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In the matter of Rd Fishing PNG Ltd (1-22581) [2023] PGNC 174; N10360 (26 June 2023)

N10360

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP NO. 5 OF 2023 (COMM-IECMS)

IN THE MATTER OF THE COMPANIES ACT 1997

AND:

IN THE MATTER OF RD FISHING PNG LTD (1-22581)

Waigani: Anis J
2023: 15^th & 26^th June

APPLICATION FOR STAY OR DISMISSAL – Order 8 Rule 27 and or Order 12 Rule 40(1)(c) – National Court Rules – whether proceeding should be stayed or dismissed – want of jurisdiction – knowledge of negotiations and part-payments made between the parent company and petitioner premised on an earlier agreement – earlier agreement not pleaded – earlier agreement not disputed – earlier agreement addresses the same debt claim – earlier agreement appoints courts and law of another country as having exclusive jurisdiction to resolve disputes – whether abuse of process established – whether earlier agreement and its terms should be regarded – exercise of discretion

Cases Cited:

Carl Exports Ltd v Camp Administration Ltd (2009) SC1050

Counsel:

A Konena, for the Petitioner
I R Shepherd, for the Respondent
B Poki, for an interested Creditor

RULING

26^th June, 2023

1. ANIS J: I refer to the notice of motion filed 12 May 2023 (NoM/application) by the respondent. I heard that on 15 June 2023 before reserving for ruling at 1:30pm on 20 June 2023, which was later further adjourned in Chambers to a date to be advised.

2. Parties have been notified so I will rule on it now.

BACKGROUND

3. The petitioner files this petition primarily to seek orders to place the respondent RD Fishing PNG LTD into liquidation under s.291 of the Companies Act, 1997 (Companies Act). The petitioner and the respondent had a long-term business relationship where the petitioner would supply Marine Gas Oil and Jet A-1 fuel (fuel) to the respondent. The petitioner claims in the petition that between 26 December 2020 and 24 August 2021 (stated period), it supplied fuel to the respondent where payments were not received. So, on 9 January 2023, the petitioner issued the respondent with a Creditor’s Statutory Demand (Statutory Demand) under s.337 of the Companies Act. The amount stated in the Statutory Demand as owing was US$8,038,752.71 (debt)

4. The petitioner claims in the petition that the respondent failed to pay the debt or enter into a compromise under Part XV of the Companies Act. As such, it claims that the respondent is simply unable to pay its debts as and when they fall due in the ordinary course of its businesses and therefore presumed to be insolvent.

5. There is an interested creditor, namely, KK Kingston LTD. Ms Poki acts for this interested creditor. It filed its Notice of Intention to Appear on 21 April 2023. Ms Poki submits that her client supports the position taken by the petitioner in opposing the NoM.

MOTION

6. The NoM seeks this main relief:

1. Pursuant to Order 8 Rule 27 and/ or Order 12 Rule 40(1)(c) the proceedings be stayed or dismissed generally.
   

SOURCE

7. I refer to the source of the application, Order 12 Rule 40(1)(c) of the National Court Rules (NCR). Sub-rule (1)(c) reads in part:

Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings... the proceedings are an abuse of the process of the Court... the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

8. In support, the respondent refers to the Supreme Court case of Carl Exports Ltd v Camp Administration Ltd (2009) SC1050. The Supreme Court held, amongst others, and I quote:

2) The jurisdiction to stay a petition, presented under Companies Act s 291(2)(c) to wind up a company, before the company is put into liquidation, is the inherent jurisdiction of the Court to prevent an abuse of its process. Application could be made under National Court Rules O8 r27 or O12 r40;

9. Order 12 Rule 40(c) is a correct source thus the NoM is properly before me for consideration.

EVIDENCE

10. The NoM is supported by affidavit evidence, in particular, the 2 affidavits of Arnel M Gonato filed 12 May 2023 and 7 June 2023. Mr Gonato is the Vice President and General Manager of the respondent. The petitioner did not file any affidavit to counter or challenge the respondent’s evidence in regard to this NoM.

ISSUES

11. The main issues in my view are (i), whether the petition filed is an abuse of process, (ii), whether the petitioner has instituted the proceeding in the correct jurisdiction or country, (iii), whether the petition is flawed or lacks merit by non-disclosure of material information by the petitioner, and (iv) whether the winding up option is reasonable under the circumstances. And subject to findings on these issues, whether I should stay or dismiss the proceeding.

ABUSE OF PROCESS

12. What was revealed at the hearing and in the evidence of the respondent is an agreement called Amended Surety Agreement dated 22 September 2022 (SA). It is marked as Annexure B to Mr Gonato’s affidavit filed 12 May 2023.

13. I note that the petitioner did not challenge the SA or its validity.

14. I make the following observations. First, I note that the parties to the SA include the parent company of the respondent and its subsidiaries in Philippines, the respondent, and the petitioner. Secondly, I note that the terms and conditions of the SA concerns the petitioner’s debt incurred in the stated period. Thirdly, I observe this; that as a consideration in the SA, the respondent, and its parent company RD Corporation (including its subsidiaries) in Philippines, have mortgaged 2 of their ships to the petitioner. The SA also contains an agreed payment schedule (periodic payments) of the debt by the principal (which is the respondent and its parent company including its subsidiaries) to the petitioner. It contains provisions where failure or default to comply would trigger the petitioner’s rights as mortgagees over the 2 ships. Mr Gonato also deposes in his affidavit filed 7 June 2023 of certain part-payments totaling USD1,195,829.90 that were made in relation the debt as per the terms and conditions of the SA. Fourthly, and again, I note that no affidavit was filed by the petitioner to rebut the affidavits of Mr Gonato. That said, I note that there is an earlier affidavit by Hyungho Kim filed 13 March 2023. However, Mr Kim makes no mention of the SA. He also makes no mention of what had transpired in Philippines earlier on 22 September 2022 between the parties regarding the debt repayment arrangement.

15. I note the submissions made by the parties.

16. In my view, I am prepared to give due regard to the evidence in support of the NoM. The respondent’s evidence is unopposed. I see no reason why I should reject it. Mr Gonato appears to be a credible deponent. He is the Vice-President and General Manager of the respondent. I find the existence of the SA crucial to this petition because it relates to the same debt or that it is premised on the same background facts. And the SA was entered into between the parties, which included the petitioner and the respondent, to address the debt. The same debt is now being pursued by the petitioner with this proceeding in this jurisdiction. With respect, this also suggests to me that the petitioner may be disingenuous by leaving out this information in its pleadings, and also, by not addressing that in evidence in reply to this application.

17. Premised on the evidence that is before me, I note that there is already in existence a process that has been instigated by the parties in Philippines to address the debt. In my view, the process appears legally binding between the parties which has not been exhausted. With that in place, the petitioner has come over to this country to file proceedings under the Companies Act to try to wind up the respondent or the principal in the SA.

18. To me, whilst the petitioner may have the right to institute proceedings in this country and subject itself to its laws, based on the now reveal circumstances of the case, I find the actions of the petitioner to constitute abuse of court process. I must add that its action may also be described as a disingenuous act. Let me elaborate. First, the debt has been addressed by the parties and there is already a process put in place for payment which is the terms and conditions of the SA. That process appears to be legally binding between the parties. There is no evidence adduced by the petitioner which says that the process had been exhausted or terminated. The petitioner therefore should, in my view and as its first option, observe the said process. Secondly, the petitioner knew of the SA but appears to deliberately leave that out of this petition. It did not file any evidence to explain this nor rebut the respondent’s evidence in this regard. In passing, I will remark that the petitioner, as a foreign entity, should ensure to comply with our laws and requirements which includes disclosing all the relevant information to the Court.

‘LEX LOCI CONTRACTUS’

19. So, the law of the country where the SA was signed or lex loci contractus is Philippines or the Philippines jurisdiction.

20. And when I consider the clauses in the SA, at pp 4, the final term reads, “Unresolved disputes shall be brought before the appropriate courts of Makati City or General Santos City, Philippines to the exclusion of any other venue or jurisdiction.”

21. The SA was signed on 7 September 2022. There is no evidence that contests this agreement and its existence between the parties including the petitioner and the respondent to this petition. The SA appears to expressly bind the parties to the debt and of how they would resolve disputes that may arise from it. The agreement also appears to expressly exclude the parties from pursuing disputes that may arise from it elsewhere or outside the courts or jurisdiction of Philippines.

22. Thus, in my view, this is another reason to sustain the ground abuse of court process. There is already a process that the parties had agreed upon to abide by to address this debt issue as per the terms of the SA and the parties including the petitioner and the respondent have agreed to submit themselves to the courts and jurisdiction of Philippines.

JURISDICTION/ NON-DISCLOSURE OF INFORMATION

23. This also makes me make this ruling in regard to the third issue which is this. Premised on the terms and conditions of the SA, this is not the correct or appropriate jurisdiction for the petitioner to air its grievance against the respondent in regard to this debt as pleaded in the petition or premised in the Statutory Demand. Based on the SA, it was agreed that the parties would submit themselves to the courts and jurisdiction of Philippines.

24. Therefore, despite the fact that this Court has independent jurisdiction to hear this petition under its laws or the laws of this country, to do so would be against the intentions of the parties as agreed to in the SA. This Court is about fairness. Thus, I simply cannot ignore the existence of the uncontested SA. And I also cannot ignore the non-disclosure of this information by the petitioner. In my view, the said non-disclosure together with my other findings, will be fatal to petitioner’s petition, which is that it will be dismissed.

SUMMARY

25. I am minded to exercise my discretion, and in doing so, dismiss the petition premised on my findings on the first 3 issues. The findings are sufficient enough without the need to proceed further.

COST

26. Cost awards are discretionary. In the present case, I will order cost to follow the event, that is, on party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

27. I make the following orders:

1. The petition is dismissed in its entirety.
   
2. The petitioner shall pay the respondent’s cost of the proceeding on a party/party basis to be taxed if not agreed.
   
3. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly

________________________________________________________________
O’Briens: Lawyers for the Petitioners
Ashurst: Lawyers for the Defendant
Warnershand: Lawyers for an interested party