Development Bank of Samoa v Manono-uta Primary School [2003] WSSC 10 (23 May 2003)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

DEVELOPMENT BANK OF SAMOA
established under the Development Bank Act 1974.
Plaintiff

AND

MANONO UTA PRIMARY SCHOOL
Manono-Uta.
First Defendant

AND

PAIAU FAAPITO
of Manono-uta, Samoan Matai.
Second Defendant

AND

LEIATAUA PESA
of Manono-uta, Samoan Matai.
Third Defendant

AND

FAILELUA AITU
of Manono-uta, Samoan Matai and others all of Manono-uta.
Fourth Defendant

AND

OTHERS
all of Manono-uta.
Fifth to Thirty Second Defendants

Counsel: TP Atoa for plaintiff
HJ Schuster for defendants

Hearing: 13 May 2003
Judgment: 23 May 2003

JUDGMENT OF SAPOLU CJ

The present proceedings are concerned with the application by the defendants to strike out the two statements of claim filed by the plaintiff on the grounds of want of prosecution and expiration of the limitation period. I will deal with the defendants strike out application under three Parts. Part A will set out the nature of the application. Part B will deal with the limitation issue. Part C will deal with the issue of want of prosecution.

PART A

Strike-out application

The plaintiff has filed two separate statements of claim for what is said to be the same cause of action. The first statement of claim is dated 28 May 1992 and was filed and served on the defendants in 1992. The second statement of claim is dated 3 October 2002 and was filed and served on the defendants in 2002.

By an amended application dated 21 March 2003, the defendants through their present counsel has sought to strike out both statements of claim on the grounds that (a) the plaintiff is guilty of inordinate and inexcusable delay in prosecuting their claim and the delay is prejudicial to the defendants, and (b) the second statement of claim has been filed outside of the limitation period and is therefore statute barred. I have decided to deal first with the limitation issue and then with the want of prosecution issue because how the want of prosecution issue is to be determined will depend to a major extent on how the limitation issue is to be determined. It is therefore necessary to deal with the limitation issue first.

For the purpose of clarity, I wish to refer at this point to certain relevant matters before I deal with the issues which call for decision in this case. I think it is significant to bear in mind that there are two contracts in this case: a contract of loan or loan agreement between the plaintiff bank and the named borrowers, and a contract of guarantee between the plaintiff bank and the named guarantors. Even though the two contracts are related in the sense that the guarantors have contracted under the contract of guarantee to be answerable to the plaintiff bank for all and any monies owing or payable to the plaintiff bank by the borrowers if they default on their loan under their contract of loan with the plaintiff bank, the two contracts are really separate.

Except for the first defendant, all the other defendants are either borrowers under the contract of loan or guarantors under the contract of guarantee. It is also important to bear in mind that not all the defendants are being sued in the same capacity. Some of the defendants are being sued as borrowers under the contract of loan and others are being sued as guarantors under the contract of guarantee. The respective liabilities of the two categories of defendants arise under two separate contracts. As it will become clear later in this judgment, the recognition of the fact that there are two separate and different contracts involved in this case will have a very significant bearing on the determination of the strike-out application by the defendants.

I should also point out that the first defendant which is the Manono-uta Primary School is not a party to any of the two contracts in this case. Thus it has no standing to be sued as a defendant in this case. Generally only a party to a contract can sue or be sued on the contract. Further, I have reservations whether the Manono-uta Primary School is a legal entity that can sue or be sued in its own name because experience shows that primary schools as such are not incorporated or registered as legal entities.

PART B

Limitation

It appears from the material placed before the Court by both counsel, that a loan agreement in one of the plaintiff bank’s standard forms was executed on 1 June 1979 between the plaintiff bank and Paiau Faapito second defendant, Leiataua Pesa third defendant, Faileleu Aitu fourth defendant, and Fiapaipai Leiataua who passed away in or prior to 1992 and is therefore not sued by the plaintiff. All these four defendants constituted the then school committee for the village of Manono-uta at the time. I will henceforth refer to the three surviving members of that school committee who are being as the second, third and fourth defendants as the defendant borrowers because they are borrowers under the contract of loan that was executed with the plaintiff bank. This will distinguish them from the other defendants who are being sued on the contract of guarantee and of whom I will refer to later as the defendant guarantors.

The amount of the loan was $30,000 and it was for the construction of a school building of nine classrooms for the Manono-uta Primary School. The loan repayments were to be for $400 per month commencing in August 1979 but it is not clear from the loan agreement when that loan was to be repaid in full. As security for the loan, the plaintiff obtained a joint and several guarantee executed by thirty individuals who are members of the village of Manono-uta but not including the defendant borrowers. The guarantee was also a continuing guarantee. Not all the guarantors are being sued in the plaintiff’s action but that is not material for present purposes.

After the loan had been disbursed, the defendant borrowers together with Fiapaipai Leiataua deceased, obtained an additional loan of $26,800 from the plaintiff on 4 October 1979 for the same purpose as the initial loan. These two loans were consolidated into one loan by making the necessary alterations in the loan agreement. The loan repayments were then increased from $400 per month to $650 per month and the first such repayment was to be made in November 1979. This consolidated loan together with interest was to be repaid in full in October 1992. The joint and several guarantee which was also a continuing guarantee remained unchanged and continued to apply to the consolidated loan.

From the material placed by the defendants before the Court and the submissions made by their counsel, the last loan repayment by the defendant borrowers was made in December 1988. No further repayment has been made since. Thus in 1992, the then solicitors for the plaintiff filed a statement of claim dated 28 May 1992 against all the present defendants. In effect what has been done in that statement of claim is to sue the present defendant borrowers on the contract of loan and the present defendant guarantors on the contract of guarantee. It is also alleged in that statement of claim that the monthly repayments under the consolidated loan were to commence in September 1988 with final payment due in May 1997. This is inconsistent with what is expressly provided in the loan agreement that the first monthly repayment for the consolidated loan was to commence in November 1979 with the loan to be repaid in full in October 1992. What is in the loan agreement must be accepted as correct in the absence of any evidence to the contrary.

It was implicit in the submissions of both counsel that if the defendants had been in default on the loan, it was after the last monthly repayment that was made in December 1988. So the default must have occurred in January 1989. The limitation period of six years therefore started to run from that time and expired either in December 1994 or January 1995. This must be in relation to the liability of the defendant borrowers under the contract of loan because the default that had occurred was a default on the part of the defendant borrowers in failing to continue to meet their obligation of making monthly repayments under the contract of loan. That, of course, is not a default on the part of the defendant guarantors under the contract of guarantee.

Under the contract of loan several steps are open to the plaintiff to take if the defendant borrowers are in default. One of these steps is that the plaintiff may demand and sue for the balance of the loan that remains owing together with any accrued interest. It was common ground between counsel that the first statement of claim which the plaintiff filed in 1992 was filed within the six years limitation period. Even though the loan contract provides that one of the steps the plaintiff may take if the defendant borrowers default is to "demand" and sue for the balance owing on the loan, a "demand" is not an essential condition precedent which must first come into existence before the liability of the defendant borrowers may arise under the contract of loan in this case. The position is different with regard to the contract of guarantee as it will be shown later in the course of this judgment.

After the plaintiff commenced proceedings against all the defendants in 1992, the defendant borrowers continued not to make any further loan repayments. Then in 1998, after the limitation period in respect of the contract of loan had expired, the Government made a payment to the plaintiff for the present loan by way of interest relief. Counsel for the defendants advised the Court that the defendants had no knowledge of such an interest payment at the time it was made by the Government. What had happened, as he explained, was that after the devastation and catastrophe caused to the country by cyclone Ofa in 1990 and cyclone Val in 1991, the Government thought of how to render assistance to members of the public who had suffered much hardship in the aftermath of the two cyclones. One of the ideas that the Government came up with was to give financial assistance by way of relief interest payments to people with loans at the plaintiff bank. Arrangements were then made between the Government and the plaintiff bank for that purpose and relief interest payments were made direct by the Government to the plaintiff. Counsel for the defendants also told the Court that the defendants had no knowledge or had anything to do with those arrangements made between the Government and the plaintiff and the defendants loan was not the only loan that was given payment by way of interest relief. It was therefore submitted for the defendants that it would not be right that any right of action by the plaintiff under the loan which must have become time barred at the end of 1994 or the beginning of 1995 should have been revived in 1998 because of a relief interest payment made by a third party over whom the defendants had no control and of which they had no knowledge at the time.

After 1998, the plaintiff filed in 2002 a second statement of claim dated 3 October 2002. It was said by counsel for the plaintiff that this second statement of claim is for the same cause of action that was pleaded in the first statement of claim. I will deal with the events leading up to the filing of this second statement of claim in a little more detail when I come to Part C of this judgment which deals with the issue of want of prosecution. Suffice for present purposes to point out that after the first statement of claim was filed in 1992 no further action was taken by the then solicitors for the plaintiff to progress or expedite the claim. In the same year the defendants filed a statement of defence dated 11 September 1992 in which they denied the claim and raised the limitation issue as one of their defences. It is also alleged in the statement of defence that no formal demand was ever made by the plaintiff upon the defendants informing them of the date of default. On this question of demand, there is also no mention in the material placed before the Court by counsel for the plaintiff that the plaintiff had ever made a demand on the defendants. I did ask counsel for the plaintiff in the course of her submissions whether the plaintiff had ever made a demand in writing upon the defendant guarantors and she seemed to think that no such demand has ever been made.

Now after no further action was taken by the then solicitors for the plaintiff on the first statement of claim from 1992 to 1996, the plaintiff asked for its file and documents back when it employed its own in-house solicitor. Unfortunately, the first statement of claim and all other documents must have been misplaced or lost by the previous solicitors for the plaintiff as no file or documents were ever returned to the plaintiff. Enquiries by the plaintiff with the Justice Department for the original of the first statement of claim that was filed with the Court registry revealed that that document had also been misplaced or lost. However, the plaintiff never enquired of then counsel for the defendants who still had the copy of the first statement of claim which was served on the defendants in 1992. It appears rather strange that the statement of claim that was filed in the Court registry in 1992 and the copy thereof which the plaintiff or its then solicitors had kept both got misplaced or lost. The outcome of all that is the second statement of claim that was filed by the plaintiff in 2002. The defendants have now applied to strike out this second statement of claim as statute-barred because it was filed outside of the limitation period. Amongst the documents filed by the defendants is a copy of the first statement of claim. So after so many years, a copy of the first statement of claim is now before the Court again and is available to the plaintiff if the plaintiff has not already received a copy of it from the defendants. I must, in fairness to present counsel for the plaintiff, point out here that she was only recently hired by the plaintiff and she is no way responsible for the delay in this matter. In fact it is she who is trying to expedite and finalise this matter.

Section 6 of the Limitation Act 1975 which is the relevant provision states as far as relevant:

"Except as otherwise provided in this Act, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,-

(a) actions founded on simple contract or tort."

For the purpose of s6 of the Act it is necessary to ascertain first whether a cause of action has accrued and if that is so then when did the cause action accrue because the limitation period would only start to run from that time. Given that the action by the plaintiff is founded on two separate contracts, the contract of loan and the contract of guarantee, I will have to deal with the limitation issue in relation to each of the two contracts separately. I will start with the contract of loan first and then with the contract of guarantee.

Contract of loan

To determine whether a cause of action has accrued against the defendant borrowers under the contract of loan and, if so, when did that cause of action accrue, one should look at the terms of the contract and then at the conduct of the borrowers to see whether it has breached the contract. The question becomes partly one of construction of the contract and partly whether the defendant borrowers by their conduct have defaulted on any of their obligations under the contract.

I have decided to proceed on the basis implicit in the submissions of both counsel that the plaintiffs cause of action under the contract of loan against the defendant borrowers accrued when the defendant borrowers defaulted on their repayment obligation under the contract. That must have been in January 1989 for the last loan repayment was made in December 1988. So the limitation period of six years must have started to run from January 1989 and expired either in December 1994 or January 1995.

The next issue is whether the interest payment made by the Government in 1998 had the effect of postponing to 1998 the time when the plaintiff’s cause of action against the defendant borrowers accrued. Counsel for the defendants submitted that because that payment was made by the Government after the limitation period had expired it could not have had the effect of postponing the time when the plaintiffs’ cause of action against the defendant borrowers accrued. This is an important issue whether a payment made on a contractual debt that is already time barred has the effect of extending the time when the cause of action accrued to the time of such payment and thus in effect revive afresh the cause of action and the limitation period. I prefer not to express any view on that issue in this case but to leave it open for full arguments in an appropriate case. However, I am of the present view that the interest payment made by the Government to the defendant’s loan as part of an arrangement with the plaintiff bank to assist people with loans at the plaintiff bank due to the devastation caused by the two cyclones in 1990 and 1991 was a payment made without the knowledge of the defendant borrowers and therefore should not be binding in any way on the defendant borrowers so as to prejudice any limitation defence they may now have to an action by the plaintiff on that loan. Of relevance on this point is s 25(6) of the Limitation Act 1975 which as far as relevant provides:

"Any payment made in respect of any debt or other liquidated pecuniary claim shall bind all persons liable in respect thereof:

Provided that a payment made after the expiration of the period of limitation "prescribed for the bringing of an action to recover the debt or other claim shall not "bind any person other than the person making the payment and his successors..."

On the basis of s 25(6) the interest payment made by the Government after the expiration of the limitation period would bind only the Government and not the defendant borrowers who had no control over the Government and its plans and who had no knowledge of such a payment being made.

It therefore follows that when the plaintiff filed its second statement of claim in 2002, its cause of action against the defendant borrowers on the contract of loan pleaded in that statement of claim was already well outside the limitation period. That cause of action must therefore be struck out of the second statement of claim as it is time barred. That leaves only the plaintiff’s cause of action in the second statement of claim against the defendant guarantors under the contract of guarantee. But before I move on to the contract of guarantee, it must be pointed out again that the plaintiffs first statement of claim filed in 1992 within the limitation period is now before the Court again and it is open to the plaintiff to proceed against the defendant borrowers on its cause of action against them pleaded in that first statement of claim provided it survives the application by the defendants to dismiss for want of prosecution with which I will deal in Part C of this judgment.

Contract of guarantee

One of the two contracts in this case is the contract of guarantee wherein the defendant guarantors had promised to the plaintiff bank to be answerable for the loan by the defendant borrowers under the contract of loan if they default. For limitation purposes, the question again is whether a cause of action has accrued against the defendant guarantors on the contract of guarantee and, if so, when did that cause of action accrue for the limitation period of six years would only start to run from that time. Before I refer to the relevant provisions of the guarantee, I need to refer first to some of the authorities on the question of when a cause of action accrues on a contract of guarantee which contains a provision that the guarantor is liable for payment of the guaranteed sum "on demand".

In the English case of Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833 which is one of the often cited authorities in this area of the law, a company was granted a loan and allowed an overdraft facility from the plaintiff bank in 1894. One of the securities given for the loan and the overdraft facility was a joint and several guarantee executed by two of the company’s directors. In 1912 about eighteen years after the loan was granted, the plaintiff bank demanded payment of the loan from the company which was the debtor. Then three years later in 1915, the plaintiff bank commenced an action on the guarantee against one of the guarantors without having made a prior demand for payment even though the guarantee required such a demand. To the plaintiff bank’s action on the guarantee, the defendant guarantor raised the limitation defence arguing that the action was brought outside of the limitation period and was therefore barred by the then English Statute of Limitations. In the English Court of Appeal, Bankes LJ in response to the argument by counsel for the defendant guarantor that the plaintiff’s claim was time barred stated at pp 848 - 849 of his judgment:

"The guarantee is in form a joint and several guarantee to pay on demand all sum or sums of money which shall become due and owing from the company to the bank, whether principal or interest......... If demand before action is an essential part of any cause of action by the bank against the guarantors, then the statute could not commence to run until the necessary demand was made....... If, therefore, a demand for payment before action brought was necessary, the action is not barred by the statute. Mr Crompton contended that no demand was necessary, and that the bank could have brought an action at any time without any demand. I do not agree with this contention. In my opinion the document, both from its nature and from its language, indicates that the guarantors stipulated for a demand being made upon them before the bank could enforce the guarantee against them. The authorities from very early times are, I think, clear that in a case like the present an actual demand before action has always been considered necessary."

The other members of the Court Pickford LJ and Scrutton LJ expressed similar views. Scrutton LJ in the course of the argument in that case also made the following comment at p836:

"In In re Brown’s Estate [1893] UKLawRpCh 44; [1893] 2 Ch 300 Chitty J held that where there is a present debt and a promise to pay on demand, a demand is not considered a condition precedent to an action, but that where there is a promise to pay a collateral sum on demand, e.g. in a covenant by a surety for the principal debtor, then a demand must be made before action brought or before the money can be considered as owing by the collateral debtor."

In the leading Australian textbook in this area of the law, namely, The Modern Contract of Guarantee (1992) 2^nd ed by Phillips and O’Donovan which is the latest edition of that work available to the Court, the learned authors state at pp 419 - 420:

"There is no necessity for the creditor to make a demand upon the guarantor before enforcing the guarantee, unless the terms of the guarantee so require. Many modern contracts of guarantee do, however, require such a demand. An example is a guarantee to pay ‘on demand all money which may from time to time hereafter be owing or unpaid’ or a guarantee which requires the creditor to request payment of the principal debt before proceeding against the guarantor. In such cases a demand (in addition to the issue of proceedings) is essential because it has been held that in the case of a sum of money payable under a collateral agreement no cause of action arises until the demand is made. The case of a guarantee is, therefore, distinguishable from the case of a present debt expressed to be payable ‘on demand’ where the view has been taken that a demand (other than the issue of proceedings) is not a prerequisite to the bringing of an action to recover the debt".

The learned authors then go on to explain the effect of the absence of a prior demand on the accrual of a cause of action in a claim by a lender or creditor on a contract of guarantee which requires such demand to be made by saying:

"The fact that no cause of action arises for the enforcement of such a guarantee until the demand is made has the result that the Statute of Limitations does not begin to run until that time".

In the New Zealand textbook Commercial Law In New Zealand (2000) 4^th ed by Borrowdale et al, it is stated in para 25.5.2 at pp 470 - 471:

"Without repeating the voluminous clauses in standard guarantees word for word, it can be said in summary that the guarantor usually accepts responsibility for every possible amount which the principal debtor may owe to the bank, at the time when a demand is made on him or her by the creditor. The requirement for the making of a demand removes any doubts which might exist as to when the guarantor’s liability accrues, thus also making clear the point from which time begins to run for limitation purposes".

From these authorities, it is clear that in the context of a bank loan, as it is in this case, if the contract of guarantee requires a demand to be made on the guarantor before he is answerable under the guarantee upon default by the borrower or principal debtor, then the liability of the guarantor does not arise until such demand is made. Any cause of action by the lending bank against the guarantor will not accrue until demand is made. And the limitation period will only start to run from the time the cause of action accrued.

The contract of guarantee in this case is in one of the plaintiff’s standard forms. It contains a stipulation that the guarantors hereby guarantee to the "Bank", the plaintiff, the payment "when demanded in writing" of all and any monies now or hereafter to become owing or payable by the "Debtor", the defendant borrowers. No such demand has ever been made by the plaintiff on the defendant guarantors. It follows that no cause of action has accrued against the defendant guarantors and the limitation period has not yet started to run. Thus the second statement of claim that was filed by the plaintiff in the year 2002 is not time barred insofar as it relates to the action by the plaintiff against the defendant guarantors. That part of the second statement of claim will therefore remain and not struck out. It does appear clear, however, that the actions against the defendant guarantors in the first and second statements of claim are both premature because no cause of action has ever accrued against them. As the strike out application does not seek to have the actions against the defendant guarantors struck out on that basis, no order is made to that effect.

My conclusions on this part of the case are therefore as follows:

(a) the plaintiff’s action against the defendant borrowers under the contract of loan as pleaded in the second statement of claim dated 3 October 2002 is struck out as it is out of time and therefore statute-barred;

(b) the plaintiffs action against the defendant borrowers under the contract of loan as pleaded in the first statement of claim dated 28 May 1992 which was filed within time will remain;

(c) the plaintiff’s actions in the two statements of claim against the defendant guarantors are premature as no demand has yet ever been made on the guarantors as required by the contract of guarantee and therefore no cause of action has accrued and the limitation period has not yet started to run in respect of both actions;

(d) the second statement of claim is not out of time insofar as it relates to the plaintiff’s action against the defendant guarantors and to that extent it is not struck out.

PART C

Want of prosecution

In order to be clear about the issues involved in the defendants' application to strike out the plaintiff’s action for want of prosecution, it is necessary to set out first the relevant circumstances. This will inevitably involve some repetition of what has been said already in this judgment. But that has become necessary for the purpose of clarity and for ease of understanding.

On 1 June 1979 the plaintiff and the defendant borrowers together with one Fiapaipai Leiataua who died in or before 1992 entered into a loan agreement. The loan was for $30,000 and it was for the construction of a school building for the Manono-uta Primary School. As security for the loan the plaintiff obtained a joint and several guarantee executed by the defendant guarantors. After the loan was disbursed, the defendant borrowers obtained an additional loan of $26,800 from the plaintiff on 4 October 1979. This additional loan was for the same purpose as the initial loan. So the total loan was for $56,800. The two loans were consolidated into one loan by making the necessary alterations to the loan agreement that had already been executed for the initial loan. The loan repayments under the consolidated loan were to be $650 per month with the first repayment to be made in November 1979 until the principal together with interest was repaid in full in October 1992. The term of the loan was therefore for thirteen years. The joint and several guarantee that had been executed by the defendant guarantors was a continuing guarantee and it therefore continued to apply to the consolidated loan.

Repayments for the loan were made by the defendant borrowers or on their behalf until December 1988 when the last such payment was made. At that time, according to the plaintiff’s records, the loan had not been repaid in full as there was still an outstanding balance. Thus the defendant borrowers defaulted on the loan and the plaintiff’s cause of action for breach of the contract of loan must have accrued in January 1989. However, the plaintiff for some reason which is not clear did not refer the loan to its then solicitors for legal action until 1992. The plaintiff’s then solicitors acted promptly and filed and served on the defendants a statement of claim dated 28 May 1992 to commence proceedings against the defendants. That, of course, was within the limitation period of six years. Proceedings were then called for mention in Court in June. The claim alleged two causes of action: one was against the defendant borrowers on the contract of loan for the outstanding balance of the loan including interest which was then for the total amount of $43,223.74, the other was against the defendant guarantors on the contract of guarantee. It was, of course, open to the plaintiff to proceed against the borrowers and the guarantors at the same time. However, I have held that the action against the defendant guarantors was premature as no demand was ever made on the guarantors as required in the contract of guarantee. Thus no cause of action had accrued against the defendant guarantors and therefore the limitation period has never started to run.

In response to the plaintiff’s claim, the defendants filed a statement of defence dated 11 September 1992 saying that the total sum that was disbursed to them was $46,000 and not $56,800 as claimed by the plaintiff. It is further alleged in the statement of defence that prior to 1988 a reconciliation of the receipts for the loan repayments with one of the plaintiff’s employees confirmed that the defendants had repaid about $49,000. That employee is no longer in the employment of the plaintiff. The defendants also denied the interest charged on the aforesaid sum of $56,800.

After the statement of defence was filed in 1992, the then solicitors for the plaintiff took no further action on the matter as it appears from the material placed before Court by both counsel. Then in 1996 the plaintiff employed its own in-house solicitor and he tried to follow up this matter with the plaintiffs previous solicitors who had filed the claim. There was no response from the plaintiff’s previous solicitors and the file and documents which the plaintiff had provided to its previous solicitors for its claim were never returned. At this time the limitation period of six years had already expired in December 1994 or January 1995 in respect of plaintiff’s action against the defendant borrowers for alleged breach of the contract of loan.

In 1997, the then in-house solicitor for the plaintiff requested the Justice Department for the original of its statement of claim which had been filed in 1992 presumably to prepare a new file for the plaintiff as its previous solicitors had not returned the file and documents on this case to the plaintiff. Unfortunately the Court file kept by the Justice Department had also gone missing. Present counsel for the plaintiff who had only recently joined the employment of the plaintiff and is in no way responsible for the delay in this matter seems to place part of the reason for the delay on the Court staff. With respect, I think it must not be overlooked that the responsibility for expediting the prosecution of a civil claim rests on the plaintiff and more particularly its solicitors. As it was stated in Allen v McAlpine [1968] 1 A11 ER 543 by Lord Denning MR at p 546:

"Delay in these cases is much to be deplored. It is the duty of the plaintiff’s advisers to get on with the case. Every year that passes prejudices the fair trial."

Present counsel for the defendants also pointed out that previous counsel for the defendants had always had in his possession the copy of the statement of claim which was served by the plaintiff on the defendants but the previous solicitors for the plaintiff had never enquired of previous counsel for the defendants about the defendants copy of the statement of claim. In my view, if the plaintiff was not able to obtain a copy of its statement of claim from its previous solicitors or the Justice Department the next best step to take was to ask previous counsel for the defendants for his copy of the statement of claim that was served on the defendants.

Be that as it may, there was no further progress in the plaintiff’s claim until present counsel for the plaintiff filed a second statement of claim dated 3 October 2002 alleging the same causes of action on the contract of loan against the defendant borrowers and on the contract of guarantee against the defendant guarantors. I have already held that this second statement of claim be struck out insofar as it alleges breach of the contract of loan against the defendant borrowers for that cause of action had already become time barred. But the plaintiff may still rely on the same cause of action against the defendant borrowers as pleaded in its first statement of claim a copy of which is now before the Court, thanks to counsel for the defendants for his act of good faith. As for the plaintiff’s action in its second statement of claim against the defendant guarantors, I have already held that action to be premature as no demand was ever made on the defendant guarantors as required under the terms of the guarantee and therefore no cause of action has yet accrued and the limitation period has not yet started to run.

It is now eleven years since the plaintiff first filed its claim in 1992 and fourteen years since the plaintiffs cause of action on the contract of loan accrued in January 1989. Counsel for the defendants submitted that this inordinate and inexcusable delay is seriously prejudicial to the defendants. The matters he raised as prejudicial are: (a) the defendants in their statement of defence dispute the amount of the loan that was disbursed to them which they say was only $46,000 and not $56,800 as claimed by the plaintiff; (b) prior to 1988 the defendants conducted a reconciliation of the receipts for their loan repayments with an employee of the plaintiff which confirmed that the defendants had repaid $49,000 but that employee is no longer working for the plaintiff; (c) two of the previous treasurers for the defendants have passed away and those people dealt with the debt and also with the plaintiff’s employee who conducted the reconciliation of the loan repayment receipts; (d) nine of the defendants have passed away and eight of the defendants have left the jurisdiction and this affects the rights to contribution by the guarantors still living in the jurisdiction against their co-guarantors who have left the jurisdiction; (e) some of the guarantors are no longer involved with the Manono-uta Primary School; (f) because of the inaction by the plaintiff the amount of $43,602.62 which was claimed in 1992 has now increased to $82,148.51; and (g) the facts which form the basis of the allegation in the first statement of claim that the loan repayments were to commence from September 1988 to May 1992 are now obscure. To some extent I have already commented on some of these matters regarding the alleged prejudice to the defendants.

From these circumstances, the matters, which in my view, are to be noted for the purposes of the principles to be referred to shortly would be: (a) the delay since the cause of action on the contract of loan accrued; (b) the delay since proceedings were first commenced on the contract of loan; (c) the fact that no cause of action has yet accrued on the contract of guarantee; (d) the fact that the limitation period for the cause of action on the contract of loan has already expired; (e) the fact that the application to dismiss for want of prosecution has been filed after the limitation period had expired; and (f) the alleged prejudice to the defendant borrowers due to the delay.

Principles on dismissal for want of prosecution

Counsel for the defendants cited all the principal English and New Zealand authorities on the Court’s inherent jurisdiction to dismiss an action for want of prosecution. I am grateful to him for his industry and assistance. Samoa does not have any provision in its Supreme Court (Civil Procedure) Rules 1980 for dismissal of an action for want of prosecution as it exists in New Zealand, so reliance is placed on the Court’s inherent jurisdiction. The first English case cited by counsel for the defendants where the principles to be applied to the exercise of the Court’s inherent jurisdiction to dismiss an action for want of prosecution is the decision of the English Court of Appeal in Allen v McAlpine [1968] 1 A11 ER 543. The principles laid down in that case of which Diplock LJ (as he then was) was a member were more clearly and succinctly restated by Lord Diplock in the House of Lords in the subsequent case of Birkett v James [1977] 2 A11 ER 801 where he said at pp 804 - 805:

"[In] the three leading cases which were heard together and which for brevity, I shall refer to as Allen v McAlpine [1968] 1 A11 ER 545, the Court of Appeal laid down the principles on which the jurisdiction has been exercised ever since. Those principles are set out, in my view accurately, in the note to RSC Ord 25, r 1, of the current White Book. The power should be exercised only where the Court is satisfied either (1) that the default has been intentional and contumelious, e.g. disobedience to a peremptory order of the Court or conduct amounting to an abuse of the process of the Court; or (2) (a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party."

By seeking to strike out both of the plaintiff’s claims for want of prosecution on the basis that the plaintiff has been guilty of inordinate and inexcusable delay which has caused serious prejudice to the defendants, it is clear that the defendants are relying on the second limb of the above-stated principle. No reliance is placed on the first limb of the principle.

Lord Diplock in Birkett v James [1977] 2 A11 ER 801 then set out the three points which were left undecided in Allen v McAlpine [1968] 1 A11 ER 543 and on which a divergence of opinions had been expressed in the Court of Appeal. Those three points are set out by His Lordship at p805 of his judgment where he stated:

"They were: (1) the relevance of the fact that the limitation period had not expired by the time the application to dismiss for want of prosecution was heard; (2) the relevance of the period which the plaintiff had allowed to elapse before action brought when this was done within the limitation period, and (3) whether the Judge ought to weigh up the plaintiff’s prospects of success in any remedy he might have against his solicitor if the action were dismissed, and, if so, how his estimate should affect the exercise of his discretion".

It was those three points that the House of Lords dealt with and resolved in Birkett v James [1977] 2 A11 ER 801 and they were extensively dealt with by Lord Diplock who delivered the leading judgment in that case. The answers given by the Court in Birkett v James on those three points are summarised in comprehensive fashion in Department of Transport v Chris Smaller Ltd [1989] 1 A11 ER 897 by Lord Griffiths in a judgment with which the other Law Lords who were also presiding in that case concurred. His Lordship stated at p900:

"The answers given were (1) that only in ‘wholly exceptional circumstances should an action be struck out within the relevant limitation period, because the plaintiff would be able to issue a fresh writ which would result in the action being heard at an even later date as a result of the striking out. ‘Wholly exceptional circumstances were discussed in the speeches of Lord Diplock and Lord Edmund Davies.......(2) Time that elapsed between the accrual of the cause of action and the issue of a writ within the limitation period cannot constitute inordinate and inexcusable delay. Although a defendant may well have been prejudiced by this delay and in some cases it may even make it difficult to have a fair trial, these considerations do not justify striking out an action which a plaintiff has commenced within the limitation period set by Parliament. The plaintiff must have been guilty of inordinate and inexcusable delay in the prosecution of the action after the issue of the writ and the defendant must show prejudice flowing directly from the post-writ delay which must be additional to any prejudice suffered because the plaintiff did not commence his action as soon as he could have done. (3) The fact that the plaintiff may or may not have an alternative remedy against his solicitor is not a relevant consideration in deciding whether or not to dismiss an action for want of prosecution."

It is also clear from the passage just cited that the burden of showing that the defendant has suffered prejudice as a consequence of an inordinate and inexcusable delay on the part of the plaintiff in prosecuting his claim lies on the defendant and not on the plaintiff. That point comes out more clearly at p904 where Lord Griffiths stated:

"[Counsel] for the defendants submits that at least the burden should be on the plaintiff guilty of inordinate post-writ delay to prove that the defendant will not suffer prejudice as a result of the delay. I regard this as a wholly impractical suggestion. It would put an unrealistic burden on the plaintiff. The plaintiff will not know the defendant’s difficulties in meeting the case, such as the availability of witnesses and documents nor will the plaintiff know of other collateral matters that may have prejudiced the defendant......The defendant, on the other hand, has no difficulty in explaining his position to the Court and establishing prejudice if he has in fact suffered it. I must, therefore, reject this second limb of the argument of counsel for the defendants".

As it appears from Department of Transport v Chris Smaller Ltd, Birkett v James, and Allen v McAlpine, the prejudice to be shown by the defendant is not restricted to the inability of the defendant to have a fair trial or the risk that he may not have a fair trial. Prejudice here may include other prejudice suffered by the defendant. It is also to be pointed out that even though the onus is on the defendant to show that he has suffered prejudice, it is still open to the plaintiff to adduce evidence and present submissions to show that the defendant has not suffered prejudice and that the defendant will still be able to have a fair trial of the issues in spite of the delay that has arisen.

The New Zealand cases which relate to the principles already referred to are New Zealand Industrial Gases Ltd v Andersons Ltd [1970] NZLR 58; Fitzgerald v Beattie [1976] 1 NZLR 265 and Mead v Day [1985] 1 NZLR 101. But it was in Lovie v Medical Assurance Society [1992] 2 NZLR 244 that a New Zealand Court gave detailed consideration to the three points that were left undecided in Allen v Mcalpine and resolved by the Court in Birkett v James as further explained in Department of Transport v Chris Smaller Ltd. In Lovie, Eichelbaum CJ after reviewing all the principal English and New Zealand authorities that I have referred to stated the relevant principles at p253 in these terms:

"I can now summarise what I regard as the principles applicable to the matters presently in issue:

1. By itself, delay prior to the issue of proceedings cannot constitute inordinate and inexcusable delay for purposes of a striking out application.

2. If such delay has occurred, further delay after issue of proceedings will be looked at more critically by the Court, and will be regarded more readily as inordinate and inexcusable than if the proceedings had been commenced earlier.

3. The defendant must show prejudice caused by the post-issue delay. If however the defendant has suffered prejudice as a result of pre-issue delay, he will need to show only something more than minimal additional prejudice to justify striking out the proceeding.

4. An overriding consideration is whether justice can be done despite the delay. As to that, all factors, including pre-issue prejudice and delay, have to be taken into account".

It should be pointed out that the fourth step in the approach adopted by Eichelbaum CJ is consistent with the approach taken in previous New Zealand cases mentioned in this judgment but it does not appear to form part of the approach adopted by Lord Diplock in Birkett v James and endorsed by Lord Griffiths in Department of Transport v Chris Smaller Ltd. It should also be pointed out that there was no mention in the course of the argument in this case whether Article 9 of the Constitution which provides that every person, in the determination of his civil rights and obligations, is entitled to a fair trial within a reasonable time is applicable to the issues in this case. Article 9 will therefore not be considered in this judgment.

I will now apply the principles to the circumstances in the present proceedings.

Action on contract of loan

Between the accrual of the cause of action in January 1989 against the defendant borrowers for alleged breach of the contract of loan and about 28 May 1992 when the then solicitors for the plaintiff filed the first statement of claim was a time lapse of about three years and five months. The claim was filed within the limitation period. In terms of the principles already referred to, that time lapse cannot constitute inordinate and inexcusable delay for the purpose of an application to dismiss for want of prosecution.

Between 1992 and 1996 no steps were taken by then the solicitors for the plaintiff to progress or expedite the claim by the plaintiff. A statement of defence was filed and served by then counsel for the defendants about September 1992. The limitation period expired at the end of 1994 or beginning of 1995. When the newly appointed in-house solicitor for the plaintiff requested the return of the plaintiff’s file and documents in 1996 from the plaintiff’s previous solicitors, no file or documents were returned and up to now nothing has been returned. The then new in-house solicitor for the plaintiff requested the Justice Department for a copy of the statement of claim that was filed in 1992 but that statement of claim was also lost. The then solicitor for the plaintiff, however, did not ask then counsel for the defendants whether he still had his copy of the statement of claim served on the defendants so that the plaintiff could prepare a copy for itself. If that had been done, the then counsel for the defendants who still had his copy of the statement of claim would have prepared a copy for the plaintiff. From 1992 when the first statement of claim was filed to now is a delay of eleven years. There is no doubt in my mind that that delay is inordinate and inexcusable in terms of the principles already referred to in this judgment.

On the question of prejudice, I am not satisfied that the plaintiff has placed all the evidence which is relevant to this issue before the Court. I am also not satisfied that the issue of prejudice was sufficiently addressed, particularly from the plaintiff’s standpoint, to enable the Court to come to a conclusion with confidence. In saying that, I intend no discourtesy to both counsel who undoubtedly have put a good deal of work into their preparations for these proceedings and who gave much assistance to the Court by their citation of authorities. But this is the first application to strike out an action for want of prosecution. And at this stage the issues involved are not only novel but complex insofar as Samoan law is concerned. Now that the Court has set out and highlighted those issues, it should now be simple to refocus the evidence and the submissions. Given the calibre of both counsel in this case that should be easily done.

I will therefore have to adjourn this part of proceedings concerning prejudice to the defendant borrowers for further evidence and submissions from both sides.

Action on contract of guarantee

As I have already held that the claim on the contract of guarantee is premature as no cause of action has yet accrued and therefore the limitation period has not yet started to run, the principles already referred to are not applicable to the claims based on the contract of guarantee. Counsel for the plaintiff would have to consider whether those claims should be withdrawn or counsel for the defendant guarantors may wish to consider a strike out application on the ground that no cause of action has yet accrued on the guarantee.

I will now adjourn this matter to 4 June which is the next mention date for counsel to consider the issue of prejudice in relation to the claim on the contract of loan and the application to dismiss for want of prosecution. A date for hearing further evidence and submissions will then be set. Judgment will then be given in an addendum.

CHIEF JUSTICE

Solicitors:
TP Atoa for plaintiff
Fepuleai & Schuster Law Firm for defendants