Porgera Joint Venture v Kami [2010] PGSC 11; SC1060 (2 July 2010)

SC1060

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 62 0f 2008

BETWEEN:

PORGERA JOINT VENTURE
Manager Placer (PNG) Ltd.
Appellant

AND:

ROBIN KAMI
Respondent

Waigani: Injia, CJ; Gabi & Makail JJ
2010: 2nd July

CONTRACT OF EMPLOYMENT – Private Contract for fixed term – Termination without notice – Payment of money in lieu of notice period prescribed by Contract - Termination for reason – Disciplinary termination without following disciplinary procedures –Breach of contract- Whether relevant for assessment of damages for breach of contract.

DAMAGES – Written Contract of Employment – Private Contract for fixed term- Term of Contract – Termination, without reason, on 4 weeks notice or without notice payment of money in lieu of notice- Termination- Early termination without notice- Money in lieu of notice paid- Termination for reason – Disciplinary termination – No disciplinary procedures followed in effecting termination – Breach of Contract - Measure of damages – Whether damages should be confined to money in lieu of notice or extended to include wages for remaining period of contract- Whether additional damages should be awarded for employer’s failure to follow disciplinary procedures.

CONTRACT LAW - Contract of employment - Fixed term contract - Three years - Certainty of period of employment - Breach of - Wrongful dismissal

ASSESSMENT OF DAMAGES - Wrongful dismissal - Fixed term contract - Damages assessed on balance of contractual term - Damages restricted to wages and other benefits in contract - Payment of monies in lieu of notice not applied.

The appellant company employed the respondent under a written contract of employment for a fixed term. The contract provided for early termination by either party, without reason, on four week notice or by the company without notice upon payment of money in lieu of notice. The appellant terminated the contract for disciplinary reasons and paid money in lieu of notice. The National Court found the termination to be unlawful and in breach of the Contract and awarded damages in wages for the balance of the contract period. On appeal against award of damages only.

Held: (by majority decision)

1. Damages for breach of fixed term contract should be assessed on the basis of salary and other entitlements which the employee is entitled to receive had the contract been lawfully terminated.
   
2. 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 in assessing damages.
   
3. The trial judge erred in assessing damages for the balance of the contract period in that employee was only entitled to damages in salary and other entitlements for the notice period and within such reasonable period required to commence and complete the disciplinary process relating to termination for cause adopted by the parties under the contract. A reasonable period in the circumstances of this case was two (2). The employee already having been paid money in lieu of four week notice, he was not entitled to receive additional damages. Consequently, the appeal was allowed with costs.
   

Cases Cited:

PNG cases

Bromley v Pacific Finance Ltd (2001) N2097
Christopher Appa v Peter Wama [1992] PNGLR 395
Ereman Ragi & Ors v Joseph Maingu (1994) SC459
Felix T Ramran v NBC & ors (1990) N1110
Gideon Berereba v Margaret Elias (2002) N2197
Kenneth Bromley v Finance Pacific Ltd (2001) N2097
Martha Limitopa and Poti Hiriange v The State [1988] PNGLR 364
Michael Brendal -v- Golden Square Pty Limited [1983] PNGLR 257
Motor Vehicles Insurance Ltd v Makis Kot (2007) SC902
Nazel Wally Zanepa v Ellison Kaivovo, Department of East New Britain & Anor (1999) SC623
Robert Karava v Kevin Byrne & Anor (1999) N1805
Pama Anio v Aho Balika & Another (2004) N2719
Papua New Guinea Banking Corporation Ltd -v- Jeff Tole (2002) SC694
Peter Aigilo -v- Sir Mekera Morauta & The State (2001) N2102
Placer (PNG) Ltd v Alois Kawa (2008) SC919
Rooney v National Forest Industries Council [1990] PNGLR 407
Teio Raka Ila -v- Wilson Kamit & BPNG (2002) N2291
University of Papua New Guinea & Ors -v- Jerry Duwaino (2009) N3727
Wata Potenge -v- Bosky Tony & Ors: OS No 307 of 1999 (Unnum. & Unrep. Judgment of 09th June 2000)
Wilson Thompson -v- National Capital District Commission (2004) N2686
Teio Raka Ila v Wilson Kamit & Ors (2002) N2291

Overseas cases

Boyo –v- London Borough of Lambeth [1995] 1RLR 50AC; (1980) I.C.RC. 755
Focsa Services (UK) Ltd v Birkett [1996] UKEAT 826 – 95 – 3001; 1 RLR 325
Gallohr v Argyle Diamond Mines Pty Ltd [2005] WSCA 166
Gunton –v- London Borough of Richmond-upon-Thames [1980] 3 All ER 577
Janicuk v Winerite Ltd [1998] 1RLR 63
Livingstone v Ray Yard Coal Co. (1882) 5 App Cases 25
McKeeman v Mercer [2005] NIIT 1745
Siagian v Sanel Pty Ltd [1994] 122 ACR 333

Books and articles referred to:

Chitty on Contract, 28th ed. Volume 2

Counsel:

D Wood, for the appellants
M Karu, for the respondent

2nd July, 2010

1. INJIA CJ: This is an appeal against award of damages for wrongful dismissal. The respondent contests the appeal.

2. The appellant and the respondent entered into a written contract of employment (the Contract) under which the appellant employed the respondent as an Assistant Logistics Coordinator. The Contract was for a fixed term of 3 years. Clause 12.2 of the Contract permitted early termination of contract "by giving four week notice of termination by either party, without reason, or by the Company without notice on payment of four week salary". Three months into the contract the appellant terminated the contract for reason but without notice. The reason was that the respondent breached Clause 11.1 of the Contract in that he chewed betel nut or ‘buai" during working hours at the mine site. Upon termination he was paid money in lieu of four week notice. The respondent instituted an action for wrongful dismissal in the National Court claiming damages in the sum of K203,353.23 which comprised wages for the balance of the contract. He denied breaching Clause 11.2 of the Contract and claimed his dismissal was "wrongful, harsh and oppressive and is therefore unlawful". Four years after his dismissal, the action was tried in the National Court on 20th August 2007 and judgment delivered on 26th October 2007. The trial judge found there was breach of contract in that the reason given by the appellant for termination was unfounded. The trial judge awarded damages in the sum of K 102,464.22 in wages for the balance of contract. The trial judge did not consider the issue of mitigation of damages which was addressed by the parties at the trial.

3. The appellant appealed the judgment on twelve (12) grounds but abandoned 3 and pursued only nine grounds, as follows:

(1) His Honour erred in that he should have found that the respondent had failed to establish a cause or action of wrongful dismissal.

(2) His Honour erred in that he should have found that the respondent had received any and all salary and other entitlements due to him from the appellant.

(3) His Honour erred in that he should have found that the respondent had been paid by the appellant his salary and other entitlements for the period of proper notice.

(4) His Honour erred in that he should have found that the respondent, who was employed for 3 years pursuant to the contract of employment, could not sustain a claim for damages for any length of time beyond the period of proper notice which, under the contract, was 4 weeks.

(5) His Honour should have found that the amount paid by the appellant to the respondent upon termination of the contract of employment was at least sufficient to satisfy any liability that the appellant had to the respondent consequent upon the termination of his employment.

(6) His Honour erred in that he should have found there was no basis upon which the appellant was liable to the respondent in the sum of k102, 464.22 (or any sum).

(7) His Honour erred in that he should have found he could not be satisfied that the respondent had suffered any loss of damage in circumstances in which the respondent failed and refused to give evidence of his income subsequent to termination of his employment with the appellant.

(8) His Honour erred in that he failed or refused to apply the principles appropriate to the measure of damages for wrongful dismissal as laid down in cases such as Appa v. Wama [1992]PNGLR 395, Ramram v NBC N1110, Karava v Byrne N1805 PNGBC v. Tle SC694 and Placer v Alois Kawa unreported decision 3 July 2008, and had he done so, the respondent’s claim was bound to fail.

(9) His Honour erred in awarding the plaintiff K102,464.22 being salary and other entitlements for the duration of the contract and Nasfund contributions when he ought to have found that the only amount, pursuant to the contract of employment, that the respondent was entitled to receive, if anything, was for 4 weeks, an amount which had already been paid to the respondent.

4. Mr Wood of counsel for the appellants concedes that the appeal is only against damages and ground 1 above should be understood in that context.

5. The main issue is whether the trial judge erred in awarding damages in lost wages for the balance of the contract.

6. The trial judge’s reasoning appears in the following statement:

"In relation to damages, the law on damages is clear. In the usual case, damage is equivalent to the length of appropriate notice. Only in a fixed term that is not subject to the determination by notice will damages be awarded for the salary over the entire period of the contract if dismissal was a breach of a contract."

7. The trial judge continues:

"Clause 12.2 is interesting. It entitles the defendant to terminate the contract without reason by giving of four weeks notice.... One view is that if the termination cannot stand, an employer can find relief in his prerogative to terminate without reason. I am not a signatory to this view because it is harsh, oppressive and unfair in circumstances where unemployment rate is high for an employer to terminate employment for a given reason that is false or unfounded.

An employer is entitled to terminate an employment without a reason as expressly or impliedly provided for in an employment contract. But he cannot provide an unfounded reason and get away with it. He should not have it both ways. In all the circumstances, I am of the considered view that even clause 12.2 does not apply in this case. This means that the plaintiff is entitled to damages equivalent to the balance of his contract of employment."

8. Mr Wood of counsel for the appellant submits the trial judge’s conclusions have no basis in law. The principle is well settled that an employee is not entitled to recover wages beyond the fixed notice period stipulated in the written contract of employment: Felix T Ramran v NBC & ors (1970) N1110 (Doherty J), Christopher Apa v Peter Wama [1992] PNGLR 395; Gideon Bereba v Margaret Elias (2002) N2197; Robert Karava v Kevin Byrne & Anor (1999) N1805; Teio Raka Ila v Wilson Kamit & Ors ( 2002 ) N2291, Placer (PNG) Ltd v Kawa (2008) SC919. In a case where there is no fixed notice period in a written contract of employment, there is no automatic right to continuous employment or damages for early termination: Placer (PNG) Ltd v Kawa (2008) SC919. Allowance should only be made for normal wages over a reasonable period. For instance for an employee employed over 5 years or more is 4 weeks: Ereman Ragi & Ors v Joseph Maingu (1994) SC459, Nazel Wally Zanepa v Ellison Kaivovo, Department of East New Britain & Anor (1999) SC623. There is no justification to allow damages beyond the fixed notice period or for a reasonable period as any such amount would amount to unjust enrichment: Teio Raka Ila v Wilson Kamit & Ors; Wilson Thompson v NCDC & Anor (2004 ) N2686.

9. Mr Karu of counsel for the respondent submits normal award of damages should follow upon finding of unlawful breach of contract of employment. He submits the decided cases on contracts for indefinite term including Placer (PNG) Ltd v Kawa are not relevant to this case. In relation to fixed term of employment where the contract is unlawfully terminated, the employee is entitled to the amount that he would have earned under the employment contract for the period from unlawful termination to the time when the employer could have lawfully terminated (balance of contract period) less the amount reasonably expected to be earned in other employment (mitigated damages). He relied on the case of Rooney v National Forest Authority [1990] PNGLR 914 and Bromley v Pacific Finance Ltd (2001) N 2097, to support this proposition. He submits the damages is not out of reasonable proportion to the loss of benefits under the fixed term contract and principles of equity and fairness warrants the damages be allowed for the balance of the contract.

10. I consider that most of the cases relied upon by counsel for the appellants are to do with public employment cases in which the circumstances giving rise to the claim and principles on assessment of damages are founded largely in public law. The Court should be careful in adopting and applying those principles in private contract cases. The Bromley and to some extent the Rooney case are relevant to the circumstances of this case. However they may be distinguished from the facts of the case before us. In Bromley there was an express term in the contract that the employee was entitled to be paid out the balance of the contract in the event of early termination for specified cause. At the trial there was no contest on the application of this term to the particular situation at hand. The Court simply enforced the express intention of the parties expressed in the contract by awarding damages for the balance of the contract. In the Rooney case the contract was for term. The contract made no provision for the parties to terminate the contract before the expiry of the contract. Her contract was a public employment contract that was unique. The Court interpreted the contract to mean that neither party intended to terminate the contract and allowed the contract to run its full term. It was on this basis that it was open to the trial judge to asses damages for the balance of the contract, subject to disallowance for mitigation of loss. The contract in the present case had no such terms as found in those two cases.

11. There is no issue on the payment of money in lieu of four week notice in accordance with Clause 12.2 of the Contract. The payment was made by the appellant and received by the respondent.

12. Clause 12.2 also provided for termination without reason. If the appellant had not provided any reason for the termination, the employee’s dismissal would have been in accordance with Clause 12.2 and the employee would have no reason to complain. The employee would be entitled to receive money in lieu of four weeks and nothing more. The principles laid down in the cases cited by Mr Wood support this position.

13. But the appellant provided a reason. The reason given is disciplinary in nature. The essence of the respondent’s case before the trial judge was that the proper disciplinary procedures were not followed in determining the allegation against him. The Contract did not expressly provide for a disciplinary procedure for dealing with breach of employee’s duties set out in Clause 11.2. The contract did not expressly make reference to or adopt any disciplinary procedures in existence adopted and in use by the appellants in dealing with a breach under Clause 11.2 similar to the provision that existed in the Contract executed between this same appellant and another group of employees which was the subject of litigation in Bure v Kapo & Placer (PNG) Ltd (2005) N2902. In Bure the disciplinary procedures were contained in a Manual published by the Porgera Joint Venture which is managed by the appellant. However Clause 2.2 of the Contract required the respondent to comply with the Company’s policies and procedures relevant to his employment, a copy of which would be provided to him on site when he commenced duties. There were excerpts of what appeared to be steps in a disciplinary procedure issued by Porgera Joint Venture produced by the respondent at the trial which suggested that there was a disciplinary procedure which applied in this case but it was not followed by the appellant: see Appeal Book, pages 41 – 45 for excerpts of disciplinary procedures. It appears from the judgment of the trial judge that it was implied in the contract that the employee would not be dismissed without following that disciplinary procedure. Therefore the real question before us is whether a finding by the trial judge to the effect that the respondent was unfairly or wrongly dismissed without following that disciplinary process; which if conducted, would have resulted in a finding in the respondent’s favor as concluded by the trial judge; is a relevant factor to be taken into account in assessing damages. If so, what is the proper measure of damages for failing to follow those disciplinary procedures.

14. The cases from our jurisdiction cited to us by both counsel do not deal with this point. I am also unable to find any case on point from Australia and New Zealand.

15. There are several cases decided by Industrial Tribunals and Court of Appeal in the United Kingdom which amply canvass the common law position on measure of damages in this type of situation. I consider the circumstances in a number of those cases and statements of principle particularly relevant to the question before this Court. But first I commence with a statement from the learned authors of Chitty on Contract, 28th ed. Volume 2, at p.899, 900 contains a succinct statement of the common law position, as follows:

"The remedy of an employee who has been wrongly dismissed is an action for damages. The normal measure of damages is the amount the employee would have earned under the contract for the period until the employer could lawfully have terminated it.... If the defendant has a right to terminate the contract before the expiry of the term, damages for wrongful dismissal should be assessed only up to the earliest at which the defendant could validly have terminated the contract. Thus if the contract expressly provides that it is terminable upon, e.g. a month’s notice, the damages will ordinarily be a month’s wages. In Gunton v Richmond L.B.C. (1980) I.C.R. 755) it was held that where a dismissal was wrongful by reason of a failure to comply with a contractually binding dismissal procedure, the damages were to be assessed only upon expiry of the contractually due notice of one month notionally served on the day when the proper disciplinary procedure, if followed, could have been concluded. Except in cases of alleged bad faith on the part of the employer, the court is not to analyse the chances that the employee would have been dismissed had the procedure been followed".

16. Gunton’s case referred to in the above passage was considered in Gallohr v Argyle Diamond Mines Pty Ltd [2005] WSCA 166 but did not form part of the reasons of the Court. It was cited in Siagian v Sanel Pty Ltd [1994] 122 ACR 333 but on another point.

17. Gunton –v- London Borough of Richmond-upon-Thames [1980] 3 All ER 577; [1981] Ch 448; AC; (1980) I.C.RC. 755, is the first case which enunciated the measure of damages on termination for cause not following disciplinary procedures in the contract. I adopt the factual background of the case as it appears in the head notes of the judgment. Gunton was employed under a contract that provided that the contract of employment was terminable on one month’s notice, and containing provision for the suspension and dismissal of officers for breaches of discipline. This latter procedure involved a number of stages, including a hearing by an appeals committee which would normally take considerably longer than one month to implement. The Council decided that Gunton should be dismissed, and issued him with notification of its decision and giving him a right to appeal. The Council thus disregarded the preliminary steps to be followed before a disciplinary dismissal. Gunton appealed. The dismissal was confirmed on appeal by letter dated 13 January 1975. The Court of Appeal held that the Council was required to invoke and carry out all the disciplinary steps of the appeal procedure that applied and therefore had wrongfully dismissed Gunton. Moreover, the Court of Appeal held that the dismissal of the appeal on 13 January 1975 did not immediately terminate Gunton’s contract of employment; he preserved the right not to be dismissed on disciplinary grounds until the prescribed disciplinary procedure had been carried out and to be compensated accordingly if they were not. When he was dismissed from his employment he was entitled to insist upon a right not to be dismissed on disciplinary grounds until the disciplinary process was conducted and concluded "in due order but with reasonable expedition." On this basis, Gunton was entitled to his salary for the period 14 January 1975 until the date when the proper disciplinary procedure, if carried out expeditiously, might reasonably have been concluded, plus one month’s notice.

18. The Court of Appeal by majority enunciated the principle that the employee is entitled to receive money in lieu of notice as well as compensation for a reasonable period for carrying out the appropriate disciplinary procedure. Gunton has been followed in many subsequent cases including Boyo –v- London Borough of Lambeth [1994] EWCA CIV 28, where the Court considered itself bound by Gunton.

19. As to what is a reasonable period to conduct disciplinary proceedings, it depends on the circumstances of each case. One of the Lordships in Gunton considered one month adequate but the issue was left to an ordered assessment. The Court’s task of determining what is a reasonable period is fraught with difficulty. This was acknowledged by Lord Justice Staughton in Boyo where His Lordship said "the allowances of a period for disciplinary proceedings is artificial, notional, hypothetical" (at page 15). In many cases the court resorted to time lines prescribed for different steps of the disciplinary procedure. In other cases where there are no time lines, some of the judges resort to their personal experiences in dealing with such cases to arrive at a reasonable period. Subsequent cases have determined different periods ranging from one month to five months: Boyo –v- London Borough of Lambeth [1994] EWCA CIV 28, McKeeman v Mercer [2005] NIIT (Northern Ireland Industrial Tribunal) 1745 (3 weeks allowed for disciplinary procedure).

20. The next question is whether the employee’s chances of success in the disciplinary proceedings if they were followed is relevant in determining compensation for loss of a right to a disciplinary hearing. In Focsa Services (UK) Ltd v. Birkett [1996] 1RLR 325, Judge Clark laid the foundation for the principle to be developed, when he said:

"The fallacy, in our judgment, in the chairman’s reasoning is to disregard the normal common law rules as to loss in cases of wrongful dismissal. That loss is limited to the sums payable to the employee had the employment been lawfully terminated under the contract. Once a dismissal has taken place, as was accepted and found in this case, it is irrelevant to consider what might have happened had a contractual disciplinary procedure been followed. An employer is entitled to dismiss on contractual notice at common law for whatever reason."

21. In Janicuk v Winerite Ltd, [1998] 1RLR 63, the employee had been summarily dismissed and had been given two weeks’ pay in lieu of notice, although under his contract of employment he was only entitled to one week. He alleged that he was contractually entitled to the benefit of a disciplinary procedure and, if that procedure had been followed, there was a chance that he would not have been dismissed. Accordingly his damages for breach of the contract should have included compensation for loss of that chance. The Industrial Tribunal dismissed the claim for damages on the grounds that he had been awarded full compensation for the failure to give him his contractual notice and that, even if he had been contractually entitled to the benefit of a disciplinary procedure, its operation was unlikely to have extended his employment for more than a week. Since he had been given two weeks’ pay when he was entitled only to one week’s notice he had already been compensated. It is quite clear that that ground of disposal of the matter, which is perfectly understandable, is one which turns simply on the facts and has nothing to do with the point in the present case. Morrison J set out the principles applicable. I can do no better than to quote them in full:

"(1) Where a contract of employment is terminable upon notice, the measure of damages to which the employee is entitled on summary dismissal is the amount which the employer would have been bound to pay had his contract been terminated lawfully, less any receipts by the employee during that period earned by way of mitigation of his loss. The employee is entitled to be put into the position he would have been in had the contract been performed. It is assumed for this purpose that the employer would have dismissed the employee by notice given at the very moment that the summary dismissal was effected.

(2) When, the purposes of calculating compensation, the court considers what would have been the loss had the contract been performed, the court assumes that the contract breaker would have performed the contract in a way most favourable to himself. This principle prevents the employee from recovering a windfall payment. If there were two lawful ways of performing the contract, the employee will be compensated on the basis that the employer will have chosen to perform the contract in the way which was least burdensome to him: Lavarack v. Woods of Colchester [1966] EWCA Civ 4; [1967] 1 QB 278. Therefore, in a simple wrongful dismissal case, the court does not ask what might have happened had the employer known that he had no right to determine the contract summarily, and then calculate compensation on a loss of chance basis. The assumption is that the employer would have chosen to have terminated the contract lawfully at the very moment that he had brought [or sought to bring] the contract to an end unlawfully in breach of contract.

(3) Some contracts of employment require the employer to follow a disciplinary procedure before notice of dismissal can be given. In other words, the disciplinary procedure acts a brake on the giving of notice. In such a case, the employer would be acting in breach of contract if he gave notice terminating the contract without first having followed the correct procedure. The measure of loss for that breach is based upon an assessment of the time which, had the procedure been followed, the employee’s employment would have continued. Again that does not require an analysis of the chances that had the procedure been followed the employee might never have been dismissed. At this stage the court is engaged on a process of quantifying damage suffered by a dismissed employee. The court is concerned to know what would have happened, contractually, if instead of unlawfully dismissing the employee the employer had not broken the contract, bearing in mind the Lavarack v. Woods principle. For this purpose, the assumption that must be made is that the employer would have dismissed the employee at the first available moment open to him; namely, after the procedure had been exhausted. The court is not concerned to inquire whether the employee would have been dismissed had the contract been performed, but rather for how long would the employee have been employed before the employer was contractually entitled to give notice. This is on the assumption that the employer has not been accused of acting in bad faith where other principles might apply. Authority for this proposition comes from Gunton v. London Borough of Richmond-upon-Thames [1980] 1RLR 321; Boyo v. London Borough of Lambeth [1995] 1RLR 50; and Focsa Services (UK) Ltd v. Birkett [1996] 325. ...We regard the attempt to introduce the loss of a chance into the calculation of the damages as a heresy and it represents a misunderstanding of the process involved in quantifying a dismissed employee’s damages for breach of contract. Mr Kibling is seeking to overlay contractual questions with concepts of fairness which, in our view, do not apply."

22. A final point is whether separate award of damages should be made for the notice period in the contract and compensation for reasonable period for want of disciplinary procedure. In Gunton one month was allowed for notice and an additional one month allowed for reasonable period for want of disciplinary notice. In Focsa, Judge Clark took a different approach when he said:

"The fact is that Mr Birkett was dismissed. In so far as he did not received his full notice, he is generally entitled to damages to reflect the pay during the notice period and no more. The only exception is where employment would have been extended by operating the disciplinary procedure: Boyo v. London Borough of Lambeth [1996] 1RLR 50; Gunton v. London Borough of Richmond-upon-Thames [1980] 1RLR 321. In this case there is no evidence to suggest that use of this employer’s disciplinary procedure would have extended beyond the one week’s contractual notice which was given. Accordingly no additional loss under this head arises."

23. The difference in approach could be easily resolved by taking a middle ground. If the period of reasonable notice for the disciplinary process to be concluded that is assessed by the Court fell within the notice period fixed in the contract, then there would be no justification for awarding separate damages for reasonable period as that would amount to double damages. An award of damages for money in lieu of notice would suffice. If the period of reasonable notice exceeds the notice period, an additional award of damages for the extra period would be justified.

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 they 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.

27. In the present case, there is evidence that there was a disciplinary procedure in existence which were adopted either expressly or by necessary implication in the employment contract by the parties: see Contract, Clause 2.2 at Appeal Book, page 36; and Appeal Book, pages 41 – 45 for excerpts of disciplinary procedures. If the disciplinary procedures were followed, it is reasonable to expect it should not take more than two weeks to commence and complete the disciplinary process. Unlike the cumbersome disciplinary procedures in the public service prescribed by statute that take long time to complete, the disciplinary procedures in the private sector are conducted in a businesslike manner in an orderly manner and with due speed. In my view, an allegation of the sort made in this case would have taken no more than two weeks in my view. The four week notice period stipulated in the contract was sufficient to cater for any disciplinary proceedings that might be conducted. Therefore he was entitled to 4 weeks pay in lieu of notice and disciplinary process. The respondent had been already paid and he accepted money in lieu of four week notice and that amount in my view is sufficient discharge of the appellant’s obligation under the contract.

28. I am satisfied that the trial judge erred in failing to consider the appropriate clause in the Contract of employment relating to termination for cause on disciplinary grounds and the material provided at the trial and erroneously awarded damages for the balance of the contract. I would allow the appeal and quash the award of damages.

29. After arriving at this conclusion it is not necessary to deal with the issue of mitigation of damages.

30. For these reasons I would allow the appeal with costs.

31. GABI, J: I have read the draft judgments of the Chief Justice and my brother Justice Makail. I agree with the conclusions and orders proposed by the Chief Justice. I wish, however, to comment on the issues of whether payment should be made to the end of the contract and the time needed to conduct the disciplinary process in the public sector. The Chief Justice and Justice Makail have already set out the facts and the terms of the respondent’s contract of employment so I do not intend to deal with or discuss them in any detail here.

Balance of contract

32. The trial judge was of the view that an "employer cannot provide an unfounded reason and get away with it. He should not have it both ways. In all the circumstances, I am of the considered view that even clause 12.2 does not apply in this case. This means that the plaintiff is entitled to damages equivalent to the balance of his contract of employment." The trial judge appears to have considered damages as a penalty for early termination by requiring the employer to pay damages to the end of the contract despite the termination clause in the contract.

33. In Nahau Rooney v National Forest Authority [1990] PNGLR 407, the contract of employment was for a specific period, but there was no termination clause in the agreement. Secondly, the contract was made pursuant to the Forest Industries Council Act and therefore the Employment Act did not apply. Woods J said at 409:

"I am satisfied that the plaintiff has done her best to mitigate her damages, has acted reasonably and, apart from the piece-work already in evidence, she was unable to mitigate her damages and the defendant is liable for the salary and value of benefits which the plaintiff would have earned under the contract. There is no clause providing for any termination upon condition, unlike most government contracts of employment which give the right to terminate on some months notice. There is no such right here which means the defendant is liable for the full term. The contract is a contract of employment under the Forest Industries Council Act (Ch No 215) and therefore I agree that the defendant and the plaintiff contracted out of the Employment Act (Ch No 373) and therefore the power in the Employment Act to terminate before the expiration of the term does not apply." (Emphasis added).

34. The Rooney case was followed in Ken Bromley v Pacific Finance Ltd (2001) N2097 and Peter Aigilo v Mekere Morauta & Ors (2001) N2102. Both of these cases were decisions of His Honour Justice Kandakasi.

35. In the Bromley case, the contract of employment provided that in the event of termination for reasons other than unsatisfactory performance, the employee was entitled to be paid the unexpired portion of the contract. At the hearing the defendant was unrepresented. In the Aigilo case, the plaintiff was paid to the end of the contract on the basis that there were multiple breaches of the law and the prescribed Constitutional procedures and the termination was held to be harsh and oppressive in the circumstances.

36. In Teio Ila v Wilson Kamit & Anor (2002) N2291, the contract of employment provided that in the event of termination the employee was entitled to be paid to the end of the contract. However, as no statutory approval under section 10 of the Salaries and Conditions Monitoring Committee Act was obtained for the terms of the executed contract, the contract was held to be void and unenforceable. The contract of employment in that case was similar to the Bromley case.

37. In Pama Anio v Aho Baliki & Anor (2004) N2719, His Honour Justice Kandakasi reassessed his views on the award of damages to the end of the contract. He said:

"...the judgment in the Peter Aigilo case followed the judgment in Nahau Rooney v. Forest Industries Council [1990] PNGLR 407. In that case, the Court awarded damages beyond the period of notice because, the plaintiff had great difficulty finding a job at the same kind of level and salary package she was under in her employment with the defendant.

Subsequently, I reconsidered the correctness of the principles on which I assessed the damages in the Peter Aigilo case. This I did initially in the case of Teio Raka Ila v. Wilson Kamit & The Bank of Papua New Guinea (11/10/02) N2291. The Supreme Court judgment in Post PNG Ltd v. Yama Security Services Ltd (unreported and unnumbered judgment delivered on 26th July 2001) in SCA 80 of 2000, influenced me. There the Supreme Court said at pp. 4 - 5:

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 penal 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 hold that, a Court dealing with a contract having such a provision has the duty to:

‘...[I]nquire 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.’" (Emphasis Added)

38. In any civil action, the purpose of an award of damages is to put the innocent party in the same position, as far as possible, that they would have been in if the wrongdoer had not committed the wrongful act (Livingstone v Rawyard Coal Co [1880] 5 App Cases 25; MVIL v Makis Kol (2007) SC902). It is clear that the purpose of damages is to compensate a person for the wrongful conduct. It is not intended to be a reward or penalty (Martha Limitopa and Poti Hiringe v The State [1988-89] PNGLR 364).

39. The Rooney case can be distinguished from the Bromley case, Peter Aigilo case, Teio Ila case and this case as in the latter cases there were termination clauses in the contracts of employment. Accordingly, I am of view that the trial judge fell into error by awarding damages to the end of the contract.

Reasonable time to conduct the disciplinary process

40. I agree with the Chief Justice that what is a reasonable time depends on the circumstances of each case. In the private sector, the disciplinary process may be completed in two (2) weeks. However, in the public sector where time lines are prescribed for different steps of the disciplinary procedure, it may take weeks to complete the process.

41. I would allow the appeal and quash the award of damages.

42. MAKAIL J: (41) This is an appeal from a judgment of the National Court given on 26th October 2007 in the National Court at Lae in WS. No 1196 of 2003. An order extending the time to appeal was made in SC App. No. 11 of 2007 on 23rd November 2007 and may be found at pp 8-9 of the appeal book. The Court made that order as the appellant was not provided with a copy of the trial judge’s written judgment until 30th June 2008. Following the provision of the written judgment, a notice of appeal and application for leave to appeal were filed on 14th July 2008. At the hearing of the appeal, the appellant withdrew the application for leave to appeal and only pursued the notice of appeal from grounds 3(2) to 3(9). It abandoned grounds 3(1) and 3(10) to 3(12).

Brief background facts

43. The respondent was employed by the appellant as an Assistant Logistics Coordinator in the supply department at the Porgera Gold Mine, Enga Province. He was employed pursuant to a contract of employment signed on 20th March 2003. Under clause 1.3, the period of the contract was three years and clause 12.2 provides for termination on four weeks notice. It states;

"This contract of employment may be terminated by the giving of four weeks notice by either party, without reason, or by the Company without notice on payment of four weeks salary."

44. Clause 12.2 of the contract states (which should be numbered clause 12.3):

"This contract of employment may be terminated by the Company without notice or payment in lieu of notice to the Employee in any of the following circumstances:

(a) During the Probationary Period;

(b) If the Employee commits a material breach of this Agreement;

(c) If, in the reasonable opinion of the Company, the Employee is guilty of any serious misconduct; or

(d) If the Employee is convicted or charged with a criminal offence."

45. On 07th July 2003, the respondent’s employment was terminated on the basis that he had chewed betel-nut at the work place during work hours, which was contrary to the appellant’s cardinal rules of employment. The respondent subsequently commenced proceeding in the National Court by writ of summons and statement of claim on 26th August 2003. The respondent’s claim was that, his termination of employment was wrongful, harsh and oppressive and therefore, unlawful. In the claim, the respondent sought damages of K203,353.23 plus interest at 8% and costs. The damages sought included salary at K35,209.00 for three years, less K9,866.25 being part already received during employment. This meant, he claimed K95,760.95. He also sought NPF savings of K12,675.24. At the time of termination, the respondent was paid K3,044.00 which comprised of the following:

(a) 4 weeks’ pay in lieu of notice	K2,708.44
(b) on site allowance	K 483.65
(c) field break	K 752.56
less tax	K 900.65
Total	K3,044.00

46. The respondent defended the proceeding. The matter was heard on 20th August 2007. On 26th October 2007, trial judge entered judgment in favour of the respondent on the question of liability and awarded damages, as follows:

(a) the sum of K102,464.22 comprising of K95,760.95 as the balance of the contract and K6,703.27 as the employer’s Nasfund contributions;

(b) Interest at 8%; and

(c) Costs.

Grounds

47. The appellant relies on the remaining eight grounds of appeal. Those are set out in the judgment of the Chief Justice.

Issue

48. As the appellant has not pursued ground 3(1) of the appeal which raises the issue of liability, this means that, it does not challenge the trial judge’s finding that the dismissal of the respondent from employment was wrongful in this appeal. From the remaining eight grounds of appeal, I consider that the issues raised in the grounds of appeal boil down to one main issue, and that is, whether the respondent was entitled to be paid wages and other benefits for the balance of the contract. Was the trial judge correct in awarding damages for the balance of the contract?

49. It is not disputed that the respondent was employed by the appellant under a contract of employment, and a copy, maybe found at pp 35-39 of the appeal book. It is also not disputed that the contract was for a period of three years, commencing on 20th March 2003 and would have ended on 20th March 2006. Pursuant to the contract, the respondent earned K35,209.00 per annum or K1,354.19 gross per fortnight. It is also not disputed that the respondent was dismissed on 07th July 2003, after serving only three months and 17 days of the contract and had a balance of two years, 11 months and 13 days remaining. He was dismissed because he was found to have chewed betel nut at the work place during work hours.

50. The main dispute between the parties is that, notwithstanding that the appellant being employed on a fixed term contract of employment and terminated before its expiration, he was not entitled to claim for the unpaid wages and other benefits for the balance of the contract of employment. If there were any damages arising, it would be equivalent to the relevant period of notice, which was four weeks, and that was paid to him at the time of dismissal. There was therefore, nothing more owed to him. What does the law say in respect to damages that may arise from a case where an employee is employed on a fixed term contract of employment and is unlawfully breached? Should the employee be paid damages for the balance of the contractual term?

51. At common law, the usual remedy for breach of contract is damages and how it is measured is based upon the principle of restitutio in integrum which basically means that, an injured party must be compensated, as far as money can, for any loss, which is not too remote for any loss suffered by him as a result of the other party’s breach of contract. In other words, the general rule is that, the measure of damages for breach of contract is intended to place the injured party in the same situation, as far as money can do it, as if the contract had been performed.

52. Applying this general principle in the context of cases of wrongful dismissal of employment, a review of past cases reveal, that generally an employee wrongfully dismissed can recover damages for pecuniary loss resulting from wrongful dismissal to the equivalent of appropriate notice. What is an appropriate period of notice is dependent on the period of employment and in Papua New Guinea, section 34 of the Employment Act, Ch 373 has been used as a guide to determine an appropriate period of notice in a given case, although there are some cases where the Courts have gone outside section 34. This is a worthy point which I shall elaborate on later.

53. Section 34 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 not be less than: -

(a) one day’s notice if the employee has been employed for less that four weeks; or

(b) one week’s notice if the employee has been employed for less that 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 not 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 contract of service referred to 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."

54. The basis for computing damages based on an appropriate period of notice transcends from the notion that there is no automatic right to employment for life. A servant is hired and fired at the will of his or her master. This is the common law position and both the National and Supreme Courts have adopted and applied this principle in so many past cases of wrongful dismissal and have also computed damages based on appropriate notice period, primarily in cases where the employment is for an unspecified period, regardless of whether or not there is a written contract of employment.

55. Some examples of past cases which held this view are: Felix T Ramram -v- National Broadcasting Commission & Ors (1990) N1110, where Doherty, J stated at p 6:

"It is a general rule that the employee wrongfully dismissed can recover damages for pecuniary loss resulting from wrongful termination to the equivalent of appropriate notice. In the usual case, damages will be equivalent to wages for the period of notice only. Rarely can an employee claim for other damages. Only in a fixed term contract that is not subject to determination by notice will damages be awarded for the equivalent of the salary over the entire period of contract if the dismissal was a breach of the contract..." (Underlining mine).

56. Her Honour further observed that:

"...Employment with an employer...is not a meal ticket for life. There are no facts or law in this case which show that an employee wrongfully dismissed can claim more than the appropriate notice."

57. Another is, Christopher Appa -v- Peter Wama & Ors [1992] PNGLR 395, where Woods, J approved the reasoning in Ramram’s case at p 397 as follows:

"It is a general rule that the employee wrongfully dismissed can recover damages for pecuniary loss resulting from wrongful termination to the equivalent of appropriate notice. In the usual case, damages will be equivalent to wages for the period of notice only. Rarely can an employee claim for other damages. Only in fixed term contract that is not subject to determination by notice will damages be awarded for the equivalent of the salary over the entire period of contract if the dismissal was a breach of the contract..." (Underlining is mine).

58. The above two cases have been followed in a number of subsequent cases including the case of Gideon Barereba -v- Margaret Elias& Ors (2002) N2197, a decision by Sevua, J and Robert Karava -v- Kevin Byrne & Anor (1999) N1805, a decision by Kapi, DCJ (as he then was). In Gideon Barereba’s case (supra), the plaintiff was a public servant employed under the Public Services (Management) Act, 1995 but had no written contract of employment providing for a period of notice upon termination. He served in the public service for more than twenty four years prior to his dismissal. He applied for judicial review, to review the decision of the defendants to dismiss him from employment.

59. Sevua, J found that the dismissal was unlawful because the plaintiff was not served with notice of charges to enable him to reply to them. As a result, the defendants breached the principles of natural justice by not affording the plaintiff an opportunity to reply to the notice of charges before they decided to dismiss him. Instead of ordering reinstatement, his Honour awarded damages by assessing it based on the period of notice. His Honour did that because his Honour was of the view that the plaintiff had no right to employment for life, and had no written contract of employment providing for notice. His Honour considered that since the plaintiff had served in the public service for twenty four years, it was unfair or unreasonable to apply the period of notice under section 34 of the Employment Act, Ch 373, given the considerable amount of time he had served in the public service. His Honour applied five years as a reasonable notice period and computed damages based on that period. I am not aware if that decision had been appealed, nonetheless, it is one of those cases which I alluded to earlier where the Courts have decided not to apply the period of notice under section 34 of the Employment Act, Ch 373 to compute damages in wrongful dismissal cases.

60. It is noted also that his Honour referred to a case decided by Los, J in Wata Potenge -v- Bosky Tony & Ors: OS No 307 of 1999 (Unnumbered & Unreported Judgment of 09th June 2000) where it was considered that the plaintiff’s damages should run for a period of one year from the date of dismissal. In Felix T Ramram’s case (supra), Doherty, J, using the four weeks notice under the Employment Act, Ch 373 as a guide, decided that the plaintiff was entitled to three months wages. In an earlier case of Michael Brendal -v- Golden Square Pty Limited [1983] PNGLR 257; (1983) N428, the plaintiff, a German national was employed by the defendant following a successful application. There was no contract of employment providing for the terms and conditions. He was dismissed after working for only five months. He sued for wrongful dismissal. Since the plaintiff was employed on a partly oral and written contract of employment with no provision for termination, McDermott, J applied the reasonable notice period to compute damages after finding the defendant liable for wrongful dismissal of employment. He applied three months notice to compute the plaintiff’s damages. Again, this is another of those cases where section 34 of the Employment Act, Ch 373 on the period of notice was not applied.

61. The Supreme Court cases which applied the reasonable notice period to compute damages in wrongful dismissal cases in unspecified period contract are Boinamo Enterprises Limited -v- Michael Edwin Carey (2004) SC744 and Ereman Ragi & Ors -v- Joseph Maingu (1994) SC459. In Ereman Ragi & Ors’ case (supra), Woods, Sheehan & Andrew, JJ stated at p 5 that:

"There is nothing in the law that states that a public servant or any other employee has any claim of life employment. Upon dismissal without opportunity to answer charges the usual assessment is made on the normal wages of the employee over a reasonable period. Under the Employment Act Ch 373 a reasonable period for a person who has been employed for 5 years or more is 4 weeks."

62. In the Supreme Court decision of Nazel Wally Zanepa -v- Ellision Kaivovo, Department of East New Britain & Anor (1999) SC623, the Court by a majority (Woods & Sawong, JJ) approved Ereman Ragi’s case (supra) on the issue of four weeks notice was the relevant period to assess a claim for damages for wrongful dismissal. The reason given by their Honours for holding this view was, "[t]here was no evidence that he (appellant) had any written contract of employment which took him out of the ordinary law or gave him any fixed term of employment or any permanent employment." In the Supreme Court decision of Placer (PNG) Limited -v- Alois Kawa (2008) SC919, Dr Kawa a medical doctor employed by the appellant under a contract of employment resigned in response to a redundancy package. It is not clear from the Supreme Court’s decision if the contract was open ended or fixed. Nevertheless, he sued the appellant for wrongful dismissal and claimed damages for the balance of the contract of employment. The National Court upheld his claim by finding that he was forced to resign, hence that amounted to wrongful dismissal. The National Court awarded damages for the balance of the contract of employment which came to about K400,000.00.

63. On appeal, on 03rd July 2008, their Honours Kapi, CJ, Gavara-Nanu & Cannings, JJ held that, Dr Kawa was not entitled to damages for the balance of the contract of employment as he had not established a cause of action in law. This was because he had resigned following his position being made redundant. In any event, their Honours held that Dr Kawa had received six weeks money in lieu of notice, notwithstanding that he was only entitled to four weeks pay for notice. On the basis that he had received four weeks pay in lieu of notice, (notwithstanding he had resigned voluntarily) the Supreme Court concluded that he had not established a cause of action for wrongful dismissal.

64. It should however be noted and emphasized that the National Court decisions of Felix T Ramram (supra) and Christopher Appa (supra) and the Supreme Court decision of Nazel Wally Zanepa (supra) did acknowledge that an employee who is employed on a fixed term contract of employment may claim damages for the balance of the contract in cases where the dismissal from employment is found to be unlawful or wrongful. In my view, this is the distinction between a case of wrongful dismissal from employment and a case of an employee lawfully ceasing employment. In other words, there is a difference in the measure of damages in cases where an employee is wrongfully dismissed from employment from that of lawful termination. In my view, examples of cases of lawful termination of employment are where an employee resigns, retrenches, retires due to reaching compulsory retirement age or dies during service. The question of whether the contract is unlawfully or lawfully terminated is the end result of the contractual relationship between the employer and the employee.

65. The case that acknowledged the view that in cases where an employee employed on a fixed term contract of employment may claim damages for the balance of the contract in the event of early termination and where the termination is found to be unlawful is Peter Aigilo -v- Sir Mekera Morauta & The State (2001) N2012. In that case, the plaintiff was the Commissioner of Police of Papua New Guinea. He was employed under a contract of employment which ran for a period of four years. He was terminated after serving one year and nine months. He sued the defendants for wrongful dismissal from employment pursuant to the contract of employment. Kandakasi, J found that the termination was unlawful on the basis inter-alia, that, no reasons were given for his termination.

66. His Honour awarded damages for the balance of the contract in the sum of K697,096.18 comprising of salary and other benefits in the contract including housing allowance, motor vehicle allowance etc. It is noted in the judgment that his Honour appeared to have computed damages for the balance of the contract in the event of early termination pursuant to clause 12 of the contract. Clause 12 provided for how damages may be calculated. The Peter Aigilo’s case (supra) appears to be the only decision in a fixed contract of employment case where damages was assessed for the balance of the contract.

67. Following the decision in Peter Aigilo’s case (supra), it is noted that his Honour took a different view where he held that even in wrongful dismissal cases, a plaintiff’s damages, if any, were restricted to the period of notice provided for in the contract and there was no justification for a payout on the remainder of the contract or any other benefits because any such claim would amount to unjust enrichment. This was in the subsequent cases of Teio Raka Ila -v- Wilson Kamit & Ors N2291 and Wilson Thompson -v- National Capital District Commission & Anor (2004) N2686.

68. In Teio Raka Ila’s case (supra), the plaintiff was employed by the defendants as Manager, Building and Maintenance of the Bank of Papua New Guinea pursuant to a contract of employment for a period of four years. He was terminated from employment after two years. The plaintiff sued the defendants for wrongful dismissal and claimed damages for the balance of the contract of employment. His Honour held that the plaintiff was not entitled to claim for the balance of the contract of employment because it amounted to unjust enrichment. In Wilson Thompson’s case (supra) his Honour said at p 20: "these line of cases, also make it clear that, in a case where an employer pays salary in lieu of notice, there can be no additional award."

69. It is, therefore, apparent from the above cases, that there are two views held by the Courts in relation to the measure of damages in fixed contract of employment cases. In the present case, I repeat, the appellant is not challenging the finding of the National Court in relation to liability. This means that the appellant has accepted that, the decision to dismiss the respondent was unlawful. The only issue is the measure of damages. Turning to clauses 12.2 and 12.3 of the contract, I consider that they do not apply here. Clause 12.2 authorizes either party to terminate the employment relationship on four weeks notice. If the appellant intends to terminate the respondent’s employment with no reason, it must give four weeks notice to the respondent and vise versa. If the appellant intents to terminate the employment of the respondent without notice, it must pay four weeks pay to the respondent. An example of a case where the respondent may give four weeks notice without reason is where he intents to resign. An example of a case where the appellant may terminate the employment notice by paying four weeks salary to the respondent is where there is a redundancy like in the case of Alois Kawa (supra)

70. Clause 12.3 of the contract provides the circumstances or grounds upon which the appellant may terminate the employment. Termination may arise during the probationary period where the employee commits a material breach of the contract, or found guilty of a serious disciplinary offence or is either charged or convicted of a criminal offence. The termination may be without notice if the respondent is found guilty of serious disciplinary offence; this is the instant or summary dismissal procedure which is common in work places where an employee if found guilty of serious disciplinary offence is dismissed instantly and where there are no disciplinary procedures to follow or even if there are, they are waived on the ground that the serious disciplinary offence is so serious such that it warrants an instant dismissal. In any of the circumstance, the appellant has the discretion to pay money in lieu of four weeks notice to the respondent.

71. In cases where the dismissal is found to be unlawful, I consider that clauses 12.2 and 12.3 do not apply. That means, there is no expressed provision in the contract for damages to be assessed based on four weeks notice. In this respect, it is worth noting too that in the National Court, the respondent did not allege that the appellant failed to follow the disciplinary procedures to dismiss him from employment. For example, breach of right to be heard in relation to the disciplinary charge. This is confirmed by the pleadings at paragraphs 5-7 of the statement of claim at p 12 of the appeal book which I set out below:

"5. The Defendant terminated the employment of the Plaintiff on the 7th July 2003 alleging the reason to be that of the Plaintiff making a statement to imply that ‘he (the Plaintiff) does chew betel nut.

6. The Defendant when executing the termination, is alleging a breach by the Plaintiff to Clause 11.2 of the attested Employment Contract which reads:

"The possession or use of betel nut on the mine site or related areas is banned. Any employee found to have in their possession or be chewing betel nut, may have their employment terminated or be removed from the mine site or related area."

7. There is no incident of any breach by the Plaintiff to (sic) Clause 11.2 and there is no evidence whatsoever for the Defendant to substantiate its allegations."

72. Neither is there any evidence nor submissions made in relation to breaches of disciplinary procedures as noted in the record of the proceeding of the National Court at pp 68-133 of the appeal book. Furthermore, the respondent accepted that subsequent to being questioned by Mr Steve Tenant of the appellant in relation to whether or not he chewed betel nut on that day and the subsequent meeting with Mr Ken Forrester of the appellant’s Human Resources Department office on 08th July 2003, he unequivocally explained himself to these men. The explanation he gave was, he did not chew betel nut but is a betel nut chewer. The outcome of the investigations resulted in his termination. It seems apparent that if the appellant had a disciplinary procedure established to deal with such disciplinary matters, there is no evidence before the National Court and also before us to suggest so. That is why the respondent was not asked to reply to the allegation of chewing betel nut and have, say witnesses to verify his denial. It appears to be an instant or summary dismissal.

73. I think that was the predicament the trial judge had as it is noted at p 136 of the appeal book the trial judge observing that, "[f]urthermore, termination is the worst case scenario in a disciplinary process. It is prudent practice, therefore, that any serious allegation and charge should be put to an employee and he should respond in writing against the allegations specifically. In this case, nothing of this sort took place.................. For the purpose of the disciplinary action, there is no documentary evidence as to how it was done."

74. Even if there was a disciplinary procedure in place, it seems that it was waived because of the nature and seriousness of the disciplinary offence which called for instant dismissal. The point here is that, this is not a case where the respondent had alleged and is alleging that disciplinary procedures were breached by the appellant, hence the dismissal was unlawful. Rather, it is a case where the respondent had alleged and is alleging that there was no evidence to support the finding of guilt, in that he chewed betel nut at the work place during work hours. To put it the other way, so to prevent any misunderstanding, there was no justifiable reason for his dismissal; he should still be working with the appellant, had it not been for the dismissal. That was the issue before the trial judge as clearly noted in his judgment at p 135 of the appeal book where he said:

"The plaintiff’s employment was terminated on 7th July 2003 on the basis that he had been chewing buai during working hours. The plaintiff denies that he chewed during working hours. The only issue therefore is whether the plaintiff chewed buai during working hours. If he did, the termination stands. If he did not, the termination should not stand."

75. This is where I distinguish the English case of Gunton -v- London Borough of Richard-upon Thames [1980] 3 All ER 577; AC (1980) ICRC 755 which is authority for the principle that the measure of damages for wrongful dismissal is based on payment in lieu of following the disciplinary procedures. That decision has been followed by subsequent cases which have been referred to in the majority decision of this Court. Those cases have no application here because as noted, there is no suggestion that there were breaches of disciplinary procedures and I need not recite them here except to distinguish them from the present case. The dismissal was instant or summarily and without proper basis or justification. That being the case, I consider that it is and would be wrong for the Court on appeal to assess damages in lieu of following the disciplinary procedures when it dismissed the respondent from employment.

76. This brings me back to the point I made earlier and that is, this is a case where the finding of the trial judge in relation to the issue of guilt of the respondent has not been challenged and the Court must proceed to determine only the question of damages. This is also where I find persuasion in the contention by counsel for the respondent. I accept that damages should follow upon a finding of unlawful breach of contract of employment. In terms of measuring or assessing damages that would flow from the unlawful breach, the cases on indefinite term or open-ended contract of employment in Felix T Ramram (supra), Christopher Appa (supra), Gideon Barereba (supra), Robert Karava (supra), Ereman Ragi & Ors (supra) and Nazel Wally Zanepa (supra) are not relevant to this case. The reason being, the Courts in those cases had computed damages based on a reasonable period of notice either in or outside section 34 of the Employment Act, Ch 373. This was so because there was no notice period in each case.

77. In Boinamo Enterprises Limited (supra), the appellant did not challenge the National Court’s finding in relation to the unlawfulness of the decision to dismiss the respondent from employment. It only challenged the decision in relation to assessment of damages. There, the respondent was employed under a contract of employment which had provision for termination on four weeks notice, but the National Court found that the appellant terminated the employment outside the contract and assessed damages based on a period of five months. The Supreme Court held that damages should have been assessed under section 34 of the Employment Act, Ch 373. So that decision is of no assistance to us in the present case. The Alois Kawa’s case (supra) is also irrelevant because it can be distinguished on its facts. That was a case where Dr Kawa was not terminated but had resigned. The Supreme Court found, and rightfully so, that Dr Kawa could not have been wrongful dismissed because he was made redundant by virtue of a restructure of the company when his position was abolished.

78. The case of Papua New Guinea Banking Corporation Ltd -v- Jeff Tole (2002) SC694, is also of no relevance to this case because there was a specific provision in the contract of employment in relation to how damages should be assessed in the event of early termination for reasons other than unsatisfactory performance and or cause. In that case, the Supreme Court held that the decision of the National Court to award damages to the respondent for the balance of the contract for wrongful dismissal was wrong because amongst other reasons, parties specifically agreed in clause 28 of the contract as to the consequence that would follow in the event that the appellant terminated the respondent’s contract prematurely for reasons other than unsatisfactory performance and or cause. It was agreed that respondent should receive 12 months entitlements or the balance of the contract period, which ever of the two was the lesser. As the termination of the respondent’s employment was in accordance with the agreement, he was paid 12 months entitlements in accordance with clause 28(b) and there was nothing more due to him.

79. In my view though, the case that is relevant to the present case is Rooney -v- Forest Industries Council [1990] PNGLR 407. Whilst I agree with the appellant’s counsel contention that it is distinguishable, it is distinguishable on the facts only in that, the contract was for a specified period and parties had no right to terminate the contract before its expiry. Further, the plaintiff had a public employment contract as opposed to a private contract of employment. The Court held that the plaintiff was entitled to recover the balance of her contract period following her unlawful termination because the court found that there was no provision in the contract regarding termination upon condition. The Court reasoned as follows:

"There is no clause providing for any termination upon condition, unlike most government contracts of employment which give the right to terminate on some months notice. There is no such right here which means the defendant is liable for the full term. The contract is a contract of employment under the Forest Industries Council Act (Ch No 215) and therefore I agree that the defendant and the plaintiff contracted out of the Employment Act (Ch No 373) and therefore the power in the Employment Act to terminate before the expiration of the term does not apply."

80. But at the end of the day, it is not unique and stands on its own because in both cases, there is a contract of employment and there is no specific provision in relation to the computation of damages for early termination for reasons other than unsatisfactory performance or conduct and or cause. Also and of great importance is that, in each case, there is a fixed written contract and was unlawfully breached. In my view therefore, the usual principles of assessment of damages for breach of contract must apply. Damages should flow from the breach and not from the period of notice so as to place the injured party, here the respondent, in the same position, as far as money can do it, as if the contract had been performed. That is, it should be computed for the balance of the contract but restricted to the benefits provided in the contract, subject to mitigation of damages.

81. I conclude that because the dismissal of the respondent was unlawful, he would have worked and earned wages for the remainder of the contract period had it not been for the unlawful dismissal. I consider that, it was within the reasonable contemplation of the parties that in the event of early termination, and where the termination is unlawful, the respondent would be entitled to wages for the balance of the contract. I make this observation because first, as the contract was for a fixed period, namely three years, there was certainty between the parties as to when the contract would have been performed and came to an end. It would have ended on 20th March 2006. That would have been the date the respondent’s wages would have ceased had it not been for the unlawful breach.

82. Secondly and very importantly, as it was a fixed term contract of employment, it meant that there was job security for the respondent for three years. I have no doubt that clause 1.3 of the contract was intended to do just that, especially when it is common knowledge in this country that there is a high rate of unemployment and I entirely agree with the observation made by the trial judge in relation to the duty of employers to justify their decisions to dismiss their employees in his judgment at p 137 of the appeal book where he said, "I am not a signatory to this view because it is harsh, oppressive and unfair in circumstances where unemployment rate is high for an employer to terminate employment for a given reason that is false or unfounded."

83. I consider that employers, be it the State or private entities, large or small must be reminded to give their staff a fair go and chance to work. In saying this, this does not mean that unscrupulous employees must not be punished. If the circumstances warrant that they should be punished, then so be it, but it must be done properly and fairly; not indiscriminately.

84. Thirdly, I do not believe that awarding of damages for the balance of a fixed period contract would amount to unjust enrichment because as I have observed, an employee as is the case here, is legitimately entitled to expect to have served out the full term of the contract and would have benefited from it. In my view, it would be wrong and grossly unfair to suggest that it would be unjust enrichment on the part of the employee when in the first place, both parties committed themselves in a contract to a fixed term and renege to honour it when it is being breached.

85. For these reasons, I find no error in the trial judge’s decision to award damages for the balance of the contract.

86. However, there is one final matter I wish to raise and that is, the question of mitigation of damages. I consider that, mitigation of damages is one of the considerations to be taken into account by the Court when assessing damages. In the present case, did the respondent mitigate his damages? Did he make reasonable attempts to find alternative employment? If so, when did he do that and to who? If he is presently employed, how much is he earning? These are relevant matters to be taken into account when determining whether the respondent mitigated his damages. I am unable to find any evidence from the respondent addressing these issues to make out a case on mitigation of damages although both counsel did make submissions on damages before the trial judge at pp 123, 124 and 128 of the appeal book. Neither do I find the trial judge in his judgment directing his mind to this question. This is where I find his Honour fell into error when he assessed damages without taking into account mitigation of damages.

87. I have seriously pondered remitting the assessment of damages to the National Court for further hearing, this time to re-asses the damages with particular reference to the question of mitigation of damages in accordance with the Supreme Court’s power in section 16(d) of the Supreme Court Act, but I have decided at the end of the day against that. First, if I do that, it would further delay the completion of the matter, noting that the dispute goes back to 07th July 2003, (date of dismissal) and secondly, it would be unfair to the appellant to allow the respondent to have a second go to prove his damages by taking into account mitigation of his damages when he ought to have done so in the first place. For these reasons, I would exercise the Court’s power in section 16(c) of the Supreme Court Act to assess and give judgment on assessment of damages on the basis that the respondent had failed to mitigate his damages.

88. There are cases, especially in the National Court which have adopted an approach where the computation of an appropriate amount for failure to mitigate one’s losses is on a percentage basis as opposed to a fixed amount. One of them is University of Papua New Guinea & Ors -v- Jerry Duwaino (2009) N3727, also a case of wrongful dismissal of employment, where 10% was used as the basis for reducing an award of K10,000.00 for failure to mitigate damages. I see no reason not to use a percentage rate to reduce the award made by the trial judge in this case. I consider that given that the respondent held a senior position and also a responsible position in the appellant company before his dismissal, he was obliged for his own sake and his family to mitigate his damages which include obtaining alternative employment following his dismissal. This means, a higher percentage rate than 10% is appropriate in the circumstances. I have decided to apply 25% for the failure to mitigate damages. 25% of the total award of K102,464.22 is K25,616.05. The final amount is K76,848.16 and I so order.

89. In the end, I would allow the appeal in part and order that each party pay their own costs.

90. By majority decision, the orders of the Court are:

(1) The appeal is allowed.

(2) The decision of the National Court made on 26th October 2007 is quashed.

(3) The respondent shall pay the appellant’s costs of the appeal.

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Blake Dawson Lawyers: Lawyer for the Appellant
Daniels & Associates Lawyers: Lawyer for the Respondent