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Union des Transports Aeriens v Magulu [1986] VULawRp 1; [1980-1994] Van LR 263 (24 February 1986)

[1980-1994] Van LR 263

IN THE COURT OF APPEAL OF
THE REPUBLIC OF VANUATU

Appeal Case No. 8 of 1985

BETWEEN:

UNION DES TRANSPORTS AERIENS
Appellant

AND:

ALICK MAGULU
Respondent

Coram: Williams J
Cazendres J

JUDGMENT

[EMPLOYMENT - employee's entitlement to severance allowance]

I have read and concur in the judgment of my learned brother, Justice Cazendres. I have written this for the benefit of English Counsel.

This appeal is brought by UTA against the Judgment of the learned Chief Justice, the Honourable Mr Justice Cooke, who had reversed a decision of the learned Magistrate, Mr Coakley.

The latter had decided under the Employment Act 1983 that one, Mr Magulu, an ex-employee of UTA, was not entitled to severance pay from UTA when they handed over their business in Vanuatu to ACI. The learned Magistrate concluded that there had been no severance of Mr Magulu's term of employment on the ground that Mr Magulu had continued to do his former job. ACI continued to employ him at the same salary, in fact a slightly higher salary. The Magistrate appeared to overlook that under s. 55 (4) service for successive employers in the same business is only continuous if the conditions and terms are at least as favourable under the succeeding employer.

The learned Chief Justice considered that the loss of seniority represented a reduction in the favourability of terms and conditions.

Mr Magulu was employed by UTA in Port Vila. I am not sure of the nature of his employment, but I believe he was a clerk.

The UTA decided to cease its activities in Vanuatu and its business was taken over by ACI (Air Caledonie Internationale).

The latter, that is ACI, were willing to take over all the UTA's staff and with one or two exceptions they did so. Mr Magulu, Plaintiff in the action before the learned Magistrate, Mr Coakley, was taken on to the staff of ACI who paid him a slightly higher salary than he had received from UTA.

Although the amount of his salary recognised that during his service with UTA he had acquired useful experience, it appears that ACI did not recognise his seniority. That is to say, ACI, his new employer, did not regard him as their employee as from the commencement of his service with UTA. I make those comments whilst aware that ACI have not given evidence to any Court as to their attitude towards Mr Magulu's seniority status among their employees.

There are in evidence, letters which have been allegedly written by ACI to the Labour Dept in Vanuatu. In those letters ACI allegedly explain that every employee of UTA who joined ACI on the take over entered into a fresh contract of service with the ACI, commenting on the date when ACI took over the interests of UTA in Vanuatu.

It was 1st January 1984 when ACI took over UTA's interests and on that date the Plaintiff, Mr Magulu, commenced his Employment with ACI.

In anticipation of the Plaintiff being employed by ACI, his employers, UTA sent him a letter dated 27th October 1983, stating that when the Plaintiff, Mr Magulu, began working for ACI, his employment with UTA would cease in accordance with the provisions of s. 55(3) of the Employment Act 1983.

S. 55 of the Act is headed "When severance allowance is not due". In order to ascertain what is meant by "severance allowance" one must refer to the preceding section of the Act i.e. s. 54. Subsection (1) of s. 54 states that severance pay is payable to an employee whose employment ceases after he has been continuously employed for 12 months or more.

S. 55(3)(d) indicates that where employment ceases on the disposal of a business as a going concern and its employee is employed by those who acquire the goodwill, the employee is not entitled to severance pay if his new employers engage him on terms and conditions which are not less favourable than he had been enjoying.

It is apparent from s. 55(3) that the "outgoing" employer has to pay severance allowance but is excused from paying under certain conditions. There is, when he ceases business, a liability imposed upon him by the Act (s. 55(3)) to pay severance allowance. If he wishes to avoid paying the severance allowance, it appears to me that the employer must show that he is not liable. He shows that he is not liable by demonstrating that the employee is now enjoying conditions which are as favourable as when he employed that person. In other words, he carries the burden of proving that the employee is not entitled to severance pay. The employer must show that he is excused from the burden of paying severance allowance by reason of s. 55(3)(d).

Accordingly, I would expect that when an employer is handing over his business (and employees) to a successor, he will make financial provision for paying them severance pay. Alternately he will arrange in the contract under which he disposes of his business, for his employees to continue in the new firm on terms as good as they have hitherto enjoyed. No doubt under the latter arrangement he may be asking his successor to accept an arrangement beneficial to him (the outgoing employer). The new employer may not agree or he may agree to employ them in return for some consideration which may be reflected in the purchase price.

I am inclined to the view that the outgoing employer should endeavour to make it a term of the take-over of his business that his employees will enjoy the same terms and conditions. If he does not take such care then there is no contractual duty on the new employer to provide those same conditions. If in fact the new employer does not provide the same terms and conditions, the outgoing employer is automatically liable under s. 54 and s. 55 to pay severance allowance.

He (the outgoing employer) may be able to claim damages from the new employer depending on the provisions of the contractual take-over.

In the appeal before us it is admitted that Magulu has lost seniority in that his service with ACI does not commence until 1st January 1984, the date on which ACI took over UTA's business. He had commenced working for UTA on 3rd November 1981 so his loss of seniority is limited to 2 years and 2 months.

Nevertheless, we consider that the loss of seniority represents the loss of something valuable. For example the quantum of severance allowance payable is set out in s. 56(2) as being ½ month's salary for each year of service with a proportionate amount for each month. Accordingly, Mr Magulu's loss of seniority is worth one month's salary to him whenever he loses his job with ACI; that is to say if ACI dismiss him now, his severance allowance will be based on 2 years' service as from 1st January 1984. Whereas if his service were regarded as a continuation of his employment with UTA he would receive 4 years severance pay.

UTA have not discharged the onus of proving that Magulu's service with ACI involves no loss of seniority. Therefore they must compensate him accordingly.

The amount claimed is not in dispute at VT73,915.

Dated at Port-Vila this 24th day of February, 1986.

WILLIAMS J.
CAZENDRES J.