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Tolulu v Darragh [2015] PGNC 87; N5894 (9 March 2015)

N5894


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


WS NO. 1605 OF 2009


BETWEEN:


DANIEL TOLULU & JANUARY TOLULU
Trading as Nabay Limited
Plaintiffs/Cross Defendant/Judgment Debtor/Applicant


AND:


ROBERT PAUL DARRAGH Trading as
Darraghs Welding & Steel Construction
Defendant/Cross Claimant/Judgment Creditor/Respondent


Kokopo: Oli, AJ
2014: 22nd March
2015: 9th March


CIVIL JURISDICTION - Practice & Procedure – Plaintiff/Cross-Claimant/Judgment debtor/applicant file application to stay the Defendant/Cross-Claimant/judgment creditor/respondent application for garnishee absolute to enforce unsatisfied judgment against Plaintiffs/Cross-Claimant/judgment debtor/applicant - Plaintiffs/Cross-Claimant/Judgment debtor/applicant claim that Defendant/Cross-Claimant/judgment creditor/respondent company was deregistered at the material time when judgment by default was entered against the Plaintiffs/Cross-Claimant judgment debtor - therefore unsatisfied judgment against Plaintiffs/Cross-Claimant judgment debtor cannot have the force of the law to be enforced – The effect of deregistration is that the Defendant/Cross Claimant/Judgment Creditor/Respondent company is deprived of its legal existence – hence, render its legal right to sue and be sued are suspended for the period of its deregistration.


CIVIL JURISDICTION - Practice & Procedure – Plaintiffs/Cross-Claimant/Judgment debtor file application to stay the judgment creditor application for garnishee absolute to enforce unsatisfied judgment against the Plaintiffs/Cross-Claimant/judgment debtor – Deregistration of Defendant/Cross Claimant/Judgment Creditor/Respondent company is a legally barred to file enforcement claim against the Plaintiff/Cross-Claimant/judgment debtor unless the company restored its legal capacity through re-registration according to the Company Act - Company Registrar's duty to appoint an administrator to manage deregistered companies asset to administer Defendant/Cross Claimant/Judgment Creditor/Respondent claim and other creditors claim as well - Considered Plaintiffs/Cross Defendant/Judgment Debtor/Applicant application under Order 13 Rule 11 of the National Court Rules to stay the garnishee absolute enforcement on Defendant/Cross Claimant/Judgment Creditor/Respondent is granted – Considered default judgment by Defendant/Cross Claimant/Judgment Creditor/Respondent during the period when it was deregistered is also set aside – Defendant/Cross Claimant/Judgment Creditor/Respondent is at liberty to commence fresh recovery proceedings against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant - Defendant/Cross Claimant/Judgment Creditor/Respondent's right to sue in future is not extinguished according to the law.


Cases Cited:


Papua New Guinea Case Cited


Papua New Guinea Banking Corporation – v - Melchior ToMoot and New Guinea Development Corporation Limited (S. C. Appeal No. 10 of 1997 SC554) - distinguished


Overseas Cases Cited
Silver Sands Transport (Pty) Ltd v SA Linde (Pty) Ltd (1973) (3) SA 548 (W) at 547C
(Barclays Bank Ltd v Truab; Barclays National Bank Ltd v Kalk (1981) (4) SA 291 (W) at 295D
Miller and Others v Nafcoc Investment Holdings Co Ltd and [2010] ZASCA 25; (2010) (6) SA 390 (SCA) at para 11


Materials refer to:
PM Meskin, B Galgut, and JA Junst Henochsberg on the Close Corporations Act (Durban: LexisNexis 1997) vol 3 issue 20 Com 550.


Counsel :


Mr. Wesley Donald, for the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant
Mr. Mr. Nelson Kopunye, for the Defendant/Cross Claimant/Judgment Creditor/Respondent


RULING


9th March, 2015


  1. OLI, AJ: The Plaintiffs/Cross Defendant/Judgment Debtor/Applicant (may be referred to hereafter as judgment debtor) filed a motion on 11thMarch 2013 to move this Honorable Court on 22nd March 2013 seeking three principle Orders. They are:

FACTS


  1. The Notice of Motion brought by Plaintiffs/Cross Defendant/Judgment Debtor/Applicant filed on 11th March 2013 and moved on 22nd March 2013 is supported by the affidavit of Mr. Daniel Tolulu sworn on 4th March 2013. His affidavit highlights the brief historical background to the proceedings now on foot. The deponent says that on 18th July 2012, he did receive certain documents from BSP Bank Manager from Rabaul branch, Mrs. Bevilon Homuo in respect to application dated 24th January 2012. The affidavit by Mr. Robert Darragh filed on 24th January 2012 in support of the Garnishee Notice dated 6th July 2012. But Mr. Daniel Tolulu then confirmed from the documents received that he became aware of judgment in accrued debt of K426,398.81 against his Company as judgment debtor entered on 11th February 2011 in favor of Defendant/Cross Claimant/Judgment Creditor/Respondent. He further stated that his previous Lawyer from Motuwe Lawyers had not informed him about the progress of the proceedings before judgment was allowed to be entered. He said from the documents received, it became evident that Defendant/Cross Claimant/Judgment Creditor/Respondent intended to enforce the unsatisfied judgment referred to herein by way of Garnishee proceedings.
  2. On 6th July 2012, an order nisi was granted to the Defendant/Cross Claimant/Judgment Creditor/Respondent, to issue a Garnishee Notice. The said Notice was filed on the same day and made returnable on 17th May 2012. However, the matter did not return again to Court and the matter remains outstanding to date.
  3. This application is brought principally on the grounds that the company Darragh Welding & Steel Construction Limited had been de-registered on 13th May 2011, some 3 months after Judgment by default was made in its favour. The company has remained de-registered when the court made the Order Nisi on 6th July 2012.
  4. The learned counsel for Plaintiffs/Cross Defendant/Judgment Debtor/Applicant submitted that it is trite law that the company wishing to carry on business in the country must be duly registered. In this instance there can be no doubt that the Order Nisi was erroneously issued and ought to be set aside together with the garnishee Notice that was filed as a result of event of 11th February 2011. He further submitted that the enforcement of an unsatisfied judgment on Plaintiffs/Cross Defendant/Judgment Debtor/Applicant is an act that constitutes or falls within the definition of carrying on business during the material period and time.
  5. The counsel for Plaintiffs/Cross Defendant/Judgment Debtor/Applicant drew the Court's attention to Order 12 Rule 1 of the National Court Rules that constitutes the Court's general powers to make Orders at any stage of the proceedings as the nature of the case requires. Under Order 13 Rule 11 of the National Court Rules, the counsel submit that a person bound by a judgment may move the Court for a stay of the execution of the judgment or some other order, on the ground of matters occurring after the date on which the Judgment takes effect. Under this Rule the Court may on terms, make such orders as the nature of the case requires. Hence, the Court has general powers under Order 13 Rule 21 of the National Court Rules to stay execution of a Judgment or Order of the Court.
  6. Finally, the Counsel for Plaintiffs/Cross Defendant/Judgment Debtor/Applicant submits that the matter concerning the de-registration of the company Darragh Welding and Steel Construction is a matter or event that occurred after the date on which the judgment was given. The Plaintiffs/Cross Defendant/Judgment Debtor/Applicant is seeking Orders herein consistent with the events that have occurred after the date of the Judgment. The counsel submits that the Order Nisi was issued in error and so as the Garnishee Notice.
  7. The Counsel for the Defendant/Cross Claimant/Judgment Creditor/Respondent Mr. Kopunye in rebuttal submit that his client objects to the motion from the outset, in that judgment was regularly obtained and the judgment was obtained against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant on 11th February 2011 and since then the judgment has being outstanding to date as unsatisfied judgment to and including the date and time of enforcement proceedings through the Garnishee proceedings against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant.
  8. The counsel for Defendant/Cross Claimant/Judgment Creditor/Respondent briefly responded and told the Court that the motion by Counsel for Plaintiffs/CrossDefendant/Judgment Debtor/Applicant is ill conceived, because liability incurred during the active life of the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant corporate entity incurred liability still exist unlike the corporate entity losing its corporate legal existence when its re-registration lapses for non-renewal of its registration according to the law.
  9. The Counsel for Plaintiffs/Cross Defendant/Judgment Debtor/Applicant express grave concern that the Defendant/Cross Claimant/Judgment Creditor/Respondent in exploring the option to enforce recovery of the unsatisfied judgment through Garnishee proceedings has not completed the process, when it first registered its interest to enforce recovery through Garnishee proceedings by issuing the Notice of Order Nisi to the Garnishee Bank who has Plaintiffs/Cross Defendant/Judgment Debtor/Applicant Operation Bank Account in order to service the unsatisfied judgment in favour of the Defendant/Cross Claimant/Judgment Creditor/Respondent to date.

ISSUE


  1. The pertinent issue is whether the Defendant/Cross Claimant/Judgment Creditor/Respondent should still enforce the unsatisfied judgment against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant during the period of Defendant/Cross Claimant/Judgment Creditor/Respondent de-registration of its corporate entity according to law.

LAW


  1. Garnishment is one of the collection methods authorized by law that allows Defendant/Cross Claimant/Judgment Creditor/Respondent to obtain the property of the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant, of which is evidence by the attachment of money or property owed to the judgment creditor but held by 3rd party.
  2. This case is slightly a different breed to the normal garnishee proceedings. In this case on foot, the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant in this motion is seeking relief under Order 12 Rule 1 and Order 13 Rule 11 and 21 respectively of the National Court Rules to stay the enforcement of the unsatisfied judgment in favour of the Defendant/Cross Claimant/Judgment Creditor/Respondent. I restate both provisions hereunder and read as follows:

Order 12 Rule 1 - General Relief (40/1).


The Court may, at any stage of the proceedings, on the application of any party, direct the entry of such judgment or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in any originating process, and Order 13 Rule 11 and 21 are restated hereunder.


Order 13 Rule 11 Matters occurring after judgment (42/12):


A person bound by a judgment may move the Court for a stay of execution of the judgment or for some other order, on the ground of matters occurring after the date on which the judgment takes effect and the Court may, on terms, make such order as the nature of the case requires.

Sub-rule (1) does not affect the powers of the Court under Rule 21 (Stay of Execution).

Order 13 Rule 21 - Stay of Execution (44/5) reads:


"The Court may, on terms, stay execution of a judgment or Order."


  1. The Company Act provide that a registered company can be deregistered for non-filing of annual returns and removed from the Company Register by the Registrar of Companies under section 365 of the Companies Act. It reads:

365. REMOVAL FROM REGISTER.


"A company is removed from the register when a notice signed by the Registrar stating that the company is removed from the register is deregistered".


  1. When the company is deregistered by operation of the law, it extinguishes its legal existence and personality. Hence, the issue raise now before the court by the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant as refer to in this application will be address hereunder as to whether legal personality and legal right to enforce unsatisfied judgment ceased to operate, as well.

APPLICATION OF LAW TO THE FACTS


  1. The law on enforcement of authentic judgment ordered by court through garnishee proceedings, is well settled in this jurisdiction between citizens, corporate entities, NGOs' and government agencies in the sphere of economic free trade business world. The issue is one that touch on the Defendant/Cross Claimant/Judgment Creditor/Respondent legal right to enforce authentic court order and that is:- whether the unsatisfied judgment can be enforce by a corporate entity upon its de-registration as judgment creditor through garnishee proceeding against the judgment debtor? The response to the first part of the question is easy in that the authentic court order is still a proper court order until it is set aside by a court of competent jurisdiction.
  2. However, the second part to this question is the legal issue that Plaintiff counsel, the judgment debtor/applicant is asking this court to answer in this application. The issue basically centre's around the legal issue as to whether corporate legal entity as well as its legal rights are suspended during the currency of the company's de-registration period. Therefore it cannot enforce its' authentic court order legally obtained against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant for debts incurred during the past active life of the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant with Defendant/Cross Claimant/Judgment Creditor/Respondent in the course of carrying on with its normal business operation before de-registration took place with the said company, Defendant/Cross Claimant/Judgment Creditor/Respondent.
  3. The counsels for both parties in this matter, did not advance any relevant case law precedent on the subject matter in our jurisdiction. However, I had the opportunity to surf the internet and search in the legal field of company deregistration law. I did find some overseas legal materials from South African jurisdiction and case law, for persuasive value and one local case precedent on garnishee proceedings and repossession of a property in the event of default, to assist me in the determination of the legal issues raised in this application before me.

EFFECT OF DEREGISTRATION ON A COMPANY


  1. The effect of deregistration on a company is that a company or close corporation is deprived of its legal existence. What this effectively means is that the company no longer exists therefore it loses its legal right or locus standi under the law to commence or enforce any authentic court orders according to the law. If this is the legal position, then the Defendant/Cross Claimant/Judgment Creditor/Respondent, since its deregistration, cannot enforced its outstanding unsatisfied judgment; similarly a company or close corporation that has been deregistered cannot issue any summons or due process against a defaulting debtor, in this case, the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant
  2. I had the opportunity to find some relevant case law in South Africa jurisdiction during my internet search for purposes of persuasive value on how their court deal with deregistration of company and close corporation on outstanding unsatisfied judgment on behalf of the judgment creditors and other creditors against the judgment debtor. In the legal article by authors; PM Meskin, B Galgut, and JA Junst Henochsberg on the Close Corporations Act (Durban: LexisNexis 1997) vol 3 issue 20 Com 550: made reference to a number of cases that applied this legal principle and I quote."It is submitted that the effect of deregistration of a corporation is that its existence as a legal person ceases...and that upon such deregistration all its property, moveable and immoveable, corporeal and incorporeal, passes automatically (ie, without necessity for delivery or any order of court) into ownership of State as bona vacantia" (see also Miller and Others - v – Nafcoc Investment Holdings Co Ltd and [2010] ZASCA 25; 2010 (6) SA 390 (SCA) at para 11 and Silver Sands Transport (Pty) Ltd v SA Linde (Pty) Ltd 1973 (3) SA 548 (W) at 547C).
  3. The event of deregistration does two things. Firstly, the legal existence of the company ceases to exist, but what is more interesting is the second point. That is, upon such deregistration all its property, moveable and immoveable, corporeal and incorporeal, passes automatically (ie, without necessity for delivery or any order of court) into ownership of State as bona vacantia. The event of deregistration triggers the company's asset ownership and custody to shift into the State as bona fide legal custodian. Therefore, the Registrar of Companies, through the appointment of a Receiver/Liquidator may deal with list of creditors with creditable judgment creditors' claim against the judgment debtor according to the law.
  4. A debt due to a creditor of a company or close corporation that has been deregistered is not extinguished, but it is rendered unenforceable against the corporation (Barclays Bank Ltd v Truab; Barclays National Bank Ltd v Kalk 1981 (4) SA 291 (W) at 295D) and if a creditor of a company or close corporation that has been deregistered, the creditor will not be able to do so and will, in effect, lose its security.
  5. However, deregistration terminates the authority of a person who was a lawful agent of the company or close corporation prior to deregistration and an attorney who continues to act for the company or close corporation may be held personally liable for the costs of the action from the date of deregistration.
  6. In PNG, the Companies Act governs and regulates the corporate affairs of all companies in Papua New Guinea on compliances, registration and deregistration matters. The relevant equivalent provisions where vesting of deregistered companies property shift to the Registrar of Company is provided in the Companies Act under section 375 and it reads:

375. LIABILITY AS TO PROPERTY VESTED IN REGISTRAR.


"Property vested in the Registrar by virtue of Section 373 is liable and subject to all charges, claims and liabilities imposed on it or affecting it by reason of any Act or rule of law as to rates, taxes, charges or any other matter or thing to which the property would have been liable or subject had the property continued in the possession, ownership or occupation of the company, but no duty, obligation, claim or liability is imposed on the Registrar or the State to do or suffer any act or thing required by any Act or rule of law to be done or suffered by the owner or occupier other than the satisfaction or payment of any such charges, claims or liabilities out of the assets of the company so far as they are, in the opinion of the Registrar, properly available for and applicable to such payment."


  1. But, if the company upon restoration by the Registrar upon a notice signed by the Registrar stating that the company is restored to the register is registered or by an order of the court. A company that is restored to the register is deemed to have continued in existence, as if it had not been removed from the register, (see section 380 (1) & (2) of the Company Act).

REGISTRATION AND DEREGISTRATION STATUS ON DARRAGH'S WELDING AND STEEL CONSTRUCTION LTD FROM INVESTMENT PROMOTION AUTHORITY (IPA) - FROM COMPANY REGISTRAR'S OFFICE - COMPANY EXTRACT


  1. The Defendant/Cross Claimant/Judgment Creditor/Respondent Company Extract tendered as evidence before the court obtained from Registrar of Company's Office with Investment Promotion Authority (IPA) reveals the following historical information on registration status on Defendant/Cross Claimant/Judgment Creditor/Respondent Company. There were four company extract information print out obtained and provided as evidence in court. The first company extracts copy dated 22nd January 2010, marked as annexure "D" has the company registration status as "Operating" means registered.
  2. The second company extract copy dated 20th July 2012, marked annexure "E" has the

company registration status as "Deregistered" means deregistered. The third company extract copy dated 20th July 2012; marked as annexure "A (1)" has the company registration status as "Deregistered" means deregistered. The fourth company extracts copy dated 13th September 2013, marked as annexure "A (2)" has the company registration status as "Operating" means registered. From the above chronological historical events, the Defendant/Cross Claimant/Judgment Creditor/Respondent company registration status reveals that Defendant/Cross Claimant/Judgment Creditor/Respondent Company was deregistered from 13th May 2011 to and including 13th September 2013.


  1. The last company extract copy dated 13th September 2013 confirms that Defendant/Cross

Claimant/Judgment Creditor/Respondent company registration status was restored. It appears that Defendant/Cross Claimant/Judgment Creditor/Respondent Company could have been restored, means re-registered between 20th July 2012 to and including 13th September 2013. There is no evidence to suggest that it was re-registered before 13th September 2013, therefore Defendant/Cross Claimant/Judgment Creditor/Respondent Company was restored on the Company Register on 13th September 2013.


  1. The evidence led by Managing Director, Mr. Robert Darragh for Defendant/Cross

Claimant/Judgment Creditor/Respondent Company claim that the copy of its Company extract obtained on 13th September 2013 from Registrar of Companies from Investment Promotion Authority confirms that the Defendant/Cross Claimant/Judgment Creditor/Respondent Company was registered. However, search done by Plaintiffs/Cross Defendant/Judgment Debtor/Applicant on 28th February 2013, some seven months before, at the Registrar of Companies, reveal that the Defendant/Cross Claimant/Judgment Creditor/Respondent Company was deregistered according to company extract copy obtained on 28th February 2013. However, whilst Defendant/Cross Claimant/Judgment Creditor/Respondent Company was deregistered, but was still carrying on business as usual despite its deregistration is illegal. The Registrar of Companies has general powers under section 365 Company Act 1997 to deregistered companies who violate and for non-compliance under section 366 of the Company Act.


  1. However, Plaintiffs/Cross Defendant/Judgment Debtor/Applicant Managing Director Mr. Daniel Tolulu on the contrary, claims that the Defendant/Cross Claimant/Judgment Creditor/Respondent Company was deregistered on 11th May 2011, therefore when it did obtain the default judgment on 6th July 2011, during the period when it was still deregistered, by operation of the law under section 365 of the Company Act, the company's legal existence has ceased to exist since 11th May 2011 therefore "carrying on business as usual" is deemed to be non-existent in law. Therefore, to enforce default judgment entered and issued by court during the period of its deregistration, was made under mistaken belief, when default judgment obtained was illegal and has no force of the law by operation of the provisions of the law under section 365 of the Company Act.
  2. I have tried and searched in our jurisdiction to find any relevant authority on this point of legal contention on the issue of deregistration of the Defendant/Cross Claimant/Judgment Creditor/Respondent Company, when it obtained the judgment by default against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant during that material time that it was deregistered. And hence, to enforce the said unsatisfied judgment against the judgment debtor through garnishee proceedings has no force of the law. Whilst there are many case authorities on garnishee enforcement proceedings to enforce unsatisfied judgment, I could not find any relevant case authority on this issue, on obtaining a judgment by default when the company was deregistered. However, I did find a Supreme Court case to provide a contrast comparison in the use of garnishee proceedings as enforcement mechanism and right to repossess a property due to rental payment default. This is the case of Papua New Guinea Corporation v Melchior ToMoot and New Guinea Corporation Limited (S. C. Appeal No. 10 of 1997 SC554). His Honours Kapi DCJ, Injia & Sawong JJ.

"This was an appeal where the appellant ("PNGBC") appeals from certain interlocutory orders made by the National Court in Lae on 31st January 1997 pending the determination of garnishee proceedings against PNGBC. The first respondent ("ToMoot") (judgment creditor) crosses appeals in respect of orders denied by the court in the same application. The orders were on a notice of motion filed by ToMoot seeking three (3) categories of order – (1) Orders for discovery of mortgage documents kept by PNGBC in respect of property situated on Allotment 2 Section 45 BOROKO. This property was owned by the Second Respondent ("NGDC") (judgment debtor) and mortgaged to the PNGBC. (2) Orders restraining PNGBC from demanding and collecting rent from tenants of the property. The tenants (garnishee) were required to pay the rent direct to ToMoot under an earlier Garnishee Order absolute issued on 20th may 1996. (3) Orders retraining the PNGBC from exercising its right under the mortgage and restraining NGDC from selling the


said property until the said garnishee order of 20th May 1996 were satisfied in full. The trial judge refused to make the first order and granted the second and third orders. PNGBC appeals against the denial of the first order. It was held that appeal was upheld on behalf of the appellant but the cross appeal by respondent was dismissed.


The court further, articulates in respect to judgment and orders that garnishee order in this case, may be enforce against the tenant of property owing rent to the judgment debtor, whilst the property is the subject of existing registered mortgage to the third party. Mortgagee exercising right to repossession of the property upon default but repossession is subsequent to garnishee order. Whether court order takes priority over mortgagee's right depends".


  1. The above case must be distinguished with this case on foot. The Defendant/Cross Claimant/Judgment Creditor/Respondent Company in this case was deregistered and whilst still being deregistered at the time between the period from 11th May 2011 to and including 13th September 2013, when it obtained the judgment by default against the judgment debtor. The distinguishing features about these two cases is that in the case of Papua New Guinea Banking Corporation v Melchior ToMoot and New Guinea Development Corporation Limited, the judgment creditor has unlimited right to enforce judgment through garnishee enforcement mechanism because corporate entity has valid registration. The registered mortgage over the property by the mortgagor has the right to repossess the property in the event of default by the mortgagee under the Contract. The judgment creditor's right to enforce unsatisfied judgment outstanding and the mortgagor's right to repossess the property under Contract is still available because their company's registrations were still valid. There is no evidence that their company's were deregistered during the period when the judgment were obtained and the right available to exercise option to repossess the property available to Mortgagor by default due breach of valid contract by Mortgagee.

CONCLUSION


  1. Having addressed the Defendant/Cross Claimant/Judgment Creditor/Respondent Company chronological events of the company's registration and deregistration status, it became very obvious that there were two separate occasions where the Defendant/Cross Claimant/Judgment Creditor/Respondent company extract copy reveal that company remain deregistered on 20th July 2012 and again on 28th February 2013, when cessation or deregistration commenced from 11th May 2011 to and including 13th September 2013. What this effectively means is that the defendant company remained deregistered for a period of 2 years 4 months and 2 days. What this also means is that, "carrying on business as usual" was done during the period it did not legally exist. Therefore, it is safe to say that for all practical purposes the defendant company ceased to exist from 11th May 2011 to and including 13th September 2013 and was indeed legally non-existent by law.
  2. The pertinent issue in this case is whether the Defendant/Cross Claimant/Judgment Creditor/Respondent Company should still enforce the unsatisfied judgment against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant during the period of its de-registration of its corporate entity according to the rule of law?
  3. The answer to this issue is in the affirmative in favour of the Plaintiffs/Cross

Defendant/Judgment Debtor/Applicant's motion, to set aside the default judgment and absolute garnishee proceedings by the Defendant/Cross Claimant/Judgment Creditor/Respondent. The legal consequences and unavoidable legal effect that flows from the event that is triggered by the deregistration of the Defendant/Cross Claimant/Judgment Creditor/Respondent company; renders all its subsequent legal proceedings to have no force of the law, since it's deregistration on 11th May 2011 to and including 13th September 2013. In other words, the Defendant/Cross Claimant/Judgment Creditor/Respondent Company upon being deregistered or cease having a corporation status, it is deprived of its legal existence to sue and be sued and or enforce any outstanding unsatisfied judgment in its favour. What this effectively means in practical terms, is that any summons or due process is served on the registered company by the deregistered company, cannot be enforced; similarly a company or closed corporation that has been deregistered cannot issue any summons or due process against a defaulting debtor.


  1. If, the history of the Defendant/Cross Claimant/Judgment Creditor/Respondent

Company is correct, in respect to its deregistration period from 11th May 2011 to and including 13th September 2013, is of any guide, I am satisfied that any legal transactions that took place during the said period will have no legal effect nor any force of the law either.


  1. In this case, I note that Defendant/Cross Claimant/Judgment Creditor/Respondent Company obtained default judgment on 6th July 2011 and instituted garnishee proceedings in January 2012, will automatically fall between the said period from 11th May 2011 to and including 13th September 2013. Therefore, by operation of the law under sections 365 and 367 of the Company Act, these two legal proceedings instituted against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant will have no legal effect or force of the law. However, the Defendant/Cross Claimant/Judgment Creditor/Respondent Company still has a valid cross claim against the Plaintiff/Company judgment debtor, and is at liberty to consider re-commencing new recovery proceedings to obtain new judgment against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant according to the law.
  2. I am satisfied that Plaintiffs/Cross Defendant/Judgment Debtor/Applicant has

made out its case and I have no other option but to grant the application by Plaintiffs/Cross Defendant/Judgment Debtor/Applicant pursuant to Order 13 Rule 1 and 21 of the National Court Rules.


  1. The court orders accordingly.

ORDER


  1. The court make the following orders:
    1. The application by Plaintiffs/Cross Defendant/Judgment Debtor/Applicant to set aside the default judgment and absolute garnishee proceeding by Defendant/Cross Claimant/Judgment Creditor/Respondent Company is granted.
    2. The Defendant/Cross Claimant/Judgment Creditor/Respondent Company is at liberty to consider re-commence new proceedings to obtain new judgment against the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant according to the law.
    3. The cost of this proceeding in favour of the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant, if not agreed be taxed.
    4. The time for entry of these Orders be abridged to the time of settlement by the Registrar which shall take place forthwith.

_________________________________________________________


Donald & Company Lawyers: Lawyer for the Plaintiffs/Cross Defendant/Judgment Debtor/Applicant
Bradshaw Lawyers: Lawyer for the Defendant/Cross Claimant/Judgment Creditor/Respondent

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