N4558

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 428 OF 2005

BETWEEN

COFFEE INDUSTRY CORPORATION LIMITED
Plaintiff

AND

RODERICK FONOVEE
First Defendant

AND

SMALL HOLDER COFFEE GROWERS ASSOCIATION INC.
Second Defendant

Goroka: Batari, J
2011: 17 June

CIVIL – PRACTICE AND PROCEDURE – Declarations – orders for declaration in nature of certiorari – decision of private body – Association Executive resolution – whether judicial review applicable.

CIVIL – Declarations – ownership of property – vehicle purchased by association from grant – ownership of – whether property interests vests in donor.

CIVIL – Declarations – Association Executive meeting – resolution of – vehicle given to chairman by resolution – validity of – Association Constitution – vested interest - fairness of – decision to transfer vehicle to chairman unfair and invalid. 

WORDS AND PHRASES – "grant" – grants in aid - definition of - allocation of rights, monies to another or for specific purposes or services. 

Cases Cited

Arabicas v. Coffee Industry Corporation Pty Ltd 
NEC & Luke Lucas v. Public Employees Association of PNG [1993] PNGLR 264
Vanderlist v. Mt. Hagen Golf Club [1990] PNGLR 315
SCR NO.1 of 1998 Re Reservation Pursuant to s.15 of the Supreme Court Act (2001) SC 672 

Counsel

K. Peri, for the Plaintiff
D. Umba, for the Defendants

17 June, 2011

1. BATARI, J: By originating summons filed 8 June 2005, the plaintiff, Coffee Industry Corporation Limited (CICL) seeks relief in the nature of declarations, inter alia, that:

a)	the motor vehicle described as Toyota Hilux 4x4, white Single cab Ute, Registration No. LAC 659 is owned by the plaintiff.

b)	and or alternatively, the Resolution No. 11.3 of the PNG Small Holder Growers Association (PNG SHCGA or the Association) Executive Meeting on 11January 2002, in regard to the motor vehicle in question is null and void and of no effect.

c)	And or alternatively, the motor vehicle is a property which ownership was and is vested with the Plaintiff. The PNG SHCGA Executive had no authority legal or otherwise whatsoever to transfer or endorse ownership of the said Motor Vehicle to any other person, including the First Defendant currently having possession.

Whether Judicial Review or Orders for Declarations

2. The relief sought in the second paragraph appears to be in the nature of application for certiorari orders to bring before the Court for judicial review, a decision of the Executive Committee of the second defendant, PNG SHCGA. That process by way of application for judicial review under O.16 of the National Court Rules is however concerned only with the protection of rights under public law. It is available whenever a person wishes to challenge the decision of a public authority.

3.	This aspect did not arise at the time of hearing. Nevertheless, the Court in my view is not barred from dealing with the relief sought under O 4 r 3 or under O 16 r 1 (2) of the National Court Rules (the NCR) for declarative orders. See, NEC & Luke Lucas v. Public Employees Association of PNG [1993] PNGLR 264 where the Supreme Court held that, a plaintiff has a choice of proceedings by way of a writ of summons or an originating summons under Order 4. 

4.	Besides, actions or decisions of private bodies as club committees, trade unions and other voluntary organizations have also come under review under O 16 of the NCR as in the case of Vanderlist v. Mt. Hagen Golf Club [1990] PNGLR 315 where the plaintiff was granted leave to seek judicial review of a decision of a social club terminating her employment. 

5.	In this case, the parties have the character of "public private bodies." The CICL is a creature of an Act of Parliament, the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 (the Act) and vested statutory powers to regulate the coffee industry. It comes under the responsibility of a State Minister and its Board members are drawn from the PNGSHCGA membership. So, there is some element of public interest present in this case which would make the application of O 16 r 1 (2) relevant: See, Arabicas v. Coffee Industry Corporation Pty Ltd [1998] N1751. The relationship between these two entities is further discussed in the latter part of this judgment. 

Uncontested Facts

6.	The motor vehicle in question was purchased by the PNGSHCGA on 27 January 2000 and registered in the Asociation corporate name. On 11 January, 2002 PNGSHCGA Executive held its meeting in Lae and resolved to write off and donate the vehicle to the Association Chairman, Roderick Fonovee. The resolution of the meeting reads:

"The Chairman remain in the current post and also term of current executives/directors be extended to three (3) years. On the other hand the current motor vehicle for SHCGA office be written off and given to Mr. Fonove covering claim for mileage and that a new vehicle for the General Secretary be purchase from this year's budget allocation." 

7.	Following that resolution, the vehicle was transferred to and registered in the name of Fonovee. The vehicle had initially been allocated to Fonovee from the time of its purchase for the convenience of performing his administrative duties as acting General Secretary for the Association. There is no doubt Fonovee had also used the association vehicle for his personal convenience. After the substantive appointment of one, Lindsay Ongapa to the post of General Secretary, the PNGSHCGA Executive resolved to buy him a new vehicle as part of the resolution for Fonovee to retain ownership of the vehicle in question. 

8. These other facts are also conceded. Fonovee was at the time of trial, the chairman of PNGSHCGA. He held the position of Chairman and acting General Secretary for PNGSHCGA at the time the vehicle was purchased. The substantive appointment to the office of General Secretary was made at the time or shortly before the Association Executive resolved to give the vehicle away to Fonovee. 

9.	It appears and I conclude from the agreed facts that, Fonovee's entitlement to the use of the vehicle came with the position of General Secretary to the Association. That entitlement would naturally lapse with the substantive appointment of General Secretary. However, it is apparent that, the resolution of the PNGSHCGA Executive Committee was intended to preserve Fonovee that entitlement so that he would continue to enjoy it after he ceased to hold the position of General Secretary. 

Status and Relationship between PNG SHCGA and CICL

10. The PNGSHCGA is the incorporated parent association of small growers associations. Its affiliates comprised, Western Highlands Small Holder Growers Association Inc., Chimbu SHCGA, Eastern Highlands SHCGA, Momase SHCGA, Southern Region SHCGA, Morobe SHCGA, Oro SHCGA, Central SHCGA, Madang SHCGA, Enga SHCGA, East Sepik SHCGA, Milne Bay SHCGA and New Ireland SHCGA. 

11.	The Association generates its funding from membership levies imposed on member Associations with annual support grant from the CICL. The Association's accounts are audited by the CICL which also inspects and reports on the Association's general operations. Affiliates of the PNGSHCGA appoint their own representatives to the Board of Directors of the CICL. By virtue of that arrangement, the Association is by inference, accountable to the CICL.

12. The CICL is a corporate entity established under the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 and comes under the responsibility of the State Minister responsible for primary industry matters. It is given the power to issue Certificate of Registration for coffee exports and manufacturing facilities. This source of power enables the CICL besides the annual government grants, to raise its own revenue from coffee export levies, charges and fees. 

13.	The members of CICL comprise persons and bodies active in the coffee industry such as, an export association, a plantation association including the PNGSHCGA and relevant government officials. Hence, the Executive and Parliamentary arms of the Government retain some control and direction over the CICL. This legislative policy arrangement under the Act suggests a measure of self-regulation within the Coffee Industry. 

14.	Although the CICL has characteristics of a public enterprise, Section 4 of the Act makes it clear that, the corporation is not an agent or representative of the State and it cannot render the State liable for any of its debts, liabilities, or obligations. In that regard and for the purpose of the Claims By and Against the State Act 1996 the CICL does not fall within the definition of "State" as defined in SCR NO.1 of 1998 Re Reservation Pursuant to s.15 of the Supreme Court Act (2001) SC 672. 

15. In spite of that corporate status, the income source of the CICL in my view is in the nature of public fund. For that reason, its expenditures and outlay of funds are subject to the usual public scrutiny and accountability as do other statutory corporations, arms, agents or bodies of the State.

Whether the vehicle is owned by the Plaintiff 

16. This proceeding stems from a primary concern that PNGSHCGA executive had given away to its Chairman, a motor vehicle purchased from a CICL grant. The corporation says the Association executive had acted without lawful authority because the vehicle remains the property of CICL by virtue of its purchase from the CICL grant and on the basis that CICL is generally accountable for PNGSHCGA existence, accounts audits and property and asset dispositions. 
 
17. This is the highest the CICL has put its ownership claim over the vehicle. It is based on purported inferences to be drawn from its support grant to the Association and purported administrative authority over the PNGSHCGA. 

18.	I am satisfied that, the PNGSHCGA is a separate legal entity having been incorporated under the Associations Incorporation Act, Chapter 142. Its constitution empowers it to raise its own revenue, purchase, own and dispose of properties. The association operates and conducts its affair in line with its constitutional objectives, separate and independent of the CICL. 

19.	The vehicle in question was purchased at the cost of K58,127.30 from a CICL grant of K150,000 in 2002. 

20.	The definition of "grant" as it relates to central government grants in aid is the allocation of rights, monies etc., to local authorities or particular persons or for specific purposes or services. "Grants" do not necessarily carry with it, a binding condition except that, the fund must be used only for the purpose intended or in line with the terms of the conditions of the grant. Where assets are bought from a grant, the usual expectation is that, the property rights and ownership vest in the recipient person or entity unless specifically stated otherwise. As for the donor, its obligation is simply to acquit the grant once the money transfers.

21.	In this case, there is no suggestion the grant was tied to any particular project. The evidence is that, PNGSHCGA gets untied grants annually from CICL for its administrative and general operational costs. So, the Association was at liberty to spend the grant pursuant to its budget plans. 

22.	It is true the CICL retains some interest in the operations of the Association to ensure proper accountability of the Association expenditures. This arrangement is a check and balance means to ensure expenditures are incurred only in furtherance of the aims and objectives of the Association. It is also designed to ensure PNGSHCGA is sufficiently efficient to deliver on its obligations to the CICL. There is nothing in the Act or the Association Constitution or by administrative arrangement that vests ownership of the Association assets in the CICL. 

23.	So, it is absurd to think or claim that the properties and assets of the association are owned, wholly or partly, directly or indirectly by CICL. 

24.	In the upshot, the plaintiff has not made out a case that it is the legal owner of the vehicle in question. Its claim is without legal basis. PNGSHCGA acquired the property rights over the vehicle when it purchased and registered the vehicle in its corporate name. 

Validity of SHCGA Executive decision to give vehicle away to Fonove

25.	I will cover this issue together with the CICL's alternative contention that, the PNG SHCGA had no authority, legal or otherwise to transfer or endorse ownership of the vehicle in question to any person or for that matter, any member of the Association Executive.

26.	The primary reason to give Fonovee the vehicle was to cover his mileage claim and to reward him for his long and dedicated service to the cause of small-holder coffee growers. The vehicle was then two years old. No doubt, it was in good repair and fully functional. 

27.	The resolution of the Association Executive Committee clearly appears mischievous and fraught in bias and unfairness for reasons that:

•	Fonovee chaired the meeting that resolved to give him the vehicle; 
•	he had all along kept possession and use of the vehicle even after substantive appointment was made to the office of General Secretary; 
•	immediately before the resolution was passed to give him the vehicle, he had threatened to resign as the Association Chairman. 

28.	It is not difficult to assume that, the resolution was calculated to legitimise an illegal act by Fonovee when his right to keep the vehicle had lapsed with the appointment of the Secretary General for the Association. His claim for vehicle allowance also appears spurious as he has not shown that entitlement by evidence. In any case, he had all along kept the Association vehicle and is therefore not entitled to any vehicle allowance.
 
29.	Further, Fonovee's presence throughout the meeting is open to inference that it was deliberate and intended to influence the outcome of the resolution of the Associate to "write-off" and allocate him the vehicle. He had a conflict of interest which could have been avoided had he excused himself from presiding over the vote that affected his personal interests. 

30.	The inescapable conclusion from his conduct is that, there was actual as well as perceived biased in the resolution of the Association Executive. In my view, a decision of an administrative body or authority or of a voluntary organisation passed in the circumstances of this case, offends against the principles of natural justice, common sense and is unenforceable.
 
31.	Furthermore, the resolution of the Executive committee is not authorized by the Association Constitution. Clause 3 deals with objects and powers of the Association which are exercised by the Executive Committee. Clause 3(b) gives the Association the power:

"(i)	to purchase, take on lease, hire or acquire by gift, device, bequest, exchange or otherwise any real or personal property, or any estate interest right or privilege in same.

(ii)	to borrow or raise such funds as the Committee determines appropriate and give security over the Association's real or personal property.

(iii)	to invest its surplus funds from time to time with any recognised bank of financial institution affording adequate security.

(iv)	in furtherance of the foregoing objects, to impose such levies on member associations as may be determined appropriate from time to time by the Association in a General Meeting.

(v)	to take such action either along or in concert with any other organisation and do such other lawful things as will facilitate achievement of any of the above mentioned objects."

32.	There is nothing in these provisions and more particularly in Clause 3(b)(i), (iii) and (v) that give the Association, power or authority to write off an asset and give it away to its own members. Clause 3(b)(v) in effect, limits the powers of Association to take such action as are lawful to facilitate achievement of any of the objects of the Association. 

33.	Further, the Executive Committee has no specific authority under Clause 6.1 to dispose of assets of the Association. That provision only gives the Executive Committee the authority to disburse funds. 

34.	Because of the corporate nature of the Association, there should be in place, regulatory processes for proper disposal of the Association assets. The Association Constitution is silent on this matter. However, when one considers the CICL supervisory role over the Association and the fact that the Association is accountable to the CICL for its accounts, it is not difficult to see that, the CICL has an equitable interest to ensure that the properties and assets of the Association are properly accounted for. 

35.	In my view, the same process adopted by the CICL for the proper disposal of its assets such as through public auctions also extends to and applies to the Association. The vehicle in question can only be properly disposed of through such legal process. 

36.	Hence, the disposition of the Association vehicle as a gift to Fonovee outside is unauthorised and illegal. It is also unlawful because the vehicle title or ownership passed without legitimate consideration. 

Conclusion

37.	I find that the vehicle is owned by the Association. The resolution of the Executive Committee resulted from an invalid meeting and consequently, an invalid resolution of the Association. The disposal of the vehicle in the manner the Executive Committee did is also against public interest and public policy. It offends against transparency in dealing with accounts and properties of associations and other voluntary organizations.

38.	The Orders of the Court are that:

1)	The decision of the Executive committee is unauthorized and invalid under the Association Constitution.
2)	The vehicle in question is and remains the property of PNGSHCGA.
3)	Disposal of the vehicle in question must follow a resolution of a validly constituted meeting of the PNGSHCGA Executive and sold under due legal process for consideration.
4)	The Interim Orders (if any) in relation to these proceedings cease forthwith.
5)	The vehicle in question be released forthwith to the PNGSHCGA.

39.	Costs are awarded against the defendants to be taxed if not agreed.

____________________________________________________

Warner Shand Lawyers: Lawyer for the Plaintiff
Acanufa & Associates Lawyers: Lawyer for the Defendants