N2401

PAPUA NEW GUINEA

[In the National Court of Justice]

OS. NO. 351 OF 1998

IN THE MATTER OF AN APPLICATION FOR LEAVE TO APPLY FOR JUDICIAL REVIEW.

AND:

IN THE MATTER OF THE APPLICATION OF NICK DARKU.
- The Plaintiff

AND:

IN THE MATTER OF THE COCOA BOARD OF PAPUA NEW GUINEA
DECISIONS DATED 28TH OF JANUARY AND 12TH MARCH 1998 RESPECTIVELY.
- The Defendant

KOKOPO: Lenalia, J.
2002, 2003: 15 Dec, 2 May

Administrative Law – Judicial review – Contract of employment – Master and servant – Written contract of employment – Contract of service – Four years contract – Termination of contract during currency of four years contract of employment.

Administrative Law – Abandonment of judicial review – Subsequent conversion to Statement of Claim by consent orders.

Civil Law – Contract of employment – Construction of well documented contract of service for a 4 years term – Breach of principles of natural justice – Termination of contract governed by contractual terms – Breach of disciplinary procedures – Clause 18.2 and Section 26 of the contract of employment.

Civil Law – Damages – Damages will lie where termination has been unusually harsh and callous – Quantum – Mental distress – Frustration and upset as result of breach of the contract: Hudson -v- Independent State of Papua New Guinea [1985] PNGLR 303.

CASES CITED:
The following cases are cited.
Curtain Bros (Qld) Pty Ltd –v- Independent State of Papua New Guinea [1993] PNGLR 285.
Harding -v- Teperoi Timbers Pty Ltd [1988] PNGLR 128
Hudson -v- Independent State of Papua New Guinea [1985] PNGLR 303.

OTHER CASES AND MATERIALS REFERRED TO:
Couchman -v- Hill [1947] KB. 554
The Law of Contract by W.T. Major at 49 - 50

Counsel:
T. Tamusio,	for the State
D. Lidgett,	for the Accused

MAY, 2nd

LENALIA, J.	These proceedings were originally commenced by an originating summons issued on the 15th July 1998 but by consent orders obtained from this Court on 20th December 2001, the Plaintiff’s application for judicial review was withdrawn and by the same orders the proceedings were ordered to be continued by way of pleadings as if they had been commenced by a Writ of Summons. This was done in accordance with Order 16 Rule 9 (5) of the National Court Rules of 1983.

The Plaintiff was employed by the Defendant Board pursuant to a written contract of employment. The substance of such contract was quite detailed covering the general terms, conditions and definitions right up to the provisions for termination of the contract of employment where there was a cause. The contract also contained prohibitions of what was not required and what were the duty statements required from the plaintiff, even including the procedures to be followed and adopted in cases where the Chief Executive Officer of the Board was charged with serious disciplinary offences.

The plaintiff’s contract of employment was to run for four (4) years or 48 months commencing from 1st January 1997 and such contract should have expired by effluxion of time by 31st December in the year 2000. The plaintiff was employed on the highest hierarchy of the defendant’s organization as its Chief Executive Officer.

The Plaintiff had only been employed for a little over one year, in fact one year and twenty-eight days when he was suspended as of 29th January 1998. On a letter dated 12th of March that same year, the Chairman of the defendant gave notice to the plaintiff officially notifying him of his termination.

Amongst reasons for the plaintiff’s termination were allegations of mal-administration, mismanagement, negligence in the discharge of his official duties within the control of the Chief Executive Officer. There were allegations of inefficiency, incompetence and unsatisfactory performances regarding the management, administration and operation of the defendant.

There were six (6) specific allegations laid against the plaintiff, the first of which related to a property described and referred to as Section 50 Allotment No. 25 located in the township of Wewak, the Provincial capital of the East Sepik Province. The board met earlier and passed a resolution and agreed to purchase the property for purposes of locating an officer of the defendant there to cater for strategic places like East Sepik and Sandaun Provinces to best deliver services to cocoa growers in
that region. The property was purchased by the defendant from its managing agents, only known as, the Bismark Consultants.

It appeared to the defendant after the purchase was effected that, the defendant was profoundly concerned about the substantial sum of money being spent to purchase the property. Eventually in another meeting, the defendant decided to withdraw the contract and attempts were made to recoup the purchase price and the responsibility of recouping that amount on behalf of the defendant was placed on the plaintiff being the defendants’ Chief Executive. According to the facts, the money could not be recouped.

The second allegation related to a sum of K18,728.00 advanced by the defendant for the renovations of the defendant’s other property, an office space located in Popondetta and for engagement of two employees on the defendant’s payroll. The amount earlier stated was advanced for renovation work which work was abandoned by the contractors for the reasons that no money was paid to complete the renovations.

The third allegation was about an alleged non-committal of travelling expenses upon the plaintiff’s return from an overseas trip to London. On this issue, there was allegations that the plaintiff failed to fully acquit all funds advanced to him for that purpose and it included other expenses. As to what other expenses were they, is not clear from the plaintiff’s evidence.

The next issue concerned the suspension of an export licence. The defendant suspended an export licence granted to the Sepik Agricultural Enterprises P/L. The defendant suspended the export licence because the company did not pay their required management fees. The defendant alleged that after the licence was suspended, it was not long afterwards when the company was given back its licence to export. The board also alleged that, the defendant had not officially met and decided on whether the licence to export cocoa would be given back to the company concerned and thus suggesting a unilateral decision taken by the plaintiff to re-issue the export licence.

The fifth allegation was about the commissioning of the cocoa export study on which the defendant approved to set up a cocoa exporting company with what was to be a Cocoa Marketing Conceptual Framework. Whatever that meant, it was to be something related to the cocoa industry in this country. The study was supposed to have been funded by the Papua New Guinea Growers Association. Despite the defendant’s resolution, the defendant was put to the expense of paying an undisclosed amount to a company, the Bismark Consultants. This was done without the defendant’s approval.

The final charge levelled against the plaintiff was for the 500,000 nursery bags for cocoa seeds purchased by the defendant. The nursery bags cost about K13,975.00 at K2.80 per bag. The defendant alleged that the plaintiff did not adopt the right procedure by first obtaining three (3) quotations from three different sources or suppliers before making a decision to bid for whichever one was the lowest. The defendant alleged that it was the duty of the Chief Executive Officer being the then Chief Executive to ensure that the correct procedures were followed.

The above charges were classified as very serious disciplinary offences and after being served with the charges, he comprehensively replied to the charges on 5th of February 1998. The defendant met on 12th March 1998, at its meeting decided to terminate the plaintiff. The plaintiff’s termination was made effective as from the same date it met.

The Plaintiff now claims that because his contract of employment was terminated prematurely, he ought to be remunerated for the balance of his contractual term which to me works out to be two (2) years nine and a half (9 ½ ) months. If the figure is not correct, the Plaintiff’s contract was terminated on 12th March to be specific.

The Plaintiff says in his evidence that not only was his termination unlawful but it was a breach of natural justice since the contract of employment specifically set out the manner under which the contract would be terminated or even in case of a suspension the termination clauses laid down the rules to be followed.

The defence evidence consists of an affidavit and annexures appended to it. The deponent is the current Chief Executive Officer, Mr. Lauatu Tautea. According to the defence evidence, the plaintiff was terminated on the grounds of mal-administration mismanagement, negligence in the discharge of duties inefficiency and or incompetence.

Mr. Lauatu suggest that when the defendant met to decide the termination of the plaintiff proper procedures were followed first when the plaintiff was suspended on 29th January 1998, then that the plaintiff was given an opportunity to respond to the allegations made against him. The deponent further says that the plaintiff had been paid all his due entitlements due to him at his termination.

LAW

The contract between the plaintiff and the defendant was one of an employment contract. I find from all evidence both for the plaintiff and the defendant that the contract of employment entered into on 1st January 1997 was well documented and comprehensively defined. It was to run for a period of fort-eight (48) months, see paragraph (iv) of the preamble to the contract.

The relevant clauses of that contract were clause 17 and 18 because they set out the grounds for terminating the contract. I set out those provisions in full.

"17 TERMINATION OF EMPLOYMENT

17.1	The grounds on which the Board may terminate the contract are:-

(a)	an abolishment of the position of the Executive Officer;
(b)	a change or a proposed change to the Cocoa Board Act;
(c)	in the event of redundancy; or
(d)	for the cause as determined by the contract.
(e)	On grounds of ill health, as advised by a Medical Officer appointed by the Board; or
(f)	As a result of Early Retirement or Normal Retirement.
(g)	For any breach of contract.

17.2	The employment under this Contract may be terminated:-

(a)	under 17.1
(b)	by the Board by giving to the Executive Officer not less than three calendar months in writing and paying the Executive Officer’s salary and other emoluments and benefits in accordance with Clause 12.

17.3	Upon termination of employment all accrued benefits calculated in accordance with the Terms and conditions and subject to any debt herein, shall become due and payable to the Executive Officer.

17.4	If on resignation, the Executive Officer had failed to give due notice in accordance with this Section, the Board shall deduct from any accrued benefits payable to the Executive Officer, a sum of money equivalent to the Salary which would have been paid to the Executive officer in respect of the notice period".

Under the contract, the defendant had the power to terminate the contract of employment for a number of causes. Such causes were defined by Clause 18 in the following terms.

"18.	TERMINATION FOR CAUSE.

18.1	In the event that the Executive Officer:-

(a)	divulges without authority from the Board any information concerning public business, other than information required to be provided under any Law;
(b)	wilfully disobeys or disregards a lawful order given by the Board;
(c)	is negligent in the discharge of the duties within the Executive Officer’s control;
(d)	is inefficient or incompetent from causes within the Executive Officer’s control;
(e)	attends work with impaired capabilities and judgment following the consumption of alcohol or un-prescribed drugs:
(f)	solicits or accepts a fee or gift in connection with the discharge of official duties;
(g)	is guilty of any disgraceful or improper conduct in the discharge of official duties or otherwise;
(h)	is continually absent from work without proper authority or good reason; and
(i)	is convicted of a criminal offence, then:-

18.2	The Executive Officer is guilty of a serious disciplinary offences as above the Board may immediately terminate the employment without notice under this Section provided that the disciplinary procedures under Section 27 has been implemented".

There is no dispute about the evidence. The plaintiff was employed under a contract of employment for a period of four (4) years. He had only worked one year, two months, one week and four days into his contract when he was terminated. Had the plaintiff not been terminated, his contract of employment would have expired by effluxion of time on or about 31st December, 2000.

Under the common law principle of master and servant the master can terminate the contract with his servant at any time for any reasons, but if he does so in the manner not warranted by the contract the master must pay damages: Ridge -v- Baldwin [1964] R.A.C. 40. The contract under which the plaintiff was engaged in was different from that of Ridge -v- Baldwin. The plaintiff’s terms of employment was specified to be four (4) years.

Under Section 26 (1)(a) of the Contract of Employment the defendant was required to provide statements of witnesses in support of the charges laid against the plaintiff. The defendant decided that the plaintiff had committed six serious disciplinary offence and Section 18 of the contract sets out the procedures to be taken. The plaintiff was properly suspended with full pay. However when the charges were served on the plaintiff no statement of witnesses were attached to the charges. The plaintiff replied within fourteen (14) days. 

I am grateful to the submissions by both counsels. Mr. Lidgett of counsel for the defendant submitted that there were six serious allegations made against the plaintiff and were specified in writing. The defence agree however that no witnesses’ statements were filed with the charges. I agree with the defence submission that under Clause 18.2 of the contract allowed for termination without notice because the charges were very serious disciplinary charges laid pursuant Clause 18 of the Contract of Employment.

Mr. Tamusio of counsel for the plaintiff submitted that, there was a clear breach of their client’s contract of employment in that when the plaintiff was charged he would have been served with witnesses statement as well. One can understand the reason why and that is so that the plaintiff could properly reply to these serious allegations made against him.

As I find from all evidence and clause 18.2 of the contract, if the plaintiff was found guilty of a serious disciplinary offence, the defendant had the choice of terminating the plaintiff without notice or otherwise. I say that because of the use of the words "may immediately terminate the employment without notice". More than this is the requirement of that clause for the defendant to comply with the disciplinary procedures laid down by Section 26 of their contract.

I said earlier on that, the contract between the plaintiff and defendant was well documented. It is clear from all evidence both for the plaintiff and the defendant that the later breached the terms of the contract of employment and thus the defendant is liable for the unlawful termination of the contract. When the terms of a contract are clear, no evidence should be allowed to be added to or to be subtracted from, vary or qualify a written contract: Curtain Bros (Qld) Pty Ltd -v- Independent State of Papua New Guinea [1993] PNGLR 285.

I remind myself that the proceedings before me, is no longer a judicial review. This court is bound by the principle of law which holds that the process of review is concerned with the decision making process only but not the decision making itself: Kekedo -v- Burns Philip [1988-89] PNGLR 122. In any event, this Court is charged with the duty to uphold any rights that might have been infringed upon in the process of hearing by the subordinate authority in the plaintiff’s case. In the first instance, it is essential that the Court maintains a fine balance between the need to protect Constitutional rights and liberties and the danger of too great interference in the affairs of the administrative authorities.

In the employment contract between the parties in this claim, I find there are no ambiguous terms. It is a common law principle that when the Courts construe a contract, words used in the written contract are presumed to have their literal meaning, but the legal terminologies are presumed to have their technical meanings. The learned writer W.T. Major suggests that the contract should be construed most strongly against the party who drew the contract up. Where for instance, there is an ambiguity in a contract so that the words will have two different meanings, it is most likely to be constructed against the interest of the party who drew it up. This rule is known as the "contra proferentem rule". See "The Law of Contract" by W.T. Major at 49-50.

Mr. Tamusio cited a number of case for the issue of quantum. First the case of Appa -v- Wama [1992] PNGLR 395 where His Honour Woods, J. ruled that it is a general rule that where an employee is wrongly dismissed ought to recover damages concerning the pecuniary loss resulting from wrongful termination to the equivalent of the appropriate notice. In His Honours third ruling, the Court there said, the first category of appropriate notice was a breach of a fixed term contract under which damages can be awarded for the equivalent of the salary for the entire period of the contract: see Rooney -v- Forest Industries Council [1990] PNGLR 407.

It is a well recognised principle of law now that where damages are awarded an award ought to be made for distress, frustration and suffering such as in the case of Harding -v- Teperoi Timbers Pty Ltd [1988] PNGLR 128. There the Court awarded a sum of K1,000.00. In an earlier authority that of Hudson -v- The Independent State of Papua New Guinea [1985] PNGLR 303 Los, J. awarded a sum of K6,000.00 for disappointment, distress, the upsets and frustration caused by the breach of the contract.

In the circumstances of these proceedings, I therefore find that failure by the defendant to comply with disciplinary procedures as required by clause 26 of the Contract of Employment amounted to unlawful termination. Thus based on all evidence led in Court the plaintiff is entitled to be paid his remuneration for the unexpired term of his contract from the date of his termination namely 12th March 1998 to 31st of December, 2000. I work that out to be two (2) years, nine (9) months, two (2) weeks and three (3) days.

Strictly speaking the plaintiff is be entitled to those entitlement specified by SCHEDULE 1, to the Contract of Employment as follows:

1.	Executive Officer’s annual salary K45,000.
2.	Domestic Servant Allowances K4400 p.a.
3.	Special Allowances K2000 p.a.
4.	Telephone allowance K600 p.a.
5.	Housing Rental Allowance K350 per week
6.	Entertainment allowance K2500 p.a.
7.	Medical Expenses Allowance K3000 p.a.
8.	Setting-In-Allowance K2500 p.a.
9.	Gratuity 25% of Base Salary.

On this award, the plaintiff shall be paid at the rate on which he was terminated nothing less nothing more on the grounds that under SCHEDULE 2 to the contract, the plaintiff was subjected to a "Planing and measuring Performances" standard and target. Clause 1.2 of SCHEDULE 2 provided for a business plan in the following terms.

"1.2 Each year during the Term the Board and the Executive Officer will agree upon and commit to writing performance targets and goals for the Executive Officer in the form of a business plan ("Business Plan"). Upon agreement, the Business Plan will be deemed to become Schedule 3 to this agreement and will thereafter will become part of this agreement".

Further Clause 1.3 (c)(i)(ii) of SCHEDULE 2 provided as follows:

"(c)	If the Executive Officer has not achieved the performance target specified in the Business Plan at the end of each year and, if no acceptable reason is provided by the Executive to the Board for failure to achieve such performance targets, then at the option of the Board, the Board may:-

(i)	reduce the Executive Officer’s Base Salary in accordance with clause 2.8 of his Schedule1; or
(ii)	deem the Executive Officer to have breached this agreement in accordance with Clause 20 of this agreement".

Then by Clause 2.8 of that Schedule, the Board of directors was required to consult each other and decide if the Chief Executive Officer had achieved to either below or above average. If, there were no acceptable reasons being provided by the Executive Officer; then the salary for the next 12 months could be reduced at the option of the Board.

Two other factors worth mentioning. All evidence show negative presence of an indicator or what is referred to in Schedule 2.1.2 as "Business Plan" which would have otherwise become Schedule 3 to this agreement. The overall performance and assessment of the plaintiff was to be noted in the following categories:-

(a)	not regarded as satisfactory performance.
(b)	whether he was improving in his performances as he gained experiences.
(c)	whether his performance were fully acceptable.
(d)	Whether the Chief Executive Officer had achieved "exceptional performances and exceeded the targets significantly.

This I find from all evidence that it was not easy nor was it an automatic right to be entitled to a pay rise or an increment for that matter for, the contract under which the plaintiff was employed was subjected to the plaintiff achieving and maintaining acceptable performances at an annual assessment. If the defendant rated him above average, it was at their prerogative to move him up the salary scale.

Finally but not the least I must reject the plaintiff’s lawyer’s submission for the whole year of 1998. The plaintiff was already paid for the first two months and eleven days of the year 1998. He is only entitled to be paid for nine (9) months two (2) weeks and three (3) days of that year. The plaintiff must however be remunerated fully for the years 1999 and 2000.

I must also reject the plaintiff’s submission for payment of NPF contributions, as NASFUND is not a party to these proceedings. The plaintiff can recover those sums from NASFUND administratively lodging a claim document with NASFUND Office to recover his contributions.

The defendant shall meet the costs of these proceedings.
____________________________________________________________________
Lawyer for the Plaintiff	:	T R TAMUSIO & ASSOCIATES Lawyers
Lawyer for the Defendant	:	WARNER SHAND Lawyers