Melanesian Trustee Services Ltd as Trustee for Pacific Balance Fund v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524 was decided by Anis J in the National Court on 18 October 2023. It is the first reported ruling on the appeal provision in section 56 of the Capital Market Act 2015.
Background
Melanesian Trustee Services Ltd (MTSL) had been trustee of the Pacific Balance Fund (PBF) since the trust deed of 22 October 2001, and latterly its fund manager as well. By a letter of 9 August 2023 the Commission revoked MTSL’s licence under section 48, alleging poor performance, weak governance, excessive fees of K180 million between 2010 and 2022, and a risk to the fund’s liquidity. The letter also appointed Weathermen Capital Advisors Ltd as interim trustee.
MTSL’s first appeal (CIA 2 of 2023) succeeded on 18 August 2023: the Court set aside both decisions, restored the licence, gave MTSL 30 days to respond and directed the Commission to decide afresh. MTSL answered on 14 September 2023, denying any wrongdoing.
On 25 September 2023 the Commission issued a second letter of revocation. It revoked the approvals “deemed to be a Capital Market License” under section 121(1) of the Securities Commission Act 2015 and section 37 of the Capital Market Act, effective immediately; appointed Weathermen as interim trustee under section 202 for three months; gazetted the revocation (G767); and directed MTSL to hand over PBF’s books, assets and bank accounts. MTSL was served the next day. It filed a second appeal (CIA 3 of 2023) and, on 28 September 2023, applied for a stay and an injunction, relying on section 56(3), Order 14 Rule 10 and Order 12 Rule 1 of the National Court Rules 1983, and the Laws Adoption and Adaptation Act.
The issues
- Does section 56(3) permit a stay, or only an interim restraining order sought before the decision is implemented?
- Can an appellant under section 56 draw on the National Court Rules or other sources of power for interim relief?
What the Court decided
Anis J read section 56(2) as giving the Court three options on appeal: confirm, set aside, or refer back to the Commission (para 11). Section 56(3) he read as mandatory.
“The only way where an aggrieved person may prevent the Commission from giving effect to its decision … is that the aggrieved person must seek and must obtain a Court Order to restrain the Commission before the Commission could give effect to its decision. In practical terms, the wording of the said provision makes it difficult for an aggrieved party to react.”
That reading matched section 48(10), which deems a revoked licensee unlicensed from the date the revocation takes effect, and section 49(2), which lets the Commission permit a revoked licensee to carry on only to close down (paras 12–13). Section 56(4) requires the Court to weigh the interests of investors and the public (para 14).
The stay application was therefore “fatally flawed and misconceived” (para 20). Section 56 appeals are a special category in which investors’ interests are paramount; the correct course is to seek interim injunctive relief before the decision is effected; the section permits no general or blanket stay; a stay and an injunction are conceptually different (Kalinoe v Paraka (2010) SC1024); and once the Court’s jurisdiction is invoked under section 56, the National Court Rules and the Adoption and Adaptation Act cannot be. Even treated as an application for a restraining order, it was obsolete: the decision had been implemented on 26 September 2023. Weathermen’s appointment, the judge added, “may pave way for the investors or the unit trust holders to be at liberty to make decisions concerning their business interests” (para 21). The application was dismissed with costs; the merits of the appeal were not decided.
Why it matters for unit holders and trustees today
- Act within hours, not days. A licensee has 14 days to appeal under section 56(1), but the decision bites at once (section 56(3)). A trustee expecting an adverse decision after a section 48(4) hearing should have its restraining-order application ready to file the moment the decision issues; afterwards the only relief is a final order setting the decision aside. See appealing a licensing decision.
- Section 56 is self-contained. It is the route for licensing decisions. Other Commission decisions go to Board review under section 111 of the Securities Commission Act within 30 days, then to the National Court on a question of law under section 114.
- The interim trustee. When a trustee’s office falls vacant the Commission may appoint an interim trustee within 12 hours (section 202); if it fails, a member may ask the Court (section 203). The interim trustee must call a members’ meeting within three months so that unit holders choose a new licensed trustee (section 204). The former trustee must hand over the books (section 205) and its rights and liabilities pass to the new trustee (section 206). See what an interim trustee is.
- Unit holders choose. Members with 10 percent of the votes or 100 members can require a meeting (section 214), and the trustee must give priority to members’ interests over its own (section 191).
The Commission’s findings about MTSL were allegations in a revocation letter, denied by the trustee and not adjudicated in this ruling. Check the outcome of CIA 3 of 2023 and the Commission’s current register before relying on the status of PBF or its trustee.
Sources
- Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524 (Anis J, 18 October 2023)
- Capital Market Act 2015 — ss 37, 48, 49, 56, 191, 202–206, 214
- Securities Commission Act 2015 — ss 111, 114 (as amended 2023), 121
- National Court Rules 1983 — O 12 r 1, O 14 r 10
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.