Sarathy v PNG Power Ltd [2021] PGNC 681; N10316 (24 December 2021)

N10316

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO.1307 OF 2016

BETWEEN:

PARTHA SARATHY
Plaintiff

AND:

PNG POWER LIMITED
Defendant

Waigani: David, J
2020: 1^st, 2^nd, 5^th, 11^th, 12^th & 16^th June, 21^st July
2021: 13^th August & 24^th December

EMPLOYMENT LAW – trial on liability and quantum of damages - claim for damages for unlawful termination of contract of employment without cause – defendant asserted that plaintiff lawfully terminated for cause for his purported involvement in a transaction relating to the purchase and variation of defendant’s Board resolution to purchase certain quantity of new generator sets and was paid his final entitlements – contract of employment consisted of the employment agreement, remuneration/benefits schedule, abridged code of ethics and defendant’s business conduct and employee conduct-policy and administration guidelines (HR Guidelines) – defendant required to follow HR Guidelines when taking disciplinary action against employees – HR Guidelines required principles of natural justice to be observed - any breach of code of ethics and business conduct could give rise to disciplinary action including termination of contract of employment – suspension notice issued by Chief Executive Officer alleging nine grounds as basis for suspension – plaintiff denied any wrong doing – allegations adequately addressed - plaintiff just performing his job as Chief Financial Officer - Chief Executive Officer issued termination notice – Chief Executive Officer involved in the procurement of generators – breach of natural justice - termination unlawful - liability established – damages awarded in accordance with Clause 4 of contract of employment being six months base salary, superannuation and leave entitlements and annual bonus less amount paid to plaintiff on termination plus interest and costs.

Cases Cited:
Papua New Guinean Cases

Jimmy Malai v PNG Teachers Association [1992] PNGLR 568
Curtain Brothers (QLD) Pty Ltd & Kinhill Kramer Pty Ltd v The Independent State of Papua New Guinea [1993] PNGLR 285
Ereman Ragi & Ors v Joseph Maingu (1994) SC459
Nazel Wally Zanepa v Ellison Kaivovo, Department of East New Britain & Anor (1999) SC623
Leo Nuia v The Independent State of Papua New Guinea (2000) N1986
Post Puma Ltd v Yama Security Services Ltd, SCA No.80 of 2000, Unnumbered and Unreported, 26 July 2001
Peter Aigilo v Sir Mekere Morauta & Ors (2001) N2103
PNGBC v Jeff Tole (2002) SC694
Legu Vagi v NCDC (2002) N2280
Teio Raka Ila v Wilson Kamit (2002) N2291
Wilson Thompson v National Capital District Commission (2004) N2686
John Pias v Michael Kodi (2004) N2690
Anio v Baliki (2004) N2719
New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946
Porgera Joint Venture v Robin Kami (2010) SC1060
Robert Kapo v Ayleen Bure (2010) SC1162
Susan Love v Bridgestone Tyres (PNG) Limited, SCA 1 of 2006, Unnumbered and Unreported (Kirriwom, Davani, and Kariko, JJ) dated 3 September 2010
George Podas v Divine Word University (2011) N4395
Eric Kiso v Bennie Otoa (2013) SC1222
Mainao v Akori (2021) SC2090
Jacob Simbuaken v Neville Egari (2009) N3824
Sogeram Development Corporation Ltd v Robin Som (2014) N5874
William Maninga v Ramu Sugar Ltd (2010) N4118
Tau Gulu v PNG Defence Force Savings and Loan Society Ltd (1995) N1399
John Tangit v PNG Power Ltd (2019) N8836

Overseas Cases Cited:

Bank of New Zealand v Simpson [1900] UKLawRpAC 6; (1900) AC 182
Horsfall v Braye [1908] HCA 85; (1908) 7 CLR 629
Gunton v London Borough of Richmond-upon-Thames [1980] 3 All ER 577
Boyo v London Borough of Lambeth [1995] 1RLR 50AC; (1980) I.C.RC. 755

Treatise cited:

Oxford Advanced Learner’s Dictionary, 9^th Edition

Counsel:

Eunice Parua for the Plaintiff
Mek Tumul, for the Defendant

JUDGMENT

24^th December, 2021

1. DAVID, J: INTRODUCTION: This is a decision on both liability and quantum of damages. The plaintiff, Partha Sarathy (Partha) is claiming damages in the sum of AUD$3.868 million to be paid in PNG Kina against the defendant, PNG Power Limited (PPL) allegedly for the unlawful termination of his contract of employment with PPL without cause with interest and costs. PPL’s position is that it denies Partha’s claim and asserts that Partha was lawfully terminated for cause for his purported involvement in a transaction relating to the purchase and variation of PPL’s Board resolution to purchase a certain quantity of new generator sets and was paid his final entitlements of K90,635.04 after his termination.

2. The evidentiary part of the trial was completed on 21 July 2020 and adjourned to 10 August 2020 for hearing of submissions. Submissions could not be heard on 10 August 2020 or other dates proposed after that date for one reason or another, but mainly for unavailability of counsel on dates proposed until eventually heard on 13 August 2021.

PLEADINGS

Plaintiff’s claim

3. On 14 October 2016, Partha commenced these proceedings by writ of summons endorsed with a statement of claim and his averments can be summarised as follows:

1. On 31 March 2015, he entered into a contract of employment with PPL as PPL’s Chief Financial Officer (CFO) for a term of two years to end on 30 April 2017 (the Contract of Employment).
2. It was a term of the Contract of Employment that the term of the contract was renewable for three years on the same salary and emoluments as those provided in the Contract of Employment.
3. On or around 17 June 2016, he received a suspension notice from the Defendant’s Chief Executive Officer, Mr. Chris Bais (Suspensions Notice) containing nine allegations of misconduct (the Allegations of Misconduct) against him and suspending him from employment with the defendant for a period of fourteen days (Suspension Period) and the Suspension Period was subsequently extended by the defendant.
4. The Allegations of Misconduct were:
   

(i) Without lawful and valid authority, he deviated from the resolution of PPL’s former Board to purchase 13 generators and decided to purchase 12 generators contrary to the former Board’s initial approval.

(ii) Partha deliberately and negligently did not seek the former Board’s approval for the variations in the scope of supply and quantity and provide the financial justifications for the variations.

(iii) As the CFO, he deliberately and/or negligently did not initiate and facilitate proper and transparent tender documentations consistent with due financial policy guidelines.

(iv) He deliberately and/or negligently did not liaise with PPL’s Legal Services Division to ensure there was a Sale and Purchase Contract to govern the transaction relating to sale and purchase of the generators so that PPL’s financial commitment was secured.

(v) He deliberately and/or negligently did not seek legal advice on the entire transaction to protect PPL’s legal rights and interests as substantial amount of money was involved.

(vi) He deliberately and/or negligently supported the submission of a flawed Business Paper to the former Board seeking their approval for the purchase of the 13 generators when the Business Paper did not have the technical specification and tender report coupled with detailed corresponding financial analysis.

(vii) He deliberately and/or negligently did not conduct due diligence to ensure there were open and containerized generators and the relative financial costs so the former Board would have made an informed and appropriate decision in relation to the purchase of the generators.

(viii) He deliberately and negligently did not accord fair opportunity to the other bidders to bid when he changed the scope of supply and quantity of generators.

(ix) He deliberately and negligently did not disclose to the former Acting Chief Executive Officer and the former Board including the current Board as to who financed his familiarization or inspection trips to visit the manufacturers in China.

5. He was required to respond to the Allegations of Misconduct during the Suspension Period which he did through his lawyers on or about 24 June 2016 denying any wrongdoing.
6. He did not receive any response from PPL to his letter dated 24 June 2016.
7. On or about 30 August 2016, he received a notice of termination from PPL’s Chief Executive Officer, Mr. Bais terminating his employment with PPL effective immediately (the Termination Notice).
8. The termination was without cause, wrongful, vindictive, malicious and in breach of the Contract of Employment and the Employment Act.
9. On or about 15 September 2016, his lawyer wrote to PPL highlighting the deficiencies of the termination and sought a reinstatement of his employment by 23 September 2016, but PPL neglected, ignored or failed to respond to that letter.
   

Defendant’s defence

4. PPL relies on the Amended Defence filed on 19 November 2018 pursuant to a consent order of 14 November 2018 which superseded the Defence filed on 2 December 2016. It denies liability and damages claimed essentially because:

1. Partha was terminated for cause due to his involvement in a transaction relating to the purchase and variation of new generator sets for PPL in that there was gross misconduct and circumvention of procurement rules and processes by those involved, including himself.
2. Partha was paid all that he was entitled under the Contract of Employment on termination.
3. It was not a term of the Contract of Employment that after the completion of the initial term of two years, the term was renewable for three years on the same salary and emoluments as those provided in the Contract of Employment.
4. If Partha were unlawfully terminated (which was denied), he was only entitled to damages equivalent to the notice period under the Contract of Employment or under the Employment Act or alternatively he be paid a termination payment in accordance with Clause 4 of the Contract of Employment being the amount equal to the aggregate of six months base salary, superannuation and leave entitlements and annual bonus.
5. Partha was under a duty to mitigate his loss by obtaining alternate employment after his employment with PPL ceased.
   

Plaintiff’s reply

5. Except for admissions made, Partha joined issue with PPL’s Amended Defence by his Reply to Amended Defence filed on 4 December 2018.

EVIDENCE
Partha Sarathy’s evidence

6. Partha called five witnesses who gave documentary and oral evidence.

7. Those witnesses were Mr. Larry Andagali, Ms. Linda Maru, Mr. John Yanis, Mr. Arnold Harriman and Partha himself.

8. Partha relies on the following affidavits:

1. Affidavit of Partha Sarathy sworn on 18 July 2019 and filed on 19 July 2019 (Exhibit A);
2. Affidavit of Partha Sarathy sworn on 30 August 2018 and filed on 31 August 2018 (Exhibit B);
3. Affidavit of Larry Andagali sworn on 8 August 2018 and filed on 19 July 2019 (Exhibit C);
4. Affidavit of Linda Maru sworn on 9 August 2018 and filed on 19 July 2019 (Exhibit D);
5. Affidavit of John Yanis sworn on 14 August 2018 and filed on 19 July 2019 (Exhibit E); and
6. Affidavit of Arnold Harriman sworn on 15 July 2019 and filed on 19 July 2019 (Exhibit F).
   

9. These affidavits were admitted into evidence with objections. In order to raise the objections, PPL relied on a Notice of Objection to the Use of Affidavits it filed on 30 January 2020 (Doc.97) and another document called Specific Objections to Specific Paragraphs in Plaintiff’s Affidavits (Pursuant to the Notice of Objection to the Use of Affidavits filed and served on 30 January 2020) which it filed on 31 January 2020 (Doc.99). The main objections raised were that; evidence contained in specific paragraphs of the affidavits of Mr. Andagali, Ms. Maru, Mr. Yanis, Mr. Harriman and Partha’s own was either not supported by pleadings or irrelevant, opinion, self-serving, speculative and submissions. I have taken into consideration the parties’ written and oral submissions for and against the objections which will generally be reflected in my reasoning and findings of fact.

10. All the witnesses were subjected to cross-examination.

PNG Power Limited's evidence

11. PPL called three witnesses who gave documentary and oral evidence.

12. Those witnesses were Mr. Andrew Ogil, Mr. Obed Batia and Ms. Doris Navuru.

13. PPL relies on the following affidavits:

1. Affidavit of Andrew Ogil sworn and filed on 10 October 2019 (Exhibit 1);
2. Supplementary Affidavit of Andrew Ogil sworn on 20 January 2020 and filed on 27 January 2020 (Exhibit 2);
3. Affidavit of Obed Batia sworn and filed on 10 October 2019 (Exhibit 3); and
4. Affidavit of Doris Navuru sworn and filed on 10 October 2019 (Exhibit 4).
   

14. Although Partha filed a Notice of Objection to the Use of Affidavits he filed on 31 January 2020 (Doc.98), PPL’s affidavits were admitted into evidence without objection.

15. All the witnesses were subjected to cross-examination.

AGREED FACTS

16. Pursuant to the Statement of Agreed & Disputed Facts and Legal Issues for Trial filed on 16 January 2020 (Statement of Facts and Legal Issues), the following are the agreed facts:

1. The parties are capable of suing and being sued.
   
2. Partha entered into the Contract of Employment on 31 March 2015 as PPL’s CFO for a term of two years to end on 30 April 2017.
   
3. The Contract of Employment consisted of the Employment Agreement, Schedule A (Remuneration/Benefits Schedule), Schedule B (Key Performance Indicators), Schedule C (An Abridged Code of Ethics and PPL’s Business Conduct and Employee Conduct – Policy & Administration Guidelines) (annexure PS2, Exhibit A).
   
4. Partha was provided with a copy of the “Job Description – Chief Financial Officer” soon after being employed (annexure PS1, Exhibit A).
   
5. Due to lack of power generation capacity in PPL’s various stand-alone centres, it had been leasing generating sets from Aggreko and its local affiliate, LCS Electrical & Mechanical, to sustain normal power supply to its customers in the respective centres. These leases were expensive and going on for over 20 years.
   
6. In or around 2015, PPL’s management decided that purchasing of generating sets rather than leasing from Aggreko would be financially beneficial in the long term.
   
7. Mr. Yanis, Acting Chief Executive Officer (A/CEO), Mr. Martin Bigiglen, Chief Operations Officer (COO) and Partha, among others, were involved in the tender process to procure new generators.
   
8. A decision was made to choose WR Carpenter (PNG) Limited (Carpenters) as the supplier. Mr Paul Charlaff, the National Operations Manager of Carpenters subsequently sent a quote to Partha for the supply of 1250 KVA generators at K702,952.38 per generator (excluding GST).
   
9. A Board Submission for Expenditure Approval dated 15 December 2015 was submitted to PPL’s Board of Directors recommending the purchase of the thirteen 1250 KVA generators from Carpenters for the price of K9.138 million excluding GST (Board Submission). Ms. Maru (then Board Secretary), Mr. Yanis and Partha all endorsed the Board Submission with their signatures.
   
10. Partha and Mr. Yanis met the then Chairman of PPL’s Board, Mr. Andagali on 25 January 2016 when a range of issues were discussed, including the purchase of gensets.
    
11. The Board Submission received overwhelming support of the Board with all, but one director, Mr. David Conn, authorising the purchase of generators. On 2 February 2016, the Board, by a Circular Board Resolution signed by Mr. Andagali, approved the purchase of 13 x 1250 KVA open generating sets from Carpenters for the named 13 centres at a cost of K9.138 million excluding GST (Circular Board Resolution), following necessary approval by Board members: annexures PS7, Exhibit A and AO9, Exhibit 1.
    
12. On 29 February 2016, Mr. Yanis wrote to Mr. Andagali, requesting the endorsement of a variation of the Circular Board Resolution by changing the quantity and specifications of the generating sets from 13 open plan generator sets to be purchased from Carpenters to 12 generating sets supplied by Daltron Electronics Limited (Daltron) comprising 6 closed plan containerized and 6 open plan generators and changing the normal Controllers on each generator to Deep Sea Controllers. Mr Andagali endorsed the variation request on the same day.
    
13. In or around March 2016, Mr Andagali was removed as Chairman of PPL’s Board. All directors of PPL’s Board were removed except Ms. Zurecnouc and Mr. Conn.
    
14. From 14 March to 18 March 2016, Partha travelled to China on a trip approved by Mr. Yanis to visit manufacturers of Cummins Generators in China.
    
15. Mr Yanis approved a Purchase Order No.216198 dated 24 March 2016 for K9.138 million (K10,051,800 (inclusive of 10% tax)) from Daltron as supplier as well as Daltron’s invoice of 29 March 2016 for purchase of 12 Generators being 6 open and 6 closed type generators with Deep Sea Controllers.
    
16. On 30 March 2016, Partha signed a PPL cheque No.164590 for K2,740,140.00 representing 30% of the amount stated in the invoice dated 29 March 2016 from Daltron for the purchase of the 12 generator sets. Ms. Maru countersigned that cheque.
    
17. Mr. Yanis and Ms. Maru resigned from PPL in or around March or early April 2016 for personal reasons.
    
18. On 9 June 2016, PPL’s Board in Special Board Meeting No.7/2016 resolved to suspend Partha and Mr Bigiglen immediately to allow for independent investigations to be carried out into their alleged improper conduct in the variation of the Circular Board Resolution and procurement of 12 generators from Daltron.
    
19. On or around 17 June 2016, Partha received the Suspension Notice from Mr. Bais, suspending him from employment with PPL for the Suspension Period.
    
20. The Suspension Notice contained the Allegations of Misconduct, being the grounds for the suspension and these were:
    

(i) Without lawful and valid authority, Partha deviated from the former Board's resolution to purchase 13 generators and decided to purchase 12 generators contrary to the initial approval by the former Board.

(ii) Partha deliberately and negligently did not seek the former Board’s approval for the variations in the scope of supply and quantity and provide the financial justifications for the variations.

(iii) As the CFO, Partha deliberately and/or negligently did not initiate and facilitate proper and transparent tender documentations consistent with due financial policy guidelines.

(iv) Partha deliberately and/or negligently did not liaise with PPL’s Legal Services Division to ensure there was a Sale and Purchase Contract to govern the transaction relating to sale and purchase of the generators so that PPL’s financial commitment was secured.

(v) Partha deliberately and/or negligently did not seek legal advice on the entire transaction to protect PPL’s legal rights and interests as substantial amount of money was involved.

(vi) Partha deliberately and/or negligently supported the submission of a flawed Business Paper to the former Board seeking their approval for the purchase of 13 generators when the Business Paper did not have the technical specification and tender report coupled with detailed corresponding financial analysis.

(vii) Partha deliberately and/or negligently did not conduct due diligence to ensure there were open and containerized generators and the relative financial costs so the former Board would have made an informed and appropriate decision in relation to the purchase of the generators.

(viii) Partha deliberately and negligently did not accord fair opportunity to other bidders to bid when Partha changed the scope of supply and quantity of generators.

(ix) Partha deliberately and negligently did not disclose to the former acting Chief Executive Officer and the former Board including the current Board as to who financed his familiarization or inspections trips to visit the manufacturers in China.

21. On or around 24 June 2016, Partha, through his lawyers, responded to PPL denying any wrongdoing in respect to the Allegations of Misconduct. PPL did not respond to that letter.
    
22. On 1 July 2016, Mr. Bais wrote to Partha extending his suspension indefinitely with full pay as investigations into the Allegations of Misconduct made against him had not been completed yet. A copy of that letter was sent to Mr Harriman, General Manager, Human Resources.
    
23. On 17 August 2016, whilst suspended, Partha emailed Mr. Bais a document titled "My Contribution and Achievements to PNG Power Limited”.
    
24. On or about 30 August 2016, Partha received a notice of termination from PPL by way of a letter from Mr. Bais terminating his employment effective immediately (the Termination Notice).
    
25. On 15 September 2016, Partha, through his lawyers, wrote to PPL alleging deficiencies in the termination and seeking reinstatement of his employment by 23 September 2016.
    
26. PPL’s procurement policy for goods over K100,000.00 is contained in “Major Works Purchasing Process Procedures and Policy Manual”, which all officers of PPL are required to comply with (Major Works Manual).
    
27. PPL's Human Resources - Management Guidelines Employee Conduct Policy and Administration (“HR Guidelines”) set out the procedure that PPL should follow when taking disciplinary action against employees.
    
28. PPL paid Partha K90,635.04 after his termination.
    
29. Subsequent to Partha’s employment with PPL ceasing, Partha:
    

(i) following a period of unemployment, is now employed;

(ii) has earned income and obtained other benefits from employment; and

(iii) has been engaged in activities from which income and other benefits have been received.

30. Partha secured alternate employment effective from April 2017 with Barlow Industries Limited.
    
30. Partha is required to reduce any such damages to which he is entitled by the amount of such income and benefits received.
    
31. Tax is required to be deducted from any such damages to which Partha is entitled.
    

DISPUTED FACTS

17. The disputed facts settled by the parties are numerous and are set out at paragraphs 33 to 102 of the Statement of Agreed & Disputed Facts and Legal Issues For Trial. Given that, they are not reproduced.

LEGAL ISSUES

18. In the Statement of Agreed & Disputed Facts and Legal Issues For Trial, the parties agreed to what the legal issues for trial were and these are:

1. Whether the decision to vary the Circular Board Resolution dated 2 February 2016 by way of a letter dated 29 February 2016 from Mr. Yanis to Mr. Andagali was valid and lawful?
2. Whether there was any breach of PPL’s procurement procedures and whether Mr. Yanis, as the CEO, had the delegated authority to make appropriate variations within Board financial ceiling based on the Major Works Manual?
3. Whether Partha’s actions and/or omissions in the variation of the Circular Board Resolution dated 2 February 2016 including him signing the cheque for K2,740,140.00 representing 30% of the total invoice issued by Daltron Electonics Limited amounted to a breach of his Employment Contract, the Abridged Code of Conduct, the HR Guidelines and the Major Works Manual;
   

(a) If yes, whether Partha’s actions and/or omissions amounted to misconduct or a serious offence and warranted his suspension and subsequent termination based on HR Guidelines?

(b) if no, whether Partha’s termination was wrongful, unlawful and in contravention of the Contract of Employment, HR Guidelines and the Employment Act?

4. Whether Partha was entitled to rely on legal and valid instruction from his supervisor, Mr. Yanis, in the form of authorisation of purchase order and invoice for twelve generators and whether to have not acted on such instruction would have resulted in breach of the Contract of Employment?
5. Whether PPL complied with the suspension and termination processes under the HR Guidelines and the Contract of Employment, including compliance with principles of natural justice which requires that no one with conflict of interest is involved in decision making and the person affected is provided a fair hearing?
6. Whether Partha’s purported personal meeting with Mr. Harriman on 5 September 2016 amounted to a notification of an appeal under the HR Guidelines?
7. Whether Partha’s appeal letter dated 15 September 2016 was a valid appeal letter under the HR Guidelines?
8. Whether the Contract of Employment was renewable for three years on the same salary and emoluments as provided in the Contract of Employment after the initial term of two years?
9. Whether Partha is entitled to damages in the sum of AUD$3.868 million, less amounts mitigated?
10. If not, what is the amount of damages that Partha is entitled to?

19. The issues can be categorised into two groups, one from issues 1 to 8 concern liability and the other from issues 9 to 10 concern damages. The principal issues that require my determination will therefore be:

1. Whether Partha was unlawfully terminated from his employment with PPL?

2. If unlawfully terminated, what, if any, are Partha’s damages?

TERMINATION OF EMPLOYMENT

Plaintiff’s submissions

20. Ms Parua for Partha submitted that Partha’s termination was without cause, vindictive, malicious and in breach of the Contract of Employment. Counsel argued that Partha responded to each of the Allegations of Misconduct through his lawyers, Leahy Lewin Lowing Sullivan (LLLS) by their letter of 24 June 2016 denying any wrongdoing in respect of each of the allegations, but PPL did not respond to that letter. Instead, PPL proceeded to terminate Partha’s employment with PPL by issuing the Termination Notice. It was submitted that on 15 September 2016, Partha, through his lawyers, wrote to PPL highlighting deficiencies in the termination including that the reasons given to justify the termination were factually inaccurate in most instances and vague in the remainder. Various decisions purported to have been made, resulting in the termination of Partha, were in fact made collectively by PPL’s previous Board, its Chairman and the CEO. The part payment to Daltron was authorised by Mr. Bais (the author of the Termination Notice) and so without Mr. Bais’ facilitation, the procurement of the generators would not have progressed. Partha sought immediate reinstatement of his employment to his substantive position by 23 September 2016, but PPL neglected, ignored or failed to respond to the request.

21. Ms. Parua essentially submitted that the evidence provided in support of Partha’s claim through the affidavits and oral evidence of Mr. Andagali, Ms. Maru, Mr. Yanis, Mr.Harriman and Partha himself adequately address and disprove each of the Allegations of Misconduct and also demonstrates that Partha was terminated without cause.

Defendant’s submissions

22. Mr Tumul for PPL contended that Partha was lawfully terminated for cause as:

1. The decision to facilitate the variation of the Circular Board Resolution dated 2 February 2016 instigated by way of a letter dated 29 February 2016 from Mr. Yanis to Mr. Andagali was without the authority of the Board and in breach of PPL’s procurement processes;
   
2. Mr. Yanis as CEO had no delegated authority to exceed procurements above his limited ceiling of K500,000.00 and required Board approval for the variation based on the Major Works Manual;
   
3. Partha committed fundamental breaches of the Contract of Employment, the HR Guidelines and PPL’s internal procurement processes for want of compliance with the Major Works Manual by his involvement in varying the Circular Board Resolution dated 2 February 2016 including him signing the cheque for K2,740,140.00 representing 30% of the total invoice issued by Daltron for the purchase of the 12 generators which exposed PPL to legal, financial and technical risks;
   
4. Partha’s actions and or omissions amounted to gross misconduct and constituted a serious offence which warranted his suspension and subsequent termination based on the HR Guidelines;
   
5. Mr. Yanis and Mr. Andagali acted unlawfully in that the entire procurement process they adopted to acquire the 12 generators facilitated through a purchase order and invoice was not done in accordance with the Major Works Manual and consequently their instructions to Partha were unlawful. Partha participated in facilitating the variation as; he ought to have known that the instructions from Mr. Yanis and Mr. Andagali were unlawful and he had initially expressed his reservation about the approach taken by them and preferred that PPL’s Board approval be sought for the variation; and under his Job Description, he had the power to investigate mismanagement of PPL’s funds;
   
6. PPL complied with the suspension and termination processes under the HR Guidelines and the Contract of Employment;
   
7. Partha’s purported personal meeting with Mr. Harriman on 5 September 2016 did not amount to notification of an appeal under the process set out at page 10 of the HR Guidelines as an appeal is required to be lodged within 5 working days after the imposition of penalty and must state the grounds of appeal;
   
8. The letter from Partha dated 15 September 2016 could not be regarded as a valid appeal letter under the HR Guidelines; and
   
9. Pursuant to Clause 3 of the Contract of Employment, the term of the Contract of Employment was 2 years which was specified in Item 19 of Schedule A and therefore the term could not be automatically renewed for 3 years on the same salary and emoluments as those provided under the contract.
   

Reasons for decision

23. It is settled law that generally, where parties have reduced their agreement into writing, the document should be allowed to speak for itself. No extrinsic evidence can be allowed to add to, subtract from or contradict the language of the written document: Curtain Brothers (QLD) Pty Ltd & Kinhill Kramer Pty Ltd v The Independent State of Papua New Guinea [1993] PNGLR 285, Anio v Baliki (2004) N2719. An exception to the general rule however is that any ambiguity in a written document or record may be resolved with the aid of extrinsic evidence, i.e., it is always available, not to contradict or vary the contract, but to apply it to facts, which the parties had in their minds and were negotiating about: Bank of New Zealand v Simpson [1900] UKLawRpAC 6; (1900) AC 182; Horsfall v Braye [1908] HCA 85; (1908) 7 CLR 629. Usually, the plain, ordinary or natural meaning of a word used by the parties to express a term will prevail unless the context warrants otherwise.

24. It has been held by this Court that when considering a termination in a wrongful dismissal case, the Court’s role is not to substitute its own view of the evidence, but it is only permitted to inquire into the circumstances of dismissal for the purpose of determining whether the employer breached the contract of employment: William Maninga v Ramu Sugar Ltd (2010) N4118; Tau Gulu v PNG Defence Force Savings and Loan Society Ltd (1995) N1399. This principle was adopted and applied in John Tangit v PNG Power Ltd (2019) N8836. I will adopt and apply this principle here.

25. It is not disputed that Partha was employed by PPL as its CFO under the Contract of Employment for a term of two years commencing on 1 May 2015 and ending on 30 April 2017: see Schedule A, Items 19, 20 and 21 of annexure PS2, Exhibit A. The Contract of Employment is the embodiment of the terms agreed to by PPL and Partha after Partha was approached by AAAI, a recruitment firm in Brisbane, Australia if he was interested in the position of Chief Financial Officer with PPL and subsequently interviewed in Brisbane by Mr. Andagali, then Chairman of PPL’s Board.

25. Clause 3 of the Contract of Employment states that the term of the contract was for the period specified in Item 19 of Schedule A to the Contract of Employment and the clause reads:

“Subject to any subsequent agreement between the CEO and the Contract Officer as to the term of this contract, the term of the Contract shall be for a period specified in Item 19 of Schedule A effective on and from the date of signing the Contract.”

26. Clause 16 of the Contract of Employment is also relevant and it states:

“The Contract Officer certifies that he has read, understood and accepted the Terms and Conditions and this Agreement supersedes any previously existing agreement(s) and understanding(s) made between the Parties, and all communication to this effect shall be made in writing in the English language.”

27. Partha is referred to in the Contract of Employment as the “Contract Officer”.

28. Item 19 of Schedule A of the Contract of Employment states that the duration of the term of the contract is “2 years renewable”. The word “renewable” is not defined in the Contract of Employment. I have consulted the Oxford Advanced Learner’s Dictionary, 9^th Edition for assistance and it defines the word “renewable” as “(of a contract, ticket, etc.) that can be made valid for a further period of time after it has finished.” Upon reading Clauses 3 and 16 of the Contract of Employment and Items 19, 20 and 21 of Schedule A together, it is abundantly clear to me that the term of the Contract of Employment was 2 years. The Contract of Employment was capable of being renewed for a further term eg, three years on terms, but, in my view, that was a matter for future negotiation or agreement between PPL and Partha in accordance with Clause 3 of the Contract of Employment. There is no evidence of any subsequent agreement between PPL’s CEO and Partha after the execution of the Contract of Employment as to any other term of the contract other than two years. In other words, there was no formal authorization from PPL for the renewal of the term for three years. I therefore find as a fact that the term of the Contract of Employment was two years commencing on 1 May 2015 and ending on 30 April 2017 and therefore the term could not be automatically renewed for 3 years on the same salary and emoluments as those provided to Partha under the Contract of Employment on the expiration of the term of the contract on 30 April 2017 as is postulated by Partha. I accept PPL’s submission in this respect.

29. It is not disputed that after Partha was employed by PPL, he was provided a copy of the “Job Description-Chief Financial Officer” (the Job Description): annexure PS1, Exhibit A. Under the Job Description, Partha was to directly report to the Chief Executive Officer.

30. In the Job Description at page 1, in answer to the question “Why was the job created?, it, among others, states:

“The CFO position was created to oversee and provide strategic direction and advice on the overall financial and commercial activities for PPL in ensuring that PPL is able to optimise access to and the use of the financial assets it has available to it, comply with the law and to minimise exposure to financial risk.”

31. The “Key Responsibilities and Accountabilities” of the CFO, although not exhaustive, are set out in the Job Description and some of them are reproduced in the table below.

You are responsible for the following activities.	You are accountable for how well the following deliverables are achieved
Financial Planning	Ensure business drivers & needs identified and managed in accordance [with] legislative requirements. Ensure Strategic and Operational Financial Plans prepared and recommended for CEO’s approval. Ensure funds and investments identified and evaluated.
Financial Risk Management	Ensure significant financial loss and waste (risks) scenarios are identified and mitigation actions recommended.
Financial Compliance	Ensure PPL complies with financial legislation and salary requirements, meets accounting standards & meets its tax commitments.
Tax Management	Ensure tax liabilities are minimised, provided for and paid.
Administering Financial Policy Deployment	Ensure rules developed and implemented for controlling access to and use of PPL’s financial assets including delegations.
Treasury Management	Ensure PPL minimises the cost of and optimise use and application of funds.
Financial Systems Administration	Ensure PPL’s financial systems are fit for purpose and efficiently support its financial management functionality.
Administering Financial Investigations	Ensure inappropriate use and application of funds is investigated and appropriate recommendation made to Management.
Financial Analysis	Ensure appropriate tools for evaluating investment initiatives are available and applied or recommended. Ensure PPL’s financial future is forecast.
Fixed Asset Register Management	Ensure PPL maintains a complete and accurate register of assets, their values and location.
Accounts Payable Administration	Ensure creditors’ invoices are reconciled and payments made as per agreed terms based on financial delegation.
Accounts Receivable	Ensure debtors payments are received and banked (specifically in GL transactions).
Cash Flow Management	Ensure PPL has and maintains access to the liquid funds needed to sustain business operations.
Financial Reporting	Ensure Business Managers are kept informed of financial matters affecting their responsibilities. Ensure performance exceptions are reported.
Financial Advice & Support	Ensure PPL’s managers are provided with appropriate financial advice and support.
Insurance Administration	Ensure both internal and external insurance are appropriately administered and concerned parties (claims) paid accordingly as per agreed terms.
Project Finance Management	Ensure project funds are administered and facilitated accordingly within budget allocated and expected outcome received.

32. In the Job Description at page 3, in answer to the question “How will I know when I am doing a good job?, it, among others, states:

“PPL’s financial performance will show significant improvement.

The ‘value’ contributed by Finance to PPL’s operation will be measured and it will show a significantly improving trend – where value is measured in terms of cost reduction per transaction, cost avoidance and revenue enablement.

Your managers will take on personal accountability for their areas and demonstrate a sense of urgency when dealing with critical business issues...”

33. Clearly, Partha was the senior executive in PPL responsible for managing PPL’s overall financial affairs and commercial activities for PPL and his success as the CFO was to be measured by financial performance indicators showing significant improvement since assuming the role.

34. At this juncture, it is necessary for me to remind myself of the general principles of pleadings given most of the defendant’s objections on the affidavit evidence adduced in support of Partha’s case were based on the purported lack of or want of pleadings.

35. His Honour, Canning’s J succinctly summarised the general principles in John Pias v Michael Kodi (2004) N2690 as follows:

“The general rule is that the pleadings set the foundation for the case. In a case commenced by a writ of summons, pleadings are the plaintiff’s statements made in the statement of claim that is attached to the writ of summons, the defendant’s statements made in the defence, the plaintiff’s statements made in a reply and so on. The general rule about pleadings has two practical consequences. First, no evidence can be adduced of something that has not been pleaded. Secondly no claim for relief can be made for something that has not been pleaded. (MVIT v Pupune, Supreme Court, [1993] PNGLR 370.)

If a defendant is to successfully submit that a claim for relief is beyond the pleadings, it must show that it has objected to evidence of that claim being adduced in the trial. If, for example, a plaintiff’s evidence of economic loss was not objected to, the defendant cannot later hark back to the pleadings and submit that the plaintiff is not entitled to damages for economic loss on the ground that it was not pleaded. (Pupune, at pages 373-375; MVIT v Etape, Supreme Court, [1994] PNGLR 596; MVIT v Tabanto, Supreme Court, [1995] PNGLR 214).”

36. There are numerous other cases on point some of which are; PNGBC v Jeff Tole (2002) SC694; Eric Kiso v Bennie Otoa (2013) SC1222; Mainao v Akori (2021) SC2090; Jacob Simbuaken v Neville Egari (2009) N3824; and Sogeram Development Corporation Ltd v Robin Som (2014) N5874.

37. In Jacob Simbuaken v Neville Egari (2009) N3824, Davani J said the reason why certain matters should be pleaded, in the context of Order 8 Rule 14 of the National Court Rules, is to avoid surprises which ought to be raised long before trial and that all material facts which it is essential for a plaintiff to establish in order to entitle him in law to the relief he seeks are pleaded failing which no evidence can be called for facts omitted. At [17] and [18] of that judgment, Her Honour said:

“17. The reason for this is simply to avoid surprises and to ensure all the issues that need to be raised are raised long before a matter gets progressed to trial.

18. Additionally, each party must plead all the material facts on which he means to rely at the trial otherwise he is not entitled to give any evidence of them at the trial. No averment must be omitted which is essential to success. Those facts must be alleged which must, not may, amount to a cause of action (West Rand Co. v. Rex [1905] 2 K.B 399).”

38. A closer examination of the Circular Board Resolution shows that “Carpenters Group” (as opposed to WR Carpenter (PNG) Limited referred to here as Carpenters) was chosen by the PPL Board as the supplier of the thirteen 1250 KVA generators. Carpenters and Dalton are two different entities registered in Papua New Guinea: see paragraph 5, Certificate of Incorporation of Carpenters dated 16 January 2020 and Company Extract of Carpenters issued on 16 January 2020 (annexure AO1, Exhibit 2) and Certificate of Incorporation of Daltron dated 16 January 2020 and Company Extract of Daltron issued on 16 January 2020 (annexure AO1, Exhibit 2). The major shareholder of Carpenters is MBF Carpenters (Australia) Pty Limited while the major shareholder of Daltron is Carpenter Technologies Limited. There was no cogent evidence to show that Dalton was not part of the Carpenters Group. In fact, there is evidence showing that Daltron was part of the Carpenters Group and PPL’s legal advice was to honour the contract to purchase the generator sets and PPL subsequently withdrew the termination of the contract with Daltron: paras 40 and 41, Exhibit 1, annexures AO25 and AO26; email exchange between Ms. Finkewe Zurecnuoc and Mr. David Conn, annexure LM2, Exhibit D.

39. Prior to the making of the Circular Board Resolution, a due diligence report called “Purchase of generator sets to replace existing leases - financial and economic assessment” was compiled to for the purchase of thirteen generator sets: annexure AO6, Exhibit 1. The Minutes containing the Circular Board Resolution do not suggest that any concern was raised or additional information was sought by the Board or any member concerning the purchase of the generator sets.

40. On 9 June 2016, the PPL Board in a Special Board Meeting No.7/2016 resolved to suspend Partha and Mr. Bigiglen to allow for investigations to be conducted into their alleged improper conduct in the procurement of 12 generators from a different entity namely, Daltron purportedly contrary to the PPL Board decision of 2 February 2016 to purchase 13 generators from Carpenters.

40. It is not disputed that on or around 17 June 2016, Partha received the Suspension Notice from the CEO, Mr. Bais containing the Allegations of Misconduct suspending him from employment for 14 days on full pay: annexure PS14, Exhibit A. I find as a fact that Partha was required to respond to the Allegations of Misconduct within the Suspension Period: admission, paragraph 8 of Amended Defence.

41. The parties agree that on or around 24 June 2016, Partha, through his lawyers, Leahy Lewin Lowing Sullivan (LLLS), responded to the Allegations of Misconduct denying all allegations: annexure PS15, Exhibit A. Partha has summarised his responses to the Allegations of Misconduct at paragraph 44 of Exhibit A and I reproduce them verbatim in the order of the allegations below:

• “The variation to supply was done by Mr. Yanis by way of authorisation of PO 216198. Further, Mr. Yanis had Mr. Andagali’s written approval. As the decision was made by Mr. Yanis, it is incorrect to state I deviated.
• As my reporting authority was the CEO and not the Board, I had no ability to seek Board approval directly. Variation was approved by the CEO, Mr Yanis (as above).
• 3 Quotations were sought, as disclosed in the Submission, which is well accepted PPL practice. No concern was raised in relation to this. Boards have exercised discretion and approved even larger purchases, most notably for generator lease from Aggreko for K40 million annually, without even an alternate quote from other suppliers.
• Legal clearance was obtained through the Board Secretary’s (senior most legal officer of PPL) approval of the Submission. A valid contract existed by virtue of offer (quote from Carpenters) and acceptance (PO from PPL). Again, the Board didn’t raise any concern prior to approval.
• Legal advice is not needed for all transactions and the previous Board or the Board Secretary did not raise any concern.
• Board Submission was transparent and contained all necessary details eg., Cummins generators KTA50 G3. Financial justification was provided. Board approved the submission, upon review.
• Changes to generators’ technical specifications were done by Mr. Bigiglen and Mr. Yanis and was approved by Mr. Andagali. Areas of technical nature do not fall under my scope as CFO.
• It was within the authority of Mr. Yanis to approve or reject any variation as he had the delegated authority to make such decisions as per the Manual.
• Travel was approved by Mr. Yanis (Appendix ‘PS7’) and the trip paid for by PPL.”
  

42. It is not disputed that PPL did not respond to the letter from LLLS.

43. On 1 July 2016, while acknowledging the receipt of the letter from LLLS dated 24 June 2016, the CEO, Mr. Bais wrote to Partha extending his suspension indefinitely with full pay for a month until investigations into the Allegations were concluded and a decision made: annexure AO21, Exhibit 1.

44. It is not disputed that on 17 August 2016, while suspended, Partha emailed Mr. Bais a document called “My Contribution and Achievements in PNG Power”: annexure AO30, Exhibit 1. This document is self-explanatory. It sets out a summary of Partha’s contribution and achievements since his employment with PPL as the CFO.

45. Partha states that some of the problems faced by PPL at the time of joining were:

1. PPL had a debt of over K250 million and in the 9 months prior to his joining, PPL was at a point of defaulting on debts until Kumul Consolidated Holdings came to its rescue with a contribution of K80 million;
2. At best, PPL was making a loss;
3. Customer Service Department which employed about 200 staff had a structure that was dysfunctional both in the corporate office and in the centres;
4. Collections were low averaging K65-K70 million per month (although the target was K80 million) and this meant that cash flow was strained with limited ability to maintain and improve generation and distribution capacity of the business after loan repayments;

46. The contribution and achievements, to name a few, were:

1. Financial reporting was improved;

2. The Customer Service Department was restructured which led to improved collection of at least K80 million since January 2016 and K86 million in March 2016; and
3. Value added to PPL from initiatives implemented was put at a conservative estimate of K279 million.
   

47. Partha’s contribution and achievements were not seriously disputed by PPL.

48. The PPL Board at Board Meeting No.4 of 2016 held on 9 August 2016 resolved to terminate Partha from his employment with PPL and this was reaffirmed at Special Board Meeting No.8 of 2016 held on 23 August 2016 despite a request by the CEO to rescind the decision to terminate made at Board Meeting No.4 of 2016 and the latter decision was decided after a tie on the Chairman’s casting vote: annexure AO31, Exhibit 1, annexure H, Exhibit 3. At the latter meeting, factors such as length of service, importance of the role or position held, gravity of allegations, sufficiency of evidence before the Board, the Board’s anti-corruption stance and external legal advice before the Board were considered.

49. It is also not disputed that on or about 30 August 2016, Partha received the Termination Notice from PPL’s CEO, Mr. Bais. Excluding the formal parts of the Termination Notice, it reads:

“I write to advise you that your employment with PNG Power Ltd (PPL) as the Chief Financial Officer is now terminated forthwith pursuant to a PPL Board resolution on 9^th August 2016 during the PPL Board Meeting No.4 of 2016 and subsequently reaffirmed at the Special Board Meeting No.8 of 2016 on 23^rd August.

It has been established that you have breached certain procurement processes when procuring the purchase of twelve (12) generators from Daltron Electronic Ltd contrary to the former Board resolution to procure and purchase thirteen (13) generators. It is further established that no due diligence was done prior to the purchase of the generators and there was no sale and purchase contract executed between PPL and Daltron Electronic Ltd to govern the sale and purchase transaction. You facilitated partial payment of the purchase price of the generators thus committing PPL to a deal that has no legal and technical safeguards for PPL.

Your actions and or omissions have exposed PPL to great risk, loss and costs.

On this basis, the Board resolved to terminate your employment and as the executive head of the company give effect to the Board’s resolution by effectively terminating your employment with PPL pursuant to Clause 16 of your Contract of Employment with PPL.

Your final entitlements will be calculated and paid to you soon.

I take this opportunity to thank you for your contribution to PPL over this short period of your employment with PPL and wish you well in your future endeavours.”

50. The Termination Notice states that Partha’s employment was terminated in accordance with Clause 16 of the Contract of Employment. However, Clause 16 has no bearing on termination. Clause 15 does, as it provides that a breach of the Code of Ethics and Business Conduct is a dismissible offence. Clause 15 reads:

“The Contract Officer shall be bound by the Code of Ethics and Business Conduct of PPL and understands that a breach of any or all of the Code of Ethics Business Conduct of PPL is a dismissible offence with the disciplinary guidelines of the Company being followed and applied. The abridged Code of Ethics and Business Conduct of PPL is given in Schedule C and in signing it the Contract Officer acknowledges that he has read and understood the contents and the consequences of breaching any or all of the Code.”

51. Partha signed the abridged Code of Ethics and Business Conduct.
52. The principle that an employer has the right to hire and fire applies in Papua New Guinea. This common law principle was affirmed by the Supreme Court in Jimmy Malai v PNG Teachers Association [1992] PNGLR 568 and reaffirmed by the Supreme Court in New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946. This principle allows an employer to hire and fire at will, with or without good reasons and without giving a right to be heard, but can be displaced by the terms of a contract of employment: Robert Kapo v Ayleen Bure (2010) SC1162; George Podas v Divine Word University (2011) N4395; John Tangit v PNG Power Ltd (2019) N8836.

53. Any breach of the Code of Ethics and Business Conduct could give rise to disciplinary action that could then result in termination of the Contract of Employment: Schedule C, annexure PS2, Exhibit A.

54. It is not disputed that the HR Guidelines set out the procedure that PPL is required to follow when taking disciplinary action against employees. The HR Guidelines applies to all PPL employees – permanent, casuals, graduates and trainees: Clause 2, HR Guidelines. That is consistent with Clause 15 of the Contract of Employment.

55. The HR Guidelines applied to Partha.

56. A copy of the HR Guidelines is in evidence: annexure PS 19, Exhibit A, annexure A, Exhibit 4.

57. Did PPL follow the HR Guidelines when taking disciplinary action against Partha?
58. It is settled law in this jurisdiction that if an employee is not terminated in accordance with the agreement of the parties, that amounts to an unlawful termination: Leo Nuia v The Independent State of Papua New Guinea (2000) N1986, Peter Aigilo v Sir Mekere Morauta & Ors (2001) N2103 and Legu Vagi v NCDC (2002) N2280.

59. I am satisfied that the evidence shows that Partha was terminated without cause, vindictive, malicious and in breach of the Contract of Employment including the HR Guidelines. The pleadings on this are supported by evidence before the Court. I generally accept Ms Parua’s submission in this regard. Central to the decision to terminate Partha’s employment was his purported involvement with Mr Yanis, Mr. Andagali and others in the procurement of 12 generator sets from Daltron Electronics Limited which emanated from a variation of the Circular Board Resolution of 2 February 2016. I agree that the purchase of the generators required processing under the Major Works Manual as a Major Works Purchase as the purchase involved an amount over K100,000.00.

60. On the evidence, I am also satisfied that:

1. The decision to facilitate the variation of the Circular Board Resolution dated 2 February 2016 instigated by way of a letter dated 29 February 2016 from Mr. Yanis to Mr. Andagali was without the authority of the PPL Board and in breach of PPL’s procurement processes – Mr. Andagali did not have any power, either ostensible or actual, or delegated authority to vary the Circular Board Resolution;
2. Mr. Yanis as CEO had no delegated authority to exceed procurements above his limited ceiling of K500,000.00 and required Board approval for the variation based on the Major Works Manual.
3. Partha did not have any authority and therefore was not capable of authorising the purchase of the twelve generators from Daltron by himself.
   

61. I have inquired into the circumstances of Partha’s dismissal for the purpose of determining whether PPL breached the Contract of Employment. There is no cogent evidence to demonstrate, and I am not persuaded by PPL’s evidence, that there was some kind of conspiracy between Mr. Yanis, Mr. Andagali and others including Partha to vary the Circular Board Resolution and facilitate the purchase of 12 generators from Daltron. The decision to vary actually was propagated by Mr. Yanis, Mr. Andagali and others: see letter seeking approval by Mr Yanis to Mr. Andagali as Chairman of PPL Board dated 29 February 2016 which was granted, annexure JY5, Exhibit E. Under Clause 15 of the Contract of Employment, the breach of any or all of the Code of Ethics and Business Conduct was a dismissible offence. However, to my mind, Partha was just performing his job as the CFO. I am not persuaded on the evidence available before me that Partha did not discharge his duties faithfully, but to the contrary acted on lawful and reasonable instructions given by his superiors or persons having authority and did not commit any wrong doing. That could not amount to serious misconduct warranting disciplinary action taken against him that led to his suspension and eventual termination from employment. Partha’s explanation to the Allegations of Misconduct through the letter from LLLS dated 24 June 2016, in my view, adequately addressed the allegations.

62. Under the HR Guidelines, the principles of natural justice apply, ie, a person affected by an impending decision, must be afforded a fair hearing prior to that decision being made and the decision maker must be impartial. Partha’s pleadings in the statement of claim (paras 7-16) and reply to the amended defence (para 5) specifically and or by reasonable inference from the material facts pleaded raise the issue of natural justice. It is also one of the legal issues the parties have agreed to be determined by the Court.

63. Here, the CEO, Mr. Bais was involved in the disciplinary action including termination. As to whether Mr. Bais was involved in his capacity as having delegated authority of the PPL Board or as CEO is immaterial. The evidence shows and it is not disputed that Mr. Bais issued the Suspension Notice, letter extending suspension and the Termination Notice. Prior to that, Mr. Bais was involved in the procurement of the generators when he authorised payment to Daltron and countersigned the cheque for the deposit. There was a conflict of interest. It suffices to state therefore that that was a clear breach of the principle of natural justice. Given that, it is not necessary to address or detail other procedural irregularities including the question of appeal.

64. Having reached this conclusion, it is now not necessary for me to address the other submissions of counsel.

65. Judgment on liability is entered in favour of Partha for unlawful termination of the Contract of Employment.

DAMAGES

66. What are the plaintiff’s damages?

Plaintiff’s submissions

67. Ms. Parua submitted that the damages claimed in the sum of AUD$3.868 million be awarded with interest sought pursuant to statute.

68. In the alternative, it was argued that, if the Court found that the Contract of Employment was for a term of 2 years and not 5 years, damages be calculated from the date of the unlawful termination (September 2016) to the end of the two-year term (30 April 2017) the exact amount to be assessed at a later date.

69. In the further alternative, it was submitted that Partha be awarded six months base salary and leave entitlements plus the annual bonus calculated for the year.

Defendant’s submissions

70. Mr Tumul contended PPL paid Partha K90,635.04 after his termination and that was his final entitlements.

71. Counsel said no alternative claim for damages was pleaded other than the claim of AUD$3.868 million so Partha was not entitled to receive any other relief in the alternative. He proceeded to make the following submissions nevertheless.

72. It was submitted by Mr. Tumul that if the Court found that the termination was unlawful, the law was that there was no entitlement to a relief called “balance of contract” especially where the parties employment relationship is governed by a written contract of employment. He said contracts of employment which provided for a payout of the balance of the contract where the contract was terminated earlier amount to penalties and he referred the Court to the decision of the Supreme Court in Post Puma Ltd v Yama Security Services Ltd, SCA No.80 of 2000, Unnumbered and Unreported, 26 July 2001 as supporting the proposition.

73. Mr. Tumul suggested that Partha was entitled to claim damages equivalent to the period of appropriate notice or two weeks pursuant to Section 34(2) of the Employment Act as the Contract of Employment, according to Clause 2, was governed by the Employment Act. Mr. Tumul also suggested in the further alternative that Partha was entitled to damages for a reasonable period during which proper disciplinary process would have been initiated and concluded which in this case would be between 2 to 3 weeks.

Reasons for decision

74. The general principles of law as to the appropriate measure of damages for wrongful dismissal are now well settled in our jurisdiction; Ereman Ragi & Ors v Joseph Maingu (1994) SC459, Nazel Wally Zanepa v Ellison Kaivovo, Department of East New Britain & Anor (1999) SC623, PNGBC v Jeff Tole (2002) SC694, Porgera Joint Venture, Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060, Susan Love v Bridgestone Tyres (PNG) Limited, SCA 1 of 2006, Unnumbered and Unreported (Kirriwom, Davani, and Kariko, JJ) dated 3 September 2010, and Robert Kapo v Ayleen Bure (2010) SC1162.

75. Where there is a contract of employment allowing for either party to terminate such contract upon giving notice in accordance with the period of notice agreed to, the measure of damages an employee is entitled to receive would be based on the salary and other entitlements he or she would have received had the contract been lawfully terminated. Damages would therefore be equivalent for the period of appropriate notice only: Porgera Joint Venture v Robin Kami (2010) SC1060, Susan Love v Bridgestone Tyres (PNG) Limited, SCA 1 of 2006, Unreported Judgment of the Supreme Court comprising Kirriwom, Davani, and Kariko, JJ dated 3 September 2010, Robert Kapo v Ayleen Bure (2010) SC1162.

76. These principles were further clarified by the Supreme Court in Porgera Joint Venture v Robin Kami (2010) SC1060. The brief facts in that case were that Porgera Joint Venture employed the respondent under a written contract of employment for a fixed term. The contract allowed for early termination by either party without reason, upon four weeks’ notice or by Porgera Joint Venture without notice upon payment of money in lieu of notice. Porgera Joint Venture terminated the contract for disciplinary reasons and paid the respondent money in lieu of notice. The National Court found that the termination was unlawful and awarded damages for the balance of the contract period. Porgera Joint Venture appealed the decision of the National Court. The Supreme Court by a 2-1 majority upheld the appeal. After discussing some English authorities including Gunton v London Borough of Richmond-upon-Thames [1980] 3 All ER 577 and Boyo v London Borough of Lambeth [1995] 1RLR 50AC; (1980) I.C.RC. 755 and the common law principles on damages for want of notice and want of disciplinary procedures in a private employment contract, His Honour, Injia, CJ observed:

“24. I consider that the common law principles on compensation for want of notice and want of disciplinary procedures in a private employment contract developed in Gunton, Janciuk, Boyo, Focsa set out above are persuasive, appropriate and applicable to the circumstances of this country and apply them to the case at hand. Much of the principles set out above relating to measure of damages for want of notice are already part of the common law as adopted and applied in this jurisdiction in many cases including the cases cited by counsel before us. The principles on compensation for want of compliance with disciplinary procedures in a private employment contract is new and requires further development and refining in subsequent cases with assistance of counsel.

25. I consider that in a private employment situation where an employee is employed under a written contract of employment for a fixed term and which contains a termination clause for termination with or without notice by either party, with or without reason, the measure of damages which the employee is entitled to receive is based on the salary and other entitlements that the employee would have received if the contract had been lawfully terminated. In a case where it is an express or implied term of the contract that termination of the employment contract for cause would be effected upon compliance with disciplinary procedures, the measure of damages is assessed on a reasonable period within which the disciplinary proceedings would be commenced and concluded. The likely outcome of the disciplinary proceeding is immaterial or is an irrelevant consideration.

26. Let me expound on the principle that I have just enunciated. In a case where the employer in the exercise of its right to terminate the contract chooses to terminate for cause, and there is a disciplinary procedure that the parties have adopted in the Contract, the employer is under an obligation to follow the disciplinary process agreed to under the contract. If the employer is found to have not followed the proper procedure the termination is wrongful and the employee is entitled to damages. But damages will not be for the balance of the contract unless the parties agree to such a term under the contract. Instead, damages is for the reasonable period during which proper disciplinary process would have been initiated and concluded in accordance with any time lines prescribed for various steps in the disciplinary procedure to be concluded. For a start, it would very much depend on the steps in the procedures set out in the disciplinary process and the time limit, if any, prescribed for various procedural steps where there are no time limits prescribed, it would come down to assessing what would be as reasonable time frame to cover the main steps in the process – formulating and presenting complaint, opportunity to reply and a decision made and communicated to the employee and any provisions for appeal or review from that decision by a higher management body or person. It is not a matter for the Court to analyze and speculate on the employee’s chances of success if the process was completed.”

77. I adopt and apply these principles.

78. I concur with Mr. Tumul’s submission that contracts of employment which provide for a payout of the balance of the contract where the contract was terminated earlier amount to penalties. The National Court decisions of Teio Raka Ila v Wilson Kamit (2002) N2291 and Wilson Thompson v National Capital District Commission (2004) N2686 also support that proposition. It is in that context that I am unable to award the amount Partha claims, ie, AUD$3.868 million. To my mind, my refusal to grant the relief sought does not prevent me from considering the appropriate damages to be awarded as Partha fundamentally is claiming damages for breach of contract. In any event, Partha also claims in the statement of claim such further or other relief as the Court may deem just.

79. Clause 2 of the Contract of Employment states that the contract was governed by the Employment Act. It reads:

“The Contract is governed by the Employment Act (the Act). Where the Contract is silent, the Terms and Conditions for the Non Citizen Employees shall prevail. In the event of any conflict of interpretation as between the Contract and the Terms and Conditions for the Non Citizen employees, the Contract shall prevail.”

80. I will go by Clause 4 of the Contract of Employment in assessing damages. Clause 4 states:

“If the Contract Officer’s employment ceases for reasons, eg., redundancy or termination without cause, then the Contract Officer will be paid a termination payment equal to the aggregate of the following: a) 6 months base salary, superannuation and leave entitlements, plus b) the annual bonus calculated for the year on the basis of full achievement.” (my emphasis)

81. This is a specific clause agreed to by the parties on what Partha was entitled to be paid in the event of early cessation of employment for reasons other than gross misconduct or resignation eg, redundancy or termination without cause. I find that this not a penalty clause.

82. I have considered Section 34 of the Employment Act which states:

“34. Notice of termination.

(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.”

83. Section 34(1) provides that s.34 does not apply to a written contract of service for the first two years of its operation unless the parties agree otherwise. In other words, it prohibits the termination of a contract of service within the first two years of operation of the contract unless the parties agree otherwise. The Contract of Employment is a “contract of service” as defined by s.1 of the Employment Act which states:

"... any 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.”

84. I am of the view that the Contract of Employment is caught by s.34(1) although the term was only for two years. The Contract of Employment was terminated within two years of operation. Did the parties agree that s.34 would apply? There is nothing express or implied in the Contract of Employment regarding that. Hence. s.34 does not apply to the Contract of Employment. I therefore reject PPL’s submission on the application of s.34.

85. Partha is awarded six months base salary, superannuation and leave entitlements plus the annual bonus calculated for the year in accordance with Clause 4 of the Contract of Employment. The particulars pleaded at paragraph 17 of the statement of claim particularly those pleaded under years 2016 and 2017 will be useful in this regard.

86. Notwithstanding the agreed facts on the question of mitigation of damages, I have not made any allowance for that as:

1. PPL has not pressed or seriously pressed the matter in its submissions; and
2. the parties have not made any suggestion for my consideration as to the amount or percentage by which the damages ought to be mitigated.
   

ORDER

87. The Court orders that:

1. Judgment on liability is entered in favour of the plaintiff, Partha Sarathy for unlawful termination of the Contract of Employment entered into between PNG Power Limited and himself dated 31 March 2015.
2. The claim for damages in the sum of AUD$3.868 million is refused.
3. The plaintiff is awarded six months base salary, superannuation, leave entitlements plus the annual bonus calculated for the year in accordance with Clause 4 of the Contract of Employment entered into between PNG Power Limited and himself dated 31 March 2015 less K90,635.04 paid on termination, the exact amount to be settled by the parties themselves or alternatively the parties may return to the Court at a later date for this purpose only.
   4. Interest at 8% pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act 2015 shall apply from the date of filing of the writ of summons to the date of judgment and the same rate shall apply post-judgment.
   5. Except for specific costs orders made previously, costs shall follow the event, ie, the defendant shall bear the plaintiff’s costs of and incidental to the proceedings.
      

Judgment and orders accordingly
________________________________________________________________
Leahy Lewin Lowin Sullivan: Lawyers for the Plaintiff
Allens: Lawyers for the Defendant