Malem v Bukop Business Group [2020] PGNC 11; N8179 (5 February 2020)

N8179

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 601 OF 2019 (COMM)

BETWEEN:
DIMA MALEM for and on behalf of himself and shareholders of Homiya Asini Corporative Society converted to Homiya Asini Business Group (Homiya Asini Corporative Limited) and members of Bukop Business Group whose names are attached to the originating summons
Plaintiff

AND:
BUKOP BUSINESS GROUP
First Defendant

AND:
MAINLAND HOLDINGS LIMITED
Second Defendant

Waigani: Anis J
2019: 18^th November
2020: 5^th February

NOTICE OF MOTION – Dismissal of proceeding – Order 12 Rule 40(1) – National Court Rules - grounds for dismissal include want of locus standi, jurisdiction and res judicata – whether plaintiff has sufficiently pleaded his capacity and representative capacity – section 30 of the Co-operative Societies Act Chapter No. 389 discussed – distinction between legal persons and members of a society or members of a business group discussed - whether the plaintiff’s capacity and representative capacity were vague – whether the plaintiff has standing – whether the Court has jurisdiction to hear the matter – whether the plaintiff’s complaint should have been filed before the dispute settlement authority – sections 39, 40, 41, 42 and 43 of the Business Groups Incorporation Act, 1974 discussed - whether the matter had been fully dealt with by a court of competent jurisdiction – whether the time bar issue had been considered and determined

Case Cited:

Malip v. Kupo [2017] N6659

Counsel:

Mr Wenge, for the Plaintiff
Mr W Hagahuno, for the First Defendant
Mr J Langah, for the Second defendant

RULING

5^th February, 2020

1. ANIS J: The defendants applied to dismiss the proceeding on 18 November 2019. After a contested hearing, I reserved my ruling to a date to be advised.

2. Parties have been notified so I will rule on it now.

BACKGROUND

3. The plaintiff claims to act for himself and on behalf of various groups of persons he pleads as plaintiffs, that is, in his originating summons. I must admit that at first, I had difficulty in trying to understand the plaintiff’s capacity and the entity or entities that he was actually representing. I will later explain that below in detail. But according to the plaintiff, he claims, amongst others, that he and his group are shareholders or legitimate members of the first defendant. He claims that their shares or memberships in the first defendant and ultimately their beneficiary interests in the second defendant, have been unlawfully acquired. Therefore, the plaintiff has commenced this proceeding for himself and on behalf of the persons that he represents, to reclaim their rights or interests in the defendants.

4. The first defendant is a business group and a shareholder of the second defendant. The defendants deny the claim. They argue, amongst others, that the plaintiff and his group are not members of the first defendant. They also argue that the claim is baseless with various serious deficiencies including want of jurisdiction.

MOTIONS

5. The first and second defendants filed separate motions seeking ultimately the same outcome, which is to dismiss the proceeding. The plaintiff has also filed a motion which seeks, amongst others, restraining orders against payment of dividends by the second defendant pending determination of the proceeding. The 3 motions returned to Court on 18 November 2019. It was decided that the defendants’ motions to dismiss should be heard first. The matter proceeded on that basis.

PRELIMINARY ISSUES

6. The defendants raise various preliminary or jurisdictional issues. I prefer to deal with them first. At this juncture, I will deal with locus standi, jurisdiction, res judicata and time bar as a start.

STANDING/AUTHORITY

7. The plaintiff herein is named as follows:

DIMA MALEM for and on behalf of himself and shareholders of Homiya Asini Corporative Society converted to Homiya Asini Business Group (Homiya Asini Corporative Limited) and members of Bukop Business Group whose names are attached to the originating summons

8. To me, I find the plaintiff’s name and his purported capacity (or capacities), as it appears or as described in the originating summons, to be ambiguous or confusing. The plaintiff claims to act for himself and others who are shareholders of this society called Homiya Asini Corporative Society which is then described or stated as converted to a business group called Homiya Asini Business Group. And then and in brackets, the business group Homiya Asini Business Group is also called Asini Corporative Limited. In the end, the plaintiff also claims that he acts for himself and others, as members of Bukop Business Group which is the first defendant.

9. The name(s) and description of the plaintiff’s capacity in themselves, in my view, are, as stated, very confusing. The plaintiff, by the descriptions under his name, appears to act for himself and on behalf of other members, of not 1, not 2, not 3, but 4 entities. To me, it is utmost important, as well as the fact that it is consistent with good court practice and procedures, that a plaintiff must clearly state his precise name and capacity in which he or she is suing under. If the plaintiff is suing under various capacities and also on behalf of various persons under these various capacities, then the plaintiff must clearly or precisely state them with supportive evidence. A plaintiff who fails to adhere to these should face the real risk of the matter being struck out or dismissed.

10. That said, let me consider the evidence to see if they will shed some light. I have considered the plaintiff’s evidence. In particular, I refer to his own affidavit filed on 21 October 2019. He states therein that he is the lead plaintiff. He states that he was authorized and has received the consent of the other shareholders of Homiya Asini Co-operative Ltd to also act for them in this proceeding. He attaches a schedule of persons whom he claims are shareholders of the said society. I find the wording of the said consent document relevant or telling. It states, and I quote in part:

We the undersigned shareholders give our individual consent as shareholders (including beneficiaries to be provided) to our chairman Dima Malem (Shareholder) to represent us in court regarding our shares held by Mainland Holding Limited.

(Underlining mine)

11. Two points which I think are fundamental are these. Firstly, I note that Homiya Asini Co-operative Ltd is a legal person, that is, a society which would have been established under the Co-operative Societies Act Chapter No. 389 (CoS Act). Section 30 of the CoS Act states, and I quote in part:

30. Incorporation.

On and from the date shown in the certificate as the date on which a society was registered, the society—

(a) shall be a corporation by the name under which it is registered, or such other name under which it may from time to time be registered; and

(b) shall have perpetual succession and a common seal; and

(c) has power to—

(i) hold property; and

(ii) enter into contracts; and

(iii) institute and defend actions, suits and legal proceedings; and

(iv) do all things necessary for the furtherance of its objects as set out in its rules.
12. A society established under the CoS Act shares similar functions or characteristics like a company that is established under the Companies Act of 1997. Its incorporation, powers and operations are primarily governed by the CoS Act. For example, its members are issued with shares, and it is managed by a board of directors. Section 66 states, and I quote in part:

66. Board of Directors.

(1) The business and operations of a society shall be managed and controlled by a Board of Directors, and for that purpose the Board shall have and may exercise, subject to this section, all the powers of the society as if they had been expressly conferred on the Board by the society.

(2) The exercise of the powers of the Board shall be subject to any restrictions or limitations imposed—

(a) by this Act; or

(b) by the rules of the society.

13. The plaintiff and his group are presumably shareholders of the society Homiya Asini Co-operative Ltd. This is where my first difficulty to comprehend begins. Homiya Asini Co-operative Ltd is the legal entity which presumably the plaintiff and his group are registered under. So I ask myself these. Why is it that the society is not named as the plaintiff to the proceeding? Should it not have been the proper person to be named as the plaintiff instead of its shareholders, to sue a third party? And even if it was named, what would be its interest to the first defendant which (i.e., first defendant) is a business group which is also a legal person? And why is the plaintiff purporting to act for the shareholders of the society against third parties? Can he do that, that is, can he sue third parties directly as a shareholder or as a member of Homiya Asini Co-operative Ltd? If so or otherwise, where is the authority from Homiya Asini Co-operative Ltd given to the plaintiff to essentially act on its behalf? I have perused the evidence. There is no such express authority attached. Such authority, in my view, has to come from the society’s board of directors or through its normal process. Suppose the plaintiff is a shareholder of Homiya Asini Co-operative Ltd, he cannot, in my view, act or claim to represent the society’s interest without the society’s authority or knowledge. And his interest, I would imagine, would ordinarily be limited to the society, and not beyond.

14. The second area where I find comprehension lacking, is in the description where it reads, Homiya Asini Corporative Society converted to Homiya Asini Business Group (Homiya Asini Corporative Limited). I had to ask myself this. How was the Homiya Asini Corporative Society “converted to” Homiya Asini Business Group? What did it mean when the plaintiff used the term converted to? A society that is created under the CoS Act is not the same as a business group that is created under the Business Groups Incorporation Act of 1974 (BGI Act). Legal entities created under these statutes are different and they operate under their respective legislations. The plaintiff, in my view, did not show the conversion in law (legal) from one entity to another, namely, from Homiya Asini Corporative Society to Homiya Asini Business Group. The third area in the description section after the plaintiff’s name which I find wanting is this. It reads in part, and I quote, and members of Bukop Business Group whose names are attached to the originating summons. My question is this. How is it possible for the plaintiff and those that he claims to represent, to at the same time claim to be purported existing shareholders or members of the first defendant? Where is the prima facie evidence, that is, recent record from the Registrar of Business Group that certifies them (i.e., the plaintiff and his group) to be current members of the first defendant? I have perused the evidence of the parties. The note that the first defendant denies that the plaintiff and his group are its registered members. It has also furnished prima facie evidence to support its contention. The plaintiff on the other hand did not provide prima facie evidence to support his claim. That plaintiff, in my view, failed in that regard.

15. Moving on, the second fundamental point is this. The plaintiff and the purported shareholders he claims to represent, are suing and as stated above in the attached consent to act, and I quote, regarding our shares held by Mainland Holding Limited. This representation is, in my view, incorrect and is against the line of argument raised by the plaintiff. The plaintiff and his group are essentially disputing the membership of the first defendant who is a shareholder of the second defendant. However, evidence adduced do not show that the plaintiff and his group hold any direct shares in the second defendant. These are in addition to my view that the plaintiff as a member of his society Homiya Asini Co-operative Ltd cannot sue third parties directly without proper authority coming from the said society and the other entities which he also claims to be part of, namely, Homiya Asini Corporative Society, Homiya Asini Business Group and the first defendant Bukop Business Group.

16. In summary, I do not think that the plaintiff has thought out these through carefully before he commenced the proceeding. As a result, it is very confusing and in my view, the proceeding cannot proceed with such serious ambiguities in the capacity and description of the plaintiff, in the originating summons. All these, in my view, puts the plaintiff’s standing and those persons that he claims to represent, in serious doubt. In conclusion, I find that the plaintiff has no standing to commence the proceeding.

JURISDICTION

17. Given my view that the plaintiff’s claim is his complaint that he is a legitimate member of the first defendant, it begs this question, that is, whether this Court has jurisdiction to deal with such a complaint. The answer to that in my view is, “no, this Court does not have any jurisdiction in the first instance to hear the complaint.”

18. The relevant law that governs complaints of this nature is the BGI Act. Sections 39, 40, 41, 42 and 43 read, and I quote in part:

39. Application and interpretation of Part V.

(1) This Part applies to disputes between—

(a) a business group and a member of the group; or

(b) members of a business group,

concerning the property or the affairs of the group, including—

(c) the distribution or disposal of any property or income of the group; and

(d) any transaction between the group and any of its members,

but, except by agreement, does not apply to any dispute between the group, or a member of the group, and a non-member.

(2) This Part also applies to disputes as in membership of, or the right to membership in, a business group.

(3) In this Part, a reference to a party or to a person interested in a dispute includes a reference to a person whose interest in the dispute is real, though not necessarily or immediately financial.

40. Dispute-settlement authorities.

(1) In order to be incorporated, each business group must have at least one dispute-settlement authority.

(2) A dispute-settlement authority may be a person or a number of persons—

(a) specified by name; or

(b) specified by office or position; or

(c) determined in the manner specified,

in the constitution of the group.

(3) Notwithstanding Subsection (2), the parties to a dispute to which this Part applies may, with the consent of the group, agree on an ad hoc dispute-settlement authority in relation to the dispute.

41. Settlement of disputes.

All disputes to which this Part applies shall be dealt with, in accordance with Sections 42 and 43, by the dispute-settlement authority or a court having jurisdiction under Section 42.

42. Jurisdiction of courts.

(1) No court has jurisdiction over a dispute to which this Part applies unless—

(a) all parties agree that it should be referred to the court; or

(b) the constitution of the business group concerned so provides; or

(c) any relevant agreement between the business group and a party so provides; or

(d) the dispute-settlement authority thinks that—

(i) it cannot satisfactorily settle the dispute; and

(ii) the court may be able to do so.

(2) The dispute-settlement authority has jurisdiction to decide any matter referred to in Subsection (1)(a), (b) or (c), and its decision is not open to challenge in any court.

(3) Where under Subsection (1) a dispute may be referred to a court—

(a) the court must be a court that, apart from the effect of this Part, has jurisdiction in the matter; and

(b) it shall be referred, in the prescribed manner, by the dispute-settlement authority; and

(c) the dispute-settlement authority is entitled to act, and if the court or a person interested so asks shall act, as an assessor on matters of custom and as to matters of common knowledge within the group, but—

(i) the advice shall be given in open court and is open to challenge; and

(ii) if for good reason the court considers it proper to do otherwise it is not bound to accept the advice.

......

43. Law to be applied.

A dispute-settlement authority or a court dealing, under Section 42, with a dispute to which this Part applies—

(a) is not bound by any law or rule of law, practice or procedure other than this Act; and

(b) may inform itself on any matter in such manner as it thinks fit; and

(c) shall not make a decision about any matter without calling for and hearing any argument made on the matter; and

(d) shall endeavour to do substantial justice between all persons interested, in accordance with this Act, the constitution of the business group concerned and any relevant custom.

(Underlining mine)

19. Section 39(2), in my view, applies in this instance. The plaintiff and persons he claims to represent, all dispute the memberships of as well as their rights to membership, of the first defendant. They claim that they are registered or legitimate members who have shares or interest in the first defendant. And section 41would also apply in this instance. Section 41 makes it mandatory for the plaintiff to comply with the processes or conditions under sections 42 and 43. See case: Malip v. Kupo [2017] N6659. In this case, the dispute, in the first instance, must be brought before a dispute settlement authority to resolve. On that basis and for the matter to reach the National Court, the plaintiff is required to furnish evidence to show that at least 1 of the 4 pre-conditions under section 42(1) has been met.

20. I note that the plaintiff has not furnished any evidence nor has counsel made submissions, to address that. That is, submissions to show (i), whether all the parties have agreed to refer the dispute to this Court for determination, (ii), whether the constitution of the first defendant allows for referral of such disputes before the National Court, (iii), whether there is an existing agreement between the plaintiff and the first defendant that allows for such disputes to be referred to the National Court for determination, and (iv), whether the matter had been referred to the dispute settlement authority which had not satisfactorily resolved the matter, and whether the dispute settlement authority has referred or recommended its referral to the National Court, to resolve.

21. In conclusion, I find that this Court has no jurisdiction in the first instance to hear this complaint or dispute by the plaintiff and those that he represents. In doing so, I also find it an abuse of the court process for the plaintiff to institute the proceeding in this manner.

OTHER COMPETENCY ISSUES

22. I decline the arguments re res judicata and time bar. The defendants claim that the plaintiff had filed a similar proceeding at the Lae National Court on 18 November 2008, and that it was dismissed on 19 October 2018. The dismissed proceeding is described as OS 708 of 2008. Evidence of that is contained in the affidavit of Robert Natu filed on 10 October 2019. There is however no written decision attached nor is there a copy of the transcript of proceedings, that is, of the Court’s ruling of 19 October 2018. All there is, is an attached Court Order which is contained at annexure E2 to Mr Natu’s affidavit. It reads, and I quote in part: “This proceeding is dismissed in its entirety”.

23. Without the Court’s full reasoning in dismissing the said proceeding, I find that there is insufficient evidence adduced by the parties for me to fully consider and make determinations, that is, on whether the defence of res judicata should be sustained, and also whether the matter is time barred. Determining the 2 issues, in my view, is unattainable because I am simply unable to verify if the matter had been dismissed based on the defence of res judicata, and also, whether the time bar issue had been the basis or was one of the basis for the Court having to dismiss the matter. I find depositions by the defendants in affidavits insufficient when I consider that these could have been easily established by provision of a copy of the transcript of the proceeding for that day. Without the transcript evidence, I am not satisfied that the defendants have proven to my satisfaction and on the balance of probabilities, that the two issues, namely, the defence of res judicata and time bar had been the basis for the Court’s dismissal of proceeding OS 708 of 2008.

SUMMARY

24. But these said and in the end, I will uphold the submissions of the defendants on the other issues. This proceeding will be dismissed. I find that the plaintiff and those that he claims to represent, lack standing. I find that the matter also falls within the jurisdiction of the dispute settlement authority under sections 39, 40, 41, 42 and 43 of the BGI Act. I find that the plaintiff did not meet any of the 4 pre-requisites that are set out under section 42(1) of the BGI Act before he filed this proceeding. As such, I find that this Court lacks jurisdiction to hear the dispute in this proceeding. I also find that the plaintiff abused the Court process when he filed this proceeding, that is, I find that he had not complied with or shown that he had complied with, 1 or more of the pre-conditions that are set-out under section 42(1) of the BGI Act.

COST

25. An award of cost is discretionary. Cost will follow the event based on the standard cost scale. The plaintiff Dima Malem will pay the defendants’ costs of the proceeding on a party to party basis which may be taxed if not agreed.

ORDERS OF THE COURT

26. I make the following orders:

1. The proceeding is dismissed for want of standing and jurisdiction, and for abuse of court process.
   
2. The plaintiff shall pay the defendants’ costs of the proceeding on a party to party basis which may 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.
________________________________________________________________

Konjib & Associates Lawyers: Lawyers for the Plaintiff

Williams Attorneys: Lawyers for the First Defendant

Manase & Co. Lawyers: Lawyers for the Second Defendant