N3092

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO.744 OF 2004

BETWEEN:

BEXHILL FUNDING GROUP LIMITED
Plaintiff

AND:

BASUMEL LIMITED (formerly MBA LIMITED) (In Liquidation)
Defendant

Waigani: Davani, .J
2006: 24 May,30 October

PRACTICE AND PROCEDURE – New Zealand judgment registered in PNG – application to set aside registered judgment – must prove requirements in s. 5 of Reciprocal Enforcement of Judgments Act (‘REJA’) – REJA s. 5 (1) (a) (ii) to (iv); s. 5 (2) (3). 

LIQUIDATION – company in liquidation in PNG – leave to proceed obtained in New Zealand – leave of liquidator in PNG not obtained prior to application to register New Zealand judgment – highly irregular – registered judgment must be set aside – Companies Act s. 298.

Cases cited:
•Francis Kalyk and Anthony John Deegan and Bruce William Hansen v. Atlas Corporation Pty Ltd Unreported judgment N1760;
Ferder v St Johnson Mildway [1938] AC 1;
•Stewart v Intercity Distributors Ltd [1960] NZLR 944; 
•Langley Constructions (Brix Lam) Ltd v. Wells [1969] 1 WLR 503;
•Steel & Tube Co of New Zealand Ltd v JBL – Sargent Construction Ltd [1973] 2 NZLR 30;
•Felixstowe Dock and Railway Co Ltd v. United States Lines Inc [1989] QBD 360;
•Stenhurst Pty Limited v. Golding International Pty Limited (1995) N1377;
•Ace guard Dog Security Services Limited and Yama Security Services Limited v Telikom PNG Limited (2004) SC757;
•Benny Diau v. Gamini Kinigama & Anor, dated 12th December, 2005.

Counsel:
G.J. Shephard and K.M. Frank, for the plaintiff
I.R. Shepherd, for the liquidator

RULING

30 October, 2006

1. DAVANI .J: By an amended Notice of Motion filed on 19 May, 2006, Blake Dawson and Waldron, Lawyers for the defendant, seek the following orders;

"The Liquidator for the defendant will at 9.30am on the 24th day of May 2006 at Waigani, move the Court for orders that pursuant to Order 13, Rule 74(2) of the National Court Rules and Section 5 of the Reciprocal Enforcement of Judgments Act;

1. registration of the judgment from the High Court of New Zealand Suit No. CIV 2003-485-205 dated 26th February 2003 (the judgment) on 17th February 2006 is set aside;

2. the plaintiff to pay the Liquidator’s costs;

3. the time for entry of these orders be abridged to the date of settlement by the Registrar which shall take place forthwith."

Background and facts

A. Appointment of Liquidator; 

2. On 24 February, 2004, Mr Robert Southwell of KPMG Chartered Accountants was appointed the Liquidator of Basumel Limited (In Liquidation), the defendant in these proceedings (‘Basumel’). Basumel was placed in liquidation by a special resolution of the shareholders of the company and that this also occurred on 24 February, 2004.

3. On or about 10 March, 2004, the plaintiff’s then lawyers, Maladinas Lawyers, served the liquidator with an order of the High Court of New Zealand dated 26 February, 2004. A copy of the order is annexed to Robert Southwell’s affidavit sworn on 10 March, 2006 and is marked with the letter "A".

4. On or about 26 March, 2004, Mr Southwell received, by facsimile, from Messrs Minter Ellison Rudd Watts, Lawyers, of Wellington, New Zealand, several documents which included;

a. Judgment of Master Gendall on jurisdiction dated 15 September 2003;

b. Judgment of Goddard .J dated 15 December, 2003; 

c. Judgment of Master Gendall dated 27 February, 2004, giving the plaintiff leave to proceed against the company in liquidation.

These are attached as annexure ‘B’ to the affidavit of Mr. Southwell.

5. On or about 27 February, 2006, Mr Southwell received, from the plaintiff’s lawyers a Notice of Registration of Judgment and a copy of an order made by the National Court Waigani on 17 February, 2006, the effect of which order is that it had registered in these proceedings as a judgment of the National Court, Waigani, the New Zealand Court order of 26 February, 2004. The New Zealand order is attached and marked ‘A’ to the affidavit of Mr. Southwell.

6. The New Zealand judgment of 26 February, 2004, was obtained two days after Mr Southwell’s appointment as Liquidator of the company. But I have heard that the proceedings conducted before Master Gendall from which he delivered judgment of 26 February, 2004, was done ex parte. Paragraphs 1, 2 and 3, of Master Gendall’s oral judgment (dated 26 February, 2004), states that the lawyers representing the company, sought and were granted leave to withdraw as those lawyers had inter alia, "no instructions from the liquidator of the defendant company", which meant that the proceedings were then conducted ex parte. According to the defendant’s lawyer’s submissions, the proceedings were conducted without the liquidator’s knowledge. He submits that it was not until 10 March, 2004, when the liquidator received the orders, was he then aware of those proceedings. However, the plaintiff’s lawyer submits otherwise. And I will deal with these submissions when I discuss the grounds for the setting aside.

7. At paragraphs 8 to 10 of his oral judgment, Master Gendall granted leave to the plaintiff to continue proceedings against the company in liquidation, such orders made pursuant to Section 248(1) (c) of the Companies Act 1993 (New Zealand), provision identical to PNG’s s.298 (1) (c) of the Companies Act. 

B. New Zealand Court proceedings; 

8. The notice of Proceeding and Statement of Claim were filed on 2 April, 2003, in the High Court of New Zealand at Wellington. The plaintiff also applied for summary judgment against the defendant company and instructed New Zealand lawyers, Buddie Findlay, to act for it.

9. Basumel objected to the jurisdiction of the New Zealand courts to hear the claim. After argument, its objection to jurisdiction was initially rejected in a judgment dated 15 September, 2003, given by Master D. I. Gendall.

10. Basumel then applied to a more senior judge, for that judgment to be reviewed. After further argument, on 15 December, 2003, the application for review was rejected in judgment given by Justice Goddard.

11. Thereafter, the plaintiff, Bexhill Funding Group Limited (‘Bexhill’), listed an application for summary judgment, to be heard. Before the hearing of the application for summary judgment, the defendant Basumel, made two applications for relief to the Court, both dated 2 February, 2004. These were;

(a) an application for non-party discovery against a third party, Boston Marks Groups Limited; and

(b) an application for pre-summary judgment discovery against the plaintiff.

Both those applications were supported by an affidavit sworn by Simon Wild on 4 February, 2004. 

12. Additionally, Basumel filed a notice of opposition to the plaintiff’s application for summary judgment which was dated 18 February, 2004. After a hearing, Basumel’s New Zealand lawyers appeared but only to withdraw. The court granted the application for summary judgment without representation and submissions by Basumel’s lawyers. Effectively, the Master considered the company’s alleged defences without the assistance of legal representation for Basumel and rejected them.

C. New Zealand judgment/order; 

13. The order taken out of the Wellington Registry on 26 February, 2004, by the New Zealand High Court, issued by Master Gendall, read as follows;

"COURT OF ORDER

THIS PROCEEDING coming on for a hearing on the 26th day of February 2004, before Master Gendall at Wellington

AFTER HEARING Mr L J Taylor and Iain Thorpe, counsel for the plaintiff and Mr W M Wilson QC and Macayla Kilday, counsel for the defendant, who were granted leave to withdraw and the evidence then adduced IT IS ADJUDGED THAT;

1. To the extent that it may be necessary, leave is granted to the plaintiff to continue these proceedings against the defendant, a company registered in Papua New Guinea placed in liquidation by a shareholders special resolution dated 24th February, 2004.

2. There be summary judgment for the plaintiff against the defendant in the sum of US$766,634.28 (seven hundred and sixty-six thousand, six hundred and thirty-four dollars and twenty-eight cents United States currency) together with interest at the daily rate of US$222.54 (two hundred and twenty-two dollars and fifty-four cents United States currency) on outstanding principal, accruing from the date of this judgment.

3. The defendant must pay the plaintiff’s costs of this proceeding in the sum of NZ$105,728.11 (one hundred and five thousand, seven hundred and twenty-eight dollars and eleven cents New Zealand currency) together with interest pursuant to contract at the daily rate of NZ$56.48) (fifty-six dollars and forty-eight cents New Zealand currency) on costs, accruing from the date of this judgment.

DATED 26th February 2004

(signed)_________
(Deputy) Registrar
JULIE PEREIRA

SEALED 9 March 2004"

This application

14. The (summary) judgment of the New Zealand High Court was registered in this court, pursuant to an order of Gavara-Nanu .J dated 17 February, 2006. His Honour found, inter alia, that there was sufficient evidence before him to register the judgment pursuant to the Reciporal Enforcement of Judgments Act (‘REJA’). His Honour also ruled that the judgment debtor was at liberty to apply to set aside registration pursuant to the National Court Rules (‘NCR’), hence, this application. 

15. This application is brought pursuant to Order 13, Rule 74 (2) of the NCR. It reads;

"74. Setting aside registration

…

(2) Subject to sub-rule (3) of this Rule, the Court may, on motion by the judgment debtor, make an order, on terms, setting aside the registration;

…"

16. Section 5 of the Act sets out the grounds on which a registered judgment may be set aside. It reads as follows;

"5. Cases in which registered judgment shall, or may be set aside.

(1) On an application duly made by any party against whom a registered judgment may be enforced, the registration of the judgment –

(a) shall be set aside if the registering court is satisfied that –

(i) the judgment is not a judgment to which this Part applies or was registered in contravention of this Part; or

(ii)the courts of the country of the original court had no jurisdiction in the circumstances of the case; or

(iii) the judgment debtor, being the defendant in the proceedings in the original court, did not (notwithstanding that process may have been duly served on him in accordance with the law of the country of the original court) receive notice of those proceedings in sufficient time to enable him to defend the proceedings and did not appear; or

(iv) the judgment was obtained by fraud; or

(v) the enforcement of the judgment would be contrary to public policy in the country of the registering court; or

(vi) the rights under the judgment are not vested in the person by whom the application for registration was made; or

(2) may be set aside if the registering court is satisfied that the matter in dispute in the proceedings in the original court had at some time before the date of the judgment in the original court been the subject of a final and conclusive judgment by a court having jurisdiction in the matter."

17. In summary, the defendant submits these to be its grounds for the setting aside;

(a) That the judgment was registered in contravention of Part II of the Act.

(b) The High Court of New Zealand had no jurisdiction to grant leave to the plaintiff to proceed against the company in liquidation;

(c) That the Liquidator was not given an opportunity to defend the proceedings in the High Court of New Zealand on 26 February, 2004 because notice of those proceedings was not given to him;

(d) That the enforcement of the Judgment in PNG would be contrary to public policy and that the Judgment was irregularly obtained.

18. The plaintiff relies on all of the affidavits and submissions filed on behalf of the parties in these proceedings. The affidavits and submissions are;

1. Kenneth Frank, sworn on 7 December, 2004 and filed on 13 December, 2004;

2. Iain Michael Gentleman, sworn on 25 November, 2004 and filed on 2 December, 2004;

3. Ian William Thorpe sworn on 25 November, 2004 and filed on 2 December, 2004;

4. Kenneth Frank, sworn on 17 December, 2004 and filed on 31 January, 2005;

5. Kenneth Frank, sworn on 15 February, 2005 and filed on 16 February, 2005;

6. Iain William Thorpe, sworn on 8 May, 2006 and filed on 9 May, 2006;

7. Submissions filed by Young & Williams Lawyers on 14 February, 2005;

8. Submissions filed by Young & Williams Lawyers on 24 May, 2006.

The defendant relies on the following affidavits and submissions;

1. Simon Nutley, sworn on 21 December, 2004 and filed on 22 December, 2004;

2. Simon Nutley sworn on 1 February, 2005 and filed 2nd February, 2005;

3. Simon Nutley, sworn on 4 February, 2005 and filed on 4 February, 2005;

4. Robert Southwell sworn on 10 March, 2006 and filed on 15 March, 2006;

5. Outline of Liquidators arguments by Blake Dawson Waldron Lawyers, dated 10 May, 2006;

6. Outline of Liquidators arguments by Blake Dawson Waldron Lawyers filed on 24 May, 2006.

19. I discuss each subsection of s. 5 of the Act as it relates to the facts of this case.

20. But before I do so, I note these to be the issues now before me;

1. Whether the New Zealand Court had the power to grant leave to the plaintiff to continue proceedings against the defendant in New Zealand, knowing full well that a liquidator had been appointed in Papua New Guinea and the existence of s. 298 of the Companies Act (of PNG).

2. Whether the New Zealand judgment should have been registered in PNG.

21. I consider these issues together.

1. First ground – s. 5 (1) (a) (i) of the REJA
The judgment is not one to which part 11 of the Act applies;

22. The defendant did not address this subsection in its written submissions but did verbally respond to the plaintiffs submissions on this. However the plaintiff submitted extensively on this. I set this out below.

23. Mr Shephard for the plaintiff reminded the court that part II of the REJA which contains s.2 to s.7, deal with registration of foreign judgments.

24. The plaintiff submits that the New Zealand judgment is a judgment to which Part II of the REJA applies, it having met its registration requirements as follows:-

(a) the judgment is of New Zealand, a foreign country to which the benefit of Part II of the REJA has been extended. 

(b) The New Zealand judgment is a summary judgment of the High Court of New Zealand and is final and conclusive between the parties, for purposes of Section 2 (2) (a) of the REJA;

(c) The New Zealand judgment is for a sum of money which is due and payable, for purposes of Section 2 (2) (b) of the REJA;

(d) The plaintiff as judgment creditor has applied within 6 years after the date of judgment to register it as a judgment of the National Court, in compliance with Section 3 (1) (a) of the REJA, noting that the – 

(i) The plaintiff is the judgment creditor

(ii) The Originating Summons seeking to register the New Zealand judgment was filed pursuant to Order 13 Rule 69 (1) of the National Court Rules on 02/12/04.

(e) The judgment has not been satisfied and thus meets the requirement of Section 3 (3) 
(a) of the REJA;

(f) The judgment is enforceable by execution in New Zealand being the country of the original Court and thus meets the requirements of Section 3 (3) (b) of the REJA.

25. The plaintiff submits that the prescribed matters for proof are set out in Order 13 Rule 68 (3) and Order 13 Rule 70 (1) of the National Court Rules. These matters were addressed and considered by the Court when it granted leave to register the foreign judgment. (see par. 3 and 6 of the plaintiff’s submissions filed on 14 February, 2005).

26. The defendant liquidator contends that the New Zealand judgment should not have been registered because –

(a) First, leave of this Court had not been obtained prior to the registration of the New Zealand judgment, thereby contravening Section 298 (1) (c) of the Companies Act. (see Liquidator’s affidavit, par. 5 (d)); and

(b) Secondly, the New Zealand judgment was, at the time when leave to register it was granted, not enforceable in New Zealand, and thus leave was granted contrary to section 3 (3) of the REJA. 

27. The plaintiff, Bexhill submits that this contention is misconceived because on the first point, the non-compliance is against section 298 (1) (c) of the Companies Act; that this is not a provision under part II of the REJA. He submits that non-compliance with it cannot constitute a breach of part II of the REJA.

28. Bexhill further submits that it was not required to have the leave of the liquidator or the Court to continue proceedings in a New Zealand Court against the defendant in liquidation in Papua New Guinea. He submits this relying on Felixstowe Dock and Railway Co Ltd v. United States Lines Inc [1989] QBD 360 which held that the restraining order made by the United States Bankruptcy court was an order in personam which did not have to be accorded recognition by the English Courts; that although the English Courts would wish to co-operate with the United States Bankruptcy Court on the restraining order, the degree and nature of any co-operation had to be governed by English Bankruptcy practice which did not favour an order which removed an overseas company’s English assets entirely outside the control of the English courts; that the continuation of the Mareva injunctions would not unjustly impede the Chapter 11 proceedings in the United States nor would it cause my prejudice to the defendants since the English assets could not be distributed in England without the intervention of ancillary winding up proceedings; that if the Mareva Injunctions were discharged, the English assets would be removed from the jurisdiction and used to keep the defendants as a going concern in North America which, although it would benefit the creditors there, would cause the plaintiff in England irreparable prejudice; and that in the circumstances, the Mareva Injunctions should be continued.

29. Bexhill submits that, in any case, it did have the leave of the Court in New Zealand to proceed against the Defendant in liquidation, in New Zealand.

30. If the leave of this Court or the liquidator in Papua New Guinea was required, then there were good grounds for such leave to have been granted. And the plaintiff then refers to its motion seeking retrospective leave, which I discuss below.

Retrospective leave 

31. As to retrospective leave, Bexhill, through Young and Williams Lawyers filed a motion on 9 May, 2006 seeking the following orders;

1. The plaintiff retrospectively be allowed to continue with its proceedings in the High Court of New Zealand, Wellington Registry (CIV 2003-485-205,CP 48/03) against the defendant, and to obtain judgment against the defendant after liquidation of the defendant had commenced; and 

2. The liquidator pays the plaintiff’s costs of opposing this application;

3. Such or other orders as this Honourable Court deems fit;

4. That time be abridged to the date of settlement by the Registrar.

32. Mr Shephard for Bexhill submits that if retrospective leave is required, which is not conceded, then this court has the power and authority to do so. He relied on the following authorities – Steel & Tube Co of New Zealand Ltd v JBL – Sargent Construction Ltd [1973] 2 NZLR 30; Stewart v Intercity Distributors Ltd [1960] NZLR 944. In Steel & Tube Co of New Zealand Ltd (supra). The question to be determined by the court was the true construction of s. 10 (3) of the Companies Special Investigations Act 1958 which provides that "no action or proceeding shall be proceeded with or commenced against any company to which this act applies or against any such receiver except by leave of the Court subject to such terms and conditions as the Court may impose." The question was whether if the court granted leave to commence an action, it was also necessary to proceed with the action. Basumel raises objection to this relying on s.298 of the Companies Act (PNG). This provision reads;

"298. EFFECT OF COMMENCEMENT OF LIQUIDATION

(1) With effect from the commencement of the liquidation of a company -

(a) the liquidator has custody and control of the company’s assets; and
…
(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

…" (my emphasis)

33. The motion in Steel & Tube Co of New Zealand Ltd (supra), sought leave to commence and proceed with the action or intended action, in similar terms to the motion filed by Young & Williams, Lawyers for Bexhill, which reads in part;

"The plaintiff retrospectively be allowed to continue with its proceedings in the High Court of New Zealand … and to obtain judgment against the defendant after liquidation of the defendant had commenced." (my emphasis)

34. Steel & Tube Co. of New Zealand Ltd (supra) address the distinction between the terms "shall be proceeded with" or "commenced" or in our case, as expressed in s.298 (1) (a) of the Companies Act "commenced" or "continue legal proceedings". Steel & Tube Co. of New Zealand Ltd (supra) emphasizes this distinction, and which I consider to be important in determining whether the order should be set aside or not.

35. That case concerned a building contract entered into by the company with a building owner and further concerns a claim by a sub-contractor against the building owner and the company (as head contractor) for work done or goods supplied. The plaintiffs sought a lien under the provisions of the Wages Protection and Contractors Lien Act 1939. The actions were commenced on 14 July, 1972 and these motions were filed on 17 November, 1972. Counsel in that case agreed that leave to commence the respective actions ought to be granted. The court also held that where action has already been commenced, that leave may be given nunc pro tune or that it has retrospective legal effect.

36. The court accepted this because the time of commencement is an essential ingredient in the process of obtaining a valid lien and further, that the lien must be established in an action so it is essential for the action to be commenced. But the court was then faced with a dilemma as to the further portions of the motions which not only sought leave to commence but adds therein "and proceed" with the action. The court there noted that s. 10 (3) was in the alternative, the prohibition being against proceeding with or commencing. Henry .J in that case noted that the cardinal principle is that there is to be equality among the various creditors. He referred to Widgery L.J’s statement in Langley Constructions (Brix Lam) Ltd v. Wells [1969] 1 WLR 503 who said of the comparable provision in the United Kingdoms Companies Act being s. 231;

"The purpose of s. 231 is clear and has not been challenged in argument. It is to ensure that when a company goes into liquidation the assets of the company are administered in an orderly fashion for the benefit of all the creditors and that particular creditors should not be able to obtain an advantage by bringing proceedings against the company. What is contemplated is that the Companies Court shall be seized of all these matters and shall see that the affairs are wound up in a dignified and orderly way."

37. In Steele & Tube Co. of New Zealand Ltd (supra), on 30 May, 1972, by Order in Council issued under the provisions of the Companies Special Investigations Act 1958, the company was declared to be subject to the provisions of that Act which is an Act making special provision for the investigation of the affairs of companies i.e s. 10 of that Act. The Act when invoked, provides for the appointment of a receiver and manager who is empowered to carry out the special provisions of the act. 

38. And the court in that case held the following;

1. That leave to commence is sufficient to enable the action thereafter to proceed.

2. Leave to commence was granted reserving leave to the liquidator to apply at a later stage for conditions to be imposed, and no step to be taken after the determination of each action without further leave of the court.

39. The reasoning behind order no. 2 was that leave to commence is sufficient to enable the action thereafter to proceed in the usual way. That leave to proceed is appropriate where the action has been commenced and its further continuation has been prohibited by s. 10.

40. The court in that case, said further at pg. 33. 

"Any question of further restricting an action once leave is given to commence it may be effected by the imposing of conditions…It is proper that leave be reserved to the liquidator to move further at any stage of the litigation but obviously at the present point of time, the actions ought to proceed in the ordinary way at least till the pleadings are completed and the issues defined".

41. Those proceedings involved the filing of pleadings so the Receiver in that case could apply for leave to proceed with any other action. However, in this case, the proceedings filed in Papua New Guinea on which this application is filed, is an order for the New Zealand judgment to be registered in Papua New Guinea. Such an order was made. The defendant now seeks to set aside these orders because the orders in New Zealand were obtained after a liquidator was appointed (for the defendant) in Papua New Guinea. Clearly the facts of this case are not similar to Steel & Tube Co of New Zealand Ltd (supra). In that case, proceedings were pending in court when the receiver was appointed in that same country. That the court granted leave to retrospectively commence proceedings but not to proceed any further unless leave was obtained. In this case, the plaintiff wishes to enforce the New Zealand judgment in Papua New Guinea. It commenced proceedings in New Zealand, then sought leave to continue proceedings in New Zealand after liquidator was appointed in Papua New Guinea, and now asks for retrospective leave to continue proceedings. With respect, I find those submissions to not only be misconceived, but misleading. According to s. 298 (c) (i) of the Companies Act, that can be done if the liquidator in PNG agrees or the court in PNG otherwise orders. The evidence is that the liquidator does not agree. Mr Shephard for Bexhill submits that this court has the power and authority to grant retrospective leave. 

42. The issue is whether the proceedings can continue in Papua New Guinea. Retrospective leave is not of concern because unlike Steel & Tube Co. of New Zealand Ltd (supra), there is no action in PNG apart from the application to register the New Zealand judgment/order. Leave was granted in a New Zealand Court, notwithstanding the appointment of the liquidator in PNG, and the defendant I am sure, can challenge that if it wishes to, under New Zealand law, in New Zealand.

43. In Papua New Guinea, the Courts with regard to proceedings commenced without the consent of the Liquidator or order of the Court, were dismissed as incompetent and were struck out as an abuse of process pursuant to Order 12, Rule 40 of the National Court Rules (see Ace guard Dog Security Services Limited and Yama Security Services Limited v Telikom PNG Limited (2004) SC757 where an appeal filed without the consent of the Liquidator or an order of the Court pursuant to Section 298 of the Companies Act was dismissed as incompetent.

44. I followed that decision in OS 852 of 2002 Benny Diau v. Gamini Kinigama & Anor, dated 12 December, 2005. I dismissed National Court proceedings commenced by the plaintiff, in their entirety, for non-compliance with Section 298 of the Companies Act. 

45. Therefore, I accept the Liquidator’s submission that except in the case of a secured creditor, it is not possible on a retrospective application for leave to continue proceedings against a company in liquidation in Papua New Guinea, because s. 298 (c) (i) of the Companies Act is clear, that leave must be obtained from the courts or the liquidator before any action is commenced against a company in liquidation, in Papua New Guinea.

46. Although I accept the plaintiffs submissions on the parri passu rule, I re-emphasize that "…the rights and remedies of unsecured creditors are suspended and in their place, the creditors have the right to claim in the liquidation." (see Papua New Guinea Companies and Securities law Guide (supra). The plaintiff must claim in the liquidation. It cannot register the judgment without first seeking the leave of the liquidator in PNG or the courts leave. According to s. 298 of the Company’s Act, the liquidator now has custody and control of the company’s assets and the plaintiff, must claim through the liquidation.

And I have already said and found that it cannot claim retrospective leave here in Papua New Guinea, because it can only do so through the liquidator here in Papua New Guinea. 

47. The only issue now is whether the order to register the summary judgment can be set aside.

48. And reverting back to Part II of the REJA, s. 3 (3) (b) states that "a judgment shall not be registered if at the date of the application, it could not be enforced by execution in the country of the original court." And the facts show that at the date of the application, the defendant was already in liquidation. There are no other reasons before me apart from this very glaring reality. The judgment could not be enforced in New Zealand unless the leave of the liquidator was obtained prior to applying to register the judgment.

49. I find this ground is proven.

2. Second ground – s. 5 (1) (a) (ii) of the REJA

The High Court of New Zealand had no jurisdiction to grant leave;

50. The Liquidator contends that because the defendant was in liquidation, the plaintiff required his leave pursuant to Section 298 (1) (c) of the Companies Act to further proceed with the New Zealand proceedings and that because the plaintiff failed to secure that leave, the New Zealand Court did not have jurisdiction.

51. The plaintiff submits that this contention is misconceived. That Master Gendall had no jurisdiction to grant leave of the Court under Section 298 (1) (c) of the Companies Act 1997. And, he did not seek to do so. The leave granted was only for its own purpose to progress the proceedings before it.

52. Mr Thorpe also deposes in paragraph 6 (e) of his latest affidavit that the High Court in New Zealand did not purport to grant leave pursuant to section 298 of the Companies Act of PNG.

53. The plaintiff submits that the requirement for leave under section 298 (1) (c) of the Companies Act does not go to jurisdiction for the purpose of Section 5 (1) (a) (ii) of the REJA. The plaintiff provides an explanation for this, called the parri passu rule.

54. The plaintiff submits that the New Zealand Court had jurisdiction when the New Zealand judgment was granted:-

(a) First, on the grounds that -

(i) New Zealand law governs the agreement giving rise to the claim. (See judgment of Master D.I. Gendall of 15 September 2003, being the first of the three judgments comprising part of Annexure "B" to Mr Southwell’s affidavit, at para. 29 to para 30).

(ii) The transaction connected with the agreement had their closest and most real connection with New Zealand (see judgement of Master D.I. Gendall of 15 September 2003, at paras 31 to 33).

(iii) The New Zealand Court was the appropriate Court (see judgment of Master D.I. Gendall of 15th September 2003, at paras 55 to 65).

(iv) The law determining jurisdiction on those grounds is recognized by the PNG Courts (see plaintiff’s submissions at paras. 45 to 62).

55. Secondly, the plaintiff submits that the defendant submitted to the jurisdiction of New Zealand Court, as –

(i) the defendant took steps in the proceedings, which constituted a submission to jurisdiction (see MinterEllisonsRuddWatts Lawyers facsimile to the Liquidator dated 27 September, 2005 and comprising Annexure "B" to Iaian Thorpe’s affidavit sworn on 8 May 2005 and filed herein, at par. 6, par. 7 and par.8).

(ii) Section 5 (2) (a) (i) of the Act provides for this.

(iii) A similar conclusion was reached by Kapi DCJ (as he then was) based on certain steps taken by the defendant in Francis Kalyk and Anthony John Deegan and Bruce William Hansen v. Atlas Corporation Pty Ltd Unreported judgment N 1760 ("Kalyk’s Case").

56. Additionally, the plaintiff submits that Section 298 of the Companies Act cannot oust the jurisdiction of a foreign Court exercising jurisdiction over proceedings commenced outside of Papua New Guinea on the basis that;

(a) The laws of Papua New Guinea are intended specifically to operate within its territorial jurisdiction;

(b) The Companies Act is no different to section 10 of the Companies Act of New Zealand and which specifically provides that it binds the State – it does not state anywhere in it that it applies beyond the territorial boundaries of PNG.

57. But the defendant submits that by section 5 (2) of the REJA, the courts of the country of the original court shall be deemed to have had jurisdiction, (a) in the case of a judgment given in an action in personam –

(1) if the judgment debtor, being a defendant in the original court, submitted to the jurisdiction of that court by voluntarily appearing in the proceedings otherwise than for the purposes of -

(a) protecting or obtaining the release of, property seized, or
threatened with seizure in the proceedings; or

(b) contesting the jurisdiction of that Court.

58. It is necessary that I set out the full text of s. 5 (2) and (3) of the REJA. It reads;

"(2) Subject to subsection (3), for the purposes of this section the courts of the country of the original court shall be deemed to have had jurisdiction –

(a) in the case of a judgment given in an action in personam –

(i)if the judgment debtor, being a defendant in the original court, submitted to the jurisdiction of that court by voluntarily appearing in the proceedings otherwise than for the purpose of –

(A) protecting, of obtaining the release of, property seized, or threatened with seizure, in the proceedings; or

(B)contesting the jurisdiction of that court; or

(ii) if the judgment debtor was plaintiff in, or counter-claimed in, the proceedings in the original court; or

(iii) if the judgment debtor, being a defendant in the original court, had before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of that court or of the courts of the country of that court; or

(iv) if the judgment debtor, being a defendant in the original court, was at the time when the proceedings were instituted resident in, or being a corporation had its principal place of business in the country of that court; or

(v) if the judgment debtor, being a defendant in the original court, had an office or placer of business in the country of that court and the proceedings in that court were in respect of a transaction effected through or at that office or place; and

(b) in the case of a judgment given in an action –

(i) of which the subject matter was immovable property; or 

(ii) in rem of which the subject matter was movable property, if the property in question was at the time of the proceedings in the original court situated in the country of that court; and

(c) in the case of a judgment given in an action other than an action of a type referred to in paragraph (a) or (b), if the jurisdiction of the original court is recognized by the law of the registering court.

(3) Notwithstanding subsection (2), the courts of the country of the original court shall not be deemed to have had jurisdiction -

(a) if the subject matter of the proceedings was immovable property outside the country of the original court; or

(b) except in the cases referred to in subsection (2) (a) (i), (ii) and (iii) and in subsection 2(c), if the bringing of the proceedings in the original court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of the country of that court; or

(c) if the judgment debtor, being a defendant in the original proceedings, was a person who, under the rules of Public International Law, was entitled to immunity from the jurisdiction of the courts of the country of the original court and did not submit to the jurisdiction of that court."

59. Mr. Shepherd for the liquidator submits that the liquidator did not submit to the jurisdiction of the court in which the order for summary judgment was made. He submits that Basumel objected to the New Zealand Courts jurisdiction in the matter, entering a conditional appearance and eventually losing a hearing on the issue of jurisdiction before Master Gendall. Basumel then appealed that decision and that appeal was dismissed. Mr Shepherd submits that in all respects, Basumel objected to and never submitted to the New Zealand jurisdiction. This it made known to the New Zealand Courts that it appeared before. Mr Shepherd referred the court to Master Gendall’s judgment, copy of which is attached to the liquidator’s affidavit sworn on 10 March, 2006 and which is attached as annexure ‘B’. In his judgment, Master Gendall pointed out the following;

1. Before him was the plaintiff’s application to set aside the Notice of Appearance under protest to jurisdiction filed for and on behalf of the defendants;

2. That when the plaintiff applied for summary judgment, it did not seek leave to serve the proceedings outside the jurisdiction (see par. No. 7 of Master Gendall’s ruling);

3. And this was when the defendant filed the Notice of Appearance under protest to jurisdiction to set aside the Notice of Appearance (referred to in par. No. 1 above) relying on these grounds;

i. That the defendant had a good arguable case against the plaintiff;

ii. That the High Court of New Zealand at Wellington –

● Had jurisdiction over the subject matter

● And is the most convenient forum in which to hear the proceedings.

60. Mr Shepherd for the defendant referred the court to Stenhurst Pty Limited v. Golding International Pty Limited (1995) N 1377, a judgment by Andrew .J where he said;

"the question of jurisdiction is to be determined solely upon the criteria of s. 5 (2) of the Act and not otherwise".

61. In Stenhurst (supra), the court found that the matter the subject of the action was an action in personam. The Statement of Claim in that action in which judgment was obtained was for monies advanced to the defendant in the sum of K229,527.00 and default judgment for debt was entered for that amount ($A332,713.00 and costs of $A9000.00). The question for decision before Andrews .J was whether the Supreme Court of Victoria is deemed by virtue of the Act, to have had jurisdiction insofar as that relates to the application to have the registered judgment set aside. It was for those reasons that he found that the question of jurisdiction is to be determined solely upon the criteria of s. 5 (2) of the REJA and not otherwise.

62. The most important issue that will determine whether the "original court" had jurisdiction is whether the judgment taken out in New Zealand is an action in personam. First, the ‘original court’, is defined in s. 1 of the REJA as "in relation to any judgment means the court by which the judgment was given". In this case, it is the New Zealand Court that is the original court. "In personam" is defined in Osborn’s Concise Law Dictionary Sixth Ed, at pg. 174 as "An act, proceeding or right done or directed against or with reference to a specific person, as opposed to in rem." "In rem" is defined in the same dictionary at pg. 174 as "An act, proceeding or right available against the world at large, as opposed to in personam."

63. No doubt, this is an action in personam because the original claim by the plaintiff against the defendant was for an alleged debt.

64. Did the defendant submit to the jurisdiction of the New Zealand Court? The defendant submits that it did not. That the defendant company appeared and contested jurisdiction in the New Zealand High Court (see annexure "B" affidavit of Robert Southwell) and the orders were made in the absence of the company, by the High Court, (i.e an exception under s. 5 (2) (a) (i) (B)) and, accordingly, the company did not, within the meaning of s. 5 (2), submit to the jurisdiction of the Court of the country of the original court by voluntarily appearing. And Mr Shepherd for the liquidator referred the court to Stenhurst Pty Limited (supra) and Andrew .Js findings that the question of jurisdiction is to be determined solely upon the criteria of s. 5(2) of the Act and not otherwise. I find that the New Zealand High Court cannot be deemed to have had jurisdiction. 

65. The defendants did not submit to the jurisdiction of the New Zealand court. The lawyers withdrew because they did not have instructions. And they withdrew after having filed application opposing the plaintiff application for summary judgment. This application is attached as annexure ‘D’ to Kenneth Frank’s affidavit sworn on 15 February,2005. I do not consider this to be ‘submission’ to the jurisdiction of the original court.

66. As for the other submissions raised by Mr. Shephard for the plaintiff, referred to earlier, I find these are not relevant because the question of jurisdiction is determined solely by s. 5 of the REJA, not anything else.

67. I find s. 5 (1) (a) (ii) of the REJA is proven. 

3. Third ground – s. 5 (1) (a) (iii) of the Act

The judgment debtor, being the defendant in the proceedings in the original court, did not (notwithstanding that process may have been duly served on him in accordance with the law of the country of the original court) receive notice of those proceedings in sufficient time to enable him to defend the proceedings and did not appear.

68. The liquidator relies on his affidavit which deposes that he did not have the opportunity to appear in the Court of New Zealand as he did not receive notice of the proceedings until 10 March, 2004, 2 weeks after entry of judgment.

69. But the plaintiff submits that prior to the appointment of the liquidator, the officers of the company could have instructed its lawyers to apply for an adjournment. That it was the shareholders who had decided not to seek an adjournment knowing full well that they had resolved to appoint a liquidator.

70. As far as I can tell from the good records and evidence before me, the defendants lawyers did apply to the court, opposing the application for summary judgment. But the New Zealand court refused those applications. It proceeded to award summary judgment. The New Zealand Court was aware of s. 298 of PNG’s Companies Act and was aware a liquidator was appointed in PNG. But it gave leave anyway to the plaintiff to continue proceedings in New Zealand, which I find to be highly irregular. And for the purposes of s. 5 (1) (a) (iii) of the REJA, I find the liquidator was not aware of the application for summary judgment until 2 weeks after the order to continue proceedings was made in New Zealand.

71. This ground is proven.

4. Fourth ground – s. 5 (1) (a) (v) of the REJA

The enforcement of the judgment would be contrary to public policy in the country of the registering court.

72. The defendant submits that enforcement would be against public policy of PNG because it would be contrary to the provisions of s.298 (1) (c) of the Companies Act as leave was not sought prior to entry of judgment or in this case, prior to registration of judgment.

73. The ‘test’ to determine what public policy is was discussed by Kapi DCJ (as he then was) in Kalyk’s (supra) case. He quoted Lord Right as saying; "What are the definite proportions as to what interest of the State or what injury is supposed to be involved".

74. He also referred to Lord Harkin in Ferder v St Johnson Mildway [1938] AC 1 who said; "harm to the public is substantially incontestable…".

75. The defendant liquidator raises s. 298 (1) (c) of the Companies Act, that because leave was not sought, it would be contrary to public interest and the provisions of s. 298 (1) (c) of the Companies Act.

76. But the plaintiff submits that the defendant was already a party and had already taken steps to defend the proceedings, which was properly instituted and the appointment of the liquidator does not affect the commencement and continuance of the New Zealand proceedings up to the appointment of the liquidator. The plaintiff submits that the case cited by the liquidator of Benny Diau v Gamini Kinigama (supra) are distinguishable from the present case.

77. It submits that the dismissals in the cases cited by the defendant do not bar or otherwise estop or extinguish the cause of action that exists in the plaintiff. From that point of view, leave required under section 298 of the Companies Act should properly be considered as relating to –

(a) The need for proper authority to institute proceedings, the absence of which was the reason for the dismissal of the appeal in ACE Guard Dog Security Services Ltd & Or case cited by the liquidator; or

(b) An element that completes the accrual of the cause of action upon which one could then act to institute proceedings as in Benny Diau’s case cited by the liquidator.

78. The plaintiff submits that the public policy in fact supports the registration of the New Zealand Judgment for enforcement in PNG.

79. Section 298 (1) (c) speaks for itself, that with effect from commencement of the liquidation of a company, the liquidator has custody and control of the company’s assets and unless the liquidator agrees or the court otherwise orders, a person shall not commence or continue legal proceedings against the company or exercise or enforce or continue to exercise or enforce a right or remedy over or against the property of the company.

80. The plaintiffs submissions are correct but only to the extent that it should have proceeded under s. 298 (1) (c) of the Companies Act, and obtained leave of the PNG court or the liquidators approval, prior to applying to register the judgment. In fact I find the harm to the public would be substantial because the liquidator’s powers in a liquidation have been ignored. That cannot and should not happen. Because the plaintiff did not comply with mandatory steps in liquidation, that it would be contrary to public policy if this court were not to set aside registration of the judgment.

Orders

81. I find that all elements under s. 5 of the REJA have been satisfied and as such, will set aside registration of the judgment.

82. The courts formal orders are;

1. registration of the judgment from the High Court of New Zealand Suit No. CIV 2003-485-205 dated 26 February, 2004 on 17 February, 2006, is set aside;

2. the plaintiff shall pay the Liquidator’s costs, to be taxed if not agreed;

3. the time for entry of these orders be abridged to the date of settlement by the Registrar which shall take place forthwith.

______________________________________________

Young and Williams Lawyers: Lawyer for plaintiff	
Blake Dawson Waldron: Lawyer for liquidator