N9592

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) NO. 11 OF 2021

BETWEEN:
NATIONAL CAPITAL DISTRICT COMMISSION
Plaintiff

V

INTERNAL REVENUE COMMISSION
First Defendant

AND:
SAM KOIM, in his capacity as COMMISSIONER GENERAL OF INTERNAL REVENUE COMMISSION and his capacity as Trustee of National Capital District Inland GST Trust Account
Second Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

AND:
CENTRAL PROVINCIAL GOVERNMENT
Fourth Defendant

AND:
MOTU KOITA ASSEMBLY
Fifth Defendant

AND:
GULF PROVINCIAL GOVERNMENT
Sixth Defendant

AND:
EDITH LAUFA, in her capacity as Trustee of National Capital District
Inland GST Trust Account
Seventh Defendant

Waigani: Anis J
2021: 4th October
2022: 29th April

DIRECTIONS HEARING – Query by the Court on its own volition based on unsettling issue concerning representation by the plaintiff – s 7(i) of the Attorney-General Act 1989 – whether plaintiff is the “State” and therefore requires permission from the Attorney General to act to sue or defend itself in a matter 

PRACTICE AND PROCEDURE – Definition of ‘State’ – whether definition unequivocal under the Constitution or the laws of Papua New Guinea – consideration – s 1 and Schedule 1.2 of the Constitution – s 2 and s 3 of the Interpretation Act 1990

PRACTICE AND PROCEDURE – ‘State” or ‘Independent State of Papua New Guinea’ as a legal person – s.247 of the Constitution – State” or ‘Independent State of Papua New Guinea’ capable or having the capacity to acquire and dispose assets, sue, and be sued

Cases Cited:

NCDC v. IRC and Ors (2021) N8809
Marape v. O’Neill (2016) SC1487
Valu v. Ngagan (2018) SC1723
Tongaiyu v Oil Search Limited (2021) SC2131
Davidwestern Advertising Group Ltd v. Hiri 152 Developments Ltd (2019) N8112
Air Niugini Ltd v. Kavieng District Development Authority (2019) N8158
Wasu Ipi and Ors v. Green Timber (PNG) Limited and Or (2021) N8898
Clinton Capitol Partners Pty Ltd v. Kumul Petroleum Holdings Ltd and Ors (2021) N9112
Maps Tuna Ltd v. Manus Provincial Government (2007) SC857
Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549
Mineral Resources Development Company Ltd v Mathew Sisimolu (2010) SC1090
PNG Power Ltd v. Ian Augerea (2013) SCI245
Niugini Building Supplies Limited v. National Housing Estate Limited (2020) SC1985
SCR No 1 of 1998; Reservation Pursuant to s. 15 of the Supreme Court Act (2001) SC672
The State v. Zachary Gelu and 1 Or (2003) SC716
NCDC v. Jim Reima (2009) SC993
Otto Napi v. NCDC (2004) N2797

Counsel:

M. Varitimos QC with D. Wood & E. Lili, for the Plaintiff
S. Sinen, for the First and Second Defendant
T. Tanuvasa, for the Third Defendant
G. Wayne, for the Fourth Defendant
N. Vada, for the Fifth Defendant
M. Ninkama with A. Serowa, for the Sixth Defendant
M. Mukwesipu, for the Seventh Defendant

RULING

29th April, 2022

1.	ANIS J:  On 4 October 2021, I heard submissions from the parties on a contested question of law, that is, whether s 7(i) of the Attorney-General Act 1989 applies to the plaintiff.  I reserved my ruling thereafter to a date to be advised.

2.	This is my ruling.

BACKGROUND

3.	I have set out the background of the matter in my earlier decision in National Capital District Commission v. Internal Revenue Commission and Ors (2021) N8809 under paragraphs 3 and 4, and I restate them herein:

3.  The plaintiff seeks various declaratory relief in its originating summons.  The relief sought essentially relate to or concern the application or interpretation of provisions under 2 legislations, namely, the National Capital District Commission Act 2001 (NCDC Act) and the Inter-Governmental Relations (Functions and Funding) Act 2009 (IGR Act).  The provisions include sections 37 to 45 of the IGR Act, and section 33(2) of the NCDC Act.

4.  What triggered the plaintiff to filing this proceeding and seeking interim restraining orders is this.  On 22 April of 2021, the 2nd defendant made a formal announcement in the media.  He informed the public and relevant stake holders, and I will paraphrase, that he has made a decision whereby instead of a current practice where GST funds for the 4th, 5th and 6th defendants (the 3 named defendants) are paid by 1st Defendant (the Commission) to them through the plaintiff, that the Commission will commence paying these GST portions or percentages of funds directly to the 3 named defendants.  The 2nd defendant gave effect to his decision by effecting payments of the GST funds that were required for the month of April 2021 directly to the 3 named defendants.

ISSUES

4.	The main issue queried by the Court is this.  What does State mean in reference to or by reading s 7(i) of the Attorney-General Act 1989 (AG Act)?  And whether the plaintiff is the State thus require permission from the Attorney General (AG) to brief out work.

5.	This Court raised the issues after challenges were raised by the Solicitor General (SG) as well as other defendants, that the plaintiff, as a state body or entity, must first seek and obtain the permission of the AG pursuant to s 7(i) of the AG Act before it may brief out or engage external lawyers (private lawyers or law firms) to act for it (the plaintiff) in the matter.  I received submissions from the parties on the issue to assist me consider and determine the issue, and I must say that I am indeed grateful in that regard.

SECTION 7(i) AND ORS

6.	I begin by setting out s 7(i) of the AG Act as follows:

7.  Duties, functions and responsibilities of the Attorney-General.
The duties, functions and responsibilities of the Attorney-General are—
……
(i)	to instruct lawyers within or outside the country to appear for the State in any matter; and…[Underlining mine]

7.	The contested word used in the section is, State.  What does it mean?  Perhaps the best place to begin, is to look the AG Act itself and see how it defines the word State.  Section 1 defines it to mean, and I quote:

"State" in relation to the functions and powers of the State Solicitor, means government Departments, Provincial and Local level Governments and an arm, department, agency or instrumentality of the National Government or a Provincial Government and includes a body set up by statute or administrative act for government or official purposes; (Underlining mine).

8.	In my view, and I must say it is obvious, that the definition of State therein is qualified.  It is defined in the context of or in relation to the functions and powers of the State Solicitor.  Although, it may provide some guidance, s 1 does therein does not define State at all or without reservation.  In the present matter, we are seeking to define State in the context of the powers and functions of the AG of Papua New Guinea.  The office and the powers and functions of the AG are uniquely distinct and separate from that of the Solicitor General (SG) and State Solicitors, as clearly stated under the AG Act.  The AG, pursuant to s. 156(2) of the Constitution and s 3 of the AG Act, is the Principal Legal Advisor to the National Executive.  Section 154 of the Constitution states, and I quote:

(1)  The Law Officers of Papua New Guinea are—
(a)	the principal legal adviser to the National Executive; and
(b)	the Public Prosecutor; and
(c)	the Public Solicitor.
(2)  An Act of the Parliament shall make provision for and in respect of the office referred to in Subsection (1)(a).  [Underlining mine]

9.	This country, Papua New Guinea, is expressly defined under Schedule 1.2 of the Constitution which states, "Papua New Guinea" means the Independent State of Papua New Guinea.  But its definition is expressly stated under s. 1 of the Constitution, that is, and I quote:

1.  The Independent State of Papua New Guinea.

(1)  Papua New Guinea is a sovereign, independent State by the name of the Independent State of Papua New Guinea.
(2)  The name of the Independent State of Papua New Guinea and its variants shall be protected by an Act of the Parliament.

10.	There are various legislations that give clarities to the term State or the Independent State of Papua New Guinea.  They are or include the Claims by and Against the State Act 1996 (CBAS Act) and the Interpretation Act Chapter No. 2 (Interpretation Act).  In my view, the latter legislation appears clear and precise on the issue at hand.  I refer to its preamble, which reads, Being an Act for the interpretation of Acts and instruments made under Acts, and for related purposes.  Like the Constitution, the Interpretation Act defines Papua New Guinea under its provision.  Section 3 states, "Papua New Guinea" means the Independent State of Papua New Guinea.  The term State is also expressly defined under s 3.  It states, "the State" means the Independent State of Papua New Guinea.  And it is also worth noting s 2, which states:

2.  Application.
(1)	Except where in this Act the context indicates otherwise, or some other meaning is clearly intended, this Act applies to every statutory provision (including this Act) whenever made or adopted.
(2)	The rules contained in this Act apply in accordance with Subsection (1) unless the context of any particular statutory provision indicates otherwise, or some other meaning is clearly indicated by a particular statutory provision.
(3)	This Act binds the State.

11.	At this juncture, I am satisfied that the term, State is expressly defined under our laws including our Constitution and it means the Independent State of Papua New Guinea.  The next point to note or query is its legal capacity.  Where can I find the law that recognizes or gives effect to the legal status or capacity of the State or the Independent State of Papua New Guinea?  The answer to that is also express.  Section 247 of the Constitution states:

“247.  Legal capacity of the Independent State of Papua New Guinea.

(1)  Papua New Guinea has power to acquire, hold and dispose of property of any kind, and to make contracts, in accordance with an Act of the Parliament.

(2)  Papua New Guinea may sue and be sued, in accordance with an Act of the Parliament.”

12.	So, in summary, I will say this.  The unequivocal definition of State is provided under the Constitution and the Interpretation Act, where it means the Independent State of Papua New Guinea or Papua New Guinea.  The State may be regarded a legal person that has powers to acquire, hold and dispose assets of any kind and to enter into contracts in accordance with law.  It also may sue or be sued in its name.  I note that Courts have also made this position clear in earlier case authorities, namely, Davidwestern Advertising Group Ltd v. Hiri 152 Developments Ltd (2019) N8112, Air Niugini Ltd v. Kavieng District Development Authority (2019) N8158, Wasu Ipi and Ors v. Green Timber (PNG) Limited and Or (2021) N8898 and Clinton Capitol Partners Pty Ltd v. Kumul Petroleum Holdings Ltd and Ors (2021) N9112.  The Supreme Court cases that regard State as a separate legal entity are Maps Tuna Ltd v. Manus Provincial Government (2007) SC857, and Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549.

CASE LAW CONCERNING SECTION 7(i)

13.	The parties herein have presented case authorities that refer to s 7(i) of the AG Act.  I intend to observe or discuss the following, (i), Marape v. O’Neill (2016) SC1487, (ii), Valu v. Ngagan (2018) SC1723 and (iii), Tongaiyu v Oil Search Limited (2021) SC2131. 

14.	In Marape and O’Neill, the fourth respondent contended that the sixth and seventh respondents, as officers of the Police force which was a state service pursuant to s. 188(1)(b) of the Constitution were part of the State.  The Supreme Court held that the 2 respondents required the authority of the AG pursuant to s 7(i) of the AG Act to engage external lawyers to act for them thus, amongst others, restrained them from taking further steps in the matter and permitted them time to make the said request to the AG.  In Valu and Ngangan, the Supreme heard an objection to competency from the respondents premised on s 7(i) of the AG Act and s10 of the Public Money Management Regularisation Act 2017.  The Supreme Court upheld the objection and dismissed the appeal on the basis, amongst others, that the appellants did not obtain a s 7(i) authority from the AG before they engaged external lawyers to act for them.  And in Tongaiyu and Oil Search, the Supreme Court, in hearing an objection to competency application filed by the second respondent, dismissed the appeal.  The Supreme Court found, amongst other reasons, that the Securities Commission of PNG was a body that was created by statute for government and official purposes, and therefore was bound by s 7(i) of the AG Act thus found that the AG’s authority to engage external lawyers was required.  The Court found that no such authority was obtained before the appellants engaged external lawyers to act for them, and in the end and together with other reasons, upheld the objection and dismissed the appeal.

15.	The main distinction I see from these Supreme Court cases if compared to the present case, is this.  The Supreme Court cases did not consider and make a determination on the meaning of, “State”, as defined or described under our laws, and in particular, whether the reference to “the State” under s 7(i) of the AG Act refers to or means The Independent State of Papua New Guinea or Papua New Guinea whereas this Court is.  And the short answer to that is that I have already defined State above which means The Independent State of Papua New Guinea or Papua New Guinea.  The definition is provided primarily under the Constitution.  No Court, whether it be the National or the Supreme Court, in my view, can ever redefine or replace the meaning of State as defined under the Constitution.  Section 9 of the Constitution makes it clear that the Constitution is supreme to the laws of this country.  

THE CONFUSION

16.	I make observations under this sub-heading.  The case law to date ‘may appear unsettled’ on the definition of state entities and how they may be part of or separate from the State.  “But do they really?”, is the question I ask myself.  In the present matter, I have made my findings, or should I say, simply pointed to the laws in regard to the definition of State above.  I have also provided explanation regarding the State’s legal capacity again pointing to the relevant provision under the Constitution.  

17.	I think it is important for this purpose to firstly keep in mind that State, which is Papua New Guinea or the Independent State of Papua New Guinea, is a legal person who can sue and be sued.

18.	The second thing to keep in mind, in my view, is the fact that there are entities or instrumentalities that are established under the Constitution, the Organic Laws, Acts of Parliament and instruments that may be regarded as part of the State.  See cases:  Mineral Resources Development Company Ltd v Mathew Sisimolu (2010) SC 1090, PNG Power Ltd v. Ian Augerea (2013) SCI245, and Niugini Building Supplies Limited v. National Housing Estate Limited (2020) SC1985.  In my view, this is where it had and may be still confusing to many.  Being part of the State is one thing which is accepted as ruled or seen in the various Supreme Court case authorities that have been cited by the parties.  With that, I make particular reference to the leading Supreme Court case, SCR No 1 of 1998; Reservation Pursuant to s. 15 of the Supreme Court Act (2001) SC 672.  The Supreme Court therein held that, The term, "the State" also includes a Provincial Government.  This Supreme Court decision plus others that have followed suit, in my view, are in harmony with and do not contradict this Court’s view which is that state entities are part of the State but are not State or The Independent State of Papua New Guinea.  What may make an entity a ‘state entity’ or ‘part of the State’, is also explained by the Supreme Court in various cases including Mineral Resources Development Company Ltd v Mathew Sisimolu (supra).

19.	The third point to keep in mind is this.  A primary reason why Courts have been faced with the dilemma of trying to determine whether an entity is part of the State, is this.  In my experience, I have seen that many litigants are suing state entities without naming the State as a party who may be vicariously liable or as a nominal defendant.  Sometimes, it may be that they are out of time to give the mandatory s 5 notice under the CBAS Act, to the State.  This may then raise questions later when proceedings are filed such as whether the entity sued is a state entity or part of the State, whether s 5 notice has been given, whether the inhouse lawyers for the state entity should appear in the matter, or whether external lawyers engaged had obtained authorization under s 7(i) of the AG Act.  Litigants should be made aware that if the State is deliberately kept out of a proceeding as a party and whereby only a state entity is named, then they face the real risk of not enjoying the fruits of their success, that is, in the event that they are successful and when they try to seek (i), a certificate of judgment from the Registrar and, (ii), the SG’s endorsement to the said certificate of judgment, pursuant to s 13 and s 14 of the CBAS Act.  See case: Air Niugini Ltd v. Kavieng District Development Authority (supra).  The Registrar and the SG, in my view, should reject any judgment or order that is forwarded to them where the State is not named as a party therein. In Air Niugini and Kavieng District Development Authority, I made this remark which I adopt herein:

14.  I would remark that it makes sense where State bodies or entities are sued and where the State is also named as a nominal defendant. In fact, it should be mandatory for parties that sue State entities or bodies, to ensure to also name the State or the Independent State of Papua New Guinea as a defendant. In that way, registration of a Certificate of Judgment under section 14(2) may ensure in the event that judgment is entered against the said State entity and the State or the Independent State of Papua New Guinea. A party who sues a state entity or body without also naming the State as a party to the proceeding shall face the real risk of not being able to have its Certificate of Judgment registered under section 14(2) of the CBASA.

20.	I will add the following to what I have said in the above case.  The CBAS Act and the AG Act, and the roles of the AG and SG, work in harmony with each other.  This was clearly explained in The State v. Zachary Gelu and 1 Or (2003) SC716 where the Supreme Court stated:

This provision indicates the nature and the scope of the functions of SG. Its main function is to "appear as an advocate for the State in matters before the courts." This is a specific and limited function. In exercising this function, SG shall accept instructions from the AG (s 13 (2)).

In practice, where the State is a party in any litigation before the courts, the SG may act as an advocate if instructed to do so by the AG in accordance with s 13 (2) of AG Act. Where the SG is instructed, he must act in accordance with the instructions of the AG, such as to settle or not to settle a matter.

Alternatively, the AG may in the exercise of his discretion instruct any other lawyer within or outside the country to act for the State (s 7 (i) of the AG Act).

21.	I make this closing observation.  If a state entity is sued without also naming the State or the Independent State of Papua New Guinea, the proceeding ought to be deemed as fatally defective because regardless of whether a s 5 notice may have been given to the State or whether the AG may have instructed the SG or external lawyers to act in the matter for the said state entity, there is nevertheless no cause of action or proceeding filed against the State or the Independent State of Papua New Guinea.  

THE PLAINTIFF

22.	The plaintiff is established under the National Capital District Commission Act 2001 (NCDC Act).  Sections 3 and 4 of the Act states:

3.  Government System of National Capital District.
(1)	A system of government for the National Capital District is hereby established.
(2)	The Government of the National Capital District shall be the National Capital District Commission.
(3)	The powers, functions and composition of the National Capital District Commission shall be as specified in this Act.

4.  National Capital District Commission.
(1)	The National Capital District Commission is hereby established.
(2)	The Commission—
(a)	is a corporation; and
(b)	has perpetual succession; and
(c)	shall have a seal; and
(d)	may—
(i)	acquire, hold and dispose of land, interest in land and property; and
(ii)	sue and be sued in its corporate name; and
(iii)	enter into contracts; and
(iv)	subject to the prior written approval of the Minister, conduct business enterprises.

23.	So, the plaintiff is the government or municipal authority for the National Capital District.  What is certain at this juncture in light of the NCDC Act is that it is a corporation or a legal person with rights and interests.  It can sue or be sued and acquire assets.  Subsection (2)(d)(iv) indicates that it does have some form of control by the State through the responsible Minister if it intends to conduct businesses.  Let me stop and say here that for this purpose, it is not necessary, in my view, to dive into considering in detail the various provisions of the NCDC Act to determine its mechanics and status as a corporation.

24.	That said, I note that the Supreme Court in NCDC v. Jim Reima (2009) SC993 held that, The NCDC is an entity of the State.  It is a public body and a statutory body.  Five years earlier, Acting Judge Allen David, as he then was, in Otto Napi v. NCDC (2004) N2797, recognized the said status of NCDC.  His Honour stated:

The National Capital District Commission is an entity established under Section 4 of the National Capital District Commission Act 2001 (“the NCDC Act”) and can sue and be sued and enter into contracts, etc.  It is established to govern the National Capital District as required by Section 4 of the National Constitution: see Preamble and Section 3 of the NCDC Act.  Section 4(5) of the National Constitution provides that for the purpose of calculating the number of provincial electorates, the National Capital District shall be treated as a province. The Organic Law on Provincial Governments and Local Level Governments 1995 applies to the Respondent as well by virtue of Section 4(1) of that Organic Law.  The National Capital District Commission therefore is the same as a provincial government and in this case for the National Capital District.

25.	The relevant Supreme Court cases referred to by the defendants are noted and have been considered herein.  They all say that the state entities including the plaintiff are part of the State.  I have no issues or quarrel with that, but even if I do, these Supreme Court decisions are binding upon this Court which is the National Court.  However, Supreme Court cases, as I have stated above herein, do not say that the plaintiff is the State or the Independent State of Papua New Guinea, as defined by the Constitution and the Interpretation Act. As I have explained above in my decision, there is no conflict between these Supreme Court decisions and this Court’s finding on the material issue which is the definition of State.  The term “State”, as stated above herein, is defined under s1 and Schedule 1.2 of the Constitution and also under s 2 of the Interpretation Act.  If a law unequivocally refers to State under its provisions, unless the term State is qualified whether under its provisions or otherwise, State shall mean or refers to the Independent State of Papua New Guinea or Papua New Guinea.

26.	Coming back to the issue, that is, whether the plaintiff is the State within the definition of s 7(i) of the AG Act, my answer answer is this, “no, the plaintiff is not the State.  The State is the Independent State of Papua New Guinea.  NCDC may be regarded as a state entity or body.  But that does not mean that it is the State.  Section 7(i) which reads in part, ‘to instruct lawyers within or outside the country to appear for the State in any matter….’ refers to the AG’s power where he or she may, where required to, appoint external lawyers to represent the State, which is the Independent State of Papua New Guinea, in any matter not necessarily limited only to Court matters or appearances.”

SUMMARY

27.	In summary, I find that the word State used under s 7(i) of the AG Act means the Independent State of Papua New Guinea or Papua New Guinea which is unequivocally defined under the Constitution and the Interpretation Act.  As such, I would answer in the negative to the question of whether the plaintiff is required to obtain permission from the AG before instructing external lawyers.

REMARKS

28.	In ending, I will make these remarks.  It seems to me that s.7(i) is relevant in complex situations or matters where the State is involved; matters that may require lawyers with expertise, either in commercial dealings, negotiations, or in court matters whether it be in commencing a proceeding or in defence.  In such situations, instead of the usual engagement whereby the AG himself, or the SG, or the State Solicitor may act for the State, the AG may instead authorize an external lawyer or law firm with such specialized expertise, pursuant to s.7(i) to appear and act for the State in a matter.  

29.	I also do not think s.7(i) is ‘a ticket’, so to speak, for any state entities to use or abuse, that is, by engaging external lawyers or firms to act for them, and then run to the AG to seek his or her permission under s 7(i).  The State already has a vast number of lawyers who are sufficiently capable to deal with matters that are commenced against it without the need to use or engage external lawyers.  Engagement of external lawyers require commitment of public funds.  As such and in my view, proper regard should be had by the AG before exercising his discretion under s 7(i) of the AG Act.  And I think strict control can occur if the State is always named as a party every time a state entity is sued.  In that way, due process would ensure whereby the AG would instruct the SG to act for the State as well as for the concerned state entity or entities or otherwise engage only one external law firm to act for the State and its entities, in a matter.  In that way, the State or the AG could avoid engaging multiplicity of lawyers all acting for separate state entities on a same or single matter, thus save public funds.

COST

30.	I will make no order on cost.

ORDERS OF THE COURT

31.	I make the following orders:

1.	The plaintiff is not the State or the Independent State of Papua New Guinea within the meaning of s 7(i) of the Attorney-General Act 1989.

2.	Consequently, the plaintiff is not required to obtain the consent or authority of the Attorney General before instructing external lawyers or its own lawyers, to act for it in this matter or in any matter.

3.	The matter shall return for directions or mention to address (i), outstanding motions that are pending, and (ii), the way forward in relation to progressing the matter to a hearing stage.

4.	Time is abridged.

The Court orders accordingly
________________________________________________________________
Ashurst Lawyers:	Lawyer for the Plaintiff
In-house Counsel:	Lawyer for the First & Second Defendants
Solicitor General:	Lawyers for the Third Defendant
Kessadale Lawyers:	Lawyer for the Fourth Defendant
In-house Counsel:	Lawyer for the Fifth Defendant
Jema Lawyers:	Lawyer for the Sixth Defendant
Mukwesipu Lawyers:	Lawyer for the Seventh Defendant