SC2799
PAPUA NEW GUINEA
[SUPREME COURT OF JUSTICE]

SC REV NO 21 OF 2024

THE HONOURABLE PHILIP UNDIALU MP,
GOVERNOR, HELA PROVINCE
First Applicant

HOMA PAUA PEOPLE’S ASSOCIATION INC
Second Applicant

V

ANTHONY HAMAGA, CHAIRMAN, MORAN LOCAL-LEVEL GOVERNMENT SPECIAL PURPOSES AUTHORITY
First Respondent

MORAN LOCAL-LEVEL GOVERNMENT
SPECIAL PURPOSES AUTHORITY
Second Respondent

SAMUEL PENIAS, SECRETARY, DEPARTMENT OF FINANCE
Third Respondent

THE INDEPENDENT STATE OF PAPUA NEW GUINEA 
Fourth Respondent

WAIGANI: CANNINGS J, MANUHU J, NAROKOBI J

30 OCTOBER, 3 NOVEMBER 2025

JUDGMENTS AND ORDERS – review of order of National Court made with purported consent of parties – significance of one of the parties to the proceedings not signing draft consent order endorsed by the Court – duty of plaintiffs to join parties to the proceedings who would reasonably be expected to oppose orders sought by the plaintiff – whether National Court led into error by failing to be take account of interest of persons in the proceedings who were not joined as parties. 

The first and second respondents commenced proceedings, as plaintiffs, in the National Court against the Secretary for Finance and the State, as defendants, seeking an order for payment to them of development levies in respect of a petroleum development project. The plaintiffs and the State signed a draft consent order, which was endorsed by the Court, and became the final order of the Court. There was no trial. The applicants, the governor of the province in which the development project was conducted and a landowner association, were not parties to the National Court proceedings but were granted leave for review of the final order of the National Court. At the hearing in the Supreme Court of the application for review, they argued that the National Court erred in making the final order as the Secretary for Finance did not consent to the order and the applicants had an interest in the National Court proceedings as the development levies should have been paid to them rather than the first and second respondents who had no entitlement to the levies and no standing in the National Court. They argued they should have been heard, but they were not heard and this was a denial of natural justice. The applicants argued that the final order of the National Court should be quashed and that the matter should be remitted to the National Court for rehearing.

Held: 

(1)	A draft consent order ought not be endorsed by the Court unless the draft order is signed on behalf of each party to the proceedings. The Secretary for Finance was a party to the National Court proceedings and the National Court erred by endorsing the draft order without his consent. For that reason alone, the final order of the Court was set aside. 

(2)	A plaintiff commencing legal proceedings is obliged to join as defendants all persons who are reasonably expected to oppose the relief sought by the plaintiff or to have a real interest in the orders sought by the plaintiff. 

(3)	The National Court ought to be alert, especially in proceedings regarding development levies in resource projects, to the likelihood that there will be persons opposed to the claims sought by plaintiffs who will have a legitimate interest in the proceedings.

(4)	Here, the applicants, who arguably had an interest in the development levies the subject of the National Court proceedings arising from provisions of the Organic Law on Provincial Governments and Local-level Governments, ought to have been joined to the National Court proceedings as defendants and thereby given the opportunity to be heard in opposition to the claims of the first and second respondents.

(5)	The first and second respondents failed to discharge their obligation to name the applicants as defendants in the National Court proceedings and this led the National Court into error in endorsing the draft consent order.

(6)	The National Court compounded the error by not alerting itself to the likelihood that there would be persons such as the applicants who would have a legitimate interest in opposing the claims of the first and second respondents.

(7)	The failure to join the applicants to the National Court proceedings was a fundamental procedural error, which vitiated the final order of the National Court.

(8)	The final order of the National Court was set aside and the matter was remitted to the National Court for rehearing. It was ordered that the applicants be joined to the National Court proceedings as defendants.

Cases cited
Hegele v Kila (2019) N8119
Hornibrook (NGI) Ltd v Wi (2012) N4702
Mali v The State [2002] PNGLR 548
PNG International Hotels Pty Ltd v Registrar of Titles (2007) N3207

Counsel
T Jugari & J Yawale for the first applicant
L Baida for the second applicant
B Lakakit for the first and second respondents
J Issack & M Tukuliya for the fourth respondent

1.     BY THE COURT: The applicants apply for review of the decision of the National Court of 27 March 2024 to endorse a draft consent order in proceedings, OS 25 of 2024, commenced by the first and second respondents against the third and fourth respondents. The subject of those proceedings was entitlement to development levies of more than K40 million payable in respect of the Moran petroleum development project in the Highlands region.

2.     So, the parties to OS 25 of 2024 were:

•	first plaintiff, Anthony Hamaga, Chairman, Moran Local-level Government Special Purposes Authority (first respondent);

•	second plaintiff, Moran Local-level Government Special Purposes Authority (second respondent);

•	first defendant, Steven Nukuitu, Secretary, Department of Finance (third respondent); and 

•	second defendant, the Independent State of Papua New Guinea (fourth respondent).

3.     The National Court ordered that:

•	the actions of the Secretary for Finance in not releasing development levies for 2022 and 2023 to the Moran Local-level Government Special Purposes Authority was null and void;

•	the Secretary for Finance shall pay development levies for 2022 and 2023 to the State (this was an error, the order was intended to require payment to the Moran Local-level Government Special Purposes Authority, which has not been corrected) within seven days from the date of the order;

•	the proceedings were concluded and the file was closed.

4.     No trial preceded the order. A draft order was handed up to the primary Judge, a short exchange between counsel and the Judge occurred and the order was endorsed.

5.     The applicants, the Governor of Hela Province and the Homa Paua People’s Association Inc, are aggrieved by the order. They were not parties to the National Court proceedings but have been granted leave for review of the order of 27 March 2024. 

6.     They rely on ten grounds of review. They argue that the primary Judge erred in law by endorsing the draft consent order in favour of the first and second respondents:

•	without the consent of the Secretary for Finance (grounds 1 and 7);

•	without affording an opportunity to the applicants to be heard on whether it should be endorsed (ground 8);

•	despite the first and second respondents lacking standing to institute the proceedings (grounds 2, 4, 5, 9 and 10);

•	despite fraudulent collusion involved on the part of the first, second and fourth respondents (ground 3);

•	despite failure of the first and second respondents to give notice to the State under s 5 of the Claims By and Against the State Act of the intention to make a claim against the State (ground 6);

•	despite there being conflicting instructions given to different law firms, thereby denying the third respondent the right to be heard (ground 7).

7.     The application to set aside the order of 27 March 2024 is strongly opposed by the first and second respondents, and by the fourth respondent, the State. The third respondent, the Secretary for Finance, has taken no part in the proceedings.

ENDORSING DRAFT ORDER WITHOUT CONSENT OF SECRETARY FOR FINANCE

8.     The Secretary for Finance, the third respondent, was the first defendant in the National Court proceedings. He did not sign the draft consent order and no lawyer signed on his behalf.

9.     A draft consent order ought not be endorsed by the Court unless the draft order is signed on behalf of each party to the proceedings or by a lawyer authorised to represent the party. A draft consent order that has not been consented to by all parties but which is endorsed by the Court is open to be set aside on the ground of procedural irregularity (Mali v The State [2002] PNGLR 548, Hornibrook (NGI) Ltd v Wi (2012) N4702). 

10.    We apply those principles here. We find that the primary Judge erred by endorsing the draft consent order without the consent of the Secretary for Finance. It was a substantial procedural irregularity that warrants setting aside the order. 
 
ENDORSING DRAFT ORDER WITHOUT AFFORDING APPLICANTS OPPORTUNITY TO BE HEARD

11.     The applicants argue that they – not the first and second respondents – are entitled to the development levy funds subject to the order of 27 March 2024. They argue that their entitlement arises due to the combined effect of s 98(2) of the Organic Law on Provincial and Local-level Governments, s 160(2) of the Oil and Gas Act and the terms of a revised project agreement executed in 2005.

12.      Section 98(2) of the Organic Law states:

Subject to Subsection (7), for each fiscal year, a developer of a natural resource, shall pay out of its own cost—

(a)	to the Provincial Governments and the Local-level Governments of the province or area in which the development is situated, development levies in the form of—

(i)	infrastructural development levies; and
(ii)	economic development and land use follow-up levies; and
(iii)	community and social development levies; and
(iv)	any other levies as are from time to time determined by national law or by agreement; and

(b)	to the National Government, Provincial Governments or Local-level Governments, land owners benefits in respect of natural resources obtained, for payment to the owners of the land from which the natural resources were obtained.

13.     Section 160(2) of the Oil and Gas Act states:

Subject to this section, a petroleum development licensee shall pay in accordance with Section 98 of the Organic Law on Provincial Governments and Local-level Governments to the affected Provincial or Local-level Governments of a petroleum project development levies at a rate of 2.00% of the wellhead value of all petroleum produced from the licence area, calculated in the same manner as provided for in Section 159.

14.     The first and second respondents argue the opposite. They say that the second respondent is the lawful recipient of the funds due to a binding undertaking given in 2012 by the then Governor of Southern Highlands Province, Hon Anderson Agiru MP, and that the order of 27 March 2024 simply stated the correct position at law and provided for enforcement of that position.

15.    Though we heard considerable argument on who is the correct recipient of the funds subject to the order of 27 March 2024 and a lot of evidence was presented by the parties, we do not intend to make a finding on the competing claims. It is unnecessary to do so; and it would be unwise to make a finding on these very contentious issues without a trial.

16.     There was no trial in the National Court, and a final order was made after hearing from only one side of what was obviously a very contentious dispute. This forces the conclusion that the order of 27 March 2024 must be set aside.

17.     A plaintiff commencing legal proceedings is obliged to join as defendants all persons who are reasonably expected to oppose the relief sought by the plaintiff or to have a real interest in the orders sought by the plaintiff. 

18.     The National Court ought to be alert, especially in proceedings regarding development levies in resource projects, to the likelihood that there will be persons opposed to the claims sought by plaintiffs who will have a legitimate interest in the proceedings.

19.     Here, the applicants, who arguably had an interest in the development levies the subject of the National Court proceedings arising from provisions of the Organic Law on Provincial Governments and Local-level Governments and the Oil and Gas Act, ought to have been joined to the National Court proceedings as defendants and thereby given the opportunity to be heard in opposition to the claims of the first and second respondents.

20.     The failure of the first and second respondents to discharge their obligation to name the applicants as defendants in the National Court proceedings was an abuse of process (Hegele v Kila (2019) N8119). This led the National Court into error in endorsing the draft consent order.

21.     The National Court compounded the error by not alerting itself to the likelihood that there would be persons such as the applicants who would have a legitimate interest in opposing the claims of the first and second respondents.

22.    The failure to join the applicants to the National Court proceedings was a fundamental procedural error, which vitiated the final order of the National Court (PNG International Hotels Pty Ltd v Registrar of Titles (2007) N3207).

23.    The applicants were denied the opportunity to be heard on whether the order of 27 March 2024 should be made.

24.    For all these reasons we find that the order of 27 March 2024 was made in error and must be set aside.

OTHER ARGUMENTS OF THE APPLICANTS

25.     It is unnecessary to consider the other arguments of the applicants. The issues they raise can only be properly addressed at a trial in the National Court. 

CONCLUSION 

26.     The application for review will be granted for two reasons. First, the order of 27 March 2024 was made as a consent order but one of the parties to the proceedings, the Secretary for Finance, did not consent to the order. Secondly, the applicants, who obviously had a competing claim to the funds subject to the order of 27 March 2024, were not joined to the National Court proceedings and were denied the opportunity to be heard on whether the order should be made.

27.     We will remit OS 25 of 2024 for rehearing and order that the applicants be joined to the proceedings.

28.     Costs will follow the event. The parties who opposed the application – the first, second and fourth respondents – will be ordered to pay the applicants’ costs.

ORDER

1.	The application for review of the decision of the National Court of 27 March 2024 in OS 25 of 2024 is granted and that decision is quashed.

2.	OS 25 of 2024 is remitted to the National Court for rehearing before another Judge.

3.	The first and second applicants are joined to OS 25 of 2024 as third and fourth defendants respectively.

4.	The first, second and fourth respondents shall pay the applicants’ costs of these proceedings on a party-party basis, which shall if not agreed be taxed.
__________________________________________________________________
Lawyers for the first applicant			:	Stout Lawyers 
Lawyers for the second applicant 		: 	Nelson Lawyers 
Lawyers for the first & second respondents 	:	Lakakit & Associates Lawyers 
Lawyers for the fourth respondent 		: 	Lawama Lawyers