Sengus Investment Ltd v National Broadcasting Corporation [2010] PGNC 142; N4129 (24 September 2010)

N4129

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

WS NO. 442 OF 2007

BETWEEN:

SENGUS INVESTMENT LIMITED
Plaintiff

AND:

NATIONAL BROADCASTING CORPORATION (formerly)
NATIONAL BROADCASTING COMMISSION)
Defendant

Waigani: Sawong, J.
2010: 18 August, 24 September

JUDGMENT DEBT – enforcement of order by application for levy of property – claim based on breach of contract - plaintiff successfully obtained judgment against defendant – plaintiff also obtained certificate of costs – defendant has not paid judgment amount despite order of court and repeated requests for payment – whether defendant is immune by virtue of s.13 of the Claims by and Against the State Act - whether judgment can be enforced by way of a levy of property as section 12(1) of the Claims By And Against The State Act prohibits execution of state assets - whilst the Defendant is set up as a corporation, it does not operate commercially - there is no statutory investment policy to make profit, nor to pay any corporate income tax, or dividend - defendant's funds and assets protected by S.13 of the Act – motion dismissed – ss 12 & 13 Claims By and Against the State Act

Cases Cited
Rundle –v- Motor Vehicle Insurance Trust [1988] PNGLR 20
Kupo –v- Lokinap & Others [1991] PNGLR 145
Tau Liu –v- Paul Tohian SC566
Albert Areng –v- Greg Babia and National Housing Corporation, (2005) June N2895
Naomi Vicky John –v- National Housing Corporation, the NHC (2005) N2779
Anave Megaraka Ona –v- NHC (2009) N3623
Kilebo Rigo Samae & Anor –v- Max Lindapao and National Housing Corporation
Paul Rawaiya & Ors –v- National Housing Corporation and the State
Philip Num –v- National Housing Corporation

Counsel:

M. Kambao, for the Plaintiff
A. Baniyamai, for the Defendant

24 September, 2010

1. SAWONG, J: Introduction: This is an application by the Plaintiff for Levy of Property for failure by the defendant to settle a judgment debt.

Background

2. The brief background leading to this Application is as follows. Initially, the Plaintiff filed proceedings against the defendant for breach of Contract for the sale of a piece of property. The Plaintiff successfully obtained judgment against the Defendant. It then successfully obtained a certificate of Taxation for Costs. Subsequently, the National Court Ordered judgment in favour of the Plaintiff for the sum of K31. 190.70 together with costs of K500.00, a total of K31,690.70.

3. The Court also ordered that, that sum be paid within seven (7) days of the date of the Order. Despite repeated request or demands, the Defendant has not paid that judgment amount, hence the present application. All of the background facts are set out in the Affidavit of Mr. Kambao.

4. In the Motion the Plaintiff seeks the following orders:-

1. Pursuant to Order 13, Rule 2(1)(a) of the National Court Rules the vehicles bearing registration numbers:-

(i) ZBC 332, Toyota Hiace, Blue in Colour, Hilux; and

(ii) ZBC 407, Toyota Hiace, White in Colour

both of which are owned by the National Broadcasting Corporation (the defendant) be impounded and taken into the custody at the National Court premises by the Sheriff of the National Court with the assistance of the NCD Police.

2. The defendant (NBC) shall pay the sum of K31, 690.70 within seven (7) days of the Order together with the interests of K7, 932.24.

3. The costs of the application in the sum of K1, 500.00 and Levy of Property fees in the sum of K200.00 be paid together with the Order No. 2 within seven (7) days as well.

5. The defendant, through its managing director has filed a sworn affidavit. The first part of that evidence is that the defendant is having financial difficulties and is unable to settle its debts on a timely manner unless monies become legally available through the budget allocation. He says the defendant has no major business activity and its funds come from the State through budget grants. He further deposes that, that the defendant's staff is employees of the State. He says the assets of the defendant are public assets owned by the State. The defendant opposes the application.

Issue

6. A legal issue arises as to whether judgment can be enforced by way of a levy of property as section 12(1) of the Claims By And Against The State Act (the Act) prohibits execution or attachment against the property or revenue of the State.

Submissions

7. Both Counsels have filed written submissions and also made brief oral submissions.

8. The essence of the Plaintiffs submission is that the finance and assets of the NBC are not protected by S.13 of the Act. He submits that as the NBC is separate corporate entity and operates commercially, its finances and assets are not protected. He relies on the Supreme Court decision In Re SCR No. 1 of 1998 – Reservation Pursuant to Section 15 of the Supreme Court Act, my decision in Albert Areng –v- National Housing Corporation (2005) N2895, Naomi Vicky John –v- National Housing Corporation (2005) N 2779, Kilebo Rigo Samae –v- Max Lindapao and National Housing Corporation, Paul Rawaiya & Others –v- National Housing Corporation and the State, Philip Num –v- National Housing Corporation, Anave Megaraka Ona –v- National Housing Corporation (2009) N3623.

9. Counsel for the Plaintiff submits that NBC is a corporate body and is a legal entity pursuant to Section 3(2) of the NBC Act. Its assets and finances are subject to ordinary laws. This is the clear intent of section 3 of the Act. He submits that the NBC 's assets and finances are that of normal independent corporate bodies and as such it has corporate status and operates commercially.

10. In the circumstances, it was submitted that the NBC is a corporation pursuant to Section 3(2)(d) of the NBC Act and is subject to the ordinary laws as a corporate citizen.

11. Mr. Baniyamai submits that in order to properly determine the issue, the starting point would be to consider the status of the Defendant. He refers to a number of factors in the enabling statute which created the Defendant. These are:

1. The NBC is a corporate entity established under the provisions of the Broadcasting Act 1973 (the Act).

2. Pursuant to section 6 of the Act, the main function of the NBC is to provide broadcasting services to the people of Papua New Guinea, and abroad, if allowed so, by the Head of State.

3. Pursuant to section 7(1) of the Act, the Government is under a mandatory duty to advise the NBC of its policies and priorities and under subsection 2, the Minister has the power to prohibit broadcasting or request the NBC not to broadcast a matter. By virtue of subsection 4, the NBC is obliged to submit an annual report to the Minister.

4. Whilst the NBC is allowed under section 9 of the Act to introduce commercial broadcasting, it is under a duty to retain full control.

5. Section 11 of the Act sets out the main powers of the NBC. Whilst the NBC is allowed specifically to purchase land and dispose of land, there is no specific power to sell land that it owns whether the power to dispose of land includes the power to sell remains unclear.

6. Section 27 of the Act makes it clear that the Public Finances Management Act applies to the finances of the NBC.

7. Under PART III of the Act, the members of the NBC Board, including the Managing Director are appointed by the Head of State. The employees of the NBC are subject to the provisions of the Public Services Management Act.

8. The affidavit of Memafu Kapera, the current Managing Director of the NBC, confirms that the NBC is a government funded organization. It is not a commercial enterprise. It is funded through the National annual budget and its assets are public assets.

12. It was submitted that as the NBC is an instrumentality of the State Section 13(1) of the Act applies to its properties. The cases decided by the National and Supreme Courts support this proposition.

13. The Constitution defines the name Papua New Guinea as the Independent State of Papua New Guinea. It defines governmental body to mean an arm, department, agency or an instrumentality of the National Government or a Provincial Government; or a body set up by Statue or administrative act for government or official purposes.

14. Mr. Baniyamai relies on In Reservation Pursuant to Section 15 of the Supreme Court Act [2001] SCR No. 1 of 1998, SC 672.

15. He submits that whilst the cases relied upon by the Applicant seem to give some weight to the application, many of these cases were decided on the application of section 5 of the Act., which requires notice to be given within six months after the occurrence of the events upon which the cause of action is based, before an action can be filed in Court.

16. He submitted that whilst the definition of the State is a central issue in section 5 of the Act, the purpose of section 5 of the Act is slightly different. In Tau Liu –v- Paul Tohian, SC 566, the Supreme Court considered and applied the reasoning in Rundle –v- Motor Vehicle Insurance Trust [1988] PNGLR 20, in respect to the purpose of a notice before the commencement of legal proceedings as provided under section 54 of the Motor Vehicle (Third Party) Insurance Act.

17. It was submitted that the purpose of section 13(1) of the Act, is to protect the assets of the State and its agencies, as they are public assets and belong to the people of Papua New Guinea. The premise behind this is as discussed by Sheehan J in Kupo –v- Lokinap & Others, cited with approval by the Supreme Court in Reservation Pursuant to Section 15 of the Supreme Court Act [2001] SCR No.1 of 1998, SC 672.

18. He further submitted that whilst the provision may seem unfair to successful litigants against the State, it does not abrogate the right of enforcement of a Court Order. It merely operates as a means to delay satisfaction until monies are legally available. See section 14(2) of the Act.

19. He submitted that as the NBC is an arm of the State its assets are protected under section 13(1) of the Act. On the basis of the above submissions, the plaintiff's Application should be refused with costs.

Reasons and Decision

20. I have read and considered carefully all of the submissions and the supporting affidavits.

21. There are a number of points to say about the various authorities referred to by Mr. Kambao.

22. The first is that most of those National Court decision involved the issue of giving a Section 5 notice on the Defendant.

23. Secondly, those cases involved the National Housing Corporation. A brief look at the structure of that organization as set out in its enabling statute, leaves no doubt that that entity although a government entity, or an instrumentality, it is to operate commercially, for profit and pay corporate tax etc. And so for all intents and purposes it has independent corporate entity and it operates commercially.

Section 13 of the Act reads:-

"(1) In any suit, execution or attachment, or process in the nature of execution or attachment, may not be issued against the property or revenue of the State.

(2) Where a judgment is given against the State, the registrar, clerk or other proper officer of the court by which the judgment is given shall issue a certificate in Form 1 to the party in whose favour the judgment is given".

24. Section 13 of the Act has been interpreted in the seminal case of Reservation Pursuant to Section 15 of the Supreme Court Act, (2001) SC 672. The Supreme Court said at p:

"...We are of the opinion that a provincial government is a 'governmental body' making up the Independent State of Papua New Guinea for the purposes of the Claims By And Against The State Act 1996. The power of the people is vested in all "governmental bodies", which administer and exercise them on behalf of the people. These governmental bodies, include 'the National Government', 'a Provincial Government', an arm, department, agency or instrumentality of the National Government or a Provincial Government or a body set up by Statute or administrative act for government or official purposes. This power is exercised by those "governmental bodies" on behalf of the same people. The finances administered by a Provincial Government, is for and on behalf of the same people. The National Government administers the National Government funds and assets..." (emphasis mine)

25. The Supreme Court held that the protection offered by S. 13 of the Act, "does not apply to assets and finances of developmental enterprises of provincial governments that have independent corporate status and operate commercially. They are subject to the ordinary laws as corporate citizens."

26. The passage I have quoted clearly refers to provincial government "developmental enterprises who have independent corporate status and operate commercially".

27. In my opinion, the Court, with respect, did not express any view on National Government developmental enterprises. However by analogy, it could be said that that passage applies equally to National Government "developmental enterprises that have independent corporate status and operate commercially." Such an interpretation would be consistent with the rational or policy behind that passage.

28. In my opinion, it would be legitimate in determining whether the protection applies or not, to consider, inter alia, the corporate structure and purpose of the organization as set out in its enabling legislation. If for instances, the corporate organization is set up to make profit, pay dividends, pay corporate tax etc. then, Section 13 of the Act would not apply.

29. Conversely, where the issue involves a National Government "developmental enterprises" who do not have independent corporate status or operate commercially, then the protection offered by S. 13 of the Act would apply to its assets and finance.

30. It appears to me that there are two schools of thought in relation to this aspect. One school of thought is that the protection offered by Section 13 does apply to some of the State owned instrumentalities, etc, which are set up like corporation but do not operate as commercial entities. Their funding, for instances would come from National Government budgetary process. They have no independent commercial income and they do not pay corporate income tax etc and do not operate for profit. Of course, on the other hand, there would be National Government entities or instrumentalities or governmental bodies who would operate commercially and for profit. Such as instrumentality or governmental body in my view, would not have the benefit of the protection accorded by S. 13 of the Act.

31. In the present case, Mr. Memafu Kapera, the Managing Director of the defendant deposes that whilst the Defendant is a corporate entity, it is not a communicable entity. Its funds are allocated to it by the National Government in the annual budgetary process. He also deposes that its assets are owned by the National Government. His evidence is undisputed.

32. Further more, the statute that established the defendant, makes it clear to my mind, at least, that the Defendant is not a commercial corporate enterprise. Its revenue comes from the National Government through the annual budgetary process. It does not operate commercially nor is profit oriented and does not pay corporate tax. The characteristics of the Defendant are not similar to other government corporate enterprises like the National Housing Corporation, Telikom PNG Ltd and the like.

33. In the present case, whilst the Defendant is set up as a corporation, it does not operate commercially. There is no statutory investment policy to make profit, nor to pay any corporate income tax, nor pay any dividend etc. A clear examination of its corporate structures reveals that it does not have a truly independent corporate structure and does not operate commercially.

34. For the reasons I have given, I come to the conclusion that the defendant's funds and assets are protected by S.13 of the Act.

35. I refuse to grant the Orders sought by the Plaintiff in its Notice of Motion filed on 20 July 2010.

36. I make the following Orders:-

1. The plaintiff's Motion is dismissed.

2. The Plaintiff shall pay the Defendant's costs to be agreed, it not taxed.

_______________________________
Steeles Lawyers: Lawyer for the Plaintiff
Baniyamai Lawyers: Lawyer for the Defendant