'Ilangana v Westpac Bank of Tonga [2014] TOCA 18; AC 17 of 2014 (31 October 2014)

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

AC 17 of 2014
[CV10 of 2013]

BETWEEN:

FU'IKAVA 'ILANGANA

Appellant

AND:

WESTPAC BANK OF TONGA
Respondents

Coram : Salmon J

Handley J

Hansen J

Tupou J

Counsel : Mr L. Niu, SC for the Appellant
Mr H. Waalkens, QC& Mr R. Stephenson for the Respondent

Date of Hearing : 23 October 2014

Date of Judgment : 31 October 2014

JUDGMENT OF THE COURT

[1] The appellant appeals from the dismissal by the Lord Chief Justice of her claim for damages for wrongful dismissal by the Bank. Although in the result the appeal must be dismissed we do this without any sense of satisfaction because on the face of things the appellant's dismissal, although lawful, appears to have been harsh and unfair.

[2] Since there is no unfair dismissal legislation in Tonga the appeal must be decided in accordance with the common law, that is the contract of employment between the parties.

[3] The appellant commenced employment with the Bank, then known as the Bank of Tonga, on 22 May 1989, shortly before her 18th birthday, and signed the employment contract pleaded and relied on in these proceedings.

[4] Clause 1 provided:

"On and from the 22nd day of May 1989 the Bank will employ the Employee and the Employee shall serve as Grade 5 officer or in such other capacity or upon such other duties ... as an authorised officer of the Bank shall from time to time specify."

[5] Clause 4 provided:

"The remuneration of the Employee whilst [she] remains in the service of the Bank shall be at such rate payable at such times as the Bank shall from time to time determine."

[6] Clause 11 relevantly provided:

"This agreement shall be terminated ... by any of the following events:-

(a) The retirement of the Employee in accordance with the Term of Employment approved by the Bank from time to time.

(b) By one calendar month's notice in writing on either side or by the payment to the Employee or the forfeiture of one month's salary in lieu of such notice.

(c) The dismissal of the Employee for misconduct ... such dismissal may be with or without any period of notice as the Bank sees fit."

[7] The appellant's statement of claim pleaded cl 11 as a term of the contract, although it was alleged to be invalid because it was contrary to s.7(1)(j) of the Bank of Tonga Act 1972 as amended.

[8] Paragraph 12 of the statement of claim traced the plaintiff's career with the Bank marked by 13 promotions, culminating in her appointments as Manager Branch Banking in October 2006, Manager Human Resources in October 2009, and Head of Retail Services in January 2012.

[9] Her appointment as Manager Branch Banking in 2006 made her a senior officer of the Bank, and her appointment as Manager Retail Services in 2012 was said to make her one of the top five officers of the Bank, all of equal standing below the General Manager.

[10] The appellant tendered at the trial the letter dated 14 June 2012 from the Bank's General Manager, the head of the Bank in Tonga, confirming her appointment as Head of Retail Services. The letter included the statement: "In acceptance of this offer, please sign and return the attached duplicate of this letter. Should you wish to discuss the content of this letter, please do not hesitate to discuss with me personally." The letter also included this statement:

"I wish you all the very best in your new role and are confident you will continue to make a valuable contribution to the business in the years to come."

The appellant signed and returned the duplicate the next day.

[11] The statement of claim did not allege that the appellant's many promotions over the years, the letter of 14 June 2012, or what may have followed that letter had varied or replaced the contract of employment of 22 May 1989.

[12] On 7 June 1992 the appellant turned 21 and shortly afterwards she became a member of the Bank's Retirement Fund which required her and the Bank to make contributions to the Fund based on percentages of her salary.

[13] The Rules of the Fund made provision for the payment of pensions to employees who attain the age of 55 years and have completed at least 15 years service with the Bank. The appellant had completed 23 years of service with the Bank when she was dismissed at the age of 41.

[14] The Bank's Retirement Fund was terminated in 2012, before the appellant's dismissal, after the National Retirement Scheme came into force. The appellant received her lump sum entitlements under the Fund.

[15] According to the appellant's oral evidence, after Westpac bought out the other shareholders in the 1990's the Bank issued its staff with pamphlets setting out the Westpac Code of Conduct. This document was not produced at the trial, although a document issued for a staff workshop to explain the Code of Conduct became an exhibit.

[16] No attempt was made to plead the Code of Conduct, or any part of it as a variation of the original contract of employment, or as the basis for an extended reciprocal implied term of mutual trust and confidence, or of any other express or implied term.

[17] In Malik v Bank of Credit and Commerce International SA [1997] UKHL 23; [1997] 3 All ER 1, 5, 12, 14-16 the House of Lords held that a term of mutual trust and confidence was implied by law in contracts of employment. In Johnson v Unisys Ltd [2001] UKHL 13; [2001] 2 All ER 801 a majority of the House of Lords, Lord Steyn dissenting, declined to apply this term to the dismissal of an employee. However Lord Nicholls at 803 said that this could not be done because it would conflict with the statutory remedy for unfair dismissal introduced in the United Kingdom in 1971. Lord Hoffmann said (at 817) that in the absence of such legislation the Courts may have been able to imply an obligation on the employer to exercise its power of dismissal under the equivalent of cl 11(b) in good faith, as did Lord Millett (at 825). However none of this was pleaded, litigated, or argued either at the trial, or in this Court.

[18] On 18 October 2012 the new General Manager handed the appellant a letter dated that day which commenced "You are hereby notified that your services with Westpac Bank of Tonga are no longer required and that your employment with the Company is terminated."

[19] The following day the appellant delivered a letter to the General Manager rejecting the Bank's offer of one month's salary. The letter including the following:

"3. ... I would like to know the grounds and any evidence against me that you considered before making your unilateral decision to terminate my employment.

4. I would also like to know why you did not give me an opportunity to explain my side with regards to whatever information you had in your possession."

[20] The New General Manager replied by letter the next day stating that the Bank stood by its earlier letter, asserted its right to terminate on one month's notice and added:

"3. The Bank's letter of 18 October clearly states that your services with the Bank are no longer required and this is the reason that your contract of employment was terminated."

[21] The appellant did not allege in her statement of claim that her contract contained at the outset an implied term that an employee with satisfactory service to the Bank, whose services were no longer required, was entitled to receive an appropriate reference from the Bank to assist her to obtain alternative employment. Nor did she allege that such a term came to be implied from a course of dealing as her successive promotions took her higher and higher in the Bank.

[22] The General Manager did not provide the appellant with such a reference, and it also seems clear that she did not ask for one. She may still be entitled to such a reference.

[23] At trial and in this Court Mr Niu for the appellant attempted to displace cl 11(b) of the contract of employment by relying on the Bank's status as a public body established by the Bank of Tonga Act 1972. It was owned initially by the Government of Tonga as to 40% and by three Commercial banks, including Westpac, who shared equally the other 60%. He also relied on some of the rules of the Bank's Retirement Fund for the same purpose.

[24] Although the Bank was established by statute, and the Government of Tonga initially was a substantial shareholder, it was never under the control of the Crown and from the outset it was essentially a Company which carried on general banking business for profit for the benefit of its shareholders. In any event, as Ward CJ held in Vaioleti v Tonga Development Bank [1999] Tonga LR 57, the fact that an employer is a public body established by statute does not limit its contractual powers of dismissal unless the statute so provides.

[25] Section 7 of the Act provides that "The Bank shall have the following powers and objects". Paragraph (j) provides:

"to promote and support schemes for the provision of pensions ... and other funds for or in connection with the employees of the Bank ..."

[26] Section 7 contains the equivalent of the Memorandum of Association of a company incorporated under the general Companies Act of Tonga.As such it governed the corporate capacity of the Bank, but could not and did not impose any duty on the Bank, and certainly not a duty enforceable by someone who was not a shareholder.

[27] The Rules of the Bank's Retirement Fund provided for contributions both by members (r 14(1)) and by the Bank (r14(2)) but did not otherwise purport to alter the contract of employment between a member and the Bank.

[28] The Rules do not provide for admission to membership of the Fund, but r 20 refers to the Bank's compulsory retirement age of 60. The definition of membership in r 2 makes it co-extensive with a member's service with the Bank, and r 14 makes an employee's obligation to contribute to the Fund co-extensive with his or her membership, and thus with their employment.

[29] It is clear therefore that the Rules cannot, of their own force, alter cl 11 of the contract of employment.

[30] Had the appellant relied on an implied term of mutual trust and confidence this litigation would have taken a very different course. However her case as pleaded and presented was rightly rejected at the trial and this appeal having failed is therefore dismissed with costs.

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Salmon J

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Handley J

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Hansen J

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Tupou J