them of the requirement to comply with the Notice for Discovery and the due date for that.
   • On 23 June 2014 the Respondent’s lawyers wrote to the Appellant’s lawyers putting them on notice that they had defaulted and forewarning that they had instructions to apply for default judgment if there was no reasonable excuse. The Appellant’s lawyers responded on the same day enclosing a medical certificate and seeking a further extension of 14 days, which was verbally agreed to by the Respondent’s lawyers on 25 June 2014.
   • On 29 July 2014 the Respondent’s lawyers wrote to the Appellant’s lawyers advising that they would seek judgment if a list was not provided by 1 August 2014.
   • On 31 July 2014 the Appellant’s lawyers sent a further letter explaining why they had not filed a list of documents and indicating that they would do so as soon as possible.
   • On 19 August 2014 the Respondent’s lawyers wrote to the Appellant’s lawyers advising that they had instructions to discontinue the proceedings and seeking endorsement of a consent notice for that purpose if it was agreed, otherwise they would apply to the Court for leave to discontinue. The Appellant’s lawyers endorsed the consent orders and returned them to the Respondent’s lawyers.
   • On 20 November 2014 the Respondent’s lawyers filed a notice of ceasing to act.
   • On 9 June 2015 the Appellant’s lawyers wrote to the Respondent’s lawyers seeking confirmation that the notice of discontinuance had been filed. The Appellant’s lawyers responded two days later, notifying that they no longer acted for the Respondent and could not assist.
   • On 22 June 2015 the Respondent’s lawyers filed a notice of change of lawyers indicating they were acting for the Respondent again.
   • On 22 April 2016 the Respondent filed the notice of motion for judgment pursuant to Order 9, Rule 15.
   • On 12 May 2016 the Appellant filed a notice of motion seeking leave to file his list of documents out of time.
     

Appeal

5. The Appellant relies on six grounds of appeal, all of which have been considered in rendering this decision. The Appellant’s principal argument is that the primary judge erred in fact and law in exercising her discretion to order that his defence be struck out and that judgment be entered for the respondent.
   

General principles

6. It is well established that an appellate court "will not interfere with a discretionary judgment on a procedural matter within [the primary judge’s] jurisdiction, except where the exercise of that discretion is clearly wrong. A discretionary judgment may be set aside if an identifiable error occurred in the exercise of discretion. Alternatively, it may be set aside where there is no identifiable error, but the resulting judgment or order is ‘unreasonable or plainly unjust’ and such that an error can be inferred”: Curtain Bros (PNG) Ltd v UPNG (2005) SC788.
   
7. The application of Order 9, Rule 15was considered in detail by the Supreme Court in Rural Development Bank v Laka (2007) SC897:
   

“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.”

8. As the authorities make clear, the decision to strike out a defence for lack of discovery is a very serious one with severe consequences, to be taken only after a full consideration of the facts and circumstances of the case, having regard to the nature of the defaulter’s conduct, the prejudice to the other party resulting from the default, the alternative remedies available, and the prejudice to the defaulter of making such a decision.
   

This case

9. The primary judge found that there was no explanation for the Appellant’s failure to comply with the notice for discovery. However, in our respectful view her Honour did not give full consideration to the circumstances of the case in making that finding. For that reason, we have concluded, with respect, that identifiable errors occurred in the exercise of the primary judge’s discretion.
   
10. In particular, sufficient weight was not given to the fact that the period that lapsed between 19 August 2014 and the date of the hearing involved an agreement by the parties to discontinue the matter, not long after which the Respondent had dismissed its lawyers. Furthermore, that it was the Appellant’s lawyerswho wrote to the Respondent’s lawyers on 9 June 2015 seeking confirmation that consent orders had been filed, in response to which the Respondent’s lawyers advised that they were unable to assist. Not long afterwards the same lawyerswere reappointed. Despite that, there was no correspondence from the Respondent’s lawyersto the Appellant’s lawyersuntil the filing of the motion for default judgmentsome 10 months later on 22 April 2016. Finally, the Appellant acted quickly in response to the Respondent’s notice of motion, filing evidence to explain the delay, and his own notice of motion to seek leave to file a list of documents out of time.
    
11. It cannot be said in those circumstances that the Appellant’s default was chronic or a deliberate tactic to abort a trial.Or that the lack of discovery rendered the trial impossible. Nor did the Respondent demonstrate any prejudice given that it had agreed to discontinue proceedings, dismissed its lawyers, and taken no further action for more than 18 months. No trial date had been fixed and any prejudice in preparation for a trial could have been remedied by obtaining specific directions for discovery. The evidence did not suggest that the Appellant would not comply with an order to produce a list of documents, or that discovery could not be achieved before any trial.
    
12. The learned trial judge failed to consider that, on the other hand, the prejudice to the Appellant was grave, resulting in the complete loss of opportunity to defend a case heunderstood, on reasonable grounds,had already been discontinued.
    

Conclusion

13. 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.The appeal will be upheld, with costs against the Respondent (which failed, without explanation, to appear at the hearing of the appeal).
    

Order

1. The appeal is allowed.
   
2. The order of the National Court in WS No 1164 of 2013 of 24 June 2016 is quashed.
   
3. WS No 1164 of 2013 is reinstated and the proceedings are remitted to the National Court.
   
4. The Respondent shall pay the Appellant’s costs of and incidental to the appeal on a party-party basis, which shall, if not agreed, be taxed.

_____________________________________________________________
Haiara’s Legal Practice: Lawyers for the Appellant
Rageau Manua & Kikira: Lawyers for the Respondent