SC1538
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 90 OF 2016
BETWEEN:

GOIMBA KOT
First Appellant

AND:
STEVEN TENTS
Second Appellant

AND:
KONGO BENGI
Third Appellant

AND:
JACOB KOT
Fourth Appellant

AND:
OK CORPORATION LIMITED
First Respondent

AND:
PUP LAKI in his capacity as CHAIRMAN of OK CORPORATION LIMITED
Second Respondent

AND:
PAU KUPO in his capacity as DIRECTOR of OK CORPORATION LIMITED
Third Respondent

AND:
WII PAU in his capacity as DIRECTOR of OK CORPORATION LIMITED
Fourth Respondent

Waigani: Higgins, J

2016:24th August &29th September

PRACTICE AND PROCEDURE – Leave to appeal sought on questions of fact – questions properly construed are questions of law or, at least, mixed facts and law – no meritorious case for leave – leave not required – appeal may be pursued as of right.

Cases Cited:
City Administrator v. Yambaran Pausa Saka Ben LTD (2009) SC 965
British Launderer’s Research Association v. Central Middlesex Assessment Committee and Hendon Rating Authority [949] 1KB462; [1949] All ER 21@ 25-26
Peter Neville v. NEC of PNG [2015] PGSC 17; SC 1431
Pere v. Ningi [2003] PGSK10
Yaklan v. Merrain[1998] PNGLR 555

Counsel:
D. Dowai, for the Appellants
P. Tamutai, for the Respondents

29th September, 2016

1.	HIGGINS, J:	This is an application on behalf of the appellants for leave to appeal from a decision of Makail, J handed down on 27th May 2016 at Mount Hagen. Leave to appeal is sought by the appellants on the ground that this appeal is or may be a challenge to and raise questions of fact rather than mixed questions of law and facts or questions of law.  In respect of the latter questions leave would not be required.

2.	The respondents have given Notice of Objection to the competency of the application, originally on the basis that it was out of time. Having recalculated the time, including days not to be counted, they abandon that application but instead object to a further application by the appellants to add two new proposed grounds of appeal on the grounds that the application to do so is made out of time.

3.	The substantive dispute arose out of the purported convening of a special shareholders meeting of OK Corporation Limited (OK). It was convened on 29th March 2010 and purported to replace the then directors of OK with the second, third and fourth appellants. Numerous affidavits had been filed to support or oppose the validity of the meeting. However, as the learned trial judge observed, much of, indeed none of, the primary facts were in dispute. Inferences to be drawn from those facts were at the heart of the dispute.

4.	It is of fundamental importance to recognise the distinction between primary facts, that is, what was seen heard or believed by a witness and secondary facts, that is, the conclusion or inference to be drawn there from.

5.	That designation and its relevance to determining whether a question is one of fact or law or of mixed fact and law was clearly explained in the recent case of Peter Neville v. NEC of PNG [2015] PGSC 17; SC 1431.Both it and City Administrator v. Yambaran Pausa Saka Ben LTD (2009) SC 965 cited with approval the decision of Denning LJ (as he then was) in British Launderer’s Research Association v. Central Middlesex Assessment Committee and Hendon Rating Authority [949] 1KB462; [1949] All ER 21@ 25-26. The critical point was:
“….If and so far, however, as the correct conclusion to be drawn from primary facts requires, for its correctness, determination by a trained lawyer – as for instance because it involves the interpretation of documents, and because the law and the facts cannot 	be separated, or because the law on the point cannot properly be understood or applied except by a trained lawyer – the conclusion is a conclusion of law”.

6.	It follows that an appeal putting in issue such a conclusion is an appeal on a question of law or, at least, a mixed question of fact and law.

7.	It was not disputed that the first appellant summoned the meeting in question and did so acting on the assumption that he was the majority shareholder in OK.

8.	The starting enquiry has to be as to the factual circumstances surrounding the incorporation of OK. It was incorporated on 5th June 1979 to purchase a coffee plantation from the then owner, Koitalei Land. The original shareholders were Ora Business Group (Ora), then unincorporated, and Kam Business Group (Kam) (also then unincorporated). They were later incorporated. The companies office records disclose that Ora held 17955 shares and Kam, 5308shares in OK. One share each was held by Mr Pup Laki and one by the late Mr. Kisan Pau. Ora was the majority shareholder. It represented as its members landowners from Kimal.

9.	Section 107 of the Companies Act1997 (the Act) provides that a special meeting of shareholders entitled to vote on an issue:
“a)	 ……..

 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.”

10.	As his Honour correctly observed, a fundamental question is who, in law, is a shareholder.

11.	Section 78 of the Act defines the term “Shareholder”. It does so by reference to names entered in a “share register”. A share register is provided for by s.67. Failure to keep such a register is an offence committed by the company and its directors. Penalties are provided by ss. 413(2) and 414(2)(fine not exceeding K10,000.00).

12.	In default of that register, and it appears that his Honour found that it did not exist, the term ‘share holder’ refers to (per s.78 (b)):
	“…. a person named as a shareholder in an application for the registration of the company at the time of registration of the company”.

13.	The Ora Business Group was incorporated on 27th October 1997. The Kam Business Group was incorporated on 12th March 1997. Each was incorporated pursuant to the provisions of the Business Groups Incorporation Act1974.

14.	A business group, though a corporation, has no shareholders. Its affairs are conducted through a committee of management. These particular business groups only existed to distribute to their members the profits declared by OK. The first appellant, Goimba Kot, had been a Director of OK. He resigned on 16th October 2002 and was replaced by his son, Jacob. He retained a role as a consultant, allegedly being paid “hefty fees”.

15.	The company chairman is Mr Pup Laki (the second respondent). He is chairman of the Kam Business Group. Mr Goimba Kot had been chairman of the Ora Business Group but on 2nd April 2010 was removed from that position and replaced by Mr. Pau Kupo (the third respondent). Those changes were registered with the Registrar of Business Groups.

16.	The Annual Return of OK for 2008 discloses the shareholders as being Ora and Kam, 17956 and 5309 shares respectively. The Directors are identified as Pup Laki (second respondent), Wii Pau (fourth respondent), Jacob Kot (fourth appellant) and Pau Kupo (third respondent). Jacob Kot was purportedly removed at a special meeting of OK ‘Directors and Committeemen’ on 24th April 2010.

17.	Those carrying out that “coup” have been challenged eg: by Steven Tents, with a claim that Mr. Goimba Kot was the real major shareholder of OK. This was something ‘everybody knows’. He also claimed that 50 percent of the interest of OK was owned by Mr Goimba Kot the first appellant.

18.	Mr Goimba Kot swore that K29, 318.60 was contributed by various clans and individuals of the region of which he contributed K11,500.00 or 40 percent in order to purchase the coffee plantation. (It is obviously an estimate only, 40 percent is K11, 727.44). It was Mr. Goimba Kot’s contention that his contribution made him a 40 percent shareholder in OK. He further asserted (Affidavit May 2010) that at the shareholders meeting he called, 75 percent of them were present. He regarded himself as ‘one of the founders’ of OK.

19.	There is a document headed “Shareholders list – Ora” under the heading of OK Corporation Ltd (Annexure B to Mr G. Kot’s affidavit. It asserts a “share value” for  Goimba Kot (Raimbuka) K11,500.00” with the remainder to various clans and tribes totalled at K10, 999. 20.

20.	There is a separate list in the same document for “Kam SHARE”.

21.	It is apparent that this list records, not the shareholders of OK, but the share each of the persons or groups will have of the profits distributed by OK. Indeed, annexure C confirms that “Mr G Kot” is referred to as a 50 percent beneficiary of “ORA group”, not as a shareholder of OK.

22.	Mr GoimbaKot’s lack of understanding of this situation is highlighted in Annexure E of his affidavit,where he states in a letter to OK’s Board;
“I also own 40 percent of the shares in Ora Business Group which owns 90 percent of OK Corporation Limited.”

23.	Firstly, Ora has no shares. It is an incorporated Association. Mr Goimba Kot apparently has a right to 50 percent of its returns from OK. That says nothing as to his right to direct Ora as a shareholder of OK or even to represent it as a shareholder.

24.	Secondly, a shareholder in OK is not, ownership of the company. It is Ora not GoimbaKot which owns the shares and as such Ora has certain rights including those of voting for directors. Nevertheless, even majority shareholders, such as Ora is, must respect the rights of minority shareholders.

25.	Thirdly, though a minor point, Kam has a 20 percent stake in OK not 10 percent.

26.	Lawyers for Mr GoimbaKot complained to police that ‘young persons’ were trying to push Messrs Goimba and JacobKot and their supporters in the coffee venture aside. That complaint led to meetings facilitated by police but no resolution.

27.	It is noteworthy that the annual return of Ora as at 2nd July 2016 makes no reference to any office being held by either Goimba or Jacob Kot. To add to the confusion GoimbaKot sought to eject the OK from land he owned at Mt. Hagen.

28.	There was a litany of complaints from either side. However, at issue before Makail, J was the legitimacy of the so-called special meeting of shareholders called by GoimbaKot. Central to that was his claim to be a shareholder carrying not less than 5 percent of the voting rights.

29.	There was, his Honour found, no support for that proposition in the evidence, even accepting all that Mr. Goimba Kot relied upon, so as to enable it to be concluded that he had any shares whatsoever in OK. The relevant shareholding, as his Honour found, was owned by Ora, a body corporate not limited by shares but controlled by a committee established under its rules and the Business Groups Incorporation Act 1974.

30.	Under s.16 of that Act (BGI Act) the Registrar’s certification as to its Rules is “conclusive evidence” thereof. The power to call meetings of Ora was vested in its committee. There was no evidence that the committee authorized the calling of the Special Shareholders Meeting of OK. It was the misconception by Mr Goimba Kot as to his status as a shareholder of OK that meant that Ora did not, as a corporation, purport to call a meeting and to nominate its representatives for it. Nor was there any evidence that the meeting was properly summoned. His Honour, however, did not need to address that issue as the foundation for calling that meeting was lacking.

31.	Is the finding that Mr Goimba Kot was not a shareholder in OK attended by any doubt? The answer must be “no”.

32.	It further follows that in so far as leave to appeal is required that leave must be refused.

33.	However, there is a more fundamental question. That is whether leave is required. The questions raised in the application for leave clearly do not relate to primary facts but rather the conclusions to be drawn from those facts.

34.	Did Mr. Kot gain any legal or equitable right to shares in OK and by reason of his investment in Ora? The answer may seem obvious but that clarity is a result of knowledge of the law. A lay person such as Mr. Goimba Kot, may reasonably hold a different view, as he clearly does.

35.	Nevertheless, the issue as to what is or not a mixed question of fact and law is not always easy to discern. 

36.	In Yaklan v. Merrain[1998] PNGLR 555. Amet, CJ dealt comprehensively with the question whether, leave to appeal having been granted, grounds involving mixed questions of fact and law or questions of law only may be added to the notice of appeal for which such leave has been given. In a separate judgment, Kapi, DCJ (as he then was) agreed, although warning that if the correct form was not observed a finding of incompetence of the appeal might follow.Los, J agreed with both opinions notwithstanding their differences.

37.	The only real difference was whether, if leave to appeal for some grounds was required, the notice of appeal filed pursuant to that leave could include grounds as of right not included in the application for leave and, hence, not filed within the 40 day period for appeals and whether or not included in the application for leave.  If leave was given under Order 7 Rule 5, the notice of application for leave may be treated as the Notice of Appeal or leave given to file Notice of Appeal within 21 days.
38.	The current issue is somewhat different. It is whether given that leave is refused for grounds of appeal which do not require leave, they may now be pursued as if they had been raised with grounds for which leave has been given or whether; by applying for leave and being refused that right has now been lost by lapse of time.

39.	Some guidance on that point was given by Los, Kandakasi and Mogish, JJ in Pere v. Ningi [2003] PGSC10. The essence of the case is that if an appellant is in doubt as to whether leave is needed or not leave should be requested. If it is unnecessary then the application stands as if leave had been granted. In other words, the refusal of leave may be ignored.  The application for leave will stand as if it was a Notice of Appeal filed within time.  In any event, time can be extended.

40.	As their Honours noted, leave is a mechanism whereby, in cases to which the requirement applies, unmeritorious cases are weeded out. It prevents abuse of the Court’s processes.

41.	The Court held:
“If the Court is satisfied that there is merit in the proposed grounds of appeal or that the appellant should have appealed  as of right, the appellant should be granted leave or allowed to proceed to  lodge his appeal.”

42.	That right of appeal granted by s.14 of Supreme Court Act1975 should not be regarded as forfeited because a litigant takes the cautious approach of assuming the need for leave.

43.	It follows that this appellant must be given leave to file Notice of Appeal on such grounds as his advisors consider may have merit. It will be a matter for the Full Court as to that question if the appellant presses the appeal.

44.	The appellant is to file Notice of Appeal, if so advised, within21 days.
_____________________________________________________________
Makap lawyers  : Lawyers for the Appellants
Tamutai lawyers: Lawyers for the Respondents