N719

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

LYSENKO

V

NATIONAL AIRLINES COMMISSION TRADING AS AIR NIUGINI

Waigani
Andrew AJ
23-24 February 1989
28 February 1989

ESTOPPEL - Res judicata - Employment contract - Breaches of - Claim for failure to pay redundancy allowances - Claim determined - Whether claim for breach of re-employment provisions estopped - Disputed terms within one clause - Separate causes of action - No estoppel.

EMPLOYMENT LAW - Contract of employment - Breach of - Damages - Measure of - Airline pilot - Irrevocable re-employment rights for two-year period - No offer of re-employment - Damages to include amount pilot would have received during two-year period.

A contract of employment of a pilot with Air Niugini provided for termination of employment by redundancy and cl 12 thereof made provision for severance pay as follows:

"A pilot whose services are terminated because of redundancy shall be paid at the rate of two months salary for each year of service with the employer, and shall retain irrevocable rights to re-employment and seniority for two years ..."

In proceedings for damages for breach of contract in the National Court (affirmed by the Supreme Court in National Airlines Commission trading as Air Niugini v Lysenko [1986] PNGLR 323), the pilot was held entitled to redundancy pay under cl 12. At the time of commencement of those proceedings, the pilot had no cause of action in relation to his rights to re-employment under cl 12; the pilot became aware of further employment of other pilots shortly before the proceedings were to be heard and was advised that there was insufficient evidence or time for inclusion of a claim in relation thereto.

In further proceedings by the pilot for damages for breach of contract arising out of neglect and refusal to re-employ him pursuant to the terms of cl 12,

Held

(1) The pilot was not estopped from litigating the further proceedings by operation of the principles of res judicata.

There were, in effect, two causes of action, founded on two distinct terms or promises in cl 12, the breach of each of which might give rise to a cause of action such that it could not be said that the proceeding for damages for non-re-employment was a matter which might have been brought forward in the earlier proceedings, but which was not brought forward only because the plaintiff pilot had from negligence, inadvertence or accident omitted to do so.

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; Brunsden v Humphrey (1884) 14 QBD 141, considered and applied.

(2) There being a breach of cl 12 as a result of which the pilot was not re-employed within the two-year period, damages should be assessed for a two-year period and should include the amount the pilot would have earned with Air Niugini over that two-year period, the value of housing in lieu of accommodation provided, and the loss of concessional air travel.

Cases Cited

Brunsden v Humphrey (1884) 14 QBD 141.
Henderson v Henderson (1843) 3 Hare 100; 67 ER 313.
Kingston Commodities Pty Ltd v Sydney Futures Exchange Ltd (New South Wales Supreme Court, Clarke J, 15 March 1985, unreported).
National Airlines Commission trading as Air Niugini v Lysenko [1986] PNGLR 323.
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

Statement of Claim

These were proceedings for damages for a breach of contract of employment.

Editor’s Note

An appeal to the Supreme Court was upheld in part. See [1990] PNGLR.]

Counsel

R Thompson, for the plaintiff.
P Bolam, for the defendant.
Cur adv vult

28 February 1989

ANDREW AJ: In this action the plaintiff claims damages for breach of contract. The plaintiff was employed by the defendant as a commercial airline pilot pursuant to a contract in writing made on 8 August 1983. The contract provided, inter alia, that, if the plaintiffs services were terminated because of redundancy, he would retain irrevocable rights to re-employment with the defendant and retain seniority for two years. The plaintiff says that the defendant has breached the terms of the said contract and that during the two years since his services were terminated the defendant has employed pilots in preference to the plaintiff and has neglected and refused to re- employ him.

The relevant clause of the contract is cl 12:

"12. Severance Pay

A pilot whose services are terminated because of redundancy shall be paid at the rate of two months salary for each year of service with the employer, and shall retain irrevocable rights to re-employment and seniority for two years ... provided that this sub-section may be reviewed on the introduction of a Retirement Benefit Fund."

It is necessary to consider the background to this matter because the question of redundancy in cl 12 has previously been the subject of litigation between the parties in this Court and questions of res judicata are raised.

Captain Lysenko commenced employment with Air Niugini as a pilot in 1973. On 30 June 1983, Air Niugini wrote and advised him that Air Niugini had been recently declared a public authority under the Public Employment (Non-Citizens) Act 1978. Section 8 of that Act provides that a non-citizen to whom the Act applies shall enter into a written contract of employment which shall specify, inter alia, the period of employment and the terms and conditions of employment. Section 9(1) provides that a non-citizen to whom the Act applies shall, in respect of his salary or any other term or condition of his employment, have no access to conciliation or arbitration procedures under any law. Section 9(2) provides that subs (1) does not derogate from any remedies available to the non-citizen under the common law in respect of his salary or any other term or condition of his employment.

On 8 August 1983, Captain Lysenko entered into a contract of employment with Air Niugini for a period commencing on 29 July 1983. The terms and conditions were to be those set out in a document described as "determination of transitional arrangement of conditions of service for flight technical crew". All pilots were engaged under this single contract.

Clause 3, "Contract of Employment", of the transitional determination provided (inter alia):

"C. The services of a pilot shall be terminable by either the employer or a pilot:

(i) During the first six (6) months of service, by seven (7) days notice in writing.

(ii) After the completion of six (6) months service, by one (1) month notice in writing.

(iii) By the payment to the pilot of seven (7) days or one (1) month salary in lieu of notice as aforesaid; or

(iv) By the forfeiture by the pilot of the last seven (7) days or one (1) month salary paid to him in lieu of notice as aforesaid.

Provided that the period of notice set out herein may be reduced or waived by mutual agreement and provided that nothing shall derogate from the employer’s right at common law to dismiss a pilot without notice for proven misconduct or other proven sufficient cause."

Clause 12 of the transitional determination, the subject matter of these proceedings, has already been set out.

On 21 December 1984, Air Niugini, in a notice to all non-citizen employees, advised that the contracts were still being prepared and their preparation would continue throughout January 1985 and that it was anticipated that the first contracts would be ready on or about 1 February 1985.

In early 1985 the matter of the new contracts was discussed between Air Niugini and the salaries and conditions monitoring committee; however, no new contracts were finalised.

Captain Lysenko was terminated on 25 March 1985 when he was given one months salary in lieu of notice. He commenced proceedings against the defendant by writ of summons 22 of 1985, on 29 April 1985, whereby he claimed:

1. The said sum of redundancy pay together with damages for breach of contract;

2. A declaration that the plaintiffs services were terminated because of redundancy and that he has an irrevocable right to re-employment and relative seniority for two (2) years from 22 April 1985;

3. Interest on the said sum and damages under the Judicial Proceedings (Interest on Debts and Damages) Act.

4. Costs.

On 28 February 1986, Barnett J published his reasons for judgment and made orders in favour of Captain Lysenko and an appeal was dismissed by the Supreme Court on 5 December 1986: see National Airlines Commission trading as Air Niugini v Lysenko [1986] PNGLR 323. Barnett J found that Captain Lysenko was retrenched pursuant to the redundancy clause (cl 12) and awarded him the sum of K77,403.51 redundancy pay plus interest. The plaintiff now claims damages for the defendant’s alleged breach of the second limb of cl 12. That is, he claims that the defendant has breached the term which gives him irrevocable rights to re-employment and relative seniority for two years. He says that a pilot whose services are terminated for redundancy has first option if an employment position as pilot arises within two years of his date of termination or, put another way, a right of first refusal. To give effect to the term, he submits, it was incumbent upon the defendant to give him notice if an opportunity for re-employment arose.

It is not in dispute that, in the two years following the plaintiffs termination, a number of opportunities for re-employment arose. The evidence shows that opportunities arose in July, August and October 1985, and in July, August and October 1986.

The plaintiff says that, in breach of cl 12 of the contract, the defendant has employed other pilots on each of these occasions without allowing the plaintiff to exercise his rights of first refusal.

It is plain enough from the findings of Barnett J on 20 February 1986, that an acrimonious relationship had developed between Captain Lysenko and the defendant and it is clear here in these proceedings that he was not going to be re-employed. That follows from the evidence of Mr Ravenhill, who was the Deputy General Manager of Air Niugini at this time.

The defendant concedes it is estopped from disputing the findings of redundancy but says that a party who, having omitted to raise all of the matters which could have been dealt with by the Court in prior proceedings in which he was involved, is prevented from litigating those matters in later proceedings and it relies upon the following:

"The Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case": Henderson v Henderson (1843) 3 Hare 100 at 115.

THE DEFENDANT’S SUBMISSION

The defendant submits that, as Captain Lysenko brought an action for damages for breach of cl 12 at a time when the damages had already occurred and were beyond the mere redundancy payment, he was obliged, in that litigation, to bring forward his whole case and as such, the courts do not permit the same parties to open the same subject of litigation in respect of a matter which might have been brought forward as part of the subject in contest. Thus, even though it might be sought to be argued that there was no res judicata in the sense that the present cause of action in these proceedings had not passed into the earlier judgment, it was a claim about the same subject matter in the proceedings which could have been aired in those proceedings: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. Even if the view is taken that the issue of damages for non-re- employment was not litigated in the earlier proceedings (as in the case of the contract claim in Anshun’s case), it is not open to the plaintiff to raise it in second litigation as the matter sought to be litigated in the second action is so relevant to the subject matter of the first action that it is unreasonable not to have relied on it and litigated it (Anshun’s case, at 602). Advice, whether sound or negligent, has no effect on the principle if the party knew of the claim at the time. The need for other preliminary findings also has no effect on the principle.

An alternative basis, it is submitted, is the application of doctrine of merger of the cause of action in the judgment. Whether there is substantially only one cause of action and it is a case of not splitting two demands but of splitting one demand into two quantitative parts (Bower and Turner, The Doctrine of Res Judicata, 2nd ed (1969), par 456) then a plaintiff is precluded from bringing the second action: Kingston Commodities Pty Ltd v Sydney Futures Exchange Ltd (New South Wales Supreme Court, Clarke J, 15 March 1985, unreported).

I turn to a consideration of the material before me which may be relevant to whether or not this claim should properly have been made in the first proceedings.

There was communication between the parties’ solicitors as to a proposed amendment to the first proceeding which is now in evidence. Thus, on 27 January 1986, the plaintiffs solicitor wrote that it had first come to its client’s attention that, a short time after the client was made redundant, the defendant had employed other pilots without giving notice to Captain Lysenko. They said that:

"Clearly in the pleadings this is a matter forming part of our client’s cause of action but your client has made no discovery in respect thereof. We request that you make available to us immediately all documents relating to the employment of pilots subsequent to 22 April 1985 and the allocation of pilots to more senior positions."

On 28 January 1986, the plaintiff wrote to advise that a further amendment to the plaintiffs pleading would be necessary. That amendment was to be:

"In further breach of the said contract the defendant has failed and refused to permit the plaintiff to exercise his right to re-employment as referred to in par 4(a) hereof whereby the plaintiff has suffered loss and damages."

The defendants’ lawyers replied saying that they had notified counsel in Sydney of the two letters and that they would respond as soon as possible.

Miss Royale Thompson, a lawyer for the plaintiff, has given evidence. She says that she received no further reply after the above letter. She referred to her file and said that, in relation to the above letters which she wrote, she had obtained instructions on 24 January 1986. The hearing was fixed before the National Court for 3 February 1986, that day having been allocated in November 1985. She received no documents on discovery following her letter of 27 January 1986. There had, she said, been no prior discovery. The application to amend was not made.

The statement of claim in the first proceeding referred to the irrevocable rights to re-employment and sought a declaration to that effect. The defence say that the plaintiff tendered at his trial various pilot seniority lists showing that there had been intakes of pilots after he was terminated and that he was well aware that he was in conflict with Air Niugini and would not be re- employed. The defendants point to the fact that the claim for damages was quantified for redundancy.

The plaintiff in evidence says that he became aware only shortly before the first proceedings that other pilots had been employed. He was never told by Air Niugini. He says he requested that this claim be added but was advised that there was insufficient time for its inclusion and as it was not discovered it would not be included. He says he cannot say when exactly he became aware and only became aware that it was a necessary consideration when the court case arose. He says he was out of the country after being terminated and was persona non grata with the airline so that there was no communication. He said he was more involved in settling back into Australia and looking for other employment as a pilot.

I make the following findings of fact. It is true that, after his dismissal on 25 March 1985, Captain Lysenko remained as Vice President of the Pilots’ Association and this is put forward as some evidence that he would have been aware of pilot intakes. There were pilot intakes on 4 July 1985, 26 August 1985, 28 October 1985, 21 July 1986, 11 August 1986 and 6 October 1986 and there were dismissals on 26 May 1986 and 23 June 1986.

In the absence of any real contradictory evidence, I give the plaintiff the benefit of the doubt that he only became aware of pilot intakes in late 1985 or early 1986.

I accept the evidence of Miss Thompson that she obtained instructions from the plaintiff on 24 January 1986 to the effect that the plaintiff had just become aware of further employment of pilots and that she then sought all documents relating to such employment subsequent to 22 April 1985 and the allocation of pilots to more senior positions. The defendant had not given discovery on this aspect prior to the commencement of the hearing. I am also satisfied that Miss Thompson advised the plaintiff that there was insufficient evidence at that stage on this aspect.

By par 5 of its defence, the defendant says that the plaintiff, in the earlier proceedings between the plaintiff and the defendant commenced by writ of summons no 221 of 1985, recovered all damages arising out of the alleged breach of contract in these proceedings — thus raising a defence of res judicata as has been outlined already.

In Halsbury’s Laws of England (4th ed), vol 16, par 1528, under the subheading, "Essentials of res judicata", the editor says:

"In order that a defence of res judicata may succeed it is necessary to show not only that the cause of action was the same but also that the plaintiff has had an opportunity of recovering [that is, it being open to him on the pleadings] and but for his own fault might have recovered in the first action that which he seeks to recover in the second. A plea of res judicata must show either an actual merger, or that the same point has been actually decided between the same parties."

In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, the Port of Melbourne sued Anshun Pty Ltd (Anshun) for $53,632 alleged to be due to it by way of indemnity under an agreement by which Anshun hired a crane from the Authority and agreed to indemnify it in relation to any injury which might arise from its use. Proceedings were brought by workman against the Authority and Anshun for damages for personal injury caused by the negligent use of the crane. He obtained judgment against both defendants and it was held in those proceedings that each defendant was liable to contribute to the other in specified proportions. McGarvie J ordered (at 590-591) that the action by the Authority against Anshun be stayed on the ground that it was an abuse of process on the ground that the matter in question could and should have been litigated in the earlier proceedings.

But I think that that is a different situation to the one here, for in my judgment there were in the circumstances here, in effect two causes of action. The circumstances are unusual. I find that the first proceeding was commenced before this cause of action arose and that it could not be said that this action was a matter which might have been brought forward but which was not brought forward only because the plaintiff had from negligence, inadvertence or even accident omitted to do so. The plaintiff did seek re-employment with Air Niugini following the first proceeding. I accept the plaintiffs evidence in this respect. He approached Captain Phillips, the Director of Operations, who was responsible for the employment of pilot staff and he attempted to see Mr Dieter Seefeld, the Chief Executive of Air Niugini. He considered that a finding of redundancy might lead the defendant to re-employ him under the terms of the agreement.

Bower and Turner in The Doctrine of Res Judicata, 2nd ed (1969) at 357 quote as follows from the leading case of Brunsden v Humphrey (1884) 14 QBD 141 at 146:

"Two actions may be brought in respect of the same facts where those facts give rise to two distinct causes of action."

But if only the facts are identical, but these identical facts give rise to substantially one and the same ground of complaint, the plea of former recovery prevails, notwithstanding there may be technical and formal differences between the two causes of action or that the two remedies may be called by different names. The test is whether or not the second proceeding involves a new cause of action or whether it is merely an attempt to recover, on the original cause of action, under some heading of damage not previously involved.

I agree with the submissions of Mr Molloy when he says that cl 12 of the contract of employment contains the terms which are in dispute in each of the proceedings between the parties. However, that clause contains two distinct terms or promises, the breach of each of which may give rise to a claim or cause of action. The first term is that a pilot whose services are terminated because of redundancy shall be paid at the rate of two months salary for each year of service with the employer.

The second term is that pilots who are made redundant shall retain irrevocable rights to re-employment with the employer and relative seniority for two years. In the present proceedings there is no doubt that the plaintiff is claiming a breach of the second of these terms. The statement of claim in the earlier proceeding reveals distinct breaches of contract are alleged. Then, in par 7, it is alleged that the defendant was in breach of contract because it terminated the plaintiffs services on the grounds of redundancy and that cannot be read to mean that the plaintiff is making an allegation that the plaintiff is a pilot whose services have been terminated for redundancy and that the defendant has failed to re-employ him contrary to his irrevocable rights to re-employment. Paragraph 8 contains the only other alleged breach of contract. The allegation there is that the defendant has failed and neglected and continues to fail and neglect to pay the plaintiff his entitlement to redundancy pay, namely 24 months salary of approximately K85,000. Again, that cannot be read as an allegation that the defendant has breached the contract in that the plaintiff is a pilot whose services have been terminated for redundancy and that the defendant has failed to re-employ him.

It is true that there was a claim for a declaration that the plaintiffs services were terminated because of redundancy "and that he has an irrevocable right to re-employment and relative seniority for two years from 22 April 1985". But a declaration may be made of contractual rights without a party losing his right to sue and recover damages in respect of a breach: see, Bower and Turner, The Doctrine of Res Judicata, 2nd ed (1969) at 361:

"The following do not satisfy the requirements mentioned and therefore are not deemed ‘judgments’ for the purposes of the plea of former recovery: a naked judicial declaration of rights and liabilities; a verdict not followed by a judgment; an unexercised right to sign judgment on default; a compromise and action on terms with which the defendant does not comply..."

In the former proceedings the claim for a declaration of a contractual right was not pressed and no order was made.

A plaintiff is not bound to join two separate causes of action in one proceeding: Halsbury’s Laws of England (4th ed), vol 16, par 1528; Brunsden v Humphrey (1884) 14 QBD 141 at 146. By par 6 of its defence, the defendant alleges that the matter sought to be litigated was so relevant to the subject matter of the previous proceedings that it would have been unreasonable for the plaintiff not to have relied upon it in those proceedings.

However, I have already found that those proceedings commenced before the cause of action arose and the plaintiff sought re-employment with the defendant. Further, the plaintiff did not discover the breach until shortly before the hearing. The reason he may not have known was through the defendant’s own breach in not informing him of vacancies. Also the plaintiff was advised that there was insufficient evidence to proceed and the defendant had not given discovery on this aspect.

For all of these reasons, I find that the defence raised should fail and that the plaintiff in the earlier proceedings did not recover all damages arising out of the alleged breach of contract in these proceedings.

It follows from what I have found before that I am satisfied that the plaintiff sought re-employment with the defendant and that there was never at any time any offer of re-employment when other pilots were employed. Accordingly I find that the defendants were in breach of cl 12 of the contract and the plaintiff is entitled to damages.

DAMAGES

The plaintiff says that the measure of damages is the amount he would have earned had he been re-employed subject to deduction in respect of any amount he earned or should have earned in other employment (McGregor on Damages, 15th ed (1988), par 1167 at 714) and, in addition to salary, the plaintiff may recover for other benefits such as accommodation: McGregor par 1168 at 715.

The first intake of pilots after 25 March 1985 (when Captain Lysenko was advised that his services were no longer required) was on 4 July 1985 when the plaintiff should have been re-employed as an F28 captain. The defendant says that by the end of May 1985 all pilots were on a new contract, including the intake of 4 July 1985. These contracts contained termination clauses whereby the employer could terminate at any time by giving the employee two months written notice or payment in lieu of notice. It is said that the relationship between Captain Lysenko and Air Niugini, being what it was, would have meant that, if he had been re-employed on 4 July 1985, he would then have been terminated so that any damages can only be assessed for the two-month period. It relies on the following passage in Chitty on Contracts, 25th ed (1983), vol 2, par 3522:

"The normal measure of damages is the amount the employee would have earned under the contract for the period until the employer could lawfully have terminated it, less the amount he could reasonably be expected to earn in other employment"

and the principle derived from McGregor on Damages, 15th ed (1988), par 366-367 at 228 that: it is also an application of the principle that where there are a number of ways in which a contract might be performed, damages are to be assessed, if it be broken, on the footing that the defendant would have chosen the mode of performance most beneficial to himself and least profitable to the plaintiff.

It could be said that upon re-employment the most beneficial approach would have been to retain the plaintiff. He was an experienced and above- average pilot. The defendant had already invested time and money in him. He was trained on all its aircraft (save the airbus).

However, the situation here is more complicated. This is not simply an assessment of damages for the period between breach of the contract until the time it could lawfully have been terminated. Here there is a breach of cl 12 of a contract, giving the plaintiff, in effect, the irrevocable right, as it turned out, to be re-employed as from 4 July 1985. It is conjecture to say he could and would have been terminated under the new contract then issued. The reality is that there was a breach of cl 12 and, as a result of that breach, the plaintiff was not re-employed within the two-year period.

Giving the words of cl 12 their plain and literal meaning, that is, the words "... and shall retain irrevocable rights to re-employment and relative seniority for two years", I conclude that damages should be assessed for a two-year period commencing from 4 July 1985. I can only read that clause as meaning that there was an irrevocable right to re-employment for the period of two years from the time when positions of pilot became available and that consequently damages were incurred during that two years.

I am satisfied that, during this period of two years, the plaintiff made every endeavour to seek re-employment as a pilot. This was his only employment. He made numerous applications to obtain work and these have been tendered in evidence.

I set out the amount the plaintiff would have earned had he been re-employed for the two-year period and the amounts to be deducted for what he did, in fact, earn.

(1) Amount the plaintiff would have earned with Air Niugini from 4 July 1985 to 4 July 1987 as an F28 captain

 Monthly figures 
Salary K4,099.16 
Gratuity 746.93 
Recreation leave 549.74 
Telephone 13.00 
Loss of licence contribution 75.00 
 K5,483.83 per mth 
 K130,611.92 for two years 

A claim is made for housing. The plaintiff was provided accommodation in Port Moresby. Evidence has been called as to the value of this on a commercial basis. However, he did not receive an allowance for housing but was simply provided the accommodation. In my view, the fairest assessment of the loss suffered is to consider the amount of rent he had to pay in Australia. There was a 12-month period in Cairns at $185 per week and $155 per week in Sydney for 12 months. This approximates to the amount of K12,000.

The plaintiff was also entitled to concessional air travel and I assess this amount at K5,000 for the two-year period.

Therefore:

(1) Salary K130,611.83  
 Housing 12,000.00  
 Concessional travel 5,000.00 K147,611.83 
(2) Amount actually earned   
(a) Oct 1985 to Jun 1986 Unemployment benefits K4,000.00  
 (b) Jun 1986 to Dec 1986 Employed as pilot in Libya 27,000.00  
 (c) 25 Apr 1986 to 4 Jul 1986 Employed as pilot with Australian Jet Charter 5,000.00 K36,000.00 
 Therefore the total amount of damages is  K111,611.83 

There was a claim made for distress but in the circumstances I do not accede to this claim.

A claim was also made for interest at commercial rates. In my view the position here is different to the first proceeding where the plaintiff, it could be said, was "kept out of his money" and the amount of interest was easily identifiable. Here the damages arose throughout the relevant two-year period and are not all identifiable as at the commencement of the cause of action. I allow interest for one year at a rate of 6 per cent.

Accordingly I order:

(1) That the defendant pay to the plaintiff the principal sum of K111,611.83 together with interest to be calculated for a period of one year at the rate of 6 per cent.

(2) The defendant to pay the plaintiffs costs as agreed or taxed.

(3) Certify for overseas counsel.

Orders accordingly

________________

Lawyers for the plaintiff: Young & Williams.
Lawyers for the defendant: Blake Dawson Waldron.