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Taian v Auali, Minister for Corporatisation [1999] PGNC 109; N1967 (14 December 1999)

Unreported National Court Decisions

N1967

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

OS 665 OF 1999
BETWEEN: MOSES TAIAN, ANDREW WALIMAN AND JACOB NUMAPO
FIRST PLAINTIFFS
AND: ANDREW TERRY
SECOND PLAINTIFF
AND: POST PNG LIMITED
THIRD PLAINTIFF
AND: VINCENT AUALI (MINISTER FOR CORPORATISATION AND PRIVATISATION)
FIRST DEFENDANT
AND: STANLEY PIL, DAVID YAGAM AND ANDREW KESINGA
SECOND DEFENDANTS
AND: THE INDEPENDENT STATE OF PAPUA NEW GUINEA
THIRD DEFENDANT

Waigani

Sevua J
17 November 1999
19 November 1999
14 December 1999

REMEDIES - Declaration

WRONGFUL DISMISSAL - Legality of the decision of the Minister under the Determination of Titles and Responsibilities and s.148 of Constitution.

Pursuant to Schedules 5 and 21 of the Determination of Titles and Responsibilities and s.148 of the Constitution, the Minister for Corporatisation and Privatisation, purported to terminate the appointments of the first and second plaintiffs as directors of Post PNG Limited. The Plaintiffs have brought this action seeking a declaration that the Minister’s decision was illegal, null and void, and of no effect.

Held

The Minister for Corporatisation and Privatisation has no legal power to appoint or dismiss a director of Post PNG Limited.

Declarations granted.

Cases Cited

SC Reference No. 1 of 1982 Re: Phillip Bouraga [1982] PNGLR 178

Counsel

P Smith for Plaintiffs

P Mawa for 1^st Defendant

A Manase for 2^nd Defendants

H Polume for 3^rd Defendant

14 December 1999

SEVUA J: The plaintiffs have filed this originating summons seeking various declaratory orders in respect of the first defendant’s decision on 20^th October, 1999, in terminating the appointment of the first and second plaintiffs who were directors of the third defendant, Post PNG Limited.

Until the 20^th October, 1999, the first plaintiffs were directors of the third plaintiff. The second plaintiff was also a director of the third plaintiff, who I now understand, has also been terminated by the first defendant. Moses Taian, one of the first plaintiffs, was the Chairman of the Board of Directors of the third defendant, Post PNG Limited. The second defendants were appointed as directors of the third plaintiff, replacing the first and second plaintiffs.

Post PNG was formerly one of two government statutory organisations which made up the former Post & Telecommunication Corporation or PTC as it was commonly known then. Post PNG is a creature of statute. It was established by the Postal Services Act 1996 (No. 56 of 1996), which Act repealed the Post and Telecommunication Act Ch. 150. Post PNG therefore became Post PNG Limited by operation of law.

Section 4 of the Postal Services Act 1996 provides for the incorporation of Post PNG as a company limited by shares under the Companies Act. Section 5 of the Act provides for the establishment of a Board of Directors in accordance with the company’s Articles of Association. The company’s articles of association is what is now known as the Constitution of Post PNG Limited.

The first defendant, Vincent Auali, is the Minister for Corporatisation and Privatisation. He was appointed by the Prime Minister in the National Gazette No. G.98, dated 2^nd August 1999. That gazette contains the Determination of Titles and Responsibilities of Ministers made by the Prime Minister by virtue of the powers conferred by Section 148 of the Constitution.

Schedule 5 of the Determination of Titles and Responsibilities of Ministers refers to the first defendant as Minister for Corporatisation and Privatisation. His responsibilities include the co-ordination of all matters, relating to the corporatisation and privatisation of public enterprises and matters relating to the State’s shareholding in all other corporations and business enterprises. He has the responsibility for Post PNG Limited.

However, Schedule 21 of the Determination of Titles and Responsibilities of Ministers is also relevant. That Schedule refers to Philemon Embel as the Minister for Public Services and Communications. In that capacity, Philemon Embel has responsibility over all matters relating to the functions of the Postal Services Act 1996 amongst other legislations and government organisations.

Clause 1.1 of the Post PNG Limited Constitution defines “Minister” as “the Minister for the time being having responsibility for Finance (or such other person as the National Executive Council may determine)”. I consider that until such time that this clause is amended, the appropriate minister is the Minister for Finance. The question whether the National Executive Council should mean the Prime Minister is not an issue here, although it is argued here. That issue should be left to another forum at another time.

The plaintiffs submitted that the Minister having legal authority to appoint and remove the Chairman of the board and the directors of Post PNG Limited, is the Minister for Finance, which presently, is the Prime Minister. This submission is based on the definition of “Minister” in Clause 1.1. That is their first argument and it is a jurisdictional issue.

The defendants submitted otherwise. They contended that the first defendant being the Minister for Corporatisation and Privatisation in pursuance of the Determination of Titles and Responsibilities, has the responsibility over the third defendant, therefore has authority to remove and appoint members of the board of directors of the third defendant.

It seems to me that the third defendant, Post PNG Limited comes under the responsibility of three different Ministers. Firstly, by Schedules 5 and 21 of the Determination of Titles and Responsibilities pursuant to s.148 of the Constitution, and secondly, by virtue of Clause 1.1 of the Constitution of Post PNG Limited. Thus, one could conceive that there is an ambiguity in the law. Be that as it may, that is not the issue before me.

All counsel, and in particular, counsel for the plaintiffs have advanced quite a number of submissions on law. However, I do not intend to address all those legal issues. In my view, the principal issue for this Court’s determination is whether the first defendant has the authority to terminate the first and second plaintiffs, and if so, what is the source of that authority.

Schedule 5 of the Determination of Titles and Responsibilities, clearly spells out the responsibilities of the first defendant as Minister for Corporatisation and Privatisation. His responsibilities include “the co-ordination of all matters relating to the corporatisation and privatisation of public enterprises; and matters relating to the State’s shareholdings in...all other corporations and business enterprises, and ...Post PNG Ltd...”. In my view, the first defendant’s political responsibilities are those that I have adverted to, nothing more and nothing less. The first defendant has not been given the responsibility to manage Post PNG Limited as a private company or legal entity. It may be true that he holds the Kumul shares in the third defendant, however, I consider that he has no power of control over the third plaintiff.

It is my view that the first defendant’s political responsibilities over Post PNG Limited include government policies, plans, proposals and all other matters regarding the corporatisation and privatisation of Post PNG Limited and also matters relating to the government shares in the company. If he asserts that he has the responsibility of appointing and removing the chairman of the board of directors and the directors of the company, he has not provided that evidence. In fact I find no evidence at all that he is responsible for the control of the third defendant. In saying that, I do not wish to be misconstrued in that I am advocating that the directors of the company should be left to do their own thing, no. They must be subject to some form of control like every other companies within the legal corporate framework of the Companies Act. In my view, all State corporations and business enterprises like Post PNG Limited should not be left to the political whim of one single minister.

In his own affidavit sworn on 16^th November, 1999, Minister Vincent Auali, says, “in the exercise of all my powers and by virtue of the determination of the Prime Minister in accordance with Section 148 of the Constitution and as a Trustee shareholder of Post PNG Limited, I have appointed a new Acting Managing Director of Post PNG Limited. I have also appointed some new Board of Directors”.

I cannot find anywhere in the Prime Minister’s determination that the first defendant has any power of direction or control outside those responsibilities that I have adverted to.

Submissions have been made in relation to s.148 of the Constitution and the Supreme Court decision in Supreme Court Reference No. 1 of 1982 Re: Phillip Bouraga [1982] PNGLR 178. Whilst it is correct, that s.148 of the Constitution had that case make reference to departments, sections, branches and functions of government, Post PNG Limited is not a department or section or branch of the government. It is a company limited by shares pursuant to the Companies Act. It has legal status as it is a legal entity per se, unlike a government department or branch.

Kapi, J. (as he then was) discussed the political responsibility of the Minister for Police at pages 196 and 197. His Honour said: “The lack of power of direction and control by a Minister under s.148(3) relates to the political responsibilities. If it is desired for a Minister to have any power of direction or control outside the political responsibilities then those powers may be given to him by another provision of the Constitution or an Act of Parliament”.

I consider that to be a succinct statement of the law that is relevant and applicable in the present case. Section 148(2) of the Constitution states:

“Except as provided by a Constitutional Law or an Act of Parliament, all departments, sections, branches and functions of government must be the political responsibility of a Minister....”.

Subsection (3) stipulates that “subsection (2) does not confer on a Minister any powers of direction or control” (my own emphasis).

Post PNG Limited is not a department, section, branch or function of the government, therefore it follows in my view, that the first defendant if he is responsible for Post PNG, could not have any power of direction or control except directions relating to the company’s community service obligations as stipulated in s.21 of the Postal Services Act. However, by s.22, the company, Post PNG Limited and its Board of Directors are not subject to direction by or on behalf of the Government. That provision is quite clear. The Minister having responsibility over Post PNG Limited does not have any power of direction over the Company and its Board either on his own or on behalf of the State.

In my view, the first defendant’s responsibilities would be restricted to those that are specified in the Prime Ministers determination. That is to say, matters dealing with corporatisation and privatisation of the company. So where does the Minister for Corporatisation and Privatisation gets his power to sack the Board of Directors? The answer is simple, he has no power. His functions of co-ordinating Post PNG Limited’s corporatisation and privatisation policies does not include the termination of the Chairperson and members of the Board. There is no evidence that he has that authority either by a constitutional provision or an Act of Parliament. That is a fundamental principle in Bouraga’s case.

The defendants submitted that since the first defendant has the power to appoint the Chairman of the Board and the directors pursuant to Clause 14.2 of the Constitution of Post PNG Limited, he also has the power to terminate them. The first defendant especially, relies on s.36 of the Interpretation Act, Ch. 2 and contended that even though Clause 14.2 of the Post PNG Limited’s Constitution does not expressly provide the Minister’s power to remove, pursuant to s.36 of the Interpretation Act, the Minister who has the power to appoint, also has the residual power to remove or suspend.

I find it difficult to reconcile that argument with the fact that the first defendant’s responsibilities relate to co-ordination of all matters in respect of the corporatisation and privatisation of public enterprises. Surely that area of responsibility is completely different to the power of control over Post PNG Limited which would include the power to remove directors. I cannot find that power in Section 21 and 22 of the Postal Services Act, and certainly, s.148(3) of the Constitution confers no such power to the first defendant.

The defendants submission seem to highlight an anomaly or ambiguity between the definition of “Minister” in Clause 1.1 of the Constitution of Post PNG Limited and s.148(1) of the Constitution, especially, the words, “National Executive Council” appearing in Clause 1.1 as opposed to the word “Prime Minister” in Constitution s.148(1). I think it is the second and third defendants who submitted that the words “National Executive Council” in Clause 1.1 should be watered down to mean the Prime Minister. Whilst I appreciate that contention, that is not the real issue before this Court. This Court has not been asked to resolve the ambiguity between those two provisions and in any event, that would be a legislative function which the Court has no right to interfere with.

The first defendant’s submission in respect of allocating the roles and functions over the third plaintiff between the first defendant and the Minister for Communications is unmeritorious. While it is true that s.1 of the Postal Services Act does not define “Minister”, it is quite absurd to say that the Minister for Communications only has the functions specified in ss.21 and 22 of the Act, whilst the company comes under the political responsibility of the first defendant. That submission is misconceived and has no basis in law as there is no provision in the Postal Services Act which supports that argument.

I maintain that the political responsibilities of the Minister for Corporatisation and Privatisation are limited to the co-ordinating of all matters relating to corporatisation and privatisation of Post PNG Limited and other public bodies. I do not read the control of the Board of Directors of Post PNG Limited and other public enterprises as a matter that relates to corporatisation and privatisation. In my view, that is a misconception. That misconception has caused enormous financial losses to the taxpayers in terms of payments, entitlements to sacked managing directors, chairpersons and board members, and I will allude to this issue later.

For now, I consider that the first defendant, has no authority or power of control over Post PNG Limited therefore he cannot remove the Chairperson and members of the Board. I find that the first defendant’s responsibilities only relate to government’s corporatisation and privatisation program over Post PNG Limited and other public enterprises.

I therefore consider that the first defendant had no power to dismiss the first and second plaintiffs. He purported to exercise a power he did not have, therefore such exercise of power must be declared invalid, null and void.

The plaintiffs have advanced an alternative argument. They say that if the jurisdictional argument fails, they would rely on s.41 Constitution.

In view of my reasons in respect of the jurisdictional argument, I need not address the s.41 Constitution argument. However, even if I am considered wrong on the first argument, I am of the view that the first defendant’s decision to dismiss the first and second plaintiffs was not warranted by or is disproportionate to the circumstances of this case.

Briefly, the basis for the sacking of the first and second plaintiffs was gross financial mismanagement.

The affidavits of Peter Yaki Mission sworn on 15^th November 1999 and that of Moses Taian sworn on 26^th November, 1999 are pertinent to this argument.

At this juncture let me say that this Court is not bound to accept and rely on an affidavit, which the deponent has deposed to findings of facts and conclusions of law. A witness cannot depose to making findings of facts and law in his affidavit. Therefore, in respect of Peter Mission’s affidavit, the Court cannot accept his findings of facts and conclusions of law as evidence. Those materials are inadmissible and I disregard them. I can only accept those matters that are admissible.

There are two principal considerations under this argument. Firstly, the affidavit of Mission refers to the “Board”, implying the board members including the first and second plaintiffs. If it is correct that serious allegations of financial mismanagement were made against the Board, with Moses Taian as Chairman, why didn’t the first defendant, assuming he had power to dismiss, terminate the two board members, namely Rev. Samson Lowa and Andrew Terry at the same time he dismissed the first plaintiffs? It appears obvious that the first defendant had been very selective and this Court cannot accept the evidence of his counsel from the bar table.

There is no evidence as to why the entire board was not dismissed. There is no evidence as to why board member Rev. Samson Lowa was not dismissed along with the first and second plaintiffs. One would assume that if the board acted collectively, in any matter considered to be improper, the entire board would be liable to be dismissed. However, in this case, while Peter Mission refers to the “Board” in his affidavit, only four of the board members were dismissed. For example, in paragraph 6 of his affidavit, he said the board had made some bad management decision. Assuming the Minister has authority, why did he not sack the entire board?

Secondly, some of the more serious allegations, which relate to previous managing directors’ pay-outs, especially, Thomas Tulin and Passingan Taru, were issues that were not deliberated on by the first and second plaintiffs. The particular allegation of contracting East West Transport for a fee of K3 million was made by the previous management and the contract signed by the former Managing Director, Passingan Taru. Yet, Peter Mission alleged that the first and second plaintiffs were responsible for that transaction. That is, factually incorrect, thus it cannot be a basis for the board’s dismissal.

Moreover, the investigation by Ram Business Consultant completed on 16^th October, 1999; contains very serious allegations of improprieties against past managing directors and board members excluding the first and second plaintiffs herein. Those allegations are not leveled at the first and second plaintiffs therefore the first defendant could not have appropriately dismissed the first and second plaintiffs for the deeds of previous board members. It would be unreasonable in law in my view.

Furthermore, there is no evidence from any independent authority, eg. Auditor General or an accounting firm, that there is actual financial mismanagement by the first and second plaintiffs. It is my view, that an investigation confirming financial mismanagement by the first and second plaintiffs can lawfully justify the sacking of the entire board of Post PNG Limited. But there is no such evidence, so what is the basis for the removal of the first and second plaintiffs?

I have therefore reached the conclusion that the first defendant’s decision was an unlawful act pursuant to s.41 Constitution.

The financial implications of this case is such that the government cannot continue to pretend that all is well in public corporations and government business enterprises like Post PNG Limited. It must be the concern of employees of these companies and the majority of the ordinary citizens of this country that there appears to be continuous political interference with the operations of these corporations. It is public knowledge that POSF, Air Niugini, Harbours Board, to name only a few of these companies, have had their fair share of litigations in Court. The government must realise that the costs of political interference to the taxpayers are astronomical.

In the case of Post PNG Limited, there is evidence suggesting that over the past two years, approximately K3,000,000.00 has been paid out to sacked managing directors. Those payments are not budgeted expenditure of the company. There is indication that the most recent managing director could be paid K 779,000.00. Post PNG Limited made a loss of revenue in the sum of K 780,000.00 over the last 9 months. An overdraft facility of K 3,000,000.00 was created by the previous Chairman, Directors and Managing Director to accommodate unbudgeted expenditure incurred in paying out entitlements of managing directors in the last 2 ½ years. The company has been experiencing cashflow problems because of the pay outs to the previous managing directors. The constant changes at the Board and management levels have not assisted. The various Ministers concerned must be held accountable for the financial woes of Post PNG Limited.

There are other evidence relating to the financial operations of Post PNG Limited which must be of great concern to the staff and employees of the company and the general public. Can the company and the country afford continuous pay outs of astronomical entitlements to sacked managing directors? If the answer is no, and I am of the view, it is no, then the continuous political interference must stop. Simply, the political whim of the Minister for Corporatisation and Privatisation must stop for the good of the company and the country.

For all these reasons, I am of the view that the Minister for Corporatisation and Privatisation has no legal power to appoint or dismiss a director of the third plaintiff. I am also of the view that the Minister’s purported dismissal of the first and second plaintiffs was illegal, null and void, and of no effect.

Accordingly, I will grant the orders sought by the plaintiffs in their amended originating summons except paragraphs 6 and 16. Costs will follow the event.

Lawyer for Plaintiffs: Fiocco Posman & Kua

Lawyer for 1^st Defendant: Paul Mawa

Lawyer for 2^nd Defendant: Pato

Lawyer for 3^rd Defendant: Acting Solicitor General