Unreported National Court Decisions
N1485
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
OS NO 44 OF 1996
BETWEEN
PORA WAN PTY LTD - Plaintiff
And
JACOB KOP - First Defendant
And
CLETUS NIKINTS - Second Defendant
And
LEO LAKA - Third Defendant
And
SERGEANT MAKIS - Fourth Defendant
And
JOHN WAKON - Fifth Defendant
Mount Hagen
Injia J
8 March 1996
22 March 1996
11 April 1996
15 April 1996
21 June 1996
26 June 1996
3 July 1996
12 August 1996
12 September 1996
20 September 1996
4 October 1996
24 October 1996
COMPANY LAW - Meetings - Extra-ordinary general meetings - Meeting convened by directors and shareholders and shareholder representatives in contravention of requirements of Section 146 of the Companies Act (Ch No 146) - whether meeting valid - Companies Act (Ch 146), S. 146.
Held:
1.       The conduct of the affairs of a company incorporated under provisions of the Companies Act (Ch No 146) must be done strictly in accordance with the provisions of the Companies Act.
2.       An extra-ordinary general meeting of directors and shareholders and shareholder representatives convened without compliance with the requirement of S. 146 of the Companies Act is invalid and resolutions passed therein are also invalid.
3.       Ordinary village people who prefer to incorporate a propriety company under the Companies Act and not other more flexible forms of business corporate entities such as under the Business Groups Incorporation Act (Ch 144) must strictly comply with the provisions of the Companies Act in the management of the company.
Cases Cited:
No cases are cited in the judgment.
Counsel:
J Kil for the Plaintiff
P Peraki for the First, Second and Third Defendants
24 October 1996
INJIA J:  By Originating Summons filed on 13 February 1996, the Plaintiff claimed the following orders:
1.       The First, Second and Third Defendants, their servants, agents and or relatives refrain from interfering in anyway with the peaceful operations of the Plaintiff Company.
2.       The Fourth and Fifth Defendants their servants and or agents release forthwith the Plaintiff’s motor vehicle described as a Toyota Land Cruiser, open back, red in colour, Registration No LAF 549.
3.       A declaration that the Plaintiff is the owner of the said Toyota Land Cruiser Registration No LAF 549.
4.       The Defendants, their servants, agents and or relatives refrain from interfering in any way with the peaceful operations of the Plaintiff Company unless in the execution of any lawful orders against the Plaintiff Company.
5.       Costs of this action.
6.       Any other orders the Court deems fit.
On 14 February 1996, the Court granted interim orders in terms of paragraph 1, 2 and 3 above.  The orders were returnable on 16 February 1996 at 9.30 a.m.  On that date, the interim orders were extended.
On 18 February 1996, the First Defendant moved to discharge the interim orders and sought other declaratory orders.  His notice of motion sought the following orders:
1.       The Order obtained by the persons namely Bora Pamunda and Thomas Roika who purportedly claim to act on behalf of the Plaintiff on 13th February, 1996 be set aside.
2.       The Motor Vehicle Toyota Land Cruiser Reg No LAF 549 taken by the Jessie John pretending to be Managing Director of  the Plaintiff be returned to the care-taker managers.
3.       The Motor Vehicle a Mitsubishi L200 4x4 Registration No ACN 978 - kept by Bora Pamunda to be returned to the care-taker managers.
4.       An Order that the First, Second and Third Defendants named in the order of 13th February, 1996 be allowed to conduct the operations of the Company Pora Wan Pty Limited as resolved by an extra ordinary Meeting resolution on the 24th of December 1995.
5.       The persons namely Bora Pamunda and Thomas Roika who purportedly claim to act on behalf of the Plaintiff, their agents or servants be refrained/restrained from interfering with the operations of Pora Wan Pty Limited.
6.       An Order that operations of Pora Wan Pty Ltd be now vested in the new care-taker management resolved to by the meeting at Highlander Hotel.
7.       The Books of the Company which were taken away from the Company Accountant be returned to the care-taker managers.
8.       Costs of this action.
9.       Any other orders the Court deems fit.  (My underlining).
On 18 February 1996, I dismissed the First Defendant’s application to set aside the interim orders (para. 1 above) and extended the interim orders until the other orders sought by the First Defendant in paras. 2-9 above were determined.  I have now heard all the evidence and submissions.
The order sought by the First Defendant in para. 4 of his motion comprise the primary issue in these proceedings. The primary issues are whether there was a meeting of shareholders of the Plaintiff held at the Highlander Hotel on 24 December 1995.  If so, what kind of meeting was it.  If that meeting was an extra-ordinary general meeting as contended  by the First Defendant, whether that extra-ordinary meeting was validly held or duly convened in accordance with the provisions of the Companies Act Ch 146 and in turn, resolutions passed therein were duly passed.
There is another issue as to whether the First Defendant is a director of the Plaintiff Company.  It will be necessary to determine this issue.
There are also other issues as to the representation of shareholders by Committee members, the business management affairs of the Plaintiff by the Managing Director and other directors, the shareholding interest of Directors in the Plaintiff, the regularity of the proceedings against each of the defendants and so on.  These issues are only secondary to and are dependant on the primary issue.  My deliberation on those issues will depend on the outcome of the primary issue.
The Plaintiff is a company incorporated under provisions of the Companies Act Ch 146 (“the Act”).  Even though the shareholders comprise of members of the Mogei Nambuga such-clans most of whom are ordinary village people, they chose not to constitute themselves in other forms of business appropriate to their standing such as incorporation under the Business Groups Incorporation Act Ch 144.  They chose to incorporate their company under provision of the Companies Act which entails modern business law and practice.  Therefore, this case must be decided strictly in accordance with the provisions of that Act.
The Plaintiff Company is a separate legal entity from its shareholders including corporate shareholders.  The uncontested oral evidence is that the Plaintiff is a subsidiary of Mogei Nambuga Milimb Investments Pty Ltd (abbreviated MNMI).  The Plaintiff was formerly known as Virgo No 1 Pty Ltd, a shelf company.  Its maiden directors were Joseph Fox and Miss Linda Kuri.  Each of them also took up one share each.  These two shares were the only shares allotted.  Pursuant to Board of Directors meeting of the Plaintiff held on 16 September 1993, (and pursuant to Return of Particulars in Register of Directors, Managers and Secretaries and Changes of Particulars of Virgo No 1 Pty Ltd filed on 16 September 1993), upon the resignation of Joseph Fox and Linda Kuri as directors, six new directors were appointed.  They are Cletus Nikints, Jesse John, Leo Laka, Bora Pamunda, Raphael Bakri and Thomas Ninji. These six new directors are the same as those of MNMI (except William Pora who has since died: See Articles of Association of MNMI lodged 21/10/87.  His replacement is the subject of dispute in these proceedings with his brother, the First Defendant, claiming he is a director and the Plaintiff’s Managing Director Jesse Johns saying he was only appointed as an “observer”).  It was also resolved at that meeting that Joseph Fox and Miss Linda Kuri relinquish their shares and the two shares be transferred to MNMI.
When the Plaintiff’s Board of Directors resolved to transfer the shares to the Plaintiff from Mr Fox and Miss Kuri, it was also resolved that the (1) transfers be approved and, subject to stamping, registered, (2) that the names of the transferees be entered in the Register of Members in respect of the shares transferred to them and that share Certificates be issued to the transferees under the Common Seal of the Company.  There is no evidence if these resolutions as to stamping, registration, etc. were effected.  The certified copies of documents provided by the Registrar of Companies do not show evidence of any such transfers being effected such as filing of Return of Allotment of Shares.
On 24 September 1993, Virgo No 1 Pty Ltd changed its name to the Plaintiff.  Since then, no changes were made as to the Plaintiff’s directorship, shareholding, etc.
The documents provided by the Registrar of Companies do not show Jacob Kop, the First Defendant, being appointed as director of the Plaintiff.  The Plaintiff is a separate legal entity and the relevant return filed on 16 September 1993 and the minutes of the  meeting of Director of Virgo No 1 Pty Ltd, later re-named the Plaintiff, do not show that he was appointed a director of the Plaintiff.  The position of a director is an important position in the Company which is provided for by the Companies Act - whereas an “observer” is not.  Unless there is proper evidence of his appointment as a director and necessary returns filed with the Registrar of Companies, this Court cannot so find that he is a director of the Plaintiff nor insofar as is relevant, MNMI.
I make the following findings of fact.  I find that both Joseph Fox and Linda Kuri effectively resigned and relinquished their shares.  I find that the directors of the MNMI are the same for the Plaintiff.  I find that the shares held by Joseph Fox and Linda Kuri were held in their capacity as directors as a matter of formality to ensure the incorporation of Virgo No Pty Ltd as a self company.  I find that when they resigned as directors, they also relinquished their respective shares.  I find that their shares were effectively transferred to MNMI upon the approval by the directors at their meeting on 16/9/93.  The registration of the transfer and issue of Certificates of Share were matter of formality and is not fatal to the transfer.
I now return to the primary issue before me.
On the evidence, I find that there was a meeting of some kind, of directors and representatives of shareholders held at the Highlander Hotel on 24 December 1995.  What kind of a meeting was it?  The Companies Act provides for five different kinds of meetings of shareholders.  They are Statutory meeting (S. 143), Annual General Meeting (S. 144), General (ordinary) Meeting (S. 145), extra-ordinary general meeting (S. 146) and meetings ordered by the Court (S. 147).  This meeting was not a statutory meeting or court-ordered meeting.  It was also not an Annual General Meeting or ordinary general meeting because such meeting was held at the Kimininga Lodge on 16 September 1995. The meeting of the 24 December 1995 was an extra-ordinary general meeting.  The First Defendant in his motion and the evidence adduced refer to this meeting as an extra-ordinary general meeting.  The evidence of the principal defendant in these proceedings, the First Defendant, who is also the purported chairman of the meeting held on 24 December 1995, is that the meeting was an “an Extra-Ordinary meeting of shareholders” (see para. 8 of his affidavit sworn 5/3/96).  I so do find that the meeting was an extra-ordinary general meeting.
Therefore, the validity of that meeting must be tested under the requirements of S. 146 and where applicable, the Articles of Association (“the Articles”) of the Plaintiff as complemented by Schedule 3 of the Regulations of the Act.
Section 146 provides:
“146.   Calling of extra-ordinary general meetings on requisition
(1)      On the requisition of members:
(a)      holding at the date of the deposit of the requisition not less than 10% of such of the paid-up capital as at the date of the deposit carries the right of voting at general meetings; or
(b)      in the case of a company not having a share capital, representing not less than 10% of the total voting rights of all members having at that date a right to vote at general meetings,the directors shall, without delay, proceed duly to convene an extra-ordinary general meeting of the company, to be held as soon as practicable but in any case not later than two months after the receipt by the company of the requisition.
(2)      The requisition shall state the objects of the meeting and shall be signed by the requisitionists and deposited at the registered office of the company, and may consist of several documents in the same form each signed by one or more requisitionists.
(3)      If the directors do not, within 21 days after the date of the deposit of the requisition, proceed to convene a meeting, the requisitionists, or any of them representing more than 50% of the total voting rights of all of them, may themselves, in the same manner as nearly as possible as that in which meetings are to be convened by directors, convene a meeting, but a meeting so convened shall not be held after the expiration of three months from that date.
(4)      Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors to convene a meeting shall be paid to the requisitionists by the company, and any sum so paid shall be retained by the company out of any sums due or to become due from the company, by way of fees or other remuneration in respect of their services, to such of the directors as were in default.
(5)      A meeting at which a special resolution is to be proposed shall be deemed not to be duly convened by the directors if they do not give such notice of it as is required by this Act in the case of special resolutions.”
Section 127 provides for removal of a director generally.  Section 127 (1) specifically deals with a directors of public companies which is not applicable to this case.
Section 127 (2) is of general application and it provides:
“(2)    Special notice shall be given of a resolution to remove a director under this section, or to appoint some person in place of a director so removed at the meeting at which he is removed, and on receipt of notice of an intended resolution to remove a director under this section the company shall, without delay, send a copy of it to the director concerned, and the director (whether or not he is a member of the company) is entitled to be heard on the resolution at the meeting.”  (my underlining).
Articles 7 & 8 of the Plaintiff provide for general meetings only.  They provide:
“7.      Two (2) members present in person or by proxy shall be a quorum for a General Meeting for all purposes.
8.       Any Resolution of the Company determined on without any General Meeting and evidenced by writing under the hands of the Directors or a Sole Director and of members of the Company shall be as valid and effectual as an Ordinary Resolution duly passed at a General Meeting of the Company.”
The requirements under S. 146 (extra-ordinary general meeting) and notice of  removal of directors in S. 127 (2) are not and should not be affected by the Articles as compplemented by the Regulations, Schedule 3, of the Act.
The Act and the Articles do not provide for resolutions affecting the appointment and removal of directors of a propriety company.  These are provided for in Schedule 3, of the Regulations.
Regulations 67-69 are relevant.  They provide:
“67.    The company may from time to time by ordinary resolution passed at a general meeting increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office.
68.(1) The directors may at any time, and from time to time, appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, but so that  the total number of directors shall not at any time exceed the number fixed in accordance with these regulations.
(2)      Any director so appointed holds office only until the next annual general meeting and is then eligible for re-election, but shall not be taken into account in determining the directors who are to retire by rotation at that meeting.
69.(1) The company may be ordinary resolution remove a director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his place.”
Reading these provisions together, the effect of all these provisions is as follows:  The meeting of 24 December 1995 being an extra-ordinary general meeting, it (1) must precede a requisition by members holding 10% of the paid up capital.  (2) The requisition must state the objects of the meeting.  (3) If the object of the meeting is to remove a director and appoint someone in his place, then the notice must state that in the requisition.  (4) The requisition must be signed by all the requisitionists.  (5) The requisition must be deposited at the registered office of the company.  (6) The directors must hold the meeting requested within 21 days after the deposit of the requisition or not later than 2 months after receipt of the requisition by them.  (7) If a meeting of the shareholders is not convened by the Directors within this period, then the requisitionists or any of them representing more than 50% of the total voting rights may hold a meeting.  (8) But such meeting of the requisitionists must be held after the expiration of 3 months after the date of deposit of the requisition.
These requirements are elaborate and some of them very formal or technical.  Many of them are in mandatory terms.  Where required, they must be strictly complied with.
The undisputed facts of the present case are that there was a letter dated 12 December 1995 signed by Jacob Kop, Cletus Nikints, Leo Laka and Raphael Bakri written to all directors and shareholders representatives (Committee members) inviting them to attend a meeting at the Highlander Hotel on 24th December 1995 at 12.00 p.m.  The letter in pidgin reads:
“Mipela laik toksave long yu long kam long miting blong ol Bod of Dairekta na Komiti Membas.  Miting bai kamap long 24 dei blong Disemba, 1995 long Highlander Hotel long 12 kilok belo.
Yu mas kam long dispela miting, mipela tok gen yu mas kam long dispela miting.  Long wanem strongpela toktok tru I bin kam long Mr Tony Spencer long Mosbi long wok blong Pora Wan Pty Ltd, na tu bai mipela toktok long wok blong Mogei Nambuga Milimp Investment Corporation.
Dispela em bai las miting blong yia 1995 olsem na olgeta Director na Komiti mas kamap.
Mipela ting bai yu kam.”
This letter was sent directly to directors and Committee members including the Plaintiff’s managing director Jesse Johns, director Bora Pamunda and Chairman of Board of Directors, Thomas Ninji.  But they refused to attend saying they already held a meeting at the Kimininga Lodge and that the financial statements were not ready.
Accepting that the extra-ordinary general meeting was held and resolutions were passed as reflected in the purported minutes of the meeting, it is clear from the evidence and, I do find, that all of the eight (8) requirements spelt out above were not met.
The letter of 12 December 1995 is not a requisition to the directors in particular to Chairman Ninji and or Managing Director Johns to convene a general meeting.  It was letter requesting them to attend an extra-ordinary general meeting which was already convened.
Assuming it was a requisition for an extra-ordinary general meeting, it did not state the complete purpose of the meeting.  As shown by the minutes of the meeting, two of the main purposes of the meeting were that the meeting was going to consider the suspension of the board of directors and consider Jacob Kop’s membership on the Board of Directors.
No notice was given to the incumbent directors as to their removal.  The incumbent directors include Managing Director, Jesse Johns, Bora Pamunda and Chairman of Board of Directors, Thomas Ninji.
There is no evidence that Jacob Kop, Cletus Nikints, Leo Laka, and Raphael Bakri held 10% of the paid up capital of the Plaintiff and therefore able to sign as requisitionists.
The incumbent directors were not given an opportunity to defend their position as required by S. 127 (2).
The requisition was not deposited at the registered office of the Plaintiff which is the office of Ring & Associates, Suite 12, Wamp Nga Haus, Romba Street, PO Box 1058, Mount Hagen.  (See Notice of Situation of Registered Office dated 6 August 1993).
The meeting was not convened by the requisitionists after the expiration of the period stipulated in S. 146 (5).  These fundamental breaches, each one on its own or collectively has the effect of invalidating the purported extra-ordinary general meeting held at the Highlander Hotel on 24 December 1995 and the resolutions passed therein.
Alternatively, assuming that it was an ordinary general meeting of shareholders, the letter of 12 December 1995 does not give notice to the directors of the purpose of the meeting which was, inter alia, to suspend them and appoint a care-taker management.  Therefore, S. 127 (2) of the Act was breached.  On this ground, I would also declare the meeting not duly convened and resolutions passed therein invalid.
My decision on the primary issue determines the substantive proceedings.  Therefore it is not necessary to determine the other related issues.  For these reasons, I declare that the purported extra-ordinary general meeting held at the Highlander Hotel on 24 December 1995 and the resolutions passed therein are invalid.  Consequently, I  grant the substantive orders claimed in the Originating Summons and other related orders as follows:
1.       The First, Second and Third Defendants, their servants, agents and or relatives refrain from interfering in anyway with the peaceful operations of the Plaintiff Company.
2.       The Fourth and Fifth Defendants their servants and or agents release forthwith the Plaintiff’s motor vehicle described as a Toyota Land Cruiser, open back, red in colour, Registration No LAF 549.
3.       A declaration that the Plaintiff is the owner of the said Toyota Land Cruiser Registration No LAF 549.
4.       The Defendants, their servants, agents and or relatives refrain from interfering in any way with the peaceful operations of the Plaintiff Company unless in the execution of any lawful orders against the Plaintiff Company.
As for costs, I order that each party bear their own costs because the dispute concerns matters of concern to the Plaintiff Company in which the First, Second and Third Defendants appear to have some interest.
Lawyer for the Plaintiff: John Kilburn Kil Lawyers
Lawyer for the Defendants: Peraki Lawyers