Home | Databases | WorldLII | Search | Feedback National Court of Papua New Guinea

Bay Cabs Ltd v Kokiva [2019] PGNC 326; N7957 (7 June 2019)

N7957

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

MP NO. 28 OF 2019

BETWEEN
BAY CABS LTD
Applicant

AND
HARRIETA KOKIVA, ACTING REGISTRAR OF COMPANIES
Respondent

Alotau: Toliken J.
2019: 04^th & 07^th June

COMPANIES ACT 1997 – Application for restoration of deregistered company – Whether deregistered company can apply to restore itself – Effects of registration or incorporation and deregistration – Companies Act 1997, ss 373, 379.

PRACTICE AND PROCEDURE – Motion to restrain Registrar from exercising powers against Applicant for breaches of Companies Act – National Court Rules, Order 12 Rule 32(1).

The Applicant is a deregistered company. Despite being deregistered it continues to carry out business in Alotau, Milne Bay Province. The Applicant owned a property described as Section 30 Allotment 05, Town of Alotau. In 2013, it entered into a tenancy agreement with a Milne Chan Enterprise Ltd (Milne Chan) for the lease of the property for a period of 5 years. The parties renewed their agreement with a slight increase in rental.

Sometime after that, the Applicant let a part of the demised premises to a third party without the knowledge of Milne Chan. Milne Chan commenced proceedings to enforce its rights under the tenancy agreement. These proceedings were, however, dismissed in their entirety on the basis that the lawyer in carriage was not registered with the PNG Law Society.

Soon after that the Acting Registrar of Companies (the Respondent) took steps to enforce alleged breaches of the Companies Act by the Applicant. The Applicant then commenced these proceedings under its own name to be restored to the Register. It further applied by Motion to restrain the Acting Registrar from prosecuting its shareholders/Directors and for the Respondent to be further restrained from disposing off or dealing with the property in question pending and until the determination of the substantive application.

Held:

(1) On registration or incorporation, a company assumes legal entity or personality that is separate and distinct from its shareholders. It continues in existence until it is removed from the register. And as long as it remains on the register, a company can sue and be sued in its name and style and carry on business as an ordinary person will.

(2) When it is removed from the Register or deregistered, a company ceases to exist as a legal entity and cannot conduct any business in its own right. Any properties owned by the company vests in the Registrar of Companies. (Section 373 (1) of the Companies Act 1997) Former officeholders of the company no longer have the right to deal with any property registered in the company’s name. Furthermore the company can no longer commence any legal proceedings, or continue current proceedings, nor can it be sued in its own name.

(3) Bay Cabs Ltd does not exist in law and therefore cannot carry out business in its own name nor can it commence or continue any legal proceedings or be sued for that matter. It follows therefore that Bay Cabs Ltd cannot apply for its restoration to the Register of Companies.

(4) The only persons who can apply for restoration are those named in Section 379 (2) of the Companies Act including a shareholder or a director of a company among others.

Because it is non-existent Bay Cabs Ltd therefore has no locus standi to have initiated these proceedings.

(5) The motion for injunctive relief is denied and the entire proceedings are dismissed for want of standing and for abuse of process.

Cases Cited:
Papua New Guinea Cases

Mairi v Alkan Tololo & Ors (No. 1) [1976] PNGLR 59
Mt Hagen Airport Hotel Pty Ltd v Gibbes [1976] PNGLR 216

Overseas Cases

American Cyanamid Company v Ethicon Ltd [1975] UK HL 1; 1 AllER 504
Counsel:

R. Inua, for the Applicant.
Nil appearance by the Respondent

RULING ON MOTION

07^th June, 2019

1. TOLIKEN J: The Applicant, Bay Cabs Ltd (Bay Cabs), filed proceedings to have itself restored to the companies Register pursuant to Section 373 of the Companies Act 1997 (the Act).
   
2. And by way of Motion Bay Cabs also sought ex parte interim orders to restrain Harrieta Kokiva, the Acting Registrar of Companies (Respondent from prosecuting the company’s Directors/Shareholders pursuant to her powers under Sections 413 (4) [Non-compliance with the Act], 423 [Carrying on business fraudulently], and 426 [Disqualification from managing companies] of the Companies Act 1997; and from disposing off or dealing with the company’s property pursuant to Section 372 of the Act ), pending and until the determination of the substantive proceedings.
   

BACKGROUND

3. Bay Cabs was incorporated under the repealed Companies Act Ch. 146 as Bay Cabs Pty Ltd on 27^th October 1998. With the coming effect of the Companies Act 1997 it became Bay Cabs Ltd. The company’s registered address was Section 50, Allotment 36, Alotau, Milne Bay Province. Its shareholders were Isaac Taitibe and Mataeala Taitibe who were also its directors.
4. On 03^rd June 2003 the company was deregistered for failing to file returns. Despite deregistration it continued to conduct business and also maintained a bank account with Bank South Pacific Ltd at its Alotau Branch between 2003 and 2019.
   
5. Bay Cabs owned a State Lease on land described as Section 05, Allotment 30, Alotau, Milne Bay Province. On 07^th November 2014, Bay Cabs (while deregistered) entered into a Tenancy Agreement with Milne Chan Enterprises Ltd (Milne Chan) for a period of 5 years at the rate of K11,000 per calendar month. The Agreement was renewed on 12^th November 2018 with an increase of the monthly rental to K13000.
   
6. It appears, however, that during the currency of the new tenancy agreement, Bay Cabs brought in another tenant into the property.
   
7. Aggrieved by this, Milne Chan commenced proceedings by way of Originating Summons on 27^th February 2019. It sought, among other things, a declaration that its tenancy agreement with Bay Cabs was valid and enforceable for the period of the duration of the lease. And by Notice of Motion of even date, Milne Chan also sought orders, among others, to restrain Bay Cabs and its agents from letting the demised premises to other persons for commercial activities. The motion and the entire proceedings by Milne Chan were, however, dismissed on 07^th of May for abuse of process on the basis that the lawyer in carriage of the matter for Milne Chan, Mr. Francis Jacob was not registered with the Law Society.
   
8. It appears that after the dismissal of Milne Chan’s proceedings, steps were taken by the Registrar of Companies to prosecute Bay Cabs for breaches of the Companies Act. On 24^th May 2019, Bay Cabs therefore commenced the current proceedings
   
9. I heard Bay Cabs Motion on 04^th June 2019. This is my short ruling.
   

ISSUES

10. The issues for my determination are:
    
    1. Whether Bay Cabs has standing or locus standi to initiate these proceedings in its own name?
       
    2. Whether injunctive relief can be granted.
       
11. Whether or not the Court gets to consider the second issue depends very much on the answer to the first issue.
    

THE LAW

12. The law on the grant or refusal of injunctive relief is settled and culminates from the English House of Lords decision in American Cyanamid Company v Ethicon Ltd [1975] UK HL 1; 1 All ER 504, which has been followed and approved in this jurisdiction in cases too numerous to cited here. (Mairi v Alkan Tololo & Ors (No. 1) [1976] PNGLR 59; Mt Hagen Airport Hotel Pty Ltd v Gibbes [1976] PNGLR 216) In essence, an applicant must satisfy the following requirements –
    
    1. There is a serious question to be tried;
       
    2. Whether the balance of convenience lies in granting or refusing the application;
       
    3. Whether damages would not be an adequate compensation for loss occasioned between the application and the trial;
       
    4. Does the interest of justice require that interim injunctive relief be granted?;
       
    5. Whether the applicant has filed an undertaking as to damages.
       

LOCUS STANDI

Whether the Plaintiff has the standing to initiate proceedings

13. At this juncture, I must say that the current case is not your ordinary run of the mill application. The Applicant is a deregistered company, and therefore at the very outset, the question of whether it has the standing to commence this or any proceedings at all must be addressed. This is a threshold issue that cannot be passed over.
    
14. It is trite that on registration or incorporation a company assumes legal entity or personality that is separate and distinct from its shareholders. Section 16 of the Companies Act provides in very clear terms that “A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the register.” So, as long as it remains on the register a company can sue and be sued in its name and style and carry on business as an ordinary person will.
    
15. But what happens when it is removed or deregistered? Well, it ceases to exist as a legal entity and cannot conduct any business in its’ own right. Any properties owned by the company vests in the Registrar of Companies. (Section 373 (1) of the Act) Former officeholders of the company no longer have the right to deal with any property registered in the company’s name. Furthermore the company can no longer commence any legal proceedings in its own name, or continue current proceedings, neither can it be sued.
    
16. It is crystal clear therefore that in this case, Bay Cabs Ltd cannot commence any legal proceeding in its own right for the simple reason that it does not exist anymore in law. It may have had properties at the time it was removed from the Register and it may be the case that its shareholders or officers may want it restored as is the case here and the Act does provide for such situations. For instance, a person who would have been entitled to company property may within 6 years from deregistration may apply to the Court for an order vesting all or part of the property in him. (Section 373 (8) of the Act).
    
17. Now, a company may be restored by order of the Court on application pursuant to Section 379 of the Act, if the Court is satisfied of the following:

(a) at the time the company was removed from the register–

(i) the company was still carrying on business or other reason existed for the company to continue in existence; or

(ii) the company was a party to legal proceedings; or

(iii) the company was in receivership, or liquidation, or both; or

(iv) the applicant was a creditor, or a shareholder, or a person who had an undischarged claim against the company; or

(v) the applicant believed that a right of action existed, or intended to pursue a right of action, on behalf of the company under Part IX; or

(b) for any other reason it is just and equitable to restore the company to the register.

18. Subsection (2) of Section 379 names the persons who may apply to restore a company. These are:
    
    • (a) any person who, at the time the company was removed from the register:
      

(i) was a shareholder or director of the company; or

(ii) was a creditor of the company; or

(iii) was a party to any legal proceedings against the company; or

(iv) had an undischarged claim against the company; or

(v) was the liquidator, or a receiver of the property of, the company;

(b) the Registrar;

(c) with the leave of the Court, any other person.

19. That being so, it is clear that a deregistered company cannot apply to the Court to restore itself, again, for the simple reason that it does not exist anymore in law. The only persons who can do that are those enumerated in Section 379 (2) which includes a shareholder or a director. In this case, Mr. Isaac Taitibe ought to have commenced these proceedings in his capacity as Director and Shareholder and not the company.
    
20. The inevitable conclusion here is that these entire proceedings, i.e. the substantive proceeding and the motion for interim injunctive relief are an abuse of process as Bay Cabs does not exist. And because it is non-existent it lacked the locus standi to initiate these proceedings or any legal proceedings at all for that matter.
    
21. This Court has the duty to protect its procedures from abuse and it is within its right to dismiss the current motion and the entire proceedings for abuse of process. (Order 12 Rule 40) And to that end there is no need for me to consider the second issue.
    

ORDERS

22. The motion is therefore denied and the entire proceedings (MP 28 of 2019) are dismissed for want of standing and for abuse of process.
    

Ordered accordingly.

_____________________________________________________________-----------------------

Lawama Lawyers: Lawyers for the Applicant