N3066

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS No. 1027 of 2005

BETWEEN

21 ILGS GOBE PROJECT AREA INC. LAND GROUPS as per the Ministerial Determination and attached as schedule "A" to this writ
Plaintiff

AND

MINERALS RESOURCES DEVELOPMENT COMPANY LIMITED
Second Defendant

AND

PETROLEUM RESOURCES GOBE LIMITED
Third Defendant

AND

BERNARD PAWIH, AS THE ACTING SECRETARY DEPARTMENT OF PETROLEUM AND ENERGY
Fourth Defendant/Contemnor

Waigani: Lay J.
2006: 29 May and 11 July

RULING ON APPLICATION TO HOLD THE FOURTH DEFENDANT IN CONTEMPT OF COURT ORDERS

PRACTICE AND PROCEDURE ─ contempt of court ─ National Court Rules 0.14 Div.6─O.12 r. 4 meaning ─ failure to stipulate a time for compliance with order in breach of O.12 r.4─ whether order ambiguous ─ whether order unenforceable ─ whether breach of order wilful.

Cases Cited:
Ross Bishop and others v Bishop Brothers Engineering and Pty. Ltd. [1998-89] PNGLR 533
Yap v Tan and B & T Engineering Pty. Ltd and Wong and Baptiste and Tau [1987] PNGLR 227
In Re Mileage Conference Group of the Tyre Manufacturers Conference Ltd.'s Agreement [1966] 1 WLR 1137 at 1162D-E
Gilbert v Endean (1878) 9 Ch D 259 and Carter v Roberts [1903] 2 Ch 312
Hitachi Sales (U.K.) v Mitsui Lines [1986] 2 Lloyd's Rep. 574 C.A.)

Counsel:
Peter Donigi, for the Plaintiffs
P. Korowi, for the Fourth Defendant

Facts:

The substantive action is for orders to prevent royalties being paid to the Second Defendant on the basis that there were serious anomalies with respect to the administration of its trust funds. The Plaintiffs brought proceedings against the Fourth Respondent alleging he was in contempt of two orders of the Court. On 4 August 2005 the Court ordered that certain moneys held under the control of the Fourth Defendant be paid into Court by 9 August 2005. This was not done. All of the parties by their counsel agreed to withhold the money from Court. In a second order made 21 December 2005 the Court ordered that 40 percent of those moneys be paid to the Plaintiffs, which was done. The Plaintiffs wrote to the Fourth Defendant requiring the balance of 60 percent to be paid into Court in compliance with the order of 4 August 2005. The Fourth Defendant paid this money to the Second Defendant; he said under a genuine understanding that was what the second order of the Court required. Paragraph 1 of the second order also required certain other money to be paid to the Plaintiffs which has not been done, but no time for obeying the order was included in its terms. The money had not been paid but arrangements were being made for its payment.

Held:

The Fourth Defendant has been represented by counsel who took no issue with the absence of his client; therefore the Fourth Defendant has consented to the matter proceeding in his absence: See Constitution s.37.

There being an agreement between the parties' counsel not to pay money into Court in compliance with the order, the initial failure to comply with the order entered on 9 August 2004 was not a wilful breach and hence the Fourth Defendant was not guilty of contempt in respect of that matter.

The Fourth Defendant's claim that he understood the second order to be a complete substitution for the first order was not reasonable, logical or believable. The Fourth Defendant wilfully paid the 60 percent of the money referred to in the order of 9 August 2005 and paragraph 2 of the order of 21 December 2005 to the Second Defendant in breach of the order of 9 August 2005. That the Defendant acted on legal advice is not a defence. He is guilty of contempt of court in respect of that failure to obey the order. The Fourth Defendant will be heard on penalty.

The Fourth Defendant could not be held in contempt for failing to pay the money referred to in paragraph 1 of the second order because the order's requirements were uncertain, there being no time stipulated for complying with the order. 

An order requiring the doing of an act which does not specify a date or period by which the act is to be performed is generally unenforceable. There are exceptions to this rule, such as where the party to perform the order deliberately puts it beyond his power to comply with the order after it is made. 

An order required by O.12 r.4 to specify a time for its performance, which does not do so might be set aside on that ground.

Failure to stipulate a time for compliance with paragraph 1 of the second order is a breach of O.12 r.4 which requires the period of 14 days to be inserted in an order requiring a person to do an act, if the Court does not stipulate a time limitation. The Registrar should not settle such an order if it does not contain a time stipulation, except in case dealing with possession of land or delivery of goods.

11 July, 2006

1. LAY J.: By a Statement of Charge filed on 25 April 2006 and served on the Contemnor on 28 April 2006, the Plaintiffs seek to have the Fourth Defendant held in contempt of certain orders of the court.

2. On the 4 of August 2005 and entered on the 9 of August 2005 the court ordered as follows:

The court orders that: 

1.	All the royalty funds the subject of the Originating Summons No. 202 2005 held by the Department of Petroleum and Energy be paid into the National Court Trust Account by or before close of business on Tuesday 9 August 2005.

2.	All pending applications relating to this proceeding and proceedings in Originating Summons No. 202 of 2005 are adjourned to Thursday 11 August 2005 at 9:30am.

3. On 21 December 2005, entered 21 of December 2005 the court ordered by consent that:

1.	Pending determination of the proceedings herein, the outstanding accumulated royalty for the period between 31 of October 2004 to 31 October 2005 be paid to the incorporated land groups (ILGS) in the 40-60 percentage proportion in accordance with section 176 of the Oil & Gas Act 1998.

2.	The order of 4 August 2005 for the payment of the sum of K 4 million into the National Court Trust Account is varied to enable 40 percent payment to the Incorporated Land Group in accordance with section 176 of the Oil & Gas Act 1998.

3.	Any party to these proceedings is at liberty to apply for variation of these orders on seven (7) days notice to all parties.

4. The substantive proceedings were commenced by the Plaintiffs to prevent moneys held in trust for them by the Fourth Defendant from being paid to the Second Defendant, on the basis that a Court ordered audit report into the management of trust funds held by the Second Defendant disclosed serious anomalies in their management.

5. The Statement of Charge reads in part:
"The Contemnor is charged that he failed to comply with the Court Order of the 4 of August 2005 and 21 December 2005 where in he failed:

1. 	To immediately advise the Finance and Treasury Department to raise a cheque in the amount of K 4,968,800 to be paid directly to the National Court Trust Account.

2. 	To advise the Department of Petroleum and Energy to raise only one cheque in the sum of K 4,968,800 to be paid directly to the National Court Trust Account.

3.	That despite the terms of the Court Order of the 4 of August 2005 and 21 December 2005 the Contemnor in his authority and knowledge raised a cheque in the sum of K 761,800 and paid to Imawe Bogasi Inc. Land Group. This in direct contravention and contempt of the said Court Order.

4. 	Despite insistence by the Plaintiffs for the Contemnor to pay the funds into the National Court Trust Account, the Contemnor intentionally and deliberately held on to the outstanding royalties the subject of the Originating Summons No. 202 of 2005 and continued to hold on to the royalties even to the date of this application."

6. The Fourth Defendant did not comply with the order of 4 August 2005. A cheque for the amount of K4.1 million was raised in favour of the National Court Trust Account on 5 October 2005. This cheque was withheld by counsel for the Fourth Defendant by agreement with the other parties counsel. This was allegedly to prevent the amount becoming subject to outstanding garnishee notices in favour of third party creditors of the Plaintiffs. 

7. The Fourth Defendant did comply with paragraph 2 of the order of 21 December 2005. However, the Fourth Defendant then went on to pay to the Second Defendant the 60 percent balance of the K4.1 million. 

8. On the 10 of May 2006 the Fourth Defendant wrote to the Secretary, Department of Finance and Treasury requesting that cheques be raised to comply with the requirements of paragraph 1 of the order of 21 December 2005. At the time of hearing this order had not been complied with.

9. Counsel for the Plaintiffs relied upon the affidavits of Joe David sworn 5 July 2005, two of 25 April 2006 and another of 3 May 2006. Counsel for the Fourth Defendant relied upon the affidavits of himself sworn 18 May 2006 and of the Fourth Defendant sworn 23 May 2006.

10. The Plaintiffs submit that the order of 4 of August 2005 not having been complied with, the Fourth Defendant is clearly in contempt of that order. The Plaintiffs submit that paragraph 2 of the order of the 21 of December 2005 does not deal with the 60 percent of the K4.1 million; hence the only order applicable to that sum is the order of 4 August 2005.

11. Counsel for the Fourth Defendant has argued that it was a reasonable understanding and belief that the order of 21 December 2005 superseded the order of 4 August 2005. He deposes that he in fact did believe that, and on that basis advised the Fourth Defendant to comply with the orders on those terms. As to time for compliance, the Fourth Defendant submits that the later order did not contain a date or time for compliance.

The Law

12. In Ross Bishop and others v Bishop Brothers Engineering and Pty. Ltd. [1998-89] PNGLR 533 (Woods, Barnett and Konilio JJ), the court held that to succeed on a charge for contempt of a court order, (a) the order must be clear and unambiguous, (b) the order must have been properly served upon the alleged contemnor, (c) failure to obey the terms of the order must be wilful,(d) the standard of proof is beyond reasonable doubt and (Barnett J. alone) s.37 of the Constitution, including that a trial shall not take place in the absence of the accused without his consent, applies to a charge of contempt of court.

13. In the earlier case of Yap v Tan and B & T Engineering Pty. Ltd and Wong and Baptiste and Tau [1987] PNGLR 227 Hinchliffe J., sitting as a single judge of the Supreme Court, held that (1)it is a civil contempt of court to refuse or neglect to do an act required by a judgment or order; (2) where an order is made by a court of competent jurisdiction it is the obligation of every person against, or in respect of, whom the order is made, to obey it unless and until that order is discharged; the principle extends to cases where the person affected by the order believes it to be a irregular or even void.

14. It is not a defence that the disobeying party honestly believed that the contemplated act did not constitute an act of disobedience, even if such a belief was bona fide based on legal advice or was reasonable on other grounds: See In Re Mileage Conference Group of the Tyre Manufacturers Conference Ltd.'s Agreement [1966] 1 WLR 1137 at 1162D-E (a decision of the Restrictive Practices Court).

This Case

15. First, the Fourth Defendant has been absent, but represented by counsel, during the hearing. His counsel took no issue with respect to his client's absence and from those circumstances I deduce that the Fourth Defendant has consented to the matter proceeding in his absence, for the purposes of s.37 of the Constitution.

16. Counsel for the Defendants conceded that there was no doubt as to the funds to which the order of the 4 August 2005 referred. Subsequently those funds were quantified as approximately K 4 million and referred to in that fashion in paragraph 2 of the order the 21st of December 2005.

17. Paragraph 2 of the order of the 21 December 2005 amended the order of 4 August 2005 only in respect of 40 percent of the total amount. That left 60 percent of the total amount still subject to the order of the 4 August 2005. The only way the order of 21 December 2005 could be interpreted to authorise what has in fact taken place, was to ignore the words "40% percent". Then the order would have referred solely to payment in accordance with Section 176 of the Oil & Case Act 1998, which does in fact direct that a percentage be paid to the incorporated land groups and a percentage to the Second Defendant. It is contested as to what those percentages are in the current circumstances. But the words "40% percentage" are in the order and clearly confined the variation to that percentage. Nothing in the order authorized payment to the Second Defendant of the balance of 60 percent. A simple comparison of the wording of paragraphs 1 & 2 of the order of 21 December 2005 shows that paragraph 1 deals with 40 percent & 60 percent whereas paragraph 2 only deals with 40 percent.

18. I find that it was not a reasonable, logical or believable interpretation to place on the order of 21 December 2005 that it wholly superseded the order of 4 August 2005, nor that the latter order dealt with the 60 percent balance of the funds the subject of the order of 4 August 2005. Notwithstanding the advice he received, the Fourth Defendant ought to have applied his own mind to compliance with the order. No person carefully reading the order and truly desiring to do as the Court ordered could come to the conclusion that it dealt with the 60 percent.

19. I find that the Fourth Defendant is in breach of the orders of the Court in that he has paid money to the Second Defendant in contravention of the requirements of the order of the 4 August 2005 as varied by paragraph 2 of the order 21 December 2005. He has not paid into the National Court Trust Account the 60 percent of the K4 million as ordered, he has paid it to the Second Defendant. 

20. As to whether the breach was wilful, I note that there was an earlier late attempt to comply with the order of the 4 August 2005. In the absence of evidence to the contrary I accept Mr Korowi's evidence that counsel for all parties agreed to withhold the cheque from payment to the National Court Trust Account. There is no evidence before me but at some stage that cheque must have been cancelled as the money has been dealt with otherwise. In so far as the money was not paid to the National Court Trust Account initially I accept that there was no wilful disobedience of the court order of 4 August 2005 down to the time that the 40 percent sum of K2,586,720 was paid to the Plaintiffs. 

21. However, in relation to the payment of the 60 percent balance to the Second Defendant, as deposed to in Mr Pawih's affidavit of 23 May 2006 at paragraph 2(d)(ii), that was clearly not authorised by either order or agreement. That was pointed out to the Fourth Defendant by the Plaintiffs counsel's letter of 8 March 2006, by which any agreement by the Plaintiffs to withhold payment from the National Court Trust account was plainly terminated.

22. If the Fourth Defendant had contrary advice, as claimed, then application should have been made to clarify the position. I find the payment to the Second Defendant was a wilful breach of the order of 4 August 2005 to pay the money to the National Court Trust Account because the Fourth Defendant's actions in making the payment put compliance with the order beyond his ability.

23. In relation to paragraph 1 of the order of 21 December 2005, the Fourth Defendant has not complied with that order, but in May 2005 commenced doing something about it. The order did not contain a time stipulation. That seems to me to be a breach of Order 12 rule 4 which provides:

"(1)	Subject to sub-rules (3) and (4) of this Rule, a judgment or order which requires a person to do an act shall specify the time within which he is required to do the act.

(2)	The time shall, unless the Court otherwise orders, be 14 days after the date of service of a minute of the judgment or order on the person required to do the act.

(3)	Sub-rules (1) and (2) of this Rule apply to a judgment or order which requires a person to pay money.

(4)	Sub-rules (1) and (2) of this Rule do not apply to a judgement for possession of land or delivery of goods.

(5)...
(6)...

24. Although the National Court Rules indicate that this rule originated from Pt.40 r.4 of the New South Wales Supreme Court Rules, O.12 r.4 is quite different and much more comprehensive. The Rule has some similarity to O.42 r.2 of the former Rules of the supreme Court(UK) which required in mandatory terms that time be specified. The Rule has been referred to in past cases: See PNG National Stevedores Pty. Ltd and Bank of South Pacific Limited v PNG Harbours Board & 2 Others (1998) N1705 (Kapi DCJ as he then was); David Kapi v Pacific Helicopters N2775 (Davani J); John Kewa v Brian Mangipu N2720 (Cannings J), but there does not appear to have been any discussion on its terms generally and their application. Sub rule 1 requires every order requiring an act to be performed, with exceptions, to specific a time for doing the act. Sub rule 2 supplies that time as 14 days if it is not ordered. The time is not implied, the specific words are to be included in the order. The order "shall specify the time": O12 r 4(1). 

25. On a proper construction of that Rule, where the court orders a person to do an act, including the payment of money, and the court has not stipulated a time for doing so, the Registrar should not settle the order unless a statement is inserted to the effect that the order shall be complied with within 14 days of service, except in cases involving possession of land or delivery of goods. The point of the Rule is that orders should not be ambiguous, vague or "open-ended". A judge should be able to rely upon the Rule being applied and thus be able to make an order without stipulating a time for compliance, secure in the knowledge that the order will not be settled and sealed unless it contains the 14 day stipulation required by 0.12 r.4(1) & (2). 

26. An order requiring the doing of an act which does not specify a period or date by which the act is to be done is generally unenforceable. There are exceptions to this proposition, such as where the person to perform the terms of the order deliberately puts it beyond his power to comply with the order after it is made: See Gilbert v Endean (1878) 9 Ch D 259 (Jessel MR, Brett and Cotton LJJ) per Jessel MR at 266, and Carter v Roberts [1903] 2 Ch 312 (Bryne J) at 320, 321. Where the Rules require time to be specified for doing an act and the order does not so specify, this is a ground on which the subject of the order might apply to have the order set aside: See Hitachi Sales (U.K.) v Mitsui Lines [1986] 2 Lloyd's Rep. 574 C.A.).

27. The Plaintiffs should have drawn the order of 21 December 2005 in compliance with O.12 r.4 and could have asked the court to impose a time for complying with the order pursuant to the power of the court to do so contained in Order 1 Rule 16 or Order 12 rule 4(6). They did not do so.

28. The end result of the Plaintiffs not complying with Order 12 rule 4 when drawing up the order made by the court and not correcting that error by a further application, is that the order is ambiguous as to time for compliance with paragraph 1 and is unenforceable following and applying Gilbert V Endean (supra) and Carter v Roberts (supra). Following and applying Ross Bishop and others v Bishop Brothers Engineering and Pty. Ltd. (supra) I find that the Fourth Defendant cannot be held in contempt of that order, even though he has taken over four months to commence compliance, because there was no time stipulation within which to comply. 

29. Now turning to the Statement of Charge I find in relation to charges: 

1. 	numbered 1 and 2 that, although late, there was a bona fide attempt to comply with the Order of 4 August 2005, the cheque was withheld from the Trust Account by agreement of counsel and the initial failure to comply with the order was not wilful and thus not in contempt. The Fourth Defendant is not guilty of those charges.

2. 	in relation to charge numbered 3 no evidence was relied upon to establish the alleged payment to Imawe Bogasi Incorporated Land Group and I find that charge not proven and the Fourth Defendant not guilty in relation to that charge.

3. 	in relation to charge number 4 I find the Fourth Defendant guilty that he withheld the money, in that he did not dispose of the money in accordance with the directions of the court order, but contrary to those directions.

30. I will hear the parties on penalty in the July sittings.
_________________________________________________________
Lomai and Lomai Attorneys: Lawyers for the plaintiffs
Korowi Lawyers: Lawyers for the Fourth Defendant