National Airline Commission v Lysenko [1990] PGLawRp 679; [1990] PNGLR 226 (8 June 1990)

Papua New Guinea Law Reports - 1990

[1990] PNGLR 226 - National Airline Commission v Lysenko 

[1990] PNGLR 226

SC386

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

NATIONAL AIRLINE COMMISSION TRADING AS AIR NIUGINI

V

LYSENKO

Waigani

Kapi DCJ Los Hinchliffe JJ

25-26 September 1989

8 June 1990

ESTOPPEL - Res judicata - Employment contract - Breaches of - Claim for failure to pay redundancy allowances - Claim determined - Whether claim for breach of re-employment provisions estopped - Disputed terms within one clause - Separate causes of action - No estoppel.

EMPLOYMENT LAW - Contract of employment - Construction and effect - Re-employment clause - Airline pilots - Retention of “irrevocable rights to re-employment and seniority for two years” - Obligation to re-employ ceased after two years - Terms of employment - Usual terms subject to seniority applicable.

EMPLOYMENT LAW - Contract of employment - Breach of - Damages - Measure of - Airline pilot - Obligation to re-employ - No offer within time stipulated - Damages limited to most favourable method of performing contract of re-employment.

A contract of employment of a pilot with Air Niugini provided for termination of employment by redundancy and cl 12 thereof made provision for severance pay as follows:

“A pilot whose services are terminated because of redundancy shall be paid at the rate of two months salary for each year of service with the employer, and shall retain irrevocable rights to re-employment and seniority for two years provided that this subsection may be reviewed on the introduction of a Retirement Benefit Fund.”

In proceedings for damages for breach of contract in the National Court (affirmed by the Supreme Court in National Airlines Commission trading as Air Niuigini v Lysenko [1986] PNGLR 323), the pilot was held entitled to redundancy pay under cl 12. In further proceedings by the pilot for damages for breach of contract arising out of neglect and refusal to re-employ him pursuant to the terms of cl 12 (Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69) the pilot was held not to be estopped from litigating the further proceedings by operation of the principles of res judicata.

On appeal therefrom,

Held

N1>(1)      The pilot was not barred by the principles of res judicata from litigating the claim for damages for breach of contract for neglect or refusal to re-employ pursuant to cl 12 of the contract of employment because that claim was not founded upon the same “cause” as the previous claim for breach of contract in failing to pay redundancy payments but was founded upon a distinct and independent cause of action which was in effect dependant on the finding of redundancy in the earlier proceedings.

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 and Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 114, applied.

Decision of Andrew AJ in Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69, affirmed in part.

N1>(2)      (Los J dissenting) Upon a proper construction of cl 12 of the contract of employment, Air Niugini had an obligation to offer re-employment to the pilot when a vacancy occurred but this obligation ceased at the expiration of two years from the time of redundancy: the terms of re-employment would be on the same level of seniority as at the date of redundancy but otherwise on the same terms and conditions as those being offered to other pilots at the time of the vacancy.

Decision of Andrew AJ in Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69, reversed in part.

N1>(3)      (Los J dissenting) On the basis that the terms of re-employment would have contained a provision for two months’ notice of termination, and applying the principle that where a defendant has two methods of performing a contract he must be taken to have selected that which is most favourable to him, damages for refusal to re-employ pursuant to cl 12 of the contract of employment were properly limited to two months salary only.

Rigby v Ferodo Ltd [1988] 1 CR 29 and Withers v General Theatre Corporation Ltd [1933] 2 KB 536 at 548-549, applied.

Decision of Andrew AJ in Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69, varied in part.

Cases Cited

Associated Grocers Co-operative Ltd v Hubbard Properties Pty Ltd (1986) 42 SASR 321.

Dietmann v Brent London Borough Council [1988] ICR 842.

Henderson v Henderson [1843] EngR 917; (1943) 3 Hare 100.

Kaka Kopun v Independent State of Papua New Guinea [1980] PNGLR 557.

Kingston Commodities Pty Ltd v Sydney Futures Exchange Ltd (Supreme Court, NSW, Clarke J, 15 March 1985, unreported).

Lewandowski v Mead Carney-BCA Pty Ltd [1973] 2 NSWLR 640.

Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69.

Make Kewe v Thomas Kudjip and Independent State of Papua New Guinea [1986] PNGLR 279.

National Airlines Commission trading as Air Niugini v Lysenko [1986] PNGLR 323.

Pinzger v Bougainville Copper Ltd [1985] PNGLR 160.

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

Rigby v Ferodo Ltd [1988] ICR 29.

Smith v Morgan [1971] 1 WLR 803; [1971] 2 All ER 1500.

Withers v General Theatre Corporation Ltd [1933] 2 KB 566.

Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245.

Appeal

This was an appeal from a decision of Andrew AJ in which he awarded damages for breach of a contract of employment: see Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69.

Counsel

J Batch, for the appellant.

I Molloy, for the respondent.

Cur adv vult

8 June 1990

KAPI DCJ: I have had the advantage of reading the draft judgment of Los J and I agree with him that the previous proceedings (WS 221 of 85) do not preclude the respondent from litigating this claim (WS 597 of 87).

MEANING OF CL 12

With regard to this matter, I have reached a contrary view. Counsel for the appellant has submitted that this clause created two rights:

N2>1.       An obligation on the part of the appellant to offer employment to the respondent when a vacancy occurred. That the offer of employment should be at the same level occupied by the respondent at the time of redundancy.

N2>2.       That the obligation to offer this employment ceased at the expiration of two years from the time of redundancy.

Counsel for the respondent submitted that the reference to two years in the clause relates to the period of employment. It is submitted that, had the appellant offered the employment, the respondent would have accepted and in accordance with this clause, he would have been entitled to be employed for a period of two years.

This dispute can be resolved by a proper construction of cl 12. The words required for interpretation are: “... and shall retain irrevocable rights to re-employment and seniority for two years ...”

A pilot has a right to re-employment under this clause on the same level of seniority as at the time of redundancy. This creates an obligation on the part of the Airline to offer the re-employment. This offer can only be made if there is a vacancy. Two questions arise for consideration at this stage:

N2>(1)      What are the terms of this re-employment?

N2>(2)      For how long is the Airline obliged to make an offer of the employment to a pilot who is made redundant?

In answer to the former, this clause does not attempt to set out the full terms of re-employment. Interpreting this in the full context of the whole contract, it would be on terms offered to other pilots at the time of the vacancy. The only exception is that the re-employment is to be offered on the same level of seniority at the time of redundancy. I do not consider that the period of employment is determined by reference to the period of two years in the clause. The period of employment where a pilot is re-employed is determined by the usual terms set out in the standard contract offered to other pilots at the time. I cannot see any proper reason to stipulate the period of employment at two years as contended by counsel for the respondent.

In answer to the second question, the two years stipulated in cl 12 relates to the right to re-employment. That is to say, the right to be offered to re-employed by the Airline. In my view, this is the only reasonable way to interpret this clause. If that were not adopted, then the right to re-employment would exist for a long time. If there were no vacancies for more than two years, say five years, it would be argued that the Airline would still be obliged to offer re-employment to those pilots. In my view that is an unreasonable way to interpretation of the clause. I find that the obligation to offer re-employment under this clause applies for a period of two years from redundancy. At the expiration of this period the Airline has no obligation to make an offer of re-employment to those pilots. I find that the trial judge fell into error in this regard.

There is no dispute that the Airline failed to inform the respondent of the vacancies within the two year period of redundancy. The appellant has submitted that, in the circumstances, the respondent is entitled to two months salary only. It is submitted that, had the respondent accepted the offer, it would have given two months notice to terminate. Counsel for the appellant relies mainly on the principle that: “ ... where a defendant has two methods of performing his contract he must be taken to have selected that which is most favourable to him”: Rigby v Ferodo Ltd [1988] ICR 29. That is a well-established principle of law: see Withers v General Theatre Corporation Ltd [1933] 2 KB 536 at 548-549. Under the relevant contract which would have been offered to the respondent at the time, the Airline had the right to terminate that contract on two months notice. Termination of the contract on two months notice would have been most favourable to the Airline.

The figures presented by the appellant in this regard were not disputed by the respondent although I would calculate the interest at 6 per cent rather than 4 per cent. I have read the draft judgment of Los J in respect to the interest and I agree with his conclusion.

CONCESSIONAL TRAVEL

The appellant’s complaint on this ground is that there was no evidence to support the question of concessional travel. This ground of appeal cannot be sustained as the evidence of concession of travel was given by Captain Sharp. The figure readjusted to cover the period of two months is K417.

I would therefore award the total amount of K9145.86 made up as follows:

>

Gross monthly salary	K5,483.83
Less monthly tax	1,809.65
Net monthly salary	3,674.18
See Ex “R” Appeal Book p 223
For two (2) months	7,348.36
Plus housing @ A$185 per week for eight (8) weeks - A$1,480 @ K1 A$1.5	986.66
Concessional travel	417.00
Sub-total	8,752.02
Plus interest @ 6% for nine (9) months (July 1985 - March 1986)	393.84
Total	K9,145.86

LOS J: This appeal is from the decision of Andrew AJ in WS No 597 of 1987: see Lysenko v National Airlines Commission trading as Air Niugini [1988-89] PNGLR 69. In that action Valerian Lysenko (Captain Lysenko) formerly employed by Air Niugini, the appellant, as a captain of Boeing 707, sued the appellant alleging breach of contract. Specifically, the captain alleged that the appellant, having first dismissed him on the grounds of redundancy, failed to inform him of the positions that became available or failed to re-employ him as per the terms of contract between the appellant and himself.

At the trial, the appellant argued that Captain Lysenko was precluded from litigating his claim by virtue of previous proceedings in the National Court, WS No 221 of 1985, and in the Supreme Court, SCA No 7 of 1986.

The trial judge held that the respondent was not so precluded. Hence the first ground of appeal. The appellant says the trial judge erred in this respect.

In WS 221, Captain Lysenko sued the appellant for failure to pay him redundancy payment. A question was also raised whether the captain was dismissed because of misconduct. But the National Court held that redundancy was the main reason and the Supreme Court, in SCA 7 of 1986, said this was the only reason for his dismissal: see National Airlines Commission trading as Air Niugini v Lysenko [1986] PNGLR 323.

In the action subject to this appeal, the learned trial judge made certain findings, then relied upon those findings to make the decision on the defence of res judicata raised by the appellant ([1988-89] PNGLR at 74):

“I make the following findings of fact. It is true that, after his dismissal on 25 March 1985 Captain Lysenko remained as Vice President of the Pilots’ Association and this is put forward as some evidence that he would have been aware of pilot intakes. There were pilot intakes on 4 July 85, 26 August 85, 28 October 85, 21 July 86, 11 August 86, 6 October 86 and there were dismissals on 26 May 86, 23 June 86.

In the absence of any real contradictory evidence, I give the plaintiff the benefit of the doubt that he only became aware in late 1985 of pilot intakes in late 1985 or in early 1986.

I accept the evidence of Miss Thompson that she obtained instructions from the plaintiff on 24 January 1986 to the effect that the plaintiff had just become aware of further employment of pilots and that she then sought all documents relating to such employment subsequent to 22 April 1985 and the allocation of pilots to more senior positions. The defendant had not given discovery on this aspect prior to the commencement of the hearing. I am also satisfied that Miss Thompson advised the plaintiff that there was insufficient evidence at that stage on this aspect.

By par 5 of its defence the defendant says that the plaintiff, in the earlier proceedings between the plaintiff and the defendant commenced by writ of summons No 221 of 1985, recovered all damages arising out of the alleged breach of contract in these proceedings — thus raising a defence of res judicata as has been outlined already.

In Halsbury’s Laws of England (4th ed), vol 16, par 1528, under the subheading ‘Essentials of res judicata’ the editor says:

‘In order that a defence of res judicata may succeed it is necessary to show not only that the cause of action was the same but also that the plaintiff has had an opportunity of recovering [that is, it being open to him on the pleadings] and but for his own fault might have recovered in the first action that which he seeks to recover in the second. A plea of res judicata must show either an actual merger, or that the same point has been actually decided between the same parties.’ ”

Andrew AJ then considered Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, and said (at 75-76):

“But I think that is a different situation to the one here for in my judgement there were in the circumstances here, in effect, two causes of action. The circumstances are unusual. I find that the first proceeding was commenced before this cause of action arose and that it could not be said that this action was a matter which might have been brought forward but which was not brought forward only because the plaintiff had from negligence, inadvertence or even accident omitted to do so. The plaintiff did seek re-employment with Air Niugini following the first proceeding. I accept the plaintiff’s evidence in this respect. He approached Captain Phillips, the Director of Operations who was responsible for the employment of pilot staff and he attempted to see Mr Dieter Seefeld, the Chief Executive of Air Niugini. He considered that a finding of redundancy might lead the defendant to re-employ him under the terms of the agreement.

Bower and Turner The Doctrine of Res Judicata (2nd ed, 1969) at 375 quote as follows from the leading case of Brunsden v Humphrey [1884] UKLawRpKQB 158; (1884) 14 QBD 141 at 146:

Two actions may be brought in respect of the same facts where these facts give rise to two distinct causes of action.

But if only the facts are identical, but these identical facts give rise to substantially one and the same ground of complaint, the plea of former recovery prevails, notwithstanding there may be technical and formal differences between the two causes of action or that the two remedies may be called by different names. The test is whether or not the second proceeding involves a new cause of action or whether it is merely an attempt to recover, on the original cause of action under some heading of damage not previously involved.

I agree with the submissions of Mr Molloy when he says that cl 12 of the contract of employment contains the terms which are in dispute in each of the proceedings between the parties. However, that clause contains two distinct terms or promises, the breach of each of which may give rise to a claim or cause of action. The first term is that a pilot whose services are terminated because of redundancy shall be paid at the rate of two months salary for each year of service with the employer.

The second term is that pilots who are made redundant shall retain irrevocable rights to re-employment with the employer and relative seniority for two years. In the present proceedings there is no doubt that the plaintiff is claiming a breach of the second of these terms. The statement of claim in the earlier proceedings reveals distinct breaches of contract are alleged. Then, in par 7, it is alleged that the defendant was in breach of contract because it terminated the plaintiff’s services on the grounds of redundancy and that cannot be read to mean that the plaintiff is making an allegation that the plaintiff is a pilot whose services have been terminated for redundancy and that the defendant has failed to re-employ him contrary to his irrevocable rights to re-employment. Paragraph 8 contains the only other alleged breach of contract. The allegation there is that the defendant has failed and neglected and continues to fail and neglect to pay the plaintiff his entitlement to redundancy pay, namely 24 months salary of approximately K85,000. Again, that cannot be read as an allegation that the defendant has breached the contract in that the plaintiff is a pilot whose services have been terminated for redundancy and that the defendant has failed to re-employ him.”

In my view the trial judge made no error. I agree with the trial judge that the cause of action in the previous suit was completely different from the suit which is the subject of this appeal. The previous action was for breach by the appellant of its obligation under cl 12 to pay the captain redundancy payment. In the subsequent suit the respondent had claimed breach by the appellant of its obligation under cl 12 to re-employ him. Clearly the difference is not subtle nor is it a matter of semantics. The basic rules in the identity of causes of action are so clearly expressed in Bower & Turner, The Doctrine of Res Judicata (2nd ed, 1969), pars 448, 449:

N2>“448.   A former judgement cannot operate as a bar to any subsequent proceedings unless those proceedings are founded upon the same cause (in the largest sense of the word, and so including both ground of civil complaint, and criminal offence) as that upon which such former judgment proceeded.

N2>449.    The burden of alleging, and, having alleged it, of establishing this identity lies upon the party who sets up the former judgment as a bar. Such onus is prima facie discharged by production of the record of the judgment, and of the pleadings, if any, in the former proceedings, and by reference to the pleadings (if any) in the second proceedings. If, on the mere comparison of these documents, it appears that the former judgment was in respect of a cause of action, or an offence, which could not, ex facie, have been the same as the cause of action, or the offence, on which the subsequent action or prosecution is founded — which is a question of law — the plea of former recovery, or (as the case may be) of autrefois convict, fails in limine. If, however, it appears, on such comparison alone, that there is a possibility of the two causes of action, or the two offences, being identical, there being nothing on the face of the documents to negative such possibility, then the plea is valid and adequate in point of law, and the party setting up the plea must proceed to establish the identity as a fact.”

As far as remedies are concerned it is my view that the damages paid for the breach of right to redundancy payment could not extend and cover a breach of obligation to re-employ the captain. Nor could that be the same as the remedy of the latter. In this respect I refer to the statement by Clarke J in Kingston Commodities Pty Ltd v Sydney Futures Exchange Ltd (Supreme Court, NSW, 15 March 1985, unreported) at p 12:

“Indeed, whether the relevant principle be described in terms of estoppel, merger or res judicata it requires me to determine whether the plaintiff is seeking to agitate in this case a claim for damages for the infringement of a right in respect of which he has already sought, and obtained, relief from a court which could have awarded damages. If he is, then the defendant is entitled to judgment in its favour.”

I think, with respect, that the only aspect of the plea in res judicata that can be argued in this appeal is what was said in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 114:

“The plea of res judicata applies except in the special case not only to a point upon which the Court was actually required by the parties to form an opinion and pronounce a judgment but to every point which properly belongs to the subject litigation and which the parties exercising reasonable diligence, might have brought forward at the time.” [My emphasis]

The only argument that can be advanced to satisfy the rule that I have emphasised is that, notwithstanding that the breach alleged in previous proceeding was different from the breach alleged here, as the respondent had become aware that Air Niugini as from 4 July 1985 had begun to engage new pilots, he should have included in the then existing claim, a claim for breach of right to re-employment. Indeed the respondent’s lawyers had indicated the claim should have been included; I cannot disagree because the matter could have been put to rest in one action. And indeed that is the contention of the appellant. This contention may gain support from the observation by Clarke J in Kingston Commodities’ case at p 14:

“I would make three further observations. There is no doubt that but for the estoppel the plaintiff in this case would have a right to damages and I have felt a degree of reluctance in shutting him out from ventilating that claim simply because he did not do so in the proceedings in the Equity Division. After all the new litigation does not involve the re-agitation of matters already debated between the parties.”

But it is obvious that the respondent was hoping the appellant would recognise the right to re-employment under cl 12. It was not necessary at that stage to force the recognition of that obligation. The proceedings subject to appeal would be possible only on the finding by the National Court that the dismissal of the captain was on the grounds of redundancy. The finding in this respect was “up in the air” until the Supreme Court decision in SCA 7 of 1986. Nevertheless, in my view, the fact that the respondent did not pursue the course of including the claim did not bar him from taking the present proceedings. With respect, I think my view gets support by the merger principle as followed by Brennan J in Port of Melbourne Authority v Anshun Pty Ltd at 610-611:

“Imprecision in the meaning of cause of action tends to uncertainty in defining the ambit of the rule that a judgment bars subsequent proceedings between the same parties on the same cause of action. The foundation of the rule, whether it be termed res judicata, or cause of action estoppel or judgment recovered, is the merging of the cause of action in the judgment. In reference to res judicata, Dixon J said in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532:

‘... the very right or cause of action claimed or put in suit has ... passed into judgment, so that it is merged and has no longer an independent existence ...’ ”

In summary, the subsequent proceedings were based upon distinct and independent causes of action. True the respondent could have included the subsequent proceeding within the previous proceedings, but the circumstances were such that the subsequent proceedings became neater and clearer on their own. One circumstance, was that the subsequent proceedings were dependent upon the finding by the court of the ground of dismissal of Captain Lysenko. The breach alleged in the subsequent proceeding became clearer after the previous proceedings. I therefore find no error in the judgment of the trial judge on this ground of appeal.

The appellant’s next ground of appeal turns on the interpretation of cl 12 of the contract of employment, which provided:

N2>“12.    Severance pay

A pilot whose services are terminated because of redundancy shall be paid at the rate of two months salary for each year of service with the employer, and shall retain irrevocable rights to re-employment and seniority for two years, provided that this subsection may be reviewed on the introduction of a Retirement Benefit Fund.”

The trial judge viewed the clause as meaning (at 77):

“... that there was an irrevocable right to re-employment for the period of two years from the time when positions of pilot became available and that consequently damages were incurred during that two years.”

That cl 12 has created an obligation and that there was a breach by the appellant in not offering re-employment is not disputed. What is disputed is whether the period of two years referred to in the clause relates to the period within which the obligation to re-employ remains effective as contended for by the appellant or whether it relates to an obligation to re-engage a pilot for that period if he accepts an offer of re-employment.

To accept an interpretation contrary to the one advanced by the appellant may appear to be absurd per se. If a pilot has the experience which would put him in the top bracket of pilots, why would the right to re-employment be limited to two years only? Why would not the period of re-employment be determined by the need and requirement of the employer? The more sensible interpretation may be in line with the cases cited by the appellant. That is, during the two years from the date of termination, if a vacancy occurred, an offer to fill that vacancy must be given to the respondent first and no other in the meantime: Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245. This meaning was accepted and elaborated in Associated Grocers Co-operative Ltd v Hubbard Properties Pty Ltd (1986) 42 SASR 321. So that the obligation of the appellant under cl 12 was to make an offer to the respondent for re-employment (Smith v Morgan [1971] 2 All ER 1500) and, at the end of two years, the obligation would cease.

Looking at the clause closely, however, it strikes me that it aims at the protection of a certain category of employee pilots: the pilots who have no Retirement Benefit Fund established for them. So that the intent of the clause is that while the appellant has the right to terminate a pilot on the grounds of redundancy, the pilot’s future must not be left in a bleak situation. He has no retirement benefit. The first and a more concrete comfort for him is a redundancy pay of about one sixth of his salary for each completed year of service. The second thing which is more of a hope, and dependent on the need of the appellant, is that he may be re-employed for a period which is more than a period of employment on a casual basis.

In this context, the cases cited by the appellant do not assist. The only cited case that deals with employment is Lewandowski v Mead Carney-BCA Pty Ltd [1973] 2 NSWLR 640. But the issue raised in that case related to what salary range might be offered without infringing an obligation created earlier by the defendant agreeing to offer a job to the plaintiff if he resigned from his job in the USA and came to Australia.

I consider that irrespective of what appears to be absurdity and unreasonableness in interpreting the clause contrary to the appellant’s contention, the true intent in the context of employment of the pilots without any provision of Retirement Benefit Fund is the one expressed by the trial judge. To answer the contention of the appellant and hence the ground of appeal, I consider that the trial judge has not made any error in this respect.

DAMAGES

It is contended on behalf of the appellant that the maximum damages for which the appellant could be liable for failure and refusal to re-employ the respondent pursuant to cl 12 was a sum equivalent to the amount of two months pay. Two months is the notice period required under the new standard agreement issued to the pilots.

N2>“Clause 14     Termination of Agreement

14.1    The Employee may terminate this Agreement at any time either by giving two (2) month’s written notice, or without such notice by forfeiting one (1) month’s salary.

14.2    The employer may terminate this Agreement at any time by giving the employee two (2) months’ written notice or by payment in lieu of such notice.”

It is argued that, if the appellant did re-employ the respondent pursuant to cl 12, the respondent would have been re-employed under the new standard agreement and the appellant would have lawfully terminated him under cl 14. The appellant could have given him two months notice or paid him two months wage in lieu of notice which is quite proper and lawful under cl 14. In support of this argument the appellants’ counsel referred to various cases, in particular the House of Lords’ decision in Rigby v Ferodo Ltd and the English Court Appeal decision in Dietmann v Brent London Borough Council [1988] ICR 842.

In Rigby’s case, an employee was entitled to 12 weeks notice of termination of his contract. His employer, appellant company, imposed a reduced salary on all its employees including Rigby. Rigby brought an action to recover damages against the employer claiming breach of contract as well as seeking a declaration that certain wage deductions were in breach of contract. It was found by the trial judge and affirmed by the Court of Appeal that Rigby did not accept the reduction, hence, variation of his contract, and therefore he was entitled to recover the difference between his contractual entitlement and the amount paid by the employer.

The House of Lords affirmed the decision of the Court of Appeal. What Air Niugini seeks to rely on is what Lord Oliver said (at 35-36):

“Finally, it has been argued that Mr Rigby’s claim is a claim for damages rather than for debt and that the ordinary rule in actions for damages for breach of contract applies, that is to say, that where a defendant has two methods of performing his contract he must be taken to have selected that which is most favourable to him. Thus the argument runs, since the appellant could have lawfully terminated Mr Rigby’s employment by 12 weeks notice, it must be treated as if it had done so and his claim to damages must be limited to the shortfall in wages during that period. The only question, it is suggested, is whether the action is in truth one for damages rather than for debt and whether, if the latter, the same principle should apply. For my part, I derive no assistance from the distinction between debt and damages, for it seems to me entirely immaterial whether Mr Rigby’s claim be treated as one for his agreed renumeration [sic] for services rendered or as one for damages for breach of an agreement to pay it. On either view the argument advanced is, in my judgment, based on fallacy. It assumes the very proposition which has already been rejected, namely, that the employment under the contract of service has come to an end. If it had, then no doubt there would be room for an inquiry at what date the employer could first lawfully have terminated it. But that is not the case with which this appeal is concerned. What your Lordships are concerned with here is a claim for sums due under a continuing contract which never was terminated, either lawfully or unlawfully, and there simply is no room in such a case for the application of the principle referred to.”

In Dietmann’s case, Dietmann was dismissed without notice and without any opportunity to appear and argue on grounds of gross negligence. She was a supervisor of a social worker under whose care a child placed under the care of Brent London Borough Council, the appellant, had died. Dietmann brought an action against the Council claiming, inter alia, damages for unlawful dismissal. In the Queen’s Bench Division, Hodgson J found that summary dismissal was wrongful and that Council was in breach of contract. In relation to the damages his Honour said (at p 756):

“Although the three judges in Gunton v Richmond-Upon-Thames London Borough Council [1980] 1 CR 755 took different routes, they arrived at the same conclusion as to how damages should be assessed when a dismissal, wrongful because of procedural impropriety, had been accepted by the plaintiff. In his skeleton submissions Mr Sullivan states the way in which damages fall to be assessed in this way:

‘Wages that would have been earned from date of unlawful dismissal to date when contract could lawfully have been terminated, ie 8 weeks contractual notice plus reasonable time for holding disciplinary inquiry.’

Subject to one qualification, Mr Hendy agrees. That qualification is that Mr Hendy submits that the plaintiff is entitled to be awarded a sum to reflect the fact that she has lost the statutory minimum notice protection that she had built up through her years of service with the council ... I cannot myself think that a more complicated case than would have been the plaintiff’s is easy to imagine and I therefore find that the proper period is eight weeks. The total compensation is therefore 16 weeks wages from which it is agreed that any unemployment benefit obtained during that period must be deducted.”

The Court of Appeal affirmed the judgment of Hodgson J.

It should be immediately obvious that while the principle may be sound, the facts in this appeal are so different that they cannot assist the appellant. Captain Lysenko sought to recover damages for breach of his right to be re-employed by the appellant in the event that a vacancy existed soon after his termination. And indeed numerous vacancies became available soon after his termination. The termination was not unlawful. There is an absurdity in the practical application of this principle in the facts of the case. If the respondent had been re-employed and terminated on the grounds of redundancy the breach of right to re-employment would have re-occurred numerous times corresponding to the number of vacancies as they came up unless the appellant was prepared to re-employ him, every time he was terminated.

CONCESSIONAL TRAVEL

There was evidence that the pilots with Air Niugini received concessions on air travel. With Air Niugini it was 90 per cent and 75 per cent with other with other operators. The travel was unlimited. The concession even applied to the family. I consider this was an entitlement outside the contract, so that its loss resulting from refusal to re-employ could not be disputed. I cannot tell, however, how his Honour the trial judge came to the sum of K5,000. I cannot say whether his Honour was wrong because I have no basis to say so. His Honour had a duty to assess damages once he had found that there was a loss. Such a duty is apparent in various National Court cases, especially in relation to assessment of damages for personal injuries or deaths caused by road accidents: see, for example, Make Kewe v Thomas Kudjip and Independent State of Papua New Guinea [1986] PNGLR 279; also Kaka Kopun v Independent State of Papua New Guinea [1980] PNGLR 557 at 564:

“In the present case, and others on which I have reserved judgment, there is some evidence of a general nature but in addition to acting on that evidence I think it is appropriate to adopt the approach of Mahoney J in Baird v Roberts [1977] 2 NSWLR 389 at 398 which was approved in Kerr v Motor Vehicles Insurance (PNG) Trust [1979] PNGLR 251 at 251, namely that once a reduction of economic capacity is established, even if there is no evidence as to pre and post accident possible earnings, a trial judge must, in general, assess some compensation in this regard; he cannot ignore the loss.”

MEASURE OF DAMAGES

As to the measure of damages, the award is based upon the loss of two years salary, it is subject to income tax in Papua New Guinea. As the award is for a lump sum paid/payable while the respondent was already in Australia, the sum may even be subject to Australian tax.

If the award was based upon a net income, after the tax by both Papua New Guinea and Australia, the respondent would receive a much smaller sum which would not truly represent the net wages for two years employment with Air Niugini. I do not, therefore, see any error made by the trial judge in assessing the respondent’s damages on a gross salary basis.

INTEREST

An award of interest is a discretionary matter under the Judicial Proceedings (Interest on Debts and Damages) Act (Ch No 52). His Honour was within the range of rates awarded by courts in Papua New Guinea: see Pinzger v Bougainville Copper Ltd [1985] PNGLR 160. It has not been shown how and where the trial judge had gone wrong in the exercise of his discretionary powers.

I would dismiss the appeal with costs.

HINCHLIFFE J: I have read the judgment of the Deputy Chief Justice and agree with his conclusions.

Order of the court:

N1>1.       Appeal upheld as to part.

N1>2.       Set aside National Court order No 1 of Andrew AJ in WS 597 of 1987 and in lieu thereof order that the appellant (defendant) pay to the respondent (plaintiff) the sum of K9,145.86.

N1>3.       Costs to be argued on a date to be fixed.

So ordered

Lawyers for the appellant: Blake Dawson Waldron.

Lawyers for the respondent: Young & Williams.