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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO 922 OF 2019
BETWEEN
PETER LANGA ANDAMAN, as Chairman of the Management Committee of Juha Hela Special Purpose Authority of North Koroba Local-level Government
for and on behalf of Members of the Management Committee of the Juha Special Purpose Authority of North Koroba Local-level Government
First Plaintiff
AND
JUHA HELA SPECIAL PURPOSE AUTHORITY OF NORTH KOROBA LOCAL-LEVEL GOVERNMENT
Second Plaintiff
AND
KONEY SAMUEL, as Chairman of the Expenditure Implementation Committee (EIC) & SECRETARY OF DEPARTMENT OF NATIONAL PLANNING &
MONITORING
First Defendant
AND
DR. KEN NGANGAN, SECRETARY, DEPARTMENT OF FINANCE
Second Defendant
AND
HONOURABLE SAM BASIL, MP, Minister for National Planning & Monitoring
Third Defendant
AND
DAIRI VELE, SECRETARY OF DEPARTMENT OF TREASURY
Fourth Defendant
AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant
Waigani: Makail, J
2022: 9th November & 2023: 22nd March
LIABILITY – Contract – Umbrella Benefit Sharing Agreement – Breach of – Infrastructure development grants – Money due and owing – Proof of – Oil and Gas Act, 1998 – Section 173
CONTRACT – Umbrella Benefit Sharing Agreement – Infrastructure Development Grants – Payment of Infrastructure Development Grants – Privity of contract – Enforceability of contract by non-party
DECLARATORY ORDERS – Establishment of Special Purpose Authority – Purpose of Special Purpose Authority – Claim of right to Infrastructure Development Grants – Construction of Act of Parliament, Contract, Proclamation by Head of State and NEC Decisions – Local-level Governments Administration Act, 1997 – Sections 42, 43, 45(1)&(4) & 48(4)
Cases cited:
Nil
Counsel:
Mr. S. Dadada, for Plaintiffs
No appearance, for Defendants
JUDGMENT
22nd March, 2023
1. MAKAIL J: Pursuant to an originating summons, the plaintiffs seek a long list of orders in the following terms:
Preliminary - Mode of Proceeding
2. As a matter of practice and procedure, Order 4, rule 2(2)(a) and (b) of the National Court Rules (“NCR”) provides that a plaintiff may commence proceedings by originating summons where the sole or principal question at issue is, or likely to be one of construction of an Act or of any instrument made under an Act, or of any deed, will, contract or other document, or some other question of law or where there is unlikely to be a substantial dispute of fact.
3. In this case, a quick preliminary examination of the orders sought in the originating summons as set out above indicates that there are number of issues for consideration in relation to the construction of certain provisions of the Local-level Governments Administration Act, 1997, the Umbrella Benefit Sharing Agreement (“UBSA”), Proclamation by the Governor General and various Decisions of the National Executive Council (“NEC Decisions”). It will then be upon the plaintiffs to establish a case for the grant of the orders sought in the originating summons.
Parties’ Evidence
4. The plaintiffs tendered the following affidavits:
(a) Affidavit in support of first plaintiff sworn 12th December 2019 and filed 16th December 2019, Exhibit “A”.
(b) Supplementary Affidavit Jack Nambari sworn 16th December 2019 and filed 18th December 2019, Exhibit “B”.
(c) Supplementary Affidavit in support of first plaintiff sworn 16th December 2019 and filed 18th December 2019, Exhibit “C”.
(d) Affidavit in support of first plaintiff sworn and filed 18th December 2019, Exhibit “D”.
(e) Further Affidavit of first plaintiff sworn 02nd January 2020, Exhibit “E”.
(f) Affidavit in support of first plaintiff sworn 19th October 2020 and filed 21st October 2020, Exhibit “F”.
(g) Further Affidavit of first plaintiff sworn 21st October 2020 and filed 22nd October 2020, Exhibit “G”.
(h) Affidavit for Summary Determination Hearing of first plaintiff sworn 20th October 2020 and filed 25th October 2020, Exhibit “H”.
5. As there was no appearance at the trial, no affidavits were received from the defendants.
Findings of Fact
6. The first plaintiff and Jack Nambari make many assertions in their respective affidavits some of which are negotiations to settle the claim prior to and after the commencement of the proceeding, allegations of misuse of funds of the second plaintiff, a complaint to the Police Fraud Squad of misuse of funds of the second plaintiff, registration of a motor vehicle in his name that was purchased using the funds of the second plaintiff and subsequently, corrected by Ela Motors, his purported suspension as Chairman of the Management Committee of the second plaintiff by the Minister for Inter-Government Relations, and the project funds being a politically sensitive matter. However, they are not directly connected to the issues raised in the orders sought and it is not necessary to determine them. The Court’s findings will be confined to the essential and relevant facts as follows; the first plaintiff is the inaugural Chairman of the Management Committee of the second plaintiff.
7. The second plaintiff was established as a Special Purpose Authority for the North Koroba Local-level Government (LLG) in Hela Province pursuant to the Local-level Governments Administration Act, 1997, National Executive Court (“NEC”) Decision No 103 of 2015 dated 7th May 2015 and the Proclamation dated 18th May 2015 by the Governor General pursuant to Section 42(1) of the Local-level Governments Administration Act, 1997.
8. To give it, its independence and authority, on 16th November 2018 the then Minister for Inter-Government Relations, Honourable Kevin Isifi, MP signed the Constitution of the second plaintiff and almost a year later, on 20th August 2019 a ten Management Committee member team of the second plaintiff were sworn into office in Port Moresby. On 23rd August 2019 the same Minister published a notice of appointment of the Members of the Management Committee of the second plaintiff.
9. Prior to the establishment of the second plaintiff and going back 10 years, in 2009 the UBS Agreement was signed between the fifth defendant (State), affected Provincial Governments, affected Local-level Governments and the identified affected landowners for the Liquified Natural Gas (“LNG”) project. Clause 6.1(d) provides for infrastructure development grants (“IDG Funds”) to be paid to the provinces affected by the LNG project.
10. Clause 6.1(d) states:
“Subject to Clauses 13 and 14 an amount of Kina 1.2 billion allocated equally over two (2) five-year periods, commencing 2010 or the date of the LNG Project Decision (whichever is later), for infrastructure development and maintenance in the affected Provinces, in accordance with Section 173 of the Act. The Parties agree that the sharing of this amount amongst the Beneficiary Group will be decided by the NEC prior to the LNG Project Decision.”
11. The fifth defendant committed a total of K1.2 billion as IDG funds to the beneficiaries over a period of ten years. According to the NEC Decision No 96 of 2010 and NEC Decision No NG 49 of 2012 the distribution percentage for Juha PDL 9 Area is 09% per annum for IDG funds. 09% per annum of K1.2 billion is equivalent to K11 million per annum. For 10 years, the total allocated sum is K110 million.
12. For the past ten years from 2010 to 2020 the Juha PDL 9 did not receive the sum of K110 million from the fifth defendant. According to the plaintiffs, this sum is due and owing.
13. On 9th November 2019 the first plaintiff and his team met with the first and third defendants and requested the defendants to settle the outstanding sum. They were informed by the first defendant that K70 million was used to meet the short fall in the 2019 National Government Supplementary Budget and the balance of K50 million will be distributed to the recipients. Special consideration will be given to them and K22 million will be paid. Except for a payment of K2 million for establishment or administration grant, the IDG funds are still outstanding.
Issues
14. The issues for determination are:
(a) Whether the plaintiffs are legally established Committee of the Juha Special Purpose Authority of North Koroba Local-level Government pursuant to the Local-level Government Administration Act, 1997.
(b) Whether it falls within the jurisdiction of the plaintiffs to receive, manage, and distribute the Juha PDL9 IDG funds allocated by the defendants pursuant to the UBS Agreement.
(c) Whether the plaintiffs are entitled to receive IDG funds pursuant to the UBS Agreement and the respective NEC Decisions.
Establishment of Management Committee of Juha Special Purpose Authority
15. As to the first issue, learned counsel for the plaintiffs submits that the process of establishing the second plaintiff has been complied with and duly completed. The result is, there is a Proclamation dated 18th May 2015 by the Governor General pursuant to Section 42(1) of the Local-level Governments Administration Act, 1997 and a Management Committee of the second plaintiff in place.
16. Although not clearly expressed in the submissions of learned counsel for the plaintiffs, the process to establish a Special Purpose Authority is a four stage one:
(a) Recommendation by the Minister for Inter-Government Relations to the NEC to establish a Special Purpose Authority: Section 43(2), (3) & (4) of the Local-level Governments Administration Act, 1997,
(b) Decision of the NEC approving the recommendation of the Minister for Inter-Government Relations and to advice the Governor General to make a Proclamation for the establishment of a Special Purpose Authority: Section 43(1) of the Local-level Governments Administration Act, 1997,
(c) Proclamation by the Governor General of the establishment of a Special Purpose Authority: Section 42(1) of the Local-level Governments Administration Act, 1997, and
(d) Appointment and swearing in of Members of the Management Committee of a Special Purpose Authority: Section 45(1) & (4) of the Local-level Governments Administration Act, 1997.
17. Based on the above facts, the Court is satisfied that the four stages have been duly completed. First, as found, there is a recommendation by the Minister for Inter-Government Relations to the NEC for the establishment of the second plaintiff. Secondly, a NEC decision approving the establishment of the second plaintiff and advice to the Governor General to make a Proclamation for the establishment of the second plaintiff. Thirdly, a Proclamation by the Governor General of the establishment of the second plaintiff. Fourth and finally, the appointment and swearing in of the Members of the Management Committee of the second plaintiff.
18. In the circumstances, the Court is satisfied that the second plaintiff has been duly established. The Court is further satisfied that first plaintiff is the inaugural Chairman of the Management Committee of the second plaintiff (Juha Special Purpose Authority of North Koroba Local-level Government) pursuant to Section 45(1) & (4) of the Local-level Governments Administration Act, 1997.
Jurisdiction of Juha Special Purpose Authority
19. As to the second issue, learned counsel for the plaintiffs articulates the reasons for the proposition that it fell within the jurisdiction of the second plaintiff to receive, manage and distribute the Juha PDL9 IDG funds allocated by the defendants pursuant to the UBS Agreement, the Proclamation, and the Constitution of the second plaintiff. Learned counsel refers to Section 48(4) of the Local-level Governments Administration Act, 1997 and submits that one of the purposes of the second plaintiff is to, as directed by the Governor General in the Proclamation, act as agent for the National Government in relation to any matter within its purposes. To ensure that it implements the National Government’s development projects, the latter has agreed to fully and effectively indemnify and hold safe the Special Purpose Authority against all claims that may be made or taken against it as a result of its acting as agent.
20. Learned counsel further refers to Section 3(1) of the second plaintiff’s Constitution and submits that it reinforces the National Government’s position that the second plaintiff is established to act as agent for the National Government, Provincial Government and Local-level Government to which its jurisdiction includes the implementation of development projects including infrastructure, social and economic projects. He also refers to Section 19 of the second plaintiff’s Constitution and it is noted that one of its functions under Section 19(a) is:
“To implement the construction and maintenance of roads, bridges, airstrips, schools, health facilities and other infrastructure on behalf of the National Government, Provincial Government and Local-level Governments in the LNG PDL9 affected communities and parts of Koroba Kopiago District”.
21. There is no doubt, and the Court accepts that the second plaintiff is established for the purpose as ably articulated by learned
counsel for the plaintiffs. The real question is whether it is within the jurisdiction of the second plaintiff to receive and disburse
IDG funds allocated for the Juha PDL9 area.
22. To answer this question, first, it is necessary to identify the source of IDG funds. The Court notes that Section 173 of the Oil and Gas Act, 1998 provides for Project Grants. Relevantly, by Sub-section (1), the State shall make grants to affected Local-level Governments and affected Provincial Governments of a petroleum project. By Sub-section (2) the amount, nature and timing of grants shall be agreed upon in a development agreement or any other agreement between the State, affected Local-level Governments and affected Provincial Governments. By Sub-section (3) grants may be in the form of monetary payments or in the form of provision of infrastructure or services or other benefits.
23. In the case of IDG, it came in the form of monetary payments and is included in an agreement identified as the UBS Agreement. This is set out at Clause 6.1(d) and states:
“Subject to Clauses 13 and 14 an amount of Kina 1.2 billion allocated equally over two (2) five-year periods, commencing 2010 or the date of the LNG Project Decision (whichever is later), for infrastructure development and maintenance in the affected Provinces, in accordance with Section 173 of the Act. The Parties agree that the sharing of this amount amongst the Beneficiary Group will be decided by the NEC prior to the LNG Project Decision.”
24. Noting the plaintiffs’ claim that it is within the jurisdiction of the second plaintiff to receive and disburse IDG funds, clause 6.1(d) (supra) does not support their claim because it is not expressed that payment of IDG funds shall be made to a Special Purpose Authority, in this case the second plaintiff. On the other hand, it states that K1.2 billion is for infrastructure development and maintenance in “affected Provinces, in accordance with Section 173 of the Act”. The reference to Section 173 is a reference to Section 173 of the Oil and Gas Act, 1998. As noted above, according to this provision, the recipients of IDG funds are “affected Local-level Governments” and “affected Provincial Governments”. Thus, it is not clear if a Special Purpose Authority is one of the recipients of the IDG funds.
25. The other reason is that, for the Court to enforce a contract against the defaulting party, a Special Purpose Authority must be a party to the contract. This is because according to the doctrine of privity of contract, a contract cannot confer rights and impose obligations on any person who is not a party to the contract. In this case, the parties to the UBS Agreement are the State, Provincial Governments for Southern Highlands, Gulf, Central, Fly River (Western) Provinces, Local-level Governments for South Koroba, North Koroba, Hayupuga, Komo, Hulia, Lake Kutubu, Erave, West Kikori, West Hiri and Nomad Districts and the identified Project Area Landowners. The second plaintiff is not one of them. Thus, it cannot rely on the UBS Agreement to enforce it against the defendants. The only way it may rely on the UBS Agreement is to vary it by adding itself as a party and include a provision for it as a recipient of and authorised to disburse IDG funds.
26. The notion that a Special Purpose Authority is a recipient and authority to disburse the IDG funds has been misconstrued by the plaintiffs because it has not been the intention of the NEC to place the IDG funds in the hands of a Special Purpose Authority. In its Decision No 96 of 2010, the NEC approved a Policy Submission No 68 of 2010 but put in place number of conditions. At paragraph 3 of its decision, it:
“approved payment of the Infrastructure Development Grants (IDG) of K1.2 billion in accordance with the formula suggested and criteria set out in this submission (Attachment “A”)”.
27. Attachment “A” refers to IDG funds and relevantly states that IDG payment to commence in 2010 and K1.2 billion was allocated. Out of this sum, K11 million was allocated to Juha PDL9. Significantly, it noted that “no mechanism has been established to manage and monitor application of this fund” and proposed that “the State utilize the Special Purpose Authorities to manage and monitor the application of these funds”. Amongst the conditions for the application of IDG funds are a Technical Steering Committee to be established between the Department of National Planning and Department of Petroleum and Energy and respective Special Purpose Authorities to screen all applications for IDG funding for projects and further, that the companies to receive IDG funds must have the capacity to implement projects.
28. While it is noted that it was proposed that Special Purpose Authorities will manage and monitor the application of IDG funds, the NEC Decision did not state that the IDG funds shall be paid to the Special Purpose Authorities. It was not an ideal situation for the parties to find themselves in, although a Technical Steering Committee was set up to screen applications for IDG funds, there was no clear direction from the NEC as to whether the Special Purpose Authority should receive and disburse the IDG funds. It was not until 7th March 2012 when the NEC by its Decision No NG 49 of 2012 attempted to address this issue and:
“4. approved and directed the Department of Finance to open ten (10) Trust Accounts (i.e. based on the license areas) and ensure correct percentages of the IDG is distributed accordingly;
29. By this NEC Decision, it approved and directed that the IDG funds be held in a Trust Account where the Provincial Administrators, (for Southern Highlands, Gulf, Central and Western Provinces, Chief Executive Officer in the case of Hela Transitional Authority), District Administrators for the “affected Districts” and Secretary for Department of Finance were the authorised signatories. Again, it is noted that the NEC Decision did not state that the IDG funds shall be paid to the Special Purpose Authorities to hold and disburse.
30. The NEC further directed that the access and use of the IDG funds was subject to a project proposal, priority of the proposed project and approval by the Expenditure Implementation Committee (“EIC”) and finally, tender and award of a contract under the Public Finances (Management) Act 1995. By this NEC Decision, the IDG funds will be held in a Trust Account and the EIC will be responsible for disbursement of these funds.
31. It should also be stated that clause 13 of the UBS Agreement provides for the EIC and its role in implementing socio-economic and infrastructure projects. Relevantly, clause 13.1(f) states that “Where there is a change in law in relation to the EIC or as result of review under Clause 9, parties agree to work with and support any alternative implementing agency appointed by the State to succeed the EIC. The State will ensure that this alternative implementing agency complies with requirements of this Clause”. Learned counsel for the plaintiffs makes no submission and further, the Court notes that the plaintiffs did not adduce any evidence to suggest that the EIC has been abolished or replaced by the Special Purpose Authorities.
32. Moreover, learned counsel for the plaintiffs makes no submissions to clarify the additional directives by the NEC to implement the IDG funds Guidelines. Neither did he oppose the construction of the directives as outlined above, as being wrong. Thus, it is inconclusive that the second plaintiff is entitled to receive and disburse IDG funds in the sum of K11 million for Juha PDL 9 per annum or K110 million for last ten years. It will be so until the UBS Agreement is varied and a further NEC decision to endorse and approve that the second plaintiff or any affected Special Purpose Authority for that matter, to receive and disburse the IDG funds.
33. The upshot is, while the second plaintiff has been established to implement development project including infrastructure, social and economic projects in accordance with Sections 42 and 43 of the Local-level Governments Administration Act, 1997, its Constitution and the Proclamation by the Governor-General, the Court is not satisfied that the plaintiffs have discharged the onus of proof on the balance of probabilities that they are entitled to the IDG funds as sought.
Non-payment of IDG funds to Juha Special Purpose Authority
34. Given the above finding, it is not necessary to consider whether the defendants owed IDG funds to the plaintiffs pursuant to the UBS Agreement and the respective NEC Decisions. With regards to the orders sought for payment of the establishment or administration grant of K2 million, learned counsel correctly informs the Court that it has been paid to the plaintiffs and the orders sought will be abandoned.
Conclusion
35. The plaintiffs failed to establish that based on the UBS Agreement, Proclamation, the second plaintiff’s Constitution and various identified NEC Decisions they are entitled to receive and disburse IDG funds for PDL9 area.
36. Finally, the order sought at paragraph 2(e) of the originating summons will be refused because the plaintiffs did not adduce evidence and learned counsel makes no submission to establish a claim for this relief. It should be added that it raises an entirely separate issue regarding a Special Purpose Authority being a landowner representative and, in all fairness, the Court must hear all relevant parties before a decision can be made.
Summary of decision on orders sought in the Originating Summons
37. Not all the orders sought in the originating summons will be granted and for clarity and avoidance of doubt, it is necessary to briefly outline the decision of the Court as follows:
(a) Order sought at paragraph 1 is granted.
(b) Order sought at paragraph 2(a) & (b) are granted.
(c) Order sought at paragraph 2(c), (d) & (e) are refused.
(d) Order sought at paragraph 3(a) to (g) are granted.
(e) Order sought at paragraph 4 is refused.
(f) Order sought at paragraph 5 is refused.
(g) Order sought at paragraph 6 is abandoned.
(h) Order sought at paragraph 7 is refused.
(i) Order sought at paragraph 8 is refused.
(j) Order sought at paragraph 9 is refused.
(k) Order sought at paragraph 10 is abandoned.
Costs
38. As to costs, it is not correct to contend that the order sought for a declaration as to the entitlement to the IDG funds and order for payment for outstanding IDG funds are consequential to the principal order for declaration of the establishment of the second plaintiff as a Special Purpose Authority. On the contrary, they are principal relief as they are being sought to resolve the substantive dispute in relation alleged non-payment of IDG funds. Given that they have been refused, to that extent, the plaintiffs have been unsuccessful and for this reason, there will be an order that each party shall bear its own costs of the proceeding.
Order
39. The formal terms of the final order are as follows:
(a) To assist in the implementation of functions of the North Koroba Rural LLG; and
(b) To act as an Agent for the National Government in relation to the benefits, including the Infrastructure Development Grants for the Juha PDL 9 Area in the PNG LNG Development Project Agreement, particularly for Umbrella Benefit Sharing Agreement and all other PNG LNG Development Agreements as may apply and to ensure that the National Government may maintain its obligations and commitments under the Agreements particularly the UBS Agreement; and
(a) To act as an Agent or Service Delivery Mechanism or Infrastructure Implementing Arm of the National Government, Hela Provincial Government and North Koroba LLG to which its jurisdiction applies, particularly in receiving and managing benefits derived from petroleum, oil and gas projects, including Infrastructure Development Grants under the Umbrella Benefit Sharing Agreement and implementing development projects including infrastructure, social and economic projects and to best represent and serve the impacted host communities, particularly the Juha Petroleum Development License (PDL) 9 Area communities and landowners in the North Koroba LLG in the Hela Province.
(b) Shall receive, manage, and account for all funds and monetary benefits payable to it, under all the PNG LNG Development Project Agreements, including the Infrastructure Development Grants for the Juha PDL9 Area allocated by the National Government under clause 6.1 of the UBS Agreement and National Executive Council Decision No. 96/2010 and NEC Decision No. NG 49 of 2012.
(c) May be an agent for the Juha PDL 9 Area Landowners in relation to the PDL 9 Area in PNG LNG Development Agreement, particularly the UBS Agreement, in order that functions of the Juha Hela SPA under North Koroba Rural LLG as regards to the Landowners and the commitments by the National Government as regarding all Agreements, particularly the UBS Agreement may be adopted and applied therein.
(a) To perform its functions and duties and do all things necessary for the purposes for which it is established.
(b) May exercise the powers and functions vested in it by its Constitution and the Organic Law on Provincial and Local Level Governments and the Local-level Governments Administration Act 1997, in respect of the area over which it has jurisdiction.
(c) To implement the construction and maintenance of roads, bridges, airstrips, schools, health facilities and other infrastructure on behalf of the National Government, Hela Provincial Government and LLG in PDL9 affected communities and parts of Koroba Kopiago District of Hela Province.
(d) To assist, advice and represent the affected PDL9 communities, Buffer Zone Landowners Associations, North & South Koroba Rural LLGs and Hela Provincial Government in relation to the development of PNG LNGs related resource project agreements.
(e) Administer, carry out or implement any other transferred or delegated functions or activities of the National Government, Hela Provincial Government and North/South Koroba Rural LLGs.
(f) To receive funds on behalf of the North Koroba Rural LLG and to make payment as directed by them.
(g) To do all such other matters and things as seen to it to be necessary or desirable for carrying out and performing its powers, functions, duties, and responsibilities and any other ancillary or incidental matter or thing.
________________________________________________________________
Kumbari & Associates Lawyers: Lawyers for Plaintiffs
Solicitor General: Lawyers for Defendants
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