Hodson v State [1985] PGNC 14; [1985] PNGLR 303; N524 (8 November 1985)

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MASTER AND SERVANT - Contract of employment - Construction of - Recruitment of non-citizen to skilled position - Position filled - Required to work in less skilled position - Clause agreeing to serve in any other capacity - Interpretation of clause - Employment background - Reason for insertion - Not to be interpreted broadly - Contract breached.

MASTER AND SERVANT - Contract of employment - Damages - Breach by employer - Employee relegated to position of lower responsibility than contracted for - Damages component for distress, frustration and general disappointment.

DAMAGES - Breach of contract - Measure of breach of contract of employment - Damages for distress, frustration and general disappointment - Available where breach caused by relegation to position of lower responsibility than contracted for.

A non-citizen was recruited from the United Kingdom to the Taxation Office, Department of Finance, to a position described in the contract of employment as Chief Investigations Officer. On arrival in Papua New Guinea he was informed that the position had been filled and that he would be required to work in a subordinate position as a Supervisor in Investigations, which he did, under protest, in accordance with cl 4 of his contract of employment which provided:

"The employee agrees to serve the employer in the office and in the Public Authority described in the schedule hereto. The employee agrees to serve in such other capacity or in such other Public Authority or in such locality as the employer may determine, but in no event shall the remuneration payable to the employee under cl 7.1 of this agreement be reduced."

(1) Clause 4 of the contract ought to be construed in the light of the background to its insertion in the standard form of contract for recruitment of non-citizens and in the context of the nature of the employment system in Papua New Guinea.

(2) So construed cl 4 could not be interpreted as a broad safety valve but rather as directed to the situation arising when a reason for shifting a contract officer out of his substantial position occurs, whether because a national officer is ready to fill the position or because there is an urgent need to utilise his skills elsewhere and he has to be held against a position in order to be paid.

(3) Damages for breach of a contract of employment may include, in an appropriate case, a component for distress, frustration and general disappointment caused by relegation to a position of lesser responsibility.

(4) In the circumstances the employee was entitled to treat the contract of employment as at an end by reason of the employer’s breach.

(5) Damages for breach of the contract of employment should include a component of K6,000 as damages for distress, frustration and general disappointment.

This was the hearing of proceedings in which the plaintiff sought damages for breach of a contract of employment.

LOS J: The plaintiff, a United Kingdom citizen was recruited by the Public Service Commission in February 1984 to work in the Taxation Office, Department of Finance, Port Moresby and the following month he arrived in Papua New Guinea to take up his post. He has been in the country since then. He claims that he was recruited for the position of Chief Investigations Officer — Level 21, but upon arrival he was made to or told to work as a supervisor in Investigations, a position subordinate to the one for which he was recruited.

The plaintiff claims that by requiring him to work in a position of lesser stature the defendant is in breach of the agreement. Consequently he seeks a declaration that he is entitled to treat the contract as at end by reason of the defendant’s breach and he is entitled to damages for the breach including the cost of returning to the United Kingdom and loss of superannuation and other benefits.

Alternatively, the plaintiff claims that the defendant negligently and without regard to whether it was true or not, induced the plaintiff to enter into the contract by representing that the plaintiff would be required to perform the duties of Chief Investigations Officer, which representation was not true.

The plaintiff says that towards the end of May 1983 he saw an advertisement in the Accountants’ Magazine in the United Kingdom where Papua New Guinea was asking for Investigation Officers of various classes. He wrote to the Papua New Guinea High Commission in London and obtained a vacancy information sheet and appropriate application forms. Based upon the information, he filled in an application. He applied for two positions:

If he was granted an interview, he would seek clarification in relation to a number of aspects of the positions — differences or similarities and number of similar positions in the establishment. In November 1983 he was invited for an interview by Mr George Obara who was the First Secretary, Recruitment, attached to the Papua New Guinea High Commission in London. During the interview Mr Obara’s emphasis was on the Chief Investigations Officer post. But as the plaintiff was leaving and to keep his options open, he said to Mr Obara if the post they discussed was not available, he would consider a supervisor post. A month later in December 1983, the plaintiff received a letter provisionally offering him the post of Chief Investigations Officer. He responded positively to this provisional offer and as a result in January 1984 he received a formal letter enclosing a contract of employment which he signed and had witnessed. To him, because the offer was specifically for the post of the Chief Investigations Officer, the supervisor’s position ceased to have any relevance.

Upon arrival in Papua New Guinea, on 9 April 1984, the following day he reported to the Taxation Office where he produced the copy of his contract. He said, however, "Mr Lohberger, the Chief Collector of Taxes and his Executive were surprised that my contract showed that I was the Chief Investigations Officer. They advised me that I was not. They advised me that another officer had been recruited from New Zealand. The second officer hadn’t yet signed a contract but was coming and he would be the Chief Investigations Officer". The plaintiff was not happy and asked Mr Lohberger to find out what had gone wrong. Since then, Mr Lohberger said he was entitled to use the plaintiff as supervisor. The plaintiff says to show that he is unhappy, he has been signing documents as "acting supervisor". He says he did not come for that position. As long ago as 1965 in the United Kingdom, he was working as a supervisor — in fact he was a group leader. He did not give up so much to come to Papua New Guinea to work in a job in the capacity that he had worked 20 years ago.

The State’s major contention is that although it is true that the plaintiff was recruited for the post of the Chief Investigations Officer, he has understood and accepted that he could be required to work in any other capacity which is the State’s right and which is specifically spelled out in cl 4 of the agreement between the plaintiff and the State dated 6 February 1984:

"Clause 4. The employee agrees to serve the employer in the office and in the Public Authority described in the schedule hereto. The employee agrees to serve in such other capacity or in such other Public Authority or in such locality as the employer may determine, but in no event shall the remuneration payable to the employee under cl 7.1 of this agreement be reduced."

There is an extension of the contention by the State. The position that the plaintiff occupies is not just any position; in answer to the advertisement in England, the plaintiff also indicated his interest in this position.

Mr Obara who was called by the State agreed with the plaintiffs preliminary evidence. But for the more important aspect of the evidence beginning with the interview, he said Mr Hodson applied for both positions. He was interviewed for both positions which is the normal practice. It is normal for many persons to apply for the same positions. If the employing department feels there is a candidate who could fill the senior post, the other candidate is offered the subordinate post.

After the interview, the report was sent to the employing department with a copy to the Public Service Commission for selection of candidates and approval. Subsequently, Mr Obara was instructed to make a provisional offer to Mr Hodson for the position of Chief Investigations Officer and he accepted the provisional offer. Upon receipt of the acceptance, Mr Obara sent a standard contract to Mt Hodson who had it signed and witnessed.

Mr Henry Bailasi, Deputy Secretary of the Department of Public Service Commission, called by the State gave similar evidence as Mr Obara in relation to the recruitment procedures. But I shall state two aspects of his evidence which are relevant to this case. First the reason for recruitment overseas and secondly in what circumstances a contract officer may be shifted or required to work in another capacity. The department concerned identifies a position and assesses whether a national officer can fill that position and if no national officer is available, the department requests the Manpower Control Unit to assess the request. If no national officer is available to fill the position, an approval is sought from the Public Services Commission for recruitment of a non-national officer to fill the position. If approval is granted, the department concerned is notified. The department then asks the Public Service Commission to advertise the position through the Overseas Missions. What comes after that is similar to what was described by Mr Obara. Before going onto the second aspect of Mr Bailasi’s evidence, I want to refer to a relevant piece that he gave. As early as when an applicant accepts a provisional offer and when other formalities like character reference etc, are completed, the recruitment officer advise the Public Service Commission which in turn advises the department concerned to make arrangement for housing. The standard contract is then offered and signed after this.

The other aspect of the evidence by Mr Bailasi relates to when a contract officer may be shifted out of the position he has been holding; I quote the following extract:

Q: Do I understand that the document indicates that Hodson was recruited to fill in the position until such time as a national officer is available to take over the position?

A: Correct, but even so if the department feels if he could be utilised elsewhere — where there is an urgent job for him to do.

Q: Generally true that a contract officer is shifted when there is an urgent need or to make room for a national officer?

Q: Clause 4 enables national staff to be promoted once they are properly trained?

It is obvious from the plaintiffs evidence and from the State witnesses that on the face of the standard contract, the plaintiff was recruited for the position of Chief Investigations Officer in the Taxation Office. Upon arrival and from the first day in office he has been in the supervisor’s position with protest. The State says it has exercised its rights reserved in cl 4 of the contract by requiring Mr Hodson to perform the duties of a supervisor. Mr Hodson understood the meaning of cl 4 and by signing the contract he accepted the full implication of the said clause. His pay has not been reduced so he has nothing to complain about.

The State seems to imply that cl 4 is a safety valve of a general nature or a multi-purpose valve. Whether or not it is so, must be ascertained from answering a simple question: why was the clause put there in the first place? I think, therefore, the clause should be interpreted in the context of why it was there in the first place. Also the clause must be interpreted in the context of the type of employment system in Papua New Guinea. Upon Independence, Papua New Guinea was faced with having to run its own Public Service which meant running it with its own citizens. While in the administrative area, there were some nationals ready to take on the job, in the professional area and the fields where specific skills and experience were needed, the country lacked manpower among its own citizens. So the country has had to recruit from overseas. As the citizens gained professional qualifications and experience in the specific fields recruitment in that area would cease. At times a citizen might be ready during the term of a contract officer. So the reason for employing that contract officer on that specific job no longer exists but as he holds a contract, he cannot be moved without breaching that contract. Clause 4 was included in the contract for that purpose. This reason is clearly reflected in the evidence of Mt Bailasi.

The other reason for the clause being there is to make it possible to shift a contract officer in an emergency situation. This may appear on the face of it as an open ended reason. Mr Bailasi did not give any examples of what might come under this category. Evidence of practices across the Public Service, if any had been produced, might have thrown further light on this question. Again I think the urgency should be based upon the availability or otherwise of a qualified and an experienced national officer. I list some examples that come into my mind. A certain department needs to fill a position within that department with a certain person with necessary skills and experience but finds that it cannot do so because no national officer is available immediately or an expatriate is yet to be recruited. In accordance with the needs of the department, the duties stated for that vacant position rank on the higher priority area than the duties already performed by the current contract officer. The department can require this officer to move from his substantive position and perform the urgent duties required of him. That officer might be moved to a different office or to a province to work for certain months or he might be required to perform the duties of a position below him following a resignation of an experienced officer or on the grounds of sheer incompetence of persons below him.

Mr Karri, counsel for the State, had put some emphasis on the last part of the last sentence in cl 4, "... but in no event shall the remuneration payable to the employee under cl 7.1 of this agreement be reduced". He argues that the word "reduced" clearly implies that a contract officer can be put in a position subordinate to the position for which he has been recruited; so long as he receives his pay he has nothing to complain about. In saying that, he referred to an excerpt from Asquith J’s judgment in Collier v Sunday Referee Publishing Co Ltd [1940] 2 KB 647 at 650:

"It is true that a contract of employment does not necessarily, or perhaps normally, oblige the master to provide the servant with work. Provided I pay my cook her wages regularly she cannot complain if I choose to take any or all of my meals out."

I shall come to the word "reduced" itself later but first in my view there is a flaw in counsel’s argument. Papua New Guinea does not go out to the international market to recruit just anybody; PNG goes out to recruit skilled and experienced persons and for specific posts. For a professional or a skilled man, just the fortnight’s pay is not sufficient. The job must motivate him and he must do it with interest. I think that the sentiments expressed by Lord Denning MR in Langston v Amalgamated Union of Engineering Workers [1973] EWCA Civ 7; [1974] 1 WLR 185 at 192 are in line with the recent trend:

"In these days an employer, when employing a skilled man, is bound to provide him with work. By which I mean that the man should be given the opportunity of doing his work when it is available and he is ready and willing to do it. A skilled man takes a pride in his work. He does not do it merely to earn money. He does it so as to make his contribution to the well being of all. He does it so as to keep himself busy, and not idle. To use his skill, and to improve it. To have the satisfaction which comes of a task well done."

Secondly it is the basic premise in the Public Service system of employment in PNG that every employee must be held against a position on the public service establishment. So when a reason for shifting a contract officer out of his substantial position occurs, whether because a national officer is ready or because there is an urgent need to utilise his skills elsewhere, he has to be held against a position in order to get paid. While he is being held against that lower position his remuneration cannot be "reduced" because that is his price under the contract, otherwise one party namely the State may be in breach of the agreement.

It appears from the evidence that at the time the plaintiff was told to occupy the position of supervisor, investigations, no reason existed under either of the broad categories mentioned earlier. The State witnesses did not specify any other categories than the two I have discussed.

Through the examination of Mr Obara and through the examination of the plaintiff, counsel for the State has attempted to elicit that (a) the plaintiff does not hold the necessary qualifications to hold the office of Chief Investigations Officer; (b) that the experience he has is irrelevant to the taxation system in Papua New Guinea. It seems to me that these claims by the State came as a surprise to the plaintiff. I can see why. These claims were not raised with the plaintiff and there were no indications in the defence filed by the State on 8 March 1985. The plaintiff has never been put in the position for anybody to assess him.

Mr Obara, in his evidence said the qualification requirement for Chief Investigations Officer stipulated in the information sheet which was advertised was a qualification in accountancy and such other educational qualification as may be accepted by the Public Service Commission, combined with a thorough knowledge of income tax legislation and experience in tax investigation. Mr Hodson did not produce any document as to evidence of his qualification.

The front line man, Mr George Obara, said clearly that the plaintiff did not provide any evidence of his formal qualification. But when he was instructed to offer the position of Chief Investigations Officer, he was under the impression, upon his recruitment work, that Mr Hodson’s experience in another third world country namely, Malawi, must have worked in favour of him. Mr Hodson says that in the UK the Tax Department has an extensive in-house training unlike in other countries where one has to attend training outside his department. Like all his counterparts in the UK Tax Department, he rose from the internal extensive training and experience. According to him no one in the Taxation Office in PNG has any long period of tax work experience as he has, ie 26 years.

The evidence by the plaintiff is that up to the taking up of employment in Papua New Guinea, he had been doing taxation work for some 26 years, including 2½ year secondment to Central Africa as a Training Officer for the Government of Malawi. In Malawi he trained new staff as well as those experienced officers who were preparing to become senior inspectors of taxes. Further he conducted numerous seminars for both civil servants and persons employed in private enterprise. When he returned to the United Kingdom, he resumed his previous duties. At the time he was recruited to come to Papua New Guinea, he was serving as one of Her Majesty’s Inspectors of Taxes employed in investigation work. Further to that he continued to represent the United Kingdom Tax Department in appeal cases before the tribunal.

The State produced no evidence to contradict this. Mr Lohberger was on the list of witnesses but the State opted not to call him. At best, therefore, the claims by the State remain claims having no evidentiary value at all. I find, therefore, as the vacancy information sheet allows it (item 1) the plaintiffs experience and qualifications and their relevance were accepted when he was engaged.

The defendant has advanced an alternative argument: the plaintiff by not taking any action the moment he was put in the subordinate position, has accepted to work in that position. This argument would be unfortunate if it was intended that the plaintiff was put in such a situation that he would be induced to breach the contract. The plaintiff has done everything possible including signing his name as "Acting Supervisor Investigation" as a token of protest. It would be unreasonable to expect a person who had had 26 years in the UK Tax Department and who has uprooted himself on the face of the contract to come to a foreign country to repudiate the contract a day after his arrival. He would be the one to lose so much. He has talked to the Chief Collector of Taxes and he has gone to the Public Service Commission. Only when he did not get any satisfactory answer did he come to court. While it is true that if the plaintiff had not complained as soon as he was put in the position of supervisor, investigations, he may not have a cause to complain later, the onus is on the State to prove unequivocal conduct on the part of the plaintiff that he has accepted the position: Cheshire and Fifoot, Law of Contract, 4th Aust ed (1981) par 1602 at 293-294. The acceptance of his salary alone is not sufficient to support the defendant’s contention in this regard, Colliers case (at 652).

I cannot see anything in the evidence to suggest that Mr Obara made any mistakes or misled the plaintiff. He explained the cl 4 to the plaintiff and the plaintiff having had a similar arrangement before in Malawi understood it. Indeed the plaintiff said his agreement was to serve as Chief Investigations Officer, Level 21, in the Taxation Office and he understood that the State reserved the right to redeploy him. However, he did not envisage that any redeployment would be on a lower level of responsibility because that might not be in the State’s interest to do so. On instructions, Mr Obara offered the position of Chief Investigations Officer to the plaintiff and he accepted it. He was entitled to rely on Mr Obara’s advice that the position was available and he accepted to come to Papua New Guinea for that position. If there were any administrative mistakes within the Taxation Office that was their internal problem. In the normal course of events, as described by Mr Bailasi, the Taxation Office would have been informed before the standard contract was offered. I find, therefore, that the defendant is in breach of the agreement. Consequently, I grant the plaintiff a declaration that he is entitled to treat the contract as at an end by reason of the defendant’s breach.

At the hearing, the plaintiff produced two amended claims. One covering the contract entitlements and the other one was described as UK forfeitures. The latter included a claim for loss of salary to age of 60 with former employer, superannuation lump sum payment increase from former employer if he had continued to serve; and pension right increase. Naturally, the plaintiff has weighed the pros and cons of losing these benefits against what he might gain if he stayed in PNG for more than one term. His contract might not be renewed so he cannot claim any renewal as of right but, given the information he had, ie, the Tax Office was expanding but there had been shortages of skilled manpower in PNG and with his experience, it was reasonable for him to think that he could stay in PNG for some time. Be that as it may, in my view, the losses described under this category have nothing to do with breach of the agreement; even if the plaintiff stayed on for some time, there is no way he could regain the UK losses.

Apart from the contract entitlements, in my view, the only other damages the plaintiff could claim is of the disappointment, distress, the upset and frustration caused by the breach: Jarvis v Swans Tours Ltd [1972] EWCA Civ 8; [1973] 1 QB 233 at 238. In this case, the plaintiff who was on holiday was disappointed and distressed when the attractive terms offered in the holiday brochure did not eventuate. The county judge found for him but he was not happy with the sum awarded. On appeal he was successful and the amount awarded was increased. In Cox v Philips Industries Ltd [1976] 1 WLR 638, Jarvis case (supra) was considered. An employee who suffered from distress, frustration and general disappointment caused by relegation to a position of lesser responsibility was awarded damages.

The defendant has produced no evidence to challenge the claims of loss suffered by the plaintiff nor was there any challenge to the computations by the plaintiff. The defendant’s argument is simply that the plaintiff has suffered nothing. The plaintiff was recruited for three years. Under the contract he is entitled to a Level 21 salary of K21,720 pa plus a 24 per cent gratuity payment, provision for housing, school fees for children, settling in and settling out grants and leave entitlements. These are computed to 18 September 1985. No doubt there may be slight alterations after this date because of the payment of the salaries to the plaintiff.

Total Entitlements:	114,372
Deductions:
Salary to 13/9/85	23,185
Gratuity to 6/4/82	2,842
Housing (34 x K75)	2,550
School in Grant	3,510
Leave taken (7½ days)	880
	594 33,561
	80,811
Interest at 8 per cent at 13/1/85 (202 days)	3,578
	84,389
Damages for distress, frustration and general disappointments	6,000
	K90,389

I award a sum of K90,389 to the plaintiff. The defendant is also to pay the plaintiffs repatriation fees and the plaintiffs legal costs

Lawyer for the plaintiff: Young & Williams.
Lawyer for the defendant: O Emos, State Solicitor.

National Court of Papua New Guinea

Hodson v State [1985] PGNC 14; [1985] PNGLR 303; N524 (8 November 1985)