Melcoffee Sawmill Ltd v George [2003] VUCA 24; Civil Appeal Case 18 of 2003 (7 November 2003)

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

Civil Appeal Case No. 18 of 2003

BETWEEN:

MELCOFFEE SAWMILL LIMITED
First Appellant

AND:

NEIL CROUCHER
Second Appellant

AND:

JACK GEORGE
Respondent

Coram: Hon. Chief Justice Vincent Lunabek
Hon. Justice Bruce Robertson
Hon. Justice John W. von Doussa
Hon. Justice Daniel Fatiaki
Hon. Justice Patrick Treston

Counsel: Mr John Malcolm for the Appellants
Mr Hillary Toa for the Respondent

Hearing Date: 29th October 2003
Judgment Date: 7th November 2003

JUDGMENT

This is an appeal against a decision of the Supreme Court sitting at Luganville where the learned judge awarded the Respondent Jack George, the total sum of VT1,924,435 being VT1,623,635 as compensation for unjustified termination of his employment and VT300,800 for damage to his reputation.

Mr George had been employed by the First Appellant, Melcoffee Sawmill Limited since 1992 and at the time of the termination of his employment he held the position of foreman. The parties agreed that at the time his monthly salary was VT72,000. It seems that there had been difficulties with the payment of wages to some employees and they, with the assistance of the appellant sought advice from the Labour Department. When the Respondent and two or three of the aggrieved employees approached the Second Appellant Mr Croucher, a Director of the First Appellant, in the presence of the Second Appellant’s son, to discuss the matter,
Mr. George was abused and sworn at by the Second Appellant and sacked on the spot.

The Respondent went back to the Labour Department and a calculation was made as to his entitlements for severance and three months salary in lieu of notice, which was promptly paid by the First Appellant. The Respondent thereafter issued proceedings for the total sum of VT19,629,524 being: -

(1) Loss of severance pay VT1,372,362; and

(2) Loss of future opportunity to work for the Appellants for the next 9 years VT8,121,600; and

(3) Damage to reputation and difficulty & delay in finding new employment VT300,800; and

(4) General damages for emotional pain and distress, VT9,834,762.

The trial proceeded on 10^th June 2003 when the Respondent was unrepresented. He and a witness, Mr Andy Joe, gave evidence, and Mr Julie Nibel, the Office Manager for the First Appellant, filed a written sworn statement as to the calculations and payment to the Respondent.

His Lordship found that the termination of the Respondent’s employment was unlawful and unjustified and that the Respondent was entitled to compensation under s.56(4) of the Employment Act [CAP. 160] (“the Act”) His Lordship found that the Second appellant was acting “on the authority of the First Defendant and for the First Defendant”. He gave judgment as detailed above seemingly against each Appellant.

The Appellants argued as follows:-

(1) That the Second Appellant was a director of the First Appellant and was acting as agent for the First Appellant and was not a proper party to the action and the judgment against him should be set aside;

(2) That there was no wrongful termination of employment, and alternatively,

(3) That there was no justification in the learned judge multiplying the amount of severance by a factor of 5;

(4) That there was no provision under the Act to impose damages for loss of reputation and in any event there was no evidence of any reputation damage.

In response, the Respondent submitted:-

(1) That the termination of employment was unlawful and unjustified;

(2) That section 56(4) of the Act was wide enough to give the Court a discretion to award damages as it did;

(3) That the common law allowed the Court to award damages for loss of future opportunities and damage to reputation for breach of the term of trust and confidence which is implied in every employment contract;

(4) That damages for loss of reputation, and loss of prospects of re-employment are recoverable despite the payment of severance and salary in lieu of notice.

Clearly, even on the finding of the Learned Justice, the Second Appellant was the agent of the First Appellant and was at all material times acting in the course of and with the ostensible authority of the First Appellant. He was never a proper party to the action and we dismiss him from the proceeding. Equally clearly, the calculation of 3 months salary in lieu of notice and the severance payment calculation made by the Labour Officer was wrong, as it was based an a monthly salary of VT32.000. This was only ascertained at the appeal hearing when raised by the Bench. As we have said, it is agreed that the monthly salary was VT72,000 and appropriate adjustments will be made in due course.

Clearly the termination of the Respondent’s employment was unjustified. The First Appellant now concedes that. It was done in a peremptory, insulting, harsh and overbearing way. It was contrary to section 49 of the Act which provides:-

“Notice of Termination of Contract

49. (1) A contract of employment for an unspecified period of time shall terminate on the expiry of notice given by either party to the other of his intention to terminate the contract.

(2) Notice may be verbal or written, and, subject to subsection (3), may be given at any time.

(3) The length of notice to be given under subsection (1) -

(a) where the employee has been in continuous employment with the same employer for not less 3 years, shall be not less than 3 months;

(b) in every other case –

• (i) where the employee is remunerated at intervals of not less than 14 days, shall be not less than 14 days before the end of the month in which the notice is given;
  
• (ii) where the employee is remunerated at intervals of less than 14 days, shall be at least equal to the interval.
  

(4) Notice of termination need not be given if the employer pays the employee the full remuneration for the appropriate period of notice specified in subsection (3).”

This was a contract of employment for an unspecified period. Three months salary in lieu of notice must be paid to the Respondent. Severance in accordance with the terms of section 56 must also be paid. That section provides:-

"AMOUNT OF SEVERANCE ALLOWANCE

56. (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 months;
    
  • (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) Where remuneration is fixed at a rate calculated on work done or includes any sum paid by way of commission in return for services, the remuneration shall, for the purposes of this section, be computed in the manner best calculated to give the rate at which the employee was being remunerated over a period not exceeding 12 months prior to the termination of his employment.

(4) The Court shall, where it finds that the termination of the employment of an employee was unjustified, order that he be paid a sum up to 6 times the amount of severance allowance specified in subsection (2).

(5) Any severance allowance payable under this Act shall be paid on the termination of the employment.

(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"

The correct calculations of what was due to the Respondent in terms of those sections at the agreed remuneration are as follows:-

Three months salary in lieu of notice

VT72,000 x 3 = VT 216,000

Severance for 9 years 7 months (being the term of employment)

VT36,000 x 9 = VT 324,000

Seven months = VT 21,000

---------------

VT 561,000

=========

The respondent alleged in his statement of claim that it was 4 months from his dismissal until he obtained employment at a similar wage. The appellants conceded the correctness of this allegation. Although the respondent's employment can be lawfully terminated by payment of 3 months remuneration in lieu of notice, there is a question as to whether the respondent is entitled to any further payment for severance under s. 56 (4).

In Banque Indosuez Vanuatu Ltd v. Ferrieux 2VLR 490 (23 October 1990) this Court limited damages by reason of the manner of the dismissal to compensatory rather than punitive or exemplary damages but recognised the existence of the implied term of trust and confidence in an employment contract. The Court found that s.56(4) “merely enables the Court to compensate an employee for any special damage which he has suffered by reason of an unjustified dismissal if the base severance allowance is insuffication for that purpose”. In Mouton v. Selb Pacific Ltd (Judgment No.3) [1998] VUCA 8, CAC No.2 of 1995 the Court said that “the notion of compensation is a wide one" and that "it may be that section 56(4) is wide enough to allow the Court to have regard to distress and even ill health caused by the manner and circumstance of a dismissal.”

In our view the loss of earnings for the further one-month beyond the duration of the notice period constitutes "special damage" and should be allowed under s. 56 (4). Under that section, although the Court "shall" order an additional sum over and above the basic severance payment, the additional payment must be to compensate for "special damage". In this case the respondent has not proved any special damage beyond his loss in the fourth months, and the award under s. 56 (4) cannot exceed that loss. We consider that there should be no multiplier of severance in respect of this relatively young respondent who was re-employed after only four months.

There remains the question of whether there should be any further relief given to the Respondent for any loss of reputation and pain, suffering humiliation or the like. That is clearly not covered by s.56 (4). There was a paucity of evidence at the hearing as to this but common sense dictates that the Respondent suffered distress beyond that usually occasioned to someone in the sudden and unexpected termination of relatively long standing employment.

Under the principles of earlier cases such as Addis v. Gramophone Co. Ltd. [1909] AC 488 the courts have held that an employee cannot recover damages for the manner in which the wrongful dismissal took place, for injured feelings or for any loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment. Malik & Mahmud v. BCCI [1997] UKHL 23; [1997] 3 WLR 95 departed somewhat from that by using an implied term of trust and confidence between an employer and employee. Breach of such term, the Court said, should result in damages to be assessed in accordance with ordinary contractual principles. Even more recently in Johnson v. Unisys Ltd. [2003] IAC 518 the Court concluded that Addis no longer stood in the way of the recovery of damages arising from the breach of an implied term of a contract of employment, even though the breach arose from the manner of dismissal.

Some Australian cases such as Sanders v. Snell [1997] 229 FCA. and Lamb v. Cotogno (1988) 164 CLR I have allowed damages for injury to feelings cause by insult, humiliation and the like by way of deterrence. The Supreme Court, Fiji Islands in Central Manufacturing Co. Ltd v. Yashni Kaut CA. CBV0010 of 2002 (24^th October 2003) decided that there is an implied term in the modern contract of employment that requires an employer to deal fairly with an employee, even in the context of dismissal, extended to treating the employee with appropriate respect and dignity in carrying out the dismissal. There the Court decided that the respondent was entitled to some compensation for the distress and humiliation that was needlessly inflicted upon him by his employer for the manner in which he was dismissed.

Although it was not an unjustified dismissal case, this court has already recognized implied terms in contracts of employment in awarding damages for breach of contract for fear and distress suffered in a riot in Vanuatu National Provident Fund Board v. Aruhuri & Ors. Civil Appeal Case No. 19 of 2001.

We have already referred to the approach in the Mouton case (above) and we are of the view that at common law there should be some recompense to an employee who has been unjustifiably and unexpectedly dismissed in the way that this Respondent was.

The Courts must be seen to mark their disapproval for bad business practices and unacceptable summary dismissals of the kind demonstrated in this case. However, because of the lack of specific evidence adduced in this case, and because of the other factors already referred to, we consider that any award of damages to the Respondent in these circumstances, should be nominal and we assess such damages in the sum of VT30,000.

The award of VT300,800 for loss of reputation made by his Lordship cannot stand, as there was no evidence to support it.

Accordingly the appeal is allowed to the extent that the Second Appellant is dismissed from the proceeding and the judgment of the Supreme Court of 21^st July 2003 is set aside. Instead there will be judgment for the Respondent against the First Appellant as follows:-

Salary and Severance as above = VT561,000

Additional salary for one month (s. 56 (4)) = VT 72,000

Damages as above = VT 30,000

---------------

VT 663,000

Less amount paid on 11^th November 2002 = VT 324,727

---------------

VT 338,273

=========

In the circumstances there will be no order for costs which will lie where they fall.

DATED at Port Vila, this 7^th day of November, 2003.

Hon. V. Lunabek CJ.
Hon. J. B. Robertson J.
Hon. J. von Dussa J.
Hon. D. Fatiaki J.

Hon. P. Treston J.