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Waghi Mek Plantations Ltd v Registrar of Companies [2020] PGNC 125; N8346 (28 April 2020)

N8346

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 233 OF 2018 (COMM)

BETWEEN:
WAGHI MEK PLANTATIONS
LIMITED
Plaintiff

AND:
REGISTRAR OF COMPANIES
Defendant

Waigani: Hartshorn J,
2020: 28^th April

COMPANY LAW – Trial – whether declarations and ancillary orders sought in respect of funds held in the name of a deregistered company should be made in favour of the plaintiff – plaintiff claims it is the rightful owner of funds in the account of the deregistered company – issue of constructive trust - constructive trust is an equitable remedy used to set aside wrongful ownership - Section 373(2) Companies Act provides that property that was held on trust by a company immediately before its removal from the register of companies, does not vest in the Registrar upon the removal of the company - plaintiff is rightful entity entitled to the funds allocated – application granted

Cases Cited:
Hi Tech Industries Ltd v. PNG Institute of International Affairs Inc. (2012) N4585 PNG Institute of International Affairs Inc v. High Tech Industries Ltd (2014) SC1577
Nominees Niugini Ltd v. Motor Vehicles Insurance Ltd (2017) N7343

Counsel:

Mr. A. Kuria, for the Plaintiff

28^th April, 2020

1. HARTSHORN J: This is a decision on whether declarations and ancillary orders sought in respect of funds held in the name of a deregistered company should be made in favour of the plaintiff. I allowed the hearing of the amended originating summons to proceed in the absence of representation of the Registrar of Companies as I was satisfied that counsel for the Registrar was aware of the hearing date and time.

Background

2. In December 2002, the National Government by the Department of National Planning and Rural Development (NPRD Dept), allocated K2 million for the rehabilitation of the Waghi Mek coffee plantations. This was on the directive of the then Chief Secretary to the National Government, Mr. Joshua Kalinoe.

3. The plaintiff, Waghi Mek Plantations Ltd, owns the majority of the coffee plantations in the Waghi Valley in what is now the Jiwaka Province. The K2million was allocated to be paid to the plaintiff but was paid to a company called Whagi Mek Holding Limited (WMHL) instead. WMHL did not own or have any interest in any coffee plantations in the Waghi Valley.

4. The shareholders of WMHL included Mr. Valentine Kambori, the then Secretary of NPRD Dept and three other officers of NPRD Dept. WMHL was incorporated on 23^rd January 2003 and was deregistered on 30^th June 2005.

5. The amount of K622,847.99 remains in an account with Bank South Pacific in the name of WMHL.

6. The plaintiff claims that it is the rightful owner of the funds in that account.

Consideration

7. Evidence on behalf of the plaintiff before the Court is to the effect that the K2 million was allocated to the plaintiff, Waghi Mek Plantations Limited. The evidence of the Hon. Wera Mori, the Minister for Trade, Commerce and Industry, is amongst others that the sum of K2 million was allocated in 2002 to the plaintiff. His evidence is unrebutted. The K2 million was paid however, to WMHL. Of significance, is that the payment of K2 million was made by NPRD Dept, the Secretary of which was Mr. Valentine Kambori, to WMHL, a company of which Mr. Kambori was a shareholder. Further, WMHL was incorporated at about the time the K2 million was to be paid.

8. A National Court proceeding was issued by the plaintiff in 2003 in respect of the payment to WMHL. In April 2004 the plaintiff was granted interim court orders freezing the bank account of WMHL. However, in May 2013 that proceeding was dismissed for want of prosecution. Upon the dismissal of that proceeding, any interim injunctive or restraining orders made in that proceeding would cease to have effect.

9. I am satisfied from the evidence that the sum of K2 million was allocated to and was to be paid by the National Government to the plaintiff. The said sum was not to be paid to WMHL. That it was so paid to WMHL and by a Government Department, the secretary of which was a shareholder of WMHL, leads me to the conclusion that such payment was intentional. Given this context, I am of the view that WMHL held the K2 million paid to it as constructive trustee for the plaintiff.

10. A constructive trust is an equitable remedy used to set aside wrongful ownership. In Hi Tech Industries Ltd v. PNG Institute of International Affairs Inc. (2012) N4585, I said at [17]:

"As to a constructive trust, the Supreme Court in Dumal Dibiaso Incorporated Land Group v. Kola Kuma (2005) SC805 said:

A constructive trust is a trust raised by construction of law or arising by operation of law, as distinguished from express trust. They do not arise by agreement or from intention of the parties but by operation of the law. Blacks Law Dictionary 6th edition - Centennial Edition (1891 -1991) states, ‘where the circumstances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest without necessarily violating some established principles of equity, the court will raise a constructive trust, and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the parties who in equity are entitled to the beneficial enjoyment’.

18. In the English and Wales Court of Appeal decision, Paragon Finance Plc v. D.B. Thakerar & Co (A Firm) [1998] EWCA Civ 1249, Millett LJ said the following concerning constructive trusts:

" ..... A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another."

11. I am satisfied that the evidence before the Court portrays the circumstances as being that it would be unconscionable for WMHL to assert its own beneficial interest in the funds in its account and deny the beneficial interest of the plaintiff. As to when the constructive trust arose, I am mindful of the following definition which I reproduced in Nominees Niugini Ltd v. Motor Vehicles Insurance Ltd (2017) N7343 at [27] and [28]:

“A remedial constructive trust is a trust imposed by court order as a remedy for a wrong. The entitlement to that remedy may be a matter of substantive law, but the trust itself is not created by the acts of the parties, or even by the obligation to make restitution, but by the order of the court. As with other court orders, the trust will come into being when the order is pronounced, unless, in an appropriate case, the order is made retroactive or its coming into force is deferred. It may be that in many cases where the remedial constructive trust is imposed, the court will order that it be imposed with effect from the time when the situation arose which gave rise to the unjust enrichment.” : T. Todd “The Remedial Constructive Trust, August 2013.

"28. Further, in Hussey v. Palmer [1972] EWCA Civ 1; [1972] 1 W.L.R 1286, at p. 1290 (quoted by Dixon J. in Rathwell v. Rathwell [1978] 3 (SCC), [1978] 2 S.C.R. 436, at p. 455, Lord Denning MR noted that a constructive trust “may arise at the outset when the property is acquired, or later on, as the circumstances may require”"
12. In this instance, I am of the view that WMHL held the K2 million on constructive trust for the plaintiff from when the said K2 million was paid into the account of WMHL.

13.WMHL is deregistered and so the Registrar of Companies is vested with its property: s. 373(1) Companies Act. Section 373(2) Companies Act provides that property that was held on trust by a company immediately before its removal from the register of companies, does not vest in the Registrar upon the removal of the company. The Supreme Court in PNG Institute of International Affairs Inc v. High Tech Industries Ltd (2014) SC1577 at [24], considered that, "property held on trust" appearing in s. 373(2) and (4) Companies Act, permits a constructive trust.

14. Consequently, I am satisfied that since the deregistration of and removal from the register of companies of WMHL, the Registrar of Companies has held the remainder of the K2 million in the account in the name of WMHL on constructive trust for the plaintiff. Orders will be made accordingly.

Orders

15. The Court Orders that:

a) It is declared that:

i) the plaintiff is the rightful entity entitled to the K2 million allocated in 2002 and paid in 2003, by the National Government to restart the rehabilitation of the Whagi Mek coffee plantations;

ii) the said K2 million was paid in 2003 to an incorrect entity. That incorrect entity is Whagi Mek Holding Limited;

iii) from the date of payment to Whagi Mek Holding Ltd of the said sum of K2 million, Whagi Mek Holding Ltd held the said sum of K2 million and any remainder on constructive trust for the plaintiff.

2. For the avoidance of doubt, it is ordered that any order that injuncts, restrains or freezes the bank account of account no. 1000950910 at the Bank South Pacific in the name of Whagi Mek Holding Ltd or named Waghi Mek Holdings Ltd Coffee Special Intervention and Rehabilitation Trust Account ceases to have any effect;
   

100. It is ordered that the balance of the funds remaining in account no. 1000950910 at the Bank South Pacific in the name of Whagi Mek Holding Ltd or named Whagi Mek Holdings Ltd Coffee Special Intervention and Rehabilitation Trust Account, shall be immediately paid to the plaintiff, or upon the authorisation of the plaintiff to Bank South Pacific, to the trust account of the plaintiff's lawyers;
     

4. The Registrar of Companies is ordered to take all necessary action to ensure that these orders are complied with;
   

d) Costs are in the cause;

e) Time is abridged.
__________________________________________________________________
Kuria Lawyers: Lawyers for the Plaintiff
Investment Promotion Authority In-house Counsel: Lawyers for the Defendant