Ila v Kamit, Governor of Bank of Papua New Guinea [2002] PGNC 62; N2291 (11 October 2002)

N2291

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 866 OF 2000

BETWEEN:

TEIO RAKA ILA
Plaintiff

AND:

WILSON KAMIT,
GOVERNOR OF BANK OF PAPUA NEW GUINEA

First Defendant

AND:

BANK OF PAPUA NEW GUINEA

Second Defendant

WAIGANI: KANDAKASI, J.
2002: 26th August
11th October

EMPLOYMENT CONTRACT – Employment contract with public authorities – Contract approved by relevant statutory authority on standard terms of employment – Executed Contract outside standard terms – Executed Contract void and unenforceable.

Employment with public authority – Specific approval of terms by Salaries and Condition Monitoring Committee required – Failure to obtain such approval amounts to void and unenforceable contract pursuant to s.10 (2) of Salaries and Condition Monitoring Committee Act (SCMC Act).

Members of Board of public authorities determining and pay salaries and other entitlement without SCMC approval attracts personal liability – State entitled to recover from them.

STATUTORY INTERPRETATION – Salaries and conditions Monetary Committee Act 1995 – Purpose of Act is to give effect to the governments’ wages policy and to control public expenditure – Therefore approval by the SCMC of terms of employment by public authorities necessary and important – Failing to obtain such approval is critical – Contract of employment without SCMC approval void and unenforceable – Any payment under such contract recoverable by the State from the members of the governing body of relevant authority s.10 SCMC Act.

DAMAGES – Unlawful dismissal – Measure of damages – Usually by reference to period of notice – Damages are payable for injury or loss actually suffered by reference to the terms of the contract – A term that in effect prevents either of the parties from their right to terminate early amounts to a threat or a penalty – Such provisions are unenforceable – Enforcement of such terms may amount to forced labour or unjust enrichment – An agreement entitling an employee for a full pay out of balance of his contract amounts to a threat and a penalty – Such a term is enforceable.

Present case – Plaintiff paid more than what he was legally entitled to – Further payments rejected – No damage or loss suffered – Claim dismissed.

COSTS – Action did not exist in law – Plaintiff warned of costs being claimed on own solicitor and client basis – Costs ordered on own Solicitor and Client basis.

Cases Cited:
Jack Livinai Patterson v. National Capital District Commission (unreported judgement) N2145.
Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (unreported judgement) SC619.
Credit Suisse v. Allerdale BC [1996] All ER 12.
Post PNG Ltd v. Yama Security Services Ltd (unreported and unnumbered judgement delivered on 26th July 2001) SCA 80 of 2000 at pp. 4-5.
Paul Toua v. Finance Pacific Limited (unreported and unnumbered judgement delivered on 19th July 2002) WS No. 1338 of 1999.
Papua New Guinea Banking Corporation v. Jeff Tole (unreported judgement) SC694.

Counsel:
Mr. C. Makail for the Plaintiff
Mr. E. Andersen for the Defendants

11th OCTOBER 2002

KANDAKASI J: This is a claim by the plaintiff (Mr. Ila) for a full pay out of the balance of his contract for a sum exceeding K400,000.00 for wrongful dismissal.

Mr. Ila was employed as an executive officer to the previous governor to the Bank of Papua New Guinea (the Bank), Mr. Morea Vele. The Bank did not previously have the position of an executive officer to its governor. Mr. Vele created the position and had it classified as a senior management position. He then had a written contract of employment signed on 19th April 1999, with effect from 1st December 1998, for four years (the executed contract) between the Bank and Mr. Ila. The Bank being a public institution was required to apply for and receive an approval of the terms of the contract of employment but no specific approval was sought and obtained from the Salaries and Conditions Monitoring Committee (SCMC). The current governor, Mr. Wilson Kamit abolished the position created by his predecessor and made Mr. Ila redundant before the agreed end of his contract.

The Bank argues that the contract is unenforceable because no approval of it was sought and obtained from the SCMC as required under the Salaries and Conditions Monitoring Committee Act (the SCMC Act). The Bank further argues that even if the contract was approved by the SCMC, the provision in the contract allowing for a pay out of the balance of the contract is in fact a penalty provision which can not be enforced. Furthermore, the Bank argues that, Mr. Ila was employed on the Banks usual terms and conditions for managers which has been approved by the SCMC and that Mr. Ila has been lawfully terminated in accordance with those terms.

On the 5th of August 2002, I directed the parties to file an agreed and disputed statement of facts and the issues for trial. I am indebted to both counsel for having complied with that direction, resulting in the filing of a statement of agreed and disputed facts dated the 26th of August 2002. This as resulted in an agreement on the relevant facts and parties needing only to make submissions on the issues before me. This has considerably reduced trial time and therefore costs. I would encourage counsel in this matter and all other counsel before the courts to talk more and only allow matters that can not be resolved through negotiations and agreements of the parties to go to trial.

Issues

The agreed issues before me are these:

1. Whether or not the terms and conditions of the Executed Contract are ‘conditions of employment’ for the purposes of s.10 of the SCMC Act?
   
2. If the terms of the executed contract require approval, and have not been approved, by the SCMC, are they void and unenforceable pursuant to the SCMC Act?
   
3. If the terms of the executed contract are void and unenforceable, what determines the terms and conditions of employment of Mr. Ila?

Facts

As noted, the factual backgrounds from which these issues arise are not in issue and are simply this. The Bank is a body subject to the provisions of the SCMC Act and the employment of Mr. Ila was subject to the SCMC Act. At or about the end of 1998 the ‘terms and conditions of employment’ for Senior Managers employed by the Bank and approved by the SCMC was in terms of a standard contract of employment (the standard terms). A copy of that is annexure "C" to the affidavit of Mr. Ila dated 15 August 2002 (Mr. Ila’s affidavit).

The standard terms contained provisions for termination of employment and for payment of certain monies on termination. It does not provide for a fixed term of contract. Clause 10.1(b) provides that the grounds available to the Bank to terminate the contract include redundancy. The next provision clause 10.2(b) provide that the process available to the Bank to terminate the contract include giving not less than three month’s notice or payment of salary and emoluments in lieu of notice. Then clause 11.1 provides that the benefits on termination available to an employee are the greater of either an ex gratia of a maximum of 3 months base salary plus 3 months base salary and gratuity in lieu of notice, or a retrenchment benefit under the Bank’s redundancy agreement.

On the 21st December 1998, the SCMC approved various payment scales and other matters for the Bank (the 21/12/98 approval). That contained no reference to the grounds upon which the employment of persons subject to that approval could be terminated, and contained no provision for the payment of termination benefits to persons employed subject to that approval.

Mr. Ila was employed by the then governor of the Bank on or about 25th November 1998 for the position of executive officer and classified his position as a management position. The position of executive officer was a new position created by then governor to employ Mr. Ila.

By letter dated 7 April 1999 (annexure "G" to Mr. Ila’s affidavit) the Bank wrote to the SCMC seeking approval amongst others, the creation Mr. Ila’s position on the terms and conditions per the 21/12/98 approval. No specific draft or proposed contract was enclosed with this letter or otherwise provided to the SCMC. The SCMC Chairman responded by letter dated 8th April 1999, essentially granting the approval sought. Then came the executed contract. It gave the employer certain relatively limited rights to terminate the employment, (Clause 8). More importantly, it also entitled Mr. Ila to a pay out of the full entitlements and benefits including his salary and gratuity, for the unexpired term (Clause 7.2) if he was terminated prior to the end of his contract.

At no time did Mr. Ila and the Bank execute a contract between them in the form of the standard terms. Prior to signing of the executed contract Mr. Ila did not receive payment of his salary and benefits. Upon or shortly after execution the plaintiff was paid for the period from 1st December 1998 up to the date of his termination. During the course of his employment Mr. Ila was paid by the Bank in accordance with the amounts and other emoluments due to him presumably under the executed contract.

During the course of his employment, Mr. Ila borrowed some money from the Bank pursuant to the Bank’s staff housing scheme and signed a deed (the housing scheme deed). In Clause 6 of the housing scheme deed, Mr. Ila irrevocably authorized the Bank to deduct from any monies or entitlements owed by the Bank to him whether in respect of termination entitlements or otherwise such amounts to sufficiently repay what he owed the Bank.

On 19th August 1999 the Bank, through the first defendant, terminated Mr. Ila’s employment with effect from close of business on 18th August 1999, on grounds of redundancy in accordance with the standard terms. Annexure B to the Affidavit of Mr. Ila is a true copy of the letter of termination. The Bank has since abolished the position of executive officer to the Governor.

Upon termination, Mr. Ila was entitled to 3 months notice or pay in lieu of notice together with gratuity if calculated in accordance with the standard terms under clauses 11.1 (a) and 10.2. On top of that, he was entitled to a further 3 months pay at base salary in ex gratia payment. This would exceed the amounts that would have been payable under the Bank’s redundancy policy.

However, the Bank in fact paid Mr. Ila 6 months salary and benefits rather than the 3 months salary and gratuity as per the standard terms. The Bank also paid a further 6 months base salary, rather than the 3 months ex-gratia base salary provided for. Annexure B to Mr. Ila’s Affidavit accurately sets out the basis upon which the Bank paid the plaintiff. The actual calculations are set out in annexure H to Mr. Ila’s Affidavit. Going by those calculations Mr. Ila was owed an amount of K4, 696.28 after deducting what was due to the Bank upon his termination. Under cover of letter dated 10th April 2000, the bank tendered the amount of K4,696.28 to Mr. Ila but he refused to accept the cheque and had it returned to the Bank under cover of letter dated 13th April 2000.

The executed contract does not contain a provision that redundancy is a ground for termination and instead it obliges the Bank under clause 7.2 to pay Mr. Ila the full balance of his entitlements and benefits including salary and gratuity. Then in clause 8.2 it provides that on termination, Mr. Ila would receive a redundancy separation payment which will be equivalent of the salary payable for the unexpired portion of the contract.

The SCMC has never expressly or explicitly, approved these terms and conditions. Indeed, the SCMC does not approve such clauses for other people. The bank did not tender, nor has Mr. Ila received, a payment pursuant to Clauses 7.2 or 8.2 of the executed contract. Subsequently Mr. Ila has been in gainful employment, which he would not have been able to conduct had he remained a full time employee of the Bank. Further, Mr. Ila is a 50% shareholder and a director of his ‘family’ company, Treen Investments Ltd which is in the business of providing security services.

Whether Terms and Conditions in Executed Contract are Conditions of Employment within the Meaning of s. 10 of the SCMC Act?

There is no argument and it is the correct position that all employment in the Public Service both within and out side the country are governed by the Public Service Management Act 1995. Section 41(1) of that Act provides for contracts of employment in the public service executed for and on behalf of the State by the Head of State for departmental heads and departmental heads for other officers of a depart subject to approval by the SCMC.

To this end, s. 10 of the SCMC Act is relevant and is very important. That provision reads:

"(1) A public authority shall not determine or vary the salaries and conditions of employment of any employee except in accordance with this Act.

(2) A determination or variation of the salaries and conditions of employment of an employee made otherwise than in accordance with this Act is void, and any agreement, written or oral, intended to give effect to such determination or variation shall be unenforceable at law.

(3) A payment or benefit given to an employee under a determination or variation of his salary and conditions of employment made other than in accordance with this Act may be recovered by the State as a debt from the members of the governing body of the public authority who shall be jointly and severally liable to repay the payment or benefit.

(4) For the purposes of Subsection (3) a benefit may be valued by the Minister and such value shall be that claimed in any proceedings brought by the State." (Emphasis supplied)

The clear import of this provision in my view, is that, all terms and conditions of employment, which are usually stated in terms of salary and conditions of employment are subject to SCMC approval for employment in the public service or with a public authority. This is a very important requirement because, unless such an approval is sought and obtained from the SCMC, any contract of employment containing terms and conditions of employment not approved by the SCMC is void and unenforceable.

In this case, Mr. Ila says the terms and conditions on which he was employed by the Bank are set out in the executed contract. He takes no issue as to the application of the SCMC Act and the need to seek and receive approval from the SCMC on the terms and conditions of his employment. He submits that, when the SCMC approved his employment with the Bank as its then governor’s executive officer, it was in terms of the executed contracted. The bank says however that, it employed Mr. Ila on the standard terms of employment of its managers, because it did not seek and receive approval for a contract in terms of the executed contract. From this, there is no doubt in my mind that as far as Mr. Ila is concerned, his conditions of employment are in the executed contract. It is also clear that the issue here is one of on what terms and conditions was Mr. Ila employed. In these circumstances, I find that the terms and conditions of the executed contract are "conditions of employment" within the meaning of s. 10 of the SCMC Act. Having so decided, I now move to the next issue.

Whether Approval of Terms of Executed Contract Required?

As noted already, there is no argument that the terms and conditions of Mr. Ila’s employment per the executed contract required approval from the SCMC to avoid the consequence provided for in s. 10 (2) of the SCMC Act. Again as noted, the Bank’s argument is that no approval was sought and obtained in terms of the executed contracted. Therefore, those terms are void and unenforceable. Mr. Ila argues however that, the approval given by the SCMC per its letter of 8th April 1999, meant approval of his employment with the Bank as executive officer to the then governor of the Bank on the terms set out in the executed contracted. It is therefore valid and enforceable.

The letter of 8th April 1999, in relevant parts reads:

"Consistent with your decision I have endorsed these appointments and I have also approved that these positions be classified as Management positions.

Equally applicable to the above, Terms and Conditions of Employment accorded to Management positions shall apply to those appointed and made retrospective to their dates of appointment."

The letter dated 7th April 1999 seeking approval to which the above letter was responding was in these terms in so far as they are relevant:

"Recommendation

It is recommended that you consider and approve:

1. The three positions under the new Management Structure.
2. The terms and conditions of employment of management, be applied to the three designated positions approved by the Governor, inline with the determination of the SCMC dated 21st December 1998."
   

The 21/12/98 approval is in evidence with the consent of the parties and is featured in the agreed statement of facts. That letter is lengthy and there is no need to quote the letter. That approval as already noted in the facts, does not contain any approval in terms of the executed contract in this case, particularly in relation to the issue of termination and what is to happen on termination.

There is no evidence before me and also there is no issue between the parties that, no specific approval was sought and obtained for a contract of employment between the Bank and Mr. Ila in terms of his executed contract. I have great difficulty accepting Mr. Ila’s argument that the terms of his executed contracted were approved by reference to the letter of 8th April 1999 from the SCMC for a number of reasons. Firstly, no specific approval was sought and obtained for a contract in terms of the executed contract. Not much was required to seek and secure the required approval if all was in order. All that the Bank could have done was to enclose a copy of the draft contract in its letter to the SCMC seeking approval of the contract. The SCMC could then have considered the contract and decided whether or not to grant the approval sought. That is not what happened. What in fact happened is the second reason for my having difficulties in accepting Mr. Ila’s arguments.

The Bank specifically sought from the SCMC approval of the creation of three new management positions including that of an executive officer to the then governor of the Bank. At the same time it sought approval to employ them on the same terms and conditions of employment of other managers of the Bank per the 21/12/98 approval, which has become known as the standard terms and conditions of employment. The SCMC granted the approvals that were requested of it.

The third reason for my having difficulties with Mr. Ila’s argument is that, the standard terms do not provide for the kind of terms the executed contract contains. As noted already in the facts, the executed contract was for a fixed period of 4 years. It gave the employer certain relatively limited rights to terminate the employment. That included, more importantly, an entitlement to Mr. Ila for a pay out of the full entitlements and benefits including his salary and gratuity, for the unexpired term of employment if he was terminated prior to the end of his contract.

As the preamble to the SCMC Act states, the purpose of that Act is amongst others, to assist the government to implement its wages policy. Wages paid to the employees in the public service and the public authorities does certainly have a major impact on the government and hence the country’s budget and monetary position. It is therefore necessary to have some control and discipline in this area. This is to ensure consistencies in the implementation of wages and or terms and conditions of employment philosophies. It is also to ensure that the expenditure is necessary and proper and is according to budget and that the country can afford the kind of terms and conditions of employment proposed.

The situation is akin to the need to comply with the tender and Minister for Finance approvals under the Public Finances (Management) Act 1995 as amended. What I said in Jack Livinai Patterson v. National Capital District Commission (unreported judgement) N2145 applies with necessary modifications to the present case. In that case I said that the requirements for tender and Minister of Finance approval are important for the purposes amongst others to control the public expenditure to ensure expenditure according to budget so as to avoid a blow out. Unfortunately, there have been more breaches than compliance and that has resulted in the bad financial position we as a nation is in today.

In that case, I also had regard to a large number of both local and overseas authorities on a failure by contracting parties to meet statutory requirements. This included the case of Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (unreported judgement) SC619 and Credit Suisse v. Allerdale BC [1996] All ER 12. Then based on those authorities, I held that the contract for service between Mr. Patterson and the National Capital District Commission was unenforceable for failing to go through the tender and Minister for Finance approval under the Public Finance (Management) Act 1995 as amended.

What this means in this case is that all relevant and applying statutory requirement must be met if any contract with a public authority is to be enforced. This is very important because it means payment out of public funds. The government through the relevant agency needs to know how much is allowed out of the public purse, which is necessary for the national budget and controlling of public expenditure to avoid unbudgeted and unforeseen expenditure. The effects of uncontrolled expenditure are disastrous for the government and the nation as a whole. Hence, the foresight in the enactment of legislation such as the SCMC Act and the Public Finances (Management) Act 1995 as amended. Given this importance, the requirements in such legislation can not in my view be met by implication or inference. Specific steps must be taken to specifically comply with the requirements of the Act. A failure to do so can not be cured by an argument that is based purely on indirect means.

In the present case, the SCMC Act, in so far as is relevant, makes two important provisions. First it requires all terms and conditions of employment with public authorities to be approved by the SCMC. Secondly, it provides that if no such approval is obtained, the contract containing terms and conditions of employment that have not been approved are void and unenforceable. This is a restatement of what has always been the position at common law particularly, in relation to the enforceability of illegal contracts.

In an employment contract, the terms and conditions on which a person is employed are very important and central to the contract. So in essence they are the foundation of the contract and if they are not authorised by law, no contract exists. It follows therefore that, there might be a contract in fact but there is no contract known to law or the law can recognise and uphold. In the present case, the executed contract has the terms and conditions of his employment as far as Mr. Ila is concerned. But since they were not approved by the SCMC specifically, or by any necessary inference I find the executed contract is void and unenforceable in line with the provisions of s.10 (2) of the SCMC Act.

Even if the terms of the executed contract were approved by the SCMC, I would still find the terms of the executed contract particularly clauses 7.2 and 8.2 of that contract unenforceable. The reason for that is simple. The relationship between an employer and his employee or a master and his servant as previously known exists as long as the parties wish to be in it. Once either or both of them decide not to continue in the relationship, nothing can be done even by a court order for the relationship to continue expect in very limited case were reinstatement is an available remedy. This is why the remedy for ending an employment contract unlawfully has always been one of damages only.

The measure of damages is usually by reference to the correct way in which the contract could have been terminated, if termination is before the agreed time. That in turn is by reference to the period of notice. This follows on from the clear position at law that a contract can be terminated lawfully only in two ways prior to the agreed end of the contract. First is for cause or good reason in which case, no damages or compensation is payable. The second is on reasonable notice or pay in lieu of notice. That is why, nearly all contracts of employment have provisions on termination in these terms.

Hence it is most unusual for a contract to contain provisions in effect prohibiting either of the parties from terminating the contract. If a contract contains such a provision, it would amount to forced labour or forced employment. That would be against universal and ones constitutional right under s.43 of the PNG Constitution. The law has therefore not hesitated to strike down contracts containing such provisions.

In this case, clause 7.2 and 8.2 of the executed contract provides that the Bank will pay Mr. Ila the balance of his contract if he is terminated prior to the expiry of his contract for reasons other than good cause. I find this is in effect a penalty provision. Through this provision, Mr. Ila is saying to the Bank you are not entitled to terminate me anytime before the agreed end of my contract for reason other than good cause. But if you do, you will pay me the balance of my contract.

The law is as was stated by the Supreme Court in Post PNG Ltd v. Yama Security Services Ltd (unreported and unnumbered judgement delivered on 26th July 2001) SCA 80 of 2000 at pp. 4-5 that:

"Damages in contract are awarded to compensate a party for loss or injury not to penalise. Damages are awarded to put the injured party in the same position, as it would have been had the contract not been breached, and it is the duty of the Court to satisfy itself that a sum to be held over a party to enforce a contract. A Plaintiff claiming under a contractual provision for liquidated damages must show that the agreement represents a genuine pre estimate by the parties of the actual loss that will be occasioned if the contract terms are met. But if the provisions can be seen to be essentially a threat over a party to secure performance of the contract, the provision will be a penalty and unenforceable.

Courts have long held that because the purpose of a penalty is to ensured compliance rather than to truly compensate, agreements for sums found to be penal will not be enforced, and the party claiming damages will be properly and adequately compensated by an award of actual assessed loss. Further, if there be provision in an agreement for a sum or sums payable on breach wholly out of proportion to the breach. (sic) The Courts will hold such provision a penalty, as unconscionable, and unenforceable. "A Plaintiff cannot recover the sum stated in a contract if he has not in fact suffered such loss." (Law of Contracts Cheshire & Fifoot 2nd Edn 767)."

The Court then went on to say that a Court dealing with a contract having such a provision has the duty to:

" ... inquire into the matter and determine whether the provision in the contract represents a genuine pre-estimate of the damages that will occur in the event of breach, as opposed to whether the sum designated is in reality a penalty to be imposed if the contract is not carried through."

The Courts in Papua New Guinea have upheld stipulations in contracts in situations similar to the present case. But that was only been in cases where such loss has been limited to a specific period of the unexpired period and where the issue of whether such clause amounted to a penalty or a genuine estimate of the anticipated damages was not raised. An example of this is the judgement of Los J., in Paul Toua v. Finance Pacific Limited (unreported and unnumbered judgement delivered on 19th July 2002) WS 1338 of 1999, which has been referred to and relied on by Mr. Ila’s counsel. A more recent example is the judgement of the Supreme Court in Papua New Guinea Banking Corporation v. Jeff Tole (unreported judgement) SC694.

In the present case, clauses 7.2 and 8.2 of the executed contract speak of the whole of the balance of the unexpired period. There is no specific estimates as how much the parties were talking about. Therefore I can not see how much was it the parties considered and this Court could uphold as a genuine estimated of Mr. Ila’s possible loss should he be terminated earlier. This offends against the well-known principle in contract law that there must be certainty in the terms of the contract. That in turn leads to another important factor for consideration, which is the concept of unjust enrichment.

As the Supreme Court noted in the Post PNG Ltd case (supra), an employee who has been unlawfully dismissed can only be entitled to compensation for injury or loss actually suffered. This recognizes the fact that a dismissed employee always as the opportunity to find other employment in mitigation of his loss or damage. The law has therefore, developed in the way it has to allow for a reasonable period of notice to enable a dismissed employee to look for alternative employment before his employment could come to an end. The law has also come to allow an employer to pay in lieu of notice on the basis that what the employee is paid will support him in the meantime while alternative employment is being sought.

Once a dismissed employee is able to find a new employment, there could be no longer any damages apart from any variations in his new terms of employment from the previous. Thus it would be unjust enrichment for an employee to be paid by his former employer even though he is not rendering any service to that employer. The payment to a former employee could be an unjustified expense. It is this kind of contract that has rendered some of the countries statutory corporations and other public authorities into bankruptcy and or had forced them to incur substantial financial obligations without good cause. This has led to the bad financial position the country is in today. For this reason this kind of contractual provisions should not be in the contracts of employment at the first place. If however, they appear, they should be struck down at the instance of any interested party for the common good of the country.

In this case, as far as I could see, this provision was a provision intended to ensure that Mr. Ila was not terminated anytime prior to the full term of his contract. The Bank was under a threat not to terminate Mr. Ila’s contract. This, I find had to be put in especially when the position he occupied was created to employ him and was classified as a management position when ordinarily it is not. Logically, therefore something had to be done to protect against any changes to that following change in the Bank’s leadership. The Bank is a public institution charged with an important duty to control the financial affairs of the country under its enabling legislation. It is unconscionable for such institutions to be placed under such threats, as that has the potential of seriously and adversely impacting against its operations. Such institutions and all other employers should be in a position to hire and fire employees as are necessary for their purposes. Should they exercise that power in breach of their employees’ rights under their respective contracts, then reasonable damages and not a penalty is the appropriate remedy.

In this case, there is no dispute that since his termination Mr. Ila has gone into a family business and there is no evidence before me of what damages if any he has in fact suffered. If he were allowed to receive the balance of his contract, he would be getting paid for nothing and he would be unjustly enriching himself.

For these reasons I would have still refused to uphold clause 7.2 and 8.2 of the executed contract as being null and void and unenforceable independent of s.10 of the SCMC Act. This leads to the final issue of if the terms of the executed contract are void and unenforceable, what determines the term and or the conditions of Mr. Ila’s employment?

What Determines the Terms of Mr. Ila’s Employment.

This is a very simple question that must be resolved by reference to the undisputed facts. The facts clearly show that approval was specifically sought in the letter of 7th April 1999 from the Bank to the SCMC in three respects. The first was the creation of the executive officer’s position and secondly that position to be classified as a management position. The third approval that was sought was for the Mr. Ila to be appointed as the executive officer on the standard terms and conditions of employment applicable to managers employed by the Bank. The SCMC gave its approval in those terms. So the terms and conditions of Mr. Ila’s employment was per the standard terms of employment of the Bank’s managers.

The Banks standard terms of employment of managers as noted already, does not have a provision for a pay out of the balance of any of its managers contract should they be terminated earlier than the agreed date of termination. Instead, they provide amongst others the grounds available to the Bank to terminate the contract including redundancy. They also provide that there could be early termination on not less than three month’s notice or payment of salary and emoluments in lieu of notice. The maximum payable to an employee on termination is either an ex gratia of a maximum of 3 months base salary plus 3 months base salary and gratuity in lieu of notice, or a retrenchment benefit under the Bank’s redundancy agreement, whichever of the two is greater.

Upon termination therefore, Mr. Ila was entitled to 3 months notice or pay in lieu of notice together with gratuity if calculated in accordance with the standard terms. On top of that, he was entitled to further 3 months pay at base salary in ex gratia payment. That was more than what he could have been paid under the Bank’s redundancy policy.

Despite that, the Bank in fact paid Mr. Ila six months salary and benefits and a further 6 months base salary. There is no issue on the calculations the Bank had arrived at and paid to Mr. Ila. Going by those calculations Mr. Ila was owed an amount of K4, 696.28 after deducting what was due to the Bank upon his termination. Under cover of letter dated 10th April 2000, the bank tendered the amount of K4, 696.28 to Mr. Ila but he refused to accept the cheque and had it returned to the Bank under cover of letter dated 13th April 2000.

The end result of all the above is this. The Bank correctly and lawfully terminated Mr. Ila. Not only that, on termination, Mr. Ila received more than what he was entitled to received under the terms and conditions that were in fact approved by the SCMC. It follows therefore that Mr. Ila’s claim has no foundation either in fact or in law. Therefore, the action must be dismissed with costs.

COSTS

The Bank is arguing for costs to be ordered against Mr. Ila on an own solicitor and client basis. In so arguing, the Bank says that, it had already forewarned Mr. Ila of its right to claim costs on an own solicitor and client basis. The reason for that was simply that, Mr. Ila was paid more than what he was entitled to and the Bank was even prepared to pay the additional amount of K4, 696.28 which Mr. Ila refused to accept. Mr. Ila, opposes that application because he says he was suing under a specific and expressed term of the executed contract.

I do not act Mr. Ila’ argument for the simple reason that all contracts are subject to statutory requirements and the general principles of contract law, particularly in relation to the enforceability of the terms of a contract. There is a further reason not to accept Mr. Ila’s argument. The provisions of s.10 (2) of the SCMC Act are clear and unambiguous and so is the terms of the letter seeking the approval of the SCMC and the SCMC’s response to that. The SCMC specifically approved Mr. Ila’ employment on the standard terms of employment of its managers and not the executed contract. In a few words, I find that Mr. Ila had no good reason to come to this Court at the first place. But in coming to Court, he forced the Bank to incur costs unnecessarily. It is therefore reasonable in all the circumstances that, he should be ordered to bear all of the Bank’s cost. I therefore order costs against Mr. Ila on an own solicitor and client basis. Such costs shall be agreed, if not taxed.

In Passing

In passing, I note that, s.10 (3) and (4) of the SCMC Act creates personal liability against members of a governing body of a public authority that determines and pays benefits other than in accordance with the SCMC Act. That includes the requirement for approval of proposed terms and conditions of employment.

There is admission here by the Bank that, it has paid Mr. Ila more than what he is entitled to under the standard terms of employment. Also it is not clear whether, Mr. Ila was paid under the executed contract or the standard terms of employment. If he was paid in accordance with the terms in the executed contract than the governor of the Bank then and now should be required to repay to the State what they have or may have allowed to be paid to Mr. Ila.

In my view, it is the careless application of public funds into the hands of a very few people that has contributed to the bad financial position we as a nation is in today. It is about time appropriate steps be taken against people who are involved in one way or another in this kind of practice in order to stop the practice. The SCMC also has to be diligent in the exercise of its powers and functions with a view to bringing back the kind of discipline and control required in setting terms and conditions of employment and creation of jobs in the public service and public authorities. It should endeavour to approve positions that are necessary on terms and conditions that the country can afford for the kind position in question.
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Lawyers for the Plaintiff: Murray & Associates Lawyers
Lawyers for the Defendant: Gadens Lawyers