IN THE COURT OF APPEAL IN TONGA				 AC 18 of 2025
CIVIL JURISDICTION							[CV 4-6 of 2024]
NUKU’ALOFA REGISTRY

BETWEEN 	TONGA POWER LIMITED 
		Appellant

AND 		MICHAEL LANI ‘AHOKAVA

AND               MA’ATA HAHANO ‘AHO 

AND               GRAHAM STEVEN ‘ESAU 
		Respondents

Hearing	11 November 2025

Court		Randerson, Harrison and Dalton JJ

Appearances    William Edwards for the Appellant
		 Penny Swarbrick and Tupou Kolokihakaufisi for the Respondents

Judgment: 	20 November 2025

JUDGMENT OF THE COURT

[1]	This is an appeal against an interlocutory decision of Justice Garlick made on 21 July 2025.  Leave to appeal was granted on 20 October 2025. 
[2]	The three respondents to this appeal are the plaintiffs in three actions in the Supreme Court.  The actions seek damages for wrongful dismissal, as well as breach of contract causing psychological harm and damage to their reputations.  The respondents were all employed by Tonga Power, and their employment was terminated without giving a reason by notices dated 26 July 2023.  Three months’ notice of termination was given in each case.  Tonga Power elected to pay three months’ salary in lieu of having the respondents work during the notice period.  There is no claim that the notice period was not reasonable, and no claim that salary could not be paid in lieu of their working during the notice period.
Discovery Applications before Garlick J
[3]	The respondents brought applications asking that the following types of documents be disclosed: documents relating to the decisions to terminate their employment; the reason for the decisions to terminate; a consideration by the appellant of the terms of the employment contracts as regards termination of the respondents’ employment; advice given regarding this; and documents approving or implementing termination.  The appellant opposed disclosure on the basis that it had determined the employment contracts pursuant to a clause which allowed termination without giving a reason on reasonable notice.  If they were correct in doing so, the respondents’ claims for wrongful dismissal failed, and there was no need for disclosure of the documents sought.  
[4]	Justice Garlick ordered discovery.  He did not determine the question the appellant raised; he decided that ought to be determined at trial.  He expressed the view that the respondents’ pleaded cases were reasonably arguable and, on that basis, ordered the discovery of the documents sought.  The appellant contends that Garlick J ought to have determined the point of law as to whether it was entitled to determine the contracts of employment on reasonable notice. Before the hearing of this appeal, we gave notice that, should we determine that issue in the appellant’s favour, the parties should be prepared to make submissions about what should become of the wrongful dismissal claim.
Efficient Management of this Litigation 
[5]	It may be easy to say with hindsight, but it would have been better had the appellant cross-applied before Garlick J for summary determination of the legal points in dispute on the pleadings.  Even in the absence of a cross - application, modern case management would allow the Court to have identified that there were points of law raised on the pleadings which were novel, and would not depend on facts proved at trial.  Early determination of these type of points will put an end to proceedings at an early stage.  This is in the interest of both parties.  As will be seen, this was the approach taken in the two House of Lords cases relied upon by the respondents: Malik and Mahmud v Bank of Credit and Commerce International SA and Johnson v Unisys Limited.   It is the approach we take on this appeal.
[6]	The actions brought by the respondents in the Supreme Court are difficult for two reasons.  One is that, as acknowledged in the written submissions on this appeal, the respondents’ wrongful dismissal cases depend on implying terms into employment contracts in circumstances where there is no case authority which supports their approach.  The second difficulty is that, with respect, the respondents’ statements of claim, demonstrate an incorrect construction of the express terms of the employment contracts in dispute, and a failure to separate the pleading of their wrongful dismissal cases from their actions for damages for breach of contract causing psychological injury.  
Express Terms of the Contracts
[7]	Mr ‘Esau and Ms ‘Aho had contracts in the same terms as each other.  Mr ‘Ahokava’s contract was in slightly different terms.
[8]	By cl1.1 of all three Contracts, the employment is said to be “on the terms and conditions contained in this contract.” And by cl 2.1 the employment is stated to “continue … until otherwise terminated in accordance with this Contract.”  Importantly, the contracts are not for fixed terms, but for indefinite terms.
[9]	Mr ‘Esau and Ms ‘Aho’s contracts provided at cl 8:
8.1 Either party may terminate this Contract on notice in writing being given to the other party.  The period of notice to be given is set out below and both parties agree that the notice periods set out constitute reasonable notice. No reason for termination needs to be given.
8.2 The requisite notice period shall be one (1) month for Employees with less than three years completed service with the Employer, and three (3) months for Employees with more than three years completed service with the Employer.
8.3 If either party gives notice in accordance with this clause, the Employer may, at its absolute discretion, elect to terminate the employment immediately and pay salary in lieu of the notice period.  If the Employee fails to give the required notice or terminates his employment prior to the expiration of the term of this Contract, he shall forfeit any pay and allowances owing to him.
8.4 The Employer reserves the right to terminate this Employment Contract without notice or pay in lieu thereof if the Employee commits an act of Serious Misconduct as set out in part B of Schedule 3.
8.5 The things listed in part A of Schedule 3 are Misconduct.  Such conduct may result in warning either spoken or written.  If a written warning is issued it shall state:
		a) the thing complained of;
b) the improvement required and the time frame for such improvement.
	c) the consequences of failure to improve within the time stated.	
[10]	Mr ‘Ahokava’s contract provided at cl 8:
8.1 Either party may terminate this contract on three (3) months’ notice in writing being given to the other party.  The period of notice to be given is set out below and both parties agree that the notice periods set out constitute reasonable notice.  No reason for termination needs to be given.
8.2 If either party gives notice in accordance with this clause, the Employer may, at its absolute discretion, elect to terminate the employment immediately and pay salary in lieu of the notice period.  If the Employee fails to give the required notice or terminates employment his employment prior to the expiration of the term of this Contract, he shall forfeit any pay and allowances owing to him.
8.3 The Employer reserves the right to terminate this Employment Contract without notice or pay in lieu thereof if the Employee commits an act of Serious Misconduct as set out in part B of Schedule 3.
8.4 The things listed in part A of Schedule 3 are Misconduct.  Such conduct may result in warning either spoken or written.  If a written warning is issued it shall state:
		a) the thing complained of;
b) the improvement required and the time frame for such improvement.
		c) the consequences of failure to improve within the time stated. 
[11]	All three contracts provided at cl 13.1, “In addition to the terms set out in this Contract, this Contract is subject to the terms implied in Contracts of Employment by the law of Tonga which are not inconsistent with the terms of the Contract.”
[12]	All three contracts provided at cl 15.3: 
15.3 By signing below, the Employee acknowledges that he has received, considered, understood and agrees to be bound by this Contract, the Schedules appended hereto and the policies and provisions of the Employer Staff Administration and Procedures Manual, which documents all together form the entire agreement between the parties relating to the subject matter of the Contract.
[13]	Schedule A to the contracts is headed Misconduct, it is a list of matters introduced by, “The following are examples of behaviour that could lead to a warning that your employment is at risk.  These are not the only things that could lead [to] a warning.”  Schedule B is headed Serious Misconduct, it is a list of matters introduced by, “The following are examples of Serious Misconduct which may lead to dismissal or to instant dismissal in particularly serious cases.  These are not the only things that could lead to you being dismissed.” The first item in this list is “Frequent occurrences of Misconduct”.
The Pleadings Below
[14]	The pleadings in each of the actions in the Supreme Court are, so far as relevant to this appeal, in identical or nearly identical terms. As noted above, each statement of claim makes a claim for wrongful dismissal and a claim for damages for breach of contract causing loss of reputation and psychological damage. Each statement of claim put the wrongful dismissal case on two bases: the express provisions of the employment contracts, and secondly on what are said to be implied terms of those contracts. The claims for damages for breach of contract causing loss of reputation and psychological damage were put on the basis of breach of implied terms of contract.
Claim based on Express Provisions
[15]	In their statements of claim the respondents plead the following interpretation of the express provisions of the employment contracts at cl 8 and sch 3:
4. 	The [employment contract] materially contained in its clause 8 and Schedule 3 provisions relating to misconduct and serious misconduct.
5. 	The effect of these provisions is that for the Plaintiff’s employment to be terminated he must either have engaged in serious misconduct or misconducted herself after having received a warning.
…
7. 	At the time of his dismissal the Plaintiff had not engaged in serious misconduct.
8.	At the time of his dismissal the Plaintiff was not in receipt of a warning that his employment was or may be in jeopardy.
9. 	The defendant was not entitled to terminate the employment of the Plaintiff in the absence of serious misconduct or a warning as aforesaid.
10. 	The Plaintiff was wrongly and/or unlawfully dismissed.
[16]	From the defences we see that the appellant admits that none of the respondents had engaged in Serious Misconduct and none had received a warning that his or her employment was in jeopardy because of Misconduct.  The defences are that the respondents’ employment was terminated on notice without reason under the express provisions of the contracts – cl 8. The defences deny that the contracts could only be terminated for Misconduct or Serious Misconduct – paragraphs 4 and 5. It is pleaded that cl 8.1 of the contracts allowed the respondents’ contracts of employment to be terminated without cause - paragraphs 37.
[17]	In our view this construction issue is one which can and should be determined before trial.  It must be determined in the appellant’s favour.  As a matter of construction, it is very clear that cl 8 gives a right to terminate on notice without giving a reason.  This is a normal term found in most employment contracts, so normal that if it is not expressed in a contract for an indefinite term, it will be implied as a matter of law, see below.  The common law is stated in Johnson by reference to a Canadian case, Wallace v United Grain Growers:
The action for wrongful dismissal is based on an implied [in this case express] obligation in the employment contract to give reasonable notice of an intention to terminate the relationship (or pay in lieu) in the absence of just cause for dismissal. … A ‘wrongful dismissal’ action is not concerned with the wrongness or rightness of the dismissal itself.  Far from making dismissal a wrong, the law entitles both employer and employee to terminate the employment relationship without cause.  A wrong arises only if the employer breaches the contract by failing to give the dismissed employee reasonable notice of termination.  The remedy for this breach of contract is an award of damages based on the period of notice which should have been given.”
[18]	Serious misconduct may justify summary termination at common law, and it is clear that the employer’s right to terminate for Serious Misconduct under the contracts of employment is a separate right from the right to terminate on notice for no reason.  Misconduct simpliciter does not give a right to terminate under the employment contracts.  However, if engaged in frequently, it will become Serious Misconduct and trigger that right in the appellant. 
[19]	In our view the claim made in paragraphs 4, 5, and 7-10 of the statements of claim should be dismissed.  We are satisfied to the very high level of assurance necessary that they could not succeed at trial.  
Claim based on Implied Terms
[20]	The respondents’ pleaded cases based on implied terms are:
6. The [contract of employment] materially contained the following implied terms:
(a) the implied term of mutual trust, confidence and good faith;
(b) An implied term that the Defendant would deal fairly with the Plaintiff, including that it would accord him natural justice in its dealings with him; 
(c) An implied term that the Defendant would not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of mutual trust and confidence between it and the plaintiff.
…
11. The defendant failed to comply with its obligations pursuant to the implied terms pleaded herein in relation to the Plaintiff.
…
17. In the event the Plaintiff engaged in misconduct, he was entitled by the terms of the [employment contract] to be provided with a warning in accordance with clause 8.5.
18. In the event the Plaintiff engaged in in serious misconduct, the Defendant was entitled to dismiss him without notice.
19. Before exercising its right to dismiss for serious misconduct, the Defendant was obliged by the terms implied into the [employment contract] as pleaded herein to treat the Plaintiff fairly and in accordance with natural justice.
20. The Defendant was obliged by the terms implied into the [employment contract] to provide the plaintiff with the opportunity to respond to any allegation or belief by the Defendant that he had engaged in misconduct, before acting on any such allegation or belief.
21. Despite clause 8.1 of the [employment contract] which states that no reason for termination needs to be given at the time of termination, the Defendant was not entitled to terminate the employment of the Employment Contract without reason or capriciously.
[21]	The statements of claim continue to the effect that Tonga Power is in breach of the pleaded obligations because it gave the respondents the written notices of termination described above; gave them no opportunity to speak and escorted them from the workplace, or in the case of  Ms ‘Aho, attended her home to give her notice of termination of her employment.  This is said to be a failure to treat the respondents fairly and reasonably; failure to accord them natural justice and failure to hear the respondents on the proposed termination.  It is pleaded that Tonga Power had no reason to terminate the respondent’s employment and acted capriciously in doing so.
[22]	Paragraphs 17 -20 (16-19 in the case of Ms ‘Aho) of the statements of claim should be dismissed.  These paragraphs concern the respondents’ cases for wrongful dismissal.  They are based on the content of implied terms said to apply when there is dismissal for Serious Misconduct or Misconduct.  The respondents plead that they had not done anything which amounted to Misconduct or Serious Misconduct, so these pleas are irrelevant to their pleaded case.  As the appellant does not contend that there was any Misconduct or Serious Misconduct these paragraphs can have no sensible function in the respondents’ cases.  Again we are satisfied to the high standard required that these claims could not succeed at a trial.
[23]	The remaining pleading in relation to implied terms is that at paragraph 21 (20 in Ms ‘Aho’s case). 
[24]	The respondents’ submissions on this appeal made a wider case than that which is pleaded at paragraph 21 of their statements of claim: 
(a)	“Although the written notice of termination does not need to include the reason for termination, the employer must have a proper reason for the termination, and to have acted in trust, confidence and good faith in reaching and effecting that decision.”  - para 18 (b) written submissions.
(b)	The respondents do “not claim that the implied term ‘prohibits the Appellant     from giving reasonable notice’.  Rather, and broadly speaking, they claim that the implied term of mutual trust and confidence, natural justice and good faith requires that the employer act reasonably (including not capriciously) in exercising its right to terminate the employment by giving notice and that such reasonableness requires the employer to have a proper reason for terminating the employment and to have acted fairly in reaching the decision to dismiss and in effecting the dismissals.” – para 33(a) written submissions. 
(c)	The only effect of cl 8.1 is that the notice of termination does not need to set out the reason for termination – para 33(b) written submissions.
[25]	For the purposes of this appeal, we will treat the pleading at paragraph 21 as encompassing all that is said in the submissions.  We also note that the term pleaded at paragraph 21 (c) adds nothing, it is taken from the language in Johnson used to explain the content of an implied term of trust and confidence.
[26]	At paragraphs 6 and 11 of the defences it is admitted that an employment contract contains an implied term of mutual trust, confidence and good faith.  However, the defendant pleads that this cannot change the express provision at cl 8.1.  That plea correctly reflects the law on this topic in the United Kingdom.
Implied terms in Employment Contracts
[27]	A term will be implied in a contract of employment just as it will be in other contracts.  It will be implied at law to give the contract efficacy or in circumstances where the rights under the contract will be rendered worthless or seriously undermined without the term.  Implication of a term into a contract is by way of interpreting the contract.  In this respect, “it is not enough for a court to consider that the implied term expresses what it would have been reasonable for the parties to agree to.  It must be satisfied that it is what the contract actually means.”
[28]	In Malik and Mahmud v Bank of Credit and Commerce International SA, above, the House of Lords in the UK did not find, but acted upon the agreement of the parties, that an employment contract contained an implied term of trust and confidence.  The claim did not concern termination of employment.  Malik and Mahmud were managers employed by the bank.  The bank engaged in dishonest transactions and collapsed.  The liquidator dismissed Malik and Mahmud; they were innocent of any dishonesty.  They sued claiming that, because during the duration of their employment, the bank behaved dishonestly, they were at a disadvantage in the labour market as potential employers regarded them as tainted by the dishonesty of their former employer.  The matter proceeded on a pleading point and the House of Lords held that the claim was viable.  The case was not a dismissal case and did not decide that the implied duty had any effect on rights of termination.  Keifel J in Commonwealth Bank v Barker was astute to this point.  She said, “It may immediately be recognised that the term of trust and confidence recognised in Malik can have no application to claims for common law damages arising out of dismissals.” - [92].
[29]	Then came the case of Johnson v Unisys Limited, above.  Mr Johnson was dismissed for cause.  He sued his ex-employer for damages for breach of contract saying he was dismissed without a fair hearing and in breach of his employer’s disciplinary procedures.  He claimed on the basis of the implied term recognised in Malik.  His claim was struck out on a summary basis and his appeals were dismissed all the way to the House of Lords, where he again lost, Lord Steyn dissenting, but not in the result of the appeal.
[30]	Johnson strongly favours the appellant so far as the claim for wrongful dismissal is concerned.  While the House of Lords recognised the implied term from Malik, none of the House (including Lord Steyn, [24]) thought it applied to moderate an express provision for termination on notice in a wrongful dismissal case.  
[31]	So far as the claim for psychological injuries was concerned, Lord Steyn thought that the Malik implied term would found an action (not a wrongful dismissal action) for breach of contract – for damages caused by dismissing the employee in a harsh or humiliating way – [24].  Lord Nicholls agreed with this in theory, but by way of obiter, for he thought that in the United Kingdom the Industrial Relations Act 1971 (UK) must be regarded as covering the field and leaving no room for such an implied term.   Lord Millet rejected the suggestion altogether – [78].  Lord Hoffman thought the step “jurisprudentially possible”, but unwise, and noted that the Canadian Courts had refused to take it – [47]. He put his decision on the basis that in the United Kingdom, legislation covered the field – [54] and following.  There is no legislative inhibition on the implication of a term in Tonga, because there is no equivalent legislation.
[32]	Thus Johnson is authority for the proposition that there is an implied term of trust and confidence in employment contracts, but that term will not dilute or otherwise affect an express provision allowing termination on notice.  As a matter of first principles, this must be right, for a term will not be implied if it conflicts with an express term. Furthermore:
If the parties have agreed that the contract of employment is of indefinite duration either expressly or by fixing no time for expiration, then the invariable position is that it can be lawfully terminated on notice.  
[33]	Such an implication is powerfully against the respondents’ contention that there could be some sort of implied term derogating from the plain meaning of cl 8 of the contracts.
[34]	The pleadings at paragraph 21 of the respondents’ statements of claim, assert not an implied term of trust and confidence, but an implied term obliging the employer to afford natural justice and act reasonably, not capriciously, in terminating in accordance with   cl 8.1 of the employment contracts.  The respondents could not point to any authority which recognised the existence of such a term. In fact, there is longstanding authority against the idea, and that authority was discussed without disapproval in Johnson – [71], per Millet LJ.  In any case, Johnson is strong authority against the idea that such an implied term could be the basis of any wrongful dismissal case.
[35]	Once again, the first principles discussed above are strongly against the implication of a term requiring reasonableness, and natural justice in the context of wrongful dismissal.  In the respondents’ submissions set out above, the pleaded position is taken to its logical but absurd conclusion that a contractual provision allowing termination giving no reason cannot be used except for a good reason, thus neatly illustrating how the implied term contended for contradicts the express terms of the employment contracts.  In short, the implied term contended for here is inconsistent with the express terms of clause 8.1 and therefore, at common law, and in terms of clause 13.1, the contention must fail.	
[36]	Lastly, in discussing the pleading at paragraph 21 of the statements of claim, it is significant that the express term in cl 8.1 is mutual, that is, it binds both employer and employee in the same way. The asserted implied term of trust and confidence, or not to act capriciously, but only for proper reason, would also operate in a mutual way in conjunction with cl 8.1.  In Commonwealth Bank v Barker, above, the joint judgment discussed how such an obligation might impact onerously upon employees – [40] and [41].  Here, in the context of a dismissal case, can it really be countenanced that an employee cannot give the employer three months’ notice to leave unless he or she provides a reason and a reason that is considered fair and acceptable according to some ill-defined standard?  The mutuality of the obligations in cl 8 of the employment contracts is against the respondents.
[37]	In our opinion the pleading at paragraph 21 of the statement of claim is doomed to fail so far as it is part of the respondents’ wrongful dismissal cases.  In its terms it is only pleaded as part of that the wrongful dismissal cases, but it may support the psychological injuries and damage to reputation cases the respondents wish to run.  For this reason we do not dismiss paragraph 21 of the respondents’ pleadings (paragraph 20 in Ms ‘Aho’s case), but strike it out in each case.
Claim for Psychological Injury and Damage to Reputation
[38]	That leaves the parts of the respondents’ pleadings which assert that they suffered psychological damage and loss of reputation because of unfair treatment in breach of an implied term of their contracts in and about the way they were dismissed.  In Johnson Lords Nicholls, Steyn and Hoffman were prepared to recognise that such a case might be made, see above at [31].  In Elisha v Vision Australia such a claim was allowed.  While the case discusses several difficulties with such claims, it is a significant development of the common law in Australia which favours the respondents in this case.
[39]	At present the claims for psychological injury and damage to reputation are not properly pleaded. In particular, all the implied terms pleaded go to wrongful termination, not the claimed psychological injury and damage to reputation, and questions of causation and remoteness of damage need to be addressed by factual pleadings.  Because we have dismissed so much of the respondents’ pleaded cases, and because the pleadings of the psychological injury and reputational damage cases require very substantial amendment, we think it is better to strike out all those parts of the statements of claim which have not already been dismissed and give leave to file new statements of claim in each action, limited to the claim for damages for psychological injury and injury to reputation. This way the respondents have the opportunity to plead in a coherent way, rather than just patch up the existing pleading by way of amendments.
Discovery
[40]	Returning to the applications which were before Garlick J, we are unable to see that the documents sought by the respondents on their discovery applications are relevant to the actions which they now have leave to replead, the focus of the applications was to obtain documents which showed the reasons for termination.  The respondent’s claims for wrongful termination have been dismissed; Tonga Power was entitled to terminate the contracts without giving reasons and has done so.  Any claims for psychological injury and damage to reputation will be based on facts which occurred in and around the respondents' dismissals.  Even if it is assumed that one such fact is that the respondents were not given a reason for dismissal, that does not make the classes of documents sought in the application before Garlick J relevant to their claims. At  the hearing before us there was some discussion about the likelihood that there will be documents in the possession of Tonga Power which will contain some information relevant to the claim which is to be repleaded as well as information irrelevant to that claim (including the reasons for dismissal).  If that is the case, the appellant will be entitled to redact irrelevant information in the documents discovered. 
[41]	It was conceded by counsel for the appellant that after the respondents replead their cases and there are new defences, the appellant will need to revisit its disclosure by reference to the new pleadings.  We have included a timetable for necessary interlocutory steps in our orders. Any disputes or issues about this timetable or compliance with the steps ordered are to be determined on application to a Supreme Court Judge.
Costs
[42]	There was no order for costs made below.  We were not asked to make any order as to the hearing below, and we do not do so.  The respondents should pay the appellant’s costs of and incidental to the appeal to be fixed by the Registrar if not agreed; the appellant has been successful.
Orders
[43]	We order that:
(a)	The appeal is allowed;
(b)	The order of Garlick J of 21 July 2025 is set aside and instead the order on the applications dated 6 March 2025 is that those applications are dismissed.
(c)	The causes of action for wrongful dismissal pleaded at paragraphs 4, 5, 7-10, and 17-20 of the statements of claim in CV5/2025 and CV6/2025 and paragraphs 4, 5, 7-10, and 16-19 of the statements of claim in CV542025 are dismissed.
(d)	The remainder of the statements of claim in those actions are struck out.
(e)	The stay imposed by Randerson J on 20 October 2025 is lifted.
(f)	The respondents have leave to file and serve new statements of claim within 28 days, limited to pleading their causes of action for damages for breach of contract causing psychological injury and damage to reputation.
(g)	The appellant is to file and serve a copy of a new defence in each action within 28 days after the new statements of claim are served on it.
(h)	The appellant is to make discovery of any new documents necessary because of the repleading at the same time it files and serves its defence.
(i)	The respondents are to pay the appellant’s costs of and incidental to this appeal to be fixed by the Registrar if not agreed. 

__________________________
Randerson J 

__________________________
Harrison J

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Dalton J