Metutera v Kiribati Shipping Services Ltd [2007] KICA 16; Civil Appeal 07 of 2007 (30 July 2007)

IN THE KIRIBATI COURT OF APPEAL
CIVIL JURISDICTION
HELD AT BETIO
REPUBLIC OF KIRIBATI

Civil Appeal No 7 of 2007

BETWEEN:

TOAURIRI METUTERA
Appellants

AND:

KIRIBATI SHIPPING SERVICES LTD
Respondents

Before: Hardie Boys JA
Tompkins JA
Paterson JA

Counsel: Steven Earl for appellant
Taoing Taoaba for respondent

Date of Hearing: 25 July 2007
Date of Judgment: 30 July 2007

JUDGMENT OF THE COURT

Introduction

The appellant, the plaintiff in the High Court, was the master of the vessel LC Betiraoi which sailed in the Linnix Islands, and which was owned by the respondent, the defendant the High Court. As a result of mechanical problems and mishaps, the detail of which need not be set out for the purposes of this judgment, the vessel ceased sailing.

On information provided either by the appellant or by the respondent’s management, the General Manager of the respondent recommended that the appellant be suspended. However, the Board of the respondent concluded that the appellant should be held responsible for what had occurred and that he be dismissed from the respondent’s service. The Board reached this decision without giving any notice to the appellant that dismissal was being considered, without hearing the appellant in person and without giving him the opportunity to make submissions in writing on whether he should be dismissed.

The appellant brought these proceedings against the respondent, alleging that he had been wrongfully dismissed in that the Board made the decision to dismiss him without giving him the opportunity to be heard. The Chief Justice held that the action could not succeed and entered judgment for the respondent. From that decision the appellant has appealed.

Respondent’s Conditions of Service

The parties agree that the terms of the appellant’s contract of service with the respondent are governed by the respondent’s Conditions of Service. Clause 7 (5) and (6) provide:

(5) Suspension for Good Cause

The General Manager shall have the power to suspend the appointment of a Company employee, provided that he shall forthwith report to the Chairman of the Board the facts of such suspension, together with the grounds for his action and any statement an employee may wish to make. The Company employee shall have a reasonable opportunity of being heard by the Board;

The Board may revoke the suspension or the company may remove the employee from his office for good cause; or some other action taken.

(6) Removal for Good Cause

Any company employee may be removed from office by the Board for what the Board, after due consideration, deems to be good cause.

Good Cause

For the purposes of sub-section (5) and (6) above "good cause" includes but shall not be limited to:

. . .

. . .

conduct of a nature which renders the person unfit to hold his office; or

conduct which constitutes failure or inability of the person concerned to perform the duties of his office or to comply with the conditions of tenure of his office.

The sequence of events

The following is a summary of the principal events:

In early November 2006 - the exact date is not apparent from the material before the court - serious problems occurred with the Betiraoi resulting in her being beached and damage occurred to the vessel involving at least damage to the propeller and rudder.

On 8 November 2006 the General Manage of the respondent wrote to the appellant asking the appellant to write a "proper and full report on how/why/when was Betiraoi handicapped."

The appellant did so. His letter is undated, but presumably was shortly after the General Manager’s letter of 8 November 2006. In the letter, which was a page and a half long, he described the events in some detail and concluded "My staff and I have great diligence in making our tour a success. The problems created by the propeller and rudder is secondly and can be repaired but the stern tube and propeller shaft are the maintenance that needs proper equipment."

On 17 November 2006 the Board of the respondent met. The copy of the minute is undated but it appears that the meeting was on 17 November 2006. The first sentence of the minute reads:

"After considering the reports and Management decisions on this case, the Board thinks Management is soft in giving a demotion to the Captain and resolved that the Captain be dismissed."

On 23 January 2007 the General Manager wrote to the appellant advising him of the decision of the Board. As the terms of the letter are significant, we set out in full the translation given to the court:

"After the decision of the KSSL Board of Director number 15/2006R, which was held in the Boardroom of KSSL on the 17th November 2006, it was decided that you will be dismissed from KSSL, starting from the time you arrive in Betio Tarawa on the carrier MV Nei Matangare.

In the decision it was you have been a master on LC Betiraoi (landing craft) and have run aground the vessel with out reporting it. You just made the report after your trip coming back from Washington and Fanning, when the chains of the anchor were tangled with the propeller. You did not report the matter before this trip, but you just made it after the trip, when there was almost a problem to LC Betiraoi, when the rudder fall.

The Board of Directors were sorry, saying that you did were not capable in look after a new project, in which has done a great damage to KSSL and has effected KSSL in a lot of ways.

You are hereby notified that you are been dismissed from your job, and the Board of Director is most happy to hear from you if you have any thing to say in writing, 10 working days after receiving this letter."

The appellant took up this offer. On 25 January 2007 he wrote a long letter of two and a half pages of typescript in which he apparently set out his explanation of what occurred. We have not been given a translation, but the precise terms of his explanation are not relevant to the issues we have to decide.

The Board considered the appellant’s letter on 10 February 2007. The result was conveyed to the appellant in a letter from the General Manager that is dated 12 January 2006 but must have been sent soon after 10 February 2007. The letter said:

"After a long deliberation on your case the Board resolved to maintain their decision they had made and that your dismissal stands. It must be cleared that the Board made the decision on your dismissal based on your decision to travel after the propeller had been freed from the strangled stern wire. This decision could have cost the ship itself, which could have put KSSL in a very poor financial position. As Master, your first priority is the safety of the ship but this had not happened in this case"

Appellant’s case in the High Court

These proceedings were commenced on 28 February 2007. The appellant’s statement of claim alleged only one cause of action, namely that it was an implied term of the contract of service set out in the Conditions of Service and the Employment Ordinance that before an employee is removed from office he ought to be given the chance to defend himself against the charges that may lead to his dismissal and that the respondent breached that term. The dismissal was therefore wrongful.
It claimed $15,229.00 being one year’s salary on the basis that the appellant was 48 years old and he had been prevented from earning income for one year.
At the hearing in the High Court Mr Berina, then counsel for the appellant, submitted that when the relevant clauses were examined, a term should be implied into clause 7 (6) of the Terms of Service that, before removal from office, an employee shall have a reasonable opportunity to be heard. He also relied on the phrase "for good cause" in clause 7 (6), submitting that the Board could not find good cause without first hearing the appellant’s explanation.

Judgment in the High Court

In his judgment the Chief Justice set out the facts and the relevant provisions of the Conditions of Service. He expressed his conclusions:

"Chapter 7 sets out six ways in which a termination may be affected

- Resignation

- Retirement and optional retirement at 45 Illness

- Suspension for Good Cause

- Removal for Good Cause

Each of these is a separate head and is to be read separately. Only (5) "Suspension for Good Cause" gives an employee "a reasonable opportunity" to be heard "by the Board". (6) does not. Whether the omission is deliberate or an accident of drafting the opportunity is not given in (6). The opportunity cannot be imported from (5) to (6) for (5) and (6) are separate ways of termination. There is no obligation under (6) even though it would be the fair thing to do for the Board to hear an employee before removal for good cause."

He did not expressly consider whether a term such as that proposed by the appellant should be inferred into clause 7 (6). He concluded that the appellant was not unlawfully dismissed in not being given an opportunity to put his case in person to the Board. For these reasons, he concluded that the claim by the appellant could not succeed and gave judgment for the respondent.

Submissions for the appellant

For the appellant, Mr Earl based his submissions on two grounds that were not pleaded or raised by the appellant in the High Court. First, he submitted that the respondent was in breach of the duty an employer owed to employees not to conduct their business in a manner likely to damage the relationship of trust and confidence between employer and employee. Secondly, he submitted that the respondent was in breach of the principles of natural justice in failing to give the appellant the opportunity to be heard before dismissing him.

We are not prepared to determine the appeal on grounds that were not pleaded nor raised in the High Court. In the course of the hearing in this court, we suggested to counsel that the real issue on the appeal was the ground that had been pleaded and argued in the High Court. Accordingly, we determine the issues on the appeal by deciding whether a term should be implied in clause 7 (6) that before an employee may be removed from office by the Board, he or she should be given an reasonable opportunity to be heard and whether, as part of that obligation, he should also be given proper notice of the grounds on which the Board is considering the possibility of dismissal.

Should the suggested term be implied into clause 7 (6)?

The principles to apply in considering whether a term should be implied are well established:

It must be reasonable.

It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it.

It must be so obvious that "it goes without saying.".

It must be capable of clear expression.

It must not contradict any express term of the contract.

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266.

Applying these principles to the present case, there can be no doubt that the term is reasonable. If an employee is to have the right to be heard if the Board is considering suspension, how much more reasonable it is for him or her to have that right if the Board is considering dismissal. For the same reason, the term goes without saying. It is obvious that a person facing dismissal should have the right to be heard, all the more so when, as in this case, it is a person in the responsible position of a master of a vessel whose future is at stake. It is certainly capable of clear expression, nor does it contradict any express term, rather it accords with another term, i.e. clause
7 (5).

That leaves the question of business efficacy. A term will be implied if it is necessary for the reasonable or effective operation of the contract: Hawkins v Clayton (1988) 164 CLR 539, Deane J at 573. What needs to be considered under this heading is not the whole contract, but rather that section in the terms of service contained in section 7 relating to terms of employment. Can these terms, particularly clause 7 (6), operate reasonably and effectively without the implied term? In our view it cannot. The right to be heard before dismissal is so fundamental that a term that denies that right can neither be reasonable nor effective. To put it another way, clause 7 (6) can only operate reasonably and effectively if the employee has the right to be heard before he or she is dismissed. Further, it makes no logical sense to provide for an employee to have the right to be heard if the Board is considering suspension but not to provide that right if the Board is considering the more serious dismissal.

For these reasons we conclude that there should be implied into clause 7 (6) a term that before the Board exercises its powers under this subclause, the employee must be given a reasonable opportunity to be heard by the Board. This obligation requires that the employee be given reasonable notice of the grounds on which dismissal is being considered. If this is not done, the employee is not able adequately to respond to the charges that may lead to his or her dismissal.

The respondent failed to comply with this obligation in several respects. First, it did not tell the appellant the grounds on which dismissal was being considered by the Board. The letter of 8 November 2006 simply told the respondent that he should provide a "proper and full report on how/why/when was Betiraoi handicapped." It gave no indication that dismissal was even being considered.

Secondly, the respondent did not give him a reasonable opportunity to be heard by the Board in person or by letter. Rather the Board went ahead and made the decision to dismiss him without his being aware that dismissal was a possibility.

Thirdly, the offer to the appellant for him to "to hear from you if you have any thing to say in writing" after the Board had made the decision to dismiss him, did not give him a reasonable opportunity to be heard. By that time the Board had already made up its mind. The offer to him to say anything in writing at that stage was an empty gesture. Further, the Board had given him no details of the conduct that could amount to "good cause" as defined in clause 7 (7) of the Terms of Service.

For these reasons we conclude that the Board was in breach of its obligation to give the appellant a reasonable opportunity to be heard before it decided whether he should be dismissed. It follows that his dismissal was wrongful.

Remedy

There is now no point in referring the matter back to the Board for reconsideration. In view of the decisions it has already made, it is no longer possible for the Board to consider the matter in an objective fair manner.

The only remedy left for the appellant is an award of damages. Unfortunately, the appellant gave no evidence on damages at the hearing in the High Court. The allegation in the statement of claim setting out particulars of loss is denied in the statement of defence. So the only course is to refer the matter back to the High Court for the assessment of damages. In considering an appropriate award, the High Court will have regards to the likely loss of earnings and, depending on the evidence, whether there should be any discount for the possibility that, even if the appellant had been given a reasonable hearing before the Board had made any decision, he may still have been dismissed, suspended or demoted.

Result.

The appeal is allowed. The decision in the High Court giving judgment for the respondent is set aside. There will be judgment for the appellant with an award of damages to be fixed by the High Court if the parties are unable to agree.
The appellant is entitled to costs in the High Court and this court in an amount to be agreed or fixed by the registrar.

Hardie Boys JA
Tompkins JA
Paterson JA