Kawari Fortune Resources Ltd v Apurel [2015] PGSC 90; SC1614 (23 February 2015)

SC1614

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 135 OF 2014

BETWEEN:
KAWARI FORTUNE RESOURCES LIMITED
First Appellant

AND:
HENIAN ZOU, HING KAU WONG AND JOSEPH TUPIRI
Second Appellants

AND:
LOUIS LIMBO APUREL, MELVIN KOROWI, CHARLES NIGEL ANDREWS, FRANCIS MANO APUREL
First Respondents

AND:
ALEX TONGAYU AS REGISTRAR OF COMPANIES
Third Respondent

Waigani: Injia CJ, Logan & Kangwia JJ
2015: 23^rd February

PRACTICE AND PROCEDURE – Application under s5(3) of Supreme Court Act 1975 for discharge of interim orders made under s5(1)(b) of that Act – relevant considerations – where underlying claim of appellant entails fundamental misunderstanding of relief available even if appeal successful – interim order discharged

COMPANY LAW – Application for discharge of interim order in appeal against orders made by National Court in an appeal under s 408 of Companies Act 1997 from a decision of the Registrar of Companies in relation to the registration of a document under s395 of that Act – where underlying controversy between vendor and purchaser of shares as to ownership of shares and related entitlement to hold office as director – whether within power of Registrar or on appeal under s 408, the National Court to determine that controversy in rectifying shareholder register separately required to be kept by a company under s67 of that Act – circumstances in which rectification application as opposed to trial on pleadings might be ordered to determine such a controversy.

Cases Cited:
Papua New Guinea Cases

Peter Makeng v Timbers (PNG) Limited (2008) N3317
National Executive Council v Ilaáva [2014] PGS 16; SC1332

Overseas Cases

Exp Shaw (1877) QBD 463
Nilon Ltd & Anor Royal Westminster Investments SA & Ors (British Virgin Islands) [2015] UK PC 2 (21 January 2015
Enviroco Ltd v Farstad Supply AIS [2011] UK SC 16, [2011] 1 WLR 921

Counsel

Mr. W. Bigi, for the Appellant/First and Second Respondents
Mr. C Kup – Ogut, for the First and Second Appellants
No appearance, for the Third Respondent

23^rd February, 2015

1. BY THE COURT: This is an application under s5(3) of the Supreme Court Act 1975 (PNG) for the discharge of an interim order made by a judge of the Supreme Court on 14^th November 2014. Before setting out that interim order and considering the merits of the application for its discharge it is necessary to detail the procedural history of the matter which culminated in the Supreme Court appeal in relation to which the interim order was made.

2. Messrs Louis Limbo Apurel, Melvin Korowi, Charles Nigel Andrews and Francis Manu Apurel (the original vendor directors) are First Respondents and ADRB Coffee Limited, CA Consultancy Limited, Latitude Investments Limited and Mekwa Financial Limited (the original vendor shareholders) are Second Respondents to an appeal instituted in the Supreme Court by Kawari Fortune Resources Ltd (the original purchaser shareholder) as First Appellant and Henian Zou, Hing Wong and Joseph Tupiri (the original purchaser directors) as Second Appellants against a judgment of the National Court given on 16^th October 2014. The Third Respondent to the appeal is the Registrar of Companies (Registrar), holding office pursuant to the Companies Act 1997 (PNG).

3. The proceedings in the National Court were in form an appeal under s 408 of the Companies Act against a decision made by the Registrar in January 2014 to reverse two decisions made by him on 22 October 2013 to record in respect of Kawari Ltd (the company), particular details in the register of companies (register) kept by the Registrar pursuant to s395 of that Act.

4. One of the Registrar’s decisions made on 22^nd October 2013 entailed entering in the register details of a change in the shareholding of the company, as shown in a Notice of Change of Shareholder (Share Transfer) in Form 13 lodged with the Registrar on 22^nd October 2013. The change then registered was a transfer of the shares in the company from the original purchaser shareholder back to the original vendor shareholders.

5. The other decision of the Registrar made on 22^nd October 2013 was to register a change in the directors of the company in accordance with the change detailed on “Consent and Certificate of Director (Existing Company) in Form 15, also lodged with the Registrar on 22^nd October 2013. By that form the original vendor directors were shown as becoming directors of the company in succession to the original purchaser directors.

6. The Registrar’s reversal decisions of January 2014 resulted in the following being recorded in the register:

(a) The original purchaser shareholder as the holder of the shares in the company; and
(b) The original purchaser directors as the directors of the company.

7. That the Registrar made these changes to the register as a result of his reversal decision is evidenced by a search of the register dated 10^th February 2014.

8. The original vendor shareholder and the original vendor directors, along with , at least purportedly, the company, brought the appeal against the Registrar’s decisions in the National Court (proceeding CIA 15 of 2014). The Registrar’s reversal decision had rendered nugatory a similar earlier appeal (CIA 140 of 2013) brought by the original purchaser shareholder and the original purchaser directors against the Registrar’s registration decisions made on 22^nd October 2013. Recognising that, they discontinued that appeal.

9. The orders made by the National Court quashed the decisions made by the Registrar in January 2014 to reverse his decisions of 22^nd October 2013. The orders also:

(a) ordered that the Registrar remove the original purchaser directors as directors of the company and restore the original vendor directors as directors of the company;

(b) ordered that the Registrar remove the original purchaser shareholder as director of the company and restore the original vendor shareholders as shareholders of the company;

(c) Ordered that the Registrar “ restore the 10 million shares [the total number of shares in question] from [the original purchaser shareholder to the original vendor shareholder]”.

(d) Enjoined the Registrar from accepting, registering and acting upon lodgment to change or alter the shareholding and directorship of (the company) except where such lodgements are made pursuant to a proper and valid resolution of a properly constituted board of directors of [the company].

10. In turn, the original purchaser directors and the original purchaser shareholder appealed to the Supreme Court against these orders. They also sought an interim order, pending the hearing and determination of the appeal. The application for an interim order was heard by a single judge of the Supreme Court. The interim order of 12 November 2014 continued, until the hearing and determination of the appeal, an interim order made ex parte on 5 November 2014. The effect of that continuance was that, until the hearing and determination of the appeal:

(a) the original vendor directors were enjoined from holding themselves out as directors of the company or exercising any power conferred on a director of the company, including calling meetings of the company "or its subsidiary companies including Kawari Wiem Limited";

(b) the original vendor shareholders were enjoined from holding themselves out as shareholders of the company or exercising any right held by a shareholder in the company, including selling or transferring "the 10 million shares of [the company] or Kawari Wiem Limited";

c) the original vendor directors and the original vendor shareholders were each enjoined from "influencing and mobilising landowners from the Alluvial and Hard Rock Mining sites for the purposes of interfering with the operations of the company or its subsidiaries including Kawari Wiem Limited;

(d) the Registrar was restrained from dealing with the original vendor directors and the original vendor shareholders regarding the company or its subsidiaries including Kawari Wiem Limited in a way that would alter particulars in the register in respect
of those companies.

11. At least for the purposes of this application, the following further background facts were not controversial.
    
12. The company is the holder of a mining exploration licence (EL 1391). It is the beneficiary of favourable geological reports in respect of the area covered by its licence. With the benefit of these reports and a consequentially formulated business plan, Mr Louis Apurel, one of the original vendor directors of the company and a director also of one of the original vendor shareholders, travelled to Hong Kong in September 2011. Amongst others, he met there Mr Hing Kau Wong (also known as Mr Truman), one of the original purchaser shareholders. They had discussions about a potential joint venture in respect of the commercial exploitation of the rights conferred by the mining exploration licence. In the result, Mr Apurel came to sign in Hong Kong, on 26 September 2011, a joint venture agreement. The parties to that agreement were Mr Apurel and Running Fortune Investments Limited, a company incorporated in the British Virgin Islands (RFI).
    
13. The joint venture agreement envisaged the incorporation in the British Virgin Islands of a joint venture company (JV Co). The original purchaser shareholder came to be the J V Co. The J V Co was to become the sole shareholder in the company. "Acquisition" was defined by the joint venture agreement (cl 1.1) to be the acquisition of the entire issued share capital of the company. The consideration for the "Acquisition" was expressed to be US$150,000 (cl 4.1). Payment of that consideration was to be by instalments (cl 4.2):
    

(a) 50 to the existing shareholders in the company after the completion of the transfer of the 100 equity interest in the company to the JV Co;

(b) 50 to those existing shareholders upon the renewal of the mining exploration licence by the relevant Minister.

14. Under the joint venture agreement, RFI was to advance the sum of $US 150,000 to the original purchaser shareholder as an interest free loan for its use in effecting the "Acquisition", as defined. Further, the entire issued share capital in J V Co was to be held as follows (cl 2.2):
    

Shareholder	Percentage of shareholding in J V Co
RFI	51
Mr Apurel	41.894
Mr Charlie Andrews Mr. Melvin Korowi	4.656 4.450

15. After the completion of the subscription of new shares in J V Co, the parties to the joint venture agreement, amongst others, were to enter into a shareholders' agreement substantially in the form of a draft annexed to the joint venture agreement (cl 2.3 and cl 1.1, definition of "Shareholder Agreement").

16. Of the original vendor shareholders, ADRB Coffee Ltd is a company controlled by Mr Apurel, CA Consultancy Ltd is a company controlled by Mr Andrews and Latitude Investments Ltd is a company controlled by Mr Korowi. Later, but nominally on 26 September 2011, those three companies, i.e. the original vendor shareholders, entered into a contract (said by Mr Apurel to have been backdated) with the J V Co, the original purchaser shareholder for the transfer of their shares (and thus the whole of the issued shares) in the company. The purchase price was expressed to be $USI50,000 (cl 3.1). The share transfer agreement made provision for the payment of this purchase price as envisaged by the joint venture agreement (cl 4 of the share transfer agreement refers). Payment of these instalments was, as to the first instalment, to be after the completion of the transfer of the entire equity interest in the company to the original purchaser shareholder and, as to the second instalment (cl 4.1 (b)):
    

... on completion of the share transfer which shall occur when:

(A) The Vendors [the original vendor shareholders] deliver to the Purchaser [the original purchaser shareholder] the following:

(a) a duly signed instrument of transfer lodged with [the Registrar];

(b) a computer generated extract from the office of [the Registrar] attesting that the transfer has been completed; and

(c) a warranty deed signed by the [original vendor shareholders; and

(d) the Vendors comply with the conditions listed under Clause 3.2 of the [joint venture agreement].

17. Clause 3.2 of the joint venture agreement lists various obligations which fall on one or the other of the parties to that agreement. So far as Mr Apurel and thus derivatively the original vendor shareholders are concerned, these obligations included the provision of geologist/valuer report confirming the existence of a contractually nominated mineral reserve on the land held under the mining exploration licence and the issue of an environmental assessment report to the satisfaction of RFI in respect of the proposed mining activity.
    

18. On 22 October 2013, Mr Apurel for his part and the original vendor shareholders for their part gave notices respectively terminating the joint venture agreement and the share transfer agreement. The lodging of the forms with the Registrar that day was a sequel to the giving of these termination notices.

19. In an affidavit filed in the National Court appeal proceedings, Mr Apurel asserted that he or, as the case may be, the original vendor shareholders were lawfully entitled to give the termination notices. He asserted that the joint venture agreement did not bind the company, because it had been made personally by him, without the authority of the company. He further asserted, on behalf of the original vendor shareholders, that the share transfer agreement was illegal, because it was contrary to the provisions (which he did not specify) of the Companies Act and also contrary to s 28 of the Investment Promotion Act
I992 (PNG) (IPA). That section provides for the making of an application by a "foreign enterprise" (as defined by s 3) to the Investment Promotion Authority for a certificate. The issuing of a certificate is made subject to the fulfilment of criteria specified in s 28 or in accordance with a Ministerial exemption made on the recommendation of that Authority. Subject to exemptions which it is not necessary to set out, a foreign enterprise is not permitted to carry on business in Papua New Guinea unless it holds a certificate issued under the IPA: s 25(2).

20. It is neither necessary nor for that matter jurisdictionally possible in determining this application present for the court to resolve on the merits the assertions made by Mr Apurel, each of which is disputed by the original purchaser shareholder and the original purchaser directors. It is enough for present purposes to note the existence of that dispute.

21. In seeking the interim order, the original purchaser directors and the original purchaser shareholder and, purportedly, the company and its subsidiary, Kawari Wiem Limited gave to the Supreme Court an undertaking as to damages in the usual form.

22. On the application for the interim order it was stated that the application was made pursuant both to s 5 and to s 19 of the Supreme Court Act. The learned Supreme Court judge, who delivered reasons for judgement ex tempore, immediately after hearing submissions on 12 November 2014, did not expressly refer to the source of the power to make the interim order.

23. Section 19 of the Supreme Court Act empowers the Supreme Court or a judge to stay the operation of the judgement under appeal or the subject of an application for leave to appeal. The interim order did not, in terms, stay the operation of the orders of the National Court. Instead, it appears to us that the statutory power under which it must be taken that his Honour sought to act was s 5(1 )(b) of the Supreme Court Act. The application by the original vendor shareholders and the original vendor directors under s 5(3) of that Act assumes that s 5(1)(b) was the source of the power to make the interim order. Their case is not that the court lacked power to make the order but rather that it
ought not in the circumstances to have been made.

24. An interim order made under s 5(1)(b) of the Supreme Court Act can, like a stay order under s 19 of that Act, have the effect of preserving the status quo pending the hearing and determination of an appeal or application for leave to appeal but these two types of relief are conceptually different. An interim order is typically an injunction addressed to an opposing party so as to protect an interest of the party seeking the interim order whereas a stay is not so addressed but rather suspends the operation of the judgement or decision under challenge: Peter Makeng v Timbers (PNG) Limited (2008) N3317 (Injia DCJ, as the Chief Justice then was). This distinction has not been understood by the
original purchaser shareholder and the original purchaser directors, for the court's order of 12 November 2014 left in operation the various orders made by the National Court in the s 408 appeal. This is by no means the limit of the lack of understanding on display in this case.

25. As is apparent from the text of s 5(1)(b) of the Supreme Court Act, the purpose of an interim order is "to prevent prejudice to the claims of the parties", pending the hearing and determination of an appeal to the Supreme Court. Necessarily, that requires attention to be focussed on these questions when deciding whether or not to make an interim order: what are the claims of the parties, what is the alleged prejudice and what is necessary, pending the hearing and determination of the appeal to prevent that prejudice? There is nothing in the text of the provision which requires an applicant for such an order to demonstrate special or exceptional circumstances. It would be an impermissible gloss on that text to introduce any such requirement.
    
26. Identifying the claims of the parties does not entail reaching any final conclusion on the merits of the claim advanced by the applicant for the interim order, only that that applicant has an arguable case. The claims are to be found in the grounds specified in the notice of appeal or, as the case may be, application for leave to appeal and in the bases upon which those grounds are contested. Where the claim of the applicant appears to strongly arguable, even comparatively minor prejudice might warrant the making of an interim order (and the converse may also warrant the making of an interim order in the
    circumstances of a particular case). What is involved is the exercise of a judicial discretion in which the two considerations, strength of the applicant's claim and nature and extent of prejudice interplay, according to the circumstances of a particular case.
    
27. We turn then to s 5(3) of the Supreme Court Act. In National Executive Council v lla'ava [2014] PGSC 16; SC1332 (26 February 2014) (Gabi, Sawong & Murray 11), it was observed that, "A direction or an order given by a single Judge of the Supreme Court may be discharged or varied pursuant to s 5(3) by way of an 'application' in the same manner in which the direction or order were made by the single Judge". Such a proceeding is not an appeal. Instead, the Supreme Court as constituted for the purpose of hearing the application under s 5(3) must decide for itself, having regard to the criteria for the granting of an interim order and in the circumstances then prevailing, whether to discharge or vary that order.
    
28. The grounds specified in the notice of appeal are prolix. It is not necessary to consider them in great detail. It is telling first to refer to the second ground (b) (the notice of appeal has a typographic error), in particular, ground (b )(iii):
    

"His Honour misconstrued the date of the status quo as at 21 January 2014 when the status quo should have been 22 October 2013 when the records of the company Kawari Limited were first tampered with by the Respondents." [Emphasis added]

29. The Registrar does not maintain the "records of the company". He maintains a separate, public record under s 395 of the Companies Act. By s396(4) of the Companies Act it is expressly stated that:
    

Neither registration, nor refusal of registration, of a document by the Registrar affects, or creates a presumption as to, the validity or invalidity of the document or the correctness or otherwise of the information contained in it.

30. Contrary to s 396(4), each of the parties to this application and to the appeal, save for the Registrar, have, both in this court and in the National Court, proceeded on the footing that the validity of their holding shares or, as the case may be, the office of director in the company is determined by a decision of the Registrar to make an entry in the register recording such a fact based on the information in a form submitted to him. That is not so.
    
31. The company is obliged by s 67 of the Companies Act to maintain a share register. Amongst other things, the share register must record the names of the shareholders and the date of any transfer of shares by or to a shareholder: s 67(2)(a) and s 67(2)(c)(iii). Provision is made by s 71 of the Companies Act for the institution of proceedings in the National Court by an aggrieved party for the rectification of the share register. That section states:
    

71. POWER TO RECTIFY SHARE REGISTER.

(1) Where the name of a person, or other particulars, are wrongly entered in, or omitted from,
the share register of a company, the person aggrieved, or a shareholder, may apply to the
Court-

(a) for rectification of the share register; or
(b) for compensation for loss sustained; or
(c) for both rectification and compensation.

(2) On an application under this section the Court may order-
(a) rectification of the register; or

(b) payment of compensation by the company or a director of the company for any loss sustained; or

(c) rectification and payment of compensation.

(3) On an application under this section, the Court may decide-

(a) a question relating to the entitlement of a person who is a party to the application to have his name or other particulars entered in, or omitted from, the register; and

(b) a question necessary or expedient to be decided for rectification of the register.

(4) Any clerical or minor error in a share register of a company may be corrected where either the Registrar or every shareholder of the company at the time of correction, has agreed in writing to the correction.

32. A dispute between the vendor and purchaser of shares may be resolved in proceedings for the rectification of the share register: Ex p Shaw (1877) QBD 463. In Nilon Ltd & Anor v Royal Westminster Investments SA & Ors (British Virgin Islands) [2015] UKPC 2 (21 January 2015), at [36] to [43], the Judicial Committee of the Privy Council, drawing upon an extensive survey of authority, has very recently made the following observations in relation to a share register rectification proceeding. We cite them at length because of
the assistance they offer both in the disposition of the present application and, more generally, as to the law on this subject in respect of the equivalent provision found in Papua New Guinea in s 71 of the Companies Act:

36. The parties very helpfully produced a schedule of the many reported cases on rectification of the share register going back to the cases on the Joint Stock Companies Act 1856 (19 & 20 Vict c 47) and the Joint Stock Companies Act 1857 (20 & 21 Vict c 14).

37. There are two points which emerge from the cases. The first is that from the earliest days of the legislation, the courts have made it clear that the summary nature of the jurisdiction makes it an unsuitable vehicle if there is a substantial factual question in dispute: eg Re Russian (Vyksounsky) Iron Works Company, Stewart's Case (1866) LR I Ch App 574, 585-586;Re Heaton Steel and Iron Company, Simpson's Case [1869] UKLawRpEq 208; (1869) LR 9 Eq 91. In such a case an issue may be directed to be tried (Re Diamond Rock Boring Co Ltd, Ex p Shaw [1877] UKLawRpKQB 40; (1877) 2 QBD 463, at 484) or the application may be adjourned or stayed (Re South Kensington Hotel Company Limited, Braginton's Case (1865) 12 LT (NS) 259), but it may also be dismissed or struck out: Re Hoicrest Ltd [2000] I WLR 414, at 420, citing Re Greater Britain Products Development Corporation
Ltd (1924) 40 TLR 488, where it was said (at 489):

"Where it was clear that there was something to be answered and something to be investigated, the ordinary course, as far back as the court had been able to trace, had been for the judge to dismiss the summons or motion, but to leave it open to the party to bring his action."

38. The second point is that Re Hoicrest Ltd appears to be alone in deciding that it is sufficient for the applicant to have a prospective right against the company, and not an immediate right, to be entered on, or removed from, the register.

39. There is no doubt that the legislation is primarily concerned with legal title. In Re London, Hamburgh and Continental Exchange Bank, Ward and Henry's Case (1867) [1867] UKLawRpCh 45; LR 2 Ch App 431 Lord Cairns LJ stated what might be thought to be the obvious when he said (at 440) that the object of the section was to secure a list or register which would show who were the shareholders entitled to the profits, and liable to contribute to the debts, of the company. The legislation both in the BYI and in Great Britain is concerned with rectification of the register of members, and membership concerns legal title: Enviroco Ltd v Farstad Supply AIS [2011] UKSC 16, [2011] I WLR 921, at paras 37-38, where Lord Collins said:

"37. The starting point is that the definition of 'member' in what is now section 112 of the 2006 Act ... reflects a fundamental principle of United Kingdom company law, namely that, except where express provision is made to the contrary, the person on the register of the members is the member to the exclusion of any other person, unless and until the register is rectified: In re Sussex Brick Co [1904] I Ch 598 (retrospective rectification of register did not invalidate notices).

38. Ever since the Companies Clauses Consolidation Act 1845 (8 & 9 Vict c 16) and the Companies Act 1862 (25 & 26 Vict c 89) membership has been determined by entry on the register of members. The companies legislation proceeds on that basis and would be unworkable if that were not so ... "

40. The great majority of the cases on the power of the court to order rectification involve a situation where a transfer has been executed but not registered, and the applicant seeks to be put on the register: eg Re Contract Corporation, Head's Case, While's Case, (1866) [1866] UKLawRpEq 245; LR 3 Eq 84; Re
Overend, Gurney & Co., Ward and Garfit's Case [1867] UKLawRpEq 52; (1867) LR 4 Eq 189; Re London, Hamburgh and Continental Exchange Bank, Ward and Henry's Case [1867] UKLawRpCh 45; (1867) LR 2 Ch App 431 (conflicting transfers); Smith v Charles Building Services Ltd [2006] BCC 334: Blindley Heath Investments u« v Bass [2014] EWHC 1366 (Ch).

41. The next largest category is cases (many of which are old cases concerning holders of partly paid shares seeking to avoid being contributories) where the applicant is already on the register but wishes to be removed, eg because the registration was effected as a result of misrepresentation (Re Scottish and Universal Bank Ltd, Ship's Case [1865] EngR 355; (1865) 2 DJ&S 544) or was effected without authority (Martin's Case [1865] EngR 657; (1865) 2 H&M 669) or was illegal because exchange
control permission was not obtained (Re Transatlantic Life Assurance Co. Ltd [1980] I WLR 79) or bonus shares were improperly issued (Re Cleveland Trust plc [1991] BCC 33).

42. The overwhelming majority of the cases turn on legal title. The only cases which have any bearing on the issue in the present appeal are these. First, there is a dictum of Turner LJ in Re Russian (Vyksounsky) Iron Works Company, Stewart's Case, (1866) LR I Ch App 574 which assists the argument of the Mahtani parties that the rectification jurisdiction may be used where the applicant claims to be on the register because of a contract. It is obiter because this was a case of a shareholder seeking removal from the register. Turner LJ said (at pp 585-586):

"Now suppose a question to arise between the vendor of shares and the purchaser of shares, the purchaser desiring to have his name entered on the list, and the vendor disputing the contract and refusing to concur. Suppose, then, an application made by the purchaser, under this section, to have his name entered on the list. Would not the Court have authority to entertain the application? ... I cannot but think that there would be
power to apply to the Court under this section to have the name of the purchaser entered on the register, though it would depend on the circumstances of the case, and the extent to which the purchaser established his right to specific performance of that agreement,
whether the Court would interfere brevi manu to order the name to be entered on the register, or would direct the case to stand over till it had been decided between the parties, in a suit for specific performance, whether the purchaser was entitled to have his name entered on the register."

43. On the other hand, in a decision ultimately resting on the principle that the company is not concerned with beneficial interests, the applicant sought rectification of the company's register to remove individuals on the ground that transfers executed in favour of such individuals had been carried out in breach of trust. Rectification was refused on the basis that even if the shares had been transferred in breach of trust, that was not a matter which concerned the company, or which invalidated the registration of the transferees' names: Elliot v Mackie & Sons Ltd, Elliot v Whyte, 1935 SC 81, in which Lord President Clyde said (at 90):

"According to the averments in the petition, these transfers were granted and registered in breach of the trust set up by the testator's trust-disposition and settlement; and, constituting, as they do, the transferees members of the company (ex facie in their own right), expose the shares to the deeds of the transferees, to the diligence of their creditors, and to any lien competent to the company. Assuming all this to be true, it discloses no ground on which it can be said, in the words of section I OO( I) of the Act of 1929, that the names of the transferees have been entered in the register 'without sufficient cause'. The company is not the judge of whether a transfer has been executed contrary to some trust reposed in the transferor, and, indeed, is not concerned with considerations of that kind, assuming them to exist. The fact - if it be a fact - that a transfer may be subject to challenge in respect that the transferor, albeit himself a registered holder of the shares, is in breach of some trust in executing it is a matter between the transferor and the persons interested in the trust, and not a matter for the company." [Emphasis added]

33. We have emphasised the passage quoted from Enviroco Ltd v Farstad Supply AIS [2011] UKSC 16, [2011] 1 WLR 921 at [38] so as to underscore the depth of the misunderstanding which has permeated the actions of the parties thus far in their endeavours to resolve their dispute. Papua New Guinea's Companies Act proceeds on the same basis as the United Kingdom companies legislation referred to in Enviroco Ltd v Farstad Supply AIS. Shareholding is determined by entry in the register of members kept by the company.

34. It is evident from his Honour's reasons that the single Judge who heard the application for the interim order recalled that the Companies Act made provision for an action by an aggrieved shareholder, although his Honour was, with respect, mistaken in his recollection that this procedure was to be found in a derivative action under s 143 of that Act. Such an action is apt where, for example, a shareholder seeks to bring a proceeding in the name of or on behalf of the company or a related company. That is not this case.

35. As Ex p Shaw (1877) QBD 463 and Nilon Ltd & Anor v Royal Westminster Investments SA & Ors (British Virgin Islands) make clear, a proceeding under s 71 of the Companies Act for rectification of the share register is not the only means by which a dispute as to share ownership may be resolved. The procedure envisaged in respect of such an application is a summary one. A trial may be more apt where there is a considerable
factual controversy. In the face of such a controversy, a judge dealing with a s71 rectification application might direct that the proceeding continue on pleadings as a trial. It is evident from Mr Apurel's affidavit that the dispute might well entail such a factual controversy, although we express no concluded view on that subject.

36. In the alternative to a s 71 rectification application, Mr Apurel and the original vendor shareholders might have sought declaratory orders in the National Court that the joint venture agreement and the share transfer agreement had been lawfully terminated with consequences as to share ownership and eligibility to appoint directors. The original purchaser shareholder might have sought declaratory orders that these agreements had not
been lawfully terminated and that it was the holder of all of the issued shares in the company. A related claim for damages and injunctive relief or an order for specific performance might have been made in such proceedings.

37. Upon the making of final orders in any of these proceedings, the register maintained under the Companies Act might then have been amended upon the lodgement with the Registrar of a prescribed form recording the position as determined by the court.

38. Approached on the basis that the claim is whether the Registrar can reverse a registration decision made by him, the appellants' challenge appears strongly arguable. It is difficult to see why the power granted to the Registrar to make a decision to register a document did not carry with it by implication a power to alter that registration decision: s 35 of the Interpretation Act 1975 (PNG). But so to analyse the claim is to ignore the quite fundamental misunderstanding as to the role of the Registrar and the utility of an appeal under s 408 of the Companies Act for the resolution of the dispute upon which it is predicated. It was not the task of the Registrar to resolve whether the agreements had been lawfully terminated, to determine what was the consequence of that in terms of share ownership or lawful occupancy of the office of director, much less to order the transfer of shares. What the Registrar cannot resolve by decision the National Court cannot resolve in an appeal under s 408 against that decision. Any argument to the contrary appears to us to be at most tenuous, if not doomed to fail.
    
39. In the face of a shared misconception of this nature, the interim order cannot stand. For this reason alone, it must be discharged. That renders it unnecessary to consider how it was that it appropriate for the interim order to make reference to Kawari Wiem Limited, which was neither a party to the appeal nor even joined as a party to the application for the interim order.
    
40. For completeness, we add that, contrary to the appellants, the proposition that the Registrar did not make a concession before the learned National Court judge hearing the s 408 appeal that it was not within his power to appoint and remove directors or shareholders of a company appears to us to be but faintly arguable. Further, for reasons already given, that concession seems to us to have been correct. Yet further, we do not see much merit in the appellants' contention that they were denied natural justice in the National Court by the standing down of the s 408 appeal to later in the day following the Registrar's concession, as opposed to being given a longer adjournment. They were granted a short adjournment but, as was so evident from their submissions oral and written in respect of the present application, a longer adjournment would not have led to any greater understanding or assistance to the learned National Court judge as to the inaptness of the s 408 procedure for resolution of the dispute in question.
    
41. Even if there were to be greater prospective merit in such claims, what would remain, even were the appeal to succeed, would be a proceeding in the National Court (the s 408 appeal) which was inapt to resolve issues of law as to, whether agreements were lawfully terminated, share ownership and entitlement to hold office as a director. That this misconception is pervasive is demonstrated by the professed desire to be granted, by way of alternative relief in the appeal, leave to reopen their discontinued s 408 appeal (CIA 140 0f 2013).

42. At the very most, all that a judge hearing a s 408 appeal, faced with the misconception evident here, might perhaps be persuaded to do is, in lieu of just dismissing the appeal, to be persuaded that, in empowering the court to give such directions as it thinks fit, s 408(2) enabled a direction to be given that a separate question of law as to whether agreements were lawfully terminated, share ownership and entitlement to hold office as a director be determined. There is a certain pragmatic attraction in that course but it does entail proceeding from a foundation grounded in a type of proceeding which was inapt.
    

We do not express any concluded view on whether it is possible to give such a direction, as the question only an incidental thought in the context of this application.

43. The only active party respondents to the application were the original vendor shareholders and the original vendor directors. The Registrar did not take an active role in either the application for the interim order or in the application for its discharge. As their earlier, discontinued s 408 appeal evidenced and their submissions on the appeal confirmed, they laboured under the same misunderstanding as the appellants. In these circumstances, the
    parties should bear their own costs in relation to the present application.
    
44. The orders made on the present application do not, for the court in determining this application cannot, determine the appeal. Nonetheless, the parties need to give careful attention to these reasons for judgement when considering the further steps to be taken both in respect of the appeal, the orders made in the s 408 proceeding which is the subject of that appeal and what alternative courses might be open to them to resolve the dispute.
    

In particular, discharging the interim order says nothing as to whether the agreements were lawfully terminated, who is or is not lawfully entitled to hold shares in the company or occupy the office of director. If, as appears to be the case, these issues remain controversial, it is for the parties, if so advised, to bring proper proceedings for the resolution of those issues and, in those proceedings, to seek such interlocutory relief as they may further be advised.

45. The orders of the court will be:
    
    • (a) The interim order made on 12 November 2014 is discharged.
    • (b) Each party to the application is to bear its own costs.

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Wesley Bigi: Lawyers for the Appellants
C Kup-Ogut: Lawyer for the Respondents