Shengtai Investments Ltd v Chen Jing [2017] PGNC 113; N6753 (3 April 2017)

N6753

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 48 OF 2014

BETWEEN:

SHENGTAI INVESTMENTS
LIMITED
Plaintiff

AND:

CHEN JING
(also known as FRANKIE CHEN)
First Defendant

AND:
CHEN XIAO JING
(also known as SUSAN CHEN)
Second Defendant

AND:
MIRIAM CHEN
Third Defendant

AND:
CHEN NENG MAI
Fourth Defendant

Waigani: Hartshorn J.

2016: 16^th May
2017: 3^rd April

Trial

PRACTICE AND PROCEDURE – declaratory relief sought- consideration of - relief will not resolve all issues between parties - relief will not finally settle real dispute between parties - declaratory relief sought is an abuse of process – application dismissed

Cases cited:

National Capital District Interim Commission v. Bogibada Holdings Pty Ltd [1987] PNGLR 135
Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Ors (No. 2) [1988-89] PNGLR 425
TS Tan v. Elcom (2002) SC683

Counsel:

Mr. J. Sirigoi, for the Plaintiff
Ms. L. David, for the Defendants

3^rd April, 2017

1. HARTSHORN J: The plaintiff, Shengtai Investments Ltd (Shengtai) claims that it is the owner of a retail supermarket that trades and operates in Malalaua District, Gulf Province (supermarket). Shengtai also claims that Chen Jing, Chen Xiao Jing and Miriam Chen, the first, second and third defendants are not shareholders or directors of Shengtai and that Cheng Neng Mei, the fourth defendant is not the manager of the supermarket. Shengtai seeks declarations to this effect and also an order that it is entitled to take immediate possession and control of the supermarket.
   
2. All of the defendants contend that the fourth defendant is the sole shareholder and director of Shengtai, that the fourth defendant owns and operates the supermarket through Shengtai and that the supermarket is located on customary land that was owned by the third defendant’s family and is now owned by the son of the third and fourth defendants.
   
3. Further, the defendants contend that as the fourth defendant is the sole director and shareholder of Shengtai, this proceeding should not have been commenced by Shengtai, as the fourth defendant had not given his authority in his capacity as sole director and/or shareholder of Shengtai for this proceeding to have been commenced. Consequently, this proceeding is an abuse of process and should be dismissed it is contended.
   

Whether proceeding brought with authority

4. Shengtai brings this proceeding at the behest of Guoqiang Chen, Lin Saiyu and Guolong Chen (plaintiff shareholders), who collectively owned 80% of the shares of Shengtai in May 2010, at the date of incorporation: Guoqiang Chen holding 30 shares, Lin Saiyu 35 shares, Guolong Chen 15 shares and the fourth defendant 20 shares.
   
5. The defendants contend that the plaintiff shareholders sold all of their shares in Shengtai to the fourth defendant for K800, 000 on 24^th February 2012 and that this sum was paid. However, the plaintiff shareholders have refused to formally transfer these shares to the fourth defendant. Consequently, the defendants submit that any meetings held and any resolutions purportedly passed by the plaintiff shareholders after the sale of the shares, are null and void and are of no effect as the plaintiff shareholders, no longer being shareholders, as they have sold their shares, were not entitled to make any decisions or resolutions concerning Shengtai.
   
6. The plaintiff shareholders deny the sale of shares and deny receiving the payments totaling K800,000.
   
7. In the affidavit of Guoqiang Chen, one of the plaintiff shareholders, he admits that he did sign the Agreement to Purchase Shares in mid February 2012 because of threats from the fourth defendant and that he had no other options. That Agreement is the Contract to sell shares, both Chinese and English versions being in evidence. It appears to show that Guoqiang Chen did sign the contract, under the name Chen Guobao, but that the other plaintiff shareholders, although named, did not sign. (It appears that there were not places made on the Contract, for them to sign.) It is also in evidence that the fourth defendant made payments totaling K800,000, though the plaintiff shareholders deny receiving these payments.
   
8. The company searches of Shengtai in evidence, none of which are certified pursuant to s. 398(2) Companies Act, do not show the purported transfer of shares. There is also a company search as at February 2014 that indicates that Guogiang Chen owns 50 shares and the fourth defendant is not listed as being a shareholder. The fourth defendant denies transferring or agreeing to transfer his shares. It does seem implausible, in my view, for the fourth defendant to have transferred his shares to Guogiang Chen, given that he had previously entered into the Contract to purchase the remaining shares in Shengtai and the evidence that he made payments for the remaining shares totaling K800,000. A company search from the Registrar of Companies is prima facie evidence of a company’s shareholding and directorships, as is a company’s share register. It is not conclusive evidence however, and is open to challenge.
   
9. In this instance, the evidence is clear that Guoqiang Chen did sign the contract as he admits that he did. As to the purported threats for him to sign the Contract, I note that the other plaintiff shareholders did not sign the contract. A question to be posed is whether the other shareholders were threatened to sign and if not why not if Guoqiang Chen was threatened as alleged. Further, the subsequent conduct of Guoqiang Chen in the purported removal of the fourth defendant as a director and shareholder of Shengtai belies the purported threats of the fourth defendant. In addition, I have difficulty in believing that the fourth defendant would make payments totaling K800,000, if there was not an agreement as contended by the plaintiff shareholders.
   
10. Consequently I find that the Contract for the sale of shares was entered into by the fourth defendant and the plaintiff shareholders, with Guogiang Chen signing on behalf of the other two plaintiff shareholders. Further, I find that the consideration of K 800,000 was paid and that the fourth defendant owns all of the shares of Shengtai.
    
11. Even if it is accepted that Guoqiang Chen signed the Contract only on his own behalf, this means that the fourth defendant owns 50% of the shares of Shengtai, as Guoqiang Chen transferred his 30 shares to the fourth defendant; the purported shareholders meeting on 10^th December 2012 being null and void. Consequently, there was not the necessary authority for Shengtai to bring this proceeding and it should be dismissed.
    

The declaratory relief sought

12. If the proceeding is not dismissed as mentioned above, I consider the substantive relief that is being sought by Shengtai. The relief sought is for a declaration that Shengtai is the owner of the supermarket, a declaration that the first, second and third defendants are not shareholders of Shengtai and that the fourth defendant is not the manager of the supermarket.
    
13. In my view, this relief that is sought is within the category referred to in the Supreme Court decision of TS Tan v. Elcom (2002) SC683 and the National Court decisions of National Capital District Interim Commission v. Bogibada Holdings Pty Ltd [1987] PNGLR 135 and Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Ors (No. 2) [1988-89] PNGLR 425. That is, it is relief that will not resolve all of the issues between the parties and it is not relief that will finally settle the real dispute between the parties.
    
14. The issues between Shengtai, the plaintiff shareholders and the fourth defendant concern amongst others, the ownership of the shares of Shengtai and therefore the control of Shengtai. If the declaratory relief sought in this proceeding is granted it will not resolve these issues. On the authority of the above decisions, in my view, the declaratory relief sought is an abuse of process.
    
15. Consequently, for the above reasons, this proceeding should be dismissed.
    

Orders

16. The formal Order of the Court are:
    

a) This proceeding is dismissed;

b) The issue of costs will be considered on a date to be determined;

c) Time is abridged.

_____________________________________________________________
Sirigoi Lawyers: Lawyers for the Plaintiff
Pacific Legal Group Lawyers: Lawyers for the Defendants