Fujitsu (NZ) Ltd v International Business Solutions Ltd [1998] VUCA 13; Civil Appeal Case 07 of 1998 (23 October 1998)

IN THE COURT OF APPEAL OF
THE REPUBLIC OF VANUATU

CIVIL JURISDICTION

Appeal Case No. 7 of 1998

FUJITSU (NEW ZEALAND) LIMITED
Appellant

AND:

INTERNATIONAL BUSINESS SOLUTIONS LIMITED
First Respondepondent

AND:

GREATER PACIFIC COMPUTERS
Second Respondent

AND:

JAN MARK POZDENA
Third Respondent

Coram: The Acting Chief Justice LUNABEK Vincent J.,
 p;& bsp;DOON A SS Jo John J.,
 p; &nsp; &nbsp &nbssp; & Rsp;R BER J., ;&nbssp;&nnbsp; &nbs; &nbp; &nsp;& bsp; bsp; MARUM Reggett J.

Counsel: Mr. SUGDEN Robert for the Appellant,
&nbssp;&nnbsp;;&nbssp;&nnbsp;; &nbsp &nbs;&nbs; nbsp;Mr.p;Mr. MALCOLM COLM John for the Respondents

Date ofing: p>th Date of Judgment: 23^rd October 1998 p>

JUDGMENT

This appeal is brought by leave from an interlocutory judgment entered on 13^th August 1998 which ordered that certain orders made by the Court on the 2^nd of July 1998 be vacated, that the Respondent’s application for security for costs be dismissed, that both parties be at liberty to apply for further directions, and that there be no order as to costs.

The proceedings were initiated on 22^nd August 1997 by a Writ indorsed with a statement of claim. The present appellant was plaintiff, and in this judgment it is convenient to continue to refer to it as the plaintiff. The plaintiff sought to recover monies due under a loan agreement and guarantees from the three defendants (the present respondents) and the delivery up of a software package which was the security provided by the first defendant for the loan. The defendants appeared by their solicitor Mr. Hakwa. The defendants also indicated to the plaintiff an intention to dispute the claim. The plaintiff advised that an application for summary judgment would be made under Order 14 of the High Court (Civil Procedure) Rules, 1964. To this end a summons seeking summary judgment and affidavits in support were prepared by the plaintiff. The affidavits were later sworn by Mr. Steven Brown on 13^th October 1997 and Mr. David Hudson on 27^th November 1997. These documents were sent to the Registry. After some delay the summons was issued indorsed with a return date of 2^nd of July 1998.

In the mean time on 22^nd October 1997, the defendants filed defences and counterclaims. The defences admitted the loan and other transactions relied upon by the plaintiff and admitted that the repayments had not been made under the loan agreement. However, the defendants alleged that in breach of implied terms in the contracts which comprised the transaction between the parties, the plaintiff had not given the defendants technical support for the development of software and had not supplied of latest releases of software packages that the defendants required for their business. The pleadings did not quantify the counterclaim, although in earlier correspondences between the parties the defendants had said that their losses were in excess of US$ 2 million. In substance the defendants sought to raise these losses as a set-off by way of defence to the plaintiff’s claim.

On 2^nd July 1998, the application for summary judgment came on for hearing. Mr. Hakwa did not appear to represent the defendants as counsel for the plaintiff had expected. Inquiries by the Court staff disclosed that Mr. Hakwa who is a member of Parliament was at Parliament House. Nonetheless counsel for the plaintiff proceeded with the hearing satisfying the primary judge that the summons under Order 14 had been duly served, and that the time and date of the hearing had been notified to Mr. Hakwa in accordance with the requirement of the Rules.

On the affidavits of Mr. Brown and Mr. Hudson, and in default of any affidavit evidence from the defendants, the Judge ordered that there be judgment for the plaintiffs against the defendants for US$ 175 982. 74 and that the defendants deliver up to the plaintiff’s solicitors forthwith the software package which comprised the security.

On the 5^th of July 1998, when the defendants learned of the summary judgment, they applied to have it set aside. Affidavits were filed by Mr. Hakwa and by the Third defendant denying that either Mr. Hakwa or the defendants were aware of the hearing on 2^nd July 1998. The third defendant, Mr. Pozdena, in his affidavit referred to the defendants’ counterclaims and deposed that:

"I confirmed that all three defendants in this action have substantial claims against the plaintiff and that they expect such claim to be tried by this Honorable Court in the normal course."

The application to set aside the orders made on the 2^nd of July 1998 came on for hearing on the 9^th July 1998. The plaintiff opposed the setting aside, arguing first that the defendants had been properly notified of the hearing and secondly because there was no affidavit from the defendants which disclosed with the requisite detail reasonable ground of defence. The primary judge reserved his decision, and delivered written reasons for judgment on 13 August 1998.

The learned judge was satisfied that the Order 14 Summons had been duly served at Mr. Hakwa’s office, but said that as Mr. Hakwa was at Parliament performing his duty to the State , that provided a good and reasonable excuse for his non attendance on the 2^nd July 1998. His Lordship also said that the summary judgment had been obtained irregularly as a plaintiff was required to obtain leave from the Court to apply under Order 14 and this had not occurred. His Lordship said that the requirement for leave had not been brought to his attention at the hearing on 2^nd July 1998.

As we understand His Lordship’s reasons, he then proceeded to consider the merits of the Order 14 Summons afresh. He said that the admissions made by the defendants in their pleadings concerning the loan agreement and the Defendants’ failure to make repayment were only qualified admissions because the defendants went on to complain that the plaintiff through its failure to perform its side of the transaction had caused the defendant’s loss. His Lordship referred to the defences and counterclaims and said :

"Without their counterclaims, their defences would not be good defences. But having made qualified admissions based on their counterclaims some of which, if not all, have been denied by the Plaintiff, I agree with Mr. Hakwa that it is most appropriate to proceed through the usual and normal procedure to allow the defendants to have a proper trial of their counterclaims. For the plaintiff to proceed under Order 14 having knowledge of all the defendant’s defences and counterclaims is to me taking a short cut. "

Accordingly, His Lordship held that the summary judgment should be set aside and the orders under appeal were made.

On this appeal the plaintiff challenges the order setting aside the summary judgment and the order relating to costs. There is no cross appeal by the defendants concerning the refusal to order security for costs.

Before this Court the plaintiff as appellant has advanced again the arguments put to the primary judge. The appellant contends that the primary judge erred in entertaining the application and in setting aside the summary judgment because Mr. Hakwa and the defendants had received proper notice of the hearing, and because the defendants had failed to put forward evidence that showed any realistic prospect that they had a defence to the claims. The appellant contends that the summary judgment should be reinstated, and that the defendants should be ordered to pay into Court the amount of the judgment and to deliver up the software to await the outcome of the trial on the counterclaim.

In our opinion the primary judge did not fall into error by entertaining the application to set aside the summary judgment, although we reach this conclusion on grounds which differ from those relied on by the primary judge. It is true that in accordance with the strict requirements of the Rules, notice of the hearing was given to Mr. Hakwa. However, the Rules of Court are intended to further the interests of fairness and justice, and they must be applied with common sense in a realistic way to ensure that the purpose, not just the letter, of the Rules is achieved. When Mr. Hakwa did not appear at Court on 2^nd July 1998 common sense, as well as common courtesy, required that inquiry be made to find out why. For all that the counsel for the plaintiff knew, Mr. Hakwa may have been involved in an accident on the way to Court, or may have been detained at the last minute for reasons quite beyond his control. That inquiry was appropriate was recognized by the Court, and the Registry staff made telephone calls which disclosed that Mr. Hakwa was at Parliament House. In these circumstances, we consider the matter should not have proceeded, at least without further inquiry to Mr. Hakwa to ascertain whether he had merely overlooked the Court appointment or whether his absence was deliberate. In the latter situation, further inquiry would have been necessary to ascertain if the defendants personally were aware of the application.

In the absence of information as to why Mr. Hakwa was not present, we think both common sense and a sensible application of the Rules required that an important hearing such as an Order 14 application, should not go ahead there and then. Counsel for the plaintiff should have invited the Court to fix another convenient time, for example later that day or at a latter date. If at the resumed hearing it transpired that counsel for the defendants had merely overlooked the appointment, the plaintiff could be compensated by an order for costs occasioned by the unnecessary adjournment.

The Court in its inherent jurisdiction has power to reopen a judgment obtained in default of appearance by the party against whom a judgment is entered, if the justice of the case so requires. That is plain from the authorities conveniently referred to in the decision of Chief Justice Cooke in Brenner -v- Johnson and others [1985] 1 Van. L.R. 180 at 181-183. This power is reflected in Orders 13 and 29 of the Rules of the High Court which deal with judgments entered in default of the filing of an appearance or pleadings. In those situations, the discretion to set aside a judgment regularly entered is usually only exercised where there is an affidavit of merits from the defendants. However, that is the guiding principle, not an absolute and invariable rule by which the discretion of the Court is to be exercised.

The present case is not one where there has been a default in filing an appearance or a pleading. Rather it concerns a failure of parties to be present at a hearing to present their side of a contested case. In this type of situation there is no rule of practice that an affidavit of merits should be filed by the party seeking to set aside the judgment. Each case has to be decided on its facts. For example, if a party fails to attend when a matter comes on for final trial, the Court would be concerned with the reasons for the non-appearance of the party. The merits of that party’s case would be very much a secondary consideration. Here, the hearing concerns a summary judgment application under Order 14. In our opinion if the primary judge was satisfied that the defendants were not present at the hearing because it was overlooked by the counsel, he was justified in exercising his discretion to reconsider the merits of the Order 14 application, even in the absence of evidence as to the merits of the defendants’ case.

The failure of the defendants to establish by evidence the merits of their defence would be of central importance to the outcome of a reconsideration of the Order 14 application, but was not a reason to refuse to entertain the application at all.

Both Mr. Hakwa and the defendants deposed in their affidavits which were before the Court on the 9^th July 1998 that they were unaware of the hearing on 2^nd July 1998. Had a simple inquiry been made of Mr. Hakwa that day, it would have revealed that his non-attendance was not intentional. The failure of the counsel of plaintiff to ascertain why the defendants were not represented before proceeding with the hearing, in our opinion provided further reason for the primary judge to reconsider the decision made by him on 2^nd July 1998.

The failure to observed a common sense approach to the application of the Rules will frequently results in the party seeking to rely on the technicalities of the Rules not achieving any useful forensic advantage. This case illustrates the point. The insistence that the hearing proceed on 2^nd July 1998 has resulted in the further hearing on 9^th July 1998, followed by this appeal which will lead the matter being returned for a further hearing of the Order 14 application. Apart from the costs involved, the plaintiff has been delayed by several months.

We should repeat what the Court of appeal said in Michel –v- The Public Service Commission and others, Civil Case 7 of 1998, judgment delivered 8^th October 1997. The Court there said:

"It is essential that at every step in a process it is remembered that any action taken should be designed to advanced the speedy just and proper determination of a real dispute. Substance must have priority over form.

Expect in the most exceptional circumstances every step should involve hearing all persons who have a legitimate or genuine interest in the determination which has to be made.

Experience in a number of high profile cases in recent years should demonstrate to the Bar that a step which is taken without hearing from all who have a genuine interest will not advance the case but will slow the process and eventually be to the disadvantage of the party of initiates such approach"

Whilst we agree that the primary judge did not err in reconsidering the orders made on the 2^nd July 1998, we do not agree with two reasons that led to His Lordship’s decision to do so. First, we do not share his view that Mr. Hakwa had a good and reasonable excuse for not being present at Court because he was fulfilling his duties as a member of Parliament. Where a legal practitioner agrees to act for a litigant and becomes the solicitor on the record at Court, or agrees to appear as counsel, he or she is required to discharge the responsibilities that attached to that role. If other commitments conflict, for example a court commitment conflicts with a commitment as a member of Parliament, or as a legal practitioner practicing in another jurisdiction, the practitioner must always make arrangements for the client to be properly represented at Court by another counsel.

We are also unable to agree with the primary judge that an application under Order 14 requires the prior leave of the Court. There is no such requirement stated in Order 14. Order 14 provides a summary means of obtaining judgment where a defence is filed frivolously as a delaying tactic, or where the defendant has no arguable basis for asserting a defence. In this sense Order 14 intentionally provides a "short cut", and a plaintiff who seeks to rely on Order 14 in an appropriate case should not be criticized for invoking the procedure.

The next question is whether the primary judge erred in setting aside the summary judgment rather than confirming it after hearing both sides.

On an application under Order 14 the plaintiff is required by affidavit evidence to verify the facts on which the claim is based, and to state that in the deponent’s belief there is no defence to the claim, or to the part of the claim in respect of which judgment is sought: O. 14 r 1. If the plaintiff’s affidavits meet this requirement, which they did in the present case, the plaintiff is entitled to judgment on the claim unless the defendant satisfies the Court with respect to the claim, or the part of the claim to which the application relates, that there is an issue in dispute which ought to be tried: see O. 14 r 3. The principles which have been developed under the equivalent of Order 14 in other jurisdictions require that the defendant either establish a technical objection such as that the plaintiff’s proceedings are defective or do not fall within Order 14, or adduce evidence to show on the merits that the defendant has a good to the claim. Usually this will be done by the defendant filing affidavit evidence but may be done by oral evidence: see O.14 r 3(a). The defendants ’ evidence must give particulars of the grounds of defence to be relied upon. Where that defence depends upon facts which differ from the facts asserted by the plaintiff, those facts must be identified and, where reasonably possible, verified by a deponent who can speak directly as to them. A mere general denial of the claim, or a general assertion that the defence has merit, will, without more, not be sufficient. Such a denial or assertion lacks the necessary degree of particularity.

Where the defendant does not dispute the allegation on which the plaintiff’s claim depends, but seeks to set up a counterclaim, the court is required to consider whether the counterclaim is raised by way of a defence of set-off, or whether it is a claim which arises independently from the cause of action asserted by the plaintiff.

A set-off may consist of a set-off of mutual debts, or the setting up of matters of complaints which , if established, reduce or even extinguished the claim, or the setting up of an equitable set-off (per Morris L J. in Hanik -v- Green [1958] 2 Q.B. 9, 23.) If the defendant raises a bona fide defence alleging breaches of the agreements sued on, whether in respect of work done or goods supplied or otherwise, the defendant is entitled to leave to defend. In the present case the general assertion of the defendants is that the plaintiff was in breach of implied terms of the contract upon which the plaintiff sues. If there is merit in the counterclaim, it could therefore operate as a defence of set-off.

In the present case, if the Order 14 application were to be decided only on the evidence that was before the primary judge on the 9^th July 1998, we think the plaintiff would be entitled to a summary judgment. Whilst Mr. Pozdena deposed to a belief that the defendants have a good counterclaim which the pleadings assert arises out of the transactions on which the plaintiff sues, the evidence adduced by the defendants fails to give any particulars of fact or law which show that the counterclaim has any merit. On the other hand the plaintiff’s evidence, and admissions made in the defence, sufficiently establish the plaintiff’s entitlements to judgment on its claim.

However, we do not consider that justice would be done if the Plaintiff’s claim for judgment under Order 14 were determined solely on the information which was before the Court on 9^th July 1998, at least without giving the parties the opportunity to file additional affidavit evidence. As the submissions of counsel before this Court unfolded, it appeared to us that the real issues that should have been addressed by both parties on the Order 14 summons were not adequately canvassed by the affidavit material before the Court. The affidavits prepared by Mr. Hakwa and Mr. Pozdena were obviously prepared in haste, and were directed primarily to issues other than the merits of the cross-claim. There was however correspondence which passed between the parties prior to the Order 14 application annexed to an affidavit of Mr. Sugden. That correspondence shows that the defendants had been asserting losses in excess of US$2 million. The pleadings sought to articulate a claim which if backed by affidavit evidence would have justified the Court refusing summary judgment and granting leave to defend.

It is apparent from the orders made by the primary judge that he considered that the material before him was sufficient to raise serious issues worthy of trial. In our view the evidence was insufficient to reach a final conclusion on that point. However there was sufficient information available to warrant giving the parties further opportunity to address the merits which the correspondence and the Court file suggest may have been overlooked whilst more technical points were argued with vigor. On the evidence now before the Court, we cannot be certain that justice would be done between the parties either by allowing the present order to stand, or by ordering summary judgment in favor of the plaintiff with or without a stay of execution.

In these circumstances we consider that the appeal should be allowed and the orders under appeal set aside. There should be an order that the application for summary judgment be reheard with liberty to each side in the mean time to file additional affidavit material. In this way the Court can be confident on the rehearing that both sides have had a proper opportunity to adduce whatever admissible evidence is available to support their respective cases.

At the conclusion of the argument the Court indicated to the parties that it proposed to take this course, and the following orders were announced:

1. Appeal allowed. Direct that the Order 14 application be heard afresh before another judge.

2. Liberty to the defendants to file and serve any further affidavits on which they intend to rely by 6^th November 1998.

3. Liberty to the plaintiff to file and serve affidavits in reply by 20^th November 1998.

4. List the Order 14 application for re hearing at 9.00 am on 26^th November 1998.

5. Costs of the appeal are to abide at the outcome of the hearing of the Order 14 application.

The intention of Order no. 5 is that the plaintiff will recover its costs of the appeal in the event that a summary judgment is entered in its favour at the rehearing. On the other hand if summary judgment is not entered and the defendants are given the leave to defend the claim, the defendants will recover their costs of the appeal.

23 October 1998

BY ORDER OF THE COURT

LUNABEK Vincent J. Acting Chief Justice	VON DOUSSA John J. Judge
ROBERTSON Bruce J. Judge	MARUM Reggett J. MBE Judge