N7906
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. N0. 1479 0F 2015

BETWEEN:
KARL PALAH & REBECCA PALAH
Plaintiffs

AND:
LEVO GAMESELA & DARUSILA GAMESELA
Defendants

Kokopo:  Susame, AJ
2019:  5, & 12 July

PRACTICE AND PROCEDURE – Application for default judgment – Defence filed out of time- Leave to file defence out of time is compulsory and mandatory – Leave never sought – Or 1 R 15, Order 7 R 2 & 6 (2) & Order 12 R 25(b) National Court Rules.   

Cases Cited:

Counsel:

Ms. J Marubu, for the Plaintiffs
Mrs. N Rainol, for the Defendants

DECISION
12th July, 2019

1.    SUSAME AJ:  By notice of motion filed on 26 June 2019 plaintiffs are applying for a default judgment pursuant to Order 12. Rules 25(b) & 32 (1) of the National Court Rules for the sum of K63, 000.00.  The application is supported by Karl Palah’s affidavit sworn on 26 June 2019. 

2.      	At the outset I set out the chronology of events leading up to this application.
3.      Plaintiffs filed a writ of summons on 22 October 2015 (document 1) to enforce a loan agreement in which a sum of K35 000.00 was advanced to the defendants to be repaid with an interest of K30 000.00 within a period of one year.  

4.     Affidavit of service of the Writ was filed on 22 October 2015.

5.      Court was put on notice by Notice of Appearance filed on 3 December 2015 (document 3) that Donald & Company Lawyers were to act for the defendants. On the same day a Notice of intention to defend (document 4) was filed. 

6.     On 14 June 2017 Notice of Change of lawyers was file together with Notice of Appearance by NatPhil & Associates entering an appearance for the defendants (documents 6 & &).

7.    On the same day (14 June 2017) Defence was filed (document 8).

8.     By Notice of Appearance filed 6 June 2019 (document 10) Marubu Lawyers entered appearance for the plaintiffs causing the Office of the Public Solicitors to withdraw representing the plaintiff by Notice of Ceasing to Act filed on 14 June 2019

9.     In her letter dated 5 June 2019 marked Annexure “A” of Karl Palah’s affidavit Ms. Marubu communicates to the defendants lawyers that defence they have filed was well out of time. And that leave was required from the court pursuant to Order 7 Rule 6(2) of the National Court Rules for filing of defence out of time. In that same letter Ms. Marubu insisted for a formal application to be filed seeking leave of court for filing of defence out of time or they will suffer a default judgment if they failed to do so. 

10.     That subsequently led to the filing of this motion on 26 June 2019 

11.      I find Kapi DCJ’s   discussions in Luke Tai v Australia & New Zealand Banking Group (PNG) Ltd [2000] PGNC 28; N1979 (17 July 2000] quite eloquent and useful on the issue of default pursuant to O 12 r 25 (b), on filing of intention to defend, filing and service of defence [O 8 r 4 (a) & (b)] and extension of time to file defence where defence has not been filed and served. [O 1 r 15 (3) & O 1 r (15) (1).   

12.      Kapi’s views were endorsed by Kirriwom J in Kipane v Anton & PNG Waterboard [2003] PGNC 82; N2429 (14 July 2003).  I do so here. 
 Order 4 Rule 25.
“25. Default (17/2)

A defendant shall be in default for the purposes of this Division –
(a)	…
(b)	Where he is required to file a defence and the time for him to file defence has expired but he has not filed his defence;…”
Defence

13.      Rules regulating defence apply to writ of summons and not originating summons (O8 r 1). Where a statement of claim is endorsed on the writ, defendant is required to file and serve his defence to the plaintiff before the expiry of 14 days after the date of expiry of the time limited for him to give notice of intention to defend.  

14.     Where statement of claim is not endorsed on the writ, defendant shall file and serve on the plaintiff his defence before the expiry of 14 days from the date of service of the statement of claim. [O 8 r 4 (b)]:

 “….a defendant who has allowed time to expire may file defence in accordance with O 1 r 15 (3), or in accordance with O 1 r 15(1) or in accordance with O 7 r 6 (2). Where a defendant files a defence in accordance with these Rules, he cannot be in default at the time of the hearing of application for default judgment.” 
 
“However, if a defendant files notice outside the prescribed period, he may not file defence or do any other thing without the leave of the Court (O 7 r 6 (2)). A defence filed without leave in these circumstances would be invalid.”  [Luke Tai v Australia & New Zealand Banking Group (PNG) Ltd]. 

15.       Applying the rules in the present case. 

16.      Writ of Summons was served to the plaintiff on 22 October 2015. Notice of intention to defend was filed on 3 December 2015. That was after one month 19 days.  No defence was filed. After that there appears to be a period of no action until 14 June 2017 when the defence was filed.

17.   	Clearly it was filed way outside of time prescribed by the rules. Leave was required from the court for extension of time to file defence. No order has been issued granting leave to file defence out of time.  There is no evidence the parties have consented for an extension of time to file defence without leave of court despite forewarning by plaintiffs’ lawyer by letter dated 5 June 2019.  In the circumstances defendants had not complied with the rules discussed above. The effect of that default is that defence is invalid. I am satisfied defendants are in default to comply with the practice rules to file their defence. 

18.    	Couple of other considerations.  Defendants has been forewarned through their lawyer to consider seeking leave of court to file defence out of time. Failure of which plaintiffs would be applying for a default judgment.  Defendants’ lawyer never responded and did not consider that option. 
 
19.	Next is the defence that was filed. I have ruled the defence filed is invalid. For the purposes of argument let me state this. There appears to be no defence on merits at all. Defendants have admitted liability. They had difficulty honoring their commitment due to the slowness of the projects they undertook which caused the delay. And they asked for extension of time to settle their loan. 

20.    	Considering all of the circumstances there is no reason why this court should not grant the plaintiffs’ application for a default judgment. 

21.    	Sum of K63 000.00 is being claimed which comprises of K35 000.00 principal amount advanced and agreed interest of K30 000.00.  I note paragraph 5 of the statement of claim which states that a sum of K2 000.00 has been paid by the defendants on 5 January 2013. That will be considered. 

22.    	I appears to me the loan advance was not in the course of parties conducting business. It was a deal between one couple trying to help another couple who were anticipating to undertake a particular project which never came through. If the project had come through the lending couple would have been paid the principle amount with an appreciation of almost 100% interest.  In the circumstances I do not consider it was not a loan strictly on business terms.  
23.   	What is important is that plaintiffs must be restored their principle sum advanced. That amount was advanced on mutual trust. It continues to be a loss to the plaintiff if the amount is not restituted. There may have been some undertakings to pay an interest of K30 000.00.  I will allow some interest but reduced amount.  In the exercise of my discretion I will allow an interest at 25%. Sum of K2000.00 paid will be discounted from the final award. 

24.   	Accordingly, default judgment is entered for the plaintiffs.  The following shall be the award:

1.	K 35 000.00 principal amount borrowed
2.	K   7 500.00 interest  
3.	K 42 500.00 payable but K2000.00 to be deducted. 
4.	K 40 500.00 payable. 
5.	8 % interest 
6.	Defendants to pay plaintiffs cost to be taxed if not agreed
7.	The time of entry of this order is abridged to the time of settlement by the Assistant Registrar, which shall take place forthwith. 
_______________________________________________________________
Public Solicitor:		Lawyer for the Appellant
Warner Shand: 		Lawyer for the Respondents