James Geama, Koim Kopun, Meti Yongasep, Dickson Kiteng, Isaac Kwetok, Steven Toap, Anthony Tipiso, for themselves and on behalf of Part “A” Employees Beneficiaries of the OTML Shares in Success Scheme v OTML Shares In Success Limited and Ok Tedi Mining Limited (2010) N4269

• Jurisdiction: Papua New Guinea
• Judge: Hartshorn J.
• Judgment Date: 14 April 2011
• Court: National Court
• Docket Number: OS 376 OF 2010
• Citation: (2011) N4269
• Year: 2011
• Judgement Number: N4269

Full Title: OS 376 OF 2010; James Geama, Koim Kopun, Meti Yongasep, Dickson Kiteng, Isaac Kwetok, Steven Toap, Anthony Tipiso, for themselves and on behalf of Part “A” Employees Beneficiaries of the OTML Shares in Success Scheme v OTML Shares In Success Limited and Ok Tedi Mining Limited (2010) N4269

National Court: Hartshorn J.

Judgment Delivered: 14 April 2011

N4269

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS 376 OF 2010

BETWEEN:

JAMES GEAMA, KOIM KOPUN, METI YONGASEP,

DICKSON KITENG, ISAAC KWETOK, STEVEN

TOAP, ANTHONY TIPISO, for themselves and on

behalf of Part “A” Employees Beneficiaries of the

OTML Shares in Success Scheme

Plaintiffs

AND:

OTML SHARES IN SUCCESS LIMITED

First Defendant

OK TEDI MINING LIMITED

Second Defendant

Waigani: Hartshorn J.

2010: 15th December,

2011: 14th April

Deed of Settlement establishing scheme for the benefit of employees of OTML – whether scheme rules contrary to the purpose of the Deed – whether scheme rules contrary to law

Facts:

The OTML Shares in Success Scheme was established to provide benefits to employees of Ok Tedi Mining Ltd. Under the Scheme 50% of the benefit was to be distributed to management level employees and 50% to award employees.

The plaintiffs, who are award employees, have commenced this proceeding against the first defendant, the trustee under the Deed of Settlement that established the Scheme, and Ok Tedi Mining Ltd. They seek declaratory and other relief that amongst others, certain provisions of the Deed and the Scheme Rules are discriminatory and illegal, are unfair, unjust and an illegal acquisition of their right to property, and are harsh and oppressive and are not warranted by or are disproportionate to the requirements of the Deed. The defendants oppose the relief sought.

Held:

1. The plaintiffs’ submission to the effect that paragraph “A” of the recitals of the Deed takes precedence to other clauses in the Deed where there is a conflict, is based on an incorrect premise and is rejected.

2. The plaintiffs’ submissions that clause 4. 1 (b) Scheme Rules is manifestly unfair under the Fairness of Transactions Act,

Transactions with Natives Act 1958 and Employment Act are rejected.

3. The plaintiffs’ submissions that s. 4.1 (b) Scheme Rules is contrary to s. 41 Constitution as it is harsh or oppressive and is not warranted by or is disproportionate as between the employees is rejected.

4. The plaintiffs’ submission that s. 4.1 (b) Scheme Rules is contrary to s. 55 Constitution and is discriminatory is rejected.

5. The plaintiffs submission that s. 4.1 (b) Scheme Rules is contrary to s. 53 Constitution as it is unfair and unjust and an illegal acquisition of property is rejected.

Cases cited:

Papua New Guinea Cases

SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314

Tarere v. Australia and New Zealand Banking Group (PNG) Ltd [1988] PNGLR 201

Max Umbu v. Steamships Ltd (2004) N2738

Overseas Cases

Bailey v. Lloyd (1829) 5 Russ 330

Dawes v. Tredwell (1881) 18 Ch D 354

Ex Parte Dawes (1886) 17 QBD 275

Holliday v. Overton (1852) 14 Beau 467

Orr v. Mitchell [1893] AC 238

Leggott v. Barrett (1880) 15 Ch D 306

The Commissioner of Inland Revenue v. Raphael [1935] AC 96

Counsel:

Mr. P. Donigi, for the Plaintiffs

Mr. I. R. Molloy and Mr. R. Warokra, for the Defendants

4th April, 2011

1. HARTSHORN J: The OTML Shares in Success Scheme (SIS Scheme) was established to provide benefits to employees of Ok Tedi Mining Ltd (OTML). Under the SIS Scheme 50% of the benefit of the scheme was to be distributed to management level employees (Part B employees) and 50% was to be distributed to award employees (Part A employees).

2. The plaintiffs are Part A employees. They have commenced this proceeding against the first defendant, the trustee under the Deed of Settlement (Deed) that established the SIS Scheme, and OTML. They seek declaratory and other relief that amongst others, certain provisions of the Deed and the Scheme Rules are discriminatory and illegal, are unfair, unjust and an illegal acquisition of their right to property, and are harsh and oppressive and are not warranted by or are disproportionate to the requirements of the Deed. The defendants oppose the relief sought.

Clause 4.1 (b) Scheme Rules

3. The plaintiffs submit that clause 4.1 (b) Scheme Rules is not valid as it is contrary to the purpose of the Deed, is contrary to law as it is manifestly unfair under the Fairness of Transactions Act 1993, the Transactions with Natives Act 1958 and the Employment Act 1978 and is contrary to the Constitution.

a) the Deed

i) The plaintiffs submit that the intention of the settlor under the Deed, and OTML is contained in what is referred to in the Deed as paragraph “A” of the Recitals and that what follows in the Deed must comply with this intention or purpose. If there is conflict with this intention, it is submitted, what is in conflict has no force and effect.

ii) The plaintiffs then submit that any discriminatory intent of the settlor and OTML is to be based on the period of service of OTML employees and not by reference to the position held by an employee as provided for in the Scheme Rules. Counsel for the plaintiffs did not rely upon or cite any authority in support of the submission that a provision in the Deed that conflicts with the intention in the Recitals has no force and effect.

iii) The defendants submit that the recitals in a deed are subordinate to the operative terms and that the authorities to this effect are perfectly clear and of long standing. In Halsbury’s Laws of England, Fourth edition, Vol 12, p 1509 it is said:

“In the construction of an instrument the recitals are subordinate to the operative part, and consequently, where the operative part is clear, it is treated as expressing the intention of the parties, and prevails over any suggestion of a contrary intention afforded by the recitals.”

A number of authorities are cited supporting this proposition: Bailey v. Lloyd (1829) 5 Russ 330; Holliday v. Overton (1852) 14 Beau 467; Orr v. Mitchell [1893] AC 238; Leggott v. Barrett (1880) 15 Ch D 306, Dawes v. Tredwell (1881) 18 Ch D 354; Ex Parte Dawes (1886) 17 QBD 275 and the House of Lords decision of The Commissioner of Inland Revenue v. Raphael [1935] AC 96 in which Lord Warrington said:

“The principle of law in this respect is perfectly settled and it may be thought unnecessary to restate it or to refer to authority on such a point. But in deference to the arguments addressed to the House I will cite the opinions of certain noble and learned Lords, expressed in the case of Mackenzie v. Duke of Devonshire [1896] AC 400. In that case an attempt was made, similar to that made by the appellants, to modify as a matter of construction clear and unambiguous words in the operative part by reference to the intention of the settlor as expressed in the narrative part of the deed. Lord Halsbury said [405]: ‘If the trust purposes are set forth in the paragraph of the deed which is appropriate to such purposes, it seems to me to be absolutely unarguable that the true meaning of those words, and the purposes of the trust so set forth, can be in any way controlled, qualified, or modified by the initial statement of what the motive of the author of the deed was. It would to my mind be disastrous to introduce such a system of construing a deed. One has known the language of a will somewhat perverted to perform the function which it was assumed the testator intended to be performed, but I never in my life heard of the language of a deed which contained a perfectly unambiguous provision being twisted from the natural ordinary meaning of the words by a preliminary statement of what the maker of the deed intended should be the effect and purpose of the whole deed when made.’ Lord Watson in the same case said [407]:

‘The narrative words come to no more than this; ‘My intention is to do so and so, and you may add this, ‘and I have accomplished that purpose by the provisions which follow.’ In such a case the safer and only legitimate course is to look to the provisions which follow, and to read them according to their natural and just construction.’ Lord Davey said [408]: ‘I take it to be a settled principle of law that the operative words of a deed which are expressed in clear and unambiguous language are not to be controlled, cut down, or qualified by a recital or narrative of intention.’ ”

iv) Given the above, I am satisfied that the submission of the plaintiffs on this point is based on an incorrect premise. Consequently, it is not necessary to consider the further submissions on this point. This contention of the plaintiffs is rejected.

b) Whether manifestly unfair

Fairness of Transactions Act

i) The plaintiffs submit that clause 4. 1 (b) Scheme Rules is manifestly unfair under the Fairness of Transactions Act. They submit that this Act was intended to create the basic standards of fairness in every transaction in Papua New Guinea, that the Deed is a “transaction” under the Act...