SC1271

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 36 of 2011

Between:

TZEN NIUGINI LIMITED
Appellant

And:

YEMA GEIPA DEVELOPERS LIMITED
Respondent

Waigani: Injia, CJ
2011: 26 March

SUPREME COURT - Appeal – Application for leave to appeal –Interlocutory judgment by National Court granting stay of liquidation proceedings – Grounds of – Respondent failed to file and serve its notice to defend the petition within time, respondent's failure in filing and serving its application and supporting affidavits within time and respondents failure to seek and obtain special leave to be heard – Court erred in its exercise of discretion in granting the stay when the appellant had satisfied all the requirements for grant of a liquidation order - Appellant has satisfied the necessary criteria for grant of leave to appeal – Leave granted.

Counsel:

F Grifffin, for the appellant
L Kari, for the respondent 

26th March, 2011 

1. INJIA, CJ: This is an application for leave to appeal from an interlocutory judgment given by the National Court in which the Court stayed liquidation proceedings against the respondent. The application is supported by the affidavit of F Griffin of counsel for the appellant. 

2. The grounds and reasons relied upon in support of the application are contained in the leave application. The main ground is that on the day fixed for hearing of the winding up petition of the respondent company, the trial judge erred in dealing with and granting the respondent's application for a permanent stay of the liquidation proceedings, firstly, when the respondent failed to file and serve its notice to defend the petition within time; secondly, when the respondent failed to file and serve its application and supporting affidavits within time; and thirdly, when the respondent failed to seek and obtain special leave to be heard; all of which are requirements of rr 20 and 22 of the Companies Rules. The other main ground is that the Court erred in its exercise of discretion in granting the stay when the appellant had satisfied all the requirements for grant of a liquidation order. Arguments of both counsel were based on those grounds.

3. The evidence before the trial Judge established that although the notice of intention to defend was filed within time, it was served on the morning of the hearing, which is one day short of the time stipulated in r 20 of the Companies Rules. The evidence also established that the application to stay the proceedings and affidavits in support were filed but served short of the 7 days requirement in r 22 (1) of the Companies Rules. 

4. I have perused the transcript of proceedings before the trial judge and understand the arguments of counsel advanced before the trial Judges and the Judge's reasons for decision.

5. There is no contest on the relevant principles on grant of leave to appeal. The grant or refusal of leave to appeal is of course discretionary. The main test is whether the application has merit. The onus is on the applicant to show that there is a prima facie case or an arguable case that the decision was wrong and that substantial injustice will be done by leaving the erroneous decision unrevised on appeal. The Court is not determining the merits of the appeal itself. It will suffice if the Court is persuaded that the proposed appeal raises issues of law or mixed fact and law which are fairly arguable and require judicial intervention.

6. The trial Judge found that the respondent had not fully complied with the requirements of rr 20 – 22 of the Companies Rules in that the notice to defend, and the application for stay and affidavits in support were not served in time and that special leave had not been sought to move the application. These findings lend support to the appellant's first main ground.

7. Notwithstanding that non-compliance, the Court exercised its discretion under s 297 of the Companies Act, the reason being that the appellant had advanced monies to individuals and the company itself in breach of various Court orders. The appellant had also commenced proceedings for damages against the respondent for recovery of certain other debts and it was considered the debt the subject of the petition should be included in those other actions, that those proceedings should be first exhausted, and winding up should be the last resort. 

8. The grant of stay appears to be permanent as submitted by Mr Kari. In my view an exercise of discretion which results in a substantive determination which terminates or halts proceedings on a petition should not be exercised lightly in a summary manner, until all parties, particularly the petitioner, have been given ample opportunity to be heard and heard fully on the merits of the application for stay. Rules 20 and 22 inclusive of the Companies Rules facilitates that opportunity by prescribing time limits in mandatory terms. That in my view does not appear to have occurred here, in that the material that the court relied upon to exercise its discretion was largely uncontested as the appellant was denied the benefit of seven clear days of service of the application and the supporting affidavits. Also as special leave was not sought by the respondent and granted by the Court, there was no room for the application to advance any further. It appears the exercise of discretion to stay proceedings on the petition permanently under s 297 of the Companies Act was exercised summarily. I accept the thrust of Mr Griffin's submission that as a result his client was denied a fair hearing on the application and the appellant's right to litigate the issue of a permanent stay and to advance its own petition was denied. 

9. There were other procedural points argued by counsel such as whether the judgment is interlocutory or final. The point was raised by the Court at an earlier hearing but I did not pursue it at the hearing proper. Although I note Mr Kari took up the point, it should have been more appropriately done by a notice of objection to competency, which was not done in this case. For purpose of this application, I have assumed that the application for leave to appeal is properly before me in the circumstances.

10. I am satisfied that the appellant has satisfied the necessary criteria for grant of leave to appeal, and I grant that leave.

11. The formal orders of the Court are as follows:

(1)	Leave to appeal is granted.
(2)	Costs of the application shall be in the cause of the appeal.
_________________________________________________________
Young & Williams: Lawyer for the Appellant
PNG Legal Services: Lawyer for the Respondent