Datuk Kie Yik Wong v Tiong Sii Huang [2022]
Dispute over ownership and control of Madang Timbers Ltd
Logging companies mentioned in this document:
N10543
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
MP NO. 33 OF 2022 (COMM-IECMS)
IN THE MATTER OF THE COMPANIES ACT 1997
AND
IN THE MATTER MADANG TIMBERS LIMITED (Company No. 1-1235)
BETWEEN:
DATUK KIE YIK WONG
First Petitioner
AND
PATRICK HAW YEONG WONG
Second Petitioner
V
TIONG SII HUANG
First Respondent
AND
KWONG TOH LING
Second Respondent
AND
KWONG LEONG LING
Third Respondent
AND
SIEW HUI LING
Fourth Respondent
AND
HENRY HUAT HUI HUANG
Fifth Respondent
AND
HOW YIENG HUONG
Sixth Respondent
AND
PACIFIC REGION DEVELOPMENT LTD (Company No. 1-52171)
Seventh Respondent
AND
MADANG TIMBERS LIMITED (Company No. 1-1235)
Eighth Respondent
Waigani: Anis J
2023: 20th & 30th October
NOTICE OF MOTION – seeking restraining or interim injunctive orders –
s.155(4) – Constitution – Order 12 Rule 1 – National Court Rules – s.142 of
the Companies Act 1997 – consideration – criteria for granting interim
injunctive relief – whether status quo require granting of restraining orders –
whether arguable case demonstrated - whether damages will be an adequate
remedy- whether undertaking as to damages filed - ruling
Cases Cited:
Employees Federation of PNG v. PNG Waterside Workers Union (1982) N392
Golobadana No 35 Ltd v. Bank South Pacific Ltd (2002) N2309
Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Robinson v. National Airlines Commission [1983] PNGLR 476
Counsel:
J Mesa, for the Petitioners
E Andersen, for the Respondents
RULING
30th October 2023
1. ANIS J: This was an application by the petitioners where they sought
interim injunctive orders against the respondents. It was heard on 20 October
2023.
2. I reserved my decision thereafter to a date to be advised.
3. This is my ruling.
BACKGROUND
4. In brief, the proceeding is commenced under the provisions of the
Companies Act 1997 (CA). The petitioners claim that the first petitioner is a
director (first petitioner) and they both are shareholders of the eighth respondent
(the Company/Madang Timbers). They allege that the respondents have, by
their actions or conduct in regard to the management or affairs of the eighth
respondent, caused them to suffer oppression or prejudice and losses concerning
their interests in the Company. They primarily allege that the first petitioner
was removed as a director by the respondents unlawfully or in breach of s.134
of the CA on 30 December 2020. The also primarily allege that a decision of
the Board of Directors of the Company that was made thereafter on 22 August
2022, to issue 20,471,360 new ordinary shares to the first and seventh
respondents via a debt to equity conversion and all subsequent actions that
followed, were in breach of the provisions of the CA and should be declared
null and void.
5. The petitioners claim that at the material time (and to this day), the first to
the sixth defendants have operated and managed the Company without their
consent, approval and meaningful involvement and participation. The
petitioners claim that (i) as a direct result of the actions of the respondents after
30 December 2020 and (ii) their action to issue the new 20,471,360 ordinary
shares, their 49.34% collective ordinary shareholding in the Company has been
reduced or diluted to less than 1% percent each.
6. The petitioners claim, amongst others, as oppressed or prejudiced
shareholders under Division 4, Part IX of the CA. They claim that the actions
of the respondents breached various provisions of the CA including ss 44, 47,
134, 164 and 166. And the relief they seek in the Petition include:
“(a) A Declaration that the decision of the Board of Directors of the
Company dated 22 August 2022 to issue 20,471,360 new ordinary
shares to the First and Seventh Respondents via a debt to equity
conversion and all consequential actions taken as a result and in
furtherance of the decision are in breach of the Companies Act 1997
and the law and is therefore null and void.
(b) A declaration that the decision of the shareholders at the AGM to
remove the First Petitioner as a director of the Company is in breach
of the law and is therefore null and void.
(c) An order pursuant to Section 152(a) of the Companies Act
requiring the First Respondent to acquire the Petitioners’ 383,320
ordinary shares previously representing 49.34% of the ordinary
shares in the Eight Respondent and all the Class B preference shares
held by the First Petitioner at a fair market value after accounting for
any diminution in the Eight Respondent’s value arising from the
related party transactions.
(d) Alternative to order (c) above, an order pursuant to Section 152(2)
(g) of the Companies Act 1997 for the Company to be put into
liquidation and all necessary orders be made to facilitate the
appointment of a liquidator pursuant to Section 291 of the Companies
Act 1997.
(e) That an investigative or forensic audit be undertaken on the
Related Party Transactions entered into between the Company and
the First Respondent, the Seventh Respondent and or parties related
to the First Respondent.
......”
7. The respondents have filed their evidence and strenuously deny the
allegations raised in the petition. They claim that their actions at the material
times were not in breach of the CA but was in accordance with it. They also
allege that they had been fair to the respondents, particularly to the first
respondent but that it was his own doing that had put him or them generally in
the positions that they are at presently with the Company. They deny that their
actions amounted to or would amount to acts of oppression as alleged by the
petitioners in the petition.
MOTION
8. The petitioners’ notice of motion (NoM) is made, (i). pursuant to s.155(4)
and 166 of the Constitution, (ii), Order 12 Rule 1 of the National Court Rules
(NCR), and s.142 of the CA. These sources are not contested so I will proceed
on these premise, and in so doing, consider whether I should grant or refuse the
interim injunctive relief that are being sought.
9. The main relief sought in the NoM are as follows:
“1.....
(a) Tiong Sii Huang, Kwong Toh Ling, Kwong Leong Ling, Siew Hui
Ling, Henry Huat Hui Huang, How Yieng Huong, Pacific Region
Development Ltd and Madang Timbers Limited and their servants,
agents, officers and employees and others be restrained from acting
upon,
(i) the Ordinary Resolution dated 30 December 2020 to remove the
First Petitioner as a director of Madang Timbers Limited (the
Ordinary Resolution); and
(ii) the decision of Tiong Sii Huang, Kwong Toh Ling, Kwong
Leong Ling, Siew Hui Ling, Henry Huat Hui Huang and How
Yieng Huong constituting the Board of Directors of Madang
Timbers Limited dated 22 August 2022 to issue 20,471,360 new
ordinary shares to Tiong Sii Huang and Pacific Region
Development Ltd via a debt to equity conversion (the Decision);
pending the determination of the substantive issues in these
proceedings;
(b) Tiong Sii Huang, Kwong Toh Ling, Kwong Leong Ling, Siew Hui
Ling, Henry Huat Hui Huang, How Yieng Huong, Pacific Region
Development Ltd and Madang Timbers Limited and their servants,
agents, officers and employees and others be restrained from taking
any or all consequential actions as a result and or in furtherance of
the Decision, pending the determination of the substantive issues in
these proceedings, including:
(i) distributions to shareholders such as payments of dividends;
(ii) recognizing any action taken on the Decision or the
Ordinary Resolution such as calling for meetings of shareholders
and or directors without the involvement of the First Petitioner
and or the Petitioners, as the case may be;
(iii) passing of ordinary resolutions;
(iv) passing of special resolutions;
(v) passing of shareholders resolutions in lieu of meetings; and
or
(vi) passing of directors’ resolutions without the involvement of
the First Petitioner.
2. Costs be in the cause.
3. Pursuant to Sections 155(4) and 166 of the Constitution and Order 12
Rule 1 of the National Court Rules, such other Orders the Court deems
fit.
4. Pursuant to Order 1 Rule 15 of the National Court Rules, an order that
the time for entry of these Orders be abridged to the time of settlement
by the Registrar, which shall take place forthwith.
......”
LAW
10. The requirements for granting interim injunction are settled in this
jurisdiction. But it must be noted at the outset that the Court’s power to grant or
refuse such an application is discretionary. The Court is not absolutely required
to be bound by any single criteria that is stated in the case law. However,
application of the Court’s discretion must be premised on good or sound
judgment, that is, it must follow the law and the facts and circumstances of the
case, otherwise, such exercise of discretion may be easily set aside or over-
turned on appeal or review by an aggrieved party.
11. The case authorities include Employees Federation of PNG v. PNG
Waterside Workers Union (1982) N392, Golobadana No 35 Ltd v. Bank South
Pacific Ltd (2002) N2309, and Collector of Taxes v. Bougainville Copper Ltd
(2007) SC853. The main criteria are:
• Are there serious questions to be tried?
• Has the Plaintiff given an undertaking as to damages?
• Whether damages would be an adequate remedy?
• Does the balance of convenience favour the granting of the interim
orders?
CONSIDERATION
12. I note the submissions of the parties. I also refer to the various affidavits
that have been relied upon by the parties to either support or oppose the NoM.
13. As a start, I note that the petitioners have filed a joint Undertaking as to
Damages on 19 December 2022. This appears to meet the second criteria which
I find to be the case.
14. Moving on, I ask myself whether there is an arguable case. When I refer
to the petition, I note 2 main events or actions that have triggered or aggrieved
the petitioners causing them to file the petition to assert their purported rights
under the provisions of the CA. The 2 events are (i), the purported termination
of the first petitioner as a director of the Company on 30 December 2020, and
(ii), the purported actions taken by the board of directors of the Company after
the removal of the first petitioner as a director, in particularly, their decision that
was made on 24 August 2022 to issue 20,686,040 new ordinary shares onto the
then existing 777,000 ordinary shares of the Company to facilitate its debt to
equity conversion.
15. Let me consider the first event. Evidence that is adduced by both parties
do not dispute (i) the Annual General Meeting (AMG) of 30 December 2020,
(ii) the documents that were produced for the listed agendas for the said AGM,
and (iii), the fact that the first petitioner was purportedly removed as a director
of the Company in the said AGM. The petitioners, however, contend that the
removal of the first petitioner was unlawful because it breached s.134 of the
CA. The respondents deny this claim. Annexure P to the first petitioner’s
affidavit filed 19 December 2022 contains a copy of the notice of the AGM
which is dated 16 December 2020, and it reads “NOTICE OF ANNUAL
GENERAL MEETING”. It is not disputed that the Company shortly after or
subsequently issued a second notice which is also attached as part of Annexure
P, and it reads, “ADDITIONAL AGENDA FOR ANNUAL GENERAL
MEETING” and it is dated 22 December 2020.
16. It is stated that Madang Timbers does not have a constitution, thus I note
that its affairs or operations are governed by the provisions of the CA. Section
134, which appears relevant for this purpose, reads:
134. REMOVAL OF DIRECTORS.
(1) Subject to the constitution of the company, a director of a company may
be removed from office by ordinary resolution passed at a meeting called for
the purpose or for purposes that include the removal of the director.
(2) The notice of a meeting referred to in Subsection (1) shall state that the
purpose or a purpose of the meeting is the removal of the director.
17. When I consider and compare the 2 notices under Annexure P to s.134 of
the CA, I note that it is arguable whether the notices are issued in compliance
with the requirements of the said provision. For example, sub-section 2 states
in mandatory terms that the notice of a meeting... shall state that the purpose or
a purpose of the meeting is the removal of the director, and it appears or is
arguable whether the 2 notices complied with this mandatory requirement; or
whether to include ‘an intention to terminate a director’ not as a separate agenda
but under any other business agenda of the AGM may be regarded as compliant
with s.134; or whether to state in the notice or supplementary notice of the
AGM that ‘it may be possible that the issue of removal of the first petitioner
may be raised and considered’, is compliant with s.134; or whether the removal
of the first petitioner ought to have been expressly stated as the main or one of
the main agendas in the shareholders meeting.
18. Consequently, I find that the first event alleged has merit.
19. In regard to the second event as alleged, firstly, if it is found at trial that
the first petitioner was unlawfully removed as a director, that may affect the
actions that have been taken by the Company or by the Board of Directors
thereafter or as of 31 December 2020 and onwards. That would include the
Company’s decision on debt to equity conversion and alleged failure to adhere
with the various requests that have been made by the first petitioner to the
Company including the financial audit reports and the solvency status of the
Company. The findings by this Court that there is an arguable case would give
weight or merit to the other claim by the petitioners that they may have also
been unfairly oppressed as alleged in the petition.
20. In summary, I find the claims raised in the petition to be meritorious; that
there is an arguable case.
21. Will damages be an adequate remedy? When I consider the evidence and
the allegations raised in the petition, I make the following observations. First,
the petitioners are suspicious of the true financial status of the Company. They
appear to claim that the Company may be in serious debt which may not be
truly reflected in its various audit reports. This is supported with their various
requests and their interactions with the respondents which are adduced in
evidence that are before me. I note that the respondents have also provided
their responses to the allegations raised by the petitioners in their evidence.
They deny these claims. Secondly, I take into account the fact that the
petitioners are also seeking as an alternative relief (i.e., relief (d) in the petition)
that the Company should be put into liquidation pursuant to s.152(2)(g) of the
CA. And thirdly, I take into account my finding of an arguable case.
22. What I must say is that this is not a trial, and so I am not going to
consider the arguments in detail or make definite findings on them now.
However, what I can say is this. In regard to damages being an adequate
remedy, I am not convinced that may be the case for the present matter. Let me
elaborate on it this way. On its face value, one may argue that damages may be
an adequate remedy in the present case. But even if I am minded to agree, the
next consideration would be that if the interim injunction is refused, whether the
respondents would be able to pay damages to or adequately recompense the
petitioners in the event the Court finds in their favour?
23. Given the uncertainty that now may exist on the financial status or
capacity of the Company, which also appears to be challenged, it seems to me
that the just and fair thing to do at this juncture for the sake and interest of all
the parties concerned, is that I should grant interim orders to preserve the status
quo of the Company, that is, until the final determination of the petition.
24. The status quo of the Company is that the first petitioner has been
removed as a director, however, he is now challenging that by this proceeding.
Secondly, because of the debt to equity conversion, the ordinary shareholdings
of the petitioners appear to have been significantly reduced from about 49%
ownership interest in the Company to less than 1% each; it is obvious that the
actions of the respondents after the removal of the first petitioner as a director
has caused the petitioners to significantly lose out on the percentage ownerships
or interests in the Company. Whether that is proper or not would be a matter for
trial. But the facts at this juncture show that the reduction of the propriety rights
or interests in the value of the ordinary shares of the petitioners do not appear to
be denied by the respondents. For illustrative purpose, I will restate herein the 2
tables that allegedly shows the ownership of shares in the Company by the
petitioners and the respondents, before and after the debt to equity conversion
which is pleaded at paras 87 and 88 in the petition:
87. Up until 23 August 2022, the shareholders and shareholding in Madang
were as follows:
N a m e o f S h a r e No. of Ordinary N o . of No. of Class B
holders Shares P re f e re n c e Preference
Shares Shares
1. First Petitioner 191,660 (24.67%) - 539,783
2. Second Petitioner 191,660 (24.67%) -
3. First Respondent 191,660 (24.66%) -
4. Lismore - - 5,112,914
5. Pacific Timber - - 1,061,717
6. Rayley - - 7,949,693
7.Seventh Respondent 202,020 (26%) 33,199 -
TOTAL 777,000 33,199 14,664,107
88. After 23 August 2022, and arising from the unlawful share dilution
exercise undertaken by the Respondents, the shareholders and shareholding
of the Company are as follows: -
N a m e o f S h a r e No. of Ordinary N o . of No. of Class B
holders Shares P re f e re n c e Preference
Shares Shares
1. First Petitioner 191,660 (0.9%) - 539,783
2. Second Petitioner 191,660 (0.9%) -
3. First Respondent 10,157,980 -
(47.81%)
4. Lismore - 5,112,914
5. Pacific Timber - 1,061,717
6. Rayley - 7,949,693
7. Seventh Respondent 1 0 , 7 0 7 , 0 6 0 33,199 -
(50.39%)
TOTAL 21,248,360 33,199 14,664,107
25. Therefore, if the respondents are allowed to continue to operate, it is
possible they will continue to run or operate the Company as they please to the
exclusion of the petitioners given the present status quo of the Company. There
is therefore a real threat or possibility of the respondents taking further steps in
the Company that may be detrimental to the interests of the petitioners on the
matters that are being challenged.
26. The steps taken may also cause irreparable damage and prejudice to the
petitioners. See case: Robinson v. National Airlines Commission [1983]
PNGLR 476.
27. I therefore find that damages may not be an adequate remedy if I am
minded not to grant the interim orders that are being sought.
28. I also find that the balance of convenience and interest of justice favour
the granting of the interim orders, that is, premised on my above considerations
and findings.
SUMMARY
29. In summary, I am minded to grant the NoM and the interim injunctive
relief that are sought.
COST
30. An order for cost with this type of application is discretionary. The
petitioners have sought in their NoM that costs should be ordered in the cause.
I am minded to and will order the cost of the NoM in that manner.
ORDERS OF THE COURT
31. I make the following orders:
1. Pursuant to Section 155(4) and 166 of the Constitution, Order 12 Rule 1
of the National Court Rules, and Section 142 of the Companies Act 1997,
orders that:
(a) Tiong Sii Huang, Kwong Toh Ling, Kwong Leong Ling, Siew Hui
Ling, Henry Huat Hui Huang, How Yieng Huong, Pacific Region
Development Ltd and Madang Timbers Limited and their servants,
agents, officers and employees and others be restrained from acting
upon,
(i) the Ordinary Resolution dated 30 December 2020 to remove the
First Petitioner as a director of Madang Timbers Limited (the
Ordinary Resolution); and
(ii) the decision of Tiong Sii Huang, Kwong Toh Ling, Kwong
Leong Ling, Siew Hui Ling, Henry Huat Hui Huang and How
Yieng Huong constituting the Board of Directors of Madang
Timbers Limited dated 22 August 2022 to issue 20,471,360
new ordinary shares to Tiong Sii Huang and Pacific Region
Development Ltd via a debt to equity conversion (the
Decision);
pending the determination of the substantive issues in these
proceedings;
(b) Tiong Sii Huang, Kwong Toh Ling, Kwong Leong Ling, Siew Hui
Ling, Henry Huat Hui Huang, How Yieng Huong, Pacific Region
Development Ltd and Madang Timbers Limited and their servants,
agents, officers and employees and others are restrained from taking
any or all consequential actions as a result and or in furtherance of the
Decision, pending the determination of the substantive issues in these
proceedings, including:
(i) distributions to shareholders such as payments of dividends;
(ii) recognizing any action taken on the Decision or the Ordinary
Resolution such as calling for meetings of shareholders and or
directors without the involvement of the First Petitioner and or
the Petitioners, as the case may be;
(iii) passing of ordinary resolutions;
(iv) passing of special resolutions;
(v) passing of shareholders resolutions in lieu of meetings; and
or
(vi) passing of directors’ resolutions without the involvement of
the First Petitioner.
2. Costs of the application shall be in the cause.
3. Time for entry of these orders is abridged to the date and time of
settlement by the Deputy Registrar of the National Court which shall take
place forthwith.
The Court orders accordingly
_______________________________________________________________
Corrs Chambers Westgarth: Lawyers for the Petitioners
Dentons PNG: Lawyers for the Respondents
