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Hoeller v Knab [2001] TOLawRp 10; [2001] Tonga LR 48 (16 March 2001)

IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

C 976/00

Hoeller

v

Knab

Ford J
16 March 2001; 16 March 2001

Practice and procedure – non-compliance with 'unless' order – time extended

The defendants, Mr and Mrs Knab, and the plaintiff, Mr Hoeller, were all Austrian citizens. Some time in the first part of 2000, the parties reached an agreement back in Austria in relation to taking over the operation of the Polynesian (or Popao) Village Resort on Vaka'eitu Island, Vava'u. The nature of the agreement reached was the subject matter of a Court case and numerous contested allegations and claims were made by each party. The defendants filed an application for security for costs against the plaintiff in the sum of $20,000 and for an order varying some of the terms of the Consent Order. The plaintiff filed a "Notice of Default" in which he gave notice that the defendants had failed to comply with some of the terms of the Consent Order and because of the default he applied for an order striking out the defendants' defence. The Notice of Default was based on one of the Orders (commonly referred to as an "unless" order) which read: "If payment is not made ... then the defendants' defence will be struck out". The defendant made an application for security for costs.

Held:

1. The Court did not believe that the defendants were deliberately disobeying the Court's "unless" Order but expected strict compliance from now on. The date by which the payment was to be made was extended.

2. In relation to security for costs the general rule was that such security may be ordered where it appeared to the Court that the plaintiff was ordinarily resident out of the jurisdiction or that the address in the writ was intentionally incorrectly stated. The justice of the case did not warrant the making of an order granting security for costs.

3. A further directions hearing date was fixed and costs were reserved.

Case considered:

Fonua v Yeoh [2000] Tonga LR 437

Counsel for plaintiff : Mr Niu
Counsel for defendants : Mr 'Etika

Ruling

At a Chambers hearing on 24 January last, I set this case down for hearing for three days commencing on Monday 26 February 2001. On the afternoon of Thursday 22 February the defendants sought an adjournment of the hearing until the Vava'u Circuit in May on the grounds that the first defendant, Mrs Knab, was in Austria collecting documentation relevant to the defence and she did not have a booking to return to Tonga until the first week in April. Counsel for the defendants said in his adjournment application that since the Chambers hearing on 24 January he had been endeavouring to ascertain the first defendant's availability for the trial from her husband in Vava'u but he had been unsuccessful up until that very day, i.e. 21 February.

The application for an adjournment was completely unsatisfactory in a number of respects, not least of all because of its lateness. I allocated an urgent Chambers hearing to consider the application the following day which was the Friday. The case was due to commence on the Monday morning. Quite apart from the general inconvenience to the Court resulting from the late notification, the plaintiff, his witnesses and counsel were all no doubt considerably inconvenienced by the lateness of the application and costs would have been incurred one way or another unnecessarily.

After hearing submissions from counsel I decided that it was appropriate in the interests of justice to grant the adjournment application, but on strict terms, and I proceeded to do so.

The case results from a falling out between the defendants, Mr and Mrs Knab, and the plaintiff, Mr Hoeller. They are all Austrian citizens. It appears that some time in the first part of 2000, the parties reached an agreement back in Austria in relation to taking over the operation of the Polynesian (or Popao) Village Resort on Vaka'eitu Island, Vava'u. The nature of the agreement reached is the subject matter of the Court case and numerous contested allegations and claims are made by each party which will not be resolved without a full scale hearing.

There is another civil case running in conjunction with the present proceeding where Mr Knab is claiming $20,000 damages against Mr Hoeller for a physical assault which is alleged to have taken place on Vaka'eitu Island in September 2000, some three months after the parties arrived in Tonga.

In November 2000, Mr Hoeller filed an injunction application seeking various interim orders from the Court. At that stage a container was due to arrive in Vava'u with goods from Austria for the Resort and the principal relief Mr Hoeller sought from the Court was an order that the defendants be restrained from touching or removing anything from the container. On 10 November 2000, the Chief Justice issued an injunction containing a restraining Order to this effect. The container is presently in the custody of the authorities on the wharf at Vava'u incurring unpaid storage charges. It remains unopened.

The terms I imposed when I granted the defendants' adjournment application were set out in a formal Order dated 23 February. On 28 February I made a Consent Order at the request of both counsel which contained a minor variation to the 23 February Order and included some other provisions designed to protect the status quo pending the trial in May.

On Tuesday of this week, the defendants filed an application for security for costs against the plaintiff in the sum of $20,000 and for an order varying some of the terms of the Consent Order. Because of the urgent nature of the application I included this case, at a late stage, in the list of Chambers matters scheduled to be dealt with this morning. Yesterday the plaintiff filed a "Notice of Default" in which he gave notice that the defendants had failed to comply with some of the terms of the Consent Order of 28 February and because of the default he applied for an order striking out the defendants' defence. The Notice of Default was based on one of the Orders I made on 23 February (commonly referred to as an "unless" order which read:

"If payment is not made in accordance with paragraph (5) above then the defendants' defence will be struck out."

I heard oral argument on all of these applications this morning. Some reasonable concessions were made by Mr Niu which allowed agreement to be reached on certain matters and I now give my Ruling which incorporates the points agreed upon and sets out my decision on the other issues.

First, in relation to the "unless" order, the position is that the application by the defendants for an adjournment of the trial date came so late in the piece that it inevitably resulted in costs and expense to the plaintiff, his witnesses and his legal advisers. The plaintiff's father, for example, who was scheduled to appear as a witness, had flown out from Austria and he was already in Tonga when the application was made. The Order I made, therefore, on 23 February in relation to costs read as follows:

"3. The defendants are to forthwith make the following payments on account of the costs awarded against them on the adjournment:

(i) return air fare for Mr Hoeller (senior) from Germany/Austria.

(ii) return air fare for two witnesses from Vava'u.

(iii) $1000 to Mr Niu on account of costs "thrown away."

(iv) $630 for 3 months storage charges on the container.

4. ...

5. Payment in terms of (3) above is to be made to Mr Niu's office by 4:30 p.m. on 9/3/01.

6. If payment is not made in accordance with paragraph (5) above then the defendants' defence will be struck out."

The Court Order made by a consent on 28 February varied Order 3 above so that it then read:

"4. In respect of order no. 3 of 23rd February 2001, the defendants are to pay a total sum of T $7,136.00, $4,652.00 of which to be paid on or before 9/3/01 and the balance of $2,484.00 to be paid on or before 16/3/01. Order no. 6 of 23rd February 2001 be read accordingly."

Another provision in the Consent Order required the defendants to properly insure the Resort and a boat that goes with the business against fire, hurricane and earthquake by 7 March 2001.

The plaintiff in its strike out application says that no payments have been made by the defendants pursuant to the costs Order and no insurance cover has been taken out. He, therefore, makes application to strike out the statement of defence upon the grounds that they have failed to comply with the "unless" Order.

Non-compliance with an "unless" order was a matter which the Chief Justice had to consider recently in Fonua v Yeoh [2000] Tonga LR 437. I respectfully adopt the following passage from that judgment:

"Mr Fifita, for the plaintiff, points out that, even when there has been a failure to comply with an "unless" order, the Court always has a discretion to allow more time. That is plainly correct and I accept the principles on that stated in Samuels v Linzi Dresses Ltd (1981) QB 115. However, it must still be a matter of discretion. In that case, Roskill L. J. finally set the principle in Whistler v Hancock [1878] UKLawRpKQB 3; (1878) 3 QBD 83 to rest and continued:

"In my judgment, therefore, the law is that a court has power to extend the time where an "unless" order has been made but not been complied with; but that it is a power that should be exercised cautiously and with due regard to the necessity for maintaining the principle that orders are made to be complied with and not to be ignored. Primarily it is question for the discretion of the master or the judge in chambers whether the necessary relief should be granted or not."

In re Jokai Tea Holdings Ltd (1992) 1 WLR 1196, 1202 Brown-Wilkinson VC confirmed the reasoning in the Samuels case and then passed on to consider the class of case described in Birkett v James (1978) AC 297, where the delay (as it was in that case) had been intentional and contumelious. He continued:

"...

In my judgment, in cases in which the Court has to decide what are the consequences of a failure to comply with an "unless" order, the relevant question is whether such failure is intentional or contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the Court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed." "

In the present case the defendants seek a variation to the Order made for the various payments on account of costs. In his affidavit in support of his application, Mr Knab says that he does not dispute the conditions regarding the payments ordered on account of costs but he seeks more time to fulfil them. He said:

"7. That if the Court do not allow this extension then in reality this business will close down in paying debts only and is just unfair to the parties which its interested are invested on this company if forced to make short time payments."

Mr Knab was able to attend the chambers hearing this morning with his solicitor. He told the Court that he was not disputing the conditions imposed but, as he quite frankly put it, his real problem was that he did not have any funds available at the present time to make the payments ordered by the Court but he gave a categorical assurance to counsel and to the Court that he would be in a position to make the various payments covered by the order before 31 March 2001. After listening to Mr Knab and his counsel I do not believe that the defendants are deliberately disobeying the Court's "unless" Order but, I would expect strict compliance from now on.

I, therefore, make the following amendment to clause 4 of the order of 28 February 2001:

"4. In respect of order no. 3 of 23 February 2001, the defendants will:

(i) pay to Mr Josef Hoeller in Austria before 31 March 2001 in Austrian shillings the full amount, as agreed between counsel, of his February return air fare to Tonga.

(ii) pay the balance in the agreed sum of $2,484.00 to Mr Niu's office before 31 March 2001.

Order no. 6 of 23rd February 2001 is to be read accordingly."

Clause 6 of the Consent Order of 28 February relating to insurance cover is also amended by deleting "within seven days from the date of these orders" and substituting therefore the words "before 23 March 2001".

In relation to the defendant's application for security for costs, the general rule is that such security may be ordered where it appears to the Court that the plaintiff is ordinarily resident out of the jurisdiction or that the address in the writ is intentionally incorrectly stated. The plaintiff is described in the pleadings as being of "Vaka'eitu Island, Vava'u". I do not see that description as being intentionally deceptive because he is resident on the Island at the moment and the statement of claim makes it clear that all the parties are Austrian citizens.

In a supporting affidavit, Mr Knab, says that his concern is that if the plaintiff is unsuccessful in his claim then he will not be able to meet any costs award because he has no assets in Tonga and he is unemployed.

One of the central disputes in this litigation, however, is over money which the plaintiff claims to have paid the defendants pursuant to the agreement they reached over The Resort. The defendants deny the figures Mr Hoeller claims to have paid to them but in her affidavit of 27 March 2000, Mrs Knab accepts that Mr Hoeller paid them a security bond of Austrian shillings ATS 50,000 in April 2000 and in about July 2000 Mr Hoeller's father paid the defendants ATS 60,000 as the plaintiff's contribution to the cost of shipping the container to Tonga and then, of course, apart from the goods belonging to the defendants, there are a considerable number of items in the container itself which the plaintiff claims belong to him and they, in a very real sense, can be seen as security pending the outcome of the case.

Given these factors and given the significant inconvenience and expense the plaintiff has already incurred because of the defendant's late adjournment application and given further the various indulgences extended to the defendants in connection with the proceedings to date, I am of the view that the justice of the case does not warrant the making of an order granting security for costs and, in the exercise of my discretion, I decline to do so. A further directions hearing is fixed for Friday 6 April 2001 at 9am.

Costs on the present applications are reserved.