N3758

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

O.S.NO. 724 OF 2008

NIMAMAR RURAL LOCAL LEVEL GOVERNMENT
Plaintiff

AND:

THOMAS TANASU, MARK SOIPANG & ROBERT KIAPSASIETH 
AS BOARD OF DIRECTORS OF MINERAL RESOURCES LIHIR LIMTED.
First Defendant

AND:

MINERAL RESOUCES LIHIR LIMITED
Second Defendant

AND:

AGORLAM LIMITED.
Third Defendant

Kokopo: Lenalia; J
2009: 20th March & 2nd September

PRACTICE & PROCEDURE – Purpose of order under O.3 of National 
Court Rules – Access to information that may lead to proceedings against third party.

PRACTICE & PROCEDURE – Application to dismiss for no reasonable cause of action – Frivolous and vexatious proceedings – Application to dismiss granted.

Cases cited:

Papua New Guinea Cases
PNG Forest Products Ltd & Inchape Berhard v Minister for Forests & The State and Genia [1992] PNGLR 85
In The Matter of The Lawyers Act 1986 and In the Matter of an Application by Peter Norman Moore [1993] PNGLR 470.
Ronny Wabia v BP Exploration & Operating Co. Ltd. [1998] PNGLR 8
Odata Limited v Ambusa Copra Oil Mill Limited and National Provident Fund Board of Trusties (6.7.01) N2106.

Overseas cases
Hubbuck & Sons Ltd v Wilkinson Heywood & Clark Ltd (1899) All ER 244
Grierson v The King (1938) CLR 431

Counsels

Mr. D. Awaita, for the Respondent/Plaintiff
Mr. P. Kuman, for the Applicant/Defendants.

2nd September, 2009 

1. LENALIA; J. On 22nd March 2009, this Court heard two applications on Notices of Motions. The first one was the application by the defendants’ lawyer to dismiss the proceedings as it does not disclose any reasonable cause of action. That Motion was moved pursuant to O.12 R.40 of the National Court Rules. The second application was the one by Mr. Awaita of counsel for the Plaintiff filed 16th March 2009 seeking orders to set aside the ex parte orders dated 11th March this year.

2. The Defendants’ Cross Notice of Motion filed 6th of the same month was first argued. The Defendants seek the following orders in the Notice of Motion:

1. Time be abridged pursuant to Order 1 Rule 15(1) of the National Court Rules and this Notice of Motion be heard forthwith.

2. The ex parte orders of 5th March 2009 be set aside immediately.

3. The entire proceedings be dismissed for non discloser of a reasonable cause of action and or for abuse of process and or frivolity and or vexatiousness pursuant to Order 12 Rule 40 of the National Court Rules. 

4. Alternatively the entire proceedings be dismissed on the basis of lack of standing/locus standi and therefore making the proceedings an abuse of process and frivolous and vexatious pursuant to Order 12 Rule 40 of the National Court Rules.

5. The Amended Notice of Motion dated 23rd February 2009 (Document No.10) be dismissed and struck out as being an abuse of process pursuant to Section 155(4) of the Constitution.

6. Pursuant to Section 155(4) of the Constitution a Permanent injunction be issued against the Plaintiff and Rudolf Tongop and Menom L Baric from harassing, Interfering and disturbing the Defendants from performing and doing their lawful business and operations and other commercial activities within Papua New Guinea.

7. Costs on Solicitor/Client basis.

3. The court heard arguments on both the Amended Cross Notice of Motion by the Defendants and the one by the Plaintiff to set aside my orders dated 11th March on 20th March this year. I have reserved until today and due to other work commitments I could not be able to reach the matter as expected.

History of the case

4. In the Originating Summons, the Plaintiff seeks four declarations, one order in the form of direction and an injunction against the three Defendants about the management and administration of the trust property belonging to Lihirians shares in Lihir Gold Mine Limited. The trust property is currently managed by the Second Defendant. 

5. The second declaration seeks to declare that the Deed of Settlement on Lihirians Equity Trust settled on 14th August 1997 between the Secretary for Mining and Petroleum and the Second Defendant for the management of the Trust Property on behalf of MRDC and the State should no longer have any binding effect. 

6. Thirdly, the plaintiff says that, the Third Defendant at no time before 1st September 2008 ever been duly appointed by the shareholders meaning the Lihirians to be the nominee trustee shareholder of the Second Defendant which now unlawfully holds itself out as trustee shareholder of the Second Defendant. 

7. The Plaintiff seeks a further declaration to declare that, the First Defendant has failed to call regular Annual General Shareholders’ meetings in breach of the Companies Act 1997 and the Constitution of the Second Defendant. 

8. As the result of the fourth declaration they seek, they seek an order to direct the First Defendant to call a special shareholders meeting in compliance with the Second Defendant’s Constitution and the Companies Act. 

9. The final order sought is an injunction to prevent the First Defendant from conducting further business on behalf of the Second Defendant in their capacity as directors of Mineral Resource Lihir Limited. 

10. In his submission in favour of the Amended Cross Notice of Motion (the Notice), Mr. Kuman of counsel for the three Defendants urged the court to dismiss these proceedings as it does not disclose any reasonable cause of action. Counsel referred to the affidavit evidence filed by eight deponents in support of the Notice. 

11. In case of Melchizedek Morus, he is the Company Secretary of the Second Defendant. He says the authority and power to appoint and remove a director is vested in the Second Defendant’s Board of directors. He says the Plaintiff is not a shareholder of the Second Defendant (MRL) and not a beneficiary of the Trust Property managed by MRL. The second argument raised by Mr. Morus on his affidavit filed on 3rd March 2009 (see par.16 & 17) is that of locus standi. He says the Plaintiff has no standing and the claim can not stand without legs. 

12. He says the genuine landowners of Lihir do not support the Plaintiffs action and have expressed concern to the Plaintiffs President on a letter dated 20th February 2009. (See ‘MM10’).

13. The Nominee Shareholder of MRL is the State. He even says that the Plaintiff is not a legal or equitable shareholder at the time it made the resolution to revoke Mr. Mark Soipang and Mr. Kiapsasieh which according to the deponent was wrong in law and illegal. 

14. The court was led through affidavits of six Chiefs who are clan leaders of the six (6) separate major clans on the island of Lihir. They include Chief Philip Pasap representing Lamatlik clan, Chief John Kapsa representing Unawos clan, Chief and clan leader Lucas Chee who represents Nikama clan, Chief and clan leader Patrick Labongis of Tengawom clan, Chief Herman Saet clan leader of Tnetalgo Clan and Chief John Bosco Solias representing Nissal Clan. 

15. In case of Lamatlik Clan, Chief Philip Pasap says that he is the clan leader of that clan and his clan operates a landowner company called Lamatlik Investments Limited. He is the Chairman and Managing Director of that company. He says, Lamatlik clan does not support these proceedings and says this action is not in support of the recent development taking place on Lihir Island. 

16. He further says that his clan views these proceedings with suspicion as it is supported and encouraged by non-Lihirians who may have ulterior motives to destroy the customary ties that have existed in the past and if not guarded against outside influence will destroy the culture after closure of the mine.

17. For the Unawos Clan, Chief John Kapsa states that his clan is also concern about the current proceedings. His clan runs its own landowner company for the interests of its clan which is called Unawos Investments Limited. He says his clan does not approve of these proceedings and his clan members see that, if judgment is granted to the Plaintiff will destabilized the customary practices after the mine is closed. Chief John Kapsa is the Chairman and Managing Director of Unawos Investments Limited. 

18. The Managing Director of Nikama Investments Limited, Chief Lucas Chee says much the same thing as the other two clan leaders say. In his case he is the clan leader of Nikama Clan which is a landowner company. According to him the landowner company operates for the best interest of his clan and his clan does not want to be left in a situation where Lihirians will become poor and destitute after the Lihir mine closes. Chief Lucas also says that, his clan does not believe that, these proceedings will provide any benefits to Lihirians and his clan sees the claim with suspicion such that his clan does not want non-Lihirians to destroy their culture. 

19. The remaining three deponents Chief, Clan Leader and Managing Director of Tengawom Investments Limited, Patrick Labongis, Chief Herman Saet, the Chairman and Managing Director of Ailia Limited, the landowner company owned and operated by Tnetalgo Clan, and Chief John Bosco Solias is the Chairman and Managing Director of Nissal Investments Limited all share the same concern as the others whose evidence I have discussed earlier. 

20. Something common about these six Chiefs is that they all say the Second Defendant (Mineral Resources Lihir Limited) is a true Lihirian Trust company and all their landowner companies supported its exit from the MRDC as of 1st September 2008. They all say they have seen this as a golden opportunity for Lihirians to realise their dreams and to become truly independent financially. Secondly, these six Managing Directors all have written to the President of the Plaintiff and its Manager to desist from pursuing these proceedings. (See letter dated 20th February 2009). 

21. In a letter dated 20th February this year to the President copied to the Manager of the Plaintiff and signed by the six Chiefs, they all expressed concern and warned them that they can not tolerate actions that would cause division amongst the Lihirians which would result in hindering development. 

22. They indicated that, all the people they represent do support the distribution done through Mineral Resources Lihir Limited to members as defined by the Trust Deed. 

Submission for the Plaintiff

23. For the Plaintiff, Mr. Awaita moved his Notice of Motion filed 16th March this year. The following orders are sought:

1. Pursuant to Order 1 Rule 8 of the National Court Rules, the ex parte Order obtained by the defendants on 11th that they did not comply with relevant provisions of the National Court Rules and Practice Directions.

2. Pursuant to Order 1 Rule 10, the several objections intended to be insisted on are as follows:

(i) The defendants’ Amended Cross Notice of Motion filed on 6th March 2009 and supporting affidavits were short- served on the plaintiff, contrary to Order 3 of the 5th October 2008 which required the defendants to give the plaintiff seven (7) days notice before applying to discharged or vary the Order.

(ii) The time for service of the notice also did not comply with the provisions of Order 4 Rule 42 of the National Court Rules which clearly states in mandatory terms that, it shall, unless the Court otherwise orders, be served not less than three days before the date named for hearing the motion. 

(iii) Practice Direction 4/90 (Issued 4th June 1990) states where lawyers file a Motion it is essential that the necessary period of service occurs prior to the hearing of the Motion. The defendants in this case did not comply with that requirement. 

(iv) The defendants further failed to comply with the requirements as provided for "Ex-Parte Interlocutory Application" under Practice Direction Gen 7/90 (Issued by Kidu CJ). The defendants’ Amended Notice of Motion should not have been treated as a Cross-Motion, because the plaintiffs Motion had been heard and determined separately and the defendants’ application was a new and separate ex-parte interlocutory application.

3. The Court Order dated 5th March 2009 be re-instated with immediate force and effect.

24. In support of their Motion, Mr. Awaita submitted that, the orders obtained irregularly on 5th March should be set aside for the interest of all the parties. Counsel submitted that the defendants did not comply with the National Court Rules and the Practice Direction and the Court can not treat the defendants Notice as a Cross of Motion should not have been treated as a Cross-Motion, because the plaintiffs Motion had been heard and determined separately and the defendants application was a new and separate ex-parte interlocutory applications.

25. On the application by the defendants, Mr. Awaita submitted, that the application to dismiss the whole proceedings is made prematurely as it overlooks the fact that the court has already determined the issue and ordered that the parties proceed by way of pleadings. He referred the court to Order No.3 of the court Order dated 12th December 2008. 

26. On the issue of locus standi, counsel submitted that this issue had been determined earlier when the Court made the above order. Counsel submitted s.155 (4) of the Constitution should only be applied judicially and in special cases only and this is not an appropriate case where this court should use its discretion in this application.

27. Counsel referred the court to a number of affidavits filed by the President of the Plaintiff Hon. Rudolf Tongop and two others. In his affidavit the President says that, he verily believes that since the commencement of these proceedings certain unknown officers, servants or agents of the First Defendants have caused the names of the Second Defendant to be changed together with the names of the shareholders in the company.

28. The president further says that, the Plaintiff was not or is not aware of the changes of name or names and MRL Capital Limited is not named as a potential nominee of the Second Defendant.

29. In case of Hon. Vincent Ambiah, he says in his affidavit that, he is an elected member of the Plaintiff and he is a Councilor of Ward 1 on the island. He gives an account of an Annual General Meeting organized by Lalaka Limited on 19th December 2008. He gives information on resolutions reached and says the Plaintiff is the sole shareholder of Mineral Resources Lihir Limited. 

30. He says there is substantial issue to be resolved in court because financial decisions made by the Board of Directors of the Second Defendant to finance companies in which certain Board members hold directorship should be stopped immediately.

31. Hon. Stanley Tinut Ward Councilor of Ward 8 on Lihir Island, a member of the Nimamar Rural Local Level Government expresses the same concern in his affidavit filed 9th December 2008. He deposes that in April 2008, the Plaintiffs Assembly resolved to revoke the appointments of Mr. Mark Soipang and Mr. Robert Kapsasieth to Mineral Resources Lihir Limited because there was total lack of contact with the Plaintiff as a beneficiary of the shares held by MRL in Lihir Gold Limited.

32. He further states that, despite the decision being communicated to Mark and Robert, the two have continuously performed tasks of directors of the Second Defendant. One of them. Mr. Mark Soipang has been instrumental in the negotiations for MRL to be transferred to a company called A’Gorlam Limited. That the same person has been engaged in a series of meetings with the leaders of the six major clans on the island to endorse the transfer of MRL to A’Gorlam Limited. Councillor Stanley says that he had been to certain of those meetings during which Mark Soipang had vied support for the transfer of MRL to the Third Defendant. 

33. Mr. Menom Barok is the current Manager of Nimamar Local Level Government. He had been on the island since 1981. From there he had been the Assistant District Manager until 1995 when the Organic Law on Provincial Governments and Local Level Governments came into effect. By operation of law, Nimamar Community Government was changed to Nimamar Rural Local Level Government. He was made the District Manager of the Plaintiff.

34. Mr. Barok gives a detailed history of the development of mining agreements and the initial involvement of Nimamar Community Government as it was then. He says, in 1995 the Lihir Gold Project Agreement was signed between the National Government, New Ireland Provincial Government, the Nimamar Development Authority and Lihir Mining Area Landowners Association. 

35. In that same year, the National Government established the Mineral Resources Lihir Limited through Mineral Resources Development Corporation. According to Mr. Barok, when MRL was established, it was intended that the company could take shares on behalf of the people of Lihir in Lihir Gold Limited. 

36. He further states that, in 2006 the Second Defendant Board of Directors in consultation with the Plaintiff agreed to sell some of its shares in LGL for purposes of offsetting a loan with the intention to free MRL of its debts and to eventually exit from MRDC’s management and control. After negotiations with all parties, some shares from MRL were sold and the proceeds were applied to service the European Investment Bank (EIB) loan.

37. An important piece of evidence found in paragraphs 22, 23 and 24 of Mr. Barok’s affidavit is that, in 2007 after the above loan had been serviced, the National Government through MRDC made a decision to transfer ownership of MRL to Lihirians. He says however that, when that decision was made, such was not formally communicated by the Lihirians’ Board of Directors to the Second Defendant. 

Application of Law

38. There are two Notices of Motions for the court to decide on. The Defendants motion was moved pursuant to O.12 R.40 of the National Court Rules. Rule 40 (1) & (2) state:

"40. Frivolity, etc. (13/5)

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings—

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) The proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1)."

39. The issue is, should this court dismiss these proceedings? The case law authorities such as Ronny Wabia -v- BP Exploration & Operating Co Ltd [1998] PNGLR 8 and PNG Forest Products Ltd & Inchape Berhard -v- Minister for Forests & The State [1992] PNGLR 85 make it clear that this Court has an inherent power and duty to protect itself from frivolous claims by litigants by ensuring that vexatious litigants do not abuse court processes by instituting frivolous or vexatious claims. If the proceedings are found to be frivolous and considered to be an abuse of the process, the Court may dismiss them. 

40. In the circumstances of the instant case, a question must be asked. Whose interest is the Plaintiff pursuing and whose is being pursued by the Defendants? Having gone through the evidence of all the parties, it seems to the court that, the people in Lihir in those six (6) major clans are fighting against themselves. 

41. Local Level Governments are established pursuant to Sections 26 and 27 of the Organic Law on Provincial Governments and Local Level Governments saying they have defined roles. The earlier proviso defines the roles of a Local Level Government in the following terms:

"(1) Subject to the Constitution and to this Organic Law, an Act of the Parliament shall make provision for a system of Local-level Governments for rural and urban communities.

(2) A Local-level Government shall in principle be an elective government whose role shall be to make laws for the purpose of governing the local community.

(3) A Local-level Government may be—

(a) an urban Local-level Government; or

(b) a rural Local-level Government; or

(c) a traditional form of government structure; or

(d) in such other form as is approved by the National Executive Council; or

(e) a combination of one or more of the forms specified in Paragraphs (a) to (d) inclusive..."

42. In my opinion, there are two things affecting this claim. First if one looks at the evidence from a peripheral perspective, it may be thought that the Plaintiff has locus standi in the current proceedings. Having a look at the pleadings in the wording of the declarations sought by the Plaintiff on the Originating Summons, why should the court make for instance a declaration in terms Order 1 when Lihir Gold Limited and the Second Defendant are already managing the shares from Lihir Gold Mine Limited on behalf of Lihir people? 

43. The Board of Directors of the Second Defendant operates independently in accordance with and within the ambit of the company Constitution. I had a look at the copy of the Second Defendant’s Constitution. Clause 2 sets out the company’s objects. It says in paragraph (a) of that document that the object of the company is to ‘invest in and hold equity in the Lihir Mining Project for and on behalf of the Lihir Landowners’ through shares in Lihir Gold Limited and related activities.

44. It is also apparent from the affidavit of Mr. Mark Soipang filed on 19th March 2009 that, the Plaintiff had taken out similar proceedings in October 2008 in OS. No. 655 of 2008 wherein it claimed for the same issues.

45. The argument by Mr. Awaita that, the National Court had made an order for the plaintiff to go by pleading through a Writ of Summons can not be left hanging. That is the subject of the order dated 12th December 2008. Order 2 of that order reads: 

"The proceedings shall proceed by way of pleadings. The Plaintiff is to file and serve a statement of claim, with the Defendants to have 44 days from the date of service on them to file and serve their Defences, timing been calculated in accordance with the National Court Rules".

46. Taking Mr. Awaita’s argument further, what is there for the Plaintiff to plead when they do not have any reasonable cause of action and in which proceedings they do not have standing? I am of the view that, the above order was obtained on the understanding that, the Plaintiff has locus standi.

47. Counsel further argued that the Defendants have not complied with the practice rules of procedure set by the National Court Rules in O.4 R.42 and the Practice Directions issued on 4th June 1990 and the Practice Direction Gen 7/90 on Amended Notice of Motion. O.1 R.8 of the National Court Rules says that noncompliance with any practice rules do not render any proceedings void. 

48. Now that, the Defendants have come out clear on their evidence, it is clear that the six major clans all support the three Defendants in their course and they do not want the proceedings to continue. It is established law that the test to determine whether a reasonable cause of action is disclosed where it is plain and obvious from the pleadings that the Court can say at the first glance that the statement of claim as it stands is insufficient even if proved to entitle the plaintiff to what he is claiming for: Hubbuck & Sons Ltd v Wilkinson Heywood & Clark Ltd (1899) A11 ER. 244; see Odata Limited v Ambusa Copra Oil Mill Limited and National Provident Fund Board of Trusties N 2106 (6.7.01).

49. In the common law case of Grierson v The King (1938) CLR. 431 where it was said that, no reasonable cause of action is disclosed if the purported cause of action pleaded is "obviously contestably bad". The above test was adopted and applied in a number of cases in this jurisdiction such as PNG Forest Products Pty Ltd & Inchuape Berhad v The State and Genia [1992] PNGLR. 85 and in Ronney Wabia v BP Exploration & Ors (supra). 

50. In the PNG Forest Products Pty Ltd and Inchuape Berhad v The State and Another (supra), the Court there held that a party has a right to have his case heard as guaranteed by the Constitution and the laws of this country all uphold that right and such right cannot be lightly set aside; see also In the Matter of The Lawyers Act 1986 and In The Matter of An Application by Peter Norman Moore [1993] PNGLR. 470. Such right may only be upheld where there is a reasonable cause of action.

51. Having perused the evidence of all the parties in the instant case, I am of the view that, I should dismiss this action because it is frivolous or vexatious in nature. I now dismiss this claim with costs to the Defendants.

__________________________________

Kimbu & Associates Lawyers: Lawyer for the Plaintiff
Kuman Lawyers: Lawyer for the Defendants