Nelson v Pruaitch [2021] PGSC 13; SC2079 (3 March 2021)

SC2079

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 30 OF 2019
BETWEEN:
DAVID S. NELSON
Appellant

AND:
PATRICK PRUAITCH, MP, MINISTER FOR FORESTS
First Respondent

AND:
NATIONAL FOREST BOARD OF PNG FOREST AUTHORITY
Second Respondent

AND:
NATIONAL EXECUTIVE COUNCIL
Third Respondent

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Respondent

Waigani: Mogish, David & Shepherd, JJ
2020: 27^th October
2021: 3^rd March

CONTRACT OF EMPLOYMENT – private contract for a fixed term – measure of damages - in the absence of a term under the contract of employment that damages will be for the balance of the contract, the appellant is only entitled to receive damages based on salary and other entitlements he would have received for the notice period.
Cases Cited

Papua New Guinea Cases
Ereman Ragi & Ors v Joseph Maingu (1994) SC459
Nazel Wally Zanepa v Ellison Kaivovo, Department of East New Britain & Anor (1999) SC 623
PNGBC v Jeff Tole (2002) SC694
Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705
Porgera Joint Venture v Robin Kami (2010) SC1060
Robert Kapo v Ayleen Bure (2010) SC 1162
Susan Love v Bridgestone Tyres (PNG) Limited, SCA 1 of 2006, Unreported Judgment of the Supreme Court (Kirriwom, Davani and Kariko, JJ) dated 3 September 2010

Overseas Cases Cited:
Gunton v London Borough of Richmond-upon-Thames [1980] 3 All ER 577

Boyo v London Borough of Lambeth [1995] 1RLR 50AC; (1980) I.C.RC. 755

Counsel:
Alois W. Jerewai, for the Appellant
Nathan Pilamb, for the Second Respondent
No appearance for other Respondents

JUDGMENT

3^rd March 2021

1. BY THE COURT: INTRODUCTION: This is the decision of the Court in a substantive appeal commenced by Notice of Appeal filed on 22 March 2019 against the whole of the judgment of the National Court constituted by Hartshorn, J (primary judge) delivered on 20 February 2019 in the matter of OS No. 756 of 2003 between the appellant as plaintiff and the respondents as first to fourth defendants in those proceedings. The judgment of the primary judge appealed was in connection with an assessment of damages reached after trial.

BACKGROUND FACTS

2. The brief background facts are these.

3. The appellant was employed by the State as the Managing Director of the National Forest Service pursuant to a contract of employment dated 6 December 2002 for a term of four years to be effective from 23 May 2002 (Contract of Employment). By a decision of the third respondent, National Executive Council (NEC), through NEC Decision No.218/2004 reached at NEC Meeting No.47/2003, the NEC approved the termination of the Contract of Employment and resolved to advise the Head of State to revoke the appointment of the appellant as Managing Director of the National Forest Service. The appellant’s employment as Managing Director of the National Forest Service was formally terminated on 27 November 2003 by publication in National Gazette No. G152 of the notice of Revocation of Appointment of Managing Director given by the Acting Head of State dated 25 November 2003. The appellant successfully challenged the termination through an application for judicial review pursued via OS No. 756 of 2003 when the National Court presided over by Los, J quashed the NEC decision to terminate the appellant’s employment as Managing Director of the National Forest Service, but refused to reinstate him to his position. The formal orders taken out included an order that the appellant’s entitlements, including salaries, allowances and other emoluments as set out in the Contract of Employment, be paid to him calculated from the date of cessation of those entitlements prior to his termination on 27 November 2003 until 27 May 2006.

4. The respondents then appealed the judgment of Los, J in proceedings instituted by SCM No. 4 of 2006. Of eleven grounds pleaded, the respondents only pursued ground 2(k) where they asserted that His Honour erred in finding that the appellant was entitled to his entitlements from the date of the termination of the Contract of Employment to the date of expiry of the contract, i.e., 23 May 2006 when that relief was not pleaded and sought in the statement filed pursuant to Order 16 Rule 3(2)(a) of the National Court Rules and not sought through the correct mode of proceedings. On 29 April 2009 the Supreme Court upheld the appeal in part in respect of ground 2(k) only. The Supreme Court ordered that if the issue of damages were not resolved by consent by 3 June 2009, the appellant (respondent in that appeal) was to file and serve a statement of claim for the purpose of assessment of damages before the National Court and the proceedings continue on pleadings until heard.

5. In the appellant’s statement of claim filed on 22 June 2010, he claimed K4,008,479.80 comprising: K1,234,137.90 for pecuniary loss of entitlements; K2,221,448.20 for loss of expected income for possible two further terms of employment as Managing Director of the National Forest Service under similar terms and conditions as those contained in the Contract of Employment; and K552,893.77 for 4% annual inflationary loss on the loss of value of the Kina for four years.

6. On 24 August 2010 the respondents filed a conditional defence which was then superseded by the filing of an amended defence on 13 February 2015. In the amended defence the respondents asserted, among others, that the appellant was not entitled to any accumulated entitlements and that he was not entitled to any entitlements claimed under the unexpired period of the Contract of Employment because entitlements for the unexpired period had not been contractually agreed. By their amended defence the respondents further asserted that the appellant was terminated for cause; that his claims if awarded would amount to unjust enrichment; and that the appellant’s claims for loss of expected income and inflation were outside the terms of the Contract of Employment.

7. The appellant filed a reply on 26 February 2015 asserting that the appellant’s termination for cause was quashed by the successful application for judicial review and that his claims for loss of expected income and inflation were not remote as they were the direct consequence of the respondents’ wrongful termination of the Contract of Employment which, among others, had also resulted in the appellant’s inability to mitigate his losses. The appellant joined issue with all other matters raised in the respondents’ amended defence.

8. The trial on assessment of damages was then conducted before the primary judge and on 20 February 2019 his Honour delivered his judgment. The primary judge held that the law concerning damages for breach of a fixed term contract was that stated in Porgera Joint Venture v Robin Kami (2010) SC1060 and Robert Kapo v Ayleen Bure (2010) SC 1162; and that pursuant to that law, the appellant was entitled to three months’ notice and a further one month for the claim for compliance with disciplinary proceedings and that salary and other emoluments for those four months under the Contract of Employment were to be calculated accordingly. It is from that judgment that the appeal arises.

GROUNDS OF APPEAL

9. Four grounds of appeal are relied upon in the Notice of Appeal in support of the appeal and they can be summarised as follows:

1. The primary judge erred in fact and in law when he incorrectly applied clauses 17.2 and 27 of the Contract of Employment in assessing damages, particularly when determining the applicable period of notice under the contract in that damages assessed should have been for all entitlements due and payable for the unexpired term of the Contract of Employment.

2. The primary judge, having fallen into error as aforesaid, further erred by wrongly applying the judgment of the Supreme Court in SCM No. 4 of 2006 and related proceedings SCM No. 44 of 2006 in respect of his assessment of damages when he did not hold that the appellant was entitled to K1,234,137.90 for the unexpired term of the Contract of Employment.

3. The primary judge erred in law in the exercise of his judicial discretion when awarding interest at the rate of 2% instead of 8% , the lower interest rate to apply from the date of filing of the statement of claim on 22 June 2010 instead of from 30 April 2006 being the date when the application for judicial review was granted and certiorari issued.

4. The primary judge erred in law in failing to consider and assess damages claimed for loss of future earnings and inflation.

RELIEF SOUGHT

10. The orders sought by the appellant in lieu of the whole of the judgment appealed against are these:

1. that damages be assessed in favour of the appellant in the sum of K1,234,137.90;

2. that interest on damages be assessed at the rate of 8% per annum from 30 April 2006;

3. that the issue of damages for loss of future income and inflation be remitted to the National Court to be assessed before another Judge;

4. that the respondents pay the appellant’s costs of the appeal on a solicitor-client basis.

ASSESSMENT OF DAMAGES

11. Mr. Jerewai for the appellant argues that the primary judge fell into error in fact and in law when making his assessment because it was submitted that his Honour failed to take into account clauses 9 and 10 of the Contract of Employment, and that even if his Honour had taken those clauses into account, the damages that ought to have been properly awarded should have been for a period of 18 months totalling K238,375.00 comprising the benefits and allowances listed in Schedule 1 to the Contract of Employment, namely: salaries (K97,500.00 @ K65,000.00 per annum), gratuity (25% of base salary being K24,375.00 @ K16,250.00 per annum) and allowances for housing (K39,000.00 @ K26,000.00 per annum), domestic servant (K4,500.00 @ K3,000.00 per annum), utilities (K4,600.00 @ K2,400.00 per annum), telephone (K5,400.00 @ K3,600.00 per annum), vehicle (K47,700.00 @ K31,800.00 per annum), entertainment (K7,800.00 @ K5,200.00 per annum) and security (K7,500.00 @ K5,000.00 per annum). In addition, Mr. Jerewai submitted that when interest at the rate of 8% annually on the sum assessed of K238,375.00 for seventeen years from 27 November 2003 totalling K324,190.00 is added, the total assessment should have been for K562,565.00.

12. Mr. Pilamb for the second respondent contends that the primary judge correctly applied the law when his Honour found that the appellant was entitled pursuant to clause 17.2 of the Contract of Employment to three calendar months’ notice and salary and other emoluments calculated for that period. In addition, Mr. Pilamb submitted that the appellant’s argument as to the application of clauses 9 and 10 of the Contract of Employment should be rejected as it was not raised before the primary judge so it cannot therefore be raised by the appellant on appeal.

13. Mr. Pilamb also contends that no error of law was made by the primary judge when he awarded interest at the rate of 2% annually because firstly, the Judicial Proceedings (Interest on Debts and Damages) Act 2015 prescribes that the rate of interest to be awarded against the State cannot exceed 2% annually; and secondly, the second respondent falls within the meaning of the State.
14. The general principles of law as to the appropriate measure of damages for wrongful dismissal are now well settled in our jurisdiction: Ereman Ragi & Ors v Joseph Maingu (1994) SC459, Nazel Wally Zanepa v Ellison Kaivovo, Department of East New Britain & Anor (1999) SC 623, PNGBC v Jeff Tole (2002) SC694, Porgera Joint Venture v Robin Kami (2010) SC1060, Susan Love v Bridgestone Tyres (PNG) Limited, SCA 1 of 2006, Unreported Judgment of the Supreme Court (Kirriwom, Davani, and Kariko, JJ) dated 3 September 2010 and Robert Kapo v Ayleen Bure (2010) SC1162.

15. These cases establish the proposition that where there is a contract of employment allowing for either party to terminate such contract upon giving notice in accordance with the period of notice agreed to, the measure of damages an employee is entitled to receive is based on the salary and other entitlements he or she would have received had the contract been lawfully terminated. Damages in that situation are therefore calculated by reference to the period of notice only.

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

“24. I consider that the common law principles on compensation for want of notice and want of disciplinary procedures in a private employment contract developed in Gunton, Janciuk, Boyo, Focsa set out above are persuasive, appropriate and applicable to the circumstances of this country and apply them to the case at hand. [Many] 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 [are] new and require 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 [are] for the reasonable period during which proper disciplinary process would have been initiated and concluded in accordance with any time lines prescribed for various steps in the disciplinary procedure to be concluded. For a start, it would very much depend on the steps in the procedures set out in the disciplinary process and the time limit, if any, prescribed for various procedural steps where there are no time limits prescribed, it would come down to assessing what would be as reasonable time frame to cover the main steps in the process – formulating and presenting complaint, opportunity to reply and a decision made and communicated to the employee and any provisions for appeal or review from that decision by a higher management body or person. It is not a matter for the Court to analyze and speculate on the employee’s chances of success if the process was completed.”

17. Clause 17.2 of the Contract of Employment essentially states that the contract can be terminated by either party (the Head of State or Managing Director) by giving three calendar months’ notice in writing. The primary judge succinctly canvassed this issue from paragraphs 5 to 9 of his judgment. Hence, in the absence of a term under the Contract of Employment to the effect that damages would be for the balance of the contract, the appellant is only entitled to be paid damages based on the salary and other entitlements he would have received for the notice period.

18. We concur with Mr. Pilamb’s contention that the primary judge correctly applied the law when his Honour found that the appellant was entitled pursuant to clause 17.2 of the Contract of Employment to three calendar month’s notice and salary and other emoluments calculated for that period.

19. There is an abundance of case authorities which support the principle that unless an appellant has raised an issue in the Court below, the appellant cannot raise it on appeal and succeed: e.g. Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705. Given that this principle is well established, we concur with Mr. Pilamb’s submission that the appellant cannot in this appeal raise any issue as to the application of clauses 9 and 10 of the Contract of Employment as that issue was not pleaded or canvassed before the primary judge.
20. Clause 27 of the Contract of Employment deals with disciplinary matters and the procedure for resolving such matters. The primary judge addressed this issue at paragraph 10 of his judgment. His Honour said that the claim for three months in relation to the institution and determination of disciplinary proceedings was excessive having regard to clause 27. His Honour formed the view that one month was appropriate. In this regard, we endorse the view expressed in Porgera Joint Venture v Robin Kami (2010) SC1060 by Injia CJ at paragraph 26 that damages are “for the reasonable period during which proper disciplinary process would have been initiated and concluded in accordance with any timelines prescribed for various steps in the disciplinary procedure to be concluded.”

21. We are unable to find any substantive error on the part of the primary judge in reaching that conclusion.

22. For these reasons, the first ground of appeal is dismissed.

23. In view of our findings above, we also dismiss the second ground of appeal. Again, we are unable to find any substantive error on the part of the primary judge in reaching the conclusion that the appellant was only entitled to be paid damages based on the salary and other entitlements he would have received for the notice period.

24. The third ground of appeal relates to the primary judge’s exercise of discretion. It is trite law that where an appeal is against a primary judge’s exercise of discretion, the onus is on the appellant to show that the exercise of discretion is clearly wrong or an identifiable error has occurred in the exercise of discretion. The appellant has not discharged that onus. We find no error in the primary judge’s exercise of discretion to award interest at the rate of 2% annually. We concur with and accept Mr. Pilamb’s submission that the Judicial Proceedings (Interest on Debts and Damages) Act 2015 limits any award of interest on damages against the State to a maximum of 2% annually and that the second respondent falls within the meaning of the State for the purposes of the Act.

25. In relation to the fourth ground of appeal, we have perused the transcript of the trial conducted before the primary judge on 8 November 2017. We have also perused the extracts of submissions which were relied on by the parties at trial. We have accordingly ascertained that no submissions were made by the parties at trial on the other heads of damages now claimed in this appeal by the appellant, including damages for loss of future earnings and inflation. Consequently, the appellant’s fourth ground of appeal is without merit and is dismissed.

CONCLUSION

26. As all grounds of appeal have been dismissed, it follows that all relief sought in the appeal are refused.

ORDER

27. The formal orders of the Court are:

1. The appeal filed by the appellant against the respondents pursuant to notice of appeal filed on 22 March 2019 is dismissed in its entirety.

2. The orders of Hartshorn, J made on 20 February 2019 in OS No. 756 of 2003 - David S. Nelson v National Forest Board of PNG Forest Authority & Ors -are affirmed.

3. The appellant shall pay the second respondent’s costs of and incidental to the appeal on a party/party basis, such costs to be taxed if not agreed.

Judgment accordingly
___________________________________________________________________
Jerewai Lawyers: Lawyers for the Appellant
Mel & Henry Lawyers: Lawyers for the Second Respondent