N6059

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS No. 666 OF 2013

KPI LIMITED, TRADING AS KRISTEN PRESS
Plaintiff

V

PHANUEL DEE
Defendant

Madang: Cannings J
2014:17th November
2015: 3rd March, 17th August

COMPANIES – management and control – dispute over general manager's position – whether legal proceedings lawfully commenced in name of company.

PRACTICE AND PROCEDURE – declarations and orders sought as to management of a company – onus of proof of unlawfulness – basic principle of litigation: he who asserts must prove.

A dispute arose as to who should hold the position of manager of a company. A number of persons involved in the company claimed that the defendant unlawfully assumed control of the company and held himself as executive manager. Proceedings were commenced in the name of the company, as sole plaintiff, against the defendant, seeking: declarations that he had unlawfully taken over management of the company and unlawfully taken possession of company property, injunctions to restrain him from interfering with the operations of the company and the company's employees, management and directors, and an order that he is liable in damages for unlawful possession of company property. The defendant argued that all relief sought should be refused and the proceedings dismissed as there was no evidence that the company's board of directors had approved commencement of the proceedings in the name of the company and it was not proven that he had been unlawfully appointed.

Held:

(1)	It is not a requirement of the Companies Act or any other law that the board of a company authorise commencement of litigation in the name of the company. No application was made for the company to be put to proof, so the absence of evidence that the board authorised or had knowledge of the proceedings was not a good reason for dismissing the proceedings.

(2)	Having regard to the fundamental principle of litigation that 'he who asserts must prove' the plaintiff bore the onus of proving that the defendant had not been lawfully appointed as executive manager.

(3)	The plaintiff was unable to prove that the defendant was unlawfully appointed and all relief was refused, subject to an interim order continuing until further order of the court.

Cases cited

The following cases are cited in the judgment:

Board of Management, Holy Spirit Primary School v Moses Sariki (2013) N5446
Galem Falide v Registrar of Titles and The State (2012) N4775
Shaw v Commonwealth of Australia [1963] PNGLR 119
Supreme Court Reference No 4 of 1980 [1982] PNGLR 65

ORIGINATING SUMMONS

This was an application for declarations and orders regarding management of a company.

Counsel:

B W Meten, for the plaintiff
B B Wak, for the defendant
17th August, 2015

1.	CANNINGS J: A dispute has arisen as to who should hold the position of manager of KPI Limited, a company incorporated under the Companies Act, which carries on a printing business known as Kristen Press at Nagada, Madang Province.

2.	KPI Ltd is apparently owned by two churches, the Evangelical Lutheran Church of Papua New Guinea and the Gutnius Lutheran Church of Papua New Guinea. I say apparently because no clear evidence of who the shareholders of the company are has been presented to the court. There is no clear evidence as to who the directors are. There is competing evidence as to who the chairman of the board of directors is.

THE DISPUTE

3.	The dispute is between two groups of people connected with the company. One group is led by Mr Hubab Kumat, who claims to be acting chairman of the board of directors. This group is concerned that in early 2014 the defendant Mr Phanuel Dee attempted to take control of the company and held himself out as executive manager. This group prefers that the person who has managed the company for a number of years, Reverend Kasek Kautil, continue to manage it. They say that Mr Dee, who was employed by the company for many years, ceased being an employee in 2003.

4.	The opposing group is led by Mr Anson Dom, who also claims (like Mr Kumat) to be chairman of the board of directors, and Mr Philip Komb, who claims to be caretaker executive director. This group opposes Rev Kautil and prefers Mr Dee. They say that Rev Kautil was terminated as manager in 2003 but that he remained residing in the manager's residence until December 2013 when he was forcibly evicted by the Police under an order of the District Court made in 2011 (an appeal against which was dismissed by the National Court in October 2013).

5.	The dispute came to a head in early 2014 when Mr Dee moved in to the company's premises and notified the employees that he was the new acting executive manager and took a number of steps, including changing all the locks to offices and the printery, to reinforce his position.

THESE PROCEEDINGS

6.	Mr Kumat's group reacted to Mr Dee's actions, which they regarded as provocative and unlawful, by commencing these proceedings, by originating summons. Mr Kumat did not, however, commence the proceedings in his name, and no other member of Mr Kumat's group was named as a plaintiff. It is the company, KPI Ltd, which is named as the sole plaintiff. No members of the opposing group apart from Mr Dee have been named as a defendant. The plaintiff seeks the following relief:

•	a declaration that Mr Dee has unlawfully taken over or attempted to take over management of the company and unlawfully taken possession of company property;

•	a permanent injunction to restrain him from interfering with the operations of the company and the company's employees, management and directors; and

•	an order that he is liable in damages for unlawful possession of company property.

7.	That relief is sought on the basis that Mr Dee was appointed manager by people who had no authority to appoint him to that position.

8.	Mr Dee argues that all relief sought should be refused and the proceedings dismissed as:

•	there is no evidence that the company's board of directors approved commencement of the proceedings in the name of the company; and

•	he has been lawfully appointed as executive manager of the company; and

•	the plaintiff has not proven that he was unlawfully appointed.

ISSUES

9.	Three major issues have emerged:

1	Should the proceedings be dismissed on the ground that the board of directors has not approved their commencement?

2	Has Mr Dee been unlawfully appointed?

3	What orders and declarations should be made?

1 SHOULD THE PROCEEDINGS BE DISMISSED ON THE GROUND THAT THE BOARD HAS NOT APPROVED COMMENCEMENT?

10.	No. It is not a requirement of the Companies Act or any other law that the board of a company authorise the commencement of litigation in the name of the company. However, the issue of whether the board did authorise or have knowledge of commencement of litigation can be raised by a party, preferably by notice of motion, and the company can be put to proof by order of the court. Here, no application was made by the defendant for the company to be put to proof, so the absence of evidence that the board authorised or had knowledge of the proceedings is not a good reason for dismissing the proceedings.

2 HAS MR DEE BEEN UNLAWFULLY APPOINTED?

11.	There is a basic principle of litigation that must be invoked here: he who asserts must prove (Shaw v Commonwealth of Australia [1963] PNGLR 119, Supreme Court Reference No 4 of 1980 [1982] PNGLR 65, Galem Falide v Registrar of Titles and The State (2012) N4775, Board of Management, Holy Spirit Primary School v Moses Sariki (2013) N5446). It is the plaintiff that is asserting that Mr Dee has been unlawfully appointed, so it bears the onus of proving that proposition. It must do that according to the standard of proof applying in civil proceedings: on the balance of probabilities. It is not up to the defendant to prove that he has been lawfully appointed.

12.	No independent or authoritative evidence as to who the shareholders are and, most importantly, who the directors of the company are, has been adduced. Even though Mr Kumat has deposed on oath in an affidavit that has been admitted into evidence that he is the acting chairman of the board and that he has no knowledge of Mr Dee's appointment, his testimony is unsupported by any company search documents or other corroborating evidence. Besides that, everything that Mr Kumat states about his own position in the company and about Mr Dee not having any role in the company is countered by the affidavit evidence of Mr Dee and Mr Komb. Annexed to those affidavits are statements in support of Mr Dee by Rev Giegire Wenge, Head Bishop of the Evangelical Lutheran Church of PNG, and Rev Eka Ondopa, General Secretary of the Gutnius Lutheran Church of PNG.

13.	The defendant's evidence does not prove that Mr Dee was lawfully appointed and the Court has not been asked to make a finding to that effect, but it certainly supports the proposition that he has been lawfully appointed. The plaintiff has failed to prove that Mr Dee was unlawfully appointed.

3 WHAT ORDERS OR DECLARATIONS SHOULD BE MADE?

14.	As the plaintiff has been unable to prove that the defendant was unlawfully appointed, all substantive relief sought in the originating summons must be refused. That raises the question of what should happen next. Should these proceedings simply be dismissed without any other order? That is one option but it is not the best option as it would leave unresolved the question of whether Mr Dee has been lawfully appointed. There would again be uncertainty as to who was lawfully holding the position of manager of the company.

15.	The better option is to allow an interim order made in these proceedings to continue until further order of the court. Under the interim order made on 14 March 2014 and entered on 2 April 2014, Rev Kautil is recognised as manager of the company and Mr Dee is permitted to remain in the manager's residence. That order has evidently allowed the company to operate in an orderly manner and I see no reason the order should not continue in force even though the proceedings in which it is made will be closed.

16.	I have considered whether the current proceedings should continue and whether the parties should be ordered to produce further and better evidence as to the shareholdings and directorships of the company. However, I think such evidence should be presented in separate proceedings if this issue cannot be resolved out of court. I encourage the disputing groups to attempt to resolve their differences amicably and to agree on who the shareholders and directors of the company are and then to get the board of directors to make a decision on who the manager of the company is. If that proves too difficult, one or more members of the disputing groups should commence fresh proceedings aimed at asking the Court to declare who the shareholders and directors are. If new proceedings are commenced, the company itself should not be named as a plaintiff or defendant. In any dispute about ownership or management of a company, it is unhelpful and confusing to name the company as a plaintiff (as happened in this case) or as a defendant.

17.	As neither side has had a clear victory and the interim order remains in place, each side will bear their own costs of the proceedings.

ORDER

(1)	All relief sought in the originating summons is, subject to order (2), refused.

(2)	The order of 14 March, 2014 shall continue in force until further order of the Court, which may be made in other proceedings, in that: (a) the defendant, his servants and agents are restrained from interfering in the conduct of the plaintiff's normal business operations, taking possession or attempting to take possession of any of the plaintiff's assets or equipment, harassing or intimidating the employees, management, shareholders or directors of the plaintiff; and (b) Reverend Kasek Kautil shall be recognised and have all the powers and responsibilities as manager of the plaintiff; and (c) the defendant is permitted to remain in the company manager's house at Nagada.

(3)	The parties will bear their own costs.

(4)	These proceedings are closed.

Ordered accordingly.
_____________________________________________________________
Kunai & Co Lawyers : Lawyers for the plaintiff 
Meten Lawyers : Lawyers for the defendant