State v Minister for Finance and National Planning, Ex parte Bainimarana [2005] FJHC 482; HBJ0007.2005 (14 October 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBJ0007 OF 2005

BETWEEN:

THE STATE

v.

MINISTER FOR FINANCE & NATIONAL PLANNING
FIRST RESPONDENT

THE ATTORNEY-GENERAL OF FIJI
SECOND RESPONDENT

EX-PARTE: COMMODORE J.V. BAINIMARAMA
APPLICANT

Mr. A. Bale with Mr. A. Rayawa for the Applicant
Mr. S.D. Turaga for the Respondents

Date of Hearing: 24th August 2005 and 5th September 2005
Date of Judgment: 14th October 2005

JUDGMENT

LEAVE:

On 24^th May 2005 I had granted leave to the applicant to judicially review the decision of the first respondent made on 29^th July 2004 to surcharge the applicant and secondly the decision on appeal dated 13^th January 2005 to uphold the surcharge and to deduct $300.00 per fortnight from applicant’s salary to recover the surcharged sum.

BACKGROUND:

The applicant was the Commander of the Republic of Fiji Military Forces (RFMF) in 2003. He was also the Chief Accounting Officer. He still holds those posts. The Commander is appointed by the President under Section 112 of the Constitution.

On 29^th May 2004 the applicant received a memorandum from the Chief Executive Officer (CEO) for Finance and National Planning informing the applicant that it was the intention of the CEO to surcharge the applicant a sum of $116,379.95 for “over expenditure incurred by your department without proper authority”. The memorandum stated that this was done by virtue of Section 63(b) of the Finance Act.

The applicant appealed to the Minister against the surcharge giving reasons for over expenditure. By letter dated 13^th January 2005 the Minister informed the applicant that the decision to surcharge him would stand but the amount levied would be reduced by $60,740.40 and a balance of $49,590.11 [or should it be $55,639.55] would be recovered from his salary at the rate of $300.00 per fortnight.

GROUNDS:

The grounds of application are:

(1) that the decision is unreasonable.

(2) failure to give reasons or adequate reason as to how the figures were reached.

(3) failure to hear the applicant in person to enable him clarify, explain or provide further date.

(4) calculation of amount in an ambiguous manner.

By a notice of motion following additional grounds were added –

(5) that the respondents’ decision was ultra vires being premised on a repealed legislation.

(6) That the respondent misinterpreted Section 67 of the Finance Act.

(7) Decision to make direct deduction from the salary violates Article 40 of the Constitution.

(8) Failure to consider relevant matters and taking irrelevant considerations into account.

STATUTORY PROVISION:

The memorandum dated 29^th July 2004 specifies that the applicant was surcharged under Section 63(b) of the Finance Act for over expenditure. Section 63 of the Finance Act provides:

“Where it appears to the Minister that any person, while he was an officer –

(a) ..... ..... ..... .....

(b) was responsible for any improper payment of public moneys or for any payment of such moneys which was not duly vouched for:

(c) ..... ..... ..... .....

(d) ..... ..... ..... .....

and where, within such period as shall be specified by the Minister, an explanation, satisfactory to the Minister, has not been furnished to the Minister with respect to such act or omission, as the case may be, the Minister may surcharge such person a sum not exceeding the value of any loss sustained by the government resulting from such act or omission.”

Section 63(b) gives the Minister power to surcharge in certain defined situations. Under sub-paragraph (b) the Minister can surcharge if he finds that there was improper payment of public moneys OR payment of moneys not duly vouched for. There are two limbs to paragraph (b) first, improper payment, and second, payment of moneys in absence of supporting documents. Additionally the surcharge cannot exceed the value of any loss sustained by the Government. Hence the Government must suffer financial loss before surcharge can be levied. Loss cannot be assumed; it must be proved if an officer is surcharged under Section 63. That loss does not on affidavits appears to be proven.

The applicant has been surcharged but under which limb one does not know. There is nothing in the affidavits filed by the respondent to suggest that the applicant made payments in the absence of supporting invoices or documents. The Minister it appears has equated over expenditure with improper payment. Here the expenditure was incurred by the applicant or the RFMF; the payment was made by the Treasury.

Definitions of course are a hazardous things. It is difficult to define improper payment but one can give examples of it. An improper payment can be an overpayment of salary to an officer or payment of salary to an officer who has retired or paying twice to someone who has done work for a ministry.

The affidavits suggest and Counsel for the respondent fairly conceded that in 2003 from June onwards the Treasury issued monthly warrants to all Ministries and the relevant Ministries and departments were to provide reconciled accounts for expenditure for the previous month. Even though the RFMF was overspending, the Treasury kept authorising payment and paid for the over expenditure having full knowledge of the over expenditure.

Section 63(b) refers to “improper payment” or “any payment is not duly vouched for”. The payments were done by the Treasury even though the expenditure was incurred by the RFMF. Section 63(b) is aimed at payments not over expenditure.

The affidavit of Ralulu B. Cirikiyasawa sworn on 18^th March 2005 says that surcharge is levied on over expenditure and the surcharge policy is contained in the Circular No. 34 of 1980 (Annexure R C 7) to his affidavit. It appears from the affidavit of Cirikiyasawa that the applicant was surcharged under Financial Regulation 59 and not under the Act. Regulation 59 provides:

“Liability of Officers – Chief Accounting Officers prematurely exhausting votes or incurring expenditure without proper authority or incurring expenditure in excess of the votes under their control will be held personally responsible and will be liable to be surcharged. An officer who has been given a Departmental Warrant to incur expenditure must not exceed the amount authorized without the prior approval of the Department for whom the work is being undertaken. The Officer concerned will be held solely responsible for any unauthorized expenditure incurred in excess of the sum allocated.”

An explanatory note to Financial Regulation 59 states that the policy is that surcharge is to be seen as a disciplinary measure and not as a measure for recovering something which would represent a loss to the taxpayer.

There is a confusion in thinking of the respondent as to whether the applicant was surcharged under Section 63(b) of the Finance Act or the Surcharge Policy. The memorandum sent to the applicant suggested he was surcharged on basis of Section 63(b) and not the Surcharge Policy as the respondents’ affidavits now suggest.

HEARING TO BE FAIR:

If the applicant was surcharged under the Surcharge Policy, then what is the procedure to be followed in carrying out the disciplinary measure. The respondent submits that the procedure in cases of surcharge is provided for in Section 63 and Section 66 of the Finance Act. The procedure is that a person aggrieved by surcharge appeals to the Minister. The respondent says an applicant does not have the right to appear in person. Section 66 is silent whether a person has the right to personal attendance before the Minister for purposes of his appeal or not. Section 66(2) enables the Minister to conduct further investigation before making his decision on appeal. The issue which raises its head is should the Minister not allow a person to comment on whatever is put before him on further investigation especially if it is adverse to the applicant. A fair hearing would entail disclosing at least the substance of what was found on further investigation and seeking the applicant’s comments. The rules of natural justice are flexible, requiring fairness in all circumstances, including the nature of the power exercised in the statutory provisions governing its exercise – Kioa & Others v. West & Another – [1985] HCA 81; 159 CLR 550 at 563 per Gibbs J.

A person who is going to be affected by an enquiry must be given a fair opportunity to be heard. The legal position regarding the right to a fair hearing was summed up by the Supreme Court in The Permanent Secretary for Public Service Commission & Another v. Lepani Matea – 9 of 1998 at page 4 as follows:

“There are numerous authorities establishing, at common law, that where someone’s livelihood is at stake that person is entitled to a fair opportunity of a hearing unless the relevant legislation has clearly excluded it. There is a presumption that natural justice applies; or as Lord Reid put it in Wiseman v. Borneman – 1971 AC 298, the court’s supplement procedure laid down in legislation if the statutory procedure is insufficient to achieve justice and additional steps would not frustrate the apparent purpose of the legislation.”

Even though the above passage talks of one’s livelihood, there is no reason why the same reasoning should not apply where by an administrative decision a person is initially surcharged $116,379.95 though later reduced to $49,590.11. This is a very substantial sum of money and the Minister had the powers to deduct up 25% from the salary or pension of an officer. Given the magnitude of the surcharge and method of recovery by deduction from wages, I consider the applicant ought to have been allowed to address the Minister in person. National security of Fiji and maintenance of order is the responsibility of the army. That security cannot be compromised. Given the importance of the task imposed on the army, any explanation as to expenditure in all probability was likely to be lengthy and perhaps delicate and therefore more appropriate for a personal hearing.

RECOVERY OF SURCHARGE:

The applicant further argued that the surcharge should be recovered like any other debt. The respondent must prove the debt in a court of law and only after the court order is obtained can the Minister make the necessary deductions under Section 67(2).

Section 67 reads:

“(1) The amount of any surcharge made under section 63 shall be recoverable as a debt due to the Government from the person against whom the surcharge has been made.

(2) Notwithstanding the provisions of any other Act, the Minister may direct that the amount of any surcharge shall be recovered, by equal monthly instalments, by deductions from the salary of an officer or from the pension of a retired officer not exceeding one-fourth of the total monthly salary or pension of such officer or retired officer, as the case may be.”

This section is a rearrangement with slight alteration of words of the earlier Section 30 of the Finance (Control & Management) Act Cap 52 (reprint in 1972 Laws of Fiji). The single sentence in the latter has been split into two subsections in Section 67.

The applicant relied on Financial Management Act of 2004 which in Section 71 says that surcharge imposed is recoverable as a debt due to the State and further relied on a report prepared by a Committee chaired by Lord Nolan called “Standards in Public Life” particularly in relation to conduct in Local Government.

Paragraph 215 of the report expressed concern at the powers of the auditor (akin to that of the Minister under the Finance Act) in certain cases of formulating and prosecuting the case, judging it and determining the penalty on basis of his own calculations of financial loss. It recommended that it is a matter which should be left to the courts.

The Financial Management Act 2004 has gone down the road recommended by Lord Nolan but this Act does not have a retrospective effect. In 2003 the Finance Act still applied. Under Section 67 there are two options of recovery open to the respondent.

(a) Under subsection (1) by proceeding through the courts. This would inevitably be the case where the officer concerned has his services terminated, or has resigned or left office for some other reason. In such cases the Minister has no access to wages which he can summarily deduct. Recovery and enforcement has to be done through courts in such cases.

(b) Under subsection (2) under which the Minister may direct that the amount of surcharge be deducted from salary or pensions. This subsection could be resorted to where the officer concerned does not dispute both the responsibility to pay and the quantum of surcharge. In such a case there is no need to go to court.

However there is a third category of persons who are still government officers but who deny that they should be surcharged and also dispute the quantum of surcharge. The applicant falls into this category. Under Section 63 it is the Minister who decides the liability. He determines the surcharge. Then the appeal is back to him. The memorandum of 29^th July 2004 is signed by the Chief Executive Officer for Finance and National Planning. In the second line it refers to “our intention to surcharge you”. Annexure C to the affidavit of the applicant is a letter from the first respondent, it too refers to “our earlier decision”. Was there more than one person involved in making the decisions or same person making both decisions – the original and decision on appeal?

The fact that the appeal is to the Minister deprives it of the desirable level of objectivity and impartiality. The Ministry here has found the applicant at fault, surcharged him a certain sum and then heard the appeal. One cannot lose sight of Section 29(2) of the Constitution which calls for parties to a civil dispute to have access to independent and impartial tribunal. In Barbados Mills & Others v. State – AAU0035 of 2004, AAU0043 of 2004, AAU0046 of 2004 and AAU0048 of 2004 the Court of Appeal pointed out that the test of independence and impartiality of a tribunal is how the proceedings would appear to a “notional independent observer”. Even though those comments were made in the context of criminal proceedings, I am of the view that they are equally apposite to proceedings before any tribunal.

In the present case a notional independent observer would have serious misgivings about the way the proceedings were handled. The applicant had raised serious issues in his affidavit; he had stated that the expenditure was reasonable and incurred in the national interest and Fiji’s international commitments. The decision to surcharge, the amount of surcharge, and the appeal all appear to be done by person or persons too close to each other so the desired level of impartiality does not meet the test of notional independent observer.

HAS SURCHARGE POLICY BEEN REPEALED:

The applicant’s submission that the Surcharge Policy was brought into existence under the Finance (Control & Management) Act. That Act the applicant submits has been repealed by the Finance Act. Therefore the surcharge policy which was made to give effect to provisions of an earlier legislation can have no effect now under the Finance Act.

I agree with the respondent’s submissions that the savings clause in Section 71(2) of the Finance Act still keeps intact instruments made, including the Surcharge Policy, made under the old Act.

I also consider that Article 40 of the Constitution which provides for compulsory acquisition of property has no relevance to these proceedings as it applies to personal property or real property acquired by the State for public purposes.

CONCLUSION:

The judicial review succeeds for the reason that the applicant could not on the facts before me be surcharged under Section 63(b) of the Finance Act as there was no improper payment or payment of moneys not duly vouched for nor was any loss to the Government shown. The proper section to use would have been Regulation 59 of the Financial Regulations. I am also of the view that given the magnitude of the surcharge an oral hearing ought to have been given and since the surcharge was seriously disputed, it should have been proved as a debt in a court of law.

Accordingly the due process was not provided to the applicant so the judicial review succeeds. I order a certiorari to quash the decision of the first respondent to surcharge the applicant for the over-expenditure. I also order costs against the respondents in the sum of $800.00.

[ Jiten Singh ]
JUDGE

At Suva
14^th October 2005