N6656
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP NO. 34 OF 2014

IN THE MATTER OF THE COMPANIES ACT 1997 

AND:

IN THE MATTER OF PIUNDE LIMITED (IN LIQUIDATION)

Waigani:  Kariko, J
2015: 14th & 21st August

PRACTICE & PROCEDURE – CIVIL JURISDICTION – Application to set aside ex parte order – Relevant considerations – Whether traffic congestion a reasonable excuse for late attendance -  Whether illness of counsel reasonable explanation for delay in filing – whether dismissed motion had good prospects of success

Cases cited:

National Development Bank Limited v Masket Iangalio (2012) N4931 
Nemo Yalo v Lagea (2012) N4937
Wep Kilip and In the Matter of Kamsi Trading Limited (2005) SC784

Counsel:

Mr C Gagma, for the applicant
Mr I Shepherd, for the Liquidator

RULING

21st August, 2015

1.	KARIKO J:  This is an application by Piunde Limited (In Liquidation) to set aside the ex parte order of 8th July 2015 dismissing the plaintiff’s NOM filed 14th April 2015. That NOM sought several orders the principal one being the termination of the liquidation.

2.	The parties are in agreement through their submissions that this court has jurisdiction to set aside the ex parte order and that for the application to be granted, the applicant must satisfy the Court on the following:

(1)	why the order was allowed to be entered in the absence of the Applicant;
(2)	if there is a delay in making application to set aside a reasonable explanation for the delay; and
(3)	that the motion that was dismissed was arguable or had good prospects of succeeding.

Absence

3.	The plaintiff’s counsel explains that he was about eight minutes late in arriving at Court on 8th July 2015 as he was held up by the traffic congestion brought on by the Pacific Games then underway in the city.

4.	The excuse of being caught up in the traffic is a frequent excuse submitted by counsel for lateness, at least in my Court, and I am in agreement with the observations of Hartshorn, J in National Development Bank Limited v Masket Iangalio (2012) N4931 that because of the commonly known traffic issues in the city, it is imperative for lawyers appearing in the Waigani Supreme and National Courts that they plan their travel so they arrive at court on time. I am unable to find the excuse offered by Mr Gagma as reasonable for his late arrival. 

5.	This case was one of two matters listed for 9.30am before me, which I had set down as a special fixture on 8th July 2015. I commenced sitting at 9.30am. Mr Shepherd for the petitioner whose office is much further away from Waigani in downtown Port Moresby compared to Mr Gagma’s office in Hohola was already in court at the time. There was no appearance for the plaintiff. The case was mentioned and Mr Shepherd then applied to have the pending motion dismissed for want of prosecution which application was granted. I then dealt with the second case which was for pre-trial conference before Mr Gagma announced his appearance about 9.38am and tried to have the case mentioned again which I refused.

6.	In his affidavit supporting the present application, Mr Gagma refers to his lateness by a couple of minutes as a “minor factor”. Far from it, lateness in attending court no matter by how much time is never a “minor factor”. It is essential that a lawyer too is punctual as a matter of respect for the Court, but also in order to protect his client’s interests.

Delay

7.	After having learnt that same day of the ex-parte order, it then took the plaintiff’s lawyers over two weeks to file the present application. The reasons given for the delay in filing the application was that Mr Gagma suffered injuries was involved in a vehicle accident on 11th July 2015 and was unable to prepare the necessary documents due to the injuries.  

8.	Mr Shepherd submitted that the illness of counsel is an internal administrative matter for the law firm and is not a satisfactory explanation for counsel being late in or failing to file documents on time.  For this proposition, Mr Shepherd referred to the case Nemo Yalo v Lagea (2012) N4937. I accept that submission. It has not been shown that there was no other lawyer available in Mr Gagma’s law firm who could have attended to the case in the meantime. In fact, I note that Mr Dalid from his firm appeared in this case when it came before me on 14th May 2015.

Prospects of succeeding

9.	 As to the submission that the dismissed motion had good prospects of succeeding, the plaintiff argued that it would have satisfactorily demonstrated that the liquidator had “conflict of interest” and that the company was in fact solvent.

10.	Pursuant to section 300(1) of the Companies Act, the Court has a discretion to terminate liquidation, where it is satisfied that it is “just and equitable” to do so. In an enquiry into whether it is just and equitable to terminate the liquidation, the relevant considerations are clearly outlined by Lay, J in Wep Kilip and In the Matter of Kamsi Trading Limited (2005) SC784, and those are:

(1)	Whether notice of the application has been given to all creditors and contributories.
(2)	The nature and extent of the creditors must be shown and whether all debts have been or will be discharged.
(3)	The attitude of creditors, contributories and the Liquidator.
(4)	The current trading position and general solvency of the Company should be demonstrated.
(5)	Any non-compliance by directors of their statutory duties should be explained.
(6)	The background and circumstances have led to the order of the liquidation being made.
(7)	The nature of the business carried on should be demonstrated and whether the conduct of the company was in any way contrary to commercial morality or public interest.

11.	I am satisfied that the plaintiff has not even met the very first consideration. In response to the motion to terminate the liquidation the liquidator James Kruse in his affidavit of 12th May 2015 deposed that following his notice for creditors to submit claims in the liquidation, he had to that date received claims from BSP as a secured creditor and four other claimants as unsecured creditors – the total of their claims totaling over K4m. The plaintiff has not produced any evidence that the creditors have been served notice of the application to terminate liquidation or they had consented to the termination. 

12.	Clearly creditors are relevant stakeholders in the liquidation process. It is through the process that the creditors may have some if not all of any debt owed to them by the company in liquidation, settled. It is essential therefore that they are properly notified and are given the opportunity to express their views on any move to terminate the liquidation. In my view it would not be “just and equitable” to allow the termination where the creditors have not been given notice and where no explanation has been advanced as to why no notice was served, and where there appears to be no good reason why there was no notice. As Lay, J remarked in Wep Kilip (supra):

“Of course, our Companies Act provides that the liquidator and not the company has custody and control of the assets. Nevertheless I consider that the creditors have sufficient interest in the assets of a company in liquidation to have an opportunity to voice their attitude if it is proposed to put those assets back into control of the company before all of those creditors have been paid. If the creditors have not given their consent, then they should be served with notice of intention to make the application. Without the views of the creditors it would be very difficult for the Court to ascertain whether or not it was just and equitable to terminate the liquidation; except where it is clearly demonstrated that the assets far exceed the liabilities and that cash resources are sufficient to pay all creditors.”

13.	I now address the matters raised by the plaintiff in support of the submission that it has an arguable case for the termination of liquidation:

(1)	That the liquidator has not discharged his duties properly and is in conflict of interest; and
(2)	The company is in fact solvent.

14.	As to the first matter, I consider it to be a ground for the termination of the liquidator’s appointment rather than the liquidation. If there was any objection to Mr Kruse being appointed the objection ought to have been raised when the application for the company to be placed into liquidation was heard back in March. In that application, Mr Kruse was proposed as the liquidator. If there are any issues regarding the discharge of a liquidator’s duties by Mr Kruse, then the appropriate application would have to be made to terminate his appointment as liquidator. 

15.	The plaintiff contends that the company is solvent. Most of the arguments in support of that submission would have been raised in March before Hartshorn, J when opposing the application to place the company in liquidation. It seems the only new material is the unaudited financial statements of the company at 31st December 2014 which according to Mr Kruse raises more questions than answers regarding the issue of solvency. 

16.	I am also of the opinion that the application to terminate the liquidation is premature. The company was placed into liquidation and the liquidator appointed on 20th March 2015. Mr Kruse was formally notified of his appointment on 25th March 2015. He placed a newspaper notice on 31st March 2015 calling for creditors to submit claims by 30th April. Between then and 5th May 2015 (the date of his affidavit in response to the application to terminate liquidation) he had received the claims noted earlier and conducted searches at the IRC and the Companies Office. The application to terminate the liquidation was filed soon after Mr Kruse commenced his duties as liquidator – in fact only some 3 weeks after he was served the orders of his appointment – without allowing him sufficient time to properly discharge his duties. Mr Kruse himself concludes in his affidavit that: 

“Creditor’s claims are continuing to be received and tested, and until such time as this process is concluded the full extent of Piunde’s indebtedness remains unknown”. 

17.	I consider it in the interests of justice that the liquidator is allowed to carry out his obligations. 

18.	To my mind, the applicant has failed to show that it has good prospects of satisfying this Court that it would be just and equitable for the liquidation to be terminated.

Conclusion

19.	In the end, I dismiss the plaintiff’s application filed 24th July 2015 seeking to set aside the ex parte order of 8th July 2015 with costs in favour of the liquidator.    
  _____________________________________________________________
Gagma Legal Services : Lawyer for the Applicant
Ashurst Lawyers	      : Lawyer for the Liquidator