Fiji Public Service Association v Airports Fiji Ltd [2007] FJAT 84; Award 01 of 2007 (17 January 2007)

THE REPUBLIC OF THE FIJI ISLANDS

NO 1 OF 2007

AWARD OF
THE ARBITRATION TRIBUNAL

IN THE DISPUTE BETWEEN

FIJI PUBLIC SERVICE ASSOCIATION

AND

AIRPORTS FIJI LIMITED

FPSA: Mr N G Singh with Mr N Tofinga
AFL: Mr K Qoro

DECISION

This is a dispute between the Fiji Public Service Association (the Association) and Airports Fiji Limited (AFL) concerning the payment of COLA salary increases pursuant to two 2004 Agreements.

A trade dispute was reported on 7 March 2005 by the Association. The report was accepted on 14 March 2005 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 18 April 2005 with the following terms of reference :

"........................ for settlement over the refusal by Airports Fiji Limited (AFL) to abide by the conciliated agreement dated 1st September 2004 and the voluntary agreement executed on 20th December 2004 between the parties, on the subject of the payment of an interim eight percent (8%) across the board COLA increases to the wages and salaries of FPSA members in AFL effective from 1st January 2000 to 31st December 2004 inclusive, in the following manner:

(i) That AFL refused to pay the said agreed 8% COLA increases to certain FPSA members by utilizing a so-called "median" salary criteria which was not part of the agreement/s, and in contravention of the same.

(ii) That the AFL has given notice to make certain recoveries of 8% COLA already paid to other FPSA members under the said agreement/s, in contravention of the same."

The Dispute was listed for preliminary hearing on 29 April 2005. On that day the parties were directed to file preliminary submissions within 28 days and the Dispute was relisted for mention on 27 May 2005

AFL filed its preliminary submissions on 26 May 2005.

On 27 May 2005, the Association was directed to file its submissions by the close of business on that day. The Dispute was listed for hearing on 24 August 2005.

The Association filed its submissions on 31 May 2005.

Due to unforeseen circumstances it was necessary for the hearing date to be vacated and the Dispute was subsequently listed for mention on 30 September 2005. On that day the Dispute was listed for hearing on 10 November 2005.

The hearing of the Dispute commenced on 10 November 2005 in Suva. As a result of preliminary submissions made by the parties, the hearing was adjourned part heard and the Dispute was listed for mention on 25 November 2005. The Dispute was subsequently listed for mention on 27 January, 24 March, 28 April and 26 May 2006 at the request of the parties.

The hearing of the Dispute resumed and was completed on 11 September 2006. During the course of the hearing, the Association called one witness and AFL called two witnesses to give evidence. 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 18 October 2006. AFL filed its answering submissions on 15 December 2006 and the Association filed a reply submission on 22 December 2006.

The terms of reference effectively requires the Tribunal to determine the meaning and hence the effect of two agreements made by the parties. The first agreement is dated 1 September 2004 (the September Agreement) and the second is dated 20 December 2004 (the December Agreement),

The relevant clauses of the September Agreement provide:

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

2. That Job Evaluation Exercise be conducted for the Fiji Public Service Association members immediately and be concluded by 31 December 2004."

The relevant clauses of the December Agreement provide:

"1. That subject to the Airports Fiji Limited Board approval, all employees who are members of FPSA and not on individual contract of employment shall receive an interim payment of eight percent (8%) salary increase across the board by way of COLA backdated to 1 January 2000 on 31 December 2004; and

2. That upon completion of the Job Evaluation Exercise currently underway, necessary adjustments to salaries rates shall be negotiated thereafter."

The Agreements purported to settle, on an interim basis, certain aspects of the Association’s Logs of Claims for the period 2000 to 2004.

The Association’s initial claim was set out in its 2000 Log of Claims submitted on 20 December 2000. The Association claimed a COLA salary increase for the year 2000.

The parties could not resolve the issue and the subsequent dispute was eventually settled by the then Permanent Arbitrator in Award No 26/2002. AFL sought to challenge the Award in the High Court by way of Judicial Review. As at 31 December 2004 the proceedings were still pending awaiting the Court’s judgment.

The effect of the court proceedings was that the Association’s claims for the subsequent years up to 2004 had not been processed or settled. Therefore these two Agreements covered the Association’s claims for the five years from 2000 to 2004 inclusive.

The Union submitted that neither agreement contained any reference to the COLA salary increase excluding those members who happened to fall outside specified criteria identified by the job evaluation exercise. The Union also submitted that the wording of the clauses in the Agreements referred to salary increases and not a "one-off" bonus payment. The Union also submitted that the AFL Board had approved the payment.

AFL submitted that it was at all material times understood by the parties that a salary median was to determine eligibility for the COLA salary increase. AFL also submitted that the parties intended that the payment to be made was by way of a bonus payment. AFL then submitted that there was no Board approval and that as a result there was no obligation. AFL claimed that this conclusion allowed it to recover any excess payments made to the Association’s members.

The Tribunal’s approach to settling this Dispute will be first to consider the meaning of the clauses relating to the COLA payment. Then the Tribunal proposes to consider whether the Board approved the payment in the December Agreement.

The principles to be applied when interpreting a written agreement, including a collective agreement, were discussed by the Fiji Court of Appeal in Din and Anor –v- Westpac Banking Corporation [2004] FJCA 30.

As a result the Tribunal accepts that the interpretation of clause 1 in each Agreement should be approached objectively. This means that the Tribunal is required to determine what meaning the clauses would convey to a reasonable person having the relevant background knowledge. The Tribunal should not be concerned with what the parties to the agreement thought the clauses meant.

The Tribunal also accepts that any material relating to the negotiations between AFL and the Association that led to the Agreements is irrelevant when determining the meaning to be attributed to clause 1 in each Agreement.

Furthermore, what the parties say they intended the clauses to mean is irrelevant. Any belief that AFL may have had about how the two clauses should be interpreted is irrelevant. The parties have agreed that the September and the December Agreements are to settle, on an interim basis, outstanding issues arising out of the Association’s Logs of Claims dating back to 2000. There was no misunderstanding.

The issue then is what is the meaning that would be conveyed by clause 1 of each agreement to a reasonable person with the relevant background knowledge.

In relation to clause 1 of the September Agreement, it is apparent that the parties have agreed that (a) there is to be COLA salary increase, (b) it is to be backdated to 1 January 2000 and that (c) it is to be paid by 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 for the five years for each member 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 as to the amount of the increase. Furthermore there is no requirement for Board approval as a condition precedent. There is no objective indication that there is any link to or connection with the Job Evaluation Exercise referred to in clause 2 of that Agreement.

It is not clear to the Tribunal why the parties did not specify the amount of the COLA increase. It may have been that the CPI figures from the Bureau of Statistics were to form the basis of the increase. It may have been that the parties wanted to wait for the completion of the court proceedings before negotiating the amount of the increase. Whatever the reason, 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 differed from clause 1 of the September Agreement in two material aspects. First, the amount of the COLA salary increase was specified to be 8%. Secondly, payment of the salary increase was subject to the approval of the AFL Board.

In addition, clause 1 of the December Agreement made it quite clear that all employee members of the Association were to receive the increase. The phrases "not on individual contract of employment" and "across the board" are repetitive and perhaps serve only to emphasise the applicability of the entitlement to all FPSA members.

Once again there is no objective indication that the entitlement in clause 1 is in any way linked to the Job Evaluation Exercise referred to in clause 2.

The effect of clause 1 of the December Agreement may be illustrated by a simple example. A 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 $16 per fortnight increase or a $8 a week increase. On the basis of 26 fortnightly pays or 52 weekly pays, each would receive an additional amount of $516 for the year 2000. For the five years up to the end of 2004, the amount owing to each would be $2080. 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.

As previously noted, the payment of the COLA salary increase was subject to board approval. This requirement is called a condition precedent. A condition precedent can be described as a provision in an agreement that does not form part of the contractual obligation but operates to suspend the contract until a specified event has happened.

In this case, the obligation on the part of AFL to pay the 8% COLA salary increase was suspended until the AFL Board had given its approval.

The evidence presented at the hearing established that the AFL Board met on 22 December 2004 in the Board Room at Nadi Airport.

The Chairman and four Directors were in attendance together with the Chief Executive Officer, a representative from the Public Enterprise Ministry and the Board Secretary who was also Manager Finance.

Item 20 of the Minutes of that Meeting, so far is relevant to the present Dispute, stated:

"i) ratified the AFL/FPSA memorandum of agreement dated 20 December 2004

ii) ...................................

iii) .............................................

iv) approved the payment of 8% salary increase to underpaid 92 non-contracted employees relative to market based salary median.

v) Approved the expenditure of $198,591 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 and Mr Nath. The decision to ratify the agreement did not provide the approval required as a condition precedent in clause 1 for the payment of 8% COLA salary increase.

What the Board did approve in (iv) of item 20 was not what clause 1 of the Agreement provided for. The Board approved something different from what clause 1 expressly stated. Only 92 non-contracted (i.e. FPSA members) were to receive the 8% increase. They were identified by reference to a market based salary median.

Therefore the Board at its meeting on 22 December 2004 did not approve the 8% COLA salary increase in the terms set out in clause 1 of the December agreement.

The Tribunal has noted the contents of the Joint Press Release dated 23 December 2004 and the Staff Circular also dated 23 December 2004. The Tribunal has concluded that those documents were ambiguous in the manner in which they referred to the AFL Board’s decision. Furthermore, 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 payment of the 8% 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 circumstance. At subsequent meetings of the AFL Board there was no approval for the 8% COLA salary increase as described in clause 1 of the December Agreement. The Board’s decisions indiciated that AFL was moving in a direction even more removed from the agreement set out in clause 1. The Board has not at any time given its approval for the payment of the 8% COLA salary increase described in clause 1 of the December Agreement.

As the AFL Board approval which constituted the condition precedent to the creation of the obligation to pay the 8% COLA salary increase did not eventuate within a reasonable time or at all, the condition was not satisfied and the contractual obligation did not and now cannot arise under clause 1 of the December Agreement.

However there is one other aspect of the condition precedent which needs to be examined. That aspect concerns the question whether the December Agreement with its condition precedent imposed some degree of obligation on the part of AFL. The Tribunal accepts that AFL 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.

To the extent that the Agreement was placed before the Board for its consideration just two days after it was signed and in the absence of any evidence to the contrary, the Tribunal is satisfied on the balance of probabilities that AFL has not breached this implied requirement.

What the Board did at its meeting on 22 December 2004 and at subsequent meetings was to unilaterally vary clause 1 of the December Agreement by limiting its application and by substituting a 8% COLA increase with a 8% one-off bonus payment.

Although 92 of the Association’s members subsequently received payments in accordance with clause 1, the AFL Board determined at a subsequent meeting in January 2005 that those payments had been made in error. The Board acted promptly. The Tribunal is satisfied that the AFL Board had approved the payment of an 8% one-off bonus payment to those members identified by reference to a market median. As previously noted this was not the substance of the December Agreement which required Board approval prior to implementation.

The Minutes of the 22 December 2004 meeting and the evidence given by Mr Nath and Mr Kumar supported this inclusion.

The parties are now left with Award No 26 of 2002 and the September Agreement. Clause 1 of the September Agreement did not contain a "subject to Board approval" provision. The outstanding issue for the parties is to reach agreement on the amount of the COLA salary increase referred to in clause 1 of the September Agreement. The meaning of that clause has been dealt with at length by the Tribunal earlier in this decision. Until the parties have reached agreement on the quantum of the COLA salary increase, it would be inappropriate for AFL to attempt to recover any monies which it claims to be entitled to recover as overpayments.

AWARD

The September Agreement provided for a COLA salary increase to all Association members to be backdated to 1 January 2000 and to be paid by 31 December 2004.

The December Agreement fixed the amount of that COLA salary increase at 8% and made payment of the COLA salary increase subject to Board approval. The Board did not give its approval at its meeting on 22 December 2004 nor within a reasonable time or at all The obligation to make the payment under clause 1 of the December Agreement has lapsed.

The parties are left with Award 26 of 2002 and the September Agreement as the bases for further negotiations to determine the amount of the increase.

AFL should not seek to recover any perceived overpayments until the parties have reached agreement on the quantum of the increase.

DATED at Suva this 17 day of January 2007

Mr. W. D. Calanchini
ARBITRATION TRIBUNAL