Perpetual Shipping Ltd v Auwonya [2017] PGNC 338; N7041 (8 May 2017)

N7041

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS No.26 of 2017

BETWEEN

PERPETUAL SHIPPING LIMITED
Plaintiff

AND
SAMUEL AUWONYA
Defendant

Waigani: David, J

2017: 12 April & 8 May

INSOLVENCY - application for leave to issue debtor’s summons – relevant considerations – power discretionary – discretion to be exercised on some proper basis - National Court Rules subservient to Insolvency Act - National Court Rules have no application if inconsistent with any provision of Insolvency Act - no rules or regulations under Insolvency Act, in absence National Court Rules apply - Insolvency Act, Sections 21 and 23 - National Court Rules, Order 1 Rule 2 considered – application granted.

Cases cited:
Kutubu Catering Ltd v Eurest (PNG) Catering and Services Ltd (2016) N6255
Rural Development Bank Ltd v James Kond (2010) N5876

Counsel:

Bill Frizzell, for the Plaintiff
A Lora, for the Defendant

RULING

8^th May, 2017

1. DAVID, J: INTRODUCTION. This is a ruling on an application by the plaintiff seeking leave to issue a debtor’s summons to the defendant in the form attached to the originating summons filed on 7 February 2017 as Schedule “A”. The application is made pursuant to Section 23 of the Insolvency Act.
   

BRIEF BACKGROUND

2. The plaintiff claims that the defendant owes it a sum of K3,500.00 being taxed costs awarded against the defendant in a case commenced in the National Court by WS No.1818 of 2016 involving the defendant and Ivi Port Resources Limited as first and second plaintiffs against the plaintiff there as fifth defendant and four others (the earlier proceedings) and the defendant has not settled the said taxed costs.
   

DOCUMENTS RELIED ON IN CONTESTED APPLICATION

3. The plaintiff relies on the affidavits of:
   • (a) J K Balasubramanian sworn on 2 February 2017 and filed on 7 February 2017;
   • (b) Constable G Heol sworn on 27 March 2017 and filed on 28 March 2017.
     
4. The defendant contests the application with leave of the Court, he having not filed a notice of intention to defend the action.
   
5. In contesting the application, the defendant relies on; his notice of motion filed on 7 April 2017 seeking an order to dismiss the proceedings on the ground that the proceedings were an abuse of the process of the Court pursuant to Order 12 Rule 40(1)(c) of the National Court Rules; and the affidavits of:

(a) Andano David Lora sworn and filed on 7 April 2017;

(b) the defendant himself sworn and filed on 10 April 2017

6. The applications were argued together.
   

SUMMARY OF PLAINTIFF’S EVIDENCE

7. The defendant and Ivi Port Resources Limited commenced the earlier proceedings in which Andano David Lora Lawyers acted for the plaintiffs there and Warner Shand Lawyers for the defendants there. On 30 March 2016, leave was granted for the earlier proceedings to be discontinued accompanied by an order for the defendant and Ivi Port Resources Limited to pay the costs of the defendants there to be taxed if not agreed. On 14 June 2016, lawyers for the plaintiff and the four other defendants filed and served a party/party bill of costs pursuant to the order of 30 March 2016 and the hearing was scheduled for 28 June 2016 at 02.00 pm. Following an inter-partes hearing of taxation of costs on 28 June 2016, a certificate of taxation was issued on 29 June 2016 with taxed costs allowed at K3,500.00. On 27 July 2016, lawyers for the plaintiff and the other defendants filed and served a notice of motion seeking judgment in the sum of K3,500.00 with respect to the certified taxed costs. On 22 August 2016, the defendant and Ivi Port Resources Limited also filed a notice of motion seeking a review of the taxed costs. On 4 November 2016, by consent of the parties, judgment was entered only against the defendant in the sum of K3,500.00 and the notice of motion filed by the defendant and Ivi Port Resources Limited was dismissed. On 9 November 2016, the judgment entered on 4 November 2016 was served on lawyers for the plaintiffs. Since service of the judgment in the sum of K3,500.00 of 4 November 2016 on lawyers for the defendant and Ivi Port Resources Limited, no monies have been received by the plaintiff toward or in settlement of the judgment sum.
   

SUMMARY OF DEFENDANT’S EVIDENCE

8. The defendant’s evidence is that the plaintiff ought to have served the originating process in these proceedings on his lawyers, Andano David Lora, Lawyers, who were his lawyers on record in the earlier proceedings instead of upon himself personally and by harassment by the police, the plaintiff engaged, in his village at Paia Inlet, Kikori District Gulf Province as his lawyers never ceased to act for him or that he had notified Mr Frizzell that he would represent himself in these proceedings. He wrote a letter of complaint to the Police Headquarters regarding the conduct and activities of some policemen and individuals namely, Alex Wong and Thomas Goh. He was treated like a criminal when police served the court documents on him and the plaintiff’s intention was to destroy his character and ridicule him in his community and cause maximum embarrassment and agony when he was trying to recover from the pain of his stevedoring contract with the plaintiff being terminated by the plaintiff. He had to send a text message from his village to his lawyers to inform them of the proceedings as he could not financially afford the trip to Port Moresby to attend the hearing of the plaintiff’s application on 12 April 2017 and after which his lawyers responded to him by telephone assuring him that they would make an appearance on his behalf. His lawyers emailed Mr Frizzell from Warner Shand Lawyers twice on requesting copies of documents that were served on the defendant to be served on them which were eventually served on 6 April 2017. Upon perusal of the documents, it was discovered that Mr Frizzell failed to forewarn the defendant that failure to settle the sum of K3,500.00 would result in this proceedings being pursued. The plaintiff has taken out these proceedings without first complying with Order 13 Rule 13 as to examination of a defendant as judgment debtor.
   

UNCONTESTED FACTS

9. From the evidence before me, I find that the uncontested facts are:
   
   • (a) The defendant and Ivi Port Resources Limited commenced the earlier as first and second plaintiffs there against the plaintiff there as fifth defendant and four others.
   • (b) In the earlier proceedings, Andano David Lora Lawyers represented the defendant and Ivi Port Resources Limited whilst Warner Shand Lawyers represented the plaintiff and four others.
   • (c) On 30 March 2016, by leave of the Court, the earlier proceedings were discontinued and the defendant and Ivi Port Resources Limited were ordered to pay the costs of the plaintiff and the others to be taxed if not agreed.
   • (d) On 14 June 2016, Warner Shand Lawyers filed and thereafter served a party/party bill of costs on the defendant and Ivi Port Resources Limited pursuant to the orders made on 30 March 2016 scheduling the hearing for 28 June 2016 at 2:00 pm.
   • (e) An inter-partes hearing was conducted for the taxation of the party/party bill of costs and it was taxed and allowed at K3,500.00.
   • (f) A certificate of taxation was issued on 29 June 2016 certifying that the party/party bill of costs was taxed on 28 June 2016 and allowed at K3,500.00.
   • (g) On 27 July 2016, lawyers for the plaintiff and others filed an application by notice of motion seeking judgment in the sum of K3,500.00 with respect to the certified taxed costs.
   • (h) On 22 August 2016, the defendant and Ivi Port Resources Limited filed an application by notice of motion seeking a review of the taxation of costs.
   • (i) On 4 November 2016, by consent of the parties, judgment was entered against the first plaintiff in the sum of K3,500.00 and the notice of motion filed by the defendant and was dismissed.
   • (j) On 9 November 2016, the judgment entered on 4 November 2016 was served on lawyers for the defendant and Ivi Port Resources Limited.
   • (k) No monies have been received by the plaintiff toward or in settlement of the judgment sum of K3,500.00.
     

CONTESTED FACTS

10. From the evidence before me, there appears to be no real dispute as to the facts surrounding the plaintiff’s claim for K3,500.00 in certified taxed costs which were converted into a judgment debt by order of the Court on 4 November 2016. Moreover, the plaintiff has not taken a definitive position about payment of the amount adjudged which is the sole basis of this application. I find that the only real issue taken by the defendant is that the application for leave to issue a debtor’s summons is premature which is cloaked in the objection or complaint about service of the plaintiff’s application.
    

FINDINGS OF FACT

11. I therefore make findings of fact in terms of the uncontested facts and need not repeat them here.
    

ISSUE

12. The main issue arising from the application is whether or not the Court should grant the plaintiff leave to issue a debtor’s summons to the defendant?
    

SUBMISSIONS OF PARTIES

13. Mr Frizzell submits that the application for leave to issue a debtor’s summons against the defendant should be granted as, amongst others,:
    

(a) the defendant owes the plaintiff a sum of money which is not less than K100.00 namely, K3,500.00 being taxed costs awarded against the defendant in the earlier proceedings which is a debt sufficient to support a petition; and

(b) the defendant has failed to settle the amount due to the plaintiff.

14. Mr. Lora of counsel for the defendant seeks to dismiss the application on the basis that it is incompetent and amounts to an abuse of process of the Court relying on Order 12 Rule 40(1)(c) of the National Court Rules. In addition, he contends that:
    
    • (a) the plaintiff is at liberty to avail itself of Section 24 of the Insolvency Act;
    • (b) Order 13 Rule 13 of the National Court Rules provides the correct procedure to use in enforcing judgment for the payment of money.
      

LAW

15. The Insolvency Act is superior to the National Court Rules by virtue of Section 9 of the Constitution: e.g., Kutubu Catering Ltd v Eurest (PNG) Catering and Services Ltd (2016) N6255. The hierarchy of the laws of Papua New Guinea set out under Section 9 of the Constitution demonstrates that Acts of the Parliament are superior than, other laws made under or adopted by or under the Constitution or any other laws including subordinate legislative enactments. The National Court Rules were promulgated under Section 184 of the Constitution. The Insolvency Act is a specific legislation governing insolvency proceedings in Papua New Guinea, so it takes precedence over the National Court Rules in that regard as well. In addition, the National Court Rules will have no application if any rule is inconsistent with any provision of the Insolvency Act. Consequently, I will reject the defendant’s argument regarding the application of Order 13 Rule 13. The defendant’s argument on the application of Order 12 Rule 40(1)(c) is rejected as well as being misconceived.
    
16. Section 23 of the Insolvency Act sets out the requirements for the issuing of a debtor’s summons. It states:
    

“23. Proceedings for debtor's summons.

(1) A debtor's summons may be granted by a Judge on a creditor proving to his satisfaction that—

(a) a debt sufficient to support a petition in insolvency is due to the creditor from the person against whom the summons is sought; and

(b) the creditor has failed to obtain payment of his debt after using reasonable efforts to do so.

(2) A summons under Subsection (1)—

(a) shall be in the prescribed form, resembling as nearly as circumstances admit a writ issued by the Court; and

(b) shall state that if the debtor fails—

(i) to pay the sum specified in the summons; or

(ii) to compound for that sum to the satisfaction of the creditor,

a petition may be presented against him that he be adjudged an insolvent; and

(c) shall have an endorsement to indicate to the debtor, the nature of the document served on him; and the consequences of inattention to the requisitions made in the summons.

17. The requirements are prescribed under Section 23 and these are:
    

(a) A debt sufficient to support a petition in insolvency is due to the creditor from the person against whom the summons is sought;

(b) The creditor has failed to obtain payment of his debt after using reasonable efforts to do so.

(c) The summons shall be in the prescribed form, resembling as nearly as circumstances admit a writ issued by the Court;

(d) The summons shall state that if the debtor fails; first, to pay the sum specified in the summons; or second, to compound for that sum to the satisfaction of the creditor, a petition may be presented against him that he be adjudged an insolvent; and

(e) The summons shall have an endorsement to indicate to the debtor; first, the nature of the document served on him; and second, the consequences of inattention to the requisitions made in the summons.

18. The onus is upon the creditor to prove the requirements to the satisfaction of the Judge.
19. The Court’s power to grant or refuse leave to issue a debtor’s summons is discretionary and the discretion must be exercised on some proper basis. I will now apply the considerations listed above to the facts and circumstances of the present case in that regard.
    

REASONS FOR RULING - APPLICATION OF CONSIDERATIONS

Is there a debt sufficient to support a petition in insolvency due to the creditor from the person against whom the summons is sought?

20. I am satisfied that there is, the sum of K3,500.00 being taxed and certified costs for which judgment was entered by consent of the parties in the earlier proceedings on 4 November 2016 and is not less than K100.00: see Section 21 of the Insolvency Act.
    

Has the creditor failed to obtain payment of his debt after using reasonable efforts to do so?

21. The plaintiff states that on 9 November 2016, the judgment for the taxed and certified costs of K3,500.00 was served on lawyers for the plaintiff, but since that time, no monies have been received by the plaintiff toward or in settlement of the judgement sum. The taxation of costs was done inter-partes and non-payment prompted an application for judgment to be entered in the sum of K3,500.00. Non-payment has also prompted the filing of these proceedings. The defendant in his evidence has not stated a position taken in relation to payment except to complain about how the originating process was served on him. I have taken or inferred that to mean that the facts upon which the plaintiff relies to make this application are not contested.
    

Whether the summons is in the prescribed form, resembling a writ?

22. Unlike other jurisdictions, there are no rules or regulations that are specifically concerned with the Insolvency Act: Rural Development Bank Ltd v James Kond (2010) N5876. Order 1 Rule 2 of the National Court Rules provides that the National Court Rules apply to all proceedings commenced or instituted on or after the commencement date with the exception of Order 21 which relates to Admiralty Proceedings: Rural Development Bank Ltd v James Kond. There is no prescribed form in the Insolvency Act, but Section 23 specifies that the summons must resemble as nearly as circumstances admit, a writ issued by the Court. The prescribed form of a writ of summons as per Order 4 Rule 16 of the National Court Rules is set out in Form 5 of the National Court Rules. I am satisfied that the summons resembles a writ.
    

Does the summons state that if the debtor fails; first, to pay the sum specified in the summons; or second, to compound for that sum to the satisfaction of the creditor, a petition may be presented against him that he be adjudged an insolvent?

23. Yes, it does.

Does the summons have an endorsement to indicate to the debtor; first, the nature of the document served on him; and second, the consequences of inattention to the requisitions made in the summons?

24. Yes, it does.
    

CONCLUSION

25. All considerations have been considered in favour of the plaintiff. In the exercise of my discretion, I will grant the plaintiff’s application and grant leave for the issue of a debtor’s summons as per the draft attached to the originating summons.
    

ORDERS

26. The formal orders of the Court are:

(a) the relief sought by the plaintiff in the originating summons filed on 7 February 2017 is granted.

(b) the notice of motion filed by the defendant on 7 April 2017 is dismissed.

(c) the costs of and incidental to the said originating summons of the plaintiff including those in relation to the defendant’s notice of motion are to be paid by the defendant on a party and party basis to be taxed if not agreed.

__________________________________________________________________
Warner Shand: Lawyers for the Plaintiff
Andano David Lora: Lawyers for the Defendant