N9112
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO. 1188 OF 2019 (NO. 2)

BETWEEN:
CLINTON CAPITAL PARTNERS PTY LIMITED
Plaintiff

V

KUMUL PETROLEUM HOLDINGS LIMITED
First Defendant

AND
HON. WILLIAM POWI, as Governor of Southern Highlands Province
Second Defendant

AND
SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT
Third Defendant

AND
HON. PHIILIP UNDIALU, as Governor of Hela Province
Fourth Defendant

AND
HELA PROVINCE
Fifth Defendant

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Sixth Defendant

Waigani: Anis J
2021: 1st & 7th September

NOTICE OF MOTION – seeking leave to file defence out of time– Order 1 Rule 15 and Order 7 Rule 6 – National Court Rules – whether service of the originating process had been effected – whether filing of notice of intention to defend nullifies the requirement for personal service of an originating process pursuant to Order 6 Rule 2(3) of the National Court Rules – whether computation of time starts from the date of filing of the notice of intention to defend under the circumstances - whether there was substantial delay – consideration of the other factors including public interest - exercise of discretion

Cases Cited:

Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Limited and Ors (2020) N8668
Workers Mutual Insurance (PNG) Ltd (in Liq) v. Sathasivan Sivakumaran (2012) N4637
Davidwestern Advertising Group Ltd v. Hiri 152 Developments Ltd and Ors (No. 2) (2019) N8112
Air Niugini Ltd v Kavieng District Development Authority (2019) N8158
Selon Ltd v. Madang District Development Authority (2020) N8440
Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549
MAPS Tuna Limited v Manus Provincial Government (2007) SC857
Nivani Ltd v Independent State of Papua New Guinea (2020) SC1945

Counsel:

S Gor, for the Plaintiff
Nil appearance by the second and Third defendants
J Wohuinangu, for the Fourth and Fifth Defendants

RULING

7th September, 2021

1.	ANIS J:  Two (2) applications were set for hearing on 1 September 2021.  Both counsel agreed to deal with the notice of motion by the fourth and fifth defendant first, which seeks leave of the Court to file defence out of time, and subject to the Court’s findings, hear the latter notice of motion by the plaintiff which seeks default judgment against the second, third, fourth and fifth defendants.

2.	I heard arguments from the parties on that day and reserved my decision to a date to be advised.  This is my ruling.

BACKGROUND 

3.	I have set out the background of the matter in my earlier decision in Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Limited and Ors (2020) N8668.  I restate it here as follows:

4.	The plaintiff’s cause of action is to enforce a contract which it claims it had with the defendants.  The contract is dated 7 November 2016, and it was to review a Vendor Finance Proposal offer that had been made by the 1st defendant to the 3rd and 5th defendants.  The contract was worth $2.8 million USD in total.  The plaintiff claims that it performed the contract, but to date, has not received full payment for its services.  A major term of the contract, the plaintiff claims, is that the 1st defendant is the person that is responsible to pay the full sum of $2.8 million USD.  It pleads that the 1st defendant had made an initial payment of $150,000 USD, which it says was the only payment made to date.  In conclusion, the plaintiff pleads that the defendants owe it a total sum of $2,650,000 USD plus damages, interests, and costs.

4.	The first and sixth defendants have been removed as parties to the proceeding.

MOTION

5.	The fourth and fifth defendants’ (defendants) notice of motion was filed on 14 July 2021 (NoM/leave application).  Relief 3 is the main relief, and it reads in part, Pursuant to Order 1 Rule 15 and Order 7 Rule 6 of the National Court Rules, the Fourth and Fifth Defendants be given leave to file the defence out of time. 

6.	The jurisdiction of the NoM was not contested.  However, I will address that later in my decision when I consider the issue of delay and application of s.9 of the Claims By and Against the State Act 1996 (CBAS Act) for purposes of computing time.

COMMON GROUND

7.	Parties are at common ground on the following.  Firstly, counsel noted the absence of counsel for the second and third defendants.  But both counsel acknowledge receipt of a letter by counsel for the second and third defendants notifying them of a clash in his schedule and of his unavailability in Court.  Counsel also informed the parties that the second and third defendants’ position was that they support the NoM.

8.	The plaintiff concedes in regard to the element of whether there is meritorious defence, which the defendants intend to file by this leave application or NoM.  The plaintiff acknowledges that challenges concerning compliances with the provisions under the Public Finance Management Act (PFM Act), which is pleaded in the draft defence of the defendants, are amongst material issues that are relevant and may be contested at the substantive hearing of the matter.

ISSUES

9.	The main issues, in my view, are, (i) whether the originating process namely the writ of summons and statement of claim was duly served on the defendants, (ii), subject to the first issue, whether the delay was substantial and whether there was no valid explanation given by the defendants, and (iii), whether other considerations exist that favour the granting or refusal of the leave application.

THE LAW

10.	In regard to the requirements for leave to file a defence out of time, I would refer to Hartshorn J’s decision in Workers Mutual Insurance (PNG) Ltd (in Liq) v. Sathasivan Sivakumaran (2012) N4637.  His Honour summarises them at paragraph 9 of his decision as follows:

“In the case of Duma v. Hriehwazi (2004) N2526, Kandakasi J. stated that the principles applicable to an application to set aside a default judgment with appropriate modification should apply to an application for leave to file and serve a defence out of time. In the case of Tipaiza v. Yali (2006) N2971, Cannings J. agreed that the factors to be taken into account on an application for an extension of time were; the extent of the delay, the reasons for the delay and does the defendant appear to have a good defence? To those factors he added one further; where do the interests of justice lie? I also make reference to the case of Green & Co. Pty Ltd (Receiver Appointed) v.  Roger Britain Green [1976] PNGLR 73. That case involved an application to set aside a default judgment regularly entered.  It was held that on such an application, the principal matter that must be shown by the applicant is that he has a defence on the merits.  That statement of the law, in my view, is equally applicable to an application seeking an extension of the time in which a defendant may file its defence.”

11.	I would adopt these as my own for consideration herein.  In summary, I will consider the extent of the delay, the reasons given, whether the defendants have a good defence and the interest of justice.

DEFAULT/DELAY

12.	The defendants began by submitting that there was delay on their part and that it was not an issue.  But later, counsel submitted that in actual fact, the defendants were not personally served with the originating process; that service of the originating processes were effected on the defendants through a third party at the National Parliament, that is, they were served through security personnel at the precincts of the National Parliament on 7 October 2019.  This fact is not disputed as revealed in the affidavit of service of Sabetha Sawati of 9 October 2019.  But then, both counsel took the position that given the effect of Order 6 Rule 2(3) of the National Court Rules (NCR), the filing of the notice of intention to defend by the defendants on 27 October 2020 meant that the originating process was taken to have been personally served on the defendants.  

13.	Order 6 Rule 2(3) reads, Where a defendant to any originating process serves a notice of intention to defend under Order 7, the originating process shall be taken to have been served on him personally on the date on which that notice is filed or on such earlier date as may be proved.

14.	The defendants served their notice of intention to defend on the plaintiff on 20 October 2020.  I inquired with counsel for the plaintiff when time should be computed for purposes of assessing the extent of the delay.  Counsel submits that time should be computed from the date of service of the originating process which was on 7 October 2019.  Counsel for the defendants agree with the said computation which is also reflected in his written submission. 

15.	Given the special nature of this case, I note the following.  Default cannot be assessed or computed based on the date of service of the originating process at the Parliament House on 7 October 2019.  The originating process was never personally served as required under Order 6 Rule 2(1) of the NCR.  Rather, it was deemed as served by operation of Order 6 Rule 2(3).  Therefore, service of the originating process on the defendants, in my view, would be regarded as served on the date of filing of the notice of intention to defend as expressly stated by Order 6 Rule 2(3).  The notice of intention to defend was filed on 27 October 2020.  In my view, time should be computed on that day.  Whether it was 44 days or 60 days, as submitted by the parties of the time that was required to file a defence, the defendants were already in default in filing their defence.  The reference to 60 days period was made in the submissions of the defendants premised on s. 9 of the CBAS Act.  In my view, the premise appears to have been based on a misconceived view that the defendants were the State.  The defendants, although they are state entities or may be regarded as part of it, are not themselves the State or the Independent State of Papua New Guinea, that is, as expressly defined under ss. 1, 247 and Schedule 1.2, of the Constitution, and s. 1 of the Interpretations Act Chapter No. 2.  See also cases: Davidwestern Advertising Group Ltd v. Hiri 152 Developments Ltd and Ors (No. 2) (2019) N8112, Air Niugini Ltd v Kavieng District Development Authority (2019) N8158, Selon Ltd v. Madang District Development Authority (2020) N8440, Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549, and MAPS Tuna Limited v Manus Provincial Government (2007) SC857.  As such, the provisions of s. 9 of the CBAS Act are inapplicable in this instance.

16.	Let me also make this observation.  The Supreme Court recently in Nivani Ltd v Independent State of Papua New Guinea (2020) SC1945 held amongst others that (2) Civil claims against the State are subject to rules of practice and procedure in the Claims By and Against the State Act, s 9 of which enables the State to apply to the Court to be allowed further time to file a defence. Section 9 was the proper source of jurisdiction for the State to invoke. Reliance on Order 7, Rule 6 of the National Court Rules was inadequate and inappropriate. The primary Judge erred by not insisting on this requirement.  I observe that in that case, the defendant was the Independent State of Papua New Guinea.  As such, the Supreme Court applied the provisions of the CBAS Act to arrive at its decision.  The situation therein does not arise here, that is, whether it be time for purposes of computing time to file a defence or for invoking s. 9 as a jurisdictional base in an application for leave to file a defence out of time.  The State, which had been a party herein, has been removed from the proceeding.  And the defendants herein are not the State or the Independent State of Papua New Guinea as defined under the Constitution and the Interpretations Act.  

17.	Coming back to delay, computation of time should commence on the date of filing of the notice of intention to defend which is 27 October 2020, to the 44th day thereafter which would be on or about 10 December 2020.  From 10 December 2020 to the date of filing of the NoM, which was on 14 July 2021, would be a delay of about 7 months 4 days.

18.	I have considered the submissions of the parties regarding delay.

19.	I note that the substantial delay argument by counsel for the plaintiff was premised on computation of time from the date of service of the originating process at the Parliament House on 7 October 2019.  I have found the said computation of time to be inaccurate.  So, with the present calculation, 7 months or less may no longer match or suit the substantial delay argument.  I find that to be the case, that is, I find no substantial delay from the time of filing of the notice of intention to defend to the date of filing of the NoM.  

20.	I note that the situation here is a peculiar one but at the same time I note that it is covered under Order 6 Rule 2(3) of the NCR.  I note that the plaintiff also submitted that it was able to prove that the originating process was served earlier, and as such, time should be computed from 7 October 2019.  In my view, where the rule reads, the originating process shall be taken to have been served on him personally on the date on which that notice is filed or on such earlier date as may be proved, it gives a discretion upon this Court to consider and apply an appropriate option (from the 2 provided).  I have opted for the former or the first where I had regarded the filing of the notice of intention to defend as the starting point to compute time.  In my view, the plaintiff cannot have it both ways.  It had failed to effect personal service of the originating process upon the defendants.  Its actions were saved by the provisions of Order 6 Rule 2(3).  To go back and assert time for service based on 7 October 2019 cannot be as the said service was not personal which was not permitted under the NCR.  The Court may also be seen as condoning the wrongful actions of the plaintiff if it computes time from 7 October 2019.

REASONS

21.	In regard to the next factor, reasons, I make these observations.  The explanations given by the defendants were through the affidavits of Hon. Philip Undialu and Marago Dagoba filed on 14 July 2021 and 15 July 2021.  Their stated reasons for the delay include political instability or impasse, work commitments, overseas travel, covid 19 situation and various attempts to locate the contract and information in relation to the matter. 

22.	I note the submissions of the parties.  Strictly speaking and in my view, the reasons given cannot in themselves be regarded as valid reasons.  I say this because the defendants knew of the matter in October of 2020.  They had lawyers at the material time, and instead of taking steps to file a notice of intention to defend and defence, time was wasted as they themselves reveal in their evidence.  And the NoM was recently filed in July of 2021.  No explanation was given on why the NoM was belatedly filed and not earlier.  But it appears the lawyers had received instructions belatedly to take steps as they had done.

23.	So, despite the reasons given, I find them to fall beneath the requirements of valid reason or explanation for delay or for not filing a defence within the time.

DEFENCE ON MERIT

24.	As stated above, the plaintiff does not take issue with the draft defence and evidence that is filed in support of the defendants’s defence and of their claim that they have a valid defence.  It is not a contested issue so I will hold that in favour of the defendants.  I would briefly note that a main challenge by the defendants in their intended draft defence is questioning whether the provisions under the PFM Act were followed in regard to the agreement or contract the subject of this proceeding.

INTEREST OF JUSTICE

25.	Let me consider this final factor, namely, interest of justice.  Who does the interest of justice favour in this instance?

26.	I have considered the submissions of the parties.  I think the answer to this question is easy given what I have already considered and ruled above.  The interest of justice, in my view, favours the defendants.  This is a matter which I think should be property tried at a full hearing.  A main factor I consider is the merit of the defendants’ defence, which has not been denied or challenged by the plaintiff.  The plaintiff acknowledges in its submission that the intended defence, amongst others, raises legal issues that perhaps may require further or full considerations by the Court.  The plaintiff recognizes that the questions surrounding the application of relevant provisions of the PFM Act may or may not be relevant but that they may require proper determination by the Court.  I also take into account the fact that the main argument by the plaintiff in response to the NoM was substantive delay which I have overruled, thus, it seems that the proper course forward should be to allow leave, permit the defendants to file their defence out of time, and for the matter to progress to trial so that it is considered and determined on its merits.  This is of course despite my negative finding against the defendants that they did not provide valid excuses for their delay in not filing their defence.

27.	In conclusion and as stated, I find the consideration interest of justice to favour the defendants.

SUMMARY

28.	In summary, I will exercise my discretion and grant the NoM.  

COST

29.	An award of cost herein is discretionary.  The defendants seek costs of the NoM against the plaintiff.  The plaintiff argues that if the Court is minded granting leave, the defendants should bear the cost or alternatively cost should be ordered in the cause.

30.	I will exercise my discretion and order cost of the NoM to be borne by the defendants.  I note that it is because of their failure to file their defence within time that has caused them to file the present NoM and for the plaintiff to come to Court to defend the matter.  I also consider the fact that the defendants, despite the fact that they have not been found to cause substantial delay, were rather found to offer unsatisfactory reasons for allowing the default to occur.

ORDERS OF THE COURT

31.	I make the following orders:

1.	Leave is granted to the Fourth and Fifth Defendants to file and serve their defence out of time.

2.	The Fourth and Fifth Defendants shall file and serve their Defence upon the parties within 14 days from the date of this Order.

3.	The parties to the proceeding may file and serve their replies to the Defence within 7 days thereafter.

4.	The Fourth and Fifth Defendants shall pay the Plaintiff’s costs for defending this application on a party/party basis to be taxed if not agreed.

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

The Court orders accordingly. 
________________________________________________________________
Fiocco & Nutley:     Lawyers for the Plaintiff
Harvey Nii:              Lawyers for the Second and Third Defendants
Gileng & Co.           Lawyers for the Fourth and Fifth Defendants