Debt Collection in Papua New Guinea

The process of debt collection in Papua New Guinea begins with a legal and factual assessment of the debtor, the nature of the debt and the evidence available to the creditor. In commercial matters, this assessment normally includes checking the debtor’s solvency, business activity, corporate history, contractual documents, invoices, delivery records, correspondence, acknowledgements of debt, pending court cases, existing judgments, enforcement history and possible objections to the claim.

For a creditor dealing with a debtor in Papua New Guinea, the initial review should also include asset and security analysis. Movable property, equipment, receivables and other collateral may be affected by registered security interests, so a search of the Papua New Guinea Personal Property Securities Registry can be important when assessing whether the debtor’s assets are already encumbered or whether another secured creditor may have priority. This assessment helps determine whether the creditor should begin with out-of-court recovery, prepare a District Court or National Court claim, consider enforcement of an existing judgment, or evaluate insolvency-related remedies.

The out-of-court stage is based on structured negotiations with the debtor and the persons who make payment decisions. It may include a formal demand for payment, verification of the amount due, discussion of repayment terms and negotiation of settlement options, such as return of goods, assignment of the debt to a third party, set-off, exchange of services or goods, or a written payment schedule.

Communication with the debtor may be carried out by mail, email, phone, messengers or other available channels, but each material contact should be documented. For out-of-court debt collection, the creditor’s objective is to confirm the debtor’s position, preserve evidence of the claim, identify whether the debt is disputed and obtain voluntary payment or a workable settlement.

In straightforward commercial cases, the informal recovery stage is often planned for a period of up to 60 days, unless the parties agree on a longer payment schedule. If negotiations do not result in payment, or if the initial review shows that the debtor is disputing the debt, hiding assets, facing insolvency or avoiding contact, the creditor should move to the court recovery stage.

Before initiating judicial debt collection, the creditor should determine the applicable limitation period. Under the Frauds and Limitations Act 1988, an action founded on a simple contract, tort, recognisance or certain statutory recoverable sums must generally be brought within 6 years from the date on which the cause of action accrued. For debt claims, a signed written acknowledgement of the debt or part-payment may create a fresh accrual of action, so the debt is treated as accruing on the date of the acknowledgement or the date of the last payment, as the case may be. An acknowledgement must be in writing and signed by the person making it.

At the litigation preparation stage, the creditor should calculate not only the principal debt, but also contractual interest, agreed penalties, recoverable costs and any court-awarded interest that may be available in debt or damages proceedings. The documents should show how the amount was formed: the contract, invoices, delivery documents, account statements, payment history, correspondence, debt acknowledgements, guarantees, security documents and evidence that the debtor was properly notified of the claim. Where foreign-language documents are used in Papua New Guinea proceedings, the creditor should prepare certified translations suitable for court use.

The court route for debt collection in Papua New Guinea depends mainly on the amount of the claim, the status of the debtor and the nature of the dispute. Village Courts may deal with certain local civil disputes and may order repayment of a debt up to 1,000 kina. This route is best understood as a small local debt option, because Village Courts are primarily designed to preserve peace and harmony in their area through mediation and fair settlement of community disputes.

The Village Court procedure has its own limits. As a general rule, a Village Court does not proceed in the absence of a party. If a party normally resident in the Village Court area deliberately avoids that area and the special procedure for bringing the matter before the proper Village Court is impracticable, the Village Court may proceed in the party’s absence, but its power to make an order is limited by the Act. A final Village Court decision may be appealed within three months by oral or written appeal to the justice of the peace, and the justice of the peace may review the decision within 12 months from the date of the decision.

For commercial and international debt recovery, the practical choice is usually between the District Court and the National Court. District Courts deal with civil claims within their monetary jurisdiction, while the National Court deals with larger or more complex civil matters. According to the information published by the PNG Judiciary, civil claims up to K10,000 are generally not allowed in the National Court, so claims above that level usually fall within the National Court route unless a specific statute provides another forum.

Judicial debt collection in the District Court and the National Court follows different procedural routes. In the District Court, proceedings may be commenced by information or complaint. An information concerns one matter, while a complaint may concern one or more matters. If the filing complies with the procedural requirements, the court issues a summons to the defendant. In District Court proceedings, the summons must be served at least 72 hours before the time fixed for the hearing.

At the District Court hearing, the defendant is informed of the nature of the complaint and asked whether there is any cause why an order should not be made. If the defendant admits the complaint and does not show good cause against the order, the court may hear the evidence it considers necessary and make an order against the defendant. If the defendant does not appear at the time and place stated in the summons or at an adjourned hearing, the court may proceed with the complaint and decide it ex parte or adjourn the hearing. If the defendant disputes the complaint, the court hears the parties, examines witnesses, considers the evidence and issues a final order.

National Court civil proceedings are different. A debt claim in the National Court is usually commenced by writ of summons or, where the rules allow, by originating summons. A writ of summons must be endorsed with a statement of claim, and the defendant’s response depends on the originating process and the applicable rules. In suitable cases, the National Court Rules provide mechanisms such as default judgment where the defendant fails to give notice of intention to defend or file a defence, and summary judgment where the plaintiff can show evidence of the claim and the defendant has no sufficient answer to it.

An order of the District Court may be appealed to the National Court. The appellant must give notice of intention to appeal by filing a notice of appeal with the clerk of the court that made the order within one month from the date of the order. A decision of the National Court may be appealed to the Supreme Court of Papua New Guinea. A person who wishes to appeal or apply for leave to appeal to the Supreme Court must file the relevant notice within 40 days from the date of the judgment being appealed. The decision of the Supreme Court is final.

For international creditors, a separate route may be relevant where the creditor already has a foreign court judgment and the debtor or assets are located in Papua New Guinea. Under the Reciprocal Enforcement of Judgements Act, a judgment creditor may apply to the National Court to register a foreign judgment to which the statutory regime applies. The Act is based on reciprocity and applies to judgments from foreign countries and superior courts declared under the Act. An application may generally be made within 6 years after the date of the judgment, or, where there were appeal proceedings, after the date of the last judgment in those proceedings.

After registration, the registered judgment has the same force and effect for execution purposes as a judgment of the National Court, subject to the rules on setting aside registration and the conditions of the Act. A practical issue in Papua New Guinea is that the judgment must come from a declared superior court that finally determined the matter. The National Court has refused registration where the judgment relied on was effectively a registration or administrative entry of a decision from a court that was not itself a declared court. For cross-border debt recovery, this makes the country of origin, the original court, the type of judgment, the appeal history and the exact registration route especially important.

After a judgment or registered foreign judgment becomes enforceable, the creditor may proceed to enforcement proceedings. Under the National Court Rules, a money judgment may be enforced by one or more methods, including levy of property, attachment of debts, charging order, appointment of a receiver and, in specific cases provided by the rules, committal or sequestration. In practice, enforcement strategy may involve bank accounts, debts owed to the debtor by third parties, movable property, immovable property, shares, securities, receivables or other assets that can be reached under the applicable court procedure.

Judgment enforcement should be planned together with asset tracing. If the debtor has movable assets or business equipment, a PPSR search may help identify existing security interests. If the debtor has receivables, contracts or money owed by third parties, attachment of debts may be relevant. If the debtor owns property or valuable rights, a charging order or receiver may be considered where the court procedure permits it. An action upon a judgment is subject to a 12-year limitation period from the date when the judgment became enforceable, while arrears of interest on a judgment debt are subject to a separate six-year rule from the date when the interest became due.

Where there is evidence that the debtor intends to leave Papua New Guinea, move to another place in the country or otherwise evade payment, the District Court framework contains exceptional court-controlled measures in civil cases, including provisions concerning imprisonment of defendants in civil cases and persons leaving the country. These measures require a proper legal basis and evidence of evasive conduct and should be assessed together with the ordinary asset-based enforcement options.

An alternative option for debt recovery is insolvency proceedings. Under the Insolvency Act 1951, a creditor may present a petition for adjudication of insolvency where the statutory conditions are met and the debtor has committed an act of insolvency. A creditor’s petition may be available where the debt due to a single creditor amounts to K100 or more, debts due to two creditors amount to K140 or more, or debts due to three or more creditors amount to K200 or more. The petition must allege the relevant act or acts of insolvency, and the petitioning creditor’s debt must generally be a liquidated sum due and subsisting at the required times.

Acts of insolvency include, among other things, transferring property to a trustee for the benefit of creditors generally, making a fraudulent conveyance, gift, delivery or transfer of property, leaving Papua New Guinea or remaining outside it with intent to defeat or delay creditors, filing a declaration admitting inability to pay debts, presenting a debtor’s own petition, allowing execution for payment of not less than K100 to be levied by seizure and failing to satisfy it within four days after seizure, failing to comply with a debtor’s summons for a sum due of not less than K100, or giving a fraudulent preference to a creditor.

Insolvency may also help creditors address asset transfers made before the procedure. A conveyance, assignment, gift, delivery, transfer or other dealing with property that constitutes an act of insolvency is void against the trustee of the insolvent. Voluntary settlements may also be void against the trustee in the circumstances provided by the Act. If the debtor, while unable to pay debts as they become due, transfers property, gives a charge, makes a payment, incurs an obligation or suffers judicial proceedings in favour of one creditor with a view to giving that creditor a preference, and an insolvency petition is presented within the statutory six-month period followed by adjudication, the transaction may be treated as a fraudulent preference and void against the trustee.

Other transfers, gifts, deliveries of property or charges made by a debtor who is unable to pay debts from his own money may also be treated as fraudulent and void where their effect is to defeat or delay creditors or to diminish the property available for distribution among creditors, subject to the statutory conditions. If such transactions are successfully challenged, the property or its value may be recovered for the insolvent estate, increasing the asset pool from which creditors’ claims may be satisfied.

If you need support with international debt collection in Papua New Guinea, Grandliga can assist at each stage of the recovery process: debtor and asset assessment, document review, out-of-court negotiations, preparation of a District Court or National Court strategy, recognition and registration of foreign judgments, enforcement planning, PPSR-related asset analysis and insolvency-related recovery. The appropriate route depends on the amount of the claim, the evidence, the debtor’s status, available assets, existing security interests and whether the creditor already has a judgment that can be enforced in Papua New Guinea.

# DEBT COLLECTION AGENCY PAPUA NEW GUINEA

27.09.2024

1206