Pioneers Health Services Ltd v Secretary of Department of Finance [2008] PGNC 46; N3326 (2 May 2008)

N3326

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 165 OF 2007

BETWEEN:

PIONEERS HEALTH SERVICES LIMITED
Plaintiff

AND:

GABRIEL YER,
SECRETARY OF DEPARTMENT OF FINANCE
First Defendant

AND:

THE STATE
Second Defendant

Waigani: Salika, J
2008: 20 February
2 May

CONTEMPT OF COURT – Failure to comply with an order of the Court – whether the actions of the alleged contemnor were deliberate.

Cases Cited:

Papua New Guinean Cases
Public Prosecutor v Nahau Rooney (2) [1979] PNGLR 448
PNG Forest Authority v Vele Iamo & Another – Unreported National Court Judgement N2490
RE Valentine Kambori (No 2) Unreported National Court Judgement N2489

Overseas Cases
Australian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98
Stancomb v Towbridge VDC [1910] UKLawRpCh 47; (1910) 2 CH 190
AG v Times newspaper Ltd and Another (1992) AC 191
Witham v Holloway (1995) 131 ALR 401

Counsel:
Mr G Poole, for the Plaintiff
Mr G Odu, for the defendants

2 May, 2008

1. SALIKA J: Introduction: The Plaintiff brings an application by Notice of Motion on 2 April 2007 for a finding of Contempt against the Secretary of the Department of Finance of Papua New Guinea, Mr Gabriel Yer, for his failure to comply with an Order of the National Court of 19 April 2004 by failing to pay in full a Judgment in favour of the Plaintiff in the total sum of K3,254,910.98 plus 8% pre Judgment interest of K1,576,367.92 pursuant to Order 14 rules 39, 42 and 49 of the National Court Rules.

2. In the substantive action, the Plaintiff sued the Second Defendant for breach of contract of services and claimed damages of K3,254,910.989.

3. On or about 19 April, 2004, the Plaintiff served sealed copies of the Court Order of 21 April, 2004 and Certificate of Judgment on the Acting Solicitor General who in turn endorsed the Certificate of Judgment as fit for payment under Section 14(2) of the Claims By and Against the State Act and referred it to the First Defendant to pay the Judgment Debt.

Evidence

4. In support of the Application for Contempt of Court, the Plaintiff relies on the following Affidavits.

(a) Affidavit of Ian Proctor sworn on 28 March 2007 and filed on 2 April 2007.

(b) Affidavit of Service of Peter Ando sworn and filed on 5 April, 2007.

(c) Affidavit of Service of Graham Agist sworn and filed on 5 April 2007; and

(d) Affidavit of Goodwin Poole sworn on 21 August 2007 and filed on 23 August,2 007.

Issues

5. The primary and only issue raised in this Application is whether the Secretary for Finance, Mr Gabriel Yer, has failed to settle in full the Judgment of 19 April, 2004.

Submissions on the law and Application for Contempt of Court.

6. The law for Contempt of Court is well settled in this jurisdiction and is found in the provisions of the National Court Rules on Contempt of Court and the various decided Supreme and National Court Judgments.

7. The Application for Contempt of Court against the Secretary for Finance, Mr Gabriel Yer, is made pursuant to Order 14 rules 39, 42 and 49 of the National Court Rules and also section 14 of the Claims by and Against the State Act 1996, Rule 39 provides as follows:

"39 of the National Court Rules. Charge, defence and determination, (55/3).

Where a contemnor is brought before the Court, the Court shall

(a) cause him to be informed orally of the contempt with which he is charged; and

(b) require him to make his defence to the charge.

(c) after hearing him, determine the matter of the charge; and

(d) make an order for the punishment or discharge of the contemnor"

8. Rule 42 of the National Court Rules provides as follows:

"42. Procedure generally, (55/6)

(1) Where contempt is committed in connection with proceedings in the Court, an application for punishment for the contempt must be made by motion on notice in the proceedings, but, if separate proceedings for punishment of the contempt are commenced, the proceedings so commenced may be continued unless the court otherwise orders.

(2) Where contempt is committed, but not in connection with proceedings in the Court, proceedings for punishment of the contempt must be commenced by originating summons, but, if an application for punishment of the contempt is made by motion on notice in any proceedings, the application may be heard and disposed of in the latter proceedings, unless the Court otherwise order",

9. Rule 49 of the National Court Rules provides as follows:

49. Punishment. (55/13)

(1) Where the contemnor is not a corporation, the Court may punish contempt by committal to prison or fine or both.

(2) Where the contemnor is a corporation the Court may punish contempt by sequestration or fine or both.

(3) The Court may make an order for punishment on terms, including a suspension of punishment where the contemnor gives security in such manner and in such sum as the court may approve for good behaviour and performs the terms of the security".

10. Section 14 of the Claims By and Against the State Act 1996 provides as follows:

"14: Satisfaction of Judgment against the State

(1) The certificate referred to in Section 13(2) shall be served on the Solicitor-General by –

• (a) personal service; or
  
• (b) leaving the document at the office of the Solicitor General with the person apparently occupying the position of personal secretary to the Solicitor General between the hours of 7.45 a.m and 12. noon pm and 4.06 pm, or such other hours as may from time to time be declared by or under the Public Service
  

(2) The Solicitor General shall, within 60 days from the date of service upon him of a certificate under Section 13(2), endorse the certificate in Form 1.

(3) Upon receipt of the certificate of a judgment against the State bearing the Solicitor General’s endorsement that judgment may be satisfied, the Department Head responsible for finance matters shall, within a reasonable time, satisfy the judgment out of moneys legally available.

(4) Any payment in satisfaction of judgment may, in the absolute discretion of the Department Head responsible for finance matters, be made by installments, provided the judgment is thereby satisfied within a reasonable time.

(5) No action –

• (a) for or in the nature of mandamus; or
• (b) for contempt of court.
  

Or otherwise lies against the Solicitor General or the Departmental Head responsible for financial matters in respect of the satisfaction of a judgment under this Act, other than for failure to observe the requirements of subsection (2), (3) or (4), as the case may be, or unless other exceptional circumstances can be shown to the satisfaction of the court".

11. In the present case, the Court is asked to find that the Secretary for Finance, Mr Yer, be found guilty of Contempt of Court because he has failed to pay the Judgment debt inclusive of 8 % pre Judgment interest. The principal Judgment debt outstanding was K154,910.98 and the 8% pre Judgment interest is K1,576,367.92. However, on Monday 30 July 2007, the Defendants paid the outstanding principal Judgment debt of K154,910.98 to finally complete payment of the principal sum.

12. There still remains the mattes of the 8% pre Judgment interest of K1,576,367.92 and 8% post Judgment interest which is yet to be calculated and paid.

13. Nonetheless, the Application for Contempt of Court is made on the basis that the Defendants failed to settle in full the Judgment debt within a reasonable time. Since 19 April, 2004 (date of Judgment) to 30 July 2007 (date of receipt of final payment of principal Judgment debt) is a long time; a period of three (3) years. The Court was referred to the case of Sealark shipping v. the Secretary for Treasury (N173) which dealt with the question of what is a reasonable time for the State to settle a judgment debt and the finding there was that 3 months is a reasonable time.

14. It is the evidence of the plaintiffs in the Affidavit of Support of Ian Proctor sworn and filed on 26 March 2007 as follows:

(a) On or about 19 April, 2004, Pioneer Health Services Ltd obtained a Judgment in its favour in proceedings WS No 1074 of 1999, in which it sought damages from the Fly River Provincial Government for breach of contract and related matters.

(b) The Judgment in the Plaintiffs favour was in the principal sum of K3,254,910.98 together with interest at eight percent (8%) per annum from 1 March 1999 until 31 March 2004, in the sum of K1,576,367.82, and costs of the proceedings to be taxed if not agreed.

(c) The former lawyers for Pioneer Health Services Ltd obtained a Certificate of Judgment from the Registrar of the Court and served it on the Office of the Solicitor General.

(d) On the same day, the Certificate of Judgment was served on the Solicitor General, he endorsed the Certificate under Section 14(2) of the Claims Act that the Judgment may be satisfied.

(e) Mr Proctor swears that he was informed by the lawyers for Pioneer Health Services Limited and verily believed that the said Certificate of Judgment was delivered to the Secretary for Finance on or about 21 April, 2004.

(f) Due to the size of the Judgment Debt, Pioneer Health Services Limited agreed to accept regular part payments in satisfaction of the debt, and received, over the next twelve (12) months, a total of K2,900,000.00 in part satisfaction of the Judgment Debt.

(g) In the initial period of the proceedings which it instituted against the Fly River Provincial Government for damages, Pioneer Health Services Limited had retained Mr Nobert Kubak as its lawyer. As time went on, Pioneer Health Services Limited became anxious about the apparently slow progress for the litigation so appointed Mr Gregory Toop in place of Mr Nobert Kubak to represent Pioneer Health Services Limited and pursue its claim. The Notice of Change of Lawyers filed on 29 December 2000 and is on the file.

(h) On or about 25 October 2005, Mr Nobert Kubak obtained an ex parte Default Judgment against Pioneer Health Services Limited in the sum of K1,610,426.30 (and interest and costs) in a claim for damages for alleged non-payment by Pioneer Health Services Limited for legal fees Mr Kubak claimed were owed to him by Pioneer Health Services Ltd.

(i) Upon Pioneer Health Services Limited becoming aware of the situation it appointed O’Briens Lawyers to represent its interest.

(j) Negotiations between the lawyers for Pioneer Health Services Limited and Mr Kubak continued for some time in an attempt to have Mr Kubak furnished a bill to Pioneer Health Services Limited so that the company could consider the claim for costs, but these were unsuccessful.

(k) Acting on Pioneer Health Services Limited’s instructions, O’Briens Lawyers instituted further court action, and on 6 April 2006, the Orders which Mr Kubak had obtained, were dissolved by the National Court.

(l) On or about 7 April 2006, Pioneer health Services Limited’s lawyers informed the First Defendant and the solicitor General that the Orders were dissolved and requested that the First Defendant to resume payments of the Judgment Debt.

(m) Since 6 April 2006, Pioneer Health Services Limited and its lawyers have made numerous representations and there has been a considerable volume of correspondence with various functionaries of the Department of Finance attempting to have the Judgment Debt paid. These have all been uniformly unsuccessful.

15. It submitted that the Court find the First Defendant, the Secretary for Finance, Mr Gabriel Yer guilty for contempt of the Orders of the National Court made on 19 April 2004 because:

(a) On 19 April 2004, the National Court made Orders by consent that:

1. Summary Judgment be entered against the Defendant in favour of the Plaintiff in the principal sum of K3,254,910.98.
   

2). The Defendant pay the Plaintiff interest calculated at the rate of 8% per centum on the above principal for the period from 1 March 1999 (the date of the issuance of the Writ of Summons in the within proceedings) until 31 March 2004 (inclusive) in the total sum of K1,576,367.92. pursuant to the Judicial proceedings (Interest on Debts and Damages) Act.

3). Costs of the whole proceedings to be agreed or taxed.

4). Time for the entry be abridged to the time of settlement, which shall take place forthwith."

(b) A Certificate of Judgment, duly endorsed under the provisions of Section (14(2) of the Claims By and Against the State Act by the Solicitor General of Papua New Guinea as a Judgment that may be satisfied, was served on the Secretary for Finance (the First Defendant) on or about 21 April 2004.

(c) Between 21 June 2004 and 1 June 2006, the First Defendant made or caused to be made nine (9) payments in part satisfaction of the Judgment. The payments made, and balance due may be seen as follows:-

Date	Amount of Payment (K)	No of Days	Interest Payable (K)	Balance Due (K)
19/06/06	NIL			4,831,378.90
26/06/04	200,000.00	63	66,711.35	4697,990.20
13/07/04	500,000.00	22	22,653.32	4220,643.50
05/08/04	200,000.00	23	21,276.67	4041,920.10
25/11/04	300,000.00	106	93,905.43	3,835,825.50
30/12/04	200,000.00	35	29,425.51	3,665,251.00
18/03/05	300,000.00	78	62,660.73	3,427,911.50
08/06/05	200,000.00	82	61,608.49	3,289,520.90
31/08/05	800,000.00	84	60,563.22	2,550,083.30
25/10/05	200,000.00	55	30,740.73	2,380,824.00
31/05/06	Nil	218	115,226.53	2,496,050.53
TOTAL	2,900,000.00		*564801.98

(d) In December 2005, a lawyer formerly acting for the Plaintiff, obtained ex parte Orders having the effect of garnisheeing the Judgment Debt due to the Plaintiff, but these Orders were dissolved by the National Court on 6 April 2006 without any payment having been made during that time.

(e) On 23 May 2006, the solicitor General of the Independent State of Papua New Guinea wrote to the First Defendant –

"In view of the fact that Pioneer health Services Ltd has been successful in setting aside the Order of 28 October 2005 as per the Order of His Honour Kandakasi J made on 6 April 2006 (copy attached), it is incumbent upon us to allow the balance of the payment of the Judgment Debt obtained by Pioneer health services Ltd in the proceedings WS No 143 of 1999 on 19 April 2004 to be paid to Pioneer health Services ltd accordingly."

(f) On 1 June 2006, O’Briens lawyers wrote to the Department of Finance enclosing a Schedule of payments made and requesting that the balance of the Judgment be paid.

(g) On 13 July 2006, the First Defendant caused a further part payment of K300,000.00 to be made to the Plaintiff but, since that time, despite requests, the First Defendant has failed, neglected or refused to take any steps to obey the Judgment of the Court.

(h) The First Defendant’s refusal or omission to act constitutes a refusal to take such actions as would give effect to or execute the Judgment of the Court and have the effect of frustrating the Judgment of the National Court.

16. It is not disputed that the Secretary for Finance, Mr. Yer had received the Court Order of 19 April 2004 and also the Certificate of Judgment of 4 May 2006.

17. It is submitted that having received the Court Order of 19 April 2004, the Secretary for Finance has a legal duty to settle in full the Judgment debt but has failed to do so. It is almost four (4) years since the Judgment of 19 April 2004 to certify the Certificate of Judgment by signing it pursuant to section 14 of the Claims by and Against the State Act 1996.

Power of the Court.

18. "Contempt of Court" is an unfortunate and misleading phrase. It suggests that it exists to protect the dignity of the judges. Nothing could be further from the truth. The power exists to ensure that justice shall be done. And solely to this end, it prohibits acts and words tending to obstruct the administration of justice" (Jennison v Baker [1972] QB 52 at 61)

19. The court has inherent power to punish for contempt and any contempt is a very serious matter. (See Public Prosecutor v Nahau Rooney (No 2) [1979] PNGLR 448). For this reason, the penalty for contempt is at large.

20. There are two (2) major reasons for the Court to exercise its powers to punish for contempt by breach of a Court Order.

21. The first is for reasons of public policy to protect the administration of justice by demonstrating that the court’s Orders must be obeyed and showing the consequences of a breach of those Orders. (See Papua New Guinea Forest Authority v Vele Iamo & Anor N2490 re: contempt charges against Valentine Kambori (No. 2) N2489 and also see Australia Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98).

22. The second reason is to protect a party who has the benefit of an Order by ensuring that it is complied with and is not mere empty words.

23. It is for these reasons that a sentence by way of a fine is punitive, with the dual object of vindicating the authority of the Court and disciplining the contemnor.

24. While it is possible for a contempt to be committed by a company without the company or its servants or agents being aware of a breach of the Court Order (See Stancomb v Trowbridge U.D.C. [1910] UKLawRpCh 47; [1910] 2 Ch 190 at 194), the question of intent is highly relevant in determining how the contempt is classified and in determining the penalty to be imposed (See A-G v Times newspapers Ltd & Anor [1992] AC 191 at 217-218).

25. A contempt which is not an accidental omission or performed through ignorance but is, rather, the result of a deliberate act of defiance resulting in a breach of a Court Order is properly viewed as contumacious (see Witham v Holloway (1995) 131 ALR 401).

Application of the facts to the Law:

26. I have read the affidavits of

(a) Ian Proctor

(b) Peter Ando

(c) Graham Agisi

(d) Goodman Poole – sworn on 21 August 2007 and filed on 23 August 2007.

27. There is no contradictory evidence by the defendants to consider the plaintiffs evidence.

28. After having read those affidavits, I am satisfied and have no doubt that Mr Yer’s disobedience was and has been deliberate and contumacious. I refer in particular to paragraphs 4,5,6,7 and 8 of Ian Proctor’s affidavit and the annexures therein which support this funding. There appears to be no interest by Mr Yer to settle the balance of this claim. This claim has been outstanding since April 2004 which is now 4 years ago. Justice has been derailed and delayed and thus denied for an unreasonable period of time.

29. Having satisfied myself on the evidence before me, I find Mr Yer guilty of contempt of Court.

__________________________________

O’Brien’s Lawyers: Lawyer for the Plaintiff
Solicitor- General: Lawyer for the Plaintiffs