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Posala v Samoa National Provident Fund Board [2017] WSSC 45 (30 May 2017)

SUPREME COURT OF SAMOA
Posala v Samoa National Provident Fund Board [2017] WSSC 45

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

IN THE MATTER OF:
Rule 183 of the Supreme Court (Civil Procedure Rules 1980)

BETWEEN:
FARANI POSALA of Lalovaea, Company Director.

First Applicant

A N D:
SMACK COMPNAY LIMITED a duly incorporated company having its registered office at Pesega.

Second Applicant

A N D:
SAMOA NATIONAL PROVIDENT FUND BOARD a statutory body established pursuant to the Samoan National Provident Fund at 1972.

Respondent

Counsel:
First applicant in person
Second applicant (has been liquidated)
R Drake for respondent

Judgment: 30 May 2017

JUDGMENT OF SAPOLU CJ

Introduction

1. These proceedings are concerned with three motions by Mr Farani Posala, the first applicant, namely, (a) motion to set aside part of the consent judgment entered on 6 May 2004, (b) a motion to stay execution of the judgment, and (c) a motion to file a notice of appeal out of time against the judgment. All three motions were dated 11 February 2005.
2. The second applicant was wound up on 12 June 1994 on the petition by another creditor. So the second applicant, presumably, had ceased to be in operation since 1994. But whether the second respondent had actually ceased to exist in law from that time is not clear.

History of proceedings

3. These proceedings have a long history which is to be found in the affidavits filed by the first applicant and the respondent. I will start with the affidavits by the respondent for ease of understanding.

(a) Evidence for the respondent

4. According to the written submissions and affidavit of counsel for the respondent sworn on 8 March 2005, on 26 October 1992 the respondent issued proceedings against the first and second applicants. Counsel for the respondent also said in her written submissions that the first applicant may have forgotten about the service of the proceedings on him in 1992 because of the passage of time. At that time, the applicants were represented by different counsel, Mr Puni. The hearing of the respondent’s action was scheduled for hearing in August 1995 by an overseas Judge. However, that hearing did not proceed due to approaches for settlement by new counsel/solicitor Mr Enari acting on behalf of the applicants. From 1996 to November 2001, counsel for the respondent had no further involvement in this matter. Then in December 2001 the respondent’s action against the first and second applicants was set down for mention in order to set a new date for hearing.
5. Subsequently, counsel for the respondent filed an amended statement of claim and she was advised by the registrar in writing on 14 November 2002 that a date of hearing of the respondent’s action against the first and second applicants had to await another Judge from overseas. A date of hearing was eventually allocated for 6 May 2004 for the overseas Judge to hear the respondent’s action. According to counsel for the respondent, prior to the date of hearing she had a number of correspondence with then counsel for the first and second applicants in respect of various approaches to try and settle the matter but no settlement was reached. So on 6 May 2004 she attended to Court with the respondent’s then manager legal ready to proceed. However, prior to the Court sitting, counsel for the applicants and the first applicant arrived and informed her that the applicants were consenting to judgment. At that time, counsel for the respondent had come to Court prepared to proceed with the hearing and to claim the outstanding loan balance together with accrued interest up to 6 May 2004, the date of the hearing. Counsel for the applicants then requested counsel for the respondent that the first applicant wanted part of the accrued interest waived as the Government had offered relief to agricultural projects affected by cyclone Val in 1991 by waiving interest on loans from semi-government institutions. The respondent’s then manager legal who was with counsel for the respondent then sought instructions from the respondent’s general manager who agreed that judgment be entered for the amount claimed in the summons and not for the much more substantial amount of the outstanding loan balance including accrued interest up to 6 May 2004. Consent judgment was then entered in favour of the respondent against the first and second applicants in the sum of $1,333.010.18 which was the sum shown on the summons.
6. Counsel for the respondent further deposed in her affidavit that following the consent judgment on 6 May 2004, she was served on 4 June 2004 with an application to file a notice of appeal out of time by a new and different solicitor purporting to be acting for the first and second applicants at that point in time. As the application had no return date, counsel for the respondent wrote to the new solicitor for the applicants pointing out this defect. When there was no response from the new solicitor for the applicants, counsel for the respondent wrote to him again on 19 October 2004. On the same date, counsel for the respondent applied for a writ of sale against land at Vaitele claimed to be owned by the second applicant to enforce the respondent’s judgment. On 24 February 2005, the said land was sold by the registrar by public auction through a mortgagee sale.
7. The then manager legal for the respondent in her affidavit sworn on 8 March 2005 said that on 6 May 2004 in the morning, she attended the hearing of this matter as instructing solicitor and a witness for the respondent. Before the hearing started, she was discussing the respondent’s case with counsel for the respondent outside of the Court when counsel for the applicants and the first applicant (who followed closely behind) approached herself and counsel for the respondent. Counsel for the applicants then informed them that his clients were willing to consent to judgment and counsel for the respondent replied that the current balance including accrued interest was now over $2 million and her client would be seeking judgment for that amount. Counsel for the applicants and the first applicant then went inside the Court and about two minutes later they again approached them and counsel for the applicants again proposed settlement at a discount as the first applicant insisted that they were entitled to interest relief in terms of a Cabinet directive issued after cyclone Val. She then responded to counsel for the applicants and the first applicant that the respondent has already replied to that matter when it was previously raised in settlement negotiations. However, counsel for the applicants in the presence of the first applicant and counsel for the respondent continued to request for a discounted amount to which the respondent’s manager legal responded that the respondent had given his clients numerous opportunities to settle which his clients never honoured. She also handed counsel for the applicant her written calculations prepared for her evidence if the hearing had proceeded which showed interest calculations, arrears and a balance of $2,233.036.60 as at 5 May 2004.
8. The respondent’s manager legal and counsel for the respondent then went inside the Courtroom whilst counsel for the applicants remained outside engaged in discussion. After about five minutes, the first applicant and counsel for the applicants entered the Court and the first applicant told the respondent’s manager legal that he had been charged with compound interest. The respondent’s manager legal responded that if he had any queries regarding compound interest it was best to enquire with the respondent and she offered to get reconfirmation from the respondent but the first applicant replied it was okay. At that time, counsel for the applicants again asked counsel for the respondent and the respondent’s manager legal, in the presence of the first applicant, to agree to judgment by consent on the amount in the statement of claim instead of the much greater amount of the outstanding balance including accrued interest to date. After brief discussion with counsel for the respondent, the respondent’s manager legal telephoned the respondent’s general manager about the proposal from the applicants counsel. After the respondent’s manager legal and counsel for the respondent spoke on the phone to the respondent’s general manager, the latter agreed to have judgment entered in the lesser amount shown in the statement of claim. When the manager legal and counsel for the respondent returned to Court and relayed the decision to counsel for the applicants in the presence of the first applicant, counsel for the applicants reconfirmed with the first applicant who immediately accepted without objection judgment in the sum in the statement of claim. The deputy registrar was then informed and the Court was convened.
9. The presiding Judge was then informed of the agreement reached between the parties and consent judgment was entered in favour of the respondent in the sum of $1,333.010.18 in the statement of claim.
10. The respondent’s manager legal further deposed in her affidavit that at no time did she or counsel for the respondent coerce the first applicant to consent to judgment. It was counsel for the applicants and the first applicant who approached them with the proposal to enter judgment by consent but they were ready to proceed with the hearing of the matter as scheduled. All discussions between herself and the respondent’s counsel and the applicants counsel were also held in the presence of the first applicant. Furthermore, the applicants counsel and the first applicant did not object to the amount of the judgment as it was the amount they proposed which was much less than the up to date balance of the debt with accrued interest which was over $2.2 million.
11. The then general manager of the respondent in his affidavit sworn on 30 May 2005 said that all loans by the respondent charge compound interest as do other lending institutions. This occurs when a loan is in default as to repayments. Copies of a standard deed of mortgage and a standard loan agreement used by the respondent in 1991 about the same period as the loan to the second applicant were annexed to the general manager’s affidavit to confirm that compound interest was charged on a loan which was in default as to repayments.
12. With regard to the claim by the first applicant that the Government’s amnesty for agricultural loans applied to the second applicant’s loan, the respondent’s general manager said in his affidavit that this was not correct. The interest relief directed by Government related only to agricultural loans made by the Development Bank of Samoa. Such relief did not affect loans made by the respondent.
13. The affidavit by the then assistant general manager of the respondent shows that a meeting initiated by the first applicant was held with the Prime Minister on 17 February 2005. Also attending that meeting were the then Deputy Prime Minister, the respondent’s chairperson, the respondent’s manager legal, the first applicant and his personal assistant. The said meeting was given copies of the first applicant’s proposal addressed to the Prime Minister. The proposal was for instalment payment of the consent judgment entered on 6 May 2004 against the first and second applicants over the next twelve years interest free and for the respondent to cancel its mortgagee sale of the land at Vaitele belonging to the second applicant. According to the respondent’s assistant general manager, the Prime Minister then invited officials of the respondent and the first applicant to discuss the matter amongst themselves for a solution.
14. Soon thereafter, a meeting chaired by the respondent’s chairperson was held with the first applicant. Also attending were the respondent’s assistant general manager, the respondent’s manager legal, and the first applicant’s and his personal assistant. At that meeting the first applicant prayed for his proposal to be accepted in view of his company F P Architects Ltd and not the second applicant paying the outstanding debt. He also stated he was confident and prepared to settle the debt at whatever balance was outstanding as his businesses were on the property to be auctioned at the mortgagee sale. In response, the respondent’s assistant general manager referred to the unsatisfactory status of the second applicant’s account as there had been numerous proposals in the past to resolve the matter. But those proposals were never honoured by the first applicant. It was then resolved to defer the respondent’s mortgagee sale auction scheduled for 17 February 2005 for one week until the respondent could consider and deliberate on the first applicant’s proposal. The mortgagee sale was then rescheduled to 24 February 2004. The following day the respondent’s chairperson wrote to the first applicant setting out the details of their meeting. By letter dated 22 February 2004, the first applicant requested that his proposal be considered as per the meeting with the Prime Minister. By special meeting held on the same date, the respondent declined the proposal by the first applicant. On 23 February 2005, the first applicant submitted an amended repayment proposal and sought reconsideration by the respondent of its decision. On the same date, the respondent’s chairperson advised the first applicant that his amended proposal was declined and the respondent would proceed with its mortgagee sale on 24 February 2005 which was duly done.

(b) Evidence for the applicants

15. The first applicant is a businessman and architect by profession. He had four companies: an architectural company F P Architects Ltd, a water company, a construction company, and Smack Co Ltd which is the second applicant in these proceedings. Apparently, the first applicant was a director in all those companies which operated from the same place at Vaitele.
16. According to the first applicant in his affidavit sworn on 12 May 2005, when proceedings were first brought against the second applicant, the summons was served directly on the second applicant’s solicitors Kruse, Enari and Barlow. By this time Mr Enari was acting as counsel for the second applicant. The first applicant said that he was not personally served with that summons and therefore he did not instruct any solicitor to act for him personally because he was not served with the summons. This must have been in 1992 when proceedings were first issued against the first and second applicants and Mr Puni (not Mr Enari) was acting for both applicants. The first applicant also said that when the second applicant was eventually dissolved in 1994 he continued negotiations with the respondent under his architectural company F P Architects Ltd because his architectural company had invested a substantial amount of money in purchasing the land and improvements in 1990 which was then conveyed to the second applicant. This must be the land that was the subject of the mortgagee sale.
17. The first applicant further said in his affidavit of 12 May 2005 that he confirmed the meeting mentioned in the affidavit of the respondent’s assistant general manager. This must be the meeting chaired by the respondent’s chairperson which was held soon after the meeting with the Prime Minister on 17 February 2005. The first applicant then said that since that meeting all correspondence with the respondent were provided under the name of his architectural company F P Architects Ltd.
18. The first applicant also said that after the second applicant was wound up in 1994, he continued negotiations with the respondent up to the date of the judgment on behalf of F P Architects Ltd not knowing that he was personally liable to pay the judgment. It was not until judgment was entered that he realised that he was personally liable to pay the judgment. If he had discovered that earlier, he would have instructed a different solicitor to act for him personally. In effect what the first applicant was saying was that he did not consent to counsel Mr Enari agreeing to enter judgment by consent against him personally because as far as he was concerned he was not being represented by counsel Mr Enari as he had not instructed counsel to represent him personally. Mr Enari was representing only the second applicant.
19. In his affidavit sworn on 11 February 2005, the first applicant said that counsel who appeared with him in Court when consent judgment was entered on 6 May 2004 was acting for Smack Co Ltd the second applicant and not for him personally. On 5 May 2004, counsel rang him and informed him that the hearing of these proceedings was scheduled for Thursday the following week which would have been 13 May 2004. However, it was not possible for him to meet with counsel that day. Around 8:30am the following morning 6 May 2004, he received a phone call to appear in Court at 9:00am. At that time he was engaged in another matter. When he arrived at the Court House he was met by counsel who appeared for the applicants who said to him that he would have to pay about $1.3 million for this case and that if he did not agree to that amount then they would have to proceed with the hearing in which he would have to pay about $2.2 million. When he asked why there were two different amounts, counsel explained to him that it was because of interest calculations. When he asked counsel whether the interest was simple interest or compound interest, he was told that it was compound interest. He then expressed disagreement as the interest should be simple interest.
20. The first applicant further said that given that counsel for the applicants did not appear to have any other option to offer to counsel for the respondent, he agreed to payment of the amount of about $1.3 million but subject to verification of the interest and the five year amnesty granted by the Government in 1996 after cyclone Val on interest on agricultural loans.
21. When the case was called in Court, counsel for the respondent informed the Judge that the parties have settled and the applicants have consented to judgment in the amount of $1.333.010.18. There was no mention that that amount was subject to verification of interest and the five year amnesty granted by Government in 1991 for interest on agricultural loans.
22. The first applicant also said that he acknowledged that some monies needed to be paid to the respondent but he did not consent to the amount for which judgment was entered because the interest charged was compound interest when it should have been simple interest and that the five year amnesty granted by Government was not taken into account. He has therefore requested that part of the amount for which consent judgment was entered should be set aside.
23. The first applicant also said in his affidavit of 11 February 2005 that as far as he understood matters, counsel who appeared for the applicants on 6 May 2004 was acting only for the second applicant as he was not personally served with a summons, statement of claim or any other Court documents. If he had been served personally, he would have instructed a different lawyer to act for him and a motion would have been filed to strike out the proceedings against him on the ground that they were statute barred.
24. The first applicant also queried in his affidavit whether the second applicant could be sued and be made liable under the consent judgment when it had been wound up in 1994. However, none of the three motions by the first applicant was directed at this issue. There was also no motion by or on behalf of the second applicant.
25. Counsel for the applicants Mr Enari in his affidavit sworn on 12 May 2005 said that some years ago, he was instructed by the first applicant to act for F P Architects Ltd in connection with a claim by the respondent against the first and second applicants. As he did not know that F P Architects Ltd was a limited company, he thought that he was acting for the first applicant personally. I must say here that it appears from the affidavit evidence that when proceedings against the first and second applicants were first issued on 26 October 1992, Mr Puni was acting for the applicants.
26. Counsel for the applicants then said in his affidavit that he acted for F P Architects Ltd and his instructions came from the first applicant to obtain a figure to be paid by F P Architects Ltd to settle the matter between the respondent and the first and second applicants. He then negotiated directly with the respondent and after some time the respondent instructed its counsel in this matter to revive the Court action. Again he contacted the first applicant and he put forward some proposals for settlement on behalf of the first applicant to counsel for the respondents. Counsel for the applicants then said that it was because of his erroneous belief that he was acting for the first applicant personally that he agreed with counsel for the respondent to accept service when the action by the respondent against the first and second applicants was revived in 2004. It is not clear what documents were served on counsel for the applicants because when the proceedings started in 1992 Mr Puni was acting for the applicants. I can only surmise that it was the amended statement of claim filed by counsel for the respondent after she was re-engaged by the respondent in December 2001 that counsel for the applicants was referring to in his affidavit.
27. In a letter dated 23 January 2002 by counsel for the applicants to counsel for the respondent annexed to the affidavit of counsel for the respondent, counsel for the applicants said that he acted for the first and second applicants.

Guarantee

28. It appears from the affidavit evidence that these proceedings originated from a loan by the second applicant from the respondent in 1990. The amount of that loan was for $420,000.00. As one of the securities for the said loan, the two directors of the second applicant executed a joint guarantee dated 19 October 1990. So the two directors were co-guarantors for the second applicant’s loan. One of those two directors was the first applicant. For some unexplained reason, there was no loan agreement in writing executed between the respondent as lender and the second applicant as borrower. What appears from the evidence was a loan offer made by the respondent to the second applicant for the amount of $420,000. Interest on the loan was to be 14% per annum reducible to 12% per annum upon prompt payment. That loan offer must have been accepted by the second applicant otherwise the loan would not have been disbursed to it.
29. I infer from the affidavit evidence that in the action by the respondent against the applicants, the cause of action against the second applicant must have been for breach of the loan agreement because of the default by the second applicant on the repayment of its loan and that the cause of action against the first applicant was based on his personal guarantee. The cause of action against the first applicant could not have been for breach of the loan agreement because he was not the borrower but only a guarantor.
30. Clause 6 of the guarantee provides:
    • “THIS guarantee shall be security for the whole of the moneys hereby guaranteed but so nevertheless that the guarantors shall not be liable either jointly or severally by reason of this guarantee to pay the Fund more than the total sum of FOUR HUNDRED AND TWENTY THOUSAND TALA ($420,000.00) plus a sum equal to one year’s interest on that amount and plus the costs and expenses incurred by the Fund in enforcing and obtaining payment hereunder AND FURTHER payment of such liability shall be in accordance with the terms and in the manner stipulated by the Fund in its letter of approval of loan dated the 11th day of October 1990.
31. It would appear from clause 6 of the guarantee that the liability of the first applicant as a co-guarantor was limited to the sum of $420,000 plus one year’s interest on that amount and the costs and expenses incurred by the respondent in enforcing and obtaining payment. This was the maximum of each of the two co-guarantor’s liability under the guarantee. The first applicant therefore could not be liable for $1,333.010.18 which was the amount of the consent judgment unless that amount included one year’s interest as aforesaid plus the costs and expenses incurred by the respondent in enforcing and obtaining payment. But obviously all of that could not have added up to $1,333.010.18.
32. I called a meeting for the lawyer for the respondent and the first applicant at 9:30am on Thursday 18 May 2017. Only the current lawyer Ms Lafaialii- Koria for the respondent appeared but not the first applicant whose family advised that he is overseas. As it was the respondent’s lawyer that I had really wanted to see about the personal guarantee given by the first applicant and a co-guarantor which appears not to have been raised as an issue when consent judgment was entered on 6 May 2004, I asked the respondent’s lawyer about the guarantee. As the respondent’s lawyer did not have the guarantee with her because she was not aware I was going to raise this issue with her, she asked for time to check out the guarantee. The following day she sent in a memorandum noting that the guarantee was limited to $420,000.

Limitation Act 1975

33. The first applicant in his affidavit of 12 May 2005 said that if the Court documents relating to the respondent’s proceedings had been served on him personally, he would have instructed different counsel to act for him and to file a motion to strike out the proceedings on the ground that they were statute barred. As earlier mentioned, counsel for the respondent said in her written submissions and affidavit of 8 March 2005 that the proceedings against the first and second defendants were issued on 26 October 1992 and the first applicant may have forgotten service of the proceedings on him because of the passage of time.

Summary and discussion of evidence

34. In 1990 the second applicant obtained a loan of $420,000 from the respondent. On 19 October 1990, the two directors of the second applicant executed a personal joint guarantee for the loan by the second applicant. One of the two co-guarantors was the first applicant. On 12 June 1994, the second applicant was wound up on the petition of another creditor.
35. The second respondent must have then defaulted on its loan and the respondent issued proceedings on 26 October 1992 against the first and second applicants for that default. The cause of action against the second applicant must have been based on its default on the loan agreement and the cause of action against the first applicant must have been based on the guarantee. The liability of the guarantors was limited to $420,000 plus one year’s interest on that amount and the costs and expenses incurred by the respondent in enforcing and obtaining payments.
36. The respondent’s action was then set for hearing in August 1995 before an overseas Judge but that hearing did not proceed due to approaches for settlement from counsel for the applicants. Then from 1996 to November 2001 counsel for the respondent had no further involvement in this matter. On 14 November 2002, counsel for the respondent was advised by the registrar that a date of hearing had to await an overseas Judge. Eventually, the action was set down for hearing on 6 May 2004 before an overseas Judge.
37. On 6 May 2004 after discussions between counsel for the respondent, the respondent’s manager, counsel for the applicants, and the first applicant, counsel for the respondent and the respondent’s manger legal agreed to the proposal from counsel for the applicants and the first applicant for judgment to be entered in favour of the respondent in the sum of $1,333,010.18 which was the amount in the summons and statement of claim. This was much less than the amount of over $2.2 million that the respondent was going to claim for the balance of the loan plus accrued interest to date if the matter had proceeded to a hearing. Judgment was accordingly entered by consent in the sum of $1,333,010.18 in favour of the respondent against the applicants.
38. Subsequently, the first applicant filed three motions all dated 11 February 2005 seeking separate orders: (a) an order to set aside part of the consent judgment entered on 6 May 2004, (b) an order to stay execution of the consent judgment, and (c) an order granting leave to file a notice of appeal out of time. In support of his motions, the first applicant claimed in his affidavit of 11 February 2005 that simple interest instead of compound should have been charged by the respondent and that the respondent had not taken into account the five year amnesty granted by the Government in 1996 after cyclone Val in 1991 on interest on agricultural loans. The first applicant also queried whether the second applicant could be liable pursuant to the consent judgment in 2004 when it had been wound up in 1994. The first applicant also claimed in his affidavit of 12 May 2005 that as he understood matters, counsel who appeared for the applicants on 6 May 2004 was acting only for the second applicant and not for himself as he had not been served personally with a summons, statement of claim or any other Court documents. If he had known that he could be personally liable he would have instructed a different lawyer to act for him.
39. Counsel who appeared for the applicants said in his affidavit of 12 May 2005 that he was under the erroneous belief that he was acting for both the second applicant and the first applicant personally and for that reason he had agreed to accept service of Court documents for both applicants when the action by the respondent against the first and second applicants was revived in 2004. This cannot be correct because the respondent issued proceedings against both applicants on 26 October 1992. At that time, it was Mr Puni and not Mr Enari who was acting for the first and second applicant. Even though it appears that counsel for the respondent filed an amended statement of claim after she was re-engaged by the respondent in December 2001, the proceedings by the respondent against the applicants were issued on 26 October 1992. It appears that counsel for the applicants was under this erroneous belief because some years earlier the first applicant had instructed him to find out the amount to be paid by his company F P Architecture Ltd to settle the matter between the respondent and the first and second applicants. It seems counsel is saying here that there was a misunderstanding between him and the first applicant. To him, the first applicant came on his own behalf to see him but to the first applicant he went to see counsel on behalf of his company F P Architects. This is rather confusing.
40. In respect of the first applicant’s claim about compound interest being charged by the respondent, it is clear that the loan of $420,000 by the first applicant was seriously in arrears. Even though there was no loan agreement in writing, the respondent’s loan offer must have been accepted by the second applicant otherwise the loan would not have been disbursed to it. The loan offer shows that the interest payable on the loan was 14% per annum reducible to 12% per annum on prompt payment. The affidavit sworn on 12 May 2005 by an accountant for the applicants shows that interest on the loan by the second applicant was charged at 12% per annum in the years 1990 and 1991. Then from the year 1992 to 2000, interest was charged at 14% per annum. This suggests that there was prompt repayment of the loan in 1990 and 1991. Then from 1992 to 2000, either no repayments were made or repayments were slow and not up to date. The first applicant therefore has no good reason to complain if the higher interest rate of 14% per annum (which he refers to as “compound interest”) was charged by the respondent from 1992 to 2000 for that was the interest rate the parties to the loan had agreed to unless there was prompt payment. I therefore reject this part of the first applicant’s complaint that the second applicant was charged with “compound interest” when it should have been charged with simple interest.
41. In respect of the complaint by the first applicant that the respondent had not taken into account the 5 year amnesty granted by the Government in 1996 after cyclone Val in 1991 on interest on agricultural loans, I accept the evidence by the respondent’s general manager that that 5 year amnesty applied only to interest on agricultural loans granted by the Development Bank of Samoa and not to interest on loans granted by the respondent. This part of the first applicant’s complaint is also rejected.
42. In respect of the complaint by the first applicant that he has effectively been made personally responsible to pay for the full amount of the consent judgment, it is clear from his personal guarantee that the first applicant’s liability was limited to the maximum of $420,000 plus one year’s interest on that amount and the costs and expenses incurred by the respondent incurred by the respondent in enforcing and obtaining payment.
43. In relation to the first applicant’s complaint that the respondent’s action was out of time and therefore statute barred, it is clear from the submissions in writing of counsel for the respondent and her affidavit of 8 March 2005 that the respondent’s proceedings against the applicants were issued on 26 October 1992. Counsel for the respondent also said that the first applicant may have forgotten service of the proceedings on him due to the passage of time. That being so, the respondent’s action was commenced well within the six years limitation period for an action for breach of contract to be brought.
44. There is evidence that counsel for the respondent ceased involvement in this matter from 1996 to November 2001. She was re-engaged as counsel for the respondent in December 2001. Subsequently, she filed an amendment statement of claim. It does not appear from the evidence what this amendment was for. On 14 November 2002, counsel for the respondent was advised by the registrar that the respondent’s action against the first and second applicants would have to await another Judge from overseas. This suggests that the amended statement of claim was filed sometime prior to 14 November 2002.
45. The query by the first applicant whether the second applicant could be made liable pursuant to the consent judgment in 2004 even though it was wound up in 1994 is not the subject of any of the three motions filed by the first applicant. There was also no motion by the second applicant regarding that issue. The Court is restricted to the motions that have been filed.
46. In relation to the complaint by the first applicant that he was not being represented by counsel at the proceedings on 26 May 2004, I regret to say that I find it very difficult to accept the evidence by the first applicant. Counsel for the applicants also said that he was under the erroneous belief that he was acting for the first applicant and not just the second applicant. With respect, I also find it difficult to accept that counsel for the applicants who was served with the Court documents did not at any time inform the first applicant that the action by the respondent was against both the first and second applicants prior to consent judgment being entered. It is also to be remembered that the respondent’s proceedings against the first and second applicants were issued on 26 October 1992 when both applicants were represented by Mr Puni. I cannot believe that from 1992 to 6 May 2004 when consent judgment was entered the first applicant who is a qualified architect and experienced businessman did not, at any time, become aware that he was a party to those proceedings. In any event, there is nothing to suggest that counsel for the respondent or the respondent’s manager legal was aware of the alleged mistakes by both the first applicant and counsel for the applicants.

The issues

(a) First issue: motion to set aside part of the consent judgment

47. These must be the first proceedings in Samoa which involve a motion to set aside a consent judgment. It is therefore important to understand the approach taken by the Courts in the developed common law jurisdictions to such a motion. It is also important to know when reading the relevant case law that the approach which has been adopted by the English and Australian Courts to a motion to set aside a consent judgment or order is somewhat different from the approach which has been adopted by the New Zealand Courts.
48. In England, the approach to setting aside a consent judgment or order is stated in 4 Halsbury’s Laws of England vol 3, para 521 as follows:
    • “[A] consent order or compromise may be set aside on a ground which would invalidate any other agreement between the parties including mistake, illegality, duress or misrepresentation”.
49. In 4 Halsbury’s Laws of England vol 26, para 562, it is there stated:
    • “A judgment given or an order made by consent may be set aside in a fresh action brought for the purpose on any ground which would invalidate a compromise not contained in a judgment or order. Compromises have been set aside on the ground that the agreement was illegal as against public policy, or was obtained by fraud or misrepresentation, or non-disclosure of a material fact where there was an obligation to disclose, or by duress, or was concluded under a mutual mistake of fact, ignorance of a material fact, or without authority”
50. In an often cited dictum by Lindley LJ in Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] UKLawRpCh 64; [1895] 2 Ch 273, 280, His Lordship said:
    • “... nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud but upon any grounds which invalidate the agreement it expresses in a more formal way than usual... To my mind the only question is whether the agreement on which the consent order was based can be invalidated or not. Of course if that agreement cannot be invalidated the consent order is good.”
51. In Australia, the High Court in Harvey v Philips [1956] HCA 27; (1956) 95 CLR 235 at p. 244 cited with approval the above passage from the judgment of Lindley LJ in Huddersfield Banking Co Ltd v Henry Lister & Sons [1895] UKLawRpCh 64; [1895] 2 Ch 273, 280 and also said at pp 243-244:
    • “The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contact void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue, influence, abuse of confidence or the like”.
52. In the Australian case of Harris v Galadine [1991] HCA 9, para 13, the High Court, in relation to impugning a consent order, said:
    • “13. When the parties to a contract choose to have the contract embodied in a consent order of the Court, the Court ‘will only interfere with such an order on the same grounds as it would with any other contract’: per Lord Denning MR in Siebe Gorman Ltd v Pneupac Ltd [1982] 1 WLR 185, at p.189; [1982] 1 A11 ER 377, at p.380. And see Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235, at pp.243, 244; Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] UKLawRpCh 64; [1895] 2 Ch 273, at p.280. The general rule is that once a consent order is perfected, it can be set aside only in a fresh action brought for the purpose (Harvey v Phillips, at p.242, Ainsworth v Wilding [1896] UKLawRpCh 42; [1896] 1 Ch 673, at p.676) unless, perhaps, the parties consent to the setting aside: Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd (1976) 28 FLR 195, at pp 200-201”.
53. As it would appear from the English and Australian authorities, to set aside a consent judgment or order, or a compromise, requires a fresh action to be brought for the purpose. As it will appear shortly from the New Zealand authorities, a fresh action to set aside a consent judgment is not required in New Zealand. The New Zealand approach is also framed in general terms of “what the interests of justice require” in a particular case.
54. The approach now followed by the New Zealand Courts to setting aside a consent judgment or order was stated in Waitemata City Council v MacKenzie [1988] NZCA 142; [1988] 2 NZLR 242, 249, where Casey J who delivered the principal judgment in the Court of Appeal said:
    • “I am disposed to accept that the Court... does have inherent jurisdiction to set aside a sealed consent order obtained without authority or as a result of a mistake if the interests of justice require it”.
55. More recently in Rangitukuma v Koning [2015] NZCA 24, para 13, Ellen France P in delivering the judgment of the New Zealand Court of Appeal said:
    • “[13] It is well settled that consent orders may be set aside where there is good ground for doing so. This Court made that point in Auckland Regional Services Trust v Lark [1994] 2 ERNZ 135, 139, noting that the High Court has an inherent jurisdiction to set aside a consent order ‘if the interests of justice require it but good ground must be established to warrant that course’. The Court in that case cited a number of other cases including Waitemata City Council v MacKenzie [1988] NZCA 142; [1988] 2 NZLR 242. In the Waitemata City Council case, Casey J stated at p.249 that the Court had an ‘inherent jurisdiction to set aside a sealed consent order obtained without authority or as a result of a mistake if the interests of justice require it’”
56. In King David Investments Ltd v Zhang [2016] NZCA 421, paras [28] to [30], Randerson J, in delivering the reasons for judgment of the New Zealand Court of Appeal, said:
    • “[28] The High Court has an inherent jurisdiction to set aside orders made by consent. The key is whether the interests of justice require the order to be set aside: Waitemata City Council v MacKenzie [1988] NZCA 142; [1988] 2 NZLR 242, 249.
    • ‘[29] Applications to set aside consent orders should not be granted except in cases which clearly require the setting aside of the order. Such circumstances may arise where there is no doubt a party’s lawyer has acted contrary to the party’s express instructions when negotiating the consent order. Such cases are, however, rare and are not to be confused with situations where a lawyer, in the presence of his or her client, advises the Court and the other party that he or she is authorised to agree to the terms of settlement. The jurisdiction may be exercised on grounds akin to the principles governing the setting aside of a contract. Thus a unilateral mistake which is not known or appreciated by the other party may provide a basis to consider setting aside a consent order.
    • “[30] The factors which might render it necessary in the interests of justice to set aside a consent order made in error include:

“(1) the gravity of the error made;

“(2) whether the error was appreciated at the time by the other party;
“(3) the prejudice caused by the error;
“(4) the delay in applying for relief;
“(5) the extent to which the consent order has been relied on;

• “(6) whether it is possible to restore the parties to the position they were before the consent order was made; and
• “(7) the effect of setting aside the order on innocent third parties”.

57. After due consideration, I have decided to adopt the New Zealand approach to setting aside a consent judgment or order. The governing consideration is what the interests of justice require in a particular case. The jurisdiction to set aside a consent judgment or order is inherent. Such jurisdiction may be exercised on grounds akin to the principles governing the setting aside of a contract as shown from the English and Australian authorities. The factors which might render it necessary in the interests of justice to set aside a consent judgment or order are set out in King David Investments Ltd v Zhang [2016] NZCA 421, para [30].
58. Applying the New Zealand approach to the circumstances of this case, it is clear that counsel for the first and second applicants as well as the first applicant were mistaken as to the extent of the first applicant’s liability. They seem to have overlooked the fact that the first applicant was not the borrower of the loan from the respondent but only a guarantor of that loan. As a guarantor, counsel for the applicants and the first applicant should have referred to the guarantee for the extent of the first applicant’s liability. If they had done so, it would have been seen that the first applicant’s liability as guarantor was limited to $420,000 plus twelve months interest on that amount together with costs and expenses incurred by the respondent recovering. On the other hand, it is not clear whether counsel for the respondent was aware of the extent of the first applicant’s liability under the guarantee and the mistake by counsel for the applicants and the first applicant. I presume she was not as there is nothing to suggest that she was aware. However, as a result of the mistake, the first respondent is liable for $1,333, 010.18 under the consent judgment that was entered. That amount is about three times more than the amount for which the first applicant should have been liable under the guarantee. There was no undue delay on the part of the first applicant in filing his motion to set aside and there was no evidence that the interests of any innocent third party will be prejudiced if the consent judgment is set aside. Overall, I am of the view that the interests of justice require that the consent judgment should be set aside in so far as it applies to the first applicant. The consent judgment still remains in respect of the second applicant.
59. I have, however, not overlooked the query raised by the first applicant in his affidavit of 12 May 2005 in relation to the second respondent having been wound up in 1994. Even though this query is not the subject of any of the three motions filed by the first applicant, it may be relevant to the issue of the first applicant’s liability under the guarantee. The issue is whether the winding up of the second applicant as borrower of the loan discharged the first applicant from liability under the guarantee.
60. In the Australian case of McDonald v Dennys Lascellas Ltd [1933] HCA 25; (1933) 48 CLR 457, the High Court of Australia was concerned with an appeal where the appellants entered into a contract of guarantee with the respondents, who were the directors of a company, to secure payment of a sum of money by the company to the appellants. The company failed to pay the sum of money and the appellants brought an action against the respondents as guarantors. At p.471, Starke J said:
    • “I now turn to the guarantee... A surety, however, is not liable on his guarantee where the principal debt cannot be enforced, because the essence of the obligation is that there is an enforceable obligation of a principal debtor (De Colyar on Guarantees, 3rd ed (1897), p.210. A surety is discharged where the principal debtor is released without his (the surety’s) consent. Again, where the principal is entitled to a set-off against the creditor’s demand, arising out of the same transaction as the debt guaranteed and in fact reducing the debt, the surety is entitled to plead it in an action by the creditor against the surety alone (Bechervaise v Lumis (1872) LR CP 372). But the generality of the rule is subject to some modifications. A release in bankruptcy does not discharge a surety for that is the act of the law. (Ex parte Jacobs; In re Jacobs (1875) LR 10 Ch 211; In re London Chartered Bank of Australia [1893] UKLawRpCh 115; (1893) 3 Ch 540...” (emphasis mine).
61. At pp 479 – 480, Dixon J said:
    • “The second question remains, namely, whether the cesser of the sub-purchasers liability for the instalment of £1,000 operates to discharge the sureties. Their liability had, like that of the sub-purchasers, become immediately enforceable, and it is said that it could not be discharged by a failure of the obligation guaranteed. The consequences of the dissolution of the principal obligation are described in Pothier on Obligations, Evans translation (1806), vol.1, p.235 as follows:- ‘It results from the definition of a surety’s engagement, as being accessory to a principal obligation, that the extinction of the principal obligation necessarily induces that of the surety; it being of the nature of an accessory obligation, that is cannot exist without its principal; therefore, whenever the principal is discharged, in whatever manner it may be, not only by actual payment or a compensation, but also by a release, the surety is discharged likewise; for the essence of the obligation being, that the surety is only obliged on behalf of a principal debtor, he therefore is no longer obliged, when there is no longer any principal debtor for whom he is obliged’. In the civil law this general proposition is subject to qualifications and exceptions, but it formulates a leading principle. As a general principle, subject to similar qualifications and exceptions, it appears to be well recognised in English law, although it is evidenced by decisions giving it particular applications and by dicta rather than by formal pronunciations (Lakeman v Mountstephen [1874] UKLawRpHL 4; (1874) LR 7 HL 17, per Lord Selborne, at p.24; Bechervaise v Lewis [1872] UKLawRpCP 22; (1872) LR 7 CP 372, per Willis J, at pp.377, 378; Finch v Jukes (1877) WN211, per Hall VC; Mortgage Insurance Corporation v Pound (1894) LJQB, per Wright J, at p.24; Stacy v Hill [1901] UKLawRpKQB 40; (1901) 1 QB 660, per Collins LJ, at p.666; and Morris & Sons Ltd v Jeffreys (1932) 148 LT 56, per Swift J, at p.58. It does not extend to a discharge of the principal debtor’s personal liability by operation of law when the discharge is for the purpose of liquidating his affairs or transforming the rights of the creditor against him into rights against or in respect of his assets”. The doctrine should be understood to look rather to the continuance of a just claim in the creditor to receive payment in respect of the principal debtor’s obligation than to the latter’s relief from actual personal liability”. (emphasis mine)
62. In the Australian text The Modern Contract of Guarantee (1992) 2nd ed. by Phillips and O’Donovan which is the latest edition of that work available to me, the learned authors stated at p.264:
    • “Section 153 (4) of the Bankruptcy Act 1966 (6th) expressly provides that the discharge of a bankrupt does not affect the liability of any person who, at the date on which the bankrupt becomes a bankrupt, was ‘surety or in the nature of a surety for the bankrupt’. The reference to ‘in the nature of a surety’ was held in Bank of New Zealand v Baker [1926] NZLR 462 to encompass the situation in which there is no promise to be personally liable for the debt of another, but the ‘guarantor’ simply provides security – in that case a mortgage of real property – for the loan made to the debtor.
    • “The judicial explanation of why a discharge in bankruptcy does not operate to discharge the guarantor is that, although the discharge extinguishes the personal obligation of the principal to pay, the obligation continues to exist as a source of right to obtain payment out of certain assets of the debtor which were acquired or which devolved upon him prior to his discharge. The practical reason is that to release a guarantor in this situation would be to defeat the very purpose for which the guarantee was taken – the possible insolvency of the principal. These considerations mean also that a company liquidation does not release the guarantor. This is the case even with dissolution because, although the company as a corporate entity ceases to exist, the obligation to pay can still be regarded as subsisting as a source of right to obtain payment from assets acquired before dissolution.
    • “The general principle regarding discharge in bankruptcy or liquidation is subject to the effect of particular provisions either in the principal contract or the guarantee.”
63. In the New Zealand case of Bank of New Zealand v Baker [1926] NZLR 462, a guarantor, who was the respondent, gave a mortgage over land to the bank which was the appellant, to secure the indebtedness of one Mr Smith to the bank. The majority of the Court of Appeal held that the bankruptcy of Mr Smith did not exonerate him from his indebtedness to the bank so that the respondent as guarantor was not released from his liability to the bank. On this point Herdman J who was in the minority agreed with the majority when he said:
    • “I likewise agree that the fact that the principal debtor, Smith, became bankrupt did not in itself exonerate the respondent’s property from liability for answering for Smith’s indebtedness to the bank when it was demanded of him”
64. From the above authorities, I have come to the view that on the material before me the winding up of the second applicant did not discharge the first applicant from his liability under the guarantee.

(b) Second issue: motion to stay execution of the consent judgment

65. Since I have decided that the first applicant’s liability should be limited to his liability under the guarantee, that means the first applicant should not be liable for anything more than what he had guaranteed. The effect of this is to grant the motion by the first applicant to set aside part of the consent judgment so that he is only liable in terms of the guarantee. In monetary terms, the liability of the first applicant would have to be ascertained in terms of the guarantee. In the circumstances, it would not be appropriate to stay execution of the consent judgment. It is also to be noted that there was no motion by the second applicant to se aside or stay the execution of the consent judgment so that the consent judgment in so far as it relates to the second applicant remains.

(c) Third issue: motion to file a notice of appeal out of time

66. As I have granted the first applicant’s motion to set aside part of the consent judgment in so far as it relates to him, there is in effect nothing to appeal against. It is therefore not appropriate to grant leave to appeal out of time.

Additional comments

67. This has been a longstanding matter and I have had to do a lot of research on it (on top of all my other work) as I have done in most of the civil cases that have come before my Court over these many years. I hope the parties will now calculate the quantum of the first applicant’s liability in terms of the guarantee. When that is done, they may come back for a consent judgment on that amount if they wish.

Conclusions

68. The consent judgment of 6 May 2004, in so far as it relates to the first applicant, is set aside in part as the liability of the first applicant as guarantor is limited under the guarantee to the sum of $420,000 plus one year’s interest on that amount and the costs and expenses incurred by the respondent in enforcing and obtaining payment.
69. The motion to stay execution of the consent judgment is denied.
70. The motion for leave to appeal out of time is also denied.
71. Each party to bear his/its own costs.
72. This matter will be re-mentioned on 8 June 2017 at 9:30am for the parties to advise whether they have reached agreement on the first applicant’s liability.

CHIEF JUSTICE