Takau v Vanuatu Maritime Authority [2006] VUSC 83; CC 212 2004 (15 December 2006)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 212 of 2004

BETWEEN:

GLEN TAKAU
Claimant

AND:

THE VANUATU MARITIME AUTHORITY
Defendant

Coram: Justice C. N. Tuohy

Mr. Kabini for Claimant
Mr. Morrison for Defendant

Date of Hearing: 8 & 9 November 2006

RESERVED JUDGMENT

Introduction

1. This is the second part of a claim by Mr. Takau for compensation for termination of his employment with the Vanuatu Maritime Authority. The first part of his claim related to the termination of his employment in November 2003 and was settled by a consent judgment for VT500,000. The second part relates to the ending of his period of reinstatement during 2004 and contains a claim for the balance of 4 years’ salary, severance pay, 3 months pay in lieu of notice and interest.
   

Facts

2. Mr. Takau worked for the Authority as a ship inspector from November 2000. It is common ground that his original contract was for 4 years from that date. In November 2003 his employment was terminated. It is not necessary for the purposes of this judgment to go into the rights and wrongs of that termination.
   
3. At its meeting on 24 March 2004, the Board of the Authority decided to consider the termination of Mr. Takau’s employment in the previous November. It passed the following resolution.
   

"The Board Meeting resolved and accepted the motion for the reinstatement of Glen Takau. The Chairman will write formally and inform him about the Board’s decision and ask for him to report to work at VMA immediately"

4. On 18 May 2004, the Chairman of the Board, Lennox Vuti, wrote to Mr. Takau telling him that the Board had resolved that he be reinstated to the position he held before his termination. He advised that if Mr. Takau agreed to be reinstated, he would commence duties on the date on which his contract was signed with the Authority.
   
5. Mr. Takau did want to resume his former employment. He began work and received salary payments from about the beginning of June 2004.
   
6. He signed a written employment contract dated 30 May 2004. The term of that contract was 4 years commencing on 30 May 2004 at an annual salary of VT1,365,000 payable fortnightly.
   
7. Under Clause 10.1 of the contract, the employer (the Authority) was entitled to terminate the employment forthwith in the event of wilful disobedience, failure to rectify a material breach or serious misconduct. Under Clause 10.2 either party had the right to terminate by written notice "as enacted by the (Employment) Act". Clause 10.4 provided that if the employment is terminated by the employer for any reasons other than those set out in Clause 9.1 (sic), the employee is entitled to "severance allowance" or such other benefits as prescribed by the Employment Act. The reference to Clause 9.1 seems to be a drafting error because the provision makes sense only if the reference had been to Clause 10.1.
   
8. The contract is signed on behalf of the Authority by Lennox Vuti, Chairman of the Board, and the seal of the Authority has been impressed next to his signature.
   
9. Mr. Vuti said that before the contract was signed it was discussed between himself and Mr. Takau and the Authority’s then solicitor, James Tari, that Mr. Takau’s re-employment would be subject to a probationary period as set out in the Authority’s Staff Manual. Mr. Takau did not contradict that evidence.
   
10. The relevant section of the Staff Manual was produced. It provided that all staff appointments "for a non-specified period" must serve a minimum probationary period of 3 months which may be extended by a further 3 months and that either party can terminate employment during the probationary period without notice.
    
11. The employment contract of 30 May 2004 was, of course, for a specified period. It did not make any reference to the Staff Manual.
    
12. Mr. Vuti said that he signed the contract because the Commissioner of Maritime Affairs, Mr. John Less Napuati, refused to sign it. However he said that the Commissioner consented to or concurred in Mr. Takau’s reinstatement. Mr. Napuati was adamant that he was not in agreement with the decision to re-employ Mr. Takau and that that was why he refused to sign the employment contract.
    
13. On this issue, I have no hesitation in accepting Mr. Napuati’s evidence and rejecting Mr. Vuti’s. Mr. Napuati’s evidence is more logical and plausible and is consistent with the contemporary records.
    
14. It was Mr. Napuati who had terminated Mr. Takau’s employment for claimed misconduct in November 2003. There is no reason at all to think that he would want to re-employ him. If he had agreed to re-employ him, there would be no reason for him to refuse to sign the contract.
    
15. The actions of all 3 witnesses, Mr. Takau, Mr. Vuti and Mr. Napuati over this period indicate that all were aware that the issue of whether the Commissioner alone had the power to employ staff was before the Supreme Court in relation to Laurent Parenté.
    
16. Parenté’s case (Parenté v Vanuatu Maritime Authority [2004] VUSC 41; CC101 of 2004) was heard on 16 July 2004 and judgment was delivered on 30 September 2004. James Tari, the witness to the contract dated 30 May 2004 was counsel for the Authority.
    
17. Immediately the Parenté judgment was delivered, upholding the right of the Commissioner to hire and fire, the Commissioner wrote to the administrator of the Authority, Mr. Marlvirlani, stating that the decision meant that the Board had no power to re-employ employees terminated by him and instructing him to cease payment of Mr. Takau’s salary. That letter is confirmation of his opposition to the reinstatement of Mr. Takau.
    
18. The Commissioner also had the foresight and bureaucratic experience to record in writing the events of early June 2004. On 1 June Mr. Takau attended at the Commissioner’s office and presented him with a draft contract already signed by Mr. Takau. This was broadly similar to the contract dated 30 May 2004. However, it purported to employ Mr. Takau as Deputy Commissioner as well as Marine Inspector and was for 4 years from 1 June 2004.
    
19. The Commissioner refused to sign it. He then wrote to Mr. Takau a letter dated 2 June 2004 stating:
    

"Dear Sir,

YOUR PRESENCE WITHIN THE VMA OFFICE

Yesterday 1st June 2004, you came in my office and delivered me a document requesting my signature.

The said document appears to be an employment contract between yourself and the Vanuatu Maritime Authority.

I would like to point out the followings:

1. I terminated you in November 2003 on specific grounds, which were not disputed
2. I do not see any reason to re-employ you
3. If you have any agreement with the Authority, you must deal with the Authority under section 39 of the VMA Act as my powers are limited to section 38 of the said Act.

............................"

20. He also wrote a memo to the Board dated 3 June 2004 stating:
    

"Dear Chairman, dear Members

On or about 1st June 2004, I was requested by Glen Takau to sign an employment contract between himself and the VMA.

Such request surprised me since I was not aware about the said employment contract.

Mr. Glen Takau then told me that it was ordered by the board itself and that I had to sign it.

In support of his assertion, Mr. Takau presented a letter of the VMA Board dated 18th May 2004 addressed to him under the signature of the Chairman

I mention that I was never served with a copy of such letter before the 1st June 2004.

Reading the said letter, I discovered that the Board has reinstated Mr. Glen Takau as "ship inspector" when the contract submitted to me mentions the position of Deputy Commissioner.

The said letter mentions also that the termination of Mr. Glen Takau was unfounded and I fully disagree with this point.

I point out that with such letter in his hand, Mr. Glen Takau will claim his salaries from 1st December 2003 to 30th May 2004 and I really do not see how VMA with its current financial situation will be able to support this new obligation when so much outstanding remain unpaid.

Furthermore, it was made clear to me that I cannot signed any engagement on behalf of the Authority, my responsibilities are limited to section 38 of the VMA Act in terms of employment.

The "Vanuatu maritime Authority" is the signatory of the contract presented by Mr. Glen Takau and then fall under section 39 of the Act, which is not of my competence.

In regard of the aforesaid reasons and other legal considerations, I wrote a letter to Mr. Takau, which is annexed to this memo.

I also address a copy to our counsel for advice if necessary.

(signed)

JOHN LESS NAPUATI"

21. Mr. Takau attempted in his evidence to deny that he had seen the contract dated 1 June 2004 or the letter of 2 June 2004 until he saw them attached to the Commissioner’s sworn statement. He also denied that it was his signature on the contract dated 1 June 2004 and suggested it was a forgery. His denials are unconvincing and inconsistent with the evidence.
    
22. The problem for Mr. Takau is that the Commissioner recorded that he was presented with this contract in his letter of 2 June to Mr. Takau (which Mr. Takau also denied receiving) and in the memo of 3 June 2004 which was sent at the time to all Board Members. Those documents were written months before the Parenté judgment was delivered and Mr. Takau’s reinstatement was reversed and this proceeding issued. It is ridiculous to suggest that the Commissioner would create a false account of being presented with a contract with Mr. Takau’s signature on it in anticipation of using it in a proceeding which was not even contemplated at the time.
    
23. Furthermore, Mr. Takau had ample opportunity to deny in a sworn statement the Commissioner’s account of being presented with this contract already signed by him but never did so until he was cross-examined about it at trial.
    
24. Mr. Takau’s evidence about this issue is simply not credible and I do not believe it. I accept the Commissioner’s evidence which is backed up by contemporary documentation.
    
25. In view of that documentation recording the Commissioner’s position and his steadfast opposition to Mr. Takau’s reinstatement, it is also quite unrealistic for Mr. Vuti to suggest that the Commissioner consented to or concurred in the Board’s decision to reinstate him. As I have already stated, I do not accept that evidence either.
    
26. I am also satisfied that the contract dated 30 May 2004 was not signed on 30 May but on some later date after it had become evident that the Commissioner would not sign the contract presented to him by Mr. Takau on 1 June. It is inconceivable that Mr. Takau would ask Mr. Napuati to sign an employment contract on 1 June if he had just signed one with Mr. Vuti, 2 days earlier.
    
27. It is a reasonable deduction from all the evidence that it was signed as late as the latter part of July 2004. The Commissioner stated in Paragraph 18 of his sworn statement dated 1 March 2005 that it was signed in July but he did not set out the source of his knowledge of that date. However, he produced a memo from the Administrator to him dated 12 July 2004 headed "GLEN TAKAU EMPLOYMENT CONTRACT" which stated that the Administrator had still not received any contract or document and that Mr. Takau would only be paid if he received an official instruction. It is probable that the contract dated 30 May 2004 was signed after the date of that memo.
    
28. As is evident from the letter of 30 September 2004 to the Administrator, the Commissioner’s position, once the Parenté judgment was issued, was that Mr. Takau had never been lawfully re-employed. Consistently with that position, he did not formally terminate his employment but merely instructed the Administrator that no further salary payment were to be made to Mr. Takau. It appears that he was not paid any further salary after October 2004 although the exact period for which he was paid was never established in evidence.
    

Submissions

Claimant

29. Mr. Kabini submitted that the employment contract dated 30 May 2004 was a valid and binding contract for a fixed term of 4 years and that the Authority’s refusal to continue to pay Mr. Takau after October 2004 amounted to an unlawful termination of that contract.
    
30. He submitted that under s. 13 (3) of the Maritime Authority Act No. 29 of 1998 ("the Act"), the Commissioner is under the direct control of the Authority in the matter of employing staff. He frankly acknowledged that that submission was in direct conflict with the decision of Bulu J. in Parenté’s case but submitted that that decision was wrong and should not be followed.
    
31. He further submitted that in the event that the Commissioner refuses to act in accordance with the directions of the Board in relation to employment of staff, the Board has the power to itself enter into employment contracts. He argued that this power was implicit in s. 13 (3).
    
32. Alternatively, he submitted that even if the Chairman of the Board was not authorised by the Act to enter into employment contacts, nevertheless the law will recognise the binding nature of a contract signed by him on behalf of the Authority. In other words that the other contracting party, Mr. Takau, did not have to concern himself with who in the Authority had authority to sign the contract. This is another issue discussed in the Parenté case.
    
33. He also submitted that s. 38 of the Act merely gave the Commissioner power to appoint staff but not an exclusive power. Reading the Act as a whole, the Board was not prohibited from itself making such appointments.
    

Defendant

34. Mr. Morrison first submitted that the decision in Parenté’s case was correct and persuasive authority that only the Commissioner could employ staff; therefore the written contract with Mr. Takau was invalid.
    
35. Alternatively he submitted that there was a collateral oral term of the contract that there would be a probationary period in terms of the Staff Manual during which Mr. Takau’s employment could be lawfully terminated without cause; and that that probationary period was still current when his employment was terminated.
    
36. Thirdly, he submitted that the Board resolution was to reinstate Mr. Takau’s employment; that the meaning of reinstatement was that his original contract, which was for 4 years from 1 November 2000, was to be reinstated and that this expired by effluxion of time on 31 October 2004; so the most he is entitled to is payment until then.
    
37. Finally, he submitted that Mr. Takau had failed to provide evidence to support the amount of damages which he claimed.
    

Discussion

38. The first enquiry must be whether the employment contract dated 30 May 2004 is a valid and binding one.
    
39. Section 38 of the Act is headed "APPOINTMENT OF STAFF" and provides:
    

"(1) The Commissioner may appoint such employees, including employees on secondment from other organizations, as he or she thinks necessary for the efficient performance of the Authority’s functions;

(2) The Commissioner may terminate or suspend the employment of any of the Authority’s employees

.....................................".

The Commissioner certainly did not appoint Mr. Takau.

40. Section 38 can be contrasted with the following section 39 which is headed "CONSULTANTS, SPECIALISTS, ETC" provides as follows:
    

"(1) The Authority may appoint consultants, specialists or advisory committees on the exercise of functions or powers of Authority."

This shows a clear legislative intention to allocate the duty of employing staff to the Commissioner and that of engaging consultants to the Authority.

41. However, Mr. Kabini argued that reading s.38 in the context of the Act as a whole, it was not intended to give the Commissioner the exclusive authority to appoint staff, and that the Authority itself also had that power. He referred to s.7 which sets out the powers of the Authority, and in particular to s. 7 (2) (a) and (c).
    
42. Section 7 provides:
    

"(1) In addition to any other powers conferred on it by this Act, the Authority has power to do all things necessary or convenient to be done for or in connection with the performance of its functions.

(2) Without limiting subsection (1), the powers include the following:

(a) to enter into contracts;

(b) to acquire, hold and dispose of real and personal property;

(c) to engage persons to perform services for the Authority;

(d) to do anything incidental to any of the powers specified in this subsection or otherwise conferred on the Authority."

43. Section 7 is a general section. Sections 38 and 39 are specific provisions relating to the employment of staff and the engagement of consultants. Section 7 (2) certainly gives the Authority the power to enter into contracts of employment with staff. However, s. 38 amounts to a specific delegation to the Commissioner of the power to appoint staff and to terminate their employment, albeit that the employment contracts of staff are with the Authority itself. This can be contrasted with s.39 which does not contain any such specific delegation to the Commissioner.
    
44. Accordingly, I am of the view that the legislative intention was to confer on the Commissioner alone the power to hire and fire staff. There is nothing unusual or strange about that. It accords with a widely held management theory that employment of staff should properly be the function of the executive of an organisation and not of the board of directors.
    
45. Mr. Kabini submitted, nevertheless, that by virtue of s.13 (3), the Commissioner was subject to the direct control of the Board in the employment of staff and that, if he did not accept it, the Board could appoint staff in his place.
    
46. This same submission was rejected by Bulu J in Parenté’s case. Section 13 (3) provides that the Commissioner is subject to the direct control of the Authority in respect of the specific functions set out in s. 13 (3) (a), (b) and (c). The only one of those which could possibly apply is (c), "the enforcement of the provisions of this Act".
    
47. In a detailed discussion, Bulu J held that that phrase does not encompass the Commissioner’s powers under s.38. While I do not necessarily adopt all of the reasoning of Bulu J, I agree with that conclusion. As a matter of ordinary language, "the enforcement" of the Act’s provisions is not an apt expression to cover the power of appointment given by s. 38. That section is not an enforcement provision and to appoint a staff member is not to enforce a provision of the Act.
    
48. However, Mr. Kabini submitted that, even if the Board had no power to appoint him and therefore the Chairman no right to sign a contract of employment with him on behalf of the Authority, nevertheless Mr. Takau was entitled to assume that he had authority to do so.
    
49. In Parenté’s case, Bulu J upheld a similar submission. There is, however, one very important factual distinction. In that case it was the Commissioner (and the Chairman) who signed the employment contract. Bulu J held that pursuant to ss.17 (1) and 41 of the Act, the Authority could have delegated or authorised the Commissioner (or the Commissioner and Chairman) to enter into the contract and there was no evidence that those internal steps had not been taken. He held that the indoor management rule, often called the rule in Turquand’s case, had been incorporated into the Act by virtue of ss. 20 (f) and 41 (2).
    
50. Section 20 of the Act provides:
    

"Where a section of this Act confers power on a person or the Authority (in this section called the "delegator") to delegate a function or power:

(a) the delegation must be made by instrument in writing; and

(b) the delegation must be made either generally or as otherwise provided by the instrument of delegation; and

(c) a function or power so delegated, when performed or exercised by the delegate, is for the purposes of this Act, taken to have been performed or exercised by the delegator; and

(d) a delegation of a function or power by the delegator does not prevent the performance or exercise of the function or power by the delegator; and

(e) subject to any general or special directions given or conditions imposed by the delegator, the delegate may exercise a function or power so delegated in the same manner and with the same effect as if it had been conferred on the delegate by this Act and not by delegation; and

(f) in the absence of proof to the contrary, the delegate is presumed to be acting in accordance with the terms of the delegation when the delegate purportedly acts pursuant to the delegation; and

(g) the delegation may be given for a specified period, but is revocable at will by the delegator."

51. Section 41 of the Act provides:
    

"(1) The Authority may, in writing, authorise any one or more members, or employees, of the Authority to execute any deeds, instruments, contracts or other documents on behalf of the Authority, and may in the same manner revoke such authority.

(2) Without limiting subsection (1), an authority may be given to

(a) the Commissioner; or

(b) any specified employee; or

(c) any employee of a specified class; or

(d) the holder for the time being of any specified office or of any office of a specified class.

(3) A person purporting to execute any document on behalf of the Authority under an authority is taken to be acting in accordance with the authority in the absence of proof to the contrary."

52. There is no evidence that there was any delegation pursuant to s. 20 to the Chairman of the power to execute employment contracts. Nor is there any evidence of an authorisation pursuant to s. 41. Both those sections require among other things that the delegation or authorisation must be in writing. It can safely be assumed that there was no such writing because if there was it would certainly have been produced or referred to by Mr. Vuti.
    
53. Here, not only was the contract executed by the Chairman without any delegation or authority under the Act, neither the Board nor the Chairman had the power to appoint employees. The person who had the power, the Commissioner, not only did not appoint Mr. Takau, he was plainly opposed to doing so, as both Mr. Vuti and Mr. Takau were aware.
    
54. Section 3 (2) of the Act provides:
    

"The Authority

(a) is a body corporate with perpetual succession; and

(b) is to have an official seal; and

(c) may sue and be sued in its corporate name."

55. The Act makes no provision as to the rules for using the official seal or for the execution of contracts except for s. 41 and there is no evidence of any authorisation being given to anyone under s. 41. If this case does nothing else, it should signal to the Authority that it ought to establish clear rules under s. 41 as to who has the authority to execute particular contracts and for use of the seal.
    
56. Mr. Vuti did not purport to act under a written delegation or authority under s. 20 (f) or s. 41 (3). There is nothing in the Act or any rules or regulations made under it which provides that the Chairman has the right to execute contracts on behalf of the Authority or prescribing who is to witness the affixing of the seal to a document. In those circumstances I do not think that Mr. Takau is entitled to take advantage of the indoor management rule. In Turquand’s case itself, the signing of the bond by two directors was in accordance with the articles of the company. But Mr. Takau cannot point to the contract dated 30 May 2004 and say that it was executed in accordance with the rules set out in the Act or any rules or regulations made under it.
    
57. In any event, it is of the essence of the rule in Turquand’s case that the person contracting with the corporate body is dealing with it in good faith. In Morris v Kanssen [1946] AC 459, the House of Lords restated the rule as follows:
    

"But persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed, and are not bound to enquire whether acts of internal management have been regular". (bold type added)

58. I do not think that Mr. Takau was acting in good faith in the sense intended. His actions in first trying to have the Commissioner sign an employment contract and then entering into a backdated one with Mr. Vuti, then denying in Court that he had earlier tried to get the Commissioner to sign one, all against the background of the then current Parenté case, lead me to conclude that he was aware of the substance of s. 38 of the Act. Therefore I am satisfied that he must have known that there was substantial doubt about the legal validity of the contract dated 30 May 2004 on which he now relies.
    
59. For that reason also, I am satisfied that Mr. Takau is not entitled to rely on the indoor management rule.
    

Conclusion

60. The conclusion I reach is that the contract dated 30 May 2004 on which Mr. Takau’s claim is based is not valid or binding on the Authority. It is therefore unnecessary to address the alternative submissions made by Mr. Morrison.
    
61. There is, of course, no dispute that during the period in question, Mr. Takau did receive a letter from the Authority offering to re-employ him, he did accept that offer, he did provide services to the Authority and he was remunerated by way of payments equivalent to a salary. I have considered whether this amounted to a contract of employment for the purposes of the Employment Act No. 1 of 1983 [CAP. 160].
    
62. Section 9 of the Employment Act provides that a contract of employment may be made in any form, whether written or oral. In this case, I consider that there has been a contract made through the letter and its acceptance, evidenced by the subsequent performance of work and payment for it. I consider therefore that Mr. Takau had the rights given by the Employment Act in respect of a contract of employment for an unspecified period.
    
63. Under s. 49 (4) of that Act notice of termination need not be given if the employer pays the employee the full remuneration for the appropriate period of notice, which in this case would have been till the end of October 2004. Severance allowance would not be payable as Mr. Takau had not been in continuous employment for 12 months or more.
    
64. As noted earlier, the exact date to which Mr. Takau has been paid is not clear, nor is the exact date of termination. However counsel ought to be able to agree this and the amount, if any, due to Mr. Takau pursuant to this decision.
    
65. The Authority is also entitled to costs in respect of this part of the claim, which will be fixed by the Court, if not agreed.
    
66. Leave is reserved to either party to apply in relation either to any amount due on termination or to costs.
    

Dated at Port Vila on 15 December 2006

BY THE COURT

C. N. TUOHY

Judge