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National Court of Papua New Guinea |
N11191
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
OS NO. 60 OF 2023 (COMM/IECMS)
WEST COMMODITY TRADERS LIMITED
Plaintiff
V
LEO MAPMANI in his official capacity as the Acting Provincial Administrator for West New Britain Province
First Defendant
WEST NEW BRITAIN PROVINCIAL GOVERMENT
Second Defendant
PAPUA NEW GUINEA FOREST AUTHORITY
Third Defendant
WAIGANI: ANIS J
4 DECEMBER 2024;19 MARCH 2025
DECLARATORY RELIEF – Money to the tune of K1 million paid under Log Export Development Levy Trust Account – s.121A of the Forestry Act - declaratory orders sought that money should be paid to the correct or intended recipient – consideration – status of the money – whether it was wrongly held given the circumstance of the case, whether the money should be paid out as sought in the relief, whether it should remain with its present custodian, or whether it should be returned to the Trustee – consideration - ruling
PRACTICE AND PROCEDURES – preliminary issue – whether there is any utility in the proceeding given the change of circumstance, that is, given that the Trustee has rescinded its decision to approve the agricultural project of the plaintiff – consideration - ruling
Cases cited
Ok Tedi Mining Ltd v. Niugini Insurance Corporation [1988-89] PNGLR 425
Pius Pundi v. Chris Rupen (2015) SC1430
The Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd [1921] 2 AC 438
Zachary Gelu v Francis Damem (2004) N2762
Counsel
J Asupa for the plaintiff
S Phannaphen for the first and second defendants
D Akane, for the third defendant
DECISION
1. ANIS J: The plaintiff seeks various declaratory relief against the defendants. I heard the matter on 4 December 2024 before reserving my decision to a date to be advised.
2. Parties have been notified so I will rule on it now.
BACKGROUND
3. The plaintiff claims that it is a landowner company which is owned by people who are situated in 2 forest project areas called Asengseng Consolidated Forest Management area and Avio Amgen Local Forest Area. The areas are located in the Kandrian District of West New Britain Province. The plaintiff claims that in 2012 and 2019, it submitted and re-submitted an agricultural project proposal for development of Cocoa, to the third defendant through its Log Export Development Levy Committee (the Committee/Trustee) for approval. Briefly, and in accordance with the requirements stipulated under s.121A of the Forestry Act, a levy called Log Export Development Levy (LEDL) is collected by the third defendant from logging operations throughout the country. Levies collected are kept and held in trust by the Committee. The Committee, upon receipt of agricultural or infrastructure development project proposals from areas affected by the logging operations, may approve and release fundings which are derived from the LEDL trust account that it manages.
4. The plaintiff asserts that the Committee has approved its cocoa agricultural project which is valued at K5.7 million. It asserts that the first phase payment of K1 million (or seed money) has been paid by the third defendant to the second defendant on or about 8 March 2023. However, it asserts that the money has not been released to it which is why it has commenced this proceeding.
5. The following facts are not in dispute so I will state them here. On 8 February 2022, a cheque in the sum of K1 million was prepared by the third defendant to be paid into the second defendant’s operating account. The understanding by the third defendant, premised on practice for such approvals, was that the second defendant would administer the funds and pay the plaintiff the seed money. The second defendant, however, refused to accept the cheque. On 21 February 2022, the second defendant wrote back to the third defendant attaching the cheque of K1 million. The second defendant notified the third defendant that the money was meant for direct funding to the plaintiff and stated that the third defendant should pay the plaintiff directly. The cheque was later cancelled by the third defendant. On 8 March 2023, the third defendant raised a new cheque for K1 million payable to the second defendant through its operating account. This time the second defendant accepted the payment into its operating account. On 28 June 2023, by letter, the second defendant wrote to the third defendant to seek clarity on the K1 million. The second last para. of the letter which appears to constitute the start of the dispute reads:
Since the Cheque has been deposited into the Provincial Government Treasury as LEDL payment to Provincial Government, the Expenditure of this LEDL Funding will be at the prerogative of Provincial Government in line with the LEDL guidelines until further clarification from your office is provided to substantiate it.
6. On 30 June 2023, the second defendant sent its reply by letter. The letter reads in part:
The project proposal submitted by West Commodity Traders Limited to PNG Forest Authority through the LEDL Secretariate project office, was assessed and vetted against the criteria of the 2015 LEDL Administrative Guideline.
I wish to advise you that the project is in compliance with the 2015 LEDL Administrative Guideline and does qualify for LEDL funding. Based on the project assessment the total funding for the project is to the sum of K5.7 million, however, based on the project submission, initial project funding of K755,000 for Capital Works and K220,000 for human capital development (Training) is released.
Therefore, the total initial capital funding to the sum of K1 million is released to the WNBPA to disburse in accordance with the NEC Decision 219/2015 for LEDL funding to be paid directly to the district and provincial treasuries.
Please facilitate the necessary project disbursements from your office to the project resource owner’s company West Commodity Traders Limited.
....
7. The first and second defendants (the 2 defendants) have since not corresponded with or released the K1 million to the plaintiff. The plaintiff was aggrieved and filed this proceeding. It seeks orders, amongst others, for the release of the K1 million that is being kept by the second defendant, to it.
EVIDENCE
8. Evidence were tendered without objection or cross-examination. The plaintiff tendered one affidavit which was marked Exhibit P1(affidavit of Peter Marme filed 1 July 2024). The first and second defendants tendered 2 affidavits which were marked Exhibit D1 (affidavit of the Leo Mapmani filed 10 April 2024) and Exhibit D2 (affidavit of Leo Mapmani filed 10 October 2024). And the third defendant tendered 1 affidavit which was marked Exhibit D3 (affidavit of Verolyne Daugil filed 27 September 2024).
MAIN ISSUE
9. The main issue to determine is whether the K1 million was properly procured, and if so, whether it should be released to the plaintiff. The other consequential issue that arose during the course of the hearing is this; that if the K1 million was not properly procured or regardless, whether it should be kept by the second defendant or returned to the third defendant.
CONTENTIONS
10. The plaintiff and the third defendant appear to have similar arguments in relation to the main issue. They argue that all the proper processes for the approval and release of the funds by the Committee have been followed and that there is nothing stopping the second defendant from releasing the funds to the plaintiff or the relevant district authority. The third defendant further submits that if the K1 million cannot be paid out then it must be returned to the Committee’s Trust Account. But as it turns out, as I will explain below, there appears to be confusions/contradictions in the third defendant’s line of arguments.
11. The 2 defendants made various arguments. I must say at the outset that I also had difficulties following counsel in his submissions. Their evidence also appears inconsistent and contradictory as I will explain below. But in summary, the 2 defendants’ main submission is that (i), the events have overtaken the proceeding making it wanting or lacking utility, (ii), the plaintiff’s proposal for the project to the Committee was not authorized by the second defendant as required under s.121A, and (iii), in regard to where the K1 million should be paid, it is not possible for the second defendant to pay the money back to the third defendant because the money was not budgeted for in the first place by the second defendant to make such payment; also that the second defendant is entitled to LEDL funds which were appropriated for in its provincial budget thus it is entitled to keep the K1 million.
CHALLENGE ON COMMITTEE’S DECISION
12. To begin, I reject the 2 defendants’ claim that the processes for applying for the projects had not been complied with by the plaintiff before its agricultural project was approved. The Committees’ administrative body LEDL Secretariate had overseen the plaintiff’s proposal at the material time. This is explained at paras. 14 to 17 in Ms Daugil’s affidavit which is marked as Exhibit D3. I observe that the Committee’s process for approval of projects under the LEDL funds is carried out independently by the Committee and its Secretariate. The process for the then proposed agricultural project by the plaintiff had already taken place and was approved. The K1 million was released after the approval by the Committee. The evidence also shows that the second defendant had in fact approved and supported the plaintiff’s proposal. But that to me appears inconsequential. The 2 defendants in their defence, are trying to question a quasi-judicial decision made by the Committee. Such challenges, in my view, are misconceived. The appropriate process to raise the argument may be to seek judicial review. But then, how can they challenge the decision of the Committee when the third defendant has correspondence that shows that Mr. Mapmani had consented to the plaintiff’s proposal before it was approved by the Committee? I refer to annexure VD3 to Exhibit D3. It was a letter dated 14 December 2022 by the second defendant to the third defendant. The first defendant, in his capacity as the Acting Administrator of the second defendant, had supported the plaintiff’s agricultural project. I note that the first defendant’s 2 affidavits do not contest or rebut the evidence of the third defendant on the matter.
13. The only real challenge on liability or the substantive matter, in my view, is preliminary and concerns jurisdiction, which is whether there is no utility in the proceeding. I will address that now.
NO UTILITY?
14. The relevant evidence to address this issue is a letter dated 16 August 2023 by the third defendant to the 2 defendants. It is marked as Annexure VD9 to Exhibit D3.
15. I restate paras. 2 to 6 herein:
......
The Log Export Development Levy is a development levy collection intended to assist funding infrastructure projects in the districts and provinces in accordance with the district and provincial development plans set.
I wish to advise you that the LEDL Committee Trustee reserves the right to deliberate and approve on all projects submitted to the LEDL Committee for LEDL funding prior to the release of funding. However, in the event that the project does not support the district and provincial development plans, than the project does not satisfy the administrative vetting criteria of the LEDL Administrative Guideline and therefore cannot qualify for funding.
It is evident from the discussions with the West New Britain Provincial Government Administration that the West Commodity Traders Limited project is not supported. Hence, to protect the LEDL trust fund and the integrity of the Trustee fund administration; I as the LEDL Trustee am instructing that the following Directives be adhered to.
The above action is necessary to protect both the administration and the integrity of the trust fund and to ensure that funds are applied for purposes supported by all stakeholders.
I thank you for your attention and appropriate action. [Underlining mine]
16. I note that I have quoted the relevant parts of the third defendant’s letter dated 30 June 2023 above in my judgment, and I would refer to that.
17. When pressed upon counsel in regard to the third defendant’s letters, counsel submitted that due to many issues/controversies that had eventuated because of the Committee’s decision to approve the plaintiff’s agricultural project, which included investigations by police or the fraud squad over the matter, the third defendant decided to rescind its decision to approve the plaintiff’s agricultural project. However, counsel maintains that these letters in no way amount an admission that the Committee or the third defendant did not follow the due process in relation to the approval that it had initially granted to the plaintiff’s project.
18. This is where I will differ with the submissions of the third defendant. In my view, the third defendant cannot have it both ways. The Committee, exercising a quasi-judicial authority or its authority as trustee, made a decision to grant the plaintiff’s agricultural project in January or March of 2023. On 16 August 2023, the Committed informed the 2 defendants, amongst others that, and I quote, It is evident from the discussions with the West New Britain Provincial Government Administration that the West Commodity Traders Limited project is not supported. The letter goes on to imply that the Committee has rescinded its decision to approve the plaintiff’s cocoa project, or that it may have put the said project ‘back onto the drawing board’, so to speak, for reprocessing.
19. The letter of 16 August has not been retracted. Counsel for the third defendant has also relied on it to make arguments for the return of the money and cost, as follows; that since that date when the letter of 16 August was sent, the 2 defendants have not returned the K1 million which they should have. The third defendant makes the argument that if the money is not released to the plaintiff, then it should be returned to the LEDL Trust Account. The third defendant also makes the argument that if an order for cost is made, it should be made following the event and not just targeting one party because the third defendant had notified the parties of its changed position earlier in its letter of 16 August.
20. I am minded to uphold the submission of the 2 defendants on this matter. The Committee appears to have rescinded its earlier decision made in January or March of 2023 where it had approved the agricultural project proposal of the plaintiff. The evidence that is presented to me, which has not been disputed, demonstrates this.
21. Because the Committee has cancelled the intended transaction of the K1 million Kina as well as possibly the plaintiff’s project, in my view, there is no utility in the matter. The plaintiff commenced this proceeding on the premise that its K5.7 million agricultural project has been approved and as such, is seeking declaratory orders to receive the money. The events, however, have overtaken this lawsuit. The plaintiff, as of 16 August 2023, does not have any right or interest to claim the K1 million that is currently being held by the 2 defendants. See cases: Ok Tedi Mining Ltd v. Niugini Insurance Corporation [1988-89] PNGLR 425, The Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd [1921] 2 AC 438, Zachary Gelu v Francis Damem (2004) N2762 and Pius Pundi v. Chris Rupen (2015) SC1430.
22. The claim will fail for this reason.
WHERE SHOULD THE K1 MILLION BE PAID TO OR BE KEPT?
23. ‘To tie up loose ends’ so to speak, is this million kina question. Who gets to keep the money?
24. I had thought that the answer to this question would be straight forward. However, the 2 defendants argue and maintain their argument that the K1 million should remain with them. They claim, amongst others, that there had to be proper budgetary allocation before the funds could be released.
25. I reject the arguments by the 2 defendants. The K1 million had been approved by the Committee for the reasons as stated above. However, because the approval is now rejected by the Committee, it must be paid back to the Committee’s Trust Account in the terms as requested by the third defendant. The K1 million consists of levy monies that have been paid by log operators under s.121A of the Forestry Act. The Committee, as the Trustee of these funds, has absolute or exclusive control over them. It is not an issue that the second defendant never applied for the K1 million following the due processes that are stipulated under the 2015 LEDL Administrative Guideline or the provisions of the Forestry Act.
26. I will therefore make consequential orders that the second defendant must immediately pay the K1 million back to the trust account of the Committee without delay.
COST
27. An award of cost is discretionary.
28. I am minded to order all the defendants liable for the cost of the proceeding. The letter by the third defendant dated 16 August 2023 that rescinded its decision to release the K1 million to the second defendant was not copied to the plaintiff. As such and premised on Exhibit D3 which contained the letter, it may be reasonable to assume that the plaintiff may have become aware of the letter on the date of filing of Exhibit D3 which was on 27 September 2024. I also note that the third defendant, right up to the time the matter was tried, did not make it expressly clear to the plaintiff that its intention was to receive back the money. It did not also inform the plaintiff that its project proposal has been cancelled or ‘put back on the drawing board’ for re-evaluation. Instead, the third defendant, in its submission, continued to maintain its position that its decision to grant the plaintiff’s project proposal was valid and that the K1 million should still be paid to the plaintiff or the relevant district authorities, that is, despite its own letter of 16 August 2023 which says otherwise.
29. As for the 2 defendants, had they applied common sense and law, they would have remitted the money back to the third defendant when they were supposed to. Their hard stand on keeping the money which clearly did not belong to them has also contributed to the matter reaching this stage. Also, I note that all the defendants are state entities or part of the State, and that since they are all partly at fault, it is only fair that they all be held liable for cost.
30. The first defendant is sued in his official capacity so I will refrain from making any cost award against him.
REMARK
31. Subsection (7) of s.121A [which was inserted through amendment by Forestry (2007 Budget Amendment) Act 2006] states:
(7) Expenditure of monies from the trust account shall be made only -
(a) in accordance with plans for agricultural or infrastructure development projects in logging areas submitted by the relevant Local-level Government or Provincial Government; and
(b) in accordance with the approval of the Committee.
[Underlining mine]
32. My ending remark is this. It appears to me that it is expressly stated in an Act of Parliament, which is the Forestry Act, that any submissions that is made to the Committee under s.121A shall only be made by two persons to the exclusion of all others. The 2 persons are (i) the relevant Local-level Government and (ii) Provincial Government. There appears to be no room for a claim that submissions could come from a third party or from those persons or landowners of the areas that are affected by logging operations. The two government entities (or any one of them) must be applicants themselves under s.121A before the Secretariate to the Committee could accept and process their proposals and also before they could be approved by the Committee.
ORDERS
33. I make the following orders:
The Court orders accordingly
________________________________________________________________
Lawyers for the plaintiff: Croton Legal Services
Lawyers for the first and second defendants: Lhyrn Lawyers
Lawyers for the third defendant: In-house Lawyers
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