Warner v Yanjian Tonga Ltd (in liquidation) [2022] TOSC 10; CV 55 of 2018; CV 5 of 2021 (18 March 2022)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY

CV 55 of 2018
(and CV 5 of 2021)

BETWEEN:

DIANE WARNER Plaintiff

-and-

[1] YANJIAN TONGA LIMITED (in liquidation)

[2] STONE COMPANY LTD

[3] HONGTAO YU

[4] FIETOKONI COMPANY LIMITED

[5] YALU GE

[6] CHINA CIVIL ENGINEERING CONSTRUCTION CORPORATION SOUTH PACIFIC (TONGA) LIMITED
Defendants

Plaintiff’s application for default judgment

RULING

BEFORE: LORD CHIEF JUSTICE WHITTEN QC
Appearances: Mr S. Fonua for the Plaintiff (by AVL)

Mr S. Taione for the Second, Third and Sixth Defendants (by AVL)
Mr S. Tu’utafaiva for the Fourth and Fifth Defendants
Date of hearing: 18 March 2022
Date of ruling: 18 March 2022

1. On 10 March 2022, the Plaintiff filed an application against the Second to Sixth Defendants herein (the “active Defendants”) for judgment in default of defence to the Plaintiff’s Third Amended Statement of Claim. On 18 March 2022, I heard the application and after considering the material and hearing from counsel, the application was determined ex tempore and was refused. Reasons were given orally at the time. As the application raised a significant issue of principle on the proper interpretation and application of Order 14 of the Supreme Court Rules, which may be instructive on future applications of this kind, those reasons (with some minor additions) are now published hereunder.
2. On 17 December 2021, directions were made requiring:
   • (a) the Plaintiff to file a Third Amended Statement of Claim by 21 January 2022;
   • (b) any applications to strike out that amended claim, or any part thereof, were to be filed by 4 February 2022; and
   • (c) if there were no applications to strike out the claim, Statements of Defence were required to be filed by 25 February 2022.
3. The balance of the directions culminated in the case returning for further directions on 18 March 2022.
4. On 15 January 2022, a volcanic eruption occurred between Ha’apai and Tongatapu. The eruption caused a tsunami and a showering of volcanic ash which resulted in major destruction and disruption throughout those island groups. As a further consequence of the eruption, the international and domestic internet cables were severely damaged resulting in a telecommunication and internet blackout for most of the next month. During the period since 15 January 2022, the aforementioned events have been so widely publicised and reported upon that numerous nations around the globe have provided material and other support to assist in the nationwide recovery which is ongoing.
5. In addition, on or about 1 February 2022, Covid-19 was detected in the community. Since then, there has been a series of lockdowns with varying levels of restrictions which have added to the disruption across all sectors of society, including private and government operations.
6. In my view, those extraordinary and unprecedented circumstances alone are a sufficient explanation for the Defendants’ failure to have filed their defences to the Third Amended Statement of Claim on time. The Plaintiff was four days late in filing her Third Amended Statement of Claim. The explanation for that by Mr Fonua - that he had to make special arrangements with Wantok (an internet provider) for the documents to be downloaded - was consistent with the experiences of most in Tonga who have been affected by these recent natural disasters and continuing impacts of the Covid-19 pandemic.
7. Central to Mr Fonua’s submissions was that Order 14 is to be interpreted so that once the date for filing of defences has passed, without defences having been filed, a Plaintiff is automatically entitled to judgment. He referred to the decision in Digicel Tonga Ltd v Leha'uli [2011] TOSC 9 at [15]. There, the then Chief Justice recited the terms of Order 14 rule 3, namely, that failure to file a defence would entitle the Plaintiff to enter judgment for the sum claimed in the case of a liquidated sum (referring to sub-rule(1)) and where the claim is for unliquidated damages, judgment for damages to be assessed (referring to sub-rule (2)).
8. In my respectful opinion, Order 14 does not support the proposition submitted by Mr Fonua. Order 14 r. (1) is entitled “Application may be made ex-parte”. It provides that when a defendant has failed to file a defence within the time limited by various rules specified thereunder, the Plaintiff may by ex-parte application enter final judgment against that defendant. Rule 2 concerns the supporting documentation that is to be provided with that application. Rule 3 concerns entry of judgment and provides in sub-rule (1) that where the writ is endorsed with a claim for liquidated damages only, the Plaintiff may enter judgment for a sum not exceeding that claim in the writ, and for costs. The balance is not relevant for present purposes. Rule 4 provides for setting aside a judgment entered under the order if the defendant satisfies the Court that (a) there was good reason for the failure to file a defence in time; (b) there is an arguable defence; and (c) the Plaintiff will not suffer irreparable injury if the judgment is set aside.
9. An application for default judgment is made to the Court. It may be due to certain infelicities in the wording of rules 1 and 3 to suggest that it is a Plaintiff who enters judgment. It is not. A Plaintiff may apply to the Court to enter judgment. If the Court is satisfied that the application for judgment has been made in accordance with the Rules, and subject to any other considerations that may be relevant, it is the Court that then enters judgment against the defaulting defendant.
10. Further, the use of the word ‘may’ clearly connotes a permissive nature to the Order and there is nothing in the language which, in my view, supports the submission that upon the Plaintiff filing an application, the Court must or shall immediately enter judgment. That interpretation is consistent with the text, context and purpose of the Order, particularly when read in conjunction with Order 5 rule 1 (power of the Court to extend or abridge time). In that regard, I agree with Mr Tu’utafaiva’s submission that if default judgment was required to be automatically entered in accordance with Order 14, then the Court’s power under Order 5 rule 1 could potentially be compromised. It ought be observed, however, that the power conferred by Order 5 rule 1 may be exercised before or after judgment.
11. In the vast majority of such applications, where there has been no defence filed at the outset, and no indication by a defendant of wishing to dispute the claim or participate in the proceedings, judgment will usually be entered on the papers and without further enquiry. But that does not mean that the Court does not have a discretion, in an appropriate case, as to whether judgment should be entered, particularly when it has information before it in a case which has been on foot for some time, which is relevant to the exercise of that discretion. The discretion also springs from the Court’s inherent jurisdiction to prevent abuses of its processes.
12. When the instant ex parte application was first filed, I directed that it proceed on notice. The reasons for that included the long history of this proceeding (commenced in 2018) which has been due in large part to delays on the part of the Plaintiff and her counsel with investigations into the underlying facts, obtaining documents and analysis and articulation of the allegations and claims against the current Defendants. The Defendants have entered defences and otherwise participated in the proceedings as against them, to date, as they have been progressively joined by the Plaintiff.
13. The delays in the progress of the proceeding have now been reflected in the Third Amended Statement of Claim. Examination of the document reveals significant changes to the nature of the cases and relief sought against at least some of the Defendants. Today, Mr Taione foreshadowed an application to strike out the claim in its current form against the Sixth Defendant.
14. I am satisfied that the Defendants, through their counsel, have explained the reasons for delay in filing their defences as being due to the recent calamities described above. However, the impacts of those challenges cannot go on forever and all concerned in court proceedings must redouble their efforts to progress cases without further avoidable delays.
15. On any view, and in the circumstances, the length of delay in filing defences cannot be regarded as inordinate.
16. I also accept, to a certain extent, Mr Tu’utafaiva’s complaint that the Plaintiff did not seek an extension of time within which to file the current statement of claim, although I do not accept that alone as a reason for not filing a defence. Even with a common sense, commensurate extension of five days on the date directed for the filing of defences, they should have been filed on or about the 2nd of March this year. The instant application was filed eight days later.
17. However, I am slow to discount the extent to which people have been impacted by the various recent difficulties including the ability to operate legal practices, obtain instructions and documents, and to communicate generally during the blackout period. Notwithstanding, I agree with Mr Fonua that counsel for the active Defendants should have put him on notice and sought his client’s consent to an extension, failing which, applications to the Court should have been promptly filed. Be that as it may, today, both counsel for the Defendants indicated that they will be in a position to file defences within a relatively short time. Further, Mr Fonua did not suggest that his client would be prejudiced by an extension of time for the filing of defences.
18. A further reason for not accepting the Plaintiff’s submission is that I consider that in the circumstances of this case and its history, it would be an act of futility and a waste of time and cost to enter judgment against the Defendants now, only to have them apply to set aside those judgments, which undoubtedly, they would. The three requirements under Order 14 rule 4 have already been canvased. Reasonable explanations for the delay have been given. The details of their prospective defences to the amendments within the Third Amended Statement of Claim are yet to be revealed but I have no doubt that if counsel for the active Defendants were not satisfied that their clients had arguable defences, they would not have appeared today seeking an extension of the time within which to file those defences. If, after those defences are filed, the Plaintiff considers that the defences or any part of them are susceptible to being struck out, then that application can be brought. Otherwise, there has been no suggestion and certainly no evidence that if the time for defences is extended (or if any default judgments were set aside), the Plaintiff might suffer irreparable harm which could not be remedied by appropriate orders for costs. So much may be assumed given the long history of the matter and as mentioned, the various changes of case and evolving case concept demonstrated by the Plaintiff so far.
19. Ultimately, in my view, it is not in the interests of justice in the circumstances of this case to seek to dispose of it by default judgment without any adjudication on the merits. Default judgment should be reserved for those cases in which a Defendant does not dispute the claim or does not wish to participate in the proceedings from the outset. That has not been the position of the active Defendants in this proceeding. The pleadings to date reveal numerous issues to be tried including important questions on the interpretation and application of relevant provisions of the Companies Act and the Liquidator’s powers to recover assets (and alleged assets) of the two liquidated companies now the subject of the proceedings. Those issues all require careful consideration once properly articulated in completed pleadings and supported by all available evidence.
20. Accordingly, the Plaintiff’s application for default judgment is refused.
    

NUKU’ALOFA	M. H. Whitten QC
18 March 2022	LORD CHIEF JUSTICE