N545

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

HORNIBROOK CONSTRUCTIONS PTY LTD

V

KAWAS EXPRESS CORPORATION PTY LTD

Waigani
Kapi DCJ
21 March 1986
24 March 1986
4 April 1986

PRACTICE AND PROCEDURE - Striking out defence - General denial only pleaded - Specific denial necessary - Defence struck out - National Court Rules, O 8, rr 27, 28.

PRACTICE AND PROCEDURE - Summary judgment - Promise to forbear - Limited to specific period - Period expired - No ground for refusing summary judgment.

CONTRACT - Breach of contract - Defences - Merger of debt in deed - Proof of security of higher value required.

In a statement of claim seeking damages for breach of a building contract pars 3 to 10 pleaded the terms of the contract and the alleged breaches thereof. The defence thereto was relevantly as follows:

"2. The Defendant does not admit the allegations contained in paragraphs 3 to 20 of the Statement of Claim.

3. Save as aforesaid, the defendant denies each and every allegation contained in the Statement of Claim."

In addition the defendant alleged a promise to forbear which was limited in fact to a period of three weeks and merger of the debt by deed of mortgage between the parties as to which there was not evidence of value.

On an application to strike out the defence pursuant to the National Court Rules, O 8, r 27 and r 28, which provide:

"27. Embarrassment, etc (15/26)

(1) Where a pleading:

(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;

(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or

(c) is otherwise an abuse of the process of the Court,

the Court may at any stage of the proceedings, on terms, or otherwise, order that the whole or any part of the pleading be struck out.

(2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1) of this Rule.

28. General issue abolished (15/27)

A party shall not plead the general issue."

Held

(1) The defence should be struck out as coming within the prohibition in O 8, r 28.
The purpose of O 8, r 28, is to prevent a defendant from making a general denial without specifically denying the facts or basis upon which the plaintiffs cause of action is based and so informing the plaintiff and the court of the precise nature of the defence.

(2) The promise to forbear being limited to a specific period which had expired was not available as a ground for refusing summary judgment.

(3) The defence of merger of debt being dependant on proof that the subsequent security is of higher value than the debt could not succeed in the absence of proof of value of the security.

Notice of Motion

This was an application on notice by the plaintiff in an action for damages for breach of contract seeking, (a) to strike out the defendants defence and (b) summary judgment.

Counsel

J Steele, for the plaintiff.
M Hirst, for the defendant.
Cur adv vult

4 April 1986

KAPI DCJ: By a notice of motion filed on 6 February 1986 the plaintiff has applied for two separate orders:

(a) that defendant’s defence be struck out;

(b) that judgment be entered for the plaintiff.

These two orders are sought under two different rules and therefore require separate consideration. I will deal with the first matter — the defence.

The proper basis for this application is the National Court Rules, O 8, r 27 and r 28. Counsel for the plaintiff has submitted that pars 2 and 3 of the defence should be struck out on the grounds that they are not allowed by O 8, r 28. Paragraphs 2 and 3 of the defence are as follows:

"2. The Defendant does not admit the allegations contained in paragraphs 3 to 10 of the Statement of Claim.

3. Save as aforesaid, the defendant denies each and every allegation contained in the Statement of Claim."

The purpose of O 8, r 28 is to prohibit the defendant from making a general denial without specifically denying the facts or basis upon which the plaintiffs cause of action is based. The reason for this is obvious. The purpose of pleading is to set out clearly the issues; not only to inform the other party but the Court as well. Each party needs to know the nature of the case against him so that he cannot be caught by surprise at the trial. Any pleading which tends not to deny specifically a fact but denies a matter generally, eg a simple denial of a debt in an action for debt, would be a general denial without specifically denying the basis of the plaintiffs action.

Do pars 2 and 3 of the defence come within this prohibition? By par 2 of the defence — a general issue is raised by not admitting the matters set out in pars 3 to 10 of the statement of claim which is in the following terms:

"3. Pursuant to a building contract dated 19 March 1985 (the ‘Contract’) the plaintiff agreed to design and construct at the defendant’s request a shopping centre snack bar and service station complex (the ‘Works’) on land owned by the defendant being all that piece and parcel of land comprised in State Lease Volume 94 Folio 231 (the ‘Premises’).

4. The plaintiff seeks leave to refer to the Contract as if fully set out herein.

5. It was a term or condition of the Contract that, during the course of the plaintiff performing the Works, the defendant would pay amounts to the plaintiff by way of progress payments in accordance with certificates (the ‘Certificates’) given by Phillips Dempsey, Architects, (the ‘Architects’) for the works performed by the plaintiff.

6. It was a further term or condition of the Contract that the defendant would pay the amount specified in any Certificate within seven (7) days of the date of delivery of a Certificate by the plaintiff to the defendant or its banker, the Boroko Branch of the Papua New Guinea Banking Corporation (the ‘defendant’s Banker’).

7. On or about 27 August 1985 the plaintiff delivered to the defendant’s Banker a Certificate dated 22 August 1985 in the amount of K193,301.00.

8. On about 27 September 1985 the plaintiff delivered to the defendant’s Banker a Certificate dated 27 September 1985 in the amount of K187,024.00.

9. On about 18 October 1985 the plaintiff delivered to the defendant’s Banker a Certificate dated 11 October 1985 in the amount of K269,491.00.

10. The defendant has breached the Contract in that the defendant has failed to pay to the plaintiff the amounts due under the Certificates dated 22 August 1985, 27 September 1985 and 11 October 1985 or any part of the amounts due."

In the same way par 3 of the defence also makes a general denial of all matters in the whole statement of claim.

I conclude that pars 2 and 3 of the defence come within the prohibition by O 8, r 28. I would strike out the whole of the defence for these reasons.

The plaintiff has further applied for summary judgment in the action. This application is based on O 12, r 38. This application is supported by affidavit of Colin Judd sworn 4 February 1986. Authorities in New South Wales (from which our present rule has been adopted) are clear that if the elements set out under the rule are satisfied, judgment will be given:

(a) evidence of facts on which the claim is based;

(b) evidence by some responsible person that in his belief the defendant has no defence to the claim or part.

All these matters have been satisfied by the affidavit of Colin Judd.

In response to the application, the defendant relies on an affidavit of Michael Newell Wilson sworn 14 March 1986. Nowhere in the affidavit is there any dispute as to the facts which form the basis of liability, nor is there any dispute relating to the amount claimed.

Counsel for the defendant raised two matters in the way of granting summary judgment:

(a) promise to forbear;

(b) that the amount claimed by the plaintiff is now included in the higher security provided by the defendant in the transfer of mortgages.

In an earlier ruling, I admitted a "without prejudice" letter written by the lawyer for plaintiff to the lawyer for the defendant. I admitted this letter only to the extent that there was a promise to forbear not to sue if certain conditions were met. I admitted this letter only on the basis that agreement was reached, not to go ahead with this application within three weeks of 12 February 1986 (which expired on 5 March 1986). This however, does not assist the defendant. The defendant has had the benefit of not proceeding with this application in the three weeks. The promise to forbear was limited to three weeks. This is no ground for refusing to grant summary judgment.

Counsel for the defendant further raises the defence alleging merger of debt by deed between the parties. There is evidence that the defendant has executed four mortgages to the plaintiff. There is no evidence as to the value of this security.

In order for the defendant to raise a defence of merger of debt, he must show that the security provided is of a higher value. See Chitty on Contracts (25th ed, 1983), par 1641 at 902. On the materials before me, I cannot see a defence on the question of merger.

I would enter judgment for the plaintiff in the sum of K649,816.

Judgment accordingly

___________________

Lawyer for the plaintiff: Gadens.
Lawyer for the defendant: Warner Shand Wilson Donigi Reiner.

[1986] PNGLR 305 - The State v Horou Posu Kave