Telikom PNG Ltd v Kopalye [2021] PGSC 66; SC2141 (3 August 2021)

SC2141

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 15 OF 2020

BETWEEN:
TELIKOM PNG LIMITED
Appellant

AND:
YAKI KOPALYE
Respondent

Waigani: Hartshorn J, Collier J, Logan J
: On the papers
2021: 3^rd August

CIVIL APPEAL – appeal of assessment of damages following entry of default judgment after striking out of defence – whether appellant able to argue issues in the appeal which were not raised before the primary judge – whether primary judge estopped from assessing damages by a Deed of Release – whether appellant should be granted leave to raise the issue of penalty

Cases Cited:
Papua New Guinea Cases

Motor Vehicles Insurance (PNG) Trust v. Pupune [1993] PNGLR 370
Post PNG Ltd v. Yama Security Services Ltd (unreported and unnumbered judgment delivered on 26th July 2001; in SCA 80 of 2000)
Electoral Commission v. Pila Niningi (2003) SC710
Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705
Kala Rawali v. Paias Wingti; Tom Olga v. Paias Wingti (2009) SC1033
Porgera Joint Venture v. Kami (2010) SC1060
PNG Tropical Wood Products Ltd v. Manuel Gramgari (2013) SC1145
Paul Paraka Lawyers v. Public Officers Superannuation Fund Board (2014) SC1363
National Capital District Commission v. Yama Security Services Ltd (2017) SC1606
Papua New Guinea Law Society v. Cooper (2017) PGSC 10; SC1585
International Finance Co v. KK Kingston Ltd (2019) SC187
Keko v. Barrick (Niugini) Ltd (2019) SC1870
Atlas Corporation Ltd v. Ngangan (2020) SC1995
Nikint Investment Ltd v. Niganu (2020) SC1919

Overseas Cases

Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79
Gould v. Mount Oxide Mines Ltd [1916] HCA 81; (1916) 22 CLR 490
Dare v. Pulham [1982] HCA 70; (1982) 148 CLR 658
Coulton v. Holcombe [1986] HCA 33; (1986) 162 CLR 1
Murray v. Leisureplay Plc [2005] EWCA Civ 963
Cavendish Square Holdings BV v. Makdessi [2015] UKSC 67; [2016] AC 1172

Counsel:

Mr. E Apis, for the Appellant
Mr. W Mapiso, for the Respondent

3^rd August, 2021

1. HARTSHORN J: I have had the privilege of reading the draft judgments of Collier J. and Logan J. Their Honours have given detailed consideration to this appeal and I now provide a few comments of my own. I agree that the appellant is not able to successfully argue the issues which it raises in this appeal as they were not raised by the appellant before the primary judge in the National Court: Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705; Coulton v. Holcombe [1986] HCA 33; (1986) 162 CLR 1.

2. In regard to reliance upon s. 155(4) and s. 158(2) Constitution for orders to be made which are necessary to do justice in the circumstances of a particular case and for paramount consideration to be given to the dispensation of justice to permit the raising of an issue on appeal which was not raised at the National Court, I refer to some of the numerous opinions of the Supreme Court which are to the effect that “justice” is to be interpreted as “justice according to law”: Electoral Commission v. Pila Niningi (2003) SC710; Kala Rawali v. Paias Wingti; Tom Olga v. Paias Wingti (2009) SC1033; PNG Tropical Wood Products Ltd v. Manuel Gramgari (2013) SC1145; Nikint Investment Ltd v. Niganu (2020) SC1919.

3. I have nothing more to add apart from respectfully agreeing with Collier J. and Logan J. that this appeal should be dismissed and with the orders proposed by Collier J.

4. COLLIER J: Before the Court is a notice of appeal filed on 11 February 2020 by Telikom PNG Ltd (Telikom), against the whole of the decision of the National Court at Waigani given on 7 January 2020 in WS 65 of 2012 Yaki Kopalye v Telikom PNG Ltd. In that decision the Court ordered Telikom to pay the respondent damages in the amount of K785,363.70, following a default judgment in his favour on 18 November 2016 when the defence of Telikom was struck out.

5. The appellant seeks the following orders:

(a) The appeal be allowed;

(b) The matter be remitted to the National Court for re-assessment of damages;

(c) Alternatively, an order be made that the Deed of Release dated 11 July 2007 entered into between parties is valid and the Respondent is estopped from reneging on it;

(d) Further in the alternative, an order be made that the amount of K58,024.60 paid by the appellant to the respondent pursuant to the Deed of Release dated 11 July 2007 is just and adequate damages;

(e) Costs; and

(f) Any other orders the Court deems appropriate.

6. This appeal came before the Court for determination on the papers.

7. In my view the appeal should be dismissed. Before turning to my reasons, it is useful to outline relevant background facts.

BACKGROUND

8. Key background facts were summarised in the primary Judge’s reasons, and the submissions of both parties.

9. On 23 May 2005, the respondent entered into a written contract of employment with Telikom under which he was employed as its Company Secretary for a term of 4 years commencing on 1 May 2005 and expiring on 30 April 2009.

10. On 18 July 2006, the head of human resources at Telikom, Mr Lucas Michael, suspended the respondent from active duties by way of letter. The respondent was issued with three charges and was required to respond within 7 days. The respondent replied to the charges on 27 July 2006.

11. By letter signed by Mr Michael and dated 24 August 2006, the respondent’s employment with the appellant was terminated. The letter concluded:

Final entitlements owed to you will be paid only after all company issued property is returned and monies owed by you to Telkom are deducted.

12. The parties executed a Deed of Release on 11 July 2007. Materially the Deed provided:

WHEREAS

1. The Releasor entered into a contract of employment with the Release as its Company Secretary for a term of four (4) years commencing May 23^rd, 2005.
2. During the currency of his employment, the Releasee terminated the Releasor’s Contract of Employment on the 24^th July 2006, due to the breach of the Releasors Employment Contract.

100. Although the Releasor has claimed that he was unlawfully terminated as he has not breached his Employment Contract as alleged by the Releasee and that he is entitled to be compensated for unlawful termination, he has accepted the Releasee’s position to settle this matter once and for all.

4. The Releasee on a without prejudice basis resolved to settle the Releasors claim on the following terms:
   1. That the Releasor be paid the usual payment and entitlements as per clause 6.3 (d) of the Contract of Employment, the detail calculations of which are attached, that are due to him on termination of employment, and
   2. That in exercising its discretion the Releasee resolved to pay to the Releasor a sum of K50,000.00, in full and final settlement of this matter.
7. The Releasor has agreed to accept the above payments as his full and final entitlements and in settlement of his claim for unlawful termination by the Releasee.

NOW THIS DEED WITNESSETH and is hereby agreed and declared between the parties that:

In consideration of the payments and benefits set out herein, the receipt of which is hereby acknowledged, without any admission of liability by the Releasee and in complete settlement, satisfaction, compromise and discharge of all actions, claims, proceedings, accounts, demands costs and expenses whatsoever which the Releasor DOES HEREBY FOREVER RELEASE AND DISCHARGES the Releaseee, its servants, employees or agents from same and covenants to indemnify and to keep indemnified at all times the Releasee, its servants or employees against all actions, suits, claims, costs and demands by the Releasor, his heirs, Executors or Agents whatsoever and howsoever arising in respect of the abovementioned termination of employment.

(errors in original)

13. A cheque in the amount of K8,024 was paid to the respondent as repatriation costs (although it appears that this cheque may have been cancelled).

14. After a number of failed negotiations regarding the payment of the balance of the respondent’s entitlements, the respondent filed proceedings in the National Court alleging unlawful termination, and sought damages.

15. The respondent pleaded Clause 6.3(e) as the material term of the contract that was breached.

16. Clause 6.3(e) provided:

The Employee shall receive the following entitlements on the termination of employment in the circumstances described below:

...

...

e) The Employer terminating the Employee as per Clause 6.2 (g):

(i) The Employee shall be entitled to receive and the Employer shall pay the Employee, the full benefits as per Schedule 1 and Schedule 2 for the unexpired duration of this Agreement or ex-gratia retrenchment payment calculated using the Redundancy ex-gratia scheduled provided in the 2004 Enterprise Agreement of Telikom, whichever is greater.

(ii) Payment of full repatriation costs as specified in Schedule 2 for the Employee and approved dependents from the location of employment to the Employee’s home village.

17. Clause 6.2 (g) provided:

Notwithstanding Clause 6.1 the employment of the Employee may be summarily terminated on the occurrence of any one or more of the following events:

...

...

7. by the Employer dismissing the Employee for reasons other than those set out in Clause 6.2 (c), (d), (e) or (f).

18. Clause 6.2 otherwise permitted summary termination for reasons including mental or bodily infirmity (cl 6.2 (c)), the employee being convicted of an indictable criminal offence (cl 6.2 (d)), the employee being declared bankrupt (cl 6.2 (e)) or the employee breaching his or her obligations as defined in cl 7 of the employment contract (cl 6.2 (f)). Clause 7 of the employment contract provided for general duties and obligations of the employee, including devoting his or her full business time and attention exclusively to the business, using his or her best endeavours to further the interests of the employer, attending to the duties of Company Secretary, not entering into the service of any other person, and not during the term of employment engaging in undertakings or business of similar nature or in competition with the employer.

PRIMARY DECISION

19. Before the primary Judge, the respondent relevantly alleged that the company constitution of Telikom at the material time created three senior executive positions, namely Managing Director, Company Secretary and General Manager Finance, and that only the Board of Directors had the power to appoint, suspend and terminate the employment contracts of the three respective senior executive positions. On 18 November 2016, the Court ordered as follows:

1. The Defendant’s Defence filed on 23 March 2012 is struck out.

2. The Judgment on liability is entered in favour of the Plaintiff with damages to be assessed.
3. Costs of and incidental to the Application be paid by the defendant if not agreed to be taxed.

4. The time of entry of the Orders be abridged.

20. The orders of 18 November 2016 were not appealed.

21. The primary Judge noted that, in those circumstances, all questions of liability in respect of the matters pleaded in the statement of claim had been resolved, and the only remaining legal issue requiring consideration and determination was whether the plaintiff was entitled to any of the damages sought.

22. The primary Judge noted 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 would be based on the salary and other entitlements he or she would have received had the contract been lawfully terminated and that damages would therefore be equivalent for the period of appropriate notice only.

23. The primary Judge observed that, once a default judgment was entered, the facts as pleaded and their legal consequences in terms of establishing the cause of action as pleaded must be regarded as proven: Coecon Ltd (Receiver/Manager Appointed) v. National Fisheries Authority (2002) N2182, Mel v. Pakalia (2005) SC 790. His Honour continued:

33. 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 would be based on the salary and other entitlements he or she would have received had the contract been lawfully terminated. Damages would therefore be equivalent for the period of appropriate notice only: Porgera Joint Venture, Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060, Susan Love v Bridgestone Tyres (PNG) Limited, SCA 1 of 2006, Unreported Judgment of the Supreme Court comprising Kirriwom, Davani, and Kariko, JJ dated 3 September 2010, Robert Kapo v Ayleen Bure (2010) SC1162.

24. His Honour then turned in detail to the facts of Porgera Joint Venture v. Robin Kami, and adopted the following observations of Injia CJ:

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.

25. The primary Judge noted that the respondent was employed under the contract by the appellant as its Company Secretary to be based in Port Moresby for a term of four years commencing on 1 May 2005 and terminating on 30 April 2009 and at a base salary of K88,000.00 per annum and other benefits paid in accordance with Schedule 2. The contract was reviewable at the appellant’s discretion every 12 months.

26. Clause 6 of the contract was relevant as it provided for termination.

27. At [40] the primary Judge found that he was satisfied, on the evidence and judgment being entered on the pleading, that the respondent:

• was wrongfully terminated contrary to Telikom’s constitution and the contract, and
• that Mr Kopalye’s termination was effected under or fell within the meaning of Clause 6.2(g) of the contract.

28. His Honour stated that, by Clause 6.3(e) of the contract, the parties agreed that the respondent’s entitlements following termination by the appellant within the meaning of Clause 6.2(g) were referable to the balance of the term of the contract.

29. The primary Judge found that there was no evidence to show that the entitlements for the unexpired duration of the contract were not greater than the ex gratia retrenchment payment calculated using the Redundancy ex gratia schedule provided in the 2004 Enterprise Agreement of Telikom. Therefore, the respondent was entitled to receive his entitlements in accordance with Clause 6.3(e) of the contract, namely for the unexpired portion of the contract. The respondent’s termination was effective from 24 July 2006, and the unexpired portion of the contract from that date to 30 April 2009 was approximately 2 years and 9 months.

30. The primary Judge found that the respondent was entitled to receive, subject to the application of the Income Tax Act, the sum of K244,076.00 annually for the following benefits or entitlements as per Schedule 1 and Schedule 2 of the contract:

1. Base Salary K88,000.00
2. Gratuity (25% of base salary and Domestic Market Allowance) K27,000.00
3. Superannuation (Employer’s 7.7% contribution only) K6,776.00
4. Domestic Market Allowance K20,000.00
5. Housing Allowance K25,000.00
6. Vehicle Allowance K25,000.00
7. Education Allowance K30,000.00
8. Entertainment Allowance K8,000.00
9. Mobile Phone Allowance K4,800.00
10. Club Fees K1,500.00
11. Security Allowance K8,000.00

31. The respondent was entitled to receive K671,209.00 for the unexpired duration of the contract of 2 years and 9 months made up as follows:

1. 2 years at K244,076.00 per annum K488,152.00
2. 9 months at K244,076.00 per annum K183,057.00

32. The primary Judge awarded the respondent K671,209.00.

33. In relation to repatriation costs, the respondent sought K8,000.00. The primary Judge awarded the respondent the sum of K8,000.00, referable to Clause 6.3(e)(ii) and Schedule 2 Item 11 of the contract.

34. In relation to unused holiday pay and allowances, the primary Judge observed that there was inadequate or no particularisation of the claim in the statement of claim, also noting that it appeared that the respondent was not from Port Moresby, being his place of employment. His Honour considered it followed that the respondent was entitled to the benefits under Schedule 2 Items 6(a) and 10(b) of the contract.

35. The respondent made claims for both leave fares and for travel costs. The primary Judge found that he could not claim both as travel costs under Schedule 2, Clause 10(c) would only apply if he were from the place of employment, rejecting the claim for K10,000.00. The respondent’s claim of K17,828.70 for leave fare entitlements was awarded.

36. In relation to long service leave, the primary Judge rejected the respondent’s claim as the contract appeared to be silent on the question of long service leave.

37. In relation to money in lieu of furlough, his Honour considered that the claim had no foundation in the pleadings.

38. In relation to damages for breach of constitutional right, the primary Judge reiterated that the respondent’s employment with the appellant was under and governed by the contract, which governed the procedure for termination and the respondent’s entitlements following termination. The primary Judge found that there was no justification for this claim.

39. The respondent made a claim for a total of K65,000.00 for disappointment, mental anxiety and distress, frustration, inconvenience, and pain and suffering he had endured as a result of his unlawful termination. The primary judge found that there was evidence to support this aspect of the claim, awarding K30,000.00.

40. A claim for loss of employment and earning opportunity was raised in the statement of claim, however was abandoned at trial.

41. His Honour found that the respondent’s claim for opportunity for retaining salaries and benefits and the claim for damages for defamation of character had no foundation in the pleadings.

42. His Honour rejected the respondent’s claim for exemplary damages, as the claim had no foundation in the pleadings. The primary Judge stated that, in any event, exemplary damages were not usually available in a claim for breach of contract.

43. The primary Judge noted that no specific relief was claimed in relation to claims for loans from individuals and financial institutions.

44. The respondent claimed interest at 8% per annum on the total amount of damages pursuant to the provisions of the Judicial Proceedings (Interest on Debts and Damages) Act, Chapter 52. However, that Act was repealed by the Judicial Proceedings (Interest on Debts and Damages) Act 2015 which came into force on 16 March 2016. The primary Judge ordered interest to be paid at the rate of 2% yearly on the amount of K677,037.70 from the date of filing of the writ of summons (8 February 2012) to the date of judgment, being a period of 8 years. His Honour’s calculation of interest payable for that period was K108,326.00.

45. The primary Judge awarded the respondent the costs of the proceedings to be paid by the appellant, on a party-party basis, to be taxed if not agreed.

46. It followed that the total amount payable to the respondent by the appellant following the primary judgment was K785,363.70.

NOTICE OF APPEAL

47. Initially the appellant relied on six grounds of appeal, however in reply submissions abandoned two of those grounds. The remaining grounds on which the appellant relied were as follows:

(a) His Honour erred in law in holding (at page 14 and 15) that “damages will not be for the balance of the contract unless the parties agree to such a term under the contract” when such an agreement is unenforceable in law per the Supreme Court Decision in Post PNG Ltd v. Yama Security Services (unreported, 26 July 2001, SCA 80 of 2000)
(b) His Honour erred in law in awarding the Respondent entitlements for the balance of the term of the Employment Contract between the parties (“the contract”) pursuant to Clause 6.3 (e)(i) of the said contract when Clause 6.3(e)(i) was a penalty clause in nature and therefore unenforceable in accordance with the principles established in the Supreme Court Decision in Post PNG Ltd v. Yama Security Services (unreported, 26 July 2001, SCA 80 of 2000)
(c) His Honour erred in law when he departed or failed to apply the established principles of law applicable to the appropriate measure of damages for wrongful dismissal cases where there is no provision for period of notice in a contract of employment as decided in the Supreme Court case of Ereman Ragi and the POSF Board v. Maingu (Unreported Judgement of the Supreme Court dated 29^th June, 1994, SCA 459)
(d) ...
(e) ...
(f) His Honour erred in law in deciding not to consider whether the Respondent was estopped by a Deed of Release dated 11 July 2007 (at paragraph 23, p.8), notwithstanding that the Appellant’s Defence had been struck out and judgement entered, particularly when the Respondent had accepted a payment pursuant to the Deed of Release, and the proper dispensation of justice required that His Honour satisfy himself that the Deed of Release was legally void.

48. The appellant sought the following orders:

(a) The appeal be allowed; and
(b) The decision of the National Court of 7^th January 2019 be set aside; and
(c) The matter be remitted to the National Court for re-assessment of damages;
(d) Alternatively, an order be made that the Deed of Release dated 11 July 2007 entered into between the parties was valid and the respondent was estopped from reneging on it;
(e) Further in the alternative, an order be made that the amount of K58,024.60 paid by the appellant to the respondent pursuant to the Deed of Release dated 11 July 2007 was just and adequate;
(f) Costs; and
(g) Any other orders the Court deemed appropriate.

SUBMISSIONS OF THE PARTIES

49. In summary the appellant submitted as follows.

• Grounds of appeal (a), (b) and (c) raised related legal issues, namely

1. Whether clause 6.3 (3) of the employment contract was a penalty clause and unenforceable at law, and
2. Whether the primary Judge was correct in law by awarding damages for the balance of the contract.

• In respect of ground of appeal (f), the relevant legal issue concerned (3) whether the primary Judge dispensed justice when he did not consider the effect of the Deed of Release on the entire claim, even after summary judgment was entered.
• Contractual clauses that provide for the payment of the balance of a contract are penalties, and therefore unenforceable: Post PNG Ltd v Yama Security Services.
• Clause 6.3(e) is a penalty clause and therefore not enforceable.
• The primary Judge also fell into error when he failed to inquire into the matter to ascertain whether the damages would be a genuine pre-estimate of Mr Kopalye’s entitlements.
• In assessing damages for wrongful termination, the measure of damages should be the period of notice to which the contract would have been legally terminated. The primary Judge committed an error of law when he failed to imply into the contract the provisions of the Employment Act when there was no notice period under the contract.
• The primary Judge erroneously applied the principles articulated in Porgera Joint Venture
• The primary Judge found that the termination of Mr Kopalye’s employment was wrongful, however fell into error.
• His Honour made an erroneous finding that the wrongful termination of a fixed contract would be deemed wrongful if the proper disciplinary process was not followed, as opposed to breach of a term of the written contract itself. In particular there was no disciplinary process under the contract of employment for the primary Judge to safely make a finding as to the wrongfulness of the termination in relation to breach of a contract; there was no evidence of the appellant’s constitution adduced or admitted at trial to safely make a finding as to the propriety of the respondent’s termination; there was no pleading that the appellant’s constitution formed part of the respondent’s terms and conditions of employment and that they were breached.
• The primary Judge denied the appellant the right to submit on evidence regarding the Deed of Release when the Court knew of its admissibility.
• Although the appellant conceded that grounds (a), (b), (c) and (f) raised issues of law not raised at trial, the issues required the appellate court to intervene and overturn the decision the subject of this appeal. The issues are fundamental or critical issues of law that the primary Judge failed to take into consideration and requires correction by the appellate Court
• The respondent does not address the threshold issue of addressing the principles of law applicable in breach of contractual terms and the measure of damages in unlawful termination cases. The respondent has not addressed such authorities of Post PNG v Yama Security Services, Porgera Joint Venture, or Ereman Ragi & POSF Board v Maingu (unreported 29 June 1995, SCA 458).
• The primary Judge was led into error on issue of law

50. In summary the respondent submitted as follows:

• Grounds of appeal (a), (b), (c) and (f) raise issues not raised before the primary Judge, and the Court should not entertain them on appeal. Further, ground (f) is an attempt to revisit the issue of liability.
• Ground (f) raises a new argument on appeal not before the primary Judge.
• An award of damages is an exercise of judicial discretion, and an appellate Court will be slow to overturn such a decision.
• The respondent seeks costs on an indemnity basis in circumstances where the appeal lacks merit and the appellant simply seeks to delay payment of damages

CONSIDERATION

51. As the appellant no longer presses grounds of appeal (d) and (e) it is unnecessary for the Court to consider them. In relation to the remaining grounds of appeal before the Court, an important threshold issue concerns the appellant’s concession that grounds of appeal (a), (b), (c) and (f) all raised issues not put to the primary Judge.

52. In Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705 the Supreme Court observed:

It is settled law that, unless a party has raised an issue in the court below, he is not at liberty to raise it on appeal. There are many authorities on point. An example of that is Motor Vehicle Insurance (PNG) Trust v. John Etape [1994] PNGLR 596 at p. 599 which followed and reaffirmed an earlier decision of the Supreme Court in Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370 at pp. 374 to 775

53. The principle that, on appeal, an appellant is not at liberty to raise issues not raised before the primary Judge at trial, is distinguishable from the general principle concerning the role of pleadings and particulars at trial. Specifically, pleadings and particulars furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it; define the issues for decision and thereby enable the relevance and admissibility of evidence to be determined at the trial, and give a defendant an understanding of the plaintiff’s case: Kapi DCJ and Jalina and Doherty JJ in Motor Vehicles Insurance (PNG) Trust v. Pupune [1993] PNGLR 370 citing Dare v. Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664. The Supreme Court in Motor Vehicles Insurance (PNG) Trust v. Pupune [1993] PNGLR 370 noted however that pleadings are only a means to an end, and if parties in fighting their legal battles choose to meet each other on different issues, they cannot hark back to the pleadings and treat them as governing the area of contest (Gould v. Mount Oxide Mines Ltd [1916] HCA 81; (1916) 22 CLR 490 at 517).

54. The difficulties attendant on permitting an appellant to raise, on appeal, new issues not previously before the primary Judge at first instance were explained by this Court in International Finance Co v. KK Kingston Ltd (2019) SC1872 and Atlas Corporation Ltd v. Ngangan (2020) SC1995. In both cases the Supreme Court adopted the following statement of principle articulated by the High Court of Australia in Coulton v. Holcombe [1986] HCA 33; (1986) 162 CLR 1:

It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.

(emphasis added)

55. I similarly consider this principle to be applicable in the appeal before us. I particularly note the following.

56. First, before the primary Judge the appellant submitted as follows:

And so, your Honour, our respectful submission this morning would be that liability has already been found on the part of the defendant. And for the assessment of damages, we say that the schedules in the contract of employment point out that it is 250,000 per annum and the contract was terminated one year after the signing of the contract which effectively means that there are three years remaining. And so it should be that three year period and calculated against the 250,000 per annum.

So our submission is that if the plaintiff is to seek damages then it would be for a total cost of 750,000 which would be equivalent to his contractual period that is outstanding. And given the application of the cases in Porgera Joint Venture v Kami, this is also - if I may also refer your Honour to another case and that was earlier decided on which was also relied on in the Porgera Joint Venture matter. That is Apa v Namah. It is a 1992 matter reported in the Papua New Guinea Law Reports volume at page 395. In that the Court states that it is a general rule that the employee wrongfully dismissed can recover damages for pecuniary loss resulting from wrongful termination to the equivalent of the appropriate notice. That is for contracts that have not—that are not more or less written contracts but for those written contracts, the judgment further goes on to say that: "For the written contracts, the damages should be assessed strictly to the term of the contract".

So with that, our respectful submission would be that on the aspect of the assessment of damages we say that it should strictly draw down to the term which is clause 6.3 of the contract of employment and the schedules that are at the back that actually calculates the amount that is entitled to the plaintiff and for the duration of the period in which the contract was prematurely terminated. That is our respectful submission with respect to that....................... .........................

So we say that - our respectful submission is that liability has been admitted and if the damages are to be paid it has to be strictly confined to the three year period of the terminated contract of employment. And I will strictly say that it should stick to 750,000 for the three years due and of course costs will follow the event because liability has been admitted so costs will be another aspect of it. But our respectful submission is that it should strictly draw down to the contract terms. That is our short submission, your Honour. Thank you.

57. Plainly, before his Honour the appellant did not argue the issues currently raised in the grounds of appeal. Indeed, from this submission it appears that the appellant conceded that:

• either the respondent had been wrongfully dismissed, or damages should be assessed on the basis that he had been wrongfully dismissed;
• the proper basis for the assessment of damages was in accordance with principles explained by Wood J in Appa v. Wama, Secretary, Department of Western Highlands and The State [1992] PNGLR 395; and
• the respondent was entitled to seek damages in the total amount of 750,000 which was equivalent to his contractual period remaining at the time of termination.

58. Second, it was not until the respondent in his submissions cavilled with the notice of appeal and the submissions of the appellant that the appellant conceded that the notice of appeal raised new grounds. Certainly, no leave has been sought by the appellant, and no reference made by it to such authorities as Fly River.

59. Third, no explanation has been offered by the appellant as to why issues of law, not raised before the primary Judge at trial, are suddenly now raised on appeal.

60. Finally, I note that, notwithstanding the absence of an application for leave on the part of the appellant in respect of the grounds of appeal, it is open to the Court to make such orders as are necessary to do justice in the circumstances of a particular case (s 155(4) Constitution, and see Papua New Guinea Law Society v Cooper [2017] PGSC 10; SC1585). If, for example, it was plain on the face of his Honour’s judgment that a miscarriage of justice had occurred through the misapplication of the law, it would be appropriate for this Court to intervene. I am not persuaded that this is the case.

61. The appellant relied in particular on the unreported decision of the Supreme Court in Post PNG Ltd v. Yama Security Services Ltd (unreported and unnumbered judgment delivered on 26th July 2001; in SCA 80 of 2000). Relevantly in that decision the Supreme Court held:

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 ensure 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).’

62. Their Honours in Post PNG further held that a Court examining a contract with such a provision had the duty to:

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

63. The decision in Post PNG Ltd has been subsequently followed in numerous decisions of this Court.

64. In Porgera Joint Venture v. Kami [2010] SC1060 for example, Gabi J referred to Post PNG, and stated:

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).

65. More recently in National Capital District Commission v. Yama Security Services Ltd (2017) SC1606 the Supreme Court (at [37]-[47]) reiterated the principles explained in Post PNG Ltd, including the obligation of the trial judge to consider whether a clause calculating payment as a result of termination or breach was a genuine pre-estimate of damages and compensatory in character, or a penalty.

66. Examination of the judgment of the primary Judge in this case reveals that his Honour discharged this obligation. In particular his Honour carefully, and at length, examined the relevant contract, and, informed by the submissions of the parties, found that the measure of damages to which the respondent was properly entitled was based on the salary and other entitlements he would have received had the contract been lawfully terminated. The reasoning of his Honour in assessing damages payable in no way supports a proposition that the relevant contractual terms constituted a threat over the appellant to secure performance of the contract.

67. In these circumstances grounds of appeal (a), (b) and (c) are unsubstantiated.

68. In relation to ground of appeal (f), his Honour had regard to the appellant’s claim that the Deed of Release entered by the parties was an absolute defence to the respondent’s entire claim, however observed:

In the present case, on the entry of judgment following the striking out of the defendant's defence, it was proven that there was a breach of the contract as alleged by the plaintiff and that left only the question of what damages necessarily flowed from the breach. The issue regarding the Deed of Release raised in the defendant's defence to my mind is no longer a live one as a consequence.

69. In circumstances where the appellant’s defence had been struck out, the strike out decision was not challenged, liability was established, and the only question for the primary Judge (and this Court) is the assessment of damages for liability, there is no merit in a claim by the appellant that the primary Judge was estopped from assessing damages, or ought to have considered whether he was so estopped, by reference to the Deed of Release. Ground of appeal (f) is not substantiated.

CONCLUSION

70. It follows that the appeal should be dismissed.

71. The respondent has sought orders for interest from the date of delivery of his Honour’s decision, until the date of judgment, payment in full within seven days, and indemnity costs.

72. I accept that interest should be paid as sought.

73. In respect of the timing of payment, I consider it reasonable to allow 30 days payment rather than seven days.

74. I also consider that costs ought to follow the event. In relation to whether costs on an indemnity basis should be awarded, I note the comments of Gabi J (Sakora J agreeing) in Paul Paraka Lawyers v. Public Officers Superannuation Fund Board (2014) SC1363:

8. The award of costs on an indemnity basis is discretionary. An order for costs on an indemnity basis may be made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blameworthy that he should be so punished by such an order (see Rex Paki vs. MVIL (2010) SC1015). The question is whether the conduct of the appellant in this matter is such that it caused the respondent to incur unnecessary costs.
9. ... Where an appeal is without merit and the actions of the appellant have caused the respondent an enormous amount of wasted time, effort and money, the conduct of the appellant must be considered to be improper, unreasonable and blameworthy.

(see also Keko v. Barrick (Niugini) Ltd (2019) SC1870)

75. While ultimately I have found the appeal should be dismissed, I do not consider that the conduct of the appellant is so improper, unreasonable or blameworthy that it should be punished by an indemnity costs order. The proper order is for the appellant to pay the respondent’s costs on a party-party basis, to be taxed if not agreed.

76. In my view the following orders are appropriate:

1. The appeal be dismissed.
2. The appellant pay the respondent’s costs of the appeal on a party-party basis, to be taxed if not otherwise agreed.
3. The appellant pay the judgment debt of K785,363.70 plus post judgment interest at 2% per annum from 7 January 2020 until payment.
4. For the avoidance of doubt, the appellant pay the respondent his judgment debt and interest in full within thirty (30) days from the date of this Order.
   

77. LOGAN J: I have had the privilege of reading in draft the judgement of Collier J.

78. Drawing upon the thorough analysis of the evidence by the learned primary judge, her Honour has summarised the relevant facts and the course of proceedings in the National Court. I gratefully adopt this summary.

79. Having regard to the course of proceedings in the National Court, it is difficult to do other than conclude that the appellant, Telikom PNG Limited (Telikom), was not well served by its lawyers. Telikom’s defence was struck out. In that defence, it had, amongst other things, sought to rely upon a Deed of Release to which it and the respondent, Mr Yoke Kopalye were said to be parties, as a complete bar to his damages claim. The defence did not plead that the provision in the employment contract in respect of the position of company secretary in respect of early termination by the Telikom as employer constituted a penalty, yet it sought for the first time to raise this issue on appeal. Moreover, judgement went by default.

80. Neither the striking out of the defence nor the judgement by default were ever the subject of challenge. Telikom must live with the consequence. Is it also precluded from challenging the amount of damages awarded on the basis that their contractual foundation is a penalty?

81. In her judgement, Collier J has set out the pertinent authorities in relation to the raising of an issue for the first time on an appeal. True it is that the jurisdiction being exercised by the Court is appellate, not original but the authorities set out by her Honour do not absolutely preclude the raising of an issue for the first time on appeal. Ultimately, the Court must exercise its power, “to do justice in the circumstances of a particular case”: s 155(4) of the Constitution. In so doing, it must “give paramount consideration to the dispensation of justice”: s 158(2) of the Constitution.

82. Fraud aside, where the raising for the first time of an issue on an appeal by an appellant would occasion evidentiary embarrassment to a respondent, it is difficult to see how, having regard to the pertinent authorities, leave to raise that issue might ever justly be granted. The place for the determination of issues of fact is at trial. The position is less dogmatic where the point sought to be raised is one of law only and where not to grant leave would visit an injustice on an appellant.

83. Given this, I was initially disposed to the view that the issue was one of contractual construction only and thus permitting Telikom to raise the issue of penalty on appeal would visit no injustice on Mr Kopalye. As a matter of initial impression, a damages award which adopted as its reference base over the balance of the fixed term a remuneration package which included allowances for security, mobile phone, entertainment, vehicle and club fees, each of which could be seen to have an intended occupational association, looked disproportionate in circumstances where, in light of the termination, no benefit would ever flow to Telikom.

84. Closer study of authority persuades me that the penalty issue may not be a pure point of law.

85. In this jurisdiction, given that English common law forms part of the Underlying Law, the root authority is, necessarily, Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79 (Dunlop). It is Dunlop which underpins the passage in Law of Contracts, Cheshire & Fifoot, 2nd Edn, 767 concerning what constitutes a penalty, which the Court cites with approval in Post PNG Ltd v. Yama Security Services Ltd, a case to which Collier J refers.

86. The clause sought to be impugned as a penalty in Dunlop was found in a resale price maintenance agreement. The third of the propositions stated by Lord Dunedin at 86-87 as to when a contractual term will be unenforceable because it constitutes a penalty was:

3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.

[Cited authority omitted, emphasis added]

Evidence was led at trial in that case as to the way in which Dunlop’s business would be damaged if prices were cut. As the following passage from the speech of Lord Dunedin in Dunlop, at 88, reveals, that evidence was regarded as relevant to the determination of whether the clause fixing an amount payable in the event of undercutting was a penalty:

Turning now to the facts of the case, it is evident that the damage apprehended by the appellants owing to the breaking of the agreement was an indirect and not a direct damage. So long as they got their price from the respondents for each article sold, it could not matter to them directly what the respondents did with it. Indirectly it did. Accordingly, the agreement is headed "Price Maintenance Agreement," and the way in which the appellants would be damaged if prices were cut is clearly explained in evidence by Mr. Baisley, and no successful attempt is made to controvert that evidence. But though damage as a whole from such a practice would be certain, yet damage from any one sale would be impossible to forecast. It is just, therefore, one of those cases where it seems quite reasonable for parties to contract that they should estimate that damage at a certain figure, and provided that figure is not extravagant there would seem no reason to suspect that it is not truly a bargain to assess damages, but rather a penalty to be held in terrorem. [Emphasis added]

87. More recently and in relation to the subject of evidence, in Murray v. Leisureplay Plc [2005] EWCA Civ 963, where the question of penalty was raised in the context of the termination of an employment contract, Arden LJ, with reference to Dunlop, stated, at [52]:

52. Lord Dunedin in the Dunlop case makes the point that, although the issue is one of construction, the court is not confined to the terms of the agreement and may look at the “inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not at the time of the breach ...” (at page 87). In my judgment, the inherent circumstances to which the court may have regard extend beyond those which may be adduced in evidence for the purposes of determining the true interpretation of the agreement under the well known test in the Investors' Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 . But the purpose of adducing that evidence is not so that the parties can demonstrate that they agreed to opt out of the remedies regime provided by the common law but rather that the reasons that they had for doing so constitute adequate justification for the discrepancy between the contractual measure of damages and that provided by the common law.

[Emphasis added]

88. Her Ladyship went on, at [54] to offer what she described as a “practical step by step guide to the questions which a court should ask in a case such as that before the Court of Appeal in that case and which could have been, but was not, pleaded in the present case:

i) To what breaches of contract does the contractual damages provision apply?

ii) What amount is payable on breach under that clause in the parties' agreement?

iii) What amount would be payable if a claim for damages for breach of contract was brought under common law?

iv) What were the parties' reasons for agreeing for the relevant clause?

v) Has the party who seeks to establish that the clause is a penalty shown that the amount payable under the clause was imposed in terrorem, or that it does not constitute a genuine pre-estimate of loss for the purposes of the Dunlop case, and, if he has shown the latter, is there some other reason which justifies the discrepancy between i) and ii) above?

89. It was in relation to the fourth of the steps to which her Ladyship referred that she envisaged evidence might be led. Her Ladyship also considered, at [55], the position if either there is no evidence at trial as to why the parties agreed a particular clause, or if the evidence is that they did consider it but took a wholly wrong view about what damages would be payable under the general law in the event of breach. It is not necessary to consider that position in this case, because the penalty issue was never raised at trial. Accordingly, there was no occasion for leading any evidence concerning that issue, or for deciding not to lead any evidence.

90. Of the other judges who constituted the Court of Appeal in Murray v. Leisureplay Plc, Buxton LJ (with whom Clarke LJ agreed) and with reference to Dunlop, also envisaged that evidence might be led as to the advantage as at the time of contract of a particular stipulated payment in the event of early termination, stating, at [117]:

The clause imposed a single payment for any of a varied series of breaches; but assisted by Dunlop's evidence as to the benefits to the company of the price maintenance policy (expressly so described) that the clause imposed, as set out in particular by Lord Atkinson in both the Dunlop cases, the House concluded that an explanation of the clause in commercial rather than deterrent terms was available. That commercial explanation lay in Dunlop's desire (to) enforce its commercial policy without the difficulty and burden of proving the quantum of damage accruing from every particular breach of that policy.

[Emphasis added]

91. The point of this excursion is that, at trial, evidence as to the advantages at the time of contract of the contractual term in question would have been admissible. The point was not wholly one of law. The onus of proving that term was a penalty was on Telikom PNG but either it or Mr Kopalye could have led evidence on this subject. To permit the point to be raised for the first time on appeal would be to deprive each party and especially Mr Kopalye of the opportunity to lead relevant evidence.

92.For these reasons, I agree that Telikom PNG should not be granted leave to raise the issue of penalty.

93. In the circumstances, holding Telikom PNG to the case it ran at trial does not visit any injustice upon it. Moreover, in Murray v. Leisureplay Plc, at [114], Buxton LJ referred to “warnings by judges of high authority that, at least in connexion with commercial contracts, great caution should be exercised before striking down a clause as penal”. The present is a paradigm example of a commercial case in which a bargain was struck between arm’s length parties as to the terms on which a senior executive, Mr Kopalye would take up a position in Telikom PNG. Also in Murray v. Leisureplay Plc, in relation to the position of a senior executive, Buxton LJ, at [117], referred to the inclusion in his “package” of “generous reassurance against the eventuality of dismissal” and added, “That such reassurance exceeds the likely amount of contractual damages on dismissal does not render the terms penal unless the party seeking to avoid the terms can demonstrate that they meet the test of extravagance posited by Lord Dunedin and by Lord Woolf.” His Lordship’s reference to Lord Dunedin is a reference to Dunlop while his reference to Lord Woolf is a reference to the advice of the Judicial Committee of the Privy Council delivered by Lord Woolf in Philips Hong Kong Ltd. v. The AG of Hong Kong (1993) 61 BLR 49, the Privy Council, which contains a modern exposition of the law with respect to contractual penalties.

94. Murray v. Leisureplay Plc was recently cited with approval in the most recent English exposition at ultimate appellate level on the law in relation to contractual penalties: Cavendish Square Holdings BV v. Makdessi [2015] UKSC 67; [2016] AC 1172.

95. Subject to the foregoing, I agree with Collier J. that the appeal should be dismissed.

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of the appeal on a party-party basis, to be taxed if not otherwise agreed.

3. The appellant pay the judgment debt of K785,363.70 plus post judgment interest at 2% per annum from 7 January 2020 until payment.

4. For the avoidance of doubt, the appellant pay the respondent his judgment debt and interest in full within thirty (30) days from the date of this Order.
__________________________________________________________________
Telikom PNG Ltd (its Employed Lawyer): Lawyers for the Appellant
Guardian Legal Services: Lawyers for the Respondent