Con v Jant Ltd [2014] PGNC 7; N5503 (21 February 2014)

N5503

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

WS NO 1019 OF 2013

TIMOTHY CON
Plaintiff

V

JANT LIMITED
Defendant

Madang: Cannings J
2013: 13 December,
2014: 7, 21 February

LAW OF EMPLOYMENT –written contract of service – whether employer breached contract by forcing employee to resign – whether contract of employment varied by agreement between parties – whether varied contract breached

The plaintiff was employed by the defendant from 1974 to 2012, during a large part of that time pursuant to written contracts of employment. The most recent contract was expressed to be of 12 months duration, commencing on 20 October 2011. On 20 March 2012 the plaintiff wrote a memo to the defendant, stating that he would like to retire at the end of that month, subject to the defendant paying for ship tickets and freight charges to his place of origin and other items. On 22 March 2012 the defendant responded, accepting the plaintiff's retirement and setting out what he would be paid upon retirement. On 27 March 2012 the plaintiff and the defendant signed a memorandum of agreement, setting out the terms of the plaintiff's retirement, which included that "the employee has agreed for the company to pay out his final entitlement by 30/3/2012". On 29 March 2012 the defendant paid some but not all of the items referred to in the memorandum, taking the view that it should withhold others until after the plaintiff vacated a house it had provided to him as part of his contract of employment, which he was obliged to do, by 15 April 2012, pursuant to the memorandum of agreement. The plaintiff did not vacate the house by 15 April 2012 and the defendant did not pay for any of the withheld items, but it extended the date by which he was to vacate the house, to 29 April 2012. On 25 April 2012 the plaintiff commenced proceedings in the District Court, seeking an order restraining the defendant from evicting him. The District Court granted such an order on 26 April 2012, which remained in force until 17 September 2013 when, upon application by the defendant, it set aside the order of 26 April 2012 and ordered that the plaintiff vacate the house by 2 October 2013, failing which the Police were authorised to deliver possession to the defendant. On 23 September 2013 the plaintiff commenced proceedings against the defendant in the National Court, claiming damages for breach (by unlawful termination) of contract. The plaintiff argued that he was forced to resign. The defendants filed a defence, denying liability, and a trial was conducted, which addressed the issue of liability.

Held:

(1) The entry by the parties into the memorandum of agreement constituted a variation of the written contract of employment.

(2) There was insufficient evidence to support the assertion that the plaintiff did not freely enter into the memorandum of agreement or that he was forced to resign.

(3) The defendant breached the contract of employment as varied by the memorandum of agreement by its failure to pay all the items it was obliged to pay or provide to the plaintiff by the nominated date, 30 March 2012.

(4) The requirement for the plaintiff to vacate the house was conditional on him being paid or provided all the items the defendant was obliged by the contract (as varied by the memorandum of agreement) to pay or provide. There was no breach of contract by the plaintiff.

(5) It was declared that the defendant was in breach of the contract of employment (as varied by the memorandum of agreement) and that the plaintiff had established a cause of action in breach of contract and that the proceedings shall, subject to agreement of the parties otherwise, continue with a trial on assessment of damages.

Cases cited

The following cases are cited in the judgment:

Bio-Normalizer (PNG) Ltd v CPL (2009) N3649
Kurumbukari Ltd v Enfi (PNG) Ltd (2012) N4704
Nivani Ltd v China Jiangsu International Ltd (2007) N3147

STATEMENT OF CLAIM

These were proceedings in which the plaintiff sought to establish liability in damages for breach of a contract of employment.

Counsel

S Tanei, for the Plaintiff
J J Lome, for the Defendant

21 February, 2014

1. CANNINGS J: The question in this case is whether the defendant, Jant Ltd, is liable in breach of contract to the plaintiff, Timothy Con.

2. The plaintiff was employed by the defendant from 1974 to 2012, largely pursuant to written contracts of employment. The most recent contract was expressed to be of 12 months duration, commencing on 20 October 2011, under which the plaintiff's position within the defendant was described as "Manager of Chip Mill section, subject to alterations from time to time". The contract was not completed. Instead the following events occurred:

• On 20 March 2012 the plaintiff wrote a memo to the defendant, stating that he would like to retire at the end of that month, subject to the defendant paying for ship tickets and freight charges to his place of origin and other items.
  
• On 22 March 2012 the defendant responded, accepting the plaintiff's proposal and setting out what he would be paid upon retirement.
  
• On 27 March 2012 the plaintiff and the defendant signed a memorandum of agreement, setting out the terms of the plaintiff's retirement, which included that "the employee has agreed for the company to pay out his final entitlement by 30/3/2012".
  
• On 29 March 2012 the defendant paid some but not all of the items referred to in the memorandum, taking the view that it should withhold others until after the plaintiff vacated a house it had provided to him as part of his contract of employment, which he was obliged to do, by 15 April 2012, pursuant to the memorandum of agreement.
  
• By 30 March 2012 the defendant had not paid the withheld items.
  
• By 15 April 2012 the plaintiff had not vacated the house and the defendant still had not paid any of the withheld items, but it extended the date by which the plaintiff was to vacate the house, to 29 April 2012.
  
• On 25 April 2012 the plaintiff commenced proceedings in the Madang District Court, seeking an order restraining the defendant from evicting him from the house.
  
• On 26 April 2012 the District Court granted the order sought by the plaintiff and the defendant was restrained from evicting him.
  
• On 17 September 2013 the District Court, in proceedings commenced by the defendant under the Summary Ejectment Act, set aside the order of 26 April 2012 and ordered that the plaintiff vacate the house by 2 October 2013, failing which the Police were authorised to deliver possession to the defendant.
  
• On 23 September 2013 the plaintiff commenced the present proceedings against the defendant in the National Court, claiming damages for breach (by unlawful termination) of contract.
  
• On 27 September 2013 the National Court stayed the District Court order of 17 September 2013.
  
• On 1 October 2013 the defendant filed a defence, denying liability.
  
• On 13 December 2013 the present trial commenced, with the admission of evidence.
  
• On 7 February 2014 submissions were made.
  

IS THE DEFENDANT LIABLE IN BREACH OF CONTRACT?

3. I find that it is, though not precisely in the manner alleged by the plaintiff. I find insufficient evidence to support the assertion that the plaintiff was forced to resign or that he did not freely enter into the memorandum of agreement.

4. However, the entry by the parties into the memorandum of agreement constituted a variation of the written contract of employment. A written contract, even one that makes no provision for variation, may be varied by agreement between the parties; and the agreement to vary the contact may be express or implied (Nivani Ltd v China Jiangsu International Ltd (2007) N3147, Bio-Normalizer (PNG) Ltd v CPL (2009) N3649, Kurumbukari Ltd v Enfi (PNG) Ltd (2012) N4704).

5. Here, there was no express variation of the original contract, but there was an implied variation: the parties were agreeing on the terms on which the contract, and the plaintiff's employment, would be terminated.

6. The memorandum of agreement, expressed to "take effect on the 30 March 2012", stated:

1. The employee retired due to inadequate job availability as a result of scaling down of woodchips production.
   
2. The company and the employee have agreed to the retirement on the above date and as such the company offered to pay as a token of appreciation for the years of service to the company. This payment is paid as bonus on top of his final entitlements:
   
   1. 5 months advance payment (10 fortnights)
   2. Freight for cargoes – MAG/LAE/LABLAB (Siassi) (K1,918.54)
   3. Passenger fare (4 children) – Lae/Lablab (K384.00)
   4. Roofing iron (6 ft * 30 sheets) (K1,053.00)
   5. Chainsaw head – second hand (K1,200.00)
   6. Air ticket for 2 adults – MAG/LAE (K1,050.00).
      
3. The company has agreed for the employee to occupy the current company house till 15/04/2012. The employee shall vacate the property after the said date to avoid legal implication.
   
4. During the period of occupying company accommodation, the retire employee should abide by the Company Regulations. Part 5: "Residence Rule for Company Accommodation." Failure to obey this regulation will result in forfeiting of this agreement.
   
5. The employee has agreed to meet all electricity/water bills during the period of occupying company accommodation till the time of vacating the house.
   
6. The employee has agreed for the company to pay out his final entitlement by 30/03/2012.
   
7. The employer shall withheld K500.00 as bond fee to be refunded after the inspection and deduction is done on water bills and damages if any occurred.
   
8. The employer shall reserve the right to ask the employee to vacate during the term of this agreement if the employee causes disadvantage to the employer.
   
9. After retirement and receiving of all entitlements and where necessary the employee shall not return to the company with complains of accommodation or other issues.
   
10. In an event where disagreement arise both parties shall solve in a peaceful manner.
    

The MOA is well understood by both parties.

7. The evidence is clear that on 28 March 2012 the defendant gave to the plaintiff, and he accepted, three cheques drawn in his favour that were described as being for the following items, in the following amounts:

• Final entitlements K8,274.60;
• Freight fare from MAG/LAE/LABLAB K1,918.54;
• Travelling fare from MAG/LAE/LABLAB K 384.00;
  

Total value of paid cheques = K10,577.14

8. The defendant did not provide the following items to the plaintiff, in cash or kind, by 30 March 2012, and has not provided them since:

• 5 months advance payment (10 fortnights) (clause 2(i) of the MOA, the value of which is estimated to be K1,000.00 x 10 = K10,000.00 gross);
• Roofing iron (6 ft * 30 sheets) (K1,053.00) (clause 2(iv) of the MOA);
• Chainsaw head – second hand (K1,200.00) (clause 2(v) of the MOA);
• Air ticket for 2 adults – MAG/LAE (K1,050.00) (clause 2 (vi) of MOA).
  

Total value of items not provided = K13,303.00.

9. The defendant's general manager, Mr Jeffery Sapak, stated in evidence that those four items are "additional benefits the company had promised him but on the condition that he vacate the said property but he was not entitled to those benefits as per his contract of employment nor under the labour law" (Exhibit D1, affidavit of 1/10/13, para 9). Mr Sapak further explained:

The other benefits like the five (5) months advance payment together with roofing iron, and chainsaw were not given but were held until he vacated the house on 15 April 2012 as agreed in the MOA. Since the payments were more or less a token of appreciation as opposed to his legal entitlement, the company withheld same until he vacated the house due to instances faced by the defendant whereby ex-employees after receiving final entitlements and other benefits have refused to vacate the properties. Hence for the defendant not to be confronted with similar instances [it] had to take that approach (Exhibit D2, affidavit of 14/11/13, para 11).

10. I consider that the defendant's position was understandable in view of past instances in which, according to Mr Sapak's evidence, ex-employees have received all their entitlements and then refused to vacate the residence that they had been provided by the defendant during the course of their employment. However, that position was not reflected in the memorandum of agreement. It is a misconstruction of that agreement to say that provision of all items was contingent on the plaintiff vacating the house he was occupying. Clause 6 is the key provision: "The employee has agreed for the company to pay out his final entitlement by 30/03/2012".

11. "Final entitlement" in that context referred to all the items that the plaintiff and the defendant agreed would be provided to the plaintiff, not just to the items paid on 28 March 2012. The agreement makes no mention of the plaintiff being required to vacate the house before he is entitled to receive the items not provided by 30 March 2012. The converse is the correct interpretation of the agreement: the defendant was obliged to provide all the items to the plaintiff before he was obliged to vacate the house. There was no breach of contract by the plaintiff.

12. I find that the defendant breached the contract of employment as varied by the memorandum of agreement by its failure to pay all the items it was obliged to pay or provide to the plaintiff by the nominated date, 30 March 2012. The defendant is liable in breach of contract.

CONCLUSION

13. This has been a trial on liability and I have determined that the plaintiff has established a cause of action in breach of contract. I have considered referring all remaining areas of dispute, including orders that would determine the proceedings and the costs of the proceedings, to mediation under Rule 5(2) of the ADR Rules. However, I consider that with appropriate directions being given to the parties, this case will reach a speedier resolution by having a trial on assessment of damages.

14. As for damages, I note that the statement of claim pleads "special damages" and "general damages for pain, suffering and loss of amenities". 15. There will need to be evidence and argument on these categories of damages. As for costs, I will make no order at this stage. This is something on which the parties might also be able to agree. Failing agreement, it can be the subject of argument at the next trial.

ORDER

(1) The plaintiff has established a cause of action in breach of contract in that the defendant failed to pay or provide to the plaintiff, by 30 March 2012, all items it was obliged by the memorandum of agreement dated 27 March 2012, to pay or provide.

(2) For the avoidance of doubt the order of 27 September 2013 continues until further order of the Court.

(3) The proceedings shall continue, subject to any agreement by the parties to the contrary, to a trial on assessment of damages and unpaid entitlements, the assessment of such sums to be determined in accordance with the above declaration of liability.

(4) The question of costs is reserved for agreement or further argument.

Judgment accordingly.
_________________________________________
Public Solicitor: Lawyer for the Plaintiff
Greg Manda Lawyers: Lawyers for the Defendant