The Papua New Guinea [PNG] Balsa Company Ltd v New Britain Balsa Company Ltd (2004) N2520

• Jurisdiction: Papua New Guinea
• Judge: Lenalia J
• Judgment Date: 12 March 2004
• Court: National Court
• Citation: (2004) N2520
• Year: 2004
• Judgement Number: N2520

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

National Court: Lenalia J

Judgment Delivered: 12 March 2004

1 Company Law—Winding up—The process of—Creditor served notice under s336 of the Companies Act 1997—Disputed debt—Creditor's statutory demand s337 of same prospective liabilities—There ought to be prima facie evidence and proof of itemised debts—Existence of substantial dispute.

2 Company Law—Creditor's statutory demand—Where there is no evidence to support the process of winding up a company—Demonstration of an arguably genuine substantial dispute—Mere assertions—Insufficient—Materials short of proof—Applicant to establish the dispute is genuine—Application granted.

3 BB Shipping (NZ) Limited Civ-2003-404-2626, Fletcher Homes Limited v Be Ellis and S Baldick M 471 im99, Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297, Queen City Residential Limited v Patterson Co–partners Architects (No 2) [1995] 3 NZLR 307 referred to

Held

(1) The test which should apply on an application to set aside a statutory demand is set out in s338(4)(a) of the Companies Act 1997 where a statutory demand has been issued against an applicant is that, the applicant has to show a fairly arguable basis on which it is not liable for the amount claimed in the statutory demand.

(2) Mere assertions that there exists a dispute is not sufficient. Where there exist material evidence demonstrating "a substantial dispute" the dispute should normally be resolved other than by means of issuing a statutory demand.

(3) The application to set aside the statutory demand is granted.

___________________________

N2520

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS. NOS: 38 OF 2004

BETWEEN: THE PNG BALSA COMPANY LTD

- Plaintiff Applicant/

AND: NEW BRITAIN BALSA COMPANY LTD

- Defendant/Respondent

KOKOPO: Lenalia, J.

2004: 20 February 12 March

Company Law – Winding up – The process of – Creditor served notice under s. 336

of the Companies Act – Disputed debt – Creditor’s statutory demand s. 337 of same prospective liabilities – There ought to be prima facie evidence and proof of itemised debts – Existence of substantial dispute.

Company Law – Creditor’s statutory demand – Where there is no evidence to

support the process of winding up a company – Demonstration of an arguably genuine substantial dispute – Mere assertions – Insufficient – Materials short of proof – Applicant to establish, the dispute is genuine – Application granted.

Due to the unavailability of local authorities in this jurisdiction on the issue of

statutory demand pursuant to s. 337 of the Companies Act 1997, the following overseas authorities are cited.

CASES CITED

The following cases are cited on judgment.

Taxi Trucks Limited -v- Nicholson [1989] 2 NLLR. 297

Queen City Residential Limited -v- Patterson Co – Partners Architects (No.2) [1995] 3 NZLR 307.

Far East Auto Imports -v- Niki International Corp. 11 PR NZ 602.

Held (1) The test which should apply on an application to set aside a

statutory demand is set out in s. 338 Subsection (4)(a) of the Company Act 1997 where a statutory demand has been issued against an applicant is that, the applicant has to show a fairly arguable basis on which it is not liable for the amount claimed in the statutory demand.

(2) Mere assertions that there exists a dispute is not sufficient. Where there exist material evidence demonstrating “a substantial dispute” the dispute should normally be resolved other than by means of issuing a statutory demand.

(3) The application to set aside the statutory demand is granted.

Counsels

D. Lidgett, for the Applicant

Mr. D. Micha , in person for the Respondent

12 March, 2004

LENALIA, J. : The applicant company applied to set aside a statutory demand issued against it by the respondent counter-part company also dealing with the sale of balsa wood on this Province. The statutory demand requires payment of K387,792.41 against the plaintiff as a debtor company. I heard arguments from Mr. Lidgett of counsel for the Plaintiff Company and Mr. David Micha who appeared by leave of the Court for the Respondent/Defendant on 20th of February 2004, I ruled in favour of the Applicant and set aside the statutory demand and I said I would establish my reasons later. I now do so.

The Papua New Guinea Balsa Company Limited instituted proceedings by way of an Originating Summons against the Respondent being the New Britain Balsa Company Limited. In their Notice of Motion filed on 30th of January 2004, the Plaintiff sought the following orders:

1. That the Respondent/Defendant Creditor’s Statutory Demand for payment of debt dated 5th of January 2004 demanding payment of K387,792.41 against the Applicant debtor company be set aside.

2. Costs.

3. Such other orders the Court deems appropriate.

Before I go further, this is a proceeding pursuant ss. 337 and 338 of the Companies Act. I shall refer to certain sections of the Companies Act when I discuss the law involved in proceedings pursuant to the two sections mentioned above. The evidence in support of this application came mainly from Mr. Howard Guy Cameron. The same is one of the directors and a shareholder of both the Applicant and Respondent companies. Under s. 335 of the Companies Act, where a company is unable to pay it’s debts, a statutory demand is issued and where evidence is adduced to the satisfaction of the Court that the debtor company is not able to pay it’s debts as they become due in the ordinary course of business, an application can be made to the Court for the debtor company to be liquidated, see s. 336 (5) of the Companies Act.

Mr. Cameron’s evidence goes on to say that it seems that the claim is only based on the contract agreement dated 25th of April 1997 whereby the parties contracted to do certain things which do not appear clear from Mr. Cameron’s evidence nor from that of Mr. David Micha but which agreement was to remain in force only for 2 years until 20th May 1999 after which a further contract was to be offered to the Respondent. According to Mr. Cameron, this was also the requirement of clause 10 of the “Contract Agreement”. That under that contract certain variations in relation to prizing of products sold were to be reviewed whenever there was some short-falls. This is the subject of clause 13 of their Contract.

The Plaintiff applicant through Mr. Cameron disputes the Statutory Demand Notice as to nowhere does such notice or any other statement attempts to properly qualify and itemise the sum claimed in the statutory demand. To support this argument, Mr. Cameron said in evidence that, the letter of demand dated 13th of November 2003 addressed to the same by the Respondent’s lawyers who are JEREWAI Lawyers saying that the Plaintiff was to pay K4,000.00 per week from 20th May 1997 together with 17 percent interest is flawed. In any event, Mr. Cameron says the claim by the Respondent is now Statute bar and against s. 16 of the Frauds and Limitation Act and as such any further contract beyond 20th of May 1999 up until the time the statutory demand was calculated must be supported by evidence.

Mr. Cameron further alleges that, the Respondent’s statutory demand describes the debt as a debt owing by the applicant company for services rendered under their agreement as alluded to dating back to 20th May in 1997, but nowhere in the letter of demand qualifies such claims. There is further allegation that, the Respondent company has not been trading and that it has been dormant for a number of years and it’s statutory mortgages were financed from outside sources. There is no principal place of business as well and it does not conduct it’s business nor does it employs employees and it has no accounts.

Mr. David Micha who appeared...