Digicel (PNG) Ltd v Commissioner General of Internal Revenue [2019] PGNC 378; N8142 (17 October 2019)

N8142

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 201 OF 2018 (COMM)

BETWEEN:
DIGICEL (PNG) LIMITED
Plaintiff

AND:
COMMISSIONER GENERAL
OF INTERNAL REVENUE
Defendant

Waigani: Hartshorn J
2019: 17^th October

COSTS - Application for indemnity costs – principles for costs on indemnity basis considered - actions of the defendant and her counsel, have caused the plaintiff to unnecessarily commence this proceeding and to incur unnecessary costs – defendant to pay plaintiff’s costs on indemnity basis

Cases Cited:

Timothy Patrick v. PepiKimas(2010) N3913
Rex Paki v. Motor Vehicles Insurance (PNG) Ltd (2010) SC1015

Counsel:

Mr. J. Brooks, for the Plaintiff
Mr.S. Paisi, for the Defendant

17^th October, 2019

1. HARTSHORN J: This is a decision on the plaintiff’s application for its costs of this proceeding to be paid on an indemnity basis. The parties have consented to the proceeding being discontinued.

Background

2. The defendant issued purported Default Assessment Notices (DA notices) to the plaintiff in respect of alleged outstanding salary and wages withholding tax (withholding tax). On 29^th March 2018, in the course of refusing the plaintiff’s application for leave to judicially review the DA notices in proceeding OS(JR) 1010 of 2017, Justice Nablu ordered amongst others, that the plaintiff was at liberty to lodge an objection to the DA notices within 14 days, being 11^th April 2018.

3. On 3^rd April 2018 the defendant issued garnishee notices in respect of the withholding tax to two Banks (and then two other Banks), giving them 24 hours to pay K55,825,851.68 from accounts of the plaintiff held at the Banks, to the Inland Revenue Commission. On 3^rd April 2018, after learning of the issuing of the garnishee notices, the plaintiff lodged its objections to the DA notices. On 4^th April 2018 the plaintiff commenced this proceeding seeking a declaration and orders in respect of the garnishee notices.

4. On 4^th April 2018 this court made orders preventing the defendant from claiming the amount referred to in the garnishee notices. This court varied those orders on 6^th April 2018 to avoid any doubt that the defendant was prevented from claiming the amount claimed in the garnishee notices.

5. On 16^th April 2018 the defendant filed a notice of motion seeking to amongst others, have the proceeding dismissed. Evidence was given that the garnishee notices issued on 3^rd April 2018 were revoked on 13^th April 2018. On 23^rd April 2018 the defendant per her lawyer informed amongst others that the 3^rd April 2018 garnishee notices were revoked, “as is the practice by IRC with all taxpayers where valid objections are filed within the prescribed time.”

Submissions on costs

6. The plaintiff submits that it should have its costs of the proceeding on an indemnity basis as amongst others:

a) The defendant issued garnishee notices requiring payment of more than K55.5 million within 24 hours on 3^rd April 2018, without notice to the defendant, eight days before the date permitted by the National Court in OS(JR)1010 of 2017 for the defendant to file objections to the DA notices;

b) The plaintiff was forced to commence this proceeding when it still had eight days to lodge its objections in circumstances where it has been belatedly conceded by the defendant that enforcement action is not taken by the Internal Revenue Commission when a valid objection has been lodged within time.

7. The defendant submits that the costs of the proceeding should be awarded against the plaintiff as amongst others:

a) The plaintiff commenced this proceeding to prevent the defendant from administratively recovering outstanding taxes which are payable to the State;

b) The defendant had acted within power. This is not an instance of corrupt or illegal use of administrative power;

c) The general rule is that costs follow the event. As the plaintiff is discontinuing this proceeding, albeit with consent, the plaintiff should pay the defendant’s costs.

Consideration

8. Order 8 Rule 61 National Court Rules is as follows:

“61. Discontinuance. (21/2)

(1) A party making a claim for relief may discontinue proceedings so far as concerns the whole or any part of any claim for relief by him-

(a) where the pleading is not closed-without leave or consent; and

(b) where a judgement has not been entered- with the consent of all other parties; and

(c) at any time- with the leave of the Court.”

9. Order 22 Rule 17 National Court Rules is as follows:

“17. Discontinuance. (52/16)

(2) Where, under Order 8 Rule 61, a party to any proceedings discontinues the proceedings without leave as to the whole or any part of the relief claimed by him against any other party, the discontinuing party shall, unless the Court otherwise orders, pay the costs of the party against whom the discontinued claim is made, occasioned by the discontinued claim and incurred before service of notice of the discontinuance.”

10. From a perusal of Order 22 Rule 17, where a party discontinues without leave, irrespective of whether leave is required under Order 8 Rule 61, that party shall pay the costs of the party against whom the discontinued claim is made, unless the court otherwise orders.

11. The plaintiff seeks its costs on an indemnity basis. The court considers the contested application of the plaintiff to determine whether it should exercise the discretion conferred upon it by Order 22 Rule 17(2) National Court Rules to “otherwise order”.

12. In regard to an application for costs on a solicitor client basis or on an indemnity basis, inTimothy Patrick v. Pepi Kimas (2010) N3913, Gavara Nanu J said as to costs being awarded on a solicitor client basis:

“...the applicant must demonstrate that there are grounds upon which such award may be made; for instance, the applicant having to defend proceedings which are frivolous and vexatious and are an abuse of process. See, Gulf Provincial Government -v- Baimuril Trading Pty Ltd [1998] PNGLR 311; or that the applicant is being dragged into the Court and is made to suffer and incur unnecessary costs. See, Concord Pacific Ltd -v- Thomas Nen [2000] PNGLR 47.”

13. In Rex Paki v. Motor Vehicles Insurance (PNG) Ltd (2010) SC1015, the Supreme Court stated that:

“The award of costs on an indemnity basis is discretionary. An order for costs on an indemnity basis may be made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blameworthy that he should be so punished by such an order. The question is whether the conduct of the appellant in this matter is such that it caused the respondent to incur unnecessary costs.”

14. In this instance, it is not controversial that the National Court per Justice Nablu, had given orders made on 29^th March 2018 that the plaintiff had until 11^th April 2018 to lodge its objections to the DA notices. Notwithstanding this order the defendant issued garnishee notices demanding payment of K55.5 million within 24 hours, eight days before the last day by which the plaintiff was allowed by this court to lodge its objections. The action of the defendant in issuing the garnishee notices rendered the order of Justice Nablu otiose as the plaintiff was not able to avail itself of the time permitted by Justice Nablu. The plaintiff had to lodge its objections immediately and commence proceedings immediately to protect its rights as a result of the actions of the defendant.

15. Further, given the statement by counsel for the defendant that the practice of the Internal Revenue Commission is that where a valid objection is filed against a tax assessment within time, no recovery action is taken to recover the disputed tax amount until the objection is determined, in this instance the defendant did not permit the plaintiff the time allowed by this court to lodge its objection and so could not have properly determined whether a valid objection was to be filed by the plaintiff within time, such that the Internal Revenue Commission would follow its normal practice.

16. In addition, notwithstanding that the plaintiff had lodged its objection on 3^rdApril 2018 and had obtained restraining orders on 4^th April 2018, both being matters of which the defendant was aware at least by its lawyer, the defendant on 6^th April 2018 informed ANZ Bank that it still had to comply with the garnishee notice.The plaintiff was then required to return to court on 6^th April 2018 to vary the restraining orders to avoid any doubt as to their operation.

17. I am satisfied given the evidence and submissions, that the actions of the defendant and her counsel, have caused the plaintiff to unnecessarily commence this proceeding and to incur unnecessary costs, such that the plaintiff is entitled to its costs are sought.

Orders

18. The Court orders that:

a) The defendant shall pay the plaintiff’s costs of and incidental to this proceeding on an indemnity basis to be taxed if not agreed otherwise;

b) Time is abridged.
__________________________________________________________________
Ashurst Lawyers: Lawyers for the Plaintiff
Legal Services Division Internal Revenue Commission: Lawyers for the Defendant