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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO 297 0F 2011
MADANG COCOA GROWERS EXPORT CO LIMITED
Plaintiff
V
NOILAI GUNAR
First Defendant
GEE GUNAR
Second Defendant
MADANG PROVINCIAL GOVERNMENT
Third Defendant
Madang: Cannings J
2012: 3 February, 25 June
REAL PROPERTY – possession of warehouse with knowledge and acquiescence of body that controlled its use – equitable interest of person in possession
COMPANIES – directors – manner of removal
A provincial government controlled the use of a warehouse on Government land and agreed to make it available to the plaintiff, a company owned and controlled by cocoa growers in the province involved in buying and selling cocoa. The plaintiff's export licence was suspended by the industry regulator and the plaintiff ceased to trade in cocoa. Though the plaintiff maintained a small presence the warehouse was largely left idle. The plaintiff alleged that the provincial government, without consulting the plaintiff, allocated the warehouse to another company, which the plaintiff alleged is owned and controlled by the brother of one of its (the plaintiff's) directors, and allowed that other company to remove the plaintiff's property and conduct its business from the warehouse. The plaintiff commenced proceedings by originating summons against the two brothers (first and second defendants) and the provincial government (third defendant), seeking 15 orders, some against the brothers to remove them from involvement in the affairs of the plaintiff and to prevent them from using the warehouse, and others against the provincial government requiring it to allow the plaintiff exclusive use of the warehouse and to reimburse the plaintiff the money spent in maintaining it.
Held:
(1) The plaintiff acquired an equitable interest in the warehouse by virtue of the provincial government acquiescing to its occupation and use.
(2) The provincial government failed in its duty to notify and consult with the plaintiff as to the proposed alternative use of the warehouse.
(3) The first and second defendants unlawfully entered and occupied the warehouse and removed the plaintiff's property and did so with the knowledge and consent of the plaintiff.
(4) All defendants must allow the plaintiff exclusive use of the warehouse and are liable to restore the warehouse to the condition it was in when it was last occupied by the plaintiff.
(5) None of the defendants shall use the plaintiff's export licence to trade in dry cocoa beans.
(6) The application for orders restraining the defendants from discussing the affairs of the plaintiff with third parties and from forming assemblies for that purpose was refused.
(7) Any unresolved issues, including disputes about payment of compensation to the plaintiff, shall be referred to mediation.
Cases cited
The following cases are cited in the judgment:
Abdul Wahab v David Wilkinson WS 548 of 2002, 19.09.06
Amos Bai as Representative of Lae Squatter Settlements v Morobe Provincial Government and The State [1992] PNGLR 150
Gawi v png Ready Mixed Concrete Pty Ltd [1984] PNGLR 74
Government of Papua New Guinea and Richard Harold Davis v Stanley Barker [1977] PNGLR 386
Koang No 47 Limited v Monodo Merchants Limited and Melpa Properties Limited (2001) SC675
Kuyan v Sallel (2008) N3376
Madang Cocoa Growers Export Co Ltd v Tautea & Cocoa Board (2012) N4584
Re Fisherman's Island [1979] PNGLR 202
Re Itikinumu Plantation case (2001) N2143
Siso Naso v National Housing Corporation (1999) N1947
Yagon v Nowra No 59 Ltd (2008) N3375
ORIGINATING SUMMONS
This was an application by a company for various orders concerning operation of its business.
Counsel
S Asivo, for the plaintiff, with leave of the Court
B W Meten, for the second defendant
25th June, 2012
1. CANNINGS J: The plaintiff, Madang Cocoa Growers Export Co Ltd, has applied for 15 orders against three defendants who, it claims, have interfered in its business operations:
THE PLAINTIFF'S GRIEVANCES
2. The plaintiff has multiple grievances against the three defendants and the best way to explain what they are is, first, to tell the story from the plaintiff's point of view. Eleven affidavits by persons involved with the plaintiff have been admitted into evidence. The plaintiff alleges, through its spokesman, its executive director, Steven Asivo, who has been granted leave to represent it in these proceedings, that it was established to represent the smallholder cocoa growers of Madang Province. The idea was that the smallholders could sell their produce to a single buyer, the plaintiff, so that it could be made ready for export. The intended result was that the smallholders would get a better price for their produce and that they would be able to more readily tap into the export market. In May 2005 the provincial government agreed to make available a warehouse in the Newtown area of Madang town for the exclusive use of the plaintiff as a cocoa storage facility. The warehouse is on government land controlled by the provincial government and is known commonly as the "DPI Buffalo Shed" or the "Number 2 Didiman Station".
3. In July 2005 the Cocoa Board granted an export licence to the plaintiff but in November 2005 the licence was suspended indefinitely following allegations that the plaintiff was allowing another company to use its licence to export cocoa. The plaintiff applied for judicial review of the suspension of its licence but for various reasons the application took a long time to be heard. It was not until early this year that the judicial review proceedings were completed, with a determination in the plaintiff's favour (Madang Cocoa Growers Export Co Ltd v Tautea & Cocoa Board (2012) N4584). In the meantime, in the period from late 2005 to early 2012, the plaintiff did not trade in cocoa. Though it maintained a small presence, the warehouse was largely left idle.
4. The plaintiff alleges that in early 2011 the provincial government, without consulting the plaintiff, allocated the warehouse to the second defendant, Gee Gunar, who in collaboration with his brother, Noilai Gunar – who was a director of the plaintiff – broke into the warehouse, removed the plaintiff's property, including computers, office furniture, files and documents, and set up business there.
5. The plaintiff also alleges that for a considerable period Noilai Gunar has been falsely representing that he is the chairman of the plaintiff's board of directors.
THE DEFENDANTS' POSITION
6. Only the second defendant appeared at the trial. Gee Gunar's position is that though his brother, Noilai Gunar, is a director of the plaintiff, he, Gee Gunar, has no association with the plaintiff and knows nothing of its operations. He has recently incorporated a company known as Yoben Duman Investment Ltd with the intention of undertaking a number of business activities, including buying and exporting cocoa. The provincial government has given his company a warehouse in the DPI premises and the company has spent a significant amount of money renovating it. He feels that he has been unnecessarily dragged into court by the plaintiff.
THE ISSUES
7. I agree with the opening submission of Mr Meten, for the second defendant, that the issues for the court's determination could have been more clearly and logically presented in the originating summons. However, I do not agree with the other part of Mr Meten's submission, that therefore no cause of action has been disclosed and the entire proceedings should be dismissed. An amended originating summons was filed on 12 December 2011 which seeks 15 orders and I think it is reasonably clear, having considered the evidence and identified the plaintiff's grievances, what the issues are. I am going to consider the orders sought, one by one.
8. The plaintiff seeks an order restraining Noilai Gunar from "acting on behalf of the plaintiff in all matters concerning the Madang Cocoa Export Growers Co Ltd". There is evidence that Mr Gunar has been holding himself out as chairman of the company, including negotiating with the Cocoa Board for reinstatement of its export licence, without any authority to do so. There is no contrary evidence before the court. Based on the principle that a court should make findings of fact in accordance with uncontradicted evidence put before it unless the evidence is so incredible or unreasonable that no reasonable person could accept it (Re Fisherman's Island [1979] PNGLR 202) I find that Noilai Gunar has been holding himself out as chairman of the plaintiff without the authority of the plaintiff's board. It is appropriate to order that he be restrained from doing so.
9. It is not appropriate that he be restrained from "acting on behalf of the plaintiff", as an order in those terms is too vague to be of utility; and also it appears that Noilai Gunar is a shareholder and director of the company and there might be things that he can properly do in either or both of those capacities that might be regarded as "acting on behalf of the plaintiff". The application for order No 1 is therefore only partially granted.
10. The plaintiff alleges that the three defendants have conspired to set up Gee Gunar and his new company in the warehouse in such a way that Gee Gunar's company will be able to use the plaintiff's export licence to trade in dried cocoa beans. I consider that the chances of the Cocoa Board allowing this to happen are remote. However, to accommodate the risk that it might happen, an order in the terms sought would be useful as it will put beyond doubt that the only person able to use any export licence issued in the name of the plaintiff is the plaintiff itself. The application for order No 2 is granted.
3 RETURN AND REPLACEMENT OF PLAINTIFF'S PROPERTY
11. There is uncontradicted evidence that the provincial government has allowed Gee Gunar the use of the workshop and that he entered the warehouse in early 2011 and without the plaintiff's consent removed the plaintiff's property and established a presence there with a view to operating a new company from there. There is uncontradicted evidence that Noilai Gunar assisted Gee Gunar in those matters. Applying the rule in Fisherman's Island I find none of the evidence as to what has happened at the warehouse since early 2011 so unreasonable or incredible that it would not be believed by a reasonable person. I find that the plaintiff's property was removed from the warehouse without the plaintiff's permission. The plaintiff was at the time a lawful occupier of the warehouse. A cause of action tantamount to the tort of conversion has been established (Government of Papua New Guinea and Richard Harold Davis v Stanley Barker [1977] PNGLR 386, Abdul Wahab v David Wilkinson WS 548 of 2002, 19.09.06).
12. Those who removed the plaintiff's property are obliged to return it. As to what the property is, the evidence is unclear. It is claimed that computers, office furniture and various files and documents were removed but a precise description is not in evidence. This deficiency in the evidence will be accommodated by the terms of the court's order. I will also order that the defendants who removed the plaintiff's property are obliged, if they do not return it within a reasonable period, to pay to the plaintiff a reasonable sum by way of compensation to enable the warehouse and the plaintiff's property to be put back in the condition they were in at the relevant time, which I will fix as 31 December 2010. The application for order No 3 is substantially granted.
13. An order of this nature would, I consider, be oppressive and is not warranted by the evidence. The application for order No 4 is refused.
14. An order of this nature is not warranted by the evidence, and in any event the plaintiff's executive director, Mr Asivo, is not a party to these proceedings. If any of the defendants publishes defamatory statements regarding Mr Asivo there are processes and remedies available under the Defamation Act 1962 which can be invoked. The application for order No 5 is refused.
6 ALL DEFENDANTS BE RESTRAINED FROM FORMING ILLEGAL ASSEMBLIES
15. This is another strange application. The plaintiff wants the defendants to be "restrained from forming any illegal assembly which may be seen as a propaganda machine to diffuse [sic] all the good work done by the current management of the plaintiff". It is not clear what would constitute an illegal assembly. Besides that, in PNG the right of people to peacefully assemble and associate is an enforceable human right under Section 47 (freedom of assembly and association) of the Constitution and the courts should not make orders that interfere with that right unless very good reasons are shown. None have been shown here. The application for order No 6 is refused.
16. Again the order sought is cast in vague terms. What does "full control" mean? Such an order is unnecessary. There is evidence before the court that Mr Asivo is the plaintiff's executive director. The plaintiff has a board of directors, which controls the plaintiff. If the board wishes to delegate particular or all responsibilities regarding the plaintiff's operations to Mr Asivo or any other person, that is a matter for the board. The application for order No 7 is refused.
17. The order sought here is similar to No (2) above and relies on the same allegation: that the three defendants have conspired to set up Gee Gunar and his new company in the Didiman No 2 warehouse in such a way that Gee Gunar's company will be able to use the plaintiff's export licence. I upheld the application for No (2) and it makes sense to uphold this one. This will ensure that if there are negotiations on behalf of the provincial government as to the cocoa trading activities of the plaintiff they will not be conducted with Noilai Gunar (who is not, despite holding himself out to be, the chairman of the board) or Gee Gunar (who has no role in the plaintiff). Any negotiations should be conducted with Mr Asivo, who is the executive director of the plaintiff, or with some other person authorised by the board of the plaintiff. The application for order No 8 is granted.
9 FIRST DEFENDANT BE DISMISSED AS A DIRECTOR OF THE PLAINTIFF
18. There was a meeting of the board of directors of the plaintiff on 26 August 2011, which was called in accordance with an order of the National Court that Mr Asivo, in his capacity as secretary of the plaintiff, call a board meeting for the purpose of deciding whether the current proceedings, OS No 297 of 2011, ought to be continued. Minutes of the meeting have been adduced in evidence, showing that three resolutions were passed:
19. The plaintiff now seeks an order endorsing the decision to remove Noilai Gunar. This raises the question of the procedure that must be followed to remove a director of a company. The question was addressed in my judgment in Kuyan v Sallel (2008) N3376. Directors of a company are, unless the company's constitution provides otherwise, removed and appointed by the company's shareholders. The shareholders' powers of removal and appointment can only be exercised at a meeting of shareholders or by a resolution in lieu of a meeting. There is no evidence that the plaintiff's constitution provided for any alternative method of removal of a director. The meeting of 26 August 2011 was a board meeting, not a shareholders meeting. There was no resolution of shareholders in lieu of a meeting. Therefore the resolution to remove Noilai Gunar as a director is of no effect. The application for order No 9 is refused.
20. There is evidence that the provincial government still uses the warehouse to store what is commonly called its 'buffalo equipment' and that this use is contrary to the agreement entered into with the plaintiff in 2005, which provided that the plaintiff would have exclusive use of the warehouse. The plaintiff's position is reasonable. The application for order No 10 is granted.
21. This is a rehash of the order sought under No (3) above. A further order is unnecessary. The application for order No 11 is refused.
12 THIRD DEFENDANT TO REIMBURSE K66,861.40 TO PLAINTIFF
22. The plaintiff claims that it has spent this amount of money on the warehouse since it moved in during 2005. I find no evidence to support this claim. The application for order No 12 is refused.
23. An order for payment of interest would only be appropriate if there were for purposes of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52 an order for payment to the plaintiff of damages or a debt. No such order is being made at this stage, so there will be no order for payment of interest. The application for order No 13 is refused.
24. There are three consequential orders that I consider are appropriate. First, an order that will clarify that the plaintiff has the right to remain in the warehouse for a discrete period. I use the term "right" advisedly. The right will be conferred by order of the court, and the reason it is appropriate to confer it is that I am satisfied, having considered evidence of arrangements and agreements reached between the plaintiff and the provincial government in 2005 and the plaintiff's permitted and unchallenged occupation of the warehouse from mid-2005 to early 2011, that the plaintiff acquired an equitable interest in the land on which it is located. It has and never has had any legal interest in the land or the warehouse, but it was invited by the provincial government to occupy the warehouse and use as it as a cocoa holding facility and as a base for its operations. It has been given a legitimate expectation that it is permitted to have exclusive occupation of the warehouse and that its permitted occupation would not be taken away from it without it being consulted and given reasonable notice that it is required to leave. A person who occupies land for a substantial period with the express or implied permission of the owner or person who has the right to control its occupation acquires an equitable interest in it, which is akin to a licence to occupy it. That was the principle endorsed as correct and applicable to the circumstances of Papua New Guinea in the leading Supreme Court case of Gawi v png Ready Mixed Concrete Pty Ltd [1984] PNGLR 74. The principle has withstood the test of time in cases such as Amos Bai as Representative of Lae Squatter Settlements v Morobe Provincial Government and The State [1992] PNGLR 150; Siso Naso v National Housing Corporation (1999) N1947; the Re Itikinumu Plantation case (2001) N2143; Koang No 47 Limited v Monodo Merchants Limited and Melpa Properties Limited (2001) SC675 and Yagon v Nowra No 59 Ltd (2008) N3375. The period of exclusive occupation which I consider is appropriate is two years.
25. The second consequential order follows logically from the first: any other occupiers of the warehouse, including the defendants, will be required to vacate it. I will allow one month for this to happen.
26. The third consequential order concerns mediation of any issues that remain in dispute after making these orders. As I am ordering that the defendants or other persons who removed the plaintiff's assets are obliged to return them or pay to the plaintiff a reasonable sum by way of compensation to enable the warehouse and the plaintiff's assets to be put back in the condition they were in at the relevant time, 31 December 2010, a mechanism needs to be in place for implementation of that order. For example, if the plaintiff claims to be entitled to compensation by reason of that order, how should it be assessed? There are at least three options available to the court: (1) order a trial on assessment of compensation or (2) let the parties resolve the matter or (3) order mediation. Under the ADR Rules the National Court is empowered by Rule 5(2), of its own motion, to order mediation for resolution of any part of any proceedings provided that at the time of considering whether to order mediation it has regard to the factors prescribed by Rule 5(3). I have had regard to those matters. I consider that: (a) mediation will not result in prejudice to the rights of any of the parties; (b) it is reasonably within the ability and power of the parties to comply with a mediation order; (c) mediation will not entail substantial work for the parties; (d) the nature of the relief sought lends itself to mediation; (e) a mediation at Madang can be set up very soon and this should be convenient to all parties; (f) no party has expressed any opposition to the prospect of mediation; (g) mediation has not yet been attempted in this case and it should be attempted at least once before consideration is given to setting down a trial; (h) none of the parties loses the right to have the assessment of compensation tried in court; and (i) it is in the interests of justice to attempt mediation as a method of resolving disputes such as this. I conclude that of the three options available, option (3) is the most appropriate as it is the one that has the greatest prospect of quickly resolving any outstanding issues. I will therefore make an order for mediation of any remaining disputed issues.
15 COSTS BE PAID TO THE PLAINTIFF
27. The plaintiff has only partially succeeded in obtaining the relief sought in the originating summons so it is not appropriate that it have all its costs of the proceedings. In fact, in all the circumstances, it is in the interests of justice, as it may well aid the amicable resolution of remaining areas of dispute, to allow the parties to bear their own costs.
ORDER
28. The following order reflects the various considerations outlined above.
(1) The application for relief under grounds 4, 5, 6, 7, 9, 11, 12, 13 and 15 of the amended originating summons filed 12 December 2011 is refused.
(2) The application for relief under grounds 1, 2, 3, 8, 10 and 14 of the amended originating summons filed 12 December 2011 is substantially granted in terms of the following orders.
(3) The first defendant is restrained from holding himself out as chairman of the board of directors of the plaintiff, Madang Cocoa Growers Export Co Ltd.
(4) All defendants are restrained from trading dried cocoa beans under any licence issued in the name of the plaintiff.
(5) The defendants who, or whose associates, removed the plaintiff's property from the Number 2 Didiman Station Warehouse, Madang, in the period since 31 December 2010, are obliged to return that property, in the condition in which it was in on 31 December 2010, to the plaintiff by 31 July 2012, failing which the relevant defendants shall pay to the plaintiff a reasonable sum by way of compensation to enable the warehouse and the plaintiff's property to be put back in the condition they were in at 31 December 2010.
(6) The third defendant shall cease forthwith to deal with the first or second defendants regarding the cocoa trading activities of the plaintiff.
(7) The plaintiff has the right to exclusive occupation and use of the Number 2 Didiman Station Warehouse, Madang, in the period from 1 August 2012 to 31 July 2014, which shall not be interrupted except with the consent of the plaintiff or by order of the National Court or the Supreme Court.
(8) The defendants and their associates and all other persons are required to vacate the Number 2 Didiman Station Warehouse, Madang, leaving it in good order and condition, by 31 July 2012.
(9) Any dispute as to implementation of these orders, including a claim by the plaintiff for compensation, shall under Rule 5(2) of the ADR Rules, on the court's own motion, be referred for mediation pursuant to a separate mediation order under Rule 5(4) of the ADR Rules.
(10) The parties shall bear their own costs of the proceedings.
____________________________________
Meten Lawyers: Lawyers for the second defendant
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