Deou Limited v Tsiabon [2002] VUCA 2; Civil Appeal Case 5 of 2002 (26 April 2002)

IN THE COURT OF APPEAL
OF THE REPUBLIC OF VANUATU
(Appellate Jurisdiction)

Civil Appeal Case No. 05 of 2002

BETWEEN:

DEOU LIMITED
Appellant

AND:

LAURENT TSIABON
Respondent

Coram: Justice Bruce ROBERTSON
Justice John Von DOUSSA
Justice Daniel FATIAKI
Justice Roger J. COVENTRY

Hearing Date: 23^rd April 2002
Judgment Date: 26^th April 2002.

Counsels: Mr. Silas Charles Hakwa for the Appellant
Mr. Ronald Warsal for the Respondent

JUDGMENT

In 1989 the respondent, Laurent Tsiabon, took up employment with the appellants, Deou Motors (then known as Laho Motors). In 1994 he was promoted to Personnel Manager and from 1996 to 1999 he held that post and that of assistant manager. In the middle of 1999 his pay and allowances totalled Vt 150,000 per month and he was provided with a house and a vehicle.

Between April 1998 and August 1999 he underwent two operations and was absent from work on sick leave on a number of occasions.

In September 1998 he was given a warning letter about his work performance. On 28th June 1999 he was demoted, his salary was reduced from Vt 150,000 to Vt80,000 per month, and the benefits of house and car were removed. On 1st September 1999 his pay was reduced to Vt50,000 per month and he was placed as sales assistant at his work.

The respondent took a month’s unpaid leave from 6th September. Upon his return on 4th October he asked the appellants to dismiss him. They refused. On 25 October he wrote a letter setting out his grievances and requiring reinstatement of his salary of Vt 150,000 per month and the benefits of house and vehicle. He stated if this didn’t occur within 14 days he would take further action.

The appellants did not comply with his request. Mr. Tsiabon therefore ceased working for the company on 7th November.

On 19th October 2000 he filed a Writ alleging constructive dismissal and claiming pay in lieu of notice, severance pay and other items.

The learned trial Judge dismissed the constructive dismissal claim, but found the respondent had terminated his employment in good faith and that, as he had worked for the appellant for more than ten years, he was entitled to severance pay of Vt 825,000. This figure was calculated by taking half a monthly salary of Vt 150,000 and multiplying it by 11 the number of years of his employment. Counsel addressed the Judge upon costs, but there has apparently been no ruling thereon.

The grounds of Appeal are that “His Lordship erred in law in holding (among other things):

(a) that the respondent has resigned from his employment with the Appellant in good faith; and

(b) that the respondent is entitled to be paid severance allowance in the sum of Vt825,000”.

It was suggested there were inconsistencies in the judgment, that the respondent’s letter of 25th October could not amount to a resignation and the finding of good faith could not be sustained. The appellant argued that the figure of Vt 50,000, not Vt150,000 should have been used when calculating the severance pay. The appellants claimed costs in both courts.

There was no cross appeal.

In these circumstances this Court need only decide if the trial Judge was right in finding the respondent was entitled to severance pay, whether the figures used to make the calculation were the correct ones and whether there should have been any deduction therefrom.

Section 54 of the Employment Act Cap 160 (as amended) states-

“(1) Subject to section 55, where an employee has been in the continuous employment of an employer for a period of not less than 12 months commencing before, on or after the date of commencement of this Act, and –

(a)---------

(b)---------

(c)---------

(d) Where the employee has been in continuous employment with the same employer for a continuous period of not less than 10 consecutive years, the employee resigns in good faith, or

(e) ----------

the employer shall pay severance allowance to the employee under section 56 this Act.”

It was undisputed that the respondent had been in continuous employment with the appellant for eleven years. The trial Judge found that it was the respondent who terminated the agreement. Again there was no dispute about that. The learned trial Judge found,

“His walking off from the employment was over frustration over his reduction of position affecting his salary. The letter of the 25 October 1999, amount to an election of termination of employment by the plaintiff. I find that the plaintiff resignation falls under section 54 (1) (d) requirement. And that is, he resigned on good faith. The good faith can only be judge by his letter of demand of the 25 October 1999, and that is to reinstate him on salary to Vt150,000 as paid to him when he was the Personal/Assistant Manager. This cannot be a claim on bad faith as this was the subject matter he continued to maintain all along...”

There was simply no evidence of bad faith in the termination of the contract by the respondent. The appellant’s counsel suggested the fact the respondent took up a job four months later with another motor company shewed bad faith. That in itself could not amount to acting in bad faith.

Section 56 of the Act states:-

“(1) Subject to the provisions of this Part, the amount of severance allowance payable to an employee shall be calculated in accordance with subsection (2).

(2) Subject to subsection (4) the amount of severance allowance payable to an employee shall be –

(a) for every period of 12 months-

(i) half a month’s remuneration, where the employee is remunerated at intervals of not less than 1 month;

(ii) 15 days’ remuneration, where the employee is remunerated at intervals of less than 1 month;

(b) for every period less than 12 months, a sum equal to one-twelfth of the appropriate sum calculated under paragraph (a) multiplied by the number of months during which the employee was in continuous employment”.

(3).................

(4).................

(5).................

(6) The court may, where it thinks fit and whether or not a claim to that effect has been made, order an employer to pay interest, at a rate not exceeding 12 per cent per annum from the date of the termination of the employment to the date of payment.

(7) For the purposes of this section the remuneration which shall be taken into account in calculating the severance allowance shall be the remuneration payable to the employee at the time of the termination of his employment.

Counsel for the appellant also argued that by section 56 (7), Vatu 50,000 was the correct figure to use when making the calculation under section 56 (2) not Vatu 150,000. In other words the respondent at best was entitled to 50.000 X11=275,000 and not 150.000 X 11 = 825,000.

He said the salary payable at termination was Vt50,000 as fixed by the appellant in his letter of 1st September 1999. Counsel argued that the respondent had accepted the demotion of 28 June 1999 and its attendant salary reduction from Vt150,000 to Vt80,000. He had also accepted the further demotion of 1st September 1999 and salary reduction to Vt50,000.

The appellants counsel further argued that the three months notice, as required by section 49, had not been worked and that any award should be reduced accordingly.

Such an approach ignores the legal and practical realities. The learned trial Judge found there had been no constructive dismissal. The reduction of salary from Vt150,000 to Vt80,000 and the loss of the house and vehicle can only therefore amount to a termination of the then current contract coupled with the offer of another on less attractive terms. The appellant in effect said ‘its up to you, accept or terminate”. It cannot be said the respondent accepted. Over the next four months he did work for some of the time, he was absent on sick leave for several days, his pay was unilaterally cut by a further Vt30,000 and he took a month’s unpaid leave, presumably to consider his position. He returned on 4th October telling the appellant the contract was over. The appellant refused to accept that.

Three weeks later he wrote the letter of 25th October requiring reinstatement to his previous remuneration and benefits. There was no response, and fourteen days later he physically stopped working for the appellant. The net effect was the respondent had worked the equivalent of the three months notice period (four months less the month unpaid leave) and, given the original option to ‘accept or terminate, had terminated.

The reality as far as both parties is concerned is the same as if the appellant had terminated the respondent and the latter worked the period of termination.

It necessarily follows that the remuneration figure to be used for calculating the severance pay is Vt150,000.

Accordingly we find the learned trial Judge was correct in finding the respondent was entitled to severance pay in the sum of Vt825,000.

Under subjection (6) of section 56, in view of the appellants actions concerning the respondent, we find this is a case in which interest at 10% should be ordered from the date of termination, namely 7th November 1999.

The appellant will pay the respondents costs of this appeal. The trial Judge did not make any order as to costs. We have been informed there were no written offers of settlement. The respondent was put to the full task of bringing his case to Court and proving it. In those circumstances we also award the respondent his costs in the Supreme Court on a party and party basis as agreed or taxed.

Any difficulties that arise in the payment of the severance allowance, interest and costs may be referred to a Judge of the Supreme Court.

ORDER

Appeal dismissed save for the ordering of interest from the date of termination.

The appellant to pay the respondents costs in this Court and the Court below.

Dated at Port Vila this 26th day of April 2002.

BY THE COURT

Justice B. ROBERTSON
Justice J. Von DOUSSA
Justice D. FATIAKI
Justice R.J. COVENTRY