Kau v Independent State of Papua New Guinea [2016] PGNC 429; N7010 (19 January 2016)

N7010

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 358 OF 2015

BETWEEN:
WANDIAGO KAU, HAMULE NGIAME, DICKSON ANGO, MARAGO PATE & JOE HAPOKAIA in their capacity as Landowners of HIDES PDL 1 PROJECT AREA
Plaintiffs

OS 359 of 2015

ANDY HAMAGA, EGA YALE, NGINI KAIAKO, WILLIE AYULE, JOHN KALOMA, ERIC HAROLI, PATRICK DABUGO & TOM EGANDA in their capacity as Landowners of SOUTH HIDES PDL 7 PROJECT AREA
Plaintiffs

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
First Defendant

AND:
KUMUL PETROLEUM HOLDINGS LIMITED
Second Defendant

AND:
KUMUL PETROLEUM (PNG LNG) LIMITED
Third Defendant

Waigani: Hartshorn J.
2015: 09^th December
2016: 19^th January

Trial

Cases:

Simon Mali v. Independent State of Papua New Guinea [2002] PNGLR 15
Tigam Malewo v. Keith Faulkner [2009] SC960
Yamanka Multi Services Ltd v. National Capital District Commission (2010) N3904

Counsel:

Mr. G.M. Egan and Ms. M. Peipul, for the Plaintiffs
Mr. M. Wangatau, for the First Defendant
Mr. E.G. Andersen and Ms. J. Nigs, for the Second and Third Defendants

19^th January, 2016

1. HARTSHORN J: This is a decision on applications for various declaratory and injunctive orders sought by Originating Summons in two different proceedings. As the claims and evidence of the plaintiffs’ in both proceedings are similar and the defendants’ are the same, the trials of both proceedings were heard together.
   

The proceedings

2. The plaintiffs’ purport to be landowners of customary land within the boundaries of two Petroleum Development Licence (PDL) Areas known as Hides PDL 1 and South Hides PDL 7.
   
3. The first defendant is the State. The second defendant is Kumul Petroleum Holdings Limited, formerly known as NPCP Holdings Limited (KPH). The third defendant is Kumul Petroleum (PNG LNG) Limited, formerly known as National Petroleum Company of PNG (Kroton) Limited and Kroton No. 2 Limited (Kroton).
   
4. The plaintiffs claim to be members of the “Beneficiary Group” as defined in the Umbrella Benefits Sharing Agreement dated on or about 23^rd May 2009 (UBSA). In the UBSA an option is given to the Beneficiary Group to acquire a 4.22% interest in Kroton. The option is to be exercised between 1^st January and 30^th June 2016. The plaintiffs’ seek relief to the effect that part of the Total Benefits Package in the UBSA is a 4.22% interest in the PNG LNG Project, that the Equity Option can be exercised by a member or members of the Beneficiary Group and by the plaintiffs’, either alone or jointly with other members of the Beneficiary Group, but to the exclusion of the State. Injunctive relief is sought to amongst others, restrain the State from negotiating the raising of funds on behalf of landowner members of the Beneficiary Group in respect of the transfer of the 4.22% Kroton Equity or from using that Equity as security to source State funding.
   

Capacity of the plaintiffs

5. During the substantive hearing, the defendants’ contended that amongst others, the plaintiffs’ had failed to establish that they had authority to bring any action in relation to the exercise of the Kroton Equity Option in their own capacity as individual members of PDL 1 and PDL 7 or on behalf of their clans or the Beneficiary Group as a whole. Further, the plaintiffs’ had failed to comply with the requirements of Order 5 Rule 13 National Court Rules relating to representative actions as interpreted by amongst others, the Supreme Court cases of Simon Mali v. Independent State of Papua New Guinea [2002] PNGLR 15 and Tigam Malewo v. Keith Faulkner [2009] SC960.
   
6. Counsel for the plaintiffs’ submitted that it was now too late for the defendants to raise these issues as they had not made application under Order 1 Rules 9 and 10 National Court Rules in respect of any irregularity. Counsel referred to Order 1 Rule 9 as providing that an application shall not be allowed unless it is made within a reasonable time, or if made after the party applying has taken any fresh step with knowledge of the irregularity.
   
7. From a perusal of Order 1 Rules 9 and 10, it is clear that they refer to applications to set aside a proceeding for irregularity. In this regard I refer to my decision in Yamanka Multi Services Ltd v. National Capital District Commission (2010) N3904, in which I referred at para 7 to Order 1 Rules 9 and 10 as being similar to and I suggested, that they were derived from, Order 2 Rule 2(1) & (2) of the Rules of the Supreme Court 1965 of England which concerned applications to set aside amongst others, judgments, for irregularity.
   
8. In this instance however, the defendants are not making any application to set aside a proceeding for irregularity. They are making submissions in the course of the substantive hearing as to what they contend to be the plaintiffs’ lack of authority to bring an action and their failure to comply with certain National Court Rules. The submissions of counsel for the plaintiffs’ in respect of Order 1 Rules 9 and 10 National Court Rules are therefore without merit.
   
9. I now consider the defendants’ submissions as to the capacity of the plaintiffs’ to bring these proceedings.
   
10. The State submits that in the UBSA, none of the plaintiffs are allocated any part of the Equity Option as individuals. It is therefore only collectively and as representatives of their respective member groups that the plaintiffs’ may act.
    
11. KPH and Kroton submit that there is no evidence that the plaintiffs’ are entitled to speak for the Beneficiary Group as a whole and that there is a lack of evidence that the plaintiffs’ are members of PDL 1 and PDL 7. It is also submitted that from a perusal of clauses 5.1 and 5.2 (b) (iii) of the UBSA, clause 5.3 (ii) and (iii) and clause 20 (i) – (iv) of the PDL 1 Landowner Licence Based Benefits Sharing Agreement (PDL 1 LBSA) and clause 6.2 (viii) – (x) PDL7 Landowner Licence Based Benefits Sharing Agreement (PDL 7 LBSA), it is clear that it was never the intention of the parties to the UBSA, PDL 1 LBSA and PDL 7 LBSA that representatives appointed to negotiate those documents would have any power to represent the Beneficiary Group in any capacity.
    
12. Further, it is submitted that the UBSA and LBSAs’ outline the agreed framework for how benefits are to be distributed to beneficiaries in accordance with sections 169 and 176 Oil and Gas Act, and the plaintiffs’ have not provided any evidence that they are acting in accordance with this agreed framework.
    

Suing as individuals

13. From a perusal of clause 6.3.2 UBSA, the Kroton Equity Option is to be shared amongst the members of the Beneficiary Group in certain ratios and percentages. Clause 6.3.2 (b) details the percentages of the Kroton Equity Option to be shared amongst the PDL Provincial Governments and groups of landowners. An example is that, “PDL 1 Landowners (Hides)” is allocated a 19% share of the PDL Area 76% share of Kroton Equity Option. None of the allocations are to a natural person. The allocations are only to two Provincial Governments and 7 groups of landowners.
    
14. Given this, there is no individual allocation to any of the plaintiffs’ in respect of which they can act individually. The plaintiffs’ have not to my satisfaction given evidence, and no submissions have been made on their behalf, to the contrary.
    

Suing on behalf of a group

15. As there is no individual allocation as mentioned, the plaintiffs’ must act on behalf of a particular group to which an allocation has been made. To be able to act on behalf of a particular group of landowners, a plaintiff must give the requisite evidence that he has the necessary authority to so act. I consider the requirements of Order 5 Rule 13 National Court Rules in this regard later.
    
16. In the UBSA, the provisions concerning representation are as follows:
    

a) Clause 5.1 – “...the Project Area Landowners have agreed to be represented by their representatives at the UBSA Forum to negotiate and sign this LNG UBSA...”

b) Clause 5.2 (b) (iii) – “...the authorisation for these representatives to attend the UBSA Forum does not mean recognition by the State for them to perform other roles as the representatives of their Licence Areas...”

17. It is the case then that if the individual plaintiffs were authorised to represent certain Project Area Landowners at the Development Forum, that authorisation does not mean that they will be recognised by the State to perform other roles as representatives of those Project Area Landowners, without proof of the requisite authority to so act.
    

Further, in the PDL I LBSA, a similar provision is as follows:

a) Clause 5.3 (ii) – “... the Project Area Landowner representatives at this Development Forum were authorised by the Project Area Landowners of the Hides PDL 1 Project Licence Area, at the meeting organized by DPE to negotiate this Agreement on behalf of their Licence Areas;”

b) Clause 5.3 (iii) – “The authorization for these representatives to attend the development Forum does not mean recognition by the State for them to perform other roles as the representatives of their Licence Areas”.

Then at Clause 20 of the PDL 1 LBSA it is relevantly provided that:

“PNG LNG CLAN VETTING AND LAND GROUP INCORPORATION

(i) The Parties acknowledge that except where any other project affected landowners’ benefits distribution mechanism is agreed between the Parties, the grantees of the benefits granted under the Act and the UBSA and distributed amongst the various clans or groups under this Agreement, are Incorporated Land Groups pursuant to sections 169(2)(b) and 176(3)(f) of the Act.

(ii) To facilitate incorporation of land groups for each of the Hides 4 APDL 7 identified clans or sub-clans as the case may be, the State undertakes to establish an inter-agency task force to be known as the PNG LNG Land Group Incorporation and Clan Vetting Task Force comprising officers from the Departments of Petroleum & Energy and Lands & Physical Planning.

(iii) The Department of Petroleum and Energy will be the coordinating agency of the clan vetting and land group incorporation program and its Secretary will be the chairman of the Task Force.

(iv) The primary role of the Task Force will be to identify, coordinate and facilitate incorporation of land groups for each affected clan or sub-clan identified within the licence area in accordance with the Land Groups Incorporation Act 1974.

(v) The Parties acknowledge that the program is time bound and will be launched immediately after the conclusion of all the LBSA forums for the wider Hides area and will be concluded by or before 1^st February 2010.”

18. Similarly, as to the South Hides PDL 7 Project Area, in which the plaintiffs in OS 359 of 2015 allege that they are some of the landowners, there is the PDL 7 LBSA. Clause 6.2 relevantly provides:
    

“(viii) The Minister will confirm the recognised beneficiaries entitled to receive CDOA and Kroton equity benefits by publishing a Ministerial Determination in the National Gazette.

(ix) The Clans recognised by the Minister have to be incorporated into ILGs for the purpose of receiving CDOA and Kroton equity benefits under the LNG Project.

(x) The Clans agree that they will establish a special purpose authority, Hides Special Purpose Authority which will be their vehicle for the distribution of benefits under this Clause.”

19. From a perusal of the above, it is the case that it was not the intention of the parties to the UBSA, PDL 1 LBSA and PDL 7 LBSA that representatives appointed to negotiate those documents would have any power to represent the Beneficiary Group in any other capacity.
    
20. Further, the documents also outline the agreed framework for how benefits are to be distributed to beneficiaries in accordance with sections 169 and 176 of the Oil and Gas Act. The plaintiffs’ have not provided any evidence that they are acting in accordance with this agreed framework.
    

Oil and Gas Act

21. Section 169 of the Oil and Gas Act provides that rights to benefits in respect of the PNG LNG Project are determined by a formal determination of the Minister (Determination). There is no evidence of, and no submissions were made to the effect that, any such Determination has been made in favour of the plaintiffs’ with respect to the entire Beneficiary Group claiming under the UBSA, the PDL 1 landowners claiming under PDL 1 LBSA or the particular tribes or clans within PDL 1, or at all, or the PDL 7 landowners claiming under PDL 7 LBSA, or the particular tribes or clans within PDL 7, or at all.
    

PNG LNG mediation exercise

22. The evidence of Milfred Wangatau, Faith Barton-Keen and Rogen Wato is that an extensive court-mandated process is underway in other proceedings to determine who the true landowners are. Until the PNG LNG mediation exercise is completed and until the plaintiffs’ have been properly identified as landowners of their respective areas and have been elected or nominated to represent all of the landowners or landowning clans, the plaintiffs have no legal basis to institute these proceedings.
    

Order 5 Rule 13 National Court Rules

23. As the plaintiffs’ are only able to act on behalf of a particular landowner group to which an allocation has been made and not individually, consideration should be given as to whether, to the extent that the plaintiffs’ are bringing these proceedings in a representative capacity, the plaintiffs’ are correctly bringing these proceedings.
    
24. Order 5 Rule 13 (1) National Court Rules provides for representative actions and is as follows:
    

“Where numerous persons have the same interest in any proceedings the proceedings may be commenced, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them”.

25. In Simon Mali v. State (supra), the Supreme Court stated amongst others, that in all actions or proceedings of a representative nature, all of the intended plaintiffs must be named and duly identified in the originating process and pursuant to Order 5 Rule 8 National Court Rules, each and every intending plaintiff must give specific instructions evidenced in writing to their lawyers to act for them. Malewo v. Faulkner (supra) confirmed the representative principles stated in Simon Mali v. State (supra).
    
26. In this instance, there is not sufficient evidence of all of the landowners of Hides PDL 1 Project Area, or South Hides PDL 7 Project Area, or the Beneficiary Group being named in the Originating Process or having given specific instructions to the plaintiffs’ and their lawyers to act for them in these proceedings.
    

Hon. Anderson Agiru and Resource Logistics Solutions (PNG) Limited

27. In regard to the question of representation, I refer to the positions of the Hon. Anderson Agiru, the Member for Parliament for the Hela Provincial Electorate and a company called Resource Logistics Solutions (PNG) Limited (RLS Ltd).
    
28. Mr. Agiru purports to have, “...secured the individual mandates of the various and respective PDL or well-head and plant-site landowners and various Provincial Governments with the exception of Southern Highland Province.” In evidence is a letter sent by him to the Independent Business Corporation of PNG in which he states that he is writing on behalf of the various provincial governments and landowners in each of the UBSA PDL groups.
    
29. There is no documentary evidence in support of Mr. Agiru’s position that he represents the Beneficiary Group. Further, as referred to, there is a process in place under the UBSA, PDL 1 LBSA and PDL 7 LBSA which is consistent with relevant provisions of the Oil and Gas Act.
    
30. As to RLS Ltd, Mr. Mathias Lasia of RLS Ltd purports to represent the plaintiffs’ as their agent, and there is in evidence a letter in support of this position. RLS Ltd further purports to have the support of a number of PDL representatives of the Beneficiary Group in respect of the proceedings on the basis that they have spoken to various Beneficiary Group members.
    
31. From a perusal of the evidence provided by RLS Ltd it is quite inadequate in demonstrating that RLS Ltd has authority to commit the entire Beneficiary Group, for the various reasons to which earlier reference has been made.
    

Conclusion

32. After considering the evidence and submissions, I am satisfied that:
    
    1. The plaintiffs’ have failed to establish that they have authority to bring any action in relation to the exercise of the Kroton Equity Option in their own capacity as individual members of PDL 1 and PDL 7 or to bind the entire Beneficiary Group;
       
    2. The plaintiffs’ have failed to show that they have conducted the required process for the grant of benefits under the Oil and Gas Act;
       
    100. If the plaintiffs’ are bringing a representative claim, then the proceedings have not been brought in accordance with Order 5 Rule 13 National Court Rules as interpreted by the Supreme Court cases of Simon Mali v. State (supra) and Malewo v. Faulkner (supra);
         
    4. Mr. Agiru and RLS Ltd have failed to produce satisfactory evidence to support their respective contentions concerning representation of the Beneficiary Group and the plaintiffs.
       
33. Consequently the proceeding should be dismissed. Given this it is not necessary to consider the other submissions of counsel.
    

Orders

35. The formal orders of the Court are:

1. Proceedings OS 358 of 2015 and OS 359 of 2015 both of Waigani, are dismissed;
   
2. The plaintiffs’ in both proceedings shall pay the respective costs of the defendants’ of and incidental to both proceedings;
   

100. Time is abridged.
     

_____________________________________________________________
Ketan Lawyers: Lawyers for the Plaintiffs
Office of the Solicitor General: Lawyers for the First Defendant

Lawyers for the Second
Gadens Lawyers: Lawyers for the Third Defendants