Rex Lam Paki v PNG Sustainable Development Program Ltd [2023] SGHC(A) 24

Introduction

The appellant applied to set aside a judgment that had been entered against him on admissions of fact. The Judge who granted judgment held that the court did not have the power to set aside a judgment on admissions, because the Rules of Court did not expressly provide for this. The Judge further held that if the court had the power to set aside the judgment, he would not do so in this case. His grounds of decision are set out at PNG Sustainable Development Program Ltd v Rex Lam Paki and others [2022] SGHC 188 (the “GD”).

Background

Parties

The appellant was formerly a director of the respondent company. In 2018, the respondent sued the appellant for breaches of fiduciary duties. In March 2019, the writ was served on the appellant. After proceedings in which service was disputed, on 26 November 2019 the appellant was directed to file his defence by 13 December 2019, but he did not do so.

While there are six named defendants to the action, only the appellant (who was the first defendant), the second defendant, and the fourth defendant (collectively, the “defendants”) were central to the setting aside application. This was because the third, fifth and sixth defendants succeeded in having service of process set aside on grounds that the Singapore courts did not have personal jurisdiction over them: GD at [9].

Application for judgment in default of defence

On 20 December 2019, in HC/SUM 6374/2019 (“SUM 6374”), the respondent applied for leave to enter judgment against the appellant in default of defence. On the same basis, judgment was also sought against the second defendant (the appellant’s wife) and the fourth defendant (a company of which the appellant’s wife was the sole registered shareholder and director).

At the hearing of the application on 30 January 2020, the Judge indicated that he wished to be addressed on the merits of the claim, rather than simply to give judgment in default of defence. He directed the respondent to apply under O 27 of the Rules of Court (Rev Ed 2014) (“ROC 2014”) for judgment on admissions of fact.

Judgment on admissions

The respondent duly filed HC/SUM 772/2020 (“SUM 772”) for judgment on admissions, those admissions being deemed admissions arising from the defendants not having filed a defence.

SUM 772 was first heard on 28 February 2020. At the hearing, PRP Law LLP (“PRP”) represented the defendants. An issue of potential conflict of interests (in representing multiple defendants) was raised in relation to PRP’s representation of the defendants. The court adjourned the application to allow PRP to take instructions and respond.

On 2 March 2020, PRP filed an application to be discharged as solicitors for the defendants.

On 4 March 2020, the court granted PRP a discharge from acting as solicitors for the defendants, following which the court heard and granted SUM 772 and entered judgment against the defendants (the “Judgment”). SUM 6374 was consequently withdrawn.

At the hearing on 4 March 2020, the defendants did not attend in person or by solicitors. Nor did they contact the respondent’s solicitors or the court to seek an adjournment.

On 10 March 2020, the respondent’s solicitors sent a copy of the Judgment to the defendants. The appellant could have filed an appeal against the Judgment, but he did not do so; neither did the second defendant or the fourth defendant.

Application to set aside the judgment

Some 17 months later, on 6 August 2021 the appellant filed HC/SUM 3731/2021 (“SUM 3731”) to set aside the Judgment. This application was filed after the appellant received notice that the Judgment had been registered in New South Wales and Papua New Guinea.

On 1 November 2021, the Judge dismissed SUM 3731. The appellant appealed against that decision, and we dismissed the appeal.

The court’s inherent power to set aside judgments and orders

The Judge noted that the ROC 2014 had no specific provision allowing for a judgment on admissions to be set aside. He then held that the architecture of the ROC 2014 excludes any inherent power to do so: GD at [83]–[92]. The Judge reasoned that had he granted the respondent’s initial application for judgment in default of defence, he would have had express power under the ROC 2014 to set aside the judgment; but as the respondent had applied for and obtained judgment on admissions, the court did not have power to set aside that judgment.

On the Judge’s reasoning, a court has no inherent power to set aside any judgment or order. It either has an express power under a specific rule in the ROC 2014, or it has no power to set aside a judgment or order at all. This reasoning cannot hold given the Court of Appeal’s decision in Harmonious Coretrades Pte Ltd v United Integrated Services Pte Ltd [2020] 1 SLR 206 (“Harmonious Coretrades”) which recognised that the court has the inherent power to set aside its judgments or orders to prevent injustice:

It is clear from these passages in Harmonious Coretrades that besides being able to set aside judgments or orders when they have been obtained irregularly, by fraud, or in default of appearance, the court retains a residual discretion, flowing from the court’s inherent powers, to set aside judgments or orders so as to prevent injustice (Harmonious Coretrades at [34]–[40]). This is consistent with O 92 r 4 of the ROC 2014 which recognises that the court has the inherent power to “make any order as may be necessary to prevent injustice…”: see also Harmonious Coretrades at [37]–[38].

The present case was not one in which the Judgment was obtained irregularly, or by fraud, or in default of appearance. But, as is clear from Harmonious Coretrades, the court still has a residual discretion, flowing from its inherent powers, to set aside a judgment on admissions if setting-aside is necessary to prevent injustice.

The respondent contended that where there is (or was) a right of appeal, there is no inherent power to set aside a judgment or order. We did not accept that argument. It would unjustifiably limit the court’s inherent power as recognised in Harmonious Coretrades. Setting-aside might be necessary to prevent injustice although there is (or was) a right of appeal. Indeed, it appears that the order that was set aside in Harmonious Coretrades was one that could have been appealed against, but the Court of Appeal nevertheless recognised that the High Court would have had inherent power to set it aside, had this been necessary to prevent injustice. That being said, whether there was a right of appeal, and (if so) why an appeal was not pursued, are relevant considerations in deciding whether setting-aside is necessary to prevent injustice. We address this point below (at [25]–[30]).

Whether it was necessary to set aside the judgment to prevent injustice

Although we held that the court did have the inherent power to set aside a judgment on admissions, we agreed with the Judge that the Judgment should not be set aside. It was not necessary to do so to prevent injustice.

Although the Judge found that he had no inherent power to set aside the Judgment, he went on to consider, in the alternative, whether any such power should be exercised to set aside the Judgment. He decided that the applicable principles were set out in cases such as Mecurine Pte Ltd v Canberra Development Pte Ltd [2008] 4 SLR(R) 907 (“Mercurine”), Su Sh-Hsyu v Wee Yue Chew [2007] 3 SLR(R) 673 (“Su Sh-Hsyu”), and First Property Holdings Pte Ltd v U Myo Nyunt (alias Michael Nyunt) [2020] SGHC 276 (“First Property”) (upheld by the Court of Appeal on appeal in U Myo Nyunt (alias Michael Nyunt) v First Property Holdings Pte Ltd [2021] 2 SLR 816). The Judge placed particular emphasis on the synthesis of the principles for setting aside a judgment in First Property (at [59]–[60]):

Paragraph 59 of First Property dealt with judgments entered by reason of a procedural default, with the defendant having had no opportunity to be heard on the merits of the claim. The principles in question apply to the setting aside of a default judgment under O 13 r 8 of the ROC 2014: Su Sh-Hsyu at [42]–[43].

Paragraph 60 of First Property dealt with judgments entered after a trial in the defendant’s absence. The principles in question apply to the setting aside of a judgment under O 35 r 2 of the ROC 2014: Su Sh-Hsyu at [1], [44]–[45].

The present case did not concern an application to set aside a judgment under either O 13 r 8 or O 35 r 2 of the ROC 2014. The appellant sought, instead, to invoke the court’s inherent power to set aside a judgment entered on admissions of facts. Such a judgment was, as the Judge had noted, a regular and final judgment, and a judgment entered on the merits. It was not a judgment entered upon a default, nor was it a judgment entered after a trial: GD at [30], [95]. Although there was no “trial”, we agree with the Judge that the principles in First Property at [60] guide the exercise of the court’s discretion, as the Judgment was one entered on the merits.

In this regard, it is not sufficient for a party applying to invoke the court’s inherent power to set aside a judgment, in a case such as the present, merely to show that he has merits in his intended defence. The court will consider the applicant’s explanation (if any) for the defaults and delay (ie, failure to file a Defence, non-attendance at the hearing, failure to file an appeal, and delay in applying to set aside the Judgment) as well as whether there is any prejudice to the other party.

In the present case, the appellant had no good reason for not filing his Defence. He was then absent at the hearing of the SUM 772, and he took no action to either file an appeal against the judgment when he learned of it in March 2020, or to set it aside. It was only in August 2021 that the appellant finally applied to set aside the Judgment.

We upheld the Judge’s decision that the appellant did not have good reasons for his defaults and delay in relation to the Judgment: GD at [106]–[171]. In particular:

(a) The appellant was represented by solicitors (PRP) from 27 February 2020, the day before the first hearing of SUM 772. As noted above, the hearing was adjourned to 4 March 2020 for PRP to consider its position on the issue of conflict. PRP decided that it could not continue to act for both the appellant and his wife (the second defendant), and applied on 2 March 2020 to be discharged as their solicitors. PRP said on affidavit that it had advised the defendants they ought to engage solicitors or to attend the hearing of SUM 772 on 4 March 2020 in person, failing which the court might make orders against them in their absence.

(b) The appellant contended that he did not engage solicitors because of his impecuniosity, but the Judge rejected this: GD at [164]– [166]. There was no evidence in the first place that the appellant was unable to engage solicitors in place of PRP when PRP applied for a discharge (on the grounds of conflict, not on the grounds of lack of funds) in March 2020. The appellant had put PRP in funds, and with PRP’s discharge the balance of those funds would have been available for him to use towards engaging new solicitors.

(c) As the Judge observed, the appellant could also have acted in person – he could have sought an adjournment of the hearing, and he could have filed a Defence: GD at [165]–[166]. Indeed, the appellant had contacted the respondent’s solicitors earlier to request an adjournment of a pre-trial conference, but he did not do the same when SUM 772 was heard. Nor did he contact the court to seek an adjournment.

(d) The appellant then did nothing in relation to the Judgment for some 17 months – the Judgment was entered against him on 4 March 2020, and a copy was sent to him on 10 March 2020; but he only applied to set aside the Judgment on 6 August 2021.

There was no good reason for the appellant being absent from the hearing on 4 March 2020 when the Judgment was entered (and not even seeking to adjourn it), or for him to only apply to set aside the Judgment some 17 months after he had learnt of it. It appears that the appellant was prompted to act only after he was notified about the registration of the Judgment in New South Wales and Papua New Guinea. His concern, it seems, was about the Judgment being enforced against him, rather than about the Judgment having been entered against him.

In those circumstances, it was not enough for the appellant to make arguments on the substantive merits, in the hope of getting the Judgment set aside pursuant to the court’s inherent power.

As the Court of Appeal observed in Harmonious Coretrades (at [40]), “the court’s inherent power to set aside a judgment or court order should never become a back-door appeal or an opportunistic attempt to relitigate the merits of the case”. In the present case, the appellant could have filed an appeal against the Judgment deadline expired, but he did not; nor did he file an application to extend time to appeal. The appellant’s arguments on the substantive merits were no more than a back-door appeal, an attempt to relitigate the merits of the case when there was no appeal. That is precisely what the Court of Appeal in Harmonious Coretrades (at [40]) had warned against the court’s inherent power being used for.

A similar situation arose in Vallipuram Gireesa Venkit Eswaran v Scanply International Wood Product (S) Pte Ltd (Kim Yew Trading Co, third party) [1995] 2 SLR(R) 507 (“Vallipuram”). There, the third party (against whom judgment had been entered) had not appeared at the trial. Under the Rules of Court in force at that time, it could have applied to set aside the judgment within seven days after the trial, but it did not do so. It only applied to set aside the judgment nearly two years after the event. The judge found that on that basis alone, the application could have been dismissed (Vallipuram at [13]). Moreover, the third party put forward no explanation for its absence from the trial, or for its failure to do anything to set aside the judgment for such a long period (Vallipuram at [15]). In the circumstances, it appeared to the court that the third party was simply trying to delay the enforcement of the judgment without any good cause to do so; the court concluded that it saw no reason why it should examine the so-called “merits” of the third party’s case and set aside the judgment if it found such merits to exist (Vallipuram at [19]).

The appellant had no good reason for his defaults and delay: he never filed a Defence, he was absent at the hearing at which the Judgment was entered against him, he did not appeal the Judgment in time, he did not seek an extension to appeal out of time, and he only applied to set aside the Judgment some 17 months after he had learnt of it. Having belatedly applied to set aside the Judgment, he then made arguments on the substantive merits as if he had appealed. This was no more than a back-door appeal that the court could not condone. Having failed to take action up till this point, despite having had numerous opportunities to do so, it was too late in the day for the appellant to contend that the Judgment could not stand.

Conclusion