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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO. 228 OF 2022
BETWEEN:
BANK OF PAPUA NEW GUINEA
Plaintiff
AND:
PUMA ENERGY PNG REFINING LIMITED
Defendant
Waigani: Tamade AJ
2022: 5th & 6th December
MANDATORY INJUNCTION - Applicant seeking orders to compel Respondent to continue the supply of refined petroleum products – consideration for granting mandatory injunctions as opposed to ordinary injunctions – applicant not directly affected by halting the supply of refined petroleum products – considerations for mandatory injunction not satisfied – application dismissed
Cases Cited:
Chief Collector of Taxes v Bougainville Copper Limited [2007] PGSC 1; SC853
Employers Federation of PNG v PNG Waterside Workers and Seamen’s Union (1982) unreported N393
Mauga Logging Company Ltd -v- South Pacific Oil Palm [1977] PNGLR 80
Robinson -v- National Airline Commission [1976] PNGLR 59
Yama Group of Companies Ltd v PNG Power Ltd [2005] PGNC 128; N2831
Counsels:
Mr. Donald Kints and Mr Jackson Liskia, for the Plaintiff
Mr. Erik Anderson and Ms Jeanale Nigs, for the Defendant
6th December, 2022
1. TAMADE, AJ: This is a ruling on an application for interim injunctive orders by the Plaintiff against the Defendant by way of a Notice of Motion filed on 16 November 2022. The application was first brought to the attention of the Court on 23 November 2022 by way of an urgent hearing however on hearing Mr Kints of the Plaintiff and Ms Nigs of the Defendant who had only received short notice of the matter, the Court adjourned the matter to Monday 5 December 2022 at 9:30am for the Defendant to be served all Court documents and to be given an opportunity to be heard on the application.
2. On Thursday 1 December 2022, the Plaintiff’s lawyers urgently requested for the matter to be relisted again before the Court on the basis that there was an urgency in the matter as the Defendant had stopped the supply of refined petroleum products in PNG causing an inconvenience to the traveling public wherein Air Niugini had grounded flights for lack of fuel. Again, on hearing the matter, as the Defendant was having difficulty obtaining instructions and filing Affidavits, the matter was adjourned to the next day 2 December 2022 at 11:00am.
3. On Friday 2 December 2022, Ms Nigs of the Defendant informed the Court that they had finally filed Affidavits from their client who was in Singapore and the Affidavits had to be transmitted to PNG and filed and given that there is a bulky affidavit served on the Plaintiff, Ms Nigs and Mr Kints of the Plaintiff consented that the matter should properly be adjourned to Monday 5 December 2022 as previously directed by the Court for the Plaintiff’s lawyers to be given time to peruse the affidavits of the Defendant and get instructions. The matter was then adjourned to 5 December 2022 by consent of parties.
4. The Plaintiff’s application essentially seeks the following orders apart from the order seeking a dispensation of the requirement of the Rules in relation to service of the application:
Facts of the Case
5. The Plaintiff is set up by law under the Central Banking Act 2000 amongst its’ functions[1] which are to issue currency and act as a banker and financial agent to the government etc, it’s other objective is to make provision in relation to foreign exchange and international reserves.[2]
6. The Defendant is one of the Puma Energy Group which has operations throughout the world. The Defendant or Puma owns and operates the Refinery which holds a Petroleum Processing Facility License from the Department of Petroleum. Previously known as InterOil Limited which entered into a project agreement in 1997 with the State, Puma operates the Napanapa refinery here in PNG.
7. The facts of this case can be gleaned from the Affidavit of the Acting Governor of Bank of PNG, Mr Benny Popoitai filed on 16 November 2022 and the Affidavit of Mr Hulala Tokome, the Country General Manager and Director of Puma filed 2 December 2022.
8. From the Affidavit of Mr Tokome, Puma imports crude oil and refined petroleum products to service the PNG domestic marketplace. Crude oil is therefore processed in the refinery which turns the crude and other additives into products such as diesel, petrol etc which are sold largely on the PNG domestic market. Mr Tokome states that a relatively small, finished products from the Refinery are re-exported. Sometimes the finished products required in the PNG market-place are purchased by Puma and sold into the PNG market place directly with limited processing in the Refinery.
9. It is of interest to note in the Affidavit of Mr Tokome that internationally, oil and petroleum products transaction are not denominated in the PNG currency as outside of PNG, they are required to be in US dollars. Mr Tokome states that as Puma requires crude and finished products by paying US dollars and then sells the output in bulk in PNG, it has an ongoing need to convert PNG Kina into typically foreign currency or US dollars in order to make payment to its’ overseas suppliers for crude feedstock and other inputs needed in the refining process along with other offshore operating expenditure and capital expenditure. Without the sufficiency of foreign currency, it can not purchase crude or finished products from its’ suppliers in order to run the Refinery and provide finished products to the PNG domestic market and maintain its expenditure which is dependent on the overseas market.
10. According to the Affidavit of Mr Popoitai, in 2017, Puma sought the authority of the Bank of PNG to open an offshore foreign currency account with the Australia New Zealand Banking Group in Singapore. This was intended to receive Puma’s foreign currency proceeds from the part of the exports on the part of the Refinery’s output which was re-exported and from that income to be able to pay for some of the necessary US dollars to meet its’ expenses to run the Refinery. Mr Tokome explains it better by stating that as exports are only a portion of the Refinery’s output, the Export proceeds are short of the amounts necessary to pay for the ongoing currency needs to purchase necessary inputs into the Refinery and therefore the need for the offshore account in which export proceeds can be credited to the Account and payments can be made to third party goods and service providers of Puma. It was part of the condition of the Account that Puma was to remit surplus funds in the account back to PNG in kina and there were other conditions as well in terms of regular reporting on the account to ensure Bank of PNG has an oversight on the foreign offshore account of Puma etc.
11. On 28 September 2021, Puma requested for a temporary change to a condition of the Authority essentially seeking approval to remit any foreign currency that it obtains from the PNG foreign exchange market (PNG FX) into the approved offshore Singapore account before routing them to Puma supply entities in readiness to purchase crude oil. Mr Tokome states that the intent of this request was to allow the aggregate in the Singapore offshore account to receive from the PNG domestic forex market so that Puma can be able to pay it’s cargoes and expenses. Bank of PNG refused to grant this authority however the offshore account had received forex payments from PNG from Puma and suppliers were then paid through the Offshore Singapore account.
12. Bank of PNG however being dissatisfied that Puma acted contrary to its’ authority then instructed the closure of the Foreign Currency Account held by Puma and directed the repatriation of the funds held in that account. Puma acted in compliance of the directives from Bank of PNG and closed the Foreign Exchange Account in Singapore however its’ issues as to the need for foreign currency still remained thereby Bank of PNG and Puma agreed for a Special Purposed Audit to be undertaken by an independent external accountant for Bank of PNG to understand Puma’s foreign exchange needs. This was when the dispute between the parties came to loggerheads. Puma maintains that it still has issues with foreign currency citing the global situation in oil prices, the Russia Ukraine conflict in regard to sanctions etc and in order to sustain its’ operations domestically in PNG and in the Refinery for the need for foreign exchange, Puma reached out to the State as a stakeholder in the Napanapa Refinery project in the predicament it is facing and requests for the Bank of PNG Intervention. The Bank of PNG on the other hand is adamant on the breaches of the terms and conditions by Puma as per its’ Authority issued. The Bank of PNG’s claim in the Originating Summons is therefore in regard to breaches of the Terms and Conditions of the Authority issued to Puma over the Foreign Exchange Account held in Singapore and its’ closure.
Facts giving rise to the application for injunctive orders.
13. The Bank of PNG claims through the Affidavit of Mr Popoitai that Puma is using its’ monopoly as the sole supplier of refined petroleum products in PNG to issue threats to the Bank of PNG to compel the Bank to perform its’ statutory function to serve Puma’s purpose. Mr Popoitai claims some exertion of pressure from Puma that if Bank of PNG does not give in to its request for the need for foreign currency, it will halt the supply of refined petroleum products in PNG which will have an adverse effect on the nation’s economy, impact on flights and travel in PNG, impact the mining operations in PNG and affect the country as a whole.
14. On 1 December 2022, Air Niugini published a Media Statement that it ceased its domestic flights as of that day due to the ongoing dispute with Puma and Bank of PNG, Puma was restricting the supply of fuel to Air Niugini domestically however international flights will remain unaffected, and the issue was predicted to be for an indefinite period.
15. Around 4pm PNG time on 1 December 2022, Puma was notified that a substantial amount of their outstanding US Dollars FX Orders were placed with the Authorised Foreign Exchange Dealers (AFEDs) and which were being accepted and processed thereby Puma informed Air Niugini that it was able to resume the normal supply of fuel however this was to ensure sustainable supply in the short term, I take whilst Puma’s foreign currencies issues with the Bank of PNG remained. Those are matters properly for the hearing of the Originating Summons proper.
16. Bank of PNG’s application before this Court is to effectively seek an order to restrain Puma not to cease from supplying refined petroleum products to the PNG domestic market and as Mr Kints of the Plaintiff submits not to blame Puma for its’ lack or inability to supply refined petroleum products based on Bank of PNG’s authority over its’ foreign currency and to stop Puma from communicating directly with Bank of PNG over its’ need of foreign currency and to also prevent any threat through to the Plaintiff or to the public through any media publication that will be seen to infringe on the Bank of PNG’s statutory role.
Can the Plaintiff be granted the injunctive orders in the terms it seeks?
17. Mr Anderson of the Defendant submits that the orders restraining Puma to halt the supply of refined petroleum products in PNG is a mandatory injunction as it seeks to positively force the Defendant to act and is not a restraint as pleaded or submitted by Mr Kints. Justice Lay (as he then was) in the case of Yama Group of Companies Ltd v PNG Power Ltd[3] referred to the following authority on the difference between an ordinary injunction which is in the negative to refrain from be done:
“A case frequently referred to as giving some guidelines as to the application of mandatory injunctions is Shepherd Homes Ltd v Sandham [1971] Ch 340 where Megarry J said:
"As it seems to me, there are important differences between prohibitory and mandatory injunctions. By granting a prohibitory injunction, the court does no more than prevent for the future the continuance or repetition of the conduct of which the plaintiff complains. ... On the other hand, a mandatory injunction tends at least in part to look to the past, in that it is often a means of undoing what has already been done, so far as that is possible. Furthermore, whereas a prohibitory injunction merely requires abstention from acting, a mandatory injunction requires the taking of positive steps ... This will result in a consequent waste of time, money and materials if it is ultimately established that the defendant was entitled to retain the erection."
A little later he said:
"The subject is not one in which it is possible to draw firm lines or impose any rigid classification. Nevertheless, it is plain that in most circumstances a mandatory injunction is likely, other things being equal, to be more drastic in its effect than a prohibitory injunction. At the trial of the action, the court will, of course, grant such injunctions as the justice of the case requires; but at the interlocutory stage, when the final result of the case cannot be known and the court has to do the best it can, I think the case has to be unusually strong and clear before a mandatory injunction will be granted, even if it is sought in order to enforce a contractual obligation."
18. The Court in Yama Group of Companies Ltd v PNG Power Ltd[4] set out the following considerations for the grant of a mandatory injunction;
“Considerations for the grant of a mandatory injunction include;
(a) it should only be granted where a strong case that serious damage will occur to the applicant is made out;
(b) the general principles for negative injunctions apply, that there is a serious question to be tried, damages are not an adequate remedy and the other factors affecting the balance of convenience favour the applicant; the case should normally be one which gives an unusually strong and clear view that the applicant will be successful at trial;
(c) the more likely it appeared that the plaintiff would succeed at trial the less reluctant the court would be to interfere at the interlocutory stage;
(d) the cost to the defendant in performing the mandatory acts should be weighed against the likely damage to the applicant;
(e) if the relief sought is such as would normally be granted after a trial it should be refused on an interim application unless the prejudice or hardship to the applicant is disproportionate to the prejudice and hardship to be caused the defendant in performing the order;
(f) if the mandatory injunction is simply to restore some activity which has been previously performed by the defendant, rather than to embark on some new activity, it will be more readily granted;
(g) ultimately in deciding whether or not to grant a mandatory injunction the over-riding consideration is an exercise in deciding which course will do the least damage, or to put it another way, the lower risk of injustice, if it turns out that the court has made the ‘wrong’ decision;
(h) if an injunction is granted the order should specify exactly what it is the defendant has to do, leaving the defendant in no doubt as to what is required to comply with the order.”
19. The considerations for the grant of a negative injunction apply to a mandatory injunction as well and these principles are set in a number of cases including Employers Federation of PNG v PNG Waterside Workers and Seamen’s Union[5], Mauga Logging Company Ltd -v- South Pacific Oil Palm,[6] Robinson -v- National Airline Commission[7] and the Supreme Court case of Chief Collector of Taxes v Bougainville Copper Limited[8] which lays down the following principles:
Has the Plaintiff delayed in making the application?
21. The grant of injunctions in any form are equitable in nature and the Court is tasked to weigh up the considerations or principles carefully. As to whether these proceedings are meritorious to warrant the Court’s exercise of jurisdiction, from a perusal of the declarations sought in the Originating Summons and from affidavits of parties, there is to my mind a serious question to be tried in regard to Puma’s request to the Bank of PNG as the regulator for foreign currency and the Bank’s allegations of a breach of specific terms and conditions in relation to Puma’s operation of a Foreign Exchange offshore account in Singapore.
22. Mr Anderson poses the question as to whether there is a serious or meritorious question to be tried in this way, “what is the legal wrong being committed by the Defendant which must be injuncted by the Court if the Defendant does not supply refined petroleum products to the PNG market? Is it a wrong actionable on the suit of the Plaintiff?”
23. I prefer to ask the question in regard to whether there is serious or meritorious question to be tried as, “Is the act complained of to be ordered by the Court in the form of a mandatory injunction directly related to the Plaintiff’s right that it intends to protect in these proceedings? If it is not in very close proximity or direct that the failure to do so would not affect the Plaintiff’s right in carrying out it's function or business, it is therefore remote and is speculative in my opinion”. I answer this question in the affirmative that the Plaintiff’s application to restrain Puma from halting the supply of refined petroleum product is indirect and remote from its core function which amongst others is to manage the use of foreign currency in the country.
24. When the Court asked Mr Kints of the Plaintiff whether his client stands to suffer any loss if the supply of refined petroleum products were to halt, Mr Kint admits that it would not however Mr Kints simply states that Puma should not blame Bank of PNG for this. The Plaintiff is a by stander as to the impact of the supply of refined petroleum products in the country. It’s right and interest vest entirely on the regulations of foreign currency which affects Puma’s ability to supply the PNG market. Take Air Niugini whose business runs on the supply of fuel from Puma, they are directly impacted by the lack of supply of fuel in PNG as their sole supplier is Puma.
25. The balance of convenience therefore does not favour the grant of a mandatory injunction as the Plaintiff stands to suffer no loss at all by the Defendant’s inability to supply refined petroleum products to the PNG market. There is also no status quo to maintain between the Bank of PNG and Puma as the ability to supply fuel by Puma as a commercial entity does not involve the Bank as a player in the market. The Bank is the regulator, it’s authority on Puma’s need for foreign exchange to purchase products and expenses and produce the outcome fuel either allows Puma to meet its customer demands in the PNG market and or its overseas suppliers on its expenses.
26. Mr Anderson of the Defendant has submitted that what the Bank is complaining of in the orders seeking that the Court restrains Puma from communicating with the Bank on the issue of foreign exchange and in publishing media statements to the public about the issue is that it does want to be bothered by Puma when it is mandated by law as its function to oversee and regulate financial system in PNG and to make provision for foreign exchange amongst it’s other functions. Mr Anderson relies on the Defendant’s right pursuant to section 46 of the Constitution that the Defendant as a legal person has the right to freedom of expression to communicate with the Bank as to it’s need for foreign exchange and in communicating their need to the public and to their customers and suppliers. I uphold this aspect of submissions.
27. Mr Anderson further submits that what the Plaintiff is essentially asking the Court is for Puma to keep supplying the products even though it can not continue to pay for it’s inputs and even prevents Puma from reducing the volume of product available, refrain Puma from approaching the bank which may lead to Puma not paying for it’s inputs which will defraud it’s suppliers by seeking to buy inputs on credit even though Puma is capable of paying for these. I also uphold these submissions.
28. I am of the view that effectively what the Plaintiff is attempted to do in this application for mandatory injunction is to disadvantage the Defendant by compelling it through an Order of the Court to keep supplying petroleum refined products until it does not have the capacity to do so when it is in a dire situation for the need for foreign exchange that it will succumb to the demands of the Plaintiff and give in to it’s demands regarding the ongoing issue as claimed in these proceedings. The application intending to refrain the Defendant from communicating with the Plaintiff and issuing publications to the public, customers and suppliers (in the hope of maintaining integrity in the commercial market-place) both in PNG and overseas is aimed at silencing the Defendant to coerce them or subject them in my view to the Bank’s position in this dispute. That is an unfair advantage in my view and orders of the Court be it in mandatory terms should not be wielded by one party to the detriment of another or to the other’s disadvantage and the Applicant’s gain. That is far removed from the intent of injunctive orders which is to preserve the status quo until all issues are determined at trial or the substantive hearing proper. In Robinson v National Airlines Commission[9], the Court said that;
“The purpose of an interlocutory injunction is to preserve the status quo until the hearing of the main action "where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo", per Frost C.J in Mt Hagen Airport Hotel Pty Ltd v. Gibbs and Anor [1976] P.N.G.L.R. 316. “
29. It follows that the application seeking mandatory injunctive orders by the Plaintiff is dismissed forthwith.
30. As the Plaintiff has proceeded by way of an Originating Summons, parties shall endeavour to get the substantive matters heard as a matter of importance to resolve the dispute between the parties to ensure the dispute does not impact the country, the economy and business, the mining sector and or domestic flights etc. Parties are also at liberty to consider the use of mediation under the ADR Rules for an alternate resolution of these issues in an amicable and timely resolution.
31. The Court, therefore, makes the following orders:
Orders accordingly.
________________________________________________________________
Jema Lawyers: Lawyers for the Plaintiff
Dentons PNG: Lawyers for the Defendant
[1] Section 8 of the Central Banking Act 2000
[2] Section 2 of the Central Banking Act 2000
[3] [2005] PGNC 128; N2831 (17 May 2005)
[4] Ibid
[5] (1982) unreported N393
[6] [1977] PNGLR 80
[7] [1976] PNGLR 59
[8] [2007] PGSC 1; SC853 (2 February 2007)
[9] Supra N7
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