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National Housing Estates Ltd, In re [2018] PGNC 601; N8547 (9 April 2018)

N8547

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP (COMM) 34 OF 2017

IN THE MATTER OF THE
COMPANIES ACT 1997

AND:
IN THE MATTER OF
NATIONAL HOUSING
ESTATES LIMITED

Waigani: Hartshorn J
2017: 13^th September
2018: 9^th April

COMPANY LAW – liquidation - Petition for the appointment of a liquidator - whether a petition for the appointment of a liquidator to a company should be stayed, dismissed or granted - s. 13 Claims Act prevents this petition from proceeding as the petition concerns a company that is the property of the State - The petition should be dismissed pursuant to Order 12 Rule 40 National Court Rules

Cases Cited:

Cal Exports Ltd v. Camp Administration Ltd (2009) SC1050

PNG Power Ltd v. Ian Augerea (2013) SC1245

Public Curator of Papua New Guinea v. Kara (2014) SC1420
In re Piunde Ltd (2015) N5971
Niule No 16 Ltd v. National Housing Corporation (2015) N6157
In re Koitaki Plantations Ltd (2017) N6670

Counsel:

Mr. B Nutley, for the Petitioner
Mr. C. Gagma, for the Company

9^thApril, 2018

1. HARTSHORN J: This is a decision on whether a petition for the appointment of a liquidator to a company should be stayed, dismissed or granted.

2. The petitioner, Niugini Building Supplies Ltd, petitions that National Housing Estates Ltd (NHEL) be placed into liquidation by the appointment of a liquidator on the basis that NHEL is unable to pay its debts as they become due in the ordinary course of business and that it is just and equitable that NHEL be placed into liquidation. The petitioner has a judgment against NHEL and the amount demanded of NHEL in its statutory demand is K5,918,746.79.

3. NHEL seeks that the petition be stayed or restrained pursuant to s. 297 Companies Act 1997 or that it be stayed or dismissed for being an abuse of the process of the court pursuant to Order 12 Rule 40 National Court Rules.

4. I consider NHEL’s applications first.

Whether the petition should be stayed, restrained or dismissed

s. 297 Companies Act 1997

5. NHEL seeks that the petition be stayed or restrained pursuant to s. 297 Companies Act 1997. Section 297 Companies Act 1997 is as follows:

“297. Power to stay or restrain certain proceedings against company.

At any time after the making of an application to the Court under Section 291(2)(c) to appoint a liquidator of a company and before a liquidator is appointed, the company or any creditor or shareholder of the company may—

(a) in the case of any application or proceeding against the company that is pending in the Court or the Supreme Court, apply to the Court or the Supreme Court, as the case may be, for a stay of the application or proceeding; or

(b) in the case of any other application or proceeding pending against the company in any court or tribunal, apply to the Court to restrain the application or proceeding,

and the Court or the Supreme Court, as the case may be, may stay or restrain the application or proceeding on such terms and conditions as it thinks fit.”

6. As I said in In re Piunde Ltd (2015) N5971 in this regard at [27]:

“27. This section does not give this court the jurisdiction to stay or restrain the petition. An application under s. 291 (2) (c) to appoint a liquidator of a company is not an “...application or proceeding against the company that is pending...”. As the Supreme Court in Cal Exports Ltd v. Camp Administration Ltd (2009) SC1050, said at para 20:

“Section 297 of the Companies Act gives jurisdiction to the court to stay proceedings where an application is made to appoint a liquidator under s291(2)(c) and at the same time there is another application or proceeding against the company in the National Court or the Supreme Court or any other Court or tribunal which is pending. Section 297 enables the company or any creditor or shareholder to make an application in that other application or proceeding to stay those proceedings until the application under s291(2)(c) is determined. The application is made in the other proceedings and before the Court in which the application or proceedings is pending, except that if the proceeding is in a court outside the National Judicial System the application is made to the National Court.”

28. The Court stated that its researches of the English, Australian and New Zealand Law had not found any case on similar sections to s. 297 in those jurisdictions which had held that those sections gave jurisdiction to stay a petition to wind up or appoint a liquidator.

29. This court is bound by decisions of the Supreme Court. Consequently the application of Piunde pursuant to s. 297 Companies Act is refused.”

7. In this instance, for the above reasons, NHEL’s application to stay or restrain the petition

pursuant to s. 297 Companies Act 1997 is refused.

Order 12 Rule 40 National Court Rules

8. NHEL seeks that the petition be stayed or dismissed as an abuse of the process of the court

pursuant to order 12 Rule 40 National Court Rules. Such an application may be made. Again,

I refer to Cal Exports v. Camp Administration (supra), as I did in Piunde (supra) at [31]:

“19. Our conclusion is that the power to stay a petition to wind up a company presented pursuant to s291of the Companies Act, before the liquidator is appointed, is founded in the inherent jurisdiction of the court to prevent abuses of the process of the court. In terms of rules of court, an application could be based on National Court Rules O8 r 27 (a pleading which is an abuse of the process of the court) or similarly O12 r40, because the Companies Rules Rule 2 provides:

"Subject to the Companies Act and these Rules, the Rules of Court of the National Court and the general practice of that Court, including the course of procedure and practice in Chambers, apply in relation to proceedings to which these Rules relate as far as is practicable".”

32. The Court went on to state that the purpose of a stay application, “....is to prevent abuse of the court process by an applicant who seeks to liquidate the company on some misconceived or unmeritorious grounds.”

33. Then at para 23, the Court said:

“23. Where the application is to stay the petition before the appointment of a liquidator, as we have said, the application is really one to prevent an abuse of the processes of the court, usually, either because:

a) The allegations in the petition do not entitle the presentation of a petition or the petitioner is not qualified to petition; or,

b) the debt is genuinely disputed and the petitioner cannot really claim to be a creditor until the debt is established. Thus the petitioner is not qualified to present the petition; or,

c) the company has a genuine counterclaim, which exceeds the petitioner's debt, and the petitioner cannot be allowed to visit the Draconian remedy of winding up on a company, when there are a real prospects that the petitioner's debt will be satisfied by bringing the counterclaim to judgement.””

9. NHEL’s primary submission is that it is a State entity and may not be liquidated: s. 13 Claims By and Against the State Act 1996 (Claims Act).

10. The petitioner counters that:

a) The protection afforded by s. 13 Claims Act does not apply to NHEL as it is a separate legal entity and its purpose and functions are to commercially operate and venture into real estate businesses. NHEL does not fall within the definition of governmental body or the State;

b) If NHEL does fall within the definition of State, s. 13 Claims Actonly applies to execution or attachment processes and not to a petition for liquidation under the Companies Act 1997.

11. I consider these issues first.

12. Section 13 Claims Act is as follows:

“13. No execution against the State.

(1) In any suit, execution or attachment, or process in the nature of execution or attachment, may not be issued against the property or revenue of the State.

(2) Where a judgement is given against the State, the registrar, clerk or other proper officer of the court by which the judgement is given shall issue a certificate in Form 1 to the party in whose favour the judgement is given.”

13. It is necessary to determine whether NHEL, a company, is property or revenue of the State. There is no definition of “property” in the Claims Act or in the Interpretation Act.In s.2(1) Companies Act 1997“property” is defined as:

“"property" means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise;”

14. Given that this definition is part of the Act which governs amongst others, the incorporation, management and regulation of companies, I am satisfied that a company falls within the definition of “property” as that term is used in s. 13 Claims Act as a company may be categorised as amongst others, incorporeal property.

15. The next consideration is whether the company known as NHEL is property of the State. It is not in dispute that the shareholding of NHEL is in the names of two Government Ministers. Further, in the Supreme Court case of PNG Power Ltd v. Ian Augerea (2013) SC1245, the Court stated the following as its “test” as to what constitutes a governmental body and consequently what should be deemed the “State” for the purposes of the Claims Act:

“68. Notwithstanding the differences in opinions as noted above, all of the above authorities and others agree that, all entities established by the National Government or a provincial government or a local level government, with some form of government control and ownership and funding is a governmental body. This should be the test to determine if an entity or a body is a governmental body. To this, we add the purpose for which the entity has been established. If it is for an important public purpose, the kind that traditionally were the function of welfare states governments is in the case of telecommunications, electricity, public transport, water and sanitation, health and education, this would render the entity a governmental body. This would be the case even if the entity appears to have private corporate status and structure.”

16. This test was adopted by the Supreme Court in Public Curator of Papua New Guinea v. Kara (2014) SC1420 at [40]. From a reading of the “test”, it is not clear whether the “purpose” that is “added” is a restriction on the first part of [68] or is an additional consideration for an entity that may not qualify as a governmental body under the first test.

17. In any event, in Niule No 16 Ltd v. National Housing Corporation (2015) N6157, I stated that given the decisions in PNG Power v. Augerea (supra) and Public Curator v. Kara (supra), the National Housing Corporation and NHEL would now be included in the term “State”and that this court is bound by these Supreme Court decisions. Consequently, the company known as NHEL is property of the State as it is deemed to be the “State” for the purposes of the Claims Act.

18. The next consideration is whether a petition for the liquidation of a company is a process captured by the words “process in the nature of execution or attachment” in s. 13(1) Claims Act.

19. The petitioner submits that a petition for the liquidation of a company is not a process for attachment of debt or garnishee of property owned by a company and is not a process for execution against any such property. Consequently, it is submitted, s. 13(1) Claims Act does not apply in this instance.

20. The terms “execution” and “attachment” are not defined in the Claims Act or in the Interpretation Act. Counsel for the petitioner made reference to Order 13 National Court Rules which concerns enforcement of judgments. Order 13makes reference to “execution” and “attachment”.

21. In the case of In re Koitaki Plantations Ltd (2017) N6670, I had occasion to consider Order 13 Rule 2 National Court Rules in detail. I make reference to it nownot because there was a consideration of the definitions of execution and attachment but because of the consideration in that case of whether the winding up of a company, which is synonymous with appointing a liquidator or placing a company into liquidation, is considered to be a means of enforcement of a judgment for the payment of money, together with other means of enforcement such as execution and attachment.

22. I reproduce [27] to [30] of In re Koitaki (supra):

“27. Order 13 Rule 2 National Court Rules to which Sakora J. refers and the New South Wales of Australia equivalent, O42.2 Supreme Court Rules 1970 are derived from the English Rules of Court. The equivalent 1965 Supreme Court Rule O.45, r.1, our Order 13 Rule 2, is as follows:

“(1) Subject to the provisions of these rules, a judgment or order for the payment of money, not being a judgment or order for the payment of money into Court, may be enforced by one or more of the following means, that is to say-

(a) the writ of fierifacias;

(b) garnishee proceedings;

(c) a charging order;

(d) the appointment of a receiver;

(e) in the case in which rule 5 applies, an order of committal;

(f) in such a case, writ of sequestration.

(2) Subject to the provisions of these rules, a judgment or order for the payment of money into Court may be enforced by one or more of the following means, that is to say-

(a) the appointment of a receiver;

(b) in the case in which rule 5 applies, an order of committal;

(c) in such a case, writ of sequestration.

(3) Paragraphs (1) and (2) are without prejudice to any other remedy available to enforce such a judgment or order as is therein mentioned or to the power of a Court under the Debtors Acts 1869 and 1878, to commit to prison a person who makes default in paying money judged or ordered to be paid by him, or to the right of a person prosecuting a judgment or order for the payment of money to a person to apply under section 105(1) of the County Courts Act 1984, to have the judgment or order enforced in a county Court, or to the enactments relating to bankruptcy or the winding up of companies.”

28. It is clear from a reading of O 45, r1(3) that the means provided for enforcement in paragraphs (1) and (2) of O 45, r 1 are without prejudice to, amongst others, any other remedy available to enforce a judgment or order or to the enactments relating to bankruptcy or the winding up of companies. Further, when an equivalent rule was adopted to the circumstances of New South Wales, instead of including all of the various enactments that provide for means of enforcement as in O 45, r1(3), it was decided to collectively refer to them all by use of the words, “any other”. Hence, O 42.2(3) Supreme Court Rules 1970 is:

“(3) Sub rules (1) and (2) of this Rule do not affect any other means of enforcement of a judgment for the payment of money.”

29. O 42.2 Supreme Court Rules 1970 is the same as Order 13 Rule 2 National Court Rules. Specifically, (and at the risk of belabouring the point) O 42.2(3) Supreme Court Rules 1970 is exactly the same as our Order 13 Rule 2(3) National Court Rules.

30. Given this, in my view, where Order 13 Rule 2(3) National Court Rules states, “do not affect any other means of enforcement of a judgment for the payment of money.”, it is not confining itself to other means provided for under the National Court Rules, but is referring to any other means available at law.”

23. So notwithstanding that execution and attachment per se are clearly not the same as the winding up of a company, it is apparent that the authors of the English Rules of Court and New South Wales Rules of Court considered, “winding up of companies” as being similar to execution or attachment amongst others, as they are all means of enforcement of a judgment for the payment of money. This is reflected in Order 13 Rule 2(3) National Court Rules.

24. It can be argued therefore that the petition for the appointment of a liquidator or placing of a company into liquidation in this instance based upon the non-payment of a judgment debt, is a process in the nature of execution or attachment as both are similar as they have the same characteristics of enforcing a judgment for the payment of money.

25. Further, when a liquidator is appointed, pursuant to s. 298(1)Companies Act 1997, the liquidator has custody and control of the company’s assets; pursuant to s. 303 (a) his principal duty is to take possession of, protect, realise and distribute the assets, or the proceeds of the realisation of the assets of the company, and pursuant to s. 310(2) Schedule 8 (g), the liquidator has the power to sell or otherwise dispose of the property of the company.

26. This enables the liquidator to deal with property of the company in a manner that has the same effect as execution or attachment against property. This includes dealing with property without being required to obtain the consent of the owner of the property and dealing with property to the exclusion of rights that the owner may have. To my mind, this may be categorised as a process in the nature of execution or attachment, as it is a process pursuant to which a liquidator has similar or the same characteristics in regard to the property of a company as those concerned with execution or attachment of property.

27. Consequently, given the above, s. 13 Claims Act prevents this petition from proceeding as the petition concerns a company that is the property of the State, a company that is deemed to be the State for the purposes of the Claims Act and the appointment of a liquidator or the placing of a company into liquidation which is a process in the nature of execution or attachment, against property of the State.

28. The allegations in the petition do not entitle the petitioner to present this petition by virtue of s. 13(1) Claims Act. That the petition has been presented may be considered an abuse of the process of the court. The petition should be dismissed pursuant to Order 12 Rule 40 National Court Rules and the authority of Cal Exports (supra).

Orders

29. The Court orders that:

a) This petition is dismissed;

b) The petitioner shall pay the costs of National Housing Estate Ltd of and incidental to this petition.
___________________________________________________________________________
O’Briens: Lawyers for the Petitioner
Gagma Legal Services: Lawyers for the Company