Pacific Equities and Investment Limited v Melanesian Trustee Services Limited and National Superannuation Fund Limited (2007) N3122

• Jurisdiction: Papua New Guinea
• Judge: 21 March 2007
• Judgment Date: 21 March 2007
• Court: National Court
• Citation: (2007) N3122
• Docket Number: OS 673 OF 2006
• Year: 2007
• Judgement Number: N3122

Full Title: OS 673 OF 2006; Pacific Equities and Investment Limited v Melanesian Trustee Services Limited and National Superannuation Fund Limited (2007) N3122

National Court: 21 March 2007

Judgment Delivered: Hartshorn, J

N3122

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS 673 OF 2006

BETWEEN:

PACIFIC EQUITIES AND INVESTMENT LIMITED

Plaintiff

AND:

MELANESIAN TRUSTEE SERVICES LIMITED

First Defendant

AND:

NATIONAL SUPERANNUATION FUND LIMITED

Second Defendant

Waigani: Hartshorn, J.

2007: 21 March

Cases Cited

Papua New Guinea Cases

Robinson v National Airlines Commission [1983] PNGLR 478.

Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572.

Markeal Limited & Robert Needham v Mineral Resource Development Co. Pty Ltd N1742.

Overseas Cases

American Cyanide Company v Ethicon Limited (1975) 1 ALL ER. 504.

Counsel

I.R. Molloy, for the Plaintiff

M. Murray, for the First Defendant

E.G. Andersen, for the Second Defendant

27 February, 2007

1. HARTSHORN, J. The Plaintiff seeks an interlocutory injunction restraining the First Defendant (MSL) and the Second Defendant (NFSL) from taking any action in respect of, or giving any effect to, a resolution of unit-holders of Pacific Balance Fund (PBF) on 14 July 2006 that PEIL be removed as Fund Manager, until judgment in this matter or further order.

2. PEIL claims by Originating Summons filed on 25 September 2006;

a) a declaration that the meeting of unit-holders of PBF held on 14 July 2006 is null and void,

b) further or alternatively, a declaration that the resolution of unit-holders at the said meeting that PEIL be removed as Fund Manager is null and void.

3. PEIL is the Fund Manager of PBF appointed pursuant to a trust deed dated 22 October 2001 between Investment Corporation of Papua New Guinea and MTSL (Trust Deed).

4. MTSL is the trustee of PBF and a duly licensed trustee under s 72 of the Securities Act 1997.

5. NFSL is a substantial unit-holder in PBF.

6. PBF is an unincorporated unit trust Investment fund.

7. MTSL convened a meeting of unit-holders for 14 July 2006 after NFSL alleged to MTSL that there were serious breaches of the Trust Deed by PEIL.

8. At the meeting held on 14 July 2006 it was resolved that PEIL be removed as the manager of PBF.

9. There are related proceedings. In SCA 67 of 2006, Lay, J. sitting as a single judge of the Supreme Court, ordered that:

c) The Orders of the National Court of 29 June 2006 appealed from are stayed insofar as they prohibit the Unit Holders meeting of 14 July 2006 considering and voting upon a resolution to remove the Manager.

d) The meeting proposed for 14 July 2006 may proceed in accordance with the agenda in the Notice of Meeting.

e) The Court declines to stay the Orders of 29 June 2006 insofar as they restrain the removal of the Manager under cl 23.3 of the Unit Trust Deed.

f) If at the meeting of 14 July 2006 a resolution to remove the Manager is carried, no action shall be taken by the Trustee to put that resolution into effect until after this appeal is heard and determined unless the Manager voluntarily executes a retirement deed.

10. His Honour’s ruling was in respect of an application to stay an order of the National Court which ordered in proceedings CIA 19 of 2006 that until determination of an appeal by PEIL against directions by the Securities Commission of Papua New Guinea to MTSL to terminate the appointment of PEIL as manager of PBF, MTSL and NFSL be restrained from taking any steps to remove PEIL as manager of PBF including by resolution at the meeting then scheduled for 14 July 2006.

11. The principles upon which this Court can grant an interlocutory injunction are well settled. The leading authority is a decision of the House of Lords in American Cyanide Company v Ethicon Limited (1975) 1 ALL ER. 504. This case has been followed on many occasions in this jurisdiction, and cited with approval by the Supreme Court in Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572.

12. The first question to be determined is; does the applicant for the interlocutory injunction have a serious question to be tried in the substantive proceedings? What does this mean? In Robinson v National Airlines Commission [1983] PNGLR 478 at 482 Andrew, J. stated

“What the Plaintiff must prove is that he has a serious, not a speculative case which has a real possibility of ultimate success…”

13. In Markeal Limited & Robert Needham v Mineral Resource Development Co. Pty Ltd N1742 Doherty, J. described this as:

“…. a strong case which, on the evidence presented would support a permanent injunction”.

14. PEIL claims that the meeting of unit-holders and the resolution that PEIL be removed as Fund Manager were unlawful as inter alia, MTSL did not serve upon PEIL a written notice to show cause pursuant to Article 8 of the Deed of Appointment between MISL and PEIL dated 16 May 2002.

15. PEIL contends this was necessary as the Notice of Meeting from MTSL refers to MTSL becoming aware of material breaches of the Trust Deed by PEIL.

16. MTSL and NFSL contend that the “Show Cause” provisions of Article 8 of the Deed of Appointment are an entirely different set of provisions allowing for the removal of PEIL and are distinct and separate from the provisions of cl. 21(l) upon which MTSL convened the meeting held on 14 July 2006.

An example of this the defendants say, is when MTSL had previously served a notice to show cause on PEIL on 3 February 2006 following publication of an audit report by PricewaterhouseCoopers.

17. An examination of Article 8 of the Deed of Appointment and Clause 21(l) of the Trust Deed appears to bear this out. Article 8 does not refer to cl 21(l) and there is no requirement in Article 8 for MTSL to call a meeting of unit-holders. Why would an alleged breach of Article 8 cause a meeting convened under cl 21(l) to be unlawful?

18. PEIL contends that as the meeting on 14 July 2006 was not convened within 42 days of the date on which MTSL first received actual notice of the occurrence of breach by PEIL the meeting is unlawful.

19. The Defendants contend that it was physically and logistically impossible to convene the meeting within 42 days due to various factors including:

(a) PEIL not maintaining a proper register of unit-holders.

(b) The Electronic Register of unit-holders provided by PEIL required extensive formatting taking at least 2 weeks to complete before the mail out process could be commenced.

(c) A further 3 ½ weeks was then required to copy 12 papers of documents, put addresses on labels and fold and insert documents into envelopes for about 30,000 unit holders.

20. The Defendants further contend that the “42 days” requirement in cl 21(l) of the Trust Deed is a covenant with the Manager by the Trustee 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 severally….”.

21. How has PEIL suffered as a result of the meeting being convened 52 days instead of 42 days after MTSL first receives actual notice of the occurrence of a breach by PEIL? Has not PEIL been given more time? NFSL and other Unit Holders are not contending that they are disadvantaged.

22. PEIL contends that pursuant to cl 26.5 of the Trust Deed except where the Fund Manager convenes a meeting, the Fund Manager must be given notice of the meeting, that PEIL was not given notice and therefore the meeting is invalid.

23. The Defendants contend that PEIL does not have an arguable case for substantive relief on this point as Mr. John Ruimb the Managing Director of PEIL acknowledged that he received copies of the formal written notice of the meeting signed by the General Manager of MTSL with attachments about 5 weeks prior to the meeting on 14 July 2006 and annexed that document to his own affidavit.

24. PEIL contends that in cl 26.7 of the Trust Deed there is a requirement that a notice...