Badui v Westpac Bank (PNG) Ltd [2022] PGNC 165; N9631 (13 May 2022)

N9631

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 758 OF 2014

BETWEEN:
MICHAEL BADUI
First Plaintiff

AND:
CABARAN IHKLAS (PNG) LTD
Second Plaintiff

AND:
WESTPAC BANK (PNG) LTD
Defendant

Waigani: Shepherd J
2019: 12^th September
2022: 13^th May

EQUITABLE REMEDIES – principles of fiduciary relationship – banker and customer relationship – banker has no fiduciary duty to customer in absence of superadded obligations such as where banker is trustee and customer is beneficiary or where banker obtains hidden advantage or in conflict situation – fiduciary duty can arise where banker provides negligent specialist financial advice to customer who relies on that advice to customer’s detriment – no fiduciary relationship established in this case.

TORTS – tort of conversion – principles of tort of conversion - conversion involves intentional physical exercise of control over a chattel which interferes with rights of the person entitled to ownership or possession of chattel – the right of customer of a bank to require reimbursement of money paid to a bank account is a chose in action – tort of conversion does not apply to choses in action – no cause of action in tort of conversion against defendant bank in this case.

BANKING LAW – relationship of banker and customer is one of debtor and creditor – banker has contractual obligation to repay equivalent sum as that which is banked by customer – banker must exercise reasonable care in discharge of its duties to customer.

COMPANY LAW – change of company director – statutory procedures for appointment and removal of company director prescribed by ss. 86, 87, 103, 104, 105, 130, 131, 132, 133, 134 and Schedule 2 s.2 of Companies Act 1997 - company director can only be removed by resolution of shareholder(s) or order of Court - whether changes in this instance were made in accordance with Companies Act 1997 – requirements for change of company director not complied with by plaintiffs.

Cases Cited:
The following cases are cited in the judgment:

Papua New Guinea Cases

ANZ Banking Group (PNG) Ltd v Lafana (2020) N8732
Baine v The State (1995) N1335
Buna v The State (2004) N2696
Covec (PNG) Ltd v Kama (2020) SC1912
Kopung Brothers Business Group v Kasieng [1997] PNGLR 331
Kuyan v Sallel (2008) N3376
Lalip v Sheekiot & The State (1996) N1457
Liwa v Vanimo (2008) N3486
Mappa v PNG Electricity Commission [1995] PNGLR 170
Mel v Pakalia (2005) SC790
Paklin v The State (2001) N2212
Palapi v Sergeant Poko (2001) N2274
Paraia v The State (1995) N1343
Pawa v Yumbun (2009) N3784
Poia v ANZ Banking Group (PNG) Ltd (2001) N2409
Putto v Sallel (2015) N5845
Spirit Haus Ltd v Marshall (2004) N3630
T.T. Anore Noa Hai Investment Ltd v Buna (2019) N7881
Wahad v Wilkinson SC1912 (2006) PGNC 94
Wanis v Sheekiot & The State (1995) N1350

Overseas Cases

Lloyds Bank Ltd v Bundy [1974] EWCA Civ 8; [1975] Q.B. 326
OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1, [2008] 1 All ER (Comm)

Texts

Chitty on Contracts Vol. 2 Specific Contracts, 31st Ed. (2012)
Osborne’s Concise Law Dictionary, 10th Ed. (2005)
Salmond on the Law of Torts, 16th Ed. (1973)
Halsbury’s Laws of England, 5th Ed. Vol.13 (2009)

Counsel:

John Goava, for the Plaintiffs
Maryanne Tusais, for the Defendant

DECISION

13th May, 2022

1. SHEPHERD J: The plaintiffs claim in their writ of summons that the defendant bank unlawfully dissipated funds in the sum of K130,000 held in the second plaintiff’s operating account and K2.5 million allegedly held in an interest bearing deposit or trust account, these reputed actions by the defendant bank having been said by the plaintiffs to have resulted in the second plaintiff’s loss of business income estimated at K72 million. The plaintiffs’ causes of action pleaded in their statement of claim are breach of fiduciary duty and conversion by the defendant bank.
   

BACKGROUND

2. The second plaintiff, Cabaran Ikhlas (PNG) Ltd (the Company), was incorporated under the Companies Act 1997 on 6 March 2009. The sole director and sole shareholder of the Company at the time of its incorporation was Ragooravaran Raman Velayudhan (Mr Raman).
   
3. Mr Kakau Billy Buribudo (Mr Buribudo) was appointed as the corporate secretary for the Company upon incorporation. However, at all material times Mr Buribudo was never a director or shareholder of the Company.
   
4. On 7 May 2009 the Company obtained certification as a foreign enterprise under s.29(2) of the Investment Promotion Act 1992 permitted under that Act to carry on business in Papua New Guinea as a purchaser, processor and exporter of rubber and rubber products.
   
5. On or about 10 February 2010 Mr Raman opened operating account no. 6001690824 (the Account) for the Company at the Port Moresby branch of Westpac Bank (PNG) Ltd (Westpac).
   
6. Mr Raman’s Notice of Authority dated 10 February 2010 notified Westpac that he was the sole authorised signatory for the Account.
   
7. Mr Raman’s Notice of Authority to Westpac was accompanied by a Profile document which stated that the Company had expanded its business operations in Papua New Guinea from rubber processing and export to include the supply of construction and earthmoving equipment, IT and electronic products as well as marine and project management.
   
8. Westpac dealt with Mr Raman as the authorised signatory of the Account for an initial period of just over 9 months, from 10 February 2010 to 25 November 2010.
   
9. However, by letter dated 26 November 2010 printed on the letterhead of the Company, the first plaintiff (Mr Badui) notified Westpac, with supporting documentation from the Investment Promotion Authority (IPA), that Mr Badui had replaced Mr Raman as the sole shareholder and sole director of the Company and that the new signatories for the Account were Mr Badui and the Company’s corporate secretary Mr Buribudo in lieu of sole signatory Mr Raman.
   
10. Westpac’s records for the Account were changed on 29 November 2010 to show that the authorised signatories for the Account were Mr Badui and Mr Buribudo. The balance of the Account at that date was K188,108.35.
    
11. On 2 December 2010 Mr Badui was allowed by the Bank to make a cash withdrawal from the Account of K45,000, leaving a balance in the Account of K143,108.35.
    
12. On or about 10 December 2010 Westpac received a copy of a letter dated 6 December 2010 addressed to the Commissioner of Police from the Investment Promotion Authority (IPA). The IPA intentionally forwarded a copy of that letter to Westpac. The letter was signed by an unidentified person “for Alex Tongayu, Registrar of Companies”. The last paragraph of the letter nevertheless stated: “For any queries, do not hesitate to contact MALIS MANINGI of our office”. This copy letter informed Westpac that the legality of the change of ownership of the Company was in dispute by Mr Raman and that the change of ownership notified by Mr Badui was under investigation by IPA. Westpac’s officers understood the copy letter to mean that Westpac was on notice that until a finding on IPA’s investigation was made, no reliance should be placed by Westpac on the purported company records as to the change of ownership of the Company which had accompanied Mr Badui’s letter to Westpac dated 26 November 2010.
13. Westpac, by way of response to the copy letter dated 6 December 2010 from the IPA to the Commissioner for Police, placed a “Post No Debit” restriction on the Account as soon as the Bank received the copy of IPA’s letter on 10 December 2010. The purpose of that restriction was to prevent Mr Badui, Mr Buribudo and Mr Raman from making any further withdrawals from the Account pending further advice from the IPA or the Commissioner for Police.
14. By letter dated 16 December 2010 addressed to the Commissioner of Police and copied to Westpac, the Registrar of Companies recalled the IPA’s letter of 6 December 2010. The letter dated 16 December 2010 from IPA was this time personally signed by Registrar of Companies Alex Tongayu (Registrar Tongayu) who stated that the IPA’s earlier letter of 6 December 2010 had not been authorised by him and that it had been written at a time when he was out of the country. Registrar Tongayu’s letter of 16 December 2010 concluded with the statement: “I have placed the company under restricted access to avoid any further changes to the file, until further notice”.
    
15. On 16 December 2010 Mr Raman was instrumental in obtaining a series of interim restraining orders against Mr Badui in proceeding OS No. 864 of 2010 – Cabaran Ihklas (PNG) Ltd & Cabaran Movers (PNG) Ltd -v- Michael Badui & Investment Promotion Authority. The interim orders restrained Mr Badui from occupying the Company’s premises at Allotment 26 Section 25, Aviat Street, Konedobu, National Capital District and at Allotment 9 Section 59, Gordons, National Capital District. Mr Badui was also ordered, among others, to return to the Company its sales documentation, books of account and other records which Mr Badui had removed from the Company’s premises, including a laptop and cash in the sum of K8,000.
    
16. On 20 December 2010 Westpac’s then Operational Risk and Compliance Manager, Mr Adam Van Haeften, sent an internal email to Westpac’s staff instructing them that the Account was to remain under “Post No Debit” status until Westpac had received verification of ownership of the Account from the proper authorities.
    
17. Proceeding OS No. 864 of 2010 was dismissed by Davani J on 7 January 2011 because the suit had been commenced by an incorrect mode of proceedings; the suit should have been instituted by writ of summons, not originating summons. Her Honour gave liberty not only to the plaintiff companies represented by Mr Raman but also to Mr Badui to file fresh proceedings by way of writ of summons and statement of claim to deal with their respective grievances regarding the disputed ownership and directorship of the Company.
    
18. Westpac was informed of the dismissal of proceeding OS No. 864 of 2010 by letter dated 10 January 2010 from Apo & Co Lawyers, the law firm that was then acting for Mr Badui.
    
19. On 11 January 2011 Mr Raman and Cabaran Movers (PNG) Ltd commenced fresh suit in the National Court against Mr Badui, Registrar Tongayu and the IPA: WS No. 6 of 2011 - Ragoovaren Raman Valayudhan & Cabaran Movers (PNG) Ltd v Michael Badui, Alex Tongayu-Registrar of Companies & Investment Promotion Authority. Mr Badui responded with a cross-claim in that proceeding against Mr Raman, Registrar Tongayu and the IPA.
    
20. Almost three weeks later, by letter dated 31 January 2011 Registrar Tongayu notified the Company’s legal representatives at that time, Kelly Naru Lawyers, that two separate investigations at the IPA into the changes which had been made to the records of the Company by Mr Badui had been conducted. One of those investigations had been conducted by the IPA’s Managing Director Mr Ivan Pomaleu OBE; the other investigation had been carried out by Registrar Tongayu himself.
    
21. Registrar Tongayu’s letter of 31 January 2011, which was copied to Westpac and to Mr Badui, advised Kelly Naru Lawyers that the IPA’s two investigations, which were each consistent with the other, had identified “anomalies” in the process involved in the changes which had been made to IPA’s records for the Company. Registrar Tongayu’s letter stated to the effect that he had exercised his statutory power to allow the records of the Company to revert back to where they were before the changes initiated by Mr Badui on 25 November 2010 had occurred.
    
22. The IPA’s records for the Company were accordingly restored to where they stood prior to the events of 25 November 2010. Mr Badui was removed from the records of the IPA for the Company as the purported sole director and sole shareholder of the Company with effect from 6 January 2011. Mr Raman was correspondingly reinstated in the IPA records to his previous position as the Company’s sole director and 100% shareholder, also with effect from 6 January 2011.
    
23. Westpac subsequently lifted its “Post No Debit” directive to its staff in connection with the Account of the Company, thereby allowing Mr Raman as sole signatory to resume operating the Account.
    
24. Westpac allowed the Account to be closed by the Company on 23 June 2011, which is when the balance of funds in the Account then amounting to K105,045.90 were transferred to Cabaran Movers (PNG) Ltd on instructions which Westpac had received from Mr Raman.
25. On 21 June 2013, two years after closure of the Company’s Account with Westpac, a negotiated settlement of Mr Raman’s claim and Mr Badui’s cross-claim in proceeding WS No. 6 of 2011 was evidenced by an order made by consent of the parties in that proceeding. Leave was granted by the Court for the proceeding to be discontinued on the basis that the parties had agreed that Registrar Tongayu was to “grant leave to Michael Badui to be reinstated as a director and 100% shareholder of Cabaran Ikhlas (PNG) Ltd.”
26. Following the discontinuance of proceeding WS No. 6 of 2011 pursuant to the order of the National Court made by consent on 21 June 2013, Mr Badui was allowed by Registrar Tongayu to be duly reinstated in the records of the Company held by the Office of the Registrar of Companies as the sole director and sole shareholder for the Company. Mr Badui then wrote on behalf of the Company to Westpac on 30 July 2013 and insisted that Westpac give him access to the Account. Mr Badui made demand for bank statements for the Account and bank statements for an alleged IBD account. He also made demand for “reimbursement of all monies in the sum of K800,000-00 in the operating account and about K4,000,000 plus interest incurred in an IDB [sic] account to date.”
27. Westpac’s lawyers, Leahy Lewin Nutley Sullivan, replied to Mr Badui’s letter of 30 July 2013 on 2 August 2013 and advised Mr Badui that he could expect Westpac’s formal response within the coming fortnight. Westpac then informed Mr Badui, as it had done on previous occasions, that it was holding no funds at all for the Company as the Account had already been closed by Mr Raman two years earlier, on 23 June 2011. Westpac also denied that it had ever held any IBD account for the Company.
28. Mr Badui and the Company then commenced this current proceeding WS No. 758 of 2014 against Westpac on 14 July 2014.

THE PLAINTIFFS’ CLAIM

29. The substantive relief which is sought against Westpac by Mr Badui and the Company in this suit WS No. 758 of 2014 is pleaded as follows:

a) Damages for conversion and or breach of fiduciary duty in the amount of K130,000 in respect of the Account.

b) Damages for conversion and or breach of fiduciary duty in the amount of K2.5million in respect of the Plaintiffs’ interest bearing deposit account or trust account.

c) Punitive or exemplary damages in the sum of K5million.

d) Damages for past economic loss or loss of business to the amount of K72million to December 2013 or such other amount to be assessed to date of judgment.

e) Interest pursuant to statute.

f) Costs.

30. Westpac’s defence, filed on 11 November 2016 pursuant to an order of the Supreme Court issued on 27 October 2016 in SCA No. 140 of 2015, has pleaded, among others, that Mr Badui and Mr Buribudo did not have the power or authority of the board of the Company to change the mandate for the operation of the Account with Westpac on 25 November 2010 and that at all material times Mr Raman was the sole shareholder and sole director of the Company having the lawful power pursuant to s.109 of the Companies Act 1997 to manage the business and affairs of the Company, including the power to operate the Account. By its defence, Westpac has formally denied that it ever held an interest bearing deposit or trust account in the sum or K2.5million for the Company. Westpac has also pleaded that at all material times it only had a banker/customer relationship with the Company. All allegations that Westpac owed any fiduciary duties to Mr Badui and the Company or that it converted monies in the Account have been denied by Westpac.

PARTIES’ EVIDENCE AT TRIAL

31. It is not in dispute by Westpac that as from 21 June 2013, the date the consent order was made in proceeding WS No 6 of 2011, Mr Badui has thereafter been entitled to be the lawful sole director and 100% shareholder of the Company. Westpac’s contention is that at all material times prior to the making of that consent order by the Court on 21 June 2013, it was Mr Raman, not Mr Badui, who had the exclusive lawful mandate pursuant to s.109 of the Companies Act 1997 to manage the business and banking affairs of the Company.
32. I observe at this juncture that for the purposes of the trial, the evidence of the Company as second plaintiff in this suit was the same as the affidavit evidence of Mr Badui given by him in his dual capacity for himself personally and in his role as the present sole director and sole shareholder of the Company, which changes only came about following the making of the consent order in WS No. 6 of 2011 on 21 June 2013. References in this Decision to Mr Badui and his evidence should accordingly be read and be deemed to extend to and include the Company and its evidence. The evidence is one and the same for both Mr Badui and the Company as first and second plaintiffs.
33. Mr Badui, and therefore also the Company, relied at trial on 12 September 2019 on two affidavits. The preponderance of their evidence is contained in Mr Badui’s primary affidavit sworn on 31 May 2018 which was filed the same day by Apo & Co, the law firm which, after a hiatus, had resumed acting for Mr Badui at that time.
34. At trial, objection to portions of Mr Badui’s affidavit of 31 May 2018 was made by Ms Maryanne Tusais, counsel for Westpac. Ms Tusais argued that paragraphs 29, 36, 45 and 48 of Mr Badui’s affidavit were objected to on the ground that they comprised matters of opinion or were scandalous. I upheld the objection and struck those paragraphs from Mr Badui’s affidavit on those grounds.
35. Mr Badui and the Company also relied at trial on an earlier affidavit sworn by Mr Badui on 4 November 2015. This earlier affidavit had been filed by Mr Badui in person at a time when he did not have any lawyer representing him. The affidavit was drafted by Mr Badui himself and contained extensive objectionable opinion material and hearsay which seriously breached the Court’s rules of admissibility of evidence.
36. The earlier affidavit of Mr Badui also made a number of scandalous allegations against Westpac and its senior employees without providing any factual basis at all. The allegations were unfounded conjecture on the part of Mr Badui.
37. Ms Tusais for Westpac therefore objected at trial to admission into evidence of the whole of Mr Badui’s earlier affidavit of 4 November 2015, notice of objection under the Evidence Act to that affidavit having already been given by her to Mr Badui’s previous lawyer, Mr Jimmy Apo of Apo & Co Lawyers.
38. However a notice of change of lawyers for Mr Badui and the Company had been filed by Mr John Goava of Sannel Lawyers on 6 September 2019. This was less than a week before trial on 12 September 2019. As Mr Goava was not a party to email correspondence dated 27 May 2019 from Mr Apo to Ms Tusais wherein Mr Apo had stated that Mr Badui would not be relying at trial on Mr Badui’s affidavit of 4 November 2015, Mr Goava was at a distinct disadvantage as Mr Badui was clearly insisting to Mr Goava at trial to endeavour to have his earlier affidavit admitted into evidence. In the result, to avoid any perceived injustice to Mr Badui, I ruled that Mr Badui’s earlier affidavit of 4 November 2015 be admitted into evidence but I struck out paragraphs 23 and 42 of that affidavit as the content of those paragraphs clearly offended this Court’s rules of admissibility of evidence. I also stressed to the parties at trial that any further matters of hearsay and matters of opinion on the part of Mr Badui contained in his two affidavits would be disregarded by the Court.
39. As for Westpac, it relied at trial on two affidavits sworn on 29 May 2015 and 31 July 2018 by its former Operational Risk and Compliance Manager, Ms Olive Whippy. These two affidavits have annexed to them copies of Westpac’s business records in connection with the Company’s subject bank account, items of correspondence said to be relevant to matters in issue in this suit, various Court orders made in proceeding OS No. 864 of 2010 and copies of publicly accessible records held by the IPA in respect of the Company. These two affidavits of Ms Whippy were admitted into evidence at trial without objection from Mr Goava for Mr Badui and the Company.

ISSUES

40. There are five legal issues which the parties mutually agreed in their revised statement of facts and legal issues filed on 30 May 2018 (Revised Statement) should be determined by the Court in this proceeding:
    

(1) Whether Westpac acted unlawfully and without justification in not allowing Mr Badui to deal with the Company’s Account?

(2) Whether Westpac acted unlawfully in dealing with Mr Raman as the authorised signatory of the Company’s Account?

(3) Whether there was a breach of fiduciary duty by Westpac?

(4) Whether Westpac’s conduct amounts to conversion?

(5) Whether Westpac’s conduct has caused Mr Badui and the Company economic loss? If so, what are the damages to which Mr Badui and the Company entitled?

41. Having perused the Revised Statement in the context of the pleadings and having now had the benefit of presentation of the parties’ evidence, I take the view that issues (1) and (2) are two sides of the same coin. I therefore consider that there are four core legal issues which remain for determination by the Court in this proceeding:

(1) Did Westpac act unlawfully and without justification in not allowing Mr Badui to deal with the Company’s Account and instead dealing only with Mr Raman in respect of that Account?

(2) Did Westpac owe any fiduciary duty to Mr Badui or the Company?

(3) Did Westpac’s conduct amount to conversion?

(4) Did Mr Badui and or the Company sustain any economic loss as a result of Westpac’s conduct? If so, what is the quantum of damages to which Mr Badui and or the Company are entitled?

CONSIDERATION

Issue 1: Did Westpac act unlawfully and without justification in not allowing Mr Badui to deal with the Company’s Account and instead dealing only with Mr Raman in respect of the Account?

42. It is an agreed fact that the Company was incorporated on 6 March 2009. At the time of its incorporation, the sole director and 100% shareholder of the Company was Mr Raman. The various IPA records of the Company presented in evidence showed that the Company had never adopted any constitution under s.33 of the Companies Act 1997.
43. Mr Badui asserts in his primary affidavit of 31 May 2018 that prior to incorporation of the Company on 6 March 2009, he had first met Mr Raman at some point between late December 2008 and early February 2009. Mr Badui says that Mr Raman, a Malaysian national, was interested in setting up business in Papua New Guinea. Mr Badui says that he suggested to Mr Raman that the two of them should enter into a joint venture arrangement to import heavy machinery such as graders, excavators, cranes, dump trucks and computer equipment which could then be supplied by the company to landowners in connection with the State’s liquid natural gas project. According to Mr Badui, Mr Raman agreed to this arrangement.
44. Mr Badui contends in item 1 of the Revised Statement filed by Apo & Co Lawyers on 30 May 2019, a year after the filing of his primary affidavit on 31 May 2018, that a meeting took place between himself and Mr Raman on 4 February 2009 at which it was agreed that he and Mr Raman were to be equal shareholders and joint directors in a company to be incorporated for the purpose of conducting their new business operations. Mr Badui says in item 1 of the parties’ Revised Statement that it is a fact that “relevant companies forms were filled” at that meeting, which apparently took place a month before incorporation of the Company on 6 March 2009.
45. However, this assertion by Mr Badui that the forms necessary to reflect his equal shareholding and directorship in the new company were signed by Mr Raman and himself at the meeting held on 4 February 2009 runs counter to what Mr Badui himself states in [6] and [7] of his primary affidavit of 31 May 2018. Mr Badui deposes in those paragraphs as follows:

“6. Because Ramen [sic] had already incorporated the Second Plaintiff on the 6th of March 2009, all I had to do was fill and sign relevant company forms such as the Share Transfer Form and Notice of Change of Directors Form to become a shareholder and Director in the Second Plaintiff.

7. Ramen [sic] was going to do the necessary paper work and register the forms to ensure that I was appointed equal shareholder and Director in the Second Plaintiff. This was then to allow the Second Plaintiff to trade in any business with a status as a local company because the initial foreign enterprise certification was for rubber.”

46. If Mr Badui’s contentions in [6] and [7] of his primary affidavit that he was to sign forms for his appointment as a director and shareholder after Mr Raman had incorporated the company are to be believed in preference to Mr Badui’s contradictory assertion in the Revised Statement that he signed those forms prior to incorporation of the Company, then Mr Badui gives no dates in his primary affidavit as to when he may have allegedly signed those forms, no copies of which were adduced in evidence at trial.
47. An historical extract for the Company issued by the IPA as at 30 September 2009, a date which is almost 7 months after the Company was incorporated on 6 March 2009, forms part of annexure “OW3” to the affidavit of Ms Whippy filed on 29 May 2015. The IPA extract indicates that on incorporation of the Company, Mr Raman as sole shareholder was issued with 10,000 subscriber ordinary shares. He was appointed as the Company’s sole director. His residential address was given as Allotment 9 Section 59, Boroko, National Capital District, Papua New Guinea. The corporate secretary for the Company was Mr Buribudo, whose appointment took effect on 6 March 2009, the date of incorporation of the Company. Mr Buribudo’s residential address as stated in the extract is, coincidentally, the same as the residential address given for Mr Raman.
48. Mr Badui deposes in his primary affidavit that after the Company was incorporated on 6 March 2009, it imported a lot of heavy roading machinery and computer equipment from Malaysia. Mr Badui says that by March 2010 the Company was a thriving business with 34 employees and assets valued at more than K12million. Mr Badui says that his role in the Company at that stage was that of chief executive officer and managing director based in Port Moresby whereas Mr Raman was the Company’s representative stationed in Malaysia. According to Mr Badui, all capital in the Company was provided by Mr Badui, not Mr Raman, who he says contributed nothing at all to the financial establishment and operations of the company.
49. I observe that as Mr Raman is not a party to this proceeding WS No. 758 of 2014 and as Mr Raman was not called or summonsed to give evidence at trial on 12 September 2019, presumably because he was no longer in Papua New Guinea, the Court has had no opportunity to receive or hear any evidence from Mr Raman in response to the many allegations made against him by Mr Badui.
50. In [13] to [15] of his primary affidavit, Mr Badui says that Mr Raman went abroad in May 2010 for 6 months taking a substantial (but unquantified) amount of cash with him, leaving Mr Badui to run the Company. Mr Badui asserts that on 15 November 2010 he discovered that Mr Raman, in concert with a Mr Jeffrey Kaki, had taken steps to establish a new company known as Cabaran Movers (PNG) Ltd with intent to move all assets and cash from the Company into the new company. Mr Badui says that it was at that point that he conducted urgent company searches at the IPA and discovered that, contrary to his understanding of his arrangements with Mr Raman, he had never been registered in the records of the Office of the Registrar of Companies at the IPA as a shareholder and director of Cabaran Ikhlas (PNG) Ltd at all.
51. Mr Badui then took steps to convene what he describes as a meeting of directors of the Company on 25 November 2010 with the intention of removing Mr Raman as sole director of the Company and transferring Mr Raman’s 10,000 shares to himself.
52. Set out in full hereunder is the text of the minute of the meeting which Mr Badui says was held on 25 November 2010, a copy of which minute is annexure “C6” to Mr Badui’s primary affidavit:

“ MINUTE OF THE DIRECTORS OF CABARAN IKHLAS (PNG) LTD HELD AT LAMANA HOTEL ON THE 25th NOVEMBER 2010

PRESENT

MICHAEL BADUI – DIRECTOR
KAKAU BURIBUDO – SECRETARY

Michael Badui the recently appointed director declared the meeting opened at 10 am and advise[d] those present that he called for the urgent meeting to discuss and resolve important issues affecting the company. Importantly the immediate removal of the Chief Executive Officer (CEO) Mr. Ragoovaran Raman VELAYUDHAN for misconduct in office and misappropriations of company funds and the appointment of the new CEO.

1: REMOVAL OF MR. RAGOOVARAN RAMAN VELYUDHAN

Mr Badui told the board that Mr. Ragoovaran Raman Velayudhan has failed to manage the company professionally and his conduct in the country has been questionable therefore should be removed and replaced [by a] fit and proper person.

RESOLUTION

It was resolved that Mr. Velayudhan be terminated effective as of date of this board meeting and Mr. Michael Badui be appointed to the position of Chief Executive Officer and the chairman of the board of directors.

2. SHARE TRANSFER

Mr Badui produced documentation showing that he has expended substantial funds and deployment of his personal assets in setting up the company’s operation in the country. He demanded that the shares of 10,000 held by Mr. Velayudhan be transferred to him in lieu of his commitment to the company.

RESOLUTION

It was resolved that the 10,000 ordinary shares held by Mr. Ragoovaran Raman Velayudhan be transferred to Mr. Michael Badui.

[3.] CHANGE OF SIGNATURES OF THE COMPANY ACCOUNT

The board deliberated on the signatures of the company bank account and other legal document[s] and agreed that all signatures to be changed immediately.

RESOLUTION

It was resolved that the signatures of the bank accounts be changed immediately. Mr. Velayudhan and other signatures [sic] be removed and the new signatures will be Mr Michael Badui the new CEO and the chairman and Mr. Kakau Buribudo the company secretary.

It was further resolved that any one of the signatures can sign.

The board directed the company secretary to file appropriate changes to Investment Promotion Authority and the bank as soon as possible.

There was no other business so the meeting was declared closed at 11 am.

[signature] [signature]
Michael Badui Kakau Buribudo
Chairman Company Secretary ”

53. Immediately after the holding of the purported directors’ meeting on 25 November 2010, Mr Badui managed to lodge with the Office of the Registrar of Companies at the IPA the very same day the following documents in connection with changes to the Company’s directorships and shareholdings, being forms prescribed by the Companies Act 1997:
    1. Notice of Change of Directors and Particulars of Directors (Form 16) giving notice that Mr Raman had allegedly ceased to be a director of the Company on 25 November 2010. This Notice also incorrectly stated that Mr Badui was a “continuing director”, whereas the evidence before this Court shows that the IPA, that is to say the Office of the Registrar of Companies, had no record at that stage of Mr Badui having ever been previously appointed as a director of the Company.
    2. Notice of Change of Shareholder (Form 13) giving notice that Mr Badui was as from 25 November 2010 reputedly now the holder of 20,000 ordinary shares in the Company, including the 10,000 subscriber ordinary shares previously held by Mr Raman.
54. The IPA’s historical extract for the Company as at 25 November 2010 which is annexure “C5” to Mr Badui’s primary affidavit states:

“Shareholders

Michael BADUI Nationality: PAPUA NEW GUINEA
Date of Birth: 13-Mar-1962
Class: Number of Shares Date
ORDINARY 10000 (ISSUED) 24 November 2010
ORDINARY 10000 (ISSUED) 25 November 2010”

55. I observe that no evidence was adduced by Mr Badui at trial to explain why the 10,000 ordinary subscriber shares which were allotted to Mr Raman on incorporation of the Company on 6 March 2009 were suddenly doubled. However I infer that it is Mr Badui’s position that he somehow caused a further allotment of 10,000 shares to be issued by the Company on 24 November 2010, a day before the purported directors’ meeting held on 25 November 2010, so that he could transfer to himself at the directors’ meeting a total of 20,000 shares, including Mr Raman’s shareholding of 10,000 shares. I note that the IPA’s historical extracts of the Company adduced in evidence at trial, which give particulars of the Company’s shareholdings on and after 25 November 2010, all refer to the Company as having a total issued number of 20,000 ordinary shares, not 10,000 ordinary shares.
56. When Mr Badui delivered his letter dated 26 November 2010 to Westpac giving notice, with copies of the above documentation, that he had replaced Mr Raman as sole director of the Company and that the signatories for the Account had been changed to Mr Badui and the Company’s corporate secretary Mr Buribudo, Westpac had no reason to suspect the authenticity and legality of those transactions and changes to the management of the Company. I am satisfied that this is why Westpac initially allowed Mr Badui to withdraw cash of K45,000 from the Account on 2 December 2010, leaving a balance in the Account at that date of K43,108.35.
57. However Westpac’s awareness of the changes to the Company’s directorship and shareholdings which had allegedly taken place on 25 November 2010 as notified in Mr Badui’s letter to Westpac of 26 November 2010 underwent a sudden reversal on 10 December 2010. This is the date on which Westpac received the copy letter dated 6 December 2010 from the IPA to the Commissioner of Police which gave notice that the legality of Mr Badui’s change of ownership of the Company was in dispute by Mr Raman and that an investigation into that change had been commenced by the IPA. Westpac immediately placed a “Post No Debit” restriction on the Account so that no further withdrawals could be made from the Account. This restriction against withdrawals applied not only to Mr Badui and Mr Buribudo but also to Mr Raman. The restriction was to remain in place until such time as Westpac had been informed of the outcome of IPA’s investigation. I find that Westpac’s actions in this regard were entirely reasonable given the uncertainty of the Company’s ownership situation as presented in the IPA’s letter of 6 December 2010 to the Commissioner for Police and copied to Westpac and Badui.
58. Westpac did not receive notification of the outcome of the IPA’s investigation into the ownership debacle affecting the Company until Westpac received a copy of the IPA’s letter dated 31 January 2011 to Mr Raman’s lawyer at that time, Mr Charles Mende of Kelly Naru Lawyers. A copy of this letter is annexure “OW1” to the affidavit of Ms Whippy filed on 31 July 2018. This letter, which was personally signed by Registrar Tongayu, was also copied to Mr Badui. It was this letter that informed its various recipients that there had been two separate investigations at IPA into the changes which had occurred with the management of the Company. One of those investigations had been conducted by Registrar Tongayu himself; the other investigation had been separately carried by the IPA’s managing director Mr Ivan Pomaleu, OBE. The result of those two investigations was that they had identified “anomalies” in the changes to the Company’s management and shareholding which had been initiated by Mr Badui. Registrar Tongayu notified Kelly Naru Lawyers, Westpac and Mr Badui that he would exercise his statutory power under the Companies Act 1997 to allow the records of the Company to revert back to where they were before the purported changes of 25 November 2010 notified to the IPA by Mr Badui had taken place. By his letter dated 31 January 2011, Registrar Tongayu informed Kelly Naru Lawyers that Mr Raman should “lodge the necessary prescribed forms through our counter to correct the errors made on the file”.
59. Annexed to Ms Whippy’s second affidavit and marked “OW4”, “OW5” and “OW6” respectively are copies of the following duly completed forms prescribed by the Companies Act 1997, all of which forms are date-stamped as having been received by the Office of the Registrar of Companies at the IPA on 3 February 2011:

(1) Notice of Change of Shareholder (Form 13) giving notice of the transfer of 20,000 ordinary shares in the Company from Mr Badui to Mr Raman on 6 January 2011. The Notice was signed by corporate secretary Mr Buribudo and is dated 6 January 2011.

(2) Consent and Certificate of Director (Form 15) dated 6 January 2011 signed by Mr Raman and giving his consent to act as a director of the Company.

(3) Notice of Change of Directors and Particulars of Directors (Form 16) giving notice that Mr Badui had ceased to act as a director of the Company on 6 January 2011 and that Mr Raman had been appointed that same day to act as a director of the Company. The notice was signed by corporate secretary Mr Buribudo and is dated 6 January 2011.

60. As Registrar Tongayu clearly allowed registration of these three notices, Forms 13, 15 and 16, to take place following their lodgment at the Office of the Registrar of Companies at the IPA on 3 February 2011, shortly after delivery of his letter to Kelly Naru Lawyers dated 31 January 2011, I find that the legal consequence of registration of these notices was that the public records for the Company held by the Office of the Registrar of Companies at the IPA now showed that Mr Badui had been removed as a purported director and shareholder of the Company and that Mr Raman had been reinstated as the sole director of the company with effect from 6 January 2011, this time with Mr Raman holding a total of 20,000 ordinary shares instead of his original 10,000 subscriber ordinary shares.
61. At some point in time in 2011, after Westpac received Registrar Tongayu’s letter of 31 January 2011 and after Westpac had obtained copies of the Forms 13, 15 and 16 lodged with the Office of the Registrar of Companies on 3 February 2011 which showed that Mr Raman had resumed control as sole director and sole shareholder of the Company as from 6 January 2011, Westpac lifted its “Post No Debit” restriction on the Account. In so doing Westpac allowed Mr Raman to resume operating the Account as the Company’s sole authorised signatory.
62. A copy of the Company’s Notice of Authority dated 10 January 2010 which I have previously mentioned was lodged with Westpac when the Account was opened on that date and which gave notice to Westpac that Mr Raman was the Company’s only signatory to the Account is annexure “OW12” to Ms Whippy’s primary affidavit filed on 29 May 2015.
63. The bank statement print-outs for the Account which are annexure “OW13” to Ms Whippy’s primary affidavit establish that Westpac allowed Mr Raman to close the Account on 23 June 2011, at which time there was a balance in the Account of K105,045.90 which was transferred by Mr Raman to Cabaran Movers (PNG) Ltd.
64. If Mr Badui had wished to challenge Registrar Tongayu’s decision as conveyed in his letter dated 31 January 2011 to Kelly Naru Lawyers, copied to Mr Badui, to allow the official records of the Company to revert back to where they were before the purported directors’ meeting of 25 November 2010 was held, Mr Badui could have done so at that time. Mr Badui had the statutory right under s.408 of the Companies Act 1997 to appeal Registrar Tongayu’s decision in this regard. Section 408 of the Act provides:

408. Appeals from Registrar’s decisions.

(1) A person who is aggrieved by an act or decision of the Registrar under this Act may appeal to the Court within one month after the date of notification of the act or decision, or within such further time as the Court may allow.

(2) On hearing the appeal, the Court may approve the Registrar’s act or decision or may give such directions or make such determination in the matter as the Court thinks fit.

65. There was no evidence presented before me in this case to indicate that Mr Badui availed himself of s.408 of the Companies Act 1997 to appeal Registrar Tongayu’s decision to allow the records of the Company to revert to their pre-25 November 2010 position.
66. However, even if Mr Badui had appealed Registrar Tongayu’s decision to this Court, it is likely that any such appeal would have been dismissed. This is because the statutory procedures prescribed by the Companies Act 1997 for the removal of a director, the appointment of a replacement director and the transfer or acquisition of shares of Mr Raman’s shares by Mr Badui were not observed by Mr Badui when he and Mr Buribudo held the purported directors’ meeting of the Company on 25 November 2010.

Shareholders’ statutory powers of appointment and removal of a director: Sections 86, 101, 102 and 103 of Companies Act 1997

67. Unless a company’s constitution provides otherwise, the Companies Act 1997 requires that a director can only be appointed or removed by the company’s shareholders, and if there is only one shareholder, then by that shareholder. A director cannot be appointed or removed as an officer of the company by another director or by other directors. The power of appointment or removal of a director statutorily resides with the shareholders or sole shareholder of a company, as the case may be, not with the directors or a director of a company.
68. Where the shareholders of a company intend to remove a director and to appoint a replacement director, Section 86(1) of the Companies Act 1997 provides that the shareholders’ powers of removal and appointment of a director can be exercised in three ways: firstly, by shareholders in attendance at an annual meeting held in accordance with s.101; secondly, at a special meeting of shareholders held in accordance with s.102; and thirdly, by a resolution in lieu of an annual or special meeting signed by shareholders in accordance with s.103.
    
69. Section 86(1) of the Act provides:

86. Exercise of powers reserved to shareholders.

(1) Powers reserved to the shareholders of a company by this Act may exercised only –

(a) at a meeting of shareholders pursuant to Section 101 or Section 102; or

(b) by a resolution in lieu of a meeting pursuant to Section 103.

70. Section 101 of the Act requires the board of a company to call an annual meeting of shareholders within 18 months of incorporation of the company and thereafter once in each calendar year. An ordinary resolution of shareholders attending an annual meeting of a company is competent to appoint and or remove a director.
71. Section 102(1) of the Act empowers the board to call a special meeting of shareholders to deal with issues that have arisen which affect a company. Section 102(1) provides:

102. Special meetings of shareholders.

(1) A special meeting of shareholders entitled to vote on an issue –

(a) may be called at any time by –

(i) the board; or

(ii) any person who is authorised by the constitution to call the meeting; and

(b) shall be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.

An ordinary resolution of shareholders passed at a special meeting of shareholders is similarly competent to appoint and or remove a director.

72. The terms “board” and “board of directors” of a company are defined in s.108 of the Act:

108. Meaning of “board”.

In this Act, the terms “board” and “board of directors”, in relation to a company, mean–

(a) directors of the company who number not less than the required quorum acting together as a board of directors; or

(b) where the company has only director, that director.

[underlining added]

73. As Mr Raman was the sole director of the Company immediately prior to the events of 25 November 2010, it is self-evident in view of s.108 of the Act that Mr Raman constituted “the board” for the purposes of the Act. As for Mr Buribudo, the evidence shows that he was at all material times the corporate secretary of the Company. He had never been appointed as a director of the Company. Mr Buribudo was therefore not a member of the board. The board of the Company comprised one person only, namely Mr Raman.
74. The third and final mode prescribed by the Act for the appointment or removal of a director is by way of a shareholders’ resolution in lieu of a meeting which is signed by a minimum of 75% of shareholders entitled to vote in accordance with s.103. Subsections (1), (2) and (3) of Section 103 state:

103. Resolution in lieu of meeting.

(1) Subject to Subsections (2) and (3), a resolution in writing signed by not less than 75% of the shareholders who would be entitled to vote on that resolution at a meeting of shareholders who together hold not less than 75% of the votes entitled to be cast on that resolution is as valid as if it had been passed at meeting of those shareholders.

(2) A resolution in writing that-

(a) relates to a matter that is required by this Act or by the constitution to be decided at a meeting to the shareholders of a company; and

(b) is signed by the shareholders specified in Subsection (3),

is made in accordance with this Act or the constitution of the company.

(3) For the purposes of Sections 2(b), the shareholders are the shareholders referred to in Subsection (1).

75. It is a fact, not contested by Mr Badui, that Mr Raman never signed any resolution in lieu of meeting in accordance with s.103 of the Act by which he agreed to resign as a director, be replaced by Mr Badui as a director or to transfer his 10,000 ordinary subscriber shares to Mr Badui. Mr Raman never agreed to do any of those things by resolution in lieu of meeting under s.103 of the Act.

Power of National Court to call a meeting of shareholders

76. Section 104 of the Act provides that the National Court may, on application by a director, shareholder or creditor of a company, order that a meeting of shareholders be held:

104. Court may call meeting of shareholders.

(1) Where the Court is satisfied that-

(a) it is impracticable to call or conduct a meeting of shareholders in the manner specified in this Act or the constitution; or

(b) it is in the interests of a company that a meeting of shareholders be held,

the Court may order a meeting of shareholders to be held or conducted in such manner as the Court directs.

(2) Application to the Court may be made by a director, or a shareholder, or a creditor of the company.

(3) The Court may make the order on such terms as to the costs of conducting the meeting as to security for those costs as the Court thinks fit.

77. There is no evidence before this Court that Mr Badui, as a creditor of the Company said by him to have been owed reimbursement of substantial monies he invested in the Company, ever applied to this Court pursuant to s.104 of the Companies Act 1997 for an order that Mr Raman convene a shareholder’s meeting of the Company at which Mr Badui could attend to put his grievance that he had been allegedly excluded by Mr Raman from having a 50% shareholding in the Company or from having not been appointed as a director of the Company.

Procedure for appointment and removal of a director of a company

78. The statutory procedure for the appointment and removal of a director or directors of a company is to be found in ss.130, 131, 132, 133 and 134 of the Companies Act 1997, which relevantly provide:
    130. Director’s consent required.

A person shall not be appointed as a director of a company unless he has consented in writing, in the prescribed form, to be a director and certified that he is not disqualified from being appointed or holding office as a director of a company.

131. Appointment of first and subsequent directors.

(1) A person named as a director in an application for registration ... holds office as a director from the date of registration ... until that person ceases to hold office as a director in accordance with this Act.

(2) All subsequent directors of a company shall, unless the constitution of the company otherwise provides, be appointed by ordinary resolution.

132. Court may appoint directors.

(1) Where—

(a) there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and

(b) it is not possible or practicable to appoint directors in accordance with the company's constitution,

a shareholder or creditor of the company may apply to the Court to appoint one or more persons as directors of the company, and the Court may make an appointment where it considers that it is in the interests of the company to do so.

(2) An appointment under Subsection (1) may be made on such terms and conditions as the Court thinks fit.

133. Appointment of directors to be voted on individually.

(1) Subject to the constitution of the company, the shareholders of a company may vote on a resolution to appoint a director of the company only where—

(a) the resolution is for the appointment of one director; or

(b) the resolution is a single resolution for the appointment of two or more persons as directors of the company and a separate resolution that it be so voted on has first been passed without a vote being cast against it.

(2) A resolution moved in contravention of Subsection (1) is void even though the moving of it was not objected to at the time.

(3) Subsection (2) does not limit the operation of Section 136.

(4) No provision for the automatic reappointment of retiring directors in default of another appointment applies on the passing of a resolution in contravention of Subsection (1).

(5) Nothing in this section prevents the election of two or more directors by ballot or poll.

134. Removal of directors.

(1) Subject to the constitution of the company, a director of a company may be removed from office by ordinary resolution passed at a meeting called for the purpose or for purposes that include the removal of the director.

(2) The notice of a meeting referred to in Subsection (1) shall state that the purpose or a purpose of the meeting is the removal of the director.

[underlining added]

Notice of shareholders’ meetings

79. Notice of meetings of shareholders and the procedure governing shareholders’ meetings are prescribed by s.105 and Schedule 2 of the Act.
80. Section 105 of the Act states:

105. Proceedings at meetings.

The provisions of Schedule 2 govern proceedings at meetings of shareholders of a company except to the extent that the constitution of a company makes provision for the matters that are expressed in that Schedule to be subject to the constitution of the company.

81. Section 2 of Schedule 2 of the Act states:

2. Notice of meetings.

(1) Written notice of the time and place of a meeting of shareholders shall be sent to every shareholder entitled to receive notice of the meeting and to every director and an auditor of the company not less than 14 days before the meeting.

(2) The notice shall state-

(a) the nature of the business to be transacted at the meeting in sufficient detail to enable a shareholder to form a reasoned judgment in relation to it; and

(b) the text of any special resolution to be submitted to the meeting.

82. In Kuyan v Sallel (2008) N3376, Cannings J confirmed that directors of a company are, unless the company’s constitution provides otherwise, appointed and removed by the company’s shareholders. In so holding, his Honour referred extensively to the above-cited statutory provisions in the Act.
83. In relation to the appointment of directors of a company, his Honour said this at [34] and [35] of his decision:

“34. Procedures for calling and conduct of meetings of shareholders are governed by Section 105 (proceedings at meetings) and Schedule 2 (proceedings at meetings of shareholders).

35. This means that, in most cases, unless the company’s constitution provides otherwise or if directors are appointed by the Court (s.132), if a director is to be lawfully appointed, the following procedure applies:

• there must be a meeting of shareholders OR a resolution in writing in lieu of a meeting (s.103);
• the resolution must be for the appointment of one director OR if the resolution is a single resolution for the appointment of two or more persons as directors, a separate resolution that it be so voted on must first be passed without a vote being cast against it (s.133(1));
• if there is a meeting of shareholders, at least 14 days written notice of the meeting must be given to all shareholders, directors and auditors of the company (Schedule 2, s.2(1));
• the notice must state the nature of the business to be transacted at the meeting in sufficient detail to enable a shareholder to form a reasoned judgment in relations to it (Schedule 2, s.2(2));
• the question of appointment of a director must be passed by ordinary resolution, i.e. a resolution approved by a simple majority of votes of those shareholders entitled to vote and voting on the question (s.87(1), s.87(2), s.133(1));
• if there is no meeting of shareholders, the resolution for appointment of a director must meet the 75% requirements of s. 103;
• the person appointed must consent to being a director and certify that he or she is not disqualified (s.130).”

84. As for the removal of a director or directors of a company, his Honour had earlier said this at [31] and [32] of his decision in Kuyun v Sallel (supra):

“31. The Companies Act provides for removal of directors in Section 134 (removal of directors) ...

32. This means that unless the company’s constitution provides otherwise, if a director of a company is to be lawfully removed from office, the following procedure applies:
    • there must be a meeting of shareholders (s. 134(1)) OR a resolution in writing in lieu of a meeting (s. 103);
    • if there is a meeting of shareholders, at least 14 days written notice of the meeting must be given to all shareholders, directors and auditors of the company (Schedule 2, s.2(1));
    • the notice must state the nature of the business to be transacted at the meeting in sufficient detail to enable a shareholder to form a reasoned judgment in relation to it (Schedule 2, s.2(2));
    • the meeting must be called for the purpose or for purposes that include the removal of a director and the notice must state that the purpose, or a purpose, of the meeting is the removal of a director (s. 134(2));
    • the question of removal of a director must be passed by ordinary resolution, i.e. a resolution approved by a simple majority of votes of those shareholders entitled to vote and voting on the question (ss 87(2), 134(1));
    • if there is no meeting of shareholders, the resolution for removal of a director must meet the 75% requirements of s 103.”
85. These observations of Cannings J as to the statutory procedure for the removal of a person as a director of a company were repeated by him in Putto v Sallel (2015) N5845 where his Honour said this at [14]:

“... the Companies Act prescribes clear and detailed procedures for removal of directors. I outlined them in Garwan Kuyan v Andrew Sallel (2008) N3376 and in Madang Cocoa Growers Export Co Ltd v Noilali Gunar (2012) N4703. Directors of a company are unless the company’s constitution provides otherwise, removed by the company’s shareholders. The shareholders’ powers of removal are exercised at a meeting of shareholders or by resolution in lieu of a meeting, in accordance with Sections 86(1) (exercise of powers reserved to shareholders), 101 (annual meeting of shareholders), 103 (special meeting of shareholders), 103 (resolution in lieu of meeting) and 104 (court may call meeting of shareholders) of the Companies Act.”

86. In the present case, it is abundantly clear from the evidence that the procedures under the Companies Act 1997 for the purported removal of Mr Raman as the sole director of the Company and the appointment in his place of Mr Badui were not complied with when Mr Badui and Mr Buribudo had their sham directors’ meeting on 25 November 2010.
    
87. The only person who could lawfully have held a shareholder’s meeting of the Company on 25 November 2010, or indeed on any date in 2010, in accordance with s.134(1) of the Act, or to have passed a resolution in writing in lieu of a meeting in accordance with s.103, to remove Mr Raman as a director was Mr Raman himself as he was the sole shareholder.
    
88. One of the legal avenues which Mr Badui could have taken in November 2010 in his endeavours to replace Mr Raman as sole director and 100% shareholder of the Company would have been to have made application to Registrar Tongayu for rectification of the register of the Company under s.395A of the Act. If objection to rectification was then received by Registrar Tongayu by any person, including Mr Raman, Mr Badui would then have had the statutory right to apply to the National Court under s.395B of the Act for rectification of the register of the Company if the Court could be satisfied by Mr Badui that it should do so. The text of those two provisions is set out below:
    

395A. Rectification or correction of Papua New Guinea Register and overseas register.

(1) The Registrar may –

(a) on the application of any person, rectify the register if the Registrar is satisfied than any information has been wrongly entered in or omitted from the register; or

(b) if it appears to the Registrar that any particulars have been incorrectly entered in the register due to a clerical error by the Registrar, correct those particulars.

(2) Before the Registrar rectifies the register under Subsection 1(a), the Registrar shall –

(a) give public notice setting out –

(i) the name of the applicant; and

(ii) the name of the company or overseas company; and

(iii) the reasons for and details of the changes sought to be made to the register or the overseas register; and

(iv) the date by which a written objection to the proposed rectification must be delivered to the Registrar, being a date not less than 20 working days after the date of the notice.

(3) Any person may deliver to the Registrar, not later than the date specified in accordance with Subsection (2)(b)(iv), a written objection to a proposed rectification of the register or the overseas register, and the Registrar shall give a copy of the objection to the applicant.

(4) The Registrar shall not rectify the register of the overseas register if the Registrar receives a written objection to the proposed rectification by the date specified unless the Registrar is satisfied that the objection has been withdrawn.

395B. Powers of Court.

(1) If an objection to a proposed rectification is received by the Registrar under Section 395A(3), the application for the rectification of the register may apply to the Court for an order for rectification.

(2) If an application for an order is made under Subsection (1) –

(a) the applicant shall, as soon as practicable, serve notice of the application on the Registrar; and

(b) the Registrar may appear and be heard in relation to the application.

(3) On application for an order under Subsection (1), the Court may, it is satisfied that any information has been wrongly entered in, or omitted from the register, make an order that the register be rectified.

89. There is no evidence before this Court that Mr Badui pursued any application to Registrar Tongayu under s.395A(1) of the Act for rectification of the register for the Company based on Mr Badui’s allegation that Mr Raman had failed to include him as a director and equal shareholder on incorporation of the Company on 6 March 2009. This means that the jurisdiction of this Court was not, and could not, have been invoked on application by Mr Badui under s.395B of the Act as there is no evidence that Mr Raman or any other person had ever given notice of objection to Registrar Tongayu under s.395B in connection with the Registrar’s proposed rectification of the register of the Company as conveyed in Registrar Tongayu’s letter to Kelly Naru Lawyers dated 31 January 2011, which letter was copied to Mr Badui.
    
90. In contrast, the evidence shows that Mr Raman became aware within a matter of days of the purported directors’ meeting held by Mr Badui and Mr Buribudo on 25 November 2010 that he had been ostensibly replaced by Mr Badui as sole director and sole shareholder of the Company. Mr Raman made his grievance in this regard promptly known to the IPA. It was notification of Mr Raman’s complaint to the IPA in early December 2010 which triggered the investigation by the IPA into the change of directorship and shares in the Company which is referred to in the IPA’s letter to the Commissioner for Police dated 6 December 2010, copied by the IPA to Westpac and Mr Badui.
    
91. It was Mr Raman’s grievance with Mr Badui’s actions which also prompted Mr Raman’s commencement of proceeding OS No. 864 of 2010 in mid-December 2010. That proceeding was instituted by Mr Raman in the name of the Company as first plaintiff and his new company Cabaran Movers (PNG) Ltd as second plaintiff. Mr Raman sought orders via these two companies which challenged the validity of the purported directors’ meeting conducted by Mr Badui and Mr Buribudo for the Company on 25 November 2010. It was that suit in OS No. 864 of 2010 that enabled Mr Raman to obtain ex parte interim orders on 16 December 2010 which temporarily restrained Mr Badui from occupying the Company’s premises at Konedobu and Gordons and which ordered Mr Badui to return to the Company its sales documentation, books of account and other records which Mr Badui had removed.
    
92. It is not in contention that proceeding OS No. 864 of 2010 had a very short judicial existence. The proceeding was dismissed by Davani J on 7 January 2011, but this was because her Honour ruled that the case had been incorrectly commenced by originating summons instead of writ of summons. There had been no hearing on the merits by her Honour. It was therefore, in my opinion, absurd for Apo & Co Lawyers in their letter to Westpac dated 10 January 2011, a copy of which is annexure “K3” to Mr Badui’s primary affidavit, to wrongfully assert that “the order for dismissal effectively means that any issues relating to alleged unauthorized changes of Directors, Shareholders or Signatories to Accounts of Cabaran Ihklas (PNG) Ltd has been effectively dismissed by the National Court in favour of our client Mr Michael Badui.”
    
93. The formal order which was made by Davani J in OS No. 864 of 2010, when dismissing that proceeding on 7 January 2011, included the following terms:

“(3) Any party is at liberty to file Writ of Summons and Statement of Claim and must do so within 7 days from today, or before 14th January, 2011;

(4) The named defendants are to then file their Notices of Intention to Defend and Defence with[in] a further 7 days, or before 21 January 2011;

(5) Parties are at liberty to apply for extension of these orders, on 24 hours notice to the other parties affected;

(6) After pleadings are closed, parties must immediately apply for directions for the substantive hearing of the matter.”

[underlining added]

94. Her Honour’s order for dismissal of OS No. 864 of 2010 made it very clear that any of the parties affected by Mr Badui’s actions in attempting to remove Mr Raman as the sole director and sole shareholder of the company, that is to say affected parties Mr Raman, the Company and Mr Badui himself, were all at liberty to file fresh proceedings by way of writ of summons and statement of claim and that they should do so “on or before 14 January 2011”, in which event any notice of intention to defend and defence was to be filed no later than 21 January 2011 and directions for the substantive hearing of the dispute were to then be immediately applied for as soon as the pleadings in that fresh action were closed.
    
95. I find that her Honour made no determination at all in OS No. 864 of 2010 that issues relating to alleged unauthorized changes of directors, shareholders and signatories to bank accounts held by the Company at Westpac had been resolved in favour of Mr Badui. All of those issues remained open for determination by the Court in the fresh proceedings for which liberty to commence had been given by her Honour, those proceedings to be expedited to substantive hearing.
    
96. The dismissal of OS No. 864 of 2010 by Davani J on 7 January 2011 was swiftly followed by Mr Raman filing proceeding WS No. 6 of 2011 on 11 January 2011. The parties cited were Ragoovaren Raman Valayudhan & Cabaran Movers (PNG) Ltd v Michael Badui, Alex Tongayu-Registrar of Companies & Investment Promotion Authority.
    
97. Westpac was not a party to proceeding WS No. 6 of 2011.
    
98. At some point in time, not adduced in evidence before me, Mr Badui filed a cross-claim in WS No 6 of 2011 against Mr Raman, Registrar Tongayu and the IPA.
    
99. Proceeding WS No. 6 of 2011 was resolved almost two and half years after it was commenced in January 2011. The parties to that suit came to a negotiated settlement of their respective differences against each other and an order was made by Davani J by consent on 21 June 2013 whereby Mr Raman was able to depart from the Company and which allowed Mr Badui, via leave to be granted by Registrar Tongayu, to take control of the Company as sole director and sole shareholder of the Company in the place and stead of Mr Raman with effect from 21 June 2013.
    
100. The terms of the order made by her Honour with the consent of all parties in WS No. 6 of 2011 on 21 June 2013, which are copied as annexure “L” to Mr Badui’s primary affidavit, were as follows:
     

“The Court by Consent Orders that:

1. The Application for contempt filed on 14th May 2013 by the cross-claimant Michael Badui is withdrawn with leave of the Court, by consent.

2. The whole proceedings is discontinued with leave of the Court, by consent.

3. The Registrar of Companies will give leave to Michael Badui to be reinstated as a director and 100% shareholder of Cabaran Ikhlas (PNG) Ltd.”

101. Notification of the making of the order by consent in WS No. 6 of 2011 on 21 June 2013 (Consent Order) was conveyed to Westpac by hand-delivered letter signed by Mr Badui on the letterhead of the Company dated 30 July 2013 and received by Westpac on 1 August 2013. A copy of this letter is annexure “OW10” to the first affidavit of Ms Whippy. In that letter, Mr Badui states:

“I hereby advise that I have recently been given 100 per cent ownership of the above Company by Justice Davani after 3 years of vigorous court battles (Please find enclose[d] a court order and latest company extract).
...

Now that the Court has finally given me ownership of the above company, I want you to do the following:

a) Furnish to me Statements of all accounts that were held with your bank since December 2010. That is statement of the main operating account No. 600 169 0824 and an IDB [sic] account or other such accounts.

b) Reimbursements of all monies in the sum of K800,000-00 in the operating account and about K4,000,000 plus interest incurred in an IDB account to date.”

102. I find that Mr Badui’s letter of 1 August 2013 to Westpac misleadingly stated that Davani J had made a ruling in favour of Mr Badui in WS No. 6 of 2011 which had restored the directorship and shareholding of the Company to him. That statement by Mr Badui to Westpac was disingenuous. Justice Davani had done no such thing. There had been no hearing on the merits by her Honour of the parties’ claims and counter-claims against each other. What had happened was that the parties had negotiated their own settlement of their respective claims against each other, the upshot of which was the Consent Order, simply endorsed by her Honour, which allowed Mr Raman to discontinue the litigation in WS No. 6 of 2011 and for Mr Badui to take over the directorship and 100% shareholding of the Company with effect from 21 June 2013. The Consent Order was not retrospective. Mr Badui did not acquire any entitlement to legal ownership and directorship of the Company until pronouncement of the Consent Order in WS No. 6 of 2011 by her Honour on 21 June 2013. Prior to that date, Mr Badui had no lawful right to claim he was a director and shareholder of the Company as all resolutions passed at the purported directors’ meeting he had convened with corporate secretary Mr Buribudo on 25 November 2010 had failed to comply with the statutory procedures for the removal of a director and appointment of a replacement director.
     
103. I note that no terms of the parties’ settlement were reflected in the Consent Order made in WS No. 6 of 2011 beyond those which I have recited above. No order was made for costs. But I infer that Mr Badui had agreed as part of the settlement negotiations that no money claim or other claims would thereafter be made against Mr Raman by Mr Badui or the Company once the ownership of the Company was transferred to Mr Badui under term 3 of the Consent Order. I place no particular evidentiary weight on that inference but it does seem to be an obvious assumption to make in the context of this present litigation, which is targeted squarely at Westpac and not at Mr Raman.
     
104. Mr Raman’s suit in WS No. 6 of 2011, which was discontinued by leave of the Court on 21 June 2013, meant that Justice Davani did not substantively determine the issue of ownership of the Company according to law. Mr Raman and Mr Badui appear to have agreed to walk away from that litigation, with Mr Badui gaining ownership and directorship of the Company in return for the proceeding being discontinued and Mr Badui agreeing not to pursue Mr Raman further on Mr Badui’s cross-claim.
105. This inference is further supported by the fact that Mr Badui and the Company have, in this present proceeding WS No. 758 of 2014, only sued Westpac regarding the operation of the Account and its funds, seeking damages against Westpac for alleged massive economic/business losses. Mr Badui and the Company have significantly not joined Mr Raman in this court action. They have made no claim against Mr Raman for the Company’s alleged economic losses, said to approach K72million, even though Mr Raman is the most obvious person against whom such a claim could be made in view of Mr Badui’s grievances against him.
106. Westpac, after receiving Mr Badui’s letter of 30 July 2013, took legal advice. The letter from Westpac’s lawyers, Leahy Lewin Nutley Sullivan, to Mr Badui, a copy of which is annexure “OW11” to Ms Whippy’s affidavit filed on 29 May 2015, advised him that Westpac would respond to Mr Badui’s demands within 14 days. The uncontested evidence of Westpac is that it then did so, and that it informed Mr Badui, as it had done on previous occasions, that it was holding no funds at all for the Company as the Account had already been closed by Mr Raman, two years earlier, on 23 June 2011, which is when Westpac allowed Mr Raman to withdraw the sum of K105,045.90 being the balance then standing to the credit of the Company’s operating account no. 6001690824. Westpac also repeated its denial to Mr Badui that it had ever held any IBD account for the Company.
     
107. It is pleaded at [8] of Mr Badui’s statement of claim in WS No. 758 of 2014 that Westpac is alleged to have held an unaccounted for amount of K2.5million in an IBD for the Company, said by Mr Badui to have been deposited with Westpac by Bank of South Pacific Ltd bank cheque no. 73190 on or about 26 January 2010, its date of issue. A photocopy of this bank cheque is annexure “M” to Mr Badui’s affidavit sworn on 4 November 2015.
     
108. However, it was conceded at trial by counsel for Mr Badui that no claim for this alleged IBD would be pursued as Mr Badui could not produce any evidence to show that the bank cheque was ever deposited into an IBD account for the Company with Westpac. Reproduced below is an extract from page 20 of the transcript of the exchanges in this regard which took place between the bench and counsel at trial:

HIS HONOUR: ... So is it an agreed fact, Mr Goava, that annexure “M”, which is the evidence of a bank cheque, that the first plaintiff and the second plaintiff cannot point to any evidence before the court whether that cheque was deposited by Mr Ragooravaran into an IBD account with the defendant bank. Is that an agreed fact?

MR GOAVA: That is an agreed fact, your Honour.

HIS HONOUR: So if Mr Ragoovaran banked that cheque elsewhere that is a matter for proof?

MR GOAVA: Yes.

HIS HONOUR: And you do not have that proof at this point.

MR GOAVA: We do not have that proof, your Honour.

109. Given the concession made at trial that Mr Badui had no proof that the Bank of South Pacific Ltd bank cheque for K2.5million had ever been deposited into an IBD with Westpac, which is consistent with Westpac’s denial of that allegation, at trial Mr Badui effectively abandoned his claim against Westpac for this amount.
110. It is at this juncture that I repeat that the steps which were taken by Mr Badui on 25 November 2010, by holding a purported directors’ meeting in his endeavour to remove Mr Raman from the Company so that Mr Badui could acquire all of Mr Raman’s shareholding and replace him as sole director and 100% shareholder of the Company, were in breach of the procedures prescribed in the Companies Act 1997 which govern the appointment and removal of a director.
111. Quite apart from the fact that the Companies Act 1997 only allows shareholders post-incorporation to appoint and remove directors, not self-appointed directors such as Mr Badui, the evidence in this case shows that none of the steps taken by Mr Badui to achieve the removal of Mr Raman from the Company complied with the relevant procedures required to be observed by the Act.
112. Had Mr Badui obtained competent legal advice prior to holding the so-called directors’ meeting which he and Mr Buribudo convened at the Lamana Hotel in Port Moresby on 25 November 2010, Mr Badui would have found that the holding of such a meeting was legally pointless because Mr Badui was at that point in time neither a shareholder nor a director of the Company. Instead, Mr Badui would have been informed by any competent commercial lawyer that he had a right to ventilate his grievances against Mr Raman by:

(1) applying to Registrar Tongayu pursuant to s.395A(1)(a) of the Act for rectification of the register for the Company to reflect Mr Badui’s assertion that he was entitled, by reason of his existing arrangements with Mr Raman, to be an equal shareholder with Mr Raman in the Company and for him to be recorded in the register as Mr Raman’s co-director. If Registrar Tongayu was then satisfied that the information supplied to him by Mr Badui warranted rectification of the register of the Company in Mr Badui’s favour, Registrar Tongayu would then be required by s.395A(2)(a) of the Act to firstly, give written notice to the Company (and therefore to Mr Raman) of receipt of Mr Badui’s application for rectification of the register; and secondly, to cause public notice of Mr Badui’s application to be published in accordance with s.395(2)(b) of the Act.

(2) If Registrar Tongayu then, within 20 working days of the date by which written objections could be made as stipulated in the public notice, received an objection, either from Mr Raman or from some other person, this would then allow Mr Badui to apply to this Court for an order for rectification of the register of the Company. It would then be up to this Court to determine whether the objection should be upheld and refuse rectification of the register, alternatively to dismiss the objection and order rectification of the register.

113. It is not in dispute in this case that Mr Badui did not avail himself of the statutory procedure to apply to Registrar Tongayu for rectification of the register pursuant to s.395A of the Companies Act 1997. It is similarly not in dispute that Mr Badui did not comply with the statutory procedures prescribed for the removal of Mr Raman as sole director (s.87, s.134, Schedule 2, s.2(1) & 2(2) of the Act) or for the appointment of Mr Badui as sole director to replace Mr Raman (s.87, s.130, s.131, s.132 and s.133, Schedule 2, s.2(1) & (2) of the Act).
114. I refer again to Kuyan v Sallel (supra) where Cannings J, having found in that case that the statutory procedures outlined in the Companies Act 1997 for the removal and appointment of replacement directors of a company called Raikos Holdings Limited had not been complied with, said this at [66]:

“ The breaches of the Companies Act that have occurred are not minor or technical breaches. They are properly characterised as major and extensive. In view of the extent of non-compliance with the Act, the argument that the persons involved in the company’s affairs – the resource owners – are unsophisticated, uneducated or illiterate villagers and the court can overlook the breaches of the Companies Act that have occurred, carries little weight. Raikos Holdings Limited has been registered under the Companies Act, it is engaged in business and its affairs must be run according to the law applying to all such business enterprises in the country (Magasaki Ltd v Linus Bai (2007) N3221).”

115. I concur with his Honour’s observations in that case, which I consider are of equal application to the situation presented in the case now before me. However, unlike the plaintiffs in Kuyan v Sallel, Mr Badui is neither uneducated nor illiterate. He is a businessman with considerable experience in the importation of heavy machinery and mining plant and equipment. Despite being conversant in the English language, Mr Badui is nevertheless unversed in those statutory procedures under the Companies Act 1997 and other possible remedies open to him at law which would have enabled him to take lawful action to challenge whatever of Mr Raman’s actions in not including him in the ownership of the Company had caused him such anguish. Mr Badui should have sought proper professional legal advice from a commercial lawyer before embarking on his misguided directors’ meeting of 25 November 2010. If Mr Badui did in fact obtain professional legal advice before holding that purported directors’ meeting, then the legal advice he was given which prompted him to hold that meeting was grossly negligent. The source of all of Mr Badui’s woes complained of in this present case derive from that legally flawed pointless meeting.
116. The holding of the so-called directors’ meeting on 25 November 2010 which was held by Mr Badui, styling himself as chairman of the board of the Company, was not a legal and proper meeting of the board because the “board” at that time, as defined by s.108 of the Act, comprised its sole director, Mr Raman. Only the board, that is to say Mr Raman, had power in the circumstances of this case to call a special meeting of shareholders: s.102(1)(a)(i). Mr Raman was the only shareholder. Being the only shareholder in the company, Mr Raman was the only person who could remove himself as a director and appoint a replacement director. The meeting which was held by Mr Badui on 25 November 2010 was not requested by Mr Raman. There is no evidence that Mr Raman as sole shareholder resolved to appoint Mr Badui as a director at that time. Significantly, the meeting was not attended by Mr Raman and no prior notice of the meeting was given to him by Mr Badui or by corporate secretary Mr Buribudo.
117. Mr Badui attended the meeting held on 25 November 2010 in the mistaken belief that he and corporate secretary Mr Buribudo could somehow pass resolutions which would enable Mr Badui to remove Mr Raman and allow Mr Badui to not only assume total management control of the Company, but also to acquire all of Mr Raman’s shareholding and to thereby provide Mr Badui with the authority needed to require Westpac to allow him to operate the Account in the place and stead of Mr Raman.
118. For these reasons I find that the holding of the so-called directors’ meeting of the Company by Mr Badui and corporate secretary Mr Buribudo on 25 November 2010 was a nullity. All of the resolutions passed at that meeting were void and from inception had no legal effect.
119. Having made that finding, it follows that Mr Raman was not lawfully removed as a director of the Company by reason of any of the resolutions passed by Mr Badui and corporate secretary Mr Buribudo at the so-called directors’ meeting of 25 November 2010, nor was Mr Badui lawfully appointed at that meeting as a director to replace Mr Raman.
120. I find that the purported changes in the directors of the Company which were supposed to have occurred on 25 November 2010, and on which Mr Badui relies as the foundation for his claims against Westpac in this case, were similarly void and of no effect. Those changes cannot be endorsed in any way by the Court in this proceeding.
121. The consequence of this is that at all material times, including the period between 25 November 2010 and the closure by Mr Raman of the Account on 23 June 2011, Westpac was lawfully entitled to deal with Mr Raman as the only authorised signatory of the Company to operate the Account. Westpac was legally entitled to refuse to deal with Mr Badui in relation to the Account during that period and to only deal with Mr Raman instead. Westpac’s actions in this regard were not unlawful or unjustified. Issue 1 is resolved in favour of Westpac.

Issue 2: Did Westpac owe any fiduciary duty to Mr Badui or the Company?

122. Mr Badui and the Company have pleaded in [12] and [14] of their statement of claim to the effect that Westpac acted as a trustee of the Company’s money and therefore Westpac and the Company had not only a banker/customer relationship but it is alleged that Westpac had an additional fiduciary duty to account to the Company for money in the Account whenever demand was made by Mr Badui. It is pleaded that Westpac breached its fiduciary duty to the Company when it refused to allow Mr Badui to have access to monies in the Account. Mr Badui and the Company seek damages for alleged conversion and breach of fiduciary duty in connection with an amount of K130,000 which they have pleaded Westpac caused to be “dissipated” from the Account.
123. The statement of claim also pleads at [16] to the effect that Westpac owed a similar fiduciary duty to the Company in respect of the alleged IBD account for K2.5million. The prayer for relief in the statement of claim seeks damages for conversion and breach of fiduciary duty in respect of this amount of K2.5million. However, I have already observed earlier in this decision that Mr Badui and the Company effectively abandoned any claim in connection with the alleged IBD at trial because there is no proof at all that Westpac ever held an amount of K2.5million on IBD for the Company.
124. Reverting to Mr Badui’s claim based on alleged breach of fiduciary duty in respect of monies held by Westpac in the Account, Westpac by its counsel Ms Tusais has submitted that no such fiduciary duty existed. Westpac’s position is that its commercial relationship with the Company was at all material times that of banker and customer, that is to say the contractual relationship of debtor-creditor.
125. The relationship of banker and customer is created by the opening a bank account. The nature of the banker-customer relationship is explained in Chitty on Contracts Vol. 2 Specific Contracts 31st Edition (2012) at [34-257] p.409 in these terms:

“ When a banker opens an account for the customer the relationship established is one of debtor and creditor. When the account is in credit, the customer is the creditor and the banker the debtor. Consequently funds deposited by the customer become the bank’s money; the customer acquires a debt or chose in action claimable from the bank. The position is reversed when the account is overdrawn.”

126. Thus, the banker as borrower receives money from the customer, or from a third party on account of the customer, as lender. Ownership of the money transfers to the banker. The banker is at liberty to use the money in any manner it chooses. However, the banker has a contractual obligation to repay an equivalent sum to the customer when demand is made by the customer for payment.
127. The contractual relationship of banker and customer does not normally extend to impose fiduciary duties on the banker. Special circumstances must exist which create superadded obligations on the part of the banker so as to constitute the banker the fiduciary agent of the customer. Fiduciary duties by a banker when created in the special circumstances of an individual case include a duty of full disclosure and a specific duty of care.
128. Cases where a fiduciary duty can be created were described in the English Court of Appeal case of Lloyds Bank Ltd v Bundy [1974] EWCA Civ 8; [1975] Q.B. 326 at p.341 as follows:

“Such cases tend to arise where someone relies on the guidance or advice of another, where the other is aware of that reliance and where the person upon whom reliance is placed obtains, or may obtain, a benefit from the transaction or has some other interest in it being concluded.”

129. So, for example, a fiduciary duty on the part of a banker will exist where a banker provides specialist financial investment advice to a customer and the customer relies on that advice to the financial detriment of the customer where the advice is later proven to have been negligent or where the banker has obtained some benefit undisclosed to the customer.
130. Fiduciary duties also arise where the relationship is one of trustee and beneficiary. The fiduciary relationship between a trustee and a beneficiary is well described by Sevua J in Poia v ANZ Banking Group (PNG) Ltd (2001) N2409 at p.4:

“ The essence of the trust therefore is the fiduciary relationship, that is, the relationship between the trustee and the beneficiary. The trustee is accordingly bound to exercise rights and powers and to act in good faith and in the interest of the beneficiaries. This means that the trustee has a duty of confidence, honesty and responsibility to act for the benefit of the beneficiary. This fiduciary relationship is breached if the trustee acts for his own advantage or for the advantage of a person or persons who are not beneficiaries where the actions of the trustee results in some disadvantage to, or detriment suffered by the beneficiaries. A court of equity would not permit a person in a fiduciary position to make a personal profit or to be placed in a conflict of interest situation.”

131. However, quoting again from Chitty on Contracts Vol. 2 Specific Contracts (supra), the learned authors say this at [34-261], pp. 411-412 in the context of the banker-customer relationship:

“ It is clear from the cases ... that banks are held to be subject to fiduciary duties or special duties of care only in exceptional cases. Basically, such a duty arises where the bank has assumed liability or has held itself out in a manner that justifies its imposition. A duty of care is more readily invoked if the bank has derived some benefit, be it direct or indirect, from the transaction involved or if it placed itself in a situation which led to a conflict of interests between the customer and itself. Cases of this sort are, of course, rare. In its ordinary dealings a bank need not be unduly suspicious and cannot, for instance be expected to initiate enquires about the motive behind a payment instruction give to it by the customer’s duly authorised agent unless there are some very clear indications which ought to alert the bank about the agent’s fraudulent design. Usually, all that is expected of a bank is the exercise of reasonable care in the discharge of its duties to customers.”

132. The evidence in the present case does not support Mr Badui’s contention that the Company’s banker-customer relationship with Westpac involved fiduciary duties owed by Westpac to the Company. This is because there was no evidence adduced by Mr Badui to show that Westpac was under any superadded obligation towards the Company beyond the normal creditor-debtor relationship pertaining to a current account operated with a bank. The Account in this instance was not a trust account. Westpac had never been appointed by the Company to be a trustee of the Account liable to account to the Company as beneficiary for the proceeds of the Account. Westpac had not given specialist financial advice to the Company or to Mr Raman on which the Company had relied to its detriment. The Account was simply a normal current account with Westpac, lawfully able to have been operated on the authority of the Company by its authorised agent and sole signatory Mr Raman as from when the Account was opened on 10 February 2010 until its closure, but with particular reference to that period of time which elapsed between when Mr Raman was restored to the IPA’s register for the Company on 6 January 2011 until the Account was closed by Mr Raman on 23 June 2011. Westpac derived no hidden or special benefit from the Account. It complied with its contractual duties to the Company in connection with the Account. Westpac had no conflict of interest when allowing Mr Raman to operate the Account.
133. I find that there is no cause of action against Westpac which can be maintained in this suit based on breach of fiduciary duty. The allegation that the commercial relationship between Westpac and the Company involved fiduciary duties on the part of Westpac towards the Company and Mr Badui is misconceived. Westpac owed no fiduciary duty to the Company, to Mr Badui or to anyone else in connection with the manner in which Westpac allowed Mr Raman to operate the Account.

Issue 3: Did Westpac’s conduct amount to conversion?

134. Mr Badui and the Company plead in [12] of the statement of claim that Westpac’s conduct amounted, among other things, to conversion. Paragraph 13(c) of the statement of claim alleges that Westpac used the Company’s money in the Account without the permission of the Company and its “duly authorised signatories”.
135. Mr Badui relies in this regard on the Notice of Authority dated 29 November 2010 which gave notice to Westpac that the Company had purportedly passed a resolution appointing Mr Badui and Mr Buribudo to be the new authorised signatories for the Account. A copy of this Notice of Authority is part of the documentation which is annexure “OW2” to the affidavit of Ms Whippy filed on 29 May 2015.
136. I have already made a finding that all resolutions passed at the purported meeting of directors of the Company held by self-appointed director Mr Badui on 25 November 2010 were void. Therefore the Notice of Authority dated 29 November 2010 which Mr Badui presented to Westpac and which asserted to the effect that he and Mr Buribudo were the new signatories to the Account in lieu of Mr Raman was also void and of no legal effect, although Westpac did not know that at the time. Matters regarding Westpac’s subsequent suspension of the Account imposed by the “Post No Debit” instruction to Westpac’s staff on 10 December 2010 were not regularised in favour of Mr Raman until after Westpac had received its copy of IPA’s letter to Kelly Naru Lawyers dated 31 January 2011, which notified that Registrar Tongayu had exercised his statutory power to allow the records of the Company to revert back to where they were prior to those changes which Mr Badui had notified to the IPA on 25 November 2010.
137. The cause of action known as conversion is a tort. It is concerned with conduct that wilfully and unlawfully interferes with ownership and/or right to possession of a chattel.
138. A chattel is defined in Osborne’s Concise Law Dictionary 10th Ed. (2005) as being “any property other than freehold land ... Chattels personal are moveable, tangible articles of property.”
139. The principles relating to the tort of conversion are referred to by Kassman J in Covec (PNG) Ltd v Kama (2020) SC1912 at [70], citing Salmond on the Law of Torts, 16th Ed. (1973) at 96-97: Conversion is defined as:

“ an act ... of wilful interference, without lawful justification, with any chattel in a manner inconsistent with the right of another, whereby that other is deprived of the use and possession of it. Two elements are combined in such interference: (1) a dealing with the chattel in a manner inconsistent with the right of the person entitled to it, and (2) an intention in so doing to deny that person's right or to assert a right which is in fact inconsistent with such right. But where the act done is necessarily a denial of the other's right or assertion of a right inconsistent with it, the tort may have been committed, though the doer may not know of or intend to challenge the property or possession of that other. If a person, not being an agent or bailee, deals with the goods of another as his own, his intention is irrelevant, for liability in conversion is strict.”

This citation is also to be found in Wahad v Wilkinsonhttp://www.paclii.org/pg/cases/PGNC/2006/94.html?stem=&synonyms=&query=SC1912 (2006) PGNC 94 and ANZ Banking Group (PNG) Ltd v Lafana (2020) N8732.

140. Further discussion of the principles applicable to the tort of conversion is contained in T.T. Anore Noa Hai Investment Ltd v Buna (2019) N7881 per David J at [51] to [53]:

“Any act committed by a person who deals with chattels not belonging to him in a manner inconsistent with the rights of the true owner is a conversion of those chattels: see definition of “conversion” in Osborne’s Concise Law Dictionary, Tenth Edition, Sweet & Maxwell, London, 2005; Paul Vout, Torts, The Laws of Australia, Second Edition, 2007, Thompson Lawbook Co. 504.

In Penfolds Wines Pty Ltd v Elliot [1946] HCA 46; (1946) 74CLR 204 at 229, Dixon, J observed that ‘the essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has property or special property in the chattel.’

So in order to successfully sue in conversion by detention, a claimant must show that:

1. He is the owner of the chattel or one who derives title from the owner (special property);
2. The defendant is dealing with the chattel in a manner repugnant to the immediate right of possession of the owner of the chattel or one who derives title from the owner;
3. The defendant’s act must constitute a denial of the claimant’s right;
4. The dealing with the chattel is intentional.
5. There must be a demand to the defendant who has possession of the chattel followed by an unjustified refusal to deliver up the chattel (Clayton v Le Roy [1911] UKLawRpKQB 114; (1911) 2 KB 1031, Rushworth v Taylor (1841) 3 QB 699).”
141. In short, the tort of conversion involves an intentional physical exercise of control over a chattel which interferes with the rights of the person entitled to ownership and/or possession of that chattel.
142. As already explained in [126] of this decision, money paid by a customer into a bank account is no longer the property of the customer. Title, that is to say ownership, to that money passes to the banker, who then becomes the debtor liable to reimburse on demand the equivalent of that money to the customer as creditor of the bank. The banker receives the money from the customer, or from a third party on account of the customer, as a borrower. Ownership and possession of the money transfers to the banker and the customer’s account is credited for the value of the money “borrowed” by the bank. The bank has a contractual obligation to repay an equivalent sum to the customer when demand is made by the customer for payment. I repeat that this right of the customer to demand reimbursement is a chose in action.
143. The tort of conversion is primarily concerned with physical chattels although it has on occasion been applied to include instruments and documents representing intangible rights. However, the tort does not cover choses in action: see The Law of Torts by Fleming, 8th Ed. (1992) on Conversion at p.54.
144. Further authority for the proposition that the tort of conversion does not apply to choses in action is to be found at Halsbury’s Laws of England, 5th Ed. Vol.13 (2009) at [1] p.3:

“ It has, however, been held that the tort of conversion does not apply to a chose in action.”

145. In the English case OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1, [2008] 1 All ER (Comm) 1 the House of Lords by majority decision of Lords Hoffmann, Walker and Brown held that strict liability for conversion only applies to an interest in chattels and not to choses in action. Their Honours in that appeal determined that the tort of conversion should not be extended to apply to choses in action as to do so would be to unfairly impose strict liability for pure economic loss on receivers who been appointed to administer the affairs of a company in receivership and who had acted in good faith.
146. In the present case, money held in the Account was not a physical chattel. Nor did money that was credited in the Account by Westpac bear any characteristic of being instrumentation or documentation representing any intangible right. At all material times the lawful signatory of the Company, Mr Raman, had the right by way of chose in action to make demand of Westpac for reimbursement of money paid into the Account. Choses in action are incapable in law of being converted for the purpose of founding any cause of action in conversion. The conduct of Westpac in allowing Mr Raman to operate the Account did not constitute any actual moving or other dealing with a chattel.
147. I accordingly uphold Westpac’s submission that both the pleadings and the evidence have failed to establish any cause of action in conversion against the bank. As with Mr Badui’s claim for alleged breach of fiduciary duty, his claim based on alleged conversion by Westpac of money in the Account is misconceived. Westpac’s conduct in dealing only with Mr Raman as authorised signatory of the Account between February 2010 until closure of the Account on 23 June 2011 did not constitute conversion of money in the Account of the Company.

Issue (4): Did Mr Badui and or the Company sustain any economic loss as a result of Westpac’s conduct? If so, what is the quantum of damages to which Mr Badui and or the Company are entitled?

148. It is axiomatic that where a plaintiff succeeds at trial in proving a pleaded cause of action, the plaintiff then becomes entitled to damages in respect of that cause of action provided damages have been sought in the plaintiff’s statement of claim.
149. The principles for assessment of damages were succinctly summarised by Cannings J in Buna v The State (2004) N2696. The principles were stated in the context of an assessment of damages hearing following entry of default judgment but Westpac has submitted that the following principles extracted from the judgment of Cannings J, approved by the Supreme Court in Mel v Pakalia (2005) SC790, are relevant and applicable to this case:

(1) The plaintiff has the onus of proving its loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and simply expect the Court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person’s case, that person has the onus of proving the allegation: Paklin v The State (2001) N2212.

(2) Corroboration of a claim is usually required and the corroboration must come from an independent source: Baine v The State (1995) N1335; Kopung Brothers Business Group v Kasieng [1997] PNGLR 331.

(3) The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim: Wanis v Sheekiot & The State (1995) N1350.

(4) If the pleadings and evidence are confusing, contradictory or inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing: Lalip v Sheekiot & The State (1996) N1457.

(5) The fact that damages cannot be assessed with certainty does not necessarily relieve the wrongdoer of the necessity of paying damages. Where precise evidence is available the Court expects to have it. However, where it is not, the Court must do the best it can: Paraia v The State (1995) N1343.

(6) The Court must be alert to vague claims, unsupported by corroborating evidence, as they may be false claims. The Court must only uphold genuine claims: Palapi v Sergeant Poko (2001) N2274.

150. Mr Badui’s claims are based on two causes of action: alleged breach of fiduciary duty by Westpac and alleged conversion by Westpac of monies in the Account. Mr Badui is seeking damages for himself and the Company for these two causes of action in the amount of K130,000.
151. Both of these causes of action have been found by this Court to be misconceived. The money in the Account was paid out by Westpac on the instructions of the lawful mandate of the Account at the material time. That mandate was held by Mr Raman, not by Mr Badui and corporate secretary Mr Buribudo. There was no breach of fiduciary duty or conversion by Westpac, contrary to what was pleaded by Mr Badui. There is no basis for any award of damages in the sum of K130,000 or for any other amount of money held in the Account prior to its closure on instructions from Mr Raman on 23 June 2011. No damages can be awarded.
152. If Westpac’s conduct in connection with the operation of the Account on instructions received from Mr Raman was in any way detrimental to the Company, and by extension to Mr Badui, their claim should be against Mr Raman personally and not Westpac.
153. Mr Badui’s claim against Westpac for damages of K2.5 million in respect of the non-existent IBD account was effectively abandoned at trial as it was conceded that there was no proof that Westpac had ever held such an account for the Company. No damages under this head were pursued and none can be awarded.
154. Next, Mr Badui has claimed that punitive or exemplary damages in the sum of K5million should be awarded to him and to the Company for Westpac’s alleged misconduct. This claim cannot be sustained as no cause of action against Westpac has been proven in this case. No damages for punitive or exemplary damages can be considered and no such damages will be awarded.
155. The remaining claim made by Mr Badui for himself and the Company in this proceeding is for damages for “past economic loss or loss of business to the amount of K72,000,000 to December 2013 or such amount to be assessed to date of judgment”. It need hardly be stated that as Mr Badui has not succeeded in proving either of his twin causes of action, this claim for past economic loss must similarly fail.
156. A plaintiff bears the burden to prove its losses with particularity and certainty. Claims for loss of business and profits must be strictly proven, supported by corroborating evidence. Even if Mr Badui had been successful in establishing on the evidence that either or both of his causes of action had been proven, which he was not, he adduced no evidence at all at trial to assist the Court to assess the Company’s alleged past economic loss or loss of business.
157. It has long been held in Papua New Guinea that the courts cannot award any damages for loss of business income if no proper business records including tax returns have been presented in evidence. This applies even to village trade store and PMV businesses: Mappa v PNG Electricity Commission [1995] PNGLR 170, Woods J; Spirit Haus Ltd v Marshall (2004) N3630, Kandakasi J; Pawa v Yumbun (2009) N3784, Makail J.
158. In Liwa v Vanimo (2008) N3486 Makail J said this at [33] in connection with claims for loss of business profits, in that instance loss of business income from PMV operations:

“ There must be some independent evidence like financial statement(s) from an accountant to support the claim for loss of profit. If the accountant’s evidence and financial statement(s) are to be relied upon, then they must be based on primary documents like bank statements, receipts and invoices, contracts and other documents which would show assets acquired, income due and liabilities incurred by the business.”

159. In the present case, no annual financial statements for the Company were presented in evidence. Mr Badui described the Company as having been “thriving” before the events of November 2010 took place. Yet no tax returns or tax assessments from the Internal Revenue Commission or any corroborative financial reports from an accountant in respect of the Company’s operations were tendered in evidence. No documentation to support the particulars of loss of business income pleaded in para. 20 of the statement of claim was forthcoming at trial. Had Mr Badui’s claims against Westpac for himself and the Company been successful, which they were not, Mr Badui simply left it to the Court to guess what the Company may have lost in business income.

CONCLUSION

160. The Court has found that Westpac did not act unlawfully or unreasonably at the material time in refusing to deal with Mr Badui and corporate secretary Mr Buribudo and only dealing with Mr Raman in connection with the operation of the Company’s Account. If Mr Badui had obtained proper professional legal advice before embarking on his misconceived purported directors’ meeting of the Company on 25 November 2010 where he, in concert with corporate secretary Mr Buribudo, appointed himself a director, he could have exercised other lawful avenues to pursue his grievances against Mr Raman. He did not do so. By persisting with this litigation against Westpac, Mr Badui’s causes of action founded on alleged breach of fiduciary duty and conversion have failed. Those causes of action could not be established on the pleadings and evidence presented at trial. Consequent upon that failure, all relief sought by Mr Badui for himself and the Company in this suit is refused. This proceeding will be dismissed.

COSTS

161. The general rule in litigation of this nature is that except where it appears to the Court that some other order as to costs should be made, costs follow the event, that is to say that the successful party has its costs paid for by the losing party on a party/party basis: Order 22 Rule 11 National Court Rules. However, Mr Badui was forewarned by the Order which was made by Kandakasi DCJ on 17 May 2018 that he needed to seriously consider withdrawing or discontinuing this proceeding. Term 5 of the Order which was made by his Honour on 17 May 2018 states as follows:

“5. In the light of the matters disclosed in the Statement of the Relevant Facts and Legal Issues for Resolution, the Plaintiffs are directed to reconsider pursuing this matter further but should they pursue the matter further and it is determined in favour of the Bank, the Plaintiffs shall pay the Defendant’s costs on a solicitor client basis.”

Mr Badui decided to press on with this litigation notwithstanding the Deputy Chief Justice’s warning. This proceeding was flawed from the start and had little or no prospect of success. Much scarce Court time and Court resources have been wasted on this case. Quite apart from the time spent at trial, the Court has had to deal at length with numerous interlocutory matters as well as the preparation of this decision. As for Westpac, the bank has been compelled to defend itself with legal representation from commencement of this proceeding through to substantive trial. I agree with the reason for the Deputy Chief Justice’s forewarning on costs given to Mr Badui. The plaintiffs, Mr Badui and the Company, are to pay Westpac’s costs of this proceeding on a solicitor/client basis, also known as lawyer/client costs, such costs to be taxed if not agreed.

ORDER

162. The formal terms of the Order of the Court are:

(1) This proceeding is dismissed.

(2) The plaintiffs shall pay the defendant’s costs of and incidental to this proceeding on a solicitor/client basis, such costs to be taxed if not agreed.

Ordered accordingly

Sannel Lawyers: Lawyers for the Plaintiffs
Dentons Lawyers: Lawyers for the Defendant