K92 Mining Ltd v Towe [2023] PGNC 40; N10139 (27 February 2023)

N10139

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO 49 OF 2021 (IECMS)

BETWEEN:
K92 MINING LIMITED
Plaintiff

V

DAVID TOWE as both COLLECTOR OF CUSTOMS AND COMMSSIONER OF THE PAPUA NEW GUINEA CUSTOMS SERVICE
First Defendant

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant

Waigani: Anis J
2022: 5^th December
2023: 27^th February

NOTICE OF MOTION – application to set aside default judgment and for leave to file defence out of time – Order 12 Rules 8(2)(a) and 35 – National Court Rules – whether sufficient cause shown as per the requirements – reasons for not filing defence within time – whether there is a defence on merit – whether the application was made promptly – other considerations – exercise of discretion

Cases Cited:

Papua New Guinean Cases
New Zealand Insurance Ltd v Chief Collector of Taxes [1988-89] PNGLR 522
Lorma Construction Ltd v The State (2012) N4636
in Nivani Ltd v Independent State of Papua New Guinea (2020) SC1945
National Capital District Commission v Internal Revenue Commission and Ors (2022) N9592
Maps Tuna Ltd v. Manus Provincial Government (2007) SC857
Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549
Green & Co v Green [1976] PNGLR 73
PNG v Barker [1977] PNGLR 386
Christopher Smith v Ruma Constructions Ltd [2002] PGSC 13
Leo Hannet v ANZ Banking Group (PNG) Ltd (1996) SC505

Overseas Cases Cited:
Grimshaw v Dunbar (1953) 1QB 408 at 415
Evans v Bartiam (1937) AC 473

Counsel:
P Smith, for the Plaintiff
D Mark, for the First Defendant
Nil appearance for the 2nd Defendant

RULING

27^th February, 2023

1. ANIS J: This was a contested hearing on whether I should exercise my discretion and set-aside a default judgment, and further, whether I should grant leave to the first defendant to file its defence out of time. I heard the first defendant’s notice of motion (NoM/application) filed on 11 November 2022, on 5 December 2022, and reserved my ruling thereafter to a date to be advised.

2. This is my ruling.

BACKGROUND

3. Between 2019 and 2020, the plaintiff imported 3 items, that is, 2 mining vehicles and one mining vehicle body part (tray). The first item (mining vehicle) arrived in Lae on 16 May 2019. It was described as CATAD45B UAT. The first defendant classified it, which attracted nil duty, before it released it to the plaintiff. The second item (mining vehicle) arrived in Lae on 28 March 2020. It was described CATAB45B UAT. The first defendant classified it, which also attracted nil duty, before it released it to the plaintiff. And the third item (mining vehicle tray) arrived in Lae on 4 July 2020. It was described as CAT truck body. Again, the first defendant classified the item, which attracted nil duty, before it released it to the plaintiff.

4. The dispute started, when the plaintiff received notifications from the first defendant in February and April of 2021, that the 3 items had been re-classified and based on that, that they each attracted excise duties. Separate requests for their payments were made by the first defendant to the plaintiff. In response, the plaintiff engaged its lawyers to try to resolve the matter with the first defendant. The plaintiff disputed the first defendant’s assessments and re-classifications of the 3 items.

5. The first defendant, however, rejected the plaintiff’s disputes and issued various demands to the plaintiff to pay the calculated duties that it had imposed on the 3 items. The total sum assessed for the 3 items was K1,748,441.69.

6. On 9 August 2021, the plaintiff paid, under protest, the final portion of the full K1,748,441.69 to the first defendant. The plaintiff afterwards, and on 9 November 2021, filed this proceeding. It is not disputed that the writ of summons and statement of claim (Writ) was served on the first defendant on 22 November 2021. It is also not disputed that the first defendant was required to file its defence before or by 5 April 2022. And it is not disputed that the first defendant had defaulted in filing its defence. As a result, default judgment was entered against it as well as against the second defendant, by Kandakasi DCJ on 19 August 2022.

7. The NoM was filed on 2 September 2022. The first defendant submitted, which was not denied by the plaintiff, that it had tried to file an earlier similar application in April of 2022, however, that sealed copies were never uplifted by the Registry and consequently His Honour the Deputy Chief Justice refused to deal with it at the time of hearing of the default judgment application on 12 August 2022. I note that His Honour’s reasoning for refusing to deal with the said application is captured under term 1 of the Court Order for default judgment of 19 August 2022. It reads, The First Defendants Notice of Motion filed on the 29^th April 2022 has not been served on the Plaintiff and will not be heard. His Honour then entered default judgment in favour of the plaintiff with further orders for damages to be assessed.

8. I now deal with the NoM.

SOURCE

9. The relied source is Order 12 Rules 1, 8(2)(a)(b) [amended with leave of the Court] and 35 of the National Court Rules (NCR). Relief 1 and 2 in the NoM read:

1. That Pursuant to Order 12 Rule 8(2)(a) and 35 of the National Court Rules, the Default Judgment entered against the First Defendant on the 19^th of August 2022 be set aside.
2. That Pursuant to Order 12 Rule 1, leave be granted to the First Defendant to file his Defence out of time.

......

10. Order 12 Rules 1, 8(2)(a) and 35 read:

1. General relief. (40/1)

The Court may, at any stage of any proceedings, on the application of any party, direct the entry of such judgement or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgement or order in any originating process.

......

(2) The Court may, on terms, set aside or vary a judgement —

(a) where the judgement has been entered pursuant to Order 12 Division 3 (default judgement)

......

35. Setting aside judgement.

The Court may, on such terms as it thinks just, set aside or vary a judgement entered in pursuance of this Division.

......

11. The plaintiff challenges the source and jurisdiction of the Court. Its complaint is this. It submits that the first defendant has invoked incorrect jurisdictional powers of the Court. As a state entity, it submits, the correct source to invoke should have been s 9 of the Claims By and Against the State Act (CBASA). In this case, it submits, the correct source is s 9 of the CBASA. The plaintiff relies on cases authorities, namely, New Zealand Insurance Ltd v Chief Collector of Taxes (1988-89) PNGLR 522 and Lorma Construction Ltd v The State (2012) N4636. In the former case, Bredmeyer J (others, Amet J and Barnett J), makes a clarity between timeline imposed by statute or an Act of Parliament as opposed to timeline imposed under the National Court Rules. On this matter and if I may paraphrase, His Honour was saying that the 40 days appeal period that is imposed by the Supreme Court Act is unaffected by (or overrides) Order 2 Rule 3(i) of the National Court Rules which regulates reckoning or computation of time for filing documents during a court vacation. In the Lorma Construction case, Hartshorn J, held:

The State cannot rely upon Order 1 Rule 15 (1) National Court Rules to either extend the time within which it is required to file its defence, which time is fixed by s. 9 Claims By and against the State Act, or to be given leave to file its defence after that time. The relief sought to file its defence out of time is therefore refused.

12. The ruling in Lorma Construction was sanctioned by the Supreme Court in Nivani Ltd v Independent State of Papua New Guinea (2020) SC1945.

13. Section 9 of the CBASA states:

9. Filing of defence by the State.

Notwithstanding anything in any other law, in any proceedings for a claim against the State, the time within which the State shall be required to file a defence or appear in response to a summons on complaint (as the case may be) shall be—

(a) in a claim commenced by writ in the National Court—

(i) where the statement of claim is endorsed on the writ—before the expiry of 60 days after the date of expiry of the time limited for it to give notice of intention to defend; or

(ii) where the statement of claim is not endorsed on the writ—before the expiry of 60 days from the date of service of the statement of claim; or

(b) where a cross-claim is made against the State—before the expiry of 30 days from the date of service of the cross-claim; or

(c) in an application under Section 57 of the Constitution—before the expiry of 90 days from the date of service of the application; or

(d) in a claim made in the District Court—before the expiry of 90 days from the date of service of the summons,

or such further time as the court before which the action is instituted, upon sufficient cause being shown, allows.

(Underlining mine)

14. I note the submissions of the parties.

15. Section 9 states the various timelines and situations where the State is required to file its defence. It also expressly permits exercise of Court’s discretion to extend time beyond those timelines that are prescribed therein, that is, where it reads in the end, or such further time as the court before which the action is instituted, upon sufficient cause being shown, allows. However, the discretion, I note, is limited by the use of the phrase “upon sufficient cause being shown’.

16. The first defendant may be regarded as a state entity or part of the State. However, I observe that the first defendant is not the State as defined under statute and the Constitution. Section 9 of the CBASA only applies to the State meaning the Independent State of Papua New Guinea. As such and in my view, it does not apply to the first defendant. I have addressed this point in my earlier decisions including the case of National Capital District Commission v Internal Revenue Commission and Ors (2022) N9592. Also relevant on point are Maps Tuna Ltd v. Manus Provincial Government (2007) SC857 and Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549.

17. In National Capital District Commission v Internal Revenue Commission and Ors (supra), I stated at [12] which I adopt herein as follows:

12. So, in summary, I will say this. The unequivocal definition of State is provided under the Constitution and the Interpretation Act, where it means the Independent State of Papua New Guinea or Papua New Guinea. The State may be regarded a legal person that has powers to acquire, hold and dispose assets of any kind and to enter into contracts in accordance with law. It also may sue or be sued in its name. I note that Courts have also made this position clear in earlier case authorities, namely, Davidwestern Advertising Group Ltd v. Hiri 152 Developments Ltd (2019) N8112, Air Niugini Ltd v. Kavieng District Development Authority (2019) N8158, Wasu Ipi and Ors v. Green Timber (PNG) Limited and Or (2021) N8898 and Clinton Capitol Partners Pty Ltd v. Kumul Petroleum Holdings Ltd and Ors (2021) N9112. The Supreme Court cases that regard State as a separate legal entity are Maps Tuna Ltd v. Manus Provincial Government (2007) SC857, and Habolo Building & Maintenance Ltd v. Hela Provincial Government (2016) SC1549.

18. I therefore find the sources cited by the first defendant to be correct for the stated reasons. I dismiss the plaintiff’s preliminary argument.

ISSUES

19. The main issues, in my view, are, (i), whether there was delay in filing the NoM, (ii), whether there was a reasonable explanation provided by the first defendant for not filing its defence within time, (iii), and whether there is a defence on merit.

LAW

20. I commend both counsel for pointing out the case law on the necessary requirements that the Court should be satisfied of before considering whether or not to exercise its discretion in applications such as this. The case authorities cited include Green & Co v Green [1976] PNGLR 73, PNG v Barker [1977] PNGLR 386, Christopher Smith v Ruma Constructions Ltd (2002) SC13, Grimshaw v Dunbar (1953) 1QB 408 at 415 and Leo Hannet v ANZ Banking Group (PNG) Ltd (1996) SC505 and Evans v Bartiam (1937) AC 473.

21. In summary and for this purpose, the requirements I should be satisfied of are, (i), making the application promptly, and if there is a delay, provide a reasonable explanation(s), (ii), valid or reasonable excuse for not filing a defence within time, (iii), defence on merit, and (iv), other considerations such as prejudice or interest of justice.

APPLY PROMPTLY

22. Did the first defendant apply promptly to set-aside the default judgment order?

23. I note the submissions of the parties in this regard.

24. The default judgment order was made on 19 August 2022. The first defendant was present at that time, and 14 days later, it filed its NoM, that is, on 2 September 2022.

25. So, the immediate query I have is whether the delay of 14 days may be regarded as not applying promptly?

26. Most recently, in Gigira Development Corporation Ltd & Ors v Talu and Ors (2022)(No. 3) N10051 (delivered on 28 November 2022), I said at [26] and [27] as follows:

26. How should I compute time to assess whether the NoM was filed promptly? In my view, computation of time for the present matter should apply immediately or days after the grant of the ex parte order. I say this because the respondents knew of the return date when the ex parte order was made which in itself may be regarded as contemptuous, that is, when they failed to appear in Court on 31^st August 2022. In my view, they ought to have conducted a file search or inquired immediately after 31^st August 2022. It is not sufficient or excusable, in my view, for the respondents or any failing party for that matter, to sit back and do nothing and only respond when they are notified. Any such continuous acts of neglect or want of appearances by counsel on mentions, direction hearings, motion hearings, or at trials, must or should be viewed unfavorably or against the party concern.

27. In the present matter, the NoM was filed on 11^th October 2022. The delay period therefore was 1 month 11 days. To promptly apply, in my view, means to immediately or quickly apply. In practical terms, it should mean, the next day or two, or a couple of days later, that is, especially in a case where the failing party had been notified of the return date but failed to appear in Court at the time when orders were made.

(Underlining mine)

27. I would adopt and apply the same test to the present case. As stated, the first defendant was present when default judgment was entered against it. It should therefore have applied immediately after that. Instead, it waited for about 2 weeks before it filed the NoM. Based on my decision in Gigira Development Corporation Ltd, 2 weeks or 14 days may be regarded as not attending to the matter promptly. I find that to be the case herein.

28. Therefore, I find that the first defendant did not apply promptly to set aside the default judgment.

DELAY

29. The delay aspect of the matter, in my view, is not so much contested. Based on my finding that the first defendant did not apply promptly, I also find that there was delay by the first defendant in not applying promptly. I note that the first defendant had filed a similar application, however, it was not heard in time, and it was rejected at the hearing of the default judgment application.

30. The defence was due on or about 5 April 2022. Default Judgment was granted on 19 August 2022. And this NoM was filed on 11 November 2022. The delay period is about 7 months. I find the delay period to be quite unreasonable. I say this despite the earlier attempt by the first defendant to have its application heard. I also say this with concern that there is evidence that some of the delay may have been attributed to the conduct of the registry, that is, in not attending to the filing and uplifting of documents without delay.

EXPLANATION

31. The next question I ask is whether the first defendant has provided a valid explanation for not filing its defence within time.

32. Again, I note the submissions of the parties in this regard.

33. The explanation given by the first defendant is contained in the affidavit of Ms Mark filed on 22 November 2022. The evidence addresses 2 matters. First, the first defendant complains to the Registrar of the National Court (Registrar) regarding alleged belated uplifting of its earlier application for extension of time to file its defence out of time, which had been defeated by the plaintiff’s default judgment application. Secondly, Ms Mark complains that despite lodging the present NoM on 2 September 2022, it was belatedly sealed and uplifted in October of 2022.

34. I will remark generally that the electronic filing system that is installed under the IECMS is new and that delays in uplifting lodged documents or related issues are not uncommon occurrences at this present time. It still requires time and more work before it may be fully operational. Presently, it operates for civil cases only for the National and Supreme Courts in Waigani. It is not operational yet in other centres or National Court registries throughout the provinces. The frustration that may have been experienced by the first defendant is noted.

35. That said, however, I note that there is no explanation provided by the first defendant for the 14 days delay period, that is, from 19 August 2022 to 2 September 2022. Why did it take the first defendant 14 days before it lodged its NoM on 2 September 2022 when the first defendant was present at the time when default judgment was entered? Further, I also uphold the plaintiff’s submission (at para 31 of its submission) that the first defendant is a model litigant and bears the duties and responsibilities which that status imposes – one of which is strict compliance with statute and court rules. The first defendant is a model litigant. That said, I observe that the requirement of a model litigant may be lacking in general with the State and its institutions in Papua New Guinea. The offices of the Public Solicitor, Solicitor General and State Solicitors, have minimal lawyers who are often left to defend the State or act for the best interest of the people of Papua New Guinea under challenging circumstances. However, I also observe that that cannot be a valid excuse for the State and its institutions such as the first defendant, that is, to fall below the standard of model litigant. I say this simply because all lawyers, whether it be in the public or private sectors, are officers of the Court. They are also bound by law in their profession, in particular, the Lawyers Act 1986 and the Professional Conduct Rules.

36. I find that the first defendant did not provide a reasonable explanation concerning its delay in both lodging its NoM and filing its defence within time.

DEFENCE ON MERIT

37. I now turn to the consideration, defence on merit. Is there a defence on merit? Should this matter proceed to trial? Or should the first defendant be permitted to file its defence because there are serious issues raised that require proper determination which could only be done at a trial proper or otherwise?

38. I note the submissions of the parties in this regard.

39. Let me begin by saying that it is not disputed that the 3 items were initially released by the defendants as duty free items. It is also not disputed that the first defendant later reassessed the items to determine if they would attract duties. And in so doing, the items were found to attract duties, thus the calculations and demands for their duty payments. The findings were then disputed by the plaintiff. But it is not disputed, or it is arguable, that the first defendant, following the dispute, had exercised its powers under s 102(1) of the Customs Act Chapter No. 101 (CA) and had demanded the plaintiff, under 3 separate letters, to pay its calculated duties for the 3 items. The letters are adduced in evidence in David Towe’s affidavit that was filed on 2 September 2022 (Mr Towe’s affidavit). Section 102(1) reads:

102. Short paid duty

(1) When any duty has been short levied or erroneously refunded, the person, who should have paid the amount short levied or to whom the refund has erroneously been made, shall pay the amount short levied or repay the amount erroneously refunded on demand being made by the Collector within five years from the date of the short levy or refund.

40. So, and as stated above, on 9 August 2021, the plaintiff, under protest, paid the final portion of the full K1,748,441.69 to the first defendant. This fact is also not disputed by the parties. ‘Payment under protest’ is permitted under s 176 of the CA. The plaintiff appeared to have made the payments under the said provision. This suggests that the plaintiff may have invoked the said provision to air its complaint. However, in the pleadings, the plaintiff, I note, appears to plead that the cause of action was commenced, not under s 176 of the CA, but rather, under s 89 of the Exercise Act Chapter No. 105 (EA). And I note that the plaintiff supports this claim at [21] and [24] of its written submission where it says:

“21....pleads procedural defects in the Plaintiff’s claim for failure to comply with Section 176A of the Customs Act...”before running to Court”...but does not plead that the Customs Act applies to the Excise Act or how or why the administrative appeals process provided in Section 176 Customs Act applies to the Excise Act, the assessment in question, the Plaintiff or the Plaintiffs claim – or any part of it.

......

24. The Excise Act contains its own review/appeal procedures for disputed Excise of duties in Section 89 thereof. The Excise Act does not import, apply, or preserve Section 176 of the Customs Act into the Excise Act either as a mandatory procedure (over vise-versa) – or at all.”

41. Sections 176(1)(4)(5)(6) & (7) and 89 of the 2 Acts read:

176. Payment under protest.

(1) If a dispute arises as to—

(a) the amount or rate of duty on any goods; or

(b) the liability of any goods to duty under any Customs tariff,

the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods.

......

(4) The sum paid under Subsection (1) shall, as against the owner of the goods, be deemed to be the amount of the proper duty unless the contrary is determined in an action brought in pursuance of this section.

(5) The owner of goods may appeal in writing to the Customs Appeals Tribunal against the assessment stating the grounds of his appeal, if, and only if, payment has been made under protest in pursuance of this section and the appeal is lodged within 30 days from the date of the assessment.

(6) The fact that an appeal is pending does not in the meantime interfere with or affect the decision of the Commissioner General and it shall apply as if no appeal is pending.

(7) Nothing in this section affects the rights of a person to bring proceedings in a Court of competent jurisdiction against the Collector for the recovery of the whole or any part of the sum paid, but proceedings do not lie under this section unless the administrative appeal processes described in this Division XV of the Act have first been exhausted.”

......

89. Deposit of duty.

(1) Subject to Subsection (4), if a dispute arises as to—

(a) the amount or rate of duty on any goods; or

(b) the liability of any goods to duty,

the owner of the goods may deposit with the Commissioner of Papua New Guinea Customs Service of Internal Revenue the amount of duty demanded.

(2) When a deposit is made in accordance with Subsection (1)—

(a) on making a proper entry the owner of the goods is entitled to delivery of the goods; and

(b) the amount of the deposit shall be deemed to be the amount of the proper duty unless the contrary is determined in proceedings brought under Subsection (3).

(3) Within six months after making the deposit, the owner of the goods may bring proceedings against the Commissioner of Papua New Guinea Customs Service of Internal Revenue in any court of competent jurisdiction for the recovery of the whole or part of the amount of the deposit, in which case any excess of the deposit over the proper duty as determined in the proceedings shall be refunded by the Commissioner of Papua New Guinea Customs Service of Internal Revenue to the owner, plus interest at the rate of 5% per annum.

[Underlining and bold lettering mine]

42. I note that the first defendant’s draft defence appears to be general which was also asserted by the plaintiff in its written submissions. However, I note that the first defendant’s pleading concerning the application of s 176 is based solely on the plaintiff’s own pleading where it first pleads payment in protest which suggests that the plaintiff had or may have intended to, invoke s 176 of the CA but then, and again according to its pleading and submissions, appears to suggest that it had or may have invoked s 89 of the EA. In my view, the plaintiff’s pleading on that aspect appears uncertain and thus may require some clarity.

43. And that, in my view, suggests or sufficiently makes out an argument for a defence on merit or an arguable case. If the Court finds that the plaintiff had invoked s 176 then this may call into question whether the process therein had been complied with and also whether the plaintiff may or could, after having invoked s 176 of the CA, also invoke s 89 of the EA. To me, these are valid questions of law which should require proper consideration and determination. I note that if I refuse outright the opportunity for the first defendant to be heard on these, that may result in denial of its right to be heard on this pivotal legal point. It would also have a prejudiced effect over its interest in the matter compared to that of the plaintiff. Also, and given the public or constitutional role that the first defendant plays, which is fundamentally to collecting tax for the citizens of this country, public consideration must also, in my view, apply. In this case, public interest favours the granting of an opportunity to the first defendant to be heard on the subject matter, amongst others.

44. I also refer to Mr Towe’s affidavit. The first defendant provides its reasons and assessments, which is supported by attachments, in regard to the 3 items. To me, there is prima facie evidence disclosed that supports the proposed defence of the first defendant. The evidence contradicts the plaintiff’s submission that the defence is vague or is unsubstantiated. The affidavit, in my view, contains evidence that supports the draft defence that is attached therein, to show that the first defendant is serious and has justifications to act in the manner as it had done based on its assessments. I note that I am not making a finding on the veracity of the said evidence. In fact, to do so would be an abuse of my discretion, which is something which is left for trial proper or an opportune time for the Court to consider or assess. At this stage, all I need to be satisfied of is prima facie evidence or otherwise at least some evidence that would support a defence. This is done, not by looking at a draft defence itself that is filed, but rather, at the evidence that is filed that supports a proposed defence. Mr Towe’s affidavit in my view puts forward what the first defendant intends to raise as its defence. I find that there is evidence filed where, if leave is granted, may go on to support the intended defence of the first defendant.

EXERCISE OF DISCRETION

45. In summary, I find it prudent that I should exercise my discretion and grant the NoM. I do so for the stated reasons under the sub-heading DEFENCE ON MERIT. I am minded to set-aside the default judgment order of 19 August 2022. Apart from this reason, I have also taken into account prejudice and public interest consideration, as relevant factors in the exercise of my discretion. They also favour the granting of the NoM.

46. I am also minded to grant leave to the first defendant to file its defence out of time. The first defendant may file the draft defence that is adduced in evidence or afresh. I will allow 14 days from the date of this order for that to occur.

COST

47. A cost order is discretionary. I will order each party to bear their own cost rather than in the normal fashion where cost would follow the event. I say this because the first defendant has not provided a reasonable explanation for the delay. And I also note that it is the first defendant’s failure to act within the ambit of the rules which has led to this where the plaintiff had to make appearance to oppose the NoM.

ORDERS OF THE COURT:

48. I make the following orders:

1. I grant the first defendant’s notice of motion filed on 11 November 2022.
   
2. The default judgment order of 19 August 2022 against the first defendant is set-aside.
   
3. Extension of time of 14 days is granted to the first defendant to file and serve its defence out of time, that is, from the date of this order.
   
4. Each party shall bear their own costs of the application.
   
5. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly
________________________________________________________________
O’Brien’s Lawyers: Lawyers for the Plaintiff
PNG Customs Services: In House Lawyers