sc2853

PAPUA NEW GUINEA
[SUPREME COURT OF JUSTICE]

SCA 25 OF 2025

IN THE MATTER OF THE COMPANIES ACT 1997

AND:

IN THE MATTER OF PIUNDE LIMITED (IN LIQUIDATION) (1-7905)
Applicant

WAIGANI: LOGAN J, ANIS J, CROWLEY J
23, 27 FEBRUARY 2026

COMPANY LAW AND PRACTICE – where the appellants are directors of a company in liquidation – where the appellants seek termination of liquidation under the Companies Act 1997 – where the appellants failed to notify and serve the application to terminate liquidation on the creditors – whether it was just and equitable to terminate the liquidation – appeal dismissed.

Facts

1.	On 20 March 2015 the National Court ordered that Piunde Ltd be put into liquidation by the appointment as liquidator of Mr James Kruse of Deloitte Touche Tohmatsu.
2.	On 27 March 2018, the directors of Piunde, filed a motion in the National Court seeking that the liquidation be terminated. That application was dismissed on 16 May 2024.
3.	The directors of Piunde filed an appeal against the order of dismissal on 17 March 2025.
4.	The appellants argued that it was just and equitable to terminate the liquidation because: the company was solvent; there was misconduct on the part of the liquidator; and that if there was an obligation to notify the creditors of the termination application, that the creditors were notified.
5.	The issue before the court was whether the primary judge erred in failing to exercise the discretionary power of the court to terminate liquidation of Piunde on the basis it was just and equitable to do so.
HELD:

1.	The burden to prove that the liquidation of the company should be terminated as it is just and equitable to do so falls on the appellants.
2.	The power of the court to terminate liquidation because it is just and equitable to do so is a discretionary remedy.
3.	While what is “just and equitable” is an irreducible concept, the elements of which cannot be exhaustively stated, indications such as a failure to: notify creditors of the application to terminate liquidation; prove solvency; and  lodge annual company returns and pay goods and services tax, were relevant considerations the primary judge took into account.
4.	The primary judge did not err in concluding, on the evidence before the court, it was not just and equitable to terminate the liquidation. 

Cases cited

Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
In re Piunde Ltd (In Liquidation) [2015] PGNC 302; N6656
In re Piunde Ltd (In Liquidation) [2015] PGNC 303; N6657
In the Mattter of Kamsi Trading Ltd (1-13612) [2005] PGSC 44; SC784
Re Bank of Queensland Ltd (1870) 2 QSCR 113
Re Calgary and Edmonton Land Co Ltd [1975] 1 WLR 355
Re Gold Valley Holdings Pty Ltd; Ex parte Tucker [2025] WASC 509
Re Piunde Limited (2015) N5971
Re South Barrule Slate Quarry Co (1869) LR 8 Eq 688
Re Warbler Pty Ltd (1982) 6 ACLR 526

Counsel

Mr C Gagma, for the appellant
Mr I Shepherd, for the respondent

1.      BY THE COURT: On 20 March 2015, acting pursuant to s 291 of the Companies Act 1997 (the Act), the National Court ordered that Piunde Ltd be put into liquidation by the appointment as liquidator of Mr James Kruse of Deloitte Touche Tohmatsu: In re Piunde Limited (2015) N5971. At the same time, the National Court dismissed an application by Piunde to set aside a statutory demand which had been served on it.

2.      On 27 March 2018, the directors of Piunde, Mr Peter Kama and Mrs Anna Kama, filed a motion in the National Court seeking the following principal relief:
(a)	that the liquidation be terminated;
(b)	that Mr Kruse be removed as liquidator; and
(c)	that Mr Kruse pay damages to them and Piunde.
3.      That application was eventually dismissed on 16 May 2024. What purports to be an appeal against the order of dismissal was commenced by a notice of appeal filed on 17 March 2025. We are seized with the determination of that purported appeal.
4.      We have characterised the appeal as a purported one for this reason. Paragraph 1 of the notice of appeal as filed recites “Piunde Limited (in liquidation) through its directors and shareholders hereinafter referred to as ‘the Appellant’ appeal …”. As a matter of ordinary English, the notice of appeal as pleaded describes the appeal as one instituted by the company in liquidation. Yet the company in liquidation is not recognised by s 300(2) of the Act as a party eligible to seek the termination of the liquidation. Section 300 of the Act provides:
300. COURT MAY TERMINATE LIQUIDATION.
(1) The Court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.
(2) An application under this section may be made by the liquidator, or a director or shareholder of the company, or any other entitled person, or a creditor of the company, or the Registrar.
(3) The Court may require the liquidator of the company to furnish a report to the Court with respect to any facts or matters relevant to the application.
(4) The Court may, on making an order under Subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.
(5) Where the Court makes an order under this section, the person who applied for the order shall, within one month after the order was made, submit a certified copy of the order to the Registrar for registration.
(6) Where the Court makes an order under Subsection (1) the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.
(7) Every person who fails to comply with Subsection (5) commits an offence and is liable on conviction to the penalty set out in Section 413(2).
5.      As can be seen, s 300(2) of the Act specifies the persons eligible to apply for the termination of the liquidation to be “the liquidator, or a director or shareholder of the company, or any other entitled person, or a creditor of the company, or the Registrar”. Moreover, the effect of s 298 of the Act was that on and from the commencement of the liquidation, the control of the company was removed from its directors and given to the liquidator. 

6.     During oral submissions we put to counsel for the “appellant” whether the proceeding was properly constituted. He replied that it had been commenced by the directors and shareholders. This entails a generous reading of the wording of the notice of appeal. However, in the National Court, the application to terminate was dealt with on the footing that it was one made by the directors. The directors of a company are by s 300(2) an eligible applicant to seek the termination of a liquidation of that company. In circumstances where no issue as to standing was raised by the respondent liquidator, we consider that the interests of justice are best served by treating the appeal as one instituted by the directors.

7.     The learned primary judge concluded that it was not just and equitable to terminate the liquidation of Piunde. His Honour did so for three principal reasons:

(a)	the creditors had neither consented to the application nor been served with notice of the application;
(b)	absence of satisfaction that the company was solvent; and
(c)	persistent failures by the company to lodge annual returns as required by the Act and to comply with goods and services tax obligations made it contrary to commercial morality to terminate the liquidation.
8.     As to the application to remove the liquidator, the primary judge found that the liquidator was not in breach of his duties. The application for compensatory damages consequentially failed.
9.     Although the grounds of appeal are prolix, in essence the appellants challenge the correctness of each of these conclusions. Indeed, the appellants go further, submitting that it was not necessary for the creditors to be served with a copy of the application for the termination of the liquidation and its supporting affidavits. 
10.    It is convenient first to deal with the subject of notice to creditors. 
11.     It is common ground that there was no evidence before the National Court that the creditors of Piunde consented to the termination of the liquidation. 
12.   In support of the proposition that it was necessary for the creditors to be given notice, the learned primary judge cited with approval this observation made by Lay J in In the Matter of Kamsi Trading Ltd (1-13612) [2005] PGSC 44; SC784:
Of course, our Companies Act provides that the liquidator and not the company has custody and control of the assets. Nevertheless I consider that the creditors have sufficient interest in the assets of a company in liquidation to have an opportunity to voice their attitude if it is proposed to put those assets back into control of the company before all of those creditors have been paid. If the creditors have not given their consent, then they should be served with notice of intention to make the application. Without the views of the creditors it would be very difficult for the Court to ascertain whether or not it was just and equitable to terminate the liquidation; except where it is clearly demonstrated that the assets far exceed the liabilities and that cash resources are sufficient to pay all creditors.

13. The appellants seemed to find comfort in alleging that this service on creditors was not necessary in a submission that there was only one case to support the existence of this requirement. They put that there was no such requirement.
14.   There is no substance in this submission. Indeed, not only does it do less than justice to the careful scholarship of Lay J evident in Kamsi Trading but it is, having regard to overseas cases concerning materially indistinguishable provisions with respect to the stay or termination of liquidations, contrary to overwhelming authority. 
15.    Authority for the proposition that, on an application for the stay or termination of the liquidation or winding up of a company notice of the application must be given to the contributories and creditors of the company concerned, and proved, may be traced to a judgment of Sir William James, Vice Chancellor in In Re South Barrule Slate Quarry Co (1869) LR 8 Eq 688. The need for that practice to be followed was concurred with in short order in The Antipodes by Lutwyche J in the Supreme Court of Queensland in Re Bank of Queensland Ltd (1870) 2 QSCR 113. 
16.    The background circumstances of these two cases were such that a need for notice of an application for a termination of a liquidation to be given to contributories was highlighted. However, as Megarry J (as his Lordship then was) stated in In re Calgary and Edmonton Land Co Ltd [1975] 1 WLR 355, at 360, there are in normal circumstances three classes of persons who have an interest in whether a liquidation or winding up should be stayed or terminated – the creditors, the shareholders or contributories and, as to his remuneration, the liquidator. In the absence of the proved consent of the persons in these classes, it needs to be proved that they were given notice of the application. 
17.   The existence of an interest bespeaks a need for the affording of an opportunity to be heard. That opportunity will only have been proved to exist if they are given the application for a stay or termination together with the affidavits to be relied upon in support of it. Only then can the court be satisfied that those who have an interest in the making or not making of an order have been informed of the precise basis for the application and afforded an opportunity of being heard in relation to whether it should be made. 
18.    The need for such notice and a non-exhaustive list of other relevant considerations on an application for the stay or termination of a liquidation was very helpfully provided by Master Lee QC (as his Honour then was) in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533:
[1] The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: Re Calgary and Edmonton Land Co Ltd [1975] 1 WLR 355 at 358-9; [1975] 1 All ER 1046 per Megarry J. See also sec 243 of the Act [ie, the Companies Act 1961].
[2] There must be service of notice of the application for a stay on all creditors and contributories, and proof of this: Re South Barrule Slate Quarry Company (1869) LR 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113.
[3] The nature and extent of the creditors must be shown, and whether or not all debts have been discharged: Krextile Holdings Pty Ltd v Widdows supra [[1974] VR 689]; Re Data Homes Pty Ltd supra [[1971] 1 NSWLR 338].
[4] The attitude of creditors, contributories and the liquidator is a relevant consideration: sec 243(1), Re Calgary and Edmonton Land Co Ltd supra.
[5] The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: Re a Private Company [1935] NZLR 120; Re Mascot Home Furnishers Pty Ltd (in liq) [1970] VR 593 at 598.
[6] If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd, supra [[1903] 2 Ch 174].
[7] The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows, supra.
[8] The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to ‘commercial morality’ or the ‘public interest’: Krextile Holdings Pty Ltd v Widdows, supra; Re Data Homes Pty Ltd, supra … 
19. The considerations to which Master Lee QC referred in Re Warbler have been cited with frequent later approval by judges in Australia: see, most recently, Re Gold Valley Holdings Pty Ltd; Ex parte Tucker [2025] WASC 509, a case to which reference might usefully be made for a comprehensive survey of earlier authority and, locally, by Lay J in Kamsi Trading.
20.   Such authorities recognise, as did the learned primary judge, that the considerations identified by Master Lee in Re Warbler and the cases to which his Honour referred are not exhaustive. This non-exhaustive quality flows inexorably from the very nature of the statutory touchstone in s 300(1) of the Act: satisfaction that it is just and equitable to terminate the liquidation. That satisfaction is necessarily specific to the circumstances of a given case. In turn, that just and equitable statutory touchstone is, not by coincidence, the reciprocal of the just and equitable consideration which may provide occasion for an order that a company be placed in liquidation: see s 291(3)(d) of the Act. 
21.    “Just and equitable” is a touchstone which permeates company law and is of ancient origin: see Mr B H McPherson (as his Honour then was), Winding Up on the “Just and Equitable Ground (1964) 27 MLR 282. Further, as Lord Wilberforce, with the agreement of Viscount Dilhorne, Lord Pearson and Lord Salmon, emphasised in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 374-375, any tendency to create categories or headings for what may constitute just and equitable is wrong. As His Lordship stated, “illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances”.
22.   Further, although the touchstone for the termination of a liquidation is satisfaction that it is just and equitable to do so, such satisfaction enlivens a discretion to terminate, not a right of termination.
23.   The onus of proving that it was just and equitable to terminate the liquidation and of persuading the court to exercise the discretion to terminate fell on the appellants. Their application, as the primary judge correctly concluded, fell at the first hurdle, because they did not serve the creditors of Piunde with a copy of the notice of motion and the supporting affidavits, much less proved this. True it is that they had sent letters to the creditors notifying an intention to terminate the liquidation. But there is a difference between the notifying of an intention via letters and the notifying an actuality by the service of a copy of the application before the court, and supporting affidavits.
24. This failure of proof alone would have warranted the primary judge’s dismissal of the appellants’ application, as it also does the dismissal of their appeal. However, as the other bases of challenge to the dismissal of their application were fully argued, it is as well to advert to their merits, if any, too.
25.   This was a case where the order for liquidation was made as a sequel to the failure by Piunde to comply with a statutory demand which had been served on it. The application that Piunde be placed in liquidation being one made within the time prescribed by s 336 of the Act, it was therefore at the time of the hearing of that application, “presumed to be unable to pay its debts as they become due in the ordinary course of business”: s 335(a) of the Act. It was incumbent upon the appellants to prove that, as at the hearing of the application for termination, Piunde was solvent. This they failed to do. 

26.    The primary judge was entitled to act on the evidence of the liquidator, Mr Kruse, that the only asset, a commercial rental property (section 8, Lot 1, Kundiawa) had been sold by orthodox public tender to the highest bidder with a resultant insufficiency of funds to pay unsecured creditors, much less fully to pay out the secured creditor, Bank South Pacific (BSP) and the costs of the liquidation. The primary judge was entitled to, and did, act on evidence from the liquidator that he and those working to him had been unable to collect from previous tenants of this property rent said to be outstanding. Mr Kruse was not required to attend for cross-examination. 

27.     There was another perspective offered in relation to Piunde’s solvency namely that of Mr Peter Gilmai. However, the opinion as to solvency voiced by him depended upon acceptance of assertions made by Mr and Mrs Kama. The learned primary judge was not obliged to accept these in favour of a more detached view offered by the liquidator. 
28.   The appellants failed to evidence any proposal for the payment of creditors or the costs of the liquidator. On any view, Piunde’s debts included that owed to the petitioning creditor, Associated Mills Limited, which had obtained judgment against it, upon which interest had been running up to the time of liquidation. Piunde’s debts also included a debt to the Internal Revenue Commissioner in respect of company tax. There was also evidence of a separate revenue debt in the form of K27,752.22 owed in respect of goods and services tax. 
29.    The primary judge was entitled to take the view, and did, that a proved failure by Piunde to lodge annual returns on and from 2002, contrary to the requirements of the Act, in conjunction with a proved failure to comply with goods and services tax obligations evidenced conduct which made it contrary to the public interest to terminate the liquidation. Such public interest considerations, evidencing commercially immoral conduct, fall naturally within the breadth of the just and equitable touchstone. 
30. It is worth noting that the present application for termination was not decided by the primary judge in a vacuum. His Honour had earlier dealt with, and dismissed, an application to set aside a dismissal for want of appearance of an earlier application to terminate the liquidation: In re Piunde Ltd (In Liquidation) [2015] PGNC 302; N6656. In so doing, his Honour had expressly highlighted the need for the application to be served on creditors and the need for solvency to be proved. Later that same year, the appellants filed a further application for termination of the liquidation, apparently on the same material, which was dismissed by the primary judge on the basis that the issues raised had already been determined in the context of the application to set aside the dismissal for want of appearance of the earlier termination application: In re Piunde Ltd (In Liquidation) [2015] PGNC 303; N6657.
31.    On this occasion, doubtless because of the passage of time and events and the new material filed, the primary judge again addressed and dealt with the merits, if any, of the new application for termination. This acknowledged, there comes a time, and that time has arrived, when any new application for termination, if not supported by creditors duly notified and failing to provide for payment of the liquidator’s fees, would be an abuse of process. 
32. Mr and Mrs Kama sought in evidence and submissions to lay blame for the predicament of Piunde on its liquidator, Mr Kruse. They alleged that he had failed:
(a)	properly to assess the claims of the unsecured creditors;
(b)	to investigate BSP’s claim as a secured creditor;
(c)	to appoint a committee of creditors and shareholders; and
(d)	to submit six monthly reports to the Companies Registrar and shareholders.
33.    There was however, another and different perspective on the evidence to this litany of complaints. That was a persistent failure by Mr and Mrs Kama to co-operate with and assist Mr Kruse to discharge his duties as liquidator. The primary judge had before him a plethora of correspondence directed to them by Mr Kruse seeking such assistance. His Honour drew the conclusion, as he was entitled to do, that the had been “strong resistance by the applicants to the liquidation from the start and therefore the apparent and continued unwillingness of the applicants to work with the liquidator” (reasons, at [31]).
34.   Unsurprisingly, given this finding, the primary judge declined to remove Mr Kruse as liquidator and found no case had been made out that there existed a reasonable apprehension of bias on his part. 
35. In relation to allegations made by the appellants concerning Mr Kruse, it is also necessary to record that on 9 May 2015, the appellants consented to the discontinuance of proceeding WS 158 of 2011 in the National Court in which they had made allegations against Mr Krause. 
36.  We would add that it is all too easy in circumstances where a closely controlled company has failed for those responsible for its management not to confront even the possibility that some element of the failure might be attributable to them or, even if not, that events beyond their control have occurred that occasioned the failure and then to transpose the strong feelings occasioned by the failure on to the officer of the court (the liquidator) who is charged with progressing the liquidation in compliance with the duties and obligations cast on a liquidator by the Act. Like animus is by no means unknown in cases of personal insolvency in relation to a bankruptcy trustee. Those acting for and advising directors and shareholders of failed companies and bankrupts have a singular responsibility to maintain an objective detachment from such animus. We feel compelled to offer this reminder in light of the quite unfounded submission made on behalf of the appellants that Mr Kruse had “intentionally fabricated claims of alleged debts”.
37.    Given that there is no occasion to upset the refusal by the primary judge to remove Mr Kruse as liquidator, it follows that there is no occasion to upset his Honour’s dismissal of the application for compensatory damages.
38.   The appeal should therefore be dismissed. Mr and Mrs Kama must pay the costs.
Orders
1.	The appeal be dismissed.
2.	Mr Peter Kama and Mrs Anna Kama, being the directors of Piunde Limited (in liquidation) (I-7905), being in substance if not in form the appellants, pay the respondent’s costs of and incidental to the appeal, to be taxed if not agreed.
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Lawyers for appellant:   	 Gagma Legal Services
Lawyers for respondent:  Ashurst PNG