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Manufacturers Council of Papua New Guinea Inc v Commisioner General, Internal Revenue Commission [2003] PGNC 55; N2441 (17 April 2003)

N2441

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE AT WAIGANI]

OS 160 of 2003

BETWEEN

MANUFACTURERS COUNCIL OF PAPUA NEW GUINEA INC

Plaintiff

AND

COMMISSIONER GENERAL
INTERNAL REVENUE COMMISSION
First Respondent

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Respondent

Waigani : Sevua, J
15th & 17th April 2003

DUTY – Imported Goods – Customs Act – Dispute as to duty payable – Section 176 – Payment under protest – Whether owner of goods can commence proceedings without complying with s.176 – Cause of action not yet arise – Notice of Motion and Originating Summons misconceived.

CUSTOMS ACT – Whether plaintiff is owner or importer of goods in question – Jurisdictional issue of locus standi – Plaintiff has no locus standi.

Cases cited:
Pacific Media Publication Pty Ltd v. Pius Saun and The State (1990) N919, 6th May 1990.
Madana Holdings Pty Ltd (t/a Coastal Water Taxis) v. Pius Saun and The State (1993) (unnumbered) 7th May 1993.
Savewell Stores Pty Ltd v. Commissioner of Customs, Director of Customs and The State (1998) N1669, 12th January 1998 (applied).

Counsel:
M. Wilson for Plaintiff
P. Bre for First Respondent
B. Bomai for Second Respondent

17th April 2003

SEVUA, J: The plaintiff is seeking various orders in its notice of motion in terms of the substantive relief pleaded in the originating summons filed on 4th April 2003.

However, in the cause of the plaintiff’s submissions, counsel, Mr Wilson, advised the Court that the plaintiff was only seeking the orders in paragraphs 5 and 6 of the notice of motion. These are:-

(5) An interim order that the first defendant is restrained from imposing import duty for current shipments and for past shipments of "PET Preforms" from Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and K.K. Kingston Limited and recovering duty allegedly outstanding until further order.

(6) An interim order that current shipments of "PET Preforms" shall be imported into Papua New Guinea free of duty and that the first defendant will not prevent delivery of such shipments to Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and K.K. Kingston Limited until further order by imposition of import duty or otherwise.

The defendants raised objections which the Court will briefly discuss a little later in this judgment. However, the Court did raise the issue of how the plaintiff should be prosecuting this matter on behalf of the three companies named in the originating summons and notice of motion namely Coca Cola Amatil Limited, Pacific Foam Limited and K.K. Kingston Limited, who have not been named as plaintiffs in these proceedings. The Court notes that one of the objections by the defendants is on locus standi and this issue, in my view, should first be addressed.

When I raised the issue of the plaintiff suing on behalf of the three companies (locus standi), Mr. Wilson referred to the affidavit of Wayne Golding sworn on 3rd April 2003, in particular paragraphs 5 to 8 inclusive and made submissions based on the evidence deposed to therein.

Counsel stressed that the plaintiff is a body corporate under the Associations Incorporation Act. I do not think the Court has any problem with the status of the plaintiff. Counsel further emphasized that the plaintiff’s By Laws stipulated inter alia that the plaintiff can prosecute or defend any suits etc before any court in its interest. However, the Court has some problems with that because the goods in question are not owned or imported by the plaintiff therefore in reality, the plaintiff does not have any financial interest in this matter in the event that damage or loss is suffered.

It is obvious that the plaintiff’s evidence does not disclose that any of its By Laws authorizes it to institute a class or representative action on behalf of its members. Mr. Wilson referred to paragraph 7 of Wayne Golding’s affidavit which alluded to a resolution of the plaintiff’s Board, which resolution is not in evidence. The Court is not obliged to do Mr. Wilson’s job in producing that evidence in an admissible form.

The defendant’s objections were that firstly, the plaintiff did not comply with s.176 of the Customs Act (the Act) and secondly, it is not the owner or importer of the goods the subject of this proceeding, thus it has no locus standi before the Court. Miss Bre, counsel for the first defendant submitted that this application is misconceived and has no basis in law as the proper cause of action is to comply with the requirements of s. 176 of the Act by paying the duty under protest prior to instituting this action and secondly, to apply for judicial review.

Section 176 of the Customs Act comes under Part XIV which deals with Disputes as to Duty and it regulates Payment under Protest. It states:-

(1) If a dispute arises as to –

• (a) the amount or rate of duty on any goods; or
• (b) the liability of any goods to duty under any Customs tariff,
  

the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods.

(2) A protest under Subsection (1) shall be made by writing on the entry of the goods the words "Paid under protest" and adding a statement of –

• (a) the grounds on which the protest is made; and
• (b) if the entry relates to more than one description of goods – the goods to which the protest applies,
  

followed by the signature of the owner of the goods or his agent.

(3) The sum paid under Subsection (1) shall, as against the owner of the goods, be deemed to be the amount of the proper duty unless the contrary is determined in proceedings brought under Subsection (4).

(4) Within the period prescribed by Subsection (5)(b), the owner of the goods may bring proceedings against the Collector in any court of competent jurisdiction for the recovery of the whole or part of the sum paid.

(5) Proceedings do not lie for the recovery of any sum paid to the Customs, as the duty payable in respect of any goods, unless –

• (a) the payment is made under protest under Subsection (1); and
• (b) the sum is paid as the duty payable under any Customs tariff, and the proceedings are commenced within six months after the date of payment.
  

(6) This section does not affect any rights or powers under Section 104.

In support of these submissions, Ms Bre cited three unreported decisions of the National Court – Pacific Media Publications Pty Ltd v. Pious Saun and The State, (1990) N919, 6th April 1990; Madana Holdings Pty Ltd (trading as Coastal Water Taxis) v. Pious Saun and The State, (1993) (unnumbered), 7th May 1993 and Savewell Stores Pty Ltd v. Commissioner of Customs, Director of Customs and The State, (1998) N1669, 12th January 1998. Counsel submitted that these cases support the defendants’ contention that the importers of the PET Preforms in this case, Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and KK Kingston Limited must pay the duty at 20% under protest before commencing any proceeding.

It was further submitted that the plaintiff is neither the importer nor the owner of the goods and as such has no standing to bring this action since s.176 refers to the owner of the goods. The defendants therefore urged the Court to dismiss the proceedings for these reasons.

The plaintiff’s counsel’s reply to those objections were that the plaintiff has authority and power to sue on behalf of its member companies, ie. the three named companies and secondly he would apply to have the three companies joined as parties to these proceedings. No ruling was made in that application because I consider that it would be proper to rule after the hearing this motion. In any event, given the "urgency" of this matter as projected by the plaintiff, the Court would have thought that the proceedings should have been instituted by Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and KK Kingston Limited.

The Court allowed the plaintiff to move its motion without ruling on the objections because of the ‘urgency’ emphasized by the plaintiff’s counsel.

Having heard submissions by all parties and considered the nature of the proceedings together with the orders sought by the plaintiff, it is my view that the jurisdictional issue of locus standi raised by the defendants must be addressed first. I therefore consider that whilst the plaintiff’s submissions in support of the interim injunction it seeks are crucial, the question of locus standi must be determined before the Court considers the arguments in support of the interim orders sought.

Paragraph 6 of the affidavit of Wayne Golding alludes to Clause 4.17 of the Rules and By Laws of the plaintiff, which provides:-

"To prosecute or defend any suits, applications and proceedings before any court or tribunal whatsoever as may be deemed necessary or expedient in the interest of the Council"

Counsel for the plaintiff emphasized this point. However, in my view, that By Law does not mean that the plaintiff could sue or be sued on behalf of its members. The last sentence of that clause clearly identifies the "Council", meaning the plaintiff, not its members. There is nothing in that clause which stipulates that the plaintiff can sue or be sued on behalf of its members, even though I consider that the plaintiff has an interest in this matter in the sense that the companies affected by the decision of the Regional Collector of Customs in Lae are its members.

Section 10 (1) of the Associations Incorporation Act 1996, clearly specify the effect of incorporation of the plaintiff just like any other Association incorporated under this Act. The Court appreciates that the plaintiff is a corporate body capable of suing and being sued in its corporate name, but there is nothing to suggest that the plaintiff can sue on behalf of its members.

Furthermore, there is no evidence of a proper authority before this Court that the plaintiff can sue in a representative capacity. The reference to a resolution passed by the plaintiffs Board in paragraph 7 of Wayne Golding’s affidavit is a mere assertion. The actual resolution has not been annexed to the affidavit despite the fact that Mr. Wilson said he had it somewhere in his file. If Mr. Wilson wants the Court to rely on that document he must produce it in the usual way and not merely seek to hand it up from the bar table.

I believe that the three companies whose interests are at stake are separate legal entities. The corporate nature of their names lead me to say this. In my view therefore, Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and KK Kingston Limited should have commenced this action, not the plaintiff. When asked who would suffer loss, if any, Mr Wilson replied that it would be the three companies. Why didn’t they initiate this proceeding as plaintiffs? They would be the ones who suffer, not the plaintiff, although it is appreciated that the plaintiff is obliged to protect the interests of its members. The plaintiff is not the party who will suffer loss or damage resulting from the detention of the PET Preforms that are held by Customs in Lae. It is the three companies that will suffer. Therefore in my view, they are the proper plaintiff’s in this action not the Manufacturer’s Council of Papua New Guinea.

The undertaking as to damages filed on 9th April 2003 was endorsed by the plaintiff and the three companies, yet the three companies are not the plaintiffs in these proceedings. If their rights or interests are affected by the decision of the first defendant then they should have been the plaintiffs in bringing this action. In my view, Mr Wilson cannot come to Court and apply to have the three companies joined as plaintiffs when they should have been originally named as the plaintiffs. He should have filed the proceedings in the name of these three companies in the first place. This becomes an issue of professional conduct and the style of litigation pursued by Mr Wilson and his firm, however that is not the issue before this Court. As the three companies are not the plaintiffs in these proceedings they cannot endorse the undertaking as to damages.

Mr Wilson has addressed the Court on the law on injunction and submitted that the plaintiff is entitled to the interim injunctive order sought. He also submitted that the Court has jurisdiction to grant the declarations sought in the originating summons and the notice of motion. I do not need to address this issue because it is not in dispute. Of course this Court has jurisdiction to grant orders in the nature of prerogative writs, however the party seeking to claim such remedy must satisfy the Court as to the requirements of obtaining such relief. Just because a party seeks an in junction or declaration it does not follow that he is automatically entitled to such a remedy. These are equitable remedies and the party seeking them must fulfil the equitable conditions entitling him to those relief.

In so far as the relief sought are concerned, the three companies, not the plaintiff may have a strong arguable case, however they are not the plaintiff in this case. Secondly, the balance of convenience does not totally favour them. The plaintiff says that the duty charged is excessive and besides, since it asserts that the three companies are exempted from paying duty under an agreement they are therefore not liable to pay duty. But what about the interest of the State and the country as a whole? The country and its people benefit from the duty that is imposed on imported goods therefore in that respect, one cannot say the balance of convenience favours the plaintiff, let alone the three companies whose interests are affected. The Court must stress once again that the plaintiff has no legal standing in this case.

Without delving much into the substance of the plaintiff’s arguments in favor of the injunction it sough, it is my view that the submissions by the defendants are correct in law and must be upheld. Whilst it is appreciated that there may be an agreement which governs the imposition of duty in respect of PET Preforms, I consider that first and foremost, the mode of proceedings is wrong because there is monetary claim involved which cannot be pleaded in a originating summons. Secondly, the Manufacturers Council of Papua New Guinea has no financial interest in this matter although it may have a duty to protect its members’ interest. It is not the owner or importer of the goods, the subject of this suit. It therefore has no legal standing to bring this action regardless of whether or not a resolution by its Board has been passed.

It is my opinion that these proceedings are premature and misconceived. In law, the owner of the goods in question ought to have paid the 20% duty imposed by the Regional Collector of Customs in Lae pursuant to s.176 (1) and (2) of the Act so that they can have the goods removed from Customs. The owners then can proceed to ss (4) to file legal proceedings to claim the duty they had paid. The correct mode then will be by writ of summons and there would be no problem claiming injunctions, declarations and the reimbursement of the duty that had been paid. Whether there is an agreement or not, I am of the view that s.176 of the Customs Act must be complied with before the owner of any goods exercise his right to sue. The right to sue does not arise until compliance with s.176 has taken place. My view is fortified by those expressed by the Deputy Chief Justice in Savewell Stores (supra) and I adopt and apply that case here.

A pages 4 and 5 of the judgment His Honour said:

"It is clear that a dispute has arisen within the meaning of s.176 of (sic) Act. This provision states that the owner of the goods may pay the duty determined by the Collector under protest. The amount so determined by the Collector is deemed to be the proper duty payable on the goods (s.176 (3)). The goods would be released upon payment of the amount determined by the collector.

However, the owner of goods has a cause of action to sue for any amount that is in excess of the proper amount payable under the law. This cause of action has not yet arisen because the plaintiff has not fulfilled the conditions set out under s.176 of the Act (see Smith v. Hudson (1921) SR (NSW) 557. It is clear from a brief survey of this provision that the owner of the goods must pay for the duty as determined by the Collector in order for the goods to be released. As the owner disputes the amount of duty determined by the Collector, he should pay under protest in accordance with the terms of s.176 and subsequently issue proceedings under s.176 (4) of the Act to recover any excess."

With respect to the plaintiff and its counsel, I consider that that is the law and that is the correct approach that Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and KK Kingston Limited ought to have taken. If it is correct that an agreement exists which exempts the importers of PET Preforms from paying duty then that issue will be determined after the conditions under s.176 of the Act have been satisfied. There is no reason to suggest that the payment of duty under protest extinguishes the rights of the owner of imported goods. The scheme of the legislation preserves the owner’s rights therefore it becomes imperative that the owners comply with s.176 of the Act. It is in their interest to do so in order to resolve the impasse otherwise the goods will remain under bond and may be subject to forfeiture and seizure.

It is therefore the judgment of this Court that the plaintiff has no locus standi and therefore cannot bring this action. The Court also considers that the proper plaintiffs in this case are Coca Cola Amatil (PNG) Limited, Pacific Foam Limited and KK Kingston Limited. The whole proceeding is misconceived and it is premature for the owner of the goods in question to initiate legal proceedings unless s.176 of the Customs Act is complied with.

For these reasons the Court orders that the notice of motion and the originating summons are dismissed with costs.
___________________________________________________________________________
Lawyer for Plaintiff : Warner Shand
Lawyer for Defendants : Pauline Bre