N3047

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1449 OF 2003

BETWEEN:

JOHN NAPI
Plaintiff

AND:

KUNDIAWA GENERAL HOSPITAL BOARD
Defendant

Waigani: Davani, .J
2005: 19, 26 August
2006: 5 April

PRACTICE AND PROCEDURE – Public hospital – Public hospital board – Board incorporated – state entity – s. 2 Public Finance Management Act – S. 6 (2) (a) Public Hospitals Act 1994

PRACTICE AND PROCEDURE – Board of a public hospital – state entity – notice to lodge claim against State – a condition precedent – s. 5 Claims By and Against State Act

Cases cited:
Paul Tohian, Minister for Police and the Independent State of Papua New Guinea v Tau Liu (1998) SC566;
The Independent State of Papua New Guinea v Barclay Brothers (PNG) Ltd (6 June, 2001) N2090
Okam Sakarius & six (6) others v Chris Tep, Project Manager and Cocoa, Coconut Extension Agency (28 March, 2003) N2355;
Otto Napi v National Capital District Commission (15 September, 2004) N2797;
Albert Purane v Asi Tipurupeke Land Group Incorporated and Mineral Resources Development Company Limited (‘MRDC’) and Secretary for Department of Petroleum 
& Energy (7 April, 2005) N2806;
Maps Tuna Limited v Manus Provincial Government (18 July, 2005) 21N2867;

Counsel:
D. Goma, for the Plaintiff
G. Gendua, for the Defendant

5 April, 2006

RULING

1. DAVANI .J: Before me are two (2) Notices of Motions filed by both the plaintiff and the defendant. The plaintiff’s motion filed on 22 September, 2004, seeks orders that the defendant’s Defence be struck out and judgment be entered, for damages to be assessed. The defendant’s motion filed by Gendua Lawyers on 18 November, 2004, seeks that the proceedings be dismissed because the plaintiff had not given notice to lodge a claim against the State under s. 5 of the Claims By and Against the State Act (‘CBASA’).

Background and facts

2. The plaintiff John Napi is the proprietor of Simbu Security Services and who were providing security services to the Kundiawa General Hospital. The plaintiff claims it provided security services to the defendant hospital for four (4) years, from 26 July, 1993 to 4 April, 1998, when its services were terminated by the defendant. The plaintiff claims that its engagement by the defendant hospital was governed by a written agreement and that the defendant was to pay it K2,000 per month which rate was subject to review. The plaintiff also alleges that when the agreement was terminated, that the defendant failed to give it a month’s notice, which was in breach of the written agreement.

3. The defendant of course denies all the above in its Defence filed on 15 March, 2004.

Application

4. Mr Gendua for the defendant submits that before filing the Writ of Summons, the plaintiff should have given notice of the claim under s. 5 of the CBASA. However, Mr Goma for the plaintiff submits that his client did not have to give notice because the defendant is not a State entity. He pointed out that the defendant is more a corporate body than a government entity because it is a corporation. He referred the court to s. 6 (2) (a)of the Public Hospitals Act 1994 which states that the Board of a public hospital.

(a)	is a Corporation, with perpetual succession; and
(b)	shall have a seal; and
(c)	may acquire, hold and dispose of property; and
(d)	may sue and be sued in its Corporate name.

(3) All courts, judges and persons acting judicially shall take judicial notice of the seal or a Board affixed to a document and shall presume that it was duly affixed.

5. The issue posed before me is whether the hospital board or a Public hospital is an entity of the State?

6. A hospital board and the public hospital that it represents are two related bodies that exist for each others benefit and enhance each others existence. I say this because a board exists for the hospital and the hospital exists and is able to operate because of the decisions made by the board.

7. But does the fact that the board is a Corporation make it a company? What distinguishes a Corporation from a hospital board or public hospital?

8. Both Messrs Gendua and Goma did not put authorities to the court that would assist the court on that point, only focusing on provisions in the Public Hospitals Act (‘PHA’). And that was helpful only to the extent where it highlighted the functions of the board and the hospital, how it is administered, where its funding comes from and generally the Boards appointment.

9. There have been several cases decided in this jurisdiction where the courts have decided that certain bodies are entities of the State despite the fact that they have been incorporated or are corporations. These cases are;

1. Okam Sakarius & six (6) others v Chris Tep, Project Manager and Cocoa, Coconut Extension Agency (28 March, 2003) N2355.

10. In that case, the Cocoa and Coconut Agency (‘Agency’) was established by the National Executive Council and registered under the Companies Act as a company limited by guarantee, being registered under the Business Names Act. The plaintiff issued a Writ of Levy of Property against the Agency to enforce a judgment taken out against it.

But the Agency successfully argued that it was a State agency and as such was protected by s. 13 (1) of the CBASA.

11. The learned judge found that the Agency was politically and financially controlled by the State and as such its assets should be regarded as the assets of the State and its people. The court ordered this notwithstanding the plaintiffs’ submissions that the Agency is a Corporation incorporated under the Companies Act and as such is liable to be sued and be dealt with like a normal company under the Companies Act.

12. The plaintiffs further submissions were that the Agency should not hide under the corporate veil considering that upon issue of certificate of incorporation, the Agency became a body corporate or a corporation and as such is responsible for its own actions.

13. The court also found that while the Agency was a company in its own right, it relied on the National Government for its annual financial grants and that it gets its funding and direction from the National Government.

14. All the above formed the basis of the learned judge’s decision that the Agency was a government entity.

2. Otto Napi v National Capital District Commission (15 September, 2004) N2797

15. In that case, the plaintiff sought payment of a judgment debt. Acting Justice David (then), found that although the National Capital District Commission Act 2001 provided that the NCDC could sue and be sued and enter into Contracts etc, that various provisions in the Act demonstrated that the NCDC is a provincial government and that enforcement proceedings could not apply to it.

3. Albert Purane v Asi Tipurupeke Land Group Incorporated and Mineral Resources Development Company Limited (‘MRDC’) and Secretary for Department of Petroleum & Energy (7 April, 2005) N2806.

16. In that case, the plaintiff sought to file enforcement proceedings against the MRDC for payment of a judgment debt owing to it by the Land group defendant. The MRDC was named as first Garnishee. 

17. Various legal issues arose in that case, one of which was whether the MRDC was an entity of the State and whether the funds it held could be garnisheed. It was pointed out to the court that the MRDC was incorporated under the Companies Act 1997, that its directors were representatives from the State and that its affairs were managed under the direction and supervision of its board. However, the court also found that;

-	the funds were managed and controlled by the State under a Trust;

-	that the MRDC’s board consists of representatives from the State;

-	that the majority shareholding is held by the State;

-	that the powers of the shareholder may be performed or undertaken by the Minister for Treasury and Finance.

18. These peculiarities or characteristics were stated in the MRDC’s constitution which of course provided the basis for the courts ruling that there cannot be any execution or enforcement upon the property or revenue of the MRDC because it is an instrumentality or entity of the State.

4. The Independent State of Papua New Guinea v Barclay Brothers (PNG) Ltd (6 June, 2001) N2090

19. The Chief Justice in that case held that a company incorporated under the Companies Act 1997 was a governmental instrumentality. The Company, the Southern Highlands Gulf Highway Limited was specifically incorporated to undertake or oversee the construction of the Gulf to Southern Highlands Highway. His Honour was guided by the definition of the term ‘public body’ in s. 2 of the Public Finance Management Act 1995. (‘PFMA’). Which then takes me to s. 2 of the PFMA. It reads;

"public body" means –

(a)	a body, authority instrumentality (corporate or unincorporated) established by or under an Act or a Constitutional Law; and

(b)	a body authority or instrumentality incorporated under the Companies Act Chapter 146) where and to the extent that –

(i)	the Memorandum and Articles of Association of that body, authority or instrumentality provide; or
(ii)	an Act other than this Act provides,

That this Act shall apply to that body, authority or instrumentality, other than –

(c)	the Auditor-General or the Office of the Auditor-General; or
(d)	the Privatization Commission established by the Privatization Act 1999;
(e)	a body authority or instrumentality incorporated under the Companies Act (Chapter 146) other than one to which Paragraph (b) relates;…" (My emphasis)

20. Section. 2 (a) (b) (ii) states in clear terms that a body is a "public body" if it is incorporated under the Companies Act and its governing act provides that the PFMA applies to it.

21. In this case, the board is incorporated and the Act governing its existence, the Public Hospitals Act 1994, states at Part IV (Finance) that;

"Public Finances (Management) Act 1995 applies to and in relation to the board of a public hospital."

22. This section speaks for itself. That the board of a public hospital, although incorporated, is a public body and that the Board’s finances are controlled and governed by the Public Finances (Management) Act which means funding to the hospital is coordinated from the Department of Finance and Treasury in Waigani. Furthermore, on perusing the Public Hospitals Act, the provisions therein demonstrate and confirm that its functions and very existence is governed by the National Government. For example;

1.	A person appointed to the Board is appointed on the Minister’s nomination, by the Head of State, acting on advice and that the powers of appointment, suspension and termination of the Board member rests with the Minister and the National Government (see Part III – Administration);
2.	The officers of the hospital are appointed following a selection process approved by the Departmental Head of the Department responsible for personnel management matters; (see Division 2 of the Act)
3.	The board is suspended by the Minister upon being satisfied of certain matters (see Part V – Suspension of Boards, of Act);
4.	That the Public Service General Orders and Public Service Management Act will apply in the event there are no regulations governing appointment and termination of officers; (See s. 28 of Act)
5.	That it is the Minister who establishes and maintains a hospital.

Conclusion

23. I find that all these characteristics demonstrate that a public hospital and its Board are entities of the State. Which therefore means that if there are any actions against public hospitals and their boards, that notice must first be given to the State under s.5 of the CBASA because s.5 notice is a condition precedent to the institution of an action against the State. (see Paul Tohian, Minister for Police and the Independent State of Papua New Guinea v Tau Liu (1998) SC566). This was not done in this case. And because a notice is a condition precedent to the filing of proceedings against the State, I find that this action cannot stand and must be dismissed.

24. Of course the court should not be tied down by reasons that the plaintiff may have a good case or that it has been sometime since the action was filed. The court must be mindful of the fact that if proceedings have been irregularly instituted, that the court must put a stop to these actions by dismissing or setting them aside, obviously, as being irregular. (see Maps Tuna Limited v Manus Provincial Government (18 July, 2005) N2867). In this case because notice was not given, the proceedings are irregular and must be dismissed. It should not be allowed to stand.

25. I also find that it is not necessary to consider submissions by both counsels in relation to the plaintiff’s lawyer’s application to strike out the Defence because the issuing of a s.5 notice is a threshold issue and its determination in fact, determines the issue.

These are the courts formal orders.

1.	The proceedings are dismissed in their entirety;

2.	The plaintiff shall pay the defendants costs of the proceedings to be taxed if not agreed.

____________________________

Goma and Associates: Lawyers for the plaintiff
Gendua and Associates: Lawyers for the defendant