State v Wyborn [2004] PGNC 3; N2847 (20 July 2004)

N2847

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

CR 1235 of 2002

THE STATE

V

GRAHAM YOTCHI WYBORN

DARU: SALIKA, J
09, 12, 13, 14, 15, 19, 20 July, 2004

CRIMINAL LAW – Accused director of a company – accused charged with criminal offence as director of company – whether defence of corporate veil available – corporate veil lifted.

Cases Cited:
Salomon v Saloman & Co (1897) AC22
Foss v Harbottle [1843] EngR 478; (1843) 2 HARE 461, Ch 12 LJ 319
CBS INC and CBS Records Australia Ltd Bali Merchants Pty Ltd v Ramu Investment Pty Ltd (CB5)(1978) PNGLR 66
Jacob Luke v John Ralda (1992) PNGLR 549
Odata Limited v Ambusa Corporate Oil Mill Limited & National Provident Fund Board of Trustees N2016
Andrew Daiva & Ome Ome Forests Ltd v Lawrence Pukali and Benedict Waide N2289
Kappo Limited v Hau & Ors SC 520

Counsel:
Mr Kupmain for the State
Mr Kimbu for the Defendant

20 July, 2005

The accused Graham Yotchi Wyborn has been charged with four counts of misappropriation pursuant to s.383A of the Criminal Code Act.

For completeness the charges are:-

First Count:

Graham Yotchi Wyborn of Daru Island, Western Province stands charged that he between 24 day of December, 1999 and 31 day of March 2000 at Daru in Papua New Guinea dishonestly applied to his own use and to the use of Lisa Wyborn and Sikani Engineering Limited monies in the sum of Fifty Eight Thousand Two hundred and Seven Kina an d Eighty Six Toea (K58,207.86) the property of the Independent State of Papua New Guinea.

Second Count

Graham Yotchi Wyborn of Daru Island, Western province stands charged that he on the 13th day of March 2000 at Daru in Papua New Guinea dishonestly applied to the use of Elaine Marina and Norman Andrew Benson money in the sum of K1,149.43 the property of the Independent State of Papua New Guinea.

Third Count.

Graham Yotchy Wyborn of Daru Island, Western Province stands charged that he on the 24th day of December 1999 at Daru in Papua New Guinea dishonestly applied to the use of Kevin Wyborn monies in the sum of K5,000 the property of the Independent State of Papua New Guinea.

Fourth Count

Graham Yotchi Wyborn of Daru Island Western Province stands charged that he on the 17th day of January 2000 at Daru Papua New Guinea dishonestly applied to his own use and to the use of others money the sum of K1,000 the property of the Independent State of Papua New Guinea.
THE ALLEGATIONS

The State alleged that a verbal contract was entered into between the Daru Town Authority and Sikani Engineering Limiter (hereinafter referred to as Sikani) some time in 1999. This was after the project for the building of the Daru Town market had been advertised for public tender Sikani won the tender ahead of four other bidders. The total contractual sum for the project was K180,000.00 On 24 December 1999 the Mayor of Daru Town Mr Lawrence Tom on behalf of the Daru Town Authority presented a K100,000 cheque number 4230 to Kevin Wyborn on behalf of Sikani as an advance and part payment to start the construction of the Daru Town Market. The agreement to start the work with K100,000.00 was verbal. It was also part of the market agreement that the balance of K80,000.00 would be paid later. As to when that was to be paid is not ascertained.

The State alleged that the K100,000 was deposited into the Sikani account number 294 6616893 which was held at the then Papua New Guinea Banking Corporation in Daru (now Bank South Pacific). The State further alleged that cash withdrawals were made thereafter to the tune of K82,535.00 from the Sikani account. Some of the money was used to purchase materials in Port Moresby and freighted to Daru.

The State alleged that a total of K65,357.29 of the K100,000.00 was misappropriated by the accused. The K65,357.29 is the total aggregate from the four counts of misappropriation.

The State alleged in the first count that the accused dishonestly applied to his own use and to the use of Lisa Wyborn and Sikani K58,207.86 in that various cash amounts totalling K58,207.86 were withdrawn from the K100,000.00, deposited into the Sikani account, were for purposes other than the construction of the Daru Town Market.

In relation to the second count the State alleged that the payment of K1,149.43 to Elaine and Norman Andrew Benson from the K100,000.00 deposited into the account of Sikani, were for purposes other than for the construction of the Daru Town Market.

In relation to the third count the State alleged that the payment of K5,000 to Kevin Wyborn drawn from the K100,000 deposited it into the Sikani account was a payment for purpose s other than for the construction of the Daru Town Market.

In relation to the fourth count the State alleged that K1000.00 was drawn out from the K100,000.00 deposited into the Sikani Account to purchase a fridge which is outside of the purpose for which the K100,000 was given.

THE EVIDENCE

The State with the consent of the Defence tendered the following documents into evidence:

(1) Statement of Gabia Gagarimabu
(2) Statement of Sebastian Bagrie
(3) Statement of Lawrence Tom
(4) Statement of Mabata Gabutu
(5) Statement of Ian Ta’bara
(6) Statement of Daryl Haste
(7) Statement of Kabai Kousa
(8) Record of Interview
(9) Cheque remittance Advise which is page No 58 in the District Court depositions.
(10) Internal General expense form which is page 59 in the deposition
(11) Requisition for Expenditure which is page 60 of the deposition.
(12) Receipt of Bank Deposit slip which is page 74 of the deposition
(13) Deposit slip dated 24 December 1999 which is page 75 of the deposition.
(14) PNGBC Customer account Record which are pages 76 and 77 in the deposition.
(15) Bank Statement of Sikani Account No 294-006616893 which are pages 78 to 81 of the District Court deposition.
(16) Invoice number T9918 dated 25 January 2000 which are pages 86 to 99 of the depositions.
(17) 28 cheques which witness Mabata Gabutu deposed to in her affidavit which are pages 82 – 85 and pages 100, 124 and 131 in the District Court depositions.
(18) Documents relating to transactions between Yatala Limited and Sikani.

The documentary evidence was tendered into evidence during different stages of the trial in that some were tendered earlier than others.

The State then called Jacob Tabua into evidence. His evidence was that he is the Managing Director of a company Westsun Construction Limited. Mr Tabua said on the 4 February 2000 Mr Graham Wyborn went to his house or place and they discussed a few things about the market . He said Mr Wyborn wanted to sub –contract his company to build the market. He then made a verbal agreement with him to sub –contract and told him he was interested. He said they then discussed the physical planning side of the building and how he would be paid. He said his company was involved in the building and construction industry.

On the same day 4 February 2000 he wrote out an invoice on behalf of his company quoting K36,000 as the labour cost for the market project. He said he requested either a 50% or 25% deposit upfront before he could commence work on the project. He said the accused then told him he would give him the 50% deposit and asked him to write out a receipt for K18,000 as part payment for labour costs. He said he wrote the receipt and gave it to the accused. He said after that was done the accused has never paid the money to him or his company and he said his company ended up not doing any work on the project.

In cross examination the witness was asked if he received any money fro the Managing Director of Sikani to which he said the accused gave him K5,000.00 after he asked the accused to help him with school fees for his children and for other personal reasons. At this juncture I note that the witness was never asked if K18,000 had been paid to him or his company by Sikani or the accused as shown on the receipt. It was ever put to him that money was paid. The invoice dated 4 February, 2000 and the receipt also of the same date were tendered into evidence without any objection, not that there was any ground for objection for the two documents to be rejected. They were marked as Exhibits "I" and "J" respectively.

The next witness was Mr Avoa Mareapo. He was Acting Daru Town Manager at the material time. He gave evidence of the K100,000 cheque presented to Kevin Wyborn. He said the cheque had been brought by the then South Fly Member of Parliament Gabia Gagarimabu who presented it to the Daru Town Mayor Lawrence Tom on 26 December 1999. He said in January 2000 the Deputy Mayor Dibura Moiba gave the Cheque to Kevin Wyborn as the accused was out of Daru. The witness identified a copy of the cheque after it was shown to him and it was tendered into evidence without any objection. The cheque number 4230 is Exhibit K in these proceedings. He said it was his duty to ensure that the Daru Town market project got off the ground. He said he had briefings with the Managing Director of Sikani about the market project and was told the funds for the project were still with the Member of Parliament. He said after the cheque was given to Sikani in January of 2000 he on 7 June 2000 did any inventory of materials. He said that was the second time for him to do that at the Department of Works yard Daru. He said he had earlier carried out an inventory at the Sikani Managing Director’s yard where the building materials were. Then he carried out another check after Sikani had returned the building materials. He said some of the materials disappeared when he did the inventory at the Works Yard.

He said on the 6 June 2000 the then Administrator Mr David Ipasi called a meeting of the members of the Town Authority. He said the purpose of the meeting was for the contractor to brief the Daru Urban Council about the market. He said in that meeting the accused for Sikani advised the meeting that he had procured additional materials and that he needed funding to get them. He said on 7 June 2000 he had a meeting with Sikani and asked him (the accused) to produce a progress report. At that meeting the accused confirmed what he said on 6 June 2000 and that was that he was waiting for additional funds.

He said on 12 June 2000 he followed up with the contractor for the progress report. He said the contractor produced an expenditure report and that the report Stated that he paid for materials and architects. The expenditure report was tendered into evidence without objection as Exhibit "L".

From that expenditure report the witness wrote an information paper to the Provincial Administrator dated 23 June 2000. That report is Exhibit "M" in these proceedings. The report recommended the termination of the contract. It was at this time that the building materials were requested to be handed back to the town authority. The materials were taken from Sikani and placed at the Works Yard in Daru. The materials are still there now. The defence did not cross examine this witness at all.

I asked the witness if he was satisfied with the expenditure report and he said he queried the payment of K18,000 to the subcontractors because while an invoice and receipt showed they were paid, no work had been done on the market project.

He said in relation to the fourth item on the expenditure report there was no physical evidence of the market built with the amount of money used.

The next witness was Ali Dabema. He was the policeman who conducted the investigations. He conducted the record of interview which had already been tendered by consent. That was the State case.

A no case submission was made at this point and I ruled there was a case to answer. A separate judgement was given in relation to that ruling.

The defence case was in the form of affidavits which were tendered into evidence by consent of the State Counsel. The affidavit of Lisa Wyborn dated the 9 July 2004 was tendered into evidence without being called. She was not required to be cross examined. The accused’s affidavit of the 7 July 2004 was also tendered into evidence without being called to give oral evidence. It was upon my invitation to the accused that if there was anything further he wanted to say which was not in his affidavit he could still give oral evidence on it if he wanted to. The accused after consulting with his lawyer took the witness stand and gave a brief sworn statement that the money was paid to Sikani, the company, and he stuck to what he said in his affidavit about doing everything for and on behalf of Sikani and that he was a wrong party being taken to court. He was not cross-examined on his affidavit or his short sworn evidence.

We have an undesirable situation where much of the evidence has been tendered by consent without being tested through cross-examination. This makes my job more difficult as to what evidence to accept and what not to accept.

The only positive things I can say about such evidence being tendered by consent is that it speeds up the trial and also it means that there is no dispute as to the evidence.

There is no dispute that a K100,000 cheque number 4230 was indeed given to Kevin Wyborn on behalf of Sikani. That cheque was deposited into Sikani Account No 294 6616893 held at the then Daru PNGBC on the 24 December 1999. Before the cheque was deposited Sikani had a credit balance of K860.00. Also on 24 December 1999 a Sikani cheque of K5,000 was written out and cashed in favour of Kevin Wyborn. Since the cheque of K100,000 was deposited into Sikani account on the 24 December 1999 there has been only withdrawals and no other deposits. This continued until 22 March 2000 when the final K80 out of K85.20 remaining balance was withdrawn. This left a balance of K5.20 credit. Bank charges reduced this to a debit balance of K2.80. It took only 3 months to deplete the account from K100,000.00 to minus zero balance. All that is not disputed.

HOW FUNDS EXPENDED

As alluded to earlier cheque leaves have been tendered into evidence by consent. Cheque leaf 147402 for K5,000 was made out to Kevin Wyborn. On the 17 January 2000 a cheque number 147404 was made out to Hale & Lunn for K1,000.00. On 25 January, 2000 a K4200.00 cheque No 147410 was made out to Ian Tabaka for the Architechural plans of the market. On 20 January 2000 a cheque number 147406 was made out in favour of PNGBC. Except for those 3 cheques which were made to other persons the rest of the cheques written out were for cash payments. On 13 March 2000 K1,149.43 was remitted to Australia to the credit of the Bensons account. There is no dispute about this transaction.

On 12 June 2000 the accused on behalf of Sikani wrote an expenditure report as follows:

25.1.00 - Plans K4,200
28.1.00 - Materials K28,136.12
4.2.00 - Subcontractors K18,000.00
6.3.00 - Company payment K48,663.88

Total Expenditure K100,000.00

This report was furnished to Avoa Mareapo by the accused as Managing Director for Sikani.

Indeed Cheque number 147410 for K4,200 shows it was written out to Ian Tabara for his architectural plans of the building.

So that expenditure is confirmed as being part of the Daru Market project work.

In relation to the amount of K28,136.12, I refer to the Statement of Daryl Haste the General Managing of Yatala Limited .

Mr Haste’s Statement was tendered into evidence by consent. He said in his Statement that K40,000 was deposited into the Yatala account at its Port Moresby Branch of PNGBC. Mr Wyborn requested Yatala Limited to purchase, pack and deliver to Laurabada Shipping Services yard building materials for shipment to Daru. Mr Haste said that was done and the cost of materials and freight and charges amount to about K26,000.00. Mr Haste said K4,000 was held by Yatala for Administrative and related costs. He said a K10,000 refund cheque was made out to a Graham Wyborn on 9 February 2000. This was later cleared by the accused who said the cheque was made out to Kevin Wyborn and not Graham Wyborn.

The refund cheque itself is not shown in evidence except the butt which said it was made out to Robert Wyborn. That was a mistake. The accused in his Record of Interview question and answer 42 said it was not Robert Wyborn who received the cheque but Kevin Wyborn a representative of Sikani. The explanation in the Record of Interview was that the company representative was ordered by Sikani to follow up with the South Fly member for the balance of the funding and that the K10,000 was spent by Kevin Wyborn to sustain himself. That is how best the K28,136.12 as shown on the Expenditure form of 12 June 2000 can be explained.

In relation to K18,000 expenditure that can be best described as a misrepresentation. Invoices and receipts issued by Westsun Construction and the evidence of Jacob Tabua shows that no such amounts of money was paid although he had been promised the K18,000.00 after writing out the invoice and the receipt by the accused acting for Sikani . In any case Westsun Construction never did any work as they were never paid up front to commence the job. One could not blame them for not doing anything. If there was any payment it was K5,000 paid to Jacob Tabua. But Mr Tabua said the money was given to him as a cousin brother because he asked Mr Wyborn for help. Again that amount of K18,000 on the expenditure form is a misrepresentation and not the truth.

The K48,663.88 recorded as company payments can not be easily ascertained let alone to say that, it is a huge company bill within a very short space of time. There are no particulars of what the company payments were for. Such payments I can think of could be salaries, bills, like water and electricity and office equipments and stationery. It is not shown on the expenditure form though.

Moreover there is no quotation as to the break up of the whole project. Of the total cost of K180,000 for the project there is nothing in the evidence to show how the K180,000 was arrived at or the breakdown or cost outlay of the project. This would show how much of K180,000 was to be spent on the plans, materials and labour. The court has no such evidence before it. The court only has the expenditure report to go by. The question arises that if the K48,663.88 was for company payments what was the justification for such huge expenditure within a space of only 3 months, January, February and March of 2000 for a very small company. The K100,000 was depleted within a space of 3 months to a zero balance. There is some evidence that the accused, his wife and from time to time Kevin Wyborn were paid salaries. There is no evidence as to how much they paid themselves in salaries or the rate of salary per week or fortnight or month they were paid on.

Was Sikani entitled to use part of K100,000 for its running or operational cost? It is to be noted that Sikani had a credit balance of only K860 before the K100,000 cheque was deposited and there was no other deposit during that material period.

DEFENCE

The accused defence has been run on the premises that he has been wrongly named as the defendant. He submitted through his lawyer that if anyone is to be charged it should be the company Sikani and not him personally because whatever he did, he did it for and on behalf of the company. He expanded on that argument to say that the Company is the proper party to be sued for breach of contract, if there was any such breach. He submitted that the charges cannot be sustained in law because Sikani is a separate and distinct legal personality from the accused although he is a director, shareholder and the proprietor of the company. The submission is derived from the proposition of law enunciated in the case of SALOMON v SALOMON & CO (1897) AC 22 where it was held that:

"The attribute that incorporation gives is that of separate legal entity to the body corporate. There is a company and the individual or individuals forming that company are separate legal entities, however complete the control might be one or more of those individuals over the company".

In the case of FOSS v HARBOTTLE [1843] EngR 478; (1843) 2 HARE 461, Ch. 12 LJ 319 the principle was expounded in that case was that if a company commits a legally actionable error, omission or wrong against another company or person the proper defendant is the company and not its officers.

The Companies Act of 1997 also gives credence to the age old proposition under s.16 which States:-

"16. Separate Legal personality.

A company is a legal entity in its own right separate from its share holders and continues in existence until it is removed from its register".

There is no argument with the law on this general principles of Company Law that officers, directors, shareholders and owners of companies are protected by and under what is commonly referred to as the "Corporate Veil".

In more recent times the law has also recognized the need to prevent abuse of the protection given under the Corporate veil. It is been held in recent cases that the courts should be ready to lift the protection accorded under the umbrella of corporate veil. I refer to the cases of CBS INC AND CBS RECORDS AUSTRALIA LTD BALI MERCHANTS PTY LTD v RANU INVESTMENT PTY LTD (CBS) (1978) PNGLR 66 and JACOB LUKE v JOHN RALDA (1992) PNGLR 549.

In CBS INC v RANU INVESTMENT case Pritchard J said Judges should not approach the issue with their eyes shut but that they should be vigilant to detect any possible instance of an attempt at abusing the protection given under the corporate veil. He went on to say that in PNG the Constitution empowers Judges to develop the underlying law, in accordance with the principle of natural justice where a case warrants the lifting of the corporate veil.

Kandakasi J in the cases of ODATA LIMITED v AMBUSA CORPORATE OIL MILL LIMITED AND NATIONAL PROVIDENT FUND BOARD OF TRUSTEES, Unreported National Court Judgement N2016; 6 July 2001 and ANDREW DAIVA AND OME OME FORESTS LTD v LAWRENCE PUKALI AND BENEDICT WAEDE Unreported National Court Judgement No 2289 17 July 2002 discussed those principles.

The Supreme Court in 1997 in the case of KAPPO LIMITED v HAU AND OTHERS, Unreported Supreme Court judgement SC 520 also alluded to those principles.

I am assisted by Kandakasi J in his decision of OBATA LIMITED v AMBUSA N2106 where he lists the various circumstances when the corporate veil may be lifted.

He lists the following:

"(1) the fundamental starting point is the importance of the doctrine of corporate personality and any suggestion to depart from it should be treated with caution.

(2) The doctrine (Stated in (1) above) is to be applied unless the result is so unsatisfactory that it warrants a departure from it.
(3) If is not possible and is undesirable to categories the kind of circumstances in which there can be departure.
(4) It is appropriate to depart from the doctrine if a company or its personality is being used as a façade stratagem, or simulacrum in an attempt to circumvent the reality of the situation.
(5) In a contractual context there is a need for some element of fraud or practice in that party’s conduct or it must otherwise be unconscionable in the sense of equitable fraud to adhere to the doctrine.
(6) The veil will not be lifted to allow for the application o f the unanimous assent rule to hold a company liable by the actions of its shareholders.
(7) It is not sufficient that mere presence of the corporate veil leads to an inequitable or generally unfair result.
(8) The corporate veil may be lifted if doing so is justified in all the circumstances of the case.
(9) Where a statute provides either expressly or by implication for a lifting of the corporate veil".

His Honour Kandakasi, J adopted these above categories as proper principles for consideration on the issues of whether or not the corporate veil should be lifted.

I am mindful of the fact that the cases and the law that I have referred to all relate to lifting of the corporate veil in civil cases. That is understandable because it is usually in civil suits that such issues arise.

I am mindful too that the Daru Town Authority also has the option to take out a civil suit against Sikani in this matter. Such an avenue was discussed and an attempt was made at the instigation of the court whether it might be appropriate to deal with this matter as a civil matter. The State was adamant that it wanted to prosecute the matter as a criminal matter. That was a decision entirely on the State to make and they made the decision to deal with the matter as a criminal matter.

Should this court sitting as a Criminal Court apply the same legal principles as in the civil cases relating to the issue of lifting the corporate veil. As the National Court I am guided and directed by the Constitution under Schedule 2:3 to develop the underlying law taking into account the principles of natural justice and to do justice. In this case I am prepared to lift the corporate veil in a criminal case if the evidence warrants me to do it. I am also prepared to lift the veil if any of the 9 factors that Kandakasi J discussed to which I alluded to earlier have been satisfied.

In that regard I am prepared to lift the corporate veil under factors 8 and 9, that is in all the circumstances the justice of the case warrants the lifting and secondly s.421 of the Companies Act of 1997 makes it an offence for any director to fraudulently take or apply the property of the Company for his own use or benefit or for the use of purpose other than the use or purpose of the company.

Evidence has also been led that K28,136.12 were used to purchase materials for the construction of the Daru Town Market. Some of those materials are physically present at the Department of Works Yard in Daru. There is no major issue or contention that such materials were indeed purchased. I find that such materials were bought for the purpose of building the market and so there is nothing wrong with that expenditure.

In this case evidence has been led that K4,200 of the company funds were used to paying for the plans of the market. I consider that expenditure as a legitimate company expenditure.

Evidence has also been led that K18,000 was paid to a subcontractor to commence work on the market project. If the funds were so used the expenditure would have been legitimate. Evidence, however is to the contrary, that no such money was paid to the purported sub-contractor and the purported subcontractor did not do any work on the market project. The obtaining of the invoice and a receipt on that invoice are misleading. If K18,000 was not paid to the contractor what happened to the K18,000. It is unaccounted for. If the court is generous and accepts that K5,000 was paid to the contractor where is the k13,000.00.

Even if the court were to accept that K5,000 was paid to the contractor it was for use or purpose other than the use or purpose of the company.

Evidence has also been led that K48,665 .88 was expended on Sikani. As I alluded to earlier how that amount was expended on Sikani is not exactly known. Most of the withdrawal cheques drawn out from the company account were in cash. A K5,000 cheque was drawn out in favour of Kevin Wyborn . A K1,000 was made out to Hale and Lunn. A K5,056.40 cheque was made out in favour of PNGBC for remittance to Australia. A further cheque number 147431 dated 13 March 2000 was drawn against Sikani Account and remitted to Elaine and Norman Benson in Australia. They are the sister and brother in law of the accused. The accused said it was part of his outstanding wage he sent to them.

Evidence is that from all the cheques that were made out a total of K85,535.00 was paid out in cash. Some explanation has been given by the accused that, that was because the companies that he wanted to buy materials from did not accept his company cheques because they did not have a credit account with them. While I accept the explanation I do not believe that all of the cash money was used to pay for goods and services for Sikani for the purpose of the market . Yatala used about K30,000 to buy the materials including its own commission. K10,000 was refunded to Sikani. Where that K10,000.00 went to is said to have gone to Kevin Wyborn. You do not need K10,000 to chase up the balance of the K80,000 from the Member of Parliament. What baffles me is why chase the K80,000 when the company had done nothing on the project. Huge amounts of cash were drawn out from the Sikani Account almost on a daily basis with no work done. Why was the K80,000 being wanted again. One would have thought that the K80,00-0 would be paid on completion of the job. Had the company completed the job with K100,000.00 they might have gone home with a K80,000 at the end of the day upon completion of the project. What has happened is the accused has gone on a spending spree without even starting the job.

I also note that after the K50,000 was withdrawn a K40,000 cheque was made out to Yatala and the accused kept the K10,000. What happened to that K10,000. That too is anybody’s guess as to what happened to it.

Avoa Mareapo’s evidence is important in so far as attempting to get the progress report is concerned. It is also important in so far as getting an expenditure report is concerned.

In this case I find that the accused has not been totally honest. He told this court that all this monies obtained from Sikani account were expended for and on behalf of the company and that he stood by his statement. The money was not given to his company as a Christmas gift. I note it was given on 24th December 1999. It was given for a specific purpose. He has in my view been dishonest when he said K18,000 was given to the subcontractor. When no such money was given . There cannot be a mistake that he included that in his expenditure report. In my view that was a deliberate attempt to fool anyone.

In the circumstances I lift the corporate veil on the basis that its lifting is justifiable under the circumstances. Moreover I lift the corporate veil under s.421 of the Companies Act. It is an offence for a Company Director or shareholder to fraudulently apply company property for his own benefit or use. The accused could have been charged under the Companies Act of 1997. S.421 of the Companies Act expressly lifts the corporate veil. If the governing law on Companies can lift the corporate veil, it is my view that the Corporate veil, by implication, can and should be lifted under the criminal laws for those reasons I have alluded to.

Counsel referred me to the case of the State v Yaip Avini – unreported and unnumbered decision of Jalina J on 12 Nov ember 1996. That case however is not a case on the lifting of the corporate veil and not on point.

Did the accused dishonestly apply those monies? The law is settled on this issue. (See Brian Kundi Lawi and the State [1987] PNGLR 183 and The State v Gabriel Ramoi [1993] PNGLR 390.) The fact of the matter is a person does not know or cannot read another persons mind from outside. A person who is dishonest does not usually broadcast his intentions to everybody. In some cases he may leave traces of what he has done, and from those people may be able to draw inferences or draw conclusions from what he has left behind. In this case the almost daily withdrawals of huge sums of money, his inability to properly account for how the monies were spent, and not even starting the project yet wanting the K80,000 to be paid has left a trail for one to come to the conclusion that the accused is not truthful about the usage of the money he and the company were given, this giving justification for the lifting of the corporate veil.

The doctrine that a company is a separate entity and a legal personality is in my respectful view a legal fiction. This is because a company is deemed to have a heart of its own breathing but it does not have a brain, legs and hands and a mouth of its own. The officers, directors and shareholders perform those functions for the company. Section 421 of the Companies Act recognizes those underlying deficiencies of a company and so has put in place a mechanism to ensure that its brains, its legs and hands and its mouth do the right things only or that its body functions according to the will and dictates of the heart and are held accountable.

There are no resolutions of the Board of Directors before the court to show that the accused was acting from the resolutions of the company. Otherwise it could be said that as the accused and his wife are the only shareholders and therefore the only signatories to the company accounts they were the same as the Company.

Taking all the circumstances of the case including the lifting of the corporate veil, I am satisfied beyond reasonable doubt of the guilty of the accused. He is the brain, the legs and hands and the mouth of Sikani.

I find him guilty of the Counts 1, 2, 3 and 4.
_________________________________________________________________
Lawyers for the State : Public Prosecutor
Lawyers for the Defendant : Mirupasi Lawyers