Goh v LCL Enterprises Ltd [1995] SBHC 8; HC-CC 138 of 1995 (9 October 1995)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 138 of 1995

ROBERT GOH
(TRADING AS G0H & PARTNERS)

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LCL ENTERPRISES LIMITED

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Be1">Before: Sam Awich

Hearing: 28th September 1995

Judgment: 9th October 1995

p style="margin-tgin-top: 1; margin-bottom: 1">Counsel: J. Corrin for Plaintiff;

C. Ashley for Defendant

SAM AWICH, COMMISSIONER:

The Plaintiff Robert Goh (trading as Goh & Partners had writ of summons filed on 18 May 1995, issued on 27th June 1995, against a defendant stated therein as LCL Enterprises Limited. It was a specially endorsed writ of summons in the format of form No 2 in part 1 of appendix A of the Rules of the High Court. The plaintiff's claim was headed, "SPECIAL ENDORSEMENT." The specially endorsed statement of claim stated: "The Plaintiff's claim is for the sum of $2,345.23 for goods supplied and delivered to the Defendant at his request. " Dates, invoices and sums that made up the total sum of $2345.23 claimed, were particularised. The writ was served by sending it by prepaid registered mail, that would be service in terms of 09 r8(2). The plaintiff's solicitors applied for default judgment which was on 18th July 1995 entered in favour of the plaintiff for; $2345.23, interest at 5 % and fixed costs at $180.

The endorsed claim meets substantially the requirements of 03 r5 and is substantially in conformity with the format in appendix A. It sufficiently particularises the dates of the sale supported by invoices and amounts, and that the goods were sold and delivered at the request of the defendant, an important requirement. The only other important item which was not stated was whether the prices were agreed, usual or reasonable prices known or expected by defendant.

The claim was not for reliefs enumerated in 0 13 r 11 so default judgment could be entered without leave of court. The action was for liquidated claim, one specially provided for in preceding Rules, so it could not be the subject of 013 r9, providing for the action to proceed as if appearance has been entered. There was affidavit of service in terms of 013 r2, and time required for filing of memorandum of appearance expired. Judgment, because of default to enter appearance was entered correctly. From the documents thus far, the judgment was regular and so could not be set aside on the ground of irregularity, nor could it be faulted and set aside on the ground that the proceedings had been irregular; see Samson Poloso -v- Honiara Consumers Co-operative Society Ltd 1988/89 SILR 16 in which the pivotal case of Anlaby -v- Praetorius (1888) 20 GBD 764 was relied upon.

The plaintiff, after obtaining judgment, sought examination of the defendant on oath as to its means. The order for examination issued on 10th August 1995, for examination to be conducted on 7th September, 1995. There is nothing on the case file to show that the order was served, but next on the file there was filed on 14 August 1995, application by the defendant to have judgment set aside. That application was supported by affidavit of solicitor for the defendant sworn on 10th August 1995. I find no use for that affidavit. It was a short statement of hearsay. On 6 September 1995 affidavit sworn by one Kwok Wai Wun sworn on 6th September 1995 was filed. Kwok Wai Wun described himself as Managing Director of the defendant company. That indeed should have been the founding affidavit filed together with the application rather than the affidavit of the solicitor. The plaintiff filed two affidavits in reply. One was sworn by Anne Harper, described as administration manager, on 27th September, 1995 and the other sworn on the same date, by Robert Goh who described himself as, "Principal of Goh & Partners."

The affidavits for both sides gave completely different descriptions of the transaction, the subject of the suit. The two affidavits filed on behalf of the plaintiff no longer stated the transaction as being, "goods supplied and delivered to the Defendant at his request". In fact the two affidavits agree with the description given by Kwok Wai Wun, being for making certain applications required of a non citizen to enable him to do business in Solomon Islands and for registration of a company. Goh states at paragraph 2 of his affidavit:

"Kwok Wai Wun first came to ask my firm to act on his behalf on about 20 May 1992. He required the following work to be done:-

Preparation of foreign investment application form, drawing up of incorporation documents, and registration if foreign investment approval obtained; application for work and residence permits"

Paragraphs 1,6, and 7 of affidavit of Harper support that. At paragraph 6 she stated that regarding registration of Kwok Wun's company, she applied to Company Registry for approval of name the company would be known by and she prepared the documents which she sent to an address in Singapore, given by "Mr Kwok." From the above, it must have been obvious to the plaintiff's solicitors that the person to sue was Kwok Wai Wun and not LCL Enterprises Limited, which had not come into existence; further more that the professional services rendered or requested could not be described as, "goods supplied and delivered to the Defendant at his request". Moreover, by citing a corporation as the defendant, it made it possible for service of the writ of summons, to be by prepaid registered mail in terms of 09 r2 and so avoided service under 09 r 2 which would have been personal in the case of Kwok Wai Wun a natural person, being the defendant. One would like to believe that the learned solicitor conducted the action that way not deliberately to deceive the court and easily and quickly obtain default judgment. It is hard to believe so but, I shall assume that it was all inadvertence:

I said at the beginning that the writ of summons endorsed with the claim was regular when filed and service of it was regular. Accordingly judgment entered on 18th July 1995 was regular. Subsequently, affidavits filed in support and opposition to application to stay execution and set aside judgment have now established that the proceedings, not the default judgment, were inaccurate, will the court set aside the default judgment?

General authority is given to the Court by Order 69 of the Rules, to set aside irregular proceedings; that Order was cited by learned Counsel Ashley for the applicant. A more specific provision is in Order 13 r8; by its authority, the court is empowered to set aside judgment obtained because of default; it reads:

"Where judgment is entered pursuant to any of the preceeding Rules of this Order, it shall be lawful for the Court to set aside or vary such judgment upon such terms as may be just."

The practice of the court is that:

(a) it must set aside judgment irregularly entered or obtained, and

(b) it may set aside judgment regularly obtained if it was the result of inadvertence on the part of the defendant to enter appearance or file defence in time, and the defendant has good defence on the merit, provided he has not unreasonably delayed in bringing the application to set aside. Instances of irregularities are when:

1. the issuing of the writ Of summons was irregular,

2. service of the writ of summons was irregular,

3. time required for defendant to enter appearance or file defence had not expired,

4. judgment is entered for more than the amount claimed and due.

There are several reasons which make a writ of summons to be declared irregular. A writ of summons which named a non existent plaintiff or defendant or endorsed by a non existent claim will be declared irregular. In some circumstances that may be found to be fraudulent. In this case fraud was not raised as a ground and so I do not consider it. From the affidavits, on balance of probability I find that the defendant LCL Enterprises was not in existence at the time the writ of summons issued. The result of that is that the court must set aside the judgment obtained on 18 July 1995. That is the rule in Lazari Bros & Co -v- Banque Industrielle De Moscou [1932] 1 KB L24. [1933] AC 289.

There are 3 other ways of looking at this case though. In the first place the plaintiff admits that the person who instructed them was Mr Kwok Wai Wun. The instruction was for the plaintiff to, among other things, incorporate a company now cited as defendant. Even if LCL Enterprises Limited had been in existence, the person who incurred liability to pay fees for the services was therefore Kwok Wai Wun, not the defendant, LCL Enterprises Limited. That is the law in s.16 of Companies Ordinance Cap. 66 which comes from the Common Law as clarified and firmly established in Salomon -v- Salomon [1897] AC 22. It was also established that early that unless a company has been incorporated, it cannot contract, and after incorporation it cannot become liable on or entitled to any benefit arising from a contract purported to have been made on its behalf before incorporation. See: Kelner -v- Boxter (1866) L.R.2 CP 174 and Natal Land Company -v- Pauline Syndicate [19041 AC 120 PL. The writ of summons was irregular to that extent.

The second other way of looking at the case is that the subject of the claim was stated as being, "for goods supplied and delivered to the defendant at his request." That we now know from the affidavits including those filed on behalf of the plaintiff, as totally false. The claim was for professional services, further more, it was not at the request of LCL Enterprises Limited, but at the request of Mr Kwok Wai Wun. It appears to me a deliberate falsehood. I find that the writ, in the statement of claim was irregular and I set aside the default judgment on that ground as well.

A third way is to consider the merits of the case. The plaintiff says that LCL Enterprises Limited paid its bill, but it still owes the sum of $2,345.23. Mr Kwok Wai Wun replying as if he were a party (he is the party before court), says he has paid all the bills and in fact some of the money paid has not been accounted for. Faced with that the plaintiff then says Mr Kwok Wai Wun paid the money to a Mr Alfredo Sevillejo personally though Mr Sevillejo was an employee of the plaintiff. In the affidavits however, the plaintiff admits that it applied some of the money received by Sevillejo, for the purpose of carrying out the instruction given to them by Alfredo. From that I am able to say that the defendant has good defence on the merit. He delayed in bringing this application from 18 July 1995 to 14 August 1995, some one month and 4 days. In view of the very good prospects in the defence succeeding the court exercises discretion in favour of setting aside the default judgment - see Vann -v- Awford (1986).

In the end the default judgment of 18 July 1995 has been set aside as irregular and on the one hand in the exercise of discretion because of the good prospects for success in the defence. Writ of execution has in fact not issued. I make no order about that application.

Costs usually is grated to the plaintiff when the defendant has failed to enter appearance or file defence, except in circumstances of certain irregularities. In this case I view seriously the irregularity in the proceedings, namely deliberately citing a non existent defendant and more so, stating a non existing transaction as the ground for the claim. Fraud was not raised by the defendant and so I did not consider it. All the same, the facts call for costs of the proceedings to be awarded against the plaintiff and I so award costs up to this stage to Mr Kwok Wai Wun who though not the defendant, was the party before court.

Dand signesigned at Honiara this 9th day of October 1995.

Sam Awich
MISSIONER OF HIGH COURT

Corrin: rin: I make application to change defendant to read Kwok Wai Mun t/a LCL Enterprises Limited -First Defendant.