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Ace Guard Dog Security Services Ltd v Lailai [2004] PNGLR 7 (30 July 2004)

SUPREME COURT OF JUSTICE

ACE GUARD DOG SECURITY SERVICES LIMITED

V

LINDSAY LAILAI; AND TELIKOM PNG LIMITED

YAMA SECURITY SERVICES LIMITED

V

LINDSAY LAILAI; AND TELIKOM PNG LIMITED

WAIGANI: KAPI CJ; HINCHLIFFE, SAWONG JJ

25 May; 30 July 2004

COMPANY LAW – Company in Liquidation – Effect of liquidation – Companies Act s.298 – Applicable to proceeding against the Company as well as proceedings that may be convened by Company.

PRACTICE AND PROCEDURE – Appeal against decision of National Court – Objection to Competency – Not incorporated – No legal status – Incompetency.

Facts

The appellants filed originating process against the respondents for damages for breach of contract and obtained default judgments on liability in both matters. The respondents appealed against the entry of default judgments. The Supreme Court allowed the appeals and remitted the matters back to the National Court for substantive hearing on both liability and quantum of damages. The respondents then filed applications pursuant to O 9 r 15 of the National Court Rules and obtained order to dismiss the actions for damages for breach of contract for not complying with a Notice of Discovery filed in respect of the two actions. An appeal was filed without the consent of the liquidator or by an order of the Court. The appellants filed Notices of Appeal against the decision of the National Court and the respondents filed Objections to the Competency of both Appeals on the following issues:

1. Whether Ace Guard Dog Guard Security Services Limited has standing to commence and continue this Appeal.

2. Whether commencement of filing of appeal by persons other than the liquidator without the liquidator's consent is contrary to Section 298, Section 310 (2) and Schedule 8 of the Companies Act 1997

3. Whether the order and judgment made on 5 September 2003 is a final judgment and therefore does require leave to appeal therefrom

Held

1. Ace Guard Dog Guard Security Services Limited is not incorporated as a company and has no legal standing and is therefore incompetent to institute the appeal.

2. At the time the order for liquidation was in place, the appellant could not file an appeal because the affairs of the company were within the powers of the liquidator. An appeal could be filed with the consent of the liquidator or by an order of the Court.

3. A director of a company in liquidation has residual powers to file an appeal against a winding up order or for appointment of the liquidator but does not include appeal for dismissal of a cause of action for not complying with notice of discovery.

Papua New Guinea cases cited

Quan Resources Pty Ltd v Australia New Zealand Banking Group (PNG) Ltd [1987] (Unreported Judgment of the Supreme Court dated 17th July 1986, SC509).

Other cases cited

Larzard Bros & Co v Midland Bank Limited [1933] AC 289.

Counsel

E. Anderson, for the respondents/applicants.
B. Lomai, for the appellants/respondents.

30 July 2004

By the court. Two Objections to Competency were filed by the respondents contesting the competency of both Appellants in the two appeals (SCA 106 of 2003 & SCA 108 of 2003 respectively).

The background to these two Objections may be summarized as follows. The appellants Ace Guard Dog Guard Security Services Limited (in SCA 106 of 2003) and Yama Security Services Limited (in SCA 108 of 2003) filed originating process in the National Court (WS 1358 of 1999 & WS 1359 of 1999 respectively) in relation to claims by the appellants against the respondents for damages for breach of contract entered into between the parties for provision of security services.

On 5 December 2000, the appellants obtained default judgments on liability in both matters, with damages to be assessed.

The respondents then appealed against the entry of default judgments. It is not necessary to set out the details of this appeal. On 6 May 2003 the Supreme Court allowed the appeals and remitted the matters back to the National Court for substantive hearing on both liability and quantum of damages.

The respondents then filed applications pursuant to O 9 r 15 of the National Court Rules to dismiss the actions for damages for breach of contract for not complying with a Notice of Discovery filed in respect of the two actions on 16 and 19 May 2003 respectively. The notices required discovery with verification within 15 days of service. The National Court (Sakora J) in a reasoned decision dismissed the proceedings (WS 1358 & 1359 of 1999) for failing to comply with Notices of Discovery.

The appellants filed Notices of Appeal (SCA 106 of 2003 & SCA 108 0f 2003) against the decision of the National Court.

The respondents filed Objections to the Competency of both Appeals. It is these two Objections which have come before us for determination. These two Objections have been heard together on the basis that they arise out of the same set of facts and raise somewhat similar grounds. It is convenient to deal with each Objection separately.

SCA 106 of 2003

The Objection raised in respect of this appeal is as follows:

"The Appellant Ace Guard Dog Security Services Limited does not exist, has no legal personality and consequently has no standing to commence and continue this Appeal."

In support of this ground, the respondents rely on the affidavit of Tiffany Gaye Nonggor sworn and filed 28 October 2003. Upon service of the Notice of Appeal on 16 October 2003, Mrs Nonggor caused a company search to be made of the name Ace Guard Dog Security Limited on 29 August 2003. On 1 September, Mrs Nonggor ascertained that Ace Guard Dog Security Limited was not registered as a company but discovered "Ace Guard Dog Security" registered as a business name on 25 October 2002. The latter is not the same as the appellant and the name was registered well after the contract in question was signed between the parties.

Consequently, counsel for the respondent submits that the appellant in the present appeal has no legal personality and it follows that it has no standing.

On the other hand, the appellant in response to the evidence by the respondents, simply produces a certificate of incorporation under its name. This certificate bears the signature of the Registrar and the Seal of the Registrar of Companies. Counsel for the appellant submits that we should take judicial notice of the certificate and find that the appellant is registered as a company and therefore has standing.

In response to this, the respondents filed two affidavits. The first is an affidavit by Teup Goledu, the Registrar of Companies sworn 28 April 2004 and deposes:

"I say that it is a forgery as the company registration number as shown on the certificate is not a valid registration number. The Company Office has only started registering companies in the '50000' and the Companies Office has yet to reach the '58000' registered mark.

Consequently any company registered in 1998 or, even at any time before this year could not have a registration number as 1-58897."

The second affidavit is sworn by Uti Sepoe sworn 20 May 2004, the Deputy Registrar of Companies and he deposes that he examined the certificate of incorporation of the appellant to determine its authenticity. He points out serious anomalies on the certificate.

First, he deposes that all certificates issued in the Office of Registrar of Companies have a record of the number sequence of all companies registered. For the relevant period in 1998, the number sequence for company registrations was around 32,000. Companies incorporated in 2004 are using number sequence 52,000. The Registry has not yet reached 58,000 number sequence. The number sequence in the certificate of registration relied on by the appellant is No. 1-58897.

Second, the purported certificate of incorporation is dated 22 November 1998. This is a Sunday and no company is incorporated on Sundays. He further states that the computer is closed for the weekends for back up.

Third, the last day for incorporating companies for the relevant period was Friday 20 November 1998. The record in the Registry shows that the last company incorporated on that date was Lujo Contractors Limited, with number 1-31928. The next available date for incorporation was Monday, 23rd November 1998. The first company to be incorporated on that day was Pauanda Coffee Limited with company no. 1-31929. Lujo Contractors Limited and Pauanda Coffee Limited have consecutive numbers. There was no company incorporated in between these two companies.

Fourth, the Deputy Registrar also identifies six aspects of the alleged forged document which appeared to be irregular compared to the standard certificate of incorporation.

Fifth, the document number of the alleged forged document, 00006053499 cannot be found or matched with any such number in the Office of the Registrar. The absence of this number is confirmed by the computer which indicates the number cannot be found in the computer.

These evidence seriously questions the authenticity of the certificate of incorporation relied on by the appellant.

Counsel for the appellant did not cross examine any of the deponents nor did he challenge the serious allegations of forgery by the Registrar and the Deputy Registrar of Companies. In the face of this serious allegation, counsel for the appellant failed to lead any evidence to prove the origins of the certificate of incorporation. We note that the certificate annexed by counsel in his affidavit is a copy and there is no reference to the existence of the original. During submissions, counsel for the appellant was only able to indicate that a person handed him a copy but not the original. Counsel made reference to the name of the person. However, he did not indicate whether he was from the Office of Registrar of Companies or not.

He did not call this person to give evidence nor did he call any other evidence to prove the authenticity of the certificate of incorporation. The certificate of incorporation bears the signature of the previous occupant of the Registrar of Companies, W.L. Marum and the seal of the Registrar of Companies. If the certificate was not contested, the Court would have taken judicial notice of the certificate under s.58 of the Evidence Act. However, in the present case, it is alleged to be a forgery.

Having regard to all the evidence, We are not satisfied that the certificate of incorporation is genuine. On the contrary, we are satisfied that the certificate is a forgery.

Counsel for the respondents rely on further evidence of forgery in the document which purports to be Company Extract of Ace Guard Dog Security Service Ltd dated 22 November 1998. This document purports to be a Registrar of Companies document which gives details of the appellant including shareholders, directors, registered office of the registered company.

This document purports to be an extract of the details of the appellant in the Registry. The idea of this document is to suggest that the appellant is a registered company and the extract is the proof of its existence. Counsel for the respondents submit that this document is also a forgery for the following reasons:

The Deputy Registrar deposed to the fact that it was not possible to have a computer extract printed in 1998 because the computer system (CORE System) was commissioned to print extracts from the system only in 1999. Counsel for the respondent submits that it is impossible to have an extract printed in 1998. He submits that this cannot be a genuine document of the Registrar of Companies.

The Deputy Registrar examined the alleged extract and concluded that it is not printed in the standard form printed by the computer system on the following basis:

a. The words "current extract" printed on the alleged forged document is printed in all upper case letters, whereas, the genuine extract is printed with first letter only in upper case.

b. The font that has been used for the heading "External Management Information" is different and is not the same as the genuine document.

c. The words "Top Ten shareholders" have spacing in between the words in the genuine form compared to no spacing between the words.

The alleged forged extract relied upon by the appellant has 6 files listed at the end of the extract with document numbers listed:

1. 00005628410
2. 00005628458
3. 00005628496

iv. 00005628573

4. 00005641266
5. 00005628535
   

The Deputy Registrar deposes that these documents were lodged on 15 October 2003 for a company, Kuaka Building Construction Limited. This company and the papers filed have no relationship to the appellant.

Counsel for the respondents submit that no company using the name Ace Guard Dog Security Services Ltd was ever incorporated in 1998 nor has there been any such company registered until now. However, there is a business name registered under the name Ace Guard Dog Security on the 25 October 2002. This can have no relevance to the appellant which purportedly entered into the contract.

Having regard to all the matters set out above, we cannot give any weight to the certificate of incorporation and the company extract. On the contrary, there is ample evidence to find that these documents are forged.

For these reasons, the appellant is not an incorporated company and therefore without any legal personality. The law in this regard is clear. Counsel for the respondent submits that consequence of the non-existence of the appellant is fatal to the appeal. He relied on passage from Halsbury, 4th Edition, Vol 37, para 241:

"A corporation, whether incorporated by charter, statute or registration, or a company, whether incorporated by special statute or registered under the Companies Act, must sue or be sued in its corporate title or registered name,, as the case may be. A corporation which has ceased to have any juristic existence cannot sue or be sued"

Counsel for the respondents further rely upon the proposition that under its inherent jurisdiction, a superior court of record has power to order the stay of proceedings in circumstances where the proceedings are instituted or continued without lawful authority by the plaintiff, and in particular where the action was brought in the name of a non-existent company (Larzard Bros & Co v Midland Bank Limited [1933] AC 289).

We find that the appellant is not incorporated as a company and therefore has no legal standing. It is therefore incompetent to institute the appeal.

Having come to this conclusion, we do not find it necessary to deal with the second issue, namely, whether the decision appealed from is a final judgment.

SCA 108 of 2003

The respondent filed Notice of Objection on two grounds as follows:

"1. The appellant Yama Security Service Limited, at the time of filing of the Notice of Appeal was in liquidation and this Appeal has been commenced by persons other than the liquidator without the liquidator's consent, contrary to Section 298, Section 310 (2) and Schedule 8 of the Companies Act 1997.

2. The order and judgment of His Honour Justice Sakora made or given on 5 September 2003 is not a final judgment and therefore does require leave to appeal there from."

The relevant facts are these. On 10 September 2003, the appellant was placed in liquidation and Robert Southwell was appointed liquidator. The appeal in this matter was filed on behalf of the appellant by Lomai & Lomai Attorneys on 14 October 2003. The liquidator has not requested Lomai & Lomai to file an appeal against the said decision nor was there any leave granted by Court to so file an appeal under the Companies Act.

Counsel for the respondents submits that the appeal filed by Lomai & Lomai Lawyers is incompetent. He relies on s.298 of the Companies Act:

"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) the directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part; and

(c) unless the liquidator agrees or the Court orders otherwise, a person shall not—

(i) commence or continue legal proceedings against the company or in relation to its property; or

..."

He further relies upon Schedule 8 of the Companies Act:

"SCHEDULE 8.—POWERS OF LIQUIDATORS.

Section 310(2).

The liquidator of a company has power to do all or any of the following:—

(a) commence, continue, discontinue, and defend legal proceedings;

(b) ..."

He submits that the appeal filed by Lomai & Lomai Lawyers was filed without the consent of the liquidator or the order of the Court and therefore is incompetent.

In response, counsel for the appellant makes two points. First he submits that the order relating to the liquidation of the appellant was set aside by the National Court on 5 March 2004 and therefore the appeal filed by the appellant is competent.

In this regard, the relevant date is the time of the filing of the Appeal on 14 October 2003. At the time the appeal was filed, the order for liquidation was in place. At that time the appellant could not file an appeal because the affairs of the company were within the powers of the liquidator. An appeal could be filed with the consent of the liquidator or by an order of the Court. The appellant did not do either. This fact was communicated to the Lawyers for the appellant. The order setting aside the liquidation on 5 March 2004 affects matters subsequent to the order. We do not consider that there is any merit in this argument and we would dismiss it.

The second point the lawyer for the appellant makes is that s 298 (1) (c) (i) of the Companies Act is only applicable to legal proceedings brought against the company and not applicable to commencing proceedings such as an institution of an appeal.

Having regard to s 298 and Schedule 8 of the Companies Act, the powers of liquidator extends not only to proceedings filed against the company but relates also to proceedings that may be commenced by the company. This includes institution of an appeal. There is no merit in this argument and we would dismiss it.

Counsel for the appellant further submits that in an appeal, it is not necessary to obtain the consent of the liquidator or to get an order from the Court. He submits that a director of a company in liquidation has residual powers to file an appeal. He relies on Quan Resources Pty Ltd v Australia New Zealand Banking Group (PNG) Ltd [1987] (Unreported Judgment of the Supreme Court dated 17th July 1986, SC509). That was an appeal against a decision of the National Court which refused to set aside an order for appointment of the Liquidator. A director filed an appeal against the decision of the National Court. The Supreme Court held that the Directors of a company have residual powers to appeal against a winding up order or for appointment of the liquidator.

We consider that this case is not applicable to the present case. Those residual powers relate to the winding up of the company or to the appointment of the liquidator. The present case deals with dismissal of a cause of action for not complying with notice of discovery. There is no merit in this argument. We would dismiss it.

Having reached this conclusion, it is not necessary to consider the ground of appeal relating to whether or not leave is required to appeal against the decision of the National Court.
In the end result we would dismiss both appeals on the basis of incompetence with costs to the respondents.

Before we leave this matter, we should point out our concern over the allegations of forgery in the production of the alleged certificate of incorporation and the extract of records from the Companies office. We consider that there has been an attempt to provide forged documents in order to answer the grounds of incompetence raised by the respondents. This is a serious matter and we would recommend that the Registrar of Companies consider referring this matter to the police for investigation.

Lawyer for the appellants: Lomai & Lomai Attorneys.
Lawyer for the respondent: Gadens.