East New Britain Development Corporation Ltd v Minicus [2018] PGNC 207; N7302 (22 June 2018)

N7302

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 358 OF 2018

BETWEEN:
EAST NEW BRITAIN DEVELOPMENT CORPORATION LIMITED
Plaintiff

AND:
ISAAC MINICUS
Defendant

Kokopo: Anis J
2018: 18 & 22 June

MOTION TO DISMISS – Order 12 Rule 40(1) of the National Court Rules - want of reasonable cause of action, frivolity and abuse of court process - whether new events have defeated the purpose of the proceeding

Facts

The defendant was purportedly appointed by the East New Britain Provincial Executive Council to the position Executive Chairman of the board of the plaintiff. The plaintiff has filed proceeding to challenge the said appointment. Interim restraining orders were obtained (initially ex-parte and later confirmed) against the defendant from taking office and from performing his functions. The defendant has also applied for the proceeding to be dismissed.

Held

1. The plaintiff is governed or is subject to the Companies Act 1997.
2. There was reasonable cause of action disclosed.
3. The claim was not frivolous, vexatious or abuse of the court process.
4. (obiter dictum) Legal issues with supportive facts that are already before the Court are sub judice and they should remain so until the time the Court has made a final determination.
   
5. (obiter dictum) A plaintiff, a defendant, a third-party, or an interested party to a proceeding:

(i) who deliberately take steps to influence the outcome of the Court’s final decision; or

(ii) who deliberately takes steps that prejudices the rights of a party to the proceeding by influencing or reducing his or her chances of success,

whilst the matter is sub judice, may be held liable for contempt of court.

6. The application was dismissed with cost.
   

Cases Cited:
Papua New Guinea Cases

Gawan Kuyan v. Sallel: Sallel v. Gawan Kuyan (2008) N3376
Rooney (No. 2), Public Prosecutor [1979] PNGLR 448
POSF v. Paul Paraka (2005) N2791
Maino v. Avei (1998) N1733

Overseas Case

Attorney General v. Times News-Paper, [1973] 3 All ER 54

Counsel:

Ms S. Kiene, for the Plaintiff
Mr N. Kubak, for the Defendant

RULING

22^nd June, 2018

1. ANIS J: The defendant applied to dismiss the proceeding. The matter was heard on 18 June 2018. I reserved my ruling to a date to be advised.

2. This is my ruling.

MOTION

3. The main relief sought in the notice of motion filed on 8 June 2018 was under Order 12 Rule 40(1) of the National Court Rules. The defendant says that the claim should be dismissed because (i) it does not disclose a reasonable cause of action, (ii), the claim is frivolous and vexatious and (iii) the claim is an abuse of the court process.

4. The defendant relies on two (2) of his own affidavits, one filed on 8 June 2018 and the other filed on 15 June 2018.

5. The plaintiff contests the motion.

ISSUES

6. The first issue is this. Whether the plaintiff is governed by a constitution or whether it is governed by the Companies Act of 1997 (Companies Act). The second issue that follows is of course whether the matter should be dismissed based on the three (3) grounds as I have stated above which are essentially set out under Order 12 Rule 40(1) of the National Court Rules.

7. Order 12 Rule 40(1) states:

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings —

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.
COMPANIES ACT 1997

8. The defendant attaches a copy of what it says is the current constitution of the plaintiff. I refer to Annexure A to the defendant’s affidavit filed on 15 June 2018.

9. The plaintiff denies that the said attached constitution is valid and binding. I refer to the evidence in support, which is the evidence of two (2) of the plaintiff’s directors namely Henry Tavul filed on 14 June 2018 and Hosea Turbarat filed on 29 May 2018 together with the affidavit of the company secretary Molley Waninara filed on 14 June 2018. These evidence plus submissions from the plaintiff’s counsel say that the Companies Act is the Act that governs the plaintiff and not by a constitution. The plaintiff’s counsel submits that the constitution which is attached to the defendant’s affidavit is a draft which has never been registered with the Investment Promotion Authority by the plaintiff. Counsel submits that the attached draft constitution does not have the Investment Promotion seal to it.

10. This issue is not difficult to determine. I uphold the plaintiff’s submission. I am satisfied that the plaintiff is governed by the Companies Act. The defendant is not entirely confident as to whether the attached constitution is in fact a valid or binding constitution of the plaintiff. I note the fact that the defendant has only recently been purportedly appointed so in my view, it makes his argument weak. The plaintiff’s evidence consists of affidavits by two (2) of its directors and its company secretary who have been with the company for many years. I therefore accept the plaintiff’s position or argument on the matter as the correct one. I also note that the plaintiff had also maintained that position at the inter parte hearing of the interim orders on 12 June 2018. And further, the plaintiff has filed the Court proceeding to assert, as grounds for its arguments, provisions under the Companies Act and not under a separate constitution.

11. I find that the plaintiff is governed by the Companies Act.

REASONABLE CAUSE OF ACTION?

12. I refer to the originating summons. It reads:

1. A Declaration of the appointment of the Defendant as Chairman of the Board of Directors of the Plaintiff is null and void and for want of compliance with Schedule 4.1 of the Companies Act.
2. A Declaration that the Contact of Employment dated 21 April 2018 of the Defendant as Executive Chairman of the Plaintiff Company is null and void for want of compliance with the provisions of the Companies Act 1997.
3. An Order Pursuant to Section 104 of the Companies Act 1997 that a meeting of shareholders be held to rectify the issue of the appointment of Mr Minicus as Chairman of the Board of Directors of the Plaintiff Company and the Contract of Employment of the Executive Chairman.
   

13. My first view on whether there is a reasonable cause of action is this. I think this Court is being asked to revisit what it has already recently considered and determined. I of course refer to the inter parte hearing of the interim restraining orders which was heard on 12 June 2018 whereby one of the considerations before the Court then was whether the plaintiff had an arguable case. I was satisfied then amongst other reasons that the plaintiff had an arguable case before I confirmed the interim orders.

14. But that said, I do not find that the defendant’s action herein to be deliberate. I note the fact that want of reasonable cause of action is a ground which a party like the defendant herein, may be entitled to claim or allege, once it invokes Order 12 Rule 40(1) of the National Court Rules. I also note that there may have been change of circumstances since the grant of the interim orders which the defendant may wish to raise therefore it is worth revisiting the argument at this juncture.

15. Let me now refer the defendant’s argument. His main contention for relief one (1) is this. Counsel began by referring the Court to Annexure E of the defendant’s affidavit filed on 15 June 2018. The annexure consists of what appears to be another purported East New Britain Provincial Executive Council (PEC) resolution which is dated 9 June 2018. In the said meeting, the PEC appeared to have purportedly appointed seven (7) directors and a company secretary. The defendant was also purportedly appointed as the Chairman of the directors and as a director. The defendant’s counsel submits that, based on the said evidence, the present proceeding is therefore without any basis and must be dismissed. The plaintiff on the other hand rejects the defendant’s argument. The plaintiff’s counsel submits in reply that the plaintiff had not received any notices or indications from the defendant or from the PEC which counsel submits would have shown that due processes had been followed or observed under the Companies Act, prior to the said purported actions of the PEC. In support, counsel referred to the case of Gawan Kuyan v. Andrew Sallel: Sallel v. Gawan Kuyan (2008) N3376. The case in summary and on point sets out the process for appointment and termination of directors under the Companies Act.

16. I note that counsel for the defendant has not explained with evidence or in his submissions whether the defendant or the PEC have fully complied with these appointment and termination procedures under the Companies Act by their actions, that is, first of all, by PEC’s first purported decision of 21 March 2018 and now in its subsequent purported decision of 9 June 2018. The main substantive issue is whether the appointment of the defendant as a chairman or a director, was carried out following the due process under the Companies Act. As such, it is not enough, in my view, to allege want of reasonable cause of action, when the party alleging that at the same time fails to adduce evidence to show or justify full compliances with the relevant processes under the law, in this case, the Companies Act, in relation to his appointment and the termination and reappointment of others in the plaintiff company. For example, where there proper notices issued for a shareholder’s meeting in compliances with the Companies Act; if so, where is the evidence of that? Where is the minute of the meeting or meetings and so forth? In my view, producing a new PEC’s decision itself is irrelevant towards fulfilling the balance of probabilities which rests with the defendant, that is, to convince me that there is no reasonable cause of action. The other reason is this. The allegations of the second purported meeting constitutes a new allegation of fact which is separate from what had been pleaded in the originating summons that was filed. The defendant it seems is running an argument based on the said subsequent meeting to say that he was duly appointed as a “Director” of the plaintiff. Strictly speaking, these fresh allegations raised by the defendant are not what is before the Court for determination. And I can only point to the originating summons. And that is perhaps something where parties may have to reconsider before the matter is set down for hearing. Thirdly, I note that evidence adduced by the defendant were not given by a member of the PEC or by the company secretary of the plaintiff. That being the case, it would be fair that the matter should be properly tried so that evidence or facts are properly considered or tested at the actual trial.

17. With that, I must say that it would be inappropriate to dwell into and address in detail the law and processes under the Companies Act concerning appointments and termination of a “Chairman” or “Director”. Now, having said that, I do note references made by the defendant’s counsel to section 107 and sections 87 and 131 of the Companies Act. These sections address the meaning of a “Director” (section 107) and they also make references to appointment of a new director through an ordinary resolution (section 131(2)). Counsel attempts to explain that the Court should consider the liberal meaning of a director in the present case. Counsel also submits that given that his client was appointed as a director, his appointment was made by an ordinary resolution under the Companies Act. I think the argument may be a valid one. But in my view, it should be raised at the actual hearing. And again, the argument is based on the alleged facts outside what has been pleaded by the plaintiff.

18. Relief 2 and 3 in the originating summons are consequential and in my opinion, it is pointless at this stage to argue whether or not they have merits, are frivolous and vexatious, or whether they are an abuse of the Court’s process. I therefore refuse to hear nor make a finding on the arguments that had been presented by the parties on these two (2) relief, that is, not until after I hear and make a finding on the main relief.

SUMMARY

19. I therefore will refuse to grant the balance of the relief sought in the defendant’s notice of motion filed on 8 June 2018.

COST

20. I will order cost to follow the event. Cost of the application will be awarded to the plaintiff on a party/party basis which may be taxed if not agreed.

REMARK

21. Let me say this. I have observed from this application, that the defendant and the PEC may have taken additional steps concerning the matter that is already before the Court for determination. So let me say this. In my view, the main legal issue, that is, concerning the legality of the appointment of the defendant as the chairman or director of the plaintiff, is now sub judice. Legal issues with their supportive facts have been pleaded and are before the Court for determination or until further order.

22. In regard to the definition of the term “sub judice”, I refer to the Supreme Court case of Rooney (No. 2), Public Prosecutor [1979] PNGLR 448. The Supreme Court stated and I quote:

Conduct will amount to contempt sub judice where it presents a real risk as opposed to a mere possibility, or interference with the due administration of justice, or it creates a real risk of actual prejudice to the trial of pending proceedings.

...

The law of contempt exists to protect the administration of justice. That particular aspect of contempt law, known as the sub-judice rule, exists to prevent any real risk of prejudice to a fair trial, which could arise if the prerequisites to a fair trial were impaired, in this case by a publication.

23. See also the following cases: Attorney General v. Times News-Paper, [1973] 3 All ER 54; POSF v. Paul Paraka (2005) N2791 and Maino v. Avei (1998) N1733.

24. A plaintiff, a defendant, a third-party, or an interested party to a proceeding who deliberately takes steps to influence the outcome of the Court’s final decision, whilst the matter is sub-judice may commit a contemptuous act to the Court. Similarly, a defendant or interested persons who deliberately takes steps that prejudices the rights of the plaintiff by influencing or reducing his or her chances of success, whilst the matter is sub judice, he or she could face a similar risk.

25. All matters that are filed before the National Court are treated seriously and they of course all are, for all purposes. Parties coming to the National Court are expected to deal with their matters diligently with the aim to reach a finality whether it be in Court or out of Court.

26. This matter should reach a finality without delay. I will list the matter down for pre-trial status conference at 9:30am on Friday 6 July 2018.

THE ORDERS OF THE COURT

27. I make the following orders:

1. The balance of the defendant’s motion filed on 8 June 2018 is refused.
2. The defendant shall pay the plaintiff’s cost of the application on a party/party basis which may be taxed if not agreed.
3. The matter shall return to Court for pre-trial status conference at 9:30am on Friday 6 July 2018.
4. Time is abridged.
   

The Court orders accordingly.

________________________________________________________________
South Pacific Legal Services: Lawyers for the Plaintiff
Kubak (Rabaul) Solicitors & Barristers: Lawyers for the Defendant