N6389
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP NO. 43 OF 2016

IN THE MATTER OF THE COMPANIES ACT 1997

AND:

IN THE MATTER OF NIVANI LIMITED
Applicant

Kokopo:  Anis, AJ
       2016: 19 & 22 August

COMPANY LAW – Section 338(1)(4)(a) of the Companies Act 1997 - application to set aside statutory demand - applicant claims substantial dispute to the debt - respondent allege no substantial dispute to the debt - respondent raised competency issues namely (i) failure to seek leave of court to amend ground (4)(b) to ground (4)(a) under section 338 of the Companies Act and (ii) failure to comply with the requirements under section 338(2) of the Companies Act - applicant filed its application within a month of receipt of a statutory demand - applicant did not serve and apply within the said month - applicant breached section 338(2) of the Companies Act - objection upheld

Facts

The applicant was served with a statutory demand.  Its creditor alleged the applicant failed to pay its debt for services rendered, that is, for supply of various products which totalled K114, 667.16.  The applicant refused to pay because it alleged that the quality of the products supplied were not in order or to the required standard.  At the hearing, the respondent drew the Court's attention to section 338(2) of the Companies Act 1997 and challenged the competency of the application.

Held

1.	Section 338(2) of the Companies Act 1997 is mandatory and failure to comply with the provision will render an application made under it invalid or incompetent.  

2.	Section 338(2) is express and not ambiguous and it states that an applicant is required to make the application to set-aside a statutory demand within one (1) month of the date of receipt of a statutory demand.  It also states that an applicant must also serve the application upon the creditor within the said one month.  The practical application is that an applicant is required to file, serve and make the application to set aside a statutory demand within one (1) month from the date of receipt of the said statutory demand.

(Case followed: Re Piunde Ltd (2015) N5971; Case not followed: Moran Development Corporation Ltd v. Akida Investments Ltd (2003) N2458)

3.	The applicant has failed to comply with section 338(2) because, except in regard to filing of the application which was filed within time, the application was not served and made within one (1) month which had lapsed on 9 August 2016.

4.	The application was incompetent and was dismissed with costs together with the proceeding.

Cases cited:

Moran Development Corporation Ltd v. Akida Investments Ltd (2003) N2458
Re Piunde Ltd (2015) N5971

Counsel:
Ms S. Kiene, for the Applicant
Mr B. Nutley, for the Respondent

RULING

22 August 2016

1.	ANIS AJ:	The applicant commenced proceedings by filing an originating summons pursuant to section 338 of the Companies Act 1997 (the Companies Act) on 8 August 2016.  It seeks to set aside a Creditor's Statutory Demand for Payment of Debt dated 6 July 2016 (the Notice) in regard to a debt of K114, 667.16.  The creditor herein is Carpenters Hardware Ltd (the respondent).  The Notice was served on the applicant on 8 July 2016.
	
2.	The originating summons was moved through or by way of a Notice of Motion filed on 8 August 2016, on 19 August 2016.  The application was contested and parties presented their submissions.

3.	At the conclusion of the hearing on 19 August 2016, I reserved my ruling.  I set a tentative date to hand down my decision at 9:30am on 26 August 2016.  I am bringing that forward to today at 1:30pm.

4.	This is my ruling.

APPLICATION

5.	The main relief sought under term one (1) of the application states and I read:

1.	The Statutory Demand served on the Plaintiff on 8 July 2016 by the Defendant be set aside pursuant to section 338(1) and (4)(b) of the Companies Act 1997 and Order 12 Rule 1 of the National Court Rules.

...

6.	In support, the applicant relies on the Affidavit of David John Stein filed on 8 August 2016.  I note that there is also another affidavit filed which is the Affidavit of Victor Lovai filed on 18 August 2016.
	
7.	The respondent filed two affidavits to oppose the application.  The first is the Affidavit of Angeline Warokra filed on 15 August 2016 and the second is the Affidavit of Anthony Paru filed on 15 August 2016.

PRELIMINARY ISSUES

8.	Counsel for the respondent raised two preliminary issues.  I set them out herein:

(i)	The applicant did not seek leave of the Court to rely on ground 338(4) (a).  According to the applicant's originating summons and application, it has stated ground 338(4) (b) as the ground upon which it would rely on to make its application to set aside the Notice.

(ii)	The applicant's application was filed in breach of the provisions of section 338(2) of the Companies Act and is therefore incompetent and should be dismissed.

9.	I note that I have already dealt with the first preliminary issue in Court.  I informed counsel during the hearing that it could have been a genuine error made by the applicant when it had cited ground 4(b) instead of ground 4(a) in its application.  I recall that I also informed counsel that I wanted to get to the real issues rather than worrying too much on technical or minor issues.  I also note that the applicant's counsel had clearly pointed out at the beginning of her submission, upon the Court request, that the applicant was going to rely on ground (4)(a) under section 338(4)(a) of the Companies Act and the applicant had proceeded with its submissions on that basis without objection from the respondent's counsel.  I note that in conclusion, I informed both counsel that the Court would regard or treat the applicant's application as based under section 338(4)(a).  So in summary, I have dealt with and have rejected the first preliminary issue.

10.	The second preliminary issue, in my opinion, is the one that requires consideration.  The respondent argues that the application is incompetent because it was filed, served and heard outside one (1) month of the date of receipt of the Notice therefore it was contrary to or was in breach of section 338(2) of the Companies Act.  In support, the respondent cites two cases namely Re Piunde Ltd (2015) N5971 and Moran Development Corporation Ltd v. Akida Investments Ltd (2003) N2458.  The applicant on the other hand did not make any relevant submissions on point on the two preliminary issues except to confirm the dates when the Notice and the application were served, that is, on 8 July 2016 and 9 August 2016 respectively.

11.	Let me set out section 338(2) herein.  I read:

The application shall be made, and served on the creditor, within one month of the date of service of the demand. 

12.	The question I ask is this:  Did the applicant apply and serve the application within a month from the date of receipt of the Notice?  I do not think this is hard to determine.  The parties confirmed in Court that the Notice was issued on 8 July 2016.  This is also in evidence, that is, paragraph 3 in the Affidavit of Anthony Paru filed on 15 August 2016.  A month from 8 July 2016 is 8 August 2016.  I note that the application was filed on 8 August 2016, served on 9 August 2016 and it was made on 19 August 2016.  In my opinion, the applicant appears to have breached section 338(2) which states that an application must be made and served on the creditor within one (1) month from the date of receipt of a statutory demand.  

13.	The supportive case on point would be the case of Re Piunde Ltd (supra).  Justice Hartshorn, in the said case and on point, found that the statutory demand was duly served on the debtor on 25 September 2014.  A month from the date of service of the statutory demand fell on 25 October 2014.  His Honour said at paragraphs 22 and 23 of his judgment and I read:

22. Given this, an application to set aside the statutory demand should have been made and served upon AML by 25th October 2014. As it was not, the application to set aside is out of time.

23. Section 338 (3) Companies Act is explicit in providing that no extension of time may be given for making or serving an application to have a statutory demand set aside.

14.	His Honour dismissed the application to set aside the statutory demand at paragraph 25 of his judgment where he held and I read:

25. Consequently, as the application to set aside the statutory demand is out of time, and no extension of time may be given pursuant to s. 338 (3) Companies Act, the application is refused.

15.	In Court, the respondent's counsel also relied on the case of Moran Development Corporation Ltd v. Akida Investments Ltd (supra).  That was a case where His Honour Justice Kandakasi interpreted or expounded on the meaning of section 338(2) of the Companies Act.  What the Court concluded was that an applicant under section 338(2) is required to file and serve its application within a month from the date of receipt of a statutory demand.  The Court said that does not include or mean that the applicant is also required to move its application within the said month.  The Court said the application may be moved in Court soon after the month. 

16.	Firstly and on the issue of filing, I think regardless of what the Court has said in the case of Moran Development Corporation Ltd v. Akida Investments Ltd (supra), section 338(2), in my opinion, is express.  It contains the words "shall", "made" and "served" therein which, in my opinion, make service and hearing of the application within one (1) month from the date of receipt of a statutory demand, mandatory.  With respect, there is no ambiguity to these requirements as stipulated under section 338(2).  Whether it be, as expressed in the provision, "made and served on the creditor" or if we swap the words without changing its meaning and say "served on the creditor and made", the two versions, in my opinion, say the same thing which is that these two things (i.e., service and making of the application) must happen within one (1) month after receipt of a statutory demand.  How do we apply that practically?  Well, for the present case, I say that the applicant must file, serve and make its application to set aside the Notice within one (1) month from the date of receipt of the Notice.

17.	Now, in addition to my opinion that section 338(2) is express, section 338(3), if read together with section 338(2), would clearly confirm the Parliament's intention of how section 338(2) should be interpreted which is, in my opinion, consistent with how this Court has interpreted it.  For example, if I accept that the actual hearing of the application to set aside a statutory demand can be heard after the one (1) month period, it would be inconsistent with section 338(3).  Section 338(3) states and I read:

No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the Court may extend the time for compliance with the statutory demand.
(Underlining is mine)

18.	Section 338(3) disallows an applicant from seeking extension of time to make an application under section 338(2) of the Companies Act.  Justice Hartshorn concurs on this point in his decision in the case of Re Piunde Ltd (supra) as I have quoted above in my judgment.  What section 338(3) means is that if an applicant fails to apply to set aside a statutory demand within one (1) from the date of its receipt, under section 338(2), the applicant cannot apply for extension of time under the Companies Act to make the said application.

19.	On that note, I respectfully differ with His Honour Justice Kandakasi's ruling on point in the case Moran Development Corporation Ltd v. Akida Investments Ltd (supra). 

20.	I now come back to summarise my finding to the question Did the applicant make and serve the application on the respondent within one (1) month from the date of receipt of the Notice?  I refer to the Affidavit of Victor Lovai filed on 18 August 2016.  He deposes at paragraph 3 therein that he served the application documents at the respondent's office on 9 August 2016.  I note that the Notice was served on the applicant on 8 July 2016.  One (1) month from 8 July 2016 would be 8 August 2016 (i.e., the last day of the month).  I reject the respondent's submission that the one (1) month fell on 7 August 2016.  But regardless of that, I note that the application was served on the respondent on 9 August 2016 which was a day after the one (1) month period had ended.  I also note that the application was made on 19 August 2016 which is also outside the one (1) month period.  Therefore, the applicant, although it has filed its application within time on 8 August 2016, has failed to serve and make its application within one (1) month as required under section 338(2) of the Companies Act.  

21.	I uphold the second preliminary objection.  The applicant was out of time to make the application under section 338(2) of the Companies Act.  

22.	Because the application and proceedings were served and made outside of time, there is no basis for me to proceed further and exercise my powers under section 338(1)(4) & (7) and section 339 of the Companies Act.

ORDERS OF THE COURT

I make the following orders:

1.	The application including the proceeding is dismissed for want of compliance with section 338(2) of the Companies Act 1997.

2.	The applicant shall pay the respondent's costs of the proceeding on a party/party basis which shall be taxed if not agreed upon.

3.	Time is abridged.

The Court Orders accordingly,	
________________________________________________________________
In-House Lawyers	: Lawyers for Applicant
O’Brian Lawyers:	 Lawyers for the Respondent