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Fiji Public Service Association v Board of Fire Commissioners of Suva [1991] FJHC 52; Hbc0145j.88s (28 August 1991)

IN THE HIGH COURT OF FIJI
(AT SUVA)
CIVIL JURISDICTION

ACTION NO. 145 OF 1988

BETWEEN:

FIJI PUBLIC SERVICE ASSOCIATION
Plaintiff

AND

BOARD OF FIRE COMMISSIONERS OF SUVA
Defendant

Mr. H.K. Nagin: For the Plaintiff
Mr. V. Parmanandam: For the Defendant

Dates of Hearing: 24th September, 31st October 1990 and
5th February 1991
Date of Judgment: 28th August 1991

JUDGMENT

The facts giving rise to the present proceedings owe their origin to the military coups of 1987.

The Plaintiff is a trade union duly registered under the Trade Unions Act. The Defendant is a body corporate constituted under Section 4 of the Suva Fire Brigade Act, Cap. 129. The Board provides the fire brigade service for the city of Suva and its duties are to prevent and extinguish fires and protect life and property against their loss or damage caused by fire within the Suva/Nausori districts.

Most of the employees of the Defendant are members of the Plaintiff. Under the provisions of the Suva Fire Brigade Act the finances for the operations of the Defendant are provided in equal proportions by the Government, the Suva City Council and Insurance Companies (see Section 30). As such the composition of the Board is made up of a Government representative, an Insurance representative duly elected under the provisions of the Act and the Mayor of the Suva City Council for the time being (see Section 5). The Mayor is also the President of the Board.

On the 28th day of February 1979 the Plaintiff and the Defendant entered into a Master Agreement to regulate the terms and conditions of the members of the Plaintiff employed by the Defendant.

According to an affidavit sworn by Mahendra Pal Chaudhary the General Secretary of the Plaintiff, on the 7th day of March 1988 in support of an Originating Summons dated the 8th of March 1988, to which I shall refer in a moment, this Agreement has been varied from time to time in the manner mentioned in Mr. Chaudhary's affidavit. All these variations were the result of agreement between the Plaintiff and the Defendant.

Following the two coups in 1987 the economy of Fiji sustained serious damage as a consequence of which both public and private sectors of the country took measures to ensure their continued economic existence.

One of the measures taken by the Government was to introduce various cost-cutting measures aimed at helping to reduce its operating expenditure and a fast-widening operating deficit.

On the 15th of September 1987 the Minister responsible for Housing and Urban Affairs, who was the Minister responsible for the operations of the Defendant, through his Permanent Secretary issued a letter enclosing a Finance Circular No. 16 directed to Permanent Secretaries and Heads of Departments. The circular confirmed the difficult financial position at the time and stated the Government's desire to keep the public sector deficit within reasonable limits. It stated that, in line with the decision by the Government to reduce salaries and wages by 15 percent, all Ministries were requested to inform Boards of Statutory Bodies to reduce salaries and wages by 15 percent. The circular stated in paragraph 5:

"We expect the above minimum wage and salary cuts to be undertaken by all Statutory Bodies irrespective of their financial position."

Paragraph 7 read in part:

"We request that you use your representations to the Boards of the Statutory Bodies and majority owned companies to put the above into effect immediately if they have not already done so."

By a further Finance Circular No. 16 dated the 23rd of September 1987 from the Permanent Secretary for Finance & Economic Planning all Permanent Secretaries and Heads of Departments were informed that despite the earlier 15 percent pay cut on civil servants and unestablished staff revenue collections had undergone a significant fall. To arrest this, the circular said, it had been decided that the remaining grant funds available to Statutory

Bodies were to be reduced by 50 percent from the date of the 15 per cent pay cut.

It is not disputed that the effect of the Finance Circular No. 16 of the 23rd of September 1987 was to severely cut the amount of funds available to the Board of Fire Commissioners of Suva for the balance of the 1987 year.

Apparently believing that it was obliged to cut salaries of all employees in accordance with the Finance Circulars mentioned above, on or about the 7th day of January 1988 the Defendant reduced the salaries of the Plaintiff's members by thirty per centum (30%) with effect from the 7th day of January 1988. This was done unilaterally and without any discussion with the Plaintiff. In fairness, however, it should be said that in the hope that things would improve the Board had deferred the imposition of any pay cuts until nearly 3 1/2 months after the last Finance circular.

On the 7th of January 1988 the Plaintiff wrote to the Defendant protesting against the salary reduction and claimed that under the Collective Agreement the Defendant had no right to reduce the salaries of the members of the Plaintiff without prior consultation.

On the 7th of January 1988 also various employees of the Defendant officially complained to the Permanent Secretary for Employment and Industrial Relations about the pay cuts and requested that the Permanent Secretary direct the Defendant to immediately restore the correct salaries.

The Defendant then restored the salaries of the employees with effect from the 7th of January 1988.

It then discussed with the Plaintiff a proposal for a 15 percent across the board reduction in the salaries of its employees but this was not accepted by the Plaintiff for reasons given in that letter. It is unnecessary for me to state those reasons here.

On the 22nd of January 1988 the Defendant wrote to its employees advising that at a meeting of the Defendant on the 21st of January 1988 it was decided that salaries of all its employees would be reduced by 15 percent as from the 1st of January 1988.

On the 22nd of January 1988 the Defendant also wrote to the Plaintiff in similar terms.

On the 25th of January 1988 the Plaintiff wrote to the Defendant protesting about the reduction of 15 percent in salaries and advising that unless the salaries were restored in full it would "inform all our members not to report for duties for the equivalent period if their salaries are reduced by 15 percent".

On the 28th of January the Plaintiff wrote to the Permanent Secretary of the Ministry of Employment and Industrial Relations reporting a trade dispute and advising that the Defendant's employees had gone on strike. On the same day the Minister for Employment and Industrial Relations made an Order declaring the strike of the Defendant's employees unlawful.

At about this stage the Defendant requested all its employees to return to work and in due course they duly did so.

On the 1st of March 1988 the Plaintiff wrote to the Defendant pointing out that the 15 percent reduction in pay was unlawful and that any directive from the Government to the Defendant for a pay cut of 15 percent was ultra vires, null and void and that the provisions of the Collective Agreement could not be superseded by an unlawful act or directive.

In the absence of any reply from the Defendant the Plaintiff issued the Originating Summons herein on the 8th of March 1988. This Summons seeks two declarations and one order as follows:

(i) A Declaration that the 15 percent pay reduction of the Defendant's employees is a breach of the Master Agreement as varied by the Defendant;

(ii) A Declaration that the 15 percent pay reduction of the Defendant's employees is an illegal act by the Defendant;

(iii) An Order that the Defendant forthwith restore normal pay of its employees with effect from the 1st day of January 1988.

On the 1st of July 1988 the Defendant made a partial restoration of salaries of the Plaintiff's members of 9 percent and on the 1st of January 1989 the Defendant made a further restoration of the remaining 6 percent of the reduction so as to then restore fully the pay cut of 15 percent.

I have set out the facts of the case at some length because they are relevant to the questions of law which arise in these proceedings. I now turn to those questions.

Under the Master Agreement dated the 28th of February 1979 between the Plaintiff and the Defendant, Article 1 provides that the Defendant recognises the Plaintiff Association as the representative of, and the agent for the purpose of collective bargaining in all matters pertaining to rates of pay, salaries, hours of employment and other general conditions of employment of
the employees of the Board.

Article 6(1) of the Master Agreement provides for the minimum of salaries of all employees to be laid down in Schedule 1 of the Master Agreement.

Article 6(6) provides that no other deductions except income tax and Provident Fund contributions may be made from any employee's salary.

Article 6(4) provides for annual increments. There is no provision in the Master Agreement for any reduction of salaries.

Accordingly counsel for the Plaintiff submits that the only way in which the Board could have legally reduced the salaries was by agreement with the Plaintiff.

The Defendant recognises the validity and effectiveness of the Master Agreement but says that it is bound at law to follow any directives given by its Ministry under the provisions of the Suva Fire Brigade Act. Although no section is quoted for this assertion I presume the Defendant relies on Section 29 of the Act which I shall quote in full:

"29. (1) On or before the thirty-first day of August in every year the Board shall submit to the Minister for his approval an estimate of the expenditure necessary for the Administration of this Act for the year commencing on the first day of January following.

(2) No such estimate shall have force or effect until approved by the Minister."

The Defendant further submits that in imposing the pay cut of 15 percent it did so under such a directive from its Ministry and ought not to be penalised for a legal act under the terms of its charter.

The Defendant recognises that its actions following the alleged directives were a frustration of the Master Agreement in so far as the same related to the salaries of its employees, but that otherwise, the Master Agreement was not affected.

The Board submits that the Master Agreement was varied to the extent of the directive from the Government, that the Board did not attempt to vary the agreement but the variation was a direct consequence of the directive from the Government by which the Board was bound. It is then submitted that it was fair and reasonable in the light of the circumstances prevailing at the material time for the Government to have made the directive that it did.

The Plaintiff in answer to this submission refers to the two circulars and submits that even if the Government had power to issue any directive to the Defendant, there does not appear to be any such directive in this case. It is said that a Government or Ministerial directive given to any body is usually in the following terms or similar:

"In accordance with the powers contained in Section Such and Such of the Such and Such Act I hereby direct."

It is argued that the first circular dated the 27th of August 1987 is headed "Critical Cash Shortage Forces Reduction in Salaries" and is addressed to the Permanent Secretaries, Heads of Departments and all staff and therefore is irrelevant as far as a Statutory Body like the Defendant is concerned. It is also submitted that paragraph 4 of this circular clearly says the Government's intention was not to breach the provisions of statutes such as the Judges' Remuneration and Emoluments Act and also contracts of employees although these officers would be asked to take a voluntary (my emphasis) 15 percent pay cut.

The second circular dated the 8th of September 1987 is headed "Reduction in Salaries - Clarification" and is addressed again to Permanent Secretaries and Heads of Departments.

Paragraph 4 of this circular states that exempted officers are being approached individually to volunteer equivalent reduction in their salaries. The above circulars are annexed to the affidavit of Mr. Harold John Owan Henderson, the Chief Fire Officer, sworn on the 5th of May 1988.

Also annexed to Mr. Henderson's affidavit is a circular from the Permanent Secretary for Finance and Economic Planning dated the 10th of September 1987. This circular is headed "Wages and Salaries Reductions Statutory Bodies and Corporations" and is also addressed to Permanent Secretaries and Heads of Departments. It refers to the serious financial position then facing the Government and the public sector and states that the situation was not expected to improve in 1988. Again I observe it is not addressed to the Defendant.

Paragraph 3 states that the Permanent Secretary had already met the management of most statutory bodies and majority owned government companies regarding the need to reduce operating and non-urgent capital spending.

Paragraphs 4 and 5 read as follows:

4. "In line with the decision taken by the Government to reduce salaries and wages by 15% we would like all Ministries to inform the Boards of Statutory Bodies to reduce salaries and wages by 15%. The only exception are those employees who have incentive based wages and salaries.

5. We expect the above minimum wage and salary cuts to be undertaken by all statutory bodies irrespective of their financial position."

Paragraph 7 begins as follows:

7. "We request that you use your representations to the Boards of the Statutory Bodies and majority owned companies to put the above into effect immediately if they have not already done so."

I have little doubt on the evidence before me that the Defendant understood these circulars to be directives to it to reduce the salaries of its employees in accordance with Government guidelines but in my judgment such a view was mistaken for a number of reasons. First it assumes the power of the Government through the Permanent Secretary for Finance to dictate to the Defendant what salaries it should pay its employees. In my opinion there is no justification for such an assumption when one considers the Suva Fire Brigade Act.

Section 4 of the Act constitutes the Board a body corporate with perpetual succession and a common seal and the right to sue and be sued.

Section 21(3) states that subject to the provisions of the Higher Salaries Commission Act, the Secretary, Firemen and all other employees appointed by the Board shall be paid such salaries as the Board from time to time determines.

It is clear that in the exercise of its corporate powers the Board entered into the Master Agreement with the Plaintiff and as I have said earlier there is nothing in the Agreement to permit any unilateral reduction in salaries. It is I think noteworthy that all previous changes in the conditions of employees of the Defendant who are members of the Plaintiff were achieved by agreement. I do not consider that Section 29 of the Act which requires the Board to obtain Ministerial approval for its annual budget is authority for the proposition that the Board must accept directives from the Minister. There is no doubt that authorities directly entrusted with statutory discretions are usually entitled and are often obliged to take into account considerations of public policy, and in some contexts the policy of a Minister or of the Government as a whole may be the relevant factor in weighing those considerations - see for example the remarks of Evatt J. in The King v. Mahony Ex Parte Johnson [1931] HCA 36; (1931) 46 C.L.R. 131 at p.145 and the general observations by the Judges of the High Court of Australia in Ansett Transport Industries (Operations) Pty. Limited v. The Commonwealth of Australia and Others [1977] HCA 71; (1977) 139 C.L.R. 54; however this will not absolve such authorities from their duties to exercise their personal judgments in individual cases nor, a fortiori, in my opinion, when there is an actual agreement governing salaries by the Defendant as in the instant case.

Considering the wording of the two circulars, in my judgment the Defendant was wrong in reading them as directives. They are couched in language more in the nature of a request than a directive. I find support for this view in the circular of 27th of August 1987 which, in its reference to employees whose salaries are prescribed by contract, indicates to me a recognition also by implication of the rights of employees such as those belonging to the Plaintiff which are fixed by agreement. In this regard I do not consider that Suva Fire Brigade Act itself gives any power to the Minister or his delegate to abrogate the rights of any employee whose conditions are subject, as here, to an Industrial Agreement. In the absence of clear words in the statute, of which I find none, I consider that any directive as alleged by the Defendant would be ultra vires the Minister. In my view the only ways in which the salaries of the Defendant's employees could have been lawfully reduced were by a Presidential Decree or the Plaintiff agreeing to such reduction. Whether or not the refusal of the Plaintiff to agree to any such reduction was unreasonable is not for this Court to say. I therefore hold that the 15 percent pay reduction directed by the Defendant for its employees was illegal. It would suffice for me to conclude the matter there but counsel for the Defendant made two other alternative submissions. The first was on frustration of the Master Agreement by the military coups.

I do not propose to discuss this submission at any length but shall refer to two cases of the many on the subject in which the Doctrine of Frustration is discussed. The first is National Carriers Ltd. v. Panalpina (Northern) Ltd. [1980] UKHL 8; (1981) A.C. 675 in which Lord Simon restated the tests at page 700 as follows:

"Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance."

In the same case, it was said that the doctrine should be flexible and capable of new applications as new circumstances arise.

In The Eugenia (1964) 2 Q.B. 226 at p. 239 Lord Denning M.R. said that for frustration to apply to a contract: "It must be more than merely more onerous or more expensive. It must be positively unjust to hold the parties bound. It is often difficult to draw the line. But it must be done."

Accepting for the sake of argument that the Doctrine of Frustration could apply to the Master Agreement I am not satisfied that it would be just to apply it here or to put it another way, that it would be positively unjust to hold the parties bound by the agreement.

I do not agree with the submission of counsel for the Defendant that Finance Circular No. 16 had the effect of changing the law and as such was lawful in spite of the Master Agreement between the Plaintiff and the Defendant.

This is not to say that I do not sympathise with the Defendant in the situation in which it found itself on receipt of the directives but in my view the correct approach for it to have followed was to endeavour to persuade the Plaintiff that in the national interest a temporary reduction in salaries was warranted. In view of the alacrity with which the Plaintiff issued the present Summons such an attempt might have been fruitless but I believe the Defendant should have at least made one final effort to resolve the problem.

This leads me to the last submission by counsel for the Defendant that the Court should exercise its discretion and refuse relief because the result of the proceedings will be of little practicable value. I accept the law as stated applicable to the particular facts in the two cases cited by counsel on this question namely Attorney-General v. Scott (1904) 20 T.L.R. 630 at 633 and Odhams Press Ltd. v. London and Provincial Sporting News Agency (1929) Ltd. (1936) 1 Ch. 357 but I consider the decision by Buckley, J. in Gibson v. Union of Shop, Distributive and Allied Workers (1968) 2 ALL E.R. 252 is relevant here. In that case on a preliminary point Mr. Justice Buckley held that:

"If, when an action was instituted the plaintiff had, or might have had, a good ground of complaint involving substantial legal issues, not of an academic character, the lapse of time between the issue of the writ and the time when, having regard to the business of the court and the necessary preparatory steps, the action came on for trial, did not disentitle the plaintiff to declaratory relief."

It is true that the salary cut suffered by members of the Plaintiff was later restored but in my judgment the Summons in this case raises substantial legal issues namely whether or not in the circumstances here the Defendant was justified in enforcing the cut and acted legally in so doing.

It may well be, and one can only hope, that the situation giving rise to the salary cut will not occur again, but in my judgment the Plaintiff is entitled to have the law declared that the Defendant was wrong in unilaterally varying the Master Agreement in the way it did in the absence of clear legislative authority for such action.

I accordingly declare that the 15 percent pay reduction of the Defendant's employees of the 22nd of January 1988 was illegal and a breach of the Master Agreement as varied by the Defendant. It is not necessary to make any further order except an order that the Defendant pay the Plaintiff's costs to be taxed if not agreed.

JOHN E. BYRNE
JUDGE

HBC0145J.88S