N5709

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 128 of 2006

BETWEEN

ANAVE MEGARAK ONA
Plaintiff

AND

NATIONAL HOUSING CORPORATION
Defendant

Waigani: Kandakasi J
2014: 04th August

EMPLOYMENT LAW – Reorganization or restructure of employer - Effect of – Options for former employees – Reemployment or redundancy – No room for resignation - In action causing tendering of resignation and acted on a nullity - Industrial Agreement establishing entitlement on redundancy – Claim within terms of agreement upheld.

COSTS – Rate of - Solicitor client costs – Forewarning – Failure to take heed of and failure to enter into out of court settlement discussions including failure to mediate – No valid reason offered - Case made out for order for costs on solicitor client costs.

MEDIATION – Parties under duty to explore out of court settlement through direct negotiations and failing that mediation in good faith – Communication from one party to the other must be responded to and reasonable efforts made to have matter resolved – Failure to do so – Order for costs on solicitor client basis appropriate as a sanction or penalty.

Papua New Guinea Cases cited:

PNG Ports Corporation Ltd v. Canopus No 71 Ltd (2010) N4288.
Canisius Karingu v. Papua New Guinea Law Society (2011) SC 675.
Able Constructions Ltd v. W.R. Carpenter (2014) N5636.
Koitaki Plantations Ltd v. Charlton Limited & Anor (2014) N5656

Counsel:

Plaintiff in Person.
No Appearance for the Defendant.

04th August, 2014

1.	KANDAKASI J: Anave Megaraka Ona resigned from his 14 years of employment with the National Housing Corporation. He decided to do so following the Corporations failure to respond to his request for retrenchment following a redundancy situation. A particular provision in an industrial agreement between his union and the Corporation dated 25th November 1992 (Agreement) allowed for employees like Mr. Ona to opt for retrenchment in writing if they so wish in such a situation. In this proceedings, Mr. Ona claims he was forced to resign and hence forego his retrenchment entitlements by the actions of the Corporation and seeks damages in terms of the entitlements he could have received had he been retrenched. The Corporation has not defended this claim in any meaningful way.

Relevant questions 

2. 	The questions then for this Court to answer are essentially three. These are:

(1)	Was Mr Ona entitled to retrenchment?

(2)	If the answer is "Yes" to the first question, does his resignation preclude him from his possible retrenchment entitlements?

(3)	If the answer to the second question is "No", what are the entitlements and hence, Mr. Ona's damages?

3.	The first two questions can be dealt with together. Thereafter, the third and final question can be dealt with. Before addressing these questions, I consider it important that, I should state the relevant facts as I find them from the evidence adduced by Mr. Ona, without any objection or rebuttal from the Corporation.

Relevant Facts

4.	Given the Corporations position, there is not much dispute over the relevant facts, which are straight forward and they commence on 14th August 1986. That is when Mr. Ona commenced his employment with the Corporation and was continuously employed since then until 23rd February 2001. During the period from late 1980s to early 1990s, the Corporations predecessor, the National Housing Commission underwent a rationalization and reorganization program under a government directive or program which was in turn based on a World Bank directive. This obviously meant that, the staff then in the employ of the Commission stood to be adversely affected. That issue was the subject of negotiations between the Public Employees Association and the Commission and the Corporation when it came into existence. The negotiations led to an agreement in 1987 and 1992. The Corporation used the 1992 Agreement to deal with people affected by the reorganization exercise. 

5.	The most pertinent provision of the Agreement in this regard is, clause 10, which reads:

"(1)	An employee who has received notice of redundancy may elect to waive (in writing) his rights to be considered for relocation, redeployment or retraining and accept retrenchment. In such cases, normal and full retrenchment benefits will apply.

(2)	An employee who has elected to waive his rights under third [sic] Clause, will be paid an amount equal to one hundred percent (100%) of his gross salary for the duration of the notice period.

(3)	Notwithstanding sub-clause (1) and (2) of this Clause, the provisions of Section 84 (4) of the National Housing Corporation Act 1990, shall apply for this purpose." 

6.	Section 84 of the National Housing Corporation Act reads in relevant parts as follows:

"84.	Transfer of staff.
(1)	…
(2)	A person who, immediately before the commencement of this Act held an office or appointment in the Housing Commission under the repealed Act, shall on the commencement of this Act, hold a similar office or appointment under this Act and on the same terms and conditions until appointments and terms and conditions of appointments are determined under Part II of this Act.
(3)	…
(4)	A person to whom Subsection (2) and (3) applies who, after the commencement of this Act, is not appointed or, if appointed, refuses to take up such appointment under Part II of this Act, may be entitled to apply for and shall receive such retrenchment and other entitlements (if any) as may be determined under this Act in the case of a person to whom Subsection (2) applies, or under the Public Services (Management) Act 1995 in the case of a person to whom Subsection (3) applies."

7.	Going only by the Agreement and the fact that there was a reorganization or restructure, all employees of the then Commission would have been rendered job less unless redeployed, relocated or put up for retraining. Section 84 and subsection (4) in particular of the National Housing Corporation Act however, enabled the former Commission employees to remain in continuous employment against the position they then occupied with the Commission until the appointment or employment under the new Act and on terms and conditions determined under the Act in accordance with Part II of the Act. In either case, the Agreement or under the Act all former employees of the then Commission, became entitled to either of two options as result of the reorganization or restructure. The first was to be considered for redeployment, relocation or retraining or (2) be rendered redundant and retrenched.
 
8.	Clause 10 of the 1992 Agreement, was in my view, intended to make the Commission and later, the Corporation's task easier by enabling the former employees of the Commission to opt for retrenchment and hence remove themselves from any consideration for redeployment, relocation or retraining. Unless, the Corporation was in a position to redeploy, relocate or retrain its former employees, those opting to be retrenchment would have been readily allowed to do so and have them paid their entitlements without delay. Indeed, there is evidence, in particular per annexure "E" to Mr. Ona's affidavit sworn on 18th December 2012, showing, that in fact happened for 64 former employees. They were retrenched and paid their entitlements total over K2 million.

9.	When the moment came for Mr. Ona to make a choice he exercised his option first by memorandums dated, 19th January 2001 addressed to the then training officer (annexure "A" to his affidavit) wherein he asked to be either:

(a)	sponsored by the Corporation to undertake studies at the University of Papua New Guinea; or

(b)	 released for studies at his own costs but with full pay.

10.	The Corporation did not respond to Mr. Ona's above communication. He therefore followed up with another memorandum dated 26th January 2001 addressed to the then managing director. In that memorandum, Mr. Ona followed up on his earlier memorandum and then asked that he be:

(a)	released for studies at his own costs but with full pay and with no conditions attached; or

(b)	released for studies at his own costs but with full pay on conditions of being bound in employment with the Corporation both during and after the completion of his studies; or

(c)	considered for voluntary retrenchment in the retrenchment exercise being carried out at the time; or

(d)	allowed to resign if the Corporation considered the prior options inappropriate.

11.	Again, the Corporation did not respond to the second of Mr. Ona's memorandum. This caused Mr. Ona to write another memorandum on 1st February 2001, tendering his resignation. That attracted immediate response in terms of accepting Mr. Ona's request for resignation and he was paid his entitlements the very next day, being 02nd February 2001.

Submissions 

12.	Having regard to the foregoing, Mr. Ona submits he was forced to resign by the Corporation's failure to respond to his two memorandums respectively dated 19th and 26th January 2001. He goes on to claim that, all that the Corporation had to do was to decide whether he would be relocated, redeployed or considered for retraining and failing any of these, have him retrenched. In other words Mr. Ona argues that, if the Corporation made a decision on his first two memorandums either of two things could have occurred. Either that, the Corporation would have decided to retain him and put him in retraining or decide against that and have him retrenched. But as noted, the Corporation for reasons only known to itself, it did not make any decision. In the circumstances, Mr. Ona is asking this Court to find that the Corporation forced him to resign which should have the effect of him being retrenched so he can be entitled to receive his retrenchment entitlements.

13.	The Corporation has filed a defence but has not actively pursued it. As already noted, the Corporation has failed to faithfully attend Court on many occasions on directions and other preliminary hearings and mentions all aimed at having this matter resolved or disposed of promptly. This continued to be the case at trial, even though Mr. Ona had warned the Corporation of asking for his costs on a solicitor client basis and giving notice of the trial. The end result of all of these is that, there is no contest on Mr Ona's claim.

Consideration and answers to questions one and two
 
14.	It is obvious to me that, by reason of the reorganization of the then Commission and the eventual birth of the Corporation, there was no continuing master and servant relationship between the employees of the Commission and the Commission which since ceased to exist and the new entity being the Corporation came into existence. The provisions of s. 84 of the NHC Act was in effect a transitional provision that allowed for continuity in the functioning of the Commission pending the final of the reorganization or restructuring process. That concluding event for the former employees would have occurred when all of the available positions under the new structure or organization were filled. The reorganization or restructure exercise in real terms, gave the former employees either of two options only. The first of the options was a right to be considered for redeployment, relocation and or retraining with the new entity. The second option was to have them retrenched. This option would have been the only option left for those who were not able to benefit under the first option. In view of that, there was no room for resignation unless and until there was a clear decision and in fact there was a relocation, redeployment or retraining for any of the former employees for the Commission against a specific position with the new Corporation and the former employees took up those positions. 

15.	By his memorandums, Mr. Ona effectively, invited the Corporation to make a decision whether to relocate, redeploy or retrain him with the Corporation or failing that have him retrenched. In the absence of any evidence of a decision to have Mr. Ona relocated, redeployed or retrained against a specific position with the Corporation and was accepted by Mr. Ona, the Corporation had no choice but to have him retrenched. This position in my view is supported by the provisions of s. 84 (4) of the NHC Act. This provisions allows for officers who decide not to take up new positions offered to them by the Corporation to retrench. It should follow therefore that, the purported resignation and the acceptance of the same had no proper foundation. Consequently, I find that the purported resignation and its acceptance is null and void and of no effect. I further find that, the lack of any response to Mr. Ona's two earlier memorandums, forced him to write the third and final letter seeking resignation, which received immediate response and action. Necessarily following on from these findings, I further find that Mr. Ona was effectively retrenched and he is thus entitled to receive his retrenchment benefits.

Consideration and answer to third question - Damages

16.	The evidence in relation to the kinds of benefits due to the former employees of the Commission on retrenchment is not in dispute. Clause 12 of the Agreement specify the following benefits on retrenchment:

(a)	ordinary pay until the date of termination;

(b)	all accrued but not taken emergency and sick leave entitlements;

(c)	any accrued and not taken maternity leave;

(d)	pro rata accrued recreational leave entitlements;

(e)	pro rata twelve days full pay equivalent for every completed year of serve for former employees who served for more than 14 years but less than 15 years;

(f)	money in lieu of notice of retrenchment up to 4 months for former permanent employees of the Commission;

(g)	repatriation costs by most direct mode of transport to the former employees home unless transport is provided by the Corporation; and

(h)	an ex gratia payment calculated by multiplying the number of completed years of service according to a sliding multiplying factor from 10 for 1 year of service to 19 for up to a maximum of 20 years of services. 

17.	Out of all of these entitlements, Mr. Ona in his affidavit evidence and his submissions, is making claims under items (b) and (h) only. In respect of the first item, Mr Ona says he has accrued unused sick leave credits of 152 days. As for the claim under item (h) he says since he has rendered 14 years of service, he is entitled to a multiplying factor of 16 which gives a total of 224 days for the calculation of his ex gratia. Then using is last net salary of K600.00 he says he is entitled claim under these two respective items as follows:

(1)	152 days divided by 10 working days is equal to number of fortnights multiplied by the fortnight salary rate. This produces 152/10 =15.2 x K600 = K9, 120.00.

(2)	224 days divided by 10 working days is equal to number of fortnights multiplied by the fortnightly salary rate. This produces 224/10 =22.4 x K600.00 = K13, 440.00.

18.	In total therefore, Mr. Ona is claiming K22, 560.00.

 19.	As noted, the Corporation has not taken any issue with any aspect of Mr. Ona's claims. Unlike some plaintiffs and their lawyers that have come before me, who tried to capitalized on the failures of their defendants to claim anything and everything, including serious and baseless and highly inflated claims, Mr. One impressed me as a fair and honest person who is only claiming what he says he is entitled to and owing and not everything outlined in the 1992 Agreement between his former employer and his union. He has even adduced under orders of the Court some parts of his former employer's records supporting his claims. I also note that, the Corporation who is possessed with the relevant records has not produced any evidence rebutting any of Mr. Ona's claims. In the ultimate end, I find Mr. Ona's claim credible. Accordingly, I am satisfied that, Mr. Ona has established his damages at the total amount of K22, 560. 

Costs

20.	In addition to the damages, Mr. Ona also claims his costs on a solicitor client basis. That proceeds on the basis that, this was a simple and straight forward matter that did require going to Court. Instead, it is one in his submission that should have been resolved by direct negotiations of the parties allowing themselves to be guided by the 1992 Agreement and of course the records kept by the Corporation. Rather than taking that path, they have forced Mr. Ona to come to and ultimately get to the point of trial and this judgment. This I find in the circumstances was totally unnecessary, especially when the Corporation was not seriously contesting the claim in any manner or form other than merely filing its defence.

21.	In PNG Ports Corporation Ltd v. Canopus No 71 Ltd, I ordered solicitor client costs against PNG Port Services for its failure to enter into out of court settlement negotiations with Canopus prior to the matter ending up in Court. That was in a case where Canopus had repeatedly sought to have the dispute resolved, which attracted no response from PNG Port Services. In arriving at that decision I allowed myself to be guided amongst others by the following:

"The Courts have repeatedly made it clear that, almost all disputes that enter the Court are capable of settlement, by the parties' direct negotiations. The recent developments in ... Alternative, Active or Appropriate Dispute Resolution (ADR) further strengthens that position. Indeed the Supreme Court on 9th November 2001, in Public Officers Superannuation Fund Board v. Sailas Imanakuan.... confirmed that position in these terms:

'... Courts are there only to help resolve or determine disputes that cannot be resolved by the parties themselves despite their best endeavors to do so. All human conflicts and disputes are capable of settlement without the need for court action. That is possible only if the parties are prepared to allow for a compromise of their respective positions. People in other jurisdictions are already recognizing the benefits of settling out of court as it brings huge savings to the parties in terms of costs and delay and help maintain good relations between the parties. This is why in other jurisdictions, out of court settlements are actively being pursued through what has become known as Alternative Dispute Resolutions or ADRs. We in Papua New Guinea have briefly talked about it in workshops and seminars but have not formerly embraced that into our court process and procedures. Work is now being undertaken to do that.'"

22.	I also noted in the PNG Ports case that:

"Recognizing the importance of having matters resolved out of Court, Parliament in 2008, amended the National Court Act and added sections 7A – 7E. These provisions, amongst others empowered the National Court to order mediation and other forms of ADR at any stage of the proceedings. These provisions also empowered the Court to promulgate appropriate rules to give effect to the legislative intent of making ADR/Mediation an integral part of the Court's process. In accordance with that mandate, the Judges recently on 30th March 2010 promulgated the 'Rules Relating to, Accreditation, Regulation and Conduct of Mediators.'"

23.	I then concluded that:

"All these now make it abundantly clear if not already done, the need for parties to seriously explore and exhaust out of Court settlement before coming to Court. If all parties involved in a dispute did that, they would be only appropriately reserving the courts for the hearing and determination of cases, which have merit that warrant only judicial consideration and determination....Thus, unless a case falls into such a category, most of the disputes should be settled and should never get to court. Hence, if they enter the courts without first exhausting out of court settlement options, the very first issue for the courts and the parties to address and resolve should be resolution of the matter through out of court settlement discussions which should take place under the shadow of the Court.... If such discussions fail, parties should be able to agree on what the relevant facts are and which of those facts are disputed and why and clearly set out or disclose the existence of a meritorious issue or issues, which warrant judicial consideration and determination. The parties should then be able to persuade the Court that, there is such an issue for the Court's consideration. Then on being satisfied that there is such an issue for trial, the Court can allow the parties to progress their matter to trial expeditiously."

24.	Finally, in the same case, I considered what all these developments meant for parties and said:

"What this means then is that, a party who fails to give any serious consideration and fails to make good faith efforts toward resolving a dispute out of Court should be responsible for the other party's costs. Where as in this case, one of the parties has taken all of the right steps toward having a dispute resolved through the parties own negotiations or with the assistance of a mediator or an independent and neutral third party and the matter subsequently settles after much costs have been incurred, the party concerned should be responsible for the costs thrown away on a solicitor and client basis, unless the parties otherwise agree."

25.	Here, despite all the efforts that are being made worldwide with followings in our country to have all disputes resolved by direct negotiations of the parties and failing that by mediation, the Corporation has taken no meaningful step to have this matter resolved either by direct negotiations or mediation. Then failing any resolution by either of these process, it also failed to participate at the trial and demonstrate what if any meritorious issue is presented here that is beyond the reach of a negotiated outcome or mediation, by reference to the kind of cases that are inappropriate for mediation. The decision in Able Constructions Ltd v. W.R. Carpenter a list of the inappropriate cases for mediation. The decision in Koitaki Plantations Ltd v. Charlton Limited & Anor restated this principles and the list of the inappropriate cases for mediation.

26.	Having regard to all of the foregoing, I am satisfied that Mr. Ona established a case for an order for his costs to be paid on a solicitor client basis against the Corporation. He has meet the requirements for forewarning to claim costs at such a rate, opportunity given to the other party to be heard on the point before judgment. Here, the Corporation had the opportunity to turn up at the trial and present his arguments if any against the Court making an order for costs on the rates Mr. Ona is asking for. Then appreciating that, Mr. Ona is a lawyer conducting his own case, my decision in Canisius Karingu v. Papua New Guinea Law Society is relevant and on point. That decision should guide the parties in ascertaining Mr. Ona's actual costs on a solicitor client basis. 

27.	Finally, Mr. Ona is claiming interest under the Judicial Proceedings (Debts and Damages) Act from the date of the issue of the writ. There is no basis to deny that claim. Hence, I am minded to allow interest on the judgment sum at the usual rate of 8% per annum until full and final settlement of the judgment.

Formal Orders

28.	The formal orders of the Court then are these:

(1)	Judgment is entered for the Plaintiff.

(2)	The Plaintiff's damages are assessed and fixed at K22, 560.00.

(3)	The Defendant shall pay the Plaintiff's costs on a solicitor client basis.

(4)	Interest is fixed at 8% from the date of the issue of the Writ to the date of the full satisfaction of the judgment.

______________________________________________________
Lawyer for the Plaintiff: The Plaintiff in person
Lawyer for the defendants: No appearance