Lee & Song TImber (PNG) Co. Ltd v Burua [2003] PNGLR 21 (21 July 2003)

NATIONAL COURT OF JUSTICE

LEE & SONG TIMBER (PNG) CO LIMITED

V

NATHANAEL BURUA AS CHAIRMAN, EAST NEW BRITAIN PROVINCIAL FOREST MANAGEMENT COMMITTEE;
BROWN KIKI AS ACTING MANAGING DIRECTOR - NATIONAL FOREST AUTHORITY;
PAPUA NEW GUINEA FOREST AUTHORITY;

VALENTINE KAMBORI AS CHAIRMAN NATIONAL FOREST BOARD;
MARHOW ENTERPRISES LIMITED;

INDEPENDENT STATE OF PAPUA NEW GUINEA;

EAST NEW BRITAIN PROVINCIAL MINISTER FOR FORESTS; AND
EAST NEW BRITAIN PROVINCIAL GOVERNMENT

WAIGANI: KANDAKASI J

22 May; 10 and 21 July 2003

PRACTICE & PROCEDURE - Trial by affidavit – When appropriate? – Where the primary facts are not in issue - Where there is a trial by affidavit and there is no dispute or contest on the facts the Court still obliged to consider and act only on credible and admissible evidence – Improper to proceed to judgement where there is a contest on the primary facts.

ADMINISTRATIVE LAW – Judicial Review – Decision granting timber authority – No reasons provided at time of reaching decision when reasons for the decision were reasonably expected - All decision makers are obliged to provide reasons for their decision except for the security of the nation or where a statute states otherwise - Provision of purported reasons subsequent to decision and not in the decision cannot be allowed as a matter of law and because of the dangers of seeking to justify and defend the decision - Factors required to be taken into account under the Forestry Act 1991 not taken into account - Principles of natural justice not adhered to and no reasonable tribunal could have arrived at the decision under review – Judicial review granted – Constitution s. 59(2) – Forest Act ss 87 to 89 .

EVIDENCE – Where business or transaction is concluded and or evidence in writing the document speaks for itself – No extrinsic evidence should be allowed to either add to or subtract from what is stated in the document.

Facts

The facts from affidavit evidence filed by the parties are not in dispute. Both Lee & Song Timber (PNG) Co. Limited (Lee & Song) and Marhow Enterprises Limited (Marhow Enterprises) applied for a timber authority from the East New Britain Provincial Forest Management Committee (PFMC) for harvesting of certain woods in the Kerevat area of that Province. They offered varying prices. By letter dated 20 December, 2002, the PFMC offered and Lee & Song accepted wood prices of Teakwood greater than 30cm in diameter, US$60.00 and those less than 30cm in diameter, US$30.00 and Kamarere & Other hardwoods K40.00 per m3. The PFMC also asked Lee & Song to include for the benefit of the Provincial Government a sum of US$10.00, for Teak wood over 30cm in diameter, US$5.00 for those less than 30cm in diameter and K10.00 per m3 for Kamarere & Other hardwoods. In exchange for that, Lee & Song were offered Vudal Compartments 1 – 4 and Little Vudal Compartments 1 – 2. Lee & Song was informed that if it accepted these conditions its application would be approved and it accepted them. But, the PFMC declined its application and accepted that of Marhow Enterprises application, which offered wood prices and benefits lower than what Lee & Song offered or was prepared to pay.

The only reason given for the decision was that the managing director of the National Forest Authority (NFA) directed them to select only one developer. Subsequently in answer to these proceedings, the chairman of the PFMC claimed that Lee & Song had a bad performance history under previous timber authorities. He claimed that this reason was not made known to Lee & Song to avoid offending it. This was not noted in the relevant minutes of the PFMC's meeting.

Section 89(2) of the Forestry Act 1991 as amended requires a PFMC to consider the National and Provincial Forest Policies, and the commercial benefits proposed by an application for a timber authority when assessing or evaluating applications for timber authorities. In the context of the second factor, specific mention is made of the past performance of the applicant. The relevant minutes do not disclose these factors being addressed either specifically or generally.

Lee & Song claim that the decision of the PFMC was in breach of an agreement between itself and the PFMC following its acceptance of the PFMC's offer. It also argues that the PFMC was required in the circumstance to provide good reasons for its decision at the time of making the decision but it failed to do so and that the decision is one no reasonable tribunal could have reached. Further it argues that the PFMC failed to take into account the relevant factors under s. 89(2) of the Forestry Act 1991 and in so doing it took into account irrelevant factors or that it was actuated by bias. Consequently it argues that the PFMC decision was ultra vires the Forestry Act 1991. The defendants argue to the contrary. In particular that the PFMC is not obliged either at common law or by statute to give reasons for its decision.

Held

1. There must be cross-examination of witnesses and oral evidence if the primary facts are in issue. It is improper to proceed to judgement without the benefit of a cross-examination of witnesses and other oral evidence where the primary facts are in issue.

2. A PFMC under the Forestry Act 1991, as a public authority is vested with a public power or function. As such it is obliged to give good reasons for the exercise of its powers within the terms of its enabling legislation, in particular s. 89(2) of the Forestry Act 1991 because there is no such thing as unfettered discretion. A failure to give such reasons at the time of exercising that power amounts to acting ultra vires or in excess of its discretion and it opens the floodgate to inferences that the PFMC acted unfairly taking into account irrelevant factors to the exclusion of relevant factors under the influence of say bias or bribery.

3. In the present case the PFMC was obliged to give reasons for its decision to decline Lee & Song's application in terms of s.89 (2) as to the factors it was obliged to take into account and also when it created an expectation but not a legally binding and enforceable agreement with Lee & Song that its application would be granted over Vudal Compartments 1 – 4 and Little Vudal Compartments 1 – 2. However it did not provide any reasons at the time of reaching its decision.

4. The failure to give reasons opens the floodgate to inferences of bias, bribery or the like and therefore a decision that is unfair and one that no reasonable tribunal could have reached in the particular circumstances of this case.

5. The belated and extrinsic evidence of the PFMC cannot be allowed to add to or subtract from the minutes of the relevant meeting and the letter advising Lee & Song by operation of the law of evidence. It is also because there is a danger that the PFMC will seek to justify and defend the decision with reasons, which it might never have had at the time of the decision.

6. For these reasons judicial review is granted and the decision of the PFMC of 6 February, 2003 is quashed. The matter shall be remitted to the PFMC to reconsider the applications of both Lee & Song and Marhow Enterprises afresh, as opposed to declaring as Lee & Song's claims that he should be awarded the timber authority. This is because, the PFMC has not yet considered s. 89(2) factors as against both applications.

7. When considering the applications the PFMC shall take into account only the considerations enumerated in s. 89(2) of the Forestry Act 1991 and it shall provide detailed reasons for its decision in terms of those considerations to the exclusion of any other.

Papua New Guinean cases cited

Aloysius Eviaisa v Sir Mekere Morauta Prime Minister & Ors (09/11/01) N2144.
Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285.
Frank Siwi & Ors v Commissioner for Police (30/05/96) N1433.
Jim Kas v The Honourable Mr Justice Mark Sevua, Their Worships Mr Sition Passingan and Mr Mark Pupaka & Anor (24/10/00) N2010
Kekedo v Burns Philip [1988-89] PNGLR 122.
Peter Ipu Peipul v Sheehan J. Mr. Ori Karapo & Iova Geita (consisting the Leadership Tribunal and Ors.) (Unreported judgement 25/5/01) N2096.
Pius Sankin, Jimmy Lingau and James Numbunda v Papua New Guinea Electricity Commission (19/07/02) N2257.
Re Gegeyo v Minister for Lands and Physical Planning [1987] PNGLR 331.
SCR 21 of 2003 Application by Jim Nomane.

Other cases cited

Breen v AEU [1971] 2 QB 175.
Council of Civil Service Unions v Minister for Civil Service [1985] AC 374.
General Electric Co. Ltd v Price Commission [1975] 1 C.R. 1.
Osmond v Public Service Board of New South Wales [1984] 3 NSWLR 447.
R v Sussex Justice; Ex parte McCarthy [1942] 1 K.B. 256.

Counsel

H Nii, for the plaintiff.
C Jaruga, for the first to fourth defendants.
Ms. C Copland, for the fifth defendant.
J Bokomi, for the sixth defendant.

21 July 2003

Kandakasi j. This matter initially came before me on 9 May 2003 when the plaintiff applied for leave for judicial review of a decision granting the Marhow Enterprises a timber authority over plantation forest land in the Kerevat area in the East New Britain Province. The leave sought was granted and I also ordered and or directed the parties to seriously consider and pursue out of Court settlement negotiations. In particular, I directed them to meet in a round table conference mode and discuss all of the issues involved with a view to arriving at a compromise mutually acceptable to all of the parties. At the same time, I directed that, if the parties fail to settle the matter out of Court within 7 days, the hearing of the substantive review must proceed on the 16 May, 2003, because the parties pressed on this as an urgent matter.

The parties failed to settle the matter out of Court. It therefore returned to me on the 16 from when it was adjourned to the 22 May by consent of all of the parties. On the 22, I issued a number of directions as to filing and serving of affidavits and submissions, the last of which was to occur on the 29 May 2003. I left it open to the parties to let the next motions' judge or any other judge available in Waigani deal with the matter as I was going to be away on circuit in June and there was no guarantee that I would return to the motions Court. However, the parties were content with me considering the affidavit material (the content of which are not in any serious contest) and their submissions and come up with a decision whenever I am able to.

Lee & Song, the PFMC to the fourth and the sixth defendants filed their affidavits and submissions on the 30 May, 2003, with Lee & Song replying to the latter's submissions and the sixth defendant on the 4 June, 2003. The fifth defendant sought and with the consent of the plaintiff was granted an extension until the 12 July, 2003 to file and serve its submissions. It filed its submissions on the 11 July, 2003.

Arguments of the Parties

The plaintiff argues that the decision by the first to the fourth defendants to grant the fifth defendant a timber authority over Vudal Compartments 1 – 4 and little Vudal compartments 1 – 2 in the Trans Kerevat Plantation to harvest teak, on 20 December, 2002 and 6 February, 2003 was erroneously arrived at. It advances a number of reasons for this. First, is the procedure and the requirements in sections 87 to 89 of the Forestry Act 1991 as amended, were not complied with, culminating in the chairman of PFMC and the PFMC itself acting under the direction of the National Forest Authority's Managing Director (managing director). Secondly, it argues that the decision was in breach of an agreement it had with them the PFMC.

Thirdly, it argues that the decision was one, which no reasonable tribunal would have arrived at because:

a. it failed to provide a reason for the decision;

b. the failure to provide any reason means the PFMC was actuated by bias and that they actuated unfairly;

c. it failed to provide a reason for breaching the agreement; and

d. the decision was against the weight of the evidence, which showed it offered a better offer to the one offered and accepted from the Marhow Enterprises.

In response, the defendants argue that, they acted within the provisions of the Forestry Act 1991 and not at the direction of the Managing Director of the National Forest Authority. As for the alleged agreement, they dispute that an agreement was reached with Lee & Song. In relation to the argument that no reasons were given for the decision, the defendants argue that, there is no statutory or common law duty to give reasons. But in any case they say reasons were given for the decision.

These arguments present a number of issues for me to determine. These are:

1. Whether the decision to grant the timber permit to Marhow Enterprises was arrived at the direction of the managing director and therefore in breach of the procedure and the requirements of the Forestry Act 1991 and took into account irrelevant factors to the exclusion of relevant considerations?

2. Was there an agreement between the Lee & Song and the PFMC for a grant of a timber permit over little Vudal Compartments 1 – 4 and Little Vudal Compartments 1 – 2 to Lee & Song?

3. Is the PFMC obliged to provide good reasons for its decision and if so, did it provide good reasons for its decision?

4. Was the decision to grant the fifth defendant the timber permit tainted with unfairness and bias and is a decision no reasonable person would have arrived at?

I will deal with each of these issues in the order in which they appear. But before I do that, it is necessary to appreciate the factual background from which these issues arise. Hence, I deal with the facts first.

The facts

The relevant facts are set out in the affidavits of Mr. Y.S. Hyun and Kyung-Soo Song for the plaintiff. The affidavits of Mr. Dick Korowa Kipoi, Ms. Caroline Jaruga and Mr. Nathanael Burua provide evidence for the defendants. Most of what all of these persons say in their respective affidavits, are not in issue. Therefore, they agreed to the Court proceeding only on the basis of the affidavits. If there was a dispute, it would have necessitated a trial, with witnesses being called and cross-examined in order to determine which version of evidence to accept. I briefly discussed the need for this in Aloysius Eviaisa v Sir Mekere Morauta Prime Minister & Ors (09/11/01) N2144. The judgement was successfully appealed against on other points so what was discussed on this issue, remains unchanged.

More recently, the Supreme Court of which I was a part, with the Chief Justice chairing and the Deputy Chief Justice being the other member of the bench, applied this principle and upheld an appeal against a National Court decision following a trial on affidavit. In that case the primary facts were in issue and the trial judge proceeded to determine the case without giving the parties and itself the benefit of cross-examination and other oral evidence. That was in the case of SCR 21 of 2003, Application by Jim Nomane.

The undisputed facts in this case are these. On or about 10 December, 2002, Lee & Song and Marhow Enterprises submitted applications for a Timber Authority to harvest plantation teak and other woods over the Kerevat Plantation in the East New Britain Province.

Both competitors offered prices for the woods as follows:

Marhow Enterprises

Teak wood - > 30cm in diameter = US$50.00 per square meter
< 30cm in diameter = US$25.00 per square meter
Kamarere & Other hardwoods = K10.00 per square meter

Lee & Song
Teak wood - > 30cm in diameter = US$60.00 per square meter
< 30cm in diameter = US$30.00 per square meter
Kamarere & Other hardwoods = K10.00 per square meter

So price wise, Lee and Song offered a better deal than Marhow Enterprises. But both these prices were even lower than international prices for teak at the relevant time, which was about US$876.00 per square meter according to the knowledge of the first to fourth defendants.

On the 20 December, 2002, the PFMC chaired by the Mr. Burua deliberated on the two applications. It then resolved to defer a decision on the applications pending a number of things. This included a counter offer on the rates offered by the applicants for an offer on rates preferred by the National Forest Services. It was also to enable the PFMC to seek and receive advice from the Papua New Guinea Forest Authority (PNGFA) as to one or both of the applications should be considered.

By letter dated 20 December, 2003, Mr. Burua as chairman of the PFMC informed Lee & Song of the PFMC's position and asked Lee & Song to accept the following wood prices:

Teak wood - > 30cm in diameter = US$60.00 per m3
< 30cm in diameter = US$30.00 per m3
Kamarere & Other hardwoods = K40.00 per m3

At the same time, it requested Lee & Song to include benefits for the Provincial Government in terms of a sum of US$10.00 per m3 for Teak wood over 30cm in diameter, US$5.00 per m3 for teak wood less than 30cm in diameter and K10.00 per m3 for Kamarere & Other hardwoods. It also indicated that Lee & Song would be offered Vudal Compartments 1 – 4 and Little Vudal Compartments 1 – 2, if Lee & Song accepted these conditions in writing. The letter in fact stated "Can you in writing confirm acceptance of these prices before approval is granted."

By letter dated 23 December, 2002, Lee & Song wrote to the Chairman of the PFMC, accepting nearly all but one of these conditions. It also thanked the PFMC for allocating them the compartments specified in the letter of the 20 December, 2003. At the same time, it asked to be given the other blocks as well if the prices offered by Marhow Enterprises were considered low because Lee & Song already had a sawmill and that it would maintain the roads in the area.

It seems there was no direct response to Lee & Song's letter of 23 December, 2003. But by letter dated 10 February, 2003, the PFMC through Mr. Burua informed Lee & Song that its application was declined. At that time, it informed Lee & Song that the managing director directed the PFMC to select only one developer to harvest the Kerevat Forest Plantation. No other reason for the PFMC arriving at that decision was provided.

The relevant meeting declining Lee & Song's application was convened on the 6 February, 2003. A copy of the minute is annexed to Ms Jaruga's affidavit sworn on the 16 May, 2003. The minutes also do not provide any other reason for declining Lee & Song's application. Marhow Enterprises application was instead accepted even though it offered prices lower than that of Lee & Songs.

In an affidavit sworn by Mr. Burua, chairman of the PFMC on the 28 May, 2003, he deposes to what he claims were reasons for the PFMC's decision. He first speaks of the managing director recommending only one of the two applicants to be accepted. But he provides no evidence of such recommendation. Secondly, he speaks of the PFMC checking and assessing the background and performance of each of the applicants. He goes on to speak of Lee & Song failing on a number of occasions before to carry out timber operations under timber authorities it was granted, some of which were situated in the Kerevat area. Thirdly he speaks of Lee & Song being associated to other companies, namely Lucky Star (PNG) Ltd, Kooseong (PNG) Ltd, Sula Timber Ltd and Luck Diwai Ltd, which had timber authorities in the East New Britain Province. These companies he says performed very poorly. These reasons are neither set out in the relevant minutes or in the letter communicating the decision to Lee & Song on its application.

Lee & Song appealed against the decision of the PFMC to the NFA by letter dated 3 March, 2003. On the 4 April the NFA deliberated on the appeal and decided that Lee & Song should be awarded the compartments indicated in the letter dated 20 December, 2003 from the PFMC to Lee & Song and accepted by Lee & Song. The NFA then directed the PFMC to convene a special meeting to rescind the decision to award the timber authority to Marhow Enterprises covering the whole of the Kerevat Plantation. A meeting was thus convened on the 13 April between all of the parties at Rabaul. The then acting managing director of the NFA, acting general counsel of NFA, acting Divisional Manager and Forest Divisional Services attended that meeting. The NFA position and decision was made known to the meeting. Marhow Enterprises was not prepared to surrender its timber authority and was therefore prepared to defend these proceedings. Consequently, the matter is in Court.

The relevant law – generally

The law governing judicial review is well settled. As Mr. Bokomi for the State submits, the circumstances in which judicial review is available are where the decision making authority:

(a) Lacks the power to make the decision in question; or

(b) Exceeds or abuses its power; or

(c) Commits an error of law; or

(d) Breaches the principles of natural justice; or

(e) Arrives at a decision, which no reasonable tribunal would have reached; or

(f) Takes into account irrelevant considerations in its decision making process; or

(g) Failed to take into account relevant considerations in its decision making process.

There are numerous authorities making this clear. Examples of these are the cases of Kekedo v Burns Philip [1988-89] PNGLR 122, per Kapi DCJ, Jim Kas v The Honourable Mr Justice Mark Sevua, Their Worships Mr Sition Passingan and Mr Mark Pupaka & Anor (24/10/00) N2010, and Peter Ipu Peipul v Sheehan J. Mr. Ori Karapo & Iova Geita (consisting the Leadership Tribunal and Ors.) (Unreported judgement 25/5/01) N2096 (only the outcome reversed by the Supreme Court).

Present case

The present case raises four major issues. First is the issue of ultra vires, which has built into it the factors that should have been taken into account and those that should have been omitted. The second is a breach of an agreement between Lee & Song and the PFMC. Third is a failure to provide reasons at the time of the decision, which means unfairness, bias and consequently a breach of the principles of natural justice. The final is the question of whether a reasonable tribunal could have arrived at the decision the subject of these proceedings. The third and the fourth issues can be combined because these issues are built around or, if not, can be viewed subject to a decision on the issue of failure to provide reasons.

The law governing ultra vires, taking into account of irrelevant factors and failing to take into account relevant considerations or factors is clearly established. All decision-makers performing a public duty are obliged to follow the procedure prescribed, if any, in a statute or any regulation, and take only relevant factors or considerations into account, to the exclusion of irrelevant considerations. If this is not done, the decision is open to be quashed on review.

In the case before me, the Forestry Act of 1991 as amended applies. Sections 87 to 89 of that Act provides the procedure and the way and manner in which a timber authority could be issued. Section 87 (1) provides that the chairman of a provincial forest management committee can issue a timber authority upon the recommendation of the committee. But this is subject to ss. 88 and 89.That is for harvesting of timber in certain specified circumstances for specific purposes. A timber authority can be granted on such terms and conditions that are considered appropriate.

Section 88 provides for only forest industry participants to apply for a timber authority. The application has to be in a prescribed form and must be lodged with the managing director. It must be accompanied by the prescribed fee and particulars, a map of the area to which the application relates, details of the project proposed and any agreements relating to the sale of timber harvested with verification of ownership and the written consent of the landowners to the proposed project.

The next section 89 then provides that the application must be referred to the relevant PFMC for its evaluation and recommendations to the relevant provincial Minister, and recommend its chairman to grant a timber authority. Before that, however, the Managing Director of the NFA must be satisfied that the application has been lodged in the approved manner.

The PFMC's evaluation of the application must be made against—

(a) the National Forest Policy; and

(b) any relevant provincial government policies, provided they are not inconsistent with the National Forest Policy; and

(c) the commercial viability of the project (including the financial resources of the applicant, the past performance of the applicant in forest industry and other projects, analysis of projected cash flows and the anticipated net benefit to the resource owners and to the State).

The PFMC may require and get the assistance of the National Forest Service and of any relevant Department in the evaluation of the application. If after the evaluation and or assessment of the application the PFMC, is of the opinion that it is satisfactory, it can recommend its Chairman to grant a timber authority to the applicant. On the receipt of such a recommendation the Chairman must notify the National Forest Board that he intends to grant a timber authority over the project area and shall request the consent of the Board to the grant. That board is required to consent to the grant of the timber authority within four weeks of the date of the notification. If the board does not respond within that period, then the required consent is deemed given.

There is no argument that most of these requirements and procedures were followed. The only argument is that there is no provision in ss87 to 89 of the Forestry Act 1991 that empowers the managing director to issue directions in the context of ss.87 to 89 as to how an application for a timber authority should be determined. Reference is made to s35 of the Act. This provision provides for the functions of the managing director, which does not include a power to direct a PFMC. Consequently, a PFMC is not obliged to follow any directions of the managing director. Alternatively, the plaintiff argues that if there is power in the managing director to direct the PFMC, and the PFMC is obliged to follow then, the PFMC erred in not following the managing director's direction to reconsider the applications and grant them on a 50/50 basis to both applicants.

A close examination of these provisions confirms the first part of Lee & Song's arguments. I therefore agree. But the question however remains, as to whether what the managing director said to the PFMC amounted to a direction that is not authorised or it was a response to an assistance sought from him by the PFMC under s. 89 (3) of the Act? This requires a closer examination of what assistance was sought of the managing director and how did he respond to that request.

The only evidence on this is the PFMC's minutes of its meeting of the 20 December, 2002, and 6 February, 2003. The relevant parts of these minutes speak of seeking the PNGFA's advice on whether both Lee & Song and Marhow Enterprises should be selected or only one of them. The precise term in which that advice was sought and given is not in evidence before me. But it is clear that the PFMC made a decision to seek the advice of the PNGFA as to whether both applications should be considered or only one. The advice was to select only one.

Given these, I cannot see how the advice that was provided by the managing director could be seen as a direction. Instead it was a response to an area in which the PNGFA's advice was sought. Even if it amounted to a direction, it was only a direction to select only one of the two applicants, without specifying which of the two applicants should be selected. I cannot see how this could be viewed outside the provisions of s. 35 and 89 of the Forestry Act 1991. On this basis I reject this argument.

This leaves me to consider the plaintiff's alternative argument. The argument is, if what the managing director said to the PFMC was a direction which later was obliged to follow and it did, then the PFMC erred in not complying with the managing director's direction to convene a meeting to reconsider the applications with a view to granting both applications on 50/50 basis. The relevant evidence is the minute dated 20 February 2003 from Mr. David S. Nelson, managing director to the Area Manager – NGI. A copy of that minute is annexure "A" to Mr. Y.S. Hyun's affidavit of the 25 April, 2003.

In relevant parts it reads:

"This is a specific instruction for you to undertake as conversed last week to you on the phone regarding Lee & Song & Marhow.

You are now instructed to convene an urgent PFMC meeting this Friday the 28 February 2003 and advise my representative, Mr Garry Simon accordingly on the decision reached at that meeting.

Treat decisions reached as highly confidential and urgent for my express knowledge.

I intend to stick by the first PFMC meeting on the awarding of 50/50 T/A by PFMC meeting to Lee & Song and Marhow.

On your side Mr. Joe Rui must never be entertained as he has personal interest on Mao How.

I await to hear positive outcome at your end."

This is clearly a specific direction to the area manager for him to ensure the PFMC reconvenes to reverse its decision to grant the timber authority to Marhow Enterprises. The plaintiff has not drawn my attention to any provision in the Forestry Act 1991, which empowers the managing director to issue such a direction. This runs contrary to the first part of its argument that there is no power in the managing director to issue directions. Instead it can be requested to provide assistance under s. 89(3). Besides, this letter was a response to Lee & Song appealing to the Minister. Counsel for the plaintiff did not draw my attention to and in any case, I have not been able to find any provision that allows for an appeal against the decision of the PFMC and the powers that can be exercised on appeal. I therefore find that the plaintiff's alternative argument has no foundation in the Forestry Act 1991. Accordingly, I reject that argument.

I now need to consider whether the PFMC took into account all of the relevant factors to the exclusion of any irrelevant factors before arriving at its decision. In this regard the provisions of s. 89 (2) is relevant. This provision reads:

"(2) An evaluation of an application will be made against—

(a) the National Forest Policy; and

(b) any relevant provincial government policies, provided they are not inconsistent with the National Forest Policy; and

(a) the commercial viability of the project (including the financial resources of the applicant, the past performance of the applicant in forest industry and other projects, analysis of projected cash flows and the anticipated net benefit to the resource owners and to the State)."

These are the factors the Act says a PFMC must take into account when evaluating or assessing an application for timber authority. As already noted, there is nothing in the relevant minutes of the PFMC meeting that shows that it gave serious consideration to each of these factors. For example there is no mention of what the relevant National and Provincial Forest Policies are and whether either or both of the applications have come within those policies.

The same can be said about the commercial viability. The only mention in so far as this aspect is concerned is where the minutes, state the wood prices. The facts clearly show that National Forest Service through the Chairman of the PFMC asked for the following prices:

Teak wood - > 30cm in diameter = US$60.00 per m3

< 30cm in diameter = US$30.00 per m3

Kamarere & Other hardwoods = K40.00 per m3

It also requested Lee & Song to accept a sum of US$10.00 per m3 for Teakwood over 30cm in diameter, US$5.00 per m3 for teakwood less than 30cm in diameter and K10.00 per m3 for Kamarere & other hardwoods in benefits to the Provincial Government. Lee & Song accepted these additional prices. These prices were above what Marhow Enterprises had offered. The relevant minutes of the meeting of the PFMC has no evidence of the PFMC deliberating on the reasons why a proposal that was lower in terms of prices should be accepted. Similarly there is no evidence in so far as the minutes are concerned of the PFMC having given any consideration to the past performances of the two applicants in comparison to each other and or industry standards.

The law clearly is that where a transaction is evidenced or set out and concluded in a document, the document should speak for itself. No oral or extrinsic evidence can be called and allowed to either add to or subtract from what is stated in a document. The Supreme Court stated that position in these terms in the case of Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285:

"Where parties have embodied the terms of the contract in a document, the general rule is that 'verbal evidence is not to be allowed to be given...so as to add or subtract from, or in any manner to vary or qualify the written contract' See Bank of Australia v Palmer [1897] UKLawRpAC 44; [1897] AC 540, 545; Reliance Marine Insurance Duder [1912] UKLawRpKQB 90; [1913] 1 KB 265, 273; Tsang Chuen v Li Po Kwai [1932] AC 713, 727; O'Connor v Hume [1954] 1 WLR 824, 830.

It is also not permissible to adduce evidence to show that subjective intentions of the parties were not in accord with the written instrument. See Chitty on Contracts (25th Ed) paragraph 802. It is settled law that where a contract is contained in a document, that courts have held that it is to the document that the courts will look to for terms of the agreement. See Preston -v- Luck (1884) 27 D 497, 506 per Cotton LJ; Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60, 77 per Isaac J."

In the present case what was discussed and resolved at the relevant meeting is set out in the relevant meeting. The belated claims of Mr. Burua in his affidavit of 28 May 2003 are not supported by the relevant minutes or even the letter informing Lee & Song of the decision against it. This evidence is inadmissible and in any case, it cannot be allowed to add to or subtract from what is stated in the minutes. I therefore reject Mr. Burua's claims.

This effectively means the PFMC did not take into account and consider the matters it was required to consider by statute, particularly s89 (2) of the Forestry Act 1991. Inferentially, this could mean that the PFMC took into account factors or considerations it should not have when it decided to grant Marhow Enterprises the timber authority. This alone should form the basis to invalidate the decision under review. But there is an additional reason for it.

Failure to give reasons and its effect

This reason is the subject of the remaining issues. It concerns the issue of giving of reasons for the decision or the lack thereof and whether or not there was an agreement between Lee & Song and the PFMC that the former would be granted a timber authority for the areas covered in the letter of the 20 of December, 2002. The other remaining issues such as the PFMC being unfair, and that no reasonable decision-maker would have reached the same decision as did the PFMC, are consequential on the question of whether or not reasons were given. I will therefore cover these issues in the context of that question.

One of the minimum requirements of the principles of natural justice enshrined in our Constitution under s59 (2) is the duty to act fairly, and in principle, to be seen to be acting fairly. This is in effect a codification of an old established principle represented by cases like that of R v Sussex Justice; Ex parte McCarthy [1942] 1 K.B. 256.

The need to provide good reasons for any decision-maker for a decision he or she makes is an important part of the principles of natural justice. For a failure to give reasons has the potential to form the foundation for a suggestion or suspicion that the decision is without good reason. Lord Denning in General Electric Co. Ltd v Price Commission [1975] 1 C.R. 1 at 12 made that clear in these terms:

"If it (the decision maker) gives no reasons in a case when it may reasonably be expected to do so, the Courts may infer that it had no good reason for reaching its conclusion and act accordingly."

These principles were adopted and applied with approval in Re Gegeyo v Minister for Lands and Physical Planning [1987] PNGLR 331 at 335. I reechoed this principles and applied them in Pius Sankin, Jimmy Lingau and James Numbunda v Papua New Guinea Electricity Commission (19/07/02) N2257. There I said:

"It is settled law that a discretion that is vested in a decision-maker in a democratic society such as ours must be exercised on proper consideration as to the relevant facts and the law. There is no such a thing as unfettered discretion. Good reasons must be given for an exercise of discretion. A failure to do so may leave open the floodgate for all sorts of allegations, including allegations that the discretion was exercised for ulterior motives. For examples of authorities on this point, see The Application of Moge Enga and Kuipi Group in the Matter of a Decision of the Minister for Lands Concerning Section 30 Allotment 7 Mt. Hagen [1995] PNGLR 246 and An Application of the NCDIC [1987] PNGLR 339."

Ms. Jaruga, counsel for the first to fourth defendants argues that, there is no statutory or common law obligation on PFMC to give reasons for its decision. In support of that argument, she generally refers to the case of Osmond v Public Service Board of New South Wales [1984] 3 NSWLR 447. However my reading of this judgement demonstrates that a failure to give reasons for an administrative decision is not immune from judicial review. The Court in fact affirmed that the principles of natural justice require reasons to be given. Accordingly, I find the argument misleading and without merit.

Marhow Enterprises on its part also argues that the Forestry Act 1991 does not require tender applicants such as Lee & Song to be provided reasons for the PFMC or its chairman's decision based on the recommendation of the PFMC. At the same time it agrees that the rules of natural justice provide that in certain circumstances, the giving of reasons might be necessary. In support of this argument, reference is made to the following passage by Lord Denning in Breen v AEU [1971] 2 QB 175 at 190 – 191:

"... ought such a body, statutory or domestic, give reasons for its decision or give the person concerned a chance of being heard? Not always, but sometimes. It all depends on what is fair in the circumstances. If a man seeks privilege to which he has no particular claim – such as an appointment to some post or other – then he can be turned away without a word. He need not be heard. But if he is a man whose property is at stake, or who is being deprived of his livelihood, then reasons should be given why he is being turned down, and he should be given a chance to be heard. If he is a man who has some right or interest, or some legitimate expectation, of which it would not be fair to deprive him without hearing, or reasons given, then these should be afforded him, according as the case may demand."

Reliance was also placed in the judgement of Lord Diplock in Council of Civil Service Unions v Minister for Civil Service [1985] AC 374 where his Lordship said:

"The decision must affect some other person either:

(a) by altering rights or obligations of that person which are enforceable or against him in private law; or

(b) by depriving him of some benefit or advantage which either:

(c) he had been permitted by the decision maker to enjoy and which has been communicated to him some rational grounds for withdrawing it on which has been given an opportunity to commence; or

(d) he has received assurance from the decision maker will not be withdrawn without giving him first an opportunity of advancing reasons for contending that they should not be withdrawn."

Having regard to these authorities, Marhow Enterprises argues that the only right Lee & Song had was the right to tender, which right was not taken away. It goes on to argue that Lee & Song did not have any right or expectation that was being deprived. Therefore, the argument goes on, it was not necessary for the reasons to be provided as to why Lee & Song's application was rejected.

The PFMC was created by statute to perform a statutory function. It is a public authority performing a function or power on behalf of the people of Papua New Guinea. The whole forestry sector or industry has been engulfed in much controversy culminating in a number of public outcries and inquiry, including the Justice Toss Barnett inquiry. Much of the emphasis today is on good governance and transparency at all levels of government and public authorities in relation to all dealings that concern the public institutions.

Providing reasons for decisions made by public authorities is a necessary element of being transparent unless the security of the nation or a statute specifically dictates or provides otherwise. Hence, I do not consider it appropriate that it should be left to the circumstances to dictate whether or not reasons should be provided for every decision by a public authority or tribunal. The reason for this is simple, unless good reasons are provided, a decision by a public authority or tribunal could be perceived as being arrived at unfairly and being actuated by such things as bias, bribery and so on and not necessarily on its merits. Accordingly, I do not accept therefore that whether or not reasons should be provided when exercising a public duty and or function is something that should be left to whims of the decision-maker or the circumstances of a case. This is particularly necessary given the numerous instances of concerns raised and experiences experienced in our country over the fair and proper exercise of public powers, duties and functions.

In the present case, both Lee & Song and Marhow Enterprises applied for a timber authority over the same area. Certain portions of area in question were offered to Lee & Song at a certain price before its application could be approved. Lee & Song accepted the offer. The letter of the 20 December, 2003 under the hand of the Chairman of the PFMC in my view created a legitimate expectation in Lee & Song that, if it accepted the offer contained in that letter, its application would be approved. That is the clear import of the letter and in my view that is what was intended and not necessarily a legally bind agreement. This is because no decision was yet made to award a timber authority to Lee & Song for the areas covered in that letter. Such a decision could only be arrived at after an assessment or an evaluation of the relevant application in accordance with s89 (2) of the Forestry Act 1991.

As already noted, there is nothing in the minutes of the meeting of either the 20 December 2002 or the 6 February 2003, that demonstrates that the applications were assessed against the factors set out under s89 (2). Hence, even if there was an agreement, it was subject to meeting the tests or the requirements set out in s89 (2). A failure to meet these requirements would amount to an illegal contract and therefore unenforceable. In these circumstances, what is clear, however, is that a legitimate expectation was created in the mind of Lee & Song that its application would be granted if it accepted the terms proposed. It was, therefore, incumbent upon the PFMC to provide a good reason as to why it could now not approve Lee & Song's application once Lee & Song's accepted the terms. Even if there was no such offer and acceptance, I am of the view that the PFMC as a public institution charge with a public duty was obliged in any case to give reasons in terms of s89(2) for rejecting Lee & Song's application.

I have already rejected the belated attempts at giving additional reasons not set out in the relevant minutes and the letter advising Lee & Song of the decision against it. I did that because these purported additional reasons were not disclosed to Lee & Song and that the law does not allow them in the light of the written records speaking for themselves. There is a further reason to reject these claims and that is this- the PFMC is trying to go into damage control and in so doing, putting forward something that would justify what it had earlier done without good reason. I am persuaded by what Akuram AJ (as he then was) said in Frank Siwi & Ors v Commissioner for Police (30/05/96) N1433. This was in the context of an application for an adjournment to enable the Police Commissioner to provide reasons for his decision the subject of the proceedings before his honour, which were not given at the time of making the decision. His honour said:

"The purpose of giving reasons is to justify upon the facts or evidence presented before the authority or tribunal that these are the reasons for which such a penalty is imposed. The danger of providing reasons after the grounds for the application are provided (sic) is that the reasons will not go to the time when the commissioner was directing his mind during assessment and coming to the decision but will be merely explaining and responding to these grounds. So the reasons would be more defensive of the decision made and not as they would have appeared at the time of the decision."

Mr. Burua claims the reasons he belatedly gives were the reasons the PFMC and he had at the time of the decision, but were not disclosed because he "did not wish to offend the plaintiff with the true reasons why its application was rejected" and that he "did not realise then that [his] decision would become the subject of court proceedings." I do not find this claim credible because, both he and the PFMC were not exercising a personal power or function for which they would have to be careful not to offend Lee & Song. Besides there is no evidence of any personal relationship between them that could prevent them from offending Lee & Song. Even if there were any such relationship, Lee & Song was still entitled to know of the reasons why its application was declined, especially when it accepted the PFMC's counter offer as a condition for a grant of his application.

The first to the fourth defendants are under an obligation just like any other public authority to observe principles of natural justice when called to exercise their powers and or functions. Their powers and or functions must be exercised properly on the basis of the relevant facts and considerations including all the relevant rules and regulations together with the relevant and applying principles of law. The merits of a case must dictate the decision in the exercise of the powers and functions vested in them. Since there is not such a thing as unfettered discretion, every decision must be supported by good reason within the confines of the facts and the law before them. A failure to do so, opens the floodgate for all manner of inferences, such as the decision-maker being actuated by bias, bribery or the like. It thereofre amounts to a serious error not to provide good reasons for a decision.

In the present case, although there is no specific evidence of any bias, bribery or anything like that, leading to the decision, the lack of any reason being provided at the time of the decision and putting it on record in terms of the minutes of the PFMC gives cause to the plaintiff to infer that the decision may have been influenced by such factors. This is more so when given the expectations that were created in Lee & Song by the PFMC's letter of the 20 December, 2002. Still further, a good reason or explanation was required to be provided for the PFMC choosing to approve Marhow Enterprises' application who offered wood prices that were lower than those offered by Lee & Song. Section 89(2) of the Forestry Act 1991, requires the PFMC to assess an application for a timber authority against its commercial viability. Certainly price does play an important part in a commercial transaction. The price determines the economic value of a product or a project. Naturally, therefore, there must exist convincing reasons to reject an offer that promises more monetary gain.

I do not see any sense in the defendant's argument that the PFMC is not obliged to accept the highest price offered. There is no foundation for this in the relevant statute. Usually, the highest price would be preferred. People rarely go for a lower price when a higher price is on offer, unless there is evidence disclosing such an offer not being a serious one. If indeed there was such evidence before the PFMC, it was incumbent on it to state that as one of the reasons for rejecting the Lee & Song's application.

The end result of what I have found and discussed so far reveals that the PFMC did not have any good reason to arrive at the decision to decline Lee & Song's application. The fact that Lee & Song offered a price that was higher required some serious consideration before rejecting it. There is no evidence or the acceptable evidence before me that the PFMC seriously considered this. Similarly, there is no evidence before me that the PFMC carefully went through each of the factors set out in s. 89 (2) of the Forestry Act 1991 and generally any other relevant and applying provisions.

These dictate the inevitable conclusion that, no reasonable tribunal conscious of the factors it ought to take into account could have arrived at the decision the PFMC arrived at. I thus find that no reasonable PFMC or a tribunal could have arrived at the decision the PFMC in this case arrived at in these proceedings.

Summary

In short I answer each of the issues raised in these proceedings as follows:

1. The decision to grant the timber permit to Marhow Enterprises was arrived at in breach of s 89 (2) of the Forestry Act 1991, in that the factors enumerated thereunder were not taken into account which means factors other than those may have been taken into account.

2. Although there was no legally enforce agreement between the Lee & Song and the PFMC for a grant of a timber permit over little Vudal Compartments 1 – 4 and Little Vudal Compartments 1 – 2 to Lee & Song, a reasonable expectation for that being done was created by the PFMC.

3. By reason of the PFMC being a statutory authority vested with a public power or function and the fact that a legitimate expectation was created in Lee & Song that it would be granted a timber permit over certain areas, the PFMC was obliged to provide good reasons for declining the plaintiff's application.

4. The PFMC did not provide reasons it was required or obliged to provide at the time of making or arriving at its decision. The belated attempts to provide them is against the law and in any case could not easily be accepted as the reason existing at the time of the decision.

5. As no good reason was provided at the time of the decision to grant the Marhow Enterprises the timber authority it is open to infer that, that was tainted with unfairness and bias and is a decision no reasonable person would have arrived at.

For these reasons, the decision the subject of these proceedings could not and therefore should not be allowed to stand. I would hence uphold the application for review and order a quashing of that decision. I would then order the PFMC to reconsider the applications and assess them strictly against the factors set out in s 89(2) of the Forestry Act 1991. I would also order and or direct the PFMC to provide full and detailed reasons for a decision on the applications bearing in mind the provisions s 89 (2).

I consider orders in terms of the above appropriate and I so order. I also order costs to follow the event.

Lawyers for the plaintiff: Harvey Nii Lawyers.
Lawyers for the first to fourth defendants: Ms. Caroline Jaruga.
Lawyers for the fifth defendant: Maladinas Lawyers.
Lawyers for the sixth defendant: Solicitor General.