N11232

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO. 36 OF 2024 (IECMS)(COMM)  

IN THE MATTER OF COMPANIES ACT 1997

IN THE MATTER OF TUMU TIMBERS DEVELOPMENT LIMITED (1-22269)

WAIGANI: ANIS J
2, 9 DECEMBER 2024; 7 APRIL 2025

COURT APPOINTED INTERIM DIRECTORS – Application made under s.132 of the Companies Act 1997 – appointment of interim directors – whether applicant met the required pre-requisites – consideration - ruling

PRACTICE AND PROCEDURES - whether applicant has standing – whether applicant is a shareholder or creditor within the requirements under s.132(1) of the Companies Act 1997 to bring such proceeding – consideration – ruling

PRACTICE AND PROCEDURES – whether a ‘clan’ is a l egal person under law who may hold shares in a company – consideration – ruling

PRACTICE AND PROCEDURES -whether a company can exist as a legal person where all its shareholders ceased to exist – effect of s.36 of the Land Groups Incorporation (Amendment) Act 2018 – whether s.36 has transitory or permanent effect - consideration - ruling

Cases cited

Application by Anderson Agiru (2002) SC686
Gadigi v Logae (2021) SC2102
Kumai Mumu v. Haghan Co. Ltd (2005) N2827
Michael Newall Wilson v. Clement Kuburam (2016) SC1489
Nicholas Morris v. Arch Bishop Francisco Panfilo and Ors (2017) N6976
Stake Property Limited v. Stake Property Rentals Limited [2021] NZHC 1879
Traisa Transport Ltd v. Mountain Property Holdings Ltd and Ors (2024) N10694
Zenith Clyne Corporation Ltd – Application by Kim Larking and Ivan Middlemost [2023] NZHC 1033

Counsel

C Joseph for the applicant
T Sirae for the respondent

JUDGMENT

1.	ANIS J: The trial for this matter was heard on 2 and 9 December 2024.  I reserved my decision thereafter to a date to be advised.

2.	This is my ruling.

BACKGROUND

3.	The applicant, Nisan Nodi Imali (applicant), commenced this proceeding under s.132 of the Companies Act 1997 (CA).  The purpose is to seek Court intervention to appoint interim directors of a company called Tumu Timbers Development Limited (respondent/the company).

4.	The applicant alleges that the present purported board members were not duly appointed to represent the company.  As such, he seeks orders for them to be removed and for interim directors to be appointed to the company.  The applicant has provided a list of persons whom he says should be appointed as interim directors.  The applicant also seeks other consequential relief.

5.	The respondent contests the proceeding.  It began by raising a preliminary matter which is that the applicant has no standing to bring the proceeding.  In relation to the substantive matter, it submits that the present directors have been duly appointed, and therefore, that the applicant’s claim is baseless and must be dismissed.

EVIDENCE

6.	The parties gave oral and written evidence, and some of their witnesses’ written testimonies were tested in cross-examination.  The written evidence were recorded and marked with exhibit numbers.

PRELIMINARY MATTERS

7.	Let me address the preliminary issue on standing. 

8.	I note the parties’ submissions on the matter including the case authorities cited.

9.	The applicant’s originating summons filed 11 July 2024 (OS) seeks the following relief:

1.  An order, pursuant to section 132(1)(a) and (b) of the Companies Act 1997, appointing the following persons as interim Directors of Tumu Timbers Development Limited (1-22269) (the Company):

(a)	Nisan Nodie Imali of Bamustu Village of Alowase Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(b)	Dibisala Kevin of Makapa Village of Paluwa Kamula Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(c)	Alfred George of Lake Campbell, Hosobe Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(d)	Bruce Agaleye of Hesalibi BA of Alibe Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(e)	Sika Mitika of Pikiwa Village of Kamula (Two) Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(f)	Stanely Anobie of Bamustu Village of Taulalo Dodo Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(g)	Robert Anai of Wasapeya Village of Haipi Doso Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(h)	Moks Ati of Bosulowo Clan, Wawoi Falls, Balimo, Delta Fly District, Western Province, Papua New Guinea;

(i)	Ian Powe of Samokopa Village of Alinapi Doso Clan, Balimo, Delta Fly District, Western Province, Papua New Guinea;

2.  An Order directing the interim Directors appointed in paragraph 1 to take all necessary actions to implement the Written Resolutions of the Shareholders of the Company dated 8 June 2024.

3.  Pursuant to sections 132(2) and/or 134(1) of the Companies Act 1997 and or the inherent jurisdiction of the National Court under section 155(4) of the Constitution the purported Directors of the Company allegedly appointed on or about 2 March 2023 or on or about 23 or 26 June 2023 namely Abilie Wape, Inapa Yamae and Wisa Susupie (Purported Directors) be removed as Directors of the Company.

4.  An Injunction restraining the Purported Directors from holding themselves out as Directors and or representatives of the Company and or engaging in any discussions and or negotiations and or signing of any agreements with any individual, company, entity or Government agency and or department with respect to the Kamula Doso Project Area in Western Province, Papua New Guinea.

5.  Pursuant to section 132(2) of the Companies Act 1997 and/or the inherent jurisdiction of the National Court under section 155(4) of the Constitution, leave of the National Court shall be obtained prior to a removal of the interim Directors of the Company appointed in paragraph 1.

6.  Costs.

7.  Such further or other order as the court deems fit.

10.	I will first address the issue of standing premised on the applicant’s reliance on s.132 before moving on to consider its application on s.134.

SECTION 132

11.	Section 132 reads:

132. COURT MAY APPOINT DIRECTORS.

(1) Where–

(a)	there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and
(b)	it is not possible or practicable to appoint directors in accordance with the company’s constitution,

a shareholder or creditor of the company may apply to the Court to appoint one or more persons as directors of the company, and the Court may make an appointment where it considers that it is in the interests of the company to do so.  

(2) An appointment under Subsection (1) may be made on such terms and conditions as the Court thinks fit. [Underlining mine]

12.	The respondent submits the applicant has no standing because he is not a shareholder or a creditor of the company.  The applicant submits that given that all the shareholders, by operation of the law, have been removed as shareholders for the company, he, as a clan member of his clan who was a shareholder of the company, has standing to make the application under s.132 of the CA.  

13.	The applicant’s clan is called Alowase Clan.  His clan and 51 other clans of Balimo in the West Fly District of Western Province formed the company in 1994.  The 52 clans registered themselves individually as incorporated land group (ILG) or individual legal persons, under the provisions of Land Groups Incorporation Act as amended (LGIA/Act).  Upon acquiring their ILG status, each ILG acquired or were allocated shares in the company.  Their shares ranged between 1, 2 and 3, which all added up to 111 shares.  The company has a constitution.  It was adopted on 3 June 2013.  The company was set up, it seems, to allow the landowners in the area to participate in business ventures including nature-based carbon offset projects.  Uncontested evidence adduced shows that the company has partnered with another company called Mayur Renewables PNG Limited.  In 2023, another developer has shown interest to work with the company.  The new company is called V Carbon Operation (PNG) Limited.

14.	I should, at this juncture, refer to s.36 of the LGIA.  Section 36 was later amended under Land Groups Incorporation (Amendment) Act 2018.  It reads:

"36. SAVINGS AND TRANSITIONAL ARRANGEMENTS.

All current and existing incorporated land groups that were incorporated prior to 27th February 2012, shall continue for a transitional period of 10 years only and that such incorporated land groups shall automatically cease to exist at the tenth anniversary of this date.". [Underlining mine]

15.	The repealed s.36, which had been amended by Land Groups Incorporation (Amendment) Act 2009, reads:

"36. SAVINGS AND TRANSITIONAL ARRANGEMENTS.

(1)  On and from the coming into effect of this Act, all current and existing incorporated land groups incorporated prior to the coming into force of this Act shall on the coming into force of this Act be allowed to continue for a transitional period of 5 years only and that such incorporated land groups shall automatically cease to exist at the fifth anniversary from the date of effect of this Act.

(2)  Within the 5 years transitional period referred to in Subsection (1), all existing incorporated land groups shall apply for re-incorporation in full compliance of all the requirements of this Act.".

16.	It is not disputed that the 52 ILGs were incorporated prior to 27 February 2012.  As such and by virtue of s.36, the 52 ILGs, together with all the other ILGs that were registered throughout the country before the prescribed date, were given a 10 year transitional period to continue to exist.  I observe that unlike the old or repealed s.36(2), which had permitted ILGs a grace period of 5 years to apply for re-incorporation, the amended s.36 does not say or permit that.  Instead, it gives an end date for cessation of ILGs that were incorporated prior to 27 February 2012.  It appears to show the legislature’s express intention to end all ILGs that were incorporated prior to 27 February 2012, on 28 February 2022.

17.	So, in the present matter, what I observe from the arguments of both parties are their assertions that the ILGs may be re-registered at some point in time in the future.  Premised on the wording of s.36 of the LGIA, I dismiss this claim or submission by the parties.  I find the assertions misconceived.

18.	I therefore observe, to avoid any misconception or misunderstanding, that the 52 ILGs (including the ILG that the applicant falls under) no longer exist as legal persons as regarded under the LGIA (s.11).  Section 36 of the LGIA does not allow any extension of time or grace period, for these categorized ILGs which include the 52 ILGs herein, to continue to exist beyond 27 February 2022.  This would also mean that the applicant, who used to be a listed beneficiary in his ILG, would no longer hold that position.

19.	For these reasons, and in answer to the first issue, I find that the applicant has no standing in the matter.  He is not a shareholder, nor does he have any authority from a shareholder to make the application under s.132 of the CA.  His ILG, which was a shareholder, no longer holds that status.  The 2 cases cited by the applicant, namely, Zenith Clyne Corporation Ltd – Application by Kim Larking and Ivan Middlemost [2023] NZHC 1033 and Stake Property Limited v. Stake Property Rentals Limited [2021] NZHC 1879, although persuasive and relevant, are distinguishable to the present case.  In the former case, the applicants were applying on behalf of a shareholder and in the latter case, the applicant was a shareholder.  

20.	But this is just the tip of the problem that the parties face.  Section 19 of the Act states:

19. VESTING OF CUSTOMARY LAND.

Subject to any other law regulating the matter, on the dissolution of an incorporated land group under this Act any customary land owned by the group reverts to the persons who would be the customary owners if the group had never been recognized under this Act.

21.	With that, let me summarise the set-up of the company and the impact that s.36 of the LGIA may have on it.  The 52 ILGs, as shareholders of the company, held shares varying from 1 to 3 per ILG.  The ILGs appeared as trustees.  The beneficiaries were the landowners, through their respective clans, over the areas concerned in Balimore, in Western Province.  However, the 52 shareholders, by operation of law, appeared to have ceased to exist as of 28 February 2022.  Further, and by operation of law, all the land that had been registered to the ILGs would have returned back to the landowners or the beneficiaries.

22.	A true copy of the company extract is adduced in the evidence of both parties.  The details contained therein are the same, and as an example, and I refer to Annexure NI4 to Exhibit P1.  It is not disputed that the 52 names contained in the company extracts as purported shareholders are in fact the names of each of the clans and not the ILGs.  They say the change was effected by Investment Promotion Authority after the ILGs had ceased to exist in 2022 by operation of law.  The immediate problem with that, as I had pointed out to the parties at the hearing, is that ‘clans’ are not persons or legal persons that are recognised in law that can acquire shares or properties.  See cases: Nicholas Morris v. Arch Bishop Francisco Panfilo and Ors (2017) N6976 and Kumai Mumu v. Haghan Co. Ltd (2005) N2827.

23.	This then leads me to these questions.  “Where does that leave or put the respondent’s status as a legal person?”  “Can it exist as a person with its present purported directors?”  “Or is it safe to say that, as of 28 February 2022, the respondent also ceased to exist or was defunct?”  I think the answer to that is obvious.  If all the 52 shareholders are removed as registered shareholders of the company, then it may be said that the company does not have any shareholders, or it may be said that no one presently owns the company.  And given that s.36 has no transitory provision to reinstate the 52 ILGs, it seems unlikely that the 52 ILGs will ever be reinstated or restored under the provisions of LGIA.  If that is to be the case, then this will put the company in a precarious position, which may be the case.

24.	I also note that this Court has a duty to protect its process from being abused by litigants, and this case may fit into this category.  See cases: Gadigi v Logae (2021) SC 2102, Michael Newall Wilson v. Clement Kuburam (2016) SC 1489, Application by Anderson Agiru (2002) SC686 and Traisa Transport Ltd v. Mountain Property Holdings Ltd and Ors (2024) N10694.  At para. 24 in Traisa Transport Ltd v. Mountain Property Holdings Ltd and Ors (2024) N10694 the Court stated, and I quote in part:

…Matters concerning abuse of process may be raised at any stage of a proceeding including at a trial of a matter.  If a law has been broken or a process has been abused, Courts must not turn a blind eye or ignore the law when the matter is brought to its attention or upon its discovery.  Courts also have a fundamental role to protect its process from being abused.  See cases:  Michael Wilson v Clement Kuburam (2016) SC1489, Breckwoldt & Co. (N.G.) Pty v Gnoyke [1974] PNGLR 106, PNG Forest Products and Inchcape Berhad v The State & Jack Genia, Minister for Forests [1972] PNGLR 85 and NAE Limited (1-21320) v Curtain Bros & Ors (2015) N6124.

25.	Premised on my various findings, I also find this case to be an abuse of process.

SECTION 134

26.	Having found that the applicant had no standing in regard to the relief sought under s.132, let me consider the second preliminary issue, which is, whether the applicant has standing to seek relief under s.134 of the CA, that is, where the applicant is alleging that that the purported current directors of the company were never duly appointed under the company constitution or the CA for appointment and termination of company directors.

27.	I note the submissions of the parties.

28.	Given all of my above findings, it is my view that any findings I may make herein on the second preliminary matter would be inconsequential.  I therefore refrain from proceeding further with this.

CONSEQUENTIAL ORDER

29.	I am minded to make a consequential order in this matter where I will direct that a copy of the Court’s decision be brought to the attention of the Registrar of Companies for his or her attention and action.

SUMMARY

30.	In summary, this case will be dismissed.

COST

31.	Given the circumstance of the case, I will order each party to bear their own cost.

ORDERS OF THE COURT

32.	I make the following orders:

1.	The proceeding is dismissed.

2.	I also issue a consequential order that a copy of this judgment be brought to the attention of the Registrar of Companies to act upon independently as he or she sees fit.

3.	Parties to bear their own costs incurred in the proceeding.

4.	Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly
________________________________________________________________
Lawyers of the applicant: Ashurst PNG	
Lawyers of the respondent: McGregor & Associates