N3447

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1350 OF 2006

NEWSAT LIMITED
Plaintiff

AND

TELIKOM PNG LIMITED
First Defendant

INDEPENDENT CONSUMER AND COMPETITION COMMISSION
Second Defendant

THE INDEPENDENT STATE OF
PAPUA NEW GUINEA
Third Defendant

Waigani: Cannings J
2007: 24-26 April, 7 May

RULING

CONTEMPT – failure to comply with court orders – whether person ordered to do things must be given notice of consequences of failure to comply – whether evidence of non-compliance – standard of proof.

The National Court made orders requiring Telikom to do certain things in relation to a contract with Newsat. Newsat asserts that Telikom did not do the things required by the court order and the failure to comply was deliberate. Newsat brought a motion against Telikom for punishment for contempt. Telikom claimed that the orders failed to give notice of the consequences of non-compliance and that there was no evidence of a failure to comply.

Held:

(1)	Proceedings for contempt are criminal in nature and the court must be satisfied beyond reasonable doubt that the three elements of the offence have been proven to exist beyond reasonable doubt: ie

•	the order was clear;
•	it was properly served; and
•	there was a deliberate failure to comply.

(2)	The order was clear and unambiguous.

(3)	It was properly served. In the circumstances the fact that the order did not warn Telikom of the consequences of non-compliance did not matter.

(4)	Telikom failed, deliberately, to comply with the order.

(5)	Telikom was therefore guilty of contempt of court and is liable to punishment.

Cases cited
The following cases are cited in the judgment:
Newsat Ltd v Telikom PNG Ltd, ICCC and The State, WS 1350 of 2006, 26.09.06, unreported
Ome Ome Forests Ltd v Ray Cheong (2002) N2289
Peter Luga v Richard Sikani and The State (2002) N2286
Richard Sikani v The State and Peter Luga (2003) SC807
Ross Bishop and Others v Bishop Bros Engineering Pty Ltd and Others [1988-89] PNGLR 533
The State v Foxy Kia Tala, Re Detective Constable Corney Winjan [1995] PNGLR 303

NOTICE OF MOTION
This was a motion for punishment of a company for contempt of court, for not complying with an order of the National Court.

Counsel
D Cooper SC, G Poole and T Imal, for the plaintiff
C Scerri QC, I Molloy and A Mana, for the 1st defendant

7 May, 2007

1. CANNINGS J: This is a ruling on whether Telikom PNG Ltd is guilty of contempt for disobeying an order of the National Court.

2. Salika J made the order on 26 September 2006 on the motion of Newsat Ltd, a company that had a year earlier entered into a contract with Telikom. Newsat sued Telikom and two other parties, claiming damages and other remedies arising from alleged breach of contract by Telikom. Salika J ordered Telikom to do certain things in relation to the contract.

3. Newsat argues that Telikom did not do what it was ordered to do and is in contempt of court. Newsat says it has proven the three elements of contempt:

•	the order was clear;

•	they served the order on Telikom; and

•	Telikom deliberately failed to comply with it.

4. Telikom disagrees. They say that, though the order was clear –

•	it was not properly served, as the order failed to specify the consequences of failing to comply with it; and

•	they did not fail to comply with it but if they did, it was not a deliberate failure.

5. Contempt of court is a criminal matter and the plaintiff must prove the existence of the three elements beyond reasonable doubt. If one element is not proven, Telikom will be not guilty. If all elements are proven, Telikom will be guilty and I will hear the parties on the question of punishment. (Ome Ome Forests Ltd v Ray Cheong (2002) N2289; Peter Luga v Richard Sikani and The State (2002) N2286; Richard Sikani v The State and Peter Luga (2003) SC807; Ross Bishop and Others v Bishop Bros Engineering Pty Ltd and Others [1988-89] PNGLR 533; The State v Foxy Kia Tala, Re Detective Constable Corney Winjan [1995] PNGLR 303.)

6. But before dealing with the two contentious issues, I need to explain what the contract between the parties was about, how the dispute between them came to court and what Salika J’s order required. I also need to state the charge that Telikom is facing.

THE CONTRACT AND THE DISPUTE

7. The contract is about the provision of satellite-based broadband, called VSAT services. The contract commenced on 26 September 2005 and its duration was one year. Any extension beyond that was subject to agreement of both parties.

Telikom licence

8. Telikom has exclusive authority under a licence granted to it by the government telecommunications regulatory authority, PANGTEL, to provide satellite-based telecommunications services within and from PNG. Its licence allows it to farm out provision of those services to other companies; and that is what it did under the contract with Newsat, called a channel dealer agreement. Newsat has access to a satellite, via the Newsat gateway, which can carry signals into and out of PNG. It owns software that allows a customer access to the satellite.

Service requests

9. Under the contract a person wanting to sign up as a Newsat/Telikom broadband customer would fill out a "service request", a five-page form (plus terms and conditions) that was a schedule to the contract. Telikom was required to forward it to Newsat, which would then decide whether it could provide its gateway. If it could, it would sign the form and return it to Telikom. The last page of the form provided for acceptance by the customer and Telikom and Newsat, thus setting up a tri-partite agreement. The customer paid Newsat an agreed sum to get access to the satellite. Newsat paid Telikom 25% of its total billings on a monthly basis.

10. Besides paying Newsat and obtaining Telikom approval a customer had to have the necessary hardware (satellite dishes and other equipment) to get on line. Most customers engaged a local company, Hitron Ltd, for that purpose. Hitron would import the equipment, then dispatch its technicians to the customer’s site and set things up. Hitron was not a party to the Newsat/Telikom contract.

Events in August 2006

11. By August 2006 – the month before the Newsat/Telikom contract was due to come to an end – about 30 customers had signed up to use the Newsat gateway, with Telikom approval. On 16 August Telikom gave Newsat notice that it would terminate the contract on 26 September 2006. Telikom also at that time decided that no further customer requests should be accepted.

12. According to Telikom’s company secretary, Ere Kariko, that decision was made as the contract with Newsat was only a short-term arrangement. Telikom was setting up its own network, focussed on delivering broadband data services to remote areas. As the expiry date of the Newsat/Telikom contract was approaching, Telikom was confident that its own network would soon be operational. Customers signed up to the Newsat gateway could be migrated to the Telikom network. Telikom took the view that given the lead-time in Newsat and Hitron connecting a new customer after approval of a service request it would be more convenient and cost effective for the customer to be directly connected to the Telikom network.

13. Telikom was concerned about a number of things. Newsat and Hitron were marketing services provided by Telikom under the Newsat arrangements as voice replacement services. Newsat was permitting voice traffic using the satellite facilities, in breach of the contract, which strictly confined the services to data traffic. Newsat and Hitron were installing VSAT facilities outside the Newsat/Telikom contract, in breach of the law.

Writ filed: 19 September 2006

14. On 19 September 2006 Newsat sued Telikom by filing and serving WS No 1350 of 2006. Newsat claimed that Telikom breached the contract in a number of ways. They didn’t approve any service requests until June 2006, nine months after the start of the contract. They approved only 30 out of 120 service requests. They did not accept any service requests after 16 August 2006. They stated a desire to compete with Newsat.

15. Newsat sought damages for breach of contract and other remedies. They wanted an injunction restraining Telikom from impeding with Newsat’s provision of VSAT services to existing or prospective customers. They wanted to stop Telikom representing that Newsat’s services are no longer available in PNG. They sought an injunction requiring Telikom to approve VSAT services to everybody who applies before 26 September 2006. Newsat also wanted the court to declare that a number of laws are unconstitutional and void, eg the Telecommunications Industry Act 2002 and the Independent Consumer and Competition Commission Act 2002.

WHAT DID SALIKA J ORDER?

Hearing on 22 September 2006

16. On 22 September 2006 – four days before the contract was due to expire – the case came before Salika J. Newsat had filed a notice of motion seeking various interim orders. Both parties were present and argued their positions; Newsat applying for the orders, Telikom resisting them.

Ruling of 26 September 2006

17. In a written judgment (Newsat Ltd v Telikom PNG Ltd, ICCC and The State, WS 1350 of 2006, 26.09.06, unreported) his Honour noted that Telikom was refusing to accept applications for Newsat services. Newsat wanted a mandatory injunction to direct Telikom to perform an act: "to continue to receive customer contracts for Newsat". Newsat was raising serious questions about interpretation of the contract. Newsat showed that it stood to suffer significant commercial damage if the injunction was not granted. There are customers who still want Newsat to provide its satellite service. There is a serious question whether Telikom has the capacity and capability to provide the type of services that Newsat can provide. Newsat stands to lose out on prospective valuable customers who might never be able to sample which service is better, Newsat’s or Telikom’s. Newsat stands to lose its business reputation as a competent telecommunications provider if it is told to cease its operations that day.

18. In those circumstances, his Honour said he would grant the orders sought in Newsat’s notice of motion.

Order of 26 September 2006

19. Salika J made four substantive orders:

1.	An Order by way of an Injunction until trial or earlier order that the First Defendant forthwith and in any event prior to the close of business on 26 September 2006 accept those Service Requests/Customer Contracts submitted to it for the provision of Newsat Services and received by it prior to the close of business on 26 September 2006 which Customer Contracts include, but are not limited to the Customer Contracts referred to in Exhibit "B" to the Affidavit of Lindsay Jorgensen filed herein.

2.	An Order by way of an Injunction until trial or earlier order directing the First Defendant by its directors servants, agents or otherwise however to perform its obligations to customers pursuant to all Service Requests/Customer Contracts accepted by the First Defendant prior to the close of business on 26 September 2006.

3.	An order directing the First Defendant to inform the Plaintiff in writing by no later than 7 October 2006 of the identity of each application made to, and accepted by, the First Defendant by close of business on 26 September 2006 and full particulars of each application so made.

4.	An Injunction by way of prohibition until trial or earlier order restraining the First Defendant by its directors servants, agents or otherwise howsoever from informing customers or potential customers of the Plaintiff that the First Defendant can provide to customers from 1 October 2006 a high-speed internet broadband connection equivalent to the broadband connection currently offered by the Plaintiff to customers pursuant to the Channel Dealer Agreement dated 26 September 2006.

20. Order No 1 refers to an affidavit by Lindsay Jorgensen, the general manager of Hitron. Annexure B to that affidavit was a list of 101 applicants who had applied to Telikom for installation of a Newsat broadband internet connection. They were businesses, eg Niugini Highlands Coffee, Bishop Brothers, or educational institutions, eg Goroka Primary School, UPNG.

WHAT CHARGE DOES TELIKOM FACE?

21. Newsat alleges that Telikom refused to obey order Nos 1 and 2 and is guilty of contempt in that it –

•	did not accept any of the service requests/customer contracts submitted to it by the close of business on 26 September 2006, thus breaching order No 1; and in so doing

•	prevented itself from being able to perform its obligations to customers, thus breaching order No 2.

22. Newsat seeks payment of a fine of at least K10 million and, pending payment of the fine, sequestration (ie seizure) of Telikom’s assets.

(As per the statement of charges and notice of motion Newsat filed on 16 October 2006 under Order 14, Rule 42 of the National Court Rules.)

THE TWO MAIN ISSUES

23. I reiterate, they are:

•	Was the order properly served, given that it failed to specify the consequences of failing to comply with it?

•	Did Telikom fail, deliberately, to comply with the order?

WAS THE ORDER PROPERLY SERVED?

No, says Telikom, the National Court Rules were breached

24. Telikom does not dispute that the order was physically served. They agree it was given to their lawyers at 3.55 pm on 26 September 2006. They argue, however, that it cannot sustain a contempt charge as it was not endorsed with a notice warning of the consequences of non-compliance as required by Order 13, Rule 7(3) of the National Court Rules, which states:

A minute of a judgment [including an order] served under this Rule must bear a notice (naming the persons concerned) that the person served is liable to imprisonment or to sequestration of property if—

(a)	where the judgment requires the person bound to do an act within a specified time—the person bound refuses or neglects to do the act within that time; or

(b)	where the judgment requires the person bound to abstain from doing an act—the person bound disobeys the judgment or order.

25. Telikom argues that Newsat is now trying to enforce Salika J’s order by committal to custody or sequestration. Therefore the order should have had a notice on it saying "that the person served is liable … to sequestration of property", or words to that effect. The consequences of non-compliance with the order are serious and compliance with the Rules is of great importance in a case such as this. There has been no explanation by Newsat for non-compliance with the Rules. Therefore the court should not allow them to get away with it.

26. Mr Scerri referred to various Victorian cases to show the importance of the endorsement. He pointed out that the Rules of the Supreme Court of Victoria are similar to Order 13, Rule 7 of the National Court Rules. Their purpose is to warn the person served of the consequences that might flow if they do not do the act the court orders them to do.

Court can dispense with requirements of the Rules

27. I am not persuaded by this argument. I have discretion under Order 13, Rule 7(7) to dispense with the requirements of Order 13, Rule 7(3) and I exercise that discretion here.

28. This is not a case where Newsat seeks to have, in these proceedings against Telikom, any person committed to custody for contempt. Newsat was trying at one stage to have Telikom’s CEO, David Waterhouse, punished for contempt and that would have exposed him to the risk of committal to custody. But he was not present when this matter was heard and I ruled he had not been given proper notice of the proceedings. This is just a prosecution against a company. No one is at risk of being committed to custody.

29. The need for strict compliance with Order 13, Rule 7(3) is not as great as it would have been if Newsat were trying to enforce the order by committal.

Does a person have to be told about the consequences of not complying with a court order?

30. Salika J’s order was made after a hearing at which Telikom was legally represented. Telikom is a large and significant government-owned corporation. It was served the order on the same day the order was made. It was an order of the National Court. It would have been stating the obvious to say that it was liable to sequestration of its property if it did not comply with the order.

31. The spectre of people or corporations who are ordered by the court to do things avoiding penalty for not doing as the court says, simply because there was no endorsement on the order warning of the consequences of non-compliance, is not a comforting one. The consequences of not complying with court orders ought not to be avoided on technicalities such as that. Maintenance of the rule of law means that courts need to inculcate in all individuals and corporations an innate and immediate respect for authority of courts and the orders that they make. We should not be inviting anybody to find loopholes in court orders.

32. If a grass roots person in a remote area were served with a court order and there was no endorsement warning them of the consequences of non-compliance, that might be an appropriate case in which to insist on strict observance of Order 13, Rule 7. That is a far cry from the current case.

33. I conclude that the order was properly served on Telikom.

DID TELIKOM FAIL, DELIBERATELY, TO COMPLY WITH THE ORDERS?

No failure to comply, says Telikom

34. Mr Scerri, for Telikom, asked me to focus on order No 1. It required Telikom, by close of business on the day it was served, to "accept those "service requests/customer contracts submitted to it for the provision of Newsat services and received by it prior to the close of business" that day. I have put the key words in italics as it is Telikom’s argument that no service requests or customer contracts were submitted to it on that day. None have been submitted since. And none had been submitted before the day of the order and left un-accepted.

35. Mr Scerri argued that Newsat has presented no evidence that there was a single service request or customer contract submitted to Telikom by close of business on 26 September 2006 that remained un-accepted. Therefore, there was nothing Telikom had to do. It did not fail to comply with the order.

Service request had to be in prescribed form, says Telikom

36. Mr Scerri hinged this argument on the proposition that the words "service requests/customer contracts" meant and could only mean a service request substantially in the form prescribed by schedule 2 to the Newsat/Telikom contract. The fulfilment of the contract depended on the service request being signed by the customer, Newsat and Telikom. He cited a number of clauses of the contract to demonstrate that "service request" was a technical term with a discrete meaning for the purposes of the contract.

37. As the order was sought and granted to give effect to the contract, the words used in the order must correspond to those in the contract.

Ronald Miller’s evidence: the real practice

38. Mr Scerri referred to the oral evidence of Newsat’s regional sales manager, Ronald Miller, who under cross-examination revealed that for some reason in the period leading up to the date of termination of the contract, 26 September 2006, Telikom was not being given service request forms. Mr Miller’s evidence was that, instead of the service request form being used, customers were getting connected in this way:

•	the customer would make enquiries with Newsat (or sometimes with Hitron, who would send them to Newsat);

•	Newsat would approach Telikom and give them the customer’s details (name, location, technical requirements etc);

•	Telikom would give the OK – a written authority to proceed, by letter or email;

•	Newsat would fill out the service request form and send it to the customer;

•	the customer would sign the form and send it back to Newsat;

•	Newsat would sign it, attach the Telikom approval to the form and it would remain in Newsat’s files – it would not go to Telikom;

•	Newsat would then notify the customer, and Hitron, that connection could proceed.

39. Far from supporting Newsat’s case, Mr Scerri submitted that Mr Miller’s evidence confirmed that no service requests or customer contracts were submitted to Telikom. There was nothing capable of being accepted by Telikom.

Lindsay Jorgensen’s affidavit

40. As for the reference in order No 1 to the customer contracts listed in annexure B to Lindsay Jorgensen’s affidavit, these were not, in fact, service requests. Mr Scerri pointed out that Mr Jorgensen did not refer to service requests or customer contracts. He called annexure B an "up-dated list of applicants", a description he also used when he was cross-examined.

41. Mr Scerri submitted that correspondence exchanged between Telikom’s lawyers and Newsat’s lawyers in the weeks after 26 September 2006 showed that Telikom has, all along, been taking a consistent position: no service requests had been submitted to it, so there was none it had to accept.

What did "service request/customer contract" mean in the court’s order?

42. I agree with Mr Scerri’s argument that for the purposes of the contract "service request" has a technical meaning. It means a request in the form set out in schedule 2 to the contract. I agree also that the purpose of the hearing before Salika J was to hear Newsat’s motion for orders that it was claiming were necessary to give effect to the contract. However, I have difficulty drawing the inference from those propositions that when the order referred to "service requests/customer contracts" it was referring only to a service request in the prescribed form.

What did Salika J intend?

43. In his written judgment Salika J was not concerned with the niceties of what was or was not a service request as defined by the contract. His Honour said that Telikom was refusing to accept applications for Newsat services and that Newsat wanted a mandatory injunction to direct Telikom to continue to receive customer contracts. The order was intended to require Telikom to accept applications for Newsat services, irrespective of whether the applications were in the prescribed form.

44. By referring to the "customer contracts" in annexure B to Lindsay Jorgensen’s affidavit, the court was saying, through the order, to Telikom: those are the service requests that you must accept – at least – plus any more that are submitted to you by the close of business on 26 September 2006.

45. The fact that the applicants on Mr Jorgensen’s list might not have filled in a service request in the prescribed form is of no consequence. It is the order that imposed the obligation on Telikom. The order did not say that recourse to the contract was necessary to work out what the order meant. It is clear, from its wording, what the order meant and required; and its literal and intended meaning is clarified and reinforced by the written reasons his Honour gave for making the order.

Telikom’s options

46. Telikom might with some justification have felt aggrieved by having such an order made against it. It was being ordered to do something – accept at least 101 service requests – that under its contract with Newsat it was not obliged to do. Under the contract it had a discretion to accept or not. Ronald Miller said in his oral evidence that sometimes Telikom said yes, sometimes no. When they said no, there was nothing Newsat could do about it. But the court order was stopping Telikom from exercising its discretion.

47. If Telikom were aggrieved by the order – and clearly they were – their options were:

•	go back before Salika J and argue that his Honour had made an obvious mistake, ie make a slip rule application OR ask his Honour to clarify the meaning and intent of the order; or

•	file an appeal in the Supreme Court (which they have done) and obtain a stay of Salika J’s order (which they have not done).

48. A lawful option was not to disobey the order (which they appear to have done).

Evidence of non-compliance

49. It is not my task to question or second-guess the appropriateness or fairness of Salika J’s order. The question is whether the order was complied with; and if not, was it deliberate?

50. I consider that there is ample evidence of non-compliance:

•	Lindsay Jorgensen’s affidavit is proof that at least 101 applications were submitted to Telikom and had not been accepted;

•	Ere Kariko’s affidavit is evidence that Telikom had decided in mid-August 2006 – a month before it was served the order – that it would not approve any more applications;

•	the letters from Telikom’s lawyers to Newsat’s lawyers in October 2006 show that Telikom was taking the view that no service requests in the prescribed form had been submitted to it, but they did not deny that some sort of applications, in some form, had been submitted.

Findings of fact

51. I am satisfied beyond reasonable doubt that:

•	at least 101 service requests/customer contracts for provision of Newsat services were submitted to Telikom by the close of business on 26 September 2006;

•	Telikom did not forthwith accept those service requests/customer contracts;

•	Telikom has not subsequently accepted any of them; and accordingly 

•	Telikom did not comply with the order of the National Court.

Was it deliberate?

52. As for whether the failure to comply was deliberate, I can only conclude that it was. Telikom took the view that it did not have to do anything as no service requests were submitted to it. This view was based on Telikom’s or its lawyers’ interpretation of the order. That view is the platform on which their defence to the contempt charge was based.

53. It is, with respect, a flawed view, a misconstruction, of the court’s order. I do not have to be satisfied that Telikom was acting disingenuously or deceitfully or that they were deliberately playing dumb. I just have to be satisfied that their non-compliance with the order was deliberate. And I am satisfied.

54. That means Telikom wilfully disobeyed the order.

No ambiguity

55. No issue was taken about whether the order was clear and unambiguous but for the avoidance of doubt I state that it was.

IS TELIKOM GUILTY OF CONTEMPT?

56. I reiterate that the offence of contempt has three elements. I am satisfied that the plaintiff has proved beyond reasonable doubt that:

•	the order of 26 September 2006 was clear and unambiguous;

•	the order was served on Telikom in the manner required by the Rules; and

•	Telikom failed deliberately to obey the order.

57. Therefore Telikom is guilty of contempt of court as charged.

ORDERS

58. I will make an order in the following terms:

(1)	The first defendant and contemnor, Telikom PNG Ltd, is adjudged guilty of contempt of court and shall be punished accordingly.

(2)	A hearing on punishment shall be conducted at a time to be fixed.

(3)	The other contemnor, David Waterhouse, is summoned to appear before the National Court to answer the charges of contempt against him in the notice of motion of 16 October 2006 at a time to be fixed.

Ruling accordingly.

O’Briens: Lawyers for the plaintiff
Allens Arthur Robinson: Lawyers for the first defendant