N10645

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 226 OF 2023

BETWEEN
PATRICK MATUS NIMAMBOT for himself and on behalf of 321 shareholders of Wain Producers Corporative Society
First Plaintiff

AND
WAIN PRODUCERS’ CORPORATIVE SOCIETY
Second Plaintiff

AND:
BRIAN FRASER
First Defendant

AND:
MAINLAND HOLDINGS LIMITED
Second Defendant

Lae: Dowa J
2023:    8th & 13th December
2024:   16th January

PRACTICE AND PROCEDURE- application for dismissal of proceedings for abuse of process - Order 12 Rule 40 of the National Court Rules-Plaintiffs lacking capacity to sue, lack of representative capacity- - clear case for summary dismissal-application granted. 

Cases Cited:
Mt Hagen Urban LLG v Sek No.15 Ltd [2009] SC1007
Philip Takori v Simon Vagari (2008) SC905 
Telikom PNG v ICCC & Digicel (PNG) Ltd (2008) SC906 
Kerry Lerro v Philip Stagg (2006) N3050
PNG Forest Products vs. State [1992] PNGLR 85
Ronny Wabia vs. BP Exploration Co. Ltd [1998] PNGLR 8
Wabia vs. BP Petroleum (2019) N4337 
 National Provident Fund vs. Maladina & Others (2003) N2486
 Wambunawa Holdings Ltd. vs. ANZ Bank (2020) N8310
Simon Mali v The State (2002) SC690 
 Malewo Faulkner (2009) SC960
Malem v Bukop Business Group (2020) N8179
AGC (Pacific) Limited -v- Woo Textile International Pty Limited [1992] PNGLR 100
Polti Wara v Sapom Kipa & Ors (2008) N3402

 Counsel:
M. Karu, for the Plaintiffs
J. Langah, for the Defendants

DECISION

16th January 2024

1.	DOWA J:	 This is a ruling on the Defendants’ Notice of Motion filed 2nd October 2023. The Defendants filed two applications that were before the Court. In the first Notice of Motion, the Defendants were seeking leave to file their Defence out of time. The second application is for dismissal of the proceedings. The Defendants proceeded with the second application because if the application is upheld, that will end the proceedings. 

2.     In the Notice of Motion, the Defendants seek dismissal of the Plaintiffs’ proceedings under Order 12 Rule 40(1) of the National Court Rules on the following grounds:

a)	Lack of standing by the Plaintiffs,
b)	Lack of representative capacity by the 1st Plaintiff
c)	Time barred under Section 16 of the Frauds & Limitations Act

3.	The Defendants rely on the following affidavits in support of the application:
           i. Affidavit in Support by Jonah Langah filed 13th September 2023
      	  ii. Affidavit of Jonah Langah filed 2nd October 2023.
          iii. Affidavit of Misia Moss filed 13th October 2023
       
4.   The application is opposed by the Plaintiffs who rely on the following Affidavits:
           i. Affidavit of Patrick Matus Nimambot filed 8th December 2023.
            ii. Affidavit of Patrick Matus Nimambot filed 13th December 2023

	Brief Facts

5.	The first Plaintiff, Patrick Matus Nimambot, says he represents 321 others and that they are shareholders of Wain Producers Corporative Society, the second Plaintiff.  The Plaintiffs allege they are shareholders in Mainland Holdings Limited since 1968 holding up to 38,953 shares. It is alleged they have not been paid any dividends for their share contribution to the second Defendant for the last 53 years. The Plaintiffs allege further that the second Plaintiff was wrongfully released as shareholder and remains a shareholder in Mainland Holdings Limited. They have instituted these proceedings to recover moneys paid for the release of some of the shares and for the reinstatement of their shares in the second Defendant company.

Issues

6.	Counsel for the Plaintiff raised a preliminary issue that the Defendants are not entitled to apply for dismissal of the proceedings without first filing their Defence. In my view, the Defendants are entitled to make the application even without first filing their Defence. They have a right to appear and raise preliminary issues after filing their Notice of Intention to Defend and nothing in the National Court Rules or any statute prevents them.

7.	The main issue for consideration is whether the proceedings be dismissed for lack of capacity and for being statute barred. 

The law under Order 12 Rule 40 of the NCR.

8.	The application for dismissal is made under Order 12 Rule 40(1) of the National Court Rules. It reads:  

” 40.	Frivolity, etc. (13/5)
(1) 	Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:
(a)	no reasonable cause of action is disclosed; or
(b) the proceedings are frivolous or vexatious; or
(c) the proceedings are an abuse of the process of the Court,
the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.”

9.	 The law on applications under Order 12 Rule (40) of the National Court Rules is settled in this jurisdiction in cases such as Mt Hagen Urban LLG v Sek No.15, Philip Takori v Simon Vagari (2008) SC905, Telikom PNG v ICCC & Digicel (PNG) Ltd (2008) SC906 and Kerry Lerro v Philip Stagg (2006) N3050. 

10.    Rule 40 of the NCRs is constructed and defined by the Supreme Court (per Takori v Yagari) in following terms: 

a)	A claim may be disclosing no reasonable cause of action if the facts pleaded does not clearly show all necessary facts and legal elements to establish a claim known to law.
b)	A claim maybe frivolous if it can be shown that it is obviously untenable that it cannot possibly succeed or is bound to fail it if proceeds to trial.
c)	Proceedings are vexatious where the case is a sham, amounting to harassment of the opposing party, or where the opposing party is put to unnecessary trouble and expense of defending the case. 

11.   The Court cannot readily dismiss a case on poor pleading or for lack of disclosing a reasonable cause of action or for abuse of process unless it is shown that the case is clearly frivolous or vexatious or an abuse of the process and that it is unlikely to succeed even it proceeds to trial.  Refer:  PNG Forest Products vs. State (1992) PNGLR 84–85, Ronny Wabia vs. BP Exploration Co. Ltd (1998) PNGLR 8, Wabia vs. BP Petroleum (2019)) N4337, Mt. Hagen Urban LLG vs. Sek No. 15 (2009) SC1007, National Provident Fund vs. Maladina & Others (2003) N2486; and Wambunawa Holdings Ltd. vs. ANZ Bank (2020) N8310.

12.     I will now proceed to consider the grounds raised by the Defendants.

i.	Whether the second Plaintiff, Wain Producers Corporative Society, has capacity to sue. 

13.    The Defendants submit the second Plaintiff, Wain Producers Corporative Society, is not a registered entity according to the records of Investment Promotion Authority (IPA) and has no capacity to sue. The Plaintiffs did not sufficiently respond to the arguments raised by the Defendants.

14.     According to the search results, Wain Producers Corporative Society is an unknown entity. The entity shown in the IPA records is Wain Producers Corporative Limited, registered as a company in 1968. This is consistent with the Plaintiffs correspondence that the shares they had with Mainland Holdings Limited was through Wain Producers Corporative Limited (WPCL) and not Wain Producers Corporative Society, the second Plaintiff, named in the proceedings. It is open to suggestion that the second Plaintiff was meant to be Wain Producers Corporative Limited (WPCL) rather than the one named in the Writ of Summons. Be that as it may, the Court will deal with the issues as it is. The Plaintiffs had the opportunity to amend the Writ or substitute the party which they did not do. The result is the second Plaintiff is an unknown and unregistered entity and has no legal capacity and standing to institute the current proceedings.

ii.	Whether the first Plaintiff, Patrick Matus Nimambot, has capacity to sue. 

15.   The Defendants submit that the first Plaintiff, Patrick Matus Nimambot, does not have representative capacity or standing to institute the current proceedings.

16.   The Plaintiffs, in response, submit that the Plaintiff, Patrick Matus Nimambot, has been authorized by 321 shareholders in the second Plaintiff to institute the current proceedings. 

17.      I have considered the pleadings in the statement of claim, the evidence and submissions of the parties and form the view that the first Plaintiff does not have capacity to sue. The reasons for arriving at this conclusion is set out the following paragraphs.

18.     Firstly, the first Plaintiff pleads he represents 321 shareholders of Wain Producers Corporative Society, the second Plaintiff. Since the second Plaintiff is unregistered and unknown entity it does not augur well how the Plaintiffs can become shareholders of a non-existing legal entity and maintain these proceedings. Again, if it is meant to be Wain Producers Corporative Limited (WPCL), it is not a party to the proceedings.

19.   Secondly, although the first Plaintiff pleads, he represents 321 other shareholders, their names, consent, and authority were not endorsed on the Writ of Summons. The Court notes the Plaintiff annexed to his affidavit filed 8th December 2023 a copy of a detached document entitled Authority to Act signed by 321 persons. The law is settled in Simon Mali v The State (2002) SC690 and Malewo Faulkner (2009) SC960 that in proceedings of representative nature, all intended Plaintiffs must be named and duly identified in the statement of claim and where a person claims to be representing them must show the Court that he has been duly authorized. In my view the first Plaintiff, Patrick Matus Nimambot, has not met the requirements of Order 5 Rule 13 of the National Court Rules. 

20.  Thirdly, the pleadings as to the Plaintiffs capacity and right to sue the Defendants are confusing. It seems the proceedings are brought on behalf of the shareholders of the company, Wain Producers Corporative Limited (WPCL). The reliefs sought in the proceedings relate to the company, WPCL. However, the company, is not named as a party in the proceedings. WPCL has not taken a position in the proceeding. I say this because WPCL has legal personality separate from the shareholders under section 16 of the Companies Act. It can sue and be sued in its corporate name.  The Plaintiffs are not direct shareholders of Mainland Holdings Limited, and any claim they may have will have to be pursued through WPCL. It has been held that where a person’s capacity to sue is ambiguous and lacking clarity, the proceedings an abuse of the process. Refer.  Malem v Bukop Business Group (2020) N8179.

21.   Furthermore, assuming that the second Plaintiff is meant to be Wain Producers Corporative Limited (WPCL), the first Plaintiff and others he represents require leave from the Court to institute proceedings pursuant to section 143 of the Companies Act. 

22. Section 143 (1) states: 

“143. DERIVATIVE ACTIONS.

(1) 	Subject to Subsection (3), the Court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to–

(a) bring proceedings in the name and on behalf of the company or any related company; or
(b) intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be
    ……”

23.    Sub-section (1) is clear. It provides for a shareholder or director to apply to the Court for leave to bring an action or defend any proceeding in the name and on behalf of the company where it is not named a party. It is known as derivative action. It has been held that where leave is not sought, the proceedings were defective and incompetent. Refer: AGC (Pacific) Limited -v- Woo Textile International Pty Limited [1992] PNGLR 100 Polti Wara v Sapom Kipa & Ors (2008) N3402, and Malem v Bukop Business Group (2020) N8179.

24.   In the present case, the allegations are against the second Defendant for failing to account for the shares it holds for WPCL and its shareholders. The reliefs sought are for the benefit of WPCL and the shareholders. Although, WPCL is not named as a party, the proceedings are brought on its behalf just as much as it is for the shareholders. A company does not exist in isolation. It has life. Its constitution and the Companies Act contain its mind and heart. The directors and senior management are its limbs (hands and legs) and they carry out its functions and intentions. It is therefore necessary for the Plaintiffs to have leave from the Court under section 143 of the Companies Act to institute these proceedings on behalf of WPCL.

25.   The Plaintiffs have not sought leave to bring this action against Mainland Holdings Limited on behalf of WPCL. For this reason, the Plaintiffs have no standing, and the proceedings are incompetent.

26.   For the foregoing reasons, the Plaintiffs named in these proceedings lack capacity to institute the current proceedings and therefore the Plaintiffs’ proceedings are liable to be struck out.

iii. Whether the proceedings are statute barred under section 16 of the Frauds and Limitation Act.

27.    As I have reached a decision that the Plaintiffs lack capacity to institute the current proceedings, it is not necessary to consider this issue.  

Conclusion

28.    I conclude based on the reasons and matters discussed above, the current proceedings are an abuse of the process. The Defendants have raised a meritorious argument in law which the Court cannot ignore and shall grant the orders sought in the interest of justice. While it is not desirable to terminate the Plaintiffs’ proceedings early, the Court has a duty to protect its process. From the material filed it is clear, it is unlikely to succeed even it proceeds to trial.

Observation

29.   In arriving at this conclusion, I am mindful of the Plaintiffs claim. I am somewhat perplexed at the Plaintiff’s laxity and slothfulness in pursuing   its interests over the years. WPCL was a shareholder as early as 1970. There is some evidence that the shares were released in 1997 and payment was released to IPA. In 1998 the funds were returned by IPA to Mainland Holdings Ltd. There is no further record or evidence of what transpired since. It is instructive for the parties to do a thorough check on their records, ascertain the status quo and put the matter to rest. 

30.  And for the record, the dismissal is against the Plaintiffs on technical grounds and against the parties named as Plaintiffs. It is not binding on parties not named, like WPCL who is at liberty to institute proceedings provided such proceedings are meritorious according to law.

31.   That said, and, in the end, I am inclined to grant the Defendants’ application and thus, the proceedings filed by the Plaintiffs shall be dismissed for abuse of the process pursuant to Order 12 Rule 40 (1) (c) of the National Court Rules.

Costs

32.    The Defendants seek cost of the application. It is a discretionary matter. Since the Defendants have succeeded in their application, costs shall follow the event, that is the Plaintiffs shall pay the costs of the proceedings. 

Orders

33.     The Court orders that:

1.	The Defendants’ application is granted.
2.	The Plaintiffs’ proceeding is dismissed. 
3.	The Plaintiffs shall pay the cost of the proceedings, such costs to be taxed, if not agreed. 
4.	Time be abridged.
_______________________________________________________________
Daniels & Associates: Lawyers for the Plaintiffs
Albright Lawyers:	Lawyers for the Defendants