N3471

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1005 OF 2006

BERNBERT TOA
Plaintiff

V

LY CUONG-LONG
CHIP MILL DIVISION MANAGER
First Defendant

TSAI CHING-JUNG
MANAGING DIRECTOR
Second Defendant

JANT LIMITED
Third Defendant

Madang: Cannings J
2008: 27 May, 15 September

JUDGMENT

LAW OF EMPLOYMENT – termination of written contract on ground of insufficient knowledge and skills – wrongful dismissal claim – whether proper procedures followed by employer – Employment Act, Section 34 –whether employer treated employee inhumanely – whether employee treated harshly or oppressively – Constitution, Sections 36, 41 – whether employee given a right to be heard.

An employee had a two-year written contract of employment, after working continuously for his employer for 16 years. He returned from recreation leave and was given verbal notice of immediate termination of his employment; followed soon afterwards by a written notice of termination and written reasons for the decision. The reasons were that the employee had insufficient knowledge and skills for the position he was occupying. The employee claims that the employer terminated his employment unlawfully, in six respects:

1. the person who gave him verbal notice of termination was not authorised to do so;

2. the verbal notice was contrary to Section 34 of the Employment Act as it should have been in writing; 

3. the written notice was contrary to Section 34 of the Employment Act as it failed to give notice of an intention to terminate the contract;

4. the employer treated him inhumanely, contrary to Section 36 of the Constitution;

5. the employer treated him harshly and oppressively, contrary to Section 41 of the Constitution;

6. the employer did not give him a right to be heard on the allegations.

Held:

(1)	The person who gave him verbal notice was a senior employee of the employer company and had actual and ostensible authority to act on behalf of the employer.

(2)	The verbal notice contravened the requirements of Section 34(5)(a) of the Employment Act. 

(3)	The written notice of termination did not contravene Section 34 of the Employment Act as the combined effect of the requirement that written notice of an intention to terminate must be given, and the power of the employer to pay money in lieu of notice, is that a contract can be terminated immediately without prior notice of an intention to terminate. 

(4)	There was no breach of the constitutional protection against inhuman treatment. 

(5)	The employer’s act (sacking an employee with 16 years’ standing in the company, the day he returned from recreation leave, seven months after the commencement of a new written contract, without notice and without giving a right to be heard) was harsh and oppressive and contrary to Section 41 of the Constitution. 

(6)	The employer failed to give the employee a right to be heard, contrary to the term of the contract guaranteeing such a right, implied by virtue of the underlying law.

(7)	It follows that the employee was wrongfully dismissed (by reason of the invalid verbal termination notice; the harsh and oppressive acts of the employer; and the failure to give a right to be heard) and that he established a cause of action in breach of contract against his employer. The case should proceed to an assessment of damages. 

Cases cited

The following cases are cited in the judgment:

Joe Kala v NBPOL (2007) N3125
Petrus and Gawi v Telikom PNG Ltd (2008) N3373
Re Conditions of Detention at Beon Correctional Institution (2006) N2969
Vere Kialo v Chemica Didiman Store, Kimbe, CIA No 46 of 2006, 16.02.07
Vitus Sukuramu v NBPOL (2007) N3124

STATEMENT OF CLAIM

This is a trial to determine whether the defendants are liable to the plaintiff for breach of contract.

Counsel

W Akuani, for the plaintiff
P Peraki, for the defendants

15 September, 2008 

1. CANNINGS J: Bernbert Toa, the plaintiff, is suing his former employer, Jant Limited, a wood chipping company based in Madang, for wrongful dismissal. 

2. Mr Toa is a qualified mechanical engineer. He started working for Jant in January 1989. He was employed under successive two-year written contracts of employment, the most recent one commencing on 17 January 2005. In July 2005 he took recreation leave. He resumed duty on Monday 2 August and was told, verbally, by the Manager of the Chip Mill Division, Ly Cuong-Long, that he was being terminated with immediate effect. Mr Toa at that time held the position of Maintenance Supervisor of the chip mill. 

3. Mr Toa wrote to Mr Cuong-Long that day, asking him to reconsider his decision. Mr Cuong-Long responded in writing the next day, 3 August, saying that his decision stood. He said Mr Toa had insufficient knowledge and skills to do the job. He gave reasons for forming that opinion, including:

•	a significant increase in consumption of hydraulic oil at the chip mill since Mr Toa took over from the previous maintenance supervisor;

•	50 seal kits for the debarker machine had gone missing in a one-month period;

•	ignoring information provided by his assistant supervisor about problems with leaks in the hydraulic system for the debarker machine;

•	not having skills necessary to fix routine problems with the hydraulic system.

4. On the same day, 3 August, the company’s managing director, Tsai Ching Jung, wrote to Mr Toa, saying that he agreed with Mr Cuong-Long’s decision to cancel the contract. Because of concerns raised by Mr Toa about the welfare of his family the company would pay him two months pay in lieu of notice, instead of the one month required by the contract. 

MR TOA’S CLAIMS

5. Mr Toa says he was wrongfully dismissed. He claims that the defendants (Mr Cuong-Long, Mr Ching Jung and Jant Ltd) breached the contract of employment in six respects:

1	the person who gave him verbal notice of termination was not authorised to do so;

2	the verbal notice was contrary to Section 34 of the Employment Act as it should have been in writing; 

3	the written notice was contrary to Section 34 of the Employment Act as it failed to give notice of an intention to terminate the contract;

4	the employer treated him inhumanely, contrary to Section 36 of the Constitution;

5	the employer treated him harshly and oppressively, contrary to Section 41 of the Constitution;

6	the employer did not give him a right to be heard on the allegations.

6. Mr Toa seeks damages for wrongful dismissal, ie breach of contract. What I have to determine is whether he has established a cause of action. The issue of damages will be addressed in a separate hearing, if he proves liability. I will now examine each of the alleged instances of breach of contract. 

1	WAS THE PERSON WHO GAVE MR TOA VERBAL NOTICE OF TERMINATION, AUTHORISED TO DO SO?

7. Mr Toa’s counsel, Mr Akuani, submits that Mr Cuong-Long lacked authority to terminate Mr Toa as the contract of employment was between Mr Toa and Jant. Mr Cuong-Long did not sign the contract. It was signed, for the company, by Mr Ching Jung, so only he could give a notice of termination. 

8. This is a tenuous argument. Mr Cuong-Long was a senior employee of the company and the decision he made was supported the next day by the managing director, Mr Ching Jung. Mr Cuong-Long clearly had actual and ostensible authority to act on behalf of the company.

9. It was neither an express nor an implied term of the contract that, to be effective, a notice of termination had to be signed by the person who signed the contract on behalf of the company. 

10. Mr Cuong-Long was authorised to make and convey the decision to terminate the contract. There was no breach of contract in this regard. 

2	WAS THE VERBAL NOTICE CONTRARY TO SECTION 34 OF THE EMPLOYMENT ACT? 

11. This argument is based on Section 34(5)(a) of the Employment Act, which provides that if an employee has a written contract of employment the notice of termination shall be given in writing. This means that Mr Cuong-Long’s verbal notice of termination, given to Mr Toa on the morning of Monday 2 August 2005, was void and of no effect.

12. I agree that the contract was breached in that respect. 

3	WAS THE WRITTEN NOTICE CONTRARY TO SECTION 34 OF THE EMPLOYMENT ACT? 

13. Mr Akuani submits that when Mr Cuong-Long wrote to Mr Toa on 3 August to confirm his verbal notice of the previous day, he breached Section 34 of the Employment Act as he gave notice of termination of the contract of employment, not notice of an intention to terminate it. 

14. The relevant parts of Section 34 (notice of termination) are subsections (2) and (3)(a), which state:

(2)	Subject to this Act, a party to a contract of service may, at any time, give notice to the other party of his intention to terminate the contract.

(3)	The length of notice of intention required to terminate a contract of service shall be the same for both parties and—

(a)	shall be as specified in the contract. 

15. Mr Akuani acknowledges that Section 35(2) allows an employer who sacks an employee to pay money in lieu of notice. But he submits that this provision only operates if notice of an intention to terminate has been given; and here no such notice was given.

16. Section 35(2) (termination of contract without notice) states:

Where a party to a contract has given notice of intention to terminate under Section 34, either party may, without waiting for the expiry of that notice, terminate the contract by paying to the other party a sum equal to the amount of salary that would have accrued to the employee during the period of the notice.

17. Mr Peraki, for the defendants, points out that the notice period was one month, under clause 12 of the contract, which stated:

Either party may terminate this contract at any time if one would notice to the other at 1 month prior to its termination. [sic]

18. Mr Akuani agrees that (despite the tortuous grammar) the notice period was one month, and he acknowledges that, in fact, Mr Toa received two months money in lieu of notice. But he persists with the argument that the Act – and therefore the contract – was breached as there was never any notice of an intention to terminate. He refers to the terms of Mr Cuong-Long’s letter to Mr Toa of 3 August, which stated:

I have considered your appeal, however, I am regretful to advise you that I must still stand on my decision due to the reasons in the attachment and which is all self-explanatory.

In view of this, it was decided to terminate your employment contract, as you are not having sufficient knowledge as well as skill to carry out your job as Maintenance Supervisor.

In view of your family concerns, the company will give you an additional one month salary with one month prior notice of termination subject to the employment contract, as from 2nd August 2005. [sic]

19. Though the grammar is off-key, the import of the letter is clear. Mr Cuong-Long was saying that he was standing by the decision to terminate Mr Toa’s employment; that Mr Toa was being terminated with effect from 2 August; and that he was going to be paid two months money in lieu of notice. 

20. I can see what Mr Akuani is driving at. Interpreted literally, the letter confirms a decision to terminate rather than giving notice of an intention to terminate. But, really, does the Act require an employer to use words such as ‘we intend to terminate your contract’ and then, at some later time, give a separate notice of termination, such as ‘your contract is now terminated’? This would appear to be the effect of upholding Mr Akuani’s submission. I am not sure that that is what the Act requires. No cases have been brought to my attention that support such a construction of the Act.

21. Section 35(2) gives the employer an option: either give the required period of notice or pay money in lieu of notice. I consider that the combined effect of the requirement that written notice of an intention to terminate must be given, and the power of the employer to pay money in lieu of notice, is that a contract can be terminated immediately without prior notice of an intention to terminate. 

22. Mr Cuong-Long’s written notice of termination did not contravene Section 34 of the Employment Act. There was no breach of contract in this regard. 

4	DID THE EMPLOYER TREAT MR TOA INHUMANELY, CONTRARY TO SECTION 36(1) OF THE CONSTITUTION?

23. This is the first part of the constitutional claim. Mr Akuani submits that the treatment meted out to Mr Toa was inhumane, so much so that Section 36 of the Constitution was breached. 

24. Section 36(1) is one of the most important human rights provisions in the Constitution. It states:

No person shall be submitted to torture (whether physical or mental), or to treatment or punishment that is cruel or otherwise inhuman, or is inconsistent with respect for the inherent dignity of the human person.

25. It is a provision most often invoked where people have been detained in custody in conditions that can be described as inhuman (eg Re Conditions of Detention at Beon Correctional Institution (2006) N2969). I am not aware of any case in which Section 36(1) has been enforced in an employment context. 

26. If an employer was running a sweatshop-style factory and employees were underpaid and treated poorly, Section 36(1) could appropriately be relied on to make orders to enforce the rights of the workers. But the present case is far removed from that scenario. There is an argument to say that Mr Toa was treated poorly by his employer. But there is no reasonable argument to say that he was treated inhumanely, in the sense intended by Section 36(1) of the Constitution. 

5	DID THE EMPLOYER TREAT MR TOA HARSHLY AND OPPRESSIVELY, CONTRARY TO SECTION 41 OF THE CONSTITUTION?

27. Section 41(1) (proscribed acts) is a unique provision of the Constitution. It is slotted in the middle of Division III.3 (Basic Rights), the division of the Constitution that sets out the human rights of the people of Papua New Guinea and provides for their enforcement. Section 41 protects individuals against harsh, oppressive and other proscribed acts, including harsh and oppressive action by their employers (Petrus and Gawi v Telikom PNG Ltd (2008) N3373). 

28. Section 41 proscribes (ie prohibits) and gives protection against seven sorts of acts. Even if done under a valid law and notwithstanding anything to the contrary in any law, an act is unlawful if it is, in the particular case:

1.	harsh; or

2.	oppressive; or

3.	not warranted by the requirements of the particular circumstances;

4.	disproportionate to the requirements of the particular circumstances;

5.	not warranted by the requirements of the particular case; or

6.	disproportionate to the requirements of the particular case; or

7.	otherwise not, in the particular circumstances, reasonably justifiable in a democratic society having a proper regard for the rights and dignity of mankind.

29. In Vitus Sukuramu v NBPOL (2007) N3124 I formulated a new rule of the underlying law that amongst other things incorporates the protections in Section 41 into contracts of employment (unless the employer and employee agree that the protections do not apply). I expressed the rule as being that:

•	the implied terms of a contract of employment, whether oral or written, include that the principles of natural justice and the constitutional right of protection against harsh or oppressive or other proscribed acts apply; and, in particular,

•	an employee has a right to be heard before termination of employment, especially if the ground of termination is poor conduct or performance or some other matter over which the employee has control.

(For other cases in which I applied the rule, see Joe Kala v NBPOL (2007) N3125 and Vere Kialo v Chemica Didiman Store, Kimbe, CIA No 46 of 2006, 16.02.07.)

30. Mr Akuani invokes the rule in Sukuramu and submits that the defendants acted harshly and oppressively by terminating Mr Toa’s employment in the way that they did. 

31. How does an employer (or an employee for that matter) act harshly or oppressively? As I said in Petrus and Gawi v Telikom an employee does not have to show that he has been treated cruelly or ruthlessly in a physical sense. Section 41 is not confined to physically harsh or oppressive acts. An act can be "harsh or oppressive" if it is unfair, ungentle, unpleasant or unwarranted given all the circumstances of the particular case. Section 41 is one of those provisions that invites, implores and requires the National Court to live up to its name as a court "of justice": to examine the facts of a case and determine whether the parties have acted decently.

32. In this case I do not think that the conduct of the defendants meets acceptable standards. A man works for a company for 16 years. He goes on recreation leave for a few weeks. He comes back to work on the appointed day. His boss walks up to him and tells him that he is terminated, immediately. He has not been given any prior notice. He has not been given a warning that his performance was below standard. He is not given the chance to explain himself. Nothing is put in writing until he writes a letter of appeal. Only then is he told, in writing, the reasons for his termination. He has a wife and children to support. They are living in work accommodation. His whole world is turned upside down. He tries to get his boss to change his mind, to no avail. The next day he gets a letter from the managing director of the company, confirming his boss’s decision. The MD wishes him well in his "future endeavours" but offers no word of thanks for the 16 years service he has given the company. 

33. This stinks. It is not a decent way for an employer to treat an employee. I uphold the submission that the defendants’ actions were harsh and oppressive. The contract was breached in that respect.

6	WAS MR TOA GIVEN A RIGHT TO BE HEARD ON THE ALLEGATIONS? 

34. The defendants did not seriously dispute the proposition that Mr Toa had to be given a right to be heard before he was terminated. 

35. Mr Peraki submitted, however, that a right to be heard was, in fact, administered by Mr Cuong-Long when Mr Toa turned up to work on Monday 2 August. Mr Cuong-Long must have told Mr Toa why he was being terminated as, when Mr Toa wrote his appeal letter that day, he referred to the missing seal kits and the other problems highlighted in writing in Mr Cuong-Long’s letter of the next day.

36. Mr Peraki’s interpretation of the facts is reasonable but his interpretation of the law is not. You give someone a right to be heard when you say to them: ‘These are the allegations against you. I want to hear your side of the story before I make a decision. I will take account of what you say and then I will make my decision.’ If you say ‘I have sustained the allegations against you and that is why I have made my decision’, all you are doing is giving reasons for a decision that has already been made. It is not a right to be heard at all.

37. I uphold Mr Akuani’s submission that Mr Toa’s right to be heard was one of the implied terms of his contract of employment, guaranteed by the underlying law. He was not given a right to be heard. 

38. The contract was breached in that respect. 

CONCLUSION AS TO CAUSE OF ACTION

39. The defendants breached the contract of employment in three respects:

•	giving an invalid verbal notice of termination;

•	acting harshly and oppressively against a long-serving employee;

•	failing to give the employee a right to be heard before terminating his employment.

40. It follows that Mr Toa was wrongfully dismissed. He has established a cause of action in breach of contract against his employer. The case should proceed to an assessment of damages. 

COSTS

41. The general rule is that costs follow the event, ie the successful party has its costs paid for by the losing party on a party-to-party basis. The question of costs is a discretionary matter. There are no special circumstances in this case that warrant departure from the general rule.

OTHER MATTERS

42. The evidence shows that Messrs Cuong-Long and Ching Jung have left Papua New Guinea. I see no point in them remaining as defendants. I will remove them as parties and enter judgment only against Jant Ltd, as third defendant.

JUDGMENT

43. Judgment will be entered in the following terms:

1	the plaintiff has established a cause of action in breach of contract (wrongful dismissal) against the third defendant;

2	the third defendant is liable for damages;

3	the proceedings shall, unless the Court is notified that the parties have settled the claim, proceed to a trial on assessment of damages;

4	the first and second defendants are removed as parties and Jant Limited shall from now on be the sole defendant; 

5	costs of these proceedings are awarded to the plaintiff, to be taxed if not agreed.

Judgment accordingly.

________________________________________

William Akuani Lawyers: Lawyers for the plaintiff
Greg Manda Lawyers: Lawyers for the defendants