N8209
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 730 of 2019

BETWEEN:
ALVIN WARU, KAVIO IRIPA, KEIAN OPAI, LUBI DAGO and EREMA HOIGE
Plaintiffs

AND:
DII AOBA, INABI ARUBA, GERALD BOROA, ESAU FRANK, NIEL NATAYE, OREVA POKIA, MCKENZIE TAMATA, ALFRED TITUS and WARI WAGANA in their capacity as DIRECTORS FOR MAGARIDA TIMBERS LIMITED
First Defendants

AND:
MAGARIDA TIMBERS LIMITED
Second Defendant

AND:
HARRIET KOKIVA, ACTING REGISTRAR OF COMPANIES
Third Defendant

AND:
INVESTMENT PROMOTION AUTHORITY
Fourth Defendant

Waigani: Anis J
2019: 15th November
2020: 27th February

NOTICE OF MOTION – motion to dismiss and motion for restraining orders – motion to dismiss heard first – Order 12 Rule 40(1)(a)(b) and (c) – National Court Rules –abuse of process – related pending proceeding filed first in time – whether current proceeding similar and thus amounts to abuse of process

Case Cited

Eremas Wartoto v. The State (2015) SC1411

Counsel:

Mr J JLome, for the Plaintiff/Respondent
Mr R Yansion, for the First and Second Defendants/Applicants
No appearance, for the Third and Fourth Defendants

RULING

27thFebruary, 2020
1.    	ANIS J: 	Various or should I say 3 applications returned before me for hearing on 15 November 2019.  The1st and 2nddefendants’ application to dismiss the proceeding was heard first in time.  I reserved my ruling thereafter to a date to be advised.

2.    	Parties have been notified so I will rule on it now.

BACKGROUND

3.    	The plaintiffs or some of them claim to be shareholders, directors or former directors of the 2nd defendant.  They are seeking, by this proceeding, various declaratory orders in relation to a shareholders’ resolution that had been passed in lieu of a shareholders’ meeting.  The resolution in question was said to have been passed by the shareholders of the 2nd defendant on 21 April 2019.  Based on it, the plaintiffs claim that they were purportedly removed as directors of the 2nd defendant and were replaced with the 1st defendants.

MOTION

4.   	The 1st and 2nd defendants’ notice of motion was filed on 7 November 2019.  Two main relief they seek are, (i), to dismiss the proceeding pursuant to order 12 Rule 40(1)(a)(b) and (c) of the National Court Rules, and (ii), for security of cost to be paid by the plaintiffs into Court in the sum of K50,000 pursuant to Order 14 Rule 25(1)(b) of the National Court Rules.

ISSUES

5.   	There are a number of issues before me.  The one that should take precedence or be addressed first in time, in my view, concerns a related proceeding which has been filed first in time by the plaintiff Alvin Waru, that is, for himself as a shareholder of the 2nd defendant and on behalf of the other shareholders.  The proceeding is described as OS 618 of 2019 and it is dated 6 September 2019.  A sealed copy of the originating summons is attached as annexure A to the affidavit of Alfred Titus filed on 7 November 2019.  The proceeding is registered before the Civil Court 1Court Track or CC1.

6.    	In that proceeding, the plaintiffs are seeking orders pursuant to section 104(1)(b) of the Companies Act 1997 (Companies Act) for the National Court to order a shareholders’ meeting to resolve, amongst other things, issues surrounding the shareholders’ resolution of 21 April 2019.  That will include issues concerning the appointment of the directors of the 2nd defendant who are named as 1st defendants in this proceeding.  I make this observation or finding primarily based on the pleadings in both proceedings and on the evidence as presented by the parties herein.

ABUSE OF PROCESS

7.  	I ask myself this.  Is it an abuse of process by filing the present proceeding?  Are the plaintiffs seeking essentially the same thing or outcome in both proceedings?  I am of the view that the plaintiffs in both proceedings are seeking a same outcome.  As such, I am of the view that the present proceeding may amount to an abuse of court process.  I find that the plaintiffs are seeking essentially the same thing in both proceedings.  Let me explain.  Regardless of the capacities in which the plaintiffs are suing under, that is, whether it be in proceeding OS 618 of 2019where they are suing as shareholders, or in this proceeding where they are suing as directors or former directors, both proceedings are, in my view, seeking the same underlying relief or outcome.  This relief or outcome, as it clearly appears, is to challenge the shareholders’ resolution of 21 April 2019.  The plaintiffs or should I say their principal plaintiff Mr Waru, it seems, first decided that the way forward in addressing the issue should be to ask the Court to order a shareholders meeting, that is, pursuant to the relevant provisions of the Companies Act including section 104.  As such, he and the other shareholders have commenced proceeding OS 618 of 2019.  Then and again, it seems that Mr Waru and this time with the directors or former directors of the 2nd defendant, have decided that perhaps the best way forward now would be to file this proceeding, that is, whilst proceeding OS 618 of 2019 still remains on foot, to challenge the validity of the shareholders’ resolution of 21 April 2019 with the aim to validate their earlier positions as directors of the 2nd defendant.

8.   	The law on abuse of the court process appears settled.  I refer to the Supreme Court case of Eremas Wartoto v. The State (2015) SC1411.  The Supreme Court stated at paragraph 37, and I quote:

37.	Turning then, to the matters in contest between the parties, we note that it is necessary for us to set out what is involved or is meant by the phrase “abuse of process”.  Firstly, what this phrase means in our view is that there is a process which is being abused by someone. That usually entails someone using a process or procedure provided for by law contrary to its intended purpose, objective or proper and intended use. Hence, when there is a claim of an abuse of process, it is necessary to first establish what the process is and when and how it can be properly invoked, before determining if indeed there has been an abuse of that process.

9.   	I adopt these as my own.

10.    	In proceeding OS 618 of 2019, the plaintiffs therein are asking the Court to facilitate a shareholders’ meeting and that if successful (i.e., if the Court grants the relief sought), the shareholders will then meet and resolve their pressing issue concerning the validity of the shareholders’ resolution of 21 April 2019.  Questions that would arise, which seems obvious, would include termination of the plaintiffs herein as directors and appointment of the 1st defendants herein as directors of the 2nd defendant, Magarida Timbers Ltd.  In the present proceeding, the plaintiffs are asking this Court to determine the validity of the shareholders’ resolution of 21 April 2019, their termination as directors and the appointment of the 1st defendants as the new directors of the 2nd defendant.  That is where, in my view, the abuse is.  The plaintiffs cannot have it both ways.  They have chosen the first option which is pending before the Court.  In my view, they cannot file this subsequent proceeding whilst proceeding OS 618 of 2019 is still on foot.

11.   	I also note that given the similarities, the relief sought in this proceeding may be sought in the earlier proceeding or vise-versa, that is, by making amendments with leave of the Court.  In this instance, I note that the earlier proceeding was filed first in time.  If there are to be changes then, in my view, it may be done so in the proceeding that is filed first in time, namely, OS 618 of 2019.  So, dismissal of this proceeding would not, in my view, prejudice the rights of the plaintiffs herein from joining or from pursuing their interests in proceeding OS 618 of 2019.

DISCRETION

12.   	I will therefore exercise my discretion in favour of the application by the 1st and 2nd defendants.  This proceeding will be dismissed for abuse of process for the reasons given.  On that basis, I see no reason to deliberate further on the other issues that have been raised by the parties.

COST

13.  	An award of cost in the matter is discretionary.  In this case, I do not see any valid reason why cost should not follow the event.  I will award the cost of the proceeding in favour of the defendants on the standard party/party cost scale.  Cost shall be paid by the plaintiff to be taxed if not agreed.

ORDERS OF THE COURT

14.   	I make the following orders:

1.	The proceeding is dismissed.

2.	The plaintiff shall pay the defendants’ costs of the proceeding on party/party basis which may be taxed if not agreed.

3.	Time for entry of these orders is abridged to the date of settlement by the Registrar which shall take place forthwith.

The Court orders accordingly.
________________________________________________________________
Jeffersons Lawyers:  Lawyers for the Plaintiff
Yansion Lawyers:  Lawyers for the First and Second Defendants
In-house Lawyer:  Lawyers for the Third and Fourth Defendants