SC2767

PAPUA NEW GUINEA
[SUPREME COURT OF JUSTICE]

SCA 83 OF 2024

BETWEEN:
AIR NIUGINI LIMITED TRADING AS AIR NIUGINI
Appellant

AND:
JOSEPH KUMASI
Respondent

WAIGANI:  LOGAN J, TOLIKEN J, FRANK J
16 DECEMBER 2024; 25 FEBRUARY 2025

CONTRACT – Breach of contract – Contract of employment – principles of construction - alleged non-payment of superannuation funds – Proof of – Liability not established
 
TORTS – Misrepresentation – Representation of payment of contribution to superannuation – Non-payment of superannuation contribution – Proof of – Liability not established – Superannuation (General Provisions) Act 2000 – Sections 3(1), 76 & 82
 
LIMITATION OF ACTIONS – Defence of statute barred – Accrual of cause of action – Action for statutory entitlement – Cause of action accrued at cessation of employment relationship – Superannuation (General Provisions) Act 2000 – Section 76 – Frauds and Limitations Act, 1988 – Section 16
 
Facts:

The respondent was a pilot employed by the appellant for 21 years, from 1995 to 2016. In 2008, the respondent, on his own behalf and on behalf of the Papua New Guinea Air Pilots Union, negotiated with the appellant for a standard form agreement that gave effect to a “Same Job, Same Pay” policy (as between citizen and non-citizen pilots) agreed with the appellant.

After the termination of his employment, the respondent brought proceedings against the appellant alleging a failure to pay superannuation pursuant to the Superannuation (General Provisions) Act 2000 (SGP Act) and that the appellant had made false representations about the “Same Job, Same Pay” policy.

The primary judge found that the appellant had breached the SGP Act and that the respondent’s claim was not time barred. 

Held:
1.	The Court (Logan J, Toliken J and Frank J): The total remuneration of the respondent included superannuation and this structure implemented the “Same Job, Same Pay” policy. 
2.	The use of a total remuneration structure in the employment contracts did not contravene ss 76(4) or 82 of the SGP Act.
3.	There was no false representations as to the “Same Job, Same Pay” policy.
4.	The respondent was not time barred in making his claim.

Cases cited
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Independent State of Papua New Guinea v Independent Timbers & Stevedoring Ltd [2020] PGSC 5; SC1918
Ona v National Housing Corporation [2009] PGSC 16; SC995
PDC Constructions (NG) Pty Ltd v Commonwealth of Australia [1969] PGSC 66 
Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989

Counsel
Mr I Molloy with Mr C Joseph, for the appellant
Mr J Holingu with Mr J Sogoromo, for the respondent

1.	BY THE COURT: The respondent, Captain Joseph Kumasi, was an employee of the appellant, Air Niugini Limited, from 9 January 1995 until 15 September 2016 when his employment was terminated. Captain Kumasi was already an experienced pilot when he commenced that employment. He is a citizen of Papua New Guinea.

2.	On 15 March 2018, some 18 months after his employment with Air Niugini came to an end, Captain Kumasi formed the view that the airline had, over a period of years commencing on 1 July 2008 and continuing until the termination of his employment (claim period), breached its obligation under s 76 of the Superannuation (General Provisions) Act 2000 (SGP Act) to make a contribution in respect of him at the prescribed rate to an approved superannuation fund. He also considered that Air Niugini had misrepresented to him that, on and from 2008, a “Same Job, Same Pay” structure would be set up in respect of citizen pilots such as him and non-citizen pilots.

3.	Accordingly, Captain Kumasi instituted proceedings in the National Court in which he sought damages quantified by reference to what he alleged was a failure by Air Niugini to pay superannuation contributions to an approved superannuation fund.

4.	Air Niugini denied that it was in breach either of any applicable contract of employment or the SGP Act. It also alleged that some or all of Captain Kumasi’s claims were, in any event, barred by the operation of s 16 of the Frauds and Limitations Act 1988. By s 16(1)(a) and s 16(1)(d) respectively, that Act provides that no action founded on a simple contract or tort on the one hand or to recover a sum recoverable by virtue of any enactment on the other hand may be brought after the expiration of six years commencing on the date on which the cause of action accrued.

5.	Captain Kumasi succeeded in his claim in the National Court. The learned primary judge found that s 76 and s 82 of the SGP Act over-rode any contractual provision to the contrary. His Honour also found that Air Niugini had “falsely misrepresented to him the manner in which his salary will be structured and where the source of the employer’s contribution to superannuation will come from”. On the basis of what he understood to be the effect of Ona v National Housing Corporation [2009] PGSC 16; SC995, his Honour also found no merit in the limitation of actions defence, holding that the cause of action did not accrue until Captain Kumasi’s employment was terminated. Accordingly, his Honour concluded that all elements of Captain Kumasi’s claim were within time. His Honour awarded Captain Kumasi damages in the sum of K421,525.20, together with interest at the rate of 8% pursuant to s 6 of the Judicial Proceedings (Interest on Debts and Damages) Act 2015.

6.	Air Niugini has appealed against this award and related orders of the National Court. Although the grounds of appeal are prolix, and as came to be conceded by its counsel during oral submissions, the essence of its grievance with the orders made by the National Court may be distilled into three propositions. The first is found in a submission that, on the true construction of the terms of contracts successively applicable to Captain Kumasi’s employment on and from 2008 and of the SGP Act, there was no breach either of any contract or the SGP Act. The second is that there was no false representation. The third is that, at least in respect of any claim made under a contract made in 2008 and which expired in 2011, the limitation period had passed by 2018 when the writ of summons was issued.

7.	Captain Kumasi’s response was that the reasons for judgment of the primary judge were correct. 

8.	Three successive contracts governed Captain Kumasi’s employment over the claim period. Each is the result of negotiations between Air Niugini and the Papua New Guinea Air Pilots Union (Union). These negotiations yielded, in each instance, a standard form agreement, which provided the template for a contract of employment between Air Niugini and individual pilots. 

9.	The three standard form contracts comprised:

(a)	An agreement dated 1 July 2008, signed by Captain Kumasi on 1 August 2008 but applicable for the period 1 July 2008 to 30 June 2011 (2008 Contract).
(b)	An agreement dated 1 January 2012, operative for the three-year period from 1 January 2012 (2012 Contract).
(c)	An agreement dated 1 January 2015, applicable for the period from 1 January 2015 to 30 March 2017 (2015 Contract).

10.	The gap between the nominal expiry date of the 2008 Contract and the commencement of the 2012 Contract was addressed by cl. 2.1 of the 2008 Contract. This provided that, should a new agreement not be negotiated in the six months prior to the expiration of that contract, “the provisions of this agreement shall remain in force until such time as a new agreement is reached and the improvements contained in the new agreement shall be backdated to the expiry of this agreement”.

11.	None of the contracts is a model of good drafting. This is best illustrated by the definition of “Employee”, which appears in each of the definitions part of each of the 2008 Contract and the 2012 Contract. “Employee” is in each contract defined to mean “a Pilot who is employed by the Employer covered under this Agreement”. “Employer” is defined to mean Air Niugini. But neither contract contains a coverage clause. One might, for example, have expected the 2008 Contract to contain a clause which stating it bound the parties named in Annex A upon the signing thereof or words to that effect. An analogous omission of a coverage clause is found in the 2015 Contract, in which “employee” is defined to mean “a pilot who is employed by the employer under this Contract”. Likewise associated with this contract is an “Annex A”.

12.	By cl. 3.1 of the 2008 Contract, it is provided that, “The Employee shall fill the position as described by the execution clause of this agreement …”. 

13.	The longstanding approach of the courts is to construe commercial contracts in a way which gives them business efficacy: see PDC Constructions (NG) Pty Ltd v Commonwealth of Australia [1969] PGSC 66 (Frost J, as his Honour then was) and Independent State of Papua New Guinea v Independent Timbers & Stevedoring Ltd [2020] PGSC 5; SC1918, at [23] and [26] (the Court). 

14.	Adopting this approach, it is tolerably clear that each individual pilot bound himself or herself to a contract in the standard form terms with Air Niugini by signing “Annex A”, as likewise did Air Niugini by the signing of that annex by a representative of the company. On its true construction, Annex A as so mutually signed incorporated by reference the standard form terms. For example, and in respect of the 2008 Contract, Annex A is the “execution clause” as referred to in cl. 3.1.

15.	The 2008 Contract contained a clause, cl. 7.0, providing for pilot remuneration which is typical of those found in each of the three contracts. No party suggested that some different outcome was dictated by the analogous clauses in the 2012 Contract and the 2015 Contract. In these circumstances, it suffices to set out and consider in detail the material part of the remuneration clause in the 2008 Contract.

16.	Clause 7.0 in the 2008 Contract provided:

7.0 REMUNERATION
7.1 The Employer shall pay to the Employee by way of remuneration for his services, the annual salary specified in Appendix A as modified below.
7.2 Method of Payment
7.2.1. Salary shall be paid fortnightly at the annual rate shown in Appendix A as a total package inclusive of Long Service Leave, Employer’s contribution to the superannuation fund and if provided by the employer the applicable rate for housing appropriate to employee’s years of service modified by any additions from clause 7.8 plus any overtime payments from clause 7.3 plus or minus any applicable amount from paragraph 21 (training bond).
7.2.2 Fortnightly salary based on the Net of above deduction shall be converted into Kina (PGK) at the sell rate published by the Employer’s bank on the Friday immediately prior to the payday.
7.2.3. Any other deductions such as Salary Sacrifice, Novated Lease payments and Superannuation shall be made from this calculation. Tax will then be deducted in accordance with the taxation laws of PNG.
…
7.5 CPI Increases
On the first of January each year the base salary in Appendix A shall be increased by 2% or as mutually agreed by the employer and the employee giving reference to the CPI increase by the Bank of Papua New Guinea, subject to the employer’s ability to pay. In any case the increase shall not be less than 2%.
…
7.7. National Superannuation Fund (NAS Fund)
The Employer and Employee Contributions towards NAS Fund shall be consistent with the Superannuation Act. Salary package stated in Appendix A is deemed inclusive of the Employer’s contribution to the superannuation, rates applicable and varied from time to time by the Superannuation Act.
…
7.10 Salary Scales
7.10.1. The salary scales shown in Appendix A labelled 1st contract, 2nd contract etc relate to the standard three year employment. For the purpose of pay calculation the pay level is determined by length of employment with Air Niugini, post cadetship in three year increments and this may differ to the actual number of contracts worked.
7.10.2 All PNG National Pilots entering into this agreement is deemed entering into the applicable contract and therefore supersedes National Flight Technical Personnel agreement 2007. 
…
14.0 RECREATIONAL LEAVE 
…
14.5 The Employee shall be paid at the salary rate specified in specified in paragraph 7.2.1 of this agreement. For the purpose of this clause, any addition to salary paid to the Employee, which is part of normal fortnightly salary (excluding overtime) at the time of taking Recreational Leave shall be taken into account for the purpose of calculating leave pay.
…
19.0 LONG SERVICE LEAVE
19.1 Effective 1st July 2008, all future Long Service Leave entitlements under the current and future applicable Laws are deemed included in the salary package provided under this contract.
…
17.	The term “National Pilot” is defined by the 2008 Contract to mean, “a Papua New Guinea citizen pilot who holds a PNG passport without dual citizenship”.

18.	Appendix A to the 2008 Contract specifies “Rates of Pay” in a table in which specified rates are differentiated according to aircraft type and 1st, 2nd or 3rd contract. Materially, the rate of pay in respect of a Captain for an F100 aircraft on his 3rd contract is stated as $161,318. The dollar amount so specified is in Australian dollars (AUD). Appendix A also tabulates an example salary conversion from AUD to PGK. 

19.	The completed and signed Annex A in respect of Captain Kumasi in relation to the 2008 Contract specifies (item 3.0) his position as “Captain F100”. It also specifies his “Remuneration” as “F100 Captain Third Contract Rates AUD161,318 per annum”.

20.	Before considering the merits of the issues raised by Air Niugini’s appeal, it is also necessary to set out some extracts from the SGP Act. Materially, s 4 provides:
4. APPLICATION OF THIS ACT.
(1) The provisions of this Act apply to –
(a) every employer employing or engaging 20 or more employees, or such other number as prescribed by regulation; and
(b) every employee engaged in employment by an employer under Paragraph (a) and receiving pay, 
…
21.	 As enacted, s 76 provided:

76. MINIMUM CONTRIBUTIONS BY EMPLOYER.
(1) An employer referred to in Section 4(1)(a) shall, in respect of each of its employees continuously employed for a period of three months or more, make a contribution to an ASF at the rate, and computed from the date, prescribed by regulation.
(2) The contribution under Subsection (1) by an employer to an ASF in respect of an employee shall be made out of the property of the employer.
(3) The employer’s liability to make a contribution under Subsection (1) is not affected by the basis on which the employee is paid (including daily, weekly, fortnightly or monthly).
(4) A provision in a contract of employment that allows an employer to make a contribution of less than the prescribed rate is void.
(5) An employer may make contributions in addition to the minimum rate prescribed.
(6) Regulations may prescribe a delay in the introduction of minimum contributions for non-citizens.
(7) An employer who fails to comply with this section is guilty of an offence.
22.	This section was amended by s 6 of the Superannuation (General Provisions) (Amendment) Act 2013 by deleting the existing s 76(6) and replacing that subsection with the following: "(6) The mandatory contributions set out in Subsection (1) shall not apply to non-citizens."

23.	Section 82 provides:

82. EMPLOYER NOT TO REDUCE WAGES ETC.
All employer shall not, by reason of its liability to pay mandatory contributions under this Act or its election to make voluntary contributions, reduce, directly or indirectly, the wages salary or other remuneration or benefits to which an employee is entitled under a contract of employment or any other law.
24.	The term “pay” is defined (s 3(1)) by the SGP Act to mean:

remuneration of any kind (including gross salary, wages and commission) that is –
(a) earned by an employee while on duty, or on leave with pay, in accordance with the terms of the contract of employment; and
(b) paid or payable in cash to the employee, 
…
25.	 The learned primary judge found, at [18], that Air Niugini, “introduced a ‘Same Job Same Pay’ structure for citizen and non-citizen pilots working for it.  This was intended to stop exodus of citizen pilots from its employ.  During negotiations and drawing up of contracts for the plaintiff and other citizen pilots, the Mr Kumarasiri directed that the employer’s mandatory superannuation contribution of 8.4% be included in the salary of the plaintiff and other citizen pilots.  The reason was, this is to avoid citizen pilots earning 8.4% more than the non-citizen pilots because non-citizen pilots are not entitled to employer’s portion of superannuation contribution.” [sic]

26.	His Honour’s reference to Mr Kumarasiri was a reference to Air Niugini’s then Chief Executive Officer, Mr Wasantha Kumarasiri. In his then capacity as President of the Union, Captain Kumasi had dealt with Mr Kumarasiri in negotiations which preceded the settling of the standard terms found in the 2008 Contract.

27.	 Against the background of an offer by another airline, Airlines PNG, to take on Captain Kumasi and others, the primary judge found, at [17], that, in May 2008, an exchange to the following effect had occurred between Mr Kumarasiri and Captain Kumasi:

“The first question Mr Kumarasiri asked was “what can I do to keep you?”  The plaintiff [Captain Kumasi] responded saying “Pay us the same as the expatriates for the same job done.”  Mr Kumarasiri responded in kind saying, “Done. You as the President of NAPU, tell all your pilots NOT to leave.” 
28.	Mr Kumarasiri’s statement, “Done”, formed the basis of an alleged misrepresentation as to “Same Job, Same Pay” made by him to Captain Kumasi. It was alleged, and the primary judge found, that Captain Kumasi entered into the 2008 Contract and the subsequent contracts during the claim period on the strength of this representation. Based on his construction of the 2008 Contract and the later contracts, the primary judge concluded that this representation was false, because PNG citizen pilots were not paid the same as non-citizen pilots.

29.	In light of the parole evidence rule in relation to contracts in writing, some care needs to be taken in relation to the permissible use of the evidence about anterior negotiations given at trial in relation to the construction of the 2008 Contract. 

30.	The relevant principle was stated by Lord Wilberforce in Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989, at 995-996, in which his Lordship stated, “In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”

31.	A like observation was made by Mason J in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429, in relation to the admission of evidence of the “genesis” and objectively the aim of a transaction to show that the attribution of a strict legal meaning would “make the transaction futile”. His Honour later referred to and repeated that observation in a discussion of the parole evidence rule in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352.
32.	Thus, in construing the 2008 Contract, it is permissible to take into account that its origin lay in an endeavour by Air Niugini to prevent departures of PNG citizen pilots by adopting a policy of “Same Job, Same Pay” in relation to its pilots, irrespective of whether they were or were not PNG citizens. This explains the definition and use in that contract of the term “National Pilot”. Further, in construing the 2008 Contract, it is both permissible and necessary to take into account that its commercial purpose is to achieve parity as between PNG national and non-PNG national pilots.

33.	Approaching the construction of the 2008 Contract in this way, and reading that contract as a whole, it becomes clear that the intended parity is with what cl. 7.2.1 terms the “total package”. This is reinforced by the reference in cl. 7.7 to what is stated in Appendix A as a “salary package”, which is “inclusive” of any employer contribution under the SGP Act. The reference to “pay” in Appendix A is not to be read in isolation. Instead, the amounts expressed in Appendix A and, in the case of Captain Kumasi, taken up in the Annex A applicable to him represent the total amount of a remuneration package. It is that total amount which is intended by the 2008 Contract to be equivalent as between PNG national and non-PNG national pilots. 

34.	So construed, the component mix of the equivalent total package will differ as between PNG national and non-PNG national pilots because Air Niugini’s obligation to make a superannuation contribution was only in respect of PNG national pilots. The base salary of pilots in this class is a figure derived from the “total package” gross as specified in Appendix A, after taking into account an 8.4% superannuation contribution made by Air Niugini.

35.	It is true that, as a result, the take home pay each pay period of a PNG national pilot such as Captain Kumasi will be less than that of a non-PNG national pilot. But that is because one receives the benefit of a superannuation contribution made by Air Niugini, whereas the other does not receive the benefit of such a contribution. Instead, equivalence – “Same Job, Same Pay” for a PNG non-citizen pilot – is achieved under the 2008 Contract by an amount equivalent to the contribution forming part of identical total remuneration.

36.	But is clause 7.7 of the 2008 Contract, as so construed, rendered void by s 76(4) of the SGP Act? Further, does the inclusive, salary package provision which permeates clause 7.0 of that contract violate the prescription in s 82 of that Act?

37.	The answer to these questions is that the “pay” as defined in the SGP Act of Captain Kumasi is but one component of a total remuneration, another part of which is a superannuation contribution made by Air Niugini, based on that “pay”. It is an error to conflate the word “pay” in the term “Rates of pay” in Appendix A to the 2008 Contract with the definition of “pay” in the SGP Act. For reasons already given, the reference to “Rates of pay” in Appendix A is a reference to the total amount of a salary package for a given pilot on a given 1st, 2nd or 3rd contract in respect of a given aircraft. These “Rates of pay” are agnostic as between PNG national and non-PNG national pilots, because they refer to a like total salary package amount. 

38.	What follows is that the 2008 Contract did not effect any reduction of wages or salary or other remuneration of Captain Kumasi by reason of Air Niugini’s liability to pay mandatory contributions under the SGP Act by virtue of his status as a PNG national employee. There was no violation of s 82 of the SGP Act. Nor was there any provision in the 2008 Contract which allowed Air Niugini, in respect of Captain Kumasi as a PNG national pilot, to make a contribution less than the rate prescribed under the SGP Act. To the contrary, the 2008 Contract envisaged that a contribution at the rate prescribed by the SGP Act would be made as part of a salary package total where there was an obligation to make such a payment. There was no violation of s 76(4) of the SGP Act. Rather, the 2008 Contract was premised on compliance by Air Niugini with that Act. That is the whole point of clauses 7.2.1 and 7.7.

39.	For completeness, we record our further conclusion, flowing from our construction of the 2008 Contract, that, under that contract, the superannuation contribution is paid from the property of Air Niugini, as are all other components of the total salary package. Thus, in this regard there is no violation of s 76(2) of the SGP Act.

40.	The foregoing reasons take up and reflect our agreement with the submissions made by Air Niugini and our respectful disagreement with the conclusions of the primary judge.

41.	It also follows from the foregoing that there was no false representation made by Mr Kumarasiri in his dealing with Captain Kumasi in May 2008.

42.	Neither party suggested that the language of either the 2012 Contract or the 2015 Contract dictated a different conclusion from that reached in respect of the 2008 Contract. Neither of these contracts violated the SGP Act. 

43.	It remains to consider whether any part of Captain Kumasi’s claim was in any event barred by the expiry of a limitation period. 

44.	In the court below and before us, the parties approached this question on the basis that the applicable law was as earlier stated by this Court in Ona v National Housing Corporation. In that case, the Court observed, at [23] of the SGP Act, that it, “does not prescribe any time limitations on compliance with the said statutory duty to make payment and to enforce payment. Accordingly, the statutory duty on an employer to process the payment and the Board to recover the contributions does not cease until such time an employee ceases to be a contributor under the Act.” For that reason, the Court held that the limitation period did not commence to run until the status of employee ceased.

45.	Air Niugini’s argument was that the status of employee was for the duration of each specific contract such that for that part of the claim period to which the 2008 Contract was applicable, more than six years had elapsed from when that contract came to an end by the time the writ was issued.

46.	In our view, however, the effect of clause 2.2 of the 2012 Contract was to continue the employment relationship in respect of employees who had previous employment immediately prior to the commencement of that agreement. In those circumstances, and as clause 2.2 provided, “all accumulated benefits and entitlements to which the Employee was entitled in respect of his previous service shall be carried forward by the Employer at the applicable rates and conditions applicable to such accumulated benefits”. One such employee entitlement was to a superannuation contribution under the SGP Act made by Air Niugini at the prescribed rate. Contractually, Captain Kumasi was placed in the same position as Mr Ona. He, too, was an ongoing employee. In these circumstances, the primary judge correctly held, in light of Ona v National Housing Corporation, that no part of the claim was statute-barred by reason of the expiry of a limitation period.

47.	For the reasons given above, the appeal must be allowed and the orders made by the National Court set aside. Costs must follow the event.

Orders
1.	The appeal be allowed.
2.	The orders made by the National Court on 7 June 2024 be set aside.
3.	In lieu thereof, it be ordered:
1.	The plaintiff’s [present respondent’s] claim be dismissed.
2.	The plaintiff pay the defendant’s [present appellant’s] costs of and incidental to the proceedings, to be taxed if not agreed.
4.	The respondent pay the appellant’s costs of and incidental to the appeal, to be taxed if not agreed.

________________________________________________________________
Lawyers for Appellant:       Ashurst Lawyers
Lawyers for respondent:     Holingu Lawyers