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LNG Plant Landowners Association Inc v Kumul Petroleum Holdings Ltd [2024] PGNC 216; N10880 (9 July 2024)

N10880

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 8 OF 2023

BETWEEN
LNG PLANT LANDOWNERS ASSOCIATION INC
Plaintiff

AND
KUMUL PETROLUEM HOLDINGS LIMITED
First Defendant

AND
MINERAL RESOURCES DEVELOPMENT CORPORATION LIMITED
Second Defendant

AND
LABA HOLDINGS LIMITED
Third Defendant

Waigani: Makail, J
2024: 3^rd & 9^th July

PRACTICE & PROCEDURE – Motion to dismiss proceeding – Disclosing no reasonable cause of action – Frivolous or vexatious – Abuse of process – National Court Rules – Order 12, rule 40(1)(a - (c)

PRACTICE & PROCEDURE – Mode of proceedings – Claim to equity benefits – Equity benefits due for release – Oil & Gas Act – Sections 167

Cases Cited:
Luke Pelego & Ors v. Hon. Dr Fabian Pok, Minister for Petroleum & Ors (2021) N8745

Counsel:
Mr J Goava, for Plaintiff
Mr C Yaga, for First Defendant
No appearance, for Second Defendant
Ms L David, for Third Defendant

RULING

9^th July 2024

1. MAKAIL, J: There are two notices of motions for ruling. Each seeks an order to have the within proceedings dismissed for failing to disclose a reasonable cause of action, being frivolous or vexatious or being an abuse of process pursuant to Order 12, rule 40(1)(a) to (c) of the National Court Rules (“NCR”). These are:

(a) first defendant’s notice of motion filed 24^th May 2024, and
(b) third defendant’s notice of motion filed 15^th May 2024.

2. Alternatively, the first defendant’s motion seeks an order to set aside an ex parte interim injunction granted by the National Court on 10^th April 2024.

3. The first and third defendants rely on the following common grounds:

(a) lack of locus standi of the plaintiff to commence the within proceedings,

(b) Failure to disclose a reasonable cause of action.

4. Having heard Mr Yaga, Ms David and Mr Goava in respect of their articulation of the grounds and principles of law for and against the motions for dismissal of proceedings, it is common ground that there is a dispute in relation to how the equity benefits derived from the Papua New Guinea Liquified Natural Gas project (“PNGLNG”) and held by the first defendant are to be received by the beneficiaries of the project.

5. Also, it is common ground that on 23^rd October 2015 the then Minister for Petroleum Hon. Nixon Duban published a Determination in the National Gazette No G692 (“Ministerial Determination”) identifying various clans from four villages namely Porebada, Boera, Papa and Rearea of Hiri West of Central Province to receive equity benefits for the PNG LNG Project Petroleum Processing Facility Licence Two (“PPFL No 2”) area.

6. The Ministerial Determination identified by number and name, the list of clans by village as follows:

• Porebada – 35 clans.
• Boera – 14 clans.
• Papa – 12 clans.
• Rearea – 18 clans.
  

7. It is understood that the equity benefits will be in the form of money held by the first defendant and to be received by the identified clans in the four named villages. Other than this, it is unclear if the equity benefits will be distributed in the form of shares for clans to own in selected companies operating in Papua New Guinea.

8. Further, it is common ground that except for the Ministerial Determination identifying the various clans and that there has been no order of the National or Supreme Court setting aside the Ministerial Determination tendered in evidence, pursuant to Section 169 and Section 170 of the Oil & Gas Act 1998 the first defendant is obliged by the Ministerial Determination to release the equity benefits to the identified clans. The equity benefit is a statutory benefit under Section 167 of the Oil & Gas Act and falls due and payable to the beneficiary landowners identified and published in a notice by the Minister for Petroleum in a National Gazette: cf Luke Pelego & Ors v. Hon. Dr Fabian Pok, Minister for Petroleum & Ors (2021) N8745.

9. The dispute is in relation to how the first defendant is going to release the equity benefits to the identified clans because there is no established process being documented by the first defendant and second defendant together with the identified clans for the identified clans to receive the equity benefits.

10. Given this, the question is:

• Will the first defendant release the equity benefits directly to the identified clans?
• If so, given that in any Papua New Guinea society, a clan is made up of a group of family members with a common ancestor, who will be the representative to receive the equity benefits on behalf of the clan?
• If the equity benefits will be paid by cash, will it be given to the representative of the clan and later distributed to the individual members of the clan or head of the family of the members of the clan?
• Will individual members of the clan receive cash directly from the first defendant?
• If cash is to be paid into a commercial bank account, will the account be held in the name of the clan or in some other form such as an Incorporated Land Group (“ILG”)?
• As commercial banks require names and signatories to the account, who will be the person representing the clan to be the account holder?
• If a clan member is appointed account holder on behalf of the clan, will there be and what guidelines will be established or set by the clan for access and distribution of the cash by the appointed member of the clan to prevent misuse of funds?
• Will the plaintiff or third defendant receive the equity benefits on behalf of the identified clans?
• If so, does the plaintiff or third defendant have the consent of each member of the respective clans, or will the members of each clan collectively decide to authorise the plaintiff or third defendant to receive the equity benefits on behalf of the clan and later distribute the cash to each clan or individual members of each clan?
• If so, will there be any fees charged for receiving and holding the equity benefits for the respective identified clans?
• If so, how much and how is it calculated?
  

11. These are some of the many, but difficult questions which arise and linger for resolution by the parties, especially the identified clans in a case where there are multitudes of clans with multitudes of clan members and competing views of how the equity benefits will be used.

12. This has led to the plaintiff and third defendant asserting that each of them represented the identified clans in the four villages and should be recognised as sole representative of the identified clans.

13. It was not until Friday 10^th June 2022 that the first defendant published a notice in the Post Courier newspaper for landowners of Porebada, Boera, Papa and Rearea to submit applications for its approval after completing the following requirements because 11% out of 24% of the Kroton Equity benefit under the Umbrella Benefit Sharing Agreement (“UBS Agreement”) was due to be released:

“(a) The Project Licence must have completed their respective Landowner Beneficiary Identification (“LOBID) process resulting in an executed Ministerial Determination under Section 169 of the Oil & Gas Act;

(b) The Project area landowners (PALO) of the Project Licence must have elected leaders declared by the Electoral Commission that are also recognised as Directors of a MRDC PNG LNG Gas Resources subsidiary company;

(c) These recognised leaders identified in (b), must formally nominate an entity set up under the Companies Act 1997 to which respective KEO (Kroton Equity Option) benefit will be paid to. A formal meeting resolution by the nominated entity accepting the payment must be provided to KPHL.” (Underlining added).

14. In the case where the landowner group meets the above requirements, the first defendant will respond by, among other things,

“(a) Stating the total sum of the dividends that have accumulated for the benefit of the Landowner group under the vendor finance arrangement which is in place.......”

15. While the process was in progress, on 12^th December 2023 the plaintiff filed the within proceedings and recently, on 10^th April 2024 was granted an ex parte interim injunction stopping the process from being completed until further hearing. It was asserted that there are fears that payment of equity benefits will be made and will end up in the wrong hands. In the originating summons, the plaintiff seeks the following orders:

“1. Pursuant to Order 14 Rule (sic) 9 and 10 of the National Court Rules (NCR) and Section 155(4) of the Constitution a declaration that a purported decision (‘Decision’) that was published in the Post Courier dated 10 June 2022 at page 61 by the Kumul Petroleum Holdings Limited, the First Defendant is deemed contrary to the preliminary formalized terms of the Kroton Equity Option (KEO) that was been discussed and formalized under a Trust Deed executed pursuant to the Umbrella Benefit Sharing Agreement (UBSA) accorded in Kokopo, ENBP in 2009.

2. An interim injunction to temporarily restrain the First Defendant from dealing with the Kroton Equity Option (KEO) payments due payable to the ‘4 impacted village communities of Papa, Rearea, Boera and Porebada’ situated within the confines of the PNG LNG Plant Site Area at Caution Bay, Hiri West LLG, Central Province in accordance with the purported decision referred to above.
   
3. A further declaration that the First Defendant allow the Plaintiff as the legitimate Landowner entity which represents the legitimate interests of the ‘4 impacted village communities’ referred to above to establish meaningful dialogue hence to effect the necessary payment of the Kroton Equity Shares due payable to the Plaintiffs.
   
4. An interim injunction to temporarily restrain the First Defendant from engaging with the Second Defendant and or the Third Defendant or both in any manner howsoever in any purported dealings related to the Kroton Equity Share payments that may be deemed payable to the Plaintiff in accordance with the purported decision of the First Defendant published in the Post Courier dated 10 June 2022 at page 61 or any other purported arrangement that may not be known to the Plaintiff.
   
5. Such further or other orders as this Honourable Court considers appropriate.
   
6. The costs of and incidental to this application be costs in the cause.”
   

16. Contrary to the first defendant’s submissions that the plaintiff lacked locus standi because it is not a party to the UBS Agreement, the first defendant did not tender a copy of the UBS Agreement to verify its assertion. For this reason, it is unclear to find, as a fact, that the plaintiff is not a party to the UBS Agreement and this ground must fail. On the other hand, the plaintiff has locus standi to sue because it is an Association capable of suing or being sued pursuant to Section 10(1)(c) of the Association Incorporation Act, Ch 142. Also, contrary to the first defendant’s submissions that the Public Officer of the plaintiff did not authorise the commencement of the within proceedings pursuant to Section 27 of the said Act, Section 27 does not apply, and this ground is misconceived and dismissed.

17. The real question is whether the plaintiff has been authorised by the identified clans to act on their behalf to receive the equity benefits from the first defendant. There is no evidence of each member of a clan or authorised head of the clan authorising the plaintiff to act on behalf of the clan from the four villages to engage with the first defendant and to receive equity benefits from the first defendant. Conversely, evidence of authorisation from the clans will lend support to the plaintiff’s assertions that it is the sole recognised body to represent the clans or that other landowners making similar claims should not be recognised.

18. Moreover, the plaintiff’s assertion that the third defendant failed to represent or act on behalf of the landowners at forums and negotiations and protect landowner rights and pursuing legal redress are vague, or if any, immaterial in the within proceedings because the central issue is the identification of the process by which the clans are to receive the equity benefits from the first defendant. If any, the money is sitting there waiting for them to complete the process fixed as guidelines before they receive the money. The process has been halted by the ex parte interim injunction and the identified clans pursuant to the Ministerial Determination are missing out of the equity benefits. The longer the ex parte interim injunction remains in force, the longer the delay for the release of equity benefits.

19. While the first requirement which is underlined above appears to be contradictory because a Landowner Beneficiary Identification (“LOBID”) and Social Mapping Study presupposes a Ministerial Determination under Section 169 and Section 170 of the Oil & Gas Act 1998, the process has commenced by the first defendant and is a step towards addressing and resolving the major issue of delayed release of equity benefits to the landowners of the subject project area. Unless there is an explanation for a LOBID exercise to be conducted as the first requirement, it may be that the first defendant review it and, if possible, amend it, to bring the process in line with the existing Ministerial Determination. Other than this, the process has begun and must be completed.

20. A strong factor which operates against the competency of the within proceedings and lend support to the first and third defendants’ submissions that the within proceedings is an abuse of process is the Ministerial Determination. As correctly pointed out by these defendants, the plaintiff is not one of the entities identified by the Minister as a recipient/beneficiary of equity benefits. Given this, it lacks the requisite standing to sue the defendants.

21. Even then the Ministerial Determination stands in the way of the plaintiff to question the legality of the exercise undertaken by the first defendant. The correct mode of proceeding to challenge the exercise undertaken by the first defendant is to challenge the Ministerial Determination by judicial review proceedings pursuant to Order 16 of the NCR. See also Luke Pelego & Ors v. Hon. Nixon Duban, Minister for Petroleum & Ors (supra).

22. Consequently, the first and second defendants’ criticism of the viability of within proceedings is in order. The reliefs sought in the originating summons are vague and do not identify the controversy between the parties because the plaintiff has failed to establish that it has the requisite standing to sue the defendants for the equity benefits. The defendants will be put through unnecessary trouble and expense to defend a proceeding which is incontestably bad and stands a slim chance of success if it were allowed to progress to trial. The Court is satisfied that the within proceedings is frivolous or vexatious and an abuse of process.

23. Finally, the parties may adopt the process of setting guidelines for facilitating release of equity benefits under the responsibility and supervision of the first defendant as those put in place by other resource project landowners in Hides Gas project or with modification or even a complete set of different guidelines. However, the parties must ensure it is within the legal framework and scope of the Oil & Gas Act 1998, in this case, Section 167, Section 169 and Section 170 and the UBS Agreement.

24. In this case the plaintiff did not point to any illegality in the process setting out the guidelines published in the Post Courier newspaper on 10^th June 2022 except to complain that it should be the party leading the discussions and negotiations on behalf of the landowners to procure the equity benefits from the first defendant. Consequently, the process has been prematurely halted by the ex parte interim injunction. In the circumstances, the plaintiff has failed to demonstrate a right protected by law which the defendants had breached and the intervention of the Court is critically necessary. For these reasons, the Court upholds the submissions of the first and third defendants that the within proceedings failed to disclose a reasonable cause of action.

25. The notices of motions are upheld, the within proceedings is dismissed for lack of locus standi of the plaintiff, failure to disclose a reasonable cause of action, being frivolous or vexatious and abuse of process. The ex parte interim injunction goes out with the proceedings.

26. As to costs, the general rule is that costs will be awarded to the successful party. It follows that the plaintiff shall pay the first and third defendants’ costs of the within proceedings, to be taxed, if not agreed.

27. The final terms of the order of the Court are:

1. The 1^st and 3^rd defendants’ respective notices of motion filed 15^th and 24^th May 2024 are upheld.
   
2. The within proceedings is dismissed for disclosing no reasonable cause of action, being frivolous or vexatious and being an abuse of process of the Court pursuant to Order 12, rule 40(1)(a) to (c) of the National Court Rules.
   
3. The plaintiff shall pay the 1^st and 3^rd defendants’ costs of the within proceedings, to be taxed, if not agreed.

________________________________________________________________
Sannel Legal: Lawyers for Plaintiff
In-house counsel: Lawyers for First Defendant
Solicitor General: Lawyers for Second Defendant
Pacific Legal Group: Lawyers for Third Defendant