Bougainville Copper wanted the courts to stop the tax office collecting K28 million while it argued about liability. The Supreme Court's refusal became the standard statement of when an interim injunction will be granted.
Chief Collector of Taxes v Bougainville Copper Ltd; Bougainville Copper Ltd v Chief Collector of Taxes [2007] PGSC 1; SC853
Supreme Court, Waigani — Kapi CJ, Sevua and Kandakasi JJ, 2 February 2007. SCA 50 and 56 of 2005.
What happened
After an audit, the Chief Collector assessed Bougainville Copper (BCL) for K28,075,581 in tax for 1999 to 2001. BCL objected but did not pay. The Chief Collector issued garnishee notices under section 272 of the Income Tax Act. BCL sued, seeking declarations that it was not liable, that it was entitled to arbitration under its agreement with the State, and an injunction against enforcement.
Gabi J granted interim restraining orders on 6 January 2005. On 28 April 2005 Salika J lifted them and refused to stay BCL’s tax appeal pending arbitration, though he held that arbitration formed part of the tax regime. Both sides appealed.
What was argued
BCL said the trial judge had wrongly lifted the injunction, that requiring payment before the dispute was resolved was harsh and oppressive under section 41 of the Constitution, and that the garnishee notices were an abuse of power. The Chief Collector said BCL had shown no serious question, had given no undertaking as to damages, and was raising points on appeal it had never put to the trial judge.
What the Court decided
An applicant must demonstrate a serious question to be tried or an arguable case on the merits, give an undertaking as to damages, and show that the balance of convenience favours relief and that damages would not be an adequate remedy. BCL had not met the requirements for an undertaking or a serious question, which was detrimental to its claim. The trial judge was correct to decline the stay and injunction.
There is no equity in tax legislation, which is necessary to support public programs. The policy of the Income Tax Act is pay the assessed tax now and litigate later, so an appeal against an assessment is no basis to stay recovery. Whether the regime is harsh or oppressive under section 41 falls to be considered within the tax regime. Only abuse of the Collector’s powers or extreme personal hardship could justify a stay, and a taxpayer alleging that must adduce evidence. BCL had not.
Questions of fact need leave under section 14 of the Supreme Court Act. An appellant is not at liberty to raise new points on appeal without the agreement of the parties: the right of appeal exists against the trial judge’s decision on issues raised before him. And an appeal against a discretion requires an identifiable and serious error before the Court will interfere.
Did it make new law?
The Court affirmed Salika J’s decision to lift the injunction and refuse a stay. The injunction principles themselves derive from American Cyanamid v Ethicon [1975] AC 396, long applied in the National Court; Chief Collector is the Supreme Court decision that restated them for Papua New Guinea in a form later courts quote, and it added the specific rule for tax recovery. Later benches have treated its criteria as identical to those for interim relief pending appeal.
Why it matters
The undertaking is not optional. An applicant who cannot or will not give an undertaking as to damages starts from a losing position.
Tax assessments are collected first. Objection and appeal do not suspend payment. A taxpayer seeking to stop collection must prove abuse or extreme hardship, not merely a good argument.
Run the whole case at trial. Points not put to the trial judge will not be entertained on appeal.
What it does not decide
The case does not settle the relationship between arbitration clauses in State agreements and the tax appeal process; the Court dealt with the Chief Collector’s appeal on that issue separately. Nor does it address interim injunctions in judicial review, where the timing rule in Makeng v Timbers (2008) N3317 applies, or the duty of disclosure on ex parte applications from Golobadana No 35 Ltd v Bank of South Pacific (2002) N2309.
Recent cases applying it
- Ka Properties (PNG) Ltd v The State [2026] PGSC 36; SC2882 — Makail J: the criteria for interim relief pending appeal are the same as the common law principles for interim injunctions recognised in Chief Collector.
- Gonjuan v Bank of South Pacific Ltd [2023] PGSC 55; SC2407 — the Court adopted the Chief Collector principles: serious issues to be tried, balance of convenience, adequacy of damages, the interests of justice, and an undertaking as to damages.
- Geru Holdings Ltd v Kruse [2020] PGSC 140; SC2050 — a primary judge who directed himself by Chief Collector, applying American Cyanamid, approached the question in a conventional way; appeal dismissed.
- Bluegrass Ltd v Kagl [2019] PGSC 20; SC1786 — cited on interim relief.
Sources
- Chief Collector of Taxes v Bougainville Copper Ltd [2007] PGSC 1; SC853 (Kapi CJ, Sevua and Kandakasi JJ, 2 February 2007)
- Constitution — s 41; Supreme Court Act (Chapter 37) — s 14; Income Tax Act 1959 — s 272
- Makeng v Timbers (PNG) Ltd [2008] PGNC 78; N3317; Golobadana No 35 Ltd v Bank of South Pacific Ltd [2002] PGNC 36; N2309
- Ka Properties (PNG) Ltd v The State [2026] PGSC 36; SC2882; Gonjuan v Bank of South Pacific Ltd [2023] PGSC 55; SC2407; Geru Holdings Ltd v Kruse [2020] PGSC 140; SC2050; Bluegrass Ltd v Kagl [2019] PGSC 20; SC1786
The Income Tax Act 1959 as consolidated is not reproduced in full on PacLII; section 272 is cited as it appears in the judgment.
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