Mal-Con Ltd v Exxonmobil PNG Ltd [2020] PGNC 219; N8489 (7 September 2020)

N8489

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 61 OF 2020

APPLICATION PURSUANT TO PARTS I and III (Division 13 – SECTION 129) of the OIL & GAS ACT 1998

BETWEEN
MAL-CON LIMITED
Plaintiff

AND:
EXXONMOBIL PNG LIMITED
First Defendant

AND:
INTERNATIONAL SOS (NIUGINI) LIMITED
Second Defendant

Waigani: Anis J
2020: 20^th August & 7^th September

NOTICE OF MOTION – 3 applications – first 2 applications seek to dismiss the proceeding – Order 12 Rule 40(1)(a), (b) and (c), Order 12 Rule 25 and Order 10 Rule 9A(15)(1)(a) and 2(d) – National Court Rules – s. 155(4) of the Constitution – applications contested - third application seeks orders for specific discovery of documents – Order 9 Rule 12 – National Court Rules – application contested

PRACTICE AND PROCEDURES – PARTS I & III and s. 129 – Oil and Gas Act 1998 – Whether they entitle persons aggrieved to bring proceedings before the National Court

Cases Cited:

Philip Takori & Others v. Simon Yagari & 2 Others (2008) SC 905
Ronny Wabia v. BP Exploration Co. Limited & 2 Others [1998] PNGLR 8
Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915
Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stagg, Valentine Kambori & The State (2006) N3050
Modilon General Hospital Board of Management v. Dianne Liriope and Ors (2012) N4772
Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Ors (No 2) [1988-89] PNGLR 425
Placer Dome (PNG) Ltd v. Yako (2011) N4691

Counsel:

Mr. J Talopa, for the Plaintiff
Mr. M Tumul, for the First Defendant
Mr. L Evore, for the Second Defendant

DECISION

7^th September, 2020

1. ANIS J: I heard 3 applications, 2 by the defendants seeking dismissal of the proceeding, and 1 by the plaintiff requesting discovery or production of specific documents in relation to the matter. I heard and reserved my decision to a date to be advised.

2. Parties have been notified so I will rule on them now.

BACKGROUND

3. The plaintiff filed this proceeding by way of an originating summons on 28 February 2020. The original summons was subsequently amended on 13 March 2020 (originating summons). The proceeding is said to be filed under Parts I and III and s. 129 of the Oil and Gas Act 1998 (O&G Act).

4. The first defendant (Exxon) is the operator of the PNG Liquified Natural Gas Project (the LNG Project). The plaintiff used to be a sub-contractor to a service provider of Exxon. The service provider then was Mosquito Zone PNG Limited (Mosquito Zone). In 2014, Exxon awarded Mosquito Zone a contract which is described as Vector Services Contract. Services under the contract involve protecting Exxon, its staff, and properties at its various sites, against living organisms such as mosquitos, ticks, fleas, cockroaches etc that transmit infectious pathogens. The contract also covers pest management such as snakes and rodents (Vector Services Contract).

5. In 2019, the Vector Services Contract of Mosquito Zone expired. Exxon invited tenders for provision of the said services. Three companies applied for the contract. Two of the companies were Mosquito Zone and the second Defendant. The plaintiff did not apply or participate in the tender process. On 14 November 2019, Exxon awarded the Vector Services Contract to the second defendant. By then, Mosquito Zone’s contract had ended. The plaintiff’s sub-contract with Mosquito Zone also ended. The plaintiff approached the second defendant to discuss the possibility of it being engaged as its sub-contractor. The discussions occurred over a period of time but in the end, the second defendant turned down the plaintiff’s offer.

6. The plaintiff was aggrieved by that and files this proceeding.

MOTIONS

7. Exxon and the second defendants file 2 separate applications to dismiss or summarily dismiss the proceeding. As for Exxon, it relies on Order 10A Rule 25, Order 10 Rule 9A(15)(1)(a) and (2)(d) and Order 12 Rule 40, of the National Court Rules. As for the second defendant, it relies on Order 12 Rule 40(1)(a)(b) and (c) and Order 12 Rule 1 of the National Court Rules, and it further relies on s. 155(4) of the Constitution.

8. Order 12 Rule 40(1) states:

40. Frivolity, etc. (13/5)

(1) 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 —

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

9. The plaintiff took issue with the fact that Exxon did not clearly plead, as a source in its application, Order 12 Rule 40(1) of the National Court Rules. It submits that Exxon’s source is ambiguous because it did not plead sub-rule (1) of Rule 40 where it submits, makes the application incompetent. I have considered the argument and the submissions of the parties. I must say that I will dismiss the plaintiff’s argument. As I pointed out to counsel at the hearing, despite the said discrepancy, Exxon did expressly plead the grounds in its application which refers to all the 3 grounds under Rule 40(1) of Order 12. I think the key test where such a claim (i.e., want of pleading specific rule) is made would be the element of surprise which comes together with the right to natural justice. Was the aggrieved party caught unaware or taken by surprise on the matter, question, or issue at hand? In this case, I do not see that the plaintiff had been disadvantaged. As stated, the specific reasons for seeking a dismissal have also been pleaded in Exxon’s application. I also note that the said source, namely, Order 12 Rule 40(1), has been duly pleaded by the second defendant in its application which is also before this Court for determination, so, the overlapping effect would have, in my view, clarified any ambiguity in Exxon’s application.

10. Now, the principles or tests under Order 12 Rule 40(1) are settled in this jurisdiction. The Court may dismiss a proceeding, (i), if it does not disclose a reasonable cause of action, or, (ii), if it is frivolous or vexatious, or (iii), if it is an abuse of process. See cases: Philip Takori & Others v. Simon Yagari & 2 Others (2008) SC 905, Ronny Wabia v. BP Exploration Co. Limited & 2 Others [1998] PNGLR 8; Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915 and Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stagg, Valentine Kambori & The State (2006) N3050.

ISSUES

11. The main issues, in my view, are as follows:

(i) Whether Parts I and III and s. 129 of the O&G Act are sources upon which court proceedings may be commenced under.

(ii) Whether the proceeding does not disclose a reasonable cause of action, is frivolous or is an abuse of process.

(iii) Subject to the above, whether Exxon should provide discovery of or disclose the documents that are being requested by the plaintiff, and if not, why not?

PLAINTIFF’S GREIVANCE

12. When I consider all the evidence and the relief that is pleaded, it is obvious that the plaintiff has come to Court because the second defendant had refused to grant it a sub-contract. The grievance, in my view, appears to be purely commercial in nature. And the plaintiff has chosen to have it heard in this fashion, that is, by filing this proceeding under s. 129 of the O&G Act.

13. Section 129 states:

129. Local purchase obligation.

(1) Subject to the provisions of this section, a licensee shall, in its operations in Papua New Guinea and in the construction and development of a project—

(a) use and purchase goods and services supplied, produced or manufactured in Papua New Guinea whenever the same can be obtained at equivalent terms, including prices, conditions and delivery or performance dates and are in all respects of a quality comparable with those available from outside Papua New Guinea; and

(b) encourage and assist citizens of Papua New Guinea who are desirous of establishing businesses providing goods and services for the operations or the project and for any town constructed primarily for the purposes of the project and the residents thereof; and

(c) make maximum use of Papua New Guinea contractors and subcontractors where services of a standard comparable with those which the licensee would obtain but for the operation of this section are available from such Papua New Guinea contractors or subcontractors at equivalent prices, and on equivalent terms, conditions and delivery or performance dates.

(2) A licensee which, for the purpose of its operations in Papua New Guinea or the construction and development of its project, requires imported vehicles, machinery, plant or equipment, and does not purchase such items direct from the manufacturer, shall effect the purchase of such items through traders based in Papua New Guinea or the Papua New Guinea operations of traders based elsewhere but having operations in Papua New Guinea.

(3) Subsection (2) does not apply to a licensee in respect of a particular purchase if—

(a) such items are not available through such traders or trading operations at an equivalent price, and on equivalent terms, conditions and delivery dates; or

(b) compliance would adversely affect the financing of the licensee's operations or the development of the licensee's project.

(4) Nothing contained in this section obliges a licensee to grant or lend money to any person or any local enterprise.

(5) Where a licensee seeks to grant to persons who are landowners in the area of the licensee's operations a contract for the supply of labour or services and a dispute which delays the grant of such a contract arises amongst persons claiming to be such landowners, the licensee may refer the dispute to the Director who may determine the dispute.

14. Section 129 is a provision that applies to a licensee and of its obligations therein which, amongst others, includes local procurement or award of contracts for provision of goods and services. Section 3 of the O&G Act defines, amongst others, the terms ‘license’ and ‘licensee’ as follows:

"licence" means—

(a) a petroleum prospecting licence issued under Section 23; or

(b) a petroleum retention licence issued under Section 40; or

(c) a petroleum development licence issued under Section 57; or

(d) a pipeline licence issued under Section 74; or

(e) a petroleum processing facility licence issued under Section 88,

or any of them, as the context requires, and includes any extension of those licences;

......

"licensee" means the registered holder of a licence;

15. The first preliminary query I have relates to the manner in which this proceeding is commenced. Firstly, the plaintiff appears to say that it is permitted to commence a proceeding under Parts I and III of the O&G Act and under s. 129. I refer to the originating summons. It reads in part, APPLICATION PURSUANT TO PARTS I and III (Division 13 – SECTION 129) of the OIL & GAS ACT 1998. I have had the opportunity of perusing the provisions. Part I begins with this sub-heading, “PRELIMINARY”, and PART III begins with the sub-heading “PETROLEUM EXPLORATION AND DEVELOPMENT.” These parts and s. 129 do not authorize an aggrieved person such as the plaintiff, to commence Court proceedings in the manner as is portrayed in the originating summons. The plaintiff, in my view, has invoked Parts, divisions and a section, in the O&G Act that have no relevance whatsoever as sources for instituting proceedings in the National Court. The originating summons is therefore filed without any foundation that may be derived from Parts I, III and s. 129, of the O&G Act. It may therefore be dismissed for frivolity and abuse of process.

16. I also notice this. In the originating summons, the plaintiff begins with this first sub-heading titled, BRIEF FACTS. Under the said sub-heading, the plaintiff pleads in total 17 paragraphs therein before it sets out the relief that it intends to seek. With respect, I find that as odd. This is not what is required in the practice and procedures requirements as well as in the process that is provided under the National Court Rules of how an originating summons form should be filled out and filed. Division 4 of Order 4 in the National Court Rules sets out the processes required or applicable, in a case where a proceeding may be commenced by way of an originating summons. Order 4 Rule 26(1) reads, and I quote:

26. Summons stating appointment for hearing. (5/4A)

(1) This Rule applies to proceedings commenced by originating summons in Form 6 stating an appointment for hearing.

17. And Form 6 states, and I quote in part:

.........................................................................................................

Form 6.

O.4, r.26

ORIGINATING SUMMONS

(Stating appointment for hearing)

(heading as in Form 1 or Form 3)

The plaintiff claims—

1. An order making provision for his maintenance, education and advancement in life pursuant to (Act) out of the estate of (name) late of (place) (occupation) deceased.

2. An order that (or as required) (or)

1. A declaration that

2. An order that (or as required) (or)

The plaintiff claims an order that (where there is defendant, add the following-

To the defendant:

If there is no attendance before the Court by you or by your counsel or solicitor at the time and place specified below, the proceedings may be heard and you will be liable to suffer judgement or an order against you in your absence.

......

18. Form 6, in this case, has not been complied with by the plaintiff. The originating summons is therefore substantially defective, and as such, ought to be dismissed or struck out for want of form. See case: Modilon General Hospital Board of Management v. Dianne Liriope and Ors (2012) N4772.

19. Let me also say this. It appears that the plaintiff’s real grievance has nothing to do with s. 129 of the O&G Act. Why do I say that? Well, the evidence as adduced shows that the plaintiff was a sub-contractor of Mosquito Zone who had been awarded the Vector Services Contract prior to 2019. That contract ended in 2019, and Exxon has now awarded the contract to the second defendant, that is, after it had put out the contract on tender and after it had invited applicants to bid for it. I had pointed out to counsel at the hearing this, that is, of the fact that the plaintiff had not applied or participated in the bidding process. And now, after the contract has been awarded, the plaintiff is going after the contractor and the operator with this proceeding, to ask the Court and I would read under relief 14 in the originating summons, “ AN ORDER restoring the Plaintiff/Applicant to its subcontracting engagement and be allowed to continue, and be engaged as a landowner company (Lanco) providing sub-contracting Vector-borne Disease Control services in all the First Defendant’s project areas as it has been doing since the year 2011.” The relief, in my view, is unattainable. The sub-contract the plaintiff is asking this Court to restore was subject to the earlier Vector Services Contract that had been granted to Mosquito Zone. That contract ended in 2019 after 5 years. These contracts have been entered through the normal commercial transactions and are ordinarily subject to the law of contract. That said, I note that s. 129 is a law that obligates licensees to observe. But the provisions therein are not absolute and importantly, they are regulated by other express provisions within in the said Act, provisions such as s. 138 which I discuss below.

20. Exxon, it seems, is sued in its capacity as the operator of the LNG Project whilst the second defendant is sued as the contractor for the Vector Services Contract. Or is Exxon being sued as the licensee of the LNG Project? As a start, it is not pleaded with clarity or evidence whether Exxon is a licensee and if so whether it is a sole licensee or one of the licensees of the LNG Project. The naming of the defendants and their capacities also appear to be in doubt. The plaintiff has not adduced evidence to clarify this. Secondly, and assuming that the licensee(s) is being sued, the O&G Act has provisions that provide recourses or penalties for non-compliance with other provisions within the Act. In this case, compliance with s. 129 is regulated by the Act and those that are responsible which includes the relevant Minister. For example, as for the present case, reference may be made to s. 138, which states:

138. Suspension and cancellation of licences.

(1) Where a licensee has not—

(a) in the opinion of the Minister, complied with a condition specified in the licence; or

(b) in the opinion of the Minister, complied with a direction given to him under this Act by the Minister, the Director or an inspector; or

(c) complied with a provision of this Act; or

(d) paid any amount payable by him under this Act within a period of three months after the date on which the amount became payable,

the Minister may, by instrument served on the licensee—

(e) in the case of a tenement—suspend for such period as the Minister thinks fit or cancel the licence as to all or any of the blocks in respect of which it is in force; or

(f) in the case of a pipeline licence or petroleum processing facility licence—suspend for such period as the Minister thinks fit or cancel the licence as to the whole or a part of the pipeline or petroleum processing facility in respect of which it is in force.

(2) The Minister shall not, under Subsection (1), suspend or cancel a licence as to all or any of the blocks, or as to the whole or part of the pipeline or petroleum processing facility, unless—

(a) he has, by instrument served on the licensee, given not less than one month's notice of his intention to suspend or cancel the licence, specifying the grounds upon which the suspension or cancellation is based; and

(b) he has caused a copy of the instrument to be served on such other persons (if any) as he thinks fit; and

(c) he has, in the instrument, specified a date, being not less than 14 days prior to the end of the period specified in the instrument referred to in Paragraph (a), on or before which written submissions may be served on the Minister in connection with the proposed suspension or cancellation; and

(d) after taking into account—

(i) any action taken by the licensee to remove that ground or to prevent the recurrence of similar grounds; and

(ii) any matters so submitted to him on or before the specified date; and

(iii) a report on those matters from the Board,

he considers that special circumstances exist that justify a decision to suspend or cancel the licence.

(3) The suspension or cancellation of a licence by the Minister pursuant to this section shall not release the licensee from any liability in respect of the licence incurred before the date of cancellation or before or during the period of suspension.

21. There is no evidence to say whether the plaintiff has exhausted that process through the Minister responsible.

CAUSE OF ACTION

22. Based on my preliminary findings, it is difficult to see a reasonable cause of action or a right that the plaintiff is seeking to protect or enforce against the defendants. See cases: Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Others (No 2) [1988-89] PNGLR 425; Placer Dome (PNG) Ltd v. Yako (2011) N4691. If there is an agreement that exists between the plaintiff and the second defendant for the second defendant to sub-contract to the plaintiff, the plaintiff may have a claim against the second defendant in contract, and that may be pursued as a cause of action without invoking Part I and Part III or s.129 of the O&G Act. The plaintiff does not have any direct connection with Exxon. I say this because the plaintiff had not applied for Vector Services Contract in 2019. Without doing that, how can it now claim unfairness or accuse Exxon of breaching its obligations under s. 129 like not awarding a contract to a local or Nationally owned company? As I had put to counsel, the race has been run and a winner has been declared. The plaintiff has not participated in the race, and it now wants to have the winner’s trophy or share the trophy with the winner. For these reasons, I find no reasonable cause of action disclosed by the plaintiff.

FRIVOLITY & ABUSE OF PROCESS

23. For the reasons stated, I also find the case frivolous. It also seems quite obvious that the plaintiff is attempting to use the provisions under the O&G Act to advance its grievance especially against the second defendant, that is, after having failed to negotiate a sub-contract with it.

24. Based on all the reasons that are stated above in my decision, I find the proceeding frivolous as well as an abuse of the Court process.

SUMMARY

25. I grant the 2 applications of the defendants in principal. This proceeding will be dismissed in its entirety.

COST

26. An order for cost in this instance is discretionary. I will award cost to follow the event on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

27. I make the following orders:

(i) The proceeding is dismissed.

(ii) The plaintiff shall pay the defendants’ costs of the proceeding on a party/party basis which may be taxed if not agreed.

(iii) Time for entry of these orders is abridged to the date of settlement by the Registrar which shall take place forthwith.

The Court orders accordingly.

_______________________________________________________________
Talopa: Lawyers Plaintiff
Allens PNG: Lawyers for the First Defendant
Ashurst PNG: Lawyers for the Second Defendant