N5092
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1499 OF 2009

JOHN MURUA
Plaintiff

V

RAMU NICO MANAGEMENT (MCC) LIMITED
Defendant

Madang: Cannings J
2013: 22 February, 4 March

LAW OF EMPLOYMENT – wrongful dismissal – oral contract – whether contract lawfully terminated for cause; Employment Act, Section 36 (grounds for termination of contract) – whether employee paid proper amount of salary in lieu of notice; Employment Act, Section 35 (termination of contract without notice).

DAMAGES – approach to assessment of damages for wrongful dismissal – whether amount of damages restricted to salary that would have been earned in notice period.

The defendant terminated the plaintiff's employment on the grounds of failure to perform to standards required and violation of the defendant's rules and regulations. The plaintiff sued the defendant, claiming damages for wrongful dismissal, and argued that the defendant failed to (1) give him three warnings; (2) give proper notice of its intention to terminate his employment; (3) use proper grounds for termination; and (4) give him a fair hearing. The defendant denied liability and argued that even if it was liable for wrongful dismissal the damages to which the plaintiff was entitled were restricted by the amount of salary that would have accrued to the plaintiff during the period of notice required under Section 34(4) of the Employment Act, which was one day. A trial was conducted on both liability and damages.

Held:

(1)	The contract between the plaintiff and the defendant was an oral contract of service and there was no term of that contract requiring the defendant to give three warnings to the plaintiff before terminating his employment. The first alleged breach of contract was not sustained.

(2)	The defendant was entitled to terminate the contract without notice irrespective of whether (a) there were good grounds under Section 36(1) of the Employment Act for termination without notice or payment instead of notice or (b) the contract was terminated under Section 34 of the Employment Act, in which case there is an obligation to pay the employee a sum equal to the amount of salary that would have accrued to the employee during the period of the notice". The second alleged breach of contract was not sustained.

(3)	As the plaintiff was arguing that the defendant improperly terminated the contract for cause he had to prove that none of the grounds of termination fell within the grounds prescribed by Section 36(1) of the Employment Act as being circumstances in which an employer can terminate a contract of employment without notice and without salary instead of notice. The plaintiff proved that none of those grounds applied. Therefore the defendant was obliged to pay salary instead of notice which, in this case, pursuant to Section 34(4)(c) of the Employment Act, was two weeks. The defendant's argument, based on Section 17 of the Employment Act, that the period was one day was rejected. As the defendant paid only one week's salary, the third alleged breach of contract was sustained.

(4)	Unless the terms of a contract of employment make provision to the contrary, an employer is not obliged to afford an employee a fair hearing prior to termination of employment. The fourth alleged breach of contract was not sustained.

(5)	As one allegation of breach of contract was sustained and it pertained to termination of the contract of employment, the defendant was liable for wrongful dismissal and the plaintiff was entitled to damages.

(6)	There is no binding principle of law that in assessing damages the National Court is obliged to award nothing more than the amount of salary that would have been paid to the employee during the notice period. Here, it was appropriate to award the sum of K1,803.00 general damages comprising the underpayment of one week's salary (K601.00) plus damages for distress, frustration and inconvenience associated with unlawful termination of employment, calculated by reference to two weeks' salary (K1,202.00), the total damages being K1,803.00.

(7)	In addition the plaintiff was awarded interest of K673.60, making the total judgment sum K2,476.60. The parties were ordered to pay their own costs due to the excessive nature of the claim set out in the statement of claim, the fact that the plaintiff did not succeed on all issues and the inconvenience caused the defendant and the court by the plaintiff's lawyers' lack of diligence in prosecuting the proceedings.

Cases cited

The following cases are cited in the judgment:

Chemica Didiman v Bernard Tiau (2007) N5000
Frederick Mathies v Joel Korina (2009) N3832
Harding v Teperoi Timbers Pty Ltd [1988] PNGLR 128
Livingston v Raywards Coal Co [1880] 5 App Cases 25
New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946
Porgera Joint Venture Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060
UPNG v Jerry Duwaino (2009) N3723
William Maninga v Ramu Sugar Ltd (2010) N4118

TRIAL

This was a trial of a wrongful dismissal action that addressed questions of both liability and damages.

Counsel

J Murua, the plaintiff, in person
C Posman, for the defendant

4th March, 2013 

1. CANNINGS J: The plaintiff, John Murua, is seeking damages for wrongful dismissal against the defendant, his former employer Ramu Nico Management (MCC) Limited. The plaintiff commenced employment under an oral contract of employment on 18 November 2006. He was a truck driver. His employment was terminated without notice on 4 July 2008 on the grounds of failure to perform to standards required and violation of the defendant's rules and regulations. He was paid one week's salary instead of notice. The defendant denied liability and argued that even if it was liable for wrongful dismissal the damages to which the plaintiff was entitled were restricted by the amount of salary that would have accrued to the plaintiff during the period of notice required under Section 34(4) of the Employment Act, which was one day. A trial has been held on the questions of both liability and damages.

LIABILITY

2. The plaintiff argues that he was wrongfully dismissed, ie that the defendant breached the contract of employment, in four respects, by failing to:

1	give him three warnings;
2	give proper notice of its intention to terminate his employment;
3	use proper grounds for termination; and
4	give him a fair hearing.

1	Failure to give three warnings

3. The plaintiff's argument is without merit. The contract of employment was an "oral contract of service" for the purposes of Division III.3 of the Employment Act 1978 and there was no term of that contract requiring the defendant to give three warnings to the plaintiff before terminating his employment. The first alleged breach of contract is not sustained.

2	Failure to give proper notice of intention to terminate

4. As this was an oral contract the defendant was entitled to terminate it without notice, and this could be done in two ways. First, under Section 36(1) (ground for termination of contract) of the Employment Act, which is often called 'termination for cause' as it conveys the notion that the employee has done something wrong that warrants instant dismissal. 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.

5. The second way that termination without notice can be lawfully effected is under Section 35(2) (termination of contract without notice) of the Employment Act, which 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.

6. Periods of notice are set out in Section 34(4) (notice of termination), which 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—

(a)	one day's notice if the employee has been employed for less than four weeks; or

(b)	one week's notice if the employee has been employed for not less than four weeks and for less than one year; or

(c)	two weeks' notice if the employee has been employed for not less than one year and for less than five years; or

(d)	four weeks' notice if the employee has been employed for five years.

7. The notice period varies according to the period for which the employee has been employed. Provided that an employer pays to the dismissed employee the amount of salary that would have accrued to the employee during the notice period, termination without notice will be lawful. I find that the defendant was entitled to terminate the contract without notice irrespective of whether (a) there were good grounds under Section 36(1) of the Employment Act for termination without notice and without payment instead of notice or (b) the contract was terminated under Section 34 of the Employment Act. The second alleged breach of contract is not sustained.

3	Failure to use proper grounds for termination

8. To identify the grounds on which the plaintiff's employment was terminated it is necessary to look at the notice of termination, which stated:

Dear John

Re: TERMINATION NOTICE

You are hereby advised that the company has decided to terminate your services as a Driver within the Administration Department effective at 5.00 pm this date 4 July 2008.

The decision to terminate your services is based on your performance over your term of employment with the company and your position has been reviewed and assessed and unfortunately your file records in the past has shown failure on your part to perform to the standards required by your department.

You have violated the company's rules and regulations on numerous occasions and although the management warned you verbally, written you formal warning letter and your supervisor attempted to discourage your behaviour whilst in the workplace, it appeared you had not adhered and tried to improve therefore the decision to cease your employment with the company is inevitable.

You will be paid one (1) week in lieu of this termination notice and should there be any other entitlements you will be paid accordingly. Should you owe the company any monies these will be deducted prior to final payment.

We take this opportunity to thank you for your past service and wish you the best for your future endeavours.

Yours faithfully

Ramu Nico Management Ltd

Mr Hanson Chen
Acting Deputy General Manager, HR Department

9. Thus two grounds were given for terminating the plaintiff's employment: failure to perform to standards required and violation of the defendant's rules and regulations. The plaintiff's argument is that although those were the grounds given, there was no substance to them. He says that he did not fail to perform to the standards required and he did not violate rules and regulations. Though there were a number of allegations of improper conduct such as 'bumping' another vehicle while driving under the influence of alcohol, being absent without leave, transporting officers in company vehicles without approval, they were all untrue. They were made by his then Supervisor Amos Moti, who has given evidence in these proceedings that he "made up" the allegations as he was forced to do so. The plaintiff is an "innocent man", Mr Moti now deposes.

10. The defendant has responded to the submission that the allegations against the plaintiff were false, through an affidavit by its HR/Payroll Clerk, Elvee Sau, who deposes that she has checked the defendant's HR records and the plaintiff's file and confirmed that the plaintiff was warned on a number of occasions about his poor performance. In her opinion there is no substance to the claim that Mr Moti was forced to make up the allegations.

11. Which evidence should the court prefer? I prefer the plaintiff's evidence. It is direct evidence, coming from the plaintiff himself and his then supervisor, which supports the proposition that the plaintiff's employment was terminated on the basis of false allegations. The defendant's evidence is hearsay. The plaintiff has proven that none of the actual grounds of termination fell within the grounds prescribed by Section 36(1) of the Employment Act as being circumstances in which an employer can terminate a contract of employment without notice or salary instead of notice.

12. In William Maninga v Ramu Sugar Ltd (2010) N4118 I said that the court's role in a wrongful dismissal case is not to sit as an appellate tribunal and rehear the competing views and evidence on the question of whether an employee should have been dismissed. Although that was an appropriate statement to make given the issues in that case I think that what I said has been interpreted rather too broadly by Mr Posman for the defendant for the purposes of the present case where there is an issue about whether the plaintiff was properly terminated 'for cause' under Section 36(1).
 
13. The plaintiff had been employed for a period of one year, seven months, two weeks, two days (15 December 2006 to 4 July 2008). The defendant was therefore obliged to pay salary instead of notice which, pursuant to Section 34(4)(4)(c) of the Employment Act, was two weeks.

14. Mr Posman submitted that in fact the notice period was only one day, and that by paying the plaintiff one week's salary the defendant was being generous. Where did he get the period of one day from? From Sections 16 (period of oral contract) and 17 (new oral contract on expiration of contract) of the Employment Act, which state:

16.	Notwithstanding any agreement to the contrary, an oral contract of service shall be deemed to be for the period by reference to which wages are paid.

17.	Each party to an oral contract of service that expires under Section 16 shall, immediately on the expiration of the contract, be deemed to have entered into a new oral contract of service for a further period of the same duration and subject to the same terms and conditions as the expired contract unless—

(a)	notice to terminate the employment under Section 34 has previously been given and—

(i)	the period of notice has expired; or

(ii)	payment of wages instead of notice has been made; or

(b)	the contract has been summarily terminated by either party for lawful cause.

15. The argument is that because the plaintiff was employed under an oral contract of service and he was paid fortnightly he was actually employed under successive contracts each of two weeks' duration. So every fortnight when he was paid his wages, his contract of service would expire under Section 16, then he would be deemed under Section 17 to have entered a new contract for a period of two weeks; and so it went on until the last of the contracts was terminated. The plaintiff was only ever employed for two weeks at a time, so when his last contract was terminated on 4 July 2008, he had been employed for a period of less than two weeks, so the notice period had to be calculated under Section 34(4)(a), which provides that if the employee has been employed for less than four weeks the notice period is one day. In dealing with this interpretation of the Employment Act it is timely to reflect on Section 158(2) (exercise of the judicial power) of the Constitution, which states:

In interpreting the law the courts shall give paramount consideration to the dispensation of justice.

16. Courts are required to dispense justice, not dispense with justice which I think is what would happen if I were to uphold Mr Posman's ingenious but with respect tortuous and oppressive interpretation of the law. The operative words of Section 34(4) relate to the period for which "the employee had been employed". The plaintiff had not been employed for less than four weeks but for "not less than one year and for less than five years". The notice period was two weeks. As the defendant paid only one week's salary instead of notice, the third alleged breach of contract is sustained.

4	Failure to give a fair hearing

17. Unless the terms of a contract of employment make provision to the contrary, an employer is not obliged to afford an employee a fair hearing prior to termination of employment (New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946). The fourth alleged breach of contract is not sustained.

Conclusion as to liability

18. Only one of the four grounds of wrongful dismissal has been sustained but that is sufficient to conclude that the defendant is liable for breach of contract. The plaintiff was wrongfully dismissed in that his contract of employment was terminated under Section 35(2) of the Employment Act but he was not paid the proper amount of salary instead of notice.

DAMAGES

19. 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 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). It follows that the dismissed employee is to be compensated not only for the wages that he has lost for the length of the notice period but also for the pain, suffering and inconvenience caused to him by the employer's unlawful act. The decision of the Supreme Court in Porgera Joint Venture Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060 might shed doubt on that approach, however I still take the view that there is no binding principle of law that in assessing damages the National Court is obliged to award nothing more than the amount of salary that would have been paid to the employee during the notice period. As I have said in other cases 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 (Chemica Didiman v Bernard Tiau (2007) N5000, UPNG v Jerry Duwaino (2009) N3723, Frederick Mathies v Joel Korina (2009) N3832). An affidavit by the plaintiff's wife is evidence of the hardship their family consisting of the plaintiff and herself and three school-aged children endured after the plaintiff's sudden termination. The plaintiff is entitled to damages to compensate him for the injury to his livelihood and emotions and those of his dependants caused by the wrongful dismissal (Harding v Teperoi Timbers Pty Ltd [1988] PNGLR 128). I assess damages as follows:

•	One week's salary still owed due to the defendant only paying one week's salary for the notice period when it should have paid two weeks = K601.00 +

•	An extra two weeks salary being an assessment of damages for distress and anxiety = K1,202.00.

The total award of damages is K1,803.00.

INTEREST

20. Interest will be awarded at the rate of 8 per cent per annum on the total amount of damages under Section 1(1) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52. Interest is calculated from the date of the breach of contract, 4 July 2008, to the date of this judgment, a period of 4.67 years, by applying the following formula:

•	D x I x N = A

Where:

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

Thus K1,803.00 x 0.08 x 4.67 = K673.60.

COSTS

21. 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. In this case there is no clear winner. The plaintiff has on the one hand succeeded in obtaining a moderate award of damages but on the other hand the defendant has succeeded in convincing the court that the bulk of the claim (the plaintiff was seeking amongst other things that he should be paid ten years worth of lost income) was exaggerated and without merit. In these circumstances it is appropriate that the parties bear their own costs.

ORDER

22. The Court orders that:

(1)	the defendant pay to the plaintiff damages of K1,803.00 plus interest of K673.60, being a total judgment sum of K2,476.60; and

(2)	the parties shall bear their own costs.

Judgment accordingly.

___________________________________________
Tabai Lawyers: Lawyers for the plaintiff
Posman Kua Aisi Lawyers: Lawyers for the Defendant