Airports Fiji Limited Staff Association v Airports Fiji Ltd [2007] FJAT 82; Award 08 of 2007 (7 February 2007)

THE REPUBLIC OF THE FIJI ISLANDS

NO 8 OF 2007

AWARD OF
THE ARBITRATION TRIBUNAL

IN THE DISPUTE BETWEEN

AIRPORTS FIJI LIMITED STAFF ASSOCIATION

AND

AIRPORTS FIJI LIMITED

AFLSA: Mr A Singh
AFL: Mr K Qoro

DECISION

This is a dispute between Airports Fiji Limited Staff Association (the Association) and Airports Fiji Limited (the Employer) concerning the interpretation of two agreements.

A trade dispute was reported by the Association. The report was accepted by the Chief Executive Officer who referred the Dispute to conciliation. As the conciliation proceedings were declared deadlocked, the Minister authorized the Chief Executive Officer to refer the Dispute to an Arbitration Tribunal for settlement pursuant to section 6 (2) (b) of the Trade Disputes Act Cap 97.

The Dispute was referred to the Permanent Arbitrator on 31 May 2005 with the following terms of reference:

"......... for settlement over the interpretation of the Memorandum of Agreement entered into following the conciliation hearing on the trade dispute referenced 36/K/88/2004 dated at Suva on 1 September 2004 and another that did not involve the Trade Dispute Machinery, that was entered into on 21 December 2004".

The Dispute was listed for a preliminary hearing on 24 June 2005. As there was no appearance by or on behalf of the Association the Dispute was listed for mention on 29 July and again on 30 September 2005. On that day the parties were directed to file their preliminary submissions within 21 days and the Dispute was listed for further mention on 28 October and again on 25 November 2005.

The Employer filed its preliminary submissions on 3 November and the Association did so on 14 November 2005.

At the request of the parties the Dispute was relisted for mention on 27 January 2006. On that day the Dispute was listed for a two day hearing on 7 and 8 March 2006.

The hearing of the Dispute commenced on 7 March in Lautoka and was completed on 8 March 2006.

At the commencement of the hearing the Association indicated that it did not intend to call evidence but would rely on documentary material which was by consent admitted into evidence as exhibits 1 to 7. The Employer called two witnesses. Exhibit 8 was the Minutes of the Board Meeting held on 22 December 2004 and Exhibit 9 were Minutes of a Meeting held on 28 January 2005.

At the conclusion of the evidence the parties sought and were granted leave to file written final submissions. The Association filed its final submissions on 15 August 2006. The Employer filed answering submissions on 19 August 2006. However it was only by letter dated 22 January 2007 that the Association informed the Tribunal that it did not intend to file a reply submission.

The Tribunal is required to determine the meaning and effect of two agreements made by the parties. The first agreement is dated 1 September 2004 (the September Agreement) and the second is dated 21 December 2004 (the December Agreement).

The relevant clause of the September Agreement provided:

"1. That Airports Fiji Limited pay COLA increases backdated to 1 January 2000 by 31 December 2004.

The relevant clause of the December Agreement provided:

"1.That subject to the Airports Fiji Limited Board approval, all employees who are current members of AFLSA shall receive a payment of five percent (5%) salary increase for those positions which are below the median of the draft JEE Report, by way of COLA backdated to 1 January 2000 on 31 December 2004."

The two Agreements covered issues arising out of the Associations Log of Claims and purported to settle those issues.

It would appear that the Employer proceeded to make the payments to the affected members of the Association in compliance with the Agreements. However subsequently the Employer indicated that it intended to make deductions because of overpayments of COLA to the affected Association members. The Employer informed the Association that the Board had approved a 5% salary increase to be effective form 1 January 2005 and a 5% one-off bonus payment. Both payments were to be made to members of the association whose salaries were below the median.

In relation to clause 1 of the September Agreement, it is clear that the parties have agreed that (a) there are to be COLA increases, (b) they are to be backdated to 1 January 2000 and (c) they are to be paid by 31 December 2004.

The effect of this clause is that the salary which each of the Association’s members was receiving as at 1 January 2000 was to form the basis of calculations. The calculated entitlement of each member for the five years was to be paid by 31 December 2004. Each members salary would continue to be paid thereafter at the increased rate.

There is no indication in clause 1 of the September Agreement of the amount of the COLA increase. It is not clear to the Tribunal why the parties did not specify the amount of the COLA increase in this Agreement. The Tribunal has concluded that clause 1 of the September Agreement could not be given effect because an essential component had not been included. The clause was uncertain or vague and was therefore unenforceable.

However, clause 1 of the December Agreement different from clause 1 of the September Agreement in three material aspects. First, the amount of the COLA salary increase was specified to be 5%. Secondly, payment of the salary was subject to the approval of the AFL Board. Thirdly, the increase was for those positions which were below the median of the draft JEE Report (i.e. the affected members).

The effect of clause 1 of the December Agreement may be illustrated by a simple example. An affected member of the Association whose salary was paid at the rate of $200 per fortnight or a wage earner who was paid $100 per week as at 1 January 2000 would receive a $10 per fortnight increase or a $5 a week increase. On the basis of 26 fortnightly pays or 52 weekly pays, each would receive an additional amount of $260 for the year 2000. For the five years up to the end of 2004, the amount owing to each would be $1300. This amount was to be paid by 31 December 2004. Salaries and wages would continue to be paid at the increased rate from 1 January 2005 onwards.

Clause 1 of the December Agreement provided that the payment of the COLA salary increase was subject to board approval. This is known as a condition precedent which is a provision in an agreement that does not form part of the contractual obligation but suspends the contract until a specific event has happened.

In this case, the obligation on the part of the Employer to pay the 5% COLA salary increase to affected members of the Association was suspended until the AFL Board had given its approval.

It was established at the hearing that the AFL Board met on 22 December 2004. Item 20 of the Minutes of that meeting, so far as is relevant to the present Dispute, stated:

"i) - - -

ii) ratified the AFL/AFLSA memorandum of agreement dated 21 December 2004

iii) approved the payment 5% salary increase to 181 underpaid contracted employees relative to market based salary median.

iv) approved the expenditure of $198591 for the above."

The ratification of the December Agreement by the Board simply amounted to confirmation and adoption by the Board of the Agreement made on its behalf by the Chief Executive Officer. The decision to ratify the agreement did not of itself provide the approval required as a condition precedent in clause 1 for the payment of 5% COLA salary increased to the 181 affected members of the Association.

However in (iii) of item 20 the Board did approve a 5% salary increase to the affected members of the Association. What was missing in (iii) was the approval to backdate that 5% COLA salary increase to 1 January 2000 and to pay it by 31 December 2004.

The Board has not expressly approved that the 5% COLA salary increase be backdated in the manner described in clause 1 of the December Agreement.

The question is can such approval be implied by considering item 20 of the Minutes as a whole. The Tribunal has concluded that approval for backdating the 5% COLA salary increase to 1 January 2000 cannot be implied.

The Tribunal accepts the evidence given by Mr Nath that the amount referred to in (v) was approved by the Board to cover all the salary increases dealt with in item 20. It the Board approved that amount to cover all the salary increases, the Tribunal accepts that the Board was clearly not approving the backdating of the 5% COLA salary increases to 1 January 2000. Mr Nath gave evidence that in error AFL had paid out over $700,000 when it subsequently made the payments in the manner contemplated by clause 1 but which had not been approved by the Board.

The Tribunal has noted the contents of the Joint Press Release dated 23 December 2004 and the Staff Circular also dated 23 December 2004. However those documents did not accurately state the decision made by the Board at its meeting on 22 December 2004.

The Board’s approval for the backdating of the 5% COLA salary increase was required, in the absence of any time limit expressed in the clause, within a time that was reasonable in all of the circumstances. There was not and there never has been any approval for the backdating of the 5% COLA salary increases. At its meeting on 28 January 2005 the Board’s resolution indicated that the Board had taken up a position which was even more removed from clause 1 of the December and which was arguably inconsistent with its partial approval as contained in item 20 of the Minutes of the meeting held on 22 December 2004.

The approval of the AFL Board in respect of all elements of clause 1 constituted a condition precedent to the creation of the obligation to pay 5% COLA salary increase to affected members of the Association backdated to 1 January 2000. The approval to backdate the payments has not been forthcoming. The condition precedent was not satisfied and the contractual obligation did not and now cannot arise under clause 1 of the December Agreement.

The Tribunal accepts that the Employer did not give an undertaking to the Association that the Board would give its approval. In a situation where the condition precedent involved the obtaining of approval, the Tribunal is satisfied that it is implied that AFL has undertaken to use reasonable efforts to ensure (without absolutely having undertaken that those efforts would succeed) that the Board’s approval would be forthcoming.

As the Agreement was placed before the Board for its consideration the day after it was signed and in the absence of any evidence to the contrary, the Tribunal is satisfied that AFL has not breached this implied requirement.

In effect the Board at its meetings on 22 December 2004 and 28 January 2005 attempted unilaterally to vary clause 1 of the December Agreement by substituting a 5% salary increase backdated to 1 January 2000 with a one off 5% payment based on current salary. The Association had never agreed to this any more than the Board had ever approved the payment of a 5% COLA salary increase to affected members backdated to 1 January 2000.

The parties are now in the position where the obligations under clause 1 of the December agreement have lapsed. Clause 1 of the September agreement remains in existence but is unenforceable because the quantum of the increase is not specified.

The parties must either agree to a percentage figure under clause 1 of the September Agreement or alternatively vary clause 1 of the December to overcome the problem posed by the Board’s failure to approve the backdating of the 5% COLA salary increase to affected members. In the meantime the status quo should remain and the Employer should not attempt to recover monies which it claims to be entitled to recover as overpayments.

AWARD

The September Agreement provided for the payment of a COLA increase which was to be backdated to 1 January 2000 by 31 December 2004. The December Agreement limited the payment of the increase to those Association members who were below the median, fixed the amount of the COLA salary increase at 5% and made the payment of the COLA increase subject to Board approval.

Although the Board approved the quantum and the scope of the COLA salary increase, it did not approve and never has approved the backdating of the salary increase to 1 January 2000. The obligation to make the payment under clause 1 of the December Agreement has lapsed.

The parties can fix the quantum of the increase pursuant to clause 1 of the September Agreement or can by agreement vary clause 1 of the December Agreement.

The Employer should allow the status quo to remain until the issue has been resolved.

DATED at Suva this 7 day of February 2007

Mr. W. D. Calanchini
ARBITRATION TRIBUNAL