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Manus Fuel Distributors Ltd v Madang Provincial Gorvernment [2019] PGNC 57; N7789 (2 April 2019)

N7789

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 604 OF 2018

MANUS FUEL DISTRIBUTORS LIMITED
Plaintiff

V

MADANG PROVINCIAL GOVERNMENT
Defendant

Madang : Cannings J
2018: 8 December
2019: 14 March, 2 April

JUDGMENTS AND ORDERS – interest – claim for post-judgment interest on judgment debt against provincial government – whether judgment creditor has a right to an award of interest – Judicial Proceedings (Interest on Debts and Damages) Act 2015.

The plaintiff succeeded in earlier proceedings in obtaining a judgment debt in the sum of K2,259,170.24 against the defendant, a provincial government. Eight months later the plaintiff commenced fresh proceedings against the defendant, applying by originating summons for a declaration that the defendant had failed to satisfy the judgment debt and an order that it was entitled to interest on the judgment debt under Section 6(1) of the Judicial Proceedings (Interest on Debts and Damages) Act 2015. The defendant argued that the relief sought should be refused as there is an exclusive procedure for satisfaction of judgment debts against provincial governments provided for by the Claims By and Against the State Act 1996, which the plaintiff had not followed, and therefore the proceedings were an abuse of process.

Held:

(1) A person who obtains a judgment debt against a provincial government must, to enforce the judgment debt, follow the procedure in Section 14 of the Claims By and Against the State Act 1996, beginning with a certificate of judgment being issued by the Registrar of the Court under Section 13(2) of that Act.

(2) Though that procedure was not followed in this case, the proceedings were not an abuse of process as they are properly characterised as an application for declarations of the parties’ rights and obligations regarding the judgment debt, rather than enforcement of the judgment debt.

(3) The plaintiff’s application was determined on its merits. The plaintiff was granted the relief that it sought: a declaration that the defendant had failed to satisfy the judgment debt and an order that the plaintiff was entitled to post-judgment interest.

Cases cited

The following cases are cited in the judgment:

Polem Enterprise Ltd v Attorney-General (2010) SC1073

Seseno v Zurenuoc (2006) N5508
Counsel:

D F Wa’au, for the Plaintiff
B B Wak, for the Defendant

ORIGINATING SUMMONS

This was a trial in which the plaintiff sought a declaration and on order relating to a judgment debt obtained in earlier proceedings.

2^nd April, 2019

1. CANNINGS J: The plaintiff, Manus Fuel Distributors Ltd, succeeded in earlier proceedings in obtaining a judgment debt against the defendant, Madang Provincial Government. Eight months later the plaintiff commenced the present proceedings against the defendant, applying by originating summons for a declaration that the defendant had failed to satisfy the judgment debt and an order that it was entitled to post-judgment interest on the judgment debt under the Judicial Proceedings (Interest on Debts and Damages) Act 2015. The defendant argues that the relief sought should be refused as there is an exclusive procedure for satisfaction of judgment debts against provincial governments provided for by the Claims By and Against the State Act 1996, which the plaintiff has not followed, and therefore the proceedings are an abuse of process.
   

2. The following issues arise:

1. Are the proceedings an abuse of process?
   
2. Should the Court declare that the defendant has failed to satisfy the judgment debt?
   
3. Is the plaintiff entitled to post-judgment interest?
   
1. ARE THESE PROCEEDINGS AN ABUSE OF PROCESS?
   

3. Mr Wak for the defendant submits that the Claims By and Against the State Act 1996 provides an exclusive procedure for satisfaction of judgment debts against provincial governments. The plaintiff has not followed it, and therefore the proceedings are an abuse of process.

4. I uphold the first leg of that argument. A provincial government is regarded as part of the State for purposes of the enforcement provisions of the Claims By and Against the State Act 1996. Sections 13 (no execution against the State) and 14 (satisfaction of judgment against the State) state:

Section 13:

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

Section 14:

(1) The certificate referred to in Section 13(2) shall be served on the Solicitor-General by—

(a) personal service; or

(b) leaving the document at the office of the Solicitor-General with the person apparently occupying the position of personal secretary to the Solicitor-General between the hours of 7.45 am and 12 noon pm and 4.06 pm., or such other hours as may from time to time be declared by or under the Public Services (Management) Act 1995 to be the normal public service hours of duty, on any day which is not a Saturday, Sunday or a public holiday declared by or under the Public Holidays Act (Chapter 321).

(2) The Solicitor-General shall, within 60 days from the date of service upon him of a certificate under Section 13(2), endorse the certificate in Form 1.

(3) Upon receipt of the certificate of a judgement against the State bearing the Solicitor-General's endorsement that judgement may be satisfied, the Departmental Head responsible for finance matters shall, within a reasonable time, satisfy the judgement out of moneys legally available.

(4) Any payment in satisfaction of judgement may, in the absolute discretion of the Departmental Head responsible for finance matters, be made by instalments, provided the judgement is thereby satisfied within a reasonable time.

(5) No action—

(a) for or in the nature of mandamus; or

(b) for contempt of court,

or otherwise lies against the Solicitor-General or the Departmental Head responsible for finance matters in respect of the satisfaction of a judgement under this Act, other than for failure to observe the requirements of Subsection (2), (3) or (4), as the case may be, or unless other exceptional circumstances can be shown to the satisfaction of the court.

5. As explained in Seseno v Zurenuoc (2006) N5508, when a judgment debt is obtained against a provincial government, the debt is to be satisfied in accordance with Section 14. That means:

• a certificate of judgment must be issued by the Registrar under Section 13(2) to the party in whose favour the judgment is given;
  
• that certificate must be served on the Solicitor-General;
  
• the Solicitor-General must endorse the certificate within 60 days;
  
• the endorsed certificate must be served on the Secretary for Finance who is obliged to satisfy the judgment out of funds legally available within a reasonable time.
  

6. I also uphold the second leg of the defendant’s argument: the evidence reveals no indication that the plaintiff has obtained a certificate of judgment under Section 13(2).

7. However, I reject the third leg of the argument – that because of the failure to obtain a certificate under Section 13(2) these proceedings are an abuse of process. These proceedings are best characterised as an application for declarations as to the parties’ rights and obligations regarding the judgment debt, as distinct from proceedings for enforcement of the judgment debt. These proceedings do not entail any action for or in the nature of mandamus or contempt of court (being proceedings proscribed by Section 14) and do not otherwise fall into the class of proceedings that could be regarded as an application to enforce the judgment debt. It was therefore not necessary to obtain a Section 13(2) certificate or follow any of the steps in Section 14 prior to making the application now before the Court.

8. The defendant has failed to prove that the proceedings are an abuse of process. I now turn to the merits of the application.

2. SHOULD THE COURT DECLARE THAT THE DEFENDANT HAS FAILED TO SATISFY THE JUDGMENT DEBT?
   

9. The judgment debt at the centre of these proceedings was obtained in WS No 785 of 2017, Manus Fuel Distributors Ltd v Madang Provincial Government, by an order dated 10 February 2018 in these terms:

(1) The defendant shall pay to the plaintiff a total amount of debt and damages of K2,227,100.00 plus interest of K32,070.24, being a total judgment sum of K2,259,170.24.

(2) The defendant shall pay the plaintiff’s costs of the entire proceedings on a party-party basis, which shall, if not agreed, be taxed.

(3) The file is closed.

10. The plaintiff has presented sufficient evidence to show that at the time of trial none of the judgment debt had been paid. The defendant has failed to adduce any contrary evidence or provide any good reason for refusing the declaration, which I will make in the terms sought by the plaintiff.

3. IS THE PLAINTIFF ENTITLED TO POST-JUDGMENT INTEREST?
   

11. It is important to appreciate that these proceedings are about post-judgment, as distinct from pre-judgment, interest. The two types of interest are often confused. As the Supreme Court pointed out in Polem Enterprise Ltd v Attorney-General (2010) SC1073 pre-judgment interest refers to interest awarded up to and including the date of judgment whereas post-judgment interest is awarded in respect of the period after the date of judgment.

12. The decision in Polem was based on the Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52, which was repealed and replaced by the Judicial Proceedings (Interest on Debts and Damages) Act 2015. However, the distinction between pre-judgment and post-judgment interest in Chapter 52 has been preserved in the 2015 Act. Under Chapter 52 pre-judgment interest was awarded as a matter of discretion under Section 1, and post-judgment interest was payable virtually as a matter of right under Section 3. In the 2015 Act pre-judgment interest is awarded as a matter of discretion under Section 4 (subject to Section 5), while post-judgment interest is payable under Section 6.

13. Section 4 (pre-judgment interest on debts and damages) states:

(1) Subject to Section 5, in proceedings in a court for the recovery of a debt or damages, the court may order a rate as it thinks proper to be applied to the sum for which judgment is given interest, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

(2) Where the proceedings referred to in Subsection (1), including proceedings arising out of a breach of express or implied contract or mercantile usage, are taken against the State, the rate of any interest under that subsection shall not exceed 2% yearly.

(3) The maximum rate of interest in Subsection (2) applies notwithstanding that the proceedings against the State arose out of a breach of express or implied contract or mercantile usage and the relevant interest rate in the contract or mercantile usage is higher than 2%.

(4) A judgment entered contrary to Subsections (2) and (3) is a nullity and is liable to be set aside and re-issued according to law by the same judge or judges on application —

(a) by the lawyer for the State; or

(b) by the registrar, clerk or other proper officer of the court by which the judgment is given; or

(c) by any party to the proceedings.

14. Section 5 (interest on interest, etc) states:

Nothing in Subsection 4(1) —

(a) authorises the awarding of interest on interest; or

(b) applies in relation to a debt on which interest is payable as of right, whether under an agreement or otherwise, except a debt on which interest is payable as of right against the State; or

(c) affects the damages recoverable for the dishonour of a bill of exchange.

15. Section 6 (post-judgment interest on debts and damages) states:

(1) Subject to Subsections (2) and (3), where judgment is given or an order is made for the payment of money, interest shall, unless the court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on such of the money as is, from time to time, unpaid.

(2) Where the judgment referred to in Subsection (1) is taken against the State, the rate of any interest under that subsection shall not exceed 2% yearly.

(3) Where, in proceedings on a common law claim, the court directs the entry of judgment for damages and the damages are paid within 30 days after the date that the direction is served, interest on the judgment debt shall not be payable under Subsection (1) unless the court otherwise orders.

(4) Where, in proceedings for damages on a common law claim, the court makes an order for the payment of costs and the costs are paid within 30 days after service of the direction or order that ascertains the amount of the costs by taxation or otherwise, interest on the costs shall not be payable under Subsection (1) unless the court otherwise orders.

(5) Notwithstanding anything in this section, where the judgment given or the order made is given or made against the State —

(a) no interest is payable on a judgment for damages until a certificate of judgment is served on the State; and

(b) to avoid any doubt, no interest is payable on taxed costs until a certificate of taxation is served on the State; and

(c) any payment under Subsections (3) and (4) shall be deemed to have been made on the date of the drawing of the cheque for payment; and

(d) where the sum awarded is increased on appeal, interest shall only be payable on the increase in accordance with this section from the date when the appellate judgment or order takes effect.

(6) A judgment entered or order given contrary to Subsections (5) is a nullity and is liable to be set aside and re-issued according to law by the same judge or judges on application —

(a) by the lawyer for the State; or

(b) by the registrar, clerk or other proper officer of the court by which the judgment is given; or

(c) by any party to the proceedings.

16. It will be observed from the mandatory terms of Section 6(1) that “where judgment is given or an order is made for the payment of money”, post-judgment interest shall be payable “at the prescribed rate from the date when the judgment or order takes effect on such of the money as is, from to time, unpaid” unless one or more of various scenarios exist, viz:

• the court otherwise orders (the exception provided by s 6(1));
• the judgment is taken against the State in which case post-judgment interest must not exceed 2% yearly (s 6(2));
• where the court directs entry of judgment for damages on a common law claim and the damages are paid within 30 days after the date of service of the direction, in which case post-judgment interest is not payable unless the court orders otherwise (s 6(3));
• where in proceedings for damages on a common law claim the court makes an order for payment of costs and the costs are paid within 30 days after the date of service of the direction or order that ascertains the amount of costs, in which case post-judgment interest is not payable unless the court orders otherwise (s 6(4));
• where the judgment or order is against the State, the entitlement to post-judgment is subject to further exceptions and qualifications under s 6(5).
  

17. None of those scenarios exists here, in that:

• the court has not ‘otherwise ordered’ (s 6(1));
• the judgment was not taken against “the State”, it was taken against Madang Provincial Government (ss 6(2) and (5)) and in that regard, I have considered but rejected an argument that a provincial government ought to be regarded as part of the State for the purposes of the 2015 Act;
• though part of the judgment was for damages on a common law claim, none of the damages was paid within 30 days (s 6(3)); and
• none of the costs was paid within 30 days (s 6(4)).
  

18. It follows that the plaintiff is entitled to post-judgment interest. At what rate? Section 6(1) says “at the prescribed rate” but there has to my knowledge been no rate prescribed in or under the 2015 Act. In these circumstances the best and fairest thing to do is to use the same rate as used for calculation of pre-judgment interest: 8%.

CONCLUSION

19. I will make the declaration and order sought by the plaintiff. Costs will follow the event.

ORDER

(1) It is declared that the defendant has failed to satisfy any part of the judgment debt of K2, 259,170.24 in WS No 785 of 2017, dated 10 February 2018.

(2) It is ordered that the plaintiff is entitled to post-judgment interest, payable at the rate of 8% per annum from 10 February 2018 on such of that judgment debt as is, from time to time, unpaid.

(3) The defendant shall pay the plaintiff’s costs of these proceedings on a party-party basis, which shall, if not agreed, be taxed.

(4) Time for entry of this order is abridged to the date of settlement by the Registrar, which shall take place forthwith; and the file is closed.

Judgment accordingly
________________________________________________________________
Ninerah Lawyers: Lawyers for the Plaintiff
Bradley Wak Lawyers: Lawyers for the Defendant