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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
MP NO. 55 of 2019 (COMM)
IN THE MATTER OF THE COMPANIES ACT 1997
AND
IN THE MATTER OF CANOPUS NO. 101 LIMITED
Waigani: Anis J
2019: 22 November, 20 December
NOTICE OF MOTION – Interim injunction – section 142(1)(a) and (b) – Companies Act 1997 – statutory requirements – whether the respondents are engaging in or proposing to engage in conduct that is or would contravene the constitution of the company or the Companies Act – whether the respondents have refused or failed or are refusing or failing or proposing to refuse or fail, to do an act or thing required to be done by the constitution of the company or the Companies Act
PRACTICE AND PROCEDURES – Undertaking as to damages – whether required – section 142(6) – Companies Act
Cases Cited:
Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Kurumbukari Ltd v. Steven Saud (2015) N5906
Counsel:
Mr C Joseph, for Petitioner
Nil appearance for the Respondent
Mr H I Kevau, for an Interested party
RULING
20th December, 2019
1. ANIS J: The petitioner applied seeking various restraining orders against persons who have interests in this proceeding. The application was contested and it was heard on 22 November 2019. I reserved my ruling to a date to be advised.
2. Parties have been notified so I will rule on it now.
BACKGROUND
3. The petitioner is Pate Wamp (the petitioner). He filed his petition on 4 September 2019. He is a shareholder and director of Canopus No. 101 Limited (respondent Canopus). His main claim in the petition is against the respondent Canopus.
4. The petitioner owns 20% or 20 ordinary shares in the respondent Canopus. Prior to 2013, the petitioner and a company called Melpa Properties Limited were the only 2 shareholders of Canopus. At that time, Melpa Properties Limited owed 80% or 80 ordinary shares whilst the petitioner owned 20% or 20 ordinary shares, in Canopus. The petitioner’s shares and his status as a director and shareholder of the respondent Canopus remains to this day. But the petitioner’s argument is this. He said on 6 September 2013, Melpa Properties Limited, without his knowledge as a director and shareholder, sold its shares in Canopus over to a company called Komkaeli Limited, for a sum of K100,000. He said at the material time of the sale and onward, he had been kept in the dark. He said he only learnt of the transaction in 2016 after he had conducted a company search on the respondent Canopus at the Investment Promotion Authority office at Konedobu in Port Moresby.
5. The petitioner files this petition under section 152 of the Companies Act 1997 (the Companies Act). He seeks various relief including compensation and restoration of the shares of Melpa Properties Limited based on various alleged breaches of the provisions of the Companies Act. The petitioner also claims that he has an agreement with Melpa Properties Limited where the said company has agreed that it would later sell its 80 ordinary shares in the respondent Canopus to the petitioner. The petitioner also intends to prove that the action of Melpa Properties Limited in having sold its shares to Komkaeli Limited has breached the said agreement.
6. At page 14 of the petition, apart from the respondent Canopus, others that are affected and whose names appear as intended recipients of the petition are, (i), Melpa Properties Limited, (ii), Komkaeli Holdings Limited, (iii), Steven Pup, and (iv), Paul Timbi. Evidence filed by the petitioner shows that these persons were all served with the present application documents.
7. Komkaeli Limited, who is the majority shareholder of the respondent company Canopus, was the only person who had responded, that is, by filing its Notice of Appearance on 9 October 2019. The respondent Canopus and the others have not filed any notice of appearances.
APPLICATION
8. The petitioner’s notice of motion was filed on 12 November 2019 (the application). He files the application and the petition in his capacity as a director and a shareholder of the respondent Canopus. The main relief he seeks in the application are, and I quote:
without the prior approval of the Petitioner pending determination of the substantive proceedings or until further orders from this Court.
COMMON GROUND
9. The parties appear to be at common ground in relation to relief 1 and 2. Komkaeli Holdings Ltd, who is appearing as an interested party in support of the respondent, opposes particularly relief 3 of the application. I will therefore address that as the contentious issue that is before this Court.
10. Let me also say this. The respondent Canopus has not formally filed a Notice of Appearance as required to by Rule 20 of the Companies Rules. And I note that it did not appear to oppose the application.
EVIDENCE
11. This then leads me to address the evidence that have been filed. I note that the petitioner has filed various affidavits in support of the application. I also note the same for the interested person Komkaeli Holdings Ltd.
12. Steven Pup is an interested person who is named in the petition. Mr Pup has filed 2 affidavits in response. I take issue with one of his affidavits, that is, the one sworn and filed on 19 November 2019. In that affidavit, he gives evidence in his capacity as a director of the respondent Canopus. In my view, this evidence cannot be allowed or be considered by this Court. Let me explain. Rule 20 of the Companies Rules states and I quote:
(1) A person who intends to appear on the hearing of a petition shall serve on the petitioner or his lawyer notice of his intention.
......
(3) A person who has failed to comply with this section shall not be allowed to appear on the hearing of the petition without special leave of the Court.
13. To me, Rule 20 is mandatory. In this case, the respondent Canopus has not filed a Notice of Intention to Appear as required by Rule 20. And the respondent Canopus, I note, has not sought special leave from the Court. Evidence and submissions made by counsel for Komkaeli Holdings Limited, and the Notice of Intention to Appear filed, are made only on behalf of Komkaeli Holdings Limited who is the only other shareholder of the respondent Canopus. So whilst this shareholder Komkaeli Holdings Limited has made an appearance to support or defend the respondent Canopus and its interest in the mater, the respondent Canopus is not represented, and without its Notice of Intention to Appear or without special leave being granted by the Court to it, it cannot be heard and I find that to be the case. At the same time, Komkaeli Holdings Limited cannot, in my view, speak for Canopus or make submissions on its behalf. It is on these basis that I decline to accept Mr Pup’s affidavit where he files as a director of the respondent Canopus. In my view, Mr Pup cannot represent, give evidence or make submissions on behalf of the respondent Canopus without the said company complying with Rule 20 of the Companies Rules. And I note that Mr Pup is not an approved intervener under section 143(1)(b) of the Companies Act where this Court would have otherwise considered the said affidavit.
14. For these reasons, I decline to accept Mr Pup’s affidavit where he deposes as the managing director of the respondent Canopus.
ISSUE
15. The main contested issue is this. Whether the respondent Canopus, Komkaeli Holdings Limited, their agent and servants should be restrained, and I quote:
from passing any resolutions or otherwise taking any corporate action authorising or enabling the:
(i) cutting down, selling, harvesting or dealing in any way with the Eucalyptus, Casuarina and other species of trees planted in Rui Plantation;
(ii)transferring, selling, encumbering or dealing in any way with State lease for Rui Plantation being the land described as Portion 1215, Milinch of Hagen Agricultural Lease, Volume 7 Folio 105; and
(iii)dissipating any of the assets of Canopus No. 101 Ltd.
without the prior approval of the Petitioner pending determination of the substantive proceedings or until further orders from this Court.
THE ARGUMENTS
16. I have considered the arguments of the parties. The main challenge by Komkaeli Holdings Limited concerns Undertaking as to Damages. Counsel submits that no such undertaking was given by the petitioner and as such, the petitioner has failed to satisfy one of the requirements for grant of interim injunctions.
17. To grant an interim injunction under the equitable principles, which were adopted as part of the underlying law of Papua New Guinea under Schedule 2.2 (adoption of a common law) and developed under Schedules 2.3 (development etc of the underlying law) and 2.4 (judicial development of the underlying law) of the Constitution, the Court, in the exercise of its discretion, must be satisfied that (i), the applicant has a serious question to be determined, (ii), the balance of convenience favours the granting of the interim injunction, (iii), that damages would be an inadequate remedy, and (iv), that the applicant has given an undertaking as to damages. See case: Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853. Komkaeli Holdings Limited’s argument on undertaking as to damages stems from these principles.
18. The petitioner, in reply, submits this. Counsel referred to section 142 of the Companies Act. He submits that the petitioner has invoked the said provision. Counsel submits that for the Court to grant interim injunction under section 142 of the Companies Act, it has to be satisfied that the respondent Canopus, Mr Pup, Komkaeli Holdings Limited and those persons named in the petition, (a), are engaging in or proposing to engage in conduct that is or would contravene the provisions of the Companies Act, or (b), have refused or failed or are refusing or failing or are proposing to refuse or fail, to do an act or thing required to be done by the Companies Act. Counsel also submits that in regard to the argument concerning undertaking as to damages, that section 142(6) does not require such undertaking to be given by the petitioner.
SECTION 142
19. Section 142 of the Companies Act states, and I quote in part:
142. Injunctions.
(1) The Court may, on an application under this section, make an order—
(a) restraining a person who is engaging in or proposes to engage in conduct that is or would contravene the constitution of the company or this Act from engaging in that conduct; or
(b) requiring a person who has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that he is required to do by the constitution of the company or this Act, to do that act or thing.
(2) An application may be made by—
(a) the company; or
(b) a director or shareholder of the company; or
(c) an entitled person; or
(d) the Registrar.
......
(6) Where an application is made to the Court under Subsection (1) for the grant of an injunction under this section, the Court shall not require the applicant, as a condition of granting an interim injunction, to give any undertakings as to damages.
(Underlining is mine)
20. The section is of course express. In this case, the petitioner is a director and shareholder of the respondent Canopus. He qualifies, and I find that to be the case, under section 142(2)(b) of the Companies Act. And he has invoked the jurisdiction of this Court under the section 142(1). I find the source invoked to be in order. Also and in direct answer to the issue at hand, I note that subsection (6) of section 142 expressly does not permit an applicant under section 142 to give an undertaking as to damages. I therefore also find that pursuant section 142(6) of the Companies Act, the petitioner is not required to give an undertaking. I dismiss Komkaeli Holdings Limited’s submission on this point.
21. At this juncture, let me say this. The main respondent Canopus has not opposed the application. And I note that the main objection that had been put forward by Komkaeli Holdings Limited has now been rejected. Under the circumstances and in my view, I find that I may be able to exercise my powers under section 142(1) and grant the 3 interim injunctive relief that are sought in the application.
22. But that may not be the end of the matter. For completeness, I have to ask myself this. What are the requirements for granting a statutory interim injunction under section 142 of the Companies Act? In response, I uphold the petitioner’s submission on point. In my view, I may grant interim injunctions under section 142 upon being satisfied of 1 of the 2 requirements or both, namely, and I quote:
(a) if a person is engaged in or proposes to engage in conduct that is or would contravene the constitution of the company or the Companies Act; or
(b) if a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that he or she is required to do by the constitution of the company or the Companies Act.
23. I have summarized the above which is based on section 142(1). Justice Cannings also made a similar summary in the earlier case of Kurumbukari Ltd v. Steven Saud (2015) N5906. I also concur with his Honour’s summary of section 142(1) of the Companies Act.
CONSIDERING EVIDENCE
24. Let me consider the evidence. In my view, and based on what has been filed by both parties, I note that most of the material facts for this purpose are not contested. Let me explain. Apart from the ownership status of the respondent Canopus and its directors which are explained above in my judgment, Canopus owns a State or Agricultural Lease which is described as Portion 1215, Milinch Hagen, Fourmil Ramu, Western Highlands Province (State Lease). That state lease is its single largest asset. The State Lease is called Rui Plantation which consists of a coffee plantation. It is located at Dei Council District in the Western Highlands Province. The state lease covers an area of 1,050 hectares of land which include buildings, plant and machinery and other infrastructure developments.
25. Mr Pup is the other director of the respondent Canopus. I refer to his affidavit filed on 19 November 2019, that is, where deposes as a director of Komkaeli Holdings Limited. Mr Pup firstly confirms the 80% purchase and transfer of the shares from Melpa Properties Limited in the respondent Canopus, to Komkaeli Holdings Limited in 2013. Mr Pup, in his affidavit, does not dispute that he is also a director of the respondent Canopus. This is also confirmed at annexure A to the affidavit of Moana Nahuet filed on 12 November 2019. The annexure is a company extract of Canopus as at 4 November 2019. There, it shows, amongst others, Mr Pup and the petitioner as the 2 directors of the respondent Canopus. Mr Pup also confirms in his affidavit that Komkaeli Holdings Limited has been appointed to manage the Rui Plantation, which had been alleged by the petitioner. He attaches evidence which appears consistent with those adduced to by the petitioner, that is, of the various activities and developments occurring on the said coffee plantation.
26. One of the concerns include cutting down of trees at the plantation. The petitioner has provided evidence of the estimated value of the trees on the plantation, that is, at annexure B to his affidavit. The assessment was carried out by the Papua New Guinea Forest Authority, that is, on 3 species of trees on the plantation, namely, Eucalyptus grandis, Eucalyptus robusta and Casuarina app. The report is dated 26 May 2008. It estimates the value of the trees at around K8 million (i.e., K7, 962, 000). The petitioner gave evidence that the trees were being harvested by the respondent Canopus, Komkaeli Holdings Limited and its agents or servants. He also wants this stopped by this injunction because he says that the said activities were unauthorized, were contrary or hazardous to the wellbeing of the coffee plantation because he says that the trees provide shades to the coffee plants which is a vital part of their survival or care.
FINDINGS
27. When I look at Mr Pup’s evidence, I notice the following deficiencies. Firstly, he does not provide evidence which shows that the processes for his appointment as a director of the respondent Canopus, whether it be under its constitution or the Companies Act, had been observed. Secondly, since the respondent Canopus has not appeared to oppose the application, there is no evidence adduced by it as well as by Melpa Properties Limited that shows that they had also followed the due processes either under the Constitution of Canopus or the Companies Act, in relation to the transfer and sale of Melpa’s 80% (i.e., 80 ordinary shares) shares in Canopus over to Komkaeli Holdings Limited. I note that these evidence may be adduced later at the trial by the respondent Canopus or the other interested persons who are named in the petition including Komkaeli Holdings Limited. But the fact of the matter is that the petitioner has filed this application and has adduced evidence supporting his intention to obtain the interim injunctive orders, and they appear convincing to me at this stage. I am satisfied that the petitioner has made out his case for this purpose. The burden of proof of course shall shift to the respondent and the interested persons to the petition. To me, however, I am not satisfied that the respondent and the interested persons have discharged that burden, that is, to disprove or seriously contest the evidence of the petitioner that is filed at this stage.
28. To me, these demonstrate serious challenges on whether the various provisions of the Companies Act have, was or had been breached. These provisions include sections 65(4)(a) (Transfer of shares), 70 (Director’s duty to supervise share register), 105 (Proceedings at meetings), 109 (Management of company), 131 (Appointment of first and subsequent directors), 133 (Appointment of Directors to be voted on individually), 134 (Removal of directors), 135(1) (Director ceasing to hold office), 138 (Proceedings of board) and schedules 2 (Proceedings at meetings of shareholders) and 4.2 (Proceedings of the Board of a company) of the Companies Act.
29. I also note that the evidence of the petitioner concerning the cutting down of the trees at Rui Plantation and of the trees’ estimated value, have not been challenged or seriously opposed. As such, it is my view that a restraining order should also be granted to preserve the status quo of the matter until further order of the Court.
SUMMARY
30. I am satisfied that the petitioner has established both requirements under section 142(1)(a) and (b) of the Companies Act. I am satisfied that the continued operation of the respondent Canopus and the named interested persons including Komkaeli Holdings Limited, may contravene various provisions under the Companies Act. I am also satisfied that the respondent Canopus and the named interested persons including Komkaeli Holdings Limited, may have failed in their obligations under the Companies Act. As such, it is necessary that the interim injunction be granted at this stage pending the trial of the matter or until further order of the Court.
COST
31. Award of cost is discretionary. The petitioner in this case seeks cost of the application to be in the cause. I will make an order to that effect.
THE ORDERS OF THE COURT
32. I will make the following orders:
(i) cutting down, selling, harvesting or dealing in any way with the Eucalyptus, Casuarina and other species of trees planted in Rui Plantation;
(ii) transferring, selling, encumbering or dealing in any way with State lease for Rui Plantation being the land described as Portion 1215, Milinch of Hagen Agricultural Lease, Volume 7 Folio 105; and
(iii) dissipating any of the assets of Canopus No. 101 Ltd,
without the prior approval of the Petitioner pending determination of the substantive proceedings or until further orders from this Court.
The Court orders accordingly.
_______________________________________________________________
Ashurst PNG: Lawyers for the Petitioner
Regeau Manua & Kikira Lawyers: Lawyers for an interested party
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