N8440

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 532 OF 2019

BETWEEN:
SELON LIMITED
First Plaintiff

AND:
SALI TAGAU
Second Plaintiff

AND:
MADANG DISTRICT DEVELOPMENT AUTHORITY
First Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant

Madang: Narokobi J
2020	: 14th July, 5th August

CLAIMS BY AND AGAINST THE STATE ACT 1996–District Development Authority – Whether a District Development Authority falls within the meaning of “the state” for purposes of Section 13(1) of the Claims By and Against the State Act 1996 – Criteria for an entity to fall within the meaning of the state considered and applied

GARNISHEE – Whether leave should be granted to serve notice on garnishee- relevant considerations for leave to be granted 

Facts:
The Plaintiffs obtained a judgment sum of K400,000 against the Madang District Development Authority. The court ordered that the money be paid within a period of 90 days. The District Development Authority did not pay, and the plaintiffs have applied to the court to obtain leave to serve the garnishee, a garnishee notice on the judgement debtor’s bank.
Held:
(1)	     When determining whether an entity falls within the meaning of the “state” for purposes of Section 13(1) of the Claims By and Against the State Act 1996, the criteria are as determined in SCR No1 of 1998; Reservation Pursuant to Section 15 Supreme Court Act (2001) SC672.

(2)	     These criteria have been summarised in John v National Housing Corporation (2005) N2770 as follows:

“1. They are established by the Constitution;

2. They are part of the three-tier structure of government enshrined in the Constitution;

3. Like the other tiers of government they are constituted by elected representatives;

4. The National Government exercises some control over provincial governments in political, administrative and financial matters;

5. They fall within the definition of "governmental body" contained in the Constitution.

6. Judgement debts are recoverable from monies allocated in their budgetary process.”

(3)	     To determine whether an entity is a governmental body, the criteria to apply are as established by the Supreme Court in Application by Air Niugini Ltd and Rei Logona pursuant to Constitution, Section 18(1) (2020) SC1922 as follows:

(i) Is it established pursuant to statute?

(ii) Are the terms and conditions of its employees set in the same way as those of officers of the National Public Service under the Public Services (Management) Act 1995?

(iii) Are its board and its chief executive officer appointed by the government of the day?

(iv) Is it obliged to give effect to the policies of the government (and not pursue its own corporate will and desire), and is it accountable to the people of Papua New Guinea through a Minister as its political head?

(v) Was it established to perform traditional government functions?

(vi) Are its operations funded by government?

(vii) Is it subject to government direction and control on a day to day   basis?

(viii) Is it subject to government control in the engagement of staff?

(ix) Does it operate as a monopolistic service provider, as distinct from operating in a commercial environment in competition with other similar entities?

(4)	      A seventh consideration to the six considerations developed in John v National Housing Corporation is whether the entity has a separate legal existence, capable of suing and be sued and owning property.

(5)	     In the circumstances, although a District Development Authority is a governmental body, it is not part of the state as it is a separate legal entity and did not satisfy a majority of the criteria in SCR No1 of 1998; Reservation Pursuant to Section 15 Supreme Court Act.

(6)	     Since the conditions for the grant of leave to serve garnishee notice has been satisfied, leave is accordingly granted with the proviso that the Madang District Development Authority be given opportunity to settle the debt through appropriate arrangements before the order nisi is made absolute.

Cases cited:
The following cases are cited in the judgment:

Air Niugini Ltd v Kavieng District Development Authority (2019) N8158
Albert Areng v Babia & NHC (2005) N2895
Albert Areng v Gregory Babia (2010) N4111
Albert Purane v Ase Tipurupeke Land Group Inc (2005) N2806
Application by Air Niugini Ltd and Rei Logona pursuant to Constitution, Section 18(1) (2020) SC1922
Aure v Sai Business Group Inc (2008) N3349
Davidwestern Advertising Group Ltd v HIRI 152 Developments Ltd (2019) N8112
Habolo Building & Maintenance Ltd v Hela Provincial Government (2016) SC1549
Kambaka v Dick (2018) N7209
Kedmec Auto Repairs v PNG Power Ltd
John v National Housing Corporation (2005) N2770
Mapiso v Enga Provincial Government (2018) N7722
MAPS Tuna Limited v Manus Provincial Government (2007) SC857
Moresby Plumbing Suppliers & Services Ltd (trading as Plumbers & Builders Supplies) v Timkumba Holdings Ltd (2020) N8309
Pato v Enga Provincial Government (1995) N1340
Pupune v Makarai, Administrator Eastern Highlands Provincial Government (In Suspension) (1997) N1647
Pupune v Makarai, Administrator Eastern Highlands Provincial Government (In Suspension) (1998) N1777
Ruta trading as Ariti Road & Building Maintenance v Eastern Highlands Provincial Government (1998) N1814
SCR No 1 of 1978; Re Ombudsman Commission Investigations of the Public Solicitor [1978] PNGLR 345).
SCR No 1 of 1998; Reservation Pursuant to Section 15 of the Supreme Court Act (2001) SC672

Legislation Cited

Claims By and Against the State Act 1996
Constitution of the Independent State of Papua New Guinea 
District Development Authority Act 2014
Interpretation Act, Chapter 2.

International Treaties Cited

Montevideo Convention on the Rights and Duties of States 1933

Counsel:

Mr. M. Yalapan, for the Plaintiffs
Mr. E. Manihambu, for the Madang District Development Authority	

JUDGMENT
5th August, 2020
1.	NAROKOBI J: The first and second plaintiff have filed a Notice of Motion on 26 June 2020 seeking to serve a garnishee notice on the Bank South Pacific Madang Branch to satisfy a judgment sum of K400,000.00 they obtained against Madang District Development Authority (“DDA”), or judgment debtor. The application is opposed by lawyers from the Office of the Solicitor-General. This is my ruling on the application.

A	BACKGROUND

2.	The first and second plaintiff sued five defendants. The third defendant was the Madang District Development Authority (DDA). The other defendants, including the Madang Provincial Government (fourth defendant) and the State (fifth defendant) did not have liability entered against them. Assessment of damages proceeded only against the third defendant.

3.	Liability was determined by default on 11 February 2020 when the court entered default judgment in the following manner:

“Pursuant to Order 12 Rules 25 and 28 of the National Court Rules, default judgement is entered against the third defendant on liability, subject to a trial on assessment of debt and damages,” 

4.	 The third defendant is the Madang DDA. As I stated above, since the other defendants did not have liability entered against them, they are considered to have been removed from the proceedings. The court deemed that the responsible entity to pay for the damages was the third defendant.

5.	On 3 March 2020 there was a trial on assessment of damages. The third defendant was not present. The trial was conducted by affidavit and the court made the following orders:

1.	The third defendant is liable in debts and damages to the first plaintiff in the sum of K400,000.00 which shall be paid to the first plaintiff within a period of 90 days after service of the order on the third defendant.
2.	In-addition, the third defendant shall pay interest to the first plaintiff on the sum of K400,000.00 calculated at the rate of 2% per annum in respect of the period commencing 2 August 2019 and ending on 3 March 2020 which shall be paid to the first plaintiff within a period of 90 days after service of the order on the third defendants.
3.	The third defendant shall pay the plaintiff’s costs of the proceedings on a party-party basis which shall, if not agreed, be taxed.

6.	The affidavit of Samson Tagau filed on 26 June 2020, states they have served the order and it is over 90 days and the judgement sum has not been paid. The plaintiffs now want to garnishee the account of Madang District Development Authority held at the Bank South Pacific for the judgment sum and costs.

7.	During submissions, I asked Counsels if a DDA was immune from enforcement proceedings by virtue of the Claims By and Against the State Act 1996 (Claims Act). Mr Manihambu submitted that a DDA was part of the state and referred me to the case of Albert Purane v Ase Tipurupeke Land Group Inc (2005) N2806 where the National Court held that the Mineral Resources Development Corporation was part of the state for purposes of the Claims Act.

B	ISSUES

8.	I consider the issues to be as follows:

•	Whether a DDA comes within the meaning of the word “State” for purposes of Section 13(1) of the Claims Act, in which case, the application for leave to issue a garnishee notice should be refused?; and
•	If a DDA is not part of the “State” then whether leave should be granted to the plaintiffs pursuant to Order 13 Rule 56(1) of the National Court Rules to serve a garnishee notice on the Madang Branch of the Bank South Pacific Bank?

9.	I will address each of the issues separately. If a DDA is not subject to Section 13(1) of theClaims Act, then I will proceed to deal with the issue of whether leave should be granted to issue a garnishee notice to the bank. In summary this is how I will deal with the matter.

C	LAW AND APPLICATION OF THE LAW TO THE ISSUES

1)	First Issue – Whether a District Development Authority comes within the meaning of the word “State” for purposes of Section 13(1) of the Claims Act?

10.	Section 13 of the Claims Act is in the following terms:

“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 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.”
11.	 Since the nature of a garnishee is an “execution or attachment” the question is whether a DDA is part of the “State” so that its property or revenue may not be attached. The issue has been dealt with in relation to the provincial government, but not in relation to a DDA, at least from the decided cases of the Supreme Court, in so far as my research has established.

12.	The issue of whether an entity comes within the meaning of the word “State” has a complex and divided history. I will therefore do my best to cover the genesis of this issue and trace it to the current status.

13.	From the common law perspective, state immunity and Crown privilege traces its origin to the latin maxim rex non potest peccare or “the king can do no wrong.” Crown privilege received restricted legislative approval in Papua New Guinea. Significantly it was not constitutionally entrenched. The legislation first incorporating state immunity in Papua New Guinea was the Claims By and Against the State Act (Chapter 30) and then repealed and replaced in 1996 by the current Claims Act. In the United Kingdom, crown immunity is sanctioned by Parliament in the Crown Proceedings Act 1947 and State Immunity Act 1978 (for sovereign states sued in the UK). It must be noted that the position in the UK has gone from absolute immunity to restricted immunity. It must also be appreciated that in Papua New Guinea, all power belongs to the people, and the Queen and her successors was invited by the people of Papua New Guinea to be its head of state to which she graciously accepted (Constitution, Section 82).

14.	The first case to have dealt with the issues appears to be the case of Pato v Enga Provincial Government (1995) N1340, where the National Court dealt with the question of whether a Provincial Government comes within the meaning of the word "State" for purposes of issuing a garnishee against the provincial government, a judgment debtor. The court was dealing with a similar provision of the predecessor to the current Claims Act. In that legislation as in the present one, “the state” was found to have not been defined by the Act. The court referred to the Interpretation Act (Ch 2) which defines "the state" as the Independent State of Papua New Guinea. Furthermore, the national legislation was found to be consistent with the definition given by the provincial law-Interpretation Act 1990 (Enga).

15.	His Honour Kapi DCJ (as he then was) further found that the Constitution did not define the word "State" but it defines the name "Papua New Guinea" under Sch 1.2 to mean “the Independent State of Papua New Guinea.” His Honour then made the following observations: 

“The Independent State of Papua New Guinea derives its legal existence or capacity from the Constitution of Papua New Guinea (see Preamble to the Constitution). The power and the authority of the people are vested in the State of Papua New Guinea and this power is exercised by the National Government (see s 99 of the Constitution). Subject to any other provision of the law the term "the State" for purposes of Claims By and Against the State Act (ch 30) means the National Government, an arm, department, agency or instrumentality of the National Government. This does not include a provincial government.”

16.	His Honour was of the firm view, that a provincial government was a legal person with full capacity to sue and be sued and to own property. It was therefore a distinct entity from the state. For this reason, it was not “the state.” His Honour further observed that the Enga provincial government did not pass any law which prevented its revenue from execution or attachment. 

17.	This line of reasoning was rejected in Pupune v Makarai, Administrator Eastern Highlands Provincial Government (In Suspension)(1997) N1647. His Honour, Injia J (as he then was) held this view:

“Therefore, it is clear in the Preamble that as far as the people are concerned, they have elected a government known as the “Independent State of Papua New Guinea “or the State”. The people’s collective governing power is vested in the “Independent State of Papua New Guinea”, be it the National government or a Provincial Government. The relationship between these two forms of governments in relation to the exercise of their respective powers is provided for by the Constitution and relevant organic laws in fine detail but on the whole, those provisions do not derogate from the underlying fundamental principle that these two forms of government are governments of the “people” or “the State”. In relation to the power to acquire and hold property or receive and generate revenue of the State, both the National Government and Provincial Government are given the status of a legal entity and vested with the appropriate powers. But the property that they acquire and hold or revenue that they generate and expend ultimately belongs to the people of Papua New Guinea, who fund these institutions through the public purse.”

18.	His Honour then went on to say the following:

“In my view the term “the State” in the context of “the property and revenue of the State” in the Claims By and Against the Act 1996  is of general application to the “property or revenue of the State”, which includes the National Government or provincial governments and local-level governments. There is nothing in this Act to restrict its application to the property or revenue of the National Government only. Both the National Government and the Provincial Governments and Local Level Governments comprise “the State” and they deserve the protection accorded by S. 13 (1). It would defy logic, commonsense and statutory purpose to accord a definition of “the State” in the context of “the property and revenue of the State” in this Act to permit the execution or attachment against the property or revenue of a Provincial Government but not the National Government when both governments are part of “the State” and both governments are funded by the people of Papua New Guinea through the public purse.”

19.	In Ruta trading as Ariti Road & Building Maintenance v Eastern Highlands Provincial Government (1998) N1814, Sawong J, shared the view held by Kapi DCJ in Pato Lawyers -v- Enga Provincial Government and declined to follow Pupune -v- Makarai & Ors. As a result, in Pupune v Makarai, Administrator Eastern Highlands Provincial Government (In Suspension) (1998) N1777, a reservation was made to the Supreme Court under Section 15 of the Supreme Court Act to decide the issue. SCR No 1 of 1998; Reservation Pursuant to Section 15 Supreme Court Act(2001) SC672 came about as a result of that reservation in Pupune v Makarai, Administrator Eastern Highlands Provincial Government (In Suspension). The Supreme Court held that provincial governments are a part of the state for purposes of Section 13 of the Claims Act. It said:

“The Constitution does not define "the State", but it defines the name "Papua New Guinea" to mean "the Independent Sate of Papua New Guinea". The Constitution also defines "governmental body" to mean –

(a) the National Government; or
(b) a provincial government body; or
(c) an arm, department, agency or instrumentality of the National Government or a provincial body; or
(d) a body set up by statute or administrative act for governmental or official purposes.

The Claims By and Against the State Act 1996 does not define "the State". The Interpretation Act defines "the State" as "the Independent State of Papua New Guinea." A provincial government is thus at least a "governmental body". Is it a part of "the State"? Is it a part of the governmental body making up the "Independent State of Papua New Guinea?" We believe it is and therefore it’s assets and finances must be protected from execution in the same way as the assets and finances of the National Government. The State therefore must also include a provincial government.

The policy justification for protecting state assets and finances was discussed briefly by Sheehan J in Wagambie and Kupo v. General Rockus Lokinap and Ors. [1991] PNGLR 145. In a motion seeking orders for payment into court of a judgment debt against the State and summons seeking to examine the Secretary for Finance as to availability of funds to meet the judgment debt, His Honour held that s. 6 of the Act was clear, that no execution or like process can issue against the State. His Honour said:

"Why should this be so? Why is the State exempt from execution process? Essentially it is because the State of PNG is a sovereign nation, endowed with the power of its people and, as the Constitution states, resolute in maintaining its national identity, integrity and self-respect.”

20.	The relevant considerations which the Supreme Court thought made the provincial government come within the meaning of “the state” was analysed by Lay J in John v National Housing Corporation (2005) N2770 and adopted by Sawong J in Albert Areng v Babia & NHC (2005) N2895. That case extrapolated six (6) criteria from the Supreme Court in SCR No 1 of 1998; Reservation Pursuant to Section 15 Supreme Court Act to determine whether an entity is part of the State:

“1. They are established by the Constitution;

2. They are part of the three-tier structure of government enshrined in the Constitution;

3. Like the other tiers of government they are constituted by elected representatives;

4. The National Government exercises some control over provincial governments in political, administrative and financial matters;

5. They fall within the definition of "governmental body" contained in the Constitution.

6. Judgement debts are recoverable from monies allocated in their budgetary process.”

21.	In John v National Housing Corporation, the court held that the National Housing Corporation did not meet criteria 1, 2, 3 and although it is a "governmental body," it is not included in the term "the state" as used in the Claims Act. It is interesting to note that conversely, an entity may not be a governmental body, but can still be considered as part of the State as it is established directly by the Constitution (SCR No 1 of 1978; Re Ombudsman Commission Investigations of the Public Solicitor [1978] PNGLR 345).

22.	The opposing view was presented in the case of Albert Purane v Ase Tipurupeke Land Group Inc (2005) N2806. In that case, Davani J reached the conclusion that Mineral Resources Development Company Limited was an instrumentality of the State and therefore was entitled to the protection afforded by Section 13(1) of the Claims Act. Her Honour said:

“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.”

23.	I have read the Supreme Court decision in SCR No 1 of 1998; Reservation Pursuant to Section 15 Supreme Court Actas creating an exception for state instrumentalities which the court in Albert Purane did not refer to.

24.	This was pointed out by Sawong J in Albert Areng v Gregory Babia where his Honour found that the Claims Act did not apply to the National Housing Corporation:

“To my mind the Supreme Court stated clearly that the protection given by s.13 (1) of the CB&AS Act does not apply to assets and finances of development enterprises of Provincial Governments that have independent corporate statuses and operate commercially.”  

25.	In Albert Areng v Gregory Babia (2010) N4111, Cannings J highlighted the conflicting views of the National Court on the application of the Claims Act to the National Housing Corporation, a governmental body. Cases in favour of the Claims Act applying to the NHC were:

•	Mt Hagen Urban LLG v NHC, WS 1194/2002, 20.04.04, Mogish J;
•	Kilebo Sigo Mamae &Ors v NHC; OS 844/2005, 27.01.06, Davani J;
•	Paul Rawaiya &Ors v NHC, OS 429/2006, 14.08.06, Gabi J; and
•	Phillip Num v NHC, OS 115/ 2003, 25.08.06, David J.

26.	Those cases which decided that NHC was not part of the state for purposes of the Claims Act were:

•	John v NHC (2005) N2770, Lay J;
•	Albert Areng v Babia & NHC (2005) N2895, Sawong J; and
•	Anave Megaraka Ona v NHC (2009) N3623, Sevua J.

27.	Cannings J found persuasive the reasoning in cases which decided that the NHC was not part of the state. With respect I am in agreement with Cannings J and I find especially instructive, the decision in John v NHC as it conducted a more detailed  analysis of SCR No 1 of 1998; Reservation Pursuant to Section 15 Supreme Court Act instead of relying only on the “substantial control” or “instrumentality of government” or “governmental body” test as the criteria of determining whether an entity comes within the meaning of the word “state.”

28.	So the question remains, whether a DDA is part of “the state” for purposes of Section 13(1) of the Claims Act. I note that in the case of Air Niugini Ltd v Kavieng District Development Authority (2019) N8158, Anis J held that a DDA is not part of “the state” for purposes of obtaining a certificate of judgement under Sections 13(2) and 14 of the Claims Act. His honour distinguished the Supreme Court case of SCR No 1 of 1998; Reservation Pursuant to s. 15 of the Supreme Court Act on the basis that it dealt with the provincial government. If I read that decision correctly, the main distinguishing factor which His Honour placed much emphasis on, was that the DDA was a separate legal entity from the State. His Honour said:

“I do not think or see my conclusion as contradictory to the established Supreme Court precedents. For example, I refer to the five men decision of the Supreme Court in SCR No. 1 of 1998: Reservation Pursuant to s. 15 of the Supreme Court Act (2001) SC672. The Supreme Court held, and I quote, The term, "the State" also includes a Provincial Government. As I have stated in Davidwestern, the Hiri Special Purpose Authority may be a state entity or an entity of the Central Provincial Government which may be part and partial of the State, and as held by the Supreme Court in SCR No. 1 of 1998. However, it is not the State within its definition under section 3 of the Interpretation Act. In my view, there is no ambiguity to the definition of the term “the State” that would require clarity, and I note that I have also reached that conclusion in Davidwestern.”

29.	In the Claims Act, Section 13 operates in tandem with Section 14, especially sub-section 13(2) by stating that no judgement may be enforced without there being a certificate of judgment issued by the Solicitor-General pursuant to Section 14. So if the National Court has decided (per Anis J) that a DDA does not come within the meaning of “the state” for purposes of Section 14, it will necessarily follow that Section 13 also does not apply to the DDA, thereby opening up the legal avenue for their (DDA) accounts to be garnisheed.

30.	Since Air Niugini Ltd v Kavieng District Development Authority is a National Court decision, I am confronted with the question of whether I should follow that decision. Before I reach my view on this question, I would like to conduct a more detailed analysis of the issue. This I do so now.

31.	I examine first the provisions of the District Development Authority Act 2014. Since it is a lengthy analysis, I attach it as Annexure 1 to my decision. I take into consideration provisions of the District Development Authority Act and my analysis when considering the application of the ratio decidendi of SCR No. 1 of 1998: Reservation Pursuant to s. 15 of the Supreme Court Act to the present case. Since the Supreme Court considered Section 13 of the Claims Act, I am of the view that I should apply the criteria developed in John v National Housing Corporation to the present case.

32.	I begin by first addressing the issue of whether a DDA is a governmental body. The Supreme Court in Application by Air Niugini Ltd and Rei Logona pursuant to Constitution, Section 18(1) (2020) SC1922 established nine (9)criteria to determine if an organisation is a governmental body. I set out these criteria in the first column and my analysis and reasons in the second and third column as to how a DDA stands in relation to each criterion.

Criteria 	Position 	Reason 	
1.Is it established pursuant to statute?	Yes	Established by the District Development Authority Act 2014, Section 4.	
2.Are the terms and conditions of its employees set in the same way as those of officers of the National Public Service under the Public Services (Management) Act 1995?
	Yes	Section 23 of the District Development Authority Act subjects the terms and conditions of employees as being the same as officers of the National Public Service under the Public Services (Management) Act 1995	
3.Are its board and its chief executive officer appointed by the government of the day?
	No	The board is not appointed by the government of the day, however the chief executive officer is appointed through the public service recruitment process. 	
4.Is it obliged to give effect to the policies of the government (and not pursue its own corporate will and desire), and is it accountable to the people of Papua New Guinea through a Minister as its political head?	Yes	Although strictly speaking it does not have to give effect of the policies of the government, there is substantial scope for collaboration and control by the government through the minister responsible.	
5.Was it established to perform traditional government functions	Yes	The DDA performs service delivery functions.	
6.Are its operations funded by government?	Yes	The funds of an Authority consist of —
•	any monies appropriated to the Authority by the National Government or a Provincial Government, including grants; and
•	any monies received by the Authority by way of grants, donations or other contributions from any lawful source, including sources outside of Papua New Guinea.
	
7.Is it subject to government direction and control on a day to day basis?	No 	Although it is answerable to the government, and subject to direction where necessary, it is not subject to government control on a day to day basis.	
8.Is it subject to government control in the engagement of staff?	No 	The terms and conditions of staff is the same as public servants, but the board is responsible for the appointment of staff.	
9.Does it operate as a monopolistic service provider, as distinct from operating in a commercial environment in competition with other similar entities?	Yes	The functions of the DDA clearly state this, for example one of its functions is service delivery in the district.	

33.	Of the nine (9) criteria, six (6) favour a DDA being a governmental body, and so I find that it is a governmental body. So that requirement is satisfied.

34.	I now turn to the other requirements in John v National Housing Corporation emanating from SCR No 1 of 1998; Reservation Pursuant to s. 15 of the Supreme Court Act.

Criteria 	Position 	Reason 	
1. They are established by the Constitution	No 	It is established by an Act of Parliament and the Organic Law on Provincial and Local Level Government (section 33A).	
2.They are part of the three-tier structure of government enshrined in the Constitution	No	They are an authority set up to develop the districts with no law-making powers.	
3.Like the other tiers of government they are constituted by elected representatives	No	It is not a representative body set up by the Constitution. It is a development agency or authority of the state. Although its controlling board, does have representatives of the national, provincial and local level government, it also has appointed members. (see ss 12 and 14, District Development Authority Act).	
4.The National Government exercises some control over provincial governments in political, administrative and financial matters	Yes	There is considerable scope in the District Development Authority Act for the national government to exercise political, administrative and financial control over the DDA.	
5.They fall within the definition of "governmental body" contained in the Constitution.	Yes 	Refer to discussions above which provides my reason for this conclusion.	
6.Judgement debts are recoverable from monies allocated in their budgetary process	Yes	Provision is made for this in their annual budgets, see section 25(2)(a) of the District Development Authority Act, which states:

“(2)	The monies of the Authority are to be expended only -
(a)	in payment or discharge of expenses, obligations and liabilities of the Authority; and…”

	

35.	I would add another criterion to the six provided by Lay J, in that the organisation is a separate legal entity, capable of suing and being sued and owning property. I believe this was the criterion which Anis J placed much emphasis on in Air Niugini Ltd v Kavieng District Development Authority. This requisite of being a separate legal entity for ineligibility to be part of “the state” traces its origins to the cases of Pato Lawyers -v- Enga Provincial Government and Ruta trading as Ariti Road & Building Maintenance v Eastern Highlands Provincial Government (1998) N1814. Although it was assumed to have been negated in SCR No 1 of 1998; Reservation Pursuant to s. 15 of the Supreme Court Act,this criterion is still recognised by the Supreme Court for purposes of the Claims Act generally, as the following cases attest - Habolo Building & Maintenance Ltd v Hela Provincial Government (2016) SC1549 and MAPS Tuna Limited v Manus Provincial Government (2007) SC857.

36.	Of the original six (6) criteria, three (3) favour the entity being considered part of the state. I have added a seventh criteria and that is whether the entity can sue or be sued and its ability to own property – that is whether it is a separate legal entity. Taking up this consideration, one will notice that a DDA can sue the state, and it will legally have standing to do so (see for example Kambaka v Dick (2018) N7209). Conversely, the State can also sue the DDA. Logically, one cannot sue an entity if it is considered as part of it. I would like to spend some time discussing this consideration in some detail.

37.	It must be appreciated that the Claims Act does not only provide for claims against the State, but also for claims by the State. Section 4 provides relevantly:

“4.Suits By The State.
Suits on behalf of the State, including relator proceedings, may be brought in the name of the State–

(a) by the Attorney-General; and

(b) in respect of a suit brought in a District Court, by–

(i) the Attorney-General; or

(ii) a person appointed for the purpose by the Minister.”

38.	The implication of this, is that if the DDA is considered as part of “the state,” and wants to initiate a case, it must be brought by the Attorney-General. This is clearly contrary to Section 4 of the District Development Authority Act, which confers on the DDA the legal ability to sue and be sued without the need of obtaining approval from the Attorney-General. To my mind an entity cannot be “not the state” for purposes of Section 4 and at the same time, be part of “the state” for purposes of Section 13. It is illogical. 

39.	It is apparent from my discussions that an entity being an instrumentality of the state, and subject to the control of the national government is in itself not determinative of the issue as was what persuaded Davani J in Albert Purane v Ase Tipurupeke Land Group Inc. A DDA may be part of the state politically, socially or financially, but in my view, it is what it is legally that should have the final say. To my mind the term “the state” which the Interpretation Act (Ch 2) defines as “The Independent State of Papua New Guinea” is best understood with some aid from what the term is considered in the context of international law, especially under the Montevideo Convention on the Rights and Duties of States 1933. 

40.	Article 1 of the Convention provides the four qualifications of a state. These qualifications have achieved the status of customary international law:

1.	Permanent population;
2.	Defined territory;
3.	Government; and
4.	Capacity to enter into relations with other states.

41.	The entity that meets this requirement is the “Independent State of Papua New Guinea” as defined by the Constitution of Papua New Guinea. It is capable of entering into relationship with other sovereign states and for all intents and purposes, is a legal person capable of suing and being sued, owning property and being in perpetual existence. Significantly it can be sued by a DDA.

42.	Section 1 of the Constitution provides:

“1. The Independent State of Papua New Guinea.
 
(1) Papua New Guinea is a sovereign, independent State by the name of the Independent State of Papua New Guinea.
(2) The name of the Independent State of Papua New Guinea and its variants shall be protected by an Act of the Parliament.”

43.	Section 247 of the Constitution states:

“247. Legal capacity of the Independent State of Papua New Guinea.

(1) Papua New Guinea has power to acquire, hold and dispose of property of any kind, and to make contracts, in accordance with an Act of the Parliament.
(2) Papua New Guinea may sue and be sued, in accordance with an Act of the Parliament.”

44.	Schedule 1.2 or the Constitution defines “Papua New Guinea” as the “Independent State of Papua New Guinea.”

45.	The National Identity Act 1971 (as amended) provides for the national flag and national seal of the independent state of Papua New Guinea. From a company law perspective, these are like the “company seal” of the state. It cannot be affixed by any governmental body except by authorised representatives of the independent state of Papua New Guinea.

46.	In the absence of express provisions in either the Claims Act or the District Development Act or any other legislation recognising a DDA as falling within the meaning of “the state,” I am of the considered view, that it is not open to me to import this relationship by implication. This approach is supported by the fact that in some provinces, they have enacted their own Claims Act (Enga Province for example, see Mapiso v Enga Provincial Government (2018) N7722). When an entity has a separate legal existence to the State, and does not otherwise meet a majority of the criteria established in SCR No 1 of 1998; Reservation Pursuant to s. 15 of the Supreme Court Act, then in my view that entity does not fall within the meaning of “the state” for purposes of the Claims Act.

47.	I would also like to make two observations in terms of policy justifications for taking a restrictive approach to interpreting the Claims Act.

48.	Firstly, I ask myself which interpretation will promote the National Goals and Directive Principles and Basic Social Obligations for purposes of Sections 25 and 63 of the Constitution. I ask this because the law is not clear, and I am required to adopt an interpretation to resolve the issue. This is therefore an appropriate case to take the NGDP and BSO fully into account (ss 25(2) and (3) and 63(2) and (3), Constitution). The circumstances of the case are that the National Court, a court of competent jurisdiction has found that a contractor has performed the required service as contracted by the DDA and seeks to be paid for the services rendered. The services rendered was to fulfill the developmental functions of the DDA. Getting paid the judgement sum will enable the plaintiff to participate in the economic life of the country, pay taxes to the State and provide employment to Papua New Guineans. It will help the country reach economic self-reliance. Limiting the ability of an entrepreneur to achieve self-sufficiency will not promote the overall agenda of the state. This is not a case of a person wanting to unjustly enrich themselves at the expense of the common good and dignity of the state.

49.	Secondly, if an enforcement proceeding is not available, what will happen to the judgement sum? Whilst we consider the interests of the people through protecting public funds, it is also in the interest of the people to uphold the rule of law. When the people of Papua New Guinea adopted their homegrown Constitution in 1975, they were implicitly subscribing to the principles of the rule of law as one of the fundamental pillars of the new country. The rule of law cannot be maintained if court orders are not complied with. It is therefore not in the interests of maintaining the rule of law that the definition of the state is given an extended meaning as an immunity for governmental bodies not complying with court orders, and should be restricted to where Parliament or the other two tiers of elective government have expressly made their intentions known by legislative fiat. 

50.	I have therefore reached the conclusion that of the seven (7) considerations, four speak against the entity being considered as part of the state. Since it is not a straightforward matter, I bear in mind what Cannings J said in Areng v Babia at para 11:

“There is an additional consideration that propels me towards concluding that the NHC is not part of the State. The Claims By and Against the State Act is generally an Act that regulates, modifies and to some extent trims down the rights of citizens who want to sue the State or enforce judgments against the State. In the event of doubt as to its interpretation the court should lean towards protecting the rights of individual citizens against those of the State.”
51.	In the final analysis, my respectful view is that a DDA does not fall within the meaning of the word “the state” for purposes of Section 13(1) of the Claims Act.

2)    Second Issue – Whether Leave Should be Granted to Issue a Garnishee?

52.	I proceed now to deal with the issue of whether leave should be granted to issue a garnishee as I have found that a DDA is not covered by the immunity provided under Section 13 of the Claims Act from enforcement proceedings initiated under the National Court Rules.

53.	Turning to the specific issue - has the judgement creditor satisfied the requirements for the grant of a garnishee? Ordinarily, applications of this nature are pursued ex parte (para 6, Aure v Sai Business Group Incorporated (2008) N3349). In this case, I have allowed the third defendant to enter an appearance and be heard as the issue of whether a DDA is part of the state, arises as a threshold issue.

54.	The substantive requirement is stated in the case of Aure v Sai Business Group Incorporated as follows:

1. there is a Debt owing to the Plaintiff by the Defendant,
2. the Debt has not been settled,
3. the Defendant is owed money by the Garnishee

55.	Order 13, rule 54(1) of the National Court Rules deems a bank as a “garnishee” by stating “A sum standing to the credit of a judgement debtor in an account in a bank shall, for the purpose of this Order, be a sum due or accruing to the judgement debtor….”

56.	I am satisfied that there is a debt owing to the plaintiff by the Madang DDA, as per the court order of 2 March 2020. This debt has not been settled. As to whether the garnishee holds money standing to the credit of the judgement debtor capable of meeting the judgement sum, will be established after leave is granted and they are served the garnishee notice.

57.	I have found useful the following explanation provided by Dowa AJ in Moresby Plumbing Suppliers & Services Ltd (trading as Plumbers & Builders Supplies) v Timkumba Holdings Ltd (2020) N8309 which I adopt with some modifications here:

“(1) The garnishee proceedings are commenced under Rule 56, sub-rule (1). Firstly, a judgement Creditor shall obtain prior leave to file and serve a garnishee notice. Leave can be obtained by filing a notice of motion or by the court on its own motion. As a matter of practice a notice of motion is preferable and should be filed. The notice of motion shall be accompanied by an affidavit of debt. By this time no garnishee notice should be filed as yet. Usually the application is made ex parte but it is prudent practice to serve the judgement debtor and their lawyers. Refer: Aure v Sai Business Group Inc (2008) N3349.

(2)Secondly the Judgement Creditor attends court and obtains leave. The Court in granting leave will fix a date for the return of the Garnishee Notice. The Judgement Creditor by this time shall file and serve the following documents on the garnishee:

(a) Order granting leave or order nisi
(b) Garnishee notice (Form 60)
(c) Affidavit of debt (use the same affidavit of debt filed earlier)
(d) Notice of motion for payment - This is a new and fresh notice of motion for payment. 

This is expressly required under Sub-rule(1)(b) and rule 61. The garnishee notice should now have a definite return date (use the form 60). The Garnishee Notice shall or should also have a fixed amount attached for certainty. The amount attached has to be verified and fixed by the court during the hearing of the leave application. (Refer: Kedmec Auto Repairs v PNG Power Ltd (2019) N7930.”

58.	After taking into account the law and the evidence, I am satisfied that leave should be granted, subject to the caveat I briefly state below.

59.	There are processes in place whereby a defendant can apply for extension of time to settle payment if funding is not immediately available. And unless this is done through a proper application, an Order of the Court must be complied with in full (Kedmec Auto Repairs v PNG Power Ltd). I will make provision for this in my final orders. I say this, as I understand that Madang DDA is a governmental body and depends to a large extent on its funding from time to time from the national government.
D	CONCLUSION AND ORDERS
60.	After considering the law and the circumstances of this case, I make the following orders:

1.	The plaintiffs are granted leave to serve a garnishee notice in form 60 of the National Court Rules on the bank manager of the Madang Branch of Bank South Pacific, Madang with a returnable date of Friday, 14 August 2020 at 9.30am;
2.	Plaintiffs shall serve this order, the affidavit of debt of Samson Tagau filed on 26 June 2020 (styled as “Affidavit in Support”) and a Notice of Motion for payment on the garnishee forthwith, with a returnable date of 14 August 2020 at 9:30am;
3.	Madang District Development Authority is at liberty to file and serve any affidavit(s) by Monday10 August 2020 to assist the court determine whether payments ought to be made by instalments from the garnishee account;
4.	The court will consider the plaintiff’s motion and any affidavits filed by Madang District Development Authority on Friday 14 August 2020 at 9.30am;
5.	Costs of the leave application is awarded in favour of the plaintiffs against the Madang District Development Authority; and
6.	Time is abridged. 

Judgment and Orders accordingly

Yalapan Lawyers: Lawyers for the Plaintiffs
Solicitor General: Lawyers for Madang District Development Authority

ANNEXURE 1 – ANALYSIS OF DISTRICT DEVELOPMENT ACT 2014

District Development Authority Act 2014, Provisions.	What the Provision is About 	
Section 3, Interpretation 	Provides definition of key terms. Significantly, it does not define “State.”
Also to be noted that the Minister here is the Minister responsible for provincial and local-level government matters.	
Section 4, Characteristics of Authorities 	DDA is a body corporate with perpetual succession; and must have a seal; and may acquire, hold and dispose of real and personal property; and may sue and be sued in its corporate name. For all intents and purposes, it is a separate legal entity.	
Section 5, Functions of Authorities 	A DDA has the following functions:

•	to perform service delivery functions and carry out service delivery responsibilities specified in the Ministerial determination made under Section 6; and
•	to develop, build, repair, improve and maintain roads and other infrastructure; and
•	to approve the disbursement of district support grants and other grants; and
•	to oversee, co-ordinate and make recommendations as to the overall district planning, including budget priorities, for consideration by the Provincial Government and the National Government; and
•	to determine and control the budget allocation priorities for the Local-level Governments in the district; and
•	to approve the Local-level Government budgets for presentation to the Local-level Government and to make recommendations concerning them; and
•	to draw up a rolling five-year development plan and annual estimates for the district; and
•	to conduct annual reviews of the rolling five-year development plan; and
•	such other functions as are prescribed by the regulation.	
Section 6. Determination of service delivery functions and responsibilities.	The Minister for Provincial and Local Level governments shall determine the service delivery functions and responsibilities of each District Development Authority in consultation with the Board and the Provincial Executive Council.	
Section 7. Powers of Authorities.	The authority has the following powers:
•	enter into contracts; and
•	charge fees for work done, and services provided, by the Authority; and
•	purchase and take on hire, and dispose of, plant, machinery, equipment and other goods; and
•	engage consultants and other persons to perform works or services for the Authority; and
•	form or participate in the formation of companies; and
•	enter into partnerships and participate in joint ventures; and 
•	do anything incidental to any of its powers.

Section 12. Membership of a Board.
	The board consists of the following members:
•	the Member of Parliament representing the open electorate who shall be the Chairperson of the Board; and
•	heads of Local-level Governments in the district; and
•	not more than three other members appointed by the Member of the Parliament representing the open electorate.
	
Section 11. Functions and powers of a Board.
	The functions of the board are to ensure the proper functioning of the DDA and to give directions to the Chief Executive Officer of the DDA.	
Section 16. Suspension of a Board by the National Executive Council.
	The National Executive Council may, by notice published in the National Gazette, suspend the Board of an Authority if the Council is satisfied that —
•	the Authority is incapable of effectively performing its functions; or
•	the Authority has conducted or is conducting its affairs in a grossly improper manner; or
•	the Authority has misappropriated or is misappropriating funds; or
•	the Authority has performed or is performing its functions or has exercised or is exercising its powers in a way that is inconsistent or in conflict with the policies and plans of the Provincial Government; or
	
Section 18. Board's functions and powers on suspension transferred to Minister.
	Where the Board of an Authority is suspended, the functions and powers of the Board are transferred to the Minister and the Minister shall perform those functions and exercise those powers until the Board is restored.
	
Section 20. Directions by the Minister.
	The Minister may give a written direction to a Board concerning the Authority's operations if the Minister is satisfied that the direction is necessary in order to ensure the proper performance of the Authority's functions and the Board shall comply with the direction.
	
Section 22. Chief Executive Officer.
	The District Administrator of a district is the Chief Executive Officer of the Authority for the district, and shall be a public servant appointed under the Public Services (Management) Act 2014.
The Chief Executive Officer is responsible for —
•	implementing the policy and decisions of the Authority in accordance with the directions of the Board; and
•	the day to day control and supervision of the staff of the Authority.
	
Section 23. Secretariat and other staff of Authorities.
	The head of the department responsible for personnel management matters shall —
•	approve a proposed staffing structure for an Authority; and
•	determine the terms and conditions of the staff of an Authority in accordance with the Public Services (Management) Act 2014 and the General Orders under that Act.
	
Section 24. Application of Part VIII of the Public Finances (Management) Act 1995.
	Part VIII of the Public Finances (Management) Act 1995 applies to District Development Authorities.
	
Section 25. Funding of Authorities.
	The funds of an Authority consist of —
•	any monies appropriated to the Authority by the National Government or a Provincial Government, including grants; and
•	any monies received by the Authority by way of grants, donations or other contributions from any lawful source, including sources outside of Papua New Guinea.

The monies of the Authority are to be expended only -
•	in payment or discharge of expenses, obligations and liabilities of the Authority; and
•	in payment of the remuneration, sitting fees and allowances of appointed members of the Board; and
•	for such other purposes that are consistent with the functions of the Authority as the Board may determine.
	
Section 26. Estimates of expenditure.
	The Chief Executive Officer of an Authority shall, before 30 November in each year, submit to the heads of the Local-level Governments in the district and the Governor of the Province, estimates of all expenditure of the Authority for the next year.
	
Section 27. Supply and tender procedures.
	The Minister responsible for financial matters may approve the establishment of a District Supply and Tenders Board to invite public tender to provide goods and services.
	
Section 28. Meetings.
	Meetings of the board are conducted in public.	
Section 33. Quarterly reports.
	A Board shall prepare, for each quarter of the year, a report on the operations of the Authority and shall give the report to the Provincial Government by the end of the next quarter.	
Section 34. Annual Reports.	A Board shall prepare an annual report and shall give the annual report to the Minister on or before 31 March of the next year.
A copy of the annual report shall be available for inspection by members of the public free of charge at the office of the District Administration.
The Board shall give a copy of its annual report to the Provincial Assembly for tabling by a member of the Provincial Assembly.
The Minister shall provide an overview of the performance of the Authorities to the Parliament on or before 31 July of each year.
	
Section 37. Dispute Resolution 	If there is a dispute between —
•	the Chief Executive Officer and a Provincial Administrator; or
•	the Chief Executive Officer and a Board member; or
•	a Board member and the Provincial Government; or
•	an Authority and any other government entity or State agency,

a party may bring the matter to the attention of the Minister and make a written submission to the Minister.

The Minister shall consider the submission (if any) made by the parties to the dispute and may meet with one or more of those parties, together or separately, to mediate a solution to the dispute. Legal proceedings are not to be taken in relation to a dispute, unless mediation has been held but failed to resolve the dispute.
	
Section 38. Regulations	The Head of State, acting on advice, may make regulations not inconsistent with the DDA Act.