N5063

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1583 OF 2009

BETWEEN:

PNG POWER LTD
Plaintiff

AND:

COTTINGHAM GENO
Defendant

Waigani: Salika DCJ
2012: 4th October, 13, 22 November
2013: 27 February

CIVIL CLAIM – Whether the plaintiff had a policy governing higher duty allowance, international market allowance and domestic market allowance – whether defendant was entitled to claim higher duty allowance – whether the defendant was entitled to claim international market allowance – whether the defendants actions amounted to fraud.

Facts

The plaintiff employed the Defendant as its Manager, Finance, from August 2004 to 20 November 2008 when she resigned. As Finance Manager, the defendant was responsible for administering and managing the executive payroll system for Middle level and Executive level management members of the plaintiff. Part of her duties was to process payments of Domestic Market Allowance (DMA) for eligible National officers and International Market Allowance (IMA) for eligible Expatriate officers. She was also responsible for processing Higher Duty Allowance (HDA) for senior National and Expatriate officers of the plaintiff. The plaintiff alleged that the defendant fraudulently paid herself K43,117.76 in the pretext that she was paying herself HDA when in fact she was paying herself an IMA, which is usually paid to Drew Courtney as an expatriate officer. 

Held:

The defendant was overpaid HDA on fraudulent calculations and I find in favour of the plaintiff. The Defendant shall pay K43,117.76 to the Plaintiff with interest at 8% from the time of filing of the Writ of Summons and costs of the proceedings is awarded to the Plaintiff.

Cases Cited:

State v Gabriel Ramoi (1993) PNGLR 390
State v Francis Natuwohala Laumadava (1994) PNGLR 291

Counsel:

Mrs K. Rema, for the Plaintiff
Ms M. Saroa, for the Defendant

27th February, 2013

1.	SALIKA DCJ: Background: The PNG Power Limited (the plaintiff) employed Cottingham Geno (the Defendant) as its Manager, Finance, from August 2004 to 20 November 2008 when she resigned.

2.	As Finance Manager, the defendant was responsible for administering and managing the executive payroll system for Middle level and Executive level management members of the plaintiff. Part of her duties was to process payments of Domestic Market Allowance (DMA) for eligible National officers and International Market Allowance (IMA) for eligible Expatriate officers. She was also responsible for processing Higher Duty Allowance (HDA) for senior National and Expatriate officers of the plaintiff.

3.	Between 2007 and 2008, the Defendant acted in the position of General Manager, Finance, at different times for a total of 44 days when the incumbent, an expatriate, Drew Courtney, was on leave.

4.	It was and is the plaintiff company's policy and practice that HDA is paid to senior contract officers who act in higher positions. In the instant case, the defendant acted on a higher position for those 44 days and was entitled to receive HDA.

5.	In her acting capacity as General Manager, Finance, the defendant received a total of K43,117.76 as HDA for the 44 days. The plaintiff claims that the Defendant was entitled to be paid K4,268.46 HDA for the 44 days and not K43,117.76.

6.	The plaintiff alleged that the defendant fraudulently paid herself the K43,117.76 in the pretext that she was paying herself HDA when in fact she was paying herself an IMA, which is usually paid to Drew Courtney as an expatriate officer.

7.	The particulars of fraud are pleaded in the following way in the amended statement of claim:

a)	The Defendant submitted applications for HDA to the Plaintiff's CEO for payment while acting on the position of General Manager, Finance.

b)	The applications were approved by the CEO of the Plaintiff Company for HDA.

c)	The total HDA payable to the Plaintiff for acting on the position is at K4,196.32.

d)	At no time was approval granted by the Plaintiff's CEO for payment of IMA to the Plaintiff while she was acting on the position of General Manager, Finance.

e)	The Defendant under the pretext that she was paying herself HDA, overpaid herself the amount of K43,117.76 which is equivalent of IMA payable to the incumbent, Mr Drew Courtney.

f)	That the Defendant had no approval to pay herself the sum of K43,117.76 in IMA.

g)	That only Expatriate Contract Officers are entitled to IMA and not National Officers like the Defendant.

AGREED AND DISPUTED FACTS

8.	Much of the facts are not in dispute in that the defendant admits receipt of K43,117.76. She, however, contends that she was properly paid the K43,117.76, as her HDA. She says that the payment was not an IMA payment and she further says the payments were approved by the Chief Executive Officer (CEO) of the plaintiff company.

9.	The plaintiff alleged that the defendant's actions amounted to fraud. The defendant denied any fraud on her part.

ISSUES RAISED

10.	Various issues were raised at the trial and I will list them as follows:

(i)	Whether or not the plaintiff has a policy governing payment of HDA, IMA and DMA payments.

(ii)	Whether or not the defendant was entitled to submit a claim for HDA for the periods she acted on a higher position.

(iii)	If she was entitled to claim HDA, how much was she entitled to for the periods she acted on the higher position.

(iv)	Whether or not the defendant was entitled to claim for IMA.

(v)	Whether or not the claims submitted by the defendant were for HDA or IMA?

(vi)	Whether or not the defendant's actions in submitting her claims for payment amounted to fraud.

11.	The above are the primary issues that the Court needs to address. There was a Memorandum of Agreement (MOA) signed by the defendant, wherein the defendant agreed to fully reimburse the plaintiff. The legality or the legitimacy of the MOA is a secondary issue which I will address later.

ADDRESSING THE ISSUES

12.	The first issue is whether or not the plaintiff has a policy governing payment of HDA.

13.	The defendant in her affidavit filed on 14 December 2011 at paragraph 4, deposed that the plaintiff had a policy that in the event that she was appointed to act in a position classified higher than her, she would be paid HDA for the duration she acted in that higher position.

14.	On her earlier affidavit filed on 10 May 2011, the defendant again in paragraph 4 said the same thing.
15.	The plaintiff's witnesses, Michael Savinio and Michael Maiti, both gave evidence that there was a policy on HDA payments.

16.	From the evidence of the defendant and the plaintiff, I have no doubt the plaintiff not only had a policy over HDA payment, but also a practice. Michael Savinio explains the process in his affidavit filed on 2 May 2012. The answer to the issue is that, there was a policy in place for the payment of HDA. 

17.	It is also logical that in any organization, be it public or private, a person acting on a higher capacity must be properly and adequately remunerated for performing at a higher level. It is the fairest thing to do and it is proper.

18.	The second issue is whether the defendant was entitled to claim HDA for the periods she performed higher duties. All the evidence before the Court supports the contention that she was entitled to claim HDA. The plaintiff does not dispute this fact. In fact the plaintiff agrees she was entitled to receive HDA for performing at a higher level than her own.

19.	The third issue is how much was she entitled to claim as HDA. This in my opinion is the pivotal issue and is the issue which is hotly contested. The evidence is that the defendant was paid K43,117.76 as HDA on acting for 44 days on a higher position. She said the HDA was approved by the then CEO, Patrick Mara, the Corporate Services Manager, Grant Hoffmeister, and the substantive General Manager, Finance, Drew Courtney, and that she was entitled to claim that amount.

20.	The plaintiff on the other hand contends that what was approved was the HDA application form for payment of HDA but not the amount. The defendant in her affidavit filed on 14 December 2011 annexed copies of the "APPLICATION FOR PAYMENT OF HIGHER DUTIES ALLOWANCE" form. The forms are not accompanied by the formula used for the calculation of the HDA payment and the actual calculations. The plaintiff contends that the defendant processed her own claim.

21.	The questions then are how were the various amounts to be paid to the defendant calculated and who made the calculations and had them verified and certified for payment. These are questions that need to be answered by the plaintiff in order to make out a case of fraud against the defendant.

22.	Michael Savinio in his affidavit filed on 2 May 2012 deposed that the process for paying HDA is:

a)	the staff who is claiming HDA fills out the HDA form and gets it approved by the Senior Officer above him or her;

b)	the HDA form is then delivered to the Human Resource payroll section for verification and certification for payment.

23.	Michael Savinio in the same affidavit deposed that the formula and the practice used for calculating HDA is:

a)	Ascertain how many days the officer worked in a fortnight in the higher position.

b)	The difference between the base annual salary is reduced to fortnightly base salary.

c)	Tax is then deducted from the fortnight salary.

d)	The balance is the HDA.

24.	 In the case of the defendant, she filled out the HDA forms and had them approved by Patrick Mara, Grant Hoffmeister and Drew Courtney. There is no evidence from the defendant if she then delivered the forms to the payroll section for verification and certification before payments were made. The witnesses for the plaintiff alleged that the defendant calculated her own HDA using a formula which was not proper. The plaintiff alleged that the amount the defendant was paid was equivalent to the IMA of Drew Courtney, on whose position the defendant acted on those various occasions.

25.	Michael Savinio's evidence details the times and payments made to the defendant as follows:

a.	For acting as General Manager, Finance, from 3.10.08 to 13.10.08, the Defendant having worked for 7 days received K7,927.30 in total HDA when she should only have received K687.72. The total excess paid is at K7,239.58.

b.	For acting as General Manager, Finance, from 8 July 2008 to 19 July 2008, having worked for a period of only 9 days, she received a total HDA of K20,159.08, when she should only have received K884.22. The total excess paid to her was at K19,274.86.

c.	For acting as General Manager, Finance, from 11 April 2008 to 23 April 2008, for having worked 9 days, the Defendant received a total HDA of K18,071.70, when she should have received K884.22. The total excess paid was at K17,187.48.

d.	For acting as General Manager, Finance, from 21 December 2007 to 7 January 2008, for having worked 12 days, the Defendant received K13,819.02, when she should have received K1,144.62. The excess paid was at K12,674.39.

e.	For acting as General Manager Finance, from 28 September 2007 to 8 October 2007, for having worked 7 days, the Defendant received a total of K13,810.10 when she should have only received K667.79. The total overpaid was at K13,142.41.

26.	To me, this evidence is important because it goes to the issue of whether or not there was fraud involved in working out the calculation. For instance, she acted on two separate occasions, for 9 days firstly from 11 April 2008 to 23 April 2008, and, secondly, from 8 July 2008 to 9 July 2008. She received two different payments of K18,071.70 and K20,159.08 respectively for the two periods. She acted for 9 days on each of those occasions and so her HDA amount of the 9 days should be the same. In this case, the difference for the two amounts is over K2,000.00.

27.	For acting as General Manager, Finance, from 21 December 2007 to 7 January 2008, for a period of 12 days, she was paid K13,819.02. This amount claimed is far less than the amount she claimed for acting for 9 days. In other words, the amount of HDA for 12 days should be more than the amount of 9 days. Moreover, she was paid K13,810.10 as HDA for acting for 7 days from 28 September 2007 to 8 October 2007 and yet for working 12 days she claimed K13,819.02. The claim for 12 days should be much higher. The point to be taken out from these payments is that, while there was a formula for calculating HDA payments, what was claimed and paid to the defendant appears to me that no formula or proper formula was used to calculate the defendant's HDA.

28.	The next relevant question is, was this a mistake or a genuine error? I am looking at the amount and the number of days worked on a higher position, her fortnightly base salary and the number of times this happened and the abrupt exit by the defendant from the plaintiff, although the defendant says she had secured new employment prior to all these, I am satisfied that these were deliberate and were fraudulent. I do not think these were mistakes committed by an inexperienced person or genuine errors, rather I am satisfied on the balance of probabilities that the claims over a period of time were fraught with fraud. In my opinion, the defendant is a very confident and intelligent professional woman. I come to that conclusion after observing her give her evidence. The formula was, in my view, easy in that it was the difference between her acting position base and his position base pay per fortnight, was K3,250.40 and her substantive base pay per fortnight was K2,263.46. Her correct HDA rate was the difference which was K966.94. If she worked for the full fortnight, that is 14 days, she would claim the full K986.94 added onto her fortnight salary. In this case, she acted for 7 days, 9 days and 12 days. Her HDA claim would therefore be less than K986.94 per fortnight on each of those occasions she acted. She in my respectful opinion was dishonest in the amounts she claimed.

29.	Looking at her claims with some objectivity, she was the acting head of Finance Division of the plaintiff. She would be expected to know the formula and the process for claiming HDA. She ought to know the difference between her substantive fortnightly base salary and the fortnightly base salary of her acting position. She only acted for a total aggregate of 44 days and could not possibly earn an aggregate HDA of K67,503.58 for those 44 days. How could she say with conviction and surety that she was entitled to the amounts and that they had been approved by her superiors. Her actions in my view were dishonest in that she "intended to cheat, deceive and mislead" (see State v Gabriel Ramoi (1993) PNGLR 390). The Court must look into her mind and determine whether, given her intelligence and experience she would have appreciated, as right minded people would, that what she was doing was dishonest. See State v Francis Natuwohala Laumadava (1994) PNGLR 291. In this case I have looked into her mind and determined that what she was doing was wrong.

30.	The fourth issue is whether or not the defendant was entitled to claim IMA. The defendant is a citizen and entitled to claim DMA but not IMA. The fact that she was acting on a higher position held by an expatriate does not entitle her to claim IMA. Only selected appropriate expatriate officers are entitled to IMA.

31.	The fifth issue is whether the claims submitted by the defendant were for HDA or for IMA. On the face of the forms, the applications were for HDA payments but the calculation to effect payment, included and matched or correlated with IMA figures. The defendant said her HDA was approved by her superiors. I find that her HDA applications were approved but not the calculations. Therefore, I find that the amount she was paid as HDA were not approved by her superiors but by herself.

32.	The sixth issue is whether the defendant's actions amounted to fraud when she submitted her claims for HDA payments. This issue has been discussed under the third issue. The defendant through her lawyers submitted that allowances such as DMA, IMA and HDA were incorporated into her new contract she signed in February 2007.

33.	I note that in 2006 and 2007 DMA was identified at K7,723.00 and other allowances such as club, housing, motor vehicle, telephone and public utilities were included and identified making her guaranteed remuneration at K95,599.37. Under the new proposed structure, no allowance is identified but the guaranteed remuneration was raised to K100,620.00 inclusive of all allowances identified in 2006 and 2007.

34.	However, I note that HDA was never identified as an allowance in 2006 and 2007. That is understandable because HDA is not an allowance paid every fortnight. It is only paid when an officer acts on a higher position for a given period. That is why HDA is not a regular allowance paid fortnightly. DMA and IMA are regular fortnightly paid allowances and are subsumed onto the guaranteed remuneration package of K100,620.00 but not HDA as it is a different type of allowance only paid after it is claimed and approval for such payment is given.

35.	Therefore, it is in my view not correct or true that HDA was incorporated into the new contract entered into by the Defendant. HDA was not incorporated into the new contract while DMA and 	IMA were (see annexure "A" of affidavit of C. Geno, filed on 14 December 2011, Doc 42). I accept the evidence of Michael Savinio that HDA is calculated on a formula of the difference between base fortnight salary of acting position and the fortnight salary of her own substantive position plus the number of days or weeks she acted on the position. The sums using that formula gives a more realistic figure for HDA as opposed to contention by the defendant that HDA was incorporated into her new contract in 2007.

36.	Considering all the circumstances of the case, I am satisfied on the balance of probabilities that the defendant was overpaid HDA on fraudulent calculations and find in favour of the plaintiff.

37.	This leaves me to just mention the Memorandum of Agreement (MOA) signed between the plaintiff and the defendant. Having found in favour of the plaintiff, there is no further need to discuss the validity or otherwise of the MOA.

38.	The Orders of the Court are that:

1.	The Defendant pays K43,117.76 to the Plaintiff.

2.	Interest at 8% from the time of filing of the Writ of Summons to the date of payment.

3.	Costs of the proceedings.
________________________________________

PANG Legal Services: Lawyer for the Plaintiff
Nelson Lawyers: Lawyer for the Defendant