Oil Search Ltd v Tongayu [2021] PGNC 22; N8785 was decided by Anis J in the National Court on 29 March 2021. It is not a unit trust case, but every approval and licence a unit trust depends on is an act of the Securities Commission, and this case shows what happens when nobody is sure who speaks for it.
Background
Oil Search, listed on PNGX and in Australia, set out in 2020 to raise up to AUD 1.6 billion through an offshore institutional offer and an offer to its PNG shareholders. The offshore offer needed the Commission’s approval under section 116 of the Capital Market Act 2015, the PNG offer approval under section 129, and both needed exemptions from section 138, which treats a document offering newly issued securities for resale as a prospectus. Letters and exemptions 001-2020 (31 March 2020) and 002-2020 (16 April 2020) were signed by Christopher Hnanguie as Chairman.
Alex Tongayu, claiming to be Acting Chairman, said he had granted nothing. On 2 June 2020 he ordered PNGX to suspend trading in Oil Search shares, and it did. Oil Search sued on 4 June 2020 and obtained an ex parte injunction lifting the suspension the next day. PNGX stayed neutral but asked for certainty about the chairmanship.
The chairmanship had been contested since 2016. Mr Tongayu, Acting Chairman from 2012, was removed in October 2016 and won judicial review of that removal in April 2018. Meanwhile Mr Hnanguie had become Chairman in July 2017; on 17 April 2018 he was removed and Mr Tongayu appointed. Mr Hnanguie sought judicial review (OS (JR) 277 of 2018) and on 12 July 2018 the National Court stayed his removal and Mr Tongayu’s appointment pending the review. Despite that order, on 13 November 2018 Mr Tongayu was gazetted (G741) as Acting Chairman. At trial, that review and the stay were still on foot.
The issues
- Should Oil Search have appealed under section 21(5) of the Capital Market Act instead of suing?
- Did section 115 of the Securities Commission Act 2015 bar the proceeding?
- Who was Chairman when the approvals were granted?
What the Court decided
On competency, Oil Search was not “aggrieved” by a Commission decision; it sought confirmation of decisions already made. In any case “appeal” in section 21(5) was used generally and “may” left other modes open, including judicial review (para 11).
Section 115 bars civil or criminal proceedings against the Commission, its Chairman, Commissioners or staff for anything done in their functions unless bad faith is shown. The judge held that it is a restriction on liability, not a time bar: bad faith must be pleaded to sue for damages, but declaratory relief about the Commission’s own decisions is not such a claim (para 14).
“The said gazettal and purported appointment of the 1st Defendant as the Acting Chairman on 13 November 2018 was baseless and wrong on the face of it as there was no vacancy to the post of Chairman of the Commission at the material time.” … “The 2nd defendant, pursuant to the Stay Order of 12 July, remains Chairman of the Commission until further orders or until the substantive judicial review application is heard and disposed of.”
A stay preserves the status quo before the decision under challenge (Ekri v Courts (PNG) Ltd (2019) SC1825), so Mr Hnanguie remained Chairman. The Act then in force allowed only the Chairman to appoint someone to act in his absence (old section 9(3)), so an acting appointment by anyone else had no legal basis and appeared to defy a court order (paras 38–39). Even on Mr Tongayu’s own case, Mr Hnanguie’s acts as Chairman remained authorised (para 36). The approvals and exemptions were valid (para 35).
The orders: declarations that the approvals and exemptions of 31 March and 16 April 2020 were valid; a permanent injunction restraining Mr Tongayu from publishing any assertion that they were not; an injunction that PNGX keep operating its market for Oil Search; and costs against Mr Tongayu and the Commission.
Why it matters for unit holders and trustees today
- Everything rests on a valid Commission. A unit trust’s deed must be approved and registered (section 208), its trustee licensed (section 37) and its units listed only with approval (section 116(1)(b)). N8785 shows courts will uphold approvals given by the officer a court order recognises, and will not let a rival officer unwind them.
- The 2023 amendment answers the problem. The Securities Commission (Amendment) Act 2023 replaced Part II. The Commission is now a body corporate governed by a Board of seven (sections 4, 9–11) appointed for up to four years (section 12). The Chairman is appointed by the Minister from three Board nominees for up to three years (section 13), five members form a quorum (section 20), and a Chief Executive Officer runs the Commission day to day (sections 27–28). The single all-powerful Chairman of old section 10(2) no longer exists. See how the Commission is governed.
- Challenging decisions. Under the amended Act a person aggrieved applies to the Board for review within 30 days (section 111) and may then appeal to the National Court on a question of law (section 114(2)). Licensing decisions go straight to the National Court under section 56 of the Capital Market Act, strictly applied in the 2023 revocation case. Section 115, now headed “Protection of members”, still shields Board members, the CEO and officers acting in good faith. See challenging a Commission decision.
Before relying on an approval, registration or licence, confirm that it was issued by the Commission under its current governance, and keep the signed instrument.
Sources
- Oil Search Ltd v Tongayu [2021] PGNC 22; N8785 (Anis J, 29 March 2021)
- Capital Market Act 2015 — ss 21(5), 37, 56, 116, 129, 138, 208
- Securities Commission Act 2015 — ss 9–13, 20, 27–28, 111, 114, 115 (as amended)
- Securities Commission (Amendment) Act 2023
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.