Puma Energy PNG Ltd v Paul [2018] PGNC 52; N7114 (15 January 2018)

N7114

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 82 OF 2017

BETWEEN:
PUMA ENERGY PNG LIMITED
Plaintiff

AND:
RAY PAUL,
Commissioner of Customs of the Papua
New Guinea Customs Service
First Defendant

AND:
BANK SOUTH PACIFIC LIMITED
Second Defendant

AND:
WESTPAC BANK (PNG) LTD
Third Defendant

AND:
ANZ BANKING GROUP (PNG) LTD
Fourth Defendant

Waigani: Hartshorn J.

2018: 15^th January

Whether interlocutory injunctive orders should continue

Cases cited:
Papua New Guinea Cases

Employers Federation of Papua New Guinea v. Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal (1982) N393
Robinson v. National Airlines Commission [1983] PNGLR 478
Markscal Ltd v. MRDC [1996] PNGLR 419
Craftworks Nuigini Pty Ltd v. Allan Mott (1997) SC525
Yama Group of Companies Ltd v. PNG Power Ltd (2005) N2831
Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Misima Mines Ltd v. Collector of Customs, Internal Revenue Commission (2007) N3206
Canopus No. 16 Ltd v. Maisi Trust Co. (2008) N3401
Ramu Nico Management (MCC) Limited and Ors v Tarsie and Ors [2010] SC1075
Airlines of PNG v. Air Niugini Ltd (2010) N4047
PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126
Collector of Customs, IRC v. Misima Mines Ltd (2014) SC1373
Mobil Oil New Guinea Ltd v. Yakainga Business Group (Inc) (2014) N6851
Talisman Energy Niugini Ltd v. Bismark Maritime Ltd (2015) N6800

Overseas Cases

American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; (1975) AC 396
Films Rover International Ltd v. Canon Films Sales Ltd [1987] 1 WLR 670

Counsel:

Mr. I.R. Molloy and Mr. C. Posman, for the Plaintiff
Mr. W. Maino, for the First Defendant
Mr. A. Waffi, for the Second Defendant
Ms. E. Ortlauf, for the Third Defendant

15^th January, 2018

1. HARTSHORN J: This is a decision on whether interlocutory injunctive orders that have been granted should continue. Those orders amongst others, restrained the first defendant, the Chief Commissioner of Customs (Chief Commissioner) from taking any action regarding the alleged liability of the plaintiff, Puma Energy PNG Ltd (Puma Energy) to pay alleged unpaid Goods and Services Tax (GST) on shipments of crude oil and further, restrained the three defendant banks from paying money pursuant to certain garnishee notices issued pursuant to s. 191AA Customs Act by the Chief Commissioner.

Background

2. Puma Energy submits that the background to this claim is as follows:

a) The Puma Group of Companies (Puma) carry on business in Papua New Guinea of amongst others, the refining and selling of petroleum

products previously carried on by Interoil. In 2014 Puma acquired the shares in various Interoil companies;

b) One of the assets which passed with those shares was the Napa Napa refinery. Puma Energy is the marketing company. The refinery is conducted by Puma Energy PNG Refinery Limited. The refinery has a bonded warehouse licence;

c) Section 6 Goods and Services Act 2003 provides for the imposition of GST on imported goods. Under s. 6(2) the GST levied on imported goods shall be collected and paid as if it were Customs duty levied under the Customs Act;

d) On 25^th April 2016 Puma Energy instituted proceedings seeking a declaration that a letter of demand from Customs for the payment of K1,935,883,136.83 claimed by Customs was invalid, as were garnishee notices issued by the Chief Commissioner to the other defendants. The notices were revoked that same day;

e) On 12^th September 2016 the Chief Commissioner, without prior notice, issued a demand for payment of K124,700,621.79 for alleged administrative penalties, and a further K896,997,735.81 for unpaid import GST. Puma Energy disputes its liability for any of the monies claimed. An appeal has been lodged with the Customs Review Tribunal;

f) Notwithstanding the appeal, and knowing that the Customs’ claims are disputed, the Chief Commissioner issued statutory garnishee notices to each of the bank defendants, under s. 191AA Customs Act Ch. 101, requiring that they pay the amounts in those notices;

g) By its originating summons Puma Energy seeks declaratory relief that amongst others, the garnishee notices served by the Chief Commissioner are invalid and unlawful;

h) Interlocutory injunctive orders were made on 2^nd March 2017 and the matter was adjourned for the hearing of full arguments on 9^th March 2017.

Puma Energy’s submissions

3. Puma Energy submits that the interlocutory injunctive orders should continue as:

a) It has serious questions to be tried which are whether the Chief Commissioner has a right to issue a garnishee notice under s. 191AA Customs Act where there is a dispute and also whether such a notice is valid. Puma Energy submits that the garnishee notices are premature and invalid as there is a bone fide dispute concerning the liability of Puma Energy for the alleged or any sum. Further, as Puma Energy has exercised its statutory right to appeal to the Customs Review Tribunal under Part XV Customs Act, no amount is due until the Customs Review Tribunal has made a determination. It is inappropriate therefore to issue a garnishee notice in these circumstances it is submitted;

b) The balance of convenience overwhelmingly favours the continuation of the interlocutory injunctive orders. If they are not continued, Puma, its employees, contractors and other third parties will suffer serious prejudice, which cannot be compensated by an award of damages;

c) In contrast, the only obvious prejudice that Customs will suffer if the restraining orders are continued is a delay in the receipt of payment of what they would otherwise be paid under the garnishee notices. Customs can be compensated by money, specifically, interest.

Chief Commissioner’s Submissions

4. The Chief Commissioner submits that the interlocutory injunctive orders should not continue as:

a) Taxation legislation must be interpreted strictly and s. 191AA Customs Act permits the issuing of the garnishee notices;

b) The garnishee notices were issued after all administrative processes had been completed;

c) An application in regard to the GST was made and the amount claimed as due was reduced by about K124 million;

d) Although Puma Energy has appealed to the Customs Review Tribunal and ordinarily garnishee notices would not have been issued until after an appeal to the Customs Review Tribunal had been exhausted, there is no Customs Review Tribunal and so the garnishee notices were issued;

e) This proceeding is invalid as it is not appropriately before the court as a taxpayer must pay the tax owing before challenging the tax claimed;

f) There is no serious question to be tried;

g) The balance of convenience favours the interlocutory injunctive orders not being continued otherwise the State will be deprived of revenue;

h) No prejudice will be suffered by Puma Energy as if it is successful substantively, any money paid pursuant to the garnishee notices will be paid back. Further, the Customs Act provides for offsets.

Consideration

5. The principles upon which the court can grant an interlocutory injunction are well settled. The leading authority is a decision of the House of Lords in American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; (1975) AC 396. This case has been followed on many occasions in this jurisdiction and cited with approval by the Supreme Court in Craftworks Nuigini Pty Ltd v. Allan Mott (1997) SC525. These principles have been reaffirmed by the Supreme Court in Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853.

6. In Chief Collector of Taxes v. Bougainville Copper Limited [2007] SC 853, the Supreme Court said at 31:

“In our jurisdiction the principles relevant to injunctive reliefs (sic) are well settled. In Golobadana No. 35 v. Bank of South Pacific, Kandakasi J. ... concluded as follows:

“A reading of these authorities shows consistency or agreement in all of the authorities that the grant of an injunctive relief is an equitable remedy and it is a discretionary matter. The authorities also agree that before there can be a grant of such a relief, the Court must be satisfied that there is a serious question to be determined on the substantive proceedings. This is to ensure that such a relief is granted only in cases where the Court is satisfied that there is a serious question of law or fact raised in the substantive claim. The authorities also agree that the balance of convenience must favour a grant or continuity of such a relief to maintain the status quo. Further, the authorities agree that, if damages could adequately compensate the applicant then an injunctive order should not be granted”.”

7. Similarly, in Ramu Nico Management (MCC) Limited and Ors v Tarsie and Ors [2010] SC1075 at 53, in a decision in which I dissented on matters not currently relevant, I said:

“The law on injunctions is settled in this jurisdiction. Injunction is an equitable remedy. It is a matter for the discretion of the Court to refuse or grant the relief sought. In order for an injunction to be granted, the applicant must demonstrate to the Court that there is a serious case to be tried on the substantive proceedings. The leading authority is a decision of the House of Lords in “American Cyanamid Company v Ethicon Limited (1975) 1 All ER 594. This case has been followed on many occasions in this jurisdiction and cited with approval by the Supreme Court in Craftworks Niugini Pty Ltd v Allan Mott (1997) SC525 and Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853.”

8. The first consideration is whether the plaintiffs’ have a serious question to be tried. A serious question to be tried has been interpreted to mean:

“What the plaintiff must prove is that he has a serious, not a speculative case which has a real possibility of ultimate success....”:Robinson v. National Airlines Commission [1983] PNGLR 478 and

“..... a strong case which, on the evidence presented would support a permanent injunction” :Markscal Ltd v. MRDC [1996] PNGLR 419.

9. Puma Energy has filed affidavits in support of its position. As to the court's consideration of that evidence at this stage, I am mindful of the words of Lord Diplock in American Cyanamid (supra):

“It is not part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations.”

Whether there is a serious question to be tried

10. Puma Energy submits that it has serious questions to be tried which are whether the Chief Commissioner has a right to issue a garnishee notice under s. 191AA Customs Act where there is a dispute and whether such a notice is valid. Reliance is placed upon the following statement in the decision of Davani J. in Misima Mines Ltd v. Collector of Customs, Internal Revenue Commission (2007) N3206 at [93]:

“Section 191AA is applied if there is “duty” owing to the Commissioner of Customs and it is not disputed. ‘Duty’ under s. 191AA means customs duties and includes a judgment debt and costs. In my view, s. 191AA should only be applied by the IRC if there is no issue in relation to the amount owing.”

11. This decision was appealed however, in Collector of Customs, IRC v. Misima Mines Ltd (2014) SC1373 and at [57] the Supreme Court said:

“57. The trial judge also found that section 191AA cannot be applied if there is a dispute regarding any duty claimed by the IRC as outstanding. We find nothing in the words of section 191AA to support that conclusion by the trial judge.

58. It is our opinion therefore that the trial judge wrongly interpreted and applied sections 102, 191 and 191AA Customs Act.”

12. On this interpretation of s. 191AA of the Supreme Court, it would appear that Puma Energy does not have a serious question to be tried. However in submissions, counsel for the Chief Commissioner informed the court from the bar table that ordinarily, garnishee notices would not have been issued until after an appeal to the Customs Review Tribunal had been exhausted. As there is no Customs Review Tribunal, that is why the garnishee notices were issued.

13. As to this information, s. 177A Customs Act establishes a Customs Review Tribunal. From the information from the counsel for the Chief Commissioner, it is not clear whether it is the Customs Review Tribunal that has not been established or whether it is the case that the Minister has not appointed the three members of the Customs Review Tribunal pursuant to s. 177B.

14. That garnishee notices are not ordinarily issued until the Customs Review Tribunal has made a determination is almost an admission that garnishee notices are not issued until the Customs Review Tribunal has determined that the amount alleged to be owing by a taxpayer is due. Secondly, it can be argued that the State, represented by the Chief Collector, should not be able to take advantage of there not being a Customs Review Tribunal in operation when the reason it is not in operation lies with the State or its Minister or other officers. In these circumstances, I am satisfied that Puma Energy does have a serious question to be tried. I am also satisfied that this case can be distinguished from Collector of Customs v. Misima Mines Ltd (2014) SC1374 on its facts.

15. Puma Energy further submits that it has a serious question to be tried as it has exercised its statutory right to appeal to the Customs Review Tribunal under Part XV Customs Act, and so no amount is due until the Customs Review Tribunal makes a determination. As referred to, counsel for the Chief Commissioner informed this court that there is no Customs Review Tribunal, this is notwithstanding that s. 177A Customs Act establishes it. It is the case as argued on behalf of the Chief Commissioner that all tax legislation must be interpreted strictly and its provisions given their plain and ordinary meaning: Collector of Customs v. Misima Mines Ltd (2014) SC1374 at [53] and the cases cited therein.

16. Consequently, applying that principle, Puma Energy as a taxpayer is entitled to its rights as conferred by the Customs Act. It is entitled to exercise its rights conferred under Part XV to approach the Customs Review Tribunal and further, it is entitled to file a notice of appeal to this court pursuant to s. 178B Customs Act if it is dissatisfied with a decision of the Customs Review Tribunal.

17. Section 178C (3) provides that:

“(3) Where an appeal is pending in the National Court against the decision of the Tribunal, the decision of the Tribunal is binding and remains in force unless a stay of the decision is granted by the National Court.”

18. It is the case that the intention behind tax legislation, as submitted on behalf of the Chief Commissioner, is for the amount assessed as duty to be paid first and any objection to the amount assessed should be made later: Collector of Customs v. Misima Mines Ltd (2014) SC1374 at [53] and the cases cited therein.

19. Section 178C (3) Customs Act, however, specifically recognises that there are circumstances when this court will grant a stay of a Customs Review Tribunal decision. If this was not the case then the wording in s.178C (3) concerning such a stay would not have been included in that subsection. This is contrary to the intention referred to. It is also supportive of the claim by Puma Energy that a garnishee notice should not be issued by the Chief Commissioner until the dispute with Puma Energy is fully and finally considered by the review and appeals process, and it has been determined that the amount allegedly owed by Puma Energy is due.

20. Consequently, I am satisfied that Puma Energy has a serious question to be tried on this basis. The Supreme Court in Collector of Customs v. Misima Mines Ltd (2014) SC1374 did not consider this argument and so again this case can be distinguished from that Supreme Court case.

Whether damages are an adequate remedy

21. As I am satisfied that Puma Energy has established that it has serious questions to be tried, the next question is whether damages would be an adequate remedy.

22. If damages would be an adequate remedy then even if there is a serious question to be tried interlocutory injunctive relief should be refused: Airlines of PNG v. Air Niugini Ltd (2010) N4047 at 22 and 23 and PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126 at 30. The rationale for the court considering whether damages would be an adequate remedy was explained by Lord Diplock in American Cyamamid (supra) at 408:

“[t]he court should go on to consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages... would be an adequate remedy and the defendant would be in a financial position to pay them, no interim injunction should normally be granted, however strong the claimant’s claim appeared to be at that stage.”

23. The consideration is whether damages would compensate the applicant should it be found that their legal rights have been infringed by the party they are seeking to enjoin: Employers Federation of Papua New Guinea v. Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal (1982) N393, 3-4.

24. In Airlines PNG v. Air Niugini (supra), I refused to grant injunctive relief as I was satisfied that any loss suffered by Airlines PNG would be able to be quantified and that it had not been shown that damages would not be an adequate remedy.

25. Puma Energy submits that damages would not be an adequate remedy as amongst others, Puma, its employees, contractors and other third parties would suffer serious prejudice which could not be compensated by an award of damages. Evidence has been given that Puma Energy would have to cease business if the interlocutory injunctive orders are not continued because of the amounts involved. Evidence has also been given that Puma Energy and Puma do not have sufficient funds to meet the sums claimed by the Chief Commissioner. Further, if Puma Energy ceases business, this would have immediate and catastrophic consequences for all of Puma’s operations in Papua New Guinea. It amongst others, supplies approximately 60% of Papua New Guinea’s fuel supply chain storage, supplies approximately 50 branded service stations, supplies many third party fuel retailers, and is the sole supplier of A1 jet fuel to Papua New Guinea’s airports. If Puma Energy ceased operations, all Papua New Guinea airports would run dry of jet fuel in a few days. Further, Puma Energy is the principal supplier of liquid fuel (Diesel and HFO) to PNG Power.

26. The evidence given on behalf of Puma Energy is not rebutted. I am satisfied given this evidence that damages would not be an adequate remedy.

27. The next consideration is where does the balance of convenience lie? In my view given the evidence referred to above concerning whether damages would be an adequate remedy, it is clear that the balance of convenience lies in favour of continuing the interlocutory injunctive orders.

28. In the circumstances, I am also mindful of the following passage of Hoffman J in Films Rover International Ltd v. Canon Films Sales Ltd [1987] 1 WLR 670 at 680:

“The principal dilemma about grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the Court may make the ‘wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the Court should take whichever course appears to carry the lower risk of injustice if it turns out to have been ‘wrong’ in the sense I have described.”

29. The principles contained within this passage have been affirmed in Yama Group of Companies Ltd v. PNG Power Ltd (2005) N2831; Canopus No. 16 Ltd v. Maisi Trust Co. (2008) N3401; Talisman Energy Niugini Ltd v. Bismark Maritime Ltd (2015) N6800 and Mobil Oil New Guinea Ltd v. Yakainga Business Group (Inc) (2014) N6851.

30. After taking all factors into account I am satisfied that the lower risk of injustice if my decision turns out to be wrong, is to permit the continuation of the interlocutory injunctive orders.

31. Consequently as I am satisfied that Puma Energy has established that it has serious questions to be tried, that damages would not be an adequate remedy and that the balance of convenience and the lower risk of injustice favour the interlocutory injunctive orders being continued, that is the order that this court shall make.

Orders

32. The formal Orders of the Court are:

a) The interlocutory injunctive orders sought in the notice of motion filed 1^st March 2017 and granted on 2^nd March 2017 shall continue until the determination of the substantive relief sought in the originating summons;

b) Costs are in the cause;

c) Time is abridged.
_____________________________________________________________
Posman Kua Aisi: Lawyers for the Plaintiff
Papua New Guinea Customs Service: Lawyers for the First Defendant
Bank South Pacific Limited: Lawyers for the Second Defendant
Ashurst: Lawyers for the Third Defendant