Sunset Rentals Ltd v Pacific View Apartments Ltd [2020] PGSC 15; SC1930 (5 March 2020)

SC1930

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 83 OF 2019

IN THE MATTER OF THE COMPANIES ACT 1997

AND
IN THE MATTER OF SUNSET RENTALS LIMITED (1-36620)
Appellant

AND
PACIFIC VIEW APARTMENTS LIMITED
Respondent

Waigani: Makail J
2020: 28^th February & 5^th March

SUPREME COURT – Practice & Procedure – Application for interim order – Restraining order sought to restrain dealing with assets and property of company under liquidation – Order sought to direct funds into liquidator’s trust account or company bank account – Liquidation stayed by order of Supreme Court – Supreme Court Act – Section 5(b) – Supreme Court Rules – Order 3, rule 2(b)

Cases Cited:

Nil

Counsel:

Ms. A. Kimbu, for Appellant
Mr. S. Gor, for Respondent

5^th March, 2020

INTERLOCUTORY RULING

1. MAKAIL J: The appellant owns two units on the ninth floor of the Pacific View Apartments Building at two mile hill in Port Moresby. They are described as:
(a) Apartment 902 sub-lease registered number 38058; and

(b) Apartment 904A sub-lease registered number 38062.

2. The appellant pays what is called a body corporate levy per month to the respondent. Over the years the amount increased. Presently, it is over K3,000.00 per month. On 24^th April 2016 the appellant’s sole director Dr Florian Gubon passed away without leaving a will. The respondent does not appear to contest the assertion that the wife of the deceased one Mrs Sainimili Gubon from Fiji was appointed by the National Court to be the administrator of the deceased’s estate. It also does not seriously contest her appointment as director of the appellant. However, there appears to be deferring legal opinions over who has the controlling interest in the appellant including the two units.

3. The respondent filed National Court proceeding and obtained default judgment against the appellant in the sum of K44,742.80 on 19^th February 2018 as outstanding body corporate levies. It alleged that despite the default judgment, the appellant failed to settle it. It issued a statutory demand in Form 42 under the Companies Act, 1997 for payment of the outstanding sum but received no payment. It then filed proceeding in the National Court to wind up the appellant. By an order of the National Court of 13^th June 2019 the appellant was put into liquidation and a liquidator was appointed to, amongst others, identify its assets, creditors, and debts and settle them. The order of the National Court may also be referred to as a winding up order.

4. Following the order for liquidation, the appellant filed this appeal and was granted an order for stay of the liquidation by Kirriwom J sitting as a single judge of the Supreme Court on 1^st August 2019. Six days later, on 6^th August 2019 the respondent filed an application to seek an order to restrain the appellant, its servants and agents from dealing in an adverse manner with the two units until the determination of the appeal and secondly, an order directing the appellant, its servants and agents to pay money generated from the units to the liquidator’s trust account or alternatively, appellant’s bank account and the funds be preserved until the determination of the appeal. The application is brought under Section 5(b) of the Supreme Court Act (SCA) and Order 3, rule 2(b) of the Supreme Court Rules (SCR).

5. The respondent argued in support of the orders sought that the present application does not in any way seek to set aside or, vary or, undermine the order for stay granted by Kirriwom J. Rather it is to compliment and facilitate its implementation in a more effective way and preserved the units and funds from being used by Mrs Gubon. This is because the stay order’s application is limited to the appointment of the liquidator and not the liquidation of the appellant. The distinction between the liquidator and the liquidation of the appellant is found in Section 300 of the Companies Act, 1997 where the power to put a company into liquidation is conferred on the National Court and conversely the same Court is conferred power to terminate it. Until the liquidation is terminated by the National Court, the liquidation of the appellant is in force and by virtue of Section 298(1) of the Companies Act, 1997, at the commencement of the liquidation the liquidator has custody and control of the company’s assets. It is for these reasons that this Court grants the orders sought to prevent prejudice to the claim of the respondent pursuant to Section 5 of the SCR and Order 3, rule 2(b) of the SCR.

6. The principal reason submitted on behalf of the respondent is that, there is overwhelming evidence that the appellant is insolvent. It cannot pay its debts. It owes substantial debts to the respondent, the Internal Revenue Commission (IRC) and may be the Investment Promotion Authority (IPA). These creditors and others will be prejudiced because there is nothing preventing Mrs Gubon from selling and/or dealing in an adverse manner with the two units and taking the proceeds for her personnel use. Secondly, there is no evidence that the money generated from the units is paid to the appellant’s bank account but it is not Mrs Gubon’s personal property. It belonged to the appellant and must be paid into the liquidator’s trust account or if not, to the appellant’s bank account and held until the appeal is determined.

7. It is also suggested by the respondent that Mrs Gubon did not come to Court with clean hands because she “has conducted the business of the Appellant for her personnel benefit and engaged in a campaign of the tax evasion for at least twelve (12) years incurring a Salary and Wages Tax Liability of K563,893, Income Tax liability of K25,752.52 under the Income Tax Act and Goods and Services Tax liability of K218,400 under the Goods and Services Act as at July 2019”.

8. Finally, she “as a non-citizen, residing in Papua New Guinea on a dependant’s visa is employed and conducts the business of the Appellant with no work permit or exemption, in breach of the Employment of Non-Citizens Act and .........carries on the business of the Appellant while she is a foreign enterprise, and has not obtained for the Appellant any certification to carry on business under the Investment Promotion Act.”

9. The appellant argued that the stay order is all encompassing and includes the liquidation of the appellant. That being the case, the status quo prior to the appellant being put into liquidation and a liquidator appointed is restored and the appellant is able to trade until the determination of the appeal.

10. The principal reason offered by the respondent in relation to the appellant’s substantial debts and suggestion of Mrs Gubon as the director of the appellant being engaged in tax evasion and conducting business in breach of the PNG labour and foreign owned business laws must not distract parties from their obligation to obey the order of the Supreme Court staying the liquidation. While Section 300 of the Companies Act, 1997 confers power on the National Court to make an order to terminate the liquidation of the appellant and no such order has been made, there is an order by the Supreme Court staying the liquidation. It is explicitly clear and states:

“(1) The winding up order is hereby stayed pending the determination of this appeal.”

11. This order has stayed the liquidation, and appointment of the liquidator and I agree with the appellant’s submission that, it is all encompassing. The liquidation and appointment of the liquidator are put on hold until the determination of the appeal. The liquidator appointed by the National Court, is by operation of the stay order, stopped from holding himself out and performing the functions of the liquidator of the appellant until the determination of the appeal. This means that he is stopped from making representations to the appellant, its servants and agents including Mrs Gubon in relation to the appellant’s assets, creditors, debts and settlement of debts including the two units until the determination of the appeal. The question of who has the controlling interest in the appellant will be one of the issues for the full Court to determine.

12. For the present purpose, the issue of termination of liquidation under Section 300 of the Companies Act, 1997 does not arise and is irrelevant. The respondent’s submission on this issue is, therefore, misconceived. Similarly, the application is misconceived because it is not drafted in the form of an application to seek an “order to vary the stay order” but is disguised in an attempt to frustrate or undermine the operation of the stay order. The application is dismissed as being an abuse of process with costs to the appellant, to be taxed, if not agreed.
Ruling and orders accordingly.
_______________________________________________________________
Kimbu & Associates Lawyers: Lawyers for Appellant
Fiocco & Nutley Lawyers: Lawyers for Respondent