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Kontos v Laumae Kabini [2008] VUSC 23; Civil Case 110 of 2005 (4 March 2008)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 110 of 2005

BETWEEN:

RICHARD ANTHONY KONTOS and GLORIA KOFFAL
Claimants

AND:

FELIX LAUMAE T. KABINI
Defendant

Coram: Justice H. Bulu

Counsels: Mr. Silas Hakwa for the Claimant/Respondent
Mr. Nigel Morrison for the Defendant/Applicant

Date of Hearing: 31 January 2008
Date of Decision: 20 February 2008

DECISION ON APPLICATION TO SET ASIDE DEFAULT JUDGMENT

Introduction

1. The Claim in this matter was filed on 27 June 2005. And service of that claim was effected on the Defendant on 28 June 2005. When no defence was filed within the time required by the Rules, the Claimant then requested Default Judgment and Default Judgment was entered on 19 July 2005. The Statement of Defence to the claim was dated 30 August 2005 and filed on 5th September 2005. The Default Judgment however was issued on 1 September 2005. On 13 October 2005 the Application to set aside the Default Judgment was filed with the Court and on 8 May 2006 the Defendant filed his Sworn Statement in support of that Application.
   

Application

2. The Application to set aside Default Judgment asked for two orders. The first is that there be an order that Default Judgment dated 1 September 2005 is set aside and the Applicant’s Defence dated 5 September 2005 to the Claimant’s claim be allowed and this matter be progressed with and determined on merit. Secondly costs of and incidental to this Application.
   
3. The grounds on which the Application is made are as follows:-
   

“(i) As set out in the Defence annexed to Sworn Statement of Applicant filed in support of this Application.

(ii) That the Defendant upon receiving the Claimant’s claim has consulted Nigel Morrison of Ridgway Blake Lawyers to act for him but due to shortage of finance coupled with his work load, he cannot make it in time to file his Defence.

(iii) That the Claimants and their solicitor have filed similar allegations like those they made in this proceeding in Supreme Court Civil Case No. 238 of 2004 and was struck out by the Court.

(iv) That the Defendant had written to the Claimants’ lawyer on 21 July 2005 raising matters that he wants to raise have this Court listed the matter and issued notice for the first conference. The issue is to ask for security of costs before filing his Defence. This cannot take place, as the Defendant had not been served with the notice of first conference of this matter.

(v) That the Defendant came to know of the Default Judgment signed against him when he attended at the Court Registry on 5 September 2005 to file his Defence after he had returned from Solomon Islands on 1 September 2005.

(vi) That the Defendant have an arguable Defence of his liability for the Claimants’ Claim. The term of his detail of his Defence is in his Defence filed on 5th September 2005. In brief his arguable Defence is as follows:-

• (a) Upon material times the Defendant is a registered legal practitioner working in the registered firm of Trans-Melanesian Lawyers Family K. Mataskelekele & Associates.
  
• (b) At all material times the Defendant have acted for the one Dinh Van Than in relation to contracts entered between the Claimants and Dinh Van Than dated 17 July 2004. The Defendant will produce relevant documents in full hearing of this matter.
  
• (c) As there was no professional relationship between the Claimants and the Defendant in relation to contract of 17 July 2004 for the case of Blue Water Island Resort from Dinh Van Than, the Claimant has no legal basis to sue the Defendant for professional negligence.
  
• (d) The contract dated 17 July 2004 was drafted by the Defendant under the supervision of now His Excellency Kalkot Mataskelekele who was then the supervising solicitor for the Defendant and sent via email to the Claimants’ lawyer in Australia, compass Legal Solutions.
  
• (e) The inventory of attached as scheduled to contract dated 17 July 2004 was carried out by Rosalie’s Dinh Van Than employee and Joshua Kailong the Claimants’ agent in Vanuatu. When the one of the Claimants Richard Kontos entered into previous agreement to purchase Dinh Van Than’s Blue Water Island Resort but failed because he had no finance to purchase the resort. As the result Dinh Van Than terminated their contract.
  
• (f) The inventory was then kept by the Claimants without the knowledge of the Defendant and was included as schedule when the Claimants and their solicitors in Australia made amendment to the draft contract sent by the Defendant and included the inventory their carried out previously without the Defendant. The contract of 17 July 2004 was signed by Claimant Gloria Koffal in Australia and the Claimant Richard Kontos came to Vanuatu on 15 July 2004 with the contract already signed by the said Gloria Koffal. Richard Kontos and Dinh Van Than signed the contract on 17 July 2004 at Blue Water Island Resort.”
  

Applicant’s case

4. On 15 May 2006 this Court made a decision that the Application to set aside the Default Judgment was not filed out of time. That paved the way for the hearing of the Application to proceed. The Application was then set down to be heard today 31 January 2008 at 2.00 p.m. Before the Court could hear the parties on that application, another issue arose. And that preliminary issue arises as to whether in an application of this nature under Rule 9.5 a witness could be cross-examined on his sworn statement filed in support of the Application. In its decision dated 7 March 2007 the Court held that in line with the overriding objectives of the Rules the deponents to the sworn statement can be cross-examined to ascertain the veracity of their evidence. The hearing today then is the opportunity given to Mr. Hakwa on behalf of his client to cross-examine Mr. Laumae and Mr. Dinh Van Than on their sworn statements. Mr. Hakwa opened by taking the Court through the chronology of events that had happened leading up to the current Application. Mr. Hakwa went on to say that the sworn statement filed in support of the Application by Mr. Laumae fails to tell the Court the reason for the delay in not filing his defence within time.
   
5. The issue Mr. Hakwa submitted is what is the reason for the delay in filing the defence within the time required under the Rules. In other words does Mr. Laumae have a reasonable cause for not defending the claim within the time.
   
6. Under cross-examination Mr. Laumae gave evidence that the reasons for not complying with the Rules to file his defence within the time required can be found in paragraphs15, 16, 17, 18, 19 and 20 of his sworn statement, more importantly paragraph 16, regarding the issues raised in a letter he’d written to Mr. Hakwa on 16 July 2005. Mr. Laumae went on to give evidence that after he had written the letter he did not receive any reply. The matters raised in his letter, in his view, were important for consideration and resolution before any defence could be filed. Shortly after he’d written the letter he left for the Solomons. But before that he did speak to Mr. Kalkot Mataskelekele the principal of the law firm who advised him to seek assistance from another counsel. When he returned from the Solomons on 5 September 2005 he went to the Court on the same day and filed his defence. After filing the defence he picked up a copy of the Default Judgment in the pigeon hole that had been issued on the 1st of September 2005.
   
7. When questioned under cross-examination by Mr. Hakwa as to why it took him so long to file a defence Mr. Laumae in response stated that it is not a new claim. It is the same claim as in Civil Case No. 238 of 2004 which the Court has struck him out as a party in that matter. In that claim they had filed a case against Mr. Kontos and they had filed counterclaim and raised the very issues being raised in this claim against him.
   
8. Mr. Laumae went on to give evidence that as counsel or practicing lawyers he believes that once a claim is filed and if there are issues that need to be sorted out and counsel writes to another colleague about those issues it is good practice to sort this out. It is good practice that counsel respond to the queries raised by the former counsel. That did not occur in this case. Mr. Laumae continued in his evidence that another reason for causing the delay is that he was facing financial difficulties and further that he also had other matters that he was dealing with at that time and further that he also left for the Solomons soon after that.
   

Laumae’s case

9. Mr. Morrison informed the Court that he had no questions on re-examination to Mr. Laumae on the understanding that the only issue arising in this hearing is that of the reasons for the delay. Mr. Morrison submitted that Mr. Dinh Van Than’s evidence does not go to that and there is really no need for him to be cross-examined. In reply Mr. Hakwa agreed with Mr. Morrison that he need not cross-examine Mr. Dinh Van Than on his sworn statement.
   
10. On conclusion of cross-examination of Mr. Laumae, Mr. Morrison then made his submissions on the application seeking orders of the Court to set aside the Default Judgment that has been entered. Mr. Morrison in his submissions firstly, submitted that Mr. Hakwa in his cross-examination has specifically informed the Court that he was not concerned with matters of merit and restricted his questioning only to issue of reasons for the delay. Mr. Morrison submitted the defence goes to the merit of the matter. In defence Mr. Laumae is saying that he is being sued for negligence by Kontos but that he has never acted for Mr. Kontos or his partner. He has never been in a position where he had a duty of care to Mr. Kontos and his partner. He was never retained by them as their counsel. If they had during their negotiations chosen to rely on anything that Mr. Laumae has said that is a matter for them. But at all relevant time he was acting for Mr. Dinh. The person who could have sued for negligence in that matter is Mr. Dinh. However he has not done so. Rule 9.5.3 (b) is concerned with the test of an arguable defence. In this application Mr. Laumae has to satisfy the Court that he has an arguable defence. That in law Mr. Kontos cannot sue Laumae for negligence as Mr. Laumae was not and did not act for him at all in the negotiations for the sale of the property and the signing of the agreement.
    
11. Mr. Morrison, in relation to the first test in Rule 9.5.3 (a) whether there is reasonable excuse for the delay in filing the defence in the claim in this matter, submitted that paragraphs 16 to 20 of the sworn statement of Mr. Laumae filed in support of the Application contains those reasons and he urged the Court to place emphasis on the letter of 21 July attached to that sworn statement. That letter contains some very strongly worded note to Mr. Hakwa. Mr. Morrison submitted that in the face of an arguable defence courtesy and good sense demands that Mr. Hakwa at least contacted Mr. Laumae pursuant to his letter that he wrote to him on 21 July. He should have at least said I’m sorry you are not happy with me over this matter but at least you comply with the Rules. I am going to apply for Default Judgment. Mr. Morrison continued that there is a background to this matter and this is found in annexure “FLTK7” to the sworn statement of Mr. Laumae and it concerns some essential factual backgrounds and that has relevance to the delay when one considers the whole matrix in this matter. Financial constraint is the reason for the delay. Mr. Hakwa did not cross-examine Mr. Laumae on this point but accepted it. Mr. Morrison continued that the length of delay is relevant in this application. Mr. Hakwa, at law, is entitled to obtain Default Judgment at least as of 26 July 2006. The overall delay in the circumstances of this matter is in the region of five weeks. This, one had to take into account the fact such as financial constraint and Mr. Laumae being out of jurisdiction for sometime.
    
12. Mr. Morrison further submitted that Rule 9.5.4 (b) provides remedy in a situation as this. Mr. Kontos and Mr. Hakwa had followed the Rules. Mr. Laumae on the other hand has not followed the strict Rules. Costs have been incurred as a consequence. The Rules enables the Court to make orders for costs in favour of Mr. Hakwa’s clients.
    
13. Mr. Morrison finally pointed the Court to the overriding objectives that cases coming before the Court should be dealt with justly. Delay is not an extended delay and Kontos being prejudice due to the delay could be remedied with costs orders.
    

Responses by Applicant

14. Mr. Hakwa in response submitted firstly on the overriding objectives. He submitted that the overriding objectives is there to enable the Court to deal with cases justly and that means justice to be seen to be done to both and not just one. Mr. Kontos complied with the Rules, Mr. Laumae did not.
    
15. In the Rules if a party does not file a response or defence within the time prescribed the option open to the party and claiming in the matter is to apply for a default judgment. That is what had happened in this case. Mr. Laumae failed to file his defence within the time required by the Rules and an application for default judgment was made.
    
16. In relation to merits Mr. Hakwa continued that that is a matter for the Court. In relation to defence Mr. Hakwa questioned the document filed and headed Defence. Can it be called a defence? It was filed out of time. Mr. Hakwa continued that the Defence is required to be filed but must be done within the Rules. Everyone must follow the Rules not just some. There is no order of the Court made to allow the defence to be filed out of time. Rule 9.5.3 (b) refers to a defence and arguable defence. That in his view must refer to a defence filed within the required period of time described under the Rules. Not outside of that time frame.
    
17. Mr. Hakwa continued that the delay of five weeks in his view is an unreasonable delay. No good reasons have been forthcoming from Mr. Laumae for the long delay.
    
18. Mr. Hakwa finally concluded that if the Court were to decide against him and his client he referred the Court to Rule 9.5.4 (b) regarding costs, that they should get costs. Mr. Hakwa concluded that Mr. Laumae has not satisfied the test prescribed in Rule 9.5 and the Court should not grant his application.
    

Discussions

19. The Application to set aside the default judgment date 13 October 2005 is made under rule 9.5. Subrule (3) sets out the two tests that must be satisfied for the default judgment to be set aside. First, there must be shown reasonable cause for not defending the claim. Second, there is an arguable defence about his liability for the claim or about the amount of the claim.
    

Reasonable cause

20. The claim was filed on 27 June 2005. The default judgment was entered on 19 July 2005. The defence to the claim was filed on 5 September 2005. In his sworn statement filed on 8 May 2006, Mr. Laumae swore that the reasons for delay in filing a defence are:-
    
    • (a) On 21 July 2005 he wrote to Mr. Hakwa raising important issues and matters regarding the claim. He informed Mr. Hakwa:-
      
      • That he has received a copy of the claim and had seen a different counsel to represent him;
      • That he has instructed his lawyer to seek security for costs before he could file a defence and or application to strike out the claim;
      • That a lot of what is pleaded in the claim are matters which the Supreme Court has struck out in CC238 of 2004.
        
    • (b) Mr. Hakwa did not respond to that letter. Mr. Laumae was expecting a response. The content of the letter particularly that relating to the repetition of issues or matters that the Court has already dealt with and security for costs are matters that, in my view, was proper for Mr. Hakwa to respond to. As a matter of courtesy between counsels it is proper to respond to that letter concerning various issues raised in it.
      
    • (c) He had contacted Mr. Nigel Morrison of Ridgway Blake to represent him. Mr. Morrison had asked him to draft a defence and hand over documents relating to the contract. However, due to financial difficulties he could not retain the services of Mr. Morrison.
      
    • (d) He had left for the Solomons soon thereafter and returned on 5 September 2005.
      
21. There was a delay of about 5 weeks before the defence is filed. The delay appears on the face of it to be an unreasonable delay. However, when the letter of 21 July 2005 and the lack of response thereto, financial difficulties faced at that time and the departure of Mr. Laumae to the Solomons at the end of July 2005 and returning on 1 September 2005 are taken into account, it is my view that those matters taken together amount to reasonable cause for not defending the claim within the time specified in rule 4.13. During the hearing Mr. Hakwa did not contest the issue of the financial difficulties being encountered by Mr. Laumae at that time and also the trip to the Solomons.
    

Arguable defence

22. A defence was filed eventhough outside the required period under rule 4.13. This is reflected in Mr. Laumae’s sworn statement filed on 8 May 2006 in support of his Application.
    
23. Paragraph 21 of Mr. Laumae’s sworn statement provides his defence to the claim as follows:-
    
    • (a) At all material times he was and is a registered legal practitioner employed in Trans-Melanesian Lawyers;
      
    • (b) At all material times he acted for Dinh Gilbert in relation to the contract entered between the Claimants and Dinh dated 17 July 2004;
      
    • (c) There is no professional relationship between the Claimants and Mr. Laumae in relation to the contract dated 17 July 2004 for the purchase of the Blue Water Island Resort. There is no legal basis for the Claimants to sue him for negligence;
      
    • (d) The contract of 17 July 2004 was checked by the Claimants lawyers in Australia, Compass Legal Solutions, before execution.
      
24. I have read the defence, even though filed out of time, and the sworn statement of Mr. Laumae dated 8 May 2006 and I am of the view that Mr. Laumae has an arguable defence about his liability.
    
25. For those reasons, the Application is granted. The Orders of the Court are:-
    
    • (a) The Default Judgment entered on 1 September 2005 is set aside. The defence dated 5 September 2005 and filed on the same date is allowed and this matter be progressed with and determined on merit;
      
    • (b) Costs of the Claimant in relation to the Default Judgment and the Application to set aside the Default Judgment are in favour of the Claimants to be taxed if not agreed.
      

DATED at Port Vila, this 4th day of March, 2008.

H. BULU
Judge.