N8347

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

  OS 877 OF 2016

IN THE MATTER OF THE COMPANIES 
ACT 1997 AND IN THE MATTER OF:

BETWEEN:
JOHN DEX  
Plaintiff

AND:
BARNABAS ANEP, DIMUS DAKSEP, 
GILBERT FAMTEM, MEMOS FRANK, 
TAITUS KABISEP, YATIE KABISEP, 
ELVIN LUKE and MARTIN SARIP 
all in their capacity as directors of 
FAIWOL INVESTORS LIMITED
First Defendants

AND: 
FAIWOL INVESTORS LIMITED
Second Defendant

Waigani: Hartshorn J, 
2020: 24th April

COMPANY LAW – trial - decision on application seeking declarations and ancillary orders - decisions concern amongst others the transfer of shares of the plaintiff in FIL to Fairwol Holdings Ltd (FHL) and the distribution of dividends -  plaintiff was aware of the Annual General Meeting, was present at the meeting and seconded a motion to the effect that his shares in FIL would be transferred to FHL – plaintiff is estopped from making a claim that he does on the issue of share transfer - There has been inordinate delay in bringing this proceeding with no reasonable explanation given for delay – plaintiff’s claim for payment of dividends is also dismissed – proceedings are dismissed – costs awarded in favour of the defendants

Cases Cited:
David Yaga v. Andrew Sallel (2012) N4612

Counsel:

Mr. J. Holingu, for the Plaintiff
Mr. S. Dadada, for the Defendants

 24th April, 2020 

1. HARTSHORN J: This is a decision on declarations and ancillary orders sought concerning decisions of the directors of Fairwol Investors Ltd (FIL). These decisions concern amongst others the transfer of shares of the plaintiff, Mr. Jon Dex, in FIL to Fairwol Holdings Ltd (FHL) and the distribution of dividends.

Background

2. Mr. Dex was a shareholder of FIL. He acquired his shareholding when FIL issued new shares in February 2005. In January 2008 FHL was incorporated. It was to take over and perform engineering and construction work instead of FIL. The only shareholder of FHL at that time was FIL. On 16th August 2010 at an Annual General Meeting of FIL, various shareholders of FIL resolved to have the majority of the shares in FIL including those of Mr. Dex transferred to FHL.

3. On 19th September 2011 the directors of FIL transferred 97,996 shares in FIL including the 3,356 shares of Mr. Dex to FHL.

4. First, Mr. Dex claims that the directors of FIL in so transferring the said shares breached the Companies Act. Secondly, Mr. Dex claims that the directors of FIL, by not paying dividends to him for his shares in FIL in 2008, 2009 and 2010, and for paying dividends to him in 2011 and 2012 at a reduced rate compared to the dividend payments made to the original shareholders of FIL, breached the Companies Act.

Consideration

5. As to Mr. Dex's claim concerning the transfer of shares in FIL to FHL, from a perusal of annexure "E" to Mr. Dex's first affidavit, (which annexure is described by Mr. Dex as, "a true copy of the Resolution by the Board"), which are the minutes of the Annual General Meeting for 2009 held on 16th August 2010, it is clear that Mr. Dex was present. He is recorded as seconding the motion concerning the transfer of new shares in FIL, some of which were held by Mr. Dex, to FHL. Mr. Dex was aware of the Annual General Meeting, was present at the meeting and seconded a motion to the effect that his shares in FIL would be transferred to FHL. 

6. I concur with the submissions on this issue by the directors of FIL and FIL. Further in my view, Mr. Dex is estopped from making a claim that he does on this issue. 

7. In addition, the directors of FIL and FIL submit that there has been undue delay by Mr. Dex in commencing this proceeding given that the decision about which complaint is made, occurred on 16th August 2010. The Originating Summons was filed on 16th December 2016. The substantive relief sought is amongst others, for declaratory orders. Counsel for Mr. Dex maintains that what is sought is equitable relief. I note in this regard that amongst others, rectification is sought. In this context, the following comments of Cannings J. in David Yaga v. Andrew Sallel (2012) N4612 as to equitable remedies, are relevant:

"Equitable principles must be applied when the court as a matter of discretion decides whether to grant such a remedy, one of the most important being whether the plaintiff is guilty of undue delay (laches) in seeking relief (Robinson v National Airlines Commission [1983] PNGLR 476, The State v Lohia Sisia [1987] PNGLR 102). The question of whether there has been undue delay is determined by the circumstances of each case. There is no strict limitation period. The six-year limitation period that applies to many types of proceedings under Section 16 (limitations of actions in contract, tort etc) of the Frauds and Limitations Act 1988 does not apply to a claim for equitable relief; and this is made clear by Section 18 (claims for specific performance etc) of that Act.

In the present case there was a lapse of 4 years, 8 months between the date of the alleged illegalities (22 October 2004) and the date on which the originating summons was filed (12 July 2010). The trial did not take place (in November 2011) until seven years after the alleged illegalities. This is an inordinate delay and the plaintiffs have provided no satisfactory explanation for it. I do not accept that the remote locations at which some of the plaintiffs live meant that they were unaware of the affairs of the company. I find that the plaintiffs have been guilty of undue delay in commencing and prosecuting these proceedings."

8. In this instance, the Originating Summons was filed 6 years 4 months after the making of the decision about which complaint is made. No reasonable explanation has been given for the delay. To my mind this period of time constitutes inordinate delay.

9. As to the dividends issue, when regard is had to the dates of the alleged non-payments or reduced payments, the same considerations apply. There has been inordinate delay in bringing this proceeding with no reasonable explanation being given for the delay. Given this it is not necessary to consider the other submissions of counsel. Consequently, this proceeding should be dismissed.

Orders

10.	It is ordered that:

a)	This proceeding is dismissed;

b)	The plaintiff shall pay the costs of the defendants of and incidental to this proceeding.
__________________________________________________________________
Holingu Lawyers: Lawyers for the Plaintiff                                  
Kumbari & Associate Lawyers: Lawyers for the Defendants