N4740

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1616 OF 2011

BETWEEN:

LIFE INSURANCE CORPORATION
(PNG) LIMITED
Plaintiff

AND:

BANK OF SOUTH PACIFIC LIMITED
Defendant

Waigani: Hartshorn J.
2012: 19th June
: 27th July

Application to set aside a default judgment – calculation of time to file a defence when time to file a notice of intention to defend expires in court vacation - Order 2 Rule 3 (3) and Order 8 Rule 4 (1) (d) National Court Rules considered 

Facts:

Default judgment was entered against the Bank of South Pacific Ltd (BSP) in the absence of a notice of intention to defend and defence. BSP now seeks to have the default judgment set aside and its filed defence and cross claim to be declared valid or alternatively that it have leave to file a defence and cross-claim. Life Insurance Corporation (PNG) Ltd (Life Insurance) seeks to have BSP's defence and cross claim struck out.

Held:

As the time limited to file a notice of intention to defend is part of the calculation of the time for filing a defence, it is part of the time allowed for filing a pleading under Order 2 Rule 3 (3) National Court Rules and so the time of the vacation is not to be reckoned in that time.
 
Cases cited: 

Niugini Civil & Petroleum Ltd v. West New Britain Development Corporation Ltd (2006) N4152 
Tzen Pacific Ltd v. Innovest Ltd (2010) N4640 

Counsel:

Mr. M. Pokia, for the Plaintiff
Mr. I. R. Shepherd, for the Defendant

27th July, 2012

1. HARTSHORN J: The plaintiff, Life Insurance Corporation (PNG) Ltd, (Life Insurance) alleges various breaches by the defendant, Bank of South Pacific Ltd (BSP) in the operation of accounts that Life Insurance has with BSP. Those breaches are of an undertaking or assurance not to debit an account, the banker's duty to its client and a statutory duty under the Bills of Exchange Act.

2. Default judgment was entered against BSP in the absence of a notice of intention to defend and defence. BSP now seeks to have the default judgment set aside and its filed defence and cross claim to be declared valid or alternatively that it have leave to file a defence and cross-claim. Life Insurance seeks to have BSP's defence and cross claim struck out.

3. BSP submits that the default judgment was irregularly entered as it had filed a notice of intention to defend and a defence in time. Alternatively, if the judgment was regularly entered, BSP submits that it has a defence on the merits and a cross claim and should be allowed to rely upon them. Life Insurance concedes that if the default judgment was entered irregularly, it should be set aside as of right. It maintains however, that the default judgment was regularly entered.

Whether judgment entered irregularly

4. BSP submits that it filed a notice of intention to defend and a defence in time. These documents were not recorded as being filed on the court file and were not filed in the court file presumably because of problems in the court registry, and so this court was unaware of the documents' existence at the time that the court considered the application for default judgment. Life Insurance submits that even if these documents were filed, the defence was not filed within time and so BSP was in default in any event.

5. It is not in dispute that the writ of summons and statement of claim were served upon BSP on 16th December 2011, that the time given to BSP to file its notice of intention to defend was 30 days after service pursuant to Order 4 Rule 11 National Court Rules, and the last day of that 30 day period was 15th January 2012.

6. BSP contends that it filed its notice of intention to defend on 4th January 2012. A copy of the notice was sent to the lawyers for Life Insurance on or about 15th March 2012. BSP contends that it filed its defence and cross claim on or about 7th March 2012 and that they were filed in time. BSP submits that Order 2 Rule 3 (3) National Court Rules provides that:

"The time of the vacation shall not be reckoned in the times appointed or allowed by these Rules for filing, delivering or amending and (sic) pleading……"

The time appointed or allowed by these Rules for filing a defence is, pursuant to Order 8 Rule 4 (1) (d):

"….. before the expiry of 14 days after the date of expiry of the time limited for him to give notice of intention to defend;…."

7. BSP's submission is that the time limited for it to file a notice of intention to defend in the writ of summons was 30 days after service of the writ. Fourteen (14) days after that time is 44 days after service of the writ. As the time limited to file a notice of intention to defend is part of the calculation of the time for filing a defence, it is part of the time allowed for filing a pleading, notwithstanding that a notice of intention to defend is not a pleading. In this instance as 27 days of the time for filing the notice of intention to defend fell within the vacation, those 27 days should not be reckoned in the time allowed for filing a defence pursuant to Order 2 Rule 3 (3) and those 27 days should begin to run when the vacation ends. Consequently, BSP had 41 days, from 1st February 2012 to 12th March 2012 to file its defence.

8. Life Insurance submits that as a notice of intention to defend is not a pleading, the time of the vacation shall be reckoned in the time appointed or allowed by the Rules for its filing. The time to file a notice of intention to defend here, expired in the vacation. The 14 days after the expiry of that time referred to in Order 8 Rule 4 (1) (d) as the time appointed or allowed to file a defence, begins to run when the vacation ends.

9. Neither counsel referred to any authority in support of their respective positions on this issue. In the course of my own research, I was only able to find one decision that had any bearing on this issue; that is the decision of Cannings J. in Niugini Civil & Petroleum Ltd v. West New Britain Development Corporation Ltd (2006) N4152 at para 20. This case concerned an application to file a defence out of time. In the course of his judgment, His Honour was considering the extent of delay and the time by which a defence should have been filed. His Honour fixed as the date of service of the writ, the 19th December 2004, considered the vacation and then stated that the defendant had 44 days after 1st February 2005 to file his defence. This supports the argument of BSP. It is not clear from the judgment whether there had been argument on the issue or that the issue was before His Honour to decide; it appears not on both counts.

10. In considering this issue, the question arises as to whether "times" in "the times appointed or allowed by these Rules" in Order 2 Rule 3 (3), refers to the specific statement of the number of days by which an act must be performed or the total number of days that are permitted for an act to be performed. The differing interpretations of "appointed" and "allowed" must also be considered. 

11. I confess that before this hearing I was of the view that the interpretation favoured by counsel for Life Insurance was correct. It was the view that I had in private practice and I suspect was formed more out of an abundance of caution for the protection of the interests of clients rather than as a result of any detailed analysis of the relevant Rules.

12. Following a perusal of the subject Rules, I am satisfied that both interpretations can legitimately be made as Order 2 Rule 3 (3), as a consequence of its drafting, is open to a number of interpretations, all of which are plausible. Further, it is the case that the time allowed to file a defence cannot be reckoned without having recourse to the amount of time given to a defendant in the writ to file a notice of intention to defend. Invariably that time is 30 days, but the Rules allow for it to be more. 

13. Given this, BSP should be permitted to rely upon the interpretation it favours.

14. As I have found in favour of BSP's argument on this issue, it is the case that I entered judgment irregularly as BSP had filed its notice of intention to defend and defence in time, before 12th March 2012. As mentioned, counsel for Life Insurance conceded that in such an eventuality, the default judgment should be set aside as of right. Consequently the default judgment shall be set aside. Given this, it is not necessary for me to consider the other submissions of counsel apart from those in respect to costs.

15. As to costs, notwithstanding that a notice of intention to defend was filed in time by BSP, a copy was not delivered to the lawyers for Life Insurance until over 2 months later. The lawyers for Life Insurance were entitled to make their application for default judgment without giving a forewarning letter to the lawyers for BSP as they had not been served a copy of the notice of intention to defend: Tzen Pacific Ltd v. Innovest Ltd (2010) N4640. Further, as a result of the failure of the court registry in recording and filing the notice of intention to defend in the court file, the fact that a notice of intention to defend had been filed was not ascertainable when a search of the court file was undertaken by the lawyers for Life Insurance.

16. Consequently, BSP should pay a portion of the costs of Life Insurance in this regard.

Orders

17. The Orders of the Court are:

a) The orders sought in paragraphs 1 and 2 of the defendant's notice of motion filed 27th March 2012 are granted.

b) The orders sought in the plaintiff's notice of motion filed 11th April 2012 are refused.

c) The defendant shall pay 50% of the plaintiff's costs of and incidental to the motions referred to in orders 1 and 2 above.

d) Time is abridged.

_____________________________________________
Mirupasi Lawyers: Lawyers for the Plaintiff 
Ashurst Lawyers: Lawyers for the Defendant