Ombudsman Commission v Yer [2009] PGSC 45; SC1041 (3 August 2009)

SC1041

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCM 11 OF 2009

BETWEEN:

OMBUDSMAN COMMISSION
Appellant

AND:

GABRIEL YER & OTHERS
Respondents

Waigani: Injia, CJ
2009: 3rd August

SUPREME COURT – practice and procedure - ruling on application for stay of interim order pending hearing and determination of appeal - Principles of grant or refusal of stay is discretionary – consideration of - criteria for granting interim injunctive relief discussed - Court to develop appropriate criteria for grant of interim injunctive relief in different judicial review cases depending on nature of case - appellant must demonstrate there is an error in the exercise of discretion which raises an arguable case on appeal - arguable issues are raised in the grounds of appeal - Weight of all considerations favors refusal of stay - application for stay refused – s.19 Supreme Court Act

Cases Cited:

Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572
Employers Federation of PNG v PNG Waterside Workers Union and Seaman’s Union (1982) N393
McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279
Peter Makeng v Timbers (PNG) Limited (2008) N3317
Thadeus Kambanei v NEC (2006) N3064
Yama Group of Companies Ltd & 3 others v PNG Power Ltd (2005) N2831,

Counsel:

V Narokobi, for the Appellant
R Pato with D Mel, for the 1st, 3rd and 5th Respondents
S Kaipu with A Minei, for the 2nd & 4th Respondents

3rd August, 2009

1. INJIA CJ: Introduction: This is an application for stay made under s 19 of the Supreme Court Act (the Act). The application relates to an interim injunctive order made by the National Court on 22 May 2009 in which the Court lifted a direction issued by the Appellant (Commission) freezing certain government funds held in a bank account operated by the respondents. The application is contested by the respondents.

Background

2. By way of background, in 2006 the National Government allocated the sum K150 million to rehabilitate facilities at educational institutions throughout the country. The money was paid into a trust account operated under the name Education Sector, Infrastructure Rehabilitation Trust Account with BSP Port Moresby, Account No. 1001511531. Between 2007 and 2008, some K46.9 million had been spent. Some K114.3 million was prepared for spending in 2009. The Commission commenced investigations into the use of these funds. In the course of its investigations, on 6 March 2009, the Commission issued a Direction under s 27 (4) of the Constitution addressed to the respondents jointly, which froze the funds and stopped dealings on the account pending the investigations. The purpose of the direction is set out in the Direction in these terms:

"... for the purpose of ensuring the attainment of the objects of s 27 of the Constitution and in particular protecting the integrity of leaders who may be involved in the matter subject of the Commission’s investigation."

3. The effect of the Direction is capitulated in the covering letter to which the Direction was attached. It "stops the disbursement, transfer or payment of these funds to anyone including a body corporate unless such payments or disbursements or any execution of subsequent trust Deeds or other instruments are authorized by a written notice from the Commission that it has completed its investigations or that it has authorized such transactions and dealings on the account or in relation to the account and the fund held therein."

4. The Direction’s duration is set out in the Direction as follows:

"UNLESS AND UNTIL NOTICE IS GIVEN TO YOU IN WRITING BY THE OMBUDSMAN COMMISSION THAT:

i. the Ombudsman Commission has completed its investigations into this matter; or

ii. the Ombudsman Commission has determined that it is appropriate to act either severally or jointly, to authorize, release, facilitate or arrange to pay or deal with the public funds held in this trust account, the subject of this direction."

5. The respondents challenged the direction in Court. On 22 April 2009 the respondents filed judicial review proceedings in OS 205 of 2009 (JR). By Notice of Motion also filed on 22 April 2009, the respondents sought interim orders lifting the ban. Leave to apply for judicial review was granted on 23rd April 2009. On 2nd July 2009, the Court granted interim mandatory injunction which lifted the direction pending the hearing and determination of the application for judicial review.

6. On 10th July 2009, the Commission appealed the interlocutory ruling as of right: s 14 (3) (b) (ii) of the Supreme Court Act. Also on the same day the Commission filed an application for stay of the interim order pending hearing and determination of the appeal. The application was moved and argued before me on 29th July 2009 and I reserved my ruling. I now deliver my ruling.

7. I have considered the material in the form of transcript of proceedings in the National Court and affidavits relied on by the parties and submissions made by both counsel and I deal with them in the course of my ruling.

Principles on grant or refusal of stay

8. The grant or refusal of stay is discretionary. The principles on grant of stay are set out in McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 (McHardy case). Counsel representing the parties made submissions on the application of the McHardy principles to the circumstances of this case.

9. In McHardy the Court said the starting point is the basic premise that the judgment creditor is entitled to enjoy the fruit of the judgment. There are ten (10) other considerations which are enumerated in that case which may be considered. The Court said the list is not exhaustive. In my view, it is not intended that the discretion should be exercised on all or selected consideration(s). The circumstances of a particular case may warrant greater or less or even no weight to all to be given to a particular consideration(s). It is open to the Supreme Court to expound on those considerations or introduce new considerations as necessitated by the circumstances of the case before it. In a case where a number of considerations are relevant, the Court must take into account the totality of those considerations in order to dispense substantive justice in the circumstances of the case before it. The onus is on the applicant to persuade the Court to exercise its discretion in his or her favor.

10. I apply these principles to the case before me in the following manner.

The judgment

11. The judgment appealed from favors the respondent in that the respondent is entitled to the fruit of the interlocutory judgment.

Leave to appeal

12. Leave to appeal is not required. This consideration favors the appellant.

Delay

13. As to delay, the application was filed promptly but I agree with the respondents that there has been a delay of 18 days in making the application. However I do not consider this period to constitute inordinate delay. I am satisfied that the actual application has been made without undue delay. This consideration favors the appellant.

Nature of the judgment

14. No question arose in the National Court as to the Court’s jurisdiction given by O16 r 3 (8) of the National Court Rules to grant interim relief upon grant of leave for review: Peter Makeng v Timbers (PNG) Limited (2008) N3317. The transcript shows that the appellant did raise points of law as to the Court’s jurisdiction to deal with the subject matter in the light of s 217 (6) of the Constitution but that is a matter which goes to the exercise of discretion. The Commission’s challenge in the appeal is essentially on the exercise of discretion.

15. The exercise of discretion in a matter within the Court’s jurisdiction in a civil action in tort or contract or judicial review proceedings is exercised on established principles and application of those principles to the given circumstances of a case. The principles on grant of interim injunctions are those set out in the National Court decision in Employers Federation of PNG v PNG Waterside Workers Union and Seaman’s Union (1982) N393. Those principles were approved by the Supreme Court in Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572. I paraphrase the three main principles or criteria in question form, as follows:

(a) Is there a serious question to be tried? Is there a real prospect that the applicant will succeed in the claim.

(b) If the applicant succeed in the action, will he or she be adequately compensated by damages.

(c) Does the balance of convenience favor the granting or refusal of the interlocutory relief. The Court should go on to consider all the matters relevant to the balance of convenience, an important factor in the balance should, other things been even, preserve the status quo.

16. In Yama Group of Companies Ltd & 3 others v PNG Power Ltd (2005) N2831, the above principles were modified in civil cases which involve review of exercise of statutory power and where an interim mandatory injunction is sought. In Thaddeus Kambanei v NEC (2006) N3064, these principles were further modified to suit interim injunctive relief in judicial review proceedings brought under O 16. It is sufficient to quote from the Kambanei’s decision: The Court in that case stated:

1. A mandatory injunction should normally only be granted where a strong case that serious damage will occur to the applicant is made out.

2. The general principles for negative injunctions apply, that is that there is a serious case to be tried, damages are not an adequate remedy and the balance of convenience favour the applicant, but the case should normally be one giving an unusually strong and clear view that the applicant will be successful at trial.

3. The more likely it appears that the plaintiff will succeed at trial the less reluctant the court will be to interfere on an interim basis.

4. But if it is necessary to make some interim order the Court will do so whether or not the high standard of probability of success is made out.

5. The costs to the defendant of performing the mandatory acts should be weighed against the likely damage to the applicant.

6. If the relief sought is such as would normally only be granted after a trial, it should be refused on an interim application unless the prejudice or hardship to the applicant is disproportional to the prejudice and hardship to be caused to the defendant in performing the order.

7. If the mandatory injunction is simply to restore some activity which has been previously performed by the defendant, rather than to embark upon some new activity, it will be more readily granted.

8. Ultimately, in deciding whether or not to grant a mandatory injunction the overriding consideration is an exercise in deciding which course will do the least damage, or, to put it another way, the lower risk of injustice, if it turns out that the court has made the "wrong" decision

9. If an injunction is granted the order should specify exactly what it is the defendant has to do, leaving the defendant in no doubt as to what is required to comply with the order."

17. In Kambanei the Court then developed a tenth principle which relates specifically to interim injunctive relief in judicial review proceedings which involve removal of a public official on disciplinary grounds. The Court said:

" For this reason, the nine principles set out above which are generally applicable to ordinary actions in tort and contract should be tailored by the Court to suit the special nature and purpose of judicial review. The standard of scrutiny of an application for stay applying those nine (9) criteria or for any application for interim injunctive orders under O.16 r.3(8) should be much higher than in ordinary suits in law. In respect to application for a stay or interim injunctive orders in a public employment situation, the primary consideration which I would add as principle No. 10 to the nine principles set out above is this:

As a general principle, in an application for interim injunction or interim mandatory injunction under Order 16 Rule 3(8), in a case of judicial review of a decision concerning suspension or removal of a public official on disciplinary grounds, a stay or an interim injunction or interim mandatory injunction should not be readily granted except in very exceptional cases where the public interest in the public employer in maintaining continuity of good administration of the office would be best served by the applicant’s restoration to office pending the hearing and determination of the substantive application for judicial review. The public interest in the good administration of the public office is the paramount consideration. The private rights of the employee such as in protecting the applicant’s integrity and reputation is a relevant consideration but it is not an important consideration."

18. The above list of criteria is not exhaustive. The case law on grant of interim injunctive relief is still in its early stages of development. It is open for a Court to develop appropriate criteria for grant of interim injunctive relief in different judicial review cases depending on the nature of the administrative decision under review. Counsel appearing before judges in such cases should assist the court develop and apply appropriate criteria and the Court should play its part in developing this area of procedural law.

19. In this case the trial judge considered the primary considerations to be whether there were serious issues to be tried and whether the balance of convenience favors the grant or refusal of the interim injunction sought. As part of the balance of convenience the judge also considered the prejudice to be suffered by the parties. The judge found in favor of the respondents on both considerations.

20. The transcript shows that the Yama Group of Companies and Kambanei’s cases were not cited to His Honor to alert him to the higher standard of scrutiny of relevant considerations and this is conceded by Mr Narokobi. Kambanei of course introduces a new criteria for interim injunctions in public interest suits under judicial review and the law is in its developmental stages. The onus was on counsel to cite the case to the trial judge so that the principles in that case would be modified and a new criteria developed if need be. This point was not raised in the National Court, it may not be open to be raised on appeal. However as a matter of law and in the interest of justice, the point is relevant to the exercise of discretion and should be raised and considered in the application before me and in the appeal itself.

Error in the judgment and Arguable case on appeal

21. In a challenge to the exercise of discretion on appeal, the appellant must demonstrate that there is an error in the exercise of discretion which raises an arguable case on appeal.

22. As to whether an arguable case on appeal is demonstrated, this consideration may be determined together with the consideration on demonstration of error in the judgment. These considerations are often determined by a quick perusal of the decision and reasons for decision of the trial judge and other relevant material placed before the Court by the parties. A transcript of the proceedings before me contain oral reasons for decision.

23. In terms of error of law or facts in the judgment, the two primary considerations considered by the judge encompass the first and second criteria in Waterside Worker’s Union case. The judge formed the opinion that whilst the Commission had the power to issue a Direction under s.27 (4) of the Constitution, the questions in the application for review raised issues on excess of jurisdiction and these issues were serious issues to be tried on the facts of the case. I am satisfied that arguable issues are raised in the grounds of appeal as to whether the Commission’s decision on a matter within its jurisdiction is judicially reviewable in view of the s.217 (6) of the Constitution.

24. On the face of the judgment the issue of whether the respondents had serious issues to be tried was not fully explored and considered. This was compounded by the lack of attention paid to relevant principles in Yama Group of Companies and Kambanei decisions. Whilst the Yama Group of Companies and Kambanei’s cases were not cited to His Honor to alert him to the higher standard of scrutiny of relevant considerations, I am persuaded by Mr Narokobi’s submission that the appellant has an arguable case on whether the trial judge applied the correct principles of law on interim injunctions. The Court in my view also has a duty to be aware of developments in the law and refer to new principles which impact on the exercise of discretion. The public interest in good governance or good administration of public funds was a relevant consideration which follows from the Kambanei decision and the trial judge’s failure to refer to this important case and the case of Yama Group of Companies and develop and apply an appropriate criteria from analogies drawn from these two cases raises an arguable case on appeal. I am also satisfied that arguable issues are raised in the grounds of appeal as to whether the Commission’s decision on a matter within its jurisdiction is judicially reviewable in view of the s.217 (6) of the Constitution.

Hardship, Inconvenience & Prejudice

25. In terms of the balance of convenience and prejudice, it appears from the material put before the Judge and the submissions made that both parties were equally placed on the application of this consideration to the facts. The Commission acted within the constitutional powers given to it to issue a direction. Whether the direction fell within the nature and ambit of the matters for which the power is given was in issue in the proceedings. On the one hand decisions on public finance matters including, budget, expenditure and accounting is the prerogative of the national government and the governmental department concerned. Public funds are regulated by the Constitution, Public Finance Management Act and the Audit Act. These laws have in built processes to ensure proper budgeting and expenditure and accounting for expenditure. On the other hand the Commission is the principal body charged by the Constitution with supervising compliance with the Leadership Code. In cases where the Commission suspects breach of the Leadership Code by a leader or his associates, the Commission has ample power to step in and conduct investigations and take necessary steps to protect its investigations and preserve property the subject of its investigations. Such investigations may be conducted at any time whilst the suspected breach is in its developmental stages or after the event. In relation to public finances, the Commission may see it necessary to intervene at an early stage and take necessary steps to preserve the finances from abuse, theft or misappropriation pending its investigations. As in this case if the Commission directs a freezing of the funds, then obviously the government department allocated the funds, the educational institutions concerned who are the beneficiaries of the funds and in respect of some schools where project contracts have already been executed, the contractors, will face financial and other hardships, inconvenience, and prejudice. The Commission does not stand to suffer any particular hardship and inconvenience in terms of accessibility of and use of the funds but as Mr Narokobi submitted, the public interest in protecting the funds from continuous abuse is achieved. Its investigations may also be prejudiced if the very object of the investigations are being abused before its very eyes in the course of the investigations. In the exercise of its discretion the Court should properly weigh these two obviously competing interests and decide in favor of a result which serves the interest of justice. These matters were considered by the trial judge in the exercise of his discretion. As to whether the result in this case served the interest of justice is best left to the judgment of that Court.

26. For this Court’s part, I am invited to exercise a similar discretion. The criteria applicable to grant or refusal of stay pending appeal is somewhat similar to grant of interim injunctive relief pending suit in many key respects. Indeed balance of convenience, preservation of the status quo and damages and prejudice to the applicant’s claim before the Court are important considerations in interim injunctions pending trial and stay pending appeal.

27. There is one other important consideration which is peculiar to the circumstances of this case which I must consider. In a case such as this where the Court is invited by the parties to exercise its judicial discretion in which the factual circumstances are permeated by administrative and to some extent by political considerations which underpin the exercise of constitutional or legal power, the exercise of that discretion is not easy. In those kinds of cases the Court should pay greater deference to the public interest in ensuring that budgeting and expenditure of public funds is a government prerogative. But there is always the proviso to be recognized and given effect to that public funds are appropriated for their designated public purposes. For this purpose any governmental body charged by law with the protection of public funds using safeguard procedures and processes provided for by law should be allowed to perform its lawful duty to ensure the funds are protected and properly expended for their designated purposes. In the exercise of its discretion, as I have already said, the Court should properly weigh these two obviously competing interests and decide in favor of a result which serves the interest of justice.

28. In my view it is in the public interest on good and efficient governance that the government should be allowed to expend the funds for designated projects pending the appeal except where a specific law on public finance management empowers a governmental body such as the Ombudsman Commission empowers it to intervene to preserve the public funds from suspected or established mismanagement, abuse or misappropriation. Government projects on rehabilitation of run down facilities at learning institutions should not be frustrated, delayed or prevented for long when those facilities require immediate attention.

29. The appellant’s counsel has not referred me to any such specific provision of any law on public finance that permits public funds to be frozen by administrative or constitutional direction and designated projects stalled pending administrative or even criminal investigations. I accept the respondent’s submission that the expenditure of the funds will be subject to scrutiny under provisions of the Constitution, Public Finance Management Act and the Audit Act. I am also of the view that future expenditures obviously will come under the scrutiny of the Commission at some point and if the persons responsible for management and expenditure of those funds have erred in the way, they face the risk of Commission’s investigations of their activities. Many educational institutions throughout the country should be allowed to access those funds.

30. In terms of the prejudice, if the appellant succeeds in the appeal and if funds are depleted by the time the appeal is heard and determined, the purpose of the appeal will have been lost and the purpose of the substantive judicial review proceedings will have been achieved. The Commission’s position in the appeal will no doubt be prejudiced. If the appeal is unsuccessful, the lifting of the interim order will have served its purpose. In my view there is noting to stop the Commission from broadening its investigations to cover new expenditures since the uplifting of the Direction. The bottom line is that the funds are meant to be spent on designated projects with due expediency and they will eventually get released for designated projects and those suspected of misconduct in office in respect of administration of funds already spent and to be spent in the future can be investigated by the Commission at any time with or without the need to preserve those funds. And so in terms of prejudice, the Commission does not stand to suffer prejudice in terms of the application of the funds. The Commission can as a matter of principle seek judicial determination on the validity of its Direction which is now being challenged in the National Court with or without the preservation of those funds.

Financial Ability of the applicant

31. In terms of the financial ability of the applicant, there is no question as to his financial ability. The same applies to the respondent.

Balance of convenience

32. As I have already said in relation to prejudice, if the appellant succeeds in the appeal and if funds are depleted by the time the appeal is heard and determined, the purpose of the appeal will have been lost and the purpose of the substantive judicial review proceedings will have been achieved. If the appeal is unsuccessful the lifting of the interim order will have served its purpose. The answer to this predicament lies in the balance of convenience. There is noting to stop the Commission from broadening its investigations to cover new expenditures since the uplifting of the Direction. The bottom line is that the funds will eventually get released for designated projects and those suspected of misconduct in office in respect of administration of funds already spent and to be spent in the future can be investigated by the Commission with or without the need to preserve those funds.

33. In my view the balance of convenience does not favor the continuation of the Direction in the interim period whilst these Court proceedings are pending and whilst the investigations are continuing.

Damages

34. As to damages, both parties agree this consideration is not relevant in these proceedings.

Overall interest of justice

35. In terms of the overall interest of justice, for reasons already given, the overall interest of justice favors the respondents.

36. In summary notwithstanding the small number of considerations which favor the appellant, all the other considerations which happen to be the important considerations favor the respondents. Weight of all the other considerations favors the refusal of stay. The application for stay is therefore refused. Cost shall be in the cause.

________________________________________________

Virgil Narokobi: Lawyer for the Appellant
Steeles lawyers: Lawyer for the 1st, 3rd and 5th Respondents
Kaipu & Associates Lawyers: Lawyer for the 2nd & 4th Respondents