N9748
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) NO. 11 OF 2021 (NO. 5)

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 GOVERNMENT
Sixth Defendant

AND:
EDITH LAUFA in her capacity as Trustee of National Capital District Inland GST Trust Account
Seventh Defendant

Waigani: Anis J
2022: 17th June, 11th July

NOTICE OF MOTION – Application to dismiss – Order 12 Rule 40 of the National Court Rules and s 155(4) of the Constitution – grounds – no reasonable cause of action, frivolous and vexatious, and abuse of process – preliminary issue – whether correct source(s) cited – whether there is clarity or ambiguity in the cited source(s) – whether there is or are serious issues that remain to be tried in light of recent amendments made to s 33 of the National Capital District Commission Act 2001, that is, National Capital District (Amendment) Act 2021 – considerations – whether pleadings and relief confined to s 33 thus clarified by the amendment, or whether pleadings and relief include considerations of other provisions of legislations including ss34, 36, 37, 40, 42, 44 and 45 of the Inter-Government Relations (Functions and Funding) Act 2009 thus should be left for the trial Court to determine – exercise of discretion

Cases Cited:

NCDC v. IRC and Ors (2021) N8809
Kindi v Guan (2020) N8408
Marago Pate v Hon. Nixon Duban and Ors (2020) N8277
Mt Hagen Local Level Government v. Sek No. 15 Ltd (2009) SC1007
Digicel (Singapore) Private Ltd v. Amelia Na’aru (2020) N8441
Nambawan Super Ltd v. Paul Paraka trading as Paraka Lawyers (2020) N8375
Theresa’s Pty Ltd and PNGBC v Rio Vista Pty Ltd [1998] PNGLR 283
Tigam Malewo v. Keith Faulkner (2009) SC960
Tamali Angoya v. Tugupa Association Inc (2009) SC978
Rimbao v Pandan (2011) SC1098
Mendepo v National Housing Corporation (2011) SC1169
Anderson Agiru v. The Electoral Commission (2002) SC687

Counsel:

A Edo, with counsel assisting E Lili, for the Plaintiff
G Wau, for the First and Second Defendants
T Mileng, for the Third Defendant
G Wayne, for the Fourth Defendant
Nil appearance by the Fifth Defendant
S Dewe with counsel assisting J Kilewe, for the Sixth Defendant
M Mukwesipu, for the Seventh Defendant

RULING

11th July, 2022

1.	ANIS J:  I heard the fourth defendant’s notice of motion filed on 23 February 2022 (NoM/Application) on 17 June 2022 and reserved my decision.

2.	I rule on it now.

BACKGROUND

3.	I summarised the brief background of the matter at paras 3, 4 and 5 in my earlier decision, NCDC v. IRC and Ors (2021) N8809, as follows:

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.
NOTICE OF MOTION

4.	Counsel for the 4th defendant submits that his client will pursue the main relief, namely, relief 3 and 4 of the NoM.  They read:

3.	Pursuant to Order 12 Rule 40(1) of the National Court Rules, section 155(4) of the Constitution, the whole proceedings be dismissed for being an abuse of process, frivolous and vexatious and for disclosing no reasonable cause of action, as circumstances have overtaken the utility of the subject proceeding; in particular the provisions of law (namely section 33 of the National Capital District Commission Act 2001) on which this proceeding was initiated and based on, have been repealed and replaced by Parliament through the National Capital District Commission (Amendment) Act 2021.

4.	Alternatively, pursuant to Order 12 Rule 1 and 8(4) of the National Court Rules and Section 155(4) of the Constitution, the interim injunctive orders granted on the 10th May 2021 be set aside or discharged forthwith, as circumstances have overtaken the basis for the injunction; in particular the provisions of law (namely section 33 of the National Capital District Commission Act 2001) on which the said interim injunctive orders were based, have been repealed and replaced by Parliament through the National Capital District Commission (Amendment) Act 2021.
……

5.	The fifth defendant did not appear and was not heard.  I was satisfied that the fifth defendant had been duly notified of the hearing date of the application, so I allowed the hearing of the NoM to proceed.

6.	The first, second, third and sixth defendants supported the NoM.  The plaintiff and the seventh defendant, on the other hand, opposed it. For ease of reference, I will address the parties herein as the fourth defendant and the plaintiff.

PRELIMINARY ISSUE

7.	The plaintiff raised a preliminary issue.  It submits that the jurisdiction invoked in the NoM, namely, Order 12 Rule 40(1) of the National Court Rules (NCR), is unclear or ambiguous.  It submits in the context that the NoM does not plead which sub-rule(s), that is, whether (a), (b), or (c) of Order 12 Rule 40(1) that the fourth defendant intends to rely on.  It submits that each of the 3 grounds therein are alternate grounds thus should be specifically pleaded in the NoM; that they should not be lumped up together.  The fourth defendant relied on the case of Kindi v Guan (2020) N8408 in support of its argument.

8.	I note the submissions of the parties on this issue.  Order 12 Rule 40(1) reads:

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.	Let me consider the case law.  In Marago Pate v Hon. Nixon Duban and Ors (2020) N8277, I stated in part at para 13 as follows, Let me also say this. Since the Court’s power herein is wide or discretionary, I may also dispense with such a requirement, for example, if I am satisfied that the parties have been notified or were aware of the reasons before coming to Court to argue the matter. 

10.	The Supreme Court in Mt Hagen Local Level Government v. Sek No. 15 Ltd (2009) SC1007, stated in part at para 29, and I quote:

……The principles stated by these cases can be summarized as follows:
(i)  A plaintiff or claimant should not be driven from the judgment seat in a summary manner and that the Court should be cautious and slow in exercising its discretionary power.
(ii)  The Court has an inherent jurisdiction to protect and safeguard its processes from abuse.
(iii)  The purpose of O.12 r.40, is to give the Court power to terminate actions or claims which are plainly frivolous or vexatious or untenable.
(iv)  A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and bound to fail if it proceeds to trial.
(v)  A vexatious claim is one that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense in defending or proving the claim. [Underlining is mine]

11.	The Supreme Court in Muriso Pokia v. Mendwan Yallon (2014) SC1336, also stated at para 12 the following:

12.  We do not agree, however, that the notice of motion was necessarily incompetent or that the primary Judge erred in hearing the motion. Order 4, Rule 49(8) vests a judge with a discretion to hear a motion that is non-complaint with this rule. Provided that the Judge is satisfied that the party responding to the motion (the appellant in this case) has been put on notice as to the case to be met and that no unfairness to that party will arise from hearing such a non-compliant motion, it is proper to hear the motion.

13.  We consider that the primary Judge was so satisfied here and decided to hear the motion despite its non-compliance with the Rule. No error of law was involved in the primary Judge deciding to hear and determine the motion. Grounds of appeal 1 and 2 are dismissed.

12.	Other case authorities that support of this principle of law where the Court may dispense with the requirement to fully plead or be precise when citing a Court’s jurisdiction in a notice of motion include, Digicel (Singapore) Private Ltd v. Amelia Na’aru (2020) N8441, and Nambawan Super Ltd v. Paul Paraka trading as Paraka Lawyers (2020) N8375 to name a few.

13.	So, I ask myself this.  Did the fourth defendant invoke the correct jurisdiction of the Court?  In my view, the answer is obvious which is, “yes, it has”.  Order 12 Rule 40(1) of the NCR applies in a case where an applicant seeks to dismiss a proceeding.  In regard to the specific sub-rule and grounds under Order 12 Rule 40, I think the important consideration to note to decide on this preliminary issue, is whether the reasons or grounds have been sufficiently pleaded or identified.  In my view, I find relief 3 sufficiently pleaded, and I say this despite the absence of expressly pleading sub-rule (1).  Reading it, the fourth defendant has clearly stated therein, and I will paraphrase, that it will be relying on all the 3 grounds under Order 12 Rule 40(1)(a), (b) and (c) of the NCR, to argue that given the recent amendment made to s 33 of the National Capital District Commission Act 2001 (NCDC Act of 2001), it means that there is no utility for this matter to continue; that the ambiguity under s 33 of the NCDC Act of 2001 regarding distribution or payment of the percentages of the 60% GST revenue that is taxed in NCD by the Internal Revenue Commission, has been resolved, that is, by the recent amendment made to s 33 by the National Capital District Commission (Amendment) Act 2021 (NCDA Act of 2021).  Consequently, that means, according to the fourth defendant, that the proceeding is without merit, frivolous and amounts to abuse if it is to continue as it serves no real purpose.

14.	It is also misconceived, in my view, for the plaintiff to argue that an applicant cannot lump up or rely on all three grounds that is, sub-rules (a), (b) and (c) of Order 12 Rule 40(1).  There are ample case authorities including Supreme Court cases that have approved similar applications where one or two or three grounds of dismissal may be pleaded or argued together.  Sometimes, the grounds may overlap each other so they are all stated together for a party to make a complete or full argument.  Sevua J in Theresa’s Pty Ltd and PNGBC v Rio Vista Pty Ltd [1998] PNGLR 283 stated that an applicant need only satisfy a ground under Order 12 Rule 40(1) before the Court may exercise its discretion.  The Theresa’s case was later affirmed by the Supreme Court in Tigam Malewo v. Keith Faulkner (2009) SC960 where, when it was argued that all the 3 grounds must be proven, the Supreme Court essentially stated that an applicant may prove 1, or 2 or all 3 of the grounds under Order 12 Rule 40(1) of the NCR, that is, before the National Court may exercise its discretion to dismiss a matter.

15.	I therefor dismiss the preliminary argument of the plaintiff.

ISSUES

16.	The main issue, in my view, is this, whether there is still serious issue(s) to be determined at trial despite the recent amendment made to s 33 of the NCDC Act of 2001 by the NCDCA Act of 2021.

RELIEF

17.	The fourth defendant, in making out its argument, makes these assertions or contentions which I believe are relevant to address the issue at hand.  It asserts that the relief sought, the pleadings, and the underlying foundation of the plaintiff’s case, do not primarily involve provisions under the Inter-Government Relations (Functions and Funding) Act 2009 (IGRFF Act) but rather s 33 of the NCDC Act of 2001, and therefore and since the issue has now been clarified by the NCDCA Act of 2021, the proceeding should come to an end.

18.	On this point, the plaintiff submits to the contrary.  It says the fourth defendant’s argument is misconceived.  It says the plaintiff’s claim is not limited to the interpretation or clarification of s 33 of the NCDC Act of 2001, but rather, that it concerns primarily the interpretation or clarification of relevant provisions under the IGRFF Act, and in particular, to ss 40, 42 and 45.  It submits, amongst others, that despite the amendment that is made to s 33 of the NCDC Act of 2001, s 45(1) of the IGRFF Act is still expressly clear which is that the Act and its provisions shall apply regardless or irrespective of any other provisions of any other Acts of Parliament.  That, it submits, includes s 33 of the NCDC Act of 2001 and the amendment that is made to it.

19.	The fourth defendant in response, submits, amongst others, that the argument by the plaintiff is baseless because it effectively means or implies that s 45 and the provisions of the IGFF Act would repeal or repeals the amended s 33 of the NCDC Act of 2001.  It submits, amongst others, that it does not make legal sense that an earlier Act of Parliament would repeal a provision of another recently passed Act of Parliament.

20.	I note the submissions of the parties on this matter. 

21.	I have perused the Originating Summons (OS).  The pleaded relief as sought by the plaintiff against the fourth, fifth and sixth defendants are in similar or identical terms (except for their respective names).  For this purpose, I will set out the first 2 relief herein:

1.	A declaration that the National Capital District is and was lawfully entitled to receive and be paid and distribute to it the amount equal to 60% of the net GST collected in the National Capital District Province as referred to in section 40(1) of the Inter-Governmental Relations (Functions and Funding) Act 2009 (as amended), without any deduction of any amount by the Internal Revenue Commission to the Central Provincial Government purportedly pursuant to section 33(2)(a) of the National Capital District Commission Act 2001 (as amended) or otherwise.

2.	A declaration that the Internal Revenue Commission is and was not lawfully entitled to pay or distribute any of the National Capital District’s share of the National Capital District Inland GST Trust Account equal to 60% of the net GST collected in the Province in the amount as referred to in section 40(1) of the Inter-Governmental Relations (Functions and Funding) Act 2009 (as amended) to the Central Provincial Government purportedly pursuant to section 33(2)(a) of the National Capital District Commission Act 2001 (as amended) or otherwise.

22.	I observe that the plaintiff seeks interpretations of provisions in both the IGRFF Act and the NCDC Act of 2001.  I observe that that is the case as expressly stated in the relief that is pleaded in the OS and in the legal arguments.  The plaintiff intends to challenge or raise them at the trial proper.  I also observe that the plaintiff’s arguments and relief sought are premised on its reliance on the provisions of the IGRFF Act over the provisions of the NCDC Act of 2001, or of its claim that the NCDC Act of 2001 must be read subject to or in conjunction with the IGRFF Act.  I also observe herein that the plaintiff still maintains that the new s 33 as amended has not invalidated or affected its claim and reliance on the provisions of the IGRFF Act.  

23.	Let me elaborate by setting out the relevant provisions of both legislations.  The old s 33 under the NCDC Act of 2001 reads:

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.

24.	And the new s 33 as amended under s 7 of the NCDCA Act of 2021 reads: 

7.  FINANCIAL ASSISTANCE TO CENTRAL PROVINCIAL GOVERNMENT (REPEAL AND REPLACEMENT OF SECTION 33).

The Principal Act is amended by repealing Section 33 and replacing it with the following new section:

"33. GOODS AND SERVICES TAX REVENUE REDISTRIBUTION TO CENTRAL PROVINCIAL GOVERNMENT, GULF PROVINCIAL GOVERNMENT AND MOTU-KOITABU COUNCIL.

(1)  The goods and services tax revenue entitlement due to the Commission under Section 40 of the Inter-Government Relations (Functions and Funding) Act 2009 shall be redistributed in accordance with this section.

(2)  The Commissioner General of the Internal Revenue Commission shall pay to -
(a)	the Central Provincial Government 10 percent of the goods and services tax revenue entitlement; and
(b)	the Motu-Koita Council 2 percent of the goods and services tax revenue entitlement; and
(c)	the Gulf Provincial Government 3 percent of the goods and services tax revenue entitlement.

(3)  The Commissioner General of the Internal Revenue Commission shall make payments under Subsection (2) by deducting the prescribed portions from the goods and services tax revenue entitlement due to the Commission, created and held under Sections 40 and 42(c) of the Inter-Governmental Relations (Functions and Funding) Act 2009 in the Provincial Inland Goods and Services Tax Trust Account for the National Capital District.".

25.	Sections 40(1), 42 and 45(1) of the IGRFF Act read:

40.  Amount of GST Distributors 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.
……
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.
……

45(1).  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. 

(Underlining mine)

GROUNDS FOR DISMISSAL - ORDER 12 RULE 40(1) APPLICATIONS

26.	The grounds for dismissal are interrelated, and they primarily focus on the argument concerning the amendment made to s 33 of the NCDC Act of 2001.  As such, I think the better or efficient way to address the issue is to ask myself this, that is, whether the proceeding will also require consideration and interpretation of the relevant provisions including ss 40, 42 and 45 of the IGRFF Act.  The answer to that, in my view, is, “yes, it will”.  The primary court documents that have been filed, including the OS, show that the plaintiff’s argument is premised primarily on the applications of the provisions, namely, ss 34, 36, 37, 40, 42, 44 and 45 of the IGRFF Act.  These appear as the basis why the plaintiff is challenging provisions under the NCDC Act of 2001 including s 33.  If we go back to the origin of the plaintiff’s grievance, I note that it was based on an announcement that was made by the second defendant in the social media on 22 April 2021, of his intention to exercise his powers under s 33 of the NCDC Act of 2001, that has caused the plaintiff to file the OS.  The plaintiff challenges the said exercise of power by the second defendant and argues that s 33 cannot be read in isolation but regard must also be had to the provisions of the IGRFF Act.  This was and is where the parties are at.

27.	The said position taken by the plaintiff, based on their present submission, has not changed.  I note that I am not making a determination here.  Any such consideration would obviously be best left for the trial Court to decide on.  The plaintiff emphasises in its submission that s 45(1) of the IGRFF Act expressly states which I requote in part, 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. (Underlining mine).

28.	To me, that in itself suggests a serious question to be tried.  The general implication of the provision is that it may apply regardless or irrespective of any other Act such as s 33 of the NCDC Act of 2001, or it may not, but as I have said, that is a consideration that should be left to the trial Court to determine.  I note that the fourth defendant has, it its submission, argued that the provisions of the IGRFF Act cannot impliedly repeal a new law or amendment that is made, and it refers to the recent amendment that is made to s. 33 in comparison to the provisions under the IGRFF Act.  The argument, in my view, is valid but that is something for the trial Court to determine.  It is not something that can be raised in an interlocutory hearing with the hope that the Court will simply accept that and therefore dismiss the matter in its entirety.  These matters, in my view, should to be properly argued at trial.

29.	I therefore find that despite the amendment made to s 33 of the NCDC Act of 2001, that it may not affect the substantive argument and issues raised by the plaintiff herein under its OS which, in my view, continues to demonstrate a meritorious challenge on the application of the 2 legislations thus requires a proper determination at a proper trial.  The fact that s 33 has been amended is noted and there is no issue in that regard.  References made to the repealed s 33 in the relief sought in the OS could be cured by a simple amendment with leave of the Court.  But to seek a summary dismissal, in my view, may be regarded as a very harsh penalty against the plaintiff.  It will also be against the interest of justice; it would be irrational and would also cause serious prejudice to the plaintiff because the issues would not be resolved, and the likelihood of the matter resurfacing again would be high thus additional costs, time and resources would have to be incurred.

30.	Given these, I have satisfied myself that there is a reasonable cause of action that warrants a proper hearing, and so I dismiss the fourth defendant’s arguments that there is no reasonable cause of action, that the claim is frivolous and vexatious, and that the claim is an abuse of process under Order 12 Rule 40(1)(a), (b), (c) of the NCR.

OTHER ARGUEMNTS

31.	Given my findings, I reject all the other arguments raised by the fourth defendant which I find to be irrelevant or baseless at this juncture.

32.	I also dismiss the fourth defendant’s submission that the restraining orders should be lifted.  I give my reason that there is an arguable case, as stated above in my decision, which shall require a full hearing.  The OS is not speculative or frivolous or is without merit.

SUMMARY

33.	In summary, I will dismiss the fourth defendant’s NoM.

COST

34.	An award of cost herein is discretionary.  I will order cost to follow the event.  The fourth defendant shall pay the costs of the plaintiff on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

35.	I make the following orders:

1.	The fourth defendant’s Notice of Motion filed on 23 February 2022 is dismissed.

2.	The fourth defendant shall pay the plaintiff’s cost of the application on a party/party basis which may be taxed if not agreed.

3.	Time for entry of these orders is abridged to the date and time of settlement by the Registrar which shall take place forthwith.

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
Kessadale Lawyers:			Lawyer for the Fourth Defendant
MKA In-house counsel: 		Lawyer or the Fifth Defendant
Jema Lawyers:			Lawyer for the Sixth Defendant
Mr Mukwesipu Lawyers:		Lawyer for the Seventh Defendant