Derwent Limited (formerly known as Telemu No.9 Limited) v Anton Pakena and Others

• Jurisdiction: Papua New Guinea
• Judge: David, J
• Judgment Date: 06 July 2023
• Neutral Citation: N10414
• Citation: N10414, 2023-07-06
• Counsel: Trevor Sausia, for the Plaintiff,Gibson Bon, for the First Defendant,Herman Leahy with Alois Sinen, for the Second Defendant
• Docket Number: WS NO.1144 OF 2013
• Hearing Date: 13 January 2023,06 July 2023
• Court: National Court

N10414

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO.1144 OF 2013

Between:

Derwent Limited (formerly known as Telemu No.9 Limited)

Plaintiff

v.

Anton Pakena

First Defendant

and

Niya Limited

Second Defendant

Waigani: David, J

2023: 13^th January & 6^th July

COMPANY LAW — application to dismiss proceedings — judgment on liability entered in favour of plaintiff after trial — matter pending assessment of damages — plaintiff has been de-registered — application made to Registrar of Companies to restore plaintiff to Register of Registered Companies — restoration not complete — plaintiff non-existent — no formal application for Registrar to be substituted for purposes of continuing the proceedings — proceedings dismissed — no costs awarded as plaintiff non-existent — National Court Rules, Order 12 Rule 40(1)(c) — Companies Act, ss. 16, 215, 307, 365, 366, 372, 373, 374, 378, 379, 380 and 395.

Cases Cited:

Papua New Guinean Cases

The State v Peter Painke [1976] PNGLR 210

National Executive Council v Public Employees Association of PNG [1993] PNGLR 264

Odata Ltd v Ambusa Copra Oil Mill Ltd & National Provident Fund Board of Trustees (2001) N2106

Anderson Agiru v Electoral Commissioner v The State (2002) SC 687

Ace Guard Dog Security Services Ltd v Lindsay Lailai (2004) SC757

Philip Takori v Simon Yagari (2008) SC905

Grand Chief Sir Michael Somare v Chronox Manek and Others (2011) SC1118

Daniel Tulapi v Steamships Trading Company Ltd (2012) SC1210

TW Transport Ltd v Richard Maru (2012) N4934

Michael Wilson v Clement Kuburam (2016) SC1489

Jacob Popuna v Ken Owa (2017) SC1564

Telikom (PNG) Ltd v Kila Rava (2018) SC1694

Bay Cabs Ltd v Kokiva [2019] N7957

GR Logging Ltd v Pulie Anu Timber Company Ltd (2020) N8345

Overseas Cases

Salomon v Salomon & Co. Limited (1897) AC 22

Lee v Lee's Air Farming Ltd (1961) NZLR 325

Fielding v Rigby [1993] 4 All ER 294

Counsel:

Trevor Sausia, for the Plaintiff

Gibson Bon, for the First Defendant

Herman Leahy with Alois Sinen, for the Second Defendant

In-House Lawyer-Office of Registrar of Companies: Lawyers for Plaintiff

Gibson Bon: Lawyers for First Defendant

Pacific Legal Group: Lawyers for Second Defendant

JUDGMENT

6^th July, 2023

1. David, J: INTRODUCTION: This is a ruling on an application by the second defendant, Niya Limited (Niya) which is moved pursuant to a notice of motion filed on 15 November 2022. Niya moves for an order to dismiss the proceedings. The ground relied on for the application is that the proceedings are an abuse of the process of the Court. Reliance is placed upon Order 12 Rule 40(1)(c) of the National Court Rules.

BACKGROUND

2. The dispute in these proceedings concerns the sale of what was initially an Urban Development Lease issued over the land described as Allotment 3 Section 375 (Ensisi Valley) Hohola, National Capital District by Niya, whose Managing Director was the first defendant, Anton Pakena (Pakena), as vendor to Derwent Limited (formerly known as Telemu No.9 Limited) (Derwent) as purchaser pursuant to a contract for sale of land dated 28 August 2007 for a consideration of K1,950,000.00 (the Contract). Derwent pursued its claim against Pakena and Niya by writ of summons endorsed with a statement of claimed filed on 11 October 2013 seeking, among others, a declaration that the Contract was not rescinded and specific performance of the Contract and alternatively, restitution of funds expended by Derwent in the sum of K602,972.27 and general damages. Pakena and Niya defended Derwent's claim and they each filed separate cross-claims essentially claiming a declaratory order that the Contract was illegal, null and void and therefore unenforceable and alternatively an order that the Contract was validly rescinded. Niya also sought a declaratory order that the Contract was terminated or expressly or impliedly abandoned by the parties. On 21 April 2020, the Court, among others, entered judgment on lability in favour of Derwent, declared that the Contract was valid and was not rescinded, and that the matter proceed to trial for assessment of damages including restitution on a date to be fixed. The cross-claims were dismissed as a consequence. Derwent appealed to the Supreme Court challenging the judgment on liability which was unsuccessful.

3. Derwent was incorporated under the Companies Act 1997 on 28 June 2007. It was deregistered and removed from the Register of Registered Companies (Register) incorporated in Papua New Guinea kept by the Registrar of Companies (Registrar) pursuant to s.395(1) of the Companies Act 1997 on 17 January 2020. Since its removal, it has not been restored to the Register.

EVIDENCE

4. Niya relies on and reads the following documents:

1. Affidavit of Stephen Hii sworn on 14 November 2022 and filed on 15 November 2022;

2. Affidavit of Herman Leahy sworn and filed on 15 November 2022 (First Affidavit of Herman Leahy); and

3. Affidavit of Herman Leahy sworn and filed on 11 January 2023 (Second Affidavit of Herman Leahy).

5. Niya also relies on a detailed Chronology.

6. Derwent relies on the Affidavit of Grace Verave sworn and filed on 11 January 2023.

ISSUE

7. The issue that is central to the determination of this application is whether Derwent's removal from the Register warrants dismissal of the proceedings for abuse of the process of the Court.

SUBMISSIONS

Second Defendant:

8. Niya submits that the entire proceedings should be dismissed on the grounds that they are an abuse of the process of the Court for the following reasons.

9. Derwent was registered under the Companies Act 1997 on 28 June 2007 and was deregistered and removed from the Register on 17 January 2020. It no longer exists as a legal entity and remained so at the time of filing of the application.

10. Once a company is deregistered and removed from the Register, it has no legal existence. Niya relies on the National Court decision of Bay Cabs Ltd v Kokiva [2019] N7957 in support of that proposition. When a company is removed from the Register, a company ceases to exist as a legal entity and cannot conduct any business in its own right. Any property owned by the company immediately before its removal from the Register vests in the Registrar with effect from the removal of the company from the Register by virtue of s.373(1) of the Companies Act 1997. Former officeholders of the company no longer have the right to deal with any property registered in the company's name. Moreover, the company can neither commence or continue legal proceedings nor can it be sued in its own name as was held in Bay Cabs Ltd v Kokiva [2019] N7957.

11. Upon removal from the Register, the property of the company including any rights that the company has to commence or continue legal proceedings are taken over by the Registrar pursuant to ss.372(1), 373 and 374 of the Companies Act 1997. Derwent has lost its standing to continue the prosecution of these proceedings. The shareholders and directors of the removed company lose power to control the company and deal with its “property” as was held in Daniel Tulapi v Steamships Trading Company Ltd (2012) SC1210 at [36].

12. Derwent admits the fact of its deregistration and removal from the Register.

13. Yet despite Derwent's removal from the Register, it has continued to be active in; pursuing these proceedings that resulted in judgment on liability being entered in its favour with damages to be assessed; and defending legal proceedings before the Supreme Court and ultimately receiving judgment in its favour from the Supreme Court.

14. On 17 October 2022, Derwent's lawyers were informed by letter from Niya's lawyers to rectify the fact of its deregistration and removal from the Register and Derwent's lawyers responded stating, among other things, that they were taking steps to rectify Derwent's deregistration and removal from the Register.

15. Niya registered its objection to the restoration of Derwent to the Register with the Registrar pursuant to s.378(4) of the Companies Act 1997 by letter from its lawyers dated 23 November 2022 (annexure “S”, Second Affidavit of Herman Leahy). The Registrar's power to restore a company removed from the Register is limited once an objection is received. A letter was written by Niya's lawyers to the Registrar affirming its objection raised in the letter of 23 November 2022 after the publication of the Notice of Intention to Reinstate a Company Removed from the Register of Registered Companies and within the period allowed by the notice.

16. Derwent has not been restored to the Register. There is nothing before the Court to demonstrate that Derwent has been restored to the Register.

17. At this point in time, restoration can only be made by the Court on application under the Companies Act 1997. No such application has been made to the Court.

First Defendant:

18. Pakena supports Niya's application. He says Derwent's lawyers have misled the Court as to the true legal status of its existence as a legal entity both in the National Court and the Supreme Court.

Plaintiff

19. Derwent submits that the relief sought in the notice of motion should be refused as:

1. An application for the restoration of the company to the Register under s.378 of the Companies Act 1997 is currently being processed and the process be allowed to be completed;

2. A public notice of intention to restore the company to the Register dated 26 October 2022 approved by the Registrar on 18 November 2022 was published at p.50 of the Post Courier on 5 December 2022.

3. The Public Notice required any objection with reasons provided to the reinstatement of the company to the Register to be lodged with the Registrar within one month after the publication of the notice pursuant to s.378(3)(d) of the Companies Act.

4. The last date for the lodgement of objections to the restoration of the company with the Registrar was on or about 7 January 2023.

5. The objection received by the Registrar from Niya's lawyers by...