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Supreme Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA NO 87 OF 2008
BETWEEN:
DEPARTMENT OF WORKS & THE STATE AS THE PRINCIPAL CREDITORS
Appellants
AND:
IN THE MATTER OF INTERNATIONAL CONSTRUCTION (PNG) LTD (IN LIQUIDATION)
Respondent
AND:
IN THE MATTER OF THE COMPANIES ACT 1997
Waigani: Injia CJ, Lay & Yagi JJ
2008: 27th October
2008: 24th July
2009: 27th April
PRACTICE AND PROCEDURE - Supreme Court Act s. 14 (3) (b) – objection to competency of appeal – COMPANIES ACT 1997 – application by the liquidator for an order for assistance – whether application interlocutory or final – Companies Act – s.332 (1) (a); Appropriate forms and procedure to be applied – Companies Act and Companies Rules & National Court Rules
Facts:
The Respondent obtained an order that a consignment of eight (8) containers of bridge parts removed from the Respondent’s premises by the Appellant be restored to the Respondent’s premises. The Appellant sought leave to appear to set aside this order, which was refused. The Appellant therefore appealed against the refusal.
The Respondent objected to competency of the appeal arguing that the notice of appeal failed to comply with section 14 (3) (b) of the Supreme Court Act as no leave to appeal was obtained. The issue was whether leave of this Court is required in respect to an appeal against an order of the National Court refusing to grant leave to a creditor pursuant to s.332 (1) of the Companies Act to contest an order of the Court restoring possession of property to the liquidator.
Held:
1. The National Court did not determine rights of ownership in the property.
2. The order of the National Court in refusing grant of leave in an application pursuant to s.332 (1) of the Companies Act to restore to the custody of the liquidator property removed without order of the Court is interlocutory in nature and therefore
leave is required under s.14 (3)(b) of the Supreme Court Act.
3. The objection to competency is upheld.
4. The appeal is dismissed as being incompetent
5. The Appellants pay the Respondent’s costs in the appeal
Cases Cited:
Papua New Guinea cases
Rimbink Pato v Julius Chan & Ors – SC527
Paul Bari, Orim Bari and State v John Raim – SC768
Kitogara Holdings Pty Ltd v National Capital District Interim Commission & Ors [1988-89] PNGLR 346; SC371
Overseas Cases:
The Avenue Builders Ltd (In Liquidation) v The Avenue Ltd [2005] in NZHC 481
GCA Legal Trustees (2004) Ltd Brashside Farm NO 2 Limited and Anor v Consultant Management Services Ltd & Ors [2007] NZHC 1179
Kiwi Marketing Inc v Prima Technologies Ltd [2008] NZHC 696
Hickson v Fresh Prepared Ltd [2007] NZHC 1233
Walter and Anor as Liquidators of Kiwi International Airlines [2006] NZHC 870
Trinity Foundation (Services No 1) v Downey & Anor [2006] NZHC 310
Counsel:
L. Putupen, for the Appellants
I. Shepherd, for the Respondents
27th April, 2009
DECISION
1. BY THE COURT: This is a ruling on the Respondent’s objection to competency of the appeal. The appeal concerns eight (8) shipping containers of bridge parts which were in possession of the Respondent when it was placed in liquidation. The Appellant removed the containers to its own premises without the consent of the liquidator or any order of the Court. The Respondent liquidator obtained an order for the containers and contents to be returned to the premises of the company, and they were returned. The Appellants then sought leave to appear to set aside the ex parte order on the basis of the Appellant’s alleged proprietary interest in the bridge parts. That leave was refused and it is from that refusal that the Appellant appeals.
GROUNDS OF OBJECTION TO COMPETENCY
2. The Respondent raised 13 grounds of objection to which 11 were withdrawn or abandoned at the hearing. The grounds pursued were grounds 3 and 4. Ground 4 is in effect the same as ground 3 and therefore both were argued together. These grounds are stated as follows:
"3. The whole of the Notice of Appeal is incompetent because the appellants seek to appeal the decision of His Honour Justice Hartshorn handed down on 17 July 2008, in circumstances where His Honour was determining an interlocutory application.
Accordingly, the appellants failed to seek leave to appeal pursuant to section 14(3) (b) of the Supreme Court Act.
4. The whole of the Notice of Appeal is incompetent because the liquidation of International Construction (PNG) Limited has not been terminated or completed.
Accordingly, the appellants failed to seek leave to appeal pursuant to section 14(3)(b) of the Supreme Court Act."
Nature of Objection
3. It is clear from the remaining grounds of objection that the Respondent is raising the issue of the Court’s jurisdiction under section 14(3) of the Supreme Court Act. this provision states:
"(3) No appeal lies to the Supreme Court without leave of the Supreme Court.
(a) from an order allowing an extension of time for appealing or applying for leave to appeal; or
(b) from an interlocutory judgment made or given by the National Court except -
(i) where the liberty of the subject or the custody of infants is concerned; or
(ii) in cases of granting or refusing an injunction or appointing a receiver; or
(iii) in such other cases prescribed by the Rules of Court as are in the nature of final decisions; or
(c) from an order of the National Court as to costs only that by law are left to the discretion of the National Court."
Notice of Appeal
4. The notice of appeal filed by the Appellants states that the appeal lies without leave and is made pursuant to section 14(1)(a) and (b) and subsection (4) of the Supreme Court Act.
Issue
5. Clearly there is only one issue before the Court for determination. The issue is where leave of this Court is required in respect to an appeal against an order of the National Court refusing to grant leave to set aside an ex parte order or decision of the National Court restoring possession of property to the liquidator pursuant to s. 332(1) of the Companies Act.
Respondent’s Argument
6. The Respondent argues that the appeal is incompetent on the basis that it is in breach of section 14(3)(b) of the Supreme Court Act. It was submitted that the decision of the National Court was of an interlocutory nature and therefore leave of the Court should have been obtained. In this case, the Respondent submits no leave was granted by this Court to appeal the interlocutory decision of the National Court.
Facts
7. The facts of this particular case are straight forward. In or about March 2007 the State entered into contracts with the Respondent for the procurement, supply and construction of bridges in the country.
8. An advance payment in excess of K3 million was made by the State to the Respondent. It appears the payment was made in accordance with the terms of the contract to enable the Respondent to import the bridge parts from overseas based suppliers in the Netherlands. Thereafter the State made additional payments which amounted to more than K6 million in total under the contracts.
9. The bridge component parts arrived in Papua New Guinea in eight (8) shipping containers before the Respondent company was placed in liquidation. These eight (8) shipping containers were kept at the premises of the Respondent company in Lae.
10. On 19 November 2007 the National Court made an order putting the Respondent company into liquidation. The Court also appointed Mr. James Kruse as the liquidator of the company pursuant to s. 291 of the Companies Act. These orders were made following a winding-up petition in proceedings MP. No. 205 of 2006.
11. By virtue of s. 298(1)(a) of the Companies Act, on commencement of the liquidation, all the assets of the Respondent were vested in the custody and control of the Liquidator. Section 298(1)(a) stated:
"298. Effect of commencement of liquidation.
(1) With effect from the commencement of the liquidation of a company-
(a) the liquidator has custody and control of the company’s assets; and
(b) ............................."
12. Upon assuming his duties and responsibilities, the Liquidator undertook an audit exercise or stock-take and determined that the 8 shipping containers of bridge parts were part of the assets of the Respondent company.
13. The Liquidator then published a tender advertisement for the sale of the bridge parts.
14. When the Department of Works became aware of the pending sale, it acted quickly and without the knowledge and consent of the Liquidator, in removing the 8 shipping containers of bridge parts from the Respondent’s premises in Lae and transferred them to its premises also in Lae.
15. On learning of the actions of the Department of Works, the Liquidator made an urgent application on 29 of February 2008 to the National Court and obtained orders ex parte for the recovery of the assets. The Court made the following orders:
"1. Leave to dispense with the service of this summons is granted
2. Pursuant to section 332(1) of the companies Act, John Wakma, the Provincial Works Manager, Department of Works, Morobe Province, is directed to assist the Liquidator, James Kruse, his servants or agents in the recover of 8 containers containing bridge components (more particularly described in the Schedule hereto) ("the containers") which were unlawfully removed from the company’s Malahang Estate property by John Wakma, his servants or agents on the 26th February 2008 and taken into the Provincial Works property at Milfordhaven Road, Lae.
3. Pursuant to Section 332(1) of the Companies Act, John Wakma, the Provincial Works Manager, Department of Works, Morobe Province, by his servants or agents be restrained from interfering with or obstructing the removal of the containers from the Provincial Works property at Milfordhaven Road, Lae by the Liquidator, his servants or agents.
4. Pursuant to Section 332(1) of the Companies Act, that the Station Commander, Lae Police Station, Morobe Province, is directed to assist the Liquidator, his servants or agents with the recovery of the containers from the Provincial Works property at Milfordhaven Road, Lae with transportation to the company’s premises at Malahang Estate at Lae.
5. That a sealed copy of the within orders be served on John Wakma, Provincial Works Manager, Morobe Province by facsimile and personal service together with a sealed copy of the Summons and Affidavit of James Kruse sworn on 28th of February 2008.
6. The time for the entry of these orders be abridged to the date of settlement by the Registrar which shall take place forthwith."
16. Following the orders made by the National Court, the Liquidator recovered the containers."
Form of Summons
17. We note that the application was made by way of a summons in accordance with the form provided under the National Court Rules.
18. The Company Rules provides for various forms to be used in varying situations, however, it does not provide for the form that is specific nor appropriate to applications under section 332(1)(a) of the Companies Act. The Summons filed in Court was presented in the form of an originating summons. We set out the form below:
"IN THE NATIONAL COURT )
OF JUSTICE AT WAIGANI ) MP. No. 205 of 2006
PAPUA NEW GUINEA )
BETWEEN:
IN THE MATTER OF THE
COMPANIES ACT 1997
AND:
IN THE MATTER OF
INTERNATIONAL
CONSTRUCTION (PNG)
LIMITED (In Liquidation)
SUMMONS
The Applicant claims the following orders:
1. Pursuant to Section 332(1) of the Companies Act, John Wakma, the Provincial Works Manager, Department of Works, Morobe Province, is directed to assist the Liquidator, James Kruse, his servants or agents in the recover of 8 containers containing bridge components (more particularly described in the Schedule hereto) ("the containers") which were unlawfully removed from the company’s Malahang Estate property by John Wakma, his servants or agents on the 26th of February 2008 and taken into the Provincial Works property at Milfordhaven Road, Lae.
2. Pursuant to Section 332(1) of the Companies Act, John Wakma, the Provincial Works Manager, Department of Works, Morobe Province his servants or agents be restrained from interfering with or obstructing the removal of the containers from the Provincial Works property in Milfordhaven Road, Lae by the Liquidator, his servants or agents.
3. Pursuant to Section 332(1) of the Companies Act, that the Station Commander, Lae Police Station, Morobe Province is directed to assist the Liquidator his servants or agents with the recover of the containers from the Provincial Works property at Milfordhaven Road, Lae with transportation to the companies premises at Malahang Estate at Lae.
4. Costs of this application together with the costs of transportation of the containers from the Provincial Works property at Milfordhaven Road, Lae to Malahang Estate be borne by the Department of Works, Morobe Province.
5. That the sealed copy of the within Orders be served on John Wakma, Provincial Works Manager, Morobe Province by facsimile and personal service together with a sealed copy of the Summons and Affidavit of James Kruse sworn 28 February 2008.
6. The time for the entry of these orders be abridged to the date of settlement by the Registrar which shall take place forthwith.
Time and place of hearing:
Time: The day of 2008 at a.m.
Place: National Court, Waigani, NCD.
Applicant: James Kruse (Liquidator)
Deloitte Touche Tohmatsu
P.O. Box 1275
Port Moresby NCD
Lawyers for the Applicant: Blake Dawson Waldron
4th Floor
Mogoru Moto Building
Champion Parade
(P.O. Box 850)
Port Moresby NCD
Telephone: 3092000
Facsimile: 2092099
Applicant’s address for service: c/- Blake Dawson Waldron
4th Floor
Mogoru Moto Building
Champion Parade
(P.O. Box 850)
Port Moresby NCD
Address of Registry: National Court of Justice
Waigani NCD
IAN R SHEPHERD
(Signed)
_____________________
Lawyer for the Applicant"
SCHEDULE
30mtr = 2 x 20 ft Containers, (1 x 32.8mtrs, Free Span, Single Bearing (8 x 4mtr) x 3.5mtr width between kerbs, approximately 45 tonnes de\ad load)
60mtr = 6 x 20 ft Containers, (1 x 60.8mtrs, Free Span, Single Bearing (15 x 4mtr) x 3.5mtr width between kerbs, Approximately 120 tones de\ad load)"
19. Clearly the form of the summons is different to the general summons form provided under the Companies Rules. It is also clear that the form used is in accordance with form 6 under the National Court Rules.
20. The Companies Rules provide for the practice and procedure including forms to be used when bringing proceedings before the Registrar or the National Court under the Companies Act. Section 2, 3, 4 and 5 of the Companies Rules state:
"2. General Rules and practice of National Court to apply.
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.
3. Title of proceedings.
Every petition, notice of motion and summons and all notices, affidavits and other documents in any proceedings under the Act shall be entitled "In the National Court of Papua New Guinea, in the matter of the Companies Act, and in the matter ..." (the company to which the proceeding relates) with the addition of the words "in liquidation" where the company is in liquidation.
4. Exclusive powers of Registrar.
No matter that is authorized by or under these Rules to be heard and determined by the Registrar may be brought before the Court or a Judge except –
(a) on a reference from the Registrar; or
(b) on an appeal under Section 6; or
(c) by special leave of the Court or Judge.
5. References by Registrar to the Court.
If any matter brought before the Registrar appears to him proper for the decision of a Judge, the Registrar may, and when required by any party shall, refer the matter to a Judge, and the Judge may dispose of the matter or refer it back to the Registrar with such directions as he thinks proper."
21. Rule 2 of the Companies Rules expressly provide that the rules and practice of the National Court apply to proceedings instituted in the National Court. However, the application of the rules and practice of the Court is subject to the Companies Act and the Companies Rules.
22. In the present case, the Companies Act and the Companies Rules do not prescribe an appropriate form to be used in respect to an application for relief under section 332(1) of the Companies Act.
23. The application by the Respondent to the National Court was made in the form of an originating summons, a form prescribed under the National Court Rules.
24. We are of our view the form adopted by the Respondent is permissible and in accordance with Rules 2 and 3 of the Companies Rules.
25. Furthermore, Order 1 Rule 8 of the National Court Rules clearly provides that proceedings are not to be vitiated merely for want of form. The Courts have been consistently exercising its discretion along that line so as not to prevent a party from seeking his or her rights in accordance with law.
26. We are also of the view that until such time as more specific rules or forms are prescribed, an originating summons is the appropriate form to be used in such applications.
Nature of the Relief under s. 332(1) of the Companies Act
27. Section 332 is designed to give jurisdiction to the Court in a wide range of circumstances, both to assist the liquidator and if necessary to control the liquidator by reviewing his decisions, examining or auditing his accounts and controlling the remuneration which he claims; examining the validity of his appointment (if appointed by directors, not the Court, because the Section gives no jurisdiction to review a decision of another judge of the same court: The Avenue Builders Ltd (In Liquidation) v 11 The Avenue Ltd [2005] in NZHC 481); and determined whether or not he has correctly claimed possession of property.
28. Some examples of the circumstances in which it has been relied upon in New Zealand, which has an identically worded section, are an application to determine who was responsible for payment of the liquidator’s costs, which were not secured by the liquidator before termination of liquidation: GCA Legal Trustee (2004) Ltd Brashside Farm No. 2 Limited and Anor v Consultant Management Services Ltd & Ors [2007] NZHC 1179; an application for directions where the directors appointed a liquidator and the Court appointed a liquidator: The Avenue Builders Ltd (In Liquidation) v 11 The Avenue Ltd [2005] NZHC 481; an application to set aside the liquidators decision not to proceed with arbitration proceedings brought by the company before liquidation and to contest the decision to reject a claim; Kiwi Marketing Inc v Prima Technologies Ltd [2008] NZHC 696; application for a declaration that the appointment of the liquidator by the directors was a sham; Hickson v Fresh Prepared Ltd [2007] NZHC 1233; application to give the liquidator directions on a course of action to take where the cost of determining the validity of thousands of small claims and making distributions would far exceed the available assets; Walter and Anor as Liquidators of Kiwi International Airlines [2006] NZHC 870.
29. Some of the applications which can be made under section 332 clearly produce decisions of a final nature. Others such as some orders for guidance or assistance of the liquidator will be of a purely interlocutory nature provided they do not finally determine the rights of a person affected by the order.
30. The right to seek the relief under section 332(1) is both automatic and qualified. It is automatic to certain class of persons whilst it is qualified to some. The right is only available to liquidators, a liquidation committee, the Registrar, a creditor, shareholder or other entitled person or director of a company in liquidation. In so far as it concerns a creditor (amongst others); this right is qualified to the extent that leave of the Court is required before any relief sought is granted.
31. The effect of a qualified right and standing of a creditor in applications under section 332(1) means that a creditor has no recognized right or locus standi unless leave is granted by the Court. Where leave is refused or not granted it simply means that a creditor has no standing in respect of any application that may be made under that provision.
Appellant’s Arguments
32. We now turn to the arguments raised by the Appellants.
33. The first argument is that the relief under s. 332(1) of the Companies Act is not interlocutory in nature. We do not agree with this submission. The principle as to what is an interlocutory judgment or order is settled in our jurisdiction. The authorities draw the distinction between an interlocutory order and final order by looking at the nature of the application and whether the order resulted in the final determination of the rights of the parties in the proceedings. See Rimbink Pato v Julius Chan & Ors – Sc 526; Paul Bari, Orim Bari and State v John Raim – SC 768.
34. In our opinion the application by the Respondent was interlocutory in nature because the principal order sought in paragraph 1 of the summons was in the nature of an assistance order that was necessary to enable the liquidator to restore the status quo to recover the assets which were in his possession at the commencement of the liquidation and in respect of which no consent of the liquidator nor other of the court authorized their removal. All other orders are consequential orders.
35. The application was to seek the assistance of the Court for the performance of duties authorized and sanctioned by the Court. The application was made pursuant to s 332(1) of the Companies Act, which grants to the liquidator a right to seek directions of the Court "in connection with the liquidation". Section 332 states:
"332. Court supervision of liquidation.
(1) On the application of the liquidator, a liquidation committee, the Registrar, or, with the leave of the Court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the Court may -
(a) give directions in relation to any matter arising in connection with the liquidation; and
(b) confirm, reverse, or modify an act or decision of the liquidator; and
(c) order an audit of the accounts of the liquidation; and
(d) order the liquidator to produce the accounts and records of the liquidation for audit and to provide the auditor with such information concerning the conduct of the liquidation as the auditor requests; and
(e) in respect of any period, review or fix the remuneration of the liquidator at a level which is reasonable in the circumstances; and
(f) to the extent that an amount retained by the liquidator as remuneration is found by the Court to be unreasonable in the circumstances, order the liquidator to refund the amount; and
(g) declare whether or not the liquidator was validly appointed or validly assumed custody or control of property; and
(h) make an order concerning the retention or the disposition of the accounts and records of the liquidation or of the company.
(2) The powers given by Subsection (1) are in addition to any other powers the Court may exercise in its jurisdiction relating to liquidators under this Part, and may be exercised in relation to a matter occurring either before or after the commencement of the liquidation, or the removal of the company from the register, and whether or not the liquidator has ceased to act as liquidator when the application or the order is made.
(3) Subject to Subsection (4), a liquidator who has –
(a) obtained a direction of the Court with respect to a matter connected with the exercise of the powers or functions of liquidator; and
(b) acted in accordance with the direction,
is entitled to rely on having so acted as a defence to a claim in relation to anything done or not done in accordance with the direction.
(4) The Court may, on the application of any person, order that, by reason of the circumstances in which a direction was obtained under Subsection (1), the liquidator does not have the protection given by Subsection (3)."
36. The phrase "in connection with the liquidation" in subsection (1)(a) has not been judicially considered in this jurisdiction. However, we see no basis for giving a restricted meaning and interpretation to the provision. The plain and ordinary meaning of this phrase, in our view, means that the Court is empowered to give such directions that are deemed necessary and appropriate in the circumstances of the case in relation to any matter that concerns or relates to the liquidation process.
37. But it cannot be said that all relief sought under section 332 is either final or interlocutory. As the authorities at paragraph 33 say you have to look at the effect of the order. In this case all the order did, which the Appellant sought to disturb, was restore the status quo in respect of possession of the containers of bridge parts. It did not decide rights of ownership. It is specifically a helping hand to the liquidator to ensure good governance and orderly progress of the liquidation, correctly discouraging creditors from self-help to the property which was in possession of and prima facie part of the assets of the company. In our view the order was of an interlocutory nature in the course of the liquidation and we find no merit in the argument to the contrary.
38. The second and third arguments are in effect the same and we therefore deal with them together. The Appellants argue that the liquidator’s application pursuant to the provisions of s. 332(1) of the Companies Act was in effect making a claim in respect to title or ownership over the properties and therefore their rights were extinguished when the National Court refused to grant unconditional leave to defend the application.
39. On closer perusal of the summons we find nothing that purports to seek any substantive rights or remedy as regards to ownership or title to the properties; hence no dispute as to title or ownership had arisen in relation to that application. The Respondent’s application was solely to restore the status quo as regards the custody of the property.
40. In our view any property that is in the possession of the Respondent at the time of liquidation is prima facie property of the Respondent. There is nothing preventing the Appellants from pursuing any alleged claim of right to ownership of property separately. As we alluded to by virtue of s. 298(1)(a) of the Companies Act, all assets of the company legally vest in the liquidator unless determined otherwise.
41. In this case we note that the Appellants have not instituted any proceeding or action challenging the liquidators claim to the properties. We therefore reject this argument as well. There would not appear to be any bar to the Appellants seeking leave to obtain a ruling pursuant to section 332(1)(g) as to whether the liquidator "validly assumed custody or control of the property". That leave would normally be granted where the applicant can show an arguable case that its rights are affected: Hickson v Fresh Preparded Ltd [2007] in NZHC 1233, applied in Trinity Foundation (Services No. 1) v Downey & Anor [2006] NZHC 310. Naturally, in the circumstances of the case, the applicant would have to demonstrate rights beyond those of an ordinary unsecured creditor.
42. The result is that we find that the Appellant’s appeal is against an interlocutory order made by the National Court in refusing to grant leave and consequently by virtue of s. 14(3) of the Supreme Courts Act leave of this Court is required.
43. We therefore uphold the objections by the Respondent and dismiss the appeal as being incompetent.
44. There is one aspect of the appeal that we would like to comment on in passing. Paragraph 3 of the orders made on 28 of February 2008 appears to in the nature of an injunction. This order reads -
"3. Pursuant to Section 332(1) of the Companies Act, John Wakma, the Provincial Works Manager, Department of Works, Morobe Province, by his servants or agents be restrained from interfering with or obstructing the removal of the containers from the Provincial Works property at Milfordhaven Road, Lae by the Liquidator, his servants or agents.
45. Under Section 14(3)(ii) of the Supreme Court Act, leave is not required in cases where there is an appeal against a grant of injunction. The Appellants may have a right to appeal that order based on the principle in Kitogara Holdings Pty Limited v. National Capital District Interim Commission & Others [1988-89] PNGLR 346. However, we note that none of the grounds raised in the notice of appeal challenged that injunctive order and therefore we see no basis for deciding this point.
46. The orders of the Court are therefore that:
___________________________________________
Greg Manda Lawyers: Lawyers for the Appellants
Blake Dawson Lawyers: Lawyers for the Respondent
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