Kant v Central Manufacturing Company Ltd [2000] FJLawRp 70; [2000] 1 FLR 326 (7 December 2000)

[2000] 1 FLR 326

IN THE HIGH COURT OF FIJI

YASHNI KANT

v

CENTRAL MANUFACTURING COMPANY LIMITED

High Court Civil Jurisdiction
Scott, J
7 December, 2000
HBC 567/96S

Unfair dismissal - whether dismissal was breach of contract of employment - whether Plaintiff had started a new 3 year contract - whether Plaintiff was entitled to compensation.

The Plaintiff group finance manager and company secretary sought the defendant assistance in securing a permanent visa extension to Australia to allow him to continue working with the defendant company. After obtaining advice, the parent company issued a letter confirming its agreement to extend the employment of the plaintiff for 2-3 additional years. The General Manager dismissed the plaintiff on allegations that he had shown him public disrespect. The plaintiff filed a writ claiming unfair dismissal. An alternative action in defamation against Mr Thomas Raja, General Manager was not proceeded with and dismissed.

Held - (1) An employer was entitled to dismiss an employee when a contract of service based on trust has broken down and cannot be fully restored;

(2) An employer cannot rely on summary dismissal where the employer gives an employee 3 months' pay in lieu of notice;

(3) The "fair and reasonable" treatment of employees which may be expected of a large company equipped with a fully fledged personnel department cannot be compared to a small private organization;

(4) A provision of a contract as to fixed term, being oral, cannot be enforced.

The plaintiff failed to establish legal entitlement to summary dismissal and was contractually only entitled to 3 month's pay in lieu of notice, which he accepted.

[Note: this case was reversed on appeal].

Cases referred to in judgment
foll Diners Club (NZ) Ltd v Narayan FCA Civ. App. ABU 4/96
foll Korovulavula v PSC FCA Reps 94/415
cons Marlborough Harbour Board v Gaulden [1985] 2 NZLR 378

B.C. Patel for the Plaintiff
Barrie N Sweetman for the Defendant

7 December, 2000.

JUDGMENT

Scott, J

On 6 June 1995, while he was employed by the Defendant as Group Finance Manager and Company Secretary, the Plaintiff was dismissed. The questions before the Court are: whether the dismissal constituted a breach of the Plaintiff’s contract of employment and if so to what extent he is entitled to compensation. An alternative action in defamation against the Defendant's General Manager, Mr. Thomas Raju (Raju) was not proceeded with and Raju was dismissed from the suit.

The amended Statement of Claim was filed on 14 March 2000. The amended Defence was filed on 13 November 2000. An agreed bundle of 78 documents was filed by consent and there was also a Defence Exhibit of 6 pages. At the conclusion of the hearing (which was unfortunately delayed by the events of May 2000) both Counsel handed up and spoke to written submissions. I am grateful to both Counsel for their assistance to me during the trial.

The Plaintiff was his only witness. The Defendant Company (CMC) called Raju and 3 other witnesses.

The Plaintiff told me that he had joined CMC in 1988 as an accountant. It is not disputed that he was good at his job and he rose steadily within the company (Document 4). By April 1991, he had risen to the position of Group Accountant and that at that time his basic terms and conditions of employment were those set out in Documents 5, 6, 7 & 8.

In March 1992, the Plaintiff was appointed Group Finance Manager and Company Secretary. Beyond an announcement on the Company's notice board, there was no formal letter of appointment. However by July 1994, the Plaintiff’s salary package was as set out in Documents 39 & 40.

In February 1995, the Plaintiff went to see Raju. He explained that his permanent residence visa for Australia was due to expire in the following July he had to make a long term decision as to his future plans.

The Plaintiff's evidence at this point, is that Raju told him that he wanted the Plaintiff to stay on with CMC for a further 3 years. After thinking about it, the Plaintiff told Raju that providing CMC would help him to obtain a visa extension so he would be willing to stay on. Raju then agreed to the Plaintiff's application to take leave to travel to Australia on holiday with the additional aim of securing a visa extension. He recommended that the Plaintiff seek the assistance of CMC's parent company, Rothmans Holdings Ltd to secure the extension.

The Plaintiff went to Australia on or about 20 February (Document 42). On 1 March (Docs 43 & 43A) he wrote to Mr. Grant Leioux at Rothmans Holdings Ltd seeking his assistance by providing a "letter of secondment to serve Rothmans Fiji as Group Manager Finance and Information Services Company Secretary". On 13 March, after advice had been obtained from Coopers and Lybrand, immigration consultants, Document 47 was prepared. It is a letter from Leioux to Raju "confirming our understanding that you wish to extend the period of time (the Plaintiff) is to be employed in Fiji for an additional 2 or 3 years" and confirming Rothmans Holdings Ltd's agreement to "this extension".

After he returned to Fiji, the Plaintiff received a letter from Coopers and Lybrand seeking payment for their advice and submission in relation to the visa. This bill was paid by CMC with Raju's agreement.

The circumstances surrounding the extension of the visa are important and will have to be returned to since they provide the foundation for one of the Plaintiff's alternative claims, which is that the contract under which he was employed was not that under which he had previously been employed on the conditions already noted (Docs 5-8 and 39 & 40) but that it was a new fixed term contract of 3 years duration.

In May 1995, the Plaintiff received a request from one of his accountants, Naven Govind, to attend the annual conference of the Fiji Institute of Accountants. The Plaintiff approved the request. He told me that he did not consult Raju before giving his approval but that he did discuss the matter with Raju a little later. Raju was concerned that two accountants would be absent at the same time but the Plaintiff pointed out that at least part of the conference was to be held over the weekend. Raju was obviously not happy with what had occurred and on 1 June he sent an admonitory memorandum to the Plaintiff, copied to the other three managers, a copy of which is document 57.

This memorandum "very much" upset the Plaintiff and provoked him to send a fairly sharp reply on the same day, document 58.

The Plaintiff told me that he met Raju the next day, Thursday and also met him again on the day after but they did not discuss the exchange of memoranda. In the Plaintiff's words: "I did not get the impression that Raju was unhappy with me". However all this changed on the following Monday, 6 June.

The Plaintiff told me that as soon as he arrived at work that morning, he realised that something was wrong. Unusually, Raju's motor car was already there in the car park. He also saw a security guard in the Sales Manager's office. There was tension in the air. He spoke to Raju's secretary who told him that Raju had asked to see a copy of the terms and conditions of employment of senior managers. He decided to go and see Raju. When he went to see Raju, Raju dismissed him. Later that day he made a diary note of what had transpired at the meeting. A copy of the note is contained in paragraph 5 of his Solicitor's letter dated 19 December 1995, Docs 64, 65 and 66. With the exception of the last TVR paragraph on page 65, the note is accepted by the Defendant as being reasonably accurate. A copy of the termination letter referred to on page 65 is document 59 while a note which followed it and which apparently accompanied the delivery of the Plaintiff's personal effects at home is copied as document 60.

The Plaintiff told me that after he was dismissed by CMC, he tried unsuccessfully to find work in Fiji (Doc. 78). He then emigrated to New Zealand but was not able to find employment at all until 1997 when he was at last able to secure a position as assistant manager in a supermarket.

As will be seen from documents 62, 65 and 72 Raju believed that the Plaintiff had been publicly disrespectful to him, that he had fallen into the habit of belittling him behind his back and disclosing confidential information about him. When these matters were put to the Plaintiff in cross-examination, he conceded that he had a duty to respect his General Manager, that he had a duty to be faithful and loyal to him and that an employee should not breach the duty of trust and confidence placed in him by his employer. He also conceded that breach of these duties could, if serious, provide grounds for dismissal. But he denied that he had ever breached these duties as claimed by Raju. In particular, he denied denigrating Raju, denied ridiculing him, denied discussing his salary, expenses and other claims, denied criticising him and denied boasting that he had "told the old man off". His evidence was that he had never said anything derogatory about Raju to anyone at any time. While he might possibly have questioned some of the operational decisions taken by Raju, he certainly had never said anything along the lines of "what the hell does the old man know?" or "he should be retiring now, he is earning a fat salary and should not be here!".

The Plaintiff's case is that Raju had no valid ground for dismissing him, that the true reasons for the dismissal were never given to him, that he was never given an opportunity to refute the allegations made against him, that his contract of employment did not include a 3 month termination clause and that in all the circumstances his dismissal was both wrongful and unfair.

As would be expected, the Defendant's case is very different.

Thomas Raju told me that he joined CMC in 1961 and that he was CMC's Chief Executive Officer for 20 years before his retirement in 1998. He first came to know the Plaintiff in 1988 when he joined CMC. Although the Plaintiff's work performance was generally satisfactory and had even attracted some glowing references such as documents 32, 39 and 54, there were also problems, some of which are referred to in Document 25. I was told by Raju that the Plaintiff had something of a personality problem and that this problem became more noticeable with time. "He had a know it all type chip on his shoulder". Clearly, however, this problem was not sufficient to prevent his steady rise up the ranks to the senior position which he finally achieved.

Raju's account of the events in 1995 was in marked contrast to what I had been told by the Plaintiff. While Raju agreed that he and the Plaintiff did discuss the Plaintiff's visa problems, he denied any variation of contract. He told me that he had not seen the letter and associated documents from Grant Leioux (Docs 43, 44, 45, 46 & 47) before discovery took place in these proceedings. The Plaintiff was never an employee of Rothmans Limited. None of the CMC's other employees had fixed term contracts and he denied agreeing to one in the Plaintiff's case or to any "extension" of the contract under which he was employed. While he admitted reimbursing the Plaintiff's visa expenses, he had done this merely to help.

So far as the Accountants Conference was concerned, Raju did not dispute receiving or sending the memoranda. He did however emphatically deny that the Plaintiff's memorandum to him (Doc 58) was the reason he dismissed the Plaintiff. Although he was unhappy with the Plaintiff's reply, he "decided to let the matter rest" and gave the memorandum to his PA to file away. According to Raju, it was not at all what happened on 1 June which led to the Plaintiff's dismissal, but what happened 2 days later, that is on 3 & 4 June.

On 3 June a relatively junior member of staff, one Ajen Diwakar, came to see him. Raju told me that Dewakar came to complain about the Plaintiff who was his immediate Superior and to tell Raju that he could no longer work with him. In the course of the conversation, Diwakar told him that the Plaintiff had been making derogatory remarks about him (Raju) behind his back, had been belittling him and running him down. The Plaintiff had alleged that Raju had only reached his position by "sucking up to the white man", that he was too old, that he was overpaid and that he had falsified his expenses.

Raju told me that he was extremely upset by Diwakar's information and he therefore decided to call in his 2 other senior managers Messrs Subhag and Khan the following morning to see whether they would corroborate what Diwakar had told him. The next morning, in essence they did. Having no reason to disbelieve what he had been told "I decided that I could no longer trust the Plaintiff and work with him. He was very senior and had all the company details. I decided most probably to part with him. I thought about it over the weekend. I decided I could not trust him. On 6 June I went to work at 8 a.m. I personally typed the termination letter" (Doc 59). "Later in the morning my PA told me that the Plaintiff wanted to see me. The Plaintiff came in. He immediately became very apologetic about writing the 1 June memorandum. I told him I had no problem with it. I told him I can no longer trust you or work with you. I gave him the termination letter. It was in a sealed envelope. He pleaded to me to reverse my decision. I said I would think it over. I said there is a taxi waiting or I can have you dropped off. He was then taken home".

Following Raju's lengthy cross-examination, 3 more witnesses were called. The first was Ajendra Diwakar whose evidence was consistent with what Raju had told me. Diwakar told me that he had gone to see Raju to complain about the Plaintiff, his immediate superior. It had "become unbearable" to work with the Plaintiff. Whenever Raju overruled any decision taken by the Plaintiff he would make "personal and professional comments" about him. Examples were "what does the old fart know? He should be retiring. He is already on a salary of 2K+. He has no professional background" and "A person who cannot have his own child, how can he succeed as a professional?". In cross-examination Diwakar denied that his evidence was exaggerated or misleading.

The next 2 witnesses can be taken shortly, Mr. Khan told me that the Plaintiff had developed the habit of making disparaging remarks about Raju, particularly in the months prior to his dismissal. Typical of the remarks made were "I've just told the old man off" or "he is not qualified for his job". The Plaintiff had also implied that Raju was cheating on his expenses. On Saturday morning 4 June, he told Raju what he had been hearing.

The last witness was Joel Sahai, also a manager with CMC. Sahai told me that he had worked with the Plaintiff quite closely. He told me that "as time progressed I found that (the Plaintiff) had an air of egotism. He was arrogant at times with a chip on his shoulder. The other managers also found this. As time went on relations between him and his staff became strained". Mr. Sahai went on to tell me that on two occasions he had heard the Plaintiff say in the general office "I told off the old man this morning" and "the old man does not know his job".

The damaging allegations made by the 2 last witnesses were not challenged.

As I see it, the principal legal questions which have to be answered here are; (1) what was the Plaintiff's contract of service with the Defendant at the time that it was determined; (2) under what provision of the contract, if any, was he dismissed; (3) was the Defendant entitled to dismiss the Plaintiff; and (4) if not, what is the measure of damages?

In my opinion, the Plaintiff's contract of service was essentially the same as that set out at documents 5 to 8. This, I accept, was CMC's basic contract of service for senior managers. While of course, technically, each promotion would give rise to a new contract embodying a new higher salary and perhaps other enhanced entitlements, the basic terms would, I am satisfied, remain the same. I accept Raju's evidence that it was company policy not to enter into fixed term contracts. I note that Document 47 speaks not of a fixed term of 3 years but of "two or three" years. I also note that in Document 43 and 43A, the Plaintiff states that the purpose of the 3 years was to upgrade his qualifications which was not what he told me in evidence. He told me that CMC required him for 3 more years because "I had appointed 2 new accountants and there were other developments. That is why Raju wanted me to stay on for a further 3 years". On the evidence before me I do not accept that Raju ever intended to enter into a fixed 3 year contract of employment with the Plaintiff. In any event, as pointed out by Mr. Sweetman such a contract, being oral, would by statute be unenforceable.

The next question is which of the termination clauses was invoked by Raju. This topic was the subject of very much questioning, but to my mind the answer is quite straightforward. At one point in his evidence Raju said: "In my view I had a right summarily to dismiss him. But I took a softer stand. We paid the Plaintiff 3 months pay on severance. I exercised the option under the contract".

As pointed out by Mr. Patel, the Defendant's right summarily to dismiss the Plaintiff was not pleaded. The Defence, as pleaded, I have to say was somewhat unhelpfully bare. But as I see it, there was no need to plead the right summarily to dismiss since that right was not being relied upon. The Defendant's case was simply that it had given the Plaintiff 3 months pay in lieu of notice and required him immediately to leave the company. Now that, in my view, is not a summary dismissal. A summary dismissal would be a dismissal without notice and without pay. While I accept that document 5 does not specifically include a provision for payment in lieu of notice, the practice of paying in lieu is well established and in my view quite unobjectionable (see e.g. Chitty on Contracts 24th Edn para 3612).

In my opinion the most important question is the third: was the Defendant entitled to dismiss the Plaintiff?

In answering this question, Counsel took widely different approaches. Mr. Sweetman relied on Diners Club (NZ) Ltd v. Narayan FCA Civ. App. ABU 4/96 and argued that since CMC had an absolute right to terminate the contract on 3 months notice, the question of justification simply did not arise.

Mr. Patel, on the other hand, as will be seen from his very learned written submission, suggested that the dismissal was unjustified and unfair both substantively and procedurally.

As pointed out in Diners Club "Fiji does not have legislative provisions protecting employees from arbitrary or unjustified dismissal as is the case in England, Australia and New Zealand. Accordingly, the rights and liabilities of the parties fall to be determined in accordance with the proper construction to be placed on the termination clause".

The Fiji Court of Appeal was, of course, only dealing with the rights of parties in private as opposed to public law. In Fiji, as in England, Australia and New Zealand the concept of fairness plays an important part in public law and even in private law if it has a significant public element; see Korovulavula v. PSC FCA Reps 94/415). But here, we are dealing with a really quite small company with an even smaller managerial team who all worked very closely together (see Document 3) and it is against that background that the actions of Raju must be judged. While I do not for one moment question that:

"there are few if any relationships of employment, public or private to which the requirements of fairness have no application whatever" (Marlborough Harbour Board v. Gaulden [1985] 2 NZLR 378, 383),

the "fair and reasonable" treatment which may be expected of a large company equipped with a fully fledged personnel department will not be the same as that to be expected of a small private organisation of the type under consideration.

Having heard and seen the witnesses, I have no hesitation in concluding that the Plaintiff had, in fact, as alleged, fallen into the habit of denigrating Raju both by making hurtful personal remarks about him and by questioning his professional competence and integrity. In these circumstances, I find that Raju was fully entitled to conclude that the essential relationship of trust between them without which they could not work together had been irretrievably broken. Disloyalty (like dishonesty) is quite different from mere laziness or incompetence or lack of commitment each of which can be the subject of improvement. Once trust between individuals has been broken, it cannot ever fully be restored.

As I find it, Raju, after making all necessary and reasonable enquiries, reached the sensible conclusion that he could no longer trust the Plaintiff and that therefore, the Plaintiff could no longer work with him. I accept that the memorandum of 1 June was not the cause of the dismissal not only because I accept Raju's evidence on that point but also because it is consistent with what the Plaintiff himself told me. "On Thursday and Friday I did not get the impression that Raju was unhappy with me". Granted, Raju had already decided to dismiss the Plaintiff when they met on the morning of 6 June but that he fairly agreed to reconsider his decision is evident from Document 60. The Plaintiff's claim really amounts to the suggestion that Raju acted capriciously. On all the evidence before me I am satisfied that he did not.

In my opinion, the Defendant was contractually entitled to dismiss the Plaintiff on 3 months notice. It paid him 3 months salary in lieu of notice which he accepted. I do not find that the Plaintiff has established any other legal entitlement and accordingly, the action fails and is dismissed.

Action is dismissed.

Marie Chan