Chan Wing Ltd v Wing Sun Company Ltd [1999] SBHC 89; HC-CC 222 of 1998 (8 September 1999)

High Court of Solomon Islands

Civil Case No. 222 of 1998

CHAN WING LIMITED

v

WING SUN COMPANY LIMITED

High Court ourt of Solomon Islands
Before: KABUI, J
Civil Case No. 222 of 1998

Hearing: 8th September 1999
Judgment: 8th September 1999

S. Patrick for the Plaintiff
Mrs M. Samuel for the Defendant

JUDGMENT

(F. O. Kabui, J): By a specially endorsed Writ of Summons filed on 27th November, 1998 the Plaintiff claimed against the Defendant the sum of $124,000 as moneys due and owing for goods sold, supplied and delivered. The Plaintiff also claimed interest on that sum of $124,000. The Writ of Summons was served upon the Defendant on 1st December, 1998 at 11:52 hours at Robert V. Emery's Office, 1st Floor LKP Building, Mendana Avenue, Honiara. The Defendant having entered no appearance to the Plaintiff's Writ, a judgment in default of appearance was entered for the sum of $24,500 against the Plaintiff on 3rd May, 1999. The judgment in default of appearance was served on the Plaintiff on that same day at 10:59 at the same address as above. By Summons filed on 16th July, 1999, the Plaintiff now seeks the following Orders:

(1) The default judgment entered by this court on the 3rd May 1999 be set aside upon the grounds set forth in the affidavit of Charlie Chan.

(2) Alternatively, that the execution of the default judgment be stayed pending the hearing of the substantial claim in the above matter.

(3) Any other orders that this Court deems fit to make.

(4) Costs in the Cause.

Reason for non-appearance to the Writ of Summons filed by the Plaintiff

The Plaintiff through Mr. Chan's affidavit filed on 16th July, 1999 in support of its application does not deny its receipt of the said Writ of summons. Paragraph 4 of Mr. Chan's affidavit above sets out what happened after the receipt of the Writ of Summons. That paragraph 4 states

"Upon receipt of the Writ of Summons, I wrote a letter on the instant date to Sol-Law informing them that my Company owe them only $99,000.00 and not $124,000.00 as claimed. Further that the Plaintiff had owed the Defendant Company the sum of $24,500.00 for the rental of the Defendant's 6 Labour line quarters and 1 storage building. Therefore the balance outstanding would be only $74,500.00. I then enclosed a cheque of $74,500. 00 for the final payment of our debt to the Plaintiff. Taking into account the proposed setoff, I believed that the Defendant Company does not owe anything further to the Plaintiff. It was because of that belief that I thought that the matter was over."

Clearly, the Defendant disputed the sum of $124,000.00, saying it only owed the Plaintiff the sum of $99,000. It said that of that $99,000, $24,500 was a sum owed to it by the Plaintiff for rental under an agreement between it and the Plaintiff. It therefore felt obliged to pay to the Plaintiff only the balance being $74,500. It made this payment by cheque No. 285064 on 9th December, 1998. It believed that as far as it was concerned, the matter was settled and that there was no need to contest the matter in Court. It was only after the receipt of a letter dated 8th March, 1999 from the solicitor for the Plaintiff that it realized that the set-off was not accepted by the Plaintiff. By this date, the time for appearance and defence had long lapsed. It then acted on 16th July, 1999 by filing its present application to set aside the judgment in default of appearance.

The Law

The law on this procedure for setting aside judgment entered in default of appearance or defence is well known in this jurisdiction and elsewhere. It is a matter for the discretion of the Court. Mrs Samuel has argued that the judgment of default in this case was not a final judgment and therefore could be set aside. She also says that there was no unreasonable delay in this case on the part of the Defendant, and that there was a good prospect of success for the counterclaim by the Defendant. At page 308 of Australian Civil Procedure by Cairns, Second Edition, 1985, the author says,

"The rules provide for the defendant to enter an appearance within a specified time. When the time allowed expires, if the defendant has not appeared the plaintiff may enter judgment. At this stage it is important to consider the nature of the plaintiff's claim, since that determines the type of judgment he may enter, and indeed whether he may enter judgment administratively or must apply to the court on motion. Generally a judgment in default of appearance may be entered by the plaintiff if his claim is for a debt or liquidated demand. That is a final judgment, and it may include any costs claimed in the originating process. If the claim is for pecuniary damages, the plaintiff may enter interlocutory judgment. This establishes the plaintiffs right to damages, but it leaves the amount to be assessed by the court. Judgment in this form is entered in all cases where the claim is for unliquidated damages. Occasionally the claim includes both liquidated and unliquidated amounts. In that case final judgment may be entered for the liquidated claim and interlocutory judgment for the part that is unliquidated."

There is no doubt in my view that the judgment in default of appearance in this case was a final judgment in that the sum of $24,500 was a debt or a liquidated demand. It was not for pecuniary damages.

As against this is the question of setting aside that default judgement on 3rd May, 1999. The rules to be applied are clearly set out again at pages 327-328 of Australian Civil Procedure by Cairns, Second Edition 1985 wherein the author says,

"The Draconian features of the default judgment procedure are mitigated in that such judgments can be set aside. Specific provisions to that effect are contained in the rules. There are rules for the setting aside of judgments in default of appearance, and in default of pleading. On its wording, the second provision applies to default judgments entered not only for want of a defence, but for any other failure resulting in the entry of a default judgment. The principles for the setting aside of a judgment are the same irrespective of whether it is entered in default of appearance or defence ... The court has an unfettered discretion to set aside a regularly entered default judgment. Although it is usual for the defendant, in applying for the setting aside of a regularly entered judgment, to explain the delay in appearing or pleading, and show a prima facie defence on the merits, there is no hard and fast rule of law to that effect. This was established in Evans v. Bartlam, where it was pointed out that since the power to set aside a default judgment as it is expressed in the rules is not surrounded with qualifications, the court should not qualify a discretion that is left unfettered in the rules. Since an unfettered discretion is conferred by the rules, the courts should not, by laying down principles of law, provide a fetter that the rules have not imposed. This interpretation of the rules was supported by the Full Court in Victoria in Kostokanellis v. Allen. What the court must do is consider all the circumstances of the case, and then decide which way to exercise its discretion."

In this case, Mr. Chan admits in paragraph 6 of his affidavit referred to above that what he thought or believed to be a set-off was not accepted by the Plaintiff. The Defendant should have acted soon after that but it waited for almost 5 months before it came to the Court for a remedy. That delay was not explained except for Mr. Chan to say in paragraph 7 of his affidavit that he thought the Plaintiff would not rebuff him because they were close business associates. That set-off was a cross-demand by the Defendant against the Plaintiff. Again, at pages 223 - 224 of Australian Civil Procedure, by Cairns, Second Edition, 1885 the author says:

"A set-off does not operate as a denial of the debt. Really it tacitly assumes the existence of the debt, and then alleges that there are reasons why the plaintiff is not entitled to payment...

As already noted, a set-off is in the nature of a cross-demand by the defendant against the plaintiff. A consequence of this is that for a set-off to avail the defendant in an action at law it must also be capable of being pleaded as a separate action. That means that the demand must be recoverable by action. If for any reason the claim of the defendant cannot be sued for separately it cannot be pleaded as a set-off. Sometimes it is said that a set-off is a shield and not a sword. That is true in the sense that it is a defence to the plaintiff's claim, whether it exceeds the amount of the plaintiff's claim or is less than it. Once a set-off is established, then the plaintiff's claim is annihilated, at least to the extent of the set-off. To say that a set-off is a shield and not a sword is not to say that it can never be used offensively. But for it to be used offensively the set-off must also be pleaded as a counter claim."

Does the Defendant have a defence?

There is certainly a defence by way of a counter-claim but it was not pleaded. Should the judgment in default of appearance be set aside for this reason? I do not think so in this case. It is wise that the Defendant discharges all its obligations towards the plaintiff and then it can sue to recover its $24,500 later or soon after this judgment. As pointed by Mr. Patrick, Counsel for the Plaintiff, the paying history of the Defendant of its debts to the Plaintiff had not been good although previous dishonoured cheques plus the cheque for the $74,500 had all been cleared in early 1999. The confidence in the Plaintiff had been shaken to such an extent that it would rather see its debts being paid on time by the Defendant rather than accepting a cross-demand by the Defendant for obvious reason. Taking into account the facts of this case I think I would on balance dismiss this application. I think this is a case, where the parties would have to meet their own costs.

The Order of this Court is that the Application be dismissed with no order as to costs.

F.O. Kabui
Judge