N5665

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 856 OF 2012

BETWEEN

KALAN CONSTRUCTIONS trading as KALAN SECURITY LIMITED
Plaintiff

V

LOUIS JOHN CHEGG & MARGARET LILLIAN CHEGG as Joint Proprietors and or properties located in and around Madang Town, Madang Province
Defendant

Lae: Sawong, J.
2014: 09th April & 18th June

PRACTICE & PROCEDURE – Instituting proceedings by an unregistered company/business name Instituting and continuing proceedings against deceased persons per se – Proceedings are a nullity – Proceedings are an abuse of Court Processes– Proceedings dismissed.

PRACTICE & PROCEDURE – Default judgment - Setting aside default judgment obtained irregularly –

PRACTICE & PROCEDURE – Costs – Costs on indemnity basis – Plaintiff and its lawyer instituting proceedings when plaintiff not registered as company or business name – lawyer not registered to practice – instituting and maintaining proceedings against deceased persons – 

Facts

The plaintiff instituted proceedings under an unregistered business name against the defendant who had both died sometime before the proceedings were instituted. Subsequently the plaintiff obtained default judgment and had a Writ of Levy of property issued by the Court. Subsequently, the Administrator of the Estate of the deceased applied to have the proceedings dismissed as a nullity and to set aside the default judgment as being irregular.

Held:

(1)	The proceedings were a nullity as the plaintiff was an unregistered business name and as the defendants were not proper defendants they having died several years before the proceedings were filed.

(2)	The default judgment was set aside as being obtained irregularly.

(3)	The plaintiff and the person acting as a lawyer for the plaintiff to pay defendant's cost on indemnity basis.

Case Cited:

Papua New Guinea cases

Hannet and Hannet v ANZ Banking Group PNG Limited [1996] SC 505
Green company Pty Ltd v Green [1976] PNGLR 73; 
Smeeton v Davara House Pty Ltd [1979] PNGLR 324; 
Page Pty Ltd v Malibu Balakau [1982] PNGLR 140. 
Bank of South Pacific v Spencer [1983] PNGLR 239.
Piritchard, Dced Prijet v Decan & Ors [1963] CH 502. 
Hays Guard Dog Security Services Ltd v Lailai & Others (2004) SC 757.
Rex Paki v MVIL (2010) SC 15

Overseas cases

Anlaby vs Praetorius (1888) 20 QBD 764; 4TLR 439 
Cahughs v Justine [1894] 1 QBE 667; 10 TLR 219, CA, 
C Hamp – Adams v Hall [1911] 2 KB 942; 27 TLR, CA,
Craig v Kanssen] [1943] 1 KB 256; [19451 all er 198, CA; 
Hewitson v Fabre [1988] 21 QBD 6; 4 TLR 510 DC; 
Anwiseman v Ruaisman [1953] P _79; [1953] 2 WLR 499; [1953 1 All ER 601] CA. 
Holmes v Russel [1941] 9 Dawling 487
Anwiseman v Ruaisman [1953] P __ 79; [1953] 2 WLR 499; [1953 1 All ER 601] CA. 
Fry v Moor (1889) 23 QBD 395, CA
Smurthwaite v Hannay (1894) AC 494, 498, 501, 506; 10 TLR 649 HL
MacFoy v United Africa Co. Ltd [1962] AC 152, 160, 
Pomtin v Rud [1962] 1 QB 594.
Ted Low v Orela Ltd [1920] 2 CH24, 
Larzard Bros & Co. v Midland Bank Ltd [1933] AC 289 206; 49 TLR 94 HL

Counsels:

E. Asigau, for the Applicant
No Appearance, for the Respondent

Ruling
18th June, 2014 

1.	SAWONG, J.: By a notice of motion filed on 18th March 2014 the applicant sought the following orders:

1.	That Pauline Chegg be joined as defendant to this proceeding pursuant to Order 5 Rule 8 of the National Court Rules

2.	Default judgment ordered against the defendants on 10 April 2013 and entered on 11 April 2013 be set aside pursuant to Order 12 Rule 35 of the National Court Rules.

3.	The entire proceeding be dismissed for being frivolous and vexatious and an abuse of the Court process pursuant to Order 12 Rule 40 of the National Court Rules.

4.	The plaintiff and the plaintiff's lawyers pay the defendants cost on a full indemnity basis.

2.	The motion was heard ex parte. The applicant relied on the affidavit of Pauline Chegg sworn on the 28th of October 2013 and filed on 18th of March 2014.

Background

3.	The applicant, Pauline Chegg is an executor of the estate of one Louis John Chegg. On 18th July 2011 the National Court in Waigani granted probate to her to administer the estate of the said Louis John Chegg. She is the daughter of the late Louis John Chegg and his wife. Both her parents passed away. On the 19th of August 2013 she received a letter dated 18th June 2013 from the office of the Sherriff, a copy of a Court Order entered on 11th April 2013, Writ of Levy of property issued on 23rd May 2013, affidavit of Willie Maku filed on 23rd May 2013 and seizure notices from the office of the Sherriff relating to the properties.

4.	On the 16th of August 2013 the plaintiff in this proceeding (WS 856 of 2012) filed proceedings against Louis John Chegg and Margaret Lillian Chegg as joint proprietors of all real estate properties in Madang. In its Statement of Claim the plaintiff claims that it had provided security services on four of the defendants properties from the 1st of January 2005 to 31st of December 2007. The plaintiff claims that the defendants had not paid for the security services provided to the defendants at their various properties. He claimed an amount of K722,700.00. 

5.	On the 10th of April 2013 the plaintiff obtained default judgment. On the 23rd of May 2013 a Writ for Levy of property was obtained. After the Writ of Levy for property was issued the Sherriff's office attempted to enforce the Writ of Levy of property. 

6.	As soon as the applicant received the various documents I have referred to earlier, she instructed her lawyers to file the present application.

7.	Counsel for the applicant submits that the default judgment is irregular and therefore it ought to be set aside as a matter of law. That submission is premised on the basis that the plaintiff was not a proper legal body at the time it filed the proceedings. It was submitted that the plaintiff had no legal capacity to sue and in that it was not a registered company and therefore had no capacity to sue. 

8.	In addition, it was further submitted that the defendants had died in 2009 and 2010 respectively and it was not possible that the deceased were properly served with the proceedings. There was therefore no personnel service in accordance with the rules of the Court.

9.	It was submitted that the proceedings were a nullity from the very beginning.

10.	As to the application to joinder I granted leave to Pauline Chegg to be joined as a defendant at the hearing of the motion.

11.	The principles relating to setting aside of default judgments irregularly entered or obtained are now settled. The jurisdiction to do so is exercised under either Order 12 Rule 8 or Order 12 rule 35 of the National Court Rules. The principles are the same in either case.

12.	The Supreme Court in Hannet and Hannet v ANZ Banking Group PNG Limited [1996] PGSC 7 SC505 considered this particular issue. The Court there discussed the distinction between irregulatory outside the National Court Rules and a mere irregulatory within the rules. After setting out the terms of Order 12 rule 8(2)(a) and (3)(a) of the Rules the Court said:

"It is clear from the terms of this rules that the National Court has a wide discretion in setting aside a default judgment. There are two broad categories of cases. The first relate to judgments that are entered irregularly and the second relates to judgments which are entered regularly".

In the present case we are concerned with judgments entered irregularly. The question then arises; how should the Court exercise its discretion where the judgment is obtained irregularly.

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 Praetoreus (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 interest 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 Pty Ltd v Malipu Balakau [1982] PNGLR 140. This authority is also referred to in Bank of South Pacific v Spencer [1983] PNGLR 239.

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 independent of the rules. This distinction was clearly drawn by Greville Smith J in Page Pty Ltd v Malipu Balakau (supra) at pages 145-146. At page 145 he made reference to O'Leary J in Green & Company Pty Ltd v Green (supra) and continued:

"This passage which is "obiter dicta" because his Honour then went on to find that the judgment before him had infact been regularly entered, can not in any event be lifted as a general statement of principle without distinguishing between an irregularity in acting under a rule and an irregularity independent of the rules. What his Honour said is true of the second but not of the first. If it were true of both then Order 93 Rule 17 would have no meaning or effect. In Anlaby vs Praetorius (supra) Fry LJ at page 769 said:

"But in the present case we are not concerned with instance of non compliance with the rule, nor with an irregularity in acting under any rule. The irregular entry of judgment was made independently of any of the rules; the plaintiff had no right to obtain any judgment at all."

In the immediate case the plaintiff did have a right to serve the writ, and, as I have found, he did serve it, and assuming that there was an irregularity in service it was an irregularity consisting only of non compliance with Order 10 Rule 1. It would follow that entry of judgment, if it were tainted with such an earlier irregularity, would be irregular in the same way – an irregularity falling within Order 93 Rule 17 which says, as I have already in substance remarked:

"Non compliance with these rules….shall not render any proceedings void."

13.	The Court after setting out Order 1 Rule 8 of the National Court Rules went further and said this:

"In dealing with judgments entered irregularly fall within the equivalent of current Order 1 rule 8, Gravel Smith J in Page Pty Ltd v Malipu Balakau (supra) said:

"This leaves open the matter of a judgment obtained irregularly. In my opinion, ordinarily the same rules apply in the case of irregularity which falls within the ambit of O.93 r.17."

He concluded that the practice in relation to judgments obtained regularly should apply should apply to judgments obtained irregularly that fall within Order 1 Rule 8. This he concluded comes within the "untrammelled discretion with the view to bring justice."

It is necessary to explore this matter further. The equivalent of Order 1 rule 8 is to be found in the old English Rules Order 71 r.1 of RSC 1883. The application of this rule was considered by the Court of Appeal in re Pritchard, deed Prichard v Deacon & Ors [1963] CH 502. This case is important because it sought to clarify the types of cases that fall within the rules and those that fall outside it. A distinction is made between proceedings which may result in mere irregularity and proceedings that can be said to be a "Nullity." In respect of the first category, they come within the rule and the Court has wide discretion given by the rule. Where a proceeding is a nullity, it is not covered by the rule and the Court must as a matter of law set aside the proceedings.

There has been confusion over the meaning of what is a "nullity". At page 516 Lord Denning said:

"We were referred to many cases on nullity and irregularity. They are most confusing because of the loose way in which the word "nullity" is used: and the sooner it is put in its proper place the better. Often a proceeding has been said to be a "nullity" when it would have been more correct to say that, if the irregularity has not been waved, it would be set aside ex debito justitiae. Thus, a judgment by default which is signed irregularly will be set aside ex debito justitiae: see Anlaby vs Praetorius (188) 20 QBD 764; 4TLR 439 Cahughs v Justine [1894] 1 QBE 667; 10 TLR 219, CA, particularly when it is signed in defiance of an express rule: C Hamp – Adams v Hall [1911] 2 KB 942; 27 TLR, CA, but it is not a nullity. Even when an order is obtained without due service of process, it is not a nullity [despite what was said in Craig v Kanssen] [1943] 1 KB 256; [19451 all er 198, CA; but it will be set aside ex debito justitiae, it has not been waved. See Hewitson v Fabre [1988] 21 QBD 6; 4 TLR 510 DC; (where the headnote is wrong in saying it was a nullity), and Wiseman v Wiseman [1953] P. 79; [1953] 2 WLR 499; [1953 1 All ER 601] CA. There are many cases which show that non service can be waved: for if a man knows of the process and allows execution to be levied against him without complaint, and does not apply to the court to set it aside within a reasonable time he maybe too late to get any relief. See Holmes v Russel [1941] 9 Dowling 487 (where there is a most instructive judgment by Coleridge J), Emerson v Brown (1844) 8 Scott MR 219: ----- The case of Fry v Moor (1889) 23 QBD 395, CA seems to me a simple illustration where the defendant had infact been served, and yet it was held that he had waved the irregularity. Even Smurthwaite v Hannay (1894) AC 494, 498, 501, 506; 10 TLR 649 HL is not a case of nullity. There was a misjoinder of causes of action contrary to the rules then in force. Mr Finlay QC argued that it was "a mere irregularity" and that "the application was not made within reasonable time within O.70, r.2". Note, he only put it on ORD 70, r2. The House rejected that argument and went on to restore the order of the Queen's Bench which was clearly based on Order 70 rule 1. There was a non compliance with the rules and the court dealt proceedings by allowing the plaintiffs to amend and elect as to which claim they would proceed with. Clearly the proceedings were not held to be a nullity; because you can not amend a nullity. No other cases give rise to any difficulty. In most of them, I am glad to say you will find that the court has refused to set aside processes for technical irregularities; see MacFoy v United Africa Co. Ltd [1962] AC 152, 160, Pomtin v Rud [1962] 1 QB 594. The only true cases of nullity that I have found are when a sole plaintiff or a sole defendant is dead: see Ted Low v Orela Ltd [1920] 2 CH24, on non existence; see Larzard Bros & Co. v Midland Bank Ltd [1933] AC 289 206; 49 TLR 94 HL; and I would like to see the word "nullity" confined to those cases in future". (my underlining)

14.	The Court then went on and stated:

"The distinction made is between proceedings that are a nullity and those that are a mere irregularity. To the first Order 1 Rule 8 is not applicable and the Court has no discretion but to set it aside. If it is an irregularity within the meaning of Order 1 Rule 8, the Court has wide discretion to deal with it under the terms of the rule. That the phrase "ex debito justitiae" is not to be confussed with a "nullity". A party who asks for a judgment to set aside ex debito justitiae is simply asking the Court to exercise its discretion in one way, namely, to set aside judgment in the circumstances. This falls within the letter category".

15.	In this case the application is founded on two basis. The first is on the basis that the default judgment had been obtained irregularly and therefore should be set aside. The second and most important basis, in my view, is that the proceeding is a nullity. It was submitted that the proceedings was a nullity on the two basis. First is that the plaintiff did not have the legal capacity to bring the proceedings as it was not registered in law. Secondly the proceedings was a nullity in that the defendants were not capable of being sued as they had passed away in 2009 and 2010 respectively. 

16.	As to the capacity of a plaintiff where the plaintiff is not registered as a company, the law is set out in Ace Guard Dog Security Services Ltd v Lailai & Others (2004) SC 757. In that case, the Supreme Court was considering an objection to competency of an appeal. The objection raised was that the appellant, Ace Guard Dog Security Services Ltd did not exist, had no legal personality and consequently has no standing to commence and continue the appeal.

17.	Before the Court were various affidavits deposed to by the Registrar of Companies, the Deputy Registrar of Companies and an affidavit from the lawyers for the respondent. The affidavits revealed that the appellant was not registered as a company. The Court accepted the argument and the evidence from the respondent. The Court said that the appellant is not an incorporated company and therefore without any legal personality. The Court also referred to the decision in Larzard Bros & Co. v Midland Bank Ltd [1933] AC 289. The Court found that as the appellant was not an incorporated company it had no legal standing and it therefore was incompetent to institute the appeal. The Court held that the proceedings were a nullity. It therefore dismissed the entire proceedings as being a nullity.

18.	In the present case, there is overwhelming evidence from the affidavit of the applicant that at the time of institution of this proceedings the plaintiff was not a registered company nor a registered business name. It had no legal standing to commence and maintain the proceedings. 

19.	Secondly, at the time of the commencement of the proceedings both defendants had been dead for sometime. They were therefore not proper parties. 

20.	Given these circumstances, I find that the entire proceedings are a nullity and amount to an abuse of the Court process. It must be dismissed. It follows that the default judgment and enforcements proceedings must also be set aside

21.	As to the issue of costs, the applicant has asked that the Court order the respondent and Kennedy Pais to pay cost on an indemnity basis. It has been submitted that the lawyers for the applicant had sent a copy of a letter dated 19th of August 2013 to Kennedy Pais who was carrying on business as a lawyer on behalf of the plaintiff. In that regard, I noted that Kennedy Pais was not registered to practice as a lawyer at that material time. He was acting unethically and in breach of the lawyers professional practice rules. Despite being notified, Kennedy Pais continued to act as a lawyer for the respondents. Furthermore, despite the advise that the properties were not owned by the defendants he continued to pursue execution of the judgment on behalf of the plaintiff.

22.	The principles on whether a Court should order a party to pay costs on indemnity basis is that it is a discretion the court must exercise on proper principles and on proper grounds. The Supreme Court in the recent case of Paul Paraka trading as Paul Paraka Lawyers v Public Officer's Superannuation Fund Board (2014) SCA 91 discussed this principles. There the Supreme Court said that an Order for cost on indemnity basis maybe made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blame worthy that he should be so punished by such an order (See Rex Paki v MVIL (2010) SC 15). In the present case the question is whether the conduct of the plaintiff and its lawyers in the matter is such that it had caused the respondent to incur unnecessary costs.

23.	In my view the plaintiff knew, or ought to have known that the two defendants had died in 2009 and 2010 respectively. Furthermore the actions of the plaintiff and its lawyers are aggravated by the fact the plaintiff is not even a registered company nor a business name. That fact ought to have been known by the plaintiff or its so called lawyer because if they had done a simple due diligence such as conducting a search of the name of the plaintiff with the Investment Promotion Authority, they would have discovered that the plaintiff was deregistered many years ago. Further, despite warnings and letter from the lawyers for the applicant the plaintiff through its so called lawyer persisted on continuing with the proceedings when it was so obvious that the proceedings were a nullity from the very beginning. In those circumstances, I conclude that the actions of the plaintiff and in particular its so called lawyer Kennedy Pais have caused the applicant an enormous amount of wasted time, effort and money such that the conduct of the plaintiff and Kennedy Pais must be considered to be improper, unreasonable and blameworthy. In these circumstances the plaintiff and Kennedy Pais must pay the respondent's costs on an indemnity basis.

24.	Accordingly I would make the following orders:

1.	That Pauline Chegg be joined as a defendant.
2.	The entire proceedings be dismissed.
3.	The default judgment entered on 11 April 2013 and the Writ of Levy of the property filed on 23rd May 2013 are set aside.
4.	The plaintiff and Kennedy Pais pay the applicant's cost on indemnity basis. 

_____________________________---______________
Pacific Legal Group: Lawyers for the Applicant 
No Lawyers for the Plaintiff