Nagari v Rural Development Bank Ltd [2010] PGNC 202; N4284 (6 October 2010)

N4284

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

WS 1030 OF 2004

BETWEEN:

ANDREW NAGARI
Plaintiff

AND:

RURAL DEVELOPMENT BANK LIMITED
Defendant

Waigani: Hartshorn, J.
2010: 22nd & 23rd March
: 6th October

Employment – unlawful termination – consideration of sections 3 (1), 7, 9 (3) and 10 (2) Salaries and Conditions Monitoring Committee Act

Facts:
The plaintiff Mr. Andrew Nagari, had his employment as the Managing Director of the Rural Development Bank Ltd terminated. He alleges that the termination was unlawful and he seeks amongst others, damages.

Held:

1. Mr. Nagari is unable to enforce the RDB Agreement and was not employed under the NEC Agreement. His claims are dismissed.
   
2. Mr. Nagari is ordered to pay the amount owing under the staff auto loan agreement being the sum of K 65,267.48.
   

Cases cited:

Waim v. Investment Corporation of Papua New Guinea (2001) N2139
Teio Raka Ila v. Wilson Kamit (2002) N2291

Counsel:

Messrs R. Pato, J. Haiara and D. Mel, for the plaintiff
Mr. K. Imako, for the defendant

6th October, 2010

1. HARTSHORN, J: The plaintiff Mr. Andrew Nagari, had his employment as the Managing Director of the Rural Development Bank Ltd (RDB) terminated. He alleges that the termination was unlawful and he seeks amongst others, damages.

2. RDB denies Mr. Nagari's allegations and cross claims that his employment agreement was illegal and so void and unenforceable. RDB claims from Mr. Nagari, the amount paid to him under the employment agreement and a further sum that it alleges Mr. Nagari owes under a staff auto loan agreement.

3. It is submitted on behalf of Mr. Nagari that the critical question to be determined is which contract of employment was applicable at the date of the termination of his employment. Was it the employment agreement entered into on 21st April 2004 (RDB Agreement), or what is described as the National Executive Council approved standard terms and conditions (NEC Agreement)? I will consider this question first.

4. It is agreed by the parties that amongst others:

a) Mr. Nagari and RDB executed an employment agreement on 21st April 2004.

b) pursuant to the RDB Agreement, Mr. Nagari was to be employed by RDB in the position of Managing Director.

c) clause 35 of the RDB Agreement provided that the contract was binding subject to the endorsement of the Salaries and Conditions Monitoring Committee (SCMC).

d) the RDB Agreement was submitted to the SCMC for its determination.

e) Mr. Nagari was paid and received salary and benefits under the RDB Agreement.

f) at the time of termination of Mr. Nagari's employment, the RDB Agreement was not approved by the SCMC.

g) the Circular Instruction dated 28th July 1999, issued by the former Chairman of SCMC, provides for severance payments to heads of public authorities.

5. It is submitted on behalf of Mr. Nagari that the contract that was applicable at the date of his termination was the NEC Agreement and not the RDB agreement. This, it is submitted, is because the NEC Agreement was the result of a decision of the National Executive Council made for the implementation of a uniform policy for the employment terms and conditions of heads of public authorities. This decision was made by the National Executive Council, it is submitted, "in accordance with its constitutional powers as an executive government to fill a void or vacuum that existed to address the issue of lost payment of salary and benefits to heads of public authorities whose employment was terminated and..... their terms and conditions of employment... were pending SCMC approval as was the case with the Plaintiff."

6. The evidence of the NEC Agreement is contained in the affidavit of Ms. Margaret Elias. Ms. Elias was the Secretary for the Department of Personal Management and the Chairperson of the SCMC at the time that she swore her affidavit. Ms. Elias deposes amongst others, that in the absence of an SCMC approved contract, Mr. Nagari is deemed to be employed on an NEC approved contract template and the SRC approved terms and conditions of employment. In cross-examination, Ms. Elias conceded that her observation of Mr. Nagari being deemed to be employed on an NEC Agreement was merely an observation from her experience.

7. The provisions of the Salaries and Conditions Monitoring Committee Act (SCMC Act), pursuant to s. 3 (1),

"...apply notwithstanding anything in any other law relating to the determination of salaries and conditions or employment of employees of a public authority."

8. Section 7 of the SCMC Act provides amongst others, that the SCMC:

"... may, in accordance with directives of the National Executive Council, require a public authority to employ specified categories of employees on written fixed period contracts of employment on such terms and conditions as are determined by a public authority subject to this Act."(second part of s. 7 SCMC Act)

9. The only evidence in respect of any directive of the National Executive Council is the, "Circular Instruction SCMC No 1 of 1999" issued by the then Chairman of the SCMC on 28th July 1999 to all Heads of Public Authorities (Circular Instruction). In the Circular Instruction, the Chairman states amongst others, that he has been directed by the Prime Minister in accordance with the Chairman's powers under the SCMC Act, to ensure that severance payments made to outgoing heads of public authorities have been calculated in accordance with Government pay policy. There are no references to any other directives of the National Executive Council in the Circular Instruction.

10. In my view it is clear that the directive referred to in the Circular Instruction does not fall within the type of directive permitted under the second part of s. 7 SCMC Act. Rather, it is in respect of the SCMC's power under the first part of s. 7 SCMC Act to require a public authority to provide information.

11. In the absence of any evidence of directives or requirements as described under the second part of s. 7 SCMC Act, RDB was not required to employ Mr. Nagari pursuant to the NEC Agreement. Further, I am unable to determine how Mr. Nagari could be considered to be deemed to be employed under the NEC Agreement given the lack of evidence of directives or requirements and specifically directives or requirements that comply with the second part of s. 7 SCMC Act.

12. Consequently, the contract of employment that was applicable at the date of termination is the RDB Agreement.

13. It is agreed between the parties that the RDB Agreement was not approved by SCMC. Section 10 (2) SCMC Act relevantly provides that:

"A determination..... of the salaries and conditions of employment of an employee made otherwise in accordance with this Act is void, and any agreement.... intended to give effect to such determination.... shall be unenforceable at law."

14. The cases of Waim v. Investment Corporation of Papua New Guinea (2001) N2139 and Teio Raka Ila v. Wilson Kamit (2002) N2291 have considered the SCMC Act and have held that a failure to obtain the requisite approval of the SCMC renders a contract void and unenforceable. I respectfully agree with these decisions.

15. Mr. Nagari is unable to enforce the RDB Agreement and was not employed under the NEC Agreement. Consequently, it is not necessary to consider the other submissions of counsel as to Mr. Nagari's claims. Mr. Nagari's claims are dismissed.

RDB's cross-claim

16. RDB claims in its cross-claim the salary and entitlements paid to Mr. Nagari under the RDB Agreement and the amount owing by Mr. Nagari under a staff auto loan agreement.

17. As to the salary and entitlements, no submissions were made by counsel for RDB as to this claim. In any event, given s. 9 (3) SCMC Act, I consider that RDB is likely to be estopped from claiming the salary and entitlements as it had a responsibility together with Mr. Nagari to obtain the requisite SCMC approval. I will not consider this particular claim further.

18. As to the amount owing under the staff auto loan agreement, the loan and interest upon it at 12% per annum is admitted. In submissions by counsel for Mr. Nagari, it is submitted that any repayment amount ordered to be paid should not include any amount charged to the account for fees paid to Bradshaw Lawyers as such fees were not ordered to be paid by Mr. Nagari and he never agreed to pay any such fees.

19. The provisions of the staff auto loan agreement only provide for legal fees to be paid by Mr. Nagari in connection with the securities there listed, which are a registered bill of sale and an irrevocable authority. There is no specific provision in respect of legal fees in the case of default or recovery, being charged to the account of Mr. Nagari.

20. Consequently, Mr. Nagari is ordered to pay the amount owing under the staff auto loan agreement being the sum of K 65,267.48 as deposed to in the affidavit of Charles Evi sworn 12th March 2010, less any amounts that have been charged for legal fees paid to Bradshaw Lawyers.

Orders

21. The orders of the Court are:

a) the plaintiff's claims are dismissed.

b) judgment is entered for the defendant on the further amended statement of claim.

c) judgment is entered for the cross claimant in the sum of K 65,267.48 less all amounts that are included in the sum of K 65,267.48 on account of legal costs paid by the cross claimant to Bradshaw Lawyers (judgment debt).

d) the cross defendant shall pay interest on the judgment debt at the rate of 12% per annum from 6th October 2010 until payment.

e) the costs of and incidental to the proceedings less the cross-claim shall be paid by the plaintiff to the defendant.

f) 60% of the costs of and incidental to the cross-claim shall be paid by the cross defendant to the cross claimant.

_______________________________________________
Steeles Lawyers: Lawyers for the Plaintiff
Rageau Manua & Kikira Lawyers: Lawyers for the Defendant