Nawae Constructions Ltd v Morobe Concrete Products Ltd [2021] PGSC 77; SC2151 (1 April 2021)

SC2151

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 1 OF 2021

IN THE MATTER OF THE
COMPANIES ACT 1997

AND:
IN THE MATTER OF:

NAWAE CONSTRUCTIONS
LIMITED
Appellant

AND:
MOROBE CONCRETE
PRODUCTS LIMITED
Respondent

Waigani: Hartshorn J
2021: 31^st March, 1^st April

STAY - Contested application for a stay and an interim injunction – appeal of appointment of liquidator

Cases Cited:
Papua New Guinean Cases

Gary McHardy v. Prosec Security [2000] PNGLR 279
Yama Group of Companies Ltd v. PNG Power Ltd (2005) N2831
Canopus No.16 Ltd v. Maisi Trust Co (2008) N3401
Ombudsman Commission v. Gabriel Yer (2009) SC1041
Evan Paki v. Don Polye (2011) SC1095
Mobil Oil New Guinea Ltd v. Yakainga Business Group (Inc) (2014) N6661
Talisman Energy Niugini Ltd v. Bismark Maritime Ltd (2015) N6800
Behrouz Boochani v State (2017) SC1566
William Duma v. James Puk (2019) SC1754

Overseas Cases

Films Rover International Ltd v. Canon Films Sales Ltd [1987] 1 WLR 670

Counsel:

Mr. D. Potane, for the Appellant
Ms. P Andrew, for the Respondent

Oral decision delivered on
1^st April 2021

1. HARTSHORN J: This is a decision on a contested application for a stay and an interim injunction. The stay is sought of a National Court decision which appointed a liquidator of the appellant and the interim injunction is sought to restrain Mr. Andrew Pini, the appointed liquidator, amongst others from conducting the liquidation of the appellant.

Background

2. The appellant appeals the appointment of Mr. Pini as liquidator. Mr. Pini was appointed upon the successful petition of the creditor/respondent. The appellant’s grounds of appeal are amongst others, that the primary judge did not properly consider that the shareholders of the holding company of the appellant had purportedly passed a special resolution on 16^th September 2020 to the effect that the holding company and the appellant were put into voluntary liquidation with Mr. Rex Paki being appointed to be the liquidator of both companies. This was about two months before the appointment of Mr. Pini as liquidator by the Court.

This application

3. The appellant relies upon s.19 Supreme Court Act and s. 155(4) Constitution for the stay and s.155(4) Constitution for the interim injunction.

4. As to s.155(4) Constitution, it is settled law that this section may only be relied upon to protect primary rights in the absence of other relevant law. I refer to Evan Paki v. Don Polye (2011) SC1095 and Behrouz Boochani v State (2017) SC1566 -two judgments amongst many, which are on point.

5. In the instance, s.19 Supreme Act provides the jurisdiction to grant a stay and s.5(1)(b) Supreme Court Act provides the jurisdiction to grant an interim order such as an injunction.

6. So in this instance, there is not an absence of other relevant law. Consequently s.155(4) Constitution may not be relied upon. Counsel for the appellant relied upon the judgment of Duma v. Puk (2019) SC1754 in which s.155(4) was successfully relied upon for the grant of a stay. That application for stay was made in review proceedings brought pursuant to s.155(2)(b) Constitution. The provisions of the Supreme Court Act do not apply in such circumstances and so there was an absence of other relevant law. As I have said, that it is not the position here and so s.155(4) Constitution may not be relied upon.

s.19 Supreme Court Act

7. As to a stay, s.19 Supreme Court Act provides that unless otherwise ordered by the Supreme Court or any Judge, an appeal, or an application for leave to appeal, to the Supreme Court does not operate as a stay of proceedings.

8. In Gary McHardy v. Prosec Security [2000] PNGLR 279, the Supreme Court found that it had unlimited jurisdiction to do justice and should exercise its discretionary power depending on the factors and circumstances of a particular case. Factors to consider when deciding whether to grant a stay include:

a) whether leave to appeal is required and whether it has been obtained;

b) whether there has been a delay in making the application;

c) possible hardship, inconvenience or prejudice to either party;

d) the nature of the judgment sought to be stayed;

e) the financial ability of the applicant;

f) a preliminary assessment about whether the applicant has an arguable case on the proposed appeal;

g) whether on the face of the record of the judgment there may be indicated apparent error of law or procedure;

h) the overall interests of justice;

i) the balance of convenience;

j) whether damages would be a sufficient remedy.
9. I make reference to the following passage of Injia CJ (as he then was) in Ombudsman Commission v. Gabriel Yer (2009) SC1041. His Honour was considering a stay application under s. 19 Supreme Court Act:

“The grant or refusal of stay is discretionary. The principles on grant of stay are set out in McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 (McHardy case)..... In McHardy the Court said the starting point is the basic premise that the judgment creditor is entitled to enjoy the fruit of the judgment. There are ten (10) other considerations which are enumerated in that case which may be considered. The Court said the list is not exhaustive. In my view, it is not intended that the discretion should be exercised on all or selected consideration(s). The circumstances of a particular case may warrant greater or less or even no weight at all to be given to a particular consideration(s). It is open to the Supreme Court to expound on those considerations or introduce new considerations as necessitated by the circumstances of the case before it. In a case where a number of considerations are relevant, the Court must take into account the totality of those considerations in order to dispense substantive justice in the circumstances of the case before it. The onus is on the applicant to persuade the Court to exercise its discretion in his or her favour.”

10. Further, s. 19 does not impose any fetter on the discretion of the Court to grant a stay.

11. In William Duma v. James Puk (2019) SC1754 the Court, of which I was a member, said at [13]:

“13. As referred to, in determining whether a stay should be granted this Court must consider what is necessary to do justice in the circumstances of a particular case. There is no fetter on this Court’s discretion apart from this consideration. We are reminded in this regard of the oft cited statement of Bowen LJ in Gardner v. Jay (1885) 29 Ch 50, at 59:

“When a tribunal is invested by Act of Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view of indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not fetter the discretion of the Judge why should the Court do so?””

12. In this instance leave to appeal is not required. As to whether there has been any delay, it is the case that the stay application was filed at least two and a half months after the appeal. Submissions were made that the delay was because Mr. Violaris a director of the appellant, is residing in Greece. The fact is however, that there has been delay during which the liquidation has been progressing.

13. As to whether the appellant has an arguable case on the appeal, without in any way considering the merits, I proceed on the basis that there is an argument, as Mr. Paki was purportedly appointed liquidator about two months before the appointment of Mr. Pini.

14. As to any hardship, inconvenience or prejudice to a party, the appellant attempted to argue that the holding company of the appellant and the shareholders of the holding company would suffer hardship, inconvenience or prejudice if a stay was not granted. Even if this is so, which to my mind on the evidence, it has not been shown to be the case, the holding company and shareholders are not parties to this appeal. It has also not been shown on the evidence that the appellant, a party, will suffer any hardship, inconvenience or prejudice if a stay is not granted.

15. I concur with the submission of the respondent that the appellant will not face any prejudice if the stay application is refused as the appellant is insolvent and has been placed into liquidation. Whether it be Mr. Pini or Mr. Paki who conducts the liquidation, the creditors, including the shareholder of the appellant will be considered in the liquidation process as provided for in the Companies Act. Mr. Pini and Mr. Paki as liquidators are obliged to perform the same functions pursuant to the Companies Act.

16. As to the financial ability of the appellant, it is beyond doubt that the appellant is insolvent.

17. As to whether on the face of the record there is an apparent error. The appellant submits that there is an error of law. The respondent submits otherwise.

18. In regard to where the balance of convenience lies, in determining this, I have had recourse to the following statement of Hoffman J. in Films Rover International Ltd v. Canon Films Sales Ltd [1987] 1 WLR 670 at 680:

“The principal dilemma about grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the Court may make the ‘wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the Court should take whichever course appears to carry the lower risk of injustice if it turns out to have been “wrong’ in the sense I have described.”

19. The principle contained within this passage has been affirmed in amongst others: Yama Group of Companies Ltd v. PNG Power Ltd (2005) N2831; Canopus No.16 Ltd v. Maisi Trust Co (2008) N3401; Talisman Energy Niugini Ltd v. Bismark Maritime Ltd (2015) N6800; and Mobil Oil New Guinea Ltd v. Yakainga Business Group (Inc) (2014) N6661.

20. To my mind, although this statement concerns the grant of interlocutory injunctions, the principles contained therein apply equally to the grant of a stay. The fundamental principle is that the court should take whichever course appears to carry the lower risk of injustice if it turns out that the appellant is not successful in its appeal.

21. In this instance the liquidation process has already been commenced by Mr. Pini. If a stay is granted, it would cause inconvenience to the liquidation process. If the appellant is successful in the appeal and Mr. Paki is the liquidator, he will perform his functions no differently to Mr. Pini, under the Companies Act, but the liquidation will have been prevented from proceeding if a stay has been granted.

22. The liquidation process will proceed in any event, whether it is performed by Mr. Pini or Mr. Paki. A stay would merely be delaying the inevitable. In such circumstances I am satisfied that the lower risk of injustice if the appellant is substantively successful is for the stay currently sought, not to be granted. Consequently, the balance of convenience favours a stay not being granted.

23. In regard to whether damages could be an adequate remedy, if a stay is not granted and the appellant is substantively successful with this appeal, any damages which may be suffered by the appellant would be caused by actions of Mr. Pini as liquidator. These could be quantified, in the absence of evidence to the contrary, and would be capable of payment.

24. The argument that damages would not be sufficient remedy for the holding company of the appellant, is not to point, as the holding company is not a party to this appeal, as mentioned. I am satisfied therefore that damages would be an adequate remedy.

25. For all of the above reasons the stay sought is refused.

26. As for the interim injunctive relief sought, as application has incorrectly been made pursuant to s.155 (4) Constitution as mentioned and not on any other basis, the interim injunctive relief is also refused.

Orders

27. The formal orders of the Court are:

a) The relief sought in the application filed 2^nd March 2021 of the appellant is refused;

b) The appellant shall pay the costs of the respondent of and incidental to the said application.
__________________________________________________________________
Davidson & Company: Lawyers for the Appellant
Leahy, Lewin, Lowing, Sullivan: Lawyers for the Respondent