SC1146

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 14 OF 2008

BETWEEN:

JOHN MANAU
Appellant

AND:

TELIKOM (PNG) LIMITED
Respondent

Waigani: Kirriwom, J., Makail & Sawong, JJ
2010: 30 June
2011: 08 December

CONTRACT LAW- Privy of contract- Collective Enterprise Agreement- Agreement between Union and employer – Enforceability of- 

CONTRACT LAW – Collective Enterprise Agreement – whether terms of agreement is or are amount to terms of contract of employment between an individual employee and the employer

INDUSTRIAL LAW –Awards – Enforceability of – Registration of – Notification of – notice published in National Gazette – Mandatory – Failure of – Effect of- Award unenforceable – Industrial Relations Act, Ch.174, Sections 1, 33, 35, 39, 44.

Facts

The appellant sued the respondent for damages for wrongful dismissal of employment. He relied on an agreement called an Enterprise Agreement between the employee's Union and the respondent as his contract of employment. The respondent opposed the claim and submitted that the agreement was unenforceable because first, the appellant was not a party to the agreement. As such, he could not rely on the terms of it and sue for damages for breach of contract of employment. Secondly, the agreement was not registered and notified in the National Gazette pursuant to s.44 of the Industrial Relations Act, Ch174. As such it had no force or effect.

Held:

1.	As a general principle, a collective enterprise agreement is not a contract of employment. However, there are exceptions in cases where:

(a)	 The contract of employment between the employer and the employee incorporates either the whole or any part of a collective agreement to be or form part of terms and conditions of the contract of employment, or

(b)	 There is an express term of the collective agreement that its terms and conditions are to be enforceable in a court of law, or

(c)	 There may be statutory provisions which may provide for enforceability of the agreement.

2.	The enterprise agreement was between the employee's union and the respondent and not between the appellant and the employer. As such, the appellant was not privy to the agreement and therefore cannot rely on it to sue the employer for damages for breach of contract of employment.

3.	Further, there was no evidence of a contract of employment between the appellant and the respondent which incorporated either the whole or in part of the enterprise agreement as part of the terms and conditions of the contract of employment between the appellant and the respondent. Furthermore, the enterprise agreement did not contain any provision that the terms of it were enforceable in a court of law. For these reasons, it was unenforceable.

4.	According to s. 44 of the Industrial Relations Act, Ch 174, an award has no force or effect, and is not enforceable unless it is registered and notified in the National Gazette.

5.	There was evidence the enterprise agreement was registered but there was no evidence it was notified in the National Gazette. As such, it had no force or effect and was unenforceable. 

6.	The appeal was, accordingly, dismissed with costs and the decision of the National Court was confirmed. 

Cases Cited:

Papua New Guinea Cases 

PNGBC v. Bara Amevo [1998] PNGLR 240 

Overseas Cases

Ford Motor Co. Limited v. Amalgamated Union of Engineering & Foundry Workers [1969] 2 QB 303
Privy Council in Young v. Canadian Northern Railway Co. [1931] A.C 73 

Counsel:

Mr. C.Narakobi & J. Maingu, for the Appellant
Mr. N. Asimba, for the Respondent

JUDGMENT
8 December, 2011

1.	BY THE COURT: This is an appeal from a decision of the National Court delivered on 20 February 2008 in proceedings entitled WS. No. 1674 of 2004. The appellant sued the respondent for damages for wrongful dismissal of employment which the respondent opposed. The trial judge dismissed the appellant's claim hence, this appeal.

Background

2.	The appellant was employed as a database manager by the respondent. His services were subsequently terminated on or about 2nd December 1998 for continuously being absent from work. At that time he was financial member of the Communications Workers Union (the Union).

3.	In 1997, the respondent and the Union entered into a Collective Enterprise Agreement (the Agreement).

4.	A few weeks later, he was reinstated or re-employed by the respondent but not to his former position. He was an unattached employee. There was no formal written contract of employment between the parties.

5.	On 4th January 1999, after discussion with a Mr. Veisame, the General Manager – Network Services, about his future with the respondent, the appellant wrote and advised that he wanted an "early retrenchment with full benefits"…

6.	On 25 January 1999, the respondent responded by accepting the appellant's voluntary retrenchment. That letter is headed "NOTICE OF FORCED RETRENCHMENT" and refers s.28(a)(iii), of Part A2.2 of the Enterprise Agreement of 1997. In consequence of that he was paid out his entitlements. 

7.	Some four (4) years later, on 29 November 2004, the appellant filed these proceedings, claiming damages on the basis that the respondent had not complied with the relevant provisions of the agreement in retrenching him.

8.	At the trial the appellant relied on his two (2) affidavits and the affidavit of one Emmanuel Kairu.

9.	The respondent relied on the affidavit of Kila Rava sworn and filed 9 August 2007.

10.	The grounds of Appeal are:

"3(a)	The learned trial judge erred in law and in fact in finding that the Enterprise Agreement 1997, was not binding on the Plaintiff, when the Defendant, had conceded that the Enterprise Agreement was binding, pursuant to the Statement of Agreed and Disputed Facts and Issues for Trial. It was a miscarriage of justice, as the Plaintiff had prepared its case, on the basis, that there was no issue of whether the Enterprise Agreement 1997, was binding on the Plaintiffs and defendants or not. The Plaintiffs' case, was for non-compliance with the terms of the Enterprise Agreement 1997, and not on the status of whether the Enterprise Agreement 1997 was a contract of employment or not.

(b)	The learned trial judge erred in law, in that after having considered ss.1.29 and 33 of the Industrial Relations Act 1962, did not go on to considers.44(2) of the same Act, which stipulates that a registered award is binding on the employers and employees to whom it relates. Section 44(2) states without doubt that the Enterprise Agreement 1997, is binding on the Plaintiff and Defendant, by virtue of the fact that it is an award registered and notified in the National Gazette in accordance with the Industrial Relations Act. The status of whether the Enterprise Agreement 1997 is an award or not, was never an issue, nor is it an issue now.

(c)	The learned trial judge erred in law and in fact, in failing to consider the fact, that the Appellant, was made redundant under the provisions of the Enterprise Agreement 1997, in the letter dated 5th January 1999. It is therefore an admission by the Defendant/Respondent. It relied on it to terminate the Appellant.

(d)	The learned trial judge erred in law, in failing to consider, that the Appellant was a member of the Union, that entered into the Enterprise Agreement, with the Respondent, and therefore, both parties were bound by this act. Further, her honour fell into err, when she applied the principles of contract law, such as "agreement, contractual intention and consideration", when it was not at issue, that such principles applied or not. It is clear, that they do not apply. The award became binding by force of statue, not on principles of ordinary contract law.

(e)	The learned trial judge erred in law, finding that the Enterprise Agreement 1997, created a joint negotiating body, and it operated by practice, not strict law. Section 44(2) of the Industrial Relations Act 	1962, states clearly that an award binds the employer and employee.

(f)	Such further grounds of appeal will be added after obtaining transcripts of the National Court proceedings.

4(a)	That the orders of Her Honour Davani J, be called up and 		quashed;

(b)	Judgment be entered for the appellant in the terms sought in its 	statement of claim;

(c)	In the alternative, judgment entered on the issue of liability, with damages to be assessed;

 (d)	Costs; and

(e)	Such other orders the Court deems fit.

11.	We now turn to the grounds of appeal. We should say here that each of the counsel for the respective parties have filed written submissions and also spoke on these. We will deal with their submissions when we consider the grounds of appeal.

12.	Ground A

"(a)The learned trial judge erred in law and in fact in finding that the Enterprise Agreement 1997, was not binding on the Plaintiff, when the Defendant, had cconceded that the Enterprise Agreement was binding, pursuant to the Statement of Agreed and Disputed Facts and Issues for Trial. It was a miscarriage of justice, as the Plaintiff had prepared its case, on the basis, that there was no issue of whether the Enterprise Agreement 1997, was binding on the Plaintiffs and defendants or not. The Plaintiffs case, was for non-compliance with the terms of the Enterprise Agreement 1997, and not on the status of whether the Enterprise Agreement 1997 was a contract of employment or not".

13.	In this ground the appellant submits that the learned trial Judge erred in law and in fact by dealing with the case on wrong principle of law as the issue before her was different. It was submitted that the issue was not whether there was a contract of employment between the respondent and the appellant as constituted by the agreement since the respondent had admitted that the award was the contract of employment between them rather the issue was that the respondent had not complied with the terms of the Agreement. It was the appellant's contention that as he was by notice retrenched pursuant to the terms of the agreement, the respondent ought to have followed the procedures as laid down in the Agreement to have him retrenched. Since this was not done, it was submitted, the retrenchment was wrong in law and in fact. 

14.	The respondent submits that the finding by the learned trial judge that the Agreement is not a contract of employment between the appellant and the respondent was correct. It was submitted that there was no error on this finding. It was submitted that the agreement is not enforceable as a contract and that it was not intended to be so.

15.	The issue, as we understand, is this. Upon a correct construction what was the true nature of the relationship between the appellant and the respondent at the time he was retrenched?

16.	In order to answer this question, it is necessary to consider whether upon a proper construction the Agreement between the union and the respondent is a contract of employment between the appellant and the respondent. The first point to note is that the Agreement is between the union and the respondent. It is not an employment agreement between the appellant and the respondent. In other words there is no privity of contract between the appellant and the respondent. One of the principles or doctrines on the law of contracts is the doctrine of privity of contract. The doctrine of privity of contract is that, as a general rule, a contract cannot confer rights or impose obligations arising under it on anyone else except the parties to the contract or agreement. See PNGBC v. Bara Amevo [1998] PNGLR 240. 

17.	The nature of collective enterprise agreements have been the subject of judicial consideration in other common law jurisdictions. These decisions are of guidance and of persuasive value in assisting in the development of this area of law in our jurisdiction. The Privy Council in Young v. Canadian Northern Railway Co. [1931]A. C 73 and Ford Motor Co. limited v. Amalgamated Union of Engineering & Foundry Workers [1969] 2QB 303 are of assistance.

18.	In Young v. Canadian Northern Railway Co. (supra) was an action by a machinist (employee) who had been employed by the respondents in their shops. The head notes reads:

"…In 1927 he received notice of dismissal on the ground of reduction of staff. He sued for wrongful dismissal, contending that was written agreement, entered into by the respondents with a labour organization and called the Wages Agreement No. 4, formed part of his contract of employment and that under it the respondent could not dismiss him upon a reduction of staff, as they had retained men junior to him. The agreement had been applied to the appellant (who was not a member of the organization) as to the amount of his wages, the notice given him, and in other respects; the respondents stated at the trial that they applied the agreement to all the men employed in their shops:- 

Held that Wage Agreement No. 4 did not form part of the contract for the employment of the appellant, the fact that the respondents had applied it to him being equally consistent with the view that they had done so as a matter of policy. Further, that having regard to the terms and nature of the agreement it did not by itself constitute a contract between any individual employee and his employer; observance of its terms by an employer could not be enforced by action even by the organization, but only by calling a strike."

"It appears to their Lordships to be intended merely to operate as an agreement between a body of employers and a labour organization by which the employers undertake that as regards their workmen, certain rules beneficial to the workmen shall be observed. By itself it constitutes no contract between any individual employee and the company which employs him. I fan employer refused to observe the rules, the effective sequel would be, not an action by any employee, not even an action by Division No. 4 against the employer for specific performance or damages, but the calling of a strike until the grievance was remedied."

19.	The decision in Ford Motor Co. Ltd v. Amalgamated Union of Engineering and Foundry Workers & Other (supra) is perhaps almost on point. The brief facts, from the head notes are these. In 1955 and 1967 a company and various trade unions respectively employee members made agreements for regulating the procedure for the relationship between the company and the unions and the conditions of employment for employees. The agreements were signed by members of a joint negotiating committee of the company and union representatives and also an accredited representatives of each individual union; they did not to contain any clear or express provision that they were enforceable at law, were composed largely of optimistic aspirations, and presented practical problems of enforcement. In 1969 the company side and a majority on the union side of the committee agreed to variations of conditions of employment, but unions in the minority dissented and declared an official strike. The company brought an action against the striking unions as action for injunctions. Injunctions were granted ex parte and, on an application to continue them, evidence was addressed that published reports of industrial commissions of inquiry showed that almost unanimous climate of opinion on both sides of the industries 1954 was that no legally enforceable contract resulted from the collective agreements such as those between the company and the union.

20.	Lane, J. held, in discharging the injunctions, that the company had not made out a sufficient prime facie case that the agreements legal contracts enforceable at law, for in the absence of clear and express provision making them answerable to legal action, reground must be had to surrounding circumstances and, although concerned with commercial relationships, the wording of the agreements, their nature, and the background adverse to enforceability against which they were reached showed that the parties did not intend that they should be binding contracts at law but that they should remain in the realm of undertakings binding in honour only.

21.	In conclusion the learned trial judge said pp.330 – 331;

"The conclusion which I have reached is that; it is necessarily a preliminary view as this of course is not the hearing of the action proper. If parties were, the answer is that so far as they had any express intentions they were certainly not to make the agreement enforceable at law. If one applies an objective test and asks what intention must be imputed from all the circumstances of the case, the answer is the same. The fact that the agreements prima facie deal with commercial relationships is outweighed by the other considerations, by the wording of the agreements, by the nature of the agreements, and by the climate of opinion voiced and evidenced by the extra-judicial authorities. Agreements such as these, composed largely of optimistic aspirations, presenting grave practical problems of enforcement and reached against a background of opinion adverse to enforceability, are, in my judgment, not contracts in the legal sense and are not enforceable at law. Without clear and express provisions making them amenable to legal action, they remain in the realm of undertakings binding in honour. None of the authorities cited by Mr. Neill, on behalf of the plaintiffs, dissuades me from this view. In my judgment, the parties, none of them, had the intention to make these agreements binding a law."

22.	From all these authorities, it is clear that as a general principle an enterprise agreement is not a contract of employment. This is of course subject to exceptions such as for instance, if a contract of employment between the employer and the employee that incorporates either the whole or any part of a collective agreement to be or forms part of terms of the contract of employment or that there is an express term of the collective agreement that its terms and conditions are to be enforceable in a court of law, or that there may be statutory provision which may provide for enforceability of the agreement.

23.	In the present case the Agreement was signed between the Union and the respondent. It was not signed between the appellant and the respondent, that is to say, there was no privity of contract between them. Further, there is or was no evidence from the appellant what was the terms of his employment, that is whether there was a contract of employment between him and the respondent and whether such a contract of service incorporated either in whole or in part terms of the Agreement as part of his terms and conditions of employment. Moreover, having regard to the terms and nature of the agreement, in our opinion, it did not by itself constitute a contract of employment between any individual employee and the employer. 

24.	The Agreement did not contain any provisions that the terms of it were enforceable in a court of law. The agreement was therefore, in our opinion, intended merely to operate as an agreement between the employer and a labour organization. It was not intended to be enforced by an employee by suing his employer for specific performance or for damages for wrongful dismissal. This does not mean that an employee or indeed the employer has no right or remedy because the remedy is to be found in the Industrial Relations Act, Ch. 174

25.	This then leads us to consider grounds 3(b), 3(d) & 3(e). These grounds maybe dealt with together as the issues overlap. They raise the issue of the application of ss. 33, 35,39 and in particular s.44(2) of the Industrial Relations Act, Ch. 174. The complaint here is that the learned trial judge erred in law in not applying s.44(2) in that the Agreement having been registered as an award, was therefore binding and enforceable on all parties.

26.	These grounds and the submissions advanced, require consideration of s.44(2) of the Act. It reads:

"44.	Effect of awards, etc.

(1)An award or a determination of the Minimum Wages Board is of no force or effect until registered and notified in the National Gazette in accordance with this Act.

(2)	Subject to this Act –

(a)	a registered award or registered determination of the Minimum Wage Board is binding on the employers and employees to whom it reliefs; and

(b)	as from the date specified in the award or determination or, if no date is specified, the date of publication of the notice under Section 43 in relation to the award or determination – it is an implied term of the contract between the employers and the employees to whom it relates that the wages to be paid and the condition of employment to be observed under the contract as in accordance with the award or determination until varied by a subsequent registered award or registered determination."(our emphasis)

Before we consider s.44 it is relevant to consider other relevant provisions of the Act. Section 44 speaks of "awards" or "determinations". What do these expressions mean precisely?

27. 	Section 1 of the Act defines these terms or expressions. The expression "award" is defined as:

(a)an award made by a Tribunal in respect of an industrial dispute referred to it under ss.29or 30, or

(b) an agreement deemed to be an award by virtue of Section 33.

28. 	Section 33 refers to filing and registration of agreements. It reads:
 
"33. Filing and Registration of agreements

(1)	Subject to Sections 35and 39, an agreement made under this Act between employers and employees and registered organizations, or any of them, shall be filed with the Registrar for registration and, on being registered, shall be deemed to be an award as between the parties to the agreement…"

Section 33 (1) is subject to the provisions of ss. 35 and 39. But what is important is that if an agreement is to be deemed to be an award that agreement must be filed for registration with the Registrar of Industrial Relations. Subsections (2) and (3) are not relevant nor applicable in the present case. This then leads us to consider s. 35.

29.	Section 35 provides for limitations of awards to only industrial matters. It reads: 

 "35. 

(1)	An award of a tribunal shall relate to industrial matters only.
(2)	An agreement made and registered under this Act shall be deemed to be, 	and is enforceable as, an award only in relation to industrial matters."

30. 	Section 35(1) is irrelevant for the present purposes as it relates to awards by tribunals and not to agreements. The relevant provision in this case is s.35(2), but it has limited application in that it relates only to industrial matters. It has no application to the facts of the present case because this case does not involve an industrial matter.

31. 	Section 39 is not relevant for the present purposes as it relates to awards which restricts or attempts to restrict employment.

32. 	This now leads us to consider s.44. It provides that an award or a determination is of no force or effect until it is both registered and notified in the National Gazette in accordance with the Act, s.44(1). This is very clear from the terms of s.44(1) of the Act. And so until an award or determination is registered and notified in the National Gazette it is of no force and effect – it is not legally binding. (our emphasis)

33.	Thus, in our opinion, s.44(1) qualifies the operation of s.44(2) of the Act. Whilst s.44(2) states that an award or a determination is binding on the employer and the employee, it can only be so, if an award or determination has been registered and notified in the National Gazette as provided for in s.44.(1) and s.43 of the Act. Unless and until both process are satisfied, an –award or determination has no binding legal effect.

34.	In the present case, there is evidence that the Agreement was registered by the Industrial Registrar as an award. However, there is no evidence that the award was notified in the National Gazette. Thus only one of the processes has been completed. The law requires that an award must not only be registered, but must also be notified in the National Gazette. There is no evidence that the award was even notified in the National Gazette. Therefore, the award is not legally binding and has no force and effect pursuant to s.44(2) of Act. It is therefore unenforceable. Accordingly these three (3) grounds are also dismissed.

35.	In conclusion, all the grounds of appeal are dismissed. We make the following Orders:

1)	The Appeal be dismissed
2)	The decision of the National Court is confirmed
3)	The Appellant shall pay the Respondent's costs, to be taxed, if not 	agreed.

________________________________

Narokobi Lawyers: Lawyers for the Appellant
Telikom In-House Counsel: Lawyers for the Respondent