Morris v PNG Associated Industries Ltd [1980] PGNC 43; N260(L) (23 October 1980)

This judgment is necessarily a lengthy one. That this should be so is not surprising when it is realised that the hearing of this case occupied (including the opening and final addresses of counsel) three months of this Court’s time There are approximately one thousand five hundred pages of evidence which forms part of a type-written transcript which runs to well in excess of two thousand pages. There were eighty-seven exhibits tendered by the plaintiff and seventy exhibits tendered by the defendant company; many of the exhibits are lengthy documents and some exhibits were minute books or ledgers or the like. Sixteen witnesses gave evident before me.

	Home \| Databases \| WorldLII \| Search \| Feedback National Court of Papua New Guinea

In these actions, which have been heard together, the plaintiff, who was the managing director and a director of the defendant company (in fact he was the chairman of directors), has sued the defendant company. In action W.S. No. 172A of 1979 (hereinafter referred to as "the first action") the plaintiff has sought declaratory and injunctive relief and certain consequential relief. In action W.S. No. 1036 of 1979 (hereinafter referred to as "the second action" the plaintiff has sought to recover moneys allegedly due under a retirement deed and damages for wrongful dismissal. In short the plaintiff claimed in the first action that on the 2nd March 1979 he had been invalidly dismissed as managing director and as a director of the defendant company and claimed in the second action that on 13th November 1979 he had been wrongfully dismissed. In the final analysis the plaintiff claims he is entitled to be paid by his former employer moneys in excess of K400,000 whether by way of moneys due under a retirement deed or by way of damages for wrongful dismissal. The defendant company has denied most of the plaintiff’s claims and has brought against the plaintiff cross-claims in which inter alia loan moneys to the amount of K45,000 are sought to be recovered.

To understand what this litigation was really about, it is necessary to appreciate that the plaintiff had previously been the driving force behind the growth and development of a highly successful business in Papua New Guinea which started off as Pacific Taxi Service Co. Ltd. and later became P.N.G. Motors Limited, an automotive and car products company, but which ultimately became P.N.G. Associated Industries Limited which encompassed not only P.N.G. Motors Limited but also Daikin (P.N.G.) Limited, an air conditioning company, and interests in Solar Energy Systems (P.N.G.) Pty. Limited, a solar energy company, and P.N.G. Air Freight Pty. Limited, an airfreight company. The plaintiff’s business involvement in Papua started in about 1958. However, for the purposes of a retirement deed to be referred to later, the plaintiff commenced employment with the defendant company on 1st July 1963.

At the time when certain events happened which led to the first action and ultimately to the second action, the plaintiff was employed by the defendant company as its managing director under the terms of a service agreement dated 16th December 1975 (Exhibit U) as varied by a variation agreement dated 7th September 1977 (Exhibit V). The plaintiff was also a director (and chairman of directors). On 19th June 1978 a retirement deed was purportedly entered into between the plaintiff and the defendant company (Exhibit W), under which deed the plaintiff was to receive on retirement a retirement allowance of K15,000 for each year of service or part thereof with the defendant company, the amount of which allowance was equal to K225,000 as at 19th June 1978 and was equal to K255,000 as at 15th November 1979 and was equal to K270,000 as at 31st October 1980. By 1978 the defendant company had become known as Papua New Guinea’s "largest nationally-owned company". The shares in the defendant company were in the names of nationals.

Before I turn to consider the major events which led to this litigation, I will make my findings in relation to the background of this litigation.

Prior to 1975 the defendant company was a listed public company which had effectively been owned and controlled by the plaintiff. The plaintiff, his family company and other associates of the plaintiff were the shareholders. In December 1975 the defendant company, as a result of a take-over offer, became effectively owned and controlled by Melanesian Investments Pty. Limited, which acquired the whole of the issued capital in the defendant company. That company and Mr Martin ToVadek, Mr Andrew Wabiria, Mr Paterson Lowa and Mr Jimmy Wasaua (all nationals) were the shareholders.

The change in ownership of the defendant company had come about as a result of an idea or scheme discussed during 1975 whereby two political parties in Papua New Guinea, the United Party and the Pangu Pati, were to acquire the whole of the issued capital of the defendant company so that their members could derive benefits from this substantial profit-earning business enterprise. The plaintiff’s initial discussions had taken place with Mr Walter Lussick, the then Principal Private Secretary to the Leader of the Opposition, and Mr John Shinn, a representative of the Pangu Pati. Some correspondence in the form of letters of intent (Exhibits X and Y) was signed by Mr Michael Somare, the Parliamentary Leader of the Pangu Pati and by Mr Tei Abal (as he then was), the then Parliamentary Leader of the United Party. During 1975 the issued capital in Melanesian Investments comprised 14 shares, 7 of which were owned by Damai Pty. Limited, the business arm of the Pangu Pati, and 7 of which were owned by Turangu Pty. Limited, the business arm of the United Party. Damai Pty. Limited later sold its 7 shares in Melanesian Investments Pty. Limited to Ginada Pty. Limited. Annexure G to Exhibit 58 (a newspaper article) and Exhibits DD and YYY (the minute books of Turangu Pty. Limited and Melanesian Investments Pty. Limited respectively) demonstrate that at the time Turangu Pty. Limited acquired half the issued capital of Melanesian Investments Pty. Limited, the shares were held on behalf of the United Party or its members. That was the position in September 1975; it was still the position in November 1979. Subsequently only one political party, the United Party, proceeded with the venture.

Undoubtedly, another reason for the acquisition was to enable the plaintiff to sell his interest in this Papua New Guinean company and be paid out in cash. The purchase price was to come out of the expected tax-free profits earned in the first five years after the acquisition. The period of five years was known as the "tax holiday", which was the period during which at that time nationally-owned companies received substantial tax concessions.

P.N.G. Associated Industries Limited (1,500,000 shares)
Melanesian Investments Pty. Ltd.	Martin ToVadek	Andrew Wabiria	Paterson Lowa	Jimmy Wasaua
(1,499,900 shares)	(25 shares)	(25 shares)	(25 shares)	(25 shares)

Each of the four individuals held their parcels of 25 shares on trust for Melanesian Investments Pty. Limited.

In late 1977 and early 1978 a share re-arrangement was considered and ultimately implemented. The company was being reorganised after the plaintiff had, to all intents and purposes, been paid out. In April or May 1978 Mr Lussick, acting on Sir Tei Abal’s behalf, suggested to the plaintiff that a new company be formed, to be called Keas Pty. Limited, to take over the capital of the other companies, which in due course would be liquidated. Keas Pty. Limited was to purchase the issued capital of Turangu Pty. Limited and was to replace Turangu Pty. Limited as the owner of the issued capital of Melanesian Investments Pty. Limited and as ultimate owner of the issued capital of the defendant company. Discussion took place regarding firstly the taking up by the plaintiff and Mr John Smith, another working director of the defendant company, of 25% each in the equity of Keas Pty. Limited in the defendant company and later the provision, in lieu thereof, of retirement allowances for the plaintiff and Mr Smith, and the granting of an option to Mr Lussick (hereinafter called "the Lussick option") in respect of 50% of the equity of Keas Pty. Limited in the defendant company. The proposal involved the plaintiff and Mr Smith guaranteeing a bank loan of K300,000 to Keas Pty. Limited, which would enable, amongst other things, the United Party’s overdraft at the bank of approximately K100,000 to be cleared. The proposal also involved K50,000 in cash being given to each of the following: Sir Tei Abal, Auwi Enterprises Pty. Limited (Sir Tei’s family company), Aba Enterprises Pty. Limited (Mr Andrew Wabiria’s family company) and PanaPana Enterprises Pty. Limited (Mr Martin ToVadek’s family company).

The plaintiff, at Mr Lussick’s suggestion, consulted a firm of solicitors in Sydney, Messrs Sly & Russell, and gave them certain instructions in relation to the whole scheme and regarding the preparation of documents. Amongst the documents prepared by Messrs Sly & Russell was the Lussick option (Exhibit EE), some retirement deeds and a proposed minute to be used in relation to the retirement deeds.

Upon the plaintiff’s return to Port Moresby, the documents prepared by Messrs Sly & Russell were handed by the plaintiff to Mr Lussick.

When the Keas transaction was finalised by the exchange of cheques and the payment of certain moneys, the plaintiff, in about June or July 1978, provided a personal guarantee for an advance of K300,000 to Keas Pty. Limited from the Bank of South Pacific Limited at Boroko and provided security to the extent of A$225,000. Without that security the Bank of South Pacific Limited would not have made the advance of K300,000 to enable inter alia Keas Pty. Limited to purchase the issued capital of Turangu Pty. Limited.

It will be necessary in due course to consider in some detail the plaintiff’s retirement deed dated 19th June 1978 and the events which led up to the signing thereof. It is sufficient at this stage to identify the major events other than the 19th June 1978 which led to this litigation.

The first important date is the 2nd March 1979. On that day the defendant company purported to dismiss the plaintiff as managing or executive director and as a director of the defendant company. Under the terms of the service agreement as varied by the variation agreement, the plaintiff’s employment as managing or executive director could only be terminated by the defendant company if, for present purposes, at any time during his employment by the defendant company the plaintiff had been guilty of any grave misconduct which was prejudicial to the interests of the defendant company. The defendant company alleged that the plaintiff had been guilty of grave misconduct, the particulars of which I will refer to later. The plaintiff denied that he had been guilty of the alleged or any misconduct and claimed that his purported dismissal was invalid, void and of no effect for a number of reasons.

The second important date is the 13th November 1979. On that day the defendant company purported to ratify certain previous decisions and purported for the second time to dismiss the plaintiff as managing or executive director and as a director of the defendant company. This procedure was adopted in case for any reason the purported dismissal on 2nd March 1979 was invalid. The defendant company again alleged that the plaintiff had been guilty of grave misconduct. The plaintiff denied that he had been guilty of the alleged or any misconduct and claimed that the purported ratifications were ineffective and that his purported dismissal was wrongful and in breach of the service agreement and constituted a repudiation thereof by the defendant company and its obligations thereunder.

The third important date is 15th November 1979. On that day the plaintiff issued and served the writ in the second action and purportedly accepted the defendant company’s alleged repudiation of the service agreement. He claimed moneys due to him under the retirement deed and damages for wrongful dismissal.

(1) Whether the board of directors of the defendant company on 19th June 1978 resolved that a retirement deed be entered into between the defendant company and the plaintiff and whether a valid binding agreement was entered into;

(2) Whether the defendant company by its director, Mr Russell Hay, acknowledged on 2nd March 1979 that the defendant company would pay to the plaintiff the amount due to him under the retirement deed;

(3) Whether the defendant company has ratified the retirement deed and acknowledged that it is bound thereby;

(4) Whether the defendant company is estopped from asserting that the retirement deed is not binding upon it;

(5) Whether the retirement deed was tabled and approved at a meeting of directors held on 19th June 1978 and the common seal was affixed thereto pursuant to a valid resolution passed at the said meeting and duly executed;

(6) Whether by reason of the resolution passed at the said meeting the common seal did not have to be counter-signed by the secretary;

(7) Whether the defendant company validly dismissed the plaintiff as its managing or executive director on 2nd March 1979;

(8) Whether the defendant company validly terminated the plaintiff’s appointment as a director on 2nd March 1979;

(9) If the defendant company did not validly dismiss the plaintiff as its managing or executive director on 2nd March 1979, whether the defendant company validly dismissed the plaintiff as its managing or executive director on 13th November 1979;

(10) If the defendant company did not validly terminate the plaintiff’s appointment as a director on 2nd March 1979, whether the defendant company validly terminated the plaintiff’s appointment as a director on 13th November 1979;

(11) Whether the purported dismissal of the plaintiff by the defendant company on 13th November 1979 was wrongful and was in breach of the service agreement dated 16th December 1975 as varied by the variation agreement dated 7th September 1977 and thereby constituted a repudiation thereof;

(12) Whether the plaintiff on the 15th November 1979, or on some other and what date, accepted the defendant company’s repudiation of the service agreement as varied by the variation agreement;

(13) Whether the defendant company has been in breach of the terms of the service agreement as varied by the variation agreement;

(14) If the defendant company repudiated the service agreement as varied by the variation agreement and if the plaintiff has accepted the defendant company’s repudiation thereof and if the defendant company has been in breach of the terms thereof, what loss and damage, if any, has been suffered by the plaintiff;

(15) If a valid binding retirement deed was entered into between the plaintiff and the defendant company, what sum, if any, is due and owing by the defendant company to the plaintiff under the retirement deed dated 19th June 1978;

(16) If the defendant company did validly dismiss the plaintiff as its managing or executive director on 2nd March 1979 from a procedural view-point, whether the plaintiff had at any time during his employment by the defendant company committed any of the acts, particulars of which are set out in paragraph (18) (a) to (i) hereof, and whether the plaintiff had thereby been guilty of grave misconduct which was prejudicial to the interests of the defendant company or whether the plaintiff had at any time during his employment by the defendant company failed to do as is set out in paragraph (19) hereof and whether the plaintiff had thereby been in breach of the service agreement dated 16th December 1975 as varied by the variation agreement dated 7th September 1977;

(17) If the defendant company did validly dismiss the plaintiff as its managing or executive director on 13th November 1979 from a procedural view-point, whether the plaintiff had at any time during his employment by the defendant company committed any of the acts, particulars of which are set out in paragraphs 18(a) to (i) hereof, and whether the plaintiff had thereby been guilty of grave misconduct which was prejudicial to the interests of the defendant company or whether the plaintiff had at any time during his employment by the defendant company failed to do as is set out in paragraph (19) hereof and whether the plaintiff had thereby been in breach of the service agreement dated 16th December 1975 as varied by the variation agreement dated 7th September 1977;

(a) Whether the plaintiff procured the payment by the defendant company to the plaintiff of an unauthorised advance of K45,000 without the authority of the board of directors of the defendant company and so as to cause the defendant company to be in breach of s.125 of the Companies Act 1963;

(b) Whether the plaintiff prepared or had prepared and confirmed or had confirmed some false minutes of a meeting of directors of the defendant company purporting to have been held on 7th September 1978 but in fact not held at all;

(c) Whether the plaintiff prepared or had prepared and confirmed or had confirmed some false minutes of a meeting of directors of the defendant company purporting to have been held on 9th November 1978 but in fact not held at all;

(d) Whether the plaintiff caused the defendant company to provide for the benefit of the plaintiff’s daughter, Rhonda Finlay, a Mazda 925 Stationwagon OQY-734 and to sell the equitable interest therein to the plaintiff at an under-value;

(e) Whether the plaintiff caused the defendant company to make an overpayment of salary to the plaintiff for the months of July, August and part of September 1977;

(f) Whether the plaintiff instructed officers of the defendant company in the months of November and December 1975 to raise false debits in the books of the defendant company instead of repaying to the Department of Finance the sum of K30,243.00 overpaid to the defendant company by that Department and instead of repaying to the Plant and Transport Authority the sum of K11,361.00 overpaid to the defendant company by that authority and/or otherwise failed to cause the said amounts to be repaid;

(g) Whether the plaintiff gave assistance and provided confidential documents for the purposes of proceedings No. W.S. 161 of 1979 between Opai Kanungel as plaintiff and the defendant company and ten others as defendants;

(h) Whether the plaintiff was in conflict between his duty and interest in becoming a party to a purported deed of 19th June 1978 relating to moneys payable to the plaintiff on termination of his employment and entering into the same without the fully informed consent of a free and independent board;

(i) If the plaintiff in entering into the said deed was in a position of conflict between his duty and interest and if the plaintiff in entering into the said deed and obtaining a benefit thereunder without obtaining the fully informed consent of a free and independent board, whether the plaintiff was in breach of his fiduciary duty to the defendant company with respect to the retirement deed or purported retirement deed dated 19th June 1978;

(19) Whether the plaintiff failed to keep or failed to cause to be kept proper accounts as required by the said service agreement;

(20) Whether the sum of K45,000 lent in September 1978 by the defendant company to the plaintiff is due and payable to the defendant company.

Before turning to the facts of this case and my findings of fact in relation to contentious issues, I make reference to the numerous witnesses who were called and I deal with the issues of credibility which arose in this case. The plaintiff’s witnesses were the plaintiff himself, Mr Stewart Fox (the secretary of the defendant company from 1976 until 1979), Mr Maurice Wilks (a former director of the defendant company and an associate director of the defendant company at the time of the 19th June 1978 meeting), and Mr D. J. Loader (the former director of the defendant company and the former general manager of P.N.G. Motors Limited, a trading subsidiary of the defendant company - whose evidence was taken on commission and placed before me in typographical form). The defendant company’s witnesses were Mr Trevor Maloney (a chartered accountant and partner in the firm of Coopers and Lybrand, the auditors of the defendant company), Mr Martin ToVadek (a director of and shareholder in the defendant company), Mr Peter McKenna (a consultant to Daikin (P.N.G.) Limited, a trading subsidiary of the defendant company, resident in Queensland), Mr John Smith (a director of the defendant company and managing director of some of the defendant company’s subsidiaries), Mr Raphael Doa (the parliamentary leader of the United Party and Minister for Health in the period prior to 2nd March 1979), Mr Lindsay LaiLai (Mr Doa’s executive officer at that time), Mr Peter Kavo (the executive officer to Mr Roy Evara, Minister for Primary Industry in the period prior to 2nd March 1979), Sir Tei Abal (a director of and principal shareholder in the defendant company and former parliamentary leader of the United Party and former Leader of the Opposition), Mr Russell Hay (a solicitor and a director of the defendant company appointed in February 1979), Mrs Sandra Connors (a secretary employed by the defendant company), Mr Simon Gaylard (a chartered accountant and member of the firm of Coopers and Lybrand, the auditors of the defendant company), Mr Rodney Sweeney-Hunt (the accountant of the defendant company from 1971 until 1977), Mr Walter Lussick (a director of the defendant company - the man who from 1973 until 1978 was either Sir Tei Abal’s principal private secretary or his executive officer), and Mr C. H. Parbery (the secretary of the defendant company from 1974 to 1976 - whose evidence was taken on commission and placed before me in typographical form).

The plaintiff was a witness whose evidence and demeanour deserved to be given (indeed they required) careful scrutiny. He had a big interest in the outcome of the case and a strong motive for telling falsehoods and for twisting the facts to suit his case. He had much to gain from findings in his favour in this case. He was, at least until 2nd March 1979, in a position of power within the defendant company (Mr McAlary described it as "a uniquely powerful position") and he had the means, resources and opportunity at his disposal to do the grave things which the defendant company later alleged against him. There were some circumstances which, on one view of them, had a sinister overtone. It was for these reasons that I thought I should be slow to reach any conclusions about his credibility and reliability that was favourable to him based upon his apparent candour or any impression of him as a witness of truth. Therefore, throughout the case I weighed the plaintiff’s evidence against the evidence given by other witnesses and I compared it with the documentary and other more objective evidence; I tested and re-tested his testimony by comparing it with all the other relevant evidence and by assessing it against the probabilities of the situation; I was on the look-out to see if any of his evidence could be demonstrated to be false or was so inconsistent with other evidence given by him or given by other witnesses that it should not be relied upon. All in all I considered it essential to subject the plaintiff’s evidence to the closest scrutiny.

My first conclusion was that the plaintiff was an honest witness whose evidence could be relied upon for accuracy and truthfulness. Notwithstanding my reluctance throughout, I also found myself at the end of this lengthy hearing generally impressed by his demeanour, his manner of testifying, and his apparent candour. His evidence was not demonstrated to be false. He did not demonstrate any degree of partiality, malice or emotions. His evidence was supported by other facts and circumstances which I have found to be established on the evidence. In short, I believe what the plaintiff told me in the witness box, and, as it seems to me, there is nothing unreasonable about my holding that belief. His evidence was credible and had the ring of truth about it.

The plaintiff was in the witness box for approximately six days and, during that time, he was subjected to a detailed and thorough cross-examination. I agree with Mr Goldberg that he was not shaken in any material respect. The plaintiff was not cross-examined about a number of topics upon which adverse evidence was subsequently called.

Mr Stewart Fox presented as a reliable and credible witness. He gave his evidence slowly, thoughtfully and in a considered fashion, and this was an indication of his carefulness as a witness. Mr Fox was not shaken in cross-examination and there were no material internal inconsistencies in his testimony. In short, he corroborated the plaintiff without showing the slightest sign that he was supporting him in disregard of the truth. He demonstrated to me that he was both reliable and truthful.

Mr Fox’s account of the crucial meeting of 19th June 1978 was logical and coherent. He had reason to recollect the events, as he was the company secretary. His recollection of the events was corroborated by contemporary documentation and, in particular, the minutes of that meeting which were not challenged by the other directors until this litigation commenced and which had passed the scrutiny of the auditors.

It has not been demonstrated to me that Mr Fox responded to a motive either in June 1978 (when the minutes were prepared) or in December 1979 (when he gave his evidence) for giving a false account of what had taken place. As will be made clear elsewhere in this judgment, there were no tensions or pressures in June 1978 which might have sparked off sinister motivation on Mr Fox’s part. No bond of friendship or loyalty of such strength as would lead to falsification of evidence was pointed to and no other reason was alluded to. It is not insignificant that it was not expressly put to Mr Fox in cross-examination that the minutes of the meeting of 19th June 1978 were false, as was the situation with the minutes of the meeting of 9th November 1978.

That Mr Fox’s evidence was important and relevant was to be seen from the efforts made by the defendant company to have his evidence taken on commission and by the attempts (unsuccessful in my view) by counsel for the defendant company to discredit him.

Mr McAlary submitted that Mr Fox could not be believed upon his oath. For that submission to stand, Mr Fox had to be both fabricating minutes in June 1978 and telling lies in December 1979, because his oral evidence and the documentary evidence were consistent with each other. Whilst he might possibly have had a motive for telling lies in December 1979 (after all, his employment with the defendant company had been terminated and there may have been little "love lost" between Mr Fox and the new directors of the defendant company after March 1979), there was no reason for him to fabricate minutes in June 1978.

A number of matters which were relevant and material were not put to Mr Fox in cross-examination and, on account of the principle in Browne v. Dunn^[1] to which reference will be made later in these reasons for judgment, the defendant company can hardly be heard to complain if Mr Fox’s evidence is believed.

It is true that Mr Fox acknowledged that he had prepared a false minute dated 9th November 1978. It is an overstatement to say, as Mr McAlary did, that that was "incompatible with the proper discharge of his duties". It is one thing to say that the minute was false; it is quite another to conclude that the falsehood was dishonest and deliberately so. I conclude that the false minute of 9th November 1978 came into existence, not out of any desire to be dishonest, but out of a desire to bring some circumstances "out into the open" and to the attention of the board, the bank and the auditors. The conclusion that there was a sinister link between the false minute of 9th November 1978 and the alleged false minute of 19th June 1978 might have been easier to reach if some real and substantial benefit was to flow to the plaintiff arising from both the two meetings so minuted or there was some profit in it for Mr Fox. All in all, I thought Mr Fox gave a reasonable explanation regarding the false minute of 9th November 1978 (see T.23.7 to T.23.8).

The minutes of the meeting of directors held on Wednesday 6th September 1978 (Folio 60 of Exhibit B) show the extent to which the board was willing to discuss and, if necessary, amend board minutes. The absence of any reference in the minutes of 21st November 1978 to any "explosion" regarding the minutes of 9th November 1978 makes Mr Fox’s evidence to the effect that, after Mr Lussick had commented and after Mr Fox had explained, "there was no further comment on the matter and the minute was accepted as read" the more credible. The contrary evidence to the effect that the matter was "left up in the air" is simply not credible. Much criticism was directed at the misleading notation in the journal (Exhibit 10) prepared by Mr Fox. The notation was such that it would be unsafe in the circumstances to draw any adverse inference from it. If what Mr Fox was trying to do was as sinister as Mr McAlary would have me conclude, I would have expected there to have been a more effective cover-up, and I would have expected Mr Fox’s motive or what he had to profit from the incident to have become apparent.

I see no basis for asserting that Mr Fox prevaricated when asked questions about the mover and seconder of the motions on the 19th June 1978.

Mr Maurice Wilks’ credibility, it is significant to observe, was not really attacked by Mr McAlary in his final submissions. Be that as it may, I thought Mr Wilks was a man who was doing his best to recall accurately events which he had little real reason to recall. One could not have expected his memory for the details of events to have been as good as that of Mr Fox or the plaintiff; after all, he was an associate director only and he had no special responsibilities at the meeting of 19th June 1978. Nevertheless, his evidence was consistent, credible corroborative of the evidence given by Mr Fox. He had no reason to tell lies or compromise himself on account of the plaintiff.

Mr McAlary attacked the credibility of Mr D. J. Loader. His evidence, it will be remembered, was taken on commission. Consequently, I was not in a position to assess his demeanour or form any view by external means of his credibility or reliability. Mr McAlary’s attack on Mr Loader’s credibility was limited to an assertion that he had been "thoroughly discredited". With all due respect to Mr McAlary, that was not the conclusion I reached either after first reading Mr Loader’s evidence or after re-reading it.

Before I turn to a consideration of the defence witnesses it must be observed that the plaintiff and his witnesses gave generally consistent evidence. True it is that the plaintiff was not supported by other witnesses on every issue; but, insofar as his witnesses did give evidence on certain issues, they corroborated him. The plaintiff was widely supported by the documentary evidence.

It must also be observed that the defence witnesses generally gave their evidence-in-chief in broad generalised terms. Once, when under cross-examination, they were invited to give particulars or to examine the contemporary documentation, their evidence often was shown to be inconsistent or contradictory and not infrequently their oral evidence was demonstrated to be false. Whether one characterises their cross-examination as a "memory test" or not, there were many failures.

At an early stage in this trial I drew to Mr McAlary’s attention the principle in Browne v. Dunn^[2]. I am certain that Mr McAlary was aware of that principle, even though it may be open to some doubt as to how far it extends. My occasional interventions during the trial indicate that defence counsel were aware, or ought to have been aware, of the implications of not putting to the plaintiff matters that were part of the defence case. It must be said that there were a significant number of conversations and events which were sworn to by defence witnesses which were never put to the plaintiff or to his witnesses. As a consequence of those omissions, which cannot be explained away by reference to the inexperience of counsel, I have found myself unable to accept that such conversations occurred or such events took place in the manner suggested by defence witnesses. The only rational explanation for conversations with the plaintiff and events concerning the plaintiff about which Mr Smith, Mr Hay and Mr Lussick, in particular, testified not having been put to the plaintiff in cross-examination is that they did not occur or take place in the manner alleged. A similar but not quite so conclusive statement may be made about the evidence of Mr LaiLai and Mr Kavo. I exclude in this context any omissions to put to the plaintiff or Mr Fox conversations or events testified to by Mr ToVadek, Mr Doa and Sir Tei Abal.

In assessing the defence witnesses, I was reluctant simply to compare their evidence with the plaintiff’s evidence and decide from such a comparison which evidence I preferred. I constantly compared the evidence given by defence witnesses with other evidence given by them and with other defence evidence led. I compared it with the documentation which was generally more likely to be objective. I tested it internally as well as externally. I generally preferred only to reject such evidence if it could be demonstrated to be false or if it was so inconsistent with other evidence that it should not be relied upon.

I now turn to a detailed consideration of the witnesses called on behalf of the defendant company. I start by referring to the two chartered accountants who gave evidence, Mr Trevor Maloney and Mr Simon Gaylard, both of Coopers and Lybrand. I found both of these men to be reliable, accurate and truthful. They each manifested a detachment expected of a professional man and they each were thoughtful and careful as they answered the questions that were asked of them when they were in the witness box. Although linked with the defendant company by virtue of Coopers and Lybrand’s role as auditors for the defendant company, the objectivity and impartiality which they exhibited was, I feel certain, in the best traditions of the accountancy profession.

There was something enigmatic about Mr Martin ToVadek as a witness. On the one hand, he struck me as a man with commercial experience who had a good grasp not only of the English language but also of business and financial matters. He is an experienced parliamentarian who has been chairman of the Parliamentary Accounts Committee; he has also held a Ministerial portfolio. He impressed me as a man of intelligence. In giving his evidence he could not be said to be disadvantaged, as is so often the case with unsophisticated Papua New Guineans. On the other hand, he not infrequently was unable to remember things and maintained that he was unable to understand things. Mostly his professed lack of memory and lack of understanding related to matters which told against the defendant company; mostly his good memory and clear understanding related to matters which assisted the defendant company’s case.

In examination-in-chief Mr ToVadek, when giving evidence about a matter very important to the defendant company, viz. the amount of money the plaintiff was to receive under the retirement deed, said (at p.715:

"Yes, (Mr Lussick) was saying something about K15,000 that was supposed to be paid to Alan Morris."

"Well, as far as I can recall today, I heard him (Mr Lussick) was saying (sic) something about K15,000 that has to be paid to Mr Alan Morris."

However, later when still under cross-examination but when not under any pressure and when not subjected to anything that could be called trickery or clever advocacy, he said (at p.741):

"I heard Mr Lussick saying in pidgin that ‘K15,000 a year be paid to Alan Morris and about K10,000 a year for John Smith’."

The truth was there in these latter two passages from the evidence, but Mr ToVadek was only occasionally prepared to tell it. However, on other occasions, when sheltering under an umbrella of helplessness, lack of understanding and/or poor memory, he was reluctant to be forthcoming with it; he did not tell the truth in the passage taken from his examination-in-chief nor in the first answer in cross-examination as quoted above.

I simply did not believe Mr ToVadek’s explanation, when recalled for further cross-examination, as to the circumstances of him going to the office of the defendant company and asking for a copy of the minutes of the meeting of 11th August 1979, some minutes which only came to light and took on some measure of importance a considerable time after Mr ToVadek had left the witness box the first time. His evidence concerning those minutes in particular, coupled with his apparent evasiveness, unreliability and hesitancy on certain issues, led me to question his credibility and finally conclude that he was not to be relied upon.

As an example of his unreliability, Mr ToVadek told me (at p.715A) that at the meeting on 19th June 1978:

"Mr Morris then handed over a ready written motion to Wally Lussick to move it as well, to Sir Tei."

This is in direct conflict not only with the plaintiff’s evidence but also with Mr Lussick’s evidence (at Tape 152.7):

Another example of a conflict between the evidence of Mr ToVadek with that given by Mr Lussick (yet another conflict which I resolve against Mr ToVadek) is to be found at pages 761, 821 and Tape 153.3 to .5.

Another example of Mr ToVadek’s unreliability is to be found at pages 718 to 720 where Mr ToVadek stated:

"Xn.Q. Do you remember when Alan Morris was sacked the first time (2nd March 1979)?

A. I told Wally Lussick that I would support any decision the directors made of the sacking of Alan Morris. I then told Wally Lussick that it was about time the company sacked Alan Morris. Then I said, I think I told you people more than twelve months ago to sack Alan Morris, so it is about time the directors make their decision and sack Alan Morris.

A. Mr Lussick said, ‘We are having a very urgent meeting. The directors is (sic) having a very urgent directors’ meeting today,’ and then he asked me if there is a possibility of you (sic) coming over, and I said, ‘No way in the world I am coming over, because we are having a transport problem.’ I asked Mr Lussick, ‘Please, just brief me for a few minutes and I will know what is going on.’

A. He said, ‘We are having this very urgent directors’ meeting to sack Alan Morris.’

A. I also said that ‘I have been telling you to sack him more than twelve months ago, so I would agree with any decision the board makes for the sacking of Alan Morris’."

A very different version of that conversation is given by Mr Lussick (at Tape 153.3):

A. Well, as close as I can recall, I said to him, ‘We are going to have a directors’ meeting this afternoon and sack Alan Morris’. And he said, ‘Good. I have been telling you for the last year to sack him. Go up there and sack him and ring me back immediately; I will wait by the telephone for you’.

A. And he also said that he supported us in what we did." (I have underlined the portions that are different.)

Mr ToVadek was plainly untruthful at two stages of his evidence. In cross-examination Mr ToVadek was asked about the method of voting at the meeting on 19th June 1978. He said (at p.741):

A. Mr Lussick said ‘Is everyone agreed?’ and we said - we put up our hands like this.

Q. If you will bear with me, Mr ToVadek, I want to make quite sure I do not misunderstand you, did they say ‘Yes’ with their voices or by nodding their heads?

A. Mr Morris, John Smith, Wally Lussick, Sir Tei Abal and myself, and the other two directors, Richard Wood and Maurice Wilks.

Quite apart from the lack of evidence supporting Mr ToVadek on this topic, it is inconceivable that the plaintiff and Mr Smith would have raised their hands, and, furthermore, Mr Wood and Mr Wilks were non-voting members of the board, so it is highly unlikely that they would have voted by raising their hands.

Some illuminating comments were made by Mr ToVadek when he was asked in cross-examination about his recollection of who it was that had moved a motion at a meeting of directors. He said (at p.767):

Q. You have a bad memory and you cannot remember things you have done months ago, is that what you said?

In the light of these comments it is hard to believe Mr ToVadek (indeed I could not believe him) when he said that he could remember small details of what happened at the meeting of 19th June 1978.

The extent of the selectivity of his memory became apparent when he was asked to recollect what happened at the meeting on 13th November 1979. He was asked to recollect what had happened only two and a half months prior to his cross-examination on that topic (at pages 786 to 787). His replies to questions were punctuated with comments such as:

"I want to tell the Court exactly what happened, but I cannot remember those things."

Mr ToVadek and Mr Hay are in conflict in relation to their evidence concerning the "gifts" by Mr ToVadek and Mr Wabiria of K191,666.67 each to Sir Tei Abal. Both witnesses could not have been telling the truth. At p.796 Mr ToVadek said that the first time he had heard of such gifts was on 29th January 1980, the date when he was being cross-examined on that topic. At Tape 130.9 Mr Hay said that he explained the transaction to Mr ToVadek, which explanation must surely have included reference to the "gifts" of such a magnitude. If I was to decide this issue of credibility on my assessment of the two witnesses in question, I would disbelieve Mr ToVadek. However, putting questions of demeanour and general credibility to one side and examining the matter upon the basis of the probabilities of the situation, the overwhelming probabilities are that such "gifts" and the circumstances of such apparent generosity would have been fully explained to Mr ToVadek. The conclusion to be drawn from this conflicting evidence is that Mr Hay’s evidence is the more credible on the balance of probabilities. I need go no further than to say in relation to this issue that Mr ToVadek was either being untruthful or he had an imperfect recollection.

Mr ToVadek agreed that some evidence he had given previously was incorrect. At p.827A, his evidence was:

"XXn.Q. The evidence you gave yesterday about when you first knew about the resolution or a proposal to sack Mr Morris, the evidence that you gave yesterday, that you first knew on 13th November, was not correct?

I simply could not believe Mr ToVadek when he told me (at pages 812, 813 and 815) that he did not know what were the contents of the retirement deed and still did not know what the contents were at the time of his cross-examination on 30th January 1980. After all, he attended the meetings of directors of the defendant company on 23rd April 1979 and 11th August 1979 (he was chairman of the latter meeting) when resolutions were passed about "the A.A. Morris retirement benefit payout" and "the Claim by A.A. Morris". It is inconceivable that, if the retirement deed had not been read by, or explained to, Mr ToVadek prior to 11th August 1979, it would not have been explained to him at least in broad terms at the meeting of 11th August 1979. It will be remembered that it was Mr Hay’s evidence that explanations had been given. Questions of demeanour to one side, human nature being what it is, probabilities being what they are, someone must have told Mr ToVadek about the contents of the retirement deed, a document, it will be remembered, which is very important in this case and the understanding of which is a crucial issue. The alternative conclusion is that the expatriate directors kept the "Melanesian" directors "in the dark" on this issue; that conclusion, with all its implications and sinisterness, is one that I do not reach.

I also could not believe Mr ToVadek when he said, when recalled to give further evidence, that he had gone to the office of the defendant company and asked for a copy of the minutes of 11th August 1979. There is no other reasonable explanation for him having had those minutes than that he was told to go and get them or that they were given to him to read. All in all, once more here was something which adversely reflected upon Mr ToVadek’s credibility.

Mr Peter McKenna was not an important witness; his evidence was confined to a relatively minor issue. I do not conclude that Mr McKenna was telling lies, but I do conclude that his evidence lacked impartiality and was based upon a selective memory and a diary that did not purport to be complete. His evidence did not, therefore, necessarily represent the whole truth. He was a witness who struck me as having been called to give specific evidence for the defendant company for a particular limited purpose. The probabilities are that he was asked to do so by his close friend, Mr John Smith. Mr McKenna’s oral evidence simply did not establish that the plaintiff’s evidence about his daughter’s use of a car was incorrect. The evidence of the diary itself, as far as it goes, supports the plaintiff.

Mr John Smith struck me as being a competent businessman, as a man of action, as one whose commercial life depends for its success on quick and firm decision-making, as one who judges people and situations quickly (sometimes hastily) and often intuitively, as one who is intolerant of what to him seems like red-tape, intellectualism or humbug, and as one who is suspicious of anyone who appears to him to be against either him or those to whom he owes a loyalty. He struck me as one who would be in most situations a loyal ally but a formidable opponent. He was a key witness in this litigation who, not surprisingly, was emotionally and otherwise involved in the litigation. I say "not surprisingly" because for many years and during the first part of the scenario encompassed by this litigation he was a close colleague and friend of the plaintiff and since on or about 2nd March 1979 he has had a strong loyalty towards those directors who purported to dismiss the plaintiff, the current shareholders of the defendant company and such individuals as Mr Lussick and Mr Hay in particular. In the middle of all this, i.e. in the period just prior to 2nd March 1979 and for some time thereafter, some events happened which might have led any man (they certainly led Mr Smith, in my assessment of him) to be suspicious of the plaintiff. However, suspicion is one thing; proof is another. Much talk, discussion, planning, even scheming would almost inevitably have followed the initial "sacking" and during the early stages of the litigation. With a man of Mr Smith’s temperament, it is not surprising to me that he lost (as I am satisfied that he did) his impartiality and his ability to be what the defendant company needed most at that time, viz. a reliable, honest and accurate witness to the facts.

It gives me no pleasure to state that, in my judgment, the circumstances in which Mr Smith found himself were such that he was led to give inconsistent, unreliable and, on occasions, false evidence. I do not doubt his underlying motives; he always wanted to help the defendant company whose cause, he had convinced himself, was right. He allowed himself to say things (some of them untrue) against the plaintiff who, he had convinced himself, was wrong. I am firmly of the opinion that Mr Smith, having become emotionally involved in what was a hard-fought, protracted, costly and sometimes bitter piece of litigation, convinced himself that he was telling the truth or as near to the truth as could be expected of a witness with normal frailties of memory. He, in the course of giving his evidence, lost his objectivity; this is a conclusion which became abundantly clear to me as Mr Smith’s evidence was being given.

I agree with Mr Goldberg that Mr Smith gave his evidence-in-chief "in a confident, positive and assertive way but by the end of his cross-examination he was quiet, timid, hesitating and completely unsure of his answers". Whether the change that occurred in the witness box is characterised as "a remarkable transformation" or not, I am in no doubt that Mr Smith had prepared himself on certain topics and that he was unprepared on others; such were the inconsistencies in his evidence and the variations in his ability to remember things that I could not rely on his evidence, and even on that evidence in respect of which he had quite obviously prepared himself.

Putting to one side Mr Smith’s demeanour, Mr Smith admitted on several occasions that he had given untrue evidence. Those admissions were such, and they were made in such circumstances, that even Mr Smith’s most avid supporter would find it difficult to put him forward as a witness whose evidence on any disputed issue could be believed or relied upon.

At p.864 of the evidence Mr Smith had stated that Mr Raphael Doa was present at the meeting on 13th November 1979. At p.870 of the evidence, after Mr Smith had agreed that Mr Doa had not participated in the discussion in any way, he was asked whether he had a clear recollection of Mr Doa being there, to which Mr Smith replied,

"I am sorry, I withdraw that - Mr Doa was not there, he was represented by Mr LaiLai, as his alternate."

At p.881 Mr Smith gave as an explanation for some inconsistent evidence the fact, not borne out by a fair reading of the evidence, that he had been "a little bit emotionally upset" and that Mr Goldberg had been "shouting at" him and that he was "confused".

and at p.981 he referred to having "probably misled the Court". He had previously stated dogmatically that the first time he had mentioned being a guarantor was when the plaintiff had returned from Sydney, but he later changed his stance after being shown Exhibit 30.

"The evidence you gave this morning when you first heard the name KEAS was not true, was it Mr Smith?"

After some evasive replies to further questions and after some intervention by me to have him answer the questions, Mr Smith again said:

At p.922 Mr Smith said that, other than by providing a guarantee, he was not involved at all with the setting up of the structure of the share transactions known as the Keas rearrangement. That evidence was contradicted by Exhibit NNN, a letter dated 30th May 1978 which was signed by Mr Smith himself. Eventually after some quibbling and equivocation Mr Smith admitted that the contents of that letter were known to him.

At p.983, Mr Smith was asked whether he had given wrong evidence to the effect that the next meeting of the board of directors of the defendant company after 2nd March 1979 was 23rd April 1979, to which he replied:

At p.870 Mr Smith said that it was Mr Hay’s and his own idea to hold the meeting on 13th November 1979 and then (also at p.870) he said that it was the consensus of the directors. He also made the incredible assertion that he had spoken to Mr ToVadek in Port Moresby in October 1979 about the meeting, but yet the Court injunction still stood and there was no pending application to vary the injunction. Mr ToVadek did not corroborate Mr Smith’s evidence about the alleged October conversation.

Mr Smith gave several different accounts of the meeting of directors held on 23rd April 1979, a date when, it will be noted, Mr Fox had left the employ of the defendant company. In Mr Smith’s initial accounts of the meeting he made no mention of the alleged conversation he had with the plaintiff concerning the plaintiff’s alleged knowledge of overpayments of government money. Mr Smith would have me believe that the minutes of that meeting were not a true and correct record. There were internal inconsistencies with the evidence of other defence witnesses regarding such matters as who suggested that the auditors be brought in and Mr ToVadek’s role. Bearing in mind the absence of any reference in the minutes to the alleged conversation Mr Smith had with the plaintiff concerning the plaintiff’s alleged knowledge of overpayments of government money and the failure by Mr Smith to mention it in his initial accounts of the meeting of 23rd April, I find his evidence (at pages 878 to 882) to the effect that he had told the board at the meeting that the plaintiff had told him that he had received overpayments from the government incredible. I disbelieve Mr Smith entirely regarding the alleged conversation first mentioned by Mr Smith at pages 839 to 840. At p.881 Mr Smith made an explanation and said:

"Yesterday afternoon I was a little bit emotionally upset, Mr Goldberg, and also you were shouting at me and I was confused."

That explanation caused me to question his credibility closely. There was no substance in his allegations that counsel had shouted at him and that he was confused. If he was emotionally upset when giving evidence about the "sacking" on 2nd March, I saw no reason to suppose that his emotional reaction was such as to affect his ability to give evidence on other issues; indeed on other issues he gave the impression of confidence. I am in no doubt that the explanation given by Mr Smith was a response to a line of cross-examination which had brought home to the witness the falsity of his own evidence.

Mr Smith’s attempts to explain away and identify alleged errors in the minutes of the meeting of 23rd April 1979 as to the alleged overpayments were unconvincing. It is significant that initially he made only one complaint about the minutes (see p.876) but later he made two complaints (see pages 885 and 887). No other witness supported Mr Smith’s evidence to the effect that he had mentioned the plaintiff during the item of business described in the minutes as "Payments from P.T.A." (see, in particular, Mr ToVadek at pages 772 to 773 and Mr Hay at page 1445).

There is an internal inconsistency between Mr Smith’s oral evidence and some affidavit evidence. I refer to Mr Smith’s oral evidence at pages 887 and 888 and to his own affidavit sworn on 31st August 1979, mentioned at pages 888 and 889.

Mr Smith’s evidence as to when he first spoke to Mr Maloney about the alleged overpayments is in conflict with the evidence of Mr Maloney. I prefer the evidence of Mr Maloney. It is significant that Mr Maloney did not state that Mr Smith had mentioned the plaintiff’s name when they spoke on 19th April 1979. This reinforces the conclusion that the conversation that allegedly occurred in September 1976 between the plaintiff and Mr Smith never occurred.

I thought Mr Smith was exaggerating when he told me that he thought he had received "something like forty-four writs" and that he had "got writs about every second day". In fact, I had cause to ask him:

"Were there more than two actions that you were aware of at that time - the Morris action and the Opai Kanungel action?"

I also thought that Mr Smith was being less than frank when he said that he "didn’t think (the Morris writ) was any more important than the rest".

I simply could not believe Mr Smith when he said (at p.943) that he could not recall any other Saturday meetings of the board of directors other than the meeting held on 25th August 1979. In giving evidence to this effect Mr Smith was at that time deliberately trying to conceal from the Court the fact that a meeting had been held on 11th August 1979, the minutes of which (along with the minutes of the meeting of 5th March 1979) he had read only two days previously but which were not disclosed until a subsequent stage in the proceedings when they were extracted from him by counsel for the plaintiff. Mr Smith’s explanations to the effect that he had been confused and that he had only looked at the dates were quite unsatisfactory. It is not without significance that the minutes of 11th August contained disclosures which those close to the defendant company had reason to keep concealed, e.g. the resolutions to be moved at a meeting to be held on 25th August 1979.

It is clear from a reading of the minutes of the meeting of directors held on Saturday, 11th August 1979 (Exhibit TTT) that some discussion had taken place concerning the draft resolutions set out in Exhibit E, i.e. the draft resolutions "selectively ratifying past meetings of directors". Those attending the meeting (as per the minutes) were Mr ToVadek, Mr Lussick, Mr Smith and Mr Hay. However, prior to any mention being made by Mr Smith of those minutes and prior to the disclosure of those minutes (and when, as I have said, a deliberate attempt to conceal them was being made), Mr Smith gave evidence to the effect that he had not discussed the draft resolutions with any other director of the defendant company apart from Mr Hay and that he had no idea what would have happened on 25th August 1979 if the draft resolutions had been put to a vote on that day. It is clear to me that Mr Smith was plainly being less than candid when he gave that evidence. His evidence was certainly incorrect.

I totally reject Mr Smith’s initial evidence to the effect that he thought that the next meeting of directors after the meeting held on 2nd March was on 23rd April 1979. I have considered whether that evidence can be explained as faulty recall or impaired recollection. However, I am driven to the conclusion that at the time that evidence was being given a deliberate attempt at concealment was in progress. It is inconceivable that the meeting of 5th March 1979, but three days after the initial "sacking" and when things were at crisis point, should not have been remembered. I have already referred to Mr Smith’s acknowledgement that he was wrong and to his apology. I am satisfied that Mr Smith knew at the time that he was giving wrong evidence. Mr Smith’s explanations and excuses as to why the minutes of 5th March 1979 do not appear in the minute book (Exhibit B) when the minutes of 23rd April are there and as to why the minutes of 5th March 1979 have not been confirmed since that date were unconvincing and did nothing to restore his credibility.

That Mr Smith was at least either careless with the truth or selective with his memory is shown from his evidence regarding the identity of the person who seconded the motion for the retirement deed for the plaintiff. In examination-in-chief he said quite confidently (at p.852):

I disbelieved Mr Smith when (at p.974) he disputed the fact that he went around to the plaintiff’s place on the night of the "sacking" to have a drink with him. On that minor issue I prefer the evidence of Mrs Connors who told me (at Tape 136.8) that she had gone around with John Smith to have a drink with the plaintiff at his place on the evening he was dismissed.

I am satisfied that Mr Smith told a deliberate lie when he denied (at pages 991 and 992) that there was any discussion at the meeting of 5th March 1979 about the defendant company retaining the firm of solicitors, McCubberys, "to prevent Mr Morris using them". A clue to the falsity of the denial is to be found at pages 991, 992 and 992A when Mr Smith waivered from his denial and used the phrase "I don’t remember". He said (at p.992A) in answer to my question designed to elicit a clear and unequivocal answer:

"H.H.Q. ...Do you mean ‘No, there was nothing in the resolution about preventing Morris using them’?

"H.H.Q. In fact you told me, did you not, Mr Smith, a minute ago that there was no such discussion?

Mr Smith’s evidence is in conflict with that of Mr Hay, whose evidence on this issue I prefer. Mr Hay said (at pages 1383 and 1384) that there was discussion and a resolution was passed to the effect that McCubberys would be retained "to prevent Mr Morris using them". Mr Hay is unlikely to admit something like that if it did not happen. The handwritten minutes (Exhibit RRR) on an issue like this are more likely to reflect the true position than the type-written minutes (Exhibit SSS) and the hand-written minutes support the unabashed Mr Hay rather than the shifty Mr Smith.

Mr Smith was conspicuous as the only witness to have given evidence that the plaintiff was given a reason for his "dismissal" by Mr Hay. He said (at p.861):

"Mr Hay said, ‘The shareholders are fed up with you stabbing them in the back over the United Party’s action’."

and he gave similar evidence at p.973 and at p.975. Not even Mr Hay suggested that he had given the plaintiff a reason for the "dismissal"; he was asked (at p.1461):

"XXnQ. Apart, Mr Hay, from the without prejudice (discussion on 8th March 1979), has Mr Morris ever received any communication from the company as to why he was dismissed?"

The fact that Mr Smith was a partial witness lacking an objective approach to the task of giving evidence was established when he stated in a non-responsive answer to a question about the motion moved at the meeting of directors held on 23rd April 1979 that the defendant company "transfer funds, as they are available, into some sort of Interest Bearing Deposit for the purpose of the A.A. Morris retirement benefit payout":

The explanations given by Mr Smith for having given untrue evidence were not satisfactory.

Mr Goldberg urged me to find that Mr Smith told many deliberate untruths. Whilst it is possible that Mr Smith told a number of deliberate lies, I have found it necessary to make positive findings to that effect in only a few respects. Whether there was a degree of deliberation or not, I am in not the slightest doubt that Mr Smith told numerous untruths. At the conclusion of his evidence Mr Smith stood substantially discredited.

Mr Smith did little to help himself when he, having been cautioned several times by me against speaking to anyone about the evidence in this case in accordance with the usual practice when witnesses are still in the witness box, sought to find out from the bank manager what the position was in relation to his guarantee of the Keas indebtedness.

Mr Smith’s unwillingness to be straight-forward and his evasiveness generally were illustrated quite vividly by his answers to questions in cross-examination on pages 921 to 929 of the evidence.

Mr Smith’s reluctance to disclose that a meeting of directors was held on 5th March 1979 was matched by his apparent reluctance to disclose that meeting to Sir Tei Abal and Mr ToVadek. There was clearly "something funny going on" in the period after 2nd March 1979 when, it will be remembered, the plaintiff was "out of the way"; the plaintiff was clearly not a party to the "funny business". The minutes of the meeting of 5th March 1979 were not put into the minute book; at the meeting held on 23rd April the minutes of the meeting held on 2nd March were confirmed but not the minutes of the meeting held on 5th March. Why was the meeting of 5th March kept secret? Why were the minutes of that meeting not confirmed? Why was Mr Smith reluctant for so long to disclose that the meeting took place? What is not clear is whether or not Mr Smith, Mr Lussick and Mr Hay were keeping from Sir Tei Abal and Mr ToVadek the manner in which the defendant company was going to be controlled and financed. What is clear is that there was a deliberate attempt to keep from the plaintiff resolutions as to his entitlement and to keep him out. I am also satisfied that, for some time whilst Mr Smith was in the witness box, there was a deliberate, but unsuccessful, attempt on Mr Smith’s part to conceal the meeting of 5th March from the Court. There was in other words, a cover-up. Mr Smith was a party to it. His involvement in that cover-up has contributed to the destruction of his credit.

Mr Smith’s evidence on many topics was contradicted by, and inconsistent with, other defence evidence, to say nothing of the conflicts with the evidence called and adduced on the plaintiff’s behalf. The internal inconsistencies, as Mr Goldberg described the inconsistencies with the defence evidence, were very significant. The external inconsistencies (with the evidence of the plaintiff, Mr Fox, Mr Wilks and Mr Loader) were also significant.

Mr Raphael Doa was less than frank as a witness. He did not induce me to have confidence in him. He seemed to be willing to give evidence on matters that he regarded as important to the defendant company and he seemed to be reluctant to recall anything else. It was significant that Mr Doa, a politician of some years experience and a Minister of the State at the time he gave evidence, refused to tell the Court in English what had been discussed in English between the plaintiff and himself in November/December 1978. He made out that he did not understand the meaning of "guarantee"; I simply did not believe him when he gave that part of his evidence; even Mr LaiLai, his own executive officer at the time, failed to corroborate Mr Doa as to his lack of understanding of such a term. I did not believe Mr Doa when he said that he did not know what the words "shareholder" and "director" meant.

Mr Doa had stated (at Tape 93.1) that, when he visited the plaintiff at the office of the defendant company, he asked the plaintiff to provide some funds so that he could run the United Party. Later (at Tape 93.8) Mr Doa stated that he asked the plaintiff for some funds "and secondly we asked him to find some ways of raising some funds for us". He said:

He would not agree that he said that he wanted that money from a bank or that he said that he wanted a guarantee for the defendant company for that amount. His evidence was in direct conflict with that given by Mr LaiLai, who said (at Tape 96.5) that Mr Doa had told the plaintiff that they had come to see him "because we wanted the company P.N.G.A.I. to guarantee us a loan from the bank, something between K200,000 and K500,000". Mr Doa’s evidence was also in direct conflict with that given by Mr Kavo, who said (at p.1216):

I prefer the evidence given by the two executive officers on this topic to that given by Mr Doa. Their evidence corroborates the plaintiff’s story.

Mr Lindsay LaiLai caused me some puzzlement. In some respects he impressed me; in others he didn’t. What was clear was that he had a selective memory; he could remember some things which told against the plaintiff; he had difficulty in remembering more recent things or things which went in the plaintiff’s favour. Apparently important matters were not put to the plaintiff. All this led me to doubt the reliability of what he had purported to remember. His recollection of certain events in February and March 1979 was at variance with that of Mr Kavo. Both Mr Kavo and Mr LaiLai could not be right about the receiving of K200 and the trip to the airport.

I was unable to accept his evidence of certain seemingly important conversations which were never put to the plaintiff in cross-examination; for example, the statement made at the pre-Christmas meeting and attributed to the plaintiff that he had inter alia a copy of a document somewhere in a bank in Port Moresby. I thought that this was simply recent invention on Mr LaiLai’s part. Furthermore, the document was never produced.

All in all, the probabilities are that the plaintiff’s version of each of the incidents about which he and Mr LaiLai gave conflicting evidence was true.

I agree with Mr Goldberg that "the credibility of Mr LaiLai’s testimony is also diminished by the excessive zeal with which he wished to implicate Mr Morris in the United Party’s claim to own shares in the company". I simply do not believe Mr LaiLai when he said (at p.1202):

The coincidence of the meeting on the steps outside McCubberys’ office and the invitation extended to the plaintiff to attend the meeting at the Islander Hotel do not fit in well with the theory advanced by Mr LaiLai to the effect that the plaintiff was pushing in a participating manner.

Mr Kavo presented as a partial witness with signs of maliciousness showing through. The incident when he banged the table in response to a question caused me to doubt his reliability and credibility. Mr Kavo, by his demeanour, gave a clue to the attitudes of many of the defence witnesses. He left me with the clear impression that both he and others, having been initially impressed by the plaintiff, changed their minds about him in about March 1979 and since then, as a consequence of much discussion "behind the scenes", some suspicion, some mulling over of things in the mind, and some "changing of camps", they have adopted a partial and sometimes hostile attitude towards the plaintiff. A clear pointer to Mr Kavo’s attitude is to be found in his statements:

I simply cannot believe Mr Kavo’s evidence about a conversation alleged to have occurred on 2nd March 1979; furthermore it was never put to the plaintiff, and it was not mentioned by Mr LaiLai.

The motive for Mr Kavo "taking sides", as was the case with some other witnesses, was the desire on their part to help gain control of the defendant company with the money and political power that went along with it. I agree with Mr Goldberg that, when the Opai Kanungel case was settled out of Court, there was a "closing of the ranks" against the plaintiff.

Mr Kavo’s evidence regarding his alleged conversation with the plaintiff on 2nd March 1979 during which the plaintiff told him that he had been "sacked" was plainly untrue.
Mr Kavo was in conflict with both Mr Doa and Mr LaiLai concerning the date of the alleged promise to meet "the first K10,000 of legal costs".

At pages 1219 and 1220 Mr Kavo gave evidence of the conversation he and Mr LaiLai had had with the plaintiff after they had met outside McCubberys’ office. Not only had none of that material been put to the plaintiff but also it had never been the subject of evidence by Mr LaiLai. I felt constrained to enquire at the time whether these matters had been put to the plaintiff. Mr McAlary said that they had and agreed to draw my attention to them in due course. Mr McAlary never did so, because he could not do so; those matters had not been put to the plaintiff. The probabilities are that Mr Kavo’s evidence regarding the conversation he had with the plaintiff and Mr LaiLai was made up. I do not assert that this was deliberate fabrication on Mr Kavo’s part; the probabilities are that much discussion occurred during 1979 and 1980 concerning this case and that, in the course of those discussions, Mr Kavo had ascertained the views of others including, in particular, Mr Lussick. It is not improbable that Mr Kavo came to convince himself that the plaintiff had spoken along the lines mentioned by him at pages 1219 and 1220 of the transcript. The "made up" evidence was merely part of the material upon which the allegation that the plaintiff had "done the wrong thing" was based. What is clear to me is that I cannot, and should not, make any findings adverse to the plaintiff based upon the evidence of Mr Kavo given in such circumstances.

I found Mr Kavo’s evidence, to the effect that Mr Beresford Love, the solicitor, gave them the blank declaratioins of trust and advised them to have them signed and witnessed, quite incredible. Mr Kavo did little to assist me in having confidence in his testimony when (at p.1233) he refused to answer the question:

I am persuaded that Mr Kavo refused to answer that question because he could not answer it truthfully without contradicting his earlier evidence and he knew it.

Because none of it was put to the plaintiff in cross-examination and because I found much of the outburst (at pages 1219 and 1220) inherently incredible, I am not satisfied on the balance of probabilities that what Mr Kavo attributed to the plaintiff was actually said by the plaintiff.

A notable internal inconsistency within Mr Kavo’s own evidence is to be found by examining what he said at p.1216 regarding the meeting at the plaintiff’s office and what he said at p.1244. At p.1216 Mr Kavo said:

"Mr Doa on behalf of the United Party said that the purpose of our visiting was to investigate into the possibilities of securing a guarantee for a loan of about K200,000 to K500,000 for the Party and this money would be used in quick return economic activity, so that by the time the National Elections came around the United Party would have some money to operate from." (I have underlined the words about which there was inconsistency.)

"XXnQ. Mr Kavo, did Mr Doa use the words: ‘quick return economic activity’, as you recall it?

Mr Kavo went on to acknowledge the defect in his own memory and to imply that he regarded intention and purpose as being interchangeable with actual words used. His whole evidence is coloured by the revealing answers given on p.1244.

I have already referred to the illustration of Mr Kavo’s partiality which was a factor which contributed to my ultimate unfavourable impression of him as a witness. That incident was at p.1238 when he banged on the table with his hand and spoke "loudly" when giving an answer adverse to the plaintiff’s case. Mr Goldberg argued persuasively that Mr Kavo had shown himself to be "over-zealous in the cause"; examples of this include his reference (at p.1233A) to the "emphatic assistance" of Mr Morris in relation to the intention to get Mr Wabiria to sign the declaration, and his evidence (at pages 1238 and 1239) to the effect that the plaintiff was insisting that the defendant company be taken to Court.

Sir Tei Abal, although recuperating from an illness at the time, commenced giving his evidence with much in his favour. He was a respected politician with a wealth of experience; he had been Leader of the Opposition, a Minister of the State and Leader of the United Party; he had ability, intelligence and understanding (more than even he cared to admit). By the time Sir Tei concluded his evidence he had shown himself to be lacking in reliability as a witness. In most instances it was not a case of deliberate dishonesty; rather it was a case of faulty memory and an inability to recount simple facts consistently.

I could have little confidence in Sir Tei’s ability to recall significant matters or events, although occasionally the truth shone through. Although there were some difficulties with language and some problems in communicating sophisticated concepts to him, he could, if he wanted to, answer simple and straight-forward questions in a simple and straight-forward manner. Regrettably, Sir Tei was not always able to, and, as a consequence, his evidence became tainted. It struck me as incredible that Sir Tei should claim to be able to remember the events of 19th June 1978 but yet he could not remember the names of the companies of which he is a director.

It was not a case of Sir Tei being tricked or trapped; it was either that he did not do himself justice or that he could not maintain what was an untenable position.

There was much debate during the trial about what Sir Tei had meant when he said during his examination-in-chief that at the meeting on 19th June 1978 Mr Lussick had said that "Alan Morris has been working with this company for a long time, he must get K15,000 a year". Although Sir Tei subsequently omitted all reference to the words "a year (LONG A YIA)", I am in no doubt that, when he used the words "a year (LONG A YIA)", he was speaking the truth, but that, realising afterwards that he had "let slip" something that helped the plaintiff’s case and something that he had not wanted to say, he tried to disguise his "slip" by not repeating the words "a year (LONG A YIA)". In this respect Sir Tei was acting with deliberation. I am reinforced in reaching this conclusion by Mr Lussick’s evidence to the effect that he had told Sir Tei before the meeting of 19th June that the amount was to be K15,000 per year of service. The interpreter cannot fairly be blamed for what I have concluded was "let slip" by Sir Tei.

The piece of paper which Mr Lussick had given to Sir Tei was obviously Exhibit GG. That paper is in the following terms:

"IT WAS MOVED BY SIR TEI ABAL, SECONDED BY MARTIN TOVADEK THAT A RETIREMENT DEED BETWEEN THE COMPANY AND ALAN ARTHUR MORRIS WAS TABLED.

CLAUSE 5 OF THE DEED REQUIRED THE AMOUNT OF THE RETIREMENT ALLOWANCE BE DULY MINUTED. IT WAS UNANIMOUSLY RESOLVED BY ALL DIRECTORS PRESENT WITH THE EXCEPTION OF ALAN ARTHUR MORRIS AND JOHN BRIAN SMITH WHO ABSTAINED FROM VOTING, THAT THE RETIREMENT ALLOWANCE WOULD BE KINA 15,000 (FIFTEEN THOUSAND) FOR EACH YEAR OF SERVICE OR PART THEREOF WITH THE COMPANY.

IT WAS THEN UNANIMOUSLY RESOLVED THAT THE RETIREMENT DEED BE APPROVED AND THAT THE COMMON SEAL OF THE COMPANY BE AFFIXED TO THE DEED AND EXECUTED BY ALL VOTING DIRECTORS OF THE COMPANY.

Sir Tei maintained throughout that Mr Lussick either read or translated that piece of paper to him. Bearing in mind the reference on that piece of paper to K15,000 "for each year of service or part thereof", it is more probable than not that the words "for each year of service or part thereor" or "a year (LONG A YIA)" or words to similar effect were used by Mr Lussick not only when he read or translated the piece of paper but also when he spoke at the meeting.

An example of Sir Tei’s unreliability is to be seen when Sir Tei’s evidence is contrasted with Mr Hay’s evidence. When being cross-examined (at p.1334) Sir Tei gave this evidence:

"XXn.Q. Since the date of that meeting (19th June 1978) have you talked about John Smith’s retirement money with anyone?

Q. After the meeting was finished on any other day have you talked about John Smith’s retirement money with anyone?

"XXn.Q. Prior to 25th August 1979 had you discussed those proposed resolutions with any directors of the company?

A. With Mr Smith, with Mr Lussick, Sir Tei Abal, perhaps with Mr ToVadek, I do not recall."

"XXn.Q. Have you ever told Sir Tei Abal what are the contents of John Smith’s deed?

A. I do not specifically recall it, but it is quite possible that I did - quite probable that I did.......I have always taken great pains to ensure that Sir Tei has understood what has been going on. It is for that reason that I say it is probable I discussed the retirement deeds with him........"

On this topic I prefer the evidence of Mr Hay to Sir Tei. Mr Hay had no reason to give false evidence and had no cause to be mistaken about matters such as these. The probabilities are that Mr Hay was right and Sir Tei was wrong.

Mr Russell Hay came into the picture fairly late in the piece. He was consulted first as a solicitor but then agreed to become a director of the defendant company. His first main task was quite obviously to engineer the sacking of the plaintiff. Mr Hay was described by Mr McAlary as "this tough young solicitor". Tough he may be, relatively young as he is, and solicitor as he is by profession he has shown that he, like everyone else, can make mistakes. I am in no doubt that, whether through inexperience, lack of proper preparation, pressures of the moment or otherwise, Mr Hay made some mistakes and then, to save face or to keep in favour with the defendant company, its directors and shareholders, he allowed one mistake to lead to another. He presumably maintained to them, and he certainly maintained to this Court, either expressly or by implication that everything had been done or must have been done correctly and that the plaintiff, and not he, was the "trouble-maker".

I regret to have to say that on several occasions Mr Hay did not tell the truth; it was not necessarily the case of a man deliberately telling falsehoods out of a desire to mislead the Court; rather it was the case of a man who, having realised that he had been at least partly responsible for the plan to sack the plaintiff misfiring, was trying to "remedy the defects" and, in doing so, allowed himself to adopt a stance that was inconsistent with the truth. Mr Hay, having convinced himself that he must have been right, lost his objectivity. In the process his credibility suffered. Some might say that any falsehood is a lie and, whatever the motivation, falsification of evidence is a serious matter. I say in this context and regarding Mr Hay’s evidence that I do not question his primary motives; he had the interests of the defendant company at heart and he did his best to help. However, what he did was not good enough, and in the final analysis, when his conduct and his memory were subjected to scrutiny and tested in the witness box, he was shown to be wanting.

Part of Mr Hay’s problem was that he tried to "wear two hats" - the "hat" of director and the "hat" of solicitor. In the final stages of the hearing before me he appeared to be trying to wear the "hat" of witness and the "hat" of solicitor; he had (and may yet still have) that division of loyalties about which much has been said in books and law reports which have discussed "professional conduct". Whilst Mr Hay was acting in the joint capacities of director and solicitor, it appeared to me that he lost his effectiveness. To an extent he came across as a witness with a selective memory. It was unfortunate that he could not find contemporaneous notes to support some of his testimony in circumstances in which he had found such notes to "support" other of his testimony. In this context it is to be observed that the notes of the minutes of the meeting of 5th March 1979 contained important discrepancies going to Mr Hay’s credit and they were inconsistent with the final product, which was to form part of the defendant company’s records. Exhibit DDDD, being the notes of the alleged telephone conversation of 5th March 1979, do not support Mr Hay as much as at first appeared; it does not appear on the face of the notes that it was a telephone conversation, the notes are inconsistent with the minutes of the meeting of that day, the conversation was not put to the plaintiff, and the notes contain writing which may have been added later.

Mr Goldberg submitted that Mr Hay’s evidence, his credit and his credibility were tarnished by Mr Hay’s claim (subsequently not upheld) of legal professional privilege. Mr Goldberg relied upon Mr Lussick’s evidence at Tape 154.2 to .3 and suggested that that demonstrates that the claim of privilege was "completely unjustifiable". I would not go as far as Mr Goldberg would have me go; however, I will go so far as to say that Mr Hay, by his claim, did little to establish or sustain his credit or credibility.

I did not believe Mr Hay when he said in examination-in-chief that the motion moved at the "meeting" on 2nd March 1979 was:

Mr Hay is not well-supported when he asserted that the words "executive director" were used. Furthermore, the over-whelming probabilities are that the title used was "managing director", the title by which he was generally known. Whilst the minutes of that "meeting" refer to the plaintiff in the motion of "dismissal" as "executive director", I am satisfied that those minutes were prepared or re-constructed by Mr Hay or on his instructions some time after the meeting had been held and after the service agreement had come into his possession. The only place where the title "executive director" is used is in the service agreement. There were no credible means by which, on the evidence, Mr Hay could have come to know prior to the "meeting" that the plaintiff’s title was "executive director". Mr Hay asserted that his clients, Mr Lussick and Sir Tei, told him that Mr Morris was executive director, but Mr Lussick denied this at Tape 156.6.

There is no oral evidence upon which I can rely to reach a conclusion that the words "pursuant to Article 96....." were expressed as part of the motion moved at the "meeting" on 2nd March 1979. The minutes of that "meeting" appearing in Exhibit B are clearly wrong to the extent that they purport to record that Mr Hay expressly moved a motion containing those words. The probabilities are that they are also wrong to the extent that they purport to record that a motion containing the words "executive director" was expressly moved and subsequently carried.

I thought that Mr Hay was less than candid when being cross-examined as to when and in what circumstances he ascertained that there was a mistake in the minutes.

I could not believe Mr Hay when he said during his examination-in-chief that "those transfers (subsequently acknowledged by him to be Exhibits KKK, AAAA, BBBB and CCCC) were tabled at the meeting (on 2nd March 1979) and were accepted and it was resolved that they be entered in the register" and that subsequently on that day an entry was made in the register of the defendant company "transferring those four groups of shares (parcels of 25 shares) from the four nominee parties to" Melanesian Investments Pty. Limited at pages 33, 34, 35, 36 and 37 of Exhibit C.

When Exhibits KKK, AAAA, BBBB and CCCC were put to Mr Hay in cross-examination (at p.1422) he agreed that in those transfers there is no number of shares, no transferee, no date, and no consideration. None of the four instruments are valid instruments of transfer.

I could not believe Mr Hay when he said in cross-examination (at p.1430) that he made all the entries in the share register (Exhibit C) at the one time at the meeting on 2nd March 1979 and in the presence of Mr Lussick, Sir Tei Abal and Mr Sam Abal. None of these three persons gave evidence to support Mr Hay on this issue. An examination of the five pages in Exhibit C shows three very significant things; first, that, if Mr Hay is right, two different coloured inks were used for entries allegedly made on the same date i.e. 2nd March (see page 30); secondly, that, if Mr Hay is right, two similar inks were used for portion of the entry allegedly made on 2nd March (column 2 on page 33) and the whole of the entries allegedly made on 5th March (see last four lines on page 33 and the entries on pages 38 to 41); and thirdly, that if Mr Hay is right, there is a curious and unexplained omission at each of pages 34 and 37 inclusive in the share register of the date (2nd March) when the transfers were allegedly entered in the share register. Mr Hay was unable to give an explanation for the use of different coloured pens; at one stage he said of his own conduct: "I cannot explain even to myself".

The inescapable conclusion to be drawn from all this evidence is that the second column on page 33 of the share register (Exhibit C) as against the transfers of 25 shares from each of Mr ToVadek, Mr Wabiria, Mr Lowa and Mr Wasaua, i.e. where the date "2.3.79" is written in, in each instance was in fact written in at the same time as the entries bearing the date "5.3.79", viz. on the 5th March 1979. Of course, I need be no more satisfied than that that was probably the situation.

It follows that I find on the balance of probabilities that not only were the four transfers not purportedly entered in the register (and invalid ones at that) until 5th March 1979, but also Mr Hay was not telling the truth. The legal consequences flowing from the "entry" in the register at that late stage will be dealt with elsewhere in this judgment. The practical consequences flowing from my conclusions as to Mr Hay’s lack of credibility are significant.

My incredulity regarding Mr Hay’s primary evidence concerning these share transfers is matched by Mr Hay’s own professed "amazement" that he made entries in the share register from invalid transfers and his insistence that he had been "careful to enter everything into the register properly at the time".

As will be implicit in my findings, the probabilities are that on 2nd March 1979 Mr Hay wrote in the first, the third, the fourth, the seventh and the ninth columns of page 33 of the share register but he hesitated to fill in the second column ("date entered in register") and ultimately failed to do so on that date because he had seen a defect in the documents of transfer. They did not contain the name of the transferee or the number of shares and there were other blanks.

Subsequently he decided to make the entries regardless of the defects in the transfers and he made the entries (on 5th March) but, in doing so, back-dated them to 2nd March. The entries nevertheless were made on 5th March 1979.

His motive for back-dating the entries was to avoid, if he could, disclosing the invalidity of the meeting of members already held on 2nd March 1979. His motive for saying (for insisting) that he had been "careful to enter everything into the register properly at the time" and for not acknowledging that he had done things improperly (and his motive, therefore, for telling untruths in this Court) developed out of the natural instinct of self-preservation. Mr Hay did not wish to acknowledge to the other directors of the defendant company nor acknowledge in this Court (with the result that the other directors would sooner or later hear about it) that he had "fouled up" his "hatchet job" - to use, for this purpose, phrases that were used during the course of argument. Whether one characterises it as cover-up, professional negligence, incompetence, human error or otherwise, Mr Hay, realising he had made a mistake, "got himself in deeper" by back-dating the share register (thereby falsifying it) and by giving false evidence (to cover up what he had done to the share register). He improperly inserted some entries dated 2nd March 1979 in an attempt (unsuccessful in my judgment to regularise an otherwise improper transaction.

At Tape 201.15 (third paragraph) to Tape 202.17 there is recorded the dialogue that passed between Mr Goldberg and myself during that part of his final address which dealt with this aspect of the case. It follows from a reading of this judgment and that dialogue that I have adopted what was loosely called "my hypothesis" in preference to "Mr Goldberg’s hypothesis"; "Mr Hay’s hypothesis" is completely untenable. I am not led by the force of the evidence to adopt "Mr Goldberg’s hypothesis" with the high level of culpability involved therein; to have done so would have involved the making of the most serious findings against Mr Hay including the making of several lots of false entries in the share register, the giving of false evidence and the fabrication of minutes of meetings.

That Mr Hay was at least unreliable in his recall of what had taken place at crucial meetings is to be seen from an analysis of his examination-in-chief appertaining to the meeting of 2nd March 1979. It is to be noted that in giving his account he omitted to make any reference to the "resolutions" for the holding of extraordinary general meetings of Daikin (P.N.G.) Pty. Limited, P.N.G. Motors Limited, P.N.G. Airfreight Pty. Limited and Solar Energy Systems (P.N.G.) Pty. Limited, or to the "resolution" removing the plaintiff as chairman of directors and electing Mr Lussick chairman "in his place for the balance of this meeting", or to the "resolution" regarding the appointment of the representative.

I thought that Mr Hay was lacking in candour when he purported not to remember much of what I felt constrained to put to him at Tapes 130.12 to 130.14. Much of that, although taken from the plaintiff’s evidence, had been testified to by other defence witnesses.

There are significant differences between Mr Hay’s handwritten notes of the meeting of 5th March 1979 (Exhibit RRR) and the typed minutes of that meeting (Exhibit SSS). The explanation for the differences was not satisfactory. The explanations as to why those minutes do not appear in the Minute Book (Exhibit B) and as to why they were not confirmed at the meeting held on 23rd April were likewise unsatisfactory. That there should be such differences reflects adversely upon Mr Hay’s credit.

I was somewhat troubled (and subsequently unimpressed) by Mr Hay’s initial denial that he was in Port Moresby on 5th November 1979, which was subsequently shown to be incorrect. It struck me that he had been trying to place himself as far away as possible from the alleged breach of this Court’s injunction.

It was incredible for Mr Hay (as he did) to suggest that quite probably Mr Smith would have told Mr Freemantle what to do regarding the meeting on 13th November 1979. He later qualified his evidence by saying "quite possibly".

I made reference earlier to the practical consequences flowing from my conclusions as to Mr Hay’s lack of credibility. It is significant indeed in litigation such as this that the legal practitioner, whose first main task after being appointed a director of the defendant company was to dismiss the plaintiff and who remains the legal adviser to the defendant company in relation to the subject-matter of this litigation, has been demonstrated to be (as a witness) at the least inconsistent, unreliable and mistaken and at the most untruthful. He, it must be noted, is (and has been) advising the lay directors. This goes some way to explain how it is that so many of the defence witnesses find themselves discredited. I made reference to the fact that Mr Hay "has been demonstrated" to be lacking in credibility as a witness; such, as will have been seen, is the case with a number of other defence witnesses as well. That the "demonstration" has been possible with so many of them (it is an inescapable conclusion in my assessment of the witnesses) is not surprising when one realises that I have had come before me in the witness box a number of witnesses for the plaintiff and then "against him", as it were, a number of defence witnesses the most important of whom are still linked in a legal adviser/layman relationship with Mr Hay, who is both solicitor and defence witness also.

Mrs Connors seemed to be a witness with divided loyalties. I do not criticize her for that, but it had its effect upon her evidence. She seemed to be uncertain in her recollection but yet she seemed to be answering in a way that was expected of her as the continuing employee of the defendant company. She was unable to amplify or expand upon generalized evidence given by her. All in all she did not impress me as a witness to be relied upon entirely.

Mrs Connors’ evidence was an example of how evidence given in a general way can be proved to be untenable when tested closely under cross-examination. At Tape 134.2 she said that she probably typed the deeds "just the day before" she took them to the stamp duties office. That answer is plainly wrong. The petty cash voucher bearing her signature and Mr Fox’s writing is dated 23rd June 1978 and that is also the date of the stamp duty imprint on the two retirement deeds. Quite obviously the deeds must have been typed up some days before the meeting on 19th June 1978 as they were present at the meeting for signing. Mrs Connors herself said (at Tape 134.3) that she typed them up "probably fairly close to" the plaintiff’s return from Sydney which, it is not disputed, was in the first few days of June 1978.

Mrs Connors was "not sure" whether the deeds were signed at the time she took them to the stamp duties office. This was a puzzling lack of certainty in her mind which led me to have little confidence in her evidence on contentious topics. Such a lack of certainty was to be seen in her not infrequent use of the word "probably", e.g. when she was asked (at Tape 134.5) if she could remember in whose handwriting the changes were made, she replied "Probably in Mr Morris’ handwriting".

A problem about Mrs Connors’ evidence, as is the case with the evidence of several defence witnesses, is that much of the detail in it was not put to the plaintiff in cross-examination. For instance, the plaintiff was not asked whether his handwriting was on the documents that were "re-typed", whether he got Mrs Connors to "re-type them several times" and whether he got her to go to the stamp duties office.

It was suggested that Exhibit W was different from the original Sly & Russell document brought back from Sydney, but yet that was not proved, as it could so easily have been done, by having Sly & Russell producing their file copies. I am not satisfied on the evidence either that there were any changes of significance or that the plaintiff was involved in anything sinister with regard to these documents. There is no evidence given by Mrs Connors, or by anyone else for that matter, from which the inference could reasonably be drawn that the plaintiff, and not Mr Lussick, had the documents in his possession at the time of the commencement of the meeting. Mrs Connors’ evidence does not refute the evidence to the effect that the documents eminated from Mr Lussick and Sir Tei Abal.

All in all, I thought that Mrs Connors in giving her evidence indulged in some reconstruction and turned assumptions into recollections. Most of her evidence was based upon assumption, as is illustrated by her evidence at Tape 137.8:

"XXn.Q. Were you given any instructions in relation to what was to go in the documents?

and by her use of the word "probably" referred to earlier. She herself gave evidence about the assumptions she had made at Tape 137.8, .9 and .11.

The petty cash voucher seemed to loom larger in the final stages of this case. Its importance as far as the defendant company is concerned might have been greater had the plaintiff’s handwriting or signature been identified on it. What is clear is that Mr Fox was involved with the stamping of the documents. The documentation itself leads me to infer that it was Mr Fox more probably than the plaintiff who had them stamped and gave instructions for their stamping; that was Mr Fox’s evidence also.

I thought Mrs Connors revealed that she had a selective memory then she purported to remember typing Exhibit W (the retirement deed) and Exhibit GG (the motion) but said she could not remember typing other documents with Sly & Russell backsheets on them and what they were. Those other documents included Exhibits AAA to GGG being purchase agreements and option agreements.

If, as Mrs Connors asserted, the plaintiff asked her to type the retirement deed (Exhibit W), it is highly unlikely that the plaintiff would have found it necessary to tell her (as she later claimed he did) that he had been granted a retirement deed and was entitled to money thereunder. In the circumstances, I reject the earlier evidence and accept the later evidence given by Mrs Connors; in any event the later evidence is the more probable.

There was something inherently improbable about Mrs Connors’ evidence in relation to the K45,000 loan. At Tape 135.4 she denied that Mr Smith told her to make out the cheque requisition and fix up a cheque "for the boss", yet she took the cheque into Mr Smith to sign. If the plaintiff had asked her to raise a cheque for the purpose of purchasing the unit, the probabilities are that she would have taken the cheque to him to sign. She gave some incredible answers when under cross-examination and her evidence changed from one day to the next.

I do not normally like to use extreme language in describing witnesses, but in the case of Mr Rodney Sweeney-Hunt I feel compelled to state that he, by his demeanour and by the intemperate words used by him in the witness box, showed himself to be partial, unreliable and untrustworthy. Furthermore, there were significant inconsistencies between his oral evidence and an affidavit sworn by him in July 1979. I have totally rejected his evidence on contentious matters.

Mr Sweeney-Hunt’s evidence that the alleged conversation he had with the plaintiff (one which, if it occurred, was very important, but which was not referred to in his affidavit sworn on 13th July 1979 - Exhibit FFFF - and which was not put to the plaintiff in cross-examination) took place on 8th July 1975 is plainly wrong as other evidence establishes that the plaintiff was out of Papua New Guinea on that date.

Mr Goldberg in his final address presented some strong arguments as to why I should disbelieve Mr Sweeney-Hunt’s evidence. However, at that stage Mr Goldberg was "preaching to the converted". By his own words and his demeanour, Mr Sweeney-Hunt had already convinced me that much of his evidence was false (and patently so) and that he, as a witness, was one with little, if any, inclination to tell the truth.

The evidence purporting to link the plaintiff with knowledge of the overpayments amounts to evidence of suspicion only; it is not, as it seems to me, nor was it ever evidence of proof. On the totality of the evidence, there is more proof as against Mr Smith, who was at all material times present and in a position of some control. Whether there was involvement by Mr Smith and, if so, whether that involvement was very great are questions it is not for me to determine. What is clear is that there is no credible evidence tending to prove that the plaintiff was involved in any sinister way.

Mr Lussick presented as a man who considered himself to have been wronged, falsely accused, and misunderstood. He seemed to be trying to give me the impression that he knew very little of the affairs of the defendant company and the various transactions it and its related companies were involved in. He seemed to be trying to "adopt a low profile", to use a modern term. However, the whole of the evidence, and the documentary evidence in particular, leaves me with the clear impression that Mr Lussick knew much more than he was prepared to admit and was very much "the power behind the throne" within the defendant company, especially after the plaintiff had been paid out for his interests in the capital of the defendant company. There is no doubt that he had influence with Sir Tei Abal and the other nationals with interest in and responsibilities for the defendant company. He was their "leader". On the last day of the evidence when Mr Lussick was in the witness box, I had cause to observe that the whole matter was becoming clearer; the reason for that was that for the first time I had had some evidence from a defence witness which revealed to me how the new owners of the defendant company were seeing things. That this revelation should have occurred when Mr Lussick was in the witness box was not without significance.

Mr Lussick, unlike the plaintiff but like so many of the defence witnesses, was unable to give detailed evidence about many things. His memory was defective in many respects. He gave some non-responsive answers. He was given to volunteering statements designed to tarnish the plaintiff. He was responsible for one or two outbursts in the witness box which led me to question and ultimately to remain unconvinced as to the truthfulness of his testimony. I agree with Mr Goldberg that he "demonstrated a partiality, animosity and malice towards the plaintiff which.....patently coloured his evidence".

That there had developed a personality clash between the plaintiff and Mr Lussick became abundantly clear when Mr Lussick was giving his evidence. That the hostility which Mr Lussick developed for the plaintiff was based on hearsay, suspicion and rumour also became clear as he gave his evidence. As I have already pointed out, it was not until that very late stage in the hearing (in fact, during Mr Lussick’s evidence) that things started to become clearer to me. What also became clear to me was that Mr Lussick became obsessed with the belief that the plaintiff was in some way "trying to destroy" him. He said he regarded the plaintiff as "a threat" to him. He thought he had to be rid of him.

Just as with the saying "actions speak louder than words", as with evidence in a case such as this "documents speak louder than witnesses". The mass of documentation associated with the Keas rearrangement, if it does nothing else, leads to the inference that a plan was in progress to take over control of the defendant company. The options given over the several parcels of 100,000 shares in the defendant company owned by Auwi Enterprises Pty. Limited, Sir Tei Abal, PanaPana Enterprises Pty. Limited and Aba Enterprises Pty. Limited to Keas Pty. Limited (Exhibits EEE, FFF, GGG and HHE) and the Lussick option (Exhibit EE) when read together and in context reveal that, as a result of the Keas re-arrangement, the control of the defendant company had moved from sthe hands of Mr ToVadek, Mr Wabiria and Sir Tei Abal (in equal one-thirds shares) largely into the hands of Mr Lussick and Sir Tei Abal. The ultimate situation was that Mr ToVadek was left with a 1/15th interest subject to an option to Keas Pty. Limited, Mr Wabiria was left with a 1/15th interest subject to an option to Keas Pty. Limited, Sir Tei had a 1/15th interest subject to an option to Keas Pty. Limited, Keas Pty. Limited owned 11/15ths, Keas Pty. Limited was effectively owned and controlled by Sir Tei, and Mr Lussick had an option over 50% of Keas Pty. Limited.

Mr Lussick believed that the plaintiff was a threat to him. Mr Lussick believed that the plaintiff was trying to destroy him. Mr Lussick knew that the plaintiff was aware of the extent to which Mr Lussick was involved in the change of control. Mr Lussick convinced himself that the plaintiff would destroy him (by exposing everything unless he could be rid of him first. Thus the plan to sack the plaintiff was formulated; and thus the campaign to discredit the plaintiff and deprive him of as much as possible was launched.

Regarding the Lussick option (Exhibit EE), which has already been executed by Sir Tei Abal and Mr Kopi Kopore, the only reasonable inference to draw (and I so draw it) is that they executed that document at Mr Lussick’s request and that he wanted it executed in his favour.

I thought the explanation to the effect that the Lussick option was some sort of present from the plaintiff to Mr Lussick and his other explanations were incredible and unrealistic. Mr Lussick was unconvincing in his attempts to disown the Lussick option document. The probabilities are, as I see them, that the plaintiff and Mr Smith got their retirement deeds in return for effectively financing the whole re-arrangement, i.e. for giving the guarantees and for putting up much of the guarantees in cash; Mr Lussick and Sir Tei got their increased control over and ultimately ownership of the defendant company by means of the purchase agreements and option agreements on account of developments within the United Party and because of trouble with some members of the Party.

Having had me believe that he (Mr Lussick) was not really involved in the Keas re-arrangement, his own letter on Turangu letterhead dated 8th May 1978 (Exhibit HHHH) was produced to him, which established that he was mistaken concerning the date and that he was very much in control of things himself. At Tape 154.10 he acknowledge that he wrote that letter on his own initiative and that the plaintiff did not tell him to write it.

That Mr Lussick had at least an impaired recollection is to be seen from a comparison of his evidence at Tape 156.6 regarding Mr Hay’s request to the plaintiff on 2nd March 1979 that he hand over his credit cards with the minutes of the meeting held on 5th March 1979 (Exhibit SSS) and the letter to the plaintiff dated 6th March 1979 (Exhibit CC).

Mr Lussick did little to improve his standing from the viewpoint of his credit when he said (at Tape 154.14):

"Nor did I particularly care who the directors (of Melanesian Investments Pty. Limited) were."

I could not believe Mr Lussick when he said (at Tape 153.13) that he did not recall any occasion when he had been with Mr Kopi Kopore when he had signed documents in the past. I thought he was attempting to disassociate himself with Mr Kopore in order to make his own evidence regarding the signing of the Lussick option more credible. As it happened, Mr Lussick did subsequently acknowledge (he really had no alternative when confronted with some documentation) that he was present with Mr Kopore on 7th November 1979 when he signed some documents.

That Mr Lussick had a selective memory was illustrated by the fact that he purported to remember the meetings of 19th June 1978 and 2nd March 1979, but yet he could not (until shown some minutes thereof) remember meetings of directors of Keas Pty. Limited held on 31st October 1979 and 7th November 1979 (see Tape 153.13 and .16).

There was a conflict in evidence between Mr Lussick and Mr Hay regarding the alleged meeting of Melanesian Investments Pty. Limited on 2nd March 1979. Mr Lussick said that there were enough directors present according to the legal advice he had had from Mr Hay, yet Mr Hay said that it was Mr Lussick who told him who the directors of Melanesian Investments Pty. Limited were, as Mr Hay did not know them.

Mr Lussick would have had me believe that his memory of matters appertaining to Melanesian Investments Pty. Limited was defective because he "never had anything really very much to do with Melanesian Investments to (sic) right up to the end" and because in the early years he had "nothing to do with Melanesian Investments". Cross-examination (at Tapes 151.1 to 155.9) produced from Mr Lussick admissions that he had attended every meeting of directors of Melanesian Investments Pty. Limited after 16th December 1975. It was as if Mr Lussick was "taking me for a fool". Mr Lussick made one very curious exculpatory statement. He said (at Tape 155.6):

"Well, it is not my recollection, I probably did (attend each and every meeting of directors of Melanesian Investments Pty. Limited from 16th December 1975 onwards), but, as I said to you, I am not interested in this sort of thing. I leave it to the people who understand and deal with it. All the matters of the records of the various companies were dealt with by the company secretary, presumably under Mr Morris’ direction, and I left it to them. They could do it far better than I could do it. I was busy enough in my own job as it was. I did not want to be tied up in something I was not interested in. In fact it reached the stage where I got so busy with the demands of the Party and the Leader of the Opposition’s Office and the individual friends I had made in Parliament, I ended up giving up every single hobby I had. I had to sell my plane, I had to sell my pistols because I could not attend the club the required 75% of the time. That was no hobbies at all."

Mr Lussick, in what I regard as an attempt to implicate the plaintiff in all that was going on, told me at Tape 155.15 that the plaintiff was at the meeting of Turangu Pty. Limited held on 22nd February 1978. The minutes of that meeting (at p.28 of Exhibit DD) show otherwise.

It was puzzling that Mr Lussick could not remember whether he rang Mr ToVadek or Mr ToVadek rang him on the occasion of the alleged notice to Mr ToVadek of the meeting of directors on 2nd March 1979. If it really had been a matter of giving notice, one would expect Mr Lussick to have remembered whether he had to take any steps to bring the matter to Mr ToVadek’s attention or whether fortuitously Mr ToVadek was in contact with him.

The untruthful witness is often caught out when he seeks to change his evidence when he perceives his own evidence is favouring the cause against which he stands. At Tape 156.14 Mr Lussick, having re-read the minutes of the meeting of directors held in 23rd April 1979, acknowledged that they were a true and correct account of what had happened at that meeting. At Tape 156.15 to .16, when cross-examined specifically about the "A.A. Morris retirement benefit payout", Mr Lussick changed his story when he was asked whether the discussion was in relation to the retirement benefit. He said:

"No, I don’t think that was what he was particularly talking about - holiday pay, superannuation, sick leave, all that sort of thing.....

.....Well, I don’t think it was discussed in those terms in that they were referring to the retirement deed, they were talking about his full entitlements on severance pay or whatever you call it. That isn’t written too precisely in line with the discussion as far as I remember it."

Mr Lussick was being less than frank when he said (at Tape 156.18) that he could not remember any talk at the meeting held on 5th March 1979 (and at which he was the chairman) about having McCubberys remain acting "so as to prevent Alan Morris from using them". He also said that he could not remember any Saturday meetings, yet the meetings of 11th and 25th August 1979 were very important meetings and unlikely to be easily forgotten.

Mr Lussick was careless with the truth when he gave evidence about the confirmation on 14th August 1978 of the minutes of the meeting held on 19th June 1978. He waivered between asserting that nobody read out the earlier minutes to saying that he could not remember and that he could not be sure. I agree with Mr Goldberg that this was an example of Mr Lussick seeking, where he could, to give evidence that suited his case irrespective of its truth. The minutes of 14th August 1978 are important as they represent contemporaneous documentation and weighty evidence as to what occurred on 19th June 1978.

In seeking to have himself excused for not being able to remember things that happened at meetings held a year or so previously and, in particular, what had happened at the meeting held on 14th August 1978, Mr Lussick said (at Tape 157.7):

"How can I pick out a meeting in the last four years and say at that meeting this happened? I can’t remember it."

By saying that he cast grave doubts upon his own capacity to remember meetings such as the 19th June 1978, about which he obviously wanted to give credible evidence which I would accept.

A peculiar (and somewhat disturbing) piece of evidence was given by Mr Lussick when he was asked about his statement in pidgin at the meeting of 19th June 1978. He was asked why he did not set out in that statement to explain to Mr ToVadek about the retirement allowance. He replied:

Mr Lussick’s evidence was not confirmed by the contemporaneous documentary evidence. I made reference to an example of this when I dealt with the minutes of the meeting of 14th August 1978. Another example is to be found at Tape 159.18 when Mr Lussick gave evidence about "the issue arising at board meetings about overseas trips by management". There is simply no corroboration of his testimony to be found in the minutes of 19th July 1977, 19th June 1978 and 6th September 1978.

Mr Lussick gave evidence that was inconsistent with Mrs Connors’ evidence regarding the question of whether she ever typed anything for him. Mr Lussick was adamant (at Tape 160.21) that he never asked Mrs Connors to type a letter for him. Mrs Connors said (at Tape 137.3):

"Mr Lussick gave me some letters to type at one stage. I cannot remember what they were about or who they were to. But I have typed a few - on a few occasions for Mr Lussick."

At Tape 156.3 Mr Lussick said that he did not know whether Mr Smith would be available to attend the meeting on 2nd March 1979, yet Mr Hay said (at p.1374) that he had been informed by Mr Lussick and Sir Tei that Mr Smith was present on the premises and would be available for the meeting.

Mr Lussick would have had me believe that it was the plaintiff who was organising everything about the Keas re-arrangement, yet it was Mr Lussick himself who told the Bank in March 1978 that he had a different plan for the share reconstruction and it was he who was negotiating with the Minister for Finance to change the Taxation Act, who was procuring the incorporation of the family companies, and who wrote the letter on the Turangu letterhead dated 8th May (Exhibit HHHH).

Although insignificant in themselves, there were some coincidences in choice of words which led me to doubt Mr Lussick’s credibility and which suggested collaboration between Mr Lussick and other defence witnesses. I refer to Mr Lussick’s use on several occasions of the word "peanuts" (to be compared with Mr LaiLai’s use of that word at p.1124) and to Mr Lussick’s use of the words "memory test" (to be compared, in particular, with Mr Smith’s use of those words), and Mr Lussick’s allegation that the plaintiff had accused him of "stealing" and sending moneys "South" (to be compared with Mr Kavo’s evidence).

I can readily understand Mr Lussick being the recipient of substantial generosity at the hands of Sir Tei Abal and the other Melanesian shareholders if the whole Keas re-arrangement was as the plaintiff explained it to me and if the plaintiff was to receive (along with Mr Smith) a substantial retirement benefit. I find it difficult to understand why he should be the recipient of such generosity if his own story is true. It follows that the K50,000 gift made to him by Sir Tei in June 1978 in the circumstances as explained by Mr Lussick reflects adversely upon his credit. So also does his participation in the giving of instructions to solicitors in relation to the making of Sir Tei’s will, the bequest to him of 100,000 shares in the defendant company, the payment of his Court fees in relation to the defamation action, and the Lussick option under which he (and not Sir Tei or Mr ToVadek or Mr Wabiria) was to receive (if it was finally executed) 50% of the company.

One matter upon which Mr Goldberg relied and which reflected adversely upon Mr Lussick’s credit, was the matter dealt with at Tape. 161.2 and .3. Mr Lussick suggested that he had applied or had intended to apply to be allotted 10,000 shares in Ginada Pty. Limited "on behalf of Auwi - Sir Tei’s family company", whereas the documentary evidence in the form of a letter dated 9th July 1979 pasted in the minute book of Ginada Pty. Limited (Exhibit BB) clearly establishes that the application was made in the name of Tusitala Pty. Limited, Mr Lussick’s own company. Upon completion of that application Mr Lussick would, I am satisfied on the evidence, have effective financial control of the defendant company. I need not decide whether what was done amounted to an abuse of power on Mr Lussick’s part. What I do decide is that Mr Lussick was guilty of deviousness, if not dishonesty, in relation to the allotment of 10,000 shares at under-value, and he was untruthful in giving his oral evidence. It is possible that he was reluctant to tell the truth not only in Court but also to Sir Tei, Mr ToVadek and Mr Wabiria.

"Q. When Mr Lussick was speaking to Sir Tei (at the meeting on 19th June 1978), he said it would be a good thing to give Alan a retirement allowance because he cannot have any shares in the Keas matter?

There were significant discrepancies between those questions which, it is reasonable to suppose, were based on instructions, and the evidence of Mr Lussick from whom, it is also reasonable to suppose, the instructions must be taken to have come. That there were such discrepancies has had some (but not much) influence upon me in assessing Mr Lussick’s credibility.

Mr Parbery’s evidence was taken on commission. I accept that evidence as far as it goes. It does not advance to any extent the case for the defendant company.

Mr Goldberg drew my attention to a number of changes and inconsistencies in the pleadings. He submitted that an admission made by the defendant company had, by amendment, become altered to a denial, that a number of changes had occurred in the particulars of misconduct alleged against the plaintiff, that a number of allegations that might have been made (if they had substance) were not made, that the allegations regarding the retirement deed had varied from time to time. There was force in what Mr Goldberg submitted, and to a degree the credibility of the defence case as a whole was affected by these changes.

It must be observed that a number of witnesses, who could have been expected to give important evidence in support of the testimony of other defence witnesses, were not called. Mr Spencer Freemantle could have given important evidence to explain what occurred at the meeting held on 23rd April 1979, i.e. after the plaintiff had been "sacked" for the first time. In his absence, the probabilities are that the minutes of that meeting, albeit unconfirmed, are accurate notwithstanding the attempts by some of the defence witnesses (Mr Smith, Mr Hay and Mr Lussick in particular) to point to errors therein or otherwise explain them. After all, not only did Mr Freemantle take the minutes but also it was Mr Freemantle who allegedly did the "routine research" and discovered the overpayments. Mr Freemantle could also have given important evidence about the notices for the 25th August and 13th November meetings and the minutes of the 13th November meetings. In his absence the probabilities are that the minutes of the 9.55 a.m. meeting of directors held on 13th November 1979, albeit unconfirmed, are accurate regarding resolutions numbered (1) and (2) notwithstanding the attempt by Mr Hay to convince me that there were errors regarding the ratification of acceptances and registration of various share transfers in favour of Melanesian Investments Pty. Limited and that resolution numbered (3) was not passed. After all, Mr Freemantle was the person who took those minutes (Exhibit J) and he signed the notice of additional business relating to that meeting (Exhibit H); Mr Freemantle was the secretary of the defendant company who was asked by Mr Hay to convene that meeting (see Exhibit 40).

Mr Roy Evara, the Deputy Leader of the United Party in November 1978, could have given evidence as to what happened at the meeting in the plaintiff’s office in 1978 attended by Mr Doa, Mr Kavo, Mr LaiLai and himself. He was a senior man and could have been expected to throw light upon matters about which there was dispute. The meeting at the Islander Hotel in February 1979 became of greater importance as the case progressed. Mr LaiLai gave evidence of an offer by the plaintiff at that meeting to pay the first K10,000 of legal costs; Mr Doa did not give similar evidence. Mr Evara could have been expected to contribute to the resolution of that conflict.

If anyone could have been expected to provide proof of the allegation that the plaintiff gave assistance and provided confidential documents for the purposes of proceedings No. W.S. 161 of 1979 between Opai Kanungel as plaintiff and the defendant company and ten others as defendants, then that person was Mr Opai Kanungel, but he was not called. If the plaintiff had made an offer of money towards legal fees, Mr Kanungel would have known about it. Mr Kanungel could have given evidence as to what occurred between the plaintiff, Mr Love and himself on 2nd March 1979 at the meeting which Mr Smith would have me believe lasted two and a half hours.

Another witness who surprisingly was not called to give evidence on behalf of the defendant company was Mr Beresford Love. He, as a solicitor, could have been expected to give strong evidence about any assistance given by the plaintiff and about any confidential documents provided by the plaintiff at or consequential upon the meeting held on 2nd March 1979. On the evidence before me no question of legal professional privilege could have arisen to prevent Mr Love giving evidence against the plaintiff if he had any such evidence to give.

Similar observations can be made concerning Mr Brian Davidson and the other solicitors handling these matters in the firm of Messrs Sly & Russell in Sydney. That firm was instructed by the defendant company to prepare the retirement deeds, the motion and Keas documents (including the Lussick option). As with Mr Love, so with Messrs Sly & Russell, no question of legal professional privilege could have arisen to prevent them giving evidence against the plaintiff if they had any such evidence to give.

Both Mr Wabiria and Mr Sam Abal could have been expected to give evidence on behalf of the defendant company on specific issues, but neither was called.

Mr McAlary criticised Mr Goldberg’s style of advocacy in this case and, in particular, criticised the method of cross-examination used. During the course of the trial I found it necessary on a number of occasions to give rulings and indicate my own views concerning the conduct of counsel and the fairness or otherwise of particular questions. I saw no substance in the criticism to the effect that the defence witnesses were subjected to a "memory test". After all, many of the issues in this case could only be resolved after a detailed analysis of what had been said and what had occurred at various meetings and gatherings. At one stage during the trial when I was in the course of giving an extempore ruling and was discussing the meeting held on 19th June 1978, I felt constrained to say that the ultimate findings of fact could only be made if all of the participants, or as many as possible, were called and if as much of the relevant documentation as is possible had been placed before the Court. I said:

"The ultimate findings of fact that will need to be made on that issue can only be made if all of the participants or as many of the participants as possible, i.e. participants at that meeting, are called to give their evidence and if as much of the relevant documentation is placed before the Court. As far as the defendant is concerned, it being a corporation, it’s case can only adequately be presented per medium of the directors of the defendant company and any other relevant persons who attended that meeting. It necessarily follows that, in my view, in a search for truth and accuracy the confrontation of each witness with the evidence or proof of the other material witnesses is desirable, if not essential. Accordingly, I am not surprised that it has been necessary to test Mr Smith for his memory of the events on 19th June 1978 and then test him by reference to the documentation and then to confront him with the evidence of the plaintiff, the other directors who have given evidence and the likes of Mr Fox, the company secretary at the time. I will not be surprised if a similar exercise is necessary if and when Sir Tei Abal and Mr Walter Lussick give evidence in this case. Strenuous as it may be, worrying as it may be, for each of the witnesses concerned, I regard it as at least permissible and probably necessary that defence witnesses be cross-examined in this way in the same way as I would not have regarded it as objectionable, inadmissible or unfair if the proofs of the several defence witnesses had been put to the plaintiff’s witnesses and the plaintiff himself."

Reference was made several times during the trial and it has been made on more than one occasion already in this judgment to the principle in Browne v. Dunn^[3]. On account of the number of topics about which the plaintiff was not cross-examined, the submission made by defence counsel to the effect that I should disbelieve the plaintiff and prefer the evidence of defence witnesses on those topics was less persuasive.

"It seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that the imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which it is suggested indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit. My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses."

"To my mind nothing would be more absolutely unjust than not to cross-examine witnesses upon evidence which they have given, so as to give them notice, and to give them an opportunity of explanation, and an opportunity very often to defend their own character, and, not having given them such an opportunity, to ask the jury afterwards to disbelieve what they have said, although not one question has been directed either to their credit or to the accuracy of the facts they have deposed to."

The principle was thus established that, if it is desired to impeach the credit of a witness on any particular topic or his evidence generally, he should be cross-examined about that topic or about any matter on which adverse evidence will be called, so as to give him a chance to make any explanation open to him, unless he has made ample notice of the matter beforehand or unless, perhaps, his story is patently incredible. That principle is now well-established in this Court as well as elsewhere. I refer to the discussion of that principle in The State v. Ogadi Minjipa^[4], The State v. Saka Varimo^[5] The State v. Manasseh Voeto^[6] and Precision Plastics Pty. Limited v. Demir^[7]; cf. Seymour v. Australian Broadcasting Commission^[8].

There was, as I have said, a considerable amount of documentary evidence that was placed before me. Much of it forms part of the records of the defendant company. Except for those documents which contain false statements therein, such as, for example, the minutes of the meeting of directors of the defendant company purportedly held on 9th November 1978 and portions of the minutes of meetings of directors of the defendant company held on 2nd March 1979, 5th March 1979, 23rd April 1979, and 13th November 1979, to which reference will be made later in this judgment, the documentary evidence is, generally speaking, a contemporaneous record of events and it, by and large, corroborates the plaintiff’s case. It is significant that all but the first-mentioned of the minutes just referred to relate to meetings held on or since the date upon which the plaintiff was "sacked" for the first time. In many respects defence witnesses at various stages in the giving of their evidence also corroborated the plaintiff’s case. It must also be said that in relation to many of the contentious issues in this case there was an absence of contemporaneous documentation tending to corroborate the testimony of the defence witnesses.

One of the contentious issues in this case was whether or not Mr Lussick was taking some initiative in the Keas re-arrangement. There is no doubt, on the evidence, that the plaintiff was aware of much of what was going on and was assisting with the negotiation and implementation of the re-arrangement. Mr Lussick would have me believe that he (Mr Lussick) was not involved to any great extent, that he left everything to the plaintiff, that the plaintiff was the architect or manipulator of the whole scheme, that the retirement deeds were the plaintiff’s "brain-child", and that on that account, there was something sinister in the plaintiff receiving substantial benefits under his deed.

I am satisfied (and so find) on the balance of probabilities that, despite Mr Lussick’s assertions to the contrary, Turangu Pty. Limited, which owned and controlled Ginada Pty. Limited and by virtue of its own and Ginada’s interest in Melanesian Investments Pty. Limited (7 shares each) and which effectively owned and controlled Melanesian Investments Pty. Limited which in turn owned at least 1,100,000 shares and therefore a majority of shares in the defendant company, was the business arm of the United Party and that since December 1975 the persons entitled and intended to benefit from the profits made by the defendant company from such shareholding in the defendant company were the United Party or its members. Mr Lussick himself referred (at Tape 160.2) to the defendant company’s money as "the Party money" and (at Tape 160.9) to the United Party’s expectation of getting some money from the sale of shares. The letters (Exhibits JJJJ, KKKK and LLL) support this conclusion. At Tape 160.16 the following evidence was given by Mr Lussick:

"A. ...They (Sir Tei, Mr ToVadek and Mr Wabiria) intended that the money to be used for the Party’s activities and that they did not want control of the funds to fall in the hands of the Party that presently was at that time.

Q. Are you saying it didn’t matter what was the proportion of holdings between the three of them because ultimately the money was to go to the United Party anyway?

I repeat that Mr Lussick would have me believe that the Keas re-arrangement was solely the work of the plaintiff, but yet when under cross-examination, he finally agreed that a scheme proposed in the course of the re-arrangement had been constructed amongst Sir Tei Abal, Mr ToVadek, Mr Wabiria, and himself, and his own letter to the plaintiff dated 16th March 1978 (Exhibit MMMM) shows the extent of his (Mr Lussick’s) involvement. The fact that the Keas re-arrangement was not wholly the plaintiff’s idea is amply illustrated by the minutes of the several meetings of Turangu Pty. Limited held in February 1978 at the office of the Leader of the Opposition in Armit Street, Port Moresby and at which the plaintiff was not present and also by the letter from Mr Lussick to Mr Beresford Love dated 3rd May 1978 (Exhibit HHHH).

Before turning to another of the contentious issues in this case, it must be stated that the documentary evidence about the Keas re-arrangement makes the plaintiff’s version of the conversations which took place in late May 1978 the more probable. The documentation provides no support for Mr Lussick. The inference to be drawn from such documentation as was tendered is that at or about the beginning of June 1978 the Sydney solicitors, Messrs Sly & Russell (and not the plaintiff) produced a quantity of documents including the retirement deeds for the plaintiff and Mr Smith, the document which became known as the Lussick option over half of Keas Pty. Limited, and the sale agreements of the shares in Melanesian Investments Pty. Limited.

I now turn to deal with the contentious issue of the meeting of directors of the defendant company held on 19th June 1978. The contemporary documentation in relation to that meeting comprises the minutes of the meetings held on 19th June 1978 and 14th August 1978 (when the former minutes were purportedly confirmed "as a true and correct record"). That documentation (found in Exhibit B) corroborates the oral testimony of the plaintiff, Mr Fox and Mr Wilks; it provides no support for the defence case. If both of those sets of minutes were incorrect in a material way (as the defendant company’s counsel invite me to find), one would have expected some action to have been taken and some appropriate references to have been made in the minute book in much the same way as action was apparently taken and an appropriate reference was apparently made as minuted in the minutes of the meeting held on 6th September 1978 - see the paragraph marked "MINUTE". I have already made some reference to the extent to which the defence witnesses at various stages in giving their oral evidence corroborated the plaintiff’s case regarding the meeting of 19th June 1978 and the plaintiff’s retirement deed. Both Sir Tei and Mr ToVadek at one stage or another corroborated the plaintiff’s case about the "K15,000 per year". Mr Lussick told me that he knew prior to the meeting that the allowance was to be K15,000 for each year of service and that he had communicated this to Sir Tei Abal. The plaintiff’s version of what happened at that meeting (quite apart from the contemporaneous documentation) included the assertion that he left the room while the retirement deeds were being considered. That assertion (which I felt constrained to scrutinize most carefully) was corroborated, in effect, by Mr Smith who said (at p.1000) that the plaintiff left the room after the Tutt Bryant matter had been finished and organised the coffee. It is to be noted that the minutes of the 19th June meeting show that Tutt Bryant was the item before the retirement deed.

The meeting purportedly held on 7th September 1978 was a matter that was in dispute. The minutes of the meetings held on 7th September 1978 and 21st November 1978 (when the former minutes were purportedly confirmed "as a true and correct record") corroborate the oral testimony given on behalf of the plaintiff. It is to be observed that the defendant originally admitted (on page 7 of the first Book of Pleadings) that such a meeting had been held when a loan to the plaintiff of K45,000 had been approved.

A matter of some controversy was the meeting in late 1978 when the plaintiff was visited by Mr Doa and Mr Evara and their respective executive officers. Whilst I received no documentary evidence about that meeting, it is significant (as I have already observed) that Mr Evara was not called, and it is noteworthy that the evidence of the plaintiff as to what occurred at that meeting was corroborated by one or other of the witnesses who were called. There was, in relation to many aspects of this matter, a lack of consistency between (and absence of corroboration of) the defence witnesses as to the aspects of that meeting which the plaintiff directly or inferentially disputed. That both Mr LaiLai and Mr Kavo should have confirmed the fact that the plaintiff told them that they would have to go to the Companies Office and they would be advised to get a lawyer is a matter of some significance.

Of course, the "meeting" of 2nd March 1979 came under close scrutiny. Whilst the minutes of that "meeting" support the defence case, each of the witnesses who were called and who gave oral evidence of what occurred provided some support for the plaintiff’s version. It is noteworthy that the plaintiff was not cross-examined in much detail about the events of that day. There was, in relation to many aspects of this matter also, a lack of consistency between (and absence of corroboration of) the defence witnesses as to the aspects of that "meeting" which ultimately were in dispute.

Similar observations can (and must) be made in relation to the conversations which allegedly took place on 27th February 1979.

I will shortly proceed to make the findings of fact. All the findings of fact are made on the balance of probabilities; that is the standard of proof in civil cases like this. Of course, there are ancillary matters about which I have had cause to refer in such terms as "possibly", "probably" and "undoubtedly" or similar phrases. Except to the extent that I have explicitly used such language to explain my approach to any particular matter, it may be assumed that I have reached all my conclusions upon the basis of the civil standard of proof.

In considering the standard of proof in a case such as this where there are numerous issues of fact and where some allegations on each side are more serious than others, I have borne in mind the words of Denning L.J. (as he then was) in Bater v. Bater^[9] (at pages 36 to 37):

".....It is of course true that by our law a higher standard of proof is required in criminal cases than in civil cases. But this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard.

As Best, C.J., and many other great judges have said, "in proportion as the crime is enormous, so ought the proof to be clear". So also in civil cases, the case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject matter. A civil court, when considering a charge of fraud, will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature; but still it does require a degree of probability which is commensurate with the occasion."

I do not understand those words to mean that there is an infinite variety of standards of proof according to the subject-matter with which the Court is concerned, but rather that the subject-matter may cause variations in the amount of evidence required to tilt the balance or probability. When dealing with the standard of proof in a divorce case in Blyth v. Blyth^[10] Lord Denning, then a member of the House of Lords, said:

"In short (standard of proof) comes to this: so far as the grounds of divorce are concerned, the case, like any civil case, may be proved by a preponderance of probability, but the degree of probability depends on the subject-matter. In proportion as the offence is grave, so ought the proof to be clear."

Morris L.J. in Hornal v. Neuberger Products Ltd.^[11] put it this way (at p.266):

"Though no court and no jury would give less careful attention to issues lacking gravity than to those marked by it, the very elements of gravity become a part of the whole range of circumstances which have to be weighed in the scale when deciding as to the balance of probabilities."

1.1 AT ALL MATERIAL TIMES AND, IN PARTICULAR, ON 19TH JUNE 1978, 2ND MARCH 1979 AND 13TH NOVEMBER 1979, THE PLAINTIFF WAS EMPLOYED AS THE MANAGING DIRECTOR OF THE DEFENDANT COMPANY FOR A TERM OF FIVE YEARS FROM 1ST NOVEMBER 1975 UPON TERMS AND CONDITIONS SET OUT IN THE SERVICE AGREEMENT DATED 16TH DECEMBER 1975 AND THE VARIATION AGREEMENT DATED 7TH SEPTEMBER 1977.

2.1 AT ALL MATERIAL TIMES AND, IN PARTICULAR, ON 19TH JUNE 1978, 2ND MARCH 1979 AND 13TH NOVEMBER 1979 THE PLAINTIFF WAS A DIRECTOR OF THE DEFENDANT COMPANY.

3.1 In the course of the Keas re-arrangement in April, May and June of 1978 a bank loan of K300,000 was arranged in favour of Keas Pty. Limited, which funds were used as to approximately K100,000 to pay off the United Party’s overdraft, as to K50,000 to Mr ToVadek, as to K50,000 to Mr Wabiria and as to K100,000 to Sir Tei Abal. Of this last-mentioned sum Sir Tei "gave" Mr Lussick K50,000. In the re-arrangement Keas Pty. Limited purchased "the total equity" in Turangu Pty. Limited which in turn owned Ginada Pty. Limited. Since Turangu Pty. Limited and Ginada Pty. Limited were the only shareholders of Melanesian Investments Pty. Limited which owned (after the sale of four parcels of 100,000 shares to each of Sir Tei Abal personally and the three family companies of Sir Tei, Mr ToVadek and Mr Wabiria) 1,100,000 shares in the defendant company, Keas Pty. Limited effectively owned and controlled the defendant company by virtue of the holding of 1,100,000 shares.

3.2 Important in the scope of things incidental to the granting of such a bank loan of K300,000 were some guarantees, including the guarantee of the plaintiff of the sum of K300,000. A crucial factor was the provision by the plaintiff of A$225,000 as a form of cash security.

3.3 The main beneficiaries under the re-arrangement and associated transactions were:

(a) Sir Tei Abal. Sir Tei became the effective owner (probably not beneficial) and controller of Keas Pty. Limited, and he became the owner (possibly beneficial) of 100,000 shares in the defendant company and his family company (Auwi Enterprises Pty. Limited) became the owner (probably beneficial) of 100,000 shares in the defendant company and he personally received K100,000 in cash. Sir Tei "gave" K50,000 in cash to Mr Lussick. The balance of K50,000 was very much needed by Sir Tei. He bequeathed in his will his own 100,000 shares to Mr Lussick. Of course, he accepted certain responsibilities and liabilities as well. He was nominally the recipient of gifts (not in cash) totalling K383,333.34 from Mr ToVadek and Mr Wabiria. His share in the "equity" of the defendant company increased from 1/3rd to 13/15ths.

(b) Mr Lussick. He could not receive shares in the defendant company in the same way as Sir Tei did and the three family companies of Sir Tei, Mr ToVadek and Mr Wabiria did, because, if he did, the defendant company would stand to lose its s.40B status and its "tax holiday" would almost certainly come to an end. Mr Lussick not only received the "gift" of K50,000 from Sir Tei and was to receive under Sir Tei’s will his 100,000 shares in the defendant company but also stood to benefit (if he saw fit to exercise it) under a yet not-fully-executed option agreement to the extent of 50% of the 1,100,000 shares Melanesian Investments Pty. Limited held in the defendant company. Mr Lussick subsequently (on 9th July 1979) applied for 10,000 shares in Ginada Pty. Limited in the name of his own company, Tusitala Pty. Limited, consideration of which application has been deferred but which application, if granted in conjunction with the exercise by him of the Lussick option, would give him not only a controlling interest in Ginada Pty. Limited but, more significantly, a controlling interest in the defendant company. Mr Lussick accepted certain responsibilities and liabilities as well.

(c) The plaintiff. He was to be provided with a retirement allowance which at the expiration of his service agreement was to provide him with K270,000. He had accepted certain responsibilities and liabilities, and, in particular, he had been a guarantor of the K300,000 bank loan and he had provided A$225,000 as a form of cash security. It must be emphasised that the provision of the retirement allowance for the plaintiff was integrally tied up with the Keas re-arrangement as, without the plaintiff’s cash guarantee, the re-arrangement could not have gone ahead and the shareholders would not have received their money. The plaintiff or his family company could not receive shares in the defendant company because, if he or it did, the defendant company would stand to lose its s.40B status and its "tax holiday" would almost certainly come to an end.

It is to be noted that the retirement deed was signed on 19th June 1978 and the Keas re-arrangement was finalised on 23rd June 1978, but a few days later. There is significance in the close proximity of these dates.

(d) Mr Smith. He was to be provided with a retirement allowance which as at the end of 1980 was to provide him with K200,000. He had accepted certain responsibilities and liabilities, and, in particular, had been a guarantor of the K300,000 bank loan and he had provided some cash security.

3.4 Those who "lost" ownership and control of the defendant company under the re-arrangement and associated transactions were:

(a) Mr ToVadek. Mr ToVadek’s share in the "equity" of the defendant company decreased from 1/3rd to 1/15th. He made a nominal gift (not in cash) to Sir Tei Abal of K191,666.67. On the other hand, his family company (PanaPana Enterprises Pty. Limited) became the owner (probably beneficial) of 100,000 shares in the defendant company and he personally received a much-needed K50,000 in cash.

(b) Mr Wabiria. Mr Wabiria’s share in the "equity of the defendant company decreased from 1/3rd to 1/15th. He made a nominal gift (not in cash) to Sir Tei Abal of K191,666.67. On the other hand, his family company (Aba Enterprises Pty. Limited) became the owner (probably beneficial) of 100,000 shares in the defendant company and he personally received a much-needed K50,000 in cash.

The fact that apparently there is, and has been, no ill-feeling or concern by the "losses" sustained by Mr ToVadek and Mr Wabiria and by the variations in the proportions of shareholdings is to be explained by reference to the fact that the initial shareholding was never regarded as being something personal to them nor was it regarded as something of which they had the beneficial ownership. So, in fact, Mr ToVadek and Mr Wabiria may well have become beneficiaries under the rearrangement and associated transactions to the extent that, whereas previously they were not the beneficial owners of any shares, following the re-arrangement their family companies became the beneficial owners of large parcels of shares.

Although I said in 3.4 that Mr ToVadek and Mr Wabiria "lost" ownership and control of the defendant company, that was of no moment to them. In the ultimate adjustment, Sir Tei Abal, Mr ToVadek and Mr Wabiria, through their respective family companies, were to be the owners (whether beneficial or otherwise) of an equal number of shares in the defendant company, i.e. 100,000 each, that Sir Tei was to own 100,000 shares in his (Sir Tei’s) own name for Mr Lussick (he has willed them to Mr Lussick), and the beneficial owner of the balance of shares in the defendant company (1,100,000 shares) was to remain with the United Party or its members with control of those shares - through Keas Pty. Limited, Turangu Pty. Limited (and Ginada Pty. Limited) and Melanesian Investments Pty. Limited - resting with Sir Tei Abal and (if Mr Lussick saw fit to exercise the Lussick option (Exhibit EE) and his application in the name of his own company, Tusitala Pty. Limited, were granted) with Mr Lussick.

3.5 Except to the extent already mentioned, I need not make any specific findings as to whether any person other than a citizen of this country (and, if so, who) has or has had some present or future legal or equitable right to or interest in any of the shares in the defendant company referred to in findings 3.3 and 3.4 above, and I need not attempt to resolve any dispute as to where the ultimate beneficial ownership of any particular shares in the defendant company and its subsidiaries at any particular time lies.

3.6 The retirement deeds for the plaintiff and Mr Smith were propounded by Mr Lussick. Mr Lussick was actively involved in this aspect of the matter and undoubtedly was a motivating force. He was acting in his dual capacity as a director and "leader" in the eyes of Sir Tei Abal and Mr ToVadek (the word "leader" was Mr ToVadek’s) or adviser to them. He was the go-between for the shareholders and the plaintiff. In discussions with the plaintiff Mr Lussick, after obtaining the plaintiff’s agreement to put up the cash guarantee to support the Keas loan and after some discussion about equity participation, arranged for the plaintiff to go to Sydney to have the documents prepared. It was not that Mr Lussick treated the plaintiff like a messenger boy. The plaintiff, as the chief executive of the defendant company, did what had been discussed. Upon the plaintiff’s return from Sydney, he handed the retirement deeds and the Keas documents (including the Lussick option) to Mr Lussick. It is not accurate to say that it was the plaintiff who orchestrated the whole of the Keas re-arrangement; to say that is to disregard Mr Lussick’s involvement, the extent of which was explained by the plaintiff in his evidence but which was illustrated more particularly by Mr Lussick’s letter of 16th March 1978 (Exhibit MMMM) and Mr Lussick’s evidence at Tape 152.3 to .4 and 160.13 to .14.

3.7 Either Mr Lussick or Sir Tei brought the unexecuted retirement deeds to the meeting of directors of the defendant company on 19th June 1978.

It is to be noted that it was not suggested to the plaintiff or his witnesses that it was otherwise.

3.8 The directors knew at the meeting that there were motions about retirement deeds.

3.9 The directors knew the amounts of money which were inserted into the retirement deeds, i.e. K15,000 per year for each year of service for the plaintiff and K10,000 per year for each year of service for Mr Smith.

3.10 The directors knew that the plaintiff and Mr Smith had been employed by the defendant company for many years.

3.11 Shortly after the matter was first raised by Sir Tei Abal at the meeting and the retirement deeds had been pushed up to the plaintiff as chairman, the plaintiff and Mr Smith both declared their interest in the matter and they both left the room.

3.12 Mr Lussick was appointed chairman of the meeting in the plaintiff’s absence and he actually sat in the plaintiff’s chair.

3.13 Mr Lussick then spoke for about five to ten minutes in both English and Pidgin and read or referred to the motions. The consensus (explicit) was that the plaintiff should receive a reward for his good work over many years and that his retirement deed should be approved. The understanding (at least implicit) was that the plaintiff should receive such a retirement allowance because he could not (for reasons of the defendant company’s tax position) become the beneficial owner of any shares in the defendant company, and he (the plaintiff) had helped with the bank guarantee.

3.14 The written motion (Exhibit GG) was implicitly accepted as the written motion and it was signed by Sir Tei Abal at Mr Lussick’s request. The handwritten figures and words "15,000 (FIFTEEN THOUSAND)" had been inserted by Mr Lussick in his handwriting.

3.15 The actual retirement deeds (Exhibits W and 12) were in front of Mr Lussick on the table at the meeting whilst he was acting as chairman.

That the retirement allowance for Alan Arthur Morris be K15,000 for each year of service or part thereof with the company.

That the retirement deed be approved and that the common seal of the company be affixed to the deed and executed by all voting directors of the company.

Those who voted (but not by the raising of hands) were Sir Tei, Mr ToVadek and Mr Lussick.

3.17 The retirement deeds came into Mr Fox’s possession after the motions had been carried.

3.18 Mr Fox supervised the signing of the retirement deeds and the affixing of the seal.

3.19 The plaintiff’s deed was signed by all the directors who had voted, viz. Mr ToVadek, Sir Tei Abal and Mr Lussick before the plaintiff signed. There is no doubt that the signature of each is affixed. In relation to Mr Lussick’s signature, it is necessary to compare Exhibit W with Exhibits KK, AAAA and CCCC.

The above findings are largely based upon the oral evidence of the plaintiff, Mr Fox and Mr Wilks and, of course, the minutes of the meeting itself. The fact that Mr Lussick’s signature appears on the deed is significant. It is most unlikely that he would have signed that document in any capacity without understanding it.

3.20 The plaintiff and Mr Smith returned to the board-room, and the plaintiff signed his retirement deed.

3.21 Mr Fox took possession of the documents and arranged for the stamp duty to be paid on the documents three or four days later.

3.22 THE BOARD OF DIRECTORS OF THE DEFENDANT COMPANY ON 19TH JUNE 1978 RESOLVED THAT A RETIREMENT DEED (EXHIBIT W) BE ENTERED INTO BETWEEN THE DEFENDANT COMPANY AND THE PLAINTIFF AND A VALID BINDING AGREEMENT (AS TABLED) WAS ACCORDINGLY ENTERED INTO.

It is to be observed that no issue arose as to the validity of the plaintiff’s retirement deed until well after the first action had been commenced. No issue has apparently been raised by the defendant company as to the validity of Mr Smith’s deed (Exhibit 12). If the plaintiff’s retirement deed was sinister, as Mr McAlary submitted it was, and if it was so adverse to the defendant company’s interests, why is it that in August 1979 the defendant company was seeking to rescind the plaintiff’s deed but yet affirm Mr Smith’s deed? The explanations for such differential treatment of two substantially similar deeds were unconvincing. Mr Lussick’s assertion that the plaintiff’s deed was inequitable is of little weight when that assertion is contrasted with his desire to affirm Mr Smith’s deed.

In making the findings set out in 3.6 to 3.21 I have taken into account the following additional facts:

3.23 The minute of the 19th June 1978 (in Exhibit B), having been signed by the plaintiff as chairman at the next succeeding meeting, is prima facie evidence of the truth of the matters stated therein (see Article 113 and s.148 of the Companies Act.

That minute has not been alleged to be false whereas other minutes have been alleged to be false in the pleadings.

3.24 The minute of 14th August 1978, having also been signed by the plaintiff, confirmed the minute of the previous meeting.

3.25 The minute of 6th February 1979 shows that the existence and validity of the retirement deeds was being acknowledged.

Each of these minutes came into existence when there was no real pressure or tension, and before any real question of the plaintiff’s dismissal or of the validity of the retirement deed had arisen.

3.26 Paragraph 7 on page 3 of the minute of 23rd April 1979, albeit unconfirmed, contains an admission or acknowledgement that the plaintiff’s retirement deed was enforceable and that some provision had to be made for the payment in due course of the retirement allowance. That paragraph reads as follows:

"7) R. Hay moved that the Company transfer funds, as they are available, into some form of Interest Bearing Deposit for the purpose of the A.A. Morris retirement benefit payout. This was seconded by Sir Tei Abal.

It is significant that by the date of this meeting real tension existed, the parties were "at arms length" and the first action had been commenced, but yet, at a time when a matter of dispute of such magnitude as the retirement deed would have been expected to be mentioned, no mention is made of any dispute either as to validity or amount. Neither the plaintiff nor Mr Fox were present at that meeting, the former having been "dismissed" for the first time and the latter having resigned.)

3.27 The minutes of 23rd April 1979 had quite obviously been stapled into the minute book (Exhibit B) at page 80 but then later removed and subsequently returned loose to the minute book. That this was done shows that someone associated with the defendant company after 23rd April 1979 was attempting to conceal those minutes (and, in particular, the references to the "A.A. Morris retirement payout" and/or the "payments from P.T.A.") but then thought better of it.

3.28 The annual accounts of the company for the periods ended 30th June 1978 and 31st December 1978 (Exhibits S and T) and the various notations on those accounts constitute admissions and acknowledgements of the plaintiff’s entitlement under his retirement deed and the adoption by the defendant company of the plaintiff’s retirement deed.

Both Mr Maloney (at pages 706 and 713) and Mr Gaylard (at Tape 141.17 and 141.18) explained what a "current liability" is and the reasons for the accounts being in that form. It is significant that the accounts show amounts for "Annual, Long Service Leave & Retirement Benefit" which quite obviously include the plaintiff’s retirement benefit of in excess of K200,000 as "current liabilities" as distinct from "contingent liabilities". At page 2 of the Directors’ Report for the period ended 31st December 1978 signed on 12th May 1979 by Mr Smith and Mr Hay on behalf of the board (part of Exhibit T) and at page 14 (Notes), the following statement appears:

"In March, 1979 a senior employee of the Group terminated and is now suing the Company for wrongful dismissal. The Directors believe that provision has been made for all amounts due on termination and do not expect any further liability in respect of the claim for wrongful dismissal."

The Company has provided Retirement Benefits for persons selected by the Board as having exceptional service records with the Company. K370,000."

3.29 At the Annual General Meeting of the defendant company held on 23rd August 1978 it was resolved (see page 42 of Exhibit A):

That the Annual Report and Accounts of the Company as at 30th June 1978 be accepted as tabled.

At the Annual General Meeting of the defendant company held on 25th August 1979, it was resolved (see page 46 of Exhibit A):

That the Annual Reports and Financial Accounts of the Company as at 31st December 1978 be accepted as tabled.

3.30 The tax returns of the defendant company for the period ended 30th June 1978 lodged in September 1979 and for the period ended 31st December 1978 lodged in January 1980 (Exhibit 45) constitute an admission and acknowledgement of the validity of the retirement deed.

The documentary evidence referred to in 3.22 to 3.29 amounts to a substantial body of evidence.

Whilst some of the evidence given by one or two of the defence witnesses in isolation superficially had "the ring of truth" about it (e.g. Mrs Connors’ evidence), the defence evidence tendered in support of the proposition that the deed had not been properly entered into was overall unconvincing. It was, as Mr Goldberg submitted, "replete with inconsistencies, improbabilities and down-right untruthfulness".

3.31 The plaintiff’s retirement deed was treated as a board matter and it was within the scope of the authority of the board.

3.32 The plaintiff’s retirement deed was entered into with the fully-informed consent of a free and independent board.

The documents were there at the meeting, there was a typed-out motion, Mr Lussick had filled it in, and Mr Lussick was the chairman for that part of the meeting. It is hard to think of anything more that could have been done, save having each director receive separate legal advice on the matter, to ensure that the board members were fully informed.

3.33 The plaintiff was not in breach of any fiduciary duty to the defendant company with respect to his retirement deed.

On the defence case, if anyone was in breach of such a duty to the defendant company, it was Mr Lussick who was, after all, the independent chairman for that part of the meeting, he was Mr ToVadek’s and Sir Tei’s "leader", and he had guided the "Melanesian" directors. If, as the defendant company would have me believe, no-one (not even Mr Lussick) was fully informed about the plaintiff’s retirement deed, then Mr Lussick was in serious dereliction of his duty as chairman and he must have manifested a naivety which I find it impossible to accredit to him. I cannot believe that Mr Lussick, who, amongst many positions he has held, has been Chairman of Committees and Deputy Speaker of the House of Assembly, could be so weak, so ignorant and so incompetent as he would have me believe he was on 19th June 1978.

3.34 In 3.30 I found that the matter of the plaintiff’s retirement deed was within the scope of the authority of the board. There was no obligation, in my judgment, for the approval of the shareholders to be obtained. In understanding what was the obligation of the plaintiff in the situation which existed on 19th June 1978, the case of New Zealand Netherlands Society "Oranje" Incorporated v. Laurentius Cornelis Kuys and Another^[12] must be borne in mind. In that case, Lord Wilberforce, in delivering the judgment of the Privy Council, said (at pages 1129 to 1130):

"The obligation not to profit from a position of trust, or, as it is sometimes relevant to put it, not to allow a conflict to arise between duty and interest, is one of strictness......Naturally it has different applications in different contexts. It applies, in principle, whether the case is one of a trust, express or implied, of partnership, of directorship of a limited company, of principal and agent, or master and servant, but the precise scope of it must be moulded according to the nature of the relationship." (The emphasis is mine.)

It is also important to understand the extent to which there has, since the 19th Century, been a relaxation of the common law principle relating to that obligation by virtue of statutory provisions and articles of association. That there have been such developments in company law was recognised by Romer J. in In Re City Equitable Fire Insurance Company, Limited^[13] where His Lordship said (at p.426):

"It has sometimes been said that directors are trustees. If this means no more than that directors in the performance of their duties stand in a fiduciary relationship to the company, the statement is true enough. But if the statement is meant to be an indication by way of analogy of what those duties are, it appears to me to be wholly misleading. I can see but little resemblance between the duties of a director and the duties of a trustee of a will or of a marriage settlement. It is indeed impossible to describe the duty of directors in general terms, whether by way of analogy or otherwise."

It was disappointing to me that Mr McAlary, in his submissions, referred me to Palmer’s Company Law (21st Edition, 1968) at pages 563 to 564 but omitted to go on to draw my attention to the next section entitled "Relaxation of the above rules" on page 565 where this statement appears:

"These are the ordinary rules of law applicable to transactions in which the directors may have an interest, but a company is at liberty to waive the benefit of such rules and to allow a director to make a contract, or to be interested in a contract, with the company, and modern articles very commonly make some provision accordingly.

A limited relaxation of the strict rules is normally essential in a company. Without them, e.g. if a company wished to start a scheme for providing pensions for ex-employees and ex-officers, no director would be able to vote thereon because he may himself be a beneficiary prospectively under the scheme.....

.....(A) statutory minimum requirement.....is now invariably embodied in the articles. Thus (the) article provides:

‘A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall declare the nature of his interest at a meeting of the directors.....’ "

Mr McAlary also referred me to Modern Company Law (3rd Edition, 1969) by Gower at p.526 but he omitted to go on to draw my attention to the sections entitled "Exclusion clauses in articles" (at pages 528 to 529) and "Statutory provisions for disclosure" (at pages 529 to 531) and the following sections:

The preamble to Article 91 of the Articles of Association of the defendant company (Exhibit D) provides:

"No director shall be disqualified by his office from holding any office or place of profit (except that of Auditor) under the Company or under any company in which this Company shall be a shareholder or otherwise interested or from contracting with the Company either as Vendor Purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way directly or indirectly interested be avoided nor shall any Director be liable to account to the Company for any profit arising from any such office or place of profit realised by any such contract or arrangement by reason only of such Director holding that office or of the fiduciary relations thereby established."

"It shall be the duty of a Director who is in any way directly or indirectly interested in any contract or arrangement or proposed contract or arrangement with the Company to declare the nature of his interest at the meeting of the Directors at which the contract or arrangement is first taken into consideration if his interest then exists or in any other case at the first meeting of the Directors held after the acquisition of his interest, provided that a general notice by a Director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract which may after the date of such notice be made with that company or firm shall be deemed to be a sufficient declaration of interest in relation to any contract so made."

"(1) Subject to this section, a director of a company who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall, as soon as practicable after the relevant facts have come to his knowledge, declare the nature of his interest at a meeting of the directors of the company."

"(8) Except as provided in Subsection (3) of this section, this section is in addition to and not in derogation of the operation of any rule of law or any provision in the articles restricting a director from having an interest in contracts with the company or from holding offices or possessing properties involving duties or interests in conflict with his duties or interests as a director.

To ascertain the meaning of the Articles just quoted, I need go no further than to refer to Hely-Hutchinson v. Brayhead, Ltd. and Another [cccxiv]^1[14]where, in considering the equivalent of Article 91 and Section 123 Lord Wilberforce said (at p.106):

"I shall not read the section, but it is clear to my mind that what it does is to impose a statutory duty on directors of companies to disclose their interest in contracts or proposed contracts under sanction of a monetary penalty and that it says nothing directly as to the effect on a contract or proposed contract of failure to do so. It does contain, however, in sub-s. (5) a statement that nothing in the section shall be taken to prejudice the operation of any rule of law restricting directors of a company from having any interest in contracts with the company.

If the matter rested there, it would be plain that the civil law relations between a director and his company with regard to a contract or proposed contract would be governed by normal principles of law and equity relating to contracts made by persons in a fiduciary position, such principles as govern the position of such persons as trustees or solicitors or anyone else in a similar position. The normal consequences which follow from a contract made by a person in such a fiduciary position are that the contract may be voidable at the instance of, in this case, the company and that in certain cases a director may be called on to account for profits which he has made out of the transaction. The application of this doctrine of equity to companies is very clearly brought out in the case of Transvaal Lands Co. v. New Belgium (Transvaal) Land and Development Co. ((1843-60) All E.R. Rep. 249), a strong case because the contract was between two companies, in one of which a director had an interest. Astbury, J., at first instance and the Court of Appeal went into the general principles of law which relate to these matters in some detail, both of them quoting the well known passage, which I shall not repeat, from Lord Cranworth’s speech in Aberdeen Ry. Co. v. Blaikie Bros. ((1914) 2 Ch. 488). Astbury, J., pointed out that in certain circumstances the appropriate remedy might be to deprive the director of the profits which he had made, but in relation to that particular type of contract, both Astbury J., and the Court of Appeal came to the conclusion that the contract was voidable.

With that in mind, one can see what is the meaning of art. 99 of the company’s articles of association, which is an article that otherwise might appear to be rather obscure in its drafting.....It is couched in a clearly permissive form. It says first that a director may take an interest in a contract, and then says he shall not be liable for the profit provided he has made the statutory declosure. It seems to me what that means is this, that if the statutory disclosure is made, then a director’s contracts with a company are exempted from the normal consequences which would follow under the general law where one person who is in a fiduciary position enters into a contract with a person to whom he owes the fiduciary duty; and there is also the second consequence, that the person in the fiduciary position does not have to account for any profit." The obligation upon a director directly interested in a contract with his company (as was the obligation of the plaintiff in relation to his retirement deed) is "to declare the nature of his interest".

3.35 In the circumstances as arose in this case the plaintiff discharged such fiduciary duty as he owed to the defendant company when he declared his interest and did not participate in the discussion in relation to the resolutions at all. The deed was tabled at a board meeting and the matter was open for discussion under the chairmanship of an independent person. Everything was in the deed and in the resolutions, and there was no concealment of any material fact, misuse of confidential information or the like. The other directors were put on notice "to scrutinise the terms of the deed, knowing the interest of one of their body" (see Palmer’s Company Law (21st Edition, 1968) at p.565 and Costa Rica Railway Company, Limited v. Forwood^[15] at pages 760 to 765).

Mr McAlary relied upon Boardman and Another v. Phipps^[16] and Regal (Hastings) Ltd. v. Gulliver and Others^[17]. However, those cases are to be distinguished from the present one because in both of those cases there was non-disclosure and misuse of the position of fiduciary, whereas in the present case there has been, in my view, proper disclosure in accordance with the Articles and the statute. Furthermore, Boardman and Another v. Phipps (supra) was not a case concerning a company director.

3.36 Because the plaintiff’s retirement deed was under seal, no question of consideration arises. However, if I am found to be wrong in making this finding, I would conclude as a matter of law that there was consideration for the retirement deed. I refer to the plaintiff’s guarantee of the K300,000 bank loan and his provision of A$225,000 as a form of cash security, something which was regarded as an integral part of the Keas re-arrangement and without which it could not have gone ahead. The consideration moved from the plaintiff as promised to Keas Pty. Limited and the three shareholders in the defendant company, Sir Tei Abal (who received K100,000) and Messrs ToVadek and Wabiria (who received K50,000 each). The defendant company indirectly benefited. There was a detriment to the plaintiff (he stood to lose his cash security and to be liable under the guarantee). The consideration was real and sufficient and was capable of estimation in terms of the value referred to above.

It must be remembered that the Keas re-arrangement took place (and the retirement deed was executed) at a time when all the principal participants were friendly towards each other. There was no tension, or pressure, or incentive for incorrect documentation. The defendant company provided the plaintiff with his retirement deed because he was to put up the money.

Although the retirement allowance was described during this case as a "gift", the commercial reality of the situation was that there was a real and substantial quid pro quo. Considering what he stood to lose if things went wrong (apart from the guarantee itself, the cash security of A$225,000 was and is still at risk) the plaintiff was no more a beneficiary than several other persons involved in the Keas re-arrangement.

The evidence, on my assessment of it, plainly does not justify the conclusion that there was a conspiracy, to which the plaintiff was a party, in relation to the retirement deeds. The fact that there were two retirement deeds (one for the plaintiff and one for Mr Smith) and the fact that, as Mr Goldberg submitted, "everyone benefitted from the situation of the loan and no-one was disadvantaged" militate against Mr McAlary’s conspiracy theory. If it was a conspiracy, it is inconceivable that the defendant company would have acknowledged and gone on acknowledging its liability when and for as long as it did and in the manner it did (see the documentary evidence previously referred to in 3.22 to 3.29).

Even if my assessment of Mrs Connors as a witness had been favourable and my assessment of the plaintiff had been unfavourable, it would not have been reasonably open to me to conclude in relation to this aspect of the case, with "a degree of probability which is commensurate with the occasion" and the "gravity" of the defendant company’s allegations that the plaintiff was "doing something sinister in relation to his retirement deed" (see Blyth v. Blyth^[18]). The inconsistency between Mrs Connors’ evidence and the plaintiff’s evidence does not justify the conclusion of a sinister motive or purpose. (Once again attention must be drawn to the documentary evidence previously referred to in 3.22 to 3.29). Mr McAlary has made a grave allegation against the plaintiff in relation to his retirement deed. Even if I had accepted Mrs Connors’ evidence, such evidence was in no way proportionate to the gravity of the charge against the plaintiff. It would not have been sufficient proof.

There was plainly insufficient evidence to justify a finding that the plaintiff "orchestrated the whole affair and manipulated the other players like puppets on a string" and that he "set out deliberately to cheat and defraud three unsophisticated and illiterate nationals in the sum of K250,000". Such a submission is potentially offensive to Sir Tei Abal and Mr ToVadek and possibly Mr Wabiria as well; it disregards the fact (which I find proved) that both Sir Tei and Mr ToVadek are reasonably sophisticated and far from illiterate it ignores the existence in the scope of things of Mr Lussick, an expatriat who cannot be said to be unsophisticated and illiterate and who, as their "leader" and adviser, had had the conduct of the matter on behalf of Sir Tei, Mr ToVadek and Mr Wabiria.

It was submitted by Mr McAlary that the plaintiff was "pulling the wool over the eyes" of the nationals on the board. The flaw in that argument is to be found in the fact that, if the plaintiff was doing that as far as the nationals were concerned, he was also "pulling the wool over the eyes" of Mr Lussick and the other expatriates who attended the meeting on 19th June 1978. I simply cannot believe that the plaintiff would attempt, let alone achieve, deception of such a magnitude.

3.37 The defendant company raised by its pleadings and as part of its case the defence of non est factum or a defence in similar terms. There is no substance in this defence. The relevant directors, Sir Tei Abal, Mr ToVadek and Mr Lussick all knew the type of document they were approving and ultimately signing. Ignorance of some of the provisions of the retirement deed is not enough to sustain that defence. The defence is only available if the document is essentially or radically or fundamentally different from the document the directors thought they were signing, and the onus is on the defendant company (see Gallie v. Lee^[19] and United Dominions Trust Ltd. v. Western^[20]).

3.38 It was argued that, because the resolution (Exhibit GG) refers to clause 5 of the deed and the amount is provided by clause 1 of the deed, there was nothing payable to the plaintiff. I was unimpressed by this argument. Clearly there was a typographical error. The intention of all concerned is clear from the deed itself and the minutes of the meeting.

3.39 IT FOLLOWS FROM THE ABOVEMENTIONED FINDINGS AND MY ASSESSMENT OF THE CREDIBILITY OF THE WITNESSES:

(a) THAT THE DEFENDANT COMPANY BY ITS DIRECTOR AT THAT TIME, MR HAY, ACKNOWLEDGED ON 2ND MARCH 1979 THAT THE DEFENDANT COMPANY WOULD PAY TO THE PLAINTIFF THE AMOUNT DUE TO HIM UNDER THE RETIREMENT DEED,

(b) THAT THE DEFENDANT COMPANY RATIFIED THE RETIREMENT DEED AND ACKNOWLEDGED THAT IT WAS BOUND THEREBY,

(c) THAT THE RETIREMENT DEED WAS TABLED AND APPROVED AT A MEETING OF DIRECTORS HELD ON 19TH JUNE 1978 AND THE COMMON SEAL WAS AFFIXED THERETO PURSUANT TO A VALID RESOLUTION PASSED AT THE SAID MEETING AND DULY EXECUTED, AND

(d) THAT BY REASON OF THE RESOLUTION PASSED AT THE SAID MEETING THE COMMON SEAL DID NOT HAVE TO BE COUNTER-SIGNED BY THE SECRETARY.

It is unnecessary for me to decide whether the defendant company is estopped from asserting that the retirement deed is not binding upon it.

I now turn to consider the question of whether the defendant company validly dismissed the plaintiff as its managing director and removed him as a director on 2nd March 1979. The alleged meeting of directors and the alleged meeting of members held on 2nd March accordingly need to come under scrutiny.

"104. The Directors may at any time and the Secretary upon the request of a Director shall convene a meeting of the Directors. A Director who is not in the Territory or in Australia shall not during such time as he is so absent be entitled to notice of such meeting."

An ordinary meeting of directors is valid if it is convened in accordance with a decision of an earlier meeting of directors to the effect that that meeting be held on a specified date. The power or authority for such an ordinary meeting being convened in that way is contained in the words "The Directors may at any time.....convene a meeting of the Directors" in Article 104. The distribution to the directors of the minutes of that earlier meeting would amount to notice of the later meeting. Of course, separate notice to all the directors may be given.

A special meeting of directors is valid if it is convened in response to the request of a director made to the company secretary. The power or authority for such a special meeting being convened is contained in the words "the Secretary upon the request of a Director shall convene a meeting of the Directors" in Article 104. Notice of such a meeting must be given to all the directors.

A special meeting of directors is valid if all directors are present and none of them denies that it is a board meeting or denies that he has received notice calling such a meeting.

A special meeting of directors may be valid when one or more directors is or are absent provided that notice of that meeting has been given to all the directors.

Notice means something more than knowledge. It means the imparting of knowledge. To receive one’s entitlement to notice of a meeting means that the knowledge that a meeting is to be held is brought to one’s attention. To give notice of a meeting means that one imparts knowledge that a meeting is to be held.

I rely upon the dictum of Hodson L.J. in Cresta Holdings, Ltd. v. Karlin and Others^[21] where His Lordship said (at p.657):

"I do not myself regard the word ‘notice’ as a synonym for the word ‘knowledge’. Notice is a word which involves that knowledge may be imparted by notice but ‘notice’ and ‘knowledge’ are not the same thing, although loosely one sometimes talks as if to act with notice and to act with knowledge were indeed the same."

In Goodyear Tyre & Rubber Co. (Great Britain), Ltd. v. Lancashire Batteries, Ltd.^[22] Lord Evershed M.R. said (at p.12):

"The word ‘notice’ to a lawyer, in my judgment, means something less than full knowledge. It means, no doubt, that the thing of which a man must have notice must be brought clearly to his attention. What, in different cases, may be sufficient notice is a matter which will be decided when those cases come before the courts; but in this case it seems to me that two things are clearly established: first, that the defendants had been told and knew (had been expressly told and clearly knew) that tyres which had been manufactured and supplied by the plaintiffs had had imposed on them by the plaintiffs a condition as to price, including a condition that they should not be resold at other than the appropriate price which the plaintiffs had prescribed. That is clear. The defendants had, furthermore, been told (see para. 4 of the circular) that the details of the condition, that what was the appropriate price in any given case for the resale of those tyres, could be obtained on application to the manufacturer at the address which was stated in the same circular. In my judgment, that constituted in this case ‘notice of the condition’ within the requirement of s.25(1)." (The emphasis is mine.)

Notice must be given sufficiently in advance of the holding of the meeting to enable the directors, if they are not immediately available to make arrangements to attend if they so desire and, if they wish to take steps to prepare or protect themselves, to do so.

I think that a company which by a decision or purported decision of the board of directors at a meeting seeks to dismiss its managing director (and thereby to obtain a benefit for themselves) and to bind both the managing director and any absent director in respect thereof cannot be allowed under colour of such decision or purported decision to retain such benefit unless they have given to all directors sufficient notice of that meeting to enable each of the directors to determine whether they will or will not attend such meeting (cf. Colhoun and Another v. Green and Others^[23]).

It was contended on behalf of the defendant company that as at the commencement of the "meetings" on 2nd March 1979, as evidenced by the share register and other evidence, the shareholders in the defendant company and owners of shares (whether beneficial or otherwise) in the defendant company were as shown in the following diagram A:

P.N.G. Associated Industries Limited (1,500,000 shares)
Melanesian Investments Pty. Limited	Martin ToVadek	Andrew Wabiria	Paterson Lowa	Jimmy Wasaua
(1,499,900 shares)	(25 shares)	(25 shares)	(25 shares)	(25 shares)

and that at the completion of the "meetings" and ever since (including as at 13th November 1979) the shareholders and owners of shares (whether beneficial or otherwise) were as shown in the following diagram B:

P.N.G. Associated Industries Limited (1,500,000 shares)
Melanesian Investments Pty. Limited	Aba Enterprises Pty. Limited	PanaPana Enterprises Pty. Limited	Auwi Enterprises Pty. Limited	Sir Tei Abal
(1,100,000 shares)	(100,000 shares)	(100,000 shares)	(100,000 shares)	(100,000 shares)

There is a superficial attractiveness about those arguments, and I have no doubt that to achieve the change from diagram A to diagram B in the course of the Keas re-arrangement was in the minds of at least some, if not all, of the directors of the defendant company during that period.

However, it was contended on behalf of the plaintiff that, as at the commencement of the "meetings" on 2nd March 1979, as evidenced by the share register and other evidence, the shareholders in the defendant company and owners of shares (whether beneficial or otherwise) in the defendant company were as shown in diagram A (supra), but that at the completion of the "meetings" and ever since (including as at 13th November 1979) the shareholders and owners of shares (whether beneficial or otherwise) were as shown in diagram C:

P.N.G. Associated Industries Limited (1,500,000 shares)
Melanesian Investments Pty. Ltd	?	Martin ToVadek	Andrew Wabiria	Paterson Lowa	Jimmy Wasaua
(1,100,000 shares)	(399,900 shares)	(25 shares)	(25 shares)	(25 shares)	(25 shares)

I feel constrained to accept the plaintiff’s argument. Indeed that is where the weight of the evidence lies. That Melanesian Investments Pty. Limited owned at least 1,100,000 shares but no more than 1,499,900 shares is evidenced by Exhibit C, the share register at folio 33 (see entries marked "balance of shares held" lines 2 and 10) and by Exhibit N, the share certificate held by the Bank of South Pacific Limited as security for the K300,000 loan lent during the Keas re-arrangement. That Messrs ToVadek, Wabiria, Lowa and Wasaua own 25 shares each is evidenced by Exhibit C, the share register at folios 34 to 37 (see entries entered in the register on 16th December 1975) and Exhibits KKK, AAAA, BBBB and CCCC, the only purported instruments of transfer in evidence. The entries entered in the register after 16th December 1975 on folios 34 to 37 and the entries on lines 3, 4, 5 and 6 on folio 33 do not (for the reasons given elsewhere in this judgment) prove otherwise. It might have been otherwise if share certificates and other certificates of transfer in relation to the parcels of 25 shares had been tendered.

I acknowledge that by each of four agreements dated 20th June 1978 (Exhibits AAA, BBB, CCC and DDD) Melanesian Investments Pty. Limited purported to sell 100,000 shares in the defendant company to each of Aba Enterprises Pty. Limited, Auwi Enterprises Pty. Limited PanaPana Enterprises Pty. Limited, and Sir Tei Abal respectively. I also acknowledge that by each of four certificates of transfer dated 23rd June 1978 (Exhibits NN, QQ, OO and PP) the four parcels of 100,000 shares in the defendant company were purportedly transferred to each of Aba Enterprises Pty. Limited, Auwi Enterprises Pty. Limited PanaPana Enterprises Pty. Limited and Sir Tei Abal respectively. Melanesian Investments Pty. Limited, assuming it did not wish, or consider itself able, to sell any of its 1,100,000 shares, purported to sell 100 shares more than it owned.

The conclusion from all this is that the plans of some, if not all, of the directors of the defendant company during the time of the Keas re-arrangement did not materialize and, as a result, persons who were shareholders in the defendant company and entitled to notice of general meetings did not receive same. But I should announce my findings regarding the "meetings" of 2nd March 1979.

4.1 At the meeting of directors of the defendant company held on Tuesday 6th February 1979 it was decided that "the next meeting of directors" be "scheduled for Friday 9th March, 1979 at 5.00 p.m." (see the unconfirmed minutes of the meeting held on Tuesday 6th February 1979 in Exhibit B).

4.2 A special meeting of directors of the defendant company, at which all the directors were present, was held on Monday 26th February 1979.

4.3 At no meeting of directors of the defendant company held prior to 2nd March 1979 was a decision made that a meeting of directors be held on 2nd March 1979.

4.4 All of the directors of the defendant company were not present at the alleged meeting of directors on 2nd March 1979. Mr ToVadek was absent.

4.5 No director requested the secretary of the defendant company, Mr Fox, to convene the alleged meeting of directors on 2nd March 1979.

4.6 The secretary of the defendant company at the time, Mr Fox, did not convene the alleged meeting of directors on 2nd March 1979.

4.7 Accordingly the alleged meeting of directors was not convened in the manner required by the Articles of Association.

4.8 At the time the alleged meeting of directors commenced, all the directors, save and except Mr ToVadek, had knowledge of the alleged meeting. The plaintiff had no advance knowledge at all; Mr Smith had a few minutes advance knowledge. Several of the directors (Sir Tei Abal, Mr Lussick, Mr Sam Abal, and Mr Hay) arrived at the premises of the defendant company where the plaintiff and Mr Smith were at work and thereupon some business was purportedly transacted without either the plaintiff or Mr Smith having the time or opportunity even to consider his own position.

4.9 No notice of the alleged meeting of directors on 2nd March 1979 was given to any of the directors.

4.10 If I am in error as a matter of law in making the finding in 4.9, and if the knowledge that Sir Tei Abal, Mr Lussick, Mr Sam Abal and Mr Hay had amounted to notice, then, as it seems to me, there can be no doubt that no notice was given to Mr ToVadek, the plaintiff or Mr Smith. The fact that a "meeting" was to be held was not brought to the attention of Mr ToVadek before it commenced. The fact that a "meeting" was to be held was brought to the attention of Mr Smith but minutes before it commenced. The fact that a "meeting" was to be held was brought to the attention of the plaintiff as it commenced. Except for what Mr Lussick said to the plaintiff when he entered the plaintiff’s office to the effect "....we want a meeting now" and except for what Mr Hay said to the plaintiff at the commencement of the proceedings: "Alan, I have got some bad news for you. We are dismissing you as managing director and chairman", there is no credible evidence that anyone imparted knowledge or told Mr ToVadek, the plaintiff or Mr Smith that a meeting was to be held.

I disbelieve Mr Tovadek’s evidence and Mr Lussick’s evidence concerning prior notice of the meeting given at page 720 and Tape 153.2 to .6.

4.11 BECAUSE THE ALLEGED MEETING OF DIRECTORS WAS NOT CONVENED IN THE MANNER REQUIRED BY THE ARTICLES OF ASSOCIATION AND BECAUSE NO NOTICE WAS GIVEN TO ALL THE DIRECTORS, THE ALLEGED MEETING OF DIRECTORS WAS INVALID. THE ALLEGED MEETING OF DIRECTORS WAS FOR THE IMPORTANT PURPOSE OF DISMISSING THE MANAGING DIRECTOR, AND THE PROCEEDINGS OUGHT TO HAVE BEEN CONDUCTED WITH SUBSTANTIAL PROPRIETY.

"A notice of meeting, to be good, must be given by persons authorised to summon the meeting, and resolutions passed at a meeting convened by the secretary without the authority of the board are invalid, nor will the consent of directors separately given suffice (Re Haycroft Gold Reduction Co. [1900] UKLawRpCh 84; (1900) 2 Ch. 230; Re State of Wyoming Syndicate (1901) Ch. 431)."

"Notice of the meeting (of directors) must be given to all the directors, for business done at a meeting of which some directors had no notice is invalid, and a director has no power to waive his right to notice (Re Portuguese Copper Mines [1889] UKLawRpCh 95; (1889) 42 Ch. D. 160; Young v. Ladies’ Imperial Club (1920) 2 K.B. 523)."

"....but a casual meeting of....directors, even at the company’s office, cannot be converted into a board meeting if one of them denies that it is a board meeting and has not received notice calling such a meeting (Barron v. Potter [1914] UKLawRpCh 40; (1914) 1 Ch. 895)."

"Prima facie, due notice must be given convening a meeting of directors, and in default the meeting is irregular (Harbon v. Phillips [1883] UKLawRpCh 72; (1883) 23 Ch. D. 14 at p.34; Young v. Ladies’ Imperial Club (1920) 2 K.B. 523)"; but this is not always necessary, for, by the articles, or by the determination of the directors, meetings may be held at fixed times, in which case no notice of each separate meeting need be given. Where notice has to be given, it may be given verbally unless the articles require it to be given in writing, and it must be given a reasonable time before the meeting (Browne v. La Trinidad [1887] UKLawRpCh 191; (1887) 37 Ch. D. 1). Otherwise it will be invalid, unless, indeed, all the directors are present at the meeting."

I have considered those passages carefully and I have read the cases cited therein and they seem to me to support the views which I have tried to express in the paragraphs of this judgment immediately preceding findings 4.1 to 4.11.

In In re Portuguese Consolidated Copper Mines, Limited^[24] Lord Esher M.R. said (at p.168):

"As he (the director not receiving notice) was within reach, and it was perfectly possible to give him notice, it was the duty of the directors to give him notice of the meeting. The circumstances existing at the time when he used the words relied on as a waiver might have been wholly altered, or he might have taken a different view if he had notice of the time and object of the meeting. That notice ought to have been given to him, and there was no such notice. The meeting of the 24th of October was therefore invalid....." (The emphasis is mine.)

"Lord Inchiquin only went to Ireland, and there is a post daily to Ireland, so there was no want of means of communication. There is no evidence whatever that any notice was sent to him of the meeting to be held on the 24th, which was the origin of the meeting of the 26th, and in my opinion, assuming that notice to all would have made the meeting held on the 24th a good meeting, yet if in point of fact notice was not given or sent to all the directors when it could have been given to all or sent to all, the meeting was a bad one, and the whole foundation of the argument breaks down."

In John Shaw and Sons (Salford), Limited v. Peter Shaw and John Shaw^[26] Greer L.J. said in the Court of Appeal (at p.133):

"I do not, and am not entitled to differ from the decision of this Court in Young v. Ladies’ Imperial Club, Ltd. (1920) 2 K.B. 523 and Re Portuguese Copper Mines [1889] UKLawRpCh 95; (1889) 42 Ch. D. 160. Those decisions mean that a meeting of directors having power to make a decision on a given matter is invalid if one of the directors entitled to take part has not been summoned." (The emphasis is mine.)

Regarding the lack of notice to Mr ToVadek, I cannot feel satisfied that the evidence given by Mr ToVadek at pages 760 to 776 was true; I cannot rely upon it. Even if his evidence were true and even if it could be construed as advance notice from Mr Lussick of a meeting to be held that day, it was not given a reasonable time before the meeting. Mr ToVadek was in Rabaul; the other directors were in Port Moresby. There is no way Mr ToVadek, who was entitled to take part in the meeting, could have got to the meeting in time, having, according to Mr ToVadek’s evidence, been summoned only about two hours beforehand. At best the conversation between Mr Lussick and Mr ToVadek about which Mr ToVadek gave evidence (at p.760) and elsewhere) was keeping a director informed about what was happening rather than the imparting of knowledge that a meeting was to be held at a certain time thereby giving him notice to attend if he wanted to and summoning him to attend.

The best oral evidence of the giving of verbal notice of a directors’ meeting can be expected to be given by the person who allegedly gave the notice. It is interesting and significant that Mr Lussick, who, it is claimed by the defendant company, gave such notice, said (at Tape 153.2) that he could not remember if he rang Mr ToVadek or Mr ToVadek rang him and he did not say that he gave Mr ToVadek notice of the intended meeting or ask him to come to the meeting. Mr Lussick’s evidence (at Tape 153.3) amounts to evidence that Mr ToVadek was kept informed about what was happening in his absence rather than evidence that he was being summoned to attend a directors’ meeting to be held at a certain time and place.

For reasons already canvassed, I cannot feel satisfied to the requisite extent that Mr Lussick’s evidence about "notice" to Mr ToVadek represents the truth. In any event his alleged activities, even if believed, did not amount to notice. That is shown by what Mr Lussick said next when under cross-examination. Mr Lussick said that, when he "rang" the plaintiff to tell him "that Sir Tei and the directors wanted a special directors’ meeting that afternoon", he "asked him if 4.30 would suit him". If it was notice that Mr Lussick was giving to the directors and if it was a special meeting to dismiss the plaintiff, the time would have been fixed and suiting the convenience of the plaintiff would have been furthest from Mr. Lussick’s mind. I am satisfied that it would be unsafe to rely upon Mr Lussick’s evidence about "notice" either to Mr ToVadek or to the plaintiff.

Regarding the lack of notice to the plaintiff, I can place no weight upon Mr Lussick’s evidence to the effect that, after lunch on 2nd March, he rang the plaintiff and "told him that Sir Tei and the directors wanted a special directors’ meeting that afternoon" and that he "asked him if 4.30 would suit him" and that the plaintiff replied, "Yes, I will still be here". I found the whole of that evidence incredible; I also could not believe his evidence (also at Tape 153.3):

A. And I said ‘I can’t tell you’ or ‘I don’t know’ or something like that."

It must be observed once again that this alleged telephone conversation was not put to the plaintiff in cross-examination.

Regarding the lack of notice to Mr Smith, he gave no evidence of having received notice from Mr Lussick or anyone else purporting to act on behalf of the directors. At p.973 Mr Smith gave this evidence in cross-examination:

"Q. ..., Was the first you knew about the meeting on 2nd March 1979 (the Friday) when you were out in the workshop at P.N.G. Motors and a message was sent to you by Mr Morris to come inside the board-room?

Q. And, when you went inside, you didn’t know for what purpose you had been summoned?

As to whether notice was given to Mr ToVadek, as Mr Lussick and Mr ToVadek would have me believe on the one hand, or whether no notice was given, as is the plaintiff’s case on the other hand, the likelihood is that no notice was given. The decision to "sack" the plaintiff was only made by Mr Lussick on the morning of 2nd March when the plaintiff was "meeting with Beresford Love and some United Party men in our boardroom". The formalities of giving notice to all directors would hardly have been in the forefront of Mr Lussick’s mind. He was, after all, a layman. Much was happening. It was necessary to move with haste. At Tape 155.18 to .19 Mr Lussick told me all that occurred on 2nd March; it is noticeable that in giving the chronology of events on that day, Mr Lussick did not mention the matter of notice of the "meeting" of directors held later in the day when giving evidence in sequence of his conversations with Mr Smith, Mr Hay, Sir Tei Abal, and Mr ToVadek; the matter of notice was first mentioned by him when he made reference to the alleged telephone conversation with the plaintiff. The conclusion is irresistible that, in the heat of the moment, the directors who were in Port Moresby got together to "sack" the plaintiff and no attention was paid to giving notice as required by the law. Mr Lussick, Sir Tei Abal, Mr Sam Abal and Mr Hay were hell-bent on "sacking" the plaintiff. Perhaps they believed that Mr ToVadek would support them; it is fair to say, with the benefit of hindsight, that his previous attitude and his subsequent attitude both reinforce such a belief. What is clear is that there was little time allowed or available for matters of legal propriety or matters of substance or formalities or, as some might describe them, technicalities.

The plaintiff led me to believe (at Tape 17.12) that he had no knowledge of any directors’ meeting scheduled for 2nd March 1979. Mr Lussick would have me believe that the plaintiff said:

If he said that, it is reasonable to suppose that he had at least some notice of the meeting. But I simply cannot accept Mr Lussick’s evidence on that point. In any event, Mr Lussick was not even supported by other defence witnesses on this point. Mr Hay said that the plaintiff did not say "I declare this meeting open" (p.1374). Mr Smith said (at p.861) that the plaintiff, at the commencement of the "meeting", said "Well, what is this meeting about?" and said (at p.979) that he did not open "this meeting on 2nd March 1979". The only reasonable conclusion open on the evidence is that this was an informal gathering of some of the directors and that the plaintiff was prepared to talk with them on that basis. However determined Mr Lussick, Sir Tei Abal, Mr Sam Abal and Mr Hay may have been (and I find that they were recklessly determined), an informal gathering or casual meeting is not thereby converted into a board meeting and it cannot be treated as such (cf. Barron v. Potter. Potter v. Berry^[27]). As Warrington J. said in that case (at p.901):

"If he had received.....notice.....summoning him to a board meeting different considerations might have arisen."

4.12 The "meeting" of directors was not, as I have indicated, formally opened as a directors’ meeting.

4.13 No chairman was specially appointed for that "meeting". The properly-appointed chairman at the time, viz. the plaintiff, did not act as chairman or put any motion up for discussion or vote.

4.14 Mr Hay had no right to act as chairman and had no power to put any motion to the vote (see Article 106).

There cannot be a valid motion until a properly-appointed chairman puts it to the vote. There was no suggestion that the plaintiff be asked to put a motion to the vote. There was no suggestion of him being replaced as chairman prior to the "vote".

4.15 Regarding the "meeting" of directors, what happened on the afternoon of 2nd March 1979 was that at about 4:30 p.m., Mr Lussick, Sir Tei Abal, Mr Sam Abal and Mr Hay walked into the board-room which was part of the plaintiff’s office. The plaintiff was there. Mr Lussick said, "Where’s John? We want a meeting now. The plaintiff thereupon walked outside and said to one of the girls on the staff of the defendant company, "Where’s John, do you know?" She replied, "Yes, he’s out the back in the workshop." The plaintiff said, "Would you go and get him and ask to come in please?" She said she would. A short time afterwards Mr Smith arrived. The door of the board-room was then closed. Everyone sat down. Mr Hay then said, "Alan, I have got some bad news for you. We are dismissing you as managing director and chairman." The plaintiff replied, "Well, o.k. As you know recently I have been considering resigning, but under these circumstances I won’t, and, if you sack me, it is going to cost you between K300,000 and K400,000. So now, when are you going to tell me the bad news?" Mr Hay then said, "If you claim this you will be paid in full, but, firstly, the board want a look at your employment contract." The plaintiff said that Mr Hay and the board had already seen his employment contract because the members of the board signed it. The plaintiff said, "But I wouldn’t know where it is." Then Mr Smith said, "Hey, wait a minute, we haven’t had a vote on this yet." Mr Hay then said, "I move that way." Mr Lussick said, "I second it." Mr Hay said, "All those in favour?" Mr Lussick, Sir Tei Abal, Mr Sam Abal and Mr Hay all put up their hands. Mr Hay then said, "Against?" Mr Smith then raised his hand and said, "Me." Mr Hay said, "Well, I have already got the minutes written." Mr Smith said, "Make sure that it goes in that I didn’t vote for it." A record was made of that request. Mr Smith held his head in his hands in a manner, as described by the plaintiff, "as if it was a bad dream he was having." Then Mr Hay said, "Sir Tei wants to say something to you." Sir Tei then spoke to the plaintiff in pidgin and said words to the effect of: "We have rung Rabaul; Rabaul is very unhappy with you; we have been friends for a long time; why are you assisting Raphael Doa and Roy Evara and the United Party people? I am very sorry that things have come to this but that is it." The plaintiff then asked Mr Sam Abal to translate to his father in ples tok, and the plaintiff said, "Mr Doa and Mr Evara with their executive officers called at the registered office of the company and asked some things that I could tell them as an officer of the company, i.e. who the shareholders were on the register of the company and who the directors were on the register of the company. Other matters which they asked me about, I could not tell them, as I was an office of the company. They wanted to know. I said that, if they wanted to know, they could go to the United Party’s solicitor and get his advice." Sir Tei said, "I am sori tumas pinis." Some conversation followed about some company keys, after the plaintiff had received a private telephone call. There was also conversation about the plaintiff’s personal papers and a visit was made to the safe. Some documents were placed in a Qantas overnight bag along with some diaries and some Rotary equipment. The plaintiff then walked outside of the board-room, paid a visit to Mr Smith who was then in his office, spoke to him, and then left the premises.

As I have indicated elsewhere in this judgment, the accounts of the "meeting" of directors of 2nd March 1979 as given by the defence witnesses are inconsistent, unreliable, and, in some respects, plainly untruthful.

Although the minutes of the "meeting" of directors of 2nd March 1979 (in Exhibit B) are prima facie evidence of the matters stated in such minutes (see Article 113), I prefer the evidence of the plaintiff.

4.16 The minutes of the "meeting" of directors on 2nd March 1979, though confirmed at the meeting held on 23rd April 1979, are incorrect in a number of respects. Dealing with that portion of the minutes under the heading "DISMISSAL OF EXECUTIVE DIRECTOR" the following appears:

"RESOLVED pursuant to Article 96 that Mr Morris be removed as Executive Director of the Company.

Moved Mr Hay, seconded Mr Lussick; Sir Tei Abal and Mr S. Abal voted in favour of the motion, Mr Smith against it.

No mention had been made at the "meeting" of Article 96, the words "executive director" were not used; "managing director" were the words used. Mr Hay and Mr Lussick voted in favour of the "motion" as well as Sir Tei Abal and Mr Sam Abal.

Notwithstanding the fact that some of the defence witnesses said in evidence that Mr Hay used the words "executive director" when moving the motion, I am in not the slightest doubt that those words were not used. The plaintiff was always known and described as managing director. Unless he had been told otherwise, Mr Hay would have had no reason to suppose at the time of the "meeting" that the plaintiff was other than managing director until he came to read the plaintiff’s service agreement after the "meeting" on 2nd March had taken place. My Hay tried to persuade me that his "clients", Sir Tei Abal and Mr Lussick, had told him. It is hardly credible that Sir Tei could have been the source of such information having regard to his state of knowledge of such matters; Mr Lussick denied (at Tape 156.6) that he had ever told Mr Hay that information.

4.17 Putting to one side the matters considered in 4.12 to 4.14, the motion moved and carried at the "meeting" was, according to the evidence, "that the plaintiff be dismissed as managing director and chairman".

As with all the findings, this finding is made on the balance of probabilities and is based on the evidence that was placed before me. I hasten to state at this juncture that it is quite possible that the motion moved and carried at the "meeting" was impliedly in terms as set out on some draft minutes (presumably hand-written) which Mr Hay had prepared in advance but which were never produced and have not become evidence in this case. That their existence has not been acknowledged and that they have not been produced and tendered does little to assist Mr Hay’s credibility. In the absence of those draft minutes I find myself unable to draw the inference which Mr Goldberg invited me to draw, viz. that the motion moved and carried was impliedly "pursuant to Article 96" - an article which does not empower the directors of a company to dismiss its managing director. If I am in error in not drawing that inference, then a motion incorporating those words (whether directly or by implication) would be invalid for want of capacity or power (see Turner v. Berner and Others^[28]).

4.18 Subject to such questions as the convening of the "meeting", notice of the "meeting", the opening of the "meeting", the chairmanship of the "meeting", and the putting of any motion to the vote dealt with earlier in these findings, an otherwise valid resolution was passed at the "meeting" of directors on 2nd March 1979.

4.19 If I am in error as a matter of law in making the finding in 4.11 in which I held that the alleged "meeting" of directors on 2nd March 1979 was invalid, then, subject to the findings in 4.12 to 4.14, an otherwise valid resolution was passed in the terms as set out in 4.17.

I do not agree with Mr Goldberg that "if the written minute is not relied on as evidence of the resolution adopted as passed by the company, there is no evidence available of any other resolution". With respect, Mr Goldberg, in making that submission, overlooked his own client’s evidence. I do not agree with Mr Goldberg that "there was no motion to remove Morris as managing director or executive director and chairman". The motion that was put to the "meeting" was referred to as "that way" when Mr Hay said, "I move that way." It is reasonable to infer that he was referring to his earlier statement: "We are dismissing you as managing director and chairman." It follows that I do not agree that "there was never a motion actually put to the meeting to that effect".

4.20 The alleged meeting of members held at 10.10 a.m. on 13th November 1979 did not, by the purported "ratification of (the) dismissal of (the plaintiff as) executive director", validate the plaintiff’s dismissal because (1) that meeting was, for reasons to which I shall refer later, invalid, (2) what occurred on 13th November 1979 was a purported ratification of the plaintiff’s dismissal "pursuant to Article 96", i.e. a dismissal which, if it was done in that way, was a nullity for want of power, and (3) that meeting perpetuated an invalidity instead of making good an irregular dismissal.

It would have been otherwise if, subject to such matters as the giving of notice to shareholders, it had been resolved "that the resolution passed or purported to be passed at a meeting or a purported meeting of the directors of the company on 2nd March 1979 in the following terms: ‘that Mr Morris be dismissed as managing director and chairman’ be and is hereby ratified and confirmed".

That the plaintiff’s purported dismissal by the board as managing director or executive director "pursuant to Article 96" is without power and therefore a nullity is to be seen from a reading of Articles 96 and 99.

"96. Subject to the provisions of any agreement for the time being subsisting the Company may at any ordinary or annual general meeting by ordinary resolution remove any Director before the expiration of his period of office and may by ordinary resolution appoint another qualified person in his stead; the person so appointed shall hold office during such time only as the Director in whose place he is appointed would have held the same if he had not been removed."

"99. The Directors may from time to time appoint one or more of their body to be Managing Director or Managing Directors of the Company for a fixed term (not exceeding five years) and may from time to time (subject to the provisions of any contract between him or them and the Company) remove or dismiss him or them from office and appoint another or others in his or their place or places and the Managing Director shall be eligible for re-appointment."

There was no power in the members to ratify and confirm a resolution referring to Article 96 which the directors had no power to pass (see Winthrop Investments Ltd. and Another v. Winns Ltd. and Others^[29]). If the power is vested in the directors (under Article 99), as I hold it was, the members or shareholders cannot exercise it except when the directors are unable or unwilling to exercise that power. In Blair Open Hearth Furnace Company Limited v. Reigart^[30] it was held that the express power vested in the board of appointing additional directors excluded any implied concurrent power in the shareholders. So here the express power vested in the board for removing or dismissing the managing director (Article 99) excludes any implied concurrent power in the shareholders.

In John Shaw and Sons (Salford), Limited v. Peter Shaw and John Shaw^[31] Greer L.J. said (at p.134):

"A company is an entity distinct alike from its shareholders and its directors. Some of its powers may, according to its articles, be exercised by directors, certain other powers may be reserved for the shareholders in general meeting. If powers of management are vested in the directors, they and they alone can exercise these powers. The only way in which the general body of the shareholders can control the exercise of the powers vested by the articles in the directors is by altering their articles, or, if opportunity arises under the articles, by refusing to re-elect the directors of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in the directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders. The law on this subject is, I think, accurately stated in Buckley on Companies as the effect of the decisions there mentioned: see 11th ed., p.723."

In Omega Estates Pty. Ltd. v. Ganke^[32] it was held that the members of a company in general meeting cannot exercise powers which are vested in the directors. Accordingly, the act of ratification referring to Article 96 was ineffective because the power to dismiss pursuant to Article 96 was not the power of the directors.

Insofar as the directors had power to dismiss the plaintiff as managing director, such power arose from Article 99, but this was not the exercise of power that was sought to be ratified.

I am satisfied that the minutes of the general meeting of members held at 10.10 a.m. on 13th November 1979 (Exhibit K) are a true and correct record of the proceedings of that meeting. Mr Hay said the resolution of ratification was passed in the form as shown in the minutes, the minutes show the form of the resolution, and the probabilities are that it was passed in that form. If the resolution of ratification had been in different terms, an error in the minutes of 2nd March would have been exposed and, if one error was exposed there was a risk that other errors would be exposed. That there should have been the purported ratification of a resolution containing the words "pursuant to Article 96" and therefore the perpetuation of an invalidity is not surprising in the circumstances. A detailed analysis of all the minutes (and, in particular, the minutes of 2nd March, 5th March, 23rd April, 11th August, and 13th November some of which contain significant errors and some of which are significantly accurate, shows the extent to which the defendant company and one or more of its directors were prepared to go to make the minutes of the "meeting" held on 2nd March appear untarnished and accurate. One or more of the directors knew that if any part of the minutes of the "meeting" of 2nd March were found to be in error, then there was a risk that other errors would be exposed and then "the cat would be out of the bag". I now readily understand why Mr Hay was unable or unwilling to explain a number of things that were put to him.

"(1) A proceeding under this Act is not invalidated by reason of any defect, irregularity of deficiency of notice or time unless the Court is of opinion that substantial injustice has been or may be caused thereby which cannot be remedied by any order of the Court.

(2) The Court may if it thinks fit make an order declaring that any such proceeding is valid notwithstanding any such defect, irregularity or deficiency.

(3) Without affecting the generality of the last two preceding subsections or of any other provision of this Act, where an omission, defect, error or irregularity (including the absence of a quorum at a meeting of a company or of the directors) has occurred in the management or administration of a company whereby:

(b) there has been default in the observance of the memorandum or articles of the company; or

(c) any proceedings at or in connexion with a meeting of the company or of the directors thereof, or an assemblage purporting to be such a meeting, have been rendered ineffective, including the failure to make or lodge a declaration of solvency under Section 257 of this Act,

(d) may, either of its own motion or on the application of an interested person, make such order as it thinks fit to rectify, or cause to be modified, the consequences in law of any such omission, defect, error or irregularity or to validate an act, matter or thing rendered or alleged to have been rendered invalid by or as a result of any such omission, defect, error or irregularity;

(e) shall, before making any such order, satisfy itself that such an order would not do injustice to the company or to any member or creditor thereof;

(f) where any such order is made, may give such ancillary or consequential directions as it thinks fit; and

(g) may determine what notice or summons is to be given to other persons of the intention to make any such application or of the intention to make any such application or of the intention to make such an order and whether and how it should be given or served and whether it should be advertised in a newspaper.

(4) The Court (whether the company is in process of being wound up or not) may enlarge or abridge any time for doing an act or taking a proceeding allowed or limited by this Act upon such terms (if any) as the justice of the case requires, and any such enlargement may be ordered although the application for it is not made until after the time originally allowed or limited."

Mr McAlary contended that sub-section (1) automatically validates the "meeting" of directors of 2nd March 1979 and that this Court should make a declaration under sub-section (2) that the "meeting" is valid notwithstanding any defect, irregularity or deficiency; but those contentions could not be right because that sub-section only relates to "proceedings under this Act". This Court is not concerned in this case with "proceedings" under the Companies Act; therefore, sub-section (1) has no operation.

Mr McAlary also urged me to exercise the Court’s powers under sub-section(3) (d) and make an order to validate the "meeting" alleged to have been rendered invalid; he submitted that I should be satisfied that such an order would not do "injustice to the company or to any member or creditor thereof". I am reluctant to do as Mr McAlary suggested for a number of reasons. First, s.366 has limitations which do not enable it to be resorted to "simply as a matter of convenience or, when those concerned with the management of a company have, by disregard of the articles and normal practices, produced a legal position which is difficult of resolution" and the section does not authorise the Court "to override the Articles" (see Omega Estates Pty. Ltd. v. Ganke^[33] at p.1423). The onus of satisfying the Court that an order under Section 366(3) (d) would do no injustice to the plaintiff, as a creditor of the defendant company for at least his outstanding salary entitlements, is on the defendant company which seeks to have the jurisdiction of the Court exercised (see Mansfield v. N.S.W. Leagues’ Club Bowling Club Ltd.^[34]). In Ryan v. Kings Cross R.S.L. Club Ltd.^[35] the Court refused to validate a meeting at which a member of a company limited by guarantee had purportedly been expelled from membership. In a case such as this, where a company seeks to validate the dismissal of its managing director and thereby to relieve itself of the consequences of a procedural irregularity, a very strong case must be made out before the Court would exercise its jurisdiction. I am not satisfied that no injustice would be done to the plaintiff by the making of the order sought under s.366(3) (d) and I therefore do not accede to Mr McAlary’s application.

All the circumstances surrounding the meetings held on 13th November 1979 subsequent to the attempted meeting in August 1979 designed to ratify selectively certain resolutions have led me to conclude that the directors of the defendant company (other than the plaintiff) were attempting by somewhat devious means to validate by the process of ratification and other means an earlier invalid dismissal when injunction orders made in this Court on 12th October 1979 and varied on 5th November 1979 were directed against interfering with the rights of the plaintiff. I find it unnecessary to decide at this time whether in fact any breach of the injunction orders occurred. I observe that it was Mr Hay who was the person who had requested, pursuant to Article 104, that the meetings of directors held on 13th November be convened. Whether what occurred amounted to a breach of the injunction orders or not, I would be disinclined to exercise my discretion in favour of the defendant company.

4.22 For reasons which I shall set out later in this judgment, the first meeting of members held on 13th November 1979 was invalid and, on that account, the purported resolution of the directors "that the resolution passed or purported to be passed at a meeting or a purported meeting of the directors of the company on 2nd March 1979 on the following terms:

‘pursuant to Article 96 that Mr Morris be removed as Executive Director of the company’

4.23 Mr McAlary conceded and agreed (at Tape 180.13) that there was no meeting of members on 2nd March 1979 which would have had the effect of removing the plaintiff as a director that day. Notwithstanding that concession I should state shortly the reasons why that "meeting" of "one" (in the person of Mr Lussick) could not have had the effect or removing the plaintiff as a director.

4.24 When I was considering Mr Hay’s credibility, I said that none of the four instruments (Exhibits KKK, AAAA, BBBB and CCCC) were valid instruments of transfer and, in any event, those four "transfers" were not "entered" in the register until 5th March 1979. It follows from that that there were four members of the defendant company who did not receive any notice of the "meeting" of "one" held on 2nd March 1979. Those persons were Mr ToVadek, Mr Wabiria, Mr Lowa and Mr Wasaua.

4.25 There was no meeting of the board of directors of Melanesian Investments Pty. Limited on 2nd March 1979 to appoint Mr Lussick as a representative of that company at the "meeting" of "one" being a "meeting" of members of the defendant company. Mr Lussick’s credibility was weakened even further when he was cross-examined about matters incidental to that "meeting".

4.26 The invalidity of the purported meeting of members (the "meeting" of "one") on 2nd March 1979 arises from one or more of the following subsidiary facts:

(1) No notice was given to all of the shareholders who at that time included Mr ToVadek, Mr Wabiria, Mr Lowa and Mr Wasaua.

(2) There was no-one present who was entitled to vote as there had been no appointment of any person pursuant to s.140 of the Companies Act.

(3) No notice of that meeting had been given to the plaintiff under s.120 of the Companies Act.

(See Sharp v. Dawes^[36]; Regina v. Leech, ex parte Tolstrup^[37] and Re London Flats, Ltd.^[38].)

4.27 IT FOLLOWS FROM MY FINDINGS 4.1 TO 4.26 (AND FROM 4.11 IN PARTICULAR) THAT THE DEFENDANT COMPANY DID NOT VALIDLY DISMISS THE PLAINTIFF AS ITS MANAGING OR EXECUTIVE DIRECTOR OR VALIDLY REMOVE THE PLAINTIFF AS A DIRECTOR ON 2ND MARCH 1979 AND THAT AT THE END OF THE DAY ON 2ND MARCH 1979 THE PLAINTIFF WAS STILL MANAGING DIRECTOR, CHAIRMAN OF DIRECTORS AND A DIRECTOR OF THE DEFENDANT COMPANY.

Further support is found for that overall conclusion, if further support be needed, in the fact that at the meeting of directors held on 23rd April 1979 Mr Hay "addressed the meeting regarding the possibility of the Board having to terminate the employment of Mr A.A. Morris again". It was astonishing to me (and hardly inducive of confidence in the defence witnesses in question) that no-one could remember what was said at that meeting on this topic. Conspicuous by its absence is an affidavit sworn by Mr ToVadek alleging that he did have notice of the directors’ meeting of 2nd March 1979 and/or knew what was happening at it and/or that the meeting was proceeding with his tacit approval.
Support is also found in the resolution passed at the meeting of directors held on 11th August 1979 to hold a meeting on 25th August 1979 "to consider resolutions selectively ratifying past meetings of directors", and the notice dated 17th August 1979 (Exhibit E) which specifically mentions the non-attendance thereof of Mr ToVadek.

I now turn to consider the question of whether the defendant company validly dismissed the plaintiff as its managing or executive director and removed him as a director on 13th November 1979. The several "meetings" held on 13th November accordingly need to come under scrutiny.

It will be convenient to refer once more to Article 104 of the Articles of Association (Exhibit D) which provides:

I need not repeat all the propositions of law set out by me in this judgment immediately prior to 4.1.

"106. The Directors may elect a Chairman and a Deputy Chairman of their meetings and determine the period for which they are to hold office and unless otherwise determined the Chairman or Deputy Chairman shall be elected annually. If no Chairman or Deputy Chairman is elected or if at any meeting neither the Chairman nor Deputy Chairman is present within a quarter of an hour of the time appointed for holding the same the Directors present shall choose some one of their number to be a Chairman of such meeting."

5.1 At no meeting of directors of the defendant company held prior to 13th November 1979 was a decision made that a meeting of directors be held on 13th November 1979.

5.2 The secretary of the defendant company at that time, Mr Freemantle, convened the alleged meeting of directors held on 13th November 1979.

5.3 No director, other than Mr Hay, requested the secretary to convene the alleged meeting on 13th November 1979.

5.4 Mr Hay requested the secretary to convene the alleged meeting on 13th November 1979 (see written request forming part of Exhibit J and Exhibit 40). This gives rise to the question of whether Mr Hay was a director of the defendant company on or shortly before 13th November when he made the written request. It is convenient to consider the position of Mr Sam Abal at the same time.

"85. The Board shall have power at any time and from time to time to appoint any qualified person as a Director either to fill a casual vacancy or as an addition to the Board but so that the total number of Directors shall not at any time exceed the maximum number fixed as above. But any Director so appointed shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation of that meeting."

"93. The Company in general meeting may subject to the provisions of these Articles from time to time appoint new Directors and may increase or reduce the number of Directors in office and may alter their qualifications."

5.5 The minutes of the meeting of directors of the defendant company held on 26th February 1979 (part of Exhibit B) show that Mr Hay was appointed a director on that day. By virtue of Article 85 his appointment was, subject to any question of his re-election, effective until the next following annual general meeting of the company.

5.6 The minutes of the meeting of directors of the defendant company held on 6th February 1979 (part of Exhibit B) show that Mr Sam Abal was appointed a director on that day. By virtue of Article 85 his appointment was, subject to any question of his re-election, effective until the next following general meeting of the company.

5.7 The minutes of the annual general meeting of the defendant company held on 25th August 1979 (part of Exhibit A) show that neither Mr Hay nor Mr Sam Abal was re-elected on that date and they both accordingly ceased to hold office from that date.

5.8 At the time when Mr Hay requested the secretary to convene the alleged meeting of directors on 13th November 1979, he was not a director of the defendant company. Neither Mr Hay nor Mr Smith (who moved the motion of dismissal) nor Mr Sam Abal was a director on 13th November 1979.

5.9 Accordingly the alleged meeting was not convened in the manner required by the Articles of Association.

5.10 BECAUSE THE ALLEGED MEETING OF DIRECTORS ON 13TH NOVEMBER 1979 WAS NOT CONVENED IN THE MANNER REQUIRED BY THE ARTICLES OF ASSOCIATION, THE ALLEGED MEETING WAS INVALID. THE ALLEGED MEETING WAS FOR THE IMPORTANT PURPOSE INTER ALIA OF DISMISSING THE MANAGING DIRECTOR, AND THE PROCEEDINGS OUGHT TO HAVE BEEN CONDUCTED WITH SUBSTANTIAL PROPRIETY.

5.11 The minutes of the alleged meeting of directors held on 13th November 1979 are, subject to one error to which I will refer later, a true and correct account of the proceedings of that meeting.

5.12 The plaintiff read to the "meeting" a prepared statement in the following terms:

"I AM THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THIS COMPANY BUT WITHOUT PREJUDICE TO MY RIGHT TO MAINTAIN THAT I AM CHAIRMAN, I AM PREPARED FOR THE PURPOSE OF THIS PURPORTED MEETING, THE VALIDITY AND REGULARITY OF WHICH I CONTEST IN RELATION TO SOME OF ITS PURPOSES, TO STAND ASIDE AS CHAIRMAN AND LET SOME OTHER PERSON ACT AS CHAIRMAN IN ORDER THAT THE MEETING MAY BE CONDUCTED IN AN ORDERLY, GENTLEMANLY FASHION."

After the plaintiff stood aside, Mr Hay, not being one of the directors, had no right to act as chairman and had no power to put any motion to the vote (see Article 106).

There cannot be a valid motion until a properly-appointed chairman puts it to the vote.

5.13 Mr Wabiria was shown in all the minutes as being "in attendance" or in a representative capacity and was not shown as a director, and, accordingly, was not treated as a voting director. The inference is that he, as a director, was not given notice of the alleged meetings on 13th November 1979.

5.14 When I was considering Mr Hay’s credibility and in 4.24, I said that none of the four instruments (Exhibits KKK, AAAA, BBBB and CCCC) were valid instruments of transfer. I am satisfied that at all material times four parcels of 25 shares each in the defendant company have been owned and held by Mr ToVadek, Mr Wabiria, Mr Lowa and Mr Wasaua. Those parcels were held on trust for Melanesian Investments Pty. Limited (see Exhibit 54). Those shares have never validly been transferred to Melanesian Investments Pty. Limited; valid transfers of those four parcels of shares have never been validly accepted; valid transfers of such shares have never been validly entered in the register of members of the defendant company. Messrs ToVadek, Wabiria, Lowa and Wasaua were at all material times members of the defendant company entitled to notice of general meetings of the defendant company and, in particular, the general "meetings" held on 13th November 1979. I refer once more to what I stated in the paragraphs immediately preceding 4.1.

5.15 No valid resolution has ever been passed at a valid meeting approving the transfer of the four parcels of 100,000 shares. I am here referring to the purported meetings of directors held on 5th March 1979 (of which the plaintiff did not receive any notice) and the 13th November 1979. It is unnecessary for me to decide whether, insofar as the names of the shareholders of those four parcels of 100,000 shares have been entered in the register of members of the defendant company, that was done with sufficient cause. It is also unnecessary for me to decide whether, in these circumstances, any person aggrieved, a member or the company might be entitled to apply to the Court for rectification of the register. What I do decide, on the evidence before me, is that the purported transfers of the four parcels of 25 shares were invalid (see In re Paradise Motor Co. Ltd.^[39]) - they were not "proper instruments of transfer" - and the purported registrations of the four parcels of 25 shares and the four parcels of 100,000 shares were invalid.

"61. An annual general meeting of the Company shall be held in accordance with the provisions of the Act. The Directors or any one of them may at any time wheresoever thought fit convene a general meeting of the Company."

"63. Subject to the provisions of Section 144 of the Act, where is is proposed to pass a special resolution twenty-one days’ notice and in other cases seven days’ notice to the members specifying the place day and hour of meeting and in case of special business the general nature and effect of such business shall be given by notice sent by post or otherwise served as hereinafter provided. The accidental omission to give notice of any meeting to or the non-receipt of any such notice by any of the members shall not invalidate any resolution passed at any such meeting ....."

A general meeting of a company such as the defendant company is valid if it is convened by a director. The power or authority for such a general meeting being convened is contained in the words "The directors or any one of them may at any time wheresoever thought fit convene a general meeting of the Company". Subject to such matters as accidental omission and non-receipt of notice (which do not arise here), notice of a general meeting must be given to all the members entitled thereto "specifying the place day and hour" of the meeting. A meeting shall, notwithstanding that it is called on short notice, be deemed to be duly called if it is agreed by the requisite majority of the number of members having a right to attend and vote at the meeting (see s.138 of the Companies Act).

5.16 The general meeting of the defendant company held at 10.10 a.m. on 13th November 1979 was convened by Mr Smith and by no-one else.

5.17 The general meeting of the defendant company held at 10.18 a.m. on 13th November 1979 was convened by Mr Hay and by no-one else.

5.18 As I have already held (in 5.8), Mr Hay was not then a director of the defendant company. It is to be noted that the failure or omission to re-elect Mr Hay as a director is not to be characterised as a "defect in the appointment" of Mr Hay as a director within the meaning of that phrase as contained in Article 109 and Section 119.

"109. All acts done at any meeting of the Directors or of a committee of Directors or by any person as a Director shall notwithstanding that it shall be afterwards discovered that there was some defect in the appointment of such Directors or persons acting as aforesaid or that they or any of them were disqualified be as valid as if every such person has been duly appointed and was qualified to be a Director."

"119. The acts of a director, manager or secretary are valid notwithstanding any defect that may afterwards be discovered in his appointment or qualification."

The distinction between a defect in appointment and no appointment at all (as was the case here) is drawn in the decision of the High Court of Australia in Grant and Others v. John Grant and Sons Proprietary Limited and Others^[40] in which Williams J. said (at p.34):

"....there is a vital distinction between (a) an appointment in which there is a defect or, in other words, a defective appointment, and (b) no appointment at all."

His Honour was quoting from the decision of the House of Lords in Morris v. Kanssen and Others^[41] in which Lord Simonds said (at pp.471-472):

"There is, as it appears to me, a vital distinction between (a.) an appointment in which there is a defect or, in other words, a defective appointment, and (b.) no appointment at all. In the first case it is implied that some act is done which purports to be an appointment but is by reason of some defect inadequate for the purpose; in the second case there is not a defect, there is no act at all. The section does not say that the acts of a person acting as director shall be valid notwithstanding that it is afterwards discovered that he was not appointed a director. Even if it did, it might well be contended that at least a purported appointment was postulated. But it does not do so, and it would, I think, be doing violence to plain language to construe the section as covering a case in which there has been no genuine attempt to appoint at all. These observations apply equally where the term of office of a director has expired, but he nevertheless continues to act as a director, and where the office has been from the outset usurped without the colour of authority.....The point may be summed up by saying that the section and the article being designed as machinery to avoid questions being raised as to the validity of transactions where there has been a slip in the appointment of a director, cannot be utilized for the purpose of ignoring or overriding the substantive provisions relating to such appointment."

In Omega Estates Pty. Ltd. v. Ganke^[42] Else- Mitchell J. described the distinction as being between "a defective exercise of a power to appoint and the non-exercise or non-existence of such a power".

The re-appointment or re-election of a director is a matter of substance. The substantive provisions in Articles 85 and 93 (referred to immediately prior to 5.5) have to be complied with before a person appointed as a director in the manner of Mr Hay’s initial appointment (and in the same manner as Mr Sam Abal’s initial appointment) can be re-appointed or re-elected. Those substantive provisions cannot be over-ridden by provisions such as Article 109 or Section 119.

If I may adapt the words of Williams J. in Grant and Others v. John Grant and Sons Proprietary Limited and Others^[43] (at p.35) and apply them to the present case, it is a serious matter that a person, such as Mr Hay, should be acting as a director of a company engineering the sacking of that company’s managing director, and purporting to do acts which directly affect the managing director and that company, when he has not been validly appointed.

5.19 Accordingly, the general meeting held at 10.18 a.m. was not convened in the manner required by the Articles of Association.

5.20 No notice of either of the alleged general meetings on 13th November 1979 was given to either Mr Lowa or Mr Wasaua.

5.21 Notice of the first meeting of members held on 13th November 1979 was given on 8th November 1979 and notice of the second meeting of members held on that date was given on 5th November 1979. In both instances there was short notice.

5.22 In neither instance was consent to such short notice given by Mr ToVadek, Mr Wabiria, Mr Lowa or Mr Wasaua.

5.23 Regarding the first meeting of members held on 13th November, the consents to short notice were given by Sir Tei Abal, PanaPana Enterprises Pty. Limited, Aba Enterprises Pty. Limited and Auwi Enterprises Pty. Limited at a time (8th November 1979) when they were not validly members of the defendant company.

5.24 The only person who was entitled to vote at the first meeting was Mr Lussick as the representative of Melanesian Investment Pty. Limited. It was, therefore a "meeting" of "one".

5.25 I refer once more to what I stated in 4.21. It is unnecessary to repeat all that is set out therein apart from emphasising the attempt that was made by somewhat devious means to validate by the process of ratification and other means an earlier invalid dismissal when injunction orders made in this Court were directed against interfering with the plaintiff’s rights.

5.26 There was non-compliance with s.120 of the Companies Act in that the plaintiff was not given special notice thereunder. The relevant portions of s.120 are:

"120(1) A public company may, by ordinary resolution, remove a director before the expiration of his period of office notwithstanding anything in its articles or in any agreement between it and him, but, where a director so removed was appointed to represent the interests of a particular class of shareholders or debenture holders, the resolution to remove him shall not take effect until his successor has been appointed.

(2) Special notice shall be required of a resolution to remove a director under this section, or to appoint some person in place of a director so removed at the meeting at which he is removed, and, on receipt of notice of an intended resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.

(3) Where notice is given under the last preceding subsection and the director concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so:

(a) in any notice of the resolution given to members of the company - state the fact of the representations having been made; and

(b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company),

and, if a copy of the representations is not so sent because they were received too late or because of the company’s default, the director may, without prejudice to his right to be heard orally, require that the representations be read out at the meeting.

(7) Nothing in the preceding provisions of this section shall be taken as depriving a person removed thereunder of compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director or as derogating from any power to remove a director which may exist apart from this section.

(8) A director of a public company shall not be removed or be required to vacate his office, by reason of any resolution, request or notice of the directors or any of them notwithstanding anything in the articles or any agreement."

5.27 BECAUSE THE ALLEGED GENERAL MEETING HELD AT 10.18 A.M. ON 13TH NOVEMBER 1979 WAS NOT CONVENED IN THE MANNER REQUIRED BY THE ARTICLES OF ASSOCIATION AND BECAUSE NO NOTICE OF EITHER OF THE TWO ALLEGED GENERAL MEETINGS HELD ON 13TH NOVEMBER 1979 WAS GIVEN TO ALL THE MEMBERS, EACH OF THE ALLEGED MEETINGS WAS INVALID. THE ALLEGED MEETINGS WERE FOR THE IMPORTANT PURPOSES RESPECTIVELY OF RATIFYING AND CONFIRMING THE DISMISSAL OF THE DEFENDANT COMPANY’S MANAGING DIRECTOR AS MANAGING DIRECTOR AND HIS REMOVAL AS A DIRECTOR AND OUGHT TO HAVE BEEN CONDUCTED WITH SUBSTANTIAL PROPRIETY.

I find it unnecessary to decide whether the facts referred to in 5.21 to 5.26 inclusive would also invalidate either or both of the two alleged general meetings held on 13th November 1979.

"Notice of all general meetings must be given to the members entitled thereto in manner prescribed by the Company’s articles or by Table A, and also to the auditors. If all the members do not attend, a company is not ‘corporately assembled’, so as to be able to do business unless the meeting is held upon notice given to every member entitled thereto, and complies with the provisions of the articles as to stating the objects for which the meeting is held (Baillie v. Oriental Telephone Co., (1915) 1 Ch. 503; cf. Young v. Ladies’ Imperial Club (1920) 2 K.B. 523)."

"A provision in the articles that the accidental omission to give notice to or the non-receipt of notice by any person entitled to receive notice shall not invalidate the proceedings (see clause 51 in Table A, Part I) will prevent any such omission being relied upon as a ground for questioning any resolutions or proceedings of a meeting of which a member did not receive notice. It has been held that such a provision in the articles will validate a meeting where some members did not receive notice of a meeting because their address-ograph plates had been separated from the rest. This had been done because their dividend warrants had previously been returned undelivered and uncashed. (Re West Canadian Collieries Ltd., (1962) Ch. 370. See also Royal Mutual Benefit Society v. Sharman, (1963) 1 W.L.R. 581) . . . . . However it has been held that an article such as clause 51 of Table A will not cover a deliberate omission even if based on a mistaken belief that a member is not entitled to notice (Musselwhite v. C.H. Musselwhite & Sons Ltd., (1962) Ch. 964)."

"Notice of meetings must be given to all those persons who, under the articles, are entitled to receive notice; in addition to the members, the auditors are entitled to notice of all general meetings (1967 Act, s.14(7)). In the absence of any provision in the articles, only those persons who are entitled to attend and vote at a meeting are entitled to receive notice of it. An omission to give due notice to any person entitled to it invalidates a meeting (Smyth v. Darley [1849] EngR 870; (1849) 2 H.L.C. 789); but a clause in the articles commonly relaxes this rule as regards an accidental omission (As to what may constitute an accidental omission, see Re West Canadian Collieries Ltd. (1962) Ch. 370. A mistake of law is not "accidental": Musselwhite v. C.H. Musselwhite & Sons Ltd. (1962) Ch. 964) or non-receipt (art. 51); and as to members who are abroad.....The failure to give notice to one member of a committee has been held to invalidate the meeting even though that member had given notice of inability to attend. (Young v. Ladies’ Imperial Club (1920) 2 K.B. 523.)"

Having read the cases cited in those passages, I have come to the conclusion that the views expressed by me in the paragraph of this judgment immediately preceding finding 5.16 are in accordance with legal authority.

5.28 It is curious that, as I have said earlier, Mr Wabiria, who was purportedly re-elected a director of the defendant company at the annual general meeting held on 25th August 1979 (see the minutes of that meeting in Exhibit A), was not given an opportunity to vote at the directors’ meeting held on 13th November 1979. He is shown in the minutes (Exhibits J and L) as being "in attendance" (see 5.13).

"118(1) At a general meeting of a public company, a motion for the appointment of two or more persons as directors by a single resolution shall not be moved unless a resolution that it be moved has first been agreed to by the meeting without any vote being given against it.

(2) A resolution passed in pursuance of a motion moved in contravention of this section is void, whether or not its being so moved was objected to at the time.

(3) Where a resolution in pursuance of a motion moved in contravention of this section is passed, no provision for the automatic re-appointment of retiring directors in default of another appointment shall apply.

(4) For the purposes of this section, a motion for approving a person’s appointment or for nominating a person for appointment shall be treated as a motion for his appointment.

(5) Nothing in this section applies to a resolution altering the company’s articles.

(6) Nothing in this section prevents the election of two or more directors by ballot or poll.

5.29 At the annual general meeting of the defendant company held on 25th August 1979, motions for the appointment of two or more persons as directors were moved by two single resolutions viz. "that Messrs ToVadek, Wabiria and Smith, who retire by rotation under Article 96, be re-elected to office" and "that Mr R. Doa and Mr A. Opai Kanungel, representing the United Party Holdings, be appointed as Directors", were passed and became resolutions of the defendant company.

5.30 No resolution to the effect that a motion or motions for the appointment of two or more persons as directors by a single resolution or single resolutions be moved was at any stage (and, in particular, prior to the motions referred to in 5.29 were passed) agreed to by the annual general meeting.

5.31 Each of the resolutions referred to in 5.29 were passed in pursuance of a motion moved in contravention of s.118, and each was "void" (under s.118(2) and deemed, on that account, to be "no appointments at all" (see Grant and Others v. John Grant and Sons Proprietary Limited and Others^[44]).

5.32 ACCORDINGLY, THE SEVERAL APPOINTMENTS OF MR TOVADEK, MR WABIRIA, MR SMITH, MR DOA, AND MR KANUNGEL AS DIRECTORS OF THE DEFENDANT COMPANY WERE INVALID.

5.33 Notwithstanding the findings in 5.8 and 5.32, what occurred at 9.55 a.m. on 13th November 1979 and was adjourned till 10.14 a.m. and what occurred between 10.14 a.m. and 10.17 a.m. on that day constituted a directors’ meeting, though an invalid one (see 5.10) and albeit attended by several people, some of whom, though purporting to be directors, were not validly appointed as directors.

I am not persuaded by Mr Goldberg’s submission to the effect that it was not "in fact a meeting of directors as it was a meeting composed of persons who were both directors and purported to exclude other persons who were directors".

5.34 Mr Hay had no right to act as chairman of any of the meetings held that day and had no power to put any motion to the vote (see Article 106).

5.35 The motion "that Alan Arthur Morris be dismissed as Executive Director of the company" was moved by Mr Smith who was not at that time a director of the defendant company.

5.36 In 5.11 I made reference to an error in the minutes of the meeting of directors held on 13th November 1979 (Exhibits J and L) and in 5.15 I found that "no valid resolution has ever been passed at a valid meeting approving the transfer of the four parcels of 100,000 shares". It is recorded in the minutes (Exhibit J) that:

"(3) That the acceptance or purported acceptance and the entry in the Register of Members or purported entry in the Register of Members of the undermentioned transfers of shares in the company by Melanesian Investments Pty. Ltd. at a Meeting or purported Meeting of Directors of the company on 5th March, 1979 be and are hereby ratified and confirmed:

For convenience I call this "resolution No. 3". It is conspicuous that in the notice of additional business to be conducted at that meeting (forming part of Exhibit J and also being Exhibit H) no reference is made to resolution No. 3. No witness, other than Mr Hay, specifically remembered that business. Whilst he did say that the minutes were wrong, for reasons which he could not explain, he would have me believe that it was resolution No. 2 (about which notice was given in Exhibit H) that was wrong and not resolution No. 3. It is to be noted that Mr Freemantle, whom Mr Hay said took the minutes, was not called to give evidence upon this or other important matters. I accept the plaintiff’s evidence to the effect that only resolutions Nos. 1 and 2 were considered and passed (with him voting against). He was not cross-examined on this topic and Mr Hay’s version was not put to him. I disbelieve Mr Hay on this issue. Mr Lussick corroborated the plaintiff (and not Mr Hay) in relation to this issue; his evidence is at Tape 159.17. Mr Smith was unsure whether the business referred to as resolution No. 3 took place.

5.37 FOR THESE ADDITIONAL REASONS EACH OF THE TWO ALLEGED MEETINGS OF MEMBERS HELD ON 13TH NOVEMBER 1979 WAS INVALID.

5.38 For the reasons stated in 4.21, which need not be repeated, I decline to exercise this Court’s powers under s.366 of the Companies Act.

5.39 IT FOLLOWS FROM THE ABOVEMENTIONED FINDINGS AND MY ASSESSMENT OF THE CREDIBILITY OF THE WITNESSES THAT THE DEFENDANT COMPANY DID NOT VALIDLY DISMISS THE PLAINTIFF AS ITS MANAGING OR EXECUTIVE DIRECTOR ON 13TH NOVEMBER 1979 OR VALIDLY REMOVE THE PLAINTIFF AS A DIRECTOR ON 13TH NOVEMBER 1979.

5.40 THE PURPORTED DISMISSAL OF THE PLAINTIFF ON 13TH NOVEMBER 1979 WAS WRONGFUL AND WAS IN BREACH OF THE SERVICE AGREEMENT DATED 16TH DECEMBER 1975 AS VARIED BY THE VARIATION AGREEMENT DATED 7TH SEPTEMBER 1977 AND THEREBY CONSTITUTED A REPUDIATION THEREOF.

5.41 ON 15TH NOVEMBER 1979 THE PLAINTIFF ACCEPTED THE DEFENDANT COMPANY’S REPUDIATION OF THE SERVICE AGREEMENT AS VARIED BY THE VARIATION AGREEMENT.

5.42 THE DEFENDANT COMPANY HAS BEEN IN BREACH OF THE TERMS OF THE SERVICE AGREEMENT AS VARIED BY THE VARIATION AGREEMENT.

It now remains for me to assess the plaintiff’s damages and to calculate what sum is due and owing by the defendant company to the plaintiff under the retirement deed dated 19th June 1978. I make my calculations as at 31st October 1980, a date which is several days after the date upon which I propose to enter judgment but a date which is, because it represents the termination date of the plaintiff’s service agreement, convenient to work to for the purpose of assessing the plaintiff’s entitlement to damages. The right to damages, of course, arose as at 15th November 1979.

I am satisfied that the agreement between the parties was that holiday pay be accumulated and it was clearly the policy and practice of the defendant company to accumulate unused holiday pay. In clause 7 of the service agreement (Exhibit U) as varied by the variation agreement (Exhibit V) it is provided:

"If the Executive Director has any recreation leave entitlement due to him at the date of expiry of this Agreement by normal fluctuation of the (sic) time he shall be entitled to receive pay in lieu of leave for his recreation entitlement and if fares have not been paid by the Company under the provisions of this clause within the twelve months immediately preceding the date of expiry of this agreement he shall be entitled to return first class air fares as provided in this clause....."

Mrs Connors gave evidence (at Tape 136.5) about the accrual of holiday pay in the case of the defendant company’s executives. On page 5 of the Financial Statements for the period ended 30th June 1977 (Exhibit Q) under the item "Annual and long service leave" in CURRENT LIABILITIES an amount of K119,676 is shown as being owing, clearly being an acknowledgement of accumulation of such leave. A similar observation may be made regarding a similar notation on page 7 of Exhibit T.

The meaning of the agreement between the parties is that any unused portion of annual leave could be accumulated. If any existing right to such leave was taken away or forfeited as at 1st November 1975, one would have expected to find clear and unequivocal language to that effect; and there is none. Placing myself (as Lord Wilberforce in Reardon Smith Line Ltd. and Yngvar Hansen-Tangen v. Yngvar Hansen-Tangen and Sanko Steamship Co.^[48] would have me do) in the "same factual matrix in which the parties were" at the time of entering into both the service agreement and the variation agreement, it is clear that the parties intended that the plaintiff should accumulate his unused holiday pay.

If I am in error in law as to the meaning of clause 7, I would hold that the defendant company is estopped from denying the plaintiff’s entitlement by virtue of what is stated in Exhibits MM and T: K41,070

1979	2 1/2 returns	K1,605
1980	2 1/2 returns	K1,605
	2 1/2 singles	K802
Total:		K4,012

I calculate the sum which is due and owing by the defendant company to the plaintiff under the retirement deed dated 19th June 1978 at K270,000.

As a question may arise as to whether there should be a further deduction for income tax on one or more of the items of damages set out above, other than salary, and as I will need to hear the parties as to such questions as interest and costs, I propose to postpone the formal entry of judgment till a date and time convenient to the parties within the next seven days. Subject to any argument on such matters, judgment will be entered for the plaintiff against the defendant company on the claims for the sum of K433,598.

During the course of the lengthy hearing in this case much time and effort was devoted to allegations of "grave misconduct" against the plaintiff. The defendant company, it must be noted, was only entitled to dismiss the plaintiff summarily if, in the terms of clause 13 of the service agreement (Exhibit U), he had, during his employment by the defendant company, been guilty of "grave misconduct which is prejudicial to the interest(s) of the company". If he was not guilty of such "grave misconduct", he could not be lawfully dismissed prior to the termination of his contract. I have already held that the purported dismissals were invalid in any event. Accordingly, it is not necessary for me to decide whether "grave misconduct" has been proved. However, in case my decision should be upset on appeal, I will proceed to indicate my conclusions with reference to the allegations of "grave misconduct" that were made against the plaintiff.

"13. If at any time during his employment by the Company the Executive Director shall be guilty of any grave misconduct which is prejudicially (sic) to the interest (sic) of the Company.... or shall fail to keep such accounts as the Directors of the Company shall from time to time require of the cash credits liabilities stock manufacture and trading transactions of and in connection with the said business and to furnish such accounts to the Board of Directors of the Company as and when required....then and in any of such cases (sic) the Board of Directors may determine the Executive Director’s employment forthwith with one (1) month notice or payment in lieu of notice and upon such determination the Executive Director shall not be entitled to claim any compensation for damages for or in respect of or by reason of such determination."

In a situation such as this the onus of establishing an allegation of "grave misconduct" is on the defendant company (see Blyth Chemicals Limited v. Bushnell^[49]).

The alleged misconduct must be shown to have occurred "during (the plaintiff’s) employment" (see clause 13 supra). Misconduct that occurred prior to 1st November 1975 cannot be relied upon (see Gordon & Gotch (Australasia) Limited v. Frederick John Cox^[50] and Gill v. Colonial Mutual Life Assurance Society Limited^[51]). Misconduct that occurred after dismissal cannot be relied upon either.

"Misconduct" in the context of a company and its managing director means conduct which is inconsistent with the fulfilment of the express or implied conditions of service or conduct which shows that the managing director has disregarded the essential conditions of his contract of service (see Clouston & Co., Limited v. Corry^[52] and Laws v. London Chronicle (Indicator Newspapers) Ltd.^[53]).

".....the question of whether the conduct of an employee amounts to misconduct justifying instant dismissal would generally depend upon whether or not the act complained of can properly be regarded as deliberate or wilful or of such nature as to strike at an essential element in the contract of service."

"Grave misconduct" is more than simply misconduct. Lord Reading C.J. considered the meaning of the words "grave misconduct" in Poad v. Scarborough Guardians^[55] in which His Lordship said (at p.968):

"The misconduct must be of a higher standard than that which would be applied, for example, in the test of whether an employer was justified in dismissing his servant for misconduct. I think we must come to the conclusion that when Parliament introduced the word ‘grave’ before the word ‘misconduct’ it meant that the misconduct must be not only of a character which could properly be described as misconduct, but also that the misconduct must be such as would amount to misconduct of a grave - that is serious and even very serious - character."

Any proven misconduct must be viewed separately and then jointly with other proven misconduct before a decision is made as to whether there has been "grave misconduct". Bowen L.J. considered the situation where there are several allegations of misconduct in Boston Deep Sea Fishing and Ice Company v. Ansell^[56] in which His Lordship said (at p.363):

"There may be cases where the breach of confidence and good faith towards the master would not arise from a simple isolated act, but would be founded on the accumulation and repetition of such acts, but those classes of cases are not cases of fraud at all, they are cases of isolated acts which, if they occurred singly, would not, in themselves, amount to a violation of the confidential relation or breach of the faithful service which the servant is bound to render. In that class of cases it is perfectly proper to consider whether on the whole the conduct of the servant has been such as to amount to a breach of confidence, and if it has not, then the master will not be justified in the dismissal."

It is the misconduct itself which must be considered and not the consequences (see Johnson (Pauper) v. Marshall, Sons & Co., Limit^[57] and Transport Commission (Tas.) v. Neale Edwards Proprietary Limited^[58]).

There must be something more than mere apprehension that the managing director may act in an improper way (see Blyth Chemicals Limited v. Bushnell^[59]).

In due course I will announce my findings in relation to the allegations of "grave misconduct". Before I do that, I should state that, in deciding what weight I should give to the evidence given on behalf of the defendant company in support of those allegations, I have taken into account a number of factors.

First, although there was no legal obligation upon the defendant company to give the plaintiff a reason or reasons for his dismissal, one would have expected that, if good reasons existed, such as, for example, particular acts of "grave misconduct" as committed by the plaintiff, then such reasons would have been mentioned at the time of his purported dismissal. No reason was given when the plaintiff was "dismissed" on 2nd March 1979, nor when a letter was written to him on 6th March 1979 (Exhibit LL), nor when he was "dismissed for the second time" on 13th November 1979. It is most unusual that no reason was given at any stage.

Secondly, the whole course of events from 2nd March 1979 onwards and as reflected in the pleadings and the evidence of defence witnesses shows that reasons to justify dismissal were being looked for or, as Mr Goldberg put it, being "frantically searched around for" and "dredged up". I am satisfied that the defendant company went to such lengths to justify and hopefully validate the purported dismissal, that in the process there was some concealment, reasons were manufactured, evidence was falsified, lies were told and a cover-up occurred.

Thirdly, during the course of giving their evidence, a number of defence witnesses (Sir Tei Abal, Mr ToVadek and Mr Lussick, in particular) revealed why it was that they wanted the plaintiff "out". That these reasons were given is significant. That they do not coincide with the allegations of "grave misconduct" is significant also.

I now proceed to make my findings regarding the allegations of "grave misconduct".

6.1 Although there was no formal meeting in the sense that everyone was physically present at the one time, Sir Tei Abal, Mr Lussick and Mr Smith on or about 7th September 1978 approved, as directors, the loan to the plaintiff of K45,000 for the purpose of purchasing a home.

6.2 Even though a minute (dated 7th September 1978) in the form as shown in Exhibit B was, in the strict sense, false, it was read out and confirmed at the meeting on 21st November. There was further authorization of the loan and a ratification of what had been done.

6.3 It has not been shown that the loan was clandestine; s.125(1) (d) of the Companies Act was referred to in the minutes as confirmed; the loan was, therefore, impliedly subject to s.125(1) (d) of the Companies Act; it was properly recorded in the books and accounts; and it was verified by the auditors. The relevant cheque requisition was raised in an appropriate way. The facts were known to the other directors of the defendant company and were out in the open.

6.4 It not having been proven that there was anything clandestine about what happened or that anything more than a technical breach of s.125 of the Companies Act occurred (i.e. subsequent to the meeting) or that the company suffered any harm, I cannot find that what the plaintiff did was "inconsistent with the fulfilment of (his) conditions of service" in a "serious" way.

6.5 IN RELATION TO THE K45,000 LOAN IT HAS NOT BEEN PROVEN THAT THERE WAS GRAVE MISCONDUCT ON THE PLAINTIFF’S PART.

I was generally more impressed by Mr Goldberg’s submissions with regard to this topic than by Mr McAlary’s submissions. Mr McAlary submitted that the plaintiff was "cunning and deceitful or a cheat". This, like the allegation of "grave misconduct" itself, was a "grave" charge; the "clear proof" of such a charge, albei on the balance of probabilities, is not to be found in the evidence (see Blyth v. Blyth^[60]).

7.1 Mr Fox prepared and had typed the minutes of a meeting of directors of the defendant company purporting to have been held on 9th November 1978 but, in fact, not held at all. He did so on his own initiative to regularize what had already occurred regarding the guarantee in the sum of K5,000 agreed to by the defendant company for the Kone Tigers Rugby League Football Club.

Having regard to other incidents in the company’s history, it is improbable that, if there had been a controversy about the confirmation of those minutes as Mr Lussick and Mr Smith would have me believe, that the matter would have been left "up in the air" and unresolved.

7.4 Those minutes were confirmed on 21st November 1978 with full knowledge of what those minutes were and the board thereby ratified what Mr Fox had done.

7.6 IN RELATION TO THE FALSE MINUTES OF A MEETING PURPORTING TO HAVE BEEN HELD ON 9TH NOVEMBER 1978 BUT, IN FACT, NOT HELD AT ALL THERE WAS NO MISCONDUCT AND CERTAINLY NO GRAVE MISCONDUCT ON THE PLAINTIFF’S PART.

8.1 The plaintiff caused the defendant company to provide for the use from time to time of the plaintiff’s daughter, Rhonda Finlay, a Mazda 925 stationwagon OQY-734. It was the plaintiff’s responsibility and within the scope of his authority as managing director to determine who was to look after the defendant company’s cars in Brisbane. The stationwagon, though used for Mrs Finlay’s purposes, was available for company use when required.

8.3 The value of the equitable interest in the stationwagon at any time, let alone the time of sale, has not been proven.

There was some evidence of the written-down value in the books of account of the defendant company, but I cannot accept that as evidence of the value of the equitable interest. Even if the evidence of the written-down value is to be construed as evidence of the value of the equitable interest, the evidence as a whole shows that there was at least a "book profit" to the defendant company being a contra-indication of under-value.

8.4 It has not been proven that the equitable interest in the stationwagon was sold at an under-value.

The evidence establishes that the value at which the stationwagon was transferred was decided upon by Mr Fox and not the plaintiff. There was no evidence from which it might reasonably be inferred that the plaintiff knowingly or deliberately purchased the equitable interest in the stationwagon at an under-value, if under-value it was, or intended to deceive or otherwise disadvantage the defendant company.

8.5 IN RELATION TO THE STATIONWAGON PROVIDED FOR THE USE OF THE PLAINTIFF’S DAUGHTER, IT NOT HAVING BEEN PROVEN THAT THE EQUITABLE INTEREST THEREIN WAS SOLD TO THE PLAINTIFF AT AN UNDER-VALUE, IT HAS NOT BEEN PROVEN THAT THERE WAS MISCONDUCT, LET ALONE GROSS MISCONDUCT, ON THE PLAINTIFF’S PART.

No satisfactory motive, reason or justification was suggested for Mr Fox raising incorrect entries in relation to the stationwagon. There was no evidence of collaboration or collusion with the plaintiff. I thought that it was implicit in the defence submissions that there had been a conspiracy between Mr Fox and the plaintiff in relation to the stationwagon and the attempted concealment of the transaction. If my understanding of the thrust of Mr McAlary’s submissions is correct, that too was a "grave" charge; the "clear proof" of such a charge, albeit on the balance of probabilities is not to be found in the evidence (see once more Blyth v. Blyth^[61]).

Insofar as Mr Fox purported to use some insurance moneys as part of the purchase price, the probabilities are that those moneys were for the plaintiff to utilize. I am not persuaded that those moneys belonged to the defendant company or were received by the defendant company as its money.

The allegation to the effect that the plaintiff caused the defendant company to make overpayments of salary was not persisted in by the defendant company, and I received no evidence in relation to it.

9.1 IT NOT HAVING BEEN PROVEN THAT THE PLAINTIFF CAUSED THE DEFENDANT COMPANY TO MAKE AN OVERPAYMENT OF SALARY TO THE PLAINTIFF FOR THE MONTHS OF JULY, AUGUST AND PART OF SEPTEMBER 1977, IT HAS NOT BEEN PROVEN THAT THERE WAS MISCONDUCT, LET ALONE GROSS MISCONDUCT, ON THE PLAINTIFF’S PART.

10.1 Someone other than the plaintiff has sought to conceal what really happened with regard to two over-payments which the defendant company received in 1975, one in the amount of K30,243 from the Department of Finance and another in the amount of K11,361 from the Plant and Transport Authority.

The documentation upon which the defendant company relies to support this allegation as against the plaintiff was inadequate and incomplete, even though the defendant company had the custody of the documents throughout.

10.1 The plaintiff did not instruct Mr Sweeney-Hunt or any officer of the defendant company in the months of November and December 1975 or at any other time to raise false debits in the books of the defendant company instead of repaying the respective sums referred to in 10.1.

I have already indicated, when dealing with Mr Sweeney-Hunt’s credibility, that I have totally rejected his evidence on contentious matters and that his evidence of an alleged conversation which he had with the plaintiff on 8th July 1975 was plain wrong.

Mr Parbery’s evidence is not such as to lead to the conclusion that the plaintiff gave him instructions to raise false debits.

The documentation, such as it is, and the debit memoranda in particular (Exhibit III and folios 1984, 1991 and 1992 in Exhibit 20), points to someone other than the plaintiff having given the instructions. The handwriting is Mr Sweeney-Hunts. There is reference to Mr C. Parbery purportedly having instructed or having authorised the movement of two amounts in the books of the defendant company in such a way as to ensure that they appeared to the defendant company’s credit in roughly equal amounts in the months of November and December 1975 in circumstances in which they ought to have all been shown in November 1975. Mr Parbery denied that he authorised such movements of money in the books of the defendant company.

Mr Sweeney-Hunt denied that Exhibit III was in his hand-writing. I disbelieve that denial. The final balance of K55.09 was written-off by Mr Sweeney-Hunt for some reason which he did not want to or would not tell this Court about. Mr Sweeney-Hunt was told to write off that credit balance in January 1976 and knew who it was who had told him but did not want to or would not tell me who it was. It is noticeable that he did not tell me that the plaintiff had authorized the writing-off of the final balance; if it had been the plaintiff, I have no doubt that Mr Sweeney-Hunt would have told me that.
The trial balance as tendered is not evidence of instructions given by the plaintiff with reference to government monies.

10.3 The report from Messrs Coopers and Lybrand (Exhibit 21) and the accounts and records attached thereto do not connect the plaintiff with the false debits.

Mr Maloney told me (at p.694) - and I accept his evidence - that the documentation does not make it obvious that any director of the defendant company gave any direction or instruction as to what was to happen to those over-payments and as to the carrying of those over-payments to profit.

Mr Maloney’s evidence (at pp.694 & 696 in particular) is very important. He told me that it was Mr Smith who spoke to him on 19th April 1979, that Mr Smith told him that an employee of the defendant company had come to him and indicated that some information had become available which led him to believe that there may have been some over-payments back in 1975 (it will be noted, supporting the accuracy of the minutes of 23rd April 1979), that he would discuss it with Mr Hay and then come back (they did on 24th April 1979), and that he told Mr Hay that, in order to do the job properly, he would have to discuss the matter with people such as Mr Parbery, Mr Sweeney-Hunt and the plaintiff. Mr Maloney confirmed that he agreed with Mr Hay not to discuss the matter with any employees or officers of the defendant company at the time the over-payments occurred other than Mr Smith. This was a somewhat curious state of affairs. Why was Mr Smith the only person Mr Maloney was to talk to? Why shouldn’t Mr Maloney speak to the others? All of that evidence was consistent with the true position having been as was stated in the unconfirmed minutes of 23rd April 1979 and not having been as Mr Smith would have me believe. Again it is to be noted that Mr Freemantle, who took the minutes and who, according to those minutes, raised the matter of over-payments from the Plant and Transport Authority and who made no mention of the plaintiff, was not called to explain that the minutes were wrong, if that was so. The only reasonable conclusion open is that the minutes are a true and a correct account of the proceedings of that meeting (they corroborate Mr Maloney’s evidence) and that Mr Smith and Mr Hay are wrong.

10.4 There is no evidence that the plaintiff knew that there was anything wrong regarding the over-payments and that he failed to do what he ought to have done in order to have the amounts repaid.

The evidence that was placed before me indicates that, even if something was wrong regarding the over-payments the matter was put right. Mr Parbery letter dated 30th May 1975 to the Department of Finance (in Exhibit MMM) - a form of indemnity - points to such a conclusion. If, as I think it should not, knowledge of the concealment of the over-payments is to be attributed to the plaintiff, then equally knowledge of this indemnity should also be attributed to him.

On the evidence, if anyone failed to do what ought to have been done in order to have the amounts repaid, it was Mr Smith and/or Mr Parbery; and I cannot infer that their knowledge was the plaintiff’s also.

Mr McAlary submitted that "it is inconceivable that Morris did not know and approve of events so signified in the affairs of P.N.G.A.I. as these overpayments". I reject that submission because of the evidence pointing to Mr Parbery’s and Mr Smith’s participation in the matter and, in particular, Exhibit MMM.

10.5 Mr Smith, who accepted responsibility for management and control of the defendant company during the plaintiff’s absences and who accepted such responsibility when the plaintiff was over-seas at the time of the over-payments, knew about the over-payments from the start.

For reasons I set out when considering Mr Smith’s credibility, I totally reject his evidence regarding this topic. His evidence about the overpayments and the meeting of 23rd April 1979 was unsatisfactory, inconsistent and at variance with his own affidavit sworn in August 1979.

The plaintiff’s evidence on this topic is supported, and Mr Smith’s evidence about his "conversation" with the plaintiff in 1976 is countered by Mr Loader’s evidence taken on commission. That evidence demonstrates that it was Mr Smith who initially knew about the matter and that Mr Smith apparently did not inform the plaintiff of what had happened.

10.6 THE PLAINTIFF NOT HAVING INSTRUCTED OFFICERS OF THE DEFENDANT COMPANY TO RAISE FALSE DEBITS RE OVER-PAYMENTS FROM THE DEPARTMENT OF FINANCE AND THE PLANT AND TRANSPORT AUTHORITY, THERE WAS NO MISCONDUCT AND CERTAINLY NO GROSS MISCONDUCT ON THE PLAINTIFF’S PART.

10.7 IT NOT HAVING BEEN PROVEN THAT THE PLAINTIFF KNEW THAT THERE WAS ANYTHING WRONG REGARDING THE OVER-PAYMENTS AND IT NOT HAVING BEEN PROVEN THAT HE FAILED TO DO WHAT HE OUGHT TO HAVE DONE IN ORDER TO HAVE THE AMOUNTS REPAID, IT HAS NOT BEEN PROVEN THAT THERE WAS MISCONDUCT, LET ALONE GROSS MISCONDUCT, ON THE PLAINTIFF’S PART.

11.1 In proceedings No. W.S. 161 of 1979 instituted on 12th March 1979, Mr Opai Kanungel brought an action against the defendant company and ten others as defendants seeking inter alia declarations in relation to certain shares held by Sir Tei Abal, Mr Kopi Kopore, Mr Martin ToVadek and Mr Andrew Wabiria and orders by way of injunctions inter alia against the defendant company.

11.2 The allegation of the defendant company is formulated in the same way in both the first action and the second action.

11.4 There is no evidence that on or before 2nd March 1979 the plaintiff had provided any confidential documents to Mr Kanungel or his advisers.

11.5 Such evidence as I had placed before me shows that on 2nd March 1979 no decision had yet been made to institute proceedings; in fact, a compromise was being negotiated (see, in particular, Mr Kavo’s evidence at pages 1237 to 1239 and Mr Beresford Love’s letter dated 2nd March 1979 - Exhibit 34).

11.6 The plaintiff did pay K200 to Mr Kavo. That was not for the purposes of the proceedings but rather to assist in achieving the compromise being attempted.

It is to be noted that this payment of K200 was not relied upon by the defendant company as constituting "assistance given" and is not alleged to have been "grave misconduct".

11.7 The plaintiff did not give any assistance for the purposes of the proceedings.

I accept the plaintiff’s versions of the meeting in November 1978, his meeting with Mr LaiLai and Mr Kavo on 27th February 1979 and the meeting at the Islander Hotel. I need not repeat what I said about their inconsistent and inconclusive evidence which I dealt with when considering their credibility and the credibility of Mr Doa. The plaintiff’s versions are, as it seems to me, the more probable.

Much was made of the "meeting" in the plaintiff’s office attended by the plaintiff, Mr Love and Mr Kanungel having regard to the fact that neither Mr Love nor Mr Kanungel were called, the only reasonable inference to draw is that, if any discussion occurred, it was directed towards the settlement of the dispute rather than towards the bringing of proceedings. However, I accept the plaintiff’s account of what happened in his office, and totally reject Mr Smith’s evidence about the "meeting" lasting some hours.

11.8 THE PLAINTIFF NOT HAVING GIVEN ANY ASSISTANCE AND NOT HAVING PROVIDED ANY CONFIDENTIAL DOCUMENTS FOR THE PURPOSES OF THE PROCEEDINGS IN W.S. 161 OF 1979 BETWEEN OPAI KANUNGEL AS PLAINTIFF AND THE DEFENDANT COMPANY AND TEN OTHERS AS DEFENDANTS ON OR BEFORE 2ND MARCH 1979, THERE WAS NO MISCONDUCT PRIOR THERETO AND CERTAINLY NO GROSS MISCONDUCT ON THE PLAINTIFF’S PART.

11.10 In the period between 2nd March 1979 and 15th November 1979 the plaintiff was not permitted to act as managing director of the defendant company and he was unable to act in any way to bind the defendant company. The defendant company was refusing to recognise the service agreement.

11.11 The plaintiff did swear an affidavit on 15th March 1979. The exhibits to that affidavit were given to the plaintiff by Mr Hay on 5th or 6th March 1979. The documents may not properly be said to be the confidential documents of the defendant company.

11.12 The plaintiff attended at the office of the Public Prosecutor in March with Mr Love. Such attendance was, in the circumstances, no more than an attendance upon a constitutional office-holder charged with the responsibility of up-holding the law.

11.13 The plaintiff attended with Mr Johnstone of the Police Department at the offices of the defendant company when certain books and records were seized. In the circumstances, there was nothing improper about such an attendance.

11.14 If I am wrong in concluding that the plaintiff did not give any assistance and did not provide any confidential documents for the purposes of the proceedings in W.S. 161 of 1979, then the giving of such assistance as was given and/or the providing of such documents as were provided could not amount to "grave misconduct" on the plaintiff’s part for the reason that, the United Party or its members, being the beneficial owners of some shares in the defendant company, the plaintiff was only assisting the United Party or its members to assert that right, a right which on any reasonable view of Mr Lussick’s evidence (at Tapes 160.5 to 161.12) was acknowledged by him. It is in this context that the change in the shareholding as a result of the Keas re-arrangement becomes important.

It should not be thought that conduct of this kind must be "grave misconduct" because the consequence may be that the defendant company would lose its s.40B status and be liable for a substantial amount of tax. I repeat that it is the misconduct itself and not the consequences that must be looked at. If, as a result of this litigation, the defendant company’s tax position is affected, then it does not follow that the plaintiff was the cause of that situation and that he has therefore been guilty of "grave misconduct". The tax position will be affected or not by the true facts and by the operation of the law. The facts upon which any tax decision will be based are likely to include those facts about which Mr Lussick gave evidence whilst he was in the witness box and, of course, the documentation.

11.15 THE PLAINTIFF NOT HAVING PROVIDED ANY CONFIDENTIAL DOCUMENTS TO MR OPAI KANUNGEL OR HIS ADVISERS AND NOT HAVING GIVEN ANY ASSISTANCE FOR THE PURPOSES OF PROCEEDINGS NO. W.S. 161 OF 1979 ON OR BEFORE 13TH NOVEMBER 1979, THERE WAS NO MISCONDUCT AND CERTAINLY NO GROSS MISCONDUCT ON THE PLAINTIFF’S PART.

12.1 I have already found (in 3.32) that the plaintiff’s retirement deed was entered into with the fully informed consent of a free and independent board.

12.2 I have already found (in 3.33) that the plaintiff was not in breach of any fiduciary duty to the defendant company with respect to his retirement deed.

12.3 I have already found (in 3.35) that in the circumstances as arose in this case the plaintiff discharged such fiduciary duty as he owed to the defendant company.

12.4 The plaintiff was therefore not in conflict between his duty and his interest in becoming a party to the retirement deed.

12.5 THE PLAINTIFF NOT HAVING BEEN IN CONFLICT BETWEEN HIS DUTY AND HIS INTEREST AND THE RETIREMENT DEED NOT HAVING BEEN ENTERED INTO WITHOUT THE FULLY INFORMED CONSENT OF A FREE AND INDEPENDENT BOARD, THERE WAS NO MISCONDUCT AND CERTAINLY NO GROSS MISCONDUCT ON THE PLAINTIFF’S PART.

Under clause 13 of the service agreement (Exhibit U) the defendant company’s right of dismissal is dependent upon "grave misconduct which is prejudicial to the interest(s) of the company..... or.....failure to keep such accounts as the directors of the company shall from time to time require of the cash, credits, liabilities, stock, manufacture and trading transactions of and in connection with the said business".

"(2) To cause to be kept the usual books of account and to have the same punctually posted up so as to be a complete record of all purchases and sales made and moneys paid and received in the course of the business.

(6) Not at any time either directly or indirectly to deal with or employ the stock-in-trade, money credits or other effects from time to time belonging or owing to the company in connection with the business for his own use or benefit.

(7) Not to do or suffer any act or thing whereby the business or any of the assets thereof or any other property belonging to the company may become liable to be seized in execution charged or affected or whereby the interests of the company therein may be prejudicially affected."

I agree with Mr McAlary that the gravity of any misconduct of the plaintiff "is to be determined against the allegations imposed on him by the above provisions". It is implicit in my findings regarding such matters as the K45,000 loan (6.1 to 6.5), the false minutes (7.1 to 7.6), the stationwagon for the plaintiff’s daughter (8.1 to 8.5), the overpayments from the Department of Finance and the Plant and Transport Authority (10.1 to 10.7), and the Opai Kanungel proceedings (11.1 to 11.14) that no breach of duty has been established.

13.1 IT FOLLOWS THAT I CONCLUDE ON THE EVIDENCE THAT THE PLAINTIFF CAUSED TO BE KEPT PROPER ACCOUNTS AS REQUIRED BY THE SERVICE AGREEMENT.

14.1 The defendant company has included in its cross-claim a claim that the plaintiff repay the sum of K45,000 being the amount lent to him in September 1978 (see 6.1 to 6.5). In the cross-claim in the second action it was pleaded that the plaintiff received the sum of K45,000 "on or about the 15th day of September, 1978"; it was further pleaded that the said sum was "repayable upon demand" (see paragraphs 1 and 3 of the Cross-claim on pages 10 and 11 of the second Book of Pleadings). In the Amended Reply and Answer to Cross-claim the plaintiff admitted each of those allegations (see paragraphs 1 and 3 on page 21 of the second Book of Pleadings); it was not pleaded by the plaintiff that the loan, although payable on demand, was subject to a condition, either express or implied, that notice of demand be given to the borrower before the moneys became due and payable, nor a pleading in similar terms. Applying the rule stated by Chitty J. in In re J. Brown’s Estate. Brown v. Brown^[62] no actual demand is required for a loan lent in those circumstances.

14.2 ACCORDINGLY, I DIRECT THAT THERE BE JUDGMENT FOR THE DEFENDANT COMPANY AGAINST THE PLAINTIFF ON THE CROSS-CLAIM IN THE SUM OF K45,000. (THIS IS A DIRECTED JUDGMENT ON THE PLEADINGS; I UPHOLD MR RAYMENT’S FIRST ARGUMENT.)

14.3 In the event of my decision on this issue being upset on appeal, I should add that I take the view that, in any event, the pleadings of the defendant company in the first Book of Pleadings show that demands (in the form of claims) were made (see pages 8, 19 and 25 of the first Book of Pleadings). Whether that is a correct conclusion or not and whether such demands were made or not, by virtue of the operation of s.125(2) (b), the loan became due and payable no later than on 26th February 1980, i.e. six months after the annual general meeting (held on 25th August 1979) being the "next following annual general meeting" after the provision of the loan in September 1978.

Subject to any argument on such matters as interest and costs judgment will be entered for the defendant company against the plaintiff on the cross-claim in the second action for the sum of K45,000.

It is difficult to summarize in a few words a complex and lengthy case such as this. I now attempt to do so in this case in order to assist those persons who are not trained in the law and who might wish to read this judgment for themselves.

What must be said of the defendant company is that once a decision was made in February or March 1979 to sack the plaintiff or, as Sir Tei Abal picturesquely put it, to "rausim", its meetings from 2nd March 1979 onwards have to a great extent been conducted invalidly and ineffectually. The Articles of Association of the defendant company have not been complied with. The defendant company has been in breach of the Companies Act. A cover-up has been attempted. Lies have been told. There has been an attempt to avoid the defendant company having to pay to the plaintiff large sums of money which were his entitlement. Two "sackings" of the plaintiff as managing director and as a director were abortive.

The professional advice that this "nationally-owned company" has received from the director appointed for the purpose of giving that advice (Mr Hay) has, in the result, been ineffective. The leadership that the "Melanesians" (to use Mr McAlary’s word to describe the nationals on the board of directors) have received from their "leader" (Mr Lussick) has not been strong. The director actually responsible for the defendant company’s management since the plaintiff was "sacked" on 2nd March 1979 (Mr Smith) has not fulfilled his duty as a director with the diligence I would have expected of him. I make no further comment about the other directors, such as Sir Tei Abal and Mr ToVadek, except to refer once more to my assessment of them as witnesses.

The defendant company has wrongfully dismissed its managing - director and is liable in damages. The attempt to avoid the liability to pay to the plaintiff his retirement allowance has failed. That this is the situation is in no small measure due to the fact that several, if not all, of the other directors of the defendant company, apart from the plaintiff, failed in one way or another in their duty to the defendant company. A number of witnesses were less than candid and some told lies. The allegations of "grave

The plaintiff is entitled to the moneys which are due to him under his retirement deed. The plaintiff is entitled to damages for wrongful dismissal. His overall entitlement on his claims is K433,598. The defendant company is entitled to be repaid the sum of K45,000 which it lent to the plaintiff. Subject to the question of costs and other ancillary matters, the net amount payable to the plaintiff (after deducting the judgment on the cross-claim from the judgment on the claims) will be K388,598.

Solicitors for the Plaintiff: Francis and Francis
Counsel: Mr A. Goldberg Q.C. and Mr G. Beaumont
Solicitors for the Defendant: Russell Hay & Co.
Counsel: Mr F. McAlary Q.C. and Mr B. Rayment

National Court of Papua New Guinea

Morris v PNG Associated Industries Ltd [1980] PGNC 43; N260(L) (23 October 1980)