Bewani Oil Palm Plantations Ltd v Iduhu [2023] PGNC 212; N10261 (17 February 2023)

N10261

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO. 154 OF 2021

BETWEEN:
BEWANI OIL PALM PLANTATIONS LIMITED
- Plaintiff-

AND:
KEITH IDUHU as Chairman of the
NATIONAL FOREST AUTHORITY
-First Defendant-

AND:
PAPUA NEW GUINEA FOREST AUTHORITY
-Second Defendant-

AND:
BEWANI PALM OIL DEVELOPMENT LIMITED
-Third Defendant-

Waigani: Tamade AJ
2022: 6^th September
2023: 17^th February

JUDICIAL REVIEW – decision making processes conducted by NFA and PNGFA – wrong forms used in the application for a Forest Clearance Authority – breach of Forestry Act and Forestry Regulation – decision to grant FCA is unreasonable and ultra vires – decision quashed – orders granted in the nature of certiorari and mandamus

Cases Cited

Kekedo v Burns Philp (PNG) Ltd [1988-89] PNGLR 122
John Mua Nilkare v Ombudsman Commission [1988-1989] PNGLR 122
Limawo Holdings Ltd v Numapo [2015] PGNC 155; N5916
Simakade Holdings v National Forestry Board [2019] PGNC 18; N7703
Amanab 56 Timber Investments Ltd v Sai’i [2021] PGNC 567; N9313

Legislation

Forestry Act
Forestry Regulation
Land Registration Act

Counsels:

Mr Ian Shepherd, for the Plaintiffs
Mr Asaiah Chillion, for the First Defendant
Ms Debbie Akane, for the Second Defendant

17^th February, 2023

1. TAMADE AJ: This is an application for Judicial Review by the Plaintiff pursuant to an Amended Notice of Motion for substantive relief filed on 10 June 2021. The Plaintiff is essentially challenging the following decisions:
   
   1. The decision dated 15 September 2021 to reject the Plaintiff’s application for a Forest Clearance Authority (FCA) to develop remaining areas in the Bewani Oil Palm Project into an oil palm estate.
   2. The decision dated 17 November 2021 to grant a Forest Clearing Authority to the Third Defendant, Bewani Palm Oil Development Limited over an area of 50 000 hectares within the Bewani Oil Palm Project Area.
      

Background of the matter

2. The Plaintiff is a company registered in PNG and is a registered forest industry participant. The Plaintiff and the Third Defendant are parties to a Project Agreement for Bewani Oil Palm Project which consisted of 139,909 hectares of land described as Portion 160C, Milinch Oenake (SW) and (SE) Bewani (NW) and (NE), Four Mil Vanimo & Aitape, West Sepik/Sandaun Province.
   
3. The Third Defendant is a landowner company representing 124 Incorporated Land Groups from the Bewani area of Sandaun Province and is the holder of a Special Agricultural and Business Lease (SABL) over the whole of the entire project which covers Portion 160C. Bewani Palm Oil Development Limited (BPODL) then subleased the entire area to the Plaintiff for the term of the SABL.
   
4. BPODL was granted a Forest Clearance Authority FCA 10-03 (FCA) over the entire Portion 170C for a term of 10 years expiring on 25 March 2019. On 28 October 2010, the Plaintiff entered into an agreement with the landowner entities which included BPODL and others to develop the project within the Project area of Portion 160C (PA2). It was agreed pursuant to clause 4.1 (aa) (ix) to assign the FCA granted to BPODL to the Plaintiff. On or about the same date of 28 October 2019, BPODL subleased the entire land contained in the SABL which consists of the project area to the Plaintiff for the entire term of the subject lease. This was on the premise that the Plaintiff as the developer would develop the land and the resource for the benefit of the Third Defendant or the customary landowners.
   
5. A project agreement then followed between the Plaintiff, the Third Defendant and the State for the development of the project which was for an initial term of eight years however the project commenced about May of 2012. This second agreement is referred to as PA2. The Plaintiff states in evidence that it has carried out its obligations under both agreements and has cleared approximately 17 558 hectares of land and planted approximately 15 761 hectares of oil palm within the project area.
   
6. The Plaintiff did significant investment into the project and performed it’s obligations pursuant to PA1 and PA2. The Plaintiff pursuant to the relevant provisions of PA1 and PA2 then applied for an FCA in its own name by application dated 29 January 2019. A response to the Plaintiff’s application was not received until later on 8 October 2021 when the Plaintiff received a letter dated 15 September 2021 that the Plaintiff’s application for the FCA had been rejected based on the findings of a Joint Agency Audit Report.
   
7. The Third Defendant had also applied for an FCA and was however granted an FCA by the First Defendant over the same project area in the grant of FCA No. 10-19 over an area of 50 000 hectares within Portion 160C in which is the Bewani Oil Palm Project Area and within the SABL which was subleased to the Plaintiff.
   
8. The First Defendant states that the Plaintiff is an entirely foreign owned company and it was brought in by the Third Defendant as the developer for the landowner company BPODL. The First Defendant is adamant that though the Third Defendant assigned its right over the SABL and the FCA to the Plaintiff, the FCA subsequently expired on 25 March 2019 and therefore BPODL applied for the FCA on its own name as it is a nationally owned entity holding the head lease. The First Defendant has relied on what Mr Chillion submits is a general forest policy that FCA’s should be granted to nationally owned entities and in this case as BPODL is the SABL holder to Portion 160C, BPODL was considered the correct entity to be granted the FCA.
   
9. Ms Akane, inhouse counsel for the PNG Forest Authority’s submissions is quite similar to Mr Chillion for the First Defendant that the PNGFA received through its own sources that there was a falling out between the Plaintiff and the Third Defendant that there were concerns raised as to the non-compliance of the FCA and therefore the Authority commenced a Joint Agency Audit of the Bewani Oil Palm Project to ascertain compliance of any of the terms and conditions of the FCA by the Plaintiff. Ms Akane submits that the Joint Agency Audit recommended to the Board of PNGFA a recommendation that the FCA should not be granted to the Plaintiff due to issues of non-compliance with the previous FCA and or due to unsatisfactory performance of the FCA and the expectations of the Joint Agency Audit and therefore the Board of PNGFA acted on the recommendation of the Joint Agency Audit to deny the Plaintiff’s application for an FCA. The PNGFA board however subsequently met in it’s meeting on 11 November 2021 and resolved to grant the FCA 10-19 dated 17 November 2021 to the Third Defendant instead.
   

Issues before the Court

1. Whether the decision of the PNG Forest Authority dated 15 September 2021 to reject the Plaintiff’s application for a Forest Clearance Authority (FCA) to develop remaining areas in the Bewani Oil Palm Project into an oil palm estate is unreasonable, it is non-compliant with the Forestry Act and the Forestry Regulations and whether the First Defendant failed or refused to discharge it’s duties under the Forestry Act in an efficient and timely manner?
   
2. Whether the decision of the PNG Forest Authority dated 17 November 2021 in granting to the Third Defendant an FCA is unreasonable, it is bias and or it has a reasonable apprehension of bias and or whether it failed to comply with the relevant provisions of the Forestry Act and the Forestry Regulation?
   

The Law in relation to applications for judicial review

10. Section 155(3) and (4) of the Constitution and Order 16 of the National Court Rules sets down the foundation for judicial review. Judicial review is concerned with the administrative process in which a decision of an administrative body is arrived at. In Kekedo v Burns Philp (PNG) Ltd[1] , the Court said that:

The purpose of judicial review is not to examine the reasoning of the subordinate authority with the view to substituting its own opinion. Judicial review is concerned not with the decision but with the decision-making process.

11. Mr Shepperd of the Plaintiff has submitted the case of John Mua Nilkare v Ombudsman Commission^[2], which has discussed the grounds for judicial review of administrative decisions which are:
    
    1. Want of excess of jurisdiction
    2. Error of law on the face of the record
    3. Failure to comply with rules of natural justice
    4. The Wednesbury Principle- where there is unreasonableness in the exercise of administrative power resulting in the subject decision.
       
12. Mr Chillion of the First Defendant has relied on the preamble of the Forestry Act to submit that the intention of the Forestry Act enforces the policy of active PNG participation by landowners in the development of their forest resources. The preamble of the Forestry Act is as follows:
    

Being an Act to provide for and to give effect to the National Goals and the Directive Principles and in particular to–

(a) manage, develop and protect the Nation’s forest resources and environment in such a way as to conserve and renew them as an asset for the succeeding generations; and
(b) maximise Papua New Guinean participation in the wise use and development of the forest resources as a renewable asset; and
(c) utilize the Nation’s forest resources to achieve economic growth, employment creation and industrial and increased “down stream” processing of the forest resources; and
(d) encourage scientific study and research into forest resources so as to contribute towards a sound ecological balance, consistent with the National developmental objectives; and
(e) repeal various Acts and for related purposes,...

13. Mr Shepperd has relied on the case Ibi Enei v Rimbunan Hijau Ltd^[3] where Justice Gavara Nanu said these:
    

...The overall scheme of the Forestry Act 1991 is also aimed at safeguarding such rights and interests of the resource owners...

14. Ms Akane of the Second Defendant argues that the decision of the PNGFA the subject of this review is not unreasonable relying on the case of Limawo Holdings Ltd v Numapo^[4] that the PNGFA has considered the rights of the customary landowners through their commercial entity BPODL and the fact that it held an SABL and the headlease over Portion 160C, Ms Akane and Mr Chillion submitted that the decision of the PNGFA was to give effect to the intent and policy of the Forestry Act and therefore it was not illogical or unreasonable.
    
15. Whilst the backdrop of the policy and intent of the Forestry Act is to encourage PNG National participation through landowners for their resource, let us unpack the process in which the PNGFA arrived at its decisions, this is where the Court is interested in, in these judicial review proceedings.
    
    1. Whether the decision of the PNG Forest Authority dated 15 September 2021 to reject the Plaintiff’s application for a Forest Clearance Authority (FCA) to develop remaining areas in the Bewani Oil Palm Project into an oil palm estate is unreasonable, it is non-compliant with the Forestry Act and the Forestry Regulations and whether the First Defendant failed or refused to discharge its duties under the Forestry Act in an efficient and timely manner?
       
16. The Plaintiff was engaged by the Third Defendant to develop its resource over the subject area pursuant to a Project Agreement entered on 28 October 2010. As can be seen in the Affidavit of Chelsea Lo, a Director of the Plaintiff company, the Third Defendant BPODL at the time comprised of landowner entities being Psalms 21 Ltd, Bulailai Ltd, Ossima Yalamaki Ltd and Momu Holdings Limited. These landowner entities represent 124 Incorporated Land Groups from within the Bewani area of Vanimo District.
    
17. Pursuant to the agreement for a large-scale oil palm and associated infrastructure project, the Third Defendant granted a sublease over the SABL held over Portion 160C over the subject area to the Plaintiff and also agreed to assign the FCA which it was granted over the area to the Plaintiff. The Second Agreement was between the State and the Plaintiff for the State to assist the Plaintiff develop the project in regard to facilitating various State authorisations etc to ensure the project materialises for the benefit of the beneficiaries.
    
18. The Plaintiff states that pursuant to clause 4.1(ix) of the first agreement and clause 3.2(g) and the definition contained in clause 1.1 of the second agreement, the Plaintiff applied for an FCA in its own name in an application dated 29 January 2019. The Second Defendant states that as there is no process under the Forestry Act for an extension or renewal of the FCA, the application by the Plaintiff would be considered a new application and therefore on receipt of the application for an FCA by the Plaintiff, the Second Defendant conducted an audit to determine compliance of the previous FCA granted to the Third Defendant over the subject area. The said audit referred to as the Field Audit Report in the Affidavit of Mr John Mosoro, the Managing Director of PNGFA, included officers from PNGFA, the Conservation and Environment Protection Authority (CEPA), Division of Commerce, Tourism and Industry of the Sandaun Provincial Administration and included officers from both the Plaintiff company and the Third Defendant company. Mr Mosoro stated that the Field Audit Report uncovered compliance issues in regard to the FCA granted to the Third Defendant and therefore recommendations based on that report was made to the board of PNGFA to reject the application for FCA by the Plaintiff.
    
19. From the submissions by the First Defendant’s counsel and the Second Defendant’s counsel, there are no submissions that specifically address the points raised by Mr Shepperd about the non-compliance of the provisions of the Forestry Act in the refusal of the application for an FCA by the Plaintiff and the grant of an FCA to the Third Defendant.
    
20. Mr Mossoro, the Managing Director of PNGFA refers to a Field Audit Report that was conducted on the project to ascertain compliance of the FCA granted to the Third Defendant. The Affidavit of Chelsea Lo refers to a Joint Agency Audit Report which I take it refers to the same audit exercise conducted which is titled Field Audit Report of Bewani Forest Clearance Authority Project in Bewani Area, West Sepik Province, PNG.
    
21. The former FCA granted to the Third Defendant expired on 25 March 2019 in which the Plaintiff stopped all forest operations. After attempts to lodge an application for FCA, a final application was lodged on 8 April 2019. The Plaintiff was informed that its application would be considered after an audit is conducted on the previous FCA granted to the Third Defendant. This audit was undertaken in May of 2019 and the Plaintiff was given an opportunity to respond to the draft of the audit report by way of a letter dated 9 December 2019. It would take about 2 years later on 8 October 2021 that the Plaintiff received a decision of the First Defendant dated 15 September 2021. Mr Shepperd of the Plaintiff has submitted that Form 234 attached to the letter of refusal by the First Defendant is a wrong form as it should be Form 240 of the Forestry Regulation. Form 234 of the Forestry Regulation is in regard to “Return of an application for a large scale conversion of forest to agriculture or other land use” in which section 90B(3) of the Forestry Act relates. Having cited Form 240 and Form 241 of the Regulations, I find that Form 234 was the wrong form used to inform the Plaintiff of the rejection of their application for FCA as the correct form for rejection should have been Form 240. I find that there is a non-compliance of the Forestry Regulation in this regard.
    
22. Also under section 90B of the Act, the Plaintiff’s proposal for an FCA should have been evaluated by the Provincial Forest Management Committee (PFMC). Section 90B provides that where the Board of the PNGFA has considered that an application for an FCA is in order, it can give notice to any government body that has an interest in the grant of the FCA and a public hearing shall be conducted where the government bodies and the private sector can be heard on the application. The outcome of such a hearing is then evaluated by the PFMC who then make a recommendation to the Board of the PNGFA whether to grant or refuse the application for FCA. I find that this process was not undertaken by the Second Defendant however the entire decision of the Second Defendant to refuse the FCA was premised entirely on the Field Audit Report. I also find that the Field Audit Report did not address or take into account the responses by the Plaintiff. There is clearly a non-compliance of the Forestry Act in this regard. I uphold the Plaintiff’s submissions that the First Defendant’s rejection of its FCA application based entirely on the Field Audit Report and without any involvement of the PFMC is ultra vires his powers.
    
23. I also find that the stark reality of the matter is that the Plaintiff has been granted a sublease over Portion 160C over the Bewani project as agreed between the landowners and the developer and supported by the State in the second agreement. The Plaintiff has a legal interest as a sub-leasee pursuant to section 54 of the Land Registration Act to which the Third Defendant’s rights over the SABL have been assigned to the Plaintiff. To overlook the fact that the Plaintiff is the subleasee of the SABL over the Bewani Project by the First and Second Defendants is grossly negligent and unreasonable.
    
    2. Whether the decision of the PNG Forest Authority dated 17 November 2021 in granting to the Third Defendant an FCA is unreasonable, it is bias and or it has a reasonable apprehension of bias and or whether it failed to comply with the relevant provisions of the Forestry Act and the Forestry Regulation?
       
24. In regard to the FCA granted to the Third Defendant in a letter dated 17 November 2021, the Application for an FCA by the Third Defendant is by way of Form 160 of the Forestry Regulation. Form 160 is in regard to An Application for Timber Authority For Agricultural or other Land Use Clearance for the Removal of Up to 50 Hectares of Trees. I uphold the submissions of the Plaintiff that the Third Defendant has used the incorrect form and the correct form should have been Form 233 of the Forestry Regulation for an FCA.
    
25. I also uphold the submissions by the Plaintiff that the Sale and Purchase Agreement attached to the Application by the Third Defendant are all made pursuant to section 88 of the Forestry Act and relate to an Application for Timber Authority and not an FCA. The Third Defendant has hopped on the wrong footing to begin its application for an FCA and this is contrary to the Forestry Act and the Forestry Regulation. This also includes the consents of landowners, the verification of ownership etc all relate to applications for a Timber Authority and not to an FCA in the Third Defendant’s application.
    
26. The Plaintiff submits that the roads or infrastructure referred to in the Third Defendant’s Application were constructed and implemented by the Plaintiff. The Palm Oil Refinery vital for the Palm Oil Project is constructed by the Plaintiff and not the Third Defendant. The Plaintiff has set out the following as glaring errors or omissions regarding the application by the Third Defendant for an FCA:
    
    1. The Financial Statements for the Third Defendant as an Applicant for the FCA for previous three years were not submitted.
    2. There were no financial documents from the Third Defendant’s bankers to support their application.
    100. No marketing strategy or appraisal was submitted.
    4. The shareholding of the company was said to be Papua New Guinean.
    5. The proposal and achievements claimed by the Third Defendant were accepted without question despite PNGFA’s Board earlier rejection of the Plaintiff’s FCA application which were based on the same achievements, infrastructure developments etc which were identified in the Field Audit Report.
       
27. The First and Second Defendants have not contested the discrepancies and or errors raised by the Plaintiff in the Third Defendants application for an FCA and based on the evidence in the Affidavit of Mr Mosoro, I uphold the Plaintiff’s submissions.
    
28. I find that the Third Defendant’s Application for an FCA does acknowledge that the Bewani Project Area is the subject of an SABL granted to the Third Defendant and that the SABL has been subleased to the Plaintiff however the Third Defendant seeks that 50 000 Ha in the same SABL in Portion 160C be converted into Tree Plantation Project intercropped with various agricultural crops. The Third Defendant in my view does not have any legal interest over the sublease, its interest is suspended as the sublease has never been extinguished or cancelled and the Third Defendant cannot exert a right over the Plaintiff’s right as the legal tenant by way of the registered sublease for the remainder of the term of the SABL.
    
29. At page 3 of the Application by the Third Defendant as can be seen in the Affidavit of Mr Mosoro, one out of the six national directors of the Third Defendant is indicated to be a Lee Man Yung who is a Malaysian. Under the shareholding structure of the Third Defendant in their application, Lee Man Yung has 250 000 shares and has a 25 percent interest in the Third Defendant. The Third Defendant’s shareholding has changed significantly in that it is no longer a 100 percent PNG company.
    
30. The Third Defendant states in its application that it has partnered with Zhustanlog Corporation who plans to inject K7.4 million plus to start up the proposed project. There are no further information on the said entity Zhustanlog Corporation and of its financial ability to sustain the project proposal. On the one hand the landowners comprising the Third Defendant using their right hand have entered into a Project Agreement with the Plaintiff, the State has given their support for the Bewani Project however the Third Defendant has caused its left hand to enter into another deal with another developer contrary to my mind to the agreement with the Plaintiff. They can not back track when they have already subleased the entire SABL to the Plaintiff.
    
31. I also accept the submissions by the Plaintiff that there has been an error in the Third Defendant’s Application contrary to Form 242 that there was no map submitted by the Third Defendant that should indicate where the actual area of the 50 000 ha applied for by the Third Defendant. I accept the Plaintiff’s submissions that the map indicted was dated 11 April 2022 which was submitted 4 months after the grant of the FCA to the Third Defendant.
    
32. I find that there was no application for an FCA by the Third Defendant in the incorrect forms lodged by the Third Defendant. There was also no need for a requirement for consent of customary landowners pursuant to section 90A(3)(f)(k) or (l) as the customary landowners rights had been taken over by the grant of the SABL to the Third Defendant and subleased to the Plaintiff.
    
33. Overall, I find that the decision by the First and Second Defendants to grant an FCA to the Third Defendant dated 17 November 2021 is contrary to the provisions of the Forestry Act and the Forestry Regulation and is grossly negligent in overlooking the glaring fact that the subject land being the SABL Portion 160C was subleased to the Plaintiff and the sublease was never surrendered, cancelled and or forfeited. I uphold the submissions by the Plaintiff that the First and Second Defendants have failed to discharge their duties responsibly and in an efficient and timely manner. The decision is also outrightly unreasonable.
    
34. In regard to the Plaintiff’s submissions that the First Defendant’s decision to grant an FCA to the Third Defendant is tainted with bias or reasonable apprehension of bias because of the relationship between the former Chairman of the PNGFA and some of the shareholders of the Third Defendant, there is no evidence to sustain this submission and therefore I refuse to accept this submission.
    

Conclusion

35. Having read the decision of the Court in Simakade Holdings v National Forestry Board^[5], this is a case similar in terms of breaches of the Forestry Act and the Forestry Regulation where wrong forms were used. It is incumbent upon the Second Defendant as the regulator to ensure compliance of the Act and the Regulation and in this case, there has been a gross breach and non-compliance of the Forestry Act and Regulation. The case of Amanab 56 Timber Investments Ltd v Sai’i^[6] has also followed the Simakade Holdings^[7] case wherein the Court considered breaches of the Forestry Act and Regulation wherein wrong forms were issued in terms of an FCA.
    
36. The arguments by the First Defendant and the Second Defendant regarding the interest of the Third Defendant as holding a SABL over Portions 160C trumping the interest of the Plaintiff as a subleasee must fail as it is contrary to law and negligent in my view to propel and validate such an illogical proposition which is not according to law. Overall, the decisions of the First and Second Defendants the subject of this review is unreasonable that it should be quashed accordingly.
    
37. The grounds for judicial review in the Plaintiff’s Amended Statement filed on 10 June 2022 are upheld except ground 5.4. The Orders sought in the Plaintiff’s Notice of Motion for judicial review filed 10 June 2022 are granted.
    
38. The Court therefore Orders that:
    
    1. An order in the nature of certiorari is granted removing into this Court and quashing the decision of the First Defendant dated 15 September 2021 to reject the Plaintiff’s application for a Forest Clearing Authority (FCA) to develop the remaining areas in Bewani Oil Palm Project (almost 80 000ha) into an oil palm estate.
    2. An order in the nature of certiorari is granted removing into this Court and quashing the decision of the First Defendant dated 17 November 2021 to grant a Forest Clearing Authority (FCA) No. 10-19 to the Third Defendant over an area of 50 000ha within the Bewani Oil Palm Project Area.
    3. An order in the nature of a mandamus is granted and is directed to the First Defendant to reconsider the Plaintiff’s Application for a Forest Clearing Authority (FCA) to develop the remaining areas in the Bewani Oil Palm Project (almost 80 000ha) into an oil palm estate and give full consideration to the submissions made by the Plaintiff in response to the Field Audit Report that is, Annexure I to the Affidavit of Chelsea Lo filed 8 November 2021 and comply fully with the provisions of section 90B of the Forestry Act.
    4. Damages is granted in favour of the Plaintiff to be assessed.
    5. The Defendants shall meet the Plaintiff’s costs of these proceedings.
       

Orders accordingly.

_____________________________________________________________

Ashurst Lawyers: Lawyers for the Plaintiff

Chillions Lawyers: Lawyers for the First Defendant

PNG Forest Authority Legal Services Directorate: Lawyers for the Second Defendant

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^[1] [1988] PGSC 19; [1988-89] PNGLR 122 (13 April 1989)
^[2] [1988-1989] PNGLR 122

[3] [2012] PGNC 392; N4402 (28 September 2012)

^[4] [2015] PGNC 155; N5916
^[5] [2019] PGNC 18; N7703
^[6] [2021] PGNC 567; N9313
^[7] Supra N5