N6731

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP NO. 13 OF 2017

IN THE MATTER OF THE COMPANIES ACT 1997

AND:

IN THE MATTER OF G-MAN CONSTRUCTION LIMITED (1-6342)

Kokopo: Anis AJ
2017: 16th & 23rd May 2017

COMPANY LAW – Petition to liquidate a company - section 291(3)(a) of the Companies Act 1997 - claim that company is unable to pay its debts as and when they are due in the ordinary course of business - petition contested

PRACTICE & PROCEDURE – Service of statutory demand and petition - sections 335(a), 336(1), 337(2), 432 and 436(1)(c) of the Companies Act discussed.

MOTION TO DISMISS PETITION – Order 12 Rule 1 of the National Court Rules, section 336(1) of the Companies Act 1997 and inherent jurisdiction of the Court - claim of time bar and an abuse of process - Order 12 Rule 40(1)(b) and (c) of the National Court Rules - claim of frivolity and an abuse of process - claim contested

Case cited:

Re Loha Customs and Forwarding Ltd (2016) N6242

Counsel:

Ms S Kiene, for the Applicant
Mr R Asa, for the Respondent

JUDGMENT

23rd May, 2017

1.	ANIS AJ:	The petitioner Nivani Ltd (hereinafter referred to as the petitioner) asks this Court to liquidate G-Man Construction Ltd (hereinafter referred to as the respondent).  It has filed a petition under the provisions of the Companies Act 1997 (hereinafter referred to as the Companies Act).  It says the respondent should be liquidated because it had failed to pay four (4) of its invoices within a month or by February 2017, as was required under a statutory demand the petitioner had issued back in January of 2017.  By statutory demand, I am of course referring to the notice that is issued under section 337 of the Companies Act.  The petitioner's statutory demand had requested payment of K489,637.55.  That, according to the petitioner, represents monies owed to it by the respondent for services rendered in relation to a road-works contract between the parties. 

2.	The respondent contests the petition.  It denies the claim that it does not have the capacity to pay its debts as and when they fall due in the ordinary course of business.  It says it has the capacity to pay its debts.  It says after the statutory demand was issued in January 2017, it has made a total payment of K243, 973.40.  It says it has refused to pay the balance because it genuinely contests the rates that had been imposed by the petitioner to arrive at some of the invoices for the work that had been rendered.  The respondent has also filed a notice of motion against the petitioner.  It says the claim is statute barred, frivolous and vexatious, and an abuse of the court process.

3.	The petition and the notice of motion were both set down for hearing.  The trial commenced on 16 May 2017.  I reserved my decision thereafter to 9:30am this morning.  

4.	This is my ruling.

ISSUES

5.	The issues are as follows: (i) Whether the petitioner's statutory demand was duly served on the respondent; (ii) If so, whether the petition was filed within one (1) month as required under section 336(1) of the Companies Act; (iii) Whether the respondent is able to pay its debts as and when they are due in the ordinary course of business; and (iv) Whether the Court should exercise its powers and appoint a liquidator to liquidate the company.

SERVICE OF STATUTORY DEMAND

6.	Section 337(2)(c) & (d) of the Companies Act reads:

A statutory demand shall....be served on the company; and....require the company to pay the debt....to the reasonable satisfaction of the creditor, within one month of the date of service, or such longer period as the Court may order.  

The modes of service of a document upon a company are expressly set out under Part XXIII - Miscellaneous of the Companies Act.  The statutory demand in this case is not a court document.  As such, the applicable provision is section 432.  It reads:

432.	Service of other documents on companies.
Notwithstanding the provisions of any other Act, a document, other than a document in any legal proceedings, may be served on a company as follows:—
(a)	by any of the methods set out in Section 431(1)(a), (b), (c), (d) or (f);
(b)	by sending it by any means, including a facsimile machine, telex, computer or other electronic device, that provides that document, or a copy of that document, to that person in a permanent form or image, including an electronic or magnetic form or image.

7.	The petitioner has addressed service in its evidence.  I refer to the affidavit of David John Stein filed on 29 March 2017.  The relevant depositions are at paragraphs 18, 19 and 20.  Mr Stein said and I quote:

18.	On 27 January 2017, I was advised by our Legal Officer, Ms Samantha Kiene, that she had properly served a Form 42 Creditor's Statutory Demand for a Debt ("Statutory Demand") on the debtor Company by way of postage to the company's registered postal address pursuant to Section 431(d) of the Companies Act 1997."
Annexed hereto and marked "H" is a true copy of the envelope containing the said Statutory Demand addressed to the Debtor Company and the form 42 itself dated 25 January 2017 and served 27 January 2017.
19.	On the same day, Christopher Stein, Assistant General Manager for the Petitioner, sent an email to Mr Leves, copied to me attaching a scanned copy of the duly served Statutory Demand.  
Annexed hereto and marked "I" is a true copy of the said email dated 27 January 2017.
20.	On 28 February 2017, I was advised by Ms Kiene that a copy of the Statutory Demand dated 25 January 2017 was served at the Kokopo Office of the Debtor company.
Annexed hereto and marked with "J" is a true copy of the said claim that was submitted.

8.	When I look at all that, I note that the petitioner served the statutory demand using three (3) different modes of service as provided for under the Companies Act.  Firstly, it posts the statutory demand by ordinary post on 25 January 2017 [sections 432(a) & 431(1)(d)].  Secondly, it sends the statutory demand through its email dated 27 January 2017 [section 432(b)].  Thirdly, it delivers a copy at the respondent's office at Takubar in Kokopo, East New Britain Province on 28 January 2017 [sections 432(a) & 431(1)(b)].  It is obvious by the actions of the petitioner that it had wanted the statutory demand to be received by the respondent immediately or without delay.  I find that to be the case here.  Now, the respondent only disputes the first method of service, that is, service by post.  It submits that Mr Stein's evidence at paragraph 18 of his affidavit is hearsay and therefore should not be accepted by this Court.  It also disputes the authenticity of Annexure "H" to Mr Stein's affidavit.  It refers in particular to the stamp on the attached copy of the envelope cover.  It says that because the stamp mark and writing on it are not legible, one cannot confirm whether the letter was actually posted; at which post office; and on what date.  I reject these arguments.  The main reason is that the respondent did not contest this fact in its evidence.  In fact, evidence given by William Leves in his affidavit filed on 3 May 2017 expressly as well as impliedly, acknowledges receipt of the statutory demand.  For example, at paragraph 2, Mr Leves said, The Petitioner's claim is based in its Statutory Demand dated 25 January 2017.  The Statutory Demand claims the alleged sum of K489, 637.55 for unpaid invoices and accrued interest.  The next example is at paragraph 5(i) where he said, it is undisputed that the Company did pay the following amounts to the Petitioner after the Statutory Demand was issued....  I find no evidence adduced by the respondent that expressly denies receipt of the posted statutory demand.  Without evidence of fact in support, the arguments on point as presented by counsel are, in my view, futile.  They are also irrelevant for the reasons that I will state below in my judgment.

9.	In summary, I find that the petitioner has served the statutory demand upon the respondent using three (3) different modes of service as provided for under the Companies Act.

WAS THE PETITION FILED WITHIN TIME?

10.	Because the petitioner has decided to serve the statutory demand using three (3) different modes of service instead of just using one, this Court must in my opinion, choose one out of the three (3), to compute time.  I say this because the respondent also argues that the petitioner has filed its petition outside the one (1) month period as required under section 336(1) [see also section 335(a)] of the Companies Act.  The respondent says because of that, the provision prevents the petitioner from relying on evidence that may show purported failure by it to comply with the statutory demand.  The respondent says without that evidence, the petition should be dismissed.  In my view, the argument correctly reflects upon the purpose or intention of section 336(1) of the Companies Act.  It is not difficult to tell which mode of service had reached the respondent first in time.  Service by email, in my view, was the mode of service that had reached the respondent first in time.  It was served consistent with section 432(b) of the Companies Act.  According to paragraph 19 of Mr Stein's affidavit, he said Christopher Stein had sent the email with the attached covering letter dated 25 January 2017 and the statutory demand, to Mr Leves on 27 January 2017.  Copy of the email is attached as Annexure "I" to the affidavit.   At the trial, I note that this fact was not contested.  I accept this evidence to be accurate.  Before I move on, let me say this.  I note that the respondent's contention concerning the petition being filed out of time was specifically based on its argument that service of the statutory demand by post was invalid.  I have of course dismissed that above in my judgment.  However, this Court is obliged to consider and properly decide the matter by looking at the issues and the facts as a whole, which I have done herein.  Just because the respondent did not raise arguments on the other two modes of service does not preclude the Court from addressing them.  Finally, I note that the fact that the petitioner has served the statutory demand using three (3) different modes of service makes it inevitable for this Court to consider and make a finding, which it has done.

11.	So the petitioner had served statutory demand on the respondent on 27 January 2017.  Section 436(1)(c) of the Companies Act states:

Subject to Subsection (2), for the purposes of Sections 431 to 435 .... a document sent by means of a facsimile machine, telex, computer or other electronic device that provides that document, or copy of that document, to that person in a permanent form or image, including an electronic or magnetic form or image is deemed to have been received on the day following the day on which it was sent;....(Underlining is mine).  

If I apply this provision to the facts, the statutory demand may be regarded as received by the respondent on 28 January 2017, which is the day after the email was sent.  But I note that the word "deemed" also means "thought" or "believed".  And I also find that the provision does not make it mandatory for the Court to strictly reckon time as stated, that is, on the day after receipt of the document for example sent by email.  In my view, it is still open to the Court to consider whether the document could be regarded as received on the same day or the day after.  If for example the legislator had used the words "shall be deemed" in the provision instead of just the word "deemed" then that would have been mandatory and there would be no discretion left to the Court to exercise.  In this age of technology, emails of course are received within seconds after they are posted.  There is therefore no reason to doubt that Mr Leves had received the email that contained the statutory demand on that same day on 27 January 2017.  

12.	With that finding, let me now compute time to determine whether the petition was filed within the required one (1) month period.  Section 336(1) states:

On an application  to the Court for an order that a company be put into liquidation, evidence of failure to comply with a statutory demand is not admissible as evidence that a company is unable to pay its debts as they become due in the ordinary course of business unless the application is made within one month after the last date for compliance with the demand.  (Underlining is mine).  

13.	A month after 27 February 2017 would fall on 27 March 2017 [see case: Re Loha Customs and Forwarding Ltd (2016) N6242].  The petition in this case was filed on 29 March 2017, which was outside the one month required period.  In other words, the petition should have been filed before or by 27 March 2017.

14.	Because the petition was filed out of time, the petitioner is prevented by section 336(1) from relying on evidence of failure to comply with the statutory demand against the respondent, in the hearing of this petition.

15.	The petitioner has only raised failure to comply with the statutory demand as its only ground to argue the petition.  This is also evidenced at the hearing.  That being the case, I cannot see how this matter can progress further given the exclusion of the petitioner's evidence herein.

EVIDENCE OF ABILITY TO PAY DEBT

16.	 Even if I may be wrong or assuming that the petitioner's evidence is accepted and it shows failure to comply with the statutory demand, such evidence would only amount to a presumption that the respondent was unable to pay its debts as and when they fall due in the ordinary course of business.  The Court would still require other evidence either from the petitioner or from the respondent, before arriving at a conclusion [see section 335(a) and section 336(2)(3) & (4) of the Companies Act].

17.	I note that I had informed the parties during the trial that both Mr Stein and Mr Leves gave impressive evidence through their affidavits.  After considering the evidence, I had also inquired with counsel for the petitioner to see whether Mr Stein has filed a responding affidavit to Mr Leves's affidavit.  Counsel advised that there was none filed.  And I recall commenting that a responding affidavit by the petitioner would have better assisted the Court.  Let me explain that now.  I think the first thing to note is that both parties have acknowledged in their evidence and through their submissions that the respondent has made two payments to the petitioner after being served with the statutory demand.  The first payment was made on 16 February 2017 of a sum of K40,000.  The second payment was made on 31 March 2017 of a sum of K203,973.40.  Mr Stein was only able to confirm the first payment.  I notice that the second payment was made on 31 March 2017, that is, two days after Mr Stein had sworn his affidavit.  Nevertheless, the petitioner did confirm the second payment in its written submission, which was handed up in Court at the trial.  I refer to the affidavit of Mr Leves filed on 3 May 2017.  His affidavit was directly in response to Mr Stein's affidavit.  Mr Leves deposes to at paragraph 6 that the company is solvent and is capable of paying its debts.  At paragraph 7, he says the company currently has six (6) existing contracts and he briefly describes each of them.  At paragraph 8, Mr Leves says the company has assets including properties, plants and equipments.  At paragraph 9, Mr Leves says the company currently has about 40 specialist employees.  At paragraph 5(e), Mr Leves says the company has to date paid a total of about K1.2 million to the petitioner for work the company has engaged the petitioner in.  In his next affidavit filed on 10 May 2017, Mr Leves states that the company has a net asset value of over K5 million.  In the other related affidavit filed on 10 May 2017 by one Michael Mipari who is an accountant of the respondent, he attaches evidence of a recent payment of K7,978.77, which the company had made to BNBM (PNG) Ltd on 10 May 2017 for goods ordered and received.

18.	These evidence, in my opinion, are compelling.  Without any rebuttal evidence from the petitioner, I would have accepted them as good evidence.  I would have been convinced and would have still found in favour of the respondent.  That is, I would have still found the respondent solvent and able to pay its debts as and when they fall due in the ordinary course of business.

REMARK

19.	The parties have also acknowledged a separate proceeding that is on foot filed by the petitioner.  When I asked counsel for the petitioner, counsel confirmed that the petitioner has filed a separate writ of summons and statement of claim in relation to the same debt as claimed in the statutory demand.  Having had the opportunity to look at the evidence, I note that Mr Leves attaches a copy of the writ of summons and statement of claim at Annexure D to his affidavit filed 3 May 2017.  Now, in the statement of claim, I notice that the petitioner has actually pleaded receipt of the two (2) payments of K40,000 and K203,973.40 from the respondent.  And the petitioner is seeking payment of the balance plus interest.  I therefore note that dismissing this petition will not prejudice the rights of the petitioner.  

20.	It seems that the parties will properly argue the contested balance of the debt in that proceeding.  

SUMMARY

21.	I dismiss the petitioner's petition filed on 29 March 2017.  Having made this ruling, it is pointless, in my view, for me to address the respondent's motion.

22.	So in regard to the first issue, Whether the petitioner's statutory demand was duly served on the respondent, my answer "yes it was."  In regard to the second issue, If so, whether the petition was filed within one (1) month as required under section 336(1) of the Companies Act, my answer is "no it was not."  In regard to the third issue, Whether the respondent is able to pay its debts as and when they are due in the ordinary course of business, my answer is "yes."  And in regard to the fourth issue, Whether the Court should exercise its powers and appoint a liquidator to liquidate the company, my answer is "no."

COSTS

23.	Cost is discretionary.  It should follow the event in the normal circumstances.

24.	In this case, however, I will order each party to bear their own costs.  The petition may be dismissed but I note that this is certainly not the end of the matter.  The parties will address the balance of the debt in the separate proceeding, which is currently on foot.  I also note that it was based on this proceeding, that the respondent has made the two payments to the petitioner.  This Court did not determine who was actually at fault in the delay of payment or consider the merits of the delay of want of payment of the four (4) invoices.  In my opinion, the Court in the separate proceeding will be in a position to decide on that.  So for now, both parties in my view should be given the benefit of the doubt.  As such, to order costs in favour of one party over the other here would be unfair in my view.

THE ORDERS OF THE COURT

I will make the following orders:

1.	The petition is refused.

2.	Each party shall pay their own costs.

3.	Time of entry of this judgment is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly.

_________________________________________________________
In-House Lawyers:	  Lawyers for the Applicant
Warner Shand Lawyers:  Lawyers for the Respondent