Nathaniel Poya v Rex Paki (2008) N3535

• Jurisdiction: Papua New Guinea
• Judge: Gabi, J
• Judgment Date: 08 December 2008
• Citation: (2008) N3535
• Docket Number: OS NO. 291 OF 2007
• Court: National Court
• Year: 2008
• Judgement Number: N3535

Full Title: OS NO. 291 OF 2007; Nathaniel Poya v Rex Paki (2008) N3535

National Court: Gabi, J

Judgment Delivered: 8 December 2008

N3535

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 291 OF 2007

BETWEEN

NATHANIEL POYA

Plaintiff

AND

REX PAKI

Defendant

Lae: Gabi, J

2008: 7th April

23rd & 26th May

18th July

14th & 26th August

23rd & 26th September

8th, 17th & 24th October

14th November

8th December

COMPANIES ACT – Section 300 – Termination of liquidation – “Just and Equitable” - Considerations

Cases Cited

Papua New Guinea Cases:

Canopus No. 16 Limited v Maisi Trust Company Limited (2008) N3401

In the matter of an application by Agmark Pacific Ltd and James Sinton Spence

Liquidator of Sepik Coffee J. V. Ltd (In Liquidation) (2007) N3223)

Wep Kilip, Kamsi Trading Ltd and Liquidator Hugh Mosley (2005) SC 784)

Overseas Cases:

Calgary and Edmonton Land Co Limited (In Liquidation) (1975) 1 WLR 355

Collison v Warren [1901] 1 Ch 812

Data Homes Pty Ltd [1971] 1 NSWLR 338

Mercy v Wanari [2000] NSWSC 756

Counsel

K Gamoga, for the plaintiff

B Ovia, for the defendant

RULING

8 December, 2008

1. GABI, J: Introduction: There are two (2 ) applications before the court; one by Nathaniel Poya to terminate the liquidation of Voco Point Trading Ltd pursuant to section 300 of the Companies Act and the other by Rex Paki to dismiss the proceedings pursuant to Order 12 rule 40 of the National Court Rules. He is also asking for the following injunctive orders:

1. “That the Plaintiff and his company Kabila Ltd and its staff be evicted from the property at Voco Point known as Section 27, Allotment 48, Lae, Morobe Province for breach of Agreement of Sale of Business Assets entered in by the Parties on 15th December 2004.”

2. “That the Plaintiff be restrained from interfering with the Defendant from exercising his powers and functions as Liquidator in the Liquidation process.”

3. “That the Plaintiff, his servants, agents, associates and tribesmen be restrained from harassing, intimidating and or interfering with the employees and agents of the Defendant at Section 27, Allotments 25 and 06, Lae, Morobe Province until the liquidation process is concluded.”

The Evidence

2. The evidence in both applications is comprised of the following affidavits: affidavit of Peter Honale dated 18th September 2007; 3 affidavits of Nathaniel Poya dated 4th September 2007, 18th June 2008 and 8th August 2008 respectively; affidavit of John Lim dated 24th September 2008; 6 affidavits of Rex Paki dated 22nd August 2007, 6th March 2008, 18th June 2008, 22nd August 2008 and 10th October 2008 respectively; and affidavit of Buri Ovia dated 10th October 2008.

3. Voco Point Trading Limited (In Liquidation) went into voluntary liquidation on 5th March 2004. Rex Paki agreed and was appointed Liquidator on the same day. There are 89 creditors of the company; however, the only registered and secured creditor is Bank of South Pacific Ltd. The fourth liquidator’s report of October 2008 shows that the total debts of the company stands at K3.9 million while its assets are worth K4.2 million. Tax liabilities of the company have not been provided; however, it is alleged that the Income Tax Returns for the years ending 31st December 2003 and 31st December 2004 have not been lodged with Internal Revenue Commission.

The Law

4. The defendant argues that as the creditors have agreed to retain him as liquidator at the meeting of 16th June 2008 the proceedings should be dismissed under Order 12 Rule 40 of the National Court Rules. Clearly the plaintiff has a cause of action and I am unable to agree with the argument.

5. With respect to the injunctive orders, counsel for the plaintiff submits that as no action has been brought against the plaintiff, the defendant cannot seek such orders. Order 12 Rule 1 of the National Court Rules in essence allows the court at any stage of the proceedings on the application of any party to make such orders as the nature of the case requires notwithstanding that the applicant does not make a claim for those orders in the originating process. In Canopus No. 16 Limited v Maisi Trust Company Limited (2008) N3401, His Honour, Hartshorn J. commenting on O12 r 1 said:

“This provision provides for what was permitted in Collison v Warren [1901] 1 Ch 812. In that case a defendant successfully obtained a mandatory injunction against a plaintiff even though he had not filed a counterclaim, as what he was seeking arose out of the same contract upon which relief was sought in the proceedings.”

6. Section 300 of the Companies Act provides:

“300. COURT MAY TERMINATE LIQUIDATION.

(1) The Court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.

(2) An application under this section may be made by the liquidator, or a director or shareholder of the company, or any other entitled person, or a creditor of the company, or the Registrar.

(3) The Court may require the liquidator of the company to furnish a report to the Court with respect to any facts or matters relevant to the application.

(4) The Court may, on making an order under Subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.

(5) Where the Court makes an order under this section, the person who applied for the order shall, within one month after the order was made, submit a certified copy of the order to the Registrar for registration.

(6) Where the Court makes an order under Subsection (1) the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.

(7) Every person who fails to comply with Subsection (5) commits an offence and is liable on conviction to the penalty set out in Section 413(2).”

Just and Equitable

7. Section 300(1) confers on the Court discretion to terminate the liquidation of a company after the appointment of a liquidator. The liquidation may be terminated upon an application by the liquidator, a director or a shareholder, any other entitled person, the Registrar of companies or a creditor (sec 300(2)). The Court must be satisfied that it is “just and equitable” to terminate liquidation. The effect of an order to terminate liquidation is that the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order (sec 300(6)). The considerations for the termination of liquidation are not set out under the Companies Act. In an enquiry into whether it is just and equitable to terminate liquidation, the relevant factors 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 (see Wep Kilip, Kamsi Trading Ltd and Liquidator Hugh Mosley (2005) SC 784).

Service of the application

8. There is no evidence before the court that the application for termination has been serviced on the creditors; however, from the fourth liquidator’s report it appears that the 25 out of 89 creditors that attended the meeting on 16th June 2008, resolved to retain the liquidator and complete the liquidation as soon as possible. It appears to me that Nathaniel Poya, who is a contributory of the company, is the only person that wants the liquidation terminated.

Whether all debts have been settled or will be discharged

9. As at 16th June 2008, total debts to the Bank of South Pacific stands at K2.2 million while trade creditors are owed K1.6 million. Final staff entitlements are estimated at K117, 000.00. It is not known how much is owed to the Internal Revenue Commission in taxes, but there is no doubt that an amount is owed by the company. There is no evidence that the debts will be settled or a scheme made to have all the debts discharged.

Attitude of creditors, contributories and liquidator

10. It is clear to me that the creditors and the liquidator are opposed to the termination of liquidation.

The current trading position of the company...