State v Arbitration Tribunal, Ex parte Carpenters Fiji Ltd [2008] FJHC 383; HBJ21.2006S (7 August 2008)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

JUDICIAL REVIEW NO. HBJ21 OF 2006S

IN THE MATTER of an application by CARPENTERS FIJI LIMITED
for a Judicial Review under Order 53 of the
High Court Rules, 1988.

AND

IN THE MATTER of the Award No. 32 of 2006 of the ARBITRATION
TRIBUNAL dated 30^th day of May 2006.

STATE

v.

1. ARBITRATION TRIBUNAL

2. B.P. (S.S) CO. LTD AND W.R. CARPENTER
GROUP SALARIED STAFF ASSOCIATION
(Respondents)

EX-PARTE:
CARPENTERS FIJI LIMITED
(Applicant)

Counsel for the Applicant: Ms B Narayan: Lateef & Lateef
Counsel for the 1^st Respondent: J Bai: Attorney-General's Chambers
Counsel for the 2^nd Respondent: A Naco: Naco Chambers

Date of Judgment: 7 August, 2008
Time of Judgment: 9.30 a.m.

JUDGMENT

This is a claim for judicial review of the Permanent Arbitrator's Ruling as contained in the Tribunal's Award No. 32 of 2006 of 30 May 2006. The Ruling is on a preliminary issue on whether the termination of employment of an employee in accordance with the terms of the Collective Agreement may be deemed unjust, unfair and harsh.

Background

The facts of the case can be briefly summarised as follows. Mr Peter Kitione ("the Grievor") was an employee of the Applicant ("the Company"), having joined the Company on 5 March 1997 as a sales trainee mail clerk. In January 1999, the Grievor was appointed Supervisor of the Applicant's Samabula Service Station and subsequently its Service Station on Victoria Parade, Suva. Relevant to this proceedings are the provisions on "termination" and "other Conditions" in his letter of appointment. They read:

"Termination: Employment maybe terminated by either party anytime. The party which intends to effect termination shall give to the other one month's notice or an indemnity equivalent to one month's salary in lieu of such notice. Where you are guilty of any form of serious misconduct, you may be summarily dismissed by the Company without entitlement to notice or payment in lieu of notice.

Other Conditions: Your other conditions of employment will be in accordance with the Master Agreement and company policies for employees of similar status in the Company."

The Master Agreement between the Company and B.P. (S.S.) Co. Ltd and Carpenters Group Salaried Staff Association ("the Association") made on 26 October 1977 came into force on 1 July 1997. It remains in force. The Agreement only applies to the Staff members of the Company up to the Supervisor level. Senior management staff members are excluded. Schedule C Clause 4(i) of the Agreement sets out the termination provisions as follows:

"An employee's service may be terminated by the employee or the employer by the giving of the one month's notice on either side or the payment or forfeiture of one month's pay as the case maybe. The period of notice will commence on the day the notice of termination is given."

On 21 February 2005, the Grievor's employment was terminated and conveyed by a letter from Mr Imraz Taz, Operations Manager for the Company. The letter inter alia, stated:

"Effective immediately your services are no longer required and in terms of your appointment letter and Schedule C Clause 4(i) of the Master Agreement between Carpenters Fiji Ltd and W R Carpenter Group salaried Staff Association on termination, we are paying you one month's pay in lieu of notice."

The Association, on behalf of the Grievor, reported the termination to the Permanent Secretary of Labour and Industrial Relations on 15 April 2005, and accepted as a dispute by the Permanent Secretary. Conciliation effort were unsuccessful and the Conciliator Mr Sahid Ali in a "Memorandum of Agreement" dated 14 July, recorded the parties agreement to refer the matter to the Arbitration Tribunal. This so called Memorandum of Agreement is signed by the Permanent Secretary, Taito Waqa supposedly under Section 5(2) of the Trade Dispute Act ("the Act"). This reference is totally wrong as the only way reference is made to the Tribunal is under section 6(1) of the Act. I will revert to this issue later.

On 15 July, the Permanent Secretary referred the dispute to the Permanent Arbitrator,

"for settlement over the termination of employment of Mr Peter Kitione with effective from 21 February 2005, which the union submits as unjust, unfair harsh and wrong. The union therefore seeks his reinstatement to his present position without loss of salary and benefits from the date of the termination."

The Company's preliminary submissions to the Tribunal asserted that given the termination of the employment of the Griever was in accordance with his contract of service, it was not harsh, unfair and wrong. The Tribunal thereafter directed the parties consider its earlier Ruling in Award No. 14 of 2005, Fiji Airlines Pilots Association v. Air Pacific Ltd wherein the same issue namely whether the termination of employment by notice of payment in lieu of notice was unfair and unseasonable. The Tribunal ruled that its jurisdiction under the Act is not limited in defining its terms of reference only in accordance with the general principles of the law of contract but it includes consideration of fairness of a termination. The Tribunal pointed out that the Fiji Airlines Pilots Association Ruling given that the issues were similar, would also be applicable in this case. It further noted that the Ruling was not challenged in the High Court.

The Tribunal having allowed for further submissions from both parties on the preliminary issue of the scope of the Tribunal's jurisdiction in a dispute on a claim that the termination of employment by notice of payment in lieu of notice was unfair unjust harsh and wrong, ruled, in reaffirming its finding contained in its Ruling in Award No. 14 of 2005, that the Company, when exercising its right to terminate the Griever's employment in accordance with terms of the contract and the Collective Agreement, is also required to "establish that it did not act unfairly or unreasonably." The Tribunal concluded that,

"The Employer carries the burden in this Dispute of establishing, first, that the termination was not wrong, and secondly, that it was neither unfair nor unjust."

Reliefs Sought

The Applicant first seeks an order of Certiorari for the Tribunal's Award No. 32 of 2006 be removed into this Court and be quashed, and secondly, a declaration that the Applicant was entitled to terminate the Grievor's employment by giving one month's pay in lieu of notice and further that such termination was not wrong, unjust, unfair or harsh.

Grounds of Appeal

These are set out in great details in the Appellant's application. In summary, the Appellant contends that the Tribunal made errors of law on the face of the record in its Ruling contained in Award No. 32 of 2006 by insisting that its jurisdiction under the Act is not limited to observing general principles of law of contract and specifically employment contract and/or the Terms of Reference does not limit the Tribunal's jurisdiction by determining the issues with reference only to contract of service.

Court's Consideration

The essence of the Applicant's case is that the termination of the Grievor's employment was made in accordance with Clause 4(1) of Schedule C of the Collective Agreement and the Grievor's Letter of Appointment under which both parties agreed that termination of employment maybe effected by giving one month's notice or payment in lieu of notice. In this case, a payment of one month's salary in lieu of notice was made. Such termination was not wrong neither was it unjust, unfair or harsh. As the Tribunal aptly puts it, "The Employer has submitted that the provisions of the Grievor's Contact (sic) of service have been followed and therefore the termination was not wrong. The Employer then submits that if the termination was not wrong because it complied with the terms of the Contract, then neither can it be unfair, unjust or harsh."

The Tribunal disagreed with the Employer's/Applicant's argument adding that while the termination of employment may have been in accordance with the "express or implied terms of the Contract of Service", the Tribunal is additionally required, by the terms of reference, to determine whether the termination was unfair unjust or harsh. The Tribunal emphasised that whilst it cannot examine the propriety of the terms of reference from the Permanent Secretary of Labour, it is duty bound to fully comply with it. It then went on to examine in details the applicable law relating to the exercise of the Tribunal's discretion and extent of its jurisdiction in dealing and determining the question of legality of the termination of an employment by notice or payment in lieu of notice. The Tribunal, after distinguishing the cases relied upon by the Applicant (The State v. The Arbitration Tribunal exp. SCC Staff Association; JR No. 14/1999; Diners Club (NZ) Ltd v. Prem Narayan FCA No. 4/1996), in the end followed its earlier Ruling in Award No. 14 of 2005.

The applicant's claim that the Tribunal had acted unlawfully, had taken irrelevant matters into consideration and not taken relevant matters into consideration.

The Court agrees with the Tribunal that it is bound by the Terms of Reference given by the Minister or the Permanent Secretary. However there must surely be provisos to this general proposition. The most important is that the Terms of Reference must be precise and not capable of more interpretations. The drafting of the terms of reference is very important and should clearly define the issues and the legal perimeters upon which the Tribunal is expected to explore and make a finding.

In similar cases that had previously come before it, the Court has expressed its concern at how badly the terms of reference were drafted. The Tribunal had alluded to this observation in The State v. Arbitrational Tribunal exp. SCC Staff Association case. This case is no exception. The terms of reference which the Permanent Secretary decided upon was borrowed word for word from Mr Mohan Lal, General Secretary of the Association letter of 11 April 2005 reporting a trade dispute to the Permanent Secretary under Section 3(2) of the Act. Mr Lal, in his pen-ultimate sentence asserted that:

"We feel that Mr Peter Kitione's termination of employment from Carpenters Motors Suva was unjust, unfair, harsh and wrong and that he should be reinstated to his present position without loss of salary or benefits from the date of termination".

Following the failure of conciliation efforts, the Conciliator Mr Sahid Ali, in a Memorandum of Agreement signed by both parties, recommended, following the parties agreement to voluntary arbitration, that the terms of reference be again the Association's assertion above. The reference by the Permanent Secretary to the Tribunal of 15 July 2005, pursuant to section 6(1) of the Act did no more than adopted in total the Conciliator's recommended terms of reference. No real effort was made to "de-sensitise" the issue. Instead the Tribunal's mandate is moulded to fit the Association's assertion of the rights of one of its members.

The Respondents argue that the Applicant by signing the Memorandum of Understanding, has agreed to the terms of reference. Two counter arguments are raised. First, the recommended terms of reference from the Conciliator was in quotations and cannot therefore be said that the parties were bound by its literal meaning or interpretation. Secondly, the so-called Memorandum of Agreement does not in the Court's view, have any legal implication. The document is endorsed by the Permanent Secretary purportedly pursuant to section 5(2) of the Act. However, section 5(2) may only be utilised if the conciliation effort is successful. In this case, it failed. Any reference to the Tribunal for arbitration can only be made under section 6(1). To use the Memorandum of Agreement made under section 5 for the purpose of a reference to arbitration under section 6(1) is plainly wrong. The Court however accepts that the parties had notwithstanding the Memorandum, voluntarily agreed to refer the matter to the Tribunal and that the reference to the Tribunal by the Permanent Secretary of 15 July 2005 is valid and proper. But the term of reference must be taken as that agreed to by the Applicant, not as supposed and superimposed by the Permanent Secretary, given the voluntariness of the reference.

In the Court's view, greater care should be taken by the Permanent Secretary in the formulation of terms of reference of any dispute referred to the Tribunal to avoid impreciseness and any perception of bias. In this instance, while the Court must assume that the reference and especially the terms of the reference were decided and drawn up by the Permanent Secretary without any predilection, it is absolutely incumbent on him to ensure that the terms of reference are not only precise, but devoid of any perception of bias. To merely regurgitate the Association's assertions of its members alleged rights as the terms of reference to the Tribunal is not only irresponsible; it is, more importantly, not in accordance with the purposes and objectives of the arbitration scheme under the Act. The Court for example, would suggest in this dispute that a more acceptable terms of reference couched in neutral language, could be for the Tribunal "to decide whether the termination of the employment of Mr Peter Kitione from the Company, being a member of the Association, in accordance with his letter of contract and the provisions of the Collective Agreement between the Company and the Association, was unjust unfair and harsh". In the end the Tribunal was left to make its own interpretation of the terms of reference, deciding that it was free both under the Act and in accordance with the terms of reference to explore further than a mere finding of legality or otherwise of the act of termination.

This Court finds some authority on the Tribunal's proposition that it may, where necessary, go further after determining the legality of the termination, to also ascertain whether the termination was unfair, unjust and harsh. At least that what appears to be the direction the development of the law in this area seems to be moving, both from constitutional law and social justice points of view. This nevertheless must be measured against the institution called the sanctity of the contract wherein the parties have explicitly agreed to be bound by the terms of their contract and/or agreement. The Tribunal's assertion that it could, even after a finding of legality, go on and decide whether the termination was unfair, unjust or harsh, can therefore only be justified if the circumstances of the case, demanded in the interest of justice, to be so. Each case depends on its own particular facts. Where in a situation there is in existence between parties a collective agreement which specifically provided procedures for termination of employment by notice or payment in lieu of notice, this Court holds the view that only the alleged breach of procedure to termination, not whether the allegation that the employer had acted unfairly in doing, is open for the Tribunal to make a finding on. This is consistent with the Court's decision in The State v The Permanent Arbitrator exp. Plantation Island Resort HBJ9/2000S. The Supreme Court in Central Manufacturing Company Ltd. v. Yashni Kant CACBV0010/2002 also lends support to this Court's view.

The Tribunal had relied on its earlier Award No. 14 of 2005. The Court notes however that it did concede in it that termination may not necessarily be harsh where it is done by way of notice or payment in lieu. It stated, at p.4 of the Award,

"... The Tribunal considers that what may amount to a harsh and unfair termination by way of summary dismissal, may not be harsh or unfair where the termination was by way of notice or payment in lieu of notice under the terms of Collective Agreement or in accordance with the provisions of the Employment Act."

Any dismissal or termination of employment that takes place pursuant to the terms of a collective agreement must be deemed fair. It cannot be otherwise. Both parties had agreed to it. They had signed it as binding on them. If it is carried out as permitted under the agreement and the action is not contrary to any law, then the dismissal is not only fair but lawful. In my view this is the only preoccupation of the Tribunal. The terms of reference, even if it is badly drafted as this Court finds, can only operate within a legal frame, that is to say, the Tribunal can only interpret the terms of reference where it is permissible to go by law. It cannot allow a broader interpretation that may infringe on the lawfulness of an act.

I believe that given the facts of this case there can be no other conclusion than that the Tribunal is limited in its jurisdiction to a finding whether the Applicant had or had not complied with Clause 4(i) of the Agreement. It may not go beyond that to address the issue of unfairness or harshness of the action, given the Court's determination above.

There is a further important factor that the Tribunal should have considered. All the employees covered under the Collective Agreement are monthly employees. Clause 1 of the Agreement clarifies as follows:

"1 Period of Employment

Except as hereinafter provided, employment shall be by the month".

There are no exceptions provided anywhere in the Agreement. As Fiji does not have an equivalent of Contracts of Employment Act that exist in other jurisdictions like England recognizing minimum of period of notice depending on the length of continuous employment, there is a presumption that common law also applied to employees who are covered under the collective agreement. This case is therefore different from the permanent employees in the Fiji Airlines Pilots Association case which was the subject of Award No. 14 of 2005 relied upon by the Tribunal in this dispute.

In the end I am satisfied that the Tribunal was wrong in its preliminary finding resulting in Award No. 32 of 2006. It had failed to take only relevant matters into consideration in coming to its finding, namely whether the termination of the employment of the Grievor Mr Peter Kitione, was made in accordance with the terms of the Collective Agreement. There will be an order of Certiorari removing the said Award into this Court and be quashed. The Applicant had in addition sought a declaration that it was entitled to terminate the Grievor's employment by payment in lieu of notice. The Court finds that this issue is still properly before the Tribunal to decide. In the circumstances there will be an Order that the matter be referred back to the Tribunal for the continuation of the hearing, with the limitation of its jurisdiction as found by this Court.

Orders

1. Order of Certiorari removing the Award No. 32 of 2006 to this Court and the said Award be quashed.

2. The matter be referred back to the Tribunal for hearing of the dispute with the terms of reference and jurisdiction herein defined.

Costs is summarily assessed at $400 against each of the Respondents.

JITOKO
JUDGE

At Suva
Thursday 7 August 2008