Straits Contracting (PNG) Pty Ltd v Branfill Investments Limited [1988] PGLawRp 36; [1988] PNGLR 239 (21 December 1988)

Papua New Guinea Law Reports - 1988-89

[1988] PNGLR 239 - Straits Contracting (PNG) Pty Ltd v Branfill Investments Limited 

[1988] PNGLR 239

SC360

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

STRAITS CONTRACTING (PNG) PTY LTD

V

BRANFILL INVESTMENTS LTD

Waigani

Bredmeyer Los Hinchliffe JJ

1-2 December 1988

21 December 1988

EVIDENCE - Admissibility - Fresh evidence - Re-opening case - Discretion of court - Relevant considerations - Whether ruling on admission of appealable.

APPEAL - Leave to appeal - From discretionary interlocutory ruling - From leave to adduce fresh evidence - Care in granting.

Held

N1>(1)      An application by a party to re-open his case to admit “fresh evidence” is a matter within the discretion of the court as to which the following matters, inter alia, are relevant:

N2>(a)      that the fresh evidence would, if believed, probably affect the result;

N2>(b)      that the fresh evidence could not with reasonable diligence have been discovered before;

N2>(c)      that the fresh evidence was not omitted by inadvertence; and

N2>(d)      that the fresh evidence was not omitted by deliberate inadvertence.

Parao Tunboro v Motor Vehicles Insurance (PNG) Trust [1984] PNGLR 272, approved and followed.

N1>(2)      The Supreme Court should hesitate to overturn a trial judge on a discretionary interlocutory ruling.

Cases Cited

Parao Tunboro v Motor Vehicles Insurance (PNG) Trust [1984] PNGLR 272.

Leave to Appeal

This was an application for leave to appeal against rulings permitting a petitioning creditor, in proceedings to wind up a company, to adduce fresh evidence after the close of evidence but before final submissions.

Counsel

I Molloy and K Yalo, for the appellant.

I Batch and P Lowing, for the respondent.

Cur adv vult

21 December 1988

BREDMEYER LOS HINCHLIFFE JJ: In this case after the conclusion of argument we reserved overnight and, on the next day, 2 December 1988, we announced our order. In each case leave to appeal was refused and the appeal was dismissed with costs. We certified the case as an appropriate one to engage overseas counsel. The question of costs on an earlier stay was reserved to the trial judge. We said we would publish our reasons later and this we now do.

The appellant seeks leave to appeal against two orders made by Konilio AJ on 8 August 1988 and 2 September 1988 in the same cause. The background to the orders is as follows. The respondent in each appeal, Branfill Investments Ltd (hereinafter called Branfill) was the petitioner in an action to wind up Straits Contracting (PNG) Pty Ltd (hereinafter called Straits Contracting). Branfill was a 40 per cent shareholder in Straits Contracting which in turn was a 25 per cent shareholder in Wawoi Guavi Timber Co Pty Ltd (hereinafter called Wawoi) which latter company had a timber permit or permits in the Western Province of Papua New Guinea. At an extraordinary general meeting of Wawoi held on 14 October 1986 the capital of the company was increased from K10,000 to K1,300,000 and 1,256,405 new shares at K1.00 each were allotted to Straits Engineers Contracting (Singapore) Pte Ltd in satisfaction of loans made by that company to Wawoi. In other words, loans made by that company were converted to share capital. The effect of the new issue and allotment was the dilution of the shareholding of Straits Contracting in Wawoi. Instead of owning 25 per cent of the shares in Wawoi it now owned 0.00197 per cent of the total share capital of the company. And because Branfill owned 40 per cent of the shares in Straits Contracting it became the indirect owner of 40 per cent of 0.00197 per cent of the share capital of Wawoi.

According to the minutes of that extraordinary general meeting of Wawoi held on 14 October 1986 the reasons for increasing the share capital were as follows:

“It was noted that as a term of the approval granted by the Minister for Forests to the acquisition by Straits Engineers Contracting (Singapore) Pte Ltd of all shares in the company not owned by Straits Contracting (PNG) Pty Ltd it is required that the loan made by Straits Engineers Contracting (Singapore) Pte Ltd to the company now totalling K1,256,405 be converted to equity in the company.”

The petition alleges that this was not in fact one of the terms of approval granted by the Minister for Forests and also that there was no loans owing by Wawoi to Straits Engineers. The loans were owed by Wawoi to Straits Contracting. The petition claims that the directors of Straits Contracting in attending that extraordinary general meeting of Wawoi and voting for the increase in share capital acted in their own interests rather than the interest of the shareholders as a whole and acted in a manner which was unfair or unjust to one of the shareholders, viz Branfill, and by s 240(1)(f) of the Companies Act (Ch No 146) that is a ground for winding up a company.

The petition was contested and came on for hearing in March 1988 before Konilio AJ. At the conclusion of affidavit and oral evidence, which occupied two days, the court adjourned for the purpose of preparing a typed transcript after which the parties were to submit written submissions. The preparation of the transcript took much longer than expected and before any written submissions were made the petitioner, Branfill, discovered some new evidence and applied to re-open its case to set that new evidence before the judge. Shortly thereafter it found some more new evidence on the same topic as the subject of the first application and it applied a second time to re-open its case to submit that new evidence. Each application was opposed and each application was granted by the trial judge. In each case the trial judge gave the petitioner leave to re-open its case and adduce further evidence. In each case he cited a leading local authority on the reception of fresh evidence: Parao Tunboro v Motor Vehicles Insurance (PNG) Trust [1984] PNGLR 272. Both counsel before us agree that that case accurately sets out the relevant law on the reception of fresh evidence. In his first judgment the trial judge said, “there is no doubt that the new evidence would affect the result of the petition if allowed”. He also said that the petitioner was not inadvertent and could not have been aware of the prior existence of that evidence prior to its production at the Commission of Inquiry into the forest industry. In the second judgment he said:

“there is no doubt in my mind that the new evidence sought to be adduced by the petitioner would, if I believe it, probably affect the result of this petition. It is strong rebuttable evidence against the evidence of the witness Toms.”

Mr Molloy, counsel for the appellant, has argued before us that the new evidence is irrelevant to the issues before the trial judge and that it only goes to the credit of Mr Toms who was the only witness for Straits Contracting. He cited to us the well known rule that witnesses cannot be called solely for the purpose of contradicting the credit of a witness: see Phipson on Evidence (12th ed, 1976), par 1607. We do not accept that submission. We are of the view that the new evidence allowed by the trial judge is relevant to the issues in dispute and could affect the result of the petition. One of the matters in issue in the petition is whether the increase of share capital in Wawoi was done for the purpose of giving effect to an approval given by the Minister for Forests, or whether it was done for some other improper motive as the petitioner alleges such as to greatly diminish Branfill’s indirect shareholding in the logging company, Wawoi. On that matter there are four documents which in chronological sequence are as follows:

N1>1.       A letter from the Minister for Forests Mr Ted Diro, to Mrs Hester Kuhon of Straits Contracting dated 16 June 1986 in which he says:

“that the Straits Engineers Contracting Pte Ltd being the major creditor should purchase all available shares in the company (meaning Wawoi Timber Company).”

N1>2.       Clause 23 of Timber Permit No 1-4 granted by the Minister for Forests to Wawoi for six months from 1 July 1986 which reads:

“Shareholding

It is a condition of this permit that Wawoi Guavi Timber Co Pty Ltd be restructured during the currency of the permit such that the national shareholding of the company is bought out by the foreign partner (Straits) Engineering Pty Ltd [sic].”

We comment here that although the names of the two companies are different, one could be a typing error, and each document refers to a company with the words Straits Engineers or Straits Engineering in its name.

N1>3.       Clause 3.2 of a document prepared by the Department of Forests headed wawoi guavi forestry project, guidelines for development proposal, which was sent to the company by the Secretary for Forests on 22 July 1986. That clause reads as follows:

“Project Structure

Straits Contracting (PNG) Pty Ltd will buy out all the shares (100%) in Wawoi Guavi Timber Company and accepts responsibility for and will pay in full all shareholders loans, debts or liens incurred by Wawoi Guavi Timber Company prior to the purchase by Straits Contracting Pty Ltd. The purchase price shall be determined in consultation with the Department of Forests.”

Note that this clause introduces a new purchaser Straits Contracting (PNG) Pty Ltd and not Straits Engineers or Straits Engineering.

N1>4.       A letter dated 6 August 1986 from Oscar Mamalai, Secretary for Forests, to the Managing Director of Straits Contracting (exhibit 13 in the appeal book) which reads as follows:

“Dear Sir,

Purchase of National Shareholding of Wawoi Guavi Timber Company Ltd by Straits Engineers Contracting Pte Ltd of Singapore.

This letter amends Sec. 3.2 Project Structure of Guidelines for the Wawoi Guavi Timber Project Proposal dated 22 July 1986 as follows:

Sec. 3.2 Project Structure.

The name Straits Contracting (PNG) Pty Ltd shall be deemed deleted and STRAITS ENGINEERS CONTRACTING PTE LTD shall be inserted.

This is to conform with the Ministerial Directive dated 16 June 1986 and the Interim Permit No. 1-4 Clause 23 issued by the Department of Forests to Wawoi Guavi Timber Company Pty Ltd on 1st July 1986.

Yours faithfully.”

This letter of 6 August 1986 purports to resolve the conflict between document 3 on the one hand and documents 1 and 2 on the other, and paves the way for the 75 per cent national shareholding in the Wawoi to be sold to Straits Engineers Contracting Pte Ltd. So far the four documents quoted support the view of Straits Contracting that the Minister approved the sale of the national shareholding in Wawoi to Straits Engineers which is what was achieved at the extraordinary general meeting on 14 October 1986. So far there would appear to be nothing unfair or unjust in the increase of share capital, merely carrying out the terms of the Minister’s approval. However, the new evidence sought to be put before the trial judge contradicts this. It is another copy of document 4 which is undated, plus an accompanying note purporting to show that the letter was signed by the Secretary for Forests in early January 1987 and given to an intermediary Mr Michael Cowan of the Forests Industries Council of Papua New Guinea in an undated form. Mr Cowan then sent it by fax to Mr David Toms of Straits Contracting in Singapore to back date it to a date which was most suitable to the company. The evidence, if believed — and we add, of course, that we have not heard any contrary evidence that may be adduced by Mr Toms or his company at the trial — shows that the letter of 6 August 1986, which we have called document 4, was not in existence prior to the extraordinary general meeting of 14 October 1986. This means that at the date of that meeting it was not clear whether the Minister had approved Straits Contracting or Straits Engineers as the purchaser of 75 per cent of the shares in Wawoi. The petitioner will no doubt argue that this conflict of evidence suggests that the increase of capital passed at the extraordinary general meeting was not done simply to give effect to the Minister’s approval but done for some other motive such as greatly to diminish the value of Branfill’s indirect shareholding stake in Wawoi.

We are of the view that this new evidence sought to be adduced, if believed, may affect the result of the petition, that it could not with reasonable diligence have been discovered before, and that it was not omitted from the trial by inadvertance or deliberate choice. We are firmly of the view that the trial judge was right in allowing it and, in any event, that we should hesitate to overturn the trial judge on an interlocutory ruling and one which lies within his discretion. We refuse leave to appeal in each case and grant costs to the respondent.

Leave to appeal refused

Lawyer for the appellant: Young & Williams.

Lawyer for the respondent: Gadens.