Court grants summary judgment against defendants for insufficient affidavit defense on bill of exchange claim.

[*596] 1984 April 17

BOYADJTS,P.D.C.)

IN THE DISTRICT COURT OF NICOSIA

Goodwin Barsby Limited,

Plaintiffs,

v.

1. Premixco Asphalting Co. Ltd,

2. Andreas Constantinou,

3. Christakis Constantinou,

Defendants,

(Action No 1005/84).

Civil Procedure - Summary Judgment - The Civil Procedure Rules, Ord. 18 - Objection as to sufficiency of affidavit in support of application - As it raises a matter affecting the jurisdiction of the Court, the objection may be taken at any stage of the proceedings or even at the Court’s own motion - The objection should be examined by reference to the contents of the affidavit.

Civil Procedure - Summary Judgment - The Civil Procedure Rules, Ord. 1 8 - The three conditions to the exercise of the jurisdiction - Deponent of affidavit in support of the application may be a stranger to the suit - In such a case a statement that he can swear positively to the facts is not sufficient, but he must show how and in what circumstances he acquired first hand knowledge of the facts - Once the plaintiff has brought his application within the provisions of 0.18, r.1 the duty is cast upon the defendant to either satisfy the Court that he has a good defence on the merits or to disclose such facts as may be sufficient to entitle him to defend - Extent of such duty - Bill or Exchange, action on, between immediate parties - Counterclaim for unliquidated damages arising out of the same transaction – [*597] Neither a defence nor a. ground of staying execution of the judgment to be given under 0.18 - Total failure of consideration - May be a ground of defence - Partial failure of consideration - Ground for a pro tanto defence provided it is an ascertained and liquidated amount.

C. Emilianides for the plaintiffs.

St. Kittis for the defendants.

JUDGMENT

The judgment of the Court was delivered by:-

BOYADJIS,P.D.C.: The plaintiffs Goodwin Barsby Limited, of Great Britain, are suing the Defendants No. 1 Premixco Asphalting Company Limited, of Nicosia, and two other defendants for an amount of English Sterling £34.500.97 or its equivalent in Cyprus pounds plus interest and. consequential expenses allegedly due on a bill of exchange drawn by the plaintiffs in Great Britain on 29th November, 1982, and

accepted by the defendants No.1 on 22nd December, 1982, under the guarantee of the 2nd and 3rd defendants, payable to

the order of the plaintiffs on 29th November, 1983. [*598]

In their indorsed statement of claim the plaintiffs allege that the said bill of exchange was properly presented for payment on its maturity; that the defendants failed to pay any amount; and that the bill, being a foreign bill, was duly protested. The bill and the protest have been produced by consent and are now before me as Exhibit 2.

The specially indorsed writ of summons was taken out on 8th February, 1984, and on 22nd February, 1984 all three defendants entered appearance to the action.

On 29th February, 1984, plaintiffs applied by summons for judgment without trial under 0.18, r.1 of the Civil Procedure Rules. Their application is supported by an affidavit dated 24th February, 1984, sworn by a certain Yiannis Michaelides, of Nicosia. It is stated in this affidavit that the affiant is the director of the representatives of the plaintiffs in Cyprus, namely Mikis Michaelides Ltd., and that he has been authorised by both companies to swear the present affidavit on behalf of the plaintiffs. It is also stated that he has full and personal knowledge of the facts of this action because he was personally involved in the negotiations leading up to the issue and acceptance of the bill of exchange. He further says that, in his aforesaid capacity he was being informed by the plaintiffs of all correspondence exchange between them and the defendants. He then proceeds to verify the cause of action and the amounts claimed and [*599] concludes that all facts stated in the statement of claim, including the non payment of the amount of the bill, are true to his personal knowledge and that

he believes that the defendants have no defence to the action and that they have entered an appearance in order to delay the issue of judgment in

the action against them.

The defendants Opposed the application and filed their notice of opposition on 14th March, 1984, supported by an affidavit sworn on their behalf on 13th March, 1984, by defendant No.3 Christakis Constantinou who is one of the directors of the company-defendants No.1 The deponent states therein that he has been advised by his counsel that the defendants have “a very good defence” in the action. He then says that by a written agreement dated 7.8.1982 the plaintiffs undertook to provide and install machinery for the operation of a crushing plant for the production of shingle by the defendants; that in breach of the said agreement the whole plant cannot operate (counsel for the defendants explained that this total failure lasted only for a while and that now the plant is in fact in partial operation); that the defendants will allege during the hearing of the application that a number of bills of exchange, including the one relied upon by plaintiffs, were issued and accepted under the aforesaid agreement; that due to the breach by the plaintiffs of their contractual obligations there has occurred a total or a partial failure of consideration; that the defendants have sufferred as a result damage exceeding £70,000.- and continue to suffer [*600] further damage; that they shall give particulars of their damage during the hearing of the application; and that it is right and fair that the defendants should be given leave to defend the whole claim.

The application was heard on 14th April, 1984. Both parties relied on their aforesaid respective affidavits and their learned counsel addressed the Court. The ruling of the Court was reserved over the weekend.

Learned counsel for the defendants submitted that the application should be dismissed on the ground that the affidavit filed in support thereof is insufficient because the deponent, being a stranger to the suit, cannot swear positively to the facts, and in particular cannot possibly have first hand knowledge that the bill has not been paid, and also because the sources of his information disclosed in the affidavit are themselves insufficient. In case the Court rules against him on this point, learned counsel added, the defendants should be given unconditional leave to defend the whole claim.

The objection of counsel for the defendants, on the sufficiency of the affidavit sworn on behalf of the plaintiffs was not raised in the notice of opposition or in the affidavit filed in support thereof. Being, however, a matter which relates to the jurisdiction

of the Court to decide upon the application on its merits (see in this respect Spyros Stavrinides v. Ceskoslovenska Obchondi Banka A.S. (1972) 1 C.L.R. 130), the objection may be taken [*601] at any

stage of the proceedings, even at the Courts own motion and must be examined with reference to the contents of that affidavit alone.

There are in fact three conditions to the exercise of the jurisdiction of the Court under 0.18, r.1. First, the writ of summons must be specially indorsed; secondly, the defendant must appear to the writ; and thirdly, an affidavit in the prescribed form must be sworn by or on behalf of the plaintiff This is evident from the unambiguous words of 0.18 , r.1 (a) which provides:-

“1 .-(a) Where the defendant appears to a writ of summons specially indorsed under 0.2, rule 6, the plaintiff may on affidavit made by himself, or by any other person who can swear positively to the facts, verifying the cause of action, and the amount claimed (if any), and stating that in his belief there is no defence to the action, apply for judgment for the amount so indorsed, together with interest (if any), or for the recovery of the land (with or without rent), or for the delivering up of a specific chattel, as the case may be, and costs. And judgment for the plaintiff may be given thereupon, unless the defendant shall satisfy the Court that he has a good defence to the action on the merits, or disclosed such facts as may be deemed sufficient to entitle him to defend.” [*602]

Regarding, the aforesaid third condition to the jurisdiction, with which we are at present concerned, namely, the sufficiency of the affidavit, it appears from the wording of the Rule that an affidavit may be insufficient in two ways, namely: (i) either because of an omission to aver therein an averment which under the Rule ought to have been averred, or (ii) because the deponent, being a person other than the plaintiff, did not have that first hand knowledge of all material facts that would enable him to swear positively to the facts or to verify the cause of action or the amount claimed. In the latter case, the statement of the deponent that he can swear positively to the facts and that he is therefore, a competent deponent within the meaning of the Rule, will not itself suffice. The deponent must show in the affidavit how and in what circumstances, being a stranger to the suit, he came to acquire the first hand knowledge of the facts so that his affidavit evidence is not in fact hearsay and inadmissible.

In the case of Spyros Stavrinides (supra) A.Loizou J., stated the relevant principle as follows at pp. 136-137 of the report:-

“ There is no doubt that, as our relevant rule stands, an affidavit may be made by another person, apart from the plaintiff, but the rule does not stop here; it must be a person that ‘can swear positively to the facts, verifying the cause of action and the amount claimed.’ The deponent must be clearly in a [*603] position to swear positively to the facts and the affidavit must show this. It cannot be an affidavit where the deponent can only depose upon information and belief. Order 39, r.2 which regulates the contents of affidavits provides that the affidavits shall be confined to such facts as the witness is able of his own knowledge to prove. Statements on information and belief, with the sources and grounds thereof, are allowed only in affidavits for interlocutory applications.”.

The approach, therefore, to the sufficiency of the affidavit is indeed a strict one. There is, however, good reason behind it which appears in the following extract from the judgment of Buckley L J., in Simon and Co. v. Palmer’s Stores (1903) Limited (1912) 1 K.B. 259 at p. 266 of the report:-

“Trial

as a rule must precede judgment. Order 14 provides an extraordinary procedure in certain cases; it is a procedure in which, instead of trial first and then

judgment, there is judgment at once and never any trial such a procedure must be strictly confinded to the specific cases for which it is provided, as set forth in the order.”

The last aforesaid English case, like all the other English decisions decided before 1962 to which I shall be referring later in this judgment, was decided with [*604] reference to the corresponding English Rule, namely 0.14, r.1 before it was recast by R.S.C. (Rev.) 1962.

In the instant case the plaintiff company, being a legal entity, cannot swear an affidavit. This does not mean that, because of this impossibility, they can never avail themselves of the provisions of 0.18, r.1. They can rely on an affidavit sworn by a competent physical person.

In the present case they have done so though their representative in Cyprus . As it was said in Pathé Fréres Cinema Ltd. v. United Electric Theatres Limited (1914)

3 K.B. 1253, the Rule must receive a reasonable construction.

Judging the affidavit sworn on behalf of the plaintiff company in this case in the light of the principles hereinabove set out and in the light of the objection of learned counsel for the defendants, I find it to be sufficient for the purpose for which it was made. It was sworn by the director of the company that represents the defendants in Cyprus, who says that, because of his aforesaid capacity and his involvement in the whole transaction, the facts are within his own knowledge. That constitutes sufficient compliance with the requirements of the rule. The contents of the affidavit as well as the capacity of the deponent bring this affidavit reasonably within Rule 1 (a) of Order 18, and the objection of learned counsel in this respect fails. The Court has jurisdiction to examine the application on its merits and to exercise its discretion in the matter accordingly. [*605]

I would like, however, to express respectfully my opinion that the time is ripe for the recasting of our Order 18, r.1 (a) so as to equate the affidavit in support of an application for summary judgment with the affidavits sworn in support of other interlocutory applications. This amendment was effected in England since 1962. The need for the change has become increasingly evident from the frequency with which nowadays actions by foreign plaintiffs are. instituted in our Courts. The international trade of our country has expanded considerably and is mostly, carried out on the basis of bills of exchange which are considered internationally as cash payments. I believe that our international commerce will be facilitated if our Rule is brought in this respect in line with the corresponding Rule in force in England, a country with which most of our foreign trade is being carried, out.

Once the plaintiffs have brought their application within the provisions of 0.1 8, r.1 , the duty is cast upon the defendants to either satisfy the Court that they have a good defence to the action on the merits, or to disclose such facts as may be deemed sufficient to entitle them to defend. It is the rule that a defendant must do this by affidavit, unless examined upon oath with the leave of the Court as laid down in Order 18, r. 3 (a). If the defendant fails to show good cause against the application the Court may give judgment for the plaintiff. The duty of the defendant in this respect was stressed in Hermes Insurance Co.Ltd. v. Theodorides (1983) 1 C.L.R. 333. [*606]

Our Supreme Court has clearly laid down in a number of decisions the extent of the duty of the defendant in this respect and what he is required to aver in his affidavit in each case in order to show the cause which will be sufficient under the Rule to defeat the right of the palintiff to obtain judgment without trial. One of these decisions is that given in the case of KyproasKyprianides v. Symeon Ioannou (1966) 1 C L R 265, where the only averment in the affidavit sworn by the defendant in answer to a claim based on a bond, was that the bond was null and void and unrecoverable in law, as it had arisen from the illegal transaction of gambling, and that there was no valuable or lawful consideration in respect of it. It was held that the affidavit was insufficient and could not achieve the purpose for which it had been sworn in that no facts or particulars were given therein either to show that there was a bona fide defence or to show the illegality. The Court emphasized the need that the affidavit “should, as far as possible, deal specifically with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied upon as supporting it.”

In the recent decision in Hermes Insurance v. Theodorides (supra) which affords another illustration of the application of the same principles, Loris, J., cited with approval the following extract from the judgment of Lord Blackburn in the case of John Wallingford v. The Director [*607] etc. of the Mutual Society (1879-80) 5 A.C. (H.L.) 685 at p. 704;-

“There may well be facts brought before the judge which satisfy him that it is reasonable, Sometimes without any terms and sometimes with terms, that the Defendant should be able to raise this question, and fight it if he pleases, although the judge is by no means satisfied that it does amount to a defence upon the merits. I think that when the affidavits are brought forward to raise that defence they must, if I may use the expression, condescend upon particulars. It is not enought to swear,‘I say I owe the man ‘nothing’. Doubtless, if it was true, that you owed the man nothing, as you swear, that would be a good defence. But that is not enough. You must satisfy the judge that there is reasonable ground for saying so. So again, if you swear that there was fraud, that will not do. It is difficult to define it, but you must give such an extend of definite facts pointing to the fraud as to satisfy the judge that those are facts which make it reasonable that you should be allowed to raise that defence. And in like manner as to illegality, and every other defence that might be mentioned.”

After quoting the above passage, Loris J., stated this at p. 340 of the report:- [*608]

“It was not enough for the defendants to aver failure of consideration for the issue of the cheques in question. They should ‘condescend upon particulars’ establishing such an alleged ‘failure ‘of consideration’ or ‘fraudulent representation’ as they put it in the present appeal”.

One should further bear in mind the remarks made by Loris J., at p. 339 of the report, regarding the distinction between a pleading where averments may be made in the alternative, and an affidavit which is the evidence in the case and, therefore, the existence of an alleged agreement cannot be averred, therein as being either express or implied.

The only question, therefore, which falls to be determined in this context is whether the defendants in the present case have properly and effectively discharged their duty under the Rule.

The question whether the cause shown by the defendant in each case is a sufficient cause or not is to be decided with reference to the nature of the claim against him as disclosed in the statement of claim. In cases where, like in the present case, the claim is founded on a bill of exchange and the action is between the immediate parties thereto, it is elementary to bear in mind that the bill is treated in international commerce as the equivalent of cash. The fact, therefore, that the [*609] defendant may have a counterclaim for unliquidated damages arising out of the same transaction forms no sort of defence to the action. It is not even a ground of which the Court should grant a stay of execution of the judgment to be thus given without trial. That was decided in Montechi v. Shimco (U.K.) Ltd. and Navone v. Same (1979) 1 W.L.R. 1180.

Reference in this context should also be made to the case of Nova (Jersey) Knit Ltd. v. Kammgarn Spinnerei GmbH (1977) 2 All E.R. (H.L.) 463, where Lord Wilberforce said at p. 470:-

“These (bills of exchange) are taken as equivalent to deferred instalments of cash, Unless they are to be treated as unconditionally payable instruments (as the Bills of Exchange Act 1882, s.3 says ‘an unconditional Order in writing’) which the seller can negotiate for cash, the seller might just as well give credit. And it is for this reason that. English Law (and the German Law appears to be no different) does not allow cross-claims, or defences, except such limited defences as those based on fraud, invalidity, or failure of consideration to be made……..”

The above principles in connection with the limited defences open to actions on bills of exchange in England apply equally in Cyprus where they find expression [*610] in section 30 of our Bill of Exchange Law, Cap. 262. See in this respect: Hermes Insurance v. Theodorides (supra).

Now let us examine, in the light of the aforementioned principles, the affidavit filed by the defendants in answer to the plaintiffs’ claim which, as I have already said, is based on a bill of exchange. What the defendants say is that the bill was issued pursuant to a written agreement for the sale and installation of certain machinery, and that the plaintiffs have violated their obligation under this agreement. No particulars are given regarding either the terms of the agreement or the nature of the breach committed by the plaintiffs. There is also an allegation that, as a result of the violation of the agreement by the plaintiffs, there has resulted a total or a partial failure of consideration A failure of consideration can be either total or partial. Only in the former case, i.e. when total failure of consideration is established, it may be a ground of defence. In the latter case it only affords a defence pro tanto against an immediate party when the failure is an ascertained and liquidated amount, which is not the case here, but not otherwise. See in this respect: Warwick v. Nairn (156 E.R. 648). No particulars are given to justify the allegation that a failure of consideration, either total or partial, has occurred. Is it because no machinery at all were delivered, or is it because one or more of the machines having not been delivered or installed, the whole plant [*611] could not operate? It may be also that the alleged failure of consideration is due to the fact that one or more of the machines were defective and so the plant could not operate until it was repaired. In the absence of any particulars in the defendant’s affidavit I do not know what is actually the case for the defendants so as to judge whether the defence of failure of consideration set up by the defendants is in fact made out or not. The oral explanation of learned counsel for the defendants during his address cannot cure the defect in the affidavit. If accepted, however, it shows that it is only a case of partial failure of consideration which, in the absence of an ascertained and liquidated amount alleged in the affidavit, cannot afford a defence to the present claim.

My impression is that the affidavit is evasive and uncertain; it is certainly insufficient to entitle the defendants to defend the action defeating the plaintiffs’ right to have immediate judgment signed in their favour.

The defendants are, of course, free

to claim in a cross action any amount of damages to which they might be entitled for the loss which they say that they have sustained

because of the alleged breach by the plaintiffs of the written agreement underlying the whole transaction between the parties, under which the bill of exchange was issued and accepted. It seems from Exhibit 1. – the copy of the writ of summons in action No. 4262/83cthat the defendants No. 1 have in fact done so since 16th July, 1983. [*612]

For the reasons which I have endeavoured to explain hereinabove, the defendants failed to discharge the duty cast upon them by either satisfying the Court that they have a good defence to the action on the meritas, or by disclosing such facts as may be deemed sufficient to entitle them to defend.

Having withdrawn their claim for interest the plaintiffs are entitled to judgment on the bill - Exhibit 2 against all the defendants as per paragraphs (a) and (c) of the prayer in the indorsed statement of claim with legal interest and costs to be assessed by the Registrar. If payment is made in Cyprus pounds, the rate of exchange to be adopted shall be the one prevailing between the Cyprus pounds and the sterling as at the date of payment.

Judgment in favour of plaintiffs as per para (a) and

(c) of the prayer with costs.