Bole v Imbeli [1983] PGNC 23; [1983] PNGLR 128; N422(M) (13 May 1983)

N422(M)

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WAMA BOLE

V

WILLIE IMBELI

Rabaul
Pratt J

11 May 1983
13 May 1983

INFERIOR COURTS - District Courts - Practice and procedure - Judgment debtors - Fraudulent debtors - Strict proof required - Need to prove fraudulent conduct - Meaning of "has then, or has had means and ability to pay" - District Courts Act 1963, s. 198(1).1

JUDGMENTS - Execution against person - Fraudulent debtors - Strict proof required - Need to prove fraudulent conduct - Meaning of "has then or has had means and ability to pay" - District Courts Act 1963, s. 198(1).2

The District Courts Act 1963 s. 198(1)3 provides for imprisonment of defaulting debtors where the person making default in payment:

(i) has then, or has had since the date of the order, sufficient means and ability to pay the sum of which he has made default, or an instalment thereof where an order has been made to pay by instalments, and has refused or neglected or refuses or neglects to make that payment.

Held

(1) The words "has then, or has had" refer to possession in the debtor on the day of judgment or since that day. "Has then" means that on the day of judgment he was at that very time in possession of money or property of his own which he could have used to pay the debt if he wanted to. "Has had" means that the debtor has received money or property or some other thing of value since the day when judgment was recorded against him.

(2) The words "sufficient means and ability to pay" mean that at the time of judgment or since then the judgment debtor possessed property over which he exercised control and from which he could take out the money which he owes on the debt.

(3) The words "refused or neglects" require a finding on the evidence of a deliberate refusal or neglect following a finding of "means and ability": mere lapse of time or an absence of means will not suffice.

Appeal

This was an application by way of notice of appeal to set aside an order of the District Court made pursuant to the District Courts Act 1963, s. 198(1).

Counsel

P. P. Poloh, for the appellant.
M. Maraleu, for the respondent.
Cur. adv. vult.

13 May 1983

PRATT J: This is an application by way of notice of appeal to set aside an order made by the learned magistrate of the District Court in Rabaul that the appellant/judgment debtor pay the sum of K118.20 within two weeks and in default, five weeks imprisonment with hard labour. The amount related to a judgment debt awarded to the respondent following an earlier appeal to Bredmeyer J in May 1981. That order was for damages in the sum of K80 plus costs in the sum of K31. I upheld the appeal last Wednesday and ordered that the magistrate’s judgment be quashed. The order by his Worship followed on the examination of the appellant. I gave brief reasons for my decision but indicated that full reasons will be handed down today. I considered the giving of reasons desirable because it appears that some of the legal profession and the magistracy do not appreciate the limitations which form part of s. 198(1)(e)(i) of the District Courts Act 1963 dealing with fraudulent debtors. There are several factors which are basic to the outcome of any proceedings taken under this section:

(1) You cannot get something out of nothing. If a man has no money at all then it may be wiser not to go to court in the first place.

(2) The law will not allow a person to be put in gaol merely because he is poor.

(3) The law will not force a person to borrow from another even if it is his wife in order to pay a debt.

(4) The judgment-creditor is like a policeman — he must prove his case fully before he can obtain his order under s. 198.

Careful consideration must be given to the words used by the legislature in s. 198(1)(e)(i) which provides as follows:

"198(1) An order made by a court:

(a) for the payment of a debt recoverable before it or of an instalment thereof, whether with or without costs;

(b) for the payment of damages for an assault or for trespass by cattle or an instalment thereof, or for the payment of damages recoverable before it and not enforceable as a fine, or an instalment thereof, whether with or without costs;

(c) for costs ordered to be paid by an informant to a defendant on the dismissal of an information, or an instalment thereof; or

(d) for the delivery of goods detained without just cause after due notice and, in the event of neglect or refusal to deliver up the goods according to the order, for the payment of the value of the goods to the party aggrieved,

shall not, in default of distress or otherwise, be enforced by imprisonment:

(e) unless it is proved to the satisfaction of the court that the person making default in payment:

(i) has then, or has had since the date of the order, sufficient means and ability to pay the sum of which he has made default, or an instalment thereof where an order has been made to pay by instalments, and has refused or neglected or refuses or neglects to make that payment;

(ii) is about to leave the Territory without paying the debts, damages, costs, money or instalment, or so much thereof as is still unsatisfied;

(iii) is about to depart elsewhere within the Territory with intent to evade payment thereof; or

(iv) has neglected or refused to comply with an order under this Ordinance for the delivery of goods detained without just cause after due notice, and has not paid the value thereof to the party aggrieved; or

(f) unless it is proved to the satisfaction of the court that that person, if a defendant incurring the liability which is the subject of the proceedings in which the order was made:

(i) obtained credit or contracted the liability under false pretences or by means of fraud or breach of trust;

(ii) wilfully contracted the liability without having at the same time a reasonable expectation of being able to discharge it; or

(iii) has made or caused to be made a gift, delivery or transfer of property or has charged, removed or concealed property with intent to defraud his creditors or any of them."

The section is in the same terms as s. 200(1)(i) of the old District Courts Act 1924 which itself was based on Victorian legislation. Consequently I have been able to obtain great assistance from the discussion and references mentioned in Paul’s Justices of the Peace 2nd ed. at 556ff. and especially 562 to 563. Magistrates should note particularly:

(1) The words "has then, or has had" in s. 198(1)(e)(i). In my view both of these phrases refer to possession in the debtor on the day of judgment or since that day. If the debtor gave away all his property the day before judgment was entered against him then this section is of no use to the judgment-creditor. "Has then" means that on the day of judgment he was at that very time in possession of money or property of his own which he could have used to pay the debt if he wanted to. "Has had" means that the debtor has received money or property or some other thing of value since the day when judgment was recorded against him.

(2) "Means and ability to pay". This means that at the time of judgment or since then he possessed property over which he exercised control and from which he could take out the money which he owes on the debt. Of course if he holds the property for someone else, say as a trustee, he does not possess the "ability" or the "capacity" to pay. He does not exercise complete control over the money. Likewise, if he owns a motor vehicle together with six other people, he does not have the "ability" to pay as there are five other people who have a say in what happens. Further his "means" to pay comes only to one-sixth of the value of the motor vehicle. Of course if the judgment-debtor does not have any income, has no money in the bank, has no other property, then he does not have the "means and ability to pay". The judgment-creditor must clearly show such means and ability to pay. In order to find out about this the law allows a summons to issue against the debtor so that he may be examined in court on oath about his property and his income.

(3) "Refusal or neglect to pay" — the fact that a long period of time has elapsed since the judgment was entered is not itself of any great consequence. I cannot help but feel that the learned magistrate in this case considered that the six months which has elapsed from final judgment was long enough. If this was so, his Worship was clearly wrong. It is essential to show by evidence either direct or by inference that there has been a "refusal or neglect", and the court order committing the debtor to prison must clearly state not only that the debtor had the "means and ability" but also that he "refused or neglected to pay". This is an essential part of the "offence" requiring proof by the judgment-creditor before he can obtain the order. Such neglect or refusal must also be deliberate but of course the debtor cannot refuse to pay merely because it would make things uncomfortable or inconvenient for himself or his family. Indeed it has been held that there is even an obligation on the debtor to seek out the creditor and pay off the debt provided the money is there. Thus, if evidence is adduced that John had K200 in the bank after judgment was given to Peter for a K100 and that he, John, knew where Peter was living but spent the whole K200 on giving a party for his friends despite his knowledge of the judgment against him, and Peter proved these matters to the court, an order could properly issue under s. 198 against John.

In the present matter, the evidence from the judgment-debtor was quite short. He said he was not employed but living at Nonga with friends. He had no money in his passbook, his wife is employed as a house-servant, there were no other people owing money to him. He was asked: "Is there any other way you can settle this debt of K118.20", to which the answer was "the court to give time to find the money". Then there was apparently a further request from the judgment-debtor for a period of three to four months to pay. He was further asked, "have you any property that can be used to settle the debt", and the answer was "nothing". There is nothing in that evidence in my view to indicate that there is either a means to pay or an ability to pay, let alone the means and ability to pay. Consequently, there is no evidence that there has been a neglect or refusal to pay because how can you neglect or refuse to pay out of funds which you do not possess in the first place. The plain facts of the matter are that all the unfortunate judgment-creditor demonstrated quite conclusively to the court was that the person that he had brought in for examination was a man of no substance, "a man of straw", who was not in a position to be able to pay anything. This of course is not an uncommon occurrence for creditors to face. As I pointed out during argument, the days when people were put in gaol for non-payment of debts merely because they had no money at the time of judgment have gone and I trust, gone forever. That is entirely different however, from a person who has money and deliberately cheats on paying that money to the judgment-creditor. Where there is evidence of that fact this section will assist the wronged creditor.

Finally, I would like to say something about the imposition of the "default penalty". Section 198(3) permits the court to grant a specific period of time in which the debt must be paid but again great care must be exercised because of the use of a term from the criminal law, within a civil context. Whilst it is true that a default penalty may be imposed it is not imposed only because the debtor fails to pay but because he had the ability to pay and failed to pay. It should be noted that s. 198(3) commences "... if any of the matters specified in sub-s. (i) of this section are proved". The default penalty cannot be imposed on someone who does not have at the time of hearing, the ability to pay off the debt, or the amount of the instalment due on the debt by earlier order of the court. Nor does it make any difference that the debtor may be receiving some money next week, unless the court makes an order granting time to pay beyond that date when he receives the money — that is an ordinary "time-to- pay" order.

For these reasons I have upheld the appeal and quashed the magistrate’s orders.

Appeal allowed.

Orders of magistrate quashed.

____________________________

Lawyer for appellant: A. Amet, Public Solicitor.
Lawyer for respondent: M. Maraleu.