Case 1.3 – 5 Star Casino

Case 1.3 – 5 Star Casino

In September 2011 the media broke the story on a dispute between landowner companies Petroleum Resources Gobe Ltd (PRG) and Petroleum Resources Moran Ltd, the PNG Government and Korean company CMSS (PNG) Ltd. CMSS signed a contract with the government and the two landowner companies to finance, build and complete the Port Moresby Casino Hotel at Four Mile.

But three years later the project stopped due to the lack of funding, triggering condemnation from the landowner companies and the then commerce and industry minister Charles Abel (Robby, 2011). The developer was to contribute K164 million for a 90 percent stake in the project. The State had provided the land and a 10-year tax holiday as a partner in the project.

The Mineral Resources Development Company (MRDC), as the custodian of landowner funds held in trust on behalf of PRG and PRM, engaged an architectural firm to check the integrity of the under-construction building to ascertain how much more should be done to get it completed. There has been no progress at the project site since the government intervened in 2011. The failure of the project now translates to a loss of K22 million belonging to landowners in the Southern Highlands Province.

The loss of a return on investment raises questions as to whether the MRDC subjected the project (including the developer) to an exhaustive due diligence process before committing the landowners. Now that the project has come to a halt will the Department of Trade and Industry and the MRDC take legal action to ensure the landowners are compensated for breach of contract and loss of income?

Update as of 2018

The case of the 5 Star casino hotel has been the subject to much public scrutiny by the mediaand the general public about its viability in contributing towards the PNG economy. However, the media attention has long since waned over the years. It has been a decade since the inception of this business venture by the CMSS, MRDC and the Government of PNG.

Since the inception of the commitment to build the casino hotel, there have been changes in the powers that be – within the CMSS as well as the government that has drastically affected the progress of the casino hotel. However, the major concern here is not that of the morality, nor the other concerns or scrutinies surrounding the construction of the casino-hotel, but rather the injustice that surrounded the construction of the casino-hotel, a plight in which implicated the two landowner incorporated land groups – Petroleum Resources Gobe Ltd and Petroleum Resources Moran Ltd.  These two ILG’s investment of K22 million translated into a loss when the completion of the project was not realised upon lack of funding by CMSS.

Since the inclusion of this concern in the 20 cases report, there has been little to no progress regarding the loss of funds incurred by the landowner groups implicated in this dilemma. Media reports only reveal concerns about the demolition of the construction as it would be an eyesore to APEC delegates (Kolma, Demolish Building before APEC Says Development Expert, Post Courier, 2017)

In 2014, the case of CMSS (PNG) Ltd v State [2014] PGNC 111 was held in the National Court. The case was between CMSS, the NCDC and the Independent State of Papua New Guinea. The case concerns the non-issuance of license by the State prior to the construction of the casino hotel. In 2013, the NCDC building board was of the view that the construction was not in compliance with the standards of the NCDC Building Board and the building was constructed defectively. The Building Board then publicised a notice of its intention to demolish the partly constructed building.

In a letter dated 29th November, 2013, the CMSS purported to give a section 5 notice pursuant to the Claims Act section 5. The section 5 notice was intentioned by the CMSS because it has alleged that the State had breached its agreement in a pertinent clause within the agreement. The notice however shows the intention of CMSS, and that is to attain funds from the government. The company may be in financial turmoil and lacks the necessary funding needed to complete the construction of the project.  The case was not in the favour of CMSS as the section 5 notice breached the time bar set.

As far as the completion of the casino hotel is concerned, there hasn’t been any progress reflected in the media concerning this issue. Although there has been a purported investigation by the police under the guise of fraud into the matter (Tarawa, Probe on K62m Casino Case, The National, 2016), an update into the investigation is yet to be published or reflected in media reports.

The involvement of MRDC into the matter has been clarified by a press release issued by MRDC, which had reportedly contained the mitigating strategies to rescue the project. These different strategies had however necessitated the structural audit of the building. The firm engaged – Kramer Ausenco, to assess the building’s integrity; the assessment proved to be in the negatory as the structural integrity of the building was compromised (as seen in the CMSS case).

The question still remains: how will the landowner companies involved in the deal be redressed for the K22 million loss incurred as a result of the bad business deal that had transpired between the parties involved? And being that the board of CMSS is still active (given their representation in the CMSS case in the national court), how can these landowners companies recoup their loss from MRDC or CMSS? Shouldn’t CMSS be subject to civil proceedings regarding the non-performance on their part of the agreement, and shouldn’t MRDC be an additional party to these proceedings being the trustee for the two landowner companies?


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