By APP

Papua New Guinea's Supreme Court has ruled the reappointment of the governor-general was unconstitutional and invalid.

Controversy surrounded the June installation of Sir Paulias Matane, who critics said was appointed by the government despite numerous breaches of parliamentary process.

On Friday, the full bench of the Supreme Court unanimously ruled that the appointment was unconstitutional because Sir Paulias was not selected after a secret ballot in parliament.

The court found Speaker Jeffrey Nape acted unlawfully by presiding over parliament at a time he was acting governor-general.

"Sir Paulias shall cease to hold office as GG at 12 midday on Dec 2010," the court declared.

"As soon as practical call a meeting of parliament to nominate the next governor-general, within 40 days of this order."

Outspoken opposition member Sam Basil told AAP the Sir Michael Somare-led government regularly used a compliant speaker to stifle debate and act undemocratically.

"This ruling is a good Christmas present for six million PNG people," he said.

"It proves what we've been saying all along about this government.

"The Somare government is on its last legs, a new government has to come in and fix the neglect, the corruption and improper way of running parliament.

Mr Nape was instrumental in allowing parliament to adjourn for long periods as government MPs defected to the opposition en masse in July. The adjournments thwarted a vote of no-confidence motion.

The latest ruling comes in a week of political chaos in which cabinet was suddenly reshuffled, Sam Abal was appointed deputy prime minister and Sir Michael faced allegations of misconduct in court.

The prime minister told a media conference on Thursday his lawyers were challenging the Ombudsman Commission's report into alleged improprieties regarding his listing of financial statements.

Some of the allegations date back 20 years.

"Should a tribunal be set up I will step aside in the interim as prime minister," Sir Michael said.

"(But) I still have a referral in the Supreme Court that has not been dealt with."