Vaioleti v Tonga Development Bank [2000] TOLawRp 21; [2000] Tonga LR 271 (15 June 2000)

IN THE SUPREME COURT OF TONGA

Vaioleti

v

Tonga Development Bank

Supreme Court, Nuku'alofa
Finnigan J
C 476/99

13, 14 April 2000; 15 June 2000

Employment law — wrongful dismissal — reasonable cause

Lio Manumu'a borrowed from the defendant bank and used a fishing net as security. His payments were in arrears. The plaintiff was his loans officer and she suggested that the net be shared with another fisherman in order to catch more fish and from the money make Lio's repayments. Lio agreed. The plaintiff confirmed this by a letter. If there were any excess after making Lio's payments that would be her share. Over a year later other officials of the bank were investigating Lio's non-payment and discovered the arrangement. The plaintiff was on leave and was brought in from her leave. She recovered the net from the other fisherman and returned it to Lio. Neither the plaintiff nor Lio had made any payments towards his loan. At the time of its return the net was tangled and had large holes so was worthless for fishing. The defendant called the plaintiff in from her leave to discuss what had occurred, and she was told to pay in $400 to Lio's account, which she did. When she returned to work, on 7 December 1998, she was told in a letter that the defendant was investigating the matter and on 9 December, she was advised that the defendant's auditor was assessing her actions to see if there had been anything fraudulent. She was suspended on 14 December 1998. She was called to see the manager, and there she made at his request her statement about what she had done. She wanted Lio brought so he could support her account, but that was refused. Later she was called in again, and the defendant's auditor put to her some questions, which she answered in writing. Lio had written a letter of complaint to the defendant, at the request of the officers who had followed up his loans arrears and heard his story. No complaint or statement made by Lio was shown to her. On Christmas Eve she received a sealed letter which formally dismissed her for breach of clauses 19 (governing 'General Dishonesty') and 20 (governing 'Fees, Rewards, Gratuities, Borrowing') of the staff manual. She appealed to the Board of Directors, but they upheld her dismissal. She claimed that the defendant did not have proper grounds to dismiss her and that her dismissal was wrongful. She claimed damages for unfair and/or wrongful dismissal.

Held:

1. A dismissal procedure provided as a contractual term was not an obligation of strict compliance but of reasonable compliance. If the employer did not strictly follow a set procedure, the test to apply was not whether the procedure should have been followed, but whether the employer acted reasonably, i.e. fair in all the circumstances.

2. The defendant had given the plaintiff a full opportunity to explain her actions and make a case for continuation of her employment. It gave full consideration to her explanation and to the case for continuing her employment. That was what the law required the defendant to do in using the procedure.

3. No bank officer should ever make arrangements about the bank's security from which he or she may personally make money for himself. The plaintiff's duty as a loans officer was to ensure that the defendant's security was preserved. When she became personally involved in the use of the security asset, she ran a grave risk of becoming responsible to her employer for any loss or reduction in value that might occur.

4. The actions of the defendant were a reasonable exercise of its contractual right to dismiss the plaintiff. By the same principles, the cause for dismissal was reasonable. The plaintiff's claim could not succeed, and it was dismissed with costs. Costs were to be agreed or taxed.

Counsel for plaintiff: Mr Fifita
Counsel for defendant: Mrs Vaihu

Judgment

The plaintiff has claimed damages for unfair and/or wrongful dismissal. She was employed from May 1996 until December 1998 by the defendant and at the time of her dismissal she was a senior loans officer. She states in her claim that the termination of her employment was unfair in that the defendant did not give her the opportunity of full explanation, and had not fully advised her of her responsibilities. She relies on the law of employment and the implied term in her contract of employment that the employer would exercise its contractual right to dismiss in a reasonable manner. She claims that the defendant did not have proper grounds to dismiss her in any event, and that her dismissal for that reason was also wrongful.

The Facts

What occurred is clear from the evidence, which was given for the plaintiff by the plaintiff herself, and by Siola'a Tu'itupou the manager of the defendant's loan department. For the defendant evidence was given by Lio Manumu'a and by Hasiloni Fungavai who was acting managing director of the defendant at the time of the plaintiff s dismissal.

Lio Manumu'a was a borrower from the defendant, and had given as security a fishing net. His payments were in arrears. The plaintiff was checking the defendant's loan securities, and in the course of that duty she went to see him. He did not have the net, and the plaintiff was active in recovering it, and she arranged for him to make a monthly payment of $40. This was a creditable discharge of her duties. However, about 4 months after that, his payments were again a problem. She put a proposal to him, which she stated was intended to help him. She suggested that the net be shared with another fisherman, who also had a loan with the bank and was paying, by salary deductions. The idea was that he could catch more fish and from the money make Lio's repayments. Lio agreed. She confirmed this by a letter and gave him time to think about it. She stated in her evidence that if there were any excess after making Lio's payments that would be her share. She stated that this arrangement was within her powers as a bank officer and not beyond them.

She went with her husband and collected the net. She delivered it to the other fisherman.

It was over a year later, that other officials of the bank were investigating Lio's non-payment and learned of what had occurred. The plaintiff was on leave, attending to her squash planting. She was brought in from her leave. She recovered the net from the other fisherman and returned it to Lio Manumu'a. During that time she had made no payments towards his loan, and, it appears, neither had Lio. He told the bank officials that the plaintiff had taken some of his nets and that she was to repay some of his loan. At the time of its return the net was worthless for fishing, with large holes and tangled. Lio removed the lead sinkers and some ropes as the only items left of any value.

While the plaintiff was still on leave the defendant called her in to discuss what had occurred, and she was told to pay in $400 to Lio's account, which she did. When she returned to work, on 7 December 1998, she said she was told in a letter that the defendant was investigating the matter and on 9 December, she was advised that the defendant's auditor was assessing her actions to see if there had been anything fraudulent. She was suspended on 14 December 1998. In the suspension letter dated that day, she was told that the suspension would be while the defendant investigated an irregular transaction on the loan account of Lio Manumu'a. The letter told her she would be required to provide a full statement of her involvement with the loan account. She was called to see the manager, and there she made at his request her statement about what she had done. She wanted Lio brought so he could support her account, but that was refused. Some time later she was called in again, and the defendant's auditor put to her some questions, which she answered in writing. Lio had written a letter of complaint to the defendant, at the request of the officers who had followed up his loans arrears and heard his story. No complaint or statement made by Lio was shown to her. On Christmas Eve her younger sister delivered a letter to her. It was unsealed and it formally dismissed her for breach of clauses 19 and 20 of the staff manual. She was very distressed by the message, the timing and the mode of delivery.

Clause 19 of the staff manual governs 'General Dishonesty', and clause 20 'Fees, Rewards, Gratuities, Borrowing'.

She appealed to the Board of Directors, but they upheld her dismissal, upsetting her further because she said they mentioned other matters that had not been stated earlier as the reasons for her dismissal.

To this day she feels her actions over the fishing net were justified. She stated the reasons for this. First she stated that the defendant had deceived Lio and that this was a way of helping Lio meet his obligations. Second what she did was within her powers as a loan officer, and third, she stated that if she could have got the money from her squash or elsewhere she would have paid off the rest of Lio's loan. She stated that everything she had done she did in good faith, and that she gained nothing from it.

During these events, on 16 October 1998, the Board of Directors, because of what had happened in this case had amended clause 20 of the staff manual. The plaintiff feels that what she did was not against anything in the staff manual either at the time of her actions or after the amendment.

The Submissions

I shall not set out the submissions of counsel in detail, but they, applied to the evidence, are the basis of my findings. The main thrust of the plaintiff's case is that the defendant did not employ its dismissal procedure, and if it did so, did not use it in a fair and reasonable manner. The secondary point is that, while the defendant had the right to dismiss for good cause, it had no cause that justified dismissing the plaintiff.

I have a choice about how to go about this matter. In the statement of claim and in his submissions, counsel for the plaintiff has covered a wide range of detailed allegations. I have considered each of these in turn, but feel no good will come from a detailed analysis of each point. As he stated correctly in opening his submissions, the essence of the complaint is that the procedure was not properly followed, and the manner of the dismissal was not reasonable. As well there is a secondary claim that, while the defendant was entitled to dismiss if there were good cause, such cause did not exist in the present case. The plaintiff's essential claims can be dealt with briefly, so I shall be brief.

The claims above are claims that the plaintiff undertook to establish. The first point to make is that a dismissal procedure was, on the evidence, included in the terms of the plaintiff's employment contract, because there was one in the staff manual and both parties accepted from the outset that it contained terms of the contract. However, it is the law, as counsel correctly pleaded and submitted, that the employer is bound to exercise its rights in a reasonable manner. The obligation in an employment situation is not an obligation of strict compliance, but of reasonable compliance. It follows therefore in law that a dismissal procedure provided as a contractual term is always subject to the overriding principle that it must require and enable the employer to act reasonably. By the same principle, if the employer does not strictly follow a set procedure, the test to apply is not whether the procedure should have been followed, but whether the employer acted reasonably. Whether or not a dismissal procedure is itself reasonable, the employer is not required by the law to adhere strictly to it if to depart from it is reasonable, i.e. fair in its circumstances.

Having said all that, I am not persuaded in the present case that the procedure set out in the manual (Clauses 16 and 17) is intended to be the only procedure for dismissal. It is not well drafted. It provides, at Clause 16(e), for an appeal to the Board of Directors if a dismissed employee feels his case has not been considered fairly. It is clear that Clauses 16 and 17 do not set out all the ways the defendant can be fair, and do not set out all the things for which an employee may be dismissed. Further to that, the essence of the procedure, as governed by the law, is that the defendant was bound to treat the plaintiff fairly in exercising its right to dismiss for cause. As the evidence in the present case unfolded it became abundantly clear that the defendant had given the plaintiff a full opportunity to explain her actions and make a case for continuation of her employment. It gave full consideration to her explanation and to the case for continuing her employment. That was what the law required the defendant to do in using the procedure. I uphold the submission of counsel for the plaintiff on that point of law, but have to rule against the plaintiff on the facts.

I turn now to the claim that the employer did not have cause to dismiss. This claim is not justified. The plaintiff, I am sure, justifies her actions to herself to this day and thus by that alone demonstrates her liability to be dismissed. What she did was, to an objective observer, contrary to her employer's interests and contrary to her duty as a bank employee. She had no rights whatever in respect of the fishing net. If she had been offered some share of it, then it was her duty while an employee of the plaintiff to decline to get involved because of a conflict of interest. Much less should she actively make arrangements that may affect the value of the bank's security. Again, no bank officer should ever make arrangements about the bank's security from which he or she may personally make money for himself. The plaintiff's duty as a loans officer was to ensure that the defendant's security was preserved. That indeed was what she said she was doing at the outset. When she became personally involved in the use of the security asset, she ran a grave risk of becoming responsible to her employer for any loss or reduction in value that might occur. That is what did happen, and the defendant rightly required her to make a payment towards the loss that had accrued from Lio's non-payment. What she did was the opposite of her duty. She was clearly liable to be dismissed if the employer, after following an enquiry procedure that was fair and reasonable, chose to do that. Viewed objectively, her payment in reduction of the debtor's loan was an admission that she had become liable by her actions to do something to put matters right.

Conclusion

For the reasons I have stated, I hold that the actions of the defendant were a reasonable exercise of its contractual right to dismiss the plaintiff. By the same principles, I hold that the cause for dismissal was reasonable. The plaintiff's claim cannot succeed, and it is dismissed with costs. Costs are to be agreed or taxed.