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Wilson v ITS Service Corporation [1998] PNGLR 110 (25 June 1998)

[1998] PNGLR 110

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

ROGER LENNOX WILSON

V

ITS SERVICE CORPORATION;
THE LOTTO PTY LIMITED;

WAIGANI AND GOROKA: SAWONG J
20, 23 May 1997 and 25 June 1998

Facts

The plaintiff was initially employed under a contract of employment with The Lotto as its financial controller. Pursuant to an existing management agreement between the defendants, the plaintiff subsequently on various occasion also performed as the first defendant’s acting general manager. The second defendant argued that when the plaintiff was subsequently appointed as acting general manager of the first defendant, by necessary implication, his first contract with the second defendant as its financial controller was vacated and therefore when terminating his contract of employment, neither of the defendants were required to comply with the terms of the first contract, particularly the term concerning the period of notice to be given.

Held

1. On the evidence, it is clear that the plaintiff was appointed on various occasions as the acting general manager for the first defendant but continued to hold his substantive position as financial controller of the second defendant. Hence, the plaintiff’s initial contract of employment subsisted.
   
2. Hence, when terminating the plaintiff’s employment contract the notice period and such other particulars concerning other entitlements should have been observed by the defendants.
   
3. Under the circumstances, the plaintiff was wrongfully dismissed.
   
4. Damages claimed by the plaintiff for distress suffered as a consequence of the wrongful dismissal are awarded. Harding v Teporoi Timbers Pty Ltd [1988] PNGLR 128 followed.
   

Papua New Guinea case cited

Hardings v Teporoi Timbers Pty Ltd [1988] PNGLR 128.

Other case cited

Stevens v Brodribb Sawmilling Co. Pty Ltd (1986) 160 CLR 16.

Counsel

D M Hill, for the plaintiff.
R D Riddell, for the defendants.

25 June 1998

SAWONG J. This was a trial of a claim for; inter alia, damages for wrongful dismissal. The plaintiff commenced proceedings by a writ of summons.

The evidence for both parties consisted of both oral and documentary evidence. The plaintiff filed evidence by affidavit and he was cross-examined on it. The defendants called Mr Ng who gave oral sworn evidence.

At the end of the trial, the parties agreed to certain issues. The court also directed that both parties file written submissions. Those have been filed and I have read and considered the evidence and the respective submissions carefully.

1. Employment of the plaintiff by the defendants

(a) Was the plaintiff employed by the second defendant as Financial Controller on a three-year contract from 1 October 1992 pursuant to an agreement dated 1 October 1992?

In so far as this issue is concerned, I note that the defendants admit in their submissions that he was in fact so employed. The qualification set out in the defendants’ submission is rejected. There is clear and overwhelming evidence.

(b) In February 1994, did the first defendant (with the consent of the second defendant) appoint the plaintiff to act as General Manager, on probation, of the second defendant?

I also note that the defendants admit that the plaintiff was appointed acting general manager on probation, from February 25, 1994 for the second defendant. He continued in that capacity up until his employment was terminated on July 10 1995. This was some 2 1/2 months before his employment contract, as Financial Controller of the second defendant was to expire.

(c) What was the legal status of the plaintiff’s employment with the first and the second defendant following such appointment?

It has been submitted that when the plaintiff was appointed acting General Manager of the first defendant, the plaintiff’s contract of employment with the second defendant was novated. In other words when the plaintiff was appointed acting general manager of ITS, his contract of employment with The Lotto, came to end and that he was now employed by ITS.

Mr Riddle submits that the evidence from the plaintiff himself coupled with his conduct supports that conclusion. Furthermore he submits that if one looks at the evidence, the contract of the plaintiff’s employment was passed to The Lotto.

In either event, it is absolutely clear that when the plaintiff was appointed acting General Manager, his substantive position was that of a Financial Controller for The Lotto. His employment at that point in time as Financial Controller of The Lotto was not terminated nor was it notated.

I do not accept the submission by the defendants that there was a novation of his contract of employment. The reasons offered by the defendants to say that by the plaintiff’s conduct constituted novation of the contract has no merit at all, for there is direct evidence from the plaintiff, when he complained of him having to perform two jobs. On the basis of the evidence, I find that the following facts are not in dispute.

In July or August of 1992, the second defendant (The Lotto) engaged the accounting firm of Ernest & Young of Brisbane to recruit a Financial Controller for The Lotto. A Ian Cameron of that accounting firm took on the task. Upon seeing an advertisement, the plaintiff applied for the job and Cameron interviewed him. The plaintiff was successful. On August 21, 1992 the plaintiff and Cameron signed a letter containing the offer of the terms and conditions of employment. They agreed that a formal contract would be prepared and signed by both parties later.

During the negotiations and when executing the contract with the plaintiff, Cameron was acting as agent for The Lotto.

The plaintiff commenced employment on October 1, 1992 as the Financial Controller for The Lotto.

In January 1993, following changes to government policy reflected in the budget which removed the favourable tax rate for gratuity and superannuation, the parties agreed, and the plaintiff’s salary package was adjusted to a total of K100,000.00 - comprising K60,000 for gross salary and a housing allowance of K39,940.00.

There is also in my view no dispute that a management agreement existed between the defendants pursuant to which ITS managed The Lotto operations of The Lotto and acted as its agents. Under the terms of that agreement, ITS was to provide, at its expense, a General Manager for The Lotto to properly and effectively run the business of The Lotto.

There is also no dispute that the plaintiff was on several occasions appointed on temporary basis to act as acting General Manager of The Lotto by ITS. The combined effect of these several acting appointments was that ITS appointed the plaintiff as acting General Manager for The Lotto on various occasions from February 25, 1994 to July 10, 1995.

The evidence is also quite clear and overwhelming. The evidence leaves no doubts in my mind that at the relevant material point in time, the plaintiff was appointed by the first defendant to act as acting General Manager of the second defendant (The Lotto).

(c) What was the legal status of the plaintiff’s employment with the first and second defendants following such appointment.

There is no dispute that a management agreement of some sort (I say some sort because this was never produced by the defendants, even though it was called for) existed between the defendants. There is also no dispute that pursuant to that agreement, the first defendant managed The Lotto operations of the second defendant. One of the terms of that agreement was that the second defendant was to provide, at its expenses, a General Manager for the second defendant to effectively run and manage the business and operations for the second defendant.

The first defendant submit, in essence that the control of the plaintiff in the performance of his duties had been passed to the second defendant, that is, long before the letter of termination dated April 10, 1995. Counsel for the defendants submit that there were a number of matters, which indicated or pointed to this conclusion. These matters included, that he was no longer remunerated by the first defendant, but was paid by the second defendant, that he assumed and performed the duties of general manager, that he was no longer referred to as the Financial Controller of the first defendant but as General Manager, he now reported to the second defendant, whereas before he reported to the General Manager of the first defendant, that his negotiations concerning his salary and conditions of employment were conducted solely with the first defendant and that his salary had been increased by the first defendant.

There is no dispute that the plaintiff was called upon to act as acting General Manager of The Lotto, by the first defendant with the consent of the second defendant pursuant to the said management agreement.

Mr Riddle relies on several English and Australian authorities for the proposition that whoever had the control over the plaintiff in his duties was ultimately the employer of the plaintiff. He relies on a passage from Mason J in Steven v Bodribb Sawmilling Co. Pty Ltd (1986) 160 CLR 16, which reads:

"But the existence of control, which is significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it as merely one of a number of indicia, which must be considered in the determination of that question. Other relevant matter include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and the provisions for holidays, the deductions of income tax and the delegation of work by the putative employee".

In general, it is the defendants’ submission that after February 25, 1995, the plaintiff was the employee of ITS and not The Lotto.

The evidence is quite clear in my view. The plaintiff had an employment contract with the second defendant as its Financial Controller for a period of three years starting from October 1992. Whilst he was still employed under the contract of employment by the second defendant, he was from time to time, called upon to act as its acting General Manager.

Thus the legal position of the plaintiff was that he was financial controller for the second defendant and acting general manager for both the first and second defendants.

2. Agreement to Increase the Plaintiff’s salary in March 1995

The evidence relating to the issues raised here are really not contentions. In so far as they are contentions, I prefer the evidence of Mr Wilson than that of Mr Ng. Much of the evidence by the plaintiff relating to this issue was not challenged, nor destroyed in cross-examination. The only basis that Mr Ng disputed this claim was that it was evidenced in writing. I think the answer is quite simple; there is no law, which says that an agreement must be in writing. I would therefore accept the evidence of the plaintiff and the submission made on behalf of the plaintiff.

3. Dismissal of the plaintiff

It is not in dispute that the plaintiff was liable to be dismissed from his employment with the second defendant pursuant to the contract of employment. The employment was to be terminated by either party by giving three months notice to the other or by three months pay in lieu thereof.

The defendants submit that the true legal position of the plaintiff as at March 1994, was that he was employed by ITS and not The Lotto. On that basis it was submitted on behalf of the defendants the notice was only required to be given by ITS and not The Lotto.

I do not accept the submission put by the defendants. First their submissions are based on the misconception that they have on the true legal position of the plaintiff’s employment as at March 1994. The evidence, in essence is very clear. The Lotto employed the plaintiff under a contract of employment as its Financial Controller. Whilst he was occupying that position and whilst the said contract of employment was still existing, he was appointed on various occasions by ITS, with the consent of The Lotto, to act as acting General Manager of ITS. I accept the evidence from the plaintiff; it was always the intention and indeed the practice between all three parties that upon the expiry of the acting period, the plaintiff would revert to his substantive position with The Lotto as its Financial Controller. There is no dispute that this was to be the case.

In all the circumstances, on the basis of the evidence, I find that both ITS and The Lotto gave insufficient notice. His employment was therefore wrongfully terminated. The issue of plaintiff’s work permit is not relevant. In any event. I have find that the plaintiff was still employed by The Lotto as its Financial Controller up until that June 29, 1995. This piece of evidence goes to support the findings that I have already made.

5. Settlement of all Claims

The facts in regard to this issue are not much in dispute between the parties. However there is a dispute as to the legal consequences of the factual situation. The facts as I find them are as follows.

In April 1995, ITS gave notice to the plaintiff that his employment as acting General Manager was to be terminated by 10 July 1995.

Subsequently, ITS, by a letter dated 22 June 1995, requested the plaintiff to hand over all records. In that letter he was informed that his employment as Financial Controller with The Lotto would also be terminated.

Following these two correspondences, and on 7 July 1995, the plaintiff spoke to Ng about, inter alia, settlement of all his entitlements. During that conversation Ng told him to put his claim in writing. On the same day the plaintiff sent a facsimile to Ng. Ng passed that letter to other ITS employees, including a Mark Michalko. Ng was then instructed by the said Michalko to offer the following in exchange for the plaintiff’s agreement to settle all existing and future claims against ITS and The Lotto:

(i) ITS to pay salary to the plaintiff from 1 July through to 30 September, based on a salary of K66,000 per year;

(ii) ITS to pay the plaintiff his unused holiday pay based on a salary of K66,000 per year;

(iii) The plaintiff to be reimbursed economy class airfares for himself and his family from Port Moresby to Brisbane;

The plaintiff to be paid for the removal of his personal effects to Brisbane.

On July 10, 1995 being the plaintiff’s last day at work, Ng set about achieving a settlement. He asked the plaintiff to calculate his salary through to September 30, 1995 and fax the details to him, after the administrative manager had checked them. The plaintiff complied with that request and he set out the calculations for:

(i) his salary up to 30 September 1995;

(ii) the payment required to be made for unused annual leave up to 30 September 1995;

(iii) the payment required to be made for long service leave after three years of service;

(iv) additional payments to be made for exchange rate variations for those payments on the basis of AUD$ 1.4 to K1.

In response, Ng advised the plaintiff by telephone that he would not be paid long service leave and that his leave entitlements would only be calculated and paid to July 11, 1995. He requested the plaintiff to redo the calculations on that basis. It is significant to note that at this stage Ng did not dispute or made any objection to payment of exchange rate variations on both salary and the payment for unused annual leave.

The plaintiff redid the calculations and faxed them to Ng. Ng then telephone the plaintiff and asked him (plaintiff) about the number of unused annual leave days claimed to July 10, 1995, in the new calculations, as it was different from the previous calculations.

In response the plaintiff sent Ng a facsimile setting out the full details of leave accumulated to July 10, 1995 and full details of leave taken to that date. That document disclosed that as at July 10, 1995 the plaintiff’s unused leave entitlement amount to 438 hours (54.8 days) and that the plaintiff was entitled to receive payment of K13,910.88 for such leave.

Ng then sent a settlement proposal to the plaintiff.

The plaintiff then sought and obtained advises from Campbell Hudson of Gadens Ridgeway Lawyers to discuss the offer. Upon receiving the advise, the plaintiff made the following additions to the settlement proposal in that document;

(i) opposite paragraphs 4 & 5, he wrote the figures K16,515.00 (being the amount claimed by the plaintiff as gross salary to 30 September 1995);

(ii) opposite paragraphs 7 he wrote the figures K13,910.88 (being the amount for accrued annual leave up to 10 July 1995);

(iii) in paragraph 10 - he wrote the words "and The Lotto Pty Ltd and ITS Service Corporation will have no further claim on Roger Lennox Wilson".

The plaintiff signed the settlement proposal and faxed it back to Ng. The defendants then calculated what payment they would make to the plaintiff. In those calculations the defendants used the plaintiff’s figure of K16,515 as the plaintiff’s salary to September 30, 1995. However they only allowed the plaintiff 43 days for accrued annual leave instead of 54.8 days, and as a consequence they calculated a figure of K10,925.44 as the payment for accrued leave and not the sum of K13,910.88.

The defendants allowed and used an exchange rate variation of AUD$ 1.4 to K1. to the sums of K16,515.00 and K10,925.44 respectively. Thus according to the defendants the total amount due to the plaintiff for those matters including tax was K27,440.44. (If the defendants had accepted and used the plaintiff’s calculation of K16,515 and K13,910.88, then the gross sum would have been K30,425.88)

From that gross sum (K27,440.40) tax was deducted, leaving a nett payable to the plaintiff of K25,223.34. From this nett sum, the defendants deducted:

(a) Plaintiff’s prepaid rental from

July 11 to July 31 - K3,628.00

(b) Plaintiff’s bond paid by the defendant - K5,200.00

TOTAL K8,828.00

The nett balance remaining after these deductions was K16,395.34, and this was paid to the plaintiff by two cheques of K2,835.89 (from ITS) and K13,557.45 from The Lotto.

By a letter dated July 18, 1995 the plaintiff wrote to ITS advising that he accepted those cheques as part payment only of his termination pay, and that as ITS had not adhered to the previous agreement he had instructed his lawyers to take that matter up on his behalf. In that he also told ITS that he had not been given reasonable notice to vacate the premises and the required repatriation costs to remove his personal effects and the necessary airline tickets.

On 20 July 1995, the defendants supplied the plaintiff with airline tickets. Some seven days later on 27 July 1995, the defendants supplied a purchase order for the removal of the plaintiff’s personal effects.

What then is the legal consequence of the undisputed factual situation as set out above?

The plaintiff says that the defendants failed to make prompt payment of all the specified amounts after including exchange rate variations and deducting tax therefrom but without making any other deduction and that as a consequence there was no performance of the proposal agreement. On the other hand the defendants say that there was a concluded agreement and that final payment was made under the agreement. In other words the defendants say that there was a concluded agreement, and that their calculations for leave were correct and that they were correct in deducting the rent and bond monies.

In summary the plaintiff’s submission is that as a matter of law, the defendants letter of 10 July 1995 (without the plaintiff’s additions) was an offer by the defendants to the plaintiff to settle all his claims on the terms contained in that letter. The plaintiff did not accept this offer, because he added particular amounts, which were to be used in determining the payout, and he further added a release clause to be signed by the defendants. Those were sent back to Ng, the effect being that this amounted to a counter offer of the plaintiff to the defendants, which was not accepted by the defendants.

The defendants essentially made two submissions. The first is that there was a binding agreement between the defendants and the plaintiff, which is contained in the letter of 10 July 1995 from Ng to the plaintiff together with its additions and amendments. On that basis they submit that the plaintiff has been properly paid, and that the defendants properly made the deduction for rental and bond.

The second leg of this submission is if the payments made to the plaintiff were insufficient, then the terms of the agreement for settlement have not been seriously breached.

I have considered the submissions. I find that there was a binding agreement between the parties to settle the termination entitlements of the plaintiff. The terms of the agreement are contained in that letter of July 10, 1995 with the amendments. I say this because the amendments were accepted and signed by the plaintiff and Alex Lathan on behalf of the defendants. It follows that the defendants had accept the additions made by the plaintiff. That being the case, the plaintiff was entitled to be paid promptly the amount he claimed and which amounts were accepted by the defendants. If the defendants had done that, then the plaintiff would not have been short paid. Accordingly I find that the correct amount that was to be paid is as follows:

(a) Accrued holiday pay K13,910.88

(b) His salary to 30 September K16,515.00

(c) Exchange variation K10,610.95

TOTAL K41,036.83

I also find that the defendants wrongly deducted the rent and bond monies, because in so far as the bond is of concern, that is a matter between the landlord and the tenant. The tenant in this case was the defendant, as they were paying the rent on behalf of the plaintiff. These follow from the findings I have made that the defendants had wrongfully terminated his services. Furthermore the defendants did not pay the plaintiff his entitlements promptly and as a result he was not able to move out of the premises until 27 July 1995. In these circumstances, it can hardly be said that the defendants acted promptly.

As the plaintiff has received a sum of K16,395.34, the balance of K24,641.49 must be paid to the plaintiff. Naturally an allowance must be made for taxation.

There is in my view undisputed evidence that the plaintiff is entitled to have the contract rectified to include provision for exchange rates variation. Here I refer to the evidence of Cameron, who was the agent for one of the defendants, that it was intended by all parties that this was to be included in the contract of employment. In any case, there is provision in the employment contract for an exchange rate adjustment on termination pay.

In these circumstances, I would make an order to vary the terms of the contract to include provisions for exchange rate variation.

The plaintiff also claimed damage for distress suffered as a result of his dismissal. The law is clearly stated in Harding v Teporoi Timbers Pty Ltd [1988] PNGLR 128, where at p. 136, that:

"I consider that in employment contracts there cannot be any doubt that it is the contemplation of the parties that if the employee is dismissed in breach of the contract, it is foreseeable that the effect would be to cause him/her to suffer some degree of mental distress, frustration or upset. This is only a good common sense conclusion. I think in this case general damages are recoverable."

I would adopt and apply the above principle to the present case. There is some evidence that he suffered distress and frustration because of his dismissal. In the circumstances I would award a sum of K6,000.00 for distress and frustration.

In so far as mitigation of loss is concerned, I accept the evidence of the plaintiff. The evidence is quite clear that immediately after he was dismissed, he sought employment with other companies. He was not successful until April 1996 when he found employment.

Interest

I consider that interest must be awarded on the general damages at the rate of 8 per cent per annum to the date of judgement, and thereafter.

For the reasons I have given, I make the following orders that:

1. The Contract of Employment dated the 1 October 1992 made between the plaintiff and The Lotto be rectified by inserting the following terms,

"Should the exchange rate between the AUD$ and the Kina fall between 1.4 AUD$ and one Kina then:

(a) such of the remuneration and housing allowance then payable to the employer in Kina is to be converted to AUD$ at the rate of 1.4 AUD$ to One Kina; and

(b) the employee is to be paid such kina amount which converts at the exchange rate then prevailing, to the AUD$ amount as specified in (a) above."

2. Judgement is entered for the plaintiff as follows:

(a) Against the first defendant, the sum of K41,291.00 together with exchange rate variation in accordance with the order made for exchange rate variation as set out in this judgement.

(b) Against the first and second defendants together, the sum of K38,146.00 together with exchange rate variations in accordance with exchange rate variation order.

(c) Against the first and second defendants jointly, the sum of K6,000.00 for distress and frustration.

Subject to the issue of costs, I direct that judgement be not entered for fourteen (14) days from today’s date. The parties may during that time apply to the court to vary the judgement to correct errors of calculation or errors of a similar kind. If the parties agreed then such an error has been made, it may be dealt with by chamber’s order. Otherwise, the judgement shall take effect and may be entered at the end of that time.

As the issue of costs has not been argued, I reserved my decision on this aspect until after the parties argue this issue.

Lawyers for the plaintiff: Allens Arthur Robinson.
Lawyers for the first & second defendants: Gadens Ridgeway.