N8159
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP NO. 52 of 2018 (No. 2)

IN THE MATTER OF THE COMPANIES ACT 1997

AND
IN THE MATTER OF PLATINUM PNG LIMITED

Waigani: Anis J
2019: 29th November & 17th December

COMPANIES ACT 1997 - Section 291(3)(a) – petition – request for appointment of a liquidator – whether company unable to pay its debts as and when they fell due – whether the argument “substantial dispute” may be raised and if so whether there was evidence of substantial dispute – whether debtor may raise the ground “just and equitable” under section 291(3)(d) of the Companies Act when not raised as a ground by the petitioner

Cases Cited:

In the Matter of the Companies Act, In the Matter of the Platinum PNG Limited (2019) N8114
Re G-Man Construction Ltd (2017) N6731

Counsel:

Mr D J Siminji, for Petitioner
Mr M Phillip, for the Respondent

JUDGMENT

17th December, 2019

1.	ANIS J:	The petitioner Delta Corporation Limited (the petitioner) applied for orders to liquidate the debtor, Platinum PNG Limited (the respondent).  The petition was contested and it was heard on 29 November 2019.  I reserved my ruling thereafter to a date to be advised.

2.	Parties have been notified so I will rule on it now.

BACKGROUND

3.	The debt, as claimed by the petitioner in its issued Creditor’s Statutory Demand for Payment of Debt (statutory demand), is K104, 000 (the debt).  The petitioner is, amongst others, a construction company.  In 2015, it was contracted by the debtor to do landscaping or levelling of 10 of its allotments which are located at 8 Mile in an area called the Kennedy Estates.  The agreement was that the debtor would pay K6, 0000 per allotment.  The petitioner completed its work for the first 10 allotments.  On 10 July 2015, it rendered a bill of K60, 000 to the debtor.  On 18 December 2015, the debtor paid K40, 000 to partly settle the bill.  The debtor again engaged the petitioner to perform the same work in relation to its additional 10 allotments.  The petitioner said that it completed the work and in a second invoice that it had sent to the debtor, it claimed a total bill of K104, 000.  According to the petitioner, the K104, 000 included the remaining outstanding K20, 000 from its first invoice, and a variation charge of 20% which added to K24, 000.  After numerous follow ups, the petitioner had issued the statutory demand to the respondent before it filed this petition.  

4.	The respondent had tried to set aside the statutory demand.  I dismissed the application on 25 November 2019 because I found that it was filed and heard outside of 1 month, that is, contrary to the requirements of section 338(2) of the Companies Act 1997 (the Companies Act).  The judgment is published as In the Matter of the Companies Act, In the Matter of the Platinum PNG Limited (2019) N8114.

PETITION

5.	The petition is supported by the following the documents:

(i)	Affidavit verifying the petition of Jeffery Kennedy filed on 20 December 2018;
(ii)	Affidavit in support of the petition by Jeffery Kennedy filed on 2 September 2019;
(iii)	Advertisement of Petition filed on 1 August 2019;
(iv)	Affidavit of Gazettal and Advertisement of the Petition filed on 2 September 2019;
(v)	Registrar’s Certificate of Compliance filed on 13 September 2019; and
(vi)	Consent of the liquidator filed on 13 September 2019.

6.	The respondent relies on one affidavit which was filed on 15 October 2019.  The deponent of that affidavit is Benny Koroka.  Mr Koroka is the Managing Director of the respondent.

7.	There is no challenge to the petitioner relying on these documents.  I am satisfied from perusing these filed documentations that they are in order as per the requirements under the Companies Act including the Company Rules.  I will move on now to consider the merit of the petition.

ISSUES

8.	I note that I have dealt with the issues relating to service of the statutory demand and also in relation to the filing of the petition, in proceeding In the Matter of the Companies Act, In the Matter of the Platinum PNG Limited (2019) N8114.  This was also noted by the parties at the hearing of this petition.

9.	The main issues therefore are, (i), where the debtor is unable to pay its debt as they become due in the ordinary course of business, and (ii), where there is a substantial dispute to the debt, and if so, whether the Court should refuse the petition and not make orders that would put the respondent into liquidation.

SECTION 291(3)

10.	Section 291(3) of the Companies Act states, in part: 

(3)	The Court may appoint a liquidator where it is satisfied that—

(a)	the company is unable to pay its debts as they become due in the ordinary course of business; or
(b)	the company or the board has persistently or seriously failed to comply with this Act; or
(c)	the company does not comply with Section 11; or
(d)	it is just and equitable that the company be put into liquidation.

ARGUMENTS

11.	The petitioner has relied on section 291(3)(a) of the Companies Act.  It submits that the respondent is unable to pay its debts as they become due in the ordinary course of business.  

12.	The respondent makes opposing submissions in two folds.  Firstly, it submits it is able to pay its debts as they become due in the ordinary course of business.  Secondly, it refers to section 291(3)(d) and submits that the Court should find that it is not just and equitable that it be put into liquidation.  The petitioner in reply submits that its basis for requesting the Court to order liquidation of the company is under section 291(3)(a) and not section 291(3)(d).  It also submits that the Court need only be satisfied of section 291(3)(a) to order liquidation of the respondent; that it need not consider section 291(3)(d) as well to make that determination.

UNABLE TO PAY DEBTS

13.	Section 335 of the Companies Act, states in part, Unless the contrary is proved, and subject to Section 336, a company is presumed to be unable to pay its debts as they become due in the ordinary course of business where—……the company has failed to comply with a statutory demand.  

14.	In the present case, the petitioner bases its claim on the statutory demand.  Can the petitioner rely on the said evidence, namely, failure by the respondent to pay its debt as demanded in the statutory demand?  The answer to that of course, is, “yes it can, that is, if the petitioner can show that it filed its petition within 1 month after the expiry of the statutory demand.”  This is required of course by section 336(1) of the Companies Act.  Section 336(1) states in part, 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.  In the present case, the admissibility of the statutory demand was not disputed by the respondent.  Regardless, I note that the petition was filed on 20 December 2018.  The statutory demand, as I have found in my earlier ruling, expired on 1 December 2018.  The petitioner had until 1 January 2019 to file its petition.  In this case, it filed its petition on 20 December 2018, which was filed within the required one month period.  As such, the statutory demand herein is admissible as good evidence to support the petition.  I find that to be the case.

15.	And the failure by the respondent to comply with the statutory demand means that it is presumed, pursuant to section 335 of the Companies Act, that the respondent is unable to pay its debts as they become due in the ordinary course of business.  I find that to be the case herein.

16.	With the said presumption now established to my satisfaction by the petitioner, the burden of proof, in my view, shall shift to the respondent to prove otherwise.  That is, the respondent should prove to my satisfaction that it is in fact able to pay its debts as they become due in the ordinary course of business.  Let me refer to the affidavit of Mr Koroka that was filed on 15 October 2019.  I note the following.  The second invoice, based upon which the debt of K104, 000 had been sought in the statutory demand, was issued to the respondent on 31 July 2016.  Evidence of that is contained in the affidavit of Mr Kennedy filed on 2 September 2019.  When I consider Mr Koroka’s affidavit, he does not attach any documentary evidence to show that the respondent disputed the debt of K104, 000 at the material time.  All there is, is what is deposed to by Mr Koroka as of 14 October 2019.  In my view, the respondent had about 3 years 3 months to do something about the debt if it had any real issues with it.  Some of the options may include filing a Court proceeding.  Mr Koroka complains in his affidavit that in fact the work was supposed to have been completed by the petitioner before the land was sold to it.  Yet I note that no action has been filed which could have addressed that.  See case:  Re G-Man Construction Ltd (2017) N6731.  The respondent had waited for more than 3 years only to now complain about the second invoice in Mr Koroka’s affidavit.  Evidence adduced also shows that the respondent has still not settled the remaining K20, 000 from the first invoice of 10 July 2015.  Mr Koroka has admitted in his evidence that the K20, 000 is not disputed.  If that is the case, then I would have to ask myself this.  Why was the K20, 000 not settled by the respondent earlier?  Why is it still owing to the petitioner after 4 years 3 months? 

17.	The respondent also argues that it has assets that are worth K3.3 million, namely, the estimated value of its 20 allotments at the Kennedy Estates.  I find this argument misconceived.  Let me explain.  Having valuable assets cannot itself be a valuable consideration under section 291(3)(a) of the Companies Act.  In other words, it cannot be a relevant consideration to test one’s ability to pay one’s debts as and when they fall due in the ordinary course of business.  I also note that Mr Koroka did not attach any proper company records of the assets of the respondent.  All he has is his sworn evidence.  And he deposes and focusses his argument on what appears to be a transaction in 2015 where the respondent purchased the 20 allotments at the Kennedy Estates for a purported sum of K3.3 million.  However, or should I say to the detriment of the respondent, what it has provided, in my view, is insufficient.  It also does not assist me to determine if the debtor is solvent and is able to pay its debts in the ordinary course of business.  

18.	To me, I therefore do not find that the respondent has discharged its burden of proof.  I find that the respondent has not established that it is able to pay its debts as and when they become due in the ordinary course of business.  I will uphold the presumption and in so doing confirm it, that is, I find, based on evidence adduced, that the respondent is unable to pay its debts as they become due in the ordinary course of business.

JUST AND EQUITABLE

19.	But before I make any final conclusions, let me consider the respondent’s argument made in regard to section 291(3)(d) of the Companies Act.  I have had the opportunity of considering the arguments by both counsel.

20.	I will uphold the submission of the petitioner.  The petitioner’s submission is made pursuant to section 291(3)(a).  The petitioner has not raised the argument nor has it requested the Court to order that the respondent be liquidated based on section 291(3)(d) of the Companies Act.  As such, it should not have warranted a response or submission on the said provision by the respondent.  In other words, the argument or the issue is constructed by the respondent without any foundation or without it being primarily raised as an issue by the petitioner.  But even if I may be wrong, I also find this.  The petitioner only needs to establish one of the grounds or situations that are stipulated under section 291(3) of the Companies Act for this Court to appoint a liquidator.  In this instance, it has done so under section 291(3)(a).  Having done so, it is entitled to the relief that is being sought.  This Court need not venture further to consider the other grounds or situations that are stipulated under section 291(3)(b), (c) or (d).  

21.	I therefore dismiss the respondent’s argument under section 291(3)(d) of the Companies Act.  

SUMMARY

22.	I will grant the relief sought in the petition.  I will order, amongst others, that the respondent be placed into liquidation.  I do so on the basis that I am satisfied that the petitioner has established, to my satisfaction, that the respondent is unable to pay its debts as and when they become due in the ordinary course of business.  The petitioner has, in my view, proven on the balance of probabilities, the requirement under section 291(3)(a) of the Companies Act.

COST

23.	An award of cost is discretionary.  In this case, I will order cost of the proceeding to follow the event.

THE ORDERS OF THE COURT

24.	I will make the following orders:

1.	That the respondent Platinum PNG Limited is put into liquidation.

2.	Darius Komb of Darkom Accountants and Business Consultants is appointed the liquidator of Platinum PNG Limited on 17 December 2019 at 1:30pm.

3.	The respondent Platinum PNG Limited shall pay the petitioner, Delta Corporation Limited’s cost of the proceeding on a party/party basis which may be taxed if not agreed.

4.	Time for entry of these orders is abridged to the date of settlement by the Deputy Registrar of the National Court which shall take place forthwith.

The Court orders accordingly.
_______________________________________________________________
Jacksons Lawyers:	Lawyers for the Petitioner
Korerua & Associates Lawyers:	Lawyers for the Respondent