Ross Mining (SI) Ltd v Slater and Gordon [2001] SBHC 162; HCSI-CC 230 of 1998 (23 March 2001)

CC No 230, 98, HC

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No 230 of 1998

ROSS MINING (SI) LTD, GOLD RIDGE MINING LTD & ROSS MINING NL

-v-

SLATER AND GORDON (A firm), DENIS WALTER REINARDT, MERTHYR HOLDINGS PTY LTD

High Court of Solomon Islands
(Muria, CJ.)
Civil Case No. 230 of 1998

Hearing: 6 December 2000
Judgment: 23 March 2001

J. Griffiths & A. Radclyffe for Plaintiffs
J. W. K Burnside & C. Ashley for Defendants

JUDGMENT

MURIA CJ: By their Notice of Motion dated 3rd August 2000 the defendants applied to set aside paragraph 2 of the Order of this court dated 1st July 1999 made following the Judgment dated 10 June 1999, which granted judgment in default of pleading to the Plaintiffs with damages to be assessed.

The circumstances surrounding this case can be found in the judgment of 10 June 1999 and I need not repeat them here. However for the purpose of this application, I shall deal with them very briefly. The Plaintiffs claim damages and injunction against the defendants for conspiracy to injure them by unlawful means, such as procuring various citizens of Solomon Islands, including David Thuguvoda, Willie Roni and Billy Gatu to commence and prosecute various proceedings in the High Court of Solomon Islands against the Plaintiffs in a manner contrary to law, being for a collateral and improper purpose; by variously funding proceedings against the Plaintiffs and agreeing to share in the fruits of the proceedings in a manner contrary to law; by procuring the making by various means, of making false and defamatory statements to various persons about the Plaintiffs and attempting to bring about situation whereby the Plaintiffs would abandon their operations. It is further alleged that the defendants have each maintained the Proceedings in a manner contrary to law and engaged in conduct which is champertous. These allegations were said to have arisen in various dates ranging from December 1996 to November 1998.

The Writ was issued on 17th December 1998 with a Statement of Claim. On 18th December 1998 the Registrar of High Court granted leave to serve writ on the Defendants out of the jurisdiction and ordered an appearance to be entered with 28 days of the date of service. Conditional appearance was entered on 20th January 1999 without leave of the Court. On 3rd February 1999 the Plaintiffs filed notice of motion seeking to set aside the conditional appearances on the basis that they were an abuse of process and alternatively, in order that the appellants file and serve an objection to jurisdiction. The Plaintiffs’ notice of motion also, by an amendment subsequently filed, sought additional relief by way of entry of judgment with damages to be assessed.

By their summons filed on 12th February 1999 the Defendants sought a number of orders. However, the hearing before the Court on 16th February 1999, the defendants pursued only two grounds namely, that the case did not fall with O.11 r 1 of the High Court (Civil Procedure) Rules and that the affidavit of Mr. Radclyffe in support of the application for service out of jurisdiction did not comply with O.11 r 3. Having dealt with the two applications together, the court refused the Defendants’ application and allowed the Plaintiffs’ application granting the judgment in default of pleading with damages to be assessed. It is the Order dated 1 July 1999 made pursuant to that judgment which the defendants now seek to set aside.

Issues

In the cause of argument, a number of issues were raised, including which tests to be applied in deciding whether or not to exercise the court’s discretion to set aside the judgment, whether the defendants have raised a defence on the merits, and whether the defendants should be allowed to reopen their explanation for failure to file defence. The main issue however, is whether there is justification in law to have the judgment, the judgment in default of 1st July as ordered on 1st 1999 set aside.

The Applicants’/Defendants’ Case

The case for the defendants, as ably argued for by Mr. Burnside is that the affidavits relied upon in this application disclose a defence on the merits and that by virtue of O.29 r 12, High Court (Civil Procedure) Rules, the default judgment should be set aside. Counsel also maintained that the affidavits offer justifiable explanation for failure to file defences in this matter.

As to the Plaintiffs’ Statement of Claim, Counsel for defendants contended that there are deficiencies in the details of the particulars given in the Statement of Claim. In addition Counsel argued that the Plaintiffs have alleged four different causes of action, alternative to each other, with each claiming damages. That being the situation, it would be unfair on the defendants if the judgment which covered all the claims is allowed to stand when the plaintiffs may well be able to substantiate one cause of action only. The only way for the plaintiffs to establish their claim is to have all the causes actions tried and that the defendants must be allowed to defend their case.

The Respondents’/Plaintiffs’ case

For and on behalf of the Plaintiffs, Mr. Griffith of Counsel was unyielding to any suggestion that the defendants have any defence which has any reasonable prospect of success in the present action. By a Chart of the conduct of the matter by the parties to the action, the plaintiffs have attempted to set out the defendants’ response or lack of it, to each of the claims stated in the Statement of Claim. Relying on Alpine Bulk Transport Co. Inc. -v- Saudi Eagle Shipping Co. Inc. [1986] 2 Lloyd’s L. R. 221 (the “Saudi Eagle” case), Counsel for Plaintiffs submitted that the defendants have failed to satisfy the test of making out a defence that has any prospect of success and as such fail to justify the setting aside of the default judgment.

The Law

The starting point in Solomon Islands, when considering whether or not to set aside a judgment obtained by default is O.29 r 12 of the High Court (Civil Procedure) Rules which provides:

“r. 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 an action has been set down on motion for judgment under Rule 8 or 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.”

This rule clearly confers power on this Court to set aside a default judgment. The exercise of that power is discretionary and it may be so exercised upon such terms as the Court may think fit.

Over the years, Courts have developed guiding principles on the exercise of the Court’s discretion under O.29, r 12 or similar rule. These principles can be found in the various cases from both our jurisdiction and other jurisdictions. One such case is that of the Saudi Eagle Case which was a case dealt with by the English Court of Appeal. That case was concerned with a charter of a vessel, the Saudi Eagle, by the plaintiffs. The defendants who were owners of the ship refused to load the plaintiffs’ cargo onto the ship. The plaintiffs claimed damages for breach of contract by the defendants. Subsequently the ship was arrested in Rotterdam. The plaintiffs were granted leave to serve a writ out of jurisdiction and did serve the defendants in Saudi Arabia. No notice of intention to defend was given and so default judgment was granted to the plaintiffs with damages to be assessed. Subsequently assessment was made and a final judgment of US$49,000 and costs in the sum of £3,000 was granted to the plaintiffs. The defendants applied to set aside the judgment and for leave to defend the action.

The judge at the first instance refused the application and on appeal to the Court of Appeal by the defendants, the appeal was dismissed. Sir Roger Ormord, giving the judgment of the Court, set out the guiding principles in the exercise of the Court’s discretion in such a case as this, extracting from the speeches of the House of Lords in Evans-v- Bartlam [19371, A.C. 473), as follows:

(i) a judgment signed in default is a regular judgment from which, subject to, (ii) below, the plaintiff derives rights of property;

(ii) the Rules of Court give to the Judge a discretionary power to set aside the default judgment which is in terms “unconditional” and the Court should not “lay down rigid rules which deprive it of jurisdiction (per Lord Atkin at p. 486);

(iii) the purpose of this discretionary power is to avoid the injustice which might be caused if judgment followed automatically on default;

(iv) the primary consideration is whether the defendant “has merits to which the Court should pay heed” (per Lord Wright at p. 489), not as a rule of law but as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence and if he has shown “merits” the-..... Court will not, prima facie, desire to let a judgment pass on which there has been no proper adjudication [ibid.p.489 and per Lord Russell of Killowen at p. 482].

(v) Again as a matter of common sense, though not making it a condition precedent, the Court will take into account the explanation as to how it came about that the defendant - ... found himself bound by a judgment regularly obtained to which he could have set up some serious defence [per Lord Russell of Killowen at p.482].”

The Saudi Eagle guiding principles have been applied in other cases subsequently. A number of those cases were cited by Counsel in their argument. I shall, however, need only referred to two of them.

In Pereira -v- Beanlands [1996] 3 All ER 528, the defendant asked the Court apart from appealing against the order of the Deputy Master debarring the defendant from maintaining a defence unless he complied with an order of the Court, to set aside a judgment in default of defence. By reason of non-compliance with an earlier order of the Court, the defendant was barred from maintaining a defence to the action brought against him and resulted in a judgment in default of defence obtained against him. The Court allowed the defendant’s appeal and set aside the judgment. It will be observed that in that case, the judgment was found to be irregular, justifying it to be set aside.

The defendant in that case, had actually filed and served a defence on the plaintiff but was debarred from relying on it for failing to serve his list of discovered documents as ordered by the Court earlier in the proceedings. Apart from the Court’s intimation that the failure on the part of the defendant (rather of his solicitor) was diplorable, a defence had actually been filed and served and which showed merits. With regard to the failure to comply with the “unless” order, there was no evidence to suggest that the non-compliance was intentional on the part of the defendant. Thus following the general guidance from the Saudi Eagle case and Allen -v- Taylor [1992] PI QR 255, the Court exercised it discretion in favour of setting aside the judgment.

The other case which I need refer to is Day -v- RAC Motoring Services Ltd [1999] 1 All. E. R. 1007. In that case the plaintiff brought an action claiming damages for negligence arising out of an accident on the road between London and Kent, involving a pick-up truck belonging to the defendant. The plaintiff commenced proceedings on 4 November 1996. The solicitors for both parties agreed to extend time for defendant to file defence on 14 days notice. On 8 October 1997, notice was given requiring defendant to file defence by 22 October 1997. Because of the muddle up in the defendant’s office, inadequate attention was given to preparing the defence and so 30 October 1997, judgment in default was entered against the defendant. On the 21 November 1997 the defendant applied to set aside the judgment. The district Court judge refused to set it aside. On appeal to a single Judge who considered a draft defence filed and exhibited to the affidavit filed on behalf of the defendant. The particulars set out in the draft defence properly denied each of the particulars in the Statement of Claim and they disclosed “an arguable defence”. The appeal was unsuccessful and the defendant appealed to the Court of Appeal. Having considered the appeal, the Court of Apeal allowed the appeal and set aside the judgment.

In both Pereira -v- Beanlands and Day -v- RAC Motoring cases the defendants had actually filed in the Courts their Draft Defences and the merits of the defence cases were disclosed by the affidavits and the Defences filed. Thus the affidavit evidence together with the defences were sufficient for the Courts to assess the merits of the case for the defendants in the two cases cited and then applied the general guiding principles set out in the Saudi Eagle and Allen -v- Taylor cases.

In the present case before us, no draft defence was ever placed before the Court when this application was brought. The defendants are simply relying on the affidavits filed in support of the application. Perhaps this was done in the hope that the affidavits would disclose the merits of the defendants’ case. I will return to this aspect of the matter later.

In this jurisdiction, the authority on setting aside default judgment is Kayken Pacific Limited -v- Harper [1987] SILR 54 where, after referring to the cases of Evans -v- Bartlam (supra) and Grimshaw -v- Dunbar [1953] 1AII E R 350, 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 triable issue is disclosed. If there is not, the exercise would be pointless.

Where, however, the court finds there is a viable defence it is clear O.29 r.12 gives it an unfettered discretion to set aside any default judgement.”

The Court, in that case pointed out that an affidavit of merit showing that the defendant has a prima facie defence would be sufficient to set aside a judgment obtained by default. It further pointed out that the Court need not at such a stage of the proceedings concern with possibility of the defence being successful but simply whether a triable issue was disclosed.

In a recent case of Leslie Allinson -v- Monique Medlin, (1996) Civ. App. 7 of 1996 (CA) (Judgment given 15 April 1996), the Solomon Islands Court of Appeal also, after referring to Evans -v- Bartlam (supra) and General Steel Industries Inc. -v- Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, allowed a judgment in default to be set aside on the basis that the defence disclosed “triable issues that were capable, if established, of affording an answer to the plaintiff’s claim.” The positions expounded in Allinson -v- Medlin and the Kayuken -v- Harper cases are thus similar, in that, a default judgment can be set aside if affidavit of merit or materials before the Court, establish that the defendant has a prima facie defence as shown by the triable issues disclosed. See Fiji Sugar Corporation -v- Mohamed [1978] FCA 33; (1988) 34 FLR 81; Barlow & Anor -v- Than [1987] I VLR 315. See also Reef Pacific Trading Limited & Ors -v- Reef Pacific (Sydney) Pty Limited & Ors (1994) Civ. App. No.1 of 1994 (CA) (judgment given on 4 November 1994) where the Court of Appeal set aside a default judgment on the basis that the material before the trial judge raised triable issues which established an arguable defence on the merits. I would however, venture to suggest that a prima facie defence for the purpose of setting aside a default judgment which is regular must be one that is more than just showing an arguable defence on the face of the materials before the Court. It must show a defence which is viable and has some degree of conviction, so that unless it is displaced, it will stand. This clearly entails that the prima facie defence must be more than just an arguable defence.

Setting aside Regular and Irregular Judgments.

A judgment which is obtained regularly must be distinguished from a judgment which is irregularly obtained. Although the Court ought not lay down rigid rules which will deprive it of jurisdiction to set aside a default judgment, it will take into consideration as well the fact that such a judgment is a regular judgment from which the plaintiff derives certain rights. As such it is a firm rule of practice that for such a judgment to be set aside, there must be affidavit of merits, that is to say, an affidavit setting out facts which disclose a prima facie defence. On the other hand where judgment is irregularly obtained, the defendant is entitled, as of right, to have it set aside ex debito justitiae. Once the irregularity is established, the Court has no discretion to refuse to set it aside. See Samson Poloso (On behalf of HM Salo Store) -v- Honiara Consumers Coopertaive Society Ltd [1988-89] SILR 16.

As mentioned earlier, the judgment in the present case was regular and as such it can be set aside if a defence on the merits is shown by the materials before the Court. Is there a defence on the merits shown by the affidavits filed on behalf of the defendants in this case? To that I shall now turn and deal with the affidavits filed by the defendants.

Affidavit of Nicholas John Styant-Browne

The affidavit of Nicholas John Styant-Browne is probably the main metrial relied upon by the defendants in support of their application to set aside the judgment. In the main, Mr Styant-Browne affidavit contains general denials of the matters raised in the plaintiff's Statement of Claim. The reason for the general denials, argued Counsel for the defendants, was that the claims themselves in the Statement of Claims are equally general. Having observed the allegations in the Statement of Claim, I am of the view that they do raise particulars of acts which are said to constitute the torts alleged to have been committed by the defendants in this case. The defendants responses to the plaintiffs’ claims are, admittedly, general and contained in the affidavits of Nicholas John Styant-Browne, Denis Walter Reinhardt and Mary Miranda Polis.

In his affidavit, Mr. Styant-Browne re-iterated that the allegations contained in the Statement of Claim are “unsustainable.” Unfortunately the basis for the strong denial has not been shown. It has to be shown by material particulars to counter the particular allegations raised in the Statement of Claim. Apart from the response to para. 8 (b)(1)i) of Statement of Claim, which response denies funding trip from Solomon Islands to Australia for Thuguvoda and Gatu for the promise to bring proceedings against first and second plaintiffs and stating that such a trip was for the purpose of taking instructions to conduct litigation on their behalf, the rest of the matters raised by Mr. Styant-Browne in his affidavit are general denials which on any view would be difficult to see how a defence on the merits can be successfully established through them.

Affidavit of Denis Walter Reinhardt

The affidavit of Denis Walter Reinhardt filed on 3 August 2000 relied upon in this application is even more general. It contains nothing more than a bare support to the affidavits of Nicholas John Styant-Browne and Mary Miranda Polis. Like that of Nicholas John Styant-Browne, Denis Walter Reinhardt’s affidavit expressly reserved the right to challenge the jurisdiction of this Court to deal with the plaintiffs’ claim in this action. However, it may be too late in the day to seriously raise that challenge since the defendants had by their conduct acknowledged the jurisdiction of this Court in this action. In any case it had already been shown that the nature of the torts alleged and the acts which constitute them, do suggest a strong connection between the acts and this jurisdiction.

Affidavit of Mary Miranda Polis

The affidavit of Mary Miranda Polis falls into the same catagory as that of Dennis Walter Reinhardt in its general denials of the plaintiffs’ Statement of Claim. Indeed like both affidavits of Nicholas John Styant-Browne and Dennis Walter Reinhardt, Mary Miranda Polis’s affidavit offers no material particulars to substantiate a claim that the defendants have a defence on the merits which carry some degree of conviction. Her affidavit is another attempt to explain away the defendants failure to file defence.

Is there a defence on merits shown?

Counsel for the defendants had strenuously contended that the defendants’ affidavits have shown a defence on the merits to the plaintiffs’ action in this case. Each of the defendants in their affidavits, says counsel, has raised “arguable and compelling” defences to the allegations raised by the plaintiffs. With respect, I disagree with counsel. The affidavits referred to are in the main, general and contain nothing that can be said to be “arguable and compelling.” A defence which is “arguable and compelling,” to use the defendants’ terminology, in my view, must be one that has a reasonable prospect of success. For a defence which is said to be “arguable” only and not compelling may have some chance of being sustained in a case where a defence had been filed and the plaintiff had sought to strike it out. In a case where no defence had been put in place and judgment had already been obtained in default, the defendant, in my judgment, must demonstrate, in substance, through affidavit and any other materials, including draft defence, placed before the Court that there is a defence on the merits which has reasonable prospect of success, that, it must carry some degree of conviction. That is the test which I feel bound to apply in this case and I do so apply.

Despite the strenuous argument by Counsel for the defendants in this case, in my judgment the affidavit materials placed before this Court in support of the application do not disclose a defence which has reasonable prospect of success. The chart prepared by the plaintiffs, helpfully and clearly shows that the defendants have simply glossed over the allegations of facts contained in the plaintiffs’ Statement of Claim. It is therefore open to this Court to conclude that the defendants’ have not shown that they have a defence on the merits which has any degree of conviction.

Exercise of Discretion.

There remains, of course, the question of discretion of the Court, a discretion which is unfettered by any binding principle. The only true and compelling guide in the exercise of the Court’s discretion is the attainment of justice, that is justice according to law. In a case such as the present one, there are factors which the Court do take into consideration in the exercise of its discretion as to whether or not to grant the remedy sought. The factors which the Court takes into account when exercising its discretion include, the circumstances giving rise to the default judgment being entered, the nature of the suggested defence (if any filed) disclosed in the affidavit materials placed before the Court, the delay in taking steps to prosecute the defence, the harship or injustice to the parties and the history of the litigation from the time the cause of action arose. These factors are not exhaustive.

In the present case, the circumstances giving rise to the default judgment, the fact of the delay on the part of the defendants and the history of the litigation had been adequately considered in the two previous judgments in this action, (judgements given by the High Court on 10 June 1999 and by the Court of Appeal on 6 July 2000), and I do not feel necessary to traverse them here again. With regard to the proposed defence (if any) disclosed, I have dealt with that in this judgment when considering the affidavits filed on behalf of the defendants. I shall only need now to deal with the question of hardship or injustice to the parties.

One of the basic functions of the Court is, within rules obliging proper compliance with the procedures, to ensure that the parties have a just outcome to their dispute, according to law: Reef Pacific Trading Limited -v- Island Enterprises Limited (1995) Civ. App. 1 of 1992 (CA) (Judgment given on 31 August 1995). The Court is therefore mindful that the objective of its decision is to do justice to the parties according to law.

The defendants’ contention is that there would be no injustice to the plaintiffs if the judgment is set aside. Indeed Counsel suggested that it would enable the plaintiffs to prove each of their allegations contained in their Statement of Claim. The plaintiffs’ on the other hand, have staunchly maintained that the defendants have not shown a defence on the merits and as such, the application to set aside judgment should be refused.

One of the purposes of the discretionary power in such a case as the present one, is to avoid the injustice which might be caused if judgment followed automatically on default. On the other hand a default judgment is a regular judgment from which the plaintiff derives certain rights which are enforceable. It is therefore incumbent on the defaulting party to show that the judgment ought not to be issued, lest, injustice be caused to him. Where the defendant has failed to establish the alleged injustice, then inevitably, the court is bound to allow the default judgment to follow.

In the present case, the defendants have failed to demonstrate that they have a defence on the merits entitling the Court to set aside the default judgment obtained on 10 June 1999 and contained in the Order of this Court dated 1 July 1999. No injustice to the defendants has been shown if the judgment is allowed to be issued upon default by the defendants. The only complaint of injustice echoed throughout the defendants argument was that it would not be just to refuse to allow them to have another chance to defend the action. I am afraid, they had that opportunity and failed to make use of it. They allowed the judgment to be entered against them and they cannot now be allowed to take advantage of their non-compliance with procedural rules. The warning given by the Court of Appeal in Reef Pacific Trading Limited -v- Island Enterpises Limited (supra) must be noted. There the Court stated at p.18 of the judgment:

“Unless Courts of Appeal show restraint in disturbing interlocutory and procedural orders, litigants. with “long pockets” or with determination to delay the vindication of legal rights, will take advantage of the Court’s leniency. Whilst the rigidity of the past in the application of procedural orders must be avoided, so too must the indiscipline of indifference to procedural rules and orders;”

The same sentiment was made by the Court of Appeal at pages 29 - 31 in the judgment given on 6 July 2000 in this action.

The first defendant is a firm of solicitors who has the means at their disposal to ensure that the conduct of their case complied with the discipline of the substance and practice of the law in litigation. They took charge of the conduct of the defence case for all the defendants. They were aware of the proceedings seeking judgment against them and yet had chosen not to take the necessary steps to avoid judgment being obtained against them. The conduct of the first defendant in the case was as described by the Court of Appeal, “both cavalier and irresponsible”. Like the defendants in the Saudi Eagle case, the defendants in the present case have deliberately chosen not present any defence to the action. Instead they were prepared to run the risk of having a default judgment entered against them. Such a conduct by a party in the case is also a relevant consideration in the exercise of the Court’s discretion. I do also take this into account in this case.

Maintenance and Champerty

I need only say one or two words on the objection by the defendants as to the applicability of the tort of maintenance and champerty in Solomon Islands. The tort of maintenance and champerty is applicable in Solomon Islands by virtue of paragraph 2(1) and (2) of Schedule 3 to the Constitution, despite its abolition by the Criminal Law Act 1967 of the UK which Act has no application in Solomon Islands.

Conclusion

Having considered this matter most anxiously, I conclude that there is clearly no basis for setting aside the default judgment in this case.
The application by the defendants to set aside judgment granted on 10 June 1999 and contained in the order dated on 1 July 1999 is refused with costs, certified for overseas Counsel.

(Sir John Muria)
CHIEF JUSTICE