N7378

PAPUA NEW GUINEA 
   [IN THE NATIONAL COURT OF JUSTICE] 

OS 383 of 2017 

IN THE MATTER OF AN APPLICATION UNDER 
SECTION 338 OF THE COMPANIES ACT 1997

BETWEEN: 
BISMARK MARITIME 
LIMITED
    Plaintiff 

AND:
DNV GL AUSTRALIA 
PTY LTD
Defendant

      Waigani: Hartshorn J 
             2017: 18th October
               2018: 19th February                              

Application to set aside statutory demand
    
Cases cited:
Papua New Guinea Cases 

Bemobile Ltd v. Wettao (2014) N6776

Overseas Cases

Bishop Industries (Wellington) Limited v. Construction Labour Hire Limited [2016] NZHC 2848

Counsel:

Mr. W. Frizzell, for the Plaintiff
Mr. T. Injia, for the Defendant

19th February, 2018

1. HARTSHORN J: The plaintiff Bismark Maritime Limited (Bismark) applies to set aside a statutory demand issued against it by the defendant DNV GL Australia Pty Ltd (DNV). Sections 338(1) and (2) Companies Act are relied upon. The statutory demand is dated 27th February 2017, is for the sum of €168,642.42, and is for unpaid invoices (statutory demand). The invoices are for various services provided including the surveying and certification of various vessels owned by Bismark.

2. Bismark contends that the statutory demand should be set aside as it has a substantial dispute concerning the debt claimed therein. The dispute concerns additional charges for €42,649.34 which it claims have not been justified despite repeated request and the actual charges for certification which it claims are excessive.

3. DNV contends that the evidence does not establish that Bismark has a substantial dispute. DNV does not take issue with when the application to set aside was made and served.

Law

4. Bismark relies upon the cases and principles set out in Bemobile Ltd v. Wettao (2014) N6776. At [13]:

“13. In the above cases the following principles are set out as to when a statutory demand ought to be set aside:

(a)	The applicant must establish that there is a, “fairly arguable basis” or a, “substantial dispute” as to the amount claimed in the statutory demand;

(b)	The evidence in support of an application must demonstrate that there is arguably a genuine and substantial dispute and which goes towards supporting the claim that the debt is disputed;

(c)	That a mere assertion that there exists a debt or debts is not sufficient to maintain the statutory demand;

(d)	That where proof has been given that there exists a substantial dispute, the matter must be resolved by other means, meaning the statutory demand must be set aside.” 

5. DNV relies upon various cases that espouse similar principles and submits that the onus of proof is on the applicant to substantiate the assertion of a substantial dispute by providing appropriate or cogent evidence. Reliance is also placed upon the New Zealand High Court case of Bishop Industries (Wellington) Limited v. Construction Labour Hire Limited [2016] NZHC 2848 and the following statement at [16]:

“[16] The onus is on the applicant to show that there is a genuine and substantial dispute as to the existence of the debt. The dispute must be real and not fanciful or insubstantial; the applicant must show a fairly arguable basis upon which it is not liable for the amount claimed. The mere assertion that a dispute exists is not sufficient. An applicant must establish that any counterclaim or cross-demand is reasonably arguable in all the circumstances. The obligation is not to prove the actual claim; such an obligation would amount to the dispute itself being tried on the application.”

Additional charges of €42,649.34

6. As to the additional charges of €42,649.34 that Bismark claims have not been justified despite repeated request, Bismark, by Mr. Hamish Sharp, claims that it made many email requests requiring written justification for additional charges totaling €42,649.34 levied in addition to various invoices for certification and other services.

7. DNV annexes copies of invoices concerning the additional charges in the affidavit of Mr Timothy Holt. Notwithstanding this, Bismark maintains its dispute to the additional sums on the basis that supporting documentation such as disbursement receipts have not been provided.

8. In paragraphs 13 to 25 of Mr. Holt’s affidavit sworn 26th June 2017, he deposes concerning email correspondence between employees of the parties. Mr. Holt deposes that Mr. Nimal Ranasinghe, Bismark’s Financial Controller, raised queries relating to the additional charges in invoices issued in 2015-2016 to which Mr. Spiliotis and Mr. Simpson of DNV responded. Mr. Ranasinghe was provided the invoices, order confirmations and expense sheets setting out DNV’s surveyors travel expenses amongst others, by Mr. Simpson and Mr. Spiliotis. The relevant email correspondence is:

a)	George Spiliotis’s email of 14th September 2017 to Mr. Ranasinghe, attaching the relevant invoices and order confirmations or service agreement forms signed by Bismark’s agents;

b)	Mr. Ranasinghe’s email of 15th September 2016, in which he acknowledged receipt of	Mr. Spiliotis’s email of 14th September 2016 and requested for a reasonable time to settle the outstanding debt;

c)	From Mr. Ranasinghe dated 29th September 2016 to Mr. Spiliotis attaching a statement of a detailed analysis of DNV’s invoices. He indicated that he had noticed that the airfare, travelling/waiting, overtime and hotel expenses charged with very high and requested detailed clarification;

d)	In an email dated 10th October 2016, Mr. Simpson provided Mr. Ranasinghe with a breakdown of the additional charges in the two big invoices. The “two big invoices” refer to invoice no. 112261963 dated 12th May 2016 and invoice no. 11276845 dated 21st July 2016;

e)	By email of 13th October 2016, Mr. Ranasinghe queried why the airfares were so high and why Bismark should pay for travelling and waiting time;

f)	In an email of 21st October 2016 from Ami Simpson to Mr. Ranasinghe attaching invoices for the airfares and accommodation, Mr. Ranasighe was advised that DNV’s surveyors travel in economy class and all travelling, waiting and overtime charged by DNV were made in accordance with DNV’s General Terms and Conditions which form part of each of the service agreements executed by parties before the services were rendered;

g)	By email of 28th October 2016 to Mr. Spoliotis, Mr. Ranasinghe acknowledged receipt of Ami Simpson’s email of 21st October 2016 but advised that the Bank of Papua New Guinea had restricted outward remittances.

9. DNV submits that the evidence shows that Bismark has been provided with relevant documentation which explains the additional charges being travel expenses of DNV’s surveyors, including accommodation, sustenance and other charges for waiting time, overtime and travelling time.

10. After considering:

a)	The correspondence between the employees of the parties, including the email of 15th September 2016 of Bismark’s Financial Controller in which it is stated, “Thank you for sending of the details. As I explained you, will be arranging payments to settle your outstanding. Please allow us reasonable period for complete settlements.”;

b)	The email dated 28 October 2016 at 8:19am from DNV to Bismark’s Financial Controller stating:

“Dear Nimal, I hope you have received the explanations/response from our administrator for the outstanding invoices. I hope we can receive your payment as required.”;

c)	The reply from Bismark’s Financial Controller on 28 October 2016 at 8:34am stating:

“Dear Mr. Georgios, Yes Ami has send the explanation with supporting for the airfares and charges for the waiting time. According to our bank now BPNG (Central Bank of PNG) has restricted the outward remittances. We will check with our bank and inform you.”

d)	That several reminding items of correspondence have been sent by DMV but no further correspondence or any payment has been received from Bismark;

I find that DNV did provide details of the additional charges of €42,649.34 to Bismark such that Bismark’s Financial Controller was satisfied sufficiently for him to inform by email that payment for the “outstanding” was being arranged, that allowance for reasonable period for complete settlements was sought, that DNV (Ami) had sent an explanation with supporting information for the airfares and charges for waiting time, and that by inference, payment would be made but this had been affected by restrictions from the Bank of Papua New Guinea.	

11. Consequently, I am of the view that Bismark has not established or demonstrated that it has a fairly arguable basis upon which it is not liable for the additional charges or that it has a genuine or substantial dispute as to the existence of that part of the debt comprised of the additional charges.

Remainder of debt

12. In regard to the claim by Bismark that the certification services had increased by 30%, DNV submits and makes reference to clause 7.2 of DNV’s General Terms and Conditions which entitle DNV to charge for any extra expenses it incurs in connection with the service it provides to its clients which includes travelling and other expenses incurred by its surveyors.

13. Further, DNV submits that clause 7.2 of the General Terms and Conditions provides that the additional expenses which are incurred by DNV in connection with the performance of its work, and for which DNV is not responsible, for instance, as a result of poor organisation on the part of the customer/client or for the repetition of tests and extra time spent, will be charged separately at the respective current cost rates.

14. In addition, there is evidence that Bismark had paid similar invoices in 2013-2014 without complaint. These invoices charged additional expenses for travel time at the rate of €90 per hour. DNV submits that Bismark’s assertion that the additional charges for waiting time and travelling time are excessive is not substantiated. This is a mere assertion and does not constitute an arguable case for Bismark to deny liability to pay DNV’s outstanding invoices.

15. DNV submits that it is entitled to recoup additional expenses incurred in providing its service pursuant to clause 7.2 of the General Terms and Conditions. DNV submits further that the General Terms and Conditions form part of the Order Confirmation Forms or Service Agreements executed by the masters of vessels and DNV’s surveyors. These are binding on the executing parties, in this case, Bismark and DNV.

16. The tariff rates charged by DNV are the prevailing charges of DNV’s services at a particular time. DNV’s client is billed according to the usual prevailing rate for the particular service or deliverable unless there is a frame agreement or discounted rate. The tariff rates are provided to the client where the customer asks for a quotation.

17. By Bismark’s own admission in paragraph 12 of the affidavit of Mr. Hamish William Sharp, Bismark engaged DNV’s predecessor GL Classification Society in 2010. Since 2010 until 2016, Bismark paid DNV’s invoices which applied DNV’s tariffs charged on the prevailing service rates at the time.

18. Bismark paid DNV’s invoices up until 2016. During that time Bismark did not object to DNV’s tariff rates. By its own conduct Bismark accepted the tariff rates charged by DNV for its services and it is therefore liable to pay the amount charged in DNV’s invoices issued in 2015-2016.

19. Further, the evidence is that DNV’s invoices were rendered after the classification of Bismark’s vessel. Further the classifications of Bismark’s vessels were never withheld pending payment of DNV’s invoices. It is submitted that DNV gave valuable consideration when Bismark’s vessels were classified in accordance to DNV’s rules and regulations.

20. In conclusion, DNV submits that the invoices were issued to Bismark pursuant to established business practices or customs employed by Bismark and DNV from 2010 until 2016. Bismark confirms this in Mr. Hamish William Sharp’s first affidavit. Bismark is therefore liable to pay DNV’s outstanding invoices.

21. As to the claim by Bismark that comparative rates of a competitor of DNV show that DNV’s rates are excessive, this does not disclose an arguable case that Bismark is not liable to pay DNV’s invoices issued in 2015-2016. 

22. This is the first time that Bismark has raised the objections regarding DNV’s tariff rates. Bismark has not provided any evidence that it objected to the tariffs in any of the email correspondence to DNV’s employees, (Mr. Spoliotis or Mr. Simpson) or in conversations with DNV’s employees before he was raised in this proceeding. It is submitted that Bismark’s objections to the tariffs are a recent creation to meet the requirements of this application. They are conjecture and speculative and do not disclose a substantial dispute to the fact that Bismark owes money to DNV. Bismark is still liable to pay DNV’s invoices as DNV has rendered the service to Bismark which Bismark has benefited from.

23. In regard to the claim of Bismark that the Order Confirmation Forms, were not executed by a director of Bismark or an authorised officer, DNV submits that samples of DNV’s Order Confirmation Forms issued in 2015-2016 are in evidence. Upon an examination of them, it is clear that the masters of Bismark’s vessels executed each of the Order Confirmation Forms in Singapore whilst in transit. Most notably, in the Order Confirmation Form for the Island Express the master of the vessel affixed the stamp of the vessel indicating conclusively that he had the authority to execute the document.

24. DNV’s Rules for Classification of Ships Part 1, in evidence, provides that the master of the vessel or the manager in charge of the vessel at the time that a survey is conducted is deemed to be the owner of the vessel. It is submitted that the assertion that the Order Confirmation Forms were not executed by a director of Bismark or an authorised officer is misconceived. The masters of the Bismark’s Brussels had at all times the express and ostensible authority of Bismark to execute the Order Confirmation Forms and therefore Bismark is bound to the terms of the Order Confirmation Forms and the General Terms and Conditions.

25. I have considered all of the evidence and submissions of the parties in regard to Bismark’s claim that DNV’s charges for certification are excessive. Having regard to clause 7.2 of DNV’s General Terms and Conditions which entitles DNV to charge for amongst others any extra expenses it incurs, that Bismark has paid similar invoices rendered on the same basis without complaint, that Bismark had paid invoices which applied DNV’s tariffs previously without complaint, that because competitors rates are less is not a valid ground to dispute whether a debt is owing or is due, that there is no evidence of Bismark objecting to DNV’s tariffs previously and that the evidence is that the relevant Order Confirmation Forms were validly executed, I am not satisfied that Bismark has properly shown that it has a genuine and substantial dispute with DNV on the basis that its charges for certification are excessive. 

26. Consequently Bismark has failed in my view, to disclose or give proof of a fairly arguable basis upon which it is not liable for the total amount claimed in the statutory demand. It has failed properly to prove that it has a genuine and substantial dispute as to whether or not the debt in the statutory demand is owing or is due. Further, upon the evidence, the debt claimed to be owed by Bismark to DNV is not a mere assertion.

27. The relief sought in the Originating Summons should be refused.

Orders

28.   It is ordered that: 

a)	All of the relief sought in the Originating Summons is refused;

b)	The plaintiff shall pay the defendant’s costs of and incidental to this proceeding;

c)	Time is abridged.
____________________________________________________________
Warner Shand Lawyers: Lawyers for the Plaintiff                           
Ashurst: Lawyers for the Defendant