N8050

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO. 1348 of 2015

BETWEEN:
COURTS (PNG) LIMITED
Plaintiff

AND:
MICHAEL’S & MICHAEL’S LIMITED
First Defendant

AND:
MICHAEL RAMSAY EKRI
Second Defendant

AND:
NOELYNNE EKRI
Third Defendant

AND:
McKUAN MICHAEL JUNIOR EKRI
Fourth Defendant

Waigani: Anis J
2019: 23August and 11 October

NOTICE OF MOTION – Section 155(4) of the Constitution and Order 12 Rule 35 of the National Court Rules– setting aside default judgment – whether judgment was irregularly entered – Order 6 Rule 3 – National Court Rules – Section 431(1) of the Companies Act 1997 – personal service – whether due services of the writs were effected – delay – where the defendants applied promptly – explanation why judgment was entered in default in the absence of the applicants – whether delay inordinate – defence and cross-claim – whether defence and cross-claim have merits

Cases Cited:

Arman Larmer Surveys Ltd v. Chan Consolidated Ltd (2013) SC1253
Arman Larmer Surveys Ltd v. Chan Consolidated Ltd (2014) SC1609
Bank of South Pacific Ltd v. Robert Tingke (2014) SC1355
Danny Totamu v. Small Business Development Corporation (2009) N3702
Paul Paraka v. Madang Provincial Government (1997) N1596
Augus Walu v. Daniel Patrick Katakumb (2012) N4709
Gigira Development Corporation Ltd v. Komu Umbrella Joint Venture Ltd (2016) N6785
Mataure Rabaul Microfinance Ltd (1-78764) v. Margareth Bale (2018) N7283

Counsel:

Mr B Nutley, for the Plaintiff/Respondent
Mr A Mana, for the Defendants/Applicants

DECISION

11th October, 2019

1.	ANIS J:	I heard arguments in relation to a notice of motion filed by the defendants on 23 August 2019.  I reserved my ruling to a date to be advised. 

2.	Parties have been notified so I will rule on it now.

MOTION

3.	The defendants’ notice of motion seeks various relief.  I will deal with the first relief, and subject to my findings, proceed to consider the others.  The first relief reads, and I quote, Pursuant to Order 12 Rule 35 of the National Court Rules 2012 and Section 155(4) of the Constitution and the inherent jurisdiction of the National Court, the ex parte Court Order of 22 April 2016 be set aside.

4.	The ex-parte default judgment of 22 April 2016 (the Court Order) reads in part, and I quote:

1.	Judgment is entered for the Plaintiff against the First, Second and Third Defendants for the sum of K2, 830,147.00.
2.	In satisfaction of the Judgment, the Defendants shall deliver possession of the trucks and motor vehicles described as:
……
3.	The trucks and motor vehicles of the First Defendant shall be sold by the Plaintiff, or the Plaintiff’s agent, at a market price.
4.	The Plaintiff shall apply the proceeds of the sale of trucks and motor vehicles of the First Defendant, to satisfy the Judgment for damages, plus interest owing at the time of sale, with the balance to be paid to the First Defendant.
5.	The Defendants shall pay the Plaintiff’s costs on a lawyer/client or indemnity basis.
6.	The Defendants shall pay interest to the Plaintiff on the Judgment sum for damages, from the date of Judgment, at a rate of 22% per annum, compounding monthly.

BACKGROUND

5.	The claim was in relation to monies which the plaintiff alleged had been owed to it by the defendants under and a business loan agreement.  The plaintiff had alleged in the writ of summons and statement of claim (writ) the following: It had on 25 February 2013 entered into a loan agreement with the first defendant; that based on the loan agreement, it had provided a loan in the sum of K5, 529,700 to the first defendant to purchase 10 Mercedes Benz Prime Mover trucks; that the first defendant had defaulted on the loan agreement in the sum of K2, 830, 147; it had sought orders to recover the said sum and other enforcement orders.  On 22 April 2016, the plaintiff applied for and this Court granted default judgment.

6.	The defendants’ notice of motion on foot seeks to set aside the Court Order.  I note that the defendants had filed a similar notice of motion on 26 October 2017 to set aside the Court Order.  That notice of motion was itself dismissed ex-parte for want of prosecution on 15 March 2018.  The defendants had also applied to set aside the Court’s order that dismissed the notice of motion of 26 October 2017, on 20 March 2018, that is, in an attempt to re-instate their notice of motion of 26 October 2017. This Court refused the defendants’ notice of motion of 20 March 2018, on 19 June 2019.  I note that at the start of this hearing, I had queried counsel whether there would be any jurisdictional challenge in relation to the present motion.  Both counsel agreed and indicated to the Court that the present notice of motion was in order in that regard.  I will therefore proceed on that basis.

ISSUES

7.	The main issues for the first relief are, (i) whether default judgment was irregularly entered on the basis that the plaintiff had not duly served the writ on the first, second and third defendants, before default judgment was entered, (ii), if the Court finds due services of the writ upon the first, second and third defendants,whether the defendants have applied promptly to set aside the default judgment, (iii), whether the defendants have provided a valid explanation for allowing the judgment to be entered in default including reasonable explanation(s) for the delay in making the application, and (iv), whether the defendants have a defence and cross-claim on merits which should require the matter to be fully trialed.

LAW

8.	The principles for setting aside an irregularly entered judgment in a case where judgment is entered in default ex-parte are settled in this jurisdiction.  Chief Justice Sir Salamo Injia summarized them well, in my view, in the case of Arman Larmer Surveys Ltd v. Chan Consolidated Ltd (2013) SC1253.  At paragraph 8 of his judgment, His Honour stated, and I quote in part:

A default judgment irregularly entered is set aside as of right, regardless of a defence on the merits: Green & Co Pty Ltd (Receiver appointed) v Green [1976] PNGLR 73, Smedon v Davara House Pty Limited [1979] NGLR 324, Page Pty Ltd v Malipu Balakau [1982] PNGLR 140, Bank of South Pacific v Spencer [1983] PNGLR 140.

9.	The principles for setting aside a regularly entered judgment in a case where judgment isentered in default ex-parte, arealso settled.  Chief Justice Sir Salamo Injia in the same case and at paragraph 8 of his judgment, stated, and I quote in part:

A regularly entered default judgment may be set aside by showing 3 things – application to set side is made promptly, a reasonable explanation is offered for the delay in allowing judgment to be entered by default; and, an affidavit showing prima facie defence on the merits.  The Court has an unfettered discretion to set aside a regularly entered default judgment after taking into account all those and other relevant matters: Barker v The Government of Papua New Guinea, Davis &Bux [1976] PNGLR 340

10.	Later in 2014, the Supreme Court,this time sitting as a full court and in hearing the substantive appeal in Arman Larmer Surveys Ltd v. Chan Consolidated Ltd (2014) SC1609, confirmed the above 3 requirements required of an applicant in an application to set aside a regularly entered judgment, that is, (i) application to set aside is made promptly, (ii), a reasonable explanation is offered for the delay and (iii), an affidavit is filed which shows a prima facie defence on the merits.  The Supreme Court also held that regard should also be had to this other consideration, and I quote:

6.	The Court should also take into account whether irreparable prejudice would be caused to the plaintiff should the default judgment be set aside. Irreparable prejudice may be caused where there is an inordinate delay in the defendant seeking to have the default judgment set aside: 

IRREGULARITY

11.	The defendants’ claim on irregularity is this.  They deny that they had been duly served with the writ before default judgment was entered against them on 22 April 2016.  The plaintiff on the other hand argues that it had duly served the writ on the first, second and third defendants (the defendants), and therefore it says that the default judgment was regularly entered against them.

12.	The requirements for service upon a company are provided under section 431(1) of the Companies Act 1997 (Companies Act).  It states and I quote in part:

(1)	Notwithstanding the provisions of any other Act, a document, including a writ, summons, notice, or order in any legal proceedings may be served on a company as follows:—

(a)	by delivery to a person named as a director or the secretary of the company on the register;
(b)	by delivery to an employee of the company at the company's head office or principal place of business;
(c)	by leaving it at the company's registered office or address for service;
(d)	by posting it to the company's registered office, or address for service, or postal address;
(e)	by serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings;

(f)	in accordance with an agreement made with the company; or
(g)	by serving it at an address for service given in accordance with the rules of the Court having jurisdiction in the proceedings or by such means as a solicitor has, in accordance with those rules, stated that the solicitor will accept service.
(2)	The methods of service specified in Subsection (1) are the only methods by which a document in legal proceedings may be served on a company in the country.

13.	Let me look at the evidence that were before the Court at the material time. I refer to the affidavit of service of Gladys Keleu filed on 9 December 2015.  Mr Keleu deposes and I summarise them as follows:

1.	Mr Keleu said that on 8 October 2015 at 9:45am, he attended the first defendant’s current office which was located at section 2, Allotment 47, at Top town in Lae, and served a sealed copy of the writ upon a person by the name of Amanda.  He said Amanda had told him that she works as a secretary for the first defendant (first mode of service);

2.	On 13 October 2015 at 2:50pm, Mr Keleu said that he attended back at the first defendant’s same officelocated at Section 2, Allotment 47, Top town, Lae, Morobe Province, and served a sealed copy of the writ upon the third defendant who had identified herself as a director of the first defendant (second mode of service);

3.	And on 26 November 2015, at 10:45am, he said that he attended at the registered address of the first defendant, located at Section 36, Allotment 35, Doyle Street, Lae and served a sealed copy of the writ on a security guard at the premises who accepted service of the writ (third mode of service).

14.	I next refer to the affidavit of Noel Razan filed 7 April 2016.  The said affidavit, like Mr. Keleu’s affidavit, had been used in supportof the plaintiff’s default application.  At paragraph 3, Mr Razan attaches an extracted copy of a company search which the plaintiff had conducted of the first defendant.  The company extract is dated and I quote, As at 8 October 2015 (first company extract).  The company search was conducted shortly after the plaintiff had filed the writ on 29 September 2015.

15.	The first question I have is this.  “Did the plaintiff personally serve the writ on the first defendant?”  My consideration is as follows. The first mode of service effected by Mr Keleu, in my view, had been in compliance with section 431(1)(b) of the Companies Act.  I also refer to the third mode of service.  Mr Keleu had also effected service at the registered office of the first defendant, that is, pursuant to section 431(1)(c) of the Companies Act.  The registered address for service I note is corroborated by the first company extract.  And let me say this.  Service under section 431(1)(c) does not require service on a natural person at the registered office of a company but rather this, that is, an originating process is duly served on a company by leaving it at the company's registered office or address for service as stated in the company register that is kept at the office of the Registrar of Companies.  I notice that the defendants have filed a recent company extract of the first defendant.  I refer to annexure B1 to the affidavit of the second defendant filed on 14 August 2019.  The said extract is dated, As at 13 August 2019 (second company extract).  For this purpose, it would be wrong for me not to regard the first company extract as the relevant and correct evidence for this purpose.  Company records change from time to time so any changes that are shown in the second company extract are not unusual.  For this purpose, I note that the plaintiff had conducted searches at the company register concerning the first defendant at the material time after it had filed its writ and based on the search result, had effected service in the manner as deposed to by Mr. Keleu.

16.	Therefore, my answer to the question of whether the plaintiff had effected personal service of the writ on the first defendant before default judgment was entered on 22 April 2016, is, “yes, personal service of the writ was effected on two separate occasions on the first defendant and both services were valid.”

17.	“What about the second defendant?  Was he personally served with the writ before default judgment was entered on 22 April 2016 as required under the National Court Rules?”I refer Order 6 Rule 3 of the National Court Rules, which requires personal service of an originating process upon defendants. It states, and I quote in part, Personal service of a document may be effected by leaving a copy of the document with the person to be served or; if he does not accept the copy, by putting the copy down in his presence and telling him the nature of the document.

18.	In contesting service of the writ, the second defendant has deposed his reasons at paragraphs 53 and 54 of his affidavit.  I notice that the second defendant questions the evidence that he had been duly served with a sealed copy of the writ by Michael Goodwin, counsel for the plaintiff.  The second defendant’s argument is that Mr Goodwin did not provide any evidence of acknowledgment of service of the writ upon him at Mr Goodwin’s office on 3 December 2015.  The second defendant also states in his affidavit that he could not recall being served with a sealed copy of the writ as alleged by Mr Goodwin.  The second defendant’s challenge is in reference to Mr Goodwin’s affidavit filed on 8 December 2015.  Mr Goodwin’s affidavit had been used to support the default judgment application.  Mr Goodwin is the counsel for the plaintiff.  He deposes in his said affidavit that he personally served the second defendant with a sealed copy of the writ at about 4:20pm on 3 December 2015 when the second defendant attended at his office.  I note that Mr Goodwin’s affidavit is corroborated, that is, by evidence deposed in the affidavit of Bobby Nutley filed on 22 August 2019.  Mr Nutley is a lawyer employed by Mr Goodwin’s firm.  In that affidavit, Mr Nutley attaches a further affidavit where he deposes therein that he had on 3 December 2015 witnessed Mr Goodwin personally serve the second defendant with a sealed copy of the writ.

19.	My assessment therefore is as follows.  I find the second defendant’s evidence to be vague.  I note that Mr Ekri merely states that he could not recall being served with the writ by Mr Goodwin.  To me, it means that he cannot confirm nor deny being served with the writ.  I also note that his affidavit was filed recently on 14 August 2019.  The meeting between Mr Goodwin and the second defendant occurred about 3 years 8 months ago.  Mr Goodwin’s affidavit of service was deposed on 7 December 2015, that is, 4 days after his meeting with the second defendant.  I note that Mr Goodwin’s affidavit is also corroborated.  Under the circumstances, I believe and find the plaintiff’s evidence to be accurate.  I therefore find that the second defendant had been duly served with the writ before default judgment was entered on 22 April 2016.

20.	I turn my attention to the third defendant.  Was she personally served with the writ, I ask myself? Service on the third defendant was said to have been effected by Mr Keleu under the second mode of service as summarized above in my judgment.  The defendants argue that the third defendant was never served with the writ.  They say that there was no evidence of acknowledgement of receipt either by their company or by the third defendant herself.  In further support of their claim, they refer to their affidavit in support, that is, the affidavit of the second defendant filed on 14 August 2019.  In particular, they refer to annexure Q.  Annexure Q consists of a statutory declaration of the third defendant.  It is dated 4 April 2019.  It states, and I quote in part, Declare that I have never sighted any Court papers from Courts PNG, therefore I did not sign any Courts PNG related paperwork.

21.	I note that this piece of indirect evidence appears to contradict what Mr Keleu had deposed to in his affidavit which had been relied upon at the default judgment hearing.  I note however that these witnesses have not been called in and cross-examined, so their evidences have not been tested in Court.  I can only assume by the parties’ conducts that they are happy with the option where it is left to the Court to decide whom it should believe based on what is filed or stated in relation to the issue.  So, I will decide on that basis.  In my view, it is not difficult to determine which evidence is credible.  I find no valid reason to doubt Mr Keleu’s evidence of service of the writ.  This is also evident above in my judgment.  When I consider Mr Keleu’s affidavit, I note that it clearly states the date, place, time and the name of the third defendant as the recipient of the writ. I must say that it is not a requirement in the rules that the person who is served with an originating process shall counter-sign or acknowledge service which must later be attached to an affidavit of service as proof of service.  Again, I would refer to Order 6 Rule 3(2) of the National Court Rules.  Additional evidence filed such as acknowledgement of receipt or signatures of a recipient may be provided as supportive evidence but their inclusions are not mandatory.

22.	In regard to the third defendant’s statutory declaration, I must say that I have regarded it with suspicion.  The statutory declaration was signed recently on 4 April 2019.  The date of service of the writ upon the third defendant, as deposed by Mr Keleu, was on 13 October 2015, that is, about 3 years 6 months ago from 4 April 2019.  If the third defendant had issues with service of the writ upon her, she should have, in my view, filed a conditional notice of intention to defend or filed an affidavit challenging service of the writ upon her, earlier in 2015 or 2016.  I say this because I note that this is not the first time the defendants are challenging the Court Order.  “Why had the third defendant not raised that earlier by filing her affidavit or statutory declaration?”  The third defendant is a party to the proceeding.  I also find it odd that she would give evidence in the manner as she has done in this case, that is, not directly but rather attach her evidence onto another evidence as if she is not a party.  She could have easily filed an affidavit and perhaps appear to clearly explain herself to the Court under the present difficult situation the defendants are faced with.

23.	Let me also add this.  The defendants have similar interests.  The first defendant is a family company that is owned or run by the second, third and fourth defendants who are family members.  There are ample evidence which shows that the plaintiff had served the writ on the first defendant using various modes of service that are provided for under section 431(1) of the Companies Act before default judgment was entered.  In my view, the second, third, and fourth defendants will have or ought to have known about the proceedings against each of them, that is, by the time service of the writ had been effected on the first defendantas early as 8 October 2015 or even by 3 December 2015 when the second defendant was served at the plaintiff’s lawyers’ office.  So, if they had issues regarding service of the writ, then where is the evidence which shows the steps that they each had taken to address service?  The obvious option as stated above should have been to file a conditional notice of intention to defend.  With respect, there is none that I can see here.  And the lack of such evidence can only act unfavorably, in my view, against the claim by the defendants that they had never been served with the writ prior to default judgment being entered against them.

24.	I therefore reject the defendants’ submission that default judgment was irregularly entered.  I find that the defendants (except for the fourth defendant) had been duly served with the writ before the default judgment application was made and was granted by the Court, and therefore that the Court Order was regularly entered against the defendants on 22 April 2016.

APPLY PROMPTLY

25.	I ask myself this.  “Did the defendants apply promptly after they were served with the Court Order?”  There is no contest that the defendants’ notice of motion was filed after some delay.  The evidence, as I will refer to below, shows that the defendants were served with the Court Order in April and May of 2016.  The present notice of motion was filed on 14 August 2019.

26.	When I compute time, there is a delay of about 3 years.  For this purpose, I find that the defendants did not apply promptly.  I say knowing fully well of the earlier attempts by the defendants with similar applications.  Let me explain.  On 26 October 2017, that is, about 1 year 5 months after being served with the Court Order, the defendants filed a notice of motion.  The notice of motion had sought to set aside the Court Order and for leave to file the defendants’ defence out of time.  It was set down for hearing and was heard 5 months later on 15 March 2018.  The Court dismissed the defendants’ notice of motion for want of prosecution after the defendants’ counsel failed to appear on the date and time that was set for hearing.  On 20 March 2018, the defendants filed another notice of motion seeking to reinstate the notice of motion of 26 October 2017.  It was heard on 11 April 2018.  On 19 June 2019, this Court dismissed the defendants’ notice of motion.

27.	All these, in my view, go to show that the defendants have failed to apply promptly to this Court.  As stated above, I find that to be the case.

28.	Let me also make this mark.  Because the defendants had failed to file their notice of intention to defend and defence, forewarning letters and service of the application documents on them were not required before the plaintiff moved its application for default judgment on 22 April 2016.  See cases: Bank of South Pacific Ltd v. Robert Tingke (2014) SC1355; Danny Totamu v. Small Business Development Corporation (2009) N3702.

REASONS FOR DELAY

29.	Of course the next issue is, whether the defendants have provided reasonable or valid reasons for the delay.  The key factors here, in my view, would be the dates when the Court Order was served on the defendants, to the time when they filed the present notice of motion.  See cases: Paul Paraka v. Madang Provincial Government (1997) N1596, Augus Walu v. Daniel Patrick Katakumb (2012) N4709 and Gigira Development Corporation Ltd v. Komu Umbrella Joint Venture Ltd (2016) N6785.  

30.	In considering the evidence, I firstly refer to the other affidavit of Mr Keleu filed on 6 May 2016.  He deposed that on 28 April 2016, he attended at the two locations which were the current business address of the first defendant and its registered location address, both of which are stated in the first company extract, where he said that he served a sealed copy of the Court Order upon the defendants.  I have no valid reason to doubt this evidence and therefore I find that the Court Order had been duly served on the defendants, that is, pursuant to section 431(1)(b) and (c) of the Companies Act.  In the second defendant’s affidavit filed on 14 August 2019, he deposes that he was served with a copy of the court order at the office of plaintiff’s lawyers on 3 May 2016.  I will assume for purposes of computing time that the defendants became aware of the Court Order in April and May of 2016.  The defendants filed the present notice of motion on 14 August 2019.  

31.	The delay period in this case is 3 years 3 months.

32.	I refer to the submissions of the parties.  Apart from the defendants’ claim denying receipt of the writ which I have already ruled out above in my judgment, what are the other reasons, I ask myself?  The only other reason worth mentioning is the delay in the delivery of the Court’s order against reinstating the notice of motion of 26 October 2017.  The notice of motion was heard on 11 April 2018 and the decision was handed down on 19 June 2019.  There had been a delay of about 14 months before the Court handed down its decision.  If I were to take that into, the delay period will be reduced to about 2 years 1 month.  I will consider this factor favorably to the defendants to compute the delay period.  I will reduce the delay period to 2 years 1 month.

33.	However, even with the said consideration, it does not, in my view, improve the delay situation of the defendants.  I still find the delay of 2 years or more to be excessive.  And this.  From the time the defendants became aware of the Court Order to the time they filed their first similar notice of motion on 26 October 2017, there had already been a delay of 1 year 5 months.  There is no valid explanation to say why it had taken the defendants that long to file their first notice of motion.

DEFENCE ON MERIT?

34.	Let me now consider the fourth issue, that is, whether the defendants have a defence on merit. 

35.	I have considered the writ and the evidence filed by the parties.  The defendants’ evidence on meritorious defence is contained in the affidavit of the second defendant. So as stated above, this was a loan agreement (the agreement).  It was entered into between the plaintiff and the first defendant on 25 February 2013.  The defendants, including the fourth defendant, signed a deed of guarantee in relation to the agreement.  A copy of the agreement is annexed to the affidavit of the second defendant.  However, I notice that some of the pages are missing.  The relevant missing pages are pages 1 and 3.  I had sought clarity from another copy, which is annexed to the affidavit of Noel Rajan filed on 7 April 2016.  A further complete copy of the agreement is also annexed to the affidavit of Sheila Sukwianomb filed on 22 August 2019.  

36.	Based on the agreement, the plaintiff paid the first defendant K5, 529, 700 to purchase 10 Mercedes Benz Prime Mover trucks from Boroko Motors in Lae.  The agreement was a fixed rate loan agreement.  “Where does it say that (i.e., fixed rate loan agreement) in the agreement?”  I ask myself.Clause 2 at page 1 of the agreement states and I quote, Subject to the terms of this document, the Mortgagee agrees to make available to the Mortgagor a single advance fixed rate loan.  The next thing I wish to point to here is clause 5.1 which is at page 3 of the agreement.  It begins as follows, The Mortgagor must pay interest to the Mortgagee on the Advance at the rate specified in item 4 calculated and charged to the Termination Date in accordance with Rule 78 method.  Based on these, the final fixed sumthat was payable under the agreement as calculated therein was K8,349,847.  The said sum is stated in the schedule of repayment which is part of the agreement, and it is attached as the final attachment to the loan agreement.

37.	The next material term in the agreement, for this purpose, is clause 4.  It is express, and I quote in part:

4.1	Repayment

The Mortgagor must pay to the Mortgagee the aggregate of Advances outstanding and the balance, if any, of the Debt as follows:

(a)	On each Loan Repayment Date, the Repayment Instalment; and
(b)	On the Termination Date, the final Repayment Instalment plus any balance of the Debt remaining on the account or which as accrued to the account for any reason.

The Mortgagor may not repay the Debt except in accordance with the express provisions of this document.

4.2	Early repayment

If no Event of Default subsists, the Mortgagor may repay the whole or any part of an Advance at any time before the Termination Date, provided however the early repayment is of the whole of the amount of the Advance and Interest to the Termination Date (together with any charges or money coming due) is made prior to 31 January 2014, the Mortgagee will accept that amount rebated by PGK100,000 on account of early repayment.

(Underlining is mine)

38.	Clause 4 provides the only two (2) manners of repayment under the agreement.  If the first defendant chooses the second option and makes early full repayment before 31 January 2014, which is within 11 months from the commencement of the loan repayment, the first defendant, provided it has not defaulted within the said 11 months period, may do so.  But early repayment means, and again I quote, the early repayment is of the whole of the amount of the Advance and Interest to the Termination Date.  And the Termination Date is defined in the agreement to mean the 36 months or the completion date.  Therefore and based on the in-built fixed rate calculation, it means that that first defendant shall still be required to pay K8, 349,847 even in the event where it decides to pay early within the first 11 months.  The only reward for making a full loan repayment of K8, 349, 847 without defaults within the first 11 months would be a K100,000 rebate or discount which will be given by the plaintiff.

39.	Let me now address the arguments and evidence filed by the parties.  Firstly, I note from the evidence of the defendants that there had been various defaults in the repayments of the loan in its first year.  For example, I refer to annexure B to the second defendant’s affidavit filed on 14 August 2019.  There, the second defendant attaches his earlier affidavit where at annexure A, he discloses the first defendant’s bank statements.  The statements show that the first defendant had defaulted in the months of May, August and November of 2013, and less payments than the full sum of K120,000 per month were received in some of the months in 2014.  Secondly, I note that the defendants keep submitting that they paid the “full payment of K5,529, 700” on or about July of 2014.  They claim that they paid the principal sum in less than 2 years.  This is where I differ and there appears to be a clear misconception there on the part of the defendants, to the terms of the agreement.  When I look at the agreement, there is no provision which requires the defendants to only pay the principal sum.  In fact, clause 4 does not appear to permit other forms of repayments except by the 2 methods that are prescribed therein.  So for example, if the defendants want to repay the full sum early,then the full sum would not be the principal sum that had been loaned to them but rather would be the sum as calculated with interest, namely, K8, 349, 847.  So in the present case, the defendants’ claim that they have already paid the principal sum is not supported by the terms of the agreement.  It is of course not disputed that the defendants did pay in total the K5, 429, 700 in July of 2014.  That sum, however and in my view, could not have been regarded as the final or full repayment sum as calculated and as agreed to under the agreement.  It would rather, in my view, be treated as a part-payment and would have been used to partly off-set the final amount due that is K8,349, 847.  I note that the plaintiff had done that (i.e., the deduction) before it filed the Court proceeding.

40.	Therefore, I do not find or see any valid argument that the defendants may raise if leave is granted to them to file their defence out of time.  

41.	For the same reasons, I also find that the defendants appear to have misconceived the terms of the agreement when they try to separate the principal sum from interest and when they also try to argue that the plaintiff is claiming only the interest component of the loan.  I also find their calculation of interest at K700,000 to be erroneous.  I note that it appears to have been calculated without regard to the terms of the agreement.

42.	The other argument by the defendants concerning meritorious defence is this.  They say that the plaintiff did not have the capacity to enter into the agreement.  The defendants argue that the plaintiff’s business is in hire-purchase or is a business that does not involve banking which is regulated under the Banks and Financial Institutions Act 2000 (BFIA).  As such, they argue that it was wrong for the plaintiff to apply interests as if it was a bank.  This issue is not a difficult one.  The agreement between the plaintiff and the first defendant was a private one and the parties entered into it at their own free will.  It was also a one-off agreement of such nature.  The plaintiff was not trading like a bank where it was engaged in banking business within the meaning of the BFIA at the material time.  If the defendants believe that there had been violations committed by the plaintiff under the BFIA, there are due processes and penalties that are prescribed under the BFIA which, in my view, would be a separate matter.  See case: Mataure Rabaul Microfinance Ltd (1-78764) v. Margareth Bale (2018) N7283.  And finally this.  The plaintiff, as a legal person that is established under the Companies Act, had the capacity to do business and enter into agreements at the material time.

43.	Finally, I refer to the second defendant’s claim that it had a gentlemen’s agreement with one Dr Mogan.  The second defendant alleges that he had verbally agreed with Dr Mogan whereby a Volvo Excavator that was valued at K700,000 was given in consideration in regard to the interest component of the loan which was also valued at K700,000.  The defendants provided evidence which tend to show that the excavator was received and is parked at one of the plaintiff’s yard.  The plaintiff has denied that there was such a verbal or gentlemen’s agreement.  Based on the allegation alone, I notice this.  If there was a verbal agreement, it was alleged to have been entered into between two individuals.  The agreement the subject of this proceeding was entered into between the plaintiff and the first defendant.  If the verbal agreement is claimed to be “a gentlemen’s agreement, then I cannot see how that will bind the parties to the agreement that is the subject to this proceeding.  It may also very well be another private agreement between the two said individuals.  The other thing I notice is this.  I refer to the second defendant’s affidavit of 14 August 2019.  He addresses the matter at paragraph 96(m).  I note that the second defendant does not give details of when or how the alleged verbal agreement was entered.  “Where did he meet with Dr Mogan?  If it was through correspondence, where are the particulars?”The second defendant’s calculation of interest of K700,000 is not properly stated and I note that the estimated sum is alleged against or in contravention to the glaring clauses of the agreement in relation to how the loan was to be repaid, and I note that I have already covered that above in my judgment.  I find this allegation vague and I do not believe that it discloses a valid defence or that it will constitute a valid cross-claim against the plaintiff in relation to the agreement.

44.	In the end, I do not find that the defendants have shown that they have a defence or cross-claim on merits.

REAL PREJUDICE

45.	I note that it is more than 3 years since default judgment was obtained and served on the defendants.  And given my findings that the defendants had been duly served with the writ before default judgment was entered, it just goes on to show or prove the real delay or neglect in the matter on their part.

46.	I also note evidence filed which shows that the first defendant has been ordered into liquidation and that a liquidator has been appointed.

47.	I therefore also find that the plaintiff would suffer real prejudice if I exercise my discretion in favour of the defendants.

SUMMARY

48.	The defendants’ application to set aside the court order will be refused.  Because of my decision, the other relief sought in the notice of motion are also declined.

COST

49.	An award of cost is discretionary.  I will order cost to follow the event on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

50.	I make the following orders 

1.	The defendants’ notice of motion filed on 14 August 2019 is refused.

2.	Cost of the application is awarded against the 1st, 2nd and 3rd defendants on a party/party basis which may be taxed if not agreed.

3.	Time for entry of these orders is abridged to the time of settlement by the Registrar of the National Court which shall take place forthwith.
________________________________________________________________
O’Briens Lawyers:                    Lawyers for the Plaintiff
Corrs Chambers Westgarth:     Lawyers for the Defendants