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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO. 52 OF 2023 (COMM)
BETWEEN:
JENNIFER GAWI
Plaintiff
V
ANNA GAWI
First Defendant
AND
S & A ENTERPRISES LIMITED 1-9571
Second Defendant
AND
HARRIET KOKIVA in her capacity as acting Registrar of Companies
Third Defendant
Waigani: Anis J
2024: 22nd May, 14th & 21st June
DECLARATORY RELIEF – Claimant asserting her rights as shareholder and director - orders sought to void or nullify purported special shareholders meeting that purportedly validated transfer and registration of share and removal of director – claim premised on various breaches of provisions of the Companies Act 1997 – claim of breach or failure to comply with or observe ss 37, 65, 86, 87, 98, 101, 102, 134 and Sch. 2 and 4 – Companies Act 1997 – consideration – whether there had been compliances or observations of these provisions by the first defendant– whether the actions of the defendants be declared void, unlawful or illegal – consideration - ruling
PRACTICE AND PROCEDURES – preliminary issue – motion to dismiss premised on want of mode of proceeding –Order 10 Rule 9A (15)(2)(d)(e) – National Court Rules - whether fraud a primary claim or ground relied upon by the plaintiff to enforce or assert her rights – if so, whether the proceeding should have been commenced by way of a writ of summons and statement of claim – Order 4 Rule 2(b) and Order 8 Rules 2, 3 and 30 – National Court Rules - consideration – ruling
Cases Cited:
Pokia v. Yallon (2014) SC1336
BSP Financial Group Ltd v. The State (2024) N10683
Tavul v Konga (2018) N7599
Westpac Bank PNG Limited v. William Tondopan and 1 Or (2021) N8896
New Britain Oil Palm Ltd v. Vitus Sukuramu (2008) SC946
Ume More v. The University of Papua New Guinea [1985] PNGLR 401
Steven Charles Pickthall v. Lae Plumbing Pty Ltd [1994] PNGLR 363
Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694
Madiu Andrew v Mineral Resources Development Company Ltd (2004) N2601
Traisa Transport Ltd v. Mountain Property Holdings Ltd and Ors (2024) N10694
In the matter of the Companies Act 1997 – Gigira Development Corporation Ltd and Ors v Stanis Talu and Ors (2021) N9027
Claire Chow v. Delores Chow (2009) N3539
Porgera Gold Mines Ltd v. Kimaleya Ondalane and Ors (2023) N10274
William Lakain v. Senior Sergeant Andrew Wilfred and Ors (2023) N10270
Gadigi v Logae (2021) SC2102
Michael Newall Wilson v Clement Kuburam (2016) SC1489
Application by Anderson Agiru (2002) SC686
Counsel:
D Kipa, for the Plaintiff
H B Maladina, for the First and Second Defendants
Nil appearances by the Third Defendant
JUDGMENT
21st June 2024
1. ANIS J: This was a civil trial for various declaratory relief. I heard closing submissions on 14 June 2024 and reserved my decision to a date to be advised.
2. This is my ruling.
BACKGROUND
3. The plaintiff was a former director and shareholder of the second defendant (second defendant/company). She held these positions from 2008 to 2023. On 5 August 2023, she learnt that she was purportedly removed as a director and shareholder of the second defendant.
4. Attempts by her to rectify the records kept by the third defendant (IPA) were unsuccessful. She was advised to address her redress in Court.
5. So, on 6 October 2023, she filed this proceeding. The plaintiff is asserting her rights as a purported director and shareholder of the company. She claims that her primary interests or rights as director and shareholder of the second defendant under the provisions of the Companies Act 1997 (CA) were violated, and so she files this proceeding where she seeks various declaratory orders to restore and enforce them (i.e., her rights and interests in the company).
6. The declaratory relief sought are as follows:
EVIDENCE
7. Both parties tendered their affidavit evidence without the benefit of cross-examination. The evidence were labeled with exhibit numbers.
PRELIMINARY MATTER
8. At a status conference hearing on 13 May 2024, the first and second defendants (2 defendants) informed the Court that they had filed another notice of motion to dismiss the proceeding (NoM). The NoM was filed on 8 May 2024. I then ordered the NoM to be listed together with the substantive matter for hearing.
9. The NoM seeks the following relief:
WRONG MODE?
10. The 2 defendants rely on 1 ground to seek dismissal of the proceeding. They claim that a wrong mode of proceeding was used by the plaintiff to commence this proceeding. They submit that the correct mode should have been by way of filing a writ of summons and statement of claim (WS proceeding) as the claim, they submit, is premised on allegations of fraud and thus the rules require that it must be properly pleaded. They rely on Order 4 Rule 2(b) and Order 8 Rules 2, 3 and 30, of the National Court Rules (NCR).
11. The plaintiff, in response, submits first that the NoM is incompetent and must be dismissed because it is vague and ambiguous. The plaintiff submits that the stated sources are too broad and not precise as required by Order 4 Rule 49(8) of the NCR.
12. I note the submissions of the parties.
13. Let me consider Order 10 Rule 9A(15)(2)(d)(e) and Order 4 Rule 49(8), of the NCR. They read in part:
(2) The Court may summarily dispose of a matter in the following situations:
......
.......
8. Form of Motions.
All Motions must contain a concise reference to the Court’s jurisdiction to grant the orders being sought. Motions not containing such reference will not be accepted for filing.
If accepted by the Registry staff without such reference, and it goes before the motions judge, the Court may strike out the motion for being incompetent and for lack of form.
The motion must state the following;
"...move the Court for Order pursuant to (e.g. section 5 of the Claims By and Against the State Act...) ...".
14. I dismiss the plaintiff’s argument that the NoM is incompetent. In my view, the ground seeking a dismissal is expressly pleaded, which is, it alleges that a wrong mode of proceeding was used to make a claim that is premised on allegations of fraud. On the face of the NoM, the plaintiff cannot, in my view, seriously say or argue that it is prejudiced or caught off-guard as to what the issue or argument is. See cases: Pokia v. Yallon (2014) SC1336 and BSP Financial Group Ltd v. The State (2024) N10683.
15. I now consider the merit of the competency claim. Did the plaintiff use a wrong mode of proceeding? Should the correct mode be by way of filing a WS proceeding? Order 4 Rule 3 of the NCR states:
3. Where plaintiff may choose. (4/3)
(1) Except in the case of proceedings which by these Rules or by or under any Act are required to be commenced by writ of summons, proceedings may be commenced either by writ of summons or by originating summons as the plaintiff considers appropriate.
(2) Proceedings—
(a) in which the sole or principal question at issue is, or is likely to be, one of the construction of an Act or of any instrument made under an Act, or of any deed, will, contract or other document, or some other question of law; or
(b) in which there is unlikely to be a substantial dispute of fact; or
(c) in which a person is authorized by an Act, regulation or by these Rules to make an application to the Court or a Judge with respect to a matter that is not already the subject matter of a pending cause or matter, and no other mode of making the application is prescribed by that Act, or regulation or by these Rules,
are amongst those which are appropriate to be commenced by originating summons unless the plaintiff considers the proceedings more appropriate to be commenced bywrit of summons.
16. I will answer this issue in favour of the plaintiff. I find nothing wrong with the plaintiff using the present mode, that is, an originating summons under Order 4 Rule 3 of the NCR. I give my reasons as follows:
(i) there are no main controversies or disputes surrounding the material facts; the material facts relate to a purported special shareholders meeting that was held by the first defendant on 2 August 2023; and the main issue before this Court is whether the actions of the first defendant after the meeting on 2 August 2023, where she had removed the plaintiff as a shareholder and director of the company, was lawful and in compliance with the provisions of the CA;
(ii) the main controversy concerns the law, that is, whether the first defendant complied with the provisions of the CA when she called the said special shareholders meeting and passed a resolution to remove the plaintiff as a director and shareholder of the second defendant;
(iii) the claim or cause of action is not premised on actual fraud per se.
(iv) the plaintiff, by this proceeding, is seeking equitable or declaratory relief to assert her rights, (i) over her post as a director of the second defendant where she claims that she was unlawfully removed, and (ii) over her personal property which is her share in the company which she claims was unlawfully transferred to the first defendant without her knowledge and consent; See case: Tavul v Konga (2018) N7599
(v) the plaintiff’s use of the terms unlawful and fraudulent is premised on her claim that the first defendant had breached the relevant provisions of the CA including ss. 37, 86, 87, 98, 101, 102, 134 and Sch. 2 and 4; that her actions breached the law, namely, the CA and thus were unlawful or fraudulent in nature; there is no pleading or relief sought herein that is premised on allegation of actual fraud, so it would be unattainable for this Court to consider and make a ruling on it; but again and as stated, fraud is not the primary basis for this claim, and I accept submissions made by the plaintiff’s counsel in that regard;
(vi) the pleaded relief and evidence adduced, in my view, are sufficient for the Court to consider make findings on whether the provisions of the CA were breached, and if so, whether I should grant or refuse to grant the declaratory relief that are sought in the originating summons, without the need to consider at all and make a definite finding on fraud;
(vii) even if I am to accept the 2 defendants’ claim that fraud should have been properly pleaded by the plaintiff and that the proper way to do that should have been to file a WS proceeding, fraud is not decisive or critical to the plaintiff’s claim, namely, concerning her asserted rights and relief as pleaded in the originating summons;
(viii) all the relief sought herein are not dependent on any requirement that the plaintiff must first of all prove actual fraud committed by first defendant of her actions of 2 August 2023.
CHALLENGE - LAW
17. The plaintiff claims various breaches by the actions of the first defendant under the CA.
18. The relevant provisions for consideration are ss.37, 65, 86, 87, 98, 101, 102, 134 and Sch. 2 and 4. I set them out in part as follows:
......
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 authorized 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.
......
65. TRANSFER OF SHARES.
(1) Subject to the constitution of the company, shares in a company may be transferred by entry of the name of the transferee on the share register.
(2) For the purpose of transferring shares, a form of transfer signed by the present holder of the shares or by his personal representative shall be given to–
(a) the company; or
(b) an agent of the company who maintains the share register under Section 67(3).
(3) The form of transfer shall be signed by the transferee.
(4) On receipt of a form of transfer in accordance with Subsections (2) and (3), the company shall forthwith enter or cause to be entered the name of the transferee on the share register as holder of the shares, unless–
(a) the board resolves within one month of receipt of the transfer to refuse or delay the registration of the transfer, and the resolution sets out in full the reasons for doing so; and
(b) notice of the resolution, including those reasons, is sent to the transferor and to the transferee within five days of the resolution being passed by the board; and
(c) the Act or the constitution expressly permits the board to refuse or delay registration for the reasons stated.
(5) Subject to the constitution of a company, the board may refuse or delay the registration of a transfer of shares under Subsection (4) where the holder of the shares has failed to pay to the company an amount due in respect of those shares, whether by way of consideration for the issue of the shares or in respect of sums payable by the holder of the shares in accordance with the constitution.
(6) Following entry of the name or names of a transferee or transferees on the share register the company shall submit to the Registrar notice in the prescribed form of that entry unless–
(a) the company is subject to a listing agreement with a stock exchange; or
(b) the total number of shares transferred since the date of incorporation or the last annual return under Section 215 is less than 50% of the issued shares; or
(c) the company submits to the Registrar its annual return under Section 215 within one month of the date of entry of the transfer.
(7) Where a company fails to comply with Subsection (4) or (6)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(1); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
......
Powers of Shareholders.
86. EXERCISE OF POWERS RESERVED TO SHAREHOLDERS.
(1) Powers reserved to the shareholders of a company by this Act may be exercised only–
(a) at a meeting of shareholders pursuant to Section 101 or Section 102; or
(b) by a resolution in lieu of a meeting pursuant to Section 103.
(2) Powers reserved to the shareholders of a company by the constitution of the company may, subject to the constitution, be exercised–
(a) at a meeting of shareholders pursuant to Section 101 or 102; or
(b) by a resolution in lieu of a meeting pursuant to Section 103.
87. EXERCISE OF POWERS BY ORDINARY RESOLUTION.
(1) Unless otherwise specified in this Act or the constitution of a company, a power reserved to shareholders may be exercised by an ordinary resolution.
(2) An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.
......
98. ALTERATION OF SHAREHOLDER RIGHTS.
(1) A company shall not take action that affects the rights attached to shares unless that action has been approved by a special resolution of each interest group.
(2) For the purposes of Subsection (1), the rights attached to a share include–
(a) the rights, privileges, limitations, and conditions attached to the share by this Act or the constitution, including voting rights and rights to distributions; and
(b) pre-emptive rights arising under Section 45; and
(c) the right to have the procedure set out in this section, and any further procedure required by the constitution for the amendment or alteration of rights, observed by the company; and
(d) the right that a procedure required by the constitution for the amendment or alteration of rights not be amended or altered.
(3) For the purposes of Subsection (1), the issue of further shares ranking equally with, or in priority to, existing shares, whether as to voting rights or distributions, is deemed to be action affecting the rights attached to the existing shares, unless–
(a) the constitution of the company expressly permits the issue of further shares ranking equally with, or in priority to, those shares; or
(b) the issue is made in accordance with the pre-emptive rights of shareholders under Section 45 or under the constitution of the company.
......
Division 6.
Meetings of Shareholders.
101. ANNUAL MEETING OF SHAREHOLDERS.
(1) Subject to Subsection (2), the board of a company shall call an annual meeting of shareholders to be held–
(a) once in each calendar year; and
(b) not later than six months after the balance date of the company; and
(c) not later than 15 months after the previous annual meeting.
(2) A company is not required to hold its first annual meeting in the calendar year in which it was first incorporated (whether or not under this Act), but shall hold that meeting within 18 months of such incorporation.
(3) The Registrar may, on the application of the company, and for any special reason the Registrar thinks fit, extend any of the periods referred to in Subsection (1) or (2) even if, as a result, the period is extended beyond the calendar year.
(4) The company shall hold an annual meeting of shareholders on the date on which it is called to be held.
102. SPECIAL MEETINGS OF SHAREHOLDERS.
A special meeting of shareholders entitled to vote on an issue–
(a) may be called at any time by–
(i) the board; or
(ii) a person who is authorized by the constitution to call the meeting; and
(b) shall be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.
......
134. REMOVAL OF DIRECTORS.
(1) Subject to the constitution of the company, a director of a company may be removed from office by ordinary resolution passed at a meeting called for the purpose or for purposes that include the removal of the director.
(2) The notice of a meeting referred to in Subsection (1) shall state that the purpose or a purpose of the meeting is the removal of the director.
......
SCHEDULE 2 – PROCEEDINGS AT MEETINGS OF SHAREHOLDERS.
Sec. 105.
Sch. 2.1. Chairman.
(1) Where the directors have elected a Chairman of the board, and the Chairman of the board is present at a meeting of shareholders, he shall chair the meeting.
(2) Where no Chairman of the board has been elected or where, at any meeting of shareholders, the Chairman of the board is not present within 15 minutes of the time appointed for the commencement of the meeting, the shareholders present may choose one of their number to be Chairman of the meeting.
(3) Subsections (1) and (2) are subject to the constitution of the company.
Sch. 2.2. Notice of meetings.
(1) Written notice of the time and place of a meeting of shareholders shall be sent to every shareholder entitled to receive notice of the meeting and to every director and an auditor of the company not less than 14 days before the meeting.
(2) The notice shall state–
(a) the nature of the business to be transacted at the meeting in sufficient detail to enable a shareholder to form a reasoned judgment in relation to it; and
(b) the text of any special resolution to be submitted to the meeting.
(3) An irregularity in a notice of a meeting is waived where all the shareholders entitled to attend and vote at the meeting attend the meeting without protest as to the irregularity, or where all such shareholders agree to the waiver.
(4) Subject to the constitution of a company, the accidental omission to give notice of a meeting to, or the failure to receive notice of a meeting by, a shareholder does not invalidate the proceedings at that meeting.
(5) Subject to the constitution of the company, where a meeting of shareholders is adjourned for less than one month, it is not necessary to give notice of the time and place of the adjourned meeting other than by announcement at the meeting which is adjourned.
......
SCHEDULE 4 – PROCEEDINGS OF THE BOARD OF A COMPANY.
Sec. 138.
Sch. 4.1. Chairman.
(1) The directors may elect one of their number as Chairman of the board.
(2) The director elected as Chairman holds that office until he dies, resigns, is prohibited from being a director of a company under Section 425, 426 or 428 or the directors elect a Chairman in his place.
(3) Where no Chairman is elected, or where at a meeting of the board the Chairman is not present within five minutes after the time appointed for the commencement of the meeting, the directors present may choose one of their number to be Chairman of the meeting.
Sch. 4.2. Notice of meeting.
(1) A director or, where requested by a director to do so, an employee of the company, may convene a meeting of the board by giving notice in accordance with this section.
(2) Not less than two days notice of a meeting of the board shall be sent to every director who is in the country, and the notice shall include the date, time, and place of the meeting and the matters to be discussed.
(3) An irregularity in the notice of a meeting is waived where all directors entitled to receive notice of the meeting attend the meeting without protest as to the irregularity or where all directors entitled to receive notice of the meeting agree to the waiver.
Sch. 4.3. Methods of holding meetings.
A meeting of the board may be held either–
(a) by a number of the directors who constitute a quorum, being assembled together at the place, date, and time appointed for the meeting; or
(b) by means of audio, or audio and visual, communication by which all directors participating and constituting a quorum can simultaneously hear each other throughout the meeting.
Sch. 4.4. Quorum.
(1) A quorum for a meeting of the board is a majority of the directors.
(2) No business may be transacted at a meeting of directors where a quorum is not present.
......
19. The processes for appointments of directors and shareholders are express as stated in the CA. The leading case law on point is Gawan Kuyan and Ors v. Andrew Sallel and Ors (2008) N3376. First and at para. 33, the Court sets out the process that is involved or required under the CA, to remove a director of a company, as follows:
32. This means that unless the company’s constitution provides otherwise, if a director of a company is to be lawfully removed from office the following procedure applies:
......
20. Secondly and in regard to the appointment of a director of a company under the CA, the Court, at para. 35, also sets out the said process as follows:
35. This means that, in most cases, unless the company’s constitution provides otherwise or if directors are appointed by the court (s 132), if a director is to be lawfully appointed, the following procedure applies:
21. And thirdly, the Court also sets out the process for valid transfer of a share in a company under the CA. At para. 48, it states:
48. This means that, in the usual case, for a valid transfer of a share to take place:
UNDISPUTED EVIDENCE - CLARITY
22. I now turn my attention to the claim and the undisputed material evidence.
23. Evidence adduced by both parties shows the following. That on or about 1983, the Late Stephen Gawi established the second defendant. At the time of establishment, he and his wife the first defendant held 1 share each in the company. In 2008, the company records show that the first defendant transferred her 1 share in the company to the plaintiff. The plaintiff adduced evidence to that effect which was acknowledged by the first defendant. However, the first defendant claims that although she had agreed to transfer her share to the plaintiff, she later changed her mind for various reasons and accused the plaintiff of fraudulently proceeding to register the 1 share to her name.
24. I note that the first defendant appears to attempt to make a claim of fraud against the plaintiff. I recall that I had informed the first defendant’s counsel in Court that there was no cross-claim filed that would set the foundation of the first defendant to make claims including fraud against the plaintiff. I informed counsel that the 2 defendants were summoned by the plaintiff in this proceeding, to provide their responses to the allegations raised, which were, whether they followed due processes set out under the CA when they purportedly removed the plaintiff as a director and shareholder of the company on 2 August 2023. I also inquired why the first defendant did not commence any action against the plaintiff since 2008 to assert her claim of fraud; why she had done nothing for the past 10 years or so even up to this present time?
25. In response, I note that counsel was unable to assist in that regard except to continue make these unfounded allegations or counter claims of fraud which are not before this Court. Counsel also submitted that the first defendant was elderly and illiterate.
26. For clarity, I dismiss any counter claims or allegations that are raised or made by the 2 defendants in this proceeding against the plaintiff. I find no proper basis for raising them without a proper cause of action, pleading or cross-claim. See cases: Westpac Bank PNG Limited v. William Tondopan and 1 Or (2021) N8896, New Britain Oil Palm Ltd v. Vitus Sukuramu (2008) SC946, Ume More v. The University of Papua New Guinea [1985] PNGLR 401, Steven Charles Pickthall v. Lae Plumbing Pty Ltd [1994] PNGLR 363, Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694, and Madiu Andrew v Mineral Resources Development Company Ltd (2004) N2601.
27. The only arguments and evidence I will consider are those that respond directly to the allegations raised by the plaintiff against the 2 defendants in this proceeding, namely, want of compliances by, breaches by, and illegal actions of, the first defendant to ss. 37, 65, 86, 87, 98, 101, 102, 134 and Sch. 2 and 4 of the CA, regarding or concerning her action of 2 August 2023.
PLAINTIFF’S EVIDENCE
28. The plaintiff’s tendered evidence were marked as exhibits P1, P2 and P3.
29. The status quo of the company records in 2008 shows the first defendant and Stephen Gawi as the 2 sole shareholders. The status quo of the company records of company in 2009 shows the Late Stephen Gawi and the plaintiff as the 2 sole shareholders of the second defendant. In 2013, the status quo of the company records kept by IPA, after the plaintiff had requested for transfer of 1 share of Late Stephen Gawi to the first defendant which had been approved by IPA, shows the plaintiff and the 1st defendant as the 2 sole shareholders of the company. The said IPA company records of 2013 also show the plaintiff and the first defendant as directors of the company. That was the status quo of ownership and directorship of the company, as recorded by IPA from its records as at 14 May 2013. Evidence of these may be seen at annexures C, D and L to Exhibit P1.
30. The Late Stephen Gawi passed on in 2010. At the material time, his 1 share in the company was recorded under his name. The plaintiff gave evidence that she filled in the transfer forms and had Late Stephen Gawi’s share transferred to her mother the first defendant. The transfer was effected on 8 August 2013. Therefore, and after 8 April 2013, the IPA records of the company show that both the plaintiff and the first defendant held 1 share each in the company. Evidence of that is contained at Annexure P to Exhibit P1.
31. The plaintiff has now adduced evidence to say that she was later advised by her lawyers that her action to transfer the 1 share of the Late Stephen Gawi over to her mother the first defendant, was not proper under the provisions of the CA. Therefore, the plaintiff is giving evidence herein to reveal this error or fault on her part, and she is asking this Court to cancel the said transfer and restore the share of the Late Stephen Gawi in the company back to his name, to be held under his estate.
32. Now we come to the fact that gave rise to this proceeding. In 2023, the first defendant made changes to the IPA records which is the subject of this proceeding. I will address that under the next sub-heading.
33. But in summary, the plaintiff has adduced evidence at paras. 29 to 38 in Exhibit P1, where she states, (i), that on 5 August 2023, she learnt of her purported removal as a director and shareholder of the second defendant, (ii), that at the material time, that she held 50% of the shares in the company, (iii), that at the material time, she did not call for any shareholders meeting nor a Board meeting, and (iv), that she never received any meeting notice of a meeting to be held by the company before the meeting was conducted on 2 August 2023.
DEFENDANTS’ EVIDENCE
34. The 2 defendants tendered a total of 5 affidavits which were marked as exhibits D1 to D5. In perusing them, I observe that the 2 defendants did not adduce any direct evidence to contest the material facts and allegations raised in this proceeding except to make counter arguments, allegations and accusations against the plaintiff. I note that I have already addressed and ruled on the matter above in my judgment.
35. The want of evidence by the 2 defendants to address the contended matters raised by the plaintiff was also confirmed by their counsel at the hearing.
36. In fact, the first defendant has adduced her own evidence to confirm that it was her that took steps in 2023 to change the IPA records of the second defendant, to, (i), remove the plaintiff as a director of the company and (ii), transfer the plaintiff’s share in the company to herself. She claims that she is elderly and illiterate and did not know what she was doing but had taken these actions premised on advice that she had received from third parties.
37. Evidence of that is contained in Exhibit D1.
38. Para.16 is crucial where the first defendant deposes as follows:
39. As proof of the said meeting, she attaches a copy of a purported Special Shareholders Resolutions dated 2 August 2023 (Special Resolution), under Annexure C to her affidavit.
40. The Special Resolution reads in part:
......
BOARD RESOLUTIONS
1.0 Mrs Anna Gawi the sole SHAREHOLDER RESOLVES at the meeting held at the office of Young and Williams Lawyers on the 1st floor of Tandy Haus Waigani Port Moresby, that pursuant to Section 134 of the Companies Act 1997:
(a) Mrs Anna Gawi AGREES to remove Jennfer Gawi as a director of the company for fraudulently appointing herself as a director by conspiring with certain officers of IPA (Investment Promotion Authority) when IPA was still using paper transactions.
(b) That Mrs Anna Gawi AGREES and ACCEPTS the acquisition of Jennifer Gawi’s share in S & E Enterprises Limited is of benefit to herself (Mrs Anna Gawi) the remaining shareholder. Jennifer Gawi acquired the shares fraudulently by conspiring with certain officers of IPA (Investment Promotion Authority) when IPA was still using paper transactions.
(c) That Mrs Anna Gawi AGREES and ACCEPTS that pursuant to section 167 of the Companies Act 1997, the Registered office of address for service of the company shall be Allotment 43 Section 238 (Gerehu stage 2) Hohola.
(d) Mrs Anna Gawi RESOLVES to follow up on her complaint of S & A Enterprises Limited against Jennifer Gawi for fraudulently altering company records at Investment Promotion Authority. Refer to Crime Report # 1374/21.
(signed).........................................................
Sole Director/Sole Shareholder Mrs Anna Gawi
CHAIRLADY
BOARD OF DIRECTOR
S & A ENTERPRISES LIMITED
CONSIDERATION
41. The status quo of the company in 2013, after the records were amended to include the first defendant as a shareholder, remained unchallenged or contested for about 10 years. The change that was effected that is now being challenged was the actions of the first defendant in 2023.
42. For clarity, before 2 August 2023, the correct or unchallenged status of the second defendant’s record kept by IPA is as follows. The plaintiff and the first defendant each held 1 share in the company. Also, the plaintiff and the first defendant were listed as directors of the company. On or after 2 August 2023, the IPA record of the company [Annexure P to Exhibit P1 as discussed above] reveals that the first defendant owns 2 shares in the company. The plaintiff was described therein as ceasing to be a shareholder as of 2 August 2023. The same record also reveals that the plaintiff had purportedly ceased to be a director of the company on 2 August 2023.
43. It is these changes made to the second defendant’s records kept at IPA that is being challenged by the plaintiff. This clarity is important in my view to avoid confusion or misconceptions.
44. Now, this all comes down to this one question. Did the first defendant breach the mandatory provisions of the CA when she acted in the way as she had done? My direct answer to that is, “yes, the first defendant did breach the mandatory provisions of the CA for removal of a director and for transfer of a share, when she instructed or directed the IPA to accept her purported Special Resolution and effected the changes to remove the plaintiff as a director or managing director and shareholder of the company.”
45. My reasons and findings may be summarized as follows:
(a) The first defendant has expressly admitted to her actions under para. 16 in her affidavit marked as Exhibit D1;
(b) The 2 defendants did not provide any evidence to show that they had complied with the requirements for removal of a director in that they had observed or complied with the process as set out in the CA as summarized in the case of Gawan Kuyan v Andrew Sallel (supra);
(c) I say and make similar findings in regard to the purported transfer of the plaintiff’s share in the company over the first defendant. The 2 defendants did not provide any evidence to show that they had complied with the requirements for transfer of a share in that they had observed or complied with the process as set out in the CA which were summarized in the case of Guyan Kuyan v. Andrew Sallel (supra);
(d) I therefore conclude and find that the first defendant breached, as well as denied the plaintiff her rights and interests under, ss. 37, 65, 86, 87, 98, 101, 102, 134 and Sch. 2 and 4, of the CA;
(e) I also find the actions of the first defendant, in breaching the various provisions of the CA as well as her conduct in holding a purported special shareholders meeting on 2 August 2023, unlawful and illegal;
(f) In the Special Resolution, the first defendant began under item 1.0 by stating and I quote, “Mrs Anna Gawi the sole SHAREHOLDER”. This assertion is not true given that the IPA records, as at 2013, which had never been challenged in a Court of law or set-aside, showed that the plaintiff was also a shareholder. The first defendant makes another untrue claim in the Special Resolution where she signed off as “Sole Director/Sole Shareholder”. Again, the IPA records of the company that was kept as of and prior to 2 August 2023, for the past 10 years going back to 2013 and as revealed under Annexure P to Exhibit P1, shows both the plaintiff and the first defendant to be shareholders and directors of the company. It was the plaintiff who had included the first defendant as a shareholder in 2013, that is, when she transferred the 1 share of the Late Stephen Gawi over to the first defendant. And again, there is no evidence adduced that shows that the 2 defendants had lodged a challenge in Court or otherwise had taken steps that would have justified the claim made by the first defendant that she was the sole shareholder and director of the company as at 2 August 2023.
(g) I find that at the time of the purported company meeting on 2 August 2023, the first defendant was not the sole shareholder or director as she had claimed;
(h) The plaintiff has discharged her burden of proof on the allegations raised;
(i) The 2 defendants, and particularly the 1st defendant, failed to discharge or negate the evidence disclosed by the plaintiff.
46. As a result, I am satisfied that the plaintiff has established or proven her case on the balance of probabilities.
RELIEF
47. Having made my findings in favour of the plaintiff, I now consider the relief sought in the originating summons. I re-state them herein:
48. I will make 2 observations and rulings on the main relief. The first concerns relief 7 and 8. The relief are premised on the plaintiff’s claim to rely on s.152 of the CA. I find the 2 relief unattainable, and that being the case, I decline to grant them. Claims made under s.152 shall be commenced as a separate cause of action by way of a petition under the CA by an aggrieved or prejudiced shareholder. See s. 14(c) of the Company Rules Chapter No. 146 and cases: Traisa Transport Ltd v. Mountain Property Holdings Ltd and Ors (2024) N10694 and In the matter of the Companies Act 1997 – Gigira Development Corporation Ltd and Ors v Stanis Talu and Ors (2021) N9027. It appears misconceived that the plaintiff is seeking such a relief by way of an ordinary originating summons.
49. My second observation concerns correcting or undoing an error committed by the plaintiff, that is, to restore back Late Stephen Gawi’s 1 share in the company. By that, I am referring to relief 5 and 6 in the originating summons.
50. I note the submissions of the parties on this.
51. The 2 defendants make fraud allegations against the plaintiff to say that she fraudulently transferred the 1 share of Late Stephen Gawi to the first defendant. I have already ruled on this above which is that such a claim is not properly before me. Allegations of fraud, as the 2 defendants had argued in their preliminary submission, must be properly pleaded or filed using a WS proceeding. There is no cross-claim filed herein. I also note that the 2 defendants had spent a considerable amount of time and effort to try to dismiss the proceeding. If they intend to raise this argument, one option would have been to apply at the directions hearing stage to covert the proceeding to pleading. They have not done so and now they are attempting to raise counter allegations premised on claims that are not before this Court. Premised on my earlier ruling, I reject these submissions by the 2 defendants.
52. In so doing, although I do not consider the explanation given by the plaintiff as totally satisfactory, the error that was committed to transfer the Late Stephen Gawi’s share to the first defendant is noted. The plaintiff, as a lay person, had thought that given that the first defendant was the wife of the Late Mr Gawi, that it was proper to simply transfer his share after his demise over to his wife.
53. The plaintiff now acknowledges, premised on legal advice received, that due process had not been observed by her under the provisions of the CA in 2013, and all she is asking, in this proceeding for the said relief, is for this Court to make an order that would restore back the 1 share of the Late Stephen Gawi in the company.
54. The plaintiff is essentially seeking corrective measures under relief 5 and 6.
55. The 2 defendants did not address this specific issue, that is, whether the first defendant should surrender her share back to the name of Stephen Gawi which shall form part of his estate. Their only argument made is in attacking the plaintiff of alleged fraud which has been rejected. But I note that counsel referred this Court to the case of Claire Chow v. Delores Chow (2009) N3539 where counsel quoted in part what His Honour Manuhu J stated at para. 31, which was as follows:
......Whether they like it or not, they are eternally mother and daughter. For now, they must both return to the position they were in prior to the transfer of the shares.......
56. Counsel, in summary, submits that the Court herein should do the same, that is, restore the shares to the pre-transfer period which would restore their relationship. First, I do not see any sense of realism in the submission made by counsel for the first defendant, that all will be well if the Court, without any legal basis, orders a reversal of shareholdings in the company to back to 2013 or 2008 or to 1983. I dismiss this submission as baseless. However or regardless, I note that the pre-transfer period in the present case, premised on the pleading and claim made by the plaintiff, is 2013. And in 2013, the status quo before the 1 share was transferred to the first defendant, was as follows: The plaintiff held 1 share and Late Stephen Gawi held 1 share. The first defendant did not hold any share in the company at that time.
57. Therefore, and with respect, I also find that the case Claire Chow v. Delores Chow (supra) does not assist the submissions made by the 2 defendants, but in fact, supports the proposition made by the plaintiff, that is, for this Court to grant the relief sought that would restore the share back to the period before the 1 share of Late Stephen Gawi was transferred to the first defendant, which is also a main relief sought by the plaintiff in this proceeding.
58. In the end, I am also minded to and will grant relief 5 and 6 to correct the error made, and restore the status quo of the shares held in the company as at 2013, that is, restoring the shareholdings to the period before the Late Stephen Gawi’s share was transferred to the first defendant.
OTHER MATTERS
59. I note that the plaintiff has also sought in the proceeding relief 10, and I quote, Any other orders this Court deems fit.
60. Evidence adduced by the plaintiff shows that she has been harassed and intimidated by the first defendant, her other children and agents or servants. The plaintiff has also adduced evidence to show how she had managed the company as its managing director to where it was before the unlawful actions of the first defendant, her servants and agents. The company had been deregistered at one point where the plaintiff had to then address and eventually restore. The first defendant did not counter this evidence with credible evidence. In fact, the findings by this Court reveal that the first defendant had committed serious breaches of the provisions of the CA. The plaintiff, who had been the managing director of the company and shareholder for more than 10 years, was removed by the first defendant without regard to law or due process.
61. This, in my view, reduces the credibility of the first defendant, and I would give less or no weight to the part where she tries to tarnish the credibility or character of the plaintiff. I also give little or no weight as well to the other supporting affidavits of the 2 defendants on this matter.
62. I am therefore minded to make other additional consequential orders to protect the plaintiff against harassment by the first defendant and her agents and servants without lawful cause. This Court has inherent powers under s.155(4) of the Constitution, to make such other orders, in this case, consequential in nature, to administer justice. See cases: Porgera Gold Mines Ltd v. Kimaleya Ondalane and Ors (2023) N10274, William Lakain v. Senior Sergeant Andrew Wilfred and Ors (2023) N10270, Gadigi v Logae (2021) SC2102, Michael Newall Wilson v Clement Kuburam (2016) SC1489, and Application by Anderson Agiru (2002) SC686.
63. In my view, the plaintiff should be allowed to manage the company, as she had been doing for the past decade prior to the unlawful actions of the first defendant in 2023, and she should be permitted to do that without any interference without lawful cause. Failure to do so by the first defendant and her agents and servants may result in contempt of court.
64. I am also minded to and will issue a consequential order that any company assets or properties that have been removed, taken or possessed by the first defendant, her agents or servants, must be immediately returned or surrendered to the custody of the plaintiff within 21 days from the date of the order of this Court.
SUMMARY
65. I am minded to grant the relief, including consequential orders, sought in the originating summons except those that have been rejected, namely, relief 7 and 8.
COST
66. A cost order made by the Court is discretionary. I am minded in this case, to award cost to follow the event against the first defendant on a party/party basis to be taxed if not agreed.
ORDERS OF THE COURT
67. I make the following orders:
(i) The first defendant, her servants and agents shall not, without lawful cause, harass, intimidate or interfere with the plaintiff and the operations of S & A Enterprises Limited 1-9571;
(ii) The first defendant, her servants and agents shall surrender to the plaintiff any assets or properties of S & A Enterprises Limited 1-9571 that had been removed, taken or possessed as of and prior to 2 August 2023;
(iii) If the first defendant, her agents and servants refuse to comply with the orders of the Court, the plaintiff would be at liberty to file contempt proceedings against each or any one of them.
The Court orders accordingly
________________________________________________________________
Wang Dee: Lawyers for the Plaintiff
Young & Williams: Lawyers for the First and Second Defendants
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