N4640

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1121 OF 2010

BETWEEN:

TZEN PACIFIC LIMITED
Plaintiff

AND:

INNOVEST LIMITED
Defendant

Waigani: Hartshorn J.
2010: 15th & 19th November

Application for Default Judgment – whether leave required to file defence out of time – whether forewarning letter to be given considered

Facts:

The Plaintiff Tzen Pacific Ltd (TPL) applies for default judgment to be entered against the Defendant Innovest Ltd for its failure to file its defence in time. Innovest opposes the application. It submits that it filed a notice of intention to defend in time and as a consequence TPL should have sent a forewarning letter to its lawyers pursuant to practice direction 1 of 1987. The letter that was sent by TPL was not a proper forewarning letter it submits, as it was sent after the time by which a defence should have been filed, and its content was not that of a proper forewarning letter. Further, Innovest submits that it was entitled to file its defence out of time, without leave of court, which it did pursuant to Order 7 Rule 6 (2) National Court Rules, as it had filed a notice of intention to defend in time.

Held:

1.	Innovest was not entitled to file a defence out of time without the leave of this court and TPL or its lawyers were not obliged to give a forewarning letter pursuant to practice direction 1 of 1987 to Innovest concerning TPL's application for default judgment.

2.	TPL has satisfied all of the requirements for default judgment to be entered.

3.	TPL's statement of claim discloses a reasonable cause of action against Innovest. This is an appropriate case for the exercise of this court's discretion in favour of entering default judgment.

Cases cited: 

Mapmakers Pty Ltd v. Broken Hill Proprietary Company Ltd [1987] PNGLR 78 
MVIL v. Sossie Joe (2007) SC863 
Joseph Peng v. Philip Tangney (2009) SC969

Counsel:

Mr. F. Griffin, for the Plaintiff
Mr. R. Habuka, for the Defendant

19th November, 2010

1. HARTSHORN J: TPL applies for default judgment to be entered against Innovest for its failure to file its defence in time.

2. Innovest opposes the application. It submits that it filed a notice of intention to defend in time and as a consequence TPL should have sent a forewarning letter to its lawyers pursuant to practice direction 1 of 1987. The letter that was sent by TPL was not a proper forewarning letter it submits, as it was sent after the time by which a defence should have been filed, and its content was not that of a proper forewarning letter. Further, Innovest submits that it was entitled to file its defence out of time, without leave of court, which it did pursuant to Order 7 Rule 6 (2) National Court Rules, as it had filed a notice of intention to defend in time.

Whether leave required to file a defence out of time

3. I will consider the last submission first. That is, that Innovest was entitled to file a defence out of time without leave of court pursuant to Order 7 Rule 6 (2) National Court Rules as it had filed a notice of intention to defend in time.

4. Innovest relies upon the Supreme Court decision of Joseph Peng v. Philip Tangney (2009) SC969. In that case the Court stated:

"Where a notice (of intention to defend) is not filed within time, the defendant needs to file an application to seek leave of the Court to file a defence out of time."

5. In my view that statement is concerned particularly with the facts of that case. It is not to be construed to mean that the opposite of that statement represents the law; that is that if a notice of intention to defend is filed in time, the defendant need not file an application to seek leave to file a defence out of time; which is the effect of Innovest's submission.

6. Such an interpretation would render the requirements of Order 8 Rule 4 (1) (a) and (b) National Court Rules, which prescribe the time by which a defence shall be filed and served, nugatory.

7. The Supreme Court in MVIL v. Sossie Joe (2007) SC863 in considering Order 7 Rule 6 (2) stated amongst others, that:

"…a Defendant can file his defence anytime within the total period of 44 days, regardless of whether he has filed a Notice of Intention to Defend within time. If the Defendant attempts to file his defence more than 44 days after the writ is served upon him, he requires the leave of the Court, regardless of whether he has filed a notice of intention to 	defend within time."

8. This statement is specifically on point and in my respectful view correctly records the obligation of a Defendant as to the filing of his defence. The submission of Innovest that it was entitled to file its defence out of time without the leave of court, is rejected.

Whether a forewarning letter is required

9. A forewarning letter is required by practice direction 1 of 1987 which was issued after the decision of the then Chief Justice Sir Buri Kidu in Mapmakers Pty Ltd v. Broken Hill Proprietary Company Ltd [1987] PNGLR 78. The practice direction is as follows:

"PRACTISE DIRECTION NCR 1/87

DEFAULT JUDGMENT – OBLIGATION TO NOTIFY PERSON OR LAWYER FILING NOTICE OF INTENTION TO DEFEND

In N 588 – Mapmakers Pty Limited v Broken Hill Proprietary Company Limited, the Chief Justice has laid down the following principal to be followed when entering default judgments, namely that there must be a practice of forewarning lawyers of the opposite side (or the Defendant if in person) before entering judgment where there is a notice of Intention to Defend filed.

In the event that this does not occur, then this failure may be a ground for setting aside the judgment.

L M Newell
Registrar
15th June 1987"

10. In Peng v. Tangney (supra), the Court considered what Kidu CJ had said in Mapmakers (supra) and reproduced the following passage:

"It is abundantly clear that the applicant had a default judgment entered against it as a result of its lawyers' failure to properly attend to the matter. Be that as it may that failure by itself does not determine the matter in favour of the respondent. Lawyers for the respondent (plaintiff) having been served with the notice of intention to defend were put on notice that a defence was to be filed and when the stipulated time was about to expire or had expired common courtesy required that a caution that a default summons was to be entered ought to have been given to the respondent's lawyers. I consider that this practice should be adopted by all lawyers."

The Court further stated that:

"We consider it unfortunate that what the learned Chief Justice had stated as a matter of professional courtesy as between lawyers, has been frequently misunderstood and misquoted, not to mention misapplied. It was never intended to be a statement of a principle of law, nor a mandatory rule of practice as subsequently translated into a Practice Direction by the Registrar. One needs only to read carefully what his Honour actually said."

11. It is clear from what Kidu CJ said in Mapmakers (supra) that his view was that when lawyers for a plaintiff have been served with a notice of intention to defend they are put on notice that a defence is to be filed. When the stipulated time, the time for filing a defence, is about to expire or has expired, common courtesy requires that a caution that a default summons (judgment) is to be entered, ought to be given to the defendant's lawyers.

12. Kidu CJ considered that common courtesy is required to be shown when the lawyers for the plaintiff are put on notice that a defence is to be filed. It is clear, in my view that Kidu CJ thought that to be put on notice, the lawyers for the plaintiff are to be served with the notice of intention to defend. Kidu CJ does not refer to the notice of intention to defend being filed, yet for reasons unexplained, it is filing and not service to which the practice direction refers.

13. In my view a plaintiff or his lawyer is put on notice that a defence is to be filed when a notice of intention to defend is served as required by Order 7 Rule 5 (3) and (4) National Court Rules. Such service is mandatory. A plaintiff or his lawyer is only put on notice by a notice of intention to defend being filed as opposed to being served, when the plaintiff or his lawyer conducts a search of the court file at the National Court Registry.

14. If a notice of intention to defend is not served but merely filed, and the plaintiff or his lawyer only discover that a notice of intention to defend has been filed when a search of the court file is undertaken in the course of preparing to apply for default judgment for the failure of a defendant to file a defence in time, is the plaintiff obliged to extend common courtesy and forewarn the defendant of an impending application for default judgment, when the common courtesy (and mandatory requirement) of being put on notice by being served has not been extended to the plaintiff by the defendant? In such circumstances, I am of the view that a plaintiff or his lawyer is not so obliged.

15. The scenario that I have just described, if I understand correctly, is what occurred in this instance. For the above reasons, I am not satisfied that TPL or its lawyers were obliged to give a forewarning letter pursuant to practice direction 1 of 1987 to the lawyers for Innovest.

16. If however a forewarning letter was obliged to have been given by TPL, in this instance TPL did give what it describes as a forewarning letter. It was dated 8th November 2010 and was personally served on 9th November 2010 (Letter), 6 days after the time by which Innovest was to file its defence, expired.

17. The lawyers for TPL had discovered that a notice of intention to defend had been filed when a search of the court file was undertaken on 8th November 2010. The Letter informed amongst others, that default judgment would be applied for before close of business on 9th November 2010.

18. Innovest submits that the Letter was not a forewarning letter as it was given after the time by which a defence was to be filed and did not provide for a further time by which Innovest should file a defence.

19. As to the Letter being given after the time by which a defence was to be filed, how was TPL or its lawyers to know that a notice of intention to defend had been filed if a copy of it had not been served? Further, the practice direction does not require a forewarning letter to be given before the time by which a defence is to be filed. I note also that Kidu CJ in Mapmakers (supra) contemplated a forewarning letter being given 

"… when the stipulated time was about to expire or had expired….."

20. As to the Letter not providing for a further period of time by which Innovest was to file its defence, again the practice direction does not require that such be given and Kidu CJ in Mapmakers (supra) does not indicate that such should be given. I am not satisfied that it is a requirement that a plaintiff provide to a defendant in a forewarning letter, a further period of time to file a defence.

21. Indeed, if it was the case, such a situation would be open to abuse with notices of intention to defend likely to be either not served or served late, thereby obliging the plaintiff or his lawyers when they eventually have notice, to provide to the defendant rather more time than that permitted under the National Court Rules, to file a defence. 

22. For the above reasons, if a forewarning letter was obliged to be given by TPL or its lawyers, I am satisfied that the Letter was in accordance with practice direction 1 of 1987 and the comments of Kidu CJ in Mapmakers (supra).

Conclusion

23. For the reasons given, Innovest was not entitled to file a defence out of time without the leave of this court and TPL or its lawyers were not obliged to give a forewarning letter pursuant to practice direction 1 of 1987 to Innovest concerning TPL's application for default judgment. If a forewarning letter was obliged to be given by TPL, the Letter given was in accordance with practice direction 1 of 1987.

24. I am satisfied that TPL has satisfied all of the requirements for default judgment to be entered and I am further satisfied that the statement of claim discloses a reasonable cause of action against Innovest. This is an appropriate case for the exercise of this court's discretion in favour of entering default judgment.

Orders

25. The orders of the Court are:

a)	default judgment is entered against the defendant with all damages to be assessed.

b)	interest at the rate of 8% per annum from the date of entry of default judgment is to be paid by the defendant to the plaintiff on the amount of damages to be assessed until payment of those damages.

c)	the defendant, its employees, agents, servants or whosoever otherwise are permanently restrained from interfering or dealing with Aria Vanu Block Timber Company Limited (including Aria Vanu Block Timber Company Limited's servants, agents and employees).

d)	the costs of the plaintiff of and incidental to this proceeding are to be paid by the defendant to the plaintiff.

e)	 time is abridged.
 
__________________________________________________________

Young & Williams Lawyers: Lawyers for the Plaintiff
Daniels & Associates Lawyers: Lawyers for the Defendant