Unreported National Court Decisions
N1642
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
OS 409 OF 1997
BETWEEN
ALOYSIUS EVIAISA - FIRST PLAINTIFF
AND
EREMAN RAGI - SECOND PLAINTIFF
AND
THE HONOURABLE ROY YAKI, MINISTER FOR FINANCE - FIRST DEFENDANT
AND
SHEM PAKE - SECOND DEFENDANT
AND
PUBLIC OFFICERS SUPERANNUATION FUND BOARD - THIRD DEFENDANT
Waigani
Sheehan J
9-10 October 1997
15 October 1997
PUBLIC OFFICERS SUPERANNUATION FUND BOARD - appointment of Managing Director - requirement of Act - challenge that procedures not followed.
Counsel
Mr P Lowing for the 1st Plaintiff
Mr G Sheppard 2nd Plaintiff
Mr J Lightfoot for the 1st Defendant
Mr J Bray for the 2nd Defendant
Mr R Pato for the 3rd Defendant
DECISION
15 October 1997
SHEEHAN J:  In this application for Judicial Review, the 1st Plaintiff Mr Eviaisa, a Board member of the Public Officers Superannuation Fund Board challenges the appointment made by Mr Roy Yaki the 1st Defendant of Mr Shem Pake the 2nd Defendant as Managing Director for the Fund on 11 September 1997.  Leave to make this application was granted by the Chief Justice on 3rd October last.
The challenge is made the ground that the appointment was made in breach of the powers of appointment given to the Minister in that the appointment was made without there being any prior recommendation of POSF Board as required by s. 12 of the POSF Act.  Mr Ereman Ragi has been joined as a 2nd Plaintiff.  As the incumbent Managing Director at the time of disputed appointment, it has been acknowledged that he has an interest in this proceedings.
The Board has also been joined an interested party.  There was an initial question as to whether the Board should be listed as a Defendant as Counsel seeking to appear on its behalf maintained, since it had sought to joined at only the last moment, and because the  very question for trial was whether or not the Board made a recommendation for an appointment or not.  Challenge to the validity of Counsel’s instructions was not resolved entirely prior to hearing.  Counsel acknowledging  that he had no written instructions undertook to obtain a resolution of the Board to confirm his authority to act.
In the end the Board was joined as 3rd Defendant and Counsel for the Board thereupon challenged the standing of the 1st Plaintiff to bring these proceedings.  He maintained that an individual Board member has no status of his own to bring an action on behalf of the Board or POSF.  The collective Board itself is the sole authorised agent to act for the fund.  With the Board now joined as a party, Mr Eviaisa’s role was subsumed in the Board and he could be dismissed from the proceedings.
This matter was quickly resolved.  Whatever the 1st Plaintiff or authority or standing to act on behalf of the Board itself or on behalf of the Fund (and there was evidence that he did have Board authority to commence these proceedings) there could be no challenge to the fact that as a Board member he had standing and an interest in the proper legitimate administration of POSF.
He is also a Trustee of the Fund Section 7 (4) of the POSF Act reads:
“(4)    the members of the Board are Trustees of the Fund and upon taking office each member of the Board shall - a sign a trust deed in a form determined by the Minister which shall make each member of Board individually and jointly responsible for the management of the Fund.”
As such, a Board member not only has standing as a Administrator of the Fund he has as a statutory trustee, a personal interest in the integrity of the Fund and therefore a duty to ensure that the legislation under which the Fund operates is abided by.  But equally importantly he is himself contributor to the Fund.  This status is sufficient in itself.  Each and every member of the POSF has the standing to inquiry into the financial management and administration of the Fund and if necessary to challenge its administration including such matters as appointments to its Board.
It is acknowledged by all parties that s. 12 of the POSF Act governs the appointment of a Managing Director of the POSF Board.  That section reads relevantly:
“12.    Staff of the Board
(1)      The Board shall:
(a)      recommend to the Minister a suitably qualified person to be appointed Managing Director of the Fund.
(5)      The terms and conditions of employment of:
(a)      the Managing director shall be fixed by the Minister;
subject to the Salaries and Conditions Monitoring Committee Act.”
The Plaintiffs maintain that the statutory procedure was not followed in the purported appointment of Mr Pake.  Because the Board made no recommendation for the appointment, there could be no appointment by the Minister.
Further it is the Plaintiffs case that even before the appointment was Gazetted the Board had on 9th September written to the Minister to register concern at the Minister’s:
“move to remove the Boards current Managing Director, Mr Ereman Ragi, and replace him with Mr Shem Pake.”
The letter went on to say that it  was unanimously agreed by the Board:
“that we write to you jointly and register our concerns regarding the move...”
The letter continues with the Board giving its support to Mr Ragi continuing as Managing Director pointing to his performance in the post.  It pointed also to the fact that Mr Ragi’s contract had already been renewed for a further term and that the then Minister of Finance had executed that contract of renewal.
The Defendants on the other hand see that letter in an entirely different light.  They say that that letter of 9th September is the recommendation that the Minister acted on in appointing Mr Pake.
Mr Lightfoot Counsel for the 1st Defendant submitted that the Ministers powers are much wider than merely rubber stamping a Board recommendation on appointment of Managing Director.  By virtue of the provisions of the POSF Act, the Minister is the person charged with the overall control and administration of the Fund.  As such the discretions given to him are equally wide.
Thus while it is clear that for an appointment of Managing Director it is mandatory that there shall first be a recommendation from the Board, once such a recommendation of one or more suitable persons - has been made, the Minister can accept or reject those nominations and indeed can put in any other person of his choosing, whether that person has been recommended by the Board or not.  It was Counsel’s contention that anything less would be an unlawful fetter on the Ministers discretion.
For the Board, Mr Pato said the evidence was clear that prior to the appointment, in fact on 4 September, the Board had discussed the position of Managing Director.  He said that while there were no official minutes of the resolutions at that meeting, it must be inferred that word had got to the Minister that there had been such a discussion.  That was confirmed to the Minister he said, by the letter of the Board members of 9th September.
Mr Pato submitted that that letter is the recommendation.  Essentially it recommended that Mr Ragi remain, that Mr Pake not be appointed.
But he contended that it is not relevant who the Board recommended.  The Minister is not obliged to accept a recommendation.  In fact the Minister appointed Mr Pake as it was within his authority to do.
For the 2nd Defendant Mr Bray supported the positions taken by other Defendants.
He submitted that while there was no fixed procedure of appointment other than the statutory requirement that the Minister act after receipt of a recommendation of the Board, that in fact is what occurred.  The Minister was made aware of the expire of Mr Ragi’s contract in August 1997 and had proceeded to fill the position by appointment of Mr Pake once he had received the recommendation of 9th September.  He said that given the ‘take-it-or-leave-it’, attitude of that letter, it was perhaps not surprising that the recommendation to retain Mr Ragi had not been followed.
It is also the contention of the Plaintiffs, that  there could be not appointment in any case when there was no vacancy.  The 2nd Plaintiffs appointment had been renewed in February 1997 so there was no position to fill.  It could not be argued, it was said that the purported appointment of the 2nd Defendant, by implication terminated the appointment of Mr Ragi.
The Defence denied that the February contract was valid.  They pointed to a lack of formal appointment by the Ministers and the lack of SCMC approval.  They termed it a secret agreement, an attempt to pre-empt the Ministers rights of appointment.
It is accepted that s 12 makes it a pre condition to an appointment of Managing Director that there shall first be a recommendation by the Board to the Minister of a person suitable for the post.
I am satisfied that the appointment of Mr Pake to the Board published in the Gazette on 11 September 1997 was not made following a recommendation by the Board as required by Section 12 of the Act.
There is the letter of 9 September.  Extensive submissions have been made as to its meaning and implications but the letter in fact speaks for itself.
I find first of all, that the letter is not a formal letter from the Board of the POSF.  It is a letter from individual Board Members though in fact signed only by Mr Eviaisa.  It is not couched as a letter of recommendation of an appointment by the Board.  It states that it is a letter from the members of the Board to express their concern at reported “moves” by the Minister to appoint Mr Pake without reference to the Board.
It points out that there is an incumbent Managing Director whose contract has been renewed by the former Minister of Finance.  It states that his work has been exemplary and expresses the view that changes should only be for a person of merit and integrity.
Finally it expresses willingness to co-operate in the appointment of a new Managing Director if it is done properly.
On its face it is not a letter of recommendation from the Board and the evidence of Mr Eviaisa confirms that.
The Defendants argue that it recommends that Mr Ragi be retained and therefore constitutes a recommendation that Minister could and did act upon as per his discretion.
I find that contention untenable It cannot be maintained, that to provoke a concerned reaction from Board members about ‘reputed moves’ to make an appointment without reference to the Board causing it to write in protection of the incumbent and its own position can be given the status of an official recommendation within the meaning of the Act.  Particularly the status of a recommendation which not only need not be accepted but one which having been rejected enables appointment of any other.
I do not accept that is the case, but even were it so, the Minister does not have the discretion to act other than on the recommendation made.  It is certainly true that the Minister is not compelled to accept a recommendation.  He may in his discretion reject a recommendation.  But in doing so he must refer the matter back to the Board for a further recommendation.
This is made clear by the Supreme Court in SCR 1 of 1984: Re Morobe Provincial Government 1984 PNGLR 212 at 219 cited by Mr Lowing for the Plaintiff where a similar provision regarding recommendation was considered.
(b)      Recommendation
This is the final step before an appointment is made.  It has a much stronger effect.  It plays a prominent role in the final appointment.  At this level the Provincial Government screens and eliminates names of people.  When the appropriate person is recommended, that person should ordinarily be appointed by the Prime Minister.  The Prime Minister cannot appoint any person outside the recommendation. 
The Prime Minister, however has the final discretion whether to appoint the person recommended.  If he exercises his discretion not to appoint the recommended person, then the matter has to go back to the process of recommendation by the Provincial Government...
Fears of possible stalemate voiced by counsel for the Defendants are more theoretical than real because the Minister has the ultimate control over appointments to the Board.  In any case this Board had already indicated a willingness to co-operate.
Equally the purported appointment is open to criticism in Judicial Review as unreasonable in the Wednesbury sense, given that there was the direct information to the Minister in the letter of 9 September that the incumbent’s term had been extended and his contract endorsed by the Ministers predecessor.
To appoint another to the post without further enquires as to the status of that contract must be seen as failing to take into account matters required to be taken into account before acting on discretion.  It is not enough to say that the contract is illegal or void when there is no indication, any enquires was ever made of it, and the incumbent had been holding his post under the renewed contract terms for some 6 months or more.
There is a further reason why the contention that s. 12 was followed cannot be upheld.  The Defendants have throughout relied on the letter of 9th September as the recommendation which the Minister acted on in what he believed to be a discretion open to him.  Yet the Gazette notice of 11 September 1997 is notification of the appointment of Mr Pake made and dated the 22 August 1997.  This is well before the discussions of the Board members of 4 September which lead to the letter of concern of 9 September.  It is compelling evidence that there was no recommendation from the Board at all and that the appointment was in fact made without reference to it.
There remains the assertion that the Board on 18 September subsequently ratified the appointment of Mr Pake.  On the evidence before the court that was not the case.  Mr Eviaisa’s evidence - uncontested in any way - is that the Board only conceded to Mr Pake’s appointment because they were faced with the fact of the confusion of two Managing Directors and because of possible moves against their own positions on the Board.  Such ratification is no ratification and in any case there could be no ratification of an appointment unlawfully made.
For clarity the present position needs to be set out.
Mr Pakes purported appointment notified in the gazette on 11 September was unlawful.  He is not the Managing Director of the POSF.  Mr Ragi is.
The status of his contract has not been questioned by these proceedings but the fact that he has a contract executed by the Minister of Finance, that application has been made for SCMC approval of its terms, and that there has been no indication of objection to the contract; and since Mr Ragi has been working and been paid under the terms of that contract for 6 months or more gives rise to a strong presumption as to its validity.  Only the Minister, the Board Mr Ragi - and the members of the POSF - have the status to inquiry into or question it.  Until such occurs Mr Ragi remains Managing Director.