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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO 66 OF 2015
STEVEN PASOM SAUD
First Plaintiff
RAIBUS LIMITED
Second Plaintiff
V
MARTIN PAINING
First Defendant
JOHN WOWONAM
Second Defendant
MATHEW DENGUO & JOHN OPOTIO
Third Defendants
LIMA MULLUNG
Fourth Defendant
PETER TAI
Fifth Defendant
DANNY GABONG & DOLING GEMBO
Sixth Defendants
Madang: Cannings J
2015: 9, 13 March
PRACTICE AND PROCEDURE – motion for interim injunction to restrain defendants from interfering in management of a company
The first plaintiff claimed that he is the lawfully appointed chairman of the board of directors of a company and that he and his colleague directors were unlawfully suspended by representatives of the company's shareholders (the third to sixth defendants) and unlawfully replaced by an interim board chaired by the first defendant, who was aided and abetted by the second defendant. He applied by notice of motion for interim injunctions against the defendants, restraining them from interfering with his administration of the company, harassing him and other directors and the staff and management of the company, damaging company property and unduly influencing the shareholders. He also sought an order referring some of the matters in dispute to mediation.
Held:
(1) The primary considerations to be taken into account when the Court decides whether to grant an interim injunction are: (a) are there serious questions to be tried and does an arguable case exist? (b) has an undertaking as to damages been given? (c) would damages be an inadequate remedy if the interim injunction is not granted? (d) does the balance of convenience favour the granting of the interim injunction? (e) do the interests of justice favour granting the interim injunction?
(2) Here: (a) there are serious questions to be tried and the plaintiff has a serious not merely speculative case; (b) an undertaking as to damages has been given; (c) damages would be an inadequate remedy; (d) the balance of convenience favours granting an injunction as it would maintain the status quo as to control of the company; and (e) the interests of justice favour the grant of the injunction.
(3) The principal relief sought by the first plaintiff was granted, but the court refused some of the orders sought including referring matters to mediation.
Cases cited
The following cases are cited in the judgment:
Avia Aihi v The State (No 1) [1981] PNGLR 81
Chief Collector of Taxes v Bougainville Copper Ltd
Ewasse Landowners Association Inc v Hargy Oil Palms Ltd (2005) N2878
Counsel
T M Ilaisa, for the Plaintiffs
G Pipike, for the Defendants
13th March, 2015
1. CANNINGS J: This is a ruling on a motion filed on 14 February 2015 by Steven Pasom Said. He claims that he is the lawfully appointed chairman of the board of directors of Raibus Ltd. He claims that he and his colleague directors have recently been unlawfully suspended by representatives of the company's shareholders (the third to sixth defendants) and their associates. He claims that he and his colleague directors have been unlawfully replaced by an interim board chaired by the first defendant, Martin Paining, who has been aided and abetted by the second defendant, John Wowonam. He claims that Mr Paining and Mr Wowonam are senior managers in Ramu Nico Management (MCC) Ltd and that company, which is a foreign enterprise, is exercising undue influence in the affairs and business of Raibus Ltd.
2. Mr Said applies by notice of motion for interim injunctions against the defendants, restraining them from interfering with his administration of the company, harassing him and other directors and the staff and management of the company, damaging company property and unduly influencing the shareholders. He also seeks an order referring some matters in dispute to mediation.
3. The defendants oppose the motion. They argue that the shareholders of Raibus Ltd unanimously resolved, for good reason, at a series of meetings of stakeholders in January-February 2015, to suspend the board of directors and appoint an interim board chaired by Mr Paining; and that these steps have been taken in the interests of the company and its shareholders and the landowner groups in the area of the Ramu Nickel-Cobalt project who benefit from the efficient and profitable management of the company.
THE MOTION
4. The plaintiff seeks the following orders:
7 Such other order as the Court sees fit.
PRELIMINARY POINT
5. Mr Pipike for the defendants argues that the motion is defective as it does not set out a proper jurisdictional basis for the orders sought. It relies only on Section 155(4) of the Constitution, which is not appropriate in this case. Section 155(4) states:
Both the Supreme Court and the National Court have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case.
6. Mr Pipike relies on the decision of the Supreme Court in Avia Aihi v The State (No 1) [1981] PNGLR 81 (which has been followed in numerous subsequent cases) to argue that Section 155(4) is a grant of power or of jurisdiction. It is concerned with remedies only and does not create or confer primary rights. I accept that proposition but I do not see that the plaintiff has offended against it. The drafting of the motion can justly be criticised for relying only on Section 155(4). It would have been better to have referred to specific provisions of the National Court Rules such as Order 12, Rule 1, which states:
The Court may, at any stage of any proceedings, on the application of any party, direct the entry of such judgment or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgement or order in any originating process.
7. However, that is a minor deficiency in the motion. The plaintiff is not seeking to use Section 155(4) as a lever to secure some right which is not otherwise available to him. I reject the preliminary point and will deal with the motion on its merits.
SHOULD INTERIM INJUNCTIONS BE GRANTED?
8. The question of whether to grant the sort of interim injunctions sought against the defendants is a matter of discretion. The primary considerations to be taken into account by the Court when a person seeks an interim injunction were confirmed by the Supreme Court in Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853 as being:
(a) are there serious questions to be tried and does an arguable case exist?
(b) has an undertaking as to damages been given?
(c) would damages be an inadequate remedy if the interim injunction is not made?
(d) does the balance of convenience favour the granting of interim relief?
(e) do the interests of justice require that the interim injunction be granted?
9. Those considerations have been set out so that a 'yes' answer will be a factor weighing in favour of granting an interim injunction and a 'no' answer will work against making such an order. I apply them as follows.
(a) Are there serious questions to be tried and does the plaintiff have an arguable case?
10. This requires the Court to make an assessment of the prospects of success of the plaintiff's substantive action by looking at the originating process (in this case, the originating summons) and the evidence that has been adduced to date. The issue is not simply whether the plaintiff has raised serious allegations, but whether he appears to have a reasonable prospect of succeeding in the substantive case (Ewasse Landowners Association Inc v Hargy Oil Palms Ltd (2005) N2878). Put another way, the court assesses whether there are serious questions to be tried and whether the plaintiff has a serious, not merely speculative, case, with a real possibility of ultimate success.
11. The principal relief the plaintiff seeks by the originating summons is a declaration that the appointment of the first defendant as interim chairman of Raibus Ltd and the appointment of an interim board of directors are illegal and null and void, for non-compliance with statute law and the constitution of the company. I am of the view that the prospects of the plaintiff succeeding in obtaining such a declaration are quite reasonable. I have earlier today ruled on a motion in the related proceedings, OS No 62 of 2015, Kurumbukari Ltd and Others v Steven Saud and Others, expressing strong doubt as to the legality of the suspension of the plaintiff and his colleague directors and the appointment of the first defendant as interim chairman and other appointments to an interim board, for three reasons.
12. First, the Companies Act makes no provision for suspension of a director and there is no evidence that the constitution of the company provides for suspension. The decision to suspend the directors appears to lack any legal basis.
13. Secondly, though the resolutions of the defendants have been in terms of suspension, it appears that in fact, and as a matter of law, what has happened is that the directors have been removed from office. However, the procedures prescribed by the Companies Act for removal of directors have not been followed, and it appears that there is nothing in the constitution of Raibus Ltd providing for what has happened. There is a strong case to say that the plaintiff and his colleague directors have been unlawfully removed from office and that the interim board has been unlawfully appointed to fill vacancies that do not as a matter of law exist.
14. Thirdly, though there have been a number of meetings attended by the third to sixth defendants, who are representatives of the four shareholder companies, and at these meetings the question of suspension of the first defendants and the appointment of an interim board have been deliberated on, none of the meetings can properly be regarded as shareholders meetings. As Mr Ilaisa emphasised, these meetings have been called 'stakeholders meetings'. A lot of people professing an interest in Raibus Ltd have attended but they are not shareholders. From the evidence available it appears that there have been no shareholder meetings at which the steps taken against the plaintiff and his colleague directors have been authorised.
15. Question (a) is therefore answered in the affirmative. There are serious questions to be tried and the plaintiff has an arguable case.
(b) Has an undertaking as to damages been given?
16. Yes. The plaintiff signed and filed an undertaking on 14 February 2015.
(c) If an interim injunction were not granted, would damages be an inadequate remedy?
17. What will happen if the injunction is not granted, but it turns out the plaintiff succeeds at the trial and proves that the defendants have acted unlawfully? Would damages be an inadequate remedy? The answer is yes. The plaintiff is not seeking damages. He is seeking declarations and orders only.
(d) Does the balance of convenience favour the granting of the injunctions?
18. As I said in Ewasse Landowners Association Inc v Hargy Oil Palms Ltd (2005) N2878 this requires the court to ask: what is the best thing to do on an interim basis taking into account the conflicting interests?
19. I consider that the balance of convenience favours granting an injunction as it would maintain the status quo as to management and control of the company. There is inevitably a lot of uncertainty when this sort of thing happens with a company. The best thing for the company is to allow the lawfully appointed directors to continue to perform their functions and to restrain those whose appointment is questionable from interfering in the running of the company. Question (d) is answered yes.
(e) Do the interests of justice require that interim injunctions be granted?
20. Yes, granting interim injunctions will not operate as a permanent restraint on the defendants taking proper steps to remove the plaintiff and his colleague directors from office. However it needs to be done properly.
21. All considerations favour the granting of interim injunctions generally in the terms sought by the plaintiff.
IN WHAT TERMS SHOULD THE INJUNCTIONS BE GRANTED?
22. This is a matter of discretion. Some of the orders sought in the notice of motion follow naturally from my conclusion as to the reasonable prospect of the plaintiff succeeding with the originating summons. Others are more contentious, indeed unnecessary. Those in the former category are the orders sought by paragraphs 2, 3, 4 and 7 of the notice of motion. I will make orders generally in the terms sought. Those in the latter category are the orders sought by paragraphs 1, 5, and 6 of the notice of motion. I refuse to make those orders. I do not think it is necessary to refer anything to mediation at this stage.
23. I will also make an order removing the company as a party. In any proceedings in which the central question is who should manage and control a company it is unhelpful for the company to be a party to the proceedings.
24. There is one other order I will make pursuant to paragraph 7 of the notice of motion, which was not expressly sought, but which will I consider clarify the position of the plaintiff and his colleague directors and create a greater degree of certainty as to management and control of the company, at least on an interim basis while the dispute that has arisen is being litigated.
CONCLUSION
25. The plaintiff has been granted the principal relief sought in the motion, but he has not entirely succeeded. In these circumstances it is appropriate that the costs of the motion be in the cause.
ORDER
(1) The relief sought in paragraphs 2, 3, 4 and 7 of the notice of motion filed 14 February 2015 is substantially granted and the following orders are made accordingly.
(2) The first and second defendants are until further order of the Court restrained forthwith from interfering in and giving instructions and directions regarding the corporate governance and administration of Raibus Ltd.
(3) The defendants, their supporters and wantoks are until further order of the Court restrained forthwith from harassing, threatening, intimidating and causing physical harm to the staff, management and board of directors of Raibus Ltd and its subsidiary companies and from causing any harm or damage to the properties of those companies.
(4) Until further order of the Court:
- (a) Steven Pasom Saud remains chairman of the board of directors of Raibus Ltd and is entitled to perform all powers, functions, duties and responsibilities of that office,
- (b) other directors who were prior to 22 January 2015 directors of Raibus Ltd remain as directors and are entitled to perform all powers, functions, duties and responsibilities of those offices,
- (c) the purported suspension of the board of directors and the purported appointment of an interim board and interim chairman that occurred in the period January-February 2015 shall be regarded as being ineffective in fact and law.
(5) The second plaintiff shall be removed as a party and the first plaintiff shall hereafter be designated as plaintiff.
(6) The relief sought in paragraphs 1, 5, and 6 of the notice of motion filed 14 February 2015 is refused.
(7) Costs of the motion are in the cause.
(8) Time for entry of the order is abridged to the date of settlement by the Registrar, which shall take place forthwith.
Ruling accordingly.
___________________________________________________________
Thomas More Ilaisa Lawyers: Lawyers for the Plaintiffs
GP Lawyers: Lawyers for the Defendants
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URL: http://www.paclii.org/pg/cases/PGNC/2015/98.html