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University of Papua New Guinea v Duwaino [2009] PGNC 107; N3723 (20 August 2009)

N3723

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CIA NO 185 0F 2006

UNIVERSITY OF PAPUA NEW GUINEA
First Appellant

CHIEF OF SECURITY, MIKE BUSSY
Second Appellant

OPERATIONS COMMANDER, THOMAS NIYAGA
Third Appellant

V

JERRY DUWAINO
Respondent

Waigani: Cannings J
2009: 10 June, 20 August

APPEAL

LAW OF EMPLOYMENT – contract of service – termination of employment – wrongful dismissal claim – whether contract of employment validly terminated – whether employee entitled to right to be heard prior to termination.

DAMAGES – amount of damages – whether restricted to the notice period provided for under the Employment Act.

The respondent was employed by a university as a security guard. His employment was summarily terminated for failure to follow instructions from his supervisor resulting in a break-and-enter at the university campus. He was not given a right to be heard before being dismissed. The respondent sued the university, the chief of security and his supervisor in the District Court for wrongful dismissal. The District Court found in the respondent’s favour and awarded him general damages of K10,000.00. The appellants appealed on four grounds, viz that the District Court failed to consider: (1) the law relating to the right of an employer to hire and fire at will; (2) the law relating to (a) the employer’s liability extending only to two weeks pay in lieu of notice and (b) the employer being under no obligation to give reasons; (3) the failure of the respondent to mitigate his losses; (4) that the respondent was only entitled to two weeks pay in lieu of notice.

Held:

(1) Ground 1 was dismissed as it was reasonably inferred that the respondent was entitled to the benefit of a formal performance review procedure and a right to be heard prior to dismissal of employment.

(2) Ground 2 was dismissed as (a) the amount of damages awarded by the District Court was not beyond the amount permitted by the Employment Act and (b) this was not a simple employer-employee relationship and there was a duty to give reasons for dismissal.

(3) Ground 3 was upheld as the District Court did not take into account the duty of the respondent to mitigate his losses; and an appropriate reduction would have been 10% of the amount awarded, K1,000.00.

(4) Ground 4 was dismissed as it is a repetition of ground 2(a) and the appellants did not allege that any other error of law was made by the District Court.

(5) The appeal was substantively dismissed and the District Court’s order quashed and replaced with a substitute order: the respondent is awarded damages of K9,000.00 plus interest of K5,544.00, being a total judgment sum of K14,544.00; plus costs of K500.00.

Cases cited

The following cases are cited in the judgment:

Ayleen Bure and Others v Robert Kapo (2005) N2902
Bal Bar and Stettin Bay Lumber Company Limited v Maima Kora (2008) N3290
Bernbert Toa v Ly Cuong-Long (2008) N3471
Bougainville Copper Ltd v Liu [1978] PNGLR 221
Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24
David Coyle v Loani Henao [2000] PNGLR 17
Egga Pua v Otto Benal Magiten (2005) N2892
Jimmy Malai v PNG Teachers Association [1992] PNGLR 568
Joses Taru v New Ireland Shipping Ltd (2008) N3501
Livingston v Raywards Coal Co [1880] 5 App Cases 25
Losia Mesa v Gari Baki, Commissioner of Police WS 731/2007, 26.06.09
MVIL v Maki Kol (2007) SC902
New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946
Paddy Fagon v Negiso Distributors Pty Ltd (1999) N1900
Peter Kirin v John Paroda (2004) N2599
PNGBC v Jeff Tole (2002) SC694
Rooney v Forest Industries Council of PNG & Anor [1990] PNGLR 407
Tony Mong v Yong Mong [1997] PNGLR 171
Vere Kialo and Chemica Didiman v Bernard Tiau CIA No 46/2006, 16.02.07
Vitus Sukuramu v New Britain Palm Oil Ltd (2007) N3124

APPEAL

This was an appeal from a decision of the District Court upholding a claim for wrongful dismissal.

Counsel

C Lari, for the appellants
J Duwaino, the respondent, in person

20 August, 2009

1. CANNINGS J: This is an appeal from a decision of the Port Moresby District Court in a wrongful dismissal case. The complainant in the District Court was the respondent, Jerry Duwaino, who was employed as a security guard by the University of Papua New Guinea at its Waigani campus. After he had been employed for one year and 13 days there was a breach of security in the early hours of the morning when Mr Duwaino was on duty. Armed criminals entered the residence of a staff member in the area that Mr Duwaino was patrolling and stole some property.

2. Mr Duwaino was held responsible for this breach of security. The University terminated his employment later that day without prior notice and without giving him a right to be heard on why he was being sacked. He was told in writing by his supervisor, the third appellant, Thomas Niyaga, that he was being stood down for failure to follow instructions, which had resulted in the security breach. He did not receive a formal notice of termination of employment.

3. He commenced proceedings in the District Court against the University and Mr Niyaga and the University’s chief of security Mike Bussy seeking reinstatement and back pay for unlawful termination. His complaint was that there was never any formal investigation into the security incident that he was allegedly responsible for and that he was not given an opportunity to be heard before the decision was made to terminate him.

4. The presiding Magistrate, Mr C Bidar, upheld the complaint and awarded Mr Duwaino damages of K10,000.00 and ordered the University to pay his legal costs. The appeal is against that decision.

GROUNDS OF APPEAL

5. The University, Mr Bussy and Mr Niyaga, have appealed to the National Court on four grounds:

1. The learned magistrate failed to consider the law relating to the right of an employer to hire and fire at will.

2. The court failed to consider the law relating to contracts of employment wherein the employer’s liability extends to two weeks pay in lieu of notice and that the employer is under no obligation to give reasons for termination.

3. The Court failed to consider the failure of the respondent to mitigate his losses, if any.

4. The amount of damages is excessive as the respondent was only entitled to two weeks pay in lieu of notice.

GROUND 1: FAILURE TO CONSIDER LAW RELATING TO RIGHT OF AN EMPLOYER TO HIRE AND FIRE AT WILL

6. This is a vague ground of appeal. Simply saying that the court below ‘failed to consider the law relating to the right of an employer to hire and fire at will’ does not comply with the duty of an appellant to plead with particularity and precision the manner in which it is alleged that the court below erred in fact and/or law (Bougainville Copper Ltd v Liu [1978] PNGLR 221, Tony Mong v Yong Mong [1997] PNGLR 171, David Coyle v Loani Henao [2000] PNGLR 17, Peter Kirin v John Paroda (2004) N2599). However, as it became clear during the course of the hearing what point the appellants were making and the respondent did not argue that this ground of appeal should be struck out on the ground of lack of particularity, I have dealt with it.

7. Ms Lari, for the appellants, submitted that under the common law adopted as part of the underlying law of Papua New Guinea if there is a ‘simple’ employer-employee relationship the employer can hire and fire at will, ie: the employer can:

- terminate the services of an employee whenever it wants to;

- with or without good reasons;

- without giving a right to be heard;

- without giving any right of appeal.

8. The only qualification to that common law right is that if the termination of employment is not based on one or more of the grounds set out in Section 36 (termination of contract without notice) of the Employment Act, in which case money in lieu of notice has to be paid under Section 34 (notice of termination) of the Employment Act.

9. Ms Lari’s summary of the law would seem to be correct in light of the recent decision of the Supreme Court in New Britain Palm Oil Ltd v Vitus Sukuramu (2008) SC946. In that case decided under Section 3 of the Supreme Court Act by a two-Judge bench (Sakora J and Lay J) my decision in Vitus Sukuramu v New Britain Palm Oil Ltd (2007) N3124 was overruled. I had developed the underlying law by ruling that the fire at will principle was no longer appropriate to Papua New Guinea and that there is to be implied in every contract of employment (subject to its exclusion by agreement) a right to be heard prior to termination of employment. The Supreme Court ruled that the National Court had in the circumstances of that case no power to develop the underlying law as the Supreme Court had already declared the underlying law – reaffirming the fire at will principle – in Jimmy Malai v PNG Teachers Association [1992] PNGLR 568. As my decision to develop the underlying law was overruled the fire at will principle has been reinstated. It is important to appreciate, however, that it is a general principle only. It is capable of being displaced by the terms of any contract of employment (eg Ayleen Bure and Others v Robert Kapo (2005) N2902).

10. Nothing displaced the general principle in the present case, Ms Lari submitted, as there was no written contract of employment between the University and Mr Duwaino. It was just a simple employer-employee relationship.

11. I do not accept that proposition. It was in evidence before the District Court that Mr Duwaino was offered employment through a letter of offer signed by the Registrar of the University in these terms:

The position is offered to you for a probation period of twelve months. After this period the University will review your performance, with a view to confirming your appointment. You should note, however, that because of the nature of security, your performance will be reviewed every two years thereafter and if found unsatisfactory, your employment with Uniforce will be terminated forthwith. ...

The conditions of service at this University are comparable to those that apply in the National Public Service, but are written to reflect the type of work that you will perform in Security.

12. It is reasonable to infer from this letter of offer (which Mr. Duwaino signed and which set the platform for his employment) that his continued employment would be subject to regular performance reviews, ie there would be a formal process of appraisal of performance along the lines that are carried out in the National Public Service. Performance appraisals are carried out so the employee receiving a formal assessment of his or her performance can then be given an opportunity to comment on the appraisal before a decision is made whether to promote or demote the employee or award a salary increment or terminate his or her employment. Mr. Duwaino, having been offered employment in the above terms, was entitled to the benefit of a formal performance review procedure and a right to be heard prior to termination of employment, just as would be the case in the National Public Service. The fire at will principle was significantly qualified by the terms of the Registrar’s offer, which were accepted by Mr. Duwaino and became terms of his contract of employment.

13. I do not therefore consider that the learned Magistrate erred by failing to consider the law relating to the right of the employer to hire and fire at will. In this case the University lacked the power to fire at will. What should have happened is that the Operations Commander or the Chief of Security should have put the allegations to Mr. Duwaino in writing and asked him to show cause why he should not be terminated over the break-and-enter incident that he allegedly negligently allowed to happen. Instead he was sacked virtually on the spot. It was clearly open to the learned Magistrate to conclude that as a matter of law this was wrong: it was contrary to the implied terms of the contract of employment between the University and Mr. Duwaino.

Ground 1 is therefore dismissed.

GROUND 2: FAILURE TO CONSIDER LAW RELATING TO LIMITATION OF EMPLOYER’S LIABILITY AND ABSENCE OF DUTY TO GIVE REASONS

14. There are two distinct arguments in this ground of appeal:

(a) that the amount of damages that could have been awarded by the District Court was restricted to the amount of wages that would have been earned in a two week period; and

(b) that an employer has no duty to give reasons for terminating an employee’s employment.

15. It is argued that the learned Magistrate erred by ignoring these principles.

(a) The two-week limitation on liability

16. This argument is based on Sections 34 (notice of termination) and 35 (termination of contract without notice) of the Employment Act, the relevant provisions being:

Section 34(2), which states:

... a party to a contract of service may, at any time, give notice to the other party of his intention to terminate the contract.

Section 34(3), which states:

The length of notice of intention required to terminate a contract of service shall be the same for both parties and—

(a) shall be as specified in the contract; or

(b) shall be not less than the periods specified in Subsection (4).

Section 34(4)(c), 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 ... two weeks' notice if the employee has been employed for not less than one year and for less than five years.

Section 35(2), 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.

17. The argument is that as Mr Duwaino was employed for a little over one year his contract of employment could be terminated without reason simply by giving him two weeks notice or by giving him two weeks salary in lieu of notice. The amount of damages awarded to him should therefore not have exceeded that amount, which in this case was about K367.00. The same argument has been put to me in two other wrongful dismissal cases, Vere Kialo and Chemica Didiman v Bernard Tiau CIA No 46/2006, 16.02.07 and Bal Bar and Stettin Bay Lumber Company Limited v Maima Kora (2008) N3290. In both cases I rejected it. There is apparently PNG authority to support it but Ms Lari did not refer to any. In particular she did not refer to any Supreme Court decision I am bound to follow. I consider that the argument is flawed.

18. When an employee succeeds in proving that their employment has been unlawfully terminated, they establish a cause of action in breach of contract. The employee is therefore entitled to damages – if damages have been sought in their statement of claim – 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, they would have been in if the wrongdoer had not committed the wrongful act (Livingston v Raywards Coal Co [1880] 5 App Cases 25; MVIL v Maki Kol (2007) SC902). It follows that the dismissed employee is to be compensated not only for the wages that they have lost for the length of the notice period but also for the pain, suffering and inconvenience caused to them by the employer’s unlawful act.

19. As I pointed out in Sukuramu’s case and the Chemica Didiman case 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. When a person is wrongfully – ie unlawfully – dismissed, the pain and anguish are magnified. Such a person deserves an adequate award of damages to compensate them for the injury to their livelihood and emotions and those of their dependants caused by the wrongful dismissal.

20. Here, the learned Magistrate awarded Mr Duwaino K10,000.00 damages even though he did not ask for damages, he wanted to be reinstated. The appellants have not argued that his Worship erred by awarding damages. Their argument is that it was beyond the amount permitted by the Employment Act. I reject the argument and dismiss the first limb of ground 2.

(b) No duty to give reasons

21. The principle on which this argument is based is that in a simple employer-employee relationship an employer can terminate the employment contract without giving the employee any reasons (Paddy Fagon v Negiso Distributors Pty Ltd (1999) N1900). Ms Lari submitted that the employment relationship in the present case was a simple one and therefore Mr Duwaino’s employment could be terminated without giving any reasons and that the learned Magistrate erred by failing to consider this principle of law.

22. I reject this submission for two reasons.

23. First, as I have already determined, this was not a simple employer-employee relationship. There was an implied term that there would be regular performance reviews and a right to be heard prior to termination of employment. It follows that there was a duty on the part of the University to give reasons for terminating employment.

24. Secondly, the learned Magistrate did not award damages due to a failure to give reasons. Damages were awarded on account of the failure to administer a right to be heard prior to termination. This is clear from the respondent’s statement of claim in the District Court. His complaint was not that he was not given reasons but that he was not given a right to be heard. The duty to give reasons and the duty to give a right to be heard are two different requirements (Bernbert Toa v Ly Cuong-Long (2008) N3471). The appellants’ argument confuses the two requirements and fails to disclose how the learned Magistrate erred in law. I dismiss the second limb of ground 2.

25. The whole of ground 2 is thus dismissed.

GROUND 3: FAILURE TO CONSIDER RESPONDENT’S DUTY TO MITIGATE LOSSES

26. It is a fundamental principle of the law of damages that a successful party has a duty to mitigate (lessen the intensity of) their losses. If they fail to do that the award of damages to which they would otherwise be entitled is reduced. In wrongful dismissal cases this means that the dismissed employee must demonstrate that he or she has tried to find an alternative source of income (Rooney v Forest Industries Council of PNG & Anor [1990] PNGLR 407, PNGBC v Jeff Tole (2002) SC694, Joses Taru v New Ireland Shipping Ltd (2008) N3501).

27. The appellants argue that in awarding K10,000.00 damages to Mr Duwaino the learned Magistrate failed to take into account Mr Duwaino’s duty to mitigate his losses. There was no evidence that he had tried to find another job so the award of K10,000.00 was excessive.

28. This is a valid argument. The learned Magistrate should have, with respect, considered the duty of the dismissed employee to mitigate his losses. His Worship did not do that. There appears to have been no evidence before the District Court to show that Mr Duwaino did in fact make a reasonable attempt to mitigate his losses, eg by trying to find another job as a security guard. I consider that an appropriate reduction would have been 10% of the amount awarded, K1,000.00.

29. I uphold ground 3.

GROUND 4: AMOUNT OF DAMAGES EXCESSIVE

30. The argument here is that the amount of damages awarded was excessive as Mr Duwaino was entitled to only two weeks salary in lieu of notice.

31. I have already dealt with this argument in ground 2 and dismissed it. It is the only argument raised in ground 4, which is surprising as his Worship did not explain how he arrived at the figure of K10,000.00 (for example by comparing the facts of the case against other wrongful dismissal cases and listing what amounts of general damages the District Court has been awarding). Though it may appear on the face of it to be a large amount of damages to award to someone who has only been employed for a little over a year I am not prepared to say that it was an excessive amount. In any event, the argument has not been raised that it was manifestly excessive.

32. Therefore ground 4 fails entirely.

WHAT ORDERS SHOULD BE MADE?

33. I have upheld one of the four grounds of appeal and, to that limited extent, I am satisfied for the purposes of Section 230(2) (power of National Court on appeal) of the District Courts Act that there has been a substantial miscarriage of justice and that the appeal should be allowed.

34. However, as most of the grounds of appeal have been dismissed the appeal will be, subject to the issue of mitigation of losses, substantively dismissed. The bulk of the District Court order that awarded damages will be left intact. I will make a substitute order under Section 230(1)(c) of the District Courts Act that accommodates my determination of the grounds of appeal. I will make the order only against the first appellant, the University as it was the respondent’s employer and should be solely responsible for satisfying any judgment debt.

INTEREST

35. The District Court order did not include any interest on the award of damages, probably because the statement of claim did not seek any. As I am going to quash the District Court’s order and substitute it with a new one, I need to consider whether to include an interest component in the new order. This would be done under Section 230(1)(e) of the District Courts Act and Section 1 (interest on certain debts and damages) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52, which states:

... in proceedings in a court for the recovery of a debt or damages the court may order that there be included in the sum for which judgment is given interest, at such rate as it thinks proper, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

36. As Bredmeyer J pointed out in Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24, this section confers a four-fold discretion on the Judge: (1) whether to grant interest at all; (2) to fix the rate; (3) to grant interest on the whole or part of the debt or damages for which judgment has been given; and (4) to fix the period for which interest will run.

37. I exercise that discretion in the following way:

- A successful party should normally receive interest on damages. Though interest was not expressly sought the National Court still has a discretion to award it (Losia Mesa v Gari Baki, Commissioner of Police WS 731/2007, 26.06.09). I think it is fair and just to award interest in this case particularly as nothing was paid to Mr Duwaino after he won the case in the District Court. He has been denied the fruits of the judgment for a long time.

- The rate of interest commonly used is 8%. In view of current economic conditions in the country I think 8% is the proper rate of interest.

- Interest should be payable on the whole of the sum of damages for which judgment is given.

- The appropriate period is the whole of the period between the date on which the cause of action arose and the date of the judgment. The cause of action arose on the day Mr Duwaino was sacked, 13 November 2001. The appropriate period, for the sake of mathematical convenience, is 7.7 years.

38. I calculate the amount of interest by applying the following 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.

Thus K9,000.00 x 0.08 x 7.8 = K5,544.00.

COSTS

39. As the appeal is being substantively dismissed I will award costs to the respondent, Mr Duwaino. The National Court has the power to make an order for a specific sum of costs. It is not necessary for the costs to be taxed (Egga Pua v Otto Benal Magiten (2005) N2892). I will fix the costs at K500.00.

ORDER

(1) Grounds 1, 2 and 4 of the appeal (set out in paragraphs 3(a), (b) and (d) of the notice of appeal) are dismissed and the appeal is to that extent dismissed.

(2) Ground 3 of the appeal (set out in paragraph 3(c) of the notice of appeal) is upheld and the appeal is to that extent allowed.

(3) The order of the District Court of 11 October 2006 in PMDC No 3799 of 2002 at Port Moresby is quashed and substituted with the following.

(4) The first appellant shall pay to the respondent damages of K9,000.00 plus interest of K5,544.00, being a total judgment sum of K14,544.00.

(5) The first appellant shall in addition pay to the respondent K500.00 costs in respect of this appeal.

(6) The above sums shall be paid to the respondent in full within 30 days after the date of entry of the National Court’s order.

Appeal substantively dismissed; order of District Court quashed and substituted order made.
_____________________

Nonggorr & Associates: Lawyers for the appellants
Lawyers for the respondent: The Respondent in Person