Helu v Koloa [2000] TOCA 20; CA 30 1999 & 31 1999 (21 July 2000)

IN THE COURT OF APPEAL OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY

NO. 30/99
BETWEEN

1. SAIMONE HELU
2. TONGA WATER BOARD

Appellants
-V-

GORDON KOLOA

Respondent.
AND
NO. 31/99
BETWEEN

GORDON KOLOA

Cross Appellant
-V-

1. SAIMONE HELU
2. TONGA WATER BOARD

Cross Respondents

Coram:
Burchett J Tompkins J Beaumont J

Counsel:
Mr. Sione ‘Etika for Appellants
Mr. Sione Kengike for Respondents

Date of hearing: 10th July 2000.
Date of judgment: 21st July 2000.

JUDGMENT OF THE COURT

Introduction

Gordon Koloa instituted proceedings in the Supreme Court against his employer, Tonga Water Board ["the Board"], and Saimone Helu [the Board's Manager], claiming damages for breaches by the Board of his contract of employment with the Board in two respects : (1) wrongful suspension ; and (2) wrongful dismissal. Mr Koloa claimed compensation for loss of 3 years' salary [i.e. $23,310], together with the sum of $10,000 for loss of reputation. The primary Judge dismissed the claim for wrongful suspension, but held the Board liable on the claim for wrongful dismissal. On that claim, the primary Judge awarded damages of $6,500 made up as follows: (1) the sum of $1,750 for loss of income ; and (2) the sum of $4,750 for humiliation, distress and loss of reputation.

The Board now appeals from the finding against it of liability for wrongful dismissal, and further appeals against the award of damages. For his part, Mr Koloa now cross appeals from the dismissal of his claim for wrongful suspension, and from the award of damages for wrongful dismissal, contending that it was inadequate.

In order to understand the issues that arise on the arguments advanced on the appeal and the cross-appeal, it will be necessary to refer first to his Honour's findings and conclusions.

The Background

The background to the litigation may be summarised as follows:

• Mr Koloa commenced employment with the Board on 1 June 1995. He was appointed to the position of Chief Production Officer "conditional on serving a probation period of 6 months ...".
  
• Mr Helu wrote to Mr Koloa and to the Board's Chief Engineer on 14 August 1995 stating that there was a serious water level and low pressure problem, and complaining that insufficient was being done about it.
  
• One of the Board's employees wrote to the Board on 24 August 1995, stating that he was writing on behalf of all other employees [21 in all] working at the Board's compound at Mataki'eua, where Mr Koloa worked. The employee complained about Mr Koloa's working procedures and alleged that Mr Koloa had improperly used the Board's property in several respects then specified.
  
• Mr Helu wrote to the Board's Chairman on 25 August 1995, recommending (1) that Mr Koloa be suspended ; and (2) that Mr Helu investigate the allegations and submit his findings to the Board for its decision. The Chairman approved the recommendations. Mr Helu then wrote to Mr Koloa, directing him to leave the premises and attaching the letter of complaint.
  
• Mr Koloa wrote to Mr Helu on 28 August 1995, disputing his suspension and providing details of (1) his own equipment which had been used in the Board's operations ; and (2) equipment owned by the Board which he had repaired at home.
  
• In another letter, signed by about half of the employees at the Mataki'eua compound, written to the Board on about 28 August 1995, it was stated that these employees did not consent to the writing of the letter of complaint dated 24 August, purportedly written on their behalf. These employees further stated that, in their opinion, Mr Koloa was honest and responsible.
  
• Another employee wrote to Mr Helu on 30 August 1995, purporting to confirm some of the allegations made by the other employees, and making some other accusations against Mr Koloa.
  
• Mr Helu wrote to Mr Koloa on 30 August 1995, requiring a written response within 14 days to the earlier allegations made in the letter dated 24 August.
  
• Mr Koloa replied on 5 September 1995, responding to the allegations.
  
• Mr Helu wrote to the Acting Solicitor-General on 13 September 1995, seeking advice, and stating that "(t)he Sub-Committee has recommended that Mr Koloa be dismissed for ineffectiveness..."
  
• The Board discussed the matter at its meeting held on 15 September 1995. The minutes record the following consideration and decisions:
  

"(a) Mr Kotoni Koloa Chief Production Officer:

The Sub-Committee informed the Board that Mr Kotoni Koloa, Chief Production Officer had been suspended as from 28th August 1995, because of allegations against him. Even though that he was still on probation his conduct and service was unsatisfactory such as the continuous low water level at Mataki'eua. Thus, to terminate the service of this officer.

In reply to the question from the Acting Chairman whether there was any understanding with the Legal Advisor on that matter, the Secretary stated that the Acting Legal Advisor has been advised.

Member S. Taumoepeau also pointed out that to ignore the allegations against this officer from the other officers at Mataki'eua but to terminate his service on the basis that his performance was unsatisfactory while he was still on probation.

The Board approved the Sub-Committee resolutions:

(i) Confirm the suspension of Mr Kotoni Koloa, Chief Production Officer effective as from 28th August 1995 until 15th September 1995.

(ii) That the service of Mr Kotoni, Koloa, Chief Production Officer, to the Tonga Water Board be terminated effective as from 15th September 1995.

(iii) Pay Mr Kotoni Koloa, Chief Production Officer the equivalent of his salary as from 28th August 1995 to 15th September 1995 while he was suspended..."

• These decisions were communicated to Mr Koloa by letter dated 18 September 1995.
  

It will be convenient to deal first with the cross-appeal against his Honour's rejection of the claim for wrongful suspension.

The reasoning of the primary Judge on the claim of wrongful suspension

In this connection, his Honour was not persuaded that any breach of any of the terms of the employment had occurred. The primary Judge said:

"In the present case, the employee was informed of the allegations against him, his explanation was sought, and he was suspended so that the employer could conduct an investigation, of which his explanation was to be a part. That surely was reasonable. It was not prohibited by any term that may be implied. It was not prolonged beyond the time needed for the employer's consideration of the matter. Though his salary was suspended it was paid in full at the end of the period. That disposes of the plaintiff's claim that his suspension was in breach of his contract. On its facts alone it was not. That part of his claim must fail".

Conclusions on the cross-appeal against rejection of the claim of wrongful suspension.

On behalf of Mr Koloa it is contended that the Board had no power, express or implied, to suspend an employee ; so that, it is said, the Board was in breach of its employment contract by purporting to suspend Mr Koloa.

We cannot accept the argument.

It is true that there was no express power to suspend. It is also true that if an employer acts in breach of the employment contract in such a way as to repudiate it, the employee may accept the repudiation and sue for damages for breach (i.e. for constructive dismissal) [see Halsbury's Laws of England 4th Ed. 1992 Reissue, Vol. 16, p.321]. But, in order to succeed, the employee must show that he or she is "entitled" to terminate the contract without notice by reason of the employer's conduct. [op cit. at 331]. As Halsbury goes on to explain [at 332]:

"For these purposes, ‘entitled’ means contractually entitled, so that an employee seeking to rely on constructive dismissal must show that the employer was guilty of a repudiatory breach of contract, not simply of unreasonable conduct: Western Excavating (ECC) Ltd v Sharp [ [1977] EWCA Civ 2; 1978] QB 761, [1978] ICR 221, CA. Reasonableness or otherwise of the employer's conduct may be evidence, but the test remains contractual: Courtaulds Northern Spinning Ltd v Sibson [1988] ICR 451, [1988] IRLR 305, CA. The possible rigour of this rule has, however, been lessened by the development of the implied term of trust and respect (see para 44 ante) with the result that behaviour sufficiently unreasonable to be in breach of that term may be relied on in that way."

Accordingly, we agree with his Honour, for the reasons he gives, that the decision to suspend was, in the circumstances, reasonable. It was not, a fortiori, a repudiation by the Board.

The Reasoning at first instance on the claim for wrongful dismissal

His Honour held (and his finding is not challenged in point of principle on the appeal) that there should be implied in the contract of employment the following terms:(1) that the Board would exercise any right it had to dismiss in a reasonable manner ; and (2) that neither party would act in a way that undermined the trust of the other. His Honour went on to hold that the Board was in breach of both implied terms. This conclusion, however, is challenged on the appeal. His Honour's reasons for concluding that these breaches had occurred may be summarised as follows:

• After the Board had passed on to Mr Koloa the initial letter of complaint, the Board received (as has been noted) two further letters. One, written by several employees, denied the allegations. Yet this letter was apparently ignored by the Board. The second letter gave details of the earlier allegations, but was not shown to Mr Koloa. This failure alone indicated that the sub-committee did not carry out a reasonable investigation of the allegations.
  
• The minutes of the Board's deliberations record that Mr Koloa was not dismissed for dishonesty, but because he was still on probation and his service was unsatisfactory. Yet the unsatisfactory conduct was not specified. The Board did not tell Mr Koloa that low water levels were considered a cause for dismissing him without warning. This was in breach of the implied terms requiring the Board to act in a reasonable and trustworthy way. It was no answer to say that Mr Koloa's appointment was "on probation".
  

Conclusions on the appeal against the upholding of the claim of wrongful dismissal

On behalf of the Board it is submitted that the actions of the Board were within the terms of the employment contract, in that its conduct should be characterised as no more than the termination of the position of an employee expressly appointed "on probation", where the service had been shown to be "unsatisfactory".

We cannot accept the submission.

The primary Judge said:

"The [probationary] period should run, in fairness to both parties. If a serious reason arises that by itself justifies the dismissal of the employee, then the probationary employee may be dismissed during the probationary period for that reason. However, if the service is unsatisfactory, it is the employer's contractual duty to act reasonably in exercising its rights. It should first warn the employee about that unsatisfactory service, and continue the probationary period. If no particular serious cause for dismissal arises, the employer generally is unjustified in dismissing a probationary employee for unsatisfactory service until the probationary period has proved that the employee is unsuitable. If the probationer is dismissed at the end of the probationary period for unsatisfactory performance, even then the employer has to be ready to show that that decision was a reasonable one in the circumstances. It cannot be reasonable unless the employee has fallen below an acceptable standard, and has had the opportunity to respond to warnings or else to state his reasons why he should not be dismissed."

We respectfully agree with this analysis. We note, in this connection, that even if the probationary aspect of the appointment is given its full weight, it does not follow that any rights given to the employer in that behalf may be exercised in a way that is not reasonable in the circumstances. Halsbury's [op. cit.] says:

"Certain (or possibly all) express terms giving rights to employers may be required to be exercised reasonably (see para 52 ante), particularly if the term of trust and respect may be viewed as an overriding term, as in United Bank Ltd v Akhtar [1989] UKEAT 230_88_1210; [1989] IRLR 507, EAT; and see White v Reflecting Roadstuds Ltd [1991] ICR 733, [1991] IRLR 331, EAT (doubting any general requirement of reasonableness but affirming the importance of this term)."

We agree.

In our opinion, the primary Judge correctly held that the limitation of reasonableness is equally applicable to the express provisions that the appointment was "probationary".

The question remains whether there was a breach by the Board of an implied term. On this question, essentially one of fact, the trial Judge said:

"[Mr Koloa] was not dismissed for dishonesty at all. He was dismissed for unsatisfactory conduct and service while on probation. This unsatisfactory conduct was not specified, and the seven allegations of dishonesty supposedly investigated by the subcommittee were not referred to in the [Board's] minute. The conduct was said to include the continuous low water levels. [Mr Helu's] memorandum about that had been sent to the chief engineer as first recipient, and it did not tell [Mr Koloa] that low water levels were considered a cause for dismissing him without further warning. The [Board] diverted itself onto other matters upon which [Mr Koloa] had had no opportunity to comment. In the minute, and in the evidence of [Mr Helu], there is no record of any consideration of the allegations of dishonesty. It seems to me from reading the minute that the low water level was added, to make the reasoning of the employer stronger".

The primary Judge's conclusion that the Board had acted in the execution of its process in a way that was not reasonable, was, as has been said, essentially factual, albeit a conclusion of secondary fact. In our view, the inference thus drawn by his Honour was clearly open to a trial Judge in all of the circumstances we have described. We are not persuaded that any ground for appellate interference has been made out. This aspect of the appeal must fail.

The findings and conclusions of the primary Judge on the measure of damages

As a matter of principle, his Honour approached the case on the following bases: (a) damages for breach of an implied term are awarded to compensate for that breach ; and (b)for wrongful dismissal, damages are assessed with reference to a plaintiffs proved financial loss, and damages can be recovered for distress and humiliation arising from the manner in which the employer carried out the dismissal.

The primary Judge found that Mr Koloa's reputation suffered as the result of his dismissal, and that this was integral with a sense of humiliation and distress ; and that to re-establish his workshop, Mr Koloa relied on his reputation. But his Honour also noted that the continuation of Mr Koloa's employment with the Board for an indefinite period was not a foregone conclusion. Accordingly, the trial Judge awarded a sum of $1,750.00 roughly equivalent to 3 months' net salary, for loss of income.

His Honour found that Mr Koloa's' humiliation, distress and damage to reputation were "not catastrophic" and would not be permanent. Nonetheless, the idea had circulated that Mr Koloa had been dismissed for dishonesty. For this head of damage, his Honour accordingly awarded the amount of $4,750.00.

Conclusions on the appeal and cross-appeal from his Honour's award of damages.

We are not persuaded that the trial Judge's assessment of damages was either excessive (as was contended for the Board) or inadequate (as was submitted for Mr Koloa). On the contrary, in our opinion, the amounts awarded were, in each case, within a range that was plainly open to the primary Judge to assess as a fair measure of compensation in the present circumstances.

Orders

In the result, both the appeal and the cross-appeal will be dismissed.

As to costs, since the Board has failed on the substantial question argued before us, that is the wrongful dismissal point, it is appropriate that the Board bear most of the costs of the whole of the appellate proceedings, that is, two-thirds of those costs.

We make the following orders:

1. Appeal dismissed.

2. Cross-appeal dismissed.

3. Order that the Board pay two-thirds of Mr Koloa's costs of the appeal and of the cross-appeal. Make no order for Mr Helu's costs, if any.

Burchett, J, Tompkins J, Beaumont, J.