N3673

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1350 OF 2006

NEWSAT LIMITED
Plaintiff

AND

TELIKOM PNG LIMITED
First Defendant

INDEPENDENT CONSUMER AND COMPETITION COMMISSION
Second Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Cannings J

2008: 14 January, 29 August

PUNISHMENT

CONTEMPT – failure to comply with court orders – punishment – corporate contemnor – determination of maximum penalty where maximum not prescribed by law – identification of starting point – assessment of mitigating and aggravating factors – fine of K5 million imposed.

The contemnor, a large corporation, was found guilty of contempt of court for deliberately failing to comply with an order of the National Court. A hearing was then held to address the question of punishment. The contemnor argued that payment of the prosecuting party’s legal costs was sufficient punishment and no fine should be payable. The prosecuting party, however, submitted that a substantial fine, in the order of K5 million to K10 million, should be imposed.

Held:

(1)	There being no maximum penalty prescribed by law for contempt of court, it is appropriate to fix a notional maximum for a corporation by considering the size and status of the corporation and the maximum penalties under the legislation governing its business and affairs.

(2)	An appropriate notional maximum in this case is K10 million.

(3)	A useful starting point for punishment purposes is the middle of the range: K5 million; and then the court should look at mitigating and aggravating factors to determine the amount of the fine.

(4)	Mitigating factors are: the contemnor is a ‘first-time offender’; the contemnor has, to some extent, complied with the court order since being found guilty of contempt; imposition of a substantial fine may have an adverse impact on the company.

(5)	Aggravating factors are: the contempt of which the contemnor is guilty cannot be regarded as ‘technical’; the contemnor did not plead guilty; the contemnor is a large, prominent, State-owned corporation, with a special duty to maintain the Rule of Law; lack of contrition.

(6)	After weighing the mitigating and aggravating factors, it was appropriate that the fine be set at the starting point.

(7)	Accordingly, the punishment imposed for contempt of court in this case was a fine of K5 million, payable, through the Registrar, to the Consolidated Revenue Fund, within 30 days.

Cases cited

The following cases are cited in the judgment:

Concord Pacific Ltd v Thomas Nen [2000] PNGLR 47
Manu Kovi v The State (2005) SC789
Newsat Ltd v Telikom PNG Ltd, ICCC and The State (2007) N3447
Peter Luga v Richard Sikani and The State (2002) N2286
Public Prosecutor v Nahau Rooney (No 2) [1979] PNGLR 448
Re Contempt of Court Proceedings against Valentine Kambori (No 3) (2003) N2490
Richard Sikani v The State and Peter Luga (2003) SC807
Ross Bishop and Others v Bishop Brothers Engineering Pty Ltd [1998-89] PNGLR 533
The State v Bart Kiohin and Henry Kevi (2005) N2811
The State v Dominic Kurai (2008) N3435
The State v James Yali (2005) N2989
The State v Justin Ipa (2008) N3439
Yap v Tan and B & T Engineering Pty Ltd and Wong and Baptiste and Tau [1987] PNGLR 227

Abbreviations

The following abbreviations appear in the judgment:

CEO – chief executive officer
ICCC – Independent Consumer and Competition Commission
J – Justice
Ltd – Limited
N – National Court judgment
NEC – National Executive Council
No – number
PNG – Papua New Guinea
PNGLR – Papua New Guinea Law Reports
Pty – Proprietary
SC – Supreme Court judgment
v – versus
VSAT – very small aperture terminal 
WS – writ of summons

PUNISHMENT

This is the punishment of a company for contempt of court.

Counsel

G Poole, for the plaintiff
A Mana, for the 1st defendant, the contemnor

29 August, 2008 

1. CANNINGS J: In May 2007 I found the contemnor, Telikom PNG Ltd, guilty of contempt of court for failing to comply with an order of the National Court. I now have to decide what penalty, if any, Telikom should be subject to.

2. The National Court order was made by Justice Salika in September 2006. It followed a motion by the plaintiff, Newsat Ltd, which had, a year earlier, entered into a contract with Telikom for provision of satellite-based broadband, called VSAT services in PNG. Newsat commenced legal proceedings against Telikom and two other parties, claiming damages and other remedies, including injunctions, against Telikom. Salika J upheld Newsat’s motion and ordered Telikom to do certain things in relation to the contract. Amongst other things, his Honour ordered Telikom to:

•	accept service requests/customer contracts submitted to it for the provision of Newsat services and received by it prior to the close of business on 26 September 2006 (of which there were at least 101); and

•	perform its obligations to customers pursuant to all service requests/customer contracts accepted by it prior to the close of business on 26 September 2006.

3. Newsat claimed that Telikom did not comply with the order and brought a contempt motion against Telikom under Division 14.6 of the National Court Rules.

4. After a hotly contested trial, I held that Salika J’s order was clear and unambiguous, that it was properly served on Telikom, that Telikom failed to comply with it (by not accepting any of the service requests/customer contracts for provision of Newsat services submitted to it) and that the failure to comply was deliberate. I concluded that Telikom had wilfully disobeyed Salika J’s order and that it was therefore guilty of contempt of court.

5. Further details of the circumstances in which the contempt was committed are set out in Newsat Ltd v Telikom PNG Ltd, ICCC and The State (2007) N3447.

DECISION MAKING PROCESS

6. To determine the appropriate penalty I will adopt the following decision making process:

•	step 1: what form of punishment should be imposed?

•	step 2: what is the maximum punishment?

•	step 3: what is a proper starting point?

•	step 4: what should the punishment be in this case?

•	step 5: should all or part of punishment be suspended?

•	step 6: who should receive the benefit of the punishment?

7. There are very few local cases involving punishment of corporate contemnors, which would have provided precedents for me to consider. So I am approaching the task of "punishment", as it is called in the National Court Rules, in this way, as contempt of court is akin to a criminal offence. 

8. Though Telikom can be regarded as having committed a civil contempt, the prosecution of an individual or a corporation for contempt is essentially a criminal proceeding. If found guilty, the contemnor can be subject to criminal-style penalties, eg committal to prison (in the case of individuals) and fines (corporations and individuals). (Yap v Tan and B & T Engineering Pty Ltd and Wong and Baptiste and Tau [1987] PNGLR 227; Ross Bishop and Others v Bishop Brothers Engineering Pty Ltd [1998-89] PNGLR 533; Peter Luga v Richard Sikani and The State (2002) N2286; Richard Sikani v The State and Peter Luga (2003) SC807.)

9. It follows that the task of punishment should be carried out by adopting the same sort of sentencing practices and principles that are applied when sentencing offenders, whether individuals or corporate bodies, for other criminal offences.

STEP 1: WHAT FORM OF PUNISHMENT SHOULD BE IMPOSED?

10. Contempt of court is prosecuted under Division 14.6 of the National Court Rules. Order 14, Rule 49 (punishment) deals with contempt by a corporation: 

Where the contemnor is a corporation the Court may punish contempt by sequestration or fine or both.

11. Sequestration entails the court-sanctioned seizure of a contemnor’s assets. Mr Mana, for Telikom, submitted that, despite what the National Court Rules say, Telikom’s assets are immune from sequestration by virtue of Section 50(3) of the Independent Public Business Corporation of Papua New Guinea Act 2002. I do not think that that provision has that effect but it is not necessary to consider the point any further as I agree with Mr Mana that sequestration would be a rather drastic punishment, particularly in the case of a corporation like Telikom, a State-owned enterprise providing essential services to the country.

12. Although it is available as a punishment, sequestration should be reserved for cases of extreme contempt or perhaps where a corporation does not have the financial capacity to pay a fine. It is not an appropriate form of punishment in the present case and the plaintiff did not press strongly for it. I consider that the most appropriate form of punishment is a fine.

STEP 2: WHAT IS THE MAXIMUM PUNISHMENT?

13. The National Court Rules do not fix a minimum or maximum punishment for contempt and there is no other law that fixes a minimum or maximum. The court has a very wide discretion. In deciding how that discretion should be exercised I think it is useful to set a notional maximum. Courts, generally, look first at the maximum penalty for an offence when deciding on a sentence for a criminal offence; then say that the maximum should be reserved for the worst category of cases; and then assess how the case of the offender being sentenced compares with the worst case category.

14. How do you set a notional maximum penalty for contempt by a corporation? I think a useful guideline to adopt – at least if the corporation is a large one – is to look at the laws that govern the business and affairs of the corporation and see what penalties are available for offences against those laws. Two major laws govern Telikom’s business and affairs: the Telecommunications Act 1996 and the Independent Consumer and Competition Commission Act 2002. The most serious offence under the Telecommunications Act is establishing a telecommunications network or supplying a telecommunications service without a licence. Section 167 provides a maximum fine in the case of a corporation of K2 million for a first offence and K10 million for a subsequent offence. Under the ICCC Act the most serious offences are to do with restrictive trade practices, which can, under Section 87(3), result in a fine of up to K10 million.

15. Committing contempt of court amounts to an interference in the administration of justice and a subjugation of the Rule of Law (Public Prosecutor v Nahau Rooney (No 2) [1979] PNGLR 448). The Constitution recognises the significance of contempt of court as an offence in various provisions. Section 37(2) states generally that nobody may be convicted of an offence that is not defined by, and the penalty for which is not prescribed by, a written law – but creates an exception in the case of contempt of court. 16. Sections 160(2) and 163(2) provide that the Supreme Court and the National Court are superior courts of record, each one having "the power to punish the offence against itself commonly known as contempt of court". Contempt of court must be treated with at least as much seriousness as the sort of offences created by the two laws referred to. Therefore the appropriate notional maximum penalty is a fine of K10 million.

STEP 3: WHAT IS A PROPER STARTING POINT?

17. Judges often refer to a starting point when they are determining a sentence, i.e. a reference point against which the case before them can be assessed. The judge assesses whether the case is more, or less, serious than the starting point. If it is, to what extent is it more serious or less serious?

18. The Supreme Court often sets starting points when giving sentencing guidelines in the course of deciding criminal appeals. For example, the Court recently gave detailed guidelines for the homicide offences of manslaughter, murder and wilful murder in Manu Kovi v The State (2005) SC789. Sentencing starting points have not been provided for in all criminal offences, however, and in such cases, the National Court is inclined to set its own.

19. In The State v James Yali (2005) N2989 I sentenced an offender for rape under the recently amended Section 347(1) of the Criminal Code. The Supreme Court had not given sentencing guidelines under the new law so I developed my own by looking at earlier cases and sentencing trends. I concluded that, given the maximum penalty for rape, without circumstances of aggravation being charged is 15 years imprisonment, the starting point for sentencing under Section 347(1) is 10 years imprisonment.

20. When sentencing for arson – where, again, no sentencing guidelines have been provided by the Supreme Court – I have followed a series of decisions by Kandakasi J and held that the starting point for someone who burns down another person’s home is ten years imprisonment (The State v Bart Kiohin and Henry Kevi (2005) N2811).

21. In the case of contempt of court, no sentencing guidelines have been given by the Supreme Court and no starting points have been set by the National Court. I propose to do what I have done when faced with a similar scenario when sentencing for offences such as grievous bodily harm and obtaining goods by false pretences: set a starting point in the middle of the available range (The State v Justin Ipa (2008) N3439 and The State v Dominic Kurai (2008) N3435).

22. The starting point I use is a fine of K5 million.

STEP 4: WHAT SHOULD THE PUNISHMENT BE IN THIS CASE?

23. I will now highlight the mitigating and aggravating factors in this case and determine the amount of the fine, if any, that should be imposed on Telikom. The more mitigating factors that are present, the more likely it is that the fine will be below the starting point. The more aggravating factors present, the more likely it is that the fine will be above the starting point. However, just like the process of sentencing in normal criminal cases, fixing the amount of a fine for a corporate contemnor in a contempt case is not an exact science. It is a discretionary process. When a factor is marked as mitigating or aggravating it does not mean necessarily that it is given the same weight as another mitigating or aggravating factor. A mitigating factor might be ‘strongly mitigating’ or ‘mildly mitigating’ or somewhere in-between. The same goes for aggravating factors.

Mitigating factors

Three stand out.

24. First, Telikom is, in the parlance of criminal sentencing, a first-time offender. According to an affidavit by company secretary, Mr Ere Kariko, this is the first time that Telikom has been charged with contempt of court and it is a good corporate citizen. There was no evidence to counter that proposition so I accept the statement as truthful. It is a strong mitigating factor.

25. Secondly, Telikom has, to some extent, complied with the court order since being found guilty of contempt. This was conceded by Mr Poole, for Newsat, in the course of submissions. However, it is by no means clear to me that Telikom has totally complied with Salika J’s order. I would have thought that this evidence would have been provided by Telikom during the punishment hearing. I will regard it as a mildly mitigating factor.

26. Thirdly, Mr Kariko has deposed in his affidavit that imposition of a substantial fine may prevent Telikom from fulfilling its statutory role under the Telecommunications Act and its role under the National Government’s Information & Communications Policy. Telikom employs 1,598 people and some may lose their jobs if the company is hit with a big fine. I am a little sceptical of these claims as Telikom is a large and established corporation, with a substantial turnover, and it would be reasonably expected to cope with payment of a fine of up to K10 million. A company of this size always faces an operational risk of being subject to a substantial fine for breach of the laws to which it is subject. Large corporations are subject to court orders of some sort from time to time and there is an inevitable risk of being held to account for breaching those laws. I will regard Mr Kariko’s claims as a mild mitigating factor.

27. Before moving to the aggravating factors, I will deal with a mitigating factor put forward by Telikom that I do not accept. Mr Mana submitted that when Telikom took the position that it did in response to Salika J’s order (which was that there were no service requests it had to comply with) it acted on legal advice, which was based on a fair and reasonable interpretation of the court order. This was not a case of an intentional breach of the court’s order, Mr Mana submitted. 

28. I dealt with this issue when deciding that Telikom was guilty. I concluded that Telikom deliberately failed to comply with the court order. It cannot be said that Telikom acted unintentionally. Nor, on reflection, can it be said that Telikom genuinely misread or misconstrued the court order. The better view is that Telikom decided that they could interpret the order in a particular way and made a conscious decision not to do what the court ordered it to do. If I am wrong in that view of the facts, the best alternative view available to Telikom is that the order was, subjectively, in the eyes of Telikom, unclear; in which case, as I said in the contempt ruling, their options were to go back before Salika J for clarification or appeal to the Supreme Court and obtain a stay. Telikom did neither and chose to disobey the order. 

Aggravating factors

Four stand out.

29. First, the contempt of which Telikom is guilty cannot be regarded as ‘technical’ or unintentional (for the reasons just given for rejecting this as a mitigating factor). The disobedience of the order was wilful.

30. Secondly, this was not a case in which the contemnor pleaded guilty to contempt. Telikom breached the National Court order and the issue of compliance with the order had to be taken to the stage of a hotly contested trial occupying two hearing days.

31. Thirdly, Telikom is a large, prominent, State-owned corporation, with a special duty to maintain the Rule of Law. Though incorporated under the Companies Act, the appointment of its board and senior management and its affairs are still regulated by the Executive arm of government. In my view, it is a "governmental body" as defined by Schedule 1.2(1) of the Constitution. It has a special duty under Section 25(2) of the Constitution to apply and give effect to the National Goals and Directive Principles. It sets a very bad example for the rest of the community if governmental bodies disobey orders of the National Court. 

32. Fourthly, Telikom has shown no remorse or contrition. An apology to the court from the CEO or the company secretary would have been appropriate but none has been forthcoming.

33. All of the above can be regarded as strong aggravating factors.

Weighing the relevant considerations

34. Both the number and the strength of the aggravating factors are greater than the number and the strength of the mitigating factors. This is not an appropriate case in which to regard the awarding of costs to the successful party, Newsat, as being a sufficient penalty (as was the case in Concord Pacific Ltd v Thomas Nen [2000] PNGLR 47). Mr Mana submitted that costs could be awarded on a solicitor-client basis. But even if that were done, the penalty would not reflect the seriousness of the contempt. It would amount to ‘a slap on the wrist’ and defeat the purpose of the law of contempt for the court to take other than a stern approach to punishment (Re Contempt of Court Proceedings against Valentine Kambori (No 3) (2003) N2490).

35. I consider that this was a serious case of contempt of court by a large corporation. The punishment must fit the crime. A substantial fine will, I consider, be neither crushing on the contemnor nor disproportionate to the gravity of its contumacious conduct. I will fix the fine at the starting point of K5 million.

STEP 5: SHOULD ALL OR PART OF THE PUNISHMENT BE SUSPENDED?

36. Suspending all or part of the fine is an option under Order 14, Rule 49(3) of the National Court Rules, which states:

The Court may make an order for punishment on terms, including a suspension of punishment or a suspension of punishment where the contemnor gives security in such manner and in such sum as the Court may approve for good behaviour and performs the terms of the security.
 
37. Neither party has submitted that I should invoke this provision and, having considered the matter, I do not think it is desirable to do so. Imposition of a substantial fine will indicate the court’s disapprobation of having its orders disobeyed. It will signal to the whole community, especially the corporate sector, the importance of complying with court orders. And it is necessary, to reinforce the authority and independence of the courts.

STEP 6: WHO SHOULD RECEIVE THE BENEFIT OF THE PUNISHMENT?

38. This question is better expressed as: to whom should the fine be paid? I raise it as an issue as Mr Poole made a valiant attempt to argue that it would be counterproductive for Telikom to pay a fine to National Government coffers as it could easily find its way back to Telikom. He submitted that the fine should be paid to the Judicial and Legal Services Commission and the money committed to the administration of the courts.

39. There is perhaps a risk that where a contemnor is a State-owned corporation a fine imposed on it may be rendered nugatory if the corporation after paying the fine puts its hand out for more public funding to replace what it has lost. But I do not think that is a matter for the court to worry about. The law is fairly clear. Fines are public moneys and must be paid, through the Registrar of the National Court, into the Consolidated Revenue Fund. That is the effect of Section 13 of the Public Finances (Management) Act, Section 18 of the Interpretation Act and Order 12, Rule 5 of the National Court Rules, which states:

(1)	Where the Court imposes a fine, the Court shall order that the person on whom the fine is imposed pay the fine to the Registrar.

(2)	The Registrar shall pay into the Consolidated Revenue Fund all moneys paid to him on account of any fine imposed by the Court.

COSTS

40. These contempt proceedings have been an adjunct to civil proceedings and I consider that it is appropriate that the successful party have its costs paid by the losing party. Telikom is being punished for committing contempt of court but I am not satisfied that the company has acted in bad faith, to the extent necessary to warrant the awarding of costs on a solicitor-client or an indemnity basis.

ORDER

41. I will make an order in the following terms:

(1)	Telikom PNG Ltd shall within 30 days after entry of judgment pay a fine of K5 million to the Registrar of the National Court, who shall forthwith pay that money into the Consolidated Revenue Fund.

(2)	Telikom PNG Ltd shall pay Newsat Ltd’s costs of these proceedings on a party-party basis, to be taxed if not agreed.

Ruling accordingly.

__________________________________________________________
O’Briens Lawyers: Lawyers for the plaintiff
Allens Arthur Robinson: Lawyers for the first defendant, contemnor