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Mountain Plumbing & Hardware Supplies Ltd, Re [2018] PGNC 542; N7662 (9 July 2018)

N7662

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP (COMM) 38 OF 2017

IN THE MATTER OF THE
COMPANIES ACT 1997

AND:

IN THE MATTER OF MOUNTAIN PLUMBING & HARDWARE SUPPLIES LIMITED

Waigani: Kariko, J
2018: 13^th June & 9^th July

COMPANY LAW - Petition for the appointment of a liquidator

Cases cited:

Starships (PNG) Limited, In the matter of the Companies Act 1997 (2016) N6580

Legislation:

Companies Act 1997

Counsel:

Mr M Pint, for the Petitioner
Mr D Gonol, for the Company

DECISION\

9^th July, 2018

1. KARIKO, J: Kenmore Limited trading as Atlas Steel PNG - Lae (Atlas Steel) petitions this Court for the company Mountain Plumbing & Hardware Supplies Limited (MPHS) to be placed into liquidation by the appointment of a liquidator on the basis that MPHS is unable to pay its debts as they become due in the normal course of business, and that it is just and equitable to do so.
   
2. The petition was filed pursuant to Sections 291(3)(a) and 291(3(d) of the Companies Act 1997 (the Act).
   
3. MPHS opposes the petition.
   

Background Facts

4. These are undisputed facts that summarize the background of this petition.
   
   • Atlas Steel claims that MPHS still owes it K27, 903.95 for goods supplied on credit.
     
   • Initially Atlas Steel claimed a total debt of K47, 903.95 that formed the basis for its statutory demand for payment of debt served on MPHS on 3^rd July, 2017 pursuant to Section 337 of the Act.
     
   • MPHS failed to apply to have the statutory demand set aside as allowed by Section 338(2) of the Act, that is, within one month of being served.
     
   • After various follow ups by the petitioner, MPHS made a part payment of K10, 000.00 on 10^th August 2017, reducing the amount of debt to K37, 903.95.
     
   • This petition was filed on 31^st August 2017.
     
   • The parties subsequently entered into settlement negotiations resulting in further payment of K10,000 in October 2017, thereby further reducing the amount of debt to K27, 903.95.
     
   • There has been no further payment to date despite a negotiated arrangement for settlement of the debt by installment payments.
     

The law

5. There are a number of provisions of the Act which are relevant to consider.
   
6. An application to set aside a statutory demand shall be made within one month of being served the demand; Section 338(2)
   
7. An application for a company to be put into liquidation must be filed within one month after the due date for compliance with a statutory demand; Section 336(1)
   
8. A company may be placed into liquidation by the appointment of a liquidator; Section 291(1).
   
9. The Court may appoint a liquidator and place a company into liquidation where it is satisfied that “the company is unable to pay its debts as they become due in the ordinary course of business” or that “it is just and equitable” to do so; Sections 291(3)(a) and 291(3)(d) respectively.
   
10. Where a company has failed to comply with a statutory demand, there is a presumption that it is unable to pay its debts as they become due in the ordinary course of business; Section 335. That presumption prevails only if the company has failed to comply with the demand within the stipulated time; Section 336(1).
    

Consideration

11. There is no dispute that:
    
    • MPHS failed to comply with the statutory demand; and
    • Atlas Steel filed this petition within the prescribed time
      
12. The presumption therefore is that MPHS is unable to pay its debts as they become due in the ordinary course of business. See Starships (PNG) Limited, In the matter of the Companies Act 1997 (2016) N6580.
    
13. In opposing the petition, MPHS largely relies on the affidavits of Wanis Pawa filed 27^th March, 2018 and 12^th June, 2018. Based on those affidavits, MPHS firstly argues the amount of debt is disputed because invoices show goods were supplied in excess of the credit limit allowed to the company. It also alleges that it never received the goods allegedly supplied in excess of the credit limit. Secondly, MPHS argues that the value of its stock and assets is in excess of K10million and this clearly confirms that it is able to pay the debt alleged against it, but for the dispute.
    
14. I am not satisfied on the evidence that the debt constitutes the value of goods supplied in excess of the credit limit or that the goods were not received by MPHS. It is a general claim that is unsupported by any particulars. In relation to its financial position, MPHS has produced a number of photographs of vehicles, buildings, hardware goods, furniture and building products. There are no independent financial statements such as a balance sheet or a profit and loss account. I am unable to properly determine on the balance of probabilities whether MPHS is solvent, that is whether its stock and assets outweigh its liabilities. I find therefore that MPHS is unable to pay its debts as they become due in the ordinary course of business.
    
15. In those circumstances, and noting that the debt arose in 2016, MPHS failed to comply with the statutory demand, and MPHS failed to settle the debt after the petition was filed and a settlement arrangement was agreed, I also consider that it is just and equitable that MPHS is put into liquidation.
    

Conclusion

16. Accordingly, I exercise my discretion in granting the petition and order that:
    
    • (1) Mountain Plumbing and Hardware Supplies Limited is placed into liquidation
    • (2) Andrew Pini is appointed the liquidator of Mountain Plumbing and Hardware Supplies Limited.
    • (3) Mountain Plumbing and Hardware Supplies Limited shall pay the costs of the petitioner of and incidental to this petition.

_____________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyer for the Petitioner
Gonol Lawyers: Lawyer for the company