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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS (COMM) NO. 950 OF 2018
BETWEEN:
TUBO TRUCKING LIMITED
Plaintiff
V
TONY KILA as the MANAGING DIRECTOR of MORAN
INA NAGA LIMITED
First Defendant
AND:
MORAN INA NAGA LIMITED
Second Defendant
Waigani: Anis J
2022: 21st October & 8th November
INTERLOCUTORY MATTERS – 2 applications heard together – one seeking leave to extend time to file defence out of time – Order 1 Rule 15 – National Court Rules – the other, default judgment application – alleged for failure to file defence within time – Order 12 Rule 25 – National Court Rules – considerations – whether delay inordinate – whether reasonable explanation provided – whether there is defence on merit – exercise of discretion
Cases Cited:
Luke Tai v. Australian and New Zealand Banking Group (PNG) Ltd (2000) N1979
George Viritia v. Alois Mabep (2011) N4236
Counsel:
A Yauieb, for the Plaintiff
L Dawa, for the Defendants
RULING
8th November, 2022
1. ANIS J: On 21 October 2022, I heard 2 applications. The first was by the defendants seeking leave to file their defence out of time, and the second was by the plaintiff seeking default judgment for failure by the defendants to file their defence within time.
2. I reserved my ruling to a date to be advised.
3. I rule on them now.
BACKGROUND
4. The claim is in contract for debt recovery, including projected losses and general damage. It is based on a dry lease or contract which the plaintiff claims it has or had with the defendants. Adduced evidence from both parties confirms the dry lease contract described as Management Agreement. It’s signed between the parties on 1 January 2013 (the Agreement/lease). Pursuant to the Agreement, the plaintiff leased 1 of its machines, described as Komatsu PC 200-8 Excavator Registration No. BDT 412 (excavator), to the second defendant. The main terms of the lease include a fixed hire rate of K225 per hour which shall be calculated and paid by the second defendant to the plaintiff at the end of each month for the duration of the hire, and the lease has an initial duration of 1 year. The excavator has since been released to the defendants in accordance with the terms and conditions of the lease, and it is presently in their custody and use. The arrangement was that the defendants would use the excavator to conduct work for Oil Search (PNG) Ltd in Moro in the Southern Highlands Province.
5. On 20 May 2015, the plaintiff received a statement of account from the defendants in regard to the lease, for a total sum of K446,
505. The sum represented the total invoices for the years 2013 and 2014. On the same day, the second defendant made a part-payment
of K200,000 to the plaintiff leaving a balance of K246,505. No further payments were made after that in regard to the said statement
of account or in regard to the Agreement. Again, evidence from both parties confirms this fact.
6. The plaintiff was aggrieved and files this proceeding, that is, claiming the outstanding balance of K246,505 from the said issued
statement of account for the period 2013 and 2014. The plaintiff also claims that the defendants continue to keep and use its excavator
to the present time. The claim of the excavator being in the possession of and use by the defendants is not denied by the defendants.
This was revealed or clarified by counsel for the defendants at the hearing of the 2 applications. In regard to the projected losses
alleged, the plaintiff pleads, and I will paraphrase as follows. On 5 June 2018, the plaintiff wrote to the defendants where it
demanded the return of its excavator plus its total estimated and calculated charge of K3,825,170, that is, for the duration of the
hire and keep of its excavator from 2012 to 2018 less what had been paid and received. And based on its Writ of Summons and Statement
of Claim (Writ) filed on 14 August 2018, it claims that the defendants have not adhered to its demands. The plaintiff therefore claims the sum
of K3,825,170 for breach of contract, damages for loss of business, return of the excavator, interest, and cost of the proceeding.
7. The defendants did not file a defence within the requirements of the National Court Rules (NCR). This fact is not denied. The matter was also delayed generally for some time before the 2 applications were filed. The plaintiff’s notice of motion was filed on 29 September 2022 (plaintiff’s NoM), and the defendants’ notice of motion was filed on 19 October 2022 (defendants’ NoM/present NoM).
APPLICATIONS
8. The defendants’ NoM seeks the following main relief:
“2. Leave be granted for an extension of time for the Defendants to file their Defence out of time pursuant to Order 1 Rule 15 of the National Court Rules.”
9. And the plaintiff’s NoM, on the other hand, seeks the following main relief:
“2. Default Judgment be entered against the Defendants pursuant to Order 12 Rule 25 of the National Court Rules for failure to file their Defence in this proceedings.”
10. The sources of the 2 applications are not contested. They appear to be in order; thus, I will proceed on that basis and consider the substantive arguments.
COMMON GROUND
11. The parties are at common ground that the Writ was served on the defendants on 28 August 2018, and that the defendants filed their notice of intention to defendant on 16 October 2018.
12. On 29 October 2018, the defendants applied for leave to seek extension of time to file their defence out of time (earlier application). The earlier application was not moved ever since and was pending at the start of the hearing of the 2 applications on 21 October 2022. After discussing the same with counsel, the defendants sought leave which was granted and withdrew their earlier application.
ISSUES
13. The main issues for consideration, in my view, are, (i), whether there was a reasonable explanation provided for the delay, (ii), whether the delay was inordinate, and (iii), whether there is defence on merit disclosed by the defendants.
DEFAULT
14. The notice of intention to defend was due on 27 September 2018, and the defence was due on 11 October 2018. The defendants filed their notice of intention to defend on 16 October 2018 which was outside its due date. They are permitted to do so, that is, under Order 7 Rule 6(1) of the NCR (i.e., to file their notice of intention to defend outside its due date). Sub-rule (1) reads, A defendant may give a notice of intention to defend at any time without leave. However, when that happens, as is in this case, sub-rule (2) prevents a defendant from taking any steps or from filing a defence without first obtaining leave from the Court. Sub-rule (2) states, Where a defendant gives a notice after the time limited for doing so, he shall not, unless the Court otherwise orders, be entitled to file a defence or do any other thing later than if he had given a notice of intention to defend within that time. See the case of Luke Tai v. Australian and New Zealand Banking Group (PNG) Ltd (2000) N1979.
15. The defendants are in default of filing their defence. I also note that the issue of default is not challenged by the defendants.
LAW
16. The case law on what is required of an applicant who seeks leave to file his or her defence out of time is settled. For this purpose, I refer to the case of George Viritia v. Alois Mabep (2011) N4236. Justice Sawong held, and I read:
“First is that, a defendant who seeks leave to file his defence out of time must give a reasonable explanation as to why he or she did not file his defence within time. Secondly the applicant must show or demonstrate that he or she has a defence on the merits. A draft defence should be annexed to the affidavit in support of the application for leave. Thirdly, he or she must make the application for leave promptly.”
DELAY PERIOD
17. It is not disputed that the delay period was more than 4 years, that is, from 11 October 2018 (i.e., the due date to file their defence) to 19 October 2022 (i.e., the date of filing the defendants’ NoM). The defendants had sought leave by their earlier application, which was filed on 29 October 2018, which was only 18 days after their default. However, and as stated, the said application was not moved, and it was later withdrawn at the commencement of the hearing on 21 October 2022.
EXPLANATION/PROMPTNESS IN MAKING THE APPLICATION
18. The defendants filed evidence in support of their NoM. I refer to Mr Kila’s affidavit of 29 October 2018. The reason given was that they were looking for a lawyer to act for them in the matter. I note that I could have given due regard had that evidence been used in the defendants’ earlier application.
19. However, the earlier application was never moved promptly, and it was subsequently withdrawn with leave of the Court after more than 3 years later on 21 October 2022. What I have before me now to consider is the Defendants’ NoM filed on 19 October 2022. The present NoM was filed (computing time from the date of default in filing their defence which was due on 11 October 2018) 4 years 8 days late. I therefore find that the defendants did not promptly apply for leave to extend time to file their defence out of time.
20. The evidence that supports the defendants’ NoM, which is before this Court, are. (i), affidavit by their counsel Martin Kombri filed on 19 October 2022 and (ii), affidavit of Mr Kila filed on 19 October 2022. Mr Kombri annexures to his affidavit 3 letters which he had sent to the National Court Registry, to request hearing dates for the defendants’ earlier application. They are dated 4 December 2018, 8 March 2019 and 27 May 2019. As for Mr Kila, he did not address the delay period that existed before the filing of the defendants’ NoM.
21. So, what I have is the 3 follow up letters by the defendants’ lawyers as evident in Mr Kombri’s affidavit. The last follow-up letter I note was sent on 27 May 2019. Since then and to the time of filing the Defendants’ NoM, which was filed on 19 October 2022, there had been a delay of 3 years 5 months.
22. I note the submissions of the parties.
23. I make these observations. I see no valid reasons provided by the defendants to say why they were unable to move their application promptly. They filed their earlier application 18 days after 11 October 2018 (i.e., the default date). However, that application has since been withdrawn after a delay of more than 4 years. But even if it were to exist and were to be properly before me, I would still have found it wanting in promptness for the stated reason, that is, delay of more than 4 years. The delay period, despite the different filing dates of the defendants’ 2 applications (the earlier application now withdrawn which had been filed on 18 October 2018, and the present application filed on 19 October 2022), is the same which is more than 4 years. I also observe that the 3 follow up letters that were sent to the Registry were in regard to the earlier application which was withdrawn and which is not before me for consideration. For argument’s sake, even if I were to compute time after the date of the last follow up letter by the defendants, the delay period would still be lengthy or inordinate, that is, 3 years and 5 months.
24. In summary, I find the delay period to be inordinate. In so doing, I reject the general arguments of the defendants of (i), the covid period in 2020 or 2019 as a valid excuse, or (ii), the claim that the plaintiff should also share some blame because they had also contributed to the delay and (iii), impliedly blaming the National Court Registry as partly or wholly responsible for the delay. The defendants were already in default so the ‘ball was always in their court’, so to speak, that is, to ensure that due process was followed without delay in seeking extension of time to file their defence out of time. They had over 3 or 4 years to do that but had failed in that regard. Their recently filed NoM of 19 October 2022 appears more like a reaction to the plaintiff’s NoM. This further demonstrates or is indicative of their overall lax or tardiness in the matter.
DEFENCE ON MERIT
25. Let me address the final consideration, that is, defence on merit.
26. I refer to Mr Kila’s affidavits of 29 October 2018 and 19 October 2022. What stood out in these evidence are as follows: The defendants intend to admit in their draft defence the existence of the Agreement. The defendants also admit, through Mr Kila’s earlier affidavit of 29 October 2018, the invoices for the years 2013 and 2014 and the total sum of K446,505. They also admit through Mr Kila’s same affidavit, that they had made a part payment of K200,000 to the plaintiff on 20 May 2015. They also admit that they still owe the plaintiff K246,505.
27. However, the defendants intend to deny that they owe the plaintiff K3,825,175, which is the total sum claimed in the Writ. They intend to allege that the Agreement was only for a period of 1 year as pleaded under clause 6.1(a). They also intend to claim that the Agreement was not renewed after its first year. As such, they intend to argue that the plaintiff should only be entitled to receive payment as per their issued statement of account, which means, and they claim, that the plaintiff should only receive the balance which is K246,505.
28. The defendants also intend to make this alternative claim. They intend to plead a separate contract called Contract for Pimaga to Kantobo Access Road via Kafa. They intend to plead that the said road contract was signed on 26 March 2013 between Kutubu Local Government Special Purpose Authority (KLGSPA) and the second defendant. They intend to plead that the Chairman of KLGSPA, is one Norman Ba’abi, who is a shareholder of the plaintiff. They intend to allege that because of the action of the Chairman, the road contract, which was allegedly worth K7,639,355.57, was terminated. They intend to plead that there are entitled to and will be seeking the said sum against KLGSPA.
29. I note the submissions of the parties under this sub-heading. For this purpose, let me set out clause 6.1(a) and (b) of the Agreement herein:
“Validity of the Agreement
(a) The Agreement will be valid for twelve (12) months upon the date of signing.
Review of the Agreement
(b) The review of the Agreement will take place annually, however, nothing stops the Parties from reviewing the Agreement on mutual consent prior to the annual review period.”
30. My observations are as follows. Firstly, I note that the defendants do not deny the Agreement. I also note that they acknowledge and admit the statement of account which they had furnished to the plaintiff in 2015, that is, for the total sum of K446,505 for the period from 1 January 2013 to 1 January 2014. I observe therefore that there is admission in regard to the issued statement. I note the defendants’ claim that the Agreement or the lease was not extended. However, I note the existence of clause 6.1(b) which impliedly provides or suggests that the Agreement or the lease may be extended from year to year subject to the parties’ rights to review its terms or conditions where required. The continued use or hire of the excavator after 2014, which is not denied, suggests, amongst others, that the lease could or may have been extended by the conduct of the parties. I note that the defendants do not deny that they still possess and use the excavator. Further, I also note that the only reason why the plaintiff released its excavator to the defendants in the first place back in 2012 or 2013, was because of the Agreement or the lease that was signed between the parties. It was because of this arrangement that the defendants now continue to keep and use the excavator, and it seems, without paying for its hire and use. Of course, the argument of what may have been paid or otherwise may be the subject of another hearing depending on how I rule in regard to the 2 applications herein.
31. In regard to the unrelated contract or agreement pleaded in the draft defence and in the evidence of Mr Kila, I make this observation. The agreement appears to be a separate matter altogether that may have no legal effect or nexus to the present claim. The parties are different, and I note that the defendants did not file a draft crossclaim. But even if they did, I would still fail to see how that claim can connect or relate to the present claim. I do not see any leverage or legal basis under law where the defendants could, by the said proposed claim, hold the plaintiff, which is a separate legal person, liable against the actions of one of its shareholders who may or may not have been involved in a separate or private agreement where the defendants, and not the plaintiff, may be part of.
32. I therefore find that the defendants do not have a defence on merit that should require further consideration or hearing. I, however, do find that there would be a need to assess the damages that are claimed in the Writ. The best way forward, in my view, would be to enter judgment in favour of the plaintiff based on default by the defendants in failing to file their defence within time, and with a further order for damages to be assessed. I note that the plaintiff has also made submissions in that regard, that is, for assessment of damages to be dealt with separately.
SUMMARY
33. I firstly dismiss the defendants’ NoM. In so doing, I grant the plaintiff’s NoM. I will enter default judgment with damages to be assessed, in favour of the plaintiff.
COST
34. An order for cost is discretionary.
35. I will order cost to follow the event. I will order the defendants to pay the plaintiff’s cost of this proceeding on liability including and up to the date of this order, that is, on a party/party basis which may be taxed if not agreed.
ORDERS OF THE COURT
36. I make the following orders:
The Court orders accordingly.
________________________________________________________________
M.S Wagambie Lawyers: Lawyers for the Plaintiff
Kombri & Associates Lawyers: Lawyers for the Defendants
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