SC1163

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 56 OF 2008

BETWEEN:
 
LAWRENCE MANGO
First Appellant

AND:

JOHN KIPONG
Second Appellant

AND:

PASSISMANUA INLAND TIMBER RESOURCE LIMITED
Respondent

SCA 57 OF 2008

BETWEEN:

LAWRENCE MANGO
Appellant

AND:

PASSISMANUA INLAND TIMBER RESOURCE LIMITED
Respondent

Waigani: David, Hartshorn and Makail JJ.
2009: 2nd July,
: 21st October

Appeals against exercise of judicial discretion - refusal to set aside ex parte restraining order and to grant restraining order 

Facts:

Passismanua Inland Timber Resource Ltd (PITRL) is a company owned by landowners from West New Britain Province. It alleges that Messrs Lawrence Mango and John Kipong are no longer directors of PITRL and in Originating Summons proceedings obtained ex parte interlocutory orders restraining them from so acting. Messrs Mango and Kipong unsuccessfully applied to have those ex parte orders set aside and now appeal that refusal.

Held:

His Honour was correct in determining that the balance of convenience favoured the new status quo continuing until the determination of the proceeding. Although His Honour was incorrect in stating that Mr. Mango did not have a serious issue to be tried, His Honour was correct in his determination of the balance of convenience and therefore did not fall into error in deciding not to grant the orders sought. Consequently, the orders sought in the notice of appeal are refused. The costs of and incidental to the appeal are to be paid by the appellant to the respondent.

Cases cited: 

Curtain Bros (PNG) Ltd v. UPNG (2005) SC788

Counsel:
 
Mr. W. Frizzell, for the Appellants
Ms. C. Copland, for the Respondent 

21st October, 2009

1. BY THE COURT: SCA 56 OF 2008: Passismanua Inland Timber Resource Ltd (PITRL) is a company owned by landowners from West New Britain Province. It alleges that Messrs Lawrence Mango and John Kipong are no longer directors of PITRL and in Originating Summons proceedings obtained ex parte interlocutory orders restraining them from so acting. Messrs Mango and Kipong unsuccessfully applied to have those ex parte orders set aside and now appeal that refusal.

2. Messrs Mango and Kipong:

a) have grounds of appeal that include that the trial judge erred in fact and law in finding that:
 
 i) they had resigned as directors,

 ii) the Board of PITRL had accepted their resignation,

iii) there had been a validly held special meeting of shareholders at which they had been removed as directors.

b) submit that PITRL failed to disclose to the trial judge on its ex parte application, matters unfavourable to the granting of the relief sought even though on such an application it had a duty to fully and accurately apprise the court of all matters relevant to the exercise of the court's discretion.

c) further submit that the material before the trial judge did not disclose a serious question to be tried but if it did the status quo should have been maintained and the restraining orders not granted.

3. PITRL submits amongst others that:

a) the grounds of appeal are concerned with the trial judge's finding of fact and the law relating to those facts and not to whether the trial judge erred in applying the principles as to interim injunctions,

b) the trial judge correctly found that there is a serious question to be tried, that the balance of convenience favoured the granting of the interim relief and that damages would not be an appropriate remedy.

4. As to the submission that PITRL had failed to disclose unfavourable matters at its ex parte application, it was for the lawyers for Messrs Mango and Kipong to raise this at the hearing to set aside the ex parte orders. We presume that occurred and the trial judge determined the application notwithstanding.

Issues

5. The issues then for consideration are, did the trial judge fall into error in determining that there was a serious question to be tried and that the balance of convenience favoured the continuation of the ex parte orders.

6. The decision of the trial judge that is the subject of this appeal was an exercise by him of judicial discretion in considering an application under Order 12 Rules 1 and 8 National Court Rules. This Court's role in an appeal from such a decision is considered in Curtain Bros (PNG) Ltd v. UPNG (2005) SC788 and that is that the Court will interfere with the exercise of the trial judge's discretion only when there is an identifiable error. We agree with and respectfully produce the following passage from that decision:

"The appellate Court will not interfere with a discretionary judgment on a procedural matter within its jurisdiction, except where the exercise of that discretion is clearly wrong. A discretionary judgment may be set aside if an identifiable error occurred in the exercise of discretion. Alternatively, it may be set aside where there is no identifiable error, but the resulting judgment or order is "unreasonable or plainly unjust" and such that an error can be inferred. These principles are well established. We adopt a passage from Kitto J in the Australian High Court case of Australia Coal and Shale Employees' Union v The Commonwealth (1956) 94 C.L.R. 621 at p.627, which was adopted by Clarkson J. in Breckwoldt & Co. (N.G.) Pty Ltd v. Gnoyke [1974] PNGLR 106 at p.112 – 113:

"The decision by the primary judge to stay the action was made in exercise of a judicial discretion and I accept that in those circumstances the principles on which this Court should act are as described by Kitto J. in Australian Coal and Shale Employees' Union v The Commonwealth ... the true principle limiting the manner in which appellate jurisdiction is exercised in respect of decisions involving discretionary judgements is that there is a strong presumption in favour of the correctness of the decisions appealed from, and that that decision should therefore be affirmed unless the court of appeal is satisfied that it is clearly wrong. A degree of satisfaction to overcome the strength of the presumption may exist where there has been an error which consists in acting upon a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts. Again, the nature of the error may not be discoverable, but even so it is sufficient that the result is so unreasonable or plainly unjust that the appellate court may infer that there has been a failure properly to exercise the discretion which the law reposes in the court of first instance…"

Serious question to be tried

7. Messrs Mango and Kipong submit that the trial judge was incorrect in determining that PITRL has a serious question to be tried as PITRL relies on:

•	affidavit material of a person who is not and has not been a director of PITRL,
•	a meeting of shareholders which never occurred
•	an alleged resignation of Messrs Mango and Kipong that PITRL's own material does not disclose.

8. PITRL submits that the trial judge was correct in determining that PITRL has a serious question to be tried as PITRL contends that Messrs Mango and Kipong voluntarily resigned, their resignation was effective, the special shareholders meeting was properly convened, and the subsequent appointment of the interim Board is valid.

9. From a perusal of the decision of the trial judge, it is clear that His Honour considered at length whether PITRL has a serious question to be tried and concluded that it has. We are not satisfied that it has been demonstrated that the trial judge fell into error in determining that PITRL has a serious question to be tried.

Balance of convenience

10. Messrs Mango and Kipong submit that even if there is a serious question to be tried, the trial judge should not have continued the restraining order as the status quo should have been maintained.

11. PITRL submits that the trial judge was correct in continuing the restraining order as:

•	Messrs Mango and Kipong had not shown that damages would not be an adequate remedy for them if an injunction was not granted,
•	it would not be in the interests of PITRL for Messrs Mango and Kipong to return to the Board and that damages would not be an adequate remedy for PITRL if a restraining order was not granted,
•	the status quo of all parties has altered since December 2007. PITRL has entered into new agreements with other entities and the new status quo should be maintained to allow PITRL to honour those agreements and generally to continue its operations without disruption.

12. From a perusal of the decision of the trial judge, His Honour gives consideration to the balance of convenience, whether damages would be adequate and the continuing operations of PITRL. We are not satisfied that it has been demonstrated that the trial judge fell into error in deciding to continue the restraining order.

13. Consequently the orders sought in the notice of appeal are refused. The costs of and incidental to the appeal are to be paid by the appellants to the respondent.

SCA 57 OF 2008

14. Mr. Mango unsuccessfully sought orders pursuant to s. 142 Companies Act to restrain a number of persons from acting as directors of PITRL on the basis that the special shareholders meeting at which they were appointed was not properly convened and constituted.

15. The application was heard at the same time as the application to set aside the ex parte orders the subject of SCA 56/08 above.

16. Mr. Mango's grounds of appeal include that the trial judge erred in:

•	applying his reasoning in proceeding OS 187/08 to OS 132/08 in finding that Mr. Mango did not have a serious question to be tried and that the balance of convenience favours the new directors and managers,
•	apparently finding that a meeting of non shareholders could dismiss validly appointed directors,
•	not finding that the requirements of the Companies Act as to the calling of a special shareholders meeting and the appointment and removal of directors are mandatory,
•	finding that there had been a validly held special meeting of shareholders at which new directors were appointed.

17. PITRL submits that:

•	Messrs Mango and Kipong had resigned, their resignation was effective, the special shareholders meeting was properly convened and the appointment of the new directors was valid,
•	the trial judge incorrectly found that there was not a serious issue to be tried in relation to the resignation of Messrs Mango and Kipong and the appointment of new directors,
•	the trial judge correctly found that the balance of convenience favoured PITRL being allowed to operate pending the determination of the proceeding.
•	that Mr. Mango had not shown that damages was not an adequate remedy or that he would suffer irreparable damage if the restraining order was not granted.

Issues

18. The issues for consideration are whether the trial judge fell into error in his determination as to a serious question to be tried and that the balance of convenience favoured PITRL continuing to operate with the new directors.

19. As referred to in SCA 56/08 above, the decision of the trial judge in refusing to grant the order sought was an exercise of judicial discretion and we rely upon Curtain Bros (supra) as to this Court's role in an appeal from such a decision.

Serious question to be tried

20. The trial judge in his written decision states amongst others that, "It follows from my ruling in OS 132 of 2008 that the plaintiff does not have serious issues to be tried…". This is clearly a typographical error as His Honour at that stage had made a ruling in OS 187/08 and not OS 132/08. 

21. As to a serious issue to be tried, we are of the respectful view that His Honour is incorrect. On the evidence presented, it is apparent that there is a serious issue as to whether the special shareholders meeting was properly convened and constituted and as a consequence, whether the appointments and removals made at the meeting were valid.

Balance of convenience

22. Notwithstanding that the trial judge stated that Mr. Mango did not have a serious issue to be tried, His Honour did consider the balance of convenience. Although it is unusual to consider the balance of convenience after a view has been formed that there is not a serious question to be tried, His Honour's determination of where the balance of convenience lay, in our view was not in error as:

•	Mr. Mango had not demonstrated that damages were not an adequate remedy and had not demonstrated that he would suffer irreparable damage if a restraining order was not granted,
•	it is likely that substantial disruption would have been caused to PITRL's operations if the orders sought had been granted.

23. We are satisfied that His Honour was correct in determining that the balance of convenience favoured the new status quo continuing until the determination of the proceeding.

24. From a perusal of the decision of the trial judge, although we are of the view that His Honour was incorrect in stating that Mr. Mango did not have a serious issue to be tried, His Honour was correct in his determination of the balance of convenience. We are not satisfied that the trial judge fell into error in deciding not to grant the orders sought.

25. Consequently the orders sought in the notice of appeal are refused. The costs of and incidental to the appeal are to be paid by the appellant to the respondent.
___________________________________________________________
Warner Shand Lawyers: Lawyers for the Appellants 
Young & Williams Lawyers: Lawyers for the Respondent