N5509

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NOS 616 & 924 OF 2006

RAIKOS HOLDINGS LIMITED
Plaintiff

V

TONY TAI TUNG CHI
First Defendant

YUAN CHIEN CHENG
Second Defendant

YOUNG WADAU
Third Defendant

BUMBUM BAIS, RICKY BAIS, JACK GABOR
AND THEIR AGENTS, ASSIGNS AND ASSOCIATES
Fourth Defendant

PORCHE ENTERPRISES LIMITED
Fifth Defendant

2007: Madang: 5, 18 October
2007: Waigani: 2 November

CANNINGS J

PRACTICE AND PROCEDURE – motion for default judgment – no defence filed –preconditions for entry of default judgment – checklist to be satisfied – court has discretion whether to enter default judgment when defendant in default –National Court Rules, Order 12, Rule 32.

The National Court ordered that proceedings commenced by originating summons be continued on pleadings. In accordance with that order the plaintiff filed a statement of claim but the defendants filed no defence. The plaintiff applied for default judgment.

Held:

(1)	In determining whether a default judgment should be entered there is a checklist of at least six items that the court should consider. If all items on the checklist are satisfied the matter is ripe for entry of default judgment.

(2)	However a plaintiff is not entitled to default judgment as of right. Entry of default judgment is a matter for the discretion of the court.

(3)	In the present case, the defendants were in default in that they had failed to file and serve a defence. However, four items on the checklist were not satisfied, in that: there was no proof of service of the motion; the plaintiff did not give notice of its intention to apply for default judgment; there was no affidavit proving due service of the statement of claim; there was no affidavit proving the default upon which the plaintiff relies.

(4)	Furthermore, even if the preconditions for entry of default judgment were satisfied the court would have exercised its discretion to refuse to enter judgment in view of the ongoing disputes and proceedings over ownership and control of the plaintiff company. The motion for default judgment was accordingly refused.

Cases cited

The following cases are cited in the judgment:

Chief Collector of Taxes v Dickson Panel Works Pty Ltd [1988] PNGLR 186
Curtain Bros v UPNG (2005) SC788
Mapmakers Pty Ltd v BHP Co Pty Ltd [1987] PNGLR 78
Raikos Holdings Ltd v Tony Tai Chung Chi and Others, OS No 924 of 2006, 23.01.07
Urban Giru v Luke Muta, West Farm Resources Ltd and West New Britain Provincial Government (2005) N2877

NOTICE OF MOTION

This is a ruling on a motion for default judgment.

Counsel

I P Mambei, for the plaintiff
Y Wadau, for the defendants

2nd November, 2007

1. CANNINGS J: This is a ruling on a motion for default judgment, which has been moved in the following circumstances. A dispute has arisen over forestry operations in the Rai Coast district of Madang Province. The operations have been conducted for a number of years under timber permit No 12-18, called the Rai Coast TRP, issued under the Forestry Act. The plaintiff, Raikos Holdings Ltd, is the permit holder. It entered into a logging and marketing agreement (LMA) with the fifth defendant, Porche Enterprises Ltd, which expired in November 2006, then was renewed in January 2007. 

2. At some time in 2006, or perhaps before then, the date is immaterial, a split developed in the ranks of Raikos Holdings Ltd. Some of the directors had a falling out with the company's managing director, Andrew Sallel, and purported to sack him and a number of other company directors and replace them with a new managing director – Bumbum Bais – and a newly composed board. The group that sacked Mr Sallel is led by Gawan Kuyan, who holds himself out as chairman of the board, and they have sided with Porche Enterprises Ltd, the company that has been doing the actual logging. Mr Sallel and his group of directors have never accepted that they were properly sacked, so much so that last year they tried to terminate the agreement with Porche Enterprises. They also used the company's name to commence court cases against Porche Enterprises Ltd (the fifth defendant) and a number of other defendants including Mr Kuyan. The cases were:

•	OS No 616 of 2006, filed on 5 September 2006; and
•	OS No 924 of 2006, filed on 21 December 2006.

3. Each case has Raikos Holdings Ltd as the plaintiff (even though it shows as defendants people who say they are the proper directors of the company). On 19 January 2007 three motions regarding OS No 924 case came before me in Waigani. The defendants moved a motion for dismissal of the proceedings and a motion to punish the managing director of Raikos, Andrew Sallel, for contempt of court. The plaintiff moved a motion for various injunctions. I refused to make most of the orders sought under those motions but made a number of other orders and declarations, which had the effect of keeping both proceedings (OS Nos 616 and 924) on foot. I published a written judgment: Raikos Holdings Ltd v Tony Tai Chung Chi and Others, OS No 924 of 2006, 23.01.07. For present purposes the most significant orders I made were:

4:	the causes of action in OS Nos 616 and 924 of 2006 shall be merged and OS No 924 of 2006 must be transferred to the Madang Registry of the National Court;

5:	the provisions of the National Court Rules concerning proceedings commenced by writ of summons shall from now on apply to the merged proceedings;

6:	the plaintiff has 14 days from the date of entry of these orders to file a statement of claim relating to the merged proceedings, failing which the entire proceedings will stand dismissed for want of prosecution.

4. I made those orders under Order 4, Rules 31 and 35 of the National Court Rules, as the parties seemed to agree that the two proceedings should be merged and it was the sort of case that lent itself to being continued on pleadings. I thought that was the best way for the issues to be defined. I said that the plaintiff may wish to make a claim for damages based on breaches of the LMA and the defendants should have the opportunity to file a defence; and that once the pleadings are closed the matter can be set down for trial.

WHAT HAS HAPPENED SINCE 23 JANUARY 2007?

5. Order No 4 has been complied with in that the two files have been merged and transferred to the Madang Registry. As for Order Nos 5 and 6, the plaintiff has filed a statement of claim within the 14-day period I allowed. That was done on 5 February 2007. The plaintiff is claiming damages and losses of approximately K11.7 million owing to the breach of the LMA by the defendants. It is claimed that the first, second and third defendants mobilised the fourth defendant to overthrow the directors and shareholders of the plaintiff. None of the defendants have filed a defence in response to that statement of claim. On 20 March 2007 the motion for default judgment was filed by the plaintiffs.

6. In the meantime, on 23 January 2007 – the day I made the orders that have given rise to the contempt charges – Mr Kuyan (who claims to be the company chairman) and Mr Bais (who says he is the managing director – Mr Sallel's replacement) filed National Court proceedings OS No 19 of 2007. They joined Raikos Holdings Ltd as a third plaintiff. As defendants, they named: Mr Sallel; Ignas Mambei (who is Raikos Holdings Ltd's lawyer in the present contempt case) and three others who claim to be still company directors (Batteng Puto, Usum Mai and Yanam Mul). The plaintiffs are seeking a declaration that Mr Sallel and his group of directors were lawfully removed from office at a board meeting in August 2006. They also want injunctions against Mr Sallel, Mr Mambei and the others, restraining them from holding themselves out as being associated with the company. OS No 19 of 2007 has yet to be set down for trial.

7. Soon after OS No 19 was filed, Mr Sallel and his group filed OS No 33 of 2007, on 31 January 2007. Messrs Sallel, Puto and Mul, plus another individual, Bawn Bulum, are plaintiffs. Raikos Holdings Ltd is also named as a plaintiff. They named Mr Kuyan and his group as defendants, as well as Tony Tai Tung Chi (the managing director of Porches Enterprises Ltd) and Teup Goledu (the Registrar of Companies). The plaintiffs seek a declaration that the meeting of August 2006 at which Mr Sallel and his group were removed was illegal. They also want an injunction against Mr Chi to stop him interfering in the company's affairs. OS No 33 has also not yet been set down for trial. So there are now three separate court proceedings on foot regarding Raikos Holdings and the Rai Coast TRP:

•	OS Nos 616 & 924 of 2006 – under which the motion for default judgment is brought;
•	OS No 19 of 2007 – filed by Mr Kuyan and his group; and
•	OS No 33 of 2007 – filed by Mr Sallel and his group.

8. I am only dealing in this ruling with the motion for default judgment, which is brought under Order 12, Rule 25(b) of the National Court Rules.

THE CHECKLIST

9. As I stated in Urban Giru v Luke Muta, West Farm Resources Ltd and West New Britain Provincial Government (2005) N2877, in most cases where the court deals with an application for default judgment, there is a checklist of at least six pre-conditions to consider. All the items on the checklist must be satisfied or ticked 'OK' before the court can exercise its discretion to enter default judgment. If one or more is not satisfied, the Court will refuse the application, unless there are special circumstances. (See generally National Court Rules, Division 12.3 (default judgment).) If all are satisfied the court has a discretion to exercise. It can refuse to enter default judgment in an appropriate case (Curtain Bros v UPNG (2005) SC788).

10. The items on the checklist are as follows:

No 1: Proper form

Is the notice of motion for default judgment in the proper form and is it supported by affidavit, as required by Division 4.5 (motions) of the National Court Rules, in particular Rules 40 (contents of motion) and 44 (affidavits)?

No 2: Service of notice of motion and affidavits

(a)	Has the notice of motion and the affidavit(s) in support and all other documents the plaintiff is relying on, been served on the defendant three days before the motion is heard, and is proof of service provided by an affidavit of service? (National Court Rules, Order 4, Rules 38 (notice necessary), 42 (time for service of notice), 43 (service) and 44 (affidavits).) OR

(b)	Has the defendant expressly or by implication waived compliance with those service requirements, eg is the defendant represented in court and ready and willing to argue the motion?

No 3: Default

The defendant must be 'in default'.

(a)	Has a notice of intention to defend NOT been filed or been filed late? (The normal time limit for giving a notice of intention to defend is 30 days after service of the writ: National Court Rules, Order 12, Rule 25(a) (default); Order 4, Rule 9 (notice of intention to defend); Order 4, Rule 11(1)(b)(i) (time for giving notice of intention to defend).) OR

(b)	Has a defence NOT been filed or been filed late? (The normal time limit for filing a defence is within 44 days after service of the writ: National Court Rules, Order 12, Rule 25(b) (default); Order 8, Rules 4(a) (defence), 23(1) (close of pleadings); Order 4, Rule 11(b)(i) (time for giving notice of intention to defend).) OR

(c)	If the defendant is required to verify its defence, has the defence not been verified or has it been verified late? (The normal time limit for verifying a defence is the same as the time limit for filing the defence: National Court Rules, Order 12, Rule 25(c) (default); Order 8, Rule 24 (defence: verification).)

Note that the time for filing a defence may be extended by order of the court or by consent without an order of the court (National Court Rules, Order 1, Rule 15 (extension and abridgment)).

No 4: Warning

(a)	Has the defendant NOT given a notice of intention to defend? OR

(b)	If the defendant has given notice of intention to defend, has the plaintiff given the defendant at least seven days notice of the intention to apply for default judgment, as required by Practice Direction No 1 of 1987? (See Mapmakers Pty Ltd v BHP Co Pty Ltd [1987] PNGLR 78, National Court, Kidu CJ; Chief Collector of Taxes v Dickson Panel Works Pty Ltd [1988] PNGLR 186, National Court, Bredmeyer J.)

No 5: Proof of service of writ

(a)	Has the plaintiff filed an affidavit proving due service of the writ of summons or notice of the writ on the defendant? (National Court Rules, Order 12, Rule 34(a) (proof of service of writ).) OR

(b)	Has the plaintiff produced a copy of the writ that has been endorsed by the defendant's lawyer with a statement that the lawyer accepts service of the writ on the defendant's behalf? (National Court Rules, Rule 34(b) (proof of service of writ).)

No 6: Proof of default

Has the plaintiff filed an affidavit proving the default upon which the plaintiff relies? (National Court Rules, Order 12, Rule 34(c) (proof of service of writ).)

THE PRESENT CASE

11. I have applied the checklist to the present case and conclude as follows:

No 1 – proper form – has been complied with.

No 2 – service of documents – has not been complied with as there is no proof of service provided by an affidavit of service.

No 3 – default – has been complied with. The defendants had 14 days after service of the statement of claim to file their defences. No defences have been filed.

No 4 – warning – has not been complied with. The defendants filed a notice of intention to defend and thus should have been given seven days notice of the plaintiff's intention to apply for default judgment.

No 5 – proof of service of the writ – has not been complied with.

No 6 – proof of default – has not been complied with.

12. As four of the six items on the checklist have not been complied with, it is not appropriate to enter default judgment. Even if the preconditions for entry of default judgment were satisfied I would have exercised my discretion to refuse to enter default judgment in view of the ongoing disputes and proceedings over ownership and control of the plaintiff company.

WHAT NEXT?

13. Having become aware, since this matter first came before me in January this year, of the dispute about ownership and control of the plaintiff company, I do not think there is much to be gained by allowing the current proceedings to continue while that dispute is unresolved. I will therefore order a stay of these proceedings pending a final determination of OS No 19 of 2007 and OS No 33 of 2007 or until a further order of the court.

COSTS

14. Normally the court would order costs in favour of defendants who repel a motion for default judgment. But this is not a normal case. If I were to order the plaintiff to pay the defendants' costs, I would be making orders against some of the people who say that they actually own and control the company. That would not make practical sense. Furthermore, I have found that the defendants were in default. So this is a case in which the parties should bear their own costs.

ORDERS

(1)	The motion for default judgment is refused;

(2)	The proceedings in OS Nos 616 & 924 of 2006 are stayed pending final determination of OS No 19 of 2007 and OS No 33 of 2007 or until a further order of the court;

(3)	The parties shall bear their own costs of the hearing of this motion.

Ruling accordingly.
__________________________________________________

Mambei Lawyers & Consultants: Lawyers for the Plaintiffs
Young Wadau Lawyers: Lawyers for the Defendants