Secretary for Law v New Guinea Development Corporation Ltd [1975] PGSC 34; [1975] PNGLR 179 (8 September 1975)

Papua New Guinea Law Reports - 1975

[1975] PNGLR 179 - Secretary for Law v New Guinea Development Corporation Ltd.

[1975] PNGLR 179

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

SECRETARY FOR LAW

V

NEW GUINEA DEVELOPMENT CORPORATION LTD.

Port Moresby

Raine J

1 September 1975

8 September 1975

COMPANIES - Returns - Offences - Failure to lodge annual return - No annual general meetings held - Companies Act 1964, s. 158 (4).

Section 158(4) of the Companies Act 1964 provides, inter alia, that the annual return of a company, signed by a Director Manager or Secretary, shall be lodged with the Registrar within one month after the Annual General Meeting.

On a charge of failing to lodge an annual return in accordance with s. 158(4) of the Companies Act 1964, held, that it was no answer to the charge that no annual general meeting had been held in accordance with s. 136 of the Act.

Hill v. Clyne (1967), 86 W.N. (Pt. 2) (N.S.W.) 317 adopted and applied.

Appeal

This was an appeal by the Secretary for Law against an acquittal by a magistrate on a charge by way of information of a breach of s. 158 (4) of the Companies Act of 1964.

Counsel

B. J Cassells, for the appellant (Secretary for Law).

E. I. M. Nwokolo, for the respondent.

Cur. adv. vult.

8 September 1975

RAINE J: The respondent company was charged by way of information with committing a breach of s. 158 (4) of the Companies Act of 1964. That sub-section provides, inter alia, that the annual return of a company, signed by a Director, Manager or Secretary, shall be lodged with the Registrar within one month after the annual general meeting. The sub-section is in similar terms to s. 158 (4) of the New South Wales Companies Act and with the Companies Act in other States and in the Australian Capital Territory.

Mr. John Kaputin, a Director of the respondent company, gave evidence on behalf of the company and stated that the company had never held an annual general meeting. It was not contested that no annual return had been lodged as required. Section 136 of the Companies Act requires, inter alia, that a general meeting of every company shall, in addition to any other meeting, be held at least once in every calendar year, or not more than fifteen months after the holding of the last preceding annual general meeting. It is similar in terms to the New South Wales s. 136.

It was submitted on behalf of the company to the learned magistrate that s. 158 (4) could not be availed of because the fact that s. 136 had not been complied with, and no annual general meeting held, made it impossible for the company to comply with s. 158. The magistrate acquitted the company. Counsel for the respondent company in the appeal before me has adopted the same argument. In Hill v. Clyne[ccxix]¹ the Court of Criminal Appeal comprised of Herron C.J, Sugerman JA. (as he then was) and Holmes JA., in a joint judgment, had to consider an almost exactly similar case. The only distinction between Hill v. Clyne[ccxx]² and this appeal was that in the New South Wales case the appellant was an officer of the company, and apparently the company was not proceeded against. In New South Wales, as here, s. 158 (5) reads:

“If a company fails to comply with this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.”

At pp. 319 and 320 the Court of Criminal Appeal said:

“The appellant contended at Quarter Sessions, as he does before this Court, that he could not be convicted of a breach of s. 158 as the holding of the annual general meeting prescribed by s. 136 is a condition precedent to the obligation imposed by s. 158 to lodge a return and, the annual general meeting not having been held, a finding that the appellant was in breach of s. 158 was not open. This contention was rejected by the learned chairman ...

The appellant’s main contention is that the operation of s. 158 is tied in with s. 136, so that the lodging of a return is merely ancillary to the holding of the annual general meeting and is not of itself a substantive obligation, the breach of which will support a conviction.

If one takes a somewhat technical view of the interpretation of the section, there is much to be said for the contention of Mr. Hamilton, but this must, we think, yield to a more commonsense approach keeping in mind the purpose of the section. Mr. Hamilton relied mainly on the absence of a requirement in s. 158, found in former legislation, that the company shall make a return once at least in every calendar year. This phrase or one of similar import had appeared in legislation governing companies which preceded the 1961 Act and the argument proceeds that its omission from the later Act was of great significance and decisive of the construction of a penal statute or provision — vide ss. 88 (1) and 92 (1) of the Companies Act, 1936-1957 (N.S.W.). In England, see the Acts of 1862 and 1908. However, we are unable to give effect to this contention, for it is opposed to the obligations clearly imposed by s. 158 and to the stream of authority which must govern its true interpretation.

...

It is true that, as stated, s. 136 provides that a general meeting shall be held ‘at least once in every calendar year’ but this section does not control s. 158 as the appellant contends. The two sections deal with different matters and s. 136 does not interfere with the operation of s. 158 for the effect of the latter section must be derived from its terms and these cannot have different effects depending on whether or not there is a provision like s. 136 in another part of the Act (State of Bombay v. Bandham Ram Bhandani (1961) 1 Ind. S.C.R. 801). The object of s. 158 is for the benefit of the public by ensuring that the information required by the Act is lodged with the registrar, whereas s. 136 exists primarily for the benefit of the members.

...

After considering the requirements of s. 158 as to the date upon which the return must be furnished, and the nature of the contents required to be included in it, there is no ground for contending that when, in any year, the company failed to hold its annual general meeting, it or its officers cannot be guilty of failing to make and lodge an annual return for the simple reason that matters to be included in it and the date up to which it is to be made and by which it is to be lodged depends upon the annual general meeting having been held (Chrichton v. Montgomery (Unreported. Supreme Court of Victoria, 30th August, 1963)).

Furthermore the appellant’s contention is conclusively answered by authority: Gibson v. Barton ((1875) L.R. 10 Q.B. 329); Edmonds v. Foster ((1875) 45 L.J M.C. 41; 33 L.T. 690); Park v. Lawton ([1911] 1 K.B. 588). These three cases were decided under comparable sections of the English Act. It was held that it is no answer to a charge against an officer of a company which has made default in lodging its annual return that no general meeting has been held, if the officer charged has himself been a party to the default in holding the meeting.”

At pp. 321 and 322 their Honours discuss Gibson v. Barton[ccxxi]³, Edmonds v. Foster[ccxxii]⁴ and Park v. Lawton[ccxxiii]⁵, together with other authorities. In my respectful opinion Hill v. Clyne[ccxxiv]⁶ was correctly decided.

Counsel for the respondent referred to Dorte v. South African Super-Aeration (Ltd.)[ccxxv]⁷. At first sight Dorte’s case[ccxxvi]⁸ appears to be in favour of the respondent and I note that Sir John Simon, as he then was, but at that time Solicitor-General, at p. 591 in Park v. Lawton[ccxxvii]⁹ during his argument made the same observation to the Divisional Court presided over by Lord Alverstone, C.J However, as Sir John Simon said at p. 591, “but as the arguments and judgments are not reported, it is not easy to know exactly what were the grounds of the decision. A possible explanation of the case is that there was no evidence that the defendant was responsible for the failure to hold the annual general meeting; though it is not admitted that even if that were so it would be a good defence.” Park v. Lawton[ccxxviii]¹⁰ concerned an information preferred against Directors of a company and it is important to observe that under the English legislation, for the Crown to succeed against a Director it had to be shown that the Director knowingly and wilfully authorised or permitted the default. It is of note that this is not the case under the New South Wales legislation and under our Act. Possibly this might account for the decision in Dorte’s case[ccxxix]¹¹, but as Sir John Simon observed in his address in 1911, the report in the Times Law Reports is extremely sparse. In any event, several years later, in Park v. Lawton[ccxxx]¹² Lord Alverstone, delivering the judgment of the Court, reached a conclusion which is quite unhelpful to the respondent in this appeal.

In my opinion, it is quite clear, therefore, that the appeal must be allowed and that the company should be convicted.

Dr. Nwokolo of counsel for the respondent company sought to press an argument upon me that the requirements of the Act are inappropriate in the case of wholly native owned companies. The respondent company is apparently wholly owned and controlled by the native born. I cannot follow this argument. It matters not whether shareholders are simple villagers or sophisticated businessmen. The fact of the matter is that the directors of a company are in a position of trust qua the shareholders and if money is subscribed by shareholders there must be some discipline, and there must be some means whereby the Government, through its officers, is able to give protection to shareholders. As we all know this has not prevented many company swindles all over the world, but at least disciplinary provisions provide some sanctions, they put some brake upon careless or dishonest management. It might well be that in a developing country such as this regard should be paid to the less sophisticated atmosphere in which companies operate. But this is a matter for the Legislature and whatever amendments are deemed appropriate I have no doubt that a wise Legislature would impose some sort of Government control over the activities of directors and those managing companies. Dr. Nwokolo quoted Re Moses and Cohen, Ltd.[ccxxxi]¹³, and in particular the observation of Roxburgh J at p. 233 when his Lordship spoke of criminal prosecutions being like a sledge-hammer to crack a nut of incompetence and inattention to duty. But what his Lordship was referring to there was in a different context. His Lordship was referring to criminal prosecutions where there might be a reluctance by a jury to convict because the default was only through incompetence and inattention rather than through truly criminal default. His Lordship went on to say that if statutes were only enforceable with difficulty, if at all, that they tended to debase the currency of the law and his Lordship said, “There seems to be a case for allowing the court in such circumstances as these to impose some penalty (beyond costs) on the company ...” In fact, so far as the particular statute his Lordship was considering was concerned, no such penalty was provided. I do not see Roxburgh J as making a complaint about prosecutions for incompetent and inattentive work by company officers, all that his Lordship was saying was that where only incompetence and inattention was complained of that it was probably a waste of time to mount an important criminal prosecution, and that in such cases a fine and an award of costs would probably be more apt. No doubt the learned judge had summary proceedings in mind. Thus I cannot agree with what I might call Dr. Nwokolo’s policy submission.

My formal orders are that the appeal is allowed and I find the company is guilty as charged and I substitute that finding for the magistrate’s finding of not guilty. I indicated to Dr. Nwokolo if I came to this decision that I would hear him on the question of penalty, because I can well understand that a company formed and run by people uninstructed in the management of corporations could inadvertently fail to comply with vital provisions of the Companies Act. Therefore, I will now hear counsel on the question of penalty. Both counsel agreed that it would save time and money, and be more convenient, were I to do this rather than to send the matter back to another magistrate.

Appeal allowed: Finding of guilty substituted for magistrate’s finding of not guilty.

Solicitor for the appellant: B. W. Kidu, Crown Solicitor.

Solicitor for the respondent: Dr. E. I. M. Nwokolo.

R>

[ccxix](1967) 86 W.N. (Pt. 2) (N.S.W.) 317.

[ccxx](1967) 86 W.N. (Pt. 2) (N.S.W.) 317.

[ccxxi](1875) L.R. 10 Q.B. 329.

[ccxxii](1875) 45 L.J M.C. 41; 33 L.T. 690.

[ccxxiii][1911] 1 K.B. 588.

[ccxxiv](1967) 86 W.N. (Pt. 2) (N.S.W.) 317.

[ccxxv](1904) 20 T.L.R. 425.

[ccxxvi](1904) 20 T.L.R. 425.

[ccxxvii][1911] 1 K.B. 588.

[ccxxviii][1911] 1 K.B. 588.

[ccxxix](1904) 20 T.L.R. 425.

[ccxxx][1911] UKLawRpKQB 6; [1911] 1 K.B. 588.

[ccxxxi] [1957] 3 All E.R. 232.