JUDGMENTBY: LEE HUN HOE CJ (BORNEO)

(delivering the judgment of the court): We allowed the appeal with costs here and the court below. We stated we would give our reasons later. We do so now.

On 11 June 1982 the plaintiffs and the defendants entered into an agreement whereby the plaintiffs agreed to build for the defendants 26 units of double-storey terrace houses and 29 units of single-storey terrace houses in Lot No 3405 at Mukim of Assam Kumbong, Perak for $ 1,762,000. The plaintiffs erected and completed all the houses. The plaintiffs alleged as follows. On 3 July 1985 the parties agreed that the defendants would pay the plaintiffs interest on the balance still remaining unpaid from 1 November 1983 at 1.5% per month until payment in full of the balance. The plaintiffs claimed that the defendants owed $ 135,964.22 being balance of contract price and interest. In part payment of the above sum the defendants gave the plaintiffs three cheques totalling $ 25,000. These cheques when presented were dishonoured. The plaintiffs sued the defendants. The summons were said to be served on the defendants on 8 November 1985. No appearance having been entered by the defendants the plaintiffs went on to obtain judgment in default on 7 January 1986. By summons in chambers dated 21 March 1986 the defendants sought leave to enter appearance and to set aside the judgment in default and to stay execution.

On 23 October 1987, the learned judge dismissed the application with costs. The defendants contended that the service was bad, hence they did not enter appearance. They also explained that the delay in filing of the application was because the parties were negotiating a settlement. All these were rejected by the learned judge. However, the learned judge stated that it was not necessary for him to consider the merits of the case, if any, since the defendants were not able to satisfy the court with the reason for the delay in making this application and the reason for the failure to enter appearance.

We are unable to agree with the reasoning of the learned judge. First, where an application is made for setting aside a judgment in default the learned judge would have to consider the merits of the case.

The defendants alleged as follows. There were disputed issues between the parties. Hence they tried to settle these by negotiation. The completion date of the project was 15 September 1982. But, because of delay on the plaintiffs part in completing the project the defendants had to pay$ 81,201.46 to over 30 purchasers. Also, the defendants had to pay $ 150,000 for defects in the scheme which the plaintiffs failed to remedy. The defendants claimed to have a good defence and a good counterclaim.

Where judgment is entered on the failure of a defendant to take any of the procedural steps laid down under the Rules of the High Court 1980, the court has an absolute discretion to set aside the judgment, if necessary, on terms and allow the case to be heard on the merits. Lord Atkin stated clearly the principles in which the court should act in Evans v Bartlamt [1937] AC 473 in these words:

...The principle obviously is that unless and until the court has

pronounced a judgment upon the merits or by consent, it is to have the

power to revoke the expression of its coercive power where that has

only been obtained by a failure to follow any of the rules of procedure.

In the instant case the learned judge did not consider the judgment to be irregular. Mallals Supreme Court Practice, 2nd Ed, Vol I at p 84 explains the position where the judgment is regular thus:

The discretion will only be exercised if the affidavit supporting the

application to set aside discloses facts showing a defence on the

merits; or for some very sufficient reason: Bank Bumiputra Malaysia

Bhd v Majlis Amanah Raayat [1979] 1 MLJ 23; Farden v Richter

(1889) 23 QBD 124.

A defence on the merits means merely raising only an arguable or

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