National Court of Papua New Guinea

T. for Applicant/Judgment Creditor

P. Kuman for the first Garnishee
No appearance for the second Garnishee

RULING

(Application to garnish account)

7th April 2005

DAVANI .J: I heard this application and reserved for ruling because it raises the fundamental issue of the role played by bodies holding and controlling equity and funds as trustees on behalf of beneficiaries. This is my ruling.

Background

Before me is a Notice of Motion filed by Gubon Lawyers on 31st March, 2005, application filed for and on behalf of the applicant/judgment creditor (‘applicant’), in the both proceedings and which seek various orders in the same terms. Both counsel consented to having the both motions heard together because they involved the same parties.

In WS 1513 of 2004, the judgment creditor seeks orders that the defendants pay it the sum of K13,200.00, being monies owing to him from a judgment obtained in this court and that in default, the court to issue a warrant of execution.

In WS1463 of 2004, the applicant seeks orders in the same terms, but for payment of judgment debt in the sum of K57,600.00.

The original judgment debt in both matters are consent orders taken out by the applicant in proceedings between itself as the plaintiff and the Ase Tipurupeke Land Group incorporated as the defendant which orders were endorsed by the court on 26th November, 2004. The sealed orders read that the defendant shall pay K13,200.00 (WS 1513 of 2004) and K57,600.00 (WS 1463 of 2004) to the plaintiff after it receives its "monetary benefit from the Department of Petroleum and Energy and the Mineral Resources Development Company Limited." The propriety of these orders are questionable but which the defendant does not take issue with, no doubt because that was the basis on which agreement to pay was reached. Subsequently, the defendant/judgment debtor filed garnishee proceedings naming the first and second garnishees as parties. The notices of motion that I must now deal with seeks orders that these monies be garnished and paid. I should state at the outset that it is the second garnishee who is named in the notice of motion, to pay the judgment creditor, not the first garnishee.

However on my hearing counsel for the applicant, he seeks orders that the Mineral Resources development Company (MRDC), the first garnishee, be garnished and to pay the debt owing.

Mr Kuman for the MRDC opposes the application and submits amongst others that the MRDC is a governmental body within the meaning of s. 219 of the Constitution. In saying that, Mr Kuman referred the court to Dan Salmon Kakaraya v The Ombudsman Commission of Papua New Guinea and the Independent State of Papua New Guinea N2478 dated 24 October, 2003, a case where his Honour Justice Kandakasi held that where an instrumentality, incorporated under the Companies Act 1997 or any other legislation but is solely owned and controlled by the State in terms of appointing the Board and or its Managing Director, for a public purpose, is a governmental body within the meaning of s. 219 (1) of the Constitution. This provision refers to the Ombudsman Commissions functions to investigate any conduct by a "State Service". I will elaborate further on this in the latter part of this judgment.

The applicant’s lawyer, however argues that the MRDC is the proper garnishee because under the Gobe Petroleum Trust Deed (GPTD), the equity has always been managed by the MRDC through the trustee who is the Petroleum Resources Gobe Limited (PRGL).

Issues

The issues pertinent to the proper determination of this matter are the following;

1. Is the MRDC, a trustee of funds held for an on behalf of Incorporated Land Groups? (‘ILGs’).

2. If so, what is the instrument governing this trust?
3. Who are the parties involved in this trust and what role do they play?
4. What is the effect of a Trust Deed?

5. Should the funds presently held in trust by the trustee be garnished to settle debts incurred by ILGs?

6. Is the MRDC an instrumentality of the State?

I will address these issues in this ruling.

In opposing the application, Mr Kuman relies on O. 13 R. 62 of the National Court Rules which reads;

"62. Dispute of liability by garnishee

Where, on the hearing of a motion by the judgment creditor pursuant to the garnishee notice, the garnishee disputes liability to pay the debt attached, the court may hear and determine the questions in dispute and direct the entry of such judgment, or make such order, as the nature other case requires."

Mr Kuman relies on the following affidavits;

1. Peter Kuman sworn on 21st February, 2005 and filed on 22nd February, 2005;
2. Imbi Tagune sworn on 11th February, 2005 and filed on 14th February, 2005;
3. Imbi Tagune sworn and filed on 28th January, 2005.

The applicant relies on the following affidavits;

1. Albert Purane sworn on 23rd December, 2004 and filed on 24th December, 2004;

2. Albert Purane sworn on 4th February, 2005 and filed on 7th February, 2005;

Reasoning on issues

This application arises from Garnishee Notices issued by the National Court on 21st December, 2004. The application returnable before me today, apart from the motions, is for those garnishee orders to be made absolute. The garnishee notice specifies the debt as "total annually or quarterly monetary benefits due or not yet payable or owed by you to the judgment debtor as landowners equity or royalties, etc".

The Garnishee Notices then seek that the judgment debts be "attached and bound in the hands of the garnishees to the extent of the sum required" and that the applicant/judgment creditor would on a return date, move for an order for payment.

Which then takes me to the first issue. Is the MRDC a trustee of funds held for an on behalf of ILGs?

The judgment debtor in this case is an ILG. The court must firstly familiarize itself with the nature of the debt before it deals with this issue. This is because it then determines whether the debt was properly incurred by the ILG and the agreement to pay was properly sanctioned by the ILG. It means I must have recourse to Writ of Summons and Statement of Claim. This document pleads a verbal agreement between the plaintiff and the Chairman and Secretary of the defendant ILG where the Chairman and Secretary of the defendant ILG agreed to pay the debt owing after it received monies owing to it from the named garnishees.

Which then raises the issue of whether the ILG did consent to providing services to the applicant. This will be answered by reference to the ILG’s constitution and the affidavit relied on by plaintiffs counsel when seeking the courts endorsement of the judgment/ consent orders (judgment debt).

The defendant ILG’s Constitution is before me as annexure ‘IT5’ to Imbi Tagune’s affidavit sworn on 11th February, 2005. I note that there are two forms of the ILG’s Constitution. I will refer to them as Const. 1 and Const. 2. If there is debt incurred by the ILG, and a decision was made by the ILG for monies to be paid from funds held by the MRDC, then there must be proof that a decision was properly made to that effect. I will have to refer to the ILG’s Constitution to enable me to ascertain whether the debt was properly incurred.

Clause 3 of Const. 1 states that "the affairs of the Land Group shall subject to any decision of the members in a general meeting, be controlled by a committee of not less than four (4) and no more than six (6) members." There is no evidence of the ILG having conducted a general meeting to decide that the monies owing to the plaintiff will be paid by the ILG from funds held by the first and second garnishee.

Under Clause 4 (2) (a) (b) of Const. 2, the ASE TIPURUPEKE Land Group Committee which is made up of five people, is responsible for the "...efficient conduct of the affairs of the land group..." and must ensure that records are kept of meetings and other affairs of the land group.

Clause 5 (1) (a) of Const. 2 states in no uncertain terms that "Before any act of the land group...," the Committee shall give notice to the members who in this case are persons who are acknowledged by Doupasi/Samberigi custom, by other customary clan members from PUKU village, to be a member of the ASE TIPURUPEKE clan. (my stress)

Thereafter under Clause 5 of Const. 2, notice must be given to members of the land group resident in PUKU village to attend the meeting.

The matter is then "fully discussed at the meeting and a decision reached on the matter by consensus of the members present." (see clause 5 (1) (c) of Const. 2).

It appears that the consent orders were not taken out with the blessing of the members of PUKU village. There is no evidence before me to suggest that not to be the case. In fact, the plaintiffs affidavit sworn on 24 November, 2004 and relied on in moving the application for endorsement of the consent orders does not refer to compliance by the defendant ILG with provisions of its Constitution before reaching such a decision. For all I know, the debt may be somebody’s personal debt.

The garnishees may wish to take the matter further by applying to set aside the consent orders. That is a matter for them.

To the first issue before me, I have heard from Mr Kuman and it is not disputed that the MRDC is incorporated under the Companies Act 1997, described as the Mineral Resources Development Company Limited and the majority of whose directors are representatives from the State. (see Company search of Posman Kua Aisi Lawyers attached to the affidavit of Peter Kuman sworn on 21st February, 2005 and MRDC Constitution, clause 11.2.1).

The MRDC’s affairs are managed under the direction and supervision of its board which is made up of the directors referred to above.

It is at this time what I also respond to the second and third issues together with the first issue. The MRDC wholly owns the Petroleum Resources Gobe Limited (PRG) who is the corporate trustee in respect of the Gobe Petroleum project for the purpose of s. 176 of the Oil and Gas Act 1998 and all other related provision of that act. (see clause C of GPTD). The Gobe Petroleum Trust Deed (GPTD) executed on 9th November 2001 provides at paragraph "C" of its preamble that the PRG has agreed to act as first trustee of the Trusts established by s. 176 of the Oil and Gas Act and in accordance with the terms of the declaration which declaration is to establish the terms of the trust for the benefit of landowners with relation to the Gobe project and is made for the purpose of clause s. 176 of the oil and Gas Act. A copy of the Deed is attached to Imbi Tagune’s affidavit as annexure ‘IT1’ sworn on 11th February, 2005.

The deed establishes three trusts, which are;

- The Gobe Participation Interest Trust
- The Gobe Future Generation Trust and
- The Gobe Community Investment Trust

As stated earlier, the GPTD exists by virtue of s. 176 of the Oil and Gas Act which reads as follows;

"176. Project Benefits trusts

(1) The equity benefit granted by the State in accordance with Section 167 to project area landowners, and any additional participating interest in a petroleum project acquired by project area landowners in accordance with Section 175, shall be received and held upon trust for those project area landowners by a corporate trustee which is wholly owned by MRDC.
(2) Where by an act or agreement the State grants to project area landowners or other persons who are the traditional owners of or who have traditional rights in relation to the land in the area of petroleum project any other benefit in relation to the petroleum project, whether by way of a beneficial interest in a licence or assets attributable to a licence, or payments based on production or profits of the petroleum project, or otherwise, that benefit shall be received and held upon trust for those persons by a corporate trustee which is wholly owned by MRDC.
(3) Where a benefit referred to in Subsection (1) or (2) is held by a trustee upon trust pursuant to Subsection (1) or (2) –

• (a) the terms of the trust shall be set out in a deed approved by the Minister; and
• (b) the board of directors of the trustee shall be comprised in the majority by representatives of the State (including the managing director of MRDC) and in the minority by representatives of the grantees of the benefit; and
• (c) any equity interest or equivalent in a petroleum project held by the trustee shall not without the consent of theState be sold or transferred or charged, mortgaged or otherwise encumbered other than for the purpose of financing the activities of the trustee in that petroleum project or securing its joint venture obligations in that petroleum project; and
• (d) the trustee and the trust funds and any assets held by the trustee shall be managed by MRDC; and
• (e) the trustee and MRDC shall enter into a management agreement on terms approved by the Minister which agreement shall govern the management of the trustee and its assets and the amounts charged to the trustee for those management services; and
• (f) unless otherwise agreed between the State and the grantees of the benefit or prescribed by law, the beneficiaries of the trust shall be incorporated land groups on behalf of the grantees; and
• (g) where project area landowners entitled to an equity benefit in accordance with this section and who are equally entitled amongst themselves to share in that benefit are represented by more than one incorporated land group (or other representative if permitted in accordance with Paragraph (f) the incorporated land groups or other representatives shall be allocated the benefit in proportion to the number of project area landowners each represents; and
• (h) the terms of the trust shall prescribe:

(i) that 30%, or such greater proportion as may be agreed between the State and the project area landowners, of the net income of the trust fund after payment of all costs and expenses shall be held upon trust for future generations of project area landowners; and

(ii) subject to the terms of any agreement between the State and project area landowners in force at the commencement of this section, that 30%, or such greater proportion as may be agreed between the State and the project area landowners, of the net income of the trust fund after payment of all costs and expenses shall be accumulated in investments in accordance with the terms of the trust and, together with the income from those investments, applied by the trustee for the benefit of project area landowners existing during the term of the trust for any one or more of the following purposes:-

(A) the general health, welfare, education and well being of the project area landowners;
(B) the provision or maintenance of community projects in the area of the petroleum project;
(C) such other purpose for the benefit of the project area landowners as is approved by the Minister; and
(i) the grantees of the benefit shall be at liberty to share or distribute income received by them from the trust in accordance with any customary arrangements or agreements they have entered into with the traditional owners of land outside of the area of the petroleum project, but such other traditional owners of land shall have no entitlement to or claim upon any part of the trust funds.

(4) The equity benefit granted by the State in accordance with Section 167 of this Act to affected Local-level Governments or affected Provincial Governments, and any additional participating interest in a petroleum project acquired by an affected Local-level Government or an affected Provincial Government in accordance with Section 175, shall be received and held upon trust for those grantees by a corporate trustee which is wholly owned by MRDC.

(5) Subject to Subsection (6), where by an act or by agreement the State grants to a Local-level Government or Provincial Government any other benefit in relation to the petroleum project, whether by way of a beneficial interest in a licence or assets attributable to a licence, or payments based on production or profits of the petroleum project, or otherwise, that benefit shall be received an held upon trust for that government by a corporate trustee which is wholly owned by MRDC.

(6) Subsection (5) shall not apply to -

(a) monetary grants made by the State to a Local-level Government or Provincial Government; or

(b) any interest in buildings or other infrastructure provided to a Local-level Government or Provincial Government where the buildings or infrastructure are not dedicated project facilities of the petroleum project.

(7) Where a benefit referred to in Subsection (4) or (5) is held by a trustee upon trust pursuant to Subsection (4) or (5) –

(a) the terms of the trust shall be set out in a deed approved by the Minister; and

(b) the board of directors of the trustee shall be comprised in the majority by representatives of the State (including the managing director of MRDC) and in the minority by representatives of that government; and

(c) any equity interest or equivalent in a petroleum project held by the trustee shall not without the consent of the State be sold or transferred or charged, mortgaged or otherwise encumbered other than for the purpose of financing the activities of the trustee in that petroleum project or securing its joint venture obligations in that petroleum project; and

(d) the trustee and the trust funds and any assets held by the trustee shall be managed by MRDC; and

(e) the trustee and MRDC shall enter into a management agreement on terms approved by the Minister which agreement shall govern the management of the trustee and its assets and the amounts charged to the trustee for those management services."

In short, this section provides for the administration of benefits emanating from the trust arrangement and granted by the State, which are to be held upon trust for project area land owners, in this case, by a corporate trustee, wholly owned by the MRDC. All benefits received shall be held by this corporate trustee. S. 176 (3) of the Oil and Gas Act is the implementing provision for the trust deed and states that the board of directors of that trustee shall be comprised in the majority by State representatives including the managing director of MRDC and in the minority by representatives of the Grantees of the benefits. It states also that any equity interest held by the trustee shall not be sold or transferred or charged, mortgaged or otherwise encumbered without consent of the State. The beneficiaries of this trust are the incorporated land groups.

The beneficiaries under this trust deed are as determined by ministerial determination pursuant to the Oil and Gas Act, which determination was made on 21st June, 2002 and 8th May, 2003. This was done by gazettal notices which are attached as annexures "IT2" and "IT3" to Imbi Tagune’s affidavit sworn on 11th February, 2005. It shows that there are 21 incorporated Land Groups under the 21st June, 2002 determination and that of these, the judgment debtor is entitled to 4% of the entitlements.

So, to answer the first issue, the MRDC is not the trustee of funds held under the GPTD but that it is the PRGL. I have also dealt with issues two and three.

In relation to issue no. 4, I find that I must have recourse to the law to answer that.

I posed the issue as to the effect of a Trust Deed. Upon hearing arguments raised by both counsel, I have had to remind myself of the definition of a trust which is aptly provided by W J Mowbray in his text "Lewin on Trusts" It states at pg. 3:

"No definition of a trust appears to have been accepted as both comprehensive and exact. Strictly, the word refers to the duty or aggregate accumulation of obligation that rest upon a person described as a trustee. The responsibilities are in relation to property held by him, or under his control. That is property he will be compelled by a court in its equity for jurisdiction to administer in the manner lawfully prescribed by the trust instrument, or where there be no specific provision written or oral, or to the extent that such provision is invalid or lacking, in accordance with equitable principle. As a consequence, the administration will be in such a manner that the consequential benefit and advantages accrue, not to the trustee, but to the persons called cestuis que trust or beneficiaries, if there be any; if not, for some purpose which the law will recognize and enforce."

Sir Arthur Underhill from his text "Underhill’s Law of Trustees" defines a trust as;

"A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property), for the benefit of persons (who are called the beneficiaries or cestuis que trust), or whom he may himself be one, and any one of whom may enforce the obligation." (see pg. 3 of Lewin on Trust (supra)).

I note the plaintiff/applicants lawyer’s submissions that because the GPTD has always been managed by the MRDC, that it is the MRDC who is the proper garnishee. This court must, for the purposes of this application and others, draw the distinction between a trustee and a corporation. In this case, the PRGL is the trustee and the MRDC, a corporation. Having already outlined the relationship between the PRGL and the MRDC, I now set out the distinction between a company and a trust. This distinction is taken from the text "Principles of Company Law" by H.A.J. Ford. It reads;

"There are several basic differences between a trust and a company.

1. A trust comes into existence as the result of a private rather than a governmental act and there is less governmental regulation of trust...
   
2. When a corporation is created, a new legal entity comes into being. It is separate from the legal persons who are directors of members. A trustee, as such, is not a distinct legal person, in a representative capacity.
   

3. A trust, unlike a corporation, may not sue or be sued as a separate entity.

4. Because a corporation is an entity separate from its directors and its members it is possible for it to have liabilities separate from the liabilities of those persons. When a trustee incurs liabilities in performance of the trust the trustee becomes personally liable and the creditor can enforce the liability against the trustees own assets unless the creditor agrees that the trustee should be liable only to the extent of the trust property. The trustee would normally have the right to apply trust property in discharge of trust related liabilities properly incurred. In some circumstances a trustee may have a right of indemnity against the beneficiaries personally so that the trustee could be reimbursed by them. But if a trustee is indebted to a creditor, the creditor can look to the trustee and need not be concerned whether there are trust assets or whether the trustee has a right of indemnity against beneficiaries.
   

By contrast directors of a company do not make themselves personally liable to creditors of the company.

5. A company is a distinct legal entity which owns its property in its own right in such a way that shareholders are not regarded as having any legal or equitable interest in the company’s property.
   

In a unit trust, however, the trustee holds property on trust for the unit holders who are regarded, like beneficiaries under a settlement, as equitable owners of the investments held by the trustees in shares proportioned to the amount of units they purchased.
...

6. A company also differs from a unit trust because its shareholders are linked together contractually by the statutory contract constituted by the Memorandum and articles; investors in a unit trust are not necessarily in any contractual relation with each other.
   
7. The degree of control possessed by a shareholder in a company differs from that which may be exerted by a unit holder over the trustee. A shareholder in a company has the remedies available to a member of a company in relation to mismanagement of the company’s affairs, whereas the remedies of a unit holder are to be found in the law of trusts....
   
8. Because a unit trust involves a disposition by the investor of the amount subscribed to be held on trust, thereby creating property interests rather than a merely contractual arrangements as when shares in a company are subscribed for, due regard must be had to the rule against perpetuities. Hence it is usual for the trust deed governing a unit trust to provide that the trust is to be wound up by a certain date, whereas a company is not affected by the rule against perpetuities..."
   

There is further discussion on the distinction between a trust and a company at pg. 54 and 55 of H.A.J. Ford’s "Principles of Company Law" (supra).

The law clearly shows the distinction between a trustee, a beneficiary and a company. The MRDC’s role is obvious and manifested in the GPTD and s. 176 of the Oil and Gas Act. The PRGL as trustee holds the assets in trust for project area land owners under trusts known as the Gobe Participation Interest Trust, the Gobe Future Generations Trust and the Gobe Community Investment Trust. These three trusts are kept separate from each other (Clause 3.7 of the GPTD). If any distribution is to be made to a beneficiary it must be done in proportions set out at item 3 of the GPTD (Clause 7.3 of the GPTD). Clause 3 of the GPTD provides for distribution into the three trusts which I referred to earlier. The GPTD is very specific as to how the three separate trusts are to be administered. On my perusal of these various provisions, I note that none of these provide for ad hoc payments to individuals or ILGs.

I should also add that having reviewed the distinction between a corporation and a trustee, that it is nigh impossible for the applicant to claim that it is the MRDC that has control of the funds. To the contrary, the legal peculiarity of a trust and a corporate body, in this case, a company, are very clear. The MRDC cannot under any circumstances, override the provisions of the GPTD, a deed approved by the then Minster for Petroleum Hon. Roy Yaki on 9th November, 2001. The GPTD’s role as trustee, is to properly administer trust funds for ILGs. Therefore, I do not accept the arguments presented by applicants counsel.

This leads me then to the fifth issue which is as to whether these funds can be garnished to settle the debts incurred by the plaintiff.

It is obvious that the GPTD, a document with a complex scheme of arrangements in relation to investment and thereafter distribution of trust monies, is created solely for the benefit of the beneficiaries who in this case are the ILGs named in the Ministerial Determination of 21 June, 2002. The common law as stated in Ritchies NSW Supreme Court Procedure, at clause 46.10.1, states that no order for payment will be made if it appears that the money is trust money. The reasoning for this is clear, that monies are held in a pool for investment purposes and are released to the ILGs in the percentages prescribed at certain prescribed periods, having satisfied all requirements under the Deed. Again, this is done to protect the beneficiaries funds. It is the trustee who will know when payments should be made to ILGs and that these payments will be the proper distribution of funds, done in accordance with the terms of the Trust Deed. Which is why it is important that ILGs comply with procedure under their Constitution before making commitments. I therefore, conclude that funds held in trust cannot be garnished.

Mr Kuman also raises further argument under s. 13 of the Claims By and Against the State Act of 1996. S. 13 of that act reads:

"13. No Execution Against the State

(1) In any suit, execution or attachment, or process in the nature of execution or attachment, may not be issued against the property or revenue of the State;

(2) Where a judgment is given against the State, the registrar, clerk or other proper officer of the court by which the judgment is given shall issue a certificate in Form 1 to the party in whose favour the judgment is given."

I discuss this together with the sixth issue which is whether the MRDC is an instrumentality of the State. Mr Kuman submits that the MRDC is an institution of the State and that as such, no execution, or attachment process in the nature of execution or attachment may be issued against the property or revenue of the State. In saying that, Mr Kuman referred the court to the matter of Dan Kakaraya (supra), decision by His Honour Justice Kandakasi where he ruled that MRDC is a public institution.

Mr Kuman also referred the court to SC 672, SCR 1 of 1998, reservation pursuant to s. 15 of the Supreme Court Act of 8th November 2001 and Okam Zacharius v Chris Tep and Cocoa, Coconut Extension Agency [2003] N2355 judgment by Salika .J dated 28th March, 2003. Another relevant decision is that of Otto Napi v the National Capital District Commission N2797 judgment by David AJ dated 15th September, 2004. These judgments are relevant for the purposes of determining whether the MRDC is an instrumentality of the State.

In Otto Napi (supra) the court held that the National Capital District Commission (NCDC) is a body that is the same as a Provincial Government and that the NCDC is the State for the purposes of the Claims By and Against the State Act and as such s. 13 of the Claims By and Against the State Act applies to it. SC 672 is a case where the Supreme Court gave opinion on whether the State includes Provincial Governments. The Supreme Court in that case held that the State also includes a Provincial Government.

Dan Kakaraya (supra) is the judgment that is close on point where the court held that the MRDC is a "public institute" and when applying the "substantial control" test, found that because the majority shareholding is held by the State and the members of the Board are appointed by the State including the managing director, that the MRDC is an instrumentality of the State. In this case, clause 11.2.1 (a to e) of the MRDC’s Constitution which is before me in evidence states that persons who from time to time hold the positions of Directors are the Secretary of the Department responsible for the administration of the Public Finance (Management) Act 1996 (‘PFMA’); Secretary for the Department responsible for mining matters; Secretary of the department responsible for petroleum matters and a senior officer of the department responsible for investment in Mining and Petroleum matters in the department responsible for the administration of the Public finance (Management) Act 1996 who is nominated by the Secretary of the department or the equivalent departmental heads or officers. They shall all exercise powers and perform all functions, duties and responsibilities of a director. These persons are all officers of the State.

In relation to the nature of the MRDC, its constitution defines it as a company incorporated in Papua New Guinea under the Companies Act 1997. As to its relationship with the State, there are various provisions in its Constitution which refer to the Public Finances (Management) Act 1996 which is an act that makes provision for the management of public finances. (see preamble of Public Finances (Management) Act 1995). These clauses are clause 11.2.1 (a) and clause 12.4.5. I have already set out what is contained in clause 11.2.1 (a). Clause 12.4.5 states that the chairman of the MRDC board shall be the secretary for the department responsible for the administration of the Public Finances (Management) Act 1996. And who would this person be? S. 4 of the Public Finance (Management) Act 1996 sets out the responsibilities of the Departmental head of the department responsible for financial management. It states at s. 4 (1) that "the departmental head of the department responsible for financial management has control and direction of all matters relating to the management of the financial affairs of the State, subject to specific directions given to him by the Minister." So in this case, it is the Secretary for Treasury and Finance.

Again, the preamble of the PFMA refers to the management of public finances. Are the funds held and administered under the Gobe Petroleum Trust Deed, public funds? The equity benefits referred to in s. 176 is derived from s. 167 (3) of the Oil and Gas Act which states that subject to ss. 167 and 169 of that act, which is the provision on identification of land owner beneficiaries, the State grants to the project area landowners and the affected local-level governments of a petroleum project, if any, an equity benefit in that petroleum project. S. 167 (4) states further that the equity benefits granted under this section shall be shared between the project area landowners and affected local-level governments of the project area in proportions agreed by them in a development agreement but in default of such agreement, in the proportions determined by the Minister by instrument. S. 167 (5) then creates this trust by stating that the equity benefit granted under this section shall be held on trust for the grantees in accordance with s. 176.

Then again, at s. 168, it provides for the granting by the State to the project area land owners and the affected Local-Level Governments and Provincial Governments of a petroleum project, if any, a royalty benefit in respect of that petroleum benefit. At s. 168 (2) of the Oil and Gas Act, it states that a royalty benefit shall be shared between the project area landowners, the affected Local-Level Government and the affected Provincial Governments of the project in proportions agreed by them in a development agreement but in default of such agreement, in the proportions determined by the Minister by instruments. These royalty benefits are payable monthly out of royalties payable to the Minister, pursuant to s. 159 of the Oil and Gas Act, (and see s. 168 (3) of the Oil and Gas Act). Again at s. 168 (4) of the Oil and Gas Act, it states therein that the royalty benefit granted under this section shall be paid to the trustee and held on trust for the grantees in accordance with s. 176 of the Oil and Gas Act.

Therefore, the monies presently held in trust are public finances within the meaning of the PFMA and are managed by the Departmental head of the department responsible for financial management, in this case the Secretary for the Treasury and Finance and that these royalty and equity funds are managed by a trustee set up under s. 176 of the Oil and Gas Act, in this case the GPTD.

So the funds are therefore controlled and managed by the State under a Trust. The Board of the MRDC consist of representatives of the State. The majority shareholding is held by the State. (see company search of Posman Kua Aisi Lawyers attached to Peter Kuman’s affidavit sworn on 21st February, 2005). The powers of the shareholder may be performed or undertaken by the Minister for Treasury and Finance (clause 1.3 of MRDC’s Constitution). The shareholders powers includes the removal of directors (clause 11.3 of MRDC’s Constitution).

The involvement of the State in this scheme of arrangement and without having to refer to any further materials but based only on the materials before me, dispels any doubt that the MRDC is an entity or instrumentality of the State. Therefore, there cannot be any execution or enforcement against the property or revenue of the State in accordance with s. 13 of the Claims By and Against the State Act.

Conclusion

The courts must carefully screen applications by individuals seeking payments of what they claim to be monies owing from ILGs to them. It is preferable under the circumstances that applicants show that the ILG had approved by special resolution in accordance with their own constitution and that there was agreement by all land owners to pay the debt owing. In this case, no such resolutions were shown to the court. In fact the PRGL and the MRDC have taken steps to ensure that only genuine claims are entertained under the trust arrangement. This is demonstrated by the Public Notice taken out in the Post Courier on 23rd January, 2004 by the both parties. A copy is attached to Imbi Tagune’s affidavit sworn on 11th February, 2005, as annexure "IT6".

This court finds that the judgment debt should not be garnished to the accounts of first and second garnishee relying on reasons presented above, and also because there is no debt due or owing to the judgment debtor from the garnishee. I say this also relying on submissions by Mr Kuman that;

- In the present case, the relationship between judgment debtor and garnishee is not one of "creditor v. debtor" but rather "trustee v. cestuis que trust/beneficiary".

- That trustee is not a debtor to his "cestuis que trust" until he holds money which he ought to pay over, or until he has by some default made himself personally liable. (see Webb v. Stenton (1883) 11QBD 518 of Re: Greenwood [1901] UKLawRpCh 35; (1901) 1 Ch 887).

- On the issue of "debt due and owing" or "debt accruing" it is well established that "debts owing or accruing" include debts debita in praesenti solvenda in futuro and as referred to in the English Annual Practice, 1979 49/1/16.

As held in O ‘Driscoll v. Manchester Insurance Committee [1915] 3KB 499 and Ritchies NSW Supreme Court Procedures – Notes 46.3.3;

"But the distinction must be borne in mind between the case where there is an existing debt, payment whereof is differed, and a case where both the debt and its payment rest in the future. In the former case there is an attachable debt, in the latter case there is not."

This proposition at law from O’Driscoll (supra) go to the form of the consent orders which is that it was made relying on a payment in future. Therefore, there is no attachable debt.

On that basis, the court makes the following orders;

Orders

1. That the motion filed by Gubon Lawyers on 31st March, 2005 against both garnishees, are dismissed in their entirety;
   
2. The garnishee notices filed by Gubon Lawyers on 21st December, 2004 in the both matters are dismissed in their entirety;
   
3. That the garnishees have liberty to apply to set aside the consent orders obtained on 26th November 2004;
   
4. The plaintiff and the defendant shall both pay the first garnishee’s costs of this application, to be taxed if not agreed;
   

5. Time is abridged to time of settlement to take place forthwith.

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Lawyer for Applicant/Judgment Creditor : Gubon Lawyers

Lawyer for the first Garnishee : Posman Kua Aisi Lawyers