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Wiebenga v 'Uta'atu [2005] TongaLawRp 28; [2005] Tonga LR 354 (21 July 2005)

IN THE COURT OF APPEAL OF TONGA

Wiebenga

v

'Uta'atu

Court of Appeal, Nuku'alofa
Webster CJ, Burchett and Tompkins JJ
App 14/2004

18 July 2005; 21 July 2005

Contract law – construction of term – context to be considered – appeal dismissed

For the Supreme Court decision, see Wiebenga v 'Uta'atu [2004] Tonga LR 285.

On 28 June 2002 a contract of employment was made relating to the services of the appellant, an Australian with expertise in information technology, rendered on behalf of the respondent, a Tongan public accountant practising in Nuku'alofa. The contract was to endure, if it was not earlier terminated, for a period of two years; but it contained a termination clause. A question arose as to the construction of the termination clause.

Held:

1. The most important rule of construction in practice was that which required attention to be given to the context. Words were to be understood as they were actually used.

2. The Court concluded that the trial judge was correct in deciding that clause 20 permitted the contract to be terminated by notice notwithstanding that it was not suggested the appellant had committed any form of misconduct or that any antecedent circumstance had arisen to justify the giving of the notice.

3. The appeal was dismissed with costs.

Counsel for appellant: Mr Garrett
Counsel for respondent: Mr Niu

Judgment

[1.] The only issue raised by the Notice of Appeal in this matter turns on the true construction of a contractual term.

[2.] The term in question is contained in a contract of employment made on 28 June 2002 relating to the services of the Appellant, an Australian with expertise in information technology, rendered on behalf of the Respondent, a Tongan public accountant practising in Nuku'alofa. The contract was to endure, if it was not earlier terminated, for a period of two years; but it contained a termination clause, which was the clause in question, as follows:

"20. Neither Employer nor Employee may unilaterally cancel the contract except for legal, just and valid cause.

a) Termination by Employer.

The Employer may terminate this contract, by serving a written notice to the Employee at least three (3) months before the intended date thereof or payment of separation / termination pay equivalent to two (2) months salary. The Employer shall bear the repatriation expenses of the Employee as outlined in Paragraph 9.

The Employer may also terminate this contract immediately without a minimum notice period should the Employee's conduct be of such a manner as to place the Employer's firm in jeopardy of legal action and/or on the following just causes: serious misconduct, wilful disobedience of Employer's lawful orders, habitual neglect of duties, absenteeism, or engaging in trade union activities and/or when Employee violates customs, traditions, and laws of the Kingdom of Tonga and/or terms of this agreement. In these circumstances, the Employee shall shoulder the repatriation expenses.

b) Termination by Employee.

The Employee may terminate this contract by serving three (3) months in advance written notice to the Employer. If the Employee terminates the contract before the completion of one year, the Employee shall shoulder all expenses relative to his repatriation back to Australia.

The Employee may also terminate this contract without serving any notice to the Employer for any of the following just causes: serious insult by the Employer, inhuman and unbearable treatment accorded the Employee by the Employer and violation of the terms and conditions of the employment contract by the Employer. In these circumstances, the Employer shall shoulder the cost of repatriation expenses (as outlined in Paragraph 9).

c) Termination due to illness.

Either party may terminate the contract on the ground of illness, diseases or injury suffered by the Employee. In this circumstance, the Employer shall shoulder the cost of repatriation."

The references in paragraphs (a) and (b) of the clause to paragraph 9 are obvious errors for clause 17.

[3.] Both paragraph (a) and paragraph (b) appear to contain provisions for termination simply by notice, with apparently appropriate consequences for repatriation, as well as provisions for termination for cause in the sense of conduct that might be thought to justify immediate termination. The question is whether, as the Appellant claims, the opening sentence of the clause so permeates the construction of every part of it that the provisions for termination on notice must be read down as permitting such a termination only for some antecedent event or situation, justifying the use of the power, that could constitute a "legal, just and valid cause". Presumably, on this construction, the antecedent justification, although giving rise to a "legal, just and valid cause", would be something less than the specified forms of misconduct that could lead to instant termination, albeit those are described simply as "just causes" in both paragraph (a) and paragraph (b). Difficult distinctions between degrees of conduct, in order to decide whether or not notice was required, would undoubtedly 90 have to be drawn. In argument, counsel accepted that his interpretation of the clause did involve these problems.

[4.] The Respondent, on the other hand, would construe the clause having regard to the logic of the structure of its paragraphs, (a) and (b) each providing for the two broad situations, the one where a party simply wishes to terminate and must therefore give notice or something in lieu of notice, and the other where some reason should allow termination without notice, while (c) provides less complicatedly for the eventuality of illness. On this view, it may be said – as the learned judge held – that, in the context of the whole clause, the opening sentence should be understood as a statement that only a circumstance or event (including the giving of the proper notice) set out in the clause may be availed of by a party as a "legal, just and valid cause" causing the contract to come to an end.

[5.] A more technical approach to the opening sentence would lay emphasis on the contrast between the word "cancel" used in it and the word "terminate" in paragraphs (a), (b) and (c). A cancellation of a contract implies that, from the moment of cancellation, it ceases to exist. But the termination provisions govern the contract's continued operation with respect to such things as a period of notice and repatriation; despite the language, in reality it is only the term of the service that is terminated, and that not necessarily at once. What is done is not done by cancelling the contract, but by the implementation of its relevant provisions. On this construction, the opening sentence could never be in conflict with the balance of the clause, since it speaks of something different. In effect, the clause, so interpreted, is saying that neither party may cancel the contract, "except for legal, just and valid cause" sufficient to justify cancellation (perhaps, frustration of contract, force majeure, etc), but each party is given the rights of termination of it set out in paragraphs (a), (b) and (c).

[6.] The Respondent relies on the elaboration in clause 20 of termination by notice by either employer or employee, with provision for payment in lieu of notice by the employer, and provisions dealing with repatriation distinguishing between termination by the employer on notice, termination by the employee on notice, termination for the fault of the employee, and termination for the fault of the employer. Paragraphs (a) and (b) appear to be intended to cover comprehensively the cases with which they deal, being a series of quite particular cases, and the maxim generalia specialibus non derogant would seem peculiarly applicable: the broad generality of the opening sentence of the clause does not derogate from the special provisions with respect to these cases.

[7.] The Appellant draws attention to another rule usually expressed in Latin, that enjoining a construction of a doubtful clause in an instrument contra proferentem, that is, against the party proffering or putting forward the particular clause. This is a rule to assist in solving ambiguities, but if the Court is able to see a clear meaning by reading a provision in accordance with its context, there will generally be no need to look further. A provision is not to be twisted into a meaning contrary to the interest of the party that drafted it where it properly bears a sensible construction.

[8.] The most important rule of construction in practice is that which requires attention to be given to the context. Words are to be understood as they are actually used. Sometimes, as where people are being ironic, words may convey even a meaning the opposite of that they would otherwise convey. Because of the governing role of context, Courts act on the principle stated in Pearce and Geddes, Statutory Interpretation in Australia, 4th ed. (1996), at 85:

"The starting point to the understanding of any document is that it must be read in its entirety."

We should not interpret the opening sentence without appreciating the light cast on it by the whole. When clause 20 is read in its entirety, the specific provisions for termination by notice do not appear readily reconcilable with the Appellant's construction of the opening sentence of clause 20. As is said in Pearce and Geddes, op. cit. at 110:

"It is commonsense that the drafter will have intended the general provisions to give way should they be applicable to the same subject matter as is dealt with specifically."

[9.] For these reasons, we conclude that the trial judge was correct in deciding that clause 20 did permit the contract to be terminated by notice notwithstanding that it was not suggested the Appellant had committed any form of misconduct or that any antecedent circumstance had arisen to justify the giving of the notice.

[10.] Although the Notice of Appeal raised no such ground, the Appellant's Outline of Argument suggested the judge also erred in a respect quite separate from the construction of clause 20. There was a general allegation in the Statement of Claim (which was admittedly incorrect at least as to some matters) that the Respondent "failed to pay the [Appellant] the two months salary, bonuses, accrued holiday pay, and overtime pay to which the [Appellant] was entitled pursuant to the terms of the agreement"; and it was also alleged that "[a]s a result of the [Respondent's] wrongful termination of the contract the [Appellant] suffered losses" the particulars of which were stated to include "Bonus for December 2003 in accordance with the agreement, a total of AUD 4,797". These allegations were denied in the Statement of Defence and, although of course it was unnecessary to plead to a particular, the pleading specifically stated that "[n]o bonus was due to the [Appellant] under the terms of the Contract".

[11.] It was in this state of the pleadings that the Appellant sought to argue the trial judge erred in failing to make a finding on the Appellant's claimed right to a bonus. There were several difficulties about this argument: (1) the issue does not seem to have been raised clearly as a separate head of claim at the hearing; (2) it was certainly not raised in the Notice of Appeal; and (3) as a result, no doubt, of the form of the Notice of Appeal, the relevant evidence was not included in the appeal papers. Having regard to these difficulties, and after some brief debate, the Appellant abandoned the point.

For these reasons, the appeal must be dismissed with costs.