CP Homes Ltd v Roberts [1998] SBHC 79; HCSI-CC 135 of 1996 (17 April 1998)

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 135 of 1996

C. P. HOMES LIMITED

-v-

BEXTER ROBERTS, JAMES PULEIPU and
ROYAL JIMMY (Trading as CHAKOPE BROS. DEVELOPMENTS) and
MAHLON ALI (Trading as HOVAH HARDWOOD ENTERPRISES.

High Court of Solomon Islands
(Muria, CJ.)
Civil Case No. 135 of 1996

Hearing: 29 January and 14 April 1998
Judgment: 17 April 1998

A. Radclyffe for the plaintiff
A. Nori for the first defendant
P. Tegavota for the second defendant

JUDGMENT

MURIA C.J. The first defendant, by their application, seek to have the Default Judgment of this court dated the 6 June 1996 set aside. They also seek to have the Order dated 22 July, 1997 set aside. In the alternative, to have the judgment debt apportioned between defendants in a just and equitable manner.

This is an action by way of writ of summons brought by the plaintiff claiming damages for breach of contract. The writ was filed on the 3 May 1996 and served on the defendants on the 17 May 1996. The total amount claimed by the plaintiff is $672,892.79 being for loan repayment ($150,000.00), invoices to the second defendant ($509,734.79) and invoices to the first defendant (13,158.00). No appearance had been entered for any of the defendants and consequently the Default Judgment was issued on the 6 June, 1996 against the defendants.

On the 19 March, 1997 a summons was filed by the plaintiff seeking assessment of damages and for an order to have the first defendant’s consignment of logs sold and the proceeds thereof to be paid into an interest bearing account in the names of the solicitors for the parties. That application was set down for hearing on 17 July, 1997 at 2.00 p.m. Mr. Tegavota attended that hearing and asked for an adjournment which the Court granted on the basis that he had not taken full instructions from his clients. The new hearing date was fixed for 21 July, 1997 at 2.00 p.m. At the hearing of that application on 21 July, Mr. Tegavota who represented both defendants at the time, was not able to argue the question of assessment of damages as he said he had no instructions to that effect. However Mr. Tegavota thought that as the logs at the log pond were awaiting to be sold and that to meet the judgment debt it would be reasonable to have the logs sold and have the proceeds thereof used to settle that debt, he consented to an order to have the logs sold and the proceeds thereof be deposited in the bank in an interest bearing account in the names of both solicitors.

The present application to have the orders referred to set aside was not brought until 13 October, 1997 by which time the first defendant had sought legal assistance from their present solicitors, although the formal notice of change of solicitor had not been filed until 21 January, 1998. At the hearing on 29 January, 1998 the first defendant relied on the affidavits of Mr. James Puleipu and Mr. Baxter Robert. The bottom line argument advanced in the affidavit of Mr. Puleipu is basically that the first defendant were not properly represented or were virtually neglected by Mr. Tegavota despite being instructed by them. That had he acted as instructed, the default judgment would not have been entered against them. The second argument leveled against Mr. Tegavota is that he consented to an order of the court without authority from the defendants. That was the Order dated the 22 July, 1997 which directed the first defendants’ consignment of logs which were awaiting shipment to be sold and the sum of $500,000.00 out of the proceeds thereof to be deposited into an interest bearing account in the joint names of the solicitors within seven days of shipment. These matters, argued Counsel for the first defendant, had all adversely affected his clients and resulted in the delay in bringing this application. There is also a defence on merit, argued Counsel, in this case.

The principles to be applied in application to set aside judgment are well settled in this jurisdiction. These are set out in Kayuken Pacific Limited -v-Harper [1987] SILR 54 where the court said at page 58:

“When making application to set aside, there must be an affidavit of merit showing that the defendant has a prima facie defence to the action. Such was the case here. It is not necessary for the court to consider at that stage whether the defence would be successful but simply whether a tribal issue is disclosed. If there were not the exercise would be pointless. Where, however, the court finds there is a viable defence it is clear 0.29 r. 12 gives it an unfettered discretion to set aside any default judgment.”

As it was pointed out in that case, when making an application to set aside a default judgment the defendant must show a defence of merit. Of course, not that the defence would be successful but at least there is a prima facie defence shown on the affidavit evidence before the Court. Once a prima facie defence has been shown the court has the power to set aside the default judgment pursuant to 0.29, r.12 of The High Court (Civil Procedure) Rules 1964 which provides as follows:

“12. Any judgment by default, whether under this Order or under any other of these Rules, may be set aside by the Court, upon such terms as to costs or otherwise as such Court may think fit, and where as action has been set down on motion for judgment under Rule 8 of this Order, such setting down may be dealt with by the Court in the same way as if judgment by default had been signed when the case was set down.”

The power under that provision is discretionary and is exercised taking into account a number of considerations set out in Harper’s case. These include the reason for the failure to enter an appearance; whether there has been undue delay on the part of the defendant to bring the proceedings to set aside the default judgment and give him the opportunity to defend the action; and whether the plaintiff would be prejudiced by an order setting aside the default judgment and a new trial to proceed.

In Leslie Allinson -v- Monique Medlin, Civil Appeal No. 7 of 1996 (CA) Judgment given on 15 April 1997) the Court of Appeal said that the jurisdiction of the court to summarily terminate an action must be sparingly used and should not be used except in a clear case where there are requisite material before the court sufficient to reach a definite conclusion that the exercise of the summary jurisdiction to terminate the action is justified. In that case the Court of Appeal found there was a tribal issue before the court capable of affording a defence to the plaintiff’s claim and set aside the default judgment. See also Reef Pacific Trading Limited and Others -v- Reef Pacific (Sydney) pty Limited and others, Civil Appeal No.1 of 1994 (CA) (Judgment given on 4 November 1994); Jane Tozaka -v- Hata Enterprises, Civil Case No.198 of 1996 (HC) (Judgment given on 3 June 1997).

I turn to consider whether there is a defence of merit disclosed in this case. Counsel for the first defendant argued that in the present case there is not sufficient evidence to show that there was a loan granted to the defendants. It is further submitted that unless the first defendants were invoiced for any amount lent to them there can be no liability to pay. That, said Counsel, had not been done in this case and as such it cannot be shown that money had actually passed to the defendants. Therefore it is submitted that on the proper construction of the contract in this case, there is a viable defence to the plaintiff’s claim. Counsel for the plaintiff, on the other hand, argued that there is clearly a loan agreement entered into between the parties in this case and money had been lent to the defendants who have failed to repay the plaintiff for the said money. Counsel for the plaintiff further submitted that the loan agreement entered into between the parties on 19 October, 1995 had been acknowledged by the defendants.

The evidence relied on by the first defendant on this issue of defence of merit came from the affidavits of Mr. Puleipu and Mr. Bexter Robert. If anything, the bulk of the contents of Mr. Puleipu’s affidavit is an attack on Mr. Tegavota’s conduct of the case on behalf of the first defendant resulting in the Order made by this Court and dated the 22 July, 1997. It can hardly justify any complaint against Mr. T egavota in relation to the Default Judgment obtained against the defendants on the 6 June, 1996. Mr. Puleipu now says that the signing of the loan agreement was the work of Mr. Bexter himself, having no authority from him (Mr. Puleipu) or his tribe. As to the Letter of Authority, he now says that he was tricked into signing it by the Administration Manager of the second defendant.

When one looks at the Loan Agreement and the Letter of Authority one is clearly disposed to see that the whole tenor of the evidence does not support the position now advanced by the first defendant. The borrowers under that Agreement are both the first and second defendants. Mr. Bexter Robert signed on behalf of the first defendant and Mr. Mahlon Ali signed on behalf of the second defendant. Mr. William Dyer signed on behalf of the plaintiff. The signing of the Agreement was witnessed by one Joseph Douglas. The Letter of Authority was signed on behalf of the Chakope Bros Developments, the first defendant, by James Puleipu, Royal Jimmy and Bexter Robert. I do not need to set out the contents of that Authority. Suffice it to say that the representatives of the first defendant clearly acknowledged that the said Letter of Authority “... is necessary to fulfil our obligation under the terms of a Loan Agreement we have entered into with the above company (C.P.HOMES LIMITED) for financial assistance ....” The other exhibits to William Dyer’s affidavit, Exhibits “B” and “C”, are obvious evidence of the financial assistance rendered to the defendants by the plaintiff. There is no evidence to suggest that the defendants had not been assisted by the plaintiff nor is there any evidence to suggest that the plaintiff has not been owed any money by the defendants. No draft defence has been filed to claim any of these defences. I do not see on the evidence how it could be done. In my judgment therefore no defence of merit has been disclosed by the evidence now before the court.

Having reached that conclusion, there is very little discretion left with the court: Kayuken Pac Ltd -v- Harper. The question of delay no longer matters. However as it has been raised, and in case I am wrong on my above conclusion, I will briefly deal with it. The writ of summons was served on Mr. Puleipu and Mr. Mahlon Ali respectively on 17 May, 1996. The default judgment was entered against the defendants on the 6 June, 1996. The present application was filed on 13 October, 1997 which was more than one year and four months after the default judgment had been entered against the defendants. That is a considerable delay whether or not the defendants instructed a solicitor before or after 6 June, 1996. It is an undue delay. Again, if it was true that Mr. Puleipu instructed Mr. Tegavota before the 6 June, 1996, then up to 17 July, 1997 he had done nothing about the default judgment except that on that day Mr. Tegavota attended the Chamber application for the assessment of damages and for an order to have the first defendant’s consignment of logs sold and proceeds thereof to be applied to the judgment debt. That hearing was adjourned to the 21 July, 1997 at which time Mr. Tegavota again attended on behalf of the defendants. At no time had any indication on those occasions been made to the court to have the judgment applied to be set aside even up to 13 October, 1997. I do not believe Mr. Puleipu when he said in his affidavit that it was about the 27 July, 1997 when he first saw the copy of the default judgment. There is indication in his affidavit that he knew of the default judgment on the 6 June, 1996 or shortly thereafter but certainly not one year later. As with the question of delay, there is no reasonable explanation for the failure to enter an appearance in this case.

Will the plaintiff be prejudiced if the court were to set aside the judgment and order a new trial in this case? My firm view is that it will, in the light of all the circumstances as I have found disclosed by the evidence. The plaintiff had a judgment in its favour for almost two years now and I think it is entitled to the benefit of that judgment unless there is justification for depriving it of the same. In the present case I find no such justification.

For the reasons stated above the order sought setting aside the default judgment entered against the defendants is refused.

As to the order sought in paragraph 2 of the summons to have the Order dated the 22 July, 1997 set aside, I feel that as the default judgment survives it would be in the interest of a just resolution of this action to have that Order remained in tact. Despite the complaint by the first defendant that Mr. Tegavota had no instruction to consent to that Order, it was reasonable to expect a professional judgment on the part of Counsel in such a situation which is in the interest of resolution of the dispute as well as that of the client’s, provided that the conduct of the matter by Counsel does not amount to professional misconduct. In this case the Order of 22 July, 1997 enables the sum of $500,000.00 to be kept in an interest bearing trust account in the joint names of the solicitors for both parties and thereafter to be applied to settle the debt owing. I do not see anything professionally unsound in that.

In those circumstances therefore the order sought in paragraph 2 of the summons must be refused also.

The order sought in paragraph 3 of the summons is an alternative seeking to apportion the judgment between the defendants. I think this is a proper issue for consideration. However, I feel this can be appropriately dealt with when the matter of assessment of damages is dealt with.

The first defendant’s application is refused and costs to be costs in the cause.

Order accordingly.

(Sir John Muria)
CHIEF JUSTICE