Independent State of Papua New Guinea v Hodson [1987] SPLawRp 44; [1987] SPLR 232 (3 April 1987)

SOUTH PACIFIC LAW REPORTS

[1987] SPLR 232

The Independent State of Papua New Guinea v. Hodson

Supreme Court
3 April 1987
Kidu C.J., Kapi Dep. CJ., Barnett J.

Employment law - contract of employment - demotion to position of lesser responsibility without loss of salary - whether beach of contract - measure of damages - damages for distress and disappointment.

The respondent, an Englishman, was hired, in the United Kingdom, to take up a responsible position in Papua New Guinea. A written contract of employment was signed, in the U.K., that Hodson was to be "Chief Investigations Officer" in the Department of Finance, office of Taxation. When he arrived in Papua New Guinea, Hodson found that he had been relegated to the lower position of supervisor, albeit without any loss in remuneration. The respondent sued for breach of that contract of employment and succeeded in the National Court. The appellant appealed, against the finding of breach, and against the award of damages, while the respondent cross-appealed on the National Court's finding that there was no negligent misrepresentation by the State. [The judgment of Los J., in the National Court, is reported as Hodson v. Independent State of Papua New Guinea at [1985] PNGLR 303.]

HELD: The decision of the trial court that the State had committed a fundamental breach was affirmed, but the assessment of damages was remitted to the trial court for re-assessment. The cross-appeal failed.

(1) The breach by the State went to the heart of the contract - the respondent was not permitted to occupy and perform the duties of the office that were contracted for: l. 130, per Kidu CJ.
(2) Although clause 4(2) of the contract allows the employer to transfer an employee to some "other capacity" there must be ground or reasons for such a transfer: l. 140, per Kidu C.J., l.300, per Kapi Dep. C.J.
(3) The quantum of damages should be recalculated to make proper provision for income tax deduction, proof of distress as a head of damages, and reassessment of whether interest ought to be awarded for the loss of future earning: 1.200 per Kidu 1. 350, per Kapi Dep. CJ.
(4) There was no evidence of negligent misrepresentation: l.200, per Kidu CJ., l. 360, per Kapi Dep C.J.

Cases referred to in judgment:
Archer v. Brown [1985] QB 401; [1984] 3 WLR 350; [1984] 2 All ER 267
Aspinall v. Government of Papua New Guinea (No. 2) [1980] PNGLR 50
Aundak Kupil v. Independent State of Papua New Guinea [1983] PNGLR 350
Cox v. Phillips Industries Ltd. [1976] 1 WLR 638; [1976] ICR 138; [1976] 3 All ER 161
Cybula v. Nings Agencies Pty. Ltd. [1981] PNGLR 120
Jarvis v. Swans Tours Ltd. [1973] 1 QB 233; [1972] 3 WLR 954; [1973] 1 All ER 71
Meaney v. Hastings Deering (Pacific) Ltd. [1979] PNGLR 170
Thompson v. Faraonio (1979) 54 ALJR 231

OBSERVATION: The High Court of New Zealand, in Vivian v. Coca Cola Export Corporation [1984] 2 NZLR 289, usefully reviewed cases where mental distress caused by breach of an employment contract was claimed. The result in Vivian followed the rule laid down in Addis v. Gramophone Co. Ltd. [1909] AC 488. Damages for mental distress for loss of employment were awarded in Horsburgh v. N.Z. Meat Processors Union [1988] 1 NZLR 698, but there the defendant was the union which forced the dismissal.
J. Goodman and L. Karri for the appellant/cross defendant
J. Ryan for the respondent/cross appellant

KIDU C.J.

Judgment:

This is an appeal against the whole of the National Court judgment on the matter. The cross-appeal by the respondent is based on the contention that the National Court erred in its decision that there was no negligent misrepresentation.

Breach of contract

Mr Hodson, an Englishman, applied for the position of Chief Investigations Officer in the Office of the Chief Collector of Taxes in the Department of Finance. He was interviewed by Mr Obara, an officer attached to the Papua New Guinea High Commissioner's office in London. Subsequently he was told by Mr Obara that he had won the position and a contract was signed.

On 9 April 1984 Mr Hodson arrived in Papua New Guinea and to his amazement he was told by the Chief Collector of Taxes that he was not to be Chief Investigations Officer as another person had been recruited from New Zealand for the job. (This person had yet to sign a contract.) Mr Hodson was relegated to one of the lower positions of supervisor. He challenged this, although he did perform the functions of the position, by signing any documents as Acting Supervisor. The Public Service failed to rectify the matter to Mr Hodson's satisfaction and consequently he sued.

The appellant contends that there was no breach of contract by it as the contract allowed it to use Mr Hodson at any other capacity so long as his salary remained the same. Clause 4 of the contract reads:

The employee agrees to serve the employer in the office and in the Public Authority described in the schedule hereto. The Employee agrees to serve in such other capacity or in such other Public Authority or in such locality as the employer may determine, but in no event shall the remuneration payable to the employee under cl. 7.1 of this agreement be reduced.

It must be emphasized from the outset that the reason Mr. Hodson was demoted (without loss in pay) before he arrived at the office of the Chief Collector of Taxes was not because he was not qualified for the job he had contracted for, but because the Chief Collector, contrary to a perfectly valid contract, refused to allow him to perform the duties of that office as he had decided that another person, a New Zealander, was to be engaged for the position.

Mr Hodson understood that under clause 4 of the contract he could be located in another position but it is quite clear from the evidence that he did not expect that clause 4 was to be utilized before he arrived in Papua New Guinea or on his first day at work.

The learned trial judge has set out in his judgment his views on the reasons for the existence of clause 4 of the contract. I have no quarrel with these reasons one way or the other. Also there may be other reasons. But for purposes of this case I consider one thing very clear and that is that clause 4 was not meant to be used to stop a person from getting a particular position he or she had contracted for and was not meant to be used by the employer or its servants or agents to manipulate non-citizen officers of the Public Service.

Clause 4 of the contract says three things very clearly:

(1) That the employee will serve in the office and Authority described in the schedule to the contract.
(2) That the employee will serve in such other capacity or in such other Public Authority or in such other locality as determined by the employer.
(3) That if (2) applies the employee will not lose any remuneration.

There is therefore no doubt about it. When a person enters into an employment contract with the State it is understood that when he arrives in Papua New Guinea he will first serve in the office described in the contract. In the case of Mr Hodson the schedule to the contract he signed reads, inter alia, as follows:

1. CLAUSE 4	CHIEF INVESTIGATIONS OFFICER
	LEVEL 21
	DEPARTMENT OF FINANCE
	(OFFICE OF TAXATION).

So under the contract he executed, Mr Hodson was to commence employment in the Taxation Office as a Chief Investigations Officer and the State was obliged under the contract to allow him to commence work in that position. I consider that the terms of the contract are clear and that it is only after the employee has commenced work that the employer can consider utilizing clause 4 unless, of course, the employee has agreed to clause 4 being utilized before he takes up his post. There is no evidence that Mr Hodson agreed to any such thing.

I support the finding of the learned trial judge that there was a breach of contract by the appellant although my reasons are different from those of his Honour. The breach went to the heart of the contract - i.e. the appellant had decided not to permit the respondent to occupy and perform the duties of the office that he (the respondent) had contracted for.

Of course if clause 4(2) is utilized it must be on grounds or for reasons which are reasonable and/or justifiable - e.g. urgent requirement for the services of the employee in another office or the position is to be localized by appointment of a properly qualified citizen. Clause 4(2) cannot be read to mean that a contract officer in the public service can be moved from an office or position or job he has contracted for without reasons. Such a construction would result in possible abuse of clause 4 and cause injustice to such employees. Employees would be moved at the mere whims of agents of the State to offices, authorities or positions where their qualifications and expertise would be of little or no use.

One example is sufficient. It would be contrary to the intent of clause 4 for the appellant or its agents and/or servants to allocate a contract officer who is a specialist in taxation law to an administrative office or position in the Department of Education, unless the employee agrees to such a course of action.

When properly used clause 4 very clearly empowers the State to re-allocate the employee to a lower position so long as there is no loss in remuneration.

I support the finding of the learned trial judge that there was a breach of contract by the appellant.

Damages

The respondent claimed

damages for breach (of contract) including the cost of returning to the United Kingdom and loss of superannuation and other benefits suffered by reason of entering into and performing the contract so far as the defendant would allow, particulars of which are set out in cl. 5(c) hereof.

But the superannuation and other benefits claimed (referred to as U.K. forfeitures) were disallowed by the learned trial judge and there is no appeal against that part of the decision.