Totona v Registrar of Companies [2012] PGSC 14; SC1182 (4 May 2012)

SC1182

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 103 OF 211

BETWEEN

HENI TOTONA for and on behalf RAUSI DOKO, ANDA GUAMO, AKO KARI, MAINO KARI, VAINA KARI, GABE KONIA, MABA LOHIA, AUUM OVEAI, DAURE VAGI, MOREA PETER, HERI VAINA, IGUA ROBERT, TOA ATA, AUDA DELENA, LAHUI VERIA, NAIME DOKO & KARI NOU AS FORMER SHAREHOLDERS AND DIRECTORS OF BURIA-REAREA CAUTION BAY LIMITED
Appellants

AND

ALEX TONGAYU, REGISTRAR OF COMPANIES
First Respondent

AND
DOKO BOHA, UDA DADI, DOKO GABE MOREA, AURI IRU, RAUSI IRI, IRU KARI, IGO MEA URI, KONIO MOREA HARI, KARI NOU KARI, KARI TOTONA KARI, TAI VAGI DOROA, DELENA VAGI REA, DAURE VERI NOHO, UNITED CHURCH REAREA VILLAGE, WEST REDSCAR CIRCUIT, CENTRAL PROVINCE, LOHO MAPORE, RAY MOREA, NOU MAINO, ROBERT KAUGA, VAI KONIO, NOAMI MOREA, VAIVA VAGI, NAO IRU, MOREA VERI, VAGI NOU AUDA, MOREA AVATA, HAU VAGI & MOREA TARATA AS DIRECTORS AND SHAREHOLDERS OF BURIA-REAREA CAUTION BAY LIMITED
Second Respondents

AND

BURIA-REAREA CAUTION BAY LIMITED
Third Respondent

Waigani: Hartshorn J, Makail J& Logan, J
2012: 01st & 04th May

SUPREME COURT APPEAL - Injunctions - Lifting of interim injunction - Exercise of discretion by primary judge - Interim injunction restrained removal of directors and shareholders of company - Removal of directors and shareholders based on purported shareholders meeting - Registrar of Companies effected shareholders' decision by removing directors and shareholders from Companies Office records - Decision of Registrar of Companies subject of appeal in National Court - Reasons for lifting interim injunction discussed.

Facts

The appellants appealed against the primary judge's decision in lifting an interim injunction which restrained the second respondents from holding themselves out and carrying out activities as directors and shareholders of the third respondent company.

Held:

1. Where an appeal is against a primary judge's exercise of direction in lifting an interim injunction, the onus is on the appellant to show that the exercise of discretion is clearly wrong or an identifiable error has occurred in the exercise of discretion. Alternatively, the judgment or order may be set aside where there is no identifiable error, but it is "unreasonable or plainly unjust" such that an error can be inferred: Curtain Bros (PNG) Ltd -v- UPNG (2005) SC788 and The State -v- Sam Akoita & Others (2009) SC1016 referred to.

2. In the present case, the appellants had failed to show that the primary judge's exercise of discretion in lifting the interim injunction was wrong. Further, no identifiable error has occurred in the exercise of discretion. In any case, the decision to lift the interim injunction was not "unreasonable or plainly unjust" such that it ought to be quashed.

3. The appeal is dismissed with costs to be taxed if not agreed.

Cases cited:

Curtain Bros (PNG) Ltd -v- UPNG (2005) SC788
The State -v- Sam Akoita & Others (2009) SC1016

Counsel:

Mr T Sirae, for Appellants
Ms N Abel for First Respondent
Mr T M Rei, for Second and Third Respondents

04th May, 2012

JUDGMENT

1. BY THE COURT: This is an appeal against the decision of the National Court of 16th August 2011 lifting an interim injunction. The interim injunction was issued by the National Court on 20th October 2010 and restrained the second respondents from holding themselves out and carrying out activities as directors and shareholders of the third respondent company. The appellants and the first respondents are landowners from Rearea village, a village located some few miles out of the city of Port Moresby and are one of groups of landowners benefiting from the LNG project that is currently being established to export liquefied gas. The substantive dispute is an appeal against the purported removal of the appellants as directors and shareholders of the third respondent company by the first respondents.

2. The appellants challenge the primary judge's exercise of direction in lifting the interim injunction. Where an appeal is against a primary judge's exercise of discretion, the onus is on an appellant to show that the exercise of discretion is clearly wrong or an identifiable error has occurred in the exercise of discretion. Alternatively, the judgment or order may be set aside where there is no identifiable error, but it is "unreasonable or plainly unjust" and such that an error can be inferred. see Curtain Bros (PNG) Ltd -v- UPNG (2005) SC788 which was subsequently endorsed and applied in The State -v- Sam Akoita & Others (2009) SC1016.

3. At the hearing in the National Court on 16th August 2011, the parties, in particular the appellants reported to the Court on the status of an appeal against the decision of the primary judge to order mediation. It appears there was some degree of uncertainty on the part of the appellants as to whether his Honour had earlier ordered mediation of the dispute pursuant to the Alternative Dispute Resolution Rules. That was the issue before his Honour. After receiving submissions from parties, in particular the appellants, his Honour reaffirmed his earlier decision to order mediation. His Honour's attention was then drawn by counsel for the second and third respondents to the existence of the interim injunction and that it should be set aside.

4. The appellants' main ground of appeal is that the primary judge erred in the exercise of discretion when he lifted the interim injunction because there was no formal application by notice of motion filed by the respondents before the primary judge to lift the interim injunction. In submissions, counsel for the appellants emphasised this point and submitted that his Honour erred when he entertained the oral application, as the appellants and counsel were caught by surprise and were denied a fair hearing. It was further submitted that the main reason why the primary judge lifted the interim injunction was because he was "frustrated" by the unwillingness of the appellants to participate in mediation through the Alternative Dispute Resolution process. Their action was deemed as a "delay tactic" to stall the resolution of the dispute and remain as directors and shareholders based on the interim injunction.

5. We note the appellants objected to the lifting of the interim injunction but on a different ground. They argued that the substantive dispute was pending trial and final resolution by the Court such that the interim injunction should not be lifted. As they did not raise the issue of the absence of a notice of motion, they are unable to raise it in this Court and so this ground is dismissed.

6. The appellants' other ground of appeal relates to an earlier application to lift the interim injunction that was refused by the National Court suggests the primary judge was wrong in lifting the interim injunction as the application was res judicata. At the hearing, counsel for the appellants did not pursue this ground. It is therefore, abandoned.

7. The question of lifting an interim injunction is discretionary and the Court's exercise of discretion must be based on proper principles of law. There are three broad principles. First, the applicant must show that no serious issue is raised in the proceedings that would require a proper determination at trial, or, that the balance of convenience does not favour its continuation. This could include that, that damages is not an adequate remedy.

8. This is a case about a dispute as to who are the legitimate directors and shareholders of the third respondent company. It is not disputed that the third respondent company is established to represent the interest of the landowners of Rearea village including the appellants and the second respondents. It was established to participate in the LNG project and significantly, to receive any monetary benefits derived from the project and disburse them to the landowners including, investing some of them. For these reasons, the third respondent company must operate without interference if those objectives are to be achieved.

9. While the interim injunction was in force, the primary judge ordered mediation of the dispute. It is suggested that the appellants opposed mediation and had appealed to the Supreme Court against that decision while they remain in office as directors and shareholders based on the interim injunction. His Honour was particularly concerned about their reluctance to go to mediation. Their reluctance had delayed the resolution of the dispute and the delay became a serious concern when they appealed to the Supreme Court against his decision to order mediation.

10. We have stated above that, one of the considerations for lifting an interim injunction is whether the balance of convenience favours its continuation. We accept his Honour's concern about the delay and reject the submission by counsel for the appellants that his Honour was "frustrated" by the delay. In our view, the delay is a proper and legitimate consideration in determining where the balance of convenience lies.

11. While we accept that the question of legitimacy of the second respondents' appointment as directors and shareholders remains to be determined, based on the decision of the shareholders in the meeting of 03rd July 2010, as directors, they are expected to fairly represent the interest of the people at the board of the third respondent company. That can only be achieved if they are allowed to take office without further delay. As shareholders, they represent the interest of landowners in Rearea village. Monetary benefits derived from the LNG project must be fairly distributed to all landowners. If there is continuous interference with the management and operation of the third respondent company at the board and shareholders' level, there is real likelihood of the landowners missing out on monetary benefits from the LNG project.

12. The respondents jointly through their counsel submitted that the appeal should be dismissed. They referred to section 409 of the Companies Act, 1997 and submitted this provision authorises the first respondent as the Registrar of Companies or a person authorised by him to deal with the affairs of a company notwithstanding an appeal to the National Court against his decision. They further submitted that the primary judge was directed to this provision and after considering it, he lifted the interim injunction. That may be so, but in our view, the overall consideration was the delay in resolving the dispute in relation to the legitimacy of the directors and shareholders of the third respondent company. Although attempts were made to mediate, they failed. As a result, his Honour found that the delay did not favour the continuation of the interim injunction. That is why he lifted it. Further, and contrary to the submissions of the first respondents, section 409 is something of a distraction in any event, as it applies only to the narrow class of the Registrar of Companies and persons authorised by him for the purposes of Division 2, not to third parties generally.

13. For these reasons, we find the appellants have failed to show that the primary judge's exercise of discretion in lifting the interim injunction was wrong. Further, we find no identifiable error has occurred in the exercise of discretion. In any case, we are not satisfied that the decision to lift the interim injunction is "unreasonable or plainly unjust" such that it ought to be quashed.

14. We order that:

1. the appeal be dismissed.

2. the appellants shall pay the respondents' costs of the appeal to be taxed if not agreed.

_________________________________________________________
Sirae & Co Lawyers: Lawyers for the Appellants
In-house Counsel: Lawyers for the First Respondent
T M Rei Lawyers: Lawyers for the Second and Third Respondents