Koroi v Suva City Council [2009] FJHC 370; HBC443.2005 (11 December 2009)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION HBC 443 OF 2005

BETWEEN:

SEMITI KOROI
PLAINTIFF

AND:

SUVA CITY COUNCIL
DEFENDANT

Mr K Marawai for the Plaintiff
Mr N Lajendra for the Defendant

JUDGMENT

This is a claim for damages arising out of the termination of the Plaintiff’s employment relationship with the Defendant.

The Plaintiff’s terms and conditions of employment were initially set out in broad terms in a letter of appointment dated 6 May 2004. So far as is relevant, that letter stated:

"...

I am pleased to inform you that Council at its Special Meeting held on 28 April 2004 has resolved to offer you the position of Director Administration and Operations on Contract for a period of 3 years with an annual salary of $45,000, performance bonus of 10% of base salary per annum, housing allowance of $300 per month and limited use of a fully serviced and maintained Council vehicle. You will be placed on a probationary period of six months.

Please confirm your acceptance of the offer or otherwise not later than 17 May 2004.

I annex Contract Document and Job Description for your perusal.

Should the offer be acceptable, then please confirm by signing on the duplicate copy of this letter as well as the Contract Document and return both to the undersigned by 17 May 2004."

The Plaintiff did sign the acceptance and returned the document on about 17 May 2004.

A document known as Individual Work Contract for Position of Director Administration and Operations (the Agreement) was subsequently signed by the parties.

Clause 5.1 of the Agreement stated:

"The terms of this contract shall be for a period of 3 years commencing on 17.05.04 subject to a probationary period of six (6) months, the substantive appointment shall be confirmed after satisfactory performance."

This clause means that if performance over the six months probationary period was assessed as satisfactory, the Plaintiff’s substantive appointment would be confirmed. It is clear that performance over the first six months is what is to be assessed. The clause implies that the performance assessment and hence confirmation or non-confirmation of the substantive appointment should occur at the conclusion of the probationary period of six months.

The agreement also included the terms and conditions that had been set out in the appointment letter.

In the Minutes of the Pre-Trial Conference signed by the parties it was agreed that the Defendant reviewed the Plaintiff’s performance in March 2005. There did not appear to be a performance review when it should have taken place on or about 17 November 2004. Certainly, I accept that the Plaintiff was not at any time informed that such a review had taken place. Although not applicable, clause 9 of the Agreement does provide a useful guide as to what form such a review might reasonably have been expected to take.

Although there was no performance review and hence no formal confirmation of the substantive appointment in accordance with clause 5.1 at the conclusion of the six month probationary period the Plaintiff continued in employment on the same terms and conditions after 17 November 2004. The Plaintiff continued in employment until 31 March 2005. This was some four and a half months beyond the probationary period.

It was not disputed that the Plaintiff had not at any stage in the period between 17 May 2004 and 31 March 2005 been formally advised by the Defendant that he had been confirmed in the substantive appointment.

The issue that arises from the evidence is the question of the status of the Plaintiff in the period between 17 November 2004 when the six months probation period ended and 31 March 2005 when the Plaintiff’s employment was terminated. Was it that by their conduct the parties had varied the Agreement to extend the probation period beyond six months? Alternatively should the Plaintiff be classified as a temporary employee acting in the position for the period between 17 November 2004 and 31 March 2005. Another possibility is that in the absence of any express confirmation, was the Plaintiff entitled to assume that, as a result of his continued employment in the position on the same terms and conditions, he had been confirmed in the substantive position.

At the outset it should be noted that this was a contract of service that was made for a period of three years and as such was required to be made in writing pursuant to section 32 of the Employment Act Cap 92 (the Act). As a result any variation to the Plaintiff’s contract was required to be in writing. The evidence before the Court did not establish that the parties had agreed in writing to a variation of the Plaintiff’s contract of service.

If there was no variation to the contract, then there was no variation to the period of probationary employment that was specified in clause 5.1 of the Agreement. That period commenced on 17 May 2004 and came to an end on 17 November 2004. It was not open to the Defendant to unilaterally extend the probationary period. Furthermore, in the absence of any variation in writing, the nature of the employment arrangement could not be changed. The Plaintiff was engaged under the contract in a substantive full time position for three years, subject only to satisfactory performance in the initial six months probationary period.

There was evidence before the Tribunal to indicate that the Plaintiff’s performance during the initial six months of his employment was the subject of some discussion at Council meetings. The Court notes that although the Defendant did lead such evidence it did not offer any convincing explanation as to why the Council did not invoke clause 5.1 of the Agreement at the conclusion of the probationary period.

By continuing to employ the Plaintiff after the probationary period on the same terms and conditions, the Defendant by its conduct has impliedly confirmed the Plaintiff in the substantive appointment for the balance of the three year contract. Whatever concerns may have arisen during that probationary period, the Council did not act on them and advise the Plaintiff that his performance was unsatisfactory and that he had not been confirmed.

By letter dated 1 April 2005 the Plaintiff was informed that his services were no longer required. The first two paragraphs of that letter are relevant to the present proceedings and stated:

"Non Confirmation of Appointment and Termination of Services"

Council had resolved at its Ordinary Meeting of 31 March 2005 not to confirm your appointment as Director Administration and Operations due to non performance while you were under probation.

In this regard your services to Council had ceased effectively as at 31 March 2005.

...."

The termination of employment was required to be effected in accordance with the provisions of the contract of service.

Clause 12 of the Agreement deals with termination of employment. Apart from clause 12.2, the remainder of clause 12 is to some extent relevant to the present proceedings. The remaining provisions state:

"12.1 Employment under this contract will terminate on one of the following events:

(a) The commencement of a new contract for another position within the Council;

(b) Expiry of the term – see Clause 5;

(c) Resignation – see Clause 12.2;

(d) Dismissal for cause – see Clause 12.3 – 12.5;

(e) Termination on notice – see Clause 12.6

12.2 ...

12.3 The Town Clerk/Chief Executive Officer may dismiss you on any of the following grounds:

(a) Incompetence;

(b) Serious incompatibility with colleagues that you have a key relationship with;

(c) Unfitness for health reasons such that you are incapable of continuing your duties;

(d) Misconduct affecting either your ability to work within the Council’s organization or reflecting adversely on the Council;

(e) Persistent failure to achieve required performance standards.

12.4 In no case may the Town Clerk/Chief Executive Officer exercise the power of dismissal without first providing you with notice in writing of any concerns, and giving a reasonable opportunity to make explanations on the concerns before issuing a formal warning or dismissing you as appropriate. If the Town Clerk/Chief Executive Officer decides to issue a formal warning you shall have a reasonable opportunity to rectify the failings referred to. In no case shall the Town Clerk/Chief Executive Officer dismiss you under (a) (b) or (e) without first having previously warned in writing on at least two occasions of the matters of concern and the improvements required and giving three (3) months notice of the content.

12.5 Nothing in this clause shall affect the Town Clerk/Chief Executive Officer’s right to dismiss without notice or warning for serious misconduct.

12.6 Notwithstanding anything in clause 12, at any time during the term of this contract, if the termination is effected that does not come under any other clause, then you shall be paid the unexpired portion of the contract or six (6) months pay, whichever is more."

The termination letter indicated that the Plaintiff’s employment was terminated due to non-performance while he was under probation. That is a reference to clause 5.1 of the Agreement. The Defendant claimed that as it had proceeded under clause 5.1, clause 12.6 did not apply to the circumstances of this case.

However, the Defendant cannot rely on clause 5.1 of the Agreement since the Plaintiff’s employment had been terminated some four months after the probationary period had come to an end. By that time the Plaintiff was, if not by express confirmation, then certainly impliedly, confirmed in the substantive appointment. There was no evidence of any variation in writing to the Agreement whereby the probationary period of six months had been extended.

It is clear from the termination letter that the Plaintiff’s employment was terminated without notice or payment in lieu of notice. It was therefore summary dismissal. Clause 12.5 of the Agreement allows for termination by way of summary dismissal.

The right of the Defendant to summarily dismiss under clause 12.5 is a common law right, the exercise of which has been modified in Fiji by statute. At the relevant time the statutory modification was contained in section 28 of the Employment Act.
That section stated:

"28 An employer shall not dismiss an employee summarily except in the following circumstances:-

(a) where an employee is guilty of misconduct inconsistent with the fulfillment of the express or implied conditions of his contract of service;

(b) for willful disobedience to lawful orders given by the employer;

(c) for lack of the skill which the employee expressly or by implication warrants himself to posses,

(d) for habitual or substantial neglect of his duties;

(e) for continual absence from work without the permission of the employer and without other reasonable excuse."

In addition to establishing that the employee’s conduct falls within one of the above circumstances, the Employer must also show that the conduct was sufficiently serious to justify the Employer regarding the contract as being at an end at common law.[See: Fiji Public Service Association and Satish Kumar –v- The Arbitration Tribunal and Another: Fiji Court of Appeal Unreported Civil Appeal No. 13 of 1999 delivered 19 February 2002].

In the present case, the termination letter did not specify any misconduct of a serious nature and as a result the Court is satisfied that there was no justification for the Plaintiff’s summary dismissal under clause 12.5 of the Agreement.

As a result the Court has concluded that the termination was effected contrary to the arrangements that are specified in clause 12.6. The termination of the employment relationship occurred during the term of the contract and it was not done (or effected) under any other clause in the Agreement. As a result the Plaintiff is entitled under that clause to be paid the unexpired portion of his contract. This is the period from 1 April 2005 to 16 May 2007 and is clearly more than six months.

In assessing the Plaintiff’s entitlement under clause 12.6 I have considered the submissions from Counsel and the relevant provisions in the contract of service.

The unexpired portion of the Plaintiff’s contract includes his wages or salary that would have been earned. The entitlement under clause 12.6 also includes any benefit to which the Plaintiff was contractually entitled and has been denied as a result of the dismissal.

I accept the Plaintiff’s net loss of wages under the contract for the period 1 April 2005 to 16 May 2007 as being $72,697.03. I also accept that the Plaintiff is entitled to the loss occasioned by the non receipt of the Defendant’s payments to the Plaintiff’s FNPF account which I fix at $9783.91. In fixing these amounts I have accepted the material in the table that was submitted to the Court by the Defendant rather than the various formulae provided by Counsel for the Plaintiff.

In addition to these items, additions to or increases in basic salary may be included in the calculation of the entitlement under clause 12.6 if the Plaintiff was contractually entitled to them. Clause 8 (1) of the Agreement states:

"The salary rate will be reviewed annually by your Town Clerk/Chief Executive Officer on the basis of market rates, skills development, ability and performance as determined by the outcome of the performance review process outlined in Clause 9 below."

Furthermore clause 8 (4) states:

"A ten percent merit payment on the basic annual salary will be paid to you on satisfactory performance based on competency and meeting the strategic objectives as outlined by the performance review process in clause 9 below."

On a careful reading of these two clauses, the Court is satisfied that the intention was that there would be a 10% increase in salary upon a review that was to take into account the matters referred to pursuant to a process that was outlined in clause 9.

This was a benefit to which the Plaintiff had an entitlement and there is no reason why it should not be included. As a result I award the Plaintiff his entitlement under clauses 8 (1) and 8 (4) at 10% on his net salary for the period 1 April 2005 to 16 May 2007.

There is a further monetary entitlement under clause 8 (2) which provides for the payment of a housing allowance in the following terms:

"Housing allowance would be paid to you at the rate of $300.00 a month for every completed month during the term of your contract."

I accept that this is a contractual entitlement and the Plaintiff is entitled to the unexpired portion under clause 12.6. I award the amount of $7,500.00. In doing so I have accepted the calculations provided by the Defendant in preference to the calculations provided by Counsel for the Plaintiff.

There is one further entitlement that is sometimes referred to as a benefit in kind. Clause 8 (3) provides for the provision of a vehicle in the following terms:

"A fully maintained Council vehicle will be allocated to you for official and limited private use."

As a matter of construction clause 8 (3) entitled the Plaintiff to use the vehicle both for official purposes and for limited private use. The Plaintiff gave evidence that the allocated vehicle was a 1998 Toyota Camry four door sedan vehicle. He did not give any evidence as to what mileage he travelled on average in any given week/month. He gave no evidence as to any estimate of the percentage of distance travelled or the use that could be attributed to private use.

An amount of $28,810.17 was claimed in the Statement of Claim as special damage for loss of the car allowance. This amount was also subsequently included in further particulars of special damage.

The Plaintiff gave no evidence as to how this amount was calculated. Counsel for the Plaintiff submitted that it was based on a model designed by Price Waterhouse Coopers. There was no evidence adduced in respect of this aspect of the claim. I am unable on the material before the Court to make any calculations in respect of this entitlement. It must be refused.

As a result I have assessed the entitlement to the Plaintiff under clause 12.6 as $72,697.03 for loss of wages, $9783.91 for loss of employer’s contribution to FNPF, $7269.70 for loss of 10% merit increase under clauses 8 (1) and 8 (3) and $7,500.00 for loss of housing allowance under clause 8 (2) of the Agreement. The total amount is $97,550.64.

The Plaintiff also claims damages. The question of damages for wrongful dismissal was discussed definitively by the Fiji Supreme Court in Central Manufacturing Company Limited –v- Yashni Kant (Civil Appeal No 10 of 2002 delivered 24 October 2003). The Court stated at page 21:

"... there is an implied term in the modern contract of employment that requires an employer to deal fairly with an employee, even in the context of dismissal. The content of that duty plainly does not extend to a requirement that reasons be given, or that a hearing be afforded at least where the employer has the right to dismiss without cause, and to make a payment in lieu of notice. It does extend, however, to treating the employee fairly, and with appropriate respect and dignity, in carrying out the dismissal. ... where the dismissal is carried out in a manner that is unreasonably humiliating and distressing, there is no reason in principle why a breach of this implied term should not be found to have occurred."

The evidence established that the Plaintiff had been made aware that between 17 May 2004 and 31 March 2005 there were some aspects of his work performance that had caused concern within the Council.

Under those circumstances the Employer was required to follow the procedure outlined in clauses 5.1 or 12.4 of the Agreement. The evidence before the Court indicated that there had not been any bona fide attempt to comply with the steps set out in clause 12.4. What purported to be termination under clause 5.1 for non satisfactory performance during the probationary period was clearly unfair in the sense that it occurred some months after the probationary period had come to an end.

The Court accepts the Plaintiff’s evidence that the manner in which the dismissal was effected caused him distress in the sense that the letter itself affected his reputation and made it more difficult for him to obtain further employment. This in turn then affected his self esteem.

Although the contract period would have ended on 16 May 2007, the Plaintiff was not able to find further employment until August 2009. Although the Plaintiff’s employment had been terminated with effect from 1 April 2005, he continued to seek employment in Suva until March 2007 when he moved to Labasa in search of employment. Under the circumstances the Plaintiff is entitled to damages in respect of the consequent anxiety up to August 2009. The difficulty experienced in finding new employment in part flowed from the damage done to the Plaintiff’s reputation as a result of the breach of the implied term that required the Employer to treat the Plaintiff fairly even in the context of dismissal. I fix that amount at $5,000.00. I consider that damages of this nature are now appropriate in Fiji in view of the Supreme Court’s decision in the Central Manufacturing Company v. Kant (supra). The Supreme Court accepted that in appropriate cases where it could be shown that an employer had engaged in unfair dealing in the course of a dismissal, injuries such as damage to self-esteem as a result of on-going unemployment may be worthy of compensation.

The Plaintiff claimed exemplary damages in his Statement of Claim. It is well established that such damages have never been and cannot be awarded for breach of any contract (per Lord Steyn in Johnson –v- Unisys Limited [2001] UKHL 13; [2001] 2 All ER 801 at page 807). The law of contract does not aim to punish the contract-breaker.

The remaining issue concerns the question of mitigation. The first observation concerning this matter is that the Defendant did not plead in its Defence that the Plaintiff was under a duty to mitigate. Under Order 18 of the High Court Rules this is a matter that the Defendant ought to have pleaded if it intended to put mitigation in issue.

The Plaintiff was cross-examined on his attempts to gain employment subsequent to his dismissal. There was no objection to those questions by Counsel for Plaintiff.

In view of the issue having been raised in cross-examination, the Court has inferred that the failure to plead mitigation in the Defence was an omission rather than based on a considered conclusion that the duty did not apply in the circumstances of the case. Both Counsel addressed the issue of mitigation in their closing submissions.

The Court has derived some guidance on the matter from the decision of the English Court of Appeal in Abraham v The Performing Right Society [1995] EWCA Civ 35; [1995] ICR 1028. In that case Mr Abraham’s five year fixed term contract of employment came to an end on 31 March 1992. It was a term of that contract that in the event of the employer terminating employment either at the end of the fixed term contract period or at any time during the final two years of such period, Abraham was "entitled, other than in the case of dismissal for gross misconduct, to a period of notice of two years or an equivalent payment in lieu."

Although the parties were not able to reach an agreement concerning the terms and conditions of a further contract, it was agreed that Abraham would remain in his post for a further two years until 31 March 1994 under the terms of his existing contract.

On 14 October 1992 the Employer summarily terminated the Plaintiff’s employment. The Plaintiff claimed that as the termination was without notice he was entitled to two year’s payment in lieu under the agreement made in March 1992.

The Court of Appeal held that the Agreement reached in March 1992 (at the conclusion of the five year fixed term contract) included all the terms that were in the previous agreement.

The Court of Appeal also held that the provision in the contract for payment in lieu gave rise to a contractual entitlement. The Court accepted that by terminating the Plaintiff’s employment without notice, the Employer was electing between the options of either giving notice or making a payment in lieu of notice. The Plaintiff was entitled to that payment as a contractual right and not as liquidated damages. As such there was no duty imposed on the Plaintiff to mitigate. The Court of Appeal then went on to discuss the position in the event that the payment in lieu was to be regarded as liquidated damages and concluded that there was still no duty to mitigate.

In the present case clause 12.6 provided for payment of the unexpired portion of the contract or six months pay, whichever is more in the event that the termination does not come under any other clause (of the agreement). The reference to any other clause is taken as meaning any clause of the agreement other than clause 12.

The termination was not properly effected under clause 5.1. Furthermore, the termination was not effected under clauses 12.3 and 12.4. It certainly was not a proper exercise of the right to summarily dismiss under clause 12.5.

The conclusion is that the termination came under clause 12.6 and as a result the Plaintiff had a contractual entitlement to the payment for which provision is made in that clause. Therefore there was no duty to mitigate.

In the event that the payment that is referred to in clause 12.6 should more properly be regarded as liquidated damages, then once again there was no duty to mitigate.

In respect of the non-pecuniary damages, the Plaintiff gave evidence on the issue of mitigation that was credible and reasonable. So far as it is necessary to make a finding on mitigation, the Plaintiff has discharged the onus and did comply with the duty to mitigate. The Plaintiff eventually managed to secure employment in August 2009 as a part time referee in the Small Claims Tribunal in Labasa.

I therefore award the Plaintiff damages in the sum of $102,550.64 with interest at 5%. I award costs to the Plaintiff on a party-party basis to be agreed and if there is no agreement to be taxed.

W D Calanchini
JUDGE

11 December 2009
At Suva