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Tozaka v Hata Enterprises Ltd [1997] SBHC 102; HCSI-CC 198 of 1996 (3 June 1997)

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 198 of 1996

JANE TOZAKA

-v-

HATA ENTERPRISES LIMITED

High Court of Solomon Islands
(Muria, CJ.)
Civil Case No. 198 of 1996

Hearing: 29th May 1997
Ruling: 3 June 1997

R. Radclyffe for the Plaintiff
A. G. H. Nori for the Defendant

MURIA CJ: On 11 September 1996 the plaintiff obtained a Default Judgment against the defendant in this action. The defendant now come to the Court and ask that the said judgment be set aside.

It will be necessary to deal briefly with the background to this application. On 22 July 1996 the plaintiff sued out a Writ against the defendant claiming damages for breach of contract. The breach complained of was that the defendant failed to complete the works on plaintiff’s house by 29 September 1995 as stipulated in the contract entered into between the plaintiff and defendant on 23 May 1995. By 25 March 1996 the woks had still not been completed and so the plaintiff gave notice to terminate the contract with defendant. Having terminated the contract the plaintiff brought this action claiming breach of contract and sought damages in respect thereof. The Writ issued on 22 July 1996 was served on the Registered Office of the defendant which was at Collin Darcy Consultancy, Unit 27, NPF Plaza on 23 July 1996. No appearance having been entered by or on behalf of the defendant within the time limited for appearance and so on 11 September 1996, Default Judgment was entered against the defendant.

The Law

The principles governing the question of setting aside default judgment have long been settled. The Court may order a judgment in default to be set aside upon such terms as the court may think fit. This principle applies equally to both judgments obtained by default of appearance and of pleading. In this regard the provisions of 0.13, r.8 and 0.29, r.12 should be noted. Those rules are provided in the following terms:

“0.13, r.8. Where judgment is entered pursuant to any of the preceding Rules of this Order, it shall be lawful for the Court to set aside or vary such judgment upon such terms as may be just.”

and

“0.29, r.12. Any judgment by default, whether under this Order or under any other of these Rules, may be set aside by the Court, upon such terms as to costs or otherwise as the Court may think fit, and where an action has been set down on motion for judgment under Rule 8 of this Order, such setting down may be dealt with by the court in the same way as if judgment by default had been signed when the case was set down.”

Notably the discretioning power of the court under those Rules are unfettered. This in my view, is principally because the Court’s basic function is to ensure the attainment of justice in the dispute between the parties and the court must be free to do that based on the evidence and circumstances before it. The bottom line principle is therefore that unless and until the court has pronounced a judgment upon the merits or by consent, it must have the power to revoke the expression of its coercive power where that has been obtained only by a failure to follow any of the rules of practice: Evans -v- Bartlam [1937] 2 All ER 646 and Leslie Allinson -v- Monique Medlin, Civ. App. NO.7 of 1996 (CA) Judgment delivered on 15 April 1997.

We are fortunate to have cases already decided by our courts on the question of setting aside judgments obtained by default. See Kayuken Pacific Limited -v- Harper [1987] SILR 54; Reef Pacific Trading Limited & Others -v- Reef Pacific (Sydney) Pty Limited, Civ. App. No. 1 of 1994 (CA); Fielder Industries (SI) Limited -v- Solwest Trading Company Limited, Civ. Case No. 153 of 1993 (Judgment given on 19 August 1994) and Aerolift International Limited -v- Mahoe Heli-lift (SI) Limited, Civ. Case. No. 387 of 1995 (Ruling given on 29 April 1996). I note that both counsel in this case had appeared in some of those cases mentioned and yet either forgot or ignored to cite those authorities. We must develop and build up our case law in our jurisdiction instead of borrowing authorities from foreign jurisdictions all the time. Once a legal principle had been firmly established in our jurisdiction it serves no point to keep referring to the authorities from foreign jurisdictions. But in order to do this, we in the Courts and Counsel appearing before those courts must strive to build up our own body of case law.

Having said that, I now wish to point out that in this jurisdiction the circumstances in which the court will determine whether or not to set aside a default judgment are succinctly set out in Kayuken Pacific Limited -v- Harper (Supra). Those criteria are: (1) What was the reason for the failure by the absent party to appear? (2) Has there been undue delay by the absent party in launching his proceedings for a new trial? and (3) Will the other party be prejudiced by an order for a new trial? There is no hard and fast rule in the exercise by the court of its discretion in such a case as this but the criteria set out have assisted the court in forming the basis for its decision. With those considerations in mind I turn now to the defendant’s case.

The Case for the Defendant/Applicant

The defendant’s case as put by Mr. Nori is two-fold. Firstly, Mr. Nori submitted that true the Writ was served on the defendant’s registered office at Collin Darcy Consultancy but the Office of Collin Darcy Consultancy did not notify the defendant of such service. It was not until 17 September 1996 when Writ together with the Default Judgment were given to the defendant. Having received the Writ and the Default Judgment, the defendant sought legal advice immediately and instructed Mr. Nori who filed Memorandum of Appearance on 18 September 1996 and filed this summons on 25 September 1996. It was argued that the service of the writ on the defendant could not be said to be effective service as it was not communicated to the defendant until 17 September 1996 although served on its registered office on 23 July 1996.

On this argument, Mr. Radclyffe argued that by virture of the Companies Act, (s.370) the defendant was properly served and it is not open to the defendant to have it set aside simply because the document was not brought to their attention. In support of his contention Mr. Radclyffe referred to the case of Boso -v- Blue Shield (Solomons) Insurance Limited, Civ. Case No. 181 of 1996 where the High Court considered the question of proper service on a company. In the present case I accept that there had been service of the Writ on the defendant in accordance with s. 370 of the Companies Act, that is, by serving the Writ on the defendant at its registered Office. I consider this to be proper service. In any case the defendant did not deny that the Writ was served on it at its registered office. The defendant’s contention is that although the Writ together with the Statement of Claim were served on its registered office, it did not know of the Writ and Statement of Claim until 17 September 1996 when the Writ together with Statement of Claim and the Default Judgment were given to defendant’s managing director. It was contended that had those in the registered office of the defendant delivered the Writ together with Statement of Claim to the defendant, an entry of appearance and defence would have been filed in time.

The evidence before the court so far shows that although the Writ and Statement of Claim were served on the defendant’s registered office, those responsible in that office failed to ensure that the papers were delivered to the defendant. Should the defendant have to bear the consequences of such a failure by its registered office? From Mr. Radcliffe’s submission, the defendant should bear whatever consequence that flows from the registered office’s failure. If that be the case, then the court, in my view, is placing restrictions on its discretion which the rules have left unfettered. The judgment here is regularly entered and therefore what ought to be considered are the length of the delay and the reasons for the delay in entering an appearance or pleading to the Statement of Claim. In order to properly ascertain these, the defendant should file an affidavit of merits putting these matters before the court and that in my view was done in this case.

I am clearly of the view that the court’s unfettered discretion must be allowed to roam the facts and circumstances in which the judgment came to be entered so as to ascertain whether there is a real likelihood that it would be unjust to the defendant to allow the judgment to stand. If that is the case, then the judgment should be set aside on such terms as will minimise the possibility of injustice to the plaintiff. I do not see why the defendant in this case should have to bear the consequences of the failure of Collin Darcy Consultancy although that was and still is the registered office of the defendant.

The second limib of the defendant’s case is that it has a defence on the merits. This is of great importance in an application to set aside a default judgment. In response to this aspect of the defendant’s case, Mr. Radclyffe boldly contended that the defendant was clearly in breach of his contract and that there is no defence available to the defendant here. Be that as it may, the court would still have to consider the affidavit filed in support by the defendant and if there is evidence of an arguable defence or a trial issue the court must allow the defendant to come in and defend the action against him.

There is no dispute here that the defendant did not complete the works on the plaintiff’s house by 29 September 1995 as agreed. Is there a defence on the merits? This must be shown either on the defendant’s version of the facts as contained in his affidavits or that there is a technical defence. As to the former, Mr. Nori argued that the plaintiff had varied the terms of the original contract so substantially that the defendant was not able to complete the works by the date agreed. In other words Counsel argued, the new terms added were not part of the original contract dated 23 May 1995 and so they were in fact new terms that substantially altered the original contract.

The evidence produced by the defendant here is that the works agreed to between itself and the plaintiff was that the defendant was to build the plaintiff’s house at Mbua Valley, Honiara. The original plan was to build a three bedroom timber frame building on concrete posts. There was no bottom floor unit shown in the original plan of the house. (See “JT2” in the defendant’s affidavit). The defendant deposed that in the course of the works the plaintiff had instructed the defendant to add to the building a self-contained accommodation unit with concrete floor and brick walls at the bottom floor of the building together with other facilities such as shower, toilet, a lounge and a kitchen. In addition, the defendant also had to do a concrete slab car park outside the house. The defendant further deposed that the new work amounted to about three-fifths of the original contract job both in terms cost and time.

Taking the version of facts as deposed to by the defendant it would appear that the plea of material alteration or variation of the original written contract has been raised by the defendant. In certain circumstances such a claim if substantiated may afford a defendant a defence to an action in contract. But how would we know the truth unless then we hear the defendant? The defendant must be heard. It is sufficient for our purpose in these present proceedings to say that on the materials before the court, there is an arguable defence on the merits. The issues raised by the defendant and there is a real likelihood that it would be unjust to the defendant to allow the default judgment to stand are triable issues in so far as the rights and liabilities of the parties here are concerned. As such the default judgment entered on 11 September 1996 cannot be allowed to stand and must be set aside.

I have said earlier in this ruling that the defendant ought not to be made to bear the consequences of the failure of its registered office (Collin Darcy Consultancy). That consequence, in terms of this case, is to deny the defendant of the opportunity to come in and defend the action. The court will not deny the defendant that leave. Likewise I feel the plaintiff quite properly relied on the defendant’s registered office to notify the defendant of the service of the Writ together with the Statement of Claim which were served on 23 July 1996 on the registered office of the defendant. That was proper service. It was the failure of the defendant’s registered office that resulted in these proceedings. In those circumstances I feel the plaintiff must have her costs of these proceedings.

The order of the court will therefore be:

1. The judgment in default entered on 11 September 1996 be set aside.

2. Leave to appear and defend the action is granted.

3. Memorandum of Appearance having already been entered on 18 September 1996, the defendant shall file its defence and have it served on the plaintiff within 7 days from the date of this order.

4. The plaintiff’s costs occasioned by this application must be paid by the defendant.

(GJB Muria)
CHIEF JUSTICE