Court of Appeal · Decided 8 September 2008

Mercurine Pte Ltd v Canberra Development Pte Ltd

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[2008] SGCA 38Case no. CA 143/2007

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Grounds of decision

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Introduction
[1] This appeal raised for consideration some important procedural issues relating to the appropriate legal tests to be applied in assessing whether to set aside a default judgment. It also posed squarely for determination the relevance of a delay in making an application to set aside such a judgment (referred to hereafter as a “setting-aside application”).
[2] The respondent, Canberra Development Pte Ltd (“Canberra”), owns Sun Plaza, a shopping mall at No 30 Sembawang Drive. The appellant, Mercurine Pte Ltd (“Mercurine”), claims to be the tenant of units #04-01 and #05-01 at Sun Plaza (“the Premises”), where it operates a six-screen cinema complex and concessionaire stands. Canberra is Mercurine’s direct landlord in respect of the Premises.
[3] Canberra commenced Suit No 861 of 2005 (“Suit 861”) on 30 November 2005 claiming unpaid rent and vacant possession of the Premises. The writ was served on Mercurine on 1 December 2005. When Mercurine failed to enter an appearance by the deadline of 9 December 2005, Canberra entered default judgment against it on 9 January 2006 (“the Default Judgment”). Some fifteen months later, on 26 April 2007, Mercurine applied, via Summons No 1843 of 2007 (“SUM 1843”), to set aside the Default Judgment. This application was granted by Assistant Registrar Lim Jian Yi (“AR Lim”) (see Canberra Development Pte Ltd v Mercurine Pte Ltd [2007] SGHC 107 (“the AR’s Judgment”)), but his decision was subsequently reversed by a judge (“the Judge”) in Canberra Development Pte Ltd v Mercurine Pte Ltd [2008] 1 SLR 316 (“the Judge’s Judgment”) following Canberra’s appeal. Mercurine then appealed to this court against the Judge’s order reinstating the Default Judgment.
[4] This court was asked to determine whether Mercurine was entitled to set aside the Default Judgment, taking into consideration:
(a) the regularity or otherwise of the Default Judgment;
(b) the merits of Mercurine’s defence; and
(c) the reason for the long lapse of time between the entry of the Default Judgment and the filing of SUM 1843.
We were initially minded to allow the appeal in full. However, as two separate writ actions commenced by Mercurine against Canberra in connection with an inter-related dispute had already been set down for trial (see [15]–[16] below), the logical result – as we shall explain – was to make the setting aside of the Default Judgment contingent upon the outcome of the writ actions – ie, if Mercurine succeeds in those proceedings, the Default Judgment will be deemed to be set aside. We thus varied the Judge’s orders rather than simply set aside the Default Judgment (see further [22] below). Before we give our reasons for this, we will first summarise the salient facts. We also set out below the outline of these grounds of decision so as to give an overview of the approach which we adopted in considering this appeal.
INTRODUCTION...................................................................................
1
THE FACTS............................................................................................
4
The parties.....................................................................................
4
The dispute.....................................................................................
5
Suit 861..........................................................................................
6
Canberra’s claim....................................................................
6
Communications between the parties after the entry of the Default Judgment....................................................................
7
Commencement of related proceedings by Mercurine........................
9
THE DECISIONS BELOW ON SUM 1843.............................................
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AR Lim’s decision.............................................................................
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The Judge’s decision.........................................................................
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THE ISSUES ON APPEAL......................................................................
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OVERVIEW OF OUR DECISION..........................................................
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THE THRESHOLD ISSUE: WHETHER MERCURINE’S DELAY IN FILING SUM 1843 WAS REASONABLE..............................................
14
Actions taken by Mercurine before filing SUM 1843.........................
14
The effects of delay on a setting-aside application..............................
18
Whether there was undue delay on Mercurine’s part.........................
22
Summary of our ruling on the threshold issue of delay........................
25
THE LEGAL PRINCIPLES RELATING TO SETTING-ASIDE APPLICATIONS.....................................................................................
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Regular default judgments.................................................................
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The orthodox position.............................................................
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The decision in The Saudi Eagle..............................................
28
Criticisms of the Saudi Eagle test.............................................
32
The test presently applicable to the setting aside of regular default judgments.....................................................................
38
Irregular default judgments................................................................
42
Whether irregular default judgments must be set aside as of right.
42
(1) The historical position: Anlaby v Praetorius.............
42
(2) The modern approach: Order 2 rule 1 of the Rules of Court...........................................................................
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(3) The symmetry between Order 2 rule 1 and Order 13 rule 8 as well as Order 19 rule 9....................................
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The test for determining whether or not the ex debito justitiae rule should be applied............................................................
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The legal position where the ex debito justitiae rule is not applied: Whether the court may consider the merits of the defence...................................................................................
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(1) The decision in Faircharm.....................................
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(2) The significance of Faircharm..............................
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(3) Should Faircharm be adopted in Singapore?.........
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How an application to set aside an irregular default judgment should henceforth be assessed..................................................
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Synopsis of the legal principles applicable to setting-aside applications..
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WHETHER THE DEFAULT JUDGMENT SHOULD HAVE BEEN SET ASIDE.......................................................................................................
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AN ASIDE ON THE QUESTION OF COSTS IN SETTING-ASIDE APPLICATIONS......................................................................................
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CONCLUSION........................................................................................
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The facts
The parties
[5] Mercurine and Canberra are both joint venture entities. As a result of the linkages between their joint venture partners, there are two common ultimate shareholders in the corporate structures of both Mercurine and Canberra, viz, Koh Brothers Group Limited (“Koh Brothers”) and Heeton Holdings Limited (“HH”). Mercurine is the corporate vehicle for the joint venture between Eng Wah Organization Ltd (“Eng Wah”), Koh Brothers and HH. EWO Entertainment Concepts Pte Ltd (“EWO”) and Clareville Investments Pte Ltd (“Clareville”) each have a 50% shareholding in Mercurine. EWO’s holding company is Eng Wah Investments Pte Ltd, which is in turn wholly-owned by Eng Wah. Fifty per cent of Clareville is held by Batam Vision Pte Ltd, whose ultimate shareholder is Koh Brothers; the other 50% is held by Heeton Land Pte Ltd, a wholly-owned subsidiary of HH. As for Canberra, it is a joint venture between Koh Brothers Development Pte Ltd, a wholly-owned subsidiary of Koh Brothers, and HH. Broadly speaking, Mercurine can be identified with Eng Wah, and Canberra, with Koh Brothers.
The dispute
[6] Mercurine took possession of the Premises on or about 25 February 2000. To date, no written agreement for the lease of the Premises (“the Lease”) has been executed between the parties. Disagreements arose over the term of the Lease, with Mercurine contending that the Lease was valid for 14 years as stated in Canberra’s letter of offer dated 4 November 1999. Canberra, on the other hand, asserted that, in subsequent discussions, the term of the Lease was reduced to seven years, with an option to renew for a further seven years upon Mercurine making a written request within a stipulated time. Since Mercurine did not meet this requirement, Canberra claimed, the Lease had expired. While the issue of the actual term of the Lease was not crucial to the outcome of this appeal, it was nevertheless of some relevance because the alleged expiry of the Lease was one of the grounds upon which Canberra staked its right to vacant possession of the Premises.
[7] Between April 2003 and November 2005, Mercurine did not pay the contractual monthly rent for the Premises. This alleged breach of the Lease was the foundation of Suit 861. Mercurine’s explanation for its non-payment of rent was that Canberra was frequently late in carrying out its obligation to reimburse Mercurine’s air-conditioning charges as earlier agreed. In her affidavit filed on 26 April 2007 in respect of Suit 861 (“Ms Goh’s Suit 861 affidavit”), Ms Goh Min Yen (“Ms Goh”), a director of Mercurine, averred that, as at June 2005, Canberra owed Mercurine $297,287.97 in air-conditioning reimbursement. Ms Goh also claimed that Canberra had failed to purchase annually the agreed number of movie gift vouchers (“MGVs”) from Mercurine. This shortfall amounted to 18,390 MGVs for the years 2000–2004. Further, Canberra had not purchased any MGVs since the beginning of 2005.
Suit 861
Canberra's claim
[9] In Suit 861, Canberra claimed rental arrears in the amount of $1,005,916.81 for the period from April 2003 to November 2005. Canberra also sought possession of the Premises on the grounds that Mercurine, by failing to execute the engrossed lease agreement sent to it on 2 August 2000 within the stipulated 21-day period and failing to pay rent for the Premises as it fell due, had evinced an intention to repudiate the Lease, which repudiation Canberra had accepted.
[10] As stated earlier (at [3] above), Mercurine did not enter an appearance and the Default Judgment was duly entered against it on 9 January 2006. Pursuant to the Default Judgment, Mercurine was ordered to:
(a) deliver possession of the Premises to Canberra (“the Possession Order”);
(b) pay the outstanding rental balance of $864,388.31 to Canberra (“the Money Judgment”); and
(c) pay damages to be assessed, interest and costs of $4,524 to Canberra.
It should be noted that although Canberra had initially pleaded rental arrears of $1,005,916.81 in its statement of claim for Suit 861, the Money Judgment was for the sum of $864,388.31 only in view of a payment made by Mercurine towards rent on 11 November 2005.
Communications between the parties after the entry of the Default Judgment
[12] Mercurine asserted that the parties arrived at a compromise agreement (“the Compromise Agreement”) sometime in or around January or February 2006 whereby Canberra would withdraw the Default Judgment if Mercurine paid it the sum of $519,155.62. Yet, Mercurine subsequently received a letter from Canberra dated 17 April 2006 conveying the latter’s offer to withhold execution of the Default Judgment and to accept the aggregate sum of $535,124.93 (comprising $518,998.12 plus interest of $11,602.81 and legal fees of $4,524) “in full satisfaction of the Orders in the [Default] Judgment obliging [Mercurine] to pay [Canberra] the balance sum of S$864,388.31”.[note: 2]
[13] Ms Goh replied on 28 April 2006 stating that Mercurine would pay the sum of $518,998.12 if the Default Judgment was duly withdrawn upon payment and the tenancy agreement for the Premises completed and returned to Mercurine. In a letter from Canberra’s solicitors to Mercurine dated 5 May 2006, however, Canberra maintained that the Lease had been terminated by virtue of the Possession Order and that Mercurine was obliged to deliver possession of the Premises to Canberra. Ms Goh averred that she was “surprised”[note: 3] by that letter because it contradicted the understanding which Mercurine had reached with Mr Koh. She stated that Mr Oh called Mr Koh again after Mercurine received the letter dated 5 May 2006 and once again obtained Mr Koh’s confirmation that Canberra would withdraw the Default Judgment after it received payment.
[14] It was common ground that Mercurine paid the sum of $518,998.10 (“the Compromise Sum”) (cf the sum of $519,155.62 allegedly agreed on earlier under the Compromise Agreement (see [12] above) as well as the sum of $518,998.12 mentioned in Ms Goh’s letter of 28 April 2006 (see [13] above)) to Canberra on 6 June 2006 after receiving cash injections from its shareholders, Clareville and EWO, on 30 May 2006 and 2 June 2006 respectively. Mercurine claimed that, prior to these cash injections, it had sought and received another confirmation from Mr Koh on 24 May 2006 that once the conditions precedent attached to the cash injections (one of which was that Mercurine was to pay the Compromise Sum to Canberra within three business days of receipt of the cash injections) had been met, Canberra would withdraw the Default Judgment. However, Mercurine subsequently received a letter from Canberra’s solicitors dated 10 July 2006 stating that Mercurine was required to deliver possession of the Premises pursuant to the Possession Order. The letter also stated that Canberra was prepared to give Mercurine an extension of time until 28 February 2007 to deliver possession provided certain terms were complied with. This letter was followed by another letter from Canberra’s solicitors to Mercurine, dated 5 September 2006, denying that Canberra had confirmed that it would withdraw the Default Judgment upon Mercurine’s payment of the Compromise Sum. In addition, this letter asserted that all payments made by Mercurine in consideration for its occupation of the Premises from 1 January 2006 onwards had been accepted by Canberra only as licence fees, and that Canberra had made no representation or given any warranty that it would continue to accept future payments and/or permit Mercurine to continue occupying the Premises. Canberra also demanded a further $19,343.20 which it claimed was still owed by Mercurine.
Commencement of related proceedings by Mercurine
[15] On 21 December 2006, Mercurine filed Originating Summons No 2374 of 2006 (“OS 2374”) seeking, inter alia:
(a) a declaration that the parties had entered into a full and final settlement of the disputes which were the subject matter of Suit 861;
(b) a declaration that the Possession Order be set aside and that the Lease subsisted and had not been terminated; and
(c) a declaration that the Money Judgment had been effectively compromised and fully satisfied by Mercurine’s payment of the Compromise Sum.
On 2 February 2007, a senior assistant register granted the declarations set out above. Canberra appealed against his decision via Registrar’s Appeal No 49 of 2007 (“RA 49 of 2007”). At the hearing of RA 49 of 2007 on 29 March 2007, Belinda Ang Saw Ean J allowed Canberra’s appeal and ordered that OS 2374 be converted into a writ action (this writ action is now proceeding as Suit No 244 of 2007 (“Suit 244”)). The trial of Suit 244, consolidated with Suit No 354 of 2007 (“Suit 354”) (see further [16] below), was set down for 7 April 2008 to 16 April 2008, and was subsequently adjourned until 30 October 2008 to 7 November 2008 (we shall refer to the consolidated suit hereafter as “the Consolidated Suit”).
[16] On 26 April 2007, following the hearing of RA 49 of 2007, Mercurine applied via SUM 1843 for, inter alia, an order that the Default Judgment be set aside. Mercurine stated that the grounds for its application were as follows:
(a) the Default Judgment was irregular because:
(i) Canberra had not complied with the requirements under O 13 r 4(1) of the Rules of Court (Cap 322, R 5, 2006 Rev Ed); and
(ii) Canberra had entered judgment for an excessive sum, in that it had omitted to take into account (among other things) Mercurine’s right to set off a sum of $139,271.50 for reimbursement of air-conditioning charges; and
(b) Mercurine had a defence on the merits which had a real prospect of success and which carried some degree of conviction.
Mercurine also commenced Suit 354 on 11 June 2007 for, inter alia, a declaration that the Lease was for a fixed term of 14 years commencing on 2 June 2000.
The decisions below on SUM 1843
AR Lim's decision
[17] In arriving at his decision to set aside the Default Judgment, AR Lim analysed the following issues:
(a) whether Mercurine had a defence on the merits;
(b) what the applicable test for determining whether to set aside an irregular default judgment was;
(c) whether the Default Judgment was irregular because, inter alia:
(i) Canberra had not complied with the requirements under O 13 r 4(1) of the Rules of Court for the purposes of its claim for possession of the Premises; and
(ii) Canberra had claimed an excessive amount in rental arrears; and
(d) if Mercurine was entitled to set aside the Default Judgment, whether it should nevertheless be allowed to enforce this right given its delay in filing SUM 1843 and its conduct after the Default Judgment was entered.
[18] In summary, AR Lim held that Canberra’s failure to obtain a certificate stating that it was not claiming in Suit 861 any relief of the nature specified in O 83 r 1 – which is required under O 13 r 4(1) – was a curable irregularity (see the AR’s Judgment at [62]). On the other hand, the Money Judgment was excessive. Since it was not the result of an accidental or a clerical error on Canberra’s part, Canberra ought not to be permitted, in the prevailing circumstances, to amend this part of the Default Judgment. The Money Judgment, therefore, remained an irregular judgment (id at [69]). The entry of the Money Judgment – which was irregular and which, in AR Lim’s view, should not be amended – was what prompted the assistant registrar to set aside the Default Judgment (ibid; see also [93] of the AR’s Judgment).
The Judge's decision
[19] On appeal against AR Lim’s decision, the Judge held that Canberra’s argument that only the Money Judgment, but not the Possession Order, should be set aside was untenable because Mercurine would be relying on the same defence in respect of both the Money Judgment and the Possession Order (see the Judge’s Judgment at [22]–[23]). However, the Judge ultimately allowed Canberra’s appeal and reinstated the Default Judgment – albeit with the sum stated therein reduced from $864,388.31 to $725,116.81 to take into account Mercurine’s cross-claim against Canberra for air-conditioning charges (id at [45]) – because she considered that Mercurine had filed SUM 1843 far too late in the day (id at [37]–[44]).
[20] The Judge held (id at [42]) that once Mercurine received the letter from Canberra’s solicitors dated 10 July 2006 requiring Mercurine to deliver possession of the Premises by 28 February 2007 (see [14] above), it would have been plain that Canberra intended to enforce its rights under the Default Judgment. Mercurine should have promptly proceeded to apply to set aside that judgment in July or August 2006 (see [44] of the Judge’s Judgment). Instead, Mercurine filed OS 2374 (see [15] above), which, if granted, would have meant that Canberra’s claims in Suit 861 had been settled pursuant to a compromise agreement. This particular application, in the Judge’s opinion, supported the view that Mercurine had abandoned any rights which it might have had to set aside the Default Judgment (see [44] of the Judge’s Judgment).
The issues on appeal
[21] Counsel for Mercurine raised the following issues before this court:
(a) whether Mercurine’s delay in filing SUM 1843 and its act of filing OS 2374 precluded it from being granted an order setting aside the Default Judgment;
(b) what the requisite standard vis-à-vis the merits of the defence was for the purposes of a setting-aside application;
(c) whether the Default Judgment was irregular; and
(d) depending on whether the Default Judgment was regular or irregular, whether the merits of Mercurine’s defence met the requisite standard so as to warrant the setting aside of that judgment.
Overview of our decision
[23] At this juncture, we should point out that the order which we made in this appeal was based purely on practical considerations (in view of the pending trial of the Consolidated Suit), and did not involve any definitive determination of the merits of Mercurine’s defence. The facts of this case and the procedural issues raised by counsel, however, highlighted the pressing need for clarification of the applicable principles for setting aside a default judgment, and we will now set out our views on this. Before we do that, it is only appropriate that we first address the threshold issue of delay as this constituted the crux of the Judge’s reasoning in reversing AR Lim’s decision. If we thought that there had been undue delay on Mercurine’s part in filing SUM 1843, this could well have been fatal to Mercurine’s appeal.
The threshold issue: Whether Mercurine's delay in filing SUM 1843 was reasonable
Actions taken by Mercurine before filing SUM 1843
[24] The first fact which we had to consider was the filing and prosecution of OS 2374, which later metamorphosed into Suit 244 (and, subsequently, the Consolidated Suit). Canberra claimed that Mercurine’s act of filing OS 2374 constituted a fresh step taken by Mercurine after the latter became aware of the irregularities in the Default Judgment. In the circumstances, Mercurine could not thereafter elect to apply to set aside the Default Judgment via SUM 1843 because such conduct would be tantamount to blowing hot and cold, contrary to the equitable doctrine prohibiting a party from approbating and reprobating.
[25] Canberra relied on the House of Lords case of Evans v Bartlam [1937] AC 473 as purportedly supporting its assertion that Mercurine’s conduct was redolent of approbation and reprobation. In that case, default judgment was entered against the defendant, who then requested for time to see if he could make any arrangement to pay the judgment sum. The plaintiff gave the defendant seven days to do so. As no arrangement was made, the plaintiff then took steps to enforce the default judgment. Subsequently, the defendant applied to have the default judgment set aside. The application was dismissed by a master, whose decision was reversed by a judge in chambers on appeal. The plaintiff then appealed to the English Court of Appeal, which overturned (by a majority of 2:1) the decision of the judge in chambers and held that the default judgment ought not to have been set aside as “the [defendant] had by his conduct shut himself out of any right to claim to have the judgment set aside” (at 484). The case then went up on further appeal to the House of Lords, which overturned the English Court of Appeal’s decision. In his judgment, Lord Atkin advocated a cautious approach in ascertaining whether the defendant had made an irrevocable election not to contest the default judgment (at 479):
[26] In our view, it was plain that Evans v Bartlam did not inexorably support the argument that Canberra advanced in relation to Mercurine’s alleged approbation and reprobation. In the present case, Mercurine did not obtain any benefit from deferring the filing of SUM 1843. The truth of the matter was that it did not initially consider a setting-aside application to be necessary because it thought – mistakenly or otherwise – that the parties were negotiating a settlement and that Canberra would not enforce the Default Judgment. Whether Mercurine’s belief was well-founded cannot be dealt with separately from the question of how meritorious its defence is. The task of deciding the merits of Mercurine’s defence is now within the purview of the trial judge who is to hear the Consolidated Suit (in so far as Mercurine’s defence in the present suit – ie, Suit 861 – goes towards the basis of its claim in the Consolidated Suit).
[27] Turning now to Suit 244, we noted that, pursuant to Belinda Ang J’s decision of 29 March 2007 (see [15] above), Mercurine filed its statement of claim in respect of Suit 244 on 24 April 2007. Thereafter, Canberra filed its defence on 30 May 2007. Mercurine seeks, inter alia, the following reliefs in Suit 244:
(a) a declaration that Mercurine, by its payment of the Compromise Sum to Canberra on 6 June 2006, had entered into a full and final settlement with Canberra of the disputes which were the subject matter of Suit 861;
(b) a declaration that the Default Judgment had been effectively compromised and fully satisfied by Mercurine’s payment of the Compromise Sum on 6 June 2006;
(c) as an alternative to prayer (b) above, a declaration that Mercurine, having paid the Compromise Sum on 6 June 2006, had fully satisfied the Money Judgment;
(d) a declaration that the Lease subsisted and had not been terminated; and
(e) a declaration that Mercurine was not obliged to deliver vacant possession of the Premises pursuant to the Possession Order.
It can be seen that, by the time Mercurine applied on 26 April 2007 to set aside the Default Judgment, Suit 244 had already been set in motion. Critically, a determination of whether Mercurine was obliged to deliver vacant possession of the Premises to Canberra as at the date of the Default Judgment (ie, 9 January 2006), and no later than 28 February 2007 (see [14] above), is fundamental to both Suit 861 (the underlying action giving rise to this appeal) and Suit 244.
[28] Mercurine submitted to this court that its right to apply to set aside the Default Judgment was independent of any rights which it might be able to assert if it succeeded in the Consolidated Suit. If Mercurine prevailed in this appeal, it intended to apply to consolidate Suit 861 with the Consolidated Suit. Canberra, on the other hand, contended that Mercurine’s purpose in filing SUM 1843 was to avoid the risk that it (Mercurine) might fail to persuade the trial judge in the Consolidated Suit of the merits of its case. Canberra also alleged that Mercurine was concerned that if a stay of Suit 861 was ordered pending the outcome of the Consolidated Suit, it would be made on terms given Canberra’s doubts about the soundness of Mercurine’s financial health.
[29] Crucially, Mercurine’s delay in filing SUM 1843 was the basis upon which the Judge reinstated the Default Judgment (with a variation to the quantum of the Money Judgment). She was of the view that the time lag before Mercurine made this application was unreasonably excessive (see [19]–[20] above). Before we analyse the facts, it would be apposite to set out the relevant legal principles on the effects of a delay in making a setting-aside application.
The effects of delay on a setting-aside application
[30] The starting point is that unreasonable delay could severely prejudice a setting-aside application. As Prof Jeffrey Pinsler SC rightly cautions in his book, Singapore Court Practice 2006 (LexisNexis, 2006), at para 13/8/4:
Canberra urged this court to adopt the English courts’ firm emphasis on the necessity of making a setting-aside application promptly. A case in point that was cited was Regency Rolls Limited v Murat Anthony Carnall [2000] EWCA Civ 379 (“Regency Rolls”). In that case, the defendant (“Mr Carnall”) was absent from the trial on 22 March 1999 because of illness. On that date, judgment was entered against him. Mr Carnall received a copy of the judgment on or about 26 March 1999. He was housebound because of his illness until 30 March 1999. He sought legal advice from a firm of solicitors on either 29 or 30 March 1999, but, by 31 March 1999, it became clear that that firm of solicitors would not be retained. After the Easter holidays (which were from 2 April 1999 to 5 April 1999 that year), Mr Carnall contacted new solicitors and had several meetings with them. Following consultations between the new solicitors and lead counsel on 16 April 1999 and 21 April 1999, Mr Carnall made a setting-aside application on 21 April 1999. On the question of whether Mr Carnall had filed that application with due promptness, the English Court of Appeal ruled in the negative, holding that the former, despite knowing the importance of prompt action, had not “acted with all reasonable celerity in the circumstances” (at [45], per Simon Brown LJ). In this regard, Rix LJ pointed out (at [39]) that Mr Carnall could in the first instance have written to the court to ask for a chance to prove his disability and to request for a new trial. We should add that the learned judge also observed (at [40]) that even if Mr Carnall had made his setting-aside application promptly, on the facts of the case, the court was not inclined to set aside the default judgment.
[31] We would distinguish the present appeal from Regency Rolls on several grounds. As we shall explain at [38] below, the communications that transpired between the parties from the date on which the Default Judgment was entered (viz, 9 January 2006) to July 2006 constituted active negotiations for a settlement. Subsequently, Mercurine took further steps to make its position clear to Canberra before filing OS 2374 in December 2006. We were satisfied that Mercurine’s conduct in waiting till 26 April 2007 before filing SUM 1843 could not be deemed to amount to unreasonable delay. Whether Mercurine adopted the correct procedure to contest the Default Judgment was, with respect, an altogether different issue.
[32] Needless to say, where a defendant delays in making a setting-aside application, the court will in every case have to closely scrutinise the reasons for the delay. Clearly, if Mercurine had deliberately withheld filing SUM 1843 with the intent or desire to gain some litigation advantage, its late application should prima facie be viewed uncharitably. It would, however, be a stretch of the imagination to conclude, on the facts of this case, that Mercurine had deliberately or, indeed, intentionally delayed the filing of SUM 1843.
[33] In contrast, delay was fatal to the defendant’s setting-aside application in the High Court case of Ang Kim Soon v Sunray Marine Pte Ltd [1997] 3 SLR 619 (“Ang Kim Soon”). There, the plaintiff, who was injured in an accident while working aboard a vessel, sued his employer for damages. The employer, in the meantime, was pursuing an admiralty action against the vessel owner for an indemnity in respect of the accident. Despite repeated requests by the plaintiff, the employer did not enter a defence, and the plaintiff eventually entered interlocutory judgment. The employer waited for nearly six months, until after the admiralty action had been decided in its favour, before applying to set aside the interlocutory judgment. After assessing the competing considerations, Choo Han Teck JC dismissed the employer’s application. Choo JC said (at [16]):
[34] Another case where the defendant’s delay in making its setting-aside application was not looked upon kindly by the court was Lee Theng Wee v Tay Chor Teng [2003] SGHC 173. In that case, the defendant applied to set aside a default judgment, which was based on a loan given to him by the plaintiff, more than three years after it had been entered against him. Woo Bih Li J considered that the defendant had “some prospect of success” (at [17]) in establishing his allegation that the plaintiff had been engaging in illegal money-lending in extending the loan, but held that the defendant’s “very long delay” (ibid) before making his setting-aside application, coupled with the absence of a valid reason for the delay, was fatal to the application. Furthermore, Woo J found that the defendant had not been truthful in the supporting affidavit which he filed for his setting-aside application (ibid). For these reasons, the learned judge upheld the assistant registrar’s dismissal of the defendant’s setting-aside application.
[35] At the risk of stating the obvious, we would emphasise that procedural rules must not occasion injustice by unfairly depriving a party of an opportunity to argue its case. On the other hand, the indolent cannot as a matter of course be awarded the same measure of justice as the diligent. As Warren L H Khoo J aptly observed in European Asian Bank v Chia Ngee Thuang [1995] 3 SLR 171 (at 176, [21]):
[36] In the Malaysian case of Tuan Haji Ahmed Abdul Rahmanv Arab-Malaysian Finance Bhd [1996] 1 MLJ 30 (“Tuan Haji Ahmed”), the defendant waited for three years before applying to set aside a default judgment. The Federal Court of Malaysia took cognisance of this “spectacular delay” (at 42) and also dismissed as “improbable” (ibid) the defendant’s explanation that the reason for his delay was that he could not afford to engage solicitors. Nevertheless, the court exercised its inherent jurisdiction and set aside the default judgment, which it considered to be irregular for want of certainty. The court took the position (ibid) that, despite a long delay before the filing of a setting-aside application, it retained a discretion to set aside an irregular judgment provided it was satisfied that:
(a) no one had suffered prejudice by reason of the defendant’s delay; or
(b) if such prejudice had been sustained, it could be met by an appropriate order as to costs; or
(c) it would constitute oppression to let the judgment stand.
The principles set out in Tuan Haji Ahmed are essentially sound, albeit not necessarily exhaustive. We would add that in respect of point (c) above, we are of the view that the greater the delay on the defendant’s part in applying to set aside the default judgment, the more cogent the explanation must be as to why it would be oppressive to let the judgment stand. Perhaps, instead of using the term “oppression” (see Tuan Haji Ahmed at 42), it might be preferable to state that where there has been undue delay, the defendant may need to show that a miscarriage of justice would be occasioned if the default judgment were allowed to stand.
Whether there was undue delay on Mercuirne's part
[37] Applying the principles outlined above (at [30]–[36]) to the facts of the present case, it appeared to us that, with respect, the Judge placed undue weight on Mercurine’s delay in filing SUM 1843. The delay should have been assessed in the context of other prior and ongoing occurrences as well as the plausibility of Mercurine’s explanation for its delay. A long delay per se may not always be procedurally incurable or fatal to a setting-aside application.
[38] Let us now examine the objective facts. It cannot be disputed that after Mercurine was notified by Canberra’s solicitors via the letter dated 10 July 2006 (see [14] above) that Canberra intended to enforce the Possession Order, Mercurine unambiguously disputed Canberra’s right to enforce that part of the Default Judgment via two letters sent by Ms Goh to Canberra’s solicitors on 8 August 2006 and 29 November 2006 respectively. In those letters, Ms Goh firmly underlined Mercurine’s position that the Default Judgment had been compromised by the payment of the Compromise Sum on 6 June 2006 and denied that the Lease had been terminated. The letter dated 8 August 2006 set out Mercurine’s position that Mr Koh had agreed “sometime on or about May 2006”[note: 4] to “withdraw”[note: 5] the Default Judgment upon full payment of the Compromise Sum. In her letter of 29 November 2006, Ms Goh reiterated this point and added that Mercurine was prepared to meet Canberra to resolve the dispute amicably. Granted that the sending of these letters by Mercurine and its filing of OS 2374 were unilateral acts, they nevertheless provided an eminently reasonable explanation for the delay on Mercurine’s part in filing SUM 1843. When the parties failed to resolve their differences by November or December 2006, Mercurine decided to file OS 2374 to protect its position. From then on until the hearing of RA 49 of 2007 on 29 March 2007 (see [15] above), Mercurine did not consider it necessary to apply to set aside the Default Judgment. However, once Belinda Ang J allowed RA 49 of 2007 and ordered that OS 2374 be converted into a writ action, a trial became “inevitable”.[note: 6] Mercurine then quite promptly filed SUM 1843 within one month of 29 March 2007. Can it now be fairly said that Mercurine had behaved unreasonably in delaying the filing of this summons?
[39] Canberra sought to impress on this court the force of the Judge’s finding that Mercurine should have applied to set aside the Default Judgment in July or August 2006 (see [20] above). Canberra argued that between July 2006 and November 2006, the parties had not engaged in any negotiations. Rather, communications between the parties had been restricted to terse exchanges of letters between their respective solicitors. This was not quite accurate in view of the contents of the two letters that Ms Goh wrote to Canberra (see [38] above), the latter of which included an intimation of Mercurine’s willingness to hold further negotiations with Canberra. The facts spoke for themselves.
[40] On the facts, we were satisfied that Mercurine’s conduct was explicable, and that its (apparent) delay in filing SUM 1843 should not be the sole or primary reason for dismissing that application because:
(a) Mercurine’s delay was not merely strategic, in that Mercurine did not stand to gain from making a late setting-aside application, and, on this basis, its conduct was readily distinguishable from that of the defendant in Ang Kim Soon ([33] supra);
(b) Mercurine was under the impression that it had negotiated a compromise with Canberra and it intended to honour that agreement, as evidenced by its payment of the Compromise Sum to Canberra on 6 June 2006 (see [13]–[14] above); and
(c) Mercurine’s explanation that it was trying to find an out-of-court settlement in view of the interests of the ultimate shareholders that the parties had in common (namely, Koh Brothers and HH (see [5] above)) was, all said and done, plausible and appeared to dovetail with the objective facts.
Summary of our ruling on the threshold issue of delay
[41] To sum up, where Mercurine’s delay in filing SUM 1843 was concerned, the Judge erred in holding that Mercurine’s failure to file that application by July or August 2006, coupled with the filing of OS 2374 on 21 December 2006, without more, justified the dismissal of SUM 1843. We therefore considered that the just result would be to allow each party the full opportunity to present the merits of its case at the trial of the Consolidated Suit. It is our view that in the proceedings below, the appropriate order would have been a stay of the enforcement of the Default Judgment pending the outcome of the Consolidated Suit. If Canberra had anxieties about Mercurine’s allegedly precarious financial position, it could have applied for an expedited hearing of that suit.
[42] Having disposed of the threshold issue of delay in Mercurine’s favour, we now proceed to give our views on the other pertinent issues raised in this appeal. We shall begin by setting out the legal principles which apply to setting-aside applications. For reasons that will become apparent, it is timely to review the current position in this critical area of civil procedure.
The legal principles relating to setting-aside applications
[43] A default judgment is usually entered because the defendant has breached procedural rules. However, there may also be cases where, quite apart from the defendant’s non-compliance with procedural rules, the plaintiff itself breaches procedural rules and enters a default judgment when it is not in fact entitled to do so. Case law, quite logically, draws a distinction between regular and irregular default judgments. This approach reflects the court’s concern with the reasons for the defendant’s setting-aside application, and rightly so since a default judgment, properly entered, confers property rights on the plaintiff. Before exercising its discretion to set aside a default judgment, the court is entitled to inquire into the parties’ conduct and assess where the balance of the equities lie. If the default judgment is regular, there is a presumption that the plaintiff acted correctly and should not be lightly deprived of the fruits of its judgment; conversely, if the default judgment is irregular, there is a presumption that the plaintiff breached the proper procedure and, thus, should not be allowed to take advantage of its own default. (It should, however, be noted that a judgment may be irregular not only because of the plaintiff’s intentional failure to comply with procedural rules, but also because of clerical or accidental mistakes made by the plaintiff.) Not surprisingly, the defendant has a heavier burden to discharge when it seeks to set aside a regular default judgment.
Regular default judgments
The orthodox position
[44] The court may exercise its discretion pursuant to O 13 r 8 of the Rules of Court to (inter alia) set aside a judgment in default of appearance (an “O 13 default judgment”) which is regular. This rule states that:
(It should be noted that O 19 r 9 contains an identical provision vis-à-vis a judgment in default of pleadings (an “O19 default judgment”).) In determining whether it is justified to set aside the default judgment in question, the court would consider, first and foremost, the merits of the defence, although the causes of the defendant’s default and the timeliness of the setting-aside application would be taken into account as well.
[45] For nearly 50 years, until the decision of the English Court of Appeal in Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc [1986] 2 Lloyd’s Rep 221 (“The Saudi Eagle”), Evans v Bartlam ([25] supra) was considered to be the leading authority on the test for setting aside a regular default judgment. That test, according to Lord Atkin, was whether the defendant had “a prima facie defence” (id at 480). Lord Wright echoed this approach in the following terms (id at 489):
The opinion of Lord Russell of Killowen could arguably give rise to some semantic debate because he used the expression “serious defence” (id at 482). However, the point which Lord Russell was making was that while a judge would inevitably consider the merits of the defence before exercising the court’s discretion to set aside a regular default judgment, proof by the defendant of some useful purpose in setting aside the judgment in question or of the existence of a serious defence was not a condition precedent to the court’s exercise of its setting-aside discretion.
[46] The test laid down in Evans v Bartlam – which we will refer to interchangeably as the “Evans v Bartlam test” and “the ‘arguable or triable issue’ test” – was subsequently applied in a number of notable cases, including Burns v Kondel [1971] 1 Lloyd’s Rep 554, a decision of the English Court of Appeal (see especially 555, per Lord Denning MR), and, locally, Chao Hick Tin J’s decision in Singapore Gems Co v The Personal Representatives for Akber Ali [1992] 2 SLR 254.
[47] It can still be confidently said that the following dictum of Lord Atkin in Evans v Bartlam (at 480) continues to be the definitive statement of the rationale and basis for the court’s exercise of its discretion when it sets aside a regular default judgment:
The decision in The Saudi Eagle
[48] In The Saudi Eagle ([45] supra), however, Sir Roger Ormrod, who delivered the judgment of the English Court of Appeal, rather perplexingly opined that all the law lords in Evans v Bartlam ([25] supra) had “clearly contemplated that a defendant who [was] asking the Court to exercise its discretion [to set aside a regular default judgment] in his favour should show that he ha[d] a defence which ha[d] a real prospect of success” [emphasis added] (see The Saudi Eagle at 223). Sir Ormrod’s judgment continued thus (ibid):
Since then, The Saudi Eagle (an English Court of Appeal decision) has apparently, and rather inexplicably, eclipsed Evans v Bartlam (a House of Lords decision) as the leading authority on the applicable test for determining whether a regular default judgment ought to be set aside. The “real prospect of success” test enunciated by Sir Ormrod (the “Saudi Eagle test”) – which is generally accepted as laying down a higher and more rigorous standard than that relating to an application for summary judgment under O 14 of the Rules of Court (an “O 14 application”), where the defendant merely needs to show that there are triable issues in order to obtain leave to defend – has become the preferred test for assessing the merits of the defence where a defendant seeks to set aside a regular default judgment. In England, the enactment of the Civil Procedure Rules 1998 (UK) (“CPR”) led to the codification of the Saudi Eagle test via r 13.3(1), which states:
Hong Kong has also apparently adopted Sir Ormrod’s interpretation of Evans v Bartlam (as set out above) and now follows the stricter Saudi Eagle test. This can be seen from the following passage in Hong Kong Civil Procedure 2006 (Martin Rogers gen ed) (Sweet & Maxwell Asia, 2006) vol 1 at para 13/9/14:
[49] One of the difficulties with The Saudi Eagle is the apparent internal inconsistency between various portions of Sir Ormrod’s judgment. As mentioned earlier (at [48] above), Sir Ormrod purported to equate the “arguable or triable issue” test with his “real prospect of success” test (see The Saudi Eagle at 223). The following passage in his judgment (ibid) provides a stark illustration of his approach (see also the passage quoted earlier at [48] above):
We agree with AR Lim that, on a plain reading, the phrase “some degree of conviction” is not synonymous with “real prospect of success” (see the AR’s Judgment at [47]). Moreover, requiring a court to “form a provisional view of the probable outcome if the judgment were to be set aside and the defence developed” (per Sir Ormrod in The Saudi Eagle at 223) appears to go beyond the proper scope of a court’s exercise of discretion at such an early stage of the proceedings, and does not accord with the overriding principle enunciated by Lord Atkin in Evans v Bartlam at 480 (see the passage reproduced at [47] above).
[50] To date, the Singapore courts appear to have uncritically adopted the approach taken by Sir Ormrod in The Saudi Eagle without assessing its soundness either as a matter of principle or as a matter of policy. The Saudi Eagle test was first applied without any explanation or examination by Rubin JC in Hong Leong Finance Ltd v Tay Keow Neo [1992] 1 SLR 205 (“Hong Leong Finance Ltd”). Shortly thereafter, it was approved without any analysis by this court in Abdul Gaffer v Chua Kwang Yong [1995] 1 SLR 484 (“Abdul Gaffer”). For the past decade or so since then, the lower courts in Singapore have considered themselves to be bound by Abdul Gaffer. The Judge, for one, interpreted Abdul Gaffer as mandating that (see the Judge’s Judgment at [24]):
This court is, however, not so constrained by the decision in Abdul Gaffer. We have pointed out that both the High Court in Hong Leong Finance Ltd and the Court of Appeal in Abdul Gaffer did not elaborate on their respective reasons for adopting the Saudi Eagle test in preference to the long-standing Evans v Bartlam test. Indeed, in Abdul Gaffer, this court simply stated (at 488–489, [18]):
There was no attempt to explain why the older Evans v Bartlam test needed re-assessment in the Singapore context. Furthermore, prima facie, the decision in Abdul Gaffer seems to suggest (incorrectly) that there is a single test for all types of setting-aside applications, regardless of whether the default judgment in question is regular or irregular. It is time to revisit Abdul Gaffer and The Saudi Eagle, not least because the latter has been heavily criticised and qualified in, inter alia, England and Malaysia (see Singapore Court Practice 2006 ([30] supra) at para 13/8/9).
Criticisms of the Saudi Eagle test
[51] Not long after The Saudi Eagle ([45] supra) was decided, Hobhouse J reverted to the Evans v Bartlam test in The “Ruben Martinez Villena” [1987] 2 Lloyd’s Rep 621 (“The Ruben Martinez”) (see Chia Jin Chong Daniel, “Setting aside a regular default judgment: What is a good defence on the merits – real prospect of success or arguable, triable issue?” (1996) 17 Sing LR 221 at 239–240; see also the judgment of Assistant Registrar Goh Yihan (“AR Goh”) in Lim Quee Choo v David Rasif [2008] SGHC 36 (“Lim Quee Choo”) at [74]). In his admirably lucid and comprehensive disquisition in Lim Quee Choo of the test currently applicable to the setting aside of regular judgments, AR Goh pointed out (at [74]) that The Ruben Martinez has apparently hitherto not been considered by the courts in Singapore. In our view, Hobhouse J’s judgment in that case is both highly illuminating and instructive, and merits close attention.
[52] In The Ruben Martinez, Hobhouse J emphasised the peculiar facts of The Saudi Eagle. In the latter case, the plaintiff charterer arrested the defendant’s ship, Saudi Eagle, in Rotterdam in October 1982 following the defendant shipowner’s refusal to load certain cargo onto the ship. A year later, the plaintiff issued a writ against the defendant claiming damages for breach of contract. Initially, the defendant decided not to defend the action because it had no assets and allowed judgment to be entered against it. Subsequently, the defendant realised that the plaintiff had earlier obtained security in Rotterdam and was holding on to the bond, such that the plaintiff’s judgment was not as barren as originally supposed. Belatedly, the defendant then applied to set aside the default judgment and sought leave to defend. The three defences which the defendant put forward in support of its setting-aside application were “the wrong defendant, the wrong plaintiff and the wrong contract” (id at 223). With regard to the first defence, Sir Ormrod did not think that it had “any reasonable prospect of success” (id at 225); likewise, he held, in respect of the latter two defences, that “neither of these suggested defences ha[d] any prospect of success” (id at 224).
[53] Hobhouse J also alluded to the inconsistencies in Sir Ormrod’s judgment that we highlighted earlier (at [49] above). He stressed (at 624 of The Ruben Martinez) that in The Saudi Eagle, Sir Ormrod had been presented with:
On this basis, Hobhouse J doubted if Sir Ormrod had intended to lay down, at 223 of The Saudi Eagle (see the passage quoted at [48] above), the principle that the court should set aside a regular default judgment only if it was satisfied that there was a better than 50% chance that the outcome of the action if the default judgment were set aside would be favourable to the defendant (see The Ruben Martinez at 624). Hobhouse J added that if, however, that was indeed the meaning which Sir Ormrod had in mind, he would regard the latter’s statement in The Saudi Eagle (at 223) as obiter dictum which he was not bound to follow (see The Ruben Martinez at 624).
[54] In Hobhouse J’s view, the decision in Evans v Bartlam ([25] supra) was based on the logic that “there [was] no purpose in setting aside a [regular default] judgment if there [was] not going to be something to be gained by having a trial” (see The Ruben Martinez at 623). As such, the defendant had to show “a real prospect that, if the matter [went] to trial, there [would] be some different decision” [emphasis added] (ibid). To achieve this, “an arguable defence” (ibid) or, more precisely, “a good arguable defence” (ibid) would suffice. At the risk of complicating the analysis, we should point out that Hobhouse J also considered “a defence which has a real prospect of success” (ibid) to be another possible description of the standard set in Evans v Bartlam – and not The Saudi Eagle – vis-à-vis the merits of the defence. To place Hobhouse J’s judgment in its proper context, we shall reproduce in full the relevant passage (see The Ruben Martinez at 623):
Thus, in The Ruben Martinez, Hobhouse J was quick to correctly recognise, not long after The Saudi Eagle was decided, that the Saudi Eagle test ought not to be read as supplanting the Evans v Bartlam test, and that the various formulations of the test which the defendant had to satisfy for the purposes of establishing a defence on the merits were very much a commentary on the facts of the individual cases concerned. However, his guidance went largely unheeded as Sir Ormrod’s “real prospect of success” test became fashionable. As a consequence, a standard (in relation to showing a defence on the merits) that was more severe than that applied in O 14 applications (where, as stated earlier at [48] above, the defendant merely has to show the existence of triable issues in order to obtain leave to defend) became entrenched where the setting aside of regular default judgments was concerned.
[55] There have been a few noteworthy exceptions, however. In Allen v Taylor [1992] PIQR 255, for instance, the English Court of Appeal declined to adopt the Saudi Eagle test. Dillon LJ expressed the view that “[i]t [was] impossible to be dogmatic about the extent to which the court must be satisfied of the validity of the suggested defence” (at 259), particularly where each party’s case would carry some conviction if it stood alone, such that the court could not say, without conducting a trial, which party would succeed (ibid).
[56] A similar departure from The Saudi Eagle ([45] supra) was endorsed by the English Court of Appeal in Day v Royal Automobile Club Motoring Services Ltd [1999] 1 WLR 2150 (“Day v RAC”). In that case, the plaintiff claimed damages for financial loss and personal injuries which she suffered when she fell from a pickup truck sent by the defendant to deal with a motoring emergency that she and her husband had encountered. The plaintiff made her claim just one day before the expiry of the relevant limitation period. The respective parties’ solicitors agreed to allow a general extension of time for the filing of the defence, which agreement was to be terminable on 14 days’ notice. Due to a “muddle” (id at 2152) in the office of the defendant’s solicitors, the defence was not filed within the extended time frame and default judgment was entered. In dismissing the defendant’s setting-aside application, the judge at first instance stated (at 2154):
He went on to say (ibid):
[57] In reversing the judge’s decision to dismiss the defendant’s setting-aside application, Ward LJ expressed the following reservations about the Saudi Eagle test (see Day v RAC at 2157):
[58] Allen v Taylor ([55] supra) and Day v RAC quite correctly shifted some of the focus away from the strength of the defendant’s case and back to the overriding objective of not unfairly or prematurely shutting a defendant out of the proceedings. We are of the view that this shift was a move in the right direction. As Prof Pinsler shrewdly observes in Singapore Court Practice 2006 ([30] supra) at para 13/8/9:
We agree with these observations.
[59] In Singapore, the lower courts, burdened (regrettably) by the weight of the authority of this court, have engaged in creative attempts to mitigate the impact and the breadth of the approach prescribed by Abdul Gaffer ([50] supra). In particular, Abdul Gaffer has been distinguished locally on a few occasions when the courts took the view that there were underlying factual disputes that ought to be adjudicated in a full trial (see Lim Quee Choo ([51] supra) at [87]–[94]). One recent example that AR Goh cited in Lim Quee Choo at [87] was Awyong Shi Peng v Lim Siu Lay [2007] 2 SLR 225 (“Awyong Shi Peng”). In that case, the High Court noted that although judgment had been entered against the defendant in default of defence, the defendant had not deliberately ignored the proceedings. As such, “the merits of the defence [might] not be scrutinised as strictly as propounded in The Saudi Eagle” (see Awyong Shi Peng at [8]). The court opined that “the merits of the case appear[ed] to be evenly balanced” (id at [9]) and concluded that since the defendant “may have a defence” [emphasis added] (ibid), he should be given an opportunity to present his case to the trial judge. The default judgment was thus set aside. While this particular approach can prima facie be aligned with the less ritualistic approach taken in Allen v Taylor and Day v RAC ([56] supra) towards the setting aside of regular default judgments, it is no longer necessary to adopt this stance since this court has now decided that the exercise of judicial discretion in relation to an application to set aside a regular default judgment must ultimately be guided by the Evans v Bartlam test.
The test presently applicable to the testing aside of regular default judgments
[61] Our revival of the Evans v Bartlam test does not necessarily affect those cases where the defendant’s conduct calls for the court to be less than ready to exercise its setting-aside jurisdiction. Ang Kim Soon ([33] supra) would be a paradigm example of this genre of cases. In such cases, Sir Ormrod’s observations in The Saudi Eagle ([45] supra) on the conduct of the defendant in that case can still provide some useful guidance (at 225):
However, we would hasten to add that the overarching principle in Evans v Bartlam ([25] supra), as enunciated by Lord Atkin at 480 (see the passage reproduced at [47] above), must always be accorded higher priority. This is illustrated by the following two English cases.
[62] In Vann v Awford The Times (23 April 1986), the second defendant did nothing while the plaintiffs entered judgment in default against him and obtained, first, an order for damages to be assessed and, subsequently, an order as to the amount of damages to be paid by the second defendant. The second defendant applied to set aside the default judgment only after the plaintiffs initiated garnishee proceedings and obtained charging orders on his property. He then gave a dishonest reason to the court for his failure to give notice of his intention to defend. The judge at first instance refused to set aside either the default judgment for damages to be assessed or the order eventually made upon an assessment of damages because he considered that the second defendant’s setting-aside application had been made too late and no reasonable explanation had been given for the delay. The English Court of Appeal, however, held that the judge’s approach was contrary to the principle laid down in Evans v Bartlam. Dillon LJ said:
Nicholls LJ adopted a similarly pragmatic stance in declining to affirm the judge’s decision, pointing out that:
[63] In J H Rayner (Mincing Lane) Ltd v Cafenorte SA Importadora E Exportadora SA [1999] 2 Lloyd’s Rep 750, the plaintiff, in resisting the defendants’ setting-aside application, alleged that the decision by the defendants not to challenge the default judgment was a deliberate and tactical choice and the latter should thus live with the consequences of their decision. The English Court of Appeal stressed that even if the plaintiff’s allegations were true (and the court plainly had some doubts in this regard), the key consideration was whether there was a defence on the merits. Waller LJ stated at 764:
In such cases, the appropriate response might be to grant the defendant leave to defend on appropriate terms.
[64] It is rather unfortunate that the existing case law has caused problems in practice because of the different expressions adopted by judges who were faced with rather different factual matrices. The legal profession (as well as judges) would do well to heed Ward LJ’s astute advice in Day v RAC ([56] supra) at 2157 that:
It is apposite to conclude this discussion by reproducing in full the material portion of the salutary principles laid down by Lord Atkin in Evans v Bartlam ([25] supra) at 480 that have long guided the assessment of setting-aside applications. They continue to encapsulate, in our view, the essence of when, how and why the discretion to set aside a regularly-obtained default judgment ought to be exercised:
[65] For completeness, we reiterate that the merits of the defence do not constitute the sole consideration that a court takes into account in deciding whether to set aside a regular default judgment. While this factor is certainly highly significant in its own right, it also has to be assessed against other relevant considerations – at the end of the day, a balancing exercise is involved. As this court recently reiterated in Su Sh-Hsyu ([60] supra) at [43]:
[66] We turn now to the legal principles which apply to the setting aside of irregular default judgments.
Irregular default judgments
Whether irregular judgments must be set aside as of right
(1) The historical position: Anlaby v Praetorius
[67] In Anlaby v Praetorius (1888) 20 QBD 764, the English Court of Appeal held that a defendant was entitled to set aside an irregular default judgment ex debito justitiae, ie, as of right (for convenience, we shall refer to this principle as “the ex debito justitiae rule”). This strict approach may be attributed to two important features of that case. First, the law as it stood then made a distinction between an order that was void (ie, a nullity) and an order that was voidable. The affected party could either ignore an order that was a nullity or ask the court to set it aside; in the latter scenario, he was entitled to have the order set aside ex debito justitiae (id at 769). As for an order that was voidable, the court had a discretion as to whether to set it aside (ibid). Second, the judgment in Anlaby v Praetorius had been entered prematurely. Fry LJ stressed (at 768) that:
In essence, the court in Anlaby v Praetorius was preoccupied with the prejudice that would be caused to the defendant if a “premature and irregular” (ibid) judgment were allowed to stand.
(2) The modern approach: Order 2 rule 1 of the Rules of Court
[68] In England, prior to October 1964, O 2 r 1 of the Rules of the Supreme Court (UK) read as follows:
[69] The introduction of the new O 2 rr 1(1) and 1(2) of the Rules of the Supreme Court (UK) (referred to collectively as “the new English O 2 r 1”) in October 1964, which was aimed at “[getting] over the decision of In re Pritchard, decd [[1963] Ch 502]” (per Lord Denning in Harkness v Bell’s Asbestos and Engineering Ltd [1966] 2 QB 729 (“Harkness v Bell”) at 734), eliminated the stark contrast between the legal effect of a void court order and that of a voidable court order. The new English O 2 r 1, which is in pari materia with O 2 rr 1(1) and 1(2) of our Rules of Court, states:
Lord Denning explained the effect of the new English O 2 r 1 in Harkness v Bell as follows (at 735–736):
[70] The flexible approach permitted under the new English O 2 r 1 (and likewise under O 2 r 1 of our Rules of Court) is well-illustrated by Harkness v Bell itself. In that case, the plaintiff applied for leave to claim damages from his employer for a work-related illness that he had contracted (leave of court was required as the relevant limitation period had already expired). The district registrar made the order granting leave. Subsequently, there were lengthy settlement negotiations between the plaintiff and the defendant employer. Some years later, the defendant learnt that there were two serious flaws in the proceedings that had resulted in the district registrar’s order, namely, the district registrar had no jurisdiction to give leave and no power to make the order in the particular form in which it was made. The defendant applied to set aside the deputy registrar’s order, but the judge in chambers held that since that order was a nullity, there was nothing to set aside. This created hardship for the plaintiff, for it meant that the district registrar’s order had not been effective at all to grant him leave to commence his action outside the limitation period. As it was too late by then for the plaintiff to file a fresh application for leave to bring his claim, he applied instead to have the deputy registrar’s order rectified. His application was dismissed at first instance on the same ground as that given for the dismissal of the defendant’s setting-aside application, ie, the deputy registrar’s order was a nullity and there was nothing that the court could do about it. The plaintiff, however, succeeded on appeal to the English Court of Appeal. Instead of setting aside the district registrar’s (irregular) order, the court “put the matter right under the new provisions [ie, the new English O 2 r 1] and … treated [the leave] as granted properly” (id at 736, per Lord Denning).
[71] Notwithstanding the flexibility allowed under the new English O 2 r 1, the ex debito justitiae rule remains relevant. This can be seen from two cases decided by the English Court of Appeal after this provision was introduced, viz, White v Weston [1968] 2 QB 647 and Willowgreen Ltd v Smithers [1994] 1 WLR 832. In both of these cases, it was held that the default judgment entered against the defendant was irregular, and therefore ought to be set aside ex debito justitiae, as proper service of the proceedings had not been effected (see Camille Cameron, “Irregular Default Judgments: Should Hong Kong Discard the ‘As of Right’ Rule?” (2000) 30 Hong Kong LJ 245 (“Cameron’s article”) at 248–249 for a helpful commentary on these two cases). As the English Court of Appeal explained in Ban Hin Lee Bank Berhad v Sonali Bank (9 November 1998) (unreported):
(3) The symmetry between Order 2 rule 1 and Order 13 rule 8 as well as Order 19 rule 9
[72] Specifically in the context of irregular O 13 default judgments and irregular O 19 default judgments, O 2 r 1 of our Rules of Court dovetails neatly with the court’s wide jurisdiction under O 13 r 8 and O 19 r 9 respectively to set aside or vary such irregular judgments “on such terms as it thinks just”. An example of the breadth of the court’s power under these provisions can be seen from the Hong Kong Court of Appeal’s decision in Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 (“Po Kwong Marble Factory”) (see Cameron’s article ([71] supra) for an insightful analysis of the case).

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Mercurine Pte Ltd v Canberra Development Pte Ltd

Grounds of decision

Introduction

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The facts

The parties

The dispute

Suit 861

Canberra's claim

Communications between the parties after the entry of the Default Judgment

Commencement of related proceedings by Mercurine

The decisions below on SUM 1843

AR Lim's decision

The Judge's decision

The issues on appeal

Overview of our decision

The threshold issue: Whether Mercurine's delay in filing SUM 1843 was reasonable

Actions taken by Mercurine before filing SUM 1843

The effects of delay on a setting-aside application

Whether there was undue delay on Mercuirne's part

Summary of our ruling on the threshold issue of delay

The legal principles relating to setting-aside applications

Regular default judgments

The orthodox position

The decision in The Saudi Eagle

Criticisms of the Saudi Eagle test

The test presently applicable to the testing aside of regular default judgments

Irregular default judgments

Whether irregular judgments must be set aside as of right

(1) The historical position: Anlaby v Praetorius

(2) The modern approach: Order 2 rule 1 of the Rules of Court

(3) The symmetry between Order 2 rule 1 and Order 13 rule 8 as well as Order 19 rule 9