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MBf Bank Ltd v Mangisi [2005] TOLawRp 32; [2005] Tonga LR 396 (21 September 2005)

IN THE SUPREME COURT OF TONGA

MBf Bank Ltd

v

Mangisi

Supreme Court, Nuku'alofa
Ford Acting CJ
CV 412/02

14 and 20 September 2005; 21 September 2005

Practice and procedure – application to set aside default judgment – dismissed Practice and procedure – application to stay writ of execution – stay issued

On 23 March 2003 the plaintiff bank obtained judgment against the defendant, in default of the filing of a statement of defence, for a total amount of $115,681 together with interest. On 27 May 2005, the plaintiff sought to enforce the default judgment by taking out a writ of possession in respect of one of the buildings which the defendant had pledged as security for the bank loan. On 19 July 2005, the defendant sought an order setting aside the default judgment and a stay of execution of the writ of possession on the grounds that she instructed solicitors and did not know that she failed to file a defence and further that she did not know that the Court made judgment in default against her.

Held:

1. The defendant failed to advance a good reason for failing to file a statement of defence on time. She also failed to establish that she had an arguable case on the merits.

2. The application to set aside the default judgment is dismissed.

3. In relation to service of the default judgment, no certificate of service was filed and the affidavit subsequently filed by the plaintiff's recovery officer in support of the application for a writ of possession simply stated that, "service was effected as per the file reference in this matter." There was no evidence that service of the judgment order was effected within the prescribed 14 day period.

4. A party cannot disclaim responsibilty for the acts of a solicitor appointed to act for him.

5. The Court issued a stay of the writ of possession until the plaintiff's counsel was able to regularise the position regarding service of the judgment order.

Cases considered:

Currie v Tokoroa Earthmovers Ltd [1966] 1 NZLR 611

Evans v Bartlam [1937] AC 473; [1937] 2 All ER 646

Jewett Cameron South Pacific Ltd v Tu'uholoaki [1999] Tonga LR 51

Practice Direction No 1 of 1993

Rules considered:

Supreme Court Rules 1991

Counsel for plaintiff: Mrs Vaihu
Counsel for defendant: Mr Kaufusi

Ruling

The Application

On 23 March 2003 the plaintiff bank obtained judgment against the defendant, in default of the filing of a statement of defence, for a total amount of $115,681.00 together with interest. On 27 May 2005, the plaintiff sought to enforce the default judgment by taking out a writ of possession in respect of one of the buildings which the defendant had pledged as security for the bank loan.

The present application, filed by the defendant on 19 July 2005, seeks an order setting aside the default judgment and a stay of execution of the writ of possession. I heard oral submissions from counsel during the course of two Chambers hearings.

Grounds of Application

The grounds of the defendant's application to set aside the default judgment are set out in six short paragraphs in her affidavit in support. They read:

"2. That when I received the writ and statement of claim I instructed and paid T.$400.00 to Petunia Tupou to defend this case.

3. That about a year after Petunia Tupou told me that she is busy and sick also and she asked me to look for another lawyer.

4. That I asked Mrs Mavae Fakatulolo but she told me she is busy.

5. That I asked (Mr) Kengike to handle the case.

6. That I did not know that Petunia or Kengike failed to file a defence.

7. That I did not know that this Honourable Court have (sic) already made judgment against myself."

The Law

The principles applicable to applications to set aside judgment when a defendant has failed to file a statement of defence on time are well established. Order 13 Rule 3 provides:

"(1) A judgment entered under rule 1 may be set aside if the defendant satisfies the Court that:

(I) there was good reason for his failure to file a defence in time; and

(II) he has an arguable defence.

(2) Application under paragraph (1) shall be made by summons supported by affidavit."

In reference to this rule Ward CJ, in Jewett Cameron South Pacific Ltd v Tu'uholoaki [1999] Tonga LR 51, noted that the Court always has a discretion and His Honour referred to what he termed the "classic statement of principle" by Lord Atkin in Evans v Bartlam [1937] AC 473; [1937] 2 All ER 646. It needs to be borne in mind, however, that the discretion conferred by the equivalent English rule is an unconditional discretion (as is the case in New Zealand) whereas, as can be seen above, Order 13 Rule 3 confers a discretion which is to be exercised within the framework of the criteria specified in subparagraphs (I) and (II).

Halsbury, vol 37 para 403, states:

"An application to set aside default judgment, should, of course, be made promptly and within a reasonable time of getting to know of the judgment. In the case of a regular judgment, it is an almost inflexible rule that the application must be supported by an affidavit of merits, stating the facts showing that the defendant has a defence on the merits, otherwise there may not be any point in setting it aside. For this purpose, it is enough to show that there is an arguable case or a triable issue."

In the Tonga context, the supporting affidavit would also need to set out the facts relied upon in order to establish that there was good reason for the defendant's failure to file a defence in time.

Findings

The first requirement on an application to set aside is for the defendant to satisfy the Court that there was good reason for his or her failure to file a defence in time. I need not go into the details of how service in the present case was effected pursuant to an order for substituted service but suffice it to say that, in terms of the substituted service order, the last day for filing the statement of defence would have been on the day the Court opened after the official 2002 Christmas and New Year vacation.

On 12 November 2002, after receiving notice that proceedings had been commenced against her, the defendant wrote a letter to the plaintiff bank from a post office box address in Auckland asking to be given a chance to pay off the debt. Significantly, in the context of the present application, she did not dispute the claim but stated in part:

"I fully accept to pay the amount I owe the bank, but there is no need to take it to Court."

From the documentation before the Court, it does not appear that the bank did or said anything to mislead the defendant into thinking that it would not be necessary for her to file a statement of defence. Certainly no such suggestion has been made by the defendant in her affidavit. No statement of defence has ever been filed.

In the paragraphs quoted earlier from her affidavit, the defendant appears to blame her lawyers for the lack of action. But there is no corroborating evidence before the Court confirming any of the criticisms she makes about her legal advisers.

In any event, as Woodhouse J (as he then was) observed in a not dissimilar situation in the New Zealand case of Currie v Tokoroa Earthmovers Ltd [1966] 1 NZLR 611, 614:

"in general a party cannot disclaim responsibility for the acts of a solicitor appointed to act for him."

In that case Woodhouse J spoke of the category of potential litigant who:

"Having given some broad instructions to a solicitor, is then content to lie back for an extended period of time leaving everything with nonchalant confidence to his professional adviser."

On her own admission, the defendant would seem to slot aptly into such category of litigant. She has failed to advance any good reason for failing to file a statement of defence on time.

The defendant has also failed quite spectacularly to establish the second criteria, which is that she has an arguable case. Her application and supporting affidavit are completely silent on this aspect of the Rule and, as noted above, in her initial letter to the bank, the defendant did not dispute the debt. Nowhere, therefore, has the defendant even suggested that she has an arguable case on the merits.

For these reasons, the application to set aside the default judgment is dismissed.

There is a final matter relating to service of the default judgment. The judgment order itself, dated 21 March 2003, stated that it was to be served on the defendant within 14 days of its issuance from the Court. It was issued on 24 March 2003. No certificate of service, however, has been filed and the affidavit subsequently filed by the plaintiff's recovery officer in support of the application for a writ of possession simply states that, "service was effected as per the file reference in this matter." Whatever is meant by "file reference", it is not evidence that service of the judgment order was effected within the prescribed 14 day period.

In the circumstances, I propose to issue a stay of the writ of possession until such time as plaintiff's counsel is able to regularise the position regarding service of the judgment order.

Normally costs would follow the event but given the omission of the plaintiff to comply with Practice Direction No. 1 of 1993 in relation to service, I decline to make any award of costs.