N3582

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

W.S.NO. 798 OF 2006

BETWEEN:

PAUL PORA
Plaintiff

AND:

POLIAMBA LIMITED
Defendant

Kokopo: Lenalia; J.
2008: 25th July & 22nd August

LAW OF CONTRACT – Contract of Employment – Master and servant – 
Written contract of employment – Contract of service – Termination of contract within probationary period – Contract specifically provided for three (3) months probation – Termination of contract on grounds of inability to perform to expected targets 

CONTRACT – Written contract of employment – Construction of 
documented contract of service– Contract providing of service – Period of contract – Five years after three (3) months probationary period – Contractual terms in writing – No evidence be allowed to add, subtract, qualify or vary written contract – Assessment of performance occurred within probation period. 

CONTRACT – Construction of – Fair and liberal approach to as to give 
effect to the agreement of the parties – Court can allow extrinsic evidence to construe invalidating clauses or terms implied by law or practice.

Cases cited:

Papua New Guinea Cases

Iambaki Okuk and The Independent State of Papua New Guinea [1980] PNGLR 274
 Papua New Guinea Air Pilots Association v Director Civil Aviation and the National Airline Commission trading as Air Niuguni [1983] PNGLR 1 Steamships Trading Co. Ltd v Joel and Others [1991] PNGLR 133
 Bruno Baiwan v University of Papua New Guinea [1995] PNGLR 18
Jimmy Malai v PNG Teachers Association [1991] PNGLR 116
 Jimmy Malai v PNG Teachers Association [1992] PNGLR 568
Curtain Bros (QLD) Pty Ltd v. The State [1993] PNGLR 285. 
Paddy Fagon v Negiso Distributors Pty Ltd (1999) N1900
Legu Vali v NCDC (2002) N2280
Fly River Provincial Government v Pioneer Health Services Limited (24.3.03) SC705
Vitus Sikurumu v New Britain Palm Oil Limited (2007) N3124

Overseas Cases:

Pym v Campbell (1856) 6 E. & B.370 
Gillespie Bros. & Co v Cheney Eggar & Co [1896] 2 Q.B. 59 
Bank of Australia v. Palmer [1897] AC 540 
Bank of New Zealand v Simpson [1900] A.C.182
Reliance Marine Insurance v. Duder [1913] 1 KB 265
Jacobs v Batavia & General Plantations Trust Ltd [1924] 1 Ch.287 
Tsang Chuen v. Li Po Kwai [1932] AC 715 at 727 
O'Connor v. Hume [1954] 1 WLR 824.
Campbell Discount Co v Gall [1961] 1 Q.B.431

Held:

(1).	Where there is a written contract, no extrinsic evidence should be 
allowed or added to it unless a contract falls under well recognized exceptions in law. No evidence should be allowed to add, subtract, qualify or vary written contract.

(2)	Assessment of performance occurred within probation period. 

(3).	Where a contract of employment provided for a three (3) months 
probationary period which was not successfully completed, there was no obligation on the part of the Defendant to continue to employ the plaintiff. 

(4).	Termination of the contract of employment was lawful and within the probationary period.

Counsel:

Mr. J. Isaac, for the Plaintiff
Mr. P. Luben, for Defendant

22 August, 2008 

1.	LENALIA; J. On the 14th of June 2006, the plaintiff filed these proceedings claiming damages for wrongful termination and damages associated with his wrongful dismissal. 

Background Facts

2.	On 23rd of June 2005, the plaintiff was informed by a letter that the defendant company had accepted his application and he was to commence his employment with the defendant as an Estate Manager on 25th of that month. He did not commence on that date as his evidence shows that he formally began on either 18th or 23rd August 2005. 

3.	On 23rd November 2005, the plaintiff was served with an unsuccessful probation notice. On 30th of the same month, he was served with the letter of termination. (See letters "C" & "D" of plaintiff’s affidavit).

Evidence

4.	The affidavit of the plaintiff contains the following evidence. The acceptance letter contained four (4) pages of the terms and conditions of his employment contract. The plaintiff’s base salary was fixed at K28, 500.00 per annum and was to be reviewed and increased to K34, 000.00 after successful completion of three months probationary period. 

5.	Other conditions included provision of accommodation with utilities provided by the defendant. On transport, if the plaintiff had to drive a company vehicle, he was required to comply with the company vehicle policy. On the superannuation scheme, he was to contribute 5% while the company would pay 7%. There was also provision for the company to pay 90% school fee subsidy for the plaintiff’s three children. 

6.	The contract also provided for leave, sick leave and compassionate leave entitlements with provision for Notice of termination and repatriation expenses. A specific aspect of the plaintiff’s contract was that, his salary was subject to an annual performance review which according to the company policies occurs in July of each year. In his case, the plaintiff was given three (3) months probationary period before any increase in his salary could be made. 

7.	In a letter dated 30th November 2005, the General Manager of the defendant company informed the plaintiff that, after reviewing his appeal and after having observed the key performance areas given him under the probationary period, he did not meet the expected target achievements as shown by the company records.

8.	The plaintiff says that when he commenced working with the defendant on 18th of August 2005, he was posted to Nalik Estate with unclear roles and responsibilities because, another person, Mr. Michael Homier was already working there as an Estate Manager. The duty statement given him was labeled "Junior Estate Manager". According to the plaintiff, the job description was of Divisional Manger. The plaintiff says this was a level below the Estate Manager which he says was contrary to the employment contract. 

9.	On the structure of the company, the plaintiff says, the general labourers report to the supervisors, from there to the Divisional Managers, from here to the Estate Managers then from there to the Field Managers who report to the General Manager. The plaintiff further states that, contrary to the initial terms of his employment contract as an Estate Manager, he was put on a Junior Estate Manager’s position to fit him in since the job descriptions were over-lapping to those of the Divisional Manager which he says were ambiguous and uncertain.

10.	The plaintiff now says that, when he was given the unsuccessful probationary notice through the General Staff Order dated 23rd November 2005 he appealed against that decision. He says his appeal was heard on 2nd of December 2005. He says had he been employed as an Estate Manager, he would have performed well above board to achieve expected targets. 

Defence evidence 

11.	The defendant simply denies liability and says that, the plaintiff’s termination was lawful because it occurred within the probationary period provided for in the contract. They filed certain reports as evidence to show that, the plaintiff did not perform to the expected standards at the end of which he was terminated. 
 
Defence Submission

12.	I thank both counsels for your written submissions. For the defendant, Mr. Luben submitted that there was no breach of the contract of employment because the plaintiff was terminated during the probationary period. They submit, the fact that there was a slight variation on placement of the plaintiff to a Junior Estate Manager did not affect the salary fixed and offered to the plaintiff in Item 4 of the contract of employment.

13.	Counsel submitted that, there were reports on the plaintiff’s work performances which were unsatisfactory during the three months probation period which finally led to the plaintiff’s termination. On top of that, counsel submitted that, there is no way the plaintiff could claim for a salary of K34, 000.00 per annum as he did not perform to the expected achievement targets as he failed to perform in the three months probation period. They submit that, the evidence of the plaintiff does not establish their case on the balance of probabilities and the case should be dismissed with costs.

Plaintiff’s submission

14.	Mr. Isaac of counsel for the plaintiff argued on the other hand that, the defendant breached the terms of the employment contract because such contract was terminated before expiration of the agreed termination date. They submit that due to this, the plaintiff is entitled the benefits he would have received for the balance of the contractual term. The written contract provided for a probationary period of three months and thereafter five (5) years after that. 

15.	Counsel submitted that the defendant made a unilateral decision to change the plaintiff’s job title from an Estate Manager to Junior Estate Manager without the consent of the plaintiff. They further submit that the reporting structure was also unilaterally altered by the defendant administration and that instead of reporting to the Field Manager, the plaintiff was directed to report to another Estate Manager. Part of their argument is that, the plaintiff’s responsibilities and duties were not discussed with the Field Manager Mr. Russell Hunt. 

16.	Counsel further submitted that, the plaintiff’s probationary period was not appraised by the Field Manager as per the terms of the employment contract. They submit, Mr. Michael Homier was not the plaintiff’s immediate supervisor and thus, Mr. Homier wrongly recommended the plaintiff’s termination. The plaintiff’s lawyer further says that, the termination notice was too general and as such, the plaintiff was unfairly and unreasonably treated. 

Terms of the Contract

17.	The contract provided that, the plaintiff was to commence working with the defendant company on 25th of July 2005. As earlier alluded to, the plaintiff actually commenced working with the defendant on the 17th of August 2005. I quote the relevant provisions of the letter containing the employment offer dated 23rd June 2005 which contained the terms and conditions of the contract:

"Dear Paul,

I am pleased to offer you employment under the new Pacific Rim Plantations Limited Personnel Policies to the position Estate Manager with Poliamba Limited, New Ireland Province which is a Level 4 in the Pacific Rim Plantations Limited Structure.

Your terms and conditions of employment are as follows:

Position.

1.	Your job title will be Estate Manager and in this position you will report to Mr. Russell Hunt, Field Manager who will be responsible for setting and agreeing your duties and responsibilities, assessing your performance in this role.

2.	You will be based in Poliamba. However as a condition of your employment, you may be required to work at any of the two companies within PNG."

18.	Two conditions, one on salary and the other on the probationary period were coached in paragraphs 4, 5, and 6 in the following terms:

"4. Your salary will be K28, 500.00 per annum. This salary will be reviewed and increased to K34, 000.00 after successful completion of your three months probationary period. Thereafter your salary will be subjected to an annual performance review, which currently occurs in July of each year. The salary is subject to the taxation laws of Papua New Guinea applicable at the time.

5. Your salary is structured to cover payment for the achievement of this position’s requirements.

6. Your salary will be paid fortnightly by cheque to a bank account nominated by yourself."

19.	Further down that document paragraphs 8 to 16 provided for accommodation, utilities, transport, superannuation fund, education and leave entitlements. Paragraph 17 provided for Notice of Termination was put in the following terms:

"Notice

17. The Company may terminate your employment at any time dependent on circumstances and procedure. In the event of termination you will be entitled to the following:

a) If you have been employed by the Company for less than five years, the Company shall give you two weeks notice in writing of termination or the Company may elect to pay to you the equivalent of two weeks salary in lieu of notice.

b) If you have been employed by the company for more than five years, at the time of your termination the Company shall give you four weeks notice in writing or the Company may elect to pay to you the equivalent of four weeks salary in lieu of notice." 

LAW 

20.	The leading case supporting wrongful termination or what has been referred to in some cases as "the fire-at-will principle" is the Supreme Court’s decision in Jimmy Malai v PNG Teachers Association [1992] PNGLR 568, Woods J, Hinchliffe J, Konilio J. The Supreme Court dismissed an appeal by a sacked employee, Jimmy Malai against Brown J’s decision in the National Court in Jimmy Malai v PNG Teachers Association [1991] PNGLR 116. Mr Malai’s employer sacked him without giving him a right to be heard.

21.	The Judge in the above case traced the development of the principles of natural justice that Mr Malai, relied on. His Honour referred to the classic dictum of Lord Reid in the famous decision of the House of Lords in Ridge v Baldwin [1964] A. C 40. Lord Reid held:

"The law regarding master and servant is not in doubt. There cannot be specific performance of a contract of service and the master can terminate the contract with his servant at any time and for any reason or for none. But if he does so in a manner not warranted by the contract he must pay damages for breach of contract. So the question in a pure case of master and servant does not at all depend on whether the master has heard the servant in his own defence: it depends on whether the facts emerging at the trial prove breach of contract."

22.	The common law principle of the ‘right to hire and fire’ was adopted and applied in many cases since Iambaki Okuk and The Independent State of Papua New Guinea [1980] PNGLR 274, Papua New Guinea Air Pilots Association v Director Civil Aviation and the National Airline Commission trading as Air Niuguni [1983] PNGLR 1, Steamships Trading Co. Ltd v Joel and Others [1991] PNGLR 133, Bruno Baiwan v University of Papua New Guinea [1995] PNGLR 18, Jimmy Malai v PNG Teachers Association [1992] PNGLR 568.

23.	In this jurisdiction in the case of Paddy Fagon v Negiso Distributors Pty Ltd (1999) N1900 it was a case of an employment contract, Kirriwom J said:

"In a master and servant relationship, the master has the right to hire and fire his servants. The same principle applies in private employment situations such as in this case as opposed to public sector employment or those employment concerned under the registered industrial organisations. Under common law a master does not have to give reasons for his decision to remove a servant and to replace one with another. That is his unfettered discretion and the common law respects. Common law is part of the underlying law in Papua New Guinea which was adopted on Independence and over the years since the Courts in this jurisdiction have adopted and cherished this common law principle."

24.	In a later case that of Legu Vali v NCDC (2002) N2280 Kandakasi, J said that at common law an employer is entitled to terminate an employee with or without reasons but where termination affects an employee’s reputation, he ought to be given the opportunity to be heard. His Honour said at the 9th last paragraph: 

"At common law an employer is entitled to terminate an employee with or without reason … However, it has been held in cases where the reason for dismissal affects the reputation of the employee concerned, he must be given the opportunity to be heard and defend himself before being terminated. This principle applies in our country in nearly all public sector employment and to the private sector only by virtue of agreement of the parties to a contract of employment. This is the effect of a number of authorities in our country such as the Supreme Court judgment in Jimmy Malai v Papua New Guinea Teachers Association [1992] PNGLR 568."

25.	The law on the right to hire and fire was critically discussed and analyzed recently by Cannings; J in Vitus Sikurumu v New Britain Palm Oil Limited (2007) N3124 that, the common law rule that an employer can hire and fire at will, with or without good reasons and without giving a right to be heard is no longer appropriate to the circumstances of Papua New Guinea. His Honour further said "to maintain such rule would be adverse to the development of the underlying law as a coherent system in a manner appropriate to the circumstances of Papua New Guinea".

26.	The court in the above case formulated a new rule of law, appropriate to the circumstances of the country, under the Underlying Law Act 2000, and said the implied terms of a contract of employment include that the principles of natural justice and the constitutional right of protection against harsh or oppressive or other proscribed acts ought to apply. After discussing appropriate law including the Constitution, the Underlying Law Act and relevant legislations on employment and a host of PNG authorities the court there held that, implied terms of a contract of employment include the principles of natural justice formulated the following underlying law: 

". 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."

27.	In the above case the plaintiff was employed as a carpenter under a written contract of employment with the first defendant. He had an argument with his supervisor and allegedly threatened him with personal violence and damaged his employer’s property. Six days later he was sacked on the ground of misconduct. 

28.	He appealed to a senior manager of the company but his appeal was dismissed and termination of his employment confirmed. He sued his employer, claiming he was dismissed without good cause and contrary to the principles of natural justice.

29.	In the case before me the issue is whether or not the plaintiff’s termination was lawful. This issue can be resolved by reference to the relevant provisions of the contract which I will refer to shortly. Generally the law is that, where there is a written contract, it should be allowed to speak for itself to the exclusion of any extrinsic evidence: Curtain Bros (QLD) Pty Ltd v. The State [1993] PNGLR 285. The following cases were referred to in the above case, Bank of Australia v. Palmer [1897] AC 540; Reliance Marine Insurance v. Duder [1913] 1 KB 265; Tsang Chuen v. Li Po Kwai [1932] AC 715 at 727; O'Connor v. Hume [1954] 1 W.L.R 824. 

30.	The principles stated in the above cases say that a written contract must be allowed to speak for itself or construed strictly according to the terms of the written contract. To this court it makes a lot of sense because the terms of a written contract do bind the parties and they are expected to perform according to what they have intended so that the words must be construed according to the intention of the parties. 

31.	A classical statement on the construction of the terms of a contract can be found in Chitty on Contracts 24th edition at pages 700-701, in the following terms:

"The object of all construction of the terms of a written agreement is to discover there from the intention of the parties to the agreement…the cardinal presumption is that the parties have intended what they have in fact said, so that their words must be construed as they stand. That is to say, the meaning of the document or of a particular part of it is to be sought in the document itself: ‘One must consider the meaning of the words used, not what one may guess to be the intention of the parties.’"

32.	Contents of a contract depend primarily on the words used by the parties. Where the contract is in writing, there is a general rule that, the court will not look beyond that writing to determine what its express terms are: Jacobs v Batavia & General Plantations Trust Ltd [1924] 1 Ch.287. 

33.	However this rule is subject to many exceptions such on evidence to prove some invalidating cause as in Campbell Discount Co v Gall [1961] 1 Q.B.431, or on terms implied by law or custom: Gillespie Bros. & Co v Cheney Eggar & Co [1896] 2 Q.B. 59, or by operation of the contract: Pym v Campbell (1856) 6 E. & B.370, or for evidence in aid for construing a document: Bank of New Zealand v Simpson [1900] A.C.182. (For more cases on extrinsic evidence see - G.H. Treitel ‘The Law of Contract’ Fifth Edition 134 to 142). (See also Fly River Provincial Government v Pioneer Health Services Limited (24.3.03) SC705 footnote 9 and page 35 to 36 of the judgment). 

Issues

34.	There are a number of issues involved. They are:

1.	Did the plaintiff’s termination occur within the period specified in the contract?

2.	If so, was that lawful or unlawful?

3.	The plaintiff was contracted for the position of "Estate Manager" was he paid at the level he was recruited for?

4.	Was there any real change in the job title?

5.	Was there any over-lapping in the job description and reporting structure on duties and responsibilities?

6.	And if so, what action did the plaintiff take to alleviate or remedy his condition?

7.	Did the plaintiff successfully complete the three months probationary period as required by paragraph 4 of the contract which could enable him to be paid the increase of K34, 000.00 per annum? 

First and Seventh issues

35.	The 1st and the 7th issues can be resolved by making reference to the terms of the contract of employment. The contract provided that, the plaintiff would continue to be employed only after successfully completing three months probationary period. This issue can be traced down to the intentions of the parties and their course of dealings within the period of three months. The plaintiff commenced working on 18th August 2005 and the letter of termination was served on him on the 30th November 2005.

36.	According to the defendant’s evidence, as early as the 10th of October and 17th of November that year, the Estate Manager for Nalik Mr. Michael Homier forwarded two performance review reports to appropriate authorities including the General Manager. In the first of those two memorandums, the plaintiff’s following weaknesses were identified:

•	meeting company set targets,

•	spend too much time in the office,

•	less supervision or check staff under him and the team,

•	more communication with contractors,

•	follow-up of field balance and move the crop within daylight hours and

•	Training, coaching and discipline of staff under him.

37.	In addition to the above weaknesses, two field department performance evaluation forms were filled, one dated 21 November, 2005 and another two days later. On the earlier one, the plaintiff was rated "poor" on meeting targets and rated "acceptable" in four performance areas, including meeting deadlines, ability to work with others, ability to learn new tasks and initiative in problem solving. On the other one, the remarks column on all twelve performance areas simply showed "Target not achieved".

38.	To enable the plaintiff to continue working with the defendant, he would have to perform to expected performance standards as required by the company. It seems from all evidence that, the plaintiff did not perform well within the probationary period. The questions posed are; did the plaintiff’s termination occur within the period specified in the contract and was he or did he successfully complete the three months probationary period? I answer in the positive to question 1 and negative to question 7. 

39.	The plaintiff did not perform successfully. His employment contract could continue only "after the successful completion of your three months probationary period"(emphasis added). Did he complete the probationary period successfully or was he successful in the evaluation processes completed within the period between 18th August and 19th November 2005? Obviously no, the plaintiff did not successfully complete the probationary period.

Second Third and Fourth Issues

40.	Answers to the 2nd, 3rd and 4th questions can be lumped together. I am of the view that, the plaintiff was terminated according to the terms of the contract. The plaintiff’s probation ended on the 17th or 18th of November 2005. The fact that, he was notified about his termination on 30th of November was mere formality. He had been earlier rated and assessed by the company administration.

41.	The unsuccessful probation notice was served on the plaintiff on the 23rd of that month about 5 days from the time of expiration of his probation period. There is evidence by the plaintiff that, he appealed against the decision of his termination. 

42.	On record there are no documentary evidence to show if the plaintiff ever appealed except on the letter of termination where the general manager referred to a letter of appeal from the plaintiff and in which letter the manager said after reviewing the appeal with the Field Manager and Personnel Manager, it appeared to him that, the plaintiff did not meet the expected targets. 

43.	The next part of the plaintiff’s argument is that, he was contracted as an Estate Manager but he was placed on a junior position as "Junior Estate Manager". I find from all evidence that this was a change of job title only as the plaintiff was still being paid on the level for which he was recruited for. 

44.	There is evidence by the plaintiff as well as the defence that within the three months probation period, the plaintiff was paid a salary of K28, 500.00 per year. He was posted to Nalik Estate as a "Junior Estate Manager". Despite such reference and title, he was still being paid a full salary on the contract scale. 

Fifth and Sixth issues

45.	Counsel for the plaintiff further argued in submission that, the Junior Estate Manager’s post was created to fit the plaintiff because the duty statements or job descriptions were over-lapping with that of the divisional manager and according to the plaintiff they were ambiguous and unclear to him. 

46.	The plaintiff annexed to his affidavit two pages of job description containing the company mission statement objectives and the relationship of the network and who to report to and by whom. (See letter "B"). Under such job description, all respective estate field staff and all the employees of the Nalik Estate were to report to the Senior Estate manager and the Field Manager. The objective of the job holder was to "optimize the quantity, quality and sustainability of FFB delivered to the mill from my area of influence at internationally competitive cost".

47.	Though the plaintiff says in evidence that, when he found out that there was a change in his job description, he spoke to the Field Manager Mr. Geeman Pangarie, he was told that, the same was to speak to Mr. Homier about it which was never eventuated. There is no further evidence on that point and the court will not accept that part of his evidence.

48.	On reading the two pages duty statement, I am of the view that, to any reasonable man, there was no ambiguity on who to report to as the key indicators on the performance standards and targets were very clear. The plaintiff although new in the job with the defendant, had been previously employed by Coconut Products Limited at Ulaveo, here in Kokopo as an Estate Manager. I find there was no ambiguity in the terms of the duty statement given to the plaintiff. 

49.	Here is a clear case where the intentions of the parties were clearly expressed in the written contract. This court cannot read nor infer any other terms and conditions into what was intended by the plaintiff and the defendant. An offer of the contract of employment was made by the defendant to the plaintiff and he accepted it, and acted on it and in law it was a binding contract. 

50.	The intention of the parties was that, the plaintiff would only be allowed to continue his employment if he had successfully completed the probationary period. In this case, the plaintiff did not successfully complete the three months probationary period. I adopt the principles stated in Curtain Bros (QLD) Pty Ltd v The State [1993] PNGLR 285 and apply them to the instant case. I conclude that, the termination of the contract occurred within the three months probationary period. I dismiss this claim with costs to be taxed if not agreed.

__________________________

Warner Shand Lawyers: Lawyer for the plaintiff
Paul Paraka Lawyers: Lawyer for the defendant