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Pacific International Freight PNG Ltd (1-109325), In re [2019] PGNC 476; N8400 (24 June 2019)

N8400

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP 9 OF 2019 (COM)

BETWEEN:
IN THE MATTER OF THE
COMPANIES ACT 1997

AND:
IN THE MATTER OF
PACIFIC INTERNATIONAL FREIGHT
PNG LIMITED (1-109325)

Waigani: Hartshorn J
2019: 21^st & 24^th June

COMPANY LAW – Liquidation - Petition for the liquidation of a company - court may appoint a liquidator where it is satisfied that the company is unable to pay its debts as they become due in the ordinary course of business - s.291(3)(a) Companies Act – solvency test under s 4 Companies Act considered – PIF does not meet solvency test – application to appoint liquidator granted

Cases Cited:

In re Star Ships (PNG) Limited (2016) N6580
Nathaniel Poya v. Rex Paki (2008) N3535
Agmark Pacific Limited and James Sinton Spence Liquidator of Sepik Coffee J.V. Ltd (2007) N3223

Counsel:

Mr. J. Kihanges, for the Petitioner

Oral decision delivered on
24^th June 2019

1. HARTSHORN J: The petitioner Black Swan (PNG) Limited (Black Swan) petitions that Pacific International Freight PNG Limited (PIF) be placed into liquidation by the appointment of a liquidator. This is on the basis that PIF is unable to pay its debts as they become due in the ordinary course of business and that it is just and equitable.

2. I permitted the petition to be moved in the absence of representation of PIF as I was satisfied that PIF was aware that the petition was to be heard at the date and time that it was as the last time the petition came before the court, Counsel Ms. J. Terra appeared for PIF and consented to the petition being adjourned for hearing to the said date and time. Further, the time and date of the hearing of the petition appeared in the advertisement of the petition which was published in the National Gazette and the Post Courier newspaper.

Whether a liquidator should be appointed

3. Black Swan relies on its petition presented on 15^th March 2019 and an affidavit verifying petition sworn and filed the same day. It seeks that a liquidator be appointed to PIF pursuant to s.291(1) and 291(2)(c) Companies Act on the grounds that PIF is unable to pay its debts as they become due in the ordinary course of business and that it is just and equitable to do so.

4. Pursuant to s.291(3)(a) Companies Act, the court may appoint a liquidator where it is satisfied that the company is unable to pay its debts as they become due in the ordinary course of business. Section 335 deals with how a presumption arises that a company is unable to pay its debts. Section 336 (2) provides:

“Section 335 does not prevent proof by other means that a company is unable to pay its debts as they become due in the ordinary course of business.”

5. In this instance Black Swan seeks to prove that PIF is unable to pay its debts by other means by relying on evidence other than that referred to in s.335 Companies Act, which it is permitted to do by virtue of s.336 (2) Companies Act.

Evidence

6. There is evidence in support of the petition concerning amongst others the debt owed to Black Swan and another creditor; the gazettal and publication of the petition; service upon the lawyer for PIF and a notice of intention to appear filed on behalf of PIF; the consent of a person to be a liquidator and a compliance certificate by the Registrar, National Court. I am satisfied from a perusal of the documentation filed and relied upon that all of the procedural requirements of the Companies Act and Rules have been complied with. Further, there is no appearance on behalf of PIF to take objection to any non-compliance, notwithstanding that a notice of intention to appear on the petition to oppose the petition has been filed.

7. As to proving the grounds, first, Black Swan relies upon the evidence concerning the debt owed to it by PIF.

8. Black Swan served a Form 42 Creditor’s Statutory Demand on PIF on 18^th September 2018 for the debt owing being for the provision of security and related services at PIF’s own request.

9. PIF then instituted court proceeding OS No. 736 of 2018 (CC2): Pacific International Freight PNG Ltd v. Black Swan (PNG) Ltd and sought to set aside the Form 42. Since instituting this proceeding PIF has not taken any step to have the matter heard and determined by the Court.

10. In this proceeding, Mr. Monogenis, the Managing Director of PIF, deposed to an affidavit which is annexed and marked “A” to the affidavit of Brent Thompson.

11. In paragraph 15 of Mr. Monogenis’s affidavit, he deposes that PIF owes Black Swan a sum of K72,666.00 which will be paid in monthly installments.

12. On 27^th February 2019, PIF made a part payment of K24,121 to Black Swan’s Bank South Pacific bank account. This amount was deducted from PIF’s debt of K72,666.00, resulting in an outstanding debt of K48,545.00 still due and owing to Black Swan.

13. As at the date of filing of the Affidavit Verifying Petition and the date of hearing of this Petition, this amount remains unsatisfied.

14. PIF, through Mr. Monogenis’s evidence, acknowledges that there is a debt, that it made a part payment of it and that there is an amount still outstanding.

15. Secondly, Black Swan relies upon the evidence concerning a debt owed to Bismil Trading.

16. At the request of Mr. Monogenis, Bismil Trading, the supporting Creditor to this Petition, provided neoprene stubby coolers and beer coasters to him.

17. Thereafter, at the request of Mr. Monogenis, the invoice for the charges was split between two of his companies: BCMS PNG Limited and PIF.

18. The total amount of the invoices was K34,375.00. That amount was equally divided between the two companies being K17,187.50 respectively.

19. Tax invoices were sent to the respective companies. Bismil Trading issued a Tax Invoice No.41922-1 on 18^th May 2017 for the amount. To date, the amount of K17,187.50 remains outstanding.

20. On 28^th February 2019, a follow up invoice in relation to this outstanding amount was issued to PIF requiring it to pay the amount. To date, this amount still remains outstanding.

21. The evidence provided by Black Swan and Bismil Trading concerning the outstanding debts owed to them by PIF totals K65,732.50. This is evidence of an inability by PIF to pay its debts as and when they fall due in the ordinary course of business.

22. The amount of K65,732.50 is more than the prescribed sum set out under s.18 Companies Regulation 1998 which provides that the prescribed sum for a winding up application should not be less than K1,000.00

23. I am satisfied from a consideration of the above evidence that Black Swan has proved to the Court to the requisite standard that PIF is unable to pay its debts as they become due in the ordinary course of business. This is so because of the two debts that have remained outstanding for a considerable period, the acknowledgment that the debts are owing and that payment cannot be made.

24. Further, although solvency is not the ground upon which this petition is brought, if solvency is considered, s.4 Companies Act relevantly is as follows:

“4. Meaning of “solvency test”.

(1) For the purposes of this Act, a company satisfies the solvency test where –

• (a) the company is able to pay its debts as they become due in the ordinary course of business; and
• (b) the value of the company’s assets is greater than the value of its liabilities, including contingent liabilities.”
  

25. Further, as I said in In re Star Ships (PNG) Limited (2016) N6580:

“I note the comments of Gabi J in Nathaniel Poya v. Rex Paki (2008) N3535. That case concerned an application to terminate a liquidation but His Honour’s comments as to solvency are pertinent. At p10, His Honour said:

“11. Solvency is an important consideration in an application to terminate liquidation. The question is whether the company meets the solvency test. There are 2 requirements: First, the company must be able to pay its creditors as the debts fall due. Second, assets must exceed liabilities. Both requirements must be met for a company is said to be solvent (see In the matter of an application by Agmark Pacific Ltd and James Sinton Spence Liquidator of Sepik Coffee J.V. Ltd (In Liquidation) (2007) N3223....”

26. I am satisfied that on the above definition of the solvency test, as I am of the view that PIF is unable to pay its debts as they become due in the ordinary course of business, PIF does not meet the solvency test.

27. I also refer to and take into account that there was no appearance on behalf of PIF at the hearing notwithstanding that PIF gave notice that it would appear and oppose this petition and notwithstanding that counsel for PIF is aware of the petition hearing time and date.

28. That there was no appearance for PIF in such circumstances at a hearing that clearly has serious consequences for PIF, permits the Court to form the view that PIF is now not concerned with whether it is placed into liquidation.

29. In the circumstances and taking all of the evidence into account, I am satisfied that this court should exercise its discretion in favour of appointing a liquidator to PIF as it is unable to pay its debts in the ordinary course of business. Further, PIF does not meet the solvency test in s.4 Companies Act. I am satisfied that it is just and equitable that a liquidator be appointed. Given this it is not necessary to consider the other submissions of counsel.

Order

30. The Court orders that:

a) Pacific International Freight PNG Limited (1-109325) is placed into liquidation;

b) Andrew Pini is appointed the liquidator of Pacific International Freight PNG Limited on 24^th June 2019 at 10:00am;

c) Pacific International Freight PNG Limited shall pay the costs of and incidental to this petition of the petitioner.
_______________________________________________________________________
Fiocco & Nutley Lawyers: Lawyers for the Petitioner
Pacific International Freight PNG Ltd In-house Counsel: Lawyers for the Company