N3270

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 939 OF 2004

EAST AROWE TIMBERS RESOURCES LIMITED
First Plaintiff

AND

MICHAEL AIYAP
Second Plaintiff

AND

BLAISIUS VIRIRIO
Third Plaintiff

AND

ALOIS AMON
Fourth Plaintiff

AND

CAKARA ALAM (PNG) LIMITED
First Defendant

AND

PAPUA NEW GUINEA FOREST AUTHORITY
Second Defendant

AND

MARTIN MATO
Third Defendant

Waigani: Makail AJ
2008: 31 January
: 18 February

INTERLOCUTORY RULING 

INJUNCTION- ex parte interim injunctive orders - application to set aside - National Court’s jurisdiction - Constitution - Sections 163(2) 155 (3)(a) and (4), and schedule 2.2 - National Court Rules,- Order 12, rule 8,- resjudicta and issue estoppel - whether capable of providing complete defence to claim that ex parte interim injunction should be set aside - considerations to take into account when determining application to set aside interim orders - undertaking as to damages - seriousness of undertaking - who to give undertaking - when to give undertaking - undertaking given to court and not to the other parties - right of party to sue on the undertaking - court’s discretion to enforce undertaking – assessment of damages pursuant to undertaking based on established principles on damages applicable to breach of contract - application of considerations - orders.

EVIDENCE - Affidavit of Counsel relied upon to support application to set aside interim orders – hearsay - improper for counsel to swear Affidavit - cannot be both lawyer and witness - certain parts of the Affidavit struck out.

ELECTION OF SHAREHOLDERS AND DIRECTORS OF COMPANY - Sections 104 and 137 of Companies Act 1997 - breach - effect.

Cases cited:

Emas Estate Development Pty Limited -v- John Mea and The State [1993] PNGLR 215
Gobe Hongu Limited -v- National Executive Council and Others (1999) N1920
Simon Mali -v- The State (2002) SC690
Mainland Holdings Limited & Others -v- Paul Robert Stobbs & Others (2003) N2522
Mark Ekepa, Pala Teya & Others -v- William Gaupe & Others (2004) N2694.
Pius Niu – Senior Sergeant Mas Tanda -v- The State (2004) N2765)
Lee & Song Timber (PNG) Co Limited -v- Nathaniel Burua as Chairman, East New Britain Provincial Forest Management Committee & 5 Others (2005) N2836

Counsels:
Mr. L Kari, for the First & Third Plaintiffs.
Mr. F Griffin, for the First Defendant.
Mr. J Bokomi, for the Third Defendant.

18 February, 2008

1. MAKAIL AJ: INTRODUCTION: This is an application by the First and Third Plaintiffs by an Amended Notice of Motion filed on 29 January 2008 pursuant to Order 12, rule 8 of the National Court Rules seeking inter alia Orders that:

1.	the ex parte Orders of the National Court of 29 November 2007 by Her Honour Justice Davani be set aside;

2.	pursuant to Orders dated 29 December 2006, the First Defendant immediately pay all outstanding premiums and levies for shipments from December 2006 to December 2007 including all illegal deductions totalling K133,660.72 into the said account forthwith; and

3.	the Defendants pay costs of the Application on Solicitor/Client basis.

It should be stated at the outset that I was informed by Mr Kari of counsel for the First and Third Plaintiffs that the Second and Fourth Plaintiffs have withdrawn from this court proceeding and the First and Third Plaintiffs will be discontinuing the proceeding against the Second Defendant. 

Hence, these parties were not represented at the hearing of the Amended Notice of Motion on 31 January 2008.

EVIDENCE

2. In support of the Application, the First and Third Plaintiffs relied on the following Affidavits:

1.	Affidavit of Peter Ling sworn and filed on 08 October 2007;
2.	Affidavit of Blaisius Viririo sworn and filed on 13 December 2007;
3.	Affidavit in Support of Blaisius Viririo sworn and filed on 21 August 2007;
4.	Affidavit in Support of Leslie Kari sworn and filed on 07 May 2007; and 
5.	Affidavit in Support of Leslie Kari sworn on 24 January 2008 and filed on 25 January 2008.

In opposing the Application, the First and Third Defendants relied on the following Affidavits:

1.	Affidavit of Francis Ramangio sworn and filed on 30 January 2008;
2.	Affidavit in Support of Martin Mato sworn on 13 September 2007 and filed on 14 September 2007;
3.	Affidavit of Carl Okuk sworn on 30 January 2007; and
4.	Affidavit of Search of Sete Ewapi sworn on 19 September 2007 and filed on 20 September 2007.

BRIEF BACKGROUND

3. The First Plaintiff is a landowner company incorporated under the Companies Act 1997 and holder of a Timber Permit No 14-55 dated 31 May 1991 (herein the Timber Permit) on behalf of the landowners of the Arowe area of the West New Britain Province.

4. Pursuant to the Timber Permit, it entered into a Logging and Marketing Agreement with the First Defendant on 6 June 1991. 

5. The Third Plaintiff claimed that he is a major landowner and shareholder of the First Plaintiff company. He also claimed that he is the Chairman of the Board of Directors of the First Plaintiff company.

6. In an Amended Writ of Summons filed on 9 August 2004, the First and Third Plaintiffs claimed damages and outstanding premiums and levies from the First Defendant as a result of alleged breaches of the Logging and Marketing Agreement by the First Defendant.

7. On 6 April 2005, the Third Defendant filed a Notice of Motion seeking leave to join as a party in this court proceeding and also to challenge the standing of the Third Plaintiff to issue this court proceeding in the name of the First Plaintiff company.

8. On 26 October 2005, the Notice of Motion of the Third Defendant was heard by His Honour Mr Justice Sakora and after hearing the evidence of the parties adjourned for submissions. It appears on 3 November 2005, His Honour dismissed the Notice of Motion of the Third Defendant with costs and allowed this court proceeding to proceed. (See copy of the Court Order of 3 November 2005 marked as Annexure "A" to the Affidavit on Support of Leslie Kari sworn on 24 January 2008 and filed on 29 January 2008).

UNDISPUTED FACTS

9. It is not disputed by the parties that following the ruling of His Honour Mr Justice Sakora on 3 November 2005, on 29 December 2006, the National Court (per His Honour Mr Justice Cannings) made Orders inter alia that the First Defendant pay all premiums and levies due to the First Plaintiff company from the East Arowe TRP area into a Trust Account to be opened and signed jointly by PNG Legal Services, the First Defendant and Allans Lawyers and disbursement to be made by them until the issues are determined. 

10. Attempts to open a bank account with all the commercial banks in Port Moresby were unsuccessful and it appears that the premium and levy monies were held in the First Defendant’s Trust Account until 12 June 2007 when by consent of all parties, the National Court (per Her Honour Justice Davani) varied the Court Order of 29 December 2006 for all the premium and levy monies to be paid to the First Plaintiff’s company’s Account No 1001282680 with Bank South Pacific Limited Port Moresby Branch.

11. It appears following the Court Order of 12 June 2007, the premium and levy monies were paid to the First Plaintiff company’s Bank Account No. 1001282680 at Bank South Pacific Limited.

12. On 14 September 2007, the Third Defendant filed a Notice of Motion seeking inter alia an Order for the calling of a Shareholder’s meeting of the First Plaintiff company to inter alia resolve the dispute on the further conduct of this court proceeding. I note this Notice of Motion was listed for hearing on 21 September 2007 but on 21 September 2007, all parties appeared and had it adjourned by consent to 5 October 2007 whilst parties negotiate an out of Court settlement. On 5 October 2007, the Notice of Motion was further adjourned and is pending hearing to date. I will return on this Notice of Motion later on in this Judgment.

13. On 29 November 2007, the First Defendant applied for and was granted ex parte Interim Injunction to inter alia restrain all other parties from dealing with the premium and levy monies that were paid by the First Defendant to the First Plaintiff company’s bank account until the hearing and determination of the Third Defendant’s Notice of Motion filed on 14 September 2007. The Interim Injunction was returnable on 5 December 2007 for hearing.

14. On 5 December 2007, when the ex parte Interim Injunction was returnable for hearing, all parties appeared before His Honour Mr Justice Hartshorn and had the hearing of the ex parte Interim Injunction adjourned and extended the ex parte Interim Injunction to 10 December 2007 for hearing. On 10 December 2007, all of the parties again appeared before Her Honour Justice Davani and again adjourned the hearing of the ex parte Interim Injunction to 18 December 2007. On 20 December 2007, only the Counsel for the First and Third Plaintiffs and Counsel for the First Defendant appeared before His Honour Mr. Justice Hartshorn and adjourned the matter for a special fixture hearing and extended the ex parte Interim Injunction until further Order.

15. As I noted above, the Third Defendant’s Notice of Motion of 14 September 2007 is still pending hearing despite the Order of Her Honour Justice Davani of 29 November 2007 directing that it be heard. It is also not disputed by the parties that the Third Defendant had made sure that this Notice of Motion was listed for hearing but parties had not been able to argue this Notice of Motion.

16. It is also not disputed that whilst the matter was pending hearing, on 22 January 2008 the majority of the First Plaintiff company’s registered shareholders convened a shareholders meeting at Meselia village in East Arowe, West New Britain Province.

DISPUTED FACTS

17. The Second Plaintiff claimed that he represents the majority landowners and is a shareholder of the First Plaintiff company. He was elected Chairman of the Board of Directors of the First Plaintiff company on 13 August 2004 at a Board of Directors meeting in Kimbe. 

18. It is also disputed that the meeting of the Board of Directors of the First Plaintiff company on 13 August 2004 was not called by the elected Directors of the First Plaintiff company and the engagement of the law firm of PNG Legal Services to represent the First and Third Plaintiffs in this Court proceeding was not endorsed by the duly elected Directors. It is also disputed that the Third Defendant is still the Chairman of the Board of Directors of the First Plaintiff company, and Mr. Francis Ramangio as Secretary of the First Plaintiff company.

19. The First Defendant alleged that he and Mr Ramangio had not transferred their shares to anyone and there are sixteen (16) business groups registered as shareholders of the First Plaintiff company and they were not represented at the Board of Directors meeting of 13 August 2004 which elected the Third Plaintiff as Chairman of the First Plaintiff company.

20. The First and Third Defendants alleged that the expenses incurred by the Third Plaintiff were personal expenses of the First Plaintiff. These personal expenses were outstanding rent of K14, 400.00 of a residential property located at Section 147, Lot 46, Tokarara, National Capital District.

21. The parties are also in dispute that on 22 January 2008, the majority of the shareholders of the First Plaintiff held a meeting and passed a resolution and removed the Third Plaintiff as Chairman and elected the Third Defendant as Director and also Chairman of the Board of Directors of the First Plaintiff company.

ISSUES

22. The primary issue is whether the ex parte Interim Injunction of 29 November 2007 by Her Honour Justice Davani should continue. In other words, should the said ex parte Interim Injunction of 29 November 2007 be set aside?

23. I remind myself that, at this stage, I am here first to decide whether or not there are serious questions to be tried at the full trial. I am not here to decide the merits of the substantive proceeding. Secondly, whether the balance of convenience favour the continuation of the Interim Injunction. Thirdly, has there been a change in the circumstances since the Court granted the ex parte Interim Injunction on 29 November 2007 and finally, has the Court been misled by the First and Third Plaintiffs when it granted the ex parte Interim Injunction on 29 November 2007?

THE LAW – COURT’S JURISDICTION

Order 12 rule 8 of the National Court Rules states as follows:

"(1)	The Court may, on terms, set aside or vary a direction before entry of judgment where notice of motion for the setting aside or variation is filed before entry of the judgment,

(2)	The Court may, on term, set aside or vary a judgment -

(a)	where the judgment has been entered pursuant to Order 12 Division 3 (default judgment); or
(b)	where the judgment has been entered pursuant to a direction given in the absence of a party, whether or not the absent party had notice of trial or of any motion for direction; or
(c)	when the judgment has been entered in proceedings for possession of land pursuant to a directions given in the absence of a person and the Court decides to make an order that the person be added as a Defendant.

(3)	The Court may, on terms, set aside or vary an order of a party, whether or not the absent party is in default of giving a notice of intention to defend or otherwise in default, and whether or not the absent party had notice of motion for the order; or

(4)	In addition to its power under Subrules (1),(2) and (3), the Court may, on terms, set aside or vary any order (whether or not part of a judgment) except so far as the order determines any claim for relief or determines any question (whether of fact or law or both) arising on any claim for relief and expecting an order for dismissal of proceedings or dismissal of proceedings so far as concerns the whole or any part or any part of any claim for relief.

(5)	This Rule does not affect any other power of the Court to set aside or vary a judgment or order"

24. The Court’s jurisdiction to set aside an ex parte order is found under sections 163(2), 155(3)(a) & (4) and Schedule 2.2 of the Constitution and Order 12 rule 8 of the National Court Rules. The National Court is generally obliged to apply and enforce, as part of the underlying law, the principles and rules of common law and equity in England that were formed immediately before Independence Day.

25. The ex parte Interim Injunction of 29 November 2007 by Her Honour Justice Davani were interim orders. 

26. An injunction is an equitable remedy. In deciding whether to grant an injunction, the National Court relies on the rules of equity that were adopted on Independence. Some of those rules were neatly summarized by His Honour Injia, DCJ, in Mainland Holdings Pty Limited & Others -v- Paul Stobb & Others (2003)N2694 and His Honour Mr Justice Cannings in Mark Ekepa & Others -v- William Gaupe & Others (2004) N2694 referred to by Mr. Griffin of counsel for the First Defendant. See also His Honour Mr Justice Canning’s Judgment in Pius Niu -v- Senior Sergeant Mas Tanda and the State (2004) N2765.

27. For example: the Court’s decision whether to grant or vary or set aside an injunction is a matter of discretion; the Court must always consider the conduct of the parties; maxims such as ‘those who seek equity must do equity’ and ‘those who come to court of equity must come with clean hands’ must be considered; a court of equity retains a discretion to set aside an interim injunction. See page 19 of Mark Ekepa’s case (supra).

PARTIES’ SUBMISSIONS

28. From all the submissions made by Mr. Kari of counsel for the First and Third Plaintiffs, Mr. Griffin of counsel for the First Defendant and Mr. Bokomi of counsel for the Third Defendant, I deduce the following as grounds relied upon by each party to either support or oppose the application to set aside the ex parte Interim Injunction of 29 November 2007 by Her Honour Justice Davani:

1.	Resjudicta and Issue Estoppel

29. Mr Kari strenuously argued that the facts, issues and arguments on the election of the Third Plaintiff and his members of Board of Directors of the First Plaintiff company and the legality of the convening of the Shareholder’s meeting on 13 August 2004 in this court proceeding had been decided by His Honour Mr Justice Sakora on 3 November 2005 when His Honour dismissed the Third Defendant’s Notice of Motion filed on 6 November 2005

30. Therefore, it was not open to the First and Third Defendants to raise the issues of the legality of the shareholder’s meeting and directorship of the First Plaintiff Company again in this present application. 

31. He also submitted that His Honour Mr Justice Sakora had struck out the First and Second Defendants’ Defence, hence there is no defence to the claim.

32. Mr Griffin on the other hand submitted that the majority of the shareholders of the First Plaintiff company had recently decided at a Shareholders meeting at Meselia village, East Arowe, West New Britain Province on 22 January 2008 to remove the Third Plaintiff and his Board of Directors and had also appointed the Third Defendant and other new Directors to the Board of the First Plaintiff company pursuant to sections 137 and 104 of the Companies Act 1997.

33. He submitted that there has been a change in the circumstances since the ex parte Interim Injunction was made on 29 November 2007, in that the Third Plaintiff and his members of the Board of Directors have been replaced by the Third Defendant and his new members of the Board. Therefore, the issues of res judicata and issue estoppel do not apply in this case. Further, the change in the circumstances support the continuation of the Interim Injunction of 29 November 2007 because it would be prejudicial to the First Plaintiff company to allow its assets, more particularly the substantial monies in its bank account, to be dissipitated by the Third Plaintiff and his members when their authority as being Chairman and Directors of the Board of the First Plaintiff company to use and control these monies has been questioned or disputed by the shareholders. (See paragraphs 4 to 7 and Annexure "CO1" of the Affidavit of Carl Okuk sworn on 30 January 2008). 

34. I adopt what His Honour Mr Justice Cannings said on the common law principle of res judicata on pages 21 and 22 of the William Ekepa’s case (supra):

 "Res judicata is a common law principle or legal doctrine that has been adopted as part of the underlying law of Papua New Guinea.

 It is expressly recognized by Schedule 2.8 (i) (d) of the Constitution. It is a defence to a claim, when the following conditions apply:

•	 The cause of action (ie, the basis of the remedies being sought) in one court case is the same as that relied on in an earlier case. (It does not matter whether the earlier case was decided in the same court or by the same Judge).

•	 The earlier case was between the same parties or their "privies". (A privy is someone so closely connected to one of the earlier parties that they have the same interest that are sought to be entered in the later case.

•	 In the earlier case, the court made a final determination of the issues between those same parties or their privies".

35. I also adopt what His Honour Mr Justice Cannings said in relation to the principle of issue estoppel on page 22 of William Ekepa’s case (supra): 

"The principle of issue estoppel is closely related to res judicata. It is a sub set of res judicata. To establish the defence of issue estoppel a party only has to show that an issue of fact or law or mixed fact and law has been authoritatively and finally determined in a previous case. The cause of action does not have to be same. Nor do the parties".

36. Applying the above principles to this application, first I consider that His Honour Mr Justice Sakora had not dismissed the Defendants’ Defence on 3 November 2005 as asserted by the First and Third Plaintiffs’ counsel. This is because the hearing before His Honour was only to determine the competency of the proceeding that is whether the First and Third Plaintiffs had the standing to sue the Defendants. Further, despite my request to counsel, I have not seen nor been referred by counsel for the First and Third Plaintiffs to a Court Order striking out the Defendants’ Defence and entering Judgment against the Defendants.

37. I also find that His Honour Mr. Justice Sakora had not determined the legality of the shareholders meeting of 13 August 2004 and the dispute over the directorship and chairmanship of the First Plaintiff company. 

38. In my view, the legality of the election of the Third Plaintiff as Chairman and his members of the Board of Directors of the First Plaintiff company on 13 August 2004 is a different matter and has been raised in this court proceeding by the First and Third Plaintiffs. It has been raised as a direct result of a recent Shareholders meeting on 22 January 2008 which resolved to remove the Third Plaintiff as Chairman and his members of the Board of Directors and appoint the Third Defendant as Chairman and his members as new Directors of the Board of the First Plaintiff company. These issues are yet to be decided by the Court at the substantive trial. 

39. Secondly, I find that the substantive claim has not been determined by the Court. That is, the question of alleged breaches of the Logging and Marketing Agreement by the First Defendant as set out in the Amended Writ of Summons filed on 9 August 2004 is yet to be determined at the substantive trial. 

For the foregoing reasons, I am of the view that the principles of res judicata and issue estoppel do not apply to this present application. I reject this ground.

 2. Third Plaintiff as duly elected Director and Chairman of the Board of Directors of the First Plaintiff Company.

	40. Mr. Kari also argued strongly that there is no dispute on the election of the Third Plaintiff as Director and Chairman and his members as Directors of the Board of the First Plaintiff company. He referred the Court to the Company Office records in Annexure "C" to the Affidavit in Support of Blaisius Viririo sworn and filed on 21 August 2007 to support this contention. Further, he asserted that in the "Special Landowners meeting" on 5 January 2008 at Kimbe by the landowners, the landowners inter alia recognized the Third Plaintiff as the new Chairman of the Board of Directors of the First Plaintiff company, hence there is no dispute over the legality of the election of the Third Plaintiff as Chairman and his members as Directors of the Board of the First Plaintiff company. See Annexure "F" for a copy of the minutes of Special Meeting of Landowners of 5 January 2008 to the Affidavit in Support of Leslie Kari sworn on 24 January 2008 and filed on 25 January 2008. I will return to the evidence supporting this contention later on in this Judgment.

41. Mr Griffin in his submissions in response maintained that the majority of the shareholders of the First Plaintiff company do not recognize the Third Plaintiff and his member as legitimate executives of the First Plaintiff company. He further contended that there is also a dispute on the legality of the landowners meeting of 5 January 2008, that is whether the meeting was called by the shareholders of the First Plaintiff company. For those reasons, Mr Griffin submitted that it is clear that there are serious questions of mixed fact and law raised in this court proceeding to justify the continuation of the ex parte Interim Injunction.

42. From these submissions, it is clear to me that there are serious factual and legal disputes amongst all the parties in this court proceeding. First, there is the dispute on who are the legitimate shareholders of the First Plaintiff company. Then, there is the dispute on who are the legitimate Directors of the First Plaintiff company and also the legality of the various meetings of the shareholders of the First Plaintiff company of which elections of the Directors and Chairman were conducted.

43. I accept Mr. Griffin’s submissions that these disputes raised serious questions of mixed fact and law to be determined at the substantive trial. Hence, the Interim Injunction of 29 November 2007 should continue.

3.	 Consent Order of 12 June 2007

44. Mr Kari further argued that the Court Order of 12 June 2007 ordering the premium and levy monies to be paid by the First Defendant to the First Plaintiff company’s bank account at Bank of South Pacific Limited was a consent one. It was made with the consent of all the parties. Therefore, it was not open to the First and Third Defendants to further challenge it. It was wrong for the First Defendant to apply and obtain a further Order in the National Court on 29 November 2007 to restrain or freeze the premium and levy monies paid by the First Defendant to the bank account of the First Plaintiff company.

45. For the First and Third Defendants, it was submitted that the First and Third Plaintiffs have failed to show that the ex parte Interim Injunction of 29 November 2007 was granted on an erroneous legal basis.

46. The question I ask is, has it subsequently been discovered that the ex parte Interim Injunction of 29 November 2007 was granted on an erroneous legal basis?

47. I accept that parties had entered into the Consent Order of 12 June 2007. Therefore, it was not open for the First Defendant to further challenge it by way of a separate application seeking Interim Injunction. However, I consider that the First Defendant’s application which sought the ex parte Interim Injunction of 29 November 2007 is different to an application to set aside the Consent Order of 12 June 2007. The present case is distinguished from the case in Supreme Court case of Simon Mali -v- The State (2002) SC690. In that case, the Supreme Court dismissed an appeal and confirmed the National Court’s decision to set aside a Consent Order on the basis that the National Court had inherent powers to set aside a Consent Order under section 155 (4) of the Constitution if first there were errors on the face of the Court’s record and secondly where it was evident that there were procedural irregularities associated with the obtaining of the Consent Order. 

48. In this present case, the First and Third Defendants have not filed an application to set aside or vary the Consent Order of 12 June 2007. Rather, the First Defendant filed another application to seek Interim Injunction to preserve the premium and levy monies held in the bank account of the First Plaintiff company. Therefore, I find that the First Defendant’s application on 29 November 2007 was not an application to set aside or vary the Consent Order of 12 June 2007.

 49. In any event, I am of the view that if the First and Third Plaintiffs were aggrieved by the ex parte Interim Injunction of 29 November 2007 which in effect had varied the Consent Order of 12 June 2007, they should have appealed to the Supreme Court. I am also of the view that this error is not the only consideration which may persuade me to exercise my discretion to set aside the ex parte Interim Injunction of 29 November 2007. 

4.	Was the Court misled when it issued the interim injunction. If yes, was that attributed to the conduct of the party which sought the ex parte Interim Injunction?

50. Mr Kari further submitted that the Third Defendant and Mr Ramangio had misled the Court to grant the ex parte Interim Injunction of 29 November 2007 because they fraudulently held themselves out as Chairman and Secretary of the First Plaintiff company respectively. Mr Kari contended that they had been removed from these positions by the Shareholders on 13 August 2004. Further, they had falsified company record documents to show that they are still Chairman and Secretary of the First Plaintiff company respectively.

51. The First and Third Defendants submitted that the Court was not misled when it granted the ex parte Interim Injunction. At the time Her Honour Justice Davani granted the ex parte Interim Injunction, the Court was satisfied that there was a serious question to be tried, that is whether a Shareholders meeting of the First Plaintiff company to elect new Directors should be convened under section 104 of the Companies Act 1997, and pursuant to the request calling for such a meeting by the twelve (12) of the nineteen (19) shareholders of the First Plaintiff company. The National Court has yet to determine these issues. 

52. I am of the view that the question of whether the First and Third Defendants misled the Court to grant the ex parte Interim Injunction is not the only consideration to persuade me to exercise my discretion in favour of the application. Whilst there is some suggestion that the First and Third Defendants had misled the Court, there is also evidence disputing the Third Plaintiff and his member’s election as executives of the First Plaintiff company. As I have said, I am of the view that this consideration is not the only consideration to persuade me to exercise my discretion in favour of the First and Third Plaintiffs’ application.

 5. 	Balance of convenience. 

53. Finally, Mr Kari submitted that the ex parte Interim Injunction has inconvenienced the First and Third Plaintiffs. It has seriously prejudiced their interest. They have incurred debts and there are no funds to run the daily operations of the First Plaintiff company. For example, they owe K14, 400.00 as rent for a residential property located at Section 147, Lot 46, Tokarara, National Capital District and the Bank of South Pacific Limited as the mortgagee in possession has demanded that the First and Third Plaintiffs settle the debt forthwith.

54. At the hearing, Mr Griffin of counsel for the First Defendant raised a preliminary objection to paragraphs 18 to 25 of Mr Kari’s Affidavit on the basis that the statements in these paragraphs were hearsay. He submitted that it was not proper for counsel to depose to material facts where he had no direct knowledge in an Affidavit to support an application in this case. Appropriate witnesses should have been called or should have filed Affidavits to depose to these facts.

55. Mr Bokomi of counsel for the Third Defendant supported the First Defendant’s objection and referred the Court to the Supreme Court case of Emas Estate Development Pty Limited -v- John Mea and The State [1993] PNGLR 215. There, the Supreme Court (per His Honour Mr Justice Brown as he then was) in commenting on the use of an affidavit sworn by Mr Canisius Karingu, the lawyer for the First Respondent in the Appeal to support the First Respondent’s title to a subject land in dispute in the National Court said this on page 9 of the Judgment:

"The appropriate role of counsel as advocate does not include that of witness. Mr. Karingu’s affidavit relates to issues which go to the very crux of the judicial review. From the extract above, he has purported to prove subsequent or subsisting interests in the subject land. As well, he pleads some alleged grievance by an unsuccessful tenderer, Mr. Leo Manjin, in support of the alleged fact that his client, Mr Mea’s, lease had been unjustly forfeited.

In this case, Mr Karingu has given evidence of material facts. The judicial reviewing authority, Los J, is faced with hearsay, and it cannot be tested by cross examination. It is not a mere matter of ethics. There should be a rule that counsel may not give evidence. A lawyer may be counsel in a case but cannot be both counsel and witness. (See R -v- Secretary of State for India [1941]2KB169). Judges should not decide on hearsay statements of counsel"

56. I have already at the hearing of the application ruled in favour of the First and Third Defendants’ objection and have struck out paragraphs 18 to 25 and Annexure "E" and "F" of Mr Kari’s Affidavit. My reason for striking out these paragraphs of the Affidavit is because they are hearsay. The matters stated in these paragraphs of his Affidavit could not properly be said to be within his own personal knowledge and information. They are merely second hand hearsay material. Counsel ought to have called the appropriate witnesses or file witnesses’ Affidavits deposing to these material facts. It is also improper for counsel who is appearing as an advocate to swear an Affidavit to support this Application. See Emas Estate’s case (supra).

57. After I ruled on the First Defendant’s objection and during Mr Kari’s submissions, Mr Griffin raised another objection to paragraph 26 of Mr Kari’s Affidavit for the same reason. I note in paragraph 26, Mr. Kari deposed that the Third Plaintiff has incurred debts which cannot be settled unless the ex parte Interim Injunction of 29 November 2007 restraining or freezing the premium and levy monies in the First Plaintiff company’s bank account is set aside. He also annexed to his Affidavit as Annexure "G" copies of the Rental Invoices from Strickland Real Estate to the Third Plaintiff dated 28 September 2007 for the total sum of K14, 400.00 and also a letter from Bank of South Pacific Limited to Strickland Real Estate dated 14 November 2007 as notice to evict the Third Plaintiff from the property.

58. Mr Kari submitted in response that paragraph 26 and Annexure "G" of his Affidavit should not be struck out as being hearsay because he was instructed to apply to set aside the ex parte Interim Injunction of 29 November 2007 on short notice and had no time to prepare and file appropriate witnesses’ Affidavits as they were not immediately available at the time he filed this application.

59. For the reasons that I have given above, I consider paragraph 26 and Annexure "G" of Mr Kari’s Affidavit are hearsay and I uphold the First and Third Defendants’ objection and struck them out. I also consider the reason that witnesses were not readily available to prepare their Affidavits as a lame excuse.

60. As I have struck out paragraphs 18 to 26 and Annexures "E", "F" and "G" of Mr. Kari’s Affidavit, it follows that first there is no evidence from the First and Third Plaintiffs to support their contention that there was a meeting of landowners of 5 January 2008 which recognized that Third Plaintiff and his members as the legitimate executives of the First Plaintiff company. Secondly, there is no evidence of debts incurred by the First and Third Plaintiffs. That is, there is no evidence of outstanding rent of K14, 400.00. As such, I find there is no evidence from the First and Third Plaintiffs to support their assertion that the ex parte Interim Injunction of 29 November 2007 has restrained them from accessing the premium and levy monies in the bank account of the First Plaintiff company to pay the outstanding rent of K14,400.00. 

61. On the other hand, I find that there is evidence from the First and Third Defendants that the premium and levy monies had been misused or dissipated by the Third Plaintiff and his lawyers. Mr Bokomi of counsel for the Third Defendant referred the Court to paragraph 23 of the Affidavit of Martin Mato sworn on 13 September 2007 and filed on 14 September 2007. In paragraph 23, the Third Defendant deposed that the monies totalling K80, 000.00 were paid by the First Defendant to the First Plaintiff company. Out of the K80, 000.00, K54, 000.00 was paid to the lawyers for the First and Third Plaintiffs.

62. Mr Kari of counsel for the First and Third Plaintiffs raised an objection to the admissibility of the statement in paragraph 23 on the basis that it is hearsay. I find that this statement in paragraph 23 is not hearsay. This fact was well within the knowledge of the Third Defendant. There is a letter from the First Plaintiff company signed by the Third Plaintiff and others to the Principal of PNG Legal Services Lawyers dated 2 August 2007 disputing payment of K54, 000.00 to that firm. A copy of this letter was forwarded to the Third Defendant’s former lawyers (Allan Baniyami Lawyers) for the Third Defendant’s information. See Annexure "B" to Mr Mato’s Affidavit. For this reason, I dismiss the First and Third Plaintiffs’ objection and find that there is evidence to suggest that the premium and levy monies have been used by persons other than the true beneficiaries, namely the landowners.

I also find that the First and Third Plaintiffs have not come to Court with clean hands.

6. 	Third Plaintiff’s personal debts

63. Even if I am wrong in not finding that there is evidence to show prejudice to the First and Third Plaintiffs, Mr Bokomi of counsel for the Third Defendant argued strenuously that the debts incurred by the Third Plaintiff were personal debts. These debts were not incurred by the First Plaintiff company so as to hold the First Plaintiff company liable to settle them by using the premium and levy monies held in the bank account of the First Plaintiff company.

64. I note here that under clauses 10.2 and 16 of the Logging and Marketing Agreement (see Annexure "A" to the Affidavit in Support of Leslie Kari sworn on 16 August 2004 and filed on 18 August 2004), the First Defendant as the contractor pays the premium and levy monies to the permit holder who is the First Plaintiff company.

65. Mr. Bokomi submitted that these monies are specifically paid to the landowners of the area where the timber project is located. They are not paid to any other group of people. If the ex parte Interim Injunction of 29 November 2007 is set aside, the Third Plaintiff will dissipate the funds in the bank account of the First Plaintiff company. The rightful beneficiaries, being the landowners will miss out.

66. I accept Mr Bokomi’s submission and find that the rental invoices from Strickland Real Estate dated 28 September 2007 for K14, 400.00 were directed specifically to the Third Plaintiff and not to the First Plaintiff. They have the name of the Third Plaintiff written on them. In my view, they are personal debts of the Third Plaintiff. He should be liable to settle these debts. 

67. It follows that the First Plaintiff company does not owe any debts to Strickland Real Estate. The First Plaintiff company would not be prejudiced if the ex parte Interim Injunction of 29 November 2007 is not set aside.

7.	 Undertaking as to Damages

68. The First Defendant submitted that it has given an undertaking to pay any damages arising from the ex parte Interim Injunction of 29 November 2007 pursuant to the written Undertaking as to Damages filed on 29 November 2007.

69. An Undertaking as to Damages is an important consideration in an application for an Interim Injunction. It is one of the preconditions of an Interim Injunction. It must be given by the applicant at the time of making the application, which is at the time of filing of, or prior to the making of the application, that is before the hearing of the application. See His Honour Mr Justice Sevua’s judgment in Gobe Hongu Limited -v- National Executive Council & Others (1999) N1920. In my view, it is not something to be taken lightly by the party applying for an Interim Injunction because it is an undertaking given to the Court and not to the parties involved in the litigation. If the party applying for the Interim Injunction is a company, the responsible officer of the company must give the undertaking on behalf of it. If the party is the State or a State entity, an appropriate officer of the State or the State entity must give the undertaking. If the party is an individual, he must give the undertaking to pay damages. This is because in most cases, the Interim Injunction will prevent the other party or parties from doing an act which may result in substantial monetary loss.

70. A party who is successful in setting aside the Interim Injunction either at the interlocutory stage or at the substantive trial may sue on the undertaking to recover any monetary loss suffered as a result of the Interim Injunction. 

See the National Court case of Lee & Song timber (PNG) Co Limited -v- Nathaniel Burua as Chairman of East New Britain Provincial Forest Management Committee & 5 Others (2005) N2836 where His Honour Injia, DCJ, stated on page 3 of the judgment:

"An Undertaking is made to the Court and not to the other party. Therefore, it is for the Court to decide where the Undertaking should be enforced at Common Law. Enforcement of an Undertaking is dealt with in two steps. First determination is made as to whether the Undertaking should be enforced at all. If the Court decides that it should, the second step is to proceed to assess damages. Damages is assessed in accordance with established principles on damages applicable to breach of contract".

71. I am therefore of the view that the party giving an Undertaking as to Damages must understand the seriousness of an undertaking. It should not be treated merely as a document filed as a matter of course when applying for an Interim Injunction.

72. In this case, I am satisfied that the First Defendant is a company with sufficient funds and assets and has given an Undertaking as to Damages. The Undertaking has been given by a responsible officer of the First Defendant company. Any damages arising from the ex parte Interim Injunction in the event that the First and Third Plaintiffs are successful at the substantive trial can be sufficiently recovered from the First Defendant following a trial on the assessment of damages pursuant to the Undertaking as to Damages. See Lee & Song Timber (PNG) Co Limited’s case (supra).

FINDINGS AND REASONS

73. From all the above evidence and submissions of all parties, I find that there are serious questions to be tried in this court proceeding. It is very clear to me that there is a dispute over the shareholding, directorship and chairmanship of the First Plaintiff company. The first question is on the legality of the meeting of the shareholders of the First Plaintiff company on 13 August 2004 and the legality of the subsequent election of the Third Plaintiff as Director and Chairman of the Board of Directors of the First Plaintiff company.

74. The second question is the legality of the shareholders’ meeting of 22 January 2008 and the subsequent removal of the Third Plaintiff and his Board members and the election of the Third Defendant and his Directors of the Board of the First Plaintiff company. Then, there is the question of the appointment of the law firm PNG Legal Services to represent the First and Third Plaintiffs in this court proceeding. Also, there is the question of alleged breaches of the Logging and Marketing Agreement. All these are issues that cannot be decided now. They are issues for the trial Court to determine.

75. Further, I note Mr Kari’s submission that the Court was misled to grant the ex parte Interim Injunction on 29 November because the Third Defendant and Mr Ramangio fraudulently held themselves out as Chairman and Secretary of the First Plaintiff company respectively. They also falsified company record documents to show that they are Chairman and Secretary of the First Plaintiff company respectively.

76. Again, I remind myself that I am not here to decide whether the Third Defendant and Mr Ramangio had misled the Court. I find that the First and Third Plaintiffs’ contention that the Court was misled when it granted the ex parte Interim Injunction on 29 November goes to show that there is serious dispute as to the legality of the election of the Third Defendant as Chairman and Mr Ramangio as Secretary of the First Plaintiff company. Again, this is an issue for the trial Court to decide.

77. The next question is, whether the balance of convenience favours the continuation of the Interim Injunction. I find that the balance of convenience favours the continuation of the Interim Injunction because the premium and levy monies in the bank account of the First Plaintiff company may fall in the hands of the Third Plaintiff and his members whose authority has now been questioned. 

78. Further, as I had earlier found, there are no evidence from the First and Third Plaintiffs to show any debts or operational expenses of the First Plaintiff company which will require the use of the monies in the bank account of the First Plaintiff Company. In fact, I consider that the continuation of the Interim Injunction will not only benefit the First and Third Defendants but also the First and Third Plaintiffs and the landowners of the timber project area because once the Court resolves these issues, it will be clear to all parties who are the legitimate executives of the First Plaintiff company who would then be entitled to decide on how to use the monies held in the First Plaintiff company’s bank account.

79. I am also satisfied that there has been a change in the circumstances since the ex parte Interim Injunction of 29 November 2007 was made. On 22 January 2008 the majority of the shareholders of the First Plaintiff Company had convened a shareholders meeting at Meselia Village and resolved to remove the Third Plaintiff and his Directors and elected the Third Defendant and new Directors of the First Plaintiff company. The change in the circumstances supports the continuation of the ex parte Interim Injunction. This is to say, the Interim Injunction of 25 November 2007 should continue in order to preserve the premium and levy monies held in the First Plaintiff Company’s bank account from being used by anyone until the Third Defendant’s Notice of Motions of 14 September 2007 is heard and determined. 

80. For all the above reasons, I am not satisfied that the First and Third Plaintiffs have made out a case for me to exercise my discretion in favour of their application.

ORDERS

The Orders of the Court I make are as follows:

1. The First and Third Plaintiffs’ Amended Notice of Motion filed on 29 January 2008 is dismissed.

2.	The ex parte Interim Injunction of 29 November 2007 shall continue until further Order. 

3.	The Third Defendant’s Notice of Motion filed on 14 September 2007 is listed for mention on Monday 3 March 2008 at 9:30 am for parties to attend and obtain a date for special fixture hearing.

4.	The costs of the Application be in the cause.

5.	The time for entry of these Orders be abridged to the date of settlement by the Registrar which shall take place forthwith.

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PNG Legal Services Lawyers: Lawyers for the First and Third Plaintiffs
Young & Williams Lawyers: Lawyers for the First Defendant
Rageau, Manua & Kikira Lawyers: Lawyers for the Third Defendant