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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS (COMM) NO. 11 OF 2021
BETWEEN:
NATIONAL CAPITAL DISTRICT COMMISSION
Plaintiff
V
INTERNAL REVENUE COMMISSION
First Defendant
AND:
SAM KOIM in his capacity as the COMMISSIONER GENERAL OF INTERNAL REVENUE COMMISSION and in his capacity as Trustee of National Capital
District Inland GST
Second Defendant
AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant
AND:
CENTRAL PROVINCIAL GOVERNMENT
Fourth Defendant
AND:
MOTU KOITA ASSEMBLY
Fifth Defendant
AND:
GULF PROVINCIAL GOVERMENT
Sixth Defendant
AND:
EDITH LAUFA in her capacity as Trustee of National Capital District Inland GST Trust Account
Seventh Defendant
Waigani: Anis J
2021: 6th & 10th May
NOTICE OF MOTION – Application for interim injunction – Order 1 Rule 7, Order 4 Rule 38(1) and (2), Order 4 Rules 42 and 49(20) and Order 12 Rule 1 – National Court Rules – Dispensation of the requirement for service – Section 155(3) and (4) of the Constitution, section 12 of the Laws Adoption and Adaptation Act 1975 and Order 12 Rule 1 of the National Court Rules – restraining orders – issues - whether there is a meritorious issue to be determined – whether damages would be an inadequate remedy and where does the balance of convenience lie? - interest of justice or public interest consideration – exercise of discretion
Cases Cited:
Golobadana No. 35 v Bank South Pacific Limited [2002] N2309
Chief Collector of Taxes v Bougainville Copper Limited [2007] SC 853
Central Provincial Government v. National Capital District Commission and Ors (2013) N5262,
National Capital District Commission v. Central Provincial Government (2015) SC1429
Motu Koita Assembly v. National Capital District (2011) N4429
Counsel:
M Varitimos QC with counsel assisting D Wood, A Edo and L Evore, for the Plaintiff
S Sinen with counsel assisting G Wau, for the First and Second Defendants
T Tanuvasa, for the Third Defendant
G Wayne, for the Fourth Defendant
N Vada, for the Fifth Defendant
M Nale with counsel assisting A Serowa, for the Sixth Defendant
M Mukwesipu, for the Seventh Defendant
RULING
10th May, 2021
1. ANIS J: I heard the plaintiff’s application for interim restraining orders at 1:30pm on 6 May 2021. The application was contested.
I reserved my ruling thereafter to a date to be advised.
2. I rule on it now.
BACKGROUND
3. The plaintiff seeks various declaratory relief in its originating summons. The relief sought essentially relate to or concern the application or interpretation of provisions under 2 legislations, namely, the National Capital District Commission Act 2001 (NCDC Act) and the Inter-Governmental Relations (Functions and Funding) Act 2009 (IGR Act). The provisions include sections 37 to 45 of the IGR Act, and section 33(2) of the NCDC Act.
4. What triggered the plaintiff to filing this proceeding and seeking interim restraining orders is this. On 22 April of 2021, the 2nd defendant made a formal announcement in the media. He informed the public and relevant stake holders, and I will paraphrase, that he has made a decision whereby instead of a current practice where GST funds for the 4th, 5th and 6th defendants (the 3 named defendants) are paid by 1st Defendant (the Commission) to them through the plaintiff, that the Commission will commence paying these GST portions or percentages of funds directly to the 3 named defendants. The 2nd defendant gave effect to his decision by effecting payments of the GST funds that were required for the month of April 2021 directly to the 3 named defendants.
5. The plaintiff, having knowledge of that, filed this proceeding. It also seeks interim restraining orders against the defendants pending the full determination of the matter. Except for the 3rd and 7th defendant, all the other defendants oppose the application for restraining orders. Mr Tanuvasa, counsel for the State, informs the Court that given the short notice, his client neither supports nor opposes the application. The 7th defendant, on the other hand, supports the plaintiff’s application.
PRELIMINARY ISSUE
6. The 1st and 2nd defendants raised a preliminary issue, that is, they sought to adjourn the matter to a different date and time. They made an oral application for the adjournment. All the defendants, except the 7th defendant, supported the application.
7. I heard submissions from the parties. In the end, I refused the application for adjournment. I would refer to the transcript of this proceeding for 6 May 2021 for my full reasonings.
NOTICE OF MOTION
8. The plaintiff’s notice of motion was filed on 4 May 2021 (NoM). It is supported with various affidavits including an undertaking as to damages which was also filed on 4 May 2021. At this juncture, I note that the Undertaking as to Damages was not disputed by the parties. I have perused it, and I must say that I am satisfied that it is in order. I find that to be the case.
9. Coming back to the relief, the main relief sought for this purpose are relief 3, 4 and 5, and I quote:
ISSUES
10. The main issues, based on discussions and submissions of the parties, are (i), whether there is a meritorious issue(s) or a serious question(s) to be determined, and (ii), whether damages would be an adequate remedy and therefore the restraining orders sought should be refused, and (iii) which party (or parties) does the balance of convenience favour?
LAW
11. The principles for granting or refusing to grant restraining orders or interim injunctions are settled in this jurisdiction. From case authorities such as Golobadana No. 35 v Bank South Pacific Limited [2002] N2309 and Chief Collector of Taxes v Bougainville Copper Limited [2007] SC 853, to name a few, they may be summarized as follows:
(i) that there is a serious question (or an arguable case) to be determined at the substantive hearing;
(ii) that damages would not be an adequate remedy if the interim injunctions are not granted, and if so, whether the interim injunction should be granted;
(iii) whether the balance of convenience favours granting of the interim injunctions;
(iv) whether the applicant has given a valid undertaking as to damages.
12. Other factors may be included depending on the circumstances of a case. In this case, I find this factor, public interest, also relevant, that is, given that the dispute involves public bodies that are dealing with public funds, or to be precise, the tax-payers’ money.
MERIT
13. The parties’ arguments, amongst others, concern the interpretation or application of s. 33(2) of the NCDC Act with ss 37 to 45 of the IGR Act. The plaintiff submits, and I will paraphrase, that the provisions should be read together, and if they are, that the provisions of the IGR Act would amongst others, supersede s. 33(2) of the NCDC Act. The plaintiff submits that the IGR Act also sets out the procedures for effecting compliance with s. 33(2). The plaintiff also submits that the IGR Act has other express mandatory deductions that must be accounted for before the GST payments may be made to the 3 named defendants under s. 33(2). On these points, the 1st, 2nd, 4th, 5th, and 6th defendants (defendants) argue to the contrary.
14. I begin by setting out s.33(2) of the NCDC Act. It states:
33. Financial Assistance to Central Provincial Government, Gulf Provincial Government and the Motu-Koitabu Council.
(1) Subject to Subsection (2), the Commission shall provide financial assistance to the Central Provincial Government, the Motu-Koitabu Council and the Gulf Provincial Government.
(2) The Internal Revenue Commission shall pay to—
(a) the Central Provincial Government, a minimum of 10% of the Goods and Services Tax; and
(b) the Motu-Koitabu Council, a minimum of 2% of the Goods and Services Tax; and
(c) the Gulf Provincial Government, a minimum of 3% of the Goods and Services Tax,
due to the Commission in a fiscal year in accordance with the Goods and Services Tax Revenue Distribution Act 2003. [Underlining mine]
15. And sections 40 to 45 of the IGR Act read:
40. Amount of GST Distributions to Provincial Governments.
(1) Each Provincial Government shall be entitled to receive for the fiscal year commencing on 1 January 2009 and each subsequent fiscal year an amount equal to 60% of the net GST collected in the province during the second preceding fiscal year.
(2) Notwithstanding the provisions of Subsection (1), a provincial government which imposes a sales and services tax of the kind permitted by Section 86(1)(a) of the Organic Law on Provincial Governments and Local-level Governments shall not be entitled to be paid a share of the GST collection whilst that provincial tax is in force.
(3) Where Subsection (2) applies, the amount of GST distribution that provincial governments would have been entitled to receive but for the operation of Subsection (2) shall be distributed pro-rata to monthly entitlements to all other provincial governments which do not impose a sales and services tax.
41. Order of precedence of distributions from National GST Trust Account.
Revenue held in the National GST Trust Account is appropriated and shall be paid and distributed as follows:—
(a) the first charge shall be for the payment of refunds of GST revenue;
(b) the second charge shall be for the payment of any amount paid under Section 40;
(c) the balance remaining shall be paid to the Consolidated Revenue Fund.
42. Order of precedence of distributions from each Provincial Inland GST Trust Account.
Revenue held in each Provincial Inland GST Trust Account is appropriated and shall be paid and distributed as follows:—
(a) the first charge shall be for the payment of refunds of GST revenue;
(b) the second charge shall be for the payment of the collection and administration expenses of all of the Provincial Inland GST Trust Accounts allocated proportionately to gross inland provincial revenue against each province;
(c) the third charge shall be for the payment of each Provincial Government's share of net inland revenue as provided for in Section 40;
(d) the balance remaining shall be paid to the Consolidated Revenue Fund.
43. Trustees to decide when payments shall be made to the Consolidated Revenue Fund.
(1) The trustees of the National GST Trust Account shall, by mutual agreement, decide the balance required to be kept in that trust account to meet the commitments arising under Section 41.
(2) The trustees of each Provincial Inland GST Trust Account shall, by mutual agreement, decide the balance required to be kept in each such trust account to meet the commitments arising under Section 42.
(3) The balances referred to in Subsections (1) and (2) may vary from week to week or month to month.
(4) When the balance required to be kept at any one point in time has been reached, any further payments into the National GST Trust Account or any of the Provincial Inland GST Trust Accounts shall be paid immediately to the Consolidated Revenue Fund.
44. Time of distribution.
Each Provincial Government shall be entitled to receive, within 21 days after the end of each month, one-twelfth of the total amount of GST revenue that it is entitled to receive under Section 40.
45. Administration of trust accounts.
(1) Notwithstanding anything in any other Act, the Commissioner General shall administer the National Goods and Services Tax Trust Account and each provincial Inland National Goods and Services Tax Trust Account in accordance with this Act.
(2) The Commissioner General shall be responsible for the transactions relating to the National GST Trust Account and each Provincial Inland GST Trust Account
(3) The Commissioner General shall be subject to the direction of the trustees of the National GST Trust and each Provincial Inland GST Trust in his administration of the National GST Trust Account and each Provincial Inland GST Trust Account
(4) The trustees may not direct the Commissioner General to perform any action that would breach any provision of this Act or the regulations. [Underlining mine]
16. The main argument on the law put forward by the plaintiff is this, and I will paraphrase. It recognizes the express provision under s. 33(2) of the NCDC Act. But it submits that the 2nd defendant’s recent decision for the Commission to make direct GST payments to the 3 named defendants, in the past month (i.e., April 2021), was made contrary to the already established practice which had existed for many years and also without regard to the other mandatory provisions under ss. 40 to 45 of the IGR Act. The practice, as it had been until very recently, it submits, was for the Commission to pay the 60% GST as legally required under s. 40 of the IGR Act directly to the plaintiff, who would then distribute the percentages or shares of the GST from the 60% received, to each of the 3 named defendants, that is, as legally required, amongst others, under the s. 33 of the NCDC Act and s. 42 of the IGR Act. The plaintiff submits that the 2nd defendant cannot simply apply s. 33(2) in isolation or without regard to the provisions of the IGR Act, and in particular, ss. 37 to 45. It submits that the provisions under the two Acts must be read together because the provisions under the IGR Act provide the actual processes for effecting the application of s.33(2). It also submits in particular that s. 45(1) of the IGR Act and the use of the phrase, Notwithstanding anything in any other Act, makes its case meritorious because it could be interpreted to mean that s. 33(2) or the powers that are bestowed upon the 2nd defendant (or the Commission) under s. 33(2), may be subject to the IGR Act and its various provisions, that is, for the distribution of GST to the 3 named defendants.
17. On point, the defendants submit that s. 33(2) is express, and as such and rightfully so, the 2nd defendant had duly exercised his powers in April of 2021. They submit that to issue an interim restraining order would in fact constitute an act where the Court may be making an order in direct breach of the said provision; or that the Court may effectively be stopping the 2nd defendant from performing his duty or function which is sanctioned by s. 33(2) of the NCDC Act. The defendants also argue that the National Court had already determined the application of s. 33(2) and ss. 40 to 45 of the 2 legislations. In particular, they refer to the case authorities, namely, Central Provincial Government v. National Capital District Commission and Ors (2013) N5262, National Capital District Commission v. Central Provincial Government (2015) SC1429, and Motu Koita Assembly v. National Capital District (2011) N4429.
18. In considering the arguments, I note the following. Firstly, I note that the 1st and 2nd defendants concede to the past established practice, that is, where 60% of the GST is paid to each province under s. 40 of the IGR Act, and in this case or scenario, is paid first to the plaintiff who would then distribute to the 3 named defendants their shares which is paid according to their required percentage breakups. I note that evidence adduced by the plaintiff shows or confirms the position of the predecessor (i.e, Betty Palaso) of the 2nd defendant where the Commission had been in support of the said practice. Counsel for the 1st and 2nd defendants does not dispute this evidence or fact. But counsel maintains that the actions of the present Commissioner General is correct and was made in accordance with law or s. 33(2).
19. To me, the past practice of the plaintiff and the 1st and 2nd defendants, coupled with the now new legal argument put forward by the 2nd Defendant to support his actions taken under s. 33(2), which effectively means his intention to do away with the Commission’s previous position on the matter, demonstrate an arguable case or legal issues that may require full consideration by the Court, and where necessary, even perhaps further consideration by the Supreme Court at a latter stage. But what these recent facts and actions taken by the present Commission mean is that it has now differed from its earlier understanding and position in regard to the various provisions under the 2 legislations. And in so doing, the Commission, pursuant to s. 33(2) has made a decision as it had done. On the face of s. 33(2), it is obvious that the 1st defendant can make the decision as it did, that is, to pay the 3 named defendants herein directly their portion or percentages of the GST that is due to the provincial governments. But on the same token and in my view, I note that the plaintiff has also raised valid legal arguments on why the 2 legislations should be looked at together. It also raised valid arguments concerning the mandatory processes that should be observed by the 2nd defendant (or the Commission) under the IGR Act, in order for him to properly or legally perform his functions or exercise his powers under s. 33(2) of the NCDC Act.
20. To me, these legal issues should be properly ventilated at a trial proper. As for the cited case authorities, what is clear to me is this. The fundamental legal issues raised herein by the plaintiff in this proceeding had not been material issues in the 3 authorities cited. And they are not definitive authorities in the sense that the specific issues raised herein have never been determined by a Supreme Court. The cases may however provide some assistance if this matter is fully argued at a later part of this proceeding. On that basis and without going into the cases in detail, I dismiss the defendants’ arguments in reliance on them as the basis that there are no meritorious issues raised in this proceeding.
21. In regard to the issue of serious question(s) to be trialed, I will say, and I find that both parties have sound arguments to present before the trial Court. I find meritorious arguments from both sides that may be raised at the trial. So, at this juncture, the scale of exercise of my discretion, so to speak, is balanced. So, on that note, I will proceed to consider the other principles.
WILL DAMAGES BE AN ADEQUATE REMEDY?
22. I ask myself whether damages would be an adequate remedy to the plaintiff in this matter, and if so, whether I should not exercise my discretion to grant the interim injunctions.
23. I note the submissions of the parties on this issue.
24. To me, the plaintiff has adduced evidence, and in particular, I refer to the affidavits of Mr Kipit and Mr Ravi. They provide evidence to say that the plaintiff’s activities, including essential services and contractual obligations, will be severely affected if the Court does not grant the interim restraining orders that are sought. The 2 affidavits are uncontested at this juncture, that is, in terms of any responding affidavits on point filed by the defendants. It is obvious considering the evidence of the plaintiff that its damages may not be fully measured in monetary terms, and that its losses could be at a grand scale if no order is put in place to permit the temporary continuity of the practice that had been in place for many years prior to April of 2021 (i.e., payment of the 60% GST by the Commission to the plaintiff under s. 40 of the IGR Act).
25. I will, however, say this. Whatever functions, obligations, or commitments the plaintiff may have, and most of which have been highlighted in its evidence, are immaterial to the percentages of the GST that is prescribed under law which the 3 named defendants are legally entitled to receive or benefit from. And perhaps a closer examination of the provisions under the 2 legislations at the trial proper may be able to clarify that.
26. I also note that evidence adduced by the plaintiff shows that the 3 named defendants have been receiving their GST shares under the existing practice before April of 2021. As such, it is only appropriate that the said practice should continue pending the final determination of the matter. This seems to be the status quo, and I find that to be the case.
27. In the end, I am satisfied that the plaintiff has met these 2 requirements, that is, firstly, I find that damages will not be an adequate remedy if I do not grant the interim orders. I also find that the balance of convenience favours the granting of the interim orders, to maintain the statue quo pending the final determination of the matter or until further orders of the Court.
OTHER CONSIDERATIONS
28. The first consideration I give under this sub-heading is this. I find that public interest requires the determination of the legal issues that have been created by this dispute and now raised by the plaintiff. All the parties herein are or represent public institutions or bodies, that is, for on behalf of the citizens or the people of Papua New Guinea. The GST money that is received belongs to the people. It is therefore, in my view, vital for the people or for the public’s interest, that the status quo be maintained whilst the matter is awaiting trial.
29. The other matter I note under this sub-heading is this. The 6th defendant has filed an affidavit in support. I refer to the affidavit of Hon. Christopher Seseve Haiveta MP and Governor of Gulf Province. I note its content and observe that the evidence may be relevant at the substantive hearing.
30. The final point I wish to add is this. The defendants submit that if the Court were to grant the restraining orders, then the plaintiff should also be restrained from having access to the GST funds or the 60% GST that is payable under s. 40 of the IGR Act. I must say that I find the argument baseless. I note and find that the said request is sought as a relief which is not part of the relief in the NoM. There is no foundation for raising it as an issue for consideration by this Court. The defendants are responding to the NoM, and as such, their arguments cannot expand beyond that. But even if I may be wrong, I note that the balance of convenience argument, amongst others, favours the plaintiff. The practice as it was before April 2021 and as it had been for many years, was that the percentage payments for the 3 named defendants were paid out to them by the plaintiff and not directly by the Commission. The balance of convenience or status quo should therefore be maintained which is also, in my view, demanded by public interest consideration, that is, at least until the matter is determined.
SUMMARY
31. In summary, I am inclined to exercise my discretion and grant the interim restraining orders sought by the plaintiff. I will grant relief 3, 4 and 5 in the NoM. I will also issue directions after the ruling, to have this matter heard and determined without delay, but subject of course to considerations and inputs that I will receive from the parties.
COST
32. An award of cost herein is discretionary. I will order cost to follow the event but excluding the 3rd and 7th defendants. My reasons are as follows. As for the 3rd defendant, it took no position at the hearing of the NoM. And regarding the 7th defendant, it supported the plaintiff’s NoM which this Court has now granted.
33. Cost of the NoM is therefore awarded in favour of the plaintiff against the 1st, 2nd, 4th, 5th, and 6th defendants on a party/party basis to be taxed if not agreed.
ORDERS OF THE COURT
34. I make the following orders
4, The 1st, 2nd, 4th, 5th, and 6th defendants shall pay the plaintiff’s cost of the application on a party/party basis to be taxed if not agreed.
The Court orders accordingly.
________________________________________________________________
Ashurst: Lawyers for the Plaintiff
IRC In-house counsel: Lawyer for the First and Second Defendants
Solicitor-General: Lawyer for the Third Defendant
Mr Wayne: Lawyer for the Fourth Defendant
Mr Vada: Lawyer or the Fifth Defendant
Jema Lawyers: Lawyer for the Sixth Defendant
Mukwesipu Lawyers: Lawyers for the Seventh Defendant
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URL: http://www.paclii.org/pg/cases/PGNC/2021/56.html