N7676

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 141 OF 2018

BETWEEN:
LAS PELES SHIPPING & PLANTATION MANAGEMENT SERVICES LIMITED
Plaintiff

AND:
JOHN TALELE Chief Executive Officer, KOKOPO DISTRICT DEVELOPMENT AUTHORITY
First Defendant

AND:
KOKOPO DISTRICT DEVELOPMENT AUTHORITY
Second Defendant

AND:
EAST NEW BRITAIN PROVINCIAL GOVERNMENT
Third Defendant

Kokopo: Anis J
2018:  19 December
2019:  7 February

MOTIONS – applications to set aside ex-parte order ordering judgment to be entered with damages to be assessed – applications to set aside ex-parte ordering judgment sum – irregularity - Order 12 Rule 8(2), (3) & (4) – National Court Rules – irregularity - section 5 notice – Claims By and Against the State Act – section 7 – Organic Law on Provincial Governments and Local Level Governments – pleadings – whether there is a valid defence

Cases cited:

Grace Lome v. Allan Kundi (2004) N2776
Jackson Walaun v. Royal Wilson (2016) N6272
Luke Tai v. Australian and New Zealand Banking Group (PNG) Ltd (2000) N1979
Makop v. Billy Parako (2004) N2593
Yange Langan v. The State (1995) N1369

Counsel:

Mrs N. Rainol, for the Plaintiff
Mr R. Asa, for the First and Second Defendants
Mr J. Biar, for the Third Defendant

RULING

7th February, 2019

1.	ANIS J:  The first and second Defendants, and the third defendant, filed two (2) similar applications on 12 December 2018.  They sought orders to set aside two (2) ex-parte orders and to dismiss the proceeding, or alternatively, for leave to file their defences out of time.  Their applications were contested on 19 December 2018.  I reserved my ruling on that day to a date to be advised.

2.	This is my ruling.  

BACKGROUND

3.	The plaintiff’s claim in the statement of claim was this.  It said it had entered into a valid contract with the defendants on 15 May 2017.  It said the contract was for a road work which was worth K4.8 million.  The plaintiff had alleged that it had completed the work under the terms of the contract however the defendants had refused to pay the plaintiff the K4.8 million. 

4.	At this juncture, liability and quantum have been determined and awarded by this Court in favour of the plaintiff on two (2) various occasions, that is, after two (2) separate ex-parte hearings.  Let me elaborate.  On 21 June 2018, the plaintiff applied for default judgment on the basis that the defendants failed to file their defence within time.  The application was fixed for hearing at 9:30am on 18 July 2018.  At that hearing, only the plaintiff’s counsel appeared.  The defendants’ then counsel Mr Killian did not appear.  I granted leave to the plaintiff and the plaintiff proceeded ex-parte with its default application.  I entered default judgment in favour of the plaintiff with damages to assessed.  On 6 August 2018, His Honour Justice Higgins set the matter down for trial at 9:30am on 16 August 2018, for assessment of damages.  On the trial date, again, the then counsel for the defendants Mr Killian did not appear in Court.  His Honour Justice Higgins proceeded with the trial, and on the same day, awarded, amongst others, judgment in the sum of K4.8 million Kina in favour of the plaintiff.

5.	The defendants have since engaged services of private lawyers.  Mr Asa now acts for the first and second defendants, and Mr Biar acts for the third defendant.  The defendants now have these two (2) applications before the National Court, and they request the Court to, amongst others, overturn its decisions of 18 July 2018 and 16 August 2018.

ISSUES

6.	The issues are as follows, (i), whether the decisions of the Court were irregularly entered, (ii), whether there is or are defences on merit(s), (iii), whether the proceeding should be dismissed in its entirety, or, (iv), whether leave should be granted and the defendants should be allowed to defend the claim, that is, whether a proper hearing is warranted in this case.

7.	Let me firstly deal with the latest ex-parte order, that is, the one made on 16 August 2018.  In my view, the ex-parte order of 16 August 2018 must be dealt with first by this Court.  If the said order is set aside, then this Court will go on to consider the earlier default judgment order of 18 July 2018.  If the Court refuses to set aside its order of 16 August 2018, it would not be open, in my view, for this Court to go back in time to consider the regularity or irregularity of its earlier ex-parte order of 18 July 2018.

ORDER - 16 AUGUST 2018

8.	The actual ex-parte court order of 16 August 2018, as recorded in the Court file, reads, and I quote in part:

1.	Judgment is entered in the sum of K4.8 million Kina in favour of the plaintiff against the defendants at the rate of 8% interest from the date of issue of the writ of summons filed on 1/3/18 to the date of payment.
2.	Costs of the proceedings shall be paid by the defendants John Talele, Kokopo District Development Authority and East New Britain Provincial Government.
3.	Costs to be taxed if not agreed on a party/party basis.

9.	At the hearing, I queried the plaintiff’s counsel regarding what had transpired in Court on 16 August 2018.  Counsel confirmed that Mr Killian did not appear on that day on behalf of the defendants.  Counsel said the Court allowed the trial to continue ex-parte.  Counsel said evidence were not formally tendered or presented to the Court; counsel said she had only begun presenting her introduction into the matter when the Court, “in its own wisdom,” as counsel puts it, awarded damages in the fixed sum of K4.8 million as claimed with interest and costs.  In other words, no actual trial was conducted on that day.  I find this interesting because it immediately raises this question.  “Would that constitute a case where it can be said that the judgment was irregularly entered?” 

10.	Let me firstly refer to Order 12 Rule 8 of the National Court Rules (NCR).  It reads, and I quote in part,

8.	Setting aside or varying judgement or order. (40/9)

(1)	The Court may, on terms, set aside or vary a direction for entry of judgement where notice of motion for the setting aside or variation is filed before entry of the judgement.
(2)	The Court may, on terms, set aside or vary a judgement —
(a)	where the judgement has been entered pursuant to Order 12 Division 3 (default judgement); or
(b)	where the judgement has been entered pursuant to a direction given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the direction; or
(c)	when the judgement has been entered in proceedings for possession of land pursuant to a direction given in the absence of a person and the Court decides to make an order that the person be added as a defendant.
(3)	The Court may, on terms, set aside or vary an order — 
(a)	where the order has been made in the absence of a party, whether or not the absent party is in default of giving a notice of intention to defend or otherwise in default, and whether or not the absent party had notice of motion for the order; or
(b)	where notice of motion for the setting aside or variation is filed before entry of the order.
(4)	In addition to its powers under Sub-rules (1), (2) and (3), the Court may, on terms, set aside or vary any order (whether or not part of a judgement) except so far as the order determines any claim for relief or determines any question (whether of fact or law or both) arising on any claim for relief and excepting an order for dismissal of proceedings or for dismissal of proceedings so far as concerns the whole or any part of any claim for relief.
(5)	This Rule does not affect any other power of the Court to set aside or vary a judgement or order.
(Underlining are mine)

11.	There are many case authorities on point.  In this case, I will refer to the case of Makop v. Billy Parako (2004) N2593.  Justice Manuhu I thought explains well the difference between a judgment that is entered ‘regularly’ to a judgment that is entered ‘irregularly’.  His Honour stated, and I quote in part:

In applications like this, the initial inquiry is whether the ex parte order was made regularly or not.  Where an ex parte order has been made irregularly, the only just remedy is to rectify the irregularity by setting aside the ex parte order.  Non-compliance with an important procedural requirement under the National Court Rules is usually considered as an irregularity, which generally results in an ex parte order being set aside.  On the other hand, where an ex parte order has been made regularly or in compliance with relevant procedural requirements, setting it aside is dependent on what is just and fair in all the relevant circumstances; and, what is just and fair is dependent on the reasons for the non-appearance which permitted the matter to proceed ex parte; the merits of the applicant’s case; and, the promptness of the application to set aside ex parte order.  

12.	In the present case, before quantum was awarded, I note that the Court had ordered that judgment be entered with damages to be assessed.  Assessment of damages was fixed for hearing at a call-over by His Honour, Justice Higgins.  So, the matter was set down for trial for assessment of damages on 16 August 2018.  On that day, the defendants did not appear.  Counsel for the plaintiff informed the Court that there was no actual hearing conducted on that day; evidence were not formally tendered in Court by the plaintiff.  And it seems that the Court had simply awarded damages to the amount or figure that was quoted by the plaintiff in the pleading or in the claim.  In my view, I find that to be irregular.  A trial that is conducted ex-parte, is still a trial.  The absence of a party or the defendants in this case, does not guarantee or mean that judgment shall therefore be entered without the proper tendering of evidence or without the proper considerations in terms of assessing damages.  This was not meant to be a summary judgment hearing but rather a trial for assessment of damages.  See the case Yange Langan v. The State (1995) N1369.  In my view, what should have happened was this.  The plaintiff should have formally opened its case, tendered its evidence where they should have been formally accepted by the Court.  And the plaintiff should have closed its case after that.  Only then, in my view, can the Court proceed to consider the evidence and reach a decision on damages.  Let me also say this.  The reason why judgment was entered but damages reserved for a trial for assessment on 18 July 2018, was because the Court was not satisfied that the damages claimed were ascertainable summarily, which was why the Court had ordered for a proper hearing to be conducted at a later date.  In this instance, however, the trial on assessment was carried out in the manner as described by the plaintiff’s counsel which I find to be irregular.

13.	In summary, I find that the Court Order of 16 August 2018 was irregularly entered.  I therefore set that order aside.  Let me make this final remark.  I refer to the minute of the court order that was taken out by the plaintiff’s counsel which was filed on 26 September 2018.  I note that the terms of the orders therein have serious discrepancies if compared with the orders as recorded by the Court in the court file. 

COURT ORDER OF 18 JULY 2018

14.	Default judgment was entered ex-parte on 18 July 2018.  In this case, the defendants also want the decision set aside.  Given my above finding, I am now able to consider this part of the claim in the defendants’ applications.

15.	The first query I have is whether the default judgment was also irregularly entered.  The main challenge put forward by the defendants relate to the forewarning notice.  See Order 4 Rule 49(19)(3) of the NCR.  The defendants submit that no such warning was given before the plaintiff filed its application for default judgment.  The plaintiff in response says that the notice was given.  Counsel referred the Court to her affidavit filed on 21 June 2018.  Annexure A attaches a letter dated 2 June 2018 from her firm to the defendants.  I am satisfied that the letter was a forewarning letter.  I dismiss the defendants’ claim in this regard.  

16.	I am therefore satisfied that the judgment was regularly entered.  With that, I will now consider the following, (i), whether there was a good explanation why the defendants did not appear and had allowed default judgment to be entered, (ii), whether the defendants’ applications were made promptly after that, and (iii), whether there is a defence on merit that may warrant the Court to exercise its discretion and set the default judgment aside.  See cases:  Makop v. Billy Parako (supra); Grace Lome v. Allan Kundi (2004) N2776.

17.	I had queried both defendants’ counsel whether reasonable explanations were provided by way of evidence by the defendants to say why default judgment was entered in the first place.  I note that the defendants provided no reasonable explanations.  As such, I am not satisfied that the defendants have met this consideration.  Let me look at the second consideration, that is, whether the defendants have applied promptly.  The defendants’ applications were filed on 12 December 2018, that is, about 5 months after 18 July 2018.  I note that the defendants had counsel acting for them at the material time.  Counsel then, knew of the hearing date for the default judgment application.  Having not appeared in Court on 18 July 2018, counsel, it seems, had made not attempts to find out soon afterwards by conducting a court file search, or by filing an affidavit explaining the steps that he had taken after 18 July 2018.  If counsel had acted diligently after 18 July 2018, evidence of that was not presented to this Court.  Evidence filed by the defendants’ current counsel showing recent steps they had taken to progress the matter after they were engaged by the defendants, are, in my view, irrelevant for this purpose.  I am therefore not satisfied that the defendants have applied promptly to the Court to set aside the default judgment.  The final consideration is defence on merit.  The defendants argue that they have a defence which was filed on 5 July 2018 which was not set aside or dismissed.  Therefore, they claim that based on the said defence, they have a defence on merit.  I find this argument misconceived.  The defendants’ defence referred to was filed outside of the time required under the NCR for filing a defence.  This fact is not disputed.  This therefore means that the defence that was filed by the defendants on 5 July 2018 is void and should not have been accepted at the National Court Registry or be filed in the first place.  Leave of the Court was required, and it was not sought and obtained.  See cases:  Jackson Walaun v. Royal Wilson (2016) N6272; Luke Tai v. Australian and New Zealand Banking Group (PNG) Ltd (2000) N1979.

18.	The only area I will consider after that is this.  Whether the defendants have filed evidence or put forward arguments that would show or show that they have a defence on merit.  The defendants’ main submission on point is this.  They submit that the plaintiff failed to give notice of its intention to make a claim against the State and or against the defendants, before it filed its claim.  They submit that the requirements were mandatory and that failure by the plaintiff to give these notices, namely, under section 5 of the Claims By and Against the State Act (CBASA) and section 7 of the Organic Law on Provincial Governments and Local-Level Governments (OPGLLG), means that the claim cannot be enforced, is void and must fail.  In their arguments, they also submit that instead of leave being granted to them to file their defence, that this Court should dismiss the proceeding in its entirety.

19.	The plaintiff did not file written submissions on this point.  But in Court, counsel submits that due notices were given.  Counsel referred to a letter of demand dated 3 October 2017 which was sent by the plaintiff’s former lawyers to the Kokopo City Authority.  Counsel submits that that was sufficient notice given by the plaintiff to the defendants of its intention to sue them.  The letter is attached as annexure “A” to the affidavit of Bernard Uriap which was filed on 24 May 2018.  The said demand letter was also pleaded at paragraph 14 of the statement of claim.  It reads, and I quote, On the 3rd of October 2017, the Plaintiff wrote a demand letter to the First Defendant demanding payment of unpaid Contract of 15 May 2017, in the sum of K4.8 Million, but it received no reply or any commitment of payment from them.  The parties also addressed a letter dated 25 October 2018 by the plaintiff’s lawyers to the 3rd defendant’s lawyers.  The letter is marked as annexure B to the affidavit of Mr Biar which was filed on 15 November 2018.  In regard to the section 5 notice, the plaintiff’s counsel stated at paragraph 3 of the said letter, and I read:

In light of your assertion of non-compliance with Section 5 of Claims by & Against the State Act, under its Notice requirements.  We advise that the subject matter Contract signed between the parties in this proceeding involved only the Management of Kokopo District Development Authority and the East New Britain Provincial Government which powers are vested in the Organic Law on Provincial Local Level Government.  Therefore, it did not require the involvement of the State as it did not include any State entity in the subject Contract Namely Department of Works for the Plaintiff to comply with strict service of Section 5 Notice on the State.

20.	I note that the plaintiff and the defendants seem to have different views regarding the requirement to give section 5 notice under the CBASA or section 7 notice under the OLPGLLG, and whether there had been compliances.  I do not think that this is the appropriate time to deal with that.   In my view, the plaintiff may need to amend its pleadings based on material facts that it would rely on, to address the issue and state that compliance of section 5 of the CBASA had been met.  The statement of claim as it is, does not address or plead that.  The defendants on the other hand have no formal defence in place.  They also may need to file a proper defence to, amongst others, plead their responses to the plaintiff’s pleading regarding compliances of section 5 of the CBASA.  I can only, at this point, refer to the Supreme Court case, SCR No. 1 of 1998.  Reservation Pursuant to s. 15 of the Supreme Court Act (2001) SC672.  The five (5) men bench were asked to interpret whether the term “State” under the CBASA also means the provincial government.  The Court held, and I quote in part, In principle therefore the assets and funds administered by the Provincial Government belong to the same people of Papua New Guinea that the Claims By and Against the State Act protects from execution. The term 'State' therefore includes Provincial and Local–Level Governments for the purposes of the Act.  The Act referred to by the Supreme Court is in reference to the CBASA.  

21.	At this juncture, I am persuaded that the defendants may have a defence on merit.  But that would be a matter, in my view, for proper arguments after the pleadings are settled and the evidence are adduced by the parties to support compliance or want of compliance of section 5.  In all fairness to the parties, I will refrain from considering the issue any further.  What have been presented to me by the parties, in my view, are sufficient for me to say that the issue should be properly tried and therefore that the default judgment should also be set aside to give such an opportunity.

SUMMARY

22.	In regard to the defendants’ applications, I will set aside both ex-parte orders, the first made on 16 August 2018 and the second made earlier on 18 July 2018.  I will direct that the plaintiff is at liberty to file and serve an amended statement of claim within 21 days from today.  I will grant leave to the defendants to file their defence within 21 days thereafter.

COST

23.	Cost is discretionary.  In this case, I will not order cost to follow the event.  Instead, I will order the defendants to pay the plaintiff’s cost for defending the two applications that were filed on 12 December 2018 as well as the plaintiff’s costs in relation to its default judgment application and for the trial on assessment of damages, that have now been set aside.  I will order this simply on the basis that the defendants had provided no valid reasons for failing to appear on 18 July 2018 and 16 August 2018.  The present applications resulted primarily because of judgments that were entered because of these failures (i.e., by the defendants to appear in Court).

24.	Cost will be taxed on a party/party basis if not agreed.

THE ORDERS OF THE COURT

25.	I make the following orders:

1.	The ex-parte court orders of 16 August 2018 and 18 July 2018 are set aside.

2.	The plaintiff to, where required, file and serve an amended statement of claim within 21 days from the date of this Court Order.

3.	The defendants are granted leave and shall file and serve their defence within 21 days thereafter.

4.	The defendants shall pay the plaintiff’s cost of the two applications filed on 12 December 2018 as well as its cost in relation to its application for default judgment and the trial for assessment of damages which were heard on 18 July 2018 and 16 August 2018 respectively.

5.	Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith. 

The Court orders accordingly.

___________________________________________________________
Natphil & Associate Lawyers:	Lawyers for the Plaintiffs
Warner Shand Lawyers Rabaul: Lawyers for the First and Second Defendants
Namani & Associates Lawyers:	 Lawyers for the Third Defendant