OS No. 649 of 2007; Andrew Posai v Bevan Saile. Francis Amon, Sare Resources Ltd (2008) N3260

• Jurisdiction: Papua New Guinea
• Judge: Lay J
• Judgment Date: 22 February 2008
• Court: National Court
• Citation: (2008) N3260
• Docket Number: OS No. 649 of 2007
• Year: 2008
• Judgement Number: N3260

Full Title: OS No. 649 of 2007; Andrew Posai v Bevan Saile, Francis Amon, Sare Resources Ltd (2008) N3260

National Court: Lay J

Judgment Delivered: 22 February 2008

N3260

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS No. 649 of 2007

BETWEEN

ANDREW POSAI

Plaintiff

AND

BEVAN SAILE

First Defendant

FRANCIS AMON

Second Defendant

SARE RESOURCES LTD

Third Defendant

Kokopo: Lay J.

2008: 15 & 22 February

CIVILCIVIL - Companies Act s 425 ? meaning of "theft" as used in s 425(5) ? whether a conviction for misappropriation contrary to Criminal Code s 383A is theft.

PNG Cases Cited

SCA 886 (2007) Mondiai and anor v Wawoi Guavi Timber Co Ltd & ors

SC 674 (2001) Canisius Karingu v Papua and New Guinea Law Society

N1501 (1996) The State v Micky Kauri

N 1930 The State v Tony Baik

N 2857 (2005) The State v Alice Wilmot

Legislations Cited:

Papua New Guinea Legislation

Companies Act 1997

Criminal Code

Overseas Legislation

New Zealand Companies Act 1993

New Zealand Crimes Act

Queensland Criminal Code

Facts

The Plaintiff brought these proceedings amongst other purposes to have the court declare that he is the lawfully elected managing director of the Third Defendant and to prevent the First and Second Defendants from interfering with his management of the Third Defendant. The First and Second Defendants by motion sought orders that the proceedings be struck out on the basis that the Plaintiff is a person prohibited from being a director or involved in management of a company by reason of the provisions of Companies Act 1997 s.425 (conviction of an offence involving dishonesty).

Held

1"theft" in its ordinary and usual meaning as used in Companies Act 1997 s.425(5) includes misappropriation;

2a person convicted of misappropriation pursuant to the provisions of Criminal Code s.383A is a person convicted of theft within the meaning of "theft" as used in Companies Act 1997 s.425(5);

3The Plaintiff is by virtue of his conviction for misappropriation on the 21 June 2004 prohibited from being a director or being involved in the management of a company until 20 June 2009;

4The Plaintiff has no standing to bring the proceedings which are dismissed with costs.

Counsel

Paisat, for the PlaintiffPlaintiff

Asa for the RespondentRespondent

22 February, 2008

1 LAY J .: The Plaintiff commenced these proceedings, amongst other things, for a declaration that he is the duly elected managing director of the Third Defendant and for injunctions preventing the First and Second Defendants from interfering with his management of the Third Defendant, particularly in relation to the procurement of a contractor approved by the Forest Authority to exploit the Third Defendant’s timber rights purchase area.

2 Amongst other applications the First and Second Defendants have applied by notice of motion for an order that:

" The Plaintiff be and hereby is prohibited from holding the office of Director of any company including the Third Defendant for a period of five years from 21 June 2004 pursuant to Order 12 Rule 1 and Section 425 of the National Court Rules and Companies Act 1997, respectively".

3 The Defendants seek that the proceedings be struck out pursuant to National Court Rules O 12 r 40. The evidence on which the First and Second Defendants rely is a certificate of conviction, signed for the Registrar at the National Court Kimbe and dated the 21st day of June, 2004 certifying that the Plaintiff was on the 21st day of June 2004 convicted of an offence under Section 383A (1) of the Criminal Code and sentenced to one year nine months imprisonment, wholly suspended on terms. The Plaintiff does not dispute the fact of the conviction.

4 Companies Act Section 425 provides as follows:

425. Persons prohibited from managing companies.

(1) Where—

(a) a person has been convicted on indictment of any offence in connection with the promotion, formation, or management of a company; or

(b) a person has been convicted of an offence under any of Sections 420 to 423 or of any crime involving dishonesty, whether within the country or outside the country; or

(c) a person who is an undischarged bankrupt;

that person shall not—

(d) where the person was sentenced to imprisonment, during the period of imprisonment and during the period of five years after release from prison; or

(e) during the period of five years after the judgement or the conviction,

be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company, unless that person first obtains the leave of the Court which may be given on such terms and conditions as the Court thinks fit.

(2) A person intending to apply for the leave of the Court under this section shall submit to the Registrar not less than one month's notice of that person's intention to apply.

(3) The Registrar, and such other persons as the Court thinks fit, may attend and be heard at the hearing of any application under this section.

(4) A person who acts in contravention of this section, or of any order made under this section, commits an offence and is liable on conviction to the penalty set out in Section 413(4).

(5) In this section—

"company" includes an overseas company;

"crime involving dishonesty" means a crime involving theft, conversion, robbery, burglary, fraud, receiving stolen property, or forgery.

5 The essence of Section 383A is contained in subsection 1:

383A. Misappropriation of property.

(1) A person who dishonestly applies to his own use or to the use of another person—

(a) property belonging to another; or

(b) property belonging to him which is in his possession or control (either solely or conjointly with another person) subject to a trust, direction or condition or on account of any other person,

is guilty of the crime of misappropriation of property.

6 The Defendants submit that as provided by the Companies Act s.425 (1) (b) the Plaintiff has been convicted of an offence involving dishonesty because dishonesty is an element of the offence defined by Criminal Code s.383A.

7 The Plaintiff submits that:

a the Defendants knew all along about the Plaintiffs conviction and took no proceedings to disqualify him, they concurred in his acting, there should be an estoppel:

b see s.426(3) of the Companies Act, an application may be made by the liquidator or a shareholder, this brings into question the locus standi of the Defendants to apply for disqualification. The Defendants are not creditors or shareholders;

c an application to disqualify a director is a substantive proceeding and if the Defendants had locus standi they could file a summons. It is not appropriate to seek relief on motion.

d Section 425(5) provides a complete definition of the meaning of "crime involving dishonesty". Each of the classes of crime in the definition is a complete crime within the Criminal Code. The court has no discretion to go outside the statutory definition. Misappropriation is not within the class of crimes defined as "involving dishonesty".

8 In relation to the Plaintiff's first submission an equitable estoppel cannot run against a statutory duty: SCA 886 (2007) Mondiai and anor v Wawoi Guavi Timber Co Ltd & ors at [81]. I consider that it must also follow that equity cannot set at naught a statutory prohibition. If Parliament has said that certain persons cannot act as directors then shareholders or directors or other officers of a company cannot by specific agreement or by their conduct set aside the prohibition.

9 The submission in respect of s.426(3) of the Companies Act is misconceived. The provisions of s.425 and s.426 are not interlinked. They are separate provisions. Section 425 deals with persons who are ipso facto prohibited from acting as directors or managers of a company, unless on application made to the court they are permitted to do so. Section 426 deals with a class of persons who may be prohibited from acting as directors or managers of a company upon application being made to the court for an order to prohibit them. Nothing in s.426 illuminates the interpretation of s.425. The Defendants are not making an application under s.425. The only application which can be made under that section is an application, by a person whom the section prohibits from acting in the management of a company, for permission to act. The Defendants are setting up the facts which attract the automatic prohibition of s.425 as a complete defence to the Plaintiffs action. That also deals with the Plaintiff's third submission that the Defendants ought to file a summons and make application under s.426 if they can establish locus standi. Section 426 is irrelevant.

10 I consider that the first premise of the Plaintiff's last argument is correct. That is, s.425(5) provides the definition of "crime involving dishonesty" and I cannot go outside that definition and import other concepts of "dishonesty". The issue then turns on whether or not misappropriation of property...