Placer (PNG) Ltd v Kawa [2008] PGSC 12; SC919 (3 July 2008)

SC919

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 45 0F 2007

PLACER (PNG) LIMITED
TRADING AS PORGERA JOINT VENTURE
Appellant

V

ALOIS KAWA
Respondent

Waigani: Kapi CJ, Gavara-Nanu J, Cannings J
2008: 29 February, 3 July

LAW OF EMPLOYMENT – wrongful dismissal – whether an employee offered a redundancy package was forced to resign – whether forced resignation amounts to breach of contract – damages for wrongful dismissal.

The respondent was employed by the appellant and after two years of employment was offered a redundancy package. The respondent left the employer’s employment, claiming that he was forced to resign and wrongfully dismissed and that the employer’s conduct amounted to a breach of the contract of employment. He issued proceedings against his employer in the National Court and succeeded in establishing that he was wrongfully dismissed and obtained an award of damages of K1.5 million. The employer appealed to the Supreme Court on two principal grounds: (i) that the National Court erred in law in concluding that there had been unlawful dismissal and (ii) that the National Court erred in law in awarding an amount of damages that was excessive.

Held:

(1) There was insufficient evidence to conclude that the respondent had been forced to resign, the correct view of the termination of employment being that he had resigned in response to the redundancy package offered to him.

(2) Accordingly there was no breach of contract by the appellant and the finding of the National Court of wrongful dismissal was made in error.

(3) There was no basis for an award of damages.

(4) Obiter dictum: if the finding of wrongful dismissal had not been found to be made in error, the award of damages would have been set aside as it appeared to have been made arbitrarily without any basis in law.

(5) The appeal was accordingly allowed and the judgment and orders of the National Court quashed.

Cases cited
The following cases are cited in the judgment:
Boinamo Enterprises Limited v Michael Edwin Carey (2004) SC744
Felix Ramram v National Broadcasting Commission (1990) N1110
Gideon Barereba v Margaret Elias (2003) N2197
Robert Karava v Kevin Byrne (1999) N1805
Vitus Sukuramu v New Britain Palm Oil Ltd (2007) N3124

APPEAL

This was an appeal against a judgment of the National Court finding an employer liable in wrongful dismissal and awarding K1.5 million damages to the employee.

Counsel
I R Shepherd, for the Appellant
F Alua, for the Respondent

1. BY THE COURT: Dr Alois Kawa was employed by Placer (PNG) Limited as a medical officer at its mine clinic at Porgera in Enga Province in May 2000. He was promoted to the position of chief medical officer in December 2001. In September 2002 he was informed that due to a restructure of the clinic the position of chief medical officer would become redundant. Placer told him that he could continue to work as a medical officer without loss of benefits or accept a redundancy package. In October 2002, Dr Kawa left Placer’s employment.

2. Dr Kawa claims that the circumstances in which his employment was terminated amounted to a forced resignation as his position was made redundant and that he was wrongfully dismissed, contrary to his written contract of employment.

3. He issued proceedings against Placer in the National Court and succeeded in establishing that he was wrongfully dismissed. The trial judge, Los J, awarded him damages of K1.5 million.

THE APPEAL

4. Placer has appealed to the Supreme Court by a notice of appeal that contains 15 grounds, which can be boiled down to two principal grounds. First, that the trial judge erred in law in concluding that there had been unlawful dismissal. Secondly, that the trial judge erred when awarding damages and that the amount was excessive.

5. There are thus two issues to determine:

• Did the National Court err in finding that this was a case of wrongful dismissal?
  
• Did the National Court err in awarding damages of K1.5 million?
  

DID THE NATIONAL COURT ERR IN FINDING THAT THIS WAS A CASE OF WRONGFUL DISMISSAL?

6. Mr Alua, for Dr Kawa, submitted that the trial judge made no error of law when concluding that this was a case of forced resignation. Dr Kawa was retrenched, which was not provided for in his contract of employment. Placer restructured the positions in the mine clinic so that Dr Kawa would be surplus to requirements and would have to leave his employment prematurely.

7. Mr Alua submitted that, although his Honour may have made a poor choice of words – that Dr Kawa had been "hard done by" – and although his Honour may have incorrectly found that Dr Kawa’s salary was reduced – the guiding principles his Honour applied in concluding that this was a case of wrongful dismissal were sound.

8. We reject these submissions because, with respect to the learned trial judge, we have been unable to locate the principles his Honour used to draw the conclusion that this was a case of wrongful dismissal. His Honour’s judgment does not expressly address the question of whether there had been an unlawful dismissal. It does not weigh the competing arguments. His Honour appears, with respect, to have presumed that this was a case of wrongful dismissal and focussed on the amount of damages that should be awarded to Dr Kawa.

9. To the extent that his Honour, tacitly and obliquely, addressed the question of whether there had been a wrongful dismissal, his consideration of the issue was affected by a significant error in a finding of fact: that Dr Kawa’s salary was reduced when the clinic was restructured and his position was made redundant. That is incorrect as the evidence before the National Court shows that he was offered a choice: be employed as a medical officer without loss of benefits or take a redundancy package.

10. He opted for the latter and therefore the correct view of the termination of his employment is that he resigned. He was not terminated or sacked. It was not the employer that terminated the contract of employment.

11. His Honour’s finding that Dr Kawa was forced to resign therefore has no basis in fact or law.

12. His Honour made two other findings adverse to Placer, which are unwarranted by the evidence. At page 6 of the judgment, his Honour stated that the "contractual terms were disregarded and the employer’s attitude was that the plaintiff better get what is offered or nothing". At page 7, his Honour stated that "the circumstances here were deliberately created in order to penalise the plaintiff". His Honour did not explain which terms of the contract were disregarded (and we have been also unable to identify any).

13. We consider that it is inaccurate to describe Placer’s position as being that Dr Kawa should "get what is offered or nothing" as it was never the case that he was offered nothing. His Honour did not explain how Dr Kawa was penalised. Those findings appear to be a reflection of his Honour’s erroneous finding that Dr Kawa’s salary had been cut.

14. We have carefully considered Mr Alua’s submissions, on behalf of Dr Kawa, which try valiantly to elaborate on his Honour’s process of reasoning. We endorse Mr Alua’s description of the term ‘wrongful dismissal’, as:

describing a situation in which an employee’s contract of employment has been terminated by the employer in circumstances where the termination breaches one or more terms of the contract of employment ...

15. That is, a claim for wrongful dismissal is best regarded as an action in which the dismissed employee seeks damages for breach of contract (Vitus Sukuramu v New Britain Palm Oil Ltd (2007) N3124).

16. However, we have not been informed, either through the judgment of the trial judge or through the respondent’s counsel’s submission, what terms of the contract of employment were breached. If it is an express term of the contract that is relied on, it has not been brought to this Court’s attention. If it was an implied term, we have not been informed what term is to be implied, why it should be implied or how it was breached.

17. We have examined the written contract. It was for an indefinite period, subject to a termination clause (No 18), which stated:

This contract of employment may be terminated by the giving of four weeks notice by either party, or by the Company without notice on payment of four weeks salary. In the event of a severe breach of Company Policies, employment may be terminated without notice and without payment of four weeks salary.

18. We note that Placer actually paid Dr Kawa six weeks money in lieu of notice, which was more than the four weeks they would have had to pay if they had terminated his employment. His final pay – representing what Placer described as his "redundancy package" – was K16,676.79. We consider that there was no breach of contract in that respect by Placer.

19. We therefore conclude that the trial judge erred in law in finding that Dr Kawa had established a cause of action for wrongful dismissal. We can find no basis in law for such a finding.

DID THE NATIONAL COURT ERR IN AWARDING DAMAGES OF K1.5 MILLION?

20. In view of our ruling on the question of liability it is not necessary to address the assessment of damages. It is sufficient to observe that the calculation of K1.5 million appears to have been based on the flawed assumption that the employee, Dr Kawa, should be compensated for deprivation of salary for a period of 15 years, representing the 15 years he still had to complete on his contract. His Honour appears to have upheld a submission that because it was a contract for an indefinite term, its unexpired period was to be calculated by deducting the employee’s age (50 years) from the age of retirement (65 years).

21. We have great difficulty seeing merit in that proposition, given the existence of a termination clause that said either party could terminate the contract on four weeks notice. As Doherty J and Sevua J correctly pointed out in Felix Ramram v National Broadcasting Commission (1990) N1110 and Gideon Barereba v Margaret Elias (2003) N2197 respectively, there is no automatic right to continuous employment or damages for early termination of contracts that are not for a fixed term.

22. There are a number of cases that suggest that when assessing damages for wrongful dismissal the amount is restricted to the value of salary that would have been earned during the notice period, eg Robert Karava v Kevin Byrne (1999) N1805 and Boinamo Enterprises Limited v Michael Edwin Carey (2004) SC744.

23. In this case that period was four weeks. His Honour departed from that principle substantially and failed, with respect, to explain his reasons or the authority for doing so.

24. If we had not decided that the finding of wrongful dismissal was made in error, we would have set aside the award of damages as it appears to have been made arbitrarily without any basis in law.

ORDER

25. We will make the following order:

(1) the appeal is allowed;

(2) the judgment and orders of the National Court are quashed;

(3) The respondent shall pay the costs of these proceedings to the appellant on a party-party basis, to be taxed if not agreed.

Judgment accordingly.

_____________________
Blake Dawson Waldron: Lawyers for the Appellant
Harricknen Lawyers: Lawyers for the Respondent