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Bougainville Copper Ltd v Commissioner General of Internal Revenue [2008] PGNC 80; N3331 (10 January 2008)

N3331

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CIA 6 OF 2005

BETWEEN:

BOUGAINVILLE COPPER LIMITED
Appellant

AND:

COMMISSIONER GENERAL OF INTERNAL REVENUE
AND CHIEF COLLECTOR OF TAXES
Respondent

Waigani: Hartshorn, J.
2007: 24 September
2008: 10 January

Income Tax Act s.247(b) - Nature of Appeal - National Court Rules Order 18 Rules 15 and 16 - Application to strike out Appeal Grounds - Inherent Jurisdiction – Res Judicata - Issue Estoppel

Facts:

The Appellant (BCL) was assessed to pay tax under the Income Tax Act. BCL objected to the assessments to the Respondent (Commissioner). The Commissioner allowed the objection in part. BCL has appealed to this Court against the Commissioner’s decision. BCL in this proceeding seeks orders for the Commissioner to provide to it certain documentation. The Commissioner opposes the motion and has also applied to have certain grounds in BCL’s notice of appeal struck out.

Held:

1. No substantive determination has been made by the Supreme Court in CCT/BCL, SC853 and as such issues raised in appeal grounds 3.5, 3.6.1, 3.6.2, 3.6.3, and 3.7 do not constitute res judicata or issue estoppel.

2. Appeal ground 3.4 is not struck out as ss.231 and 232 of the Income Tax Act are not obligatory. There may be an estoppel argument in such circumstances.

3. Consequently, the orders sought by the respondent in its notice of motion for appeal grounds 3.4, 3.5, 3.6.1, 3.6.2, 3.6.3 and 3.6.7 are refused.

Cases Cited:

Papua New Guinea Cases

Herman Gawi v. PNG Ready Mixed Concrete (1983) unnumbered, unreported
Global Marine Australia Inc v. Chief Collector of Taxes [1986] PNGLR 123
Barlow Industries v. Chief Collector of Taxes [1987] PNGLR 386
David Toll v. Kibi Kara & Ors (No.2) [1990] PNGLR 201
PNG Forest Products v. Independent State of Papua New Guinea [1992] PNGLR 85
Tolom Abai v. The State (1995) N1402
Titi Christian v. Rabbie Namaliu (1996) unreported OS No. 2 of 1995 18.7.06
PNG Forest Authority v. Securimax Security Pty Ltd (2003) SC717
Jack Livinai Patterson v. Lawyers Statutory Committee (2005) SC822,
Lerro v. Stagg & Ors (2005) N2818
Chief Collector of Taxes v. Bougainville Copper Ltd and Bougainville Copper Ltd v. Chief Collector of Taxes (2007) SC853

Overseas cases

Mills v. Cooper [1967] 2 QB 459
Commonwealth of Australia v. Burns [1971] VicRp 100; (1971) VR 825
Builders Licensing Board v. Sperway Constructions (Sydney) Pty Ltd [1976] HCA 62; (1976) 135 CLR 616
Reg v. Humphreys [1977] A.C. 1
Considine v. Citicorp Aust Ltd (1981) 1 NSWLR 657
Hunter v. Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] A.C. 529
Arnold v. National Westminster Bank PLC [1991] 2 A.C. 93
Syngenta Crop Protection Pty Ltd v. Commissioner of Taxation [2005] FCA 1646
WR Carpenter Holdings Pty Ltd v. Commission of Taxation [2007] FCA 103

References

The Doctrine of Res Judicata by Spencer-Bower and Turner 1969 2nd ed
Cross on Evidence, 7th Australian ed, J.D. Heydon (2004)

Counsel:

E.G. Andersen and J. Holingu, for the Appellant
N.M. Cooke QC and M.M. Varitimos, for the Respondent

10 January, 2008

1. HARTSHORN, J: BCL was assessed to pay tax under the Income Tax Act. BCL objected to the assessments to the Commissioner. The Commissioner allowed the objection in part. BCL has appealed to this Court against the Commissioner’s decision. BCL now seeks orders for the Commissioner to provide to it certain documentation. The Commissioner opposes the motion and has also applied to have certain grounds in BCL’s notice of appeal struck out.

I will address BCL’s motion first.

BCL’S MOTION

2. For the determination of BCL’s motion it is necessary to consider;

a) the nature of an appeal to this Court from a decision of the Commissioner on an objection to an assessment.

b) the process for putting material before this Court on such an appeal.

3. BCL’s appeal was commenced under s. 247(b) Income Tax Act. Section 247 is as follows:

247. Application for review or appeal.

A taxpayer dissatisfied with the decision may, within 60 days after service of the notice either-

(a) make an application to the Review Tribunal for Review in the prescribed form; or

(b) file an appeal to the National Court in accordance with the National Court Rules.

4. The ‘notice’ referred to in s. 247 is a written notice pursuant to s. 246 Income Tax Act of the Commissioner of his decision to disallow or partially allow an objection by a taxpayer.

5. Section 247 has been in force in its current form since 1 January 2000. Before then s.247 was as follows:

A taxpayer dissatisfied with the decision may, within 60 days after service of the notice, in writing request the Chief Collector either-

(a) to refer the decision to the Review Tribunal for review, or

(b) to treat his objection as an appeal and to forward it to the National Court.

6. The National Court Rules Order 18 Division 2 deal with taxation appeals. These rules were in force before the amendment to s. 247 on 1 January 2000 and have not been amended since. Order 18 Rules 15-16 are as follows:

15. Appeals from disallowance of objection.

When the Commissioner General of Internal Revenue has been requested under the Act to forward an objection to the Court he shall-

(a) forward the notice of the objection to the Court within the time prescribed by law, or if no time has been so prescribed, then within 30 days after the date of the receipt by him of the request, or within such further time as is agreed between him and the taxpayer; and

(b) within seven days of the date on which he has forwarded or referred the notice of objection - give to the taxpayer written notice that the objection has been forwarded.

16. Documents to accompany notice of objection.

(1) The Commissioner General of Internal Revenue shall also forward, together with the notice of objection, to the proper officer of the Court-

(a) the assessment in respect of which the objection was made (including any amendment of the assessment); and

(b) the notice of the disallowance of the objection; and

(c) the request for the forwarding or reference of the objection to the Court; and

(d) any other documents in his possession or power which are necessary for the hearing of the appeal.

(2) If a dispute arises concerning the documents to be forwarded or as to the genuineness or the correctness of a copy of the documents, the Court may, on application made by a party to the appeal by motion, make such order as it thinks fit with respect to the dispute.

7. It is apparent from reading these Rules that they provide a process for the Chief Collector to forward an existing objection to the National Court in the manner prescribed by s. 247(b) before 1 January 2000.

8. The Commissioner contends that the effect of the amendment to s. 247 of the Income Tax Act is that the National Court Rules in Order 18 Division 2 are irrelevant and inapplicable to the current appeal as they were not amended at the time or subsequently to s. 247 of the Income Tax Act being amended, that no longer is the Chief Collector requested by a taxpayer to treat his objections as an appeal and that it is now clear that the taxpayer must institute any proceedings by filing a Notice of Appeal.

9. It is apparent that as a result of the amendment to s. 247 a taxpayer dissatisfied with a decision of the Chief Collector is responsible for either making an application to the Review Tribunal for a Review or filing an appeal to the National Court instead of previously requesting the Chief Collector to do so for him.

10. As the taxpayer now does this, the amendment provides that a review shall be in the prescribed form and an appeal shall be in accordance with the National Court Rules. All that has altered as a result of the amendment is how a review or appeal is commenced under s. 247.

11. The National Court Rules are made pursuant to s. 184 of the Constitution. Section 184(4) provides that if an Act of the Parliament comes into force that is inconsistent with a rule of court, the rule ceases to have effect to the extent of the inconsistency.

12. The amendment to s.247 is silent as to how an appeal is to be heard, the nature of an appeal, or what material is to be considered at an appeal. The only inconsistencies are those parts of the Rules concerning the Chief Collector being requested to treat the objection as an appeal and to forward it to the National Court, instead of the taxpayer commencing the appeal.

13. The National Court Rules should be read taking this into account; that is disregarding only those parts of the Rules that are concerned with the Commissioner being ‘requested’ and for him to ‘forward’ pursuant to s.247 before that section was amended.

14. The effect of the s.247 amendment in my view, is not to render Order 18 Division 2 National Court Rules irrelevant and inapplicable, but to cause those parts of Order 18 Rules 15-17 that relate to the Chief Collector being ‘requested’ and his obligation to ‘forward’ the objection to the National Court, to cease to have effect.

15. As the amendment to s. 247 of the Act only affects how an appeal is commenced, and those parts of Order 18 Rule 15-17 that are not inconsistent continue in effect, the nature of such an appeal, what material is considered and how an appeal is to be conducted, to my mind have not altered.

16. Section 185 of the Constitution provides that:

If in the circumstances of a particular case before a court no provision, or no adequate provision, is made in respect of a matter of practice or procedure, the court shall give ad hoc directions to remedy the lack or inadequacy.

17. Although it is not necessary to give such ad hoc directions in this instance, in the absence of any legislative amendment, some suggested directions that could be given in future appeals under s. 247(b) Income Tax Act and the parts of Order 18 Rules 15-16 National Court Rules that continue to have effect, are:

a) A Notice of Appeal shall be filed within 60 days of the Commissioner’s decision. The form of the Notice of Appeal shall be as described in O 18 r 19(1) subject to –

i) "Review Tribunal" being replaced with "Chief Collector" and

ii) the deletion of the requirement for specification of question or questions of law involved.

b) The Notice of Appeal shall be served on the Commissioner within the 60 days and an affidavit of service is to be filed.

c) Within 30 days of service of the Notice of Appeal upon him or within such extended time as agreed between him and the taxpayer, the Commissioner must forward certified copies of the documents enumerated in O 18 r 16 (1), to the Registrar of the National Court and shall also furnish a set of the same documents to the taxpayer.

d) Further conduct of the appeal in the National Court is to be in accordance with the procedure in the National Court Appeal Rules 2005.

Nature of taxation appeal

18. There do not appear to be any reported Papua New Guinea case authorities on s.247(b) of the Income Tax Act. There are two (2) cases reported concerning appeals under s.255 Income Tax Act after the National Court Rules came into force in July 1983. An appeal under s.255 Income Tax Act is from a Review Tribunal decision that involves a question of law. The processes set out in Order 18 Rules 18-23 for the collation and referral to the National Court of material to be used in a s.255 appeal is similar to that set out in Order 18 Rules 16-17 for a s.247(b) appeal.

19. In Global Marine Australia Inc v. Chief Collector of Taxes [1986] PNGLR 123, Bredmeyer J. noted that all evidentiary material that had been tendered to the Review Tribunal had been tendered to him by consent and no new material was put before him. Also the same counsel who appeared at the Tribunal appeared before him and re-argued the same points. It is not apparent that there was any contest as to the proper process to be followed on such an appeal.

20. In a later decision of Bredmeyer J. in Barlow Industries v. Chief Collector of Taxes [1987] PNGLR 386, an appeal under s.255, His Honour stated that such an appeal differs from most other appeals heard by the National Court, that the appeal is de novo and the evidence is not limited to that placed before the Tribunal.

21. Again there does not appear to have been any contest as to the process to be followed. Given that both cases appear to have followed different processes in respect of which there was no contest, to my mind, they do not give any guidance as to the proper process to be followed.

22. The Commissioner contends that;

a) s.250 Income Tax Act is as follows;

Upon a reference or appeal-

a) the taxpayer is limited to the grounds stated in his objection; and

b) the burden of proving that the assessment is excessive lies upon the taxpayer.

b) s. 14ZZO of the Australian Taxation Administration Act 1953 (Cth) also provides that the appellant has the burden of proving that an assessment is excessive. Section 14ZZ of that Act is relevantly the same as s.247 Income Tax Act (PNG).

c) In the Federal Court of Australia case of Syngenta Crop Protection Pty Ltd v. Commissioner of Taxation [2005] FCA 1646, Gyles J. said at paragraph 10;

The appeal provided by s 14ZZ and fleshed out in s.14ZZO is a full appeal. It is not limited to what might be called judicial review grounds. The burden is on the applicants in the present case to prove that the assessments are excessive.

d) The Syngenta case (supra) was approved by the Full Court of the Federal Court in WR Carpenter Holdings Pty Ltd v. Commission of Taxation [2007] FCA 103.

e) Consequently an appeal under s.247(b) Income Tax Act should be a full appeal and not be limited to ‘judicial review grounds’.

23. Counsel for BCL cited the decision of Kapi DCJ (as he then was) in David Toll v. Kibi Kara & Ors (No.2) [1990] PNGLR 201 which was subsequently cited with approval in the Supreme Court in Jack Livinai Patterson v. Lawyers Statutory Committee (2005) SC822, as the leading case in Papua New Guinea on the nature of appeals to the National Court, although the case did not concern a tax appeal under the Income Tax Act.

24. The Toll Case (supra) was an appeal on penalty to the National Court by a lawyer who had previously been found guilty of improper conduct by the Lawyers Statutory Committee. When the appeal came before the National Court the parties argued as a preliminary point the specific question whether the appeal under that Act was a hearing de novo or an appeal by way of reconsideration of the material before the lower tribunal. His Honour made a number of relevant observations.

25. Quoting in part from the decision of Mason J. in Builders Licensing Board v. Sperway Constructions (Sydney) Pty Ltd [1976] HCA 62; (1976) 135 CLR 616 at 621 His Honour said:

In my view, these are the relevant considerations in determining whether a rehearing takes on one form or the other. Mason J. then goes on, and in my view, this is the determinant factor in considering this issue:

" But in the end the answer will depend on an examination of the legislative provisions rather than upon an endeavour to classify the administrative authority as one which is entrusted with an executive or quasi-judicial function, classifications which are too general to be of decisive assistance. Primarily it is a question of elucidating the legislative intent, a question which in the circumstances of this case is not greatly illuminated by the Delphic utterance that the appeal is by way of a rehearing."

Where the legislation simply uses the word "rehearing", the matters set out in the judgment of Mason J. would be the relevant considerations in determining the issue. However, as he pointed out, these matters in themselves are not definite indicators and the important thing is to elucidate the real intention of the Parliament. It would appear that in considering the matters discussed by Mason J., there is a strong argument supporting the position that a rehearing in the National Court should be based on the materials that were available before the Committee hearing. However, I need to interpret s.58(5), which would give the real intention of the Parliament regarding the nature of the rehearing before the National Court.

Where the Parliament intends that an appeal is by way of rehearing on the evidence given in the lower tribunal from which the appeal is lodged, the record of the hearing of the decision by the lower tribunal is provided to the appellate court for the purposes of hearing. The need to do that is inherent in the nature of the appeal. How this record is prepared and is brought to the appellate court, are set out in the rules of practice and procedure. For example, in the case of an appeal from the Local Court to the National Court, O18, r 6 and r 7 of the National Court Rules deal with the manner in which the record, the decision, and other relevant documents are to be forwarded to the Registrar for the purposes of the hearing. Likewise, when there is an appeal from a review tribunal under the Income Tax Act the records of the review tribunal forwarded to the Registrar of the purposes of the hearing under O 18, r 21 of the National Court Rules. Similarly, where there is an appeal from the National Court to the Supreme Court and the appeal is by way of rehearing under s.6 of the Supreme Court Act (Ch No 37), the Supreme Court Rules deal with questions of the record, the decision, and other relevant documents for hearing by the Supreme Court in an Appeal Book under O 7, Divs 11, 12, 13, 14 and 15 of the Supreme Court Rules.

If the intention of the legislation under s.58 of the Lawyers Act is that the nature of the rehearing is based on the evidence that was given at the Committee hearing, the question of how the record of the Committee is placed before the National Court is a matter to be covered by regulations to be made under s.109 of the Lawyers Act. As far as I am aware, such regulations have not yet been made. The question of the record of a lower tribunal becoming part of the record which the appellate court considers in a case where the rehearing is on the basis of what was placed before the lower tribunal, becoming admissible before the appellate court is not dependent on the consent of the appellant or the other party.

26. Counsel for BCL submitted that it is clear from His Honour’s decision that the provisions made by the Rules of Court for the process of having the matter heard in the National Court are a vital part of the determination of the legislative intent.

27. In addition, the parliamentary intention in the present case is that the appeal be in accordance with the National Court Rules. The National Court Rules provide a mechanism for a rehearing in the sense of a reconsideration of the material before the lower tribunal.

28. There is no procedure in Division 2 of Order 18 National Court Rules for treating an appeal as a hearing de novo and permitting some form of pleading, discovery, interlocutories generally, and oral evidence.

29. In the Syngenta case (supra) and WR Carpenter case (supra), there is no argument concerning whether an appeal is to be de novo. It appears to be assumed.

30. In paragraph 3 of the Syngenta case (supra) Gyles J. refers to the Commissioner of Taxation providing a statement of facts, issues and contentions pursuant to the Rules. This Court was not provided with a copy of those rules for comparison purposes with our relevant National Court Rules. I note however that pursuant to Order 52A Rule 13 of the Australian Federal Court Rules that relate to Taxation Appeals from disallowance of objections, a Judge at a directions hearing is able to amongst others, make orders with respect to, discovery and inspection of documents, interrogatories, admissions of fact or of documents, the defining of the issues, the filing and serving of affidavits, the giving of particulars and the giving of evidence at the hearing, including whether evidence of witnesses in chief should be given orally or by affidavit.

31. There is then, in contrast to our National Court Rules, provision for a hearing de novo of a taxation objection appeal.

32. It is also relevant to my mind, that the amendment to s.247 Income Tax Act specifically inserted a reference to the National Court Rules. As referred to earlier, the National Court Rules are made pursuant to s.184 of the Constitution by the Judges of the Supreme Court or of the National Court. If the parliamentary intention when making the amendment had been for an appeal to be heard de novo, given the terms of Division 2 Order 18 National Court Rules that were in force then and remain in force now and which do not provide for a de novo appeal procedure, to my mind that intention was not fulfilled.

33. In the circumstances therefore it is apparent that the nature of an appeal under s.247 (b) Income Tax Act to the National Court is a re-consideration of the material that was considered by the Chief Collector, as opposed to a hearing de novo in which other material is considered.

34. At the conclusion of their submissions, Counsel informed the Court that they had agreed that after I had delivered my ruling as to the nature of the appeal, they would attempt to resolve what documentation is to be supplied and by whom. If this is not the position or agreement is unable to be reached, either party may make an appropriate application to me on 3 days written notice to the other of such an application.

35. The costs of an incidental to this motion are to be paid by the respondent to the appellant to be taxed if not agreed.

Commissioner’s motion

36. The Commissioner applies to strike out grounds 3.4, 3.5, 3.6 and 3.7 of BCL's Notice of Appeal filed on 13 January 2005 on the grounds that they disclose no reasonable grounds of appeal or are scandalous, frivolous or vexatious, or may prejudice, embarrass or delay the fair hearing of the appeal, or are otherwise an abuse of process of the Court. I will address the submissions made on behalf the Commissioner in the same order as set out in the written submissions presented on his behalf.

37. As to appeal grounds 3.5, 3.6 and 3.7 the Commissioner contends that these were determined against BCL in SCA 50 of 2005 Chief Collector of Taxes v. Bougainville Copper Ltd and SCA 56 of 2005 Bougainville Copper Ltd v. Chief Collector of Taxes (2007) SC853 (CCT/BCL) and it would be an abuse of process of the Court to allow the same issues to be re-litigated. In addition, the findings of the Supreme Court in CCT/BCL on the issues raised in appeal grounds 3.5, 3.6 and 3.7 constitute res judicata or issue estoppel against BCL.

Inherent jurisdiction

38. Counsel for the Commissioner cited inter alia, the following cases concerning this Courts inherent jurisdiction and its power to regulate proceedings to prevent abuse of process; PNG Forest Authority v. Securimax Security Pty Ltd (2003) SC717, PNG Forest Products v. Independent State of Papua New Guinea [1992] PNGLR 85, Lerro v. Stagg & Ors (2005) N2818. In PNG Forest Authority v. Securimax Security Pty Ltd (supra), Sakora J. accepted as law that pursuant to its inherent power to control its own proceedings an appellate court may strike out a notice of appeal where plainly there is no right of appeal, where the notice does not state any reasonable grounds of appeal or is otherwise frivolous or vexatious or an abuse of process or where the notice is served out of time or where the notice is otherwise irregular.

39. The Commissioner contends that it is an abuse of process by BCL for it to attempt to litigate issues in the National Court when the Supreme Court had already determined those issues against the same party in CCT/BCL.

40. The hearing in CCT/BCL was an appeal by the Commissioner against part of a National Court decision that arbitration was part of the tax regime in Papua New Guinea, an appeal by BCL primarily against the decision to set aside interim restraining orders which had prevented the Commissioner from enforcing certain tax assessments against BCL, and against the refusal to stay an appeal (this appeal) pending arbitration.

41. In appeal ground 3.6.4, BCL was claiming that its disputes with the Commissioner were to be determined by arbitration. In CCT/BCL the Supreme Court made inter alia, specific declarations, the effect of which was not to allow arbitration of those disputes.

42. At the hearing before me, Counsel for BCL conceded that appeal ground 3.6.4 could no longer be argued as the Supreme Court had substantively determined the issue.

43. As to whether the issues in appeal grounds 3.5, 3.6.1, 3.6.2, 3.6.3 and 3.7 have already been determined by the Supreme Court, as mentioned, apart from the arbitration issue BCL's appeal to the Supreme Court was against the refusal by the National Court to grant interim injunctions in other proceedings which challenged the issuing by the Commissioner of garnishee notices under s.272 the Income Tax Act (Garnishee proceedings).

44. The Garnishee proceedings put in to issue whether payment of taxation could be enforced before the assessments of taxation had been judicially considered. The Garnishee proceedings did not concern a consideration of the actual assessments.

45. The Supreme Court in CCT/BCL considered a refusal by the learned National Court Judge to exercise his discretion in favour of BCL to grant interim injunctive relief. The Supreme Court was not determining substantively the issues in the Garnishee proceedings. To my mind, it cannot be said that the Supreme Court has determined the issues before it such that it is an abuse of process for BCL to prosecute those issues in its appeal.

46. Specifically as to appeal ground 3.5, this concerns whether s. 41 of the Constitution prevents the Commissioner from making amendments to assessments and adjustments to income tax returns.

47. The Commissioner contends that this same argument was raised by BCL in CCT/BCL in relation to the issuing of garnishee notices. That is not correct. The Supreme Court did consider the effect of s. 41 of the Constitution on the issuing of garnishee notices but did not consider the effect of s.41 of the Constitution on the making of amendments to assessments and adjustments to income tax returns.

48. Specifically as to appeal ground 3.6, the Commissioner contends that BCL's argument that its liability to income tax should be determined by reference to clause 7 of the Bougainville Copper Agreement in the form in which it existed before the 1974 amendments is erroneous as this was determined by the Supreme Court in CCT/BCL. Upon a reading of that part of the Supreme Court judgment dealing with the Bougainville Copper Agreement, it is apparent that the Supreme Court is concerned only with the arbitration question.

49. The Supreme Court has not made a substantive determination on the subject matter of appeal grounds 3.6.1, 3.6.2 and 3.6.3.

50. Specifically as to appeal ground 3.7, the Commissioner contends that BCL’s argument that assessments would not be payable until 2 months after earning sufficient income to pay the tax liability following the successful recommencement of mining operations on Bougainville pursuant to the Facility Agreement dated 1 December 1989, was raised by BCL in the Supreme Court and the Supreme Court decided the point against BCL.

51. Upon a reading of paragraphs 97 and 98 of the Supreme Court judgment it is apparent that the Court considers this point in relation to the arbitration question and not specifically on the issue raised in appeal ground 3.7. Again, no substantive determination has been made on the issue. The comment concerning the Facility Agreement is obiter dictum as the interpretation of the Facility Agreement related to the question of assessment of taxation and not enforcement of the payment of taxation.

Res judicata

52. Res judicata is a legal doctrine recognised in Schedule 2.8(1) (d) of the Constitution. In the Supreme Court case of Titi Christian v. Rabbie Namaliu (1996) unreported OS No. 2 of 1995 18.7.06, there was considerable discussion and agreement by the Court on the principle of res judicata but disagreement upon its application.

53. In Tolom Abai v. The State (1995) N1402, Sheehan J. stated the principle thus:

It is simple law that a claim that has been tried in a Court of Law and a decision lawfully made on it cannot be tried again in respect of the same matters. The legal term for this is res judicata which means ‘the matter is decided’. That is, a final judgment by a competent Court on the merits of a claim has been made and is conclusive – final - as to the rights of the parties and those claiming through them. Such a decision is a bar to any new action involving the same claim or cause of action.

54. Earlier, in Herman Gawi v. PNG Ready Mixed Concrete (1983) unnumbered, unreported, Bredmeyer J. quoted the following passage from The Doctrine of Res Judicata by Spencer-Bower and Turner 1969 2nd ed p.1, as in his view it stated the law clearly and succinctly:

In English jurisprudence a res judicata, that is to say a final judicial decision pronounced by a judicial tribunal having competent jurisdiction over the cause or matter in litigation and over the parties thereto, disposes once and for all of the matters decided, so that they cannot afterwards be raised for re-litigation between the same parties or their privies.

The effect of such a decision is twofold.

In the first place, the judicial decision estops or precludes any party to the litigation from disputing against any other party thereto in any other litigation, the correctness of the earlier decision in law and fact. The same issue cannot be raised again between them, and this principle extends to all matters of law and fact which the judgment decree or order necessarily established as the legal foundation or justification of the conclusion reached by the Court.

In the second place, by virtue of the decision the right or cause of action set up in the suit is extinguished, merging in the judgment which is pronounced. Transit in rem judicatam. The result is that no further claim may be made upon the same cause of action in any subsequent proceedings between the same parties or their privies.

55. Bredmeyer J. goes on to consider the six probanda postulated by Turner, all of which must be established by the party setting up res judicata. For our purposes they are:

a) was the earlier decision a judicial decision?

b) was the judicial decision pronounced?

c) did the judicial tribunal have competent jurisdiction?

d) was the judicial decision final?

e) did the judicial decision involve a determination of the same question?

f) are the parties the same?

56. When the above are applied to this case all but one appear satisfied. The fifth probanda, that the judicial determination involves a determination of the same question, is not satisfied. The decision in CCT/BCL was on an appeal against the learned National Court Judge’s exercise of discretion not to grant interim injunctive relief. It was not a substantive determination of the issues in appeal grounds 3.5, 3.6.1-3.6.3 and 3.7.

Issue estoppel

57. The principle of issue estoppel was discussed and accepted as being applicable in Papua New Guinea, Christian v. Namaliu (supra) An authoritative statement as to issue estoppel is that of Diplock L.J. in Mills v. Cooper [1967] 2 QB 459 at pp 468-469:

That doctrine, so far as it affects civil proceedings, may be stated thus: a party to civil proceedings is not entitled to make, as against the other party, an assertion, whether of fact or of the legal consequences of facts, the correctness of which is an essential element in his cause of action or defence, if the same assertion was an essential element in his previous cause of action or defence in previous civil proceedings between the same parties or their predecessors in title and was found by a court of competent jurisdiction in such previous civil proceedings to be incorrect, unless further material which is relevant to the correctness or incorrectness of the assertion and could not by reasonable diligence have been adduced by that party in the previous proceedings has since become available to him.

The above passage was adopted and approved by the English House of Lords in Reg v. Humphreys [1977] A.C. 1, approved and applied in Hunter v. Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] A.C. 529 and Arnold v. National Westminster Bank PLC [1991] 2 A.C. 93.

58. Before an assertion is precluded from being made it must inter alia, have been the same assertion, have been an essential element in the previous cause of action and was found by a court of competent jurisdiction to be incorrect.

59. In this case, the particular assertions, or determinations were not found by the Supreme Court to be incorrect. The Supreme Court only made findings on the appeal against the learned National Court Judge’s refusal to grant interim injunctive relief. The Supreme Court did not make an authoritative or final determination on the issues in appeal grounds 3.5, 3.6.1, 3.6.2, 3.6.3, and 3.7.

60. In addition, in Cross on Evidence, 7th Australian ed, J.D. Heydon (2004) at par 5080, it is stated that:

Only a decision about a matter which it was necessary to decide - a decision which is fundamental or cardinal to the judgment - can create an issue estoppel. Hence it is necessary to understand what the author of the decision was required to decide.

61. In CCT/BCL it was only necessary for the Supreme Court to decide as to the learned National Court Judge’s exercise of his discretion in refusing interim injunctive relief. It was not necessary for the Supreme Court to decide the particular issues substantively.

62. As to whether the findings of the Supreme Court in respect of the issues raised in appeal grounds 3.5, 3.6.1, 3.6.2, 3.6.3, and 3.7 constitute res judicata or issue estoppel, as contended by the Commissioner, as the Supreme Court was considering an appeal from the refusal of interim injunctive relief in proceedings that sought substantive relief concerning the enforcement of the payment of taxation, as opposed to the actual assessment of taxation, to my mind res judicata or issue estoppel do not arise.

Appeal Ground 3.4

63. The Commissioner contends that as this ground of appeal alleges conduct on behalf of the Commissioner and that he is estopped from altering its position, BCL is relying upon estoppel by conduct. The Commissioner contends that estoppel cannot arise against a public official doing what he is instructed to do by statute, particularly where State revenue is concerned. The Commissioner cites Considine v. Citicorp Aust Ltd (1981) 1 NSWLR 657 and Commonwealth of Australia v. Burns [1971] VicRp 100; (1971) VR 825 in support of his contention.

64. The Commissioner contends that as s.231 of the Income Tax Act empowers him to make an assessment in respect to any person liable to pay tax and that s.232 of the Income Tax Act allows him to amend an assessment, he cannot be estopped from doing what he is instructed to by statute.

65. I note however that s.231 and s.232 of the Income Tax Act provide that the Commissioner General may make an assessment and may amend an assessment. It does not appear obligatory for him to do so or that he is instructed to do so. Consequently there may be an estoppel argument in such circumstances. I cannot be satisfied therefore that appeal ground 3.4 is not a reasonable ground of appeal or is frivolous or vexatious or is an abuse of process of the Court. It is not appropriate that it be struck out.

Conclusion

66. The orders sought by the respondent in its notice of motion dated 1 March 2007 for appeal grounds 3.4, 3.5, 3.6.1, 3.6.2, 3.6.3 and 3.6.7 are refused. Appeal ground 3.6.4 is struck out. Costs of and incidental to this notice of motion are to be paid by the respondent to the appellant to be taxed if not agreed.

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Gadens Lawyers: Lawyers for the Appellant
Young & Williams Lawyers: Lawyers for the Respondent