Ronia v Solomon Islands National Provident Fund Board [1996] SBHC 84; HCSI-CC 53 of 1996 (21 August 1996)

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No.53 of 1996

EDWARD RONIA

-v-

SOLOMON ISLANDS NATIONAL PROVIDENT FUND BOARD

High Court of Solomon Islands
(Palmer J)
Civil Case No.53 of 1996

Hearing: 6th August 1996
Judgment: 21st August 1996

A. Nori for the Plaintiff
A. Rose for National Provident Fund

PALMER J: Judgment: The Plaintiff seeks by Originating summons filed on 16th February 1996, the following declarations and orders.

Declarations:

(1) A declaration that under Clause 19 of the Contract of Employment entered into between the Plaintiff and the Defendant on 9th January 1990 the Defendant had an obligation to provide housing to the Plaintiff and that no discretion whatsoever was vested in the Defendant to do otherwise.

(2) A declaration that clause 13 of the Contract of Employment entered into between the Plaintiff and the Defendant on 4th October 1994 cannot be interpreted to have the effect of removing rights and entitlements which the Plaintiff was already enjoying under the earlier contract dated 9th January 1990.

(3) A declaration that the Defendant’s action in terminating the employment contract which it entered into with the Plaintiff on 4th October, 1994 was unlawful and of no effect, for the reasons that:-

(a) it acted outside the terms of the contract; and or in the alternative,

(b) it acted in breach of the rules of natural justice.

Orders:

(1) An order that the Plaintiff be re-instated to his post as Assistant General Manager Finance with the Defendant forthwith.

(2) In the alternative an order that the Defendant pay damages to the Plaintiff for breach of contract; and

(3) That the cost of this application be paid by the Defendant.

The Plaintiff was formerly the Assistant General Manager (Finance) of the Solomon Islands National Provident Fund (the “Fund”): a statutory body set up under the Solomon Islands National Provident Fund Act 1973 (as amended). He joined the services of the Fund, under a Contract of Employment signed on 9th January 1990, as an Assistant General Manager (Finance). As part of his entitlement under his Contract of Employment he was accommodated at a private residence by the Defendant. On 6th March 1990, the Plaintiff obtained a housing loan from the Defendant to purchase a private house at Vura, Honiara. Sometime in early October 1990, the Plaintiff obtained a further loan for the repair and extension of his house. On 12 February 1991 he moved into his house. In late November 1992 however, some twenty-one months later the Plaintiff put his house out for rent and moved unilaterally into one of the Defendant’s vacant houses at Tasahe (the “Tasahe house”). He took this action when he was acting as the General Manager of the Fund, (for a short period only), when the General Manager together with some members of the Board and the Assistant General Manager (Administration), were overseas attending a social security conference in Mexico.

It is not disputed that prior to the appointment of this Plaintiff, it had been a long standing policy of the Board that a staff member of the Fund other than the General Manager who owns a private residence or who obtains a loan from the Fund to purchase or build a private residence would not be provided with private accommodation by the Board (see affidavit of James Apaniai filed on 1st March 1996 at paragraphs 5 and 13). Instead, he would only be entitled to a housing allowance, as equally stipulated in their contract of employment.

It is also not disputed that in June 1992, two meetings were held by the Board (on the 17th and 30th June), in which the above stated policy of the Board was re-confirmed, and a resolution passed for the four executive houses of the Fund at Tasahe to be rented out. One of those houses was the Tasahe house to which the Plaintiff later moved into in November 1992. It is not disputed that the Plaintiff was present in both of those meetings and therefore must be deemed to have been well aware by that time of the long-standing policy of the Board. In late November 1992, the Plaintiff moved into the Tasahe house.

Obviously, being aware that his actions were contrary to the policy of the Board, the Plaintiff submitted an application to the Board, on behalf of the holders of the Assistant General Managers posts, sometime in December 1992, for the Board to vary or waive its policy inrespect of the holders of the Assistant General Managers’ posts. The Board considered the Plaintiff’s application at its meeting held on l6th December, 1992, but refused it. It also re-affirmed its policy, as stated above, in that meeting (see affidavit of James Apaniai filed on 1^st March 1996 at paragraph 13 and annexure “JA1”). The Board’s decision was formally conveyed to the Plaintiff at the Board’s next meeting held on 24th February, 1993. At that same meeting, it was resolved that the renting out of the said four executive houses be finalised. Three of the four houses could be rented out, but not the Tasahe house, as the Plaintiff continued to reside in it.

Sometime in March 1993, the Plaintiff wrote to the Board requesting that he be allowed to rent the Tasahe house for $1,000.00 per month. This too was refused by the Board. On 29th August, 1994, in a meeting of the Board, it passed a resolution that all staff who own or whose spouses own private houses and who are residing at the Defendant’s residences be given three months notice to vacate those residences or be required to pay the commercial rental rates for those houses. In November 1994, the Plaintiff made another application to the Board requesting accommodation for holders of the Assistant General Managers’ posts. This was considered by the Board in its meeting on 21st December 1994, but again the request was rejected. In that same meeting, the Board demanded that the Plaintiff must move out by 31st December 1994, or pay the commercial rates applicable with effect from that date. The Plaintiff still refused to move out or even to pay the commercial rental rates applicable.

On 7th February 1995, the Board met again to consider what action to take against the Plaintiff. One of the resolutions drawn up by the Board was for the Plaintiff to commence paying the monthly rental of $2,750.00 with effect from February 1995; the first payment falling due on Friday 10th February 1995, at 12 noon, and thereafter on the first day of each month. It was also resolved that a failure to comply would result in the dismissal of the Plaintiff (see same affidavit of James Apaniai filed on 1st March 1996, at paragraph 25(1)). The resolutions of the Defendant were conveyed to the Plaintiff by letter dated 8th February 1995, according to the same affidavit of James Apaniai, at paragraph 25(6).

The matter was then referred to the Trade Disputes Panel by the Plaintiff on 20th February 1995. It appears that a decision is yet to be delivered by the Panel inrespect of that referral. One of the initial issues raised by Mr. Rose of Counsel for the Defendant was that since the matter had been referred to the Trade Disputes Panel that it was an abuse of the courts process to then seek a High Court ruling on the same issues raised before the panel. I will say more on this when I come to address this point specifically.

Sometime in October/November of 1995, the parties entered into a new contract of employment. The policy of the Board however remained unaffected. On 28th December 1995, the Chairman of the Board wrote a letter to the Plaintiff requesting him yet again to vacate the Tasahe house by 15th January 1996 and to pay up the rentals due for the months of October, November and December of 1995 and January 1996. In response, the Plaintiff finally decided to challenge the validity of the Chairman’s letter it seems by legal process. On 17th January 1996, the Board convened a special meeting to consider the response of the Plaintiff. It was then resolved in that meeting to terminate the services of the Plaintiff, but instead of giving him the required three months notice, this was converted to cash.
The Plaintiff now comes to this Court seeking the declarations and orders as set out in the beginning of this judgment.

THE ISSUES

In the hearing before this Court, the Plaintiff informed the Court that he would not be pursuing paragraph 1 of the Orders sought: that is for his re-instatement to his post as Assistant General Manager (Finance) with the Defendant. He accepts that it would not be in the interest of both parties for him to pursue that remedy and has opted instead for remedy in damages only. The withdrawal by the Plaintiff of his application for re-instatement virtually amounts to an acceptance or concession by the Plaintiff that his contract of employment with the Defendant is at an end. The concession by the Plaintiff is significant because what it now means is that the consideration by this Court of the issues pertaining to his rights to accommodation pursuant to Clause 19 of his Contract of Employment, and the lawfulness of the actions of either party should now be understood or considered in the light of the question of assessment of damages as the sole remedy that the Plaintiff is now seeking.

There are essentially two distinct issues before this Court for its consideration. One relates to the question of interpretation of the effect of Clause 19 of the Contract of Employment of the Plaintiff, in conjunction with the question pertaining to the relevance and effect of the long-standing policy of the Board, as to the rights of this plaintiff to be provided with a fully furnished house; and the other relates to the question of termination of his employment with the Board. Those two issues however, are linked to each other, and therefore will be considered in that light.

ABUSE OF PROCESS?

Is it an abuse of the court’s process in bringing this action to this court when it would appear that the same matters have also been canvassed before the Trade Disputes Panel? Mr Nori, of Counsel for the Plaintiff argues that the matters raised before this Court relate to the question of construction of the Contract of Employment of the Plaintiff on one hand and on the other, the question of lawfulness of the termination of the Plaintiff’s employment. He points out that these are matters well within the jurisdiction of this Court to deal with. I couldn’t agree more. The fact that a matter has been referred to the Trade Disputes Panel is not necessarily sub-judice this Courts jurisdiction to deal with that matter. The matter referred to the Panel has not yet been finally disposed of (though I appreciate that all that is yet to done is for the Panel to deliver its ruling on the matter). Instead of waiting further for that ruling, the Plaintiff has opted to bring his case further to this court for relief, and I think there is very good reason for that because the facts as presented to the Panel in the hearing in 1995, have now taken a further turn, in that in the interim period, the Plaintiff had been dismissed. As an aside, I merely wish to point out that this action of the Defendant could possibly be in contravention of section 10(1) of the Trade Disputes Act 1981, as read with paragraph 10(2) (c) of the same Act. However, that is a separate issue which the Plaintiff may or may not wish to pursue further. Turning back to the issue of sub-judice, there is clear case authority in this jurisdiction, in the case of The Attorney-General (First Appellant), The Chairman of the Public Service Commission (Second Appellant)-v-Kenneth George Wheeler, Solomon Islands Court of Appeal judgment in civil case no. 6 of 1989, in which his Lordship Kapi JA at pages 8-10, after referring to the English case authorities on this issue, Wallersteiner-v-Moir (1974) 3 All E.R. 217, and In re Harris [1936] NSWStRp 57; (1936) 37 S.R (N.S.W) 17 per Jordan CJ, said,

“Having regard to the analogous situations discussed in the above cases and examination of other matters set out above. I have reached the conclusion that a mere fact that a proceeding has been in the courts does not necessarily prevent or suspend the performance of any other lawful act.”

The rights of the plaintiff to bring his case to this court are well protected within our judicial framework, and I am satisfied that it is lawful for him to bring this matter forward to this court must therefore be dismissed.

TERMINATION OF THE PLAINTIFF’S EMPLOYMENT.

In grappling with this issue, the starting point is to consider the reasons given by the Board in terminating the employment of the Plaintiff. In the submissions of learned Counsel. Mr Rose for the Defendant, he sets out two basic reasons for the termination of the Plaintiff. The first reason given was disobedience to or refusal to comply with the lawful instructions of the Board for the Plaintiff to move out of the Tasahe house and to pay rentals due for October, November and December of 1995 and January 1996. The second reason given was “bad relationship” obviously arising from the deteriorating state of affairs pertaining to the question of accommodation. What is relevant to note and I’ve pointed this out is that these two reasons are directly related to the question or issue of interpretation of Clause 19 of the Contract of Employment of the Plaintiff. It will be pertinent therefore to consider at this point the question of lawfulness of the orders or instructions of the Board to the Plaintiff to move out of the Tasahe house or to pay rentals for it in lieu thereof. The importance in determining this question, (on the lawfulness of those orders or instructions of the Board) is that it will directly impinge either way on the other related issues: on the lawfulness of the actions of the Board, and on the other hand the question of lawfulness of the refusal of the Plaintiff to comply with those instructions.

In order to assess the question of lawfulness of those orders or instructions, we would need to address first, the question as to the status of those orders or instructions. On this issue, the words of Smithers J in Hart v Jacobs (1981) 39 ALR 209, apposite.

“When one comes to identify orders that are lawful; in the context of a contract of employment. It is not lawfulness or unlawfulness in relation to the criminal law that is relevant, but whether the order is one, which, by the terms of the contract, the employer according to law, is entitled to give and have obeyed. What is lawful, for the purpose, must in this case be ascertained from the implied terms of the contract. What those terms are is, of course, a question of fact.”

What were those orders or instructions given by the Board? As described earlier, these were that the Plaintiff must either move out of the Tasahe residence, or pay the commercial rental rate applicable inrespect of that residence; which was $2,750.00 per month. But before this is considered in detail, this Court must consider as a preliminary issue whether those orders are covered by any express term in the contract of employment of the Plaintiff, or not. If not, then we must go on to determine, whether those instructions or orders come within the ambit of any other term which should be implied into that contract? This raises in contrast the collateral issue concerning the rights of the Plaintiff under the express terms of that contract. It would be pertinent therefore at this juncture to consider briefly, the right of the Plaintiff, to be provided with a fully furnished house under that contract of service.

CLAUSE 19 OF THE CONTRACT OF EMPLOYMENT

The rights of the Plaintiff as stipulated in his contract of employment are clearly defined in Clause 19(1) and (2) of the first Contract of Employment signed on 9th January 1990. That Clause is headed “Housing” and reads as follows:

“19.1 The Board shall provide the employee with a fully furnished house.

19.2 Where the employee is not provided with accommodation by the Board rent free, the Board shall pay rental allowance at the rate of fifteen percent (15%) of the basic salary.”

The plaintiff relies exclusively, on what he considers to be the clear and conclusive requirement of sub-clause 19 (1) above, imposing a duty on the defendant to provide him with a fully furnished house for accommodation, and relying in turn on this restrictive interpretation of that clause to justify his refusal in complying with the orders or instructions given by the Board. In other words, sub-clause (1) gave him an absolute right to be provided with a fully furnished house. And that accordingly. he was lawfully entitled to reside in the Tasahe house, and to remain there. In defiance of the orders or instructions of the Defendant to move out, or pay the commercial rental value for that house. The question whether a house is available or not is immaterial for purposes of analysing the right or entitlement of the Plaintiff to be provided with a fully furnished house, because even if no house is available for whatever reason, the Defendant would still have been obliged to fulfil its part of the bargain.

The Defendant on the other hand takes the view that Clause 19(1) is not conclusive, neither is it exclusive and therefore should not be read in isolation but in the context of both clauses being read together, and as complimenting each other, where applicable On this basis, they argue that it had been an established policy of the Fund that where an employee owns a private residence or is assisted by the Fund with a loan to purchase a private residence. Then he/she will not be eligible to be accommodated by the Fund. Instead, he/she will be provided with housing allowance at the rate prescribed in the agreement of service. Mr Rose of Counsel for the Defendant argues, and this has not been disputed that the Plaintiff was assisted with a loan from the Fund for the purchase of a private residence. On this basis, he was not entitled under the long-standing policy of the Board to be provided with a fully furnished house and Clause 19(2) of his Contract of Employment was the operative clause. Mr Rose points out that the Defendant relies on this policy to support the lawfulness of its instructions to the Plaintiff.

The first issue that we would need to decide upon is whether the exclusive construction of sub-clause 19(1) advanced by the Plaintiff, correct, i.e. “that there is no discretion vested in the Defendant to do otherwise. In other words, sub-clause 19(1) should be read as imposing a mandatory requirement on the Defendant to provide a “fully furnished house”, and thereby conferring on the Plaintiff, on the other hand, an absolute right or entitlement to such accommodation which he can insist on under the contract. Whilst sub-clause 19(1) is clear and unambiguous on one hand, it must be remembered that there are other sub-clauses in Clause 19, which, as a rule of thumb should not be ignored. In order to understand and fully appreciate therefore whether sub-clause (1) imposes a mandatory requirement on the Defendant, or merely directory, it is my respectful view that it should be considered within the context of those other sub-clauses. This is an important rule of construction and commonly referred to as the doctrine of construction as a whole (see Francis Bennion Statutory Interpretation, second edition, Part XXV; Metropolitan Gas Co v. Federated Gas Employees’ Industrial Union [1925] HCA 5; (1924) 35 CLR 449 at page 455; and D.C. Pearce Statutory Interpretation in Australia, second edition, at page 31; the latter case and text referred to in the submissions of Mr Rose.).

When sub-clause 19(1) is considered within the context of the existence of sub-clause (2), the issue on whether sub-clause (1) imposes a mandatory requirement becomes clearer. A sure way of testing, in this particular case whether sub-clause (1) imposes a mandatory requirement is simply to ask whether the Defendant would have been in breach of the requirements under the Contract of Employment, if it did not comply with it. If the answer was a clear-cut yes, then we could safely conclude that sub-clause (1) imposed a mandatory requirement on the Defendant. The answer however, is not that clear-cut. It could only be a yes, if the Defendant had also not been able to comply with the requirements of sub-clause (2). In other words, if the Defendant could not, for a host of reasons comply with the requirements of sub-clause (1), then that is not the end of the story. Sub-clause (2) allows it to keep its side of the bargain by paying rental allowance at the specified rate to the employee. Only if it doesn’t also comply with sub-clause (2), can it then be said that the Defendant had been in breach of the requirement under the Contract of Employment to provide accommodation under Clause 19.

The question posed earlier therefore, whether sub-clause (1) imposed a mandatory requirement on the Defendant to provide the Plaintiff with a fully furnished house, must be answered in the negative. Sub-clause 19(1) should be construed as merely imposing a directory requirement on the defendant. In a way, this disposes of the issue raised in the first declaration sought in paragraph 1(1) of the Originating Summons; that it was not obligatory for the Defendant to provide the Plaintiff with a fully furnished house under Clause 19(1) of the Contract of Employment. What is important to take note of is that as long as the Defendant complies with the requirement of sub-clause (2, in the event that it is not able to comply with or fulfil the requirement of sub-clause (l), then it cannot be held to be in breach of its responsibilities under that contract of service. The obvious reason is because only if there was a breach can it be said that the Plaintiff is entitled to a claim for relief.

THE POLICY OF THE BOARD

Having settled the question as to the rights or entitlement of the Plaintiff under Clause 19 of the contract of employment, we come next to the question as to the status of the policy of the Board. The first question that we would consider briefly is whether there is a conflict between that policy, with the express provisions of Clause 19(1) and (2) of the contract of employment. If there was, then the express provisions of the contract of service must prevail and the policy held to be unlawful. This would be material to the question of lawfulness of the instructions given to the Plaintiff.

What was the policy of the Board in respect of accommodation? That policy can be summed up as follow; that where a staff member of the fund, other than the General Manager, owns a private residence or his spouse owns a private residence, then he/she would not be entitled to be provided with a private residence by the fund. In the case of the Plaintiff, he would not be entitled to be provided with a fully furnished house. The other part to that policy is that where a staff member, other than the General Manager is provided with assistance by the Fund by way of a loan to purchase a private residence, then again he/she would not be entitled to be provided with a fully furnished house, in the case of the Plaintiff (see affidavit of James Apaniai filed on 1st March, 1996. at paragraphs 5, 11, and 13).

Having identified what the policy of the Board was, we can go on next to consider briefly whether there was a conflict between that policy with the express provisions of Clause 19. It is my respectful view that there is no conflict between the policy of the Board with Clause 19. Earlier on, I pointed out that there may be some legitimate reasons why the Board may not be able to comply with the requirements in sub-clause 19(1). This long-standing policy of the Board appears to be one of those reasons. The effect of that policy of the Board, where it applies, is merely to activate sub-clause (2), instead of sub-clause (1). I have already pointed out earlier too that, in the situation where the Board does not comply with sub-clause (1), it does not necessarily imply that the Defendant may have then been in breach of its responsibilities under the contract of service. As long as it complies with the requirement of sub-clause (2), then it is still acting lawfully within the ambit of Clause 19. It is not denied and has never been disputed that the Board is not refusing to provide a fully furnished house to the Plaintiff. What it is saying rather is that, “whilst on one hand there is an express provision in the Contract of Employment for the provision of a fully furnished house, it has been our long-standing policy that where you have a private residence or taken out a loan for the purchase of a private residence from the Fund, then you would not be provided with a fully furnished house. Instead, you would only be paid rental allowance as also stipulated in your Agreement of Service.” The Plaintiff however had not only refused to accept this arrangement, but refused also to comply with the orders or instructions issued subsequently and in pursuit of the policy of the Board.

This leads on next to the question whether by refusing to comply with the policy of the Board, the Plaintiff was acting unlawfully. If it was a mere policy, then it may be argued that it is not obligatory for the Plaintiff on one hand to comply with it whilst on the other hand, for the Defendant to require obedience or compliance to it. Bearing in mind the nature of policies; that they change from time to time (variable), and may be waived or varied. We must go on next to consider whether those policies of the Board should be implied as terms in the contract of employment of the Plaintiff or not. This is the next crucial issue for this Court to consider because only if those policies take on the cloak of implied terms, can it be validly argued that the Defendant was entitled to give the orders it did and to require that they be obeyed. And where the Plaintiff refuses to comply with them, it may then lawfully be regarded as insubordination and amounting to wilful disobedience.

IMPLIED TERMS

There are two basic ways that a term or terms may be implied in a contract of employment. They may be implied by law (that is legislation), so that even if the parties seek to contract out of the requirements of the law it cannot be done because the law will still imply such a requirement in the agreement. The second way is that they may be implied in fact. It is the latter, that is of concern to us. The courts, through the years, have drawn up a test which they have applied consistently in deciding when a term may be implied in fact or not. This is known as the “business efficacy” test, or the officious bystander type of case. (see The Moorcock [1889] UKLawRpPro 8; (1889) 14 P.D. 64. at page 68, Easton v. Hitchcock [1912] UKLawRpKQB 12; (1912) 1 K.B 535, and also applied in the Australian Courts. see Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468, and Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337). The test has been succinctly stated in Shirlaw v Southern Foundries (1939) 2 K.B. 206, per MacKinnon L.J. as follows.

“Prima facie that which in any contract is left to be implied and need not expressed is something so obvious that it goes without saying; so that if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!’”

In the Castlemaine Tooheys Ltd case (ibid), Hope JA at page 486-7 stated:

“One basic distinction between these two classes of implied terms is this. Terms implied by the application of the business efficacy test are terms unique to the particular contract under consideration; they depend upon the express terms of that contract and the relevant surrounding circumstances. Terms implied by law, on the other hand, are, or at least relevantly for these proceedings, terms which, are to be implied in all contracts of a particular class.”

Also in Hart v. Jacobs (1981) 39 ALR 209 at 217, Smithers J also made the following pertinent comments:

“The only terms to be implied are those which it is necessary to imply to give efficacy to the contract and to make it a workable agreement in such manner as the parties would clearly have done if they had applied their minds to the contingency which has arisen. The important words are ‘necessary’, ‘to give efficacy’, ‘workable’ and ‘clearly’. The strict nature of the test so stated is in line with what was said by Jordan CJ in Heimann v Commonwealth(l938) [1938] NSWStRp 47; 38 SR (NSW) 691 at 695 to the effect that:-

“In order to justify the importation into a contract of an implied term which is not to be found in the express language of the contract when properly construed, and is not annexed by some recognized usage, or by statute or otherwise it is essential that the express terms of contract should be such that it is clearly necessary to imply the term in order to make the contract operative according to the intention of the parties as indicated by the “express terms” and further:-

“It is not sufficient that it would be reasonable to imply the term......It must be clearly necessary. And the test of whether it is clearly necessary is whether the express terms of the contract are such that both parties, treating them as reasonable men - and they cannot be heard to say that they are not - must clearly have intended the term, or, if they have not adverted to it, would certainly have included it, if the contingency involving the term had suggested itself to their minds....”

Also see the comments of Mason J in the High Court of Australia in Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337 at 346:

“For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question. Accordingly, the courts have been at pains to emphasise that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract.”

(Note the above quotations have been conveniently compiled together in the text “Australian Labour Law, Cases and Materials, 2nd Edition by RC McCallum, MJ J Pittard, and GF Smith).

If we are to apply the business efficacy test to the facts of this case, the relevant question that can be posed is, what would have been the response of the parties had they addressed their minds to the policy of the Board at the time the contract was executed. The Board’s response would have been obvious as the above-stated policy had already been in existence, prior to the engagement of the Plaintiff. The Plaintiff’s response on the hand could have been either way. He could have accepted it or not. To assist us in coming to some intelligent conclusion on this matter. Hope JA in the Castlemaine Tooheys Ltd case (ibid) has pointed out that the express terms of the contract and the relevant surrounding circumstances should be considered.

When we turn first to the express terms of the contract of employment, as already pointed out, there are two mutually related clauses which deal with the subject of accommodation. I have already pointed out that the policy of the Board does not conflict with those two clauses and that the express provisions of Clause 19(1) are not obligatory.

When we turn to the issue of relevant surrounding circumstances, it is my view that this should not be confined to the circumstances prior to and as prevailing at the time of the signing of the contract only, but that it should also include where applicable, the subsequent dealings between the parties. This is where sometimes the question of custom and practice prevalent in such similar work environment or industry may become relevant in determining whether a term should be implied or not. In other situations, the subsequent dealings of the parties where certain practices may have been observed by the parties, despite the fact that the contract of service may have been silent on such matters, may even be considered as terms which Court may imply into the contract of the parties (see Law of Employment by A. Szakats, second edition, paragraph 54).

As we turn to the facts of this case, and much of this can be gleaned from the affidavits of James Apaniai filed on 1st March 1996, and Edward Ronia filed on 16th February 1996, it will be observed that when the Plaintiff was engaged by the Defendant in January of 1990, he was accommodated in a private residence provided by the Defendant. In March of 1990, the Plaintiff purchased a private residence with a loan obtained from the Defendant and after extensive repairs done to that residence, he moved into that residence on 12 February, 1991. It is not clear on the evidence before this Court whether the Plaintiff was aware by then of the policy of the Board, but most likely, he was. I say this, because if there was no such policy of the Board in existence, it would not have been necessary for him to move into that house. He could easily have put it out on rent immediately, and continued to reside in the residence provided by the Defendant. What is clear from the evidence before this Court is that by June of 1992, the Plaintiff was well informed of the policy of the Board, and despite numerous requests and applications to the Board to have its policy waived or varied, the Board had not changed its position. It is significant too, to note, that the policy had been consistently applied across the board to all the employees of the Fund, with the exception only of the General Manager. The policy of the Board therefore can also be viewed as a practice prevailing within the Fund, and therefore all the more reason to support its inclusion in the contract of employment of the Plaintiff, as an implied term. It is also significant to note that for a period of time (that is from February, 1991, to November, 1992) there appears to have been observation or compliance with such policy by the Plaintiff, when he resided in his private residence. His transfer from his private residence to the Tasahe house had never been authorised, endorsed or approved by the Defendant.

When the express terms of the contract of employment and the relevant surrounding circumstances are considered together, I am satisfied that the stated policy of the Board should be included in the contract of employment of this Plaintiff as an implied term. Hence the “business efficacy” test should be answered in the affirmative. It should be pointed out too that it has not been disputed by the Plaintiff that there exists such a policy.
This takes me next to consider the question of whether the termination of the Plaintiff by the Defendant was unlawful. The relevant clause in the 2nd Agreement of Service executed between the Plaintiff and the Defendant is contained in Clause l6(c), which states:

“Without prejudice to any other remedy which the Board may have, the Board may notwithstanding clause 3 terminate the Employee’s employment summarily by notice in writing if the Employee:-

(c) is guilty of any gross misconduct, negligence or default or serious breach or non-observance of any of the conditions of this agreement.”

Mr Rose for the Defendant points out that the reasons given for the termination of the Plaintiff fall well within the ambit of sub-clause 16(c) above. The actions of the Plaintiff he argues fall within the definition of the term ‘gross misconduct’ in the Interpretation part of the Agreement,

“gross misconduct” includes conduct which involves dishonest, insubordination and disobedience to or refusal to comply with, lawful instructions given by or on behalf of the Board.”

I have already analysed in detail the actions of the Plaintiff in relation to the question of lawfulness of the orders or instructions of the Defendant, and therefore do not need to repeat them here. They also apply here and are relevant in deciding whether those same actions amounted to gross misconduct. I concluded that the instructions or orders given by the Board, to the Plaintiff were made pursuant to an implied term in the form of the long-standing policy of the Defendant. On that basis, those instructions were valid and lawful, and should have been obeyed or complied with by the Plaintiff. By refusing to obey or comply with those lawful instructions, his actions amounted to “gross misconduct” as defined in the Interpretation section of his contract of employment and accordingly, he had been lawfully terminated under Clause 16(c) of the second Agreement of Service. The declaration sought in paragraph 1(3) (a) of the Originating Summons therefore should also be dismissed.

On the question whether the Defendant had acted in breach of the rules of natural justice, this argument consequentially fails as a result from the way this Court has ruled above. Under Clause 16(c), summary dismissal is permitted, provided that the notice of termination to the Plaintiff was issued in writing. There is clear evidence that the requirement of Clause 16(c) had been complied with fully by the Defendant.

But even if the requirements of Clause 16(c) had not been complied with, the Defendant did terminate the employment of the Plaintiff with three months pay; with the requirement of Clause 17, (termination by notice) in mind. The Plaintiff has sought to submit that Clause 17 could not lawfully be invoked, as it is silent on the question of conversion of the Plaintiffs right under the Contract, of a three months notice of termination, to cash. Whilst on one hand, that may be correct, on the other hand, it could be equally argued that where the Plaintiff accepts the payment of cash (bearing in mind that this payment had specifically been made in lieu of the requirements of Clause 17) then he could be held to have waived his right to that notice; preferring to be paid for his three months notice, without having to provide any service for it. Otherwise, the Plaintiff would not have been entitled to any such payment, if he had, as in this case, been validly terminated under Clause 16(c) of his Contract of Employment. As an alternative argument, though not pressed by Mr Rose, it would have been tenable, in any event. It should be borne in mind, and I quote, that:

“The object (of notice) is...to give the servant a fair opportunity of looking out for and obtaining another situation, instead of being thrown suddenly and unexpectedly upon the world with, it may be a wife and a family to support, and no means, either from savings or otherwise, of supporting himself or them.”(Morrison v. Abernethy School Board (1876) 3 Sess Cas 945, at 950 per Lord Deas.).

The effect of a payment of cash, in lieu of notice therefore, can also be seen as a waiver on the part of the employer for services to be rendered by the employee during that period of the notice; bearing in mind the fact that the salary which the employer pays out is for the services that the employee will provide. In my respectful view therefore, the fact that there is no specific provision in the contract of employment on the question of payment of cash in lieu of notice, does not necessarily mean that such a question may not be considered. If the Plaintiff should insist on his rights under the contract of employment to a three months notice, then he should simply have refused such payment and demand that he serve out his notice of three months with his employer at the end of which he will still be paid for those three months in the normal way.

In the circumstances of this case, if Clause 16(c) alone had been invoked, then his summary dismissal was justified, and he shouldn’t have been paid the three months salary at all. However, in the situation where the Defendant also seeks to cover itself under Clause 17 of the contract of employment as an alternative ground for dismissing the Plaintiff, then it must bear the risk of losing that payment even if the first ground was found to have been justifiable.

I am satisfied the dismissal of the Plaintiff was justifiable in all the circumstances before this Court, and I must refuse the declaration sought in paragraph 1(3) of the Originating Summons.

Consequentially, the orders sought by the Plaintiff must also be denied. On the question of costs I am satisfied this must be borne by the Plaintiff.

ORDERS OF THE COURT

1. Dismiss the declarations sought in the Originating Summons filed on 16th February 1996.

2. Dismiss the orders sought in the same Originating Summons.

3. Costs of the application to be borne by the Plaintiff.

A.R.PALMER
JUDGE