Nangamanga Limited and Anthony Flynn and Rose Flynn v Gold Exports Limited and Michael Bole and Opaoti Trading Limited (2011) N4570

• Jurisdiction: Papua New Guinea
• Judge: Gabi J
• Judgment Date: 01 June 2011
• Court: National Court
• Citation: (2011) N4570
• Docket Number: WS No. 1068 of 2009
• Year: 2011
• Judgement Number: N4570

Full Title: WS No. 1068 of 2009; Nangamanga Limited and Anthony Flynn and Rose Flynn v Gold Exports Limited and Michael Bole and Opaoti Trading Limited (2011) N4570

National Court: Gabi J

Judgment Delivered: 1 June 2011

N4570

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS No. 1068 of 2009

BETWEEN

NANGAMANGA LIMITED

First Plaintiff

AND

ANTHONY FLYNN

Second Plaintiff

AND

ROSE FLYNN

Third Plaintiff

AND

GOLD EXPORTS LIMITED

First Defendant

AND

MICHAEL BOLE

Second Defendant

AND

OPAOTI TRADING LIMITED

Third Defendant

Lae: Gabi, J

2011: 1st June

INJUNCTION – mareva injunction – plaintiffs seeking disclosure orders ancillary to granting of a mareva injunction - order requiring disclosure by second defendant of assets of first defendant - plaintiffs have primary right to be protected – Court has jurisdiction over first defendant as a Papua New Guinea company - pursuant to s. 155 (4) of Constitution, Court has power to grant an ancillary order requiring disclosure by second defendant of assets of first defendant - application granted

Facts:

By a motion on notice, the plaintiffs are seeking disclosure orders ancillary to and in aid of the mareva injunction ordered on 22nd April 2010.

Held:

The plaintiffs have a primary right to be protected. The first defendant is a Papua New Guinea company, which comes under this Court’s jurisdiction. Pursuant to s. 155 (4) of the Constitution, the Court has the power to grant an ancillary order requiring the disclosure by the second defendant of the assets of the first defendant. Accordingly, the application is granted and the costs are in the cause.

Cases Cited:

Papua New Guinea Cases

Aundak Kupil & Kauke Kensi v. The State [1983] PNGLR 350

Avia Aihi vs. The State (No. 1) [1981] PNGLR 81

Mauga Logging Company Pty Ltd v. South Pacific Oil Palm Development Pty. Ltd.(No. 1) [1977] PNGLR 80

Re s. 19 (1) (f) of the Criminal Code [1982] PNGLR 150

Overseas Cases

Jackson v Sterling Industries Ltd (1987) 162 CLR 612

Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264

Counsel:

M. A. Pryke, for the Plaintiffs

P. Kaumba, for the Defendants

RULING

1st June, 2011

1. GABI, J. Introduction: By a motion on notice, the plaintiffs are seeking disclosure orders ancillary to and in aid of the mareva injunction ordered on 22nd April 2010. The orders the plaintiffs seek are:

“2. Pursuant to Order 12 Rule 1 and Section 155(4) of the Constitution that the second defendant/second respondent (“the second defendant”) file an affidavit in Court describing and quantifying all the assets of the first defendant/first respondent (“the first defendant”) and their locations and –

(a) annexing originals or certified copies of –

i. all bank statements of all the first defendant’s bank accounts for the period 1/1/2010 to 30/6/2010;

ii. financial statements including a detailed profit and loss statement, and tax return and supporting schedules of the first defendant for the year ended 31/12/2009 and a detailed Balance Sheet at 31/12/2009 including a detailed listing of fixed assets with descriptions which reconcile to the net book value of the fixed assets in the Balance Sheet at 31/12/2009;

iii. financial statements including a detailed profit and loss statement of the first defendant for the six month period ended 30/6/2010 and a detailed Balance Sheet at 30/6/2010 including a detailed listing of fixed assets with descriptions which reconcile to the net book value of the fixed assets in the Balance Sheet at 30/6/2010;

iv. copies of all invoices issued by the first defendant in the period from 1/1/2009 to 31/12/2009 for the sale of Gold; and

(b) annexing and certifying correct –

i. a statement of Gold stocks held by the first defendant or in transit but not yet sold disclosing quantities and cost and therefore a total cost valuation as at 31/12/2009 and as at 30/06/2010;

ii. a statement of amounts receivable (debtors) from all customers of the first defendant in respect of Gold sales as at 31/12/2009 and as at 30/6/2010.”

Evidence

2. The plaintiffs rely on the affidavit of Mark Anthony Pryke sworn on

11th August 2010 and filed on 17th August 2010.

Background

3. The first and second plaintiffs and the second defendant were shareholders in Gold Exports Limited, the first defendant, which carries on business as a buyer and exporter of gold in Lae in the Morobe Province. In 2002, the first and second plaintiffs were major shareholders. In December 2003, the second plaintiff agreed to transfer a certain number of the first plaintiff’s shares as well as his shares in first defendant to the second and third defendants. The second defendant thus obtained a controlling interest in the first defendant. It is pleaded that the plaintiffs were never paid for the shares which they transferred. The plaintiffs further plead that in July 2005, the defendants fraudulently redeemed the remaining ordinary shares of the first and second plaintiffs in the first defendant. They claim that as a direct result of the transfer and the fraudulent redemption of their shares they have suffered loss of dividends and other earnings. They seek damages, declaratory orders that the transfer and the purported redemption of the shares are null and void and the restoration of those shares.

4. On 22nd April 2010, I granted an injunction restraining the defendants from selling, transferring, removing, disposing of, dealing with or diminishing any asset of the first defendant. On 15th September 2010, I dismissed the defendants’ notice of motion filed on 16th July 2010 which sought to discharge the injunction.

Disclosure orders

5. In his supporting affidavit dated 11th August 2010, Mark Anthony Pryke sets out the basis for the plaintiffs’ application. He deposes thus:

“3. It is usual where a mareva injunction is granted that the defendants also be ordered to disclose such information for the reasons that it will assist in locating and freezing the defendant’s assets and also in establishing any breaches of the order.

4. The affidavits of the second defendant/second respondent (the second defendant) say that the first defendant/first respondent (the first defendant) regularly buys gold which it sells to a company in Australia. Clearly the assets of the first defendant are therefore in a constant state of flux as regards their nature, amount and geographical location. It would be a simple matter for the defendants to send gold or invest funds from the sale of gold overseas – not only in Australia, but elsewhere also.”

Jurisdiction

6. The plaintiffs are seeking disclosure orders and the question is whether I have jurisdiction to grant such orders. The disclosure orders sought are for the second defendant to file in Court an affidavit giving details of the assets of the first defendant and annexing certain bank statements, financial returns and statements relating to gold stocks and amounts receivable from customers in respect of gold sales from it to its customers.

7. I am grateful to counsel for the plaintiffs for making detailed submissions on the subject as there appears to be no reported Papua New Guinea cases where such orders have been made. Literature placed before me indicates that in countries such as England, Australia, Canada, Barbados, Cyprus and Jersey there are specific Court Rules relating to procedure for obtaining mareva injunctions and subsidiary orders including orders that the defendant make disclosure of assets. Prior to the promulgation of these rules in those countries, the orders were made pursuant to the inherent jurisdiction of the courts. There are no such rules in this jurisdiction except s. 155 (4) of the Constitution, which gives the Supreme Court and the National Court inherent power to make such orders as are necessary to do justice in a particular case.

8. In Australia, the power of the Federal Court to grant mareva injunction is derived from s. 23 of the Federal Court of Australia Act 1976 (Cth). It provides:

“The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.”

9. The provision confers upon the Federal Court a power to make orders of such kind, including interlocutory orders, as it “think appropriate.” The general power has been held to encompass an order requiring the disclosure by the defendant of his assets. Courts with power to grant freezing orders also have power to grant orders ancillary to freezing orders such as an order requiring the disclosure by a defendant of his assets: Jackson vs Sterling Industries Ltd (1987) 162 CLR 612.

10. In Riley McKay Pty Ltd vs McKay [1982] 1 NSWLR 264, the New South Wales Court of Appeal found the power to grant relief under s. 23 of the Supreme Court Act 1970. Section 23 provides:

“Court shall have all jurisdiction which may be necessary for the...