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Morobe Provincial Government v Yalu Plantation Ltd [2007] PGNC 22; N3123 (21 February 2007)

N3123

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 599 OF 2003

BETWEEN:

MOROBE PROVINCIAL GOVERNMENT
First Plaintiff

AND:

YALU PLANTATIONS LIMITED
Second Plaintiff

AND:

MOROBE FARMS (WAWIN) LIMITED
Third Plaintiff

AND:

NIUGINI PRODUCE MARKETING LIMITED
Fourth Plaintiff

AND:

MOROBE DEVELOPMENT CORPORATION
Fifth Plaintiff

AND:

WATT KIDDIE Trading as KIDDIE & ASSOCIATES ACCOUNTANTS
Defendant

Lae: Gabi, J
2007: 21 February

PRACTICE AND PROCEDURE - Companies Act - S.291 - Appointment of liquidator by shareholders – Provincial Government sole shareholder – Special resolution by the Provincial Government or the Provincial Executive Council.

Counsel:

Mr A Manase, for the plaintiffs
Mr J Sirigoi, for the defendant

DECISION

21 February, 2007

1. GABI, J: Introduction: The plaintiffs are challenging the legality of the appointment of the defendant as the liquidator.

2. By an Originating Summons filed on 20 October 2003, the plaintiffs are seeking the following orders:

"1. A declaration that the Defendant was appointed as a Liquidator of the Second, Third, Fourth and Fifth Plaintiffs contrary to Section 291(2)(a) and (b) of the Companies Act.

2. A declaration that the purported appointed of the Defendant as Liquidator of the Second, Third, Fourth and Fifth Plaintiffs was improper, illegal and therefore null and void and of no effect.
   
3. An Order that no Notice of Appointment of Liquidator be lodged before the Registrar of Companies ("the Registrar") and the Registrar shall not accept any materials lodged by the Defendant purporting to represent such documents if lodged in breach of the provisions of the Companies Act.
   
4. An Order that the Registrar remove all or any documents lodged by the Defendant which purports to portray him as a Liquidator from the Records kept by the Registrar of Companies in respect of the Second, Third, Fourth and Fifth Plaintiffs.
   
5. Costs of these proceedings against the Defendant on a Solicitor/Client basis.
   
6. The entry of these orders be abridged to the time of settlement of these orders by the Registrar which shall occur forthwith.
   

3. The plaintiffs filed two (2) affidavits of John Nicholas dated 20 October 2003 and 14 March 2005 respectively and the affidavit of search of Bobby Simon dated 30 November 2005. In response the defendant filed his affidavit dated 8 October 2004.

Background

4. On 26 June 1996, the late Ainea Sengero writing as the Chairman of the Provincial Supply and Tenders Board advised the defendant in a letter that his firm has been engaged to provide professional accounting and secretarial services to KumGie Development Corporation Pty Ltd, Morobe Development Corporation Pty Ltd, Morobe Farms (Wawin) Pty Ltd, Morobe Food Processing Pty Ltd, Niugini Produce Marketing Pty Ltd, Yalu Plantation Pty Ltd and YKDC Investment Pty Ltd. On 13 December 1999, a Morobe Provincial Government cheque no. 337928 for K9,600.00 being for payment of liquidation fee no.K99/1216 was paid to the defendant. On 7 June 2000, the Board of Directors of Niugini Produce Marketing Ltd and Morobe Food Processing Ltd resolved to wind up these companies and appointed the defendant as the liquidator. On 4 April 2002, the defendant lodged with the Registrar of Companies Notice of Appointment of Liquidator (Form C039) in respect of Morobe Development Corporation Ltd, Morobe Farms (Wawin) Ltd, Morobe Food Corporation Ltd, Morobe Food Processing Ltd, Niugini Produce Marketing Ltd, Yalu Plantation Ltd, and YKDC Investments Ltd. On 11 April 2002, the Registrar accepted the notice of appointment. On 29 April 2002, the defendant caused to place advertisements in the local newspapers that he was appointed a liquidator and that creditors of the respective companies should lodge their claims with him. On 1 May 2002, the Governor of Morobe Province, Hon. Luther Wenge wrote to the defendant expressing outrage over his conduct in placing the advertisements and demanded that the notices be retracted on the basis that the Morobe Provincial Government has not appointed him as the liquidator. On 3 June 2003, the Registrar advised the defendant that his appointment was nullified on the basis that it was not done in accordance with section 291 of the Companies Act. At its meeting no. 10/2003 and decision no. 81/2003 dated 11 August 2003, the Morobe Sam Sewe resolved to approve the Registrar’s nullification of the appointment of the defendant as the liquidator. On 22 August 2003, the Morobe Provincial Administration caused a notice to be published in the local newspaper advising the public that Morobe Development Corporation Ltd, Morobe Farm (Wawin) Ltd, Niugini Produce Marketing Ltd and Yalu Plantation Ltd are not in liquidation.

5. On 20 August 2003, these proceedings were commenced in the National Court Registry in Lae. On 24 October 2003, the Court made a number of orders including an injunctive order restraining the defendant, his servants and agents from exercising powers and functions of a liquidator and/or holding themselves out as a liquidator. The second, third, fourth and fifth plaintiffs are wholly owned by the first plaintiff.

The Law

6. The issue is whether the appointment of the defendant as liquidator is valid.

7. Sections 86, 88, 101, 103, 291 and 310 of the Companies Act are relevant in respect of this matter. Section 291(2) provides:

"(2) A liquidator may be appointed by –

(a) special resolution of those shareholders entitled to vote and voting on the question; or

(b) the board of the company on the occurrence of an event specified in the Constitution; or

(c) the Court, on the application of the company, or a director or shareholder, or other entitled person, or a creditor of the company (including any contingent or prospective creditor), or the Registrar".

8. A person may be appointed by:

(a) special resolution of the shareholders;

(b) the board, on the occurrence of an event specified in the constitution;

(c) the Court, on the application of the company, a director or shareholder, a creditor of the company, or the Registrar.

9. Grounds (b) and (c) are not relevant. First, the second, third, fourth and fifth plaintiffs have not adopted a constitution and an event has not been identified by reference to the constitution of each of the companies. Second, the power is exercisable only by the shareholders, not directors. Finally, no application has been made to the Court by any of the persons specified under s.291(2) (c).

10. As indicated earlier the Morobe Provincial Government is the shareholder in the second, third, fourth and fifth plaintiffs. As the shareholder, the Morobe Provincial Government or the Provincial Executive Council must resolve to liquidate the second, third, fourth and fifth plaintiffs. There is no evidence before me to show that the Provincial Government or the Provincial Executive Council have passed a special resolution to put these companies into liquidation. There is, however, evidence that the Provincial Executive Council has accepted and approved the nullification of the defendant as the liquidator.

11. Mr Sirigoi of Counsel for the defendant submitted that the three directors (the late Ainea Sengero, Nelson Hungrabos and Manasupe Zurenouc) had authority and acted for and on behalf of the Provincial Executive Council. I am unable to accept that argument on the basis that there is no evidence before me to show that the Provincial Government or the Provincial Executive Council had delegated its authority to these officers. Even if I were to accept that position the resolution only relates to liquidation of the fourth plaintiff, not the second, third and fifth plaintiffs.

12. For the reasons in the judgment, I find that the appointment of the defendant as liquidator is invalid. I make the following orders:

1. A declaration that the defendant was appointed contrary to Section 291(2) (a) and (b) of the Companies Act.

2. A declaration that the purported appointment of the defendant as liquidator of the second, third, fourth and fifth plaintiffs was improper, illegal and therefore null and void and of no effect.
   
3. That no notice of appointment of liquidator be lodged before the Registrar of Companies ("the Registrar") and the Registrar shall not accept any materials lodged by the defendant purporting to represent such documents.
   
4. That the Registrar remove all or any documents lodged by the defendant which purports to portray him as a liquidator from the Records kept by the Registrar of Companies in respect of the second, third, fourth and fifth plaintiffs.
   
5. Costs of these proceedings against the defendant.
   
6. The entry of these orders be abridged to the time of settlement of these orders by the Registrar which shall occur forthwith.

________________________________

Steeles Lawyers: Lawyers for the plaintiffs
Sirigoi Lawyers: Lawyer for the defendant