SC1414

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 8 OF 2014

BETWEEN:

DIVINE WORD UNIVERSITY
Appellant

AND:

GEORGE PODAS
Respondent

Waigani: Kirriwom J, Kassman J, Murray J,
2014: 30 October
2015: 26th February

APPEAL – decision on breach of employment contract – appeal on judgment on assessment of damages - grounds of appeal is that court erred in assessing and awarding damages to plaintiff representing the balance of the term of the Agreement- learned judge erred in assessing damages payable for the balance of the term of the contract – appeal upheld

Counsel:

Wailyo Mapiso, for the Appellant
Jan-Marie Ainui, for the Respondent

Cases cited:
Porgera Joint Venture v Kami [2010] PGSC 11; SC1060

Legislation cited:
Employment Act c.373 Sections 34(1) and 35(2) 

DECISION

26th February, 2015 

1.	BY THE COURT: This was an appeal from the judgment of the National Court at Madang made on 13 December 2013 in proceeding WS No. 611 of 2009. In that decision, the National Court assessed damages in favor of the Respondent totaling K7,092.81 and ordered that each party bear their own costs of those proceedings. 

Background

2.	By an Employment Agreement dated 15 January 2007 ("the Agreement"), the Appellant Divine Word University "(DWU") employed George Podas ("Podas") as Supervisor of the Kiosk for a term of three years. Essential terms were stated in the agreement including duties, fortnightly pay, annual leave, medical expenses, in-house training and termination. 

3.	By a letter from DWU to Podas dated 4 August 2008, Podas' employment was terminated with immediate effect. Podas was paid all his final entitlements including a sum equivalent to three months of pay which DWU said was the contractually agreed amount payable in lieu of notice. Five days later, Podas secured employment with his former employer Best Buy. At the request of Podas, DWU allowed Podas and his family to remain in occupation of accommodation provided by DWU to the end of the school year to avoid disruption to the education of Podas children who were attending school in Madang. 

4.	On 2 August 2009, Podas filed a writ in the National Court at Madang claiming DWU breached the Agreement by failing to give three months notice of its intention to terminate the Agreement, failing to give reasons for the termination of the Agreement, and failing to allow Podas the right to be heard and to appeal before the termination was made final. 

5.	In its defence filed, DWU admitted the Agreement was duly entered and performed until termination by DWU's letter dated 4 August 2008. DWU denied the Agreement was unlawfully terminated as claimed by Podas and maintained the instant termination by payment of three months wages in lieu of notice was permitted by Clause 15(iv) of the Agreement.

6.	On 23 September 2011, the National Court in its decision on liability found DWU had breached the Agreement "… by not giving three months notice in writing of its intention to terminate the contract as required by the contract of employment. The contract did not allow for the salary to be paid in lieu of notice and the defendant could not rely on section 35(2) of the Employment Act (a party may without waiting for expiry of a notice of intention to terminate pay a sum equal to the amount of salary that would have accrued during the notice period) as that provision does not (by virtue of Section 34(1)) apply for the first two years of operation of a written contract of service." As to the two other claims by Podas, the National Court found there was no provision in the Agreement that obliged DWU to give Podas the right to be heard prior to terminating the contract and DWU was not obliged to give Podas reasons for terminating the contract and neither did Podas have such rights under the underlying law. The matter then proceeded to assessment of damages on the claim on which liability was found in favor of Podas.

7.	Podas claimed damages which the trial court categorized as "(1) special damages representing unpaid overtime during the period of actual employment (K5,824.00); (2) general damages representing humiliation, pain and suffering due to the circumstances in which the contract had been abruptly terminated (no specific amount claimed); (3) loss of future salary, representing the salary that would have been due to the Plaintiff if the contract had been completed (K6,448.00); and (4) loss of future overtime (K4,513.60), being a total claim of K16,785.60 plus unspecified general damages."

8.	On 13 December 2013, the National Court found:

1)	The claim for unpaid overtime of K5,824.00 was misconceived. It was actually a claim for unpaid debt. The plaintiff did not obtain judgment for any unpaid debt. He only obtained judgment in respect of a cause of action in breach of contract. The claim was misconceived. Nothing was awarded.

2)	The claim for general damages was jurisprudentially sound. It was not misconceived. However the evidence showed that the defendant had treated the plaintiff with humanity and respect and concern for the welfare of his family including the school-aged children by allowing him and the family to occupy employer-provided, rent-free accommodation for a period of four months after termination of the contract. This was sufficient compensation for the humiliation, pain and suffering incurred by the plaintiff as a result of the breach of contract. Nothing was awarded. 

3)	There is no universal principle of law that a person who succeeds in establishing liability against his former employer for breach of a contract of employment is entitled to no more damages than the amount of salary that would have been payable to him under the contract. Each case and each contract must be determined on its merits. Here, there was a notice period of three months but the contract made no provision for payment of salary in lieu of notice, so the three month notice period was an irrelevant point of reference for purposes of assessment of damages. In the special circumstances of this case and given the unusual and clumsily drafted contract and the indecent manner in which it was abruptly terminated, the interests of justice required that the plaintiff be awarded damages representing the balance of the salary that would have been due to him if the contract had been performed according to its terms (K6,448.00) less the amount that was actually paid to him (K1,074.66) after the contract was terminated. He was awarded K5,373.34.

4)	The claim for loss of future over time was not supported by the evidence, as the contract did not provide for payment of overtime as there was hence no legitimate expectation that overtime would be paid after the date of termination of the contract nothing was awarded." 

9.	In addition, interest was awarded (K1,719.47) making the total judgment sum payable of K7,092.81.

10.	DWU then filed this appeal from the judgment on assessment of damages issued on 13 December 2013. The Notice of Appeal filed 20 January 2014 contains six grounds of appeal. 

11.	All of the grounds of appeal repeat the one critical argument and that is the court erred in assessing and awarding damages to Podas representing the balance of the term of the Agreement. The critical finding of the court was that "there was a notice period of three months but the contract made no provision for payment of salary in lieu of notice". DWU placed reliance on clause 15(iv) of the Agreement which provides "Either party shall give three (3) months notice in writing of its intention to terminate/resign this contract."

12.	The learned judge described the Agreement as being poorly and clumsily drafted and there was some merit in that criticism but, with respect, the intention of the parties was clear. Clause 15(iv) in our view provided the avenue to either party to terminate the contract on giving three months notice in writing. If DWU wished to terminate the Agreement, DWU was required to give Podas three months notice if its intention to terminate. If Podas wished to resign, Podas was required to give DWU three months notice of his intention to leave DWU. The general premise is no contract or law should force parties to a relationship which has turned foul. More so in employment relationships, a party seeking to terminate must comply with the terms of the agreement or the law in ensuring that the termination is conducted in an orderly and lawful manner with minimal disruption and loss to the other party. 

13.	DWU did not give Podas notice of intention to terminate the employment of Podas but simply advised Podas that his services were no longer required and made a payment in lieu of notice equivalent to three months salary. The learned judge found there was no provision in the Agreement for a payment in lieu of notice. That is not disputed and we agree. However, DWU gave written notice to Podas and paid Podas the equivalent of three months' salary. We will come back to that.

14.	DWU argues the law recognizes the power to make a payment in lieu of notice and referred to section 35(2) of the Employment Act. Although we agree that was not applicable as found by the Learned Judge, the law as pronounced by the Supreme Court in Porgera Joint Venture v Kami [2010] PGSC 11; SC1060 provides that "Damages for breach of a fixed term contract should be assessed on the basis of salary and other entitlements which the employee is entitled to receive had the contract been lawfully terminated." In that case, the Supreme Court found "The employee was only entitled to damages in salary and other entitlements for the notice period and within such period required to commence and complete disciplinary process…". This is good law and we have no reason not to follow that case. Neither is there reason to draw a distinction on the facts and circumstances of this case. 

15.	On finding the termination of Podas was unlawful, damages payable were assessable or could be calculated by reference to the period of notice Podas was entitled to and that was three months in accordance with clause 15(iv) of the Agreement. The payment made by DWU was in recognition of an applicable provision in the contract and was also a lawful assessment and payment.

16.	Returning to the payment by DWU of the equivalent of three months' salary, that payment was accepted by Podas. In accepting that payment, Podas can be taken to have accepted the termination of the Agreement. Further, within five days of receiving notice from DWU, Podas started work with another employer. Podas can be taken to have accepted his termination when he secured alternative employment. In other words, Podas mitigated his losses in the best way possible. At the most, he was then entitled to five days of pay and the difference in salary, if any, between the salary paid by DWU and that by his new employer. No such claim was made. 

17.	We find the learned judge erred in assessing damages payable for the balance of the term of the contract.

18.	For the reasons stated, we uphold the appeal. As costs follow the event, we also order that the Respondent shall pay the Appellant's costs of the appeal, to be taxed if not agreed.

19.	The formal order of the court is:

(1)	The appeal is upheld.

(2)	The orders of the National Court of 13 December 2013 in proceeding WS No. 611 of 	2009 are quashed.

(3)	The proceedings WS No. 611 of 2009 are dismissed.

(4)	The Respondent shall pay the Appellant's costs of the appeal on a party–party basis to be taxed if not agreed.

Judgment accordingly:
____________________________________________________________________
Guardian Legal Services: Lawyers for the Appellant
Public Solicitor: Lawyers for the Respondent