Micah v Wagun [2003] PGNC 114; N2397 (7 July 2003)

N2397

PAPUA NEW GUINEA
[In the National Court of Justice]

BETWEEN:

OS No. 74 of 2003

Ben Allan Micah
-Plaintiff –

AND:

Paul Wagun
-First Respondent –

AND:

Hugh Mosely
-Second Respondent-

WAIGANI: GAVARA – NANU, J
2003: 31st March & 07th July

PRACTICE AND PROCEDURE – Insolvency – Application to be discharged as insolvent – Insolvency Act Chapter No. 253 ss. 129, 131 and 132 discussed.

Cases cited:
Application for Review by Martin Negai N-1764

Counsel:
P. Pakop for the plaintiff
I. Shepphered for the respondents.

GAVARA-NANU J: The plaintiff in his originating summons filed on 21st February, 2003, is seeking declarations and orders that his insolvency arose out of circumstances for which he cannot justly be held responsible, and that he be granted a certificate of discharge pursuant to s. 132 (1) and (2) (a) of the Insolvency Act, Chapter No. 253. (hereinafter referred to as ‘the Act’).

The plaintiff is also seeking orders for the return of all the assets, documents, titles and so on obtained from him by the trustee under the insolvency. However, such orders are consequential upon the determination of the two main Orders he is seeking.

The back ground facts of this application are as follows : The plaintiff was a guarantor to the then PNGBC (hereinafter referred to as ‘the bank’) for a loan obtained by a company called Archipelago Shipping Pty Ltd. Thus, pursuant to that guarantee, the plaintiff was liable to the bank for any debt that Archipelago Shipping Pty Ltd may owe under the loan agreement. Consequently, when Archipelago Shipping Pty Ltd, defaulted in its loan repayments, the bank sued the plaintiff for the unpaid balance of the loan. On 03rd June, 1997, the bank obtained a default judgment against the plaintiff. It is noted that the default judgment is still current, as it has not been set aside.

On 21st September, 2001, a Debtor’s Summons was issued and served on the plaintiff. Upon the failure by the plaintiff to respond to the Debtor’s Summons, a petition in insolvency was filed resulting in the Insolvency Order being made by this Court against the plaintiff in the matter of MP. No. 742 of 2001, on 19th December, 2001.

The plaintiff’s application for a certificate of discharge is made under s. 132 (1) and (2) of the Act. Subsection (1) provides that, at anytime after the insolvent has passed his last examination, or at any earlier time with the consent of the creditors testified by a special resolution, the insolvent may on the prescribed notice, apply to the Court for a certificate of discharge. Subsection (2) provides that, a certificate of discharge shall not be given under s. 132 unless it is proved to the Court that: -

(a) the insolvency arose from circumstances for which the insolvent cannot justly be held responsible; or

(b) a special resolution of his creditors has been passed to the effect that: -

• (i) the insolvency arose from the circumstances for which he cannot justly be held responsible, and
  
• (ii) the creditors desire that a certificate of discharge be granted to him, or
  

(c) the gross amount realized in the estate is equal to the

total amount of debts proved in the estate.

Section 131 of the Act, provides that the insolvent may obtain a certificate of discharge from the Court in accordance with s. 132, and s. 129 of the Act, sets out the procedure by which the insolvent may have his last examination.

The plaintiff has based his application on two grounds, viz. that he should be granted certificate of discharge because he has passed his last examination as required under s. 129 of the Act. Alternatively, his insolvency arose out of circumstances for which he cannot justly be held responsible.

Thus, for the certificate of discharge to be issued to the plaintiff, he has to satisfy the two pre-conditions or grounds on which he is making his application. Indeed these are same requirements or pre-conditions under s. 132 of the Act, for the granting of a certificate of discharge.

There are other grounds under s. 321, upon which the plaintiff may be discharged, but they are not relevant here.

Mr John Maddison who is the Manager of Asset Management of the bank, deposed in an affidavit that the Bank does not consent to the plaintiff’s application to be granted a certificate of discharge. He also denies that the plaintiff has passed his last examination as set out in s. 129 of the Act. Mr Maddison also says in his affidavit that the bank as the major creditor has consented to the trustee’s action in entering into a contract for sale of the major asset belonging to the plaintiff at Section 8, Allotment 18, Bampaton street, National Capital District.

The plaintiff has said that he did his last examination in August, 2002, in Deloitte Touché Tohmatsu’s office. However there is no evidence that such examination did take place and further more, there is no evidence that such examination complied with the mandatory requirements of s. 129 of the Act. In this regard I have already noted the affidavit evidence by Mr Maddison that there was no such examination.

As to the second ground of the application that the insolvency arose out of circumstances for which the plaintiff cannot justly be held responsible, I am of the view that such an issue does not arise here, for the reason that the applicant was the guarantor of the loan given to Archipelago Shipping Pty Ltd by the bank and secondly a default judgment was entered against him which is still current and thirdly the Debtor’s Summons was not in anyway challenged by the plaintiff. These are all established by evidence. In those circumstances, it is my view that the plaintiff cannot rely on this ground.

In this application, the plaintiff is effectively asking this court to review the Insolvency Order made against him by this Court. But for that, he would need to invoke s. 150 of the Act. However, such process is not open to him because he has to first have the default judgment entered against him set aside. The case in point is the case of Application for Review by Martin Negai – N.1764. In that case, Kapi DCJ, refused to invoke s. 150 in an application which effectively asked him to review a summary judgment entered against the insolvent applicant. His Honour said a judgment may be set aside only on application made under the National Court Rules or on appeal to the Supreme Court. In this case, the default judgment against the plaintiff was entered on 03rd June, 1997, which as I said is still current as it has not been set aside.

The plaintiff does not dispute that he signed the guarantee for the loan by the Archipelago Shipping Pty Ltd from the bank, on 02nd October, 1995. He also does not dispute that the defaulted judgment was entered against him on 3rd June, 1997, and a Debtor’s Summons based on that judgment was subsequently served on him, upon on which he was adjudged insolvent on 19th December, 2001.

In those circumstances it is my view that, he cannot now argue that he is not responsible for his insolvency.

Thus the plaintiff having failed to satisfy the two pre-conditions under s. 132 (1) and (2) of the Act, this Court in my view does not have the power or the jurisdiction to grant the orders sought by the plaintiff.

The plaintiff has placed some reliance on the Order made by the Chief Justice where he was ordered to provide the list of his assets which he has done. In my view, that cannot be regarded as an examination for the purpose of ss. 129 and 132 (a) of the Act, for the reason that any such Orders would not accord with s. 129 of the Act.

As to the application for directions with respect to the Ombudsman Commission freezing his entitlements, I am of the view that such application should be made separately through Originating Summons to have the actions of the Ombudsman Commission reviewed. In respect of the application for the removal or replacement of the Official Trustee, that again should be pursued separately.

For those reasons, the plaintiff’s application is refused. The plaintiff will pay the cost of the respondent’s costs.

Lawyer for the plaintiff : Powes Parkop Lawyers
Lawyer for the First Respondent :
Lawyer for the Second Respondent : Blake Dawson Waldron