Papua New Guinea Law Reports - 1987
[1987] PNGLR 403
N648
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
PAUL TORATO
AND UNITED PARTY INC
V
SIR TEI ABAL,
MARTIN TOVADEK,
RAPHAEL DOA,
ROY EVARA,
OPAI KUNANGEL
AND UNITED PARTY HOLDINGS PTY LTD
Waigani
Bredmeyer J
4-6 March 1987
18 December 1987
PRACTICE - Judgments and orders - Consent order - Setting aside - Application to be treated with extreme caution - To be set aside only in clear case - Relevance of delay in bringing application - Ratification of order.
JUDGMENTS AND ORDERS - Consent orders - Amending varying and setting aside - Application to be treated with great caution - To be set aside only in clear case - Relevance of delay in bringing application - Order not “consented” to - Ratification of order by subsequent meeting of company as consent.
Two defendants applied to set aside a consent order made on 23 October 1986 which finally disposed of a cause of action some six weeks after it was entered. The five named first defendants were the directors of the second defendant. The application was made on the basis that the defendants had not instructed the counsel who purported to represent them to consent to the order. The evidence showed that the instructions to the counsel who consented to the order for the first and second defendants came from the company secretary. The company secretary in turn had limited instructions to consent on behalf of two of the director/defendants and none at all on behalf of the other three director/defendants. The company secretary had no authority to instruct counsel to consent to the order on behalf of the company, the second defendant. On 29 October 1986, two extraordinary meetings of the second defendant dealt with the order in such a way as to acquiesce in and ratify its terms.
Held:
(1)      Where a party applies to have a consent order which has been passed and entered set aside on the ground that it was made without his consent and the time for filing an appeal has also expired, the application should be treated with great caution and should not be granted unless the case clearly calls for interference with the order made.
Marsden v Marsden [1972] 2 All ER 1162, followed.
(2)      In the circumstances and particularly taking into account the delay in bringing the proceedings and the ratification of the actions of the company secretary at the extraordinary meetings of the company, the application to set aside the consent order should be refused.
Cases Cited
The following cases are cited in the judgment:
Keeble v Guardian Trust and Executors Co of New Zealand Ltd [1976] 2 NZLR 338.
Marsden v Marsden [1972] 3 WLR 136; 2 All ER 1162.
Neale v Gordon Lennox [1902] AC 465.
Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711; 3 WLR 440; 3 All ER 16.
Salmon (deceased), Re; Coard v National Westminster Bank Ltd [1981] Ch 167; 3 WLR 748; 3 All ER 532.
Notice of Motion
Two defendants sought by motion on notice to set aside a consent order on the ground that they had not consented to it.
Counsel:
S Golledge, for the plaintiff.
J Steele, for the first defendant.
Cur adv vult
18 December 1987
BREDMEYER J.: This is an application by the first and second defendants to set aside a consent order made by Wilson J on 23 October 1986. The facts are disputed. Four of the first five named defendants say that they had no notice of the agreement which resulted in the consent order and that they did not instruct Mr Gawi to consent to the order on their behalf. They also say that the second defendant, United Party Holdings Pty Ltd (hereinafter UPH), did not consent to the order.
The five first named defendants were all directors and held all the shares (one share each) in UPH which was the United Party’s investment company. All five directors held these shares “on trust for all those automatic citizens of Papua New Guinea who are presently members of the United Party”. (See WS 191/1979 and OS 109 of 1985 and the judgment of Barnett J dated 21 February 1986.) All five members had been Members of Parliament but three lost their seats and, at the time of the dispute, only Roy Evara and Martin ToVadek were Members of Parliament and they were the only two signatories to the company’s bank account. The major asset of the company was some shares in Papua New Guinea Associated Industries Pty Ltd (hereinafter PNGAI) which was being taken over by Dylup Holdings Ltd and United Party Holdings was about to receive a large payment for its shares.
In August 1986 Paul Torato commenced the present action against the five named defendants (there was no second defendant) and sought an order appointing himself as the representative of all those automatic citizens of Papua New Guinea who were members of the United Party, and an interim injunction restraining the defendants spending any of the money they were about to receive from the sale of shares in Papua New Guinea Associated Industries Pty Ltd and other orders. Mr Torato in affidavit evidence said that he was the Parliamentary Leader of the United Party, that the company was about to get K800,000 from the sale of its shares and had already spent about K200,000 in anticipation. This money had been spent by purchasing vehicles on credit from PNGAI to be paid for when the money from the sale of shares was received. A Mazda 929 was bought for the company secretary, Sam Manikot, for K22,232, a Mazda utility for Roy Evara, K13,500, a similar vehicle for Martin ToVadek shipped to Rabaul, K14,250 and one for Lindsay Lailai, the party secretary and an intending candidate, which was shipped to Kavieng. I have no evidence as to how the rest of the money was spent.
The money was received by UPH from the sale of the shares and, after deduction of moneys owed to PNGAI it came to K668,855 which was deposited into the company’s account with PNGBC on 7 October 1986. The two directors who were signatories to the account, Messrs Evara and ToVadek, then began a spending spree. Within a week they had spent K355,000. K52,000 was paid to Sir Tei Abal a director and former MP, K27,000 to Martin ToVadek and sitting MP, K27,000 to Andrew Wabiria, a former MP, K48,051 to a “Kanti Investments”, K40,000 to the directors as directors fees (K8,000 to each director being K1,000 per year for the past eight years), K21,366 for a vehicle for Opai Kunangel, a former MP, K22,364 for a vehicle for the United Party’s East New Britain Branch, K7,000 reimbursement of the United Party East New Britain Branch for its campaign in the Provincial Elections, and K8,000 to Roy Evara for reimbursement of his 1982 election expenses including the costs of fighting an electoral petition case. K20,000 was paid to S Manikot the company secretary for a year’s salary. He said he had not been paid for the previous year. On 16 October 1986 Mr Torato obtained a Mareva injunction against the defendants freezing the company’s account with PNGBC on the very proper basis that by the time his court case could be heard there would be no money left. Mr Michael Goodman of the firm of Beresford Love Francis & Co represented the defendants on the making of that order. He also appeared on the making of another interlocutory order on 20 October which continued the injunction. The court file on that hearing is marked: “Mr Golledge for the applicant, Mr Goodman for the defendants (now withdrawing) and Mr Gawi for United Party Holdings Pty Ltd.”
On 23 October 1986 an important consent order was made by Wilson J settling the whole action. The court file shows that Mr Golledge represented the plaintiff and Mr Gawi appeared for both defendants. (I add that the Order of 16 October which primarily froze the company’s bank account also joined the company as a second defendant.) It is the order of 23 October 1986 which the first and second defendants seek to set aside. It reads:
“1.      United Party Inc be joined as a Plaintiff.
2.       Paul Torato be appointed to represent all those automatic citizens of Papua New Guinea who were, as at the date of the Declarations of Trust by the First Defendants in respect of the shares they hold in the Second Defendant presently members of the United Party for the purpose of these proceedings.
3.       That the Originating Summons No 83 of 1986 and any Interlocutory Proceedings be dismissed.
4.       Existing injunction dissolved.
5.       The Second Defendant within 24 hours shall pay United Party Inc by banker’s cheque the sum of K220,000.00. United Party Inc shall then issue an instruction to its bank that Sam Manikot is to become signatories [sic] on its bank account.
6.       The transfer of shares by the First Defendants noted below in Paragraphs 8(b)(ii) hereof shall be deemed not to be a breach of the Trusts on which those shares are held.
7.       Each party to pay his or its own costs.
8.       And the Court notes the following terms of agreement between the parties:
(a)      Paul Torato shall convene a meeting of the National Executive of United Party Inc and, at that meeting, move a Motion to the effect that the National Executive recommend to the National Convention of United Party Inc that Martin ToVadek, Roy Evara and Sam Manikot be elected to the National Executive.
(b)
(i)       The First Defendants shall within 7 days convene an extraordinary meeting of the shareholders of United Party Holdings Pty Ltd and at that meeting they shall, in accordance with the Articles of Association of that Company, cause Paragraphs 5.03 and 6.03 to be deleted from those Articles.
(ii)      The First Defendants shall within 48 hours of the holding of that meeting execute a transfer of shares they hold in the Second Defendants in favour of United Party Inc.
(c)      The Directors of United Party Holdings Pty Ltd shall convene a meeting of the Board of Directors of the said company forthwith and appoint Messrs Paul Torato MP, Lindsay Lailai and Patrick Pagun as Directors of the said company. With Mr Paul Torato MP to be appointed the Chairman of the Board of Directors of the said company for 24 months from the date of such appointment, and for the purposes of these proceedings and this Agreement, the said Lindsay Lailai and Patrick Pagun shall be deemed to be parties to these proceedings and shall be parties to this Agreement.
(d)      The Second Defendant shall instruct the Papua New Guinea Banking Corporation that Paul Torato and Patrick Pagun are to become signatories on the company bank account and that Paul Torato and Sam Manikot are to be made compulsory signatories on that account.
9.       Time for entry of this Order be abridged to the time of settlement by the Registrar which shall be forthwith.”
Mr Evara gave affidavit and sworn evidence that he never consented to this as an individual or as a director of UPH and he never instructed Mr Gawi or anyone else to consent to the order. Sir Tei Abal, Raphael Doa and Opai Kunangel as individuals and directors gave affidavit evidence that they did not consent to the order. Martin ToVadek gave similar affidavit evidence but the plaintiff requested him for cross-examination as he was entitled to do under s 34(2) of the Evidence Act (Ch No 48). I thought that request was bona fide and reasonable; ToVadek did not come, so I ruled his affidavit evidence inadmissible. The result is that the defendants called oral and affidavit evidence from Evara, and affidavit evidence from Abal, Doa and Kunangel that they did not consent to the order. Mr John Gawi was called by the defendants. He readily admitted that he had no direct instructions from, or contact with, any of the five directors but that he got instructions on behalf of Evara and ToVadek and the company from Sam Manikot. Manikot was the company secretary and he told Gawi that he was in touch with, and could pass on instructions from, Evara and ToVadek. The plaintiff called Manikot, Patrick Pagun and Lindsay Lailai. Manikot said that he instructed Gawi to consent to the order on behalf of the company, and that he had instructions from ToVadek and Evara to negotiate a settlement of the court case with Torato. He admittedly made no contact with Abal, Doa and Kunangel and had no instructions from them in relation to the court case. They lived out of Port Moresby, they were hard to contact, and they left the running of the company mainly to Evara and ToVadek.
There is no doubt that Abal, Doa and Kunangel did not instruct Gawi as individuals or directors of UPH to consent to the order, either directly or indirectly through Manikot. The main conflict of evidence turns on whether Evara instructed Gawi through Manikot to consent, and here I have to assess the evidence of Evara against that of Manikot and Patrick Pagun. At the outset of this task I comment that good relations exist between these men. Although Manikot and Pagun were called by Mr Torato they enjoy the respect of Mr Evara. For many years Pagun was Mr Evara’s principal political adviser when he was a Minister and gave him loyal service. Manikot is the company secretary, a former acting Departmental Head, and Evara described him as a good friend.
Evara had a vague recollection of being served with legal process in August 1986 at his home, which I think was the originating summons in this case as no other documents were being served in August in the related action (OS 109 of 1985), and has no recollection of how Mr Goodman appeared for the defendants at the court on 16 and 20 October. I have already noted how Goodman says he was withdrawing on the 20th, the reason being that he was having difficulty locating his clients to get instructions. He filed a notice of ceasing to act on 22 October. Mr Evara said that Pagun approached him and told him that it would be wise to settle the court case commenced by Mr Torato in the interests of the United Party doing well in the forthcoming (ie 1987) National Elections and lest great sums of money be used up in legal fees. Evara met with Pagun and Manikot at Ela Beach on Tuesday, 21 October. Manikot had with him a cheque dated 20 October 1986 and made out to UNITED PARTY INC for K160,000. It had already been signed by Evara and Martin ToVadek, the other co-signatory on the account. Manikot asked Evara to alter the cheque to K220,000 and initial it, which he did. Manikot explained that the money was to be paid K20,000 each to the seven sitting United Party MPs (including Evara and Torato), K20,000 to Lindsay Lailai and Pagun, loosely described as the two party executives who are also intending candidates, and K60,000 for party administrative expenses including equal sums to Torato and Evara to pay their respective staffs.
Mr Evara did not recall when he first became aware of Mr Torato’s action. He does not recall Sam Manikot coming to his house, after he returned from Rabaul to get ToVadek’s signature on the cheque, to discuss the injunction obtained by Torato to freeze the account. On 21 October, when he altered the cheque at Ela Beach, he said he did not know of the court order freezing the account. He said that he did not instruct Pagun or Manikot to see Gawi and to settle the dispute with Torato.
Sam Manikot gave evidence that, prior to the injunction of 16 October freezing the bank account, he had spoken to Roy Evara about settling the dispute with Torato. I add that the United Party was disunited — Torato and Evara each claimed to lead it — and each was keen to get hold of the money in UPH to come from the sale of shares. On 16 October Manikot flew to Rabaul with the company’s cheque book to see ToVadek. On the same day the injunction was obtained freezing the account. He learnt about the injunction next day through a telephone call with his wife who was in Port Moresby. He then went and discussed the problem with ToVadek who proposed a payment of K160,000 out of company funds to the party. On Saturday, 18 October Manikot flew back to Moresby and went straight from the airport to Evara’s home and spoke to Evara for about 10 minutes about the injunction. Evara was happy to see Gawi and try and work out a settlement with Torato. (Gawi was the company’s lawyer having been appointed at a meeting of directors on 6 October 1986.) On Monday, 20 October Manikot attended the court hearing when the injunction obtained on the 16th was extended and other procedural orders made. After the court case he phoned ToVadek in Rabaul and briefed him on the court case and he was still happy with Manikot’s plans to settle the case.
On Tuesday, 21 October he met with Evara and Pagun at Ela Beach for lunch. They discussed the injunction and the court orders. Manikot said Evara was fully aware of the court orders freezing the account and was happy to increase the payment to K220,000. He said, “Go and see Torato and whatever solution you come up with I will go along with it”.
Patrick Pagun knew of the court case started by Torato in August. He believed that this in-fight between party members would not benefit the party and that the dispute should be settled; his main concern was to get money out of UPH for the party’s candidates in the forthcoming National election. In October he went to and fro between Torato and Evara trying to agree on a sum of money to be released. At the meeting at Ela Beach on 21 October Evara said to Manikot and him, “Go and see Torato and Gawi and anything you come up with I will go along with it”. Evara wilingly altered the cheque to K220,000 which was to be spent in the way I have mentioned. The cheque was altered from K160,000 to K220,000 to allow for the extra money to go to the party as distinct from the sitting members and the two executives who were also intending candidates.
I thought all three witnesses on the issue gave their evidence in a straight-forward manner but I have decided to resolve this conflict of evidence in favour of Manikot and Pagun. It is two witnesses against one and they were more definite in their recollection. For example Manikot says that on his return from Rabaul on Saturday 18 October he went straight to Evara’s house and discussed with him the court injunction and what ToVadek had said in Rabaul. Evara did not deny this meeting but rather that he could not recall that specific incident; Manikot came to his house on so many occasions. I accept Manikot’s positive, confident testimony to that vague, hard-to-recall testimony of Evara. Then the probabilities strongly favour the version of Manikot and Pagun. The court proceedings commenced in August. In simple terms they were an attempt to get control of the funds UPH was about to receive for Torato and the United Party. The defendants engaged a lawyer, Goodman, but the action was of no great threat to them as no court orders had issued and they had spent about K200,000 prior to 7 October and spent K355,000 in the week following. Then on Thursday, 16 October Torato obtained the injunction freezing the account. Manikot, the company secretary, and Pagun, a top United Party “executive” or “secretary”, knew all about the order. Manikot told ToVadek, a director and Evara’s co-signatory for the account, about it the next day. It was a great moment. It is highly likely that Evara knew of the court order shortly after it was made, and that he discussed it with his aides. I find as a fact that he knew about it at least on Saturday, 18th when Manikot said he discussed it with him and that he knew about it well before the meeting at Ela Beach on Tuesday, 21 October. At that meeting he signed the cheque to the United Party and increased it from K160,000 to K220,000 as a means of settling the dispute. Because I believe Manikot and Pagun on this issue — that Evara knew of the court order on 21 October — and not Evara, I also believe them that Evara said, “Go and see Torato and Gawi and I will go along with whatever solution you come up with”, or words to that effect. I therefore conclude that Evara, through his agent Manikot, instructed Gawi to settle the court case with Torato as they thought fit with the express knowledge that a payment of K220,000 to the party was to be a major feature of the settlement.
Following the meeting at Ela Beach, Manikot and Pagun met with Lindsay Lailai (the general secretary of the party and Torato’s man). Lailai gave evidence that the K220,000 was to be spent in the manner indicated above. The three went to see John Gawi who drafted terms of settlement. The next day, the 22nd, Gawi sent the draft to Kirkes, lawyers for Torato. The consent order was made on the 23rd. At no time was a draft of it shown to, or discussed with, Evara or any of the other directors. After the meeting with Gawi on the afternoon of the 21st, Pagun reported to Evara that, “They had seen Gawi and were coming up with something”. Nothing more than that. Gawi got what instructions he had to act for the defendants on the 23rd from Manikot.
I also accept Manikot’s evidence that ToVadek had also instructed him to see Gawi and Torato and work out a proposed settlement and that on 23 October Gawi thus had general instructions, via Manikot, to consent to the order on his behalf.
The most important part of the order was that the company pay the party K220,000. Torato wanted the lot, all K304,000 which was in the account when the court order froze it. The K220,000 was a compromise figure: K20,000 was to go to all the sitting members including Mr ToVadek. He was not standing for re-election but in his case it was regarded as a reward for past services — a contribution to his retirement fund, as Manikot put it. K20,000 was to go to each of the two executives who were intending candidates and the rest was to go on administration — to pay unpaid staff members of Evara and Torato and for the expenses of the forthcoming UP convention. The other parts of the order were to mend the rift between the Torato and Evara factions of the party. Torato and his aides Lindsay Lailai and Pagun were to become directors of UPH (Torato as Chairman). Torato, Pagun and Manikot were to be added as signatories to the account, Torato and Manikot to be compulsory signatories. Thus the two factions each had signatories, Torato and Pagun on one side, Evara, ToVadek and Manikot on the other, with one on each side to sign. Likewise the Evara side was to be re-admitted to the party. Evara, ToVadek and Manikot were to be elected to the National Executive, and Manikot was to become a signatory to the party bank account. I have no doubt that the other signatories were Torato and men on his side. The three directors Abal, Doa and Kunangel lost in the consent order. They remained as directors of the company but with less power because of the three new Torato directors. They were not due to get any of the K220,000 which was going to sitting Members of Parliament and elsewhere as has been noted, but these directors had done well with cash payments and vehicles prior to the court order of 16 October, and, as continuing directors, could expect to share in the largesse in the future.
How did the five named first defendants act after the consent order? Did they in any way ratify it? I review the evidence on these matters. First, I consider Roy Evara. I accept the evidence of Pagun and Manikot that at their meeting with Evara at Ela Beach on 21 October they only discussed the K220,000 and he gave them the general instructions, “Go and see Torato and Gawi and I will go along with whatever solution you come up with”. No other aspects of the settlement which resulted in the order of 23 October were discussed at Ela Beach. Evara said to me, and I believe him, that he was happy with the cheque of K220,000 going to the party and how it was to be distributed. It is clear that between that meeting at Ela Beach on the 21st, and the making of the consent order on the 23rd, Manikot and Pagun did not tell Evara of the other terms that were being negotiated. They had discussions with Gawi on the afternoon of the 21st and on the 22nd and last minute discussions with Gawi on the other side at the court house on the 23rd just before the order was made, but they did not consult Evara or get his instructions. Manikot described that as a human failing on his part. Contrast this with the other side where Lailai was in continual touch with Torato getting his views on the proposed settlement including getting his last minute instructions not to make Evara a signatory to the United Party bank account, which instructions were implemented.
Evara first learnt of the Order some time after the 23rd at a meeting of the United Party executives in Torato’s office. Present were Evara, Torato, Lailai, ToVadek, Paul Langro and Michael Kunjil. Evara gave brief evidence of this meeting in par 18 of his affidavit of 17 February 1987 and in his oral evidence. Lailai was the only other witness to give evidence of the meeting and he did so at greater length. Evara said that Torato read out the order but did not finish reading it because a bitter argument broke out between him and Torato. He said that the “consent” order was humbug because it was made without the directors’ consent. It was then resolved that an extraordinary general meeting of UPH would take place on 29 October in which Gawi would explain the order. Lailai agreed that an argument broke out but he said the argument was over money not over the court order. Evara said, “Can I get my cheque? Can you give me my money?” Lailai refused and said, “You have just had a court case and I do not think it fair for you to get any money now. You have already received benefits”.
I have doubted Evara’s credibility on what was said at Ela Beach, and as I have no reason to disbelieve Lailai, I accept Lailai’s version and I think the probabilities favour it. I consider that Evara did ask for money at that meeting and with justification. He had agreed to the K220,000 payment part of the settlement on the firm understanding that he as a sitting member would be getting K20,000 of it, so he was angered by Lailai’s and Torato’s refusal. One of them drew his attention to cl 8(b) of the order which required a meeting of the shareholders of UPH to be called within seven days of the order when the matter could be discussed further.
Two meetings of UPH were held at Travelodge Hotel on 29 October 1986, one immediately after the other. The minutes of each were tendered without objection. They describe each meeting as an extraordinary general meeting of the company. Present at the first meeting was Raphael Doa (Chairman), Evara, ToVadek, Kunangel and P Abal (as proxy for Sir Tei Abal), also the company secretary, Sam Manikot, who kept the minutes, and John Gawi. At that meeting Gawi explained the court order and the only item of business conducted at the meeting was the passing of a resolution which read as follows:
“TO APPOINT MESSRS TORATO, PAGUN AND LAILAI AS ADDITIONAL DIRECTORS TO UNITED PARTY HOLDINGS PTY LTD
The meeting passed a resolution to appoint Paul Torato, Patrick Pagun and Lindsay Lailai as new directors of the company and their appointment took effect on 29 October 1986. The meeting also endorsed the Court decision that Mr Paul Torato is the new Chairman of the company for two years.
MOTION CARRIED.”
Clearly this meeting was held and the resolution passed to implement cl 8(c) of the order of 23 October.
Immediately after that brief meeting a second meeting was held attended by Torato, ToVadek, Evara, Doa, Kunangel, Lailai, Pagun, P Abal (as proxy) and Manikot as Company Secretary. Mr Torato chaired the meeting. Ten items of business were discussed at that meeting the first of which was the passing of a resolution which read as follows:
“TO CONSIDER IMPLEMENTATION OF COURT ORDER
Meeting agreed that the court order be endorsed and accepted by the Board of Directors of the United Party Holdings Pty Ltd particularly transfer of shares held by UPH P/L Board of Directors to United Party Inc
MOTION CARRIED.”
Mr Evara gave evidence that prior to these meetings the five first defendants held a private meeting at which he told them what had happened at the meeting with Mr Torato and the others in Mr Torato’s parliamentary office. They agreed that they would attend the meetings, listen to John Gawi’s explanation of the court order, and try and ascertain what had happened before seeking their own legal advice as to how to revoke the court order of 23 October. They agreed that the order was not binding on them as they were not represented when it was made. They agreed to treat any resolutions passed at the meetings as being void and of no effect as being based on a fraudulently obtained court order and passed by persons not qualified to vote as directors. The other members said to be present at these private meetings, ToVadek, Doa, Kunangel and Abal, did not give any evidence of the meetings at Travelodge that day.
As I have said the minutes of the two company meetings were tendered without objection and Mr Evara does not contend that they are inaccurate. I heard evidence from Gawi who was present at the first meeting and the first two items of business of the second meeting; Manikot, who was present at both meetings; and Pagun and Lailai who were present at the second meeting. It is clear from all their evidence that the minutes accurately reflect what happened overtly at the meetings. The motions were put on the voices, they were carried; no one voted No; and no one called for a show of hands. At no stage did Evara and his four co-defendants speak against any motion, or vote against any motion or overtly abstain from voting. They never walked out; they never protested when Torato, Pagun and Lailai joined the meeting. Evara’s, and his co-defendants’, opposition to the court order was in no way manifested at the meetings.
Gawi said that when all present met at the start he noticed some unease on the part of Evara and Doa at the presence of Torato. He then sent Torato and the other two new directors-to-be out of the room while the first meeting was conducted and then they returned to take part in the second meeting. Gawi said when he explained the order at the first meeting there was no objection voiced to it, but Evara questioned him on the clause which required the directors to transfer their single share each to the United Party Inc. Evara thought the shares were to be transferred to Torato. Gawi said, “No to the United Party Inc”. Evara said, “I feel happy about that,” and ToVadek said “That is what should have been done a long time ago”. When Torato, Pagun and Lailai joined the old directors for the new meeting Gawi said they clapped when Torato took the chair and “they carried on as if they had never quarrelled”. Gawi told them that he was pleased that they appeared to be a United Party at last.
I find that when the court order was read and explained at the first meeting on the 29th and when a resolution was passed at that meeting and also at the second meeting held on the 29th to implement the court order, none of the five-named defendants dissented or objected in any way. I accept Evara’s evidence that he was unhappy about the order but he did not voice his objection in any way. Overtly he acquiesced in the order although in his mind he was opposed to it. I do not accept Evara’s evidence that the other four co-defendants felt the same way. They have not given any evidence to this Court on the matter in support of Evara’s evidence — their joint affidavit does not mention the meetings — and the evidence from the other witnesses I have mentioned and the minutes is against that contention. After all they did not lose much by the order. True their power was diluted; the court order produced three new directors, but they remained on as directors. They had benefited handsomely from the largesse of the company before and, as directors, could be expected to benefit again. (ToVadek, for example, put before the second meeting a claim for reimbursement of expenses he had personally incurred on the part of the party.) It is true they had to transfer their shares to the United Party Inc, but that was not a sacrifice as they held them on trust for the members of the party anyway. It is true that K20,000 was being paid by the company to the party but that was in accordance with the objects of the company. I find that at these meetings ToVadek, Doa, Kunangel and Abal (by proxy) acquiesced in the order of 23 October.
Thereafter things went bad for Evara. The order was not implemented in any way which benefited him. I do not know if the K220,000 was paid to the party but, if it was, the K20,000 of it promised to him was not paid. At an “Extraordinary General Meeting” of the company held on 3 December 1986, at which he, Abal and Doa were not present, he was removed as a director, and a motion was passed that his car be taken from him and “donated to the United Party”. There is no evidence that any of the other directors suffered the loss of their company-bought cars in the same way. Evara did not obey that resolution and Lailai told me in March that the company was suing to recover Evara’s car. Clause 8(a) of the order required Torato to convene a meeting of the National Executive of the party to recommend to the National Convention that Evara, ToVadek and Manikot be elected to the National Executive. This was not done. Lailai said he and Torato thought it was not necessary as Evara had already formed a new party. Evara said he resigned from the United Party in November 1986. On 5 November, Evara instructed Steeles to act for him and the other defendants to revoke the order and that firm applied to do so by notice of motion filed on 2 December.
SETTING ASIDE A CONSENT JUDGMENT
A judgment by consent can be set aside in limited circumstances. Volume 2 of the Supreme Court Practice (1979) at pars 2010, and 2010A states:
“A consent order can be set aside in an action commenced for the purpose on any ground that would invalidate an agreement ... If consent has been given by a mistake, it may be withdrawn at any time before the judgment is passed and entered ... But where a final judgment has been passed and entered the Court cannot set it aside unless a fresh action is brought for that purpose although it has been entered by mistake (Ainsworth v Wilding [1896] 1 Ch 673 and Wilding v Sanderson [1897] 2 Ch 534.)”
In the present case the judgment has been “passed and entered”. It was made by Wilson J on 23 October and entered on the same day. And in this case the application to set aside the judgment was not made in fresh proceedings. It was made by notice of motion in the same proceeding (OS 83 of 1986) which resulted in the order of Wilson J.
I quote from par 2010A of the same edition of the Supreme Court Practice.
“Where a party applies to have a consent order set aside on the ground that it was made without his consent and the application is made either before or contemporaneously with its being perfected, the court has a discretion to set aside the order where grave injustice would be done by allowing it to stand: Marsden v Marsden [1972] 2 All ER 1162 (CA).”
The facts of that case fully support the summary quoted. That was a divorce case where a consent order was made. The wife’s barrister agreed to release a charge she had placed on the matrimonial house and agreed to an order for her maintenance, in each case contrary to the express instructions given to the barrister by the wife’s solicitor. The consent order was made on 24 February but not perfected, ie entered, until 14 March. On that day either contemporaneously with the perfection, or a little beforehand, the wife applied to have the consent order set aside. Although the court did in that case set aside the consent order, Watkins J (at 1165) said that such applications should be looked at with “extreme caution” and should not be granted unless the case “clearly calls for interference with the order made”. I think that there are strong public policy reasons why consent orders should not be easily set aside. The parties and the public should be able to act on a court order especially after the appeal period has expired. In the present case, the defendants’ application was made on 3 December six weeks after the perfection of the order and just after the expiry of the 40 day appeal period.
Neale v Gordon Lennox [1902] AC 465 is a much earlier leading authority, quoted in Marsden v Marsden [1972] 2 All ER 1162, where a consent order was set aside because the plaintiff’s barrister had acted without her instructions. In that case the consent order was an interlocutory order referring a defamation case to an official referee for trial instead of the normal mode of trial before a judge and jury. The plaintiff had consented to the reference subject to a special condition; her counsel consented to the reference without mention of the condition. The order was made on 12 February and the application to set it aside on 1 March. In the present case, the order made by Wilson J was a final order and the application to set it aside was made six weeks later.
The principles of Marsden’s case were followed in Keeble v Guardian Trust and Executors Co of New Zealand Ltd [1976] 2 NZLR 338, but on the facts of that case, the plaintiff was disbelieved and it was found that she had instructed her counsel to consent to the order so the consent order was not set aside. On the timing, the consent order was made on 15 December but was not sealed until 26 January. Meanwhile the plaintiff had on 22 January applied to have the order set aside.
I propose to follow the principles in Marsden’s case and the others I have cited. The application should be looked at with extreme caution. On the authority of Marsden’s case the application is late because it was made six weeks after the perfection of the order and just after the appeal period had expired. In the case of Evara, I consider he knew and consented to the most important term of the order, the payment of K220,000. He had given general instructions to Manikot and, through him, to Gawi, to settle the case but neither consulted with him or got his consent to the detailed other terms of the order. He failed to voice his dissent to the order at the company’s meetings on 29 October and thereby, in my view, ratified the order. Mr Evara is an experienced politician and Minister of State. He would have reasonable business acumen. He is not a village man who would be overawed by the better educated, more commercially astute men present at those meetings. His failure to protest at those meetings causes me to doubt his sincerity in seeking to set aside the order. Does he want the court to set aside the order for the reason given, that he did not consent to it, or because Torato and others have reneged on the order and the spirit of the order? He has not been accepted back into the United Party, he has been removed as a director of UPH, he was not paid the K20,000 promised, and they have sought to take the company-bought car off him. He failed to act promptly. He knew the full details of the order at least on 29 October, yet the application was not made to the court until 3 December. For all these reasons I exercise my discretion against setting aside the order on his behalf.
I consider that ToVadek falls into the same category as Evara. He too specifically agreed to the K220,000 payment and gave instructions to Manikot to settle. He too acquiesced I think without any inner reservation in the company meetings on 29 October which endorsed the order. He thus ratified Manikot’s actions and the order. He failed to come to this Court when required for cross-examination. His application to the court is also late without good excuse. I do not think he has been prejudiced much by the order, and in the exercise of my discretion I refuse to set the order aside at his request.
Sir Tei Abal, Raphael Doa and Opai Kunangel fall into a different category. They had no prior knowledge whatsoever of the order. They in no sense directly or indirectly instructed Gawi to act for them. But I consider that they too are late in this application to this Court without good excuse. They failed to act quickly or get their lawyer to act quickly when they learnt of the order on 29 October. They positively acquiesced in the order at the company meeting on that date. For reasons given above I doubt whether they have been prejudiced much by the order. The public interest favours the plaintiff. The order was obtained without fraud on his part or any knowledge that Gawi did not have authority to act for the named defendants and UPH. The appeal period has expired. In the exercise of my discretion I refuse to set aside the order on their behalf. If they have been prejudiced by the order, and can prove damages then they may be able to sue Mr Gawi for professional negligence: see Re Salmon (deceased); Coard v National Westminster Bank Ltd [1980] 3 All ER 532, by way of analogy, where Sir Robert Megarry V-C refused an application to apply for testator’s family maintenance out of time on the basis of substantial delay by the applicant, unfair prejudice to the other side, and because the applicant probably had a remedy in negligence against her solicitors.
Did the second defendant, UPH, consent to the order? Manikot, the company secretary, instructed Gawi to consent to it on behalf of the company. What authority did Manikot have to do that? As I have said above he had authority from two directors only, Evara and ToVadek, generally to negotiate an agreement with Torato and specifically to pay out K220,000 to the party. He had no authority from the other three directors, and the authority from the two did not come from a resolution of directors.
The power of the company secretary to bind the company in dealings with outsiders is a matter of agency, the secretary being one of the agents capable of binding the company in certain circumstances. In this regard the secretary may be authorised by the directors to enter into certain types of contracts eg of a certain type or up to a certain amount. Over and above his actual authority the company secretary has an ostensible authority to do certain things on behalf of the company, eg to sign contracts connected with the administrative side of the company’s affairs such as employing staff, and hiring cars: see Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 (CA). The courts have ruled that a company secretary has no authority, for example, to call a meeting of the company without a resolution of the directors, or to issue a writ in the company’s name. But in respect of such a matter, any act done by a secretary beyond his authority may be ratified by the directors: see vol 1 Australian Corporate Affairs Reporter (CCH) par 6-910.
The matters contained in the order were of great importance to the company involving a large payment not of its profits but of its capital, the appointment of three new directors, changing the articles of association and the signatories to the bank account. All five directors would surely be vitally interested in the appointment of three new directors. I consider that Manikot had no power to instruct counsel to consent to these orders on behalf of the company without a resolution of the board of directors. And of course Gawi had no power. He had been appointed the company’s solicitor which was only a retainer to act for the company when specifically instructed to do so. He had no specific instructions from the directors to act on this consent order except via Manikot. However, I consider that the directors at the two extraordinary general meetings of the company held on 29 October acquiesced in, and ratified, the order and hence the secretary’s actions.
The plaintiff was not guilty of fraud in obtaining the order. He had no knowledge of Gawi’s lack of authority to consent on behalf of the company. All the old directors of the company ratified the court order at the meetings on 29 October. All of them signed an agreement for convening the meeting at short notice. They are late in bringing this application six weeks after the perfection of the order and after the appeal period has expired. As a matter of public policy the plaintiff should be able to rely on the order after that period has elapsed. They do not appear to be prejudiced much by the order. If they are, they may have a remedy against Mr Gawi for negligence. In the exercise of my discretion I refuse to set aside the order on behalf of the company.
Application refused with costs granted to the plaintiff.
Application refused
Lawyers for the plaintiff: Kirkes.
Lawyers for the defendants: Steeles.