N8587
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO. 326 OF 2019

BETWEEN:
STEVEN MAKEN In his capacity as Managing Director of Small and Medium Enterprises Corporation (SMEC) and a Member of the Board of SMEC
Plaintiff

AND:
HON. WERA MORI, MP In his capacity as the Minister for Commerce and Industry
First Defendant

AND
PETRUS RALDA
Second Defendant

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Miviri J
2020: 09th September, 8th October

PRACTISE & PROCEEDURE – Judicial Review & appeals – Notice of motion –Order 16 Rule 1 NCR – Judicial Review – Letters by Minister terminating – Managing Director SMEC & Board –Failure by Minister to follow Procedure by Regulatory Statutory Authorities (Appointment to Certain Offices) Act 2004 & SMEC Act 2014 – Grant of Relief – Declaration & Certiorari – Discretionary – Error of Law – Bad faith ill motive – irrelevant consideration – breach of natural Justice – unreasonable – material relied sufficient – balance discharged – Judicial Review granted – cost follow event.

Cases Cited:
Asiki v Zurenuoc, Provincial Administrator [2005] PGSC 27; SC 797
Lupari v Somare [2008] PGNC 121; N3476 

Counsel:

J. Holingu, for Applicant
R. Uware, for First, Second & Third Defendants

					RULING 
 08th October, 2020
1.	MIVIRI, J: This is the ruling on the Plaintiff’s substantive Notice of Motion pursuant to Order 16 Rule 1 of the National Court Rules (“the Rules”) dated the 21st June 2019 for Judicial review of the first defendant’s decision by letter dated the 15th February 2019 whereby he recommended to the Board of the Small and Medium Enterprises Corporation (SMEC) to suspend the plaintiff and to appoint Mr. Petrus Ralda to be the care taker administrator or the Managing director. The board did not suspend the plaintiff. On the 05th April 2019 first defendant suspended plaintiff as Managing Director of SMEC and appointed Petrus Ralda as Acting Managing Director of SMEC.

2.	On the 21st March 2019, the First defendant terminated all board members of SMEC. 

3.	The plaintiff seeks orders in the nature of a declaration that the decision of the First Defendant terminating all the Board Members of SMEC was an error in law, ultra vires, based on irrelevant considerations, made in bad faith, null and void ab initio. Further that the decision or action of the First Defendant in suspending the Plaintiff as the Managing Director of SMEC by the letter dated the 05th April 2019 was in similar fashion an error in law, ultra vires, based on irrelevant considerations, made in bad faith null and void ab initio. 

4.	On the basis of these he seeks Certiorari to remove into court those decisions firstly of the termination of all board members by letter dated the 21st March 2019 and secondly by letter dated the 05th April 2019 of his suspension as the Managing Director of SMEC and in his place appointing Mr. Petrus Ralda to be quashed.

5.	He relies upon section 155 (4) of the Constitution. And deposes in support two affidavits by himself, firstly sworn the 12th September filed the 17th September 2019 and secondly 17th December 2019. Two further affidavits are of service firstly Peter Rauka Oa sworn and filed the 26th June 2019 and Nigel Wende sworn 9th and filed the 10th March 2020. He prays further support from the amended Statement pursuant to Order 16 Rule 3 of the National Court Rules.

6.	At the outset the Small and Medium Enterprises Corporation Act 2014 (“SMEC Act 2014”) sets up the Small and Medium Enterprises Corporation as a body corporate by section 4 and 5 of the Act. And the plaintiff is staff employed as its Managing Director and Chief Executive Officer pursuant to section 28 of that Act which is as follows:

“PART V. - STAFF OF THE CORPORATION. 

28. MANAGING DIRECTOR. 
(1) There shall be a Managing Director of the Corporation whose manner of appointment, suspension and dismissal is under the Regulatory Statutory Authorities (Appointments to Certain Offices) Act 2004. 

(2) The Managing Director is – 

(a) the Chief Executive Officer of the Corporation; and 
(6) the Head of the staff of the Corporation; and 
(c) responsible to the Board for the efficient carrying out of the functions of the Board; and 
(d) responsible to the Minister for the efficient carrying out of the functions of the Corporation under the Act. 

(3) The Managing Director shall be appointed for a term of four years and, subject to the Salaries and Conditions Monitoring Committee Act 1988, on such terms and conditions as are determined by the Board, and is eligible for re-appointment. 
(4) The Managing Director shall be terminated or suspended if he – 
(a) becomes incapable for any reason of performing or non-performance of his duties; or 
(b) other than the written consent of the Board, engages in any paid employment or carries on business outside the duties of his office; or 
(c) becomes bankrupt, applies to take the benefits of any law for the relief of bankrupt or insolvent debtors, compounds with his creditors or makes an assignment of his salary for their benefit; or 
(d) is convicted of an offence that is punishable under a law by imprisonment; or 
(e) commits a serious misconduct in office; or 
(f) ceases to be ordinarily resident in the country; or 
(g) commits an offence against this Act. 

(5) Any contract, arrangement or understanding under which the Managing Director would, but for this subsection, be entitled to any compensation or payment in respect of the termination of his appointment other than as provided in Subsection (4) is void ab initio and of no force or effect.”

7.	Plaintiff was appointed by the head of State through the Public Service Merit based appointment process for (4) years commencing from the 25th September 2015 to 24th September 2019. Which was published in the National Gazette G635 dated Thursday 1st October 2015. He signed his contract of employment on the 24th July 2019. Hence his removal would have been no doubt in-accordance with that process. 

8.	That is the heart of the dispute questioning whether or not the Minister the First defendant had powers to recommend to the Board for his termination. And if so on what basis, if not why? Secondly whether or not the Minister the First Defendant had power to terminate the Board of Small and Medium Enterprises Corporation? If so on what basis, if not why?

9.	Section 7 of the RSA (A of CO) Act 2004 reads:

 “INVESTIGATIONS OF GROUNDS FOR DISMISSAL.
(1) Where, in relation to a Regulatory Statutory Authority, the Board believes that grounds exist for the dismissal of the chief executive officer, it shall cause an investigation into the conduct, activities or performance of the chief executive officer.
(2) The grounds for dismissal referred to in Subsection (1) shall be consistent with the grounds for dismissal as specified in the chief executive officer’s contract of employment which include breach of contract, misconduct, poor performance, incompetence and ill health, as prescribed in the Regulations.
(3) Where the Board has made an investigation under Subsection (1), it shall submit a report on its investigation together with its recommendations to the Public Services Commission.
(4) On the receipt of a report under Subsection (3), the Public Services Commission –
(a) shall consider the evidence provided and the recommendations of the Board; and
(b) may make, or cause to be made, and consider such further investigations (if any) as it considers necessary; and
(c) shall, on the basis of the report and the results of further investigations (if any), inform the Board by way of a recommendation whether or not the appointment of the chief executive officer should be revoked.
(5) The Board shall convey its recommendation to the Minister and, in the event that the National Executive Council approves the recommendation of the Minister to revoke the appointment of the chief executive officer, the National Executive Council shall advise the Head of State to revoke the appointment of the chief executive officer.”

10.	 In my view the Board of SMEC should of its own volition consider whether there are grounds for the dismissal of the Chief Executive Officer. These grounds are read with reference and consistent with the contract of employment of the plaintiff with the SMEC. And these grounds include breach of contract, misconduct, poor performance, incompetence, and ill health, or as prescribed in the Regulations.  And if it is established that there are grounds investigations will be conducted into the conduct, activities, and the performance of the plaintiff. From which a report will be prepared and sent to the Public Services Commission who will consider it. And it is up to them to investigate further as they see fit added further to the initial investigation report comprising the report from which recommendation will be made to the board as to whether or not the appointment of the Chief Executive Officer should be revoked or not. And the Board will recommend to the Minister who will cause it to come before the National Executive Council who if they approve the recommendation of the Minister to revoke the appointment of the chief Executive Officer, and will advise the Head of State to revoke the appointment of the Chief Executive Officer.
 
11.	Section 8 of the SMEC Act relates to the suspension of the Chief Executive Officer. It calls for material information from credible sources that the conduct of the Chief Executive Officer is such that serious charges of misconduct maybe brought against him and the Board will determine whether any grounds exist for his suspension. And the grounds for suspension are consistent with those in his contract of employment signed. In other words, they would comprise the basis for his suspension and not without. The board will advise the Minister of this fact who in turn will advise the National Executive Council who will advise the Head of State to suspend him pursuant. And the suspension is on full pay.

12.	What is established by the evidence led by Steven Maken is that the first defendant wrote to the chairman of the Board of SMEC on the 12th December 2018 requesting the Board to review business profiles for funding of cottage industries and sustainable small and medium enterprises from the 2018 appropriation. To which the plaintiff wrote to the first defendant pointing that funding available was for SMEC Business Incubation Centre (BIC). It will be misappropriation and misapplication of funds if these funds were re-allocated to other activities other than originally set. And it was highly probable that criminal charges including charges under the leadership code and the Public Finance Management Act 1995 will follow suit. But accepting that the way forward given was for the first defendant to write to the Minister for National Planning Monitoring and Treasury informing the need for SMEC to implement programs and activities other then BIC request re-allocation of funds away from the activities for which the appropriation was made in 2018.

13.	The first defendant wrote to the Prime Minister Honourable Peter O’ Neill copied to the Minister for National Planning Monitoring and Treasury Honourable Richard Maru indicating his directive to SMEC Board and Management to expedite K9.2 million of SMEC funding appropriation for 2018 to a list of activities programs of his choice that he proposed. This met naturally with a negative response from the Minister for National Planning and Monitoring and Treasury by letter dated 22nd January 2019 confirming that it was tantamount to misappropriation and only parliament could reallocate and not him what was allocated remained as originally allocated to SME BIC. This led to the Plaintiff further informing the first defendant reconfirming the position by Honourable Richard Maru set out above. To which the first defendant replied with the subject letter asking the board to suspend him as Managing Director.

14.	In my view there is nothing out of the ordinary contrary to law against the plaintiff in the exchange set out above. He was doing what he was appointed or contracted to do. It did not amount to cause for concern or that investigations would be mounted because the conduct was questionable. Nor would it be a case for recommendation to the Board for investigation pursuant. What the plaintiff did was compliance with law because an Act of Parliament the Appropriation Act 2018 would have been responsible for the allocation of the money in the terms confirmed both by Honourable Richard Maru and the plaintiff. And the conduct of the Plaintiff was not criminal nor was it against law to so advise the first defendant against. If any the insistence of the conduct of the first defendant would have amounted to potential breaches of the law as forecasted by the plaintiff and Honourable Richard Maru MP.

15.	And it is clear these are the views of the Board because there were no grounds against the conduct, activities, and the performance of the plaintiff warranting investigations on the basis of which would have seen the suspension of the plaintiff. And this is the position of the State who has not filed any material to show that there was ever a suspension in accordance with the procedure set out above. That is there was information from credible sources that warranted serious charges of misconduct which could be brought against the applicant Steven Maken and therefore warranting his suspension on full pay pending. There is no investigation report, or anything likened to an investigation report by the Board of the SMEC authored by them to the Public Services Commission. Particularly with regard to breach of contract, misconduct, poor performance, incompetence, and ill health, as prescribed in the Regulations made out by the investigations report. Which report was made to the Board of SMEC who then made the same to the Minister First Defendant, who in turn made that to the National Executive Council who advised the Head of State for the termination of the services of the Plaintiff. There is no evidence to this effect presented by the defendants against.

16.	That means the only evidence and materials are from the Plaintiff who shows that none of the procedures required by law set out above were ever followed or heeded to. What has been disposed to attached as part of the affidavits of Steven Maken both set out above do not advance the case of the defendants that procedure was followed to terminate his services as the managing director and Chief Executive Officer of SMEC. Rather the contrary is obvious from the letter of 21st March 2019; the First defendant terminated all board members of SMEC. And on the 05th April 2019 he suspended the plaintiff as Managing Director of SMEC and appointed Mr. Petrus Ralda in his place.

17.	There is no process set out under the SMEC Act 2014 for what the first defendant did to the Plaintiff and then to the Board. Nor is there any related provision under the RSA (A of CO) Act 2004 authorizing what the first defendant did on both occasions by both letters, one initially of the 05th April 2019 first defendant suspended plaintiff as Managing Director of SMEC and appointed Petrus Ralda as Acting Managing Director of SMEC. And then of the 21st March 2019, where he terminated all board members of SMEC. 

18.	It follows that the argument of the plaintiff that there was substantive ultra vires lays for the reasons which are set out above which need not be repeated. Secondly there was procedural ultra vires also for the reason set out above. The law discussed above with the process and procedure there in both Acts were not followed in the suspension and termination of the plaintiff. He was not accorded a process of law in that he was not accorded opportunity as to what was alleged against him. And that he was not given opportunity to respond against that allegation after which it was determined as set out in Asiki v Zurenuoc, Provincial Administrator [2005] PGSC 27; SC 797(28 October 2005). It was clearly contrary to section 59 of the Constitution. There was breach of natural Justice within the meaning of section 59 of the Constitution. And in the light of all set out above was an unreasonable decision and would not stand in law given. It is analogous with Lupari v Somare [2008] PGNC 121; N3476 (22 September 2008) because there is mischievous failure to observe the mandatory process of the revocation of a head of a Statutory or Regulatory Office in accordance with the Regulatory Statutory Authorities (Appointments to Certain Offices) Act 2004.

19.	Consequently Judicial review lies giving the aggregate totality that the decision of the First defendant in the termination of all Board Members which also included the plaintiff as a board member of the SMEC by his letter dated 21st March 2019 is void ab initio because it was clearly an error of law and ultra vires the law it was based on irrelevant consideration which was made in bad faith including the motive stemming and therefore was illegal and of no effect.

20.	Further the decision or action of the First defendant Minister by letter dated 5th April 2019 in the suspension of the Plaintiff as the Managing Director of SMEC and in his place the appointment of Mr. Petrus Ralda as the Acting Managing Director of SMEC was substantially an error of law committed and was ultra vires, because it was based on irrelevant consideration and was made in bad faith coupled with the motive resulting in it being illegal and null and void ab initio.

21.	It followed that Declaration did lie firstly that the actions of the First defendant by his letter dated 21st March 2019 in the termination of all Board Members, the plaintiff included as a board member the decision affected him as a board member of the SMEC is void ab initio because it was clearly an error of law and ultra vires the law. It was based on irrelevant consideration which was made in bad faith including the motive stemming and therefore was illegal and of no effect.

22.	Secondly that Declaration did lie in that the actions of the First Defendant in the suspension of the Plaintiff as the Managing Director of SMEC and in his place appointment of Mr.Petrus Ralda as the Acting Managing Director of SMEC by letter dated 5th April 2019 was substantially an error of law committed and was ultra vires the law, because it was based on irrelevant consideration and was made in bad faith coupled with the motive resulting in it being illegal, null and void ab initio.

23.	Consequentially Certiorari was discharged on the balance required for the court in both instances to call for their removal each into this court, firstly of the termination of all board members by letter dated the 21st March 2019 and secondly by letter dated the 05th April 2019 of his suspension as the Managing Director of SMEC and in his place appointing Mr. Petrus Ralda to be both quashed forthwith and of no effect in law.

24.	The formal orders of the Court are: 

(i)	The plaintiff’s application for judicial review is granted.

(ii)	An order in the nature of a declaration is granted in that the actions of the First defendant by his letter dated 21st March 2019 in the termination of all Board Members including the plaintiff as a board member of the SMEC is void ab initio because it was clearly an error of law and ultra vires the law. It was based on irrelevant consideration which was made in bad faith including the motive stemming and therefore was illegal and of no effect.

(iii)	An order in the nature of a Declaration is granted in that the actions of the First Defendant by letter dated 5th April 2019 in the suspension of the Plaintiff as the Managing Director of SMEC and in his place appointment of Mr.Petrus Ralda as the Acting Managing Director of SMEC was substantially an error of law committed and was ultra vires the law, because it was based on irrelevant consideration and was made in bad faith coupled with the motive resulting in it being illegal null and void ab initio.

(iv)	An order in the nature of certiorari is granted quashing forthwith the decision of the First defendant in the termination of all board members by letter dated the 21st March 2019.

(v)	An order in the nature of certiorari is granted quashing the actions of the First defendant by letter dated the 05th April 2019 in the suspension of the Plaintiff as Managing Director of SMEC and in his place appointing Mr. Petrus Ralda in his place to be both quashed forthwith.

(vi)	The respondents pay the plaintiff’s costs of these proceedings.

(vii)	The time for entry of these orders is abridged to the time of settlement by the Registrar which shall take place forthwith.

25.	The contract of the Plaintiff has endured this turmoil and lapsed in the time due. There is neither pleading nor evidence to advance any further in the matter nor is recourse to Section 155 (4) of the Constitution warranted further on the matter.
Orders Accordingly.
__________________________________________________________________
Holingu Lawyers: Lawyers for the Plaintiff /Applicant		
Office of Solicitor General: Lawyers for the First, Second & Third Defendants