N2131

PAPUA NEW GUINEA

[In the National Court of Justice Mt. Hagen]

WS. No. 713 of 2000

Between:

Edward Eganda Megeria
Plaintiff/Respondent

And:

Don B Romanong,
Provincial Administrator Southern Highlands
First Defendant/Applicant

And:

Southern Highlands Provincial Government
Second Defendant/Applicant

Mt. Hagen: Davani J
2001: 11 & 18 May 2001

PRACTISE AND PROCEDURE – Where default judgment is irregularly entered, the Court has a wide and inherent discretion to deal with it as a regularly entered judgment – distinction between a "nullity" and "an irregularly entered judgment" – National Court Rules O.1 r.8,). 1 r.9, O.12 r.8(2)(a), O.12 r.8(3)(a) and O.12, r.34.

Cases Cited:
Paul Marinda v The Independent State of Papua New Guinea N1026 dated 20 December 1991.
PNG National Stevedores Pty Ltd and the Bank of South Pacific Ltd v The Honourable Andrew Baing & 2 Ors N1705.
Leo Hannet and Elizabeth Hannet v The ANZ Bank SC505
George Page Pty Ltd v Malipu Bus Balakau [1982] PNGLR 140
Analby v Practorius (1988) 20 QBD 764
Permanent Trustee Co (Canberra) Ltd v Shocks and Holdings (Canberra) Pty Ltd (1976) 28 FLR 195

Counsel:
Nandape, for the Defendants/Applicants
Gonol, for the Plaintiff/Respondent

18 May 2001

DECISION
(Interlocutory Application)

Davani J:	This is an application by both Defendants/Applicants (‘Applicants’) to set aside an order obtained by the Plaintiff/Respondent (‘Respondent’) on 7 October 2000 when this court entered Default Judgment for the Plaintiff and for damages to be assessed. The Court awarded costs of the application to the Respondent. 

It is necessary that this court consider the manner in which the application for Default Judgment was brought and to also present a detailed discussion on the law relating to the setting aside of judgments.

The Respondent is a former employee of the Southern Highlands Provincial Government, the Second Defendant herein. By a Writ of Summons and Statement of Claim filed on 23 June 2000, the Respondent claimed he was underpaid salaries and various entitlements during the period 27 December 1989 to 20 April 1999.

The Applicants argue that service of the Writ of Summons and Statement of claim upon them was irregular and should as a mater of right be set aside. In presenting this argument, they refer to the affidavit of service filed by the Respondents and on which the Respondents relied when obtaining Default Judgment. This is the affidavit of one Edward Megeria, the Respondent himself, sworn on 10 July 2000 where he deposes that on 4 July 2000 at 1.40 pm, he served two (2) sealed copies of the Writ of Summons filed in these proceedings together with a cover letter dated 27 June 2000 on a Mr Peter Reve "…the Assistant Provincial Administrative Officer at the Southern Highlands Provincial Headquarters in Mendi who accepted service on behalf of the First and Second Defendants". The affidavit has no attachments.

The Applicants argue the Respondent is in default of Order 12 Rule 34 of the National Court Rules which states:

"Judgment shall not be entered against a Defendant under this Division unless:-

(a)	An affidavit is filed by or on behalf of the Plaintiff proving due service of the writ of summons or notice of the writ on the Defendant, or 
(b)	The Plaintiff produces the writ of summons endorsed by the Defendants Solicitor with a statement that he accepts service of the writ on the Defendants behalf; and
(c)	An affidavit is filed by or on behalf of the Plaintiff proving the default of the Defendant upon which the Plaintiff relies."

Ms Nandape for the Applicants argues that proper service was not effected on the Defendants for the following reasons;

1.	Service on the First Defendant should have been personal service as stipulated in Order 6 Rule 2 (1) of the National Court Rules and that therefore the alleged service on Mr Reve was improper.

2.	Service on the Second Defendant was not proper as Mr Reve was not the duly authorised officer to accept service in that the documents should have been served on the Second Defendants Administrator, Personal Secretary or in their absence the Legal Officer or Legal Clerk as these two persons are directly involved with legal transactions entered into by the Second Defendant. 

Ms Nandape relies on the affidavit of Backly Tanza, the Defendants Legal Clerk, sworn on 21 March 2001 and filed on the same day which states inter alia:

1.	The proper procedure is to serve the summons on the Administrator, the Personal Secretary or himself (Backly Tanza), the legal clerk.

2.	That he is unable to confirm if the summons had been served on the Second Defendant as he does not have any records confirming service and that as a result he did not inform the Second Defendants lawyers. (of these proceedings).

Ms Nandape did not furnish the court with the appropriate legislation supporting her propositions on service of legal documents on the Second Defendants duly appointed representatives as confirmed by Backly Tanza’s evidence.

In response, Mr Gonol for the Respondent submitted also that it was the accepted practise to serve legal documents on the Second Defendants or the Second Defendants administration officer as at that time there was no act governing service of court process. He also submitted that he complied with the same procedure when he served the documentation seeking orders for Default Judgment, upon the Second Defendant. The Affidavit of service of Edward Megeria sworn on 2 October 2000 and filed on 10 October 2000 deposes to this.

Ms Nandape deposes in her affidavit sworn on 23 March 2001 that in late October 2000, her employer firm Tamutai lawyers, received instructions from the Second Defendant to review this matter and numerous other Default Judgments and Garnishee Orders. She further deposes that; 

1.	On 30 November 2000, the Second Defendants Administrator referred to Tamutai Lawyers, Mr Gonol’s letter of 25 September 2000 enclosing Notice of Motion and affidavits filed in support of application for Default Judgment.

2.	On 6 March 2001, she, Ms Nandape, received instructions from her principal to file Notice of Intention to Defend and Defence in this matter.

3.	On 7 March 2001, she conducted a search of the court file which confirmed that Default Judgment had been entered.

Was judgment irregularly entered against the First and Second Defendants?

For me to make the legally correct decision, I will review the law on setting aside irregularly entered judgments and the remedies available to the aggrieved parties.

First Defendant – Clearly, on the facts and affidavits filed, the Respondent has breached Order 6 Rule 2 (1) of the National Court Rules, by not serving the writ personally on the First Defendant. That is not in issue.

Second Defendant – Ms Nandape has not presented legislation on which she relies to support her submissions that service is improper. Both Counsel before me have not done that. I have had recourse to Section 7 of the Organic Law or National and Local-level Governments of 1995 which states:

"7.	Service of process

Any notice, summons, writ or other process required to be served on a Provincial Government or a Local-Level Government maybe served on an officer designated by the Provincial Government or the Local-level Government for that purpose."

I have seen that, Mr Backly Tanza’s affidavit is evidence of the Second Defendants service process and which is that the documents should be served on the Administrator, Personal Secretary or Legal Clerk and who are the proper officers "designated" by the Second Defendant to receive service of documents.

The Writ of Summons in this case, having been filed on 23 June 2000 would then have to have been served in accordance with that designated procedure.

Could the Plaintiff have chosen another option of service considering the uncertainty in relation to service at that time.

In the case Paul Marinda v The Independent State of Papua New Guinea N1026, dated 20 December 1991 at page 23, his honour discussed service by the Plaintiff upon the State and the difficulties associated with service upon the State and the possible remedy available to a party attempting to serve on the State (or anybody for that matter), which the Plaintiff could have adopted, if he wanted or chose to, a situation analogous to this;

"He has not served the State strictly in accordance with the law. Now I realize that there are difficulties in finding a senior member of the government just to serve a summons. That may be so, but if there are service difficulties perhaps the Plaintiff should have sought for substituted service".

Having said that, I find that service on the Second Defendant was irregular and in breach of the procedures designated by the Second Defendant by virtue of Section 7 of the Organic Law on Provincial Governments and Local-level Governments.

How should the Court exercise its discretion where judgment is irregularly obtained?

The authority often quoted on this issue is Analby v Praetorius (1988) 20 QBD 764 which stands for the proposition that if a judgment is irregularly entered, the defendant is entitled to set it aside ex debito justitiae (as required in the interests of justice).

Upon a close analysis of Analby v Praetorius (supra) there is a further distinction to be made between judgments entered irregularly in acting under a rule and a judgment obtained irregularly independently of the rules. (My stress). There the court held that the irregular entry of judgment was made independently of any of the rules and that the Plaintiff had no right to obtain any judgment at all.

In this case, the Plaintiff did have a right to serve the writ, he did serve it and I have now found there was an irregularity in service, an irregularity falling within Order1 Rule 8 of the National Court Rules which states;

"8.	Non-compliance with Rules not to render proceedings void. 

Non-compliance with any of these Rules, or with any rule of practice for the time being in force, shall not render any proceedings void, unless the court otherwise so directs, but the proceedings may be set aside, either wholly or in part, as irregular, or may be amended or otherwise dealt with in such a manner, and on such terms, as the court thinks fit. (my stress)

9.	Application to set aside for irregularity.

An application to aside any proceedings for irregularity shall not be allowed unless it is made within a reasonable time or if made after the party applying has taken any fresh step with knowledge of the irregularity". (my stress)

Therefore, an application to set aside, in this case, for irregularity, is subject to Order1 Rule 9, which is that it must be "made within a reasonable time" and that "the Applicant has not taken any fresh step with knowledge of the irregularity." 

The latter component i.e taking any fresh step, is not in issue so I will not discuss that aspect. On considering whether the application was made within a reasonable time, I noted that after receipt of instructions from the Defendants on 30 November 2000, the Applicants lawyer did not attend on the matter until 6 March 2001, when the file was referred to Ms Nandape by her Principal. Ms Nandape filed the application to set aside Default Judgment on 30 March 2001. I do not have any evidence before me as to what occurred during the period 30 November 2000 to 6 March 2001 when the matter was referred to Ms Nandape. I note from Ms Nandape’s evidence that on receipt of instructions from her principal (6 March 2001) Ms Nandape conducted inquiries and searches to establish the background of the Default Judgment. 

From my own knowledge of the court system, I am aware that the courts would have gone into vacation commencing on 24 December 2000 to the end of January 2001. It appears, the both lawyers for the Plaintiff and Defendant did not progress the matter until late March 2001 i.e. the Applicants Lawyers filing the application to set aside and the Respondents Lawyers letter to the Assistant Registrar of 27 March 2001 requesting that the matter be set down for hearing on assessment of damages. I do not have any evidence that this letter was served on the Applicants Lawyers. I also note from the court file that on 9 April 2001 when the matter was mentioned, there was no appearance by either the Applicants or their lawyers. The Respondents lawyer was in attendance. Since then, the matter has not progressed until the 11 May 2001 when the application to set aside was argued.

I find that the application to set aside was filed within a reasonable time considering the courts diary in December 2000, the court vacation and the investigations carried out by Ms Nandape during March 2001. In saying so, I will distinguish this case with PNG National Stevedores Pty Ltd and the Bank of South Pacific Ltd v The Honourable Andrew Baing and two others N1705, where his Honour Kapi DCJ stated at pg 5 that "the general rule is that a perfected judgment cannot be recalled or varied, for the public interest requires that the judgment when it is entered should conclude the litigation". However, there are exceptions to this rule which his honour set out as taken from the case Permanent Trustee Co. (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd 1976 28 FLR 195 at 198, one of those exceptions being those which are authorised by statute, as in this case, Order 1 Rule 9. His Honour in the PNG National Stevedores case found that the application to set aside was filed seventeen (17) months after the order was made and because there was no explanation for this delay, his honour in the exercise of his discretion, did not grant the relief sought i.e. set aside the consent judgment. In this case, the application to set aside Default Judgment was filed within three (3) months, not taking into account the court vacation in the latter part of December 2000 and January 2001.

Should the court at this time consider whether the Applicant has a Defence?

Ms Nandape’s submissions are that in an application to set aside an irregularly entered judgment, the court should not consider, as in the case of regularly entered judgments, whether -

1.	There is a Defence on the merits
2.	The reasons for the delay in filing the application to set aside 
3.	An explanation as to why the judgment was allowed to go by Default.

I consider this argument to be misconceived and misleading. This point was argued and decided in an appeal from the National Court to the Supreme Court where his Honours Kapi DCJ, Los J and Salika J in the case Leo Hannet and Elizabeth Hannet v The ANZ Bank SC505, discussed the courts inherent discretion to set aside, the filing of a Defence and the difference between a "nullity" and "an irregularly entered judgment". In that case, their honours agreed that "the distinction is made between proceedings that are a nullity and those that are a mere irregularity. To the first, Order 1 Rule 8 is not applicable and the court has no discretion but to set it aside. If it is an irregularity within the meaning of Order 1 Rule 8, the court has a wide discretion to deal with it under the terms of the rule. A party who asks for a judgment to be set aside ex debito justitae simply is asking the court to exercise its discretion in one way, namely to set aside judgment in the circumstances".

By way of background, in the Leo Hannet Supreme Court Appeal, their honours considered an appeal from the Chief Justice where he, having found judgment was irregularly obtained, directed that the Applicant show evidence of a Defence on the merits. Before his honour handed down his decision, he adjourned to allow the Applicant to produce affidavit deposing to evidence on the merits and annexing a draft Defence. Having considered the Applicants defence, the Chief Justice concluded that he was not satisfied there was a Defence on the merits stating further that the proposed Defence only pleaded an arrangement in relation to the house that was the subject of the loan for which the Applicants had given Guarantees. The Applicant appealed against the Chief Justices decision stating his Honour erred when he, once concluding that judgment was irregularly entered, in that there was no proper service in accordance with the National Court Rules, that he had no discretion but to set aside the Default Judgment and should not have directed the second appellant to prove a defence on the merits. Their Honours Kapi DCJ, Los and Salika JJ when considering the appeal in the Supreme Court, agreed with the Chief Justices decision in the National Court. They held that Order 12 Rule 8 (2)(a) and (3)(a) of the Rules gives the court a wide discretion when setting aside a Default Judgment which means the court can request evidence of Defence on the merits, where courts have found judgments to have been irregularly entered.

The Court was of the same view in an earlier judgment of Greville Smith J of Page P/L v Malipu Balakau [1982] PNGLR 140 (when considering Order 93 Rule 17 (old rules) and presently Order 1 Rule 8) here his honour said:-

"This leaves open the matter of a judgment obtained irregularly. In my opinion, ordinarily the same rules apply in the case of an irregularity which falls within the ambit of Order 93 Rule 17".

His Honour concluded that the practice in relation to judgments obtained regularly should apply to judgments obtained irregularly. This he concluded comes within the "untrammelled discretion with a view to doing justice."

In the case before me, I have found that Default Judgment was irregularly entered. I will, with a view to doing justice, consider whether the Defendants have a meritorious Defence.

The Defendants have not filed an affidavit and draft Defence for this courts consideration. However, on the court file is the affidavit of the Plaintiff Edward Eganda Megeria sworn on 17 March 2001 and filed on 30 March 2001 which the Plaintiffs lawyer relied on and which shows that the Applicants/Defendants do not deny or dispute that the Plaintiff is the Second Defendants former employee and that unpaid wages/entitlements are due to him. This then confirms that liability is not in dispute. I refer specifically to paragraph 11 of his affidavit, and annexures ‘A’, ‘B’ ‘G 17(a)’, ‘G 17 (b)’, ‘G 37’ and ‘G 39’. The evidence shows that the Second Defendant has not paid the Plaintiff only because of the unavailability of funding. (Re annexures ‘G 37’ and ‘G 39’ of Edward Megeria’s affidavit). Therefore, it will not serve any useful purpose if the Default Judgement is set aside when the matter in contention is one of how much is to be paid by the Second Defendant to the Plaintiff.

I note also that the Plaintiff claims unpaid wages and entitlements from 27 December 1989 to April 1999. The writ of summons filed on 23 June 2000 claims entitlements that arose six (years) before the summons was filed on 23 June 2000. Relying on the wide discretion available to me under Order 1 Rule 9 which states interalia, "that proceedings may be dealt with in such a manner, and on such terms as the court thinks fit", it is appropriate that at the hearing of the assessment of unpaid wages and entitlements, the Defendant have leave to raise the statutory defence of section 16 of the Frauds and Limitation (Amendment) Act 1992, if necessary, to assist the court in assessing the correct amount due.

In relation to costs to be paid, I note from evidence before the court and submissions that court proceedings were filed because of the lack of a response(s) from the Defendants. Even then, because the proceedings were not properly served, this has now resulted in Default Judgment and presently, the application to set aside. Under these circumstances, it is appropriate that, both parties meet their own costs of this application.

My orders are as follows:

1.	I refuse the First and Second Defendants application to set aside the Default Judgment of 7 October 2000;

2.	I give leave to the both Defendants to raise the statutory Defence of Section 16 of the Frauds and Limitations (Amendment) Act 1992, at the hearing of the assessment of unpaid wages and entitlements.

3.	The Plaintiff immediately set this matter down for hearing of assessment of unpaid wages and entitlements.

4.	Each party shall pay their own costs of the application.
________________________________________________________________________________
Defendants/Applicants	:	Tamutai Lawyers
Plaintiff/Respondent		:	Paulus Dowa Lawyers.