'Ilangana v Westpac Bank of Tonga [2014] TOSC 9; CV 10 of 2013 (29 April 2014)

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

CV 10 of 2013

BETWEEN :

FU'IKAVA 'ILANGANA
Plaintiff

AND:

WESTPAC BANK OF TONGA
Defendant

L.M. Niu SC for the Plaintiff
A.H. Waalkens KC with R. Stephenson for the Defendant

JUDGMENT

[1] On 22 May 1989 the Plaintiff entered into a contract of employment with the Bank of Tonga. A copy of the contract is document P-24 and 25.

[2] In July 2002 the Bank of Tonga changed its name to Westpac Bank of Tonga (Act 3 of 2002) however its identity as a statutory body established by the Bank of Tonga Act (Cap 105), now renamed the Westpac Bank of Tonga Act, was not affected (Section 4).

[3] On 30 June 2008 the Westpac Bank of Tonga Act was amended by Act 3 of 2008 which, inter alia, provided that:

"8(1) "The Board of Directors of the Bank shall consist of those persons who are from time to time appointed by the shareholders as Directors in accordance with the Bank's articles".

[4] In July 2008 the Government of Tonga which owned 60,000 D and E shares in the Bank sold those shares to the Westpac Banking Corporation.

[5] Schedule 3 to the Sale and Purchase agreement dated 4 July 2008 are amended Articles of Association describing the Westpac Bank of Tonga as a company having its head office in Nuku'alofa. The general powers of the Board (Article 72) are not inconsistent with Section 8 (1) of Cap 105 as amended.

[6] After her initial appointment as a grade 5 officer, the Plaintiff steadily progressed until on 14 June 2012 (Document P-18) she was appointed Head of Retail Services. This was a senior grade 1 appointment and she was part of the "Tonga Leadership Team". Her position carried an annual salary of $64,260.

[7] On 18 October 2012 the Plaintiff received a letter from the Bank's General Manager. The relevant parts of the letter are as follows:

"Termination of Employment"

You are hereby notified that your services with Westpac Bank of Tonga are no longer required and your employment with the company is terminated. One month's salary in lieu of notice will be credited to your account ... on 19th October 2012. By accepting this payment, you hereby acknowledge that reasonable notice of termination of your employment with Westpac Bank of Tonga has been provided to you."

[8] On 19 October (Exhibit P-22) the Plaintiff replied. She did not accept "the terms and conditions" of the letter of 18 October. She refused the one month's salary. She requested to be told why it had been decided to terminate her employment and pointed out that she had not been given an opportunity to make representations before the decision to terminate her employment had been taken.

[9] On 19 October the General Manager replied. The Plaintiff was sent a copy of her contract of employment. The General Manager asserted that the contract had been "validly and legally terminated" on the ground that the Plaintiff's services with the Bank were no longer required.

[10] It cannot be doubted that the Plaintiff then found herself in a very difficult position. Between 1997 and 2006 she had taken a number of staff loans for various purposes including a home loan from the Bank. By 2011 the amount owed was $138,000. She applied for a further loan but her application was refused. She then refinanced with the ANZ Bank. At the date of her termination she owed ANZ approximately $198,000. Apart from a temporary and rather poorly paid position with a money transfer firm she has not been able to secure the employment necessary to service her debt.

[11] The writ was issued on 20 February 2013. The relevant parts of the contract of employment are as follows:

"11. This agreement shall be terminated as well by the death of the employee as by any of the following events:-

(a) The retirement of the employee in accordance with the Terms 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, dishonesty, willful insubordination or the willful breach by the employee of any of the conditions of this agreement or of the employee's declaration of secrecy. Such dismissal may be with or without any period of notice as the Bank sees fit".

[12] In paragraph 18 of the Statement of Claim it was accepted that the Defendant had purported to act pursuant to clause 11(b) of the contract. No alleged breach of clauses 11(a) or 11(c) were pleaded. In paragraphs 11 and 19 the Plaintiff claimed that clause 11(b) had to be construed in the light of sections 7(1)(j) and 7(1)(jj) of the Westpac Bank of Tonga Act (as amended) and, so construed, had the effect that:

"The Defendant could only terminate (The Plaintiffs) employment upon her death, or for misconduct, willful insubordination or willful breach by her of any of her conditions of employment".

In the words of paragraph 19:

"The Plaintiff says that the Defendant has unlawfully terminated the contract and has unlawfully dismissed her because the termination was based on clause 11(b) which was, insofar as it purported to give the Defendant the right to terminate by giving one month's notice or one month's salary in lieu of such notice, invalid and contrary to the provisions of section 7(1)(j) of the Act".

[13] Section 7(1)(j) of the Westpac Bank of Tonga Act is as follows:

"7(1). The Bank shall have the following powers and objects:

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

Section 7(1)(jj) to which reference was also made, reads:

"(jj). To do all such other things as may be deemed incidental or conducive to the attainment of the above objects or any of them".

[14] The Statement of Defence was filed on 21 March 2013. Although several peripheral matters were denied, the principal facts (later embodied in a "Memorandum of Agreed Facts and Issues" dated 18 October 2013) were admitted. The claim that the Bank's entitlement to invoke clause 11(b) had been circumscribed by sections 7(1)(j) or (jj) was however rejected.

[15] The Plaintiff, who was the only witness, gave evidence on 9 April 2014. She described the consequences of her termination as outlined in paragraph 11 above. She told the Court that she is her family's sole breadwinner and, being unable to keep up with the mortgage payments as a result of losing her job, is facing the loss of her family's home.

[16] In the Plaintiff's view the manner of her dismissal was unfair: she was unaware of any shortcomings in the discharge of her duties; no complaint had ever been made to her; she had never been given the chance to make representations before she was dismissed. The "Code of Conduct and Doing the Right Thing" (Exhibit A) page 15, required breaches of the Code to be followed by "training, coaching and counselling" but none of these had been offered to her. While she knew that other members of staff had been dismissed, none, so far as she knew, had been terminated in the way her employment had been brought to an end.

[17] It appears that at about the time that the Plaintiff left the Bank, several other employees were successfully prosecuted for offences of dishonesty. When being interviewed for other positions, potential employers had the unfortunate impression that somehow the Plaintiff had also been involved. In the absence of reasons being given for her termination she was unable to refute this impression.

[18] In the Plaintiff's opinion paragraphs (b) and (c) of clause 11 were to be taken together:

"I understand clause 11(b) to mean that the Bank could not terminate by giving one month's notice but there had to be a good cause, as outlined in 11(c)".

[19] The Plaintiff told the Court that she had been a contributing member of the Bank's pension scheme until the scheme was wound up in 2012. All the Bank's employees were then transferred to the Tonga Government's National Retirements Benefits Scheme. Upon transfer she elected to withdraw the benefits which had accrued under the Bank's scheme and had been fully paid out. She used the proceeds to buy a minibus with which she hoped to start a small business.

[20] In cross-examination, the Plaintiff accepted that the Defendant is now a wholly owned subsidiary of the Westpac Bank. She also accepted that it is a commercial undertaking which carries on business for a profit. Asked about her pension, she expressed the opinion that section 7(1)(j) was binding on the Bank and had the effect of requiring it to employ her until pensionable age unless clause 11(c) of the contract could validly be invoked.

[21] Following the evidence, both counsel addressed the Court. Although Mr Waalkens began, it will be convenient first for refer to Mr Niu's oral submissions on 10 April since it was not until that time that the suggested impact of section 7(1)(j) on clause 11(b) was fully expounded.

[22] Mr Niu began by explaining that prior to the enactment of the Bank of Tonga Act in 1972 there had been in existence a Tonga Savings Bank established by Act 7 of 1936. The Savings Bank was under the control of the Treasurer (Section 4). Some, at least, of the employees of the Savings Bank were public servants (Section 6). The repayment of monies deposited in the Savings Bank was guaranteed by the Government (Section 8). Section 14 gave His Majesty in Council the power to make Regulations affecting the Savings Bank. Disputes arising from the operation of the Savings Bank were to be referred for final decision by an arbitrator (Section 16).

[23] Section 6(1) of the Bank of Tonga Act provided that the new Bank would "acquire and take over from the Savings Bank ... the business of the Savings Bank ... and shall assume the following liabilities and acquire the following assets ...". The liabilities were confined to the deposit liabilities of the Savings Bank. By Act 6 of 1976 the Savings Bank ceased to carry on business as provided by Section 6(2) of the Bank of Tonga Act.

[24] Although Mr Niu conceded that the employees of the Bank of Tonga were not public servants, he submitted that they were public officers within the scope of the Pensions Act (Cap 8) and were therefore entitled to be paid a pension upon reaching retirement age. This entitlement, as I understood Mr Niu to be submitting, would be frustrated if a person's employment were to be terminated before reaching pensionable retirement age.

[25] Mr Niu's alternative submission was that given the circumstances of its establishment, the Bank was, and has remained, a public body with the result that its employees and their terms of service fall within the scope of public law remedies. In support of this submission he relied on a passage from Malloch v Aberdeen Corporation [1971] 2 All ER 1278 (cited by the Privy Council with approval in Commodities Board v 'Uta'atu [1990] To LR 92) in which, at page 1294 Lord Wilberforce said:

"One may accept that if there are relationships in which all requirements of rules of natural justice are excluded (and I do not wish to assume that this is inevitably so) these must be confined to what have been called "pure master and servant" cases which I take to mean cases in which there is no element of public employment or service, no support by statute, nothing in the nature of an office or a status which is capable of protection. If any of these elements exist, then, in my opinion, whatever the terminology used, and even though in some inter partes aspects the relationships may be called that of master and servant, there may be essential procedural requirements to be observed and failure to observe them may result in the dismissal being declared to be void."

In Mr Niu's submission there are present in the case of the Westpac Bank of Tonga not only elements of public employment and service but also support by statute. Accordingly, in the absence of demonstrated procedural fairness the Plaintiff's dismissal had to be declared void.

[26] Mr Waalkens filed detailed and helpful written submissions for which I am grateful. Put briefly, he submitted:

(a) that there was no public law element in the employment relationship between the parties sufficient to displace the express terms of the contract of employment between them; and

(b) that on its proper construction, the contract of employment gave the right to the Bank to terminate the Plaintiff's contract (subject to notice or payment in lieu) without cause.

[27] The identification of activities which are subject to public law is not an easy process and the most that can be derived from the passage from Malloch quoted above is that when the identified public elements are present there "may" be essential procedural requirements to be observed.

[28] As pointed out by Mr Waalkens, Malloch has to be read in the light of the later observations in R v East Berkshire Health Authority ex parte Walsh [1984] 3A All E.R. 425 in which the Master of the Rolls explained that it is the existence of special statutory provisions bearing directly on the right of the public body to dismiss a Plaintiff which imports the rules of natural justice, not the mere fact of employment by a public authority. In the case of the Commodities Board Act (Cap 115) referred to in 'Uta'atu's case (above, paragraph 25) section 11(1) made specific provision for the regulation of the terms and conditions of the Board's employees. In the case of the Bank of Tonga Act no such Regulations appear.

[29] In De Smith, Woolf and Jowell "Judicial Review of Administrative Action", 5th Edition 1995, after a detailed examination of the various facts and matters taken into consideration by the courts, the authors conclude, on page 175, that "the position can be summarized in the following propositions:

(1) The test of whether a body is performing a public function and is hence amenable to judicial review, may not depend upon the source of its power or whether the body is ostensibly public or a "private" body.

(2) The principles of judicial review prima facie govern the activities of bodies performing public functions.

(3) However, not all decisions taken by public bodies in the course of their public functions are the subject matter of judicial review. In the following two situations judicial review will not normally be appropriate even though the body may be performing a public function:

(a) where some other branch of the law more appropriately governs the dispute between the parties. In such a case that branch of the law and its remedies should and normally will be applied; and

(b) where there is a contract between the litigants. In such a case the express or implied terms of the agreement should normally govern the matter. This reflects the normal approach of English law, namely that the terms of a contract will normally govern the transactions, or other relationship between the parties, rather than the general law (R v CICB ex p. Aegon Lain [1967] 2 QB 684; R v Insurance Ombudsman ex p. Aegon Life Assurance Limited [1994] C.O.D. 426; R v Jockey Club ex p. Aga Khan [1992] EWCA Civ 7; [1993] 1 WLR 909 and other authorities referred to in the footnote). Thus, where a special method of resolving disputes (such as arbitration or resolution by private or domestic tribunals) has been agreed by the parties (expressly or by necessary implication), that regime, and not judicial review, will normally govern the dispute."

[30] In the present case, while the Defendant Bank undoubtedly has its source in statute, its present character is, as I find, essentially that of a private limited company, in the management of which the Government of Tonga has no part. Its staff are plainly not public officers subject to the directions and control of the Public Service Commission.

[31] In my view the Pensions Act does not assist the Plaintiff. The right to receive a pension is contingent on the continuation of the employment, it does not confer a right to the employment being continued or a right to have the employment determined in any particular manner. Section 11 of the Pensions Act may also be noted.

[32] As will be seen from the Statement of Claim, this is an action in contract, not Judicial Review. In my view public law remedies are not available to the Plaintiff.

[33] I also find myself in agreement with Mr Waalken's second proposition. Clause 11 seems to me to be plain and unambiguous. Each of the paragraphs (a) (b) and (c) describes separate sets of events and has to be considered discretely. Paragraph (b) allows the employer to terminate the employment without the need for any reason being assigned. The Code of Conduct "Exhibit A" has no relevance to clause 11(b) which is a termination rather than a dismissal. No right to be heard is engaged. In the absence of unfair dismissal legislation there is no scope for the court to imply terms in conflict with the express terms of the contract.

Result:

The Plaintiff's claim is dismissed with costs, to be taxed if not agreed.

Dated: 29 April, 2014

CHIEF JUSTICE

N. Tu'uholoaki
29/4/2014.