N4395

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 611 OF 2009

GEORGE PODAS
Plaintiff

V

DIVINE WORD UNIVERSITY
Defendant

Madang: Cannings J
2010: 18 December,
2011: 18 February, 23 September

LAW OF EMPLOYMENT – wrongful dismissal – whether employer breached written contract of employment by failing to give three months notice in writing; by failing to provide a right to be heard; by failing to give reasons – Employment Act, Sections 34, 35

The defendant terminated the plaintiff's employment under a fixed term written contract of employment without notice, without giving the plaintiff a right to be heard and without providing reasons. The plaintiff had been employed for 18 months at the time of termination. He sued the defendant, claiming damages for wrongful dismissal, arguing that the employer breached the contract by: (1) not giving three months notice, (2) not giving a right to be heard, and (3) not providing reasons. A trial was held on the issue of liability.

Held:

(1)	The defendant breached the contract by not giving three months notice in writing of its intention to terminate the contract as required by the contract of employment. The contract did not allow for salary to be paid in lieu of notice and the defendant could not rely on Section 35(2) of the Employment Act (a party may without waiting for expiry of a notice of intention to terminate pay a sum equal to the amount of salary that would have accrued during the notice period) as that provision does not (by virtue of Section 34(1)) apply for the first two years of operation of a written contract of service.

(2)	The defendant was not obliged to give the plaintiff a right to be heard prior to terminating the contract, there being no term of the contract conferring that right and no right under the underlying law (New Britain Palm Oil Limited and Others v Vitus Sukuramu (2008) SC946 applied).

(3)	The defendant was not obliged to give the plaintiff reasons for terminating the contract, there being no term of the contract conferring that right and no right to reasons under the underlying law.

(4)	The court's finding on the first ground was sufficient to conclude that the defendant breached the contract. Liability was established and a declaration made accordingly.

Cases cited

The following cases are cited in the judgment:

Ayleen Bure v Robert Kapo (2005) N2902
Bal Bar and Stettin Bay Lumber Company Limited v Maima Kora (2008) N3290
Bernbert Toa v Ly Cuong-Long and Jant Ltd (2008) N3471
Bromley v Pacific Finance Ltd (2001) N2097
Jimmy Malai v PNG Teachers Association [1992] PNGLR 568
New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946
Placer (PNG) Ltd v Kawa (2008) SC919
Porgera Joint Venture Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060
Rooney v National Forest Authority [1990] PNGLR 914
UPNG v Jerry Duwaino (2009) N3723
Vere Kialo and Chemica Didiman v Bernard Tiau CIA No 46/2006, 16.02.07
Vitus Sukuramu v New Britain Palm Oil Limited and Others (2007) N3124

TRIAL

This was a trial on liability for wrongful dismissal.

Counsel

A Meten, for the plaintiff
G T Elai, for the defendant
23 September, 2011

1. CANNINGS J: The plaintiff, George Podas, is seeking damages for wrongful dismissal against his former employer, Divine Word University. On 15 January 2007, the plaintiff commenced employment as Kiosk Supervisor under a fixed term written contract of employment. A little over 18 months later, on 4 August 2008, he was given a notice of termination, signed by the Acting President of the University, stating that his services were no longer required and that his employment was terminated with immediate effect. He was given no prior notice of termination, he was not given a right to be heard on the question of whether his employment should be terminated and he was not given any reasons for termination. He argues that he was wrongfully dismissed, ie that the University breached the contract of employment, in three respects:

1	not giving three months notice in writing of its intention to terminate the contract;

2	not giving him a right to be heard prior to termination; and

3	not providing reasons for termination.

2. The parties have agreed that this trial will be restricted to the issue of liability and that in the event the plaintiff succeeds a separate trial may be held on assessment of damages.

1	DID THE UNIVERSITY BREACH THE CONTRACT BY NOT GIVING THREE MONTHS NOTICE IN WRITING?

3. The plaintiff argues that the University was obliged by clause 2.1(a)15 of the contract to give him three months notice of its intention to terminate the contract. It did not do that. It gave him no notice. He gave uncontested evidence that he was at work shifting ice cream when he was, without warning, handed the following letter:

4 August 2008

Mr George Podas
Kiosk

Dear Mr Podas,

Re: Termination of Employment

Your employment services at Divine Word University are no longer required, and your employment is hereby terminated. This notice takes effect immediately.

In lieu of normal notice of termination, you shall be paid out according to the terms of your contract and according to the Employment Act 1978, Section 35 (2).

Entitlements from your employment will be paid by the DWU Financial Office upon your satisfactorily withdrawal from the University.

The University thanks you for the services you have given during your time of employment.

Yours sincerely

Br Andrew Simpson
Acting President

4. Clause 2.1(a)15 of the contract was in these terms:

The employment of GP shall stand terminated with the effect from the date on which the period of employment expires; or the DC may terminate the employment of CN;

i.	Position has been removed.
ii.	Employee has committed serious misconduct.
iii.	Employee is, or becomes, by reason of mental or bodily infirmity.
iv.	Either party shall give three (3) month notice in writing of its intention to terminate/resign this contract.
v.	Refer to the DWU Human Resource Management Manual. [sic]

5. There are five points to make about this clause and its relationship to the termination notice. First, its grammar and punctuation (including improper use of the semicolon) are, to use a polite word, poor, and it is clumsily drafted. "GP" is defined by clause 1.2 of the contract as George Podas, the plaintiff employee, "DC" is defined as the Director of Catering, but "CN" is not defined anywhere. It is probably a typographical error but it renders the clause virtually meaningless. These defects are typical of the entire document, which is disconcerting, given that it emanates from an institution of higher learning.

6. Secondly, if a charitable approach to interpretation of the clause is taken and it is presumed that it is intended to prescribe the circumstances in which the contract can be terminated, it appears to prescribe five circumstances:

(i)	where the position has been removed;
(ii)	where the employee has committed serious misconduct;
(iii)	where the employee has a mental or bodily infirmity;
(iv)	where either party gives three months notice of intention to terminate;
(v)	where the Human Resource Management Manual allows termination.

7. Thirdly, clause 2.1(a)15 provides that "the DC may terminate the employment". This presumably means that the power to terminate the contract is conferred on the Director of Catering. Br Simpson signed the notice in his capacity as Acting President of the University and there is no evidence that he was the Director of Catering.

8. Fourthly, clause 3 of the contract is a notice clause that prescribes how any notice given under the contract was to be given. It required that any notice to "CN" (again an error in the contract) was to be in writing addressed to:

George Podas
C/ of Divine Word University
PO Box 483 
Madang 511
Madang Province.

9. Clause 3 further stated that a notice "will be taken to be duly given or made when delivered, received or left at the above address". The notice given to the plaintiff did not comply with clause 3 in two respects: it was not properly addressed to him (it simply stated "Mr George Podas Kiosk") and it was not properly served on him.

10. Fifthly, nothing in clause 2.1(a)15 gave the University the option of paying the employee money in lieu of three months notice; and there is no other clause that gives such an option to the University.

11. The University concedes that, in fact, it did not give the plaintiff three months notice, but argues that it did not have to as it paid him three months salary in lieu of notice (a fact that is largely undisputed). Although the contract itself did not provide for salary being paid in lieu of notice such a course of action is provided for by the Employment Act, Section 35(2); and this was explained to the plaintiff in the termination letter.

12. Section 35(2) (termination of contract without notice) states:

Where a party to a contract has given notice of intention to terminate under Section 34, either party may, without waiting for the expiry of that notice, terminate the contract by paying to the other party a sum equal to the amount of salary that would have accrued to the employee during the period of the notice.

13. It will be observed that under this provision the option of terminating the contract by paying to the employee a sum equal to the amount of salary that would have accrued to him during the period of notice is conditional upon the employer having given notice of intention to terminate under Section 34. The question therefore becomes: did the University give "notice of intention to terminate under Section 34"?

14. Section 34 (notice of termination) states:

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

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

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

(a)	shall be as specified in the contract; or
(b)	shall be not less than the periods specified in Subsection (4).

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

(a)	one day's notice if the employee has been employed for less than four weeks; or
(b)	one week's notice if the employee has been employed for not less than four weeks and for less than one year; or
(c)	two weeks' notice if the employee has been employed for not less than one year and for less than five years; or
(d)	four weeks' notice if the employee has been employed for five years or more.

(5)	Notice of termination shall be given—

(a)	in the case of a contract of service referred to in Section 19(a) — in writing; and

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

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

15. Neither Mrs Meten, for the plaintiff, nor Mrs Elai, for the University, addressed this in detail, but I regard it as the critical issue on which the result of the case turns. To reiterate: was the termination letter of 4 August 2008 a notice by the University of its intention to terminate under Section 34? If yes, Section 35(2) applies. If no, the course of action under Section 35(2) is not available.

16. Section 34 was not mentioned, although Section 35(2) was, in the termination letter. Does that mean that it was not a notice under Section 34? No, I do not think a notice need expressly refer to Section 34 to be regarded as a Section 34 notice. If in substance it is notice of an intention to terminate, it is not necessary to expressly refer to Section 34. The opening paragraph – "Your employment services at Divine Word University are no longer required, and your employment is hereby terminated" – could not have stated the University's position much more clearly. It was clearly a notice of intention to terminate the contract. But, the question remains whether it was "given … under Section 34"?

17. At this point Section 34(1) must be considered. It provides that Section 34 does not apply to a written contract of service for the first two years of its operation unless the parties agree otherwise. The present contract is a "contract of service" (as defined by Section 1: an agreement, whether oral or in writing, express or implied, by which one person agrees to employ another person as an employee and that other person agrees to serve his employer as an employee). In this case it is a written contract. The contract was terminated within the first two years of operation (it commenced on 15 January 2007 and was terminated on 4 August 2008). Did the parties agree that Section 34 would apply for the first two years of its operation? No, there is nothing express or implied in the contract about Section 34 applying for the first two years of its operation. So Section 34 does not apply to this contract. Therefore the termination notice was not given under Section 34.

18. Is this a reasonable interpretation of Sections 34 and 35? I consider that it is. I am not aware of the matter being adjudicated or commented on in any other case but it seems that the purpose of Section 34 not applying (unless the parties agree otherwise) during the first two years of operation of a written contract is to encourage the parties during that early period of operation of the contract to determine the question of termination in accordance with the terms of the contract rather than by recourse to the general provisions of Section 34. This does not remove the right of either the employer or the employee to terminate the contract, provided that this is done in accordance with the terms of the contract or under other provisions of the Employment Act, such as Section 36 (termination of contract without notice). The employer, for instance, could still terminate the contract without notice or payment instead of notice where, for example, the employee wilfully disobeys a lawful and reasonable order or misconducts himself by an act of omission or commission that is inconsistent with the due and faithful discharge of his duties or on any other ground on which it would be entitled to terminate the contract without notice at common law.

19. I am satisfied that applying Section 35 in this way is consistent with the purpose of the Employment Act, so to return to the critical issue of whether the termination notice given to the plaintiff was a notice of intention to terminate under Section 34, the answer is no. That means Section 35(2) did not apply, and that means that it was not open to the University to validly terminate the contract by paying the plaintiff three months salary in lieu of notice. That method of termination was not available. The plaintiff had to be given three months notice in writing. He was not. There was no other ground of termination relied on. 

20. When the author of the termination notice, Br Simpson, gave evidence at the trial he indicated that, though no reason was given in the termination notice, the prevailing reason for the plaintiff's termination was a restructure of the University's on-campus retail operations, involving establishing a mini-supermarket. The plaintiff's position had changed. However, nothing along those lines appeared in the termination notice and the University in its defence and at the trial did not seek to rely on clause 2.1(a)15(i), which may have arguably allowed the University to terminate the contract, without notice, on the ground that the "position has been removed". Br Simpson also testified that although the University was not fully satisfied with the work done by the plaintiff, it was not a 'for cause' termination.

21. Br Simpson's evidence confirms that the University was obliged as a matter of law, due to the combined effect of the terms of the contract and the provisions of the Employment Act, to give the plaintiff three months notice of its intention to terminate the contract. Its failure to do so was a breach of contract. 

2	DID THE UNIVERSITY BREACH THE CONTRACT BY NOT GIVING THE PLAINTIFF A RIGHT TO BE HEARD PRIOR TO TERMINATION?

22. This is a more straightforward issue to determine. On 16 February 2007 in Vitus Sukuramu v New Britain Palm Oil Limited (2007) N3124, I formulated a new rule of law, appropriate to the circumstances of the country, under the Underlying Law Act 2000. I ruled that the 'fire at will' principle of the common law that allows employers to terminate a contract of employment for any reason without giving a right to be heard and without providing reasons was no longer appropriate to the circumstances of Papua New Guinea. I ruled that the implied terms of a contract of employment include that the principles of natural justice and the constitutional right of protection against harsh or oppressive or other proscribed acts apply. That meant that an employee had a right to be heard before termination of employment. I applied that rule in several cases that subsequently came before me (eg Bal Bar and Stettin Bay Lumber Company Limited v Maima Kora (2008) N3290, Bernbert Toa v Ly Cuong-Long (2008) N3471). On 30 October 2008 in New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946 the Supreme Court (constituted under Section 3 of the Supreme Court Act by two Judges, Sakora J and Lay J) upheld an appeal by the employer against that new rule. My decision in the National Court was overturned. The Supreme Court ruled that the National Court had in the circumstances of that case no power to develop the underlying law as the Supreme Court had already declared the underlying law – reaffirming the fire-at-will principle –in Jimmy Malai v PNG Teachers Association [1992] PNGLR 568. As my decision was overruled, the underlying law has reverted to the old common law position: the fire-at-will principle has been reinstated. An employer can hire and fire at will, with or without good reasons and without giving a right to be heard. These are of course general principles, which can be displaced by the terms of a contract of employment (eg Ayleen Bure v Robert Kapo (2005) N2902).

Put simply an employee has no right to be heard before being sacked unless his contract of employment says so. In the present case nothing in the contract gave the plaintiff a right to be heard. He was not given a right to be heard. That is inconsequential. There was no breach of contract in that regard.

3	DID THE UNIVERSITY BREACH THE CONTRACT BY NOT GIVING REASONS FOR TERMINATION?

23. The answer is no. The defendant was not obliged to give the plaintiff reasons for terminating the contract, as nothing in the contract conferred a right to reasons and, as explained above, under the underlying law an employer can give any or no reason for terminating an employee's contract of employment.

CONCLUSION

24. The plaintiff has proven the first of the three grounds of breach of contract relied on, which is sufficient for him to be entitled to damages, and a declaration will be made accordingly. Costs will follow the event.

REMARKS

25. As to how damages should be calculated the parties can discuss that and settle the matter or perhaps take it for mediation. If agreement cannot be reached they may return to court for a trial on assessment of damages. In their discussions the parties would be well advised to consider the implications of the recent decision of the Supreme Court (Injia CJ and Gabi J, Makail J dissenting) in Porgera Joint Venture Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060, which may lend support to the view that an employee who has been wrongfully dismissed cannot be awarded a sum of damages of any amount greater than the salary he would have received if the contract of employment had been lawfully terminated under a notice period in the contract of employment. I have expressed a different view in a number of cases including Vere Kialo and Chemica Didiman v Bernard Tiau CIA No 46/2006, 16.02.07 and UPNG v Jerry Duwaino (2009) N3723. I have indicated that an employee who has been wrongfully dismissed might in an appropriate case be able to prove that he should be awarded damages for an amount greater than the salary he would have received in the notice period. However, that view has been expressed while sitting as a Judge of the National Court. There may come a time when it is demonstrated that I have no choice but to follow Supreme Court authority on this point. There is also what might be described as a third view as to the proper calculation of an award of damages, which is that damages should be calculated according to the salary that would have been earned in the unexpired portion of the contract. For example, if an employee is wrongfully dismissed 18 months into a three-year contract, damages would equal 18 months worth of salary. I have never expressed that view, and the Supreme Court (Kapi CJ, Gavara-Nanu J, Cannings J) in Placer (PNG) Ltd v Kawa (2008) SC919 confirmed that in most cases it will not be a proper approach to assessment of damages. However, each case must be determined on its merits, having regard to the terms of the actual contract of employment. If a fixed-term contract has no termination clause the appropriate award of damages might be the salary and emoluments that would have been earned in the unexpired period of the contract (eg Rooney v National Forest Authority [1990] PNGLR 914, Bromley v Pacific Finance Ltd (2001) N2097).

26. Finally I need to express an opinion on how the University dealt with the plaintiff from a human point of view. The Court has so far focussed on the legal issues but every case, especially a wrongful dismissal case, has a human dimension. I think the University needs reminding of this as it appears that it has dealt with the plaintiff in a most inhumane and indecent way. He had only been employed for 18 months and it seems that the University was not entirely pleased with his performance and a considered decision was made, it seems for good business reasons, that his employment should be terminated. Wouldn't the decent thing to do be to call him into the office for a chat and explain why this decision was being made (in addition to complying with the formal notice clause in the contract)? Instead of handing him an envelope while he is in the middle of doing his work, containing a letter – which, with respect, was cast in officious and harsh language – telling him abruptly that he was being sacked immediately? Didn't someone in the University stop to think that this man had a wife and children to care for, and that he deserved to be treated with courtesy and decency? I remarked in another Madang case, Bernbert Toa v Ly Cuong-Long and Jant Ltd (2008) N3471, that this way of terminating a worker's employment stinks and I apply the same remark to the present case. It is often said that the hardest job of any employer is to sack someone. It can be traumatic for both the employee and the employer. But there are good, proper and decent and Christian-like ways in which an employer can terminate a person's employment. They were not deployed in this case. 

ORDER

(1)	It is declared that the plaintiff has established a cause of action in breach of contract against the defendant.

(2)	The matter shall proceed to a trial on assessment of damages unless the parties agree to settle the proceedings by other means.

(3)	The defendant shall pay the plaintiff's costs of the proceedings to date, on a party-party basis, to be taxed if not agreed.

(4)	Time for entry of the order is abridged to the date of settlement by the Registrar, which shall take place forthwith.

Judgment accordingly.
____________________________
Public Solicitor: Lawyer for the Plaintiff
Pacific Legal Group: Lawyers for the Defendant