SC2253

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 110 OF 2020 (IECMS)

BETWEEN:
KUMUL PETROLEUM HOLDINGS LIMITED
Appellant

AND:
EDWARD ALINA
as the General Secretary to TOMA ILG and TOMA INCORPORATED LAND GROUP and as the Chairman of PAI PARAPIA RESOURCES OWNERS ASSOCIATION INC.
First Respondent

AND:
PAI PARAPIA RESOURCES OWNERS ASSOCIATION INC.
Second Respondent

AND:
DUGALI HAPE
as the Chairman of TOYU ILG and TOYU INCORPORATED LAND GROUP
Third Respondent

AND:
MORAN OIL LIMITED
Fourth Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Respondent

Waigani: Hartshorn J., Yagi J., and Bona J.
2021: 28th October
2022: 31st

APPEAL  

Cases Cited:
Papua New Guinean Cases

Paul Tohian & The State v Tau Liu (1998) SC566 
Tau Gamu v PNG Banking Corporation (2001) N2288
Curtain Bros (PNG) Ltd v. UPNG (2005) SC788
Paul Paraka trading as Paul Paraka Lawyers v. Nambawan Super Ltd (2014) SC1363 
Mamun Investment Ltd v Koim (2015) SC1409 
Brian Josiah v Steven Raphael (2018) SC1665
Paga Hill Development Company (PNG) Ltd v Powes Parkop (2019) SC1877 
Aquila Samson v NEC (2019) SC1880
 Simon Kauba v Alphonse Willie (2021) SC2162
Sahale v. Karogo (2021) SC2129

Overseas Cases

Antonio Di Liristi v. NSW Public Trustee [2021] NSWSC 1347
Attorney General (NSW) v. Quin (1990) 170 CLR 1 
Clements v. Independent Indigenous Advisory Committee [2003] FCAFC 143
Dranichnikov v. Minister for Immigration and Multicultural Affairs [2003] HCA 26

Counsel:

Mr. D. Mel, for the Appellant
Mr. C. Gagma, for the First, Second and Third Respondents
No appearance on behalf of the Fourth and Fifth Respondents

31st May, 2022
1. HARTSHORN J: This is a decision on a contested appeal from an interlocutory National Court judgment which refused a motion to dismiss a National Court proceeding (order appealed). Leave to appeal has been granted.

Background

2. The plaintiffs’ now first to third respondents in this appeal, commenced a proceeding in the National Court by originating summons against the first defendant now appellant and the second and third defendants now fourth and fifth respondents in this appeal.

3. In the National Court proceeding the first to third respondents seek amongst others, various declaratory relief and orders concerning alleged equity entitlements arising out of Petroleum Development License No. 5.

4. The appellant applied to dismiss the National Court proceeding by notice of motion filed 18th September 2020 on various grounds (dismissal motion). The primary judge amongst others, refused the dismissal motion. The refusal is the order appealed.

Appeal

5. The appellant’s grounds of appeal are in essence that the primary judge heard the dismissal motion and received detailed oral and written submissions from parties but did not make any findings whatsoever on the issues raised by the dismissal motion and refused it without giving any reasons for the refusal.

6. The first to third respondents in essence submit that the primary judge did not fall into error in the exercise of his discretion in refusing the dismissal motion.

Consideration

7. The first ground of appeal concerns the primary judge falling into error by refusing the dismissal motion without giving any reasons in the circumstances detailed by the appellant. The appellant relies upon the judgments of this Court in Paul Paraka trading as Paul Paraka Lawyers v. Nambawan Super Ltd (2014) SC1363; Sir Arnold Amet v. Peter Charles Yama (2010) SC1064 and Deylyn David v. The State (2006) SC881.

8. In the transcript at the commencement of the comments of the primary judge that he made after he had heard the dismissal motion, the primary judge refers by name only to the issues that he states were raised by the appellant. He then states that those issues could be adequately dealt with at trial and that this is, “because there are so many issues”. 

9. Nowhere in his comments does the primary judge give any or any detailed consideration to any of the issues which were argued by the appellant at the hearing of the dismissal motion. The primary judge states that he wants to hear more on the question of standing, that more details will be required at trial and that, “all I am saying is that I am not persuaded that at this stage the proceeding should be summarily dismissed”. The primary judge then amongst others, refuses the dismissal motion and makes orders concerning pleadings.

10. It is clear from the transcript that at the hearing of the dismissal motion counsel for the defendants’ and plaintiffs’ both handed up detailed written submissions. Comprehensive oral submissions were also made in support and in opposition to the dismissal motion before the primary judge. Notwithstanding this the primary judge did not in any way consider the issues which had been comprehensively argued before him apart from requesting more on the question of standing.

11. This court on numerous occasions has stated that a Court or a Judge must give reasons for the decisions and orders made or given. A failure to give reasons is fatal to the decision as such a decision may be set aside or quashed: Paul Paraka Lawyers v. POSFB (supra) at [67]. In Deylyn David v. The State (supra) the Court said at [126] and [127]:

“By giving reasons a Judge makes himself or herself accountable. If no reasons are given or they are expressed in a vague or scanty way, it is reasonably to be inferred that there are no good reasons to give. This is a principle that has been applied increasingly in judicial review of administrative action. We believe the same principle must apply when a higher court is hearing a review or appeal of a lower court’s decision.

127. It is one thing for a trial judge to say that he or she has considered all the evidence. It is another thing to actually do it; and another still to disclose through a recent judgement (whether oral or written or both) that it has actually been done. In the present case, we consider, with respect, that His Honour has failed to disclose through a clearly expressed process of reasoning why he drew the conclusions he did. The judgement was infected by error in that regard as His Honour did not say why he considered that the circumstantial evidence led only to one reasonable conclusion – guilt.”

12. In Paul Paraka v. POSFB (supra) at [72], Sawong J, with whom Sakora J. and Gabi J. agreed, found that it was clear that the primary judge in the matter before him had committed errors of law in not giving any reasons for the decision he made. At [70], Sawong J. said:

“70. It is clear from the written judgment of the trial judge that His Honour did not at anywhere in his decision give any reasons as to why he dismissed the appellant’s submissions on the issues that were raised before him. He does not even, discuss those issues. Parties had spent considerable time and made detailed submissions on various issues, yet His Honour did not give any reasons whatsoever on these aspects.”

13. The scenario referred to by Sawong J. appears to mirror what has occurred in this instance.

14. The respondent argues that this court should only interfere with the exercise of the primary judge’s decision when there is an identifiable error and relies upon Curtain Bros (PNG) Ltd v. UPNG (2005) SC788. It is submitted that there was no error, no unfairness and no breach of natural justice committed by the primary judge.

15. By not giving reasons for refusing the dismissal motion, it may be inferred that the primary judge did not consider the submissions which were made on the various issues and thus, he has no good reasons to give. By so doing the primary judge failed to give any or sufficient weight to relevant considerations and fell into error as a consequence: Curtain Bros (PNG) Ltd v. UPNG (supra); Sahale v. Karogo (2021) SC2129.

16. Further, in relation to the respondent’s submission that there was no unfairness or a breach of natural justice, I have had recourse to judgments of the Australian High Court, the Federal Court and the New South Wales Supreme Court. These are persuasive in this jurisdiction.

17. As to natural justice, the principles of which are provided for in s.59 Constitution, in the High Court case of Attorney General (NSW) v. Quin (1990) 170 CLR 1. Dawson J at [11] said:

“It is now generally accepted that “(t)he rules of natural justice are ‘in a broad sense a procedural matter’”. In recent years the trend has been to speak of procedural fairness rather than natural justice in order to give greater flexibility to the extent of the duty than is possible merely by reference to a curial model. Indeed, in England judges now speak of a “duty to act fairly” and natural justice becomes “fair play in action”.”
(The case citations in this passage have been omitted.)

18. With reference to procedural fairness - it equating to natural justice, a failure to afford a party procedural fairness will constitute an error of law: Clements v. Independent Indigenous Advisory Committee [2003] FCAFC 143 per Gray ACJ and North J at [8] and Antonio Di Liristi v. NSW Public Trustee [2021] NSWSC 1347 at [88].

19. Where the relevant failure to afford procedural fairness is a failure to consider a substantial claim that has been advanced by a party, there will also be a constructive failure to exercise jurisdiction: Dranichnikov v. Minister for Immigration and Multicultural Affairs [2003] HCA 26 per Gummow and Callinan JJ at [24] and [27] and Antonio Di Liristi v. NSW Public Trustee [2021] NSWSC 1347 at [89].

20. In this instance, to my mind, by not giving reasons as mentioned, the primary judge failed to consider a substantial claim of the appellant - a claim for the proceeding to be dismissed - on numerous grounds and thereby failed to afford the appellant procedural fairness. On the authority to which reference has been made, this constitutes an error of law and also a constructive failure to exercise jurisdiction.

21. For the reasons given, I am satisfied that the primary judge has fallen into error in not giving any or adequate reasons for his refusal of the dismissal motion and constructively failed to exercise jurisdiction. Consequently, the appeal should be upheld. 

22. In regard to whether the relief sought by the Appellant in the National Court should be granted, the dismissal of the proceeding, I have had the privilege of reading the draft judgment of my brother, Justice Yagi and respectfully agree with His Honour’s reasoning and conclusions.

Orders

23.  It is ordered that:

a)	The appeal is upheld and the judgment given on 25th September 2020 at Waigani in OS 116 of 2020 – Edward Alina and Ors v. Kumul Petroleum Holdings Ltd and Ors is quashed.

b)	The application filed 18th September 2020 in the National Court proceeding is granted and proceeding OS 116 of 2020 – Edward Alina and Ors v. Kumul Petroleum Holdings Ltd and Ors is dismissed for being incompetent.

c)	The costs of and incidental to this appeal and of and incidental to OS 116 of 2020 – Edward Alina and Ors v. Kumul Petroleum Holdings Ltd and Ors shall be paid by the first, second and third respondents to the appellant.	

24. YAGI J: I have had the privilege of reading the draft judgment of Justice Hartshorn. His Honour has discussed two issues in this appeal, firstly, the omission by the primary judge in giving adequate reasons for refusing the appellant’s application and, secondly, the failure to afford procedural fairness to the appellant. I agree with the reasons and conclusions reached by Justice Hartshorn.

25. The question then arises whether the matter should be remitted back to the National Court for re-hearing of the appellant’s application.

26. The appellant filed on 18 September 2020 an application in the National Court to dismiss the entire proceeding on the following grounds:

(i)	The respondents lacked standing or locus standi to commence the proceeding.

(ii)	The proceeding is time barred under s. 16(1) of the Frauds and Limitation Act 1988 (FLA).

(iii)	The proceeding is incompetent pursuant to s. 5 of the Claims By and Against the State Act 1996 (CBASA), and

(iv)	The proceeding is frivolous, vexatious and discloses no reasonable cause of action and otherwise constitutes an abuse of court process under Order 12 Rule 40 of the National Court Rules 1983 (NCR).

27. The application went before the National Court for hearing on 25 September 2020. It was contested by the respondents. The Court heard the application and was ably assisted by counsel appearing for the parties, in terms of detailed written submissions as well as oral arguments.

28. After hearing the arguments, the National Court declined to dismiss the proceeding (without giving any specific reasons) and proceeded to issue directions and orders for further conduct of the proceeding. The Court ordered the respondents to file and serve a statement of claim and the appellant and others to file and serve a defence.

29. In this appeal, the appellant in paragraph 4.1 of the notice of appeal seeks a specific order that its application to dismiss the proceeding be granted with costs.

30. The grounds relied upon by the appellant in this appeal are set out in paragraph 3 of the notice of appeal, and maybe broadly categorised as –

	(i)	failure to give reasons for the decision

(ii)	failure to find that the proceeding is incompetent under s. 5 of the CBASA.

(iii)	failure to find that the respondents lacked standing to commence proceeding

(v)	failure to find that the claim by the respondents is time barred under s. 16(1) of the FLA.

31. A hearing of an appeal by the Supreme Court is by way of a re-hearing or a hearing de novo: Aquila Samson v NEC (2019) SC1880. In this case, having agreed with Justice Hartshorn as to the outcome of the appeal, I consider that this Court has power to consider the merit of the application under s. 6 of the Supreme Court Act 1975. This provision states:

6.	Appeal to be by way of rehearing

(1)	An appeal to the Supreme Court shall be by way of rehearing on the evidence given in the court the decision of which is appealed against, subject to the right of the Supreme Court -

	(a)	to allow fresh evidence to be adduced where it is satisfied that the justice of the case warrants; and

	(b)	to draw inferences of fact.

(2)	For the purposes of hearing and determining an appeal, the Supreme Court has all the powers, authority and jurisdiction of the National Court.

32. Under ss. 8(1)(e) and 16(c) of the SCA, the Supreme Court also has power to give such judgment as ought to have been given by the National Court if the Supreme Court deems it expedient and in the interest of justice.

33. All the affidavit evidence to enable the primary judge to determine the appellant’s application are contained in the appeal books. In my view it is expedient and in the interest of justice that this Court consider the merit of the application. In the Court below, the appellant relied on the following affidavits - 

(i)	Sally Tadabe sworn and filed 18 September 2020

(ii)	Grace Kapao sworn and filed 21 September 2020

(iii)	Grace Kopao sworn and filed 22 September 2020

34. The respondents strenuously opposed the application and relied on three affidavits -

	(i)	Edward Alina filed on 23 September 2020,

	(ii)	Edward Alina filed on 24 September 2020; and

	(iii)	Dugali Ape filed on 24 September 2020.

35. At the hearing in the National Court, although appearance was made by counsel representing the Independent State of Papua New Guinea (third defendant) and Moran Oil Limited (second defendant), these parties took no active role. Counsel for the third defendant took a neutral position. He neither supported nor opposed the application. Counsel for the second defendant, apart from referring to outstanding costs in an earlier proceeding, supported the application by the first defendant (appellant) and simply adopted the submissions made by counsel for the first defendant. 

36. I start my deliberation with the issue of compliance with the requirement of notice of intention to claim under the CBASA.

37. At the time of filing the National Court proceeding, the respondents filed supporting affidavits, one of which is an affidavit by Dugali Hape sworn on 03 and filed on 09 September 2020. In this affidavit Mr Hape deposed that notice pursuant to s. 5 of the CBASA was given to the State. A copy of a letter dated 30 August 2020 from Gagma Legal Service to the Solicitor General is attached as annexure “D” to that affidavit. The letter bears a stamp by the Department of Justice and Attorney General and Office of the Solicitor General of having received the notice on 01 September 2020 (s. 5 Notice).

38. The appellant contends that the respondents cause of action in the National Court proceeding is for alleged breach of contract which breach occurred on 1 January 2010, hence, the s. 5 Notice was defective as it was given outside the 6 months period. In that regard, it is submitted the National Court fell into error in not dismissing the proceeding on that ground.

39. The respondents contend that the s. 5 Notice was given within time and in accordance with s. 5(2)(b) of the CBASA in that they become aware of the alleged breach of agreement in June 2020, hence, the s. 5 Notice was given within the 6 months period.

40. The claim by the respondents is based on a Licence Benefit Sharing Agreement which was executed in or about December 2009 (LBSA). Clause 6.1(d)(vii) of the agreement provided for an undertaking made in a letter dated 19 November 2009 by the then Prime Minister for the transfer of 5% equity share interest held by the State in Eda Oil Limited to Petroleum Resources Moran Limited. There is no specific date provided in the LBSA for the actual transfer to occur, although it appears, it was envisaged by the letter of 19 November 2009 that such event was to occur in January 2010. The actual transfer was made on 12 October 2017 and 17 June 2020. These transactions came to the knowledge of the respondents in June 2020, approximately 10 years after the breach in January 2010.

41. Counsel for the respondents did not refer to any law nor rely on any case authorities for the proposition that in a claim for alleged breach of contract time to give notice to the State under s. 5 of the CBASA commences to run as from the time when the claimant became aware of the breach. However, this proposition appears to resonate with the principle in Tau Gamu v PNG Banking Corporation (2001) N2288 where the National Court held that in a case involving a breach of statutory duty the accrual of the cause of action commences as from the time when the breach was discovered. This statement of the law was held by the Supreme Court in Mamun Investment Ltd v Koim (2015) SC1409 to be inconsistent with s. 16(1) of the FLA and should not be followed. In that case (Mamun Investments Ltd) the Court was considering the question of when the time limit under s. 16(1) of the FLA is to commence. The Court reasoned that the provision of s. 16 did not expressly state that time begins to run at the time of discovery.

42. In my humble opinion the principle in Mamun Investments (supra) equally applies to the provision of s. 5 of the CBASA. There is no express statement that notice of claim is to be given to the State within 6 months after the cause of action is discovered. In this case the respondents claim is based on the LBSA and in particularly Clause 6.1(d)(vii) of the agreement. This clause is stated as follows:

6.	TOTAL BENEFITS PACKAGE
6.1	CDOA and Kroton Equity Benefits

(d)	The clans invited to PDL 5 Development Forum referred to in clause 1.1(iv) and Schedule 1 of this Agreement, after a period of protracted negotiations, agreed to the distribution of Kroton Equity as follows:

(vii)	The additional equity of 5% from Eda 	Oil’s interest in PDL 5, shall be transferred to PRML in accordance with 	the letter from the Prime Minister dated 19th November 2009, and the sharing of additional equity shall be negotiated and agreed to the development agreement review referred to in Clause 7(c),

43.	The content of the letter of the Prime Minister is in these terms:

Directors
Petroleum Resources Moran Limited
C/- Mineral Resources Development Company
P. O. Box 1076
PORT MORESBY 
National Capital District

Dear Sirs,

Undertaking to Transfer of an Interest in PDL5

I refer to the discussions that have occurred over recent months to address the concerns of land owner groups with the division of 22.5% State Equity Entitlement in PDL5 that was acquired in accordance with Section 165 of the Oil & Gas Act 1996. Currently the 	State Equity Entitlement is held as follows:

Eda Oil Limited (“EOL”)				20.5%

Petroleum Resources Moran Limited (“PRML”)	2.0%

As a consequence of acquiring these interests in PDL5 both EOL and PRML have an interest in the Moran Unit and will have an interest in the PNG LNG project.

I have been advised that a settlement has been reached that is acceptable to all parties. This settlement involves the following elements.

1.	Effective 1 January 2010, EOL will assign a 5% interest in PDL5 to PRML. Thereby the companies will have the following holdings in PDL5:

		EOL		           15.5%
		PRML		7.0%

EOL and its affiliated company Kumul LNG Limited will assign to PMRL and its affiliated company Gas Resources Moran Limited interests in both the Moran Unit and the PNG LNG Project accruing to the 5 % interest in the Moran Unit and the PNG LNG Project accruing to the 5% interest in PDL5.

2.	The consideration for the assignment described in paragraph 1 above will be K10,000,000.

It is confirmed that I endorse this statement and will support its implementation, Specifically, in my capacity as the sole shareholder of Petromin PNG Holdings Limited, the owner of EOL, I will procure EOL to assign the interest in PDL5 to PRML in the manner described in this letter.

Yours faithfully

M T SOMARE GCL GCMG CH CF KStJ
Prime Minister

44. In my view the combined effect of the letter by the Prime Minister and Clause 6.1(d)(vii) of the LBSA, is that the transfer or assignment of the 5% interest was to occur in January 2010. That is the intention of the parties under the agreement. However, the transfer or assignment did not happen in January 2010 and hence constitute a breach. In that regard, the respondents right to sue on the breach accrued as from January 2010. 

45. In the circumstances and pursuant to s. 5 of the CBASA, the time for the respondents to give notice to the State runs as from January 2010. The notice given by the respondents by way of letter dated 30 August 2020 was well and truly beyond the prescribed 6 months period. 

46. The law as regards failure to comply with the requirement of s. 5 of the CBASA is well established. A failure to comply is fatal and renders a proceeding incompetent: Paul Tohian & The State v Tau Liu (1998) SC566, Brian Josiah v Steven Raphael (2018) SC1665, Paga Hill Development Company (PNG) Ltd v Powes Parkop (2019) SC1877 and Simon Kauba v Alphonse Willie (2021) SC2162. The consequence is that the proceedings instituted by the respondent is incompetent.

47. That being the case, in my opinion, it is determinative of all other issues and therefore it obviates the necessity to further consider those other issues.

48. Accordingly, I would allow the appeal and dismiss the entire National Court proceeding OS No. 116 of 2020 for being incompetent.

49. BONA J: I have read the final drafts of Hartshorn J and Yagi J and agree with the reasoning and conclusions therein. I have no further comment to make.

50.    BY THE COURT: For the above reasons the Court makes the following orders:

a)	The appeal is upheld and the judgment given on 25th September 2020 at Waigani in OS 116 of 2020 – Edward Alina and Ors v. Kumul Petroleum Holdings Ltd and Ors is quashed.

b)	The application filed 18th September 2020 in the National Court proceeding is granted and proceeding OS 116 of 2020 – Edward Alina and Ors v. Kumul Petroleum Holdings Ltd and Ors is dismissed for being incompetent.

c)	The costs of and incidental to this appeal and of and incidental to OS 116 of 2020 – Edward Alina and Ors v. Kumul Petroleum Holdings Ltd and Ors shall be paid by the first, second and third respondents to the appellant.	
__________________________________________________________________
Mel and Henry Lawyers: Lawyers for the Appellant                                       
Gagma Legal Services: Lawyers for the First to Third Respondents