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Aleems Investments Ltd v Khan Buses Ltd [2011] FJHC 473; HAC102.2011L (26 August 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 102 of 2011L

BETWEEN:

ALEEMS INVESTMENTS LIMITED
Plaintiff

AND:

KHAN BUSES LIMITED
Defendant

INTERLOCUTORY JUDGMENT

Judgment of: Inoke J.

Counsel Appearing: Mr S Nandan (Plaintiff)
Ms N Khan (Defendant)

Solicitors: Reddy & Nandan (Plaintiff)
Natasha Khan Assocs. (Defendant)

Dates of Hearing: 4 August 2011

Date of Judgment: 26 August 2011

INTRODUCTION

[1] This is the defendant’s application to set aside a default judgment and Writ of Fifa. The Writ was issued out of this Court following a judgment in default of appearance was entered by the plaintiff.

[2] The defendant argued that the judgment was irregularly entered but I think the argument cannot be sustained on the facts. I will therefore deal with this application solely on the question of whether the default judgment should be set aside because the defendant has a meritorious defence.

CASE HISTORY

[3] The Writ of Summons was filed on 1 July 2011. It was served on the defendant on 6 July 2011. On 28 July 2011, the defendant having not filed an acknowledgement of service, the plaintiff took out a default judgment. The defendant apparently tried to file its acknowledgement of service in the court registry but was rejected because the plaintiff’s papers for default judgment had already been filed. The defendant was already out of time in any event. The Writ of Fifa was also taken out on 28 July 2011. The judgment debt to be levied was $408,952.63 plus interest at 10% pa from 28 January 2008 until the date of payment plus costs. Armed with the Writ of Fifa the plaintiff managed to gather assistance from others to have the defendant’s bus operation brought to a halt by having the defendant’s buses impounded. Late on Friday 29 July 2011, the defendant’s solicitors filed an ex-parte application to stay execution of the Writ and set aside the default judgment. I directed the application to be issued inter-partes because I did not think there was justification for an ex-parte hearing but directed the application to be called before me on the following Monday, 1 August 2011. On the 1 August 2011, both counsels came to an arrangement which allowed the defendant to run its fleet of buses but gave enough comfort to the plaintiff and I set the application to be heard inter-partes on 4 August 2011. This is my judgment after hearing counsel.

DOES THE DEFENDANT HAVE A MERITORIOUS DEFENCE?

[4] As I have said above, the issue to be decided here is whether the defendant has a defence justifying the setting aside of the default judgment. To answer that issue, one needs to look at the history behind this claim.

[5] I start from my judgment which I delivered on 25 September 2009 in winding up action HBF 15 of 2009L, reported in: In re Khan Buses Ltd [2009] FJHC 213; HBF015.2009L (25 September 2009). In that judgment I ordered that the plaintiff’s petition to wind up the defendant be permanently stayed. The alleged debt in that winding up action is the very same debt that is the subject of these proceedings. That is not in dispute.

[6] The plaintiff appealed successfully to the Court of Appeal which set aside my judgment on 24 January 2011, reported in Aleems Investments Ltd v Khan Buses Ltd [2011] FJCA 4; ABU0036.2009 (24 January 2011). That freed the plaintiff to bring this action.

[7] Incidentally, about two weeks before the Court of Appeal judgment was delivered, the plaintiff company’s principal director, on 8 January 2011, sued the defendant’s principal personally in civil action HBC 5 of 2010L for the very same debt. The matter came before Master Tuilevuka who rightly dismissed the director’s personal suit, having accepted my finding that the debt was not owed. The Master’s judgment is reported in Khan v Khan [2010] FJHC 101; HBC005.2010L (1 April 2010).

[8] That in itself shows the desperation and confusion with which the plaintiff purses the defendant for the alleged debt. The plaintiff cannot on the one hand say that the debt is a company debt and then having failed in pursing the defendant company, immediately pursues the debt as one owed by its director.

[9] The only reason, in my respectful opinion, the Court of Appeal differed with me was that they came to a different conclusion on the facts. I came to the conclusion that there was no debt at all but the Court of Appeal concluded otherwise – that it was a case of “mirrors and smoke screens”. The same affidavits were considered in both Courts. It was not a case that there was no evidence at all for me to base my findings of fact, and under those circumstances, my conclusions should not have been disturbed, with respect. Only a full hearing could determine which Court is correct on the facts. With the greatest of respect, under those circumstances, I do not think I am bound by the Court of Appeal’s findings of fact.

[10] Briefly, I concluded that the plaintiff used the defendant’s then unused $200,000 overdraft facility in the Habib Bank to “borrow” money from the bank in 2000. When the money was not repaid, the bank and its solicitor pressured the defendant who in turn pressured the plaintiff who eventually repaid the money and interest into the defendant’s Habib Bank account. This is the very same money which the plaintiff now turns around and sues the defendant for.

[11] In any event, Ms Khan, counsel for the defendant, has now produced new evidence which fortifies my conclusions on the facts as I have stated above. Annexed to the affidavit of a director of the defendant company, was the statement of account at the Habib Bank of Ashleem Investments Limited, a company with which the plaintiff is connected, which showed that on 7 March 2000, cash in the sum of $200,000 was credited to that company’s account. Also annexed to the affidavit was a copy of the defendant’s cheque butt dated 7 March 2000 for $200,000 paid to “Habib Bank re Aleem Khan”. The very next entry in the statement showed that the sum of $167,797.02 was paid out on the same day vide cheque number 418159. Also annexed was a receipt from the trust account of the solicitor Haroon Ali Shah for the exact same amount and for the same cheque number from Habib Bank which is said to be for the purchase of a property by Mr Aleem Khan, the principal of the plaintiff company. The seller of that property has filed an affidavit confirming the sale of his property to Mr Aleem Khan and the receipt of the balance purchase price in that amount from his solicitor, Haroon Ali Shah.

[12] Ms Khan submitted that this is clear evidence that the money was “borrowed” from the defendant by Ashleem Investments Limited, a company connected with the plaintiff (and part of the “Aleem Group”) through their common principal, Mr Aleem Khan, and, the fact that Mr Aleem Khan used the money for his own private purposes is irrelevant.

[13] The plaintiff on the other hand totally relies on the Court of Appeal’s judgment as supporting its case. Mr Nandan submitted that I am bound by the findings of fact by the Court of Appeal, in particular paragraph 74 of the judgment. He drew up the statement of claim in this action based solely on what was there said. He did not have to provide any other evidence to support his client’s claim. I understood his submission to be that I am not required to look at any evidence, let alone, new evidence. Paragraph 74 stated:

... Clearly the petition and affidavit together with the exhibits of the Petitioner established a prima facie case of debt. In reply there was an assertion that the debt to Habib Bank was never owed, in law, by Khans Buses together with an assertion that it was in fact owed by Mr Aleem or his principal company to Habib Bank. This is nothing but smoke and mirrors as the documents produced by Khan's Buses themselves showed. Then there were further assertions that Mr Aleem had somehow legally indemnified the possible default by Ashleem Investments Limited and that the rescue from winding up of Khan's Buses at the hands of Habib Bank by Aleems Investments Limited was done because Aleem Investments were legally obliged so to do; this resulting in the consequence that after Habib Bank was paid off, Khans Buses did not owe the debt to Aleems Investments Limited. All this amounts to more smoke and mirrors. If this were an Order 14 application for summary judgment on a debt no reasonable tribunal properly self directed would grant leave to defend conditionally or unconditionally.

[14] As I have said above the new evidence clearly showed that this statement is most likely to be wrong. In any event, even if the Court of Appeal is correct that there is a prima facie case of a debt, it does not mean that the defendant has no meritorious defence.

THE LAW

[15] In Khan v Native Land Trust Board [2009] FJHC 216; HBC198.2006L (23 September 2009), I stated the applicable law as follows:

[14] In BW Holdings Ltd v Graham Eden and Associates Ltd [2002] FJCA 66; ABU0027U.2000S (16 August 2002), a case similar to this, the Court of Appeal set out the applicable law as follows:

“The granting of leave to come in and defend an action is discretionary. At the end of a 9 page careful examination of the arguments advanced by counsel for the parties the Resident Magistrate came to the conclusion that the Company was not advancing a bona fide defence giving rise to triable issues. I agree.”

The Resident Magistrate dealt with this issue in these terms:

“The judgment being regular the defendant was required to show a defence on merits. The central requirement for the applicant to satisfy the court by evidence is that the defendant has a good defence on the merits. That the defendant has put forward a bona fide defence giving rise to triable issues....The affidavit material presented does not disclose a defence on the merits....The onus at all times was on the defendant to establish sufficient cause. They have not shown sufficient cause for the exercise of discretion in their favour.”

[15] Similarly, in Evans v Bartlam [1937] 2 All E R 646, a decision of the House of Lords, where judgment in default of appearance was sought to be set aside, Lord Wright, at p 656, said this:

“In a case like the present, there is a judgment, which, though by default, is a regular judgment, and the applicant must show grounds why the discretion to set it aside should be exercised in his favour. The primary consideration is whether he has merits, to which the court should pay heed; if merits are shown, the court will not prima facie desire to let pass a judgment on which there has been no proper adjudication...

He clearly shows an issue which the court should try. He has been guilty of no laches in making the application to set aside the default judgment, though as Atwood v Chichester [1878] UKLawRpKQB 4; (1878) 3 QBD 722 and other cases show, the court, while considering delay, has been lenient in excluding applications on that ground. The court might also have regard to the applicant's explanation why he neglected to appear after being served, though as a rule his fault (if any) in that respect can be sufficiently punished by the terms, as to costs, or otherwise, which the court, in its discretion, is empowered by the rule to impose."

CONCLUSIONS

[16] I think the defendant has a defence on the merits. There are other parties which I think may be necessary parties to this action such as Ashleem Investments Limited and the Habib Bank. In the circumstances therefore I am satisfied that I should exercise my discretion and set aside the default judgment entered on 28 July 2011 and the Writ of Fifa issued in execution thereof, permanently stay execution of the Writ and allow the defendant to defend.

[17] The interim orders made on 1 August 2011 are also to be set aside.

COSTS

[18] There is nothing to displace the usual rule so I order that the plaintiff pays the defendant's costs which I assess based on the material filed and the time of hearing as $1,500.

ORDERS

[19] I therefore make the following orders:

• (a) The default judgment entered on 28 July 2011 and the Writ of Fifa issued in execution thereof are set aside.
  
• (b) Execution of the Writ of Fifa is permanently stayed.
  
• (c) The interim orders made on 1 August 2011 are also set aside.
  
• (d) The defendant shall file its defence within 28 days with leave to file joinder or other applications as it sees fit.
  
• (e) The matter is to take its normal course thereafter.
  
• (f) The plaintiff shall pay the defendant's costs of $1,500 within 14 days.
  

Sosefo Inoke
Judge