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TST 4 Mile Ltd (1-22484), In re [2017] PGNC 281; N6996 (25 August 2017)

N6996

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP 21 of 2017 (COMM)

IN THE MATTER OF THE

COMPANIES ACT 1997

AND:

IN THE MATTER OF
TST 4 MILE LIMITED
(1-22484)

Waigani: Hartshorn J
2017: 24^th, 25^th August

Application for a stay of a petition that seeks the appointment of a liquidator

Cases:

Cal Exports Limited v. Camp Administration Limited (2008) SC1050
In the matter of Piunde Limited (2015) N5971
Seawind Tankers Corporation v. Bayoil SA [1998] EWCA Civ 1364

Counsel:

Mr. S. Gor, for the Petitioner
Mr. I.R. Shepherd, for TST 4 Mile Limited

Oral decision delivered on
25^th August, 2017

1. HARTSHORN J: This is a decision on a contested application for a stay of a petition that seeks the appointment of a liquidator. Application is made pursuant to Order 8 Rule 27 and Order 12 Rule 40 (1)(c) National Court Rules.

2. The company TST 4 Mile Limited (TST) seeks the stay of the petition on the ground that TST has a genuine counterclaim against the petitioner, Pom Traders SDN BHD, a company incorporated in Malaysia (Pom Traders), and there are specific circumstances which make it appropriate for the petition to be stayed. Those specific circumstances are that, amongst other, TST is able to pay its debts as they fall due and it would not be just and equitable to place TST into liquidation in those circumstances.

3. Pom Traders submits that the stay should not be granted as:

a) There is only one other proceeding that involves both parties and in which TST sues Pom Traders and Pom Traders vigorously contests that proceeding;

b) Barry Tan, a shareholder and director of TST has admitted most of the debt the subject of this petition;

c) The accounts relied upon by TST to show that it is solvent and able to pay its debts are unaudited.

Law

4. Both counsel agreed that the law as to a stay of a petition to appoint a liquidator is as stated in the Supreme Court decision of Cal Exports Limited v. Camp Administration Limited (2008) SC1050. That is at paragraphs 19 and 20, pursuant to Order 8 Rule 27 and Order 12 Rule 40 National Court Rules by virtue of Rule 2 Companies Rules. I also refer to my decision of In the matter of Piunde Limited (2015) N5971 in this regard.

5. The Court in Cal Exports (supra) at paragraph 37 stated that the law that applies in Papua New Guinea is properly stated in the English and Wales Court of Appeal case of Seawind Tankers Corporation v. Bayoil SA [1998] EWCA Civ 1364 where it was held that:

“a) once the court comes to the conclusion that:

i) there is a genuine and serious counterclaim, one of substance;

ii) and that is shown that the company has not been able to litigate the counterclaim;

iii) and that the counterclaim is in an amount exceeding the amount of the petitioner’s debt;

b) the court should ask itself are their special circumstances, which make it inappropriate for the petition to be dismissed or stayed?

c) If there is a genuine qualifying counterclaim, it is not relevant that the debt on which the petition is founded is undisputed. In the absence of special circumstances the petition ought to be stayed or dismissed.”

Consideration

6. In this instance, it is not in dispute that there are proceedings commenced in the High Court of Malaya at Kuala Lumpur, Malaysia by TST and two other Papua New Guinea companies against Vincent Ang Teck Heng and Pom Traders. The claim is for breaches of fiduciary duties and it seeks accounts of secret profits and punitive and exemplary damages against Pom Traders and Vincent Ang.

7. From the evidence, I am satisfied that on balance TST has a genuine and serious counterclaim. This is because it is the subject of proceedings in the High Court in Malaysia. Notwithstanding that Pom Traders is defending the matter, it is submitted vigorously, as there is no evidence of, for instance, any successful application to dismiss that proceeding, or other facts from which I could conclude that it is not a genuine and serious claim, I am entitled to assume that the claim is genuine, otherwise it would likely not and just as importantly should not have been commenced.

8. Secondly, the claim is being litigated but has not yet been determined. Thirdly, although the claim is not quantified, from a perusal of the statement of claim and given the allegations over a period of time and the evidence of Mr. Tan, it is likely that the amount of the claim will exceed the amount of this petition.

9. Given this, the Court then enquires whether there are special circumstances which make it inappropriate for the petition to be stayed. The only circumstance of that nature raised by counsel for Pom Traders is that Mr. Tan on behalf of TST has admitted most of the debt the subject of the petition. However, according to the test in Seawind v Bayoil (supra), if there is a genuine counterclaim, it is not relevant that the debt on which the petition is founded is undisputed. It cannot be then, a special circumstance.

10. Consequently, on the test what the Supreme Court in Cal Exports (supra) held is appropriate for Papua New Guinea, I am satisfied that the stay for which application is made, should be granted.

11. In coming to that conclusion, I also take into account the evidence that is not rebutted that TST is able to pay its debts as they fall due in the ordinary course of business. Further, in these circumstances, and using the words from Cal Exports (supra), Pom Traders cannot be allowed to visit the draconian remedy of winding up a company, when there are real prospects that the petitioner’s debt will be satisfied by bringing the counterclaim to judgment.

12. Given this, it is not necessary to consider the other submissions of counsel.

Orders

13. The Orders of the Court are:

a) This proceeding is stayed generally;

b) The petitioner shall pay the respondent’s costs of and incidental to the notice of motion of the respondent filed 8^th June 2017;

c) Time is abridged.

___________________________________________________________
Fiocco & Nutley Lawyers: Lawyers for the Petitioner
Ashurst Lawyers: Lawyers for the Respondent