Debt Collection in Papua New Guinea

The debt collection process in Papua New Guinea begins with an assessment of the debtor’s solvency, their line of business, the history of the business, the availability of documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on the client’s behalf in the collection process.

If the debtor has no current court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers in order to achieve the fastest possible recovery of the debt.

The average time for informal extra-judicial collection is up to 60 days (except in cases where a payment plan has been agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period is 6 years. The limitation period is interrupted if the debtor acknowledges the debt, for example by written admission or partial payment of the debt or interest. After the interruption, the limitation period begins to count again.

The courts of first instance are the Village Courts, the District Courts and the National Court. Village Courts mainly deal with cases involving ordinary legal disputes between village residents, but also have jurisdiction over claims for small debts of up to 1,000 kina. District Courts deal with less serious claims where the amount claimed does not exceed 10,000 kina. Cases where the amount claimed is greater are heard by the National Court.

The primary function of the Village Court is to ensure peace and harmony in the area for which it is established by mediation and seeking a fair and amicable settlement of disputes.

The Village Court cannot hear a case in the absence of a party. If the Village Court is satisfied that a defendant who normally resides in the area of ​​the Village Court’s jurisdiction is deliberately avoiding being in that area, the case can only be heard by holding joint sessions with the Village Court in whose area the debtor actually resides. The joint session shall consist of at least two village court justices of the peace from each village court and a visiting village court justice of the peace. If it is not possible to hold a joint session, the village court may continue to hear the case in the absence of the party, but in such a case the village court has no power to make an order.

The final decision of the village court may be appealed within three months by oral or written appeal to the justice of the peace. The justice of the peace may review the decision of the village court at any time within 12 months from the date of the decision.

Judicial collection of debts in the District Court and the National Court is carried out by means of information or a complaint, which can be filed by the applicant himself, his legal representative or another authorized person. The information concerns only one issue. The complaint may concern one or more issues. If the information or complaint complies with the procedural requirements, the court will issue a summons and send it to the defendant. The summons must be served not later than 72 hours before the time specified in the summons for the hearing.

At the hearing the defendant shall be told the nature of the complaint and asked whether he has any cause why an order should not be made against him. If the defendant admits the truth of the complaint and does not show good cause why an order should not be made against him, the court, after hearing such evidence as it deems necessary with respect to the subject matter of the complaint, shall make an order against the defendant.

If the defendant fails to appear at the place and time specified in the summons or at the place and time to which the hearing has been adjourned, as the case may be, the court may proceed with the complaint and decide it ex parte or may adjourn the hearing to a later date.

If the defendant does not recognize the truth of the complaint, the court must continue the process by: hearing the positions of the parties, examining witnesses, and considering the evidence submitted by the parties to support their positions. The court, after hearing the parties and the evidence presented by each of them, shall consider and decide the entire matter and issue a final order.

An order of the District Court may be appealed to the National Court. The appellant must give notice of his intention to appeal by filing a notice of appeal with the clerk of the court that made the order within one month of the date of the order. The decision of the National Court may be appealed to the Supreme Court of Papua New Guinea. If a person wishes to appeal or apply for leave to appeal to the Supreme Court, he or she must file a notice of appeal or notice of his or her application for leave to appeal, within 40 days of the date of the judgment being appealed. The decision of the Supreme Court is not subject to appeal.

Once the judgment has entered into legal force, the creditor must initiate enforcement proceedings. The judgment may be presented for enforcement within 6 years from the date of the judgment. As part of the enforcement of the judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities; seizing and confiscating shares in the company. In cases where there is evidence that the debtor is going to leave the country without paying the debts, or is going to go to another place within the country with the intention of evading payment of the debt, the court may take such debtor into custody.

An alternative option for debt collection is to use bankruptcy proceedings. The creditor can file an application to declare the debtor bankrupt if the debtor has committed an act of insolvency. The actions that fall under the signs of an act of insolvency include, in particular: the debtor has transferred his property to a trustee for the benefit of his creditors as a whole; the debtor has made a fraudulent transfer of his property or any part of his property; the debtor has left the territory of Papua New Guinea; a penalty has been imposed on the debtor as a result of any legal process in the amount of not less than 100 kina and the debtor has failed to pay such amount. At this stage, in the event of insufficiency of the debtor’s assets to fully satisfy the claims of creditors, it is possible to cancel the debtor’s transactions that were made with the purpose of defrauding creditors. Thus, according to the Insolvency Act, a transfer, assignment, gift, delivery or other disposal of property that would be an act of insolvency is considered invalid and is subject to return to the debtor. In addition, any transfer, gift or delivery of property or encumbrance made by the debtor with the purpose of causing damage or detaining creditors or reducing the debtor’s property subject to distribution among his creditors is also considered fraudulent and invalid. As a result of the use of these provisions, it is possible to return these assets to the debtor and thereby increase the chances of satisfying creditors’ claims in full. 

If you have any questions or need support on international debt collection in Papua New Guinea, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us for more information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY PAPAU NEW GUINEA

27.09.2024

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