Papua New Guinea Law Reports - 1986
[1986] PNGLR 323
SC325
PAPUA NEW GUINEA
[SUPREME COURT OF JUSTICE]
NATIONAL AIRLINE COMMISSION TRADING AS AIR NIUGINI
V
VALERIAN LYSENKO
Waigani
Bredmeyer Cory Wilson JJ
30 October 1986
5 December 1986
MASTER AND SERVANT - Contract of employment - Construction and effect - Termination of services - No reason given or required - Redundancy clause - Redundancy pay dependent on objective facts at date of dismissal.
MASTER AND SERVANT - Contract of employment - Construction and effect - Termination of services - Dismissal for proven misconduct - Proof of misconduct required.
The contract of employment of a pilot with Air Niugini provided (cl 3) that a person with the pilot’s length of service could be dismissed by one month’s notice in writing or one month’s salary in lieu of notice. The clause also provided that nothing in it derogated from the employer’s right at common law to dismiss a pilot without notice for “proven misconduct or other proven sufficient cause”. Clause 12 provided that where a person is dismissed for redundancy he is entitled to a redundancy payment based on a formula involving the person’s level of pay and years of service.
A senior pilot with eleven and a half years service was given one month’s pay in lieu of notice and sued to recover redundancy pay. The trial Judge found that there was a redundancy situation at the time of the dismissal, but that the main reason why the pilot was singled out for dismissal was that management considered him guilty of misconduct. On appeal from an award of redundancy pay plus interest,
Held
On a proper construction of the contract:
(1)      The pilot could only be dismissed for misconduct or other sufficient cause where there was proof thereof.
(2)      Management’s belief in misconduct did not satisfy the requirement of proof.
(3)      Accordingly, the pilot was to be treated as having been dismissed for no stated reason under cl 3.
(4)      The entitlement to redundancy pay under cl 12 was dependent on the objective fact of redundancy at the date of dismissal.
(5)      There being a redundancy situation at the time of dismissal the pilot was entitled to redundancy pay.
Appeal
This was an appeal from a decision of Barnett J in which he awarded a pilot dismissed by the appellant, redundancy pay plus interest.
Counsel
M Holmes, for the appellant.
I Molloy and R Thompson, for the respondent.
Cur adv vult
5 December 1986
BREDMEYER J: This is an appeal against a decision of Barnett J awarding K77,403.51 redundancy pay plus interest to the respondent. The respondent was a pilot employed by Air Niugini whose services were terminated in March 1985. The appellant appeals as of right on the trial Judge’s finding of estoppel in pais against the appellant. The appellant seeks leave to appeal on findings of fact that the respondent was terminated as redundant. The respondent in turn has filed a notice under O 7, r 28 of the Supreme Court Rules claiming that the trial Judge should have found that the plaintiff was dismissed for redundancy notwithstanding the finding that this was not the main reason for termination.
Clause 3 of the plaintiff’s contract with Air Niugini provided that a person with the plaintiff’s length of service could be dismissed by one month’s notice in writing or one month’s salary in lieu of notice. By implication no reason need be given for such dismissal. The clause also provided that nothing in it derogated from the employer’s right at common law to dismiss a pilot without notice for “proven misconduct or other proven sufficient cause”. Clause 12 provided that where a person is dismissed for redundancy he is entitled to a redundancy payment based on a formula involving the person’s level of pay and years of service.
The trial Judge found that there were pilots surplus to requirements as at 25 March 1985, the date the plaintiff was given his termination notice. He found that there was some oversupply of pilots at that time. He found that although there was an oversupply of pilots, the reason why the plaintiff was chosen for termination (and not a less senior pilot who would have been entitled to a smaller redundancy payment) was the management’s belief that he was guilty of misconduct. The trial Judge found that the “main reason” for the plaintiff’s termination was the management’s belief that he was guilty of misconduct. The trial Judge said:
“I find therefore, as a matter of law, that the plaintiff was not retrenched mainly for the reason that he was redundant.
That however by no means disposes of the plaintiff’s case. His claim that the representations of fact made to him by the defendant (through its servants) raise estoppel in pais, is a powerful one.”
The trial Judge went on to say that Air Niugini’s termination letter to the plaintiff was a representation that he was not being terminated for misconduct. The letter thanked him for his dedicated service and terminated him with honour. The trial Judge found that that representation was not withdrawn, the plaintiff acted on it to his detriment and that the defendant was estopped from saying that it believed the plaintiff was guilty of misconduct. This meant, said the trial Judge, that the “only remaining reason” for termination of the plaintiffs contract was that the plaintiff had become surplus to requirements. This was because the decision to sell the two Boeing-707s and replace them by a single Airbus drastically reduced the airline’s international operations and the plaintiff, who was a senior Boeing- 707 pilot, had become redundant.
The finding that there were pilots surplus to requirements at the time of the plaintiff’s dismissal was open to the learned trial Judge. The most important piece of evidence in favour of the plaintiff’s case was an internal memo from the General Manager, Masket Iangalio, to the Personnel Manager, Paul Aisa, dated 25 March 1985 as follows:
“Termination Notice — Capt Val Lysenko
As a result of the disposal of the two B707s which has been officially finalised and the replacement of these with one Airbus A.300, we have surplus pilots beyond our requirement [sic].
Therefore, management has decided to terminate the services of certain pilots and technical crews. We consider this an appropriate time when the company is in the process of issuing them a new contract effective 1st April 1985.
We are required under the current contract to give sufficient notice to the non-national pilots and engineers. Therefore, I wish to inform you the management has decided that Captain Lysenko should be given one month’s notice in lieu and that he be paid a month’s salary at F.28 captain standard. His flying duties will cease effective from the date in which you issue him the notice.
There are various other pilots and engineers whose employment with Air Niugini is currently being reviewed, and similar conditions of termination would be applicable to them as soon as we finalise our list. Could you please effect mangement’s decision.
(Sgd) masket iangalio
General Manager”
Air Niugini called Iangalio, Captain Ravenhill, the Deputy General Manager, and Captain Phillips, the Superintendent of Flying Operations, and others to say that there was no surplus of pilots when Lysenko was sacked. The management of Air Niugini were at loggerheads with Lysenko. He as Vice-President of the PNG Air Pilots’ Association was opposing Air Niugini’s management decisions at every turn. He was suspected of lobbying politicians against Air Niugini’s management decisions. Captain Ravenhill wanted to get rid of Lysenko “at the earliest opportunity and at the least cost”. The oral evidence of Ravenhill, Iangalio, and others called by the defendant that there was no pilot surplus, may be coloured by their animosity towards, and mistrust of, Lysenko. One’s recollection of a conversation can be slanted by animosity. The contemporaneous written record, on the other hand, does not change with time. Moreover Iangalio’s memo of 25 March was an internal memo written on the day of the sacking without any thought of possible use in a court case. It was not written to Lysenko or to the Pilots’ Association and not designed to show the airline in the most favourable light. I consider that the trial Judge was right to rely heavily on this memo; to consider that it, plus some oral evidence from Lysenko, outweighed the contrary evidence, largely oral, called by the airline. I accept and affirm the trial Judge’s finding of fact that there was some pilot surplus at the time of Lysenko’s dismissal and would refuse leave to appeal on this finding of fact.
The second finding of fact by the learned trial Judge was also open to him, which was that although there was a pilot surplus, Lysenko was not retrenched mainly for that reason. The main reason for his retrenchment was not the redundancy situation but management’s belief that he was guilty of misconduct. It was not proven misconduct, but the management’s belief that he had been guilty of misconduct. Ravenhill held that firm belief; he knew he could not prove it and, when Cabinet in March 1985 finally approved the management’s decision to sell the two Boeing-707s, he knew that he “could dismiss anyone who was not happy with management”.
This finding, as I say, is supportable and open on the evidence. Indeed it is not challenged by the appellant. But I consider with respect that the trial Judge misconceived the legal consequences which flow from these two findings. Under cl 3 of the contract, which I have outlined above, dismissal could be of three kinds. The first was on one month’s written notice or pay in lieu thereof. No reason need be given. If however there was a redundancy situation at the time of dismissal the dismissed pilot must receive the redundancy pay as provided for in cl 12. The entitlement to the payment depends on the objective fact of redundancy even though the word redundancy or retrenchment is not mentioned as the reason for dismissal. The second way of dismissal is at any time without notice for “proven misconduct”, and the third is in the same way for “other proven sufficient cause”. Lysenko’s conduct does not come within the second or third categories. It was not proven misconduct or proven other sufficient cause. He was dismissed because of management’s unproven belief in his misconduct. This means that legally the plaintiff was dismissed for no stated reason, ie, under the first alternative mentioned above, and, as such, because objectively speaking there was a redundancy situation, he is entitled to his redundancy payments.
It is not necessary therefore to go on and consider the learned trial Judge’s understanding of the doctrine of estoppel in pais and its application to the facts of this case. It is sufficient to say that when the plaintiff was dismissed he was a pilot surplus to requirements; as such he is entitled to redundancy payments calculated in accordance with cl 12.
I would refuse leave to appeal and dismiss the appeal with costs. I would certify that the case was a suitable one to engage overseas counsel.
CORY J: I concur in the judgments of Bredmeyer and Wilson JJ.
WILSON J: This appeal relates to a judgment obtained by Valerian Lysenko, formerly a senior pilot with Air Niugini, in which Air Niugini was ordered to pay K77,403.51 together with interest as a redundancy payment. Lysenko had been a pilot with Air Niugini for eleven years, six months and his length of service attracted such a substantial payment under the terms of employment which covered him and other officers.
Following decisions by the government to support Air Niugini’s proposal in the beginning of 1985 to rationalise its operations its two Boeing-707 jets were to be sold and one A300 Airbus acquired. This phase of the company’s history was attended with some not inconsiderable public debate, agitation and industrial objections, led by the pilots. Lysenko was Vice-President of the Pilots’ Association and, it would seem, not popular with the management because of his actions in lobbying against the management’s proposal.
Once the National Executive Council had approved the rationalisation plan management was able to calculate its pilot requirements properly. It would seem that there would be a surplus. At meetings before the final decision management had made it clear that the redundancy provisions of two months salary for each year’s service would be paid and that redundancy would be effected on the basis of the least senior personnel being dismissed first. A fair commercial approach.
Lysenko was given notice of termination on 25 March 1985. The notice gave no reasons but Lysenko was to be paid one month’s salary in lieu of one month’s notice.
On his return from Cairns where the letter was delivered to him he went to see Masket Iangalio, the General Manager. Iangalio said he was being terminated because of the surplus of pilots. He said nothing of any sort about misconduct.
Lysenko then went to see Paul Aisa, the Personnel Manager, and on 29 March 1985 obtained a certificate of service which stated that his contract was not to be renewed as he was “surplus to requirement (sic)”.
Lysenko took the view that he was being terminated on the basis of redundancy. On 1 April the company wrote to Lysenko saying that the certificate was only issued for the purpose of assisting him to find further employment and that it was not to be used as a basis for any claim against the company.
The trial Judge found as a matter of fact that there was a redundancy situation applying when Lysenko received his notice.
Air Niugini sought to allege before the trial Judge that Lysenko was dismissed for misconduct and was not being made redundant. While the trial Judge found that the reason or motive for termination was management’s belief that Lysenko was guilty of misconduct he went on to find that Air Niugini was estopped from raising this as a defence to the claim by the application of the principle known as estoppel in pais. This was raised in relation to the representation that he was redundant and also that because of the sentiments regarding good service in the termination letter of 25 March 1985 and the certificate of service that he was impliedly not guilty of misconduct.
LEAVE TO APPEAL
Counsel for Air Niugini has sought leave to have certain findings of fact by the trial judge examined by this court. I do not intend to set out the grounds or the argument. Mr Holmes in a fair appraisal of this aspect of this client’s case came as close to conceding the difficulty of obtaining leave as was possible, while still wishing to keep the matter alive. It was clear however that the trial Judge gave very full and careful consideration to all of his findings of fact, some of which turned on conflicting personal evidence and some on extrinsic evidence. I can find no fault at all with the trial Judge’s findings of fact and I would refuse leave to appeal in respect of them.
THE MAIN ARGUMENT
Air Niugini argues on appeal that the trial Judge erred in his application of the principle of estoppel in pais because there was no evidence of intention on its part that Lysenko would act on the representations contained in the certificate of service and further that there was no detriment to Lysenko because whatever representation was made was withdrawn on 1 April. This argument was skilfully pursued by Mr Holmes and, if it had rested solely on the certificate of service and the events surrounding its issue, may have been convincing.
However, the fact of the matter is that the General Manager had spelt out the position before Lysenko received his notice. His memorandum to the Personnel Manager of 25 March 1985 has been quoted in full by Bredmeyer J. This document is fatal to the argument of Air Niugini. The fact was that because there was a surplus Air Niugini decided to get rid of Lysenko. They thought he was disloyal but they were not prepared to confront him with this charge. They tried to avoid the conflict and were also clear that while they believed he was disloyal they could not prove it.
The clear factual situation was that of redundancy and to that extent the representations are of little moment.
I find it unnecessary therefore to make any further comments about the correct application of the principle of estoppel in pais. One observation I do make however is in respect of the assertion that there was an implied representation of good conduct, or no misconduct, through noting years of good service on the termination notice and the certificate of service. I would not be prepared to accept such statements as raising positive assertions that there was no misconduct.
For the reasons set out I am of the view that there was, as a matter of fact, a redundancy situation and that this became the opportunity for Air Niugini to dismiss a senior pilot, Mr Lysenko, who was in their eyes troublesome. Due to the factual situation of redundancy Lysenko was entitled to the judgment he obtained.
I would dismiss the appeal. Costs to be awarded to the respondent and I certify for overseas counsels fees.
Appeal dismissed
Lawyers for the appellant: Beresford Love, Francis & Co.
Lawyers for the respondent: Young & Williams.