PNG Coffee Industry Board v Panga Coffee Factory Pty Ltd [1990] PGSC 18; [1990] PNGLR 363 (11 September 1990)

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STATUTES - Statutory powers and duties - Statutory bodies - Power to contract - Power to do all things necessary to performance of functions - Power to issue licences subject to conditions - Discretionary powers - Fetter of discretion - Test for - Incompatibility with due exercise of valid powers - Licence conditions conflicting with contractual provisions.

TRADE AND COMMERCE - Statutory regulation of marketing - Coffee industry - Export licence - Conditions - Whether power to impose fettered by contractual provisions of stockpiling agreements - Coffee Industry Act (Ch No 208), ss 13, 14, 32.

ADMINISTRATION LAW - Statutory bodies - Statutory regulation of marketing - Coffee industry - Export licence - Conditions - Whether power to impose fettered by contractual provisions of stockpiling agreements - Coffee Industry Act (Ch No 208), ss 13, 14, 32.

COSTS - Departing from general rule - Discretion - Contempt proceedings - Conduct of party - Proceedings dismissed for non-compliance with Rules - Payment of costs by each party reasonable.

The Papua New Guinea Coffee Industry Board (the Board) entered into agreements with licensed exporters which encouraged the licensed exporters to stockpile green coffee beans (for advance payment of K$1.50 per kilo by the Board) for the purpose of demonstrating Papua New Guinea’s capacity to meet additional demand on the international market and thereby to influence the International Coffee Organisation to enlarge the international quota for Papua New Guinea. The agreements, which obliged the exporter to make appropriate repayments if stockpiles were reduced, contained no other provisions or conditions as to repayment or reduction of stockpiles or other contingencies. The international quota scheme was abandoned in July 1989.

In October 1989, the Board issued an annual certificate of registration to a coffee exporter which, inter alia, required the coffee exporter to reduce its stockpile over the period of registration and to repay moneys not otherwise payable under its agreement with the Board.

The Coffee Industry Act (Ch No 208) conferred the following powers and duties on the Board:

· power to do all things necessary or convenient in connection with the performance of its functions (s 13(1));

· to exercise its powers and perform its functions in the best interests of the coffee producers of Papua New Guinea (s 14);

· power, subject to such conditions and restrictions as it thinks fit, to register a person as a registered coffee exporter (s 32(1));

· power to cancel registration for failure to comply with conditions or restrictions endorsed on a certificate of registration (s 32(4));

N1>(1) Persons or public bodies entrusted by the legislature with certain powers or duties expressly or impliedly for public purposes, cannot divest themselves of those powers and duties by entering into contracts or taking action incompatible with the due exercise of the powers or the discharge of the duties.

Birkdale District Electricity Supply Co v Southport Corporation [1926] AC 355 at 364, followed.

N1>(2) (Amet J not deciding) A contract entered into by a statutory body pursuant to a valid exercise of power may operate to fetter the exercise of future discretionary powers in relation to the subject matter of the contract where the contract is not incompatible with the powers and duties of the statutory body.

Windsor and Maidenhead Royal Borough Council v Brandrose Investments Ltd [1981] 1 WLR 1083, followed.

N1>(3) (Amet J not deciding) Accordingly, whilst the imposition of conditions and restrictions on the certificate of registration of a coffee exporter was a discretionary power conferred on the Board by s 32(1) of the Coffee Industry Act, the Board had fettered its discretion to exercise those powers by entering into the agreement with the coffee exporter as to stockpiling which was not incompatible with the Board’s powers under s 13 and s 14 of the Act.

N1>(4) (Amet J dissenting). Having regard to the conduct of the parties and the failure of the prosecutor to comply with the rules as to service, an order that each party to proceedings for contempt of court in failing to comply with an order of the court should pay its own costs, was fair and reasonable.

Samrein Pty Ltd v Metropolitan Water Sewerage & Drainage Board (1982) 56 ALJR 678.

Water Resources, Commissioner of v Federated Engine Drivers’ and Firemen’s Association of Australasia Queensland Branch [1988] 2 Qd 385.

Windsor and Maidenhead Royal Borough Council v Brandrose Investments Ltd [1981] 1 WLR 1083.

This was an appeal from a decision of the National Court declaring that conditions imposed on the grant of a certificate of registration for an export licence under the Coffee Industry Act (Ch No 208) were not validly imposed.

AMET J: The appellant, Papua New Guinea Coffee Industry Board (the Board), is a statutory corporation established under s 3 of the Coffee Industry Act (Ch No 208) (the Act). One of its major functions stipulated under s 12 is “to provide for the control and regulation of the production, processing, marketing and export of coffee, and for related purposes”.

The respondent, Panga Coffee Factory, Pty Ltd (Panga), is a national company with its offices at Kagamuga in the Western Highlands Province. It is a coffee exporter. To so conduct business as a coffee exporter it needed to be registered by the Board pursuant to its powers under s 32 of the Act. Panga was registered for 1989.

Sometime in March 1988, the Board promulgated a policy whereby it would pay K1.50 per kilogram to coffee exporters to encourage them to stockpile coffee in their warehouses for the purposes of maximising stockpiled coffee by 30 March 1989. A formula was devised by which, upon a reduction of the additional stock, the exporter would pay to the Board an amount equal to the value of the stock reduced. The purpose of this stockpiling exercise was to demonstrate to the International Coffee Organisation, Papua New Guinea’s capacity to produce and to make representation to the International Coffee Organisation not to reduce Papua New Guinea’s membership quota but to increase it on the international market. The registered exporters, including Panga, were advised by the Board that, on 30 March 1989, a representative of the International Coffee Organisation would make an inspection and audit in Papua New Guinea of all coffee stocks. The International Coffee Organisation inspection was conducted and as a result of the audited amount of coffee stocks on hand and the representations made by the Board, the International Coffee Organisation increased the Papua New Guinea quota by 11,000 bags.

In furtherance of the Board’s stockpiling policy of March 1988, it entered into a written agreement with Panga on 5 September 1988 to give effect to the policy and to spell out specifically the formula by which the Board was to pay registered exporters who stockpiled coffee and the formula by which the exporters were to make payment to the Board when the additional stock was reduced. Between May and 5 September 1988, pursuant to the policy and the terms of the agreement, the Board paid to Panga a total sum of K12,042,480 in a number of payments. Thereafter, up to the institution of the proceedings, Panga had paid to the Board K379,710 pursuant to the terms and formula under the agreement for reduction of additional stockpiled coffee.

On 4 July 1989, as a result of a breakdown in the price fixing agreement of the International Coffee Organisation, the Board issued a circular advising that as at 9 am that day all quotas by the International Coffee Organisation were suspended and the international market returned to the free market situation and that limitations on exports and imports were suspended.

Following this breakdown in the price fixing agreement of the International Coffee Organisation and the suspension of all quota arrangements, the Board made a number of attempts to have the registered exporters, and in particular, Panga expedite repayment of the moneys that had been paid to them pursuant to the stockpiling agreement. At this time Panga had a balance of K11,662,770 outstanding in moneys that had been paid to it by the Board. The Board first issued a general circular notice to all exporters entitled “refund of coffee stock purchase loans” on 17 April 1989, stipulating relaxed terms and conditions for refund of the moneys paid to exporters under the stockpiling scheme and urging exporters to expedite repayment. It threatened in par 5 that “failure to repay all monies outstanding by 10 August 1989 will mean immediate suspension of quota and a non-renewal of export registration in the 1989/90 coffee year”. The Board also wrote to Panga on 19 July 1989 followed by another letter on 27 July 1989 expressing concern at the slowness in repayment by Panga and warning it that all moneys outstanding be repaid to the Board by 10 August 1989 including costs. On 28 August 1989, the Board issued yet another circular to all exporters entitled “revised guidelines for the registration of coffee exporters”. Clause 11 of the revised guidelines provided that:

“Before an export license is granted for the year ended 30 September 1990 the applicant is required to have repaid all monies advanced to it by the Board (including without derogating from the generality of the foregoing, all monies loaned to exporters for the purpose of stock retention scheme).”

Panga Coffee then instituted proceedings seeking judicial review of the Board’s policy guidelines and conditions it purported to impose upon the renewal of export licenses. On 1 September 1989, it obtained a restraining order against the Board in the following terms:

N2>“2. The Applicant by its Counsel having undertaken to abide by any order the Court may make as to damages, the Papua New Guinea Coffee Industry Board be restrained by its members, servants or agents from taking into account the alleged indebtedness of the Applicant to the Board, in respect of decisions touching on the Applicant’s licenses under the Coffee Industry Act or the renewal thereof until this matter is disposed of or until further order.”

On 4 October 1989, the Board issued to Panga a certificate of registration expressed to be subject to the following conditions and restrictions:

(a) The applicant must comply in all respects with the terms of any written agreement between it and the Papua New Guinea Coffee Industry Board which settled the claims of the applicant against the said Board in proceedings OS 145 of 1989 and WS 1243 of 1989 pending in the National Court.

(b) If no such agreement is entered into before 5.00 pm on 16 October 1989, then the applicant must reduce its stock of green bean coffee of exportable quality held by it at its registered warehouse as at 30 September 1989, other than working stock, by 33,000 bags of 60 kilograms every three months from 1 October, 1989 for a period of 12 months thereafter. This sub-clause does not apply to any green bean coffee of exportable quality purchased by the registered coffee exporter after 30 September 1989.

N2>2. The applicant must comply with all lawful obligations and requirements contained in circulars of the said Board issued from time to time to registered coffee exporters.”

On 16 October 1989, Panga filed motion for contempt against the Board, alleging that the Board had wilfully disobeyed the terms of cl 2 of the order of the Court made 1 September 1989.

This motion for contempt came on for hearing together with the substantive judicial review application before the learned trial judge. On 19 October 1989, the trial judge concluded that the notice of motion was defective because it had not been served on the defendant Board three clear days before the appointed time for hearing. On 20 October, the court changed its earlier ruling and considered that the charge was properly before it. In the final judgment, his Honour reconsidered his earlier ruling and decided that the contempt charge was not properly before him on 19 October 1989 because it had not been served properly and so declined to entertain the charge. The court then ordered that each party pay their own costs in respect of this motion for contempt.

The appellant submits that there were no special circumstances to suggest that costs should not follow the event, and accordingly it should have been awarded its costs in successfully resisting the application. The respondent on the other hand has submitted that in view of the findings of the court on the judicial review matter, the appellant was plainly in contempt of the order of Los J when it imposed the conditions. It avoided a contempt conviction by reliance on a technicality, and so the making of no order as to costs was therefore within the discretion of the court which was perfectly entitled to express its disapproval of the Board’s conduct by depriving it of costs.

I am of the opinion that the appellant should succeed on this ground of appeal. The trial judge quite properly considered that because the sanction for contempt carried with it criminal penalties it was necessary that service be properly effected and so the court declined to entertain the matter any further. That being the case, the appellant had successfully resisted any further prosecution of the motion by the respondent. The matter was therefore no longer before the court and it is not to the point that the court might have made certain findings on the substantive judicial review application. Those findings, such as they might have been, did not impinge in any way, in law, upon the charge of contempt. It is also not to the point to say that conviction for contempt was avoided by reliance on a technicality. The appellant was perfectly entitled to rely on all rules of practice and procedure that litigants are obliged to adhere to.

The appellant has in the alternative submitted that it had not alleged in the conditions it had imposed that the respondent was indebted to it, such as to be in contempt of the restraining order. This is evident on the face of the conditions that are the subject of the allegation of contempt, that they do not allege in terms that the respondent was indebted to the appellant. Indeed conditions 1(a) and (b) relate to an agreement that was attempted to be entered into which did not eventuate. There is no reference whatsoever in either of those two paragraphs of an allegation by the appellant that the respondent was indebted to it. Neither do the terms of cl 2 refer to or allege any indebtedness on the part of the respondent. Clause 2 does refer to various circulars in which the Board required the coffee exporters to expedite repayment of the moneys paid out by the Board pursuant to the stockpiling scheme. But it does not specifically in terms allege indebtedness on the part of the respondent and that the said indebtedness was being taken into account as a condition for the grant of the certificate of registration.

The alleged contempt, by the conditions in the certificate of registration, against the order of 1 September 1989, as the appellant had submitted, might well have been arguable as being unsubstantiated. In any event the matter did not proceed at all to a determination and so it is quite without foundation for the respondent to support the order of the trial judge as to costs by suggesting that the Board had avoided a conviction for contempt by a mere technicality. It ought not to be the function of this Court to surmise from the evidence in relation to the substantive judicial review matter that the issue of contempt had in fact been supported or that a conviction might have been sustained. The legal position quite clearly is that the charge was dismissed as not being properly before the Court at that stage. I consider that the learned trial judge erred in the exercise of his discretion. Costs should follow the event.

“A declaration that, in considering any conditions to be imposed on the grant of an export licence in favour of the applicant for the year ended 30 September 1990, the respondent was not entitled to take into account:

(i) Payments which the respondent alleged to be due by the applicant under various agreements relating to the stockpiling of coffee;

(ii) The respondent’s allegations that the applicant was in breach under the said agreements.”

The appellant contends that the learned trial judge erred in making the declaration sought under this claim because throughout the judicial review proceedings it indicated that it did not allege that payments were due under the agreements or that the respondent was in breach of the agreements. It is submitted that the Court erred in assuming that at the time the appellant considered the grant of the certificate of registration to the respondent for the year ending 30 September 1990, the appellant alleged that payments were due by the respondent under various agreements relating to the stockpiling of coffee and alleged that the respondent was in breach of the said agreements.

Once again it is necessary quite simply to look at the terms of the conditions that were imposed on the certificate of registration to the respondent. Paragraph 1(a) does not in any way allege that moneys were due by the respondent Panga to the appellant Board under various agreements relating to the stockpiling of coffee. It rather refers to an anticipated agreement between the Board and the respondent Panga which might settle the claims of Panga against the Board in proceedings, OS 145 of 1989 and WS 1243 of 1989, pending in the National Court. The condition stipulated that Panga must comply in all respects with the terms of the anticipated agreement in relation to the two matters pending in the National Court. It had nothing whatsoever to do with any existing agreements nor indeed with any moneys that might be alleged to be owing to the Board by the respondent Panga. Paragraph 1(b) of the conditions similarly had no relevance whatsoever to the declaration that was sought. It also referred to the proposed agreement stipulating that “if no such agreement is entered into before 5.00 pm on 16 October 1989, then the registered coffee exporter must reduce its stock of green bean coffee etc”. Paragraph 2 of the conditions referred simply to various circulars of the Board issued from time to time through registered coffee exporters and stipulating that the registered coffee exporter, meaning Panga, must comply with all lawful obligations and requirements contained in such circulars. It also had no reference to any allegations by the Board that payments were due from Panga under various agreements relating to the stockpiling of coffee. Nor that the exporter Panga was in breach under any such agreements.

And so, examining closely the terms of the conditions imposed upon the certificate of registration granted to the respondent Panga on 4 October 1989 and the terms of the declaration sought under 4(d) in the amended originating summons, it becomes quite clear that the declarations sought were misconceived and consequently misled the trial judge into the same error. It appears that the respondent Panga misconstrued the agreement being referred to in the conditions par 1(a) and par 1(b) as being the agreement entered into between the Board and Panga in relation to the stockpiling scheme, on 5 September 1988, whereas the agreement being referred to in the conditions was a proposed agreement to settle Panga’s claims against the Board in two pending National Court proceedings. The conditions quite unequivocally do not refer to the agreement in relation to the stockpiling scheme entered into between the Board and Panga on 5 September 1988.

I consider therefore that the declaration sought under 4(d) was misconceived and consequently misled the trial judge into error in concluding that at the time the appellant considered and granted the certificate of registration and imposed the conditions the appellant alleged that payments were due under the agreement of 5 September 1988. I therefore uphold this ground of appeal.

The appellant has submitted that the learned trial judge erred in law in holding that the stockpiling agreement between it and Panga of 5 September 1988 fettered the appellant’s discretion in issuing a certificate of registration to the respondent as a coffee exporter subject to conditions and restrictions imposed on the certificate. Secondly, that the learned trial judge also erred in holding that the said conditions were imposed for the ulterior purpose of putting the appellant in a better position than it was under the agreement for recovering the moneys advanced for stockpiling.

The respondent submitted that the trial judge was correct in finding that the appellant, pursuant to its contract with the respondent, validly fettered its discretion under s 32. The conditions of registration which the appellant purported to impose abrogated the respondent’s rights under the contract and were therefore invalid. It was also submitted by the respondent that the conditions were imposed for the ulterior and improper purpose of enforcing repayment of the moneys which were not due under the terms of the contract until certain conditions were complied with. And so it was submitted that the appellant was attempting to avoid the obligations and consequences of the terms of the agreement and to have its moneys repaid by the means of the imposition of the conditions quite contrary to the terms of the agreement.

N2>A. The Exporter has been granted a Licence by the Board to export coffee from Papua New Guinea.

N2>B. The Exporter has been allocated a total working stock of 660,660 kilograms of green bean coffee of exportable quality which the exporter has agreed to hold at its registered warehouse at all times (hereinafter called its ‘working stock’). This includes the allocation for Kumul Kopi for which Panga Coffee Factory Pty Ltd has accepted responsibility.

N2>C. The Exporter has been allocated a target of additional stock of 1,226,940 kilograms of green bean coffee of exportable quality which the exporter may hold at its warehouses.

N2>1. In consideration of these presents, the Board agrees to pay to the Exporter the amount of K1.50 per kilogram for the amount of additional stock of green bean coffee of exportable quality which the exporter has at its registered warehouse from this count forward. The words ‘additional stock’ shall mean the difference between (a) and the amount of stock of green bean coffee of exportable quality which the exporter holds at its registered warehouse at the time the Board’s agents inspect the exporter’s registered warehouse and (b) the exporter’s working stock.

N2>2. The Board agrees that it’s agent, employees, servants or workmen will inspect the exporter’s registered warehouse at least once each month and the exporter agrees to allow the Board’s agents, employees, servants or workmen free and uninterrupted access to it’s warehouse on any day, excluding weekends and public holidays and the exporter agrees that it’s employees, agents, servants or workmen shall not hinder, obstruct or interfere with the Board’s agents, employees, servants or workmen in any way.

N2>3. In the event that the exporter’s stockholding of green bean coffee of exportable quality at its registered warehouse is inspected by the Board and found to be less than the latest verified stock figure (if that exceeded the working stock), then the exporter agrees to pay to the Board within ten (10) days of the date of inspection, the amount of K1.50 per kilogram multiplied by the difference between the exporter’s current stockholding as inspected and calculated by the Board and the exporter’s latest verified stock.

N2>4. The said amount shall be a debt payable by the exporter to the Board without any notice or demand being required to be given to the exporter. The exporter agrees to effect payment to the Board by depositing the said amount to the Board’s Account Number 6853003 with the Goroka Branch of the Papua New Guinea Banking Corporation within the said time period.

N2>5. If the exporter shall at any time fail to pay to the Board any monies whatsoever required to be paid by the exporter pursuant to the provisions of this Agreement then the exporter shall pay interest on such monies at the rate of 24 percent per annum on so much of the monies as remains unpaid from time to time until full payment of the said monies and interest is received by the Board. Interest shall accrue from day to day and shall accrue on the basis of a year of three hundred and sixty-five (365) days.

N2>6. The Board may without notice to the exporter set-off the whole or any part of any liabilities of the Board to the exporter against the exporter’s indebtedness to the Board.”

Section 13(1)(i) of the Coffee Industry Act, on the powers of the Board, provides:

“Subject to this Act and in particular Section 14, the Board had, in additional to the other powers conferred on it by this Act, power to do all things that are necessary or convenient to be done for or in connexion with the performance of its functions and, in particular has power, to enter into contracts.”

“The Board shall exercise its powers and perform its functions in such manner as the Board considers to be in the best interests of the coffee producers of Papua New Guinea.”

“The Board may — subject to such conditions and restrictions as it thinks fit, and as are endorsed on the certificate of registration, register a person as a registered coffee exporter...”

“The Board may cancel the registration of a person under this section on the ground that he had failed to comply with any of the conditions or to observe any of the restrictions endorsed on the certificate of registration.”

The appellant’s first argument is that the terms of the conditions are not inconsistent with the continued operation of the terms of the agreement. Clause (1) of the conditions is, of course, irrelevant as it does not relate in any way at all to the agreement in question. Clause (2) also does not refer to any of the terms of the agreement nor does it stipulate any conditions which can be said to be inconsistent with the precise terms of the agreement. It was submitted by the appellant that the conditions in cl (2) for the registered coffee exporter to comply with all ]awful obligations and requirements contained in circulars issued by the Board from time to time are a perfectly legitimate and valid instruction or requirement upon registered coffee exporters by the Board, that it is perfectly consistent with s 32 of the Act. Going to the terms of the relevant circulars which the Board had issued relating to the stockpiling agreement and the repayment of moneys paid by the Board to registered exporters by the ordinary process of reduction in the additional stock piled, the appellant submits that the terms of those circulars do not derogate from nor are they in terms inconsistent with any of the relevant provisions of the agreement. The appellant submitted that the imposition of the conditions was not acting in breach of its obligations under the agreement. It was not alleging that the moneys were then due and payable. The appellant submitted that it was simply exercising its powers to regulate the export of coffee, and because the basis for the stockpiling scheme was now no longer in existence, it considered it appropriate that stockpiled coffee be progressively reduced by the registered exporters, principally the respondent.

I consider that it is relevant and necessary to consider the basis upon which the agreement, which the respondent alleges has been infringed, came into being. It is not denied that the stockpiling scheme between the appellant and the respondent given effect to in the agreement, was to enable the Board to make representation to the International Coffee Organisation to increase the Board’s international quota. This would, of course, in turn benefit all the coffee producers and exporters. The producers would then be able to sell more, and the large registered exporters would similarly be enabled by the process to sell more to the international market. And, as outlined in the circumstances giving rise to this dispute, the registered exporters were encouraged by this incentive of a payment in advance by the Board to them to stockpile coffee in excess of their assigned working stock. This incentive was to assist the Board in its endeavours to assist the industry generally in the country in its representation to the International Coffee Organisation. And so the registered coffee exporters were benefiting in advance in the amount of K1.50 per kilogram for the amount of additional stock that the Board requested them to stockpile and which they agreed to hold and not dispose of on the market pending the inspection and audit by the representatives of the International Coffee Organisation.

When, however, the international quota arrangements were suspended, the export and import of coffee became open and the necessity for stockpiling did not exist anymore. And so, in the overall interests of the industry and in particular the small holder producers who were dependent on the Board to inject a coffee stabilisation fund to prop up the price for coffee when coffee prices fell, the Board made efforts through its various procedures in circular instructions and conditions to require registered exporters, and in particular the respondent, to expedite repayment of the moneys that had been advanced to them by reducing their additional stock. The appellant submits that it was simply saying to the respondent registered exporter, to speed up the process of reducing its additional stock for which it had been advanced the moneys and repay the moneys, in order that the Board might be able to use it to the benefit of the industry generally.

That is the natural consequence of the requirement upon the respondent progressively to reduce its stock. The conditions did relate to the agreement’s methods of repayment, which was by reduction of the additional stock held, but that is simply the consequence of the operation of the provision of the agreement. Standing by itself the conditions are perfectly legitimate and valid. It does not necessarily infringe or offend against the provisions of the agreement. It is the consequence of compliance with the conditions which brings into play the provisions of the agreement.

The learned trial judge considered that compliance with the conditions which brought into play the terms of the agreement thus requiring or obliging the respondent to make payments to the appellant was an ulterior purpose in that it put the appellant in a better position than it was under the agreement. I cannot see that this is necessarily an ulterior purpose. It is not putting the appellant in a better position. It is simply, by the operation of the terms of the agreement, expediting what would ordinarily happen. The terms of the agreement did not provide any particular time frame. It provided simply that upon reduction of the additional stock the moneys should become a debt payable by the exporter to the Board without any notice. Because of the failure of the quota system on the international market, the Board, in the interests of the industry, simply provided a time frame within which stock was to be reduced. The repayment of the moneys was due and payable at any time upon reduction of stock, and so the requirement by the Board for progressive reduction of stock within a certain time frame did not infringe any terms of the agreement. It had the benefit of a large sum of money interest free which small holders did not have the benefit and the Board was simply saying, we would now like you to reduce your stock and thereby repay this advance so that it could be used to assist the industry and in particular the small holders. I can see no ulterior purpose in the motive with which the Board was endeavouring to have the exporter return the very large amount of advance it had had the benefit of, interest free.

LOS J: Since drafting my own judgment in this appeal, I have read the draft judgment of my brother Ellis J. To avoid any duplicity in the basic reasoning and conclusions, I accept and concur with respect his Honour’s eloquent and detailed reasoning and the conclusions. I have nothing further to add.

ELLIS J: The factual matrix underlying the questions of administrative law raised by this appeal may be simply stated. Pursuant to powers conferred upon by it by the Coffee Industry Act (Ch No 208) (the Act), the Papua New Guinea Coffee Industry Board (the Board) entered into agreements with licensed exporters such as the present respondent, Panga Coffee Factory Pty Ltd (Panga). In doing so, the Board was motivated by a desire to enlarge Papua New Guinea’s share of the quota which at that time operated in the world market under the direction of the International Coffee Organisation. This laudable aim was pursued by way of a financial incentive designed to encourage licensed exporters to stockpile green coffee beans rather than sell them so as to demonstrate Papua New Guinea’s capacity to meet the additional demand which would be created by an increase in the national coffee quota. Such exporters were paid K1.50 per kilogram of additional stock on hand, presumably intended to compensate for the costs of production not covered by sale proceeds by reason of deliberate stockpiling.

This arrangement became the subject of a written agreement between the Board and Panga containing a number of features which are common ground between the parties: the contract did not operate to render moneys advanced by the Board to Panga a debt due by Panga to the Board and it obliged Panga, within 10 days of inspection, to make an appropriate repayment to the Board whenever its stocks reduced. The contract otherwise imposed no temporal conditions as to either repayment of the moneys advanced or reduction of Panga’s stockpile.

This policy of “stockpiling” was promulgated in about March 1988 in order to maximise stockpiled coffee within Papua New Guinea on 30 March 1989. The subject contract was dated 5 September 1988. Although the stockpiling scheme was successful in that there was a modest increase in the national coffee quota, the international quota scheme was abandoned via a circular from the International Coffee Organisation dated 4 July 1989.

On 4 October 1989, the Board issued a certificate of registration in favour of Panga for the period from 1 October 1989 to 30 September 1990 (both dates inclusive) which had the effect of imposing certain restrictions on Panga’s licence as a coffee exporter, which I set out in full later herein. It is sufficient for present purposes to indicate that condition 1(b) sought to require Panga to reduce its stockpile over the ensuing 12 months with a consequential repayment of moneys not otherwise repayable under the agreement between the Board and Panga.

Hence, the first question raised by the present appeal is whether the Board can, as a matter of law, impose upon Panga via condition 1(b) an obligation not contained in Panga’s contract with the Board. Panga, the respondent to this appeal, contested the Board’s assertion that it could impose a condition which the Board sought to justify on the basis that the contract could not operate to fetter the Board’s discretion.

In determining this issue it is necessary first to consider the relevant provisions of the statute from which the Board derives its powers. Section 12 of the Act sets out the functions of the Board in terms which are undoubtedly broad enough to encompass the stockpiling scheme, the subject contract and the licence conditions. Section 13 deals with the powers of the Board: I need not set out in full each of the specific functions listed within this section; it is sufficient to indicate that the Board is empowered “to do all things that are necessary or convenient to be done for or in connexion with the performance of its functions” and to note that s 13(1)(i) entitles the Board “to enter into contracts”. Significantly, s 14 provides:

“The Board shall exercise its powers and perform its functions in such manner as the Board considers to be in the best interests of the coffee producers of Papua New Guinea.”

Section 32 deals with the registration of coffee exporters and, relevantly for present purposes, entitles the Board to make registration “subject to such conditions and restrictions as it thinks fit”.

Clearly, the Board had the statutory power to act as it did: the question is whether it agreement with Panga precludes the conditions sought to be imposed (as contended by the respondent) or whether that agreement cannot, in law, operate to fetter the Board’s discretion in respect of its conditional re-registration of Panga (as contended by the appellant).

When considering this question, there are competing interests and it is necessary, as Mason J (as he then was) said in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 at 76, to “work a reasonable compromise between the desirability of recognising the binding nature of contracts and the need to preserve the free and unfettered exercise of the discretion”.

The practical consequence of each extreme is obvious: a totally unfettered discretion will render people reluctant to contract with statutory bodies; a fully fettered discretion may well prevent such a body from introducing new or additional provisions in order to effect an adjustment to take account of changed circumstances. In the present case those alternatives would present as either licensed exporters being unwilling to stockpile or the Board being unable to adjust the regulatory framework of the industry upon the abandonment of the international quota system. As contracts typically limit the freedom of statutory bodies, that necessarily involves some fetter of discretion Accordingly, the question is one of degree: to what extent can a statutory body legally bind itself for the future?

There are no local reported decisions directly on this point. The two leading English cases are decisions of the House of Lords in Ayr Harbour Trustees v Oswald (1883) 8 App Cas 623 and Birkdale District Electricity Supply Co v Southport Corporation [1926] AC 355. In the former case the Trustees unsuccessfully sought contractually to abdicate their statutory power to build and that contract was held to be void. The latter decision involved the Company endeavouring to charge the Corporation for electricity at a rate higher than that specified in an agreement between the parties: it being contended that the contract was an invalid fetter of the statutory power of the Company. That contention was rejected on the basis that the “rule” against divesting a statutory power did not apply to contracts which restricted action in relation to matters of business management (per Lord Sumner, at 372). The decision in the Ayr case was distinguished by his Lordship on the basis that the Trustees in that case had “renounced their statutory birthright” (ibid, at 371-372).

Incompatibility with powers and duties of the statutory body appears to be the crucial test: as the Earl of Birkenhead said in Birkdale District Electricity Supply Co v Southport Corporation, at 364:

“... if a person or public body is entrusted by the Legislature with certain powers and duties expressly or impliedly for public purposes, those persons or bodies cannot divest themselves of these powers and duties. They cannot enter into any contract or take any action incompatible with the due exercise of their powers or the discharge of their duties.”

In Dowty Boulton Paul Ltd v Wolverhampton Corporation [1971] 1 WLR 204; [1971] 2 All ER 277, the Court of Appeal in England was urged to follow the Ayr decision. Thirty-five years into a 99-year lease of a municipal airport, the Corporation unsuccessfully endeavoured to discontinue the airport usage in favour of a proposed housing estate. That decision, along with a more recent decision in Windsor and Maidenhead Royal Borough Council v Brandrose Investments Ltd [1981] 1 WLR 1083, is authority for the proposition that a contract, made by a statutory body pursuant to a valid exercise of its power, may operate to fetter that statutory body’s discretion in relation to that subject matter.

These decisions suggest that a statutory body may contract so as to fetter the future exercise of its discretion and thereby bind its successors provided that such a contract is not incompatible with the powers of that statutory body.

In the Ayr case, the incompatibility was the abdication of the statutory power to build; no such incompatibility was apparent in either the Birkdale decision or in the Wolverhampton Corporation case, each of which represents an instance where a statutory body was held to be contractually bound by its prior decision in matters which might be regarded as normal business decisions, namely, the price of electricity and a lease covenant as to land use respectively.

The proper test therefore appears to be whether the contract is incompatible with the powers and duties of the statutory body. No such incompatibility has been shown by the present appellant.

The appellant filed written submissions which included the following contention — “A public body cannot by contract fetter its right or duty to exercise a discretion vested in it by law” — and Halsbury’s Laws of England (4th ed), Vol 1, par 188, was relied upon in support of that proposition which was a selective quotation of part of a sentence within that paragraph. A consideration of the entire sentence demonstrates that the general contention of the appellant is not without limitations relevant to the present case:

“A public body cannot by contract fetter its right or duty to exercise a discretion vested in it by law, although this principle appears to be limited to contracts which are incompatible with the discharge of its functions and so will not normally include commercial contracts.”

A number of reported decisions were cited in support of this submission. In R v The Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd [1979] HCA 62; (1979) 144 CLR 45, the High Court of Australia held the Tribunal’s discretion to refuse consent to a transfer of a licence extended to matters of public interest and was not confined to cases where the transfer would bring about a contravention of the Act and that a concentration of ownership below the limit fixed by s 90c might be taken into account when deciding whether to consent to the transfer of a licence. Three aspects need to be borne in mind. First, the decision both acknowledges and demonstrates that the subject matter, scope and purpose of the particular Act under consideration may well result in a statutory discretion being not unconfined even though the enabling Act entitles the statutory body to do all things as it thinks fit. Secondly, the 2HD case is not in point: the present case involves the particular issue of whether the statutory discretion is fettered by reason of the conditions of a prior contract. Finally, to the extent that this decision may be used to support the proposition that an unqualified statutory discretion generally is unconfined unless it is affected by limitations derived from the subject matter, scope and purpose of the statute, I would note that in the present case the words of s 13(1)(i) which empower the Board “to enter into contracts” can have no practical utility if the discretion is totally unconfined.

The decisions in William Cory & Son Ltd v London Corporation [1951] 2 KB 476; Commissioners of Crown Lands v Page [1960] 2 KB 274 and Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (supra) were also relied upon in support of the proposition that “a public body cannot by contract fetter its right or duty to exercise a discretion vested in it by law”.

The William Cory case involved a plaintiff claiming that the London Corporation was in breach of a term of the contract in question which thereby amounted to a repudiation of the contract through anticipatory breach. Being unable to challenge the amended by-laws the plaintiff there relied upon the contract. Here the plaintiff did not bring a claim under the contract: it elected to challenge the imposition of the licence conditions thereby rendering this decision inapplicable in my view.

Likewise, in Commissioners of Crown Lands v Page, the statutory body successfully resisted a challenge based upon an implied covenant for quiet enjoyment as contended for by the lessee. I note that this case involved the requisition of property arising out of the exigencies of war which gave rise to litigation commenced some 10 years after the war by a lessee who had paid no rent in the interim.

In the Ansett Transport Industries’ case, the relevant agreement had the added status of being particularly authorised by the Commonwealth parliament via a statute. Of the five judges hearing the case, Barwick CJ, Gibbs J and Aicken J (Mason J and Murphy J contra) held that the agreement was not an invalid fetter on the discretionary power conferred by the relevant regulations thereby rendering the agreement valid. Aicken J, with whom Barwick CJ agreed, considered the grant of permits to other operators was a breach of that agreement. However, Gibbs J joined with Mason J and Murphy J to the contrary, thereby causing the plaintiff to fail. Senior counsel for the appellant in the present case directed the Court’s attention to the portion of the judgment of Mason J (as he then was) appearing (at 74) of the report of that case in which a reference is made to the Ayr case. Both this reference and that which appears on the following page confirm that the relevant test is whether the contract in question is incompatible with the proper exercise of the powers and duties of the statutory body.

Although, as I have earlier indicated, there are no local cases which deal directly with this particular issue, the status of private contractual rights within a regulatory environment was considered by Kidu CJ in NTN Pty Ltd & NBN Ltd v The State [1986] PNGLR 167. The ratio decidendi in that case was that the regulation making power there in question was a power to regulate and restrict, not to prohibit in the absence of such a specific power. However, his Honour went on to indicate, albeit obiter, that s 14 of the Act in question did not permit the making of regulations which purported to abrogate contractual rights. In the present case it cannot be doubted that the legislation permitted the Board to impose licence conditions, the issue here is whether such conditions can operate to modify prior contractual provisions. In relying upon the decision in the Birkdale case I note that the result in this case is consistent with the sentiments expressed by the Chief Justice in the NTN case.

Although the view Which I have reached on the first issue raised by this appeal is sufficient to dispose of the appeal, I need to consider the second substantive issue for the following reason. Where a three member court hears a multiple issue appeal in circumstances where there is more than one dispositive issue then it is possible that the judgments of the court will give rise to a result but no ratio, as occurred in the AAP case: Victoria v Commonwealth [1975] HCA 52; (1975) 134 CLR 338. In the present case such a situation could arise if one judge did not consider it necessary to express an opinion on an issue and the other two judges were not in agreement on that issue. In those circumstances, although there would be an outcome to the appeal, there would be no guidance for subsequent litigants in the important areas of administrative law raised by this appeal.

The learned trial judge, in finding against the Board on the issue of improper purpose, held that the present case was in the same category as: Congreve v Home Office [1976] QB 629, where the Minister revoked licences in an attempt to secure a financial advantage due to an increase in licence fees; Brownells Ltd v Ironmongers’ Wages Board [1950] HCA 3; (1950) 81 CLR 108, where the Board empowered to fix overtime rates for employees used them to bring about the closing of shops at a different time; and Bailey v Conole [1931] WALawRp 3; (1931) 34 WALR 18, where a power to control bus stops was used to protect trams against competition from buses. His Honour also referred to the decisions in R v Bowman [1898] UKLawRpKQB 54; [1898] 1 QB 663 and R v Birmingham Licensing Planning Committee; Ex parte Kennedy [1972] 2 QB 140, both cases where it was held that the improper purpose was to supplement public funds. Finally on this aspect, his Honour considered the case of a local authority which spent money for two purposes, only one of which was permissible, thereby rendering the decision invalid: R v Inner London Education Authority; Ex parte Westminster Council [1986] 1 WLR 28; [1986] 1 All ER 19.

This Court’s attention was directed to a number of other reported decisions on the question of an improper purpose and, for that reason, I deal with each of them.

The only local decision which has mentioned the question of improper purpose appears to be Gegeyo v Minister for Lands and Physical Planning [1987] PNGLR 331, a National Court decision where a finding of improper purpose arose in circumstances where the evidence disclosed that the Minister’s reasons for revoking certain appointments were without any factual foundation.

Counsel for the appellant raised the decision in Samrein Pty Ltd v Metropolitan Water Sewerage & Drainage Board (1982) 56 ALJR 678, In that case the plaintiff alleged that the defendant had two purposes, one of which was said to be unauthorised. The High Court held that the second purpose was not ulterior but subsidiary to the true and dominant purpose. The purpose said to be unauthorised was alleged to be “a substantial purpose actuating the acquisition”. However, in a unanimous judgment, the five member bench held that this purpose was “simply a means to an end”.

Reference was also made to the decision of the Privy Council in Municipal Council of Sydney v Campbell [1925] AC 338, where the Council, which was empowered to acquire compulsorily land for development, was found to have acquired certain land in order to secure a financial benefit and, that being an unauthorised purpose, the acquisition was held invalid.

In considering these decisions, two points need to be borne in mind. First, there is no doubt that reduction of the stockpile is a purpose clearly within the statutory powers of the Board. This is therefore not a case involving a purpose not authorised by the enabling statute. Rather, the challenge in the present case has been based upon the claim that the motivating purpose was to achieve repayment of moneys advanced to Panga, a purpose which was unauthorised not by reason of the enabling statute but by virtue of a court order made on 1 September 1989. Secondly, I note that there are a number of authorities for the proposition that a decision which has augmenting public funds as its motivating purpose may be susceptible to challenge: R v Bowman; R v Birmingham Licensing Planning Committee; Ex parte Kennedy; Municipal Council of Sydney v Campbell.

The issue of improper purpose was argued in this Court by way of appeal. It is therefore necessary to consider in what circumstances it will be appropriate to interfere with the decision of the trial judge on this issue. As Miles J indicated in Lewis v PNG [1980] PNGLR 219 at 234-235:

“In deciding the merits of the case on appeal however one new matter arises and that is the decision of the trial judge himself. That decision, with all findings contained in it, has to be given proper weight. A Supreme Court judge is not free to substitute his own findings of fact unless he has given consideration to the whole of the decision of the National Court judge. In some areas the Supreme Court may properly be more reluctant to differ from the National Court judge. On a question of credit of a witness the trial judge is in a superior position and his assessment is not likely to be rejected. Where the decision is ultimately and largely an individual matter of opinion, for instance in apportioning blame for contributory negligence, or assessing damages for pain and suffering, the trial judge’s finding, based on his own opinions, should carry substantial weight. So too where the finding is one of a ‘Primary fact’ or ‘evidentiary fact’ rather than an inference from such facts (if the distinction may be drawn), the trial judge’s decision should rarely be disturbed.”

More recently, in Rimbink Pato v Umbu Pupu [1986] PNGLR 310 this Court adopted and applied three principles set out by Kirby P in Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 209-211. The second of those principles is most relevant for present purposes, namely that appellate courts will normally show deference to the assessment of credibility made by the trial judge, traditionally justified by the advantage which the trial judge has by reason of hearing and seeing the witnesses.

The decision of the trial judge in the present case, expressed at pp 34-35 of his judgment by way of adopting the submissions of counsel for Panga on this point, was that the licence conditions were imposed with the purpose of forcing Panga to repay to the Board those moneys previously advanced to it by the Board. His Honour appears to have focused upon the evidence of Mr Koki by quoting from his affidavit and four questions and answers from his cross-examination. Accordingly, his Honour’s conclusion on this issue is not specifically stated: it arises by way of implication. In referring to the evidence of Mr Koki, who was the principal witness for the defendant-appellant on this issue, he appears to have relied upon the answers given in cross-examination to the effect that the conditions wore imposed because the Board felt it could not get the money back if the licence was not renewed.

It is necessary to consider what evidence was available to the trial judge in the present case, which evidence may be conveniently grouped into three categories: the chronology of documents, the evidence of the Board’s Acting Chairman, Mr Koki, and the wording of the conditions themselves.

I deal first with the documents. On 17 April 1989, the Board issued a circular entitled “Refund of Coffee Stock Purchase Loans” in the following terms:

“Following strong requests from certain exporters we have relaxed the Board’s terms and conditions for refund of the Board’s Funds loaned to exporters under the 1988/89 stockholding scheme. The revised terms are as follows:

1. Monies are to be repaid according to the decline in stocks as verified by the Coopers & Lybrands monthly count up to and including that on 1/6/89. Any monies repayable are due within 10 days of the relevant count.

2. Monies not repaid by 10/6/89 to attract 14% interest per annum calculated on a daily basis.

3. All monies to be repaid by 10/8/89 and portions of monies not repaid by that date to attract 24%, calculated on a daily basis.

4. The interest rates may be revised upwards depending on any movement in market rates.

5. Failure to repay all monies outstanding by 10/8/89 will mean immediate suspension of quota and a non-renewal of export registration in the 1989/90 Coffee Year.”

On 4 July 1989, the Board promulgated a facsimile document heralding the suspension of the quota system and a return to a free market.

The body of a letter to Panga dated 27 July 1989 entitled “Refund of Coffee Stock Advance Loans” read:

“Further to our letter of 19th July, 1989 the Board is very concerned about your slowness in repaying the amount due, when requested by the Board. The Board would like to warn yourselves that all monies outstanding must be paid back to the Board by 10/8/89, including interest.

In line with the Board Circular Ref: 104-106/27006 of 17th April, 1989 in particular paragraph 2 the interest payable on the outstanding loan is recalculated up to the date, of this letter, as follows:

As a consequence of an ex parte application on 9 August 1989, Panga obtained interim orders.

“The Respondent will undertake not to cancel the Applicant’s export registration as a coffee exporter, or decline to renew such registration, save in accordance with s 32 of the Coffee Industry Act.”

The document went on to note that the Board would consider its position at a meeting on 24 August 1989, and the proceedings were stood over until 1 September 1989.

On the same day as that agreement was signed by counsel, the Board issued a circular to all exporters; two of its five paragraphs containing an indirect reference to Panga:

“As most of you will already have been made aware a certain exporter has not paid up the money at the stipulated time and the situation is creating mounting pressure on the Board in particular the management ...

You will appreciate that we are facing another difficult situation which was never anticipated whilst we are paying out these monies in goodwill which has not been reciprocated by one exporter and request everybody’s co-operation in maintaining calm in the industry.”

A further circular dated 28 August 1989 set out guidelines for the registration of coffee exporters. The paragraph numbered 11 read:

“Before an Export Licence is granted for the year ended 30th September 1990 the Applicant is required to have repaid all monies advanced to it by the Board (including without derogating from the generality of the foregoing, all monies loaned to Exporters for the purpose of stock retention scheme).”

On 1 September 1989, the proceedings gave rise to certain orders, the second of which is relevant for present purposes:

“The Applicant by its Counsel having undertaken to abide by any order the Court may make as to damages, the Papua New Guinea Coffee Industry Board be restrained by its members, servants or agents from taking into account the alleged indebtedness of the Applicant to the Board, in respect of decisions touching on the Applicant’s licenses [sic] under the Coffee Industry Act or the renewal thereof until this matter is disposed of or until further order.”

Subsequently, on 4 October 1989, the Board re-registered Panga subject to the following conditions:

(a) The applicant must comply in all respects with the terms of any written agreement between it and the Papua New Guinea Coffee Industry Board which settled the claims of the applicant against the said Board in proceedings OS 145 of the 1989 in WS 1243 of 1989 pending in the National Court.

(b) If no such agreement is entered into before 5.00 pm on 16th October, 1989, then the applicant must reduce its stock of green bean coffee of exportable quality held by it at its registered warehouse as at 30th September 1989, other than working stock, by 33,000 bags of 60 kgs every three months from 1st October, 1989, for a period of 12 months thereafter. This sub-clause does not apply to any green bean coffee of exportable quality purchased by the registered coffee exporter after 30th September, 1989.

N2>2. The applicant must comply with all lawful obligations and requirements contained in circulars of the said Board issued from time to time to registered coffee exporters.”

These documents clearly reveal that the Board was trying to obtain a refund of the outstanding moneys during at least the period from 17 April 1989 to 28 August 1989, despite the absence of a contractual provision entitling it to repayment. Indeed, both the circular of 17 April 1989 and the letter of 27 July 1989 attempted unilaterally to vary the contract between the parties by suggesting that all moneys were due and payable on 10 August 1989. The concluding sentence of the earlier document threatened that “failure to repay all monies outstanding by 10/8/89 will mean immediate suspension of quota and non-renewal of export registration in the 1989/90 Coffee Year”. This threat was still extant as late as 28 August 1989 as par 11 of the registration guidelines discloses. Further, by the circular dated 18 August 1989, the Board, in expressing its dissatisfaction with Panga, disclosed that this issue was of great importance to the Board, couched as it was in terms of “mounting pressure”, “another difficult situation” and alleging a lack of goodwill on the part of Panga. Finally under this heading, the very structure of the conditions which the Board sought to impose upon Panga, notwithstanding the court order of 1 September 1989, discloses the extent of the Board’s determination. It sought to give Panga two alternatives: either reach an agreement with the Board by 16 October 1989 finalising the litigation or reduce the stockpile. Although the earlier documents in the time carry less weight, it cannot be doubted that this body of evidence is capable of suggesting that the Board, despite the court’s restraining order, had not refrained from considering the alleged indebtedness of Panga at the time of its conditional re-registration on 4 October 1989.

Secondly, I deal with the crucial witness in the case: Dekot Koki, the Acting Chairman of the Board. In view of the cross-examination, I set out the body of his affidavit in full:

N2>“1. I am the Acting Chairman of the defendant and have been a member of the defendant for the majority of the time since my appointment on or about May 1983.

N2>2. I am duly authorised by the defendant to make this affidavit on his behalf.

N2>3. In registering the plaintiff as a registered coffee exporter pursuant to Section 32 of the Coffee Industry Act 1976 from the 1st of October 1989 subject to the conditions and restrictions endorsed on the Certificate of Registration, the defendant did not take into account any alleged indebtedness of the plaintiff to the defendant.

N2>4. The defendant did not in particular allege that the plaintiff was indebted to the defendant.

N2>5. The defendant took account of the fact that the plaintiff had a stockholding of green bean coffee of exportable quality at its registered factory and of the fact that the defendant had paid to the plaintiff K1.50 per kilo to hold such coffee pending the inspection and audit of it by the International, Coffee Organisation.

N2>6. The defendant formed the opinion that following the breakdown of negotiations with the International Coffee Organisation to increase the quota for Papua New Guinea, there was no need for the continuance of stockholding at such levels by registered coffee exporters.

N2>7. The defendant in the exercise of its powers to regulate the export of coffee and provide for stockholding arrangements, considered it appropriate for the plaintiff to progressively reduce its stockholding.

N2>8. The defendant did take account of the fact that when the plaintiff reduced its stockholding it would be required to make payments of K1.50 per kilo in accordance with its contractual arrangements with the defendant. However, the defendant in considering the renewal of the registration of the plaintiff was not asserting that the plaintiff was indebted to the defendant in respect of its stockholding whether under contract or otherwise.”

Counsel for the appellant submitted that the four questions and answers quoted by the trial judge at p 30 of his judgment did not convey the full import of Mr Koki’s evidence and for that reason I have carefully reviewed not only his affidavit but also the whole of his oral evidence.

I note that Mr Koki claims that the Board did not take into account Panga’s alleged indebtedness (par 3); that it did take account of the fact that money had been paid to Panga pending the inspection/audit by the International Coffee Organisation (par 5), and that the Board did take into consideration that repayments would be a consequence of a reduction in Panga’s stockpile (par 8). The affidavit suggests that there was no further need for the stockpile and that the Board “considered it appropriate for (Panga) to progressively reduce its stockholding”. No reasons were advanced in the affidavit as to why such a reduction was desirable: that was left for the cross-examiner to ascertain.

I set out, exactly as it appears in the transcript, that portion of the cross-examination relied upon by the trial judge and I include the next following questions:

N2>Q. Guidelines signed if money not paid by 10/8/89. Export licence would not be renewed?

This passage discloses a number of points. First, although the Board threatened in the guidelines of 28 August 1989 that the licence would not be renewed if the moneys were not repaid, it appears subequently to have considered that it could not obtain repayment if the licence was not renewed. Secondly, the penultimate answer represents an admission that the conditions were imposed because non-renewal would not achieve repayment. The last quoted question and answer reveal the witness trying to repair the damage of his previous answer. Subsequent questions failed to reveal any credible “other reasons” save for an attempt to suggest that the stockpiled coffee would be of a lower standard, a matter not raised in the affidavit of this witness, any of the Board’s circulars or other documents in evidence.

There are a number of other aspects of the cross-examination of Mr Koki which reflected adversely on the Board’s case including a concession that the “Board was under pressure to get its money back” and a further concession that the condition 2 of the re-registration of Panga included a reference to circulars for that same reason. Further, Mr Koki was unable to give any satisfactory explanation, despite taking a long time to answer, why condition 1(a) was included if the Board was only concerned with stockpiling and not repayment of the moneys.

True it is that in re-examination the witness replied “No” when asked whether the Board took into account Panga’s debt. However, by then, the damage was done. Indeed, when questioned in re-examination as to the reduction of the stockpiled coffee, he answered, in terms of the monetary consequences:

N2>“Q. Why do you say now not (in the) best interest(s) to hold coffee in (stockpile)?

N2>A. It could not be because it (would) take (money) away from shareholders fund got from growers.”

Thirdly, I consider the content and structure of the conditions per se. Although Mr Koki endeavoured to suggest that condition 1 was structured so that the stockpile reduction requirement would take effect in the absence of the written agreement, I think the preferable view is that the structure of condition 1 represents an attempt to exert further pressure on Panga to effect repayment. It is obvious that condition 1(b), in requiring the reduction of the stockpile, would achieve a consequential reduction in money previously advanced by the Board to Panga via cl 3 of the agreement. However, not only did this agreement contain no provision in respect of repayment of moneys advanced to Panga, it contained no other provision in respect of repayment of moneys advanced to Panga, it contained no provision for reduction of the stockpile. Condition 2 is a standard form of condition, not uncommon in a licensing context. I note that such a condition was imposed upon all licensed exporters at the time of re-registration for the 1989/1990 year. It is telling that such a condition was first imposed at a time when the Board was involved in a dispute as to the repayment of moneys with the result that, although the condition would normally be unexceptional, when considered in the context of the then prevailing dispute and the wording of the other condition, it acquires a different complexion, namely an attempt by the Board to give itself day-to-day power over Panga via circulars, thereby providing something of a backstop to the litigation which was at that time awaiting hearing.

Not only does the portion of the cross-examination of Mr Koki quoted in the judgment of the court below provide an appropriate foundation for the trial judge’s conclusion, there are further aspects of his evidence which support that conclusion. In my view there is additional material, namely the documentary chronology and the form and context of the conditions, which tells against the appellant. In those circumstances, and given the superior position the trial judge who saw Mr Koki in the witness box, I do not think the finding in favour of Panga on the issue of improper purpose should be disturbed.

Counsel for the appellant, who appeared at the hearing on 19 and 20 October 1989, maintained that the alleged indebtedness of Panga pursuant to the contract was not a live issue for the Board during the course of that hearing and that any evidence on that issue went merely to quantification. Even taking that to be correct, the relevant date is not the date of the trial but the date of the decision to impose the conditions, namely 4 October 1989.

I note that affidavits were filed by Robby Lovai for the Board and Geraldine Tan for Panga and that both these deponents were cross-examined. It appears that the issue raised by their evidence was the status of a pro forma document forwarded by the former witness, completed and returned by the latter, which carried the suggestion that “the amount is fully repayable to the Board after the ICO Stock Count in March 1989”. This document, completed on 17 October 1988 suggests that even at that early stage the Board was seeking to obtain a repayment obligation not otherwise found in the written agreement between the parties. The effect of this document need not now be considered as the trial judge found that this document operated merely to establish the amount advanced by the Board to Panga and that finding has not been challenged or argued in this appeal.

The affidavit evidence of Walter Perdacher on behalf of Panga was apparently uncontested as he does not appear to have been cross-examined. As the trial judge observed, his evidence established that at no time has Panga been in breach of the agreement.

The appellant submitted that the trial judge erred in making the declarations sought because, throughout the judicial review proceedings, the appellant indicated that it did not allege that payments were due under the agreement, or that the respondent was in breach of the agreement. In answer, the respondent submitted that the trial judge was correct in making the declarations sought as the alleged indebtedness of the respondent remained a live issue at the hearing. He referred the court to the evidence of Robby Lovai and Geraldine Tan. Although his Honour did consider that evidence in reaching a conclusion as to the status of the document completed by Geraldine Tan, that is not what is now raised.

The appellant, under this ground of appeal, contests the first three orders made by the trial judge. The third order is prefatory to the subsequent orders and for that reason I think it should stand even though it becomes superfluous in light of the subsequent orders. The challenge to the first two orders was made on the basis that they were private law remedies, inapplicable in proceedings for judicial review.

Three authorities were referred to on this aspect of the appeal. O’Reilly v Mackman [1983] UKHL 1; [1982] 3 All ER 1124 is authority for the proposition that a person seeking public law remedies must, as a general rule, proceed by way of an application for judicial review rather than by way of an ordinary action. The proceedings commenced by the present respondent satisfy that test. The House of Lords in O’Reilly’s case appears to have viewed with displeasure the appellant’s attempt to deprive the respondents of the protections afforded them by O 53 of the Supreme Court Rules (UK). No such aspect arises here.

In Preston v Inland Revenue Commissioners [1984] UKHL 5; [1985] 2 All ER 327, the Commissioners were found not to have been inspired by an improper purpose. Accordingly, that case may be distinguished from the present appeal. I note that the House of Lords considered that judicial review could be granted if there was an abuse of power and indicated that an abuse of power included action equivalent to a breach of contract.

Calverly v Chief Constable of the Merseyside Police [1986] 1 All ER 257 suggests that in exceptional circumstances the Court could, in the exercise of its discretion, grant judicial review remedies to an applicant who had not exhausted or pursued his alternative rights. As I have earlier indicated, I consider the present respondent was entitled to elect to challenge the imposition of the conditions rather than to allege a breach of contract. Even if it could be said that the respondent should have proceeded by way of an allegation of breach of contract, I think that the Court, in the present case, should exercise its discretion in favour of granting traditional review.

The status of the contract vis-a-vis the conditions was very much in issue in these proceedings. Although the Board may not have alleged indebtedness, I think that these orders should remain, if only to confirm the proper construction of the agreement. If, as the Board now contends, indebtedness is not in issue then the first two orders made by the trial judge are superfluous but that does not satisfy me that those orders should be set aside. To the extent that amounts are mentioned in the first order, they obviously relate to the then current position between the parties.

The present appellant succeeded because the relevant notice of motion was filed and served on 16 October 1989, with the result that, at the commencement of the hearing on 19 October 1989, the notice of motion had not been served three clear days prior to the hearing of the charge as required by O 4, r 42 of the National Court Rules.

It is clear that proceedings for contempt are quasi-criminal in that they are penal in nature with the consequence that there should be strict compliance with the relevant procedures. As Cross J (as he then was) said in Re B (JA) (an infant) [1965] Ch D 1112 at 1118:

“It is clear that if safeguards such as these have not been observed in any particular case, then the process is defective even though in the particular case no harm may have been done. For example, if the notice has not been personally served the fact that the respondent knows all about it, and indeed attends the hearing of the motion, makes no difference ...

When, however, one passes away from safeguards which are laid down in the interest of the contemnor and comes to consider mere verbal deficiencies in the documents in question — cases where the documents do not comply strictly with the rules, but it is impossible that in any conceivable case the contemnor could be in any way prejudiced by the defects — then it seems to me that there is no reason why the courts should be any slower to waive such technical irregularities in a committal proceeding than they would be in any other proceeding.”

The distinction is between a safeguard intended to protect the interests of the defendant and a mere technical correction of a document. In the Court below this is what occurred: an amendment of the wording of the statement of charge was allowed by the notice of motion for contempt was dismissed for failure to comply with the rules as to service.

There does not appear to be any local authority for the proposition that contempt proceedings require strict compliance with procedures, especially as to service. However, there is ample Australian authority: Doyle v Commonwealth (1985) 156 CLR 510; Spindler v Balog (1959) 76 WN (NSW) 391; Skouvakis v Skouvakis [1976] 2 NSWLR 29; Commissioner of Water Resources v Federated Engine Drivers’ and Firemen’s Association of Australasia Queensland Branch [1988] 2 Qd 385; Taylor v Whelan [1962] VLR 306; R v Lovelady; Ex parte Attorney-General [1981] WASC 329; [1982] WAR 65.

His Honour’s conclusion that the conditions were imposed so as to compel repayment by Panga not only determined the allegation of improper purpose raised in the substantive proceedings but also provided the evidentiary foundation for the contempt charge which was based upon an alleged breach of par 2 of the orders of the Court, made on 1 September 1989.

In Bishop v Bishop Bros Engineering Pty Ltd [1988-89] PNGLR 533, this Court, in relation to contempt proceedings, made no order as to costs in view of the conduct of an appellant, who was partly successful upon appeal. Likewise, in Knight v Clifton [1971] Ch 700, the Court of Appeal substituted an order that each party pay its own costs of contempt proceedings where the Court disapproved of the appellant’s conduct even though that conduct fell short of contempt.

The order here, that each party pay its own costs of the contempt proceedings, must therefore be viewed in the context of the conduct of the appellant, as found by the trial judge and the failure of the respondent to comply with the rules. In those circumstances I consider that the costs order was eminently fair and reasonable: it was warranted by the circumstances and it is supported by the authorities which I have mentioned.

It follows that I would dismiss the appeal with costs but not without observing that this was an appropriate matter in which to brief overseas counsel.

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Supreme Court of Papua New Guinea

PNG Coffee Industry Board v Panga Coffee Factory Pty Ltd [1990] PGSC 18; [1990] PNGLR 363 (11 September 1990)

Papua New Guinea Law Reports - 1990