N8175

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP No. 63 of 2018 (COMM)

IN THE MATTER OF THE INSOLVENCY ACT

AND

IN THE MATTER OF MICHAEL RAMSEY EKRI

Waigani: Anis J
2019: 19th December
2020: 31st January

INSOLVENCY PROCEEDING – creditor’s petition – sections 15, 16, 25 and 26 – Insolvency Act Chapter No. 253 – act of insolvency - alleged debt a court ordered judgment – section 21(1)(i) – Insolvency Act – whether all prerequisites including service, documentations and the debt for a sum of K100 or more, were established – whether the debtor should be adjudged insolvent – prerequisites for commencing insolvency proceeding of such nature discussed – whether court has power to appoint a trustee in the first instance discussed

Cases Cited:

Rural Development Bank Ltd v. James Kond (2010) N5876

Counsel:

B Nutley, for the Petitioning Creditor
Nil representation for the Debtor

JUDGMENT

31st January, 2020

1.	ANIS J:	The proceeding was commenced by way of a petition under the Insolvency Act Chapter No. 253 (the Insolvency Act or the Act).  The petitioner was Carpenter Retail & Property Limited (the petitioner or petitioning creditor).  I heard the petition on 19 December 2019 and reserved my decision to a date to be advised.

2.	This is my ruling.

BACKGROUND

3.	The alleged Judgment Debtor is Michael Ramsey Ekri (Mr Ekri).  The basis for this insolvency proceeding against Mr Ekri relates to a judgment debt that had been obtained against him and others, in proceeding WS 1348 of 2015.  The petitioner claims that Mr Ekri should be adjudged insolvent because he has not satisfied the judgment of the Court, which the petitioner claims is more than K100.  

4.	The judgment debt referred to is a default judgment.  It was granted by the National Court on 22 April 2016 in proceeding WS 1348 of 2015.  The Court had found therein that Mr Ekri, with 2 others, were guarantors to a loan agreement that had been obtained by a company called Michael’s & Michael’s Limited.  The petitioner, then known as Courts (PNG) Limited, had sued Michael’s & Michael’s Limited together with the guarantors including Mr Ekri, for, amongst others, breach of the said loan agreement.  On 22 April 2016, the petitioner obtained default judgment against the company and the guarantors including Mr Ekri.  They were all equally or severally liable in default, that is, in the sum of K2, 830, 147 amongst others including interest.  Interest was ordered to be compounded monthly at 22% per annum as at 22 April 2016.

5.	The petitioner claims by this petition, as I see, that the judgment, despite service upon Mr Ekri, continues to remain outstanding.  And it claims that the said act of non-payment of the judgment by Mr Ekri has occurred within 6 months before the date of filing of the petition.  Therefore, the petitioner intends to request the Court to adjudge Mr Ekri insolvent.

EVIDENCE

6.	The petitioner filed the following evidence in support of the petition:

(i)	Affidavit verifying petition of Sheila Sukwianomb filed on 28 October 2019;
(ii)	Affidavit in support of Sheila Sukwianomb filed on 28 October 2019;
(iii)	Consent of Trustee Andrew Pini filed on 28 October 2019.

SERVICE

7.	Mr Ekri did not appear and as such, he was not heard.  The hearing proceeded ex parte, that is, after I was satisfied of the evidence of service of the petition upon Mr Ekri as adduced to by the petitioner.  This included evidence of notification to Mr Ekri of the hearing date.  I would refer to the transcript of the proceeding for my full reasoning.  I note that attempts had been made by lawyers of the company Michael’s and Michael’s Limited to appear at the hearing.  I rejected appearance by counsel after counsel confirmed that she had no instructions from Mr Ekri in person to appear or act for him personally in the matter.

8.	Section 32 of the Insolvency Act states, and I quote:

32.	Proceedings on failure to appear.

If at the expiration of—
(a)	four days after service; or
(b)	such further time—
(i)	as is prescribed; or
(ii)	as the Court thinks necessary to enable the debtor to appear,
the debtor has not entered an appearance to the petition at the place appointed by the summons, the Court may, on proof of service, proceed to adjudicate the debtor insolvent.

9.	In the present case, I note that Mr Ekri was served with the petition on 6 December 2019.  And I note that more than 4 days had lapsed after that without him filing a notice of appearance before the matter was listed for hearing on 18 and then on 19 December 2019.  

ISSUES

10.	The main issues are, (i) whether the prerequisites including documentations, that are required to be filed or observed under the Insolvency Act have been complied with, and (ii), whether Mr Ekri has committed an act of insolvency and whether he should be adjudged insolvent.

PREREQUISITES

11.	In this case, the petitioning creditor is a company.  As such, let me sumarise what is required to be filed or to be met before this Court may seize of the matter or be in the position to consider and determine the petition.  

12.	In so far as filing and service of court documents are concerned, for this type of case, they are as follows:

(i)	Filing and service of the petition upon the debtor.  The petition shall have, as an attachment, a duly signed and stamped summons by the Registrar (sections 16, 26, 27 and 30);
(ii)	Filing and service of the affidavit verifying the petition (sections 28 and 29);
(iii)	Filing and service of other evidence in support (section 162); and 
(iv)	Filing and service of consent of the intended trustee (optional).

13.	Let me address the filed consent of the intended trustee in the matter.  I note that unlike section 291 of the Companies Act of 1997 where the Court may directly appoint a liquidator when a company is put into liquidation, no such power is bestowed upon the Court to directly appoint a recommended trustee in insolvency proceedings in the first instance or immediately after a debtor is adjudged insolvent by the Court (section 9).  Instead, measures are put in place for the Court to set a date for the meeting of creditors where a trustee may be appointed (sections 9, 49 and 54).  The Act also states that until such time the creditors meet and appoint a trustee, the official trustee, who is appointed by the responsible Minsters (section 5), shall act as the interim trustee of the estate of the insolvent (sections 9, 58, 64, 65 and 68).

14.	The other requirements to be met for this type of case, which are fundamental in nature, are:

(i)	The Judgment debtor, unless the Act provides otherwise, must be a resident of the country or must have property in the country (section 2);
(ii)	The alleged act of insolvency must not be something that occurred more than 6 months when computed immediately before the time the petition is presented or filed in Court; the act of insolvency alleged must occur 6 months or less than that, that is, on a date immediately before the date when the petition is presented or filed (section 22);
(iii)	The prescribed sum must be K100 or more [section 25(2)(a)];
(iv)	A period of 4 days must lapse from the date of service of the petition and the debtor has not filed his or her notice of appearance (section 32); and
(v)	The person verifying the petition for the petitioner which is a company must be duly authorized to do so [sections 28(2) and 29].

15.	I refer to the documents filed by the petitioner in this petition.  I am satisfied that the petitioner has complied with filing of the relevant documentations as stated above, that is, all except perhaps in relation to consent of the trustee.  Although there may be no issue in relation to its filing, it is my view that consent of an intended trustee cannot be of any real assistance to the Court in terms of the Court appointing a trustee.  This power, in my view and in the first instance, belongs to the creditors at their first appointed meeting, the meeting which shall be set down by the Court together with its other orders, that is, if it is minded to grant an order to adjudicate Mr Ekri insolvent.  I will elaborate further on this below under the sub-heading PROPOSED RELIEF.

16.	In regard to the second sets of requirements as set out under paragraph 14 of my judgment, I also find that the petitioner has established or proven them to my satisfaction on the balance of probabilities.

17.	There is however one matter which I think requires clarification.  I refer to the requirement where the alleged act of insolvency must occur within 6 months before the filing or presentation of the petition.  In this case, I note that the actual default judgment order was obtained in 2016.  It had been served on various occasions in the past on Mr Ekri.  Service on those dates in 2016 and 2017 were obviously outside the required 6 months period.  However, when I consider the evidence and in particular, the affidavit in support of Sheila Sukwianomb filed on 28 October 2019, she deposes at paragraph 12 that the default judgment order was last served on Mr Ekri on 22 July 2019 whereby the petitioner had requested Mr Ekri to pay the judgment debt.  Time computed on that day shows that the alleged act of insolvency was committed within the 6 months period, that is, given the fact that the petition was filed on 28 October 2019.

ACT OF INSOLVENCY COMMITTED?

18.	Moving on to the next and final issue, I ask myself this.  Did the petitioner prove the pleaded alleged act of insolvency?  

19.	The act of insolvency alleged as stated relates to the alleged unsatisfied judgment of 22 April 2016.  Evidence of the Court Order, its service upon Mr Ekri and the claim that it has not been complied with since it was last served on 22 July 2019, are all contained in the affidavit of Ms Sukwianomb filed on 28 October 2019.  The evidence is uncontested and I have no reason to doubt it.  I find that Mr Ekri has committed an act of insolvency, that is, that he has failed to settle the petitioner’s debt of K2, 830, 147 plus interest which in total and as at 24 October 2019, stands at K5, 972,328.09.  The said act of insolvency qualifies under section 21(1)(i) of the Insolvency Act.  The section states, and I quote in part, if the debtor……having against him the judgment of any court, and……being required to do so by the judgment, has failed……to satisfy it.  This, according to section 21(1), constitutes an act of insolvency.  

PROPOSED RELIEF

20.	The petitioner pleads its relief at page 2 of the petition.  In summary, they are, (i), the judgment debtor Michael Ramsey Ekri, be adjudged insolvent, (ii), the registered liquidator and trustee Andrew Pini, nominated by the petitioner, be appointed as the official trustee of the assets of Michale Ramsey Ekri, (iii), the petitioner’s costs of and incidental to these proceedings be taxed and paid by Michael Ramsey Ekri, and (iv), such further and other orders that this Honourable Court deems fit.  

21.	I have addressed the second relief above where I have ruled that the Court does not have the power to appoint a trustee in the first instance except to order a meeting of the creditors who will then appoint a trustee.  And until such time, the official trustee, who is appointed by the Minister responsible under the Act, shall be the interim trustee.  I think it is also not correct or misleading, to ask the Court to order the intended trustee to be appointed as the official trustee.  The title or the term, the official trustee, is defined and is bestowed upon the trustee that is appointed by the Minister responsible under sections 1 and 5 of the Act.

22.	Sections 9(1), 49, 50, 51 and 54 of the Insolvency Act state, and I quote in part:

9.	Immediate functions of official trustee in relation to insolvency on creditor's petition.
(1)	In the case of a creditor's petition—
(a)	until a trustee is elected under Section 54 by the creditors, the official trustee is the trustee for the purposes of this Act; and
(b)	immediately on the order of adjudication being made the property of the insolvent passes to and vests in the official trustee and continues to be vested in him until a trustee is so elected by the creditors.
……

49.	Contents of order.
In addition to any other things that under this Act it should or may include, an order of adjudication of insolvency shall—
(a)	fix a date, not being earlier than six days or later than 30 days after the date of the order, for the holding of a general meeting of the creditors of the debtor, for the purpose of the election of a trustee; and
(b)	shall specify a time and place at which the debtor shall come in and deliver to the trustee a full and accurate statement, verified on oath, of—
(i)	his debts and other liabilities; and
(ii)	the names and residences (so far as they are known to him) of his creditors, and
(iii)	the causes of his inability to meet his engagements.
......

50.	Calling of meetings.
Notice of the first meeting of creditors shall be given in the prescribed form—
(a)	in the National Gazette; and
(b)	in the prescribed newspapers or such newspapers (if any) as the Court directs in any case; and
(c)	by affixing a copy of the notice in some conspicuous place in the Registry and the post office nearest to the place where the debtor carried on business, or resided, at the date of presenting the petition.
51.	Holding of meetings.
The first meeting of creditors—
(a)	shall be held at the Registry or some convenient place near to the Registry; and
(b)	shall be held in the prescribed manner; and
(c)	shall be presided over by the Registrar or, if the Registrar is unable to attend through illness or any unavoidable cause, by such chairman as the meeting elects; and
(d)	is subject to the prescribed provisions as to quorum, adjournment and all other matters relating to the conduct of the meeting or the proceedings at the meeting.

54.	Election, etc., of trustees and committees of inspection.
(1)	The first meeting of creditors—
(a)	may, by resolution—
(i)	appoint a fit person resident in the country, whether a creditor or not, to be the trustee of the property of the insolvent at such remuneration (if any) as the creditors from time to time determine; or
(ii)	leave his appointment to the committee of inspection appointed under Paragraph (b); and
(b)	may, by resolution, appoint some other fit person or persons—
(i)	not exceeding five in number; and
(ii)	being creditors qualified to vote at the first meeting of creditors or authorized in the prescribed form by creditors so qualified to vote,
       to form a committee of inspection for the purpose of superintending the administration by the trustee of the insolvent's property; and
(c)	may, by resolution, give directions as to the manner in which the property is to be administered by the trustee.

23.	Apart from what I have stated, I note that section 49 is mandatory, and I am obliged to include the provisions with their inserted details into the final order.  I find that to be the case, and so, I shall include them together with the other others that I will make.

CONSEQUENTIAL ORDERS

24.	I am unassisted by counsel nor the evidence adduced, to say whether there is in existence an official trustee that has been appointed by the Minister responsible under the Act.  As such, I cannot say for sure that there is one appointed who would take charge during the transition period, that is, before the first meeting of the creditors to appoint a trustee.

25.	There is presently no Insolvency Regulation that may provide guidance in the matter.  See case: Rural Development Bank Ltd v. James Kond (2010) N5876.  As such and in my view, it may be unjust or against the interest of justice if I were to make an order that is uncertain, vague or general, that is, on the assumption that there is an existing official trustee under that Act who would take charge in the interim.  But more importantly, I note that the Registrar of the National Court is tasked with the responsibility of setting and chairing the first meeting of the creditors to appoint a trustee (sections 50 and 51).  As such, I will make consequential order to ensure the smooth transition, that is, I will also make an order that the Registrar with the assistance of the petitioner or vice-versa, shall assist and take the steps that are required to facilitate the appointment of the trustee at the first meeting of the creditors, that is, by following the processes that are set out under Division 1 PART IV.—ELECTION, ETC., OF TRUSTEES AND COMMITTEES OF INSPECTION, of the Act.

SUMMARY

26.	I will grant the petition.  I find that Mr Ekri has committed an act of insolvency, under one of the situations specified under section 21(1) of the Insolvency Act.  In this case, its section 21(1)(i).  I find that Mr Ekri had been served with the Court Order on 22 July 2019, to settle a sum of K2, 830, 147 together with interest.  I find that Mr Ekri had at least 30 days or so thereafter, to settle the amount with interest but had failed to do so.  

27.	I am therefore satisfied, based on the evidence that have been adduced by the petitioner in this proceeding, that this is an appropriate case where the Court should adjudge the Judgment Debtor Michael Ramsey Ekri, insolvent.

COST

28.	Section 37 of the Insolvency Act states, and I quote:

37.	Costs.

(1)	The petitioning creditor shall defray the costs and expenses of all proceedings in the insolvency until, and inclusive of, the order of adjudication.
(2)	When costs and expenses have been taxed, they shall be repaid to the petitioning creditor out of the first moneys received from the estate of the insolvent.

29.	I will therefore make the following order on cost.  I will order that the appointed trustee shall pay the petitioner’s cost of the proceeding (the petition) up to the cost incurred for the drafting and filing of the order for adjudication, and they shall be assessed on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

30.	I make the following orders:

1.	The Judgment Debtor, Michael Ramsey Ekri is adjudged insolvent.

2.	The Registrar of the National Court with the assistance of the petitioning creditor Carpenter Retail & Property Limited or otherwise Carpenter Retail & Property Limited, shall take all necessary steps under Division 1 PART IV.—ELECTION, ETC., OF TRUSTEES AND COMMITTEES OF INSPECTION, of the Insolvency Act Chapter No. 253, to facilitate the first meeting of the creditors for the appointment of a trustee to administer the estate of the Judgment Debtor.

3.	The first appointed general meeting of the creditors shall be held at a venue to be selected by the Registrar with the assistance of the petitioning creditor Carpenter Retail & Property Limited or by Carpenter Retail & Property Limited, on a time between 9am and 5pm on Friday 14 February 2020, or between 9am and 5pm on Friday 21 February 2020, or on another adjourned date and time to be set by the Registrar or Carpenter Retail & Property Limited.

4.	After the appointment of the trustee, the Judgment Debtor, Michael Ramsey Ekri shall attend at the registered office of the trustee or the trustee’s nominated place, between the hours of 9am and 5pm on Friday 6 March 2020 or on another date and time to be set by the trustee, and deliver to the appointed trustee a full and accurate statement, verified on oath, of:
(i)	his debts and other liabilities; and
(ii)	the names and residences (so far as they are known to him) of his creditors, and
(iii)	the causes of his inability to meet his engagements.

5.	The petitioning creditor shall be entitled to its cost of the proceeding including cost incurred for drafting and filing the order for adjudication, and its cost shall be assessed on a party/party basis which may be taxed if not agreed.

6.	When costs and expenses have been taxed, they shall be repaid by the appointed trustee to the petitioning creditor, out of the first moneys received from the estate of the insolvent.

7.	Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly.

________________________________________________________________
O’Briens Lawyers:     Lawyers for the Petitioner