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NBF Asset Management Bank v Elder [2004] FJHC 132; HBC0564d.1999s (11 August 2004)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 564 OF 1999

Between:

NBF ASSET MANAGEMENT BANK
Plaintiff

and

1. JOHN ELDER
2. SAINIANA ELDER
Defendants

Mr. P. McDonnell for the Plaintiff
Ms. S. Saumatua for the Defendants

DECISION

The plaintiff by motion dated 27 February 2004 applies for the following orders:

(i) Judgment in Default of Defence to Counter-claim entered on the 5th day of December, 2001 against the Plaintiff to be set aside;

(ii) The Plaintiff be granted leave to file its Reply to Statement of Defence and Counter-claim;

(iii) There be a stay of proceedings for the Defendants Application of Assessment of Damages; and

(iv) The costs of this application be costs in the cause.

Background

Judgment in default of defence to the counterclaim was obtained by the defendants on 5 December 2001.

Judgment in default of defence was obtained by the plaintiff on 26 April 2000 but it was set aside by consent.

The plaintiff says that it has a defence on defendants’ counterclaim on merits and this is disclosed in the affidavit of Trevor Seeto the Manager Legal of the plaintiff Bank (vide paragraphs 11 and 12).

The plaintiff’s application is made under Or.19 r.9 and Or.45 r.10 of the High Court Rules 1988.

The defendants oppose the application on the grounds set out in the affidavit of Kitty Suliana, Registration clerk of the defendants’ solicitors sworn 19 March 2004.

Submission by the parties

It is the defendants’ submission that the plaintiff had more than sufficient time to finalize its Defence to Counterclaim. They say that they are prejudiced by the plaintiff’s inaction and the delay is unreasonable and inordinate.

Counsel submitted that the proposed defence to counterclaim has no prospect of success.

The defendants submit that the application to set aside default judgment on the counterclaim be dismissed and that the defendants be allowed to proceed with the application for assessment of damages.

Mr. Trevor Seeto for the plaintiff states that the defendants are fully aware of the plaintiff’s claim and that the Statement of Defence and Counterclaim do not reveal any proper cause of action or valid defence and that it is in the interest of proper resolution of this matter that the defendants’ judgment in default of defence to counter-claim be set aside.

Counsel for the plaintiff further says that the defendants will not be prejudiced in any way by this application considering that judgment in default was obtained in December 2001 and Notice of Application for Assessment of Damages was filed in September 2003 which is a delay of almost two years.

Principles on setting aside judgment

In the setting aside of a judgment the Court has a very wide discretion and is guided by certain well-known principles. One of the principles 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”. (per Lord Atkin in Evans v Bartlam [1937] A.C. 473).

This was a regular judgment and in setting it aside the Court exercises its discretion. In Halsbury’s Laws of England Vol 37 4th Ed. para. 403 the basic principles applicable to setting aside a default judgment are stated thus:

“In the case of a regular judgment, it is an almost inflexible rule that the application must be supported by an affidavit of merits stating the facts showing that the defendant has a defence on the merits,... For this purpose it is enough to show that there is an arguable case for a triable issue.

There it is further stated:

“There is no rigid rule requiring the applicant to explain why he allowed judgment to go by default, but nevertheless, at least in the case of a regular judgment, such explanation is obviously desirable to enable the court to exercise its discretion, especially as to any and if so what terms should be imposed.”

It is stated in The Supreme Court Practice 1993 p.137-138 that:

“...the major consideration is where the defendant has disclosed defence on the merits, and this transcends any reasons given by him on the delay in making the application even if the explanation given by him is false (Vann v Awford (1986) 83 L.S. Gaz. 1725, The Times, April 23, 1986 C.A.). The fact that he has told lies in seeking to explain the delay, however, may affect his credibility of his defence and the way in which the Court should exercise its discretion.

A useful summary of the factors to be taken into consideration is to be found under Notes to Or.13 r.9 of The Supreme Court Practice 1995 Vol 1 at 142 which I have considered and which is, inter alia, as follows:

“The purpose of the discretionary power is to avoid the injustice which may be caused if judgment follows automatically on default. The primary consideration in exercising the discretion is whether the defendant has merits to which the court should pay heed, not as a rule of law but as a matter of common sense, since there is no point in setting aside a judgment if the defendant can show merits, the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication. Also as a matter of common sense the court will take into account the explanation of the defendant as to how the default occurred.

Consideration of the application

I have already stated hereabove the submissions of counsel.

Bearing in mind the above principles, to enable the Court to properly exercise its discretion there are certain basic preconditions which have to be fulfilled by an applicant. They are: (i) reasons why judgment was allowed to be entered by default, (ii) an affidavit deposing to facts that show that the defendant has a defence on the merits. (Pankaj Bamola & Anand Priya Maharaj v Moran Ali Civil Appeal No. 50/90 F.C.A.).

The plaintiff/applicant has explained in considerable detail the reasons for the delay in filing its Defence to Counterclaim and why it has taken time to make the present application.

After the judgment on Counterclaim on 5 December 2001 the defendant took no further steps except to file Notice of Intention to Proceed on 1 July 2003. Then on 8 August 2003 the plaintiff attempted to file its Reply to the Statement of Defence and Counterclaim, as it was compelled to do so, the defendant had already obtained a default judgment. Then on 14 August 2003 the defendants filed an application for Assessment of Damages.

There is great confusion about the service of default judgment on the plaintiff, the latter denying emphatically that this was done. The ‘affidavit of service’ has just recently been filed. I do not intend to go into the question whether it should have been served or not. There is a difference of opinion among practitioners in this regard.

Be that as it may, on the one hand the trial of this action has not taken place and on the other hand we have a judgment in default on the counterclaim which intervened while the substantive action has yet to be heard. In these circumstance in the interests of justice the application ought to be allowed so that all the issues are determined in the one trial and in this regard the following passage from the judgment in Davies v Pagett (1986) 10 FCR 226 at 232 of the Full Court of the Federal Court of Australia is apt:

“The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only by the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct, in the case of the party upon whom the limitation is sought to be imposed. The temptation to impose a limitation through motives of professional discipline or general deterrence is readily understandable; but, in our opinion it is an erroneous exercise of the relevant discretion to yield to that temptation. The problem of delays in the courts, egregious as it is, must be dealt with in other ways; for example, by disciplinary actions against offending practitioners and by a comprehensive system of directions, hearings, or other pretrial procedures which enable the court to supervise progress and, more pertinently non-progress, in all actions.”

Conclusion

For these reasons in the exercise of my discretion and applying the principles and authorities stated above the default judgment obtained by the defendants in default of defence to Counterclaim be set aside. The defendants will not suffer any prejudice if that was allowed.

It does not appear that the defendants are in any hurry to have the action finalized judging from the very slow pace with which they have been moving.

Lord Atkins in Evans v Bartlam (1937) 2 All E.R. p646 at p651 stated that the applicant ‘must produce to the court evidence that he has a prima facie defence’. This has been done in the affidavit of Trevor Seeto for the plaintiff and that is sufficient. There does not have to be a draft defence for what is required is an affidavit disclosing a prima facie defence (The Fiji Sugar Corporation Limited v Mohammed Ismail (Civil Appeal No. 28/83 at p9 FCA).

Orders

It is ordered that:

(a) the judgment in default of Defence to Counterclaim entered on 5 December 2001 against the plaintiff be set aside.

(b) leave is granted to the plaintiff to file its Reply to Statement of Defence and Counterclaim within 14 days.

(c) there be stay of the defendants’ application for Assessment of Damages until further order of this Court.

(d) costs of this application are to be costs in the cause.

(e) the action to take its normal course hereafter.

D. Pathik
Judge

At Suva
11 August 2004.