Fiji Airline Pilots Association v Air Pacific Ltd [2007] FJAT 72; Award 74 of 2007 (2 November 2007)

This is a dispute between the Fiji Airline Pilots Association (the Association) and Air Pacific Limited (the Employer) concerning the redundancy package payable to Mr Rajendra Singh (the Grievor).

A trade dispute was reported by the Association. The report was accepted by the Chief Executive Officer who referred the Dispute to a Disputes Committee.

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Subsequently the Minister authorized the Chief Executive Officer to refer the Dispute to an Arbitration Tribunal for settlement pursuant to section 5A (5) (a) of the Trade Disputes Act Cap 97.

The Dispute was referred to the Permanent Arbitrator on 5 April 2006 with the following terms of reference:

"- - - for settlement over the employer’s failure to negotiate and agree on the redundancy package payable to Mr Rajendra Singh."

The Dispute was listed for a preliminary hearing on 28 April 2006. On that day the parties were directed to file preliminary submissions within 21 days and the Dispute was listed for mention on 26 May 2006.

On 26 May 2006 the parties were directed to file a signed statement of agreed facts. However on 23 June 2006 the parties requested a hearing date and the Dispute was listed for hearing on 2 October 2006.

By letter dated 29 August 2006 the Association informed the Tribunal that its advocate would be away overseas at that time and requested that the hearing date be vacated. As a result the Dispute was listed for mention on 1 September 2006. The Association confirmed its application on that day. By consent the Dispute was listed for mention on 24 November 2006.

The Dispute was then listed for hearing on 6 March 2007 in the Western Division. However due to unforeseen circumstances it was necessary for the Tribunal to vacate that date. The Dispute was subsequently listed for hearing on 5 July 2007.

When the Dispute was called for hearing on 5 July 2007, the Association informed the Tribunal that the matter could not proceed as the Grievor required a copy of the Sikh Holy Book for the oath. The Association also informed the Tribunal that arrangements would have to be made for a copy to be brought from the Sikh Temple. As a result the hearing date was vacated and the Dispute was refixed for hearing on 13 August 2007. On that date the parties agreed to appear before the Tribunal on 17 August to present oral submissions on the signed Statement of Agreed Facts which had been filed on 5 July 2007.

The Dispute was called for hearing on 17 August 2007 in Suva. The parties commenced to make closing oral submissions. However it became apparent that there were relevant factual issues still in dispute. As a result the hearing was adjourned part heard for mention on 24 August 2007. On that day the Dispute was listed for further hearing on 10 October 2007.

The hearing of the Dispute resumed on 10 October 2007. Each party called one witness to give evidence. The hearing was then adjourned part heard to 12 October for closing submissions. The hearing was completed on 12 October 2007.

The essential facts in this Dispute were set out in the signed Statement of Agreed Facts.

The Grievor joined the Employer in 1967 as an aircraft engineer and commenced employment as a pilot in November 1974. By 2003 the Grievor was a First Officer on the Boeing 747 -200 aircraft.

The Boeing 747 – 200 was to be phased out of the Employer’s fleet at the end of June 2003 and was to be replaced by the Boeing 747-400. One of the differences between the two 747 aircraft was that the 747-200 was equipped with an analogue system (dials and instruments) whilst the 747-400 plane was equipped with a digital system (screens).

As the Grievor was only rated on the 747-200 aircraft, he was required to undertake a conversion course to qualify him to fly the 747-400 aircraft as a First Officer

In March/April 2003 the Grievor traveled to Seattle, USA to undertake the conversion training for the Boeing 747-400 aircraft. During the course of the training, the Grievor’s performance was assessed as unsatisfactory and as a result the Boeing trainers terminated the training and the Grievor returned to Fiji.

In his evidence the Grievor stated that the problem for him on the training course was that he had difficulty, due to light reflections, reading the screens which now provided all the flight information in digital form.

In a memorandum dated 10 April 2003 from Captain M Tuisue, the Employer’s General Manager Flight Operations and Chief Pilot, addressed to the Grievor, the reasons for the termination of the Grievr’s training were clearly stated:

"The Instructors indicated that even after being given two (2) extra Fixed Base Simulator (FBS) sessions and two (2) Full

Flight Simulator (FFS) you have not reached the required standard and they will not recommend putting you forward for the Type Rating Check or any other check. It was also their assessment that additional training will not improve or bring about a positive change to the unacceptable standard that you had achieved.

Following the above discussions with the Flight Safety Boeing Instructors (including your instructor) after which the decision was made to terminate your B 747-400 F/O Promotional Training, I called you on the same afternoon to convey that decision to you (with explanation) and that you need to return home and take the necessary time off - - - to allow the company to meet, discuss and make a decision on your case.

By letter dated 17 June 2003, the Employer set out in some detail, its attitude to the Grievor’s position and his options. The letter stated:

I refer to discussions with you in the recent past. For the record, the salient points in the discussions were:

a) Your B747-400 First Officer Transition Promotional Training was terminated on 8 April 2003. A copy of GMFO’s memo to you setting out the reasons for termination is enclosed.

i) you had recently received advice of critical financial issues (in connection we believe with a failed property investment) and

The second reason we largely discounted on account of the fact that the accident occurred some weeks after the commencement of training, by which time it was already clear that you were not performing up to standard.

As to the first reason, this has been present for years and is not a new item for you to live with. We do not understand these financial issues to have gone away-indeed, it appears they are becoming more critical.

Clearly if these issues are going to cause you to be stressed at training surely you will also be stressed while on active duty, so we take no comfort from this excuse – quite the opposite, in fact.

Your situation is unusual in that with the imminent departure of the B747-200, not being rated on any other aircraft in the fleet, you simply have no other opportunity to serve Air Pacific. You do not have rating on the 767-300 and it appears from the advice received from Boeing that the ‘glass cockpit’ issues with which you appear to have difficulty would also apply if you were put through 767-300 training.

Air Pacific’s legal advice is that your employment with Air Pacific can now be terminated under clause 6.6 of the Master Agreement; an alternative might be to say that upon the departure of the 747-200 you will become surplus to the needs of the company and therefore redundant. We do not consider, based on the assessment of your examiner in Seattle that it would be cost-effective to put you through re-training.

The Company has considered its position. It does not feel compelled to make a bad business decision to re-train you when the collective expert opinion is that you would not succeed. However on the basis that this is not a precedent it is prepared to go this far.

We assume that you consider yourself capable of completing the training. The Company, while unconvinced, is prepared to accept this assurance – and incur the costs of re-training – provided that you accept responsibility for your own future.

If you succeed at re-training obviously you will have a future with the Company to retirement age and, subject to the discretion of the company, beyond retirement age. However if you do not succeed, your position as a B747-200 First officer will be redundant and you will need to be made redundant as per clause 8 of the Master Agreement.

b) to be re-trained, against the Company’s better judgement, on the basis that if you fail, you will be made redundant and will bear the total estimated cost of re-training (not less than F$66 811), which will be deducted from your redundancy package.

In the circumstances the Company considers this an equitable outcome which reflects the intention of the Master Agreement, by which the Company gives such support as is commercially justifiable to a pilot but also by which the pilot accepts responsibility for his fate.

We look forward to hearing from you within 7 days from the date of this letter.

It should be noted that for the Grievor’s reference attached to this letter was a work sheet setting out the estimated training cost in respect of the B747-400 conversion for both two pilots and one pilot.

The Grievor decided that he wanted to attend the conversion training a second time. He said in his evidence that he made this decision because he still had ten years of flying left and he wanted to continue flying.

As a result the Employer agreed on the condition that if he failed the Grievor would become redundant and would have the total estimated cost of retraining deducted from his redundancy package.

This arrangement was formalised in a letter dated 3 July 2003 (the latter letter) from the Employer’s Executive General Manager Operations/Services, Mr T Wong. The letter was countersigned by the Grievor on 24 July 2003.

The Grievor confirmed his acceptance of the retraining option and its conditions as outlined in the earlier letter dated 17 June 2003. The latter letter itself stated :

"I refer to your letter to me dated 01 July in response to my earlier letter dated 17 June 2003 offering you two options. These options were:

b) To be retrained, against the Company’s better judgment on the basis that if you fail, you will be made redundant and will bear the total estimate cost of retraining (not less than F$66 811) which will be deducted from your redundancy package.

Your letter of 01 July 2003 made reference to my 17th June letter and accepted the option of retraining. Subject to your confirmation that you have indeed accepted this option by appending your signature to the space provided in this letter we will initiate your retraining program on the B747-400.

Please be aware that a separate training bond for this retraining will also need to be signed by you prior to retraining and you will of course be bound by this bond."

The acknowledgement which appeared at the bottom of the latter letter and which was signed by the Grievor stated:

"I Rajendra Singh confirm that I full understand and accept the retraining option and its conditions outlined in EGMOS letter dated 17 June 2003. I confirm that the Company has advised me of my rights to union representation and advice before entering into this Agreement and I have exercised that right."

It should be noted that the acknowledgment was also countersigned by the Union President.

By an agreement dated 11 August 2003 the Grievor entered into what is commonly called a bond whereby the Grievor agreed to pay to the Employer as liquidated damages a sum of money under certain specified circumstances.

Under clause 1 the bond became activated in the event that the Grievor either left the Employer during the period of five years or was dismissed/terminated by the Employer for misconduct.

Depending upon if and when either of those events occurred, the Grievor was obliged to pay back to the Employer a specified percentage of the total cost of the conversion training course which included 50% of the airfare, cost of ground school instruction, cost of simulator instruction and cost of base endorsement.

"2. The provisions of Clause 1 above shall not apply in the case where the Pilot has his training terminated by the Company for reasons other than misconduct on where he:

a. loses his licence to operate as a Pilot due to medical reason which can in no way be attributable to any omission or willful act on his part.

b. is unable to continue in employment with the Company because his work permit has not been renewed due to no omission or willful act on his part.

c. has to leave the service of the Company on valid compassionate grounds stated to and accepted by the Company in writing.

3. Upon return from training, actual costs will be varied according to the actual invoice costs and such costs of training will be entered into the Bond".

At the hearing the parties indicated to the Tribunal that the word "on" in clause 2 was probably a misprint and should be read as "or". The Tribunal indicated that it would proceed on that basis.

This bond agreement was entered into by the Grievor in accordance with clause 12.1 of the Collective Agreement and the conditions of the bond agreement were consistent with the provisions of clause 12.1

The Grievor commenced his re-training for conversion to the 747-400 in Fiji on 11 August 2003. He then departed on 23 August 2003 for the Seattle component of the programme. He was paired with First Officer Jope Dakai who was also undertaking First Officer conversion training for the 747-400. The Grievor had undergone about ten days of training when on 11 September 2003 he received a telephone call from Captain Tuisue in Fiji. The Grievor was advised by Captain Tuisue that Boeing had informed the Employer that the Grievor had failed to meet the required standard and that the training was to be terminated. He was required to return to Fiji at once. A request by the Grievor to remain in the United States for a short period to visit his daughter was rejected. The Grievor took a couple of days leave and then returned to Fiji.

In his evidence the Grievor stated that he was having the same problems with reading the digital screens as he experienced during his first conversion course. He also said that during the training in the simulator he and First Officer Dakai would rotate roles as Captain and First Officer to enable the training to be as realistic as possible. The Boeing trainer sat behind the two trainees.

The Grievor stated that although he purchased a pair of spectacles, this did not make any difference to the problem he encountered.

In his evidence Captain Hilton stated that as far as he could recall the reports received from Boeing indicated that the Grievor was unsafe and unpredictable.

By letter dated 17 October 2003 from Mr T Wong, the Grievor was informed that his employment was terminated due to redundancy. Omitting formal parts the letter stated:

"On 3 July 2003 you and the Company reached agreement on the process to be followed after your failure to achieve Boeing 747-400 First Officer training at Flight Safety Boeing in Seattle in April this year. A copy of the letter is enclosed. You chose option (b).

The General Manager Flight Operations has now advised me of your failure to complete retraining in Seattle. The consequence of this is that the Company now has no option but to make you redundant. By this letter the Company gives you notice accordingly, with immediate effect.

In accordance with clause 8.3 of the Air Pacific/FALPA Collective Agreement, your redundancy compensation (Adjusted in line with our 3 July agreement) is calculated as follows:

3 months’ base pay.........................................................	$21,090,25
Annual leave/Normal pay...............................................	$13,685.33
2 weeks pay for every completed year of service (35 years)...	113,562.88
	$148,338.46

Less income tax............................................................	$47,468.30
(Less FNPF deduction)..................................................	$11,867.04

	$89,003.12

Less retraining costs (reduced on Account of non-completion of training....................................................................	$59,909.00

Nett............................................................................	$29,094.12

You will be required to acknowledge receipt of this amount in full and final settlement of all claims you have against the Company.

Please return the rest of the Company’s property in your possession specially the Medical Insurance Identification Card. Therefore the balance due to you is $29,094.12 and a cheque for this amount is available for collection when the Company property in your possession is returned.

We thank you for your many years of loyal service to Air Pacific and wish you well in the future."

The Union submitted that the Grievor did not take issue with the calculation of $148,338.46 as the total amount of the redundancy package. However there were two issues in respect of the nett calculations. The first concerned the tax treatment of the package. This was a matter which concerned the Employer, the Grievor and the Tax Office. The Tribunal accepts that the Employer made the necessary application to FIRCA which was subsequently rejected.

The second issue concerned the deduction made in respect of re-training costs. This matter was raised by the Association in a letter dated 8 February 2004 to the Employer. It was claimed that the deduction of $59,909.00 as training costs was not a fair amount.

In a letter dated 12 February 2004 the Employer replied to this concern as follows:

As advised, I failed to find any logic in this item being presented as a grievance. Mr Singh and FALPA have voluntarily signed an Agreement with the Company on the 3rd of July 2003 that the retraining costs would be not less than $66,811. After Mr Singh’s failure at retraining, the Company considered all costs and savings associated with the premature termination of his training and voluntarily reduced the amount to $59,909.00. The latter sum includes an advance of USD 4,438.00 given to Mr Singh to cover the expected full period of his stay in Seattle. He did not submit an expense claim as required on premature return from his training and held on to unexpended money that belongs to the Company.

At the meeting you required the Company to furnish receipts for FALPA to verify the retraining cost of $59,909,00 as a measure of fairness. There is however no basis for this demand as we have a valid agreement that determines what minimum deduction can be made against our former employee Mr Singh. Air Pacific is entitled to deduct the agreed amount of $66,811 and in good faith it had passed on savings of $6,902 to Mr Singh. Surely this is more than fair."

The position in relation to the agreement concerning payment of training costs and the bond agreement is a relatively simple issue.

As the Grievor’s training had been terminated by the Employer after discussions with the Boeing trainers for reasons other than misconduct, then pursuant to clause 2 of the bond agreement the repayment provisions set out in clause 1 did not apply in this case. As a result the provisions in clause 3 also did not apply. As a result the Grievor’s obligation to the Employer arose from the agreement that he signed on 24 July 2003 and which appeared at the bottom of the Employer’s letter dated 3 July 2003.

When the Grievor attended the first conversion training course he had also signed a bond agreement dated 2 March 2003. That agreement was in virtually identical terms to the second bond agreement. As the Grievor’s training had been terminated by the Company, following discussions with Boeing, for reasons other than misconduct, there was at no stage any suggestion that the Grievor would have been liable for any percentage of the training costs had he decided to accept the "redundancy now" option.

The difference on this occasion is that the Grievor had agreed that the total estimated costs of retraining in the event that he did not pass the course were to be deducted from his redundancy package..

As a result the Tribunal accepts that the agreement set out in the Employer’s letter dated 3 July 2003, and signed on 24 July 2003 by the Grievor, did entitle the Employer to make deductions from the Grievor’s redundancy package.

However the Tribunal has also concluded that it would have been unfair, if not unconscionable, for the Employer to have made what might be termed a profit as result of the agreement. This is even more so when the deductions are to be made from the Grievor’s redundancy package which constituted an entitlement under the Collective Agreement which in term was an implied condition of his contract of service (section 34 (7) Trade Disputes Act Cap 97).

To some extent the Employer would appear to have accepted this as a matter of fairness by what it wrote in its letters dated 12 February 2004 (above) and 2 March 2004 (below) concerning the matter.

In relation to the items for which a deduction could have been made from the Grievor’s redundancy package, the Tribunal has concluded that the Employer was restricted to the items set out in the work sheet for training costs which was enclosed for the Grievor’s reference with the Employer’s letter dated 17 June 2003. Express reference was made to that letter in the Employer’s letter dated 3 July 2003 and the acceptance signed by the Grievor on 24 July 2003.

Although the total estimated cost was stated on the worksheet to be $66811, a figure which was also referred to in the letter dated 3 July 2003, the Employer initially sought to deduct only $59,909. The basis of this calculation was set out in an attachment to a letter dated 2 March 2004 to the Association. The relevant portion of that letter stated :

"Boeing charge a full transition course whether the pilot commences a course for 5 minutes or 99% of its planned duration. Because Mr Singh was not able to complete the course, Boeing had to supply a captain for F/O J Dakai to continue which incurred additional costs plus further costs for Qantas Base Check support for F/O Dakai.

These and other costs, outlined in the attachment were the actual out of pocket costs paid by Air Pacific for Rajen Singh’s attempted re-training."

The Attachment listed in Fijian Dollars Boeing charges $39770, Accommodation for 19 days $3778, Allowances advanced $8485, J class ticket – LAX- SEA vv $1045 and other associated costs $6831. These amounts came to a total of $59909.

At the hearing Captain Hilton indicated in his evidence that the Employer had recalculated the amount to be deducted which was reduced to $58,619.00. Captain Hilton produced a document (ex 17) which showed the items as Boeing charges $39770 Accommodation $3443, Allowances advanced $8486, J class Ticket $1013 and other associated costs $5907. The associated costs were listed as QF Base check/Instructor required for 1 crew support for Pilot Dakai $4608, Sydney Accommodation for Captain Caucau (x 2 nights) $369, Sydney per diem for Captain Caucau $541, Air ticket tax $145 and Administrator’s cost $244.

In its opening submissions the Association claimed that the amount which should have been deducted by way of training costs was $16391. However in its closing submissions the Association conceded that the amount which the Employer was entitled to deduct was a maximum of $33631 in the event that the Tribunal concluded that the Employer was entitled to make any deduction.

The Association’s figure was based on the items which were stated to be included in the total cost of training as set out in clause 1 of the bond agreement. The Association submitted that only the first two items listed were applicable in this case. They were 50% of the airfare which was calculated at $506.50 and the cost of ground school instruction at $33125.

However the Tribunal has already indicated that the bond agreement has no application in this dispute. The Grievor’s obligation arose as result of the agreement set out in the letter dated 3 July 2003 which he signed on 24 July 2003. It is necessary to consider the contents of the letters dated 17 June and 3 July 2003 and the attachment to the former letter in order to identify the items and calculate the quantum of the deduction to be made from the Grievor’s redundancy package.

The obligation which the Grievor signed up to was to bear the total estimated cost of re-training. The Tribunal has concluded that this means the total cost incurred by the Employer as a result of the Grievor choosing to take and subsequently failing the re-training option. The Tribunal considers that this meaning is consistent with the principles of interpretation discussed by the Fiji Court of Appeal in Hassan Din and Another –v- Westpac Banking Corporation (unreported civil appeal No 66 of 2003 delivered 26 November 2004). The Tribunal is satisfied that this is the meaning that would be conveyed to a reasonable person with the relevant background knowledge.

The total costs incurred by the Employer as a result of the Grievor choosing and then subsequently failing must include all the costs incurred by the Employer as a result of the Grievor’s failure to complete the training. If the Grievor had chosen to take the "redundancy now" option, then F/O Dakai’s conversion training would have only taken place when there was another pilot who was also to undertake conversion training. The Tribunal accepts that the training is undertaken by two trainees at any one time to simulate realistic flight conditions during training.

As a result of the Grievor’s failure to complete the course, the Employer incurred additional costs which were a direct consequence of the absence of the Grievor due to that failure.

The Tribunal is satisfied that the payment of $39770 to Boeing, accommodation of $3443, allowances of $8486 and the air ticket cost of $1013 were all costs actually incurred by the Employer and were items listed in the working sheet which had been provided to the Grievor with the Employer’s letter dated 17 June 2003.

The Tribunal accepts that just as in Seattle when Boeing was required to provide a pilot to train with First Officer Dakai after the Grievor’s withdrawal, so the Employer was required to provide a pilot for the mandatory simulator training in Sydney following the Seattle component of the programme. Although the working sheet refers to a base check in AKL, it is nevertheless clear that half the cost is the responsibility of each of the two trainees shown at $4301. Although this is less than the actual cost, the Tribunal is satisfied that it was incurred as an actual cost which was a consequence of the Grievor’s absence due to his failure to compete re-training in Seattle. The other items are also a direct consequence and are also itemized in the working sheet.

The Tribunal therefore accepts that the Sydney accommodation, per diem and air ticket tax together with administrator’s costs were all actual costs incurred as a consequence of the Grievor’s failure to complete the training at Seattle.

Although the parties have negotiated on the matter, they were not able to reach agreement on the question of the deductions to be made from the Grievor’s redundancy package.

The Tribunal has concluded that the Employer is entitled to deduct the sum of $58619.00 from the Grievor’s redundancy package.

Arbitration Tribunal of Fiji

Fiji Airline Pilots Association v Air Pacific Ltd [2007] FJAT 72; Award 74 of 2007 (2 November 2007)