Wara v Kipa [2008] PGNC 92; N3402 (9 May 2008)

N3402

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 600 OF 2007

POLTI WARA AND MELSON MEMBA for and on behalf of the
Shareholders and Landowners of Mamgogl Limited and Dei Wamp Nga Limited
Plaintiffs

AND

SAPOM KIPA - CHAIRMAN
First Defendant

AND

JIMMY WARA - DIRECTOR & COMPANY SECRETARY
Second Defendant

AND

WILSON MANGA - DIRECTOR
Third Defendant

AND

GOIMBA KOT
Fourth Defendant

Mount Hagen: Makail AJ
2008: 5 May; 29 April

INTERLOCUTORY RULING

INJUNCTIONS - application for interim injunction - whether serious questions raised - balance of convenience - damages an adequate alternative remedy - jurisdiction of national court - Constitution - section 166(2) - National Court Rules - Order 14, rule 10.

COMPANY LAW - dispute over management and control of management company - coffee plantation - landowners verses directors of management company - standing of traditional landowners to sue - whether have interest - legal, proprietary or equitable - allegations of breach of duty of care by directors - Companies Act 1997 - sections 112 & 115 - coffee plantation on registered state lease - 99 years agricultural lease - Land Act 1996 - section 87 - indefeasible title of property - Land Registration Act 1981- section 33 traditional landowners have no right of ownership and occupation of land - no shareholders meeting - no shareholders resolution to remove defendants as directors - Companies Act 1997 - sections 101 & 102 - order sought to deliver up possession of company records, equipment and property - no legal basis for application - application misconceived.

COMPANY LAW - right of shareholders or directors to sue - suing by derivative action - leave of court required before suing - Companies Act 1997 - section 143 - company separate entity from shareholders and directors - Companies Act 1997 - section 16 - no leave granted to plaintiffs to sue under name of company - court proceeding defective and incompetent.

PRACTICE & PROCEDURE - application to dismiss court proceeding - pleadings do not disclose reasonable cause of action - frivolous and vexatious - abuse of process - National Court Rules - Order 12, rule 40(1)(a),(b)&(c) - application upheld - orders.

Cases cited:
PNG Forest Products Pty Ltd & Inchape Berhad -v- The State & Jack Genia as Minister for Forest [1992] PNGLR 85
Theresa -v- Rio Vista [1998] PNGLR 283
AGC (Pacific) Limited -v- Woo Textile International Pty Limited [1992] PNGLR 100

Counsel:
Mr Roger Otto, for the Plaintiffs
Mr Paulus Kunai, for the Defendants

5 May, 2008

1. MAKAIL AJ: I have before me two applications for ruling today after I heard them on 29 April 2008. The first application is by the Plaintiffs by Amended Notice of Motion filed on 3 March 2008 inter alia for an Interim Injunction to restrain the Defendants from entering Tremene Coffee Plantation located in Portion 1402 C situated near Kotna in the Dei District of the Western Highlands Province.

2. The second application is by the Defendants by Notice of Motion filed on 5 March 2008 to dismiss the entire Court proceeding on the basis that it does not disclose a reasonable cause of action against the Defendants, as being frivolous and vexatious and also as being an abuse of process pursuant to Order 12, rule 40 of the National Court Rules.

BRIEF FACTS

3. The brief facts are that the case involves a dispute over the control and management of a Coffee Plantation commonly known as Tremene Coffee Plantation which is owned by a company called Mamgogl Limited. All the Defendants are currently Directors of the Board of Mamgogl Limited.

EVIDENCE

4. The Plaintiffs have filed and rely on the following Affidavits to support their application for an Interim Injunction:

1. Affidavit of Polti Wara sworn on 29 October 2007 and filed on 31 October 2007;

2. Affidavit of Melson Memba sworn on 29 October 2007 and filed on 31 October 2007;

3. Affidavit of Kuntil Wapuka sworn on 29 October 2007 and filed on 13 November 2007;

4. Affidavit of Kumin Dei sworn on 29 October 2007 and filed on 13 November 2007;

5. Affidavit of Kin Kobela sworn and filed on 17 October 2007;

6. Affidavit of Philip Puk sworn on 29 October 2007 and filed on 13 November 2007;

7. Affidavit of Dokta Mel sworn on 29 October 2007 and filed on 31 October 2007;

8. Affidavit of Konda Ant sworn on 29 October 2007 and filed on 31 October 2007;

9. Affidavit of Ekip Mumdi sworn on 29 October 2007 and filed on 13 November 2007;

10. Affidavit of Maip James Giri sworn on 29 October 2007 and filed on 13 November 2007;

11. Affidavit of Bimundi Beng sworn on 29 October 2007 and filed on 13 November 2007;

12. Affidavit of Andrew Mapa sworn on 29 October 2007 and filed on 13 November 2007;

13. Affidavit of Paul Poiya Kapi sworn on 29 October 2007 and filed on 13 November 2007;

14. Affidavit of Buldung Appa sworn on 29 October 2007 and filed on 31 October 2007;

15. Affidavit of Michael Magla sworn and filed 17 29 October 2007;

16. Affidavit of Peter Ware sworn and filed on 17 October 2007;

17. Affidavit of Tom Bangi sworn and filed on 17 October 2007;

18. Affidavit of James Tengdui sworn on 28 August 2007 and filed on 17 October 2007;

19. Affidavit of Kundi Pena sworn and filed on 17 October 2007;

20. Affidavit of Soti Plang sworn on 29 October 2007 and filed on 31 October 2007; and

21. Affidavit of Roger Gileng Otto sworn and filed on 26 March 2008.

5. From these Affidavit materials, it is the Plaintiffs’ evidence that Kim Kobela, Philip Puk, Dokta Mel, Konda Ant, Kuntil Wakupa and Kumin Dei are six of the Directors out of eleven Directors of the Board of Directors of Mamgogl Limited who are supporting the Plaintiffs to bring this Court proceeding against remaining Directors, namely the four Defendants in this Court proceeding.

6. Tremene Coffee Plantation is a coffee plantation located on Portion 1402C in the Dei District of the Western Highlands Province. The land on which the coffee plantation is located is State land. Mamgogl Limited is the registered proprietor of the State lease having granted the State lease by the State some years back.

7. The other witnesses, like Polti Wara, Melson Memba, James Tengdui, Tom Bangi, Peter Ware, Kundi Pena, Michael Magla, Maip James Giri, Bulding Apa, Soti Plang, Paul Poiya Kapi and Andrew Mapa are either village councillors, village court magistrates or community leaders or represent the interest of the various business groups who hold shares in Mamgogl Limited. They also claim that they are the original traditional landowners of the land, Portion 1402C.

8. They alleged that the Defendants as Directors of the Board of Directors of Mamgogl Limited have badly managed the company and the coffee plantation and the company ran into debts and was placed in receivership on 5 May 1994. Since then, a number of Management companies were engaged to manage the coffee plantation, the last one being a company called Brolay Limited which was engaged in 2003 for a period of ten (10) years.

9. In 2005, Mamgogl Limited filed Court proceedings at the Mt Hagen National Court in OS No 195 of 2005 against Jimmy Wara, Michael Goodwin and Brolay Limited and successfully obtained an Interim Injunction to restrain them and their agents and servants from entering Tremene Coffee Plantation until the determination of the substantive proceeding. It is not known what became of the OS No 195 of 2005 proceeding but I assume that it is still pending final determination. I only make one observation here and that is, this is a matter for the Plaintiffs in that matter to pursue if they believe that it will be in the interest of all parties including the company, Mamgogl Limited and Tremene Coffee Plantation.

10. The Plaintiffs, with the support of the above six mentioned Directors of Mamgogl Limited, landowners, community leaders and youths moved into the coffee plantation soon after the Interim Injunction was granted and cleared the bushes, drains, removing pigs and human beings from stealing the coffee cherries to sell. At the same time, the Plaintiffs incorporated a new company called Dei Wamp Nga Limited which they say will take over from Mamgogl Limited to manage the coffee plantation. The Plaintiffs claimed that after three years of hard work, the coffee plantation is flourishing with coffee cherries and is on its way to financial recovery.

11. The Plaintiffs claimed that in 2007, the Defendants started complaining and raised issues over the management of the coffee plantation.

12. The Defendants have also filed and rely on the following Affidavits to response to the Plaintiffs’ application and also to support their own application to dismiss the Plaintiffs’ Court proceeding for failing to disclose a reasonable cause of action, being frivolous and vexatious and as an abuse of process. They are:

1. Affidavit of Sapom Kipa sworn on 3 March 2008 and filed on 5 March 2008;

2. Affidavit of Goimba Kot sworn on 11 March 2008 and filed on 12 March 2008; and

3. Affidavit of Wilson Manga sworn on 11 March 2008 and filed on 17 March 2008.

RULING

13. I have read the written submissions filed by both counsel and have also heard brief oral submissions on both applications and will not repeat them here because they are pretty much straight forward.

PLAINTIFFS’ APPLICATION FOR INTERIM INJUNCTION

14. To better appreciate which way I will rule on these applications and the kind of Orders I will make in both applications, I set out in full the Orders the Plaintiffs seek in their Amended Notice of Motion filed on 3 March 2008. They are as follows:

"1. The Plaintiffs/Applicants who are shareholders of Mamgogl Limited and Customary Landowners be allowed to remain on the property described as Portion 1402C, Milinch of Hagen, Fourmil Ramu, Western Highlands Province and situated near Kotna in the Dei District of Western Highlands Province and commonly known as Tremene Coffee Plantation.

2. The First, Second, Third and Fourth Defendant/ Respondents and their servants and agents be restrained from entering the property described as Portion 1402C, Milinch of Hagen, Fourmil Ramu, Western Highlands Province and commonly known as Tremene Coffee Plantation.

3. An Order directing the Defendants to deliver up possession of all Company records and equipment and other properties of Tremene Coffee Plantation which are in their possession.

4. The Management of Tremene Coffee Plantation be taken over by Dei Wamp Nga Limited as this Company was formed by the same shareholders from Mamgogl Limited who are the current Plaintiffs/Applicants in this proceedings.

5. Costs of the application and

6. Any such order the Court deems fit".

15. It is settled law that an Applicant for an Interim Injunction must show that there are serious questions to be tried at the substantive Court proceeding, the balance of convenience favours the grant of interim injunction and that damages is not an adequate alternative remedy. The National Court’s jurisdiction to grant an Interim Injunction is found in section 166(2) of the Constitution and Order 14, rule 10 of the National Court Rules.

Serious questions to be tried

16. First, the question is; what are the serious questions to be tried at the substantive Court proceeding? Mr Otto of counsel for the Plaintiffs has urged me to find that the serious questions that had arisen in this Court proceeding had been the management and control of Mamgogl Limited and Tremene Coffee Plantation. In other words, the fundamental issue raised in this Court proceeding is who should manage and control Mamgogl Limited and Tremene Coffee Plantation? Should it be the Plaintiffs or should it be the Defendants?

17. Next is the question of right of ownership of the Company records and equipment and other properties of Tremene Coffee Plantation. Who owns them? Is it the Plaintiffs or the Defendants?

18. To my mind, I consider that there are no serious questions raised in this Court proceeding. First, I find that the Plaintiffs are not Shareholders of Mamgogl Limited. I refer to the Company Search Report of AC Fox & Associates dated 28 February 2008, marked as Annexure "A" to the Affidavit of Sapom Kipa sworn on 3 March 2008 and filed on 5 March 2008 which lists sixteen (16) Incorporated Business Groups as Shareholders of Mamgogl Limited. There is no mentioned of the Plaintiffs as being Shareholders of Mamgogl Limited in this Report.

19. Thus, if the Plaintiffs are not Shareholders of Mamgogl Limited, they have no right to claim control and management of Mamgogl Limited and the Tremene Coffee Plantation. It is trite law that only shareholders of a company can appoint Directors of a company and may remove them and this may be done in an Annual General Meeting under section 101 of the Companies Act 1997 or in any Special Shareholders Meeting (Extra Ordinary meeting of Shareholders) under section 102 of the Companies Act or by an Order of the Court under section 104 of the Companies Act 1997.

20. The day to day management and control of the affairs of a company is in the hands of the Directors and the Shareholders cannot unnecessarily interfere. See sections 107 and 109 of the Companies Act 1997. However, where Directors fail to perform their duties and act against the interest of the company then only then can the Shareholders bring actions against the Directors for their removal under sections 147, 148, 149, 150, 151 and 152 of the Companies Act 1997.

21. It may well be the case that they are traditional landowners of Portion 1402C where the Coffee Plantation is located and are also concerned community leaders, but I have to agree with the submission of Mr Kunai of counsel for the Defendants that traditional landowners’ right of ownership of Portion 1402C is a "thing" of the past. I would describe it as a colonial mentality that must be done away with and be eradicated from minds of our people if we want to see more economic development in our country let alone the growth of our coffee industry as in the present case.

22. In any case, I find that the Plaintiffs and their agents and servants have no right to claim ownership of Portion 1402C where the Tremene Coffee Plantation is located because it is a registered State leasehold land of which Mamgogl Limited is the registered proprietor by virtue of section 87 of the Land Act 1996. It is an Agricultural lease granted to Mamgogl Limited for a period not exceeding 99 years. And by operation of section 33 of the Land Registration Act 1981 Mamgogl Limited holds the title to the Agricultural lease free of any encumbrances. It has an indefeasible title.

23. If the Plaintiffs believe that Portion 1402C was wrongly acquired by the State or no proper form of compensation was given to the traditional landowners prior to or after its acquisition, then these are matters for the Plaintiffs to pursue through other means of resolution rather than hijacking the whole process of control and management of Mamgogl Limited and Tremene Coffee Plantation in the way they have done.

24. And so, I have to also agree with Mr Kunai’s further submission that the Plaintiffs are seeking Orders to take over the control and management of a company, being Mamgogl Limited in which they are neither Shareholders nor Directors. The only Directors are Kim Kobela, Dokta Mel, Konda Ant, Kundil Wakuba and Kumin Dei who appear to be supporting the Plaintiffs but they are not Plaintiffs in this Court proceeding. In other words, the Principal Plaintiffs are Polti Wara and Melson Memba and these two gentlemen are not Shareholders. They are also not Directors of Mamgogl Limited. They are strangers so to speak.

25. Further, they have no right to enter and occupy Portion 1402C where the Tremene Coffee Plantation is located because they have no title to this land. Mamgogl Limited is the registered proprietor and only the Directors and employees and staff of Mamgogl Limited have a right to enter and do business on this land.

26. I note there is evidence before me that the Plaintiffs and their servants and agents are illegally on the Coffee Plantation. There is no agreement between Mamgogl Limited and the Plaintiffs to be on the Coffee Plantation. In this Court proceeding, it appears to me that the Plaintiffs are asking the Court to legitimize their illegal occupation and activities and make Orders for them to take control and manage the company and the Coffee Plantation. I will not allow this to happen here.

27. Now, in relation to whether or not the Defendants are Directors of Mamgogl Limited, Mr Otto first submitted that they were not Directors but had been holding themselves out as Directors of Mamgogl Limited. When I pressed the issue further with Mr Otto during the hearing of the applications by asking him if they had been removed as Directors by the Shareholders either through an Annual General Meeting of Shareholders or through a Special Shareholders Meeting, he was unable to say so. I then asked him if there is any evidence of any Shareholders Resolution placed before me to verify his assertion that the Defendants are no longer Directors or had been removed as Directors of Mamgogl Limited and he informed me that there was none.

28. Thus, in the absence of any evidence of any Shareholders Resolution removing the Defendants as Directors of Mamgogl Limited, I am not prepared to accept the Plaintiffs’ submission that the Defendants are not Directors of Mamgogl Limited therefore, have no right to control and manage the affairs of Mamgogl Limited and Tremene Coffee Plantation.

29. On the other hand, I find that the Defendants are Directors of Mamgogl Limited and have every right to control and manage the affairs of Mamgogl Limited and Tremene Coffee Plantation.

30. It follows from here that I find that the Plaintiffs have not demonstrated to my satisfaction that there are serious questions raised for determination at the substantive Court proceeding.

Balance of convenience

31. I am not at all convinced that if I do not grant the Interim Injunction, the Plaintiffs will suffer irreparable damage. First, I note that the Plaintiffs claim that they spend substantial amount of money to restore the operations of Tremene Coffee Plantation since 2005. But I note that they are not able to substantiate this claim with appropriate evidence such as receipts of payments for tools and pesticides except to note in paragraph 17 of the Affidavit of Polti Wara sworn on 29 October 2007 and filed on 31 October 2007 where a figure of K310,000.00 is mentioned.

32. Secondly, I note that the Plaintiffs claim that they had engaged young village men to provide human labour work at the Coffee Plantation. Again, I note that the Plaintiffs have not quantified their claim in terms of the number of young village men engaged and how much money was paid to them as consideration for their services.

33. Be that as it may, I am sure that the good work of the Plaintiffs will be expended if the Defendants were to be allowed to control and manage the company and the Coffee Plantation even if I do not grant an Interim Injunction to stop them from entering the Coffee Plantation.

Damages as an alternative remedy

34. I accept the submission of Mr Kunai that the Plaintiffs can be adequately compensated with damages if I do not grant their application for Interim Injunction. This is because they claim that they have spent money and labour to restore the Coffee Plantation to an operational state since taking over in 2005.

35. As I noted above, I consider that the Plaintiffs seek to take over and control the company and the Coffee Plantation because they have spent substantial amount of money and labour on the restoration of the Coffee Plantation.

36. If these are their real concerns, then they are entitled to recover damages from the Defendants or more so from the company, Mamgogl Limited. This is where I accept Mr Kunai’s submissions that the Plaintiffs may issue a Writ of Summons action to recover damages from the Defendants or Mamgogl Limited.

37. For the foregoing reasons, I am not satisfied that the Plaintiffs have made out a case for me to grant their application for an Interim Injunction.

38. Finally, I note that the Plaintiffs also seek in paragraph 3 of the Amended Notice of Motion an Order directing the Defendants to deliver up possession of all the Company records and equipment and other properties of Tremene Coffee Plantation which are in their possession. I have a difficulty with granting this Order because the Plaintiffs have not in their Amended Notice of Motion referred me to the provision of the National Court Rules or any another law, be it the Constitution, Act of Parliament or the principles of common law and equity as adopted under Schedule 2.2 of the Constitution to back their application for an Order under paragraph 3 of the Amended Notice of Motion.

39. In fact I raised this very issue with Mr Otto of counsel for the Plaintiffs at the hearing of the application and he was unable to refer me to any provision of the National Court Rules or any another law, be it the Constitution, Act of Parliament or the principles of common law and equity as adopted under Schedule 2.2 of the Constitution except Order 14 rule 10 of the National Court Rules.

Order 14 rule 10 of the National Court Rules is in the following terms:

"10. Preservation of property. (28/2)

(1) In proceedings concerning any property, or in proceedings in which any question may arise as to any property, the Court may make orders for the detention, custody or preservation of the property.

(2) An order under Sub-rule (1) may authorize any person to enter any land or to do any other thing for the purpose of giving effect to the order.

(3) In proceedings concerning the right of any party to a fund, the Court may order that the fund be paid into Court or otherwise secured". (Emphasis is mine).

40. I see no where in the above provision a reference to the Court’s power to order a party to deliver up possession of all the Company records and equipment and other properties to another party(s).

41. If what the Plaintiffs are really asking the Court to grant is a mandatory Injunction to compel the Defendants to deliver up possession of all the Company records and equipment and other properties, then they have not specifically referred to nor made any submissions to that effect.

42. A mandatory Injunction is an equitable remedy. It is also a discretionary remedy. Under Schedule 2.2 of the Constitution, the Courts may apply and enforce the principles and rules of common law and equity in England as applied in England prior to Independence as part of the underlying law, except if, and to the extent that -

(a) they are inconsistent with a Constitutional Law or a statute; or

(b) they are inapplicable or inappropriate to the circumstances of the country from time to time; or

(c) in their application to any particular matter they are inconsistent with custom of Papua New Guinea.

43. A mandatory Injunction is usually granted where there exists a contract between the parties to compel a party to perform its side of the bargain. It is the opposite of a prohibitory Injunction which seeks to restrain the party from performing or doing an act(s) until the determination of the substantive Court proceeding.

44. In this case, I do not find any agreement or contract between the Plaintiffs and the Defendants for the Defendants to deliver up possession of all the Company records and equipment and other properties of Mamgogl Limited.

45. Therefore, I am left in the "dark" so to speak to the Court’s power to grant such an Order in paragraph 3 of the Amended Notice of Motion of the Plaintiffs. In the absence of any reference to the Court’s power to order the Defendants to deliver up possession of all the Company records and equipment and other properties, I can only conclude that the Court has no power to make an order in the terms as sought by the Plaintiffs in paragraph 3 of the Amended Notice of Motion.

46. I think this Court only has power under Order 14, rule 10 of the National Court Rules to order the detention, custody or preservation of all the Company records and equipment and other properties until the determination of the dispute of right of ownership of the property, in this case, the shareholding or directorship of Mamgogl Limited and the management of the Tremene Coffee Plantation is finally resolved by the Court. But I note that this is not what the Plaintiffs are seeking from the Court. Accordingly, I find that the proposed Order sought in paragraph 3 of the Amended Notice of Motion of the Plaintiffs is not only without foundation but also misconceived.

47. There is another reason for me to reject the Plaintiffs’ application for an Order under paragraph 3 of the Amended Notice of Motion and that is in my view the proposed Order sought is a final or permanent in nature. It is not an Interlocutory or Interim one. Before the Court can decide whether or not to order the Defendants to deliver up possession of all the Company records and equipment and other properties of Tremene Coffee Plantation, the Court must first determine the issue of the management of Tremene Coffee Plantation. That is, do the Plaintiffs have the right to manage Tremene Coffee Plantation or is it the Defendants? As I said, this is one of the substantive issues for the Court to determine at the conclusion of a proper trial. It cannot be determined at this stage.

48. In addition to this reason, it also seems to me that the application for an Order under paragraph 3 of the Amended Notice of Motion is really a consequential Order. Again, it is depended on issue of the management of Tremene Coffee Plantation. That is, do the Plaintiffs have the right to manage Tremene Coffee Plantation or is it the Defendants? As I said, this question cannot be answered now unless and until a proper trial is conducted.

49. But as I have found above, there are no serious questions raised in this Court proceeding because Plaintiffs are not Shareholders or Directors of Mamgogl Limited and so they have no right to claim control and management of Mamgogl Limited and the Tremene Coffee Plantation. It follows that the question of consequential orders does not arise here.

50. For the foregoing reasons, I find that the Plaintiffs have not demonstrated to my satisfaction that I have the power to order the Defendants to deliver up possession of all the Company records and equipment and other properties of Tremene Coffee Plantation. And so I refuse the application for an Order 3 of the Amended Notice of Motion of the Plaintiffs.

51. In all the circumstances, I am not persuaded at all that this is an appropriate case for an Interim Injunction to lie. Therefore, I refuse the entire application of the Plaintiffs in their Amended Notice of Motion filed on 3 March 2008.

DEFENDANTS’ APPLICATION TO DISMISS PROCEEDING

52. The next question I have to determine is whether or not the Plaintiffs’ entire Court proceeding should be dismissed as well. This question is raised by the Defendants in their Notice of Motion filed on 5 March 2008.

53. I accept the submissions of Mr Kunai of counsel for the Defendants that first the pleadings in the Amended Originating Summons filed on 3 March 20008 do not disclose a reasonable cause of action against the Defendants. It is not clear from the pleadings if the cause of action is based on contract, tort or statute law, for example the Companies Act 1997. As I noted earlier, the substantive proceeding involves issues as to the management and control of Tremene Coffee Plantation owned by Mamgogl Limited.

54. In the Amended Originating Summons filed on 3 March 2008, the Plaintiffs seek the follows reliefs:

"1. A Declaration that any management agreement between the Defendants/Respondents with other parties in respect of the property described as Portion 1402C, Milinch of Hagen, Fourmil Ramu, Western Highlands Province commonly known as Tremene Coffee Plantation and situated near Kotna in the Dei District of Western Highlands Province be declared Null and Void.

2. A Declaration that the current arrangement where by the Plaintiffs/Applicants, for and on behalf of the shareholders of Mamgogl Limited and Dei Wamp Nga Limited, are continuing to maintain and manage the property described as Portion 1402C, Milinch of Hagen, Fourmil Ramu, Western Highlands Province commonly known as Tremene Coffee Plantation and situated near Kotna in the Dei District of Western Highlands Province is valid and legally enforceable.

3. An Order restraining the First, Second, Third and Fourth Defendant/ Respondents and their servants and agents be restrained from entering the property described as Portion 1402C, Milinch of Hagen, Fourmil Ramu, Western Highlands Province and commonly known as Tremene Coffee Plantation.

4. An Order directing the Defendants to deliver up possession of all Company records and equipment and other properties of Tremene Coffee Plantation which are in their possession.

5. An Order that the management of Tremene Coffee Plantation be taken up by Dei Wamp Nga Limited as this Company was formed by the same shareholders from Mamgogl Limited who are the current Plaintiffs/Applicants in this proceedings.

6. Costs of the proceedings and

7. Any such other orders the Court deems fit".

55. I note that the reliefs sought in the Amended Notice of Motion of the Plaintiffs are the same reliefs being sought in the Amended Originating Summons filed on 3 March 2008.

56. And so, the question is; what is the cause of action in this Court proceeding? It seems to me that it is based on the Directors’ breach of duty of care to manage Mamgogl Limited and the Coffee Plantation under sections 112 and 115 of the Companies Act 1997.

57. But the difficulty I am having is to reconcile the pleadings with the reliefs being sought by the Plaintiffs in the Amended Originating Summons. In fact I recall asking Mr Otto of counsel for the Plaintiffs at the hearing of both applications what the substantive action is and he informed me that the Plaintiffs are seeking inter alia a Declaration that "any management agreement between the Defendants/Respondents with other parties in respect of the Tremene Coffee Plantation be declared null and void". I then asked Mr Otto to refer me to the copy of the Management Agreement between the Defendants and any other parties on the management and control of Tremene Coffee Plantation. He was unable to refer me to a copy of the Management Agreement in any of the Plaintiffs’ Affidavits to support the proposition that the Defendants have entered into a Management Agreement without the approval of either the Shareholders or Directors of Mamgogl Limited.

58. And so, where does this leave us? There is only one conclusion I draw from the Plaintiffs’ submission and that is, the Plaintiffs’ Court proceeding seeking Declaratory Orders on the validity of "any management agreement between the Defendants/Respondents with other parties in respect of the Tremene Coffee Plantation be declared null and void" any management agreement between the Defendants/Respondents with other parties in respect of the Tremene Coffee Plantation be declared null and void" is based on a speculation and assumption.

59. In the most often cited case of PNG Forest Products Pty Ltd & Inchape Berhad -v- The State & Jack Genia as Minister for Forest [1992]PNGLR 85, His Honour Mr Justice Sheehan (as he then was) said inter alia that: "an action should only be struck out in cases where the cause of action is obviously and incontestably bad".

60. In Theresa’s -v- Rio Vista [1998]PNGLR 283, His Honour Mr Justice Sevua referred to and quoted a useful statement of Lord Wilberforce in the English case of Allen -v- Guld Oil Refining Limited [1981]1All ER 353 at 355 [1981]AC 1000 at 1010 - 1111 on the principles used by the English Courts to determine proceeding on the grounds of no reasonable cause of action in the following terms:

"My Lords, I and other of your Lordships have often protested against the procedure of bringing, except in clear and simple cases, points of law for preliminary decision. The procedures indeed exist and are sometimes useful. In other cases.... they do not serve the cause of justice...."

"An order dismissing the proceedings on the grounds that no reasonable cause of action disclosed will be made only in plain and obvious cases where the claim is obviously unsustainable. It is not sufficient ground to dismiss cases where the proceeding disclose some cause of action, even though the case may be weak or not likely to succeed. See Wenlock -v- Moloney [1965]2 All ER 821".

61. I find that it is plain and obvious that this Court proceedings is incontestably bad because the pleadings do not disclose a reasonable cause of action against the Defendants. The entire Court proceeding is based on a speculation or assumption that there is or are Management Agreement(s) between the company, Mamgogl Limited and some unknown party(s).

62. For this reason, I uphold the Defendants’ application on the first leg of Order 12, rule 40(1)(a) of the National Court Rules and that is I dismiss the entire Court proceeding for failing to disclose a reasonable cause of action against the Defendants.

63. Secondly, Mr Kunai urged me to dismiss the entire Court proceeding because the Plaintiffs have no standing to bring this Court proceeding against the Defendants. They are not shareholders of Mamgogl Limited. The true shareholders are the various Incorporated Business Groups which I find are named in the Company Search Report of AC Fox & Associates dated 21 February 2008 and marked as Annexure "A" to the Affidavit of Sapom Kipa sworn on 3 March 2008 and filed on 5 March 2008.

64. I accept Mr Kunai’s submissions in this respect because from the Company Search Report of AC Fox & Associates dated 21 February 2008, marked as Annexure "A" to the Affidavit of Sapom Kipa sworn on 3 March 2008 and filed on 5 March 2008, I note that the only Shareholders of Mamgogl Limited are sixteen (16) Incorporated Business Groups by the names of:

1. Kurup Farming Business Group Incorporated holding 8,000 ordinary shares;

2. Kombulga Business Group Incorporated holding 183 ordinary shares;

3. Katembo Business Group Incorporated holding 7,444 ordinary shares;

4. Kapilimbo Business Group Incorporated holding 4,244 ordinary shares;

5. Kuiapi Business Group Incorporated holding 4,252 ordinary shares;

6. Kei Business Group Incorporated holding 3,420 ordinary shares;

7. Kintebokabo Business Group Incorporated holding 823 ordinary shares;

8. Kults Kume Business Group Incorporated holding 574 ordinary shares;

9. Watepo Business Group Incorporated holding 11,675 ordinary shares;

10. Nambel Business Group Incorporated holding 1,294 ordinary shares;

11. Katemp Rogebo Business Group Incorporated holding 12,810 ordinary shares;

12. Raemboka Company Limited holding 2,100 ordinary shares;

13. Jiminga Business Group Incorporated holding 780ordinary shares;

14. Kobagl Business Group Incorporated holding 2,372 ordinary shares;

15. Kotna Business Group Incorporated holding 4,520 ordinary shares; and

16. Tewanko Business Group Incorporated holding 8,000 ordinary shares;

65. I cannot see any one of the Plaintiffs being named as a Shareholder of Mamgogl Limited. Further, I note that the following persons have been elected as Directors of the Board of Mamgogl Limited:

1. Wilson Manga;

2. Kumin Dei;

3. Simon Nui;

4. Konda Ant;

5. Kundil Waguba;

6. Sapom Kipa;

7. Jimmy Wara;

8. Goimba Kot;

9. Dokta Mel;

10. Philip Puk;

11. Pingi Kot;

66. Whilst it may be that some of the Plaintiffs are members of the Incorporated Business Groups like for example, Philip Puk, Dokta Mel and Konda Ant, and some of them are concerned community leaders like for example, Bulding Apa, Melson Memba and Polti Wara, to my mind, they are not Shareholders of Mamgogl Limited. And they may have genuine concerns to restore or rehabilitate the Coffee Plantation. They may have some proprietary or equitable interest in the Coffee Plantation but I do not think such interest would override the legal interest of the Defendants who are by law under section 109 of the Companies Act 1997 charged with the duty to control and manage the business and affairs of Mamgogl Limited. The Incorporated Business Groups are the Shareholders of Mamgogl Limited.

67. Therefore, I find that the Plaintiffs are not shareholders of Mamgogl Limited. So, the question is, what standing have the Plaintiffs have to bring this Court proceeding against the Defendants?

68. As I said earlier, it may be the case where the Plaintiffs have a genuine concern and that is to see the Coffee Plantation become a successful business enterprise again, free of debts and producing quality coffee cherries but to bring this Court proceeding in the way they have done, I do not agree.

69. If the Plaintiffs are bringing this Court proceeding in their capacity as Shareholders of Mamgogl Limited, then I find that there is no evidence to show that they are Shareholders of Mamgogl Limited and it follows that they have no standing to bring this Court proceeding either in their capacity as Shareholders or in the name of Mamgogl Limited.

70. If they are bringing this Court proceeding in their capacity as Directors of the Board of Directors of Mamgogl Limited, then they will need leave of the Court before they may bring this Court proceeding in the name of Mamgogl Limited against the other Directors who are Defendants in this Court proceeding.

71. For this reason, I find that the Plaintiffs have no standing to bring this Court proceeding against the Defendants. This Court proceeding is frivolous and vexatious and also an abuse of process. It must be dismissed on this basis.

72. Now this leads me to the last reason for me to also hold that the entire Court proceeding should be dismissed. If the Plaintiffs are Directors of the Board of Mamgogl Limited, (which I find not to be the case), the Plaintiffs have not sought and obtained leave of the Court before bringing this Court proceeding in the name of Mamgogl Limited against the other Directors in this Court proceeding.

73. Leave to issue Court proceeding in the name of a company by the Shareholders or Directors of a company is a mandatory requirement under section 143 of the Companies Act 1997, otherwise, the Court proceedings is defective and incompetent. For the benefit of the parties and those who are not aware of this requirement, I set out in full section 143 of the Companies Act 1997 as follows:

"143. Derivative actions.

(1) Subject to Subsection (3), the Court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to -

(a) bring proceedings in the name and on behalf of the company or any related company; or

(b) intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be.

(2) Without limiting Subsection (1), in determining whether to grant leave under that subsection, the Court shall have regard to -

(a) the likelihood of the proceedings succeeding; and

(b) the costs of the proceedings in relation to the relief likely to be obtained; and

(c) any action already taken by the company or related company to obtain relief; and

(d) the interests of the company or related company in the proceedings being commenced, continued, defended, or discontinued, as the case may be.

(3) Leave to bring proceedings or intervene in proceedings may be granted under Subsection (1), only where the Court is satisfied that either -

(a) the company or related company does not intend to bring, diligently continue or defend, or discontinue the proceedings, as the case may be; or

(b) it is in the interests of the company or related company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole.

(4) Notice of the application shall be served on the company or related company.

(5) The company or related company -

(a) may appear and be heard; and

(b) shall inform the Court, whether or not it intends to bring, continue, defend, or discontinue the proceedings, as the case may be.

(6) Except as provided in this section, a shareholder is not entitled to bring or intervene in any proceedings in the name of, or on behalf of, a company or a related company". (Emphasis is mine).

74. Section 143 is clear and unambiguous. The reason for shareholders or directors to seek leave before bringing any Court proceeding in the name of a company is that under section 16 of the Companies Act 1997, a company is a separate entity from its shareholders, directors, officers and employees. His Honour Mr Justice Sakora puts it more neatly in the case of AGC (Pacific) Limited -v- Woo Textile International Pty Limited [1992] PNGLR 100 in the following terms:

"The point is further illustrated by looking closely at one of the essential attributes or characteristics of a company as a corporate entity or body. And this is its capacity to sue and liability to be sued: s 18(4) Companies Act. When a wrong is done to the company, the company is the proper plaintiff to maintain, in its own name, an action for redress. Members, as such, have generally no standing to sue on behalf of the company. Similarly, if a company commits a wrong or incurs a liability in the course of its operations, it (and not the members or officials) is the proper defendant. This is sometimes referred to as the "proper plaintiff" rule or the rule in Foss -v- Harbottle [1843] EngR 478; (1843) 2 Hare 461, Ch 12 LJ 319. And the wrong obviously is the wrong (liability) committed by the officers and employees of the company. That a company is capable of suing and is liable to be sued in its corporate name is not merely an administrative convenience; it follows logically from the concept of separate legal entity and principles of agency. Thus, civil liability and criminal responsibility of the company arise from a myriad of situations through the acts and omissions of its servants and agents.

But not every act or omission or default can give rise to legal consequences or responsibilities, nor can every servant or agent commit the company or incur liability. It all depends on the circumstances surrounding the act or omission in question, the nature of the act or omission, the relative position of the agent or servant in the hierarchy of the corporation and what they are and are not empowered to do. Thus, putting it another way, not every servant of the company is a "responsible officer"; the mind of some employees is not the mind of the company".

75. It is not disputed that Mamgogl Limited is a company incorporated under the Companies Act 1997 and is the management company of Tremene Coffee Plantation.

76. And so there is no doubt in my mind that this Court proceeding is supposed to be a derivative action if the Plaintiffs are indeed Shareholders or acting in their capacity as Directors of the Board of Directors of the Mamgogl Limited. They ought to have applied for leave to issue this Court proceeding in the first instance. They have not and I have no difficulty in finding that the entire Court proceeding of the Plaintiffs is defective and incompetent. It is frivolous and vexatious and also an abuse of process. It should also be dismissed for this reason.

CONCLUSION

77. For the foregoing reasons, first, I refuse the Plaintiffs’ application by their Amended Notice of Motion filed on 3 March 2008 for Interim Injunction and secondly, I uphold the Defendants’ application by their Notice of Motion filed on 5 March 2008 and dismiss the Plaintiffs’ Court proceeding in its entirety for not disclosing a reasonable cause of action against the Defendants, as being frivolous and vexatious and also as being an abuse of process.

ORDERS

Accordingly, I make the following formal Orders of the Court:

1. The Plaintiffs application by Amended Notice of Motion filed on 3 March 2008 for an Interim Injunction to restrain the Defendants from inter alia entering Tremene Coffee Plantation located in Portion 1402C situated near Kotna in the Dei District of the Western Highlands Province is refused.

2. The Plaintiffs’ entire Court proceeding is dismissed forthwith.

3. The Plaintiffs shall pay the Defendants’ costs of the both applications and the entire Court proceeding to be taxed if not agreed.

4. Time for entry of these Orders be abridged to the date of settlement by the Registrar which shall take place forthwith.

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Paul Mawa Lawyers: Lawyers for the Plaintiffs
Paulus Kunai Lawyers: Lawyers for the Defendants