Court sets aside default judgment due to lack of service and triable issues regarding set-off defense.

[*99]1983 June 23

(NIKITAS, P.D.C.)

IN THE DISTRICT COURT OF NICOSIA

Georghios I. Tsetsis,

Plaintiff-Respondent,

v.

Gramex Overseas Ltd.,

Defendants-Applicants.

(Action No. 5481/81).

Civil Procedure - Judgment by default of appearance - Setting aside of - Principles applicable - Claim under an agreement for sale of goods - Defendants contending that goods were not of a merchantable quality, they were of a different description from those ordered and there was non-delivery of all the goods ordered - Buyer has the right to set off for damages - Section 59(1 ) of the Sale of Goods Law, Cap. 267 - Allegations of defendants if proved at the trial might establish both a good defence and a good counterclaim - Triable issues of law and fact which ought to be investigated - Judgment set aside - Terms of setting aside.

Civil Procedure - Service of writ of summons on a Corporate Body - Delivery of an office copy of the writ of summons at the office of such body is deemed to be good service - Order 5, rule 7 of the Civil Procedure Rules.

St. Charalambous, for Defendants-Applicants.

L. Papaphilippou, for Plaintiff-Respondent.

JUDGMENT

The following judgment was delivered by:-

NIKITAS, P.D.C.:- In this action [*100] there was judgment in default of appearance on 16 December 1981 and the defendant company now apply to set it aside.

The application dated the 21st January, 1983, is supported by an affidavit sworn by Mr. Stelios Angelides, who describes himself as the main shareholder and one of the directors of the defendant company (hereafter to be called the defendants), which has its registered office at Nicosia. A short but vital issue is first raised by Mr. Angelides. He says that there was no service or proper service of the writ of summons on the defendants. The matter was not taken up by counsel in his written address but of course if the judgment was irregular the defendants are en titled to have it set aside ex debito justitiae (Anaby v. Proetorius,

20 Q.B.D. 764). Consequently the first point which has to be decided is was there service or proper service or process. I think there was. The matter is governed by the Civil Procedure Rules, Ord. 5,r.7 which provides for alternative ways of effecting service upon a corporate body. By the express wording of the rule delivery of an office copy of the writ of summons at the office of such body is deemed to be good service and this is what has been done in the instant case as may be seen from the affidavit of service which forms part of the record. Parenthetically it may be added that in para 6 of his affidavit Mr. Angelides Candidly admits that the defendants took no steps to defend the action for they were [*101] misled by plaintiff into thinking that the action would be settled out of Court.

The case put forward by the defendants so far as it may be ascertained from that affidavit may be sufficiently summarised as follows; The defendants agreed to buy from the plaintiff, who carries on business at Piraeus, Greece a quantity of Kalamata olives, extra large and another quantity of pickles in jars according to a proforma invoice attached to the application as exh. E for the sum of US $ 16,850. Subsequently on 11.12.79 a letter of credit was opened through the Chartered Bank of Nicosia for that amount - see exh. Z. The deponent says that the defendants sold the goods to a customer in Jeddah, Saudi Arabia, the implication being that the plaintiff knew that defendants required the goods for resale.

The defendants contend that' the plaintiff failed to insure the consignment in accordance with the contract ; that the goods supplied were not of a merchantable quality; that there was non-delivery of all the goods ordered; that they were worth less than the contract price; and that an examination of the goods at Larnaca port by the insurers disclosed not only that the. quantities sent were less than those agreed, but that the goods were not in conformity with the contract being of a completely different description. The insurers’ certificate of survey is appended also to the application as exh. ∆

By a letter dated the 25th November 1980 - exh.B – [*102] the Chartered Bank informed the defendants, inter alia, that the insurance policy and the bill of lading tendered did not comply with the terms of the letter of credit to which defendants replied on the same day by exh. A rejecting the goods and requiring the Bank to make arrangements for the return of the goods to the plaintiff.

Despite their protestations the defendants signed eventually on 3rd May 1980 a bill of exchange for the amount in question on the strength of which plaintiff obtained in December 1981 the judgment now sought to be set aside. Mr. Angelides in paragraph 7 of his affidavit gives the following explanation for the defendants action.

"Η εναγομένη εταιρεία ....

ισχυρίζεται ότι υπέγραψε το επίδικον γραμμάτιον δυνάμει του οποίου εξεδόθη η ως

άνω απόφασις εναντίον της υπό διαμαρτυρίαν και/ή υπό πλήρη επιφύλαξιν των

δικαιωμάτων της και/ή κατόπιν συμφωνίας μετά του Ενάγοντος δια να δυνηθούν τα

εμπορεύματα να ταξιδεύσουν - μεταφερθούν από τον διαμετακομιστικόν χώρον του

λιμένος της Κύπρου - IN TRANSIT - εις τον τελικόν προορισμόν των ήτοι την JEDDAH της

Σαουδικής Αραβίας όπου θα ελέγχοντο λεπτομερώς δια να διαπιστωθούν όλαι αι διαφοραί και/ή ελλείψεις τούτων." [*103]

It is further alleged that the buyer in Jeddah rejected the goods and threatens to raise a claim against defendants for damages. Lastly it is said that defendants' damage may possibly exceed the amount of the claim.

The affidavit accompanying the opposition was sworn by Mr. Ph. Valiandis an advocate in the office of plaintiff's counsel who states that he was duly authorised to make it. After denying in a general way the case set up by defendants Mr. Valiandis puts forward in several paragraphs of his affidavit a number of legal arguments stemming from defendants ’ allegations. It is also stated in the affidavit that on 28.12.81 a writ of movables was issued which was returned un executed and on 12. 9.82 a petition was presented for a winding up the defendant company, which is still pending after it was repeatedly postponed. The deponent added that notwithstanding those steps the defendants remained inactive for more than a year before filing the present application in complete disregard to the judicial process.

Å judgment in default of appearance may, in the discretion of the Court, be set aside upon terms. The Civil Procedure Rules Ord. 17,r.10 provides:

"10. Where judgment is entered pursuant to any of the preceding rules of this Order, it shall be lawful for the Court in a proper case to set aside or vary such judgment upon such terms as may be just." [*104]

The correct approach on the principles governing the discretion of the Court is explained in Phylactou and Others v. Michael, (1982) 1 C.L.R. 204 Supreme Court. In giving the essence of the

decision Pikis J. said (P.209).

"The task of the trial Judge is primarily to discern whether sufficient merits are disclosed as to justify the re-opening of the case. The disclosure of such merits being, as counsel agreed, the foremost consideration governing the discretion of the Court on the subject of re-Opening a case".

And further down at p. 210:-

"The effect of the case law is that the Court must not be astute to unseat a party from his right to be heard in his cause, so long as he discloses merits. But the Court may, nevertheless, decline to re-open the case if his conduct is such as to strike at the root of the administration of justice."

The main submission of counsel for plaintiff is that by disposing of the goods as alleged the defendants have acted in a way inconsistent with the ownership of the seller and must be taken to have accepted them as provided by s.42 of the Sale of Goods Law, Cap. 267. Accordingly, so the argument of counsel runs, the affidavit evidence filed on behalf of the defendants does not disclose a defence in law even in case all those allegations can be substantiated, the defendants having only a right to bring a separate action against [*105] the plaintiff for damages. The point was not fully canvassed before me, but it is I think clear from the provisions of section 59 of Cap. 267 that the buyer has the right to set off a claim for damages in the circumstances contemplated by the section. In other words set off is recognised as a defence. Section 59(1) reads:.

"59(1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty the buyer is not by reason only of such breach of warranty entitled to reject the goods but he may -

(a) set up against the seller the breach of warranty in diminution or extinction of the price;"

This principle was first enunciated in Mondel v. Steel (1841) 8 M & W 858 and was later incorporated into the Sale of Goods Act 1893 s.53(1) which is identical with s.59(l) of our Law. In that case it was declared that it was " competent for (the buyer) ... simply to defend himself by showing how much less the subject matter of the action was worth, by reason of the breach of contract". And under s.59 (2) of Cap. 267 it is possible for the buyer to bring a separate action for damages for breach of the same warranty if he has suffered further damage. The rule, however, had no application [*106] where the seller's cause of action was founded on a bill of exchange accepted by the buyer for the price of goods sold who could, only pursue his cross-claim by an independent action unless there was a total failure of consideration. This proposition originated in an old case Warwick v. Nairn (1855) 10Exch. 762, but more recent authorities cannot be easily reconciled with this case. For example, in Harris & Co. v. Vallarman & Co. (1940) 1 All E.R.185 the Court of Appeal held that this rule was not sufficiently decided for it to strike out, as showing no cause of action, paragraphs in a defence in which such a set off was claimed. But in Lamont and Co. Ltd. v. Hyland Ltd.,

(1950) 1 All E.R. 929 the Court in substantially similar circumstances refused to interfere with the order of the Master giving summary judgment in favour of plaintiffs and allowed their appeal against an order staying execution pending trial of the defendants’ counterclaim. However, Roxburgh J., who delivered the unamimous judgment of the Court of Appeal, pointed out that in Court v. Sheet, (1891) 7 T.L.R. 556 a different result was reached on similar facts. He also quoted Thesiger L.J. who said in Anglo-Italian Bank v. Wells 38 L.T. 201:

"If the appellants had disclosed by their affidavits facts sufficient to establish a good ground of counterclaim, I think the counterclaim would have been sufficiently connected with the cause of action in the present case to justify its being set up as a defence even to a liquidated claim on a bill

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[*109] the date of complying with above terms and that in default judgment to stand. Defendants shall have 15 days after appearing for delivering his defence.

Application granted on terms.