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Samoa Commercial Bank Ltd v Palm Island Traders [2010] WSSC 56 (11 June 2010)

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

CP 256/09

BETWEEN:

SAMOA COMMERCIAL BANK LIMITED
a duly incorporated company having its registered office at Apia
Plaintiff

AND:

PALM ISLAND TRADERS
a duly incorporated company having its registered office at Matautu-uta
First Defendant

AND:

FAGA MATAUTIA aka FANOLUA MATAUTIA
of Vaivase-tai, General Manager
Second Defendant

Presiding Judge: Justice Slicer

Counsel: K Ainuu for Plaintiff
F Vaai-Hoglund for Defendants

Hearing: 26 May 2010
Judgment: 11 June 2010

JUDGMENT OF SLICER J

1. Samoa Commercial Bank Limited ("Samoa Bank") a Judgment Creditor seeks the leave of the Court to proceed with its recovery action against the judgment debtor despite an order of bankruptcy obtained by the Respondent. The circumstances giving rise to the judgment debt are stated in the judgment of the learned Chief Justice in Samoa Commercial Bank Limited v Palm Island Traders and Faga Matautia delivered on 13 February 2009.
   
2. The bases of the application for leave are that:
   
   1. The Respondent failed to disclose in his Statement of Affairs his ownership of property at Tulaele;
      
   2. Details of his employment and income as a Manager of a real estate business;
      
   3. He has attempted to evade any money in satisfaction of his debt.
      
3. The relief sought is to enable the Samoa Bank to recover its debt including the causing of a writ of sale to be issued against his property currently under mortgage to the bank.
   
4. The Bankruptcy Ordinance 1908 ("The Ordinance") section 53 (2) relevantly provides;
   

"Upon the adjudication being advertised, all proceedings to recover any debt provable under the bankruptcy shall be stayed; but the Court may, on application by any creditor or person interested, allow any proceedings commenced to be continued, on such terms and conditions as it thinks just."

5. The Respondent sought the protection of bankruptcy by his petition dated 11 March 2009. On 16 September 2008 he had executed a mortgage on his land as security for his wife's loan.
   
6. The Defendant contends that although he is the owner of property at Tulaele, he holds it on Trust for members of his family. He further contends in an affidavit dated 1 May 2009 that his weekly income is ST$100.00 and that he has no other source of income.
   
7. Counsel for the Respondent raised a preliminary objection to the application, contending that the failure to advertise the adjudication was a pre-condition to the operation of the power of the Court to 'allow any proceedings commenced to be continued.'
   
8. The Ordinance section 31 provides for a debtor's petition for bankruptcy. Filing a petition is equivalent to an order of the Court and its filing constitutes an adjudication (The Ordinance s.51). The Registrar is required, immediately after adjudication to give notice to the Official Assignee who in turn is required to advertise that adjudication (section 52 (2)). The property of the bankrupt vests in the Official Assignee upon adjudication not publication (section 53 (1)). It is not necessary for the purpose of disposition of this application to determine the status of property if no Assignee has been appointed, section 53 (2) provides that on publication of the adjudication;
   

"...all proceedings to recover any debt provable under the bankruptcy shall be stayed..."

9. If there is not publication, there can be no protection afforded by section 53 (2).
   
10. The power of the Court is enlivened only when there has been a statutory stay of proceedings. Here there has been no publication, so there is no duty on the Court to exercise its discretion on continuance of proceedings.
    
11. The Samoa Bank sought to execute its judgment obtained on 13 February 2009 by a Judgment Summons dated 19 February with a return date fixed on 16 March. The Respondent filed his petition on 9 March. The Judgment Summonses Act 1965 ("The Act") section 14 (1) provides:
    

"Where the judgment debtor, upon the return of a judgment summons, satisfies the Court that he or she has been adjudicated a bankrupt and that the debt was provable in his bankruptcy, a judgment order shall not be made."

12. The wording of the statute differs from the Ordinance section 53 and precludes the Applicant from enforcing the judgment by way of Judgment Summons. The wording of the Act section 14 does not prevent other means of enforcement.
    
13. The Respondent succeeds on his procedural objection but the Applicant must succeed on the interpretation of the protection of a debtor's property.
    

CONTINUANCE OF PROCEEDINGS

14. If I am wrong on the preliminary issue, I would nevertheless grant leave for the Applicant to proceed with enforcement proceedings. The Respondent was the registered owner of the land. He mortgaged the property for his benefit or at least that of his wife. On his argument he at least retained one-fourth share but did not disclose that interest in his Statement of Affairs. His evidence that he signed the mortgage by mistake and only at the behest of his wife is belied by his position as the Manager of a real estate business. His claim of an equitable interest by others is rejected. The Statement of Affairs did not disclose the judgment debt of this Court for the amount of ST$100,200.00. His evidence generally is not accepted. He had both legal and equitable in the property which is the subject of this application.
    

GENERAL CONSIDERATION

15. The present statutory scheme is unsatisfactory. The Ordinance sections 14-24 originally provided for the appointment of an Official Assignee but were repeated by Regulation 3 of the Samoa Bankruptcy Order 1922 (NZ). The non-appointment of an Official Assignee renders the general operation of the scheme unworkable. The Applicant in its primary submission contended that the Respondent was not, in law, a bankrupt. Counsel argued that since there was no statutory vehicle for the vesting of property or to effect its distribution, section 31 was meaningless and its import into the Judgment Summonses Act of no effect. It is not necessary to determine this pragmatic argument. It is not necessary, in these reasons, to consider whether the Ordinance section 9 enable the Bankruptcy Court to remedy the deficiencies. The 1908 legislation, unamended does not reflect the demands of a modern and complex economic society. The Ordinance neither adequately protects the creditor (section 44) or the debtor. The Executive, despite the deficiencies in the Ordinance can provide immediate remedy by the appointment of a Statutory Officer. Parliament can provide more permanent redress. Bankruptcy law ought protect both creditor and debtor, which reflects the reality of commerce and personal economies.
    

CONCLUSION

16. Samoa Bank has sought leave to permit the Judgment Creditor to proceed with its recovery action. It does not require leave. The law precludes enforcement by means of a Judgment Summons. It is more appropriate to provide the remedy of a declaration, not by leave but of restricted right.
    

COSTS

17. Any issue of costs is meaningless. I am not prepared, in the circumstances of this case prepared to conclude that the Respondent is not a bankrupt. That issue ought await another day. For the purpose of the Action section 14, I am not prepared to determine that he is not a bankrupt, and will not entertain on a costs application, an argument to the contrary.
    
18. Each party ought to be responsible for their costs.
    

ORDER

19. The Court declares that Samoa Commercial Bank is entitled, as of right, to proceed with recovery action against the judgment debtor other than by means of a Judgment Summons.
    

JUSTICE SLICER