Mas International Ltd v Sode [2008] PGSC 27; SC944 (24 July 2008)

SC944

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 96 OF 2006

BETWEEN

MAS INTERNATIONAL LIMITED
Appellant

AND:

DAVID SODE,
Acting Commissioner General
of Internal Revenue
Respondent

Waigani: Gavara-Nanu, Manuhu & David, J
2006: 29 November
2008: 24 July

APPEALS – Appeal against exercise of discretion by learned trial judge to refuse injunction - Appellant to demonstrate error.

TAXATION – Proper construction of tax legislation – Strict interpretation required – Provisions to be given their plain and ordinary meaning – Policy to pay first and litigate later – Posting of security is condition precedent to contesting any assessment made in respect of the value of goods seized including their return with or without litigation.

INJUNCTION – Principles discussed – Undertaking as to damages provided by appellant questionable –Whether Undertaking as to damages sufficient.

Cases cited:
AGK Pacfic (NG) Ltd v. William Brad Anderson & Ors (2000) N2062
American Cyanamid Co. v. Ethicon Ltd [1975] UKHL 1; (1975) AC 396
Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Collins & Leahy Limited v. Collector of Stamp Duties (2001) N2150
Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572
Employers Federation of PNG v. PNG Waterside Workers and Seaman’s Union & Anor (1982) N393
Fulleborn Plantations Ltd v. Pepi Kimas (2007) N3209
Gobe Hongu Ltd v. NEC & Ors (1999) N1920
Golobadana No.35 Ltd v. Bank South Pacific Ltd (2002) N2309
Internal Revenue Commission v. Dr. Pirouz Hamidian-Rad (2002) SC692
Kurt Reimann v. & Ors v. George Skell & Anor (2001) N2093.
Mark Opur v. Darbar Enterprises Ltd (2004) N2528
Markscal Limited & Robert Needham v. Mineral Resources Development Co. Pty Ltd (1996) N1472
Mauga Logging Company Pty Ltd v. South Pacific Oil Palm Development Pty Ltd [1977] PNGLR 80
Misima Mines Ltd v. The Collector of Customs (2003) N2497
Misima Mines Ltd v. The Collector of Customs & Anor (2007) N3206
MVIT v. Etape [1994] PNGLR 569
MVIT v. Pupune [1993] PNGLR 370
Mt. Hagen Airport v. Gibbs [1976] PNGLR 216
National Housing Corporation v. Yama Security Services Pty Ltd (2000) N1985
Norah Mairi v. Alkan Tololo [1976] PNGLR 125
Public Employees Association v. Public Service Commission [1988-89] PNGLR 585
Rimbink Pato v. Anthony Manjin & Ors (1999) SC622
Telikom PNG Limited v Independent Consumer and Competition Commission and Digicel (PNG) Limited (2007) N3143

Counsel:
H. J. Leahy, for the Appellant
L.N. Nablu, for the Respondent

24 July, 2008

1. BY THE COURT: Before us is an appeal against the whole of the judgment by Kandakasi, J given on 04 September 2006 in which his Honour refused the appellant’s application for certain orders, including an order in the nature of an interim injunction to restrain the respondent from taking steps, including advertising to sell or to deal with the tugboat CIK Memed and the pontoon Wirasperkasa ("the vessels") and the cargo aboard each of the vessels inclusive of all heavy equipment and machinery and other property seized under certain notices of seizure issued and served upon the appellant by or on behalf of the respondent.

2. Aggrieved by that decision, the appellant instituted this appeal by way of a Notice of Appeal dated 12 September 2006 and filed on 17 September 2006.

3. On 20 October 2006, the appellant applied for and was granted an interim stay order under s.5 (1)(b) of the Supreme Court Act. The respondent applied for the discharge of the interim stay order which was heard by the full bench of the Supreme Court on 24 October 2006. The decision on that application appears to have been overtaken by this appeal.

4. This appeal lies without leave.

Background

5. The appellant claims to have imported certain logging equipment including machinery, motor vehicles and other items through the port of Wewak aboard a vessel called Sea Link Fly which arrived there on 03 January 2006. Inward customs clearance for the vessel and its cargo was obtained on 04 January 2006.

6. The vessels and their cargo arrived at Wewak port on 18 January 2006. The appellant’s cargo aboard the Sea Link Fly was off-loaded onto Wirasperkasa on 19 January 2006. The appellant claims in an affidavit sworn by Mr Loa Haihavu on 16 August, 2006, in paragraph 27, that outward customs clearance for the vessels was obtained in Wewak on 20 January 2006 for their journey to Port Moresby and the vessels left Wewak soon after. Mr Haihavu also deposes in the affidavit that documents including the outward clearance were in the possession of the captain of Cik Memed when it left the Wewak port. The documents he says were; Customs Clearance certificate dated 20 January 2006; Outward manifests; Customs Form 36; Application for Clearance and Guarantee to pay duty; Crew List; Passenger List and vessels’ store list.

7. The Customs Clearance certificate issued at the Wewak port was only in respect of Cik Memed, not Wirasperkasa.

8. The appellant claims that due to stress of weather, the vessels did not arrive in Alotau until 30 January 2006. According to the respondent, the vessels had no inward customs clearance and according to Mr Eric Awamaki, Manager, IRC Customs Operations in Alotau, his office was not aware of the presence of the vessels in Alotau port until 2 February 2006.

9. The appellant claims that Mr. Awamaki boarded Cik Memed and obtained from its captain the crew’s passports and the Wewak outward customs clearance documents. This happened following a complaint by local landowners. The passports were returned to Mr Haihavu, but not the outward customs clearance documents. Mr Awamaki sent the original of the outward Customs Clearance certificate for Cik Memed which was issued in Wewak through TNT to Customs Enforcement Division in Port Moresby on 27 February 2006.

10. Whilst anchored at the Alotau port Wirasperkasa accidentally caused a substantial damage to the local jetty. According to the respondent, after sorting out the damage, on or about 04 February 2006, the vessels without obtaining an outward customs clearance left Alotau to Kala Log Pond at Yule Island some 250 kilometres north west of Port Moresby. The vessels also did not have inward customs clearance to dock at Kala Log Pond. Mr Haihavu deposes in paragraph 40 of his first affidavit that Mr John Sam, Customs Manager in Port Moresby authorised customs clearance for the vessels to be docked at Kala Log Pond. On 18 February 2006 the vessels were intercepted by Customs Officers and ordered both vessels to return to Port Moresby.

11. When in Port Moresby, the respondent seized the vessels with all their cargo and advertised them for sale by public tender. The advertisements were placed in the Post Courier on 11 and 15 August 2006. According to the respondent, the seizures were effected by service upon the appellant of four notices of seizure; one notice dated 02 April 2006, which was in respect of sixteen containers onboard Wirasperkasa and three other notices each dated 10 April 2006, were in respect of the vessels and the rest of their cargo.

12. The vessels are currently docked at the Lancron Naval Base here in Port Moresby with all their cargo.

Correspondence between the parties regarding notices of seizure, lodgement of a written claim for goods and security for return of goods.

13. Correspondences were exchanged between the parties following the seizures, including a written claim by the appellant for the goods seized and the demand for the lodgement of security for the return of the seized goods by the respondent.

14. It is noted that with a covering letter from the respondent written by Ms Caroline Korus, Acting Assistant Commissioner, Customs Enforcement Division dated 13 April 2006, the respondent through Ms Korus served the three notices of seizure dated 10 April 2006 on the appellant. The letter and the three notices were served personally by Ms Korus on 13 April 2006 on Mr Gregory Emilio of Emilio Lawyers, who were lawyers acting for the appellant, in the presence of Mr Gabutu Hariki, who was introduced to Ms Korus as the Operations Manager for the appellant. Mr Dominic Voo in his affidavit sworn on 23 August 2006 (supplementary affidavit) on behalf of the Appellant confirms receiving the letter with the three notices.

15. The other notice of seizure dated 02 April 2006 in respect of the sixteen containers onboard Wirasperkasa was served on the appellant on 02 April 2006.

16. In the letter by Ms Korus dated 13 April, 2006, the appellant was advised that:-

1. It was required under s.126 (2)(b) of the Customs Act, Chapter 101 ("the Act") to make a written claim to the Collector for the seized goods within one month from the date of the notice of seizure;
   
2. It had the right to commence legal proceedings against the Collector for the return of the seized goods within four months from the date of the notices as required under s.129 of the Act;
   
3. The goods could be returned to it upon payment of security amounting K14,078,566.27, which was inclusive of the value of the goods seized, duty, GST and costs incurred in investigating and effecting the seizures in accordance with s.127 of the Act; either by a bank cheque or a bank guarantee.
   

17. By another letter from the respondent again written by Ms Korus to the appellant dated 21 April 2006 in response to an earlier letter by the appellant to the respondent dated 18 April 2006, in which the appellant raised an objection to the assessment made by the respondent for the amount of security, the appellant was advised that:-

1. Its objection could not be considered unless it lodged a written notice of its claim over the seized goods within one month of the notices (of seizure) as had been previously advised in the respondent’s letter to the appellant dated 13 April 2006; the appellant was further advised that the claim should be lodged by 18 May 2006;
   
2. The respondent reiterated that the seized goods could be returned to the appellant upon payment of the security.
   

18. By a letter from the appellant to the respondent dated 24 April 2006 which was in response to the respondent’s earlier letter of 21 April 2006, the appellant gave notice of its claim over the seized goods and requested for the review of the amount assessed for security. This letter was written by Mr Voo in his capacity as the appellant’s General Manager. The notice was given within one month of the date of the notices of seizure. It is to be noted that the respondent treated the appellant as the owner and importer of the goods seized from this time onwards.

19. After receiving the appellant’s letter of claim, the respondent in a letter written by Mr Paul Iramu, Acting Commissioner for Customs dated 11 May 2006 responded to the appellant’s objection to the previously assessed amount for security and advised that a reassessment of security had been made, which was K12,019,197.39. The appellant was given thirty days upon receipt of that letter or by 12 June 2006 to either pay the security or commence legal proceedings for the return of the seized goods and if it failed to exercise any of those options, the seized goods would be disposed without further notice.

20. By a letter from Emilio Lawyers to the respondent dated 16 May 2006, which was in response to the respondent’s letter of 11 May 2006, it was suggested, amongst other things, that the appellant be allowed to provide security by paying 10% of the total value of the seized goods by bond and a bank guarantee in accordance with s.14 of the Act with the appellant reserving the option to pay the amount assessed for security for the return of the goods.

21. In response to a letter from the appellant dated 01 June 2006, in which the appellant further objected to the revised amount for security, the respondent advised the appellant in a letter written by Ms Korus dated 09 June 2006, that it (respondent) had reassessed the amount for security and further reduced the amount for the return of the seized goods to K10,772,900.18. Four revised notices in respect of each seizure dated 09 June 2006 were also forwarded to the appellant together with that letter. In that letter, the respondent advised that the revised notices superseded the earlier notices. The appellant was given thirty days upon receipt of that letter or by 17 July 2006 to pay the revised amount of security to secure the release of the seized goods, failing which, the good would be sold without further notice. By that letter, the appellant was also informed that, that was the final revision of the amount for security.

Claim in the National Court.

The originating process

22. The appellant instituted proceedings in the National Court in an Originating Summons ("the Summons") was filed on 09 August 2006. The summons was subsequently amended on 16 August 2006, which was filed on 17 August 2006. In the Summons, the appellant seeks a number of orders against the respondent, principally challenging the validity of the seizure by the respondent of the vessels and their cargo.

23. We set out the substantive orders sought in the Summons below:-

1. A declaration under s.129 of the Customs Act that the Notices of Seizure dated 10 April 2006 issued in respect of the tugboat "CIK MEMED", the pontoon "WIRASPERKASA" and the heavy equipment and machinery and vehicles and other items conveyed by tugboat "CIK MEMED" and on board the "Wirasperkasa" and issued by the Defendant under section 126 of the Customs Act is unlawful void and of no effect.
   
2. An order in the nature of a mandatory injunction for the return to the Plaintiff of the pontoon "Wirasperkasa", the tugboat "CIK MEMED" and the heavy equipment and machinery and vehicles and other items conveyed by tugboat "CIK MEMED" and on board the "WIRASPERKASA" and all property seized under the Notices of Seizure referred to in paragraph 1 above; ALTERNATIVELY
   
3. An order in the nature of an interlocutory injunction restraining the Defendant from further advertising for sale, selling, removing, disposing, dealing or doing anything with the pontoon "WIRASPERKASA", the tugboat "CIK MEMED" and the heavy equipment and machinery and vehicles and other items conveyed by tugboat "CIK MEMED" and on board the "WIRASPERKASA" and all property seized under the Notices of Seizure referred to in paragraph 1 above, such as would deny or hinder in anyway the Plaintiff’s right to enforce it’s right to ownership and to physical possession of them.
   
4. An order that the Defendant, file an Affidavit stating whether a copy or copies of:-
   
   • (i) The Plaintiff’s customs clearance certificate dated 20 January 2006; and
     
   • (ii) The tugboat "CIK MEMED" and the pontoon "WIRASPERKASA" outward manifest; and
     
   • (iii) Customs Form 36 – Application for Clearance and Guarantee to pay Duty; and
     
   • (iv) The crew lists for the tugboat "CIK MEMED" and the pontoon "WIRASPERKASA"; and
     
   • (v) The passenger lists for the tugboat "CIK MEMED" and the pontoon "WIRASPERKASA"; and
     
   • (vi) The store lists for the tugboat "CIK MEMED" and the pontoon "WIRASPERKASA" is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and to serve the Affidavit on the Plaintiff or it’s Lawyers.
     
5. An order for damages.
   

Application for interlocutory injunction

24. On 04 September 2006, the appellant made an application through a Notice of Motion dated 23 August, 2006 for an interlocutory injunction and other orders. The orders sought were principally in similar terms as paragraphs 3 and 4 of the orders sought in the Summons. We set them out below:-

1. An order in the nature of an interlocutory injunction restraining the Defendant from further advertising for sale, selling, removing, disposing, dealing or doing anything with the pontoon "WIRASPERKASA", the tugboat "CIK MEMED" and the heavy equipment and machinery and vehicles and other items conveyed by tugboat "CIK MEMED" and on board the "WIRASPERKASA" and all property seized under the Notices of Seizure referred to in paragraph 1 above, such as would deny or hinder in anyway the Plaintiff’s right to enforce it’s right to ownership and to physical possession of them.
   
2. An order that the Defendant, file an Affidavit stating whether a copy or copies of;
   
3. The Plaintiff’s customs clearance certificate dated 20 January 2006; and
   
4. The tugboat "CIK MEMED" and the pontoon "WIRASPERKASA" outward manifest; and
   
5. Customs Form 36 – Application for Clearance and Guarantee to pay Duty; and
   
6. The crew lists for the tugboat "CIK MEMED" and the pontoon "WIRASPERKASA"; and
   
7. The passenger lists for the tugboat "CIK MEMED" and the pontoon "WIRASPERKASA"; and
   
8. The store lists for the tugboat "CIK MEMED" and the pontoon "WIRASPERKASA" is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and to serve the Affidavit on the Plaintiff or it’s Lawyers.
   

25. The appellant relied upon the following Affidavits:-

1. Affidavit by Mr Haihavu sworn on 16 August 2006;
   
2. Affidavit by Mr Voo sworn on 17 August 2006;
   
3. Supplementary affidavit by Mr Haihavu sworn on 17 August 2006;
   
4. Supplementary affidavit by Mr Voo sworn on 23 August 2006.
   

26. The respondent in contesting the application relied upon the following affidavits:-

1. Affidavit by Ms Korus sworn on 22 August 2006;
   
2. Affidavit by Mr Abilio sworn on 1 September 2006;
   
3. Affidavit by Mr Sam sworn on 1 September 2006;
   
4. Affidavit by Mr John Nakria sworn on 1 September 2006;
   
5. Affidavit by Mr Jerry Kaon sworn on 1 September 2006;
   
6. Affidavit by Ms Korus sworn on 4 September 2006.
   

27. As we have alluded to earlier, on 04 September 2006, the learned trial judge refused the appellant’s application.

Grounds of appeal

28. We set out the grounds of appeal below:-

1. The learned trial judge erred in mixed fact and law in that he held that the Respondent’s letter dated 13 April 2006 to the Appellant was valid notice under Section 129 (1)(b) of the Act when he also held it to be notices under ss. 126, 127, 127A and 129 of the Act. The learned trial judge should have held that the letter was not a valid notice because it was issued before the Appellant claimed ownership under ss.126 (2)(b) and 129 of the Act which demonstrated that there was a substantive issue and serious question to tried.
   
2. The learned trial judge erred in mixed fact and law in that he held that the Respondent’s letter dated 13 April 2006 to the Appellant was valid notice under s.129 (1)(b) of the Act when the Appellant had not served on the Respondent before 13 April 2006, a claim as the owner of the subject goods under ss.126 (2)(b) and 129 (1) of the Act.
   
3. The learned trial judge erred in mixed fact and law in refusing to grant the Appellant’s application for interlocutory injunctive orders against the Respondent after erroneously finding that there was no substantive issue to be tried or serious question to be argued when he should have held that there was a substantive issue and serious question to be tried when the Respondent’s letter dated 13 April 2006 appeared to not be valid under s.129 (1)(b) of the Act because it was issued before the Appellant claimed ownership under ss.126 (2)(b) and 129 (1) of the Act, which demonstrated that there was a substantive and serious question to be tried.
   
4. The learned trial judge erred in mixed fact and law in refusing to grant the Appellant’s application for interlocutory injunctive orders against the Respondent after erroneously finding that there would be no irreparable damage done to the Appellant, when he should have held that irreparable would be suffered by the Appellant in that the Appellant’s goods that were seized by the Respondent were the subject of a hire agreement between the Appellant and a third party namely PT Kharishma Rimba Jaya, and that the Appellant would have suffered irreparable damage in that it would be responsible to pay back the full value of the hired goods (which were valued at more than K10 million) to the third party and owner of the subject goods if the injunctive orders sought were not granted.
   
5. The learned trial judge erred in mixed fact and law in refusing to grant the Appellant’s application for interlocutory injunctive orders against the Respondent after erroneously finding that the Undertaking as to Damages given by the Appellant’s Gabutu Hariki on 17 August 2006 was questionable, when he should have held that the Appellant had complied with an essential requirement for the granting of an interlocutory injunction and that was to give an Undertaking as to Damages.
   
6. The learned trial judge erred in mixed fact and law in accepting that the mode of service of the purported notice, i.e. the Respondent’s letter dated 13 April 2006 to the Respondent was valid under s.126 (1) of the Act, when he should have held that the said letter was not validly served on the Appellant when it was not served personally on him or posted and addressed to it at last known place of business.
   

Orders sought

29. The appellant seeks the following orders:-

1. That the appeal be upheld.
   
2. That the order of the learned trial judge given on 04 September 2006 be set aside.
   
3. An interim order in the nature of an interlocutory injunction restraining the Respondent, his officers, agents, employees, officers or any person under his authority or directions or whosoever from further advertising for sale, selling, removing, disposing of and dealing with the vessels and the goods and all property aboard the vessels seized under the Respondent’s purported notices of seizure, such as would deny or hinder in anyway the Appellant’s right to enforce ownership and physical possession of them, until the determination of the Appeal herein, pursuant to s.5 (b) of the Supreme Court Act, Chapter 87.
   
4. An order in the nature of an interlocutory injunction restraining the Respondent, his officers, agents, employees, officers or any person under his authority or directions or whosoever, from further advertising for sale, selling, removing, disposing of and dealing with the vessels and the goods and all property aboard the vessels seized under the Respondent’s purported notices of seizure, such as would deny or hinder the Appellant’s right to enforce ownership and physical possession of them, until the determination of the Appeal herein, and until determination of the National Court proceedings, OS No.562 of 2006 pursuant to ss.6 (2) and 8 (e) of the Supreme Court Act, Chapter 87 and O.14 r.10 of the National Court Rules 1983.
   
5. An order that the proceedings be remitted to the National Court for hearing of the Appellant’s claim under the summons.
   

Issues

30. The central issue for us to determine here is whether the learned trial judge erred in refusing to grant the orders sought by the appellant on 4 September, 2006.

The Law

31. It is settled law that this Court will not interfere with the learned trial judge’s ruling unless it finds that his Honour fell into an error.

32. It is also settled law that the onus is on the appellant to demonstrate the error it says the learned trial judge fell into in refusing its application.

33. In respect of the injunctive orders sought by the appellant on 4 September, 2006, it should be said that a grant or a refusal of such relief is discretionary, exercise of which had to be made properly by the trial judge in accordance with settled principles.

34. The principles relevant to the grant of injunctive orders in this jurisdiction are well settled. Some of the cases that have discussed the principles are: Golobadana No.35 Ltd v. Bank South Pacific Ltd (2002) N2309, AGK Pacific (NG) Ltd v. William Brad Anderson, Karson Construction (PNG) Ltd & Downer Construction (PNG) Ltd (2000) N2062, Employers Federation of PNG v. PNG Waterside Workers and Seaman’s Union & Anor (1982) N393, Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572, Mt. Hagen Airport v. Gibbs [1976] PNGLR 216, Public Employees Association v. Public Service Commission [1988-89] PNGLR 585, Markscal Limited & Robert Needham v. Mineral Resources Development Co. Pty Ltd (1996) N1472 and Gobe Hongu Ltd v NEC & Ors (1999) N1920. See, also American Cyanamid Co. v. Ethicon Ltd [1975] UKHL 1; (1975) AC 396.

35. Going by the principles stated in these cases, there are three basic principles to be satisfied; first, an applicant must demonstrate that there are serious questions to be tried; secondly, the balance of convenience favoured the grant of injunctive orders so as to preserve the status quo and thirdly, damages is not an appropriate remedy.

36. One other fundamental requirement that has to be met by an applicant is to file and give an undertaking as to damages. This is a condition precedent to granting of injunctive orders: Rimbink Pato v. Anthony Manjin & Ors (1999) SC622, Gobe Hongu Ltd v NEC & Ors (supra) and National Housing Corporation v. Yama Security Services Pty Ltd (2000) N1985. This requirement may be dispensed with only in cases where an applicant can show that it is not in the interest of justice to give such undertaking, especially where no damages are likely to be suffered: See, Mauga Logging Company Pty Ltd v. South Pacific Oil Palm Development Pty Ltd [1977] PNGLR 80 and Kurt Reimann v. & Ors v. George Skell & Anor (2001) N2093.

Whether the learned trial judge erred in law and in fact in holding that the appellant did not demonstrate that there was a serious question to be tried and determined?

37. Grounds 1, 2 and 3 of the Notice of Appeal will be discussed together in answering this question. These grounds relate to the effect of the respondent’s letter to the appellant dated 13 April 2006, regarding the notices issued and served upon the appellant by the respondent pursuant to s.129 (1) of the Act. The learned trial judge discussed this issue at page 177, lines 11 to 13 of the Appeal Book.

38. Counsel for the appellant contends that a notice is yet to be issued by the respondent under s.129 (1). It is further contended that even if the respondent has issued such notice by the letters of 13 April 2006 and 21 April 2006, as claimed by the respondent any such notice is flawed because:-

1. It did not require the appellant to take proceedings for the recovery of the seized goods; and
   
2. The notice was capable of varying interpretations, thus it was ambiguous, vague and uncertain; and
   
3. The notice under s.129 (1) (b) precedes the claim made by the appellant for the seized goods under s.126 (2) (b).
   

39. In our opinion, ground 6 of the Notice of Appeal can be disposed of quite easily because the appellant did not take issue with the mode of service in the court below regarding the respondent’s letter of 13 April 2006. The appellant cannot raise its objection now. See, MVIT v. Etape [1994] PNGLR 596 and MVIT v. Pupune [1993] PNGLR 370.

40. The appellant in principal says that the seizure of the goods is unlawful because no notice was issued under s.129 (1) and that the time within which to commence legal proceedings for the recovery of the seized goods has yet to run.

41. The respondent contends that the appellant has the onus to show that the seizure was unlawful as being contrary to ss.145 and 146. It is the respondent’s argument that the seizure was lawful because the vessels and their cargo did not satisfy the mandatory reporting and clearance requirements under the Act.

42. It is further contended by the respondent that any errors as to form, content and or the manner in which notices were given under s.129 (1)(b) cannot invalidate the seizures because there is no prescribed form of notice nor is there a prescribed mode of service under the Act. It is also argued that the subsequent letters by the respondent dated 11 May 2006 and 09 June 2006 corrected or superseded the notices issued earlier when the appellant was advised that it had thirty days to either pay the security assessed or to commence legal proceedings for the return of the seized goods, the deadlines for the latter being 17 July 2006.

43. Ms Nablu submitted that the appellant commenced the National Court proceedings on 09 August 2006, which was outside the thirty days period given to the appellant. The consequence of which, it was submitted was that the seized goods could be disposed of under s.127A.

44. Section 127A provides:-

127A. Disposal of seized goods on refusal to provide security.

(1) Where a claimant refuses to give security as required by the Commissioner General or Collector under the provisions of Section 127, in respect of any ship, boat, aircraft or goods seized, the Commissioner General may sell the ship, boat, aircraft or goods seized by public auction and shall -

(a) set up a trust account at a bank in Papua New Guinea, into which the net proceeds of that sale, after deducting any selling expenses, shall be deposited; and

(b) pay to the claimant the amount held in that trust account if he successfully challenges the seizure in legal proceedings commenced under the provisions of Section 129; or

(c) if no legal proceedings for return of the ship, boat, aircraft or goods seized have been commenced by the claimant under the provisions of Section 129 within the time required by that Section, or if such legal proceedings have been commenced and are unsuccessful, the Commissioner General shall pay the amount held into the consolidated revenue of the State.

(2) Where the Commissioner General has made payment in full of the net proceeds to a claimant under the provisions of Subsection (1), that payment shall be deemed to be in full satisfaction of all claims by the claimant relating to the seizure of that ship, boat, aircraft or goods seized, including, but not limited to, any claim for damages or loss resulting from the seizure of that ship, boat, aircraft or goods seized.

(3) On payment by the Commissioner General in full of those net proceeds to a claimant, the claimant may not commence any further legal proceedings against the Commissioner General or the Collector in respect of the seizure of that ship, boat, aircraft or goods seized.

45. Notices issued by the respondent served two main purposes first, for the seizure of the vessels and their cargo and second, for their return upon payment of the security (ss.126 (1), 127 and 129 (1)). We also note that the appellant by its letter of 24 April 2006 to the respondent gave notice of its claim over the seized goods.

46. As a matter of general principle, all tax legislations including the Act must be interpreted strictly and given their plain and ordinary meaning. See, Collins & Leahy Limited v. Collector of Stamp Duties (2001) N2150, Internal Revenue Commission v. Dr. Pirouz Hamidian-Rad (2002) SC692, Norah Mairi v. Alkan Tololo (1976) PNGLR 125, Misima Mines Ltd v. The Collector of Customs (2003) N2497, Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853, Misima Mines Ltd v. The Collector of Customs & Anor (2007) N3206.

47. The intention behind tax legislation is for the amount assessed either taxed duty or security as in this case must be paid and any objection to the amount assessed is to be made later. See, Chief Collector of Taxes v. Bougainville Copper Ltd (supra) and Mark Opur v. Darbar Enterprises Ltd (2004) N2528.

48. We accept the respondent’s argument that s.125 is an enforcement provision which authorises seizure while ss.126 to 129 state procedural requirements for such seizure. In our opinion, compliance with these provisions is necessary to effect seizure and to deal with the seized goods by the respondent and at the same time facilitate a procedure for the owner of the goods to lay claim for their return.

49. It should be noted that a seizure under s.126 (1) cannot be invalidated solely because of an error in the notice. This safeguard is provided by s.126 (4) of the Act.

50. In order for us to decide whether the learned trial judge erred in determining that there was no serious question to be determined, it is necessary to examine ss. 126 (1), 127 and 129 (1) of the Act. We restate these provisions below:-

126. Notice of seizure.

(1) Where a conveyance or goods have been seized as forfeited, the seizing officer shall give written notice of the seizure, and the cause of it, to the owner of the conveyance or goods, or if the owner cannot be identified after reasonable inquiry, on the person who was in possession or who was in control of the conveyance or goods when they were seized, by delivering or transmitting the notice to him -

(a) personally; or

(b) by post and addressed to him at his last-known place of abode or business.

(2) The conveyance or goods seized –

(a) shall be deemed to be condemned; and

(b) may be sold by the Collector, unless the person from whom it or they were seized, or the owner, gives, within one month after the date of the seizure, written notice to the Collector at the nearest port that he claims it or them.

(3) If any goods seized are of a perishable nature or are live animals, they may be sold by the Collector without delay.

(4) For the purposes of Subsection (1) the seizure of a conveyance or goods shall not be deemed invalid solely because of any error contained in the form of notice.

127. Return of seized goods on security.

(1) The Commissioner General or the Collector may authorize any ship, boat, aircraft or goods seized to be delivered to the claimant on his giving security.

(2) The security given to the Commissioner General or the Collector shall be in the form of cash or by bank guarantee.

(3) The amount of the security shall be an amount equal to the value of the items seized, as determined by the Commissioner General or the Collector, plus freight and insurance costs incurred in their transport to Papua New Guinea, plus the amount of any duty of customs or excise and any Goods and Services Tax payable on their importation.

(4) The question as to whether the value, determined by the Commissioner General or the Collector under Subsection (3), of items seized, is fair and accurate, is non-justiciable.

129. Requirement by Collector of legal proceedings for return of seized goods.

(1) Where any goods have been seized by an officer and a claim to the goods has been served on the Collector by the owner, the Collector may -

(a) retain possession of them without taking proceedings for their condemnation; and

(b) by notice under his hand, require the claimant to take proceedings against him for the recovery of them.

(2) If the claimant does not commence legal proceedings for the return of the goods within 30 days after the date of the notice, they shall, without any further proceedings, be deemed to be condemned.

51. It is a mandatory requirement to issue a notice of seizure under s.126 (1) of the Act, but the respondent has a discretion whether to issue a notice to the owner of the seized goods to take out legal proceedings for their return under s.129 (1)(b). A notice of seizure issued under s.126 (1) is prescribed under s.67 (1) of the Customs Regulation, Chapter 101, (Form 62). However, a notice under s.129 (1) (b) is not prescribed in the Regulations.

52. Having had a closer look at these provisions, we find four things were done in this case in compliance with these provisions by the respondent:-

1. The seized goods were condemned under s.126 (2)(a) and could be sold if the appellant as the owner of the goods did not make a written claim for them under s.126 (2)(b) within one month from the dates of the notices of seizure;
   
2. Once a written claim for the goods seized was made on 24 April 2006 pursuant to s.126 (2), the appellant was then required to give security for their release in the form of cash or bank guarantee under s.127 (1) to (3);
   
3. The seized goods could be disposed of by the respondent on the appellant’s failure to provide security in accordance with s.127A;
   
4. The respondent had a discretion whether or not to notify the owner of the seized goods to take legal proceedings against it (respondent) upon the appellant’s failure to provide security, before it (appellant) could exercise its power under s.127A to dispose of the goods. The appellant was notified in a letter dated 09 June 2006 by the respondent that it had until 17 July 2006 to pay or lodge security in the amount of K10,772,900 which included duty. This deadline was not met by the appellant.
   

53. The notices of seizure for the vessels and their cargo were issued on 10 April 2006. These notices were served personally on the appellant through its lawyers Emilio & Associate Lawyers on 13 April 2006. The deadline to make a claim by the appellant in respect of the seized goods (paragraph 16 of Ms. Korus’s affidavit sworn 04 September 2006) was initially set for 19 May 2006. However we accept that the correct deadline given was 18 May 2006 which is the date conveyed to the appellant by the respondent’s letter dated 21 April 2006.

54. The notice of seizure for the sixteen containers was issued on 02 April 2006 and served on the appellant on the same day. The deadline to make a claim in respect of those goods according to paragraph 16 of Ms Korus’s affidavit was 06 May 2006.

55. We note that in all the notices of seizure served on the appellant, there are notations printed at the foot of each of them which make reference to s.126 and they bear the following comments:

"Extract from Customs Act, Section 126 ............any ship, aircraft or goods seized shall be deemed to be condemned, and may be sold by the Collector unless the person from whom the ship, boat, aircraft or goods are seized or the owner, within one month from the date of seizure, gives notice in writing to the Collector at the nearest port, that he claims the ship, boat, aircraft or goods, but if any goods so seized are of perishable nature or are live animals they may be forthwith sold by the Collector".

56. The appellant gave written notice of its claim for the seized goods in its letter to the respondent dated 24 April 2006. This notice of claim was within the period allowed by all four notices of seizure.

57. There is no time limit given in the Act in which security has to be paid after a written notice of claim is lodged. In this case though, we note that in the respondent’s letter to the appellant dated 13 April 2006, the appellant was given four months to commence legal proceedings from the date of the notices of seizure. It is to be noted that time allowed here by the respondent, i.e four months is well in excess of the 30 days prescribed by s. 129 (2) of the Act. In spite of such time allowed by the respondent, the appellant failed to institute proceedings within those four months. We come to this conclusion on the basis that the Summons was filed without the security being paid. For the proceedings to be validly instituted, the assessed security had to be paid first.

58. The appellant contends that pursuant to s.126 (2)(b) of the Act, the appellant had thirty days to make a claim and when that was complied with, it had by virtue of s.129 (2), another thirty days within which to commence legal proceedings. We do not agree with this contention for the reasons already given. We consider this contention to be misconceived and without merit.

59. For the avoidance of any doubt, the notices referred to under s.126 (1) are those issued on 02 and 10 April 2006 in respect of the sixteen containers, the vessels and their cargo which are all Form 62 notices and not the respondent’s letter of 13 April 2006.

60. The end result is, there was no serious question to be decided as correctly found by his Honour, in that there being an assessment made by the respondent as to the amount of security the appellant had the obligation to pay the security before it could mount any legal challenge against the assessed security. This goes to the validity of the OS proceedings.

Whether the learned trial judge erred in holding that the balance of convenience did not favour the grant of the injunction sought?

61. Mr. Leahy submitted that the appellant will lose its cause of action or the National Court proceedings will be rendered nugatory if the seized goods were sold. He argued that injunction was necessary to preserve the status quo.

62. Mr. Leahy relied on a passage in American Cyanamid Co. v. Ethicon Ltd (supra) where Lord Diplock at page 408 said:

"Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of him succeeding at the trial".

63. As to the credibility of the evidence in affidavits sworn by Mr Haihavu and Mr Voo, Mr. Leahy submitted that the learned trial judge considered their evidence contrary to the principles applicable to grant of interlocutory injunctions. His Honour’s remarks on evidence in affidavits sworn by Mr Haihavu and Mr Voo, are found at pages 204 and 206 of the Appeal book.

64. A relevant and notable part of his Honour’s remarks appears as follows:

"The letter of 13 April address all of those provisions. I do not accept Mr. Leahy’s submission that you piecemeal every piece of this section. Seizure is one part of the whole process and any actions to recover goods seized must be covered in totality from the basis for the seizure to notices to legal action. An then, of course, in between is return of goods, payment of security".

65. Ms. Nablu submitted that the learned trial judge was correct in holding that the affidavits relied upon by the appellant did not show any evidence that it would suffer irreparable harm or damage.

66. Ms. Nablu further submitted that the affidavit evidence of Mr Haihavu cannot have weight because he was acting as the appellant’s customs agent without authority. This is because Mr Haihavu was employed by Adsteam Agency as its clearing agent and was on a week’s leave when he got involved in appellant’s affairs to do their customs clearance. This can be seen from the letter from Adsteam Agency to OIC Customs dated 03 March 2006. (see, pages 104 and 117 of the Appeal Book). Mr Jerry Kaon, Acting Assistant Commissioner of Customs, confirmed in his Affidavit, sworn 01 September 2006, that Mr Haihavu was only authorised to clear goods for his employer and none other. His Honour ruled after an objection that the letter from Adsteam Agency was relevant for purposes of deciding whether Mr Haihavu had the authority to do what he did and to swear an affidavit. His Honour in finding that Mr Haihavu did not have the authority to do clearance for the appellant at page 205 of the Appeal Book, lines 7 to 15 said:

"So it seems clear to me that the person who has purportedly gone behind trying to secure the clearance for the goods in question did not have authority in the first place to do what he did. He was approved as a customs clearing agent for a particular company, and that particular company did not approve nor did it authorise. So the clearing agent was obviously acting outside the parameters of his approval and the clearance approval given by the tax office. So that calls into question whether there was any valid application for and clearance secured for the Plaintiff."

67. Ms. Nablu further submitted that the affidavit evidence of Mr Voo also cannot have weight, because his position with the appellant was not clear. This contention is based on the fact that in his initial affidavit sworn on 17 August 2006, Mr. Voo deposed that he was the Manager of Aitape Forest Products Limited. He apparently had no business association or connection with the appellant which could authorise him to swear the affidavit. In his supplementary affidavit sworn on 23 August 2006, while maintaining his position with Aitape Forest Products Limited as its Manager, Mr. Voo deposed that he was on that day appointed as the appellant’s authorised representative as evidenced by a Certificate of Appointment. This he said formalised and validated his involvement with the appellant in processing all customs clearances for the vessels and their cargo. He claimed that the certificate of appointment, amongst other things, also gave him the standing and authority to give an undertaking as to damages. In the appellant’s letter of claim to the respondent dated 24 April 2006, Mr. Voo signed the letter in his capacity as the General Manager of the appellant. This further throws into confusion and questions the authority of Mr Woo to swear the affidavit in support of the appellant.

68. The interest of the State in terms of revenue collection by the respondent is always of a paramount consideration. This is a point always emphasized by courts. In this context the parties in this case and in other cases for that matter do not stand on an equal footing in that the tax regime favours the respondent so that any and all assessments made for tax, duty, security and so on by the respondent must be paid first before the party affected by such assessment can mount a challenge to such assessment. This point was made in Chief Collector of Taxes v. Bougainville copper Ltd (supra) where the Supreme Court said:

"......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.76

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."

69. There is no way around this settle principle of law.

70. The appellant as we alluded to earlier having failed to pay the security assessed and to take out proceedings as required by law, we find no error in his Honour’s decision, and the balance of convenience did not favour the granting of injunctive orders. On this point we are satisfied upon evidence before us that both Mr. Haihavu and Mr. Voo lacked authority to swear affidavits for the appellant. This goes to the very basis of the appellant’s case.

Whether the learned trial judge erred in law and in fact in holding that no irreparable harm would be suffered by the Appellant if the interlocutory injunction were refused?

71. Ms. Nablu submitted that damages are an appropriate remedy for the appellant and the trial judge’s finding was correct. She relies on s.127A which sets out the procedure provided for the respondent to dispose of the seized goods and to deal with the proceeds from the sale of those goods. The appellant takes issue on this point, but no substantive argument has been advanced on its behalf. The appellant continued simply to maintain that the sale of the seized goods will negate its cause of action against the respondent hence the necessity of obtaining an injunction. We are inclined to accept the submissions by Ms. Nablu.

Whether the learned trial Judge erred in holding that the Undertaking as to Damages was insufficient?

72. An Undertaking as to Damages (the undertaking) was filed on 17 August 2006. This was signed by one Gabutu M. Hariki as Managing Director of the appellant.

73. Ms Nablu submitted that the undertaking was not sufficient as the credibility of the appellant was in doubt, thus the trial judge was correct in holding it to be questionable. To support this contention, she referred to the affidavits sworn by Mr. Voo where Mr. Voo deposed that he was the Manager for Aitape Forest Products Limited. In his supplementary affidavit, Mr. Voo deposed that he had "implicit authority" from the appellant to obtain the necessary customs clearances for the vessels and certain logging machinery and equipment aboard the vessels. Mr. Voo was purportedly appointed as an authorised representative and an agent for the appellant by way of a Certificate of Appointment of Representative/ Agent which he received on 23 August 2006. However, in the appellant’s letter to the respondent dated 24 April 2006 in which it laid claim to the seized goods, he signed the letter as the General Manager of the appellant. This clearly shows that Mr. Voo’s position in respect of his connection with the appellant is unclear.

74. We also note that his Honour also expressed doubt as to whether the appellant was a registered Papua New Guinean company. See, pages 205 and 206 of the Appeal Book.

75. In the circumstances we find that his Honour was correct in holding that the undertaking given as to damages by the appellant was insufficient.

76. For the foregoing reasons, we find no error in the decision made by his Honour. The appeal is therefore dismissed.

77. Appellant will pay the respondent’s costs of this appeal.

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H J Leahy Lawyers: Lawyers for the Appellant
Policy & Legal Affairs Division, Internal Revenue Commission: Lawyers for the Respondent