New Zealand Insurance Co Ltd v Chief Collector of Taxes [1989] PGLawRp 60; [1988-89] PNGLR 522 (14 December 1989)

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[1988-89] PNGLR 522 - New Zealand Insurance Co Ltd v Chief Collector of Taxes

ADMINISTRATIVE LAW - Judicial review of judicial acts - Application to review National Court decision - Civil jurisdiction - Grounds for - Where failure of lawyer to lodge appeal within time - Overall interests of justice - Grounds for merits of review fully argued - Grounds for review cogent and exceptional - Application brought promptly - Failure to lodge appeal caused by erroneous view of Rules of Court - Leave granted - Supreme Court Act (Ch No 37), s 17 - National Court Rules, O 2, r 3(iii) - Constitution, s 155(2)(b).

CONSTITUTIONAL LAW - Powers of Supreme Court - Review of judicial acts of National Court - Civil jurisdiction - Where notice of appeal not lodged in time - Principles applicable - Overall interests of justice - Merits fully presented and cogent - Leave granted - Supreme Court Act (Ch No 37), s 17 - Constitution, s 155(2)(b).

PRACTICE AND PROCEDURE - Supreme Court - Application for leave to apply for judicial review - Civil jurisdiction - Relevant principles - Application of - Overall interests of justice - Merits argued and cogent - Failure to lodge appeal in time outweighed - Supreme Court Act (Ch No 37), s 17 - Constitution, s 155(2)(b).

On an application for leave to apply for judicial review in circumstances where a lawyer had failed to lodge a notice of appeal in a matter involving the tax liability of insurance companies administering the Motor Vehicles Insurance Trust Fund and regarded as a “test case” of some commercial importance, the failure to lodge the notice of appeal was as a result of the lawyer’s erroneous belief that time for filing the notice of appeal did not run during the court vacation, and where the application for leave to apply for judicial review was brought on promptly,

The application for review should be granted. The merits of the case to be argued on review which were fully presented on the application provided cogent and convincing reasons and exceptional circumstances in favour of granting leave to review; they far outweighed the reasons for failure to lodge the notice of appeal within time.

Independent State of Papua New Guinea v Colbert [1988] PNGLR 138, discussed and applied.

This was an application made pursuant to s 155(2)(b) of the Constitution for leave to review a decision of the National Court in its civil jurisdiction where the lawyer for the applicant had failed to lodge a notice of appeal within the time prescribed by the Supreme Court Act (Ch No 37), s 17.

BREDMEYER J: Section 155(2)(b) of the Constitution provides that the Supreme Court “has an inherent power to review all judicial acts of the National Court”. This is an application for such a review by New Zealand Insurance Co Ltd. It is an application for review because the company got out of time to lodge an appeal. On 25 November 1988, Woods J delivered a written judgment against the applicant company. Under s 17 of the Supreme Court Act (Ch No 37), a person who desires to appeal must do so within 40 days after the date of the judgment in question, or within such further period as is allowed by a judge on application made to him within that period of 40 days. The 40-day period expired on 4 January 1989. The applicant company wished to appeal but got out of time because its lawyer thought that time did not run during the court vacation. That was a mistake on his part because the appeal period is fixed by statute, by s 17 of the Supreme Court Act which I have quoted, and not by the National Court Rules.

Under O 2, r 3(i), the court has a vacation every year from 20 December to the following 31 January. Sub-rule (iii) provides:

“That time of the vacation shall not be reckoned in the times appointed or allowed by these Rules for filing, delivering or amending any pleading unless so directed by a judge nor shall a pleading be delivered or amended, nor judgment be entered in default, unless under the direction of a judge.”

Clearly that sub-rule only applies to times appointed or allowed by the Rules for filing a pleading. The time limit in this case has been imposed by statute. Also a notice of appeal is not a pleading. Order 8 of the National Court Rules deals with pleadings which are a statement of claim (which may or may not be endorsed on a writ), a defence, a reply, a rejoinder, a cross-claim and a set-off.

In this case, the applicant company failed to appeal in time because its lawyer mistakenly thought that the appeal period did not run during the vacation. That mistake has been made before. It is the background to the case of Wood v Watking (PNG) Pty Ltd [1986] PNGLR 88. In that case, the judgment of the trial judge was handed down on 28 November 1985 and the losing party, Wood, wanted to appeal. His lawyer attempted to file a notice of appeal on 11 February 1986 but was refused by the Registrar as being out of time. He then applied to the Supreme Court for a direction that the appeal was competent and within the time limit on the basis that, although the judgment had been pronounced on 28 November 1985, it had not been entered until much later. The Supreme Court ruled against that argument and said that entry of judgment was not an essential preliminary to the lodging of an appeal and that failure to enter judgment does not affect the running of the time limit of 40 days which commences from the day the judgment is pronounced.

The ambit of the Supreme Court’s review jurisdiction under s 155(2)(b) of the Constitution was first considered in Avia Aihi v The State [1981] PNGLR 81 and this was followed by Avia Aihi v The State (No 2) [1982] PNGLR 44, Danny Sunu v The State [1984] PNGLR 305 and more recently in The Independent State of Papua New Guinea v Colbert [1988] PNGLR 138. Colbert’s case, as far as I know, was the first civil case to be considered for a review under s 155(2)(b) of the Constitution. The law is accurately summarised in the headnote in Danny Sunu’s case. The discretionary power to grant a review of a decision under s 155(2)(b) of the Constitution should be exercised only where:

N2>(b) there are cogent and convincing reasons or exceptional circumstances; and

In deciding whether there are cogent and convincing reasons the following matters are relevant:

In Colbert’s case, the applicant endeavoured to file an appeal one day outside the 40-day appeal period. The miscalculation of an appeal period by one day may not seem a very large error but it was compounded by the fact that other errors were made by the lawyer for the State in that case. For example, he failed to heed the advice of counsel to apply for an extension of time and he failed to read, or have brought to his attention, a later letter from counsel urging him to lodge the appeal on the 40th day. Also, there was a delay of some five months after the appeal period expired, or six months after the date of the judgment, before the application for constitutional review was brought. In that case, the failure to lodge the appeal within time and the delay of five months in bringing the review application were due to neglect and/or incompetence of the applicant’s lawyer.

In the present case, the reason for the application for review is that the applicant company’s lawyer considered that the appeal period did not run during the court vacation. That was an elementary mistake by a lawyer who is otherwise fully competent and in my view it does not, of itself, amount to an exceptional circumstance which would enable us to hear this review. I have been persuaded by reading the judgments of my brothers in draft that there are other factors which justify the grant of leave for judicial review. These are enunciated as (a) to (g) in the judgment of Barnett J. To these I add the fact that this review application was brought more promptly. It was brought six weeks after the expiration of the appeal period; in Colbert, the review application was filed five months after the appeal period expired. I consider therefore on the Danny Sunu principles that leave for review should be granted.

I am authorised to make the following remarks on behalf of the whole bench. Having granted leave to review and having had the case argued on the merits, we should now discuss and decide the merits. We regret that the impending retirement of two of our number from this bench, and pressure of other work, has meant that we are unable to devote the necessary time to deciding the merits. We therefore grant leave to review and leave it to the parties to reargue the merits before a differently constituted bench. As it is the applicant’s fault that it failed to appeal within time, and thus it has put the respondent to the expense of arguing this application, we consider that the applicant should pay the costs of this application and we certify the case an appropriate one to engage overseas counsel.

AMET J: This is an application for leave to review a decision of the National Court pursuant to the Constitution, s 155(2)(b), by New Zealand Insurance Co Ltd, hereinafter referred to as the applicant. The judgment sought to be reviewed was handed down on 25 November 1988. The applicant failed to lodge a notice of appeal as required by s 17 of the Supreme Court Act (Ch No 37) within 40 days, until 10 February 1989, believing that time did not run against it during the court vacation period from 20 December 1988 to 31 January 1989 pursuant to O 2, r 3(iii), of the National Court Rules and that it had until 16 February 1989 to file its notice of appeal. The applicant had attempted to file the notice of appeal on 10 February 1989 but the Deputy Registrar rejected it as being out of time. The applicant then erroneously sought direction from the Supreme Court by notice of motion that it be permitted to file the notice of appeal relying on its belief that the time limit did not run against it during the court vacation period. That motion was rejected by me sitting as a single Supreme Court Judge on 17 February 1989. That ruling is included in the review book.

The application for leave is supported by an affidavit of Philip Ross Payne who was the lawyer for the applicant in the appeal before the National Court and who had the carriage of the matter thereafter. That affidavit dated 14 February 1989 was the same one relied upon in the motion before the Supreme Court on 15 February 1989. It deposed to the following circumstantial facts that gave rise to this application for leave:

N2>1. That both parties had agreed that, regardless of who won the appeal before the National Court, the unsuccessful party would appeal to the Supreme Court to obtain a definitive decision as the matter was considered to be of importance to all parties.

N2>2. That on 15 December 1988, Mr Ian Gzell QC of Brisbane was asked if he would accept a brief to settle the notice of appeal.

N2>3. That on 10 February 1989 parties conferred in the precincts of the National Court at Waigani when the lawyer for the applicant attempted to file the notice of appeal.

By consent, both the application for leave and the substantive review arguments were heard together as is commonly the practice of the Supreme Court in criminal and civil appeals where leave is required. This was, of course, practical as the substantive arguments on the merits of the review necessarily formed part of the arguments in the consideration of the application for leave as to whether there are cogent and convincing reasons and exceptional circumstances or where some substantial injustice is manifest or that the case is of special gravity. This necessarily involves an examination of the factual circumstances as well as the judgment and the law.

In my view, the very brief factual circumstances of failure by the applicant’s lawyer to file a notice of appeal within the time limit, being his error of law as to the application of O 2, r 3(iii), is essentially the same as that of the lawyer in the case of The Independent State of Papua New Guinea v Colbert [1988] PNGLR 138. That case was a similar application for leave to review pursuant to the Constitution, s 155(2)(b), where the applicant’s lawyer who had carriage of the appeal had also failed to lodge a notice of appeal within the 40-day time-limit owing to his miscalculation of the 40-day period. He attempted to file the notice of appeal one day out of time. The majority in that case held that:

Negligence on the part of a lawyer in not protecting the right of appeal of the client in a civil case is not a valid ground for exercising power of judicial review unless there are exceptional circumstances beyond his control.

The majority of the court considered that the miscalculation by the lawyer and his being out of time by a day was negligence and not an exceptional circumstance beyond his control. Leave was consequently refused. I dissented from the majority in that case. My reasons for so doing are amply stated in that case. I would distinguish that decision from this application.

Colbert’s case, in my view, is authority only for the narrow proposition that negligence on the part of the lawyer for an applicant in failing to protect the rights of appeal of his client does not amount to an exceptional circumstance and is not a valid ground for exercising power to grant leave for judicial review. It should be read and applied very narrowly and should be distinguished from this application for the special reasons set out below. I enumerated these special features in my dissenting judgment in the case and I adhere to them in distinguishing it from this present application. The following are the features in Colbert’s case which in my view make it markedly distinct from this application:

N2>1. There was no review book and thus no transcript of evidence was available to the court.

N2>2. Consequently there was no detailed examination of the evidence with the judgment sought to be reviewed.

N2>3. There was no address and discussion of the substantial questions of law that were necessarily raised in the proposed grounds of review.

N2>4. No arguments were addressed by counsel on the merits of the proposed grounds of review toward the determination of the question of the principles applicable whether there are cogent and convincing reasons and exceptional circumstances or where some substantial injustice is manifest or that the case is of special gravity.

And so the significant difference in my opinion between Colbert’s case and this application is that in the former the majority of the court refused the application only on the basis of negligence on the part of the lawyer although no transcript of the evidence was available to be considered in the detailed way in which we have done so in this application. The majority so ruled without consideration of the other matters of principle which are necessary in determining whether or not, notwithstanding the fact that the lawyer was negligent, there are cogent and convincing reasons and exceptional circumstances on the basis of there being substantial merits on the proposed grounds of appeal or that some substantial injustice is manifest or that the case is nevertheless of special gravity, such as would warrant grant of leave in the interests of justice. These would involve matters such as the amount of damages or sum of money involved, the questions of law raised in the proposed grounds of review or constitutional issues raised as to relevance or otherwise of the common law as adopted vis-a-vis the development of the Underlying Law.

In my view, the substantial difference which should distinguish Colbert’s case from this case, the Avia Aihi cases and Danny Sunu’s case is that, apart from the negligence and delay on the part of the lawyer in relation to the factor of time for filing notice of appeal, all of the other factors relevant to determining whether there are cogent and convincing reasons and exceptional circumstances, or where some substantial injustice is manifest, or that the case is of special gravity, or that there are substantial questions of law as to the merits of the case to be argued on review, or whether in the interests of justice leave should be granted for review, and which involve substantial addresses and persuasion by the lawyers for and against the judgment and the evidence, were present in this application but not in Colbert’s case.

In the end result, in this application, upon a proper application of the principles first stated in Avia Aihi and Danny Sunu, in the exercise of my discretion I grant leave for judicial review. I agree with Barnett J that, upon a thorough presentation by counsel and examination of both the judgment and the evidence before the Court there are demonstrated exceptional circumstances in favour of granting leave.

I accept the narrow ratio decidendi in Colbert’s case as it applies to this case that the mistake made by the applicant’s lawyer would not by itself be sufficient ground for exercising the court’s discretion in the applicant’s favour, but I hasten to add that conversely, mistake or negligence by an applicant’s lawyer should not alone be a ground for exercising the court’s discretion in refusing to grant leave. Rather the court should, notwithstanding that fact, proceed to a thorough examination and consideration of the judgment together with the evidence as may be relevant in considering the other issues relevant to the determination of the application. The mistake or negligence on the part of the lawyer should not, of itself, be the sole basis for the exercise of discretion to refuse leave. The other matters ought also to be considered and at the end of the day all put in the balance as to what are the interests of justice in the final decision whether or not to grant leave.

For all the reasons Barnett J has referred to, and with which I agree, I consider that the overall interests of justice warrant a grant of leave.

BARNETT J: This is an application under s 155(2)(b) of the Constitution for leave to review a decision of the National Court.

The applicant, the New Zealand Insurance Co Ltd, had unsuccessfully objected to the National Court against an assessment by the Chief Collector of Taxes. The National Court upheld the Chief Collector’s contention that the applicant was involved in a business partnership with its fellow licensed insurers who administer the Motor Vehicles Insurance Fund. The court consequently upheld the Chief Collector’s assessment that K567,740 described as “MVIT Income” was properly included as part of the applicant’s income.

After the National Court found against the applicant there were, under s 17 of the Supreme Court Act (Ch No 37), only 40 days to lodge a notice of appeal to the Supreme Court. Unfortunately, the lawyer for the applicant omitted to lodge the notice of appeal in time. His omission was the result of a mistaken belief that time did not run in such matters during court vacations.

With the normal channel for proceeding by way of notice of appeal blocked, the applicant has invoked the “inherent” power of the Supreme Court under s 155(2)(b) of the Constitution to review judicially all decisions of the National Court. It is now settled that the Supreme Court does have power to review National Court decisions after the time for appeal has lapsed and there are several recent authorities where the Supreme Court has begun the process of formulating principles to be followed when exercising this power. The “pioneering” cases were Avia Aihi v The State [1981] PNGLR 81 and Avia Aihi v The State (No 2) [1982] PNGLR 44. This was a case where the Full Bench of the Supreme Court granted leave for the applicant to have her criminal conviction reviewed 13 months after the time for appeal had expired. In that case, the applicant was an imprisoned woman without ready access to a lawyer.

In Danny Sunu v The State [1984] PNGLR 305, Pratt and McDermott JJ extracted key phrases from the various judgments in the Avia Aihi cases in an attempt to set down the principles which should bind (or at least guide) the court in subsequent cases. The following phrases were extracted: ([1984] PNGLR 305 at 307):

“It is ... clear that such power will be exercised only in ‘exceptional circumstance where some substantial injustice is manifest, or the case is of special gravity.”

“There must be ‘cogent and convincing reasons and exceptional circumstances’.”

“... the discretion will be exercised only where it is in the interests of justice and the court is satisfied there is ‘grave reason to apprehend that justice has actually miscarried, that is to say, that the conviction was contrary to the truth and justice of the case’.”

The Danny Sunu case was also an application from a criminal, conviction. Pratt and McDermott JJ followed the lead of Kapi J in Avia Aihi (No 2) (at 61) and agreed that the merits (or otherwise) of the case to be argued must be considered as one of the factors under the heading “cogent and convincing reasons”.

In all these authorities, the applicant was a convicted person seeking judicial review because the normal appeal period had expired. Such applicants receive a sympathetic hearing when they are labouring under such difficulties as being in prison without ready access to the services of a suitable lawyer. There are indications in some of the judgments that the court’s attitude would be less sympathetic in cases where the State was applying for review against sentence or acquittal.

These developments through the cases are set out clearly by Kapi Dep CJ in the next major authority, The Independent State of Papua New Guinea v Colbert [1988] PNGLR 138. This was the first instance of an application under s 155(2)(b) for judicial review of a National Court decision in a civil case. The reason it was necessary to apply by way of judicial review was, again, that the applicant’s lawyer had not filed a notice of appeal within the 40-day period. Unlike the previous cases referred to above, the Supreme Court did not hear submissions on the merits of the applicant’s case though, from the judgments, it seems that it was apparent that the issues were on questions of law only.

In Colbert’s case, the applicant’s lawyer was the State Solicitor and the negligent omissions and actions amounted to serious and repeated incidents of negligence which included not heeding senior counsel’s written and urgent advice. On the last possible day, having missed by a few minutes the closing time of the Registry, the lawyer failed to have it opened as is provided for in the rules. The lawyer then allowed a further delay to occur before applying for judicial review (ignoring the helpful advice of the respondent’s lawyer in the process). In total then, there was a delay of six months from the date of judgment to the lodging of the application for judicial review. As a result, the respondent in Colbert was deprived for that period of the damages awarded by the National Court for injuries he had received because of the applicant’s negligent failure to provide adequate security at the institution where its employees were housed. The undue delay was causing financial loss to the respondent and further injury to his health and these factors were before the Supreme Court while it determined whether to extend the respondent’s emotional and financial suffering by granting leave for the applicant to proceed by way of judicial review.

Although detailed arguments on the substantive merits of the case were not called, Kapi Dep CJ pointed out that, on the material before the court, it was clear that only error of law was being alleged, that the trial judge appeared to have applied settled principles of common law and that the applicant had not satisfied the onus upon him to show that “some substantial injustice is manifest” or the case is “of special gravity”, or that there is “grave reason to apprehend that justice has actually miscarried”. Bredmeyer J carefully detailed five acts of negligence by the State Solicitor which resulted in the appeal being out of time. Like Kapi Dep CJ, he considered that these acts of professional negligence by the State Solicitor did not amount to an exceptional circumstance or a “cogent and convincing reason” for entertaining the application. Bredmeyer J examined also the merits of the case sought to be argued and conceded (at 147) that:

“... the principle of law decided by [the trial judge] was important, and the award of damages was large — and they are factors which support the application — but in my view they are heavily out-weighed by the cause of delay.”

Amet J, in Colbert’s case, interpreted the same statements of principle derived from the judgments of Pratt J and McDermott J in Danny Sunu v The State but, in applying the principles to the facts, reached a different conclusion in his dissenting judgment.

“... the factor of ‘reasons for failing to appeal within time’ (which has received much prominence and criticism and indeed considerable over-emphasis), is only one of two factors to be taken into account in one of three principal bases for the grant of review. It is an important factor, but it is not the sole and conclusive factor. It is my view that it is not necessarily fatal to an application that the reasons for failing to appeal within time are not wholly satisfactory or acceptable. It is only one of two factors to be considered in the third major factor whether there are cogent and convincing reasons.”

Amet J made it clear that he required more consideration to be given to the merits of the case as the merits are an important aspect in deciding whether there are cogent and convincing reasons or exceptional circumstances which would justify the court in reviewing the decision.

In the application now before the Court, I find that a proper application of the principles first declared in the Avia Aihi cases and refined in Danny Sunu and Colbert lead me, in the exercise of my discretion, to grant leave for judicial review.

I interpret the judgment in Colbert’s case rather narrowly. It is authority for the principle that in a civil case where the respondent is suffering from undue delay in finalising the matter, which delay was caused by the negligence of the applicant’s lawyer, such negligence by the lawyer will not, standing alone, amount to exceptional circumstances, cogent and convincing reason or manifest injustice which would justify a grant of leave for judicial review.

The present application is significantly different from Colbert’s case. Like Colbert’s case, the reason for proceeding by way of judicial review was because the lawyer for the applicant made a silly mistake which resulted in failure to lodge the notice of appeal within the statutory 40-day period. In the present case, however, there are several exceptional circumstances in favour of granting leave.

N2>(a) The applicant is one of 14 “linked” insurance companies all of which are facing similar taxation assessments on the basis of being involved together in a business partnership;

N2>(b) The Chief Collector of Taxes, the applicant and the other insurance companies are all treating this application as a “test case” to obtain a Supreme Court ruling on the law to be followed in future assessments to be levied on the other 13 companies;

N2>(c) There is affidavit evidence of an informal agreement between lawyers for the parties that no matter who won the case in the National Court the loser would appeal to the Supreme Court to ensure that the law applicable to the tax liability of insurance companies administering the Motor Vehicles Insurance Trust Fund would be finally settled.

N2>(d) In this case the respondent (the Chief Collector of Taxes) has assessed (and presumably collected) the tax already. It is not like Colbert’s case where the respondent was a private person who was suffering injury to his health and finances as a result of the delay caused by the negligence of the applicant’s lawyer.

N2>(e) If the Court refuses leave in this case the result will be that the State (the Chief Collector) will retain the assessed sum but there will immediately be another “test case” commenced by one of the other insurance companies. Eventually that matter will reach the Supreme Court again and, if the company is ultimately successful, the Chief Collector will be left holding tax paid by this applicant which has been improperly collected. This will not be a satisfactory result.

The best interests of all parties and of the wider public will be served by resolving the matter in dispute as soon as possible.

N2>(f) No doubt because of the above considerations, Mr Beaumont indicated at the outset that although the respondent was not formally consenting to leave being granted it did not intend to positively oppose the application;

N2>(g) Finally the sums of public revenue involved are very large and the principles of law are important and need to be resolved. Having heard detailed submissions on the merits of the case, it is obvious to me that “the case is of special gravity”.

In these circumstances, I am of the opinion that justice will be best served by granting leave for review. The mistake made by the applicant’s lawyer would not, by itself, be sufficient ground for exercising the Court’s discretion in the applicant’s favour. The additional exceptional circumstances listed above do, however, provide cogent reasons for granting leave for judicial review.

In my view, the phrases quoted from the various authorities are useful attempts by the various judges to verbalise the principles involved in exercising the judicial discretion in these “leave for review” cases. The phrases tend to overlap as they are all attempts to state the same principle. They cannot usefully be represented as a coherent set of rules and sub-rules which can then be applied mechanically as a sort of magic formula. Each separate phrase, however, deserves to be considered in the light of the circumstances of the application before the court. Such a study will enlighten the judicial mind and contribute to a sound and balanced exercise of the discretion.

In the long run, the question facing any superior court considering an application for review is whether the wider interests of justice require it to override the recognised need for finality in litigation by allowing a particular decision to be reviewed. When exercising its discretion in such cases, the conduct of the applicant and his lawyer and any delay caused by negligence on behalf of the applicant will be one factor to be taken into account but the main consideration will be whether there is grave reason to believe that justice may have miscarried.

The submissions put forward on the merits of this application by the applicant raise important and difficult questions in an area where the law is not settled. It requires to be settled by the Supreme Court and that really is what both parties want. A well-argued case submits that the trial judge erred in law. An equally well-argued submission asks this Court to uphold his judgment. If the trial judge did err in law, then justice has miscarried and unless review is granted there will be no way for the possible injustice to be rectified.

To me, the fact that the appeal procedures were closed off should not be over-emphasised. A good case for judicial review has been argued and in the exceptional circumstances of this case of “special gravity”, there appear to be cogent and convincing reasons why judicial review should be granted. To refuse to grant review in the face of all the above factors would, I think, give the appearance that justice is not being done.

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Papua New Guinea Law Reports

New Zealand Insurance Co Ltd v Chief Collector of Taxes [1989] PGLawRp 60; [1988-89] PNGLR 522 (14 December 1989)

Papua New Guinea Law Reports - 1988-89