N4429

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

OS No. 833 OF 2010

BETWEEN

MOTU KOITA ASSEMBLY
Plaintiff

AND:

NATIONAL CAPITAL DISTRICT COMMISSION
Defendant

Waigani: Kandakasi, J.
2011: 23rd March
2011: 22nd September

STATUTORY INTERPRETATION – Sections 33 and 33A of National Capital District Commission Act 2001 as amended and s. 38 of Motu Koita Assembly Act 2007 - Principles governing statutory interpretation – Intention behind legislation –Financial support for Motu Koita Assembly based on Goods and Services Tax refund - Correct rate 10% - No room for conflict – National Capital District to pay at correct rate including balance of any prior underpayment.

Cases Cited:

PLAR No. 1 of 1980 [1980] PNGLR 326
Attorney General v. Hamidian-Rad [1999] PNGLR 444
SCR No. 1 of 2000; Re Morobe Provincial Government for and on behalf of the Morobe Provincial Executive Council (2002) SC693.
The State v. Downer Constructions (PNG) Limited (2009) SC979.
Inakambi Singorom v. Klaut [1985] PNGLR 238
Chief Collector of Taxes v. Bougainville Copper Limited; Bougainville Copper Limited v. Chief Collector of Taxes (2007) SC853.
Mairi v. Tololo [1976] PNGLR 125

Counsel:

P. Mawa, for the Plaintiff
P. Mesa, for the Defendants

22nd September, 2011

1. KANDAKASI J: The Motu Koita Assembly (MKA) is suing the National Capital District Commission (the NCDC) for a recovery of several sums of money it claims the NCDC owes it for Goods and Services Taxes (GST) collected in the National Capital District (NCD). The NCDC admits its indebtedness but not the amounts the MKA claims. This situation has arisen because of an argument over the correct rate, whether it is 2% or 10% for the assessment and paying over of the dues to the MKA by the NCDC. That in turn follows conflicting legislative provisions on the subject, according to the parties' arguments.

2. The submissions of counsel identify the following three issues as the issues for the Court to determine. 

(a)	Does s. 33A of the National Capital District Commission Act 2001 as amended, (NCDC Act 2001) impliedly amends and repeals s. 33 of the said Act? 

(b)	Subject to a determination of the first issue, and having regard to s. 38 of the Motu Koita Assembly Act 2007, (MKA Act 2007) is the correct rate for GST contributions to the MKA by the NCDC 2% or 10%?

(c)	If question (b) is determined in favour of 10%, is the NCDC obliged to pay to the MKA any balance owing on 10% of the unpaid GST for the fiscal years of 2008, 2009 and 2010. 

3. These questions can be dealt with as one because it will be necessary to consider all of the provisions in contest to make any sense out of them. I therefore deal with the questions as one.

Relevant Background or Facts

4. Before getting into a consideration of the issues presented, it is necessary to briefly consider the background to this case. In this regard, I note that both the NCDC and the MKA are creatures of statute established by their respective legislation. The NCDC is almost the equivalent of a provincial government or second in line from the National Government but only for the NCD. On the other hand, the MKA is the equivalent of a local level government covering only a small part of the NCD, especially for the local or the indigenous peoples of the Motu Koita areas in the NCD.

5. The MKA derives its funding from a number of sources. One of that is from the NCDC in the form of certain portions of GST collected by the NCDC in the NCD. All seemed to have gone well in terms of such funding arrangement until the NCDC decided to withhold the payment of the taxes due to the MKA not so long ago. That was pending a resolution of a question of whether the correct rate should be 2% or 10%. This issue did not get resolved promptly so the MKA decided to issue these proceedings seeking to enforce its claim that it is entitled to receive 10% of all GST collected by the NCDC for the fiscal years 2008, 2009 and 2010. The MKA argues that, the NCDC is in breach of the statutory duty imposed upon it under section 33A of the NCDC Act 2001 as amended and that the NCDC is indebted to it in the sum of K23, 247, 855.00 in unpaid GST.

6. There is no question that, the NCDC is legally obliged to pay the MKA the kind of taxes in question. The argument is over what is the correct rate, 2% or 10%.

Consideration
(a)	Generally

6. The main provisions in controversy between the parties are sections, 33 and 33A of the NCDC Act 2001 as amended and section 38 of the MKA Act 2007. These provisions read as follows:

Provisions of the NCDC Act:

"33. Financial Assistance to Central Provincial Government, Gulf Provincial Government and the Motu-Koitabu Council.

(1) Subject to Subsection (2), the Commission shall provide financial assistance to the Central Provincial Government, the Motu-Koitabu Council and the Gulf Provincial Government.

(2) The Internal Revenue Commission shall pay to—

(a) the Central Provincial Government, a minimum of 10% of the Goods and Services Tax; and

(b) the Motu-Koitabu Council, a minimum of 2% of the Goods and Services Tax; and

(c) the Gulf Provincial Government, a minimum of 3% of the Goods and Services Tax, 

due to the Commission in a fiscal year in accordance with the Goods and Services Tax Revenue Distribution Act 2003."

"33A. Financial assistance to Motu Koita Assembly.

The Commission shall pay to the Motu Koita Assembly a minimum of 10% of the Goods and Services Tax refunded to the Commission in a fiscal year by the Internal Revenue Commission."

Provisions of the MKA Act

"38. Outline of Motu Koita Assembly Finances.

The finances of the Assembly shall consist of—

(a) receipt from taxation and licensing fees imposed by Assembly laws; and

(b) grants from the National Government based on an agreed percentage of receipts from Airport Tax, Harbour fees and State Land Lease rentals; and

(c) grants from the National Governments in accordance with Section 42; and

(d) grants from the National Capital District Commission based on 10 percentage of the Goods and Services Tax payable by the Internal Revenue Commission to the National Capital District Commission in accordance with Section 33 of the National Capital District Commission Act 2001; and

(e) the proceeds of court fees, fines and penalties as provided for by Section 39; and

(f) the proceeds of certain investments in accordance with Section 44; and

(g) the proceeds of investments by it (including interest on bank deposits) and income from commercial enterprises conducted by it; and

(h) such other moneys as are lawfully available to it under this Act or any other law."

(b)	Principles of Statutory Interpretation

7. As this requires an interpretation and application of these provisions, it is necessary for us to remind ourselves of the principles governing interpretation of statutory provisions. As I have noted in many of my earlier decisions, Wilson J., stated the relevant principles in PLAR No. 1 of 1980, having regard to the different approaches to statutory interpretation in these terms:

"… there is no place in a developing country where the courts, as well as the Law Reform Commission, are given special responsibilities in the process of development, for the narrow interpretation of statutes without adequate regard to the social purpose of particular legislation. Development is difficult to achieve if courts adopt too conservative an approach to the interpretation of statutes. There has been a tendency in our National Judicial System, less evident in some recent decisions of the courts but still perceptible, to over-emphasize the literal meaning of a provision at the expense of the meaning to be derived from other possible contexts; the latter including the application of the "mischief" rule, the recognition of the general legislative purpose, as well as the obligations laid down under the Constitution such as, for example, the obligation upon the courts in interpreting the law to give 'paramount consideration to the dispensation of justice'…"

8. A number of subsequent decisions of the Supreme and National Courts have consistently allowed themselves to be guided by these principles. An example of that happening is in the case of SCR No. 1 of 2000; Re Morobe Provincial Government for and on behalf of the Morobe Provincial Executive Council. On its part, the Court having regard to the provisions of schedule 1.5 (interpretation) of the Constitution said: 

"Going by this expressed dictation in the Constitution …, it is now an accepted principle of both constitutional and other statutory interpretation, that provisions of the Constitution and all Acts of Parliament must be given their fair and liberal meaning. This is so as to give effect to the intent of Parliament behind the provisions in question. There is a long line of case authority on that."

9. Then as I noted elsewhere as in my dissenting decision in the case of The State v. Downer Constructions (PNG) Limited, there are however, two known exceptions to this approach. The first is in cases where the words used in the legislation under consideration are so plain and clear that no art of interpretation is required. The second is in tax legislation cases, where the strict interpretation rule applies. In such cases, the law is that, for the imposition of a tax or charge against a subject, clear and unambiguous intention must be shown in the statute. Otherwise, an interpretation favourable to taxpayers would be preferred. 

(c) Application of the principles

10. A close examination of each of these provisions reveal, in my view, that the legislature has used plain language to express its intention in relation to the question of one source of finance for the MKA. It is so plain and clear that there is no room for any argument as to the interpretation or meaning of these provisions. 

11. Considering the provisions by provision, it is clear as to what the legislature has provided for. Section s. 38 of the MKA Act, simply makes a statement as to the sources of finances for the MKA. It does not impose any duty or obligation on anybody let alone the NCDC. This is apparent from the opening line to that provision, which reads: "[t]he finances of the Assembly shall consist of …". Without more, the provision then goes onto listing the various sources of the MKA's finances. Subparagraph (d) of that provision makes reference to NCDC as a source in these terms:

"(d) grants from the National Capital District Commission based on 10 percentage of the Goods and Services Tax payable by the Internal Revenue Commission to the National Capital District Commission in accordance with Section 33 of the National Capital District Commission Act 2001…" (Emphasis supplied)

12. This provision, in my view, merely states one of the sources of funding for the MKA is by way of a grant from the NCDC:

"based on 10 percentage of the Goods and Services Tax payable by the Internal Revenue Commission to the National Capital District Commission in accordance with Section 33 of the National Capital District Commission Act 2001.." (Emphasis Supplied)

13. From these words, it is obvious to me that, this provision is neither fixing the amount or rate at which the NCDC is to make a grant to the MKA nor is the provision imposing an obligation on the NCDC to make the grant. Instead, it is clear that the NCDC is one of the sources of MKA's funding in the form of a grant based on 10% of the GST payable by the Internal Revenue Commission (IRC) to the NCDC under s. 33 of the NCDC Act 2001. Expressed another way for clarity, the MKA's funding consists amongst others, of a grant from the NCDC. The NCDC is to draw or source the grant from a 10% of GST payable by the IRC to the NCDC under s. 33 of the NCDC Act 2001.

14. Sections 33 (1) of the NCDC Act imposes the necessary obligation on the NCDC to make the grant in these terms:

"Subject to Subsection (2), the Commission shall provide financial assistance to the Central Provincial Government, the Motu-Koitabu Council and the Gulf Provincial Government."

15. Obviously this provision does not specify the amount or the rate or the source from which NCDC is to provide the financial assistance to the entities identified, which includes the Motu Koita Council which has now changed to MKA. This obligation is however subject to what is provided in subsection (2), which says:

"(2) The Internal Revenue Commission shall pay to—

(a) the Central Provincial Government, a minimum of 10% of the Goods and Services Tax; and

(b) the Motu-Koitabu Council, a minimum of 2% of the Goods and Services Tax; and

(c) the Gulf Provincial Government, a minimum of 3% of the Goods and Services Tax, 

due to the Commission in a fiscal year in accordance with the Goods and Services Tax Revenue Distribution Act 2003."

16. This subsection clearly states that the IRC is to pay to the Central and Gulf Provincial Governments and the MKA at varying percentages of GST, which are due to the NCDC in a fiscal year in accordance with the Goods and Services Tax Revenue Distribution Act 2003. When these provisions are read together, they do make sense. It is obvious that, subsection (1) creates an obligation in the NCDC to provide financial assistance. That obligation may be discharged having regard to any payments made by the IRC in accordance with subsection (2), which is clearly understandable. Subsection (2) fixes 2% for the IRC to pay as opposed to the NCDC.

17. When reading s. 38 of the MKA Act and s. 33 together, it is clear that the source of the grant under s. 38 of the MKA Act or financial assistance to the MKA under s.33 (1) of the NCDC Act 2001 as amended, is GST collected in the NCD. Hence, if the IRC pays at the specified rates to the MKA and the other two provincial governments out of the GST refunds due to the NCDC, the latter need to take that into account when considering the kind of financial assistance it can give to the MKA or the two identified provincial governments under subsection (1). If however, the IRC does not make the payments to the MKA and the two provincial governments that also need to be taken into account when the NCDC determines what level of financial assistance it can provide under s. 33 (1) of the NCDC Act 2001. 

18. Section 33A of the NCDC Act 2001 as amended, then brings in more clarity, in my view as to the level of financial assistance the NCDC should provide under s. 33 (1). Section 33A once again reads:

"33A. Financial assistance to Motu Koita Assembly.
The Commission shall pay to the Motu Koita Assembly a minimum of 10% of the Goods and Services Tax refunded to the Commission in a fiscal year by the Internal Revenue Commission."

19. Obviously, the wording is very clear once again that there is no need for any art of interpretation to be applied. The words speak for themselves. They simply say, in any fiscal year, the NCDC is obliged to pay to the MKA not less than 10% of GST refunded to it by the IRC. This provision and the interpretation is consistent with the wording in s. 38 (d) of the MKA Act 2007 as earlier noted. The intention behind these provisions is, in my respectful view apparent. The NCDC is obliged to pay over to the MKA not less than 10% of the GST refunds NCDC receives in each fiscal year from the IRC. The 2% specified in s.33(2) of the NCDC Act 2001 as amended, should not be confused with this rate because the 2% as noted earlier is the rate for the IRC if IRC is paying to the MKA.

Decision and answers to questions raised

20. Having regard to what we have observed above, I find that there is no basis for any conflict or controversy over what the provisions in question provide for. It follows therefore that, there is no room for the argument that s. 33A impliedly amended or amends s. 33 of the NCDC Act 2001 as amended. Similarly, there is no room for any argument as to what is the correct rate of GST based grant the NCDC should make and pay over to the MKA. Accordingly, if the NCDC has been withholding any payment or it has been making payments only at 2%, it has done so without any proper statutory foundation. Proceeding on this basis, I answer the questions raised before me as follows:

(a)	Question: Does s. 33A of the National Capital District Commission Act 2001, as amended impliedly amend and repeal s. 33 of the said Act? 
Answer: No it does not but compliments s.33(1) of NCDC Act.

(b)	Question: Subject to a determination of the first issue, and having regard to s. 38 of the MKA Act 2007 is the correct rate for GST contributions to the MKA by the NCDC, 2% or 10%?
Answer: The Correct rate based on GST refunds for the NCDC to pay over to MKA is 10% and not 2%.

(c)	Question: If question (b) is determined in favour of 10%, is the NCDC obliged to pay to the MKA any balance owing on 10% of the unpaid GST for the fiscal years of 2008, 2009 and 2010?
Answer: If NCDC has made payments at rates below 10% of GST refunds from the IRC, it is obliged to pay the balance of those under payments.

21. In the end result, I find for the MKA on the issues thus far present before me. Accordingly, I order costs in favour of the MKA, which costs shall be agreed if not taxed.

22. Finally, I direct the parties to consider what to do with the substantive proceedings in the light of the key questions being determined in this judgment. I fix 11th October 2011 at 9:30am for a return of this matter.

_____________________________
Mawa Lawyers: Lawyers for the Plaintiff
Lari Raula Kila Lawyers: Lawyers for the Defendant