SC853

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 50 OF 2005

BETWEEN:

CHIEF COLLECTOR OF TAXES
-Appellant-

AND:

BOUGAINVILLE COPPER LIMITED
- Respondent-

AND:

SCA NO. 56 OF 2005

BETWEEN:

BOUGAINVILLE COOPER LIMITED
-Appellant-

AND:

CHIEF COLLECTOR OF TAXES
- Respondent-

Waigani: Kapi, CJ., Sevua, and Kandakasi, JJ.

2005: 28 November
2007: 2 February

APPEALS – PRACTICE & PROCEDURE – Appeal against interlocutory decision lifting interim stay and injunction – Questions of fact raised in appeal – Leave required to raise questions of fact – Section 14(1)(2),(3) Supreme Court Act.

APPEALS – PRACTICE & PROCEDURE – Appellant raising issues not raised before trial judge – Appellant at no liberty to raise new points on appeal except with the agreement of the parties – Right of Appeal exists only against exercise of a trial judge’s decision on issues raised before him.

APPEALS – PRACTICE & PROCEDURE – Appeal against exercise of discretion of a trial judge – Appellant obliged to demonstrate identifiable and serious error warranting interference by Appellate Court before Supreme Court can interfere with trial judge’s decision.

CONSTITUTION – Income Tax Act – Whether requirement or policy of pay now litigate later harsh and oppressive within the meaning of s.41 of the Constitution – No equity in tax legislation – Law necessary for the support of public programs – Whether Chief Collector of Taxes issuance of statutory garnishee notices to taxpayer amounting to an abuse of his powers and therefore harsh and oppressive – Taxpayer under obligation to adduce appropriate evidence to establish claim of abuse or harsh and oppressive exercise of power – Taxpayer failing in its obligation – No case of abuse or harsh or oppressive exercise of power. 

INJUNCTION – Application for interim injunction pending arbitration – Relevant issues and principles governing grant or refusal of relief considered – Requirements for undertaking as to damages and demonstrating a serious question to be determined at the trial or an arguable case on the merits not met – Effect of – Detrimental to grant of relief sought – Trial judge correct in declining grant of stay and injunction.

LEGISLATION – Proper construction of tax legislation – Interpretation favourable to tax payer preferable – No equity in tax legislation - Necessary to support Parliaments new and ongoing public projects - Policy behind Income Tax Act – Pay assessed tax now and litigate later – Appeal against tax assessments no basis to stay or stop by injunction the recovery of assessed taxes - Question of harshness of tax legislation within meaning of s.41 of the Constitution considered – Question to be considered within tax regime – Abuse of Collector of Taxes powers and extreme personal hardship and oppression could result in stay or injunction of powers to collect assessed taxes. 

TAXATION – Proper construction of tax legislation – Interpretation favourable to tax payer preferable – No equity in tax legislation - Necessary to support Parliaments new and ongoing public projects - Policy behind Income tax Act – Pay assessed tax now and litigate later – Appeal against tax assessments no basis to stay or stop by injunction the recovery of assessed taxes - Question of harshness of tax legislation within meaning of s.41 of the Constitution considered – Question to be considered within tax regime – Prove of abuse of Collector of Taxes powers and extreme personal hardship and oppression could result in stay or injunction of powers to collect assessed taxes. 

Papua New Guinea Cases Cited:
Government of Papua New Guinea and Davis v Barker [1977] PNGLR 386.
SCR No. 1 of 2000; Re Morobe Provincial Government for and on behalf of the Morobe Provincial Executive Council (2002) Unreported, SC693, 27th September 2002.
Golobadana No 35 Ltd v. Bank of South Pacific Limited (formerly Papua New Guinea Banking Corporation) (2002), Unreported, N2309, 11th November 2002.
Mt. Hagen Airport v. Gibbs [1976] PNGLR 216
Public Employees Association v. Public Service Commission [1988-89] PNGLR 585.

Markcal Limited & Robert Needham v. Mineral Resources Development Co. Pty Ltd (1996) Unreported, N1472, 05th September 19/96.
Gobe Hongu Ltd v National Executive Council and Others (08/06/99) N1920.
National Housing Corporation v Yama Security Services Pty Ltd (25/08/00) N1985.
Rimbink Pato v. Anthony Manjin & Ors (30/04/99) SC622.
Mauga Logging Company Pty. Ltd v. South Pacific Oil Palm Development Pty Ltd (No.1) [1977] PNGLR 80.
Kurt Reimann & Ors v. George Skell and Kimbe Soccer Association (21/03/01) N2093. 
Internal Revenue Commission v. Dr. Pirouz Hamidian-Rad (22/03/02) SC692.
Mairi v Tololo [1976] PNGLR 125.
Misima Mines Ltd v Collector of Customs (18/12/03) N2497.
Patterson Lowa,& Ors v. Wapula Akipe,& Ors [1991] PNGLR 265; [1992] PNGLR 399.
Chief Collector of Taxes v. T.A. Field Pty. Ltd [1975] PNGLR 144.
Commissioner General of Internal Revenue v. Julian Paul Leach (24/09/98) N1779.
Premdas v. Independent State of Papua New Guinea [1979] PNGLR 329.
SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314.
MVIT v. James Pupune [1993] PNGLR 370.
PNGBC v. Jeff Tole (27/09/02) SC694.
Fly River Provincial Government v. Pioneer Health Services Limited (24/03/03) SC705 
The Papua Club Inc. v. Nasaum Holdings Limited & Ors (02/12/05) SC812.
Van Der Kreek v. Van Der Kreek [1979] PNGLR 185.
Boyepe Pere v. Emmanuel Ningi (30/06/03) SC711.
Chan v Ombudsman Commission (25/06/99) SC607.

Overseas Cases Cited:

House v. The Queen (1936) 55 CLR 499.
Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64.
Clyne v DCT 150 CLR 1.
Watson v. Commissioner of Taxation (2002) FCA 374.
Uysal v. Deputy Commissioner of Taxation,(2003) FCA 1156.
Edelsten v. Wilcox & Federal Commissioner of Taxation (1988) 83 ALR 99.
Deputy Commissioner of Taxation v Akers (1989) 89 ATC 4725 at 4727.
Deputy Commissioner of Taxation v. Ho (1996) 131 FLR 188.
Deputy Commissioner of Taxation v. Saunders [2001] WASC 48.
Held v Deputy Commissioner of Taxation (1988) 19 ATR 1213.
Deputy Commissioner of Taxation v. Awad [2001] NSWSC 37.
Dianne McGrath Fingleton v. The Queen (2005) HCA 34.

Counsels:

Mr. N. M. Cooke Q.C. and Mr. M. M. Varitimous SC for the Appellant in SCA 50 of 2005 and the Respondent in SCA 56 of 2005.
Mr. E. Anderson and Mr.R. Lindsay for the Respondent in SCA 50 of 2005 and the Appellant in SCA 56 of 2005.

2 February, 2007

1. BY THE COURT: Before us are two appeals against a decision of Salika J., in the National Court given on 28 April 2005. The first one is by the Chief Collector of Taxes (CC of T) while the second one is by the Bougainville Copper Limited (BCL). The former is the first in time filed and it concerns only part of the decision appealed against. That concerns the learned trial judge’s decision that arbitration was part of the tax regime in Papua New Guinea (PNG). The later is against the whole of the decision of the National Court, including the issue of arbitration. The main focus there is the learned trial Judge’s decision to lift interim restraining orders issued by Gabi J., on 6 January 2005 which prevented the CC of T from enforcing certain tax assessments against BCL. Another area of focus in BCL’s appeal is Salika J.’s refusal to stay an appeal by BCL against certain tax assessments by the CC of T against it pending arbitration. 

BACKGROUND 

2. In order to appreciate the background from which these appeals are before us, it is necessary to set out the relevant chronology of events. On 24 September 2003, the CC of T issued, after an audit, notices of tax assessments against BCL for the tax years 1999, 2000 and 2001. The total amounts assessed was K28, 075,581; which became payable on or before 24 October 2003. Without having paid the taxes assessed against it, BCL on 24th November 2003 objected to all of the assessments. After not receiving payment for the assessed taxes from BCL, the CC of T on 19th February 2004, issued statutory garnishee notices under s.272 of the Income Tax Act 1959 ("ITA"). That prompted BCL the next day, 20th February 2004, to file an Originating Summons and Notice of Motion claiming a number of identical reliefs. The first relief BCL sought was a declaration that, it was not liable to pay taxes for the years 1990 to 2003. Secondly, it sought a declaration that, it was entitled to call for arbitration. Thirdly, it sought an injunction to restraint the CC of T from enforcing tax assessments against it and an injunction restraining the CC of T from issuing statutory garnishee notices under s. 272 of the ITA. 

3. On 25 February 2004, the CC of T voluntarily withdrew its s.272 statutory garnishee notices, and agreed not to issue and enforce them until seven days after the determination of BCL’c objections. The CC of T then reviewed and determined BCL’s objection on 17 November 2004, and issued amended notices of assessment against BCL. The amended assessments resulted in a reduction of the outstanding income tax liability of BCL by K270, 465.25, which in turn reduced the total outstanding liability of BCL to K27, 805,115.75. This figure was arrived at after giving a credit for interest withholding tax of K4, 910,914 in favour of the Plaintiff. 

4. By 4th January 2005, BCL made no payment on the revised assessment of the taxes due and owing by it. Therefore, the CC of T issued on that date, s.272 statutory garnishee notices. Two days later, on 6 January 2005, the BCL filed a further notice of motion seeking orders for it to lodge only one appeal consolidating all of its appeals against each of the amended notices of assessments. It also sought interim injunctions to restrain the CC of T from collecting or otherwise enforcing the assessed taxes until after the hearing of its appeal against the assessments. On the same day, 6th January 2005, Gabi J., granted the interim reliefs BCL sought in its notice of motion, which included an injunction against the issuance and enforcement of garnishee notices under s. 272 of the ITA.

5. On 13th January 2005, BCL lodged a notice of appeal against the decision of the CC of T to disallow its objections to assessments for the years 1999, 2000 and 2001, and the CC of T’s amended assessments against it. About two months later, on 18th March 2005, BCL filed and served after 4pm a notice of motion claiming amongst others a stay of its own appeal pending completion of arbitration, the subject of a notice of arbitration annexed to the Affidavit of a Paul Coleman filed in support of the motion. It also sought, pending arbitration, a stay of all and any notices issued by the CC of T under s. 272 of the ITA or similar or other steps taken by the CC of T to require payment by BCL the taxes assessed against it for the years of income from 1998 to 2005. Further, BCL sought to restrain the CC of T from collecting and or enforcing the assessments against it, pending completion of the said arbitration. However, BCL did not file and serve any undertaking as to damages.

6. On 24th March 2005, Salika J., heard and determined the issues identified in the notices of motion filed by BCL on 20 February 2004, 6 January 2005 and 18 March 2005. Salika J., handed down its decision on 28th April 2005, with reasons and ordered, in substance, and amongst others that all previous restraining orders injuncting the CC of T from enforcing and issuing notices pursuant to s.272 of the ITA be discharged and that the CC of T was at liberty to issue and enforce notices pursuant to s.272 of the ITA. So the Court effectively dismissed all of BCL’s application.

7. Being aggrieved by the decision of Salika J., BCL filed its appeal and application for leave to appeal on 7th June 2005. BCL did not serve on the CC of T its notice of appeal until 28 June 2005. On 14th October 2005, the Supreme Court heard and ordered, inter alia, that proceeds of certain treasury bills which were subject of the garnishee notices be paid into Court to abide the determination of the Appeals. The following month on 10th November 2005, the Supreme Court heard BCL’s application for leave to appeal and granted it except for grounds 1, 2, 9, 10 and 17. These grounds sought to appeal against findings of fact only, which the Court directed be heard and determined by the full bench of the Supreme Court, together with the substantive appeals.

ARGUMENTS OF THE PARTIES

8. The CC of T accepts the general position in relation to appeals that, there can be no appeal against an interlocutory judgment unless the appeal comes under any of the three exceptions provided for by s.14 (3) of the Supreme Court Act. The CC of T also accepts that, these appeals come under s.14 (3) (ii) of the said Act because they arise out of a decision refusing to grant an injunction. At the same time however, the CC of T argues that, to the extent that BCL’s appeal is depended on some questions of fact alone, leave is required in terms of s. 14 (1) (c) of the Act. BCL argues that, s. 14 (3) (ii) is not subject to s. 14 (1) (c). Therefore, it argues that, even if the basis for an appeal that falls under s. 14 (3) (ii) is on a question of fact; leave is not required. Yet BCL has filed an application for leave to appeal on a number of grounds that are dependant on the learned trial Judge’s findings of facts.

9. On the substantive appeal, BCL raises a number of issues. They fall under three broad categories, namely findings of fact, findings of law and findings of mixed fact and law. The CC of T argues that, the learned trial Judge did not fall into any of the alleged errors set out in BCL’s notice of appeal. This Court should therefore, dismiss BCL’s appeal and order costs against it. 

10. Turning specifically to BCL’s arguments as per its notice of appeal, it argues in the first part that, the learned trial Judge erred in the following findings of facts because the evidence did not support and or were against the weight of the evidence:

(1) BCL received credits for interest withholding tax. – Appeal ground 1;
(2) Shares are liquid assets, which can be readily sold. – Appeal ground 2;
(3) BCL had been treated like all other taxpayers (impliedly). – Appeal ground 9;
(4) Failing to find that BCL was treated substantially differently than other tax payers to the detriment of BCL. – Appeal ground 10; and
(5) It was speculative that BCL would not earn on money paid to the CC of T. – Appeal ground 17.

11. In the second part of its appeal, BCL argues that, the learned trial Judge erred in law when he:

(1) Identified the issue for determination, as "the issue is whether the collection of a large tax debt owed by a multinational mining company should be frustrated to the disadvantage of the National Revenue? – Appeal ground 3;

(2) Failed to find that the issues were whether or not BCL had an arguable case in terms of the grounds of its proceedings under CIA 6 of 2005, whether the CC of T’s actions were harsh and oppressive for the purposes of s. 41 of the Constitution, and whether the proceedings and notices should be stayed pending arbitration. - Appeal grounds 4;

(3) Failed to apply the tests of arguable case/serious question to be tried and balance of convenience. - Appeal ground 6; 

(4) Found that the State had an overriding interest rather than apply the balance of convenience. – Appeal ground 7;

(5) Failed to apply the proper rules of construction of tax legislation, namely in favour of taxpayers. – Appeal Ground 8;

(6) Failed to distinguish between the power to issue garnishee notices and the obligation not to do so in circumstances where it would be harsh and oppressive to do so. – Appeal ground 11;

(7) Failed to consider whether the actual issue of garnishee notices in the particular facts of the case was harsh and oppressive. – Appeal ground 12;

(8) Treated the colloquial expression ‘pay now and litigate later’ as an expression of the law. – Appeal ground 13;

(9) Considered whether the whole statutory scheme for collection of tax was harsh and oppressive rather than considering whether BCL had an arguable case that the issue of notices in all of the circumstance of this particular case was harsh and oppressive. – Appeal ground 15;

(10) Refused to stay the notices and the proceedings pending the arbitration of the issue, whether the 1974 Amendments to the Bougainville Copper Agreement formed the foundation of CC of T’s rights was in force. – Appeal ground 18; and 

(11) Found that the arbitration is part of the assessment whether the arbitration is governed by the Arbitration Act or the BCA. – Appeal ground 19;

12. Finally, BCL argues that the learned trial Judge erred in law and in fact in:

(1) Finding that the PNG tax laws and the tax regime in Australia were the same, particularly with respect to the payment of interest by tax authorities where a tax appeal is ultimately successful. – Appeal ground 5;

(2) Finding that the ‘pay now and litigate later’ scheme was not harsh and oppressive. – Appeal ground 14; and 

(3) Failing to find in all the circumstances of the case that the issue of notices was harsh and oppressive and in breach of s. 41 of the Constitution. – Appeal ground 16; 

RELEVANT ISSUES

13. In our view, the arguments of the parties and the various grounds of the appeal by BCL as well as the appeal by the CC of T raise a number of issues. These are as follows:

(1) Whether leave is required on a question of fact in an appeal covered by s. 14 (3) (ii) of the Supreme Court Act as against a decision either granting or refusing to grant an injunction?

(2) Did the learned trial Judge err in his findings of the facts as outlined in grounds 1, 2, 9, 10 and 17 of the BCL’s grounds of appeal?

(3) In an application for stay of proceedings and interim restraining orders pending an alleged right of arbitration:

(a) What are the correct and relevant issues for determination by the Court? 

(b) Did the learned trial Judge correctly address his mind to the relevant issues in this case and come to a determination of them?

(c) If the learned trial Judge did not address each or any of the issues, is that serious enough to warrant an interference by this Court with the learned trial judge’s exercise of discretion against stay of proceedings and injunction against enforcement of assessed taxes? 

(4) Whether the learned trial Judge correctly applied the proper rules of construction of tax legislation in terms of:

(a) Giving the proper construction, meaning and application of ss.263, 264,257 and 272 of the Income Tax Act to the case before him;

(b) Properly considering and determining whether the issuance of garnishee notices by the CC of T under s. 272 of the ITA were harsh and oppressive within the meaning of s. 41 of the Constitution in the particular circumstances of the case?

(5) Whether the BCA of 1967 as amended in 1974:

(a) Removed the powers of the CC of T to assess and issue the garnishee notices under s.272 of the ITA; and 

(b) Provided for arbitration as the mode for resolution of any dispute over BCL’s tax liability?

PRELIMINARY ISSUES 

14. Before proceeding to deal with all of the issues presented, there are two preliminary issues that must be first dealt with. The first of those issues is the question of leave. The second is the principles guiding a Supreme Court sitting on appeal from a decision that constitutes the exercise of a discretion vested in a trial judge. We first turn to the second of the preliminary issues first as it concerns the powers of this Court. 

(a) Principles Guiding the Supreme Court 

15. As the appeal arises out of and concerns the exercise of the learned trial Judge’s discretion, it is necessary for this Court to remind itself of the relevant guiding principles. Section 155 (4) of the Constitution, inter alia, vests the National Court with such a discretion. Accordingly, we are of the view that the learned trial Judge was generally correct when he held that the National Court has an inherent jurisdiction to deal with applications of the type that were before him. However, whether that jurisdiction should be exercised in a particular case is dependant on any other applicable law and the particular facts of the case. In the case before the learned trial Judge, his Honour decided against an exercise of his discretion in favour of BCL.

16. We accept the learned counsel for the CC of T’ submissions that, BCL as the appellant has the burden to demonstrate to the satisfaction of this Court that the learned trial Judge erred, say because, he acted on some wrong principles. We also accept the learned counsel for the CC of T’s submission that the High Court of Australia in House v. The Queen, clearly stated the principles to be applied in determining such appeals in the joint judgment of Dixon, Evatt and McTiernan JJ in these terms:

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."

17. These principles have in fact been adopted and applied by this Court in a number of cases in our jurisdiction. An earlier example of that is the judgment of Prentice DCJ in Government of Papua New Guinea and Davis v Barker. 

18. What this means for the case before us is simple. Only if this Court finds that the learned trial Judge fell into some identifiable error, this Court could interfere with the exercise of the trial Judge’s discretion. Such an error could be committed if the learned trial Judge acted upon a wrong principle, or he allowed extraneous or irrelevant matters to guide or affect him, or he mistook the facts, or he did not take into account some material considerations. Further, if such errors are not apparent from His Honour’s judgment, it would be sufficient if on the facts it is clear that, the decision is unreasonable or plainly unjust. If such a case is made out by BCL which has the burden to do so, only then can this Court interfere and make the orders that are necessary on the facts on grounds of substantial error.

19. In order to determine whether the learned trial Judge in the present case erred in the exercise of the discretion vested in him, it is necessary to consider what was before him, the relevant substantive and procedural legal principles involved and the application of those principles to the case before him. These are the subject of the third and fourth issues. A consideration of those issues will necessarily call for a consideration and determination of the other issues. It would be thus necessary to turn to those issues now. However, before we do so, we will first deal with the other preliminary issue of leave to appeal.

(b) Question of Leave

20. The question of leave is centred on s. 14 of the Supreme Court Act. This provision in relevant parts reads:

"14. Civil appeals to the Supreme Court.

(1) Subject to this section, an appeal lies to the Supreme Court from the National Court—
(a) on a question of law; or
(b) on a question of mixed fact and law; or
(c) with the leave of the Supreme Court, on a question of fact.

(2) An appeal does not lie from an order of the National Court made by consent of the parties.

(3) No appeal lies to the Supreme Court without leave of the Supreme Court—
(a) from an order allowing an extension of time for appealing or applying for leave to appeal; or
(b) from an interlocutory judgement made or given by the National Court except—
(i) where the liberty of the subject or the custody of infants is concerned; or
(ii) in cases of granting or refusing an injunction or appointing a receiver; or
(iii) in such other cases prescribed by the Rules of Court as are in the nature of final decisions; or
(c) from an order of the National Court as to costs only that by law are left to the discretion of the National Court.

(4) An order refusing unconditional leave to defend an action shall not be deemed to be an interlocutory judgement." 

21. What is the meaning to be given to these provisions? The law in our jurisdiction in relation to the interpretation of statutes is very clear. There is ample authority for the proposition that, the Constitution and all other statutes in the country must be given a fair, large and liberal meaning to the words used in the legislation so as to give effect to the intent of Parliament. Where the words used by Parliament are so plain and clear, no art of interpretation is required. The Court must give effect to the language used by Parliament. 

22. In the present case, the words used by Parliament are very clear that no greater art of interpretation is required to ascertain Parliament’s intent. We consider that the use of the words "Subject to this section" in the opening of subsection (1) is significant. This particular legislative expression is not the same as to say "subject to subsection …". If that were the case, it would be subject to a particular subsection. Instead the expression is, "subject to this section". This, in our view, means the totality of what section 14 provides for. Consequently, each of the subsections must be read and understood as one, thereby leaving no room for one of the subsections to take precedent over the other or even exclude the application of one of the subsections by the operation of the other. 

23. Bearing the above observation in mind, it is now necessary to consider what the section provides for. The first subsection speaks of the kind of questions namely, a question of law, a question of mixed fact and law and a question of fact with leave of the Supreme Court that may be raised in an appeal. The next two subsections provide for the kinds or nature of orders, judgment or decision out of which, an appeal may be lodged as of right or only with leave of the Court, or may not be possible to lodge an appeal against. Clearly, subsections (2), (3) and (4) do not concern the kinds of questions that may be raised in an appeal because subsection (1) already takes care of that. No doubt, in any appeal any one or more or a combination of the questions mentioned in subsection (1) would arise. Subsection (1), is thus in our view, a general provision that applies to all appeals and is qualified by the following subsections, in that, whether a person can appeal against any order, judgment or decision as of right, is dependant upon the questions raised and the kinds or nature of the orders, judgment or decision sought to be appealed against.

24. Going by the above interpretation, we are of the view that, where an appeal arises out of an interlocutory judgement, order or decision that raises questions of fact only, leave is required in terms of s.14 (1) (c). However, if the question raised in such an appeal raises questions of mixed fact and law and or questions of law only, the appeal lies as of right.

25. In the present case, BCL raises in its appeal five (5) questions of fact as already noted and outlined in the earlier part of this judgment. They constitute appeal grounds 1, 2, 9, 10, and 17. BCL has filed and served an application for leave to appeal in respect of these questions of fact. Clearly, therefore, BCL has accepted by its conduct the need to get leave of the Court to appeal on the questions of fact raised by these grounds of appeal. Thus, this Court must consider the issue of whether or not leave should be granted to BCL to raise these grounds of its appeal. As these questions constitute substantially part of BCL’s grounds of appeal, we will deal with them when dealing with the respective grounds of appeal. 

APPLICATION FOR STAY AND INTERIM INJUNCTIVE ORDERS (Appeal Grounds 3 to 19

(a) Nature of Case before Trial Judge

26. As noted in the back ground to this appeal, the learned trial Judge had before him three notices of motion. The first was one filed by BCL on 20th February 2004. In that motion, BCL sought a number of orders. Firstly, BCL sought a declaration that it was not liable to pay taxes for the years 1990 to 2003. Secondly, BCL sought a declaration that, it was entitled to call for arbitration. Thirdly, BCL sought an injunction to restraint the CC of T from enforcing the tax assessments against it and an injunction restraining the CC of T from issuing statutory garnishee notices under s. 272 of the ITA.

27. The second motion was also filed by BCL on 6th January 2005. As already noted, that notice of motion sought orders for BCL to lodge only one appeal consolidating all of its appeals against each of the amended notices of assessments. It also sought interim injunctions to restrain the CC of T from collecting or otherwise enforcing the assessed taxes until after the hearing of its appeal against the assessments. Following the grant of interim injunction by Gabi J., that notice of motion returned for arguments as to whether the interim injunctive orders should be lifted or extended. 

28. The third motion was the one filed by BCL on 18th March 2005. In that motion, BCL sought, pending arbitration of tax liability for BCL, a stay of its own appeal proceedings CIA 6 of 2005 filed after Gabi J.’s orders, and all steps taken by the CC of T to enforce the assessed taxes. BCL also sought orders restraining the CC of T from issuing further notices pending arbitration. 

29. In all of these motions, BCL was seeking interim restraining orders. At the hearing before Salika J., BCL agreed to a dismissal of its motion of 20th February 2004. Going by the submissions BCL put before the learned trial Judge and now before this Court, it is clear that, BCL was not desirous of prosecuting its appeal against the CC of T’s tax assessments. Instead, BCL wanted the appeal stayed and called for arbitration of the issue of, whether it was liable to pay tax for the years assessed against it. In the meantime, BCL wanted the CC of T to be restrained from collecting on or enforcing the assessments he made against BCL.

(b) Relevant Principles

30. The question then is, did BCL assist the learned trial Judge with the relevant principles governing the grant or refusal of an application to stay proceedings and interim injunctive orders in the particular circumstances of the application put before Salika J. and before that, Gabi J? The transcript does not show BCL clearly and succinctly outlining for the learned trial Judge, the relevant principles and or requirements it was required by law to meet before it could obtain the reliefs it asked for. Similarly, the records do not show BCL demonstrating to the learned trial Judge that, its application met all of the requirements for grant of the reliefs it sought.

31. In our jurisdiction the principles relevant to injunctive reliefs are well settled. In Golobadana No 35 Ltd v. Bank of South Pacific Limited (formerly Papua New Guinea Banking Corporation), Kandakasi J., reviewed all of the case authorities on point from Mt. Hagen Airport v. Gibbs and Public Employees Association v. Public Service Commission to subsequent ones like those in Markcal Limited & Robert Needham v. Mineral Resources Development Co. Pty Ltd and AGK Pacific (NG) Ltd v. William Brad Anderson Karson Construction (PNG) Ltd & Downer Construction (PNG) Ltd. His Honour then concluded as follows:

"A reading of these authorities show consistency or agreement in all of the authorities that the grant of an injunctive relief is an equitable remedy and it is a discretionary matter. The authorities also agree that before there can be a grant of such a relief, the Court must be satisfied that there is a serious question to be determined on the substantive proceedings. This is to ensure that such a relief is granted only in cases where the Court is satisfied that there is a serious question of law or fact raised in the substantive claim. The authorities also agree that the balance of convenience must favour a grant or continuity of such a relief to maintain the status quo. Further, the authorities agree that, if damages could adequately compensate the applicant, then an injunctive order should not be granted." 

32. In addition to the above, there is ample authority in our jurisdiction that, before the Court could grant an interim injunctive relief, the applicant must provide an undertaking as to damages. This Court in Rimbink Pato v. Anthony Manjin & Ors noted that, giving an undertaking as to damages is an important requirement an applicant for an interim injunctive relief must meet before the relief can be granted. The Court did not elaborate on the requirement for undertaking as to damages. In our view, Sevua J., correctly stated and discussed the law and practice on undertaking as to damages, in His Honour’s decisions in the case of Gobe Hongu Ltd v. National Executive Council and Others and National Housing Corporation v. Yama Security Services Pty Ltd, which we hereby adopt. 

33. In the National Housing Corporation case, His Honour, said and we agree that the nature and purpose of the requirement for an undertaking as to damages:

"… works out both ways, and is not detrimental to the applicant in anyway. If he [applicant for an injunction] succeeds, he suffers no harm from having given the undertaking. However, if he fails, he will have to compensate the defendant for any loss the defendant suffers. I think the classic statement of the law pronounced by Lord Diplock in F. Hoffmann - La Roche & Co. A.G. v. Secretary of State for Trade and Industry [1925] AC 295 at 361 clearly illustrates this point. Lord Diplock said:-

‘Besides mitigating the risk of injustice to the defendant the practice of exacting an undertaking as to damages facilitates the conduct of the business of the courts. It relieves the court of the necessity of embarking at an interlocutory stage upon an inquiry as to the likelihood of the defendant being able to establish facts to destroy the strong prima facie case which ex hypothesis will have been made out by the plaintiff. The procedure on motions is unsuited to inquiries into disputed facts. This is best left to the trial of the action, and if the plaintiff then succeeds in establishing his claim he suffers no harm from having given the undertaking, while if he fails to do so, the defendant is compensated for any loss which he may have suffered by being temporarily prevented from doing what he was legally entitled to do so.’"

34. Then in the Gobe Hongu case, His Honour stated, at page 5 and we agree that:

The usual undertaking as to damages is a condition precedent to the granting of an interlocutory injunction. Such undertaking must therefore be given by the applicant at the time of making the application, ie. filed at the time of, or prior to the making of the application. … Counsel have not referred me to any provision of the National Court Rules or any other statute, which provides for the undertaking, however it has become the practice in this jurisdiction, as in New South Wales and other jurisdictions that, an undertaking as to damages must be given.

35. In almost all cases of interim injunction application, the Courts invariably require and ensure that undertaking as to damages are given before granting the relief sought. There are however, few recorded cases in which the requirement for such an undertaking has been dispensed with. The earliest recorded case is the judgment of Frost CJ., in Mauga Logging Company Pty. Ltd v. South Pacific Oil Palm Development Pty Ltd (No.1). There, the court found that the applicant was under receivership and was in no position to give any undertaking as to damages. The court decided to dispense with the requirement for an undertaking as to damages saying, it was not necessary to require such an undertaking in the interest of doing justice in the case. Kandakasi J., followed that decision in the case of Kurt Reimann & Ors v. George Skell and Kimbe Soccer Association. There, His Honour decided to dispense with the requirements for an undertaking as to damages as His Honour was persuaded that no damages were likely to be suffered. In both of these cases, the court specifically decided to dispense with the requirement for undertaking as to damages because the applicants made out a case for the dispensations.

(c) Application of Principles to Present Case

36. As noted, the transcript of what transpired before the learned trial Judge do not show that BCL assisted the learned trial Judge in terms of clearly and succinctly pointing out to His Honour the above principles and urging him to apply them. BCL has not improved that position in a clear and concise manner even before this Court. Whilst we accept that the learned trial Judge did no remind himself of these principles, the onus was on counsel for BCL who failed in his duty both to the trial Court, this Court and to his client to assist the Court. Hence, we are of the view that, if the learned trial Judge fell into any error it was set in motion by BCL’s own failure. Accordingly, we are of the view that, BCL should not be allowed to hark back on its own failure and succeed.

37. The question then is, was the error serious enough to warrant interference by this court with the decision the learned trial Judge arrived at. The answer is simply no when we have regard to the relevant law and what the parties and the learned trial Judge did in terms of application of the law to the matter before him. 

(1) Undertaking As to Damages

38. Bearing the above principles and requirements in mind, we now need to determine if BCL meet all of these requirements. We start with the easiest of the requirements, namely, providing an undertaking as to damages. There is no dispute that, BCL did not provide any undertaking as to damages both at the time of asking for and obtaining the interim orders from Gabi J. and subsequently when it applied for a continuation of the interim orders, before Salika J. Neither was there an application for any dispensation nor did BCL make out a case for a dispensation of its obligation to give an undertaking as to damages. 

39. The CC of T raised the issue before Salika J. In response, BCL took the position that:

"The idea of us [BCL] giving an undertaking is ridiculous … If the money is paid, we get it back without interest. If the money is not paid they will get it with interest and penalty. There is absolutely no doubt that it will be paid. They have not suggested it will not be paid. The prejudice is only one way and it would be reversal of common sense for a taxpayer to say, the court should stay this until the issue is determined and there will be no reason for us not paying it to then say, but you have to undertake to pay it. Of course we undertake to pay it. There is no question we are going to pay it once the court has decided. That is not an undertaking as to damages. No undertaking as to damages is required because there are no damages involved." 

40. It is apparent to us that, BCL decided that, it will not give any undertaking as to damages because it considered that, the idea of giving an undertaking as to damages was ridiculous. BCL was of the view that, there would be no damages caused by the injunction and further that; it will pay the money if required.

41. We note further that, not only did BCL take a position against giving an undertaking as to damages but it contradicted the reasons why it was applying for a stay of the proceedings and injunctions against the CC of T. BCL argued that, if the injunction was not granted it would shut down. The evidence shows that, the major shareholders of BCL had set up management and other investment companies which were charging and receiving substantial amounts of monies in fees from BCL. BCL did not provide any guarantees that, it would have and or reserve with easy access and reach in PNG, sufficient cash or asserts to meet the tax assessments should it fail in its efforts to avoid them. In these circumstances, an undertaking as to damages was necessary and required but BCL chose not to provide one. Accordingly, we find that Gabi J., erroneously granted the interim injunction on 6th January 2005, which we find that Salika J., correctly corrected by lifting the interim injunction, even though His Honour did not base his decision on the lack of an undertaking as to damages.

(2) Serious Case to be Tried or Arguable Case

42. A critical consideration in BCL’s application for stay and the interim injunctive orders was the need for it to demonstrate that, the substantive proceedings raised a serious question to be tried or in other words, establish an arguable case for trial. So the question is, what serious question or an arguable case for trial did BCL establish before the learned trial Judge that the learned trial Judge erroneously overlooked resulting in, the lifting of the interim injunctive orders granted by Gabi, J.?

43. A consideration of the question just posed above, will as of necessity, require a consideration of both the factual and legal issues presented in the application. Hence, a consideration of this question will necessarily require a consideration of the questions raised by almost all of the balance of the BCL’s grounds for appeal. We therefore, propose to cover each of the other grounds as they become relevant and necessary as we proceed.

44. The case before the learned trial Judge concerned various provisions of the ITA and to the extent that BCL raised it, s.41 of the Constitution as well as the BCA of 1967 as amended by the BCA of 1974, particularly their interpretation and application to the case before him. Dealing firstly with the ITA, we note that, this Court in Internal Revenue Commission v. Dr. Pirouz Hamidian-Rad, reviewed the relevant authorities on the way in which tax legislation must be interpreted. These authorities suggest that, for the imposition of a tax or charge against a subject, clear and unambiguous intention must be shown in the statute. Otherwise an interpretation favourable to taxpayers would be preferred. There is no room for any art of interpretation. There is also, no equity in tax legislation. Further, there is no presumption in favour of the State. This means noting can be read in or implied but only the words used by the legislation must be given their natural meaning and effect. 

45. The income tax regime prescribed by the ITA which applies to all persons and companies resident in or trading in PNG is quite clear. This regime requires an income earner or a taxpayer to lodge his or her taxation return. The CC of T then raises an assessment. Once issued, the assessment is conclusive evidence of the amount of the tax payable and that all the particulars of the assessment are correct. A taxpayer has a right, and may if he or she so wishes, object to any tax assessment against him. The CC of T determines any objection with a right vested in a taxpayer to appeal to the National Court or a referral to an Appeals Tribunal established under the ITA against the determination of the objection. But once an assessment is issued, the tax becomes payable and the tax becomes a debt due to the State. If it is not paid, the CC of T may recover the tax by any means at his disposal, including a statutory garnishee notice under s.272 of the ITA. 

46. Where an appeal or referral against an assessment is lodged it does not operate as a stay of the tax payable under the assessment. Hence, an appeal or referral does not interfere with or affect the assessment, and so therefore the tax payable may still be recovered notwithstanding a pending appeal or referral. On hearing an appeal or referral against an assessment, the National Court or the Appeals Tribunal may confirm, reduce, increase or vary the assessment. If the Court or the Appeals Tribunal alters the assessment, a due adjustment has to be made after the Appeal.

47. In the present case, the CC of T issued several assessments against BCL to which BCL objected. The CC of T considered BCL’s objections and issued amended assessments. Following that, BCL appealed against each of the assessments on 13th January 2005 under s.247(b) of the ITA. That being the case, we accept the CC of T’s submission that ss. 257 and 258 of ITA became particularly relevant.

48. Section 257 provides as follows:

"257. Pending appeal not to delay payment of tax.

The fact that an appeal or reference is pending does not in the meantime interfere with or affect the assessment the subject of the appeal or reference and income tax may be recovered on the assessment as if no appeal or reference were pending."

49. The words employed by this provision are absolutely clear. In our view, an appeal or a reference against an assessment does not interfere with or affect the assessment, the subject of the appeal or reference. Therefore, the income tax in the assessment may be recovered as if there is no appeal or reference pending. This position is strengthened in our view, by the lack of any provision in the ITA enabling a Court to grant a stay on any recovery action generally or for any particular reason against the assessment.

50. The Parliament in our view, has provided for the possible consequences that might follow out of a successful appeal in s. 258 of the ITA. This provision stipulates:

"If the assessment is altered on the appeal or reference, a due adjustment shall be made, for which purpose amounts paid in excess shall be refunded, and amounts short paid shall be recoverable as arrears."

51. Given that, it appears clear to us that, Parliament did not intend that, there should be any interference in the obligation to pay on the part of a tax payer and the CC of T’s power to collect income tax once assessed against a tax payer. In order to achieve that objective s.239 (1) provides that:

"The production of a notice of assessment, or of a document under the hand of the Chief Collector or an Assistant Collector purporting to be a copy of a notice of assessment, is conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct." 
(Emphasis supplied)

52. The CC of T argues that, the consequence of this provision in relation to BCL’s proceedings under OS No 79 of 2004 filed on 20th February 2004, which was before Salika J., and on appeal before this Court is that, the amended notices of assessments represent conclusive evidence of the due making of the assessments, and that, the amount and all the particulars of the assessment are correct. Further, the CC of T argues that, the legislation is very clear that, except on the hearing of the tax appeal against the assessments, which Appeal was filed on 13 January 2005 (CIA No 6 of 2005), one cannot go behind the amount said to be owing under the assessments. Therefore, the CC of T submits that, BCL is not entitled to argue before this Court that, they do not owe the amounts contained in the amended notices of assessment and seek to prevent the CC of T from lawfully proceeding with any of the powers of recovery actions going by the provisions of s.259, 262 (3), 263, 264 and 272. Thus, the CC of T argues that, if BCL wishes to argue against the enforcement of the assessed tax, it must do so before the National Court in the tax appeal proceedings, which it sought to stay and did manage to get Gabi J., to initially grant, pending arbitration.

53. In response, BCL agrees with most of the CC of T’s arguments, but only in relation to the content of the assessment. It argues that, the conclusiveness does not apply to the method of payment and the method of enforcement of payment when a properly arguable appeal is underway. Instead, it submits that, it is purely a discretionary matter for the CC of T to either, enforce payment of the amounts assessed or, delay enforcement pending any appeal. In support of its arguments, BCL submits that, the position is analogous to an appeal to the Supreme Court from the National Court where an appeal does not operate as a stay, but stay orders may be granted on application in appropriate cases.

54. Further, BCL argues that, the discretion vested in the CC of T is not an unfettered one. Section 41 of the Constitution provides an overriding restriction on the exercise of all discretionary powers. This provision provides against any harsh and oppressive exercise of discretion. It is BCL’s argument that, the CC of T acted in a harsh and oppressive manner against it when he decided to exercise his discretion to enforcement payment of the assessed taxes.

55. We accept BCL’s submissions that, the conclusiveness of the assessment is only in respect of the amount assessed and the basis on which that may have been arrived at. We also accept BCL’s submissions that, whether or not the assessed tax should be enforced when an appeal or reference against an assessment is pending is a matter within the discretion of the CC of T because s. 257 uses the discretionary word "may" rather than the mandatory "shall" when speaking of recovery of such taxes pending an appeal or a reference. Further, we accept BCL’s arguments that, the discretion vested in the CC of T is not an unfettered one and is subject to the requirement to act fairly and not harshly or in an oppressive manner.

56. At the same time, we accept the CC of T’s submissions that, the exception to the conclusiveness of an assessment arises and can only arise when an appeal is properly filed and the issue is raised in the appeal proceedings by reason of the words "except in proceedings on appeal against the assessment" as used in s.239 (1) of the ITA. It follows therefore, in our view that, whether or not any enforcement of assessed income tax is harsh and oppressive must be raised in the appeal against the assessment in question and not outside any appeal. This is because, the only way to question an assessment, is by way of an appeal and not otherwise. We note this procedure is common throughout most of the tax legislation in the country such as the Customs Act. 

57. In this case, the application for interim restraining orders and stay of enforcement of the assessed income tax was under proceedings commenced by Originating Summons, OS 79 of 2004, filed on 20th February 2004. The aim of those proceedings was to obtain a declaration from the Court firstly that, BCL was not liable to pay the assessed taxes and secondly that, it was entitled to call for arbitration pursuant to the BCA of 1967 as amended by the BCA of 1974. Those proceedings were also aimed at obtaining injunctive orders against the CC of T from enforcing the assessed income tax against BCL. The assessments issued by the CC of T against BCL triggered those proceedings. The kinds of reliefs sought in the OS proceedings were capable of being raised on appeal, which was, the procedure prescribed under the ITA. Indeed, BCL confirmed that position when it eventually filed its appeal CIA 6 of 2005, on 13th January 2005. Obviously, therefore, from a procedural view point, BCL was not correctly in Court. BCL erroneously argued for and managed to get the interim reliefs it obtained erroneously from Gabi J. on 6th January 2005. We are thus of the view that, Gabi J. also erred in granting the interim orders on 6th January 2005. Accordingly, Salika J., correctly lifted the interim orders. 

58. The question then is, did BCL correct the procedural error when it eventually filed its appeal? Going by the notice of motion filed on 18th March 2005, BCL did not correct the procedural error because the motion was filed under OS 79 of 2004. Further, the proceedings BCL sought to have stayed were its own proceedings. This is the first time we have come across such a situation because, it is rarely common for a party to apply for a stay of his or her own action or proceedings. In making its application, BCL was telling the Court in effect that, it was wrong in issuing the proceedings. If however, BCL was correct in its view that, the issue of its tax liability has to be determined by arbitration and was correct in issuing and maintaining both the OS proceedings and its eventual appeal, it should have taken that point up initially in its objection to the assessments and if the CC of T ruled against that, it should then have appeal against such a decision. If despite his appeal the CC of T took the steps he took to enforce the assessed taxes, BCL should have then applied within the ambit of its appeal for a stay of any such enforcement, pending a determination of the issue of, whether BCL was entitled to call for arbitration and if so, an order for arbitration to take place. No doubt, BCL by its own conduct complicated and compounded the existing procedural errors. 

59. In these circumstances, we are of the view that, the learned trial Judge was correct in dismissing the application to continue the interim injunction and for a stay of the steps the CC of T was entitled to take to enforce the assessed taxes. In coming to that view, we note that, the learned trial Judge did not find this point as one of the reasons for his decision. It is settled law that, the Courts have an inherent jurisdiction to watch over their processes and procedures to ensure that they are not abused. This is an issue that is always open to the court at any stage of the proceedings. As such, it does not matter whether a party appearing before the Court is raising it, because it goes into the competence of the very proceedings brought before the Court.

60. Apart from the procedural errors noted above, the question that necessarily arise on the merits is, did BCL make out a case for a grant of the injunctive and stay orders it sought from the Court? The CC of T argued in the Court below and now before us that, BCL is obliged to pay the taxes assessed against it first and litigate later which is, the underlying policy under the ITA. The CC of T bases its arguments on ss.259, 262 (3), 263, 264 and 272 of the ITA. On the other hand, BCL of course argues that such a policy does not exist. 

61. The provisions relied on by the CC of T in so far as they are relevant, state as follows: 

"259. When tax payable.

Subject to this Part, any income tax assessed is due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the 30th day after the service of the notice."
…

"262. Penalty for unpaid tax.
…
(3) Notwithstanding anything contained in this section, the Chief Collector may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable." 
…

"263 Tax a debt due to the State.

Income Tax, when it becomes due and payable, is a debt due to the State and payable, subject to the Mineral Resources Stabilization Fund Act (Chapter 194), to the Commissioner General in the manner and at the place prescribed." 
…

"264. Recovery of tax.

Any tax unpaid may be sued for and recovered in any court of competent jurisdiction by the Chief Collector suing in his official name."
…

"272. Chief Collector may collect tax from person owing money to taxpayer.

(1.) The Chief Collector may at any time, or from time to time, by notice in writing (a copy of which shall be forwarded to the taxpayer at his last place of address known to the Chief Collector), require -

(a) any person by whom any money is due or accruing or may become due to a taxpayer;
(b) any person who holds or may subsequently hold money for or on account of a taxpayer;
(c) any person who holds or may subsequently hold money on account of some other person for payment to a taxpayer; or
(d) any person having authority from some other person to pay money to a taxpayer,

to pay to the Chief Collector, either forthwith upon the money becoming due or being held or at or within a time specified in the notice (not being a time before the money becomes due or is held) –

(e) so much of the money as is sufficient to pay the amount due by the taxpayer in respect of any tax and of any fines and costs imposed upon him under this Act, or the whole of the money when it is equal to or less than the amount; or
(f) such amount as is specified in the notice out of each of any payments that the person so notified becomes liable from time to time to make to the taxpayer, until the amount due by the taxpayer in respect of any tax and of any fines and costs imposed upon him under this Act is satisfied,

and may at any time, or from time to time, amend or revoke any such notice, or extend the time for making any payment in pursuance of the notice."

62. In our view, these provisions are very clear by the language used that, once the CC of T issues an income tax assessment, it becomes payable on the date specified in the assessment. Then from the date it becomes payable, it becomes a debt due and owing to the State. Unless paid, the CC of T may sue in any court of competent jurisdiction to recover the debt so accruing and or issue garnishee notices under s. 272 of the ITA.

63. In the present case, the relevant assessments are the amended notices of assessment which were issued on 17th November 2004. They all became payable on 23rd October 2003 but BCL did not pay by or before the due date. So, they became a debt due and payable to the State as of 23rd October 2003, which the CC of T could seek to recover by way of recovery action in a Court of competent jurisdiction and or issue garnishee notices under s. 272. The CC of T decided to opt for the latter option and served garnishee notices on 04th of January 2005. As noted, BCL responded by erroneously filing and obtaining also erroneously the interim stay and restraining orders from Gabi J., on 6th January 2005. 

64. The effect of a notice under s.272 has not yet been considered by any court in PNG. We are grateful for the able assistance of counsel for the CC of T in terms of drawing to this Court’s attention to s. 218 of the Australian Income Tax which is in identical terms to that of s. 272 of the PNG ITA. We accept CC of T’s submissions and arguments that, the learned trial Judge was correct in holding that the Australian tax regime is similar and is in identical terms to that of ours, with only a few and minor variations, which we will point out as we continue with the discussions. Given the similarity in the two regimes, we accept that, Australian cases dealing with the provisions of the PNG ITA which are of concern to us in this case would be of much persuasion in the absence of anything else to the contrary. Counsel for the CC of T assisted this Court by drawing the Court’s attention to the case of Clyne v DCT which deals with the effect of a garnishee notice under that provision. There, Gibbs CJ., said: 

"… once the notice is given, it operates to prevent any subsequent dealing with the money which will prevent compliance with the notice when the time for compliance arrives."

65. In the same case, Mason J., said:

"The section relates to moneys owing to the taxpayer when the notice is given, it imposes an obligation to pay forthwith moneys which are then payable; it imposes an obligation to pay moneys which become payable at a future time when that time arrives … It merely requires the recipient to pay to the Commissioner when they become payable moneys owing to the taxpayer at the date of the notice. The obligation attaches to the recipient on service of the notice, though it cannot be performed until a future date. The effect of imposing the obligation is to make it unlawful for the recipient to pay the moneys to anyone but the Commissioner after service of the notice."

66. In the absence of any authority to the contrary, we adopt these observations as relevant and applying to our s. 272 of the ITA. Further, we are of the view that, on the strength of ss. 259, 262 (3) and 263 of the ITA, the CC of T was entitled to issue the garnishee notices under s. 272. By the time the CC of T issued the notices in question, there were no appeals pending. Hence, the issue of stay or injunction pending appeal did not even arise. BCL’s appeal was in fact a response to the notices under s. 272. We note and accept that, BCL was within the time period for appeals under s. 247 and so the CC of T may have acted prematurely. Nevertheless, that argument ignores the fact that, the obligation to pay and accrual of a debt to the State recoverable by a garnishee notice or a Court action, arose from the date when the assessed taxes became payable, namely 24th October 2003. Hence, it was incumbent on BCL to act promptly if it was in fact aggrieved by the amended notices, but, it did not, until the issuance of the garnishee notices. We are of the view that, that was to BCL’s own detriment.

67. Now, when BCL eventually filed its appeal, the issue of stay of recovery and enforcement of the assessed taxes did arise. Section 257 of the ITA specifically addresses that issue, by stipulating that, an appeal or reference does not operate as an automatic stay of collection of the assessed taxes. Again, there is no local case on point. We find good assistance from the submissions of the learned counsel for the CC of T, who have provided the court with relevant case authorities on the equivalent provisions under the Australia Taxation Administration Act 1953, namely ss. 14ZZM and 14ZZR which are in identical wording as our s. 257.

68. The first case cited was Watson v. Commissioner of Taxation. There, Heerey J., of the Federal Court of Australia had before him a case where the applicant sought by way of interlocutory relief an injunction restraining the respondent from proceeding to enforce a notice of assessment issued to the Applicant. The applicant also sought an injunction restraining the respondent from calculating interest and penalties on that notice of assessment. It was alleged that, the assessment in question was wrong.

69. In dismissing the application, His Honour said: 

"But the basic proposition, it seems to me, is that under s.14ZZM of the Taxation Administration Act 1953 (Cth) the review process does not interfere with the right of the Commissioner to recover tax liabilities. In colloquial terms, it is a case of pay now, litigate later." (Our Emphasis)

70. The other case cited was, Uysal v. Deputy Commissioner of Taxation. There the applicant sought an interlocutory injunction in the Federal Court to restrain the respondent from taking any further steps to obtain judgment, relying upon assessments which he had issued.

71. The presiding judge, His Honour, Heerey J., said: 

"The fact that objections are on foot and that tax returns have been lodged clearly cannot prevent the Commissioner proceeding in a court for recovery of amounts for which assessments have been issued. The legislative scheme is clear. Assessments are binding and can be enforced notwithstanding that the taxpayer is following a right to challenge the assessments under Pt IVC of the Act.

The specific areas alleged simply go to the merits of the assessments. They may well turn out to be valid complaints. But the taxation system necessarily assumes that the Commissioner may make errors of fact or law in assessments and that these errors will be corrected either in the AAT or in the court. But that does not gainsay the legislative scheme that in the meantime the assessments are binding and may be enforced. Of course, if that enforcement results in a judgment and recovery under the judgment, and there is a subsequent setting aside or varying of the assessments, the assessments to that extent would be no longer binding and the Commissioner would have to repay with interest any money recovered." 

72. The CC of T argued before the learned trial Judge and again before us in this Court that, except for a requirement to pay interest to a taxpayer who successfully appeals against an assessment, the observations of Heerey J., in the above two cases, equally applies to the PNG situation given the similarity in the tax regimes, for the reasons given by his honour. We accept this argument, noting as we did already that, Parliament has by s. 258 provided for the consequences that should follow upon a successful appeal. There is, in our view, a good public interest reason behind this as was noted by Raine J., in Chief Collector of Taxes v. T.A. Field Pty. Ltd:

"But if one takes pause, and remembers that Parliament must have money to support its many existing operations and projects to cite a few, hospitals, schools, defence, rural improvements, and the police, then it is not suprising to find provisions in the Income Tax Act that attempt to ensure that the money believed owing to the Chief Collector is not lost to the country while lengthy and difficult appeals are embarked upon. I can imagine taxpayers bring very irritable in cases where they are sure, on good grounds, if you like, that the assessment is wrong, because they still have to hand over the amount they are sure was wrongly assessed, at least temporarily. But there are cases, or could be cases, where, but for effect of s.257, in combination with other provisions, many assessments would never be paid, people would leave the jurisdiction, money channelled off, companies despoiled and so on."

73. Consequently, we find that the learned trial Judge did not fall into any error when he held that, the PNG taxation regime is similar or identical to the Australian equivalent, except on the question of interest on money refundable to a taxpayer following a successful appeal against a tax assessment. His Honour was thus correct when he had regard to the relevant Australian taxation cases as well as the relevant and applicable provisions under the PNG ITA and held that the tax policy in PNG is to "pay up now and litigate later". This is the end result of the combined effects of s. 257 with ss. 239 (1), 259, 262 (3), 263 and 264. 

74. If one were to consider the ITA as setting out a complete statutory code for the imposition, assessment and the collection of taxes due and payable, there would be no jurisdiction in the Court to hear and determine applications to stay or restrain enforcement of assessed taxes. Taxpayers would only have the right of appeal but with the obligation to "pay now and "litigate later." 

75. However, as already noted, the power of the CC of T to enforce assessed tax is a discretionary one granted by statute. It is settled law that, all such powers must be exercised on proper consideration or basis and with reasons. Additionally, all Acts of Parliament and other laws are subject to the Constitution. Certainly, in the light of the expressed language of the ITA, no stay or restrain can be readily and easily granted. Instead, we are of the view that, a case must be made out to warrant a stay or restrain of the powers vested in the CC of T within the context and bearing in mind the tax regime and the policy behind it under the ITA. The question then is, in what circumstances can the Court stay or restraint the CC of T from taking and or pursing enforcement proceedings against a tax payer?

76. As already noted, there is no decision in PNG to assist in a resolution of the question raised. There is of course the decision in The Chief Collector of Taxes v. Field. However, that case concerned an action by the CC of T to recover assessed taxes through a writ of summons out of the National Court. The CC of T in those proceedings sought summary judgment on the basis of the assessments. In granting that application, the Court refused to accept arguments going into the merits or demerits of the assessment because of the conclusiveness of the assessment accorded by s. 239 (1) of the ITA. Hence, it did not strictly concern an application to stay enforcement of judgment, pending appeal or referral. Nevertheless, it does make the point that, tax assessments are conclusive for a good reason, namely to assist Parliament in its obligation to raise the funds required to support its ongoing and new public programs.

77. The Constitution by schedule 2.3(1)(d) obligates this Court to develop the underlying law for the country where there is a vacuum or there is a need for it, having regard to relevant decisions of courts with a legal system similar to that of PNG. In this case, since PNG’s tax legislation is almost in identical terms to that of Australia, the learned trial Judge was correct in having regard to Australian decisions to see how the law has developed in that country.

78. The Australian experience shows that, intervention by the court in the enforcement of a tax assessment is very rare. This experience also shows that, the onus is on the taxpayer to establish special circumstances to warrant a stay or restrain by injunction an enforcement of an assessed tax. It is clear that, the only basis on which an enforcement of a tax assessment can be stayed or restrained is restricted to cases of the CC of T abusing his discretion and or where the enforcement would result in great personal hardship to the taxpayer. 

79. An example, of case of abuse of the CC of T’s powers is the case of Edelsten v. Wilcox & Federal Commissioner of Taxation. This was a case of judicial review of the Commissioner’s decision to issue notices to the Health Commissioner equivalent to a garnishee notice. The court there found the Commissioner to be acting arbitrarily in seizing all the taxpayer’s professional income as a doctor for some improper or collateral purpose. He found the Commissioner acted with the rapacity of a Verres and unfairly. The taxpayer in that case, was successful because of the Commissioner’s abuse of power.

80. The obiter dicta of Sevua J., in Commissioner General of Internal Revenue v. Julian Paul Leach shows a possible instance of the National Court in PNG finding a possible case of abuse of the CC of T’s powers under the ITA. In that case, his honour was assessing damages under a default judgment, where the issues we are presently concerned with here were not present. Sevua J., criticised the conduct of the CC of T in issuing a Garnishee Notice and found that: 

"… the manner in which the Internal Revenue Commission had dealt with Mr Leach was not only oppressive and arbitrary, but clearly capricious and whimsical. He had lost his business, assets, credit standing in the community and good financial reputation with his bank, and really, there was no justification for all these. The plaintiff, just had no right in law or under the Constitution to threaten, intimidate and harass a taxpayer in the manner it did with Mr Leach."

81. In the case before us, there is neither any claim, nor is there any evidence of the CC of T abusing its powers. What is clear however is that, the CC of T is simply performing its statutory duty to audit, assess and collect tax due and payable to the State. The main argument for BCL is that, unless enforcement of the assessed taxes is stayed, it will adversely affect its financial position to the point of driving it bankrupt. The question then is, is that a special circumstance within the meaning of great personal hardship as defined by the Australian cases, to warrant a stay or injunction of the enforcement steps taken or likely to be taken by the CC of T?

82. The Australian cases make it clear that, it is easier to say what are not special circumstances rather than to define in advance, what they are. These cases provide a guide as to what does not amount to special circumstances or great personal hardship. It has been held that, the possibility that the taxpayer may be bankrupted is not of itself an extreme personal hardship. Similarly, it has been held that, just as bankruptcy of itself is not sufficient hardship, the normal consequences of bankruptcy cannot effect a different result. The reason for this was as provided for by Ireland J., in Deputy Commissioner of Taxation v. Ho, that:

"… it is trite to say that the mere obligation to pay income tax of itself does not impose extreme personal hardship [and that] "the onus being upon the applicant to demonstrate sufficient circumstances warranting the grant of a stay." 

83. In that case, the applicant argued that, the enforcement of the assessed taxes would drive him bankrupt. But reasoning as it did, the court held that, the applicant had failed to discharge the considerable onus upon him to demonstrate a special or exceptional circumstance justifying a grant of a stay of proceedings. 

84. The Australian authorities have held more importantly that, the Australian equivalent of our s.257 of the ITA, namely ss.14ZZM and 14ZZR, of the Australian Taxation Administration Act 1956 have been held to prevent the Court from considering the merits or chances of success of any appeal by the taxpayer. Ireland J., also held in the Ho case that, the fact that the applicant may be deprived of his ability to object or appeal of itself does not justify the granting of a stay of the recovery proceedings in the face of the analogous Australian provisions of s.257 of the PNG ITA. Further, in Watson v. Commissioner of Taxation, Heerey J., was of the view that, the fact that the taxpayer contends that the assessment in question "must be wrong" is insufficient to support an injunction restraining the CC of T from proceeding to enforce a notice of assessment, or restraining the respondent him from calculating interest and penalties on a notice of assessment.

85. The decision of Sanderson M., in Deputy Commissioner of Taxation v. Saunders, adds that, inconsistencies or overlappings in assessments of taxes payable by a company or persons and or individual’s behind the business or company is no reason to stay or interfere by injunction, action to recover assessed taxes. Sanderson M., reasoned that, the inconsistent assessments issued against a taxpayer is neither unusual nor impermissible, and is not a matter which could justify a stay. In the same case, Sanderson M. rejected a further argument for a stay of recovery action on grounds of abuse of process. The taxpayer based his argument on Federal Court proceedings commenced by him in relation to documents seized by the Australian Federal Police, including documents relating to the notices of assessment. The Court reasoned that, by virtue of s.208 of the Australian Income Tax Act,a tax when due and payable subsequent to an assessment is rendered becomes a debt due to the Commonwealth and payable to the plaintiff. The Court further reasoned that by virtue of s.209 of the Australian Income Tax Act the plaintiff is empowered to recover any unpaid tax from the defendant. In particular His Honour noted:

"… the fact that the taxpayer challenges the assessment, whether that be by way of review by the plaintiff or through the courts, is no impediment to the recovery by the plaintiff of the unpaid tax pursuant to the provisions of the Act."

86. Harrison M., added in Deputy Commissioner of Taxation v. Awad, that the "court is precluded from considering the prospects of success in the appeal to the Full Court of the Federal Court". In so doing, Harrison M., accepted earlier authority supporting the proposition that, "any speculation as to the prospects of the taxpayer on review or appeal is entirely inappropriate in these proceedings". The later in time decision of Heerey J., in Uysal v. Deputy Commissioner of Taxation, reaffirmed the position that, the legislative scheme was clear that, assessments are binding and can be enforced notwithstanding that the taxpayer is following a right to challenge the assessments. More importantly, again, the case supports the proposition that, specific errors going to the merits of the assessments are no basis for a grant of injunction. The Court noted that, the taxation system necessarily assumes that the Commissioner may make errors of fact or law in assessments, and that those errors will be corrected either in the Administrative Appeal Tribunal or in the Court, but that does not gainsay the legislative scheme that, in the meantime, the assessments are binding and may be enforced. The decision in The Chief Collector of Taxes v. Field as we already noted, followed that position having regard to the particular tax regime in the country in the context of a challenge against the CC of T applying for summary judgment in recovery action out of the National Court based on the conclusiveness of a notice of assessment.

87. In the case before us, BCL applied for a stay and an injunction against the enforcement by the garnishee notices, the notices of assessment against it. In making that application, BCL firstly argued that, it was entitled to call for arbitration which it had commenced to determine the issue of its liability to pay the assessed taxes. Secondly, it argued that, the assessments were all wrong as it was not liable to pay any taxes for the periods assessed. Finally, it argued that, the way in which the CC of T was proceeding against it was harsh and oppressive contrary to the prohibition against such actions in s.41 of the Constitution. 

(i) Arbitration

88. BCL relies upon the BCA of 1967 as amended by the BCA of 1974 to support its claim for arbitration. The Agreement and the amendments thereto are in schedule 1 and schedule 2 to the Mining (Bougainville Copper Agreement) Act 1974 M(BCA)A. By virtue of s. 4(1) of the Act, these agreements have the force of law and all laws not inconsistent with the Act or the agreements apply to and in relation to all matters or things done or suffered under the agreement. 

89. Clause 7 of the BCA of 1967 deals with taxation. In the BCA of 1967, exemptions from income tax were granted for 3 years following the commencement of commercial production. That date was fixed by the BCA of 1974 amendments to clause 7 as 1 April 1972. Effectively, therefore BCL had a tax exemption for a period of 3 years under the BCA of 1967 which expired on 1st April 1972.

90. Clause 7 of the BCA of 1967 also made provision for the way in which expenditure during the exempt period that would normally be regarded as deductions to be carried forward. It was deemed to have been incurred on the day following the expiration of the tax exempt period.

91. The amendments more importantly for our purposes saw a deletion of the BCA of 1967’s clause 7 and replaced with a new clause 7. The new clause 7 in subparagraph (a) provides that except where a contrary intention appears, the provisions of the ITA shall apply. The next subparagraph (b) gives BCL exemption from tax for the year ending 31 December 1973. Provisions are then made by the new clause 7 (f) for deductions in respect of expenditure of a capital nature. New clause 7(f)(iv) and (vi) expressly deal with capital expenditure where the property in respect to the expenditure has been disposed of, lost or destroyed, in which case, ss.78 and 160 of the ITA apply to BCL.

92. The main questions to be determined in BCL’s tax appeal concern the deductions for depreciation on property and capital expenditure in respect of property which has been disposed off, lost or destroyed within the meaning of clause 7(f). Whether or not the CC of T was correct in assessing tax against BCL in the way he did is a question that must be raised and answered in the hearing of the appeal against the notices of assessments. It is not a relevant question for consideration in the interlocutory application of BCL seeking to stay or restrain the CC of T from enforcing the notices of assessments in its application under the OS proceedings for stay of the appeal pending arbitration. Those questions will be decided by the National Court on the hearing of the tax appeal. Besides, the relevant factual evidence will need to be evaluated by the National Court at that time. It is not a question on which the Supreme Court could express any opinion in these appeals in advance of the findings to be made by the National Court on hearing the tax appeal. 

93. Clause 23 of the BCA of 1967 provided for arbitration as a way to resolve any dispute under the Agreement. The amendments by the new clause 7 (r) of the BCA of 1974, expressly excluded the application of clause 23 in these terms:

"The provisions of Clause 23 hereof shall not apply in respect of any dispute, question or difference of opinion relating to the liability or the quantum of liability of the Company to income tax or in respect of any other matter arising under any paragraph of this Clause." 

94. On a proper construction of this provision, it is clear that, taxation disputes are expressly excluded from arbitration under clause 23 of the BCA of 1967. The clear intention of the parties is thus, to exclude taxation matters from arbitration and instead apply the provisions of the statutory tax regime prescribed in the ITA subject to any specific matters agreed to between the parties in clause 7.

95. As noted, taxation matters are dealt with in clause 7 of the BCA of 1974. Clause 7(a) which is affirmed by s. 4 (4) of the M(BCA)A, provides that:

"Except where the contrary intention appears, either expressly or by implication, the provisions of the Income Tax Act which are not inconsistent with the provisions of this Agreement are applicable to the Company." 

96. As far as we can ascertain, there are no provisions in clause 7 of the BCA of 1974 which are inconsistent with the ITA. Clearly therefore, the provisions of the ITA apply to the company unless a contrary intention appears. Hence, the tax regime under the ITA applies, which includes of course ss.239, 257, 259, 263, 264 and 272. Then in so far as the specifics of the assessment goes, clause 7(f)(vi) allows for the application of ss.78 and 160 of the ITA, which at the relevant time, dealt, amongst others, with the property which had been disposed off, lost or destroyed and featured in the notices of assessments.

97. BCL places reliance on clause 6.2 of an agreement with the State dated 1st December 1989. Under that clause, the State agreed to defer BCL’s tax liability for income derived during the year ending 31 December 1989 and any other liability determined by reference to that tax on that income until the mine recommenced operations and recovered the costs of reopening. BCL argues that, since the mine has not recommence operations its tax liability remains deferred.

98. We note three points against BCL’s arguments. Firstly, clause 6.2 is not a general exemption from income tax or an exemption from tax on non-mining income. The agreed exemption is only in respect of tax payable by BCL for mining related income derived in 1989 only. Secondly, we note that this is no answer to the clear import of the words used in clause 7 (r) of the BCA 1974, which specifically excludes the agreement for arbitration under clause 23 of BCA 1967. Accordingly, we accept CC of T’s submission that, BCL is not entitled to call for arbitration. Finally, we note that the 1989 agreement was an agreement between BCL and the State and another party and not necessarily with the CC of T who is empower to administer the tax regime under the ITA which can only be removed or curtailed by an Act of Parliament. Hence, unless the 1989 agreement was elevated into an Act of Parliament as were the BCA of 1967 and the BCA of 1974, the provisions of the 1989 agreement cannot stop the operation of the M(BCMA)A and agreements in schedule 1 and schedules 2 which have the force of law as an Act of Parliament. 

99. Having regard to the above analysis of the PNG tax regime as may have been varied by the BCA of 1967 as amended by the BCA of 1974, in so far as BCL is concerned, we are of the view that, arbitration has no part to play in it. The ITA applies to every taxpayer, including the BCL. The only prescribed procedure to question and or challenge a tax assessment, is by way of appeal to the National Court or a referral to the Appeals Tribunal established under the ITA. There is no provision for arbitration. As noted, the Act establishes an exclusive regime subject only to the Constitution. Accordingly, we accept the arguments of the CC of T against BCL’s appeal and in support of its own appeal that, the learned trial Judge erred in law in considering arbitration to be part of the assessment process in the scheme of the whole taxation regime in PNG. His Honour erred in not holding that, pursuant to the BCA of 1967 as amended by the BCA of 1974, any dispute or question or difference of opinion relating to the liability or the quantum of liability of BCL to income tax was excluded from being referred to arbitration, and that the provisions of the ITA applies to the BCL. Further we find that, following on from that error, the learned trial Judge erred in not holding that the purported reference to arbitration by BCL constituted a purported reference to arbitration contrary to the expressed provisions of clause 7(r) of the BCA of 1974 and was therefore invalid. We would therefore uphold ground 19 of BCL’s appeal but dismiss ground 18 of its appeal with the result that the whole of the appeal of CC of T’s which is purely on this point being upheld.

100. Having determined that, BCL had no entitlement to arbitration on the basis of the above analysis of the tax regime in the country and the relevant provisions of the BCA of 1967 and the BCA of 1974; it should leave BCL with nothing to show for the need to demonstrate a serious question for determination in the substantive proceedings for the purposes of the interim stay and injunction it sought, which is the subject of its appeal grounds 4 and 6. Further, by applying for stay and injunction especially pending arbitration, BCL left nothing to be resolved in the substantive proceedings. Rather it in fact sought to take away from the jurisdiction of the Court the very questions it wanted the court to determine in the substantive proceedings. Accordingly, we would dismiss BCL’s appeal grounds 4 and 6.

(ii) Tax Assessments Wrong?

101. The other issues BCL raised in the Court below and this appeal include mainly, the question of, whether or not BCL is liable for the taxes assessed against it by the CC of T, taking into account the provisions of the ITA and the BCA of 1967 and BCA of 1974. BCL’ argument as already noted is that, it is not liable to pay the assessed taxes, which, it claims are wrong. It further argues that, the way in which the CC of T has proceeded against it is harsh and oppressive and that, it will cause substantial financial hardship with the likely result that, its PNG operations will shut down. 

102. The correct legal position under the PNG tax regime as we already noted is that, claims that an assessment of tax is wrong or a taxpayer claiming no liability and or financial hardship are not sufficient to stay or restrain the CC of T from taking and pursing recovery action against a taxpayer. Under this regime, BCL as a taxpayer may only be entitled to raise these arguments only in the context of an appeal against any such assessments at the hearing of such an appeal without entitling it to a right to stay or restrain the CC of T from enforcing the assessments even pending its appeal against the assessments. 

(iii) Actions of CC of T Harsh and Oppressive – s.41 Constitution 

103. The only issue BCL was entitled to raised in its application to stay and for an interim injunction against the CC of T’s power to enforce the assessed taxes was its claims concerning the harshness and oppressiveness of the tax regime and its application by the CC of T against it, which it claims was in breach of s. 41 of the Constitution. This is the subject of appeal grounds 9 to 16 of BCL’s appeal. 

104. As can be seen, there are two parts to this claim. The first relates to the tax regime itself and the second concerns its application against BCL by the CC of T in the present case. The first part is the subject of appeal grounds 14. The learned trial Judge adopted the above analysis of the tax regime, including the inequity of the regime itself in terms of the policy "pay now, litigate later". He correctly adopted the rationale of the Australian cases as appropriate for Papua New Guinea. The tax regime is not unique to PNG. It is a regime that exists in almost all countries of which, Australia, our closest neighbour is an example. That regime is necessary for the raising of funds to support the various and necessary public expenditures of a country. That is why, it has been long recognised that, there is no equity in tax legislation. We would therefore, dismiss arguments as against the law itself, including specifically appeal grounds 13, 14.

105. This leads us to deal with appeal grounds 9, 10, 11, 12, 15 and 16 of BCL’s appeal, which concerns the application of the tax regime. We accept that, the way in which the CC of T applies or administers the regime as against a taxpayer when compared to the way in which he deals with other taxpayers may amount to a case of treating a taxpayer in an harsh and oppressive manner within the meaning of s. 41 of the Constitution. 

106. There are many cases on s. 41 of the Constitution. Despite that, BCL did not cite even one case to support its arguments and to assist this Court. The leading case on this provision is Premdas v. Independent State of Papua New Guinea. There, Prentice CJ, when speaking of s 41, said:

"I consider that, giving s 41 a fair and liberal meaning as the court is instructed to do by Schedule 1.5 (2) of the Constitution, it should be regarded as of general application. The criteria put forward in the section are clearly questions of fact. Both counsel concur in the submission that in assessing the quality of the relevant facts, the test should be an objective one. I feel that the test should be to question whether the Minister and the Committee acted as reasonable men in the circumstances, having regard to the policy of the act on the one hand and the various provisions of the Constitution on the other."

107. This view is consonant with those of Kidu CJ, Kapi DCJ (as he then was), and Kaputin J in SCR No 1 of 1984; Re Minimum Penalties Legislation. What appears clearly from these authorities is that, whether an act or conduct is harsh and oppressive is dependant on the relevant facts giving rise to a claim of harsh and oppressiveness. The person making the claim has the burden to establish his or her claim by appropriate evidence.

108. So what are the facts and complaint here? In appeal grounds 9 and 10 BCL claims that, the learned trial Judge erred in impliedly finding that, it was treated like all other taxpayers when the evidence supported a finding that it was treated substantially differently than other tax payers.

109. These complaints arise out of the following parts of the learned trial judge’s decision:

"The tax policy and the regime must be given its full and great weight and the overriding interest of the State must be taken into account. In considering whether the defendant should be restrained from giving Section 272 notice to the plaintiff, I am of the view that while the plaintiff may have good reasons for disputing the assessment, the plaintiff must not be treated differently from other taxpayers. Moreover, there are appeal processes provided by law to exhaust. I give full weight to the policy of the tax regime and order that the restraining orders originally granted by Gabi, AJ be lifted and the defendant is at liberty to issue s.272 notices under the ITA." (Emphasis supplied).

110. We can not see anything erroneous about what the learned trial Judge said. His Honour was correct when he said that, in considering whether the CC of T should be restrained from giving a s.272 notice to BCL, "the plaintiff [BCL] must not be treated differently from other taxpayers". His Honour was not determining here the question of whether the CC of T treated BCL differently from other tax payers. Rather, the learned trial Judge was concerned and was talking about the tax legislations’ policy and how that must be applied. The suggestion by BCL that the learned trial Judge impliedly found that the CC of T did not treat it differently from other tax payers has no room within the context of what the learned trial Judge was talking about.

111. In its submission before this Court, BCL tries to make much out of the testimony of Mr. Castiglione. This witness was employed at the relevant time by the CC of T with the audit section of the tax office. Under cross-examination, the witness testified that, he was not aware of the normal procedure in relation to the issuance of statutory garnishee notices under s. 272 of the ITA. He also testified under cross-examination that, he was not able to tell how many other such notices were issued to other tax payers. Later under re-examination, it was clarified that, a different section deals with the issuance of statutory garnishee notices under s.272. His section’s duty was only to do audits. He was therefore, not in any position to give any evidence of how many other statutory garnishee notices were issue to other tax payers and in what circumstances.

112. Given the evidence before the Court, it would have been erroneous on the part of the learned trial to arrive at a finding of the kind BCL argues for. If BCL wanted the Court to arrive at such a finding, it was incumbent upon it to secure and produce before the trial Judge the appropriate evidence. Such evidence could have included evidence of no garnishee notices being ever issued and or that other tax payers in the same position as BCL were given favourable and different treatments from the one BCL received, ultimately resulting in say, no issuance of a garnishee notice under s. 272 against the other taxpayers identified in BCL’s evidence. From the cases that have gone before the National Court, this was not the first time the tax office has issued statutory garnishee notices. One case that readily comes to mind is the case of Misima Mines Ltd v. Collector of Customs. There, the Controller of Customs issued Misima Mines with a statutory garnishee notice on reassessment of import duty payable by mine. It is therefore, not correct to suggest that, this is the first time ever that, the CC of T has issued garnishee notices under s.272 of the ITA and therefore BCL has been treated differently.

113. Further, in its submissions and appeal grounds 11, 12, 15 and 16 BCL goes into the matters that transpired only as between itself and the CC of T. It argues that, the CC of T was wrong in issuing the garnishee notices because the CC of T made a decision earlier that, no taxes were payable by BCL for the relevant period of taxable income, approved remittance of substantial funds out of PNG on that basis, the basis for calculating and assessing the taxes against it was wrong, and in any event, issuing the garnishee notices when BCL’s right of appeal against the assessments had not expired. These arguments go into the merits of BCL’s appeal against the assessments. Under the established principle of taxation law or the taxation regime as noted above, these are irrelevant arguments for the purpose of BCL’s application for a stay of its own appeal and injunctions against the CC of T pending arbitration. PNG’s taxation regime as already noted says that, once the notices of assessments were issued, the assessments became conclusive and became payable on the dates specified in the notices. When the CC of T did not receive the assessed taxes, he was within his power to issue the garnishee notices to enforce the assessments regardless of whether or not, there was an appeal against the assessments. If BCL succeeds in its appeal, it will be entitled to a refund of the monies paid over to the CC of T. 

114. As we have already noted, BCL complicated its own position by its own conduct. When it claimed an entitlement to arbitration and applied for a stay of the appeals against the assessments and sought to restrain the CC of T under an OS proceeding, which was an abuse of the Courts process, it went outside the process prescribed under the ITA, under which it could correctly challenge the assessments. The arguments BCL is raising in the appeal before this Court are matters that should be raised only under and at the hearing of the appeal and not otherwise. Further, BCL has failed to demonstrate in any way that, the CC of T in proceeding in the way he did against it, he abused the powers vested in him and further that, the enforcement of the assessments will result in extreme personal hardship, not of the type the Australian cases have identified as not warranting a stay or injunction against enforcement of such assessments.

115. For these reasons, we find that, appeal grounds 9, 10, 11, 12, 15 and 16 have no merit. Accordingly, we would dismiss them. The end result of this is that, BCL failed to, and did not establish to the satisfaction of the learned trial Judge that, there was or were serious questions to be determined at the hearing of the substantive proceedings. This leaves for us to consider for the sake of completeness, whether BCL demonstrated to the satisfaction of the learned trial Judge that the balance of convenience favoured a stay of the enforcement of the assessment and its appeal against them and a continuity of the interim injunction against the CC of T. 

(3) Balance of convenience (Grounds 2, 6, 7 and 17)

116. Grounds 2, 6, 7 and 17 of BCL’s appeal either in part or in whole deal with the issue of balance of convenience. Of these grounds, it is easy to dispose off ground 6 in so far as this ground claims that, the learned trial Judge failed to consider inter alia the balance of convenience. We repeat what we already said about BCL’s failure to assist both this Court and the Court below. Although we agree that the learned trial Judge appears to have failed to specifically address the issue, he did consider the issue in the context of the other issues, namely an arguable or serious question within the tax regime and he correctly arrived at the conclusion that, there was no basis to either stay the proceedings and or order a continuity of the interim restraining orders.

(i) Shares as Liquid Assets - Ground 2

117. In ground 2 of its appeal BCL claims that:

"His Honour erred in fact in stating that shares are liquid assets which can readily be sold, but failing to find that a forced sale can significantly affect the value received for the shares."

118. In our view, there are two parts to this ground of appeal. In the first part, BCL is claiming that, the learned trial Judge erred in stating that, shares are liquid assets and can be readily sold. The second part claims that, the learned trial Judge failed to find that, a force sale could significantly affect the value received for the shares so that, impliedly, the balance of convenience favoured a stay and restrain against enforcement of the assessed taxes. From BCL’s other arguments, these claims are raised to lay the foundation for its main argument that, a forced sale of its assets in shares will result in it being run out of existence by the CC of T on account of the tax assessments as it will be left with no other assets and sources of income. For the reasons we will shortly give, we find this ground has no merit whatsoever and as such we would dismiss it.

119. A careful perusal of what transpired in the Court below shows that the issues raised by these claims were not fairly raised and put before the trial Judge. They are therefore, raised for the first time before this Court, which BCL is not entitled to do. The reason for this is simple; an appeal lies to the Supreme Court to examine and where warranted, correct an alleged error of a trial judge and not the failures of parties to raise issues, factual or legal, they should have first raised in the Court below. An appellate court does not and can not sit as a court of original jurisdiction. Further, there is always the need for finality in litigation. Additionally, fairness to a trial judge and the parties themselves, the need for proper and timely management and disposition of cases and the need to minimize costs of litigation to the parties and the Court, demands that an appellate Court should not hear and determine issues not first raised in the trial court, except with the consent of the parties or with special leave of the Court very exceptional circumstances such as want of jurisdiction.

120. A long list of Supreme Court decisions from MVIT v. James Pupune to PNGBC v. Jeff Tole, Fly River Provincial Government v. Pioneer Health Services Limited and Curtain Brothers (PNG) Limited & Curtain Brothers (Qld) Pty Limited v. University of Papua New Guinea bring these principles out very clearly. On the basis of those principles these line of authorities preclude an appellant from raising on appeal an issue he or she failed to raise before the trial court. A contrary view has however, been expressed in the decision of the Supreme Court in The Papua Club Inc. v. Nasaum Holdings Limited & Ors. That decision relied on a number of earlier decisions of the Court including Van Der Kreek v. Van Der Kreek and the Australian High Court decision in Dianne McGrath Fingleton v. The Queen. In those cases, the respective Courts held that an appellant can be allowed to raised a legal point and succeed without first raising the issue in the trial court. They neither considered nor discussed any of the reasons we advanced above, which we consider are very important. On a proper consideration of those reasons, we are of the view that the MVIT v. James Pupune line of authorities is correct and appropriate and we endorse them. 

121. On the merits of the case before us, we accept without more the CC of T’s submissions that, the learned trial Judge did not fall into any error when he stated that shares are liquid assets and can be readily sold and turned into cash. His Honour was perfectly correct when he said that. This is because, shares trade easily every business day of the week. Shares in public companies can and do get sold readily. However, what one gets for them is dependant on the particular share and the kind of business undertaking or interest the shares represent. The free forces of the market namely, supply and demand determines the price. 

122. In the present case, if BCL wanted a finding that, it would be forced to sell and such a sale would significantly affect the value received for the shares, it was incumbent on it to demonstrate that by appropriate evidence. BCL failed to produce any evidence of the unit prices for each of the shares it had and how much price each of the shares would attract if it was forced to sell. The evidence, more particular the evidence of Mr. Coleman for BCL under cross-examination showed that BCL had other cash assets in excess of K21 million with JB Morgan case management and Rio Tinto Finance. These cash assets continue to generate income for BCL by way of interests. The evidence also showed the original of these funds including the assets in shares came from a remittance of over K89 million with the CC of T’s approval or clearance. Clearly therefore, the learned trial Judge was correct in taking this factor into account when considering whether or not to grant a continuity of the stay and interim injunction Gabi J., erroneously granted on 6th January 2005.

(ii) Overriding interest of State – Ground 7

123. Turning than onto ground 7 of BCL’s appeal, we note that, BCL is claiming that:

"His Honour erred in law in finding that the State had an ‘overriding’ interest, rather than apply the balance of convenience."

124. In the learned trial Judge’s own words, His Honour said: "The tax policy and the regime must be given its full and great weight and the overriding interest of the State must be taken into account." As already noted, the tax regime favours a collection of assessed taxes, whether or not, there is an appeal pending. This is necessary because, the State must have the necessary funds to support its many existing and new projects such as hospitals, schools, defence, police and rural improvements to name a few. 

125. For that purpose, it is necessary to have the kind of tax regime we have, which is aimed at ensuring that the money believed to be owing to the State is not lost while lengthy and difficult appeals are embarked upon. Surely, this may not go down well with taxpayers who know on good grounds, that the assessment is wrong and yet be obliged to hand over the amount they are sure was wrongly assessed, at least temporarily. On the other hand, there would be cases where the State would never be paid, by reason of taxpayers leaving jurisdiction or channelling of off money else where and companies despoiled and so on but for the effect of s.257, in combination with other provisions of the ITA. 

126. Given that, the scale is already in favour of the State. In other words, the interest of the State becomes paramount, under our tax regime. Hence, BCL or any taxpayer could only secure a stay or injunction against the collection of assessed taxes by demonstrating a case of abuse of the CC of T’s powers and extreme personal hardship not of the type of cases in which the Australia Courts have refused to order a stay or injunction. The onus was on BCL as the applicant to demonstrate a case worthy of a stay or injunction. 

127. The only case, BCL tried to establish was its claim that, allowing the CC of T to proceed with the enforcement actions would close down BCL’s PNG operations. Yet BCL failed to demonstrate that, an enforcement of the assessed taxes will for example render it completely bankrupt, not that, that would be sufficient to secure a stay or injunction. This claim, as already noted, contradicts BCL’s answer to its failure to give an undertaking as to damages. Further, this claim fails to appropriately and sufficiently accept the fact that, should BCL become successful in its appeal, it will get its refund though not with interest. In other words, BCL failed to accept that, it was not left without any remedy such that, its interest could only be protected by a stay and or an injunction against the enforcement of the assessed taxes, if it became successful in its appeal. In the consequence, it failed to demonstrate to the satisfaction of the learned trial Judge and before us now that, it stood to suffer irreparable damage if the stay and or injunction it sought to have continued was not granted. 

(iii) Earnings on money paid to CC of T – Ground 17

128. Ground 17 of BCL’s appeal raises the argument that, the learned trial Judge:

"… erred in fact and against the evidence in finding that it was ‘speculative’ that the Appellant would not earn interest on money paid to the defendant."

129. The relevant part of the judgment giving rise to this ground of appeal reads as follows:

"The tax policy that ‘pay up now and litigate later’ is based on the premise that once an assessment is made, it is deemed that the assessment is correct unless the tax payer disputes it. For that reason it must be paid first. Where it is disputed a new assessment is done and if the tax payer is successful either wholly or partly in his appeal he simply gets his whole refund or part refund. While interest may not be paid the tax payer gets back the money he otherwise would have lost, whether in whole or in part.

The argument raised by the plaintiff that it will not earn any interest if the money was paid to the defendant is speculative in my view. While there is some evidence of the plaintiff having investments, I consider the submission speculative. The plaintiff has an obligation, as do all tax payers to pay its tax. The tax regime is there for the purpose." 
(Emphasis supplied)

130. From a careful perusal of the evidence and the arguments the parties put before the learned trial judge, we note that, there was no contest that, under the PNG ITA, if an appeal against an assessment succeeds, the taxpayer is entitled to receive a refund of the amounts wrongly assessed and received from him or her under the assessment. There is no provision for payment of any interest on the amounts wrongly assessed and received from the tax payer. There was also no contest that, under Australian taxation regime, a tax payer is entitled to interest on amounts wrongly assessed and paid over to the tax office.

131. The learned trial Judge was primarily concerned with the tax regime in PNG. He considered the position in Australia for comparison purposes only and for assistance in interpreting and giving effect to the PNG legislation. We accept BCL’s arguments in ground 5 of its appeal that, the Australian tax regime is not exactly the same as that of PNG. This was only to the extent that, under the Australian regime, interest on the monies refunded is payable. The same does not apply under the PNG regime. Otherwise, the two tax regimes are identical or similar. The learned trial Judge was duty bound to interpret and apply the PNG law as it was, which did not provide for any entitlement to any interest in the way Australian legislation provides for. Given that, we are of the view that, the learned trial Judge was correct in arriving at the conclusion that the argument that loss of interest within the tax regime in PNG was speculative, in the sense that it was an irrelevant consideration. 

132. Further, BCL’s argument proceeded on the basis that, it would succeed on its appeal against the assessment. The learned trial Judge only dealt with an interim application. He did not deal with the substantive issues raised by BCL’s appeal. Until a hearing and determination of the issues raised in the appeal, neither the trial Judge nor the parties could tell for sure that, BCL would succeed on its appeal. In that regard, the argument that, BCL would receive a refund of the monies paid over to the tax office under the various amended assessments, and that it would loose out on interests it would earn on those monies was speculative. This was more so in our view because, the correctness of the assessment remained conclusive against BCL subject only to the right of appeal.

133. For these reasons we find that BCL’s appeal grounds 2, 6, 7 and 17 are without merit. We would therefore dismiss them. This effectively means that BCL failed to demonstrate to the satisfaction of the learned trial Judge and now before us that, the balance of convenience favoured a grant of the stay and injunctive reliefs it sought in the Court below. It follows therefore, that, the learned trial Judge was correct in refusing to stay the proceedings and order a continuity of the interim stay and restraining orders granted erroneously by Gabi J., on 6 January 2006.

(iv) Interest Withholding Taxes - Ground 1

134. This effectively leaves us to deal with ground 1 of BCL’s appeal. BCL pleads that the learned trial judge:

"… erred in fact in finding that the Appellant had received credit for interest withholding tax when the said interest withholding tax was wrongly withheld by the Respondent." 

135. This obviously goes into the substance of BCL’s appeal against the tax assessments. This is an issue that can only be raised in the context of the appeal and not otherwise, in accordance with the taxing regime in the country as discussed in the foregoing. However, to make the consideration complete, we will address it. 

136. Before proceeding to consider the evidence which the parties placed before the learned trial judge, we note at the outset that, there was no dispute between the parties on the question of interest withholding taxes. What was clearly in dispute was BCL’s tax liability for the relevant income tax years, the forum and mode to resolve that dispute, stay of proceedings and the CC of T’s powers to issue and enforce statutory garnishee notices against BCL. BCL is thus, in our view, raising this issue for the first time, which it cannot do for reasons already noted under appeal ground 2.

137. Turning to the issue raised in this ground of appeal, we are of the view that, it is necessary to closely examine and consider the evidence put before the learned trial judge, which we have done. The evidence adduced before the learned trial Judge shows that, the relevant evidence on the question of credit came from Mr. Coleman for BCL and Mr. Castiglione for the CC of T. The main part of the evidence consisted of the Notices of Amended Assessments. These assessments allowed for various tax credits for the years assessed. Based on this evidence the learned trial Judge found that, the CC of T issued on 17 November 2004, Amended Notices of Assessment after BCL objected to earlier tax assessments against it. His Honour further found that, these assessments resulted in a reduction on the total amount of tax payable by BCL to K27, 805,115.75. That figure, His Honour found was arrived at after giving a credit for interest withholding tax in favour of the Plaintiff in the sum of K4, 910,914. On these findings, the learned trial Judge further found that, BCL had in fact received a tax credit in amounts more than what Mr. Coleman deposed to in his affidavit. 

138. Other evidence adduced before the learned trial Judge show that, in correspondence exchanged between, BCL’s tax agents and the CC of T, BCL sought a refund of the amounts received and withheld by the CC of T for interest withholding taxes. BCL argues that, the CC of T was wrong in withholding and not refunding the money in question. The evidence clearly shows that, the CC of T after exchange of some correspondence with BCL or its agents, decided to allow credits in favour of BCL in the amounts disputed in the Notices of Amended Assessments. Effectively, this amounted to a refund of the amounts the CC of T received and withheld for interest withholding taxes against BCL.

139. The evidence, placed before the learned trial Judge, did in fact support, in our view, the learned trial Judge’s findings of fact. BCL as the appellant was under an obligation to demonstrate how the learned trial Judge committed the alleged error. This it could have done easily by pointing out, for example that, there was no evidence supporting the learned trial Judge’s findings or that the learned trial Judge’s findings were against the weight of the evidence. BCL has done neither of these. This ground of appeal is therefore without any merit. We would dismiss it.

DECISION 

(a) Leave Application 

140. As would be obvious from the foregoing, the alleged findings of fact on which BCL seeks leave of this Court to appeal are not, in reality findings of facts. Instead they are in fact complaints that, the learned trial Judge should have found some other facts without laying the necessary factual foundation in the evidence for such findings of facts.

141. As this Court said in Boyepe Pere v Emmanuel Ningi the purpose of the requirement for leave to appeal under s.14 of the Supreme Court Act is to ensure only meritorious cases go to the Court on appeal. It is clear law now that, in order to obtain leave of this Court, an appellant must satisfy the Court that, there is a meritorious and arguable case. In this case, the Appellant has neither a meritorious, nor an arguable case, to establish that, the learned trial judge’s findings of fact were wrong. Further, we are of the view that, those facts were not relevant in terms of the issues then before the National Court and now before us. They do not go to assist in any way in relation to the task of this Court to determine whether the trial Judge’s exercise of discretion should be set aside. Accordingly, we would refuse to grant leave for BCL to proceed to appeal on the questions of facts in its appeal grounds 1, 2, 9, 10 and 17 and dismiss them.

(b) BCL’s Appeal SCA 56 of 2005

142. Having regard to the foregoing considerations, it should be obvious as to what should be the decision on the appeal and the issues before this Court. Except for appeal ground 19 of BCL’s appeal as to arbitration not being part of the tax assessment process and ground 5 as to the Australian tax legislation and the PNG one not being similar, all of the other grounds of BCL’s appeal are without any merit by reason of which we would order a dismissal of all of them. Upholding BCL’s appeal grounds 19 only corrects the legal position that, arbitration is not a process or remedy available to any taxpayer or BCL either under the PNG tax regime or the BCA of 1967 as amended by the BCA of 1974. BCL’s success on this ground of its appeal is thus not sufficient to stop the obvious conclusion that, the part of the National Court’s decision to which this ground relates must be quashed. As for ground 5 of BCL’s appeal again upholding BCL’s appeal only reaffirms the obvious different position as between the PNG and Australian tax regimes only in relation to the question of interest the refund of monies wrongly assessed and received from a taxpayer. It does not substantially alter the similar positions as between the two countries in the main taxation regime or policy behind the income tax legislative scheme. The success of BCL on these two grounds of appeal are insignificant to prevent the obvious consequence that the whole of BCL’s appeal under SCA 56 of 2005 is without merit and as such it must be dismissed with costs against BCL with certification for two overseas counsel. 

(c) CC of T’s Appeal SCA 50 of 2005

143. Turning then to the appeal by the CC of T, the sole issue there concerns arbitration of BCL’s tax liability. As already noted, the only ground of the CC of T’s appeal against Salika J.’s, decision is that His Honour erroneously held that arbitration was part of the tax assessment process and therefore erroneously held that arbitration may proceed. Based on the views we have expressed in relation to this point in BCL’s appeal, we would uphold the CC of T’s appeal seeking to set aside that part of the learned trial judge’s decision and in lieu thereof make orders the CC of T is asking for. 

(d) Orders

144. Ultimately, we make the following orders and declarations in respect of the two appeals:

(1) The appeal, SCA 56 of 2005 by Bougainville Copper Limited is dismissed as having no merit;

(2) The appeal SCA 50 of 2005 by the Chief Collector of Taxes is upheld in its entirety;

(3) A declaration that the provisions contained in the Mining (Bougainville Copper Agreement) Act 1974 ("the Act") do not permit Bougainville Copper Limited to refer or submit to arbitration any dispute, question or difference of opinion relating to the liability or the quantum of liability of Bougainville Copper Limited to income tax or in respect of any other matter arising under any paragraph of clause 7 of the Bougainville Copper Agreement (being the Agreement referred to in Schedule 1 of the Act, and as varied by the Agreement set out in Schedule 2 of the Act).

(4) A declaration that the purported Reference to Arbitration by Bougainville Copper Limited of the disputes, questions and/or differences of opinion set out in paragraphs 19(a) and (b) of a document entitled "Notice of Reference to Arbitration Pursuant to the Bougainville Copper Agreement dated 6 June 1967" (bearing date 23 March 2004) ("the said 23 March 2004 Notice of Reference"):

(i) constitutes a purported Reference to Arbitration contrary to the provisions of clauses 7 and 23 of the Bougainville Copper Agreement (being the Agreement as referred to in Schedule 1 of the Act, and as varied by the Agreement set out in Schedule 2 of the Act);

(ii) are not disputes which Bougainville Copper Limited is entitled to have arbitrated;

(iii) is invalid.

(5) An order that Bougainville Copper Limited by itself, its servants or agents or otherwise howsoever, is restrained from taking any further step in or for the purposes of an Arbitration purportedly commenced by Bougainville Copper Limited against the Independent State of Papua New Guinea on or about 23 March 2004 by a document entitled "Notice of Reference to Arbitration Pursuant to the Bougainville Copper Agreement dated 6th June 1967".

(6) An order that Bougainville Copper Limited pay the costs of the Chief Collector of Taxes in both appeals with certification for two overseas counsel;

(7) The money paid into Court by order of Kapi CJ., on 14 October 2005, and subsequently invested, together with any accretions thereto, be paid forthwith to the Chief Collector of Taxes.

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Gadens Lawyers: Lawyers for the Appellant/Respondent
Young & Williams Lawyers: Lawyers for the Respondent/Appellant