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National Bank of Fiji v Petero [1993] FJHC 110; Hbc0368j.92s (24 November 1993)

IN THE HIGH COURT OF FIJI
(AT SUVA)
CIVIL JURISDICTION

ACTION NO. 368 OF 1992

BETWEEN:

NATIONAL BANK OF FIJI
a body corporate duly constituted under the National
Bank of Fiji Act, 1973 and having its
principal office at Suva in Fiji
Plaintiff

AND

1. ATONI PETERO
2. ILAISAANE AMI PETERO
both of 22 Irvine Place Tamavua, Suva in Fiji,
Accountant and School Teacher respectively.

3. MEREWAI KARALAINI RAYALO
4. INIA RAYALO KORO
both of 9 Tavola Street Kinoya near Suva in Fiji,
Master Butcher and Cashier respectively.
Defendants

V. Kapadia: For the Plaintiff
I Fa: For the 3rd and 4th Defendants

Dates of Hearing: 19th and 23rd August 1993
Date of Interlocutory Judgment: 24th November 1993

INTERLOCUTORY JUDGMENT

The Third and Fourth Defendants apply to set aside a Default Judgment entered against them on the 28th of October 1992. The Plaintiff issued a Writ herein on the 14th of August 1992 against all four Defendants alleging that during January, 1988 and thereafter the Plaintiff lent and advanced to VANUA MEATS LIMITED certain loan facilities the payment of which was guaranteed by the Defendants by a Deed of Guarantee executed by the Defendants on the 28th of January, 1988.

As at the 23rd of June, 1992 the Plaintiff alleges that VANUA MEATS LIMITED was indebted to the Plaintiff in the sum of $292,977.01 with interest accruing thereon at the rate of 13 percent per annum computed from the 24th of June, 1992 until settlement.

A demand was made by the Plaintiff on the Defendants to pay the amount owing but the Defendants have failed to do so.

On the 18th of September, 1992 the Plaintiff entered Judgment in Default of Defence against the First and Second Defendants in the sum of $292,977.01 together with interest computed at the rate of 13.5 percent per annum computed from the 24th of June, 1992 until settlement and $70.00 costs and on the 28th of October, 1992 the Plaintiff entered Judgment in Default of Defence against the Third and Fourth Defendants for a similar amount.

Service of the Writ of Summons was acknowledged by the solicitors for the Third and Fourth Defendants on the 25th of August, 1992.

On the 24th of May, 1993 the Third and Fourth Defendants issued the Notice of Motion presently before me seeking to set aside the judgment entered against the Third and Fourth Defendants.

The Notice of Motion is supported by an affidavit sworn by the Third and Fourth Defendants on the 24th of May, 1993. The affidavit consists of eight short paragraphs and it is fair to say immediately that with the possible exception of paragraph 7 on which I shall comment shortly, the other paragraphs make general statements none of which addresses the merits of the Defence which they ask the Court to believe they may have to the Plaintiff's Statement of Claim. To give some examples, in paragraph 4 the Defendants state that they approached the Plaintiff to discuss the Writ of Summons served on them as they are of the view that the debt in this case is not owed by them but by some other party un-named.

In paragraph 6 they state that they have been advised and believe, although they do not mention by whom, that the judgment entered against them was obtained irregularly and is in fact defective although again they do not provide any particulars of the alleged irregularity.

In paragraph 8 they depose that they have a good and valid Defence in this case and would like to defend the allegations made by the Plaintiff against them.

In paragraph 7 they deny owing the Plaintiff the money claimed herein as they say the Debtor in this case is a Company, VANUA MEATS LIMITED and that the Plaintiff should in fact proceed against that Company and its assets.

On behalf of the Plaintiff an Affidavit in Reply has been sworn on the 23rd of July, 1993 by Umesh Hasji of Suva, Assistant Manager Lending Administration of the Plaintiff. As most of the allegations of fact made by Mr. Hasji in his affidavit have not been denied by the Defendants in the submission made by their counsel I shall state these facts now.

Mr. Hasji deposes that on the 28th of January, 1988 the Third and Fourth Defendants signed a Deed of Guarantee to the Plaintiff for money advanced by the Plaintiff to VANUA MEATS LIMITED.

Mr. Hasji states that both Third and Fourth Defendants were at all material times the Directors of VANUA MEATS LIMITED which defaulted in the payment of the loan given to it by the Plaintiff and as at the 23rd of June, 1992 it owed the Plaintiff the sum of $292,977.01 together with interest thereon at the rate of 13 percent per annum.

The Plaintiff had through its solicitors issued Demand Notices against the Third and Fourth Defendants on the 30th of June, 1992 demanding that the Third and Fourth Defendants pay the money advanced by the Plaintiff to the Company but the Third and Fourth Defendants failed or neglected to pay or make arrangements for the payment of the debt.

Thereafter the Plaintiff instituted the present proceedings and as stated previously judgment was entered against the Third and Fourth Defendants on the 28th of October, 1992 in the amount mentioned previously by me.

On or about the 10th of November, 1992 the Third and Fourth Defendants were served with copies of a Bankruptcy Notice dated 6th November, 1992. The Defendants failed to make any arrangements for payment of the debt.

On or about 30th December, 1992 the Third and Fourth Defendants were served with true copies of a Creditor's Petition dated 9th December, 1992 which was listed for hearing in the Magistrate's Court on the 29th of January, 1993. To date Mr. Hasji claims, the Third and Fourth Defendants have failed to make any arrangements for payment of their debt and on the 26th of March, 1993 a Receiving Order was obtained against the Third and Fourth Defendants in the Magistrate's Court on the Creditor's Petition.

The application to set aside judgment was then issued by the Third and Fourth Defendants on the 24th of May, 1993 and the debt still remains owing.

The Plaintiff deposes that it has always maintained that the debt is owed by the Third and Fourth Defendants pursuant to the Guarantee signed by them on the 28th of January, 1988.

Lastly Mr. Hasji deposes that he believes that the Third and Fourth Defendants do not have any Defence to the claims made by the Plaintiff under the Guarantee.

I shall now discuss as briefly as possible the legal submissions I have taken from the parties. Counsel for the Defendants first states that the application to set aside judgment is made under Order 13, Rule 19 of the Rules of this Court. He first quotes the well-known judgment of Lord Atkin in Evans v. Bartlam (1937) A.C. 473 where Lord Atkin said at p.480:

"The principle obviously is that unless and until the Court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure."

Counsel for the Defendants properly states that the requirement of the law in relation to the setting aside of a judgment obtained by Default is that the Applicant must file an affidavit stating facts showing a Defence on the merits. He cites the English Court of Appeal decision of Burns v. Kondel (1971) 1 Lloyd's Rep. 554 where Lord Denning M.R. said at p.555:

"We all know that in the ordinary way the Court does not set aside a judgment in default unless there is an affidavit showing a defence on the merits. That does not mean that the defendant must show a good defence on the merits. He need only show a defence which discloses an arguable or triable issue."

Counsel also mentions another Court of Appeal decision Wenlock v. Moloney and Others (1965) 2 All E.R. 871 which is a case dealing with the striking out of pleadings although similar principles generally apply to applications such as the present.

I note however that the Headnote in Wenlock v. Moloney and Others states in part:

"Although the Plaintiff's claim seemed unlikely to succeed, the case was not a plain and obvious one."

The question I have to decide is whether the Defendants' case as appears to date is so plainly and obviously weak that it is doomed to failure.

In my judgment for reasons which I shall now give I consider it is.

In giving my reasons I shall refer to the submissions made by counsel for the Plaintiff which in my view have not been answered satisfactorily by the Defendants.

Counsel first comments that paragraph 4 of the affidavit filed on behalf of the Third and Fourth Defendants is too vague and does not disclose any Defence. I agree and make a similar comment on paragraph 6 of that affidavit. The only paragraph in the Defendants' affidavit which appears at first glance to provide a semblance of a Defence is paragraph 7 which I have previously mentioned, but even this is illusory. Counsel for the Plaintiff refers me to clauses 11 and 12 of the Instrument of Guarantee the effect of which is to give the Plaintiff independent rights against the Defendants apart from any other guarantees or securities which the Plaintiff may have against any person.

In Paget's Law of Banking, 9th Edition at p.515 the authors state that since the case of Duncan, Fox & Co. v. North and South Wales Bank (1880) 6 App Cas 1 in the House of Lords it has been accepted as the law that a creditor is not bound to resort to securities before suing a surety. The authors also mention the earlier Scottish case of Ewart v. Latta (1865) 4 Macq 983 at 987 where Lord Westbury C. said:

"Until the debtor has discharged himself of his liability, until he has fulfilled his own contract, he has no right to dictate any terms, to prescribe any duty, or to make any demand on his creditor. The creditor must be left in possession of the whole of the remedies which the original contract gave him, and he must be left unfettered and at liberty to exhaust those remedies, and he cannot be required to put any limitation upon the course of legal action given by him by his contract by any person who is still his debtor, except upon the terms of that debt being completely satisfied."

If these authorities were not enough, the Plaintiff also relies on Sections 6 and 15 of the Indemnity, Guarantee and Bailment Act, Cap.232.

Section 6 reads:

"The liability of the surety is co-extensive with that of the principal debtor unless otherwise provided by the contract."

Section 15 reads

"Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety."

Accordingly in my judgment the Defendants could not argue as a matter of law that the Plaintiff must first attempt to satisfy its judgment against VANUA MEATS LIMITED and its assets. Apart from this the affidavit of the Defendants gives no particulars at all of their alleged Defence which would lead me to conclude that they have any Defence on merits in this case. In what may possibly be called a "last desperate throw", counsel for the Defendants referred to a Practice Direction issued in the Queen's Bench Division in England on 9th May 1979 under which thenceforth the solicitor for a plaintiff or, if acting in person the plaintiff himself who obtains a Judgment in Default of Defence must indorse the court copy of the Judgment to the effect that the time for service of the Defence has expired.

Counsel comments that this was not done in the instant case and that therefore the Plaintiff's Order is defective.

I do not agree. Assuming for the moment that the English Practice Direction applies in Fiji, as to which I have serious doubts, in this case the Defendants' solicitor was well aware of events. He signed an Acknowledgment of Service which states that the Defendants intend to contest the proceedings and to apply for a stay of execution of any judgment entered by the Plaintiff. That they did not do so until at least seven months after judgment was entered can hardly be held against the Plaintiff and I reject this submission.

Accordingly the application to set aside judgment is refused and I order the Third and Fourth Defendants to pay the Plaintiff's costs of these proceedings to be taxed if not agreed.

JOHN E. BYRNE
J U D G E

HBC0368J.92S