M & E Plumbing Pty Ltd, Re [1973] PGSC 27; [1973] PNGLR 295 (29 June 1973)

Papua New Guinea Law Reports - 1973

[1973] PNGLR 295 - M. & E. Plumbing Pty. Ltd., Re

[1973] PNGLR 295

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

RE M. & E. PLUMBING PTY. LTD.

Port Moresby

Prentice J

26 June 1973

29 June 1973

COMPANIES - Directors - Conviction - Application for leave to act as director - Relevant considerations - Companies Ordinance s. 122.[cccxxxi]1

In October 1969 the applicant M. whilst a director of M. & E. Plumbing Pty. Ltd. was convicted of larceny, sentenced to and served one month’s imprisonment. In April 1970 M. resigned as director of the company following advice from the Companies Registry that his continuing to act as director of the company was in apparent contravention of s. 122 of the Companies Ordinance. The company thereafter was directed by the applicant’s wife and father and appeared to be doing well: it held a 50 per cent interest in R. Pty. Ltd. and a one-third interest in V. S. Pty. Ltd. M. applied to be reinstated to the board of M. & E. Plumbing Pty. Ltd. and to become a director of R. Pty. Ltd. and of V. S. Pty. Ltd. Material placed before the court by the Secretary for Law indicated that the applicant had been concerned with the promotion and management of companies including V. S. Pty. Ltd. following his resignation as director of M. & E. Plumbing Pty. Ltd.

Held

N1>(1)      an applicant, seeking leave to be reinstated as a director pursuant to s. 122 of the Companies Ordinance, bears the onus of establishing that the general policy of the legislature laid down in that section ought to be made the subject of an exception in his case.

Dicta of Street J. in Re Altim Pty. Ltd., [1968] 2 N.S.W.R. 762 at p. 764 adopted and applied; Re Ferrari Furniture Co. Pty. Ltd., [1972] 2 N.S.W.L.R. 790 referred to;

N1>(2)      Having regard to all the circumstances the applicant had not discharged the onus of establishing a sufficient case to permit an exception to the clear legislative policy for the protection of the public; and

N1>(3)      The application should be dismissed.

Application

This was an application pursuant to s. 122 of the Companies Ordinance by Raymond William Mullins, a former director of M. & E. Plumbing Pty. Ltd. for leave of the court to be reinstated to the board of that company and to become a director of three other associated companies. Mullins had been convicted of larceny in October 1969, and served one month’s imprisonment, and had resigned as a director of M. & E. Plumbing Pty. Ltd. on 17th April, 1970, following advice from the Companies Registry that he was in apparent contravention of s. 122 of the Companies Ordinance.

Counsel

R. Wood, for the applicant.

N. Gregory, for the respondent, the Secretary for Law.

Cur. adv. vult.

29 June 1973

PRENTICE J: The applicant was convicted at the Boroko District Court on 17th October, 1969, of larceny of plumber’s supplies to the value of $109.52. He was at that time a director and chairman of M. & E. Plumbing Pty. Ltd. He was sentenced to, and served, one month’s imprisonment at Bomana, and thereupon resumed duties as a director. He has had no other convictions.

On 11th March, 1970, M. & E. Plumbing Pty. Ltd. was advised that the Companies Registry records indicated the applicant was still acting as a director in apparent contravention of s. 122 of the Companies Ordinance. The applicant then resigned as a director from 17th April, since when the company has been directed by the applicant’s wife and father. The company is clearly doing well. It has been accepted as a guarantor for a $65,000 loan from the Commonwealth Trading Bank to Ravan Pty. Ltd., a company in which it owns a 50 per cent interest. It holds a one-third interest in Valley Squash Pty. Ltd. The applicant desires to become the director of Ravan, and Valley Squash, as well as to be reinstated to the board of M. & E. Plumbing.

The application is supported by affidavits of directors of three companies. A Mr. Van Hass directs Ravan Pty. Ltd. and desires the applicant’s participation in its board’s activities. (One might expect this to be a concomitant of the plumbing company’s guarantee of Ravan’s loan.) A Mr. Fitzhenry directs Judan Pty. Ltd. and Valley Squash Pty. Ltd., and owns 50 per cent of Judan’s capital. Judan owns another one-third of Valley Squash Pty. Ltd. The third deponent, a Mr. Hall is the director of Ronhall Pty. Ltd. which holds the remaining one-third interest in Valley Squash Pty. Ltd.

Mr. Wood for the applicant, has asked me to regard the conviction as of doubtful propriety, on the basis that an intention permanently to deprive the owner of possession of the goods, did not appear from the statement of facts and the record of interview to be found in the District Court papers. The applicant was represented in the District Court, after adjournment by Mr. Eric Pratt. He pleaded guilty. He did not appeal from the conviction and sentence. It is sufficient to say that I consider the conviction appears plainly justified on the record of the District Court. Indeed one matter put in the statement of facts, and acknowledged by the applicant, would indicate that that larcenous conduct by him was not the first of its kind. I am satisfied, as was the learned magistrate, that his conduct was deliberate if not premeditated.

Counsel for the Secretary for Law appeared under s. 122 (3) of the Ordinance, to oppose the application. He tendered various documents from the Companies Registry which he says establish that the applicant has been playing a leading role in the formation of Valley Squash Pty. Ltd., and through his wife may be in a position to dominate the affairs of Valley Squash Pty. Ltd.

In an application of a similar kind, under a similar section to the Bankruptcy Act, Street J. (as he then was) of the New South Wales Supreme Court, enunciated in regard to that section—“... an applicant who comes to the court seeking leave must bear the onus of establishing that the general policy of the Legislature laid down in this section ought to be made the subject of an exception in his case. It should be borne in mind that the section is not in any sense a punishment of the bankrupt. Nor should a refusal to grant leave under that section be regarded as punitive. The prohibition is entirely protective, and the power of the court to grant leave is to be exercised with this consideration in the forefront.” (Re Altim Pty. Ltd.[cccxxxii]²).

N1>Street J. considered that a similar approach should be made to s. 122, Companies Act 1961 (New South Wales)—a section for practical purposes identical with that of the Papua New Guinea Ordinance. See Re Ferrari Furniture Co. Pty. Ltd.[cccxxxiii]³. I am unable to see that any differing approach to the Papua New Guinea Ordinance is called for.

N1>No question has been raised as to the applicant’s honesty in general. And I treat his application in the light of one offence only, that of the larceny described, standing in the s. 122 scales against him. On perusal of the documentary material tendered by the Secretary for Law and having regard to the fact that the applicant’s father William Mullins resides in Australia, I find myself with more than a suspicion that the applicant has been concerned either directly or indirectly with the promotion and management of companies, since he received the warning in March, 1970 as to the illegality of his directorship of M. & E. Plumbing Pty. Ltd. I note that the affidavits in his support are from directors of companies with which he and M. & E. Plumbing Pty. Ltd. are associated, and that the companies of which he now seeks to be appointed director all have dealings with the public. There is nothing disclosed in the affairs of any of the three companies or of the applicant personally, which suggests any kind of necessity that the applicant be freed from his statutory fetters (to use Street J.’s phrase).

N1>The legislative policy is clear, and this Court should not lightly set aside the s. 122 disentitlement. Having regard to all the circumstances, I consider the applicant has not discharged the onus of establishing a sufficient case to permit of my working an exception to the clear legislative policy for protection of the public. I dismiss the application and I propose to order that the applicant should pay the respondent Secretary’s costs in the application.

N1>Application dismissed. Applicant to pay respondent’s costs.

Solicitor for the applicant: McCubbery, Train Love & Thomas.

Solicitor for the respondent: P. J. Clay, Crown Solicitor.

R>

[cccxxxi]Section 122 of the Companies Ordinance provides:—

N2>122.      (1) Where a person is convicted whether within or without the Territory—

N2>(a) on indictment of an offence in connexion with the promotion, formation or management of a corporation;

N2>(b) of an offence involving fraud or dishonesty punishable on conviction with imprisonment for three months or more; or

N2>(c) of an offence under section 124 or under section 303 of this Ordinance, and that person, within a period of five years after his conviction or, if he is sentenced to imprisonment, after his release from prison, is, without the leave of the Court, a director or promoter of or is in any way whether directly or indirectly concerned or takes part in the management of a company, he is guilty of an offence against this Ordinance.

N2>(2) A person intending to apply for the leave of the Court under this section shall give to the Secretary for Law not less than ten days’ notice of his intention so to apply.

N2>(3) On the hearing of an application under this section, the Secretary for Law may be represented at the hearing of and may oppose the granting of the application.

[cccxxxii] [1968] 2 N.S.W.R. 762, at p. 764.

[cccxxxiii] [1972] 2 N.S.W.L.R. 790.