Air Niugini v Salter [2001] PGSC 3; SC679 (9 November 2001)

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MASTER AND SERVANT – Written Employment Contract – Between Statutory Corporation, (a "public authority") and Non-Citizen – Accrued long service leave entitlements not term of written Contract – Application of Statute – Employment Act (Ch. No. 373); Employment of Non-Citizens Act (Ch. No. 374); Public Employment of Non-Citizens Act (Ch. No. 342); National Airline Commission Act (Ch. No. 244); Industrial Relations (Ch. No. 174); Port Moresby Common Rule 1975.

Held:	(1)	Pursuant to Section 3(1)(b) of the Employment Act (Ch. No. 373), and Section 5 of the Public Employment of Non-Citizens Act (Ch. No. 374); the Employment Act does not apply to a non-citizen employed by a "public authority" defined in S.2 of the Public Employment of Non-Citizens Act;
	(2)	Air Niugini being "a public authority" declared under S.5 of the Public Employment of Non-Citizens Act, the Employment Act does not apply to a non-citizen employed by Air Niugini. The law applicable is the National Airline Commission Act (Ch. No. 244) and the Public Employment of Non-Citizens Act.
	(3)	Pursuant to S.9(2) of the Public Employment of Non-Citizens Act, the Industrial Relations Act and any Common Rule or Industrial Award made thereunder has no application to a non-citizen employed by a "public authority" as defined under S.2 of the Public Employment of Non-Citizens Act.
	(4)	The Employment of Non-Citizens Act is not an Act under which a non-citizen is employed, and therefore that Act does not qualify under the exception in S.3(1)(b) of the Employment Act.
	(5)	The Employment Act is a statute of general application which applies to non-citizens employed in the private sector who are not employed under any other Act in force.

Michael Brendel v. Golden Square Pty Ltd. [1983] PNGLR 257
Atlas Plant Hire Pty Ltd. v. Beck [1984] PNGLR 158
Michael Carter v. Korobosea Developments Pty Ltd [1986] PNGLR 157
Franz Mayer v. Erwin Lutz & Another [1996] PNGLR 163
Lysenko v. National Airline Commission [1988 – 89] PNGLR 69
Nazel Wally Zanepa v. Ellison Kaivovo & 2 Others, Unreported Supreme Judgment No. SC623 (1999)
Ereman Ragi v. Joseph Maingu Unreported Supreme Court judgment No. SC457 (1999)

BY THE COURT: We heard these two appeals on 25 April 2001 and deferred our judgment to today.

These appeals relate to two different decisions made by two differently constituted National Courts but because they raise the same issue, we heard them together. All parties to the appeal agree that the grounds of appeal in both appeals raise one common issue of law. The issue is: Are the plaintiffs (now respondents) both non-citizen expatriates, employed by Air Niugini (or the National Airline Commission) under a contract of service, entitled to long service leave upon their termination of employment pursuant to Section 63 of the Employment Act (Ch. No. 373) or alternatively, pursuant to Clause 7 of the Port Moresby General Employment (Common Rule Award 1975) made under Part VI of SS 46 - 48) of the Industrial Relations Act (Ch. No. 174). Both S.63 of the Employment Act and clause 7 of the Common Rule provide for payment for accrued long service leave entitlements.

Both plaintiffs are former employees of Air Niugini. Mr. Salter was employed as a pilot on 1 April 1989 and Mr. McLaughlin was employed as a Sales Manager on 20 July 1980. Both plaintiffs entered into written contracts of employment with Air Niugini. On 25 June 1999, Mr. Salter’s employment was terminated. Mr. McLaughlin’s employment was terminated on 17 December 1996. Consequently, both plaintiffs filed separate proceedings in the National Court at Waigani seeking damages. Mr. Salter claimed loss of employment entitlements totalling K215,590.89 of which K81,510.20 was for money in lieu of accrued long service leave. Mr. McLaughlin claimed total damages in the sum of K69,214.65 for accrued long service leave entitlements.

Both plaintiffs’ respective employment contracts did not provide for long service leave entitlements. So Mr. Salter relied on S.63 of the Employment Act whilst Mr. McLaughlin relied on clause 7 of the Common Rule. The trial judges in each case agreed with them and awarded damages accordingly. The trial judges awarded Mr. Salter K85,999.58 and Mr. McLaughlin was awarded K76,683.96 in damages for accrued long service leave entitlements.

The two decisions are based on two different statutes but because there exists similar provisions in the Employment Act and the Common Rule which exclude the application of the Employment Act or the Common Rule to persons employed "under any other law in force in the country" or "under any other Act in force in Papua New Guinea" respectively, the same issue arises. These exclusion provisions are set out in S.3(1)(b) of the Employment Act and S.2 of the Industrial Relations Act and Schedule 2 of the Common Rule.

Judicial opinion on the application of the Employment Act to non-citizens is divided between several judges of the National Court. In 1983, in Michael Brendel v. Golden Square Pty Ltd. [1983] PNGLR 257, McDermott J when interpreting S.15(1) of that Act held that the Employment Act 1978 applied to a non-citizen employed under a "contract of service. However, His Honour did not consider S.3(1)(b) of the Act. Mr. Brendel was a non-citizen expatriate employed in the private work force but the question of whether the Employment of Non-Citizens Act (Ch. No. 374) applied to his employment did not arise. In 1984, in Atlas Plant Hire Pty Ltd. v. Beck [1984] PNGLR 158, Pratt J held the contrary view that pursuant to S.3(1)(b) of the Employment Act (Ch. No. 373), that Act did not apply to a non-citizen expatriate employed under "any other law in force", such "any other law" being the Employment of Non Citizens Act (Ch. No. 374). In 1986 an attempt by another judge of the National Court to have the same issue resolved by the Supreme Court, by way of a reference, was dismissed on competency grounds: Michael Carter v. Korobosea Developments Pty Ltd [1986] PNGLR 157. Also in 1996, in Franz Mayer v. Erwin Lutz and Another [1996] PNGLR 163, Doherty J rejected the principle in Atlas Plant Hire v. Beck and adopted and applied the principle in Brendel v. Golden Square Pty Ltd; the reason being that when interpreting S.3(1)(b), Pratt J. did not consider S.88(1)(g) of the Act. In Salter’s case, Los J. agreed with Doherty J.

*(1)*	*Subject to Subsection (2), this Act applies to and in relation to the State and an authority constituted by or under a law.*
*(2)*	This Act does not apply to or in relation to a matter or thing to which the Public Services Conciliation and Arbitration Act or the Teaching Services Conciliation and Arbitration Act, or any other law relating to the settlement of trade or industrial dispute applies. ( our emphasis).

Schedule 2 of the Port Moresby Common Rule gazetted on 9 June 1977 states that the Common Rule applies to:-

"All persons employed in that area (Port Moresby area as defined in Schedule 1) except employees engaged---

*(a)*	*directly in primary production; or*
*(b)*	*in domestic duties; or*
*(c)*	under any other Act in force in Papua New Guinea other than those employees classified as General Labourers and Class 1, 2 and 3 occupations as determined by the Minimum Wages Board Determination No. 4 of 1974. ( our emphasis).

The application of the Common Rule to a non-citizen was not addressed and determined by either Doherty J. in the Frank Mayer case or Sevua J. in the McLaughlin case. Sevua J. was under the impression that Doherty J. decided the issue and proceeded to apply Clause 7 of the Common Rule whereas Doherty J. merely made a passing remark when Her Honour was determining the plaintiff’s entitlements under the Employment Act.

We now consider the merits of these appeals. We will first deal with SCA No. 64 of 2000 – Air Niugini v. Denis Salter.

Mr. Griffin of counsel for the appellant submits as follows. The reasoning in Brendel, Franz Mayer and Salter is wrong because S.3(1)(b) of the Employment Act is clear. "Any other Act" in S.3(1)(b) of the Employment Act clearly refers to the Employment of Non-Citizens Act under which Mr. Salter was employed. Although one might argue that a non-citizen’s employment is "affected" or "regulated" by the Employment of Non-Citizen’s Act, but not employed "under" it, the definition of "employer" in S.2 of that Act which says "a non-citizens employed under this Act" means that a non-citizen is "employed under" that Act. Section 88(1)(g) of the Employment Act comes within the meaning of "Except where it is specifically provided otherwise" in S.3(1). With the only exception in S.88(1)(g) (which permits an employer to make deductions from a non-citizen’s salary to pay for his cost of repatriation), the entire Employment Act makes no reference to non-citizens and S.88(1)(g) cannot be read to render the whole Employment Act applicable to non-citizens. And because the Employment of Non-Citizens Act does not oblige a non-citizen’s employer to pay a non-citizen accrued long service leave entitlement and Mr. Salter is not entitled to receive such payments.

Mr. Frank and Mr. Enderson of counsel for the respondents jointly submit that the reasoning of Doherty J and McDermott J adopted by Los J is the correct interpretation of S.3(1)(b) of the Employment Act because that Act makes no distinction between a citizen or non-citizen employee and the reference to non-citizens in S.88(1)(g) shows that the Employment Act was intended to apply to non-citizens employees as well. Pratt J’s decision is wrong because when interpreting S.3(1)(b), His Honour did not consider S.88(1)(g). The Employment of Non-Citizens Act does not qualify under "any other law" in S.3(1)(b) of the Employment Act because the former Act does not set basic or minimum terms and conditions of employment of a non-citizen. They submit an example of a statute which sets basic or minimum terms and conditions of employment which falls under S.3(1)(b), is the Public Employment of Non-Citizens Act (Ch. No. 342). Mr. Salter was employed under the Employment Act and not under any other law and therefore, S.63 of the Employment Act applies to Mr. Salter.

It appears to us that counsel on both sides have misunderstood the application of the Employment Act and the Employment of Non-Citizens Act, to non-citizens employed in this country. The Employment Act is a general statue which applies to all employment situations in this country, both citizens and non-citizens alike. The Employment Act does not make a distinction between citizen and non-citizen employees in the workforce in this country. However, S.3(1)(b) contains two important exclusion provisions. First, the Act does not apply to a person employed under any other law (meaning statutory law) in force in the country. Secondly, where specific provisions of the Employment Act or that "other law" under which a person is employed "specifically provided otherwise".

The Employment of Non-Citizens Act is not an Act under which a non-citizen is employed. This Act simply regulates all non-citizen’s employment in this country including those employed by the State (see Section 3(1)) through a system of work permits. It makes the possession of a work permit by a non-citizen a pre-requisite for obtaining and sustaining employment in this country. It prohibits the employment of non-citizens whether in self-employment or in the employment of an employer, and prescribes criminal offences for breaches of the Act. As submitted by Mr. Frank, this Act does not provide a complete employment code governing the relationship between the employer and a non-citizen employee, in terms setting out the terms and conditions of employment. Such terms and conditions are left to the discretion of the employer and the non-citizen employee to contract. This is made clear in Section 5A(2) of the Act and the Regulations S.2 and Schedule 2 which require all non-citizen expatriates to be employed under a written contract of employment. In requiring all non-citizens and their employers to enter into written contracts of employment, it is intended that such written contracts conform to the requirements of the Employment Act.

Non-citizen expatriates employed in this country fall into two categories: (1) A non-citizen employed in the public sector or by a "public authority" as defined in Section 2 of Public Employment of Non-Citizens Act (Ch. No. 244) and (2) A non-citizen employed in the private sector.

The employment of non-citizens in the public sector is governed by the Public Employment of Non-Citizens Act (Ch. No. 342). This Act is a complete employment code of its own and it falls within the exception in S.3(1)(b) of the Employment Act.

Section 2 of this Act provides that the Act applies to all non-citizens employed by a "public authority". The term "public authority" is defined in Section 2 as the Public Service, the Parliamentary service, police force, the education service and any other body declared under Section 5 by the Minister for Public Service to be a "public authority" for purposes of the Act.

We consider it is necessary to set out in full Sections 5, 6, 8 and 9 of this Act because, as it will become apparent later, these provisions will determine the outcome of all the arguments raised by counsel on both sides in both appeals. These provisions and certain executive declarations made by the Minister for Public Service between 1982 – 1983 under S.5 of the Act were not considered by the trial judges in the two cases the subject of these appeals.

The Minister may, by notice in the National Gazette, declare a body, whether corporate or unincorporate and whether established by statute or otherwise, to be a public authority for the purposes of this Act but shall not declare a body to be a public authority where a written agreement, whether made before or after the commencement date, whether made before or after the commencement date, between the State and the body, specifically provides that this Act shall not apply to the body.

Notwithstanding any other law, other than a Constitutional law, the Public services Commission shall, in accordance with the general direction of the Head of State, acting on advice---

A non-citizen to whom this Part applies shall enter into a written contract of employment with the State which shall specify inter alia—

The National Airline Commission Act (Ch. No. 244) establishes the National Airline Commission ("the Commission") which is responsible for the management of the National Airline, Air Niugini. Part 10 of this Act established the "Service of the Commission". Section 24 provides that the Regulations made under the Act shall prescribe the terms and conditions of employment of all employees. Section 38 of the Act empowers the Commision to enter into written Contracts under seal and gives legal effect to such contracts. Section 38(2) provides for variation of terms of written contracts to be "in writing under seal."

The Commission or Air Niugini is "a public authority" within the meaning of that term in S.2 of the Public Employment of Non-Citizens Act. Pursuant to Section 5 of the Public Employment of Non-Citizens Act, on 2 November 1982, by notice in the National Gazette No. G73 published on 4 November 1982, the then Minister for Public Service Mr. Tony Siaguru declared Air Niugini to be a public authority for purposes of the Act: Also see Lysenko v. National Airline Commission [1988 – 89] PNGLR 69 at 70. And then on 21 June 1987, pursuant to the Organic Law on the Public Service Commission, the Chairman of the Public Services Commission, by notice in the National Gazette, No. G43 published 7 July 1983, delegated his power under S.5, 6, and 9(2) of the Public Employment of Non-Citizens Act 1978 to the National Airline Commission, which was by then a public authority. That meant that pursuant to S.8 of the Public Employment of Non-Citizen Act, a non-citizen and the Commission were required to enter into a written contract of employment, the terms and conditions of which would include those stipulated by the Public Employment of Non-Citizens Act and the National Airline Commission Act. In requiring a non-citizen and Air Niugini to enter into written contract, it was intended by both the National Airline Commission Act and the Public Employment of Non-Citizens Act that the terms and conditions set out therein would be exhaustive so that if there were to be any dispute regarding them, then the aggrieved party would resort to his common law remedies (for breach of contract) in a Court of law and not through the arbitration and conciliation procedure set out in the Industrial Relations Act.

The National Airline Commission Act and the Public Employment of Non-Citizens Act provides a complete employment code in respect to terms and conditions of employment of non-citizens by Air Niugini. Both of these severally or jointly qualify under the first exception in S.3(1)(b) of the Employment Act. Therefore, the fact that Mr. Salter’s long service leave entitlements was not provided for in the written contract of employment can only mean that it was intended by the contracting parties that this particular item of terms and conditions of employment was excluded.

The above interpretation of S.3(1)(b) of the Employment Act is consistent with the dissenting opinion of Injia, J. in Nazel Wally Zanepa v. Ellison Kaivovo & 2 Others, Unreported Supreme Judgment No. SC623 dated 2 November 1999, in respect of citizen public servants employed in the public service under the Public Service Management Act 1986. The majority view in Nazell Zanepa follows the Supreme Court’s decision in Ereman Ragi v. Joseph Maingu Unreported Supreme Court judgment No. SC457 (1999). In Nazel Zanepa, Injia J said at p.9 – 10:-

"The Employment Act is a general statue which applies to all employer-employee relationships where there is no other statutory law governing a particular kind of employer-employee relationship. The PS(M) Act (Public Service Management Act 1986) is a statutory law which provides for the employment of persons in the government public service. The PS(M) Act is

a complete employment Code of its own. In my view, quite clearly the PS(M) Act is a law which comes within the meaning of S.3(1)(b) of the Employment Act. Further there is nothing in the Employment Act which specifically provides for provisions of that Act to apply to a person employed under the PS(M) Act or vice versa. To the extent that the statement of the Supreme Court in Ereman Ragi applies to a public servant employed under PS(M) Act, the Court clearly erred. I would differ from the opinion of the Court in that case and hold that by virtue of S.3(1)(b) of the Employment Act, the Employment Act has no application to a person employed under the PS(M) Act. With respect, I would also dissent from the view of my two brother judges on this point. I would overrule the principles in Ereman Ragi on this point".

By virtue of S.3(1)(b) of the Employment Act, this Act applies to non-citizen expatriates employed by employers which do not come within the definition of "a public authority" in S.2 of the Public Employment of Non-Citizens Act. Also this Act does not apply to a non-citizen who is employed under any other statutory law. In the absence of such "any other statutory law", the Employment Act applies to all non-citizens as well as citizens employed in the private sector.

From the foregoing discussions, it is apparent that because Mr. Salter’s employment was governed by the Public Employment of Non-Citizens Act and the National Airline Commission Act, the Employment Act does not apply to Mr. Salter under the first exception in S.3(1)(b).

Similarly, under the second exception in S.3(1) of the Employment Act there is nothing in S.63 of the Employment Act, the Public Employment of Non-Citizens Act or the National Airline Commission Act which specifically imply accrued long service leave entitlements into his written contract of employment. For these reasons, we are of the view that the trial judge erred. We allow the appeal and quash the decision of the National Court.

In relation to the Common Rule, the same line of arguments were raised by counsel for the appellants as to the meaning of "under any other Act in force in Papua New Guinea". Mr. Griffin submits that the words "engaged" and "employed" in Schedule 2 mean the same thing. He submits that because Mr. McLaughlin was employed under the Employment of Non-Citizens Act, the Common Rule made under the Industrial Relations Act has no application to Mr. McLaughlin.

It is submitted for the respondents, in particular by Mr. Frank that the phrase "engaged under any other Act" in Schedule 2 refers to "any other Act" other than the Industrial Relations Act. It is submitted the Employment of Non-Citizens’ Act does not fall within the terms of this phrase because a non-citizen is not employed under this Act. The argument is that because there is no other Act under which a non-citizen employed by a statutory corporation such as Air Niugini is employed, Mr. McLaughlin was employed under the Industrial Relations Act and therefore, the Common Rule which is made under this Act applies to Mr. McLaughlin. Mr. Frank refers to number of provisions in the Industrial Relations Act, such as Sections, 11(1)(4) and 59(1)(3) to support his submissions. Mr. Enderson for Mr. McLaughlin was also adamant that this is the correct interpretation of the phrase "engaged under any other Act" in Schedule 2 of the Common Rule.

As we have already said, it appears that counsel on both sides are not familiar with the statutory regime which regulates the employment of non-citizens by a "public authority" as defined in Section 2 of the Public Employment of Non-Citizens Act insofar as the avenues for dealing with trade or industrial disputes is concerned. Clearly, by virtue of S.9 of the Public Employment of Non-Citizens Act, a non-citizen employed by a "public authority" such as Air Niugini has no recourse to the conciliation and arbitration procedure under the Industrial Relations Act. Section 2 of the Industrial Relations Act and Schedule 2 of the Common Rule are also clear on this point. That is, where a person is employed under any other Statute which provides a mechanism for resolving trade or industrial disputes, then the dispute resolution procedure prescribed in the Industrial Relations Act does not apply to that person. The National Airline Commission Act and the Public Employment of Non-Citizens Act expressly prohibit a non-citizen from utilizing the arbitration and conciliation procedure under the Industrial Relations Act to settle his trade or industrial dispute regarding his terms and conditions of employment. His remedy is in the common law.

Mr. McLaughlin was employed under the provisions of the National Airline Commission Act and the Public Employment of Non-Citizens Act. The next effect of these as against the provisions of the Common Rule under consideration is that, Mr. McLaughlin was not employed under the provisions of the Common Rule. The Common Rule under Schedule 2 specifically provides that the Award "applied to all persons employed in Port Moresby area except those employees employed under any other Act in force in Papua New Guinea (our emphasis). It is clear the Award did not apply to those employees who are or were employed under any other Act in force in PNG. Thus, in this case, as Mr McLaughlin was employed under the provisions of the National Airline Commission Act, and the Public Employment of Non-Citizens Act, the Award did not apply to him.

For these reasons we find that the trial judge also erred. We accordingly allow the appeal.

In summary, we find that the trial judges in both matters erred in law. We allow both appeals, quash the decisions the subject of these appeals and award costs of both appeals to the appellant.
_______________________________________________________________
Lawyer for the Appellants : Pato Lawyers
Lawyer for Geoffrey McLaughlin : Maladina Lawyers
Lawyer for Denis Salter : Gadens Lawyers

	Application
*(1)*		*Except where it is specifically provided otherwise, this Act does not apply to or in relation to the employment of a person— .....*
		(b) Under any other law in force in the country.(our emphasis)

Supreme Court of Papua New Guinea

Air Niugini v Salter [2001] PGSC 3; SC679 (9 November 2001)