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Western Builders Ltd v Chaudhary Holdings Propritary Ltd [2014] FJHC 472; HBC171.2012 (27 June 2014)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION


Civil Action No. HBC 171 of 2012


BETWEEN:


WESTERN BUILDERS LIMITED
a limited liability company having its registered office at Koula Road, Varadoli, Ba
PLAINTIFF


AND:


CHAUDHARY HOLDINGS PROPRITARY LIMITED
a limited liability company having its registered office at K W March Buildings, 81 Marks Street, Suva
DEFENDANT


BEFORE : Master Thushara Rajasinghe

COUNSEL: Mr. Padarath N. for the Plaintiff

Mr. Singh U. for the Defendant


Date of Hearing : 16th April, 2014

Date of Ruling : 27th June, 2014


RULING


  1. INTRODUCTION
  1. The Defendant filed this Summons dated 18th of December 2013 seeking following orders inter alia;
    1. The Judgment by Default entered on 23 October 2012 be set aside,
    2. The Defendant be at liberty to defend the claim by filing a statement of Defence within 14 days of the Order for setting aside herein,
    3. The execution of the Default Judgment herein be stayed until the determination of this application,
    4. The cost of this application be costs in the cause,
  2. Having being served with this Summons, the Plaintiff appeared in court on the 18th of February 2014, where the Parties were given directions to file their respective affidavits in oppositions and reply which they filed accordingly. Subsequently, this Summons was set down for hearing on the 16th of April 2014. The counsel for the Defendant and the Plaintiff made their respective oral arguments and submissions during the cause of the hearing and tendered their respective written submissions at the conclusion of it. The Defendant was allowed to file his reply written submissions after the conclusion of the hearing. Having considered the Summons and respective affidavits and submissions, I now proceed to pronounce my ruling as follows.

B. BACKGROUND


  1. The Plaintiff instituted this action by way of a writ of summons dated 21st of June 2012 seeking following orders inter alia;
    1. Judgment for the sum of $ 53,267.55,
    2. Judgment for interest on the sum claimed from 1st of September 2007 to the 18th of June 2012 at the rate of 13.5% per annum under the Law Reform ( Miscellaneous Provision) ( Death and Interest) Act Cap 29, laws of Fiji in the sum of $ 34,517.37,
    3. Judgment for interest on the sum claimed from the 1st of September 2007 to the date of payment and/or judgment at the rate of 13.5% per annum under the Law Reform ( Miscellaneous Provision) ( Death and Interest) Act Cap 29, laws of Fiji,
    4. General Damages for breach of contract,
    5. Costs,
  2. The Plaintiff claim is founded on the allegation of breach of contract by the Defendant. The Plaintiff had entered into a contract with the Defendant to carry out building construction works for the extension of a super market at Vunimono, Nausori for a sum of $ 280,366. Afterward, the agreed amount was adjusted to $ 233,267.55 and the Defendant paid a sum of $ 180,000. Thereafter, the Defendant has been defaulted or neglected to pay the balance sum of the $ 53,267.55. The Plaintiff instituted this action to recover that defaulted amount with the interest.
  3. The Affidavit of service was filed on 10th of July 2012. The Defendant failed to file their acknowledgment of service pursuant to Order 12. The Plaintiff then entered a default judgment against the Defendant on the 23rd of October 2012 pursuant to Order 13 rule 1 of the High Court rules. The Defendant is now seeking to set aside said default judgment in this Summons.

Defendant's Case,


  1. The Defendant application for set aside the default judgment entered on 23rd of October 2012 constitute with two main components. The first is that the judgment was entered irregularly. The second component is that the Defendant has a meritorious defense against the claim of the Plaintiff. The contention of irregularity is founded on two main grounds, the first is that the service of the writ is defective and the writ of summons has not been served on the Defendant. The second ground is that the judgment on the interest is not a liquidated claim pursuant to Oder 13 r 1.
  2. In respect of the ground of irregularity, the Defendant contended that they were never served with this writ of summons, nor did the default judgment entered against them. The Defendant came to know about this proceeding once they were served with the winding up notice by the Plaintiff in order to execute this default judgment. Additionally, the Defendant contended that the service of the writ is defective and not in conformity with the section 391 of the Companies Act. The Plaintiff has served the writ to the registered office of the Defendant by registered post, instead to the registered postal address of the Defendant as required by the section 391 of the Companies Act.
  3. The Defendant further submitted that the claim of interest pursuant to section 5 of the Law Reform (Miscellaneous Provisions) (Death and Interest) Act is not a liquidated claim wherefore; the default judgment entered pursuant to Oder 13 r 1 is irregular.
  4. Apart from these two grounds on irregularity, the Defendant submitted that they have a meritorious defense with the real prospect of success. They deny that the parties have agreed for a contracted amount and further allege that the Plaintiff failed to comply with their obligations under the said contract for construction.

Plaintiff's Case,


  1. The Plaintiff deposed in their affidavit in opposition that the Defendant has not provided their registered postal address to the registrar of company as required under section 109 and 110 of the Companies Act. Under such circumstances, they had to serve the Writ on the Registered Office. The Plaintiff extensively provided the material details of the substantive dispute between the parties and forcefully contented that the Defendant has no meritorious defense.

C. THE LAW


  1. Order 13 rule 1 (1) states that;

" Where a writ is indorsed with a claim against a defendant for a liquidated demand only, then, if that defendant fails to give notice of intention of defend, the plaintiff may, after the prescribed time enter final judgment against that defendant for a sum not exceeding that claimed by the writ in respect of the demand and for costs, and proceed with the action against the other defendants, if any"


  1. Order 13 rule 10 provides the jurisdiction for set aside such judgment entered pursuant to Order 13 rule 1, where it states that;

"Without prejudice to rule 8 (3) and (4), the court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuant of this Order".


  1. Lord Atkin in Evans v Bartlam (1937) A.C. 437) has outlined the legal foundation of the court's jurisdiction to set aside default judgments, where his lordship held that;

"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".


  1. The Default judgments have being divided into two spheres as regular and irregular judgments. Fry L.J in Anlaby and others v Peatorius (1888) Q.B.D. 765, has outlined the approaches to be adopted on these two classes of default judgments, where Fry L.J held that;

"There is a strong distinction between setting aside a judgment for irregularity in which case the Court has no discretion to refuse to set it aside, and setting it aside where the judgment though regular, has been obtained through some slip or error on the part of the defendant in which case the Court has a discretion to impose terms as a condition of granting the defendant relief".


D. ANALYSIS,


  1. I now turn to the Defendant's first ground of irregularity, that the service of writ of summons was defective and never served on the Defendant. In order to deliberate this issue of defective service of the writ, it is worthy to review the applicable procedure of service of writ on bodies cooperate. The general rules for the service of Originating process are provided in Order 10 of the High Court rules, which states that " a writ must be served personally on each defendant by the Plaintiff or his agent". However, O 10 r 1 (2) has provided an alternative mode of service either by sending a copy of the writ by ordinary post or inserting it through the letter box at the usual or last known address of the Defendant if he resides within the jurisdiction. Order 10 r1 (7) has provided for the manner in which a writ could be served on a body corporate, where it states that;

" this rule shall have effect subject to the provision of any Act and these rules and in particular to any enactment which provides for the manner in which documents may be served on bodies corporate".


  1. Order 65 rule 3 provides the procedure for service of documents on a body corporate, where it states that;
  2. The noteworthy feature of Order 65 r 3 (2) is the omission of the phase "for which provision is not otherwise made by any enactment" as it has stated in Order 65 r 3 (1). This might generate a confusion whether Order 65 r 3 (2) is not subjected to any enactment which provides for the manner in which documents may be served on a body corporate. This confusion has discussed and settled in Boocock v Hilton International Co ( 1993) 4 All E.R 19, where Neill L. J. held that;

" it is sufficient to summarise the matter by saying that, in the absence of any relevant enactment, service of originating process on a body corporate can now be effected either by personal service on one of the persons named in Ord 65 r 3 (1) or ( following the changes made in 1979 which allowed postal service) by sending a copy of the writ to the registered office of the body corporate. In the present case, however, the 1985 Act ( companies) make provision as to service and it seems to me that, in the light of Ord 10 r 1 (7), section 695 (1) governs the matter despite the fact that there is no reference to " any enactment" in Ord 65 r 3 (2)".


  1. In view of Order 10 r 1 (7), Order 65 r 3 (I ) and (2) and Neill L.J's passage in Boocock v Hilton International Co ( Supra), I find that the section 391 of the Companies Act governs the procedure for service of documents including originating process on a body corporate. Section 391 of the Companies Act states that;
  2. The employment of the word "may" in section 391 has appeared that it has left open the possibility that some other form of service could be used concurrently with the section 391. Kerr LJ. in Singh v Atombrook Ltd ( 1989) 1 All ER 385) cast doubt of the such interpretation where he observed that " I have some doubts as to why "may" must be construed as " must" in that provision". However, Neill LJ in Boocock v Hilton International Co (supra) brought some certainty to this issue, where he held that;

" In Singh v Atombrook Ltd ( 1989) 1 All ER 385) that Court of Appeal considered the provision for service on a limited company set out in s 725 of the 1985 Act. Section 725 (1) provides that a document may be served on a company by leaving it at, or sending it by post to, the company's registered office. Kerr LJ expressed doubts as to whether the word " may" had to be construed as "must" and appears to have left open the possibility that some other form of service would be adequate. It seems to me, however, that though the matter is not wholly free from doubt, the combined effect of Ord 10 r 1 (7), and ord 65 r 3 (1) is to limit the methods of service of originating process to the methods prescribed in the 1985 Act".


  1. I accordingly, held that the proper procedure of service of originating process on a limited company has provided under section 391 of the Companies Act, which is apparently to a certain extent different from the corresponding section of 1985 Act of UK. Section 725 of 1985 Act provides that a document may be served on a company by leaving it at, or sending it by post to the company's registered office. Conversely, section 391 has provided two different points of destination for the service by post and for the service by leaving the document. If a document is to be served by post pursuant to section 391, it should be posted to the registered postal address of the company and if the service is by leaving the document, it should be left at the registered office of the company. The Company is required to provide it registered postal address and the place of its registered office to the Registrar of Company under section 109 and 110 of the Companies Act.
  2. Turing to this instance case, the Plaintiff has served the writ on the Defendant by posting it to the registered office of the Company, which is undoubtedly in contrary to the section 391 of the Companies Act. The Plaintiff contended that upon a search at the Registrar of Companies, they found that the Defendant has not provided their registered postal address and only provided the place of their registered office; wherefore they had to serve the writ on the registered office of the defendant by registered post, which the Plaintiff claims as an effective service. I am reluctant to concur with such a proposition and find it as a misconceived contention. The court should not adopt such a liberal approach to deviate from the literal meaning of the section 391 unless it is compelled with an exceptional circumstance.
  3. The Plaintiff failed to provide any credible explanation why they opted not to leave the writ at the registered office of the Defendant. They only gave an explanation for the service of the writ on the registered office by post. Under such circumstances, I am satisfied that service of the writ on the registered office of the Defendant by registered post is a defective service pursuant to section 391 of the Companies Act, hence the judgment entered in default of acknowledgment of service consequent upon such defective service of writ by the Defendant is an irregular judgment.
  4. A mere conclusion that the judgment is an irregular judgment, does not allow the court to set it aside promptly without giving proper consideration whether this irregularity would fall with the scope of Order 2 rule 2 as mere irregularities or as they have actually gone into the roots of the default judgment. In pursuant of Order 13 r 10 the court is not only allowed to set aside the judgment, but could vary the judgment on the ground of irregularity, if the court thinks just.
  5. The view mentioned above has discussed and elaborated by the Chancery Division in Bank of Credit and Commerce International ( Oversea) Ltd ( In liquidation) v Habib Bank Ltd ( 1998) 4 All ER 753, where Park J while discussing the suitable approaches on irregularities in the writ or in the default judgment has broaden the scope, or rather I say, brought a new dimension to the wildly acclaimed passage of Fry L.J in Anlaby and others v Peatorius (supra), Park J held that;

" I think that Mr. Higgs, who appeared for Habib Bank, says that the principles on which the court exercise its jurisdiction under ord 13 r 9 and the way that they apply in this case, are as follows,


  1. If there is something irregular about the writ or the judgment in default, then, subject to (2) below, the court should set the judgment aside. The Defendant is, he says, entitled to have it set aside ex debito justitiae. In this case he suggests that there are irregularities in the writ and the judgment. The main complain about the writ are.......................
  2. As an exception to (1), if there are irregularities in the writ or the default judgment but they are de minimis or merely clerical errors, the court will not set the judgment aside, Rather,it will correct the errors..................
  3. If there was nothing irregular about the writ or the judgment, but the defendant wants to have the judgment set aside in order to defend the action, the court has a discretion which it will exercise on principles laid by various cases especially Alpine Bulk Transport Co inc v Saudi Eagle Shipping Co Inc, The Saudi Eagle ( 1986) 2 Lloyd's rep 221. The court will want to be satisfied that there are sufficient merits in the defense which the defendant wishes to present before it will set the judgment aside. There is no point in setting it aside if the defednat is almost certainly going to lose any way....................

Mr. Higgs' submissions, in particular proposition (1), may have represented the approach of the court in the earlier part of this century, but in my judgment they do not represent the approach of the courts now. It is not the approach which I intend to follow.


Assume a case where the writ and the judgment did suffer from some irregularities. Nevertheless assume also that, by the time that the application to set the judgment aside comes to be heard, time has passed and almost certainly a great deal of information about the case, verified by affidavits, will be before the court. If, from the affidavits and exhibits, the court concludes that, even though there were irregularities in the writ or the judgment or both, the substantive content of the judgment is right, the court will not set the judgment aside. The only effect if it did would be to put the parties to further expense and delay to reach a regular judgment for the same amount.


Further, it is the same in principle, if the court is satisfied from the affidavits and exhibits that, although the amount in the default judgment was wrong, it ( court) knows what the correct amount was. The court will not set the incorrect judgment aside and make the Plaintiff start again. It will vary the judgment to the correct amount.


Of course, if the material before the court shows that the judgment was or might have been wrong but the court cannot, without a trial, be confident of what the correct judgment should have been, it will set the judgment aside".


  1. This radical departure from the approach identified by Fry L.J in Anlaby and others v Peatorius (supra) by Park J in Bank of Credit and Commerce International (Oversea) Ltd ( In liquidation) v Habib Bank Ltd (supra) have undoubtedly generated a regime of convenience which only can apply on the irregularities in writ or in the judgments. However, the irregularity, which I find in this instance action, is not in the writ, nor in the judgment. The irregularity is with the procedure which eventually led to the entering of this default judgment.
  2. In Singh v Atombrook Ltd (Supra) Kerr LJ found that

" with regard to the wide terms of Order 2 r 1 and its purpose of abolishing the distinction between non compliance with procedural rules which renders proceedings a nullity and non- compliance which merely render proceedings irregular, failure to comply with section 725 (1) of the Companies Act 1985 which provides that a writ must be served on a company by leaving it at, or serving it by post to, the company's registered office, does not, even on the basis that the provision is mandatory, constitute such an irregularity in the proceedings as to render them a nullity and entitled the defendant to have them set aside ex debito justitiae instead, non compliance with s 725 is a mere irregularity within Ord 2 r 1(1) and as such does not nullify the proceedings".


  1. However, the factual circumstances in Singh v Atombrook (supra) is to some extent different from this instance case, where in that action, the Plaintiff mistakenly, which was mainly due to the act of Defendant, served the writ on an address of a company which was owned by the Defendant's company but traded under a different name. In this matter the Defendant claims that the writ was never served on them, though the Plaintiff claimed that it was served to the registered office of the Defendant by registered post.
  2. Beside that the irregular service of the writ contrary to section 391 of the Companies Act, the Defendant claims that the writ was never served on them. The Plaintiff has failed to provide any registered postal receipt in order to substantiate their claim of that the writ was served by registered post. In fact, I find that the Plaintiff has not challenged or contradict the Defendant by evidence other than merely stating it in their affidavit in opposition. Indeed, the Plaintiff has provided some registered postal receipts in respect of subsequent service of notices of winding up on the Defendant's registered office. With that the Plaintiff attempted to form an inference that if those notices have properly reached, the writ would have reached as well, which I find in misconceived and has no credible merit in it.
  3. Section 2 (5) of the Interpretation Act states that;

" where any written law authorizes or requires any document to be served by post, whether the expression 'serve" or " give" or "send" or any other expression is used, unless a contrary intention appears, the service shall be deemed to be effected by properly addressing to the last known postal address of the person to be served, prepaying and posting, by registered post, an envelope containing document, and, unless the contrary is proved, to have been effected at the time at which the envelop would be delivered in the ordinary course of the post".


  1. In view of the section 2 of the Interpretation Act, the onus is on the Defendant to satisfy the court that the writ was served by registered post by properly addressing the address of the person to be served and delivered the envelope containing the writ in the ordinary course of the post. There is no credible evidence presented by the Plaintiff to satisfy such requirements.
  2. In my opinion, Order 10 r 1 (3) (b) (ii) deals with the required component for a proper affidavit of service to prove the due service of originating process. According to order 10 r 2 (3) (b) (ii) any affidavit proving due service of the writ must contain a statement to the effect that; in case of service by post, the copy of the writ has not been returned to the Plaintiff through the post undelivered to the addressee. The affidavit of service filed by the Plaintiff on 10th of July 2012 has no such statement, which is certainly contrary to the requirements stipulated under Order 10 r 1 (3) (b).
  3. Having concluded that the service of writ to the registered office of the Defendant by registered post is an irregular service and the absence of credible evidence to prove the requirements stipulated under section 2 (5) of the Interpretation Act, I am satisfied that this writ of summons has never being properly served on the Defendant.
  4. Lord Green M.R. in Craig v Kanseen ( 1943) KB 256 at p 262,263 held that;

" in my opinion it is beyond question that failure to serve process where service of process is required goes to the root of our conceptions of the proper proceedings, the idea that an order can validly be made against a man who has had no notification of any intention to apply for it has never been adopted in this country. It cannot be maintained that an order which has been made in those circumstance is to be treated as a mere irregularity and not as something which is affected by a fundamental vice. The affidavit of service in the present case was on the face of it insufficient, and no order should have been completed on the strength of it".


  1. The above stated passage of Lord Green MR in Craig v Kanseen (supra) is certainly applicable in this case. Wherefore, I hold that the default judgment entered on 23rd of October 2012 is irregular and should be set aside unconditionally. I do not wish to discuss other grounds raised by the Defendant during the cause of the hearing as my above findings suffice me to make my conclusion. I accordingly make following orders that;
    1. The Default Judgment obtained on 23rd of October 2012 is hereby set aside,
    2. The Defended is directed to file and serve a statement of defense within 14 days of this ruling,
    3. The matter is to take normal cause,
    4. Cost of this application be cost of the cause,

Dated at Suva this 27th day of June, 2014.


.....................................
R.D.R. Thushara Rajasinghe
Master of High Court, Suva

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