State v Duban [2023] PGNC 338; N10501 (11 September 2023)

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Madang: Cannings J
2023: 18^th, 19^th, 23^rd, 24^th, 25^th May, 21^st August, 11^th September

CRIMINAL LAW – misappropriation, Criminal Code, s 383A – elements of offence – circumstances in which money of a public authority ceases to be its property – money of public authority disbursed from fund intended for purposes of public hospital – whether money applied to purposes to which it could lawfully be applied – whether the accused authorised and/or facilitated unlawful or improper application of money belonging to public authority – meaning and proof of ‘dishonesty’.

Two accused were charged with one count of misappropriation of K600,000.00 (“the funds”) the property of the National Gaming Control Board, being money from a statutory fund that was intended for infrastructure and medical equipment at a public hospital. The funds were parked in a bank account, the district operating account, under the control of both the accused. The first accused was the member of Parliament for the district in which the public hospital was located and the second accused was the district treasurer. The State alleged that the funds were not applied to their intended use but instead diverted to other uses unrelated to the public hospital including payment of travel allowances for overseas duty travel by the second accused. It was alleged that each accused authorised and/or facilitated the misapplication and misuse of the funds and aided and assisted each other in dishonestly doing so. The State invoked s 7 of the Criminal Code to argue that each was guilty of the offence of misappropriation under s 383A(1)(a) of the Code.

1. CANNINGS J: The accused, Nixon Duban and Helen Kanimba, are each charged with one count of misappropriation under s 383A(1)(a) (misappropriation of property) of the Criminal Code.

2. The allegation is that in March-April 2013 when Mr Duban was member for Madang Open in the National Parliament and Mrs Kanimba was Madang District Treasurer, they dishonestly appropriated K600,000.00 of public money under the control of the National Gaming Control Board, referred to in this judgment as “the funds”, intended to be applied to an infrastructure and medical equipment project for Yagaum Rural hospital in Madang District, to unauthorised and unlawful purposes.

Nixon Duban and Helen Kanimba ... stand charged that they ... between 1 March and 30 April 2013 ... dishonestly applied to their own use and to the use of others monies in the sum of ... K600,000.00, the property belonging to National Gaming Control Board contrary to s 383A(1)(a) and (2)(d) of the Criminal Code.

4. The State alleges that the funds were parked in the Madang District Treasury operating account, which was under the control of both the accused. The State alleges that the funds were not applied to their intended use but instead diverted to other uses unrelated to the public hospital including payment of travel allowances for overseas duty travel by the second accused. It is alleged that each accused authorised and/or facilitated the misapplication and misuse of the K600,000.00 and aided and assisted each other in dishonestly doing so. The State invoked s 7 of the Criminal Code to argue that each was guilty of the offence of misappropriation under s 383A(1)(a) of the Code.

6. In October 2011 Daniel Marme, the then administrator of Yagaum Rural Hospital, a public hospital in Madang District, drafted a project proposal entitled “Yagaum Lutheran Rural Hospital Infrastructure Renovation and Improvement Project”, seeking funding for staff houses renovation, water supply improvement, medical equipment and new doctor’s house to the total value of K1,227,245.46. The proposal was forwarded to the office of the then Prime Minister, Hon Peter O’Neill MP.

7. In March 2012 the first accused Mr Duban completed an application, based on that project proposal, and submitted it to the National Gaming Control Board’s board of trustees, which is responsible under the Gaming Control Act 2007 for management of the Community Benefit Fund, a fund established under that Act for distribution for purposes of community benefit. The proposal was endorsed by Prime Minister O’Neill who directed that it be favourably deliberated on by the Gaming Board.

8. In April 2012 funding for the project was approved by the Community Benefit Fund board of trustees.

9. In May 2012 a cheque for K300,000.00 was drawn from the Community Benefit Fund payable to Yagaum Lutheran Rural Hospital.

10. On 11 June 2012 Mr Duban presented the cheque for K300,000.00 to the then hospital administrator, Belid Pitau (State witness #1). The hospital board established a project committee and opened a special trust account into which the K300,000.00 was deposited.

11. In July-August 2012 Mr Duban was elected in the 2012 general election to the National Parliament as member for Madang Open. Prime Minister O’Neill appointed him as Minister for Police. He held the seat until the 2017 general election, when he lost to Bryan Kramer. There was in the period between 2012 and 2017 a successful election petition against Mr Duban brought by Mr Kramer. It resulted in a by-election, which Mr Duban also won.

12. In July-August 2012 the hospital board obtained quotes from medical equipment suppliers and decided to purchase two items from EBOS Health & Science for the sum of K300,000.00, an ultrasound scanner and a portable x-ray machine.

13. On 31 August 2012 Mrs Pitau submitted an acquittal of the K300,000.00 to Mr Duban, which was copied to the chairman of the Community Benefit Fund board of trustees.

14. On 1 October 2012 Mr Duban wrote to Prime Minister O’Neill (the Minister responsible for the Gaming Board) asking the Prime Minister to approve payment of approximately K900,000.00 remaining from the funds approved for the Yagaum Lutheran Rural Hospital Infrastructure Renovation and Improvement Project into the Madang District Treasury Operating account, to enable him to control the release of the funds in instalments of K300,000.00.

15. The Prime Minister replied by letter dated 5 October 2012, acceding to that request. He said he would direct his chief of staff to follow up with the Gaming Board so that Mr Duban’s request could be met.

16. On 5 November 2012 the Community Benefit Fund board of trustees approved the proposal to pay the K900,000.00 remaining from the funds approved for the Yagaum Lutheran Rural Hospital Infrastructure Renovation and Improvement Project into the Madang District Treasury operating account.

17. On 15 November 2012 a cheque was issued from the Community Benefit Fund payable in the sum of K900,000.00 to Madang District Treasury operating account; the attached voucher indicated that it was the final payment for Yagaum Rural Hospital.

18. On 13 December 2012 the cheque for K900,000.00 was deposited into the Madang District Treasury Operating Account at Bank South Pacific.

19. On 28 December 2012 a cheque was issued from Madang District Treasury Operating Account in the sum of K300,000.00 payable to Yagaum Lutheran Rural Hospital.

20. On 20 January 2013 Mr Duban presented that cheque for K300,000.00 to Yagaum Rural Hospital in respect of the Yagaum Lutheran Rural Hospital Infrastructure Renovation and Improvement Project. That left a sum of K600,000.00 still due to be applied in respect of the project. It is that sum of K600,000.00 that is the subject of the indictment in this case.

21. On 28 March 2013 Mr Duban wrote, in his capacity as member for Madang and Minister for Police and chairman of the Madang District Joint District Planning and Budget Priorities Committee (JDPBPC), to Mrs Kanimba (as district treasurer) and Lawrence Pitor (district administrator) instructing them to draw down K340,000.00 of the K600,000.00 funding allocation reserved for Yagaum Rural Hospital. Mr Duban noted that this was on the understanding that “funding reimbursement” would be made through a JDPBPC resolution when funding is further needed by the hospital.

22. On 29 March 2013 Mr Duban’s instructions were followed and cheques for were drawn in favour of:

23. On 3 April 2013 Mr Duban wrote to Mrs Kanimba (as district treasurer) and Lawrence Pitor (district administrator) instructing them to draw down the balance of K260,000.00 of the K600,000.00 for the Yagaum Rural Hospital funds, and apply it to an educational tour to Jayapura in May 2013 by various District administration officers and LLG ward councillors and recorders. He added that the amount of K260,000.00 would be refunded as soon as DSIP funds are made available.

24. The instruction of 3 April 2013 was substantially followed, but it transpired that in respect of the K260,000.00 drawdown:

25. The break-up of those amounts, paid in April and May 2013, is set out in a table included in the Forensic Analysis & Examination Report into Yagaum Lutheran Rural Hospital Investigation prepared by State witness #9 Paulson Undi, acting Director of Forensic Audits, Auditor-General’s Office, which has been admitted into evidence as exhibit P98, at pages 9-10:

No	Date	Payee	Description	Chq#	Amount (K)	Comment
EDUCATIONAL TOUR TO JAYAPURA, INDONESIA EXPENSES
1	10/5/2013	Helen Kanimba	Logistics Support for team	3604	132,324.00	Logistics support
2	23/04/2013	Air Niugini	Rtn a/fares. Mdg/POM/Mdg	3051	1,217.40	Airfares
3	10/05/2013	Air Niugini	A/fares. Team Madang to Vanimo	3065	7,405.50	Airfares
4	10/05/2013	Rabaul Shipping	Boat fares for delegation to Vanimo	3071	35,400.00	Boat fares
5	10/05/2013	Kwadi Inn	Inv#13/007 o/s accom bills	3068	7,920.00	Accommodation
6	10/05/2013	Sandaun Surf Hotel	Accom for 3 officers	3072	8,400.00	Accommodation
7	23/04/2013	Mathias Igode	T/A on d/travel to POM 23-29	3052	1,400.00	Travel allowance
8	10/05/2013	Mathias Igode	9 days T/A Edu Trip to Jayapura	3069	1,800.00	Travel allowance
9	10/05/2013	Helen Kanimba	9 days T/A Edu Trip to Jayapura	3063	1,800.00	Travel allowance
10	10/05/2013	Ambrose Akoi	9 days T/A Edu Trip to Jayapura	3067	1,800.00	Travel allowance
11	10/05/2013	Nique IT Services	Inv#31. Passport processing	3070	3,150.00	Passport processing
Total					K202,616.90
FINANCIAL ASSISTANCE
12	08/05/2013	Ivan Kanimba	Financial assistance school fee	3062	20,000.00	School fee assistance
13	20/05/2013	Don Bosco Tech	S/Fee assist for [Gideon Gedix and Steven Gedix]	3077	5,000.00	School fee assistance
14	10/05/2013	Tingim Wanskin	Fin/assistance. JDP & BPC Res#	3066	30,000.00	Financial assistance
Total					K55,000.00
Grand Total					K257,616.90

26. In November 2013, two payments were made from the Madang District Treasury Operating Account, which were claimed in submissions to be “reimbursement” of funds for the Yagaum Lutheran Rural Hospital Infrastructure Renovation and Improvement Project:

27. On 8 August 2014 the hospital administrator Mrs Pitau submitted an acquittal of the second instalment of K300,000.00 (which had been received by the hospital on 20 January 2013) to Mr Duban’s office. It was reported that this K300,000.00 was applied to complete renovation of five of 22 staff houses and purchase and installation of water tanks to improve water supply at the hospital.

28. The offence with which the accused are charged is in s 383A (misappropriation of property) of the Criminal Code, which states:

(1) A person who dishonestly applies to his own use or to the use of another person—

(b) property belonging to him which is in his possession or control (either solely or conjointly with another person) subject to a trust, direction or condition or on account of any other person,

(1A) Notwithstanding Subsection (2), an offender guilty of the crime of misappropriation shall be sentenced —

(a) to imprisonment for a term of 50 years without remission and without parole, if the property misappropriated is of a value of K1 million or upwards, but does not exceed K10 million; and

(b) to life imprisonment if the property misappropriated is of a value of K10 million or upwards.

(2) An offender guilty of the crime of misappropriation of property is liable to imprisonment for a term not exceeding five years except in any of the following cases when he is liable to imprisonment for a term not exceeding 10 years:—

(a) where the offender is a director of a company and the property dishonestly applied is company property; or

(b) where the offender is an employee and the property dishonestly applied is the property of his employer; or

(c) where the property dishonestly applied was subject to a trust, direction or condition; or

(d) where the property dishonestly applied is of a value of K2,000.00 or upwards.

(a) property includes money and all other property real or personal, legal or equitable, including things in action and other intangible property; and

(b) a person's application of property may be dishonest even although he is willing to pay for the property or he intends to restore the property afterwards or to make restitution to the person to whom it belongs or to fulfil his obligations afterwards in respect of the property; and

(c) a person's application of property shall be taken not to be dishonest, except where the property came into his possession or control as trustee or personal representative, if when he applies the property he does not know to whom the property belongs and believes on reasonable grounds that such person cannot be discovered by taking reasonable steps; and

(d) persons to whom property belongs include the owner, any part owner, any person having a legal or equitable interest in or claim to the property and any person who, immediately before the offender's application of the property, had control of it.

A person who dishonestly applies to his own use or to the use of another person ... property belonging to another ... is guilty of the crime of misappropriation of property.

30. The elements of this offence, as stated by the Supreme Court in Kavo v The State [2015] 2 PNGLR 232, are that the accused has:

31. Elements (i) and (iii) are non-contentious in that each accused “applied” (gave instructions for and/or facilitated the use of) “property” (the funds deposited by the Gaming Board into the Madang District Treasury operating account).

32. Elements (ii), (iv) and (v) are contentious, and give rise to two key issues:

33. First, were the funds applied to proper, lawful purposes (elements (ii) and (iv))?

WERE THE FUNDS (K600,000.00 FROM THE GAMING BOARD) APPLIED TO PROPER, LAWFUL PURPOSES?

35. If public money under the control of and allocated by a public authority such as the Gaming Board is applied to a lawful purpose, it ceases to be property of the Gaming Board, thus element (iv) would be unproven. If it is applied to an unlawful purpose, it remains the property of the Gaming Board and its use by the accused or any other person would mean that elements (ii) and (iv) are satisfied (Lawi v The State [1987] PNGLR 183).

36. There were 99 pieces of documentary evidence tendered by the State, with the consent of the defence, and these were admitted into evidence and marked as exhibits P1 to P99.

37. State witness No 1 Belid Pitau was administrator of Yagaum Lutheran Rural Hospital in the period from 2012 to 2014. She said the hospital in 2012 was in desperate need of improvement. She arranged with Mr Duban to follow up the funding request with the Gaming Board. He presented the first cheque for K300,000.00 in June 2012. He said the funding had been approved and that was the first instalment. The hospital board appointed a project committee to supervise the use of the funds, as the hospital had been told that it would receive a total of K1,200,000.00 from the Gaming Board. The project committee took advice from Modilon General Hospital personnel and the money was applied to correct purposes.

38. After acquitting the first instalment the hospital sought the second instalment. She noted that the second instalment was in the form of a cheque for K300,000.00 drawn from the Madang District Treasury account. It was used for staff housing at the hospital and a water supply project. But they only managed to complete five of 22 houses.

39. She said that they were still expecting to receive a further K600,000.00. They had plans to build a doctor’s house and to spend more on renovation of the staff houses and to rectify the water supply for the hospital. They were told that a contractor had been selected to construct the doctor’s house, but she was never privy to the details. She tried to follow up with the Madang Treasury office to find out what was happening with the balance of K600,000.00 but the officers were not helpful. The hospital got no further money.

40. In cross-examination Mrs Pitau maintained her evidence that in the time she was at the hospital the balance of K600,000.00 was not made available to the hospital. Mr Meten put to her that there were four shipping containers of medical equipment and supplies delivered to the hospital, which came from the District Treasury office. She denied that. There was one container, left at the hospital, at the relevant time, until October 2014 when she left the hospital for alternative employment. That container was donated by Rotary International. Mr Meten also put to her that a contractor came in and built a doctor’s house. She said that was a lie. She said that the hospital was the project holder and all the K1.2 million from the Gaming Board should have been paid to and managed by the hospital. Instead only K600,000.00 was received and they never saw the balance of K600,000.00.
41. State witness No 2 Awateng Okam has been a senior officer at Yagaum Lutheran Rural Hospital since 2014 and took over from Mrs Pitau as administrator, and is still the hospital administrator. He is aware of the Hospital Infrastructure Renovation and Improvement Project and that it was to be funded by the Gaming Board and that the total funding was K1.2 million. He is aware of the first K600,000.00 being applied by the hospital for purchase of medical equipment and for five staff houses and a partially-completed doctor’s house.

42. When he assumed office as administrator in late 2014 he was told that K600,000.00 was still due. He spoke to various people at the Madang District Treasury Office but could not get much information on the balance of K600,000.00 that he understood the hospital was entitled to. It has never been received.

43. Mr Meten asked Mr Okam about four containers of medical equipment being delivered to the hospital. He said he did not know anything about that.

44. State witness No 3 Emily Philip is an officer of the Madang Provincial Treasury Office. She responded to a search warrant in 2019 requiring her to provide payment vouchers and transaction reports. It involved a lot of work but the necessary documentation was eventually retrieved. She gave the documents to her boss, the Provincial Accountant.

45. State witness No 4 Michael Maihua has been an officer of the Madang District Treasury office since 2015. He is presently supervisor of the Accounts section. He responded to a search warrant served on his boss in 2019 and assisted one of his officers, Emily Philip, in compiling the documents including payment vouchers and general expense forms FF3 and FF4, which complied with the search warrant.

46. In cross-examination he was asked whether while complying with the search warrant he found any payments in relation to requests by Yagaum Lutheran Rural Hospital. He said that he noticed a payment made to Jiwaka Welfare Association that had some connection with the hospital but he does not know the details as it was before his time.

47. State witness No 5 Mathew Sengian is a retired Department of Finance officer based in Madang from 1976 to 2021. He was served with a search warrant by police in 2019 and instructed his officers to locate all documents concerning funds received for Yagaum Lutheran Rural Hospital from the Gaming Board. One of his main functions was to manage public funds coming into the District Treasuries in the province and to ensure that public money was paid out to the right people, as authorised by each District Development Authority.

48. In cross-examination he was asked about payments made in connection with Yagaum Lutheran Rural Hospital to Jiwaka Welfare Association and Umsah Building Contractors. He said he only came to know about the payments through the PGAS printout, which he checked when responding to the search warrant in 2019. He knows nothing more about those payments.

49. State witness No 6 Bernard Alvin Lange was Madang provincial administrator from 2010 to 2014. He had been an officer of the provincial administration since 1988. In examination-in-chief he was asked by the prosecutor Ms Mosoro about the diversion of funds in the Madang District Treasury operating account earmarked for Yagaum Lutheran Rural Hospital that occurred in March 2013, including application of K260,000.00 to meet travel expenses for selected District Administration officers and LLG ward councillors and recorders for an educational tour to Jayapura, Indonesia. He said he approved the payments as a Section 32 officer as he trusted the senior officers, the then Madang District Administrator, Lawrence Pitor, and the then District Treasurer, Mrs Kanimba, who had the backing of Mr Duban who was then the member for Madang Open and Minister for Police.

50. State witness No 7 Bryan Kramer is a former member for Madang Open, having won the seat at the 2017 and 2022 general elections. He was dismissed from office in May 2023 in accordance with the recommendation of a leadership tribunal that found him guilty of misconduct in office. He said that the alleged misuse of the Gaming Board funds for Yagaum Lutheran Rural Hospital had been a ground of challenge in his election petition (he was runner-up) that challenged Mr Duban’s win in the 2012 general election. The petition succeeded and resulted in a by-election in 2013, which Mr Duban won again and he (Mr Kramer) was again runner-up. He has maintained his concern about the alleged misuse of the funds over a long period and lodged a formal complaint to the police in 2019 that led to the investigation and charges being laid against Mr Duban and Mrs Kanimba.

51. In cross-examination he was asked whether the Gaming Board or Yagaum Lutheran Rural Hospital had ever complained about the matter. He said he was not aware of them making a formal complaint, like the one he did.

52. In re-examination he said that he complained due to a sense of duty. From his point of view, a wrong had been done and those responsible should be brought to account.

53. State witness No 8 Detective Chief Sergeant David Saule is OIC CID at Kundiawa police station, Chimbu Province. He has spent 33 years in the Royal Papua New Guinea Constabulary, including 30 years in criminal investigations. He was brought from Kundiawa to Port Moresby in 2020 to be a member of the special investigation team formed by the Commissioner of Police to investigate the alleged misappropriation of Gaming Board funds intended for Yagaum Lutheran Rural Hospital.

54. State witness No 9 Paulson Undi is a forensic auditor in the Office of the Auditor-General. He has a Masters degree in forensic auditing from the University of Wollongong, Australia. He was asked by the Commissioner of Police in 2019 to be a member of the special investigation team formed to investigate the alleged misappropriation of Gaming Board funds intended for Yagaum Lutheran Rural Hospital. He investigated the allegations and prepared a 25-page report entitled "Forensic Audit Analysis & Examination Report into Yagaum Lutheran Rural Hospital”, which was admitted into evidence as exhibit P98. Under “Conclusions”, he stated that:

In conclusion, forensic audit observed that the Madang District Administration failed to comply with the procurement processes and procedures stipulated under the Public Finances (Management) Act 1995 and misapplied K600,000.00 of the funds belonging to the Yagaum Lutheran Hospital. Mr Duban used his position and office and have instructed, directed and approved the expenditures of the K600,000.00. Further, the funds would not have been misappropriated had the BOT [board of trustees] of the CBF [Community Benefit Fund] under the NGCB [National Gaming Control Board] released the balance of K900,000.00 to Yagaum Lutheran Hospital. Instead the funds were released to Madang District Treasury because of the influence, directives and approval of the Prime Minister and the deliberate ignorance of the CEO of NGCB not preventing the funds to be paid to Madang District Treasury operating account.

Finally, the Prime Minister, Mr Duban, Imelda Agon, Mr Pitor and Mrs Kanimba must be held responsible for the actions in misappropriating the K600,000.00 of the CBF that was released for the Yagaum Lutheran Rural Hospital projects.

55. In examination-in-chief he highlighted that after the first K600,000.00 of the K1.2 million from the Community Benefit Fund was allocated to the Yagaum Rural Hospital’s projects, the balance of K600,000.00 was misapplied. K140,000.00 was wrongly advanced to Yabob Lutheran Church, K200,000.00 was wrongly advanced to Tumbuna Tracks Studios and K260,000.00 was applied to various recipients for the educational tour to Jayapura (but out of that K260,000.00, K55,000.00 was given to recipients who appeared to have nothing to do with the Jayapura trip in the form of “financial assistance, including K20,000.00 which was given as school fee assistance to Mrs Kanimba’s son, Ivan Kanimba). All that balance of K600,000.00 was intended for the use of Yagaum Rural Hospital, but it was all misappropriated. The application of the K600,000.00 was non-discretionary.

56. In cross-examination he stated that although the Gaming Board decided to transfer the K600,000.00 into the Madang District Treasury operating account, it was wrong to do so. The operating account is the account into which the District’s discretionary funds were deposited, but the K600,000.00 did not belong there as it was non-discretionary. The board of trustees breached the trust deed to which allocation of money in the Community Benefit Fund was subject. Asked by Mr Meten to produce the trust deed, the witness was unable to do so and said that it should be in the police file. The witness was adamant that K600,000.00 had been misappropriated. It was not supposed to be diverted elsewhere.

57. In re-examination he stated that he did not find any evidence that the K600,000.00 intended for Yagaum Rural Hospital, which was diverted to unauthorised purposes, was reimbursed to Yagaum Rural Hospital.

58. There were five pieces of documentary evidence tendered by the defence, with the consent of the State, and these were admitted into evidence and marked as exhibits D1 to D5.

60. The second accused Helen Kanimba gave oral testimony and was the only witness for the defence. She explained in examination-in-chief that she was educated to grade 12 and has a diploma in accounting from the PNG Administration College. She has been gainfully employed in various accounting and finance positions in the public sector since 1978. She was the Madang District Treasurer, serving under three different MPs including Mr Duban from 2002 to 2015. In 2019 she was elevated to the position of provincial finance manager in the Madang provincial administration. She still holds that position but is presently suspended due to the criminal charge she faces in this case.

61. She is aware of the deposit of a Gaming Board cheque for K900,000.00 in the Madang District Treasury operating account in December 2012, which was for the Yagaum Rural Hospital project. The Madang District Treasury operating account was the only bank account for Madang District used in the years 2012 and 2013 to hold other funds including discretionary funds allocated by the National Government to Madang District.

62. Of that K900,000.00, the first K300,000.00 was drawn as a cheque against the Madang District Treasury operating account on 28 December 2012 and presented to
Yagaum Rural Hospital in January 2013. However, the acquittal of those funds was not provided to Madang District Treasury until August 2014.

63. In the period from January to May 2014, the balance of K600,000.00 for the Yagaum Rural Hospital was diverted to other projects in accordance with Mr Duban’s requests:

64. She agreed that of the K260,000.00 originally allocated for the educational tour to Jayapura, only K202,616.90 was applied to costs associated with that tour and the sum of K55,000.00 was applied for financial assistance for various recipients as approved by Mr Duban.

65. These funds were diverted as there was a delay in 2013 of District Support Improvement Program (DSIP) funding, which was not received until July 2013. Also Yagaum Rural Hospital had not acquitted the K300,000.00 they received in January 2013. Diversion of funds in this manner is a normal practice and consistent with sound financial management. In this instance it was done transparently with the approval and knowledge of the district administrator and the provincial treasurer.

66. She saw it as her duty to ensure that Yagaum Rural Hospital was refunded the amount of their project funds that had been temporarily diverted, and this is what happened in the second half of 2013:

67. She said that four shipping containers containing the medical equipment were brought to the Madang District office yard. The ward members from across the district were brought in and Mrs Pitau and other hospital officers attended the event at which the containers were handed over to the hospital. It was a big event. The containers were opened and all those present saw everything inside them.

68. In cross-examination Mrs Kanimba acknowledged that the K600,000.00 allocated by the Gaming Board to Yagaum Rural Hospital had to be applied to the hospital, and it was, she said, in the second half of 2013. It was parked in the Madang District Treasury operating account, as that was the only suitable account available at that time for the deposit of such funds.

69. It was diverted temporarily to other projects in the first half of 2013 because of a delay in provision of Madang District’s discretionary funds. This was a normal practice to accommodate a cash shortage. She consulted the provincial treasurer and all transactions were conducted with the knowledge and authority of the provincial administrator. There was no trust instrument accompanying the deposit of the K600,000.00 and no specific instructions that might have prevented the diversion of the funds. There was no acquittal of the initial K300,000.00 drawn from the Madang District Treasury operating account and paid to Yagaum Rural Hospital until August 2014. It should have been provided much earlier than that. They were waiting for the acquittal and there was a long delay in providing it.

70. I now address the question of whether the K600,000.00 was applied to proper, lawful purposes.

71. It is conceded by the defence that the sum of K600,000.00, which was allocated by the Gaming Board to Yagaum Rural Hospital in late 2012 and deposited into the Madang District Treasury operating account, was diverted to other purposes in early 2013:

72. All that expenditure had nothing to do with Yagaum Rural Hospital. All of it was prima facie for unauthorised and improper purposes. Defence counsel Mr Meten argues, however, that no misapplication of funds occurred, for three reasons.

73. First, the State did not present any evidence of the much-talked-about trust deed which was supposed to set out the guidelines for the use of the Community Benefit Fund controlled by the Gaming Board. There were no specific instructions preventing the temporary diversion of the funds.

74. Secondly, it was the Gaming Board which gave up control of the funds when it agreed to the deposit of the funds in the Madang District Treasury operating account. Once that happened, responsibility for management and control of the funds passed to the Madang District Treasury. There was a long delay (until August 2014) before Yagaum Rural Hospital provided an acquittal of the second tranche of K300,000.00 Gaming Board funds it had received, so in early 2013 it was open to Madang District Treasury to make use of the funds to apply to other projects.

75. Thirdly, all the K600,000.00 was in fact applied for the benefit of Yagaum Rural Hospital by the end of 2013, when:

76. First, the trust deed, which provides specific guidelines on use and control of funds from the Community Benefit Fund, was presented in evidence by the State. It is exhibit P33. The inability of State witness #9 Paulson Undi to refer to it when he was asked in cross-examination did not mean there was a gap in the State’s case. The cheque for K900,000.00 from the Gaming Board, which was deposited into the Madang District Treasury operating account in December 2012 was drawn against the Community Benefit Fund and was intended to be applied for the benefit of Yagaum Rural Hospital. That fund is a statutory fund established under s 163(6) of the Gaming Control Act 2007. The sum of K600,000.00 was part of the response to the original request for funding made on behalf of Yagaum Rural Hospital by Daniel Marme in October 2011, and it was part of the sum of K900,000.00 that Mr Duban requested Prime Minister O’Neill be paid into the Madang District Treasury operating account in October 2012. The purposes to which the K600,000.00 could lawfully be applied were strictly limited to purposes connected with Yagaum Rural Hospital.

77. Secondly, the Gaming Board did not give up control of the funds when it agreed to the deposit of the funds in the Madang District Treasury operating account. The Gaming Board was always the source of the funds and it is to the Gaming Board or the board of trustees of the Community Benefit Fund that the acquittal of the funds should have been made. Though there was a delay, until August 2014, before an acquittal by the hospital of the second tranche of K300,000.00 Gaming Board funds it had received, this did not provide the Madang District Treasury – more particularly, the two accused – with a good reason to use the funds for discretionary purposes, as if they were discretionary funds under their control.

78. Thirdly, I reject the contention that all the K600,000.00 was applied for the purposes of Yagaum Rural Hospital by payment of K340,000.00 to Jiwaka Welfare Society for containers of medical equipment for Yagaum Hospital and K305,000.00 to Umsah Construction for construction of a doctor’s residence. The only documentary evidence of these expenditures is in exhibits D3 and D4, which are a bundle of Madang District Treasury payee history documents, including barely legible requisitions for expenditure referring obliquely to payments to Jiwaka Welfare Society and Umsah Contractors. Mrs Kanimba gave oral evidence that the medical equipment was purchased and handed over to the hospital representatives and that the money was in fact paid to a local contractor to build the doctor’s house. However, there was no corroboration of her evidence and I found it unconvincing. The State witnesses’ evidence was clear: they did not know of any medical equipment or supplies being provided to the hospital. Mrs Pitau knew of only one container holding medical equipment and supplies, which was provided by Rotary International. The doctor’s house has never been completed. Besides that, there were important parts of Mrs Kanimba’s evidence that were not put to the State witnesses, in breach of the rule in Browne v Dunn (1893) 6 R 67 (HL), and this means her evidence has a reduced probative value.

79. I find that the K600,000.00 was not applied to proper, lawful purposes. It was applied to improper and unlawful purposes, unauthorized by the Gaming Board. It remained the property of the Gaming Board.

80. The K600,000.00 was applied to the use of persons other than Yagaum Rural Hospital, who were not authorised to receive it, namely:

81. This means that elements (ii) and (iv) of the offence of misappropriation have been proven by the State against both accused.

82. In determining the element of dishonesty, the following principles, which were conveniently summarised recently by Berrigan J in The State v Paraka (2023) N10273, are to be applied:

A person is not criminally responsible, as for an offence relating to property, for an act done or omitted to be done by him with respect to any property in the exercise of an honest claim of right and without intention to defraud.

83. Mr Meten submitted that there was no dishonesty on the part of either accused as it was clearly Mr Duban’s intention, when the K600,000.00 was diverted in early 2013 to Tumbuna Tracks Studios and Yabob Lutheran Church and other priority projects, that that sum would be reimbursed to Yagaum Rural Hospital when the hospital needed the funds and when discretionary funds in the Madang District Treasury operating account were replenished. Mrs Kanimba has given clear evidence that that was her understanding too. The diversion of the funds to other priority projects was always subject to the requirement that the funds would be reimbursed to Yagaum Rural Hospital when circumstances permitted.

84. Then, Mr Meten continued, Yagaum Rural Hospital was in fact reimbursed the funds later in 2013. If a proper investigation had been done, at least to the end of 2013, it would have been clear to those investigating this matter that all the K600,000.00 was applied to Yagaum Rural Hospital by the end of 2013.

85. Mr Meten’s argument is that both accused honestly acted. They each reasonably believed that they could lawfully apply the K600,000.00 parked in the Madang District Treasury operating account to other priority projects, which was always seen as a temporary diversion of the funds. There was never any intention to permanently deprive Yagaum Rural Hospital of the funds. So, even if the Court finds that in fact and law the K600,000.00 could not be lawfully applied in that manner, neither of the accused acted dishonestly. Everything was done transparently. No attempt was made by either of them to hide diversion of the funds. Approvals were obtained from the then provincial administrator, Mr Lange, when necessary.

86. I have rejected the argument that the hospital was reimbursed the funds later in 2013, during determination of elements (ii) and (iv) of the charge. I appreciate, however, that that does not force the conclusion that the accused have acted dishonestly.

87. As Mr Duban gave no evidence, the question of application of the defence of honest claim of right does not arise. I am persuaded by the submission of Ms Mosoro for the State that the accused did not honestly believe that he was applying the proceeds of the Gaming Board cheque for K600,000.00 in a lawful manner. He should and would have known that the funds were intended for Yagaum Rural Hospital, that they were not discretionary funds that could be applied to other projects, and could only be applied to Yagaum Rural Hospital. The fact that there is no evidence that he tried to hide what his instructions were, does not force the conclusion that he was acting honestly. His instructions were improper. The fact that there is no evidence that he directly benefited personally from the improper payments does not mean that he was acting honestly. He should and would have known that his instructions were unlawful.

88. Though it is argued that he had no intention to permanently deprive Yagaum Rural Hospital of its funds, that is what he in fact did, as Yagaum Rural Hospital has never benefited from the funds. It has been permanently deprived of the funds. Those funds have gone. The State has proven beyond reasonable doubt that the accused acted dishonestly. Element (v) has been proven.

89. Mrs Kanimba gave evidence that she acted with an honest claim of right, in carrying out Mr Duban’s instructions, to temporarily divert the K600,000.00 to other priority projects, and without any intention to defraud. The onus was on the State to disprove beyond reasonable doubt the elements of the defence under s 23(2) of the Code. I find that the State has discharged that onus.

90. The belief that the funds could be used as discretionary funds and applied to short-term priorities was not a reasonable belief. It was the Yagaum Rural Hospital that applied for the funds in the first place. K1.2 million was approved. The first K600,000.00 was allocated to the hospital. There was no good reason for not allocating the second lot of K600,000.00 to the hospital. Mrs Kanimba herself benefited from the diversion of the funds that occurred in early 2013. Two cheques were drawn in her name from the Madang District Treasury operating account on 10 May 2013. One was described as for “Logistics support for team” and was in the sum of K132,324.00. The other was for travelling allowance for the educational tour to Jayapura in the sum of K1,800.00. Two days earlier, on 8 May 2013, a cheque was drawn from the same account payable to Ivan Kanimba and described as “financial assistance for school fees”. Those three payments are inherently suspicious and have an appearance of conflict of interests and impropriety.

91. Her belief that such payments were proper was so unreasonable, it cannot be accepted that she honestly held such a belief. She should and would have known that all payments made from the K600,000.00 intended for Yagaum Rural Hospital were improper, unauthorised and unlawful. She knew that these were not discretionary funds that could be applied to other projects.

92. She was a very experienced officer familiar with the basic principles of proper management and control of public finances. She should and would have known that the K600,000.00 could only be applied to Yagaum General Hospital. She aided and assisted Mr Duban in committing the offence of misappropriation.

93. If she did not directly commit the offence, she would be guilty under s 7(1) of the Criminal Code. She facilitated all the unlawful payments and she benefited from some of them. The State has proven beyond reasonable doubt that she acted dishonestly. Element (v) has been proven.

94. The State has proven all elements of the offence of misappropriation beyond reasonable doubt regarding both accused.

95. The accused, Nixon Duban, having been indicted on one count of misappropriation of property under s 383A(1)(a) of the Criminal Code, is found guilty, as charged.

96. The accused, Helen Kanimba, having been indicted on one count of misappropriation of property under s 383A(1)(a) of the Criminal Code, is found guilty, as charged.
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Public Prosecutor: Lawyers for the State
Meten Lawyers: Lawyers for the Accused

National Court of Papua New Guinea

State v Duban [2023] PGNC 338; N10501 (11 September 2023)