Woodbank Pacific Limited v National Forest Board & Innovest Limited (2019)
Dispute over which of two Logging and Marketing Agreements signed with two different companies was lawful and valid.
Logging companies mentioned in this document:
SC2177
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA NO. 110 OF 2019
WOODBANK PACIFIC LIMITED
First Appellant
JEFFREY LING
Second Appellant
-V-
ADOLF PAROPET, LEO BARIS, LUCAS IRUM, JACK KOKON, TITUS
SEKARI, EDDIE WAKET, BENNY DAMUGU, JOHN KALUK and
COLLIN MUAM in their capacity as registered directors of Papir Holdings
Limited
First Respondents
PAPIR HOLDINGS LIMITED
Second Respondent
HARRIET KOKIVA. Acting Registrar of Companies
Third Respondent
MARTIN DARO FRANK MOTEKOPU, ROBERT SUKU, ALBERT
WAKET, MARCELLUS WARAWI, KENNEDY KOWER, PIUS SEKARI,
RAYMOND SUMAPER, STEVEN NAROP and ANTON WAKOWAK as
purported directors of Papir Holdings Limited
Fourth Respondents
YOUNG WADAU
Fifth Respondent
SCA NO. 111 OF 2019
WOODBANK PACIFIC LIMITED
First Appellant
-V-
ADOLF PAROPET, LUCAS IRUM, JACK KOKON
First Respondents
INNOVEST LIMITED
Second Respondent
TINOU SABUIN, Managing Director, PNG Forest Authority
Third Respondent
PIA K DOMETA
Fourth Respondent
ALBERT WAKET, Chairman of Papir Holdings Limited
Fifth Respondent
SCA NO. 138 OF 2019
ALBERT WAKET in his capacity as Chairman of Papir Holdings Limited
Appellant
-V-
ADOLF PAROPET, LUCAS IRUM, JACK KOKON
First Respondents
INNOVEST LIMITED
Second Respondent
TINOU SABUIN, Managing Director, PNG Forest Authority
Third Respondent
PIA K DOMETA
Fourth Respondent
ALBERT WAKET, Chairman of Papir Holdings Limited
Fifth Respondent
Waigani: Makail J, Kariko J & Anis J
2021: 28th September & 17th November
JUDGMENTS– Duty to give reasons for decision – Reasons must be
sufficient – Failure to provide sufficient reasons – Effect of – Breach of natural justice COMPANY LAW – Management of company – Authority to enter into contracts Facts: These appeals are from two related proceedings that were heard together in the National Court concerning the timber project described as Kumil Consolidated TRP 12-22 in the Bogia District of Madang Province. A resource owners (landowners) company Papir Holdings Limited was incorporated with the assistance of developer Woodbank Pacific Limited. The board of directors subsequently approved Woodbank Pacific Limited as developer for the timber project and the parties entered into a Logging and Marketing Agreement (LMA). Only seven of the ten directors attended the meeting and signed the LMA. The directors who did not attend had formed a faction that aligned themselves with another developer, Innovest Limited. A purported shareholders meeting was then held which terminated and replaced six of the directors. Under the newly constituted board, the LMA with Woodbank Pacific Limited was declared void by the District Court, following which a new LMA was entered into with Innovest Limited. Yet another shareholders meeting was held which again changed membership of the board, re-instating the six directors who were earlier removed. The trial in the National Court centered on the questions of who the lawfully appointed directors of the company are and which LMA is valid and lawful. The trial Judge held in favour of the directors appointed on incorporation of the company but decided the LMA with Woodbank Pacific Limited is void while the LMA with Innovest Limited is valid and lawful. The appellants challenge the decision regarding the LMAs alleging (a) breach of natural justice, (b) inconsistency in the findings, and (c) fraud was wrongly considered when it was not properly pleaded and proven. Held: 1. There was a breach of natural justice by the trial Judge failing to give adequate and sufficient reasons in his decision to enable the case to be laid properly and sufficiently before this Court. 2. Appeals are allowed. 3. Pursuant to Section 16(c) of the Supreme Court Act, the appealed decisions are set aside and in lieu, the LMA with Woodbank Pacific Limited is declared valid and lawful, and the LMA with Innovest Limited is declared void and of no effect.
Cases Cited:
Coconut Products Ltd v Markham Farming Company Ltd (2018) SC1717
Mission Asiki v Manasupe Zurenoc & Ors (2005) SC797
Sir Arnold Amet v Peter Charles Yama & Electoral Commission (2010) SC1064
South Pacific Post Ltd v Tame (2020) SC2042
Legislation:
Companies Act 1997
Supreme Court Act, Ch.37
Counsel:
Mr R Bradshaw, for the First Appellant
Mr J Wohuinangu, for the Second Appellant
Mr R Mannrai, for the First Respondent
Mr A Mana, for the Second Respondent
17th November, 2021
1. BY THE COURT: The three appeals arise from decisions in two related
proceedings heard together in the National Court:
• OS No. 780 of 2018: Woodbank Pacific Limited & Jeffrey Ling v Adolf
Paropet, Leo Baris, Lucas Irum, Jack Kokon, Titus Sekari, Eddie Waket,
Benny Damugu, John Kaluk and Collin Muam in their capacity as
registered directors of Papir Holdings Limited & Others
• OS No. 15 of 2019: Albert Waket as Chairman of Papir Holdings Limited
Papir Holdings Limited & Woodbank Pacific Limited v Adolf Paropet,
Leo Baris, Lucas Irum, Jack Kokon, Titus Sekari, Eddie Waket, Benny
Damugu, John Kaluk and Collin Muam in their capacity as registered
directors of Papir Holdings Limited & Others
2. To appreciate the appealed cases and the appeals, it is appropriate to set out
the relevant background facts which are largely not in controversy.
BACKGROUND 3. The court proceedings concern customary land designated for timber project and described as Kumil Consolidated TRP 12-22 in the Bogia District of Madang Province (“Kumil TRP”). 4. On 24th October 2017, the landowners (resource owners) of Kumil TRP entered into an agreement with Woodbank Pacific Limited (“Woodbank”) whereby the parties agreed that in return for Woodbank’s assistance to the resource owners to acquire a Timber Permit for the Kumil TRP, the resource owners would enter into a Logging and Marketing Agreement (“LMA”) with Woodbank if a Timber Permit was granted (“the Assistance Agreement”). 5. On 17th November 2017, a landowner company, Papir Holdings Limited (“Papir Holdings”) was incorporated. 6. The company was incorporated with ten (10) directors – Leo Baris, Albert Waket, Raymond Sumaper, Martin Daro, Pius Sekari, Robert Suku, Anton Wakowak, Adolph Paropet, Lucas Irum and Albert Purarum. Five of them were signatories to the Preliminary Agreement - Adolph Paropet, Albert Waket, Robert Suku, Anton Wakowak and Lucas Irum. 7. Soon after the incorporation, a faction of the directors led by Adolph Paropet (“the Paropet Faction”) emerged which basically wanted to engage a developer other than Woodbank to operate on Kumil TRP. The faction included Adolph Paropet and Lucas Irum who were signatories to the Assistance Agreement. 8. Over the next month, the Parapet Faction sought to have a timber permit extension granted to the company Papir Development Corporation Limited (“Papir Development”) the landowner company which was previously granted a permit in respect of the Kumil TRP that expired in 2005. The effort to obtain the extension was sought with the assistance of another timber project developer Innovest Limited (“Innovest”). 9. Notwithstanding the pursuit of the Paropet Faction, Papir Holdings was granted Timber Permit No. TP 12-22 for Kumil TRP (“TP 12-22”) on 5th December 2017. 10. On 10th December 2017, a directors meeting of Papir Holdings was held. The Parapet Faction directors did not attend, and this was noted in the meeting
minutes. The directors who were present were Albert Waket, Raymond
Sumaper, Martin Daro, Pius Sekari, Robert Suku, Anton Wakowak and Albert
Purarum (“the Waket Faction”). The meeting resolved that Papir Holdings enter
into a LMA with Woodbank, consistent with the Assistance Agreement.
11. The LMA was consequently executed the next day on 11th December
2017, and Woodbank was endorsed as the contractor/developer to undertake
logging and marketing activities pursuant to TP 12-22 (“the Woodbank LMA”).
12. The Woodbank LMA was duly executed under seal by the same seven
directors of Papir Holdings who attended the directors meeting the previous day.
13. The National Forest Board advised Woodbank by letter dated 15th
December 2017 that its application for a licence to operate within the Kumil
TRP was found to be in order, and on 21st December 2017 Woodbank was
granted Timber Licence No. PNGAFL-877/17.
14. After the signing of the Woodbank LMA, changes were later made to the
directorships of Papir Holdings:
(1) 20th December 2017 – at a purported meeting of landowners and
shareholders, six directors of the Waket Faction who were aligned
with Woodbank, namely Albert Waket, Martin Daro, Pius Sekari,
Robert Suku, Anton Wakowak and Albert Purarum, were terminated
and replaced by others.
(2) 22nd December 2017 – Four directors, including Adolf Paropet and
Luke Irum submitted letters of withdrawal (resignation) as directors
but these were retracted later the same day.
15. By March 2018, the records at the Companies Office showed Papir
Holdings had eleven (11) directors, of whom four were original directors - Leo
Baris, Raymond Sumaper, Adolph Paropet and Lucas Irum.
16. On 1st March 2018, a directors meeting was held in which the Board
resolved to have the Woodbank LMA declared invalid and the company to then
seek to enter into a LMA with Innovest.
17. Adolf Paropet filed proceedings in the District Court which, among other
things, sought to have the Woodbank LMA declared null and void. The court
ordered in his favour on 25th May 2018. This order was subsequently and
eventually set aside on 20th September 2018 and the proceedings dismissed on
19th December 2018 for want of jurisdiction.
18. Based on the District Court decision of 25th May 2018, the National Forest
Board cancelled Woodbank’s Timber Licence No. PNGAFL-877/17.
19. On 27th May 2018, a LMA was signed between Papir Holdings and
Innovest which was apparently signed on behalf of Papir Holdings by Adolf
Paropet as Chairman and witnessed by Jack Kokon as Director/Secretary.
20. This turn of events naturally displeased the Waket Faction who disputed
the legality of the registered directors.
21. A shareholders meeting of Papir Holdings was called and held on 24th
August 2018 whereby the initial directors who were aligned with the Parapet
Faction (Adolph Paropet, Leo Baris, and Lucas Irum) were terminated and the
remaining initial directors removed on 20th December 2017 were re-appointed.
22. The changes in the directorships were registered on 31st August 2018.
NATIONAL COURT PROCEEDINGS
23. On 23rd October 2018, OS No. 780 of 2018 was filed which sought
amongst others:
(1) a declaration that the changes to directors of Papir Holdings on
24th August 2018 are void and of no effect;
(2) a declaration that the Woodbank LMA is void and of no effect; and
(3) a declaration that the Innovest LMA is valid and lawful.
24. On 16th January 2019, OS No. 15 of 2019 was filed which sought amongst
others:
(1) a declaration that the changes to the directorships of Papir
Holdings on 20th December 2017 are unlawful and invalid;
(2) a declaration that the changes to the directorships of Papir
Holdings on 31st August 2018 are lawful and valid; and
(3) a declaration that the Woodbank LMA is lawful and valid.
APPEALED DECISION
25. The parties in the National Court may be conveniently categorized into
four groups – the Paropet Faction and Innovest as the plaintiffs, and the Waket
Faction and Woodbank as the defendants.
26. A total of forty-two (42) affidavits were tendered into evidence without
objection and without requiring the deponents for cross-examination.
27. The trial Judge delivered his oral judgment soon after the completion of
final submissions. His Honour approached his judgement by referring to each
relief sought and stating whether the relief was granted or refused and the
reasons for that.
28. In OS No. 780 of 2018, the trial Judge determined first that the proper
directors of Papir Holdings were the directors registered on the incorporation of
the company on 17th November 2017. His Honour held that all the changes in
the directorships since that date are invalid and of no effect. This finding was
applied in his Honour’s decision in OS No.15 of 2019.
29. In respect of the Woodbank LMA, the trial Judge stated (AB:1258-1259):
Paragraph 4 of the OS 780 of 18 seeks the declaration that the purported
Logging and Marketing Agreement dated 11th December 2017 between
Papir Holdings Limited and Woodbank Pacific Limited over the Kumul
TRP in Madang Province is void and of no effect. I will grant that
declaration..... However, I have formed the view that the declaration
should be made that the LMA dated 11th December 2017 is void and of no
effect taking into account all of the evidence that is before the court, taking
into account the persons who actually signed that agreement for Papir
Holdings Limited.....
It was not signed to my satisfaction by the persons who were clearly acting
with the authority of the company to sign such a critical document on
behalf of the company at that time in December 2017.....I have formed the
view that irrespective of that formation of opinion by the Managing
Director, there are good reasons for regarding that LMA now as a result of
these proceedings as void and of no effect.
(Our emphasis)
30. Regarding the Innovest LMA, his Honour remarked (AB:1259):
Paragraph 6 seeks a declaration that the Logging and Marketing
Agreement dated 27th May 18 between Papir Holdings Limited and
Innovest Limited over the Kumul TRP in Madang Province is valid and
lawful. I will grant that declaration as I am satisfied that the LMA was
executed on behalf of Papir Holdings Limited by persons who on the
relevant date had full legal authority to execute that agreement on behalf
of the company..... it is also clear that the Forest Authority’s position
favours that of the LMA between Innovest and Papir Holdings Limited and
it would serve the interests of all the people concerned, in particular the
landowners.....in the interest of justice that that declaration be granted.
(Our emphasis)
31. In addressing the relief pleaded in OS No. 15 of 2019 concerning the
Woodbank LMA, the trial Judge said (AB:1262):
I have formed the view that the Logging and Marketing Agreement just
mentioned should be declared void and invalid by view of my ruling in OS
780 of 18.
.................................................
Paragraph 12 seeks a declaration that the original LMA between Papir
Holdings Limited and Woodbank Pacific Limited be declared valid and
lawful and binding. I decline to grant that declaration for the reasons
given in the other proceedings.
32. His Honour ultimately declared that the Woodbank LMA was void and of
no effect, and the Innovest LMA was valid and lawful.
THE APPEALS
33. Briefly described, the appeals are:
•SCA No. 110 of 2019 - filed by Woodbank against the decision in OS No.
780 of 2018.
•SCA No. 111 of 2019 – filed by Woodbank against the decision in OS
No. 15 of 2019.
•SCA No. 138 of 2019 – filed by Albert Waket as Chairman of Papir
Holdings against the decisions in both OS No. 780 of 2018 and OS
No. 15 of 2019.
34. The appeals do not challenge the trial Judges determination regarding the
proper directors of Papir Holdings but dispute the decision that the Innovest
LMA is lawful and valid, and the Woodbank LMA is not (“the appealed
decision”).
35. On the hearing of the appeals, the following parties appeared:
•Woodbank
•Albert Waket
•Adolf Paropet, Lucas Irum and Jack Kokon
•Innovest
36. For purposes of this judgement, we refer them as:
•Woodbank – first appellant
•Albert Waket – second appellant
•Adolf Paropet, Lucas Irum and Jack Kokon – first respondent
•Innovest – second respondent
37. We adopt the appellants’ suggestion that the grounds of appeal in all
appeals can be placed into 3 broad grounds – That the trial Judge erred in fact
and in law:
(1) by not allowing sufficient time for the appellants’ counsel to make
final submissions, and by not providing adequate reasons in relation
to the appealed decision, which amount to a breach of natural justice;
(2) in deciding that the Woodbank LMA was invalid, as this is
inconsistent with the decision that the proper directors of Papir
Holdings were the directors on the incorporation of the company; and
(3) by finding fraud as a basis to invalidate the Woodbank LMA when
fraud was neither properly pleaded nor proven.
BREACH OF NATURAL JUSTICE
38. The appellants first contended that the appealed Judge erred in fact and law
by not giving their counsel equal or sufficient time when presenting their final
addresses compared to the time allowed to opposing counsel.
39. Eventually, the point was not seriously pursued. The appellants attempted
to make their case by highlighting from the transcript, the actual time
apportioned to each counsel. We are unable to discern from the transcript the
unfairness suggested by the appellants that would amount to a denial of natural
justice. We therefore reject this argument.
40. The appellants next submitted that the trial Judge did not provide adequate
reasons for the appealed decision.
41. A trial Judge has a duty to provide reasons for his decision, and where no
reasons are given, it must be inferred that no good reasons exist for the
decision; Mission Asiki v Manasupe Zurenuoc & Ors (2005) SC797; Sir Arnold
Amet v Peter Charles Yama & Electoral Commission (2010) SC1064. The
reasons for decision must be sufficient to assist a party wishing to appeal the decision prepare his grounds of appeal, and for the respondent to defend them, and the parties must be able to identify issues borne out by the grounds: Coconut Products Ltd v Markham Farming Company Ltd (2018) SC1717. The decision shall provide adequate and sufficient reasons to enable the case to be laid properly and sufficiently before the appellate court. If the reasons are otherwise insufficient, it is assumed there are no good reasons, and the appeal would be upheld on that ground alone; South Pacific Post Ltd v Tame (2020) SC2042. 42. The trial Judge declared the Woodbank LMA null and void after “taking into account all of the evidence” and “the persons who actually signed that agreement for Papir Holdings Limited”. His Honour was not satisfied the agreement was signed “by the persons who were clearly acting with the authority of the company to sign such a critical document on behalf of the company”. His Honour added that “there are good reasons” for the declaration. 43. The trial Judge did not refer to or discuss the evidence he had regard to in reaching his decision. Nor did his Honour explain what the “good reasons” were. It appears though that his Honour’s decision was based primarily on a finding that the Woodbank LMA was not signed by authorized signatories. But his Honour did not explain the legal and factual basis upon which he made this determination. Counsel for the respondents argued that the relevant evidence which would have influenced his Honour is contained in the affidavits of Albert Pararua. That submission is however not reflected in the trial Judge’s decision and this Court cannot assume that to be the case especially when there was evidence that contrasted this witness’ depositions. 44. Next, the trial Judge determined the Innovest LMA valid and lawful because his Honour was “satisfied that the LMA was executed on behalf of Papir Holdings Limited by persons who on the relevant date had full legal authority to execute that agreement on behalf of the company”. Again, his Honour did not explain the legal and factual basis upon which he reached this conclusion. 45. Counsel urged this Court to note that Adolf Paropet as Chairman signed the LMA and it was therefore signed by the proper authorised person, but the trial Judge did not state that. The fact that the agreement was signed by the Chairman does not of itself mean the agreement was lawfully entered into. His Honour had already decided that the board then in office was not lawfully appointed, and there was no evidence that a directors meeting had been held to discuss the LMA and approved its execution, unlike what occurred in respect of the Woodbank LMA. His Honour did not explain how the signatories for Papir Holdings had “full legal authority”.
46. The nett effect is that we are not satisfied that the appealed decision gave
adequate and sufficient reasons to enable the case to be laid properly and
sufficiently before this Court.
47. In the circumstances, we find the ground of breach of natural justice is
established and conclude that his Honour erred in law in declaring that:
(1) the Woodbank LMA was void and of no effect; and
(2) the Innovest LMA was valid and lawful.
DISPOSITION OF THE APPEALS
48. Based on our determination in the preceding paragraph, we would uphold
the appeals without needing to consider the other grounds of appeal.
49. What orders would then be appropriate for this Court to make?
50. Under Section16 of the Supreme Court Act, Ch. 37 the Supreme Court has
power to deal with an appeal in several ways, including the power to give
judgment that should have been given in the National Court (Section 16(c)). We
think that is the proper course to adopt in the present appeals as the question to
settle is straight-forward. It concerns the validity of the two LMAs. That is an
issue which this Court can resolve. The evidence in the court below only
comprised filed affidavits which are before us. We also have the benefit of the
submissions in the National Court which were repeated before us. We are
satisfied we can properly consider these materials and duly answer the question.
VALIDITY OF THE LMAs
51. The evidence presented in the National Court included affidavits of the
following persons whose evidence we consider relevant to the issues raised in
this appeal:
•Adolph Paropet (2 affidavits – Exhibits P1 & P16)
•Albert Purarum (2 affidavits – Exhibits P2 & P18)
•Jack Kokon (2 affidavits – Exhibits P3 & P17)
•Leo Baris (2 affidavits – Exhibits P6 & P21)
•Luke Irum (2 affidavits – Exhibits P12 & P27)
•Albert Waket (2 affidavits – Exhibits D1 & D5)
•Pius Sekari (– Exhibit D2)
•David Ling (2 affidavits – Exhibits D8 & D10)
•Jeffery Ling (2 affidavits – Exhibits D9 & D11)
•Emous Toubu (3 affidavits – Exhibits D3, D6 & D7)
52. A summary of the evidence of the plaintiffs (now respondents) relating to
the two LMAs follows:
Witness Evidence
Adolf Paropet Any agreement or MOA signed between Papir Holdings
(Initial director & chairman and Woodbank between October and December 2017 were
of Papir Holdings) not binding.
Woodbank enticed directors Robert Suku, Anton Wakowak,
Raymond Sumaper, Pius Sekari and Albert Puraran to sign
the Wodbank LMA, which was signed on 26th December
2017 but falsely dated 11th December 2017. There was no
meeting or signing of documents on 10th or 11th December
2017.
On 20th December 2017, six of the initial directors of Papir
Holdings were terminated and replaced, and the change in
directorships was registered with the IPA on 4th January
2018.
A directors meeting was held on 1st March that resolved to
terminate the Woodbank LMA as illegal and invalid, and
pursue a LMA with Innovest instead.
The District Court nullified the Woodbank LMA on 25th
May 2018.
The Innovest LMA was signed on 27th May 2018.
Leo Baris He preferred Innovest as developer of the Kumil TRP.
(Initial director of Papir
Holdings)
Luke Irum He also supported Innovest as developer of the Kumil TRP.
(Initial director of Papir
Holdings)
Jack Kokon The Assistance Agreement of 24th October 2017 was not
(Secretary of Papir signed by the true resource owners.
Holdings)
Adolf Paropet was the Chairman of Papir Holdings, and he
did not sign the Woodbank LMA.
The Woodbank LMA was signed on 26th December 2017
and backdated to 11th December 2017.
Albert Purarum The directors of Papir Holdings were induced into signing
(Initial director of Papir the Woodbank LMA by being provided money and alcohol
Holdings, and a signatory to by Woodbank.
the Woodbank LMA)
The contents of the LMA were never explained to the
directors. They did not understand the agreement they
signed.
The Woodbank LMA was signed on 26th December 2017
and not 11th December 2017 as shown on the document.
53. A summary of the evidence of the defendants (the appellants now) relevant to the two
LMAs follows:
Albert Waket The resource owners signed the Assistance Agreement on
(Initial director & vice- 24th October 2017.
chairman of Papir Holdings)
Ten directors were appointed on the incorporation of Papir
Holdings on 17th November 2017 - Adolf Paropet, Albert
Waket, Luke Irum, Robert Suku, Anton Wakowak, Leo
Baris, Martin Daro, Albert Puraran, Pius Sekari and
Raymond Sumaper.
A directors meeting of Papir Holdings was held on 10th
December 2017 whereby the proposed LMA with
Woodbank was tabled and explained by officers of
Woodbank to the directors present at the meeting - Albert
Waket, Anton Wakowak, Martin Daro, Robert Suku, Albert
Puraran, Raymond Sumaper and Pius Sekari.
Adolf Paropet (Chairman) and Jack Kokon (Secretary) did
not attend the meeting as they had aligned themselves with
another contractor.
The meeting resolved that the company sign the LMA with
Woodbank, and this was done the next day.
The seven directors present at the previous day’s meeting
acknowledged they understood the agreement before they
signed under seal on behalf of Papir Holdings.
Pius Sekari (Similar evidence to that of Albert Waket)
(Initial director of Papir
Holdings) The claims of enticement to sign the Woodbank LMA and
the backdating of the agreement are not true.
David Ling The Assistance Agreement was signed after discussions
(Director of Woodbank) with resource owners of Kumil TRP. Signatories to the
agreement included Adolf Paropet, Albert Waket and Luke
Irum.
Pursuant to the Assistance Agreement, financial help was
provided Woodbank to the resource owners to incorporate
Papir Holdings and pursue a Timber Permit.
After its incorporation, Papir Holdings was issued Timber
Permit No. TP 12-22, the Woodbank LMA was entered into
pursuant to the intention of the Assistance Agreement.
The Woodbank LMA was signed on 11th December 2017
and not 26th December 2017 as claimed by Albert Pararum.
The allegations of inducement and coercion made by Albert
Pararum are also denied.
Jeffrey Ling (Similar evidence to that of David Ling)
(Manager of Woodbank)
Papir Holdings held a board meeting on 10th December
2017. Chairman Adolf Paropet did not attend, and Albert
Waket was nominated to act as Chairman. Seven directors
were present. The proposed LMA with Woodbank was
tabled and explained to the directors. After discussions, the
board resolved unanimously to sign the agreement.
The agreement was signed the next day, 11th December
2017.
Emous Toubu The Woodbank LMA was signed on 11th December 2017.
(Resources & Environment
Manger, Woodbank)
54. In brief, the appellants submitted that the Woodbank LMA was signed by a
majority of the directors who the National Court found to be the lawful
members of the board of Papir Holdings, while most of the directors of board at
the time of the execution of the Innovest LMA were unlawfully appointed.
Therefore, the earlier LMA was lawfully entered into, and the other was not.
The respondents argued first that the appealed decisions were based on findings
of fact for which leave had not been granted, and also that the trial Judge
committed no error in his reasons for decision as his Honour was entitled to
make the findings he did.
55. In relation to the respondents’ argument on leave, we dismiss it. The
ground involves not only questions of fact but also questions of law.
56. Moving onto the substantive issues, we stress that under Section 109(1) of
the Companies Act 1997, the business and affairs of a company shall be
managed and supervised by the board of directors. The shareholders cannot
interfere in the management of the company. Pursuant to Section 111(1) but
subject to the constitution, the board may delegate any of its powers to other
persons including certain directors.
57. The rules governing how a company may enter into a contract are found in
Section155 of the Companies Act which states:
155. Method of contracting.
(1) A contract or other enforceable obligation may be entered
into by a company as follows—
(a) an obligation which, if entered into by a natural
person, would, by law, be required to be by deed, may
be entered into on behalf of the company in writing
signed under the common seal of the company; or
(b) an obligation which, if entered into by a natural
person, is, by law, required to be in writing, may be
entered into on behalf of the company in writing by a
person acting under the company's express or implied
authority; or
(c) an obligation which, if entered into by a natural
person, is not, by law, required to be in writing, may be
entered into on behalf of the company in writing or
orally by a person acting under the company's express
or implied authority.
58. Clearly, Section 155(1(b) is relevant to both the Woodbank LMA and the
Innovest LMA.
59. The constitution of a company may provide for the persons authorised to
execute a contract on the company’s behalf. However, there is no evidence that
Papir Holdings had a constitution at the time. There is also no evidence that the
directors of the company were not authorised to enter into the LMAs. By the
same token, there is no evidence that the Chairman of Papir Holdings was the
only authorised person to execute contracts on behalf of the company.
Ordinarily, company directors are lawfully entitled to enter into contracts. Prima
facie then, both LMAs were lawfully entered into by Papir Holdings.
60. Schedule 4 of the Companies Act provides for proceedings of a board
meeting, and the Schedule applies where a company does not have a
constitution. Section 5(3) of Schedule 4 states that a board resolution is passed
when agreed to unanimously or by majority of the directors present.
61. The significant differences in the facts and circumstances relating to the
two LMAs are that:
(1) The Woodbank LMA was tabled at a board meeting and approved
for execution, but the Innovest LMA was not;
(2) the Woodbank LMA was signed by seven of the ten lawfully
appointed directors (as found by the learned trial Judge), while the
Innovest LMA was signed by only one of those directors;
(3) The Woodbank LMA was signed first in time, and it was based on
prior commitments made by both the resource owners of Kumil TRP
and Woodbank under the Assistance Agreement.
62. In submissions, the respondents argued that the evidence of Albert
Pararum, one of the directors who signed the Woodbank LMA, clearly shows
that the Woodbank LMA was irregular and tainted with fraud. The witness
claimed that:
(1) the directors who signed the Woodbank LMA did not have the
agreement explained to them before signing;
(2) the directors were induced with money and alcohol by Woodbank
to sign; and
(3) the agreement was signed on 26th December 2021 but pre-dated to
11th December 2021.
63. We have read the affidavits of witnesses who deposed to matters in respect
of the Woodbank LMA, and we find the claims by Albert Pararum to be
uncorroborated and not credible. The other witnesses who raise the same
allegations are Adolf Paropet and Jack Kokon. However, their evidence on this
matter is plainly hearsay as they merely repeat what was relayed to them by
Albert Pararum at the purported meeting of landowners and shareholders on
20th December 2017.
64. Interestingly Albert Pararum makes no reference to the board meeting of
10th December 2017, and we consider the suggestion that the signing was on
26th December 2017 incredible as that day is a traditional public holiday,
Boxing Day.
65. Importantly, none of the other directors who participated in the signing of
the Woodbank LMA support Albert Pararum’s assertions. Two of those
directors, Albert Waket and Pius Sekari, filed affidavits in which they state that
they were present at the board meeting of 10th December 2017 and were happy
for Papir Holdings to partner with Woodbank, and duly signed the LMA on 11th
December 2017. They both deny the improprieties alleged by Albert Pararum
and repeated by Adolf Paropet and Jack Kokon. Woodbank executives David
and Jeffrey Ling also vehemently refute the alleged improprieties, while Emous
Toubu confirms the LMA was signed on 11th December 2017.
66. Another notable point is that Adolf Paropet makes no reference to the
Assistance Agreement with Woodbank even though he signed it as Chairman of
proposed company Papir Holdings Limited.
67. Five signatories to the Assistance Agreement (Adolf Paropet, Albert
Waket, Luke Irum, Robert Suku and Anton Wakowak) were subsequently
appointed directors of Papir Holdings when it was incorporated.
68. It is clear to us that the execution of the Woodbank LMA was consistent
with the intentions of the parties expressed in the Assistance Agreement.
69. Further it is noted that Directors Leo Baris and Luke Irum who were a part
of the Paropet Faction did not make any reference to the board meeting of 10th
December 2017 or the signing of the Woodbank LMA.
70. We are satisfied on the balance of probabilities that the Woodbank LMA is
valid and lawful.
71. At the same time, we find the validity of the Innovest LMA to be
otherwise. There is no evidence that the then board of directors authorised the
signing of this agreement. The argument pushed by the respondents that the
signatories for Papir Holdings had the ostensible authority to execute the
Innovest LMA, is one that Innovest may pursue in a claim for damages which is
open to it.
72. Accordingly, we would uphold the appeals, quash the orders in respect of
the LMAs, and declare instead that the Woodbank LMA is valid and lawful and
the Innovest LMA is nullified.
ORDER
1. The appeals are allowed.
2. The declarations by the National Court on 19th July 2019 in
proceedings OS No. 780 of 2018 that:
(a) The Logging and Marketing Agreement signed on 11th
December 2017 between Papir Holdings Limited and Woodbank
Pacific Limited is void and of no effect; and
(b) The Logging and Marketing Agreement signed on 27th May
2018 between Papir Holdings Limited and Innovest Limited is
valid and lawful,
are set aside.
3. In lieu thereof, it be declared that:
(a) The Logging and Marketing Agreement signed on 11th
December 2017 between Papir Holdings Limited and Woodbank
Pacific Limited is valid and lawful.
(b) The Logging and Marketing Agreement signed on 27th May
2018 between Papir Holdings Limited and Innovest Limited is
void and of no effect.
4. The order of the National Court on 19th July 2019 in proceedings
OS No. 15 of 2019 refusing to declare that the Logging and
Marketing Agreement signed on 11th December 2017 between Papir
Holdings Limited and Woodbank Pacific Limited is valid and lawful,
is set aside.
5. In lieu thereof, it be declared that the Logging and Marketing
Agreement signed on 11th December 2017 between Papir Holdings
Limited and Woodbank Pacific Limited is valid and lawful:
6. The respondents shall pay the appellants’ costs of and incidental to
these appeals, to be taxed if not agreed.
________________________________________________________________
Bradshaw Lawyers: Lawyers for the First Appellant
Gileng Lawyers: Lawyers for the Second Appellant
Mannrai Lawyers: Lawyer for the First Respondent
Cors Chambers Westgarth: Lawyer for the Second Respondent
