SC1429

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 89 OF 2013

BETWEEN:

NATIONAL CAPITAL DISTRICT COMMISSION
Appellant

AND:

CENTRAL PROVINCIAL GOVERNMENT
First Respondent

AND:

INTERNAL REVENUE COMMISSION
Second Respondent

AND:

INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Respondent

Waigani: Lenalia, Hartshorn and Kassman JJ
2014: 1st July
2015: 12th June
 
SUPREME COURT - APPEAL – appeal against decision that payment of GST revenue should be sourced from a statutory trust account – proceedings stemmed from NCD and IRC failure to provide financial assistance to Central Provincial Government- two grounds of appeal – whether primary Judge erred in law in finding that money payable by the IRC pursuant to s. 33 (2) (a) NCDC Act is to come from money in the Provincial Inland GST Trust Account in the name of NCDC established under s. 3 GST Revenue Distribution Act and continued in existence by s. 35 (1) Inter-Governmental Relations Act – whether the primary Judge erred in law in making that part of Order which referred to mediation the source of the money – s33(2)(a) NCDC Act, s3 GST Revenue Distribution Act, s.35 Inter-government Relations Act

PRACTICE AND PROCEDURE - no grounds shall be relied on or any relief sought at the hearing except the grounds and relief set out in the statement - an order or finding should not be made if it is not sought in the originating process or in the case of judicial review, in the statement, or Notice of Motion - trial judge fell into error in making declaratory orders not sought in the pleading – primary Judge also erred in referring the issue of "the source of the money" to mediation – both grounds of appeal upheld

Cases cited: 
PNGBC v. Tole (2002) SC694
Medaing v. Ramu Nico Management (MCC) Ltd (2011) SC1144

Counsel:
Mr. J. Griffin QC and Mr. M.M. Varitimos QC, for the Appellant
Mr. E. Hampalekie, for the First Respondent
Mr. S. Sinen, for the Second Respondent

12th June, 2015

1. BY THE COURT: This is an appeal against a National Court finding that payments of Goods and Services Tax revenue (GST) required to be made by the second respondent, the Internal Revenue Commission (IRC) to the first respondent, the Central Provincial Government (CPG) should be sourced from a statutory trust account established in the name of the appellant, the National Capital District Commission (NCDC).

2. The IRC supports the appeal of the NCDC and the CPG opposes it. The third respondent, the State did not participate in the appeal.

Background

3. The CPG commenced judicial review proceedings against the NCDC and the IRC in the National Court. This was in respect of the alleged failure by the NCDC and IRC to comply with their duties to provide financial assistance to the CPG under the National Capital District Commission Act 2001 (NCDC Act). Following a hearing the primary Judge amongst others, partly refused and partly granted the application for judicial review and made declarations as to the nature and extent of the IRC's failure to comply with its statutory obligation.

4. The primary Judge refused to grant any relief against NCDC, notwithstanding that various orders were specifically sought against NCDC in CPG's Notice of Motion.

5. The case concerned what payments if any, the NCDC and the IRC were obliged to make to the CPG, and whether those parties had been in breach of any statutory duties in failing to make such payments to be made after GST had been collected. The Notice of Motion did not seek any declarations or other orders as to the "source" of payments.

6. The scheme of the relevant legislation is that GST revenue is collected by the IRC. Relevant GST revenue is placed in a statutory trust established by force of relevant provisions contained, at the relevant time, in both the Goods and Services Tax Revenue Distribution Act 2003 (GST Revenue Distribution Act) and the Inter-Governmental Relations (Functions and Funding Act 2009 (Inter-Governmental Relations Act). It is then to be "appropriated", "paid" and "distributed" as prescribed by this legislation, especially sections 8 and 42 of each of the Acts respectively. The trustees of the trust, appointed by the legislation are the Commissioner General and the Provincial Treasurer.

7. In the course of his decision, the primary Judge considered s. 33 NCDC Act and found that the money that IRC had to pay to the CPG, was to come from the Provincial Inland GST Trust Account in the name of the NCDC, established under the GST Revenue Distribution Act and the Inter-Governmental Relations Act - that is trust account funds to which the NCDC is entitled. The primary Judge expressly recognised that this may cause hardship to the NCDC and estimated that there was about K100 million in issue.

First ground of appeal

8. NCDC's first ground of appeal is that the primary Judge erred in law in finding that money payable by the IRC pursuant to s. 33 (2) (a) NCDC Act is to come from money in the Provincial Inland GST Trust Account in the name of NCDC established under s. 3 GST Revenue Distribution Act and continued in existence by s. 35 (1) Inter-Governmental Relations Act. This is because the issues before the primary Judge did not extend to the determination of, or finding on, any issue as to the source of the money to be utilised by the IRC for the purposes of making the payment referred to in s. 33 (2) (a) NCDC Act and should not have been determined adversely to NCDC by the primary Judge in litigation in which the IRC did not raise that issue against NCDC and in which the defendants raised no issues.

9. As to this ground NCDC submits that the findings of the primary Judge went beyond the issues for determination that were raised in the Notice of Motion that was before him. In particular, the Notice of Motion did not raise any issue as to the source of the funds being the Provincial Inland GST Trust Account in the name of NCDC. Given the orders sought in the Notice of Motion, combined with the fact that the primary Judge refused all of the relief sought against NCDC, the primary Judge should not have made any finding to the effect that money payable by the IRC was to be sourced from the Provincial Inland GST Trust Account in the name of the NCDC, which is the repository of the NCDC's own share of GST funding.

10. CPG and IRC did not make any submissions specifically on this point that the issues before the primary Judge did not require him to make a determination or finding as to the source of the money to be utilised by the IRC.

Consideration

11. From a perusal of the Notice of Motion that was before the primary Judge, it is clear that no declaratory relief is sought concerning the source of money to be utilised by the IRC for the purposes of making the payment referred to in s. 33 (2) (a) NCDC Act. Also no orders are sought in that regard.

12. The finding of the primary Judge about which NCDC makes complaint was made in the course of a decision given in an application for judicial review. An application for judicial review is made pursuant to Order 16 National Court Rules. Order 16 Rule 6 (1), relevantly provides that subject to amendment, no grounds shall be relied on or any relief sought at the hearing except the grounds and relief set out in the statement.

13. Similarly, in Order 4 Rule 7 (1) National Court Rules it is provided that an originating process shall state specifically the relief claimed and that a plaintiff is restricted to what has been included in his originating summons or writ of summons and statement of claim: PNGBC v. Tole (2002) SC694; Medaing v. Ramu Nico Management (MCC) Ltd (2011) SC1144.

14. In our view, the corollary to what is provided for in the above Rules, is that an order or finding should not be made if it is not sought in the originating process or in the case of judicial review, in the statement, or Notice of Motion referred to in Order 16 Rule 5 National Court Rules.

15. We find support for our view in the majority decision in Medaing v. Ramu Nico Management (supra). In that case the majority were satisfied that the trial judge fell into error in making declaratory orders that were not sought in the pleading, were not applied for during the trial and in respect of which no notice was given to the parties that it was contemplated that such orders were to be made. We see no reason why this reasoning should not be applicable to a finding, as distinct from an order, that is made by a judge in similar circumstances.

16. In this instance we are of the view that the subject finding made by the primary Judge went beyond the issues for determination that were raised in the Notice of Motion that was before him and in particular no issue was raised in the Notice of Motion as to the source of the funds being the Provincial Inland GST Trust Account in the name of NCDC. Further, given that the effect of the subject finding is that the NCDC is adversely and directly affected because of the finding that the money to be paid by the IRC to the CPG is to be sourced from the Provincial Inland GST Trust Account in the name of NCDC and also in circumstances where the two trustees of the statutory trust, the Commissioner General and the Provincial Treasurer, were not parties to the proceeding, in making the subject finding that he did, we are of the view that the primary Judge fell into error.

17. Consequently this ground of appeal is upheld. 

Second ground of appeal 
18. Given this, the only other ground of appeal requiring consideration is that the primary Judge erred in law in making that part of Order number 5 of his Order which referred to mediation the source of the money ordered to be paid by the IRC to the CPG and the contemporaneous mediation orders numbered 1 – 22.

19. NCDC contends that the primary Judge erred as:

a)	even if the primary Judge was entitled to order a mediation, the mediation ordered was inconsistent with the primary Judge's decision;

b)	although the primary Judge's orders included an order that part of the proceeding referred to mediation was "the source" of the money to be paid, the primary Judge had already determined that question by finding that the money would come from the Provincial Inland GST Trust Account in the name of NCDC;

c)	when the mediation order was made, the proceeding had been disposed of. So there were no parts of the proceeding before the court that remained to be litigated and all orders that had been sought against NCDC had been refused with costs.

20. NCDC contends that the issue of the source of the money to be paid by the IRC in carrying out its duties under s. 33 (2) (a) NCDC Act was referred to mediation in circumstances in which:

a)	the primary Judge had already determined that issue, leaving it pointless to send the issue to mediation;

b)	the issues before the primary Judge required no determination or finding as to the source of the money to be utilised by the IRC for the purposes of meeting the payment referred to in s. 33 (2) (a) NCDC Act, and in particular, there was no issue raised by the Notice of Motion as to whether the payment should be made out of money held on trust for NCDC; and

c)	the determination of that issue by the primary Judge was itself in error by reason of the matters set out in the grounds of appeal and as submitted on behalf of NCDC.

21. IRC made submissions in support of those made on behalf of NCDC on this ground of appeal.

22. CPG submitted as to the argument that the proceedings had been disposed of, that at the leave stage, NCDC had argued that the National Court decision was interlocutory and not final. That is contrary to its position taken on this point.

Consideration

23. The submissions of CPG concerning the proceeding being interlocutory and not final do not address the point that in his decision, the primary Judge had determined all issues before him and that all of the orders that had been sought against NCDC had been refused with costs. 

24. As we have found that the primary Judge erred in making the finding that he did concerning the "source of the money" as the issues before him did not extend to the determination of, or finding on, any issue as to the source of the money, for the same reasons, the primary Judge erred in referring "the source of the money" issue to mediation.

25. Consequently this ground of appeal should be upheld. Given this finding the appeal should be upheld.

Orders

26. The formal Orders of the Court are:

a)	the finding of the Honourable Justice Cannings contained in the reasons for judgment delivered on 18th July 2013 in National Court proceeding OS (JR) No. 335 of 2010, that money payable by the Internal Revenue Commission pursuant to s. 33 (2) (a) National Capital District Commission Act 2001 are to come from money in the Provincial Inland GST Trust Account in the name of the National Capital District Commission established under s. 3 Goods and Services Revenue Distribution Act 2003 and continued in existence by s. 35 (1) Inter-Governmental Relations Act (Functions and Funding) Act 2009, are quashed and set aside.

b)	that part of order number 5 of the Honourable Justice Cannings made on 18th July 2013 in National Court proceeding OS (JR) No. 335 of 2010, which referred to mediation the source of the money ordered to be paid by the Internal Revenue Commission to the first respondent and the contemporaneous mediation orders on 18 July 2013 numbered 1-22, are quashed and set aside.

c)	the first respondent shall pay the costs of the appellant and the second respondent of and incidental to this appeal, including the amended application for leave to appeal and the application for extension of time to file a Notice of Appeal.

d)	the time for entry of these orders is abridged to the time of settlement by the Registrar which shall take place forthwith.

_____________________________________________________________
Ashurst Lawyers: Lawyers for the Appellant 
Wagambie Lawyers: Lawyers for the First Respondent 
Internal Revenue Commission: Lawyers for the Second Respondent