Bemobile Ltd v Wettao [2014] PGNC 369; N6776 (25 July 2014)

N6776

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 106 of 2014

BETWEEN:
BEMOBILE LIMITED
Plaintiff

AND:
DANIEL WETTAO
Defendant

Waigani: Hartshorn J
2014: 22^nd, 25^th July

Application to set aside a statutory demand – Sections 338(1) and 338(4) Companies Act

Cases Cited:
Papua New Guinea Cases

Moran Development Corporation Ltd v Akida Investments Ltd (2003) N2458
The PNG Balsa Company Ltd v New Britain Balsa Company Ltd (2004) N2520
Bank of South Pacific Ltd v South Pacific Timber Exports Ltd (2004 N2712 Department of Works v International Construction (PNG) Limited (In Liquidation) (2009) SC1051
Rex Paki v Motor Vehicle Insurance Ltd (2010) SC1015
In re Bemobile Ltd (2011) N4712
In Pacific Rim Constructors – Singapore Pte Ltd v Huala Hire & Construction Ltd (2012) N4710

Overseas Cases

Silverpoint International Limited v Wedding Earthmovers Limited (2007) NZHC 1769

Counsel:

Mr. J. Brooks, for the Plaintiff

25^th July, 2014

1. HARTSHORN J: The Plaintiff Bemobile Limited seeks to set aside a statutory demand issued against it by the Defendant, David Wettao.

2. I allowed the hearing of the originating summons to proceed in the absence of the defendant and representation on his behalf as I was satisfied that the lawyers for Mr. Wettao had been notified in writing by letter dated 16^th July 2014, which was personally delivered on 17^th July 2014, that the hearing was listed at 9:30 am 22^nd July 2014. I noted also the acknowledgment of receipt of the letter.

3. Sections 338 (1) and 338 (4) Companies Act, and Order 12 Rule 1 National Court Rules are relied upon by Bemobile for the relief that it seeks.

4. The statutory demand sought to be set aside is dated 14^th February 2014 and is for the sum of K43,730.00.

Preliminary

5. As to whether an originating summons is the appropriate form of originating process to be used for an application such as this, I am satisfied that it is after having regard to the decisions of Moran Development Corporation Ltd v Akida Investments Ltd (2003) N2458; The PNG Balsa Company Ltd v New Britain Balsa Company Ltd (2004) N2520; Bank of South Pacific Ltd v South Pacific Timber Exports Ltd (2004 N2712; Department of Works v International Construction (PNG) Limited (In Liquidation) (2009) SC1051; In re Bemobile Ltd (2011) N4712 and In Pacific Rim Constructors – Singapore Pte Ltd v Huala Hire & Construction Ltd (2012) N4710.

6. As to whether s.338 (2) Companies Act has been complied with; that, “The application shall be made, and served on the creditor, within one month of the date of service of the demand”, I am satisfied that it has as the originating summons was filed within one month of the date of the statutory demand and within one month of the date that Bemobile contends that it was served with the demand. In addition, the originating summons was served upon the lawyers for Mr. Wetteo on 10^th March 2014. I note that Mr. Wettao is listed on the letterhead of JAL Japson & Associate Lawyers as either a senior associate or consultant - it is not clear which. Further, in a letter dated 3^rd March 2014, JAL Japson & Associate Lawyers informed that they act for Mr. Wettao and Amamusa Consultants in regard to the statutory demand the subject of this proceeding, and another related but separate statutory demand, the subject of another proceeding.

7. The filing and service of an application to set aside a statutory demand within one month is all that is required by s.338 (2) Companies Act and I refer to the decision of Moran Development Cooperation Limited v Akida Investments Limited (supra) in this regard.

8. Bemobile contends that the statutory demand should be set aside as:

(a) It has a substantial dispute as to whether the debt claimed in the statutory demand exists at all;

(b) Bemobile has a claim against Mr. Wettao that he was paid money by Bemobile to which he was not entitled.

Law

9. Sections 338 (1) and (4) Companies Act are as follows:

“(1) The Court may, on the application of the company, set aside a statutory demand.

.........

(4) The Court may grant an application to set aside a statutory demand where it is satisfied that –

(a) there is a substantial dispute whether or not the debt is owing or is due; or

(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, setoff, or cross-demand is less than the prescribed amount; or

(c) the demand ought to be set aside on other grounds.”

10. These sections are similar to s.290 (1) and (4) Companies Act of New Zealand. Consequently cases from the New Zealand Courts on setting aside applications are relevant as well as persuasive in applications to set aside in this jurisdiction. This is demonstrated in the case of the PNG Balsa Company Limited v New Britain Balsa Company Limited (supra) in which Lenalia J, after considering New Zealand authority, held that in order to demonstrate that there is a substantial dispute, an applicant must, “show a fairly arguable basis” to justify the contention that it was not liable to pay the amount claimed in the statutory demand.

11. I note that in the New Zealand High Court case of Silverpoint International Limited v Wedding Earthmovers Limited (2007) NZHC 1769, it was accepted that the test to be applied still is, whether there is a fairly arguable basis on which an applicant can claim that it is not liable.

12. I also make reference to the following decisions:

(a) In Re Bemobile Limited (supra), the Court held that the applicant must establish that there was a, “substantial dispute” as to the amount claimed in the statutory demand. In that matter the Court held that the statutory demand ought to be set aside as there was a substantial dispute and the proper course was that the dispute ought to be pleaded by way of statement of claim.

(b) In Moran Development Corporation Limited v Akida Investments Limited (supra), Kandakasi J also found that there was a, “substantial dispute” as to the alleged debt and set aside the statutory demand.

(c) In Pacific Rim Constructors – Singapore Pte Limited v Huala Hire & Construction Limited (supra), the Court held that if a debt is disputed, “to a large extent”, the statutory demand must be set aside. See also PNG Balsa Co Limited v New Britain Balsa Co (supra).

13. In the above cases the following principles are set out as to when a statutory demand ought to be set aside:

(a) The applicant must establish that there is a, “fairly arguable basis” or a, “substantial dispute” as to the amount claimed in the statutory demand;

(b) The evidence in support of an application must demonstrate that there is arguably a genuine and substantial dispute and which goes towards supporting the claim that the debt is disputed;

(c) That a mere assertion that there exists a debt or debts is not sufficient to maintain the statutory demand;

(d) That where proof has been given that there exists a substantial dispute, the matter must be resolved by other means, meaning the statutory demand must be set aside.

14. The Statutory demand here, is for K43,730.00 for retainer fees, pro rata payments and accommodation for the month of October, November and December 2013. Bemobile contends that these are alleged amounts associated with a consultant agreement that Mr Wettao had with Bemobile from June 2012.

15. Pursuant to the consultancy agreement, Mr. Wettao would work three days a week for K7,000 per month. There is provision in the agreement for additional days to be worked and for reimbursement of certain expenses. Mr. Wettao was to provide legal services. In addition one of the main purposes of Mr. Wettao’s engagement as a consultant was for the acquisition of sites or areas for the construction of Bemobile cell towers.

16. In May 2013, a contract came into existence between Bemobile and Amamusa Consultants. Amamusa Consultant is a business name owned by Mr. Wettao. The Amamusa contract purports to perform the site acquisition work that was being performed by Mr. Wettao for much larger payments than those to be paid to Mr. Wettao for the same work under this consultancy agreement.

17. As to the Statutory Demand issued by Mr. Wettao for the amount of K43,730.00, Bemobile contends:

(a) Many of the payments claimed relate to additional days claimed for the months of October, November and December 2013 and associated accommodation and meal allowances;

(b) Bemobile has no record of requesting Mr. Wettao to work additional days in October, November and December 2013;

(c) Bemobile has not received any legitimate receipts for meals and accommodation claimed by Mr Wettao;

(d) Mr. Wettao had no contractual entitlement to be paid for accommodation and meals under his consultancy agreement.

18. In short, Bemobile is highly suspicious of all of the amounts claimed by Mr. Wettao in the statutory demand.

19. Further, from a review of records relating to Mr. Wettao’s consultancy agreement, some of which are in evidence, Bemobile is of the view that many of the previous payments made to Mr. Wettao may have been based on ‘receipts’ that were merely pro forma documents and that many of the payments may not have been justified.

20. Also, from the invoices that Bemobile has seen, it is of the view that there has been a systematic attempt to claim money that is not genuinely owing to Mr. Wettao.

21. Bemobile also contends that Mr. Wettao is claiming for site acquisition work under the Amamusa contract, when his own consultancy agreement was still on foot. It is clear that site acquisition was a key component of his consultancy agreement. This gives rise to an obvious conflict and inconsistency between Mr. Wettao’s obligations under his consultancy agreement and the work he claims to have performed under the Amamusa contract.

22. Bemobile further contends that the evidence is that Mr. Wettao has been paid for accommodation allowance for almost every day of every month for the entire period of the consultancy agreement when he had no entitlement to accommodation allowance. On this basis Bemobile contends that it has a cross claim against Mr. Wettao that far exceeds what is claimed in the statutory demand.

23. From a perusal of the affidavit evidence relied on and particularly that of Messrs Raj Deo and Nehemiah Naris, I am satisfied that Bemobile has established a ‘fairly arguable basis’ or a ‘substantial dispute’ and that it should not pay the amount claimed in the statutory demand. Mr. Wettao has not provided adequate evidence of the debt he claims in the statutory demand and prima facie, is making a mere assertion that the debt exists.

24. Further, I am satisfied that Bemobile has established that it has a substantial claim against Mr. Wettao for money wrongfully paid to him by way of accommodation allowance and meal allowances. This is irrespective of the fact that Bemobile disputes the money claimed by Mr. Wettao in the statutory demand.

25. Given this, I am satisfied that the requirements of s.338 (4) (a) and s.338 (4) (b) Companies Act have been met. Consequently the statutory demand should be set aside.

Costs

26. Bemobile seeks its costs of this application from Mr. Wettao on an indemnity basis. This is because:

(a) Mr. Wettao has been on notice for some time that Bemobile seriously disputes the debt that he claims, yet he has nevertheless issued the statutory demand and forced Bemobile to make this application.

(b) In the circumstances, Mr. Wettao and his lawyers have forced Bemobile to take these proceedings when the debts claimed by Mr. Wettao are clearly the subject of a significant and substantial dispute.

(c) Bemobile has always disputed the debts claimed by Mr. Wettao and has asked him to provide evidence of the debts that he claims are owing. Despite these requests Mr. Wettao has not provided any evidence and Bemobile has been forced to come to court to set aside the statutory demand.

27. In Rex Paki v Motor Vehicle Insurance Ltd (2010) SC1015, the Supreme Court, of which I was a member held that:

“The award of costs on an indemnity basis is discretionary. An order for costs on an indemnity basis may be made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blameworthy that he should be so punished by such an order. The question is whether the conduct of the appellant in this matter is such that it caused the respondent to incur unnecessary costs.”

28. From a perusal of the affidavit of Mr. Jason Brooks, upon which reliance is placed for an indemnity costs order, I am not satisfied that the conduct of Mr. Wettao or his lawyers can be said to be so improper, unreasonable or blameworthy that it should be punished by an order for indemnity costs. Consequently costs shall be awarded on a party party basis.

Orders

29. The Orders of the Court are:

(a) The relief sought in paragraphs 1 and 2 of the originating summons filed 10^th March 2014 is granted.

(b) Time is abridged.

_________________________________________________________________
Ashurst Lawyers: Lawyers for the Plaintiff
Japson & Associates: Lawyers for the Defendant