N11156

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO 214 OF 2024

BETWEEN:
KETUN GOLPU INVESTMENT LIMITED
Plaintiff

AND
HENGAMBU DEVELOPMENT CORPORATION LIMITED
Defendant

LAE: DOWA J
13 DECEMBER 2024; 14 FEBRUARY 2025

PRACTICE AND PROCEDURE –Application to set aside interlocutory injunction-whether the applicant met the requirements of setting aside the interim injunction-change of circumstances resulting in setting aside the interim injunction

 PRACTICE AND PROCEDURE-Application by defendant to dismiss proceedings – grounds of - Plaintiffs proceedings has no reasonable cause of action, cannot be sustained or even allowed to proceed to trial - whether the pleadings fail to disclose a reasonable cause of action - whether proceedings are so frivolous or vexations, that it is untenable – consideration of – plaintiffs proceedings cannot be sustained, plaintiffs have no reasonable cause of action – proceedings dismissed

Cases cited
Wamena Trading Ltd v Civil Aviation Authority [2006] PNGLR 
Leda v Setting Bay Lumber Logging Company (2011) N4542 
Maiva v Marl (2012) N4696
Sky Development Corporation Ltd v Emau (2017) N6807
Powi v Southern Highlands Provincial Government (2006) SC844
PNG Forest Products vs. State [1992] PNGLR 84
Ronny Wabia vs. BP Exploration Co. Ltd [1998] PNGLR 8
Wabia vs. BP Petroleum (2019) N4337
Philip Takori v Simon Vagari (2008) SC905
Mt. Hagen Urban LLG vs. Sek No. 15 (2009) SC1007
National Provident Fund vs. Maladina & Others (2003) N2486
 Wambunawa Holdings Ltd. vs. ANZ Bank (2020) N8310

Counsel
K Aisi for the plaintiff  
D Kaima for the defendant

DECISION

1.	DOWA J: This is a ruling on the Defendant’s application to set aside interim interlocutory orders and for the dismissal of proceedings for disclosing no reasonable cause of action pursuant to order 12 Rue 40 of the National Court Rules

Background facts.

2.	The proceedings concern use and or misuse of funds belonging to Hengambu Landowners Association Inc., a landowner group from the Wafi/Golpu Gold Project area in the Morobe Province. The Plaintiff is a company incorporated under the Companies Act. Mr. Kailes Geo, Chairman of the Plaintiff company deposes that the Plaintiff is an investment company for the Hengambu Landowners Association. It is incorporated for the purpose of facilitating all investment funds received from the government and the mine developer for the Hengambu landowners.

3.	It is alleged that on 29th August 2024, the Morobe Provincial Government paid K 5.4 million as infrastructure Development Grant to the Defendant company for and on behalf of Hengambu Landowners Association. The Plaintiff alleges that the Defendant company does not represent Hengambu Landowners Association, and the money was wrongly paid to the Defendant company. The Defendant is incorporated by one John Nema, former Chairman of the Hengambu Landowners Association, who was voted out. Mr. Geo deposes that the money for the landowners is in the wrong hands and fears that it could be misused.

4.	The Plaintiff filed this proceeding seeking declaratory orders that the Plaintiff is the only legitimate landowner company to receive Infrastructure Development Grants for the Hengambu Landowners Association Inc. and other consequential orders.

5.	Pending the hearing of the substantive matter, the Court has on 11th October 2024 granted interim orders restraining the defendant from dealing with the funds.

The Defendant’s application

6.	By Notice of Motion the Defendant now seeks an order to set aside the restraining orders and for the dismissal of the substantive matter. For clarity the Defendant seeks the following orders: 

1.	Pursuant to Order 12 Rule 1 and/or Order 12 Rule 8(4) and (5) of the National Court Rules 1983 (“Rules”), the interim orders made on 11 October and entered on 14 October 2024 be set aside;

2.	Pursuant to Order 1 Rule 7 and/or Order Rule 38(2)(d) of the Rules, the requirements for service of this application and the affidavit of John Nema sworn on 30 October 2024, the affidavit of John Nema sworn on 30th October 2024, the affidavits of Levai Bing, Bob Kitombing, Semmy Geatulu, and Petrus Simon, all sworn on 14 October 2024 and filed herein be dispensed with;

3.	Pursuant to Order 12 Rule 1 and/or Order 12 Rule 40(1)(a), (b), or (c) of the Rules, these proceedings be dismissed in their entirety for disclosing no reasonable cause of action, being frivolous and vexatious and/or an abuse of process;

4.	The Plaintiff pays the Defendant the costs of these proceedings.

5.	Such further or other orders this Honourable deems appropriate.

6.	Time for entry of these orders be abridged to the date of settlement which shall take forthwith upon sealing of these orders.”

7. The Defendants rely on the Affidavits of John Nema, Levai Bing, Bob Kitombing, Semmy Geatulu, and Petrus Simon, all sworn 30th October 2024 and filed 1st November 2024. 

Issues
8.  The main issues for consideration are:

1. Whether the interim orders granted on 11th October 2024 be set aside.
2. Whether the proceedings be dismissed for disclosing no reasonable cause of action and for frivolity.

1. Whether the interim orders granted on 11th October 2024 be set aside.

Principles for setting aside Inter-locutory Orders

9.	The case of Wamena Trading Ltd v Civil Aviation Authority (2006) PNGLR 1, pages 236, set out the following principles:

“9.      The following principles have been found to apply to an application to vary or discharge an interlocutory order:
A.	The court has wide powers to grant or refuse to grant, vary or set aside, dissolve or discharge an interlocutory order;
B.	an application to dissolve an injunction should not simply be an opportunity for the parties to reargue an earlier inter parties order;
C.	if the interlocutory order is the subject of an appeal the court should be slow to make an order which is likely to interfere with the review powers of the appellate Court;
D.	some of the circumstances in which an interlocutory order might be set aside are:
a.	where the conditions or stipulations of the order have been met and the order is no longer necessary.
b.	If it is subsequently discovered by the Court that the interlocutory order was founded on wrong principles; 
c.	changes in relevant circumstances, including the failure of the party enjoying the order to act responsibly after obtaining it; 
d.	it is shown that the party obtaining the order has not come to the Court with ‘clean hands’; See Mainland Holdings Ltd v Paul Stobbs N2522 (Injia DCJ)
e.	where the plaintiff has failed to prosecute its’ action after obtaining an injunction: See National Housing Corp. v  Yama Security Services Pty. Ltd N1985 (Sevua J);
f.	if the Court finds that it was misled on the earlier application: See Mark Ekepe v William Gaupe N2694 (Cannings J);
g.	on an ex parte interlocutory application there has been a failure to make a full disclosure of relevant material both for and against the applicant’s case: See Sioti Bauf and Lovoi Nadai v Poliamba Pty. Ltd [1990] PNGLR 278, Golobadana No 35 Ltd v Bank of South Pacific Ltd N2309 (Kandakasi J);
E.	An interlocutory order should not be set aside if the application is merely the opportunity for the applicant to produce evidence which was available and could have been produced when the injunction was first argued inter parties: See Mainland Holdings Ltd v Paul Stobbs (supra).“

10.	The interlocutory orders of 11th October 2024 were issued without the benefit of the evidentiary matters filed by the Defendants. The Defendants have since filed five affidavits and the factual circumstances have changed. The Court will have to reconsider the orders made and determine whether they remain or be discharged.

11.	The Defendants main grounds for the application are:

1. The Plaintiff company is deregistered and has no standing.
2. The Plaintiff Company does not have a cause of action against the Defendant. 
3. The proceedings are an abuse of the process by virtue of the Supreme Court stay Orders issued on 12th December 2023 and 19th February 2024, restraining Paul Yanam and Kailes Geo from occupying executive positions in Hengambu Landowners Association Inc. 

Whether the Plaintiff has standing to institute the proceedings.
12.	The IPA records produced in Court show the Plaintiff company was first registered on 24th October 2012. It was deregistered or ceased on 19th November 2018. It was reregistered on 20th September 2024, four (4) days before the filing of the current proceedings. By virtue of Section 16 of the Companies Act it is a legal entity and has standing to institute proceedings in its corporate name.

Whether the Plaintiff has a cause of action against the Defendant.

13.	The pleadings and evidence filed does not show the Plaintiff has a personal interest in the subject funds paid by the Morobe Provincial Government to the Defendant. The Plaintiff alleges that the Plaintiff is owned by Hengambu Landowners Association Inc. And it represents the interests of Hengambu Landowners Association and the monies paid by the Provincial Government were meant for Hengambu Landowners Association and should have been paid to the Plaintiff and not the Defendant. 

14.	On the other hand, the Defendant contends that it is the legitimate landowner company owned by the Hengambu Landowners Association Inc and the money has been properly paid to its account. 

15. 	The IPA records produced in Court show that the Plaintiff company has issued 7 shares and is owned by the seven directors named in the register. Hengambu Landowners Association Inc is not featured as a shareholder in the Plaintiff company. The Plaintiff’s connection with the Association is under Article 1 and Article 2, section 6 of the Association’s Constitution where it states that the investment entity of the Hengambu people shall be Ketun Golpu Investment Limited, the Plaintiff company. Apart from that there is no other connection. 

16. 	Hengambu Landowners Association Inc on the other hand, is a legal entity incorporated under the Associations Incorporation Act 1966. Section 10 of the Act provides it has legal personality and standing to hold property including shares in a company. It has standing and power to institute proceedings in Court. Section 10 reads:

“10. EFFECT OF INCORPORATION.
(1) On the grant of a certificate of incorporation to an association under Section 7, the association–
(a) is a corporation with perpetual succession and a common seal; and
(b) may acquire, hold and dispose of property; and
(c) is capable of suing and being sued in its corporate name.
(2) The common seal of an incorporated association shall have the name of the association inscribed on the seal in legible characters.
(3) All courts, Judges and persons acting judicially shall take judicial notice of the seal of an incorporated association affixed to a document, and shall presume that it was duly affixed.”
17.	Hengambu Landowners Association Inc did not initiate the current proceedings. It appears the Plaintiff is acting as a proxy for the Association by virtue of Article 1 and 2, section 6 of the Association’s Constitution. That cannot be done without a legal connection or a resolution by the executives of the Association pursuant to Article 5, section 8 of the Constitution. 

18.	The result is the Plaintiff is acting on its own. The Plaintiff has, however, not demonstrated that it suffered any personal interest because of the money being paid by the Morobe Provincial Government to the Defendant. The money is not meant to be paid to the Plaintiff. It has no legal interest in the money. If it is instituting proceedings on behalf of the Hengambu Landowners Association Inc., it must show a legal connexion. Since Hengambu Landowners Association is not registered as a shareholder in the Plaintiff company, the Plaintiff can not be lawfully acting for the Association, a separate legal entity. 

19.	For the foregoing reasons, I find the Plaintiff has no legal standing and has no arguable cause of action against the Defendant.  

Are the proceedings abuse of the process	

20. 	The Defendants submit that the proceedings are an abuse of the process by virtue of the Supreme Court stay Orders issued on 12th December 2023 and 19th February 2024, restraining Paul Yanam and Kailes Geo from holding executive positions in Hengambu Landowners Association Inc.

21.	The evidence before the Court clearly shows there is a leadership tussle for the executive positions in the Hengambu Landowners Association. One group is led by Paul Yanam and Kailes Geo, the directors of the Plaintiff company. The second group is led by John Nema and other directors of the Defendant company. John Nema was the Chairman of the Association until 20th November 2023 when he was ousted in a members’ meeting at the direction of the National Court in proceedings, OS 124 of 2023-John Nema v Paul Yanam, Kailas Geo and others. The National Court endorsed the election of Paul Yanam and others as new executive members of the Association on 20th November 2023. John Nema appealed the decision to the Supreme Court in proceedings – SCA No 190 of 2023 -John Nema v Hengambu Landowners Association Inc and Paul Yanam and others. Pending the determination of the Appeal, the Supreme Court ordered a stay of the National Court decision of 20th November 2023. The Supreme Court made further orders that John Nema remain as Chairman of the Hengambu Landowners Association. The Supreme Court further restrained Paul Yanam and Kailes Geo from occupying any executive position in the Association pending the final determination of the Supreme Court Appeal. The Supreme Court Appeal is yet to be determined. 

22.	In the circumstances, the actions taken by the Plaintiff led by Kailes Geo seemingly on behalf of Hengambu Landowners Association would be without authority, considering both the Kailes Geo and Hengambu Landowners Association are parties to the Supreme Court Appeal and the stay orders are binding on them. By virtue of the stay orders, the executive members led by John Nema are the authorised executive members of the Association. Any decision and representations made for the Association by persons other than John Nema would be without authority.

23.	The actions taken by the Plaintiff led by Kailes Geo is an abuse of the process. This Court is duty bound to observe and respect the orders of the Supreme Court. 

Conclusion

24.    For the foregoing reasons, I have reached a conclusion that the restraining orders issued on 11th October 2024 shall not continue and must be set aside.

2. Whether the proceedings be dismissed for disclosing no reasonable cause of action and for frivolity.
25.   The next issue is whether the proceedings be dismissed for disclosing no reasonable cause of action and for frivolity.
The Law	
26. Order 12 Rule 40 (1) of the National Court Rules are relevant, and they are set out below:
		
 “Order 12 Rule 40
“Frivolity, etc. (13/5)
(1)	 Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings-
•	(a) No reasonable cause of action is disclosed; or
•	(b) The proceedings are frivolous or vexatious; or
•	(c) The proceedings are an abuse of the process of the Court,
The Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.”

27.	The case law on Order 12 Rule 40 of the National Court Rules is well settled.  Refer:  PNG Forest Products v State (1992) PNGLR 84–85, Ronny Wabia v BP Exploration Co. Ltd (1998) PNGLR 8, Wabia v BP Petroleum (2019)) N4337, Philip Takori v Simon Vagari (2008) SC905, Mt. Hagen Urban LLG v Sek No. 15 (2009) SC1007, National Provident Fund v Maladina & Others (2003) N2486; and Wambunawa Holdings Ltd. v ANZ Bank (2020) N8310.

28.	The principles of law settled and emanate from the above cases are:		
a.	A claim may be disclosing no reasonable cause of action if the facts pleaded do not clearly show all necessary facts and legal elements to establish a claim known to law.

b.	A claim may be frivolous if it can be shown that it is obviously untenable that it cannot possibly succeed or is bound to fail if it proceeds to trial.

c.	Proceedings are vexatious where the case is a sham, amounting to harassment of the opposing party, or where the opposing party is put to unnecessary trouble and expense of defending the case.
 
d.	The Court has an inherent jurisdiction to protect and safeguard its processes from abuse. 

e.	The Court cannot readily dismiss a case for lack of disclosing a reasonable cause of action or for frivolity or abuse of process unless it is shown that the case is clearly untenable and that it is unlikely to succeed even if it proceeds to trial.

29.	The Plaintiff’s substantive claim is for declaratory orders that the Plaintiff is the only entity created by the Constitution of the Hengambu Landowners Association Inc. to receive Infrastructure Development Grants from the State and the recent payment of K 5.4 million by the Morobe Provincial Government to the Defendant is unlawful.

30.	Article 1 and 2 (6) of the Constitution of the Hengambu Landowners Association provide that the Association’s investment entity shall be Ketun Golpu Investment Limited, the Plaintiff company. The Plaintiff was deregistered or ceased operating since November 2018. It was re-registered on 20th September 2024, just four days before the filing of these proceedings. 

31.	The Defendant company was registered on 16th October 2019 after the cessation of the Plaintiff company. The Defendant company is led by John Nema, the current Chairman of the Association. Mr. Nema deposes that the company was incorporated to manage the funds of the Association, with a similar purpose to that of the Plaintiff company. The evidence shows share certificates were issued to the members of the four Hengambu landowner clans. Mr. Nema deposes that the Defendant company has the authority of the members of the Association and is well placed to receive funds and carry out infrastructure developments in the Hengambu community.

32.	The evidence shows that the Infrastructure Development Grants were paid to the Defendant at the time the Plaintiff was deregistered. Article 5, Section 8 of the Association’s Constitution gives the mandate to the executive members of the Association to make management decisions on the affairs, finances and records of the Association. 

33.	As I have found, the current executives of the Association are under the leadership of John Nema, by virtue of the stay orders issued by the Supreme Court. The decisions made by the executive for the funds to be paid to the Defendant company is within the scope of their executive authority. This is especially so at the time when the Plaintiff was deregistered.

34.	The directors of the Plaintiff cannot represent or act for the Association. The Supreme Court has specifically restrained the former executive members led by Paul Yanam and Kailes Geo from managing the affairs of the Association. The Court has expressly ordered John Nema to remain Chairman of the Association. In the circumstances, the proceedings are instituted without authority of the legitimate executive members of the Association and will fail.

35.	Secondly, as found earlier in the judgment, the Plaintiff has no personal interest. This is because, although the Constitution of the Association says the Plaintiff is the business entity of the Association, the Hengambu Landowners Association Inc. itself is not a registered shareholder of the Plaintiff company. The Plaintiff cannot be lawfully acting for the Association.

36.	Finally, the monies are for Infrastructure Development Grants for the Wafi/Golpu mine area. It is not clear whether the funds are meant for the business interests of the Plaintiff. I am not satisfied that the Plaintiff has legal standing. Neither does it have a cause of action against the Defendant.  

37.	For the foregoing reasons, I conclude that the Plaintiff will not succeed in the substantive matter. It is bound to fail. I will therefore dismiss the proceedings.

Costs

38.	The Defendant has succeeded in its application. It is entitled to the costs. 

Orders

39.     The Court orders that:
1.	The Plaintiff’s proceedings are dismissed.
2.	The interlocutory orders issued on 11th October 2024 is discharged.
3.	The Plaintiff shall pay the costs of the proceedings.
4.	Time is abridged.
_____________________________________________________________
Lawyers for the plaintiff: Aisi Lawyers
Lawyers for the defendant: StratServ Legal