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Shell Company (Pacific Islands) Ltd v Morris - Minority Judgment [2004] SBCA 6; CA-CAC 005 of 2003 (2 August 2004)

IN THE COURT OF APPEAL OF SOLOMON ISLANDS

Civil Appeal No. 005 of 2003

BETWEEN:

SHELL COMPANY (PACIFIC ISLANDS) LTD
Appellant

AND:

WAYNE FREDERICK MORRIS AND BENJAMIN ST GILES PRINCE
[AS TRUSTEES OF THE ESTATE OF REX FERA (A BANKRUPT)]
Respondents

CORAM: Lord Slynn of Hadley (President), McPherson J. A., Ward J. A

HEARING: 3^rd September 2003
JUDGMENT: Read by RHC on 02/08/04

OPINION OF LORD SLYNN OF HADLEY P.

1. By writ issued on 5 February 2002, Mr Morris and Mr Prince, ("the trustees") as trustees of the estate of Mr Fera, a bankrupt, claimed against Shell Company (Pacific Islands) Ltd ("Shell") the sum of SBD 2,049,913.66 as monies had and received to the use of the Trustees. It is said that they were void against the Trustees under section 50 (1) of the Bankruptcy Act (Cap. 3).

2. The essence of the claim is (1) that Shell's then manager knew that Mr Fera could not pay from his own monies his debts as they fell due and that he was being pursued by his other creditors and (2) that payments made to Shell amounting in total to the said sum, which were made by Mr Fera within the period of six months prior to the date of the filing of a bankruptcy petition against Mr Fera, were given and received by Shell with a view to his giving Shell a preference over other creditors when Mr Fera had ceased to pay his other debts.

3. After the defence was served an order was made on 28 May 2002 "by consent" as to the dates of various procedural steps to be taken in the action, including an order that the parties file and serve their respective affidavits of documents by 25 June 2002. Neither party complied with that order but after the trustees had done so late on 11 September 2002 they sought an order by summons dated 28 October 2002 (1) that Shell file and serve its affidavit of documents within 14 days and (2) that in default the defence be struck out and judgment entered as if no defence had been filed. On 12 November 2002 the Hon Mr Justice Kabui "by consent" made the Orders 1 and 2 sought by the trustees.

4. Shell's affidavit was sworn on 26 November (i.e. within the 14-day period) but was not filed until 27 November (one day late) or served until 2 December when Shell's solicitor was told (contrary to his previous belief) that it had not been served on 27 November.

5. On 4 December the Court ordered that, Shell having failed to comply with Order No. l, judgment in default of compliance be entered against the defendant as provided in Order No. 2 for the sum of SBD2, 049,913.66 with interest. It appears that such Order was made without a hearing and there was no express endorsement of consent by Shell. By summons dated 16 December, Shell applied for the judgment of 4 December to be set aside and asked for leave to defend the action.

6. On 27 January 2003 Kabui J dismissed that application. Shell filed a Notice of Appeal on 24 February 2003 and asked for an extension of time to file an application for a decision as to whether the Court's judgment was a final or an interlocutory judgment, on which depended whether leave to appeal was needed. If it was final it was not - if it was interlocutory it was. The judge refused the application for leave to appeal (if it was needed) it seems on the basis that this was a "question best left for the Court of Appeal to decide"; leave to amend the Notice of Application and the Notice of Appeal was however granted by the judge.

7. After dealing with the applications to amend the Notice of Application and the Notice of Appeal the learned judge turned to consider whether the refusal to set aside a default judgment was interlocutory or final. He recognised the predicament in which Shell found itself in deciding whether leave was necessary, or not, due to conflicting opinions on the issue and decided that it was not appropriate for him to decide the question and he left it to this Court.

8. It is clear that judgments like Orders can be final or interlocutory. There is no dispute as to what the test is. Both sides agree that it is the test laid down in Boszon v Altrincham UDC [1903] UKLawRpKQB 44; [1903] 1 KB 547 at pp 548-549 by Lord Alverstone CJ,

"Does this judgment or order, as made, finally dispose of the rights of the parties? If it does, then I think it ought to be treated as a final order; but if it does not, it is then, in my opinion, an interlocutory order."

9. We have been referred to a number of cases in which this test was approved and it seems right to treat it as settled practice.

10. That, however, is only the beginning of the problem. The real question is whether Kabui J's judgment finally disposes of the rights of the parties. There are judgments which indicate that it does not - e.g. Carr v Finance Corporation of Australia Ltd (No. 1) [1981] HCA 20; (1981) 147 CLR 246 at pp 248 and 256-7 and Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423, 439-440, both in the High Court of Australia. Elsewhere it has been said that it does - for example in Provincial Government of North Solomons v Pacific Architecture Pty Ltd PNGLR 1992, p147.

11. Carr v Hall turns on section 35 (1)(a) of the Judiciary Act of Australia 1903-1959 but it seems to me that the question to be asked in accordance with Boszen is the same in the Solomon Islands. The judgments in Australia show that it is not an easy question. In Carr, Gibbs CJ, while ruling that the ability to make a second application to set aside a default judgment meant that the judgment technically was not final, even if the chances in practice of a court reversing its decision on the first application might be slight and only available in rare cases, said that if the practical rather than the legal effect of the right to make a second application were the rule, "the question whether a judgment is final or interlocutory would be even more uncertain than it is at present" (p 248). Mason J also stressed the unreality in practice of regarding a second application as fully effective "when their practical effect [i.e. of the first refusal] is to shut out the defendants from contesting the default judgment".

12. I share Mason J's view in Carr that the agreement in favour of this being a final order "has some attraction" (p 256) and the view of Windeyer J in Hall that "this question is a troublesome one".

13. In the PNG case (Provincial Government of North Solomons) (supra) the Supreme Court whilst accepting the Boszen test of looking at "the order, as made" said that in the case before it there was involved "a judgment made by the Registrar and then an order by the National Court finally determining that the judgment is valid and cannot be set aside. We are satisfied that this is not interlocutory but is a final judgment" (p147). This was different from a case where there was only an order striking out a defence and giving leave to enter judgment.

14. As Mr Sullivan pointed out this PNG decision does not discuss the reasons behind the opinions in the Australian cases or give reasons for the basis of its decision.

15. I do not think either solution is wholly satisfactory and it may well be that further research and argument will produce a sounder basis for a decision either way. On the existing jurisprudence and the arguments we have heard it seems to me that the right course for this Court is to accept that the legal availability of a second application, however likely or unlikely a favourable result, prevents the present order challenged in this case from being a final order. I would therefore rule that leave is required for the appeal to continue.

16. The next stage is therefore to consider whether time should be extended for the filing of the Notice of Appeal and whether leave to appeal should be given. If leave is appropriate then the appeal proceeds in the same way as if there was an appeal as of right on a final order. Whether this is a case in which leave should be given depends on several criteria which have been indicated by the courts.

17. In Price Waterhouse and Ors v Reef Pacific Trading Ltd and Or (unreported): Judgment 29 April 1996, Case No. 3 of 1995 this Court said that in exercising its discretion to extend time the Court should look to see whether in allowing time to expire, the applicant whose right of appeal had gone "must show some good or acceptable reason why the time in which to file an appeal was allowed" and that "there must be some merit in the proposed grounds of application for leave to appeal or the proposed grounds of appeal". The matter is one of discretion and the applicant must satisfy the Court that the case is a proper one for time to be extended and for leave to be given.

18. As already indicated, Shell's affidavit of documents was sworn on the last day; filing was one day late and service was 7 days late i.e. on 2 December 2002. Judgment in default was given on 2 December 2002 and judgment refusing to set aside the judgment in default was given on 24 January 2003 and perfected on 27 January 2003. It is the last of those judgments which is the subject of the present appeal. The order following that judgment was amended on 14 February 2003 and the Notice of Appeal filed on 24 February and amended on 26 February.

19. In so far as these acts were out of time the delays were very short. Although solicitors should obviously comply with Court Orders or the times fixed by the rules, if the other criteria are satisfied I should be slow to penalise parties for such short delays (see e.g. Palata Investment Ltd v Burt & Sunfield Ltd [1985] 2 ALL ER 517, per Ackner LJ.

20. Are there credible explanations for the delay relied on in the judgment in default? In my view there plainly are even though they still clearly amount to a breach of the order. As to the initial delays there were difficulties because the office in Honiara had to communicate with its head office in PNG; the Honiara Manager was away for part of the period when the affidavit should have been in course of preparation. Mr Hapa believed, perhaps wrongly, that he could not file on 26 November because the office would by then be closed and there was a slip-up in the office in relation to service of the affidavit of documents. The delay in filing the Notice of Appeal was apparently due to doubt as to whether the procedure was that applicable to final or interlocutory judgments. These can all be criticised whether due to the delay of the clients or the solicitors but there is no question here of non-compliance being "intentional or contumelius" or "deliberate or contumatious" (re Jokai TEA Holdings Ltd [1993] 1 ALL ER 630 at p637 and Pereira v Beanlands [1996] 3 ALL ER 528 at p 535.

20. Is there then "some merit in the proposed grounds of application for leave or proposed grounds of appeal?" Mr Sullivan is severely critical of Shell's defence and grounds of appeal. He says that Shell "could have shown an arguable defence to the point of conviction". They have done nothing of the sort and on his detailed analysis of the pleadings he says that there is no sign of a defence and the affidavit in support does not swear to any evidence which could be sufficient.

21. It is clear that the question is "whether there are arguable grounds of appeal" and not whether the grounds of appeal will succeed on the hearing of the appeal. The appellant treats this as meaning whether there are arguable points on the appeal generally. Thus the issue as to whether a Consent Order can be set aside is an important issue. That, however, is not the only question. The issue is whether arguable points on the substance of the appeal have been shown.

22. There is force in Mr Sullivan's criticisms but we should not look for too much. Shell denies the facts relied on as showing that there was a fraudulent preference and in particular the knowledge alleged. It says that there was no fraudulent preference for the purposes of section 50 (1) of the Bankruptcy Act (Cap. 3). The trustees are entitled to say that at best this is very thin but I do not accept that no arguable defence has been shown. I would accordingly reject the trustees' argument on this point whatever the ultimate result at the trial on the evidence and the risk on costs. If Shell wishes to defend this claim it is in my view entitled to do so subject to the trustees' final, and as it seems in their contention, overriding point.

23. That "knockout point" is that there can be no setting aside of a Consent Order except when the underlying agreement on which the consent is made is varied with the actual consent of the parties or where there is evidence of fraud, mistake or some other reason for invalidating the underlying agreement on which the Consent Order is based.

24. In this case the Order of 12 December 2002 that in default of compliance with the order to serve an affidavit of documents within 14 days, the defence be struck out and judgment be entered against the defendant and the order of 4 December 2002 entering judgment in default are described as being "by consent". Mr Hapa says that before the learned judge he agreed to the Consent Order of 12 November 2002 prepared by the trustees' solicitors because he thought that they could be ready on time. The order of 4 December 2002, however, is endorsed "on paper no hearing". Mr Hapa does not say that he expressly consented to that by communicating with the trustees' solicitors. I am prepared to assume for present purposes that the paper was endorsed with his consent.

25. I accept that, if there was an agreement underlying the Consent Order, there was no subsequent agreement that it be varied or revoked. Nor has it been shown that there was an element of fraud, mistake or other factor which would vitiate the underlying agreement. If therefore the test is that relied on by the trustees and eventually by the learned judge I also accept that Kabui J's decision cannot be challenged.

26. It seems that in earlier days this was the test. Since then there has been however a deeper analysis as to what is meant by a Consent Order. Is it really a contractual agreement in the technical sense which the Court should respect as such or is it merely an order in the course of proceedings to which neither party objects (Chandles-Chandles v Nicholson [1942] 2 ALL ER 315 at p 317.) As to the first, was it what Lord Denning in Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 ALL ER 377 called "a real contract" or was it an order "the parties hereto not objecting so that the Court can itself vary the order".

27. For my part I would accept the distinction drawn by Lord Denning based on his description of what used to happen in dealing with procedural summonses in the "bear garden" i.e. the courts dealing with procedural matters where cases were dealt with very quickly.

28. I also think that it is important that the Court should keep control of its proceedings and that it may, perhaps rarely or only occasionally, refuse to enforce an order which is made "by consent" if it is persuaded that it would be unjust or wrong to do so.

29. Accordingly, although I appreciate the reasoning behind Kabui J's order in this case I would reject the argument that the fact that an order said to be made by consent concludes the issue. In a busy lawyer's office a statement expressed as by consent which is really a statement not to object should not preclude the overriding discretion of the Court to allow a case to continue if that is the appropriate course.

30. In this case I would accordingly set aside the judgment dated 4 December 2002 and the judgment of 27 January 2003, save in so far as leave to amend the Notice of Application and the Notice of Appeal are concerned, give Shell liberty to defend the case and grant any necessary extensions of time to do so.

31. The Trustees must pay the costs of and incidental to this appeal. Any other costs in respect of which orders have not been made should be reserved for the trial judge.

Lord Slynn of Hadley
(President)