Lifese Engineering (PNG) Ltd v Roniotis [2019] PGSC 19; SC1785 (15 April 2019)

SC1785

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 39 OF 2019

BETWEEN
LIFESE ENGINEERING (PNG) LIMITED
First Appellant

AND
BILLAL ELOMAR
Second Appellant

AND
NICK RONIOTIS
First Respondent

AND
CLOUDY BAY SUSTAINABLE FORESTRY LIMITED
Second Respondent

AND
PNG SUSTAINABLE DEVELOPMENT PROGRAME LIMITED
Third Respondent

Waigani: Makail, J
2019: 12^th & 15^th April

SUPREME COURT – PRACTICE & PROCEDURE – Application for leave to appeal – Application for stay – Leave sought to appeal interlocutory judgment – Refusal to set aside ex parte interim injunction – Whether primary rights of parties finally determined – Supreme Court Act – Sections 14(3)(b) & 19

Cases Cited:

Hon. Ano Pala v. Sam Koim & Ors (2015) SC1346
Matiabe Oberia v. Chief Inspector Michael Charlie & The State (2005) SC801
Sam Koim v. Hon. Peter O’Neill & Ors (2016) N6198

Counsel:

Mr. P. Lowing & Mr. W. Yep, for Appellants
Mr. Babanem, for First & Second Respondents
Ms. Nigs, for Third Respondent

RULING

15^th April, 2019

1. MAKAIL, J: The appellants apply for leave to appeal and also stay of the decision and order of the National Court of 29^th March 2019 on an urgent basis citing reasons that since the subject decision and order were made the first respondent has moved in and taken over control and management of the second appellant as sole director including, amongst other things, passing of Board resolutions to transfer shares of the second respondent to another company called Oppa Limited of which he is a sole shareholder and director and terminating the services of LLLS lawyers as lawyers for the second respondent. Both applications are made under Sections 14(3)(b) and 19 of the Supreme Court Act.

Background Facts

2. The facts as submitted by the appellants are these; the first appellant is a registered PNG company and is owned by Lifese Pty Ltd (Lifese), a company owned by the Elomar family. Ibrahim Elomar and Mamdouh Elomar are the directors of the first appellants and owners of Lifese. The first appellant won a construction contract for a term of four years. It was a very profitable business and the first appellant wanted to look for further opportunities to do business in PNG and decided to purchase the second respondent.

3. On or around 2014, the first appellant purchased the second respondent for K14 million from the third respondent from cash it had at bank. The first respondent convinced Mamdouh and Ibrahim that it would be favourable for him and his company to be shown on the extract of the second respondent in order for the second respondent to be granted favourable contracts and businesses in PNG. Accordingly, Mamdouh and Ibrahim agreed to make the first respondent a director of the second respondent and further, grant 25% of the second respondent’s shares to Oppa Limited, to be held in trust for and on behalf of the first appellant. Oppa Limited is a company incorporated in British Virgin Islands whose sole shareholder and director is the first respondent.

4. The order of 29^th March 2019 came into existence in this way.

OS No 144 of 2019 Proceedings

5. On 15^th March 2019 the first and second respondents filed OS No 144 of 2019 proceedings, and sought and were granted an ex parte order that has the following effect:

(a) The second appellant is restrained from being the director of the second respondent;

(b) The appellants are restrained from having any control and power over the second respondent and the first respondent is appointed with the absolute power to do anything as the sole director; and

(c) The third respondent is restrained from pursuing any legal action against the first respondent and his company Oppa Limited.

6. The proceedings OS No 144 of 2019 was commenced by the first and second respondents to seek declarations against the appellants’ actions in entering into an Acquisition Agreement with a company called August Storms Holdings Limited. Following grant of the ex parte order of 15^th March, it was made returnable on 8^th April 2019 at 9:30 am for inter parte hearing.

7. On 22^nd March 2019 on the urgent application of the appellants the National Court set aside the order of 15^th March 2019 and the first respondent was given the opportunity to file relevant application in MP No 41 of 2017 to vary or alter any order to appoint himself as the sole director of the second respondent. It should be mentioned that the application was heard and orders were granted by the judge who was and is dealing with the MP No 41 of 2017 proceedings. This is the related proceedings and will be discussed in more detail shortly.

8. Then on 25^th March 2019 the first respondent filed another application seeking to set aside the order of 22^nd March 2019 and reinstate the order of 15^th March 2019. Further, order that the PNG Forest Authority be restrained from cancelling the second respondent’s timber permits and for the State and its line agencies to take whatever actions necessary against “entities or persons deemed to have breached the laws of PNG.”

9. On 29^th March 2019 after hearing both parties, the National Court presided by the Chief Justice granted all of these orders.

MP No 41 of 2017 Proceedings

10. Returning to the MP No 41 of 2017 proceedings, prior to the OS No 144 of 2019 proceedings, on 25^th September 2017 the first respondent filed a petition in MP No 41 of 2017 and sought the following orders:

(a) That Mamdouh Elomar and Ibrahim Elomar be prohibited from acting as directors of the second respondent;

(b) That the second respondent be sold to Oppa Limited at fair market value; and

(c) That the first respondent be made sole director of the second respondent.

11. The first appellant opposed the petition on the following grounds:

(a) The first respondent resigned as a director of the second respondent and is no longer a director of the second respondent;

(b) Oppa Limited holds 25% shares in trust for and on behalf of the first appellant; and

(c) Oppa Limited and the first respondent have never paid for any shares of the second respondent, nor have they contributed any capital to the purchase, operational costs and investments in the second respondent.

12. Currently, a total of six applications are pending determination. As to the issues, counsel for the appellants candidly set them out in his written submission in this way:

(a) Who should own the second respondent? Is it Oppa Limited or the first appellant?

(b) Who should be the director of the second respondent? Is it Mamdouh and Ibrahim Elomar or should they be prohibited and the first respondent be the only director of the second respondent?

(c) Who should manage and operate the second respondent?

13. On or around 23^rd October 2017 parties entered into a consent order where the second appellant representing the first appellant and the first respondent representing Oppa Limited were appointed interim directors of the second respondent pending the determination of the proceedings. Parties also agreed a current employee of the second respondent be the interim manager.

14. On or around 7^th February 2018 the first appellant filed an application for security for costs. On or around 5^th April 2018, Oppa Limited filed an application to include the third respondent in the proceedings and to restrain it from commencing or doing certain acts.

15. Both applications were heard by Shepherd J on 13^th June 2018 and he reserved his ruling on both applications. The ruling is pending to date.

Proposed Grounds of Appeal

16. The appellants, therefore, seek leave to appeal the order of 29^th March 2019 and consequently, the order of 15^th March 2019 in OS No 144 of 2019 proceedings.

17. In support of the application for leave, the appellants have given a long list of issues which they assert are being brought up by the proposed grounds of appeal and demonstrate that there is an arguable case and leave should be granted. They are restated in brief form as follows:

(a) Improper mode of commencing contempt proceedings;

(b) The Acquisition Agreement has already lapsed;

(c) Consent of Oppa Limited and the first respondent are a precondition to the completion of the Acquisition Agreement;

(d) Interim orders sought are not within the scope of the pleadings as contained in the originating summons;

(e) Non service and refusal to serve originating summons; and

(f) Abuse of court process by the first respondent.

Dispute over ownership of second respondent

18. The dispute over directorship and ownership of the second respondent giving rise to all of these issues can be traced back to the MP No 41 of 2017 proceedings. If the judge in charge of the case had made a decision on the first appellant’s application for security for costs and Oppa Limited’s application for joinder of the third respondent and to restrain it from commencing or doing certain acts, and regardless of the outcome of the applications, it would have paved the way for the first respondent to progress the petition to trial and have it listed for hearing. Parties will have been given the opportunity to address some of these issues, importantly the ownership of the second respondent. Instead a ruling on the applications has been outstanding for the last 9 months since the judge reserved his decision on 13^th June 2018. Then there are six pending applications which counsel for the appellants said are still pending hearing. It is not known when they will be heard but presumably are awaiting the outcome of the reserved applications.

19. Where a decision is outstanding for that long, 9 months, the petition will reach a stalemate and it can be inferred from this that the first respondent commenced OS No 144 of 2019 proceedings to expedite those issues and get some answers. It may explain why the first respondent has sought declarations against the appellants’ actions in entering into an Acquisition Agreement with August Storms Holdings Limited as being contemptuous as they are in breach of the consent order of 27^th October 2017 in MP No 41 of 2017. It may also explain why in the interim, the first respondent has obtained an ex parte order to restrain the second appellant from being a director of the second respondent and the appellants from having any control and power over the second respondent.

20. Now the appellants may be entitled to assert that it is an abuse of process to seek a declaration for contempt of court by way of an originating summons. For the subject consent order was made in MP No 41 of 2017 proceedings and the correct process for the first respondent to adopt is to file a motion for contempt accompanied with a statement of charge in those proceedings: See Order 14, rules 42 to 47 of the National Court Rules and Sam Koim v. Hon. Peter O’Neill & Ors (2016) N6198.

21. Further, the appellants may be entitled to assert that the OS No 144 of 2019 proceedings was commenced to bypass MP No 41 of 2017 proceedings and to obtain orders to gain quickly the control and management of the second respondent. For that, the appellants may be entitled to assert that it is an abuse of process.

22. Similarly, it may well be that the Acquisition Agreement has already lapsed well before the first respondent commenced OS No 144 of 2019 proceedings and that in respect of the various applications that have been filed, the relief sought in the interim orders may have been granted outside and beyond the scope of the pleadings in the originating summons.

23. But these issues may have taken centre stage and clouded the real issue on which party is legally entitled to own the second respondent. This is the main issue which is outstanding and must be resolved quickly, either in MP No 41 of 2017 proceedings or OS No 144 of 2019 proceedings or both by way of a consolidation.

24. It may be that the orders which were granted in favour of the first and second respondents may appear irregular. But these issues may also highlight a case management issue. It may be a lack of proper supervision and priority given by the judge in charge of the MP No 41 of 2017 to deal with the main issue of ownership of the second respondent when it was first raised. It is incumbent on judges to take control and manage their cases so as to avoid delays and procrastination by lawyers and parties. Where a ruling is reserved on an interlocutory application for more than a month, there is little justification for the delay and a judge will be accused of the well known legal jargon “justice delayed is justice denied”.

25. If it was the lack of proper supervision and priority by the judge to the MP No 41 of 2017 proceedings, it was compounded by the parties’ uncompromising positions as can be seen from the multiple applications brought by them before the National Court. Each party can be accused of being guilty of making ex parte applications one after the other, the first one being by the first and second respondents on 15^th March 2019 and the other by the appellants on 22^nd March 2019. The third was by the first and second respondents on 29^th March 2019 and heard inter parte.

26. One of the considerations for grant of leave is whether the decision has any bearing on the final determination of the issues between the parties. Will it affect the primary rights of the parties or prevent the determination of the issues? Matiabe Oberia v. Chief Inspector Michael Charlie & The State (2005) SC801 and adopted in Hon. Ano Pala v. Sam Koim & Ors (2015) SC1346.

27. By the very nature of an interim relief, it is intended to be temporary until further orders of the Court. Where it is granted ex parte, it implies that one party was not present and heard when the order was made. At the next return date, that party will be given the opportunity to be heard. In this case the National Court eventually received submissions of both parties in an inter parte hearing on 29^th March and made the orders subject of the leave application.

28. However, the orders do not address the main issue of ownership of the second respondent. They are interim orders intended as a temporary measure to allow the first respondent to control and manage the second respondent until the National Court decides the legitimate owner of the second respondent. This issue, as noted earlier, is pending and it is the duty of the National Court to take charge of the matter, whether in the MP No 41 of 2017 proceedings or the OS No 144 of 2019 proceedings, and make a decision in the interests of justice. It should be added as a caution that the Supreme Court should not be seen to be made to cover for the inadequacies of the National Court but should be the last resort when all other avenues have been exhausted.

29. For the forgoing reasons, I am not satisfied that the appellants have shown that the National Court has finally determined the primary rights of the parties in relation to who owns the second respondent and there is no other recourse in the National Court for them to address the issue of ownership of the second respondent. At the next return date which I note is 17^th April 2019 at 9:30 am before the Chief Justice, parties can expedite the hearing of the matter.

Order

30. The application for leave to appeal will be refused, so as the application for stay with costs.

Ruling and orders accordingly.
______________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for Appellants
Raurela Lawyers: Lawyers for Respondents