N2119

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 258 of 2000

BETWEEN:

SALVATORE ALGERI
Plaintiff

AND:

PATRICK LESLIE
Defendant

WAIGANI		:	Sakora J
2000			:	18 August
2001			:	29 June

Companies – Winding up – Liquidator – Powers, duties & responsibilities of – Transaction – Preferential payment – Voidable transaction – Setting aside of – Companies Act 1997, ss. 290 - 300; 303 - 327; 335 - 339; 340 - 342; National Court Rules, O. 4 rr. 37 & 38; O. 6, r.12.

Counsel:
Mr Young for the Plaintiff.
Mr Rihatta for the Defendant.

29 June 2001

SAKORA J:	Two applications between these parties in respect of the same matter came before me and heard together. The other application was by the defendant (OS No. 328 of 2000). These applications were made as a direct result or consequence of the following three orders of this Court:

•	Winding Up Order of 12 November 1999 in respect of Millennium Corporation Limited (MP No. 576 of 1999).

•	Payment into Court of the sum of K40,513.19, and accrued interest to date, being the proceeds of monies lodged with Kina Finance Limited in an Interest Bearing Deposit (Orders made on 7 March 2000 in OS No. 27 of 2000).

•	The plaintiff and the defendant herein to initiate proceedings against each other in respect to claims on the ownership of the monies the subject of the preceding order (Orders made on 7 March 2000 in OS No. 27 of 2000).

The plaintiff’s claim is by Notice of Motion filed 9 May 2000 pursuant to an Originating Summons filed of even date. It is said to be supported by the affidavit of the plaintiff himself, sworn 30 April and filed 9 May 2000. The application seeks the principal relief:

That any monies held in or paid into the National Court Registry Trust Account pursuant to the Orders made 7 March 2000 in relation to the proceedings of OS No. 27 of 2000 be delivered and paid to the Plaintiff.

The Plaintiff’s entitlement to sue and claim arises from or is based upon his appointment as a Liquidator of the company the subject of the Winding Up Order (supra, paragraph (2)), and his powers and duties consonant with that appointment under the Companies Act 1997 (the Act).

The defendant’s claim is by Originating Summons which, the Court cannot help but note, is unaccompanied by a Notice of Motion as required by O. 4, rr. 37 and 38 of the National Court Rules (NCR), the former of which reads:

37.	Interlocutory or other application in proceedings.

An interlocutory or other application, in or for the purpose of or in relation to proceedings commenced by writ of summons or by originating summons, shall be by motion. (my underlining).

And the latter rule is in the following terms:

38.	Notice unnecessary.

(1)	Subject to sub-rule (2), a persona shall not move the Court for any orders unless before moving he has filed notice of the motion and served the notice on each interested party who has an address for service in the proceedings. (my underlining).
(2)	A person may move the Court without previously filing or serving notice of the motion –
(a)	where the preparation of the notice, or the filing or service (as the case may be) of the notice would cause undue delay or other mischief to the applicant;
(b)	where each party interested, other than the applicant, consents to the order;
(c)	where under these Rules or the practice of the Court for the time being the motion may properly be made without the prior filing or service (as the case may be) of notice of the motion; or
(d)	where the Court dispenses with the requirements of sub-rule (1) of this Rule. 
(3)	Except with the leave of the Court, and subject to these Rules, a motion shall be moved only on a date fixed by the Court for the hearing of motions.

None of the circumstances envisaged by Sub-rule (2) exist here for there to be no Notice of Motion.

Thus, it is the Court’s view that the defendant’s application (for lack of a better term under the circumstances) registered as OS No. 328 of 2000 has not been properly brought or initiated. It does not comply with the specific requirements of the NCR (supra).

Be that as it may, the Court notes that no objection by or on behalf of the plaintiff Liquidator has been taken to this obvious and fundamental error. Under the circumstances, therefore, all the evidentiary material that the defendant purports to rely on in support of the proceedings OS No. 328 of 2000 can, in my view, be accepted and considered as if these had been duly filed pursuant to his Notice of Intention to Defend dated and filed 15 June 2000 upon substituted service on him of the plaintiff’s documents (in respect of OS No. 258 of 2000), pursuant to Orders of this Court made 9 June 2000 (entered 14 June 2000) under O. 6, r. 12 NCR. And I do so accept and consider them in respect of the disputed claims to the money in question.

The plaintiff Liquidator’s entitlement to claim and the particulars of the claim itself are detailed in the supporting affidavit of the Liquidator himself (supra). These demonstrate the following circumstances. The defendant was at the time of the Winding Up Order (supra) the General Manager of Millennium Corporation Limited ("the company"). Before the winding up, Mr Greg Sheppard of Maladinas Lawyers had been engaged to act on behalf of the company, and, as such, maintained monies in a Trust Account on behalf of the company. The lawyer also maintained a Trust Account in the name of the defendant personally. These are borne out, firstly, by the 14 July 1999 letter from an Alphonse Lalaga (no title or designation and no letterhead) to Maladinas Lawyers (for the attention of Mr Sheppard). In the light of the issues now before this Court, it is instructive that this letter be reproduced in full hereunder (omitting the formal parts):

Re: Cheque to Patrick Leslie – K50,000.00

I authorise and direct you to draw a cheque from funds held in your trust account the amount of K50,000.00 to Patrick Leslie.

In respect to past transactions on Millennium’s Trust Account, I confirm Mr Patrick Leslie’s authority to operate and receive funds on Millennium’s behalf.

In future, you are fully authorised to operate the trust account on his instructions including payments in cheque from and in cash to Mr Leslie. (my underlining)

This letter is Annexure "A" to the affidavit of Patrick John Leslie sworn 17 March and filed 19 June 2000. Secondly, the defendant confirms these, and more, in his affidavit, more particularly paragraphs (8), (10), (11), (14), (15) and (16).

Now, one of the interesting aspects of the depositions under these paragraphs is that, whilst he maintains that the K50,000.00 that was withdrawn from the company was the K50,000 cash he had collected whilst on vacation to Bokoram village in Bougainville between 21 December 1998 and 14 January 1999 (paragraphs (4), (5) and (6)), the defendant, to put it colloquially, seems to "shoot himself in the foot" by what he deposes to under paragraph (8):

8.	After maturity date, sometimes in June, 1998, I withdrew the principal amount of K50,000.00 gave it to Greg Sheppard of Maladina (sic) Lawyers to be held in his trust account so that it could be invested with Kina Finance. (my underlining)

The dates are significant. According to his sworn affidavit (supra), comparing paragraphs (4), (5) and (6) with paragraph (8), it would seem that the purported collection of monies in his village from clan members and the investment with the subject Fast Money scheme (offered by the company) took place after the withdrawal of the selfsame amount. That cannot be logically so, and the withdrawal date of June 1998 would appear to me, under the circumstances, to be the result of a deliberate ploy on the part of the defendant to distance that "transaction" from the Winding Up Order and when the company was deemed to have become "unable to pay its debts as they become due in the ordinary course of business".

It is to be noted that in an affidavit sworn (but not dated) and filed 10 December 1999 in support of his application (pursuant to Notice of Motion undated but filed 10 December 1999), which application was dismissed on 16 December 1999, the defendant deposed that the K50,000.00 cash contribution by his people was to purchase trucks for them and that he left this money with "Maladina (sic) Lawyers and instructed them to invest with Kina Finance". In this affidavit the defendant seems to want to distance the K50,000.00 from the company!

Furthermore, the defendant’s suggested time of withdrawal (paragraph (8), supra) would seem to clash with the 14 July 1999 letter of authority and direction in respect of K50,000.00 and future dealings with or operation of the company’s Trust Account (Annexure "A", supra). The "plot" thickens, as it were (and putting it colloquially), when the contents of the defendant’s letter of 26 November 1999 to Mr Sheppard are brought into contention. Omitting the formal parts, the letter reads:

I refer to our discussions yesterday with yourself and Mr Stephen Halstead. Are you aware you are holding on trust for me the sum of K40,000.00 which I now require you to refund me.

The second and the last paragraph threatens his lawyer and trustee with legal action if the demand is not met within 7 days. It is instructive to note once again that the Winding Up Order was made 12 November 1999 and entered 15 November 1999.

The K40,000.00 that is demanded by the defendant of his lawyer and trustee (with threat of litigation) is, in the contention of the plaintiff, the K41,000.00 (inclusive of interest) that the defendant had instructed and authorised Mr Sheppard to invest in Kina Finance as an Interest Bearing Deposit (IBD). This is the money also that the defendant filed an application in the winding up proceedings to be released to him in early December 1999. The application was opposed and was struck out by the Court.

In his 17 March 2000 affidavit the defendant deposes to the fact that he is aware more with his own accounts and Millenium Trust Account with his lawyers. He puts it as follows under paragraph (19):

I am however more profoundly aware only of my accounts with the said Mr Gregory James Sheppard as earlier mentioned and better versed upon these accounts only, including Millenium Trust Account.

Another glaring instance where the defendant "shoots himself in the foot" with his depositions is in relation to his paragraph (20) (17 March 2000 affidavit). He deposes there that in July 1999 (what date?) a cheque made out to him by Maladinas Lawyers was later cancelled under his specific instructions and reissued in the name of Mr George Unage. There is no indication as to why this statement is made, but it would appear that the Transaction Request was for a sum of K50,000.00 as or for "Release part funds held in trust account" to go to the defendant (Annexure "F" to the defendant’s 17 March 2000 affidavit). The cheque number on the requisition is 889957 (a Trust cheque). And Annexure "E" is deposed to be that cheque, a Bank of South Pacific Limited cheque. Except for the name of the bank and the cheque number (088-950 386?), the rest of the cheque is indecipherable. And the cheque number is different from the number nominated in the Transaction Request. The endorsement on the photocopy page does not bear the author’s name or signature, but is dated 15/7/99.

In opposing the plaintiff’s application, the defendant has filed and relies upon the affidavit of Peter Brian Tauriko (sworn 28 April and filed 19 June 2000). The deponent says he is a Pastor of the SDA Church and a Paramount Chief from Bakoram village in the Nagovi area, Bougainville. He says he is also a first cousin of the defendant. He deposes to collection of monies by the immediate family members during the Christmas-New Year holidays of 1998 when the defendant and his family were home. He says that the contributions amounted to K50,000.00, which amount was invested by the defendant with or in Millenium Corporation Limited (compare defendant’s affidavit of 10 December 1999, supra).

At paragraph (8), it is deposed to that the defendant informed them in June 1999 that he had withdrawn the principal amount of K50,000.00 and had Mr Sheppard invest it with Kina Finance. Once again the date of June 1999 is significant as it tallies with other evidence to confirm withdrawal of the monies, and contradicts the defendant’s assertion.

Finally, on the evidence before me, the defendant has filed and relies upon a supplementary affidavit sworn by himself on 28 April 2000. At paragraph (4) he refers to paragraph (13) of his original affidavit (supra) and says that his first title as an employee of Millennium Corporation "was as Public Relations Officer, and as such was heavily involved in the promotion of the scheme, attending to customers/investors queries, with Government authorities, presentation in the meia (sic) (T.V. Radio,, Print), representations at meetings (private and public) and so forth.

At paragraph (13) of the original affidavit he deposes as follows:

13.	At all relevant times from February 1999 I was casually employed by Millenium Corporation (in liquidation) as Manager/Promoter at its Malagan Haus, Boroko.

It is noted that these depositions assertions, as to his employment status with the company, are just that, mere assertions. There is not put before me in the appropriate manner by independent evidence confirmatory of these. It is the plaintiff’s case that at all relevant times the defendant was the General Manager of the company. In his affidavit of 17 August 2000 (in response to the plaintiffs, supra) the defendant says he was employed as a "General Manager Public Relations" (paragraph (2)). In paragraphs (14) and (15) he asserts that (in response to the plaintiff’s reliance on s. 340(2) of the Act) the transaction was done before the company was liquidated, and that he was "not aware of the true position of the company. I was taking orders from the managing Director and Chairman of the Board of Directors Mr Alphones (sic) Lalaga and, Director Mr William Lalaga. . .". In this respect, I am only too well aware of Mr Alphonse Lalaga’s letter of 14 July 1999 to Maladinas Lawyers (supra) advising, inter alia, his confirmation of the defendant’s authority to operate and receive funds on the company’s behalf.

The Law

A winding up may be by the Court (compulsory) or voluntary, the former appropriate where the winding up has to be forced upon the company, and the latter being appropriate where the company wishes not to oppose a winding up but to co-operate. Needless to say, compulsory winding up is supervised by the Court.

Most commonly the applicant is a "creditor of the company", and the ground most commonly relied on is that "the company is unable to pay its debts".

The process of liquidation is set out in detail in Division 1 of the Act, ss 290 to 300. Section 291 needs to be set out hereunder in full:

291.	Commencement of Liquidation.

(1)	A company may be put into liquidation by the appointment as liquidator of a named person.

(2)	A liquidator may be appointed by –
(a)	special resolution of those shareholders entitled to vote and voting on the question; or
(b)	the board of the company on the occurrence of an event specified in the constitution; or
(c)	the Court, on the application of the company, or a director or shareholder, or other entitled person, or a creditor of the company (including any contingent or prospective creditor), or the Registrar.

(3)	The Court may appoint a liquidator where it is satisfied that –
(a)	the company is unable to pay its debts as they become due in the ordinary course of business; or
(b)	the company or board has persistently or seriously failed to comply with this Act; or 
(c)	the company does not comply with Section 11; or
(d)	it is just and equitable that the company be put into liquidation.

(4)	The liquidation of a company commences on the date on which the liquidator is appointed.

Upon the winding up order and his appointment, the liquidator assumes control of the company’s property in substitution for the directors. And as an "officer of the court" he has numerous powers and responsibilities. He must act bona fide, impartially and skilfully, and must file reports and accounts with the Court. And he can invoke the Court’s aid in the discovery and realisation of assets. In the exercise of these powers and discharge of the responsibilities, he must take possession of the company’s assets, realise them, determine what are the debts of the company, satisfy such debts, distribute any balance of proceeds, after payment of the debts and costs of winding up, among members and lastly to bring about the dissolution of the company: Ford HAJ: Principles of Company Law, 3rd ed, Butterworths, 1981 para. 2211 (Ford).

Thus, generally the liquidator collects the assets, pays debts, and distributes any surplus to company members in accordance with their rights. The Act under s. 298 lists the various effects of liquidation. The pertinent parts of the provision are reproduced hereunder:

298.	Effect of Commencement of Liquidation.

(1)	 With effect from commencement of the liquidation of a company –
(a)	the liquidator has custody and control of the company’s assets; and 
(b)	. . .
(c)	unless the liquidator agrees or the Court orders otherwise, a person shall not 
(i)	commence or continue legal proceedings against the company or in relation to its property; or 
(ii)	exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company; and 
(d)	. . . 
(e)	. . . 
(f)	. . . 
(my underlining).

(2)	Subsection (1) does not affect the right of a secured creditor, subject to Section 353, to take possession of, and realise or otherwise deal with, property of the company over which the creditor has a charge.

Division 3 makes provisions (ss 303 to 327) in relation to the "Duties, Rights and Powers of Liquidators". The principal duty of a liquidator is provided as follows:

303.	Principal Duty of Liquidator.

Subject to Section 304, the principal duty of a liquidator of a company is –

(a)	to take possession of, protect, realise, and distribute the assets, or the proceeds of the realisation of the assets, of the company to its creditors in accordance with this Act; and 
(b)	where there are surplus assets remaining, to distribute them, or the proceeds of the realisation of the surplus assets, in accordance with Section 361 (4).

in a reasonable and efficient manner.

Division 5 of Part XV111 makes provisions in respect of a company’s inability to pay its debts (ss 335 to 339). Section 335 defines the phrase "inability to pay debts" in the following way:

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.

It is the plaintiff’s case that the withdrawal of the K50,000.00 from the Millenium Corporation Limited Trust Account with Maladinas Lawyers was a "transaction" as envisaged by s. 340 of the Act. Division 6 makes provisions for circumstances under which certain transactions may be voided. And the principal provision is s. 340, which is in the following terms which need to be reproduced in full hereunder:

340.	Transactions having Preferential Effect.

(1)	In this section, "transaction" in relation to a company, means –
(a)	a conveyance, transfer, or other disposition of property by the company; or 
(b)	the giving of a security or charge over the property of the company; or 
(c)	the incurring of an obligation by the company; or 
(d)	the acceptance by the company of a execution under a judicial proceeding; or 
(e)	the giving of a release of waiver by the company; or 
(f)	the payment of money by the company, including the payment of money under a judgment or order of a court,

and includes a transaction that is entered into, given effect required to be given effect to because of an order of a court.

(2)	A transaction by a company is voidable on the application of the liquidator if the transaction –

(a)	was made –
(i)	at a time when the company was unable to pay its debts as they became due in the ordinary course of business; and 
(ii)	within the specified period; and 
(b)	enabled another person to receive more towards satisfaction of a debt than the person would otherwise have received or be likely to have received in the liquidation,

unless the person entered into the transaction with the company in good faith in the ordinary course of business and had no reasonable grounds for suspecting that the company was unable to pay its debts as it became due in the ordinary course of business.

(3)	Unless the contrary is proved, for the purposes of Subsection (2), a transaction that took place within the restricted period is presumed to have been made at a time when the company was unable to pay its debts as they became due in the ordinary course of business.

(4)	For the purposes of this section, in determining whether a transaction took place in good faith, no account is to be taken of any intent or purpose on the part of the company –
(a)	to enable another person to receive more towards satisfaction of a debt than the person would otherwise receive or be likely to receive in the liquidation; or 
(b)	to reduce or cancel the liability, whether in whole or in part, of another person I respect of a debt incurred by the company; or 
(c)	to contribute towards the satisfaction of the liability, whether in whole or in part, of another in respect of a debt incurred by the company.

(5)	For the purposes of Subsection (2) (a) (ii), "specified period" means –
(a)	the period of six months before the commencement of the liquidation; and 
(b)	in the case of a company that was put into liquidation by the Court, the period of six months before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date on which the order was made.

(6)	For the purpose of Subsection (3), "restricted period" means –
(a)	the period of one month before the commencement of the liquidation; and 
(b)	in the case of a company that was put into liquidation by the Court, the period of one month before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date on which the order of the Court was made.

The all-important time and date for the start of winding up is deemed to be on the filing of the application or petition for winding up; not on the making of the order. And once made, the Court order for a winding up is binding on all shareholders and creditors, as well as on the company itself.

One of the most important specific powers of the Liquidator enables him to set aside, after the event, certain kinds of transactions which have been entered into by the company. This is known as the undue preference doctrine: Colin Howard, Companies, OUP (1989), p. 131 (Howard). It is derived from the law of bankruptcy in respect of an insolvent individual, in which context the purpose of the undue preference doctrine is to prevent people who fear that they are about to become bankrupt from transferring all their possessions to someone else in order to save the assets from being seized by the trustee in bankruptcy for distribution among the creditors (ibid).

The same doctrine applies to any transaction made by a company in liquidation which, if made by an individual who is bankrupt, would have been set aside as an undue preference (s. 340 Act, supra).

Section 341 of the Act makes provisions for the various orders or reliefs that can be granted upon the Court being satisfied (on the application of the liquidator) that a particular transaction is voidable pursuant to s. 340 (supra). The provision is set out in full hereunder:

341.	Setting Aside Voidable Transactions.

Where, on the application of a liquidator, the Court is satisfied that a transaction is voidable under Section 340, the Court may make any one or more of the following orders –

(a)	an order requiring a person to pay to the liquidator, in respect of benefits received by that person as a result of the transaction such sums as represent those benefits;
(b)	an order requiring a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;
(c)	an order requiring property transferred as part of the transaction to be restored to the company;
(d)	an order requiring property to be vested in the company where it represents in a person’s hands the application, either of the proceeds of sale of property, or of money, so transferred;
(e)	an order releasing or discharging, in whole or in part, a debt incurred or a charge, security, or guarantee given by the company;
(f)	an order declaring an agreement constituting, forming part of, or relating to the transaction or specified provisions of such an agreement, to have been void at and after the time when the agreement was made or at and after a specified later time;
(g)	an order varying such an agreement in the manner specified in the order and where the Court thinks fit, declaring the agreement to have had effect as so varied at and after the time when the agreement was made, or at and after a specified later time;
(h)	an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable;
(i)	an order requiring security to be given for the discharge of an order made under this section;
(j)	an order specifying the extent to which a person affected by the setting aside of a transaction or by an order made under this section is entitled to claim as a creditor in the liquidation.

Additional provisions relating to setting aside transaction are made under s. 342. Subsection (1) says that the title or interest of a person in property which that person acquired in good faith and for valuable consideration from a person other than the company is not affected by the setting aside of a transaction or an order made under s. 341 (supra).

And Subsection (2) provides that recovery of the property (or its equivalent value) by the liquidator under this Act may be denied wholly or in part where –

(a)	the person form whom recovery is sought received the property in good faith and has altered his position in the reasonably held belief that the transfer to that person was validly made and would not be set aside; and 
(b)	in the opinion of the Court, it is inequitable to order recovery or recovery in full.

Conclusion

The first issue for determination is whether or not the K50,000.00 that the defendant says was collected from (or contributed by) his clan members of his village during holidays between 21 December 1998 and 14 January 1999 was invested in the Fast Money scheme offered by the company, or deposited in Maladinas Lawyers Trust Account as defendant’s personal funds.

I find from the evidence before me, both as to the investment of the money, and its subsequent withdrawal or pay-out, that the K50,000.00 (however the defendant came by it) was invested in the Fast Money scheme. This evidence comes from the defendant himself, in his 17 March 2000 affidavit (filed 19 June 2000), paragraphs (6), (8), (10), (11), (14), (15) and (16); and Annexure "A", letter of 14 July 1999 from Alphonse Langa to Maladinas Lawyers, supra). Paragraph (6) puts the issue beyond doubt:

6.	I invested the money with Millennium Corporation Limited upon my return from home.

Thus, this money became available as part of the general funds of the company.

The second issue of fact for determination is whether or not the withdrawal of the K50,000.00 from the general funds of the company constituted a "transaction" as defined and envisaged by s. 340 (1) (a) of the Act: a conveyance, transfer, or other disposition of property by the company. This transaction took place, in my findings, after 14 July 1999 (Annexure "A" to defendant’s 17 March 2000 affidavit) rather than "sometimes in June 1998" as asserted by the defendant in an endeavour to put as much distance as possible between the transaction and the application to wind up the company.

And this transaction took place at the time when the defendant was a responsible officer of the company, a General Manager Public Relations, and, thus fully conversant with the operation and financial status of the company. In this respect I discount as factually baseless the defendant’s assertion (paragraph 13 of his 17 March 2000 affidavit, supra) that at all relevant times he was casually employed by the company as Manager/Promoter at its Malagan Haus premises, Boroko. Indeed Mr Alphonse Lalaga’s (Managing Director and Chairman of the Board of Directors) letter of 14 July 1999 (Annexure "A", supra) identify and place him (defendant) in an important financial position on behalf of the company, status akin to a Financial Controller of a company or Chief Accounting Officer in a public authority or organisation.

Moreover, the transaction in question took place at a time when the defendant ought to have been fully aware of the financial position of the company, in view of the position he held with the accompanying authority, duties and responsibilities. Despite his disclaimer, I find that the defendant was fully cognizant of the fact that at the time of the transaction, the company was "unable to pay its debts as they became due in the ordinary course of business".

It is not without consequence, therefore, to note that in his 7 August 2000 affidavit (filed 8 August 2000) in answer to the plaintiffs 30 April 2000 (supra) affidavit, the defendant agrees with what the plaintiff deposes to in his paragraph (1), where he responds as follows:

1.	On para. 1 agree.

And the plaintiff’s paragraph (1) is in the following terms:

1.	On 12 November 1999, a winding up order was granted against a company known as Millenium Corporation Limited (the Company) on the grounds that the Company was unable to pay its debts and I was appointed as its liquidator. Annexed hereto "SA7" is a true copy of the winding up order. (my underlining)

Further confirmation of the defendant’s awareness of the company’s financial position comes from his own affidavit (17 March 2000, supra) where, at paragraph (19) he deposes as follows:

19.	I am however fully aware only of my accounts with the said Mr Gregory James Sheppard as earlier mentioned and better versed upon these accounts only, including Millenium Trust Account.

I am, therefore, satisfied that at the time of the transaction the company was unable to pay its debts as they were incurred and became due in the ordinary course of business. Thus, I hold that the transaction (withdrawal or payment of K50,000.00 from or out of the company’s general funds) was and is one envisaged by s. 340 (1) (a) of the Act, and, thus, covered by the undue preference doctrine. As one of the many creditors who invested monies with the company under its Fast Money scheme, the withdrawal of the K50,000.00 at the relevant time was and is a voidable transaction capable of being set aside pursuant to s. 341 of the Act.

In this respect I conclude and find that the transaction was not conducted or undertaken in good faith and for valuable consideration as envisaged by ss. 341 and 342 (1), nor pursuant to s. 342 (2) (a) and (b) (supra). I find that the K50,000.00 was withdrawn from the company’s general funds and given to the defendant in preference to the many other creditors/investors in the scheme. Thus, the transaction is voidable and capable of being set aside.

Finally, I find that the transaction took place within restricted and specified periods as defined under s. 340(3), (5) and (6) of the Act (supra). The withdrawal of the K50,000.00 took place after 14 July 1999. The company’s petition for winding up was made on 11 November 1999. The winding up order was made 12 and entered 15 November 1999, all of which happened within four (4) months of the transaction in question.

In the end result, it is the judgment of this Court, that the plaintiff liquidator’s application be granted, and it is so granted by the following orders:

1.	That the "transaction" between the company and the defendant in respect of the sum of K50,000.00 is set aside.

2.	That any monies held in or paid into the National Court Registry Trust Account pursuant to Orders made on 7 March 2000 by this Court in relation to the proceedings of OS No. 27 of 2000 be delivered and paid to the Plaintiff.

3.	That the Defendant pay the Plaintiff’s costs of and incidental to this application.
________________________________________________________________________
Lawyers for the Plaintiff:	Allens Arthur Robinson Lawyers.
Lawyers for the Defendant:	Kari & Co. Lawyers.