THE COURT REPORT
National Housing Estate on verge of liquidation
A recent Supreme Court decision has put the much maligned and corrupt State owned National Housing Estates Limited (NHEL) on the verge of liquidation, even as politicians continue to dabble in its affairs.
Although the State, through its nominated shareholders, the Ministers for Housing and Finance, resolved to shut down the company through a voluntarily liquidation in 2017, that commitment has never been effected.
As a result, it is a private company, Niugini Building Supplies, which could finally bring down the curtain on NHEL and its sad history.
Niugini Building Supplies is seeking to have NHEL wound up over an unpaid debt of almost K6 million; the Supreme Court has cleared the way for the petition to proceed to trial.
Meanwhile, in an apparent contradiction of the government’s earlier decision to liquidate the company, Minister for Housing, Justin Tkatchenko, has made two controversial new appointments to the company Board, one of whom was recently charged with misappropriation, false pretence and abuse of office.
An unpaid debt
Niugini Building Supplies Limited is a long established and successful family business involved in merchandising and construction.
In October 2014, the company secured a court judgement against the National Housing Estates Limited and the National Housing Corporation in the sum of K4,879,263.
Neither NHEL or NHC paid the judgement debt despite numerous demands and attempts to follow up over several years. So, in June 2017, Niugini Building Supplies served a statutory demand for a total sum of K5,918,746, which included the interest that had accrued.
When NHEL still failed to pay the debt, Niugini Building Supplies filed a petition seeking its winding up.
In September 2017, the petition came before Justice Hartshorn in National Court. The judge reserved his decision and Niugini Building Supplies had to wait a further seven months before Justice Hartshorn announced he was dismissing their petition.
The judge reasoned that rather then being an independent company, NHEL was “the State” within the meaning of the Claims By and Against the State Act 1996. That law prohibits the enforcement of judgements against the State. The judge based his decision on the fact that NHEL’s two shareholders are the State Ministers for Housing and Finance. Therefore both NHEL and its assets, said Hartshorn, are the property of the State.
Aggrieved by the decision, Niugini Building Supplies appealed to the Supreme Court. It argued that as an incorporated company under the Companies Act 1997, NHEL is a separate entity from the State and any claim against the company should be dealt with under the relevant principles of Companies Act.
The Supreme Court allowed the appeal. It has found that NHEL is not part of “the State”. NHEL was not established under a specific statute but under the Companies Act. There is no statutory provision deeming its employees public servants. Its directors and chief officer are appointed by the shareholders and not directly by the government. There is no specific statutory obligation on NHEL to give effect to government policies or to be accountable to the National Executive Council. The State has an interest only in the shares and any dividend that may be paid but not in the company itself and its assets.
Applying all these factors the Supreme Court ruled the trial judge had erred in finding NHEL was “the State” within the meaning of the Claims By and Against the State Act 1996 and in ruling the winding up petition was an abuse of process.
The Supreme Court upheld the appeal with costs, reinstated the winding up petition and remitted it back to the National court for trial.
In the meantime, it is unclear what the current government’s position is on NHEL.
As we reveal below, recent filings show Housing Minister, Justin Tkatchenko, appointed new Directors to NHEL’s board in July. Despite finding time to appoint new Directors, the government has failed to file legally required annual returns that would permit the public, and government auditors, to see the financial state of this opaque and shady vehicle.
If the winding-up action is successful in the National Court, and administrators are sent in, it is anticipated they will have a very ‘interesting’ time trying to reconstruct the books and trace the assets of NHEL.
Right hand man
Housing Minister, Justin Tkatchenko, has recently appointed his ‘right hand man’, Aisop Mol, as his nominee to be Chairman of the Board for National Housing Estate Limited. Tkatchenko has appointed the embattled acting Managing Director of the National Housing Corporation, Elizabeth Bowada, to serve alongside Mol.
Mol has been described in the media as Minister Tkatchenko’s ‘right hand man’ and the two have certainly had a long and close association.
In 2010, Mol was working as a supervisor for Tkatchenko’s business PNG Gardner when a company vehicle he was driving got caught in the cross-fire in a shoot out between police and a gunman at the Jacksons domestic airport. The vehicle suffered 27 bullet holes.
A year later Mol represented Tkatchenko at local rugby league events where both Tkatchenko and his businesses have been generous benefactors. From there Mol went on to become the successful electoral manager for Tkatchenko in his Moresby-South electorate and then, as an apparent reward, Mol was appointed District Administrator.
Elizabeth Bowada is also a controversial choice by the Minister for the NHEL Board, albeit for rather different reasons. Bowada is facing charges of misappropriation, false pretence and abuse of office in relation to a payment of K118,486 from the NHC.
She was charged by police in July, just a month after the NEC controversially rejected a short-list of candidates for the permanent managing director appointment which reportedly did not contain Bowada’s name.
Although Minister Tkatchecko has denied allegations he unlawfully interfered in the selection process to get the short-list overturned and thus allow Bowada to continue in her acting role, he has expressed his admiration for her:
“She’s been working with me implementing all the government’s reforms of NHC and she’s been doing a fantastic professional job.”.
These recent appointments do nothing to inspire confidence that NHEL’s future is going to be any less controversial than its past so perhaps the best we can hope for is that Niugini Building Supplies is successful with its petition application and that the scandal of the National Housing Estate is soon brought to a close.