Mineral Resources Development Company Ltd v Ombudsman Commission of Papua New Guinea [2008] PGSC 17; SC931 (20 August 2008)

SC931

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCOS 2 OF 2007

Originating Summons filed pursuant to Section 18(1) Constitution.

BETWEEN:

THE MINERAL RESOURCES DEVELOPMENT
COMPANY LIMITED
Plaintiff

AND:

THE OMBUDSMAN COMMISSION OF
PAPUA NEW GUINEA

First Defendant

AND:

THE INDEPENDENT STATE OF
PAPUA NEW GUINEA
Second Defendant

Waigani: Kapi CJ., Gabi J. and Hartshorn J.
2007: 30 November, 7 December
2008: 20 August

OMBUDSMAN COMMISSION – whether it has jurisdiction pursuant to sections 26(1) and 219(1)(a) Constitution to investigate Mineral Resources Development Company Limited and its Managing Director/Chief Executive Officer - "statutory authority" in section 26(1)(g) Constitution considered – "governmental body" in section 219(1)(a)(ii) and Schedule 1.2(1) Constitution considered

Facts:
The second defendant (Ombudsman Commission) began investigations into a resolution of the Plaintiff’s (MRDC) Board concerning termination payments made to the Plaintiff’s Managing Director. The Plaintiff (MRDC) has filed an originating summons pursuant to s.18(1) of the Constitution seeking declarations that MRDC, its employees and agents are not subject to the jurisdiction and control of the Ombudsman Commission and that its investigations into the affairs of MRDC and its Board of Directors are null and void.

Held:
1. MRDC comes within the definition of "statutory authority" in s.26(1)(g) Constitution. Consequently the provisions of the Leadership Code apply to and in relation to the head of and members of the Board of MRDC.
2. The Managing Director of MRDC is one of the persons provided for under s.26(1)(g) of the Constitution and therefore is subject to the Ombudsman Commission's investigative jurisdiction.
3. There is no obligation pursuant to statute or the principles of natural justice that the Ombudsman Commission has a duty to notify a person subject to the Leadership Code
4. The Orders for declaratory and injunctive relief sought by the Plaintiff are refused.

Cases cited:
Re petition of M. T. Somare [1981] PNGLR 265
Kaseng v. Namaliu [1995] PNGLR 481
The Hon John Momis and The Bougainville Provincial Government In Suspension v. The National Executive Council and The Right Hon Bill Skate, The Prime Minister (1999) SCOS 1 of 1999 (Unnumbered and Unreported Judgment of the Supreme Court dated 26th November 1999)
John Mua Nilkare v. Ombudsman Commission [1999] PNGLR 333
Re Jim Kas, Governor of Madang (2001) SC670
The Independent State of Papua New Guinea v. Barclay Brothers (PNG) Ltd (2001) N2090
Kakaraya v. The Ombudsman Commission & The State (2003) N2478
Southern Highlands Provincial Government & Ors v. Sir Michael Somare & Ors (2007) SC854

Counsel:
Mr. F. A. Griffin, for the Plaintiff
Mr. N. Y. Yalo, for the First Defendant

28 August, 2008

1. BY THE COURT: The Ombudsman Commission began to investigate a resolution of the Board of Mineral Resources Development Co Ltd (MRDC) which concerned the termination payment to MRDC’s Managing Director and Chief Executive Officer, Mr. John Francis Kaupa.

2. Directions were issued by the Ombudsman Commission to the sole shareholder, the Board and the Managing Director of MRDC under s.27(4) Constitution concerning the payment. MRDC's cause of action has been prompted by these actions of the Ombudsman Commission.

3. MRDC has filed an originating summons pursuant to s.18(1) Constitution seeking declarations that MRDC, its employees and agents are not subject to the jurisdiction and control of the Ombudsman Commission and that its investigations into the affairs of MRDC and its Board of Directors are null and void.

4. The issues agreed to by the parties for determination are:

1. Whether the Ombudsman Commission has jurisdiction under:

a) Division III.2 of the Constitution;

b) Section 219 of the Constitution;

c) The Organic Law on the Duties and Responsibilities of Leadership;

d) The Organic Law on the Ombudsman Commission; and/or

e) Any other Organic Law or Act of Parliament, to investigate into the affairs of the Managing Director and Chief Executive Officer of the MRDC.

2. If so, under what circumstances can the Ombudsman Commission investigate into the affairs of the Managing Director and Chief Executive Officer of the MRDC.

3. Whether the Ombudsman Commission has jurisdiction under:

a) Division III.2 of the Constitution;

b) Section 219 of the Constitution;

c) The Organic law on the Duties and Responsibilities of Leadership;

d) The Organic law on the Ombudsman Commission; and/or;

e) Any other Organic law or Act of Parliament, to investigate into the affairs of the MRDC.

4. If so, under what circumstances can the Ombudsman Commission investigate into the affairs of the MRDC.

5. Whether the Ombudsman Commission has jurisdiction under:

a) Division III.2 of the Constitution;

b) Section 219 of the Constitution;

c) The Organic Law on the Duties and Responsibilities of Leadership;

d) The Organic Law on the Ombudsman Commission; and/or

e) Any other Organic law or Act of Parliament, to investigate into the MRDC's Board’s resolution of the 23 April 2007 to "endorse the Shareholders decision to pay the kina equivalent of all the benefits for the balance of the term" of Mr. Francis Kaupa’s Professional Service Agreement with MRDC in the amount of K1,126,492.00.

6. Whether the Ombudsman Commission's investigation into the affairs of the MRDC, it's Managing Director and Chief Executive Officer was unconstitutional, invalid and of no effect.

7. Whether the Ombudsman Commission's direction to MRDC dated 30 April 2007, issued pursuant to Section 27(4) of the Constitution was unconstitutional, invalid and or of no effect.

Jurisdiction of the Supreme Court

5. The parties do not question the jurisdiction of this Court but it is appropriate to comment upon it. The issues here are constitutional law issues dealing with whether the Ombudsman Commission has jurisdiction to conduct an investigation under sections 26 and 219 Constitution, into the affairs of MRDC, its Board of Directors and its Managing Director and Chief Executive Officer. The determination of these issues involves interpreting sections 26 and 219 Constitution.
6. Section 18(1) Constitution provides:

"Subject to this Constitution, the Supreme Court has jurisdiction to the exclusion of other courts, as to any question relating to the interpretation or application of any provision of a Constitutional Law."

7. In Re petition of M. T. Somare [1981] PNGLR 265 the Supreme Court unanimously concluded that the Supreme Court has jurisdiction to the exclusion of other courts to deal with questions of interpretation and application of constitutional law. In Southern Highlands Provincial Government & Ors v. Sir Michael Somare & Ors (2007) SC854, Kapi CJ, with whom the other members of the Court unanimously agreed, affirmed this conclusion.

Originating Summons

8. As to the procedure adopted by MRDC, the original jurisdiction of the Supreme Court under s.18(1) Constitution may be invoked by seeking declaratory orders by originating summons; Kaseng v. Namaliu [1995] PNGLR 481, The Hon John Momis and The Bougainville Provincial Government In Suspension v. The National Executive Council and The Right Hon Bill Skate, The Prime Minister (1999) SCOS 1 of 1999 (Unnumbered and Unreported Judgment of the Supreme Court dated 26th November 1999), and Re Jim Kas, Governor of Madang (2001) SC670. This procedure has been followed by MRDC.

Whether the Ombudsman Commission has jurisdiction – s.219(1)(a) Constitution

9. As MRDC made submissions on this issue after the jurisdiction question, it is appropriate for us to consider it at this juncture.

10. Section 219(1)(a) Constitution provides for the bodies which may be investigated by the Ombudsman Commission. Section 219(1) is as follows:

219. Functions of the Commission.

(1) Subject to this section and to any Organic Law made for the purposes of Subsection (7), the functions of the Ombudsman Commission are—

(a) to investigate, on its own initiative or on complaint by a person affected, any conduct on the part of—

(i) any State Service or provincial service, or a member of any such service; or

(ii) any other governmental body, or an officer or employee of a governmental body; or

(iii) any local government body or an officer or employee of any such body; or

(iv) any other body set up by statute—

(A) that is wholly or mainly supported out of public moneys of Papua New Guinea; or

(B) all of, or the majority of, the members of the controlling authority of which are appointed by the National Executive,

or an officer or employee of any such body; and

(v) any member of the personal staff of the Governor-General,a Minister or the Leader or Deputy Leader of the Opposition; or

(vi) any other body or person prescribed for the purpose by an Act of the Parliament, specified by or under an Organic Law in the exercise of a power or function vested in it or him by law in cases where the conduct is or may be wrong, taking into account, amongst other things, the National Goals and Directive Principles, the Basic Rights and the Basic Social Obligations, and

(b) to investigate any defects in any law or administrative practice appearing from any such investigation; and

(c) to investigate, either on its own initiative or on complaint by a person affected, any case of an alleged or suspected discriminatory practice within the meaning of a law prohibiting such practices; and

(d) any functions conferred on it under Division III.2 (leadership code); and

(e) any other functions conferred upon it by or under an Organic Law.

11. MRDC submits that it is not one of the bodies referred to in s.219(1)(a). One of those bodies is any other "governmental body" referred to in s.219(1)(a)(ii). In its submissions, MRDC submits why it is not "any other body set up by statute" referred to in s.219(1)(a)(iv) but does not specify why it is not a "governmental body" as referred to in s.219(1)(a)(ii).

12. Schedule 1.2(1) Constitution defines "governmental body" as:

"governmental body" means—

(a) the National Government; or

(b) a provincial government; or

(c) an arm, department, agency or instrumentality of the National Government or a provincial government; or

(d) a body set up by statute or administrative act for governmental or official purposes;

13. In the Option Agreement in the Schedule to the Mineral Resources Development Company Pty Limited (Privatisation) Act 1996, Recital B, it is provided that, "MRDC is a company wholly owned by the State and has been nominated by the State to hold and manage all of the State's interests in mining and petroleum development projects."

14. The Mining Act and Petroleum Act were both amended to provide that the State, MRDC and a company to be incorporated by MRDC, are given a right to acquire and transfer participating interests in mining and petroleum projects.

15. MRDC is a company incorporated under the Companies Act. Pursuant to MRDC's constitution clause 4.1 (b), "The State shall be the only beneficial owner of shares in the capital of the Company and all persons or entities holding shares in the Company will hold the shares on trust and for the exclusive benefits of the State."

16. Clause 1.3 of MRDC's constitution provides, "Notwithstanding the provisions of this Constitution, all matters requiring actions of or performance by the shareholder may be performed or undertaken by the Minister responsible for the administration of the Public Finances (Management) Act 1996. The Minister shall perform these obligations in a manner that he/she believes is in the best interest of the shareholders and the Company".

17. Clause 11.2.1 of MRDC's constitution provides that the persons who hold the positions of Secretary of the Department responsible for the administration of the Public Finances (Management) Act 1996, the Secretary for the Department responsible for Mining matters, the Secretary of the Department responsible for Petroleum matters and a specified senior public servant, or their equivalent departmental heads or officers, shall by virtue of their position be automatically entitled to sit on the Board of Directors of MRDC.

18. For all of the above to occur, a decision or decisions would have been made and acts performed by or on behalf of the National Executive Council. This Court has not been given evidence of these decisions or acts but it is able to conclude by inference that such decisions and acts have occurred.

19. In that regard the position of MRDC is similar to the company referred to in The Independent State of Papua New Guinea v. Barclay Brothers (PNG) Ltd (2001) N2090. The company was incorporated by the State under the Companies Act for the purpose of road project construction and financing, following various National Executive Council decisions. There was only one share on issue initially held by one Minister on behalf of the State.

20. The words "administrative act" in the definition of "governmental body" in Schedule 1.2(1) Constitution are not defined. In our view, when given a fair and liberal meaning pursuant to Schedule 1.5(2) Constitution, "administrative act" would encompass the acts that were taken to implement the decision or decisions of the National Executive Council to set up MRDC.

21. That MRDC was set up for governmental or official purposes is evident from its shareholding, the provisions of its constitution and the Mineral Resources Development Company Pty Limited (Privatization) Act 1996, to which we have already referred.

22. We are satisfied for the above reasons that MRDC is a body set up by administrative act for governmental or official purposes and is a "governmental body" for the purposes of s.219(1)(a)(ii) Constitution.

23. As s.13(b) Organic Law on the Ombudsman Commission satisfies the latter part of s.219(1)(a) Constitution, we are satisfied that MRDC and an officer or employee of MRDC may be investigated by the Ombudsman Commission pursuant to s.219(1)(a)(ii) Constitution.

Whether MRDC is a "statutory authority" – s.26(1)(g) Constitution

24. Section 26(1) Constitution provides for the persons in respect of whom Division III.2 Constitution – The Leadership Code, applies.

25. Section 26(1)(g) is:

"all heads of or members of the boards or other controlling bodies of statutory authorities;"

26. "Statutory authority" is not defined in the Constitution, in any Organic Law or other legislation. MRDC submits that this Court should find that "statutory authority" is the same as "public authority" as defined under s.2 Salaries and Conditions Monitoring Committee Act 1988 (SCMC Act) which is as follows:

"public authority" means any –

(a) government body; or

(b) State Service; or

(c) authority or instrumentality or other body (corporate or unincorporated), established by or under a Constitutional Law or an Act of the Parliament and declared by the Minister, by notice in the National Gazette, to be a public authority for the purposes of this Act;

27. If this Court so finds, then MRDC is not a statutory authority or public authority, submits MRDC, as MRDC had its status as a "public authority" revoked by National Gazettal Notice G90 on 10th July 2003.

28. The SCMC Act, according to its preamble, is an Act, "... to assist in the implementation of the Government’s wages policy....." amongst other matters. The definition of "public authority" reflects this by giving the power to decide whether a body is a "public authority" to the Minister of Government responsible.

29. It is not appropriate, in our view, that a decision that has an effect of determining whether a person is subject to the Leadership Code should rest solely with a Minister of Government.

30. MRDC further submits that the reasoning and conclusion by Kandakasi J. in his defining of "statutory authority" in the National Court case of Kakaraya v. The Ombudsman Commission & The State (2003) N2478 was incorrect as His Honour did not have the jurisdiction to determine such a question.

31. Leaving aside the question of jurisdiction, it was not submitted why His Honour’s reasoning which led to his definition, was incorrect.

32. His Honour’s definition of "statutory authority" is, "all corporations whether incorporated under the Companies Act 1997 or any other legislation, in which the State is the sole shareholder and does have the controlling authority in terms of appointing its board and or the managing director, is a statutory authority within the meaning of s.26(1)(g) Constitution".

33. His Honour formulated this definition with the intention and purpose of the provisions of the Leadership Code and s.219 Constitution in mind. At p.28 of his judgment he said:

"The purpose (of the provisions of the Leadership Code and s219(1) Constitution) is to ensure that all governmental or public bodies are accountable to the people through the investigative and referral powers of the Ombudsman....These provisions are there to protect the people of Papua New Guinea from institutions and people in positions of leadership and influence that are inclined to use their positions for personal gain and in so doing prove themselves untrustworthy."

34. We respectfully agree with His Honour’s comments.

35. Whilst agreeing with His Honour’s definition in principle, we are of the view that it is preferable to look to the Constitution itself to assist in understanding its terms.

36. As "governmental body" is defined in Schedule 1.2(1) Constitution and a governmental body and an officer and employee can be investigated by the Ombudsman Commission, it is logical to assume that it was intended that the head of such a body would be subject to the provisions of the Leadership Code.

37. Similarly, as the body referred to in s.219(1)(iv) Constitution and an officer and employee can be investigated by the Ombudsman Commission, it is logical to assume that it was intended that the head of such a body would be subject to the provisions of the Leadership Code.

38. In our view the words "statutory authority" were intended to cover the above 2 types of bodies described in (d) of the definition of "governmental body" and in s.219(1)(iv) Constitution.

39. We find therefore that an appropriate definition of "statutory authority" is:

"a body set up by statute or administrative act for governmental or official purposes, and any other body set up by statute –

(A) that is wholly or mainly supported out of public moneys of Papua New Guinea; or

(B) all of, or the majority of, the members of the controlling authority of which are appointed by the National Executive."

40. Given the above definition we find that MRDC comes within the definition of "statutory authority" in s.26(1)(g) Constitution. Consequently the provisions of the Leadership Code apply to and in relation to the head of and members of the Board of MRDC.

41. As we have made the findings that we have in regard to s. 219(1)(a) and s.26(1) Constitution, it is not necessary for us to consider the other issues concerning the jurisdiction of the Ombudsman Commission.

Mr. Kaupa

42. MRDC submits that Mr. Kaupa was appointed its Managing Director and/or Chief Executive Officer under a Professional Services Agreement and not under the Public Services (Management) Act. He was therefore not one of the persons provided for under s.26(1) Constitution and was not subject to the Ombudsman Commission's investigative jurisdiction.

43. Given our finding as to the definition of "statutory authority" above, how Mr. Kaupa was retained is not an issue. It is not disputed that he was at all material times the Managing Director and/or the Chief Executive Officer of MRDC. Consequently he is one of the persons provided for under s.26(1)(g) Constitution.

Whether notice under s.17 Organic Law on the Ombudsman Commission required

44. MRDC submits that the Ombudsman Commission should have given it notice under s.17 Organic Law on the Ombudsman Commission of its intention to commence investigations into MRDC's Board resolutions of 23rd April 2007, that such notice was mandatory and that in the absence of such notice, any investigation by the Ombudsman Commission was illegal.

45. The Supreme Court in John Mua Nilkare v. Ombudsman Commission [1999] PNGLR 333, ruled that there is no obligation pursuant to statute or the principles of natural justice that the Ombudsman Commission has a duty to notify a person subject to the Leadership Code that he is under investigation under that law.

46. After a detailed analysis of the law, Kapi DCJ (as he then was), said:

"There is clearly an implied intention by the legislature that a person investigated under OLDRL should not have the right to be notified before an investigation is carried out. The right to be notified is given at a later stage after the investigations have been carried out under s.20(2).

Having come to this conclusion, there is no room for the application of any principle of underlying law with respect to natural justice which may require a right to be notified before investigation commences. Any such principle (if any) would be inconsistent with the implied intention not to apply this right until at a later stage of investigations under the provisions of OLDRL."

47. We see no reason to depart from this reasoning.

48. For the above reasons, we refuse the Orders for declaratory and injunctive relief sought by MRDC. Costs of the proceedings are to be paid by MRDC to the Ombudsman Commission.

Young & Williams Lawyers: Lawyers for the Plaintiff
Ombudsman Commission: Lawyers for the First Defendant
Office of the Solicitor-General: Lawyers for the Second Defendant