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Wheels Entertainment Ltd v Ryals [2025] PGNC 52; N11177 (17 March 2025)

N11177

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO. 310 OF 2024

WHEELS ENTERTAINMENT LIMITED in its capacity as 50% shareholder of ETAB (PNG) Limited
Plaintiff

-V-

ANTHONY RYALS & ANGUS RYALS as Directors of ETAB (PNG) Limited
First Defendant

YAO RICKY LIN as Director of ETAB (PNG) Limited
Second Defendant

WAIGANI: KARIKO J
7 &17 MARCH 2025

COMPANY LAW – application to dismiss proceedings – whether proceedings a derivative action requiring leave of the court, s 143 Companies Act – complaint of oppressive, discriminatory or prejudicial conduct, s 152 Companies Act – distinct causes of action

The plaintiff filed proceedings under s 152 Companies Act claiming the directors had engaged in conduct that was oppressive, discriminatory and prejudicial to its interests as a shareholder. The defendants alleged the plaintiff filed a derivative action without obtaining leave of court under s 143 and applied to have the proceedings dismissed.

Held:

(1) A derivative action is a suit by a shareholder or director for a wrong done against a company and the action is taken because those in control of the company do not wish to take any action against the wrongdoing.

(2) An action under s 152 of the Companies Act concerns oppressive, discriminatory or prejudicial conduct of the company which may be detrimental to the interests of shareholders.

(3) A derivative action under s 143 of the Companies Act is distinct from a cause of action under s 152: a derivative action allows a shareholder to bring action in the name of and on behalf of the company, while a cause of action under s 152 may be brought by the shareholder in its own name.

Cases cited

Kiee Toap v The State (2004) N2731
Kupo v Westpac Bank PNG Limited (2014) N5881
Pora v Hull (2009) N3729
Ramu Development Foundation Ltd v Yama (2023) N10407
Ronny Wabia v BP Exploration & Operating Co Ltd [1998] PNGLR 8
Sabatica Pty Ltd v Battle Mountain Canada Ltd (2003) SC709
Tigam Malewo v Keith Faulkner (2009) SC960

Counsel

W Langap for the plaintiff
K Kil for the defendants

RULING

1. KARIKO J: Before me is an application by the defendants to have the proceedings dismissed on these grounds:
   
   • for failing to disclose a reasonable cause of action,
   • for being frivolous and vexatious,
   • for being an abuse of process, and
   • for being incompetent.
     

BACKGROUND

2. The affidavit evidence relating to the application shows these facts.
   
3. ETAB (PNG) Limited was incorporated as a foreign enterprise on 17 October 2016 with two shareholders each holding 50% of the shares in the company:
   
   • Ryles Holdings Limited
   • Wheels Entertainment Limited
     
4. ETAB operates as a bookmaker under a licence registered in the names of the shareholders.
   
5. Upon the company’s registration, Angus Roderick Ryals, Anthony John Ryles and Wilson Unua were registered as directors of ETAB.
   
6. The Ryals own Ryals Holdings while Unua owns Wheels Entertainment.
   
7. The Ryals managed and operated the business of ETAB after its incorporation.
   
8. On 3 November 2023, Yao Ricky Lin was appointed a director of ETAB replacing Unua.
   
9. After that, Lin took over managing and conducting the operations of ETAB.
   
10. Aggrieved by the situation with the company, Wheels Entertainment filed these proceedings against the Ryals and Lin as directors of ETAB seeking this principal declaration:
    

Pursuant to Section 152(1) of the Companies Act 1997 and Section 200(1)(c) of the Gaming Control Act 2007, the first defendant’s addition of the second defendant to the Board of ETAB (PNG) Limited on the 7th November 2023 be declared unfairly discriminatory and prejudicial to the plaintiff’s interests in ETAB (PNG) Limited and its bookmaker’s licence.
(Emphasis added)

11. The plaintiff also seeks consequential orders:
    
    • under s 152(c) for the future conduct of the affairs of the company, and
    • under s 152(h) to set aside actions of the directors.
      
12. The plaintiff alleged that the change of directorships was without its knowledge; on about the time of the change, Ryals Holdings was removed from the Companies Registrar jeopardizing the validity of the bookmaker licence; and Lin appeared to be benefitting from the business as a director - matters detrimental to its interest as shareholder in ETAB.
    

SUBMISSIONS

13. Of the several provisions cited as jurisdictional basis for the application, O12 r 40(1) of the National Court Rules is appropriate. It states:
    

“ (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 and vexatious; or

(c) the proceedings are an abuse of 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”.

14. The fundamental argument by the defendants is that the plaintiff has filed a derivative action for which leave of the court must first be obtained, by virtue of s 143 of the Companies Act. It was submitted that there has been no directors meeting or shareholders meeting of ETAB which authorized Wheels Entertainment to commence proceedings as a shareholder of the company on behalf of ETAB. It followed therefore that there is no cause of action, rendering the proceedings frivolous and vexatious, and an abuse of process.
    

CONSIDERATION

15. It is well settled that the National Court has an inherent power and duty to protect itself from abuse of its processes by litigants, including the filing of court actions that are frivolous or vexatious, and the proceedings may be dismissed if considered an abuse of process. See Ronny Wabia v BP Exploration & Operating Co Ltd [1998] PNGLR 8. The originating process must demonstrate that the plaintiff has a cause of action; that it must clearly set out the legal elements of the claim and the facts that support each element of the claim. Only if the plaintiff’s originating document does that, is there a reasonable cause of action; Kiee Toap v The State (2004) N2731 and Tigam Malewo v Keith Faulkner (2009) SC960.
    
16. Derivative action is covered in s 143 of the Companies Act, and subsections 1(a) and (6) are relevant to this discussion:
    

“s143. Derivative action.

(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) ...

(2) ...

(3) ...

(4) ...

(5) ...

(6) Except as provided in this section, a shareholder is not entitled to bring or intervene in any proceedings in the name of, or on behalf of, a company or a related company”.

(Emphasis added)

17. Subsection (3) lists the matters the court must be satisfied with in considering leave.
    
18. It is clear that pursuant to s 143, leave of the court is first required for a derivative action which includes proceedings filed by a shareholder in the name and on behalf of the company.
    
19. As I explained in Kupo v Westpac Bank PNG Limited (2014) N5881 at [9]:
    

“A derivative action is a suit by a shareholder or director (usually in the minority) for a wrong done against a company (for example, a breach of duty by a director) and the action is taken because those in control of the company do not wish to take any action against the wrongdoing. Derivative action is a remedy for shareholders and directors that has been developed by the common law and now provided by statute and in the case of Papua New Guinea, section 143 Companies Act”.

(Emphasis added)

See also Pora v Hull (2009) N3729 per David J at [24] and Ramu Development Foundation Ltd v Yama (2023) N10407 at [21].

20. I accept the plaintiff’s submission that while he is a shareholder, he is not seeking to bring proceedings in the name and on behalf of ETAB for a cause of action which is vested in the company, and for which the plaintiff seeks to sue on behalf of the company through a derivative action. Rather, and plainly from reading the originating summons, the plaintiff is suing as a shareholder on its own behalf principally pursuant to s 152(1) of the Companies Act, which concerns a different cause of action of oppressive discriminatory and prejudicial conduct. The provision relevantly reads:
    

“152. Prejudiced shareholders.

(1) A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity or in any other capacity, may apply to the Court for an order under this section”.

(Emphasis added)

21. The Supreme Court (Amet CJ, Kapi DCJ, Los J) in Sabatica Pty Ltd v Battle Mountain Canada Ltd (2003) SC709 adopted this explanation of the words ‘oppressive, unfairly discriminatory or unfairly prejudicial’ by Richrdson J in Thomas and HW Thomas Ltd [1984] 1 NZLR 686 at 693 when discussing the New Zealand equivalent of our s 152:

“In employing the words ‘oppressive, unfairly discriminatory or unfairly prejudicial’ Parliament has afforded petitioners a wider base on which to found a complaint. Taking the ordinary dictionary definition of the words from the Shorter Oxford English Dictionary: oppressive is ‘unjustly burdensome’; unfair is ‘not fair or equitable; unjust’; discriminate is ‘to make or constitute a difference in or between; to differentiate’; and prejudicial, ‘causing prejudice, detrimental, damaging (to rights, interests, etc). I do not read the subsection as referring to three distinct alternatives which are to be considered separately in watertight compartments. The three expressions overlap, each in a sense helps to explain the other, and read together they reflect the underlying concern of the subsection that conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates against some only is a legitimate foundation for a complaint under s 209. The statutory concern is directed to instances or courses of conduct amounting to an unjust detriment to the interests of a member or members of the company. It follows that it is not necessary for a complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want of good faith towards him on the part of those in control of the company.”

(Emphasis added)

22. It follows from the forgoing that both s 134 (derivative action) and s 152 (oppressive, discriminatory or prejudicial conduct) are distinct causes of action available to a shareholder, but the former requires leave of the court before filing. Accordingly, I find the application misguided and dismiss it with costs.
    

ORDER

23. The Order of this court is:
    
    • (1) The defendants’ notice of motion filed 12 December 2024 is dismissed.
    • (2) The defendants shall pay the plaintiff’s costs of the application, to be taxed if not agreed.

________________________________________________________________
Lawyers for the plaintiff: Zzahaqoo Legal
Lawyers for the defendants: Kilburn Kil Lawyers