N4269 

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 376 OF 2010

BETWEEN:

JAMES GEAMA, KOIM KOPUN, METI YONGASEP,
DICKSON KITENG, ISAAC KWETOK, STEVEN
TOAP, ANTHONY TIPISO, for themselves and on
behalf of Part "A" Employees Beneficiaries of the
OTML Shares in Success Scheme
Plaintiffs

AND:

OTML SHARES IN SUCCESS LIMITED
First Defendant

OK TEDI MINING LIMITED
Second Defendant

Waigani: Hartshorn J.
2010: 15th December,
2011: 14th April

Deed of Settlement establishing scheme for the benefit of employees of OTML – whether scheme rules contrary to the purpose of the Deed – whether scheme rules contrary to law 

Facts:

The OTML Shares in Success Scheme was established to provide benefits to employees of Ok Tedi Mining Ltd. Under the Scheme 50% of the benefit was to be distributed to management level employees and 50% to award employees.

The plaintiffs, who are award employees, have commenced this proceeding against the first defendant, the trustee under the Deed of Settlement that established the Scheme, and Ok Tedi Mining Ltd. They seek declaratory and other relief that amongst others, certain provisions of the Deed and the Scheme Rules are discriminatory and illegal, are unfair, unjust and an illegal acquisition of their right to property, and are harsh and oppressive and are not warranted by or are disproportionate to the requirements of the Deed. The defendants oppose the relief sought.

Held:

1.	The plaintiffs' submission to the effect that paragraph "A" of the recitals of the Deed takes precedence to other clauses in the Deed where there is a conflict, is based on an incorrect premise and is rejected.

2.	The plaintiffs' submissions that clause 4. 1 (b) Scheme Rules is manifestly unfair under the Fairness of Transactions Act, 
Transactions with Natives Act 1958 and Employment Act are rejected.

3.	The plaintiffs' submissions that s. 4.1 (b) Scheme Rules is contrary to s. 41 Constitution as it is harsh or oppressive and is not warranted by or is disproportionate as between the employees is rejected.

4.	The plaintiffs' submission that s. 4.1 (b) Scheme Rules is contrary to s. 55 Constitution and is discriminatory is rejected.

5.	The plaintiffs submission that s. 4.1 (b) Scheme Rules is contrary to s. 53 Constitution as it is unfair and unjust and an illegal acquisition of property is rejected.

Cases cited: 

Papua New Guinea Cases

SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314 
Tarere v. Australia and New Zealand Banking Group (PNG) Ltd [1988] PNGLR 201 
Max Umbu v. Steamships Ltd (2004) N2738

Overseas Cases

Bailey v. Lloyd (1829) 5 Russ 330
Dawes v. Tredwell (1881) 18 Ch D 354
Ex Parte Dawes (1886) 17 QBD 275
Holliday v. Overton (1852) 14 Beau 467
Orr v. Mitchell [1893] AC 238
Leggott v. Barrett (1880) 15 Ch D 306
The Commissioner of Inland Revenue v. Raphael [1935] AC 96

Counsel:

Mr. P. Donigi, for the Plaintiffs 
Mr. I. R. Molloy and Mr. R. Warokra, for the Defendants

4th April, 2011

1. HARTSHORN J: The OTML Shares in Success Scheme (SIS Scheme) was established to provide benefits to employees of Ok Tedi Mining Ltd (OTML). Under the SIS Scheme 50% of the benefit of the scheme was to be distributed to management level employees (Part B employees) and 50% was to be distributed to award employees (Part A employees).

2. The plaintiffs are Part A employees. They have commenced this proceeding against the first defendant, the trustee under the Deed of Settlement (Deed) that established the SIS Scheme, and OTML. They seek declaratory and other relief that amongst others, certain provisions of the Deed and the Scheme Rules are discriminatory and illegal, are unfair, unjust and an illegal acquisition of their right to property, and are harsh and oppressive and are not warranted by or are disproportionate to the requirements of the Deed. The defendants oppose the relief sought.

Clause 4.1 (b) Scheme Rules

3. The plaintiffs submit that clause 4.1 (b) Scheme Rules is not valid as it is contrary to the purpose of the Deed, is contrary to law as it is manifestly unfair under the Fairness of Transactions Act 1993, the Transactions with Natives Act 1958 and the Employment Act 1978 and is contrary to the Constitution.

a) the Deed 

i) The plaintiffs submit that the intention of the settlor under the Deed, and OTML is contained in what is referred to in the Deed as paragraph "A" of the Recitals and that what follows in the Deed must comply with this intention or purpose. If there is conflict with this intention, it is submitted, what is in conflict has no force and effect.

ii) The plaintiffs then submit that any discriminatory intent of the settlor and OTML is to be based on the period of service of OTML employees and not by reference to the position held by an employee as provided for in the Scheme Rules. Counsel for the plaintiffs did not rely upon or cite any authority in support of the submission that a provision in the Deed that conflicts with the intention in the Recitals has no force and effect. 

iii) The defendants submit that the recitals in a deed are subordinate to the operative terms and that the authorities to this effect are perfectly clear and of long standing. In Halsbury's Laws of England, Fourth edition, Vol 12, p 1509 it is said:

"In the construction of an instrument the recitals are subordinate to the operative part, and consequently, where the operative part is clear, it is treated as expressing the intention of the parties, and prevails over any suggestion of a contrary intention afforded by the recitals."

A number of authorities are cited supporting this proposition: Bailey v. Lloyd (1829) 5 Russ 330; Holliday v. Overton (1852) 14 Beau 467; Orr v. Mitchell [1893] AC 238; Leggott v. Barrett (1880) 15 Ch D 306, Dawes v. Tredwell (1881) 18 Ch D 354; Ex Parte Dawes (1886) 17 QBD 275 and the House of Lords decision of The Commissioner of Inland Revenue v. Raphael [1935] AC 96 in which Lord Warrington said:

"The principle of law in this respect is perfectly settled and it may be thought unnecessary to restate it or to refer to authority on such a point. But in deference to the arguments addressed to the House I will cite the opinions of certain noble and learned Lords, expressed in the case of Mackenzie v. Duke of Devonshire [1896] AC 400. In that case an attempt was made, similar to that made by the appellants, to modify as a matter of construction clear and unambiguous words in the operative part by reference to the intention of the settlor as expressed in the narrative part of the deed. Lord Halsbury said [405]: 'If the trust purposes are set forth in the paragraph of the deed which is appropriate to such purposes, it seems to me to be absolutely unarguable that the true meaning of those words, and the purposes of the trust so set forth, can be in any way controlled, qualified, or modified by the initial statement of what the motive of the author of the deed was. It would to my mind be disastrous to introduce such a system of construing a deed. One has known the language of a will somewhat perverted to perform the function which it was assumed the testator intended to be performed, but I never in my life heard of the language of a deed which contained a perfectly unambiguous provision being twisted from the natural ordinary meaning of the words by a preliminary statement of what the maker of the deed intended should be the effect and purpose of the whole deed when made.' Lord Watson in the same case said [407]: 

'The narrative words come to no more than this; 'My intention is to do so and so, and you may add this, 'and I have accomplished that purpose by the provisions which follow.' In such a case the safer and only legitimate course is to look to the provisions which follow, and to read them according to their natural and just construction.' Lord Davey said [408]: 'I take it to be a settled principle of law that the operative words of a deed which are expressed in clear and unambiguous language are not to be controlled, cut down, or qualified by a recital or narrative of intention.' "

iv) Given the above, I am satisfied that the submission of the plaintiffs on this point is based on an incorrect premise. Consequently, it is not necessary to consider the further submissions on this point. This contention of the plaintiffs is rejected.

b) Whether manifestly unfair

Fairness of Transactions Act 

i) The plaintiffs submit that clause 4. 1 (b) Scheme Rules is manifestly unfair under the Fairness of Transactions Act. They submit that this Act was intended to create the basic standards of fairness in every transaction in Papua New Guinea, that the Deed is a "transaction" under the Act and that the Act provides for the concept of fairness and what to do with transactions that are manifestly unfair. The plaintiffs further submit that what is contained in the Deed is an outcome of discussions at the management level of OTML and with its directors and shareholders. Part A employees were not involved in the discussions and what was presented to them was a "fait accompli". This resulted in the terms to which Part A employees were entitled under the SIS Scheme, being manifestly unfair and unconscionable.

ii) The defendants submit that a trust as established under the Deed falls outside the definition of "transaction" under the Fairness of Transactions Act and that the definition under the Act is directed to "a contract, promise, agreement, dealing or undertaking of an economic or commercial nature" as defined in s. 3 (1) of the Act. A trust falls outside this category of transaction in the same way as a gift or testamentary disposition are excluded.

iii) Further, the defendants submit that even if this matter did involve a "transaction" under the Act, the plaintiffs have not followed the provisions of the Act and so this court has no jurisdiction to deal with the matter under that Act. No application has been made under the Act and such an application is a prerequisite; s. 5 (1); this court has not attempted to arrive at an amicable settlement; s. 7 (1); the second prerequisite, and this court has not formed an opinion that an attempt at a mediated settlement has failed; s. 8 (1). I agree with this submission.

iv) I also note that s. 11 of the Act provides for amongst others, limitation periods of 3 and 6 years after the date of a transaction. This would appear to affect any claim that the plaintiffs may have had pursuant to the Act against the defendants. Consequently this contention of the plaintiffs is rejected.

Transactions with Natives Act 1958

v) The plaintiff submits that clause 4.1 (b) Scheme Rules is manifestly unfair under the Transactions with Natives Act 1958. They submit further that although this Act has been superseded by the Employment Act, it has not been repealed. Section 15 Fairness of Transaction Act however, does specifically repeal the Transactions with Natives Act 1958 and the Transactions with Natives Act 1963. Consequently this contention of the plaintiffs is rejected.

Employment Act 

vi) As to the plaintiffs submission that clause 4.1 (b) Scheme Rules is manifestly unfair under the Employment Act, the plaintiffs appear to be submitting that s. 149 Employment Act gives this court jurisdiction to review the structure of the Deed and the Scheme Rules. Section 149 (2) Employment Act, however is concerned with, "… determining any question under this Act." This proceeding is not a proceeding under the Employment Act. Section 149 does not give this court jurisdiction as submitted. This contention of the plaintiffs is rejected.

c) Constitution Section 41

i) The plaintiffs submit that s. 4.1 (b) Scheme Rules is contrary to s. 41 Constitution as it is harsh or oppressive and is not warranted by or is disproportionate as between the employees. Section 41 (1) Constitution is:

"(1) Notwithstanding anything to the contrary in any other provision of any law, any act that is done under a valid law but in the particular case-

(a) is harsh or oppressive; or

(b) is not warranted by, or is disproportionate to, the requirements of the particular circumstances or of the particular case; or

(c) is otherwise not, in the particular circumstances, reasonably justifiable in a democratic society having a proper regard for the rights and dignity of mankind,
is an unlawful act."

ii) For s. 41 Constitution to apply, the act about which complaint is made must be an, ".. act that is done under a valid law." The plaintiffs submit that, "law" in s. 41 has not been considered by the Supreme and National Courts. Further, as, "law" is defined in Schedule 1.2 (1) Constitution to include the underlying law, they submit that, "any act that is done and is valid under the principles of common law and rules of equity as they are adopted or created by our courts can in appropriate circumstances be held to be unlawful under s. 41 of the Constitution."

iii) The defendants submit that contrary to the plaintiffs' submission, "law" in s. 41 has been considered by the Supreme Court in SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314 and by the National Court in Tarere v. Australia and New Zealand Banking Group (PNG) Ltd [1988] PNGLR 201. Further, although there is some divergence as to whether, "an act done under a valid law" in s. 41 is referring only to a constitutional law or any law, it is clear that it does not apply to rights or obligations derived not from a constitutional law or other law, but from a private transaction. Thus it has been held that s. 41 cannot be relied upon in respect of an act done under a mortgage: Tarere (supra), or a contract: Max Umbu v. Steamships Ltd (2004) N2738.

iv) As Schedule 1.2 (1) Constitution defines, "law" to include the underlying law, there is an argument that, "law" in s. 41 is not confined to a constitutional law. I am not of the view however that, "law" includes an act performed pursuant to the terms of a private trust deed. The trustee when performing his functions is doing so pursuant to the Deed and not under a valid law, whether it be constitutional, underlying or other law. To interpret, "law" in s. 41 Constitution to cover this scenario would be to abandon the usual principles of statutory interpretation. Consequently, I am not of the view that the plaintiffs are able to rely upon s. 41 Constitution as they have. This contention is rejected.

Section 55 

v) The plaintiffs submit that s.4.1 (b) Scheme Rules is contrary to s. 55 Constitution and is discriminatory. Section 55 (1) Constitution is:

"(1) Subject to this Constitution, all citizens have the same rights, privileges, obligations and duties irrespective of race, tribe, place of origin, political opinion, colour, creed, religion or sex."

vi) The plaintiffs submit that amongst others, s. 55 does not permit an arbitrary division of labour as is envisaged in the Scheme Rules, that the settlor has created a privilege which, "in turn manifests a right in the employees that served OTML longest.", and that the distribution of the fund must be based on a, "criterion that is non-discriminatory." This has not occurred submits the plaintiffs, as the Scheme Rules arbitrarily destroyed the rights and privileges of the employees of OTML by dividing the monies between the executive class and working class.

vii) The defendants submit that the submissions of the plaintiffs are misconceived. The plaintiffs have taken only the first words of s. 55 (1) and argued that the rights and privileges of the employees under the Scheme Rules are not the same. This does not take into account that the entitlement to equality under s. 55 (1) is irrespective only of race, tribe, place of origin, political opinion, colour, creed, religion or sex. There is no general obligation under the Constitution that requires all citizens to have the same benefits, irrespective of, for example, skills, aptitude, training and experience.

viii) In this instance, for s. 4.1 (b) Scheme Rules to be contrary to s. 55 Constitution, there must be a right or privilege, and in respect of that right or privilege there must be an allegation that there is discrimination. The entitlement of the employees to benefits under the Deed including the Scheme Rules, arise under the Deed. As submitted by the plaintiffs, there was no duty on the settlor and no duty on OTML to establish the SIS Scheme. Without the actions of the settlor and OTML there would not be any benefits under the SIS Scheme to the employees of OTML, whether they be Part A or Part B employees. In the absence of such a scheme the employees would continue to be paid their wages and salaries for the work they perform. In such circumstances, can it be said that the employees have rights or privileges to the benefits under the SIS Scheme? I am not satisfied that they do have such rights or privileges. If there was not such a scheme, the employees of OTML would not have a cause of action against the settlor or OTML to in some way compel them to introduce such a scheme. To my mind, the benefits that they do receive under the scheme should be seen more as being in the nature of a gift as opposed to any right or privilege.

ix) If it is the position that the employees do have the rights and privileges to the benefits of the SIS Scheme by virtue of the provisions of the Deed and Scheme Rules, are these the rights and privileges that are protected by s. 55 (1) Constitution? I am not of the view that they are. The rights and privileges of the employees are dependent upon whether they are management level or award employees. Section 55 (1) does not provide that a citizen has the same rights and privileges irrespective of whether he is employed at management level or under an award. In this regard, I note that s. 48 Constitution envisages discrimination in employment on the basis of qualifications that are held by providing that every person has the right to freedom of employment in any calling for which he has the qualifications.

x) I am not satisfied that any rights or privileges that the employees have to benefits under the SIS Scheme are protected by s. 55 (1). Consequently the contention that s. 4.1 (b) Scheme Rules is contrary to s. 55 Constitution and is discriminatory is rejected.

Section 53

xi) The plaintiffs submit that s. 4.1 (b) Scheme Rules is contrary to s. 53 Constitution as it is unfair, and unjust and an illegal acquisition of the property rights of Part A employees to a larger portion of the fund. Section 53 (1) Constitution relevantly is:

"(1) Subject to Section 54 (special provision in relation to certain lands) and except as permitted by this section, possession may not be compulsorily taken of any property, and no interest in or right over property may be compulsorily acquired, except in accordance with an Organic Law or an Act of the Parliament, …….."

xii) The plaintiffs submit that amongst others, the Deed created a fund and the rights of expectation to distribution from the fund in the employees of OTML. The Scheme Rules terminated, extinguished and forfeited the majority of the OTML workers rights to a greater portion of the fund. The Scheme Rules are therefore contrary to s. 53 (1) Constitution and are void and of no effect.

xiii) The defendants submit that s. 53 only applies to citizens and there has in any event, not been any taking of property. No right (even if it can be described as property under s. 53), has been granted and then taken away.

xiv) For s. 4.1 (b) Scheme Rules to be contrary to s. 53 Constitution there must be property that has been taken. I am not satisfied that there is evidence of any property being taken. Further, I am not satisfied that any right or interest in property has been granted and then taken away. I refer to my remarks concerning the rights if any, of OTML employees to benefits under the SIS Scheme in my consideration of submissions as to s. 55 Constitution. The contention of the plaintiffs as to s. 53 Constitution is rejected.

Conclusion

4. As I have not found in favour of the plaintiffs in respect of any of the relief sought in paragraph 1 of the originating summons, it is not necessary for me to consider the other submissions of counsel.

Orders

5. The Court orders that:

a)	the relief sought in the originating summons is refused and the proceeding is dismissed, 

b)	the defendants' costs of and incidental to the proceeding are to be paid by the plaintiffs.
_________________________________________________________

Warner Shand: Lawyers for the Plaintiffs 
Allens Arthur Robinson: Lawyers for the Defendants