N4845

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 210 OF 2011

BETWEEN:

MATALAU NAKIKUS
Plaintiff

AND:

AQUILA TUBAL, the Provincial Administrator,
East New Britain Provincial Administration
First Defendant

AND:

EAST NEW BRITAIN PROVINCIAL
GOVERNMENT
Second Defendant

AND:

INDEPENDENT STATE OF
PAPUA NEW GUINEA
Third Defendant

Kokopo: Hartshorn J.
2012: 16th & 24th July

Trial

Facts:

The plaintiff was employed as a Director - Corporate Affairs by the third defendant. After completing two years of a three year contract, the plaintiff was charged and found guilty of serious disciplinary offences, and was demoted to a position that was two grades lower in salary. The plaintiff alleges that by the actions of the first defendant, his contract of employment has been unlawfully terminated. The main grounds for this allegation are that the first defendant failed to refer the alleged disciplinary matters concerning the plaintiff to the Secretary for the Department of Personnel Management and instead dealt with the matters himself as Provincial Administrator and further, he transferred the plaintiff to a different position. The plaintiff commenced this proceeding seeking damages for breach of contract.

Held:

The failure by Mr. Tubal to refer Mr. Nakikus's disciplinary matter to the Secretary DPM and Mr. Tubal's purported deliberation on Mr. Nakikus's response to the disciplinary charges and his subsequent decisions as to guilt and disciplinary action were in breach of s. 18.3 and s. 25 (1) (c) Standard Terms and Conditions for the Employment of Senior Officers in the National Public Service 1999 Category A.

Cases cited: 
Papua New Guinea Cases

Mericidita Malihan v. Divine Word University (2010) N4112 
Philip Taudevin v. Charles Thesira & Ors [1995] PNGLR 56

Overseas Cases 

Koompahtoo Local Aboriginal Land Council v. Sanpine Pty Ltd [2007] HCA 61
Whittaker v. Unisys Australia Pty Ltd [2010] VSC 9

Counsel:

Mr. O. G. Kivu, for the Plaintiff
Mr. B. Killian, for the First and Second Defendants
Mr. J. Nalawaku and Ms. H. Hilary, for the Third Defendant

24th July, 2012

1. HARTSHORN J: The plaintiff Mr. Matalau Nakikus was employed as a Director - Corporate Affairs by the third defendant, the State, for the East New Britain Provincial Administration (ENBPA). After completing two years of a three year contract, Mr. Nakikus was charged and found guilty of serious disciplinary offences, and was demoted to a position that was two grades lower in salary. Mr. Nakikus alleges that by the actions of the first defendant, Mr. Aquila Tubal, the Provincial Administrator of ENBPA, his contract of employment has been unlawfully terminated. The main grounds for this allegation are that Mr. Tubal failed to refer the alleged disciplinary matters concerning Mr. Nakikus to the Secretary for the Department of Personnel Management (Secretary DPM) and instead dealt with the matters himself as Provincial Administrator and further, Mr. Tubal transferred Mr. Nakikus to a different position. Mr. Nakikus commenced this proceeding seeking damages for breach of contract.

2. The defendants deny the claims of Mr. Nakikus and submit that Mr. Tubal was entitled to take the actions that he did as the powers that he exercised were delegated to him by the Secretary DPM. Consequently, Mr. Nakikus's contract of employment was not breached and has not been terminated.

3. The defendants have filed defences but no evidence has been filed or tendered on their behalf.

4. As the defendants are or are employed by the State and the claim is in contract, the issue of whether the Claims By and Against the State Act has been complied with arises. In the affidavit of Mr. Nakikus, he deposes that his lawyers gave notice to the State. As there is no pleading by any of the parties in this regard and it has not been raised by any of the defendants, I will not consider this issue further.

Use of delegated power

5. The first issue for consideration is whether the delegated powers that Mr. Tubal purportedly exercised were able to be exercised in respect of Mr. Nakikus. The defendants rely upon a purported copy of an instrument of delegation by Ms Margaret Elias, the Secretary DPM (Instrument). It is part of an annexure to the affidavit of Mr. Nakikus. It is not signed or dated but appears to have come into effect sometime in 2008.

6. Pursuant to the Instrument, the Secretary DPM has delegated to the Provincial Administrator ENBPA, all the powers, responsibilities and limitations specified in Part XIV Discipline, in sections 50, 51 and 52 Public Services Management Act 1995 (PSM Act), up to Deputy Secretary and Deputy Provincial Administrator levels. The sections are concerned with the discipline of officers and with how their minor and serious offences are to be dealt with.

7. Section 41 (3) PSM Act, provides that:

"Notwithstanding the provisions of this Act relating to discipline of officers, a contract of employment under Subsection (1) shall make specific provision for discipline and an officer employed under a contract of employment under Subsection (1) is exempted from the provisions of Part XIV"

8. I am satisfied that Mr. Nakikus is an officer employed under a contract of employment under s. 41 (1) as he is an officer appointed to a senior management office and is described in his contract of employment throughout as a senior officer. Consequently he is exempted from the provisions of Part XIV.

Breach of contract

9. The purported delegation of powers to the Provincial Administrator under s. 50 – 52 PSM Act is therefore irrelevant to matters of discipline concerning Mr. Nakikus and the submission by counsel for Mr. Tubal and the ENBPA that the powers of delegation under the Instrument had to be expressly excluded from Mr. Nakikus's contract of employment is not to the point given the irrelevancy. Matters of discipline concerning Mr. Nakikus are provided for in the Standard Terms and Conditions for the Employment of Senior Officers in the National Public Service 1999 Category A (Terms and Conditions) which is attached to and is part of his contract of employment. An alleged serious breach of s.18 Terms and Conditions is referred to the Secretary DPM under s. 25 Terms and Conditions. The Secretary DPM then has certain obligations to perform under s. 25 Terms and Conditions. This is without regard or reliance upon Part XIV PSM Act.

10. The purported delegation of powers under s. 41 PSM Act by the Secretary DPM under the Instrument, to my mind does not assist the defendants. Section 41 is concerned with Contracts of Employment. There are no powers or responsibilities in s. 41 concerning discipline that can be transferred.

11. Consequently the failure by Mr. Tubal to refer Mr. Nakikus's disciplinary matter to the Secretary DPM was in breach of s. 18.3 Terms and Conditions. Similarly, Mr. Tubal's purported deliberation on Mr. Nakikus's response to the disciplinary charges and his subsequent decisions as to guilt and disciplinary action were in breach of s. 25 (1) (c) Terms and Conditions.

Whether contract terminated

12. Having found the above breaches of Mr. Nakikus's contract of employment, do they result in the termination of the contract, as pleaded by Mr. Nakikus? The submissions of counsel for all parties did not assist the court on this issue. 

13. In Philip Taudevin v. Charles Thesira & Ors [1995] PNGLR 56, Sheehan J. noted that not every breach of a contract gives a right to treat the contract as terminated. His Honour cited a passage from Chitty on Contracts 25th ed para 1591 where it is said, "any breach of contract gives rise to a cause of action; not every breach gives a discharge of liability" and then stated that, "Only a breach of a term fundamental to a contract will entitle an innocent party to treat the contract as terminated." It follows that the relief for any breach that interferes with a term that is not fundamental to the contract will only be in damages. Notwithstanding that His Honour was dealing with a contract for the sale of land, the principles of contract law discussed, are applicable here. 

14. I have also had recourse to a decision of Cannings J in Mericidita Malihan v. Divine Word University (2010) N4112 in which His Honour considered when a contract of employment has been repudiated by an employer.

15. After ascertaining that there were no cases in this jurisdiction directly on point, His Honour considered the Australian High Court case of Koompahtoo Local Aboriginal Land Council v. Sanpine Pty Ltd [2007] HCA 61 and the Victorian Supreme Court case of Whittaker v. Unisys Australia Pty Ltd [2010] VSC 9. In Koompahtoo (supra), the majority held that a party repudiates a contract by evincing unwillingness or an inability to render substantial performance of it. As to determining whether one of the parties is renouncing or repudiating the contract, their Honours held that: 

"The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other, renunciation either of the contract as a whole or of a fundamental obligation under it."

16. In Whittaker (supra) it was held that:

"It is clear … that an actual intention to repudiate is not necessary; the issue is resolved objectively by reference to the effect it would have on a reasonable person. Hence the question becomes whether the conduct of the employer, judged objectively, evinced an intention to no longer be bound by the contract. Repudiation may also be established by conduct that evinces an intention to perform the contract only in the manner in which it suits that party to perform.

Whether there has been repudiation in a particular case is a question of fact.

Not every breach of contract is repudiation and repudiatory conduct is not to be inferred lightly. Repudiation may be evidenced by a single act or by an accumulation of conduct in circumstances where no individual act on its own constitutes repudiation."

17. As to whether the breaches of contract were fundamental; I am not of the view that they were. They did not prevent Mr. Nakikus from performing his obligations under the contract as purportedly varied. I note in this regard that paragraph 3 of the contract of employment allowed for Mr. Nakikus to serve in such other capacity as determined by the Provincial Administrator and so that possibility can be said to have been in the contemplation of the parties. As to whether the conduct of Mr. Tubal, when judged objectively, evinced an intention to no longer be bound by the contract of employment, I am not of the view that it did. That Mr. Nakikus's penalty was a variation of the contract and demotion, and not dismissal, is indicative. Further, there is no evidence that Mr. Tubal acted other than in accordance with powers that had been delegated to him. The decision to demote and transfer to another office are within those powers (ss. 33, 34, 52 (5) (c) and (d) PSM Act). It was because of the erroneous belief that Mr. Nakikus was able to be dealt with pursuant to those powers that led to the actions being taken. These actions cannot be seen, when judged objectively, as evincing an intention to no longer be bound by the contract of employment. Consequently, I am not satisfied that Mr. Nakikus's contract was terminated by the actions of Mr. Tubal.

Damages

18. Mr. Nakikus is though, entitled to damages for the breaches of his contract of employment. 

19. As to the calculation of damages for breach of contract, I refer to the following passage from Chitty on Contracts, volume 1, General Principles, 28th ed. at page 1271:

"Damages for a breach of contract committed by a defendant are a compensation to the claimant for the damage, loss or injury he has suffered through that breach. He is, as far as money can do it, to be placed in the same position as if the contract had been performed. This implies a "net loss" approach in which the gains made by the claimant as a result of the breach (e.g. savings made because he is relieved from performing his side of a contract which has been terminated for breach; savings in taxation; benefits obtained from partial performance; or the salvage value of something left in his hands) must be set off against his losses arising from the breach (after he has taken reasonable steps to minimise those losses)."

20. This statement as to damages for breach of contract is applied in most common law jurisdictions of which this country is one. In this instance, for Mr. Nakikus to be placed in the same position as if his contract of employment had not been breached, he should be compensated for the difference in salary and entitlements as a result of the demotion. He should also receive any salary and entitlements to which he was entitled but which he did not receive or was paid.

Loss of salary

21. Given my finding above, as Mr. Nakikus was demoted by two salary grades, he is entitled to the difference between what he was earning whilst on Grade 17 and Grade 15 to which he was demoted, from the date that the demotion took effect to the date that he ceased performing his obligations under his contract of employment.

Gratuity

22. Similarly Mr. Nakikus is entitled to the difference between what he would have received as a gratuity under Grade 17 and Grade 15 from the date the demotion took effect to the date that he ceased performing his obligations under his contract of employment.

Housing

23. I am not satisfied that Mr. Nakikus is entitled to damages for housing. He was provided housing and the evidence is he was to be provided housing when demoted. There is no evidence that he was not so provided.

Utilities, entertainment, telephone

24. If Mr. Nakikus was entitled to these amounts when on Grade 17 and did not receive them after his demotion, he is entitled to them for the period up to the date that he ceased performing his obligations under his contract of employment.

Vehicle allowance

25. Damages under this heading are refused as under Mr. Nakikus's contract of employment he was provided with a fully serviced motor vehicle on a 24-hour basis and there is no evidence that he was not so provided until he ceased performing his obligations under his contract of employment.

Damages for breach of contract

26. Damages under this heading are refused as this has been catered for under the loss of salary and gratuity headings.

Mental distress

27. There is no evidence of any mental distress suffered. Damages under this heading are refused.

Orders

28. The orders of the Court are:

a)	Judgment is entered for the plaintiff for the amounts if any, to be calculated under the headings Loss of salary, Gratuity and Utilities, entertainment and telephone above, the total amount to be assessed if not agreed, together with interest on the total amount at 8% per annum from the date of the issue of the writ of summons until payment of the total amount and interest thereon.

b)	The defendants are to pay the costs of the plaintiff of the proceeding.

c)	Time is abridged.

____________________________________________________________

Kivu & Associates Lawyers: Lawyers for the Plaintiff 
East New Britain Provincial Administration In- House Lawyer: Lawyers for the First and Second Defendants 
Namani & Associates: Lawyers for the Third Defendant