Hanjung Power Limited v Dr Allan Marat, Attorney-General, and Betty Palaso, Commissioner General of Internal Revenue, and The Independent State of Papua New Guinea (2009) N3751

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 18 September 2009
• Court: National Court
• Citation: (2009) N3751
• Docket Number: OS (JR) NO 123 OF 2009
• Year: 2009
• Judgement Number: N3751

Full Title: OS (JR) NO 123 OF 2009; Hanjung Power Limited v Dr Allan Marat, Attorney-General, and Betty Palaso, Commissioner General of Internal Revenue, and The Independent State of Papua New Guinea (2009) N3751

National Court: Cannings J

Judgment Delivered: 18 September 2009

N3751

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO 123 OF 2009

HANJUNG POWER LIMITED

Plaintiff

V

DR ALLAN MARAT

ATTORNEY-GENERAL

First Defendant

BETTY PALASO

COMMISSIONER GENERAL OF INTERNAL REVENUE

Second Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

Third Defendant

Waigani: Cannings J

2009: 18 June, 18 September

JUDGEMENT

JUDICIAL REVIEW – subordinate legislative enactments – Regulation made under Act of the Parliament – whether principles of natural justice apply to making of Regulations – whether person affected by Regulation has a right to be heard prior to its making – whether the National Executive Council has a duty to give reasons for making a Regulation – whether a Regulation can be struck down on the ground of unreasonableness – whether the making of a Regulation can be a prohibited act contrary to Constitution, Section 41.

The Governor-General, acting with and in accordance with the advice of the National Executive Council, made a Regulation under the Customs Act prohibiting the import of a product used by the plaintiff that was essential to the viability of its business. The plaintiff was not consulted before the Regulation was made. The plaintiff sought judicial review of the decision to make the Regulation on the grounds that it was denied natural justice, that no reasons were given for making the Regulation and that the decision to make the Regulation was unreasonable and a proscribed act contrary to Section 41 of the Constitution.

Held:

(1) If making a Regulation will obviously have an immediate and substantial effect on a particular person’s commercial interests the authority making the Regulation has a duty to accord natural justice to that person prior to making it.

(2) The affected person must be consulted and given a right to be heard and, if the Regulation is made, must be given reasons for having made it.

(3) The authority making a Regulation must not act irrationally or unreasonably and the effect of the making of the Regulation must not be harsh or oppressive or otherwise contrary to the standards prescribed by Section 41 (proscribed acts) of the Constitution.

(4) Here, the Regulation under review was obviously likely to have an immediate and substantial effect on the plaintiff’s commercial interests so the National Executive Council had a duty to accord natural justice to the plaintiff. That duty was breached by the failure to notify, consult or give a right to be heard to the plaintiff as to the proposed Regulation.

(5) The principles of natural justice were also breached by the failure to provide the plaintiff with reasons for making the Regulation.

(6) The decision to make the Regulation, which imposed an absolute prohibition on the import of a product used by the plaintiff that was essential to the viability of its business, without any provision for a licence to import, without consultation with the plaintiff and in the absence of reasons for making the Regulation, was irrational and unreasonable.

(7) Further the Regulation was harsh and oppressive in its operation and though the decision to make the Regulation was made under a valid law it was in the circumstances a proscribed act contrary to Section 41 of the Constitution.

Cases cited

Papua New Guinea Cases

Aegaiya v Baki and The State (2009) N3693

Dale Christopher Smith v Minister for Lands (2009) SC973

Gegeyo v Minister for Lands [1987] PNGLR 336

Isaac Lupari v Sir Michael Somare (2008) N3476

Matu Mining Pty Ltd v Embel (1995) SC483

Mision Asiki v Manasupe Zurenuoc (2005) SC797

Nanan v Maru and Commissioner of Police (1997) N1507

NTN Pty Ltd v The State [1986] PNGLR 167

Ombudsman Commission v Peter Yama (2004) SC747

Pansat Communication Pty Ltd v Momis (1995) N1321

Paul Saboko v Commissioner of Police (2006) N2975

Petrus and Gawi v Telikom PNG Ltd (2008) N3373

Pinggah v Elias (2005) N2850

Sausau v Kumgal and PNG Harbours Board (2006) N3253

Telepage Pty Ltd v PTC (1987) N605

Wilson Kamit v Aus-PNG Research & Resources Impex Ltd (2007) N3112

Zachary Gelu v Sir Michael Somare MP (2008) N3526

Overseas Cases

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223

Clements v Bull (1953) 88 CLR 572

Development Co Ltd v Village of Wyoming (1980) 116 DLR (3rd) 1

Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446

Lyster v Camberwell City Council (1989) 69 LGRA 250

McWilliam v Civil Aviation Safety Authority (2004) 142 FCR 74

New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307

White v Ryde Municipal Council [1977] 2 NSWLR 909

Williams v Melbourne Corporation (1933) 49 CLR 142

Counsel

M M Varitimos, for the plaintiff

18 September, 2009

1. CANNINGS J: The plaintiff, Hanjung Power Ltd, owns and operates a power plant at Kanudi in the National Capital District. It is applying for judicial review of a Regulation made under the Customs Act that prohibits the importation into the country of the heavy fuel oil it needs to run its plant.

2. The Regulation in question is the Customs (Prohibited Imports – Certain Petroleum Products) Regulation 2008. It was made by the Governor-General under the Customs Act acting with and in accordance with the advice of the National Executive Council. Section 3 of the Regulation states:

The importation of a Petroleum Product which has a sulphur content in excess of the relevant Maximum Prescribed Standard for sulphur is prohibited.

3. The type of heavy fuel oil that Hanjung uses for the two very large, slow-speed diesel engines that generate power at its plant has a sulphur content in excess of the maximum prescribed standard. Section 4 of the Regulation makes it an offence to import it. Commencement of the Regulation has been stayed by order of the National Court, pending determination of this judicial review.

4. Hanjung seeks a declaration that the Regulation is void and of no effect on four grounds:

1 Breach of the principles of natural justice.

2 No reasons were provided for making the Regulation.

3 The making of the Regulation is irrational and unreasonable.

4 The Regulation offends against Section 41 of the Constitution.

5. The defendants were denied a right of appearance at the hearing of the judicial review due to their persistent failure to comply with orders and directions of the Court as to clarification of issues, provision of documents and other pre-trial matters. The Court has not been told why the Regulation was made, in particular whether environmental issues led to its making.

1 NATURAL JUSTICE

6. Hanjung says that its commercial interests and the livelihood of its employees were obviously going to be directly and substantially affected by the making of the Regulation, so the NEC was obliged to observe the principles of natural justice before advising the Governor-General to make the Regulation. The NEC should have notified Hanjung of the proposal to make the Regulation, consulted Hanjung and given it a right to be heard.

7. I accept and find as a fact that the Hanjung plant at Kanudi supplies 30% of Port Moresby’s electricity. The plant has been operating continuously since January 1999. It was built at a cost of US$44 million. The two very large engines at the plant were designed and built to use heavy fuel oil, which has been imported without restriction since commencement of power generation at the plant. The engines cannot run on fuel with a lower sulphur content. The sulphur has a lubricant effect on the engines. Heavy fuel oil is not manufactured locally. It must be imported. Hanjung has a contractual obligation to provide electricity under a 15-year power purchase agreement which commenced in January 1999. It has an ongoing fuel supply agreement with InterOil Products Ltd under which heavy fuel oil is pumped to the plant.

8. The effect of the Regulation, if it is allowed to operate, will be that InterOil will not import heavy fuel oil. Hanjung’s power plant will be shut down, 30% of Port Moresby’s power supply will be lost and many people will lose their jobs. That will be the immediate impact of the Regulation. The multiplier effect on the country’s economy and the residents of Port Moresby will also be considerable.

9. In these circumstances did the NEC have a duty to observe the principles of natural justice before deciding to advise the Governor-General to make the Regulation?

10. Natural justice is often thought of as a principle that applies when a decision-maker makes an administrative decision affecting the rights or reputation of an individual (Gegeyo v Minister for Lands [1987] PNGLR 336). It has its roots in judicial review of administrative action, not so much legislative action. In Natural Justice: Principles and Practical Application, Butterworths © 1984, G A Flick made the point that:

It is generally accepted that the rules of natural justice have no application, and no prior opportunity of being heard need be given, where there is involved the exercise of legislative power.

11. However, the learned author went on to observe, having referred to the decisions of the New South...