Brendel v Golden Square Pty Ltd [1983] PGLawRp 509; [1983] PNGLR 257 (29 July 1983)

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MASTER AND SERVANT - “Contract of service” - Contract part written part oral - To be treated as oral contract - Terms of - Where no express provision for termination - Reasonable notice required - Employment Act, 1978, ss 15, 16, 19, 34.

The Employment Act 1978, provides that a “Contract of service” means any agreement, whether oral or in writing, express or implied whereby one person agrees to employ another person as an employee.

N1>(1) Where a contract of employment is part written and part oral it is by definition oral and is to be so regarded for the purposes of the Employment Act 1978.

N1>(2) The terms of such a contract are to be ascertained from both the written and oral terms agreed upon and are to be interpreted in accordance with any relevant provisions of the Employment Act.

N1>(3) Where such a contract contains no express provision for its termination the length of notice must be reasonable in the circumstances and the provisions of the Employment Act as to minimum notice provisions apply.

Drew, Ashwell Keith v. Towers Investments Pty Ltd and Ors (Unreported judgment No. 731 1973).

Odell, Lesley Michael v. Port Services (P.N.G.) Pty Ltd (Unreported judgment 3 June 1983).

These were proceedings by an employee claiming damages for wrongful dismissal from his employment with the defendant company.

MCDERMOTT J: The plaintiff claims damages arising out of his alleged wrongful dismissal from employment with the defendant company.

There is no written contract of employment. The hiring of the plaintiff came about in this way: an advertisement appeared in “Holzzentralblatt”, a German trade magazine on 9 November 1981, seeking applicants for employment with Golden Square Pty Ltd, Port Moresby. Mr Brendel, a German national, replied on 10 October 1981 sending his personal particulars, details of his technical qualifications and requested information about the position, transfer, social security and commencement date.

“... and we would herewith like to introduce ourselves to you in more detail, and would, at first, like to comment on your field of work as well as the general conditions of a possible contract”.

Thereafter followed details of field of work, the company, general points (hours of work, accommodation, use of vehicle), sparetime, general contract conditions, income tax and finally living conditions in Port Moresby.

In December 1981, the company replied by telegram which the plaintiff recalls as “Job OK letter following”. This letter is not in evidence, however, it is clear from the plaintiff’s reply of 12 December 1981, that the company put in train the employment of the plaintiff, transfer arrangements and requested his trade certificates. There was further communication between the parties by telephone and telegram about arrangements. There appears to have been no further mention of terms and conditions of employment.

During this negotiating period, the plaintiff was employed as a section manager by the Suba Company in Hockenheim. I am satisfied on the unchallenged evidence that the plaintiff was a skilled tradesman and wood technician.

The plaintiff arrived in Port Moresby on Friday, 19 March 1982, and commenced work the following Monday. He was supplied with accommodation, transport and after 4 months got an 8 per cent salary increase. He continued in employment until given notice of termination by letter dated 5 August 1982, effective as from 13 August 1982. What are the terms and conditions of the contract of employment between the parties?

I have been referred to the Employment Act 1978 whereby a “‘contract of service’ means any agreement, whether oral or in writing, express or implied whereby one person agrees to employ another person as an employee.”

This Act repeals the Native Employment Act 1958 but on its face has a much wider application now and appears to me applicable to all contracts of employment except those employed “under any other law” (s. 3) or those “exempt from all or any of the provisions of this Act” (s. 4). The subject contract is not an exception.

The defendant argued that the Act applied and was complied with or, alternatively, the common law requirements were met in the case of this termination of employment.

Because the requirements of s. 19 of the Employment Act 1978 were not met, it cannot be said a written contract exists between the parties. Section 15(1) requires the employer to commit to writing any oral contract the absence of which means that:

“... a statement by the employee as to the terms and conditions of the contract shall be conclusive evidence of those terms and conditions ...” (s. 15(3)).

The only terms and conditions which are before me are those in the company’s letter (the translation), specifically:

N2>(1) The duty statement (I infer the plaintiff had position of A2-supervisor).

“Term of Contract: 2 years. Flights to and from are free after fulfillment of period of contract. Should the contract be broken by the employer, the return flight will be paid for, whilst at a breaking of contract by the employee, costs for the return flight will have to be carried on his part. The company withholds from the salary, which is payable fortnightly, the sum of Kina 100,00, over the duration of 14 pay periods, which is equivalent to the price of a flight-ticket Moresby/Frankfurt. After expiration of the 24-months contract, this sum will be reimbursed together with the return ticket. Starting salary is Kina 16,000 per annum. At present, the rate of exchange is Kina 1.00 = 3.29 DM. After a satisfactory familiarization period with the work of 4 months, a raise in salary is planned which can be raised once more after a further 8 months. Flat (furnished) and partial air conditioning are free of cost. Paid annual leave is 4 weeks, and is, as a rule, paid after expiration of duration of contract. However, this concurs with the wishes of the employee. The company reimburses the employer’s share of the social security insurance, which can be transferred by the employee to his regional social security fund for workers at his own discretion. There exists no legal health insurance here. An industrial accident insurance protects the employee of the results of an accident while at work. A union of 5 people of the same company enables effecting a private health insurance. Each person pays up to Kina 200 per annum, which is paid by the insured himself”.

N2>(7) Illness, temporary disability and industrial accident. What is pertinent:

“In case of an illness, attested by a local doctor, that a continued stay in the tropics is not advisable, the employer will pay for the return flight.”

“We hope this information furthered your ideas, and we look forward with interest to your early reply.”

N2>Q. In any conversation before 19 March with Golden Square were you told it might not run for 2 years? A. No

N2>Q. If known that might happen, would you have left employment and come here? A. Surely not.

These were the terms and conditions in the minds of the parties when the contract was made. It is the evidence on which the plaintiff relies; these terms are not disputed.

The contract according to the evidence is strictly part oral and part written, however, the Act says it be one or the other so it is by definition, oral.

Because I consider the Employment Act 1978 applies to this contract the following provisions are relevant to the interpretation of it.

N2>s16 Notwithstanding any agreement to the contrary, an oral contract of service shall be deemed to be for the period by reference to which wages are paid.

N2>s33(1) A contract of service for a specified time or for specified work shall, unless terminated otherwise under this Division, terminate when the period of time for which the contract was made expires, or the work specified in the contract is completed.

N2>s34(1) This section does not apply to a written contract of service for the first two years of operation of the contract unless the parties to the contract agree otherwise.

N2>(2) Subject to this Act, a party to a contract of service may, at any time, give notice to the other party of his intention to terminate the contract.

N2>(3) The length of notice of intention required to terminate a contract of service shall be the same for both parties and:

N2>(4) Where there is no provision in a contract of service for notice of intention to terminate, the length of the notice shall be not less than:

(b) one week’s notice if the employee has been employed for not less than four weeks and for less than one year; or

(b) in the case of any other contract of service — either orally or in writing,

and the day on which the notice is given shall be included in the period of notice.

(b) subsistence expenses, if any, between the date of termination of the employment and the date of repatriation.

The defendant submits that the writing between the parties is not the contract. Section 19 has not been complied with and therefore until it is, any written contract is unenforceable.

“An unenforceable contract is thus one that is validly formed although its operation or performance cannot be secured by reference to the courts.”

See Cheshire and Fifoot Law of Contract 4th Australian edition par. 1101 320. The plaintiff cannot come to court relying on this writing as a contract but has to submit to a contract of implied reasonable terms.

Alternatively, it is submitted that there is no contract on the terms of the letter at all which says:

“... we would at first, like to comment on your field of work as well as the general conditions of a possible contract.”

I have been referred to Masters v. Cameron [1954] HCA 72; (1954) 91 C.L.R. 353 and to Cheshire and Fifoot (supra) concerning conditional assent by way of an analogy which I don’t find helpful.

These submissions avoid the gist of the matter, that is, the plaintiff commenced work for which the defendant paid and provided him with benefits which were undoubtedly those contained in the company’s letter. That is what happened and it appears to me that is the only way I can ascertain what the agreement is, together with a further gloss of other implied reasonable terms if necessary and the Acts mentioned.

“Express and implied contracts are both contracts in the true sense of the term, for they both arise from the agreement of the parties, though in one case the agreement is manifested in words and in the other case by conduct. Since, as we have seen, agreement is not a mental state but an act, an inference from conduct, and since many of the terms of an expressed contract are often implied, it follows that the distinction between express and implied contracts has very little importance, even if it can be said to exist at all.” — see Chitty on Contracts (25th ed., 1903) par. 12 at 12.

Because the Act provides for the period of employment and termination of oral contracts, do these sections apply to this contract? It is submitted on the plaintiff’s behalf that as the Act covers the field with the intention of protecting employees, as illustrated by the conclusiveness of the employees version of the contract and the minimum conditions, s. 11(4), it is meant to supplement agreements and contracting parties can agree to better terms. This is borne out by the various sections i.e. s. 33(4) (notice), s. 61 (entitlement to leave), s. 65 (entitlement to sick leave). But s. 16 is not in this mould as it applies “... notwithstanding any agreement to the contrary ...”. The termination provisions fit in with it and apply. I cannot accept the submission then that there was no provision for termination except for misconduct (s. 36). Indeed, the parties specifically alluded to a “broken contract”. That the parties are irrevocably bound in the employment contract is in contravention of s. 34(2) which is subject only to the minimum notice provisions of s. 34(4), mutual agreement to terminate, s. 35, and termination without notice, s. 36(1) and (2).

Despite the pleadings, at trial the company’s reasons for termination were abandoned, the defendant being content to rely upon compliance with the Act. As I take the view that the Act applies to this contract, I therefore cannot find the plaintiff’s dismissal wrongful. I am grateful for Mr. Challenger’s written submissions on the various ways damages could be assessed but my findings now make this an unnecessary consideration.

The matter does not end here. What is reasonable notice in this case? See Chitty on Contracts (25th ed., 1983) par. 861 at 461.

“A contract which contains no express provision for its determination may yet be determined by reasonable notice on the part of one or both of the parties. The question whether a contract can be determined in this way is often said to depend upon the implication of a term, although it is probably better to regard it as depending upon the true construction of the agreement. Nevertheless, since ex hypothesi, the agreement contains no provisions expressly dealing with determination, the question is not one of construction in the narrow sense of putting a meaning on language which the parties have used, but in the wider sense of ascertaining, in the light of all the admissible evidence and in the light of what the parties have said or omitted to say in the agreement, what the common intention of the parties was in the relevant respect when they entered into the agreement ... Similar constructions have been adopted in the case of contracts between employer and employee ...”

N2>(1) The plaintiff was brought by “wantoks” from half a world away to be employed as he mistakenly believed for 2 years.

N2>(2) Termination of his previous employment to work for the defendant company.

N2>(3) The plaintiff, a skilled workman, was employed in a supervisory capacity and given benefits over and above his wages.

N2>(4) Difficulties to be expected in returning to Germany and again obtaining employment.

N2>(7) His genuine attempts to find alternative employment in this country at least in the period up until February 1983.

N2>(8) Reference to unpublished National Court judgment of 3 June 1983 Lesley Michael Odell v. Port Services (P.N.G.) Pty Ltd.

In that case one month’s notice was said to be reasonable. One of the factors which influenced this conclusion was the period of notice given by the employee plaintiff when he terminated a similar type position with another employer in this country. The Employment Act 1978 was not argued. From the evidence, I infer, taking into account the annual holiday period and the ramifications of certain types of notice given in the sophisticated German industrial scene, notice of three months was given by the plaintiff to the Suba company in Germany. See also Ashwell Keith Drew v. Towers Investments Pty Ltd and Ors unreported judgment No. 731 (1973).

One week’s notice is clearly insufficient notwithstanding the normal practice of employers here, governed by the wage period as explained by the Director of the Employers Federation in his evidence. I consider reasonable notice to be three months. It therefore follows that the plaintiff has to be given notice for a period of two months and three weeks which now means wages in lieu together with appropriate reimbursement for his German social security commitments and pro-rata bonus payments for this period. As the return airfare to Germany has already been tendered, there is no claim for it. However, I draw the defendant company’s attention to s. 15 of the Employment of Non-Citizens Act 1978 in order to assess whether the tender takes into account all that is required for repatriation.

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Papua New Guinea Law Reports

Brendel v Golden Square Pty Ltd [1983] PGLawRp 509; [1983] PNGLR 257 (29 July 1983)

Papua New Guinea Law Reports - 1983