N5901
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1672 of 2002

BETWEEN:

ONNE RAGEAU
Plaintiff

AND:
CHAUDOC LIMITED
First Defendant

AND:
MOLA LAM MEDICAL LIMITED
Second Defendant

AND:
BRACALBA LIMITED
Third Defendant

AND:
GLEN LIDDLE MOLA
Fourth Defendant

AND:
MISIMOA MORRIS LAM
Fifth Defendant

AND:
ROBIN SIOS
Sixth Defendant

Waigani: Hartshorn J.
2014: February 18th,
2015: January 8th

Trial

Cases Cited:
Papua New Guinea Cases

Morris v. PNG Associated Industries Ltd (1980) N260 (L)
Vitus Sukuramu v. New Britain Palm Oil Ltd (2007) N3124
New Britain Palm Oil Ltd v. Vitus Sukuramu (2008) SC946,
James Geama, Koim Kopun v. OTML Shares In Success Ltd (2011) N4269

Overseas Cases

In Re Homebush Abattoir (1966) A.R. (NSW) 37

Counsel:

M. Saroa, for the Plaintiff
 G. B. Purvey, for the Defendants

8th January 2015

1. HARTSHORN J. The plaintiff and the fourth, fifth and sixth defendants are all medical doctors by profession. They were all working at a Private Hospital and Clinic in Port Moresby prior to April 2002. In 1994 the plaintiff was employed by the first defendant as a doctor. The first defendant is the holding company of the second defendant, a company which carries on a medical practice on land owned by the third defendant.

2. In March 1996 the plaintiff became a 10% shareholder of the first defendant pursuant to a shareholders' agreement.

3. In April 2002, the plaintiff was given notice of termination of his employment and the notice of his deemed intention to retire from the shareholders agreement. The defendants also informed that pursuant to the shareholders agreement, they exercised their option to purchase his share. The share was compulsorily acquired in November 2002.

4. The plaintiff in his amended statement of claim pleads amongst others that:

a) the purported termination of his employment was unlawful,

b) his purported termination from being a shareholder of the first defendant was unlawful,

c) the purported compulsory acquisition of the shareholding was unlawful.

5. The defendants pleaded amongst others that:

a) the termination of the employment was lawful,

b) the termination of the plaintiff's partnership was lawful,

c) the plaintiff's shareholding was lawfully compulsorily acquired by the defendants.

6. The parties agreed seven issues for trial in a "statement of agreed and disputed facts with issues for trial" that was filed on 30th October 2007. The plaintiff made written submissions in respect of six of those issues. I now consider those issues.

Did the defendants lawfully terminate the plaintiff's contract of employment on or about 29th April 2002 in that the plaintiff's conduct constituted a proper cause for termination?

7. The plaintiff contends that the purported termination of his employment contract was unlawful as the defendants failed to:

a) inform the plaintiff of the specific action or conduct that constituted the "guilty conduct" warranting his dismissal,

b) give the period of notice or take it into account when giving notice,

c) provide the plaintiff with the right to appeal the decision or to be given the opportunity to be heard.

8. These contentions are not pleaded in the amended statement of claim. The agreed relevant issue is set out above and is also contained in the plaintiff's written submissions. Consequently these contentions should be rejected. I will however give consideration to them.

9. The plaintiff submits that the shareholders agreement does not make provision as to what constitutes guilty conduct or wrongful behaviour and so the Employment Act 1978 applies. Pursuant to that Act submits the plaintiff, he was entitled to 4 weeks notice but was not given such notice. The defendants did not take issue with the Employment Act applying. I am of the view though that pursuant to authority and its wording, in this instance it is not the Employment Act that applies, it is the Port Moresby General Employment Award 1973 as varied by the Port Moresby General Employment (Amending) Award 1975 (Port Moresby Common Rule).

10. It is of no moment however as both the Employment Act and the Port Moresby Common Rule, provide for an employer to terminate a contract of employment or service without notice in certain circumstances.

11. In the Employment Act, s. 36 (1) provides:

"36. Grounds for termination of contract.

(1) An employer may terminate a contract of service without notice or payment instead of notice—

(a) where the employee—

(i) wilfully disobeys a lawful and reasonable order; or
(ii) misconducts himself by an act of omission or commission that is inconsistent with the due and faithful discharge of his duties; or
(iii) is guilty of a fraud or dishonesty; or
(iv) is habitually neglectful of his duties; or
(v) is imprisoned for a period exceeding seven days; or
(vi) is continually absent from his employment without leave or reasonable excuse; or
(vii) is convicted of an offence or contravention of this Act or any other law relating to employment; or

(b) on any other ground on which he would be entitled to terminate the contract without notice at common law."

12. The Port Moresby Common Rule, Clause 8 (a) (iv) provides:

"(iv) Nothing in this clause shall affect the right an employer may have to dismiss an employee without notice for conduct incompatible with the due and faithful discharge of that employee's duty to his employer. In the event of a dispute as to the right of dismissal without notice, either party may refer the matter to the Secretary for Labour or his delegate for decision."

13. It is pleaded in the amended statement of claim that the plaintiff gave notice to the fourth defendant for special leave without pay to contest the Abau seat in the 2002 National Elections. In preparation for this leave the plaintiff arranged for another Doctor to cover his position. The request to accept this doctor to cover his position was refused as was the plaintiff's request for special leave. It is further pleaded by the plaintiff that "The Plaintiff despite the Doctors'refusal went ahead and nominated for the elections and went on a campaign trail on one (1) week off and one (1) week on that basis."

14. To my mind, without consideration of the defendants submissions in this regard, the actions of the plaintiff as pleaded by him fall within s. 36 (1) (a) (i), (ii), (iv) Employment Act and clause 8 (a) (iv) Port Moresby Common Rule such that his contract of service or employment could be properly terminated without notice. It is clear to my mind that the plaintiff deliberately absented himself from his duties as pleaded.

15. In this regard I refer to the case of In Re Homebush Abattoir (1966) A.R. (NSW) 37 that was referred to in Morris v. PNG Associated Industries Ltd (1980) N260 (L), in which Cook J. at p374 said:

"…. the question of whether the conduct of an employee amounts to misconduct justifying instant dismissal would generally depend upon whether or not the act complained of can properly be regarded as deliberate or wilful or of such nature as to strike at an essential element in the contract of service."

16. I am satisfied from the evidence that the plaintiff was advised that his request for special leave was refused and of the reasons why, that a letter outlining those reasons was sent to him and that a second request for special leave was also refused. Given this, this court to my mind, is entitled to find that the plaintiff's actions were deliberate and his employment was able to be terminated without notice.

17. In addition, I agree with the submissions of the defendants' that as a medical specialist, shareholder and director, the plaintiff disregarded the essential conditions of his employment when he was absent from his employment and his duties as a doctor and director of the medical hospital. Further, his conduct in leaving his employment in circumstances when he was refused such leave and provided with reasons why his request for special leave was refused was conduct that entitled the defendants' to dismiss the plaintiff from his employment as provided in clause 3.6 of the shareholders agreement.

18. As to the contention that the letter of 29th April 2002 did not inform the plaintiff of the specific action or conduct that constituted "guilty conduct" warranting his dismissal, I note that this is not pleaded in the amended statement of claim and is not listed as an issue in the statement of agreed and disputed facts with issues for trial. In any event the letter does refer to guilty conduct which would entitle his dismissal from employment. Given this and in the absence of submissions concerning and reliance upon relevant authority by the plaintiff as to the degree of particularity required, I reject this contention. 

19. As to the contention that the plaintiff should have been given an opportunity to be heard and a right of appeal, again these points are not pleaded and not listed in the statement of agreed and disputed facts with issues for trial. 

20. Further, reliance is placed by the plaintiff on the case of Vitus Sukuramu v. New Britain Palm Oil Ltd (2007) N3124. An appeal against this decision was however upheld in New Britain Palm Oil Ltd v. Vitus Sukuramu (2008) SC946, (which is in fact referred to in the written submissions of the plaintiff on another point). In that appeal, the Supreme Court stated at para 28:

"… the underlying law of Papua and New Guinea…. did not contain a right to be heard on dismissal in an ordinary employer and employee relationship."

21. Given this decision, I am not satisfied that the plaintiff was entitled to be given a right to be heard or a right to appeal as contended by the plaintiff.

22. Consequently for the above reasons the plaintiff has failed to prove that the termination of his employment contract on or about 29th April 2002 was unlawful.

23. As I have found that the plaintiff has failed to prove that the termination of his employment was unlawful, it is not necessary to consider the submissions of the plaintiff on the issue concerning whether any loss was sustained by the plaintiff as a result of an unlawful termination.

Whether the defendants lawfully deemed the plaintiff to have given notice of his intention to retire from the shareholders agreement.
 
24. The plaintiff contends that:

a) there was no intention on the part of the plaintiff to retire from the shareholders agreement by word or conduct,

b) the plaintiff's refusal to accept the defendants' offer to purchase the shares was not a repudiation of the shareholders agreement.

25. I have found that the conduct of the plaintiff was such that his employment contract could be terminated without notice and that it entitled the defendants to dismiss the plaintiff from his employment as provided in clause 3.6 of the shareholders agreement. Having so found, I am satisfied that on a plain reading of clause 3.6, the defendants were entitled to deem that the plaintiff had given notice of his intention to retire from the shareholders agreement. The intention of the plaintiff or whether he had repudiated the shareholders agreement, as contended by the plaintiff, is immaterial.

Whether the defendants lawfully exercised their option under the shareholders agreement to purchase the share of the plaintiff in the first defendant

26. The plaintiff submits that the defendants did not lawfully exercise their option as:

a) no notice was given by the plaintiff to the defendants as he had no intention to retire from the shareholders agreement,

b) the defendants did give notice of their option to purchase the plaintiffs share but it was irregular as it was based on a defective notice of termination and also lacked the consent of the plaintiff as to the fair value of the share. It was based on a valuation done by PwC,

c) the plaintiff and defendants did not enter into any agreement as the defendants withdrew their offer to purchase the share by their letter dated 21st October 2012,

d) in the first instance, the defendants did not come to an agreement as to the fair value of the share but made an initial valuation at K410,000 by PwC. These actions were done without the plaintiff's consent or consultation but he eventually agreed to settle at that figure.

e) although a letter of termination was forwarded to the plaintiff, no reason for his termination is expressed in the letter. The termination notice is misconceived as no ground of termination is provided and the defendants have not complied with the fundamental principles of natural justice.

27. As to (a) above, as the plaintiff had been deemed to have given notice of his intention to retire pursuant to clause 3.6, no notice was required to be given by the plaintiff pursuant to clause 3.1.

28. As to (b) and (e) above, I have found that the termination of employment of the plaintiff was lawful and rejected his contentions as to no reasons being given. In any event the letter of 29th April 2002 did inform of the exercise of the option pursuant to clause 3.2 to purchase the plaintiff's share. As to the lack of consent of the plaintiff as to the fair value of the share and as to contentions (c) and (d) above, clause 3.4 defines "fair value".

29. Clause 3.4 provides amongst others, that in default of agreement by the parties as to the fair value of the shares in the first defendant, this sum shall be as determined by Coopers & Lybrand or such other independent qualified accountant as shall be agreed by the parties. Given the circumstances existing at the time, the defendants were correct in my view in assuming that the consent of the plaintiff was unlikely to be obtained. They then proceeded in accordance with clause 3.4 and instructed the successors of Coopers & Lybrand to determine the sum.

30. This contention is rejected.

Whether the defendants lawfully adopted the constitution of the first defendant to permit compulsory acquisition of the plaintiff's share of the first defendant

31. The plaintiff contends that the constitution was not adopted lawfully to permit compulsory acquisition as provisions of the constitution are not in accordance with s. 83 Companies Act 1993.

32. Section 83 Companies Act provides amongst others that a shareholder is not bound by an alteration of the constitution of a company that requires the shareholder to acquire or hold more shares or increases the liability of a shareholder unless the shareholder agrees in writing.

33. Here the plaintiff was not required to acquire more shares or to increase his liability and no complaint is being made by the defendants. This contention is misconceived. 

34. Further, from the evidence, I am satisfied that the resolutions passed on 7th November 2002 by the shareholders of the first defendant where in accordance with s. 103 Companies Act and that the new constitution was adopted lawfully.

Whether the provisions of the Fairness of Transactions Act 1993 are applicable to the compulsory acquisition of the plaintiffs share in the first defendant

35. The plaintiff contends that the compulsory acquisition by the defendants was unfairly done and sections 4, 5 and 6 Fairness of Transactions Act 1993 are applicable.

36. In this regard I make reference to my decision of James Geama, Koim Kopun v. OTML Shares In Success Ltd (2011) N4269 at para 3b. As in James Geama (supra), as far as I am aware, no application has been made under the Fairness of Transactions Act 1993 and such an application is a prerequisite: s.5 (1), this court has not attempted to arrive at an amicable settlement: s. 7 (1), the second prerequisite, and this court has not formed an opinion that an attempt at a mediated settlement has failed: s. 8 (1). As the plaintiff has not followed the provisions of the Fairness of Transactions Act 1993, this court has no jurisdiction to deal with a matter under that Act.

37. Given the above, the plaintiff has failed to prove his case.

Orders

38. The formal Orders of the Court are:

a) this proceeding is dismissed.

b) the plaintiff shall pay the defendants' costs of and incidental to the proceeding.

c) time is abridged.
____________________________________________________________
Nelson Lawyers: Lawyers for the Plaintiff 
Young & Williams Lawyers: Lawyers for the Defendants