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Basamuk Landowners Association Inc v Mineral Resource Authority [2021] PGNC 14; N8704 (20 January 2021)

N8704

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 146 OF 2020

BETWEEN:
BASAMUK LANDOWNERS ASSOCIATION INC
Plaintiff

AND:
MINERAL RESOURCE AUTHORITY
First Defendant

AND:
GARRY JERRY AS THE MANAGING DIRECTOR OF MINERAL RESOURCE AUTHORITY
Second Defendant

AND:
RAMU NICO MANAGEMENT (MCC) LIMITED
Third Defendant

WANG BAOWEN, AS THE VICE PRESIDENT OF RAMU NICO MANAGEMENT (MCC) LIMITED
Fourth Defendant

Madang: Narokobi J
2020: 20^th November
2021: 20^th January

ROYALTY PAYMENTS – whether withholding royalty payment is lawful –whether orders should be made for the release of the royalty

The plaintiff is a landowner entity from the Ramu Nickel/Cobalt mine in Madang Province. Certain royalty payments due to it under the mining benefits agreement, described as Revised Memorandum of Agreement Relating to Ramu Nickel/Cobalt Project 2013 is being withheld by the defendants. The plaintiff comes to court to obtain orders to compel the defendants to release the moneys.

Held:

(1) Granted that the second defendant is empowered by Section 5 (g), (h) and (o) of the Mineral Resource Authority Act 2018 to stop royalty payments, such power can only be exercised based on proper considerations.

(2) In circumstances where the reasons offered by the second defendants are not supported by evidence, they do not constitute valid and lawful reasons to stop royalty payment.

Cases Cited:

No cases are cited

Statute cited:

Mineral Resources Authority Act 2018
Mining Act 1992

TRIAL

This is a hearing on the plaintiff’s application for declaratory and consequential relief.
Counsel

Mr B Meten, for the plaintiff, on instructions from Lhyrn Lawyers
Mr G Pipike, for the First and second Defendants
Ms E Valakvi, for the Second and Third Defendants

JUDGMENT

20^th January, 2021

1. NAROKOBI J: The plaintiff is a landowner entity and is suing, principally the Mineral Resources Authority for withholding approval for the payment of its royalties, held by Ramu Nico Management (MCC) Limited.
   
2. The proceedings are commenced by way of originating summons, and the following orders are sought:
   
   1. A DECLARATION that the first and third defendants are unlawfully, illegally and unreasonably withholding royalties and grants earmarked for the plaintiff under the Reviewed Memorandum of Agreement signed by the stakeholders of Ramu Nickel Mine Project on 3 December 2013, since 2016.
      
   2. AN ORDER that, the second and fourth defendant shall within 7 days from the date of this Order, process payments of all unpaid grants and royalties which the plaintiff is entitled to under the 2013 Reviewed Memorandum of Agreement, since 2016.
      
   3. AN INTERIM ORDER that the second and fourth defendants shall produce in court through affidavits by each the summary of outstanding grants and royalties that the first and third defendants owes to the plaintiff since 2016 under the Reviewed Memorandum of Agreement, within seven (7) days upon service of this interim order.
      
   4. The defendants shall pay costs of these proceedings on an indemnity basis.
      
   5. Any further Order that the Court deems fit.
      
3. In my view, the issue is straight forward, that is whether there is any legal basis for the first defendant to withhold the royalties due to the plaintiff?
   
4. The plaintiff has filed two affidavits, both by Sama Mellombo, one on 15 May 2020 and the other on 14 September 2020. In response, the first defendant filed an affidavit, by its Managing Director on 3 July 2020. The third and fourth defendants did not file any affidavits.
   
5. Essentially, the affidavits reveal the following pertinent facts composing the background of this matter, which I recount now.
   
6. The plaintiff is the Basamuk Landowners Association Inc, and it represents the customary Landowners of Basamuk area where the refinery for the Ramu Nickel/Cobalt Mine is located. It is one of the four (4) Incorporated Association that represent areas impacted by the Mine.
   
7. Sama Mellombo is the Chairman of the plaintiff Association, and he and his executives they were elected on 16 April 2014. He was re-elected as the Chairman on 6 April 2017 after a general election for a term of (5) years.
   
8. The Chairmanship of Sama Mellombo was opposed, resulting in proceedings styled as OS 364 of 2019 and OS 879 of 2019. In both matters, Sama Mellombo’s Chairmanship was confirmed by the court. Court orders of both proceedings resolved in favour of Soma Mellombo are in evidence before me. I take judicial notice of them.
   
9. What is in contention is the royalties of the Ramu Nickel/Cobalt Mine. On 3 December 2013, the stakeholders of the mine signed an agreement describe as Revised Memorandum of Agreement Relating to Ramu Nickel/Cobalt Project 2013 or MOA. The MOA is in evidence. The purpose of the MOA, amongst other objectives is to enable the provincial government, the local level government and the landowners to receive an equitable share of benefits from the mine. The plaintiff is a party to that agreement.
   
10. Clause 3 of the MOA provides for royalties:

3 ROYALTIES

3.1 Subject to clause 3.2 and 3.3, upon receipt of mine royalties for mine products from the Project, the state will distribute royalties in the following proportions:

1. Landowners 69%
2. Madang Provincial Government 8%

100. Local level Government 23% “
     

11. Clause 3 of the MOA goes on to provide at Clause 3.2 (D) that Basamuk landowners will receive the following entitlements:
    
    1. LMP 42, LMP 43 & ML 149 landowners – 6%
    2. Future Generation Trust – 1%
    3. L.O.A – 2%
       
12. Sama Mellombo deposes that the royalty payments commenced in 2018, and that there were more than 5 royalty payments. No entitlements has been provided to the plaintiff. The plaintiff is not aware of the reasons why it has not received any entitlements.
    
13. Apart from this, the plaintiff says there was an additional payment required to be paid by the State for 2016 to 2018, equivalent to K50,000 per year, which means there is now an outstanding amount of K100,000. These monies are due from the first defendant.
    
14. What are the reasons for non-payment? I begin with the third and fourth defendants as their reasons are straight forward. They have taken a neutral stand saying that they are subject to directions of the regulator, which in this case, is the first defendant. No approval has been issued. In fact, they were directed not to pay. For this reason, they cannot release the plaintiff’s money. This was submitted through counsel as they did not file any affidavit material.
    
15. The second defendant’s Managing Director, Mr. Jerry Garry (first defendant) says that the only reason they are withholding approval for payment is because there are disputes between the various factions of the plaintiff. Mr. Garry simply asserts this and does not produce evidence such as court documents to support his reasons. He says that the first defendant is obligated under Section 5 (g), (h)and (o) of the Mineral Resource Authority Act 2018 to oversee the enforcement of all agreements and to give directions regarding royalty payments under the Mining Act 1992. On this basis they advised the third and fourth defendant to withhold royalty payments until they are satisfied that all legal proceedings have been resolved.
    
16. After considering the affidavit material filed by the parties and hearing submissions from counsels, I have reached the view that there is no lawful basis to withhold the royalty payments. Granted that the second defendant is empowered by Section 5 (g), (h) and (o) of the Mineral Resource Authority Act 2018 to stop royalty payments, such power can only be exercised on proper considerations supported by evidence. If there was a Supreme Court appeal on foot, it was incumbent upon the first and second defendants to obtain copies of the court documents and consider the legal implications of the appeal in relation to their organisation’s functions and equally important, disclose it to the plaintiff. To simply assert that since an appeal has been filed, money should be withheld, with respect, is not a proper or lawful basis to withhold the plaintiff’s entitlements.
    
17. There is no dispute that the plaintiff is the legitimate entity representative of the Basamuk landowners under the MOA. As the regulator of the mining industry, the first and second defendants do not have any issue with the plaintiff’s standing to receive benefits. I infer from the plaintiff’s evidence that the contention appears to be as to who should be the chairman of the plaintiff. The uncontentious evidence before the court, is that this issue has been resolved by the National Court. Although an appeal has been referred to, there is no evidence of the appeal before the court. If indeed a stay order was made by the Supreme Court, it has not been produced to the court. No doubt, the proceedings have been on foot since early last year, so I would imagine that any interested party who feels that the outcome of this proceeding would affect their interest, would have applied to join the proceedings by now and put forward their objections. In fact, it is incumbent upon the first and second defendants as the regulator to bring to the attention of the court identities of other interested parties and how the release of the royalties would prejudice their rights, thereby forming the basis to properly exercise its discretion under the Mineral Resource Authority Act.
    
18. On the basis of the foregoing, I have reached the conclusion that there is no proper and lawful justification for the first and second defendants to withhold approval for the royalty moneys due to the plaintiff and I make orders in terms of paragraph one (1) and two (2) of the orders sought in the originating summons filed by the plaintiff on 15 May 2020.
    
19. For costs, the general rule is that it follows the event. I consider that the plaintiff is entitled to costs on an indemnity basis as this matter should have been resolved out of court as indicated by the number of correspondences from the plaintiff which the first and second defendants did not have the courtesy to respond to. Granted that the first defendant was acting in the course of employment, I hold the second defendant responsible for the costs.
    
20. My orders are therefore as follows:
    

1. It is declared that the first and third defendants have no legal basis to withhold royalties and grants earmarked for the plaintiff since 2016 under the Revised Memorandum of Agreement Relating to Ramu Nickel/Cobalt Project 2013 signed by the stakeholders of Ramu Nickel/Cobalt Mine Project on 3 December 2013.

2. The second and fourth defendant shall within seven (7) days from the date of this Order, process payments of all unpaid royalties and grants which the plaintiff is entitled to since 2016 under the Revised Memorandum of Agreement Relating to Ramu Nickel/Cobalt Project 2013.

3. The second defendants shall pay the plaintiff’s costs of these proceedings on an indemnity basis.

4. The proceedings are considered determined and the file is closed.

5. Time is abridged.
Lhyrn Lawyers: Lawyers for the Plaintiff
GP Lawyers: Lawyers for the First and Second Defendants
Inhouse Counsel: Lawyers for the Third and Fourth Defendants