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Gopalan v Uni Transport Pty Ltd [1986] PNGLR 101 (1 May 1986)

Papua New Guinea Law Reports - 1986

[1986] PNGLR 101 - David Gopalan v Uni Transport Pty Ltd 

[1986] PNGLR 101

N536

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

DAVID GOPALAN

V

UNI TRANSPORT PTY LTD

Waigani

Cory J

24 April 1986

1 May 1986

COMPANIES - Winding up - Preferential payments - Salary and wages - In respect of services rendered to company - Damages for wrongful dismissal not included - Companies Act (Ch No 146), s 310(1)(d).

CONSTITUTIONAL LAW - Fundamental rights - Protection and enforcement - Harsh and oppressive act - Refusal to make preferential payment under Companies Act - Claim for damages for wrongful dismissal not included - No discretion to pay - No harsh or oppressive act - Constitution, s 41 - Companies Act (Ch No 146), s 310(1)(d).

In proceedings for wrongful dismissal the employee of a company recovered damages which included sums for notional loss of wages, loss of holiday pay and loss of annual leave fares.

Following the appointment of a receiver and manager of the company the employee sought to have the damages so awarded paid as a preferential payment pursuant to the Companies Act (Ch No 146), s 310, which provides for priority of payment in respect of “all wages or salary of an employee ... in respect of services rendered by him to the company ...” or alternatively, pursuant to the Constitution, s 41, alleging that it was a “harsh and oppressive” act for the receiver and manager to refuse to make any payment to him.

Held

(1)      Neither the award of general damages for wrongful dismissal nor the amounts awarded for notional loss of wages etc, could properly be treated as wages “in respect of services rendered by him to the company” within the Companies Act (Ch No 146), s 310(1)(d), and neither was therefore entitled to priority.

Re VIP Insurances Ltd (In Liq) and the Companies Act [1978] 2 NSWLR 297; 3 ACLR 751 at 752, and

International Harvester Export Co v International Harvester Australia Ltd [1983] VicRp 50; [1983] 1 VR 539 at 545; [1983] VicRp 50; 7 ACLR 391 at 399, adopted and applied.

(2)      Pursuant to the Companies Act (Ch No 310) s 310, there was no exercise of any discretionary power on the part of the receiver and manager; it was mandatory that he satisfy the various claims in the order of priority laid down by the sections and accordingly no remedy was available pursuant to the Constitution, s 41.

SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314 at 322, applied.

Cases Cited

Avia Aihi v The State [1981] PNGLR 81.

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223.

International Harvester Export Co v International Harvester Australia Ltd [1983] VicRp 50; [1983] 1 VR 539; 7 ACLR 391.

Premdas v The Independent State of Papua New Guinea [1979] PNGLR 329.

SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314.

SCR No 4 of 1982; Re Delba Biri v Ninkama [1982] PNGLR 342.

VIP Insurances Ltd (In Liq) and the Companies Act, Re [1978] 2 NSWLR 297; 3 ACLR 751.

Summons

This was an application for a declaration that part of a judgment obtained in proceedings for wrongful dismissal of the applicant/plaintiff be treated as a preferential payment in the receivership of the defendant company.

Counsel

J Shepherd, for the plaintiff.

M Hirst, for the defendant.

Cur adv vult

1 May 1986

CORY J: In this action, on 2 August 1985, judgment was entered for the plaintiff in the sum of K24,176.45, being the damages awarded to the plaintiff for the defendant’s wrongful dismissal of the plaintiff on 24 December 1983. Included in the above damages were the following:

A receiver and manager for the defendant company was appointed by the secured creditors on 17 April 1985. Solicitors for the plaintiff have written to the receiver of the defendant company requesting payment of the above sums and the receiver has refused payment relying on the provisions of the Companies Act (Ch No 146), stating that the plaintiff is not thereby entitled to any preferential payment and is in the same position as other unsecured creditors.

The plaintiff seeks a declaration that:

“such part of the above judgment as the court deems fit, be paid to the plaintiff by the receivers and managers of the defendant as a preferential payment in the receivership.”

Section 207 of the Companies Act (Ch No 146) provides:

“Priorities as to Floating Charges

(1)      Where:

(a)      a receiver is appointed on behalf of the holders of any of he debentures of a Company that are secured by a floating charge; or

(b)      ...

then if the Company is not at the time in the course of being wound up, debts that in a winding up are preferential debts and are due by way of wages, salary, annual leave or long service leave, and any amount that in a winding-up is payable under s 310(3) or (5); or

(c)      shall be paid out of any assets coming into the hands of the receiver or other person taking possession in priority to any claim for principal or interest in respect of the debentures; and

(d)      shall be paid in the same order of priority as is prescribed by s 310 in respect of those debts and amounts.

(2)      For the purpose of subs (1), a reference in s 310(1)(d) or (f) to the commencement of the winding-up shall be read as a reference to the date of the appointment of the Receiver....”

The abovementioned s 310(1)(d) and (f) provides as follows:

“310(1)         Subject to this Act, and in particular to s 207 and s 253, in a winding up there shall be paid in priority to all other unsecured debts:

(d)      fourthly, all wages or salary of an employee, including earnings by way of commission... not exceeding K600 whether payable for time or piece work in respect of services rendered by him to the Company within four months of the commencement of the winding up; and

(f)      sixthly, all remuneration payable to an employee in respect of annual leave or long service leave,... accrued in respect of any period before the commencement of the winding-up.” (My emphasis.)

The question then arises whether the above amounts for notional wages etc awarded to the plaintiff as part of his damages are to be treated as wages “in respect of services rendered by him to the Company” and therefore entitled to priority in relation to payment. It has been conceded by counsel for the plaintiff that this is not the case, based on the Australian authorities in relation to the Australian Companies Acts which are in similar terms to the Papua New Guinea Act. In the case of Re VIP Insurances Ltd (In Liq) and the Companies Act [1978] 2 NSWLR 297; 3 ACLR 751, an employee was paid money under an award in lieu of notice. It was held that this payment was not a payment of wages or salary within the meaning of the Companies Act 1961 (NSW). Needham J at 298; 752 stated:

“In my opinion the payments are not payments of wages or salary. Wages or salary are, in my opinion consideration for work which is done by an employee....”

“The payment was a computation of the award of damages paid to the employee where the required termination of notice was not given by the employer.” In a similar case of International Harvester Export Co v International Harvester Australia Ltd [1983] VicRp 50; [1983] 1 VR 539; 7 ACLR 391, a decision of the Supreme Court of Victoria, the payments there involved were certain retrenchment payments to certain employees and as was mentioned at 546; 399 of the judgment of Beach J the question was whether these payments were “wages in respect of services rendered to the company” and he went on to hold at 547; 399:

“In my opinion retrenchment payments are not payments in respect of services to the company ... they are not wages but a sum in lieu of the wages the employee would have received had he continued in the employ of the company between the termination of his employment and the expiry of the notice.”

In the circumstances, the receivers and managers were justified in refusing to treat any part of the plaintiff’s award of damages as a preferential payment. The same considerations apply in relation to the plaintiff’s claim for notional loss of annual leave as applies to his notional loss of wages. The whole of the plaintiff’s judgment for damages for wrongful dismissal is therefore an unsecured debt with no priority for payment. As a result of the plaintiff having been wrongfully dismissed by the defendant, he has suffered substantial financial and physical hardship. He used up his return air ticket to Singapore by going to Australia to obtain a work permit in order to prosecute his claim for damages. He now has insufficient funds to return to Singapore where his elderly parents are situated and are in an impecunious condition. The plaintiff’s health has suffered and he has become despondent and almost suicidal at times. He has only been able to obtain part-time meagre employment and he has used up whatever savings he had at the time of his dismissal. It is in these circumstances that the plaintiff seeks to rely on s 41 of the Constitution and asks the Court to declare that the receivers and managers should pay some sum of money out of the total judgment. Section 41 provides as follows:

“Proscribed Acts

(1)      Notwithstanding anything to the contrary in any provision of any law, any act that is done under a valid law but in a particular case:

(a)      is harsh or oppressive; or

(b)      is not warranted by, or is disproportionate to, the requirements of the particular circumstances or of the particular case, or

(c)      ...

is an unlawful act.”

The “harsh or oppressive” act which the plaintiff here relies upon, is the refusal of the receivers and managers to pay any moneys. In the case of Premdas v The Independent State of Papua New Guinea [1979] PNGLR 329, Prentice CJ, in considering the scope and interpretation of s 41, where the claim was that there had been an abuse in the exercise of discretionary power, held (at 344) that the test to be applied was an objective one and approved the test applied in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223 namely, whether certain action was unreasonable “must be proved to be unreasonable in the sense that the Court considers it to be a decision that no reasonable body could have come to”. In the present case there was no exercise of any discretionary power on behalf of the receivers and managers, under s 310 of the Companies Act; it was mandatory that they satisfy the various claims in the order of priority laid down under that section. It could not in any way be argued that what they thereby did was unreasonable. The view that s 41 was not available where “the act” relied upon was done in a situation where there was no discretion to do the act, was adopted by a majority of the judges in the case of SCR No 1 of 1984; Re Minimum Penalties Legislation [1984] PNGLR 314, Kidu CJ (at 322) stating:

“... section 41 is not available in cases where the legislation gives no discretionary power to the person or authority to direct it to do or desist from doing something.”

In that case the act relied upon was the judicial act of imposing a minimum penalty, in relation to which the judge had no option but to impose the minimum penalty.

Section 155(4) of the Constitution is sought to be relied upon by the plaintiff as an alternative ground of relief.

Section 155(4) reads as following:

“Both the Supreme Court and the National Court have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of the particular case.”

In SCR No 4 of 1982; Re Delba Biri v Ninkama [1982] PNGLR 342 at 348, approving the interpretation adopted in Avia Aihi v The State [1981] PNGLR 81, it was held that this section “could not be interpreted in a way which would give the Court the power to override the provisions of an Act passed by Parliament”. The “justice” referred to in s 155(4) must be justice according to the law, in this case according to the Companies Act. The Companies Act, s 310, provides that payments are to be made in a certain order of priority. The plaintiff does not come within that order.

The order of the court is that the application of the plaintiff is refused.

Application refused

Lawyer for the plaintiff: N Kirriwom, Public Solicitor’s Office.

Lawyer for the defendant: Gadens.