N3855

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1156 OF 2007

BETWEEN
WILLIAM MICHAEL
Plaintiff/Respondent

AND
MOROBE CONSOLIDATED GOLDFIELDS
First Defendant/Applicant

AND

HARMONY GOLD (PNG) LTD
Second Defendant/Applicant

Lae: Yalo, AJ
2008: 7 & 19 March

PRACTICE AND PROCEDURE – defendant/ applicant files notice of motion to strike out plaintiffs proceedings filed – substantive proceedings filed by plaintiff for damages caused by the applicants/defendants unlawful termination of the plaintiff/respondents employment - it appears the plaintiff/respondent was terminated without according him an opportunity to state his case – plaintiff/respondent has a case that requires determination in court with relevant evidence – defendant/ applicants application to dismiss proceedings for not disclosing a reasonable cause of action is dismissed – matter to proceed to trial

Held:

Unlike other jurisdictions, we have pronounced that the principles of natural justice (S.59), and in particular the minimum requirement of the principles of natural justice as we have expressed in our Constitution, is one of our Fundamental Principles of Government. ... all conduct, and all decisions made, whether in the public or private sector that relate to or that affect the rights of a person are subject to the principles of natural justice, just as does the obligation to observe the rights guaranteed in the Constitution applies. 

Cases cited

WS No 879 of 2006, Joe Kala v New Britain Palm Oil Ltd (16 February 2007) (Unreported)

Counsel

Mr William Michael in person
Mr Ninawale, for the Defendants/Applicant 

RULING ON MOTION

19th March, 2008 

1. YALO, AJ: This is a ruling on a Notice of Motion filed by the Defendants/Applicants (hereafter, Applicants) on 27 November 2007. The Applicants apply to this court seeking to strike out the Plaintiff/Respondent's (hereafter, Respondent) substantive proceedings pursuant to Order 8 rule 27(1) and Order 12 rule 40 of the National Court Rules. I have quoted these rules on page 4 and 5 of this judgment. 

2. The Applicants' Notice of Motion seeks the following orders:

1	The whole of these proceedings against the First Defendant be struck out pursuant to Order 8 rule 27(1) of the National Court Rules.

2	Alternatively, the whole of these proceedings against the First Defendant be dismissed pursuant to Order 12 rule 40 of the National Court Rules.

3	The whole of these proceedings against the Second Defendant be struck out pursuant to Order 8 rule 27(1) of the National Court Rules.

4	Alternatively, the whole of these proceedings against the Second Defendant be dismissed pursuant to Order 12 rule 40 of the National Court Rules.

5	Costs of these proceedings. 

Background facts

3. The First Applicant employed the Respondent as the Human Resources Recruitment Officer based in Wau, Morobe Province. The Respondent and the First Applicant signed a contract of employment (hereafter, contract) on 12 January 2007 to take effect from 29 January 2007. The Respondent was employed under probation for the first six months. 

4. About the beginning of the second week of March 2007 the Respondent is alleged to have demonstrated "prejudicial behaviour, namely fraternizing with another Harmony employee on company property that has caused serious disruptions to operations and business" of the Applicant. 

5. The First Applicant terminated the Respondent on 13 March 2007. The termination notice reads:

"March 13, 2007
Mr William Michael
LAE
Morobe Province

TERMINATION OF EMPLOYMENT – PREJUDICIAL CONDUCT

Upon investigation it has been revealed that you engaged in conduct that has adversely affected the operations and business of Harmony PNG, namely threats being brought upon the wellbeing of the employees of harmony PNG which will not be tolerated.

This activity is in direct violation of your Contract of Employment with Harmony Gold – PNG Operations, namely Clause 11.4 – Adverse or Prejudicial Conduct; you have engaged in conduct with another Harmony Employee that has severely affected the normal business of the Hidden Valley Wau Compound and your position as the Recruitment HR Officer for Harmony PNG Central Services. You are therefore notified that the penalty for the above activity is instant dismissal. Your employment with Harmony Gold – PNG Operations has therefore been ceased effective immediately this Tuesday the 13th of March 2007.

All monies owed to you up until the 13th March 2007, will be paid to you full and completely by the Accounts Department Harmony Gold – PNG Operations.

A copy of the Harmony Gold – PNG Operations Record of Discipline Proceedings (FM373) signed and acknowledged by you, has been given to you for your records. You will not be eligible for any future employment with harmony Gold – PNG Operations.

Yours faithfully

Shane Richards

HR Manager
PNG Central Services
HARMONY PNG

6. The Respondent is aggrieved by the First Applicant's decision to terminate his employment.

Substantive proceedings 

7. The Respondent filed proceedings at the National Court on 15 October 2007. The Respondent claims, among others, that he was terminated without lawful excuse. In addition, he claims that the First Applicant failed to comply with the terms of his contract when he was terminated. At the time of termination the Respondent had worked for the First Applicant for more than 6 weeks. Under clause 12.1 of the contract, the First Applicant was obliged to serve a one week notice prior to his termination. The First Applicant failed to give this one week prior notice when he was terminated. 

8. The Respondent particularizes his claim for loss and damages as follows:

•	Loss of fortnightly salaries and wages; and 
•	Loss of annual leave benefits; and 
•	Loss of employer contributions to superannuation fund; and 
•	Loss of furlough leave entitlements; and 
•	Loss of pro rata long service leave entitlements; and 
•	General damages for mental distress, inconvenience and disappointment as a result of wrongful termination.

9. The Applicants' notice of motion I have referred to earlier seeks to dismiss the Respondent's claims.

Issue

1	Whether the Respondent's proceedings disclose a reasonable cause of action?

Relevant law

10. Order 8 rule 27 of the National Court Rules states:

27. Embarrassment, etc.

(1)	Where a pleading – 

(a)	discloses no reasonable cause of action off defence of or other case appropriate to the nature of pleading; or 
(b)	has a tendency to cause prejudice, embarrassment or delay in the proceedings; or 
(c)	is otherwise an abuse of process of the Court, 

the Court may at any stage of the proceedings, on terms or otherwise, order that the whole or any part of the pleadings be struck out. 

(2) 	The Court may receive evidence on the hearing of an application for an order under sub-rule (1). 

11. Order 12 rule 40 states:

40. Frivolity, etc. 

(1)	Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings – 

(a)	no reasonable cause of action is disclosed; or
(b)	the proceedings are frivolous or vexatious;;or 
(c)	the proceedings are an abuse of process of the Court, 

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1). 

Respondent's claims against the Second Applicant

12. The parties to the contract subject of these proceedings are the Respondent and the First Applicant. The Second Applicant is not privy to the contract. The Respondent has named and dragged an innocent party into these proceedings. This has a tendency to cause embarrassment to the Second Applicant. I therefore strike out and or dismiss the whole of the Respondent's substantive proceedings against the Second Applicant pursuant to Order 8 rule 27(1) and Order 12 rule 40(1) of the National Court Rules. 

13. The First Applicant is a proper party named in these proceedings. The First Applicant is hereafter referred to as the 'Applicant'.

The Applicant's arguments

14. The Applicant relies on two main grounds to dismiss the Respondent's proceedings. They are: (1) no reasonable cause of action, and (2) frivolous and vexatious proceedings.

(1)	No reasonable cause of action

15. Counsel for the Applicant relied on a written submission and affidavits sworn and filed by Ms Kathryn Sheehan and Mr Shane Richards. 

16. The Applicant argues that the Respondent's action discloses no reasonable cause of action. It denies that the Respondent is entitled to claim loss of fortnightly salary and wages. The Applicant argues that it employed the Respondent under a 6 months probationary period. The Respondent had worked for six weeks prior to his termination. The Applicant summarily terminated the Respondent pursuant to Clause 11.4 of the contract. That it paid the Respondent all his entitlements on his termination. Finally, the Respondent is estopped from commencing proceedings against the Applicant for loss of fortnightly wages or salary on the basis that he accepted the Applicant's offer to settle his claim by paying K441.39 in full and final settlement.

(2)	Frivolous and vexatious cause of action

17. The Applicant's alternative argument is that the Respondent's action is frivolous, vexatious and an abuse of process. It submitted that the Respondent has accepted the full and final settlement of his termination entitlement. He cannot now claim for an amount above what he had already accepted and received. Furthermore, the Respondent was only employed for a short probationary period. That even if the Applicant was not entitled to summarily dismiss the Respondent, the Applicant was entitled to terminate the contract on one week's notice in writing. The Respondent is entitled to one week's salary or wages which was calculated at K441.39. This was paid to the Respondent in full and final settlement.

18. The Applicant further argued that the Respondent is not entitled to claim for loss and general damages, he was paid one week's pay and his superannuation entitlements. Since the Respondent has not worked more than three years with the Applicant, he is not entitled to furlough leave entitlement. Finally, that the Respondent does not plead a cause of action for mental distress, inconvenience, disappointment and frustration. Therefore he cannot make any claim for such alleged damage.

Respondent's arguments

19. The Respondent argues that he has a reasonable cause of action. The basis for such cause of action is that the Applicant breached Clause 12.1 of the contract. That is he was not given one week notice prior to his termination. He argues that the Defence filed by the Applicant shows that there is a reasonable cause of action. He submits that the material evidence in the affidavits of Ms Sheehan and Mr Richards shows that this is not a cause of action that may be dismissed under Order 8 rule 27(1) and Order 12 rule 40(1) of the National Court Rules. The Respondent prays to this Court that the Applicants' notice of motion be dismissed.

Findings

20. The Respondent and the Applicant executed the contract on 12 January 2007. The contract took effect on 29 January 2007. I infer that the Respondent commenced work on or about 29 January 2007. 

21. On or about the second week of March 2007 the Respondent is alleged to have 'fraternized' with a female colleague, another employee of the Applicant. The Applicant conducted an investigation. 

22. There is evidence before me that Mr Richards spoke to the Respondent on two occasions about the alleged conduct. First, on 12 March 2007 at Mr Richard's office. Mr Richards asked the Respondent whether he booked a hotel room in Lae and had sex with a Lenao Haru, another employee of the Applicant. The Respondent denied the allegation.

23. The Second time was on 13 March 2007 when the Respondent was served the termination notice. It is fair to infer that there may have been no opportunity given to the Respondent on 13 March to exercise a right to be heard on the allegation against him.

24. Whilst Mr Richards's termination letter to the Respondent refers to an investigation there is no reference to the Respondent been offered any opportunity to be heard prior to reaching a final decision to terminate the Respondent. However, I do find in the copy of the Record of Disciplinary proceedings annexed to Mr Richard's affidavit that the Respondent denied the allegation. This document dated 13 March 2007 states in part: 

•	Details of investigation into above conduct:

Prejudicial Behaviour, namely fraternizing with another Harmony employee on company property that has caused serious disruptions to operations and business. This action has also endangered other employees working at Wau Compound. [Companies involved in the industry that the First Applicant is in invest millions of Kina to develop projects. Time and security are viewed as very vital to the bottom line. It has every right to protect its own interests and terminate any employee anytime. However such action must be taken subject to the rules and norms. ]

Harmony PNG Contract of employment Clause 11.4 – Adverse or prejudicial Conduct: you have been engaged in conduct with another Harmony Employee that has severely affected the normal business of the Hidden Valley Wau Compound and your position as the Human Resource Recruitment HR Officer for Harmony PNG Central Services. 

25. It seems clear to me that Mr Richards called the Respondent into his office, put the allegations to the Respondent, and upon denial, he resolved to terminate the Respondent forthwith. The Applicant was not provided a copy of its investigation. 

26. On 19 April 2007 the Respondent's Lawyers wrote to the Applicant asking that the Respondent be reinstated because the Respondent was terminated contrary to Clause 12.1 of the contract. The Applicant's Lawyers responded to the Respondent's Lawyers denying all liabilities. The Applicant's Lawyers stressed that every opportunity was given to the Respondent prior to his termination.

27. What if the Respondent is not guilty of the alleged conduct? I am not suggesting that the Respondent is innocent. Was the Respondent interviewed? Was Ms Lenao Haru, interviewed? Did she admit to 'fraternizing' with the Respondent? Who else gave evidence that proved the Respondent's alleged conduct? Was the Respondent given adequate opportunity to state his case? Was the investigation so damning that the Respondent was guilty of the alleged conduct which led to the termination of his contract? Should the Applicant hold the Respondent liable for the disruptions to its operations if he were innocent? 

28. It is relevant for me to pose these issues because I am offered no benefit of a copy of the Applicant's investigation. The investigation would state the names of persons interviewed and what they said. It would also state whether the Respondent was interviewed, and his response. In addition, the Respondent denies behaving in a prejudicial manner. Further, I find that no reasonable opportunity was given to the Respondent to adequately state his case. 

29. I do not see the Respondent denying the fact that some people had gone to the Applicant's office, used insulting and abusive language and threatened the Applicant's employees. 

30. The Applicant did not given one week prior notice of termination to the Respondent in accordance with Clause 12.1 of the contract. The Respondent was six weeks into his probationary period of employment. Under Clause 12.1 of the Contract he was entitled to a notice of termination one week prior to the date of termination. Clause 12.1 of the contract says:

During the initial (and extended, if applicable) probation period in clause 3, either party may terminate this contract of employment at any time in its sole discretion on 1 (one) days notice in writing to the other if you have been employed for less than 4 weeks or one weeks notice in writing to the other if you have been employed for more than 4 weeks.

In such circumstances, the Company will be liable to pay you up to the date is termination only. 

31. Clause 12.1 of the contract is stated in similar terms as Section 34(4)(a) and (b) of the Employment Act Ch 373. 

32. This notice clause ensures fairness. A party wishing to terminate the contract must consider the interest of the other party. As regards the Applicant's interest, one week may be sufficient time to organize itself, take steps to find a replacement and arrange to prepare the employee's termination entitlements.

33. As to the Respondent's interest where prior notice of termination is given, he has two choices. First, he may choose to leave the company earlier than the date of termination nominated by his employer. In that case, he is entitled to be paid money in lieu of notice. In the case before me, the Applicant states in its termination notice that the Respondent will be paid to the date of termination. That is, 13 March 2007. 

34. Secondly, the employee may choose to serve out the notice period. In such case, the employee may be paid entitlements to the date of termination. In the present case, the Applicant terminated the Respondent forthwith. He had no choice. His termination took effect immediately. 
 
35. The two options I have referred to above are expressed in similar terms as Section 35 of the Employment Act Ch 373.

36. In any event an employee has a right to challenge his termination if he thinks he has reasonable grounds to do so. In this case the Respondent claims breach of contract by the Applicant. It appears so, but this issue should be fully considered and determined at the substantive stage. 

37. For the present purpose, I am convinced that the notice clause in the contract confers an implied right on the Respondent to be accorded adequate opportunity to defend himself against the alleged conduct and the termination. Put it another way; the notice clause imposes an implied obligation on the Applicant to accord reasonable and adequate opportunity to the Respondent to respond to the allegations and the reasons for his termination. The Applicant was obliged to act fairly. I have had the benefit of reading my brother Justice David Cannings' judgment in the matter WS No 879 of 2006, Joe Kala v New Britain Palm Oil Ltd (16 February 2007) (Unreported) referred to me by the Respondent. I adopt as mine, his Honour Justice Cannings' discussions on the issue of giving an 'opportunity or right to be heard' as an implied term of a contract. 

38. In that case the Defendant terminated the Plaintiff from employment. The reason for termination was that the Plaintiff's child allegedly broke into a visitor's vehicle and stole a pistol. The visitor had his vehicle parked on the Defendant's property. The Defendant stated that the break-in and theft were one in a series of incidents involving the Plaintiff's children and that he had not ensured that his children were of good behaviour. The Plaintiff's contract was terminated under a clause that allowed for immediate notice to terminate, subject to payment of three months worth of salary and other benefits. The Defendant made those payments and the Plaintiff accepted them. Later the Plaintiff decided to sue the Defendant claiming termination without good cause and contrary to the principles of natural justice. His Honour Justice Cannings ruled, among others, that "It is an implied term of any employment contract that if an employer proposes to terminate an employee's contract for reason relating to the capacity or performance of the employee the employer must give a right to be heard". Cannings J, formulated new rules under Section 9 of the Underlying Law Act taking into account the relevant considerations which he has set out in his judgment. The new rules relevant for the present purposes are:

•	the implied terms of a contract, whether oral or written, include that the principles of natural justice and the Constitutional right of protection against harsh or oppressive or other proscribed acts apply; and in particular

•	an employee has a right to be heard before termination of employment, especially if the ground of termination is poor conduct or performance or some other thing over which the employee has control.

39. In my view, there is an additional point which lends strong support to this new rule. In our jurisdiction the duty to act fairly and to observe the principles of natural justice is an express requirement of Section 59 of the Constitution. Section 59(1) recognizes the principles of natural justice which we have adopted as the underlying law under Schedule 2.2 of the Constitution. Section 59(2) goes further to set down the minimum requirement of natural justice. Section 59 states:

59.	Principles of natural justice

(1)	Subject to this Constitution and to any statute, the principles of natural justice are the rules of the underlying law known by that name developed for control of judicial and administrative proceedings.

(2)	The minimum requirement of natural justice is the duty to act fairly and, in principle, to be seen to act fairly.

40. What is the significance of Section 59 under our Constitution? Well, Part III of the Constitution provides for the Basic Principles of Government. The Subdivisions of Part III (Basic Principles of Government) are as follows: Division 1 – National Goals and Directive Principles; Division 2 – Leadership Code; Division 3 – Basic Rights; Division 4 – Principles of Natural Justice; and Division 5 – Basic Social Obligations. Unlike other jurisdictions, we have pronounced that the principles of natural justice (S.59), and in particular the minimum requirement of the principles of natural justice as we have expressed in our Constitution, is one of our Fundamental Principles of Government. In my humble view, all conduct, and all decisions made, whether in the public or private sector that relate to or that affect the rights of a person are subject to the principles of natural justice, just as does the obligation to observe the rights guaranteed in the Constitution applies. This, we have pronounced, is the way we would like to govern ourselves. 

41. The new rules developed by Cannings J, apply here. The Respondent was terminated for an alleged 'poor conduct'. 

42. The Respondent was entitled to one week's notice of his termination pursuant to Clause 12.1 of the contract. Since he was terminated on the same date he was given notice, is he not entitled to enforce that right he was denied? The Applicant argues that the payment of K441.39 to the Respondent on 18 May 2007 is money in lieu of notice. The Respondent argues otherwise. He argues that the K441.39 was his salary accrued to the date of termination. Unless the parties resolve this issue it remains to be determined. 

Conclusion

43. The Respondent is alleged to have 'fraternized' with a female colleague. As a result the female employee's spouse and his relatives have insulted and threatened the Applicant's employees. These events are tantamount to breach of the Respondent's employment contract. Therefore he was terminated without prior notice, notwithstanding that he was entitled to one week notice in accordance with Clause 12.1 of the contract. He was not given an opportunity to state his case. But more than that the Respondent denies the alleged conduct which resulted in the Applicant's employees being abused, insulted and threatened. No evidence is before me proving the guilt of the Respondent. Perhaps the Applicant may produce such evidence at the trial of the substantive issues. In light of the Respondent pleading unlawful termination and breach of contract, the Applicant providing no evidence of according adequate opportunity to the Respondent to state his case, and not providing evidence of guilt of the Respondent's alleged conduct, there exists a reasonable cause of action. I order as follows:

1	The whole of the Respondent's proceedings against the Second Applicant is dismissed with costs.

2	All of the orders 1, 2, 5, 6 and 7 sought in this notice of motion filed on 27 November 2007 are dismissed with costs. 
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Black Dawson Waldron Lawyers: Lawyers for Applicants