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Aku v Raphael [2015] PGNC 66; N5840 (7 January 2015)

N5840

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 18 OF 2000

PETER AKU & 17 OTHERS
Plaintiffs

V

STEPHEN RAPHAEL, SECRETARY, DEPARTMENT OF DEFENCE
First Defendant

PETER TSIAMALILI, SECRETARY, DEPARTMENT OF PERSONNEL MANAGEMENT
Second Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Cannings J
2014: 21, 22 October, 28 November
2015: 7 January

DAMAGES – unlawful dismissal from employment – assessment of damages after default judgment – whether question of liability ought to be revisited – whether plaintiffs entitled to damages in respect of salaries not paid after date of termination of employment.

The plaintiffs were civilian employees of the Department of Defence. In June 1999 they were required to retire during a Public Service downsizing exercise conducted by the National Government. They each signed a deed of release and were paid an amount of final entitlements. They were not happy about being forced to retire and claimed that they were underpaid and forced to sign the deeds of release. They commenced proceedings in the National Court in 2000 against the defendants, two Departmental Heads and the State, claiming damages for wrongful dismissal. The defendants failed to file a defence. On 16 August 2004 the National Court entered default judgment in favour of the plaintiffs subject to an assessment of damages. The defendants appealed against the entry of default judgment. The Supreme Court dismissed the appeal on 10 September 2008 and remitted the assessment of damages to the National Court.

At this trial on assessment of damages, the plaintiffs sought damages for 'lost' salaries and entitlements to which they would have been entitled, if they had not been wrongly dismissed, during the period from the date of their forced retirement (4 June 1999) to the date of the Supreme Court decision (10 September 2008), a period of nine years, four months and six days. The defendants argued that the issue of liability should be revisited and that they should be found not liable as the plaintiffs had failed to disclose a reasonable cause of action and failed to establish that the deeds of release were ineffective; but, in the event that the defendants remained liable, nothing should be awarded as the plaintiffs had not pleaded any claim for future entitlements, and in any event they were only employees, not officers, of the Public Service, and were not entitled to receive anything other than wages, so the claims for other benefits (money in lieu of notice, money in lieu of leave, money in lieu of furlough, repatriation benefits, ex gratia payments, State's share of superannuation contributions) had no legal foundation.

Held:

(1) The effect of the default judgment was that the facts and cause of action pleaded in the statement of claim are presumed to have been proven, and are only revisited if they do not make sense or would make an assessment of damages a futile exercise (William Mel v Coleman Pakalia (2005) SC790).

(2) Here, the facts pleaded were clear and the statement of claim sufficiently disclosed a cause of action in unlawful dismissal or breach of contract, so assessment of damages was not a futile exercise. The default judgment resolved the argument the defendants wanted to raise about the deeds of release: the deeds were rendered ineffective by the default judgment. The issue of liability was not revisited. The defendants remained liable.

(3) The plaintiffs adequately pleaded and proved damages in respect of lost future entitlements, as the relief sought in the statement of claim included a claim that "their salaries should be backdated to the time of their retirement to date of the decision", subject to two qualifications: (a) the plaintiffs were only entitled to "salaries", as distinct from other benefits they claimed (MILOL etc); (b) the relevant "date of the decision" was the date of the National Court decision on default judgment (16 August 2004), not the date of the Supreme Court's dismissal of the appeal against default judgment (10 September 2008).

(4) In view of those qualifications, it was appropriate to award damages equal to 56% of each claim for "backdated salaries". In addition each plaintiff was awarded interest on the amount of damages, calculated at the rate of 8% per annum from the date of the default judgment to the date of this judgment.

(5) The total judgment sum was damages, K504,559.34 + interest, K419,389.72 = K923,949.06.

Cases cited

The following cases are cited in the judgment:

August v Hargie Oil Palms Ltd (2006) N2966
Jeffrey Afozah v The Police Commissioner (2008) N3300
Paul Saboko v Commissioner of Police (2006) N2975
Prai Ipandi v Robin Guria (2010) N3830
Raphael, Tsiamalili & The State v Abote, Aku, Noup & 30 Others SCA Nos 131, 132 & 133 of 2004, 10.09.08, unreported
Rupundi Maku v Steven Maliwolo (2012) SC1171
William Mel v Coleman Pakalia (2005) SC790

TRIAL

This is a trial on assessment of damages for unlawful dismissal.

Counsel

P Ame & J Apo, for the Plaintiffs
G Akia, for the Defendants

7th January, 2015

1. CANNINGS J: This is an assessment of damages for unlawful dismissal from employment, following entry of default judgment.

2. The case has a complex history. The plaintiffs were civilian employees of the Department of Defence based at Goldie Barracks. On 4 June 1999 they were required to retire during a Public Service downsizing exercise conducted by the National Government. They each signed a deed of release and were paid an amount of final entitlements. They were not happy about being forced to retire and claimed that they were underpaid and forced to sign the deeds of release.

3. In 2000 they commenced proceedings in the National Court against the defendants – two Departmental Heads and the State – claiming unpaid entitlements and damages for wrongful dismissal. The defendants failed to file a defence in time.

4. On 16 August 2004 the National Court (Gavara-Nanu J) refused the defendants leave to file a defence out of time and entered default judgment in favour of the plaintiffs subject to an assessment of damages.

5. The defendants appealed against the refusal to grant leave to file a defence out of time and the entry of default judgment. On 10 September 2008 the Supreme Court (Kapi CJ, Lay J) dismissed the appeal and remitted the assessment of damages to the National Court (Raphael, Tsiamalili & The State v Abote, Aku, Noup & 30 Others SCA Nos 131, 132 & 133 of 2004, 10.09.08, unreported).

6. Attempts to settle the matter were made over several years, to no avail. At the request of the plaintiffs, the matter was listed for hearing in 2014. The defendants made another application (as they had done in 2004) to set aside the default judgment and file a defence out of time, which was refused by the National Court (Kariko J) on 16 June 2014. The matter came on for trial, as an assessment of damages pursuant to the default judgment of 16 August 2004, in October 2014. Submissions were completed on 28 November 2014.

7. This case is closely related to two others, WS No 19 of 2000, Petero Noup & 7 Others v Raphael, Tsiamalili & The State and WS No 20 of 2000, Aiye Abote & 30 Others v Raphael, Tsiamalili & The State, in which the facts and issues are very similar to this case. However, as there has been no order for consolidation of the proceedings, each case has been dealt with separately. There have been three trials on assessment of damages.

WHAT ARE THE PLAINTIFFS CLAIMING?

8. It is important to clarify this at the outset as what they actually claimed at the trial does not match what they sought in their amended statement of claim (filed on 14 September 2001). They claimed less at the trial than what they sought in the amended statement of claim.

9. What they actually claimed at the trial is:

• damages in respect of 'lost' salaries and entitlements to which they would have been entitled, if they had not been wrongly dismissed, during the period from the date of their forced retirement (4 June 1999) to the date of the Supreme Court decision (10 September 2008), a period of nine years, three months and six days.
  

10. What they claimed in the amended statement of claim is:

(a) under-paid entitlements, ie they claimed that they were not paid their correct entitlements upon their retirement on 4 June 1999 (para 16(i));

(b) damages for frustration, hardship and mental distress (para 16(ii));

(c) exemplary damages (para 16(v));

(d) special damages (para 16(vi)); and

(e) 'salaries ... backdated to the time of their retirement to date of the decision' (para 16(i)).

11. The claims for (a) under-paid entitlements, (b) damages for frustration, hardship and mental distress, (c) exemplary damages and (d) special damages were, in effect, abandoned at the trial. Only the last claim, for (e) 'backdated salaries', was actually pursued.

12. The amounts of damages actually claimed (exclusive of interest) are:

EVIDENCE

13. All but three of the plaintiffs (those shown as making a 'Nil' claim in the above table) swore affidavits in support of their claims, and these affidavits were admitted into evidence. The plaintiffs deposed that they consulted Ronald Kutapae, Principal Industrial Officer of the Public Employees Association, who calculated their entitlements. Included in each affidavit is a calculation of each plaintiff's 'lost' entitlements from June 1999 to September 2008. Two affidavits by Mr Kutapae were also admitted into evidence. He sets out his qualifications and experience and explains the laws and instruments he had regard to when calculating each plaintiff's 'lost' entitlements.

14. For the defendants, the only evidence was an affidavit by Peter S Tsiamalili, sworn on 7 November 2003 when he was the Secretary for Personnel Management (the second defendant). Mr Tsiamalili deposed that the Department of Personnel Management in consultation with the Department of Defence correctly calculated the plaintiffs' retirement benefits in accordance with their status as casual employees. In his opinion the actions of the Department of Personnel Management were executed in compliance with the 1999 Budget directives.

ISSUES

15. The defendants argue that despite the default judgment against them, the issue of liability should be revisited. They should be found not liable as the plaintiffs have failed to disclose a reasonable cause of action and failed to establish that the deeds of release were ineffective.

16. However, in the event that they remain liable, nothing should be awarded as the plaintiffs have not pleaded any claim for lost future entitlements. Furthermore, they were only casual employees, not officers of the Public Service. They were not entitled to receive anything other than wages, so the claims for other benefits (money in lieu of notice, money in lieu of leave, money in lieu of furlough, repatriation benefits, ex gratia payments, State's share of superannuation contributions) have no legal foundation.

17. The issues therefore are:

1 Should liability be revisited?

2 What should the plaintiffs be awarded, if anything?

1 SHOULD LIABILITY BE REVISITED?

18. The effect of the default judgment is that the facts and cause of action pleaded in the statement of claim are presumed to have been proven, and are only revisited if they do not make sense or would make an assessment of damages a futile exercise (William Mel v Coleman Pakalia (2005) SC790, Rupundi Maku v Steven Maliwolo (2012) SC1171).

19. Mr Akia, for the State, submitted that the Court should revisit the issue of liability and find that the State is not liable. He submitted that the amended statement of claim is defective in two respects:

(a) It is so vague the defendants have been left guessing what the cause of action is. The amended statement of claim fails to disclose a cause of action.

(b) It concedes that the plaintiffs were paid their final entitlements in accordance with the deeds of release, which remain effective.

An assessment of damages will therefore be a futile exercise.

(a) Does the amended statement of claim disclose a cause of action?

20. I agree that the amended statement of claim could have been drafted with greater precision. There is no cause of action, such as negligence or unlawful dismissal or breach of statutory duty or breach of human rights, expressly pleaded. However, the actual allegations are clear enough. It is pleaded that:

• the plaintiffs were employed with the Department of Defence for periods of up to 30 years;
  
• the defendants forced them to retire against their wishes;
  
• the defendants did not pay them their correct entitlements pursuant to the Public Services (Management) Act 1995, the Employment Act 1978 and the 1982 Redundancy Agreement Award;
  
• the plaintiffs were required to execute the deeds of release and were not given the opportunity to seek legal advice before receiving their retirement cheques, which was an 'act of suppression' and a 'proscribed act' for the purposes of Section 41 (proscribed acts) of the Constitution;
  
• the defendants' actions were therefore unlawful;
  
• the plaintiffs were entitled to the relief sought.
  

I consider that the amended statement of claim adequately pleads a cause of action in unlawful dismissal or breach of contract.

(b) Are the deeds of release effective?

21. The execution by the plaintiffs of the deeds of release might have provided the defendants with a good defence if this point had been raised in a defence filed in accordance with the National Court Rules. However the defendants failed to file a defence in time. When the National Court entered the default judgment in August 2004, the defendants were refused leave to file a defence out of time. Their appeal against the refusal of leave was dismissed by the Supreme Court in 2008. Another application to set aside the default judgment was made by the filing of a notice of motion in May 2014 but the application was refused by the National Court on 16 June 2014. Despite those attempts to set it aside the original default judgment entered on 17 August 2004 has remained intact.

22. Mr Akia submits that even if the default judgment is not formally set aside, it still cannot override the deeds of release, which discharge the defendants from and protect them against all actions and claims brought against them by the plaintiffs. He relies on the decision of Davani J in August v Hargie Oil Palms Ltd (2006) N2966 to argue that a default judgment cannot be sustained in law whenever a deed of release remains effective.

23. With respect, that argument misconstrues what was decided in that case. Davani J refused a motion for default judgment as a matter of discretion (quite properly, it appears to me) because of the existence of a deed of release. The facts in the present case are quite different. A default judgment has already been entered, more than ten years ago. It has remained intact despite at least two attempts (by the Supreme Court appeal and the May 2014 notice of motion) to have it set aside. The default judgment has resolved all issues arising from the deeds of release. The amended statement of claim acknowledged the existence of the deeds of release but pleaded that they were an act of suppression and a proscribed (and therefore unlawful) act.

24. By entering default judgment on the basis of those pleadings the National Court was deciding by necessary implication that the deeds of release are ineffective. The deeds of release do not absolve the defendants from liability or protect them against the plaintiffs' claims. They are ineffective.

Conclusion re liability

25. The issue of liability will not be revisited. The default judgment remains intact. The defendants remain liable. An assessment of damages is not a futile exercise. Damages will now be assessed.

2 WHAT SHOULD THE PLAINTIFFS BE AWARDED, IF ANYTHING?

26. Mr Akia submitted that in the event that the default judgment remains intact and the defendants remain liable, nothing should be awarded, or at least the amounts awarded to the plaintiffs should be considerably less than what they are claiming. He raises two arguments:

(a) As the plaintiffs' claim is for entitlements lost, in the sense that they are claiming for amounts lost after the date of retirement, 4 June 1999, nothing should be awarded as they have not pleaded any claim for lost future entitlements.

(b) The plaintiffs were only casual employees, not officers of the Public Service, so they were not entitled to receive anything other than salary. Therefore the claims for other benefits (money in lieu of notice, money in lieu of leave, money in lieu of furlough, repatriation benefits, ex gratia payments, State's share of superannuation contributions) have no legal foundation.

Did the plaintiffs claim for lost future entitlements?

27. Yes, they did. The claim appears in paragraph 16(viii) of the amended statement of claim, where it is claimed that "their salaries should be backdated to the time of their retirement to date of the decision". I agree with Mr Akia that the pleading could have been more precisely drafted. But it is adequate. It put the defendants on notice that the plaintiffs were seeking damages in respect of amounts that they claimed would have been paid to them if they had not been unlawfully dismissed. I reject the defendants' argument that the plaintiffs be awarded nothing.

(a) Are the plaintiffs entitled to damages in respect of non-salary benefits?

28. No. I uphold Mr Akia's submission that damages should not extend to non-salary benefits, for two reasons. First because there is no pleading for non-salary benefits. Paragraph 16(viii) of the amended statement of claim pleads only that "their salaries should be backdated ...". Secondly, if it were possible to interpret the claim for backdated salaries to include non-salary remuneration, I would still reject the non-salary component of the claims as the plaintiffs were employed, not as officers of the National Public Service, but as employees of the Department of Defence. I am not satisfied that they had any entitlement to the sort of non-salary benefits that they are claiming; and I am not satisfied that an entitlement to such benefits is adequately pleaded in the amended statement of claim.

29. I will award nothing in respect of 'lost':

• money in lieu of notice,
• money in lieu of leave,
• money in lieu of furlough,
• repatriation benefits,
• ex gratia payments, and
• State's share of superannuation contributions.
  

Method of calculation

30. There is another important issue to address. Mr Akia did not make submissions on this point but I am obliged to raise it as a matter of good sense and justice. The question is this: what is the end-point of the period in respect of which 'lost' salaries should be calculated?

31. Mr Ame, for the plaintiffs, submitted that it should be the date of the Supreme Court decision dismissing the defendants' appeal against the entry of default judgment, 10 September 2008. That would mean that the plaintiffs would get damages equivalent to lost salary from the date of their forced retirement, 4 June 1999, to 10 September 2008, a period of nine years, three months and six days, ie 9.27 years.

32. I do not think that would be right. I have taken the view in a number of cases that the Courts should be slow to award excessive amounts of lost salaries and other benefits to plaintiffs who have succeeded in a wrongful dismissal action (Paul Saboko v Commissioner of Police (2006) N2975, Jeffrey Afozah v The Police Commissioner (2008) N3300, Prai Ipandi v Robin Guria (2010) N3830). Each case must be decided on its merits, but it can be unjust to confer windfall gains on persons for lost salaries when they have not done any work to earn the salary.

33. It would be unjust to award more than nine years worth of salary to these plaintiffs when they have not done any work. It would be fairer to take the sort of centreline approach I have applied in Saboko, Afozah and Ipandi. I will fix an earlier date than that proposed by Mr Ame. The appropriate date is the date of entry of the National Court default judgment, 17 August 2004. Each plaintiff will be awarded a sum of damages to reflect the amount of salary lost due to their unlawful dismissal in the period from 4 June 1999 to 17 August 2004, a period of five years, two months, one week, six days, ie 5.20 years.

34. How will those amounts be calculated? By examining the claim of the lead plaintiff, Peter Aku, and focusing on the salary component of the claim and determining the amount of the salary component, in percentage terms, that is referable to lost salary for the period of 5.20 years. That figure will then be applied to the salary component of each of the plaintiffs' claims to arrive at an assessment of damages.

35. Peter Aku's claim is:

36. The salary component of the claim is K63,540.03. The non-salary component, which is excluded from the calculations, is K53,037.60. The only amount of damages to which Mr Aku is entitled is the part of the salary component of the claim relating to the period from 4 June 1999 to 17 August 2004, which is estimated to be 56% of the salary component of the claim (from 4 June 1999 to 10 September 2008, a period of 9.26 years): 0.56 x K63,540.03 = K35,582.41.

37. Each plaintiff will therefore be awarded damages of 56% of the salary component of their claim.

For example:

• the plaintiff with the smallest claim, Kaupa Mua, will be awarded 0.56 x K44,293.98 = K24,804.63;
  
• the plaintiff with the largest claim, Mendi Wena, will be awarded 0.56 x K70,000.90 = K39,200.50.
  

The awards of damages for all plaintiffs are shown in the schedule at the end of this judgment.

INTEREST

38. I will award interest at the rate of 8 per cent per annum to each of the plaintiffs, on the amount of their damages. This is done 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 default judgment, 17 August 2004, to the date of this judgment, 7 January 2015, a period of 10.39 years. I calculate the amount of interest by applying the formula D x I x N = A, 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.

For example, for Kaupa Mua:

• K24,804.63 x 0.08 x 10.39 = K20,617.61.
  

For Mendi Wena:

• K39,200.50 x 0.08 x 10.39 = K32,583.46.
  

The awards of interest to all plaintiffs are shown in the schedule at the end of this judgment.

COSTS

39. 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. The plaintiffs have waited more than 15 years for justice. They are the successful parties, even though they have not been awarded all that they have claimed. They will be awarded costs, on a party-party basis.

ORDER

(1) Damages are payable by the defendants to the plaintiffs, as prescribed by "damages awarded" in the Schedule.

(2) Interest is payable by the defendants to the plaintiffs, as prescribed by "interest awarded" in the Schedule.

(3) The defendants are liable to pay a total judgment sum to each plaintiff, as prescribed by "judgment sum" in the Schedule.

(4) Costs of the proceedings shall be paid by the defendants to the plaintiffs on a party-party basis, to be taxed if not agreed.

SCHEDULE*

* Notes to the schedule:

Column 1: plaintiff number

Column 2: plaintiff name

Column 3: salary component of each claim

Column 4: damages awarded = column 3 x 0.56

Column 5: interest awarded = column 4 x 0.08 x 10.39

Column 6: judgment sum = column 4 + column 5

Judgment accordingly.
________________________________________________________________

Ame Lawyers: Lawyers for the Plaintiffs
Solicitor-General: Lawyer for the Defendants