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Rei v Dekenai Constructions Ltd (1-22515) [2025] PGNC 251; N11409 (11 August 2025)

N11409

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO. 31 OF 2025 (IECMS-COMM)

IN THE MATTER OF COMPANIES ACT 1997

IN THE MATTER OF AN APPLICATION UNDER S. 300 OF THE COMPANIES ACT 1997

GAUDI REI in his capacity as the Director of MABATA INVESTMENTS LIMITED (1128423)
Plaintiff

V

DEKENAI CONSTRUCTIONS LIMITED (1-22515)
First Defendant

ANDREW PINI as the Liquidator of MABATA INVESTMENTS LIMITED (1128423)
Second Defendant

WAIGANI: ANIS J
10 JULY, 11 AUGUST 2025

COMPANY LAW – Application under s.300(1)(2) of the Companies Act 1997 – Application seeking orders to terminate liquidation – preliminary issue – whether proceeding an abuse of court process – whether the grounds raised are appealable grounds that relate to the substantive order for liquidation, and if so, whether they can also be relied on or are relevant for consideration by the Court in an application that is filed under s.300(2) of the Companies Act 1997 - consideration - ruling

Cases cited
In the Matter of Kamsi Trading Limited (2005) SC784
In re Spence (2007) N3223
In the Matter of the Companies Act 1997, In the Matter of Mabata Investments Ltd [In Liquidation] (2025) N11280
Koitaki Plantations Ltd, In re (2020) N8595
Gabriel Yer v. Peter Yama (2009) SC990

Counsel
M Wangatau, for the plaintiff
J Kakaraya for the first and second defendants

DECISION

1. ANIS J: This matter was trialed on 19 June 2025. I reserved my ruling thereafter to a date to be advised.

2. This is my ruling.

BACKGROUND

3. The plaintiff is a director and Chairman of a company called Mabata Investments Limited (MIL). MIL is presently under liquidation. It was placed into liquidation by the Natonal Court on 21 February 2025 in proceeding MP No. 23 of 2024. The second defendant has been appointed as its liquidator.

4. The plaintiff, in this proceeding, intends to terminate the liquidation order of 21 February 2025. In his Originating Summons filed 16 May 2025 (OS), he seeks this main relief:

1. An order that pursuant to Section 300(1)(2) of the Companies Act 1997, the Liquidation Orders made against Mabata Investments Limited on the 21^st of February 2025 and entered on the 29^th of February 2025 in proceedings titled MP. No. 23 of 2024 (IECMS-COMM), be terminated.

......

EVIDENCE

5. The parties tendered their evidence without the benefit of cross-examination. The plaintiff tendered a total of 4 affidavits which were marked as Exhibit P1, Exhibit P2, Exhibit P3 and Exhibit P4. The defendants tendered one affidavit which was marked as Exhibit D1.

PRELIMINARY ISSUE

6. The defendants raised a preliminary issue at the start of the hearing. It is contained in their notice of motion filed 18 June 2025 (NoM).

7. The defendants claim the OS should be dismissed under Order 12 Rule 40(1)(c) of the National Court Rules (NCR) for abuse of court process. They rely on 2 grounds which are stated herein:

(a) the true nature and effect of the application is in the nature of an appeal and the plaintiff is using this application as an appeal mechanism or alternative appeal of the decision made on 21 February 2025 placing Mabata Investments Ltd into liquidation in proceedings MP NO. 23 of 2024...; or alternatively

(b) the application seeks to re-litigate the Petition in proceedings MP NO. 23 of 2024 (IECMS)(COMM) and matters which are either res judicata or issue estopped.

SECTION 300

8. Section 300 of the Companies Act 1997 (CA) states:

300. COURT MAY TERMINATE LIQUIDATION.

(1) The Court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.

(2) An application under this section may be made by the liquidator, or a director or shareholder of the company, or any other entitled person, or a creditor of the company, or the Registrar.

(3) The Court may require the liquidator of the company to furnish a report to the Court with respect to any facts or matters relevant to the application.

(4) The Court may, on making an order under Subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.

(5) Where the Court makes an order under this section, the person who applied for the order shall, within one month after the order was made, submit a certified copy of the order to the Registrar for registration.

(6) Where the Court makes an order under Subsection (1) the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.

(7) Every person who fails to comply with Subsection (5) commits an offence and is liable on conviction to the penalty set out in Section 413(2). [Underlining mine]

CONSIDERATION

9. So, I ask myself this. Is this proceeding an abuse of the court process?

10. The best place to begin is to consider the arguments of the plaintiff which are contained in his evidence and submissions. The plaintiff argues that the liquidation order of 21 February 2025 that was made against MIL should be terminated premised on these 5 grounds:

(i) Duplication of proceedings and abuse of process (disputed creditor claim);

(ii) Failure to exhaust remedies under the agreement;

(iii) Breach of natural justice;

(iv) Unfair and inequitable conduct by the first defendant;

(v) Breach of the shareholder agreement.

11. I note the submissions of the parties in this regard.

12. I remind myself that when an application of this nature is filed, the court’s power to grant the substantive relief is discretionary. However, the discretion shall be exercised premised on the conditions just and equitable as required under s.300(1) of the CA. Case law has provided guidance on various considerations that the Court should consider to decide whether it is or would be just and equitable to terminate liquidation of a company and restore the company back into operation. I refer to Justice Lay’s decisions in In the Matter of Kamsi Trading Limited (2005) SC784 and In re Spence (2007) N3223. His Honour in re Spence (supra) sets out some of the considerations at para. 11 of his decision as follows:

11. In SC 784 Wep Kilip, Kamsi Trading Ltd and Liquidator Hugh Mosley, I found the following matters relevant to the question of whether or not it was just and equitable to terminate liquidation :

(d) whether the contributors and creditors had been served with the application;

(e) the nature and extent of all the creditors;

(f) whether all of the debts have been or will be discharged;

(g) the attitude of creditors, contributories and the liquidator;

(h) the current trading position of the company and its general solvency should be demonstrated;

(i) any non-compliance by directors with their statutory duties should be fully explained with all reasons and circumstances;

(j) the general background which led to the winding up should be explained;

(k) the nature of the business carried on by the company should be demonstrated;

(l) whether in anyway, the conduct of the company was contrary to commercial morality or the public interest.

13. Having these considerations to assist me determine the preliminary matter, I make the following observations:

• MIL was ordered into liquidation by the National Court on 21 February 2025 in proceeding MP No. 23 of 2024;
• The ground that was relied upon by the first defendant which was granted by the Court to liquidate MIL were just and equitable reasons as required under s.291(3)(d) of the CA;
• The Court granted the order for liquidation in the absence of any representatives of MIL;
• I observe that the absence of MIL to defend itself at the said hearing is strenuously challenged by the plaintiff in this proceeding; the plaintiff argued, amongst others, that MIL was not duly served or notified of the hearing and of the petition;
• The plaintiff had applied by way of a notice of motion under MP No. 23 of 2024, to terminate the liquidation orders of 21 February 2025;
• I dismissed the plaintiff’s notice of motion; my reasonings are contained in an unpublished decision described as In the Matter of the Companies Act 1997, In the Matter of Mabata Investments Ltd [In Liquidation] (2025) N11280; at para.13 of my decision, I stated:
  

13. The Applicant used a normal notice of motion form that is prescribed under the National Court Rules (NCR), to apply to dismiss this concluded proceeding. The problem with the approach may be summarised with these observations:

• the Applicant is not a party to this concluded proceeding;
• the options that the Applicant may have under the circumstances may be:
  

(i) to appeal under s.17 of the Supreme Court Act Chapter No. 37 (SCA); see case: Kitogara Holdings Pty Ltd v. National Capital District Interim Commission [1988-89] PNGLR 346; or

(ii) to make an application under s.300(1)(2) to terminate the liquidation process.

• if the Applicant chooses the latter option, which appears to be the case here, there is a further issue that arises which is that he is seeking as his primarily relief, to dismiss the completed proceeding when s.300(1)(2) of the CA does not provide for such a relief to be sought in the manner as instigated by the Applicant, that is, apart from the reason that this is a completed matter;

......

• It appears that premised on the said findings, that the plaintiff has filed this proceeding;
• The plaintiff opted for option 2, which was to file the OS and raise arguments that he had raised in his notice of motion in MP No. 23 of 2024;
• I observe that the plaintiff has used the correct mode of proceeding to make an application under s.300(2) of the CA; see cases: Koitaki Plantations Ltd, In re (2020) N8595, Gabriel Yer v. Peter Yama (2009) SC990 and In the Matter of the Companies Act 1997, In the Matter of Mabata Investments Ltd [In Liquidation] (supra);
• However, the defendants’ contention is premised on the reasons or grounds that are relied upon by the plaintiff under his OS; the defendants argue that the said grounds challenge the final or substantive decision of the National Court in MP No. 23 of 2024, therefore the correct mode of proceeding, they argue, should have been to file an appeal under the plaintiff’s right which is provided under s.17 of the Supreme Court Act Chapter No. 37 or by way of a review under s.155(2)(b) of the Constitution;
• The defendants also contend that the 5 reasons are not reasons that are relevant or may be regarded by a Court that is constituted under s.300 of the CA;
• I observe that the plaintiff has not provided valid arguments against the contentions of the defendants on this preliminary issue;
• In fact, the plaintiff, in responding and with respect, appears disinterested in responding directly to the preliminary issue; I observe that the plaintiff’s counsel was focus only on the grounds that his client was raising before the Court.
  

14. When I weigh up these considerations, I am minded to uphold the submissions of the defendants. The 5 grounds that are relied upon by the plaintiff directly relate to or address the final decision of the Natonal Court made on 21 February 2025 in MP No. 23 of 2024. What the plaintiff has done is this. When his notice of motion was rejected in MP No. 23 of 2024, he appears to think that he can file a fresh Originating Summons but this time under s.300 of the CA, use the same or similar reasons, and then ask the Court to grant him the same relief which is to terminate the liquidation order of 21 February 2025. In my view, that is an abuse of the Court process. The 5 reasons that the plaintiff is relying on, in my view, constitute substantive challenges on the findings by an earlier National Court in MP No. 23 of 2024. The correct process should have been to file and appeal or review. The correct process is not to use the court process that is provided under s.300(1)(2) to raise substantive arguments against the Court’s findings in MP No. 23 of 2024.

15. The 5 arguments raised in the OS are substantive in nature against the final orders of 21 February 2024 in MP No. 23 of 2024, and because the plaintiff was never heard in the said final order that liquidated MIL, the plaintiff, in my view, should have appealed that decision of the Court or file a review if that was his intention. It is an abuse of the court process, in my view, for the plaintiff to utilize s.300 as a disguise to challenge a final order of another National Court, that is, in using one National Court and asking the Court to overturn a final decision of another National Court.

16. An applicant that files a s.300(2) application is required to show to the National Court why the Court should release or terminate a liquidation order that was granted earlier in a separate and completed National Court proceeding. The tests that the Court may take into account to make its independent assessment, in my view, are not premised on the wrongness or errors that were committed by the earlier National Court that granted liquidation against the company concerned. Rather, they should, in my view, contain reasons that are premised on post-events (or after the termination orders were issued against the company concerned) that is, whether the liquidated company concerned has met the various requirements to convince the Court to conclude that it is just and equitable that the company should be relieved from liquidation.

17. The requirements may include those 9 tests as stated by Lay J in In re Spence (supra), namely, (1), whether the contributors and creditors had been served with the application, (2), the nature and extent of all the creditors, (3), whether all of the debts have been or will be discharged, (4), the attitude of creditors, contributories and the liquidator, (5), the current trading position of the company and its general solvency should be demonstrated, (6), any non-compliance by directors with their statutory duties should be fully explained with all reasons and circumstances, (7), the general background which led to the winding up should be explained, (8), the nature of the business carried on by the company should be demonstrated, and (9), whether in anyway, the conduct of the company was contrary to commercial morality or the public interest.

SUMMARY

18. In summary, I uphold the preliminary issue in favour of the defendants. The proceeding will therefore be dismissed.

COST

19. An award of cost for these types of proceedings remains discretionary. I am minded to order cost to follow the event applying the party/party cost-scale which may be taxed if not agreed.

REMARK

20. In remark, I observe that the orders of 21 February 2025 were granted ex-parte or without the respondent having any say in that proceeding. And I observe that the plaintiff appears to raise some good grounds in relation to the final orders of the Court. However, given that he has used an incorrect process to air his grievances, this Court cannot hear them or proceed any further except to end this proceeding.

ORDERS OF THE COURT

21. I make the following orders:

1. The proceeding is dismissed in its entirety.
   
2. The plaintiff shall pay the defendants’ costs of the proceeding on a party/party basis which may 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 Natonal Court which shall take place forthwith.
   

The Court orders accordingly

Lawyers for the plaintiff: Ace
Lawyers for defendants: O’Brien’s