Wep Kilip and In The Matter of Kamsi Trading Limited (1–13612) v In The Matter of An Application By The Liquidator, Hugh Mosley (2005) SC784

• Jurisdiction: Papua New Guinea
• Court: Supreme Court
• Date: 06 May 2005
• Citation: (2005) SC784
• Docket Number: SCA No 35 of 2005
• Year: 2005

Full Title: SCA No 35 of 2005; Wep Kilip and In The Matter of Kamsi Trading Limited (1–13612) v In The Matter of An Application By The Liquidator, Hugh Mosley (2005) SC784

Supreme Court: Lay J

Judgment Delivered: 6 May 2005

1 Application for a stay of National Court order—single judge of the Supreme Court—Supreme Court Act s5(1)(b) and s19—Supreme Court Rules O3 r2—considerations for a stay.

2 Application for a stay of order refusing termination of liquidation—considerations for terminating a liquidation—Companies Act 1997 s300—factors for enquiry into whether termination "just and equitable".

3 Gary McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279, Calgary and Edmonton Land Co Ltd (1975) 1 All ER 1046; El–Fahkri, in the matter of Elpah Pty Ltd (In Liq) [2002] FCA 1469; Metledge v Bambakit Pty Ltd; Manuel Koutsourais, Applicant [2005] NSWSC 160; Re Warbler Pty Ltd (1982) 6 ACLR 526 Re South Barrule Slate Quarry Co (1869) 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113; Krextile Holdings Pty Ltd v Widdows [1974] VR 689; Re Data Homes Pty Ltd [1971] 1 NSWLR 338; In re a Private company (1935) NZLR 120; Re Mascot Home Furnishers Pty Ltd (1970) VR 593; Re Telescriptor Syndicate Ltd [1903] 2 Ch 174; Ayerst (Inspector of Taxes) v C & K (Construction) Ltd AC 167; Buchler and Anor (as joint liquidators of Leyland Daf Ltd) (Respondents) v Talbot and ANor. (asjoint administrative receivers of Leyland Daf Ltd) and others (Appellants and others [2004] UKHL 9 referred to

Facts

The Applicant Appellants sought to stay the order of the National Court refusing an application to terminate the liquidation of the Second Appellant, which was commenced in December 2002. The application was refused inter alia because the Applicants had not demonstrated that (a) the creditors had been paid or consented (b) the shareholders consented (c) the liquidator had been paid.

Held

The factors set out in Gary McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 were applied to determine whether or not to grant a stay. Those factors included (1) whether there was an error on the face of the record and (2) whether a preliminary examination showed an arguable case on the appeal. It was necessary to examine the principles applicable to the termination of a liquidation which is an enquiry into whether it was just and equitable to terminate the liquidation. Factors to consider include (a) whether the creditors and contributories had been served with the application; (b) the nature and extent of the creditors & whether all of the debts have been or will be discharged; (c) the attitude of creditors, contributories and the liquidator; (d) the current trading position of the company and its general solvency should be demonstrated; (e) any non compliance by directors with their statutory duties should be fully explained with all reasons and circumstances; (f) the general background which led to the winding up should be explained; (g) the nature of the business carried on by the company should be demonstrated and whether in any way the conduct of the company was contrary to commercial morality or the public interest.

It had not been demonstrated that the company was solvent, or that all of the creditors had been paid, or that the shareholders agreed. The liquidator had not been paid. The company had not paid tax or lodged returns to the Commissioner of Internal Revenue or the Registrar of Companies. There was no error on the face of the record. There did not appear to be any arguable case on the appeal. The balance of convenience and interests of justice did not favour granting a stay. Application refused.

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Lay J: The Applicant applies for a stay pursuant to s19 of the Supreme Court Act and O3 r2(b) of the Supreme Court Rules, of an order of the National Court dismissing an application to terminate the liquidation of the Second Appellant.

On 10 December 2002 a winding up order was made against the Second Appellant in respect of the petitioning creditor's debt of K5,627.86. The debt was paid in full on 21 January 2003 to the lawyers for the petitioning creditor. An invitation for proofs of debt was issued which attracted claims totaling K309,498.54 excluding legal and liquidators fees. Unknown amounts may be due for group tax and income tax as the Second Appellant has never paid anything for these taxes. There is a claim by the liquidator for K107,000 in costs including legal costs. K290, 284.20 in claims have been paid, or rejected by the liquidator. The First Appellant, a director and shareholder of the Second Appellant, has not co–operated with the liquidator. He has not provided documents from which the Liquidator might calculate the amount due, if any, to the Commissioner of Taxation. The Liquidator has sold two trucks which were the property of the Second Appellant and at this time the First Appellant still refuses to give possession of one of the trucks to the purchaser.

Submissions

The Appellants submit that the First Appellant is struggling financially, that there are strong grounds for believing the appeal...