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Tedor v PNG Ports Corporation [2011] PGSC 36; SC1137 (16 November 2011)

SC1137

PAPUA NEW GUINEA
IN THE SUPREME COURT OF JUSTICE

SCA N0. 74 0F 2008

BETWEEN:

SIALIS TEDOR
Appellant

AND:

PNG PORTS CORPORATION
Respondent

Waigani: Lenalia, Gabi & Kariko JJ

2010: 2 July
2011: 16 November

APPEAL – appeal against dismissal of proceedings – application to set aside default judgement – principles.

APPEAL – appeal against dismissal of proceedings – whether proceedings a nullity – non compliance with the Public Finance (Management) Act.

APPEAL – appeal against dismissal of proceedings – 012 r40 National Court Rules –whether proceedings disclosed a reasonable cause of action.

After the plaintiff obtained default judgement following an inter-partes hearing, the defendant applied to have the judgement set aside or in the alternative dismiss the entire proceedings as irregular for not having complied with several statutory provisions.

The National Court dismissed the proceedings for being a nullity and for not disclosing a cause of action. The plaintiff appealed against that decision.

Cases cited:

Smith v. Ruma Constructions Ltd (2002) SC695
John Bokin v The Independent State of Papua New Guinea (2001) N2111
Paul Marinda v The Independent State of Papua New Guinea (1991) N1026
Albert Areng v Gregory Babia (2005) N2928
Leo Hannet and Elizabeth Hannet v ANZ Banking Group (PNG) Ltd (1996) SC505

Counsels:

Mr F Griffin, for the appellant
Mr M Ginyaru, for the respondent

16 November, 2011

1. BY THE COURT: On 20 April 2007, Sialis Tedor & Associates a law firm based in Lae ("Tedor Lawyers"), filed proceedings in the National Court claiming the sum of K166,923.34 being monies owed by the PNG Ports Corporation ("the Corporation") for legal services rendered to it pursuant to an agreement entered into by the parties. The law firm also claimed interest and costs.
   
2. The Corporation failed to file its defence within the prescribed time resulting in Tedor Lawyers filing an application for default judgement.
   
3. The court allowed the Corporation to file an application to file its defence out of time but no such application was filed.
   
4. On 24 August 2007 the application for default judgment was heard inter-partes after the Corporation failed to obtain further adjournment to file the application to extend time to file its defence.
   
5. The National Court granted the orders sought by Tedor Lawyers, including:
   
   • (a) judgement for the sum of K166,923.34;
     
   • (b) interest at 10% per annum from 24 March 2006 to the date of payment or judgment; and
     
   • (c) costs. ("the Default Judgement")
     
6. A little over 3 months later on 30 November 2007, the Corporation filed a notice of motion in the same court seeking:
   
   • (a) to have the proceedings dismissed as being irregular;
     
   • (b) to set aside the Default Judgment; and
     
   • (c) leave to file its defence out of time.
     
7. The motion was heard and on 30 June 2008 the court ruled in favour of the Corporation.
   
8. This appeal by Tedor Lawyers is against that decision of the National Court.
   

The National Court Decision

9. The primary judge held that the entire proceedings be dismissed for reasons that:
   
   • (a) The proceedings was a nullity from the beginning.
     
   • (b) No reasonable cause of action was disclosed.
     

The appeal

10. There are several grounds of appeal but they can be categorized into the following broad grounds:
    
    • (a) the primary judge erred in law in allowing the Corporation's application to set aside the default judgement; and
      
    • (b) the primary judge erred in law in dismissing the proceedings.
      

Setting aside default judgement

11. While the decision of the National Court discussed the court's jurisdiction in relation to the setting aside of a default judgement, its ultimate conclusion was not based on its powers to set aside a default judgement. The grounds of appeal alleging that the primary judge erred in setting aside the default judgement are therefore misconceived. However we think it useful to make some observations on the setting aside of default judgement:
    
    • (a) Firstly, the National Court may set aside a default judgement pursuant to O12 r8(2)(a) and O12 r35 of the National court Rules.
      
    • (b) Secondly, in relation to default judgements entered ex-parte, the principles applicable to an application seeking to set aside a default judgement are well-settled in this jurisdiction. The relevant principles were restated by the Supreme Court in Smith v. Ruma Constructions Ltd (2002) SC695. These principles require an applicant to satisfy the Court as to:
      
      • (i) why it allowed judgment to go in default;
        
      • (ii) a reasonable explanation for any delay in making the application; and
        

(iii) having a defence on the merits.

(c) Thirdly, the principles noted in (b) are inapplicable to a default judgement entered after an inter-partes hearing because the defendant would have already addressed these matters at the hearing.

(d) Fourthly, where default judgement is entered following an inter-partes hearing, the only course open for a defendant who is dissatisfied with the decision would ordinarily be to appeal against the order.

(e) Fifthly, a default judgement may also be set aside if entered irregularly, that is, in breach of the rules of court or the law: see John Bokin v The Independent State of Papua New Guinea (2001) N2111; Paul Marinda v The Independent State of Papua New Guinea (1991) N1026.

12. In the present case, default judgement was regularly entered.
    
13. The submission that a statement of claim does not disclose a reasonable cause of action, is not an irregularity of a kind upon which an application to set aside a default judgement can be founded: Albert Areng v Gregory Babia (2005) N2928. This argument should be raised earlier before default judgement is entered, or the default judgment could be appealed against and the lack of a reasonable cause of action could be raised as a ground of appeal.
    
14. For the above reasons, the primary judge would have erred in law had he granted the application to set aside the default judgement.
    

Dismissal of proceedings as a nullity

15. His Honour concluded that the proceedings was a nullity from the beginning for non- compliance with sections 59 and 61 of the Public Finance (Management) Act and section 14 of the Harbours Board (Amendment) Act which is now known as the Harbours Act.
    
16. Section 59 of the Public Finance (Management) Act provides that there shall be public tender where a public body seeks to award a contract for services of a value which exceeds a specified sum (K1,000). Section 61 of the Public Finance (Management) Act states that a public body cannot enter into an agreement for payment which exceeds the prescribed amount (K80,000) without prior approval of the Minister. The Public Finance (Management) Act applies to the Harbours Board (now the PNG Ports Corporation) pursuant to section 14 of the Harbours Act.
    
17. The question of whether the statutory provisions of the Public Finance (Management) Act and the Harbours Act rendered the agreement as null and void are matters for pleadings and trial. They do not render the proceedings a nullity.
    
18. The Corporation did not request for the proceedings to be declared a nullity. Instead, the application was for the proceedings to be set aside pursuant to O1 rr8 & 9 as being irregular. For this argument the Corporation had to demonstrate that the rules of court or practice rules had not been complied with; Leo Hannet and Elizabeth Hannet v ANZ Banking Group (PNG) Ltd (1996) SC505. But no such breach of the rules of court or practice rules was raised in support of this application.
    
19. Accordingly we find the primary judge erred in dismissing the proceedings as a nullity.
    

Dismissal of proceedings for not disclosing cause of action

20. His Honour the primary judge also dismissed the proceedings for not disclosing a reasonable cause of action, holding that:
    
    • (a) There was uncertainty in the terms of the agreement:
      
    • (b) There was no evidence of the agreement before the court;
      
    • (c) The persons who entered into the agreement for and on behalf of the Corporation did not have the legal capacity to do so;
      
    • (d) Tedor Lawyers did not comply with section 62 of the Lawyers Act; and
      
    • (e) Tedor Lawyers did not plead that it had complied with the Public Finance (Management) Act, the Harbours Board (Amendment) Act and the Lawyers Act.
      
21. We find the primary judge wrongly placed too much emphasis on the respondent's submissions which labored on matters raised in its draft Defence which was wrongly before the court as evidence on this application. This draft Defence relevantly reads:
    
    • (a) ........
      
    • (b) ...the Defendant admits that Santee Lou Margis and Bonny Gelu were former employees but denies that they had the legal authority to enter into such agreement described by the Plaintiff and pre-commit the Defendant to the Plaintiff for the sum of money being claimed.
      
    • (c) ...the Defendant repeats paragraph 2 of its Defence and says further that even if such an agreement was entered into between the Plaintiff and the Defendant (which is denied) the said agreement is legally null and void at the first instance and is of no effect in that it was done in breach of the Public Finance (Management) Act and the Harbours Act (Chapt No 240) which requires an agreement to be publicly tendered before it can be awarded to the successful bidder.
      
    • (d) .......
      
    • (e) ...the Defendant says that the Invoices submitted for payments pursuant to its purported agreement by the Defendant (which is denied) to act on its behalf were not in accordance with the Lawyers Act 1986 and the National Court Rules and furthermore, they were too excessive. The Defendant says that the normal practice for billing the Defendant under the Lawyers Act 1986 was for the Plaintiff to submit an itemized bill of cost in taxable form for the Defendant to see and if agreed, to settle the bills but if there is disagreement, the bills had to be taxed in accordance with the National Court Rules. The Defendant says further that the submission of the invoices without complying with the requirement of the Lawyers Act 1986 and the National Court Rules renders the invoices defective and legally void and of no effect.
      

(Our underlining)

22. These particulars of the proposed Defence were repeated in the supporting affidavits of Tau Vini and Martin Ginyaru, both in-house lawyers employed by the Corporation and stressed again in written and oral submissions on the application.
    
23. To our minds, the listed matters are properly for pleadings and trial and we find His Honour wrongly applied O12 r 40 in relying on them to dismiss the entire proceedings.
    

Conclusion

24. In conclusion we allow the appeal and order as follows:
    
    1. This appeal is upheld.
       
    2. The decision of the National Court given on 30th June 2008 in the proceedings W.S. No. 400 of 2007 is quashed.
       
    3. The default judgement entered by the National Court on 24th August 2007 in the proceedings W.S No. 400 of 2007 be re-instated.
       
    4. The proceedings W.S. No. 400 of 2007 shall be relisted for directions hearing in the National Court at Lae.
       
    5. The respondent shall pay the appellant's costs of and incidental to this appeal, to be taxed if not agreed.
       

_____________________________________________________________
Young & Williams: Lawyer for the Appellant
PNG Ports Corporation In-house Counsel: Lawyer for the Respondent