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Hehei v ANZ Bank (Vanuatu) Ltd [2004] VUCA 7; Civil Appeal Case 35 of 2003 (11 June 2004)

IN THE COURT OF APPEAL
OF THE REPUBLIC OF VANUATU
(Civil Appellate Jurisdiction)

Civil Appeal Case No. 35 of 2003.

BETWEEN:

MARKSON HEHEI
Appellant

AND:

THE ANZ BANK (VANUATU) LTD
Respondent

Coram: Hon. Chief Justice Vincent Lunabek
Hon. Justice Bruce Robertson
Hon. Justice Daniel Fatiaki
Hon. Justice Patrick I. Treston
Hon. Justice Hamlison Bulu

Counsel: Mr. Hilary Toa for the Appellant
Ms. Jennifer La’au for the Respondent

Hearing Date: 3rd June 2004
Judgment Date: 11th June 2004

JUDGMENT

1. This is an appeal from the dismissal of an application for leave to appeal out of time in the Supreme Court in Santo on 12^th March 2004.
   
2. On 8^th November 1999, Mr. Hehei mortgaged to the Bank all his interest as registered proprietor in the lease title No. 03/OJ74/004 to secure the repayment of certain monies advanced by the Bank to Mr. Hehei. On 17^th May 2000 the Bank filed an originating summons under the old rules claiming a declaration that the Bank as mortgagee be empowered to sell and transfer the property as the Bank asserted Mr. Hehei was in arrears in his repayments, and that on demand to repay the sums owing he refused or failed to pay.
   
3. On 28^th March 2001, Mr. Hehei filed a defence and counterclaim. The counterclaim asserted that his losses were due to the bank’s negligence. He said that he had repaid part of the loan and only a small portion remained and that when the Bank confiscated his vehicles, his business could no longer operate fully to enable him to continue to repay his loans. He denied he was ever in arrears in his repayments.
   

On 6^th June 2001 an amended originating summons to include Rasa Louis as a party was filed. Notwithstanding he does not appear to have figured in the proceedings.

4. On 20^th July 2001 the Bank advised the Court that it would be applying to have the defence struck out because the defence was not a good one.
   
5. On 2^nd October 2001 the Court heard the Bank’s application. In a judgment dated 4^th October 2001 the Court dismissed the Bank’s application to strike out Mr. Hehei’s defence and counterclaim as the Bank had failed to provide any affidavit or oral evidence in support of its application. The Court issued a direction order for the Bank to file a defence to the respondent’s counterclaim within 21 days.
   
6. On 25^th July 2002 Mr. Hehei applied for judgment in his favour as the Bank had not complied with the direction orders of 4^th October 2001 to file its defence to his counterclaim within 21 days.
   
7. On 19^th November 2002, in the absence of Mr. Hehei, the Court gave further directions requiring Mr. Hehei to correct his defence and counterclaim within 14 days and also required the Bank to respond to the defence and counter-claim within 14 days.
   
8. On 14^th February 2003 Mr. Hehei did not appear himself or through his counsel. On being satisfied that Mr. Hehei did not have any good defence the Court dismissed Mr. Hehei’s “purported Defence and Counter-claim dated 28 March 2001”.
   
9. On 12^th March 2004 Mr. Hehei applied to the court for leave to appeal out of time, and for an order suspending the enforcement of the Court Order dated 14^th February 2003.
   
10. The trial judge was not satisfied that Mr. Hehei had good reasons. He found the “application is 12 months out of time” and that Mr. Hehei “does not live in a remote place. He lives in Luganville and is seen everyday walking up and down the streets... For the applicant who lives in town, and throughout last year 2003 Mr. Toa, his counsel was occasionally in Luganville for Court engagements, there can be no excuse.” The trial judge also found that “... the enforcement warrant has been executed... It does no seem logical for the applicant to be applying at this late stage (for the Court to suspend an Order which has been executed).
    
11. As a consequence of those findings the Court at page 2 of its decision ordered that:-
    

“1) Leave be and is hereby refused to the applicant to appeal out of time.

2) The application is dismissed in its entirety.

3. The applicant will pay the respondent's costs of and incidental to this application.”
   
12. Mr. Hehei now appeals that decision of the Supreme Court seeking that it be quashed and that leave be granted to the appellant to file his appeal out of time on the following grounds:-
    

“1. The Supreme Court has already dismissed the respondent’s application to strike out the appellant’s defence and counter-claim against the respondent in its decision dated 4^th October 2001, and issued Directions which were not complied with by the respondents within the 21 days to file their defence to the appellant’s counter-claim.

2. The respondent have not complied within the time allowed in the Rules to apply or lodge their application to have the default judgment set aside but instead have later turned up under an application which was way out of time and have had the Supreme Court to reverse it’s own orders.
   
3. It is not fair and is clearly unjust for someone who has not complied with Court Directions and later on when they fell like it turn up under an application and say they want to entreat the favour of the Court when they have failed and refused to act within 21 days as directed by the Court in its previous Orders which they had not complied with.
   
4. The learned trial judge erred in law when he failed to apply his mind to that question of whether or not the respondent has complied with the last directions outlining clearly that they were required to respond to the appellant’s counter-claim within 21 days but they didn’t do so.
   
5. The applicant can show in evidence that he did not fail in his payments but that were deliberate and negligent interference by the defendant which in the end costs the applicant to fall into arrears through no fault of his own, and should therefore be compensated for such breach of their Agreement by the ANZ Bank Vanuatu Limited.
   
6. There is a serious question of law to be tried before the Court of Appeal on the question of whether or not a Court could reverse it’s own Orders which have not been complied with by one party in default after the Orders were issued.
   
7. There is a serious question of law to be tried by the Court of Appeal particularly on the issue of the same Court reversing it’s own Orders which have not been complied with in the first place by the party who had failed to comply with those Order, and returning before the same Court to have that same application heard which was already heard and determined by the same Court against the applicant.
   
8. On the principle of “functus officio”, there is a serious question of law to be considered by the Court of Appeal where the trial judge after having made a ruling against the respondent should have desisted from hearing any further applications about the state of the appellant’s defence and counterclaim whereby the respondents were in a position thereafter to appeal but they did not do so. The case then would have been against the respondents instead of the ruling against the appellant to amend his defence and counterclaim by the Orders of 19^th November 2002.”
   
13. This is a matter which seems to have developed a life of its own. The appeal raises important questions about the management of proceedings under the new Civil Procedure Rules of 2000.
    
14. On 28^th March 2001, Mr. Hehei filed his defence and counterclaim to the Bank’s claim. In his defence and counterclaim he had described himself, as the plaintiff and the Bank as the defendant. The correct position was that the Bank was the plaintiff and Mr. Hehei was the defendant. The matter went before the Court on 19^th November 2002. The Court directed Mr. Hehei to correct his defence and counterclaim within 14 days. Why it did not happen at the time on the spot we cannot understand. Perhaps all the subsequent difficulties would have been avoided. However, an order was made and Mr. Hehei failed to comply with those directions within the time specified.
    
15. By motion dated 31^st July 2001 the Bank sought the dismissal of Mr. Hehei’s defence and counterclaim and judgment on its amended summons. The motion was heard on 4^th August 2001.
    
16. In the decision delivered on 4^th October 2001 the Court dismissed the Bank’s application and issued a direction for the “Bank to file a defence to Mr. Hehei’s counterclaim within 21 days from the date of this order together with any supporting affidavit(s)”. The Bank did not comply with the Court’s directions. No defence was filed.
    
17. At this point each party was in default of orders which had been made requiring action. Nothing happened for the next 10 months.
    
18. On 25^th July 2002 Mr. Hehei applied to the Court for a default judgment on the basis that the Bank had not complied with the direction order of 4^th October 2001 within the time required. No action was taken on this application.
    
19. On 10^th February 2003 the Bank applied to the Court to “(strike out) the counterclaim in Civil Case No. 10 of 2001”. The reference to Civil Case No. 10 of 2001 is a mystery. The Bank requested the Court to strike out the counterclaim in that matter but not Civil Case No. 17 of 1999. This error was never corrected.
    
20. On 14^th February 2003, the Court struck out Mr. Hehei’s defence and granted the relief sought by the Bank in its originating summons. There is no evidence to show that Mr. Hehei was served with a notice of hearing on that date.
    
21. Several issues stand out from all of this:-
    
    • The rights and interests of Rasa Louis have not been properly dealt with.
      
    • The error or defect in Mr. Hehei’s defence and counterclaim which was required to be corrected in the Bank’s application of 31^st July 2001 was in the entituling of the document. It was not an error that went to the substance of the defence or counterclaim and was plainly obvious on the face of the document. It should have been corrected by a formal order of the Court without necessarily requiring Mr. Hehei to do anything; Indeed the simultaneous order of the Court that the Bank file a defence to Mr. Hehei’s counterclaim suggests that that was the intention of the Court. No defence to Mr. Hehei’s counterclaim has ever been filed by the Bank. Equally the intituling of Mr. Hehei defence and counterclaim has never been corrected.
      
    • A second error occurred on 19^th November 2002 when the Court in the absence of Mr. Hehei or his counsel and without disposing of Mr. Hehei’s earlier application for default judgment on his counterclaim where the Bank had been ordered to file a defence, entertained the later application by the Bank to strike out Mr. Hehei’s unamended or uncorrected defence and counterclaim. In granting the Bank’s application it seems the trial judge’s attention was not drawn to the Bank’s earlier default in not filing a defence to Mr. Hehei’s counterclaim as ordered.
      
    • A third error is evident on the face of the Bank’s purported application to strike out Mr. Hehei’s defence. We say purported because the case number referred to in the application is Civil Case No. 10 of 2001 which was not the correct case reference number. It should have read Civil Case No. 17 of 1999.
      
    • In light of the forgoing errors the Court itself fell into error and made what would appear to be irreconcilable and inconsistent orders.
      

On the one hand, the judge dismissed the Bank’s application seeking to strike out Mr. Hehei’s defence and counterclaim and ordered it to file a defence to the counterclaim, and, on the other hand, the Court refused Mr. Hehei’s application for default judgment against the Bank and struck out Mr. Hehei’s defence and counterclaim which it had earlier required the Bank to plead to presumably because there was some merit in it.

• So ingrained were the errors that even on the execution warrant issued in the case, the parties were reversed in the body of the warrant making it appear as if it was the Bank that was the execution debtor and Mr. Hehei the execution creditor.
  

22. The philosophy of the Civil Procedure Rules which were established to ensure fairness and a speedy trial, as far as is practicable, seems to have been lost which is unfortunate. The processes here were seriously flawed. What happened was neither speedy or fair. There were breaches on both sides.
    
23. Mr. Hehei submitted that there is a serious question of law to be tried before this Court on the question of whether or not a Court could reverse its own orders which had not been complied with by one party in default after the orders were issued. Further the consequences of the Court ignoring orders which have not been complied with, and permitting the party in default to come before the Court to have that same application heard again with a different outcome.
    
23. The nature of the orders made on 4^th October 2001 are direction orders and are not final orders. They are made for the purposes of giving guidance to the proceedings to enable it to move forward in a controlled and sensible manner that is fair to the parties. We do not consider that the principle of ‘functus officio’ applies in such circumstances.
    

This is a mess which must be sorted out in a disciplined and professional manner which has not yet occurred.

(1) Leave to appeal is granted and the appeal is allowed.

(2) The judgment of 14^th February 2003 is set aside.

(3) Leave is granted for the appellant to file his defence and counterclaim out of time under the new rules. This must be done by July 2004. Within the same time the correct entituling must be attended to.

(4) A conference should be convened as soon as possible thereafter to determine the future conduct of the hearing.

(5) Each party to meet their own costs.

DATED at Port Vila, this ... day of June 2004.

Hon. Vincent Lunabek CJ.
Hon. Bruce Robertson J.
Hon. Hon. Daniel Fatiaki J.
Hon. Patrick Treston J.
Hon. Hamlison Bulu J.