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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS 323 OF 2002
BETWEEN:
NATIONAL PROVIDENT FUND BOARD OF TRUSTEES
Plaintiff
AND:
SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT
Defendant
Waigani: Davani, .J
2005: 29 December
2006: 12 January, 21 March
PRACTICE AND PROCEDURE – Stated case – application arising from enforcement proceedings against Provincial Government – O. 10 R. 20 and R. 21 of National Court Rules
ENFORCEMENT – Provincial Government – executed agreement – loan secured by security - judgment debt – enforcement – waiver of statutory immunity by agreement – whether judgment can be enforced against provincial government – s.13 of Claims By and Against State Act
Cases cited:
Halsbury's Laws (4th Ed)
Jay Mingo P/L v Steamships [1993] PNGLR 129
SCR No. 1 of 1998; reservation pursuant to section 15 of the Supreme Court Act (2001) SC672
Words and phrases Legally Defined – Vol. 4; R - Z
Counsel:
P. Kuman, for the Plaintiff
No appearance by the Defendant
21 March, 2006
DECISION
1. DAVANI J: This matter comes before me as a 'stated case' for decision, such referral being made pursuant to O.10 r.20 and r.21 of the National Court Rules ('NCR'). These provisions read;
"20. Interpretation of Division 4
In this Division "question" includes any question or issue in any proceedings, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise.
21.Order for decision
The Court may make orders for
(a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and
(b) the statement of a case and the question for decision."
Background
2. Before I discuss the merits of this application, I set out below the background from which this application emanates.
3. In August, 1998, the Southern Highlands Provincial Government ('SHPG') drew down K1 million, advanced to it by the National Provident Fund ('Nasfund'). This was done as a result of a loan Agreement with the then SHPG when it agreed to borrow K17 million for the construction and maintenance of roads in the Southern Highlands Province. On 6 August, 2001, the SHPG and Nasfund entered into a "Non-Revolving Multiple Advance Fixed Rate Loan Agreement" for the SHPG to draw down K17 million. The plaintiff terminated this agreement on 11 March, 2001 because the SHPG defaulted by not repaying the K1 million, as agreed.
4. As security for the loan, SHPG gave a Charge over its Conditional Grant and Debt Service Trust Account. The Trust Account does not exist any more but the Charge over the Conditional Grants is still valid and enforceable.
5. Thereafter, Nasfund filed these proceedings on 18 March, 2002, seeking recovery of the outstanding debt. On the 21 July, 2004, the National Court ordered the SHPG to pay to Nasfund the sum of K1,223, 691.77 together with interest at 8 percent per annum from the date of issue of the Writ of Summons until settlement of the judgement debt. Interest is currently accruing at a daily rate of K268.21.
6. Since then, the Nasfund has filed enforcement proceedings but which have been adjourned pending deliberation by this court on the O.10 r.20 and r. 21 referral.
Application
7. Upon hearing Mr Kuman on an application for oral examination of the SHPG's Officers namely the Governor and the Administrator, several issues arose in relation to enforcement of judgements against Provincial Governments, more particularly s.13 of the Claims By and Against the State Act ('CBASA') and Supreme Court decision SCR No. 1 of 1998; reservation pursuant to section 15 of the Supreme Court Act (2001) dated 8 November 2001, SC672. (The 'Reservation')
8. Section 13 of the CBASA states;
(1) "In any suit, execution or attachment, or process in the nature of execution or attachment, may not be issued against the property or revenue of the State.
(2) Where a judgment is given against the State, the registrar, clerk or other proper officer of the Court by which the judgment is given shall issue a certificate in Form 1 to the party in whose favour the judgment is given." (my emphasis)
9. The Reservation on which presided Amet CJ, Los and Sheehan JJ, ruled that the term "the State" also includes "Provincial Governments" for purposes of enforcement under Section 13(1) of the Claims By and Against the State Act 1996. This decision effectively meant that no "attachment or execution" can be levied against the assets, properties, funds etc of Provincial Governments.
10. This decision effectively gave immunity to Provincial Governments against the usual enforcement/execution proceedings under the National Court Rules such as issue of writs, attachment of debts/garnishment, charging orders etc.
11. After deciding that the matter should be dealt with as a stated case under O.10 r. 21 (b) of the NCR, the question for decision being "whether parties can by private agreement waive statutory immunity", other issues now arise that relate to the stated case. These are;
(a) Whether the charge given over the 'Conditional Grants' by SHPG is capable of being attached or levied against?
(b) If not, then can NPF, based on the Facility Agreement, resort to other enforcement proceedings against SHPG based on the waiver of immunity given by SHPG?
12. In support of that application, Mr Kuman filed;
13. Prior to hearing the application, I directed that Mr Kuman, lawyer for the plaintiff, inform the defendants of the date for the hearing of the application. This Mr Kuman did. He filed an affidavit deposing to his service of the application upon the defendant's representatives. I was satisfied that the defendants had been served.
14. At the date of the hearing, the defendants officers did not appear. Because I was satisfied that service was properly effected within good time, I ruled that the application would be heard ex parte. I noted also the history of the defendants officers lack of interest in the proceedings, which of course resulted in default judgement being taken out against them. And even so, they still did not attempt to either settle or contact the plaintiff's lawyers. The applications for enforcement of the judgement debt also fell on deaf ears because the defendants showed no interest.
15. Before embarking on a consideration of the above issues, the court should also appraise itself of the forms of security the plaintiff extended to the SHPG and which the parties executed before the loan monies were extended to the SHPG. The court also notes the waiver provisions in the Facility agreement and which will be the subject of my discussions, below.
16. As security for the facility agreement, SHPG gave a charge over its 'Conditional Grants' and 'Debt Service Trust Account'. The charge was executed on 6 August 2001.
17. The waiver provisions in the facility agreement are set out in Clauses 13.6 (b) and 13.7. These two provisions read;
"13. Waiver of immunity
(a) ...
(b) To the extent that the Borrower may claim for itself or its assets immunity from such execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed), the Borrower (SHPG) hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the fullest extent permitted by law." (my emphasis)
"13.17 Statutes
So far as is lawful, the provisions of all statutes and regulations at any time operating directly or indirectly to:-
(a) lesson, modify or affect the Borrower's obligations in favour of the lender; or
(b) stay, postpone, or otherwise prevent or prejudicially affect the exercise of all or any of the Lender's rights, powers and remedies conferred by this Agreement; are negatived and excluded from and will not apply to this Agreement. All powers, rights and remedies conferred on the Lender or any receiver by law, in equity or by any statute will be in addition to those contained in this Agreement and will not curtail, diminish or qualify any of them." (my emphasis)
18. I discuss these waiver provisions in detail, later below.
19. As to the nature of these securities, a 'conditional grant' is not defined in the Facility Agreement. However, "Charge" is defined in Clause 1.1 of the Facility Agreement as an instrument, in form and substance satisfactory to NPF under which SHPG charges to NPF all sums from time to time payable to SHPG pursuant to Section 93 (1) (a) of the Organic Law on Provincial Government and Local Level Governments ('Organic Law') as security.
20. The Charge, given by SHPG on 6 August, 1998 in favour of NPF where "Conditional Grants" as defined under Clause 1.2 being "Grants made to the Borrower by the State pursuant to the provisions of Section 93(1) (a) of the Organic Law on Provincial Governments and Local level Governments."
21. Section 93 of the Organic Law deals with "Development Grants" and subsection (1) (a) deals specifically with "Provincial Infrastructure Development Grants" given to each Provincial Government in each fiscal year (annually) by the National Government which grant is calculated based on a formula under Schedule 3.
22. Schedule 3.2 provides for the "purpose" of the grant as follows;
"The grant shall be applied by a Provincial Government according to the priorities of a province in the development of administrative and physical infrastructure within the province according to the following:-
(a) 50% to social services and administrative infrastructure; and
(b) 50% to land and other physical infrastructure development."
23. Under the Facility Agreement the "Debt Service Trust Account" is defined to mean an "impersonal deposit account maintained at the Port Moresby Branch of PNGBC as No. 253287 under the name or style of "Southern Highlands Four Roads Project Debt Service Trust Account" into which the borrower (SHPG) shall pay a specific sum each calendar month for the purpose of paying to the Lender all fees and interest in respect of the Advance and repaying to the Lender (NPF) all fees and interests in respect of the Advance and repaying the Advance to the Lender (NPF)..."
24. Mr Kuman submits that both the Facility Agreement and the terms of the Charge are intended to ensure that the SHPG allocates funding from Conditional Grants under Section 93 (1) of the Organic Law to the Debt Service Trust Account after which the funds will be applied towards service of the loan from time to time, as agreed.
25. The pressing issue before this court is whether a party or parties can, by private agreement, waive statutory immunity. Section 13 of the CBASA is the provision that states in no uncertain terms that any process in the nature of execution or attachment may not be issued against the property or revenue of the State (my emphasis). This provision is discretionary, although the Reservation has put this issue to rest. The Reservation dealt with enforcement of a judgement by a person against a Provincial government. It was a simple clear situation of a provincial government owing monies to an individual for services rendered. In this case, parties entered into a complex commercial arrangement governed by several agreements, which I have discussed above. Which ultimately leads to my consideration of the two other issues that arise from the question for the 'stated case' and which I again set out below, and will deal with separately.
1. Whether parties can by private agreement waive statutory immunity?
26. Clauses 13.6 and 13.17 of the Facility Agreement are clear. Clause 13.6 states in no uncertain terms that the SHPG will waive any immunity from "suit, execution, attachment...," that may be extended to it. Clause 13.17 expressly states that any "...statutes and regulations..." that may "...prevent or prejudicially affect... the lenders rights, powers and obligations conferred by this agreement are negatived ...excluded from and will not apply..." It expressly states further that any other "...powers, rights and remedies..." available to the Nasfund "...by law, in equity or by any statute..." is in addition to those contained in the agreement and "...will not curtail, diminish or qualify any of them". In my view, these provisions are clear, that notwithstanding the immunity available to the SHPG under s.13 of the CBASA, that the SHPG cannot claim them because it has waived that privilege by an agreement.
27. Furthermore, the nature of the Facility Agreement is such that it is executed under seal by the Nasfund and the SHPG. It in effect, is a Contract, which has been breached. The validity of the Contract or in this case, the Facility agreement, is not challenged by the SHPG or is not in issue. Therefore, the defendant SHPG has breached obligations it has to the Nasfund, as provided under the "Debt Service Trust Account" which is an "impersonal deposit account maintained at the Port Moresby Branch of PNGBC as No. 253287 under the name or style of "Southern Highlands Four Roads Project Debt Service Trust Account" into which the borrower (SHPG) shall pay a specific sum each calendar month for the purposes of paying to the lender all fees and interest in respect of the Advance and repaying to the Lender (NPF) all fees and interests in respect of the Advance and repaying the Advance to the Lender (NPF) on or before the termination date". (see definition of "Debt Service Trust Account" as defined in Facility Agreement).
28. The defendants role is to ensure that there was or/is funding available from the Conditional grants for the plaintiff Nasfund to draw from. But this has not occurred. The SHPG, again, has breached the terms of the Contract.
29. It is not disputed that the principal source of funds for the Provincial Governments is through the various grants under the Constitution from the National Government which it can control. In this case, the appropriate grant the subject of the loan agreement is the Provincial Infrastructure Development Grant under section 93(1)(a) of the Organic Law on Provincial and Local Level Government (OLPLLG). This is confirmed by Thaddeus Kambanei's letter to Mr Kuman of 26 November, 2004, which is attached as an annexure to Peter Kuman's affidavit sworn on 10 June 2005.
30. In that letter, Mr Kambanei, in his capacity as Secretary for Treasury, explains the procedure involved in the release of funds to Provincial Governments. He states that the process dictates that upon release of the Finance and Treasury Ministers warrant, Warrant Authorities are then issued by the Secretary for Treasury pursuant to s. 29(1) of the Public Finance Management Act ('PFMA'). He states that the Warrant Authorities authorize expenditure of monies from the Consolidated Revenue Fund ('CRF') for the purpose for which those monies are appropriated. The Warrant Authority constitutes the authorization to the various implementing agencies to commit and spend funds out of the CRF. He states further that the Warrant Authority would be issued to the SHPG to authorize it to draw funds from the CRF for purposes of expenditure under each activity and project. And the PFMA only authorizes the Secretary for Treasury to release Warrant Authorities to those agencies specifically mentioned in the Schedule under section 2 of the Appropriation Act for Recurrent Expenditure 2004 ('Appropriation Act'). Mr Kambanei then explained that neither the PFMA nor the Appropriation Act authorizes the Secretary for Treasury to issue Warrants of Authority directly to other parties not named in the Schedule attached to the Appropriation Act to draw directly from the CRF. He submits that this may be because the funds withheld in the CRF are public funds and are to be used following proper budgetary processes which are sanctioned by Parliament. He states that whatever grants that are due to the SHPG will be given directly to the SHPG which can appropriately deal with it according to its items of expenditure under each activity and project. He recommended that the Nasfund liaise directly with the SHPG's Governor and Provincial Administrator to set aside funds to settle the outstanding debt. But the evidence before me is that despite the numerous correspondence from Nasfund's lawyers to the SHPG requesting payment, that it has never responded to these correspondence, hence this application.
31. Mr Kuman has provided extensive detailed submissions on the waiver issue and the court acknowledges that assistance. I have adopted a greater part of his submissions because they are very relevant on the issue of waiver.
32. This court is a court of unlimited jurisdiction (s.166 of Constitution) and has inherent powers to do justice in the circumstances of a case (s.155(4) of Constitution). It must be seen to be doing justice. In a case of this nature where statute expressly forbids execution or enforcement process against the State, there has to be exceptions. If not provided for in the Statute concerned or in any other law, then the court must consider the common law to assist it in the development of the underlying law. (see schedule 2.3 of Constitution)
33. Mr Kuman referred me to various Constitutional and Statutory immunity granted to persons and entities and officers of those entities in our jurisdiction and legal frame work. He referred the court to s.344 Part XIV of the Constitution, the provision on immunity from prosecution, given to persons involved in the Bougainville conflict. Article 50 of the Asia Development Bank Act Chap. 82 gives immunity to the bank from "every form of legal process". Articles 31 and 32, Schedule 1 of the Diplomatic and Consular Privileges & Immunities Act Chap. 83, provides for immunity for diplomatic and Consular staff. Immunity is also granted by Statute to other organizations such as the IMF (see s. 3 Schedule 1, Article IX) International Financial Organization Act (Chap. 86), International Centre for Disputes Settlement (see s. 6, Article 20, Investment Disputes Conventions Act Chap. 346), various United Nations organizations such as WHO, UNDP (see Chap. 88) and the United Nations & Specialized agencies (Privileges & Immunities) Act South Pacific Commission (see s. 10 International Organizations (Privileges & Immunities) Regulations Chap.87).
34. I have heard also that there are statues that specifically provide that immunity can be waived on conditions e.g. by terms of a contract (see Schedule 1, section 3 International Financial Organizations Act chap. 86 or generally (see s. 6, Article 20, Investments Disputes Convention Act Chap. 346).
35. Article 50, s. 1 of the Asia Development Bank Act Chap. 82 expressly provides for immunity from prosecution. It states;
"1. The Bank shall enjoy immunity from every form of legal process, except in cases arising out of or in connexion with exercise of its powers to borrow money, to guarantee obligation, or to buy and sell or underwrite the sale of securities, in which cases, actions may be brought against the Bank in a court of competent jurisdiction in the territory of a country in which the Bank has its principal or a branch office, or has appointed an agent for the purpose of accepting service or notice of process or has issued or guaranteed securities.
...
36. Again, s.13 of the CBASA, unlike the other legislations that I refer to above, is not mandatory. And I have seen that clauses 13.6(b) and 13.7, the waiver provisions in the facility agreement state unequivocally that the SHPG will not seek protection from execution and/or attachment under any legislation.
37. And to understand the doctrine of Waiver, Mr Kuman referred the Court to its definition as provided in the text "Words and Phrases Legally Defined – Volume 4; R – Z (3rd Ed) Butterworth's and as adopted from 16 Halsbury's Laws (4th Ed) para. 1471 and which reads;
"Waiver is the abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted, and is either express or implied from conduct. It may sometimes resemble a form of election, and sometimes be based on ordinary principles of estoppel, although, unlike estoppel, waiver must always be an intentional act with knowledge. A person who is entitled to rely on a stipulation, existing for his benefit alone, in a contract or of a statutory provision may waive it, allow the contract or transaction to proceed as though the stipulation or provision did not exist. Waiver of this kind depends upon consent, and the fact that the other party has acted upon it is sufficient consideration. Where the waiver is not express it may be implied from conduct which is inconsistent with the continuance of the right, without need for writing...."
38. The SHPG has indeed, by consent, waived the immunity available to it under s. 13 of the CBASA. This is because, by that definition, the law on waiver can be summarized as follows;
(a) "a waiver may be express or implied;
(b) a waiver is an abandonment of a legal, equitable or statutory, right;
(c) a waiver must be given by consent and must be an intentional act done with knowledge by the person giving it;
(d) a waiver given must come from an existing right vested in and for the sole benefit of the person giving or consenting to the waiver;
(e) the other party in whose favour the waiver is given must rely on the waiver and such reliance must materially affect his/her position; and
(f) a waiver can be withdrawn or terminated on reasonable notice unless the such termination would cause injustice to the other party."
39. The SHPG has foregone that right or benefit or privilege. According to 16 Halsbury's Laws (4th Ed), and generally, under the Common Law, it is recognized that a party to whose benefit a right exists, either in Contract or by Statute, can forgo that right or benefit impliedly or explicitly. And under the general principles of ordinary Contract Law, a party is bound by the terms and conditions of the contract entered into. In equity, by way of estoppel by deed, neither party will be allowed to renege. His Honour Sevua .J in Jay Mingo P/L v Steamships [1995] PNGLR 129 at pg. 133 said of estoppel by deed;
"There are various types of estoppel. There is estoppel by deed, which in any action on a Deed, prevents a party to it from disputing any distinct allegations of fact which he has made on it."
40. No doubt, immunity or in this case, statutory immunity can be waived and the SHPG did that by Contract, in this case the Facility Agreement. It cannot and should not claim that immunity.
Conclusion
41. This then takes me to the two (2) other questions posed to this court that I referred to earlier. These are;
(a) whether the charge given over the 'Conditional Grants' by SHPG is capable of being attached or levied against?
The answer to this is 'yes'. But to be done directly with the SHPG (re see Secretary for Treasury's advice).
(b) If not, then can the NPF, based on the Facility Agreement, resort to other enforcement proceedings against SHPG based on the waiver of immunity given by SHPG?
Because the answer to question (a) is yes, that the NPF can use other enforcement procedures available to it under the law, to seek payment of the outstanding judgement debt, which includes interests and costs.
As to the costs of this application, the SHPG shall pay these costs, to be taxed if not agreed.
________________________________
Posman Kua Aisi lawyers: Lawyer for the Plaintiff
No representation for the Defendant
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