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Taveuni Estate Limited v Vella Trading Co Ltd [2011] FJHC 159; HBC346.2002 (11 March 2011)

IN THE HIGH COURT OF FIJI ISLANDS
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBC 346 of 2002

BETWEEN:

TAVEUNI ESTATES LIMITED
Plaintiff

AND:

VELLA TRADING CO LTD
Defendant

Counsel: Cromptons Solicitors for the Plaintiff.
Mitchell Keil & Associates for the Defendant.

Date of Interlocutory Judgment: 11th March, 2011

INTERLOCUTORY JUDGMENT

This is the defendant's summon for seeking following orders:

1. That the judgment entered in the Suva Magistrates Court Civil Action No 1325 of 2001 in default of Notice of Intention to defend have been given, which was removed into this court, be set aside for irregularity;
   
2. That the plaintiff pays to the Defendant the costs of and occasioned by this application to be assessed summarily.
   

In support of the defendant's summon an affidavit was filed by one Mohammed Usman a law clerk employed by the defendants solicitors.

The main ground advanced by the defendant to support its summons is that the default judgment entered against the defendant is irregular since the service of the court process was improperly effected. Further, it is stated that the defendant has a good defence upon the merits.

In response to the defendant's affidavit, an affidavit was filed by Peter John Bolton one of the directors of the plaintiff company. He denies the fact that the default judgment entered is irregular. He further states that according to the sales and purchase agreement between the plaintiff and the defendant the service of any notice or demand were to be done to the defendant's address stated in the said agreement. According to the deponent, after obtaining the leave of the court, the service of summon was done by way of substituted service i.e. by advertising the notice of Magistrate Court proceedings and summons in South China Morning Post News Paper.

The copy of the said order and the said advertisement are marked as PJBS 5 and PJBS 6 respectively. Therefore, the deponent states that the service of the court process was properly effected and also the default judgment entered against the defendant is thereby regular.

If the judgment is regular and the defendants wished to have the judgment set aside it is incumbent on the defendant to show merits. This requirement was stressed in Cathrineholm v.Norequipment Ltd [1972] All E.R 538 as follows:

'the defendants were not entitled to set aside ex debito justitiae. In general the only circumstances in which there was a right to have a default judgment set aside was where that judgment had been irregularly obtained. Since the writ had been sent to the defendants' registered address through the post in a prepared envelope, service was deemed to have been effected by virtue of the Companies Act 1948 and sec.26 of the Interpretation Act 1889; no appearance having been entered, the judgment had been obtained regularly. If the defendants wished to have the judgment set aside by the court in the exercise of its discretion under merits they would, in accordance with well settled practice, have to show merits.'

Relevant legal principles

The primary consideration in exercising the court's discretionary power to set aside a default judgment is whether the defendant has a meritorious defence.

In deciding the defendant's application, court has to determine two factors namely whether there is a meritorious defence available to the defendant and whether the default judgment entered is irregular.

In order to establish a meritorious defence what the defendant is required to prove is that he has an arguable defence.

The principles governing the setting aside of default judgment are well settled and are very clearly stated in the Supreme Court Practice 1999 Volume 1 at 157 as follows:

Regular Judgment- if the judgment is regular, then it is an (almost) inflexible rule that there must be an affidavit of merits i.e. an affidavit stating facts showing a defence on the merits.

The following passage by Huddleston B in Farden v. Richtor [1889] UKLawRpKQB 79; (1889) 23 Q.B.D 124, throws some light on this issue.

''the application to set aside must be taken to have been met on the threshold by the objection that the defendant had not made any affidavit suggesting that he had a defence on the merits. During the argument I was inclined to doubt whether such an affidavit could be always necessary. But in Smith v.Dobbings the present Master of Rolls appears to have stated that it was "an inflexible rule" that a regular judgment properly signed could not be set aside without such an affidavit, and there are statements in the manuals of practice to much the same effect. The expression is perhaps strong, but, where there is no such affidavit, it is only natural that the court should suspect that the object of the applicant is to set up some mere technical case. At any rate, when such an application is not then supported, it ought not to be granted except for some very sufficient reason."

For the purpose of setting aside a default judgment, the defendant must show that he has a meritorious defence. For the meaning of this expression see Alpine Bulk Transport Co. Inc v. Saudi Eagle Shipping Co. Inc: The Saudi Eagle (1986) 2 Lloyd's Rep 221,CA
Vann. V. Awford (1986) 8 L.S.graz. 1725; The times, April 23, 1986, C.A).

On the application to set aside a default judgment the major consideration is whether the defendant has disclosed a defence on the merits; and this transcends any reasons given by him for the delay in making the application even if the explanation given by him is false

In Grimshaw v. Dunbar [1953]1Q.B 416, Jankins L.J. stated as follows;

'be that as it may, a party to an action is prima facie entitled to have it heard in his presence; he is entitled to dispute his opponent's case and cross examine his opponent's witnesses and give his own evidence before the court.'

The following extract from Dick v. Piller [1953]KB 497 also laid down some important principles on this issue.

'Prima facie that is his right, and if by some mischance or accident a party is shut out from that right and an order is made in his absence, then common justice demands, so far as it can be given effect without injustice to other parties, that litigant who is accidently absent should be allowed to come to the court and present his case-no doubt on suitable terms as to costs as was recognised in Dick v Piller[1953] KB 497'

In Burns v. Kondel (1971) 1 Lloyd's Report 554 it was held by Lord Denning, M.R., Fenton Atkinson L J and Sir Gorden Willmer that:

'That a defence on the merits does not mean a defendant must show a good cause of defence but need only to show one which discloses an arguable or triable issue.'

In addition to that I further consider the following extract from the judgment of Lord Wright in Evans v. Barlam (1937) 2All E.R.656, where it says:

The primary consideration is whether he has merits to which the court should pay heed; if merits are shown the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.

It is with these legal principles in mind I consider the defendant's application.

One of the allegations levelled by the defendant is that the defendant was not served summons by the plaintiff properly and therefore, the entering of the default judgment is irregular. The defendant submits that it being a company, the summons shall be served on its registered office. The defendant relies on section 391 of the Companies Act.

The defendant further submits that notwithstanding of the provisions in the agreement, summons were to be served on the defendant's registered office and if not it is contrary to law.

Section 391 of the Companies Act reads:

A document may be served on a company by sending it by post to the registered postal address of the company in Fiji or by leaving it at the registered office of the company.

However, a careful analysis of the section 391 shows that it is not mandatory to serve summons on the registered postal address of the company. Therefore, I do not think that by serving summons on the last known address of the defendant company, the plaintiff has acted in contravention of the section 391 as alleged by the defendant.

The plaintiff submits that according to the sale and purchase agreement the summons to be served on the last known address of the defendant and accordingly the plaintiff served summons on the defendant's address which was given in the agreement. It was not challenged by the defendant.

In the present case the plaintiff has attempted to serve summons on the defendant's given address but it was returned. Thereafter, having obtained leave of the court, the plaintiff has effected the serving by way of an advertisement in a news paper.

The sale and purchase agreement requires either party to inform the change of address.

Clause 15 of the Sales and Purchase Agreement between the plaintiff and the defendant reads:

'any notice or demand required to be served on the purchaser may be served by posting the same by registered post (by airmail in the case of a notice to be sent from one country to another country) addressed to the purchaser at his address for service hereinbefore stated or by delivering and leaving the same at any building in which the purchaser may for the time being reside work or carry on any trade or business and if sent by post shall be deemed to have been received on the seventh day after posting. The purchaser may change its address for service by giving the vendor written notice of the new address.'

However, the defendant has not informed the change of address to the plaintiff.

Therefore, the defendant is not entitled to plead that it was to be served on their registered office. When the defendant did not inform the change of their address the plaintiff could not have done anything other than serving summons on the last known address stated in the agreement. When it was served so and returned, the plaintiff advertised it on the news paper.

Therefore, the plaintiff in my view, made every endeavour to serve summons on the defendant. Therefore, the advertising of the notice on the news paper could be regarded as a substituted service properly done. It could be further noted that the defendant has failed to state in its affidavit, what the registered postal address was at the material times.

Therefore, the defendant's 1st argument would fail and there is no irregularity in the serving of process on the defendant. Since the judgment is regular the defendant is not entitled to have the judgment set aside as of right.

Now I turn on to the second ground advanced by the defendant i.e. the plaintiff's statement of claim does not provide sufficient information as to the claim against the defendant and it has many questionable facts. But the defendant has not stated in its affidavit in support what those questionable facts are.

Order IX (1) of the Magistrates Court Rules states the manner in which the plaintiff should state his claim.

Order IX (1) reads:

It shall be sufficient for the plaintiff to state his claim in the writ of summons briefly in a general form, but he may deliver to the clerk of the court, at the time of making application for the writ of summons, particulars of his demand in any form which shall give the defendant reasonably sufficient information as to the details of his claim.

Whenever the plaintiff shall deliver such particulars, he shall also deliver to the clerk of the court as many duplicates thereof as there are defendants and such particulars shall be served with the writ.

Order IX (2) reads:

The court may, on the application of the defendant, or on its own motion, order further or better particulars.

Therefore, if the defendant was of the view that the statement of claim does not provide sufficient information or it has some questionable facts he should have come to courts and raised that issue. But the defendant cannot use it as an excuse for avoiding the courts.

Further, in pursuant to Order IX (2) the defendant could have applied the court seeking more particulars in relation to the plaintiff's claim. Therefore, even if the statement of claim does not provide sufficient information it was overshadowed by the defendant's failure to attend the court. Therefore, that fact cannot be considered as a valid reason for setting aside the default judgment.

The next issue to be determined here is that whether the defendant has shown a meritorious defence. Pursuant to the terms of the Deed of Covenant the defendant is liable for payment of the service charges. The two affidavits filed by the defendant do not disclose any meritorious defence. In those affidavits the deponent simply states that the defendant has a meritorious defence which in my view is highly inadequate in an application of this nature. It could also be noted that the defendant has not denied the existence of the debt or the defendant's liability to pay the plaintiff.

It is true that according to the decided authorities the defendant is only required to show an arguable defence in order to get the default judgment set aside. However, that does not mean the defendant can succeed by showing some fanciful defence. The defence must show a real prospect of success. Merely because the deponent who is a lawyer's clerk states, that the defendant has a meritorious defence without stating the facts showing a merit, I do not incline to conclude it as a valid ground to set aside the default judgment.

Therefore, it is evident that the degree of defence required to be shown in an application of this nature has not been shown adequately by the defendant.

Delay in the Application.

According to the Order 2 rule 2 of the High Court Rules 1988, an application to set aside a default judgment has to be made within a reasonable time. If the application is not made within a reasonable time then the application shall not be allowed.

In the instant case the default judgment was entered on 15.07.2002. The application to set aside the default judgment was filed on 25.02.2004, after a delay of over one year and seven months, which in my view is inexcusable in the absence of any valid explanation. The defendant in its affidavits has failed to give any reasonable explanation as to the delay in filing the application. Therefore, it is apparent that the defendant is guilty of laches.

Therefore, the arguments advanced by the defendant for his application to set aside the default judgment are far from satisfactory and hence, cannot be accepted.

In the light of aforementioned authorities and submissions made by the counsel, and having regard to the facts of the case, court is of the view that the defendant has failed to advance any valid ground to set aside the default judgment. Therefore, I conclude that the default judgment against the defendant shall not be set aside.

On the above premise, I dismiss the defendant's application. Cost is summarily assessed in the sum of $ 1000.00.

..............................
Pradeep Hettiarachchi
JUDGE
At Suva
11th March, 2011