Kim Foon & Sons Pty Ltd v Minister of Finance & Planning [1996] PGNC 19; N1464 (24 July 1996)

Unreported National Court Decisions

N1464

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

OS 521 OF 1995
BETWEEN:
KIM FOON & SONS PTY LTD - Applicant
And:
MINISTER OF FINANCE & PLANNING - 1st Respondent
And:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA - 2nd Respondent
And:
NATIONAL PROVIDENT FUND BOARD OF TRUSTEES - 3rd Respondent

Waigani

Doherty J
18 December 1995
March 1996
24 July 1996

JUDICIAL REVIEW OF ADMINISTRATIVE DECISION - National Provident Fund Act.

The plaintiff sought review of the 1st respondents gazettal of its name pursuant to S. 3 (2) National Provident Fund Act Ch 377 thereby obliging it and its employees to subscribe to the Fund.

Held:

1. ـ W60; Whilst the Minister had power under S. 3 (2) he had to exercise that power subject to the rules of natural justice including, inter aleal n of htentid cause.

2. &#160 &##160;; The sece sectionction coul could notd not be used to amend or vary the clear provisions of the legislation.

3. &##160; D60; Deliberane maatpul ofon of numbers of employees to evade the Auld be a ground for applicaplication of S. 3 (2) but there must be actual evidence, suppositions on the part of administrators did not suf

ـ&#160  &#The; wo month grace perioperiod after gazettal was intended for applications for review, amendment etc.

5. ; T60 Minester’s deci decision under S. 3 (2) had to be a genuine exercise of discretion.

6. ټ&##160; S60; S. 4 of 4 of the Act is intended inter alia to enable officers of the 3rd respondent to make investigations befovisinS. 3 (2) might be applied.

Cases Cited:

MacDhui Development ment v Genv Genia & State [1992] PNGLR 49

Gegeyo v Minister of Lands [1987] PNGLR 331

Kekedo v Burns Philp (PNG) Ltd [1988/89] PNGLR 122

Gorio v National Parks Board [1982] PNGLR 364

PNG Ready Mixed Concrete Pty Ltd v The State of Papua New Guinea & Others [1981] PNGLR 396

Counsel:

Ms Stylianou for the Applicant

Mr Kawi for 1st & 2nd Respondents

Mr Frank for the 3rd Respondent

DECISION

24 July 1996

DOHERTY J: The apnt seeks certain decn declarations and review of a decision of the 1st Respondent when he applied the provisions of the Nationalident Fund Act Ch 377 (hereinafter “the Act”) to the applicant and its employeeloyees thereby compelling the applicant and its employees to contribute to the National Provident Fund.

There is no dispute that the applicant has 21 employees, less than provided for in the mandatory provisions of S. 3 of the Act and so is not obliged by law to automatically subscribe.

The facts leading up to these applications are set out in affidavits filed by the Plaintiff’s director and representatives of the respondents, there was no application to cross examine on the affidavits and the facts can be outlined as follows:

1. ; The plafntifpacompany has has been carrying on business since 1972; it is a foreign company and is so registered.

2. ҈& I60;mpl employs 21ys 21 people, it employed 21 at time the defendant’s personnel visited the company premises and for some time prior to that. The defendant not dispute pute this.

3. The Act was passed in 198 , it provides for compulsory contributions to the fund from establishments with 25 or more employS. 3 contions by esshmenose eees and employer agree [S. 3 (3)] and a td a third hird categcategory oory of estf establisablishments of less than 25 employees pursuant to S. 3 (2).

4. The National Provident Fund manager wrote to the Plaintiff on 1st October 1992 asking them to fill in a form SPF 3 which was “to determine your eligibility for coverage under “NPF&;.&#1his taintiff did.

5.

5.&#160  ҈& The lete letter said inspsctors would come but none did.

6. ټ There was no responesponse until a letter of 23rd June 1994 in very similar terms to the letter of October 1992 enclosie samm SPF“dete eligibility” which the plaintiff completed and returneturned.&#ed. 160; The pThe plaintays itys it considered the letter a general enquiry and responded on that basis. There was a visit by an inspector in March 1994, the records of the plaintiff whecked but no further action was taken and there was no foro formal reply to the plaintiff’s form SPF 3.

7. &ـ T60; The 1ste 1st respondent gave notice in Gazette No 66 of 1st September 1994 under S. 3 (2) to apply the Act toral eishments employing less than 25 people including the plaintiff.

8. < &160; ټ On 10tobOctober 199r 1994 the National Provident Fund Assistant Manager wrote advising the Plaintiff of the Ministers decision gazetted on 1st Septembe4.

10. The gaz ttalceoti 1sofSept September 1994 stated the Act would apply to companies including the plaintiff after expiration of 2 months of the gazettal notice.

The defendants filed an affidavit formployeing the plai plaintiffntiff had had no superannuation fund. He did ay the plaintiff haff had more than 21 employees during his seven years employment nor suggest employee numbers were kept low deliberately.

From affidavits filed by the 3rd defendant&#8 staff it is apparent severseveral companies were being considered as being “eligible to contribute to NPF despite employing numbers just below 25 employees”...and “to force their compliance into the NPF Act” (sic). The plaintiff we such comp company.

The attitude of National Provident Fund officers is shown in an exchange of memorandum saying &#8220will be aware there are companies which maintain their employee numbers at 23 and 24 so as o as to avoid contributing to the NPF. We can use the section quoted above to force their compliance into the NPF Act.”

Subsequently the Fund executive officer advised the Minister “I am advised by my compliance department there are certain employer contributors which deliberately keep their employee numbers below 25 so that the NPF Act will not affect their operations.” He set out criteria pplicaplication of S. 3 (2) which included those establishments maintaining less then 25 employees to avoid contributions and thhere employees had made requests of the National Provident Fund. There is no evidencedence that the plaintiff came within the latter and the affidavit evidence shows the employees did not wish to join. That has not been chged.

The internrrespondence put to the Minister suggests that employees ofes of National Provident Fund made their submissions after their own invesions and assessments and the Minister had little or no inpu input. Counsel for the 1st and 2nd Defendant agree this was the situation.

It is common ground between counsel that S. 3 (3) to the Act gives power for employer and employees who wish to jo do so voluntarily in contrast to S. 3 (2) - where the empe employer is bound whether he wants to or not once S. 3 (2) comes into operation.

The plaintiff challenges the Minister’s decision on grounds which may be summed up as follows:

(1) Decisio wasd aseirrn evanlevant considerations.

(2) Raasonexle tatecn byoemploemployees that they would not be forced to join.

(3) The Minister exercised his discretion impropes he d to der tope atent of the Act whit which isch is to a to apply pply to esto establishments of 25 or more employees and has extended the Act in an aary wntrarpublic policy.

>

(4)&#(4) & Denial nial natural justice.

(5) &#The action was harsh and and oppressive within meaning of S. 41 Constitution.

(6) &#1ailure to comply with S.th S. the /p> <&&##16e Ministerister actedacted in a in an unrn unreasoneasonable able manner and not in accord with the principals in Associated Provincialure Hv Wedry Corporation [1948] 948] 1 KB 223.

The first and secondecond defe defendants did not file a defence but appeared and argued the grounds in a comprehensive detailed submission.

In submission plaintiff counsel says the applicant had no knowledge and no indication of the intentions of the 1st and 3rd defendants, he was given no notice before September 1994 that the National Provident Fund was taking active steps to invoke S. 3 (2) of the Act to enable him to put his views nor was it given an opportunity to make representations and this is contrary to natural justice and an arbitrary exercise of power.

Counsel for plaintiff relies on the concept of natural justice that prior to exercising of the discretion the plaintiff had a right to know and be heard. She relies on such precedents as MacDhui Development v. Genia & State [1992] PNGLR 49 for the principle that failure by the Minister to give notice was a breach (in the MacDhui case giving notice was a mandatory requirement in the Act unlike here where no procedure is provided) - and where the Minister acted on wrong material the Court has a duty to interfere when proprietary rights are adversely affected.

Gegeyo v Minister of Lands [1987] PNGLR 331 held that the Minister cannot make a decision without consultation and natural justice required at least advice or notice in writing for the proposal and the reasons for it. Defence Counsel sought to distinguish this case on the basis that: (1) there was notice by way of the letters and the intent of the fund was very clear; and (2) the requirements of natural justice apply only to S. 3 (3) of the Act. I quote from his submi:

“The requirements of natural justice are only observed while proceeding under section 3 (3). In absenca stay provision sion giving the applicant a right to be heard, it is submitted that the Cohe Court should not imply one into the amb section 3 (2) of the NPF Act.”

I consider the letters do not at all make the the intent of the officers of the fund clear. My reading is that there eere enquiries about the plaintiff’s staff situation and gave information about the benefits of the fund. There is noement that subm submission will be made by the fund to the Minister under S. 3 (2) of the Act and the plaintiff was being considered. I cannot find any hint oriimplication suggesting that, dependant on their reply, the Minister might be asked to exercise his discretion under S. 3 (2).

I consider that some such notice should have been given toplaintiff, it is only fair fair that he and anyone else, understood the full implications of the enquiries.

I further consider that action by the Fund should have been acted promptly, given lapses of time the plaintiff was entitled to conclude his answers satisfied the Fund and assume he need take no further action.

Counsel for defence seeks to distinguish the Gegeyo and Genia cases [supra] submitting “Gegeyo’s case concerned an application for judicial review of the decision of the Minister for Lands to revoke the appointments to the land Board of Mr Gegeyo and 3 others, just 11 weeks after their appointments were made. The only form ofce was thes the letter of revocation from the Minister saying that the “Minister has revoked your appointment...”

I consider the principles very relevant to the present case and cite, with respect, the headnote in Gegeyo v Minister of Lands [Supra] (3) The power to revoke or suspend an appointment, being a decision affecting the status of persons, the Minister was required to observe the principles of natural justice, to the extent at least of giving advice or notice in writing of the re for his his proposed decision and if those reasons were likely to reflect adversely on the character integrity or reputation of that person, then by giving that person an opportunity of being heard in his defence.” pt that principle and appl apply it herein. I find that while tnister ster undoubtedly did have powers under S. 3 (2) they be exercised after alerting prospective candidates and with guidelines that prospective emve employers can consider and take advice

On this ground I co I consider the 1st and 3rd Defendants erred in their administration of S. 3 (2) of the Act.

The defendants speak in strong terms on policy and intent of the Act, referring to speeches in Hansard leading up to it and submit the Court should take cognisance of those policy decisions and uphold the Ministers invocation of his powers when considering the plaintiff’s grounds. is no doubt the intentionntion and the public policy behind the legislation is intended to benefit those working when age or other circumstances renders them unable to continue working; this accords with the humanitarian attitudes in the preamble to the Constitution but Parliament has passed an Act and set the limit of employees at 25. Parliament can and is well able to change that limit at any time. It is not dministrators nors nor the Courts to take it upon themselves the duty and power to say circumstances have changed, Parliament has not caught up with those changes yet, we will now do what Parlt really intended. Th0; The dison in S. 3 (2)3 (2) is not, in effect to amend the law, it must be exercised properly and within the scope of the Act.

In considering the respondents view both as shown in their minutes and in submission before the Court I have asked myself if this legislation is comparable with laws such as tax legislation - where the Courts have drawn a distinction between avoiding and ev tax. I considonsider the paralaels are not exact except to the extent the National Provident Fund and Minister should have real evidence of evasion before deciding it exists and not suppositions as evidenced here.

Cl for respondent imputs bads bad faith on plaintiff. I disagree0; On the facts acts I consider there was no bad faith on any party - complete surprise on plaintiff, over enthusiasm on the Respondent fund - (if they considered employees were not told aboutFund then why did they not not go and tell them) and unquestioning acceptance by 1st respondent.

Whilst I agree with Counsel for the Respondents that S. 3 (2) is to be read independently of the preceding subsections and vests a discretion which must be exercised independently the Minister must actually exercise it with cause and I consider the Wednesbury principles apply to that exercise.

Counsel for the respondents refers to Wednesbury principles and I accept and apply his summation of them.

(a) &#It must be a real exercisercise of the discretion.

(b) ـ The bodt must have have regard to matters which it is expressly or by implication referred by the statute conferring the discretion.

(c) &##160;; It ignorelevrnt cont considerations.

(d)p>(d)&#160 &##160;ust mot onot operateerate on the basis of bad fai dishy.

(e) & It must must direct itself properly in lawn law.

.

(f) ust a anl nabrs personewoul woul would act and must not be so absurd in its action that no reasonable pers person would act in that way.

These principles haen ap in sl cas Keke Burns Philp (PNG) PNG) Ltd [Ltd [1988/1988/89] P89] PNGLR NGLR 122 setting out the circumstances where judicial review may lie against an administrative decision.

In applying these principles I consider the first and third defendants did act on a misconceived premise that they had not fully investigated. I haveady noted that the Ache Act does not give any criteria for the application of S. 3 (2) but hold that silence does not empower the Minister to extend the Act to any organisation at will. ng thicy and matters rers rers referred to in the Act I think the officers may be correct in saying S. 3 (2) could be properly used tng organisations manipulating their employee numbers to evade the Act within its parameterseters. However such a decision needs proof and notice. In this regaconsider that that that is one of the purposes of S. 4 (a) of the Act.

Counsel also s the doctrine of legitimate expectation, I accept it does not apply to this case, having fing found for the Plaintiff I need not elaborate further on this ground.

In summation I consider the wording of the form and letters sent to the Plaintiff seek information to “determine your eligibility of coverage under fund” but do not indicate it will be used to decide if powers of Minister be used to cover the plaintiff and to that extent, coupled with complete lack of reply or response for several months is unfair to the plaintiff. There is a supposition, evidenced in internal minutes that the plaintiff and others were deliberately suppressing numbers of employees to avoid and evade the Act. This overlooks the fact that the plaintiff had that r of employees for approximroximately 20 years, 8 of those before the Act was passed.

I consider Minister has clear unequivocaer to apply the Act to others but it is a discretion that mhat must be exercised in a way which incorporates, as quoted in Gorio v National Parks Board [1982] PNGLR 364 at 367:

“The whole scope and purpose of the enactment must be considered, and one must assess the importance of the provision that has been disregarded, and the relation of that provision to the general object intended to be secured by the Act.’ In assessing mportance of e of the provision, particular regard may be had to its significance as a protection of individual rights, the relative value that is normally attached to the rights that may be aely affected by the decisiocision and the importance of the procedural requirement in the overall administrative scheme established by the statute. Furthermoreh may depend upnd upon the particular circumstances of the case in hand.”

The matter which caused me greatest concern in this case was the apparent lack of action on the part of the plaintiff immediately after the notice in the gazette. Does amount to acquiescencscence, was there a right of review that he failed to seek?

The Act itself is silent on the point. ys “the Minister mayr may, after giving 2 months notice in the National Gazette, apply this Act...”

There is no clear provision for an appeal or submission within those 2 months.

I consider the intend of the 2 month grace period was to allow submission for review, objection, application for stay or any such application by the affected employer or employees.

There was no application by the plaintiff but this must be seen in the light of the facts. The notice was in the National Gazette - not a practical means of communication although it is intended to be a public notice. To adopt the words of Miles J in PNG Ready Mixed Concrete Pty Ltd v State of Papua New Guinea & Others [1981] PNGLR 396 at 407, (also speaking of notices in the National Gazette), “the case is an example of the deficiencies in the system”.

The Fund’s officers did not tell the plaintiff until 6 weeks after the gazettal notice and did not give any indication that there was any avenue other than compliance open to him. When the Plaintiff did re pond a reply was not made until after the 2 month period had elapsed. I consider this an unfaiioaction on the part of the 3rd defendant and, whilst I con it is the intention of the Act to have a 2 month limit pert period for review, in the instant case I consider the lack of notice couwith lack of response amounamounts to an improper exercise of discretion and I am not prepared to refuse the plaintiff relief because of it.

I uphold plaintiff’s application for certiorari of the 1st defendant’s decision and quash that decision.

Lawyers for the Applicant: Warner Shand Lawyers

Lawyers for the 1st & 2nd Respondents: State Solicitors

Lawyers for the 3rd Respondent: Herman Leaky