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Cawley v Sabumei, Sabumei and Numuni Hotels Pty Ltd [1990] PGNC 64; N922 (9 November 1990)

Unreported National Court Decisions

N922

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS 588/89
BETWEEN: MICHAEL CAWLEY
PLAINTIFF
AND: BENAIS SABUMEI
FIRST DEFENDANT
AND: LORNA SABUMEI
SECOND DEFENDANT
AND: NUMUNI HOTELS PTY LTD
THIRD DEFENDANT

Waigani

Jalina J
21 September 1990
9 November 1990

PRACTICE - Application to set aside judgment by default - Judgment for damages to be assessed - No irregularity in obtaining judgment - Defendant having good defence on the merits - Reasons for Defendant’s failure and grounds of defence on the merits not in affidavit in support of application to set aside - Application refused - National Court Rules O.12 r.8

Cases Cited

Barker v The Government of PNG and Bux [1976] PNGLR 340.

Geroge Page Pty. Ltd v Malipu Bus Balakau [1982] PNGLR 140.

Green and Co. Pty. Ltd. v Green [1976] PNGLR 73.

The Government of PNG and Davis v Barker [1977] PNGLR 386.

APPLICATION TO SET ASIDE JUDGMENT

This was an application on notice seeking to set aside a judgment entered in default of pleadings.

Counsel

P Payne, for Applicant/Third Defendant.

I Shepherd, for the Respondent/Plaintiff.

Cur adv vult

9 November 1990

JALINA J: Th an application under O er O 12, r 8 (3)(a) of the National Court Rules to set aside a default judgment entered on 23 February, 1990. Judgment was for damages tassessed.

BACKGROUND

On 29 June 1989 T989 The Plaintiff filed an amended Writ of Summons Claiming among other things, damages for breach of contract. Since the present application involves the issue as to whether or not the Third Defendant has a good defence “on the merits” I will set out the statement of claim in full.

STATEMENT OF CLAIM

1. ; The firdt anonsecond defendefendants are the directors of the third defendant.

2. & The third deftndant is a cs a company incorporated according to the Companies Act and entitled to be sued in the name citp>

4. &##160; By a Memorandum of m of Understanding made between the plaintiff and the first and second defendants, the plaintiff agreed to manage the hotel owned by the 3rd defendant known as Lantern Lodge and situated at Allotment 46, Section 33, Town of Goroka in the Eastern Highlands Province for a period of two (2) years from 9 November 1987 and, at the expiration thereof, the defendants agreed to grant the plaintiff an option to purchase the said hotel for Five Hundred Thousand Kina (K500,000.00).

5. ټ&#P60; tior to the the expiration of the term of the said Memorandum of Understanding, the Plaintiff and the first and second defendants agreed to enter into a contract for sale and purchase of the shares in the third defendant for Six Hundred Thousand Kina (K600,000.00).

6. ټ&##160; T60; The saie said Memorandum of Understanding to manage the hotel was contained in writing and was dated 9th November 1987.

7. & The said cct lo sale and pand purchasrchase of e of the shares in the third defendant was partly oral, partly in writing and partly by conduct. In so fart was, theract ade aious interviews whis which occh occurrecurred on d on the fthe following dates:

(a) ـ On or a or about 24 February 1988 at Lantern Lodge in Goroka between Michael David Cawley, Isikeli Tami and their legal representative, Mr Ross H of W Shanson and Associates of Mount Hagen, the the first and second defendants, and thei their legr legal representative, Mr Bernard Avery of Messrs Avery & Sawong of Lae.

(b) ;&#16 17 August gust 1988 a988 at the Islander Hotel, Port Moresby between Michael David Cawley and the first defendant.

In so far as it was in writing, the said agreement was containedr is infefrom thom the fole followinlowing documents or some or one of them:

(a) ـ Contrac for Sale oale of Shares in the third defendant, a copy of which was facsimiled from Messrs Warner Shand Wilson and Associates of Mount Hagen to Messery &Sawon8th April 1988.

(b) &#160 &#160 Lett Letter to Messrs &amy & Sawong to Messrs Warner Shand Wilson and Associates dated 15 April 1988.

(c) Letter Messrs Warner Shand Wilson and Associates to Messrs Avamp; g dated 27 May 19ay 1988.

(d) ҈ r ttesrsessrs WarneWarner Shand, Lae to Messrs Warner Shand Mount dateAugus8.

(e)&#16) &<  Letter M ssrserarnand, Lae, Lae to Messrs Warner Shand, Mount Hagen dated 18 August 1988 and redrafontract for Sale of Shares in third defendant of same date.

(f) &##10;& Le0; Letter Mter Messrs Warner Shand, Lae to Messrs Warner Shand, Mount Hagen dated 22 August 1988.

(g) ҈ r ttesrsessrs WarneWarner Shand, Mount Hagenessrser ShLae date dated 30ed 30 August 1988.

(h) &160; Letter MessrneWarhan S Lae, Lae to Messrs Warner ShMountn dat Septemeptember 1ber 1988.<988.

(i) &##160;; L60ter tter Messrsessrs Warner Shand, Lae to Messrs Warner Shandnt Haated ptember 1988.

(

(j)&#1j) ـ Letter sessrs WarneWarner Shand, Lae to Messrs Warner Shand, Mount Hagen dated 31 October 1988.

(k) Letter MessrseWarnan ShMou, Mount Hagen to Messrs Warner Shand, Lae dated 10 November 1988.

(l) ټ&#S60; fuch further ther documents or letters that may be advised following discovery herein.

In so far as it was by ct, thduct sted of or is to be inferred from the following:

(i) &#160 &#160 &#160 At all mat times the firstfirst and second defendants well knew that the plaintiff had, since entering into possession of the said hotel in November 1expenarge ts of money on renovations and improvements over and aand above bove the Kthe K30,000.00 referred to in the said Memorandum of Understanding dated 9 November 1987 which clearly signified the plaintiff’s intention to complete the contract and the defendants, by acquiescing in the said expenditure thereby indicated that they were aware of the plaintiff’s intention to complete the said contract.

(ii) ـ&#1urtherrther, the the first and second defendants had full knowledge of the final terms of the Contract for Sale of Shares and were fully aware that 17 November 1988 was the settlement date that had been agreed to by all parties and their legal representatives as was confirmed in a letter from the first and second defendants’ lawyers to the plaintiff’s lawyers dated 31 October 1988.

8. &##160;; I60; In brea breach of both the Contract for Sale of Shares and the said Memorandum of Understanding, the defendants unlawfully terminated the said contract and memorandum on 8 Nor 198>

60; ; Th0 plaintiff, iff, as heas he was entitled to do so, accepted the said termination and duly removed his furniture and fittings from the said hotel and duly vacated same.

10. By r of nhe matters aforesforesaid the plaintiff has lost the benefit of the said Contract for Sale of Shares and Memorandum of Understanding and has lost revenue hld otse haceivereunder and has lost the bene benefit afit and prnd propertoperty in the improvements and renovations effected by him and has suffered loss and damage.

Particulars

(i) ټ&##160; R60; Revenuevenue as manager of the Lantern Lodge Hotel from 8 November 1988 to 8 November 1989.

(ii) &&#160dingaProfiProfit from from the ownership of the s in td defendant from from 8 Nov8 November 1988.

(iii) Cosrenovations and improveprovements including archi fees

(160; < &#16ounts ants advanced to d to the first and second defendants as advances on the purchase price for the s in tird dant.

ANDD the plaintiff claims:

1. & 160; An acAn nccount of alof all profits received by the third defendant since 8 November 1988.

2. ҈ A60; An order for tye pa bent by the third defento thintifthe amount found ound to beto be due due to him on the taking of such accounts and damages for loss of profits, both past and future.

3.ټ&##160;; #160; Dama Damages fges for wrongful termination of both the Contract for Sale of Shares and Memorandum of Understanding.

4. &#R60; d funK12f 00.05 by t by the first and second defendants being the amount advanced to the first and second defendants as part payment of the purchase price for the shares in the third defendant.

5. ҈ A60; An order for tpe apmeintment of a valuer to determine the value of the improvements and renovations made to the said hotel.

60;҈&ـ The amount determined by t by the said valuer as part of his damagesmages here herein plin plus the amounts expended by the plaintiff on architects fees and related costs.

7. &ـ F60; Furtherrther and other relief.

8. &##160;; I60eresterest on d on damages.”

The Writ of Summons was served by sending a sealed copy to thlicanrd Dent’s regid address on 3 July 1989. Not. Notice of Intention to Defend was filed iled by thby the Appe Applicant/Third Defendant’s lawyers on 2 August, 1989. A copy of such Notice was sent to the Plaintiff’s lawyer.

On 3 January 1990 the Plaintiff’s lawyers, after conducting a search at the National Court Registry and discovering that Defence had not been filed by the Third Defendant wrote to the Third Defendant’s lawyers giving notice of their intention to enter summary judgment against the Third Defendant if defence was not filed by the close of business the next day; 4 January, 1990. It was also pointed out that the Third Defendant was four (4) months overdue in filing its defence.

On 9 January, 1990 the Third Defendant’s lawyers wrote to the Plaintiff’s lawyers pointing out that because the court was on vacation, time did not run against their client pursuant to O 2, r 3 (iii) of the National Court Rules and that the Defence would be delivered prior to the expiration of the vacation. For convenience I set out O 2, r 3.

“3. tioca/p>

(i) ҈ Th0; There shall be ation tion in each year from the twentieth day of December to the following thirty-firstof Ja, botlusiv>

#160;; Any JudgeJmay may may siay sit isit in vacation for another and may in vacn vacationation exercise any authority which any othdge mexercf he were present and sitting in Court.

(iii) The The time oime of the the vacation shall not be reckoned in the times appointed or allowed by these Rules for filing, delivering or amending any pleading unless so directed by a Jnor sa ple be delivereivered or d or amendamended, nor judgment be entered in default, unless under the direction of a Judge.”

On 22 February 1990 a further search was carried out by the Plaintiff’s lawyers and further discovering that defence had not been filed by or on behalf of the Applicant/Third Defendant proceeded to and in fact obtained judgment on 23 February 1990 in default of defence as has been pointed out above. This, it must be noted, was almost one (1) month after the expiration of the period of court vacation referred to in O 2, r 3 (i) of the National Court Rules. However, in view of Mr Payne having conceded that the default judgment was obtained in accordance with the National Court Rules it appears to me that he no longer wishes to rely on an argument based on O 2, r 3 (iii). This course of action by Mr Payne appears to me to be a sensible one as he no doubt realised that an argument based on O 2, r 3 (iii) could not possibly succeed in the face of almost five (5) months delay between 2 August 1989 when Notice of Intention to Defend was filed on behalf of the Applicant/Third Defendant and 23 February, 1990 when default judgment was entered on behalf of the Respondent/Plaintiff against the Applicant/Third Defendant.

It is well established in this jurisdiction that in order for this Court to exercise its discretion in favour of the applicant, the applicant must establish why the default judgment, regularly entered, ought to be set aside. To do that the applicant must, by affidavit evidence advance a reasonable explanation as to why judgment was allowed to go by default, an explanation why there is a delay (if there was a delay) in bringing the application (or otherwise show that the application was made promptly) and material adverting to a defence on the merits of the application. See Green and Co.Pty.Ltd. v Green [1976] PNGLR 73, Barker v The Government of Papua New Guinea and Bux [1976] PNGLR 340, The Government of Papua New Guinea and Davis v Barker [1977] PNGLR 386, George Page Pty. Ltd v Malipu Bus Balakau [1982] PNGLR 140.

Mr Payne advances two arguments in favour of his client’s application. The first argument is based on the converse of the argument based on delay in applying for a default judgment, regularly entered, to be set aside. He says that because the Respondent has failed to serve a copy or notify the Applicant of the judgment coupled with its failure to have damages assessed, the Respondent would not be prejudiced in any way except as to costs which the Applicant was prepared to accept.

Although not raised by Mr Payne, the Respondent has not given any reason for its failure to serve a copy or notifying the Applicant or its lawyers of the judgment.

While I agree that the Respondent/Plaintiff has neither served a copy nor notified the Applicant/Third Defendant of the judgment and has further failed to take steps to have damages assessed, I do not consider it reasonable to say that that the Respondent would not be prejudiced in the circumstances of this particular case where the Applicant has also failed to protect its own interest for a period of almost five months. This is not a case where the Applicant was not represented. In fact it was represented by Blake Dawson Waldron, a reputable multinational law firm. Neither the Applicant nor its lawyers have explained why Defence was not filed for almost five months. After having been warned by the Respondent’s lawyers, the Applicant or its lawyers did not take steps to carry out a search at the Registry to ascertain whether or not default judgment had been obtained. In any case in my view whether or not a successful party (in this case the Respondent) in a civil suit enforces a judgment or order is a matter that it alone can decide. If it does not bring the terms of the judgment or order to the notice of the party against whom it is made, it cannot blame that party for failure to comply with it. If the Respondent does not have damages assessed then he takes the risk of not being paid any monies in damages. I therefore cannot accept failure by the Respondent to take steps to have damages assessed as sufficient ground to compel me to exercise my discretion in favour of the Applicant. For me to do so would be to open new grounds for setting aside default judgments, regularly entered, when such a ground is not contemplated by O 12, r 8(3).

The second argument is based on the Applicant’s defence on the merits. Before I consider this aspect however, I note that the Applicant has come to this court with a disadvantage (which has been pointed out above) that it has not, by affidavit evidence, given an explanation as to why judgment was allowed to be entered by default. It has failed to satisfy this court of the second rule of practice in applications of this nature.

Is there a defence on merits shown by affidavit? In support of his application on this ground Mr Payne relies on the affidavit of James Sleight dated 6 September, 1990 where in paragraph 5 Mr Sleight says in general terms that the Third Defendant has a good defence. The rule requiring the applicant to show his defence on the merits is clear. It must be by an affidavit disclosing defence on the merits. Such an affidavit, to be considered as showing a defence on the merits must set out statements of material fact sufficient to satisfy the court that the applicant has a prima facie defence and that it is reasonable that the applicant should be allowed to raise that defence. See Supreme Court decision in The Government of Papua New Guinea and Davis v Barker [1977] PNGLR 386. The applicant has not done so in this case. It has merely filed an affidavit containing a general statement. With respect, that is not good enough in my view. The end result is that in the exercise of my discretion in the circumstances I refuse the application. I order that the Applicant pay the costs of the Respondent of this application.

Lawyer for the Plaintiff (Respondent): Joseph K Pakau Lawyers.

Lawyer for the Third Defendant (Applicant): Blake Dawson Waldron.