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Independent State of Papua New Guinea v Petroleum Resources Gobe Ltd [2024] PGSC 6; SC2534 (29 February 2024)

SC2534

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]


SCR NO. 83 OF 2018


BETWEEN
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Applicant


AND:
PETROLEUM RESOURCES GOBE LIMITED
First Respondent


AND:
MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED
Second Respondent


Waigani: Logan J, Shepherd J and Miviri J
2023: 27th April
2024: 29th February


PRACTICE AND PROCEDURE – application for review of a National Court decision granting summary judgment – the State applying to have summary judgment set aside – whether s 12(3) of the Claims By and Against the State Act 1996 ought to have precluded summary judgment from being awarded.


MINERALS AND ENERGY – whether claims for unpaid royalties under the Oil and Gas Act 1998 and related loss of profits constitute a liquidated demand or an unliquidated demand.


The National Court awarded summary judgment for the respondents against the applicant (the State) on 18 May 2018. The State applied for a review of the decision in this Court on 12 October 2018. The State raised seven grounds of review, of which four grounds were pressed. In an earlier decision of this Court the respondent’s objection to competency of the review application was dismissed: Independent State of Papua New Guinea v Petroleum Resources Gobe Limited [2022] PGSC 97, SC2278. The principal issue for determination was whether s 12(3) of the Claims By and Against the State Act 1996 operated to prevent the awarding of summary judgment in this case. The key question was whether the respondents’ claims against the State constituted a liquidated demand or an unliquidated demand within the meaning of s12(3) of the Act. The respondents’ claims included unpaid royalty benefits (arising under statute and/or a trust deed), loss of profits due to the unpaid royalty benefits, and negligence by the State in failing to comply with the statutory provisions and trust deed terms that required the payment of the royalty benefits. The State’s filed defence also raised issues as to whether there had been compliance with the notice requirements of s 5 of the Act, whether these claims were, in whole or in part, barred by s 16 of the Frauds and Limitations Act 1988 and whether, in any event, the amount claim was excessive in that it included sums which ought to have been remitted to the Commissioner General of Taxation, having regard to s 159(4) of the Oil and Gas Act 1998 and to s 280 of the Income Tax Act 1959.


Held:


(1) The respondents’ claims against the State were for an unliquidated demand, not a liquidated demand or ‘debt only’.
(2) This meant that at most judgment should have been entered for damages to be assessed.
(3) The primary judge erred in giving judgment for the amount claimed.
(4) It was not appropriate for this Court to make orders that the damages be assessed due to extant factual controversies including the notice and limitation of action issues and the issue of whether any amount was required to be remitted to the Commissioner General of Taxation.
(5) The summary judgment was quashed and the matter was remitted to the National Court for determination according to law.

Cases Cited:
Balakau v Amet [2013] PGNC 107, N5313
Chapau v. The State [1999] PGNC 95, N1933
Dempsey v. Project Pacific Pty. Ltd [1985] PNGLR 93
Independent State of Papua New Guinea v. Petroleum Resources Gobe Limited [2022] PGSC 97; SC2278
Rose v. The State [2007] PGNC 71; N3241
Secretary, Department of Mineral Policy and Geohazard Management v. Manton Group Ltd [2018] PGSC 40; SC1703
State v. Josiah [2005] PGSC 18; SC792


Legislation Cited:
Constitution s 155
Claims By and Against the State Act 1996 ss 5, 12
Frauds and Limitations Act 1988 s 26
Income Tax Act 1959 ss 140, 142C, 280
Income Tax (2015 Budget) (Amendment) Act 2014 s 7
Oil and Gas Act 1998 ss 159, 168, 176


Counsel:
Mr M Wangatau, for the Applicant
Ms B Kumo, for the First and Second Respondents


29th February 2024


  1. BY THE COURT: This review application has its origins in a summary judgment for a very large sum of money entered in 2018 in the National Court against the applicant, the Independent State of Papua New Guinea.
  2. The writ by which the National Court proceeding was commenced was issued as long ago as 2014. The decade which has passed since then is littered with procedural missteps and missed opportunities by each of the parties. These range from an inability of the parties, notwithstanding a concession by the State that some monies were owed, albeit nothing like the amount claimed, to compromise, even though the National Court made very particular orders to promote informed negotiation and mediation, to a combination of illness by an assigned legal officer and internal inadvertence within the Office of the Solicitor-General resulting in a default of appearance which prompted the learned primary judge to give judgment and to misconceived objections by the respondents to the competency of the present review application. As will be seen, a yet further missed opportunity was a steadfast endeavour by the respondents to retain a judgment which, with respect, ought never have been given, instead of the parties either resolving the respondents’ claim by agreement or having it adjudicated in the National Court. Had that course been followed, there is every reason to expect that each of the parties would by now have seen the claim disposed of to finality.
  3. The history of the proceedings was summarised in this Court’s 2022 judgment concerning the respondents’ objection to competency: Independent State of Papua New Guinea v Petroleum Resources Gobe Limited [2022] PGSC 97, SC2278 (2022 competency judgement). Adopting that summary, the following scenario emerges.
  4. Orders made on 18 May 2018 in WS 1488 of 2018 (CC2) in the National Court in proceedings in respect of the Gobe Petroleum Project between Petroleum Resources Gobe Limited as first plaintiff and Mineral Resources Limited as second plaintiff and the State and various officials of the State and Oil Search Limited as defendants are reproduced below, without editorial correction:
  5. These orders were made on an application for summary judgment.
  6. By an application filed on 12 October 2018 the State applied to this Court pursuant to s 155(2)(b) of the Constitution for leave to review these orders.
  7. On 3 April 2018, the State was granted leave by the Court to add Petroleum Resources Gobe Limited and Mineral Resources Development Company Limited (MRDC) as respondents to the application for leave to review. An amended application for leave to review naming these respondent parties was subsequently filed on 16 April 2019.
  8. The grounds of review, as set out in the amended application for review, are as follows:

The learned trial judge erred in mixed law and fact when His Honour failed to consider relevant considerations which, if considered, the summary judgment should not have been granted and these relevant considerations are:-


(i) The learned trial judge erred in law and fact when His Honour failed to consider that between 1999 and 2002, the Second Plaintiff was not legally mandated to receive royalties on behalf of the First Plaintiff until 2003 when Section 176 of the Oil and Gas Act was amended to provide the legal basis for the Second Plaintiff to receive royalties under the Act. Royalties for the periods of 1999 to 2002 were paid directly to Landowners per the Oil and Gas Act.

(ii) The learned trial judge erred in law and fact when he failed to consider the 5% Royalty Withholding Tax component pursuant to Section 159 of the Oil and Gas Act which if considered, would have reduced the amount claimed at paragraph 18 of the Plaintiffs’ Amended Writ of Summons and Statement of Claim consequently by 5% of the Plaintiff's outstanding royalties claim of K150,083,848.30

(iii) The learned trial judge erred in fact to consider that the table of unpaid royalties contained at paragraph 18 of the Plaintiffs’ Amended Writ of Summons failed to correctly plead that the Fourth Defendant paid royalties for the year 2015 and was erroneously pleaded by the Plaintiffs as payments outstanding. If properly considered would have reduced the judgment debt ordered in the learned trial judge’s order now the subject of this review.

(iv) The learned trial judge erred in fact to consider that the table of unpaid royalties contained at paragraph 18 of the Plaintiffs’ Amended Writ of Summons failed to correctly plead that the First, Second and the Fourth Defendants paid royalties for the subsequent years, 2011, 2013 and 2015 and was erroneously pleaded by the Plaintiffs as payments outstanding. If properly considered would have significantly reduced the judgment debt ordered in the learned trial judge's order now the subject of this review.

(v) The learned trial judge erred in law and fact when he failed to consider that some royalty monies from the periods 2003 to 2005 were paid directly to the respective project area landowners through their respective Incorporated Land Groups (ILGs) in accordance with the purpose of the Trust Deed and in accordance with Section 176(3)(a) of the Oil and Gas Act.

(vi) The learned trial judge in his decision in entering judgment pursuant to the Orders of 18ᵗʰ May 2018 failed to consider the Defendants’ Defence filed 11th December 2016 which raises meritorious defence based on both law and fact.


(vii) The learned trial judge in his decision in entering judgment pursuant to the Orders of 18ᵗʰ May 2018 failed to consider that pursuant to section 12(3) Claims By and Against the State Act, 1996, where in a claim against the State, the State is in default within the meaning of National Court Rules, judgment of liquidated claim shall not be entered against the State for the sum claimed unless the claim relates to a debt only, and in all other cases judgment shall be entered for damages to be assessed and, where appropriate, for costs.


  1. The response of Petroleum Resources Gobe Limited and MRDC to the amended application for review was to object to its competency. That objection was dismissed on 28 October 2019 on the basis that it was itself incompetent.
  2. The application for leave to review came on for hearing before a single judge of this Court on 20 November 2019. On 19 December 2019 the learned judge granted the State leave to review: Independent State of Papua New Guinea v Petroleum Resources Gobe Limited and anor, SC 83 of 2018, 19 December 2019 (Hartshorn J).
  3. The respondents made a further objection to competency in respect of the application for review filed as a consequence of this grant of leave to review. That objection was, as has already been mentioned, dismissed by the Court for reasons given in the 2022 competency judgement.
  4. On the hearing of the application, the respondents asserted that particular grounds of review were not maintainable because they raised issues not raised in the National Court. This assertion repeated a misconception already exposed, for reasons given in the 2022 competency judgement. The present proceeding is an application for review, not an appeal. Authorities concerning the raising of issues for the first time on an appeal are irrelevant. The State has already been granted leave to review on the grounds specified in its application for review. Those grounds are set out above and in the 2022 competency judgement.
  5. As it happens, at the hearing, the State exercised a discerning forensic value judgement in relation to those grounds of review. It chose not to press some of those grounds (grounds (i), (iii) and (iv)).
  6. Of the remaining grounds, it is convenient first to deal with the applicant’s allegation (ground (vii)) that default judgement was granted against the State in contravention of s 12(3) of the Claims By and Against the State Act 1996, which provides:

(3) Where in a claim against the State the State is in default within the meaning of the National Court Rules, then notwithstanding that a plaintiff’s claim for relief is for a liquidated demand, judgement shall not be entered against the State for the sum claimed unless the claim relates to a debt only, and in all other cases judgement shall be entered for damages to be assessed and, where appropriate, for costs.


  1. As the applicant’s helpful submissions reminded, observations have been made in prior decisions of this Court as to the meaning and effect of s 12(3) of the Claims By and Against the State Act.
  2. Of these, earliest in time would appear to be State v Josiah [2005] PGSC 18, SC792. In that case, a number of members of the Defence Force instituted proceedings against the State in the National Court in respect of unpaid incidental allowances allegedly due to each of them for a period during which they had at various times attended overseas training. Although granted an extension of time for that purpose, the State failed to file a defence. On the application of the plaintiffs, a judge granted summary judgement, including judgement in default of pleadings, in respect of the allowances claimed. The Court concluded that the claim for allegedly unpaid allowances was not a liquidated claim. In so doing the Court cited with approval an observation made in Dempsey v Project Pacific Pty. Ltd [1985] PNGLR 93 that a claim is “liquidated when it is ascertained or is capable of being ascertained by a simple calculation, as when there is no element of assessment on judgment”. Having reached this conclusion, the Court also drew attention to s 12(3) of the Claims By and Against the State Act, noting that, even had the claim been liquidated, it was not one for a debt and thus the judgement had been granted contrary to statute. This provided one reason why, in the circumstances of that case, the judgement was set aside.
  3. That a summary judgement, even for a liquidated claim, could not go in default against the State in the face of s 12(3) of the Claims By and Against the State Act was accepted by Dingake J, sitting in this Court’s applications list on the hearing of a stay application, in Secretary, Department of Mineral Policy and Geohazard Management v Manton Group Ltd [2018] PGSC 40, SC1703. Although, given the nature of the proceeding before him, it was neither necessary nor appropriate for his Honour to reach a concluded view, his Honour observed, at [24]: “In my mind, the granting of summary judgment on a liquidated demand in the face of Section 12(3) of the Claims By and Against the State Act against the State ... may well be an impermissible error on the face of the record.”
  4. Observations concerning the meaning and effect of s 12(3) of the Claims By and Against the State Act have also been made in the National Court. Notably in Balakau v Amet [2013] PGNC 107, N5313 Kandakasi J (as his Honour then was) offered, at [5] to [11], this analysis of what constitutes a claim for a “debt” for the purposes of that provision:
    1. ... The question then is what constitutes a “debt”. L.B. Curzon, A Dictionary of Law defines the term in these terms:

“A sum that one person is bound to pay another. ‘Debt normally has one or other of two meanings: it can mean an obligation to pay money or it can mean a sum of money owed.’...”


  1. Other ordinary English dictionaries define the term broadly to include services and a feeling of being indebtedness to someone. According to the ordinary English language the term “debt” has two contextual categories. The first is in terms of “money owing” and means money owing, arrears, liability, debit, balance, balance due and or credit. The second is in terms of an obligation where someone is obliged or has the duty, responsibility and or dues owed to another.
  2. The first context renders no complication because it clearly deals with money owed. Such a situation would come about out of say for example where goods and services are supplied or rendered at a particular agreed price or cost and are not paid for or that someone lends certain sums of money on conditions of their repayment with or without interest. The second context which is a debt other than a sum of money owed would present complications. This context talks about a duty or obligation being owed. The complication would be in terms of identifying what kinds of duties or obligations would fall under this category. In the context of the question under consideration in this judgment, we are fortunately provided with an answer by s. 12(3) of the CBASA. The debt must relate to a liquidated claim. The question then is what is a “liquidated claim”?
  3. There are numerous authorities in our jurisdiction which helpfully define what is a liquidated claim. The 1982 Annual Practice, par 6/2/4a, provides the following definition of liquidated demand, which has been used for many years:

“A liquidated demand is in the nature of a debt, i.e. a specific sum of money due and payable under or by virtue of a contract. Each amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a 'debt or liquidated demand' but constitutes ‘damages’.”


  1. The Supreme Court in Anthony Nicholas Dempsey v. Project Pacific Pty Ltd adopted and effectively applied the above definition. In so doing, the Court was of the view that, value of shares in the company were not considered liquidated because they could not easily be ascertained but by further consideration and assessment.
  2. The above definition has been adopted and applied with approval in many subsequent cases. One of the latest is the decision of her Honour Sagu AJ (as she then was) in Wamp Nga Holdings Ltd v. KK & Sons Ltd. Her Honour had regard to a simple yet more helpful definition in the Oxford Dictionary of Law, 6th edition published in 2006 which defines the term "liquidated claim" as follows:

“A demand for a fixed sum, eg. A debt of $50. Such a demand is distinguished from a claim for unliquidated damages, which is the subject of a discretionary assessment by the court.”


  1. Now taking into account all of the foregoing discussions, it is clear that where there is a liquidated claim against State and the State is clearly in default, the Court can sign judgment for the amount claimed only if the claim is in respect of a debt claim. Such a claim must involve the payment of a certain sum of money which is due and owing and is easily ascertainable without the need for any assessment.
  2. Also in Balakau v Amet (supra) Kandakasi J expressed disagreement with this observation made by Gavara-Nanu J in Rose v. The State [2007] PGNC 71; N3241 concerning s 12(3) of the Claims By and Against the State Act:

“...The section provides that, where a claim against the State is for a liquidated demand, unless the claim relates to a debt only, no judgment can be entered against the State for the liquidated amount claimed. Thus, where a claim against the State is for a liquidated amount as well as for general damages, as is the case here, the Court is only empowered to enter judgment for damages to be assessed, in the event of a default by the State ...”


  1. In Balakau v Amet, Kandakasi J, at [3], opined of the provision that:

“Where there is a case for the signing of a default judgment against the State on a liquidated claim, the Court is precluded from signing judgment for the amount claimed. But this provision does allow for the Court to sign judgment for the amounts claimed if it is a debt claim.”


In so doing Kandakasi J referred to a statement to like effect made by Sawong J in Kumba v Pagalio [2010] PGNC 92, N4089.


  1. With respect, we consider that the apprehended difference of views between what is stated in Balakau v. Amet and Rose v. The State is more apparent than real.
  2. As a matter of construction, the reference in s 12(3) to a liquidated demand is found in an emphatic qualifying clause: “then notwithstanding that a plaintiff’s claim for relief is for a liquidated demand”. The subsection opens with a statement which covers the generality of claims to which the State is a defendant party in default in terms of the National Court Rules. It thus embraces both unliquidated and liquidated claims howsoever arising. There then follows the emphatic qualifying clause mentioned. The purpose of the emphatic qualifying clause is to make it patent that the general prohibition against entering judgement against the State for the amount claimed applies even in cases of liquidated claims. In turn, that emphasised prohibition is subject to a qualification, which is if the claim is for a debt only. In all other classes of case, a default by the State can only sound in the granting of judgement with damages to be assessed.
  3. In the ordinary course of events, where a claim is unliquidated one might expect that a default judgement would only ever be granted for damages to be assessed. In this sense, s 12(3) of the Claims By and Against the State Act confirms a prevailing position where a defendant to an unliquidated claim is in default: see Chapau v. The State [1999] PGNC 95, N1933 (Injia J, as his Honour then was).
  4. We consider that, in the observations Gavara-Nanu J made in Rose v. The State, his Honour did nothing more than recognise that the prohibition in the provision extended to both unliquidated and liquidated claims against the State, subject only to an exception in respect of the latter category if the claim were for a debt only. We respectfully agree that this is the effect of the provision. That expression of agreement does not carry with it any dissent from the observations made by Kandakasi J in Balakau v. Amet or Sawong J in Kumba v. Pagalio, each of which cases recognise, correctly, that the only type of liquidated claim to which the s 12(3) prohibition does not extend is a claim which is for debt only.
  5. Later in time in the National Court, in relation to s 12(3) of the Claims By and Against the State Act, is Moiga v Hembehi [2022] PGNC 401, N9868. In that case, materially, judgement had been granted against the State on the basis of a default on an ex parte application in respect of a claim in negligence and for the amount of that claim. One basis upon which Shepherd J set aside the default judgement was that it had been granted in breach of s 12(3) of the Claims By and Against the State Act, because the claim was unliquidated in character. Necessarily in so doing, his Honour recognised that the statutory prohibition extended to unliquidated claims.
  6. Moiga v Hembehi also offers a helpful reminder of the enduringly authoritative statements made in this Court in Dempsey v Project Pacific Pty Ltd (supra) concerning the difference between a liquidated and an unliquidated claim. In that case, at 95 – 96, Pratt J (Amet J agreeing) stated:

“A liquidated demand is in the nature of a debt, i.e. a specific sum of money due and payable under or by virtue of a contract. Each amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a ‘debt or liquidated demand’ but constitutes ‘damages’.”


In that same case and to like effect Woods J stated, at 101: “a claim is liquidated when it is ascertained or is capable of being ascertained by a simple calculation, as when there is no element of assessment on judgment”.


  1. Regard to the amended statement of claim in the present case discloses that one of the causes of action pleaded is in respect of allegedly unpaid royalty benefits arising from the Gobe Petroleum Project, said to be payable by the State to Petroleum Resources Gobe Limited pursuant to s 176 of the Oil and Gas Act 1998 and clause 2.2 of a trust approved by the Minister for the purposes of that section. Pursuant to s 176 of the Oil and Gas Act the trustee of such a trust must be wholly owned by MRDC. In this case, there is such a trust, the Gobe Petroleum Trust.
  2. A royalty benefit forms one component of the payments which must be made to such a trust pursuant to s 176. The other is what is termed an “equity benefit”. For the purposes of s 176 of the Oil and Gas Act, a “royalty benefit” is one “granted by the State in accordance with Section 168” see s 176(1). By s 168(3) and 168(4) of the Oil and Gas Act, it is provided:

(3) The royalty benefit granted under this section shall be payable monthly, by the Minister, out of royalties payable to the Minister pursuant to Section 159.

(4) The royalty benefit granted under this section shall be paid to the trustee and held on trust for the grantees in accordance with Section 176.


  1. By s 159(1) and 159(2) of the Oil and Gas Act, it is provided:

159. ROYALTY.


(1) Subject to Subsection (2), a tenement holder shall pay to the State royalty at a rate of 2.00% of the wellhead value of all petroleum produced from the licence area.

(2) For the purposes of Subsection (1), the wellhead value of any petroleum is the value of the petroleum determined in accordance with Section 158 less any deductions prescribed in the regulations to the extent and in the manner prescribed.


  1. In turn, s 158 of the Oil and Gas Act provides:

158. DETERMINATION OF VALUE OF PETROLEUM.

Except as otherwise provided in the Schedule, the Minister shall, from time to time, after considering any information furnished by the tenement holder and any other information that the Minister thinks relevant, determine in accordance with Schedule 1 the value, for the purposes of this Act, of petroleum produced from a licence area–


(a) in the case of petroleum intended for export – as at the point of export; or

(b) in the case of petroleum not intended for export – as at the point of delivery to a refinery or processing facility in Papua New Guinea; or

(c) where a gas agreement applies, at the point specified in the gas agreement.


  1. It is not necessary to set out any part of the Schedule to the Oil and Gas Act, only to appreciate that it provides for an elaborate process by which the value of petroleum may be determined.
  2. The point of this excursion into the Oil and Gas Act is that, having regard to the authorities set out above concerning the meaning and effect of s 12(3) of the Claims by and Against the State Act, a claim for allegedly unpaid royalty benefit could not in our view be described as a “liquidated demand” and certainly not as a claim for a “debt only”. The process of ascertaining the correct amount of a royalty benefit is ultimately dependent upon a Ministerial determination of petroleum value according to an elaborate process and then upon the ascertainment of the volume of production over a given period.
  3. What follows from this is, with all respect to the learned primary judge, the granting of judgement by default in respect of allegedly unpaid royalty benefits was prohibited by s 12(3) of the Claims by and Against the State Act.
  4. The position is no better insofar as an alleged negligent breach by the State of an alleged duty of care to comply with the terms of the Gobe Petroleum Trust and s 176 of the Oil and Gas Act has been made. .Assuming that there is such a duty of care and that it was negligently breached (each being large questions unnecessary to answer for the purpose of determining this appeal), such a cause of action is, necessarily, a claim for unliquidated damages. In respect of this claim also, the effect of s 12(3) of the Claims by and Against the State Act was to prevent the entry of judgement by default against the State.
  5. The same applies to the allowance of an amount for loss of profits in the judgement entered. This too is, necessarily, in respect of an unliquidated claim.
  6. Thus, however one approaches the claims made against the State as pleaded in the amended statement of claim, it was only ever lawfully possible for judgement to be entered for damages to be assessed, together with an appropriate order for costs.
  7. This is reason enough in itself to set aside in full the judgement of 18 May 2018.
  8. Although the point was not developed in the submissions for the first and second respondents, and although it is contrary to the view we have expressed about the effect of the Oil and Gas Act, we acknowledge that there may be an argument that, elaborate though the provisions of that Act are for the determination of wellhead value, they ultimately result in the Ministerial determination of a sum certain such that there is a resultant statutory obligation to pay an equally certain percentage as a “royalty benefit”. In turn, so an argument might go, there is not just a liquidated sum but a debt. However, even if there were merit in such an argument and certainly if there were not, the other grounds of review persuade us that, in lieu thereof, judgement should not be ordered for damages to be assessed, as might otherwise be open pursuant to s 12(3) of the Claims by and Against the State Act.
  9. Ground (v) appears to us to raise an issue warranting trial in respect of whether there is anything owing in respect of the 2003 to 2005 years or whether, as alleged, payment was made in accordance with s 176 of the Oil and Gas Act and the trust deed.
  10. As to ground (vi), the pleaded defence, which was on file at the time when judgement was entered on 18 May 2018, raised the following issues:
  11. We have already accepted that the last of these propositions, also found in ground (v), raised a triable issue.
  12. In the absence of a notice under s 5 of the Claims By and Against the State Act, the institution of the proceeding against the State and its officers in the National Court was incompetent. It was for the learned primary judge to satisfy himself on the evidence presented by the respondents on 18 May 2018 that such notice had been duly given prior to the granting of any judgement. This did not occur. Whether such notice was given is a triable issue.
  13. By s 16(1) of the Frauds and Limitations Act, it is provided:
    1. LIMITATION OF ACTIONS IN CONTRACT, TORT, ETC.

(1) Subject to Sections 17 and 18, an action–

(a) that is founded on simple contract or on tort; or

(b) to enforce a recognisance; or

(c) to enforce an award, where the submission is not by an instrument under seal; or

(d) to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture,

shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.


  1. The claims made against the State as pleaded in the amended statement of claim are either claims in tort (alleged negligent breach of an alleged duty of care) or to recover a sum said to be owing under statute, namely under the Oil and Gas Act. It follows that such claims were subject to a limitation period, commencing when the cause of action accrued. Insofar as the claim was based in tort, the cause of action accrued at the time when, as a result of a proven breach, damage was causally suffered. That might be thought to occur at the time when, as a result of any proved negligence by the State via an officer, payment was made other than as required by the Oil and Gas Act and the trust deed approved for the purposes of s 176 of that Act. The time when such payment was required to be made under statute and that trust deed, and was not so paid, might likewise be thought to be the time when a cause of action to recover monies owing under an Act occurred. The claims relate to sums allegedly not paid or not paid in full as far back as 1999. The writ by which proceedings were instituted in the National Court was not filed until 27 November 2014.
  2. As matters stood on 18 May 2018 when judgement was entered, and in the face of a pleaded limitation defence, there was a triable issue as to whether that part of the claim which arose more than six years prior to the commencement of the proceeding was statute-barred. For this reason also, judgement ought not, with respect, have been entered for the whole of the amount claimed. Rather, it should, with respect, have been recognised that there was a triable issue concerning the effect in the circumstances of the limitation defence pleaded.
  3. Ground (ii) does not go to whether the whole of the judgement sum was excessive. Instead, it raises a nice question as to whether that sum was excessive to the extent that it did not give credit for an amount which should have been withheld from any royalty benefit amount otherwise payable and instead paid to the Commissioner General of Taxation, pursuant to the combined effect of s 159(4) of the Oil and Gas Act, s 280 of the Income Tax Act, clause (c) of the trust deed dated 1 April 2003 and clause (d) of the trust deed dated 5 August 2015.
  4. These respectively provide:

Oil and Gas Act, s 159(4):

(4) Notwithstanding the provisions of the Income Tax Act 1959, where, in a financial year, in relation to the same licence area, a person has paid–

(a) royalty under this section; and

(b) development levy under Section 160,

the royalty paid by that person under this section shall be deemed to be income tax paid by that person in respect of its liability to income tax under the Income Tax Act 1959 on its assessable income from petroleum operations derived from the petroleum project to which the royalty relates.


Income Tax Act, s 280, materially:


  1. DUTIES OF PAYING AUTHORITY.

(1) A person who is registered, or is required to be registered as a paying authority under Section 277 at any time during a month (in this subsection referred to as the “relevant month”) shall–

(a) deduct the required amount from each payment; and

(b) not later than 14 days after the end of the relevant month–

(i) [Repealed.]

(ii) pay to the Commissioner General the total amount of tax deducted from eligible payments made during that month; and

(iii) furnish to the Commissioner General a remittance advice stating–

(A) the total amount of eligible payments made during the relevant month; and

(B) the total amount of tax deducted from those payments or that there was no tax deducted, if that was the case; and

(iv) [Repealed]

...

(9) In Subsection (1), “required amount” means–

(a) in the case of a business income payment 10% of the gross amount of the payment; or

(b) in the case of a payment of a prescribed royalty payment – 5% of the gross amount of the payment.

The trust deed dated 1 April 2003 provides, by clause (c):

“(c) that the expenditures out of the account shall be solely; for the payment of the landowners benefits less the deductions of the nominal tax (if applicable) to the relevant Gabe Landowners and payment of nominal tax to Internal Revenue Commission (IRC) ...” [emphasis added]


The trust deed dated 5 August 2015 provides, by clause (d):

“(d) All payments or withdrawal from the account shall be for payments of benefits to the Incorporated Land Groups (JLG) through Petroleum Resources Gobe (PRG) which is a subsidiary of Mineral Resources Development Company (MRDC) and, Internal Revenue Commission (IRC) as stipulated under the relevant agreements and Section 176 of the Oil and Gas Act. 1998. In addition, payments will only be made if sufficient balance is available.” [emphasis added]


  1. The State’s submission was that the combined effect of these provisions was that 5% of the gross amount of the royalty payments had to be paid to the Commissioner General of Taxation and, thus, in any event, judgement had been entered for an excessive amount, to the extent of this taxation liability.
  2. The respondents’ submissions implicitly assumed that such a 5% withholding liability existed. However, the respondents submitted that the effect of what was said to be s 142C of the “Income Tax Act 1958” (sic) was that the State was entitled to deduct the requisite 5% from the judgement sum.
  3. There is no “Income Tax Act 1958” on the statute books. However, in 2015 Parliament enacted the Income Tax (2015 Budget) (Amendment) Act 2014 (2014 Amendment Act), which amended the Income Tax Act 1959. Section 7 of the 2014 Amendment Act inserted a new Division 6C into the Income Tax Act. The new Division 6C contains, materially, s 142C, which provides:

142C. LIABILITY TO PRESCRIBED ROYALTY (WITHHOLDING) TAX.

Where a prescribed royalty payment is paid or credited by any person to a customary landowner, the person making the payment or crediting such payment is liable to withhold and pay tax upon that income at the rate of 5%.


  1. The effect of the 2014 Amendment Act is that the amendment made by s 7 of that Act was deemed to have come into operation on 1 January 2015.
  2. It follows that, whatever may be the meaning and effect of s 142C of the Income Tax Act, it could have no application to any royalty benefits payable before then. That comprises the vast bulk of the royalty benefits allegedly owing here.
  3. This aside, s 142C of the Income Tax Act has nothing to say in relation to the liability of a judgement debtor to withhold an amount from the judgement sum entered.
  4. Instead, it seems to us that the combined effect of s 159(4) of the Oil and Gas Act, s 280 of the Income Tax Act, clause (c) of the trust deed dated 1 April 2003 and clause (d) of the trust deed dated 5 August 2015 is that, whatever might have been the State’s liability in respect of the payment of a royalty benefit, that liability was always net of 5% of the gross amount of the payment. That 5% sum was payable to the Commissioner General of Taxation. To the extent that s 142C of the Income Tax Act had any application in the circumstances (which may be doubted, for the reason given already), it serves only to underscore this position.
  5. It follows that the judgement sum entered was in any event excessive.
  6. We emphasise that, on our review of the material filed with respect to the application, it appears to us that the learned primary judge received little, if any, assistance from the applicants seeking judgement in default. The court is entitled to expect from a party seeking judgement in default assistance as to whether there is any inhibition in law or in fact in respect of the granting of such judgement. That the judgement sought was for such a colossal sum as in the present case served to underscore the gravity of that duty. Further, that duty remained even where, because of the default, there was an understandable degree of judicial displeasure regarding the conduct of the defendants.
  7. For these reasons the orders made by the National Court on 18 May 2018 must be quashed. In lieu thereof, it will be ordered that the application for judgement in default be dismissed. The National Court should, in those writ proceedings, enter up all necessary adjournments and proceed to hear and determine the claims made in the amended writ according to law.
  8. The respondents must pay the applicant’s costs of and incidental to the review application.

ORDERS:


  1. The orders made on 18 May 2018 in proceeding WS 1488 of 2018 (CC2) in the National Court (writ proceeding) are quashed.
  2. In lieu of those orders in the writ proceeding, it is ordered that the application for judgment in default is dismissed.
  3. In respect of the writ proceeding, the National Court must enter up all necessary adjournments and proceed to hear and determine the claims made in the amended writ according to law.
  4. The respondents shall pay the applicant’s costs of and incidental to the review application, such costs to be taxed if not agreed.

________________________________________________________________
Ace Lawyers: Lawyer for the Applicant
Jema Lawyer: Lawyers for the First and Second Respondents

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