HDD Development Ltd v Natei [2018] SBHC 21; HCSI-CC 189 of 2017 (16 February 2018)

HDD DEVELOPMENT -V- PATTERSON NATEI,
LIMITED HENRY SAU, JOE
(Claimant) MARTIN SEMI, JACK
OTFOTO, DICK VAU,
WILSON TOLONGEA,
MATHEW NATEI,
HENDRY TELEU,
JIMMY RAMO, STEVE
MELIVE,STEVE LAORE,
MARTIN MOALI,
MARY PONIGA,
FLORENCE PANIGA,
SIMON MOLI, STEVEN
OAMOLA, MATHIAS
UTUPIA
(1^st – 17^th Defendants)

HIGH COURT OF SOLOMON ISLANDS
(BROWN J)
Civil Case No. 189 of 2017

Date of Hearing: 7 February 2018
Date of Judgment: 16 February 2018

W. Rano for claimant
M. Bird for defendants

Application of Rule 17.54,55 in case where fraud on the losing party by the successful party, subsequently pleaded post judgment will ground claim to set judgment aside.

Brown J:

This is an application to set aside a judgment of the court given on the 11 October 2017, when the court answered agreed issues as follows;

“1. The claimant is entitled to eviction orders affecting all these defendants apart from the first fifth and sixth defendants and their families.

2. The first defendant has made out a claim for adverse possession in his favour and that of the fifth and sixth defendants benefit, in respect of part of the land in perpetual estate number 192-004-379.”

No orders appear to have been taken out, when I peruse the file. The application to set aside the judgment relies on a statement of case and supporting affidavit sworn by Pau Siew Hong on the 7 December last. Relying on the statement and supporting evidence, the applicant claimant (“the applicant”) bases its case on two grounds; the judgment was obtained by fraud, or independently, the judgment does not reflects or result in the courts intention.

Before addressing the applicant’s case, I shall deal with the defendants’ argument advanced by Ms. Bird of counsel. She relies on the finality of the order, disposing of the applicant rights in these proceedings, leaving an aggrieved litigant right of appeal but not any right to have the findings set aside under High Court Orders 17.54,17.55 of our Rules. Whilst referring to the principle of “finality”, where such final order may only be set aside by way of appeal, she argued this application was “the wrong approach to set aside an order that is a final order disposing of the rights of the parties to an action”. In support she referred to Justice (as he then was) Apaniai’s decision in Kololeana Development, John Peti anors, Delta Timbers v Jackson Piasi anors, and Lily Duri^[1] where, accepting the principle the judge by ratio decidendi said;
“28. In this application, the Applicants are also seeking to have the July 2008 Ruling and the October 2008 Order set aside on the ground of fraud. The application is made as part of the present claim.
29. Unfortunately, the principle stated above has made it clear that the correct approach is to file a fresh action. It follows therefore that the application to set aside the July 2008 Ruling and the October 2008 Order on the ground of fraud cannot be allowed to stand as it is a wrong approach.”

Curiously no argument or at least, no address by reasons, to the Rules particularly R. 17.55 was apparent in the judgment. Nor apparently had the judge been appraised of the earlier decision of the Court of Appeal in Aeounia v Osiramo^[2] which recognized a power in this court, pursuant to earlier Order 38 Rule 7;
“Any verdict or judgment obtained where one party does not appear at the trial may be set aside by the Court upon such terms as may seem fit, upon an application made within 21 days after the trial”.

As a consequence, the appeal was allowed and the trial judge’s findings that he was functus officio set aside, the proceedings remitted for re hearing. Order 38 was the precursor dealing with applications of this nature, now Order 17.55 which states;
R.17.55 The Court may set aside an order at any time if:

1. The order was made in the absence of a party, or
2. The order was obtained by fraud; or

4. The order does not reflect the courts intention at the time the order was made, or
6. 
   

To conflate R.17.54 (power to amend simplicitor before filing of order) with R.17.55 (power to set aside orders in particular circumstance) as Ms. Bird seeks, cannot be, for the particular rules are clearly directed at different events. The decision, then in Kololeana Development does not help her. That decision apparently failed to address the Rules providing for the course relied on by this applicant.

Ms. Bird does touch on an issue, concerning the relevance of R.17.54 by its wording, “before the filing of the order”, for the use of “order” in this fashion, need be contrasted with the “judgment” given in favour of those defendants. Whereas, by definction, “order” is deemed to be “judgment”, use in this case of “Order” may appear to differentiate between “order” as used in the earlier part of the rules (.......may amend or set aside an “order”) to that used in the latter part (before filing of the “order”). The Rules at R. 17.54 rather reflects the commentary in the White Book^[3] when dealing with rehearing;
“Rehearing by court of first instance – Before an order has been sealed, or otherwise perfected, there is jurisdiction in the court that made it to rehear the matter and withdraw or modify it (Re Harrison‘s Settlement [1955] Ch.260; [1955] 1 All.E.R.185, C.A). But after an order has been sealed, or otherwise perfected, then, unless it is an ex parte order (which can be discharged: Boylev. Sacker (1888) 39 Ch.D.249), or an order which does not embody the intention of the court (which can be corrected under O.20, r.11 the court making the order has no jurisdiction to review it, and the remedy is to appeal to the Court Appeal (Re St. Nazaire Co.(1897 12 Ch.D.88; Preston Banking Co. v. Allsup [1895] 1 Ch.141, C.A.; Chas Bright & Co. Ltd . v. Sellar [1903] UKLawRpKQB 175; [1904] 1 K.B. 6; Hession v. Jones [1914] 2 K.B.421, per Bankes J., p.427). In certain circumstances, the court which made an interlocutory order may vary or discharge it on the grounds of change of circumstances (Preston Banking .v. Allusp, above; Re Scowby, Scowby v. Scowby [1897] 1 Ch.741, C.A.; Re May (1883) 25 Ch.D.237;Scott v. Alvarez [1895] 1 Ch.596). (see generally paras . 20/11/6 to 8). In some cases the court may have power to conduct a rehearing (see below). An action may be brought to set aside a judgment obtained by fraud (see n., “judgment obtained by fraud,” para.59/11/4, n.3 below).

Where a judgment is said to have been obtained by fraud, the White Book^[4] suggests the “appropriate course would normally be to bring a fresh action to set aside that judgment, because in such cases, there will usually be serious and difficult issues of fact to be determined and therefore a first instance court is the most appropriate forum (Robinson v Robinson (1982) 2 All.E.R 699, C.A).

With that in mind, since our particular Rule 17.55(b),(d) allows this court power to set aside the judgment, [once satisfied there is some evidence to raise the question] I propose to consider the applicants case to determine whether the court may exercise the power, or if the proper course is to appeal on the question of fact. (I accept the application is allowed pursuant to R17.55 and while no order may have been taken out, from the manner in which the judgment has seen couched (answering agreed issues for trial) coupled with the statement of case, I am satisfied the defendant is not prejudiced by absence of formal order taken out. They have had opportunity to address the two issues now raised by the applicant.

By argument, counsel for the applicant, Mr. Rano says:
[22] It is not the intention of this application to re-litigate the question of adverse possession. Nor it is for the Judge to consider whether the new evidence is material in the sense of what the decision might be if the matter were to be tried with honest evidence. Rather the new evidence or facts is material to whether the original judgment can be impugned (see Royal Bank of Scotland Plc v Highland Financial Partner LLP [2013] EWCA Civ. 328 (12 April 2013)).
[23] It is submitted that there is a conscious and deliberate dishonesty in relation to the relevant evidence given, such as the concealment of relevant material facts. There is no doubt that the fact of the proceedings in 2006 is material to this proceeding (Takhar v Gracefield Development Ltd [2017] EWCA Civ.147, applied).

Mr. Rano relies on the authority of those English decisions. I accept the Court of Appeal has expressly held that English decisions made after the 7 July 1978 will be binding if they are merely declaratory of what the law was before that date.^[5] The Court of Appeal decision referred to earlier, appeal of Aeounia was concerned with our earlier Order 38 Rule 7 which reflected the English rule at the time, O.16 r.11 (setting aside judgment). The matters in our current Rule 17.55, give rise wider rights in this court to set aside an order, by definition including a right to set aside a judgment falling within the Rule.

When I refer again to the White Book at 59/11/4 (3.judgment obtained by fraud) the learned authors state; “The charge of fraud must be made with the same particularity as in an action and as strictly proved, and the same rules apply as to burden of proof and admissibility of evidence (Hip Foong Hong v Neotia [1918] UKPC 65; (1918) A.C 888 pp.893, PC)”.

Mr. Rano, by argument, relied upon the English case of Takhar v Grace field Development Ltd & Others (2017) EWCA.Civ.147 (a Court of Appeal decision from the High Court, Chancery Division, Mr. Justice Newey), a case where the appellant sought to show, after an earlier adverse decision, she had fresh evidence of a forgery which would have confirmed the earlier judges findings of a pattern of deceitful behavior so as to give rise to a fraud practiced on her by those defendant individuals, and thus had the judge been aware of the forgery, he would have rejected the defendants’ case.

After considering manifold authorities, the Court of Appeal determined to allow the appeal and remitted the matter to the trial judge on the question of whether Mrs. Takhar had satisfied the reasonable diligence condition in the case. Her case, whilst reliant on appeal similarly to the plea in the case before this court, (one of fraud only apparent after the event of the adverse decision) did address the law as it affected her in England.

I propose to consider whether the substantive law on which the Appeal Court relied to allow Mrs. Takhar’s appeal has relevance in this jurisdiction, since there have been divergence of decisions between the English and Commonwealth countries.

In an endeavor to put the divergence in perspective, I will start with the English Court of Appeal acceptance of a due diligence condition incumbent on the appellant, to show reasonable diligence before trial would not have found fraud by the respondent, before an attack on a previous judgment may be mounted. For while the English Court of Appeal^[6] accepted the need to show reasonable diligence before trial, Australia and Canada and in fact Hip Foong Hong diverged by allowing an exception to the policy against re-litigation (res judicata or abuse of process) in cases of fraud, [regardless of whether or not a “due diligence” condition was satisfied].

For by the doctrine of precedent I am obliged to follow authority binding on me but such authority stated to be the law in England, Owens Bank Ltd v Bracco,^[7] a House of Lands decision, where the leading judgment of Lord Bridges was said to be obiter dicta in so far as it dealt with the correct test for setting aside a domestic judgment on grounds of fraud, needs to be viewed through the prism of a New South Wales Court of Appeal decision in Toubia v Schwenke^[8]. The criticism of Bracco is recorded where dealing with the dissenting Commonwealth Authorities, in Takhar at 48, 49 & 50.
“ 48. Perhaps the most outspoken critic of Lord Bridge’s speech in Owens Bank Ltd v Bracco has been Handley JA who is also the editor of Spencer Bower and Handley on Res Judicata (4^th ed) 2009. In Toubia v Schwenke (2002) 54 NSWLR 46 he questioned whether Lord Templeman was right to base his statement of the law on Boswell v Coaks and said that Lord Bridge’s speech was obiter in so far as it dealt with the correct test for setting aside a domestic judgment on grounds of fraud. These dicta were in his view contrary to earlier decisions of the Privy Council and the House of Lords including the Opinion of the Hip Foong Hong v Neotia & Co [1918] UKPC 65; [1918] AC 888 where Lord Buckmaster said (at page 894):

“In all application for a new trial the fundamental ground must be that there has been a miscarriage of justice. If no charge of fraud or surprise is brought forward, it is not sufficient to show that there was further evidence that could have been adduced to support the claim of the losing parties; the applicant must go further and show that the evidence was of such a character that it would, so far as can be foreseen, have formed a determining factor in the result. Such considerations do not apply to questions of surprise; and still less to questions of fraud. A judgment that is tainted and affected by fraudulent conduct is tainted throughout, and the whole must fail; but in the present case their Lordships are unable to say that such a case has been established.”
49. But Handley JA went to say:

I would not follow the dicta in Owens Bank Ltd v Bracco, Owens Bank Ltd v Etoile Commerciale SA, and the Federal Court even if there was no High Court decision on the point because, with respect, the dicta are contrary to principle and earlier authority. The assumption is that the Court and the losing party were successful imposed on by the fraud of the successful party, but relief should nevertheless be denied and the judgment allowed to stand because the defrauded party was careless or lacked diligence in the preparation of his case. Contributory negligence is not a defence to an action for fraud whether the relief claimed is rescission or damages. As Brennan J said in Gould v Vaggelas (1985) 157 CLR 215, 252: ‘A knave does not escape liability because he is dealing with a fool.”’
50. The same view has been taken in Canada on the basis that fraud unravels all: see Canada v Granitile Inc (2008) 302 DLR (4^th) 40 at [209] and [303].

Handley JA averted to the dicta in Bracco critically by refusing to accept that a judgment should be allowed to stand where the court and the losing party were successfully imposed on by fraud, of the successful party, because the defrauded party was careless or lacked diligence in the preparation of his case.

In this courts view primary concern must be the claim of fraud which has been made post judgment, on evidence since given and the diligence question would stand in the way of the primary concern. The effect of adopting a principle requiring a due diligence condition before considering the alleged fraud (discovered subsequent to the judgment) was plainly shown by the reasons of Newey J, the judge of first instance in Takhar;
“37. To my mind, the reasoning in the Australian and Canadian cases is compelling. Finality in litigation is obviously of great importance, but “fraud is a thing apart”. Supposing that a party to a case in which judgment had been given against him could show that his opponent had obtained the judgment entirely on the strength of, say, concocted documentation and perjured evidence, it would strike me as wrong if he could not challenge the judgment even if the fraud could reasonably have been discovered. Were it impossible to impugn the judgment, the winner could presumably have been sent to prison for his fraudulent conduct and yet able to enforce the judgment he had procured by means of it: the judgment could still, in effect, be used to further the fraud.”

The England Court Appeal, in Takhar directly addressed the question of whether in later claims of fraud, the rule of policy (in Bracco) “admits of an exception” hence the unnecessary reasonably diligence condition before addressing the “fraud” question and refused to admit the exception. The reasons^[9] were:
“The due diligence condition has been applied in Hunter and stated to be the law in Owens Bank Ltd v Bracco. So far as this court is concerned, it represents the balance struck by the English authorities between the two Policy considerations, between the policy consideration which are in play and in my view we are obliged to apply it.”

The “obligation” touched on is clearly that obligation of precedent. The House of Lords decision in Bracco was given in 1992. A succinct statement of principle which reflected the earlier decision in Bracco was that of Lord Templeman in the Privy Council appeal of Owens Bank Ltd v Etoile Commerciale SA^[10];
“An English judgment is impeachable in an English court on the ground that the first judgment was obtained by fraud but only by the production and establishment of evidence newly discovered since the trial and not reasonably discoverable before the trial: see Boswell v Coaks (No.2) (1894) 86 L.T.365n.”

The policy concerning abuse of court process requiring parties to address their whole case in the 1^st instance and not to subsequently seek to litigate again, was the underlying basis of the principle of res judicata. The Court in Takhar recounted the “classic statement of principle to be found in the judgment of Wigram V-C in Henderson v Henderson^[11]
“In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicate applies, except in special cases, not only to points on which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.... Now, undoubtedly the whole of the case made by the bill might have been adjudicated upon in the suit in Newfoundland, for it was of the very substance of the case there, and prima facie, therefore, the whole is settled. The question then is, whether the special circumstances appearing upon the face of this bill are sufficient to take the case out of the operation of the general rule.”

The acknowledgment that “special circumstances” are sufficient to take the case out of the operation of the general rule rather recognizes exception, exceptions which have been named in our Rule 17.55. Amongst such exceptions is the instance of fraud.

In any case, the comments about refusal to reopen a case “in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have, from negligence inadvertence or even accident, omitted part of their case” may be seen to be ejusdem generis with the phrase “exercising reasonable diligence”.

It is, then that limited construction which is to be placed on that phrase “exercising reasonable diligence.” As matter of logic, fraud, found subsequent cannot be initially addressed.

I adopt Handley JA’s view that the Lord Templeman’s dicta were contrary to earlier decisions of the Privy Council and House of Lords including the Opinion of the Board in Hip Foong Hong^[12]

Consequently I accept the reasoning of Handley JA and find that the “due diligence condition” does not apply in cases where fraud is subsequently pleaded. The earlier English common law may be accepted to be declaratory of the law in the Solomon Islands.

The fresh evidence on which the applicant relies is in a sworn statement of Mr. Andy Leung filed in support on the 8 November 2017.
The significance, Mr. Rano argues of this fresh evidence is that;
“(a) the defendants could not have been on the land prior to 2006;
(b) there is no agreement with Pacific Seg Corp (which is clearly manifested by the lack of any proof of the existence of such agreements or simply the lack of any written agreement); and
(c) there was no meeting ever with Simon Leung.”

Such evidence in the face of evidence relied on by court in reaching its decision, supports the contention that Mr. Natei (for the defendants) was dishonest, and by such dishonesty, fraudulently obtained judgment in his favour.

When I read the fresh material, I am satisfied an issue arises over the honesty of Mr. Natei, an issue which needs to be tried. For all these reason, I set aside my earlier judgment. The issue of fraud in the plea of the applicant shall be set down for further hearing following directions listed for 13 April 2018 at 9:30.
Costs shall be reserved.

__________________
BROWN J

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^[1] (2013) SBHC 176, HCSI-CC 181 of 2007 (1 Nov 2013)
^[2] (2008) SBCA 5, CA-CAC 29 of 2007 (18 July 2008)
^[3] The Supreme Court Practice 1995 (Eng.), 591/1/5
^[4] Order 59 r.11/4
^[5] Cheung v Tanda (1984) SILR 108
^[6] Takhar v Grace field Development, Supra
^[7] (1992) 2 AC 443
^[8] (2002) 54 NSWLR 46
^[9] Takhar, 54
^[10] Supra (1995) 1 WLR44 at 48
^[11] [1843] EngR 917; (1843) 3 Hare 100 at 114-116
^[12] Supra