Fiji Revenue & Customs Authority v Permanent Arbitrator [2001] FJHC 134; HBJ0011J.2001S (10 September 2001)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

JUDICIAL REVIEW NO: HBJ0011 OF 2001S

Between:

FIJI ISLANDS REVENUE & CUSTOMS AUTHORITY
Applicant

And:

THE PERMANENT ARBITRATOR
1st Respondent

And:

FIJI PUBLIC SERVICE ASSOCIATION
2nd Respondent

Ms B. Malimali for Applicant
Mr J. Udit for 1st Respondent
Mr H. Nagin for 2nd Respondent

Hearing: 19th June 2001 - 23rd August 2001
Judgment: 10th September 2001

JUDGMENT

This is an application for judicial review of an award by the Permanent Arbitrator on 12^th March 2001 that the dismissal of Mrs Premila Kumar and Mr Allan Prasad, former employees of the Fiji Islands Revenue & Customs Authority, was wrongful, unfair and harsh. He ordered their reinstatement without loss of benefits.

The relief sought by the Fiji Islands Revenue & Customs Authority (the Authority) can be summarised as follows:

1. Certiorari to quash the Award;
2. A declaration that the Permanent Arbitrator exceeded his jurisdiction;

100. A declaration that the Permanent Arbitrator acted unreasonably and unfairly.
     

The grounds on which relief is sought are:

1. The Permanent Arbitrator exceeded his jurisdiction when he decided that the Chief Executive Officer of the Authority had no powers to terminate the employment of Mrs Kumar and Mr Prasad;
   
2. Alternatively, the Permanent Arbitrator erred in law when he found that the Chief Executive Officer did not have powers to appoint or terminate employees;
   

100. The Permanent Arbitrator did not act judicially, and did not take into account relevant considerations;
     

4. Error on the face of the record.
   

The affidavit of Sekonaia Tui Malakai was filed in support of the application. Notices of Opposition to leave being granted were filed by both Respondents. The First Respondent objected to leave being granted on the grounds that the Applicant had failed to show procedural error or wrongful exercise of power. The Second respondent opposed leave on the grounds that the Permanent Arbitrator did not act ultra vires of the Trade Disputes Act, that his discretion had been exercised judicially, that there was error on the face of the record and that all relevant matters had been taken into account.

On 23^rd May 2001, counsel agreed in Chambers that the court should proceed to consider leave and the substantive application together in the Aexpedited hearing@ procedure.

The Second Respondent filed the affidavit of Rajeshwar Singh on 22^nd May 2001. Counsel for the Applicant also filed the preliminary submissions of the Applicant and the Second Respondent before the Arbitration Tribunal. Counsel for the First Respondent filed a certified copy of the proceedings before the Arbitration Tribunal. All parties then filed helpful written submissions. There was a final hearing date on 23^rd August before I adjourned for judgment.

The Background

On the 1^st of January 1999 the Fiji Island Revenue and Customs Authority came into being. It was established by Act of Parliament and purported to replace the Inland Revenue Department and the Customs and Excise Department of the Fiji Government with a single statutory body. Under the Act, all persons formerly employed by the two departments, were transferred to the service of the Authority.

Section 17(2) of the Act provides:

AUntil such time as terms and conditions of service, including rules as to the conduct and discipline of its employees, are drawn up by the Authority, the terms and conditions of service of State employees, including the conduct and discipline of State employees, shall continue to apply to every person transferred under subsection (1).@

Section 26 of the Act provides that the power to make appointment vests in the Authority. Section 27(2) of the Act provides:

AThe Chief Executive Officer shall -

(a) hold office as the Commissioner of Inland Revenue and Comptroller of Customs and Excise under the Income Tax Act and Customs Act respectively;

(b) be responsible to the Authority for the proper administration and management of the functions and affairs of the Authority in accordance with the policy laid down by the authority;

(c) be responsible to the Authority for the administration and enforcement and collection of revenue under, the laws specified in the First Schedule;

(d) perform such other functions or duties as the Authority, from time to time may determine;

(e) not be removed from office without the consent of the Minister.@

Mrs Kumar and Mr Prasad were both employees of the Authority. Mrs Kumar was an accounts officer at the Customs Division, and Mr Prasad was Assistant Accounts Officer in the same division.

On 16^th July 1999 the two officers were informed by memorandum that they were to be subjected to disciplinary hearings in respect of charges under the Public Service Commission (Constitution) Regulations 1990. The charges were for ANegligent Conduct@ and AConduct Prejudicial@ in respect of approvals of Salary Scale Progression payments made improperly to Mrs Kumar and Ms Rowena Ali. The two officers were given 14 days to respond to the charges. On 23^rd August 1999, a Disciplinary Tribunal was appointed by the Chief Executive Officer to try the charges against the officers. At the hearing, all relevant documents were disclosed to the officers, and they were represented by the Fiji Public Service Association.

On 6^th March 2000, the Tribunal found on the evidence that Mrs Kumar had committed the offences charged, and that Athe charges against Allan Prasad are partly substantiated and he is partially exonerated.@ The matter was referred to the Chief Executive Officer to impose penalty. He did so after receiving submissions in mitigation. On 24^th March 2000, the Chief Executive Officer informed both officers that he had terminated their appointment.

The Public Service Association was not satisfied with this decision and registered a trade dispute with the Permanent Secretary for Labour, under the Trade Disputes Act. The Arbitration Tribunal was then requested to make an award in respect of the following dispute:

Afor settlement over the termination of Messrs Premila Devi Kumar and Allan Prasad with effect from 24^th March 2000 which action the Union claims is wrongful and unfair and therefore seeks immediate reinstatement without loss of pay and benefits.@

The Permanent Arbitrator handed down his Award on 12^th March 2001. He found firstly that the Chief Executive Officer had no powers to appoint, dismiss or discipline employees, and that the dismissal of the two officers was therefore wrongful in law and without jurisdiction, secondly that a reasonable employer could not conclude that Allan Prasad was guilty of serious misconduct when the Tribunal had Apartially exonerated@ him, thirdly that both officers had been accorded procedural fairness, and fourthly that the penalties imposed were harsh and disproportionate. He concluded that reinstatement ought to be effected.

Review of the Arbitration Tribunal

There can be no dispute that the Arbitration Tribunal is susceptible to review (Re Satish Chandra (1986) FLR 16). As Byrne J said in Ports Authority of Fiji -v- Port Workers and Seafarers Union JR0008 OF 1996 at page 11:

AIf a Tribunal goes beyond its jurisdiction or fails to follow the rules of natural justice or acts unreasonably in the Wednesbury sense, any decision it makes in law is simply not a decision.@

In that case leave was granted to review a decision of the Tribunal to award compensatory payment, when its term of reference was in respect of redundancy.

At leave stage, the Applicant must show an arguable case. It must also show that it has sufficient interest in the proceedings, and that the case is not frivolous or an abuse of the process.

In Inland Revenue Commissioners -v- National Federation of Self-Employed and Small Businesses Ltd. [1981] UKHL 2; (1981) 2 ALL ER 93 Lord Scarman said (at page 113):

AIf he fails to show, when he applies for leave, a prima facie case, or reasonable grounds for believing that there has been a failure of public duty, the court could be in error if it granted leave. The curb represented by the need for an applicant to show, when he seeks leave to apply, that he has such a case is an essential protection against abuse of legal process. It enables the court to prevent abuse by busybodies, cranks and other mischief makers. I do not see any further purpose served by the requirements for leave.@

I am satisfied on this test, that leave should be granted. I do not consider the Authority to be a crank or a busybody. Clearly it has a direct interest in the question of whether the Tribunal exceeded its jurisdiction, and/or of whether its Chief Executive Officer has powers to dismiss its employees. There is certainly an arguable case for the proposition that the Permanent Arbitrator exceeded his jurisdiction in considering lawfulness whilst considering wrongfulness.

Ultra Vires

The Applicant says that the Permanent Arbitrator exceeded his jurisdiction when he asked whether the Chief Executive Officer had powers to dismiss, when that was not referred to in his terms of reference.

Professor Wade in his text Administrative Law (5^{up> Ed.) Said at pagt page 38:}

AThe simple proposition that a public authority may not act outside its powers (ultra-vires) may fitly be called the central principle of administrative law.@

In Anisminic Ltd. -v- Foreign Compensation Commission [1968] UKHL 6; (1969) 2 AC 147, Lord Reid said (at p.171):

AIt has sometimes been said that it is only where a tribunal acts without jurisdiction that its decision is a nullity. But in such cases the word Ajurisdiction@ has been used in a very wide sense, and I have come to the conclusion that it is better not to use the term except in the narrow and original sense of the tribunal being entitled to enter on the inquiry which is of such a nature that its decision is a nullity. It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the inquiry to comply with the requirements of natural justice. It may in perfect good faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it. It may have refused to take into account something which it was required to take into account.@

In Racal Communications Ltd (1980) 2 ALL ER Lord Diplock at p.637 said of concept of ultra vires that:

AIt proceeds on the presumption that where Parliament confers on an administrative tribunal or authority, as distinct from a court of law, power to decide particular questions defined by the Act conferring the power, Parliament intends to confine that power to answering the question as it has been so defined, and if there has been any doubt as to what that question is this is a matter for courts of law to resolve in fulfilment of their constitutional role as interpreters of the written law and expounders of the common law and rules of equity. So, if the administrative tribunal or authority have asked themselves the wrong question and answered that, they have done something that the Act does not empower them to do and their decision is a nullity.@

Section 6 of the Trade Disputes Act Cap 97 provides that the Minister for Industrial Relations may, with the consent of the parties authorise the Permanent Secretary to refer a trade dispute to a Tribunal for settlement. Section 3(2) of the Act provides that a trade dispute when reported to the Permanent Secretary shall sufficiently specify Aeach and every matter over which the dispute has arisen or is apprehended.@

The jurisdiction of the Permanent Arbitrator is therefore limited to the trade dispute referred to him for decision. His jurisdiction is limited to his terms of reference. In Suva City Council -v- Suva City Council Staff Association JR 3/1989, Byrne J found that the Permanent Arbitrator acted outside his terms of reference when he considered the individual merits of the cases of compulsory retirement when he was only required to ask whether the consent of the Staff Association was required before the retirement of any employee over the age of 55. His Lordship found that the Permanent Arbitrator acted beyond his jurisdiction and that part of his Award was a nullity.

The Permanent Arbitrator=s terms of reference were in relation to the termination of the officers. The dispute referred to the Tribunal was:

AFor settlement over the termination of Messrs Premila Devi Kumar and Allan Prasad with effect from 24^th March 2000 which action the Union claims is wrongful and unfair and therefore seeks immediate reinstatement without loss of pay and benefits.@ (my emphasis)

It is apparent that at the hearing of the Disciplinary Tribunal, the power of the Chief Executive Authority to terminate was not raised. The officers were charged and tried under the PSC (Constitution) Regulations 1990, and at that stage, the Chief Executive Officer=s powers to suspend or terminate, was irrelevant. However those powers were relevant at the stage of mitigation, and they were not disputed.

The question of whether he had those powers was raised for the first time by the Association when the Chief Executive Officer was cross-examined at page 14 of the record. His evidence was that he had powers to discipline employees under section 17 of the Act, and that he had taken legal advice from his legal section on this issue. At page 18 of the record, it is apparent that the Arbitrator was aware of the issue and asked Ms Malimali for the Authority to provide evidence of a delegation of powers to appoint by the Authority to the Chief Executive Officer. A copy of the Chief Executive Officer=s contract of service was given to him, but not evidence of a valid delegation.

The question of the legality of the terminations was then raised in submissions. In its submissions the Association submitted that the Chief Executive did not have powers to deal with disciplinary matters and that only the Public Service Commission had such powers. The Association referred to the fact that the right of appeal under the Public Service (Amendment) Act No. 58 of 1998 was wrongfully taken away when the Chief Executive decided to terminate the officers himself.

The Authority in its submissions, said that the question of the lawfulness of the terminations, was not within the terms of reference of the Tribunal, but that in any event the Authority had powers to appoint, promote and dismiss by virtue of section 17(1) of the Fiji Islands Revenue and Customs Authority Act which transferred all employees to the employ of the Authority on 1^st January 1999. The Authority submitted that the Act gave the Authority powers to appoint under section 26, and gave the Chief Executive Officer responsibility for the management of the functions and affairs of the Authority, under section 27.

These submissions were therefore ventilated for the first time, at the hearing of the Arbitration Tribunal. The question of the lawfulness of the terminations, under the 1999 Act, were not specifically referred to in the dispute referred to the Tribunal.

The question on judicial review, is whether the Tribunal exceeded its jurisdiction by considering the issue.

There can be no doubt at all that if the Tribunal acted within his jurisdiction, and if he was right in deciding that the Chief Executive had no powers to discipline or terminate, that the terminations of the employment of the officers are null and void.

Does Awrongful@ include Aunlawful@? The Authority says it does not, and that all the Tribunal was required to do was to consider whether the employer Agenuinely and reasonable believed the grievor was guilty of serious misconduct.@ In its supplementary submissions, the Authority said that the real dispute was the circumstances of the dismissal, and that it was never the intention of the parties to refer the lawfulness of the dismissal to the Tribunal.

The First Respondent says that the Oxford English Dictionary defines Awrongful@ as Acontrary to law, statute or established rule, unlawful, illegal@, that the Tribunal was required to deliberate on lawfulness, and that section 31 gave the Tribunal wide powers to illicit all relevant information.

The Second Respondent says that the issue of lawfulness in respect of the penalty imposed was included in the Authority=s submissions before the Tribunal, and that the Authority could not therefore now argue that lawfulness was irrelevant.

I do not agree with the First Respondent that section 31 of the Trade Disputes Act allows the Permanent Arbitrator to consider issues outside his terms of reference. The purpose of section 31 is to allow the Permanent Arbitrator to obtain evidence in order to allow him to properly consider the terms of reference of the dispute, referred to him by the Permanent Secretary.

The issue, as I see it, is whether the terms of reference included jurisdiction to consider the lawful powers of the Authority and the Chief Executive.

The word Awrongful@ in terms of employment law, and the word Aunfair@ have their own definitions in the common law. The word Aunfair@ is commonly used, in both statute and common law to refer to dismissals which are not based on; 1) the capability or qualifications of the employee; 2) the conduct of the employee; 3) reasonableness; or 4) good faith. Employment tribunals are usually required to consider whether in all the circumstances, having regard to equity and the substantial merits of the case, the employer acted reasonably in dismissing the employee, and for a valid reason.

An investigation into the fairness of a dismissal, involves an examination of the substance of the dismissal, including a consideration of the employer=s needs, the circumstances of the employee=s length of service, and other factors in mitigation of the employee=s misconduct. The House of Lords in Smith -v- City of Glasgow District Council (1987) 1 RLR 326, said that the employer must show that he/she genuinely believed that dismissal was reasonable and the reasons for such dismissal, were valid.

The test is not entirely subjective, because the employer also has to show that his belief was based on reasonable grounds (see Watling & Co. Ltd. -v- Richardson (1978) 1 CR 1049, also Smith & Wood AIndustrial Law@ p.299). As Lord Denning said in Alidair Ltd. -v- Taylor (1978) 1 RLR 82, at pp.84-85:

AIf a man is dismissed for stealing, as long as the employer honestly believes it on reasonable grounds, that is enough to justify dismissal. It is not necessary for the employer to prove that he was in fact stealing. Whenever a man is dismissed for incapacity or incompetence it is sufficient that the employer honestly believes on reasonable grounds that the man is incapable or incompetent. It is not necessary for the employer to prove that he is in fact incapable or incompetent.@

It was this test that the Tribunal referred to at page 5 of its award. The Tribunal said:

AIn cases involving unjustified dismissals the Tribunal has to be convinced that the employer genuinely and reasonably believed that the grievor was guilty of serious misconduct.@

This then is the legal meaning of the word Aunfair.@ The word Awrongfully@ logically, was intended to have some other meaning.

In common law and statute, the word has developed a special meaning. The common law action for wrongful dismissal was and is based on form rather than substance. Thus a wrongful dismissal in a case where employee and employer share contractual relations, may be termination in a way not envisaged by the contract, or before the contract expires (see McClelland -v- Northern Ireland General Health Services Board (1957) 2 ALL ER 129). The concept of wrongful dismissal may include an argument that the dismissal was invalid either because of breaches of natural justice, or on the ground of ultra vires.

In Vine -v- National Dock Labour Board (1957) AC 488 a registered dockworker employed by the Board under a statutory scheme, was dismissed for refusing a valid order. His dismissal was effected by a committee which, on a true construction of the statutory scheme, did not have powers to dismiss. The House of Lords held that the dismissal was ultra vires and a nullity.

The word Awrongful@ is therefore different to the word Aunfair.@ A dismissal may be wrongful on the basis of form and procedure. An unfair dismissal may be challenged on the question of whether the employer believed on reasonable grounds that the employee=s conduct justified dismissal.

As Smith & Wood in the text AIndustrial Law@, saw at p.232:

AThe obvious contrast between the two is that the statutory action for unfair dismissal involves an inquiry into the overall merits of the dismissal whereas the common law action for wrongful dismissal looks basically to the form of the dismissal.@

In the light of these definitions, it is apparent, that the concept of ultra vires is included in the question of the wrongfulness of a dismissal. I accept that the thrust of the trade dispute referred to the Tribunal related to unfairness. However, the use of the word Awrongful@ in addition to Aunfair@ in the referred dispute, defined the bounds of the Arbitration Tribunal=s jurisdiction. Further, the Authority=s powers to discipline were raised at the Arbitration hearing by the Authority itself, in the course of the hearing. When the parties continuously referred to the Authority=s powers to discipline, and to the provisions of the PSC (Constitution) Regulations 1990, it was inevitable that the Arbitration Tribunal would consider those provisions, and their applicability to the dismissals of the officers. Indeed, it was the Tribunal=s duty to do so, despite the Association=s apparent concessions initially as to the lawfulness of the dismissals.

In all the circumstances, I find that the Tribunal did not exceed its jurisdiction in considering whether the Chief Executive Officer of the Authority had lawful powers to dismiss. The Award is therefore not a nullity on this ground.

Error on the face of the Record

The Applicant says that the Permanent Arbitrator erred in finding that the Chief Executive Officer had no powers to terminate. I do not agree. Although judicial review proceedings do not permit the reviewing court to consider the merits of the decision, and must only be concerned with the decision-making process, there are some errors of law, which, if made, may nullify the entire proceedings under review. Although there is considerable authority for the view that an inferior tribunal has jurisdiction to adjudicate incorrectly and correctly questions of law which go to the merits of a case, there is also considerable authority for the view that all errors of law are reviewable (see Professor Wade Administrative Law 6^th Ed. p.302). In South-East Asia Fire Bricks SDN.BHD -v- Non-Metallic Mineral Products Manufacturing Employees Union (1981) AC 363, the Privy Council also took that position. Byrne J in State -v- Arbitration Tribunal of the Republic of Fiji ex parte Ports Authority of Fiji J/R Action No. HBJ0008 of 1996 referred with approval to the view of Lord Denning M.R. in Pearlman -v- Harrow School Governors [1978] EWCA Civ 5; (1979) QB 56 when he said:

AThe way to get things right is to hold thus: no court or tribunal has any jurisdiction to make an error of law on which the decision of the case depends. If it makes such an error, it goes outside its jurisdiction and certiorari will lie to correct it.@

I do not consider that the Permanent Arbitrator made an error of law in this case. The Fiji Revenue and Customs Authority Act certainly transferred employees to the employment of the Authority, but section 17(2) of the Act provided that rules as to conduct and discipline were to apply in the same way as they applied to State employees. The Authority was undoubtedly given powers to appoint. This arguably included dismissal pursuant to the Interpretation Act. However, section 27(2) of the Act, which provide for the powers and function of the Chief Executive, do not include a power to appoint or dismiss. Nor can such power be implied from meetings of the Authority, or from the words AThe Chief Executive Officer shall .... perform such other functions or duties as the Authority, from time to time may determine.@

The dismissal of an employee has serious consequences for both employee and employer. Statutory provisions for dismissal must be strictly read. Section 24 of the Act provides that the powers of the Authority may be delegated to a person or committee. However, there was no such delegation of the power to appoint to the Chief Executive.

In the circumstances I do not consider that the Permanent Arbitrator erred in law in finding that the Chief Executive Officer had no powers to dismiss. This ground for review also fails.

Irrelevant and Relevant Considerations

The Permanent Arbitrator accepted that the Authority believed on reasonable grounds that Mrs Kumar=s actions qualified as Aserious misconduct@, but said that in the light of Mr Prasad=s Apartial exoneration@, his actions probably did not.

The Authority says that the Permanent Arbitrator failed to consider the seriousness of the conduct of both officers, in the context of the revenue-collecting role of the Authority. Nor, it says did he consider the effects of reinstatement.

It is clear from a reading of the Award, that the Permanent Arbitrator, having heard evidence from a number of witnesses, acted reasonably in the Wednesbury sense. Given his findings on ultra vires, he clearly did not need to canvass at length the Aunfairness@ portion of the dispute. He was entitled to reach the conclusion that he did on the Authority=s Areasonable belief@ as to the grounds for dismissal.

Nor is the Award, and the reasons for it so unreasonable that no reasonable tribunal could have reached that conclusion. Nor is reinstatement unreasonable given the Arbitrator=s finding that the dismissals were null and void. The Award shows that the Arbitrator considered the question of reinstatement carefully and rationally.

Conclusion

For the reasons I have given in this judgment, this application for judicial review fails. The Applicant must pay the 1^st and 2^nd Respondents costs to be taxed if not agreed.

Nazhat Shameem
JUDGE

At Suva
10^th September 2001