![]() |
Home
| Databases
| WorldLII
| Search
| Feedback
National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO. 925 OF 2019 (COMM)
BETWEEN:
PNG SUSTAINABLE DEVELOPMENT PROGRAM LIMITED
Plaintiff
AND:
WESTERN FDR LIMITED
Defendant
Waigani: Anis J
2019: 19th December
2020: 31st January
COMPANIES ACT 1997 – Originating Summons – setting aside of Creditor’s Statutory Demand for Payment of Debt –section 338 of the Companies Act – section 338(4) – Companies Act - whether the debt is substantially disputed – whether the debt is less than the prescribed amount if the set-off value is deducted – if the debt is not disputed, whether the Court should exercise its power under section 339(1)(a) of the Companies Act and order payment
Cases Cited:
In the Matter of the Companies Act and In the Matter of Nivani Ltd (2016) N6389
Re Piunde Ltd (2015) N5971
Counsel:
E Andersen, for the Plaintiff
D Kakaraya, for the Defendant
RULING
31stJanuary 2020
1. ANIS J: The plaintiff, by an originating summons, sought to set aside a Creditor’s Statutory Demand for Payment of Debt (Statutory Demand) on 19 December 2019. The originating summons was contested. After the hearing, I reserved my ruling to a date to be advised.
2. Parties have been notified so I will rule on it now.
BACKGROUND
3. The plaintiff is an overseas based company. It is incorporated in Singapore and has carried on business in Papua New Guinea (PNG) since 2001. On 19 November 2019, it was served with the Statutory Demand. It responded by filing this originating summons on 17 December 2019.
4. The plaintiff and the defendant signed a service contract on 13 October 2017 for a period of 1 year (the agreement). Under the agreement, the defendant was engaged to rehabilitate the plaintiff’s fish hatchery in Daru in PNG. As part of the agreement, Ronald Coehn, a director of the defendant, was engaged as the project manager, and he was provided with a second-hand vehicle, a red Nissan Navara Double Cab Four Wheel Drive (project vehicle). The agreement concluded after a year in 2018. The defendant vacated the hatchery premises on 8 July 2018. In so doing, it lodged its final claim under the terms of the agreement including reimbursement claims. The defendant, it seems, left the hatchery premises with the project vehicle. On 16 July 2019, the plaintiff wrote a letter to the defendant. In that letter, the plaintiff informed the defendant that its claim had been reconciled and that the balance owed by the plaintiff to the defendant was K282, 560.86. The defendant demanded payment thereafter, and on 18 November 2019, it issued the Statutory Demand under section 337(2)(b) of the Companies Ac 1997 (Companies Act). The Statutory Demand was served on the plaintiff a day after on 19 November 2019. The plaintiff then files this originating summons.
ORIGINATING SUMMONS
5. The Originating Summons was filed on 17 December 2019 (originating summons). The plaintiff seeks the following main relief:
ISSUES
6. The main issue, in my view, is this. Whether the plaintiff has satisfied the requirements under section 338(4) for me to set aside the Statutory Demand, that is,(a), whether there is substantial dispute to the debt, or (b), whether any counter-claims if off-set with the debt would be less than the prescribed amount that is K1,000, or (c), whether the demand ought to be set-side on other grounds.
7. I note that the defendant has also raised this issue. It claims that it is not, by this hearing, being afforded its right to be heard. I may deal the issue separately, that is, subject to or in addition to my findings on the main issue.
SECTION 338
8. Section 338 of the Companies Act 1997 (Companies Act) states, and I quote in part:
(1) The Court may, on the application of the company, set aside a statutory demand.
(2) The application shall be made, and served on the creditor, within one month of the date of service of the demand.
(3) 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.
(4) The Court may grant an application to set aside a statutory demand where it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due; or
(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
ARGUMENTS
9. The defendant raised a preliminary argument in relation to service of the originating process. Counsel submitted that the defendant was not duly served. I overruled the objection. I was satisfied that the originating summons was served, and I allowed the originating summons to be heard. I found that there was sufficient evidence that met the requirements of service under section 431(1) of the Companies Act. I would refer to the transcript of proceedings for my full reasoning.
10. The plaintiff’s arguments may be summarized as follows. It submits that the debt that is claimed in the Statutory Demand is not a final debt or sum. It submits that the actual value of the project vehicle has not been fully ascertained. It submits that it also intends to make other claims against the defendant. As such, it submits that this is not a case where the debt in the Statutory Demand is certain. The plaintiff has also adduced evidence to show its assets and liquidity status. It submits that it is capable of paying its debts as and when they fall due. It submits that it has valid reasons in this instance for not settling the debt or the claim by the defendant.
11. In regard to the defendants’ right to be heard argument, the plaintiff submits as follows. It says the matter required urgent attention given the requirements under section 338(2) of the Companies Act which was why it had taken these steps. It submits that the last day for making the application is 19 December 2019, which is why, it submits, the application had to be served and made before or by 19 December 2019. It submits that despite the predicament the defendant may have been put through or is faced with, it (i.e., the plaintiff) had to comply with the 1 month time requirement that is set by section 338(2) of the Companies Act. And it submits that because it has done that and the last day falls on 19 December 2019, which is the date set in the originating summons for hearing, the Court should or must hear the matter. To refrain from that and to have the originating summons heard on another date, it submits, would amount to non-compliance of section 338(2) and if that occurs, its rights, it submits, would be prejudiced.
12. To the main argument, the defendant submits these. It says that it had not had sufficient time to prepare itself, peruse the evidence of the plaintiff and file responding affidavits to defend itself in the matter. It says the originating summons was served on it less than 1 day before the hearing. As such, it submits that its right to be heard would be breached if the originating summons is heard on 19 December 2019 and not adjourned to another date and time. The defendant also submits that the originating summons is pre-mature and therefore must be dismissed. It submits that dismissing the originating summons now will not prejudice the rights of the plaintiff. It submits that the plaintiff may still raise the same arguments after or when the petition is filed. And finally, it submits that the debt that is sought in the Statutory Demand is not disputed by the plaintiff. As such, it submits that the relief sought should be refused.
COMMON GROUND
13. I note that the parties are at common ground on the following. Firstly, there is no dispute that the Statutory Demand was served on the plaintiff on 19 November 2019. The parties also agree that 19 December 2019 is the final day of the 1 month period as required under section 338(2) of the Companies Act for the plaintiff to apply to set-aside the Statutory Demand. And the parties agree that the application was made within time. See cases: Re Piunde Ltd (2015) N5971 and In the Matter of the Companies Act and In the Matter of Nivani Ltd (2016) N6389. I do not see any reason to rule otherwise and I also concur with these positions or facts.
CONSIDERATION
14. The plaintiff obviously has the burden of proof on the balance of probabilities. In this case, the relevant provision which the plaintiff must satisfy this Court is sub-section 4 of section 338. I may set aside the Statutory Demand if the plaintiff can show:
(a) there is a substantial dispute whether or not the debt is owing or is due; or
(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
15. In this case, the plaintiff’s arguments fall under section 338(4)(a) and (b) of the Companies Act. Let me deal with the claim that the debt is substantially disputed under section 338(4)(a). I ask myself this. Is the sum of K282, 560.86 which is sought in the Statutory Demand substantially disputed or disputed at all? My answer to that is, “no, the debt is not disputed”. I say this based on the plaintiff’s own evidence. I refer to the affidavit of Leonard Wilson Fufus Kamit filed on 17 December 2019. Annexure LWFK7 attaches a letter by the plaintiff dated 16 July 2019 to the defendant. The letter consists of the plaintiff’s reconciled calculations of the defendant’s final payment as per the agreement. The reconciled total amount payable to the defendant, according to the plaintiff, was K282, 560.86. The said sum is the debt that is being sought in the Statutory Notice. In my view, this shows that there is no substantial dispute whether or not the debt is owing or is due. This debt is due and owing and I find that to be the case.
16. Let me consider the second argument under section 338(4)(b). The plaintiff’s off-set argument relates primarily to the project vehicle. I would also refer to the plaintiff’s letter of 16 July 2019 as stated above in my judgment. The final paragraph reads, and I quote in part: The funds payable to you will be withheld pending the return of the SDP vehicle. Due to the gravity of this matter and the threats you made against me, we have alerted our lawyers to these events and should the situation not be resolved amicably we will proceed to take legal action. I next refer to annexure LWFK 9 to Mr. Kamit’s affidavit. It consists of a letter which is dated 23 October 2019. The letter, amongst others, gives a reasonable estimate of the project vehicle at K65, 000. If I minus the K65, 000 from the debt or sum that is claimed in the Statutory Demand which is K282, 560.86, I will arrive at a sum of K217, 560.86. Is that sum less or more than the prescribed amount? The prescribed amount under Regulation 18 of the Company Regulation of 2015, is K1,000. The remaining estimated debt of K217, 560.86 is obviously much higher than the prescribed amount. As such, I am not satisfied that the plaintiff has established its argument under section 338(4)(b) of the Companies Act. As such, its argument under the said provision shall fail and I find that to be the case.
17. Let me also, for completeness, address section 338(4)(c) of the Companies Act. The plaintiff may have actions that may be criminal or civil in nature that it may intend to pursue as I can see from the submissions made by its counsel. These may include the recovery of the project vehicle. In my view, however, these are matters that are different or separate from the debt that is owed. The debt claimed in the Statutory Demand is undisputed because it had been reconciled by the plaintiff, and the plaintiff, through its own evidence, said that the said sum was due and payable. I also note this. The reconciliation was carried out in July of 2019. If the plaintiff had issues with the project vehicle or other claims against the defendant as alleged, there is nothing before me to show other proceedings filed in relation to the matter. Had that been done, it may have assisted the plaintiff’s submission in this regard.
SUMMARY
18. In conclusion, I find that the plaintiff has not satisfied this Court on the balance of probabilities, on any of the 3 requirements under section 338(4) of the Companies Act. The relief sought by the plaintiff, that is, its application to set-aside the Statutory Demand will therefore fail.
19. I will also decline to grant the alternative relief for the reasons I give below.
CONSEQUENCIAL ORDER
20. Because I have found no dispute as to the debt, section 339 becomes available and may be invoked by this Court. I note that I have powers under the said provisions and I note that the exercise of the power is not subject to submissions that should first of all be made by a party or in this case by the defendant.
21. Section 339(1) reads, and I quote:
339. Additional powers of Court on application to set aside statutory demand.
(1) Where, on the hearing of an application under Section 338, the Court is satisfied that there is a debt due by the company to the creditor that is not the subject of a substantial dispute, or is not subject to a counterclaim, set-off, or cross-demand, the Court may—
(a) order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or
(b) dismiss the application and forthwith make an order under Section 291(3) putting the company into liquidation,
on the grounds that the company is unable to pay its debts as they become due in the ordinary course of business.
22. Based on my findings in my judgment and, in relation to issues under section 338(4) of the Companies Act, I am inclined to make orders in terms of sub-paragraph 1(a) of section 339. I also find that justice of the case requires that I make orders in this manner. To me, this is a clear case where the plaintiff’s own evidence shows that it has reconciled the defendant’s final invoices and has come up with the sum which is now being sought by the defendant in its Statutory Demand. And the said sum was due and payable as at 16 July 2019.
REMARKS
23. First remark: The application was heard on 19 December 2019. I note that the plaintiff filed additional affidavits after that on 20 December 2019. I note that no orders were made for these affidavits to be filed late or after the hearing, that is, if they had been intended for the Court to consider. One explanation could be that they may have been filed late by the Registry, I simply do not know. But for the record, these affidavits, namely, affidavit of Ashley Kepa, John Wesley, Mary Obaha and Debbie Akane, all sworn on 19 December 2019 and filed on 20 December 2019, were not properly before the Court in relation to the hearing of the originating summons and therefore I had not regarded or considered them in my decision.
24. Second remark: Given my findings, I see no need to address the defendant’s argument on right to be heard.
COST
25. Awarding cost is discretionary. I will order cost to follow the event on a party to party basis to be taxed if not agreed.
ORDERS OF THE COURT
26. I make the following orders:
________________________________________________________________Dentons PNG: Lawyers for the Plaintiff
Warner shand Lawyers: Lawyers for the Defendant
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/pg/cases/PGNC/2020/8.html