Internal Revenue Commission v Central Provincial Government [2013] PGSC 80; SC1288 (18 September 2013)

SC1288

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SC APPEAL NO. 102 OF 2013

BETWEEN

INTERNAL REVENUE COMMISSION
Appellant

AND

CENTRAL PROVINCIAL GOVERNMENT
First Respondent

AND

NATIONAL CAPITAL DISTRICT
Second Respondent

Waigani: Kassman, J
2013: 11th & 18th September

Cases cited:

McHardy v. Prosec Security and Communications Ltd [2000] PNGLR 279 SC646

Legislations cited:

National Capital District Commission Act 2001
Goods and Services Tax Revenue Distribution Act 2003
Sections 5(1)(b) and 19 of the Supreme Court Act
Order 1 Rule 7 of the Supreme Court Rules 2012
Order 3 Rule 2 of the Supreme Court Rules 2012
Section 14(3)(b) of the Supreme Court Act

Counsel:

Mr Sinen, for the Appellant
Mr Hampalekie, for the First Respondent
Mr Varitimos and Mr Wood, for the Second Respondent

DECISION

18th September, 2013

1. KASSMAN J: On 18 July 2013, the National Court delivered a decision in proceedings OS (OR) No. 335 of 2010 Central Provincial Government v. National Capital District and Internal Revenue Commission ("CPG", "NCDC" and "IRC" respectively) ("the decision").
   
2. In the decision, the National Court partly refused and partly upheld the CPG's application for judicial review of the alleged failure of the NCDC and the IRC to comply with their duties to provide financial assistance to the CPG under the National Capital District Commission Act 2001 and the Goods and Services Tax Revenue Distribution Act 2003.
   
3. The National Court also referred to mediation by an accredited mediator "The question of how the second defendant's duties under Section 33(2)(a) of the National Capital District Commission Act are to be complied with, and in particular determination of the amount of money due to be paid by the second defendant to the plaintiff and the source of that money and the timing of payment of that money" and issued specific directions as to the conduct of that mediation.
   
4. On 27 August 2013, the IRC filed this appeal from the decision of the National Court. The Grounds of Appeal in the Notice of Appeal are:
   

"i. The learned Trial Judge erred in law in finding that Section 33(2)(a) of the NCDC Act can be read in accordance with (in respect of the period 15 July 2004 to 31 December 2007) the Goods and Services Tax Revenue Distribution Act 2003 or (since 1 January 2008) the Inter-Governmental Relations (Functions and Funding) Act 2009.

ii. The learned Trial Judge erred in law in failing to apply strict interpretation to the provisions of the Goods and services Tax Revenue Distribution Act 2003 and the Inter-Government Relations (Functions and Funding) Act 2009.

iii. The learned Trial Judge erred in mixed law and fact in failing to find that the reference to the "Internal Revenue Commission" in Section 33(2) of the NCDC Act operable as the Internal Revenue Commission is not the legally mandated authority to give effect to the distribution of GST under the provisions of the Goods and Services Tax Revenue Distribution Act 2003 and the Inter-Government Relations (Functions and Funding) Act 2009,.

iv. The learned Trial Judge erred in mixed law and fact in finding that the provisions of the Inter-Governmental Relations (Functions and Funding) Act 2009 were general in nature and therefore had to be read subject to the specific duty imposed upon the Appellant under Section 33(2)(a) of the NCDC Act.

v. The learned Trial Judge erred in law in finding that although the provisions of the Inter-Governmental Relations (Functions and Funding) Act 2009 vests no discretion on the Commissioner General of Internal Revenue to depart from the statutory formula prescribed in the Act, the Commissioner General is still obliged to depart from the statutory formula in the Inter-Governmental Relations (Functions and Funding) Act 2009 in order to give effect to the obligations imposed on the Appellant by Section 33(2) of the NCDC Act.

vi. The learned Trial Judge erred in mixed law and fact in failing to consider the administrative difficulties and inconvenience likely to be suffered by the Appellant in having to strictly comply with the obligation imposed upon the Appellant under Section 33(2) of the NCDC Act.

5. Pending determination of the appeal, the Appellant seeks an order that the proceedings in the National Court be stayed. This application for stay is made pursuant to Sections 5 and 19 of the Supreme Court Act and Order 3 Rule 2 of the Supreme Court Rules.
   
6. Prior to commencement of submissions, counsel for the First Respondent and counsel for the Second Respondent informed the court their instructions were to consent to the grant of the application for stay. In other words, there was no objection to the application to stay the orders of the National Court. I considered this but ruled, without protest, that I still had jurisdiction to consider the application in the exercise of my discretion as the matter required the performance of my judicial function and the fact the parties consented to the application for stay did not deprive me of function to serve. With respect, I retained the discretion to refuse to grant the application for stay.
   
7. The Commissioner General IRC Betty Palaso deposed in her affidavit sworn 27 August 2013 paragraphs 3 to 11 inclusive:
   

"3. His Honour Justice Cannings also ruled that the Appellant is required to pay the Central Provincial Government out of funds kept in the Provincial Inland GST Trust Account of the NCDC.

4. The findings of His Honour Justice Cannings will have very adverse effects on the Appellant and upon myself, in terms of administering the distribution of GST under the provisions of the Inter-Governmental Relations (Functions and Funding) Act 2009 ("IGR Act").

5. Under the provisions of the IGR Act, each Provincial GST Trust Account is established pursuant to a Trust Instrument under Section 34.

6. I am merely a Trustee to each of the respective Provincial Inalnd GST Trust Accounts, and vested with the power to administer the respective Provincial Inland GST Trust Accounts.

7. I am therefore bound by the terms of the trust Instruments creating the respective Provincial Inland GST Trust Accounts

8. It is my view that the findings of His Honour Justice Cannings in the proceeding ordering the Appellant to pay the Central Provincial Government out of funds kept in the NCDC Provincial Inland GST Trust Account will amount to an unauthorized and unlawful payment out of such trust account.

9. Furthermore, the findings of His Honour Justice Cannings compelling me to pay Central Provincial Government out of funds kept in the NCDC Provincial Inland GST Trust Account will be met with difficulty as I do not have any legal or administrative power under the IGR Act to depart from the prescribed formula for GST distribution under the provisions of the IGR Act.

10. The findings of the National Court are also likely to have serious implications on State revenue as well as on the operational budge of the National Capital District Commission.

11. The above statements are true to the best of my knowledge and belief."

8. Section 19 of the Supreme Court Act provides "Unless otherwise ordered by the Supreme Court or a Judge, an appeal, or an application for leave to appeal, to the Supreme Court does not operate as a stay of proceedings."
   
9. Section 5(1)(b) provides "an interim order to prevent prejudice to the claims of the parties may be made by a judge."
   
10. Order 1 Rule 7 of the Supreme Court Rules 2012 states "Judge" "means a judge of the Supreme Court of Justice" so I am satisfied I have jurisdiction to hear and determine this application. Further, there was no objection in this regard.
    
11. The leading judgment of the Supreme Court in McHardy v. Prosec Security and Communications Ltd [2000] PNGLR 279 SC646 sets out the considerations to be applied in the Court's exercise of discretion on an application for stay. I will now apply the criteria to the facts and circumstances of this matter.
    
    1. Start with the principal premise that the judgment creditor is entitled to the benefits of the judgment - Apart from arguing there were strong grounds of appeal, there was no suggestion that this principle should not apply.
       
    2. Whether leave to appeal is required and whether it has been obtained – IRC argues this is an appeal on a question of law and of mixed fact and law and, as such, this falls outside the ambit of Section 14(3)(b) of the Supreme Court Act. I agree.
    100. Whether there has been any delay in making the application – the decision appealed was made on 18 July 2013. Notice of Appeal was filed on 27 August 2013. This application for stay was also filed on 27 August 2013. The relevant period is calculated from the date of the decision appealed to the date of filing of the application for stay. In this matter, that period is 40 days. There was no argument that the period represented any delay. I agree.
         
    4. Possible hardship, inconvenience or prejudice to either party – CPG is entitled to the fruits of the judgment obtained just over two months ago but CPG has not raised any objection and in fact consents to the grant of the stay order. I note this and have no reason to question this approach by CPG. This Court notes the concerns of IRC as expressed by the Commissioner General that the orders of the National Court, if not stayed, are likely to have a number of administrative and legal implications on the exercise of the IRC Commissioner General's powers. Even though assessment of the amount of money payable has been referred to mediation which has yet to take place, the indications are that the amount will be substantial. IRC stands to suffer greater prejudice if a stay is not granted.
       
    5. The nature of the judgment sought to be stayed – the judgment of the court appealed is an interlocutory ruling in that it does not finally dispose of the CPG's claims and the proceeding but the orders appealed are certainly final in that they determine the liability of IRC under certain legislation and the assessment of the amount payable is all that remains for determination and that has now been referred for mediation.
       
    6. The financial ability of the applicant – there is no challenge to the financial ability of IRC but that is not to say its funds are limitless. IRC is not an ordinary litigant. The revenue it raises is all governed by law in the form of taxes and duties collected by IRC for the government and the State. The disbursement of those funds is also governed by law. Consideration of the financial ability of IRC as the applicant for stay would not apply in this instance.
       
    7. Preliminary assessment about whether the applicant has an arguable case on the proposed appeal – CPG does not oppose this application for stay so I assume they have doubt as to strength of their position under the judgment of the National Court which is appealed by IRC. This may also indicate there is ongoing discussion to resolve the matters in dispute. There was some suggestion the parties agreed to stay the orders of the National Court which were under direction for mediation and the parties preferred the opportunity to better articulate and discuss their respective positions without the pressure of directions to mediation. In those circumstances, it is my considered view that no useful purpose is served in conducting an assessment of the strength of the appeal apart from making the observations that have been discussed here and throughout this decision.
       
    8. Whether on the face of the record of the judgment there may be indicated apparent error of law or procedure – I repeat my views stated in paragraph (g) above.
       
    9. The overall interest of justice – Following my preliminary assessment about whether the applicant has an arguable case on the proposed appeal, I would say the interests of justice are best served by a stay of the judgment of the National Court.
       
    10. Balance of convenience - Following my comments and observations as to whether the applicant has an arguable case on the appeal, I find the balance of convenience is best served by a stay of the judgment of the National Court.
        
    11. Whether damages would be sufficient remedy – the application for stay is not opposed. CPG cannot later argue it has suffered damage by the stay when IT has now agreed to the stay being granted.
        
12. On the basis of my assessment made above, I grant the application for stay.
    
13. The formal Orders of the Court are:
    
    1. The proceedings in the National Court entitled OS (JR) 335 of 2010 and the orders made on 18 July 2013 are stayed forthwith pending determination of the appeal in this proceeding.
       
    2. Time for entry of this order is abridged to the time of settlement by the Registrar which shall take place forthwith.
       

Judgment accordingly:

________________________________________________________________
IRC in-house counsel: Lawyers for the Appellant
MS Wagambie Lawyers: Lawyers for the First Respondent
Ashurst Lawyers: Lawyers for the Second Respondent