LA Jarden Collector Agency Pty Ltd and Richard Hill & Associates v Iangalio and Public Curator of Papua New Guinea [1998] PGSC 28; SC597 (31 August 1998)

Unreported Supreme Court Decisions

SC597

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

SCA NO. 40 OF 1998
BETWEEN: LA JARDEN COLLECTOR AGENCY PTY LTD
FIRST APPELLANT
AND: RICHARD HILL & ASSOCIATES
SECOND APPELLANT
AND: MASKET IANGALIO
FIRST RESPONDENT
AND: PUBLIC CURATOR OF PAPUA NEW GUINEA
SECOND RESPONDENT

Waigani

Los Injia Kirriwom JJ
29 July 1998
31 August 1998

Counsel

A Manase, for Appellants

G Sheppard, for First Respondent

LOS J: The First Respondent objects to competency of the appeal by the Appellants. The objection is on two grounds. Firstly it is said that the nature of the judgment which the appellants seek to appeal against requires leave. The appellants have failed to obtain leave.

In the second ground its said that the appellants have filed notice of appeal before obtaining any leave which is contrary to the Supreme Court Act.

It is argued on behalf of the First Respondent that the National Court decision the subject of this appeal is interlocutory. Thus leave must be obtained before appealing. The appellants on the other hand argue that the decision is final and no leave is required.

Where a decision of the National Court sought to be appealed from is interlocutory, leave must be sought. That is the requirement under section 14 (3)(b) of the Supreme Court Act. It says:

“(3) No appeal lies to the Supreme without leave of the Supreme Court –

(a) ...

(b) from an interlocutory judgement made or given by the National Court.”

But the question here is whether the National Court judgment is interlocutory. Briefly the First Respondent was made an insolvent upon application by various creditors. The Second Respondent was made an official trustee to administer the insolvency, and many creditors’ claims were lodged and accepted by the trustee and they were paid but the two appellants’ claims were rejected. The First Respondent then made an application before the National Court to annul the insolvency order. The appellants were represented and the application was objected to by their counsel. After hearing the arguments, the court in its discretion granted the order sough by the trustee. The main part of the order was “that the adjudication of Insolvency made on 11 March 1998 is annulled”.

What is a final judgement or interlocutory judgment has been subject of various decisions. Some of these decisions have been listed in the written submission by the appellants. The difference between the two is not always clear. But generally it is as pointed out in Provincial Government of North Solomons –v- Pacific Architecture (1992) PNGLR 145. At page 147 the Court said:

“Generally, two tests have been propounded as to whether a judgement is final or interlocutory. The first test is that the Court will have regard to the nature of the application not to the nature of the order made. Thus, a judgment or order must be interlocutory in character unless it is made on an application which must operate in such a way that whatever judgment or order is given or made on it, it must be finally dispose of the dispute or the controversy between parties. The other test is that the court will look at the order made by the court below and not the nature of the application so that if the order finally disposes of the rights of the parties, it is final; but if it does not, then it is interlocutory.”

An example of the first test was followed in Rimbink Pato –v- Chris Haiveta and Ors (1997) SC 527. The court there looked at what the two motions meant to do, that is whether they were meant to dispose of the interests or dispose of the substantive disputes between the parties altogether. The court decided otherwise even though the proceedings were dismissed.

The Appellants do not dispute the law relating to what is an interlocutory judgment. But they submit that in the facts of this case, the order is final. It is final because it puts the First Respondent in his original position as distinct from an order to discharge. They rely on an English case, John –v- Mendoza (1939) 1 KB 141, to support that proposition. The facts as summarized in the appellants submission are these: Mendoza, an insolvent, persuaded John, a creditor, to falsely declare that Mendoza did not owe him any money thus enabling grant of an annulment order. John subsequently tried to recover the debt from Mendoza failed. The reason was that he deliberately abstained from proving his debt in the insolvency of Mendoza.

I do not consider that John –v- Mendoza helps the appellants on the facts. But some difficulties may be faced from the implication and consequences arising from the annulment order taken under s 141 of Insolvency Act. It says:

“If an insolvent, or a person on behalf of an insolvent –

(a) pays all his creditors in full; or

(b) obtains a release of the debts due by him to his creditors,

the insolvent may apply to the Court for an order annulling the adjudication, and on being satisfied that all the creditors of the insolvent have been paid in full or have released their debts the Court may make such an order, on such terms as to commission or remuneration, or charges already incurred, as it thinks just.”

Any order under this section signifies that all creditors have been paid and the insolvent has been released of his debts by those he still owed. However, Mr Sheppard’s argument on this is that an annulment order under s 141 does not end the right of the parties because of the provisions of sections 97 and 150 of the Act. Section 97 says:

“(1) The insolvent or a creditor, debtor or other person aggrieved by any act or decision of a trustee may appeal to the Court.

(2) On an appeal under Subsection (1), the Court may –

(a) confirm, reverse or modify the act or decision complained of; and

(b) make such order as it thinks just.

The appellants had the right to appeal to the National Court under this section but they failed to do so. That right has yet to be utilized. This argument makes sense. The only difficulty is that at what point in time the order to annul would lose its interlocutory status if it depends on utilization of the provision of s 97 by a creditor. The counter argument by the Appellants is that the official trustee did not advise them that their claims had not been accepted. Be that as it may it appears clear that if they missed that procedure they still have a right under s 150 to ask the same court to review, or rescind its order. The section says:

“The court may review, rescind or vary any order made by it under this Act”.

I consider it clear that s 150 is all the more reason for holding that National Court decision is not final.

Because of the view I take on the first ground of objection, it is not necessary to address the second part of the ground. Suffice is to say that if leave was sought it had to be properly done in accordance with Order 7, Divisions 1 and 2 as appropriately discussed and decided upon by the Supreme Court in Henzy Yakham and another –v- Stuart and Carol Merriam (1996) SC 533.

Lastly, the appellants argue that the grounds of appeal are based on law and mixed fact and law. Therefore leave is not required. This submission is ill conceived. Once a decision of the National court is interlocutory, it is irrelevant whether an appeal is based in law, leave must be sought under s 14(3) of the Supreme Court.

I would uphold the objection to competency

INJIA KIRRIWOM JJ: This is a preliminary application objecting to the competency of this appeal before the Supreme Court. The first respondent, the applicant herein, seeks dismissal of this appeal at this stage because, he submits, the decision of the National Court appealed against was not a final order but an interlocutory judgment. Under the Supreme Court Act Chapter 37 and the Supreme Court Rules leave is required to appeal against an interlocutory judgment or ruling of an interlocutory nature which, it is submitted, the appellants did not seek nor first obtained before lodging their appeal. Thus, it is submitted, their appeal is incompetent and must be dismissed.

The first and second appellants who are the respondents in this application contend that the decision appealed against is a final judgment that concluded the proceedings before the Court below. They submit that it was not an interlocutory order, therefore leave is not necessary and their appeal is not incompetent.

The issue before the Court now is whether the decision of the National Court was final in the disposition of the matter before it or was it a ruling on an interlocutory application? If it was a ruling on an interlocutory application, then s.14 of the Supreme Court Act Chapter 37 and the Supreme Court Rules Order 7 Division 1 and 2 clearly express that the person aggrieved must give notice of his application for leave to appeal.

Section 14(3) of the Supreme Court Act under the heading of civil appeals to the Supreme Court provides:

“No appeal lies to the Supreme Court without leave of the Supreme Court –

(a) From an order allowing an extension of time for appealing or applying for leave to appeal; or

(b) from an interlocutory judgment made or given by the National Court except –

(i) where the liberty of the subject or the custody of infants is concerned; or

(ii) in cases of granting or refusing an injunction or appointing a receiver; or

(iii) in such other cases prescribed by the Rules of Court as are in the nature of final decision; or

(c) from an order of the National Court as to costs only that by law are left to the discretion of the National Court.”

In determining whether the decision of the National Court was a final decision or an interlocutory judgment, it is important to look at the nature of the proceedings and the effect of the final order. If the effect of the final order is that it disposes of the substantive action in the matter before the Court, then that is an order in the nature of a final decision and leave to appeal is therefore not required. This is the observation of this Court in Rimbink Pato v Sir Julius Chan & Others (SCA NO.19 or 1997 – 16 July 1997 (SC NO.527) .

In this case it is necessary to look at the nature of the proceedings before the National Court to determine whether or not this case falls into this category excepted under s.14(3)(b). The history of this case is that the first respondent herein was adjudicated insolvent by the National Court on a petition of a creditor pursuant to the Insolvency Act Chapter 253. This adjudication of insolvency was publicised widely in the country’s two daily newspapers. The appellants who claim to be creditors who are resident abroad, responded to this publication by filing their proofs of debt amounting to on May 1, 1998 evidencing debts amounting to AUD18,750.00 (K25,337.84) for services rendered to the First Respondent during the 1997 General Elections. However, before any advice was given to the appellants on their proofs of debt, the second respondent, who is the official trustee of the insolvent estate of the first respondent, filed proceedings in the National Court seeking, inter alia, to annul the adjudication order under s.141 of the Insolvency Act. We think, for interest sake, it is necessary to quote the section in full which reads:

“If an insolvent, or a person on behalf of an insolvent –

(a) pays all his creditors in full; or

(b) obtains a release of the debts due by him to his creditors,

the insolvent may apply to the Court for an order annulling the adjudication, and on being satisfied that all the creditors have been paid in full or have released their debts the Court may make such an order, on such terms as to commission or remuneration, or charges already incurred, as it thinks just”.

At the hearing of the motion seeking annulment of the adjudication of insolvency, the appellants also appeared and objected to the relief sought on the basis that the first respondent had not satisfied their debts. We observe, in passing, that the first respondent indicated, through counsel, of his preparedness to give an under-taking to pay the debts eventually if the appellants proved their debts against him. This indicates to us that the appellants were not secured creditors, in other words, their debts against the first respondent were not protected by any court judgment or order. In his ex tempore judgment Woods J granted the order for discharge and annulment of the adjudication of insolvency of the first respondent but did not go as far as ordering him to give an under-taking or give security as he indicated his preparedness to do so. His Honour said of the appellants debts:

“Those two matters, in view of the what the official trustee has said, will have to be proved in the normal course”.

This statement by His Honour shows, in one view, that he was directing his mind to the fact that the appellants were not secured creditors when he gave the order for annulment of the adjudication for insolvency which effectively excluded the appellants from any form of satisfaction of their debts accruing from the insolvency. His Honour’s own words ‘will have to be proved in the normal course’ clearly confirms this. In other words, the appellants had avenues open to them before the insolvency of the first respondent that they have not exhausted but were taking advantage of the insolvency to claim the benefits of someone else’s efforts. But that is the inevitable consequence of publication of a debtor’s adjudication of insolvency at the instigation of a petitioning creditor. Be that as it may, strictly speaking, in our respectful view, this issue is quite distinct and separate from what we are concerned with here on the finality or otherwise of the order made by Woods, J. when he annulled the adjudication of insolvency and discharged the first respondent from further obligations arising under that insolvency.

In our view the order sought by the first respondent was to terminate the proceedings already on foot with respect to the insolvency. The annulment of the adjudication nullifies the order for insolvency thus restoring the original status of the first respondent as solvent. The purpose of the proceedings was to obtain that result and once the annulment order was made that was the end of that action. There is no substantive matter pending to be tried under that action therefore the relief granted could not be said to be an interlocutory judgment.

We think it is important to advert to the power of the official trustee to make a determination on the proof of debt. There is no doubt that under the Insolvency Act he does have the power. If a creditor is dissatisfied with the determination by the official trustee, he must apply to the Court. The applicant submits that the appellants had not exhausted this avenue under the Act. But the appellants contend that they had no opportunity to utilise the avenues in the Insolvency Act because they had no knowledge of the Official Trustee’s rejection of their proofs of debts and furthermore the haste with which the official trustee moved, pursuant to s.141, to have the Court annul the adjudication of insolvency of the first respondent only hours before the meeting of the creditors was scheduled to take place

caught them by surprise and hardly any chance to invoke the provision of the Insolvency Act. It is a catch-22 situation forced upon the appellants by the respondents. The issue raised here is one of fairness and justice. This court is a court of fairness and justice and we are of the view that this issue ought to be fully argued.

Thus, what this Court is concerned with here is whether the appeal as filed is proper. It is proper if leave is not required and that depends of whether the decision appealed from is a final judgment. We are not concerned with whether the appellants had exhausted all the statutory avenues open to them in insolvency proceedings before coming to this Court. These are the arguments to be addressed in the substantive appeal itself. We are also not concerned with the resultant effect of the ultimate outcome following the decision on the appeal. What we are concerned with is whether or not the appellants have an arguable case that they ought to be heard by an appellate court against the decision of the National Court. It is obvious by just looking at the transcripts of the proceedings in the National Court that there was quite an urgency to annul the adjudication order of the first respondent and surprisingly at the behest or instigation of the official trustee. This is the independent referee in this competition of creditors to claim on the insolvent’s estate. The question of fairness and proper opportunity to the creditors to present their proofs of debts before the official trustee and to be given due assessment is a pertinent one. Just as important also is the duty of the official trustee to allow the Act to operate to its full extent to the satisfaction of all those creditors who have filed proofs under the insolvency to be accorded the benefits accruing from that insolvency. After all, regardless of whether the appellants are secured creditors or not, once they had filed their proofs of debts following publication of the adjudication of insolvency of the first respondent, they were entitled to be given a fair treatment. That is the whole purpose for the Insolvency Act. The urgency with which both the first and second respondents moved to annul the adjudication of insolvency notwithstanding and amidst strong opposition by unsatisfied creditors who had already filed proofs may well amount to an attempt to defeat the purpose of the Act itself.

We note that the first respondent’s move for annulment was primarily based on the unfair manner in which the petitioning creditor had taken advantage of his precarious position by demanding and receiving from him an amount over and above the judgment debt for legal costs which he claimed amounted to extortion and an abuse of process. But with respect that is a concern as between the insolvent and the petitioning creditor, it had nothing to do with the appellants who had properly filed their proofs of debts in response to the advertisement of the adjudication of insolvency and who had every right to be given their due process under the insolvency for whatever it was worth under the Act. The appellants, in our view, therefore have an arguable case to be heard on appeal.

We believe the law is as clearly stated in Rimbink Pato v Sir Julius Chan & Ors (supra) after referring to the cases of Carr v Finance Corporation of Australia (No.1) (1981) CLR 247 and Shelley v PNG Aviation Services [1979] PNGLR 119. The Supreme Court in Rimbink Pato v Sir Julius Chan summarised the test as follows:

“The tests are first that the Court must look at the nature of the application to the Court and not the nature of the order the Court eventually made. Second the Court must look at whether the judgment or order made finally disposes of the rights of the disputing parties.”

The Court then went further:

“In our view (the trial judge’s) decision gives an appearance of finality because he had dismissed the proceedings. But when we look at the nature of the application before him, it becomes clear. The substantive process filed for determination was for enforcement of certain constitutional rights claimed to have been violated by the National Government by the engagement of foreign mercenaries. While this was on foot, two motions were filed for the Court to decide upon. The judge made it clear in the introduction to his decision as to what matters he was dealing with. He titled his decision as “Ruling”. Then he said “there are two notices of motion in this matter.”. The first motion sought to dismiss the proceedings on the ground that the plaintiff had no standing and secondly it did not disclose any reasonable cause of action. The second motion was to strike out the proceedings on the basis of abuse of process.

It is apparent to us that the decision did not resolve the substantive action. The disputes were that the expenditure of monies on hiring of mercenaries had breached the Constitution and the Finance Management Act ... In considering these, it is our view that the issues in the substantive proceedings are still outstanding. The decision appealed from is therefore interlocutory.”

This case can be differentiated with that of Rimbink Pato v Sir Julius Chan & Ors. In that case the substantive action on foot was for some declarations that the conduct or actions of the defendants were in violation of the Constitution and the Finance Management Act. The appeal to the Supreme Court stemmed from the decision of the National Court on two Notices of Motion dismissing the proceedings on the grounds of locus standi of the applicant, no reasonable cause of action disclosed and abuse of process. That decision did not resolve the substantive issue. The case of Shelley v PNG Aviation Services (supra) is also distinguishable. That case related to striking out defence and counter-claim which the Court held to be an interlocutory decision.

In this case the appellants were claiming against the estate of the insolvent after properly filing proof of debts and were entitled to be properly considered in the insolvency. The proceedings for annulment were intended to terminate the insolvency and discharge the first respondent from further obligation under the insolvency order. The effect of the annulment order is that the first respondent is discharged from insolvency and the appellants are deprived of opportunity to obtain satisfaction of their debts under the insolvency by full utilisation of the provisions of the Insolvency Act. The appellants will however need to re-institute proceedings afresh if they wished to recover their debts. It is thus obvious that the decision, albeit interlocutory, is a final decision as there is no substantive issue afoot that remains to be tried; thus leave is not required to appeal.

There was a scheme of settlement entered into between the official trustee and those creditors who were paid out but the appellants were not party to that scheme due to lack of notice. This, in our view, had caused a further unfair prejudice on the appellants’ claim and as such they are, in all fairness, entitled to be heard by this Court in their appeal. After all, s.141 talks about ‘pays all his creditors in full or obtains a release of the debts due by him to his creditors’. This appeal evidences that not all creditors were satisfied or not all of them gave legal release to the insolvent.

We therefore dismiss the objection to competency and order the appeal to proceed.

Lawyer for the Appellants: Pato Lawyers

Lawyers for the Respondent: Maladinas Lawyers