Yam v Lennea [1995] SBHC 62; HC-CC 214 of 1994 (3 November 1995)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 214 of 1994

AUSTIN AND LYNDY YAM

-v-

DELBERT LENNEA

High Court of Solomon Islands
(Muria, CJ.)

Hearing: 19 October 1995
Decision: 3rd November 1995

J. Corrin for Plaintiffs
A. Nori for the Defendant

MURIA CJ: This is an application to set aside the order of this Court made on 23 June 1995 whereby damages to be assessed had been awarded to the plaintiff together with mesne profits of $32,500 at 5% interest from the date of the order. The order also restrained the defendant from remaining in the house on parcel no. 191-018-148. That order had been served on 26 June 1995 at 11.20 am on Mr. Philip Tegavota who was then acting for the defendant, although Mr. Tegavota on the 11 August 1995 hearing argued that he could not remember being served. I had dealt with that aspect of the matter on 11 August 1995.

On the 11 August 1995 hearing the defendant was found to have committed a contempt of Court and fined $250.00. The Court refused to hear the defendant’s application to set aside the order of 23 June 1995 unless the defendant purged his contempt. He has now done so and Mr. Nori who now acts for the defendant argued the application to have the order set aside. In the alternative, Mr. Nori suggested that the execution of the Order be stayed pending the outcome of Civil Case 153 of 1994. Naturally Ms Corrin strongly opposed the application.

There are a number of issues involved in this application and I prefer to deal with those issues as I see them. But I think it is necessary to briefly see what the background circumstances are in this case.

In March 1994, the plaintiffs entered into an oral agreement with the vendor (Brown Saua) to purchase the vendor’s residential property at Lengakiki in Parcel No. 191-018-148 for the sum of $160,000. The sale was duly completed and the transfer was also executed with stamp duty paid on 2 June 1994 of $3,750.00 and lodged for registration. According to the transfer instrument, the property had been bought for the sum of $100,000.00. The plaintiffs, however, had been unable to move into the property as the defendant and his family were still occupying the property. Also, the transfer had not yet been registered due to a caveat lodged by the defendant.

The defendant’s contention is that, his company, Islands Construction Management Limited - entered into an agreement with Mr. Brown Saua sometime in December 1993 to purchase the property in Parcel 191-018-148 which be had been occupying as the Manager of his company. A transfer instrument had been signed by the vendor and the “director-Secretary” of the company for a transfer sum of $170,000.00. The transaction between the vendor and Islands Construction Management Limited. did not go through and the only reason that I can gather for not completing that transaction was the difficulty of finding the purchase money in time although it would seem that some understanding had been obtained from the Westpac Bank to provide a loan to the defendant’s company to purchase the property.

In the meantime the plaintiff’s transaction with the vendor had been completed. The property had been registered on 23 January 1995 in the plaintiff’s names, the defendant’s caveat having been removed. They were still, however, unable to move into the property because the defendant had refused to vacate it.

It will be noted that the defendant’s Company has commenced action against the vendor in Civil Case 153 of 1994. The parties to that action are Island Construction Management Limited as plaintiff and Brown Saua and Australia and New Zealand Bank as defendants.

Those, being the brief background facts, I shall now consider the issues raised in the case.

Firstly I deal with the question of whether the Judgement is a default judgement and thereby amenable to the powers of the court to have it set aside.

The plaintiff applied in this case for judgement pursuant to Order 14 r 1 of the High Court (Civil Procedure) Rules on the basis that the defendant had no defence in law to the plaintiff’s claim. The defendant had filed a Defence in this case but the Defence was that the defendant’s company, Islands construction Management Limited, had paid almost $25,000.00 for the purchase of the property (parcel 191-018-148), The defendant also stated in the Defence that he signed an Agreement with the vendor Mr. Brown Saua to purchase the property. That Agreement was in December 1993, with no actual date mentioned in the Agreement, signed by the defendant on behalf of “the Purchaser” who by virtue of Clause 3 of the Agreement Island Construction Management Limited.

In applying for leave to sign judgement in the present case pursuant to Order 14 r 1, counsel for the plaintiffs relied on the argument that the action was brought against the defendant who was occupying the house in parcel no. 191-180-148. The Defence filed by the defendant was that there was an agreement between the defendant’s company and the vendor to purchase the property and that some money in the sum of $25,000 had already been paid to the vendor by the defendant’s company. The agreement relied on by the defendant is, as I have already stated, the one entered into between the vendor (Brown Saua) and the defendant’s company. In addition the defendant, in his Defence, contended that his company had executed a transfer document with the said vendor. In those circumstances the defendant asked that the plaintiffs be restrained from evicting the defendant from the said property.

I shall say no more about the alleged agreement and the transfer document relied on by the defendant as they are clearly more relevant to Civil Case 153 of 1994 than to the present action and also for the reasons which will become apparent in this judgment.

The principle underlying the plaintiff’s application for judgement is that the Is. construction Management Limited is a different legal entity from the defendant in this case. As such the defence raised by the defendant could not possibly succeed as against the plaintiffs who are now registered owner of the property and that the purported transaction relied on by the defendant was a matter between Mr. Brown Saua and the defendant’s company. The defendant cannot rely on that, argued the counsel for the plaintiffs.

It is a clear principle that a company duly formed and registered is regarded in law as a separate legal entity which can sue and be sued. This principle had been laid down in Salomon -v- Salomon & Co. Ltd [1897] A.C. 22.

The defendant in the present case is Delbert Lennea who has been sued in person. His company is not a party to the case. The fact that he is the Manager of Is. Construction Management Limited does not alter his status in this action.

Having considered the plaintiff’s application and the Defence filed, the Court ordered that judgement be entered against the defendant on 23 June 1995. Is this a judgement in default which can be set aside on such terms as the court may order? I do not think so. The plaintiffs obtained judgement pursuant to Ord. 14. r 1 which says that ... “the defendant shall satisfy the Court that he has a good defence to the action on the merits or shall disclose such facts as may be deemed sufficient to entitle him to defend the action generally ...” and if he does not do so, then the Court is empowered to order judgement to be signed against him. That is an order on the merits and it is not a judgement by default which may be set aside such as that provided for under Ord.29 r 12.

Then there is the question of the failure of the then solicitor for defendant’s to attend the hearing on 22 June 1995 when the judgement was ordered to be signed against the defendant, which order was signed on 23 June 1995. Is the judgement a judgement by default due to the non-attendance of the defendant’s solicitor at the hearing? In my judgement it is not. A failure to attend on Order 14 r 1 application is not a default, for a party who has no defence may chose not to attend the hearing. The default which may result in judgement by default is a failure to comply with the rules directing to do something either under order 29 or under the other orders. Nothing of the sort is contemplated under Ord. 14 r 1. see Spira -v- Spira [1939] 3 All ER 924.

The other argument advanced by Counsel for the defendant is that in the alternative the Court should set aside or stay the Order of 23 June 1995 pending the disposal of Civil Case 153 of 1994. It is submitted that the present action is closely linked with Civil Case 153 of 1994 that to refuse to set aside or stay the order of 23 June 1995 would be to pre empt the outcome of Civil Case 153 of 1994. It is therefore just and equitable to set aside the Order or at least to have it stayed pending the conclusion of Civil Case 153 of 1994 argued counsel.

I think I can deal with this argument very briefly, Firstly, it must be said that one of the time honoured maxis of equity is that equity follows the law. The defence raised by the defendant here is, in law unsustainable. As against the plaintiff’s legal title in the property, the defendant does not hold nor can he claim any right not even equitable right in the said property. It would clearly be inequitable to allow the defendant who has no claim in law to interfere with the plaintiff’s legal title and who is the purchaser for valuable consideration.

The suggestion that if the Order is not set aside or stayed it would pre empt the outcome of Civil Case 153 of 1994 cannot be maintained as well. As I have said, the parties in Civil Case 153 of 1994 are Island Construction Management Limited and Brown Saua & ANZ. The plaintiff in that case is not a party to the present proceedings. Conversely, the plaintiff in this case is not a party to the Civil Case 153 of 1994. The vendor (Brown Saua) is not a party to the present case either. I therefore do not see how the outcome of this case can be said to pre empt the outcome of Civil Case 153 of 1994.

The defendant may very well feel aggrieved by the actions of the vendor in this case. But I feel on proper advice in the first place, he would have taken the proper course right from the start, i.e. to have the purchase’s interest taken care of.

For all the reasons that I have stated, I do not feel it is right to set aside or stay the Order of 23 June 1995 and as such the application is refused.

The counter-claim raised by the defendant must in the circumstances be struck out.

Order: Application refused.

No order for costs.

(Sir John Muria)
CHIEF JUSTICE