Hakik v Voko Industries Ltd [2001] FJLawRp 115; [2001] 1 FLR 482 (14 December 2001)

ABDUL HAKIK v VOKO INDUSTRIES LIMITED

High Court Civil Jurisdiction

5 -9 February, 22 February, 17 July, 14 December, 2001

HBC 142/98S

Wrongful dismissal – categories of payment in lieu of notice – whether payment in

lieu amounts to breach of contract – whether former employee legally entitled to pay and benefits until he found alternative employment

The Plaintiff brought this claim for damages for wrongful dismissal from his position of Sales and Overseas Business Manager. He claimed for arrears of salary and allowances, motor vehicle allowance and entertainment allowance for a 3 year 3 month period, 92 days unpaid leave and 33.3 working days annual leave and wrongful seizure of motor vehicle. The contract of employment provided for termination by one month's notice by either party. The terms of employment were never varied during the period of the Plaintiff's employment. He also refused to return a motor vehicle but the Defendant later seized it. The Defendant sought to terminate the employment relationship by payment in lieu of notice. The Plaintiff claimed his employment could be terminated only by one month's notice and since he received only sixteen days notice, he was essentially employed by the Defendant until he found alternative employment and as such should be paid throughout the period of unemployment. The Court rejected a claim that he was not formally dismissed, in favour of a practical approach facing the company at a time of serious financial difficulties.

Held – (1) The Defendant acted in accordance with the law in tendering the Plaintiff a cheque for one month's salary in lieu of that period of notice stated in his letter of appointment.
(2) It is most unlikely that any company would make a promise to an employee in consideration of his not taking his leave when it fell due he should receive double the normal rate of salary for it unless there was some evidence in the form of minutes of a company meeting of directors to confirm this. In the face of denial by the company, normal rates will apply.

Claim for 57 days leave, compensation for 35 days leave, payment in lieu of notice and travelling expenses allowed with interest at the rate of 6 percent from the date the Writ was issued to the date of judgment.

Cases referred to in Judgment
Delaney v Staples [1992] 1 AC 687
Gothard v Mirror Group Newspapers Ltd. [1988] 1 CR 729
Yashni Kant v Central Manufacturing Company Limited [2000] 1 FLR 326

Tevita Fa for the Plaintiff
Devanesh Sharma and Davendra Prasad for the Defendant

14 December, 2001

JUDGMENT

Bryne, J

The Plaintiff at all material times was an employee of the Defendant holding the position of Sales and Overseas Business Manager. He had begun employment with the Defendant on the 1st of April 1987 as its Financial Controller and over the next five years received salary increases and on the 23rd of March 1991 was promoted to the position of Sales and Overseas Business Manager. He was regarded by the Defendant as a very satisfactory employee but this did not save him from being dismissed by the company on the 31st of August 1995, due to the serious financial problems which the Defendant was then suffering.

In this action he claims damages for wrongful dismissal consisting of arrears of salary and allowances for the period August 1995 to November 1998 in the sum of $80,000.00, motor vehicle allowance for that period in the sum of $24,340.00 and entertainment allowance of $6,000.00 for the same period. In addition he makes a claim for unpaid leave from the 1st of April 1987 to the 31st of March 1992, a period of sixty-five days less eight days taken and thirty-five days leave allegedly due to him for the period 1st of April 1992 to 11th of August 1995 in the sum of $3,230.77.

He also makes a claim for 33.3 working days annual leave from the 1st of September 1995 to the 30th of November 1998 when he obtained a position as Accountant with Rewa Dairy. The amount claimed for this period is $3,000.00.

The Plaintiff's total claim is for the sum of $127,093.85.

The relevant facts which are not in dispute are that when the Plaintiff was first appointed to the Defendant in 1987 he was given a letter dated 9th March 1987 informing him, so far as relevant, that his employment which began on the 1st of April 1987 was subject to termination by one month's notice of either side. Annual leave was to be taken at the rate of ten working days per annum. These terms of employment were never varied during the period of the Plaintiff's employment by the Defendant.

In a letter dated 9th August 1995 to the Plaintiff the Defendant informed him that the Chairman of the Defendant's Board, Mr L Qarase had decided with Mr JM Jun, the Managing Director that the Plaintiff tender his resignation from the Company with effect from 25th August 1995.

In a letter dated 23rd August, 1995 to the Defendant the Plaintiff asked the Defendant to specify the reasons if any why the Defendant wished the Plaintiff to resign. Until the Defendant gave evidence in this case through Mr. Jun I am satisfied that it did not give the Plaintiff any reasons for its call for him to resign.

On the evening of 31st August 1995 the Plaintiff received a letter delivered to him at his house by the Defendant's Accountant, a Mr Narain wherein two cheques were enclosed. The first cheque was for $1,508.76 being the Plaintiff's salary for the month of August. The second cheque was for $1,409.58 the amount which the Defendant calculated was the Plaintiff's travel expenses overseas on behalf of the Company.

The letter also gave the Plaintiff notice that he should return to the Defendant the Company motor vehicle registered number CI696 which the Plaintiff had been using.

The Plaintiff refused to accept the cheques on the ground that he was still employed by the Defendant. He also refused to return the motor vehicle for the same reasons but this was later seized by the Defendant. The Plaintiff disputed the Defendant's right to resume possession of the vehicle and the Plaintiff makes a claim for the sum of $20.00 per day from 1st of September 1995 to the end of November 1998 for $24,340.00 being the estimated amount due to him at the rate of $20.00 per day for the use of this vehicle.

The parties called only one witness each. The Plaintiff gave evidence in his own cause and Mr Jun Mook Jun, the Defendant's Managing Director, testified for the defence.

Not un-naturally the Plaintiff claimed that he had been treated wrongly by the Defendant in view of the fact, which the Defendant through Mr. Jun accepted, that he was at all times a very conscientious and hard worker, a fact established by his promotion and various salary increases he received.

Much evidence was given about his claim for fifty-seven days leave which he said he could not take because of pressure of work. He stated that Mr. Jun had agreed that in consideration of his not taking his leave when it fell due he should receive double the normal rate of salary for it. Mr. Jun denied making any such promise and having observed both witnesses, I prefer to believe Mr. Jun on this. I consider it most unlikely that any Company would make such a promise to an employee unless there was some evidence in the form of Minutes of a Company Meeting of Directors to confirm this. The Plaintiff tendered a letter dated 25/5/92 purporting to contain a note from Mr. Jun agreeing to this but I accept Mr. Jun's evidence that he did not do so. However I am satisfied that the Plaintiff is entitled to be paid at the normal rate for this leave which he was unable to take because of pressure of work and I allow this claim in the amount of $5,261.50. I also accept that the Plaintiff is entitled to payment in lieu for thirty-five days leave not taken again because of pressure of work. I allow this claim in the sum of $3,230.77.

The Plaintiff claims the sum of $3,000.00 for leave allegedly due from the 1st of September 1995 to 30th of November 1998 when he began employment with Rewa Dairy. This is on the footing that the Plaintiff was still employed by the Defendant until the 31st of November 1998 but for reasons which I shall give shortly I do not accept that proposition.

The Law

The basis of the Plaintiff's claim is that because under his letter of appointment his employment could be terminated only by one month's notice and since he received only sixteen days notice, he remained in the employment of the Defendant until he obtained his position with Rewa Dairy. Most employment contracts contain a clause similar to that governing the Plaintiff's employment with Rewa Dairy that employment may be terminated by one month's notice by either party or one month's salary in lieu of notice. The Plaintiff says that his term of engagement made no reference to a month's salary in lieu of notice.

I cannot accept this submission. The law governing dismissal by payment in lieu of notice is in my judgment now made clear by the speech of Lord Browne-Wilkinson in Delaney v Staples [1992] 1 AC 687 at pp 692 and 693 in which the other members of the House concurred. His Lordship said this:

"The phrase 'payment in lieu of notice' is not a term of art. It is commonly used to describe many types of payment the legal analysis of which differs. Without attempting to give an exhaustive list, the following are the principal categories.

(1) An employer gives proper notice of termination to his employee, tells the employee that he need not work until the termination date and gives him the wages attributable to the notice period in a lump sum. In this case (commonly call 'garden leave') there is no breach of contract by the employer. The employment continues until the expiry of the notice: the lump sum payment is simply advance payment of wages.

(2) The contract of employment provides expressly that the employment may be terminated either by notice or, on payment of a sum in lieu of notice, summarily. In such a case if the employer summarily dismisses the employee he is not in breach of contract provided that he makes the payment in lieu. But the payment in lieu is not a payment of wages in the ordinary sense since it is not a payment for work to be done under the contract of employment.

(3) At the end of the employment, the employer and the employee agree that the employment is to terminate forthwith on payment of a sum in lieu of notice. Again, the employer is not in breach of contract by dismissing summarily and the payment in lieu is not strictly wages since it is not remuneration for work done during the continuance of the employment.

(4) Without the agreement of the employee, the employer summarily dismisses the employee and tenders a payment in lieu of proper notice. This is by far the most common type of payment in lieu and the present case falls into this category. The employer is in breach of contract by dismissing the employee without proper notice. However, the summary dismissal is effective to put an end to the employment relationship, whether or not it unilaterally discharges the contract of employment. Since the employment relationship has ended no further services are to be rendered by the employee under the contract. It follows that the payment in lieu is not a payment of wages in the ordinary sense since it is not a payment for work done under the contract of employment.

The nature of a payment in lieu falling within the fourth category has been analysed as a payment by the employer on account of the employee's claim for damages for breach of contract. In Gothard v Mirror Group Newspapers Ltd [1988] 1 CR 729, 733, Lord Donaldson of Lymington M.R. stated the position to be as follows:

"If a man is dismissed without notice, but with money in lieu, what he receives is, as a matter of law, payment which falls to be set against, and will usually be designed by the employer to extinguish, any claim for damages for breach of contract, i.e. wrongful dismissal. During the period to which the money in lieu relates he is not employed by his employer."

In his judgment in Yashni Kant v Central Manufacturing Company Limited HBC 567 of 1996S delivered on the 7th of December 2000 Scott J said at page 8:

"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)."

He concluded his judgment by saying at page 10:

"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."

I respectfully agree.

Although apparently Delaney v Staples was not cited to the Judge nevertheless his remarks are entirely consistent with those of Lord Browne-Wilkinson.

The Plaintiff submits that he was never formally dismissed by the Defendant in that there was no evidence of any resolution by the Board of the Company dismissing him. In this regard I consider one has to be practical. It is clear that the Defendant no longer wished to employ the Plaintiff because of the financial problems it was experiencing and I am satisfied that the Defendant acted in accordance with the law in tendering the Plaintiff a cheque for one month's salary in lieu of that period of notice stated in his letter of appointment. The result is that I reject the greater part of the Plaintiff's claim but I am satisfied that he is still owed the amount of $5,261.50 (57 days leave) and $3,230.77 compensation for (35 days leave). In addition he must receive again the amount of $1,508.76, payment in lieu of notice and $1,409.58 travelling expenses. This latter amount was set off against his claim for a larger sum after deducting a debt due by Saheb Holdings Ltd which I am satisfied the Plaintiff agreed to pay. His agreement was mentioned in the Defendant's letter to him of 31st August 1995 and although in evidence the Plaintiff denied any such agreement I prefer to accept the Defendant's evidence on this.

To summarise I hold the amount due to the Plaintiff consists of:

$5,261.50

$3,230.77

$1,508,76

$1,409.58

giving a total for which I give judgment of $11,410.61. This will carry interest at the rate of 6 percent from the date the Writ was issued on the 6th of March 1998 to the date of judgment 14th December 2001 a period of 3 years - $2,568.00.

There will therefore be judgment for the Plaintiff against the Defendant in the sum of $13,978.61. The Defendant must also pay the Plaintiff's costs which are to be taxed if not agreed.

Judgment for Plaintiff.

Mereseini Rakuita Vuniwaqa and Marie Chan