Kramer v National Executive Council [2017] PGNC 127; N6779 (16 June 2017)

N6779
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO. 880 OF 2017

BETWEEN
FRANK MICHAEL KRAMER
Plaintiff

AND
NATIONAL EXECUTIVE COUNCIL comprising of DEPUTY PRIME MINISTER, LEO DION, ACTING MINISTER FOR STATE ENTERPRISES HON. CHARLES ABLE & OTHER MEMBERS
First Defendants

AND
HON. PETER O’NEILL, PRIME MINISTER, CHAIRMAN OF NEC & TRUSTEE OF THE KUMUL PETROLEUM SHARE TRUST
Second Defendants

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Makail, J

2017: 12^th May & 16^th June

PRACTICE & PROCEDURE – Application to dismiss proceedings – Judicial review proceedings – Review of decision to dismiss plaintiff as Director and Chairman of Board of Directors of company – Kumul Petroleum Holdings Limited – Grounds of – Failure to disclose a cause of action – Abuse of process – National Court Rules – Order 12, rule 40 (1) (a) & (c)

Cases cited:
Kuman v. Digicel (2008) SC1232

Telikom (PNG) Limited v. ICCC and Digicel (2008) SC906

Counsel:
Mr. G.Geroro, for the Plaintiff
Ms. T. Twivey with Mr. Sioni, for the First and Third Defendants
Mr. M. Goodwin, for Kumul Petroleum Holdings Limited

RULING ON APPLICATION TO DISMISS PROCEEDINGS

16^th June, 2017

1. MAKAIL J: This is the first and third defendants’ application to dismiss these proceedings for being an abuse of process pursuant to Order 12, rule 40 (1) (c) or alternatively, failing to disclose a cause of action pursuant to Order 12, rule 40 (1) (a) of the National Court Rules.

2. It arises from a judicial review proceedings commenced by the plaintiff to review the decision of the first and second defendants to dismiss the plaintiff from the position of Director and Chairman of the Board of Kumul Petroleum Holdings Limited (“KPHL”).

3. It is not disputed that the application was filed after leave was granted to the plaintiff to apply for judicial review following his dismissal. The plaintiff was dismissed by the shareholder of KPHL under Section 10 (13) of the Kumul Petroleum Holdings Limited Authorisation Act 2015 (“Act”). By this provision, the power to dismiss is conferred on the “Kumul Petroleum Trustee” who is the shareholder of KPHL and current Prime Minister Hon. Peter O’Neill.

4. Prior to dismissing the plaintiff, the Trustee sought and the National Executive Council (“NEC”) endorsed to approve its decision to dismiss the plaintiff. The reason given by the Trustee to dismiss the plaintiff was that the plaintiff failed to fill in the many vacancies that existed in the Board of KPHL. For that reasons, it was considered not in the best interests of KPHL for him to remain as a Director and Chairman of the Board.

5. Obviously, the plaintiff denied the allegation and alleged that he took steps to have the vacancies filled. As one of the grounds of judicial review, he took issue with the NEC’s involvement. He alleges that under the Act, the NEC has no role to play in the dismissal of a Director or Chairman of KPHL. It is for this reason that the Trustee breached the Act and further, acted beyond its powers when it sought approval from the NEC to endorse its decision to dismiss him.

6. Furthermore, Section 10 (13) of the Act did not oust or remove the principles of natural justice enshrined in Section 59 of the Constitution and the minimum requirement to give him the opportunity to respond to the allegation was not accorded to him before the decision to dismiss was taken.

7. A further alternative application by the first and third Defendant to set aside the ex parte interim restraining orders of 12^th April 2017 and the plaintiff’s application to extend these orders were adjourned pending the outcome of the dismissal application. It should also be stated that O’Briens Lawyers have appeared on behalf of KPHL in response to a summons for production, such is dependent on the outcome of this application.

8. The first and third defendants’ main ground to dismiss the proceedings is that the decision to dismiss the plaintiff is not reviewable because it was made by the shareholder of a company incorporated under the Companies Act 1997 being KPHL. As a company, it is not a governmental or public body and the shareholder was not exercising a public power.

9. The dispute as to the plaintiff’s dismissal is of a private nature where judicial review and reinstatement is not available. If the plaintiff wished to challenge his dismissal and seek reinstatement as a Director and Chairman, he ought to have commenced proceedings by way of a writ of summons or by plain originating summons pursuant to Order 4, rule 1 of the National Court Rules. In other words, an appropriate mode of proceedings is either a writ of summons or originating summons.

10. For these reasons, the proceedings are an abuse of process and must be dismissed pursuant to the Court’s discretionary power under Order 12, rule 40 (1) (c) of the National Court Rules.

11. In the alternative, the proceedings failed to disclose a cause of action because in so far as the plaintiff seeks to challenge any NEC decision:

• The NEC made no decision to dismiss him as a Director and Chairman and at no stage purported to dismiss him as a Director and Chairman,
  
• The NEC had no power to dismiss him as Director, and
  
• The decision the NEC made was to simply endorse the decision of the shareholder/Trustee to remove the plaintiff as a Director and as such was a policy decision and may not be disturbed by judicial review.

12. As to the principles of law on the Court’s discretionary power to dismiss proceedings at the interlocutory stage, Order 12, rule 40 (1) (c) provides that where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings, the proceedings are an abuse of process of the Court, the Court may order that the proceedings be dismissed.

13. As was held in numerous past cases in this jurisdiction and affirmed by the Supreme Court in Kuman v. Digicel (2008) SC1232, the Court will not and should not readily exercise its discretion to dismiss an action except in clear cases where abuse of process is apparent. The Court, however, has a duty to ensure that its processes are protected and safeguarded from any possible abuse.

14. In Telikom (PNG) Limited v. ICCC and Digicel (2008) SC906, the Supreme Court there said that an abuse of process of the Court can exist in many different forms and that it was not wise to indicate the circumstances that may amount to abuse of process and that each case alleging abuse of process should be determined on its own peculiar circumstances and merits.

15. These are the submissions of the first and third defendants which were not contested by the plaintiff and I accept as the law on abuse of process in this jurisdiction.

16. In my view, the question whether the proceedings are an abuse of process is dependent on whether the subject decision is reviewable. I am of the further view that this question is intertwine with the alternative question posed by the defence as to whether the proceedings disclose a cause of action. This is because the question of cause of action may decide the type of mode of proceedings to commence. I propose to address them together.

17. There is no dispute that prior to his dismissal, the plaintiff was a Director and Chairman of KPHL. KPHL is a company incorporated under the Companies Act 1997. The evidence from the Prime Minister Hon. Peter O’Neill in his affidavit in support is that there are 100 shares in KPHL. They are held by the Kumul Petroleum Trustee for and on behalf of the State pursuant to a Trust Deed and Section 4 (2) of the Act. As the current Prime Minister, he is the Kumul Petroleum Trustee.

18. In my view, the decision to dismiss the plaintiff was made by the shareholder of a company who happens to be the Prime Minister but in his capacity as a Trustee. This alone is sufficient to bring the dispute as to the plaintiff’s dismissal as a Director and Chairman outside the scope of judicial review, hence not reviewable.

19. It is my further view that the dispute is a matter of private law rather than public law. It is a case of a pure master and servant relationship dispute where damages are an appropriate remedy. For these reasons, I would uphold the defence submission that the appropriate mode of proceedings to challenge the dismissal is either a writ of summons or originating summons under Order 4, rule 1 of the National Court Rules. In my view, to commence and proceed by way of judicial review is an abuse of process of the Court. The proceedings will be dismissed for this reason.

20. However, there are further reasons. Whilst Section 10 (8) and (11) of the Act prescribes a procedure for appointment of Directors and Chairman of KPHL, there is none for their removal. On the other hand, Section 10 (13) confers on the Trustee the sole discretion to remove any Director at any time provided that not more than three Directors are removed in any 12-month period. In my view, this reinforces the proposition that the dispute is one of pure master and servant relationship where, in a typical case, a servant is subject to ‘hire and fire’ at any time at the hands of the master.

21. And it may well be that the reasons given for the plaintiff’s dismissal lacked merit or are unfounded and that the plaintiff was not given an opportunity to be heard before the decision was taken, hence denied natural justice, but the bottom line is that, he was employed by a company as opposed to the State or a State instrumentality or agency to bring his complaint within the domain of public law and entitlement to judicial review.

22. Furthermore, it may well be that the NEC has no role to play in the decision to dismiss and that it was wrong for the Trustee to seek their approval to endorse his decision to dismiss but again, the bottom line is that it was a decision made by a shareholder/Trustee of a company. Such decisions would not readily attract the supervisory powers of the Court in the form of judicial review. It should be a case of wrongful dismissal where the remedy is in damages. This is where I am satisfied that there is a cause of action pleaded but the mode of proceedings is inappropriate.

23. In any case, even if the NEC got itself involved in the dismissal of the plaintiff which I note is being categorically denied by the defence, in my view, it is not sufficient to characterise its involvement as one that would make the decision by the Trustee susceptible to judicial review. There must be something more than that, say an expressed provision in the Act that confers power on the NEC to dismiss a Director and Chairman of the Board of KPHL.

24. This leads me to the next point. On the other hand, it is noted that Section 8 of the Act removes the involvement of the State or its agent or instrumentality and gives KPHL independence. For ease of reference Section 8 is set out below:

“8. Independence of Kumul Petroleum Companies.

(1) Notwithstanding the identity of any party owning any of the shares in Kumul Petroleum Holdings, each of the Kumul Petroleum Companies are not, and shall not for any purpose, be taken or characterised as being —

(a) the State; or

(b) an agent of the State, unless expressly appointed for such purpose by the State with the express concurrence of Kumul Petroleum Holdings or the subsidiary concerned; or

(c) an instrumentality of the State.

(2) No asset of any Kumul Petroleum Company —

(a) shall be vested in or transferred to the State pursuant to this Act, the IPBC Act, the Liquefied Natural Gas Project (State Participation) Act 2008 or the Oil and Gas Act 1998; and

(b) is or shall be a public asset for any purpose and no such assets may be vested in or transferred to the State except on the liquidation of Kumul Petroleum Holdings under Part XVIII of the Companies Act 1997,

except as provided in this or any other Act.

(3) No Kumul Petroleum Company is or shall be entitled to render the State liable for its or their debts, liabilities or obligations.

(4) The State shall not guarantee or indemnify any —

(a) Kumul Petroleum Company in respect of any of its assets or liabilities (including any overdraft or other financial accommodation); or

(b) third person in respect of any debt or liability of any Kumul Petroleum Company, unless, in each particular instance, the National Executive Council with the concurrence of Kumul Petroleum Holdings expressly agrees that the State may do so.

(5) The Kumul Petroleum Companies shall pursue their objects and perform their functions and duties and exercise their powers and authorities independently of, and free from, interference or direction by the State, State Ministers or Members of the National Parliament or other Provincial or Local-level Governments or officers of the public service other than as provided expressly in this or any other Act.

(6) For the avoidance of doubt, the Kumul Petroleum Companies are free to engage in all of the activities of a commercial enterprise including, without limitation, acquiring, developing and disposing of assets and borrowing and otherwise obtaining financial accommodation, independently of, and free from, interference or direction by the State, Ministers or Members of the National Parliament or other Provincial or Local-level Governments or officers of the Public Service, other than as provided expressly in this or any other Act.

(7) Subsections (5) and (6) do not apply to any action taken by the Kumul Petroleum Trustee in accordance with the terms of the Kumul Petroleum Trust Deed.

(8) No Kumul Petroleum Company is a Department of the National Public Service, and no officer of a Kumul Petroleum Company (including the Managing Director) is an officer in the National Public Service.”

25. It would appear the rational is to free KPHL from ‘political interference’ and allow it to perform its function as a commercial enterprise as noted from the Preamble and Section 8 (6) of the Act. Even Sub-section 8 makes it quite clear that KPHL as one of the Kumul Petroleum Companies is not a Department of the National Public Service and no officer of the company including the Managing Director is an officer in the National Public Service.

26. I am of the view that the same principle can apply to the Director and Chairman of the Board to the extent that they are not officers of the National Public Service where in most cases, judicial review is available where officers are dismissed from employment. There is a large body of case law on this point which I propose not to spent time on.

27. Needless to say, these reasons put it beyond argument that the nature of the employment relationship between the plaintiff and KPHL is one of pure master and servant and the appropriate remedy for the plaintiff is in damages, not judicial review and reinstatement.

28. I am satisfied that the defence has made out a case of abuse of process and the discretion will be exercised in their favour. The proceedings are dismissed as being an abuse of process pursuant to Order 12, rule 40 (1) (c) of the National Court Rules. The interim restraining orders of 12^th April 2017 and the summons for production will follow suit. They are dismissed and costs shall follow the event.

Ruling and orders accordingly.
________________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for Plaintiff
Twivey Lawyers: Lawyers for First & Third Defendants
O’Brien’s Lawyers: Lawyers for Kumul Petroleum Holdings Limited