Kond v National Development Bank Ltd [2010] PGSC 35; SC1080 (19 November 2010)

SC1080

PAPUA NEW GUINEA
IN THE SUPREME COURT OF JUSTICE

SCA No. 89 of 2010

BETWEEN:

JAMES KOND
Appellant/Applicant

AND:

NATIONAL DEVELOPMENT BANK LIMITED
Respondent

Waigani: Sawong, J
2010: 15th & 19th November

SUPREME COURT – practice and procedure - application for stay of orders for insolvency - grant or refusal of stay is discretionary and to be exercised on proper principles and on proper grounds - most important matter is nature of Judgment - whether there is an arguable case - whether there is apparent error of law or procedure - issues raised in the grounds of appeal show that there are legal issue which are arguable – application for stay of order granted – s.19 Supreme Court Act, Ch 37

Facts:

The respondent filed a creditor's petition seeking to adjudge the appellant insolvent. The National Court adjudged the appellant insolvent. The Appellant then filed an application by way of a Notice of Motion seeking orders to set aside the insolvency orders. That application was dismissed. The Appellant has filed a Notice of Appeal against that ruling. Pending the hearing and determination of the said Appeal, the Appellant has now applied to stay the orders for insolvency and the entire National Court proceedings.

Held:

1. The grant or refusal of stay is discretionary and it is to be exercised on proper principles and on proper grounds.
   
2. The most important matter that should persuade a Judge is the nature of the Judgment, whether there is an arguable case and whether there is apparent error of law or procedure.
   
3. The issues raised in the grounds of appeal show that there are legal issues which are arguable and that there is an arguable case on each of the grounds.
   
4. A stay of the insolvency orders is granted.
   

Cases cited in the judgment:

Gary McHardy v. Prosec Security & Communications Limited Trading as Protect Security (2000) PNGLR 279.
Mirupasi v. Tulapi PGNC 108; (N3249)
Manu trading as Manu & Associates, Lawyers v. Vele (2006] PGNC 87; N3097.

Counsels:

Mr. P. Pato, for the Appellant/Applicant
Mr. H. Namani, for the Respondent

RULING

19th November, 2010.

1. SAWONG, J: INTRODUCTION: This is an application for stay of orders for insolvency made against the Appellant on 7th December, 2009.

2. The application is made by way of an Amended Notice of Motion filed on 30th August 2010. The application is made pursuant to s. 19 of the Supreme Court Act, Ch. 37.

B: BACKGROUND

3. The Respondent filed a Creditor's Petition in MP No. 842 of 2006 in the National Court seeking to adjudge the appellant insolvent.

4. On 7th December 2009 the National Court adjudged the Appellant insolvent.

5. The Creditor's Petition initiating the insolvency proceedings was signed by the lawyer for the Respondent, Mr. Robert Bradshaw.

6. The Summons endorsed on the back of the Petition was not signed by the Registrar of the National Court.

7. On 4th June 2010, the Appellant filed an application by way of a Notice of Motion seeking orders to set aside the insolvency orders of 7th December 2009. That application was heard on 15th June 2010 by Hartshorn J, and he delivered a ruling on 22nd June 2010 dismissing the application. The Appellant has filed a Notice of Appeal against that ruling. Pending the hearing and determination of the said Appeal, the Appellant has now applied to stay the orders for insolvency and the entire National Court proceedings.

8. In support of the application the Appellant relies on his own affidavit filed on 22nd July 2010, his supplementary affidavit filed on 30th August 2010 and the affidavit of Peter Hai Pato filed on 28th October 2010.

9. Both counsels have filed and made both written and oral submissions. I have considered both submissions and the affidavit evidence.

10. The principles in grant or refusal of stay are set out in Gary McHardy v. Prosec Security & Communications Limited Trading as Protect Security (2000) PNGLR 279 (McHardy case). The grant or refusal of stay is discretionary and it is to be exercised on proper principles and on proper grounds. The Court must start from the basic premise that the judgment creditor is entitled to enjoy the benefit of the judgment. There are ten (10) other considerations which are set out in that case. These considerations are:

(i) Whether leave to appeal is required and whether it has been obtained;

(ii) Whether there has been any delay in making the application;

(iii) Possible hardship, inconvenience or prejudice to either party;

(iv) The nature of the judgment sought to be stayed;

(v) The financial ability of the applicant;

(vi) Preliminary assessment about whether the applicant has an arguable case on the proposed appeal;

(vii) Whether on the face of the record of the judgment there may be indicated apparent error of law or procedure;

(viii) The overall interest of justice;

(ix) Balance of convenience;

(x) Whether damages would be sufficient remedy.

11. Counsel representing the Appellant in his written submissions covered all of the considerations set out in McHardy's case. I do not consider it necessary to repeat or restate all of what he has submitted. Counsel for the Respondent, has restricted himself to whether the Appellant has raised an arguable case.

12. I propose to deal with two of the factors in determining whether a stay order should be granted or not. I consider that of the 10 factors, the most important matter that should persuade a Judge is the nature of the Judgment, whether there is an arguable case and whether there is apparent error of law or procedure. In my view it is important to note that at this stage, the Court is not considering the merits of the grounds of appeal. All that is required is upon a quick perusal of the grounds of appeal, any affidavit evidence and the submissions advanced, determine whether the ground raised in the notice of appeal raise any arguable case.

13. There are four basic grounds of appeal raised in the Amended Notice of Appeal. These are:

(1) The learned Judge erred in law and fact or in mixed law and fact in holding that the word "shall" in section 27 of the Insolvency Act 1951 is directory and not mandatory in that;

(2) The learned Judge erred in law and acted in excess of his powers in holding that the Creditor's Petition may be signed by lawyers of the Petitioning Creditor in that;

(3) Furthermore, the learned Judge erred in law and fact or in mixed law and fact in failing to consider the Appellant's submission that;

(4) The learned Judge erred in law and fact or in mixed law and fact in not dismissing the proceeding MP No. 842 of 2006 between National Development Bank Ltd and James Kond in that:

14. In grounds 1and 2 of the notice of appeal it is stated that the learned Judge erred in mixed law and fact in holding that the word "shall" in Section 27 of the Insolvency Act, 1951 is directory and not mandatory. Here it is submitted that the learned trial judge erred in law in holding that the expression "shall" is directory and not mandatory. He relies on the decision of His Honour Injia, DCJ (as he then was) in Mirupasi v. Tulapi [2007] PGNC 108; (N3249) where His Honour said that the word "shall" in Section 27 was of the Insolvency Act 1951 was mandatory.

15. In that case, Injia, DCJ (as he then was) said:

"The requirement that the petitioner must sign his own petition is a mandatory requirement of a statute. Failure to comply with this mandatory requirement is fatal to the validity of a petition in the first place. It also follows that any proceedings conducted on an invalid petition are vitiated by this fundamental flaw in the procedure. This is analogous to an election petition filed under the Organic Law on National and Local – Level Government Elections which is struck out for failing to comply with the mandatory requirement of s 208 (c) of that Organic Law because the petition is not signed by the petitioner."

16. Mr. Pato submits that the two decisions conflict in the interpretations of the word "shall" in s. 27 of the Act. Thus, this ground is an arguable case.

17. I accept this submission. It is clear to my mind that the two decisions appear to be in conflict with each other. The issues raised in the grounds of appeal show that there are legal issue which are arguable. I am satisfied that there is an arguable case on this ground.

18. In the next ground of appeal it is said that the learned trial judge erred in law and acted in excess of his power in holding that the creditor's petition may be signed by lawyer for the petitioning creditor contrary to s. 27 and 28 of the Insolvency Act.

19. The argument here follows on from the first ground of the appeal. The petition was signed by the lawyer for the Respondent as its agent. The argument here is that this was not proper. It was submitted that it was wrong in law, in that it was contrary to s.27 of the Act for a lawyer to sign the creditor's petition when s.27 requires a petitioner to sign the petition.

20. In my view this ground raises an important legal issue and raises an arguable case.

21. The third ground of the appeal relates to an issue that the Petition was not signed by the Registrar of the National Court as required by s. 30(2) of the Insolvency Act 1951 and was therefore defective.

22. The argument here is that as the Registrar of the National Court did not sign the Petition as required by s. 30(2) of the Act, the petition was incompetent. This issue was raised before the learned trial judge, but he did not consider it nor addressed his mind to it in his decision.

23. Mr. Pato submitted that the issue of the signature of the Registrar on the Petition is mandatory requirement. He submitted that if the Registrar hasn't signed the Petitions then the Petition is incompetent and the entire insolvency proceeding is invalid. He relies on the decision of Davani, J in Manu trading as Manu & Associates Lawyers v. Vele [2006] PGNC 87; N3097.

24. Counsel for the Respondent has not argued this point but has conceded that the issue was raised and submissions made on this point to the trial judge, but the learned trial judge did not address this issue.

25. I have read the transcript of the proceedings in the National Court and the judgment of His Honour. I accept this issue was raised before His Honour but it is clear from the judgment that His Honour did not address his mind to this issue.

26. Section 30(2) of the Act prescribes that the Registrar of the National Court must sign the petition. In this it appears that the Registrar did not sign the petition. This then raises the competency of the petition and the orders that were made originally in December 2009. In my considered opinion, the arguments raised here demonstrate clearly that the issues raised here demonstrate an arguable case.

27. For the reasons I have given, I would grant a stay of the orders made on 7th December 2009 and also the entire proceedings in MP No. 842 of 2006.

Costs must follow the event, to be agreed, if not taxed.

Makap Lawyers: Lawyers for the Appellant
Namani Lawyers: Lawyers for the Respondent