National Superannuation Fund Ltd v Pacific Equities and Investments Ltd and Securities Commission of Papua New Guinea and Melanesian Trustee Services Ltd (2006) SC845

• Jurisdiction: Papua New Guinea
• Judge: Lay J
• Judgment Date: 11 July 2006
• Court: High Court
• Citation: (2006) SC845
• Docket Number: SCA No. 67 of 2006
• Year: 2006
• Judgement Number: SC845

Full Title: SCA No. 67 of 2006; National Superannuation Fund Ltd v Pacific Equities and Investments Ltd and Securities Commission of Papua New Guinea and Melanesian Trustee Services Ltd (2006) SC845

High Court: Lay, J

Judgment Delivered: 11 July 2006

SC 845

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 67 OF 2006

NATIONAL SUPERANNUATION FUND LTD.

Appellant

AND:

PACIFIC EQUITIES AND INVESTMENTS LTD.

First Respondent

AND:

SECURITIES COMMISSION OF PAPUA NEW GUINEA

Second Respondent

AND:

MELANESIAN TRUSTEE SERVICES LTD.

Third Respondent

Waigani: Lay, J

2006: 7 and 11 July

SUPREME COURT-Practice and Procedure-application for a stay of National Court order-jurisdiction of a single judge of the Supreme Court-Unit Trust-Trust Deed-Termination of Trust Manager-Duties of Trustee-funds invested by public.

Facts

1. The Appellant is a major holder of units in a public unit trust called the Pacific Balance Fund ("PBF"). The First Respondent is the Manager of PBF and the Third Respondent is the Trustee of PBF, under a Trust Deed. The Securities Commission (the Second Respondent) gave a direction purportedly pursuant to the Securities Act to the Trustee to terminate the services of the Manager in respect of PBF. The Manager appealed to the National Court.

2. Separately, the Appellant complained to the Trustee that there were serious breaches of the Trust Deed by the Manager. The Trustee called a meeting of the Unit Holders as it was required to do by the terms of the Trust Deed. In the Securities Act appeal proceedings in the National Court the Manager obtained an injunction order staying the calling of the Unit Holders Meeting until after the determination of that appeal.

3. The Appellant appealed against the injunctive orders and applied to a single judge of the Supreme Court for order staying the injunctive orders granted by the National Court.

Held

1 To obtain a stay the Appellant has to demonstrate an arguable case in the appeal;

2 A single judge of the Supreme Court cannot grant orders which would affect the orders to be made in the appeal. An order having the effect of making any orders made in the substantive appeal of academic interest only, is beyond the jurisdiction of a single judge;

3 The Appellant had an arguable case because:

a the National Court appeal under the Securities Act would not be determinative of the issues between the Appellant, the Manager and the Trustee;

b it was arguable the trial judge was wrong to hold that the Court will determine the future of the Manager when the Trust Deed quite clearly gave that right and responsibility to the Unit Holders;

4 Where the Manager of a Unit Trust has the responsibility for preparation of the accounts it has a positive duty of disclosure to the Unit Holders;

5 The Court should be reluctant to interfere with the Trustee’s duties and Unit Holders rights in relation to the Manager, as provided in the Trust Deed;

6 In balancing the overall interest of Justice the transparency and accountability in the application of funds invested by the public should carry greater weight than the interests of individual corporations having roles in the administration of the Trust.

7 Order granted staying the injunction insofar as the injunction prevented the Unit Holders meeting being held, but not staying the injunction which prevents dismissal of the Manager.

Cases Cited

O’Brien v Komesaroff (1982) 150 CLR 310

Wau Ecology Institution v Registrar of Companies (2005) SC794

Gary McHArdy v Prosec Security and Communication Ltd SC646

Green & Ors v Wilden Pty. Ltd & Ors [2005] WASC 83

Wawa Trading Co Pty. Ltd v Lie Tat Swie and Bank of New South Wales Pty. Limited [1982] PNGLR 375

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

Films Rover International Ltd. v Cannon Film Sales Ltd. [1987] 1 WLR 670.

RULING ON APPLICATION FOR A STAY

Counsel

E. Anderson, for the Appellant

D. Steven, for the First Respondent

C. Raurela, for the Second Respondent

A. Nambau, for the Third Respondent

1. LAY, J.: The Appellant seeks a stay of orders made by His Honour Injia DCJ in proceedings CIA No. 19 of 2006 given on 29 June 2006 in Port Moresby, the Orders being:-

1 until the determination of this appeal:-

a the second respondent, its servants or agents including Pacific Balance Fund, Nasfund and any other Unit holders of PBF are restrained from taking any steps whatsoever to remove or retire the Appellant (now First Respondent) as the manager of The Pacific Balance Fund.

b The Unit holders of Pacific Balance Fund including Nasfund are restrained from including any agenda and reaching any resolution on the removal of the Appellant in their meeting scheduled to be held on 14 July 2006 or any other meeting.

2 The appellant (now First Respondent) take steps to prosecute the appeal in the July sittings of the National Court, failing which the Registrar should place the matter on the summary determination list to be summarily determined in the August sittings of the National Court.

3 Costs is reserved

4 The time for entry of these orders is abridged to take effect within three (3) days herefrom.

2. The Appellant is a Unit Holder in the Pacific Balance Fund (“PBF”), which is a unit trust investment fund whose capital origins stem from the former Investment Corporation Fund of Papua New Guinea. There are over 30,000 Unit holders and the Appellant is the holder of 21 percent of the units. The First Respondent is the Manager of PBF appointed pursuant to the trust deed dated 22 October 2001 signed between Investment Corporation of Papua New Guinea and the Third and Second Respondent which is the Trustee of PBF and a duly licensed trustee under Section 72 of the Securities Act 1997.

3. I interpose here a general description of public unit trust deeds taken from the judgement of Mason J in O’Brien v Komesaroff (1982) 150 CLR 310 (a copyright case):

This concept involved the vesting of property in a trustee who was bound by a trust deed to deal with the property as directed by the manager (usually a private corporation). The trust property was held for the benefit of "unit holders" ,these being members of the public who subscribed to the trust and derived income from their investment in proportion to their unit holding.

4. The Securities Commission gave directions to the Second Respondent to terminate the appointment of the First Respondent as Manager of PBF. The First Respondent exercised its rights pursuant to the Securities Act 1997 Section 13 to appeal, which is proceedings CIA No. 19 of 2006 in the National Court. The Appellant was not a party to those proceedings which were between the First Respondent as appellant, the chairman of the Securities Commission of Papua New Guinea as the first respondent and the Third Respondent in these proceedings as second respondent.

5. Certain consent orders were entered into between the parties in CIA No. 19 of 2006 on 22 February 2006 to preserve the status quo and the position of the Manager and the Trustee whilst the appeal to determine whether the Securities Commission had the power to give the direction to the Second Respondent to remove the First respondent as Manager, was heard and determined.

6. Quite separate and independently from the Securities Commission actions and appeal CIA No. 19 of 2006 the Appellant in these proceedings alleged to the Trustee (the Second Respondent) that there were serious breaches of the Trust Deed by the Manager. Clause 20 1.1(1) of the Trust Deed provides:

"21.1 the Trustee covenants with the Manager in relation to the Trust, with the intent that the benefit of these covenants enures not only to the Manager but to the Unit Holders of the Trust jointly, and to each of them separately that it will:

(1) where the Manager is in material breach of a provision of this deed convene a meeting of Unit Holders within 42 days of the date on which the Trustee first receives actual notice of the occurrence of the events contemplated by this paragraph to consider the removal of the Manager."

7. Pursuant to that duty the Second Respondent gave notice of a meeting of the Unit Holders to be held on 14 July 2006. The First Respondent then applied by motion in proceedings CIA No. 19 of 2006 for orders preventing the meeting called for the 14 July 2006 from being convened. The Appellant was heard on that application, which resulted in the orders set out above.

8. The Appellant's appeal is from the whole of the orders recited at the beginning of these reasons.

9. The powers of a single judge of the Supreme Court to grant interim orders pending the hearing of an appeal stem from Sections 5, 10 and 19 of the Supreme Court Act and the Supreme Court Rules O.3 r.2.

5. Incidental directions and interim orders.

(1) Where an appeal is pending before the Supreme Court—

(a) a direction not involving the decision on the appeal; or

(b) an interim order to prevent prejudice to the claims of the parties; or

(c) an order in any proceedings (other than criminal proceedings) for security for costs; or

(d) an order dismissing an appeal in any proceedings (other than criminal proceedings) for default in furnishing security; or

(e) an order admitting an appellant to bail,

may be made by a Judge.

(2) A direction or order made under Subsection (1) shall be deemed to be a direction or order of the Supreme...