PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS 1736 OF 2005

BETWEEN:

DANIEL JIFOK
(Plaintiff/Respondent)

AND:

KAMBANG HOLDINGS LIMITED
t/a LUTHERAN SHIPPING
(Defendant/Applicant)

Madang: Davani, J.
2006: 19 & 21 July

PRACTICE AND PROCEDURE – default judgment entered – service of summons not on registered office – service irregular – S.431 Companies Act.

PRACTICE AND PROCEDURE – default judgment – irregularly entered – should be set aside as of right - but court can still exercise discretion – O.12 R.8; O.12 R.35; O.1 R.8 of National Court Rules.

PRACTICE AND PROCEDURE – Notice of Intention to Defend – must file before taking any step – O.7 R.2 of National Court Rules.

Cases Cited
Leo Hannet & Elizabeth Hannet v The ANZ Banking Group (PNG) Ltd SC505
Anlaby v Praetorious (1888) 20 QBD 764
Green & Company Pty Ltd v Green [1976] PNGLR 73
Smeeton v Davara House Pty Ltd [1979] PNGLR 324;
Page P/L v Malipu Balakau [1982] PNGLR 140
Bank of South Pacific v Spencer [1983] PNGLR 239;
Singh v Atombrook Ltd [1989] 1 W.L.R. 810

Text Cited:
The Supreme Court Practise 1991 Vol.1

Counsel:
B. Meten, for the Plaintiff/Respondent
Y. Wadau, for Defendant/Applicant

21 July, 2006

RULING

1. DAVANI, J: Before me is a Notice of Motion filed on 13 July, 2006 by Young Wadau Lawyers for and on behalf of the defendant/applicant ("applicant"), seeking orders that default judgment obtained by the plaintiff on 17 February, 2006 be set aside. The application is made pursuant to O.12, R.35 of the National Court Rules ('NCR'). This provision reads: 

"35. Setting aside judgment.

The court may, on such terms as it thinks just, set aside or vary a judgment entered in pursuance of this division."

2. In this case default judgment was entered on 23 February, 2006. A provision which is relevant which the applicant did not refer to is O.12 R.8 of the NCR which reads:

"8. Setting aside or varying judgment or order (40/9)

(1)	The Court may, on terms, set aside or vary a direction for entry of judgment where notice of motion for the setting aside or variation is filed before entry of the judgment.

The Court may, on terms, set aside or vary a judgment –

(a)	where the judgment has been entered pursuant to Division 3 of Order 12 (default judgment);

(b)	where the judgment has been entered pursuant to a direction given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the direction; or

(c)	when the judgment has been entered in proceedings for possession of land pursuant to a direction given in the absence of a person and the Court decides to make an order that the person be added as a defendant.

(2)	The Court may, on terms, set aside or vary an order –

(a)	where the order has been made in the absence of a party, whether or not the absent party is in default of giving a notice of intention to defend or otherwise in default, and whether or not the absent party had notice of motion for the orders; or

(b)	where notice of motion for the setting aside or variation is filed before entry of the order.

(3)	In addition to its powers under sub-rules (1), (2) and (3) of this Rule, the Court may, on terms, set aside or vary any order (whether or not part of a judgment) except so far as the order determines any claim for relief or determines any question (whether of fact or law or both) arising on any claim for relief and excepting an order for dismissal of proceedings or for dismissal of proceedings so far as concerns the whole or any part of any claim for relief.

(4)	Nothing in this Rule affects any other power of the Court to set aside or vary a judgment or order".

Analysis of Evidence and the Law

3. Before obtaining default judgment, the plaintiff conducted a search and filed an affidavit of search deposed to by one Benjamin Mano sworn on 12 January, 2006. The plaintiff also relied on the affidavit of service of one Thomas M. Illaisa sworn on 29 November, 2005.

4. The application to set aside is opposed by Mr. Meten for the plaintiff. 

5. Mr Wadau submits that the default judgment should be set aside because it was irregularly obtained. He relies on his affidavit sworn on 13 July, 2006. He deposes that on 7 July, 2006 he conducted a search of the court file and noted the affidavits of Thomas Ilaisa and Mr. Bernie Meten. He noted that the Writ of Summons and Statements of Claim was served on "…the defendant's registered office at IPI building in Lae by delivering a copy of the document to Miss Hania, the secretary to the general manager of the defendant's company head office." (See Thomas M. Illaisa's affidavit). In his affidavit and also in his submissions, he emphasizes that the company search by Mr Bernie Meten reveals that the defendant's registered office is located at Section 27 Allotment 48, Voco Point, Lae and the postal address is PO Box 1226, Lae, Morobe Province. And I note that on perusing Mr Meten's affidavit, there is a company search of the defendant company dated 24 August, 2005 which provides the following details:

"Registered Office. Section 27 Allotment 48
Voco Point,
Lae,
Morobe Province,
Papua New Guinea"

"Address for service -	Section 27 Allotment 48, 	
	Voco Point,	
	Lae,	
	Morobe Province,	
	Papua New Guinea 	

6. Mr Meten's opposition to the application is based on two (2) grounds. These are;

1.	The applicant's application is not supported by a proper affidavit setting out a recent search of the company's office deposing to the correct registered office of the plaintiff.

2.	That not-withstanding the above, the applicant should not take any step in the proceedings without first filing a Notice of Intention to Defend.

7. I deal first with the giving of the Notice of Intention to Defend.

8. Mr. Meten referred the court to O.7, R.2 of the NCR which states that a person shall not, except by leave of the court, take any step in any proceedings unless, before taking the step, he has filed originating process in the proceedings or has given a Notice of Intention to Defend in the proceedings.

9. In this case, Mr Wadau submits that he has filed Notice of Appearance which confirms his appearing for the applicant. The Notice of Appearance reads:

"Notice is hereby given that Young Wadau of Young Wadau Lawyers has been instructed to take carriage of this matter. 

Address:	Young Wadau Lawyers,	
	Section 10 Allotment 40,	
	JK Wama Building,	
	Modilon Road,	
	PO Box 414, 	
	Madang, (511)	
	Madang Province"	

10. This Notice of Appearance was filed on 17 May, 2006. 

11. The rules require that parties first file Notice of Intention to Defend because the Notice of Intention to Defend is explicit in itself in stating the defendant's intention to defend the proceedings. It reads:

"………………………………….of …………………………….intends to defend this action".

12. The Notice of Appearance only states that Mr Wadau is appearing for the applicants. It does not state that Kambang Holdings Limited t/a Lutheran Shipping intends to defend the action. Again, the rules are specific in that if a party wishes to take any steps in the proceedings, he must first of all, for a defendant, file or give Notice of Intention to Defend. And a Notice of Intention to Defend may be given at any time without leave (see O.7, R.6 of NCR).

13. As to the second leg of Mr Meten's submission in relation to the filing of affidavit material, I note that Mr Wadau's application is supported by his affidavit. I do not accept Mr Meten's submission that the application must be supported by an affidavit deposing to an independent search of the company's office. The results of the search conducted by the plaintiff confirms that as at 24 August, 2005, the defendants principle place of business and its registered office is what is set out above. And the affidavit of service deposed to by Mr Ilaisa is as to service of documents upon the IPI building in Lae. Both counsels accept that service on an incorporated entity must be on its registered office. Section 431 of the Company's Act is very specific. It sets out in no uncertain terms the manner of service upon companies. Section 431 of the Company's Act reads:

"431. Service of Documents on companies in legal proceedings.

(1)	Notwithstanding the provisions of any other Act, a document, including a writ, summons, notice, or order in any legal proceedings may be served on a company as follows:

(a)	by delivery to a person named as a director or the secretary of the company on the register;

(b)	by delivery to an employee of the company at the company's head office or principal place of business;

(c)	by leaving it at the company's registered office or address for service;

(d)	by posting it to the company's registered office, or address for service, or postal address;

(e)	by serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings;

(f)	in accordance with an agreement made with the company.

(2)	The methods of service specified in Subsection (1) are the only methods by which a document in legal proceedings may be served on a company in the country".

14. In this case, the affidavit of service does not state whether the IPI building in Lae is the registered office of the company. Mr Meten's affidavit sets out the principle place of business and registered office of the defendant company. The affidavit of service of Thomas Ilaisa does not say that the registered office or principle place of business as deposed to in Mr Meten's affidavit is located in the IPI Building, Lae. That affidavit is devoid of any reference at all to the descriptions set out in Section 431 of the Company's Act.

15. Clearly service is irregular. Should that be the basis for the setting aside of the judgment? What powers does the court have, considering, the plaintiff was apparently served with the orders on the 27 February, 2006, Notice of Trial was filed on 12 May, 2006, and Motion to Set Aside Judgment, filed on 13 July, 2006 which shows that a period of about four (4) months had lapsed since the taking out of default judgment. Is this a matter that the court should be concerned with? 

16. The court should now be concerned with the issue of, if and how it should exercise its discretion where judgment is irregularly obtained.

17. Mr Wadau referred the court to Wong v Haus Bilas Corporation where a judgment was set aside for irregularity because service was not properly complied with. There have been numerous cases in this jurisdiction where default judgments have been set aside for irregular service. The case Leo Hannet & Elizabeth Hannet v The ANZ Banking Group (PNG) Ltd, SC 505 dated 16 August 1996, is one where the trial Judge found that because the writ was not personally served, that judgment was irregularly entered. But instead of setting aside the default judgment, he ordered the deferral of the ruling and directed that the defendant file affidavit deposing to a proposed Defence and to serve on the other side and for parties to then return for further submissions. He then heard submissions and found, on the question of there being a meritorious defence, that the defendant did not demonstrate a meritorious defence because he filed a proposed Defence and counter-claim which was not attached to an affidavit.

18. The appellants appealed. The ground of appeal on which the Supreme Court made its decision was this;

"That his Honour erred in law and in fact in refusing to set aside the default judgment which was entered without required service under National Court Rules and therefore was irregular."

19. Counsel for the second appellant submitted that once the Chief Justice reached the conclusion that the judgment was entered irregularly, namely, that there was no proper service in accordance with the National Court Rules, he had no discretion but to set aside the default judgment. He submitted that His Honour erred in directing the second appellant to prove a defence on the merits.

20. Counsel for the respondent on the other hand submitted that while the Chief Justice found that the judgment was entered irregularly, he did not fall into error when he directed the second appellant to file evidence of a defence on the merits. He submitted that there is a wide discretion in the National Court to require that the second appellant prove a defence on the merits under O.12 r 8 (2) and (3)(a) of the Rules.

21. And the Supreme Court in the Leo Hannet case accepted the second appellant's submissions.

22. I have already set out in full O.12 R.8(2)(a) and (3)(a) of the NCR. It is clear from the terms of this order that the National Court has a wide discretion in setting aside a default judgment. The default judgments are grouped into two categories, that of judgments that are entered regularly and those that are irregularly entered. I have already concluded that this is an irregularly entered judgment and have also posed the issue as to how this court should exercise its discretion on an application to set aside an irregularly entered judgment.

23. The Courts in Papua New Guinea have quoted authorities from England as well as Australian States on this issue. The most often quoted authority on this issue is Anlaby v Praetorius (1888) 20 QBD 764 which stands for the proposition that if a judgment is entered irregularly, the defendant is entitled to set it aside ex debito justitiae (as required in the interests of justice). This principle was approved in Green & Company Pty Ltd v Green [1976] PNGLR 73; Smeeton v Davara House Pty Ltd [1979] PNGLR 324; Page P/L v Malipu Balakau [1982] PNGLR 140 and Bank of South Pacific v Spencer [1983] PNGLR 239.

24. Upon a close analysis of Anlaby v Praetorius (supra) there is a further distinction to be made between judgments entered irregularly in acting under a rule and a judgment obtained irregularly independently of the rules. This distinction was clearly drawn by Greville Smith, J, in Page P/L v Malipu Balakau (supra) at pages 145 to 146.

25. In this case, the plaintiff had a right to serve the writ and the irregularity in service as I have seen, was non-compliance with s.431 of the Companies Act.

26. Does non-compliance with s.431 render the proceedings void? Neither Mr Wadau nor Mr Meten made submissions on this point. Order 1 Rule 8 of the NCR states;

"8. Non-compliance with rules not to render proceedings void.

Non-compliance with any of the rules, or with any rule of practice for the time being in force, shall not render any proceedings said, unless the court directs, but the proceedings may be set aside, either wholly or in part, as irregular, or may be amended or otherwise dealt with, in such manner, and on such terms as the court thinks fit."

27. And Greville Smith, J, in Page P/L v Malipu Balakau [1982] PNGLR 140 said, that the same rules in relation to the setting aside of a regularly entered judgment applies to a judgment irregularly entered that falls within the ambit of O.1 R.8 of the NCR.

28. And the principles in relation to the setting aside of regularly entered judgments are;

1.	There must be an affidavit stating facts showing a defence on the merits; and

2.	There must be reasonable explanation why judgment was allowed to go by default; and

3.	The application must be made promptly and within a reasonable time.

29. And Greville Smith, J, concluded that to do this would be to come within the "untrammelled discretion with a view to doing justice". (See Anlaby v Praetorious (supra)).

30. The Supreme Court in Leo Hannet & Elizabeth Hannet v ANZ Banking Group (PNG) Ltd (supra), found that judgment was obtained in breach of service provisions (O.6 R.3 of NCR), that it was an irregularity falling within O.1, R.8 of the NCR and that the trial Judge did not fall into error when he directed that the second appellant show evidence of a defence on the merits.

31. Furthermore, the applicant in this case has not waived his right by taking a fresh step in the proceedings. I say this because O.1 R.9 of the NCR states;

"9. Application to set aside for irregularity.

An application to set aside any proceedings for irregularity shall not be allowed unless it is made within a reasonable time, or if made after the party applying has taken any fresh step with knowledge of the irregularity."

32. In this case the applicant has not taken any fresh step. As to applying to set aside after a lapse of 4 months, I have not heard any submissions from counsel on this. But the evidence is that he gave instructions to his lawyer after he learnt of the default judgment. And it took him about 4 months to do that. He has not provided an affidavit to explain why he did not give instructions earlier. In Singh v Atombrook Ltd [1989] 1 W.L.R. 810, a defendant applied to set aside a judgment for irregularity 3 months after becoming aware of it. The court held that he was too late to have the judgment set aside as of right and the defendant was compelled to rely on the discretion of the court under O.13 R.9. That provision is the United Kingdoms equivalent of our O.12 R.9 (1).

33. And to exercise that discretion, the application must be made before the entry of judgment (O.12 R.8 (1). In this case, application to set aside is made about 5 months after entry of judgment. And it would have been prudent for the applicant to set out in an affidavit in support, the reasons for that delay. The Supreme Court Practice 1991 Vol. 1, 0.13 R. 9 (6) (pg. 136) states this;

"13/9/6 Irregular Judgment – The affidavit in support should state the nature of the irregularity and the circumstances under which the alleged default has arisen. The defendant need not disclose the nature of his defence in his affidavit but it is often prudent for him to do so, in case he is unable to persuade the court that the judgment is irregular…"

34. And I find there is substantive delay here. Although the judgment was irregularly entered, I am prompted to now exercise this discretion, by considering principles in relation to the setting aside of a regularly entered judgment. Furthermore, it would also not serve any purpose if I were to defer ruling on this and to order that the defendant file a form of the Defence because submissions on delay will obviously be raised by the plaintiff and which I have now found to be very apparent.

Orders

35. The orders of this court are that;

1.	The application to set aside default judgment is refused.

2.	The defendant shall pay the plaintiffs costs of this application, to be taxed if not agreed.

___________________________________________________________

Narakobi Lawyers: Lawyers for Plaintiff/Respondent
Young Wadau Lawyers: Lawyer for the Defendant/Applicant