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Westpac Banking Corporation v Brunet [2005] VUSC 148; CC 237 2004 (11 August 2005)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)


Civil Case No. 237 of 2004


BETWEEN:


WESTPAC BANKING CORPORATION
Applicant


AND:


PIERRE JEAN-MARIE BRUNET
First Defendant


AND:


CHRISTIANE MARIE JOSETTE BRUNET
Second Defendant


Coram: Justice H. Bulu


Mr. Wade Roper for the Applicant
Mr. John Malcolm for the Respondents


Date of Hearing: 9 June 2005
Date of Judgement: 11 August 2005


RESERVED JUDGMENT


INTRODUCTION


  1. The Supreme Court claim was filed on 22nd December 2004 in the Supreme Court in Vila.
  2. On 30th December 2004 the Supreme Court claim was served on the First Defendant, Pierre Jean-Marie Brunet.
  3. The Second Defendant, Mrs. Christiane Marie Josette Brunet was served a copy of the Supreme Court claim on 31st December 2004.
  4. The Claimant claims under mortgage entered into in 2001 whereby the defendants mortgaged leasehold titles 11/OJ32/017, 11/OK34/006, 11/OJ32/020, 11/OJ32/021, 11/OJ32/011 and 11/OJ32/016 to the Claimant all their right, title and interest as registered proprietors in those leases to secure the repayment of VT250,000,000 owing to the Claimant under the 2001 Agreement.
  5. On 25 April 2003, it was agreed between the parties that the amounts secured would be increased to VT806,500,000 with interest (2003 Agreement)
  6. It was a term of the 2003 Agreement that all moneys secured under the mortgages would be paid to the Claimant by the Defendants by 31st July 2003.
  7. It was a term of the mortgages, that all monies secured under the mortgages would be paid by on or before the dates for payment thereunder.
  8. On 17 January 2005 Mr. Wade Roper of George Vasaris & Co. applied to the Court enclosing:-
  9. Default judgment was entered in favour of the Claimant on 24 January 2005. The Court further empowered the Claimant as mortgagee to sell and transfer the leasehold properties numbers 11/0622/042, 11/OJ32/017, 11/OK34/006, 11/OJ32/020, 11/OJ32/021, 11/OJ32/011 and 11/OJ32/016 and to apply the proceeds from the sale and transfer of the properties moneys then due and owing to the Claimant as Mortgagee.
  10. On 1st of March 2005 the Defendants applied to have the Judgment ”dated 14 January 2005” set aside.
  11. On 14 March 2005 the Defendants applied to the Court to stay the Default Judgment entered on 14 January 2005 pending the application to dismiss the default judgment.
  12. Hearing was set down for 9 June 2005.

APPLICATION


  1. The Defendants through their counsel opted to proceed with one application only, namely the application of 1st of March 2005 seeking an order of the Court to set aside the “January 14 Judgment.”

The grounds advanced for the application are as follows:-


“2. contained in the rules.


3. affidavits sworn and filed herein.”


SUBMISSION BY APPLICANTS


  1. Submissions on behalf of the applicants fall into three main areas. These are as follows.

Civil Procedure Rules do not provide for default judgment in relation to mortgages


  1. The applicants submit that the Civil Procedure Rules do not provide for default judgment in relation to mortgages. The jurisdiction of the Court to issue default judgment is pursuant to rules 9.1 and 9.2 of the Civil Procedure Rules No. 49 of 2002. That rule applies to a claim for a fixed amount of money only. The alternative is a damages claim for money only to be proved. On service, the Claimant can seek judgment for the amount of the claim plus interest and costs. There is no right to a mortgage sale by default judgement.
  2. The applicants further submit that the Statement of Claim was seeking orders, not money. That the amount claimed has not been disclosed. The rule as to default judgments are specifically to liquidated damages. Where the damages are not liquidated, an application for judgment can be made under rule 9.3 which allows for judgment and the matter listed for formal proof or other application.

No notice under rule 7.3.


  1. The Applicants further submit that rule 7.3 applies to applications of this nature. An application under rule 7.3 must be served at least 3 clear days before a hearing.
  2. The Applicants submit that there must be notice of such application served on the other party. This was not done. As such, the application was defective from the outset and the Judgement ought to be overturned.

No default


  1. The claim was served at about 3.30 p.m. on Pierre Brunet on 30th December 2004. It was served on Mrs. Brunet about 3 p.m. on 31st December 2004.
  2. This was the Christmas period and the Court was closed except for urgent applications. Most law firms were closed and the lawyers were overseas. There were also a number of public holidays.
  3. The applicants submit that public holidays and Sundays are precluded from time calculations. Paragraphs 26 and 28 of Halsbury on Practice and Procedure, Volume 37 was cited to the Court. Those paragraphs reads:-

“Where the act is required to be done on a specified number of clear days, at least that number of days must intervene ...


In general, a provision specifying a period of not less than a specified number of days excludes both the starting date and the terminal date.


Sundays and public holidays are excluded.”


  1. The applicants submit that on normal calculations, the 14 days expires on 19th January and the application could be made on 20 January. The default judgment was issued within 14 days since service of the claim. There was no default and the judgment ought to be overturned.

CLAIMANTS SUBMISSIONS IN ANSWER TO THE DEFENDANT’ S APPLICATION


  1. The Claimants submits that rule 4.13 (1) (a) relevantly states the time within which the Defendants response must be made. It states:-

“The Defendants’ response must be filed and served within 14 days notice of service of the claim.”


  1. Given that the claim was served on the First Defendant on 30 December 2004 and on the Second Defendant on 31 December 2004, the time for filing a response under rule 4.13 expired on 13 and 14 January 2005 respectively.
  2. There is some suggestion in the Second Defendant’s Statement sworn 31 May 2005, that the subject rule should be construed so as to exclude from the calculation of the requisite 14 day period, public holiday and Sundays.
  3. The Rules do not support any such proposition and in the Bank’s submissions, had the authors of the Rules intended to exclude public holidays and Sundays for the purposes of Rule 4.13 or otherwise, they would have done so expressly.
  4. In all the circumstances, 14 days within the Rules must be interpreted literally as exactly that and not given some other construction as contended for by the defendants.
  5. Setting aside of a default judgment is provided for under Part 9 Rule 5 of the Civil Procedure Rules. Under that part a defendant, against whom judgment has been entered, may apply to the Court to have that default judgment set aside. Such an application can be made at any time.
  6. Before the Court can set aside the default judgment, it must first be satisfied that the defendant –
    1. has shown reasonable cause for not defending the claim; and
    2. has an arguable defence, either about his or her liability for the claim or about the amount of the claim.
  7. In the recent Court of Appeal decision in ANZ v. Dinh Civil Appeal Case No. 27 of 2004 the Court of appeal expressly recognized that even where an irregularity might otherwise exist the Court still had to look at the issue of whether a genuine defence existed prior to the exercising any discretion under rule 9.5 (3) generally.
  8. In all the circumstances, the Court will need to look at the statements before it on this application before it can determine whether or not there is a genuine defence, irrespective of any finding the Court may make as to the interpretation of “14 days” for the purposes of the rules.

DOES A GENUINE DEFENCE EXIST


  1. The Defendants have provided a draft defence together with the application to set aside. They advance three bases of defence as follows:-
    1. the Claimant has overcharged interest;
    1. the Claimant has overcharged fees;
    2. the Mortgage is and was harsh and conscionable.

BANK OVERCHARGED INTEREST


  1. The Bank has charged penalty to the interest on the amounts outstanding at the rate of 25% per annum. The defendants specifically agreed to this penalty interest under the April 2003 Agreement.
  2. If the Defendants had any objections to the interest rates being charged by the Bank, the appropriate time to raise those concerns would have been prior to the execution of the April 2003 Agreement. In fact they failed to raise any objection to the interest rates charged by the Bank at any time preceding the extant application to set aside.
    1. Following the Dinh’s case and that Adams v. Kendrick Trading (International) Limited (1986) K NSWLR 503, this Court can quite properly have regard to Mr. Gouglan’s evidence about conversations with Mrs. Brunet and her conduct both pre and post the onset of these proceedings, in determining whether or not the arguments now advanced are genuine.
    2. Given the Defendant’s conduct, and more particularly the Second Defendant’s voluntary surrender of the keys after the Default Judgment had been entered, no credence should be given to the arguments the Defendants now purport to raise.

BANK OVERCHARGED FEES


  1. This complaint seems to relate to evidence advanced in the Second Defendant’s statement of 31 May 2005, as to inter alia, some AUD$70,000 worth of legal fees debited to the Defendants’ facilities.
  2. The Bank submits that it could properly levy the fees against the Defendants facilities under the agreements which the Defendants had voluntarily entered into.
  3. The Bank submits that the Defendants’ difficulties do not end there. The Defendants’ conduct in failing to raise any objection to the levied fees prior to the entry of Default Judgment must, without more, be construed by the Court as damning evidence that the attempt to now raise a defence is merely an attempt to obfuscate the issues and frustrate the Bank’s attempts to recover under its securities.

THE MORTGAGE IS AND WAS HARSH AND UNCONSCIONABLE


  1. It is unclear what arguments the Defendants purport to advance in this regard. None has been provided.
  2. It is an immutable and incontrovertible fact, on the evidence before the Court, that the Defendants received advances from the Bank, to their own benefit, in the amount of VT807 million.
  3. It is exceedingly difficult, in the circumstances, to envisage how the Defendants can have any argument that requiring them to repay the monies so advanced somehow is harsh and/or unconscionable.
  4. It ought be obvious from the evidence before the Court that the Defendants, particularly the Second Defendant, are astute business people with far greater means and higher levels of education than the average litigant who comes before this Honourable Court.
  5. In the result, any suggestion that the Defendants were unaware of the consequences of non-compliance with their obligations under the Mortgages is simply ludicrous.
  6. This is not a case in which a Third Party was called upon to provide security without any benefit and improperly advised as to the consequences of their actions.
  7. The Bank submits that no defence exists in the current matter, and the Default Judgment must stand accordingly.

THE CLAIMANT WAS NOT ENTITLED TO DEFAULT JUDGMENT ON 14 JANUARY 2005


  1. The Bank submits that the first thing to say about this head of the application is that no Default Judgment has been entered on 14 January 2005. Therefore no defence exists.
  2. The Bank went on to say that it is clear from various correspondences between the parties and statements filed before the Court that the response was not filed on 14 January 2005. It was in fact filed on 19 January 2005 and not on 14 January as alleged.

A MORTGAGEE POWER OF SALE ORDER IS NOT AN APPROPRIATE ORDER FOR DEFAULT JUDGMENT


  1. The Bank submits that the arguments advanced by the Defendants in this regard are facile and wholly without merit.
  2. In the limited time the author of these submissions has been in practice in Vanuatu, this Honourable Court has issued in excess of 100 Default Judgments in Mortgagee Power of Sale matters.
  3. If that alone were not enough, the Court of Appeal in Dinh found that the Default Judgment that had been entered in that matter, on a claim in substantially the same terms as that which initiated these proceedings, was an appropriate order and could stand as such.
  4. The Bank went on to say that the Court of Appeal findings must dispose of any arguments the Defendants have in this regard.

DISCUSSIONS


  1. The substantive application before this Court is that of 1st March 2005 to set aside the default judgment. The application seeks an order of this Court to the effect that the judgment “dated 14 January 2005” be set aside.
  2. The applicants raised a number of topics that require the consideration of this Court that can be summarized as follows:-
    1. jurisdiction of the Court to issue default judgment;
    2. no liquidated claim;
    1. default judgment was done within 14 days.
    1. no application under rule 7.3;
    2. rule 9.5 setting aside default judgment.
  3. I take each topic in turn.

JURISDICTION OF THE COURT TO ISSUE DEFAULT JUDGMENT


  1. The applicants submit that the jurisdiction of the Court to issue a default judgment is pursuant to rules 9.1 and 9.2. That those rules applies to a claim for a fixed amount of money only. And that the alternative is a damages claim for money only to be proved.
  2. I set out below rules 9.1 and 9.2 fully:-

“Default by defendant


9.1 If a defendant:-
  1. does not file and serve a response or a defence within 14 days after service of the claim; or
  2. files a response within that time but does not file and serve a defence within 28 days after the service of the claim;

the claimant may file a sworn statement (a “proof of service”) that the claim and response form was served on the defendant as required by Part 5.


Default – claim for fixed amount


9.2 (1) This rule applies if the claim was for a fixed amount.

(2) After the claimant has filed a proof of service, the claimant may file a request for judgment against the defendant for the amount of the claim together with interest and costs. The request must be in Form 12.


(3) In the Magistrates Court, the request may be made orally.


(4) The court may give judgment for the claimant for:-


(a) the amount claimed by the claimant; and


(b) interest from the date of filing the claim at a rate fixed by the court; and


(c) costs in accordance with Part 15.


(5) Default judgment must not be given in the Magistrates Court before the first hearing date.


(6) The claimant must serve a copy of the judgment on the defendant.


(7) If the defendant does not apply within 28 days of service to have the judgment set aside under rule 9.5, the claimant may:-


(a) file a sworn statement that the judgment was served on the defendant as required by Part 5; and


(b) apply to the Court for an enforcement order.”


  1. Rule 9.1 lays down the principle. Rules 9.2 and 9.3 are concerned with specific situations, namely, claim for a fixed amount and claim for damages. The language of rule 9.1 are general and not prohibitive to situations described in rule 9.2 and 9.3 only.

NO LIQUIDATED CLAIM


  1. The arguments advanced by the applicants is that the claim was really an application for orders to allow the Mortgagee to sell. It was not a liquidated sum being claimed. That a mortgage power of sale order is not an appropriate order for default judgment.
  2. A mortgage is a private agreement between the Mortgagor and the Mortgagee whereby, as in this case, the applicants mortgages certain of their properties as collateral for loans they took from the Bank (the Mortgagee). Demands have been made to the applicants as Mortgagor pursuant the Agreements to repay the loans totaling VT806,500,000 plus interest. These are found in the Supplementary Sworn Statement of Gregory Vincent Coughlan annexures “GVC6”, “GVC11”, “GVC12”, “GVC13” and “GVC20”.
  3. By a loan agreement between the Claimant and the First and Second Defendants dated 22 February 2001 (2001 Agreement) the claimant agreed to advance to the First and Second Defendants and the First and Second Defendants agreed to accept the sum of VT364,000,000. It was a term of that 2001 Agreement that the sum of VT250,000,000 would be secured by mortgages from the First and Second Defendants.
  4. By mortgage dated 31 May 2001 in respect to leasehold title number 11/OC22/042 (“the Mortgage”), a collateral mortgage over leasehold titles 11/OJ32/017, 11/OK34/006, 11/OJ32/020, 11/OJ32/021, 11/OJ32/011 and a second ranking collateral mortgage over title number 11/OJ32/016 (“the Second Ranking Collateral Mortgage”), the First and Second Defendants mortgaged to the Claimant all their right title and interest as registered proprietors in the leases comprised in the aforesaid title numbers to secure the repayment of VT250,000,000 owing to the Claimant under the 2001 Agreement, together with interest thereon.
  5. Under the 2003 Agreement, it was agreed between the Claimant and the First and Second Defendants that the amounts secured under the Mortgages would be increased to VT806,500,000, together with interest thereon (“the 2003 Agreement”).
  6. The Supreme Court Claim by the Claimant in this case, is asking for the Court to enforce an agreement, a private arrangement between the Mortgagor and the Mortgagee. The amount of money claimed under the Agreement is VT806,500,000 plus interest. This is clearly stated in the claim. Because the Mortgagors failed to uphold their part of the deal that the Mortgagee has come to the Court seeking specific performance under their agreements. That in my view falls within the ambit of rule 9.1.

DEFAULT JUDGMENT ENTERED WITHIN 14 DAYS


  1. There is no default judgment entered on 14 January 2005. There is nothing more to say to that.

14 DAYS FOR RESPONSE


  1. Rule 4.13 of the Civil Procedure Rules sets out the time within which documents are to be filed in Court. Rule 4.13 (1) (a) states:-

“The defendant’s response must be filed and served within 14 days of the date of service of the claim.”


  1. The Claim was filed on the First Defendant on 30 December 2004 and on the Second Defendant on 31 December 2004. The time for filing under rule 4.13 expired on 13 and 14 January respectively, if Sundays and Public Holidays are counted.
  2. Should the computation of “14 days” exclude Sundays and public holidays as has been strongly argued by the applicants, as is found in Halsbury, volume 37 at paragraphs 26 and 28. Paragraph 26 is headed “General rules as to reckoning periods of time”. The relevant provision is set out fully below.

“Where the act is required to be done a specified number of clear days before or after a specified date, at least that number of days must intervene between the days on which the act is done and that date. In general, in procedural matters, a provision specifying a period of not less than a specified number of days excludes both the starting date and the terminal date.”


  1. Paragraph 28 is set out fully below.

“28. Intervening holidays. Where the period in question prescribed an act to be done, however it is expressed, is a period of seven days or less and would include a Saturday, Sunday or a bank holiday, Christmas Day or Good Friday, that day must be excluded from the reckoning of the period.”


  1. Paragraph 26 is concerned with the general rule concerning the computation of time. Paragraph 28 is an exception to that general rule and is concerned with a period of “seven days or less”. In that situation Sundays and holidays must not be taken into account to compute or reckon the time for a specified action to occur within.
  2. Has the Vanuatu Parliament provided for the computation of time. The answer is yes. This is found in section 33 of the Interpretation Act [CAP. 132]. That section states:-

“Computation of time etc.


  1. (1) In computing time for the purposes of an Act of Parliament –

This is the law in this country. The common law principles cannot apply.


  1. In this case the claim was served on the First and Second Defendants on the 30th and 31st December respectively (Thursday and Friday).
  2. I apply the rule in section 33.

Calculation of 14 days After Service


Days
Date
First Defendant
Second Defendant
Thursday
30 December 2004
Service
-
Friday
31 December 2004
1
Service
Saturday
1 January 2005
-
-
Sunday
2 January 2005
2
1
Monday
3 January 2005
3
2
Tuesday
4 January 2005
4
3
Wednesday
5 January 2005
5
4
Thursday
6 January 2005
6
5
Friday
7 January 2005
7
6
Saturday
8 January 2005
8
7
Sunday
9 January 2005
9
8
Monday
10 January 2005
10
9
Tuesday
11 January 2005
11
10
Wednesday
12 January 2005
12
11
Thursday
13 January 2005
13
12
Friday
14 January 2005
14
13
Saturday
15 January 2005
15
14
Sunday
16 January 2005
16
15
Monday
17 January 2005
17
16

  1. Applying that rule in relation to the First Defendant, the 14 days after service of the Claim expired on 14 January 2005. For the Second Defendant, 14 days after service expired on 15 January 2005. In my view, the application for default judgment was done outside the 14 days.

NO APPLICATION UNDER RULE 7.3


  1. Rule 7.3 reads:-

“Service of Application


7.3 (1) An application must be served on each other party to the proceeding unless:-


(a) the matter is so urgent that the Court decides the application should be dealt with in the absence of the other party; or


(b) the Court orders for some other reason that there is no need to serve it.


(2) The application must be served at least 3 days before the time set for hearing the application, unless the Court orders otherwise.”


  1. Part 7 is concerned with interlocutory matters. Rule 7.2 defines “interlocutory order” (as) an order that does not finally determine the rights, duties and obligations of the parties to a proceeding.
  2. Part 9 on the other hand is concerned with “ending a proceeding early”.
  3. A request for judgment under that part is not the same thing as an application under Part 7 that does not finally determine the “rights, duties and obligations of the parties”. Such a request is for the Court to enter judgment that does affect the “rights, duties and obligations” of the parties in the proceeding. As such specific provisions are provided under Part 9 that deals with such request. The nature of such request is “paper request”. The Claimant applies in line with that part because the defendant has not responded within 14 days to the claim after service. The applicant need not be in Court when the application is considered. It is all done on paper. That is how it happened in this matter.
  4. The specific provisions concerning default judgment under Part 9 of the Rules do not require service of notice on the other party when applying for a default judgment.

SETTING ASIDE A DEFAULT JUDGMENT


  1. The relevant rules are set out under Part 9 of the Civil Procedure Rules. A defendant, against whom judgment has been entered, may apply to the Court to have that judgment set aside at any time pursuant to rule 9.5. Before the Court can set aside the default judgment it must first be satisfied that the defendant (9.5 (3)) –
    1. has shown reasonable cause for not defending the claim; and
    2. has an arguable defence, either about his or her liability for the claim or about the amount of the claim.
  2. In my view the most apt test for the exercise of the Courts discretion at common law is that espoused by Cole JA in Cohen v. McWilliam 38 NSWLR 476 at page 501 – where he states:-

“The cases establish that the discretionary decision is to be reached in all the relevant circumstances. However at least the following matters require consideration:-


(i) the reason for default;
(ii) explanation of any delay;
(iii) the demonstration of any defence on the merits;
(iv) additional costs occasioned by amendment or adjournment;
(v) the public and private interest in efficient disposition of litigation;
(vi) the non-financial pressures of litigation on the non defaulting party;
(vii) the public and private interest in there being a hearing on the merits.

No one has primacy. Different weight will be and should be attached to these and other factors depending on the circumstances.”


  1. There is a fundamental difference between the position under the Civil Procedure Rules and that at common law generally, namely that in the present case the Court will not exercise its discretion unless and until it is satisfied both that the defendants have shown reasonable cause for failing to defend the claim and that a defence exists on the merits.
  2. The applicants in this matter argue that rule 9.5 (3) only applies to regularly obtained judgments. I have found nothing irregular about the default judgment in this matter.
  3. The most recent case of ANZ v. Dinh CAC 27 of 2004 is on point as it concerns a construction of Rule 9.5 (3) and the issue of irregularity. The Court of Appeal at page 7 of its judgment stated:-

“In his statement in support of the application to set aside the default judgment, the Respondent asserted that he was not served with a Response form. The Appellant thereupon filed a further affidavit of service from the process server deposing that a Response form was served at the same time as the claim. Counsel for the Respondent contends a disputed question of fact therefore arose. Not only was there irregularity in that the affidavit of service did not refer to the Response form, but now there is also a disputed question of fact which would justify setting aside the Default Judgment.


The significance of these deficiencies must be assessed in the factual context of the case. In the instant case, the context includes the history of demands, formal and informal, form the Appellant, and correspondence from the Respondent written after the Supreme Court claim was served. We refer below to the history of correspondence, but, significantly, at no time before the service of the Supreme Court claim did the Respondent challenge his liability to make payment of the sums claimed by the Appellant.”


I concur fully with the statement by the Court of Appeal.


HAS THE DEFENDANTS SHOWN REASONABLE CAUSE FOR NOT DEFENDING THE CLAIM?


  1. The Applicants submit that the reasonable cause for defaulting is because it was over the Christmas period. No solicitors were present and the fact that the Claimant applied for the default judgment earlier prevented the defendants exercising the option of putting in a defence.
  2. Taking the latter first, I have found nothing wrong with the application for default judgment. No more needs to be said.
  3. On the first point raised (in paragraph 85 above), there is no evidence before the Court that all lawyers in the firm of Geoffrey Gee and Partners were overseas during that period. It was further argued that the Court was also closed for that period. To that I simply say that the Registry was opened during that period.
  4. The Applicants further say (at paragraph 7 of the Sworn Statement of Christiane Marie Josette Brunet) that there were three public holidays during that period and that they were calculated in the reckoning of the period of 14 days within which the defendants need to respond. Such days they argue are Friday 31st December 2004, New Year’s Day holiday, and 3rd January 2005.
  5. The list of public holidays issued for last year and this year do not include Friday 31st December 2004 as a public holiday nor 3rd January 2005 as a public holiday.
  6. The applicants further argued strongly that the Response form was filed on 14 January 2005. The Form has the words typed “14th January 2005” against “Date of filing” to show that that was when the form was filed. The evidence before the Court tells a different story. The Supreme Court Register shows that the form was delivered on 18 January and registered on 19 January 2005. It could not have been filed on 14 January 2005.
  7. In my view, the Defendants have not been honest in raising this defence.

ARGUABLE DEFENCE ABOUT LIABILITY FOR CLAIM OR AMOUNT OF CLAIM


  1. The grounds advanced in the application to set aside default judgment entered on “14 January 2005” are as follows:-

“(a) The Claimant has overcharged interest;

(b) The Claimant has overcharged fees;
(c) The Mortgage is and was harsh and unconscionable.”
  1. I will deal with each head in turn.

Overcharged interest


  1. Under the April 2003 Agreement (that increased the loan facility to the amount of VT806,500,000 to the defendants) the Bank has charged penalty interest on amounts outstanding at the rate of 25% per annum. This amount may seem high, however, it must be remembered that the defendants agreed this rate.
  2. If the defendants had any objection to the interest rates being charged by the Bank, the appropriate time to raise those concerns would have been prior to the execution of the April 2003 Agreement.
  3. In the Adams case Hope JA, in the majority at pages 586 and 587 refers to a passage from the decision of the House of Lords in Evans v. Backlam [1937] OER 473 and states:-

“Whatever else the statement means, in my opinion it means that evidence can be received, by cross-examination or otherwise, as to the bona fides of the applicant in seeking to rely upon the defence, even though the evidence adduced relates to the issues which would be determined if the matter went to trial. However the question to which this evidence is directed is not simply whether the applicant has shown a defence on the merits; it goes rather to the composite question whether the applicant has shown a bona fide defence on the merits.


If the Judge hearing the application concludes that the applicant has deliberately lied about the alleged defence and is thus dishonest in raising it, the applicant would fail to establish that he had a bona fide on the merits. But if in such a case the Judge merely concluded that he prefers the evidence from the respondent to that of the applicant, or anything as to credit short of disbelief by the applicant in the facts he relied on to found the defence, he would not on that account alone be entitled to find that the applicant had failed to establish that he had shown a bona fide defence on the merits. If he did so, he would be trying the issue to be determined at the trial, and this would be an error of law.”


  1. I concur fully with this statement. The question the applicants must satisfy is whether they have “shown a bona fide defence on the merits”.
  2. Following the decision in the recent Court of Appeal case of Dinh, the Court can properly have regard to evidence about conversations between the Claimant and the Defendants and the Defendants conduct both pre and post the onset of these proceedings, to determine whether or not the arguments now advanced are genuine.
  3. This must be assessed in their factual context. That context includes agreements and demands made prior to the commencement of these proceedings. At no time before the issuance of the Supreme Court Claim did the Defendants challenge their liability for the claim or the amount of the claim.

Overcharged fees


  1. It is not clearly stated or specified which fees the Bank charged that falls under this head.
  2. The Sworn Statement of the Second Defendant dated 31st May 2005 seems to suggest at paragraph 11 that this relates to the fees “such as a $70,000.00 legal to John Ridgway, a lawyer previously in Vanuatu”. Other than that, the statement and the defence are too general to be of any relevancy or to inform the Claimant as to what the defence is.
  3. On the evidence, it is clear that John Ridgway did do some work for the Bank in accordance with the agreements, hence the fee charged. Clause 4.22 of the Mortgage dated 21 May 2001 covers this. It states, amongst other things:-

“That is addition to all costs and expenses which the Mortgagor may be liable at law or equity to pay in respect of this security or otherwise in relation thereto the Mortgagor will upon demand pay all costs and expenses incurred by the Mortgagee ... including costs between solicitor and own client as well as between party and party ...”


  1. Again as in the other heading, the Defendants at no time prior to the commencement of these proceedings raised any objections to the imposition or overcharging of any such fees.

Mortgage is harsh and unconscionable


  1. All that the applicants say is that the “mortgage is harsh and unconscionable”. It is difficult, if not impossible, to make any sense of this defence, without any more specifications.
  2. The Defendants had agreed and received an advance of VT806,500,000 to their own benefit to be repaid with interest. It is very difficult, in the circumstances, to see how the Defendants can have any argument that requiring them to repay the monies borrowed from the Claimant somehow is harsh and/or unconscionable.
  3. This is not a case in which a third party was called upon to provide security without any benefit and improperly advised as to the consequences of their actions.

ORDERS


108. The formal orders of the Court are -


(a) The application to set aside the default judgment is refused.

(b) The Applicants to pay the Claimants costs at the standard rate of and incidental to this hearing as agreed or in default of agreement as taxed.

DATED at Port Vila, this 11th day of August 2005.


H. BULU
Judge

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