New Guinea Islands Produce Co Ltd, Re [1980] PGNC 65; [1980] PNGLR 304 (6 October 1980)

Papua New Guinea Law Reports - 1980

[1980] PNGLR 304 - Re New Guinea Islands Produce Co Ltd 

[1980] PNGLR 304

N261(L)

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

RE NEW GUINEA ISLANDS PRODUCE COMPANY LIMITED

Waigani

Pratt J

6 October 1980

COMPANIES - Arrangements etc. with creditors - Stay of proceedings against company sought - No proceedings commenced - Stay available only where proceedings commenced - Practice of seeking blanket orders disapproved - Companies Act 1963, s. 181(9).

On an application, pursuant to s. 181 of the Companies Act 1963, for an order to convene a meeting of creditors of the company for the purposes of discussing a scheme of arrangement, a further application was made “that proceedings be stayed in any action or proceeding against (the company) except by leave of the court and subject to such terms as the court may impose”. No proceedings against the company had been instituted.

Held:

N1>(1)      An order pursuant to s. 181(9) of the Companies Act 1963, “to stay or restrain further proceedings in any action or proceeding against the company except by leave of the court”, can only be granted in a case where an action or proceeding has already been commenced.

Re Reid Murray Acceptance Ltd. [1964] VicRp 12; [1964] V.R. 82 adopted and applied.

N1>(2)      Accordingly the application for a stay of proceedings should be refused.

N1>(3)      Semble, the practice of making a blanket application for a stay of proceedings on application under s. 181 is undesirable.

Summons.

This was an application by way of summons under s. 181 of the Companies Act 1963 seeking orders pursuant to s. 181(1) and s. 181(9).

Counsel:

V. I. C. Clarke, for the applicant.

16 October 1980

PRATT J.: This was an application by way of summons under s. 181 of the Companies Act for an order appointing a meeting of the creditors of the company for the purpose of discussing and deciding upon a scheme of arrangement. In addition to asking the court for an order to convene the meeting a further application was made “that proceedings be stayed in any action or proceeding against New Guinea Islands Produce Co. Ltd. except by leave of the court and subject to such terms as the court may impose”.

I made an order convening the meeting for 10.00 o’clock Friday 24th October, 1980 but declined to grant an order staying proceedings.

I was advised by counsel for the applicant that the order sought was in the usual form and that it was normal to make such application when applying for an order to convene a meeting for discussion of a scheme of arrangement. It seemed to me however that it would not be proper for me to make an order affecting people who had no notion that such an application was being made before this Court and who for various reasons best known to themselves and quite genuinely wished to institute proceedings either with or without the knowledge that such a meeting was being convened. As a matter of practice it would seem a foolish course to me for a creditor to commence proceedings knowing that an order had been made for such a meeting to be convened as a decision of three-fourths of the creditors assembled at the subsequent meeting to go ahead with the scheme of arrangement would effectively nullify any separate proceedings by an individual creditor. I do not say that there may not be occasions when for practical or business reasons it would be desirable for such proceedings to be instituted but in the majority of instances I think it would be rather unusual.

I am confirmed in my belief in this matter by examining a Victorian case of Re Reid Murray Acceptance Ltd[cdxcvi]¹ in which Mr. Justice Adam examines s. 181 of the Victorian Companies Act (in exactly the same terms as our own). More particularly his Honour is examining the effect of sub-s. (9) of that section which in brief allows a court to order a stay of proceedings where an application is made for a creditors’ meeting to be convened. At p. 86 his Honour said “there appears to be no authority directly in point, though I have been informed that in practice orders for stays have often been made on ex parte applications without argument in the terms of the order now challenged. As I have myself recently in Re Factors Ltd. (unreported) refused, after some argument and some, though not final, consideration, to make the wider order which has been made by Dean J., I do not feel that the alleged practice, which must, I think be recent, should carry weight in this contested matter”[cdxcvii]². His Honour then went on to say[cdxcviii]³ “If, as I think, sub-s. (9) can affect only further proceedings in already pending proceedings, I would think that the application for a stay must be inter partes in accordance with the principles enunciated in such cases as Ex parte Francis[cdxcix]⁴; and Commissioner of Police v. Tanos[d]⁵. This certainly seems the fairer construction of the section”. His Honour goes on “It is to my mind clear that, as on 29th November, no action which could be described as a proceeding under sub-s. (9) had been taken by the trustee against the company ... my conclusion that the order of 29th November (ordering a stay of proceedings pending the holding of the meeting), insofar as it purported to preclude proceedings by the trustee under the deed, that is proceedings altogether in futuro, was made without jurisdiction has rendered it unnecessary for me to consider further argument ...”.[di]⁶

With respect I would adopt everything said by Mr. Justice Adam. In this case there is no evidence that any party has or intends to institute proceedings against the company. It is simply a blanket application made in pursuance of the usual form and in my view such applications should not be made in future unless proceedings have in fact already been instituted.

Order convening meeting granted.

Application for stay refused.

Solicitor for the applicant: Gadens.

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style='font-size:10.0pt;font-family:"Times New Roman";col";color:black'>[cdxcvi] [1964] V.R. 82.

[cdxcvii] [1964] VicRp 12; [1964] V.R. 82 at p. 86.

[cdxcviii] [1964] V.R. at p. 87.

[cdxcix] [1907] V.L.R. 368.

[d] (1958) 98 C.L.R. 383.

[di] [1964] V.R. at p. 88.