Niugini Logistics & Construction Co Ltd v Fearon [2020] PGNC 270; N8584 (19 October 2020)

N8584

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) NO. 916 OF 2019

BETWEEN:
NIUGINI LOGISTICS & CONSTRUCTION COMPANY LIMITED
First Plaintiff

AND:
RAGA SIMEON AND BARBRA MON in their capacities as Board of Directors of Niugini Logistics & Construction Company Limited
Second Plaintiffs

V

DAVID JOHN FEARON
Defendant

Waigani: Anis J
2020: 14^th & 19^th October

NOTICE OF MOTION –– request for restraining orders – Order 14 Rules 9 and 10, Order 12 rule 1, National Court Rules – section 155(4) – Constitution – whether arguable case demonstrated – whether balance of convenience favours granting of the interim injunctions – undertaking as to damages – whether discretion should be exercised

Cases Cited:

Re L & A ILB (PNG) Limited (1-4935) (2019) N8157
Shelley Launa Kupo v. Westpac Bank (PNG) Limited (2014) N5881
Re Kimbe Nivani properties Ltd (2017) N7696
AGC (Pacific) Limited v. Woo International Textile Pty Ltd [1992] PNGLR 100

Counsel:

Mr. W Hagahuno, for the Plaintiffs
Mr. M Wenge, for the Defendant

RULING

19^th October, 2020

1. ANIS J: The plaintiffs applied for various restraining orders against the defendant. The application was contested. It was heard on 14 October 2020. I reserved my ruling thereafter to a date to be advised.

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

BACKGROUND

3. The plaintiffs are seeking various declaratory orders in their Originating Summons (OS). Of them all, the 2 primary relief pleaded are, and I quote:

1. A declaration that the Second Plaintiffs are the lawful directors of the First Plaintiff and are therefore responsible for the management and control of the First Plaintiff.
   
2. A declaration that, the Defendant Mr David John Fearon is not the owner, employee and or authorized agent of Niugini Logistics Limited and was never at any time appointed and or authorized by the Plaintiffs to act for and on behalf of the First Plaintiff.
   

NOTICE OF MOTION

4. The plaintiffs’ notice of motion (NoM) was filed on 29 August 2020. In summary, they allege that the defendant resides at a rented site of the first plaintiff’s premises which is located on a customary land outside Port Moresby at Laloki in Central Province. They claim that the site belongs to the first plaintiff under a customary lease for the upkeep or storage of the first plaintiff’s plants, assets, and equipment.

5. The sources relied upon in the NoM are Order 14 Rules 9 and 10 and Order 12 Rule 1, of the National Court Rules, and section 155(4) and the Constitution. They are not contested. As such, I will proceed to address the relief.

6. The NoM seeks the following main relief:

2. Pending the final determination of the substantive proceeding, the Defendant be restrained from further removing, dealing with and or disposing of all or any of the assets, properties, tools, equipment and or machinery of the First Plaintiff pursuant to Order 14 Rules 9 and 10 as well as Order 12 Rule 1 of the National Court Rules.
3. The defendant be restrained from entering and or occupying the First Plaintiff’s property on its premises at Portion 239, Laloki, Central Province pursuant to Order 12 Rule 1 of the National Court Rules and section 155(4) of the Constitution.
4. That the Defendant return forthwith to the company premises at Portion 239, Laloki, Central Province all of the properties, machinery, tools, equipment and or assets of the First Plaintiff he has removed from the company premises within 3 days of this Court (sic) pursuant to Order 12 Rule 1, Order 14 Rules 9 and 10 of the National Court Rules.
5. That the Second Plaintiffs and all of the remaining shareholders be ordered and directed to have custody and control over the First Plaintiff’s properties and or assets until the final determination of the within proceeding.

......

ISSUE

7. The main issue, in my view is whether there is a serious or an arguable case that is filed or pending.

DERIVATIVE ACTION?

8. In addressing the merit of the matter, the first preliminary point raised by the defendant is this. He says the case is unmeritorious because it is flawed; it says the second plaintiffs did not seek leave of the Court, as required under the Companies Act 1997 (the Companies Act) to file a derivative action for or on behalf of the first plaintiff.

9. Counsel for the plaintiffs, with respect, makes no valid or meritorious submissions on point in reply except to say that the action was duly commenced by the plaintiffs.

10. The relevant provision is s. 143(1). It reads:

Division 3.—Derivative Actions.

143. Derivative actions.

(1) Subject to Subsection (3), the Court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to—

(a) bring proceedings in the name and on behalf of the company or any related company; or

(b) intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be.

11. When I look at the evidence and consider submissions of the parties, I observe these. The second plaintiffs are directors and shareholders of the first plaintiff. They are aggrieved by the actions of the defendant. Also in evidence, are documents or information which appear to show that the first plaintiff and another company called Dusty’s Ltd, have engaged the defendant to operate as a manager and to, amongst others, take custody of their assets and properties. Evidence adduced by both parties appears to show that the properties and assets in question, either belong to the 2 companies or only one of them. The defendant claims that he was duly appointed or assigned by a power of attorney dated 15 October 2019, which he had executed with the 2 companies, and he submits that he therefore represents their interests. I note that the power of attorney is adduced in evidence. I also note that it is not expressly pleaded and that no relief is sought against it (i.e., the power of attorney) in the OS.

12. I find the argument raised by the defendant in regard to s. 143(1) valid. The facts and arguments disclosed, show that the second plaintiffs may have commenced the proceeding using a wrong mode or jurisdiction of the Court, that is, without invoking the Court’s powers under s. 143(1) of the Companies Act. Secondly, and in not so doing or in not obtaining leave of the Court under s. 143(1), the plaintiffs may not have standing to bring this proceeding. See cases: Re L & A ILB (PNG) Limited (1-4935) (2019) N8157, Shelley Launa Kupo v. Westpac Bank (PNG) Limited (2014) N5881 and Re Kimbe Nivani properties Ltd (2017) N7696.

13. The argument raises challenges to the mode or jurisdiction of the proceeding, and to the standing of the second plaintiffs. In commencing the proceeding, the second plaintiffs, it seems in fact are seeking to act for and on behalf of the first plaintiff, in relation to the relief that they seek in the OS. And if that is the case, which appears so based on the evidence adduced and submissions by the parties, then it raises the valid question of whether the cause of action is a derivative action where leave shall be required under s. 143(1) of the Companies Act, and therefore whether the OS that is filed herein has no merit or is misconceived.

SERIOUS CONTROVERSY

14. Is there any serious controversy in the relief sought in the OS? I refer to the 2 primary relief. The plaintiffs firstly seek a declaration that the second plaintiffs are the directors of the first plaintiff. The relief, in my view, appears to have various flaws. I cover the first one above in my decision, that is, of the real possibility that the second plaintiffs may have commenced the proceeding without proper basis and perhaps contrary to s. 143(1) of the Companies Act. The second flaw is this. The relief may not be attainable as it seeks declaration for the directors and shareholders, to run the day to day affairs of the first plaintiff, which is not their role under law. A director’s role is to report to the shareholders and make executive decisions for the company. A shareholder may own a share or shares in a company. However, the day to day affairs of the company is carried out by its chief executive office, or its company secretary or general manager. See case: AGC (Pacific) Limited v. Woo International Textile Pty Ltd [1992] PNGLR 100.

15. Because of my findings on the first matter (re derivative action), it also affects or puts into question the validity of the second primary relief. Without possibly obtaining leave under s. 143(1) of the Companies Act to institute a derivative action, it is arguable whether the plaintiffs or the second plaintiffs, have standing to seek the 2 primary relief, and in this case, relief such as a declaration that the actions taken by the first plaintiff to appoint the defendant or his firm to manage the properties of the first plaintiff and Dusty’s Limited, are null and void or had been obtained without lawful authorization.

OTHER CONSIDERATIONS

16. I note that the second plaintiffs have given an undertaking as to damages. Given my findings above, I must say that it is uncertain whether such undertaking may be regarded as valid. I find uncertainty in the undertaking that is given by the plaintiffs.

17. The balance of convenience, in this case and based on the facts of the matter, in my view, do not support the plaintiffs’ cause or proceeding as pleaded in the OS. The jurisdiction of the proceeding, the capacities of the plaintiffs and the merit of the proceeding, are doubtful as I state above in my decision. As such, the balance of convenience does not favour any grant of injunctions as this stage or juncture.

SUMMARY

18. In summary, I am not satisfied or convinced that I should exercise my discretion and grant the interim restraining orders as sought by the plaintiffs in their NoM The NoM shall fail.

COST

19 Awarding cost in this instance is discretionary. I do not see any valid reason why it should not follow the event. Cost of this NoM will be awarded to the defendant on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

20. I make the following orders:

(i) The plaintiffs’ notice motion filed on 29 August 2020 is dismissed in its entirety.

(ii) The plaintiffs shall pay the defendant’s cost of the application on a party/party basis to be taxed if not agreed.

(iii) Time for entry of these orders is abridged to the date and time of settlement by the Registrar which shall take place forthwith.

The Court orders accordingly.

Williams Attorneys: Lawyer for the Plaintiffs
Luthers: Lawyers for the Defendant