In the matter of the Companies Act 1997 and in the matter of Bemobile Limited (2011) N4712

• Jurisdiction: Papua New Guinea
• Judge: David J
• Judgment Date: 07 December 2011
• Citation: (2011) N4712
• Docket Number: MP No.410 of 2011
• Court: National Court
• Year: 2011
• Judgement Number: N4712

Full Title: MP No.410 of 2011; In the matter of the Companies Act 1997 and in the matter of Bemobile Limited (2011) N4712

National Court: David, J

Judgment Delivered: 7 December 2011

N4712

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

MP No.410 OF 2011

IN THE MATTER OF THE COMPANIES ACT 1997

AND:

IN THE MATTER OF BEMOBILE LIMITED

Waigani: David, J

2011: 1, 2 & 7 December

COMPANY LAW PRACTICE & PROCEDURE – application to set aside statutory demand – dispute over payment of bonuses – clause 4.2 of the employment contract basis of payment of bonuses - meaning of clause 4.2 of contract of employment disputed – substantial dispute whether or not debt is owed or due basis of application to set aside – onus on applicant to substantiate assertion of a substantial dispute by appropriate and material or cogent evidence – in order to demonstrate that there is a substantial dispute, applicant must show a fairly arguable basis to justify contention that it was not liable to pay the amount claimed in statutory demand – mere assertions of a dispute not sufficient – existence of substantial dispute substantiated – statutory demand set aside - sections 335, 337 and 338 Companies Act.

COMPANY LAW PRACTICE & PROCEDURE – Companies Rules apply – Companies Rules provide for practice and procedure including forms to be used for proceedings brought before the Registrar or the National Court - no form prescribed by Companies Act and Companies Rules for application to set aside statutory demand – Companies Rules permit the National Court Rules and general practice of the National Court including the course of procedure and practice in chambers to apply - where lack of form, proceedings may be instituted by originating summons provided under the National Court Rules – where there is lack of practice or procedure, ad hoc directions can issue to remedy such lack or inadequacy – application filed by form of summons under Companies Rules – proceedings not vitiated by want of form – application by summons legitimised by exercise of discretion and ad hoc directions - application competent – Companies Rules and National Court Rules and Constitution.

Cases cited:

Moran Development Corporation Ltd v Akida Investments Ltd (2003) N2458

The PNG Balsa Company Ltd v New Britain Balsa Company Ltd (2004) N2520

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

In the Matter of the Companies Act and In the Matter of International Construction PNG Limited (2007) N3337

Department of Works v In re International Construction (PNG) Ltd (In Liquidation) (2009) SC1051

Counsel:

Derek Wood, for the applicant

Francis Griffin, for the respondent

RULING ON APPLICATION TO SET ASIDE STATUTORY DEMAND

7 December, 2011

1. DAVID, J: INTRODUCTION: By a summons filed on 17 November 2011, the applicant company, Bemobile Limited made application to set aside the Creditor’s Statutory Demand for Payment of Debt dated 3 November 2011 served upon it by the respondent, Niall McCarthy (the statutory demand). The statutory demand which was served pursuant to section 337 of the Companies Act requires the applicant within one month of the date of service or such longer period as may be permitted by the Court to pay to the respondent US$74,250.00 or enter into a compromise under Part XV of the Companies Act or otherwise compound with the respondent or give a charge over its property to secure payment of the debt to the reasonable satisfaction of the respondent.

2. At the hearing, the applicant relied on the following documents:

1. Affidavit of Fergus Wilmer sworn and filed on 17 November 2011;

2. Affidavit of Andrew Rolt sworn on 10 November 2011 and filed on 17 November 2011; and

3. Affidavit of Chris Allen sworn and filed on 30 November 2011.

3. On 23 November 2011, the respondent filed his notices of intention to defend and appearance both dated 23 November 2011 through his lawyers, Young & Williams.

4. The respondent opposes the application. He relies on the following documents:

1. Affidavit of the respondent sworn and filed on 29 November 2011; and

2. Affidavit of Francis Griffin sworn on 30 November 2011 and filed on 1 December 2011.

5. I have considered the affidavit evidence before me and have given appropriate weight where it is due as is reflected in the judgment.

6. From the affidavit evidence before the Court, the undisputed facts giving rise to this application appear to be these. The respondent entered into an employment contract with the applicant dated 9 June 2010 to be the Head of Customer Operations/Revenue Generation at a gross annual salary of K600,000.00 for a term of 3 years starting work on 14 May 2010 (the employment contract). Clause 4.2 of the employment contract addresses the question of payment of annual or other discretionary bonuses. The Reference Schedule to the employment contract sets out the criteria for computing bonus payment. By a letter from Young & Williams Lawyers to the applicant dated 11 October 2011, the respondent through his lawyers demanded the payment of US$74,250.00 in satisfaction of the bonus payment. Having not received the payment demanded from the applicant, on 3 November 2011, the statutory demand was served on the applicant, the respondent claiming that the amount claimed is for outstanding and approved bonus payment for the financial year ending 31 March 2011. The disagreement over the bonus payment led to the respondent terminating his employment though his letter to the applicant dated 7 November 2011 alleging breach of contract on the part of the applicant for non-payment of his bonus. The application was made by way of a summons in accordance with Form 20 provided by the Companies Rules.

7. I will address the disputed facts later on in the judgment.

8. The respondent took issue with the competency of the application. Mr. Griffin for the respondent contended that the commencement of these proceedings by a form of summons constituted an abuse of process of the Court as it was neither authorized under the Companies Rules nor the National Court Rules. He submitted that the practice in this jurisdiction appears to be that the originating summons provided by the National Court Rules has been the mode of originating process used in making applications to set aside a statutory demand and he referred me to Moran Development Corporation Ltd v Akida Investments Ltd (2003) N2458, The PNG Balsa Company Ltd v New Britain Balsa Company Ltd (2004) N2520 and Bank of South Pacific Ltd v South Pacific Timber Exports Ltd (2004) N2712 as examples.

9. Mr. Wood for the applicant on the other hand submits that the correct mode of originating process that should be used in an application for a relief under section 338 (1) of the Companies Act is a form of summons prescribed under the Companies Rules more particularly that which is in accordance with Form 20. The applicant relies on section 440 (3) of the Companies Act and In the Matter of the Companies Act and In the Matter of International Construction PNG Limited (2007) N3337 to support the contention that the Companies Rules are in force and they provide the appropriate practice and procedure including the forms for the making of this application and a variety of others including those made under sections 50 (1)(p) and (v) and 51 (1) of the Companies Rules and entitled in the manner set out by section 3 of the Companies Rules.

10. There are generally two modes of commencing civil proceedings in the National Court under the National Court Rules. Order 4 Rule 1 states that proceedings can be commenced by writ of summons or originating summons, but this is subject to any provision of any Act (Constitutional Law or an Act of Parliament) or Regulations or Rules made thereunder including the filing of a cross-claim under Order 8 Rule 38 of the National Court Rules.

11. An application to set aside a statutory demand can be made to the National Court and served on the creditor within one month of the date of service of the statutory demand under section 338 (1) and (2) of the Companies Act. However, the mode of instituting the application is not specified. Section 338 states:

“338. Court may set aside statutory demand.

(1) The Court may, on the application of the company, set aside a statutory demand.

(2) The application shall be made, and served on the creditor, within one month of the date of service of the demand.

(3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the Court may extend the time for compliance with the statutory demand.

(4) The Court may grant an application to set aside a statutory demand where it is satisfied that—

(a) there is a substantial dispute whether or not the debt is owing or is due; or

(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c) the demand ought to be set aside on other grounds.

(5) A demand shall not be set aside by reason only of a defect or irregularity unless the Court...