Wenge v Mittio [2013] PGSC 13; SC1234 (5 June 2013)

SC1234

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 58 OF 2013

BETWEEN

BISHOP GIEGERE WENGE in his personal capacity as well as official capacity, Head Bishop of the Evangelical Lutheran Church of PNG (ELC-PNG)
First Appellant

AND

SIR ARNOLD AMET in his personal capacity
Second Appellant

AND

TONESSIE EWABI in his personal capacity
Third Appellant

AND

RICKY MITIO in his capacity as a Director and as Chairman of the Board of Directors of the Kambang Holdings trading as Lutheran Shipping Ltd
First Respondent

AND

KAMBANG HOLDINGS trading as Lutheran Shipping Ltd
Second Respondent

AND

ELC-PNG Nominees Limited, Trustees Board of Kambang Holdings Limited
Third Respondent

AND

TITI SOLOMON in his capacity as Chairman of the ELC-PNG Nominees Limited, the Trustee Board of Kambang Holdings Ltd
Fourth Respondent

AND

AGUA NOMBRIE in his capacity as Chief Executive Officer of Kambang Holdings Ltd trading as Lutheran Shipping Ltd
Fifth Respondent

Waigani: Makail, J
2013: 31st May & 05th June

SUPREME COURT – PRACTICE & PROCEDURE – Application for stay – Stay of proceedings and interim restraining order pending appeal – Appeal against interim restraining order – Company dispute – Dispute over directorship, chairmanship and management – Removal of directors and suspension of chief executive officer – Exercise of discretion – Supreme Court Act – ss. 4(3)(b)(ii) & 19.

Cases cited:

Gary McHardy -v- Prosec Security and Communication Limited [2000] PNGLR 279
Paul Paraka -v- Eastern Highlands Provincial Government (2005) SC809
Fulleborn Plantations Limited -v- Pepi Kimas and The State (2007) N3209

Counsel:

Mr A Manase, for Appellants
Mr J Napu, for Respondents

RULING ON APPLICATION FOR STAY

05th June, 2013

1. MAKAIL, J: The appellants have appealed against a decision of the National Court of 17th May 2013 which, among others restrained them from performing functions of the Board of Kambang Holdings Limited the second respondent. In the interim, they apply to stay the proceedings and decision pending the determination of the appeal pursuant to s. 19 of the Supreme Court Act.

2. According to the first appellant's two affidavits, the second respondent operates a shipping business. A dispute arose between the parties in relation to its control at the board and management level. It started off as an industrial dispute between the management and staff under the leadership of the fifth respondent as chief executive officer in relation to better working conditions. As a result of this dispute, the fifth respondent was said to have been suspended pursuant to a decision of the Church Council at the November 2011 Goroka Church Synod but remained in office. The unresolved dispute led to a strike action taken by the staff against the management. This saw the operations of the second respondent come to a stand still for two weeks in October 2012 and the ramifications were catastrophic. Passengers and cargoes were left stranded at various ports serviced by the second respondent's ships in the Momase region, Oro, East and West New Britain provinces.

3. In an attempt to resolve the dispute, the first appellant stepped in and directed the first respondent to suspend the fifth respondent within 24 hours. That of course was not possible because the first respondent could not unilaterally make that decision. It must be made by the board and despite his plea for time to convene a board meeting, on 25th October 2012, the first appellant went ahead and purportedly removed him and the directors from the board of the second respondent and replaced them with the second appellant and new directors with a view of getting them to resolve the dispute. Subsequently, the second appellant was appointed chairman of the board. At the same time, he suspended the fifth respondent and replaced him with the third appellant as acting chief executive officer.

4. The first appellant alleged that his actions were lawful because he was implementing a decision of the Church Council of which he is Chairman from the meeting of November 2011 Goroka Church Synod. That meeting resolved that the fifth respondent should be suspended. Following his decision, things returned to normalcy and on 15th November 2012, an Annual General Meeting of Shareholders of the second respondent was held and reaffirmed his decision. Despite the Shareholder's resolution, the first and fifth respondents remained in office based on what appeared to be a decision made by the third respondent as nominee of the second respondent.

5. Some four months after the change in the directorship of the board and management, on 15th March 2013 the respondents commenced proceedings challenging the purported decision to remove and replace them with new directors under the chairmanship of the second appellant and management of the third appellant. They alleged that the first appellant unilaterally made that decision without the authority of the third respondent. Such an exercise of power was in breach of the governing legislation of the Church, namely, the Evangelical Lutheran Church of Papua New Guinea Act, 1991 ("ELC-PNG Act").

6. The Supreme Court will not unnecessarily interfere with or stay the proceedings and decision of the National Court because a judgment creditor is entitled to the benefits of the judgment. The grant of the interim restraining order was an exercise of discretion of the primary Judge. A stay will not issue unless grave injustice will occur and it must be established among others, that there is an arguable case and the balance of convenience favour its issuance. Essentially, the power to stay is discretionary. Gary McHardy -v- Prosec Security and Communication Limited [2000] PNGLR 279.

7. There is no issue as to the appeal being as of right, it being from a decision against the grant of an interim restraining order which require no leave. Supreme Court Act, s. 14(3)(b)(ii). Similarly, the application has been promptly filed and moved. In my view its grant depends very much on firstly whether the appellants have demonstrated an arguable case and secondly, whether the balance of convenience favour its grant. The appellants attempted to demonstrate that the decision of the National Court was wrong by advancing three reasons. First the decision is contradictory and confusing. They contend that the proceedings were commenced against them in their personal capacity while the interim restraining order restrained them from performing functions in their official capacity. In addition to that, it only restrained them and not the other directors and that meant that the other appointed directors were free to perform their official functions on behalf of the second respondent. The second appellant was in office until the issuance of the interim restraining order.

8. Secondly, they contend that the terms of the interim restraining order were not sought in the notice of motion and in a case where a party does not seek specific reliefs either in the originating process or notice of motion, it is not open to the Court to grant them and they relied on Paul Paraka -v- Eastern Highlands Provincial Government (2005) SC809 and Fulleborn Plantations Limited -v- Pepi Kimas and The State (2007) N3209 to support this submission.

9. I accept the observations in Paul Paraka and Fulleborn but I am not satisfied that the terms of the order granted by the National Court were not sought in the notice of motion and that they are contradictory and confusing. As far as I can see, the second term of the order was sought in the notice of motion and the first term was made to emphasise and clear any uncertainty as to the parties' obligations. In other words, the terms of the order are unequivocally clear. They extend to and include any directors and staff who have replaced the respondents by the use of the phrase "..... by their servants, agents and employees.....".

10. The order was made at a time when parties were in a tussle as to who were the legitimate board and chief executive officer. When the proceedings were commenced, it was unclear whether the first and fifth respondents were removed and replaced by the second and third appellants as chairman and acting chief executive officer respectively. I say this because first there is no evidence that immediately following the November 2011 Goroka Church Synod meeting, the first appellant informed the fifth respondent of his suspension.

11. Secondly, if the appellant's assertion that the second appellant and his new directors including the new chief executive officer were in office from 25th October 2012 to the date of the interim restraining order, then it would appear that there were two groups of directors, chairman and chief executive officer of the second respondent at the relevant time. This is because there are correspondences such as the one dated 15th February 2013 issued under the name of the first respondent as chairman of the second respondent to the third appellant to, among others transfer the second respondent's main account to Madang.

12. Even if the second respondent's records at the Companies Office in Port Moresby were changed, in reality and on the ground, they were of no effect. What has been demonstrated is a typical company dispute. It is over the directorship, chairmanship and management that far too often occur in this jurisdiction. As far as the respondents were concern, there were serious questions arising from the first appellant's exercise of power to remove, suspend and replace them and they did not recognise that decision. This sufficiently explains why they sued the second and third appellants in their personal capacity. For these reasons, I am not satisfied that the appellants have established an arguable case on these points.

13. This brings me to the question of the decision making authority or who has the power to remove the directors, chairman and chief executive officer of the second respondent. The appellants submit that the first appellant acted within his powers to implement the decision of the Church Council to remove the first respondent as director and chairman of the board and replacing him with the second appellant, likewise the suspension of the fifth respondent and appointment of the third appellant as acting chief executive officer. They say that the primary Judge wrongly exercised his discretion to grant the interim restraining order because no arguable case was established. The purported decision was based on the first appellant's exercise of power under s. 4(2) of the ELC-PNG Act, 1991 and s.9(3)(a),(8)(a)&(11)(c)&(d) of the ELC-PNG Constitution. The first appellant as Head Bishop of the Church is also by virtue of s. 4(2) of the ELC-PNG Act, 1991 the Chairman of the Church Council and has authority to oversee the affairs of the second respondent and in the exercise of this authority, removed the first respondent and his directors and suspended the fifth respondent.

14. Three important issues arise from this proposition. First, as there is no dispute that the first appellant is the Head Bishop of the ELC-PNG and also the Chairman of the Church Council and that the Church Council under his chairmanship had resolved to suspend the fifth respondent as chief executive officer, what authority does the Church Council have to suspend him? Conversely, is it the board of the first respondent that has the authority to suspend him? Secondly, assuming that the Shareholders have authority to suspend him, is it lawful for the first appellant to suspend him prior to the meeting and resolution of the Shareholders on 15th November 2012?

15. Thirdly, if it is accepted that as the Head Bishop and Chairman of the Council, he has the authority to suspend the chief executive officer, it is arguable that he has no authority because the authority to "oversee" does not include removal of directors of board and chief executive officer. The word "oversee" is defined by the Oxford Concise Australian Dictionary, 3rd ed, (1997) Oxford University Press, at 957 as "officially supervise (workers, work, etc.)." The old English is oferseon or to "look from above". It is arguable that by this definition, the Head Bishop's role is confined to watching over or supervising the affairs of the second respondent.

16. In the case of the first respondent, there is no evidence of a resolution passed by the Church Synod in Goroka removing him as director and chairman. If there is no resolution, on what authority did the first appellant have to have him removed and replaced? If he was removed by the Shareholders at its meeting on 15th November 2012, it is arguable that he was removed prior to the Shareholder's meeting because the first appellant had served him his letter of termination on 25th October 2012. In my view, these are issues serious enough to justify an exercise of discretion in favour of the respondents and I see no further reason to interfere with that exercise of discretion.

17. Following the grant of the interim restraining order on 17th May 2013, the matter was adjourned to 07th June 2013 for listing for hearing of the substantive claim. The last thing the Court wants to see is the closing down of the second respondent's shipping business because of lack of proper management due to the ongoing Court battle. At present, the first respondent is in charge of the board and the fifth respondent is in charge of the management. They were in charge until 25th October 2012 when they were removed and suspended respectively. They were replaced by a new board and chief executive officer but as noted earlier, there appeared to have been two groups of individuals running the company until the Court was asked to intervene which it did on 17th May 2013.

18. By the interim restraining order, the original status quo of pre 25th October 2012 was restored and the first and fifth respondents were to remain in their respective offices until the determination of their claim. In my view changing the status quo would cause a lot of inconvenience to the parties and also the staff. It is better to allow the respondents, in their original set up to continue to run the company until the matter is completed either in the Supreme Court or the National Court, whichever occurs first. As far as the proceedings in the National Court is concerned, the matter will return to Court on 07th June 2013 for listing. This will give the parties the opportunity to fastback the hearing of the matter so that the issues surrounding the removal and appointment of members of the board of directors, chairman including the chief executive officer are resolved quickly.

19. For these reasons, I am not satisfied that a stay of the proceedings and decision of the National Court should be issued. It is refused with costs.

Ruling and orders accordingly.

______________________________________

Manase & Co Lawyers: Lawyers for Appellants
Napu & Co Lawyers: Lawyers for Respondents