Odata Limited v Ambusa Copra Oil Mill Limited and National Provident Fund Board of Trustees (2001) N2106

• Jurisdiction: Papua New Guinea
• Court: National Court
• Citation: (2001) N2106
• Date: 06 July 2001
• Year: 2001

Full Title: Odata Limited v Ambusa Copra Oil Mill Limited and National Provident Fund Board of Trustees (2001) N2106

National Court: Kandakasi J

Judgment Delivered: 6 July 2001

1 PRACTICE AND PROCEDURE—Interlocutory—Applications to strike out proceedings for failure to disclose cause of action—Such applications can only be granted in the clearest of cases.

2 CONTRACT LAW—Privity of Contract—subsidiary company agent of parent company if parent is in control—Corporate veil no bar to bringing an action against a parent company which is in fact the major player—Corporate veil may be lifted if fair to do so in all the circumstances of the case.

3 COMPANY LAW—Corporate veil—Important starting point is the separate legal personality of corporations upon incorporation—Protection of corporate veil available to legitimate or proper use—But not available for those abusing or otherwise seeking to avoid liability—Circumstances in which the corporate veil may be lifted considered—Courts should be ready to lift the veil if fairness, equity and justice so require—s16 Companies Act 1997.

4 LEGISLATION—Investment Promotion Act 1992—Foreign enterprises need to obtain certificates under s25 of the Act before carrying on business in Papua New Guinea—Failure to obtain certificate does not automatically render contracts with foreign enterprises null and void—s41A only grants a right to the other party to apply for a declaration that such a contract is unlawful and void—Applications under s41A of the Act has to be considered on their own merits with fairness and equity in mind.

5 WORDS AND PHRASES—"Carrying on business"—s3(1)(a) of Investment Promotion Act 1992—On its own suggest some physical activity must take place in Papua New Guinea first to give rise to the need to apply for certification under s25—But when read together with other provisions including s41A no physical activity in the country is required as long as the activity is to be performed wholly or partly in Papua New Guinea.

6 PNG Forest Products Pty Ltd v The Independent State of Papua New Guinea (1992] PNGLR 85, Ronny Wabia v BP Exploration Operating Co Ltd (1998] PNGLR 8, Bougainville Copper Foundation v The Minister for Trade and Industry The Honourable Mr Galeva Kwarara and The National Investment and Development Authority (NIDA) (1988–89] PNGLR 110, Rundle v MVIT (1988] PNGLR 20, CBS Inc v Ranu Investments Pty Ltd (1978] PNGLR 66, Pinpar Development Pty Ltd v TL Timber Development Pty Ltd (1999] PNGLR 139, Jacob Luke v John Ralda (1992] PNGLR 549, Kappo No 5 Pty Ltd v Wong (1998] PNGLR 544, B Fortunaso Limited v Bank of South Pacific Ltd, Public Officers Superannuation Board, State Services and Statutory Authorities Superannuation Fund Board (1992] PNGLR 275, Osprey Industries v Hallam (1992] PNGLR 557, Stanley Yarlett v New Guinea Motors Ltd (1984] PNGLR 155, Reynolds v Walcott (1985] PNGLR 316, Driver v Swanson (1977] PNGLR 30, Bank of Hawaii (PNG) Ltd v PNGBC (2001) N2095, Hubbuck & Sons Ltd v Wilkinson Heywood & Clark Ltd (1899] All ER 244, Dyson v Attorney–General (1911] 1 KB 410, First City Trust Co v Woodlawn Properties Ltd (1990) (RPR (2d) 259, 272; 80 Sask R 299; 66 DLR 4th, 470, Salomon v Salomon & Co Ltd (1897] AC 22, Woolfson v Strathclyde Regional Council (1978] SC90, Tunstall v Steigmann (1962] 2 QB 593, Chen v Butterfield (1996] NZCLC 261,086, Jones v Lipman (1962] 1 All ER 442, Gilford Motor Co Ltd v Horne (1933] Ch 935, Trevor Ivory Ltd v Anderson (1992) 6 NZCLC 67,611; (1992] 2 NZLR 517, Creasey v Breachwood Motor Ltd (1992] BCC 638 and Morris v Hanley (2000) NSWSC 957 (25 August 2000) referred to

Facts

The Plaintiff ("Odata") is suing on the basis of a contract between itself and the First Defendant ("Ambusa"). Ambusa was incorporated by the Second Defendant ("NPF") as a subsidiary. That was in association with or in a joint venture with simple village people who knew nothing about the venture or running any business and did not participate in any of the decisions of Ambusa. NPF was fully in control of the Ambusa, including a negotiation of the contract, its signing and eventual termination.

The Defendants by notice of motion seek to dismiss the proceedings. That is on the basis that, Odata has not complied with the requirements for certification as a foreign enterprise before carrying on business in Papua New Guinea under s25 of the Investment Promotion Act 1992 and on the on the basis of the doctrines of privity of contract and corporate veil for NPF.

Failing a dismissal of the proceedings, the Defendants asked for security for costs in the sum of K299,779.33 being two thirds of their estimated costs.

Held

1. On the facts, Odata was not carrying on business in Papua New Guinea but may have been carrying on business in Papua New Guinea within the meaning of s3(1)(e) only by having regard to other provisions such as s41A of the Investment Promotion Act 1992 as a matter of law and therefore required to apply for a certificate under s25 of the Investment Promotion Act 1992.

2. Odata as a foreign enterprise's failure to obtain a certificate under s25 of the Investment Promotion Act 1992 does not automatically render its contract with Ambusa null and void. Instead, s41A grants a right to the Defendants to apply for a declaration that such a contract is unlawful and void which right they have not exhausted.

3. When an application under s41A of the Investment Promotion Act 1992 is made it has to be considered on its own merits including the principles of fairness and equity in the interest of doing justice, having regard to the conduct of the parties.

4. The corporate veil may be lifted in a number of circumstances including when it is fair to do so in all of the circumstances and having regard to the extent of the control of the affairs of the company by whoever is behind it.

5. In the present case, NPF formed Ambusa as its subsidiary and had control of the board and the activities of Ambusa including the entering into of negotiations, finalising negotiations and signing the contract with Odata and eventually terminating it. NPF even assumed the carriage and conduct of the defence of Ambusa. These factors point to Ambusa being only a front and or agent of NPF and in the circumstances it is only fair that the corporate veil should be lifted to allow NPF to face Odata's claim.

6. Odata does have a reasonable cause of action against the Defendants. Accordingly it is improper to strike out this action merely on technicality in an interlocutory application such as this.

7. It is within the Court's discretion to determine what amounts should be fixed for security for costs. That discretion is to be guided by the principles of whether:

(a) the application is promptly made?

(b) the plaintiff's claim is bona fide or is one likely to succeed?

(c) the Defendant has contributed to the plaintiff's impecuniosity?

(d) the amount to be fixed for security for costs is reasonable an will have the effect of nullifying the proceedings?

(e) there exists a crossclaim on the merits with substance?

8. Having regard to the Defendants conduct and their effects in the present case as well as the lack of any justification for the estimate of costs and the amount asked for by them to be given for security for costs, it is declined. But, in the exercise of the Court's discretion, a sum of K20,000.00 is fixed as the appropriate amount to be given in security.

___________________________

Kandakasi J: By notice of motion, the Defendants are applying to dismiss these proceedings because they argue that no reasonable cause of action is disclosed against them. They argue that, the Plaintiff ("Odata") did not apply for and get either a certificate or an exemption under s25 or s26 of the Investment Promotion Act 1992, from the Investment Promotion Authority. Additionally, the Second Defendant ("NPF") argues that, there is no cause of action against...