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Bank of South Pacific Ltd v PNG Nambawan Trophy Holdings Ltd [2004] PNGLR 36 (12 November 2004)

NATIONAL COURT OF JUSTICE

BANK OF SOUTH PACIFIC LIMITED

V

PNG NAMBAWAN TROPHY HOLDNGS LIMITED;
FRANK GUI; AND
MARY LEONG

WAIGANI: KANDAKASI J

19 December 2003; 12 November 2004

PRACTICE & PROCEDURE – Application seeking set aside of default judgment entered after decline of application for extension of time to file and serve defence out of time – Decision leading to default judgment subject of appeal to the Supreme Court – No jurisdiction in National Court to entertain application – Application amounts to an abuse of the Court's process – Application declined.

EVIDENCE – Evidence available when earlier application made but not adduced – Attempt to adduce it in subsequent application – Inadmissible unless evidence qualifies as fresh evidence on proper application.

JUDGEMENTS & ORDERS – Effect of judgments and orders – Decision refusing leave to file and serve defence out of time – Entry of judgment in default of defence – Application made to set aside of default judgment – Same issues raised in earlier application raised – National Court without jurisdiction – Appeal available.

Facts

By notice of motion filed on 20 October 2003, the Defendants are seeking a set aside of a default judgment entered against them on 10 September 2003. That judgment followed an unsuccessful application for an extension of time by the Defendants for them to file and serve their defence, which decision is the subject of an appeal to the Supreme Court.

Held

1. The judgment of the Supreme Court in Christopher M Smith v. Ruma Constructions Ltd (supra) operates against this application. This authority says effectively that it does not really matter whether there is a defence on the merits or not. What matters is whether the Court has the necessary jurisdiction to deal with the matter and do justice. If the Court is without jurisdiction, justice is secondary because jurisdiction is a pre-requisite. Apart from the fact that this Court is bound by that decision, the Defendants did not persuade the Court with any authority to the contrary. Accordingly, the submissions put forward by the defendants were rejected.

2. Dismissal of the application with costs against the defendants.

Papua New Guinea cases cited

Anderson Agiru v. The Electoral Commission and The Independent State of Papua New Guinea (Unreported judgment delivered on 24/06/02) SC687.
Avia Aihi v. The State (No. 1) [1981] PNGLR 81.
Christopher M Smith v. Ruma Constructions Ltd (11/10/02) SC695.
General Accident Fire & Life Assurance Corporation Ltd v. Ilimo Farm Products Pty Ltd [1990] PNGLR 331.
Mesia Novau v. Nimrod Mark & Electoral Commission [1992] PNGLR 229.
Papua New Guinea Banking Corporation v. Jeff Tole (27/09/02) SC694.
Polling v. Motor Vehicles Insurance (PNG) Trust [1982] PNGLR 228.
William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (14/04/04) N2526.

Counsel

W. Arua for the applicants/defendants
J. Palek for the respondent/plaintiff.

12 November 2004

Kandakasi j. By notice of motion filed on 20 October 2003, the Defendants are seeking a set aside of a default judgment entered against them on 10th September 2003. That judgment followed an unsuccessful application for an extension of time by the Defendants for them to file and serve their defence, which decision is the subject of an appeal to the Supreme Court.

In the light of the appeal against the decision leading to the default judgment, I asked the applicants' counsel as to whether the National Court has the jurisdiction to deal with the application. The Court must now determine that question. Depending on a decision on that issue, the Court would also have to decide whether the Applicants have made out a case to set aside the default judgment.

Without relying on any specific case on point but only by reference to s. 155(4) of the Constitution and some cases on it, such as Avia Aihi v. The State (No. 1) [1981] PNGLR 81 and others, the applicants submit that the Court does have the power to hear and determine the application. On the other hand, the Plaintiff/Respondent argues to the contrary.

For the purpose of the issues before me, it is necessary to set out briefly the background to the application. On 1 July 2003, the Plaintiff took out these proceedings against the Defendants and served them all with a sealed copy each on 10 July 2003. Nineteen days later on 29 July 2003, the Defendants filed their notice of intention to defend. However, they did not file and serve their defence within the required period. This resulted in the Plaintiff filing a motion on 1 September 2003 for default judgment. The Defendants responded with a counter motion filed on 8 September 2003 seeking an extension of time for them to file and serve their defence out of time.

By consent of the parties, the Court dealt with both of these motions on 10 September 2003, starting with the application for extension of time. The Defendants did not satisfy the Court as to why they allowed the time limits for their defence to expire, the need for them to disclose by affidavit evidence a defence on the merits and provide an explanation for the delay in bring the application: William Duma v. Yehiura Hriehwazi and Pacific Star Limited

Trading as "The National" (14/04/04) N2526 at 6 – 7. The Court therefore, declined the application for extension of time. It then proceeded to hear the application for default judgment. The Defendants did not contest that application. On being satisfied that there was default within the meaning of the rules, the Court ordered judgment in default against the Defendants.

Subsequently, on 20 October 2003, the Defendants filed the application now before me. On the same day, they filed an appeal to the Supreme Court against the decision refusing extension of time for them to file and serve their defence. This raises at the outset the question of the Court's jurisdiction to deal with the application, which is the first main issue before this Court. I turn to a consideration of that issue now.

Jurisdictional Issue

What has happened in this case is a repeat of what happened in the case of William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (supra). There the defendants failed to file and serve there defence after having filed a notice of intention to defend. They therefore, applied for an extension of time to file and serve their defence out of time. At about the same time, the plaintiff applied for default judgment. The Court heard both of those applications, starting with the application for extension of time, which the Court refused. Thereafter, the Court proceeded to hear the application for default judgment unopposed and granted it as in this case. Thereafter, the defendants appealed to the Supreme Court against the decision refusing them extension of time to file and serve there defence out of time. Pending a hearing and determination of the appeal, the defendants applied by motion in the National Court for a set aside of the default judgment.

In dismissing the application seeking to set aside the default judgment, I noted the failures of the defendant as in this case. These were that the defendants did not provide a reasonable explanation for allowing the time limits for their defence to expire; they failed to disclose a defence on the merits in an affidavit setting out the relevant facts and that, there was no reasonable explanation for the delay in the timing of the application.

In support of the application seeking a set aside of the default judgment, the defendants filed three affidavits. After noting and considering the contents of the affidavits, I concluded that:

"... [T]here is no real improvement from the position the defendants were in when I declined their application for leave and followed by the signing of default judgment against them. In my view, the affidavits in support of the application now before me do not state facts disclosing a defence on the merits. All there is are arguments and submissions on what defence they have, which they claim per paragraph 10 of Mr. Gomez's affidavit that they will be able to prove at a trial. But there is no disclosure of the facts relied on that will enable them to prove their proposed defence at trial, and even before that a possible defence in terms of the draft annexed to the affidavits of Mr. Gomez or the first defendant."

I then noted that, what was then before the Court was not a straightforward and usual application for a set aside of a regularly entered default judgment. Rather, it was an application for a set aside of a default judgment regularly entered with the knowledge but without the objection of the defendants after a failed application for leave for them to file and serve their defence out of time. At page 14 of the judgment, I noted that:

"By the present application, the defendants are in effect asking this Court to reconsider the very arguments and principles already considered and applied in the application for leave. This can only happen before the Supreme Court on appeal. There, the defendants will be entitled to a rehearing of the application but on the record."

I further noted that there was indeed an appeal against the Court's decision on the leave application, which was pending before the Supreme Court. Therefore, I took the view that the application for a set aside of the default judgment was in effect a duplication of the appeal. I found that as amounting to an abuse of the Court's process. Then I said, where a Court finds a case of an abuse of its process, the Court has the power to stop it at any time by dismissing the process that amounts to an abuse of its process. In that regard, I noted also that for a variety of circumstances, both the National and Supreme Courts have exercised that power and cited as an example, the Supreme Court judgment in Anderson Agiru v. The Electoral Commission & Anor. (24//06/02) SC687. There the Supreme Court reasoned as follows in dismissing the proceedings before it:

"From the history of the various proceedings instituted by the Appellant in both the National and Supreme Courts and the case law we have alluded to, there are no doubts in our minds that the application, the subject of this appeal, was an abuse of process. The decision not to appeal to the Supreme Court against the order of the National Court refusing to grant leave under O.16 r.3 of the NCR but to make a double barreled application directly to the Supreme Court under Constitution secs. 155(2)(b) and 155(4) was a calculated and deliberate choice by the Appellant. For him to then seek to obtain the same remedy eventually through an application under Constitution s. 57 cannot be permitted."

In the case then before me, I found that the defendants made a deliberate decision to appeal to the Supreme Court, which I found was correct both from a procedural and jurisdictional view point. I went on to express the view that if the defendants were successful on their appeal, they could obtain leave to file and serve their defence out of time. Consequentially, the default judgment could be set aside, which was the very relief they were seeking in the application before the National Court. Therefore, the application then before me was an abuse of the Court's process. Consequentially, I dismissed the application on that basis.

I decided to dismiss the application for another reason too. I was not satisfied that the defendant's applicants, did make out a case in terms of the three requirements an applicant in an application seeking a set aside of a default judgment must meet.

There was a further reason for me to dismiss the application in the William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (supra) case. That was based on the Supreme Court judgment in Christopher M Smith v. Ruma Constructions Ltd (11/10/02) SC695.

In that case, the National Court entered summary judgment against the respondent in its absence. It therefore appealed to the Supreme Court against the judgment. There was some delay in prosecuting that appeal resulting in an application seeking to dismiss the appeal for want of prosecution. The Supreme Court declined that application and directed the appeal be progressed to a hearing. Subsequently, the respondent withdrew its appeal and sometime later applied for a set aside of the summary judgment. The National Court heard and granted that application. Aggrieved by that decision the appellant appealed to the Supreme Court.

If the position, at least procedurally was not clear, the Supreme Court judgment in Christopher M Smith v. Ruma Constructions Ltd (supra) made that clear at pp. 6 and 12 in these terms:

"The approach taken by the trial judge with respect is fundamentally wrong. In essence the learned trial judge reviewed the decision of Woods J. The trial judge had no jurisdiction to do this under an application to set aside judgment under O 12 r 8 of the Rules. This power belongs to the Supreme Court under the Supreme Court Act or s 155 (2) (b) of the Constitution.

The learned trial judge with the greatest respect did not address this point in his deliberations and more importantly his judgment. In my view, the National Court was without ...jurisdiction to entertain any application questioning the summary judgment after this Court had ruled that the summary judgment was final and that the respondent should pursue its appeal."

I noted that the Supreme Court was satisfied that the respondent did disclose a defence on the merits. Nevertheless, the Court was of the view that the respondent was not entitled to bring the application, particularly when the application came after the respondent exercised its right of appeal.

In William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (supra), the defendants successfully applied for leave to appeal against my decision in the earlier application for extension of time. Thereafter, they lodged an appeal to the Supreme Court. In those circumstances, I held that the National Court was without jurisdiction to deal with the matter, even if, the Court was satisfied that the defendants disclosed a defence on the merits.

Present Case

As already noted, the present case is almost on all fours with the case of William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (supra). There is no argument against the application of the case and the principles set out therein to this case. The Defendants argument however is that, this Court should be guided by the need to do substantial justice and relies on the case of Mesia Novau v. Nimrod Mark & Electoral Commission [1992] PNGLR 229 and Polling v. Motor Vehicles Insurance (PNG) Trust [1982] PNGLR 228. Theses cases provide authority for the proposition that, the rules of the Court are akin to a "handmaiden rather than mistress." In other words, the rules of the Court are only a means to an end and not an end in themselves, which is to say a party should not be allowed to succeed only based on the rules but on merit.

The Supreme Court effectively re-affirmed these principles of law in its recent judgment in Papua New Guinea Banking Corporation v. Jeff Tole (27/09/02) SC694. Accordingly, these are sound and well accepted principles of law in PNG. They apply and bind this Court once it is properly vested with the necessary jurisdiction to deal with the matter before it. Where the Court lacks the necessary jurisdiction, it cannot validly do anything even if justice demands it. The Supreme Court's judgment in Christopher M Smith v. Ruma Constructions Ltd (supra) made this very clear.

In the present case, this Court already heard and determined the issues of whether Defendants have a reasonable explanation for allowing the time limits for them to file and serve their defence to expire and disclosing a defence on the merits. It also heard and determined the reasonableness or otherwise of the reasons provided for the delay in bringing the application. All of these took place in the context of the application for extension of time for the Defendants to file and serve their defence. The Defendants argue however that, they did not provide all of the relevant facts or evidence disclosing a defence on the merits. They are now able to do that, which has the effect of disclosing a defence on the merits of the case. Given that, they submit that, it is only just and fair that, the Court should hear them and grant the relief they seek in order to do justice.

The judgment of the Supreme Court in Christopher M Smith v. Ruma Constructions Ltd (supra) operates against this application. This authority says effectively that it does not really matter, whether there is a defence on the merits or not. What matters is whether the Court has the necessary jurisdiction to deal with the matter and do justice. If the Court is without jurisdiction, justice is secondary because jurisdiction is a pre-requisite. Apart from the fact that this Court is bound by that decision, the Defendants did not persuade me with any authority to the contrary. Accordingly, I reject the submissions put forward by the Defendants.

There is a final matter for comment before I finally get to the final orders. That matter arises out of the Defendant's submission, which says, they did not put forward the facts before the court in the context of the application for extension of time but are now able to do that. They therefore, submit that, the Court should give them a hearing in relation to their defence in the interest of doing justice. Implicit in there, is an invitation for this Court to give them a re-hearing and for them to introduce evidence they were not able to put in the earlier hearing resulting in the dismissal of their application for extension of time.

By this, the defendants are asking the Court to rehear the application it has already heard and for them to adduce evidence for that purpose, which they failed to do under the earlier application. As already noted, this is exactly what the defendants asked the Court to do in the William Duma v. Yehiura Hriehwazi and Pacific Star Limited Trading as "The National" (supra). At page 14 of the judgment, I noted and said this about it (omitting the citation of authorities in the footnotes):

"By the present application, the defendants are in effect asking this Court to reconsider the very arguments and principles already considered and applied in the application for leave. This can only happen before the Supreme Court on appeal. There, the defendants will be entitled to a rehearing of the application but on the record... That means they will not be at any liberty to introduce any new evidence except based on "fresh evidence." Even that, would be on the basis of any such evidence meeting the test of the evidence not being available and could not be secured and tendered in the Court below..."

As already noted, this is being repeated here. Further, it is settled law which the Supreme Court in Christopher M Smith v. Ruma Constructions Ltd (supra) made it abundantly clear, once a court has decided on an issue it cannot rehear the matter unless an higher court on appeal so orders. This proceeds on the rationale that, there ought to be finality in litigation in the public interest subject only to appeal. There are a lot of authorities for this proposition such as the Supreme Court judgment in General Accident Fire & Life Assurance Corporation Ltd v. Ilimo Farm Products Pty Ltd [1990] PNGLR 331,where it said at 334:

"It is of some strength in the argument that a court should be wary of extinguishing a plaintiff's right of action, but, having found a verdict the public interest requires finality to litigation, subject of course to the rights of parties to appeal the verdict (with due diligence). The emphasis must be on finality and questions directed to show no inordinate delay or lack of real prejudice to the respondent are peripheral to the real issue.

In the present case, the defendants had the opportunity to adduce the evidence they attempt to adduce now before me when they first made their application for extension of time. The evidence they are trying to put before this Court is not fresh and or something they discovered after the judgment declining them extension of time. The evidence was always with them but for their inability to adduce them. After having failed to adduce that evidence because of which they failed to secure the extension they sought under the previous application, they are now coming under a purportedly different application seeking to supply the missing evidence and get to the same result, which is to bring their defence into Court well after the expiry of the time limits for them to do that and be heard on it before judgment. This is clearly against established authority.

For all of the foregoing reasons, I am not inclined to grant the application of the defendants. Accordingly, I order a dismissal of the application with costs against Defendants.

Lawyers for the plaintiff: In House Legal Services.
Lawyers for the defendants: Stevens Lawyers.