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Maluipa v Uguro [2014] PGNC 251; N5679 (18 July 2014)

N5679

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 663 OF 2013

FRED MALUIPA, CHAIRMAN, USINO HOLDINGS LIMITED
First Plaintiff

USINO HOLDINGS LIMITED
Second Plaintiff

V

JIMMY UGURO, ACTING DISTRICT ADMINISTRATOR
First Defendant

HON ANTON YAGAMA MP
Second Defendant

USINO-BUNDI JOINT DISTRICT PLANNING
AND BUDGET PRIORITIES COMMITTEE
Third Defendant

Madang: Cannings J
2014: 17 April, 16 May, 13 June, 18 July

PROPERTY – chattels – earthmoving machinery purchased with public money – ownership and control – whether company to which equipment was allocated is vested with legal title in the machinery.

The defendants attempted to seize possession of three items of earthmoving equipment that had been in the possession and control of the plaintiffs for three years. The defendants claimed that the equipment had been purchased with public money, following decisions made and implemented by their predecessors, for the benefit of a particular local-level government, and that the plaintiffs had been given possession and control (but not ownership) of the equipment subject to the condition that it be used for the benefit of the people of that local-level government area. The defendants claimed that the equipment had been used by the plaintiffs as if it were their private property, in breach of the conditions subject to which it had been temporarily allocated to the plaintiffs, and that therefore it should be returned to its true legal owner, the local-level government. The plaintiffs were aggrieved by the seizure of the equipment and commenced these court proceedings seeking a declaration that the second plaintiff is the legal owner of the equipment and orders that the equipment must be returned to it and that the defendants be permanently restrained from interfering with the business of the second plaintiff, and damages. The following issues were raised: (1) who is the owner of the equipment? (2) is the owner of the equipment subject to any enforceable legal obligations as to its use? (3) did the defendants have any right to seize the equipment? (4) what declarations or orders should the court make?

Held:

(1) The second plaintiff is the owner of the equipment. Though it was purchased with public money and allocated to the second plaintiff subject to a loose understanding that it be used for the benefit of the people of a particular local-level government area, the equipment was in effect given to the second plaintiff, a company incorporated under the Companies Act.

(2) There was no trust or any other instrument put in place that had the effect of imposing legally enforceable obligations on the second plaintiff as to how it should use the equipment.

(3) None of the defendants had any equitable interest in the equipment and there is no law that allowed them to seize the equipment or to authorise any other person or authority to seize it.

(4) It was declared that the second plaintiff is the owner of the equipment and that none of the defendants had any legal or equitable interest in it or any right to seize it. It was ordered that the defendants must release the equipment into the possession of the second plaintiff within 14 days after the date of judgment. The plaintiffs' claims for an order restraining the defendants from interfering with the daily business operations of the second plaintiff and for damages were refused as being unsupported by any relevant cause of action and not being specifically sought in the originating summons.

Case cited

The following case is cited in the judgment:

Philip Benjamin v Department of Works (2005) N2874

ORIGINATING SUMMONS

This was an application for declarations and orders regarding ownership of property purchased with public funds.

Counsel

B B Wak, for the plaintiffs
T Boboro, for the defendants

18th July, 2014

1. CANNINGS J: This case concerns a dispute about ownership and control of three pieces of earthmoving equipment, an excavator, a backhoe-loader and a tractor. The equipment was purchased in 2010 for the total price of K1,678,270.00, using District Support and Investment Program (DSIP) funds approved by the Usino-Bundi Joint District Planning and Budget Priorities Committee (JDPBPC). The Committee, chaired by the then member for Usino-Bundi Open, Samson Kuli MP, allocated the equipment to the second plaintiff, Usino Holdings Ltd, to carry out roadworks and other infrastructure development for the benefit of the people of the Usino Local-level Government area. The first plaintiff Fred Maluipa is the chairman of Usino Holdings Ltd, which retained possession and control of the equipment from 2010 to 2013.

2. After his election in 2012 the new member for Usino-Bundi Open, the second defendant, Anton Yagama MP, with the assistance of the Acting District Administrator, the first defendant, Jimmy Uguro, undertook an audit of DSIP funds allocated by the previous district administration. This was done under the auspices of the third defendant, the Usino-Bundi JDPBPC, of which Mr Yagama, as the newly elected sitting member, was Chairman. An investigation team was engaged and an audit undertaken. It was concluded that Usino Holdings Ltd had not used the equipment as intended, for the benefit of the people of the Usino LLG area; instead Usino Holdings Ltd was being run as a private business of Mr Maluipa and his family. The defendants decided that direct action should be taken to recover the equipment. With the assistance of the Police they in November 2013 seized the excavator. Their attempts to seize possession of the backhoe and the tractor were unsuccessful.

ISSUES

3. The plaintiffs commenced these proceedings in December 2013. They seek a declaration that Usino Holdings Ltd is the owner of the equipment and orders that the equipment must be returned to it and that the defendants be permanently restrained from interfering with the business of Usino Holdings Ltd, and damages. The following issues arise:

1. who is the owner of the equipment?
   
2. is the owner subject to any enforceable legal obligations as to use of the equipment?
   
3. do the defendants have any right to seize the equipment?
   
4. what declarations or orders should the court make?
   
1. WHO IS THE OWNER OF THE EQUIPMENT?
   

4. Mr Boboro, for the defendants, submitted that the equipment had been purchased with public money, with the approval of the Madang Provincial Supply and Tenders Board, following decisions made and implemented by the defendants' predecessors, for the benefit of the people of the Usino LLG area, and that the plaintiffs had been given possession and control (but not ownership) of the equipment subject to the condition that it be used for the benefit of the people of that local-level government area. The plaintiffs, however, had used the equipment as if it were their private property, in breach of the conditions subject to which it had been temporarily allocated to Usino Holdings Ltd. Therefore it should be returned to its true legal owner, the people of the Usino LLG area. Mr Boboro submitted that Usino Holdings Ltd was incorporated in 2006 as a business arm of the Usino LLG. Mr Maluipa was President of the LLG at that time, and that is why he was appointed as chairman of the board of directors.

5. The plaintiffs do not dispute that the equipment was purchased with public money. I find that that is in fact the case. The whole of the purchase price of K1,678,270.00 came from DSIP funds. I also find that the equipment was allocated by the JDPBPC to Usino Holdings Ltd for its exclusive use. Was the allocation a temporary arrangement? No. I find no evidence to support that interpretation of the arrangement.

6. There is unsatisfactory evidence before the Court as to the shareholders and directors of Usino Holdings Ltd at the time of trial. The most recent company extract provided in evidence is dated 25 November 2010 (affidavit of Fred Maluipa, filed 28 February 2014, exhibit P1, annexure B). It shows that the company has issued two shares: one to Fred Maluipa and one Thomas Monda. There were seven directors, one of whom is Mr Maluipa. Mr Monda is shown as Company Secretary. Mr Maluipa deposes in that affidavit that Usino Holdings Ltd is a 'trustee company' for five census areas in the Usino LLG area and that it is owned by the directors. None of this is borne out by the company extract annexed to his affidavit.

7. Ultimately, however, I find that the unsatisfactory state of the evidence does not affect the court's finding that, as a matter of law, title in the equipment has been vested in Usino Holdings Ltd. It was incorporated under the Companies Act and it is by virtue of Section 16 of that Act a legal entity in its own right independent of its shareholders (Philip Benjamin v Department of Works (2005) N2874).

8. Though it was purchased with public money and allocated to Usino Holdings Ltd subject to a vague understanding that it be used for the benefit of the people of Usino LLG area, the equipment was in effect given, as a grant, to Usino Holdings Ltd. I find that Usino Holdings Ltd is the owner of the equipment.

2 IS THE OWNER SUBJECT TO ANY ENFORCEABLE LEGAL OBLIGATIONS AS TO ITS USE?

9. There was no trust or any other instrument put in place that might have had the effect of imposing legally enforceable obligations on Usino Holdings Ltd as to how it should use the equipment. I find that Usino Holdings Ltd is not subject to any enforceable legal obligations as to the use of the equipment.

3 DO THE DEFENDANTS HAVE ANY RIGHT TO SEIZE THE EQUIPMENT?

10. I find that none of the defendants has any equitable interest in the equipment that would entitle them to give directions as to how the equipment should be used. There is no law that allows them to seize the equipment or to authorise any other person or authority to seize it. They had and have no right to seize the equipment.

4 WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?

11. As it is clear that Usino Holdings Ltd is the owner of the equipment a declaration to that effect will be made. I will exercise the discretion of the Court to clarify that the defendants have no legal or equitable interest in the equipment. I will not make orders restraining the defendants from interfering with the daily business operations of Usino Holdings Ltd or for damages. These claims are unsupported by any relevant cause of action. There is no claim at all for damages in the originating summons. Costs will follow the event.

ORDER

(1) It is declared that the owner of the equipment described in the Schedule is the second plaintiff.

(2) It is declared that none of the defendants has any legal or equitable interest in the equipment described in the Schedule.

(3) The defendants shall within 14 days after the date of entry of this order release into the possession of the second plaintiff all of the equipment described in the Schedule that is in their possession or control.

(4) The application by the plaintiffs for an order restraining the defendants from interfering with the daily business operations of the second plaintiff and for damages is refused.

(5) The defendants shall pay the plaintiffs' costs of these proceedings on a party-party basis which shall, if not agreed, be taxed.

(6) Time for entry of this order is abridged to the date of settlement by the Registrar, which shall take place forthwith.

SCHEDULE

Ordered accordingly.
___________________________________________________________
Kunai & Co Lawyers: Lawyers for the Plaintiffs
Kuman Lawyers: Lawyers for the Defendants