N10500

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO. 74 OF 2022 (IECMS)

BETWEEN:
POST PNG LIMITED
Plaintiff

V

CHINA NANJING INTERNATIONAL LTD
Defendant

Waigani: Anis J
2023: 6th and 12th October

NOTICE OF MOTION – seeking to set aside default judgment – premised on irregular and regularly entered judgment – sources – Order 12 Rule 8(2)(a) and Order 12 Rule 35 – National Court Rules – consideration – various criteria discussed - ruling

Cases Cited:

Green & Co (in liquidation) v Green [1976] PNGLR 76
Government of PNG v Barker [1977] PNGLR 386
Pansat Communications Pty Ltd v David Mai & Authur [1995] PNGLR 438
Christopher Smith v Ruma Constructions Ltd (2002) SC695
Leo Hannet & Elizabeth Hannet v ANZ Banking Group (PNG) Ltd SC505
Grace Lome v her next friend Jack Lome v Allan Kundi (2004) N2776
Pokia v Yallon (2014) SC1336
Arman Larmer Surveys Ltd v Chan Consolidated Ltd (2014) SC1609
Tipaiza v Yali [2005] PNGLR 623
K92 Mining v. David Towe and 1 Or (2023) N10139
Gigira Development Corporation Ltd & Ors v Talu and Ors (No. 3) (2022) N10051
Jay Mingo Pty Ltd v. Steamships Trading Pty Ltd [1995] PNGLR 129

Counsel:

P H. Pato, for Plaintiff
L Damien, for the Defendant

RULING

12th October 2023

1.	ANIS J:  I heard arguments in relation to the defendant’s notice of motion (NoM) filed 24 August 2023, on 6 October 2023.  I reserved my ruling thereafter to a date to be advised.

2.	This is my ruling.

BACKGROUND

3.	The claim was for breach of contract.  In 2017, the plaintiff and the defendant entered into an agreement called Build, Operate and Transfer Project (BOT Agreement).  According to the terms and conditions of the BOT Agreement, the defendant would renovate the iconic Boroko Post Office Building (the Building).  It was agreed that the defendant would use its own resources to renovate the Building for a period of 2 years.  In exchange and for a duration of 18 years thereafter, it was agreed that the defendant would occupy and take charge of the Building.  This would include collecting and distributing rental income that is earned in the running of the Building.

4.	On or around 7 June 2018, the parties entered into a second agreement called Service Lease Agreement (Lease Agreement).  The renovations under the BOT Agreement was completed and the parties operated under the terms and conditions of the Lease Agreement until a dispute occurred concerning payment of utilities for the Building, that is, for water, power and carpark (utility or service charges).  The plaintiff served the defendant with invoices for the utility charges for the months 31 March 2020 to 30 April 2022, which had totaled up to K1,590,661.75.  

5.	Negotiations had between the parties to resolve the matter failed, and so on 9 November 2022, the plaintiff filed this proceeding.  On 4 July 2023, after a failed attempt to settle the matter out of Court as ordered by the Court, default judgment was ordered against the defendant, that is, for failing to file its defence within time.  The defendant had denied ever being properly served with the writ of summons and the statement of claim (the Writ) at the hearing of the default judgment application.  The Court refused the argument and granted default judgment in favour of the plaintiff for a liquidated sum of K1,490,661.75 plus interest and costs.  The Court found, amongst others, that the defendant had filed a notice of intention to defend thus refused the claim for want of service of the Writ.

PRELIMINARY MATTERS

6.	I will address 2 preliminary matters raised by the parties.  The first concerns whether the question of service of the Writ, which had been raised and addressed earlier, can be re-argued in the present NoM.

7	The answer to that is “no it cannot be raised or rehearsed in this NoM”.  The issue had been argued inter-pates before the Court granted default judgment.  Secondly, it does not constitute one of the criteria that a Court may consider in an application to set aside a default judgment that is regularly entered.  The only way to directly re-address the issue would be to appeal that decision to the Supreme Court.  The situation would have been different if for example the default judgment application had been heard exparte, which would mean that the issue (i.e., want of proper service of the Writ), whether it was raised or not, would have been decided without the presence of the defendant, thus the defendant would be at liberty to raise it as an issue in its NoM that is filed under Order 12 Rule 8(2)(a) of the National Court Rules (NCR). The Defendant, premised on that scenario, could then argue that the judgment was irregularly entered because it was not duly served.  The issue could then be decided by the Court after an inter-pates hearing of the set-aside application.  This is however not the case.

8.	I note that the defendant herein has belatedly attempted to raise the issue (i.e., want of proper service of the Writ) as the basis to argue that the judgment was irregularly entered.  As I have ruled above, that cannot be the case primarily because the argument had been argued inter-pates at the default judgment hearing and it was rejected by the trial Judge.  Secondly, I note that the criteria for setting-aside a default judgment that is sought under Order 12 Rule 8(2)(a), are not the same as the criteria for granting default judgment.  Because different criteria apply (i.e., the tests for granting default judgment and the tests for setting aside default judgment), the provisions of Order 12 Rule 8(2)(a) applies so that upon satisfying the Court with the required criteria, the Court may exercise its power to set-aside a default judgment.  

9.	But let me be clear.  Order 12 Rule 8(2)(a) states, “…The Court may, on terms, set aside or vary a judgement—…where the judgement has been entered pursuant to Order 12 Division 3 (default judgement)…”.  This Order is not intended, and in my view, must not be invoked with the intention to review or rehearse arguments on matters that had been raised inter-pates and had been decided by the Court at a default judgment hearing.  This distinction is critical in my view and has to be noted to avoid confusions especially concerning applications that are made under Order 12 Rule 8 of the NCR.

10.	For example and in the present case, the relevant criteria for the Court to consider and decided whether to set aside the default judgment, are (i), why the judgment was allowed to be entered in absence of the applicant, (ii), If there is a delay in making the application to set aside, a reasonable explanation as to the delay, (iii), by affidavit stating material facts disclosing a defence on merit or there is an arguable case, (iv), what is the prejudice to the other party?, and (v) where does the interest of justice lie?  See cases: Green & Co (in liquidation) v Green [1976] PNGLR 76, Government of PNG v Barker [1977] PNGLR 386, Pansat Communications Pty Ltd v David Mai & Authur [1995] PNGLR 438, Christopher Smith v Ruma Constructions Ltd (2002) SC 695, Leo Hannet & Elizabeth Hannet v ANZ Banking Group (PNG) Ltd SC 505, Grace Lome v her next friend Jack Lome v Allan Kundi (2004) N2776, Pokia v Yallon (2014) SC1336, Arman Larmer Surveys Ltd v Chan Consolidated Ltd (2014) SC1609, Kakas v National Housing Corporation (2020) SC2000, and Tipaiza v Yali [2005] PNGLR 623.  

11.	I note that these criteria have been cited by both parties to argue the matter on the premise that judgment was regularly entered.  

12.	I therefore dismiss any arguments raised by the defendant in regard to want of proper service of the Writ or the originating process.  In so doing, I uphold the plaintiff’s submission in that regard.

13.	Moving on to the next preliminary matter, the plaintiff submits that the NoM should be dismissed as an abuse of process because the defendant is rehearsing the arguments that have been raised earlier at the hearing of the default judgment application.  I have partially granted this submission by the plaintiff as stated above.  However, I reject the submission that the entire NoM constitutes an abuse of process.  Order 12 Rule 8(2)(a) expressly provides for this type of NoM to be made.  And I note that the plaintiff is expressly relying on the 5 criteria as its reasons for seeking to set aside the default judgment that was regularly entered.  Thus, I do not find the NoM to constitute abuse of process, and in so doing, I refuse to dismiss it in its entirety.

ISSUES

14.	Apart from my preliminary findings, the main issue, premised on the submission of the parties, are those 5 criteria for a regularly entered judgment which have been summarised above.

CONSIDERATION

15.	Why was judgment allowed to be entered in the absence of the defendant?  This criteria is inapplicable in the present matter.  Both parties were present, and the default judgment application was argued inter-partes on 4 July 2023.  

16.	I turn to the second criteria and ask whether there was a delay in filing the NoM and if so, whether there was a reasonable explanation provided.  

17.	I note the submissions of the parties on this matter.  

18.	In regard to the first leg of the issue, I note that there was delay in filing the NoM.  The order for default judgment was made on 4 July 2023.  Both parties were represented and were present at the time of the decision.  The defendant, however, filed its NoM on 24 August 2023.  So, the delay period is 1 month and 20 days.  Is that delay period unreasonable?  To answer this, I refer to the case of K92 Mining v. David Towe and 1 Or (2023) N10139, where the Court stated:

27.  I would adopt and apply the same test to the present case.  As stated, the first defendant was present when default judgment was entered against it.  It should therefore have applied immediately after that.  Instead, it waited for about 2 weeks before it filed the NoM.  Based on my decision in Gigira Development Corporation Ltd, 2 weeks or 14 days may be regarded as not attending to the matter promptly.  I find that to be the case herein.

[Underlining mine]

19.	And in Gigira Development Corporation Ltd & Ors v Talu and Ors (2022)(No. 3) N10051 (delivered on 28 November 2022), I stated at [26] and [27] which I adopt herein, as follows:

26.  How should I compute time to assess whether the NoM was filed promptly?  In my view, computation of time for the present matter should apply immediately or days after the grant of the exparte order.  I say this because the respondents knew of the return date when the exparte order was made which in itself may be regarded as contemptuous, that is, when they failed to appear in Court on 31st August 2022.  In my view, they ought to have conducted a file search or inquired immediately after 31st August 2022.  It is not sufficient or excusable, in my view, for the respondents or any failing party for that matter, to sit back and do nothing and only respond when they are notified.  Any such continuous acts of neglect or want of appearances by counsel on mentions, direction hearings, motion hearings, or at trials, must or should be viewed unfavorably or against the party concern.

27.  In the present matter, the NoM was filed on 11th October 2022.  The delay period therefore was 1 month 11 days.  To promptly apply, in my view, means to immediately or quickly apply.  In practical terms, it should mean, the next day or two, or a couple of days later, that is, especially in a case where the failing party had been notified of the return date but failed to appear in Court at the time when orders were made.

20.	Given that the parties were represented and present at the time the Court ordered default judgment, the defendant should have promptly applied after that, say within a few days, and not weeks or months later.  This then leads me to the second leg of the issue which is the reason(s) for the delay.  What is the reasonable explanation given?  I refer to the evidence.  I first refer to the affidavit of XinHua Wang filed 24 August 2023.  Mr Wang also filed a second affidavit on 31 August 2023.  Mr Wang, however, does not give a reason as to why the defendant did not quickly file its NoM but had allowed a period of 1 month 20 days to lapse.  I next refer to the 2 affidavits of Ms Damien filed 24 August 2023 and 1 September 2023.  Ms Damien deposes, amongst others, her various attendances with the former lawyers of the defendant Simpson Lawyers, to ascertain clarity on whether Simpson Lawyers had received instructions from the defendant to file its Notice of Intention to Defend.  No express reason for the delay is provided in Ms Damien’s affidavits except perhaps to confirm that valuable time may have been wasted in attending to matters that had already been argued before the Court, that is, matters concerning service of the writ or filing of a notice of intention to defend.

21.	In conclusion, I find that there was delay in filing the NoM.  I also find that no explanation has been provided for the delay.  I do not consider Ms Damien’s evidence to constitute an explanation at all.  Even if I am proven to be wrong (which I say otherwise), the reasons provided in Ms Damien’s affidavit cannot be regarded as valid or reasonable, that is, given that what had been sought after, which was evidence of whether Simpson Lawyers had instructions to file the defendant’s notice of intention to defend, had been argued and had been determined by the Court at the time of the hearing of the default judgment application.

22.	The next question I ask is this.  Is there a valid defence on foot that leave should be granted?  Evidence to establish whether there is a valid defence is contained in Mr Wang’s affidavit filed 24 August 2023.  At paragraphs 29 to 31, Mr Wang states 2 main grounds in which the defendant intends to raise in its defence if leave is granted.  It firstly claims that the Lease Agreement is unregistered with no Ministerial Approval as required under s.128 of the Land Act 1996.  Further, it claims that the description of the state lease in the Lease Agreement as allotment 9, section 15, Boroko, National Capital District does not exist.  In other words, the defendant is alleging there that there may have been a wrong or misdescription of the state lease where the Lease Agreement is based on.  The defendant’s second ground of argument is this.  It claims that its obligation to pay for the service charges under the Lease Agreement shall only apply or commence on the 5th year and onwards, as per the terms of the Lease Agreement. 

23.	I note the submissions of the parties.

24.	In regard to the first intended ground of defence by the defendant, I make the following observations.  I note that the parties are currently operating under the terms and conditions of the Lease Agreement.  The Lease Agreement has a lifespan of 18 years.  It appears to be at its 5th year this year.  The defendant is currently occupying and conducting its business at the Boroko Post Office or the Building, that is, after it had completed the renovation work as per the terms and conditions of the BOT Agreement.  The defendant does not say in its evidence that it had opposed the legality of the lease or that it had raised it with the plaintiff beforehand.  There is also no evidence to say that the defendant has given notice that it will terminate the lease and vacate the area in the near future or that it had already given such notice.  Evidence adduced shows that there are tenants currently occupying and operating in the Building.  These tenants have signed sub-leases which are in accordance with the terms and conditions of the Lease Agreement and where the defendant is directly responsible for, that is, in terms of collecting rentals amongst others.  

25.	The plaintiff has also referred to the various principles of estoppel and the case of Jay Mingo Pty Ltd v. Steamships Trading Pty Ltd [1995] PNGLR 129 which I find are relevant for this purpose.

26.	When I weigh all these, I do not find the proposed ground, that is, alleged non-compliance with s.128 of the Land Act 1996 as a valid defence that is worth granting leave and committing the Court’s time towards hearing it.  I must say that I am perhaps mostly persuaded by the facts and circumstances of the case, especially the conduct of the defendant, which I find is wanting to the said defence.

27.	I turn to the second proposed ground of defence.  The defendant claims that the Lease Agreement states, according to its interpretation of the clauses, that the provisions for payment of the service charges shall apply after the 4th year from the date or signing or coming into operation of the Lease Agreement.  

28.	I note the submissions from the parties.

29.	The relevant clauses in the Lease Agreement are clauses 4, 7.1 and the Schedule.  A copy of the agreement is adduced in the evidence of both parties in response to the NoM.  Clauses 4 and 7.1 read:

“4.  SERVICE CHARGE AND RENTAL INCOME DISTRIBUTION

China Nanjing shall pay to Post PNG a service charge and rental income distribution at the rate and in the manner specified in the Schedule.
……

7.  CHINA NANJING’S CONVENATS

China Nanjing shall – 

7.1 Service Charge

Pay the service charge to Post PNG on the due dates without deduction on any account as provided.”

30.	In regard to the Schedule of the Lease Agreement, I note that the parties do not dispute that there are no express provisions there that addresses the item service charges, that is, despite the heading under item 2 therein which reads “Service Charge and Rental Income Distribution”, and also, despite referrals made under clause 4 to the Schedule for provisions of payment for service charges.

31.	I also make these 2 separate observations in regard to the Schedule.  First, it provides that the defendant would pay a fixed rent of K100,000 per month after the 4th year to the plaintiff for a period of 12 years.  I note that there is no provision for inclusion of the service charges on top of the K100,000 that is fixed for rental payments per month for 12 years.  As such, I reject that defendant’s argument that the service charges will apply together with the rental on the 5th year and onwards.  That argument appears contrary to the agreed terms of the Lease Agreement as per the Schedule.  The second observation is this.  The last clause under item 2 of the Schedule reads,

•	The above covers rentals to Post PNG…

32.	It seems express from this clause that item 2 of the Schedule including the table herein, only applies to rental charges and not service charges. 

33.	With that, this appears to bring clarity and when I consider clause 7.1.  It expressly states that China Nanjing shall… Pay the service charge to Post PNG on the due dates without deduction on any account as provided.  

34.	When I weigh all these considerations, I also find this proposed defence to be without merit.

35.	In regard to the criteria prejudice and interest of justice, in view of my considerations and findings in regard to the other criteria above, I find them to favour the plaintiff.  Without a meritorious defence, further continuation of the proceedings would only prejudice the rights and interest of the plaintiff.  Additional time and resources would have to be committed including the Court’s time.  And the interest of justice lies in favour of the plaintiff; that there has to be finality in litigation.  

OTHER CONSIDERATIONS

36.	I also note that the defendant has admitted to paying K100,000 in regard to the service charges item.  This is adduced in the evidence of Mr Wang and also in the evidence of the plaintiff.  I note that the said payment was made not on a without prejudice basis.  There is also no evidence to suggest that the payment was made strictly on the premise that the defendant reserves all its rights to the claim.

37.	This therefore appears as evidence of admission of liability by the defendant.  I take into account this factor as acting against the defendant in this matter.

38.	The next consideration I should mention is the defendant’s dispute over the state lease as is described in the Lease Agreement.  In addressing it, I note that the only misdescription therein concerns the allotment number of the state lease.  Clause 1.1 of the Lease Agreement and under the definition Premises, it describes the state lease where the Building is situated as Section 15, Allotment 9, Boroko, National Capital District.  It appears that the allotment number is put down incorrectly therein as allotment 9.  However, the plaintiff, through Justin Worinu’s affidavit filed 19 September 2023, in response to this issue, appears to clarify that.  Mr Worinu attaches a copy of the state lease which shows the allotment number to be 11 and not 9.  The error appears as an oversight or as a clerical error.  As such, I find this argument frivolous, insufficient, and inconsequential, to constitute a valid defence on merit.  The argument, with respect, also appears to fly in the face of the fact that the defendant continues to occupy the Building which is situated over the state lease in question, and of the fact that the defendant continues to do business in accordance with the terms and conditions of the Lease Agreement with no apparent intention of leaving any time sooner.

SUMMARY

39.	In summary, I will refuse to grant the defendant’s NoM.

COST

40.	An award for cost is discretionary.  I will order the cost to follow the event on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

41.	I make the following orders:

1.	The defendant’s Notice of Motion filed 24 August 2023 is refused.

2.	The defendant shall pay the plaintiff’s cost of the application on a party/party basis to be taxed if not agreed.

3.	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

________________________________________________________________
Parker Legal: Lawyers for the Plaintiff
Leahy Lewin Lowing Sullivan:	Lawyers for the Defendant