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Court of Appeal of Vanuatu |
IN THE COURT OF APPEAL OF
THE REPUBLIC OF VANUATU
(Appellate Jurisdiction)
CIVIL APPEAL CASE No. 27 of 2004
BETWEEN:
ANZ BANK (VANUATU) LIMITED
Appellant
AND:
DOMINIQUE DINH
Respondent
Coram: Justice Bruce Robertson
Justice John von Doussa
Justice Patrick Treston
Justice Hamlison Bulu
Counsel: Mr. Wade Roper for the Appellant
Mr. Robert Sugden for the Respondent
Date of hearing: 25 & 26 April 2005
Date of decision: 3rd May 2005
JUDGMENT
On 28 April 2004, a default judgment was entered in favour of the appellant against the respondent in the amount of Vatu 76,268,677 together with interest accruing on that amount until the judgment is satisfied in full at the daily rate of Vatu 28,519. The respondent was also ordered to pay the Appellant’s costs of and incidental to the proceedings as agreed or taxed.
On 13th December 2005, an Order was made in the Supreme Court which set aside the default judgment. Notwithstanding that the default judgment was set aside, the Respondent was ordered to pay the Appellant’s costs of the application. Detailed reasons for that decision were not delivered by the primary Judge at that time, although he indicated that written reasons would follow. No reasons had been published by the time that this appeal came on for hearing.
The Appellant appealed against the setting aside of the default judgment on the ground that the material placed before the primary Judge could not support an Order under rule 9.5(3) of the Civil Procedure Rules, No. 49 of 2002. That rule provides:-
“The Court may set aside the Default judgment if it is satisfied that the defendant:
(a) has shown reasonable cause for not defending the claim; and
(b) has an arguable defence, either about his or her liability for the claim or about the amount of the claim.”
In the absence of reasons from the primary Judge disclosing the reason or reasons which lead to the default judgment being set aside, this Court called upon counsel for the Respondent to identify why an Order under rule 9.5(3) would be justified.
This Court had the benefit of all the evidentiary material that was before the primary Judge, and also the benefit of very extensive written submissions from both parties. Counsel for the Respondent in oral argument expanded on his written submissions. His submissions identified five topics that require the consideration of this Court:
(a) that the Respondent has shown reasonable cause for not defending the claim;
(b) the default judgment was irregularly entered;
(c) the Appellant did not have a legal entitlement or standing to sue for the alleged debt;
(d) in the alternative, the Appellant is estopped from claiming part of the alleged debt, namely that part represented by a loan of USD$400.000; and
(e) in the further alternative, there is a real question to be tried about the calculation of interest included in the claim.
We take each of those topics in order:
(a) Has the Respondent shown reasonable cause for not defending the claim?
The Supreme Court claim was filed on 27 February 2004. On 9 March 2004 a process server purported to serve the claim on the Respondent by delivering a copy of the Supreme Court claim to the Respondent’s secretary. That this did not constitute proper service was realized by the Appellant’s advisors and the Supreme Court claim was served personally upon the Respondent on 24 March 2004.
In accordance with the Civil Procedure Rules, the Defendant, if he proposed to dispute the claim, was required to file a response within 14 days and a defence within 28 days of the date of service. Neither of these events occurred. Hence the Appellant’s application for a default judgment.
The default judgment was served on the Respondent on 12 May 2004. The judgment debt was not paid, nor was any action taken at Court by the Respondent in respect of it before 14 June 2004 when a Summons to the Respondent to attend an Enforcement Conference was served on him. It appears that the Respondent then sought legal advice as he recognized that enforcement of the Judgment could lead to an Order requiring him to vacate his domestic residence. An application to set aside the default judgment was filed on 29 June 2004.
The Appellant’s claim against the Respondent concerns an outstanding balance on loan accounts in respect of loans made in the years 1984 through to 1999. From mid 2001, the Appellant had been in fairly constant communication with the Respondent seeking repayment, or further security and a satisfactory repayment arrangement in respect of the outstanding monies. As time went on the Appellant became more insistent, and on 4 January 2004 served formal notices of demand. These were followed up by the Supreme Court claim. On 17 May 2004, the Appellant’s solicitors endeavoured to serve a copy of the Summons to Attend the Enforcement Conference, together with a letter setting out documentary material which the Appellant required the Respondent to produce at the Conference. The Respondent refused to accept those documents, but the attempted service would have brought them to his attention.
Notwithstanding this background, the Respondent in sworn statements placed before the primary Judge asserted that he had an inadequate understanding of the documents, and did not understand the steps being taken against him. The Respondent is a business man with long involvement in commerce in Vanuatu. The assertion that he did not understand the intended action being taken against him by the Appellant seems incredible.
Counsel for the Respondent has developed a complex argument that the requirements of the paragraphs (a) & (b) of the rule 9.5(3) are inter-dependent, and the requirement in paragraph (a) may be modified, even to the point of irrelevancy, by the strength of the defence demonstrated for the purpose of paragraph (b). That is, if the Defendant can establish an extremely strong ground of defence, the fact that no reasonable explanation for the delay can be demonstrated would not prevent a default judgment being set aside.
In the present case, we think that the appeal must succeed on other grounds, so it is not necessary for us to deal with the Appellant’s arguments on this topic at length. Suffice it to say that we think the language of rule 9.5(3) is plain. There are two requirements each of which must be considered on an application to set aside a default judgment. There may be some scope for taking into account the nature and strength of a defence advanced under paragraph (b) of that rule when considering what would constitute “reasonable cause” under paragraph (a) in the circumstances of a particular case. However that possibility does not lead to the conclusion contended for by the Respondent.
If there were a case where an unanswerable defence was demonstrated, but reasonable cause was not demonstrated, the rules would permit the default judgment to be set aside, but not for the reasons advanced by counsel for the Respondent. The purpose of the rules is to further the administration of justice. The rules should not be applied so as to cause or perpetuate injustice. In the extreme case postulated, the answer would lie in the application of rule 18.10 which deals with failure to comply with the rules, applied in light of Overriding Object 1.2(1), namely that the overriding objectives of the rules is to enable the courts to deal with cases justly.
Counsel for the Appellant also argued that the notion “reasonable cause” in rule 9.5(3)(a) should include consideration of whether the Defendant was given a reasonable opportunity to put his or her side of the case. At points in the presentation of this argument, we understood it to be suggested that there was some obligation upon the Claimant to do more than just serve a claim, for instance, to also seek out the Defendant and encourage his or her participation in the litigation. This argument finds no support in the rules themselves, and indeed in contrary to the scheme envisaged by the rules in litigation for the recovery of a contractual debt. The Respondent’s argument rests on dicta in a decision of this Court in Fujitsu (NZ) Ltd v. International Business Solutions Ltd, Greater Pacific Computers & Jan Pozdena, [1998] VUCA 13; Appeal Case No. 7 of 1998, judgment delivered on 23 October 1998. In that case, in the course of discussing a quite different situation, the Court endorsed the proposition that: “Except 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”.
That observation must be read in a context. The Court of Appeal decision concerned an application to set aside a Summary Judgment entered in default of appearance of counsel for the Defendant at a hearing. The Defendant had already filed a defence and counterclaim and had articulated the basis of his opposition to judgment. When the application for Summary Judgment came on for hearing, counsel for the Defendant, who counsel for the Claimant had expected to turn up, was not at the Court. The anticipation that the Defendant would have been represented was sufficient for inquiries to be made as to the whereabouts of the other counsel, and it transpired that he, being a Member of Parliament, was in Parliament. The Claimant proceeded with the application for Summary Judgment. It is hardly surprising that in those circumstances the Court stressed the importance of hearing the absent party. That case bears no similarity to a case of a debtor failing to respond to the service of recovery proceedings.
In the present case, not only had the Respondent failed to take action to answer the Supreme Court claim, he had over a long course of dealings, admitted the claim, and raised no possible ground upon which it could be defended.
In summary, on this topic we are inclined to the view that the information placed before the primary Judge does not establish a reasonable cause for not defending the claim within the prescribed time. However, we prefer to decide this appeal on the matters that arise in relation to whether an arguable defence about liability and quantum is demonstrated.
(b) Was the Default Judgment irregularly entered?
The Respondent’s argument is based on the fact that the affidavit of service relied upon to obtain the default judgment did not expressly depose to the fact that a Response document, Form 7, was served at the same time as the Supreme Court claim. Counsel for the Respondent contends that strict compliance with all relevant rules must occur for the default judgment to be regularly entered, and if not, that the default judgment must, without more, be set aside.
Rule 5.2 provides that the claim and response must be served on the Defendant personally unless the Court orders that service occur in some other way. Rule 9.2(2) requires that a claimant seeking a default judgment file a proof of service.
In his statement in support of the application to set aside the default judgment, the Respondent asserted that he was not served with a Response form. The Appellant thereupon filed a further affidavit of service from the process server deposing that a Response form was served at the same time as the claim. Counsel for the Respondent contends a disputed question of fact therefore arose. Not only was there irregularity in that the affidavit of service did not refer to the Response form, but now there is also a disputed question of fact which would justify setting aside the Default Judgment.
The significance of these deficiencies must be assessed in the factual context of the case. In the instant case, the context includes the history of demands, formal and informal, from the Appellant, and correspondence from the Respondent written after the Supreme Court claim was served. We refer below to the history of correspondence, but, significantly, at no time before the service of the Supreme Court claim did the Respondent challenge his liability to make payment of the sums claimed by the Appellant. After the service of the Supreme Court claim, the Appellant on 30 April 2004 wrote to the solicitors for the Appellant, with copies to the Appellant and the Chief Registrar of the Supreme Court, saying, in part:
“I acknowledge receipt of the Supreme Court Claim in this matter which was filed on 1st March 2004. I understand the intention of your client to make this claim, and I do not dispute the claim made by ANZ Bank in this matter. I am prepared to file documents in response to the claim. I wish to inform you that I am prepare to formally undertake to pay the amount claimed by your clients....”
The letter went on to say that the Respondent had in the past met an offer to make periodic payments, and to seek further time having regard to the economic situation of Vanuatu and the construction industry at that time.
In the circumstances of this case, even if a response form was not served with the Supreme Court claim, it was a mere technicality of no substance. The Respondent was plainly aware of the claim, and the need to respond to it. Moreover, he knew precisely the identity and address of relevant parties, including the Registrar of the Court, to whom he needed to respond. If no response had been served, in the circumstances this is an obvious case to dispense with strict compliance with the Rules, as provided for in Rules 18.9 and 18.10.
The argument based on irregularity is without merit.
(c) Does the Appellant lack standing to sue for the alleged claim?
When the Respondent first borrowed monies, he did so from La Banque Indosuez (Vanuatu) Ltd. On or about 25 March 1994 that institution changed its name to La Banque d’Hawaii (Vanuatu) Ltd. Whilst so named the Respondent borrowed further monies. On or about 31st November 2001, ANZ International (Hong Kong) Ltd became the beneficial owner of all the shares in La Banque d’Hawaii (Vanuatu) Ltd, and the name of the institution was again changed, this time to Banque ANZ Pacifique Ltd.
On or about 6 June 2002, ANZ International (Hong Kong) Ltd lodged a petition with the Supreme Court of Vanuatu seeking to amalgamate ANZ Bank (Vanuatu) Ltd (the Appellant in this proceedings) with Banque ANZ Pacifique Ltd. That application sought an Order under s.214 of the Companies Act, CAP. 191. An Order under that section was made by the Chief Justice on 4 July 2002, relevantly, the Order provided:
“(a) That ANZ Bank (Vanuatu) Ltd hereby succeeds to all the undertaking, assets, property, rights, powers and privileges of Banque ANZ Pacifique Ltd;
........
(d) That any proceedings pending by, or against, Banque ANZ Pacifique Ltd are hereby able to be continued by, or against ANZ Bank (Vanuatu) Ltd;”
The Order provided for the amalgamation to be advertised in the Gazette and in the daily newspapers. This occurred. The correspondence between the Appellant and the Respondent leaves no doubt that the Respondent was well aware that the present applicant was the successor of the bank from which he had borrowed.
Counsel for the Respondent contended that the Order of the Supreme Court pursuant to s.214 of the Companies Act was not effective to transfer the Respondent’s debt, and the right to sue for it, to the Appellant without his consent, or at least without notice to him as would occur if the debt was being assigned.
In our opinion this argument fails for two reasons. First, we consider there is no doubt that the Order made under s.214 of the Companies Act had the effect stated in the Order and was sufficient in itself to transfer the debt and the right to sue for it, to the Appellant. The Respondent’s arguments requires that the notion of “property” referred to in s.214 and paragraph (a) of the Supreme Court Order be read down so as not to include any contractual right that can only be assigned with the consent of a contracting party. In support of this argument reference is made to Nokes v. Doncaster Amalgamated Colleries Ltd [1940] AC 1014 where it was held that a contract of employment could not be transferred simply by a Court Order under a provision analogous to s. 214 of the Companies Act. In our opinion that decision does not assist the Respondent’s argument. Contracts of employment are of a special kind, which can only be transferred with the consent of the worker who is obliged to perform services for the employer. A contract of indebtedness is quite different. The creditor is entitled to assign a debt without the consent of the debtor, although to protect the legal assignment, notice to the debtor is required.
The argument also fails in this case as a matter of fact. In so far as notice to the Respondent may have been required that the debt was being transferred, and even if the consent of the Respondent was required, the correspondence between the parties makes it clear beyond doubt that the Respondent had been made fully aware of the transfer, and, by his silence over an extended period when he was corresponding about the loans, he must be taken to have consented.
This ground of the Respondent’s argument also fails.
(d) Is the Respondent liable to pay the capital sum in respect of USD400,000.00 loan?
The Respondent contends that the Appellant, by reason of the conduct of a former officer of La Banque d’Hawaii (Vanuatu) Ltd is estopped from seeking to recover the principal of this loan, although it is not in dispute that the Respondent is under a continuing obligation to pay interest on it.
The Respondent asserts the following facts in support of this allegation. In 1999 he obtained from La Banque d’Hawaii (Vanuatu) Ltd a bridging loan of USD400,000.00 at an interest rate of 6.5% to assist him to build a house at Elluck. He proposed to sell the house on completion to the French Ambassador, and to repay the loan out of the proceeds of sale. However, he says that later in 1999 he was introduced to a Mr. Ghosh by the Bank officer, and urged and induced by the officer to sell the house to Mr. Ghosh for USD1,000,000.00 from which the loan would be repaid.
In passing, we comment that the statement of the Respondent suggests that the probable reason why he agreed to sell the house to Mr. Ghosh was not pressure from the Bank officer, but the fact that Mr. Ghosh was proposing to purchase from the Respondent the White Sands Golf and Country Club for USD2,200,000.00 for which he had paid a deposit.
As events turned out, Mr Ghosh did not come good with the purchase price. The Bank officer arranged for USD600,000.00 to be paid to the Respondent who handed over the titles. This sum was the amount which the Bank was prepared to lend on the security of those titles to Mr Ghosh. The outstanding loan of USD400,000.00 was not discharged at that stage, but the intention was that it would be repaid when Mr. Ghosh paid the balance of the purchase price for the Elluck house. That never occurred. Mr. Ghosh delivered a cheque for USD500,000.00 to cover the outstanding obligations under the contract to purchase the house but the cheque was dishonoured when it was presented to the payee Bank in Hong Kong. The Respondent contends that the Appellant through the Bank officer is now estopped from denying that the USD400,000.00 is to be paid by Mr Ghosh, not by the Respondent, even though the Respondent acknowledges his ongoing liability to pay interest.
In our opinion these facts do not give rise to an estoppel of the kind suggested. The Bank officer may have agreed to defer calling up the loan whilst there was a prospect that the Appellant would receive sufficient monies from another source to cover the loan. However, the inevitable implication from the facts is that the loan would be repaid within a reasonable time, and if it were not paid by a third party, the Respondent would ultimately discharge it. A reasonable time has long since passed. Even taking the most benevolent view of the facts alleged by the Respondent, they provide no basis for asserting an arguable defence to that part of the claim which represents the principal of USD400,000.00.
The estopped argument is also highly inconsistent with a long course of correspondence between the parties from at least mid-2002. In that correspondence the Appellant had been pressing for repayment of the loans, or further security and a satisfactory payment arrangement. Throughout that correspondence, the Respondent acknowledges his liability to repay USD400,000.00, and at no stage does he raise any suggestion that by reason of the conduct of the Bank officer in 1999 he was not required to repay it.
(e) Is there any arguable issue about the quantum of the interest?
This argument rests on the broad proposition that the Respondent entered into borrowing arrangements with La Banque Indosuez (Vanuatu) Ltd, later La Banque d’Hawaii (Vanuatu) Ltd, and whilst he agreed to terms that would permit that Bank to vary interest rates according to its trade practice, the Respondent never agreed to the “ANZ Bank” applying its interest rates from time to time to the loans.
The argument, apart from making a broad allegation that the interest rates may not be those which would have applied had the institution which made the initial borrowings continued in existence, fails to descend to particularity. No instance is given of a calculation or figure that might be wrong. Where a Defendant seeks to establish an arguable question to avoid a summary judgment, or to demonstrate an arguable defence for the purpose of setting aside a default judgment, it is not sufficient for the Defendant merely to raise a general assertion that the claim might not be correct. The Defendant must give particulars sufficient to show that there is real substance to the argument. In a case like this, where the argument, if it had substance, would go only to a small part of the claim, the particulars given must also indicate which parts of the claim are open to possible question, and which parts are not affected. This is necessary so that judgment can be entered for that part of the claim which is not the subject of dispute.
The lack of particularity apart, the argument must fail anyway upon a consideration of the facts of this case. First, the initial lending institution, on or about 30 November 2001, changed its name to Banque ANZ Pacifique Ltd. At least from this time the Respondent must have known that his loans had become subject to the interest policies to the “ANZ Bank”, yet he raised no issue about that, and continue to thereafter acknowledge his liability for the Appellant’s claims, including interest calculations from time to time given to him. Further, the clause from the original borrowing documents upon which argument appears to rest, does not support the proposition advanced by the Respondent’s counsel. Article 3 of the first loan agreement provides:
“Account debit balances, including, as the case may be, the debit balance shown upon closing the account in favour of the Bank shall incur interest at the rate of 14% per annum payable to the Bank. Such interest shall be calculated in accordance with trade practice on the basis of a 360 day year. The Bank reserves the right to vary the interest rate applicable to debit balances upon giving eight days ordinary notice.”
The reference to “trade practice” concerns the banking practice of assuming each year has 360 days. It has nothing to do with the practice of a particular bank in fixing a rate of interest. The provision just stated along with similar provisions in the other loan documents, clearly reserved to the lender the right to vary interest rates from time to time.
The fact that the Respondent has in all his dealings with the Bank never questioned the interest calculation is in itself a telling indicator that this part of the Respondent’s argument is without substance.
In summary, we consider that the information which was before the primary Judge provided no basis for finding that the Respondent had an arguable defence to the claim or any part of it.
In our opinion the appeal should be allowed, and the default judgment should be reinstated. That part of the judgment of the primary Judge which ordered the Respondent to pay the costs of the application to set aside the default judgment should remain.
The formal Orders of the Court are therefore as follows:
DATED at PORT-VILA this 3rd day of May 2005
BY THE COURT
J. BRUCE ROBERTSON J
JOHN von DOUSSA J
PATRICK I. TRESTON J
HAMLISON BULU J
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