Independent State of Papua New Guinea v Potape [2014] PGNC 155; N5773 (16 October 2014)

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Waigani: Salika, DCJ
2014: 25 April, 4, 11, 13, 18, 19 August, 4 September, 16 October

PRACTICE & PROCEDURE - Criminal Law – Conspiracy to defraud – Members of the Joint District Planning and Budget Priority Committee – conspired to pay themselves allowances they were not entitled to – s.407(1)(b) of Criminal Code.

CRIMINAL LAW – Misappropriation – s.383A(1) of Criminal Code – Defence of honest claim of right under s.23 of the Criminal Code raised but not available.

1. SALIKA DCJ: Background: The accused is the sitting Member of Parliament for the Komo Magarima Open Electorate in the Hela Province. He first won that seat in the 2007 National Elections and again in the 2012 National Elections. By virtue of being the elected member for the Electorate he is the Chairman of the Komo Magarima Joint District Planning and Budget Priority Committee (JDP & BPC) under s.33A of the Organic Law on Provincial and Local Level Government (OLPLLG)

(1) There shall be established, in each district, a Joint District Planning and Budget Priorities Committee.

(a) the Member of the Parliament representing the open electorate who shall be the Chairman of the Committee; and

(c) the heads of Local-level Governments in the district or their nominees; and

(d) any other members not exceeding three in number appointed by the Member of the Parliament representing the open electorate in consultation with the heads of the Local-level Governments in the district.

(2A) The Member of the Parliament representing the open electorate shall appoint one of the other members of the Committee to act as Chairman of the Committee in the event of the absence of the Member representing the open electorate from a meeting of the Committee.

(3) The Joint District Planning and Budget Priorities Committee shall have the following functions:—

(a) to oversee, co-ordinate and make recommendations as to the overall district planning, including budget priorities, for consideration by the Provincial Government and the National Government; and

(b) to determine and control the budget allocation priorities for the Local-level Governments in the district; and

(c) to approve the Local-level Government budgets for presentation to the Local-level Government and make recommendations concerning them; and

(d) to draw up a rolling five year development plan and annual estimates for the district; and

(4) The District Administrator shall be the Chief Executive Officer of the Committee.

(7) An Act of the Parliament shall make provision for other functions and powers of, and the administrative arrangements for the Committee.

The salaries, allowances and other terms and conditions of the members of Local-level Governments shall be as are determined by the Salaries and Remuneration Commission.

4. While s.33A (5) provides for an Act of Parliament to make provision of other functions and powers of and the administrative arrangements for the committee. Counsel did not refer the court to that Act or whether such an Act of Parliament has been made or passed for this purpose.

5. In the absence of the benefit I am no wiser and am stuck with what I have, that is the OLPLLG and the Salaries and Remuneration Commission Determination.

6. On Saturday 20 November 2010 the Komo Magarima JDP & BPC met in Tari and passed a resolution to pay themselves sitting allowances of K5,000.00 per day to the chairman and K2,500 per day to all the other members of the committee.

7. In total the committee resolved to pay K60,000 to the Chairman as outstanding sitting, transport and accommodation allowances.

8. The committee also resolved to pay K30,000 to the other members of the committee as sitting, transport and accommodation allowances. Apart from paying allowances to the members of the committee, resolutions were also made to pay K30,000 to the District Treasurer, the District Administrator, the Governor's representative, and a Kevin Solomon whose status is not known. The State alleged that the resolutions of the committee did not take into account whether the members attended the meeting or not, because all the members received K30,000.00

9. The State also alleged that in any case the District Treasurer and the District Administrator were public servants and were not entitled to be paid any allowances.

10. The State further alleged that the JDP & BPC did not have the authority to set their own rates for various allowances to pay themselves.

Count 1: Between the 1st and the 30th day of November, 2010 at Tari in Papua New Guinea, the accused conspired with Francis Ank, Tumbi Yari and others to defraud the Independent State of Papua New Guinea by fraudulently passing a resolution to pay inflated payment to themselves as JDP & BPC Sitting Allowance, thereby contravening s.407 (1) (b) of the Criminal Code (Chapter No 262).

Count 2: Between the 1st and the 30th day of November, 2010 at Mendi in Papua New Guinea, dishonestly applied to his own use the sum of sixty thousand Kina (K60,000), the property of the State of PNG, thereby contravening s.383A(1)(a) of the Criminal Code.

Count 3: Between the 1st and the 30th day of November, 2010 at Mendi in Papua New Guinea, the accused dishonestly applied to the use of Thomas Potabe, Eric Yawas, Hape Marale, Dennis Libe, Francis Keara, J Solomon, Francis Aule and Tumbi Yari, monies in the sum of two hundred and seventy thousand Kina (K270,000.00) the property of the State of Papua New Guinea, thereby contravening s.383A(1)(a) of the Criminal Code.

"The Defence does not deny the receipt of the payment and the decision, being the JDP & BPC resolution dated 20th November, 2010 to make the payments. The Defence clarifies the payments by saying it is aware of the SRC determination relating to JDP & BPC "sitting" allowance of K50.00 per "sitting" for the Chairman/accused and K25.00 per "sitting" for the other members. However, it says the payment the JDP & BPC resolved to pay and the payment received was not a '"' sitting" allowance" per se. Rather the payments were for the members' JDP & BPC "meeting" allowances and associated costs, incurred for the two (2) year period such as for travel, vehicle hire, accommodation, fuel, food, security etc as reimbursement, which they had incurred and paid themselves. The SHPG does not and did not pay those expenses for JDP and BPC as erroneously assumed by the State Prosecutor.

Further, although a sum of K12 million was budgeted for the eight (8) JDP and BPCs in SHP where each JDP and BPC would have been entitled to K1.5 million each, the funds were not paid although it was budgeted. Similarly although, SHPG had budgeted K16 million in 2010, i.e. K2 million for each District, SHPG only paid K700, 000.00 to Komo-Magarima district in November, 2010. The State Prosecution team failed to understand the fundamental difference between "budget" and actual payment and erroneously contends Komo-Magarima JDP and BPCs meeting costs and expenses had been paid by SHPG when there is undisputed evidence to the contrary.

The funds [K330, 000.00] being part of the K700, 000.00 paid were appropriated by SHPG in its Provincial budget in 2010 for that purpose and they had used it accordingly. SHPG does not pay for the JDP & BPC members meeting costs and associated expenses separately by paying directly to the service providers, as incorrectly assumed by the Police Prosecutors and the State." (underlining mine).

14. For a fuller understanding and benefit of everyone who has an interest in this case I will state what transpired at the meeting of the Komo Magarima JDP & BPC. The committee meeting was held on Saturday 20 November 2010. It was this meeting that members of the JDP & BPC decided to pay themselves the allowances.

The chairman thanked everyone for their attendance to JDP&BPC for year 2010 and also budget and elaborate on the Seven Hundred Thousand (K700,000.00) allocated to Komo Magarima JDP/BPC by the Southern Highlands Provincial Government.

The Chairman highlighted that the other part of the funds will be allocated towards the end of the year and expend as per the budget by this committee when the funds are available.

Hon Francis Potape MP	O/S JDP/BPC Allowance/Fuel/Vehicle	K60,000
Hon Eric Yawas	O/S JDP/BPC Allowance/Fuel/Vehicle	K30,000
Hon Nelson Hiwi	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Hon Hape Merele	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Hon Francis Keara	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Hon Thomas Potape	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Mr Tumbi Yari	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Mr Doriga Pole	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Mr Denis Libe	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Mr Francis Ank	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Mr Kevin Solomon	O/S JDP/BPC Allowance/Fuel/Vehicle	K30.000
Total		*K360,000*

"Resolution was passed and accepted by every committee to expend the funds accordingly. The chairman also wish the JDP/BPC members a merry Christmas and prosperous happy New Year.

These minutes of t he meeting of the Committee play a major part in assisting the court to work out the state of mind of the accused and the members of the committee.

18. For the conspiracy allegation the State relied on the evidence of the payments made to every member of the JDP & BPC and the District Administrator and the District Treasurer. The minutes of the meeting dated 20 November 2010 do not show a narrative or how and why the decision was made to make the payments to the members and others of the committee.

19. The State has the duty to prove beyond reasonable doubt that there was conspiracy as alleged. The CCH Macquire Dictionary of Law 2nd Edition defines conspiracy as "a criminal offence involving the agreement of two (2) or more to commit an unlawful act, or to do a lawful act by unlawful means". The same dictionary defines defraud as "to deprive of a right by fraud".

20. The question then is was there an agreement between the members and advisors of the Komo Magarima JDP & BPC to pay themselves the allowance. There is no direct evidence that those members and advisors made any agreement outside of the meeting or before the meeting. There is however evidence that at the committee meeting they agreed or resolved to pay themselves those allowances. Did that amount to conspiracy?

21. The meeting minutes of 20 November 2010 do not show any discussion as to whether the payment of those allowances were or would be proper or lawful. Moreover there is nothing recorded in the minutes of 20 November 2010. Whether any advise was given to the committee by the District Treasurer or whether they were even asked to give any advise on this payments as to whether it was lawful or not to pay themselves the allowances. It is however crystal clear to me that all of the beneficiaries of the decision were themselves which raised a conflict of interest situation in respect of all of them.

22. This meeting was held on a Saturday and began at 7.30 am and finished at 10.00 am. I wonder whether this was a meeting over breakfast. The minutes were taken by Tumbi Yari the Acting District Administrator for Komo Magarima. Seven members including the chairman were present. Four members recorded apologies and were absent. There is no record in the minutes that anyone of those recorded as absent and with apologies arrived later in the course of the meeting.

23. Yet those who were recorded as being absent with apologies were also paid the allowances for not attending the meeting. The question arises, is it proper to pay those for not attending the meeting? The answer is an obvious – No. In answering the second issue I find that the decision to award themselves the various amounts as reimbursements without receipts and that all had a vested interest in the awarding of the money in my view amounted to conspiracy to defraud. This amounted to an agreement between the Committee members to commit an unlawful act or to do a lawful act by unlawful means.

24. In other words did the Salaries and Remuneration Commission delegate its function to the Komo Magarima JDP & BPC? The answer is no. The Salaries and Remuneration Commission is the only body that determines allowances for Members of Parliament at National and Provincial and Local Level Government levels. Evidence from Jack Bagita the Executive Officer of the SRC is that Sitting allowances for JDP & BPC members are determined by the SRC alone and no other authority can decide. This includes travelling allowances to be paid.

25. Jack Bagita was asked "who is responsible for meeting such other expenses of the JDP & BPC members and he said the Provincial Government should pay for expenses like vehicle hire, accommodation and food and security. In this case the Southern Highlands Provincial Government did allocate funding for the Komo Magarima District for the JDP & BPC activities. In this case the District Administrator with his officers would take full responsibility for the arrangement of the JDP & BPC meeting in consultation with the chairman and his electoral officers. All logistical arrangements for the meeting is and must be taken care of by the District Administration. It is not the chairman's private meeting such that each Member of the Committee is to make his own arrangements to attend the meeting. It is the responsibility of the District Administration to ensure the logistical arrangements. I do not believe that each of the members of the JDP & BPC made their own arrangements to attend the Committee meetings.

26. The terms and conditions of Members of the National Parliament, the Provincial Government Members and the Members of Local Level Government Members are determined by the SRC. This includes travelling allowances for both domestic and international travel accommodation, vehicle hire and security.

27. As I understand the defence case the accused and the other members of the JDP & BPC were claiming reasonable refunds for travelling, accommodation, vehicle hire and security allowances and they reasoned that K60,000 was the reasonable amount to be reimbursed to the chairman and that K30,000 be reimbursed to the other members and advisors.

28. When claiming reimbursement one should usually attach receipts of ones spending so that the spending and reimbursement can be verified. In some cases where no receipts are not readily or easily available, the person claiming reimbursement can make a statutory declaration declaring the spending and declaring on oath that the declaration is true.

29. In this case such advise ought to have been given by the District Administrators and the District Treasurer. They failed to give that advise especially so when they were themselves beneficiaries. Without the benefit of any receipts for goods and services provided which payments had been made from the beneficiaries own pockets, this reimbursements were pure guesstimates or guesses.

30. In any case the District Administrators should have been responsible for making such payments for goods and services provided to the minutes and advisors of the committee. The service providers should have the necessary Finance Forms filled to claim payments for providing services (FF3s and FF4s) to the members and advisors of the committee.

31. The manner in which the reimbursements were sought and paid were in my respectful opinion improper and in my respectful opinion amounted to conspiracy to defraud the State.

32. Proper procedures must be in place for the guidance of everyone relating to reimbursement for goods and services supplied and paid for by individuals.

33. The accused gave evidence that the committee had arrived at the K5,000 per meeting allowances for the Chairman and the K2,500 per meeting for the other members on the basis of the ratio the SRC had used in determining "sitting" allowances for the JDP & BPC members at K500, in other words whatever the amount decided for the Chairman the other members would receive half of the Chairman's allowance.

34. The problem with the determination of the committee is that it had no authority to make any such determination. Under s.33A(3) of the OLPLLG, t he committee is not given any powers to make any determination to award allowance for accommodation, food, vehicle hire, etc. The powers under that provision of the Organic Law are quite specific and do not extend to the power to make determination as to how much allowance of the members should get.

35. Having said that, the decision of the committee to make the determination to pay K5,000 to the chairman and K2,500 to the other members was illegal in my respectful opinion from the start. The SRC is the only body that has the authority to make determination relating to allowances to be paid to Members of Parliament, Members of Provincial and Local Level Government as per the evidence of Jack Bagita.

36. Did the accused dishonestly apply the K60,000 to his own use? I have already found that the determination by the committee to pay themselves the allowances was illegal. The court in Kindi Lawi v The State (1987) PNGLR 183 quoting from the English case of R v Freely (1973) IQB 530 where the Court of Appeal in the English case said:

"This brings us to the heart of the problem. Is 'dishonesty' in s 1 of the Theft Act 1968 intended to characterize a course of conduct? Or is it intended to describe a state of mind? If the former, then we can well understand that it could be established independently of the knowledge or belief of the accused. But if, as we think, it is the latter, then the knowledge and belief of the accused are at the root of the problem.

Take for example a man who comes from where public transport is free. On his first day here he travels on a bus. He gets off without paying. He never had any intention of paying. His mind is clearly honest; but his conduct, judged objectively by what he has done, is dishonest. It seems to us that in using the word 'dishonestly' in the Theft Act 1968, Parliament cannot have intended to catch dishonest conduct in that sense, that is to say conduct to which no moral obloquy could possibly attach. ... A man's belief and his willingness to pay are things which can only be established subjectively.

So we would reject the simple uncomplicated approach that the test is purely objective, however attractive from the practical point of view that solution may be."

In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails.

If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realized that what he was doing was by those standards dishonest. In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it. It will be obvious that the defendant himself knew that he was acting dishonestly. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did." (My emphasis.)

37. The Supreme Court in Kindi Lawi v The State (supra) adopted the statement of an English case of R v Landy (1981) IWLR 355 which said:

"I am sure he was acting dishonestly because I can see no reason why a man of his intelligence and experience would not have appreciated, as right minded people would have done, that what he was doing was dishonest".

I adopted this statement and say that the accused with his level of education, experience ought to have known that the JDP & BPC had no authority to determine the rate of allowances to pay himself and the other members of the committee. Again with his level of education, intelligence and experience he ought to have known that one cannot properly claim a refund without payment receipts. Proper financial processes needed to be adhered to. The accused being the Chairman of the Komo Magarima JDP & BPC together with other members of the committee not only made a determination and decision to pay themselves K60,000 and K30,000 respectively but they all received it and used it. I am of the firm view that the K60,000.00 was dishonestly received and used by the accused.

39. The Supreme Court in Kindi Lawi v The State (1987) PNGLR 183 has resolved this issue. In this case money initially belonged to the State or the Komo Magarima District. The monies were in my respectful opinion wrongfully paid out to the accused and others. The State still has a legal interest in the monies and can sue the accused and others for its return. It is therefore without question that the accused and others dishonestly applied State or Government money for their own use.

(2) A person is not criminally responsible, as for an offence relating to property, for an act done or omitted to be done by him with respect to any property in the exercise of an honest claim of right and without intention to defraud."

41. The accused and the other members have raised this s.23 defence of bona fide claim of right. The accused has raised this defence on the basis that he honestly believed he was entitled to a refund of moneys he had spent from his own pocket.

42. There is however no evidence from any service provider that the accused paid for such services and that they were unable to provide or issue any receipts to the accused because the place is so isolated. Furthermore the accused did not provide any sworn statutory declaration that he had expended K60,000 for such services in the years 2009 and 2010.

43. With respect all that the accused said was that he estimated that he was entitled to K5,000 per sitting. The other members also estimated their claims to be K2,500 per sitting. They too could not produce their payment receipts so as to claim refunds. It is absurd to make a claim for refund when one cannot produce the payment receipts. The excuse given was that the service providers are rural people and do not have receipt books. That in my view is an insult to the people of Hela, because if they are doing business, surely they must be able to issue receipts. It was extremely necessary to ask for receipts to claim refunds. The simple rule is that if you have receipts you claim and get your refund, if you do not have receipts you cannot claim and get your refund.

44. Tumbi Yari and Francis Ank are public servants. Tumbi Yari was the District Administrator and the Chief Executive Officer for the Komo Magarima District. Francis Ank was the Treasurer for the district. They were the relevant government officers who would be responsible for ensuring that the arrangements for the JDP & BPC were in order. It was their job to arrange transport, accommodation, security and liaise with service providers and show the service providers how to put in their claims. But the question is how are Tumbi Yari and Francis Ank entitled to be paid the money of K30,000.00 each? They are senior public servants in the District. They were simply doing their job as government officers. They have no bona fide claim of right to those allowances except travelling allowance. They cannot be bona fide recipients of the money.

45. Kevin Solomon and Dennis Libe had no honest claim of right. What were they paid for? Moreover the allowances were paid regardless of whether the member attended a meeting or not. For instance Kevin Solomon never attended any JDP & BPC meetings on 2010. Francis Ank attended only two meetings and was absent in 3 meetings. There were others who did not attend one or two meetings. Yet, evidence is that Kevin Solomon received full K30,000 and the others also received their full amount. One cannot claim the full K30,00 if one did not attend any or all the meetings of the Committee.

46. The single fact that there were no payment receipts to accompany the claim for refund and that the amount of K60,000 and K30,000 respectively were estimates that did not give the accused the right to claim a K60,000 refund. Moreover the fact that the full amounts of K30,000 was paid to the other recipients who did not qualify to be paid to the other recipients who not qualified to be paid at all or did not qualify to be put in full also destroys the defence of a bona fide claim of right under s.23 of the Criminal Code.

47. The funds were allocated by the Southern Highlands Provincial Government for the administration of the Komo Magarima District including holding of JDP & BPC meetings and its associated costs.

48. This issue has been answered under issue number (vii). The answer is "no" they did not have any bona fide claim of right to the K330,000.00.

49. Members only of the JDP & BPC are entitled to be paid sitting allowances of a maximum of 8 days in a year and attendance of the Committee members must be certified by the Chairman and the District Administrator. This is catered for under the SRC Determination G007 - 06. Advisors to the JDP & BPC including the District Administrator are entitled to their normal Public Service Allowances and in this case travelling allowances for meals and incidentals. Expenses for accommodation and transport are paid to service providers which should be arranged by the District Administrator and his officers.

50. In this case the accused is entitled to claim sitting allowances for 8 days in a year. But he is not claiming sitting allowances for the JDP & BPC meetings, rather he is said to be claiming a refund for accommodation, transport and security as stated by his counsel. If he wants a refund then he should refer the claims to the SRC for its deliberation and not make those decisions himself.

51. While the defence counsel has submitted that the claim was for a refund for accommodation, transport and security the JDP&BPC minutes of 20 November 2010 do not reflect that. The relevant minutes on item 2 says:

"Hon Francis Potape MP – O/S JDP/BPC Allowance / Fuel Vehicle – K60,000.00"

I take that to mean that 'O/S" means Outstanding, JDP/BPC allowance/fuel vehicle.

52. Item 3 of the said minutes talk about a proposed budget for accommodation for the JDP/BPC Committee Members Accommodation. An amount of K150,000.00 was set aside for that. In other words accommodation expenses have been budgeted for separately for the committee members. Yet the defence counsel submits that the K60,000 paid to the accused was also for accommodation. This too cannot be right.

53. Item 4 of the said minutes of 20 November 2010 talks about proposed budget for hire of motor vehicle. An amount of K140,000 was set aside for this. It appears to me that vehicle hire and fuel costs already have a separate budget allocation. Again the defence counsel submitted that the K60,000 was also for vehicle hire and fuel costs. This cannot be right.

54. The defence submission is that the allowances claimed by the accused and the other members of the Komo Magarima JDP & BPC were for refund of meeting allowances and associated costs incurred for the two year period for travel, vehicle hire, accommodation, fuel, food and security. If such refund allowances are or were to be claimed they should be put first to the SRC to authorise such payments. The committee itself cannot and should not be allowed to authorise such payments. This will set a dangerous trend if the JDP & BPC were authorised to pay themselves such allowances as has happened in this case.

55. The SRC is the only legitimate body which is lawfully authorisd to determine allowances and terms and conditions of members of the JDP & BPC. In this case the payments received by the accused ought to have been tabled before the SRC for its deliberations. What was done by the Committee to pay themselves the allowances were unlawful.

56. This question has already been answered. The simple rule when claiming reimbursement is there must be receipts attached to your claim for reimbursement.

57. Having now discussed the issues raised in the matter and having now answered them, I find that the accused and the JDP & BPC members had no authority to award the accused K60,000.00 allowance, thus the award of the K60,000.00 was unlawful and dishonest. From all the evidence, I find that the members of the Komo Magarima JDP & BPC conspired to unlawfully award themselves the K60,000 payment to the chairman and K30,000 to the other members and advisors. They could not claim accommodation, vehicle hire and fuel costs as those were separately budgeted for as shown in the minutes. To me these payments amounted to unjust enrichment.

58. Accordingly I find the accused guilty on all the three counts he was charged with.
__________________________________________________________
Public Prosecutor: Lawyer for State
Haiara Legal Practice: Lawyer for Accused

National Court of Papua New Guinea

Independent State of Papua New Guinea v Potape [2014] PGNC 155; N5773 (16 October 2014)