Lastoffirst Papua PNG LNG Equity Holdings Ltd v Independent State of Papua New Guinea [2022] PGNC 89; N9471 (4 March 2022)

N9471

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 48 OF 2020 (IECMS)(CC2)

BETWEEN:
LASTOFFIRST PAPUA PNG LNG EQUITY HOLDINGS LIMITED
Plaintiff

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
First Defendant

AND:
KUMUL PETROLEUM HOLDINGS LIMITED
-Second Defendant-

Waigani: Tamade AJ
2022: 3^rd & 4^th March

PRACTICE AND PROCEDURE – application by second defendant seeking to dismiss proceedings for being an abuse of process, being frivolous and vexatious and for failing to give discovery – grounds of application for dismissal – discussion of – second defendants application upheld – proceedings dismissed

Cases Cited

The following cases are cited in the judgement:

Simon Mali v The State [2002] PNGLR 15
Tigam Malewo v Keith Faulkner [2009] SC960
Mikakata v Tobias (2021) N9010

Counsel

Mr Alois Jerewai, for the Plaintiff
Ms Jeanale Nigs, for the Second Defendant
04^th March, 2022

1. TAMADE AJ: This is a ruling on an application by the Second Defendant seeking to dismiss these proceedings for being an abuse of process, frivolous and vexatious and for failure to comply with the requirements under Order 5 Rule 13 of the National Court Rules and the cases of Simon Mali v The State (2002) PNGLR 15 and the case of Tigam Malewo v Keith Faulkner [2009] SC960 on representative actions.

2. In the alternative, the Second Defendant also seeks a dismissal of these proceedings on the Plaintiff’s failure to give general discovery pursuant to a Notice of Discovery served on the Plaintiff pursuant to Order 9 Rule 15(1) and Order 12 Rule 1 of the National Court Rules (NCR).

3. This is a matter concerning the PNG LNG Project. On 23 May 2009, the State, various landowner groups impacted by the Project, impacted Provincial and Local Level Governments entered into an Umbrella Benefit Sharing Agreement (UBSA) in respect to the PNG LNG Project.

4. The UBSA was aimed at sharing of benefits emanating from the PNG LNG Gas project. The State would therefore hold a participatory interest in the project in a special purpose vehicle initially set up as Kroton No.2 Limited and over time, it has evolved into what is now Kumul Petroleum Holdings Limited.

.5. The Second Defendant states that pursuant to Clause 6.1(a) of the UBSA, 25.75 % of the shares in Kroton held by the State is the subject of an option available to certain landowner beneficiaries and refers to this as the Kroton Equity Option. Clause 6.1 (a) of the UBSA states that:

“6.1 The Total Benefit Package

The Total Benefit Package consist of the following elements;

1. Participating Interest (equity)

The Beneficiary Group will be entitled to the benefits of an estimated 7 % equity participating interest in the LNG Project consisting of;

1. An estimated 2.78 % interest arising from entitlements by virtue of participating interests in the existing PDL’s and by virtue of the 2% interest accruing to Project Area Landowners from the State’s 22.5 % participating interest, provided for in section 167 of the Act and relevant provisions of the LNG Gas Agreement in the new PDLs with respect to the PRLs included in the LNG Project (“CDOA Equity”)
2. An estimated 4.22% by virtue of a commercial option (“Equity Option”) for an undivided and fixed 25.75 % shareholding in Kroton granted by the State (“Kroton Equity”)
   

6. I restate the Second Defendant’s position on the Kroton equity option as submitted as follows:

1. As the current 100 % shareholder of Kroton, the Second Defendant is obliged by the UBSA to transfer 25.75 of the shares in Kroton to the UBSA Beneficiary Group in exchange for the sum of US$240 million per percentage point.
   
2. The 25.75% of the issued shares in Kroton are the subject of an option, the Kroton Equity Option under the UBSA
   

100. The UBSA clearly provides that the Kroton Equity option is an option to acquire 25.75 % shareholding in Kroton. It is not an option for a direct 4.22% equity interest in the PNG LNG Project.
     

4. Clause 9.1 of the UBSA (Trustee Agreement for Equity) provides the legal basis by which KPH and Kroton’s involvement in the Kroton Option stems. It states; “Kroton NO.2 Limited shall be a clearing house and benefits to be paid direct to beneficiaries”.
   
5. The second expression under Clause 9.3(b) of the UBSA states that: “The Interest of the Project Area Landowners, and PG’s in the LNG Project with respect to Kroton Equity will be represented by Kroton No.2 Limited.”
   

7. The Second Defendant further submits that according to the UBSA, the Kroton Equity option was to be exercised between 1 January 2016 and 30 June 2016 however the NEC has extended this option period.

8. As the Kroton Equity Option was to be exercised by the Beneficiary Group, the ‘Beneficiary Group’ under the UBSA is defined in clause 6 as ‘Project Area Landowners (upstream, pipeline and plant), affected PG’s and LLGs.’

9. The Second Defendant therefore states that the Plaintiff does not represent the beneficiary group as defined in the UBSA to exercise the Kroton Equity Option.

10. The Second Defendant relies on the Simon Mali v The State (2002) PNGLR 15 and the case of Tigam Malewo v Keith Faulkner [2009] SC960 on representative actions.

11. The Court said in the Simon Mali case that:

... in all actions or proceedings of a representative nature, all the intended plaintiffs must be named and duly identified in the originating process, be it Writ of Summons, Originating Summons or Statement of Claim endorsed on a writ. In this respect, pursuant to the Rules ..., each and every intending plaintiff must give specific instructions (evidenced in writing) to their lawyers to act for them. There are good reasons for this, one being where costs of the litigation are concerned, if awarded against the plaintiffs. Some of the problems or consequences in a representative action are anticipated in the various sub-rules under Order 5, Rule 13 National Court Rules (representation: current interests).

12. The Second Defendant also relies on the case of Mikakata v Tobias (2021) N9010 where Justice Dowa reiterates the point that where an action is instituted by a Plaintiff in a representative capacity, written consent or authority from all whom the Plaintiff purports to represent must be endorsed on the proceedings.

13. In submission by Ms Nigs, I posed to the question to Ms Nigs that where the Plaintiff is a corporation as in this case as opposed to an individual purporting to represent a clan or a group of people where individual consent and or authority is required, should the Court look behind the corporate veil to see who runs the entity as to representation or should the Court accept the entity as representing the persons it purports to represent? Ms Nigs maintains her submissions that the Plaintiff does not represent all the project landowners, the affected Provincial Governments and Local Level Governments referred to as the “Beneficiary Group” defined under the UBSA.

14. I turn to the Affidavit of Ms Sally Tadabe filed on 7 October 2021 in support of the application by the Second Defendant. A company extract from IPA shows the Plaintiff comprises of various individuals as directors however the sole shareholder is a Mr John Kekeno Kelewa.

15. Mr Jerewai of the Plaintiff implores me to find that the Plaintiff is a company incorporated under the Companies Act as pleaded in the Statement of Claim and at paragraph 7 of the Statement of Claim it pleads that it was formed by the “Beneficiary Group” comprising of the affected landowners (including upstream, pipeline and plant), affected Provincial and Local Level Governments. The composition of the Plaintiff company does not reflect that in the IPA extract of company nor is there any other authority from all parties defined under the UBSA as the “Beneficiary Group” that they authorise the Plaintiff to act for them.

16. Mr Jerewai submits that the question of authority should be a matter properly for trial and not to be determined by way of an interlocutory application. I reject this submission as a party to a proceeding is entitled to challenge the competency of a proceedings at any stage of the matter.

17. The Affidavit of John Kekeno filed 11 June 20121says that he is a landowner from the Pina Clan from the affected landowner areas in the Hides PDL1 of the LNG Project Area. He says that there was a meeting convened at Holiday Inn on 3 January 2016 and that more than 600 affected landowners attended that meeting which resolved in that meeting to create the Plaintiff entity to exercise the Kroton Equity Option so as not miss the commercial opportunity.

18. From Mr Jerewai’s submissions and the Affidavit of John Kekeno, the Plaintiff entity is only made up if not of mostly landowners and there is no evidence of the involvement of any affected Local Level Government and or affected Provincial Government.

19. I find that the Plaintiff entity does not represent the “Beneficiary Group” as defined under the UBSA and therefore it lacks standing and authority to sue in these proceedings.

20. The second leg of the Second Defendant’s application is in the alternative that it seeks a dismissal of the proceedings for the Plaintiff’s failure to file and serve a List of Documents in response to a Notice of Discovery filed and served on 30 July 2021 pursuant to Order 9 Rule 15(1) and Order 12 Rule 1 of the National Court Rules.

21. Mr Jerewai has admitted in submissions that they have not filed a List of Documents and served on the Second Defendant, nor have they formally conveyed a position for not doing so to the Second Defendant. Mr Jerewai submits that he verbally informed Ms Nigs that the filing of the Affidavit of John Kekeno was sufficient as it contained all documents referred to in the pleadings pursuant to Chambers Directions issued by the Court in relation to this matter. The Chamber Directions in relation to discovery of documents and other steps to be taken to progress the matter was initially made on 8 March 2021 and subsequently extended on 16 June 2021 by consent of parties. The date for giving discovery shall lapse by 30 July 2021, the date in which the Second Defendant filed and served a Notice of Discovery on the Plaintiff. Pursuant to the Order 9 Rule 15, the Plaintiff should have given discovery in 15 days and by courtesy if they were not able to comply they should have relayed their position to the Second Defendant.

22. Mr Jerewai submits that the Notice of Discovery was not necessary and to my mind, a party can used a general discovery to fish for information with no purpose however be that as it is, Order 9 Rule 15 allows for general discovery and the Plaintiff was obliged to comply with providing a List of Documents and or respond appropriately which it did not.

23. The Plaintiff is also in default of providing a List of Documents according to the Notice of Discovery served on them and for not complying with the National Court Rules.

24. Based on all these reasons, I will dismiss these proceedings on the grounds advanced by the Second Defendant in their application that the Plaintiff lacks authority to represent the ‘Beneficiary Group” as defined in the UBSA and for failing to provide a List of Documents to the Second Defendant according to the National Court Rules.

25. I therefore make the following orders:

1. These proceedings are dismissed.
2. The Plaintiff shall meet the Second Defendant’s costs of these proceedings on a party/party basis.
   

Orders accordingly.

Jerewai Lawyers: Lawyers for the Plaintiff
Dentons PNG: Lawyers for the Second Defendant