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Petroleum Resources Moran Ltd v Moran Oil Ltd [2022] PGNC 462; N9936 (30 September 2022)

N9936

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 10 OF 2020

BETWEEN:

PETROLEUM RESOURCES MORAN LIMITED

- Plaintiff-

AND:

MORAN OIL LIMITED

-First Defendant-

AND:

EDA OIL LIMITED

-Second Defendant-

AND:

KUMUL PETROLEUM (DEVELOPMENT) LTD

-Second Defendant-

AND:

KUMUL PETROLEUM HOLDINGS LTD

-Third Defendant-

Waigani: Tamade AJ

2022: 23^rd August; 30^th September

SECTION 5 NOTICE – failure to give notice to make a claim – Claims By and Against the State Act 2015, Section 22 – Kumul Petroleum Holdings Limited and its subsidiaries are not part of the State

LIMITATIONS OF ACTIONS – Frauds and Limitations Act, Section 16 and 18 – Section 6 (3) claim on specialty brought within 12 years – Plaintiff’s claim not on specialty – proceedings statute barred – proceedings dismissed.

Cases Cited
Oil Search Ltd v Mineral Resources Development Corporation Ltd [2010] PGSC 12; SC1022
Yama v Gabut [2017] N6808
Kimbe Nivani Properties Ltd (1-11424) v Nivani Ltd (1-30946) [2019] PGSC 75; SC1842
SCA 110 of 2020 - Kumul Petroleum Holdings Limited v Edward Alina and Ors

Legislation:
Claims By and Against the State (Amendment) Act 2015
Kumul Petroleum Holdings Limited Authorisation Act 2015
Frauds and Limitations Act 1988

Counsel:
Mr. Martin Kombri, for the Plaintiff
Mr. Nathan Pilamb, for the Second, Third and Fourth Defendants

30^th September, 2020

1. TAMADE AJ: This is a ruling on the Second, Third, and Fourth Defendant’s Notice of Motion filed on 18 August 2022 seeking a dismissal of these proceedings for failing to give Notice of Intention to make a claim against the State pursuant to section 5 of the Claims By and Against the State Act and alternatively for a dismissal pursuant to Order 12 Rule 1 of the National Court Rules and Section 155(4) of the Constitution that these proceedings are time-barred pursuant to section 16(1) of the Frauds and Limitations Act 1988.

2. The Plaintiff’s claim essentially seeks certain declaratory orders for equity entitlements pursuant to the Oil & Gas Act in regard to the Moran Petroleum Project in the Petroleum Development Licence. The Plaintiff is essentially claiming interest in a Petroleum Development Licence 5 (PDL5) that it is a landowner entity which claims that any additional participating interest in the said project given by the State should be given to the Plaintiff.

Section 5 Notice pursuant to the Claims By and Against The State Act

3. The Defendants submit that a Notice purporting to be Section 5 Notice pursuant to the Claims By and Against the State Act dated 6 July 2020 and served on 9 July 2020 is not proper as it was given outside the 6 months provided for when the cause of action in this matter is said to occur on or about 1 January 2010 when the then Prime Minister of PNG, Grand Chief Late Sir Michael Somare then issued a letter from the Prime Minister’s Office referred to by the Defendants as the Somare Commitment in a letter dated 19 November 2009. The letter by the Prime Minister dated 19 November 2009 is reprinted in the text below:

19^th November 2009

The Directors
Petroleum Resources
C/- Mineral Resources Development Company
P O Box 1076
PORT MORESBY
National Capital District

Dear Sir

Undertaking to Transfer of an Interest in PDL5

I refer to the discussions that have occurred over recent months to address the concern of land-owner groups with the division of 22.5 % State Equity Entitlement in PDL5 that was acquired in accordance with Section 165 of the Oil and Gas Act 1996. Currently, the State Equity Entitlement is held as follows:

Eda Oil Limited (“EOL”) 20.5%

Petroleum Resources Moran Limited (“PRML) 2.0 %

As a consequence of acquiring these interests in PDL5, both EOL and PRML have an interest in the Moran Unit and will have an interest in the PNG LNG Project.

I have been advised that a settlement has been reached that is acceptable to all parties. The Settlement involves the following elements:

1. Effective 1 January 2010, EOL will assign a 5 % interest in PDL5 to PRML. Thereby, the companies will have the following holdings in PDL5
   

EOL 15.5%

PRIML 7.0 %

EOL and its affiliated company Kumul LNG Limited will assign to PRML and its affiliated company Gas Resources Moran Limited interests in both the Moran Unit and the PNG LNG Project accruing to the 5% Interest in PDL5.

2. The consideration for the assignment described in paragraph 1 above will be K10,000,000.

It is confirmed that I endorse the settlement and will support its implementation. Specifically, in my capacity as the sole shareholder of Petroleum PNG Holdings Limited, the owner of EOL, I will procure EOL to assign the interest in PDL5 to PRML in the manner described in this letter.

Yours Faithfully

_________________------__
HON. SOMARE GCL, GCNG, CH OF KSS
Prime Minister

Cc: Directors: Petroleum
Directors: Eda Oil Limited.

4. The Defendants, therefore, submit that the Somare commitment was to be given effect to on 1 January 2020 which was when the assignment of the 45 percent interest was to happen between Eda Oil Limited (EOL) and Petroleum Resources Moran Limited (PRML).

5. This Somare Commitment was also stipulated in the LBSA as between the relevant parties.

6. The Defendants further submit that in a similar proceeding in OS 116 of 2020- Edward Alina and Ors v Kumul Petroleum Holdings Ltd and Ors challenging the Somare commitment by landowners of PDL 5, an application was refused by the National Court pursuant to section 5 of the Claims By and Against the State Act and this was appealed to the Supreme Court. In a decision by the Supreme Court in SCA 110 of 2020- Kumul Petroleum Holdings Limited v Edward Alina and Ors, the Supreme Court held that the cause of action for a breach of clause 6.1 of the LBSA and the Somare Commitment would occur about 1 January of 2010 and therefore the section 5 notice was given outside the time allowed for under section 5 of the Claims By and Against the State Act. The Supreme Court, therefore, dismissed those proceedings.

7. The Defendants, therefore, submit that this is a similar claim on the Somare Commitment and therefore the section 5 notice given by the Plaintiffs on 9 July 2020 is out of time.

8. Mr. Kombri however argues that at the time the Supreme Court heard the matter in SCA 110 of 2020- Kumul Petroleum Holdings Limited v Edward Alina and Ors, the Court was not informed by counsels and was therefore not aware as to the amendments to the Claims By and Against the State Act. Mr. Kombri has handed up to the Court copies of the Amendment to the Claims By and Against the State Act 2015 which inserts a new section 22 which states that the Kumul Mineral Company, Kumul Minerals Holdings, and its subsidiaries and Kumul Petroleum Company, Kumul Petroleum Holdings and it’s subsidiaries are not subject to the Claims By and Against the State Act.

9. Mr. Kombri also draws the Court’s attention to section 8.1 of the Kumul Petroleum Holdings Limited Authorisation Act 2015 that stipulates the independence of the Kumul Petroleum Companies that each of the Kumul Petroleum Companies are not and shall not be characterized as the State or an agent of the State unless expressly appointed with the consent of the Kumul Petroleum Holdings or it’s subsidiaries and also can not be regarded as an instrument of the State.

10. Having been drawn now to these recent amendments to the law in regard to the Claims By and Against the State Act and the Kumul Petroleum Holdings Limited Authorisation Act 2015, I am satisfied that the Defendants named herein in these proceedings are not subject to the Claims By and Against the State Act and therefore I refuse the application to dismiss on section 5 of the Claims By and Against the State Act.

Statutory time bar pursuant to the Frauds and Limitations Act

11. The second leg of the Defendants application relies on section 16 of the Frauds and Limitations Act that the Plaintiff has sat on it’s right to file proceedings and therefore these proceedings are filed outside of the six-year time limitation as per section 16 of the Frauds and Limitations Act.

12. The Supreme Court held in the case of Oil Search Limited v MRDC^[1], that:

(1) A proper determination of whether an action involving alleged breach of contractual obligations is time-barred entails a finding on three matters:

(a) identification of the cause of action;

(b) identification of the date on which the cause of action accrued;

(c) categorization of the cause of action according to whether it is "founded on a simple contract" or "an action upon a specialty".

13. In the case of SCA 110 of 2020- Kumul Petroleum Holdings Limited v Edward Alina and Ors, the Supreme Court clearly found that the claim by the Plaintiffs in those proceedings regarding a breach of the LBSA and the Somare Commitment, (similar issues now raised in these proceedings) was out of time and contrary to section 16 of the Frauds and Limitations Act. The Court found that:

“the combined effect of the letter by the Prime Minister and Clause 6.1(d)(vii) of the LBSA, is that the transfer or assignment of the 5 percent interest was to occur in January 2010. That is the intention of the parties under the agreement...In that regard, the Respondents right to sue on the breach accrued as from January 2010.”

14. Mr. Kombri for the Plaintiff has however argued that his client’s claims consist of specific performance of an agreement however states that his clients were never a party to the LBSA at the time it was entered into, and his clients claims also concern an assignment of interest which is caught under section 16(3) and section 18 of the Frauds and Limitations Act. Mr. Kombri claims that his clients’ claims were therefore filed within 12 years as provided for under the Frauds and Limitations Act.

15. Section 16 (1), (2), (3), and (4) of the Frauds and Limitations Act 1988 is in the following terms:

6. LIMITATION OF ACTIONS IN CONTRACT, TORT, ETC.

(1) Subject to Sections 17 and 18, an action–

(a) that is founded on simple contract or on tort; or
(b) to enforce a recognizance; or
(c) to enforce an award, where the submission is not by an instrument under seal; or
(d) to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture,

shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.

(2) An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.

(3) Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of 12 years commencing on the date when the cause of action accrued.

4)[1] [2]Nothing contained in Subsection (3) shall be construed as affecting any action for which a period of limitation is specified by any other Act, and that subsection shall be read and construed accordingly.

16. Section 18 of the Frauds and Limitations Act is in the following terms:

18. CLAIMS FOR SPECIFIC PERFORMANCE, ETC.

Section 16 does not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief.

17. Mr. Pilamb of the Defendants argues that any claim in equity by the Plaintiff on the contract should have come within the period of 6 years relying on the principle of latches as Justice Cannings has stated in the case of Yama v Gabut^[2]:

“The laches principle is a principle of equity. A person who seeks an equitable remedy, such as a declaration, should not unreasonably delay the claim for relief. All equitable remedies are discretionary. The court, in exercising its discretion whether to grant the remedy sought, will take into account the extent of any delay in commencing proceedings or prosecuting the claim. This is so even though the plaintiff might appear to have a good case. No one is entitled as of right to an equitable remedy (Robinson v National Airlines Commission [1983] PNGLR 476, The State v Lohia Sisia [1987] PNGLR 102, Batteng Putto v Andrew Sallel (2015) N5845).”

18. A review of the declaratory reliefs sought by the Plaintiff in the matter reveals that the declaratory reliefs do not seek specific performance. The Plaintiff claims that it is entitled to receive the additional 5 percent participating interest referred to as the Somare commitment. The Plaintiff claims that the Defendants should enter into negotiations for the transfer of this additional participating interest to it and that any financial dividends arising out of and or associated with the additional participating interest received by the First Defendant from the transfer of the additional participating interest shall be accounted for and paid by the Defendants to the Plaintiff.

19. In the Affidavit of Mr. Richard Aupae filed on 13 April 2021, he states that it had come to the Plaintiff’s knowledge that the Defendants had transferred the additional participating interest to the First Defendant through vendor financing. The Plaintiff’s are therefore in essence seeking through these proceedings in the declaratory reliefs sought that the actions of the Defendants to transfer the additional participating interest in PDL5 to the First Defendants is wrong and that the Defendants should be tasked to transfer this interest to the Plaintiff.

20. The Supreme Court in the case of Kimbe Nivani Properties Ltd (1-11424) v Nivani Ltd^[3] has stated this in relation to a claim for specialty to which section 16(3) of the Frauds and Limitations Act refers to as:

“A statute-based cause of action will be an action upon a specialty when the cause of action is upon a right or obligation conferred or created by statute, but it will not be a specialty when the action is upon a common law cause of action constituted by a breach of statutory duty.”

21. I am of the view that the Plaintiff’s cause of action is not a specialty within the definitions as discussed in the case of Kimbe Nivani Properties Ltd^[4], the Supreme Court in SCA 110 of 2020- Kumul Petroleum Holdings Limited v Edward Alina and Ors had found that the cause of action on a breach of the additional 5 percent participating interest in PDL5 as per clause 6.1(d)(vii) of the LBSA and as per the Somare Commitment was found on simple contract thereby it was within the ambit of section 16(1) of the Claims By and Against the State Act.

22. I am of the view that as the Supreme Court has decided this issue, I am inclined to follow the Supreme Court’s ruling that the matters the Plaintiffs are claiming in these proceedings fall within the ambit of section 16(1) of the Frauds and Limitations Act and therefore these proceedings are statute barred and shall be dismissed accordingly.

23. The Court, therefore, makes the following orders:

1. These proceedings are dismissed in their entirety.
2. The Plaintiff shall meet the Second, Third, and Fourth Defendants costs of these proceedings.
   

Orders accordingly.

________________________________________________________________

Kombri & Associates Lawyers: Lawyers for the Plaintiff

Mel & Hennry Lawyers: Lawyers for the Second, Third and Fourth Defendants

^[1] [2010] PGSC 12; SC1022 (30 April 2010)
^[2] [2017] N6808
^[3] [2019] PGSC 75; SC1842 (10 September 2019)
^[4] Supra