N3290

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CIA NO 64 0F 2007

BAL BAR
First Appellant

STETTIN BAY LUMBER COMPANY LIMITED
Second Appellant

V

MAIMA KORA
Respondent

Kimbe: Cannings J
2007: 23 November
2008: 25 March

LAW OF EMPLOYMENT – oral contract of service – termination of contract for cause – wrongful dismissal claim – whether contract of employment validly terminated. 

The respondent was employed by a company as a security guard. The company sacked him on the ground of absenteeism. The respondent sued his immediate boss, the security manager (first appellant) and the company (the second appellant) in the District Court for wrongful dismissal. The District Court found in the respondent’s favour and awarded him general damages of K5,000.00 and special damages of K2,000.00, a total of K7,000.00. The appellants appealed on three grounds: (1) there was no evidence before the District Court of unlawful termination; (2) the award of damages was excessive as, even if termination were unlawful, the amount of damages is restricted to the notice period; and (3) the award of damages was excessive as there was no evidence to substantiate the amount of K7,000.00.

Held:

(1)	There was ample evidence before the District Court of unlawful termination.
(2)	The amount of damages for wrongful dismissal is not restricted to the notice period.
(3)	The amount of K5,000.00 for general damages is not unreasonable. 
(4)	There was no claim for special damages in the District Court and no explanation was given of how the sum of K2,000.00 was arrived at; so ground 3 of the appeal was, to that limited extent, upheld.
(5)	The appeal was substantively dismissed and the District Court’s order quashed and replaced with a substitute order: the respondent is awarded damages of K5,000.00 plus interest of K1,760.00, being a total judgment sum of K6,760.00; plus costs of K500.00.

Cases cited:

Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24
Egga Pua v Otto Benal Magiten (2005) N2892
Livingston v Raywards Coal Co [1880] 5 App Cases 25
Naki v AGC (Pacific) Ltd WS No 1256/1999, 20.10.06
Vere Kialo and Chemica Didiman v Bernard Tiau CIA No 46/2006, 16.02.07

APPEAL

This was an appeal from a decision of the District Court upholding a claim for wrongful dismissal.

Counsel

T Tingnni, for the appellants
O Oiveka, for the respondent

1. CANNINGS J: This is an appeal from a decision of the Kimbe District Court in a wrongful dismissal case.

2	The complainant in the District Court was Maima Kora, who was for a number of years employed as a security guard by Stettin Bay Lumber Company. On 27 October, 2003, the company sacked him without notice, ie his employment was terminated on that day without prior notice and without paying him any money in lieu of notice.

3	He was told that he was being sacked as he was absent from duty without leave on 17 October 2003, he was seen to be drunk that day and he had a history of absenteeism.

THE DISTRICT COURT CASE

4	In January 2004, he sued his immediate boss, the security manager, Bal Bar, and his employer, SBLC, in the District Court, claiming K10,000.00 damages for wrongful dismissal, ie unlawful termination.

5	The case took a long time to be heard, apparently because of a shortage of Grade V Magistrates in Kimbe, but it was eventually resolved on 4 April 2007 by Magistrate Mr L Vava.

6	His Worship decided the case in Mr Kora’s favour. He held that the termination was unlawful as, in fact, Mr Kora was at work on 17 October 2003 until 1.00 pm when he signed off and went from the company’s head office at Buluma to his sister’s place at Kavui to attend to an urgent customary obligation. His Worship found, as a fact, that Mr Kora obtained permission from his immediate supervisor, Mr John Wakore, before signing off and that there was no evidence that he was drunk. His Worship relied on evidence from Mr Kora and two other company employees, in making those findings of fact.

7	His Worship considered that an affidavit by the company’s Administration Manager, Mr Reginald Ovasui, did not address the central issue of whether the reasons given to Mr Kora for his sacking were true or false. His Worship concluded that there was no evidence, for the purposes of the Employment Act, of a just or lawful excuse for terminating Mr Kora’s employment without notice. Therefore his termination was unlawful.

8	His Worship awarded Mr Kora general damages of K5,000.00 and special damages of K2,000.00, a total of K7,000.00.

GROUNDS OF APPEAL

9	The appellants, Mr Bar and SBLC, have appealed to the National Court on three grounds:

•	ground 1: there was no evidence before the District Court of unlawful termination;
•	ground 2: the award of damages was excessive as, even if termination were unlawful, the amount of damages is restricted to the notice period; and
•	ground 3: the award of damages was excessive as there was no evidence to substantiate the amount of K7,000.00.

GROUND 1: WAS THERE EVIDENCE OF UNLAWFUL TERMINATION?

10	I have struggled to appreciate what point the appellants are trying to make with this ground of appeal. The notice of appeal states:

The Magistrate erred in law and fact to find the second defendant [SBLC] liable for unlawful termination when there was no evidence before the court.

11	Are the appellants really arguing that there was no evidence before the District Court? If so, the argument goes nowhere as clearly there was evidence.

12	The complainant (Mr Kora, the respondent to the present appeal) presented three affidavits, one from himself and the others from SBLC employees. They were aimed at establishing what happened on 17 October 2003 and the reasons he was given for being sacked. The defendants (the appellants in the present appeal) presented Mr Ovasui’s affidavit, which stated that Mr Kora had been given a warning notice in respect of a two day absence from duty in August 2003 and was suspended without pay for a week in September 2003, on the ground that he was absent without leave for one day. This affidavit was aimed, it appears, at establishing that Mr Kora had an absenteeism problem and there were good reasons for sacking him.

13	Thus, there was evidence presented by both sides of the case and it cannot be said that there was no evidence before the District Court.

14	When Mr Tingnni, for the appellants, made his oral and written submission, he travelled beyond the scope of the argument raised by the ground of appeal. He argued that there was no evidence of unlawful termination. Put the other way, he submitted that there was evidence that Mr Kora’s termination was lawful. Mr Tingnni referred to Section 36(1) (grounds for termination of contract) of the Employment Act, the provision that prescribes the circumstances in which an employer can terminate a contract of service without notice and without paying money in lieu of notice.

15	Section 36(1) states:

An employer may terminate a contract of service without notice or payment instead of notice—

(a)	where the employee—

(i)	wilfully disobeys a lawful and reasonable order; or
(ii)	misconducts himself by an act of omission or commission that is inconsistent with the due and faithful discharge of his duties; or
(iii)	is guilty of a fraud or dishonesty; or
(iv)	is habitually neglectful of his duties; or
(v)	is imprisoned for a period exceeding seven days; or
(vi)	is continually absent from his employment without leave or reasonable excuse; or
(vii)	is convicted of an offence or contravention of this Act or any other law relating to employment; or

(b)	on any other ground on which he would be entitled to terminate the contract without notice at common law.

16	Mr Tingnni submitted that Mr Kora was guilty of breaching Section 36(1)(a)(i), (ii), (iv) and (vi), in that he:

•	wilfully disobeyed a lawful and reasonable order;
•	misconducted himself;
•	was habitually neglectful of his duties; and
•	was continually absent without leave or reasonable excuse.

17	Mr Tingnni submitted that the learned Magistrate erred by not making those findings. But he has failed to show me how his Worship erred.

18	His Worship did not ignore the evidence presented by the appellants. Nor did he fail to weigh the evidence. His Worship summarised the evidence presented by Mr Kora and the evidence presented by the appellants (which he was not impressed with), then made findings of fact that Mr Kora was at work on 17 October 2003 until he signed off at 1.00 pm after obtaining permission from his immediate supervisor to attend to an urgent customary obligation. His Worship was, in effect, finding that none of the circumstances in Section 36(1) applied.

19	Therefore if the company wanted to terminate the contract of employment it had to do so under Section 34 (notice of termination) and Section 35 (termination of contract without notice) of the Employment Act, which are the provisions that allow employers to terminate an oral contract of service with notice or by paying money in lieu of notice.

20	Section 34(2) states:

… a party to a contract of service may, at any time, give notice to the other party of his intention to terminate the contract.

21	Section 34(4)(d) states:

Where there is no provision in a contract of service for notice of intention to terminate, the length of the notice shall be not less than … four weeks' notice if the employee has been employed for five years or more.

22	Section 35(2) 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.

23	I can detect no error in his Worship’s process of reasoning. This was a case of termination without notice so the complainant in the District Court had to show that the termination was not justified under Section 36(1). He succeeded on that issue and the appellants have failed to show me how his Worship erred in finding in his favour.

24	I therefore dismiss the first ground of appeal.

GROUND 2: IS THE AMOUNT OF DAMAGES RESTRICTED TO THE NOTICE PERIOD?

25	The appellants argue that even if the termination of employment was unlawful, the amount of damages that could have been awarded by the District Court was restricted to the amount of wages that would have been paid in the notice period, ie the period of notice under Section 34(4) of the Employment Act.

26	In the present case, it is not clear how long Mr Kora had been employed by SBLC but I presume it was more than five years as there is evidence that he was paid long service entitlements a year before he was terminated. That being the case his notice period was four weeks. He was paid at a rate of K1.081 per hour and, on a 35-hour-a week basis, the salary payable in the notice period would have been: K1.081 x 35 hours x 4 weeks = K151.34.

27	The amount of damages awarded to him should not have exceeded that amount, Mr Tingnni submitted.

28	The same argument was made in another Kimbe wrongful dismissal case, Vere Kialo and Chemica Didiman v Bernard Tiau CIA No 46/2006, 16.02.07, and I rejected it. There is apparently PNG authority to support it but Mr Tingnni did not refer me to any. In particular he did not refer me to any Supreme Court decision I am bound to follow.

29	When an employee succeeds in proving that their employment has been unlawfully terminated, what they do is establish a cause of action in breach of contract. The employee is therefore entitled to damages – if damages have been sought in their statement of claim – which is a remedy aimed at compensating them for the losses suffered as a result of the breach of contract. In any civil action, the purpose of an award of damages is to put the innocent party in the same position, as far as possible, as they would have been in if the wrongdoer had not committed the wrongful act (Livingston v Raywards Coal Co [1880] 5 App Cases 25; Naki v AGC (Pacific) Ltd WS No 1256/1999, 20.10.06).

30	It follows, in my opinion, that the dismissed employee is to be compensated not only for the wages that they have lost for the length of the notice period but also for the pain, suffering and inconvenience caused to them by the employer’s unlawful act.

31	As I pointed out in the Chemica Didiman case, losing one’s job is invariably a dramatic and often a traumatic event in a person’s life, especially in PNG where jobs are scarce and many people other than the employee’s immediate family are dependent on the income generated by the job. When a person is wrongfully – ie unlawfully – dismissed, the pain and anguish are magnified. Such a person, in my view, deserves an adequate award of damages to compensate them for the injury to their livelihood and emotions and those of their dependants caused by the wrongful dismissal.

32	Here, the learned Magistrate awarded Mr Kora K5,000.00 for general damages, which is far in excess of what would have been awarded if damages had been restricted to wages payable for the notice period. No error of law was made by assessing damages at more than K151.34. Therefore the second ground of appeal is dismissed.

GROUND 3: CAN THE AWARD OF K7,000.00 BE SUBSTANTIATED?

33	Mr Tingnni submitted that the learned Magistrate erred by not substantiating or explaining how he arrived at the figures of K5,000.00 for general damages and K2,000.00 for special damages.

34	As for general damages, this head of damage was sought in the statement of claim in the District Court. Amongst the remedies sought by Mr Kora was "compensation" of K10,000.00, which can fairly be read as a general damages claim. General damages are intended to be compensation for losses, damage and injury that are presumed to have been incurred as a result of an employer’s breach of a contract of employment. That will cover losses such as pain and suffering, distress and inconvenience brought about by the loss of employment.

35	Though it would have been preferable for his Worship to explain how he calculated K5,000.00 (for example by comparing the facts of the case against other wrongful dismissal cases and listing what amounts of general damages the District Court has been awarding) I do not think he committed an error of law by not doing so. It is a moderate sum, considering that the sacked employee had been employed by SBLC for a considerable period and the company is a large, established and prominent business in the province.
36	In the Chemica Didiman case, the wrongfully dismissed employee was awarded K1,000.00 by the District Court and I increased that to K2,000.00 on appeal. He had only been employed for five months, whereas in the present case Mr Kora had been employed for more than five years. In these circumstances, K5,000.00 does not seem an unreasonable sum.

37	Special damages, on the other hand, are intended to compensate the innocent party for some sort of loss or damage incurred that is not presumed by the law to have been incurred. It is a special sort of damage that must be expressly pleaded and proved. Mr Kora’s statement of claim filed in the District Court did not claim any special damages. The only head of damage sought other than general damages was exemplary damages. However, his Worship did not address the issue of exemplary damages in his reasons for decision and I do not think that this is an appropriate case for the award of exemplary damages.
38	It was therefore an error to award special damages and his Worship, with respect, compounded the error by not explaining how he arrived at the sum of K2,000.00.

39	Ground 3 of the appeal, as far as it concerns the award of special damages, is upheld.

WHAT ORDERS SHOULD BE MADE?

40	I have upheld part of one of the three grounds of appeal and, to that limited extent, I am satisfied for the purposes of Section 230(2) (power of National Court on appeal) of the District Courts Act that there has been a substantial miscarriage of justice and that the appeal should be allowed.

41	However, as most of the grounds of appeal have been dismissed, the appeal will be, subject to the issue of special damages, substantively dismissed. The part of the District Court order that awarded general damages will be left intact.

42	I will make a substitute order under Section 230(1)(c) of the District Courts Act that accommodates the resolution of the grounds of appeal.

INTEREST

43	The District Court order did not include any interest on the award of damages, probably because the statement of claim did not seek any. As I am going to quash the District Court’s order and substitute a new one, I need to consider whether to include an interest component in the new order. This would be done under Section 230(1)(e) of the District Courts Act and Section 1 of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52, which states:

… in proceedings in a court for the recovery of a debt or damages the court may order that there be included in the sum for which judgment is given interest, at such rate as it thinks proper, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

44	As Bredmeyer J pointed out in Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24, this section confers a four-fold discretion on the Judge: (1) whether to grant interest at all; (2) to fix the rate; (3) to grant interest on the whole or part of the debt or damages for which judgment has been given; and (4) to fix the period for which interest will run.

45	I exercise that discretion in the following way:

•	A successful party should normally receive interest on damages. Though interest was not expressly sought and there has been no cross-appeal against the failure of the District Court to award interest, I think it is fair and just to do so.

•	The rate of interest commonly used is 8%. In view of current economic conditions in the country I think 8% is the proper rate of interest.

•	Interest should be payable on the whole of the sum of damages for which judgment is given.

•	The appropriate period is the whole of the period between the date on which the cause of action arose and the date of the judgment. The cause of action arose on the day Mr Kora was sacked, 17 October 2003. The appropriate period, for the sake of mathematical convenience, is 4.4 years.

46	I calculate the amount of interest by applying the following formula D x I x N = A.

47	Where D is the amount of damages assessed; I is the rate of interest per annum; N is the appropriate period in numbers of years; and A is the amount of interest.

48	Thus K5,000.00 x 0.08 x 4.4 = K1,760.00.

COSTS

49	As the appeal is being substantively dismissed, I will award costs to the respondent, Mr Kora. The National Court has the power to make an order for a specific sum of costs. It is not necessary for the costs to be taxed (Egga Pua v Otto Benal Magiten (2005) N2892). I will fix the costs at K500.00.

ORDER

(1)	The appeal against the finding of unlawful termination of employment and the award of general damages of K5,000.00 is dismissed.

(2)	The appeal against that part of the District Court order that awarded special damages of K2,000.00 is allowed.

(3)	The order of the District Court of 4 April 2007 in GFC No 09/2004 at Kimbe is quashed and substituted with the following.

(4)	The second appellant shall pay to the respondent damages of K5,000.00 plus interest of K1,760.00, being a total judgment sum of K6,760.00.

(5)	The second appellant shall in addition pay to the respondent K500.00 costs in respect of this appeal.

(6)	The above sums shall be paid to the respondent in full within 30 days after the date of entry of the National Court’s order.

Appeal substantively dismissed; order of District Court quashed and substituted order made.

_____________________

Rageau Manua & Kikira Lawyers: Lawyers for the Appellants
Public Solicitor: Lawyer for the Respondent