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Reef Pacific Trading Ltd v Reef Pacific (Sydney) Pty Ltd [1994] SBCA 13; CA-CAC 1 of 1994 (4 November 1994)

IN THE COURT OF APPEAL OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Appeal Case No. 1 of 1994

Connolly P
Williams JA
LOS JA

Delivered the 4th day of November1994

JUDGMENT -.WILLIAMS JA

On 24 January 1991 discussions were held at Gizo between a number of persons which resulted in a document headed Deed of that date being signed by some of those present. It has been the assertion of the respondents to the appeal (Reef Pacific (Sydney) Pty Limited, Rosa Price, and Graeme Price) that immediately on the execution of that document in Gizo, a binding agreement came into existence between each of them of the one part and the present appellants (Reef Pacific Trading Limited, Wolfgang Meiners, Joann Marie Meiners, Davinia Philip and Danny Philip) of the other part.

Since then there has been much litigation in the High Court concerning that alleged agreement and its legal consequences, if any. The most significant matters for present purposes are the following:

1 The present respondents, as plaintiffs, commenced an action against the present appellants, as defendants, on November 1991 claiming a total of $503,311.14 by way of liquidated claims and further unspecified damages for breach of contract. All claims arose out of the alleged agreement of 24 January 1991.

2. On 28 November 1991, the appellants delivered a defence generally denying “each and every allegation contained in the Statement of Claim”.

3. On 4 December 1991, the respondents filed a Motion for Judgment seeking orders that the defence be struck out and that “judgment be entered on the liquidated amount and damages”.

4. Then on 14 January 1992, the respondents delivered an amended statement of Claim. The moneys due and owing claim was thereby reduced from $209,311.14 to $108,038.14. It is necessary to set out some of the allegations in that pleading in some detail:

“(1) At all material times Reef Pacific (Sydney) Pty Limited is and was a company duly incorporated according to law in the state of New South Wales, Australia, which is capable of suing and being sued in its own name.

.....

(3) On the 24th of January, 1991 the Plaintiff, Reef Pacific (Sydney) Pty Limited and the first defendant entered into a Deed of Agreement.

.......

(7) It was a further expressed term of the aforesaid Deed of Agreement that the first defendant would repay to the Plaintiff no later than the 30th of June, 1991 all moneys advanced by the plaintiff to the first Defendant”.

5. Thereafter the Acting Chief Justice heard the Motion for Judgment on 16 March 1992 and the hearing was adjourned. Argument was resumed on 9 April 1992.

6. In the meantime on 6 April 1992, the first three appellants filed an amended defence. Again it is necessary to refer to some of the contents of that pleading in detail:

“(1) Admit paragraph 1 of the statement of Claim and further adds that:-

(i) Rosa and Graeme Price are neither shareholders, directors, or officers of Reef Pacific (Sydney) Pty Limited; and

(ii) the 1st, 2nd, and 3rd Defendants did not knowingly or otherwise, have any dealings with Reef (Pacific) Pty Limited.

......

(3) (ii) In the alternative the said agreement was made conditional on:-

(b) Rosa and Graeme Price giving 50% shares in Reef Pacific (Sydney) Pty Limited to the 2nd and 3rd defendants.

(4) The conditions described in paragraph (3) (ii) herein have not been complied with in that:-

(ii) the 2nd and 3rd Defendants were not issued with shares in Reef Pacific (Sydney) Pty Limited.”

7. On 23 April 1992, the Acting Chief Justice delivered judgment on the Motion for Judgment. For reasons which he published, he struck out the defence delivered 28 November 1991, and held that the defence delivered 6 April 1992 “to be general, not specific in nature and insufficient”. He went on to say it “contains no reasonable answer to the plaintiffs’ claim”. In consequence, he gave the respondents judgment for $108,038.14 for debt, and $294,000 for liquidated demand.

8. Consequent thereon, the respondents took out judgment for $402,038.14 plus interest. On its face it is not a default judgment.

9. In about July 1993, the respondents sought to satisfy the judgment by way of a writ of fieri facias. The appellants applied to Palmer J to have that writ set aside but, for reasons which he published on 3 August 1993, that learned Judge declined to do so. In the course of so doing, he observed that the appellants could apply pursuant to O. 29 r 12 to have the default judgment of 23 April 1992 set aside if they considered they had sufficient grounds to do so. He gave directions requiring any such application to be made within 14 days and stayed execution on the writ of fieri facias until further order of the Court.

10. The appellants made an application under O. 29 r 12 in accordance with those directions. It came on for hearing before Palmer J on 24 November 1993 and he gave judgment refusing to set aside the order in question on 27 January 1994. It will be necessary to refer to his reasons in more detail later.

11. The next relevant step was that the appellants applied, relying on the inherent jurisdiction of the Court, to Muria CJ to have the judgment of Palmer J of 27 January 1994 set aside on the ground that it was procured by fraud, trickery and deceit amounting to an abuse of process. That application was dismissed on 18 March, 1994.

12. Then on 31 March 1994, the appellants lodged an appeal against the decision of Muria CJ delivered 18 March 1994. By that notice, the appellants sought to have set aside the judgments of 23 April 1992, 27 January 1994, and 18 March 1994 on the grounds that the learned Judge erred in law in not deciding the issues before him in favour of the appellants. It is no necessary to refer to other grounds stated in that notice.

13. On 9 June 1994, the appellants sought leave to add additional grounds of appeal which sought to attack the finding of Muria ACJ on 23 April 1992 that the amended defence was general and not specific, and to attack the finding of Palmer J on 27 January 1994 that there were no triable issues raised by the appellants. The President of this Court gave leave on 9 June 1994 for those grounds to be added.

14. For reasons delivered on 21 June 1994, the learned President of this Court of Appeal ordered, pursuant to s. 19(g) of the Court of Appeal Act, that the notice of appeal (that is the notice of 31 March as amended on 9 June) be struck out.

15. Then the appellants sought leave by application dated 5 October 1994 to further amend “the Notice of Appeal dated 9 June 1994”. The grounds sought to be added alleged that Palmer J made errors of law in arriving at his judgment of 27 January 1994.

16. That application came before the Court on 18 October 1994. The Court pointed out to counsel for the appellants that they could not add to a notice of appeal against the decision of Muria CJ of 18 March 1994, grounds of appeal against the decision of Palmer J of 27 January 1994.

17. On 19 October 1994, the appellants filed a notice of appeal against the decision of Palmer J of 27 January 1994 and that is now the substantive appeal for determination.

18. On 20 October 1994, this Court granted the necessary extension of time for the lodging of the appeal in question.

19. On 18, 19 and 20 October 1994, both Mr. Milte and Mr. Traczyk, who variously appeared for the appellants, specifically stated there was no appeal as such against the judgment of 23 April 1992 and declined invitations from the Court to consider so doing.

Both before Palmer J on the application to set aside and in this Court, the appellants in order to establish a defence on the merits relied, in the main, on the same issues raised in the defence of 6 April 1992, which was struck out by Muria ACJ on 23 April 1992. That does present some problems, many of which were adverted to by Connolly P in his reasons of 21 June 1994. Muria ACJ gave consideration to the matters raised by the defence of 6 April 1992 before he struck out that pleading. It was only after that consideration on the merits that it could be said there was default of pleading such as entitled the respondents to judgment. Thus this was not the usual case of judgment in default of pleading which would entitle the defendants to apply pursuant of O. 29 r. 12 to have the default judgment set aside. In a case such as this, my present view is that the better course for the defendants to adopt is to appeal against the judgment. The appellant court could then determine whether the Judge at first instance was correct in striking out the defence. But where the procedure is followed of striking out the defence and then giving judgment in default of pleading, there is technically a judgment by default to which O. 29 r. 12 may apply. In such a situation there would ordinarily need to be additional material before the Judge before he could set aside the earlier judgment. If there was no fresh material, it is difficult to see how setting aside the earlier judgment could be justified. That could not be done merely on the basis that the later Judge considered the earlier Judge had erred in law in arriving at his decision.

In the light of that, it should be noted that Muria ACJ, in the course of his reasons of 23 April 1992, said:

“I shall consider this case on the pleadings together with the affidavit evidence now before the Court.”

He summarised the issues raised by the defence, including paras. 1, 3 and 4 quoted above, by saying the appellants were “challenging the legality of the said Agreement”. Thus, it is clear that the decision of Muria ACJ was based not only on the pleadings but also on the affidavit evidence then before him.

When the application to set aside was heard by Palmer J, there was additional material before him which was not before Muria ACJ. For present purposes, it is sufficient to identify the affidavit of M H Roberts filed on behalf of the respondents on 26 July 1993 in an associated action.

It was for Palmer J to decide whether on the material before him there were grounds for setting aside the judgment 23 April 1992. In accordance with general principle, it was least incumbent on the appellants to show a defence on the merits: (Farden v. Richter [1889] UKLawRpKQB 79; [1889] 23 Q.B.D. 124).

Much of the difficulty in the past has arisen because the appellants have not carefully and precisely formulated their defence, and too much attention has been directed to irrelevant issues. For example, on all previous hearings much time has been wasted dealing with the appellants’ contention that the judgment of 23 April 1992 was obtained by fraud because of matters surrounding the compliance by the respondents with an order against them for security for costs.

As the reasons of Palmer J of 27 January 1994 indicate, the first point raised before him was that as at 24 January 1991 there was no Company Reef pacific (Sydney) Pty Limited in existence; it did not exist at the time of signing - there was no legal person in existence. In answer to that, his Lordship referred to documents before him showing that the company Lawnbit Pty Limited was incorporated on 3 December 1990, and that by documents lodged with the Australian Securities Commission, its name was changed to Reef Pacific (Sydney) Pty Limited. He therefore concluded that the company was in existence at the material time.

He also said:

“On the 31st December 1990, a form, 304A, being ‘Notification of Change of Office holders of Australian Company’ was lodged to the Australian Securities Commission. That document was processed on the 22nd April 1991, however, it was specifically provided, that the change was to be effective from the date of filing, being, the 31st December 1990. No copy of that form 304A has been produced from the search. Mr. Kama has submitted that this change was in favour of Rosa Price and Graeme Price. No evidence to the contrary has been submitted to challenge this. On the balance of probabilities, I am not satisfied that Rosa Price and Graeme price were not the directors of Reef Pacific (Sydney) Pty Limited as on the 24/1/91 and therefore were not duly authorised to attest the common seal of the company.”

With respect, his Lordship appears to have misconstrued the combined effects of the affidavits of G C Parr, exhibiting company searches, and of M G Roberts, dealing with the acquisition of the company. The following extracts from the affidavit of Roberts, a Sydney Solicitor, are significant:

“4 ..... after my return to Australia in late January 1991 I was instructed to obtain a shelf company to be the company that was to be known as Reef Pacific (Sydney) Pty Limited. I obtained a company known as Lawnbit Pty Limited which later changed its name to Reef Pacific (Sydney) Pty Limited.

8. The purpose of our trip to Gizo was to finalise agreements...in relation to certain further advances that [Graeme Price and Rosa price] were proposing to make to assist [Reef Pacific Trading Limited] commence operation, and to establish a joint venture entity to be known as Reef Pacific (Sydney) Pty Limited which was to be the sole and exclusive agent/marketer for seafood product produced at the Gizo Plant in Australia.

18.... I recall that the actual documents were ultimately executed shortly after midnight in the early hours of 24 January 1991.

21.... the documentation was prepared and properly executed.

22.... I made it clear to [Wolfgang Meiners, Joann Meiners, Danny Philip and Davinia Philip] that the documents signed on 24 January 1991 were the original and binding documents........ I confirm that my clear instructions at all times were that unless final agreement had been reached between the parties and the documentation was executed [Graeme Price] would not authorise the release of any monies to [Reef Pacific Trading Limited].

24.... it was agreed at the meeting on 22 January 1991 at the Gizo factory that after I returned to Australia I would arrange the acquisition of a company structure which would become known as Reef Pacific (Sydney) Pty Limited. It was agreed that the company would be constructed as follows:

(a) Directors; M. Roberts, G. Price and W. Meiners.

(b) Shareholders: G. Price and M. Roberts as to 50% of the company (in total) and W. Meiners as to the other 50%. It was agreed that W. Meiners would not be entitled to voting rights.

(c) Secretary: G. Price

25. Annexed hereto and marked as follows are copies of the following documents:-

“H” Consent to Act as Director (G. Price);

“I” Consent to Act as Director (M. Roberts);

“G” Consent to Act as Director (W. Meiners);

“I” Consent to Act as Secretary (G. price);

“I” Share Certificate (G. price);

“J” Share Certificate (M. Roberts);

“K” Share Certificate (W. Meiners);

26. I confirm that the above changes and alterations to the company structure were duly prepared and arranged but were never actually lodged as dispute between the parties arose shortly after the relevant funds were advanced to [Reef Pacific Trading Limited. The company documentation to reflect the above changes was to have been executed by Mr. Meiners on his next trip to Sydney which would be approximately at the time the first delivery was due.........”

The company search documents in fact show that the change of name material was lodged on 6 March 1991 and upon registration the name change was effective from 6 February 1991.

Further, Palmer J was in error in saying that the document being “‘Notification of Change of Officer Holders of Australian Company’ was not before the Court”. The document number referred to is 000 981 803 and that document was exhibited to Parr’s affidavit. Perhaps the confusion arose because it had nothing to do with the appointment of the Prices, as was the submission to Palmer J by Mr. Kama. Of course in December 1990 neither the Prices nor Roberts knew what company they would be acquiring.

It is clear on all the material that the Prices were not directors of Reef Pacific (Sydney) Pty Limited on 24 January 1991, and that company (by whatever name) could not have been party to an agreement executed on that date. The fact that on 24 January 1991 its predecessor in name was in existence on a shelf in Sydney is irrelevant.

Further it is at least arguable, and that is all that need be proved at this time, that the company which was intended to be a party to the agreement of 24 January 1991 was a company structured in accordance with cl. 6 of the agreement which provided:

“It is acknowledged and agreed by the agent that as part consideration hereof the Company will be entitled (and shall be registered) to 50% of the shares in the Agent company however such shares will be of a non-dividend earning nature, and further that a nominee of the Company will be appointed a Director of the Agent Company.”

The “agent” was Reef Pacific (Sydney) Pty Limited and the “Company” was Reef Pacific Trading Limited.

On all of the evidence, the Prices, assuming they had control of Reef Pacific (Sydney) Pty Limited at a material time did nothing to implement that provision of the agreement though they claimed (and recovered) $294,000 by way of liquidated damages for the appellants’ failure to supply product.

Palmer J spent some time in his judgment discussing the effect of Rosa Price placing her signature on the seal of Reef Pacific (Sydney) Pty Limited at a later point in time. That analysis becomes irrelevant in the light of the facts outlined above.

On the material before Palmer J, properly analysed, the appellants established an arguable defence on the merits. It seems clear that if all that material was before Muria ACJ on 23 April 1992, he would not have stuck out the defence of 6 April 1992.

Given that triable issues have been raised with respect to the agreement of 24 January 1991, at least in so far as the rights and liabilities of Reef Pacific (Sydney) Pty Limited are concerned, the judgment in favour of that company entered on 23 April 1992 cannot stand and must be set aside.

In the statement of claim, the indebtedness of the appellants in the sum of $108,038.14 was initially said to be to Reef Pacific (Sydney) Pty Limited, but there was an alternate claim with respect thereto made by Mr. and Mrs. Price. The Prices would appear to have no personal claim to the $294,000 liquidated damages for failure to supply product. Yet the one judgment was given in favour of Reef Pacific (Sydney) Pty Limited, and Mr. and Mrs. Price for $402, 038.14. In consequence, the whole of the judgment of 23 April 1992 should be set aside.

Palmer J dismissed the application before him to set aside the judgment of 23 April 1992, but expressly made no order as to the costs of the application before him. Muria ACJ, when he gave judgment on 23 April 1992, expressly ordered that each party bear its own costs.

The question of costs is a difficult one. As already noted, many of the applications to this Court since the judgment of 23 April 1992 have been misconceived. Further, because of irrelevant matters raised by the parties, the Court was often diverted from the fundamental issues which should have been addressed. In the circumstances, all orders for costs previously made which are not directly affected by the orders of this Court, should stand.

The orders will be as follows:

1. Allow the appeal from the order of Palmer J of 27 January 1994.

2. Set aside the judgment of 23 April 1992 and grant the appellants unconditional leave to defend the action.

3. Direct that the defendants to the action file and deliver a defence within 28 days of the handing down of this judgment. Thereafter the action to proceed in accordance with the Rules of the High Court.

4. Order that there be no order as to the costs of the proceedings before Muria ACJ resulting in the judgment of 23 April 1992.

5. Order that the respondents pay the appellants taxed costs of and incidental to the proceedings before Palmer J resulting in the judgment of 27 January 1994, and the appellants’ taxed costs of and incidental to the appeal instituted by the filing of the notice of appeal on 19 October 1994. In each case, there should be a certification for overseas counsel.

6. The application filed on 5 October 1994 for leave to amend the notice of appeal from the judgment of Muria CJ of 18 March 1994 should be refused. No order as to costs.

WILLIAMS JA

CONNOLLY P AND LOS JA: WE AGREE