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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS No. 86 of 2019 (COMM)
BETWEEN
FLAVALEA LIMITED
Plaintiff
AND:
CHINA RAILWAY CONSTRUCTION ENGINEERING (PNG) LIMITED
Defendant
Waigani: Anis J
2020: 17th March & 24th April
INTERLOCUTORY APPLICATIONS – Application for default judgment – Order 12 Rule 1, 25(b), 27 and 32 of the National Court Rules – Application for leave to file defence out of time – Order 7 Rule 6(2) of the National Court Rules – preliminary issue - service of originating process – whether writ of summons and statement of claim duly served – Companies Act 1997 – section 431 discussed – considering and analyzing evidence – question of whom the Court should believe – affidavit of service of the writ of summons and statement of claim considered
Cases Cited:
Joe Tipaiza v. James Yali (2006) N2971
Joseph Andreas Kauba v. Morris Bais (2011) N4447
Robbie Lyumbrip v. The Electoral Commission of PNG (2019) N7869
Moro Stokes v. Global Constructions Ltd (2008) N3491
James Wata v. Grant R Muddle (2018) N7272
Malcom Culligan v. John Onmga (2018) N7424
Rural Development Ltd v. Kuri (2001) N2099
Provincial Government of North Solomons v. Pacific Srchitecture Pty Ltd [1992] PNGLR 145 at page 148 – 149
Wamp Nga Holdings Ltd v. MMK Transport Ltd (2014) N5664
Rage Augerea v. The Bank South Pacific Ltd (2007) SC869
Counsel:
Mr C Kuira, for the Plaintiff
Mr A Rake, for the Defendant
RULING
24th April, 2020
1. ANIS J: Two (2) applications were argued before me on 17 March 2020. One was by the plaintiff for default judgment and the other was by the defendant for leave to file its defence out of time. I heard and reserved my ruling to a date to be advised.
2. Parties have been notified so I will rule on it now.
BACKGROUND
3. Briefly, the claim is one for enforcement of contract. The plaintiff claims that it signed a referral contract with the defendant on 12 July 2015 (referral contract). It alleges, amongst others, that according to the terms of the contract, the defendant would pay the plaintiff 10% for any work that the plaintiff successfully secures for the defendant. It says one of the work it had secured was in relation to a contract that had been awarded to the defendant by the State, that is, for the construction of the new Waigani Court Complex (the project). The plaintiff claims that it had successfully secured the contract for the project for the defendant, which was worth K427, 174,202.24. It says the defendant has made a part-payment of K420, 000 to it for its service. But it claims that the defendant still owes it a balance of K42, 297,420.22. It is commencing this proceeding to enforce the referral agreement or otherwise seek payment for the outstanding sum which it says is still due and owing under the referral contract.
APPLICATIONS
4. The plaintiff filed an earlier application for default judgment on 16 April 2019. In its subsequent application, which was filed on 24 February 2020, which is before the Court, the plaintiff seeks the following main relief:
......
5. I turn to the defendant. It also filed its first application for leave to file a defence out of time, on 23 December 2019. It later filed the current application on 11 March 2020, which is also now before this Court, seeking similar relief. The main relief sought are, and I quote:
......
PRELIMINARY ISSUES
6. Three (3) preliminary issues were raised. The plaintiff attacks the source relied upon by the defendant in its application. The plaintiff submits that Order 7 Rule 6(2) is an incorrect source to apply for leave to file a defence out of time. Instead, the plaintiff submits Order 1 Rule 15 as the correct source. The plaintiff did not cite any case authorities to make this argument.
7. I find the argument baseless. Order 7 Rule 6(2) is a correct source for one to apply for leave to file a defence out of time. See cases: Joe Tipaiza v. James Yali (2006) N2971, Joseph Andreas Kauba v. Morris Bais (2011) N4447 and Robbie Lyumbrip v. The Electoral Commission of PNG (2019) N7869. There are also case law where the National Court had considered and applied both Order 7 Rule 6 and Order 1 Rule 15, as relevant sources in an application for extension of time to file a defence out of time. See cases: Moro Stokes v. Global Constructions Ltd (2008) N3491, James Wata v. Grant R Muddle (2018) N7272 and Malcom Culligan v. John Onmga (2018) N7424.
8. The next preliminary issue is this. The defendant submits that the plaintiff has also cited an incorrect source, that is, Order 12 Rule 1 in its application for default judgment. The defendant submits that the correct source should be Order 12 Rule 27 of the National Court Rules. The defendant, I note, appeared to have abandoned the argument after I had pointed out to counsel that Order 12 Rule 27 was also pleaded as a source in the plaintiff’s application. I find the argument by the defendant baseless, and I will not spend any more time on that. I dismiss the argument.
9. The third preliminary issue is this. The defendant submits that the writ of summons and statement of claim (the writ), to date, has never been duly served on it. As such, it claims that it cannot be in default of filing its defence. It argues that the plaintiff’s application for default judgment should therefore be dismissed at this juncture. The plaintiff argues otherwise. It submits that service had been duly effected upon the defendant pursuant to section 431 of the Companies Act 1997 (the Companies Act).
10. Let me consider the evidence. The plaintiff filed an affidavit of service of the writ on 27 February 2019. It was deposed to by Carl Kuira (affidavit of service). I note its content. The defendant filed an affidavit in reply on 11 March 2020. It was deposed to by George Atoa, and I also note its content. With these, I ask myself this. Was the writ duly served on the defendant? The best place to begin of course is section 431(1) of the Companies Act. It states, and I quote:
431. Service of documents on companies in legal proceedings.
(1) Notwithstanding the provisions of any other Act, a document, including a writ, summons, notice, or order in any legal proceedings may be served on a company as follows:—
(a) by delivery to a person named as a director or the secretary of the company on the register;
(b) by delivery to an employee of the company at the company's head office or principal place of business;
(c) by leaving it at the company's registered office or address for service;
(d) by posting it to the company's registered office, or address for service, or postal address;
(e) by serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings;
(f) in accordance with an agreement made with the company; or
(g) by serving it at an address for service given in accordance with the rules of the Court having jurisdiction in the proceedings or by such means as 7a solicitor has, in accordance with those rules, stated that the solicitor will accept service.
(2) The methods of service specified in Subsection (1) are the only methods by which a document in legal proceedings may be served on a company in the country.
11. I note that there is no issue regarding the defendant’s address and registered office, that is, as revealed in the plaintiff’s evidence. I refer to annexure A to the affidavit of service which is a company extract of the defendant. It is dated 26 February 2019. It shows the registered address of the defendant as section 57, allotment 5, Magila Street, 6 Mile, NCD, and its postal address as P O Box 5222, Boroko NCD. The defendant, however, disputes service generally and also the person that had allegedly received the document at its registered office as shown in the affidavit of service. The person purportedly served is identified as one Peter Hawas. The defendant claims that no such person was employed by it at the material time. This argument may be true but in my view, irrelevant if one is to prove service under section 431(1) of the Companies Act. Even if I accept the defendant’s argument, it does not prevent service under section 431(1)(c) and (d). Evidence shows that it could also be regarded as served by leaving it at the company's registered office or address for service. And there is also evidence which shows that it was or could have been posted to the defendant’s postal address.
12. To me, these all come down to a situation where I have to decide who I should believe, that is, whose evidence is credible on the question of whether in fact service had been effected in the manner and place as indicated by the plaintiff in its affidavit of service. I say this because the defendant has filed evidence whereby it has strenuously denied ever been duly served with the writ, either through this person Peter Hawas, whom it claims, was not its employee at the material time, or by post to its registered postal address. The defendant tends to also argue in regard to the latter that even if the writ may have been posted, that it was never sent to or received at its postal address because, according to the defendant, it never came to its attention then.
13. But before I decide that in the next sub-below, that is, considering and weighing the evidence, there is a challenge raised by the plaintiff on the defendant’s evidence, namely, to the affidavit of Mr Atoa. The plaintiff argues that paragraphs 6, 10 and 17 of the affidavit of Mr Atoa contain hearsay materials and therefore should be struck-out, or that less or no regard or weight should be given to it. The said paragraphs read, and I quote:
......
......
14. I have considered the arguments. I will say this at the outset. I think a clear distinction has to be made, that is, between a lawyer employed by an external law firm that has been engaged by a party that gives evidence on behalf of his or her client, and an in-house lawyer or an employee of a defendant company who gives evidence on behalf of the defendant or its employer. An employee of a defendant company may include persons such as an in-house lawyer, company secretary, a company accountant, a general manager or a managing director. In regard to the former, the law is clear, which is that lawyers cannot depose to evidence on contested facts or in regard to matters that involve the substantive claim, on behalf their clients. And evidence that is given by such a person (i.e., lawyers) will be regarded or limited to instructions that had been received from their clients. See cases: Rural Development Ltd v. Kuri (2001) N2099, Provincial Government of North Solomons v. Pacific Srchitecture Pty Ltd [1992] PNGLR 145 at page 148 – 149. In regard to the latter (i.e., evidence given on behalf of a company who is party), the deponents may consist of employees, staff or persons who may be regarded as responsible persons of the company. These persons may investigate or collate evidence on behalf of the company or have knowledge or access to information for or on behalf of the company whom they work for. Examples of case authorities with similar views include Wamp Nga Holdings Ltd v. MMK Transport Ltd (2014) N5664, Rural Development Ltd v. Kuri (supra), Provincial Government of North Solomons v. Pacific Srchitecture Pty Ltd (supra), and Rage Augerea v. The Bank South Pacific Ltd (2007) SC869. The Supreme Court in Rage Augera for example stated at paragraph 6 of its judgment, and I quote in part:
In the case of a natural person suing, the affidavit would ordinarily come from himself or herself with the support of any direct and relevant witness. Where a legal person is suing, the affidavit and the relevant evidence would come from a responsible person with the company organization who has the personal knowledge and involvement with regard to the matters pleaded and in issue.
15. Let me now turn to the plaintiff’s argument on point. It submits that Mr Atoa is a lawyer and as such he should not have deposed to these facts; that in so doing, his evidence amounts to hearsay and therefore should be discarded. I, however, decline to accept the argument. Mr Atoa is not an external lawyer engaged by the defendant in the matter. He is the in-house legal officer for the defendant. He is an employee who appears to have personal knowledge of the matter based on his investigations and the files or information that he possess or has custody over as a responsible person, for and on behalf of the defendant in relation to the matter. These are also deposed to in and I refer to his affidavit, and in particular, at paragraphs 1, 2 and 3. He states, and I quote:
16. To me, the said depositions speak for themselves, that is, in regard to Mr Atoa’s position, role and authority within the defendant. And I note that he expressly states that he believes the facts that he deposes in his affidavit, to be true. I therefore do not find Mr Atoa’s depositions at paragraphs 6, 10 and 17 of his affidavit, hearsay evidence. It is therefore available before me for consideration.
17. Let me also say this. Evidence that is given by a defendant company or corporation in an application for leave to file a defence out of time, need not be in full disclosure or detail like evidence that may be relied upon at an actual trial. The minimum test, in my view, should be whether the disclosed evidence by an applicant raises material issues that supports the intended defence of the applicant, that is, it should be sufficient enough to persuade the Court to exercise its discretion and allow the defendant time to file its defence out of time. It is of course not a full hearing. Full disclosure of evidence to support each and every allegation of fact, in my view, may be disclosed but they should not be fully required, demanded or expected until at the trial proper. On that basis, it is also my view that the defendant has met this requirement and that its evidence is sufficiently before the Court for consideration.
FINDINGS ON 3rd PRELIMINARY ARGUMENT
18. I now go back to address the evidence. As stated, it now comes down to the question of whom I should believe. I note that the evidence have not been subject to cross-examination so they have not been tested in open Court. What I have, as a start, is the plaintiff’s evidence. The crucial evidence of course is the affidavit of service. I have considered the evidence at some length and detail. I have also considered Mr Atoa’s affidavit. In my view, I find reasons to believe Mr Atao’s evidence. I find his evidence credible. Let me list the main considerations I noted in his evidence:
(i) The claim by the plaintiff is for more than K42 million. It is a substantial claim made against the defendant. As such, it is hard to believe that the defendant would just sit back and do nothing if it had been duly served with the writ by the plaintiff, whether it be by post, through someone or by leaving it at its registered premises, on 26 February 2019 as allege by the plaintiff. Evidence that corroborates this view, is the defendant’s evidence at paragraphs 4 to 20 of Mr Atoa’s affidavit. I note that as soon as the defendant was made aware of the matter through a third party of 27 September 2019, it took steps to conduct a court file search. After that, Mr Atoa conducted his internal inquiries within the defendant company; he had meetings with current and former employees of the company; and having obtained the relevant information, on 15 November 2019, Mr Atoa briefed out instructions to their lawyers Rake lawyers to take steps to defend the defendant in the matter.
(ii) I give due regard to the defendant’s evidence that it did not employ this person Peter Hawas at the material time. This evidence in my view could only be verified by the defendant. The defendant has expressly stated that its record did not show that Peter Hawas was an employee. I find the evidence credible and I also accept that.
(iii) Let me refer to annexure B to the affidavit of service. It contains a coloured copy of the process service form of Kuira Lawyers. I observe striking similarities in the letters “H”, “W”, “o”, and “M” that had formed part of the purported signature of Peter Hawas. These letters in the signature appear to resemble the other hand-written details in the said form. This observation has created doubts to my mind, that is, as to whether or not it was this Peter Hawas person that had signed the said process service form. With this doubt or uncertainty in my mind, it weakens the plaintiff’s said evidence, and on the other hand, it gives more weight or strengths to the defendant’s evidence and arguments on point.
(iv) The plaintiff’s evidence that it also posted the writ is weaken by my findings generally in relation to the affidavit of service. Again, I uphold the defendant’s evidence that it was never duly served with the writ, and as such, that it had not had the opportunity to file the relevant pleadings to defend itself. I reject the claim and evidence by the plaintiff that it had duly posted a sealed copy of the writ to the defendant, on 26 February 2019. And this. I also note that it is unusual and at the same time wanting in good practice, that the writ was purportedly sent without a covering letter. And I also note that Mr Kuira had to file a separate supplementary affidavit several months later on 1 May 2019, to annex a copy of the writ which he had not attached to in his earlier affidavit of service. As stated, such actions or conduct by the party or its lawyers, create doubts in my mind, thus makes me wonder whether I should believe the plaintiff on the issue of service.
(v) From the plaintiff’s evidence, apart from the alleged service of the writ on 14 February 2019, the plaintiff did not disclose evidence of other dealings or communications that it had had with the defendant before the defendant engaged lawyers to act on its behalf in the matter. When I say communications, I refer to methods such as letters or emails either from its lawyers or by the plaintiff, directly to the defendant. I also notice that the plaintiff filed its first notice of motion for default judgment on 16 April 2019, and has kept it ever since without serving it upon the defendant. And I note that it is now, by its present application, seeking the Court’s leave to withdraw the said notice of motion. There is one correspondence by the plaintiff which is said to have been purportedly sent to the defendant. I refer to annexure A to the affidavit of debt, which was filed on 16 April 2019. The letter is dated 11 April 2019 and was said to have been sent by the plaintiff to the defendant. The defendant has denied knowledge of that until on or about 27 September 2019. The letter was typed out, however, it had the Post Office Box number of the defendant hand-written, as opposed to it being typed out like the rest of the letter. It therefore puts into question, in my view, its veracity. The conclusion I reach is that I do not find the said evidence credible.
19. With these evidence, I therefore reject the affidavit of service as a credible evidence, that is, the affidavit of Carl A Kuira filed on 27 February 2019. I uphold the evidence deposed to by Mr Atoa regarding want of service of the writ upon the defendant. I find that what Mr Atoa has deposed to in regard to the defendant not being duly served, as the true and correct position, that is, in regard to the issue of service of the writ.
SUMMARY
20. In summary, I uphold the preliminary argument of the defendant in relation to service of the writ. I reject the affidavit of service evidence of the plaintiff. For the reasons as stated, I do not find the depositions of Mr Kuira and the materials that he attaches as credible, and I reject or if not give little or no weight to them. In so doing, I find that the plaintiff has not served the defendant with its writ of summons and statement of claim which it had filed on 14 February 2019. I will therefore order the plaintiff to serve the writ on the defendant’s lawyers within 7 days from today. I will also issue a consequential order, that is, for the defendant to file and serve its defence within 14 days thereafter.
21. Because of my decision, I decline to deal with the substantive arguments in relation to the two applications that are before me.
COST
22. An order for cost is discretionary. I will order cost to follow the event. I will order the plaintiff to pay the defendant’s cost of the applications on a party/party basis which may be taxed if not agreed.
THE ORDERS OF THE COURT
23. I will make the following orders:
The Court orders accordingly.
_______________________________________________________________
Kuira Lawyers: Lawyers Plaintiff
Rake Lawyers: Lawyers for the Defendant
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