Tobias v Aweto [2024] PGNC 2; N10642 (16 January 2024)

N10642

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 236 OF 2020

BETWEEN:
ESTHER TOBIAS in her capacity as the SPOKESPERSON for herself and on behalf of OTHERS whose names appear in the SCHEDULE of this Originating Summons as SHAREHOLDERS of SAI BUSINESS GROUP Inc (refer to Attached List)
Plaintiffs

AND
THE CHAIRMAN, JOHN AWETO AND HIS SETTLEMENT AUTHORITY MEMBER, DAVID MORIABE AND GILENDE KIKOAI
First Defendant

AND:
THE CHAIRMAN, MENOS IVANGO ACKRIS AND HIS MANAGEMENT COMMITTEE MEMBERS, KEN SIMON, VINCENT KOPIAO, AKAI KAPIS, KEVERA KYANGO, SAM MAX AND TOM SAM
Second Defendant

AND:
SAI BUSINESS GROUP INC.
Third Defendant

AND
MAINLAND HODINGS LTD
Fourth Defendant

AND
HARRIET KOKIVA in her capacity as ACTING REGISTRAR OF THE COMPANIES & BUSINESS GROUPS
Fifth Defendant

AND
NATIONAL SUPERANNUATION FUND LIMITED
Sixth Defendant

Lae: Dowa J

2021: 27^th July, 17^th & 18^th August, 9^th & 11^th November, 2^nd December
2024: 16^th January

PRACTICE AND PROCEDURE- application for declaratory and consequential orders-Whether management Committee and Dispute Settlement Authority failed to perform statutory duties under the Business Group Incorporation Act- Discussions on competency of proceedings under Order 4- Whether failure to use appropriate modes of action renders proceedings incompetent-Whether plaintiff had representative capacity to sue- Court being satisfied that proceedings were competent and plaintiff having established a case was granted the reliefs sought.

Cases Cited:

Simon Mali -v- The State (2002) SC690
Tigam Malevo v Keith Faulkner (2009) SC960
Jackson Tuwi -v- Goodman Fielder International Limited (2016) SC1500

Counsel:

P. Yayabu, for the Plaintiffs
S Toggo, for the first, Second and Third Defendants
M Malingi, for the Fourth Defendant

DECISION

16^th January 2024

1. DOWA J: The Plaintiffs seek various declarations and consequential orders against the Defendants alleging breach of statutory duties under the Business Group Incorporation Act and mismanagement of the shareholders’ funds in Sai Business Group Inc.

Background Facts

2. The Plaintiff, Esther Tobias, represents 467 others in the proceedings. They come from Kapao LLG, Menyamya District, Watut LLG and Mumeng District of Morobe Province. They are members and shareholders of Sai Business Group Inc., a business group incorporated under the Business Group Incorporated Act. The first Defendants are the members of Dispute Settlement Authority for Sai Business Group Inc. appointed under the Act. The second Defendants are the Management Committee members of Sai Business Group Inc. hereinafter shall be referred to as SBGI.

3. The Plaintiffs allege amongst others that:

1. the first and second Defendants unlawfully removed some of the Plaintiffs’ names from the share register.
2. the first Defendants failed to conduct any members dispute settlement meetings.

100. the second and third Defendants failed conduct any annual general meetings.

4. the second and third defendants failed to provide financial reports and pay dividends.
5. the second Defendant, as Chairman, misappropriated funds belonging the Sai Business Group Inc. for his personal gain to the detriment of the Plaintiffs.
   

4. Aggrieved by the actions and/or inactions of the first and second Defendants, the Plaintiffs instituted the currents proceedings.

The Application

5. The Plaintiffs seek more than 15 reliefs in the Originating Summons. The main reliefs are:

i. A declaration that the first defendants failed in their statutory duties to call and convene meetings to hear and resolve members complaints and grievances brought against the second Defendants in respect of the affairs of Sai Business Group as prescribed by sections 41,42 and 43 of the Business Group Incorporation Act.

ii. A Declaration that the term of office by the first and second Defendants have lapsed since 2017 and are currently illegally occupying the said offices.

iii. A Declaration that the second Defendants are in breach of their statutory duties under the Business Group Incorporation Act by failing to keep and maintain a correct register of shareholders, call annual General Meetings of members, provide annual financial reports, and pay dividends.

iv. A Declaration that the second and third Defendants have unlawfully removed names of some of the Plaintiffs from the 2011 share register.

v. An Order that the first and second Defendants be removed from the current positions as members of the Management Committee and Dispute Settlement Authority and be replaced by the new members to be led by the Plaintiff Esther Tobias.

vi. Other restraining and consequential orders.

Evidence

6. The Plaintiffs rely on a total of 25 affidavits, exhibits P1 to P25, deposed to by Esther Tobias and eleven (11) others. The deponents Esther Tobias and Enos Tapo were cross-examined and gave additional oral evidence.
   
7. The first, second and third defendants rely on the affidavits of Menos Ivango and John Aweto which were tendered into evidence by consent.
   
8. The Fifth Defendant relies on the Affidavit of Malis Miningi which was also tendered into evidence by consent.
   

The Plaintiffs’ Claim

9. From the pleadings, evidence and submissions of counsel, the Plaintiffs’ claim is summed up in the following:
   
   1. The Plaintiff Esther Tobias and other Plaintiffs are shareholders as shown in the 2011 Share register. However, their names were removed and no longer shown in the 2018 share register. The Plaintiffs submit that their names were illegally removed and replaced by others by the second Defendants.
      
   2. The Plaintiffs have on numerous occasions requested the first Defendants to convene a meeting for the members and shareholders to discuss and resolve the issues of shareholding and the finances of Sai Business Group Inc., but the first Defendants led by John Aweto keeps on ignoring their requests which is a breach of their statutory duties prescribed by sections 41,42 and 43 of the Business Group Incorporation Act.
      
   100. The Plaintiffs submit that the second Defendants are in breach of their statutory duties under the Business Group Incorporation Act and the Companies Act by failing to conduct annual general meetings, provide financial reports and pay dividends, especially the proceeds of the sale of shares in Mainland Holdings Limited.
        
   4. The Plaintiffs submit further that the second Defendant, as Chairman, misappropriated funds belonging the Sai Business Group for his personal gain to the detriment of the Plaintiffs. The Chairman has been charged by police and is in no good position to continue as chairman.
      
   5. Finally, the Plaintiff submits that the first and second Defendants be replaced by the Plaintiff Esther Tobias and other Committee members in a new-look Management Team.
      

The first second and third Defendants’ Response

10. In response to the allegations, the first, second and third Defendants submit the following:
    

i. The proceedings are incompetent for two reasons:

1. The facts pleaded for reliefs sought are largely disputed and thus it is not appropriate to commence proceedings by Originating Summons by virtue of Order 4 Rule 3 (2) of the National Court Rules.
   
2. The Plaintiff Esther Tobias lacks representative capacity to institute the proceedings on behalf of unnamed persons.
   

2. On the merits, the first second and third Defendants submit that the Plaintiffs have not clearly pleaded a reasonable cause of action. The facts are not clear, and the evidence given is insufficient for the Court to grant the reliefs sought.
   

The Fifth Defendants Submission

11. Mr. Miningi, counsel for the fifth Defendant, submits that the Plaintiff lacks standing and has no cause of action. He submits that the share certificates currently held by the Plaintiffs were issued in 1970 in a company, known as Sai-Watut Rural Cooperative Limited which was registered on 26^th July 1968. SWRCL was a major shareholder in Mainland Holdings Ltd. The Company was deregistered in March 1996. Sai Business Group Inc was registered on 24^th January 1995. There is no evidence to show the legal process applied for the smooth transition of the issued shares in SWRCL being properly transferred to Sai Business Group Inc.
    

The Issues

12. The issues for consideration are:
    
    1. Whether the proceedings are incompetent under Order 4 Rule 3 (2) of the National Court Rules.
    2. Whether the proceedings are incompetent for lack of representative capacity.
    3. Whether the proceedings are incompetent due to lack of a clear relationship between Sai-Watut Rural Cooperative Limited and Sai Business Group Inc.
    4. Whether the Plaintiffs are entitled to the reliefs sought in the Originating Summons.
       

Competency Issues

1. Whether the proceedings are incompetent under Order 4 Rules 2 and 3 (2) of the National Court Rules.
   

13. Counsel for the first, second and third Defendants submits that the proceedings are incompetent arguing the mode of proceedings used by the Plaintiff is inappropriate. The Defendants submit that the reliefs sought in the Originating Summons are based on allegations of fraud and breach of statutory duty and there is a substantial dispute of facts, and the proceedings should have been commenced by pleadings in a Writ of Summons under Order 4 Rule 2 and 3(2) of the National Court Rules.
    
14. Order 4 of the NCR provides for two modes of beginning civil proceedings, either by Writ of Summons or Originating Summons. Rule 1 gives a litigant the choice to commence proceedings either by Writ of Summons or by Originating Summons. Rule 2 (1) provides that a Writ of Summons is required where the claim is made for a relief based on tort, fraud, breach of duty either contractual or statutory breach, and for damages for breach of promise of marriage. Rule 2, subrule (3) provides that subrule (1) does not apply to proceedings commenced by a person who desires to apply for a declaration of right.
    
15. Rule 3(2) provides that “proceedings-
    

(a) in which the sole or principal question at issue is, or is likely to be, one of the constructions of an Act or of any instrument made under an Act, or of any deed, will, contract or other document, or some other question of law; or

(b) in which there is unlikely to be a substantial dispute of fact; or

(c) in which a person is authorized by an Act, regulation or by these Rules to make an application to the Court or a Judge with respect to a matter that is not already the subject matter of a pending cause or matter, and no other mode of making the application is prescribed by that Act, or regulation or by these Rules,

are amongst those which are appropriate to be commenced by originating summons unless the plaintiff considers the proceedings more appropriate to be commenced by writ of summons.”

16. Rule 3 (2) provides that it is appropriate to commence proceedings by Originating Summons in which the main issue is or likely to be one of the constructions of an Act, or an instrument or contract or document or question of law or in which there is unlikely to be a substantial dispute of facts.
    
17. Turning to the present case, I note some of the reliefs sought are based on allegations of breach of statutory duty and there is some dispute of facts. On 5^th March 2021, the Court suggested to the Plaintiff to consider the option of converting the pleadings to a statement of claim, but the Plaintiff did not take up that option. Whilst it may seem inappropriate to commence proceedings by Originating Summons, where there is dispute of facts, and where there are allegations of breach of statutory duty, it does not make the proceedings incompetent. Rules 1 and 3 (1) gives the Plaintiffs the choice to commence proceedings either by Writ of Summons or Originating Summons. The Plaintiffs in this case are not merely seeking damages for breach of duty. Rather, they are seeking declaration of their rights as allowed by Rule 2 (3) of the NCR. In respect of the factual disputes, the onus is still on the Plaintiffs to satisfy the Court with credible evidence that they are entitled to the reliefs they are seeking.
    
18. I will therefore reject the Defendants arguments and hold that the mode of proceedings used is sufficient and competent.
    
19. There is a second reason I will reject the Defendants ‘arguments. The Defendants raised this issue belatedly. It would have been prudent to raise this matter early. The matter proceeded to trial and a lot of witnesses gave evidence some of whom were cross-examined at length over several days. By their conduct, the Defendants have accepted the mode of proceedings used by the Plaintiff and are now estopped from raising same.
    
    2. Whether the proceedings are incompetent for lack of representative capacity.
       
20. . The relevant rules dealing with representative capacity is Order 5 Rules 13 of the National Court Rules. Rules 13 reads:
    

“13. Representation; Current interests. (8/13)

(1) Where numerous persons have the same interest in any proceedings the proceedings may be commenced, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them.

(2) At any stage of proceedings pursuant to this Rule the Court, on the application of the plaintiff, may, on terms, appoint any one or more of the defendants or other persons (as representing whom the defendants are sued) to represent all, or all except one or more, of those persons in the proceedings.

(3) Where, under Sub-rule (2), the Court appoints a person who is not a defendant, the Court shall make an order under Rule 8 adding him as a defendant.

(4) A judgement entered, or order made in proceedings pursuant to this Rule shall be binding on all the persons as representing whom the plaintiffs sue or the defendants are sued, as the case may be, but shall not be enforced against any person not a party to the proceedings except with the leave of the Court.

(5) An application for leave under Sub-rule (4) shall be made by motion, notice of which shall be served personally on the person against whom it is sought to enforce the judgement or order.

(6) Notwithstanding that a judgement or order to which an application under Sub-rule (5) relates is binding on the person against whom the application is made, that person may dispute liability to have the judgement or order enforced against him on the ground that by reason of facts and matters particular to his case he is entitled to be exempted from the liability........”

21. The law on representative capacity is settled in the cases, Simon Mali -v- The State (2002 SC690), Tigam Malevo v Keith Faulkner (2009) SC960 and Jackson Tuwi -v- Goodman Fielder International Limited (2016 SC1500. The basic elements of instituting class action are:
    
    1. All intended Plaintiffs be named in the originating process.
    2. Each intended Plaintiffs must give specific instructions evidenced in writing to the lawyers to act for them.
    100. The principal or lead Plaintiff must produce an authority to the Court to show that he is authorized by them.
         
22. There is evidence that the Plaintiff, Esther Tobias, is a member and shareholder of the Sai Business Group Inc., incorporated under the Business Group Incorporation Act, whose members come from Kapao LLG, Menyamya District, Watut LLG and Mumeng Districts of Morobe Province. She represents 467 members and shareholders of Sai Business Group Inc. whose names are listed in the Schedule of the Originating Summons. The 467 members have specifically and expressly signed their consent and authority to Esther Tobias to be their spokesperson and represent them in these proceedings. I am satisfied that the Plaintiffs have substantially met the requirements of Order 5 Rule 13 of the National Court Rules.
    
23. Even if I am wrong in my ruling, the proceedings are still competent in that the lead Plaintiff, Esther Tobias, has standing to institute the current proceedings on her own right and capacity as she is a shareholder and member of the business group.
    
24. I am therefore satisfied that the lead Plaintiff, Esther Tobias, has the legal capacity to represent the rest of the Plaintiffs in the proceedings and thus the proceedings are competent for all purposes and intent.
    
    3. Whether the proceedings are incompetent due to lack of a clear relationship between Sai-Watut Rural Cooperative Limited and Sai Business Group Inc.
       
25. On 1^st April 2021, the Court directed the fifth Defendant, Registrar of Companies to investigate, call meetings of the disputing parties and provide a status report on the shareholding of Sai Business Group. The Registrar of Companies provided the report contained in the Affidavit of counsel, Malis Minigi, filed 23^rd May 2021.
    
26. Mr. Miningi reports that the share certificates currently held by the Plaintiffs were issued in 1970 in a company, known as Sai-Watut Rural Cooperative Limited which was registered on 26^th July 1968. SWRCL was a major shareholder in Mainland Holdings Ltd then. The Company SWRCL was deregistered in March 1996. Sai Business Group was registered on 24^th January 1995. Sai Business Group Inc. became a shareholder in Mainland Holding Limited in June 2000. There is no evidence to show the legal process applied for the smooth transition of the issued shares in SWRCL being properly transferred to Sai Business Group and eventually becoming a shareholder in Mainland Holdings Limited.
    
27. Based on his investigation, Mr. Miningi submits that the current proceedings are incompetent as there is no clear evidence of the legal process involved in transferring the original shares held in SWRCL to Sai Business Group.
    
28. It appears there are two separate issues to be determined. Firstly, the shares and shareholding in SWRCL and SBG, and secondly the shareholding in Mainland Holdings Limited. The current proceedings concern the shares and shareholding in SWRCL/ SBG. The main complaint is the removal of some of the shareholders in SWRCL/SBG from the share register. It does not concern the shareholding by SWRCL/SBG in Mainland Holdings Limited.
    
29. In my view, the lack of clarity in the process involved in installing SBG as shareholder in Mainland Holdings Limited replacing SWRCL is not an issue for consideration before the Court and thus it does not render the proceedings incompetent. Further, it seems the fifth Defendant misdirected herself in the investigations contrary to the directions issued by the Court. The submission of the fifth Defendant is therefore rejected as it is misconceived.
    
    4. Whether the Plaintiff is entitled to the reliefs sought in the Originating Summons.
       
30. I will now turn to merits of the claim and determine whether the Plaintiff is entitled to the reliefs sought.
    

Relief No 1. Dispute Settlement Authority

31. The Plaintiffs allege they requested the first Defendants led by Chairman, John Aweto, to convene members meetings and resolve disputes concerning the management affairs of SBG. The matters of concern to the members that required immediate resolution by the first Defendants are:
    
    1. calling annual general meetings.
    2. Election of Management committee
    3. Payment of dividends
    4. Illegal dealings in shares
    5. Misuse of funds by management committee
       
32. The defendants failed to meet the Plaintiff and members of SBG to resolve the above matters. As a result, the members proceeded to conduct a meeting on 11^th November 2017 and resolved to appoint new members in place of the current members led by the Charman, John Aweto. The members also resolved in that meeting that the Management Committee led by the current Chairman Menos Ivango Ackris be replaced by the Plaintiff and other members. The Plaintiffs are now seeking declaratory orders affirming and endorsing the resolutions of the members.
    
33. In response, the Defendant, John Aweto, the Chairman of the Dispute Settlement Authority denied receiving any requests from the Plaintiffs. There is however overwhelming evidence that repeated requests were being made to the first Defendants to deal with the members’ complaints, but no hearing was conducted.
    
34. The First Defendant has a duty to call meetings of members under Part V of the Business Group Incorporation Act. The relevant sections are set out below:

“PART V. – DISPUTE SETTLEMENT.

39. APPLICATION AND INTERPRETATION OF PART V.
    

(1) This Part applies to disputes between–
(a) a business group and a member of the group; or
(b) members of a business group,
concerning the property or the affairs of the group, including–
(c) the distribution or disposal of any property or income of the group; and
(d) any transaction between the group and any of its members,

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

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

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

40. DISPUTE-SETTLEMENT AUTHORITIES.

(1) In order to be incorporated, each business group must have at least one dispute-settlement authority.
(2) A dispute-settlement authority may be a person or a number of persons–
(a) specified by name; or
(b) specified by office or position; or
(c) determined in the manner specified,
in the constitution of the group.

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

41. SETTLEMENT OF DISPUTES.

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

42. JURISDICTION OF COURTS.

(1) No court has jurisdiction over a dispute to which this Part applies unless–
(a) all parties agree that it should be referred to the court; or
(b) the constitution of the business group concerned so provides; or
(c) any relevant agreement between the business group and a party so provides; or
(d) the dispute-settlement authority thinks that–
(i) it cannot satisfactorily settle the dispute; and
(ii) the court may be able to do so.

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

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

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

(c) the dispute-settlement authority is entitled to act, and if the court or a person interested so asks shall act, as an assessor on matters of custom and as to matters of common knowledge within the group, but–
(i) the advice shall be given in open court and is open to challenge; and

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

35. The Act makes it plain that a dispute between the members of the business group and the business group concerning the property or affairs of the business group shall be settled by the Dispute Settlement Authority. The National Court has no jurisdiction to hear and determine a dispute unless:
    

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

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

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

(d) the dispute-settlement authority thinks that–

(i) it cannot satisfactorily settle the dispute; and

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

36. In the present case there is no evidence of the dispute being referred to the Court by agreement of its members nor by reference to a constitution of the business group except for the current proceedings.
    
37. On 5^th March 2021, the Court directed the first Defendants led by the Chairman, John Aweto, to administratively deal with the issues raised in the current proceedings.
    
38. As per the direction of the Court, a meeting was organized by the first Defendant on 18^th March 2021. The Chairman of the Dispute Settlement Authority, John Aweto, deposes in his affidavit filed 22^nd March 2021, he called a meeting of members to resolve the issues raised by the Plaintiffs, but it became difficult. The first Defendants preferred the Court to deal with the matter and referred the matter to Court for continuation of the hearing.
    
39. A copy of the minutes of the meeting shows the issues raised in the proceedings were introduced but not adequately discussed and resolved. The meeting was convened at 2mile Lae and attended by only 23 members out the 2,000 plus members. The Chairman of the Management Committee, Menos Ivango Ackris, was a notable absentee. The minutes of the meeting show a general feeling of dissatisfaction of how the SBG is run.
    
40. There is a substantial dispute between the members of SBG and the Management Committee of SBG. Under section 17 of the Business Group Incorporation Act, SBG is a legal entity and carries on its functions by the Management Committee, the second Defendants led by the Chairman. Serious allegations have been made against the Management Committee especially the Chairman. It seems the first Defendant has not adequately dealt with the issues raised. He has conceded that the first Defendant is unable to deal with the issues raised by the Plaintiffs. To that extent they have failed to perform their statutory duty and needs to be replaced by new members who will deal with members issues without fear or favour.
    

Term of office of the first and second Defendants

41. The Court notes the Plaintiff’s submission that the term of office of the current members of the Dispute Settlement Authority and Management Committee has expired since 2017 and should be replaced by the new members proposed in the proceedings. The Plaintiff says the decision to remove the existing members with the proposed members was resolved in a members’ meeting of 11^th and 25^th November 2017 and other subsequent meetings. The Plaintiffs submit that the Committee’s term expired in 2017 after serving a term of three (3) years. The parties have not brought to the attention of the Court the term of office a member of the Dispute Settlement Authority and Management Committee is to serve. The Business Group Incorporation Act is silent on this issue. Section 14 of the Act provides for the necessity of a business group to have a constitution. The constitution shall then provide for its powers, functions, rules, obligations of the group including the terms and conditions of employment of the Dispute Settlement Authority and the Management Committee. In the present case, the parties have not made any reference to SBG constitution, nor have they provided a copy to the Court.
    
42. The first and second Defendants argue that their term of office was renewed and extended for a term of ten (10) years. The Court notes there was a meeting of some members led by the second Defendants on 31^st May 2018 at Pine Lodge, Bulolo where the members of the current Management Committee and the Dispute Settlement Authority were extended for 10 years. The minutes of that meeting do not show the number of members present except for some proxies. The current Plaintiff is a notable absentee in that meeting. It seems the issues raised in the current proceedings were not discussed in that meeting. In my view that is a matter that should be left to the entire members to resolve in a more neutral and transparent meeting of all the members/shareholders.
    
43. Despite the lack of regulatory requirements governing the term of office, the parties seem to accept the acceptable period for the term of office is three years. In my view the current members have served more than three years, and there is a need for fresh appointments, especially in the light of mounting complaints.
    

Illegal Dealings with shares

44. The Plaintiff complaints that the second Defendants unlawfully dealt with the members shares. The Plaintiff asserts that her name and other shareholders names have been illegally removed from the list of shareholders in the 2011 share register and replaced by others who were not original shareholders. Those who had their names removed are Enos Tapo, Giamsao Mosa, William Dotao, Peter Kaima, Philimon Gaindi and Francis Uyatipango and about 460 others from Kawamanga and Wandini villages. This is a serious allegation and several of the shareholders have testified of the loss of their shares. The second Defendants, especially the Chairman failed to respond. I find that this complaint is sustained by evidence. The Plaintiff and other shareholders whose names have been illegally removed be reinstated in an updated shareholders list.
    

Failure to call General Meetings

45. The Plaintiff submits the Chairman of SBG failed to call annual general meetings since he was appointed. The allegation is disputed by the Chairman. The Chairman deposes that they called meetings in 2017, and 2019. He says the 2018 meeting was disrupted by the Plaintiffs supporters, which is denied by the Plaintiff who says it was caused by members of SBG members who were frustrated with the mismanagement of their finances by the Chairman. A perusal of the minutes of the meetings of 2017 and 2019 shows only a small number of members attended by proxy. I am not satisfied that there was a genuine and transparent annual general meeting of all members of SBG. There is therefore a need to call that meeting as soon as practicable at a neutral place accessible to all members.
    

Payment of Dividends

46. The Plaintiff submits the second and third defendants failed to pay dividends to its members. In response, the second Defendant, especially the Chairman, who deposes that SBG was not operating from 2002 till 2015. Between December 2014 and April 2017 SBG received some dividend payments from Mainland Holdings Limited. The funds were used to commence the operations of SBG and pay outstanding debts. Since 2017 he was battling Court battles initiated by the Plaintiff and other disgruntled members. The inference to be drawn from a lack of direct response is that no dividends have been paid to members. This is a breach of section 26 of the Business Group Incorporation Act which places an obligation on the Management Committee to pay dividends. It is also surprising that the Management Committee made no payments after receiving more than K 10,000,000.00 from National Superannuation Fund Limited after the sale of their 50,000 shares in Mainland Holdings Limited. I find the second Defendants failed in their statutory duty to pay dividends to the members/shareholders of SBG.
    

Mismanagement of Funds

47. The Plaintiff complains that the second Defendants, especially the Chairman of SBG misused funds belonging to SBG from dividends and proceeds of the recent sale of shares from Mainland Holdings Limited. The Plaintiff submits the second Defendants sold 50,000 shares SBG holds in Mainland Holdings Limited for K 10,000,000.00 without the consent and approval of the members. The second Defendants misused the SBG funds in building their own business without properly accounting for the funds used. The second Defendants, especially the Chairman, has not directly responded to the allegations. The Court will caution itself from drawing any adverse conclusions from lack of response because it is not a pleading in a statement of claim. Nonetheless, the evidence shows that SBG’s 50,000 shares in in Mainland Holdings Limited were sold for ten million kina to National Superannuation Fund Limited in February 2018. There is no evidence of resolution of members to dispose off the shares. There is no evidence of how the funds were used.
    
48. Against this backdrop, there is evidence of the Second Defendant, the Chairman Menos Ackris, setting up alternative joint venture business in Menos JV Limited. According to the minutes of a meeting dated 6^th June 2019, annexed to the affidavit of Menos Ackris filed in the proceedings, the company, Menos JV Limited is set up to protect the interests of SBG. Interestingly SBG holds 60 % while MIA Holding Limited holds 40 %. According to the Chairman, MIA Holdings Ltd is owned by Chairman, Menos Ivengo Ackris’ family. Menos JV Limited has already ventured into security and coffee businesses.
    
49. There is no evidence of members of SBG resolving a joint venture business with the Chairmans family company. It is arguable that the funds to set up the new businesses in Menos JV Limited came from the proceeds of SBG’s share sales without the knowledge and approval of the members. It is arguable that the Chairman, Menos I Ackris being related to both SBG and MIA Holdings Limited has a conflict of interest and can be apprehended by many as such, especially by the members of SBG. In the circumstances, the complaint of misuse of the members funds in SBG is not without substance nor unmeritorious and should become a subject of further investigation.
    

Conclusion

50. The Plaintiff has demonstrated to the Court sufficient cause for the reliefs sought in the proceedings. However, it does not necessarily follow that the reliefs sought should follow suit. The Court will make orders that will protect the interest of members of SBG and to do justice to the parties in the circumstances of the case.
    
51. The Plaintiff, Esther Tobias, is supported by a big number of shareholders, some of whom have filed affidavits in the proceedings. Their main complaints are they were not paid dividends, no financial report produced, no general meetings held and for misuse of funds. Some complain of their names going missing in the share register. These are serious allegations against the management committee over the discharge of their statutory duties under the Business Group Incorporation Act. The complaints of financial mismanagement have resulted in the laying of criminal charges against some of the current management committee members, especially the chairman and his deputy.
    
52. SBG is a public business group whose members hail from various Districts. The Management Committee is accountable to the shareholders. The evidence presented by the parties shows that the business group is run in isolation and without much financial accountability.
    
53. The Court will do injustice to the shareholders just by refusing to grant the reliefs in the manner sought by the Plaintiffs. The merits of the proceedings call for corporate action and intervention by the Court. SBG itself cannot do anything without the innovative and proactive leading by the Management Committee.
    
54. In my view, the Court has jurisdiction under section 42 of the Business Group Incorporation Act to make such orders and directions as are necessary to protect the interest of the business group and its members/shareholders.
    
55. Even if I am wrong in my view, the Court has an inherent power under section 155(4) of the Constitution to make, in the circumstances as seems to it proper, such other orders as are necessary to do justice in the circumstances of this case.
    

Agendas for the shareholder meeting

56. I am therefore inclined to grant directional orders for the members to meet, discuss and resolve the management and other issues highlighted in the proceedings. The main agendas for the members to resolve in the meeting shall be:
    
    1. Election of the Management Committee.
    2. Election/Appointment of the Dispute Settlement Authority.
    3. Review and rectification of shareholders names.
       

Eligibility of the current Management Committee and the Dispute Settlement Authority

57. The Court observes from the evidence presented that it is not in the interest of the business group, SBG, to retain the current members of the Dispute Settlement Authority. They have clearly demonstrated, even conceded that they are incapable of resolving the disputes concerning the affairs of SBG and perform their statutory duties independently. It is directed that the members of the current Dispute Settlement Authority be excluded in the elections.
    
58. Likewise, it is not in the interest of the SBG to have the current Management Committee led by the Chairman, Menos I Ackris, to continue into the future. The evidence shows, apart from the management failures, the current Chairman has a clear conflict of interest in effectively running SBG when he must devote his time in managing other companies, Menos JV Limited and MIA Holdings Limited. It is directed that the current management committee led by the Chairman be excluded in the elections.
    

Endorsement of proposed new Management Team

59. The Court notes the Plaintiffs submission that the Court endorse the new management team to be led by the Plaintiff as appointed by the members in their November 2017 meeting. As I have found, the resolution does not represent the wider community of members. There seems to be another faction led by the current management. To arrive at a fair and just resolution, all members be allowed to assemble and together elect their group leaders in a transparent and open election by all members. The Court will not endorse the names of the group leaders proposed.
    

The elections

60. The elections must be conducted fairly and transparently. All the members or shareholders be present. It is recommended that the shareholders whose names appear in the 2011 share register be allowed to participate and vote. Representations in meetings and voting by Proxies be discouraged unless there are good reasons for non-attendance. The elections be conducted by the District Administrators of Watut LLG of Bulolo and Kapao LLG of Menyamya District in a venue that is accessible to by all members.
    

Freezing of the accounts

61. I will also make an order for the immediate freezing of all the accounts until a new Management Committee is elected. The freezing of the account is necessary to stop any unnecessary withdrawal pending the elections.
    

Future of SBG -General observation

62. The pioneers who started the business group had good intentions. It seems over the years they have not seen any returns although their investments have appreciated in value. It seems they will still grapple with management issues no matter who takes the chair. For their peace of mind, they may consider the options of winding up as provided for by section 26 of the Business Group Incorporation Act, that is, liquidate the assets, pay themselves after expenses and move on. The Court notes, that is the desire of some of the aging members. That is just an observation and not a recommendation nor a direction of the Court.
    

Costs

63. Generally, a successful party is entitled to costs. The Plaintiff has been successful in pursuing this case. The Plaintiff’s cost of the proceedings shall be paid by the first, second and third Defendants.
    

What orders should the Court make?

64. The reliefs 1 to 15 sought in the Originating Summons shall not be granted in the manner and terms set out but instead the Court shall make such orders as are necessary, compatible, and consistent with the findings of facts to do justice in the circumstances.
    

ORDERS

65. The Court orders:
    
    1. By way of declaration that the first Defendants failed in their statutory duties under the Business Group Incorporation Act to hear and resolve the members grievances and resolve disputes in a timely manner.
    2. By way of declaration that the second Defendants failed in their statutory duties under the Business Group Incorporation Act to call general meetings, pay dividends and properly manage and account for the members finances in Sai Business Group Inc.
    3. By way of declaration that the first, second and third Defendants unlawfully removed the Plaintiff and other shareholders names from the 2011 share register.
    4. The first Defendants are hereby removed as members of the Dispute Settlement Authority of Sai Business Group Inc. and shall cease forthwith and shall not be eligible for reappointment for the next three (3) years.
    5. The second Defendants are hereby removed as members of the Management Committee of Sai Business Group Inc. and shall cease forthwith and shall not be eligible for reappointment for the next three (3) years.
    6. All shareholders who have had their names missing from the shareholder register shall have their names restored in an updated share register.
       
    7. There shall be a shareholders meeting of Sai Business Group Inc. (SBGI) within 21 days of the date of this order.
       
    8. All the shareholders of SBGI shall attend the meeting at a venue that is neutral and accessible to all shareholders to attend.
       
    9. The elections shall be facilitated and conducted jointly by the District Administrators of Bulolo and Menyamya Districts of Morobe Province.
       
    10. The agendas amongst others to be discussed and resolved at the meeting shall be:
        
        1. Election of Management Committee
        2. Election of Dispute Settlement Authority
        100. Ratification of Shareholders names
             
    11. Notice of the meeting shall be given to all members seven (7) clear days.
        
    12. Pending the meetings above, there shall be a freeze on the accounts of the Sai Business Group Inc. and its related businesses forthwith.
        
    13. The Plaintiff, Esther Tobias, shall take out a minute of this order and serve on the SBG’s banks forthwith.
        
    14. The expenses necessarily incurred shall be met by SBGI, the third Defendant.
        
    15. The minute of this order and resolutions of the members shall be served on the Registrar of Business Groups, Investment Promotions Authority to update its records.
        
    16. The Plaintiffs cost of the proceedings be paid by first, second and third Defendants to be taxed if not agreed.
        
    17. Time be abridged.

_____________________________________________________________________
Paula Ivarami Yayabu Lawyers: Lawyers for the Plaintiffs
Daniels & Associates: Lawyers for the First, Second and Third Defendants

M.Minigi - inhouse Lawyer: Lawyer for the Fifth Defendant