A case commentary on Mercurine Pte Ltd v. Canberra Development Pte Ltd [2008] SGCA 38.

MUHAMMAD AIDIL
Third Year NUS Law, Deputy Chief Editor, SLR

Uniquely Singapore. Or so it seems in Mercurine, where the Court of Appeal (“CA”) departed from its stricter “real prospect of success” test to one which asks whether the defendant can establish a prima facie defence in that there are triable issues -an approach that differs from other common law jurisdictions. The facts of the case are straightforward. The respondent obtained an O13 default judgment against the appellant who failed to enter appearance. 15 months passed before the appellant applied for the default judgment to be set aside. The Assistant Registrar granted the application but this decision was reversed by Prakash J in a Registrar’s Appeal who reinstated the default judgment. The appellant appealed to the CA, which varied the judge’s order and held that the default judgment would be deemed to be set aside if the appellant succeeds in another consolidated suit.

But the law, it seems, was far less straightforward.

In Mercurine the CA departed from its decision in Abdul Gaffer v.  Chua Kwang Yong [1995] 1 Sing. L. R. 484, which applied the stricter “real prospect of success” test enunciated in Saudi Eagle [1986] 2 Lloyd’s Rep 221. The CA reverted to the test established in a time-honoured English case of Evans v. Bartlam [1937] AC 473, i.e. whether the defendant can establish a prima facie defence in that there are triable issues. While the merits of a defence is a highly significant factor in itself, the CA held this must be assessed against other considerations.  The burden is on the defendant to show that he has a prima facie defence.

This decision must be correct because for a court of law to delve into the question of whether a defence has any “real prospect of success” would be to pre-judge a case without having the benefit of full evidence which can only be adduced in a trial. However, what is unclear is the exact threshold level of a prima facie defence qua an application to set aside a regular default judgment.

While the CA alluded to the threshold for a defendant in an O14 summary judgment application, it is clear that the analogy is not complete. If the threshold is indeed an O14 one, would it mean that the principles of whether an O14 application should be granted can be applied to the setting-aside-of-default-judgment context?

If that is the case, the plaintiff, in order to sustain the default judgment, would have to show that the defendant does not have a “fair or reasonable probability of having a real or bona fide defence” (negative proposition of Goh Chok Tong v. Chee Soon Juan [2003] 3 Sing. L. R. 32).  However, this is a higher threshold than a mere “prima facie” defence.

To set aside an irregular default judgment, the CA affirmed that the ex debito justitiae rule remained as the starting point. However, the court’s discretion remains unfettered (Order 2 Rule 1).

Accordingly, the test of whether the ex debito justitiae rule applies is whether there has been an egregious breach of the rules of procedural justice that prejudices the defendant (e.g. judgment entered prematurely) so as to warrant the setting aside of the irregular default judgment as of right. If the court decides not to apply the rule, it must consider if there are any other reasons for setting it aside.

The crucial factor to be considered pertains to the merits of the defence. The burden lies with the plaintiff to show that the defendant is “bound to lose” (Faircharm Investments Ltd v Citibank International Plc [1998] EWCA Civ 171 (“Faircharm”)) even if the irregular default judgment is set aside and the matter re-litigated. The CA did not apply Faircharm wholesale but rather modified it to mitigate its harshness to the defendant (its effects have been mitigated in the UK by statute).

Therefore, the burden is naturally heavier on the plaintiff who obtained an irregular default judgment because firstly, he has to satisfy the court as to why the ex debito justitiae rule should not apply and secondly, if the court is satisfied on the 1st limb, the plaintiff has to further show that the defendant is bound to lose and it is therefore pointless to set aside the judgment for the matter to be re-litigated. Two observations are apposite: firstly, this decision clearly demonstrates the court’s fine act of balancing two competing interests which are the need to (a) dispose cases efficiently and expeditiously and the need for (b) procedural fairness to litigants.

Secondly, the thresholds set are rather pro-defendant as it either provides a very low threshold level for the defendant to overcome to set aside the default judgment or a high threshold for the plaintiff to overcome in order to sustain the default judgment. Perhaps this can be explained by a Court’s preoccupation with the fundamental overarching duty to dispense justice regardless of procedural breaches.