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T.T. Angore Noa Hai Investment Ltd v Buna [2019] PGNC 143; N7881 (24 May 2019)

N7881

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No. 1144 of 2016 (CC4)

BETWEEN:
T.T. ANGORE NOA HAI INVESTMENT LIMITED
Plaintiff/Cross-defendant

AND:

KAU BUNA
Defendant/Cross-claimant

Waigani: David, J
2018 : 11 & 26 September
2019 : 24 May

COMPANY LAW – redemption of shares – demand by shareholder for company to redeem his shares – company has no constitution since incorporation – in the absence of constitution, provisions of Companies Act 1997 regulate affairs of company – shareholder driver and employee of company – demand for redemption of shares not actioned so company’s truck retained and used without authority of company - Companies Act 1997, Sections 16, 17(2), 27, 29, 31, 32(2), 33, 56, 57, 59, 60, 61 and 62.

DAMAGES – claim for damages for conversion by detention - assessment of damages.

Cases Cited:
Papua New Guinea Cases

The Government of Papua New Gunea & Ors v Stanley Parker (1979) PNGLR 53
Cheong Supermarket Pty Ltd v Pery Muro (1987) PNGLR 24
Abel Kopen v The State [1988-89] PNGLR 655
Graham Mappa v ELCOM (1992) N1093
Jonathan Mangope Paraia v The State (1995) N1343
Enga Enterprises Pty Ltd v Danny Pokali (1995) N1359
RH Trading Limited v Damansara Forest Products (PNG) Limited & Ors (1999) N1904
Julian Paul Leach v Commissioner General of Internal Revenue Commission and Lazarus Sapoli (2000) SC 631
Odata Ltd v Ambusa Copra Oil Mill Ltd & National Provident Fund Board of Trustees (2001) N2106
PNGBC v Jeff Tole (2002) SC694
William Mel v Coleman Pakalia (2005) SC790
Steven Naki v AGC (Pacific) Ltd (2006) N5015
Eliab Buka v Henry Uramete (2009) N3905
Leeway East Enterprise Ltd v Daniel Danaben (2013) N4951
Helen Jimmy v Paul Rookes (2013) N5360
Henganofi Development Corporation Ltd v Public Officers Superannuation Fund Board (2014) SC1356

Overseas Cases

Rushworth v Taylor (1841) 3 QB 699
Salomon v Salomon & Co. Limited (1897) AC 22
Clayton v Le Roy [1911] UKLawRpKQB 114; (1911) 2 KB 1031
Penfolds Wines Pty Ltd v Elliot [1946] HCA 46; (1946) 74 CLR 204
Macaura v Northern Assurance Co. (1925) AC 619 (HL)
Lee v Lee’s Air Farming Ltd (1961) NZLR 325

Treatises Cited:

Osborn’s Concise Law Dictionary, Tenth Edition, Sweet & Maxwell, London, 2005
Paul Vout, Torts, The Laws of Australia, Second Edition, 2007, Thompson Lawbook Co.

Counsel:

Justin Haiara, for the Plaintiff/Cross-Defendant
Jerry Kama, for the Defendant/Cross-Claimant

JUDGMENT

24 May, 2019

1. DAVID, J: INTRODUCTION: This case is about a dispute between the plaintiff/cross-defendant company (TTANHIL) and the defendant/cross-claimant (Kau) who is one of TTANHIL’s shareholders and who had requested that his shares in TTANHIL be redeemed. TTANHIL has more than 600,000 issued shares and of those shares, the defendant holds 6,798 ordinary shares. As TTANHIL did not immediately action Kau’s request, he took possession of a truck belonging to TTANHIL namely, a white Isuzu, twin-steer, cargo truck bearing registration number HAS 558 (the truck) that was purchased in December 2015 from Boroko Motors, Mt. Hagen Branch, Western Highlands Province for K440,000.00 as security until TTANHIL redeemed his shares. The purchase of the truck was partly financed by Bank South Pacific (BSP Finance (PNG) Limited) through a loan it granted to TTANHIL in the sum of K240,000.00. Since the purchase of the truck, Kau was employed by TTANHIL to drive it. Kau continued to retain possession of the truck despite various demands given to him by TTANHIL to return it until impounded through the intervention of the police in Mt. Hagen.
   

2. This is a decision after a trial was conducted on the issues of liability and quantum of damages.

PLEADINGS
Statement of claim

3. On 14 September 2016, TTANHIL filed a writ of summons endorsed with a statement of claim claiming, among others, an order that Kau forthwith return the truck to it, special damages calculated at K6,000.00 per day from August 2016, and general damages. On the face of the pleadings, the claim is based on a tort to chattels namely, conversion by detention. As the truck was impounded with the intervention of the police in Mt. Hagen after these proceedings were instituted, TTANHIL has only pursued the balance of the relief sought in the prayer for relief.
   

Defence and cross-claim

4. On 24 October 2016, Kau filed his defence and cross-claim.
   
5. In the averments contained in his defence, Kau generally denies liability and states that TTANHIL was not entitled to any of the relief sought in the statement of claim. He denies:
   
   1. Having any knowledge of a loan of K240,000.00 obtained by TTANHIL from the Bank South Pacific to purchase the truck.
   2. Although employed as the driver of the truck, he was not paid on a full time fortnightly basis, but paid allowances as he was part-owner of TTANHIL as a shareholder, TTANHIL had no back up finance to employ drivers in the initial stages, and he did not demand to be paid on a fulltime fortnightly basis.
   3. That TTANHIL has any command or control over him as to the custody and use of the truck while the truck is in his custody and control as he was part-owner of TTANHIL as a shareholder, is not paid on a fulltime basis, and he has custody and use of the truck in good faith as he contemplates reaping the benefits of his contribution from TTANHIL when it grows big.
4. (a) Demanding that the shares he holds in TTANHIL be redeemed, but requested TTANHIL to redeem the shares because the Chairman and Manager-Logistics were mismanaging TTANHIL, never called any shareholders meeting since its inception, and no financial reports were shown to the shareholders;
   • (b) Forcefully taking possession of the truck as he was the only authorized driver of the truck, he has never been paid any fortnightly wages for driving and operating the truck, and he is still a shareholder of TTANHIL; and
   • (c) Hiring out the truck without the authorization of TTANHIL at the rate of K6,000.00 per day as the truck is in his custody as security for his shares and sweat equity in starting the company to be settled forthwith.
6. That TTANHIL has demanded the return of the truck, that he is illegally keeping the truck, and hiring it out and collecting cartage fees for his own use.

6. He admits that:

1. TTANHIL is a company duly incorporated under the Companies Act 1997 (Companies Act);
2. TTANHIL has more than 600,000 issued shares out of which he has 6,798 ordinary shares;
3. He was an employee of TTANHIL;
4. TTANHIL purchased the truck in December 2015 from Boroko Motors, Mt. Hagen Branch;
   5. TTANHIL was the owner of the truck and entitled to the possession and use of the truck; and
6. He had the custody and use of the truck.
   
7. In the averments contained in his cross-claim, Kau states, among, others, that:
   
   1. He is from Togoba in the Western Highlands Province and was approached by several directors of TTANHIL for assistance to set up TTANHIL.
   2. He initially met one Eric Ekanda who was then the Logistics Manager of TTANHIL and who later introduced him to one Michael Kuku, Chairman of TTANHIL and other directors.
   3. The Chairman and directors of TTANHIL informed him that they were in the process of setting up TTANHIL, but were short of money and requested assistance from him with finance and materials and in return for his contribution, they promised to include him as a shareholder and become a part-owner of TTANHIL.
   4. The terms of the agreement were:
      
      • (a) He to support the directors to initially set up TTANHIL in any way he could;
      • (b) The support would be by way of finance and materials to set up its base at the current location;
      • (c) In return, TTANHIL would make an offer for him to purchase shares in TTANHIL and ultimately being recognised as part-owner of TTANHIL.
   5. Relying on the agreement struck, at various times from 2011 onwards, he performed his side of the bargain by providing finance and supplying materials/goods.
   6. At around that time, he was permanently engaged by a transport company as a driver of a cargo truck so in the process of doing the company runs, he would load kaukau bags and vegetables to be sold at Moro to make money on the side for TTANHIL.
   7. With the assistance of his family and himself for which he believed he would be rewarded by TTANHIL by way of sweat equity, TTANHIL was established and started to expand and contemplated reaping the benefits of his labour later on.
   8. Particulars of his contributions and sweat equity from early 2011 and onwards are:
      
      • (a) At various times from 2011 to 2013, he and his family contributed money to set up the company.
      • (b) He bought kaukau bags and other vegetables at Mt. Hagen and had them sold by his wife at local markets in Tari and Moro to make money for the company.
      • (c) Over a period of five years from 2011 to 2016, he was never put on payroll as the driver of the truck and only received allowances as he contemplated that he would reap the benefits of his contributions and labour when the company expanded.
      • (d) He wasted his time and resources helping the company grow to become a multi-million kina company now.
        

9. The main reasons why he demands that his shares be redeemed, his share of input and entitlements be paid out and ultimately severing his links with TTANHIL for which he has given notice to the Chairman and directors, but not heeded, are:

(a) The Chairman, Logistics Manager and one or two other directors own private companies and vehicles and they use these businesses to do company work and they excessively bill TTANHIL.

(b) From 2011 to August 2016, the directors have not called any shareholders meeting.

(c) The directors have not shown any financial reports of the company for those five years.

(d) TTANHIL is privately run by the Chairman and the Logistics Manager without the advise and knowledge and input of the other directors and shareholders.

(e) TTANHIL is totally mismanaged by the Chairman and one or two directors.

8. Kau seeks to be compensated and therefore claims, among others,:
   
   1. an order that TTANHIL redeem his 6,798 ordinary shares forthwith;
   2. damages for sweat equity in the sum of K500,000.00;
   3. his final entitlement as the driver of the truck be assessed and paid by TTANHIL;
   4. alternatively, TTANHIL award him the ownership of the truck.
      

Reply and defence to cross-claim

9. On 17 November 2016, TTANHIL filed its reply to Kau’s defence and defence to Kau’s cross-claim.
   
10. In its reply to Kau’s defence, TTANHIL has; adopted Kau’s admissions, taken issue with the denials and avers that Kau does not have a defence on the merits and should be struck out for being frivolous and vexatious.
    
11. In the averments in its defence to the cross-claim, TTANHIL essentially denies liability and avers, among others, that:
    
    1. Kau was not allowed to keep the truck as security for his shares.
    2. The cross-claim does not disclose a reasonable cause of action and is frivolous and vexatious and should be dismissed as Kau is an ordinary shareholder and only the Board of TTANHIL has the power to redeem shares pursuant to Sections 57, 89 and 91 of the Companies Act.
       

STATEMENT OF AGREED AND DISPUTED FACTS AND LEGAL ISSUES

12. TTANHIL filed a Statement of Agreed and Disputed Facts and Legal Issues on 1 March 2018 (the Statement of Facts and Legal Issues) without it being endorsed by Kau with leave of the Court essentially due to the latter’s lack of cooperation and for want of compliance with the Court’s earlier directions. Given this, I will exercise caution in assessing the evidence said to be undisputed or disputed as the onus is on TTANHIL to prove his case on the balance of probabilities.
    

EVIDENCE

13. TTANHIL’s evidence consists of the affidavits of:
    
    1. Jimi Gini sworn on 1 November 2017 and filed on 2 November 2017 (Exhibit “A”);
       2. Tabe Jugari sworn on 1 November 2017 and filed on 2 November 2018 (Exhibit “B”);
       3. Chris Buna sworn on 12 March 2018 and filed on 13 March 2018 (Exhibit “C”).
          
14. These affidavits were tendered and admitted into evidence without objection. The witnesses who deposed to these affidavits were not cross-examined.
    
15. TTANHIL successfully objected to Kau tendering the only affidavit he intended to rely on and use at the trial which was filed on 16 August 2018 and filed on 17 August 2018 to support his defence and cross-claim on the grounds that; the affidavit was filed outside the time allowed to do so and contrary to the Court’s earlier directions of 3 July 2018 and no application for extension of time was made; and notwithstanding that default, no notice to rely on and use the affidavit at the trial pursuant to Section 35 of the Evidence Act was filed and served on TTANHIL which was also contrary to the Court’s directions of 3 July 2018. Consequently, Kau has not produced any evidence before the Court to support his defence and cross-claim.
    
16. Given that situation, Kau suggested that he withdraw his cross-claim (written submissions). In his oral submissions however, Mr Kama requested the Court to dismiss the cross-claim. I propose to dismiss the cross-claim.
    

UNDISPUTED OR ESTABLISHED FACTS

17. From the pleadings, the Statement of Facts and Legal Issues, the totality of TTANHIL’s evidence and the parties’ submissions, I consider that the following principal facts are either undisputed or have been established on the balance of probabilities for purposes of determining the substantive issues:
    
    1. TTANHIL was incorporated under the Companies Act on 7 November 2011: Annexures A (Certificate of Incorporation No.1-80889 dated 14 March 2017) and B (Company Extract as at 14 March 2017) of Exhibit A.
    2. TTANHIL has not had a constitution since its incorporation.
    3. TTANHIL has more than 600,000 issued shares.
    4. Kau is from Togoba village outside Mt. Hagen in the Western Highlands Province.
    5. TTANHIL has 16 directors.
    6. Michael Kuku, Pupi Toria, Chris Buna and Jim Gini are some of the directors on the Board of Directors of TTANHIL.
    7. Michael Kuku is the Chairman of the Board of Directors of TTANHIL.
    8. Jim Gini is the Deputy Chairman of TTANHIL.
    9. Pupi Toria is the Logistics Manager of TTANHIL.
    10. Chris Buna is the Operations Manager of TTANHIL as well.
    11. Kau is the biological father of Chris Buna.
    12. TTANHIL is owned mostly by clansmen from the Tapu and Teni clans living within the Angore area of the Hayapuga Local Level Government area of the Tari District, Hela Province.
    13. The Tapu and Teni clans are two of the landowning clans within the Petroleum Development Licence 8 area of the PNG LNG Project within the Hela Province.
    14. TTANHIL was incorporated to participate in spin-off business activities when the construction stage of the upstream PNG LNG Project by Exxon-Mobil (PNG) Ltd commenced in 2011.
    15. Kau was met in 2011 when the PNG LNG upstream construction phase was in progress.
    16. At the time, Kau was employed elsewhere and driving a dump truck that was involved in delivering gravel from Mt. Hagen to Komo to build the Komo International Airstrip.
    17. On Kau’s return trips to Mt. Hagen, he was given; money to buy materials and food for TTANHIL and deliver the same to it on his return trips to maintain its business at Angore; and some allowances for him.
    18. Kau became good friends with members of TTANHIL as a result.
    19. Kau was issued with 6,798 ordinary shares as sweat equity given in recognition of his contributions towards the establishment and growth of TTANHIL: Annexure C, Exhibit A, Share Certificate No.2014105 dated 13 November 2014.
    20. In December 2015, TTANHIL bought the truck for K440,000.00 from Boroko Motors, Mt. Hagen: Annexure D of Exhibit A, Loan Agreement No.L10334 dated 27 November 2015 and Bill of Sale and annexure E of Exhibit A, Certificate of CTP Insurance Policy issued on 5 December 2015.
    21. The purchase of the truck was partly financed by BSP Finance (PNG) Limited through a loan of K240,000.00 repayable by monthly instalments of K6,144.67: Annexure D of Exhibit A, Loan Agreement No.L10334 dated 27 November 2015 and Bill of Sale.
    22. TTANHIL’s equity contribution for the purchase of the truck was K200,000.000.
    23. As the owner of the truck, TTANHIL is entitled to the possession and use of the truck.
    24. Kau was an employee of TTANHIL.
    25. Since the truck was purchased, TTANHIL employed Kau as the driver of the truck as:
        • (a) he had experience in driving such trucks so the company did not have to engage another driver; and
        • (b) since he was a shareholder, it was anticipated that he would take good care of the truck.
    26. In or about August 2016, Kau demanded TTANHIL to redeem his 6,798 ordinary shares.
    27. As TTANHIL did not immediately action Kau’s request to redeem his shares, he retained possession of the truck and it remained in his custody until impounded by Mt. Hagen police.
    28. The truck was in the custody of Kau and used by him for his own use since August 2016 until impounded by police in Mt. Hagen.
    29. On 17 August 2016, a letter of demand was issued by the lawyers for TTANHIL to Kau to return the truck within 7 days of the date of the letter as he was illegally in possession of the truck failing which legal action in the National Court would be instituted: Annexure F of Exhibit A.
    30. A formal complaint about the illegal possession of the truck on behalf of TTANHIL was laid at the Mount Hagen Police Station: Annexure G, Letter from Haiara’s Legal Practice to the Provincial Police Commander dated 17 August 2016 and annexure H, Acknowledgement of Service of dated 5 September 2016 to Exhibit A.
    31. Kau refused to return the truck until his shares were redeemed: annexure I of Exhibit A, letter from Tonges Lawyers to TTANHIL dated 24 August 2016.
    32. The lawyers for TTANHIL served on Kau the writ under cover of a letter to him dated 20 September 2016 and also requested him to immediately return the truck: Annexure J of Exhibit A.
    33. On 20 March 2017, the Mt Hagen Police impounded the truck.
    34. TTANHIL’s police complaint was registered in Occurrence Book No.685/03 on 21 March 2017.
    35. On 21 March 2017, Kau returned the keys to the truck to TTANHIL upon the police sighting a statutory declaration signed by Michael Kuku, Chairman of TTANHIL dated 20 March 2017 declaring, among others, that TTANHIL was the owner of the truck and that the Board of TTANHIL never resolved that Kau have the truck: annexure K of Exhibit A.
    36. On 21 August 2017, the truck was forcefully removed from the premises of Boroko Motors at Mt. Hagen by Kau and others when it was brought there to negotiate for it to be traded-in for another vehicle.
    37. Following the truck’s forced removal from the premises of Boroko Motors, on 25 August 2017, another complaint was lodged against Kau at the Mount Hagen Police Station: annexure L of Exhibit A, Letter from Haiara’s Legal Practice to Provincial Police Commander, Western Highlands Province dated 25 August 2017.
    38. On 28 August 2017, the truck was recovered by police at Kimil in Jiwaka Province.
    39. TTANHIL’s police complaint was registered in Occurrence Book No.1065/08 on 29 August 2017.
    40. On 29 August 2017, Kau was arrested by police, but escaped from police custody the same day.
    41. On 4 September 2017, the truck was traded-in at Boroko Motors, Mt Hagen for another vehicle namely, an Isuzu Dump Truck bearing registration number HAU 273 following clearance given by the police and the payment of additional K200,000.00: annexures M, N, O and P of Exhibit A.
    42. As a result of the trade-in, the ownership of the truck was transferred to Boroko Motors Ltd: annexure Q of exhibit A.
    43. TTANHIL was deprived of the use of the truck in its business during the time it was unlawfully in the possession of Kau.
    44. TTANHIL’s loan with BSP Finance (PNG) Limited was settled: annexure R of Exhibit A, Notice of Discharge and Deed of Release between BSP Finance (PNG) Limited and the plaintiff.
        

DISPUTED FACTS

18. From the pleadings, the Statement of Facts and Legal Issues, the totality of the plaintiff/cross-defendant’s evidence and the parties’ submissions, I consider that the following principal facts are disputed for purposes of determining the substantive issues:
    
    1. Kau was entitled to have his shares redeemed by TTANHIL.
    2. Kau was entitled to take possession of the truck as security for his shares.
    3. TTANHIL hires out the truck at K6,000.00 per day.
       

LEGAL ISSUES

19. A number of legal issues are identified in the Statement of Facts and Legal Issues, but I consider that the relevant issues that arise for my determination are:
    1. Whether Kau has any right under the Companies Act to compel TTANHIL to redeem the shares he holds in the company?
    2. Whether Kau has any proprietary interest in TTANHIL’s properties and assets?
    3. Whether Kau is liable for conversion by detention?
    4. If Kau is liable for damages for conversion by detention, what are TTANHIL’s damages?
       

ANALYSIS OF THE ISSUES AND EVIDENCE

WHETHER KAU HAS ANY RIGHT UNDER THE COMPANIES ACT TO COMPEL TTANHIL TO REDEEM THE SHARES HE HOLDS IN THE COMPANY?

PLAINTIFF/CROSS-DEFENDANT’S SUBMISSIONS

20. Mr Haiara for TTANHIL submits that an examination of Sections 56, 57, 59, 60, 61 and 62 reveal that a share can only be redeemed if the constitution of a company makes provision for the redemption of that share. Since TTANHIL has no constitution, it cannot redeem Kau’s shares in accordance with Section 59. Kau, as an ordinary shareholder, therefore has no right to compel TTANHIL to redeem his shares.
    

DEFENDANT/CROSS-CLAIMANT’S SUBMISSIONS

21. Mr Kama for Kau made no submissions on the issue under consideration.
    

REASONS FOR DECISION

22. There is no requirement under the Companies Act for a company to have a constitution. Section 27 makes it clear when it states:

27. No requirement for company to have constitution.

A company may, but does not have to have a constitution.

This provision gives a company an option to have a constitution.

23. A company that does not have a constitution may adopt one by special resolution. Section 33(1) relevantly states:

33. Adoption, alteration, and revocation of constitution.

(1) The shareholders of a company that does not have a constitution may, by special resolution, adopt a constitution for the company.

24. Subject to Section 17(2), the Companies Act allows a company to include in its constitution any matter contemplated by the Companies Act for inclusion in the constitution of a company and such other matter as the company wishes to include in its constitution (Section 31 Companies Act). However, the constitution of a company has no effect to the extent that it contravenes or is inconsistent with the Companies Act or any other Act (Section 32(2) Companies Act).
    
25. Section 17(2) allows a company to include in its constitution a provision that restricts its capacity. It states:
    

17. Capacity and powers.

(2) The constitution of a company may contain a provision relating to the capacity, rights, powers, or privileges of the company only where the provision restricts the capacity of the company or those rights, powers, and privileges.

26. In the absence of a constitution, the provisions of the Companies Act apply and they regulate the affairs of a company. This legal position is made clear by Section 29 which states:
    

29. Effect of Act on company not having constitution.

Where a company does not have a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act.

27. In the present case, TTANHIL does not have a constitution so the provisions of the Companies Act will apply by virtue of Section 29.
    
28. The relevant provisions of the Companies Act which deal with the issue of redemption of shares are Sections 56, 59, 60, 61 and 62.
    
29. Section 56 states:
    

56. Company may acquire or redeem its own shares.

(1) A company may purchase or otherwise acquire any of its own shares under Sections 57, 89 and 91 to 93 (inclusive), but not otherwise.

(2) A company may redeem a share which is a redeemable share in accordance with Section 59, but not otherwise.

(3) A share that is acquired or redeemed by a company is deemed to be cancelled immediately upon acquisition or redemption, as the case may be.

(4) Immediately following the acquisition or redemption of shares by a company, the company shall submit a notice in the prescribed form to the Registrar of the number and class of shares acquired or redeemed.

(5) Where a company fails to comply with Subsection (4) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).

30. Section 59 states:
    

59. Meaning of "redeemable".

For the purposes of this Act, a share is redeemable where the constitution of the company makes provision for the redemption of that share by the company—

(a) at the option of the company; or

(b) at the option of the holder of the share; or

(c) on a date specified in the constitution,

for a consideration that is—

(d) specified; or

(e) to be calculated by reference to a formula; or

(f) required to be fixed by a suitably qualified person who is not associated with or interested in the company.

31. Section 60 states:
    

60. Redemption at option of company.

A redemption of a share at the option of the company is—

(a) an acquisition by the company of the share, for the purposes of Section 57(2) and (3); and

(b) a distribution, for the purposes of Section 50.

32. Section 61 states:
    

61. Redemption at option of shareholder.

(1) Subject to this section, where a share is redeemable at the option of the holder of the share, and the holder gives proper notice to the company requiring the company to redeem the share—

(a) the company shall redeem the share on the date specified in the notice, or where no date is specified, on the date of receipt of the notice; and

(b) the share is deemed to be cancelled on the date of redemption; and

(c) from the date of redemption the former shareholder ranks as an unsecured creditor of the company for the sum payable on redemption.

(2) A redemption under this section—

(a) is not a distribution for the purposes of Sections 50 and 51; but

(b) is deemed to be a distribution for the purposes of Section 54(1) and (5).

33. Section 62 states:

62. Redemption on fixed date.

(1) Subject to this section, where a share is redeemable on a specified date—

(a) the company shall redeem the share on that date; and

(b) the share is deemed to be cancelled on that date; and

(c) from that date the former shareholder ranks as an unsecured creditor of the company for the sum payable on redemption.

(2) A redemption under this section—

(a) is not a distribution for the purposes of Sections 50 and 51; but

(b) is deemed to be a distribution for the purposes of Section 54(1) and (5).

(3) Where a company—

(a) has issued shares that are redeemable on a specified date; and

(b) does not redeem those shares by that date,

the company shall, immediately after that date, submit a notice in the prescribed form to the Registrar of the number of shares that have not been redeemed.

(4) Where a company does not comply with Subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).

34. Section 56(2) is abundantly clear when it states that a company may redeem a share which is a redeemable share in accordance with Section 59, but not otherwise. Section 59 defines what share is redeemable. A share is redeemable if the constitution of the company makes provision for the redemption of that share: Henganofi Development Corporation Ltd v Public Officers Superannuation Fund Board (2014) SC1356. The constitution must stipulate that the share may be redeemed by the company either; at the option of the company; or at the option of the holder of the share; or on a date specified in the constitution for a consideration that is either specified; or to be calculated by reference to a formula; or required to be fixed by a suitably qualified person who is not associated with or interested in the company.

35. I accept Mr Haiara’s submission that since TTANHIL has no constitution, it is unable to redeem Kau’s shares in accordance with Section 59. Kau therefore has no right to compel TTANHIL to redeem his shares.

WHETHER KAU HAS ANY PROPRIETARY INTEREST IN TTANHIL’S PROPERTIES AND ASSETS?

PLAINTIFF/CROSS-DEFENDANT’S SUBMISSIONS

36. Mr Haiara for TTANHIL submits that Kau as an ordinary shareholder has no proprietary interest in TTANHIL’s properties and assets.

DEFENDANT/CROSS-CLAIMANT’S SUBMISSIONS

37. Mr Kama for Kau made no submissions on the issue under consideration.

REASONS FOR DECISION

38. The submission by TTANHIL is consistent with established company law. In this connection, I start with the principle that from the date of incorporation, a company acquires a legal personality wholly separate and independent from those who incorporate it namely, shareholders, with rights and liabilities of its own. This principle has its origins in the oft-cited case of Salomon v Salomon & Co. Limited (1897) AC 22 which requires no elaboration. That case established the “veil of incorporation” and it was reaffirmed by the Privy Council on appeal from a decision of the Court of Appeal of New Zealand in Lee v Lee’s Air Farming Ltd (1961) NZLR 325. So according to that case, a company is distinct and separate from its shareholders, unless the corporate veil can be lifted. In the case of Odata Ltd v Ambusa Copra Oil Mill Ltd & National Provident Fund Board of Trustees (2001) N2106, Kandakasi, J (as he then was) suggested a number of considerations (adopted from the relevant New Zealand company law and practice as our Companies Act is closely modelled on the New Zealand legislation) that can be taken into account when considering whether or not the corporate veil should be lifted. The principle has been codified by Section 16 of the Companies Act. That provision states:

16. Separate legal personality.

A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the register.

39. The second limb of Section 16 also makes it clear that once a company is incorporated, regardless of any change in its shareholding whether caused by the death of a shareholder or otherwise, the company will continue to exist, i.e., it has perpetual succession, until it is removed from the register.

40. Consequently, as a company is a separate entity from its shareholders and the directors collectively as a board are responsible for the management of the company, a shareholder does not have any power or authority to deal with the company’s assets. A shareholder has no proprietary interest in the assets of the company: Macaura v Northern Assuarance Co. Limited (1925) AC 619 (HL).

41. In Macaura v Northern Assurance Co. Limited, the owner of a timber estate sold the whole of the timber thereon to a timber company in consideration of fully paid up shares in the company. Subsequently, by policies effected in his own name with several insurance companies, he insured this timber against fire. Most of the timber was destroyed by fire. He then sued the insurance companies to recover the loss, but the actions were stayed and the matter referred to arbitration pursuant to conditions contained in the policies. The claimant was the sole shareholder in the company and was also a creditor of the company to a large extent. The arbitrator held that the claimant had no insurable interest in the goods insured and disallowed the claim. On appeal against the decision of the Court of Appeal affirming an order of the court below that affirmed the award of the arbitrator, the House of Lords held, inter alia, that the claimant had not either as shareholder or creditor of the company any insurable interest in any particular asset of the company.

42. Lord Buckmaster at 626-627 observed:

“Turning now to his position as shareholder, this must be independent of the extent of his share interest. If he were entitled to insure holding all the shares in the company, each shareholder would be equally entitled, if the shares were all in separate hands. Now, no shareholder has any right to any item of property owned by the company, for he has no legal or equitable interest therein. He is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up.”

43. Lord Wrenbury at 633 also observed:

“My Lords, this appeal may be disposed of by saying that the corporator even if he holds all the shares is not the corporation, and that neither he nor any creditor of the company has any property legal or equitable in the assets of the corporation.”

44. In addition, while shareholders are owners of a company and the ultimate control of the company rests with them, they do not own the company’s assets.

45. A share in a company is a personal property: Section 36.

46. Section 37 confers on the holder of shares the rights and powers attaching to their shares. That provision states:

37. Rights and powers attaching to shares.

(1) Subject to Subsection (2), a share in a company confers on the holder—

(a) the right to one vote on a poll at a meeting of the company on any resolution, including any resolution to—

(i) appoint or remove a director or auditor; or

(ii) adopt a constitution; or

(iii) alter the company's constitution, where it has one; or

(iv) approve a major transaction; or

(v) approve an amalgamation of the company under Section 234; or

(vi) put the company into liquidation; and

(b) the right to an equal share in dividends authorised by the board; and

(c) the right to an equal share in the distribution of the surplus assets of the company.

(2) Subject to Section 51, the rights specified in Subsection (1) may be negated, altered, or added to by the constitution of the company.

47. These rights and powers may be negated, altered, or added to by the constitution: Section 37(2).

48. Given these observations, I am of the respectful view that Kau does not have any proprietary interest either legal or equitable in TTANHIL’s properties and assets.

WHETHER KAU IS LIABLE FOR CONVERSION BY DETENTION?

PLAINTIFF/CROSS-DEFENDANT’S SUBMISSIONS

49. Mr Haiara contends that since Kau has no proprietary interest in the truck, the facts clearly demonstrate that his actions amounted to conversion and therefore he is liable for damages for conversion.

DEFENDANT/CROSS-CLAIMANT’S SUBMISSIONS

50. Mr Kama urged the Court to note that Kau was employed by TTANHIL as the driver of the truck at the time the cause of action was alleged to have arisen. In such a situation, a case of conversion could have been founded against Kau had he sold or parted with the truck or attempted to do any of both. This case presents none of these. The truck was repossessed by TTANHIL and is no longer in Kau’s possession.

REASONS FOR DECISION

51. Any act committed by a person who deals with chattels not belonging to him in a manner inconsistent with the rights of the true owner is a conversion of those chattels: see definition of “conversion”” in Osborn’s Concise Law Dictionary, Tenth Edition, Sweet & Maxwell, London, 2005, Paul Vout, Torts, The Laws of Australia, Second Edition, 2007, Thompson Lawbook Co. 504.

52. In Penfolds Wines Pty Ltd v Elliot [1946] HCA 46; (1946) 74 CLR 204 at 229, Dixon, J observed that ‘the essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has property or special property in the chattel.’

53. So in order to successfully sue in conversion by detention, a claimant must show that:

1. He is the owner of the chattel or one who derives title from the owner (special property);
2. The defendant is dealing with the chattel in a manner repugnant to the immediate right of possession of the owner of the chattel or one who derives title from the owner;
3. The defendant’s act must constitute a denial of the claimant’s right;
4. The dealing with the chattel is intentional.
5. There must be a demand to the defendant who has possession of the chattel followed by an unjustified refusal to deliver up the chattel (Clayton v Le Roy [1911] UKLawRpKQB 114; (1911) 2 KB 1031, Rushworth v Taylor (1841) 3 QB 699).
   

54. I am satisfied that all these essential elements are present in this case. In addition, Kau does not seriously contest the fact that he was in actual possession of the truck until impounded by the police. I find Kau liable in conversion by detention.

IF KAU IS LIABLE IN CONVERSION BY DETENTION, WHAT ARE TTANHIL’S DAMAGES?

PLAINTIFF/CROSS-DEFENDANT’S SUBMISSIONS

55. It is submitted that TTANHIL is entitled to the following damages:

1. K2,214,000.00 in special damages for loss of business when the vehicle was taken in around 1 August 2016 and released back to TTANHIL and traded-in on 4 September 2017 at a hire rate of K6,000.00 per day;
2. K200,000.00 in additional costs incurred for trading-in the truck for a dump truck on 4 September 2017;
3. K86,025.38 in loan areas of K6,144.67 payable every month from 1 August 2016 to 4 September 2017; and
4. General damages.
   

DEFENDANT/CROSS-CLAIMANT’S SUBMISSIONS

56. Mr Kama submitted that if TTANHIL is entitled to any damages for loss of use of the truck while it was in Kau’s possession, it has however not proven its losses or damages on the balance of probabilities so these proceedings should be dismissed.

57. In addition, it was contended that TTANHIL’s evidence discloses:

1. No proof of contract or engagement of the truck at the time of Kau’s possession of the truck such that it would be reasonable to infer that the truck was making a loss.
2. No proof of hire out rate or contractual rate by which the truck was said to be hired out.
3. No proof of earning of the truck at the time of Kau’s possession of the truck.
   

58. It was argued that most of TTANHIL’s evidence went to establish the value of the truck and the fact that the purchase of the truck was partly financed by Bank of South Pacific Limited, but no evidence was produced to substantiate the truck’s earning capacity at the time of Kau’s possession of the truck. In any event, any evidence led by TTANHIL to suggest the rate by which the truck was earning or making an earning, the evidence was objected to or should be disregarded and given no weight to at all as lacking cogency. There was nothing before the Court to assist the Court with to assess any damages TTANHIL might be entitled to. A claim for loss of use of the truck by TTANHIL must be based on actual loss incurred and not based on assumptions.

REASONS FOR DECISION
Legal principles

59. The legal principles that are applicable in assessing damages where liability is established either following a trial or after the entry of default judgment are very much well settled (William Mel v Coleman Pakalia (2005) SC790, Steven Naki v AGC (Pacific) Ltd (2006) N5015) and these are:

• The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person’s case, that person has the onus of proving the allegation. (Yooken Paklin v The State (2001) N2212, National Court, Jalina J.)
• Corroboration of a claim is usually required and the corroboration must come from an independent source. (Albert Baine v The State (1995) N1335, National Court, Woods J; Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331, National Court, Lenalia J.)
• The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim. (Peter Wanis v Fred Sikiot and The State (1995) N1350, National Court, Woods J.)
• The same principles apply after default judgment is entered and the trial is on assessment of damages – even when the trial is conducted ex parte. A person who obtains a default judgment is not entitled as of right to receive any damages. Injury or damage suffered must still be proved by credible evidence. (Yange Lagan and Others v The State (1995) N1369, National Court, Injia J.)
• If the evidence and pleadings are confusing, contradictory and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing. (Obed Lalip and Others v Fred Sikiot and The State (1996) N1457, National Court, Injia J.)
• Where default judgment is granted, for damages to be assessed on a given set of facts as pleaded in a statement of claim, the evidence must support the facts pleaded. No evidence will be allowed in support of facts that are not pleaded. (MVIT v Tabanto [1995] PNGLR 214, Supreme Court, Kapi DCJ, Hinchliffe J, Sevua J; Waima v MVIT [1992] PNGLR 254, National Court, Woods J; MVIT v Pupune [1993] PNGLR 370, Supreme Court, Kapi DCJ, Jalina J, Doherty J; Tabie Mathias Koim and 28 Others v The State and Others [1998] PNGLR 247, National Court, Injia J.)
• The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages. Where precise evidence is available the court expects to have it. However, where it is not, the Court must do the best it can. (Jonathan Mangope Paraia v The State (1995) N1343, National Court, Injia J.)
• The court must be alert to vague claims, unsupported by corroborating evidence, as they might be false claims. The court must only uphold genuine claims. (Kolaip Palapi and Others v Sergeant Poko and Others (2001) N2274, National Court, Jalina J.)
• The person who has been wronged has a duty to mitigate their losses; though it is the defendant who has the onus of proving failure to mitigate (Dia Kopio v Employment Authority of Enga and Others (1999) N1865, National Court, Hinchliffe J; Coecon v National Fisheries Authority (2002) N2182, National Court, Kandakasi J.)

60. I will apply these principles in the context of this case below.

Special damages

61. Special damages is damage of a kind which is intended to compensate the innocent party for loss or damage incurred that is not presumed by the law to have been incurred and must be expressly pleaded and proved by credible evidence: PNGBC v Jeff Tole (2002) SC694, Leeway East Enterprise Ltd v Daniel Danaben (2013) N4951, Helen Jimmy v Paul Rookes (2013) N5360. There is no credible evidence from the plaintiff to prove special damages for the hire of the truck at K6,000.00 per day calculated from 1 August 2016 to 4 September 2017 on the balance of probabilities. Therefore, nothing is awarded for special damages.

General damages

62. If a defendant causes damage to a plaintiff’s profit-earning asset, generally the plaintiff is entitled to damages to compensate the plaintiff for profits lost during the period that he is deprived of using the asset: Abel Kopen v The State [1988-89] PNGLR 655. If at all possible, the plaintiff should provide an audited set of accounts or business records to verify his claim. However, if precise evidence is not available, it does not necessarily follow that the plaintiff will be awarded nothing. The court will do the best it can on the evidence that is available: Graham Mappa v ELCOM (1992) N1093, Jonathan Mangope Paraia v The State (1995) N1343, Helen Jimmy v Paul Rookes.

63. In the present case, TTANHIL has not produced an audited set of accounts or business records to verify its claim. There is no credible evidence about the daily hire rate for the truck or comparable rates for similar types of trucks if the truck were hired out. Given the truck was a profit earning asset, I will do the best I can.

64. However, I must distinguish the fact that damages sought here are for conversion and not for loss of business or profit per se. Damages are awarded in conversion for the market value of the goods converted at the date and place of conversion: Paul Vout, Torts, The Laws of Australia, Second Edition, 2007, Thompson Lawbook Co, 775.

65. Where the goods exist and have been restored to the plaintiff, but have depreciated in value, the measure of damages is the extent to which they have depreciated: Enga Enterprises Pty Ltd v Danny Pokali (1995) N1359. In that case, the action was a claim for conversion of a motor vehicle owned by the plaintiff who was involved in the rental car business. The vehicle valued at K12,000.00 was detained for about one year. The plaintiff sued for a daily rate of K100.00, costs of repairs, damages for detention, damages for conversion and interest totalling K64,766.15 on the basis of consequential loss. It was held that claims for consequential loss were usually considered too remote and only awarded a total of K6,051.10 consisting of K1,500.00 as damages for depreciation on the basis of the value of the vehicle pleaded in the writ and the cost of repair of K4,551.10.

66. No valuation or proper valuation is before the Court as to the true valuation of the truck from or about 1 August 2016 to 4 September 2017. I also note that the truck was in the possession of TTANHIL after it was first repossessed from 21 March 2017 to 21 August 2017 after which it was forcefully removed from the premises of Boroko Motors at Mt. Hagen. Hence, I will be guided by the initial purchase price of the truck (K440,000.00) and its trade-in value given by Boroko Motors on 4 September 2017. According to the Tax Invoice from Boroko Motors dated 4 September 2017 (annexure O, Exhibit A) the trade-in value given for the truck was K200,000.00. That was a massive loss of K240,000.00 since the truck’s purchase obviously reflecting depreciation in its value.

67. In the circumstances, with no proper assistance offered by the plaintiff as to the truck’s true valuation irrespective of the trade-in value which could have been more or less than its true value, I will assess damages for conversion by detention in the global amount of K180,000.00 allowing for contingencies as well.

Additional costs incurred for trade-in for dump truck

68. There is no specific pleading by TTANHIL for the additional costs incurred for the trade-in of the truck for a dump truck. Hence, this submission is rejected and I award nothing.

Loan arrears

69. There is no specific prayer for relief by TTANHIL for the loan arrears which TTANHIL submits amounts to K86,025.38 for the period of 14 months computed from 1 August 2016 to 4 September 2017 at the rate of K6,144.67 monthly to be paid by Kau. Hence, this submission is rejected and I award nothing.

INTEREST

70. TTANHIL seeks interest at the rate of 8% annually pursuant to statute (Judicial Proceedings (Interest on Debts and Damages) Act).

71. The awarding of interest under the Judicial Proceedings (Interest on Debts and Damages) Act is discretionary: Cheong Supermarket Pty Ltd v Pery Muro (1987) PNGLR 24. In the exercise of my discretion, I will award interest at the rate of 8% annually pursuant to that Act. Pre-judgment interest shall be calculated from the date of filing of the writ to the date of judgment and post-judgment interest to apply thereafter.

SUMMARY OF DAMAGES

72. Of all the different heads of damages sought in the statement of claim and in TTANHIL’s submissions, TTANHIL is only entitled to general damages for conversion by detention in the sum of K180,000.00

ORDER

73. The formal orders of the Court are:

1. Judgment is entered for the plaintiff/cross-defendant, T.T. Angore Noa Hai Investment Limited for conversion by detention.
2. Relief 1 sought in the prayer for relief is not pursued and is treated as abandoned.
3. No special damages is awarded.
4. The plaintiff/cross-defendant, T.T. Angore Noa Hai Investment Limited is only entitled to general damages in the sum of K180,000.00.
5. Pre-judgment and post-judgment interest shall be at the rate of 8% annually pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act.
6. The defendant/cross-claimant, Kau Buna’s cross-claim is dismissed.
7. The defendant/cross-claimant, Kau Buna shall pay the plaintiff, T.T. Angore Noa Hai Investment Limited’s costs of the proceedings on a party-party basis, to be taxed, if not agreed.
   

Ordered accordingly

_______________________________________________________________
Haiara’s Legal Practice: Lawyers for the Plaintiff
Jerry Kama: Lawyers for the Defendant