SC857

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 77 OF 2005

BETWEEN:

MAPS TUNA LIMITED
Appellant

AND:

MANUS PROVINCIAL GOVERNMENT
Respondent

Lae: Hinchliffe, Gavara – Nanu, & Lenalia JJ
2006: 28th June & 26th June 2007

CIVIL LAW – Practice & Procedure – Appeal against dismissal of the entire proceedings – Issues argued on appeal – Service pursuant to s. 5 of the Claims By and Against the State Act – Whether the term "State" includes Provincial Government – Claims By and Against the State Act – Whether s.5 of the Act applicable to Provincial Governments - 

PRACTICE & PROCEDURE – Service of process where State is not nominal Defendant – Whether service under s.5 should be effected on the State as well. 

PRACTICE & PROCEDURE – Legal entity of the State – Section 247 of the Constitution – Legal entity of Provincial Governments and Service of process against Provincial Governments and Local Level Governments – Organic Law on Provincial Governments and Local Level Governments, Sections 6 & 7. 

Cases Cited

Reve Mase v District Land Court (1980) N260
The State v District Land Court [1982] PNGLR 192
Rimbink Pato Trading as Pato Lawyers v Enga Provincial Government [1995] PNGLR 469
Pupune and Others v Umbum Makarai and Others [1997] PNGLR 622
SCR N0.1 of 1998; Reservation Pursuant to Section 15 of the Supreme Courts Act (2001) SC 672 of 1998
Karl Paul v Arua Kispe and Another (2001) N2085
Paul and Mary Bal v Kenry Taia and 3 Others (2003) N2481
Morobe Provincial Government v Independent State of PNG. (WS 1534 of 2003 WS 86 of 2003 and WS 1415 of 2004)
Timothy Lim Kok Chuan v Simon Goh Say Beng and Another (2004) N2753.

Counsels 

T. Pryke, for Appellant 
P. Kuman, for the Respondent. 

26 June 2007.

1.	BY THE COURT: In 2002 the parties entered into an agreement whereby they agreed that the appellant was to manage two fishing vessels of the respondent. However in 2003 a dispute arose and the respondent decided to retake possession of such vessels. Due to that dispute, in August 2003 the appellant filed an Originating Summons wherein it sought restraining orders to restrain the respondent, its employees, servants or agents from removing or interfering in any way with the two vessels FV. Manus 1 and FV. Manus 2 from the appellant’s possession and management until further orders. 

2.	In 2005, the respondent applied to the court for the proceedings to be dismissed or alternatively to have the proceedings proceed by way of pleadings. The court ordered that the proceedings proceed by pleadings and also ordered that the two fishing vessels were to remain at the appellant’s wharf but not to be engaged on fishing activities. 

3.	The appellant filed pleadings and in its pleading, it pleaded the terms of the contract that was entered into between the appellant and the respondent. The debt in the appellant’s pleadings amounted to K663, 180.10. The respondent disputed the terms of the contract and applied for better particulars and further pleaded that the agreement was unfair in terms of the Fairness of Transaction Act 1993. 

4.	In the course of pleadings, when the respondent filed its defence to the Amended Statement of Claim, they included a Cross-Claim. In that Cross-Claim the respondent claimed damages for the use of the two vessels and it also alleged negligence and cause of damages to the machinery on the vessels. The respondent’s claim in the Cross-Claim amounted to K240, 000.00. 

5.	In the process of providing Further and Better Particulars, the appellant revealed that it had not given notice to the State in accordance with Section 5 of the Claims By and Against the State Act of 1996.

6.	Being aware of the above position, the respondent filed a Notice of Motion on 22 June 2005 in which it sought orders that the question of whether a Section 5 notice of the Claims By and Against the State Act ought to be given prior to suing a provincial government and if so, whether the failure by the plaintiff (now appellant) to give such notice made those proceedings a nullity.

7.	On 11 July 2005, the motion was argued before Davani, J and on 18th of that same month, the trial judge ruled that she did not think it was necessary for the issue of whether or not Service pursuant to Section 5 of the Claims By and Against the State Act 1996 requires the giving of notice prior to suing a Provincial Government be tried as a stated case. 

8.	We note from the Appeal Book and the transcript of proceedings before the trial judge that, the Notice of Motion filed by the respondent on 22 June 2006 sought specific orders under Order 10 Rule 21 of the National Court Rules. The questions in the Notice of Motion were whether notice pursuant to Section 5 of the Claims By and Against the State Act ought to be given before suing a Provincial Government. 

9.	Secondly, if the answer to question (a) was in the positive, whether failure by the plaintiff to give such notice nullifies the proceedings.

10.	Instead of considering and answering the questions posed for her consideration, the trial judge ruled inter alia that because it was a clear case where the appellant had not given the mandatory notice pursuant to s.5 of the above Act, and since they admitted failure to give such Notice, the trial judge concluded that, the court must in cases where there is an apparent irregularity in the process, exercise its inherent powers to ensure that such proceedings should be brought to an end. 

11.	The court further held that the court has a duty to control the conduct of its proceedings that come before it and to ensue sure that the proceedings that come before the court are subject to jurisdictional limits. The cases of Karl Paul v Arua Kispe, the Regional Manager PNG Forest Authority-Lae (2001) N2085, Paul and Mary Bal v Kenry Taia & 2 Others and The State (2003) N2481 and a few other cases were cited by the trial judge to support the conclusion she reached. 

12.	The above cases simply say that service of notice under s.5 of the Act is a must and should be complied with before suing the State of its agencies.

13.	As result of the above conclusion, the trial judge dismissed the whole proceedings. From such dismissal, the appellant appealed. 

14.	There are nine (9) grounds to this appeal and the amended supplementary Notice of Appeal contains the following grounds: 

"(a). The trial judge erred in law in determining the question of whether notice under Section 5 of the Claims By and Against the State Act 1996 (CBAASA) needs to be given prior to suing a provincial government when the court was asked to determine under Order 10 Rule 21 of the National Court Rules whether the question should be tried separately from the other issues or together with other issues in the proceedings.

(b). The trial judge erred in law in incorrectly assuming or determining that notice under Section 5 of the CBAASA needs to be given prior to suing a provincial government. 

(c). The trial judge erred in law in that she erred in the exercise of her discretion by failing to consider Order 10 Rule 21 and failing to consider issues relevant to the application prior to finding that it was necessary to try the issues as a stated case.

(d). The trial judge in law in dismissing the proceedings upon finding that it was not necessary to try the issue as a stated case when the correct course would have been to order that the issue be tried together with the other issues.

(e). The trial judge erred in law in that she took into consideration her errors of law referred to in paragraphs 3(a) and 3(b) above when determining to dismiss the proceedings in their entirety and order return of the vessel to the defendant/applicant. 

(f). The trial judge erred in law in making orders for return of the vessel to the defendant/applicant when such an order was not sought by the notice of motion or otherwise. 

(g). The trial judge erred in law in making orders for the return of the vessel to the defendant applicant in that she failed to first entertain argument in that regard, thereby denying the plaintiff/respondent natural justice.

(h). The trial judge erred in law in failing to give any or any proper consideration to the oral submission of submission of counsel for the plaintiff/respondent that the plaintiff/respondent had a common law lien on the vessel for a debt owed to it by the defendant/applicant in respect of monies expended on the vessel for repairs and improvements before ordering the plaintiff respondent to return the vessel to the defendant/applicant.

(i). The trial judge erred in fact in finding that the lawyers for the plaintiff/respondent did not respond to Mr.Kuman’s letter of 30/5/2005."

15.	In arguing this appeal, Mr. Pryke of counsel for the appellant submitted on three basic issues. On procedure, counsel argued that when the matter came on for hearing before the trial judge on 11th of July 2005, it was an application for orders that issues be tried as a stated case. He further argued that it was not an application to determine the question of law nor was it an application for summary dismissal. 

16.	The appellant’s counsel further argued that, the Notice of Motion dated 22nd of June 2005 was put in specific terms for the trial judge to try the preliminary question separately from the issues of law and fact on the intended trial proper. Such argument is valid in light of reference being made in the Notice of Motion which cited Order 10 Rule 21 to 24 of the National Court Rules.

17.	The second point of contention is on the question of service pursuant to s.5 of the Claims By and Against the State Act. Mr. Pryke argues that the above Act does not say that Provincial Governments or Local Level Governments may sue or be sued. The reason for that part of his argument comes from the interpretation of s.6 of the Organic Law on Provincial Governments and Local Level Governments which counsel submits that Provincial Governments and Local Level Governments are separate legal entities.

18.	The third issue raised by counsel for the appellant relates to costs ordered against the appellant to pay the respondent costs on solicitor/client basis. The appellant disputes orders for costs as all along in the course of pleadings, counsels both for the plaintiff and the defendant/respondent were in constant contact with each other on their clients’ interests. The final part of Mr. Pryke’s submission is that, the order for dismissal of the proceedings in their entirety was based on the trial judge misconception on service under s.5 of the Claims By and Against the State Act as that was not the question referred to the court for consideration.

19.	Mr. Kuman appearing for the respondent submitted that, since the appellant’s lawyers had admitted that they did not give notice under s.5 of the Act, the trial judge correctly exercised her discretion to consider the question of service. He argued in his submission that there are many National Court cases which deal with s.5 notice. We will refer to some of those cases in due course. 

20.	Counsel further submitted that even if there were no formal application, the trial judge would have come to the same conclusion to dismiss the proceedings on its entirety because s.5 of the Act is mandatory and service on a provincial government is a must as much as service on the State itself.

LAW.

21.	The Notice of Appeal contains about nine grounds of appeal.

We will not answer those grounds individually as they are all interrelated. In the course of our discussion, we will refer to those grounds when we discuss points of law and fact as we go along. 

22.	The issue really is did the trial judge exercise her discretion correctly when she made orders for the dismissal of the whole proceedings when the question of service pursuant to s.5 of the Claims By and Against the State Act was not the issue before her to determine? We answer this question in the negative. 

23.	We note that the Notice of Motion that was argued before the trial judge on 22nd of June 2005 contained only two issues relating to service pursuant to Section 5 of the Claims By and the State Act. The Notice of Motion before the trial judge on the above date was worded in the following terms:

"1. Pursuant to Order 10 Rule 21 of the National Court Rules, the following questions be tried as a stated case:

"(a). Whether Section 5 under the Claims By and Against the State Act 1998 must be given prior to suing a Provincial Government."

(b). If so, whether the failure by the Plaintiff to give such a notice makes these proceedings a nullity?"
2. Cost

3. Any other Orders."

24.	We note that paragraph 1 (one) of the notice made specific reference to Order 10 Rule 21 of the National Court Rules 1983. Rule 21 of Order 10 says that where there is a separate question of "fact" or of "law" or partly of either of them raised at any stage of the proceedings, such question ought to be decided first by way of a stated case. 

25.	If the answer to the question stated is in the affirmative, the court should rule whether such question should be tried separately before, during or after the main trial. This did not happen that way.

26.	We quote Order 10 Rules 21 and 23 of the National Court Rules in the following terms:

"21. Order for decision.

The Court may make orders for – 

(a)	the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and
(b)	the statement of a case and the question for decision.

22. …

23. Records, etc. of decision.

Where any question is decided under this Division, the Court shall, subject to Rule 24, either – 

(a)	cause the decision to be recorded; or
(b)	direct the entry of such declaratory judgment, or make such declaratory order, as the nature of the case requires."

27.	On page 119 of the Appeal Book (A/B), the trial judge commented that the issue before her was whether she should put an end to these proceedings since the respondent in the application before her had already admitted that there was lack of s.5 notice. Due to the above circumstances, the trial judge came to the conclusion that it was not necessary for the questions put to that court in the notice of motion to be tried separately.

28.	In his written submission, Mr. Pryke referred to the case of Timothy Lim Kok Chuan v Simon Goh Say Beng and Another (2004) N2753 a case by His Honour Justice Gavara-Nanu a member of this Bench where the court in that case dealt with a similar application. In that case, there were three questions raised. The questions related to the issue of whether the contract pleaded in the Statement of Claim was legal pursuant to Sections 5, 19, 48A and 48B of the Stamp Duties Act and s.41A of the Investment Promotion Authority Act 1992.

29.	The defendants in the above case argued that, the contract was illegal because the plaintiff being a non citizen was bound by the requirements of s.41A of the Investment Promotion Authority Act to obtain a certificate to carry on business in Papua New Guinea in the nature of matters pleaded in the Statement of Claim. 

30.	After considering the facts and law in the cited case, the judge referred to a number of overseas authorities including Order 31 Rule 2 of the New South Wales Supreme Court Rules and Vols. 1 and 2 of Ritchie’s Supreme Court Procedure at page 2661, the judge granted leave to the defendants for the questions raised in the Notice of Motion to be determined separately. 

31.	In the current appeal, the trial judge cited cases such as Paul and Mary Bal v Kenny Taia & 3 Others (2003) N2481, Morobe Provincial Government v Independent State of Papua New Guinea (WS 1534 0f 2003, WS 86 of 2003 and WS 1415 of 2004 all dated 12th April 2005 where there was clear issues of lack s 5 notice. In this jurisdiction there are many cases dealing with the question of service under s 5 of the Claims By and Against the State Act. The law is clear that where the State or its agent is sued a notice in writing of the intention to make a claim must be given within six (6) months from the date the claim arose.

32.	It is our view that the questions put to the trial judge to decide were not about whether or not a Provincial Government is part of or an agent of the State. They were questions about a situation may arise as was in these proceedings where the Manus Provincial Government alone was named as the defendant and whether under such circumstances, notice under s.5 should be given before suing a Provincial Government. 

33.	The key principles in relation to service under Section 5 of the Claims By and Against the State Act have been stated over and over again. The case of Tohian and The State v Tau Liu (1998) SC566 establishes that notice of intention to make a claim against the State is a condition precedent to issuing a writ of summons. The Court in the above case comprising of Kapi, DCJ; (as he then was) Sheehan; & Jalina; JJ further held that notice under s 5 of the Claims By and Against the State Act must be given first before the writ is issued, even if the writ is issued within six (6) months after the date of the occurrence out of which the claim arose.

34.	Where there has been non-compliance with the requirements of the above Act that is a ground for setting aside a default judgment: Marinda v The State (1991) N1026. The method of service to the appropriate persons mentioned under s 5 is mandatory: Bokin v The Independent State of Papua New Guinea (2001) N2111.

35.	In Hewali v Police Force and The State (2002) N2233 Kandakasi; J held that a notice under s.5 must be in writing and it must give sufficient details of the intended claim such as time, date, and place of occurrence. In William Trnka v The State (2000) N1957 Sevua; J said that both the Attorney General and the Court before which an action is instituted have discretion to extend the time for giving notice of intention to sue the State. According to the above case "sufficient cause" ought to be shown to have existed why notice was not given within 6 months. The example of that would be "inaccessibility" to legal advice.

36.	The reasons why notice under s.5 of the above Act must be given within 6 months is that the State should be given early warning while the evidence is fresh. It would enable the State to make its own investigation if it wanted to and depending on whatever evidence it gathers may decide to either settle or dispute an intended claim: Minato v The State (1998) N1768.

37.	In SCR N0.1 of 1998; Reservation Pursuant to Section 15 of the Supreme Court Act (2001) SC 672 of 1998 consisting of Amet; C.J (as he then was), Los; Sheehan; Salika and Sakora; JJ, held that Provincial Governments and Local Level Governments are part of the State, (see also Rimbink Pato, Trading as Pato Lawyers v Enga Provincial Government [1995] PNGLR 469 and Pupune and Others v Ubum Makarai Administrator Eastern Highlands Provincial Government [1997] PNGLR 622).

38.	The two questions in the notice of motion which were argued before the trial judge were in our view legitimate questions considering the terms of Section 5 of the Claims By and Against the State Act and Sections 6 and 7 of the Organic Law on Provincial Governments and Local Level Governments. Those Sections in the Organic law provide:

"6. Legal capacity.

A Provincial Government or a Local-level Government—

(a) may acquire, hold and dispose of property of any kind; and
(b) may sue and be sued,

and a provincial law or a local-level law may make provision for and in respect of the manner and form in which each respective government may do so.

7. Service of process.
Any notice, summons, writ or other process required to be served on a Provincial Government or a Local-level Government may be served on an officer designated by the Provincial Government or the Local-level Government for that purpose."

39.	Provincial Governments are established by PART VI (Sections 187A to 187J of the Constitution and Section 10 of the Organic Law on Provincial Governments and Local Level Governments. Because such governments are State entities they have the capacity to acquire, hold and dispose of any property and they have the legal capacity to sue or they can be sued independently according to s.6 of the Organic Law on Provincial Governments and Local Level Governments which provides for the legal capacity of the Provincial Governments and Local Level Governments.

40.	The State also has its legal capacity to sue and it can be sued and acquire, hold or dispose of property. That capacity originates from s.247 of the Constitution. That Section provides: 

"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." 

41.	Service of process in cases where the State is sued is provided for by s.7 of the Claims By and Against the State Act in the following terms:

"7. Service of process where State is a party.

(1) Where the State is a party to a suit, all process in the suit required to be served on it shall be served on—

(a) the Departmental Head of the Department responsible for justice matters; or

(b) the Solicitor-General.

(2) Service under this Section shall be effected by—

(a) personal service on the officer referred to in Subsection (1); or

(b) leaving the document at the office of the officer referred to in Subsection (1) with the person apparently occupying the position of personal secretary to that officer between the hours of 7.45 a.m. and 12 noon, or 1.00 p.m. and 4.06 p.m., or such other hours as may from time to time be declared by or under the Public Services (Management) Act 1995 to be the normal public service hours of duty, on any day which is not a Saturday, Sunday or a public holiday declared by or under the Public Holidays Act (Chapter 321)."

42.	Mr. Pryke argued that, a Provincial Government is not the State. He further submitted that Provincial Governments are established under s.187A of the Constitution and the State and each Provincial Government has separate and distinct legal entities. 

43.	While this line of argument may appear to be true in the sense that Sections 6 and 7 of the Organic Law on Provincial Governments and Local Level Governments provide for service of process on a designated officer of a Provincial Government or Local Level Governments, the Supreme Court in Reservation Pursuant to Section 15 of the Supreme Court Act (2001) (supra) consisting of 5 Judges decided that the term "the State" includes Provincial Governments to which we agree. 

44.	The following quotation comes from page 7 of the above reference on 
the question of whether or not a Provincial Government body is part of the State:

"We are of the opinion therefore that a provincial government is a "governmental body" making up the Independent State of Papua New Guinea for the purposes of the Claims By and Against the State Act. The power of the people is vested in all "governmental bodies" which administer and exercise them on behalf of the people. These governmental bodies include "the National Government", "a Provincial Government", "an arm, department, agency or instrumentality of the National Government or a Provincial Government" or "a body set up by statute or administrative act for government or official purposes". This power is exercised by these "governmental bodies" on behalf of the same people. The finances administered by a Provincial Government, is for and on behalf of the same people. The National Government administers the National Government funds and assets.

In principle therefore the assets and funds administered by the Provincial Government belong to the same people of Papua New Guinea that the Claims By and Against the State Act protects from execution. The term 'State' therefore includes Provincial and Local–Level Governments for the purposes of the Act". 

45.	We find that there are no definitive and clear authorities on the issue of whether a Provincial Government should give a s.5 Notice on itself being "the State" when Sections 6 &7 of the Organic Law concerned provide for the legal capacity and the method of service of any legal process on an officer or officers designated by the Provincial Governments or the Local Level Governments. We feel that this question should have been answered by the trial judge. We have read the judgment in SCR N0. 1 of 1998 Reservation Pursuant to Section 15 of the Supreme Court Act (2001) SC672 of 1998 and we are of the view that, the above reference does not appropriately address the issue of service and more particularly service under s.7 of the Organic Law. 

46.	If a Provincial Government is sued and where the State is not a party to the proceedings, why should service pursuant to s.5 of the Claims By and Against the State Act be served on the The State when s.7 of the Organic Law specifically provides for service to be effected on Provincial Governments and Local Level Governments designated officers? To this Court, it would seem that there is plurality in the modes of service in cases where a Provincial Government is sued. It is our view that, the questions that were referred to the trial judge were legitimate and they ought to have been answered. 

47.	They submit that because the two forms of governments have separate legal entities, the State can sue a Provincial Government and vise versa. Counsel argued that due to the above absurdity, the trial judge should have given leave for the stated question to proceed by way of a stated case under Order 10 Rule 21 of the National Court Rules.

48.	The circumstances under which certain issues or questions arising in the proceedings may be determined separately from the issues on the main trial were conveniently set out in Timothy Lim Kok Chaun and Simon Goh Say Beng v Madam Tong So Chin (supra). They include the following:

1.	Where there is a preliminary question of fact or law that is critical to the disposition of the proceedings, so that if decided one way, it will necessarily dispose of the proceedings.

2.	Where resolution of separate question may result in early resolution of the proceedings or by narrowing the disputed issues, avoid additional expenses or delay.

3.	Where issues are clearly separable.

4.	Where liability issue can be determined ahead of the final assessment of damages."

49.	In absence of Supreme Court authorities on the issue of stated cases pursuant to Division 4 of Order 10 of the National Court Rules (see Rules 20 to 24), we approve and adopt the above principles and apply them to the circumstances of the appeal before us. We are of the view that the above Rules provide for the procedure for any questions of fact or of law to be tried separately apart from issues which are expected to be tried on the main trial. 

50.	As was in the circumstances on the instant appeal, we are of the view that the issue of whether Notice under s.5 of the Claims By and Against the State Act of the intention to sue must be given before suing a Provincial Government was a relevant question for the trial judge to consider before dismissing the proceedings. 

51.	The trial judge cited the case of Karl Paul v Aruai Kispe & 2 Others (2001) N2085 for the proposition that the National Court has wide powers to control the conduct of its proceedings and to take firm approach to ensue that the business of the Court is conducted in an orderly and fair and timely manner and to make sure justice is done to a particular case. 

52.	While we agree with such proposition, we are of the view that the discretion given to the National Court or any Court for that matter must be exercised judicially taking into consideration all issues of law and the interest of all concerned parties. As in the circumstances of the current appeal, the question is where would the parties go to for justice if justice is denied them in the Court system?

53.	The courts powers must be exercised according to law. The discretion given to the National Court by s.155 (3) (a) (b) of the Constitution is the inherent power to review any exercise of judicial power or authority must be exercised judicially: The State v District Land Court [1981] PNGLR 192 (see also Reve Mase v The Independent State of Papua New Guinea (1980) N260). 

54.	We come to the conclusion that the learned trial judge erred in the exercise of the discretion given to that Court by the Constitution because the question referred to the court below made specific reference to Order 10 Rule 21 of the National Court Rules. It seems to us that there may be some ambiguity on the service of the process created by s.7 of the Organic Law on Provincial Governments and Local Level Governments. 

55.	The fact is that because Provincial Governments have legal capacity to sue and be sued, service of process is provided for in Section 7 of the Organic Law which provides in part "Any notice, summons, writ or other process" which are required to be served on a Provincial Government or a Local Level Government may be served on a designated officer for that Provincial Government or Local Level Government. 

56.	Would the words "any notice, summons, writ or other process" include a notice pursuant to s.5 of the Claims By and Against the State Act? That question is unanswered and this Court must uphold the appeal in its entirety.

57. It is our view that according to the hierarchy of laws under s.9 of the Constitution, s.7 of the Organic Law on Provincial Governments and Local Level Governments takes precedence over s.5 of the Claims By and Against the State Act or any other Acts of Parliament. To this Court it means that, in a case where the Provincial Government or a Local Level Government is sued, service ought to be effected on a designated officer of that form of government in compliance with s.7 of the Organic Law on Provincial Government and Local Level Government. 

58. Having upheld the appeal, there is no need for this Court to consider the issue of the return of the vessel to the respondent and the question of costs. This Court orders that, the decision by the trial judge dated 18 July 2005 be quashed. 

59. We remit the matter in whole to the trial judge or another judge to order the issues to be reserved under s.15 of the Supreme Court Act for the Supreme Court to determine the issues posed in relation to the Sections 7 of the Organic Law on Provincial Governments and Local Level Governments and Section 5 of the Claims By and Against the State Act 1996. The costs of this appeal shall be born by the Respondent. 

_______________________________

Pryke & Janson Lawyers: Lawyer for Appellant 
Posman Kua Aisi Lawyers. Lawyer for Respondent