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Kina Bank Ltd v Lei [2019] PGNC 446; N8213 (14 November 2019)

N8213

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 865 of 2017 (COMM)

BETWEEN:
KINA BANK LIMITED
Plaintiff

AND:
BARRY LEI
Defendant

Waigani: Hartshorn J,
2019: 14^th November

PRACTICE AND PROCEDURE - Application for proceeding to be dismissed – defendant mortgaged property as security for loan obtain from the plaintiffs predecessor Kina Finance Ltd before amalgamation – defendant submits among others that proceedings by the plaintiff is abuse of process as it is not the entity to which he gave a mortgage and from which he obtained a loan – plaintiff submits it is an amalgamated company following a short form amalgamation, it having acquired the rights and liabilities of its predecessor companies, Kina Finance Ltd and PNG Home Finance Company Ltd, pursuant to s. 238(d) Companies Act - amalgamation is effective and the amalgamated company succeeds to all property, rights, powers and privileges of each of the amalgamating companies - s. 238(a) and (d) Companies Act 1997 – proceedings is not abuse of process – defendants application to dismiss proceedings is refused

Counsel:

Mr. D. Bidar, for the Plaintiff
Mr. J. Cappo, for the Defendant

14^th November, 2019

1. HARTSHORN J: This is a decision on a contested application for this proceeding to be dismissed.
   

Background

2. The plaintiff Kina Bank Ltd commenced this proceeding against the defendant Barry Lei claiming amongst others damages in the sum of K104,835.44. This is the amount alleged to be due and owing by the defendant under a loan contract entered into with Kina Finance Ltd. The defendant gave a mortgage over certain property to Kina Finance Ltd as security for the loan.
   

This application

3. The defendant seeks to dismiss this proceeding pursuant to Order 12 Rule 40(1)(a) and (c) National Court Rules on the grounds that no reasonable cause of action is disclosed, the plaintiff does not have standing and that it is an abuse of process.
   
4. The defendant submits that amongst others, that no reasonable cause of action is disclosed as the plaintiff has no standing pursuant to s. 238(d) Companies Act 1997 as:
   
   1. it is not the entity to which he gave a mortgage and from which he obtained a loan;
      
   2. the mortgage has not been transferred into the plaintiff’s name;
      
   100. the company from which he obtained the loan did not assign the loan to the plaintiff or give the defendant notice that it was transferring the loan.
        
5. The plaintiff submits amongst others that:
   
   1. it is an amalgamated company following a short form amalgamation, it having acquired the rights and liabilities of its predecessor companies, Kina Finance Ltd and PNG Home Finance Company Ltd, pursuant to s. 238(d) Companies Act;
      
   2. it has pleaded a reasonable cause of action in contract and pursuant to statute;
      
   100. this proceeding is not an abuse of process and the defendant has failed to specify the grounds upon which he alleges that the proceeding is an abuse of process.
        

Consideration

6. The defendant does not deny that he is in arrears under the loan contract he has with Kina Finance Ltd. His dismissal application is grounded upon the plaintiff, Kina Bank Ltd, not being the entity with which he contracted or the entity from which he obtained the loan and which has the benefit of the mortgage that he gave to secure the loan.
   
7. The plaintiff is an amalgamated company. It amalgamated with its two wholly owned subsidiaries, Kina Finance Ltd and PNG Home Finance Company Ltd. In evidence is the certificate of amalgamation certifying that the amalgamation took effect on 1^st July 2016 and that the name of the amalgamated company is Kina Bank Ltd.
   
8. Section 238 Companies Act provides for the effect of the certificate of amalgamation. Pursuant to s. 238(a) and (d), on the date shown in a certificate of amalgamation, the amalgamation is effective and the amalgamated company succeeds to all property, rights, powers and privileges of each of the amalgamating companies. Section 239 Companies Act provides for the effect on registers. Section 239(1) relevantly provides that where an amalgamation becomes effective, no person charged with the keeping of any books or registers shall be obliged to change the name of an amalgamating company to that of an amalgamated company in those books or registers or in any documents.
   
9. The effect of these sections is that where an amalgamation becomes effective, it is not necessary for the name of an amalgamating company to be changed to the name of the amalgamated company as the amalgamated company, in this instance Kina Bank Ltd, has from the date of the effect of the amalgamation, succeeded to all property etc. of the amalgamating companies, in this instance Kina Finance Ltd.
   
10. Section 239(4) Companies Act confirms that this is the position in regard to the registration of documents concerning Real Property by expressly providing that the provisions of the Land Registration Act are not affected, except as provided in s.239 Companies Act.
    
11. In regard to the submission that the loan and mortgage have not been transferred or assigned, it is not necessary that this occur. The operation of the sections of the Companies Act to which I have referred, have that necessary effect. As to no notice being given to the defendant, again no notice is necessary by virtue of the operation of the sections of the Companies Act to which I have referred. Further, I am not aware of any provisions in the loan or mortgage documentation requiring such notice and none were brought to the attention of this court by the defendant.
    
12. I am satisfied from a perusal of the pleadings and evidence before this court and for the above reasons that the plaintiff has the necessary standing and that a reasonable cause of action is disclosed.
    
13. In regard to the proceeding being an abuse of process, there is nothing to substantiate this submission. This submission is without merit.
    
14. Consequently, the notice of motion of the defendant seeking dismissal should itself be dismissed as the requirements for a dismissal under Order 12 Rule 40 National Court Rules have not been met.
    

Orders

15. It is ordered that:
    
    1. The notice of motion of the defendant filed 25^thMay 2018 is dismissed;
       
    2. The defendant shall pay the plaintiff’s costs of and incidental to the said notice of motion;
       
    100. Time is abridged.

__________________________________________________________________
O’Briens: Lawyers for the Plaintiff
Western Pacific Legal Services: Lawyers for the Defendant