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Reko PNG Ltd v Gopera Investments Ltd (Company No.1-15064) [2015] PGNC 78; N5998 (24 June 2015)

N5998


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


MP. NO. 6 OF 2015


IN THE MATTER OF COMPANIES ACT, 1997


BETWEEN


REKO PNG LIMITED
Petitioner


AND


GOPERA INVESTMENTS LIMITED (COMPANY NO. 1-15064)
Respondent


Waigani: Ipang, J
2015: 28th May & 24th June


COMPANY LAW – Winding up – Application by way of petition – whether petition is the appropriate form for winding up application – whether Companies Act, 1997 caters for winding up – Whether petition for winding up can still utilise Company Rules, Chapter 146.


COMPANY LAW – PRACTICE & PROCEDURE – for winding up – Ruling in Papua New Guinea Harbours Board –v- Chris Textiles Ltd [2005] PGNC 102; N2855 considered with In The Matter of the Companies Act, 1997 –v- International Construction (PNG) Ltd MP No. 205 of 2006 N3337.


Cases Cited:


Papua New Guinea Harbours Board –v- Chris Textiles Ltd [2005] PGNC 102; N2855 (31 May, 2005)
In the Matter of the Companies Act, 1997 –v- International Construction PNG Ltd MP No.205 of 2006 N3337 (Unreported)


Counsel:


Mr Mokawau Mukwesipu, for the Petitioner
Mr Timil Tape, for the Respondent


12th June, 2015


  1. IPANG, J: The Respondent Gopera Investments Ltd by its Notice of Motion filed on the 23rd of April, 2015 seeks to dismiss the entire petition for being abuse of the Court process pursuant to Order 12 Rule 40(1) (c) of the National Court Rules and Costs against the Petitioner, Reko (PNG) Limited.
  2. The main crux of the Respondent’s application is that the Petitioner filed its Petition under the Companies Rules, which the Respondent says is a wrong mode of proceeding as Companies Rules is a dormant piece of legislation.

BACKGROUND


  1. The Respondent Gopera Investment Ltd is a land owner company and it is the holder of a Timber Permit No. 2-15 issued by the PNG Forest Authority on the 11th of May, 1992 for the Respondent to undertake logging operations within the Timber Permit Area of about 83,800 hectares of land known as East Kikori Timber Rights Purchase Area.
  2. The Petitioner Reko PNG Limited and the Respondent entered into a Logging and Marketing Agreement on or around 11th March, 2014.
  3. The relationship between the parties got sour when the Respondent take the LMA stands terminated. The Petitioner instituted court proceedings titled OS No. (Comm) 612 of 2014 Reko (PNG) Ltd –v- Gopera Investment Limited. The Petitioner sought orders from the Court that the termination of LMA is not proper and to say that LMA is effective.
  4. When the Petitioner realized that the Respondent intended to put an end to their LMA and thus stopped the logging operation, the Petitioner issued a statutory demand under the Companies Act 1997 on the 20th January, 2015 and filed this Winding Up Petition on the 18th of march, 2015.

RESPONDENT’S SUBMISSION


  1. Respondent submitted that the Petitioner filed its Petition under Form 2 of the Companies Rules and such other documents filed like Affidavit verifying Petition under Form 3 etc ... The petition is filed pursuant to s.14 of the Companies Rules. This provision states.
  2. Mr. Tape of Counsel for the Respondent submitted that all the sections of Companies Act referred to in the Companies Rules are provisions under the repealed Companies Act and not Companies Act 1997 provides for Companies Legislation that were repealed and subsection (3) provides that the Companies Rules remain in force and not repealed by Section 440. Thus, Section 440 provides:

440. Repeals


(1) The following Acts are hereby repealed-
  1. Companies Act (Chapter 146)
  2. Companies (Amendment) Act, 1985
  1. Companies (Amendment) Act, 1986
  1. Companies (Amendment) Act, 1988
  2. Companies (Budget Provisions) Act, 1989
  3. Companies (Amendment) Act, 1990
  4. Companies (Amendment) Act, 1994
  1. The Companies Regulation is hereby repealed.
  2. For the removal of doubt, it is hereby declared that the Company Rules remain in force and are not repealed by this Section.”
  3. Tape submitted that s.440 (3) is not being read in isolation from the other provisions of the Companies Act 1997. Tape further submitted that the Companies Rules was not repealed at that time for the purposes of Section 442 and 443 of the Companies Act.
  4. Respondent Counsel cited Papua New Guinea Harbours Board v Chris Textiles Ltd (2005) N2855 where the Court held:
    1. A company could apply by way of a petition under Part II s.14 of the Companies Rules Chapter 146 for an order for winding up when the petitioning creditor is not yet registered as a company pursuant to s.442 or s.443 of the Companies Act, 1997.
    2. Once an existing company is registered either pursuant to s.442 or s.443 as a company under the Companies Act, 1997, the correct legal procedure is under Part XVIII of the Companies Act, 1997.
    3. The application of s.449 (1) of the Companies Act ceases to have effect on the date a company becomes a company registered under Companies Act, 1997.
    4. It is not just and equitable to order winding of the application because the applicant has not come to Court with clear hands.
  5. His Honour Sevua, J continued on:

“Sections 440 of the Companies Act 1997, repealed the Companies Act Chapter 146. Subsection (2) repealed the Companies Regulations. However, the Companies Rules were not repealed. Therefore it would appear that what I had alluded to earlier on regarding the application of the Companies Rules Chapter 146 in winding up proceedings would somewhat be in conflict with the new Companies Act 1997. But I will refer to the correct provisions of the Act and make some determinations or declarations as to the correct mode of an application of this nature.


Considering the combined effect of these provisions, it is my view that the reason s.440 (3) is applicable is because companies were to comply with ss.442 and 443. That is, the old Companies Rules Chapter 146 in relation to an application for winding up by petition under s.14 of the Rule could still be made if the company has not yet registered as a company under the Companies Act 1997 in accordance with s.442, or the company is not yet deemed to be registered as a company under the new Act in accordance with s.443. It must be noted that the cut off time limit is six (6) months after the 1997 Act came into force. Therefore by operation of law (s.443) all companies are deemed to have been registered under the Companies Act 1997 on 2nd September 1997, 6 months from the commencement date of that law


I consider that a company which is owed monies by another company cannot make an application for winding up under s.14 of Part II of the old Companies Rules after 6 months from the date the Companies Act 1997 became operative otherwise there would not be any point in having Part XVIII of the new Act relating to liquidation of companies. I reiterate that there is no provision in the Companies Act 1997 which gives jurisdiction to use both procedures. I am of the view that the use of the old procedures, ie. a petition pursuant to s.14 of the Companies Rules Chapter 146, is subject to ss. 442 and 443 of the Companies Act 1997.


By this provision, the procedure by way of a petition under Part II, s.14 of the Companies Rules Chapter 146 should only be followed if the applicant is a company which was not yet registered under the new Act under s.442 or s.443. However, it is pertinent to note here that there is a cut off point in s.443 (1) and that cut off point is six (6) months. Therefore the current legal position is that 6 months after the commencement of the Companies Act 1997, an existing company is deemed to be registered under the new Act. As I alluded to earlier, the combined effect of ss. 442, 443 and 449 of the Companies Act 1997 is that, applications for winding up under Part II, s.14 of the Companies Rules Chapter 146 should never be entertained by the Court unless such applications are brought under Part XVIII of the Companies Act 1997, which is, the procedures for liquidation.”


  1. His Honour Sevua, J concluded:

“Accordingly, I consider that it is appropriate to formulate the law here because the continued use of a petition in winding up under s.14 of the Companies Rules Chapter 146 is a mischievous way of misleading the Court and besides, I am of the view that it would defeat the purpose of Part XVIII of the Companies Act 1997. I consider that the use of the old procedure has limited application because of the combined effect of ss. 442, 443 and 449 (1) of the Companies Act 1997. It therefore is necessary to declare or determine here that, a company’s application by way of a petition pursuant to s.14 of the Companies Rules Chapter 146, seeking an order for winding up could only be made if that company is not yet registered as a company under the Companies Act 1997 in accordance with ss. 442 and 443 of that Act. By law, a company must be registered as a company under the new Act either in accordance with s. 442 or s. 443 of the Act. And once that requirement has been complied with, liquidation is the proper process by which, an applicant must seek."


SUBMISSION BY THE PETITIONER


  1. Mr. Mukwesipu of Counsel for the Petitioner submitted that paragraph 9 of Mark Maipakai sworn on 9th April, 2015 and filed on the 23rd April, 2015 claimed that the Petition was made under the Companies Rules which is the wrong mode of proceedings as the Rules are no longer applicable.
  2. Petitioner argued that the Companies Rules was never repealed by Companies Act 1997. Although, Companies Act 1997 repealed the old Companies Act and Regulation, it did not repeal the Companies Rules pursuant to s.440 (3). It states, "For the removal of doubt, it is hereby declared that the companies Rules remain in force and are not repealed by this Section." Thus, the Petitioner submitted that the Companies Rules are very much in force.

CONSIDERATIONS


  1. In the case cited by the Respondent's Counsel, PNG Harbours Board v Chris Textiles Ltd (2005) N2855 Sevua, J held:
  2. Liquidation under the Companies Act 1997 is commenced by the appointment of a liquidator pursuant to Section 291(2). I agree with the Petitioner that the Companies Act 1997 only goes as far as who may appoint a liquidation under s.291(2) and far as who may appoint a liquidator under s.291 (2) and for Court appointed Liquidators, the Act only sets out the grounds on which the Court can appoint a liquidator (s.291 (3). Otherwise, there is nowhere in the Companies Act 1997 or the Companies Regulation 1998 does it provide the procedure to follow in making an application for court order appointing a liquidator.
  3. In Re International Construction PNG Ltd (2007) N3337, Hartshorn, J considered Sevua, J's decision in PNG Harbours Board case (supra) but ruled contrary to Sevua,J's view that the Companies Rules have not been repealed by the Companies Act 1997 and are to be followed and applied with necessary modification on an application for the appointment of a liquidator.
  4. In the PNG Harbours Board case (supra) Sevua,J placed much emphasis on Section 449 of the Act which provides for Transitional Provisions Applying to Liquidation of companies. The Section 449 (5) provides that the Companies Rules that apply to the winding up of any company commenced before the company was registered under the Companies Act 1997. Sevua,J therefore took this to mean that for all companies registered under Companies Act 1997,the Companies Rules that apply to winding up of companies are not applicable.
  5. I am in agreement and endorsed Hartshorn, J's view that Section 449(5) does not say that the Companies Rules do not apply in other circumstances. There is no prohibition in the Companies Act 1997 on the use of the Company Rules, the Company Rules, are to be followed or used on application for the appointment of a Liquidator. Thus, the use of the procedure for winding up a company under the Companies Rules is not an abuse of the Court process.

20. For the above reason(s), I dismiss the order(s) sought in Respondent's motion filed on the 2nd April, 2015.


_______________________________________________________________
Gadens Lawyers: Lawyer for the Petitioner
Kandawalyn Lawyers: Lawyer for the Respondent

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