Wong v Solomon Islands National Provident Fund [2006] SBCA 10; CA-CAC 030 of 2005 (31 May 2006)

IN THE SOLOMON ISLANDS COURT OF APPEAL

NATURE OF JURISDICTION:	Appeal from Judgment of the High Court of Solomon Islands.
COURT FILE NO:	Civil Appeal No. 30 of 2005
DATE OF HEARING:	Tuesday 23rd May 2006
DATE OF JUDGMENT:	Wednesday 31st May 2006
THE COURT:	Lord Slynn of Hadley P, Williams JA. Ward JA
PARTIES:	PATRICK WONG AND OTHERS -V- SOLOMON ISLANDS NATIONAL PROVIDENT FUND
ADVOCATES: Appellant: Respondent:	Andrew Radclyffe Billy Titiulu
KEY WORDS:	Where the employees failed to pay the NPF contribution to the Fund – where the Directors were criminally liable under the Act. Whether the company can be liable as civil debt under the NPF Act.
EX TEMPORE/RESERVED/ ALLOWED/DISMISSED:	Allowed.
PAGES:	1-4

JUDGMENT OF THE COURT

The plaintiff in this action is the body corporate established by the Solomon Islands National Provident Fund (cap. 109) (section 4) to administer the Fund 'into which shall be paid all contributions required to be made under the provisions of this Act and out of which shall be met all payments required to be made by the Fund under the provisions of this Act' (section 7). The purpose of the Fund, described by the Chief Justice as a superannuation type savings scheme for all employees in the country who are members of the Fund, is to provide benefits for employees in the Solomon Islands and it is funded inter alia by contributions from employers and employees, the latter contributions being deducted from employees’ wages.

The First Defendant is a limited company engaged in commerce; the Second and Third Defendants are Directors of the Company; the Fourth Defendant is its General Manager.

The Plaintiff claims that the First Defendant Company has failed, in breach of its statutory duty to produce payroll or wages records in accordance with sections 40 (1) (h) and 47 (c) of the Act; has failed to pay its employees’ contributions in accordance with section 13 (1) of the Act and has failed to pay the relevant surcharges payable under section 16 of the Act.

This claim against the company is not in issue in the present appeal. It is the second claim which this court has to consider. That is a claim that the Second and Third and Fourth Defendants are also in breach of statutory duty to produce records, to pay contributions and the relevant surcharge. The Plaintiff Board seeks an order that all the Defendants produce the records for specified periods in and since 2001, account for the unpaid contributions of the company and pay to the Board $1,415,109.13 in respect of unpaid contributions between January 2001 and August 2004 together with the appropriate surcharge.

The statute provides in section 13 –

'(1) Every employer shall pay to the Fund in respect of each of his employees in every month during which such employee is employed by him and in the month following the termination of such employment a contribution calculated upon the amount of wages payable to such employee by such employer for the preceding month at the appropriate rates set out in the second Schedule'.

By sub-paragraph (b) of subsection (1) of section 13 the Board is empowered 'in respect of an employee engaged in any prescribed employment' to direct that payment shall be made by some other person on behalf of and to the exclusion of the employer, whereupon such other person shall be deemed to be the employer for the purposes of subsection (2).

By subsection 13 (3) (b) 'any employer' may pay contributions in excess of the Scheduled rate and by section 15 'the employer' may recover from the wages the portion of any contribution recoverable from the wages of the employee.

If contributions which an employer is liable to pay under section 13 (1) are not paid when due, 'the employer' shall be liable to pay a surcharge.

By section 40 (1) –

'if any person ... (a) fails to pay to the Fund in any month any amount which, under section 13 (1) he is liable to pay in that month in respect of any employee ..........he shall be guilty of an offence'.

Similarly if that person fails to pay any surcharge which 'he is liable to pay under section 16' or any contribution or surcharge which he is liable to pay under section 38, or to produce any document required to be produced under section 47 (c) he commits an offence.

By section 43 if an offence has been committed by a body corporate any person who at the time of the commission of the offence was a director, manager, or other similar officer, or was purporting to act in such capacity, as well as the body corporate, shall be deemed to be guilty of an offence unless he proves that the offence was committed without his consent or connivance and that he exercised all due diligence to prevent the commission of the offence.

By section 46 (1) 'All contributions payable under the provision of this Act may, without prejudice to any other remedy, be recoverable by the Board as a debt due'.

The Second and Fourth Defendants applied to strike out the writ and statement of claim against themselves as disclosing no reasonable cause of action; the Second Defendants (foreign nationals) applied to set aside service of the writ as irregular.

The Chief Justice refused both applications. He dealt first with the obligation to produce documents required under section 47 (c). He said that the enactment of Section 43 was fatal to the application of the Defendants to strike out. Section 43 imputed liability to the directors but 'by necessary implication it is imposes/extends statutory obligation to them as well. Otherwise it would make [nonsense of] the penalty sought to be imposed upon the directors and secretaries without the necessary duty or obligation attached'. It is the intention, purpose and objective of section 43 to include directors under the obligations imposed under section 47 (c) unless they can prove that the offence was committed without their consent but with due diligence. 'Where the offence has been created with penal sanction attached, it necessarily infers the existence of a corresponding duty'.

He held that the same reasoning applies to the alleged liability to pay contributions and surcharge. 'The creation of an offence necessarily implies the creation of a statutory duty'.

The deeming provision, section 43, not only covers liability for criminal offences but 'extends personal liability on them as well for any outstanding unpaid contributions of the employees'.

The Second and Fourth Defendants appeal against that judgment on the ground that it was erroneous in law. There is no appeal as to the decision on irregular service.

Mr. Titiulu, in a carefully prepared argument, contends that the judgment is correct. He too relies on section 43 and on section 40 (1)(b) of the Act. The agents of the company, its board of directors, are more than agents. When they act within the ambit of the powers conferred on them they are treated as the company itself. They speak and act as the company and are to be treated as the company itself. He relies in particular on H L Bolton (Engineering) Co. Ltd. –v- T J Graham and Son Ltd [1956] 3 All ER 624 and on Tesco Supermarkets Ltd –v- Nattrass [1971] UKHL 1; [1971] 2 All ER 127 and submits that the appellants 'possess the authority and power to influence and to ensure that the company performs its statutory obligations at all times including the payment of its employees’ contributions. In addition to the argument based on the sections previously referred to, he contends that as by section 5(2) of the Act -

'the Board shall have such powers and shall perform such duties including the duty of enforcement, as are prescribed by or under this Act and may by instrument in writing under its common seal delegate to any person all or any such powers and duties'.

He stresses, on the basis of decided authorities, that the writ can only be struck out, as disclosing no reasonable cause of action, in plain and obvious cases. It is not enough that the claim is 'weak and not likely to succeed'.

We have considered with care the reasoning of the Chief Justice and the arguments of Counsel.

On the face of it section 13 (1) imposes an obligation on the employer, and only on the employer, to pay the employees’ contributions, being employees 'employed by him'. It is not suggested that the exception in paragraph (b) is relevant: there is no evidence of any such direction. It is also the plain that his offence created by section 40 (1)(b) is an offence by the employer – ie failure to pay any amount which under (section 13 (1) (ie in respect of those employed by him') 'he is liable to pay'. The same is true of a failure to pay the surcharge which the employer shall be liable to pay under section 16. A failure to produce documents in section 47(c) i.e. inter-alia documents which the employer is required to keep, must be followed by a notice in writing sent to an employer’s address'. The failure to produce documents no doubt is an offence by the company.

Directors are not within the offences specified in this section in themselves. In so far as the non-payment of contributions and surcharges are concerned it is the employer who is liable. Directors and managers are dealt with separately. If their company is in breach, directors are deemed guilty unless they can show lack of consent but due diligence.

Section 16 deals with civil proceedings. Here contributions (including section 16 surcharges) payable can be recovered as a debt by the Board.

The contributions are payable by the employer and are accordingly recoverable as a debt from the employer. It does not seem to this court that it is possible to say that by necessary extension or implication directors are also liable. If liabilities was intended to be extended to directors for the company’s debts there would have been a specific provision dealing with directors as there was in regard to liability for criminal offences.

We bear fully in mind the purpose of the creation of this Fund; but we also remember the general rule restated in Lonrho –v- Shell Petroleum Co. Ltd (No.2) [1982] AC 173 that where a statute creates an obligation and enforces performance in a specific manner, that performance cannot be enforced in any other manner'. The two exceptions referred to by Lord Diplock do not apply. The objection here was imposed on the Company and can be enforced as prescribed. It was not imposed on the directors.

Richardson –v- Pitt Stanley [1995] 2 WLR 26 shows that where a breach of statutory duty results a criminal liability it is a question of construction whether by express provision or by necessary implication a civil liability also arises. In that case it was held that there was no civil but only criminal liability on the company itself and its directors. Here it is different. There is an express civil liability on the company and none expressly on the directors.

Even bearing in mind that a writ and statement of claim can only be struck out in plain and obvious cases, we are satisfied here, with respect to the learned Chief Justice, that there is no reasonable cause of action shown against the directors. The claim cannot be cured by amendment.

We therefore allow the appeals with costs and strike out the claim against the Second and Fourth Defendants, the First and Second Appellants.

Lord Slynn of Hadley P
Williams JA
Ward JA