East New Britain Development Corporation Ltd v Minicus [2018] PGNC 275; N7392 (31 July 2018)

N7392

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: 12, 16 and 31 July

COMPANIES ACT 1997 – challenge on want of compliance of procedures for appointment and termination of board chairman – schedule 4.1 of the Companies Act – whether the plaintiff’s assertion that it is governed by the Companies Act is substantiated or is an accurate assertion – whether the plaintiff has, on the balance of probabilities, established its assertion that it is governed by the Companies Act

Cases cited:

East New Britain Development Corporation Ltd v. Isaac Minicus (2018) N7302
Nivani Ltd v. West New Britain Provincial Government (2018) N7190

Counsel:

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

JUDGMENT

31^st July, 2018

1. ANIS J: The plaintiff filed this proceeding on 29 May 2018. It claims that it is governed by the Companies Act of 1997 (the Companies Act). And its contention is this. It claims that the defendant’s purported appointment as its Chairman of the board of directors made on 21 March 2018, was not done following due process, namely, due process under schedule 4.1 of the Companies Act.

2. As such, it seeks the following relief:

1. A Declaration that 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 the 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.
   

EVIDENCE

3. Both parties have agreed to tender their evidence without the benefit of cross-examination. I have labelled their evidence. For the plaintiff, they are labelled as Exhibit P followed by a given number. For the defendant, they are labelled as Exhibit D followed by a given number. I set them out here in a table format.

Exhibit No.	Description	Date filed
“P1”	Affidavit of Hosea Turbarat	29/05/18
“P2”	Affidavit of Henry Tavul	29/05/18
“P3”	Affidavit of Henry Tavul	14/06/18
“P4”	Affidavit of Molly Pesso-Waninara	14/06/18
“P5”	Affidavit of Abagail Waula	05/07/18
“P6”	Affidavit of William Laudin Lamur	10/07/18
“P7”	Affidavit of Wilmer Mareve	11/07/18
“D1”	Affidavit of Isaac Minicus	08/06/18
“D2”	Affidavit of Isaac Minicus	15/06/18
“D3”	Affidavit of Bill Rua	03/07/18

ISSUES

4. The issues are as follows:

(i) Whether the plaintiff’s assertion that it is governed by the Companies Act is substantiated.
(ii) Subject to the above, whether the defendant’s purported appointment as the Chairman of the directors of the plaintiff was made contrary to the requirements set out under schedule 4.1 of the Companies Act;
(iii) Subject to the above, what relief should the Court grant based on its findings?

NO CONSTITUTION?

5. The first issue is a preliminary so I will deal with it now.

6. Does the plaintiff have a valid constitution? This question was raised by this Court at various interlocutory hearings in the past. The first time was on 29 May 2018. That was when the plaintiff had applied for ex-parte interim orders. The plaintiff’s position then was that the company had a draft but uncertified constitution. The plaintiff had argued that as far as it was concerned, it was governed by the Companies Act. When the matter returned for inter parte hearing on 12 June 2018, again the question was asked. Both parties did not provide sufficient evidence to assist the Court on this specific question. The interim orders were confirmed on that day. Shortly after, the defendant applied to dismiss the proceeding. His application was heard on 18 June 2018. Again, the question was asked of whether the plaintiff had a constitution or whether it was governed directly by the Companies Act. Again, the parties were unable to fully assist the Court. Instead, they filed evidence based on their beliefs, understandings and practices. Based on these evidence, the Court decided that the plaintiff was governed by the Companies Act. The Court’s interlocutory ruling was published on 22 June 2018 as an unreported judgment, that is, East New Britain Development Corporation Ltd v. Isaac Minicus (2018) N7302. I note that that was an interlocutory ruling based on evidence that had been presented by the parties.

7. At the trial of the matter, the defendant has now come forward with new evidence, which it claims states that the plaintiff has a governing or operating constitution which was registered in 1998. I refer to Exhibit D3 which is the affidavit of Bill Rua filed on 3 July 2018. Let me refer to annexure B of that affidavit. The first page consists of a covering letter dated 18 August 1998, which bears the plaintiff’s letter-head. It appears to be a request made by the plaintiff to re-register its name and constitution. The next page attaches the purported company constitution of the plaintiff. The bottom of the said covering letter has a stamp which appears to be from the Companies office then which marks the constitution with these phrase and I quote “Registered 25 AUG 1998”. It appears that the purported constitution was registered 7 days after the date of its lodgement. Annexure C of the affidavit consists of a letter dated 18 August 1998 by the plaintiff’s then accountant Clarkson and Associates, and it is addressed to the then Registrar of Companies. Presumably, the said letter attaches the plaintiff’s covering letter of 18 August 1998 and its draft constitution, which had been submitted for registration on 18 August 1998.

8. I note that this evidence was not seriously rebutted by the plaintiff. I say this for the following reasons. The plaintiff, in its rebuttal to Exhibit D 3, tendered Exhibit P6 which is an affidavit by William Lamur who is its current managing director. Mr Lamur does not dispute the defendant’s evidence. Mr Lamur, in a similar fashion and like the plaintiff’s earlier evidence, deposes his belief and what he says has been the practise of the plaintiff, and he concludes that based on his view or understanding, the plaintiff has and continues to operate under the Companies Act.

9. The plaintiff’s evidence, in my view, shows that the plaintiff is itself not certain that it has a registered constitution. That has been its position since it has commenced this Court proceeding. I find the defendant’s evidence on point relevant and credible. I cannot dismiss Mr Rua’s evidence. The evidence shows that the plaintiff may have a registered constitution dated 25 August 1998. Mr Rua’s evidence shows that he had derived these information from the Investment Promotion Authority of Papua New Guinea (IPA) which of course is the responsible office that keeps records including registration records of company constitutions, that is, of companies that are created or that operate in Papua New Guinea like the plaintiff.

10. The plaintiff’s central issue is dependent upon the premise or assertion that it is governed by the Companies Act. That said, if the said premise is wrong, in doubt or is in jeopardy, this Court, in my view, will not be in a position to deal with the main issue. In this case, the defendant has challenged the said premise as a preliminary issue. I have considered the evidence and arguments as I have stated above in my judgment. This is my ruling. I find the plaintiff’s premise or assertion (i.e., that it is governed by the Companies Act) to be an issue. I find that the said assertion has been effectively disputed by the defendant with not absolute but credible evidence. The defendant’s evidence challenge the plaintiff’s assertion that it is governed under the Companies Act. What then are the consequential effects, I ask myself. Well firstly, it makes the plaintiff’s pleading vague. Secondly, it makes the main relief sought in the originating summons, unattainable (see the case, Nivani Ltd v. West New Britain Provincial Government (2018) N7190). The main relief reads and I quote, A Declaration that 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. The said relief is pleaded on the premise that the plaintiff is governed by the Companies Act. The assertion, as I have found, is disputed. Because the governing law of the plaintiff company is not the central issue, I refrain myself from addressing that in this proceeding without proper pleadings.

ALTERNATIVE ARGUMENT

11. The plaintiff has also made submissions in the alternative in the event that the Court finds that it is governed by the company constitution. The defendant has also provided submissions in reply.

12. I reject the alternative arguments. The reason being that there was no proper pleading for this argument to be raised, even at the very last minute.

SUMMARY

13. In summary, let me say these. I am not persuaded by the plaintiff that it has satisfactorily asserted, on the balance of probabilities, that it is governed by the Companies Act. In other words, it is possible that its assertion could be wrong. And without any proper pleadings or cross-claim filed, by the parties that may raise the question of which law or rules the plaintiff is operating under, I am restricted to and can only make a finding starting from the plaintiff’s pleaded assertion, and subject to my ruling on that, proceed further to consider and determine issues two (2) and three (3).

14. And given my negative finding in relation to the first issue, this claim cannot proceed any further. It must fail.

COST

15. Cost will follow the event. I will order cost in favour of the defendant to be assessed on a party/party basis which may be taxed if not agreed.

REMARKS

16. The defendant has indicated its intention to enforce or file a claim that is based on the undertaking that was filed by the plaintiff for the initial grant of the interim orders. In my view, if that would be the case, it should be properly pleaded and filed separately.

17. My second remark is this. Because of the Court’s preliminary finding, the main issue relating to the validity of the appointment of the defendant as the chairman of the board of directors of the plaintiff has not been determined.

18. My third remark is this. I note that the question of whether the plaintiff is governed by a registered constitution or whether it is governed by the Companies Act may easily be resolved as an internal matter. Of course, if that does not eventuate, then the parties would be at liberty to properly plead and raise that as a separate matter before the Court.

THE ORDERS OF THE COURT

19. I make the following orders:

1. The plaintiff’s claim is refused.
2. Cost of the proceeding is awarded to the defendant on a party/party basis to be taxed if not agreed.
3. Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly.
________________________________________________________________
South Pacific Legal Services: Lawyer for the Plaintiff
Kubak & Kubak Solicitors & Barristers: Lawyers for the Defendant