Sayama v Pomaleu [2010] PGNC 217; N4571 (20 August 2010)

N4571

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 719 OF 2008

BETWEEN

JASON SAYAMA
Plaintiff

AND

IVAN POMALEU, REGISTRAR OF
COMPANIES & BUSINESS GROUPS
First Defendant

AND

MENOS IVANGO ACKRIS AND HIS FORMER
MANAGEMENT COMMITTEE
Second Defendants

AND

TONY ABIO AND HIS CURRENT
MANAGEMENT COMMITTEE
Third Defendants

AND

SAI BUSINESS GROUP INC.
Fourth Defendant

OS NO. 225 OF 2009

BETWEEN

JASON SAYAMA
First Plaintiff

AND

SAI BUSINESS GROUP INC.
Second Plaintiff

AND

TONY ABIO
First Defendant

AND

JEREMIAH EMES, MICAH GAIMA, JOHAN NAMTO,
KANDIS GILIMBING, TIMOTHY KAIWENATO, and TOPIAS TIOTO
Second Defendants

AND

IVAN POMALEU, REGISTRAR OF BUSINESS GROUPS
Third Defendant

OS NO. 279 OF 2009

BETWEEN

IVAN POMALEU, REGISTRAR OF BUSINESS GROUPS
Plaintiff

AND

JASON SAYAMA AND HIS FORMER
MANAGEMENT COMMITTEE
First Defendants

AND

MENOS IVANGO ACKRIS AND HIS FORMER
MANAGEMENT COMMITTEE
Second Defendants

AND

TONY ABIO AND HIS CURRENT
MANAGEMENT COMMITTEE
Third Defendants

AND

SAI BUSINESS GROUP INC.
Fourth Defendant

Lae: Gabi, J
2010: 20th August

CIVIL – Business Groups Incorporation Act (the Act) ss11, 13, and 14 – duty of the Registrar with respect to the certificate of incorporation and the maintenance of a register of members – the Act ss8, 9, 10, 14-16, 19, 24, 27 and 35 – powers of the Registrar over a business group – failure of business group management to provide a list of members – orders to rectify register of members.

Facts

Since its incorporation the successive management committees of Sai Business Group Inc have failed to provide the Registrar of Business Groups with a list of members which is acceptable to all those claiming entitlement to membership. In an attempt to rectify the situation the Registrar appointed members to the management committee, but the problem persisted. In these proceedings the Registrar seeks an order that he be appointed interim chairman of the business group in order to facilitate preparation of a register of members.

Held

1. The Registrar has no power to appoint members of the management committee of a business group and such appointments are illegal;

2. There is no statutory basis for and the Registrar cannot be appointed as chairman of a business group;

3. Submissions invited for orders to appoint an independent body to work closely with the Registrar to compile a register of members.

Cases Cited

Igiseng Investments Ltd vs. Starwest Constructions Ltd (2003) N2498

Counsel

T. Tape, for Ivan Pomaleu
B. Lakakit, for Jason Sayama
B. Ovia, for Tony Abio
M. Karu, for Menos Ackrish

DECISION

20th August, 2010

1. GABI, J: Introduction: The three proceedings were consolidated because they relate to the question of control and management of Sai Business Group Inc. OS No. 719 of 2008 and OS No. 225 of 2009 were commenced by Jason Sayama. In OS No. 719 of 2008, Jason Sayama was seeking orders for his reinstatement and that Menos Ackrish's appointment by the Registrar of Business Groups was null and void. In OS No. 225 of 2009, Jason Sayama was again seeking orders that Tony Abio and his management committee were holding office illegally and that he and his management committee be reinstated.

2. OS No. 279 of 2009 was commenced by Ivan Pomaleu, the Registrar of Business Groups. He seeks a number of declaratory orders, including the orders that the appointment or election of Jason Sayama, Menos Ackrish and Tony Abio and their management committees are null and void, that they are no longer members of the management committees of Sai Business Group Inc and that no authentic or proper register of members exists. He also seeks an order to act as an interim chairman of Sai Business Group Inc. for a period of six (6) months.

The Evidence

3. The trial proceeded by way of affidavit evidence.

OS No. 719 of 2008

4. The following affidavits were filed in this proceeding: (i) three affidavits of Jason Sayama dated 24th November 2008, 16th July and 22nd July 2009 respectively; and (ii) three affidavits of Menos Ackrich dated 7th May, 22nd July and 8th September 2009 respectively.

OS No. 225 of 2009

5. The following affidavits were filed: (i) the affidavits of Elop Bano, Donald Dibasy, Topias Tioto, Yatapsa Kaimoeto, Roman Awaki, Tony Abio and Dominic Naslus dated 27th July 2009 respectively; (ii) affidavit of Jason Sayama dated 30th April 2009; and (iii) affidavit of Ken Simon dated 2nd October 2009.

OS No. 279 of 2009

6. The following affidavits were filed: (i) affidavit of Ivan Pomaleu dated 28th May 2009; (ii) affidavit of Menos Ackrish dated 24th June 2009; (iii) the affidavits of Tony Abio, Topias Tioto, Roman Awaki, Donald Dibasy, Donald Naslus and Yataspas Kaimoeta dated 27th July 2009 respectively; and (iv) affidavit of Jason Sayama dated 18th November 2009.

7. The affidavit evidence in these proceedings clearly indicates six things: (i) that there is a power struggle for control of the management of Sai Business Group Inc by Jason Sayama, Tony Abio and Menos Ackrish; (ii) that there is a prolonged in-fighting between members and management committees; (iii) that there are serious allegations of bribery, corruption and misappropriation of funds, particularly dividends, by Jason Sayama, Tony Abio and Menos Ackrish; (iv) that no dividends have been paid to members; (v) that there has been no authentic register of members since the incorporation of Sai Business Group; and (vi) that there are serious questions regarding the eligibility of Jason Sayama and Menos Ackrich as shareholders of Sai Business Group Inc.

8. The issues before the court are:

1. Whether there is an authentic register of members for Sai Business Group Inc?
   
2. If not, whether the appointment or election of Jason Sayama, Tony Abio and Menos Ackrish are valid?
   
3. If the appointments or elections are invalid, does the Registrar of Business Groups have power to manage Sai Business Group Inc. on an interim basis?
   

Facts

9. In order to understand the background to these proceedings, it is necessary to set out the facts in chronological order. On 5th November 2004, in proceeding OS No. 368 of 2002, by consent of all parties an interim management committee comprising of Jason Sayama (Chairman), Tony Abio (Deputy Chairman), Dominic Naslus (Secretary) and Yawing Biammua (Treasurer) was appointed, to update the register of members within six months and to call a shareholders' meeting to appoint a permanent management committee. Sometime in 2006, Teup Godelu, the former Registrar of Business Groups, terminated Jason Sayama and his interim management committee and appointed Menos Ackrish and his management committee. Jason Sayama appealed, pursuant to section 45 of the Business Groups Incorporation Act (hereinafter the "Act"), to Hon. Michael Nali, the then Minister for Trade and Industry, who directed the Registrar of Business Groups on 25th January 2007 to reinstate Jason Sayama. However, the Registrar refused to reinstate Jason Sayama, who then instituted proceeding OS No. 719 of 2008 to compel the Registrar to reinstate him. On 10th December 2008, Jason Sayama was reinstated as chairman of the management committee.

10. On 14th March 2009, a meeting was held at Watut LLG Council Station where Tony Abio was elected as chairman of Sai Business Group. On 1st May 2009, Jason Sayama, after becoming aware of Tony Abio's election, commenced proceeding OS No. 225 of 2009 to challenge the legality of the election of Tony Abio and his management committee. On 4th May 2009, Jason Sayama obtained interim orders against Tony Abio and his management committee.

11. On 29th May 2009, Ivan Pomaleu, the Registrar of Business Groups, instituted this proceeding OS No. 279 of 2009 seeking to act as an interim chairman of Sai Business Group Inc for a period of six months, to appoint an interim management committee to update the register of members, draft a new constitution and call a meeting to appoint a permanent management committee.

Register of Members

12. Paragraphs 1 to 5 of the consent order of 5th November 2002 are in these terms:

"1. An "Interim" Committee of Sai Business Group Inc. consisting of Jason Sayama ("Interim Chairman")Tony Abio("Interim Deputy Chairman")Yawing Biamena ("Interim Treasurer")

Dominic Ngaslus("Interim Secretary")("the interim Committee") is hereby appointed with effect from the date of entry of these Orders and shall expire on the date of the next Annual General Meeting.

2. The Interim Committee shall take all necessary steps to compile a Register of Members based on available records and in consultation with responsible village leaders which should be completed before the date of the next Annual General Meeting of members.

3. A person with no interest in Sai Business Group Inc. nominated by the Registrar of Business Groups shall oversee the compilation of the said Register of Members.

4. The Interim Committee shall call an Annual General Meeting of Members which shall be held at HIKIAWA village, Bulolo District on the first Saturday after the date 6 months after the date of entry of these Orders at which the members of the Interim Committee shall stand down and an election shall be held to fill the vacated positions.

5. Only those persons whose names appear on the said Register of Members shall vote at Annual General Meetings of Members and each such member shall have one vote."

13. It is clear from the consent order that the interim committee was given the task to compile a register of members and that "only those persons whose names appear on the said Register of Members shall vote" at meetings. The evidence shows that Mr. Ketalam Solomon and the Division of Commerce of Morobe Provincial Administration compiled a register of members in October 2004.

14. However, it was seriously disputed by some members. As such, it cannot be regarded as authentic. In fact, the interim committee never approved or adopted that register of members. It appears that a second attempt at compiling a register of members was done by Menos Ackrish in November 2008. Again the register is said to be "grossly misleading and erroneous as it has deleted a lot of genuine shareholders and replace them with people who are not shareholders" (see affidavit of Ken Simon sworn and filed on 2nd September 2009).

15. The evidence before me is clear and overwhelming that there is no genuine or authentic register of members for Sai Business Group Inc. at present. A register of members is important for purposes of payment of dividends and for voting at meetings; only members are entitled to receive dividends and vote at meetings.

Validity of appointment or election of Jason Sayama, Menos Ackrish and Tony Abio

16. Jason Sayama was appointed the interim chairman of the interim committee, which was required to "call an Annual General Meeting of Members...on the first Saturday after the date 6 months after the entry of these orders..." The interim committee was tasked to compile a register of members and call a meeting to elect a permanent management committee within six months from 5th November 2004. No register of members was compiled, no annual general meeting was called and no application was made to the Court to extend time.

17. Jason Sayama placed the blame for non compilation of a register of members squarely on the shoulders of the Registrar of Business Groups for not nominating an independent person to supervise and oversee its compilation. I reject that argument. It was in the interest of everyone involved to ensure that a register was compiled and a meeting called to elect a permanent committee. I am of the view that the interim chairmanship of Jason Sayama lapsed on 7th May 2005.

18. On 10th December 2008, Jason Sayama and his interim management committee were reinstated in OS No. 719 of 2008. In that proceeding, Jason Sayama's complaint was that his termination and the appointment of Menos Ackrish by the Registrar of Business Groups were unlawful. He was not seeking extension of his appointment or reinstatement under the order of 5th November 2004. A material fact that was not disclosed to the Court was that Jason Sayama's interim chairmanship had lapsed on 7th May 2005 and that he was no longer holding office on an interim basis when Menos Ackrish was erroneously appointed by the Registrar of Companies in 2006. Accordingly, I set aside the order of 10th December 2008 and 4th May 2009 in OS No. 225 of 2009.

19. Menos Ivango Ackrish and his management committee were appointed by Teup Goledu, the former Registrar of Business Group. The appointment was unlawful for two reasons. First, the constitution of Sai Business Group Inc. clearly provides that members of the management committee shall be appointed by members (see clause 3(c)). Second, the Registrar has no power under the Act to appoint the chairman and/or the management committee.

20. It was suggested that a shareholders meeting on 14th August 2009 appointed Menos Ackrish and his management committee. Without a genuine or authentic register of members any appointment or election is void from the beginning. As such, the appointment of Menos Ackrish on 14th August 2009 is unlawful.

21. Tony Abio was elected as chairman of Sai Business Group Inc. on
14th March 2009 at Watut LLG Council Station. Again without a genuine and authentic register of members, the appointment or election of Tony Abio on 14th March 2009 is unlawful as well.

22. I find that since 7th May 2005 Sai Business Group Inc. has been without a legitimate chairman and/or a management committee.

Power of the Registrar of Business Groups to manage Sai Business Group Inc. on an interim basis

23. Both counsel for Tony Abio and Jason Sayama submitted that the Registrar has no powers, expressed or implied, to manage a Business Group on an interim basis. Granting him the order to do so would be tantamount to creating a right which does not exist under the Act. They argued that the power of the Court under section 185 of the Constitution to give ad hoc directions only relates to matters of practice and procedure not to create a new right (Igiseng Investments Ltd vs. Starwest Constructions Ltd (2003) N2498). I am of the view that Section 185 of the Constitution has no application in this matter as this case does not relate to a matter of practice and procedure of the Court. Accordingly, I reject the argument.

24. Counsel for Tony Abio submitted that there is no requirement under section 13 of the Act for the Registrar to keep a register of members and that there is no speck of evidence suggesting that majority of members are concerned with a share register. This argument is without any foundation and I reject it outright. The Registrar is required to "keep a register or registers of business groups...The register or registers shall contain copies of all certificates of incorporation issued under Section 11" (Section 13 (1) and (2) (b)). "A certificate of incorporation shall set out the constitution of the group" (Section 11 (9)). "[T]he constitution of a business group...must set out ...the qualifications (and disqualifications if any) for membership of the group; and...the title, composition, membership and manner of appointment of the committee or other controlling body of the group" (Section 14 (1) (b) & (c)).

25. It is absolutely vital that the Registrar keeps a register of members for a number of reasons. Firstly, dividends will be paid to members only. The committee of a business group is required to distribute to the members of the group the distributable profit of the group earned during a given period (Section 26). Secondly, it is the members who appoint or elect members of the management committee of the business group (Section 14 and clause 3(c) of the Constitution of Sai Business Group Inc.).

26. The Registrar has wide ranging powers under the Act. He has the powers to: (i) inspect records and accounts of business groups (Section 8); (ii) examine or cause to examine a person with information in his possession that may be required by the Registrar (Section 9); (iii) incorporate a customary group of persons as a business group (Sections 10 to 13); (iv) vary the Constitution of a business group (Section 14 to 16); (v) direct the committee of a business group or a dispute settlement authority to call a meeting of members (Section 19); (vi) give directions for accounts and records of business groups to be kept in a particular manner and/or give directions for copies of such records and accounts to be kept in the register of business groups (Section 24); (vii) keep a register of business groups (Section 13) and fixed charges (Section 27); (viii) wind-up the affairs of a business group (Section 28); and (ix) distribute surplus property, which vests in him, on dissolution (Section 35). There is, however, no specific power for the Registrar to act as chairman of the management committee either permanently or on an interim basis.

27. In view of the wide ranging powers of the Registrar, particularly the power to wind up a business group, counsel for the Registrar submitted that in such a situation the Registrar becomes a statutory manager as well as a regulator. As such, the Registrar can be appointed to manage the business group on an interim basis and referred me to Bank of PNG vs. Resource and Investment Finance Ltd (2002) N2284. That case can be easily distinguished from this one. Under the Banks and Financial Institutions Act, the Central Bank is empowered to take control and manage the affairs of an authorized institution if it is unlikely to meet its obligations (see Sections 36 to 48). There is express power under the relevant legislation whereas in this case the Act is silent.

28. Since its inception or formation, Sai Business Group Inc. has never had a proper or authentic register of members. Mainland Holding Ltd has paid substantial amounts of funds to the business group but it appears that payments have been made to persons other than members of the business group. There are serious allegations of bribery, corruption and misappropriation of funds, particularly dividends, by Jason Sayama, Tony Abio and Menos Ackrish. The evidence shows in-fighting and power struggle for control of the management of Sai Business Group Inc. by Jason Sayama, Tony Abio and Menos Ackrish. Jason Sayama, Tony Abio and Menos Ackrish have failed miserably to provide an authentic register of members. Finally, there are serious questions regarding the eligibility of Jason Sayama and Menos Ackrich as shareholders of the business group. I have grave or serious misgivings or doubts that Jason Sayama, Tony Abio and Menos Ackrish will ever compile a genuine or authentic register of members acceptable to all members.

29. The reasons for the Registrar seeking interim chairmanship of the business group are to update the register of members and to call a meeting of members to appoint a permanent management committee; not to run or manage the business for Sai Business Group Inc. The Registrar has power to direct the management committee or the dispute settlement authority to call a meeting, but that direction cannot be given when the register is seriously disputed by members. I hold the view that no proper or valid appointment of members of the management committee can be made without an authentic register of members.

30. The Registrar is required to keep a register of members (Sections 11, 13 and 14). The list of members or shareholders is normally provided by the management of the business group. In this case, the successive management committees have failed to provide a list of members and the prospects of one being provided soon is quite remote in view of the factional in-fighting between Jason Sayama, Tony Abio and Menos Ackrish. In the circumstances, common sense dictates that an independent body working closely with the Registrar should compile a register of members, which is acceptable to all factions, so as to enable the members to receive dividend payments and appoint a management committee of Sai Business Group Inc. The preamble and the purposes of the Act give me some comfort in holding that view. The preamble states that the Act is to provide for "the incorporation of customary groups for business...and the control and regulation of the conduct of business by such groups." One of the purposes of the Act is to provide "some formal structure of business groups for the basic protection of the members of business groups and persons dealing with those groups" (Section 1(c)). The composition of a business group must be clearly indentified for purposes of incorporation and the register of members is a formal structure designed to identify and protect the rights of members for purposes of payment of dividends and voting at meetings of the business group.

31. The Registrar cannot be appointed as Chairman of Sai Business Group Inc. as the Act is silent. Accordingly, I now call for submissions on the composition of an independent body to work closely with the Registrar to compile a register of members, particularly orders 16, 18, 19, 20, 23 and 24 of the Claim.

________________________________

In-House Lawyer - IPA: Lawyer for Ivan Pomaleu
Michael C. Thoke Lawyers: Lawyer for Jason Sayama
Biliou Lawyers: Lawyer for Tony Abio
Daniels & Associates Lawyers: Lawyer for Menos Ackrish