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Stokes v Global Constructions Ltd [2008] PGNC 190; N3491 (1 September 2008)

N3491

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 781 OF 2006

BETWEEN:

MORO STOKES
Plaintiff

AND:

GLOBAL CONSTRUCTIONS LIMITED
Defendant

Mount Hagen: Makail, AJ
2008: 1 September
: 25 July

INTERLOCUTORY RULING

EVIDENCE - objection raised on admissibility of agreement - agreement to settle claim - made during "without prejudice" negotiations and marked "without prejudice" - whether admissible - circumstances under which "without prejudice" correspondences or documents may be admitted - necessary to show intention of parties to be bound by the agreement to settle claim in full - not to mislead court.

COMPANY LAW - modes of service of documents including Writ of Summons on company - either on the director or the secretary of the company named on the company register - or by delivery to an employee of the company at the company’s head office or principal place of business - or leaving it at the company’s registered office or address for service - mandatory requirement - Companies Act 1997 - section 431(1)(a),(b)&(c)&(2) - failure to comply - effect of - amounts to improper or no service.

PRACTICE & PROCEDURE - application for leave to file defence out of time - improper or no service of Writ of Summons on defendant - amounts to reasonable explanation for delay - evidence of agreement to settle claim raised in affidavit evidence - not pleaded in draft defence - no prejudice to plaintiff - defence may include it in final defence prior to filing - estoppel by deed raised by defendant - amounts to defence on merits - delay of expeditious determination of proceeding - no evidence of prejudice to plaintiff - application granted.

Cases Cited:

Papua New Guinea cases cited:

Tinange Tamase -v- Motor Vehicle Insurance (PNG) Trust [1992] PNGLR 244
David Kapi -v- Pacific Helicopters (2002) N2275

Overseas cases cited:

Tomlin -v- Standard Telephones & Cables Ltd [1969] 3 All ER 201

Counsel:

Mr K. Sino, for the Plaintiff
Mr K. Peri, for the Defendant

1 September, 2008

1. MAKAIL AJ: This is a case where the Plaintiff is suing the Defendant for making defamatory statements that she conspired with criminals to kill her husband, Jess Stokes. Mr Stokes was then an employee of the Defendant and working in Mt Hagen. If he was killed, she would claim compensation from the Defendant and share it with the criminals.

2. These defamatory statements were allegedly made after criminals broke into the Plaintiff and Mr Stokes’ residence in Mt Hagen in October 2005 but were shot and killed by police. The Plaintiff out rightly denies these allegations and says that they are highly defamatory of her character and seeks general and special damages from the Defendant.

3. After the Plaintiff served the Writ of Summons on the Defendant by leaving it with a Mr Ian Jeffson, a Director of the Defendant at his Kagamuga Airport office on 17 June 2006, the Defendant filed a Notice of Intention to Defend on 10 April 2007 but failed to file its Defence thereafter.

PARTIES’ APPLICATIONS

6. As a result, on 13 November 2006 the Plaintiff filed for default judgment against the Defendant pursuant to Order 12, rules 25 and 27 of the National Court Rules. But on 8 March 2007, the Defendant filed another application to seek leave to file its Defence out of time pursuant to Order 1 rule 7 and Order 7 rule 6 of the National Court Rules.

EVIDENCE

7. The Plaintiff relies on the following Affidavits to support her application for default judgment:

1. Affidavit of Service of the Plaintiff sworn on 30 August 2006 and filed on 1 September 2006;

2. Affidavit of Search of the Plaintiff sworn on 13 November 2006 and filed on 14 November 2006; and

3. Affidavit in Support of the Plaintiff sworn on 13 November 2006 and filed on 14 November 2006.

8. For the Defendant, it relies on the Affidavit in Support of Nelson Yano sworn and filed on 8 May 2008.

PARTIES’ SUBMISSIONS

9. Mr Sino of counsel for the Plaintiff submits that the Defendant is in default of filing its Defence by the due date, being 2 August 2006. Thus, he submits that default judgment should be entered against the Defendant with damages to be assessed.

10. In respect of the Defendant’s application for leave to file its Defence out of time, he submits that the Defendant has failed to give a reasonable explanation for the delay in filing its Defence especially when the delay is more than 7 months from the date of the filing of the application for leave of 8 May 2007.

11. Next, he submits that there is no Defence on merits because the Defendant cannot rely on the agreement entered between the parties on a "without prejudice" basis to raise a defence of estoppel by deed. Although he did not submit that it is inadmissible, this seems to be the crux of his submission.

12. He also submits in the alternative that if the Court accepts the agreement, the Plaintiff cannot be bound by it because she signed it without knowing its implication. She is illiterate.

13. Finally, he submits that there will be prejudice to the Plaintiff if the Defendant is given leave to file its Defence out of time because it will delay the expeditious determination of this proceeding.

14. For the Defendant, Mr Peri concedes that the Defendant is in default of filing its Defence within time but submits that nonetheless, leave should be granted to file its Defence out of time.

15. In order for the Court to grant leave to the Defendant to file its Defence out of time, there are three considerations that the Defendant must establish and they are:

1. there must be a reasonable explanation for the delay in filing the Defence;

2. there must be a Defence on merits; and

3. there will be no prejudice to the Plaintiff if leave is granted.

16. First, he submits that there is a reasonable explanation for the delay in filing the Defence. This is because the Plaintiff did not serve the Writ of Summons at the registered office of the Defendant. As a result, it was not aware of the claim until sometimes after the time for filing of the Defence expired.

17. Secondly, he submits that the Defendant has a Defence on merits. There is evidence from the witness of the Defendant, Mr Yano that the Plaintiff had accepted a sum of K3,625.00 as full and final settlement of the compensation claim. This settlement is evidenced by an agreement entered into by the parties on 29 June 2006 in Mt Hagen. It is marked Annexure "B" to the Affidavit of Nelson Yano.

18. On that basis, he submits that the Plaintiff is estopped or barred from making any further claims against the Defendant such as this one in this proceeding.

19. In respect of whether there will be any prejudice to the Plaintiff, he submits that there will be none because the Plaintiff did not show any evidence of prejudice except that there will be a further delay to bring the matter to an early conclusion.

REASONS FOR DECISION

20. I have perused all the Affidavit materials and pondered upon the submissions of both counsel and this is what I have to say on my part.

21. First, there is no dispute that the Defendant is a registered company and carries on business in Papua New Guinea. Secondly, there is no dispute that Mr Stokes was employed by the Defendant at its Mt Hagen office. Thirdly, whether the Plaintiff and Mr Stokes were married or had a de facto relationship is in issue but there is no dispute that the Plaintiff and Mr Jess were living together in Mt Hagen when criminals broke into their house. Lastly, there is no dispute that the Plaintiff signed an agreement on 29 June 2006. Based on the agreement, she received K2, 000.00 and a further K1, 635.00 giving a total sum of K3, 635.00. But it is disputed that the total sum of K3, 635.00 was paid as full and final settlement of the compensation claim.

22. Now in respect to the Plaintiff’s application for default judgment against the Defendant, it is clear from the evidence of the Plaintiff that the Defendant is in default. The Writ of Summons was served on 17 June 2006. The 44 days to file a Defence under the National Court Rules inclusive of the time to file a Notice of Intention to Defend expired on 2 August 2006.

23. I could enter default judgment now but then the Defendant seeks leave to file its Defence out of time and I have to decide that too.

Reasonable explanation for delay

24. And so, in respect of the first consideration, I accept the submissions of the Defendant that there is a reasonable explanation for the delay in filing the Defence in that it was not aware of the claim until after the time had expired. This is because the Plaintiff had served the Writ of Summons on a person by the name of Mr Jeffson at an office at Kagamuga Airport. She claims that he is a director of the Defendant.

25. But I do not have any evidence that Mr Jeffson is a director of the Defendant and if the office at Kagamuga Airport is the head office or the principal place of business of the Defendant and if Mr Jeffson is an employee of the Defendant. Further, there is no evidence that the office at Kagamuga Airport is the registered office of the Defendant or the address of service of the Defendant. I say this because section 431 of the Companies Act 1997, provides specifically that any document including a Writ of Summons, etc in any legal proceedings must be served on certain officers or employees of a company and at specific locations.

26. It states as follows:

"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". (Emphasis is mine).

27. The first three modes of services under section 431(1)(a)-(c) are applicable in this instant case. The first one is the Writ of Summons must be served on the director or secretary of the company. The director or secretary must be a person named on the company register. Alternatively and secondly, it must be served on an employee of the company at the company’s head office or principal place of business. If not, thirdly, it must be left at the company’s registered office or address for service.

28. As I said above, I do not have any evidence that first Mr Jeffson is a director of the Defendant except for the Plaintiff’s bold statement in paragraph 2 of her Affidavit of Service that Mr Jeffson is a director of the Defendant. If he is a director, section 431(1) (a) requires that his name must be recorded "on the register" as a director. I infer this to mean that there must be evidence of a register or a company search report verifying that Mr Jeffson is a director of the Defendant.

29. There is no evidence of a register or a company search report verifying that Mr Jeffson is a director of the Defendant before me. In the absence of such evidence, I find that he is not a director.

30. Secondly, there is no evidence before me to show that the office at Kagamuga Airport is the head office or the principal place of business of the Defendant and that Mr Jeffson is an employee of the Defendant in order to establish that mode of service under section 431(1) (b) has been complied with. I find that there is no evidence of a company search report to show that the office at Kagamuga Airport is the head office or the principal place of business of the Defendant. I also find that there is no evidence to show that Mr Jeffson is an employee of the Defendant. Thus, I am left in the dark so to speak about the head office or the principal place of business of the Defendant and if Mr Jeffson is an employee of the Defendant.

31. Thirdly, I do not have any evidence to show that the office at Kagamuga Airport is the registered office of the Defendant. This is to establish the mode of service under section 431(1) (c) has been complied with. Again, there is no evidence of a company search report to show that the office at Kagamuga Airport is the principal place of business of the Defendant once again, hence, I am left in the dark so to speak about the registered office or address of service of the Defendant.

32. I consider that apart from the other modes of service of the Writ of Summons or any other court documents for that matter on a company under section 431(1)(d),(e)&(f), service of the Writ of Summons on either the director or the secretary of the company named on the company register or by delivery to an employee of the company at the company’s head office or principal place of business or leaving it at the company’s registered office or address for service are mandatory under section 431(1)(a),(b)&(c) and (2).

33. Thus, it means that a failure to comply with any one of these modes of service under section 341 of the Companies Act 1997 amounts to improper or no service of the Writ of Summons on the Defendant.

34. In the circumstances, I am not satisfied that the Plaintiff duly served the Writ of Summons on the Defendant. On the other hand, I am satisfied that the Defendant has offered a reasonable explanation for the delay and that is, the Writ of Summons was not duly served on the Defendant in accordance with section 431 of the Companies Act 1997, hence the delay in the Defendant filing its Defence with time.

Defence on merits

35. As for the second consideration, that is whether there is a Defence on merits, none of the counsel have been able to point me to the law or any case authorities on the question of admissibility of a document marked as "on a without prejudice" basis. I have been left on my own to reach my own decision.

36. I say this because in order for the Defendant to demonstrate that there is a Defence on merits, it seeks to show that the parties have settled the claim for compensation. As proof of the settlement, it seeks to rely on an agreement signed by the parties on 29 June 2006. The Defendant says that by this agreement, the Plaintiff agreed to make no further claims against the Defendant upon being paid K3,625.00.

37. For the benefit of all, I set out the relevant parts of the agreement below:

"WITHOUT PREJUDICE

We refer to our agreement to pay an ex gratia payment of Two thousand Kina (K2, 000.00) as part payment subject to final calculation converting Australian dollar value to PNG Kina.

That the recipients acknowledge receipt of K2,000.00 in cash and also take note that this is paid in satisfaction of any claim existing or future that you may believe that you have on Global Constructions limited and its agents.

This agreement is dated the 29th day of June 2006 at Mt Hagen". (Emphasis is mine).

38. As I note from the submissions of the Plaintiff’s counsel Mr Sino made earlier on, he objects to the Defendant relying on the agreement to support its contention that there is a defence of estoppel by deed on the basis that it was an agreement reached on a "without prejudice" basis. That is why it bears a phrase "without prejudice" on it.

39. Although he did not submit that the agreement is inadmissible, I think that that is what he wanted to submit. Thus, the question is, is the agreement made on a "without prejudice" basis admissible evidence?

40. In the case of Tinange Tamase -v- Motor Vehicle Insurance (PNG) Trust [1992] PNGLR 244, Her Honour Doherty J followed the decision in Tomlin -v- Standard Telephones & Cables Ltd [1969] 3 All ER 201 at 210 where the status of "without prejudice" correspondence in negotiating settlement of claims for damages for personal injuries or deaths arising from motor vehicle accidents was considered at length.

41. In Tinange Tamase’s case (supra), the Plaintiff's husband died from injuries sustained whilst a passenger in a car accident. She sought legal advice on a possible claim against the insurers of the car, but this was more than one and a half years outside the period required for lodging claims under section 54 of the Motor Vehicles (Third Party Insurance) Act, though less than the period provided by the Wrongs (Miscellaneous Provisions) Act for bringing actionable claims arising from death.

42. The Plaintiff's lawyers successfully sought permission of the Insurance Commissioner to submit her claim outside the period prescribed in the former Act, and negotiations proceeded between them and the Defendant on the quantum of her entitlement. In the course of the negotiations, the period of 3 years expired and the right of action became statute barred by the latter Act. In that action the Plaintiff sought to effect the terms of the settlement but the Defendant pleaded the defence of limitation of action.

43. The issues before the Court were:

1. Whether the correspondence between the Plaintiff's lawyers and the Defendant constituted an agreement binding upon the parties and enforceable by the Court.

2. If there is no such binding agreement, on the facts, whether the Defendant by its conduct is estopped from denying that it agreed to make payments to the Plaintiff and her dependent children.

44. Her Honour held that:

1. If an agreement is reached between the parties making it clear that liability is agreed prior to the limitation period expiring, such an agreement is enforceable by the Courts.

2. On the facts of the case, there was no such agreement and, accordingly, the Court did not enter judgment for the Plaintiff.

3. The Plaintiff had not acted to her detriment on any promise by the Defendant, and so the doctrine of estoppel did not apply.

45. In arriving at that decision, Her Honour shared what Sir Gordon Willmer in Tomlin’s case (supra) said at page 207 of that Judgment that: "an uneasy suspicion is that there was probably telephonic communication going on between the parties in the background behind this correspondence"; but since Her Honour had no such evidence before her, she could only proceed on the facts before her. And so, the facts showed that the letter of 29 February was written after the statutory limitation period expired. There was no statement of acceptance of liability on the part of the Defendant. Despite an Affidavit before Her Honour stating that "liability has not been an issue", she could not find any categorical statement or clear inference that liability has been admitted or a statement that it is not denied.

46. In the case of Tomlin (supra), the solicitors for an injured employee and solicitors for his employer’s insurance company had come to an arrangement that liability for injury would be accepted on a 50 per cent basis. This was referred to throughout correspondence between the two solicitors. In subsequent proceedings it was submitted that the agreement, referred to in letters headed "without prejudice" was not a binding agreement at all. After reviewing the facts Danckwerts LJ said at 204 of the Judgment:

"I come to the conclusion that the proper construction is that there was a definite and binding agreement on a 50/50 basis and that, although certain negotiations were entered into for the purpose of trying to agree to the amount of the damages, the agreement as to the 50/50 basis stands and the plaintiff is entitled to hold onto that agreement which was reached."

47. The Court found that there was an agreement to settle the claims between the parties on a "50/50 basis" and found, as a fact, that that correspondence amounted to an agreement. It was noted that all the correspondence was headed "without prejudice", but it found that there was in the correspondence a complete contract and that both parties intended to be bound by that contract, and so it was enforceable. Hence, the words "without prejudice" do not always alleviate a party from liability. Much depends on the facts.

48. Whilst I am unable to find any cases directly on point, that is cases which say that "without prejudice" correspondences or agreements are inadmissible, it appears from the cases of Tinange Tamase (supra) and Tomlin (supra) that the Courts have proceeded on the basis that the "without prejudice" correspondences exchanged between the parties are admissible if they go to show that the parties intended to be bound by the agreement made between the parties and the Court proceeded in each instances to determine whether or not there was an agreement between the parties.

49. The nearest of them all is the case of David Kapi -v- Pacific Helicopters Limited (2002) N2275. In that case, the Defendant applied to strike out the Statement of Claim and for judgment to be entered for the Plaintiff in the sum of K30, 000.00. The sum of K30, 000.00 was paid into Court so that it would be paid later to the Plaintiff for the death of a relative in a helicopter crash.

50. The Plaintiff also filed a cross application for judgment of K30, 000.00 and for costs and interest to be assessed at a separate trial, alternatively, for the Defendant’s application to be dismissed. In the Statement of Claim, the Plaintiff claimed damages for negligence or alternatively damages pursuant to the Civil Aviation (Aircraft Operators Liability) Act.

51. The Defendant argued that the sum of K30, 000.00 is the statutory maximum amount allowed under section 27(i) of the Civil Aviation (Aircraft Operators Liability) Act, being the Act governing aircraft accidents. Her Honour was referred by the Defendant’s lawyers to a number of letters exchanged between them and the Plaintiff’s lawyers where they offered to settle the claim at the statutory maximum amount of K30, 000.00 without admission of liability inclusive of interest.

52. In considering whether those letters should not be read by the Court because they were exchanged on a "without prejudice" basis, this is what Her Honour said:

"In this case, the letters were purely for the purpose of negotiating a settlement. The law allows, (rather than compels) either party to veto the admission into evidence of concessions made during negotiations. Here, the Defendant is attempting to show that they had always maintained their offer to the Plaintiff of the statutory maximum of K30, 000.00. Then the ‘without prejudice’ acceptance of the offer was withdrawn by the Plaintiffs on 7.5.02. The correspondences are therefore to establish the offer made. It cannot be permitted to put a party into the position of being able to cause a court to be deceived as to the facts, by shutting out evidence which would rebut inferences upon which that party seeks to rely (see Pitts -v- Adney [1961] NSW R 535 per Walsh .J). The court must not be misled, no matter how subtle it is".

53. Thus, it is clear that "[t]he law allows, (rather than compels) either party to veto the admission into evidence of concessions made during negotiations". This proceeds on the basis that the Court needs to know the intentions of the parties. That is, if they intended to be bound by the agreement and that the Court must not be misled from the dispute.

54. I will follow these principles and apply them in the instant case because I am of the view that whilst the agreement of 29 June 2006 was made on a "without prejudice" basis, it was intended to show that parties had agreed to settle the compensation claim in full. And so the agreement must be admitted into evidence and considered by the Court as it seeks to show that parties have intended to be bound by the agreement and I so order that it be admitted into evidence.

55. Proceeding on from that, I am of the view that the agreement shows that there is prima facie a defence of estoppel by deed. But there is another matter I wish to raise here in respect of this defence before moving onto Mr Sino’s alternative submission. I have carefully perused the draft Defence of the Defendant annexed as Annexure "D" to the Affidavit of Yano but cannot see any pleading raising this defence.

56. Whilst that may be so, I consider that the omission in the draft Defence will not prejudice the Plaintiff in her preparation of her case because the Defendant may include it in the final Defence prior to filing. I leave that to counsel to take up in the event that I decide to grant the Defendant leave to file its Defence out of time.

57. As to Mr Sino’s alternative submission that if the Court accepts the agreement, the Plaintiff cannot be bound by it because she signed it without knowing its implication, I reject this submission because first there is no evidence before me that the Defendant did not explain to her the effect of agreement of 29 June 2006. Secondly, there is no evidence before me that she is illiterate.

58. On the contrary, I find that there is evidence before me that the Defendant had in no uncertain terms explained to her the implications of the agreement when Mr Yano sent to her a letter dated 1 November 2006 marked as Annexure "A" to the Affidavit of Mr Yano where he states in part:

"We are willing to pay the balance of funds as per your police statement (attached). Total damages stated were K3, 625.00: you have acknowledged payment of K2, 000.00 in June 2006. Leaving a balance of K1, 625.00.

This payment however is subject to you signing the attached agreement. You must clearly state to withdraw your intention to proceeded with any court action against the company or any of its officers. You must also accept that this is your final payment and no further claims will be submitted against the company" (Emphasis is mine).

59. There is no evidence from her to suggest that she did not receive this letter nor is there evidence that she rejected this letter. And so, based on this letter, it is clear to me that the Defendant did advise the Plaintiff of the implication of agreement in the event that she accepts the sum of money offered as compensation to settle her claim. The implication is that, she will not make any further claims against the Defendant.

60. Having said that, whether the defence of estoppel by deed will succeed is a matter for the full trial. All I need to determine at this stage is whether there is a Defence on merits as demonstrated by the evidence of the Defendant and so far, I am satisfied that there is one.

Prejudice

61. As to the final consideration and that is whether the Plaintiff will be prejudice if the Court grants leave to the Defendant to file its Defence out of time, I am not satisfied that the Plaintiff will be prejudiced because there is simply no evidence placed before me to show the prejudice. If there is a delay in the expeditious determination of this proceeding, I consider that it is of minimal effect. There are many other cases also pending expeditious determination here in Mt Hagen and I believe the Plaintiff will eventually have her day in Court.

62. In the circumstances, I am satisfied that the Defendant has shown that the Plaintiff will not be prejudiced if I grant leave to it to file its Defence out of time.

CONCLUSION

63. For all the foregoing reasons, I am satisfied that the Defendant has made out its application for leave to file its Defence out of time and I grant the application. In granting the Defendant’s application, conversely, I refuse the Plaintiff’s application for default judgment.

ORDERS

I make the following formal Orders of the Court:

1. The Plaintiff’s application for default judgment is refused.

2. The Defendant is granted leave to file its Defence within 14 days from the date of this Order.

3. Costs of the both applications be in the cause.

4. The matter is referred for Directions hearing on a date to be fixed.

5. Time for entry of these Orders be abridged to the date of settlement by the Registrar which shall take place forthwith.

Sino & Co Lawyers: Lawyers for the Plaintiff
Warner Shand Lawyers: Lawyers for the Defendant