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Southern Cross Assurance Ltd v Mundi No. 1 Ltd [2018] PGSC 6; SC1657 (16 March 2018)

SC1657

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 38 OF 2016

SOUTHERN CROSS ASSURANCE LIMITED
Appellant

V

MUNDI NO. 1 LIMITED
Respondent

Waigani: Hartshorn, Kariko & Higgins, JJ
2017: 2 November
2018: 16 March

APPEAL – insurance law – claim for ship lost at sea – certificate of currency for relevant period – premium not paid – notice of cancellation of insurance just prior to loss – summary judgment – principles for entry of – not applied by primary Judge – serious issues of fact and law – appeal allowed

Cases cited:

Bruce Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112
Chief Collector of Taxes v TA Field Pty Ltd [1975] PNGLR 144
Curtain Bros (Qld) Pty Ltd & Kinhill Kramer Pty Ltd v the State [1993] PNGLR 285
Daniel v Pak Damoi (2009) SC970
Kumul Builders Pty Ltd v PTC [1991] PNGLR 299
Saki v Busu High School (1999) SC 599
Telikom PNG Ltd v Thomas Tulin (2004) SC748

Legislation:

National Court Rules

Counsel:

Mr G Egan with Mr R Raka, for the Appellant
Mr G Purvey, for the Respondent

JUDGMENT

16^th March, 2018

1. BY THE COURT: This is an appeal against the decision of the National Court given on 15^th March, 2016, whereby the primary Judge upheld several applications by the respondent Mundi No. 1 Limited (Mundi), among others, for the entry of summary judgment for K7million against the appellant Southern Cross Assurance Limited (Southern Cross).

2. The proceeding in the National Court concerns a claim by Mundi for the loss of its ship MV Mundi Navigator. The claim was made pursuant to a policy of insurance cover provided by Southern Cross.

Grounds of appeal

3. There are ten main grounds of appeal and they may be appropriately grouped and summarised as follows:

• Grounds 3(a)-(d): the primary Judge erred in fact and law in striking out the appellant’s defence and dismissing the cross-claim when a proper defence and a reasonable cause of action were disclosed.
• Grounds 3(e)-(g): the primary Judge erred in law in dealing with the application as one for default judgment when the motion was for summary judgment.
• Grounds 3(h): the primary Judge erred in fact and law in not considering that the default could be regularised.
• Grounds 3(i)-(j): the primary Judge erred in law in issuing orders against the Insurance Commissioner.
  

4. We consider it convenient to first deal with the question of whether the primary Judge dealt with the application before him as one for default judgment rather than summary judgment. If that was the course taken by his Honour, there is ample authority to find that his Honour erred in law and the appeal must be upheld. If not, it would then be necessary to decide whether summary judgment was entered on the correct legal principles. If that was the case, we should then decide whether the consequential orders, being those orders issued against the Insurance Commissioner, are in accordance with the law.

National Court decision

5. The notice of motion heard by the primary Judge contained two main applications:

(1) An application for the appellant’s amended defence and cross-claim to be struck out (pursuant to O8 R27 National Court Rules); and
(2) An application for summary judgment as briefly noted earlier (pursuant to O8 R38 National Court Rules).

6. Mr Baniyamai, for the respondent Mundi, forcefully argued before the primary Judge that the appellant had filed its defence out of time and without leave, rendering the defence, the amended defence and the cross-claim irregular. That warranted the striking out of those pleadings, leaving the appellant without a defence. His Honour was invited to enter judgment for Mundi under Order 12 Rules 27 (default judgment for a liquidated sum) and Order 12 Rule 38 (summary judgment); see Appeal Book, Page 396:2-18).

7. The transcript of the National Court decision is found on pages 423 to 431 of the Appeal Book. In the first three of the eight pages, his Honour provides the brief background facts giving rise to the respondent’s claim (according to the affidavits filed by the respondent) and introduces the respondent’s notice of motion. In the following four pages His Honour proceeds into a long discussion of the purpose of court rules and the necessity for proper pleadings, the requirement to file documents within stipulated times and if not, to seek appropriate leave to file the documents out of time. Otherwise, his Honour then explains that reliance on irregularly filed pleadings (in this case, the late filing of the defence and cross-claim without leave) amounts to an abuse of process.

8. In relation to the alleged default in filing of the defence and cross-claim, the primary Judge stated the following:

“.... because of the non-compliance with the requirements of the rules and repeating for emphasis, defence not filed within time prescribed by the rules, no leave was sought and granted to file defence out of time and defence was filed anyhow, that constituted abuse of process.” (Appeal Book Page 427:37-41)

“There was an abuse of process here. Firstly, no defence filed within the prescribed time. Secondly, filing defence without leave of the court constituted an abuse of process”. (Appeal Book, Page 427:51-53)

“But it is my respectful opinion that the first leg of the plaintiff’s case, that is in relation to abuse of process of the court, I am satisfied that the summary powers of the court should be exercised here...” (Appeal Book, Page 429:48-52)

“So I have no hesitation in concluding that I am satisfied and if I may pause to note for emphasis, the evidence was all there ...Evidence demonstrated from official court records that the default that the plaintiff company relies on constitute abuse of process and so I have no difficulty with granting the reliefs that are sought ...” (Appeal Book, Page 427:36-44)

9. His Honour then struck out the appellant’s defence and cross-claim pursuant to Order 8 Rule 27 and Order 12 Rule 40 respectively for being an abuse of process, and entered summary judgment under Order 12 Rule 38 in favour of the respondent. See Appeal Book, Pages 430:40-43.

10. The cited Rules in the respondent’s notice of motion all grant the National Court discretionary power:

• To strike out a pleading for being an abuse of process (Order 8 Rule 27);
• To dismiss a claim for being an abuse of process (Order 12 Rule 40); and
• To enter summary judgment (Order 12 Rule 38).
  

Consideration

11. We are not convinced that his Honour dealt with the motion before him as an application for default judgment under the guise of an application for summary judgement. If we found otherwise, his Honour would have erred in law. In Telikom PNG Ltd v Thomas Tulin (2004) SC748 the Supreme Court explained that “These two types of judgment are distinct and have their own factual basis and attendant procedural requirements, and principles”. Rather, his Honour considered the default in filing the defence and cross-claim out of time and without leave as abuse of process warranting the striking out of the defence and the cross-claim. As Southern Cross was then left without a defence, his Honour decided Mundi was entitled to summary judgment.

12. The determination of abuse of process has not been seriously challenged by the appellant except to the extent that it was submitted his Honour ought to have acted under Order 1 Rule 15 National Court Rules and regularised the pleadings by extending time to comply. We note that Order 1 Rule 15 was not argued in the National Court, and therefore that argument cannot be entertained on appeal.

13. Were the correct principles applied then in ordering summary judgment?

14. Mundi’s argument on the substantive claim is that by law the insurance cover for its vessel remained in force when the ship sank. In the affidavit evidence relied upon by Southern Cross, the respondent countered that:

• The appellant had not applied to renew the 2012-2013 policy;
• The outstanding on the 2011-2012 premium had not been settled; and
• The Certificate of Currency issued 13^th August, 2012 was subject to the payment of the outstanding premium.
• The insurance policy was cancelled by notice to Mundi’s banker before the MV Mundi Navigator sank.
  

15. In our opinion, the affidavit evidence of the appellant discloses a reasonable and arguable defence – that the insurance cover was effectively cancelled prior to the sinking of the MV Mundi Navigator.

16. Leading Supreme Court cases that have settled the law in relation to summary judgment include Bruce Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112 and Curtain Bros (Qld) Pty Ltd & Kinhill Kramer Pty Ltd v the State [1993] PNGLR 285. The principles stated by those cases confirm that an applicant relying on Order 12 Rule 38 must satisfy the court that:

(1) there is evidence of the facts proving the essential elements of the claim; and
(2) there is evidence from the plaintiff or some responsible person that in his belief there is no defence.

17. The primary Judge did not cite any case authority nor did he expressly or by inference refer to the applicable principles on the subject of summary judgment under Order 12 Rule 38. It appears that his Honour was more preoccupied with the issue of “default”. In relation to the substantive claim, his Honour made some brief remarks whereby his Honour concluded that Mundi’s insurance policy was cancelled without justification. That view was based on the affidavits of Samson Jubi, the owner of Mundi; See Appeal Book Page 429:39-52. Otherwise, his Honour essentially held that upon striking out the defence, Southern Cross had no defence, and that entitled Mundi to summary judgment.

18. If in a case a defence is filed or evidence is given by the defendant, the plaintiff must show that upon the facts and/or the law, that the defendant has no defence. The plaintiff will not be entitled to summary judgment if there is a serious conflict on questions of fact or law. Summary judgment is appropriate if the Court determines on the evidence that there is no triable issue of fact and no arguable defence based on law; Kumul Builders Pty Ltd v PTC [1991] PNGLR 299. Courts have been reminded not to readily invoke the rule for summary judgment and to only do so in clear cases; see also Chief Collector of Taxes v TA Field Pty Ltd [1975] PNGLR 144; Saki v Busu High School (1999) SC 599; and Daniel v Pak Damoi (2009) SC970.

19. We find there are serious issues of fact and law to be tried in the present matter and it is therefore not a clear case for summary judgment. The main issues in our opinion are whether the insurance cover was still current at the time of the sinking of MV Mundi Navigator when:

(1) The premium for the previous year had not been fully paid;
(2) The Certificate of Currency stated that its validity was subject to payment of the outstanding premium; and
(3) Southern Cross had advised Mundi’s bankers (who were responsible for payment of the premium) before the vessel sank that the insurance policy was cancelled.

20. In our opinion, the facts and the law pertinent to the issues ought to properly proceed to trial.

21. As the appeal challenges the exercise of discretion by the National Court, this Court should only interfere if the exercise of that discretion was clearly wrong. We are satisfied that the learned primary Judge erred in fact and law in ordering summary judgment when:

• His Honour failed to consider the relevant legal principles for the entry of summary judgment and to properly apply them to the facts of the case;
• The appellant raised a reasonable and arguable defence; and
• Serious issues of fact and law existed that warranted the dispute being properly tried.

Conclusion

22. In our view, the above conclusions are determinative of the appeal so we would uphold the appeal for those reasons.

23. Given the nature of the case including the significant amount of money claimed, and noting that the respondent was in fact only late by one day in filing its defence, we would order that time for filing of the defence is extended to the date it was filed, that is 2^nd October, 2014. As a consequence, the filing of the cross-claim and the amended defence would effectively be regularised also, and that would allow the substantive dispute to be progressed to trial.

Order

24. Accordingly, we order that:

(1) The appeal is upheld.
(2) The orders of the National Court made 15^th March, 2016, in proceedings WS No. 956 of 2014 are quashed.
(3) The time for the respondent to file its defence in proceedings WS No. 956 of 2014 is extended to 2^nd October, 2014.
(4) The case is remitted to the National Court to be listed for a directions hearing to progress it to trial.
(5) The respondent shall pay the appellant’s costs of and incidental to the appeal.

__________________________________________________________
Posman Kua Aisi Lawyers: Lawyer for the Applicant
Young & Williams Lawyers: Lawyer for the Respondent