N11658

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

MP NO. 21 OF 2022 (IECMS)

IN THE MATTER OF COMPANIES ACT 1997

AND:
IN THE MATTER OF TELIKOM LIMITED
(1-26889)
Plaintiff

WAIGANI: KANDAKASI, DCJ
20 SEPTEMBER 2022; 15 NOVEMBER 2023

COMPANY LAW – Wind-up petition - Debtor disputing alleged debt after failing to seek a set aside of statutory demand – Presumption of indebtedness and insolvency – Presumption rebuttable - Process for winding up of a company available only for undisputed and established debtors – Ways of establishing undisputed debts – Responding company entitled to be heard - Petition for wind-up filed when debt is seriously in issue – Effect of – Abuse of process and open to be dismissed – Companies Act. ss.335, 336, 337, 338.  

PRACTICE & PROCEDURE – Payment of money into Court – Wind-up petition - Object and purpose of - Payment outside the National Court Rules – Payment made whilst maintaining dispute of alleged debt - Effect of –  Invalid payment - Petitioner accepting payment into court and seeking funds paid into court to be release to it – Relevant considerations – Invalid payment  - Money paid into Court not validly available for acceptance – Funds ordered to be returned to respondent company – National Court Rules 1984, O.8, rr. 68, 69 (1) and 75 (1) and (2).

Cases cited

Cumper v. Pothecary (1941) 2 KB 58
David Kapi v. Pacific Helicopters [2002] PNGLR 92
In the Matter of Paradise Property and Development Pty Ltd trading as Paradise Real (1994) N1279
In the Matter of Piunde Limited (2015) N5971
L & A Constructions Limited v. L & A ILB (PNG) Limited (2022) SC2200
Moran Development Corporation Limited v. Akida Investments Limited (2003) N2458
NHC v. Audela Ltd (2020) N8436
Pacific Rim Constructors - Singapore PTE Ltd v Huala Hire & Construction Ltd (2012) N4710
PNG Balsa Co. Ltd v. New Britain Balsa Co. Ltd (2004) N2520
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
Rustproof Ltd v Eastpac Ltd (2015) N7038
SCR No 1 of 1980; Re S22A(b) Police Offences Act; Biyang v. Liri Haro [1981] PNGLR 28
Strata Welding Alloys Pty Ltd v. Henrich Pty Ltd (1980) 5 ACLR 442
Walker v. Total Cleaning Services Ltd (2020) SC1924

Facts

An alleged creditor O3B Sales B.V (the Petitioner) filed for a wind-up of another company, Telikom PNG Limited (Telikom), claiming Telikom could not pay a debt of US$985, 238 or PNG Kina equivalent of K3, 102, 994.60. The debt was allegedly based on a contract for the provision of telecommunications satellite-related goods and services. The alleged debt was not admitted nor confirmed by any agreement of the parties or judgment.  Copies of the alleged contract did not disclose signing of the agreements with the common seal of the parties affixed with an indication of the capacity of the persons signing for and or on behalf of the parties. The petition was filed after the issuance of a statutory demand against Telikom, which Telikom did not apply for a set aside in accordance with the provisions of s.338 of the Companies Act 1997. Telikom disputed the alleged debt on the basis that it had no contract with the Petitioner, and the goods and services allegedly supplied were not supplied to it.  There was no evidence of the kinds of goods and services provided with the relevant and necessary details such as dates, each of the items of services rendered or goods supplied and their respective costs. There was evidence of a restructure of Telikom and related companies, following which all satellite related functions with all assets and liabilities were vested in PNG DataCo. Whilst maintaining its dispute, Telikom paid into Court the whole amount of the alleged Debt to demonstrate it was solvent and was able to pay debt in full if the debt was clearly established against it. It, therefore, did not file and serve a notice of deposit in accordance with the National Court Rules 1984 (NCRs). Despite that, the Petitioner filed an acceptance of the payment into Court as full and final satisfaction of the debt. 

Two main issues were presented, namely: (a) Is Telikom precluded from raising issues it should have raised when served with the letters of demand and a statutory demand? (b) What is the effect of Telikom paying money into Court outside the process provided for and in accordance with the NCRs whilst disputing its indebtedness?

The Petitioner claimed Telikom was precluded from taking any issue with the debt in view of its failure to apply under s.338 of the Companies Act 1997 for a set aside of the statutory demand served on it.  It also argued the payment into Court and the acceptance of the same by it, was confirmation of the debt. Additionally, it maintained it had an agreement with Telikom and the goods and services were supplied and rendered for which Telikom was served with two service orders adding to the amounts claimed.  Ultimately it argued for a release to it the money paid into Court. Telikom however, argued it was not precluded for contesting the petition when the debt is still an issue on the basis that it has no contract with the petitioner and in any case, it was the wrong party to be sued.  If at all, it should have been PNG DataCo. Further, Telikom claimed it did not receive the alleged goods and services and the Service Orders or invoices. Finally, it argued its payment into Court was not an admission of the alleged debt but to show it is not insolvent and has the funds to pay if the debt is established against it and argued for an order for a return of the money it paid into Court.   

Held:

1.	The process for winding up of a company is available as a last resort for the recovery of debts that are undisputedly established. Hence, the issuance of a statutory demand and thereafter filing for a wind-up of a company when the debt is disputed would amount to an abuse of the process and are liable for a set aside or a dismissal.

2.	An undisputed debt could be established in either of three ways: (1) an unequivocal admission of the debt by the debtor; or (2) the debtor and the creditor have reached agreement wherein the debtor acknowledges the debt and agrees to pay the debt in a certain way which the creditor accepts; or (3) by a final judgment of a Court confirming the amounts owed by the debtor.  

3.	A respondent to a wind-up application who has failed to apply for a set aside of a statutory demand for a debt that is disputed, is entitled to appear and oppose the application on grounds it could have relied upon earlier to apply for a set aside of a statutory demand, that would have resulted in a set aside of the statutory demand which would also be the grounds on which the wind-up application could be dismissed.

4.	In the present case, Telikom which failed to apply for a set aside of the statutory demand served on it was entitled to oppose the application for its wind-up because the alleged debt was seriously disputed on grounds that could have resulted in a set aside of the statutory demand and a dismissal of the wind-up application.

5.	The issuance of the statutory demand and the subsequent filing of the wind-up application in the present case amounted to an abuse of the process and the basis for winding up a company based on an alleged debt.

6.	As for the payment of money into Court, the purpose of paying money into Court is a confirmation of an offer to settle the whole of the cause of action pleaded and pursued in the relevant proceeding and failing its acceptance, get the costs of the proceeding through to trial and final judgment if the final judgment amount is up to or less than the money paid into Court.  To be effective, a notice of the deposit must be filed and served in accordance with O. 8, r.71 of the NCRs and if accepted, to be effective, the acceptance must be in accordance with the prescribed form and within the time stipulated by O.8, r. 75 (1) and (2) of the NCRs. 

7.	The payment into Court in the present case which was not in accordance with the NCRs and purpose of paying money into Court, it was invalid and ineffective and therefore not capable of any acceptance. The Court has control over what becomes of the money so paid into Court. In view of the serious dispute over the alleged debt, the money paid into court should be returned to Telikom and an order was made in those terms.

Counsel

Mr. P. Smith for petitioner/applicant 
Mr.G. Garo respondent 

DECISION ON APPLICATIONS

1.	KANDAKASI DCJ:	This is a petition by O3B Sales B.V (the Petitioner) seeking to wind up Telikom Limited (Telikom) based on an alleged unsatisfied debt of US$985, 238 or K3, 102, 994.60 equivalent (the Debt) arising from an alleged contract dated 14 May 2018, described as Master Services Agreement (Master Agreement) the Petitioner claims it had with the then Kumul Telikom Holdings Limited (KTHL). Telikom voluntarily paid into Court the full amount of the Debt, whilst maintaining its dispute against the alleged Debt. The Petitioner, after finding about that, filed and served a notice of acceptance of the payment into Court and is now applying by notice of motion for the money paid into Court to be paid to it in full and final settlement of the Debt.

2.	Telikom opposes the application and takes issue with the alleged Debt on the basis that, it had no contract with the Petitioner and did not receive the alleged goods and services under the alleged contract.  If at all, it submits, the contract and the alleged Debt may have been with KTHL or PNG DataCo. Further, Telikom takes issue with the alleged amount of the Debt. Furthermore, Telikom says the money it paid into Court, whilst maintaining its dispute, was forced upon it because of a hearing date looming. The payment was to demonstrate, it is not insolvent and can pay the Debt fully if the Debt gets to be established against it.  Finally, it emphasises that, the payment into Court was not an acceptance of its indebtedness.

Relevant Issues for determination 
3.	The position taken by the parties gives rise to the following issues:

(a)	Is Telikom precluded from raising issues it should have raised when served with letters of demand and the statutory demand?

(b)	What is the effect of Telikom paying money into Court outside the purpose and the process provided for by the NCRs whilst disputing its indebtedness? 
4.	Learned Counsels ably assisted the Court with their respective submissions on behalf of their respective clients.  Their submissions assisted the Court greatly for which the Court is most grateful.

Relevant factual background

5.	Before proceeding to deal with each of the issues, it is necessary to state the relevant facts and or the background to this proceeding and the issues presented. The Petitioner claims it entered into the Master Agreement with Telikom for the supply and provision of telecommunications satellite related goods and services.  Subsequently, two services orders or invoices (Service Orders) totalling the amounts claim as the Debt were send to Telikom.  Neither of them was paid. 

6.	On 28 May 2021, the Petitioner sent to Telikom a letter of demand claiming, Telikom owed the Debt. That letter asked Telikom to immediately pay the Debt and warned that failing any payment, the Petitioner would commence legal proceedings to recover the Debt.  The letter also asked Telikom to contact the Petitioner if Telikom wished to discuss payment options.  Telikom did not respond.  That resulted in a further letter of demand dated 26 November 2021 being sent to Telikom. That letter attached a copy of the Master Agreement, the Service Orders and a Statement of Accounts.  It then requested Telikom to satisfy the Debt and repeated its warning in the first letter of demand of legal action failing any satisfaction of the demand within 7 days.  The 7 days lapsed on 06 December 2021, without Telikom making any payment. On the same date, the Petitioner’s lawyer received a letter from Telikom disputing the Petitioner’s claim in the following terms:

“We advise that Telikom Limited does not have any contractual relationship with your client. Therefore, we are unable to accede to your client’s request to settle outstanding invoices as per your letter of 26th November 2021.

We would like to clarify that Telikom Limited is the continuing entity after the merger of Telikom PNG Limited and Bemobile Limited (both are former subsidiaries of Kumul Telikom Holdings Limited).”

7.	By affidavit evidence filed for Telikom, especially, an affidavit by Brian Mape sworn on 20 July 2022, it points out that:

(a)	Telikom is a continuing part of the formerly KTHL, which the government decided to have it deregistered.

(b)	By a vesting notice published in the National Gazette No. G361 of 10 June 2016, with an earlier one published in Gazette No. G53 of 26 January 2015, that all satellite assets, liabilities, and rights to use satellites, satellite radio links and Gerehu Earth Station were transferred to Kumul Consolidated Holdings (KCH) by 30 September 2016.

(c)	Immediately upon vesting, KCH was required to further transfer the satellite assets to PNG DataCo in line with NEC Decision 107/2011 and 32/2014.

(d)	The Deed of Transfer and Assignment (Wholesale Network Business to DataCo and Retail Business to Telikom) signed on 31 July 2018 effectively transferred the wholesale business including international and intra-national satellites from Telikom to PNG DataCo effective as of 01 August 2018.

(e)	A Right to Use Agreement granted PNG DataCo the right to use the wholesale Telikom’s satellite assets to operate the wholesale satellite business in return for a lease payment to Telikom Limited.

(f)	Telikom has not signed any Master Agreement and has not received any of the Service Orders from the Petitioner.

(g)	The correct party for the Petitioner to sue or chase up the Debt with, should be PNG DataCo given the restructure and vesting of assets and liabilities. 

8.	In response to Telikom’s letter dated, 06 December 2021, the Petitioner through its lawyers wrote on 28 January 2022 pointing out, the Master Agreement was signed by the former chairman of Telikom.  In the same letter, the Petitioner repeated its demand for full payment of the Debt within seven days from the date of the letter.  The Petitioner received neither any payment nor any response to that letter.   Consequently, on 22 April 2022, the Petitioner issued a Creditor’s Statutory Demand for Payment (statutory demand) to Telikom. Telikom failed to respond to the statutory demand or apply for its a set aside.  Consequently, on 28 June 2022, the Petitioner filed this petition. 

9.	By letter dated 20 July 2022, from Dentons (Telikom’s lawyers) to the Registrar of the National Court informed: 

“It is the intention of Telikom Limited to deposit the sum of the alleged indebtedness into the National Court Trust Account pending determination of the Petition.” 

10.	By BSP Credit Transfer Application Form and Batch Header dated the 20 July 2022, Telikom made the payment into Court in the PNG Kina equivalent of the alleged Debt in the sum of K 3,102,994.60 and identified the payment was for “…Professional Services Inv. 2018-1118”. A receipt for the payment was then issued by the Registrar of the National Court which states “Credit Transfer by Telikom PNG (sic) Limited for its alleged indebtedness to the Petitioner for goods and services delivered”.

11.	On 26 July 2022, by letter from Telikom’s lawyers to the Petitioner’s, Telikom informed that the reason for the payment into Court was to prove that Telikom was solvent.   Telikom did not file and serve any notice of the deposit or payment into Court on the Petitioner. Despite that, on finding out about the deposit, the Petitioner on 29 August 2022, accepted the payment in full settlement of both the Debt and the proceeding, by filing a notice of acceptance and by open acceptance before the Court.

12.	With this factual background in mind, I now turn to a consideration of the issues for determination.  I start with the first issue first.

Is Telikom precluded from raising issues it should have raised when it was served with letters of demand and the statutory demand?
13.	As already noted, the Petitioner argues, in view of Telikom failing to apply for a set aside of the statutory demand, it is now precluded from taking any issue against the petition. The Petitioner also argues that Telikom cannot take issue with the reliefs sought based on Telikom’s payment into Court and its subsequent acceptance of that payment. On the other hand, relying on a number of decisions of the Supreme and National Courts, Telikom argues it is entitled to take issue with the petition and the reliefs sought in the Petitioner’s application because it has a serious dispute as to the existence of the Master Agreement, the Service Orders, and it not being the correct party to be sued but PNG DataCo could be the correct party following the restructure and vesting of assets and liabilities. 

Considerations 

14.	There is no specific provision in our Companies Act 1997, which provides as to the consequences that should follow upon a debtor failing to set aside a statutory demand and a creditor proceeds to file a wind-up petition. In support of Telikom’s submissions, its learned Counsel Ms. Nigs referred the Court to the Australian (Commonwealth) Corporations Act 2001’s s. 459S. That provision reads:

“459S Company may not oppose application on certain grounds
(1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a) 	that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b)	that the company could have so relied on, but did not so rely on (whether it made such an application or not).
(2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.
(Emphasis supplied)

15.	As can be seen, this provision expressly precludes a company responding to a wind-up application, from opposing the application on grounds that the company relied on or could have relied on in an application to set aside a statutory demand but did not do so.  However, as subsection 2 suggests, leave to oppose the petition can be granted if the Court is “satisfied that the ground [relied upon] “is material to proving that the company is solvent”.  Obviously, this provision makes it clear that, a responding company is not totally precluded from raising any issue against a wind-up application.  Instead, it grants such a company an opportunity to oppose the application and raised the issues it raised or should have raised in an application for a set aside of a statutory demand though, not as of right but with leave of the Court.  The company has the burden to seek and secure the Courts leave first.  Leave will be granted if the company is able to satisfy the Court that the ground(s) it relies upon “is material to proving that the company is solvent”. 

16.	This in my view is what is effectively provided for by s. 336 of our Companies Act 1997.  The provision relevantly reads:

“336. Evidence and other matters
(1)	On an application to the Court for an order that a company be put into liquidation, evidence of failure to comply with a statutory demand is not admissible as evidence that a company is unable to pay its debts as they become due in the ordinary course of business unless the application is made within one month after the last date for compliance with the demand. 
(2)	Section 335 does not prevent proof by other means that a company is unable to pay its debts as they become due in the ordinary course of business. 
(3)	Information or records acquired under Section 219 or, where the Court so orders, under Section 220, may be received as evidence that a company is unable to pay its debts as they become due in the ordinary course of business. 
(4)	In determining whether a company is unable to pay its debts as they become due in the ordinary course of business, its contingent or prospective liabilities may be taken into account. 
(5)	An application to the Court for an order that a company be put into liquidation on the ground that it is unable to pay its debts as they become due in the ordinary course of business may be made by a contingent or prospective creditor only with the leave of the Court, and the Court may give such leave, with or without conditions, only if it is satisfied that a prima facie case has been made out that the company is unable to pay its debts as they become due in the ordinary course of business.”
(Emphasis mine)
17.	Section 335 defines what is meant by the phrase “inability to pay debts” as used in s. 336 in the following terms:

“335.	Meaning of “Inability to pay debts” 
Unless the contrary is proved, and subject to Section 336, a company is presumed to be unable to pay its debts as they become due in the ordinary course of business where– 
(a)	the company has failed to comply with a statutory demand; or 
(b)	execution issued against the company in respect of a judgment debt has been returned unsatisfied in whole or in part; or 
(c)	a person entitled to a charge over all or substantially all of the property of the company has appointed a receiver under the instrument creating the charge; or 
(d)	a compromise between a company and its creditors has been put to a vote in accordance with Part XV but has not been approved.”
(Emphasis mine)

18.	In Moran Development Corporation Limited v. Akida Investments Limited (2003) N2458, I expressed the view that, Division 5 of Part XVIII, ss. 335 – 339 of the Companies Act provides for liquidation of companies. After setting out the provisions of s. 337 which provides the foundation for the serving of a statutory demand, I noted, its purpose is as stated in subsection 2 (d), which is to get a debtor company to:

“‘enter into a compromise under Part XV, or otherwise compound with the creditor, or give a charge over its property to secure payment of the debt, to the reasonable satisfaction of the creditor, within one month of the date of service, or such longer period as the Court may order.’

This is applicable where there is no dispute on the alleged debt.”

19.	But where there is a dispute, I noted s. 338 provides for a set aside of a statutory demand.  After setting out the provision in question, I opined:

“The most relevant part is subsection (4). This provision clearly provides for the set aside of a statutory demand where there is a substantial dispute as to whether or not there is a debt, or there is a good counter claim, or set-off, or the demand ought to be set aside for other reasons. This, in my view, gives the Court a wider discretion to order a set aside of a statutory demand.

The combined effect of ss. 337 (1) and 2(d) and 338 (4) in my view, is this. If a company which has been served with a statutory demand substantially disputes the debt, and or has a counter claim, or is able provide other good reasons for a set aside of such a demand, it should not be forced into meeting the demand or be subjected to liquidation. Instead, it is entitled to a set aside of the demand.”
(Emphasis added)

20.	Her Honour Davani J (as she then was) expressed a similar view in her decision in Pacific Rim Constructors - Singapore PTE Ltd v Huala Hire & Construction Ltd (2012) N4710, at [14]:

“...The combined effect of ss. 338 (4) and (5) together with s. 337 (1) when read together is that upon being served with a Statutory Demand, a company can either dispute the debt, provide a counter claim or state good reasons as why the  Statutory Demand  should be set aside. If it can do so, then it should not be forced into meeting the demand, or, more seriously, be subjected or forced into liquidation. Instead, it should attempt to prove why it asserts that the Statutory Demand  should be set aside and it will do that by evidence.”
(Emphasis mine)

21.	There are few other decided cases on applications for set aside of statutory demands pursuant to s. 338.   These cases make it clear that, where an alleged debtor can demonstrate a genuine and or a serious dispute of the debt, the statutory demand will invariably be set aside.  One such decision is the one by Lenalia J (as he then was) in PNG Balsa Co. Ltd v. New Britain Balsa Co. Ltd (2004) N2520.  That decision adopted principles enunciated by Courts in New Zealand, as to how an alleged debtor can establish a genuine or serious dispute over the alleged debt and the consequences that can follow upon that being done. Based on the New Zealand cases handed up to him, his Honour extracted the relevant principles, which Davani J (as she then was) in Pacific Rim v. Huala Hire (supra) restated in the following terms:

“i.	That the evidence in support of the application must demonstrate that there is arguably a genuine and substantial dispute, and which goes towards supporting the claim that the debt is indeed disputed;

ii.	That there must be evidence to show that the debtor company owes monies to the creditor and that these debts have been adequately itemized;

iii.	That mere assertion that there exists a debt or debts are not sufficient;

iv.	That where proof has been given that there exists a substantial dispute, the matter must be resolved by other means, meaning the Statutory Demand must be set aside.”
(Emphasis mine)

22.	Since our Companies Act 1997 is based on the New Zealand Companies Act, the New Zealand cases are most relevant in the absence of any local case authority.  The decisions and the principles they represented were in the context of an application for a set aside of a statutory demand pursuant to s. 338 and not after the time for such an application had expired and a wind-up petition has been filed, as in this case.  Nevertheless, the wording in s. 336 suggests the same happens when there is a serious dispute on the debt. This provision in my view, makes it clear that, a failure to set aside a statutory demand by a company that is the subject of a wind-up application is not conclusive evidence of its inability to pay its debts as they fall due in the ordinary course of business.  Instead, it is only a presumption or a prima facie case against the company that, it is not able to pay its debts as they fall due in the ordinary course of business. This is strengthened by the provisions of s. 336 (2) - (5) which provide for ways other than a statutory demand not being set aside, to establish a prima facie case of the company’s indebtedness and its inability to pay its debts in the ordinary course of business.  

23.	The decision of the Supreme Court in L & A Constructions Limited v. L & A ILB (PNG) Limited (2022) SC2200 confirmed the above position in these terms at [11]:

“…if on the hearing of the creditor’s petition, the company does not rebut the presumption that it is unable to pay its debts, a winding up order would ordinarily be made.”

24.	Although the Court dealt with the presumption of insolvency, it did not touch on the question of how the presumption could be rebutted and the consequences that could flow from that.  Counsels were not able to assist me with any submissions on this point. Despite that, I note there is no case on this point. But that is not the same to say the law’s presumption of something is a new or strange concept.

25.	  A well-known area of law in which the notion of presumption of a position at law is in the criminal law area, where an accused is presumed innocent until proven guilty according to law and beyond any reasonable doubt by the prosecution.  That concept is enshrined as a right of an accused person under s. 37(4)(a) of the Constitution. The concept and the provision have been considered in several cases.  One such case, is the decision in SCR No 1 of 1980; Re S22A(b) Police Offences Act; Biyang v. Liri Haro [1981] PNGLR 28. The following passage from the judgment of Miles J., with whom Andrew J., agreed indicates what is entailed in the concept of presumption of innocence in these terms:

“Laskin J. (as he then was) in Regina v. Appleby …put it in these terms:
‘I do not construe s. 2(f) as self-defeating because of the phrase ‘according to law’ which appears therein. Hence, it would be offensive to s. 2(f) for a federal criminal enactment to place upon the accused the ultimate burden of establishing his innocence with respect to any element of the offence charged. The ‘right to be presumed innocent’, of which s. 2(f) speaks, is, in popular terms, a way of expressing the fact that the Crown has the ultimate burden of establishing guilt; if there is any reasonable doubt at the conclusion of the case on any element of the offence charged, an accused person must be acquitted. In a more refined sense, the presumption of innocence gives an accused the initial benefit of a right of silence and the ultimate benefit (after the Crown’s evidence is in and as well any evidence tendered on behalf of the accused) of any reasonable doubt: see Coffin v. U.S.[ci]51.

… the initial benefit of a right of silence may be lost when evidence is adduced by the Crown which calls for a reply. This does not mean that the reply must necessarily be by the accused himself. However, if he alone can make it, he is competent to do so as a witness in his own behalf; and I see nothing in this that destroys the presumption of innocence. It would be strange, indeed, if the presumption of innocence was viewed as entitling an accused to refuse to make any answer to the evidence against him without accepting the consequences in a possible finding of guilt against him. The presumption does not preclude either any statutory or non-statutory burden upon an accused to adduce evidence to neutralize, or counter on a balance of probabilities, the effect of evidence presented by the Crown. ...’

In my view these words are well suited to the constitutional situation in Papua New Guinea.”
(Emphasis mine)

26.	Taking guidance from such judgments, I am of the view that, the presumption provided for under ss. 335 and 336 of the Companies Act means a failure to apply for a set aside of a statutory demand gives rise a presumption that the company that is the subject of a wind-up application is insolvent and is not able to pay its debt in the ordinary cause of business.  That presumption is rebuttable by appropriate evidence in the same way the prosecution as to do against the presumption of innocence of an accused in a criminal case and what an accused is required to do once the prosecution has established a prima facie case against him or her.  If Parliament wanted to completely shut out a company from contesting a wind-up application once it has failed to apply for a set aside of a statutory demand served on it, Parliament would have provided to that effect, but it did not do so.

27.	This position of the law is understandable. The process of winding up a company or filing for insolvency, is a process that is available as an ultimate and final resort for creditors to employ for debts that are undisputed and clearly due and owing from a debtor company. It is a serious step and process because this could lead to orders for a winding up of a company. Such an order or outcome can have serious ramifications against the company.  Given that, and in the absence of any clear statutory statement to the contrary, caution and care must be exercised by a court dealing with insolvency proceedings.  Before a matter can be allowed to proceed any further, the Court needs to be satisfied that: (a) the debt alleged is clearly and undoubtedly established with no dispute; (b) it is due and owing; and (c) the respondent company has without good cause failed to settle the debt in the ordinary cause of business; and (d) the debtor company is insolvent and ungovernable by its directors.

28.	In my view, a debt can be established beyond any argument in any of three ways.  The first way is by an unequivocal acknowledgement or admission of the alleged debt by the respondent company. A written acknowledgment or admission that recognises the present existence of the debt, which remains outstanding and is duly signed by the person making the acknowledgement or admission, would constitute an effective acknowledgment or admission.  The second way would be by way of a clear and unequivocal and unconditional agreement of the creditor and alleged debtor. Such an agreement would need to state in clear terms the debtor’s acknowledgement or admission of the debt and the debtor undertaking to pay in a certain way either fully or in parts until the full amount of the debt is paid, which the creditor agrees to accept.  The third and final way would be in cases where a court has come to a final and deliberate judgment finding the debtor liable to the creditor for a specified amount. This does not include any interest on the judgment sum which needs to be calculated and added onto the judgment sum.

29.	It should follow therefore that, a wind-up petition would be dismissed, if the alleged debtor company is able to establish a serious contest or dispute of its insolvency and indebtedness. The decision of the Supreme Court of New South Wales, per Needham J., in Strata Welding Alloys Pty Ltd v. Henrich Pty Ltd (1980) 5 ACLR 442, referred to by learned counsel for Telikom is on point. There, his Honour held:

“A court hearing a petition to wind up a company is entitled to determine in the first place whether the petitioner is a creditor of the respondent; and it would be entitled to do that even if the facts and the law applicable to them were complex...
The procedure for use of the s.222 notices and subsequent issue of petitions is available to creditors who are unable to obtain payments of their debts, those debts being either conceded by the respondent company or else not subject to any substantial dispute. If there is a substantial dispute then there can be no question of a company having neglected to pay the sum and the petition should be dismissed.”
(Emphasis mine)

30.	Locally, in In the Matter of Paradise Property and Development Pty Ltd trading as Paradise Real (1994) N1279, Kapi DCJ (as he then was) considered the conflicting overseas decisions on point and held:

“I have considered the merits of both lines of authority, and I have come to the conclusion that the narrow or the literal approach is not the correct view. As Muirhead AJ said in Arafura Finance Corporation Pty Ltd v Kooba Pty Ltd (supra) said at p 306:

“‘The literal approach has an attractive simplicity but I am not confident it accords with modern commercial reality. If there is a bona fide dispute the court must resolve it and the defendant has adequate opportunity of putting his case upon the hearing, and indeed beforehand, if restraining orders are sought. ...’

In every case the court always has a discretion to refuse or withhold an order for winding up. The court may refuse an order if a company appears and assert that the demand is wrong; or that it has cross-claim for similar or larger amount; or that it is able to pay its debts…”
(Emphasis mine)

31.	The decision of the Supreme Court in Cal Exports Ltd v. Camp Administration Ltd (2009) SC1050, reiterated the law but in the context of an application to stay a wind-up proceeding at [21] in the following terms:

“…An application to stay the proceedings on a winding up petition presented under s291(2)(c) before the company is put into liquidation involves different considerations. The application is made pursuant to the court’s inherent jurisdiction to stay an application made under s.291 (2) (c). Any person who has sufficient interest in the company such as the company itself, a shareholder, director or a creditor can bring an application to stay the s291(2)(c) application on the grounds that the application amounts to an abuse of the process of the court. The purpose of the application is to prevent abuse of the court process by an applicant who seeks to liquidate the company on some misconceived or unmeritorious grounds.
(Emphasis mine)

32.	Then at [23] the Court went on to explain what it meant by abuse of process in the following terms:
“…Where the application is to stay the petition before the appointment of a liquidator, as we have said, the application is really one to prevent an abuse of the processes of the court, usually, either because:
a) 	The allegations in the petition do not entitle the presentation of a petition or the petitioner is not qualified to petition; or,
b) 	the debt is genuinely disputed and the petitioner cannot really claim to be a creditor until the debt is established. Thus, the petitioner is not qualified to present the petition; or,
c) 	the company has a genuine counterclaim, which exceeds the petitioner's debt, and the petitioner cannot be allowed to visit the Draconian remedy of winding up on a company, when there are a real prospects that the petitioner's debt will be satisfied by bringing the counterclaim to judgement.”
(Emphasis mine)
Decision on the first issue

33.	From the foregoing discussions, it is obvious to me that alleged debtor companies have been allowed to be heard in applications for orders for their wind-up. Where at such hearings, a responding company can demonstrate a genuine or serious dispute on the alleged debt, the proceedings will either be stayed or dismissed.  Proceeding on that basis, I answer the question under consideration in the present case, in the negative.  In other words, Telikom as the respondent to the petition before the Court in the present case, is not precluded from appearing in Court and presenting its dispute or issues against the alleged Debt and hence the petition. The issues Telikom is raising are genuine or serious and thus constitute a serious dispute on the alleged Debt and its insolvency. The issues Telikom is raising go amongst others, into the questions of whether:

(a)	the alleged Master Agreement is a legally binding agreement between the Petitioner and Telikom? 

(b)	the goods and services as alleged were rendered and the alleged Service Orders were in fact served on Telikom?

(c)	in view of the restructure, merger and vesting of assets and liabilities between Telikom and PNG DataCo, is Telikom being correctly pursued as the Debtor company?

(d)	Is Telikom insolvent and is therefore just and equitable that it be put into liquidation?

34.	Elaborating on these disputed areas briefly, I see a complete lack of any signing of the Master Agreement under the common seal of both Telikom and the Petitioner. It is settled law that, no purported agreement with a company will be considered valid unless it is done under the common seal of the company and is done for an on behalf of the company by a person with capacity to do so. As for the second question on the alleged provision of goods and services, apart from the Service Orders, there is no clear itemisation of the goods or services that were in fact allegedly provided and or rendered to Telikom with the relevant dates and value for each of them, and who on behalf of Telikom acknowledged receiving them at the time of delivery or rendering. On the issue of correct party to be sued, the affidavits filed in support of the petition do not address this point and demonstrate how Telikom is still liable, in view of the restructure and vesting of assets and liabilities. Finally on the last issue, the affidavits thus far filed for the Petitioner do not address this issue. By bringing the monies into court, Telikom has demonstrated it is not solvent. Also, by raising the various issues Telikom is raising, the alleged debt is serious contested. These issues are serious, and they therefore require proper pleadings, trial and determination unless the parties can have them settled. 

35.	I will now turn to a consideration and determination of the second issue. 

What is the effect of Telikom paying money into Court outside the purpose and the process provided for in the NCRs whilst disputing its indebtedness? 

36.	Payment of money into Court is provided for in the NCRs in several circumstances for specific purposes. The amounts paid into Court would constitute the maximum amounts a defendant is prepared to pay in full settlement of the whole proceeding and the cause of action therein pursued.  If a plaintiff accepts the payment into Court in accordance with the rules of the Court, that will finally resolve the matter. However, if the plaintiff does not accept the money paid into Court, the matter will progress to a trial and if after trial, the plaintiff recovers damages in amounts up to or less then the money paid into Court, the plaintiff will be ordered to pay the defendants costs from the date of the payment into Court up to the final decision and disposal of the matter. 

37.	In this case, both the Petitioner and Telikom agree that Telikom’s payment into Court was outside what is provided for by the NCRs. The parties also, agree that no notice of the deposit was filed and served in the required form and manner as prescribed by the relevant rules. Further, the parties acknowledge that, despite the lack of notice in the required form, the Petitioner accepted the payment into Court.

38.	The Petitioner submits, that a payment into Court could properly be made under O.8, r 69 (1).  There is no other foundation or authority in the NCRs or the National Court Act for payment into court or its receipt into the National Court Registrars Trust Account in the way done and or administered in this case. The Petitioner also submits that, Telikom made the payment into Court to aid in a prosecution of its case. That is improper as such an action would improperly expose the Court and/or the Registrar as some form of stakeholder or banker.  Despite these problems, the Petitioner submits the payment into Court should be treated as a complete answer to the petition, which it has accepted. Consequently, it submits, the Court should grant its application for the funds to be paid over to it through its lawyers. 

39.	In support of its submissions, the Petitioner relies on the following passage from the decision of the National Court, in David Kapi v. Pacific Helicopters [2002] PNGLR 92, per Davani J (as she then was): 

“What of the payment into court? Payment into Court constitutes an officially recorded offer to settle that cause of action to which the payment relates. If the Plaintiff wishes, he may accept the money paid in. Upon acceptance, the proceedings are forever stayed in so far as they relate to that cause of action for which the payment in was made.”

40.	The Petitioner also relies upon the following passage by Goddard, L.J., in Cumper v. Pothecary (1941) 2 KB 58 at p. 67 - 68:

“…there is nothing contractual about payment into court. It is wholly a procedural matter and has no true analogy to a settlement arranged between the parties out of court, which, of course, does constitute a contract. If the Plaintiff does not accept the money within the (time limited) the money remaining in court shall not be paid out except in satisfaction and in pursuance to an order of the court or judge which may be made at any time before, at or after the trial and before the court makes an order it must consider whether it is right to do so.”

41.	Telikom submits the payment into Court was not made pursuant to O. 8 Division 6 of the NCRs.  Then basing on the decision in Cumper v. Pothecary (supra), it submits the Petitioner is not entitled to the money paid into Court. The Court has complete discretion over the funds and hence make orders concerning the funds paid into Court. Applying this to the present case, Telikom submits, in the circumstances of this case as outlined earlier, the Petitioner is not entitled to the money paid into Court as of right. The money can only be paid out under an order of the Court which has complete discretion either to, make or refuse make the orders sought by the Petitioner or Telikom in this case. Finally, Telikom submits, to do justice in the circumstances of the case, the Court should refuse the petitioner’s application and order that the funds paid into Court be paid back to it.

Consideration

42.	I accept the submissions that O.8, Division 6, rr.68 - 84 of the NCRs is the correct and applicable provisions of the NCRs for paying money into Court for a wind-up petition.  This is obvious from the wording in r. 68 which defines the phrase “cause of action” as used in Division 6. The provision reads:

“In this Division unless the contrary intention appears - 
‘cause of action’means a cause of action for the recovery of debt or damages..”
(Emphasis mine)

43.	By its very nature, a petition for the wind-up of a company is the final process that could lead to an order for a winding up of a company for its inability to pay its debts as they fall due in the ordinary cause of business. Clearly therefore, wind-up applications based on an alleged debt, are for the recovery of an established or undisputed debt. This comes within the phrase “for a recovery of debt” in O. 8, r. 68 of the NCRs.

44.	The process of a recovery of debt through a wind-up petition starts with the issuance of letters of demand by a creditor.  Failing any settlement of the debt or the parties failing to arrive at a workable arrangement for a settlement of the debt, a creditor has either of two options to take depending on whether the alleged debt is clearly established in the way set out at [27] of this judgment or it is disputed.  

45.	If the debt is undisputed, a creditor would then proceed to serving a statutory demand on the debtor. At that point, unless the debtor successfully applies for a set aside of a statutory demand served on it or meets the demand, the creditor will be entitled to file a wind-up petition for a winding up of the debtor company.  The petition would then be heard, and the reliefs sought would be granted in view of no dispute of the debt.  

46.	If, however, the debt is disputed and the alleged debtor is able to rebut the presumption of insolvency, the petition to place the debtor in liquidation will be dismissed.  In view of that, it would be advisable for an alleged creditor to refrain from issuing a statutory demand, and failing any set aside of it, proceed to file a wind-up petition if the alleged debt is seriously disputed. The proper course to take for the creditor would be to taking out ordinary debt recovery proceedings, and have its alleged debt established.  This could be done through a writ of summons with a statement of claim endorsed thereto that clearly pleads the basis for the alleged debt.  That would give the alleged debtor the opportunity to plead the basis for disputing the debt.  Unless such a proceeding is settled through the parties’ direct negotiations or through a facilitated process like mediation, the matter should go through the normal Court process where the alleged creditor will have the task of establishing its claim by the calling and adducing of evidence establishing the alleged debt. The alleged debtor would also have the opportunity to adduce evidence of its own rebutting the debtor’s claim.  If at the end of the process, the Court finds in favour of the creditor, the Court will enter judgment for the creditor for a fixed amount.  Subject only to the debtor’s right of appeal being successfully utilised, the judgement of the Court will settle the dispute. If the judgment is not settled within the time frames fixed by the Court or the NCRs, the creditor would now also become a judgment creditor who could then serve a statutory demand and file for a wind-up of the judgement debtor company. This time, it would be straight forward in view of the judgment. 

47.	It should clearly follow from the above and more so, the decision of the Supreme Court in Cal Exports Ltd v. Camp Administration Ltd (supra) that, where an alleged debt is disputed, it would be an abuse of the process of the Court for an alleged debtor to proceed to file a wind-up petition.  In such a case, an alleged debtor would be entitled to apply for a dismissal of the application for abuse of process. Paying money into Court the way Telikom did here would be an abuse of process also because that would be contrary to the purpose of paying money into Court.  

48.	The NCRs provide for the purpose of paying money into Court. The most relevant provision is O.8, r. 69, which provides for the way in which a defendant or a respondent could bring money into Court.  It clearly states:
“(1)	A defendant may from time to time bring money into Court - 
(a) 	in answer to any one or more causes of action on which a plaintiff claims; and
(b) 	in addition to money previously brought in under this Rule.
(2)	A defendant may bring money into Court under this Division by paying the money into Court or by filing a security in accordance with Rule 81.”
(Emphasis added)
49.	Order 8, r 71 (1), then requires a defendant who pays money into Court to file a notice of the deposit or payment into Court in the prescribed form, namely, Form 24.  On being served with a notice of deposit, a plaintiff may accept the payment into Court in accordance with r.75, unless the defendant has earlier with leave of the Court, withdrawn its payment into Court.  Subrules (1) and (2) of r.75 are relevant on the question of acceptance of a payment into Court. They read as follows:
“75.	Acceptance by plaintiff. (22/8)
(1) 	A plaintiff may, within the time fixed by Sub-rules (2), (3) and (4), accept money brought into Court in satisfaction of the cause of action in answer to which the money is brought in…
(2) 	Where the notice of payment, or last notice of payment, in answer to a cause of action is filed before the beginning of the trial, the plaintiff may accept the money in satisfaction of the cause of action within 14 days after service on him of the notice of payment, or last notice of payment, but before the beginning of the trial, by filing a notice of acceptance in Form 26.
(Emphasis mine)

50.	As can be seen from these rules, an acceptance of a payment into Court is dependent or conditional on four requirements being met. These are:

(a)	the payment into Court must be in answer to the relevant a cause of action; and

(b)	the notice of the payment into Court being filed and served in the prescribed form, Form 24; and

(c)	the acceptance must be made within 14 days from the date of service of the notice of payment; and

(d)	the acceptance must be in form 26.

51.	A defendant who meets requirements (a) to (b) would be entitled to the benefits of bringing money into Court as discussed earlier.  On the other hand, if a defendant pays money into Court outside what is provided for by the NCRs, it would not be entitled to the benefits of bringing the money into Court.  The same would apply, in the case of a plaintiff accepting money paid into Court outside the process prescribed by the NCRs because the money is not properly in Court for anyone to accept.

52.	 In the present case, it is important to reiterate the view that the proceedings are an abuse of the process of the Court given the serious dispute on the alleged debt. The proceeding is therefore, not correctly and validly before the Court. As for payment into court, requirements (a) to (c) above, have not been met. As the parties accept, the payment was not in accordance with the requirements of O. 8, r. 69 (1) and purpose of bringing money into Court. The payment into Court was not in answer to the cause of action but to demonstrate Telikom was not insolvent and that it did have the money to pay to the Petitioner subject to a resolution of the dispute it has against the alleged Debt.  I agree, the payment into Court was therefore improper and unauthorised.  Again, as the parties agree, Telikom did not file and serve a notice of deposit in form 24.  These factors in my view, rendered the payment into Court improper or unauthorised and therefore invalid. Thirdly, given the improper and unauthorised payment into Court and no notice in form 24 being filed and served, there was no properly paid into Court funds available for the Petitioner to accept in accordance with O. 8, r. 75 (1) and (2).  Accordingly, I find the Notice of Acceptance filed by the Petitioner invalid.

53.	Based on the foregoing, I make the following orders:

(1)	The Notice of Acceptance filed by the Petitioner is struck out.

(2)	The application by the Petitioner to have the money paid into Court to be paid to it through its lawyers is refused.

(3)	The application by Telikom for a return of the funds it paid into Court, is granted.

(4)	In the light of the findings of the alleged Debt being seriously disputed, this proceeding is an abuse of the process of the Court.

(5)	Costs of the applications are ordered in favour of the company, Telikom to be taxed, if not agreed.

(6)	The substantive matter is adjourned to 13 December 2023 at 3:00pm.

(7)	Parties are required to consider this decision and settle upon a draft consent order finalising the proceeding or for further conduct of the proceeding for the Court’s consideration and endorsement if all is in order.

_____________________________________________________________________
Lawyers for the petitioner: O’Briens		
Lawyers for the company: Dentions PNG