N11263

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO. 356 OF 2024

JOUN TUKA, General Manager and Director of Lolokoru Estate Limited
First Plaintiff 

LOLOKORU ESTATE LIMITED 
Second Plaintiff 

-V-

NEWMAN DENDE, Chairman of Tauchale ILG and Trustee Shareholder of Lolokoru Estate Limited 
First Defendant

WILLIAM DOME, Chairman of Dave ILG and Trustee Shareholder of Lolokoru Estate Limited 
Second Defendant

WAIGANI:  KARIKO J
20 MARCH, 1 MAY 2025 

COMPANY LAW – company constitution – calling of shareholders meeting – procedure  

Two directors who were trustee shareholders of two of three shareholders of a company called and convened a purported shareholders meeting. The validity of the meeting was challenged in court. 

Held

1.	Where a company adopts a constitution, the procedure for calling of shareholders meeting is governed by the constitution provided it is not inconsistent with the Companies Act.

2.	Where the constitution of a company has not been complied with in calling a shareholders meeting, the meeting and the resolutions passed are null and void and of no effect. 

Cases cited
Green Investment Ltd v Wamomo Seafood Exporters Ltd (2019) N8120 
Henry Tavul v Nakikus Konga (2018) N7599
Magasaki Ltd v Linus Bai (2007) N3221

Counsel
N Kiuk for the plaintiffs
P Feareka for the defendants

1.	KARIKO, J: The plaintiffs in these proceedings principally seek to have a purported special shareholders meeting of Lolokoru Estates Limited (LEL) declared null and void. They also seek other subsequential relief.

BACKGROUND

2.	The following background facts are not in dispute.

3.	Lolokoru Estates Limited (LEL) is a company owned by three Incorporated Land Groups from Talasea WNBP. The ILGs are Tauchale ILG, Kulumo ILG and Dava ILG. The company entered into an agreement with New Britain Oil Palm Limited (NBPOL) for an oil palm project initiated on their customary land and for which LEL is paid monthly lease payments and royalties.

4.	Issues involving the board and management of LEL resulted in National Court proceedings OS No. 307 of 2023 in which the Court on 27 December 2023 ordered that among others, a company constitution be drawn up, endorsed by the shareholders and duly registered. This was effectuated and the company’s constitution (the Constitution) was duly registered with the Companies Office.  The Court also ordered that new directors (Board) be duly elected and this was also done on 17 March 2024.  These events were challenged in court proceedings OS No. 77 of 2024 but that was discontinued.  

5.	The new Board with Urban Pakua, trustee shareholder of Kulumo ILG as Chairman, has been operating since 18 March 2024 to date. The first plaintiff is general Manager of LEL and is a director. The two defendants are also directors as trustee shareholders of the Dava ILG and Tauchale ILG respectively.

6.	The defendants issued a notice dated 23 December 2024 calling a shareholders meeting for 3 January 2025 at 10am at the Genesis Hotel (the Notice).

7.	These proceedings were filed in response to the Notice and upon ex parte application, interim injunctions were issued on 2 January 2025 against the meeting being held.

8.	A purported shareholders meeting was nevertheless conducted on 3 January 2025 pursuant to the Notice and among other resolutions, a new Chairman and Board were elected. 

9.	The plaintiffs filed contempt proceedings regarding the conduct of the meeting, which is pending.

PLAINTIFFS’ CLAIM

10.	The plaintiffs filed these proceedings challenging the validity of the meeting of 3 January 2025.

11.	The dispute was expedited to substantive hearing as the main issue to be tried is whether the purported shareholders meeting was conducted in accordance with LEL’s constitution (the Constitution). 

12.	The main relief sought is an order that the notice for the meeting was null and void. Summarized, other relevant relief pleaded include:

•	a declaration that the Constitution is valid and legally binding regarding management of LEL.
•	a declaration that the shareholders of LEL are members of the Tauchale ILG, Kulumo ILG and Dava ILG.

DEFENDANTS’ SUBMISSIONS

13.	The defendants submitted the meeting was properly called pursuant to ss 28, 29, 34 and 35 of the Constitution. 

14.	The Court was also urged to note that the members of the ILGS the defendants represented had serious concerns about the management of the company’s affairs that legitimized the calling of the meeting of 3 January 2025.

CONSIDERATION

15.	Evidence presented comprised affidavits tendered by consent.  

16.	To my mind, a proper discussion of the relevant provisions of the Constitution is necessary to resolve this dispute.

17.	In considering the Constitution, it is important to note s 28 and s 32 of the Companies Act which state:

28.	Effect of Act on company having constitution.

Where a company has a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act except to the extent that they are negated or modified, in accordance with this Act, by the constitution of the company.

32.	Effect of constitution.

(1) 	Subject to this Act, the constitution of a company is binding as a contract between–
(a) 	the company and each shareholder; and
(b) 	each shareholder,
in accordance with its terms.

(2) 	The constitution of a company has no effect to the extent that it contravenes, or is inconsistent with, this Act or any other Act.

18.	There are two types of shareholders meeting referred to in the Constitution. First of these is an annual meeting (clause 28) and the other is a special meeting of shareholders (clause 29). This reflects the provisions of the Companies Act – annual meetings (s 101) and special meetings (s 102). 

19.	The meeting of 3 January 2025 was clearly not an annual meeting so s 29 is irrelevant. The meeting was purportedly a special meeting of shareholders. The Notice:

•	was addressed to “All Shareholders”
•	was referenced “INVITATION FOR SHAREHOLDERS MEETING”
•	was an invitation to attend “the special shareholders Meeting”

20.	s 29 of the Constitution provides: 

29.1	A special meeting of shareholders entitled to vote on any issue:
29.1.1	May be called at any time by the Board; and 
29.1.2	Must be called by the Board on the written request of more than one-third of the shareholders. 

21.	This largely mirrors s 102 of the Companies Act which states:
 
A special meeting of shareholders entitled to vote on an issue–
(a)	may be called at any time by–
(i) 	the board; or
(ii)	 a person who is authorized by the constitution to call the meeting; and
(b)	shall be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.

22.	It is clear by these provisions that the power to call a special meeting of shareholders vests in the Board. 

23.	By virtue of s 32 of the Companies Act, where a company adopts a constitution, the procedure for calling of shareholders meeting is governed by the constitution provided it is not inconsistent with the Act.

24.	Members of the three ILGs who own LEL are the shareholders; s 23 Constitution. The Chairmen of the ILGs are trustee shareholders; s 24 Constitution.

25.	The notice was issued by two trustee shareholders who signed off on the Notice. While the trustee shareholders represented two-thirds of the shareholders, the power to call a shareholders meeting lies with the Board. That being the case, the Constitution was not complied with rendering the Notice null and void, and the resultant meeting of 3 January 2025 and the resolutions passed are also null and void and of no effect. Cases where meetings and resolutions have been declared null and void because the procedures under the Companies Act for the meetings and resolutions were not followed include Magasaki Ltd v Linus Bai (2007) N3221, Green Investment Ltd v Wamomo Seafood Exporters Ltd (2019) N8120 and Henry Tavul v Nakikus Konga (2018) N7599. These were cases where the companies did not have a constitution, but the principles would apply to non-compliance with the procedures provided in a company’s constitution.

26.	Whether the meeting was conducted in accordance with s 34 (Methods of holding Meetings) and s 35 (Quorum) of the Constitution is irrelevant if the meeting was unlawfully called.

27.	While the members of the ILGS represented by the defendants may have had genuine grievances concerning the affairs of LEL, this did not validate the shareholders meeting being called and convened in breach of the Constitution. 

28.	  On the evidence and the law, I find for the plaintiffs and grant the relief sought in the terms of the Order.

29.	As to costs, I am not satisfied that costs on an indemnity basis as pleaded by the plaintiffs is appropriate.

ORDER

30.     I hereby:

(1)	declare that the constitution of Lolokoru Estates Limited adopted by its members on 17 March 2024 is the legally binding constitution of Lolokoru Estates Limited pursuant to the Companies Act.
(2)	declare that the shareholders of Lolokoru Estates Limited are the members of Tauchale ILG, Kulumo ILG and Dava ILG through their trustee shareholders.
(3)	order that the purported special meeting of shareholders held on 3 January 2025 at the Genesis Hotel, Kimbe, WNBP, and the resolutions passed therein are invalid, null and void and of no effect.  
(4)	order that the defendants pay the plaintiffs’ costs on party-party basis, to be taxed if not agreed.
(5)	order that time for entry of these orders is abridged to the time of settlement before the Registrar which shall take place forthwith.
_______________________________________________________________
Lawyers for the plaintiffs: Kiuk & Associates Lawyers
Lawyers for the defendants: Konjib & Associates Lawyers