Melanesian Trustee Services Ltd v Tongayu [2018] PGNC 442; N7547 (26 October 2018)

N7547

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CIA No. 90 of 2018 (COMM)

IN THE MATTER OF APPEAL PURSUANT TO SECTION 112 (2) OF THE SECURITIES COMMISSION ACT 2015 AND SECTION 56 OF THE CAPITAL MARKET ACT 2015

AND IN THE MATTER OF SECTION 48 OF THE CAPITAL MARKET ACT 2015 AND SECTION 54 OF THE SECURITIES COMMISSION ACT 2015

BETWEEN:
MELANESIAN TRUSTEE SERVICES LIMITED
Appellant

AND:
MR ALEX TONGAYU as Chairman of Securities Commission of PNG
First Respondent

AND:
SECURITIES COMMISSION OF PAPUA NEW GUINEA
Second Respondent

AND:
OXLEY EQUITIES LIMITED
Third Respondent

Waigani :Thompson J
2018: 26^th October

Counsel:

Mr J Haiara, for the Appellants
Mr I Molloy, for First and Second Respondents
Mr R Otto, for Third Respondent
Mr M Nale, for Interested Party

26^th October, 2018

1. THOMPSON, J: The Appellants have filed a Notice of Motion seeking interim relief, pending determination of the appeal filed on 12 September 2018.
   
2. The appeal, and the motion, refer inter alia to four decisions:
   
   1. The decision to remove the appellant as trustee of the Pacific Balance Fund.
      
   2. The decision to revoke the appellant’s Capital Market Licence.
      
   3. The decision to appoint the Third Respondent as interim trustee of the Pacific Balance Fund, and
      
   4. The decision to conduct a regulatory review of the Appellant.
      
3. Each of the decisions was made by the First Respondent in his capacity as Chairman of the Second Respondent, because under Section 10 (2) of the Securities Commission Act, the Chairman has authority to exercise all the Commission’s powers under the Securities Commission Act and under the Capital Market Act.
   
4. By its motion, the Appellant has sought stays of those four decisions, pending the determination of the appeal, effectively restraining the Defendants from implementing the decisions. The principles relating to the grounds of interim restraining orders or stays, are well settled, and have been succinctly set out in the parties’ written submissions. The Applicant must show that he has a serious issue to be tried, that he has an arguable case, that an Undertaking as to Damages is given, and that the balance of convenience should favour the grant of relief. These principles include requirements to show that there has been no delay in making the application, that the action is not frivolous or vexatious, whether or not damages would be an adequate remedy, and whether or not the status quo will be preserved.
   
5. The appeal raises serious issues to be tried arising out of serious decisions which have been made, and is not frivolous or vexatious.
6. The Respondents submit that the appeal nevertheless does not show that there is a serious issue to be tried or that the Appellant has an arguable case in relation to the first three decisions, because the parts of the appeal relating to those three decisions, are not valid.
   
7. The Respondents say that those three decisions were made under Division 1 of the Capital Market Act. Section 56 (3) of the Capital Market Act says that an appeal against a decision made under Division 1 does not act as a stay unless the National Court makes restraining orders pending the determination of the appeal.
   
8. The appeal means an appeal under Section 56 (1). This provides that a person who is aggrieved by a decision of the Commission, which is defined to mean the Securities Commission, shall appeal to the National Court. The wording is almost identical to the wording of the equivalent provision in the Securities Commission Act, where Section 112 says that a person who is not satisfied with a decision of the Commission, which is defined to mean the Securities Commission, may appeal in the National Court. Neither of the Acts prescribe any form of appeal or any procedures to be followed for the appeal process.
   
9. The Appellant has filed a Notice of Appeal which says in the heading that it is an appeal pursuant to Section 112 of the Securities Commission Act and Section 56 of the Capital Market Act. In the body of the appeal, it says that the Appellant is a person aggrieved by the Defendant’s decisions, using the wording of the CM Act, and appeals under Section 112 of the SC Act. The grounds of appeal refer to both Acts.
   
10. The Notice of Motion is headed in the same way, as an appeal under Section 112 of the SC Act and Section 56 of the CM Act. The relief sought in the motion is stated to be sought under Order 18 Rule 12 of the National Court Rules relating to appeals and Section 56 (3) of the CM Act.
    
11. The Respondents submit that relief cannot be granted for the first three decisions, because it can only be granted under Section 56 (3) of the CM Act, and as there is no valid appeal under Section 56 (3) of the Act, no restraining orders can be granted.
    
12. The Respondents have not filed an application to strike out or dismiss the first three decisions which are included in the appeal. They say that there is no prescribed procedure for objecting to the competency of the appeal. That is true, and of course there is no prescribed procedure for any part of the appeal process. This makes it difficult to make objections on competency grounds.
    
13. In the absence of any application to strike out those grounds, it is not appropriate for this Court to find on an interlocutory application, that those grounds of appeal are not valid. At this stage of proceedings, the Appeal is sufficient to show on a prima facie basis that it is valid, because it is in the form of an Appeal, it is shown in the heading as being an Appeal under the two relevant appeal sections of both Acts, and it was filed within time. If there is a defect in the body of the Appeal by not stating that it is also made under Section 56 (3) of the CM Act, it is one which may be able to be cured by amendment, the Respondents would be able to oppose any such application, and are also entitled to challenge the validity of those three grounds at the substantive hearing.
    
14. The Respondents do not dispute that the appeal is valid for the decisions made under the SC Act, they dispute the three decisions made under the CM Act.
    
15. For the purpose of this interlocutory application, the Appellant has shown an arguable case that the Notice of Appeal is an appeal under both Section 112 of the SC Act and Section 56 (3) of the CM Act, and it is therefore a valid Notice of Appeal for the decisions made under the CM Act as well as the Securities Commission Act.
    
16. The Court therefore has the power to grant restraining orders against all the decisions, under Section 56 (3) of the CM Act and under Order 18 Rule 12 of the National Court Rules relating to appeals, as set out in the notice of motion.
    
17. I therefore consider the principles applicable to restraining orders.
    
18. The Appellant has not delayed in bringing this application, which was filed at the same time as the appeal.
    
19. The affidavit material shows that the letters written by the First and Second Respondents to the Appellant gave it the opportunity to respond to the Directions to provide documents, but did not give notice of their intention to revoke the Appellant’s licence. The Appellant has therefore shown an arguable case that the Respondents failed to comply with Section 48 (4) of the CM Act which says that the Commission shall not revoke a licence without giving the licensed person an opportunity to be heard.
20. The affidavit material shows that the Respondent’s decision to revoke the Appellant’s appointment as trustee was stated in the Gazettal notice to be made pursuant to Sections 48 and 202 of the CM Act. Section 48 does not refer to any power to revoke an appointment of a trustee, and Section 202 prima facie refers to the power to appoint an interim trustee after the position has become vacant following removal by its members. The Appellant has not been removed by its members of a registered scheme under Section 201 of the CM Act. Prima facie, therefore, there was no vacancy, and no power to appoint an Interim Trustee. The Act does not appear to give the Respondents any other power to remove a trustee, and no other power was referred to by the First Respondent in the gazettal.
    
21. The Appellant has therefore shown an arguable case that the Respondent’s decisions to remove it as Trustee and to appoint the Third Respondent as an Interim Trustee, may have been in breach of the Act.
    
22. In relation to the fourth decision, I agree with the Respondent’s submission that the Appellant’s prospects of success are low. As found in the cases cited by the Respondents, an administrative body will not generally be restrained from performing its lawful enquiries, duties and obligations, and the Appellant has not shown that the decision to carry out regulatory or investigative processes was in breach of any requirements of the Act.
    
23. For the above reasons, I find that the Appellant has established that there is a serious issue to be tried and that it has an arguable case on the first three of the four decisions set out in the motion.
    
24. In relation to the balance of convenience, the Respondents say that in view of the allegations of mismanagement, for the interests of unit holders, the Respondents’ decisions should not be stayed pending the appeal. No evidence has been provided to show that the unit holders’ interests would be better protected by the management of the Third Respondent. The evidence shows that it is a company with no previous experience or history of holding a Capital Market Licence or acting as a Trustee, as it was only incorporated and came into existence less than four weeks before the Respondents commenced the investigatory process, only became licensed about four weeks before the other decisions were made by the Respondents, and whose 50% share holder and director is the same person who was involved in managing the Pacific Balance Fund administered by the Appellant in the period when the Respondents allege that mismanagement occurred.
    
25. The effect of the decisions on the Appellant is severe, as it has resulted in it being wholly unable to carry on any business activity at all and has been forced to cease operation with many consequential effects on the companies administered by them. A complete inability to carry out day to day activities and to carry on business affairs, is a loss which cannot be adequately compensated for, by damages. A stay would not seriously prejudice the Respondents, because they can still carry out their normal activities regulating the Industry. If successful at the substantive hearing, the Respondents will be able to resume dealing with the three decisions against the Appellant.
    
26. I find that the balance of convenience favours the appellant.
    
27. The last issue concerns the Undertaking as to Damages.
    
28. The cases helpfully provided by the Respondents show that it is mandatory to give an undertaking as to damages – see Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC 853. However, there is no conclusive authority on the form of the undertaking which is required. Various National Court cases such as Telikom PNG Ltd v ICCC (2007) N 3143 and Fulleborn Plantations Ltd v Pepi Kimas (2007) N3209 have found that an undertaking given by a company should be given under seal.
    
29. An undertaking has been given in this case, which has been given under the seal of the appellant company, and states that it has been signed by the appellant’s Interim Chief Executive Officer with the authority of the Board.
    
30. The undertaking here is not the same as the undertaking in the Telikom case, because in that case it was not given under seal. In PNG Deep Fishing Ltd v Luke Critten & Ors (2010) SC 1126, the Court confirmed the principles established in the BCL case that an undertaking has to be given. They added a sentence that it must also be under seal by the Managing Director. The form of the undertaking was not an issue in that case, and so was not the subject of any findings.
    
31. Having read all the cases, I consider that the generally accepted requirement for the form of an undertaking by a company, is that it has to be given under seal by the appropriate person. In the present case, the undertaking has been given under the seal of the Appellant, by its interim Chief Executive Officer. I regard this as sufficient compliance with the requirement for an undertaking by a company.
    
32. Finally, there were some submissions made by both parties relating to the validity of the First Respondent’s appointment as Chairman of the Second Respondent. It has apparently come to the Appellant’s attention that the issue of the First Respondent’s appointment is contentious and is the subject of several other legal proceedings. An order was made by the National Court on 12 July 2018 in proceedings on OS (JR) 277 of 2018 whereby the appointment of the First Respondent made on 10 April 2018, has been stayed pending the determination of those proceedings. The Appellant submits that as a result, all the decisions made by the First Respondent after 12 July 2018 could not have been validly made.
    
33. The Respondents submit that because this has not been included as a ground of Appeal, it is not relevant, and it is not an issue for determination on the application. It is correct that this has not been pleaded in the Notice of Appeal. Nevertheless, this Court cannot ignore a valid court order which stayed the First Respondent’s appointment before these decisions were made, and which may result in an application for amendment. Before this matter proceeds to a substantive hearing, consideration should be given by the parties to the possibility of consolidating any of the proceedings which raise the same issues in dispute between the parties.
    
34. For the foregoing reasons, I therefore make the following orders:
    
    1. The decisions of the First and Second Respondents to revoke the Appellant’s Capital Market licence, to remove the Appellant as Trustee of the Pacific Balance Fund, and to appoint the Third Respondent as Interim Trustee of the Pacific Balance Fund, are stayed and the Respondents are restrained from implementing those decisions, until the determination of these proceedings or until further order.
       
    2. The Appellant’s application to restrain the First and Second Respondents from reviewing or investigating the Appellant, is refused.
       
    3. The costs will be costs in the cause.
       
    4. The time for entry of the Orders is abridged to the time of settlement by the Registrar which shall take place forthwith.

______________________________________________________________
Haiara’s Legal Practice: Lawyers for the Appellant
Kopunye Lawyers: Lawyers for the First and Second Respondents
Themis Lawyers: Lawyers for Third Respondents
Jema Lawyers: Lawyers for Interested Party