Ling Seng Chuan v Andy Kenamu and Others
| Jurisdiction | Papua New Guinea |
| Judge | Anis J |
| Judgment Date | 07 July 2022 |
| Neutral Citation | N10395 |
| Citation | N10395, 2022-07-07 |
| Counsel | L David, for the Plaintiff,L Yandeken, for the First Defendant,Nil appearances by the Second and Third Defendants |
| Docket Number | OS (COMM) NO. 528 OF 2017 |
| Hearing Date | 04 July 2022,08 August 2022,07 July 2023 |
| Court | National Court |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS (COMM) NO. 528 OF 2017
Between:
Ling Seng Chuan
Plaintiff/Cross-Defendant
v.
Andy Kenamu
First Defendant/Cross-Claimant
and
Ooi Say Hooi
Second Defendant
and
Chong Saw Ling
Third Defendant
Waigani: Anis J
2022: 4th July, 8th August
2023: 7th July
CLAIM IN CONTRACTS AND FRAUD — Agreement to surrender urban development lease for issuance of new state leases — consideration is K4,000,000 — payment made in full — urban development lease surrendered — new state leases issued as agreed — despite transfer of new leases as per the terms of the agreement, the leases were underdeveloped — alleged breach of contract — second agreement — sale of second urban development lease for K6,000,000 — transfer completed — balance of K1,350,000 remaining — sum not disputed — claim that the balance will be paid out of declared dividends — evidence of variation agreement adduced — whether civil fraud or fraudulent conduct by the defendants established — claim that directorship and shares were removed from the plaintiff by the first defendant contrary to law and to the terms and conditions of the head or joint venture agreement — whether fraud and fraudulent conduct established — relief — whether all the relief should be granted
Cases Cited:
Janet Roland Sios v. Philma Kelegai and Ors (2020) N8594
Esso Highlands Ltd v. Willie (2018) N7684
Gawan Kuyan v Andrew Sallel (2008) N3376
Ngu v. King Ngu (2020) N8422
Namo Aporo Land Owners Association Inc. v. Sakai (2020) N8178
Relyna Komet v. Angeline Komet (2018) N7404
Counsel:
L David, for the Plaintiff
L Yandeken, for the First Defendant
Nil appearances by the Second and Third Defendants
Pacific Legal Group: Lawyer for the Plaintiff
Yandeken: Lawyer for the First Defendant
JUDGMENT
7th July, 2022
1. Anis J: This matter was tried on liability and quantum between the plaintiff and the first defendant. The second and third defendants have not shown interest in the matter thus were not heard. I heard final submissions from the parties on 8 August 2022 before I reserved my decision to a date to be advised.
2. Parties have been notified so I now give my decision.
BACKGROUND
3. Claims are made by both the plaintiff/cross-defendant (plaintiff) and the first defendant/cross-claimant (first defendant). For the plaintiff, his claim is 2-fold. He refers to a written contract that was entered into between the first defendant, himself and the second defendant on 8 November 2010 (the 1st Agreement/head agreement). The parties herein admit to the existence of the 1st Agreement and its material terms and conditions. The Agreement was signed premised on a land that was owned by the first defendant. The land was an urban development lease described as State Lease, Volume 34, Folio 249, Portion 2494, Granville, National Capital District (1st UDL).
4. It was agreed that the first defendant would surrender his UDL and that new state leases would be created and issued to a company that would be created and owned by the plaintiff and the first defendant. It was also agreed that in consideration of the first defendant having to surrender the 1st UDL, the plaintiff would pay him K4,000,000. The company that was created for that purpose is called Hari Yupi Investment Ltd (HYI). Both the plaintiff and the first defendant were the directors and shareholders of the company at the time of its establishment. The plaintiff held the majority shares, that is, 64 whilst the first defendant held 34. As per the terms of the 1st Agreement, the 1st UDL was surrendered and in place of that individual state leases were created and issued to HYI. It is not disputed that the plaintiff, as agreed under the terms of the 1st Agreement, had paid the first defendant the full K4,000,000 over a period of time between 8 November 2010 and 7 February 2011.
5. On 23 January 2016, the first defendant and the other shareholder the second defendant, conducted a purported shareholders meeting at the Laguna Hotel in Port Moresby. They resolved to purportedly remove the plaintiff as a director and shareholder of HYI. They also purportedly resolved to transfer his 64% shares in HYI over to the first defendant. The plaintiff, in the second part of his claim, alleges fraud or fraudulent conduct against the first defendant, that is, he claims that the actions of the first defendant was fraudulent because he claims that (i), he was not aware of the shareholders meeting, (ii), he was not notified of it (iii), he did he give his consent for the transfer of his shares in HYI to the first respondent, and (iv), he did not give his consent for his removal as a director of HYI.
6. The first defendant has filed a crossclaim against the plaintiff. There he claims that he and the plaintiff also signed another written contract on 14 February 2011 (2nd Agreement) regarding his other land, that is, an urban development lease described as Allotment 53 Section 533, Portions 2645 & 814 Rem, Granville, National Capital District (2nd UDL). He claims that under the terms of the 2nd Agreement, the plaintiff shall pay him K6,000,000 to acquire the 2nd UDL or the leases that would be crated under it.
7. Again, the parties do not dispute the validity of the 2nd Agreement. The first defendant claims in the crossclaim that he was paid only K2,000,000 and that the plaintiff still owes him K4,000,000. In response, the plaintiff claims that he has already paid the first defendant a total of K4,650,000. The plaintiff has adduced evidence or receipts to support his defence. He claims, however, that he only owes the first defendant a balance of K1,350,000. He further states in his defence that he will pay the first defendant the K1,350,000 from dividends that are earned or to be earned by HYI as agreed to between the parties.
8. The first defendant's counsel, however, and in his closing submission, stated that he had instructions to withdrew the full K4,000,000 claim sought in the crossclaim. This crossclaim is now abandoned. However, counsel submits that the first defendant agrees with the plaintiff's defence or admission that only K1,350,000 was still owing from the K6,000,000 payment under the 2nd Agreement. As such, he submits that the plaintiff should pay him the said outstanding amount.
MANNER OF TRIAL/ EVIDENCE
9. The trial proceeded without any objections or cross-examinations of witnesses. The plaintiff tendered a total of 5 affidavits which were marked as Exhibits P1 to P5, and the defendants tendered a total of 3 affidavits, which were marked as Exhibits D1 to D3. I note that the first defendant had issues in regard to certain parts of Exhibit P5. I heard submissions, and in doing so, overruled the objection and allowed Exhibit P5 to be tendered. I would refer to my ruling in the transcript of the proceeding.
PRELIMINARY FINDINGS
10. I refer to the 1st Agreement. I must say that the agreement may also be described as head agreement or joint venture agreement between the parties. It is in this agreement that the parties have agreed to create HYI, and also, of who should own what number of shares and the directorship of the company. Under clause 2.2, it was agreed that (i), the plaintiff would own 64% of the shares, (ii), the first defendant would own 34% of the shares, and (iii) the second defendant would own 2% of the shares, in HYI.
11. Clause 2.2 (sic) also expressly states that HYI's directors shall be the 3 shareholders, and the clause also gives (i), the plaintiff the right to appoint 2 more directors and (ii) the first defendant the right to appoint 1 more director.
12. Clause 3.1 obligates the first defendant to ensure to have his 1st UDL and the created state leases from the said UDL transferred to HYI. And clause 3.2 states that the plaintiff has agreed to pay the first defendant K4,000,000 subject to the first defendant complying with transferring all the state leases, which will have been created premised on his surrendered 1st UDL, over to HYI.
13. So, I observe in summary that the plaintiff was the one that had funded the business arrangement between the parties. He was the developer with the finance. I also observe that the first defendant was the person who was the registered proprietor of the land which was the 1st UDL at the material time who was able to negotiate with the plaintiff in relation to the business dealing or arrangement. The parties had intended to create a company and to go into the real estate business. I observe that since the plaintiff was going to pay for the purchase of the land that was the subject of the 1st UDL held by the first defendant, it was agreed that the plaintiff would have the majority shares in the company that is to be created, which is HYI. I observe that the plaintiff, from his own money, paid the first defendant K4,000,000 as per clause 3.2 of the 1st Agreement. The first defendant accepted the full payment and in so doing, surrendered his 1st UDL and also facilitated the creation and transfer of new state leases (which were created and issued over 1st UDL land area) over to HYI where the plaintiff was the majority shareholder. This was done as per clause 3.1 of the 1st Agreement.
14. I now come to the part where it gets interesting and perhaps confusing. Paragraphs 10, 11, 12, 13 and 14 of the SoC reads:
“10. Between 8 November 2010 and 7 February 2011, the Plaintiff paid the First Defendant the total sum of K4,000,000.00 for the issuance of new State Leases in the name of the Company.
11. On 5 May 2011, at the request of the First Defendant, the Plaintiff paid a total of K100,000.00 to the First Defendant as an advance for the Company's project expenses.
12. Between 6 November 2013 and 27 April 2016, the Plaintiff paid a total sum of K112,904.45 to the National Capital District Commission for the land tax for 2013, garbage and land tax for 2015 and the outstanding garbage rates and land tax up till 2016 for the New...
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