Bank of South Pacific Limited v South Pacific Timber Exports Limited (2004) N2712

• Jurisdiction: Papua New Guinea
• Judge: Sakora J
• Judgment Date: 12 November 2004
• Court: National Court
• Citation: (2004) N2712
• Year: 2004
• Judgement Number: N2712

Full Title: Bank of South Pacific Limited v South Pacific Timber Exports Limited (2004) N2712

National Court: Sakora J

Judgment Delivered: 12 November 2004

1 Civil Practice and Procedure—Application to set aside Statutory Demand—Statutory Demand to enforce judgment for costs—Abuse of process—Companies Act 1997, s335, s337 and s338; National Court Rules, O13 r2 and O22 r62.

Ruling on Application to Set Aside Statutory Demand

___________________________

N2712

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS No. 287 OF 2002

BANK OF SOUTH PACIFIC LIMITED

Plaintiff

v.

SOUTH PACIFIC TIMBER EXPORTS LIMITED

Defendant

Waigani : Sakora J

2003 : 11 June

2004 : 12 November

Civil Practice and Procedure – Application to set aside Statutory Demand – Statutory Demand to enforce judgment for costs – Abuse of process – Companies Act, ss 335, 337 and 338; National Court Rules, O 13 r 2 and O 22 r 62.

Mrs T Nonggorr for the Plaintiff

Mr T Boboro for the Defendant.

RULING ON APPLICATION TO SET

ASIDE STATUTORY DEMAND

12 November 2004

Sakora J: This is the plaintiff bank’s application to set aside a Statutory Demand served on it by the defendant company on 13 May 2003 for the sum of K7,438.75, pursuant to s 338 Companies Act 1997 (the Act).

Mrs Nonggorr of counsel for plaintiff moved the court on the Notice of Motion filed 3 June 2003. In support of the application learned counsel referred to and relied on the two affidavits of John Maddison, the Assets Manager of the plaintiff bank, sworn 3 June and 6 June 2003 respectively.

The Originating Summons, the Notice of Motion and the first of the supporting affidavits (supra) in this application all filed on 3 June 2003, were duly served on the registered office of the defendant company and on its lawyers on record on 3 June 2003 (Affidavit of Service of Keith Iduhu sworn 11 June 2003). Despite this, there have not been any relevant materials filed by or on behalf of the defendant contesting this application.

However, counsel for the defendant was heard, without the benefit of any facts such as would be in a supporting affidavit underpinning one’s argument(s).

In his first affidavit Mr Maddison deposed to the history of the litigation between the parties, exhaustively outlining under paragraph (3) (a) to (t) inclusive, events following the plaintiff bank’s service on the defendant company of a Statutory Demand on 19 June 2001 for the sum of K331,396.61 pursuant to s 337 of the Act. This elicited a host of associated proceedings, commencing with the defendant’s application on 11 December 2001 to have the plaintiff’s Statutory Demand set aside pursuant to s 338 of the Act.

The defendant company’s application was based on and supported by an affidavit sworn by the Managing Director of the company Timothy Neville on 11 December 2001. The deponent, inter alia, admitted to the company owing only K279,646.00 to the plaintiff bank rather than the K331,396.61 that had been claimed.

The court granted the defendant’s application with costs on the basis that the difference between the sum claimed the subject of the Statutory Demand and the sum admitted as due and owing (K51,750.61) was substantial within the terms of the Act, thereby constituting a substantial dispute whether or not the debt is owing or is due, pursuant to s 338 (4) (a) of the Act.

It would appear that before the first Statutory Demand was dealt with by the court, the plaintiff bank served a further Statutory Demand on the defendant, this time for the amount admitted by the Managing Director in his affidavit of 11 December 2001 (supra). The defendant filed yet another application to set aside the second Statutory Demand. This application was granted also with costs on the basis that it was an abuse of process. Whilst this court is unable to determine, from the material before it, what exactly was it that constituted abuse of process, perhaps whatever situation it was before that court can be said to covered by what is envisaged under s 338 (4) (c) of the Act: the demand ought to be set aside on other grounds.

Be that as it may, the defendant company proceeded to have entered judgment against the plaintiff on 14 October 2002 for the costs awarded in respect of its two successful applications to set aside: for K2,172.50 and K5,266.25 respectively, totalling K7,438.75. It would appear further that this action was undertaken despite its inaction on the admitted debt of K279,646.0 as being due and owing to the plaintiff.

It is convenient to note at this juncture that the multiple proceedings constituting the litigation between the parties had its genesis on or about 18 April 1997 when the defendant is said to have entered into a lease agreement (in writing) with Nambawan Finance Limited for the lease of a heavy equipment machine, namely a KMC CA 220 Skidder which was purchased and used in the defendant’s business. Nambawan Finance is said to have advanced the sum of K239,439.19 for the purchase of the equipment on 29 May 1997.

It is now part of the corporate history that the Papua New Guinea Banking Corporation Limited (PNGBC) and Nambawan Finance Limited amalgamated, such amalgamation taking effect on 31 December 2000 with the Registrar of Companies giving formal effect under his hand and seal on 4 January 2001. As a consequence PNGBC assumed all rights and liabilities, to all choses in action, of the Nambawan Finance Limited. It is a further part of that history that PNGBC and this plaintiff bank subsequently amalgamated, with the legal consequence that all monies payable pursuant to the loan agreement by the defendant to the Nambawan Finance Limited became payable to the plaintiff the eventual successor.

It would appear that the lease agreement required the defendant to pay monthly repayments to the plaintiff. By 27 September 1999 there was a residual balance of K215,000.00 owing, which was re-written as a commercial loan and advanced for the defendants’ benefit on that date.

On 3 May 2002, the plaintiff bank had issued on its behalf a Writ of Summons (WS No. 570 of 2002) claiming the principal amount of K215,000.00 together with interest as per the plaintiff’s default rate of interest on a commercial loan and outlays in accordance with the loan agreement.

Upon due service of the Writ of Summons, the defendant company defaulted in its filing of a Defence within the time limit under the National Court Rules (NCR). Instead it applied for leave to file its Defence out of time, after...