Central Bank of Papua New Guinea v Tugiau [2009] PGSC 50; SC1013 (22 December 2009)

SC1013

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 29 OF 2007

BETWEEN:

THE CENTRAL BANK OF PAPUA NEW GUINEA
Appellant

AND:

GABRIEL TUGIAU
Respondent

Waigani: Kirriwom, Kandakasi and Batari JJ.
2008: 27th February
2009: 22nd December

EMPLOYMENT LAW – Contract of employment – Unwritten contract but governed by staff hand book – Terms and conditions – Dispute as to – Terms and conditions – Entitlements claimed outside any specific agreement and staff handbook not terms of the contract - Dispute as to relevant period of notice – Contract silent – Applicable period of notice as prescribed by the Employment Act s. 34 (3) and (4) and relevant measure of damages - Employer calculated paid final termination entitlements and accepted by employee – Effect of – No outstanding entitlements – Damages assessed beyond notice period prescribed by the Employment Act amounting to penalty.

DAMAGES – Assessment of – Damages for unlawful termination of employment – Relevant measure of damages – Period of notice before termination as prescribed by the Employment Act in the absence of any agreement of the parties – Any assessment beyond prescribed period of notice illegal and amounting to penalty for termination.

DAMAGES – Claims for psychological effects, stress, embarrassment, shame and defamation reputation and character following alleged unlawful dismissal – Need for proper foundation in pleadings and evidence of such loss in fact being suffered – Lack of proper pleadings and proof of – No basis to assess and allow any damages.

Cases Cited:

Motor Vehicles Insurance Limited v. Maki Kol (2007) SC902.
Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370.
Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694.
Nazel Wally Zanepa v. Ellison Kaivovo & Ors (1999) SC623.
Ereman Ragi & The POSF Board v. Maingu (1994) SC 459.
Teio Raka Ila v. Wilson Kamit, Governor of Bank of Papua New Guinea and Bank of Papua New Guinea (2002) N2291.
Legu Vagi v. National Capital District Commission (2002) N2280.
Gideon Barereba v. Margaret Elias (2002) N2197.
Rooney v. Forest Industries Council & Anor [1990] PNGLR 407.
Felix T. Ramram v. National Broadcasting Commission & Ors, (1990) N1110.
Re Isaac Lupari v. The State (2008) SC930.
Young Wadau v. PNG Harbours Board (1995) SC 489.
Post Puma Ltd v. Yama Security Services Ltd (unnumbered judgment 26/07/01) SCA No. 80 of 2000.
Teio Raka Ila v. Wilson Kamit & Bank of Papua New Guinea (2002) N2291.
Wilson Thompson v. National Capital District Commission (2004) N2686.
Boinamo Enterprises Limited v. Michael Edwin Carey (2004) SC744.
Robert Karava v. Kevin Byrne and Tourism Promotion Authority (1999) N1805.
Fly River Provincial Government v Pioneer Health Services Ltd (24/03/03) SC705.
Tian Chen Limited v. The Tower Limited (20/01/03) N2319.
Papua New Guinea Forest Authority v. Concord Pacific Ltd (No 2) (12/09/03) N2465.
Peter Aigilo v. The Independent State of Papua New Guinea (2001) N2102.

Counsel:

I. Shepherd, for the Appellant
J.B. Nanei, for Respondent

22nd December 2009

1. BY THE COURT: The Appellant Bank is appealing against an assessment of damages in favour of the Respondent, Mr. Gabriel Tugiau for loss of employment income for 3 years at K72, 000.00, leave, vehicle and housing allowances at K20,000.00 and stress, anxiety and loss of reputation at K50,000.00. The Bank says, this assessment amounts to a penalty which has no foundation in law. Further in relation to the leave, vehicle and housing allowances, the Bank says those were not part of Mr. Tugiau's contract of employment. As for the damages for stress, anxiety and loss of reputation, the Bank says Mr. Tugiau did not make a case for such awards. Therefore, the learned trial judge erred in the assessments he arrived at.

2. Of course, Mr. Tugiau is opposing the appeal and says the National Court did not fall into any error when it made the various awards in his favour. Accordingly, he argues for a dismissal of the appeal.

Relevant Issues

3. From the arguments of the parties the issues for us to determine are clearly these:

(a) Did Mr. Tugiau suffer any damages?

(b) If the answer to the first question is in the affirmative, what is the measure of his damages?

(c) Did the contract of employment between the parties provide for leave, vehicle and housing allowances?

(d) If the answer to question (c) is in the affirmative, which of the allowances were due and owing to Mr. Tugiau and in what amounts?

(e) Did Mr. Tugiau make out a case for the award of damages for stress, anxiety and loss of reputation?

(f) If the answer to question (e) is in the affirmative, what is the appropriate measure of his damages?

(f) Is the award of damages for loss of income for 3 years effectively a penalty?

4. We deal with each of these issues in the order they are presented. But before doing so, it will be necessary to have some understanding of the background to this appeal to give proper context to a consideration of the issues and their determination. Accordingly, we first turn to a consideration of the background.

Background

5. The Bank, which is a public institution, terminated its employment of Mr. Tugiau under an unwritten contract of employment but clearly governed by a Staff Handbook. The termination was allegedly over some missing numismatic notes representing K64,680.00 in value. At the time of the termination, the Bank worked out Mr. Tugiau's termination entitlements based on a salary of K16, 081 per annum, which added up to K10, 917.19. After allowing for tax and other deductions he was paid a net of K7, 015.85, which he accepted on 13th September 1994.

6. Subsequently, however, Mr. Tugiau was not happy and he sued the Bank for reinstatement and other relieves including, various heads of damages for unlawful dismissal. Following the Bank's failure to give discovery, the Court entered judgment for Mr. Tugiau which included an order for reinstated. That came after 7 years and 2 months from the date of his dismissal. However, Mr. Tugiau did not resume his employment with the Bank as he had already secured alternative employment with Air Niugini Savings and Loans Society, after 1 year 7 months from the date of the termination of the contract. So he chose instead to sue for damages for wrongful dismissal. Accordingly, the matter proceeded to an assessment of damages hearing after which, the National Court arrived at the decision, the subject of this appeal.

Did Mr. Tugiau suffer any damages?

(a) Relevant Principles of law on Assessment of damages

7. Duly noting the background as we have just outlined, we turn to a consideration of the first issue of did Mr. Tugiau suffer any damages. It is necessary to first remind ourselves of principles governing an assessment of damages as recently stated by this Court in its decision in the matter of Motor Vehicles Insurance Limited v. Maki Kol,[1] in the following terms:

"Generally speaking, a desire to compensate one's loss and suffering is at the very core of the whole body of law governing the assessment of damages, be it for a breach of contract situation or personal injuries. Usually, the law looks at awarding damages in monetary terms not more or not less than what has actually been suffered or lost. Lord Blackburn in Livingstone v. Rawyards Coal Co ... formulated the classical and often quoted principle in the following terms:

'where any injury is to be compensated by damages, in settling the sum of money to be given for ... damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation.'

In time, this principle has become known as the principle of restitution in integrum."

(b) Relevant Facts

8. It is therefore appropriate that we have started with the question; did Mr. Tugiau suffer any damages? This is a question that turns on the relevant facts and or background to the action. As we have already noted, the Bank and Mr. Tugiau were in a relationship of employer and employee or master and servant for a period of 15 years, one month, one week and 4 days. The Bank terminated its employment of Mr. Tugiau, over some missing numismatic notes valued at K64,680.00 However, in separate proceedings against the Bank by another officer Mr. Andrew Saige, the Court found that the notes in question went missing in Mr. Saige's office. He had the keys to a box that contained the notes. The Court found that Mr. Saige was in a position to explain what become of the notes but did not. Consequently the court found he was responsible for its loss or theft.

9. At the time of termination, the Bank worked out Mr. Tugiau's termination entitlements which added up to K10, 917.19. After allowing for tax and other deductions including the repayment of a loan, he was paid a net of K7, 015.85, which Mr. Tugiau accepted and signed for on 13th September 1994. Later however, Mr. Tugiau sued the Bank for unlawful dismissal.

10. Following the Bank's failure to give discovery, the Court entered judgment for Mr. Tugiau which included an order for reinstated. However, Mr. Tugiau decided not to resume his employment with the Bank as he had already secured alternative employment. He therefore, chose instead to sue for damages for wrongful dismissal and gave up the order for reinstatement. That effectively meant that Mr. Tugiau voluntarily either terminated or resigned from his employment with the Bank.

11. Given the position Mr. Tugiau took he was under an obligation to properly plead and then establish by appropriate and credible evidence, what his entitlements were under his contract with the Bank, how much of that he received up to the date of his termination and how much was due and owing from the Bank. Further in the light of his acceptance of the payout soon after his termination, he was under an obligation to plead and demonstrate the basis for claiming further damages.

12. In his pleadings, Mr. Tugiau claims in this way:

"(a) he was on a salary of K16, 081.00 per annum;

(b) various leave entitlements;

(c) accommodation and vehicle allowances;

(d) a total of K3,650.00 in special damages; and

(e) damages for psychological effects, stress, embarrassment, shame and defamation of his good reputation and character."

(c) Principles on Pleadings

13. Except for the special damages totaling K3,650.00, Mr. Tugiau did not plead with any particularity any of the other parts of his claim. The law requires proper pleadings with particulars before any claim or prayer for relief can be granted. For as this Court said in Motor Vehicles Insurance (PNG) Trust v. James Pupune,[2] pleadings with particulars have the useful function to:

"1. furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it;

2. define the issues for decision in the litigation and, thereby, enable the relevance and admissibility of evidence to be determined at the trial; and

3. give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court."

14. Parties who have failed to observe this requirement of the law have seen their claims disallowed or dismissed. One of the latest examples is the decision of this Court in Papua New Guinea Banking Corporation v. Jeff Tole.[3] There the plaintiff claimed and the National Court allowed for certain damages not properly pleaded. On appeal the Supreme Court disallowed those damages because of the lack of pleadings with particulars.

(d) Pleadings and Evidence

15. In the present case, in addition to the lack of proper pleadings with particulars, Mr. Tugiau did not adduce any credible evidence in support of his claim save only for his salaries and someone else, Mr. Andrew Saige being responsible for the missing numismatic notes. The Bank did not take any issue with this particular aspect of Mr. Tugiau's claim. Indeed evidence for the Bank confirms that, Mr. Tugiau was on a salary of K16,081.00 per annum as at the time of his termination and the Bank calculated what was due and owing on that basis before paying him is final entitlements. As for the allegations for stealing the numismatic notes, Mr. Tugiau produced a copy of a judgment of Sevua J., finding Mr. Andrew Saige being responsible. The Bank made no apologies and short to make amends with Mr. Tugiau after Seuva J.'s decision by having him reinstated.

16. As for his other heads of damages, Mr. Tugiau was required to, but he did not personally provide any evidence in support of them. He would have easily put into evidence a copy of his letter of engagement or appointment and or any written confirmation of the terms and conditions of his employment including amongst others, a copy of his last pay slip which could have confirmed the kind of salaries and entitlements he was receiving as at the time of his termination. Instead, Mr. Tugiau relied on an affidavit from a Mr. Kapinas Polo who was a former employee of the Bank, who calculated Mr. Tugiua's entitlements on the basis of the witness' own experience and knowledge. That witness did not refer to and rely upon any source material or evidence forming the foundation for the kind of figures he allocated to various heads of Mr. Tugiau's damages, before arriving at an alleged net loss of K850,197.38. That figure included damages for defamation, stress and shame at K70,00.00 each without any supporting evidence. In much the same manner, the witness allowed for normal salary at K611,721.00 and a whole lot of other heads of damages to arrive at the net after tax total of K850,197.38.

17. Apart from only a discloser that, Mr. Polo was a former salaries officer in the employ of the Bank, he produced no evidence of his qualifications and other experience, if any to give him the authority and the basis to calculate Mr. Tugiua's damages in the way he did. Simply there was no evidence of Mr. Polo being an expert in the calculation of damages in the way he did. Despite that, he readily allocated K70,000.00 each for defamation and for stress and shame without more. Only a properly qualified and experience lawyer could give a view on what ones damages might be based amongst others on comparable verdicts or cases on point. There is no evidence of Mr. Polo's qualification and experience as a lawyer and reference to any case law forming the foundation for his allocation of K70,000.00 each for defamation and shame and stress. It is clear to us that, the witness has clearly demonstrated his willingness to say and do anything for Mr. Tugiau even if that was outside his qualification and experience and there was no evidentiary or legal basis for it. He was clearly prepared to exaggerate, speculate and inflate Mr. Tugiau's claim without any factual or legal foundation. He was certainly an unreliable witness who was prepared even to assume the role of a lawyer or a judge as demonstrated in his allocation of the various figures to various heads of damages. Hence, nothing he said could be of any value to anyone.

(e) Answer to the Question – What are Mr. Tugiau's damages?

18. Based on Mr. Tugiau's pleadings and the evidence that were placed before the learned trial judge, we are of the view that, as at the time of his termination by the Bank, Mr. Tugiau did not suffer any damages. The only exception to this might be the fact that, the Bank terminated Mr. Tugiau on what appears to be a false claim of Mr. Tugiau stealing numismatic notes totaling K64,680.00, which the National Court subsequently established another person, Mr. Andrew Saige was responsible for. If Mr. Tugiau suffered any other damages, the onus was on him to demonstrate that by credible evidence. The evidence he produced in Court lacked any clarity any credibility as to what he was entitled to receive and did not receive prior to or at the time of his termination.

19. The evidence does show that, the Bank calculated what it considered were properly due and owing to Mr. Tugiau and offered to pay him that much. Also the evidence clearly shows that, Mr. Tugiau acknowledged the correctness of the Bank's calculations when he accepted the payment. His acceptance of the payment was unconditional. That effectively released the Bank of any further claims. Notwithstanding this, the learned trial judge made various awards of damages. This would appropriately lead us to consider the question of whether the various awards by the learned trial judge were penalties which can not be upheld.

(f) Awards by trial Judge – Were they penalties?

20. The learned trial judge noted Mr. Tugiau's annual salary of K16,081.00. At the same time, the learned trial judge noted an estimated annual salary of K30,422.24 in 2001 with CPI adjustments and decided to accept K24,243.31 as an estimate for 1998. His Honour then multiplied that by 3 years and arrived at the figure of K72,729.93. As for the other parts of Mr. Tugiau's claim, His Honour said:

"For 3 years, the plaintiff would have been entitled to leave entitlements, a motor vehicle allowance and housing allowance. For all those I would round the award to K20,000.00 for 3 years. I have arrived at that figure from the estimates shown on the Annexure B of the plaintiff's submission.

In relation to distress and anxiety I will award him K50,000.00. I come to that figure on the basis of the award in the case of AIGILO V. THE STATE AND TWO OTHERS. It was submitted in Mr Aigilo's case he showed evidence of becoming sick. However loosing ones job on suspicion of being a thief and consequently being terminated from work on that suspicion is something to be stress about and to a large extent one will loose face in the organization one is employed in. The proper thing in those circumstances was to suspend the officer and investigate the matter. If it is proven that the person stole the thing, then there is cause for termination. In this case the plaintiff was terminated for something he did not do. He lost his employment and his standing in the Bank for which he worked for over 15 years. For those reasons, I award him K50,000.00 for stress, anxiety and loss of reputation in the Bank and his peers."

21. When one comes to deal with an unlawfully terminated or dismissed employee's damages, the measure of damages is usually by reference to the period of notice for termination, for terminations prior to the agreed end of the contract. This follows on from the clear position at law that a contract can be terminated lawfully only in two ways prior to the agreed end of the contract. First is for cause or good reason in which case, no damages or compensation is payable. The second is on reasonable notice or pay in lieu of notice. That is why nearly all contracts of employment have provisions on termination in these terms. [4]

22. In this case, Mr. Tugiau did not have a written contract with the Bank. They were in an informal contract of employment but subject to a Staff Manual. This mirrors the employment setting in the Public Service, where there is no certainty in relation to the period of employment of the various contracts of employment for people in the Public Service. This has given rise to phrase like "employment for life" or "employed up to the compulsory period of retirement" which is at age 65.

23. In Gideon Barereba v. Margaret Elias,[5] (which was referred to and the learned trial judge considered briefly), Sevua J, examined the kind of employment setting we have just described. In so doing, his Honour had regard to the decisions in Rooney v. Forest Industries Council & Anor[6] and Felix T. Ramram v. National Broadcasting Commission & Ors,[7] and noted as at the time of his decision that, there were two different views on assessment of damages, respectively represented by those cases.

24. The decision in Rooney's case represents one view which says an unlawfully dismissed employee is entitled to damages and other benefits for the balance of the contract where the contract is for a fixed term. On the other hand, the decision in Ramram's case, says "[t]here is no automatic right to continuous employment or damages for early termination in contracts of employment that are not for a fixed term."

25. Sevua J agreed with the latter view and said:

"If I were to permit that, [employment for life or up to retirement] I would be sanctioning a meal ticket for life and a free ride for life for the plaintiff, and for other litigants in the same boat: I consider that the proper approach to assessing damages in this case is that taken by Doherty, J in Ramram's case. There, the Court adopted the statutory guide of four weeks notice in the Employment Act, Chapter 379, as a guideline to assess damages. Her Honour considered that period of notice together with a claim for damages for eight years and used her discretion to assess the equivalent of three months wages at the value payable to the plaintiff at the time of his dismissal, and Her Honour concluded that to be reasonable, given the plaintiff's period of employment. I am of the view that that is a sensible and fair approach especially in the Public Service type open-ended contract."

26. His Honour, said at the same time that, no hard and fast rule can be laid because His Honour was of the view that, an assessment of damages following dismissal depends on many factors. Therefore, His Honour said each case must be left to be judged on its own facts. He went on to say that, the total period of employment prior to termination is a relevant factor.

27. After having regard to the decision in the Ramram case, Sevua J., noted Mr. Barereba was employed for twenty four years and was claiming loss of salary for fourteen years. He also noted that, following his dismissal, Mr. Barereba, appealed to Public Service Commission which took almost ten years before the final response. In those circumstances, in considering whether a three months wages or a twelve months salary should be accepted, His Honour took into account the period of employment and said a period of three months or even 12 months would be unreasonable and decided to allow for 5 years.

28. It is now well recognized that, a person can be employed in the public service either under a written contract of employment or under an unwritten contract or a mixture of both. When a dispute arises in relation to the terms and conditions of employment in the public service, one must turn to the contract, if the employment is under a written contract. If the employment is under an unwritten contract, one must turn to the normal public service terms and conditions of employment.

29. Recently, the Supreme Court reaffirmed this position in Re Isaac Lupari v. The State.[8] There the Court reviewed the cases on point up to the date of its decision dealing with employment in the public service. There the Court had particular regard to the decision of the Supreme Court in Ereman Ragi v. Joseph Maingu[9] and Young Wadau v. PNG Harbours Board[10] and noted correctly that:

"The two Supreme Court decisions in Ereman Ragi v. Joseph Maingu (supra) and Young Wadau v. PNG Harbours Board (supra) support the proposition in the case of a public servant employed under a contract that, unless there is express provision for the application and continuation of a public servant's rights and privileges including, the public service disciplinary process and the right to judicial review of decisions affecting them, they do not apply. There is no conflict in these two decisions of the Supreme Court."

30. It is now also clear law that, there is no entitlement to such a relief called "balance of contract" especially where the parties' employment relationship is governed by written contract of employment. This is because the main reason for awarding damages is to compensate a plaintiff for his actual loss, which is usually expressed technically in terms of restitutio in intergrum. But that is subject to a plaintiff's obligation to mitigate his loss and provided also that the kinds of damages he is asking for are not too remote.

31. The Supreme Court in Post Puma Ltd v. Yama Security Services Ltd,[11] first expressly held that contracts which provided for a payout of the balance of the contract if the contract is terminated earlier, amounts to penalties. As such, the courts will not uphold such a clause because apart from them not fixing an actual loss, they go against the basis on which contracts exist, namely the freedom of the parties.

32. Kandakasi J., had regard to that judgment and followed it in another termination of employment case involving the Bank. That was in the case of Teio Raka Ila v. Wilson Kamit & Bank of Papua New Guinea.[12] There His Honour held that a provision providing for a payout of the balance of the plaintiff's contract was null and void and therefore unenforceable. His Honour referred to the relevant provision of the contract and said:

"I find this is in effect a penalty provision. Through this provision, Mr. Ila is saying to the Bank you are not entitled to terminate me anytime before the agreed end of my contract for reasons other than good cause. But if you do, you will pay me the balance of my contract.

The law is as was stated ... in Post PNG Ltd v. Yama Security Services Ltd ... at pp. 4-5 that:

'Damages in contract are awarded to compensate a party for loss or injury not to penalise. Damages are awarded to put the injured party in the same position, as it would have been had the contract not been breached, and it is the duty of the Court to satisfy itself that a sum to be held over a party to enforce a contract. A Plaintiff claiming under a contractual provision for liquidated damages must show that the agreement represents a genuine pre estimate by the parties of the actual loss that will be occasioned if the contract terms are met. But if the provisions can be seen to be essentially a threat over a party to secure performance of the contract, the provision will be a penalty and unenforceable.

Courts have long held that because the purpose of a penalty is to ensured compliance rather than to truly compensate, agreements for sums found to be penalty will not be enforced, and the party claiming damages will be properly and adequately compensated by an award of actual assessed loss. Further, if there be provision in an agreement for a sum or sums payable on breach wholly out of proportion to the breach. (sic) The Courts will hold such provision a penalty, as unconscionable, and unenforceable. 'A Plaintiff cannot recover the sum stated in a contract if he has not in fact suffered such loss.' (Law of Contracts Cheshire & Fifoot 2nd Edn 767).''

The Court then went on to say that a Court dealing with a contract having such a provision has the duty to:

'... inquire into the matter and determine whether the provision in the contract represents a genuine pre-estimate of the damages that will occur in the event of breach, as opposed to whether the sum designated is in reality a penalty to be imposed if the contract is not carried through.'"

33. His Honour went on to note that, the Courts in our country have upheld contracts having provisions for a pay out of the balance of the contract as in the Rooney case. But those were cases in which the issue of whether such provisions amounted to penalties or were a genuine estimate of the anticipated damages did not arise. The Courts have also allowed for the balance of the contract where such loss has been limited to a shorter period of the unexpired period. As his Honour noted, the judgment of Supreme Court in Papua New Guinea Banking Corporation v. Jeff Tole,[13] is a case on point.

34. PNGBC v. Jeff Tole re-echoed the above position though not expressly. There the Court upheld an appeal against an award of damages for the balance of a contract of employment terminated prior to the agreed date of termination. The relevant provision of the contract made provision for a pay out of the balance of the contract or 12 months which ever of the two were lesser. There PNGBC, terminated Mr. Tole 1 year 8 months before the agreed period of termination. The National Court awarded damages for the full balance of the contract. This Supreme Court found that was erroneous and allowed for damages for 12 months as agreed to by the parties.

35. All of these proceeded on the basis that the only true measure of damages is the amount of wages actually lost or denied. This is usually by reference to the relevant period of notice as agreed to by the parties or imposed by law. They also take into account the fact that a plaintiff is under an obligation to mitigate his loss which includes securing alternative employment. In the Wilson Thompson v. National Capital District Commission[14] the National Court provided some guidance on how to assess damages by reference to the relevant period of notice. There the Court said:

"...the law does look up to the period of notice to measure an unlawfully terminated employee's damages. The relevant period of notice is the one the contract provides for or one imposed by legislation such as the Employment Act in the absence of any agreement of the parties to the contrary. A number of cases in this jurisdiction confirm that position. An example of that is the case of Appa v Wama [1992] PNGLR 395 where the Court said at p. 397:

'It is a general rule that the employee wrongfully dismissed can recover damages for pecuniary loss resulting from wrongful termination up to the equivalent of appropriate notice. In the usual case, damages will be equivalent to wages for the period of proper notice.'"

36. This was a correct application of what has always been the law as represented by the decision of the Supreme Court in Boinamo Enterprises Limited v. Michael Edwin Carey.[15] There the Court said:

"The law in this regard was settled by this court in Ereman Ragi and the POSF Board v. Maingu (Unreported Judgement of the Supreme Court dated 29th June, 1994, SCA 459) and confirmed in Naged Wally Zarepa v. Ellison Kauvo & Ors (Unreported Judgment of the Supreme Court dated 29 November, 1999, SC 623). As the Respondent was unlawfully terminated and the termination was outside the terms of the employment contract we are of the view that, the provisions of the Employment Act should then apply.

In that regard we think that the provisions of s.34(4) of the Employment Act apply.

...

In this case the Respondent worked for only 4 months. He should, therefore according to s.34(4) of the Employment Act, have been given only one week notice or 1 week pay in lieu of notice. The learned trial judge's reasons for awarding 5 months damages was done on what he thought was fair and reasonable. We are of the view that after he correctly ruled that the respondent was unlawfully terminated he ought to have assessed the respondent's damages under the Employment Act. With respect we are of the view that the learned trial judge erred in awarding damages of 5 months."

37. It should reasonably follow that, where an employer correctly assess and pays his dismissed employer damages in lieu of notice and all other entitlements due and owing to the employee as at the time of his dismissal, there can be no additional award. The National Court's decision in Robert Karava v. Kevin Byrne and Tourism Promotion Authority[16] confirms this point. There, the relevant contract did not provide for the period of notice. In the circumstances, the Court applied the provisions of the Employment Act and found that the plaintiff received payment in lieu of notice. Consequently, the Court declined to make any award of damages and dismissed the action.

38. In this case, as noted, the Bank and Mr. Tugiau were in a relationship of employer and employee for a period of 15 years, one month, one week and 4 days. Their employment relationship was not under a written contract but governed mainly by a Staff Manual. The Staff Manuel at page 169 makes provision for an employee to give two weeks notice before resigning. At page 177 the Manuel also provides for the employer to terminate the services of an employee for disciplinary reasons. Depending on the type of disciplinary offence an employee commits, the employee's termination can be immediate, which means termination without prior notice or warning. There is however no clear provision for termination by the Bank for any other reason.

39. Section 34 (3) and (4) of the Employment Act are relevant. They stipulate in these terms:

"(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."

40. On one interpretation, it is open to say on the basis of subsection (3) that, to the extend that the Staff Manuel allows for a two weeks notice period for an employee before resigning or leaving the employ of the Bank, the Bank could also be entitled to give two weeks notice before termination or pay in lieu of notice. At the same time, it is open to say that since the parties do not have a written contract of employment subsection (3) does not apply. That would pave the way for subsection (4) to apply.

41. Subsection (4) provides for minimum periods of notice where there is no clear provision on termination in the parties' contract. This starts from a low of 1 day's notice for employment for not less than 4 weeks and up to a maximum of 4 weeks notice for a period of employment that is 5 years or more. This in our view means that, unless the parties to an employment contract agree otherwise as to the period of notice before termination, the minimum periods of notice under s. 34 of the Employment Act apply. That means parties can allow for other notice periods provided they do not amount in effect to a penalty clause.

42. The contracts in Gideon Barereba, Nahau Rooney and Felix T. Ramram line of cases, were silent on the issue of notice before termination. That paved the way for the application of the provisions of s.34 of the Employment Act. However, the National Court decisions effectively allowed for notice periods beyond the provisions of s. 34, and in so doing they have written into the parties' contract, notice periods without the parties' expressed agreement and outside the provisions of the Employment Act. These line of cases also go against the now well established law that, the Court's function in contracts is to look for the intention of the parties expressed in their contracts and uphold them in so far as is possible. It is not however the function of the Courts to re-write or otherwise, write the parties' contract. This has been made clear in a good number of Supreme and National Court judgments.[17] In the circumstances, we are of the view that the Gideon Barereba, Nahau Rooney and Felix T. Ramram line of cases do not correctly represent the law and as such, they should not be followed.

43. There is a further reason not to follow the Gideon Barereba, Nahau Rooney and Felix T. Ramram line of cases. That has to do with a fair and consistent administration of justice. We do not consider the current state of affairs in the area of assessment of damages for wrongful or unlawful dismissal cases as fair and satisfactory. In order to be fair, the law needs to be consistent in its application to all unlawful or wrongful dismissal cases.

44. In our view it is not right that, provisions of a payout of the balance of contracts for early termination of written contracts of employment be struck down on grounds of such clause amounting to a penalty and at the same time, allow for more notice periods well outside the provisions of s. 34 (4) of the Employment Act were the parties' contracts are silent on the issue of notice. This scenario allows for a perception that, people who enter into written contracts stand the risk of being given lesser notice periods and lesser damages compare to those in unwritten contracts of employment who can be allowed longer notice periods and more damages. This is highly discriminatory and unfair without good reason. As such, it cannot be allowed to continue. In a free economy such as ours, the Courts should continue with the attitude of allowing the parties' free agreement in due recognition and compliance of law to prevail and the Courts should exercise more care and ensure to avoid rewriting contracts for the parties.

45. We do appreciate that the Gideon Barereba, Nahau Rooney and Felix T. Ramram line of cases have thought it was not fair for an employee who has been in continuous employment of a particular employer for much longer periods than 5 years to be entitled to one month's notice or pay in lieu of that. We agree that the minimum notice periods provided for in s.34 may be most unfair particularly in cases where one has been in continuous employment for say 10 years or even 15 years or more as in this case. However, Parliament having considered all things has set a minimum standard if the parties are not able to otherwise provide for in their contracts. We do appreciate that in some cases, given the might of an employer and or an unfavorable job market, prospective employees might not be able to negotiate for better notice periods. That is no reason for the Court to go outside the bounds or limits of s.34 of the Employment Act. Rather, it is a matter within Parliament's prerogative to have the law changed to allow for more notice periods in cases of continuous employment for periods beyond 5 years. Until such changes come through, the duty is on employees to negotiate for better notice periods and the Courts have the duty to uphold all reasonable and free agreements of the parties within the confines of the law and not to re-write them.

46. Applying what we have just stated to the present case, we are of the view that the learned trial judge erred in effectively allowing for a notice period of three years. It effectively amounts to a penalty against the Bank merely for terminating Mr. Tugiau. We would therefore set aside the award of K72, 729.93. This is particularly the case for four reasons. The first and the second are simply this; (1) the parties did not provide for a 3 years notice period or pay in lieu thereof in their contract; and (2) the allowance was beyond the provisions of s. 34 (4) of the Employment Act.

47. The third reason is this. The National Court had earlier granted Mr. Tugiau an order on his application for reinstatement to his former employment with the Bank. From the date when the National Court made those orders, Mr. Tugiau was effectively back in the employment of the Bank. He was thus, entitled to receive what he was entitled to receive under his then contract with the Bank. However, Mr. Tugiau made a deliberate decision not be reinstated and instead pursued his claim for damages for wrongful dismissal as he had already secured alternative employment. This had the effect of Mr. Tugiau deciding to terminate his employment with the Bank because he was already in alternative employment. In the circumstances, and if at all, he could have suffered damages for the period he was kept out of employment by the Bank which is 1 year 7 months and not on account of lack of notice. Allowing for damages beyond that period has the effect of the Court penalizing the Bank for merely terminating Mr. Tugiau and not for any damages in fact suffered by Mr. Tugiau. The learned trial Judges decision with respect had no foundation in law and in fact. This was the case, because the Court had earlier rectified the issue of termination by ordering Mr. Tugiau's reinstatement.

48. Further at the trial, Mr. Tugiau did not adduce any evidence of what if any damages he suffered in terms of any salaries and other entitlements despite having secured the alternative employment. If for instance, he was receiving salaries and other entitlements any less or lower than what he received under his former employment with the Bank, he could be entitled to the difference but subject to the law in relation to notice before termination, as we have discussed and clarified in the foregoing, Mr. Tugiau laying foundations in his pleadings and establishing it by appropriate evidence. The learned trial judge refers to Mr. Tugiau receiving K280.00 from his employment with Air Niugini Savings and Loans Society. But it is not clear whether that figure is a fortnightly, monthly or annual. There is also no evidence supporting any such finding.

49. The fourth and final reason for our saying the learned trial judge fell into error is this. The amount of K24,243.31 for loss salary was merely a figure the learned trial judge picked from an estimate of K30,422.24 which Mr. Tugiau would have received in 2001 with Consumer Price Index adjustments. Nothing in these terms by way of evidence came from Mr. Tugiau. Only the highly, inflated and speculative evidence of his witness Mr. Polo spoke in those terms. At the trial, Mr. Tugiau produced no official documents or evidence regarding CPI adjustments to salaries either generally or for employees of the Bank if not specifically for Mr. Tugiau demonstrating such adjustment being allowed and consistently applied and at what rates and intervals. Simply put no credible foundation was laid by Mr. Tugiua for the award. But the Bank's evidence in the form of the Staff Manuel does provide for pay increases. However, they are conditional on performance appraisals and good reports. Mr. Tugiau did not produce any such evidence.

50. This leaves us to now turn to a consideration of the award of K20,000.00 in leave, motor vehicle and accommodation allowances. The first point we make is that, the Bank calculated and paid Mr. Tugiau his accrued leave entitlements. If he was entitled to more despite having accepted the banks calculations and payment on that basis, it was incumbent on him to specify each of the accrued leaves and the relevant monetary value in lieu of leave.

51. Secondly, we note that Mr. Tugiua did not adduce any evidence of being entitled to receive any form of allowance toward his accommodation and motor vehicle. Indeed the only pay slip adduced in evidence showed only his base salaries and a small sick allowance being paid to him. Evidence adduced for the Bank showed that, the Bank only assisted Mr. Tugiau to purchase his vehicle.

52. The Staff Manuel also makes it clear that, the Bank provides accommodation and vehicles for its management and senior level staff. For accommodation they are at highly subsidized rental levels from K60.00 per fortnight for single units and K90.00 per fortnight for 3 bedroom flats or houses. There is provision also for a payment of housing allowances for salaried staff at the rate of K6 per fortnight for employees earning annual salaries below K7749 and K7.00 for those receiving salaries beyond K7750. This is available to those who purchase their own accommodation through a home ownership scheme. In respect of the housing scheme, the Bank provides subject to an employee's eligibility level, 10% of the employee's concern's contribution toward a housing loan in return for the Bank having a mortgage or lien over the employee's retirement and other end of service entitlements.

53. With regards to motor vehicle, the bank provides its executive and senior management level staff with motor vehicles. It also provides for staff members to use their own vehicles for the Banks business in return for a reimbursement of 30t per kilometer.

54. On the evidence that was before the learned trial Judge and now before us, we cannot see how Mr. Tugiau could claim and be award anything in relation to accommodation and vehicle allowances. Clearly therefore, the award of K20,000.00 to cover for leave, motor vehicle and accommodation allowances cannot be sustained.

55. The final matter we turn to is the award of "K50,000.00 for stress, anxiety and loss of reputation in the bank and amongst his peers." Traditionally, the law did not and does not compensation of any disappointment and hurt feelings which ordinarily follow any termination of employment. The law has now developed to a point where the Courts have been awarding damages for such things has stress, anxiety and defamation of character or loss of reputation. This can only happen in cases where a plaintiff, first properly pleads the loss or damage with the relevant particulars and then establishes it by appropriate evidence at the trial. The evidence must establish actual damage being suffered, for example serious negative impact on ones health or not being able to secure alternative employment because of any unlawful and baseless attacks and injury to ones reputation or character. This ties in well with the accepted principles governing the assessment and allowance of damages as we have earlier noted, that is to say, a plaintiff can only be compensated by way of damages for loss or damages actually suffered. It follows therefore that, damages cannot be allowed as a matter of cause but only actual losses and damages which are clearly pleaded and established by appropriate evidence as was the case in Peter Aigilo v. The Independent State of Papua New Guinea.[18]

56. In this case, the plaintiff did not plead with any particularity his claim of having suffered stress, anxiety and loss of reputation in the Bank and amongst his peers. He only pleaded in the prayer for relief "damages for psychological effects, stress, embarrassment, shame, defamation of his good reputation and character." That was no pleading at all. The law is clear that, foundation must be laid in the pleadings to properly ground any prayer for relief. Without any such pleadings there can be no award.

57. The Supreme Court emphasized the importance of proper pleading and made the point we have just made clear in the Jeff Tole case. In that case, there was a lack of proper and sufficient pleading even though some things where pleaded and there was an indication in the statement of claim that, further and better particulars will be provided prior to or at the trial. The Court was of the view that, such a pleading was no pleading at all. The Court made it clear also that, the rules and hence the case law that has built around them, requires proper pleading before there can be any award of damages.

58. Having failed to properly lay a foundation in his pleadings for his claim for "damages for psychological effects, stress, embarrassment, shame, defamation of his good reputation and character" Mr. Tugiau did not produce any evidence at the trial of what damages if any he in fact suffered. He produce for example, no medical evidence clearly establishing the kind of psychological effects and stressed he may have suffered. Similarly, he did not produce any evidence of what if any damage was done to his character or reputation generally or amongst his peers and the Bank. Instead, there was no contest between the parties that, by order of the Court, Mr. Tugiau was entitled to reinstatement. That restored his good standing before his peers and the Bank. However, Mr. Tugiau chose not to be reinstated as he had secured alternative employment. The fact that he secured alternative employment was indicative of his dismissal by the Bank having no adverse impact on his reputation as a trustworthy employee and his ability to secure alternative employment.

59. In short we note that Mr. Tugiau failed to properly and sufficiently plead his claim for damages for psychological effects, stress, embarrassment, shame, defamation of his good reputation and character. We also note that, Mr. Tugiau failed to establish by any evidence his claim for damages for psychological effects, stress, embarrassment, shame, defamation of his good reputation and character. Consequently, with the greatest respect, we find that, the learned trial judge had no proper basis or foundation both in law in fact to arrive at the decision to award K50,000.00 for stress, anxiety and loss of reputation in the bank and amongst peers.

Decision on Appeal

60. On the basis of the foregoing we are of the view that, there is merit in the whole of the Bank's appeal. It appears that the Bank has been penalized for merely terminating Mr. Tugiau, particularly when the awards had no foundation in the pleadings, the law and the evidence adduced before the trial Court. Consequentially we find that, Mr. Tugiau did not suffer any damages as pleaded or at all. In the circumstances, we uphold the appeal against the decision of the National Court dated 26th March 2007 in WS 757 of 2000 and order that it be quashed. Further, we order a dismissal of those proceedings with costs against Mr. Tugiau the Respondent in the Appeal and Plaintiff in the National Court.

____________________________________

Blake Dawson Lawyers: Lawyers for the Appellant.
JB Nanei Lawyers: Lawyers for the Respondent.

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^[1] (2007) SC902.
^[2] [1993] PNGLR 370.
^[3] (2002) SC694.
^[4] For judicial statements to this effect in our jurisdiction, see for example the decisions of the Supreme Court in National Court in Nazel Wally Zanepa v. Ellison Kaivovo & Ors (1999) SC623 and Ereman Ragi & The POSF Board v. Maingu (1994) SC 459 and the National Court decisions in Teio Raka Ila v. Wilson Kamit, Governor of Bank of Papua New Guinea and Bank of Papua New Guinea (2002) N2291; Legu Vagi v. National Capital District Commission (2002) N2280
^[5] (2002) N2197.
^[6] [1990] PNGLR 407.
^[7] (1970) N1110.
^[8] (2008) SC930.
^[9] Supra note 4.
^[10] (1995) SC 489.
^[11] (unnumbered judgment 26/07/01) SCA No. 80 of 2000.
^[12] (2002) N2291.
^[13] Supra note 3.
^[14] (2004) N2686.
^[15] (2004) SC744.
^[16] (1999) N1805.
^[17] See for example, Fly River Provincial Government v Pioneer Health Services Ltd (24/03/03) SC705; Tian Chen Limited v. The Tower Limited (20/01/03) N2319; Papua New Guinea Forest Authority v Concord Pacific Ltd (No 2) (12/09/03) N2465.
^[18] (2001) N2102.