PNG Express Line Co Ltd v North Fly Development Corporation Ltd [2019] PGNC 441; N8144 (25 October 2019)

N8144

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 287 of 2018 (COMM)

BETWEEN:
PNG EXPRESS LINE CO
LIMITED
Plaintiff

AND:
NORTH FLY DEVELOPMENT
CORPORATION LIMITED
Defendant

Waigani: Hartshorn J
2019: 25^th October

COMPANY LAW - Application to set aside statutory demand – court may set aside statutory demand on certain grounds – one of those grounds to set aside statutory demand is where there is a cross claim, set-off or cross demand against the party issuing the demand – plaintiff in this case appears to have a cross claim, set-off or cross demand against the defendant – statutory demand is set aside - Section 338(1) and (4) Companies Act

Cases Cited:
Papua New Guinea Cases

Pacific Assurance Group Ltd v. Pacific International Hospital Ltd (2017) N6992
Bismark Maritime Ltd v. DNV GL Australia Pty Ltd (2018) N7378

Overseas Cases

Bishop Industries (Wellington) Limited v. Construction Labour Hire Limited [2016] NZHC 2848

Counsel

Ms. R. Kwayaila, for the Plaintiff
Mr. G. Manda and Ms. G. Makap, for the Defendant

25^th October, 2019

1. HARTSHORN J: This is a decision on a contested application to set aside a creditor’s statutory demand.

Background

2. The plaintiff (PELC) is a shipping company that provides a commercial shipping service between Port Moresby and Kiunga. It is agreed between the parties that the defendant (NFDC) was granted a State Lease in respect of the Kiunga Wharf on 11^th August 2016. NFDC served a creditors statutory demand (CS demand) upon PELC for K1,011,506.82 on 9^th April 2018. The CS demand describes the details of the amount owing by PELC as, “Debts owing on outstanding invoices for Berthage and Wharfage Charges.”

3. PELC filed this originating summons on 4^th May 2018 and it is uncontroversial that the originating summons was served upon NFDC on 9^th May 2018.

The application to set aside

4. PELC submits that the CS demand should be set aside pursuant to s. 338(1) Companies Act as it genuinely and substantially disputes that it owes any of the amount claimed in the CS demand. This is because:

a) K1,872,405.64 has been paid to NFDC for berthage and wharfage fees since April 2012 on the representation by NFDC that it owned the Kiunga Wharf and was entitled to charge for berthage and wharfage. NFDC however did not own the Kiunga Wharf until 11^th August 2016 and was not entitled to charge for berthage and wharfage until 11^th August 2016. The sum of K1,872,405.64 was received fraudulently by NFDC it is submitted and should be used to offset berthage and wharfage fees incurred by PELC since 11^th August 2016;

b) the demand for K1,011,506.82 includes K394,471.10 for berthage and wharfage fees charged before NFDC obtained the State Lease to the Kiunga Wharf.

5. NFDC submits that the CS demand should not be set aside as:

a) the originating summons was not served upon it within the time required by s. 338(2) Companies Act and so it is incompetent;

b) PELC has failed to show that it has a substantial dispute concerning whether it owes the amount claimed. PELC’s dispute is concerned with invoices issued before NFDC was granted the State Lease and not with invoices issued since then.

Preliminary

6. NFDC submits that the originating summons was not served, “within one month of the date of service of the demand.” as required by s. 338(2) Companies Act. It is agreed that the CS demand was served on PELC on 9^th April 2018 and the originating summons was served on NFDC on 9^th May 2018.

7. NFDC submits that, “Adopting and applying the ‘corresponding date principle’, the last day for the application to be served on the Defendant would be on the 8^th May 2018.”

8. The corresponding date principle to which I referred in Pacific Assurance Group Ltd v. Pacific International Hospital Ltd (2017) N6992 should apply in this instance. As the CS demand was served on 9^th April 2018, the corresponding date for, “one month” is 9^th May 2018 - the corresponding date - and not 8^th May 2018 as submitted by NFDC, by which the originating summons was required to be served. Consequently this submission of NFDC is rejected.

Consideration

9. Section 338(1) and (4) Companies Act is as follows:

“338. Court may set aside statutory demand.

(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, set-off, or cross-demand is less than the prescribed amount; or

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

10. PELC submits that it paid the sum of K1,872,405.64 to NFDC from or about April 2012 up to the date when NFDC was granted the State Lease for the Kiunga Wharf. This sum constituted payments to NFDC for berthage and wharfage charges to which NFDC represented to PELC that it was entitled as the owner of the Kiunga Wharf. NFDC was not issued a State Lease for the Kiunga Wharf until 11^th August 2016. There is evidence of the invoices and their payment made by PELC.

11. In regard to establishing a cross claim in an application to set aside such as this, in Bismark Maritime Ltd v. DNV GL Australia Pty Ltd (2018) N7378 at [5], I reproduced the following statement from the New Zealand High Court case of Bishop Industries (Wellington) Limited v. Construction Labour Hire Limited [2016] NZHC 2848at [16]:

“[16] The onus is on the applicant to show that there is a genuine and substantial dispute as to the existence of the debt. The dispute must be real and not fanciful or insubstantial; the applicant must show a fairly arguable basis upon which it is not liable for the amount claimed. The mere assertion that a dispute exists is not sufficient. An applicant must establish that any counterclaim or cross-demand is reasonably arguable in all the circumstances. The obligation is not to prove the actual claim; such an obligation would amount to the dispute itself being tried on the application.”

12. I am satisfied that PELC has established that it is reasonably arguable in all the circumstances that it has a cross claim, set-off or cross demand against NFDC, as at the time that PELC was charged for berthage and wharfage fees by NFDC and paid such feesprior to 11^th August 2016, NFDC was not the owner of the Kiunga Wharf and not entitled to charge such fees.

13. I am further satisfied that PELC has satisfied s. 338(4)(b) Companies Act as it appears to have a cross claim, set-off or cross demand and the amount specified in the demand, being K1,011,506.52, less the amount of the cross claim, set-off or cross demand, being K1,872,405.64, is less than the prescribed amount being K1,000.00 (s.18 Company Regulation 2015).

14. Consequently,the CS demand should be set aside. Given this it is not necessary to consider the other submissions of counsel.

Orders

15. The Court orders that:

1. The creditor’s statutory demand issued by the defendant to the plaintiff dated 9^th April 2018 is set aside;
2. The defendant shall pay the plaintiff’s costs of and incidental to this proceeding on a party to party basis if not agreed otherwise;

c) Time is abridged.
__________________________________________________________________
Rebecca Advocates & Co: Lawyers for the Plaintiff
Greg Manda Lawyers: Lawyers for the Defendant