N8803
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (IECMS) NO. 3 OF 2021

BETWEEN:
JOSHUA ANSCAR NICK
Plaintiff

V

SAKA BEN WIA
First Defendant

AND:
BENIK HOLDINGS LIMITED
Second Defendant

AND:
REGISTRAR OF COMPANIES
Third Defendant

Waigani: Anis J
2021: 27th & 29th April

NOTICE OF MOTION – Application for summary judgment – Order 12 Rule 38 – proceeding filed under s. 395B of the Companies Act 1997 – Request for Court to grant order to rectify company record or entry – whether summary judgment should be entered – whether there was no valid argument or evidence adduced by the defendant – whether the evidence by the responsible person sufficient to make out a case for summary judgment – whether there were admissions made which should be regarded

Cases Cited:

William Duma v. Eric Meier (2007) SC898

Counsel:

Mr M Wenge, for the plaintiff
Mr R Tamarua, for the First and Second Defendants
Nil appearance by the Third Defendant

RULING

29th April, 2021

1.	ANIS J:	On 27 April 2021, I had before me a notice of motion for summary judgment (application) which was filed by the plaintiff.  The application was contested.  I heard the application and reserved my ruling to today at 1:30pm.

2.	This is my ruling.

BACKGROUND

3.	The plaintiff and the first defendant are brothers.  They initially both held shares and were the only directors of the 2nd defendant (the company).  The plaintiff held 460 shares whilst the 1st defendant held 540 shares.  The company is incorporated under the Companies Act 1997 (the Companies Act).  A material asset owned by the company is a property.  It is described as Section 52, Allotment 64, Hohola, National Capital District (the Property).  

4.	The relationship between the brothers deteriorated over the years.  Other proceedings had been filed by the brothers and the company which are not relevant for this purpose.  The background to the dispute which has caused the plaintiff to file this proceeding is this.  The plaintiff was purportedly removed as director in 2015.  His shares in the company were also purportedly sold or transferred in 2015.  The plaintiff lodged a complaint with the 3rd defendant regarding the alleged actions of the 1st defendant.  The 3rd defendant conducted its investigations.  On 19 October 2020, the 3rd defendant, in exercising its functions under the Companies Act, published a public notice in the National Newspaper.  It reads in part:

Section 395A Notice to Rectify Records

The Registrar of Companies gives notice pursuant section 395A(1) of the Companies Act 1997 (as amended) that Joshua Anscar Nick (former shareholder and director of Benik Holdings Limited, P.O. Box 929, NCD) has applied to rectify the register of Benik Holdings (1-53808).  Accordingly, the Registrar of Companies will rectify the register as there is reasonable cause to believe that the shareholding and directorship changes made on 23rd of October 2015 and 31st July 2017 (respectively) were unauthorized and illegal.

Any person who objects to the rectification shall do so in writing to the Registrar of Companies within 30 days from the date of publication.  
……

5.	The 1st defendant objected to the rectification intention of the Registrar.  That led to this proceeding being filed.  I should also mention that the 1st defendant has also filed proceeding before the District Court under the Summary Ejectment Act Chapter No. 202, to evict the plaintiff from the Property.  The said proceeding is pending.

APPLICATION

6.	The application for summary judgment is made pursuant to Order 12 Rule 38 of the National Court Rules.  The Order reads:

38.  Summary judgement. (13/2)

(1)  Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff-
(a)	there is evidence of the facts on which the claim or part is based; and
(b)	there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed,
the Court may, by order, direct the entry of such judgement for the plaintiff on that claim or part, as the nature of the case requires.

PRELIMINARY ISSUES

7.	Two preliminary issues were raised.  The first was by the Court.  I queried with both counsel whether the Court can grant a summary judgment application in proceeding that is filed by way of an originating summons where declaratory orders are sought.  

8.	The relevant rule to address the first preliminary issue is Order 12 Rule 37 under Division 4.  It reads in part:

This Division applies to all proceedings except proceedings which include
(a)	a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment, seduction or breach of promise of marriage; or
(b)	a claim by the plaintiff based on an allegation of fraud; or
(c)	a claim for damages arising in respect of the death of any person or in respect of personal injuries to any person.
(Underlining mine)

9.	Counsel for the 1st and 2nd defendants was unable to refer me to a case on point.  But counsel supports the proposition that the process adopted by the plaintiff was defective.  That said, Mr Wenge, for the plaintiff, has, in my view, correctly pointed to Division 4 of Order 12, and in particular, counsel makes reference to Order 12 Rule 37.  Counsel submits that the Division, which contains the provisions to apply for summary judgment, applies to all proceedings, which counsel submits, include proceedings that are filed under an originating summons with the exceptions that are expressly pleaded therein.  Counsel submits that the present matter does not meet one of the exceptions under Order 12 Rule 37(a), (b), or (c) and therefore the application is properly made before the Court.

10.	The case on point is the Supreme Court case of William Duma v. Eric Meier (2007) SC898.  In addressing the point, the Court stated at paragraph 13:

 We agree with both counsels that there is no prohibition on an application for summary judgment in proceedings commenced by way of Originating Summons (see Division 4 of Order 12 of the National Court Rules). In this case the application for summary judgment was properly before the Court.

11.	The second preliminary issue was raised belatedly by the defendants.  Counsel took issue with the affidavit evidence that have been filed by the plaintiff and referred to purported effect or requirement under s. 398(4) of the Companies Act.  I will repeat my views which are as follows.  Counsel did not comply with the requirements under the Evidence Act Chapter No. 48 for cross-examination or objections to the use of an affidavit evidence (See s. 35 and s. 36).  No notice or warning had been given to the plaintiff.  And the issue was belatedly raised after the plaintiff had presented his submissions and evidence to the Court.  Observance on the rules of natural justice was not afforded to the plaintiff.  I dismiss the objections and submissions made by the 1st and 2nd defendants on these grounds.  

MAIN ISSUES

12.	The main issues are (i), whether there is evidence adduced by the plaintiff that supports the allegations of facts that are raised or sought as relief in the matter, and (ii) whether there is evidence deposed to by a responsible person to say that there is no valid defence or arguments disclosed by the defendants to counter the claim by the plaintiff.

MAIN COMPLAINT

13.	The main reason why the plaintiff had wanted the Registrar of Companies to rectify the company records of the company (i.e., the 2nd defendant) that is kept at the Companies register is this.  He claims that the 1st defendant, without following the due processes for removing him as a director and shareholder in the company, had illegally or unlawfully taken steps outside the requirements of the Companies Act, and in so doing, removed him as a director as well as transferred all his shares in the company, over to himself, that is, the 1st defendant.  Not only that, but the records also show that the 1st defendant went ahead to make other members of his family directors and also had some of his shares transferred to them.

ADMISSION

14.	Both parties have filed evidence.  As for the 1st defendant, he has said a lot of things in his evidence particularly of what had transpired in the past as well as through his counsel.  I have considered them but as I had indicated to counsel in Court that most of the 1st defendant’s evidence, with respect, are irrelevant to the issue at hand.  

15.	But the most revealing part from the evidence of the 1st defendant, which is relevant, is his own admissions to the main issue.  At paragraphs 33 and 60 of his affidavit filed on 2 March 2021, the 1st defendant deposes under oath as follows:

33.	Being frustrated now, after the Plaintiff attempts to stole and mortgage the BHP property, and then nearly deregistered BHL, as ONLY director and Managing Director of BHL, I was left without a choice but only to unilaterally made the following decision to affect the company:
(i)	I transferred from my bundles (540) of shares to my family members and admitted them as new shareholders of the company;
(ii)	Later, following a shareholders meeting, the Plaintiff’s shares were transferred to me;
(iii)	The shareholders then appointed new directors with the Plaintiff being removed as he was ineligible given his conviction and sentencing on November 2015.
……
60.	On the contrary, I have been defending BHL with everything I have.  I believe that ground upon which I relied on to unilaterally removed him as a shareholder by transferring his shares to me without any consideration is just and only fair after what he attempted to rob the company, then deregister the company.

16.	Then at paragraph 61, the 1st defendant deposes, and I quote, Everything I have deposed is nothing but all truth.

17.	The 3rd defendant did not appear to give evidence.  Section 395B, however, does not make it mandatory or crucial for the 3rd defendant to appear in instances such as this.  Section 395B (2)(b) states, the Registrar may appear and be heard in relation to the application.  What is however revealing is evidence of the Registrar’s publication, that is, of its intention to rectify the records of the company.  Copy of the document is attached as annexures L to the plaintiff’s affidavit of 4 December 2020.  This evidence is not refuted by the 1st defendant nor the material facts that had led to the filing of this proceeding.  The said Section 395A Notice to Rectify Records shows that an independent assessment had been made by the Registrar and that based on the findings, the Registrar, and I quote in part from the said notice, Accordingly, the Registrar of Companies will rectify the register as there is reasonable cause to believe that the shareholding and directorship changes made on 23rd of October 2015 and 31st July 2017 (respectively) were unauthorized and illegal.

18.	This evidence coupled with the admission given by the 1st defendant that he had acted unilaterally, it seems without regard to the provisions of the Companies Act, and in transferring or acquiring the plaintiff’s shares in the company without any consideration, shows or proves the wrongful actions of the 1st defendant.  Not only that, but the plaintiff has also provided affidavit evidence that shows that the 1st defendant did take the actions as he has alleged, which has also been found by the Registrar, namely, to remove him as a director of the company; to appoint 4 his family members to replace him as directors of the company; to remove or transfer all his 460 shares in the company to the 1st defendant; and to transfer 10 shares each of the 1st defendant’s shares in the company, to 5 of his family members.  

19.	The first defendant does not dispute these claims except to challenge the admissibility of some of the evidence which reveal or go to confirm the allegations that have been raised by the plaintiff.  I have given my ruling regarding admission of evidence.  

CONSIDERATION

20.	I note the evidence that have been filed by both parties.

21.	I note that the plaintiff is a former director and shareholder of the company.  He deposes his evidence as the responsible person and adduces evidence to show that the 1st and 2nd defendants have no defence on merits.  When I consider the plaintiff’s evidence, filed on 4 December 2020 and 5 March 2021, I am satisfied on the balance of probabilities that the defendants in particular the 1st and 2nd defendants, have no valid defence.

22.	The least the 1st defendant could do with his new purported directors and shareholders is to provide evidence that they had complied with the requirements under the Companies Act in regard to the removal of the plaintiff as a director and also his shares that had been purportedly transferred without consideration.  The relevant provisions of the Companies Act for removal of a director is s. 134, and as for transfer of shares, s. 65.  The 1st and 2nd defendants did not give any evidence to say whether these provisions have been observed.  In fact, by the 1st defendant’s own admission, he states that he was frustrated by the alleged actions or inactions of the plaintiff which was why he had to unilaterally make the decisions or took the steps as he had done, that is, in removing the plaintiff as a director as well as transferring his shares.  His actions are clearly in breach of the provisions of the Companies Act.

CLEAN HANDS

23.	The 1st defendant also argues that the plaintiff has not come to Court with clean hands, in reliance of the equity maxim, he who comes into equity must come with clean hands.  As such, he submits that the Court should dismiss the application.  The plaintiff denies the argument.

24.	I note that the relief the plaintiff seeks are provided for under statute law, namely, s. 395B(3) of the Companies Act.  It reads, (3) On an application for an order under Subsection (1), the Court may, if it is satisfied that any information has been wrongly entered in, or omitted from, the register, make an order that the register be rectified.

25.	I also note this.  The plaintiff has followed the process to try to correct what appears to be clear error or unlawful acts by the 1st defendant, that is, of his actions to remove the plaintiff and appoint other members of his family as directors of the company, and also his actions in transferring the plaintiff’s shares without his consent or knowledge to the members of his family without any consideration.  The plaintiff lodged his complaint with the 3rd defendant.  An investigation followed, and the 3rd defendant had reasonable grounds to rectify the company records of the 2nd defendant.  Notice of its intention was published in the newspapers.  The 1st defendant objected to the intention of the Registrar of Companies.  The plaintiff then exercised his rights under the s.395B of the Companies Act.  Other alleged facts, accusations or events that may have occurred elsewhere, in my view, are irrelevant to the foundation of this claim as pleaded.

26.	For these reasons, I dismiss this argument by the 1st defendant.

SUMMARY

27.	I will grant summary judgment in favour of the plaintiff.

COST

28.	Cost is discretionary.  I will order cost to follow the event on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

29.	In so doing, I make the following orders: 

1.	A declaration that the ceasing of shareholding and transfer of 460 shares belonging to the Plaintiff in Benik Holdings Limited to the First Defendant on 3 October 2015 were unlawful, void and of no effect.

2.	A declaration that the transfer of shares in Benik Holdings Limited by the First Defendant to Lois Londati Wia, Young Wia, Aveame Kitalin Carol Wia and Christopher Wia on 25 August 2015 and the respective changes or appointment to that effect to the records of Benik Holdings Limited on 25 August 2015 and 28 August 2015 were all unlawful, void and of no effect.

3.	A declaration that the appointment of Mary Oasedika Wia as a Director on 30 July 2017 and the appointments of Christopher Wia and Carol Aveame Kitalin Wia as Directors on 31 July 2017 and ceasing of the Plaintiff as Director of Benik Holdings Limited were all unlawful, void and of no effect.

4.	The Objection by the Second Defendant dated 5 November 2020 has no factual and legal basis and therefore is refused and rectification of the record of the Second Defendant shall proceed in accordance with the published Notice to Rectify dated 21 September 2020.

5.	The Registrar of Companies shall rectify the records of Benik Holdings Limited to reflect the orders of this Court.

6.	The First and Second defendants shall pay the Plaintiff’s costs of the proceeding on the party/party basis to be taxed if not agreed.

7.	Time for entry of these orders is abridged to the date of settlement by the Registrar which shall take place forthwith.
________________________________________________________________
Luthers:	Lawyers for the Plaintiff
Lomai & Lomai Attorneys:	Lawyers for the First and Second Defendants