N7998

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) No. 290of 2018

BETWEEN:
DONDONALD LIMITED
Plaintiff

AND:
HON. DR. FABIAN POK, Phd, MP
as the Minister for Petroleum
First Defendant

AND:
THE PETROLEUM ADVISORY BOARD
compromising Bob Sari, Haukaua Susan Harry, Dairi Vele,
Dickson Guina and Warea Undi
Second Defendant

AND:
KEPSIE PUIYE as the Acting Secretary
for the Department of Petroleum & Energy
Third Defendant

INDEPENDENT STATE OF
PAPUA NEW GUINEA
Fourth Defendant

Waigani: Thompson J
2019: 21 August & 3 September

JUDICIAL REVIEW -Oil and Gas Act 1998 - cancellation of Petroleum Prospecting Licence-  failure to comply with statutory procedures

Counsel:

Mr. P.Lowing, for the Plaintiff
Mr. A. Ninkama, for the Defendant

3rd September, 2019

1.   THOMPSON J:	 On 9 May 2018 the Plaintiff filed this Originating Summons, seeking judicial review of the Defendant’s decision made on 23 April 2018 to cancel the Plaintiff’s Petroleum Prospecting Licence 560.

Facts

2.	On 12 August 2015 the Plaintiff applied for a PPL in Northern Province, pursuant to Section 21 of the Oil and Gas Act 1998 (“the Act”).  On 30 September 2016 the Defendants issued an Information Concerning Grant of PPL Licence No. 560 to the Plaintiff, pursuant to Section 23 of the Act.  Pursuant to Section 23 (1) (2), the Information Instrument informed the Plaintiff that it would be required to lodge a security for compliance with the licence conditions, that the security was to be by way of a bond in the prescribed form supported either by a cash deposit or a guarantee from a commercial bank in PNG acceptable to the Minister, in the prescribed form, for the amount of K100,000.00, and it included a statement  that the application would lapse if the security was not lodged with the Minister within one month or within three months if the Minister allowed it. 

3.	On 23 November 2016 the Plaintiff deposited K100,000.00 with the Bank South Pacific, with an instruction to provide the bank guarantee to the Defendants.  

4.	The Bank did not provide the guarantee.  It appears that the absence of the guarantee was overlooked by both the Plaintiff and the Defendants.

5.	On 30 November 2016 the Defendants issued a PPL 560 to the Plaintiff, for a period of six years.

6.	Pursuant to Section 138 (1) (e) of the Act, the Minister may cancel a PPL by Instrument served on the Licensee.  Pursuant to Section 138 (2), the Minister cannot do this unless he has given at least one month’s notice of his intention to cancel.

7.	Under Section 138 (2)(d), the Minister shall not cancel a licence unless, inter alia, he considers that special circumstances exist to justify a decision to cancel the licence, after taking into account any action by the licensee to remove the ground relied on in the notice to show cause, any other matters submitted by the licensee, and a report from the Board. 

8.	Nothing further happened until 20 February 2018, when the Plaintiff received a letter dated 15 February 2018 attaching an Instrument to Show Cause Notice dated 20 February 2018, issued pursuant to Section 138 of the Act.  The Notice said that the Condition of providing the Bank guarantee had not been met, and the Plaintiff was directed to Show Cause why the licence should not be cancelled, within 31 days.

9.	The Plaintiff then contacted BSP and found that the guarantee had not in fact been issued in 2016, and that BSP was still holding the monies on deposit.  On or about 27 February 2018 BSP issued a guarantee in the prescribed form to the Defendants.  On 6 March 2018 the Plaintiff made a written submission to the Defendants, confirming that they had paid the K100,000.00 security money to BSP in November 2016, and had instructed BSP to issue the guarantee, but that due to an administrative error by BSP, the guarantee had not been issued.  The Plaintiff confirmed that the money was still in place, and that BSP had now issued the guarantee, and provided a copy of the Defendants’ confirmation of receipt of the guarantee.  The Plaintiff submitted that the oversight had not been detected until notified by the Defendants, but it had now been rectified.  It was therefore not a continuing breach of the Condition.

10.	On 23 April 2018 the First Defendant issued a Notice of Cancellation of the PPL 560 pursuant to Section 138 of the Act, undercover of a letter dated 25 February 2018 which was headed “Notice of Intention for Cancellation”.  The Notice said that the Minister had considered the reason given in the Plaintiff’s response for failing to comply with the condition, and had considered a Report from the Board.  The Minister said that the Plaintiff’s reason was inadequate, and was regarded as a wilful misrepresentation.   The Notice concluded by saying that the Plaintiff’s licence “will be cancelled”.

11.	On 24 April 2018 the parties had a meeting, at which the Minister said that he had not in fact received a Petroleum Advisory Board Report before issuing the Notice, and would therefore be issuing a fresh Notice to Show Cause.

12.	The Plaintiff requested the Defendant’s written confirmation of this, but the Notice of Cancellation was not withdrawn, and a fresh Notice to Show Cause was not issued.  The Plaintiff therefore issued these proceedings on 9 May 2018, seeking to review the Notice of Cancellation.  On 15 May 2018 the Plaintiff obtained interim orders restraining the Defendants from removing its name from the Petroleum Register, and from granting a PPL over the same block to anyone else, pending the determination of the proceedings.

13.	The substantive relief sought by the Plaintiff is to quash the Defendants’ decisions to issue the Notice of Cancellation and to cancel the PPL, and to restore the Plaintiff to the Petroleum Register. 

Grounds

14.	The Grounds for Review are that the Minister erred in finding that special circumstances existed to justify a decision to cancel, when the Plaintiff’s response was made in writing and within time, the Notice to Show Cause was based on only one Ground, namely, the failure to provide the Security Bond Fee of K100,000.00 cash or a guarantee from a Commercial Bank, the Plaintiff had taken action and removed that Ground by showing that the Security Bond Fee of K100,000.00 cash had been paid to a Commercial Bank in PNG acceptable to the Minister at the material time, that the Plaintiff had given an instruction to the Bank to provide the guarantee at that time, that the Bank had erroneously failed to carry out the instruction in 2016, but that the Bank had now provided the guarantee, and that this was sufficient to show cause why the licence should not be cancelled

15.	The Plaintiff has pleaded that this was a breach of Section 138 (2), a breach of natural justice, and a breach of Section 41 of the Constitution, in that the Minister failed to take into account relevant considerations and took into account irrelevant considerations, by finding that the reason for the failure to comply with the condition was inadequate and was regarded as a wilful misrepresentation, and that his decision was unreasonable in the Wednesbury sense.

16.	The Plaintiff also submitted that the Notice of Cancellation was generally defective because of the difference in dates with the covering letter, and because it wrongly stated that the Minister had considered a report from the Petroleum Advisory Board, when no such Report had been issued.

Findings

17.	The Defendants produced no evidence to show the basis for the Minister’s statement that the Plaintiff’s explanation was a wilful misrepresentation.  There was no evidence of why he considered the Plaintiff to have in effect lied or otherwise deceived him about their explanation, or made any other type of misrepresentation. 

18.   The Plaintiff had produced independent documentary evidence from the Bank which proved that the monies had been paid to the Bank at the material time. There was no suggestion that the documents had been backdated or forged. The Plaintiff produced evidence that despite its instruction to the Bank to issue the guarantee, this had not happened, and the only explanation was inadvertence by the Bank.  

19.   There was also inadvertence by the Plaintiff and the Defendants, who all failed to realize that the Bank had not given the guarantee.  However, the Defendants produced no evidence that this had resulted in any adverse effect or prejudice to the Defendants.  There was no evidence that there had been any circumstances since 2016 which might have required the Defendants to call upon the guarantee.  

20.	The wording of Section 138 (2) gives rise to a prima facie rebuttable presumption that if the licensee responds within time, and takes action to remove the Ground for cancellation and prevent it recurring, then the licence shall not be cancelled.  There may be other matters and a Report on such matters by the Board, which may show that special circumstances exist to justify a cancellation.  However, the Defendants provided no evidence of any other matters or any Report on such matters by the Board, which might have shown special circumstances to rebut the presumption.

21.	In the absence of such evidence, the decision to cancel the licence was made by incorrectly stating that a Board Report had been considered, by failing to take into account the relevant prescribed matters, namely, that the licensee had responded within time and  had taken action to remove the Ground and prevent it recurring and no special circumstances had been identified, and by taking into account irrelevant matters, namely, the wholly unsubstantiated statement that the licensee’s explanation was a deliberate misrepresentation.  It was therefore a breach of both Section 138 (2) and of natural justice.

22.	The Defendants did not make any submission on the Ground that there were no special circumstances justifying cancellation of the licence.  

23.	Instead, the Defendants submitted that the Notice of Cancellation was not valid because it only gave notice that the PPL would be cancelled at an unknown future date, the Minister had not in fact received or considered a Petroleum Advisory Board Report, and also because it was based on the Notice to Show Cause which was not valid because it failed to comply with the requirement in Section 138 (2) (c) to give notice of the date not less than 14 days
before the end of the notice period, in which to serve a written submission.

24.   That Notice to Show Cause gave a time of 31 days in which to respond. By inference, the end of the notice period specified in S238(2)(a) could only have been at least 14 days after the end of the 31 days. The date for cancellation was not actually specified, but the only requirement in S238 (2)(a) is to specify the end of the notice period, not to specify a date for cancellation, which could only arise after the Minister had considered   the response and Report and made a decision to cancel.

25.    The Notice of Cancellation did not specify a date of cancellation, and therefore did not actually cancel the licence. This was a breach of S138(1)(e) which gives the Minister the power to cancel by serving an instrument of cancellation. This is to be distinguished from the power given to the Minister under S 138(2)(a) to give notice of a future intention to cancel.

Conclusion

26. It therefore seems that the Defendants have reached the same primary conclusion as the Plaintiff, although they have reached it by different paths. There is agreement that the Minister’s decision to cancel the licence was incorrect.

27.  However, the Defendants go on to say that because the Minister’s decision was incorrect, the Plaintiff’s licence was not in fact cancelled, and so the relief sought should be refused.

28.	The Defendants submitted that as a result of the Notice of Cancellation being in-valid, they had not implemented the Minister’s decision, they intended to withdraw it, and intended to issue a fresh Notice to Show Cause.  The Defendants further submitted that they had not actually removed the Plaintiff from the Petroleum Register, and the Plaintiff’s name was still registered as the holder of PPL 560.  They therefore submit that these proceedings were not necessary.

29.	If the Defendants had acted in accordance with this view, it may have been a persuasive argument. However, the Plaintiff was placed in a position of doubt and uncertainty about the decision, by reason of the fact that the Notice of Cancellation was not withdrawn, and no fresh Notice to Show Cause was issued.  In those circumstances, it was reasonable for the Plaintiff to issue proceedings to have the status of the decisions determined by the Court.

30.	In view of the Defendant’s admission that despite the Notice of Cancellation, the licence has not actually been cancelled and the Plaintiff has not been removed from the Petroleum Register, it is not necessary to grant the declarations and mandamus sought by the Plaintiff in relation to the Register.

31.	I therefore make the following orders:

(1)	An order in the nature of certiorari is granted to remove the decision of the 1st Defendant made on 23 April 2018 to issue a Notice of Cancellation of Petroleum Prospecting Licence (PPL) No. 560, into the National Court for the purpose of it being quashed.
(2)	The 1st Defendant’s decision made on 23 April 2018 to issue a Notice of Cancellation of Petroleum Prospecting Licence (PPL) No. 560 is quashed.
(3)	The interim orders made on 15 May 2018 are discharged.
(4)	The Defendants are to pay the Plaintiff’s costs, to be agreed or taxed
____________________________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers:  Lawyers for the Plaintiff	
Adam Ninkama Lawyers:                        Lawyers for the Defendants