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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
CR 54 OF 2011
STATE
V
GARTH McILLWAIN
Waigani: Salika, DCJ
2013: 24 May; 3 July; 30 August
CRIMINAL LAW – Forgery of bank documents –s.222 of the Companies Act – Notice of Registration of Charge in Prescribed
Form – the Company created a fixed and floating charge – The company to submit the Notice of Registration of Charge –
In practice the Banks or Financial Institution submit it – to Registrar of Companies.
CRIMINAL LAW – accused signed the Notice of Registration of Charge – Accused not director of any of the Yama Group of
Companies – Notice of Registration of Charge was a false document under s.460 of the Criminal Code Act – No evidence
that accused knew the document was a false document – No evidence the documents were uttered fraudulently.
COMPANY LAW – Fixed and Floating Charges improperly executed – Fixed and Floating charges invalid.
Cases Cited:
ANZ Bank v Kila Wari (1990) N801
Papua New Guinea Banking Corporation v Aruai [2002] PNGLR 159
Counsel:
Mr M Egan QC with Mr I Sheppard, for the Accused
Mr P Kaluwin, for the State
30th August, 2013
Count 1:
Garth McIllwain of New South Wales,, Australia, stands charged that he on a date between the 01st day of September, 2000 and the 01st December 2006, at Port Moresby, National Capital District in Papua New Guinea forged a document purporting to be a Certificate of Compliance with Stamp Duties Act by Smugglers Inn Resort Limited dated the 6th of May, 1999.
Count 2:
Garth McIllwain of New South Wales,, Australia, stands charged that he on a date between the 01st day of September, 2000 and the 01st December 2006, at Port Moresby, National Capital District in Papua New Guinea forged a document purporting to be a Notice of Registration of Charge by Smugglers Inn Resort Limited dated the 6th of May, 1999.
Count 3:
Garth McIllwain of New South Wales, Australia, stands charged that on the 01st day of December, 2006, at Port Moresby, National Capital District in Papua New Guinea knowingly and fraudulently uttered a false document purporting to be a Notice of registration of Charge by Smugglers Inn Resort Limited dated the 6th of May, 1999.
Count 4:
Garth McIllwain of New South Wales,, Australia, stands charged that he on a date between the 01st day of September, 2000 and the 01st December 2006, at Port Moresby, National Capital District in Papua New Guinea forged a document purporting to be a Notice of Registration of Charge by Yama Security Services Limited dated the 6th of May 1999.
Count 5:
Garth McIllwain of New South Wales, Australia, stands charged that he on the 01st day of December 2006, at Port Moresby, National Capital District, in Papua New Guinea knowingly and fraudulently uttered a false document purporting to be a Notice of Registration of Charge by Yama Security Services dated the 6th of May, 1999.
Count 6:
Garth McIllwain of New South Wales, Australia, stands charged that he on a date between the 1st day of September 2000 and the 01st December 2006, at Port Moresby, National Capital District in Papua New Guinea forged a document purporting to be a Notice of Registration of Charge by Neisenal No 77 Limited dated the 6th of May, 1999.
Count 7:
Garth McIllwain of New South Wales, Australia, stands charged that he on the 01st day of December 2006, at Port Moresby, National Capital District, in Papua New Guinea knowingly and fraudulently uttered a false document purporting to be a Notice of Registration of Charge by Neisenal No 77 Limited dated the 6th of May, 1999.
COUNT 1
"Section 222: Registration of Charges
(1) Subject to this Part, where a company creates a charge to which this Part applies, the company shall submit to the Registrar for registration within two months after the creation of the charge–
(a) a notice for registration of the charge in the prescribed form; and
(b) a certified copy of the document creating or evidencing the charge.
(2) Where this section is not complied with in relation to a charge to which this Part applies, the charge is, so far as it confers any security on the company's property or undertaking, void against–
(a) the liquidator of the company; and
(b) any creditor of the company.
(3) This section does not prejudice any contract or obligation for repayment of the money secured by a charge, and when a charge becomes void under this section the money it secures becomes immediately payable.
(4) The charges to which this Part applies are–
(a) charges (other than charges solely on land) to secure any issue of debentures; and
(b) charges on uncalled share capital of a company; and
(c) charges or assignments created or evidenced by instruments (including instruments creating or evidencing absolute bills of sale or absolute assignments or transfers of book debts) that, if executed by an individual, would be invalid or of limited effect if not registered under the Instruments Act 1953; and
(d) floating charges on the undertaking or property of a company; and
(e) charges on calls made but not paid; and
(f) charges on a ship or aircraft, or on a share in a ship or aircraft; and
(g) charges on goodwill, on a patent or licence under a patent, on a trade mark, or on a copyright or a licence under a copyright; and
(h) charges on the book debts of a company.
(5) Where a charge created in the country affects property outside the country–
(a) an application for registration of the charge in the prescribed form; and
(b) a certified copy of the document creating or evidencing the charge,
may be submitted for registration under and in accordance with Subsection (1) notwithstanding that further proceedings are necessary to make the charge valid or effectual according to the law of the place in which the property is situated.
(6) Where a company creates a series of debentures containing or giving by reference to any other document a charge the benefit of which the debenture holders of that series are entitled to equally, the company shall submit to the Registrar for registration within two months after the execution of the document containing the charge, or, where there is no such document, after the execution of the first debenture of the series–
(a) a notice in the prescribed form of the following particulars:–
(i) the total amount secured by the whole series;
(ii) the dates of the resolutions authorizing the issue of the series and the date of the document (if any) by which the security is created or defined;
(iii) a general description of the property charged;
(iv) the names of the trustees (if any) for the debenture holders; and
(b) either–
(i) a certified copy of the document creating or evidencing the charge; or
(ii) where there is no such document, a copy of the first of the debentures of the series.
(7) For the purposes of Subsection (6), where more than one issue of debentures in the series is made, the company shall submit to the Registrar notice in the prescribed form of the date and amount of each issue within two months after the issue.
(8) Where a company has made or paid any commission, allowance or discount, directly or indirectly, to a person in consideration of that person either absolutely or conditionally subscribing or agreeing to subscribe, or procuring or agreeing to procure subscriptions, absolute or conditional, for any debentures, the particulars required to be submitted under this section include particulars as to the amount or rate per cent of the commission, allowance, or discount.
(9) The deposit of any debentures as security for a debt of the company shall not be treated, for the purposes of Subsection (8), as the issue of the debentures at a discount.
(10) Failure to comply with Subsection (7) or (8) does not affect the validity of the debentures issued.
(11) A charge to which this section applies–
(a) does not need to be registered under the Instruments Act 1953; and
(b) is not subject to avoidance under that Act; and
(c) on registration under this Part, has effect and is as valid, for all
purposes, as if it had been duly registered under that Act.
(12) Where–
(a) a charge requiring registration under this section is created before the expiration of two months after the creation of a prior unregistered charge; and
(b) the charge comprises all or any part of the property comprised in the prior charge; and
(c) the subsequent charge is given as a security for the same debt as is secured by the prior charge, or for any part of that debt,
then, to the extent to which the subsequent charge is a security for the same debt or part of the same debt and so far as respects the property comprised in the prior charge, the subsequent charge is not operative and has no validity unless it is proved to the satisfaction of the Court that it was given in good faith for the purpose of correcting a material error in the prior charge or under other proper circumstances and not for the purpose of avoiding or evading this Part.
(13) Where default is made in complying with this section each director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
460. DEFINITION OF FORGERY.
(1) In this section, "make a false document or writing" includes–
(a) altering a genuine document or writing in a material part, whether by erasure, obliteration, removal or otherwise; and
(b) making a material addition to the body of a genuine document or writing; and
(c) adding to a genuine document or writing a false date, attestation, seal or other material matter.
(2) A person who makes a false document or writing, knowing it to be false, and with intent that it may in any way be used or acted on as genuine, whether in Papua New Guinea or elsewhere–
(a) to the prejudice of a person; or
(b) with intent that a person may, in the belief that it is genuine, be induced to do or refrain from doing any act, whether in Papua New Guinea or elsewhere,
is said to forge the document or writing.
(3) A person who makes–
(a) a counterfeit seal or mark; or
(b) an impression of a counterfeit seal knowing the seal to be counterfeit; or
(c) a counterfeit representation of the impression of a genuine seal; or
(d) without lawful authority, an impression of a genuine seal,
with intent that the thing so made may in any way be used or acted on as genuine, whether in Papua New Guinea or elsewhere–
(e) to the prejudice of any person; or
(f) with intent that a person may, in the belief that it is genuine, be induced to do or refrain from doing any act, whether in Papua New Guinea or elsewhere,
is said to forge the seal or mark.
(4) It is immaterial in what language a forged document or writing is expressed.
(5) It is immaterial that the forger of any thing forged did not intend that a particular person–
(a) should use or act on it; or
(b) should be prejudiced by it; or
(c) be induced to do or refrain from doing any act.
(6) It is immaterial that the thing forged is incomplete, or does not purport to be a document, writing or seal that would be binding in law for any particular purpose, if it is so made, and is of such a kind, as to indicate that it was intended to be used or acted on.
22. The evidence is the same not only in relation to Count 1 of the Charges but in relation to all forgery charges (Counts 2, 4 & 6) on the indictment in the form of Exhibit F itself and exhibits C, G and J. The documents or exhibits show, and it is not disputed, that the accused signed as Director and purportedly on 6 May 1999 as shown on the Exhibited documents. This has been clarified by evidence that those documents were signed just before or on 1 December 2006.
23. The State had alleged that the accused had forged the documents knowing them to be false and that he knew those documents to be false and that they would be lodged with the Registrar of Companies and would be acted upon.
24. The State evidence is based largely on the documentary evidence and it has asked the court to draw inferences from the evidence before it. There is no direct evidence from the State that the accused knew the documents to be false. The allegations by the State are serious and to me the process and procedure stipulated under s.222(1) is critical to the charges before the Court. The Forms 24 and 25 were either erroneously executed or signed or fraudulently signed or executed by the accused, which he had no right to sign.
25. The only direct evidence as to whether or not Forms 24 and 25 were erroneously or fraudulently signed by the accused is understandably from the accused himself. His evidence is that as Managing Director of the Bank he signed thousands of bank documents daily. While I do agree that he signs many documents a day I do not believe that he signs thousands of documents on a daily basis. This in my opinion is exaggerated. He said he relied on Bank Officers to ensure the documents were properly filled and that his job was to sign on pages clearly marked with a sticker saying "sign here". He said he did not check every document that came to him for signature. He was however asked if he read Exhibit F before signing to which he said he would have read it. He was asked if he was aware of what he was signing to which he said – Yes.
26. If he read the documents and knew what he was going to sign and went on to sign the document is evidence which goes to the issue of whether the documents were erroneously or fraudulently signed. In other words, when he signed the document did he know that by him signing that the document was false. This to me raises an issue of propriety of what he was doing. The accused was also asked if Forms 24 and 25 should be accompanied by other documents such as the deed itself and his answer to that was "not necessarily". His evidence in that regard is contrary to what the Companies Act s.222(1)(a) and (b) envisages. Moreover his evidence is contrary to s.225(5) of the Act as well in relation to Form 25. I appreciate that these forms were signed before 1 December 2006, some 6 years and 9 months ago, but in this case his evidence is contrary to the legal requirement because in my opinion he normally should not sign those documents, that is Forms 24 and 25 as they do not require his signature. The Forms would have been foreign to him. In my opinion he ought to have sought clarification or advise on them before signing them.
27. Section 230 of the Companies Act says:
INTERESTED PERSONS MAY REGISTER DOCUMENTS.
Any person who is interested in a charge or other documents that are required to be registered under this Part may submit to the Registrar for registration any of these documents, or any particulars required by this Part, and that person is entitled to recover from the company the amount of any fees properly paid by him on registration.
This simply means that any interested person in this case the Bank South Pacific which had and has an interest in a charge or other documents may submit to the Registrar of Companies for registration the Notice of Registration of the Charge or charges. Accordingly pursuant to s.230 of the Companies Act the lodgment of the Notice for Registration of Charge (Exhibit C) and the subsequent issue of Certificate of Registration of Charge (Exhibit B) would be valid but in this case I note that Exhibit C Form 24 is a form specifically under s.222(1)(a) and (b) of the Companies Act and not under s.230 or s.222(i)(b) and s.230 combined together..
28. The accused is a very experienced man within the Banking industry. He came to Papua New Guinea in 1966 working with the Reserve Bank of PNG. From 1978 he worked with Credit Corporation, and from September 2000 worked with PNG Banking Corporation and from 19 April 1997 worked with Bank South Pacific as its Managing Director. He retired from the Bank of South Pacific in November 2008. He has served on the Credit Corporation Board and Air Niugini Board.
29. The accused's evidence which is not contested, is that on 1 December 2006 he was authorized to sign documents for and on behalf of Bank of South Pacific. Usually those documents were prepared by Bank Staff from various sections of the Bank and put into his tray for his signature. He said most of those documents were not pre-dated. He said he never signed the documents on 6 May 1999 and that is accepted by the State.
30. I am mindful that there was nothing to be gained by the accused personally by signing Form 25. However, it was with respect grossly negligent of him to sign documents which he should not have signed or he ought to have sought clarification on first. Mr Maddison and the Legal Section of the Bank should have carried out a due diligence check on those documents before having the documents placed on the accused's tray for his signature.
31. Moreover, the Bank should properly train its management and staff which or what documents are to be signed by bank officers and which or what documents are to be signed by its customers or clients. Form 24 and 25 documents under the Companies Act are very important documents and should be treated with great care and with due diligence. They are documents not for bank officers to execute or sign. This is because, as happened in this case the accused wrongfully signed documents which Mr Yama was not aware of. The Bank Staff including its management must ensure their clients or customers are not put in the state Mr Yama was put in.
32. The Bank owes a duty of care to its customers or clients be it fiduciary or contractual. (See ANZ Bank v Kila Wari (1990) N801 and Papua New Guinea Banking Corporation v Pala Aruai [2002] PNGLR 159). A single slip up could mean serious adverse consequences equally for both the Bank and its customers, and those could be detrimental to good business practices and maintaining good relationships, as happened in this case. I am of the view that the accused and the rest of the Bank officers including Mr Maddison were negligent and reckless in their duties to their clients the Yama Group of Companies.
33. I say this because Forms 24 and 25 are not documents to be signed by the Banks Managing Director. The Bank Officers including Mr McIllwain and Mr Maddison knew that there would be serious consequences for the Yama Group of Companies if they failed to discharge their debts. When the alleged debts were not attended to by the Yama Group of Companies, the Bank relied on those improperly registered Fixed and Floating charges to start debiting the accounts of the various Yama Group of Companies. The Yama Group of Companies were as a consequence of the negligence of the accused, Mr Maddison and other bank officers forced into liquidation as a result of these actions. Peter Yama gave evidence that the Bank's legal fees and accounting fees were paid from the accounts of the Yama Group of Companies. All expenses the Bank incurred relating to the Yama Group of Companies were debited to the accounts of Yama Group of Companies. The Bank was entitled to do that according to the evidence of Mr Maddison in that it relied on the Fixed and Floating charges created by the Yama Group of Companies. However, the Fixed and Floating Charges were illegally and therefore irregularly registered and as such they were invalid. These were all done because of improper registration of the fixed and floating charges by the registrar of companies based on illegal and invalid Notices for Registration of charges. In other words the registration of the Fixed and Floating Charges were done illegally which made the Fixed and Floating Charges invalid.
34. The same invalid Fixed and Floating Charges were used to cause the Yama Group of Companies to improperly go into liquidation and for a liquidator to be appointed. This would have caused a lot of anxiety and inconvenience as the owners and directors of the Yama Group of Companies all because of the actions of careless actions of a few bank officers and management. These are some of the reasons why the Bank ought to be very careful when dealing with their clients, that is to ensure that everything needed to be done was done correctly and properly.
35. However, having said the Fixed and Floating Charges were improperly registered the Court still faces the issue of whether the accused knew that by signing the documents, the documents became false documents. The court must be satisfied on that issue beyond reasonable doubt. In order to satisfy the court there must be credible evidence.
36. In that regard, I find in relation to Count 1 of the indictment that I am satisfied that the accused by signing Form 25 (Exhibit F), made a material addition to the body of a genuine document, thereby rendering the document to become a false document bringing it under s.460 of the Criminal Code. The accused in his evidence said he knew what he was signing. However did he know that the document that is form 25 he was signing would become a false document. That is the critical issue here. There is no evidence he knew the document would be false if he signed or when he signed. Accordingly I find him not guilty of Count 1.
COUNTS 2, 4 and 6:
37. In relation to Counts 2, 4 and 6 I say the same things as I said in relation to Count 1. In Count 2 the document forged there was Exhibit G. It is a bank document (Form 24) created under the Companies Act and is a Notice for Registration of a Charge. This form was filled by Bank Staff and signed and executed by the accused the Bank's Managing Director. The date the accused signed was purportedly on 6 May 1999 but evidence is that it was signed just before or on 1 December 2006. The State accepts that the document was signed before or on 1 December 2006.
38. Form 24 in my respectful opinion is a form to be signed off by a Director of a Company lodging the Notice for Registration of the charge. This Form is created under s.222(1)(a) of the Companies Act and is to be signed off by a director of the company and not a bank officer or a Bank Director. The accused signed the Exhibit as if he was a Director of Smugglers Inn Resort Limited when in fact he was not, on either of the dates shown on the form, that is on 6 May 1999 or 1 December 2006 or ever. If he knew what he was signing, and went ahead and signed, he would have intended that document to be relied on to register the Charge to the prejudice of Mr Yama and his Group of Companies who was and is a Director of Smugglers Inn Resort Limited, a director of Yama Security Services and Neisenel No 77 Limited. This put the accused in my opinion, squarely under s.460(1) and (2) of the Criminal Code Act.
39. In this instance while the accused says he simply signed documents which had "sign here" stickers stuck on the pages for him to sign. I find that he knew what he was signing and signed. The simple fact is that once a person signs a document, that document is his for all intents and purposes. In this case he signed the documents. He cannot blame his subordinate officers regardless of his evidence that he trusted his subordinate to do their work properly. He cannot pass blame on others. He cannot blame his own inefficiency and carelessness on others. To me he was simply negligent and wreckless. He should have checked these things. There was no need to rush as the documents were already almost 7 years late anyway. However whether the accused knew what he was signing was false is the critical issue. There is no evidence he knew that if he signed the document would be false. Accordingly I find him not guilty to Counts 2, 4 and 6 of the indictment.
COUNTS 3, 5 and 7
41. The Charges themselves were purportedly created on 6 May 1999 by Smugglers Inn, Yama Security Services Limited and Neisenal No 77 Limited from a deed entered into by the Yama Group of Companies namely Neisenal No 77 Limited, Yama Security Services Limited, Madang Taxi Hire and Smugglers Motel Limited and Papua New Guinea Banking Corporation on 6th May, 1999.
42. In relation to Counts 3, 5 and 7 they are all charges for knowingly and fraudulently uttering false documents purporting to be Notices for Registration of Charges by Smugglers Inn Resort Limited, Yama Security Services Limited and Neisenal No 77 Limited respectively. After signing the Notice, Bank Officers then lodged the documents with the Office of the Registrar of Companies. The Registrar of Companies received the Notices for registration of the Charges and acted on the documents to register the fixed and floating charges. In this case the Public Prosecutor invoked s.7 of the Criminal Code to include the accused in the commission of the offences.
43. There is no dispute the Notices in Exhibits G, J and C were lodged with the Registrar of Companies by the Bank Officers. There is also no dispute the Bank Officers did this after the accused had signed the respective documents. The documents were therefore lodged for registration of the charges with the requisite authority from the accused and in my view s.7 is correctly invoked. However, those documents were false documents which the accused did not know that upon him signing the documents became false documents. The question then is – were those documents fraudulently uttered? There is no evidence they were fraudulently uttered.
44. Accordingly, I find the accused not guilty to Counts 3, 5 and 7.
45. The remaining issue I wish to address is the validity of the Fixed and Floating charges created on 6 May 1999 purportedly by the Yama Group of Companies. I note from Exhibit D, that is the Fixed and Floating Charge that the deed is between Nessenial No 77, Yama Security Services, Madang Hire Car and Smugglers Motel and Papua New Guinea Banking Corporation. I also note on page 73 of the Exhibit D, that is page 73 of the deed of the Fixed and Floating Charge that there is one identical signature on the right of the page purportedly signed for each and every one of the parties entering into the deed. I also note on the left side of page 73 of Exhibit D one identical signature purporting to affix the Company Seal of each of the Companies named in the respective sections or boxes (if I can call them that)
_________________________________________________________________
Public Prosecutor: Lawyer for the State
Ashurst Lawyers: Lawyer for the Accused
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