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Supreme Court of Vanuatu |
IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)
CIVIL CASE No. 110 of 2003
BETWEEN:
KEITH MOLLOY
Claimant
AND:
AIR VANUATU (OPERATIONS) LTD
Defendant
Coram: Chief Justice Vincent LUNABEK
Mr. Juris Ozols for claimant
Mr. John Malcolm for defendant
Hearing date: 31 August 2004
Judgment date: 8 September 2004
JUDGMENT
INTRODUCTION: Nature of claim and brief facts
This is a claim for severance allowance by the Claimant against the Defendant Company, in the amount of Vatu 15,907,200.
It transpires that at the time of the trial and the final submissions, the claimant abandons half of his claim which is set out as the ‘further and alternative claim’ at paragraphs 10 and 11 of the claim.
It follows that the Claimant’s claim stands in the sum of Vatu 7,953,600 against the Defendant Company.
The Claimant is a resident of Port-Vila since 1987.
The Defendant is a Company incorporated in Vanuatu and operated as an airline owned wholly by the Government of Vanuatu.
The Claimant has been employed by the defendant from 25 April 1987. He worked continuously for the airline until 27 April 2003.
The Claimant’s contract of employment was renewed by the Defendant Company in 1989, 1993, 1995, 1997 and 2001.
After receiving notice, the Claimant’s contract of employment was terminated on 27 April 2003. The Claimant had been employed by the Defendant for 16 years and 2 days.
At the time of termination of his contract, the Claimant was earning VT994,200 per month.
The Claimant filed a sworn statement of 27 August 2004 in support of his Claim. He was cross-examined on it.
The Defendant filed a statement of defence on 11 July 2003. It contains assertions of fact. Those assertions must be disregarded because they fail due to a lack of any evidence in support of them.
In effect, the Defendant did not give any evidence. As such, the sworn statement of Jean Paul Virelala filed on 27 July 2004 on behalf of the Defendant Company, must be ignored as he was not available to be cross-examined on any of the contents.
EVIDENCE
The only evidence before the Court is that of the Claimant, Keith Molloy in his witness statement and his oral evidence in Court.
The evidence of the Claimant shows the following:-
“The monthly remuneration is inclusive of all salary entitlements including severance allowances”.
This constitutes the point of dispute between the two (2) parties.
LAW
The following are the relevant provisions of the Employment Act [CAP. 160] and the relevant clauses of the Employment Contract (Renewal) between the Claimant and the Defendant Company:-
Sections 6, 9, 54, 55, 56 and 57 of the Act [CAP. 160] provide:
“EFFECTS OF CUSTOM, AGREEMENT ETC.
“CONTRACT OF EMPLOYMENT
FORM OF CONTRACT
Provided that a contract of employment for a fixed term exceeding 6 months or making it necessary for the employee to reside away from his ordinary place of residence shall be in writing and shall state the names of the parties, the nature of employment, the amount and the mode of payment of remuneration, and, where appropriate, any other terms and conditions of employment including housing, rations, transport and repatriation.”
SEVERANCE ALLOWANCE
SEVERANCE ALLOWANCE
54.(1) Subject to section 55, where an employee has been in the continuous employment of an employer for a period of not less than 12 months commencing before, or after the date of commencement of this Act, and-
(a) the employer terminates his appointment; or
(b) the employee retires on or after reaching the age of 55 years; or
(c) the employer retires the employee on or after reaching the age of 55 years; or
(d) where the employee has been in continuous employment with the same employer for a continuous period of not less than 10 consecutive years, the employee resigns in good faith; or
(e) the employee ceases to be employed by reason of illness or injury and is certified by a registered medical practitioner to be unfit to continue to work,
the employer shall pay severance allowance to the employee under section 56 of this Act.
(2) For the purposes of subsection (1)-
(a) an employee who works for his employer on 4 or more days in any week shall be deemed, in respect of that week, to have been in continuous employment;
(b) no employee shall be held to have ceased to be in the continuous employment of an employer by reason of his participation in a strike which is not unlawful;
(c) where an employee ceases to be in the employment of one employer and enters the employment of another under Section 55(4), his employment by the first and second employer shall be deemed to be continuous employment.
(3) For the purposes of section 308 of the Companies Act, CAP. 191 severance pay shall be deemed to be wages.
WHEN SEVERANCE ALLOWANCE NOT DUE
55.(1) Severance allowance shall not be payable to an employee who has been recruited outside Vanuatu and is not ordinarily resident in Vanuatu.
(2) An employee shall not be entitled to severance allowance if he is dismissed for serious conduct as provided in section 50.
(3) Where-
(a) an employee dies and the employee is employed or offered employment by the personal representative of the deceased forthwith after the death;
(b) employment by a partnership ceases on the dissolution of the partnership, and the employee is employed or offered employment by a member of the dissolved partnership or a new partnership forthwith after the dissolution;
(c) employment by a body corporate ceases on the dissolution of that body and the employee is employed or offered employment by some other corporate body in accordance with enactment or a scheme of reconstruction forthwith after the dissolution; or
(d) employment ceases on the disposal of the goodwill, or of the whole or a substantial part of the business as a going concern, or of that part of the business in which the employee is employed and he is employed or offered employment by the person who acquires the goodwill or business or part of the business forthwith after the disposal,
on terms and conditions which are not less favourable than those of the former agreement, the employee shall not be entitled to severance allowance.
(4) Where an employee to whom an offer is made in any of the circumstances specified in subsection (3) accepts the offer, he shall be deemed to have entered the employment of the person by whom the offer is made forthwith upon the cessation of his employment with the first employer.
(5) Where an employee is deemed to be in continuous employment in accordance with section 54(2)and that continuous employment is terminated in circumstances in which severance allowance is payable, the employer in whose service the employee was employed immediately before the termination shall be deemed to be the employer during the whole of the period and shall be liable to pay severance allowance accordingly.
(6) An employer who is liable to pay severance allowance under subsection (5) shall-
(a) be entitled to deduct any period and to make any deduction which any previous employer would have been entitled to deduct or to make had the previous employer become liable to pay severance allowance; and
(b) be exempt from any liability to pay the allowance in respect of any period for which any previous employer was exempt from such liability.
AMOUNT OF SEVERANCE ALLOWANCE
56. (1) Subject to the provisions of this Part, the amount of severance allowance payable to an employee shall be calculated in accordance with subsection (2).
(2) Subject to subsection (4) the amount of severance allowance payable to an employee shall be-
(a) for every period of 12 months-
(i) half a month’s remuneration, where the employee is remunerated at intervals of not less than 1 month;
(ii) 15 days’ remuneration, where the employee is remunerated at intervals of less than 1 month;
(b) for every period less than 12 months, a sum equal to one-twelfth of the appropriate sum calculated under paragraph (a) multiplied by the number of months during which the employee was in continuous employment.
(3) Where remuneration is fixed at a rate calculated on work done or includes any sum paid by way of commission in return for services, the remuneration shall, for the purposes of this section, be computed in the manner best calculated to give the rate at which the employee was being remunerated over a period not exceeding 12 months prior to the termination of his employment.
(4) The court shall, where it finds that the termination of the employment of an employee was unjustified, order that he be paid a sum up to 6 times the amount of severance allowance specified in subsection (2).
(5) Any severance allowance payable under this Act shall be paid on the termination of the employment.
(6) The court may, where it thinks fit and whether or not a claim to that effect has been made, order an employer to pay interest, at a rate not exceeding 12 per cent per annum from the date of the termination of the employment to the date of payment.
(7) For the purposes of this section the remuneration which shall be taken into account in calculating the severance allowance shall be the remuneration payable to the employee at the time of the termination of his employment.”
“DEDUCTIONS FROM SEVERANCE ALLOWANCES
57. (1) An employer may deduct from any severance allowance payable-
(a) in the case of an employee who is retired on or after attaining the age of 55 years:
(i) half the amount of any gratuity due a the age of 55 years from any pension fund;
(ii) any gratuity granted at the age of 55 years by the employer;
(iii) 5 time the amount of any annual pension granted at the age of 55 years from any pension fund mentioned in paragraph (a)(i) above;
(iv) 10 times the amount of any annual pension granted at the age of 55 years by the employer;
(b) in any other case-
(i) any gratuity granted by the employer;
(ii) any contribution made to any pension fund mentioned in paragraph (a)(i) above by the employer.
(2) For the purpose of this section “pension” fund means any provident or pension fund or similar scheme (other than the Vanuatu National Provident Fund Act [CAP. 189], as amended from time to time) which fund is specifically approved by the Commissioner.”
The relevant part and clauses of the Employment Contract provide:-
“EMPLOYMENT CONTRACT RENEWAL
BETWEEN: AIR VANUATU (OPERATIONS) LIMITED
P.O. BOX 148
PORT-VILA
AND: Keith Molloy
Born on 11th September 1936
Of P.O. Box 886
PORT-VILA
(“The Employee”)
WHEREAS the Employee was under contract with the employer as from the 25 April 1987 to 24 April 2001.
AND WEREAS the Employer has agreed to his being employed by the Employer pursuant to the conditions as set out in this Agreement and the Annexures A, B, C and D, in the position of Director of Operations.
AND WHEREAS the parties wish to record their agreement in writing.
NOW THIS AGREEMENT SAYS:
3. THE total remuneration of the Employee shall be VT966700 per calendar month and shall be subject to review in accordance with Company policy as approved by the Board of Directors. The monthly remuneration is inclusive of all salary entitlements including severance allowance...
...
...”.
SUBMISSIONS
The Claimant submits to the following effect:
Clause 3 of the Employment Contract does not operate as any waiver of the claimant’s rights under Sections 54 and 55 of the Employment Act.
The Claimant says that the entitlements of severance under Part XI of the Act arise upon the cessation of Employment. It is not something that can accrue during the course of employment and it can be and is lost in the event that the employee resigns of his own volition or he is terminated for misconduct.
The Claimant further points out the entitlements to a severance allowance were changed by Parliament in 1989 and 1995. Section 57 of the Employment Act deals specifically with offsets against severance allowances and it makes it clear that the only deduction an employer is entitled to make is in respect of any gratuities the employer has made from any pension fund other than the V.N.P.F. There is no evidence of any such pension funds being paid to the Claimant.
It is then submitted for the Claimant that the situation for the Claimant and the other pilots and indeed all of the other employees of Air Vanuatu is the same, there is no valid contracting out of entitlements that they have under the Employment Act that in certain circumstances i.e. termination of their employment by the employer, resignation after the age of 55, or resignation due to ill health, or resignation by the employee after not less than 10 years of consecutive service, the employer is obliged to pay severance allowance.
It is finally submitted for the Claimant that the evidence of the Claimant in re-examination shows that there is no increase in his salary between the second last and last contract (i.e. ‘KM4’ and ’KM5’) that could be the equivalent of “severance allowance”.
The Defendant submits to the following effect:
It is open to the parties to agree to terms of a Contract in writing (Section 9 of the Employment Act [CAP. 160].
After a probation period and after 12 months continuous employment an employee is entitled to severance providing he or she comes within Section 54(1) of the Employment Act and in particular:-
The Defendant says in this case there is no termination the contract simply expired on time; or
In this case the Defendant says it did not retire the Claimant. The contract simply expired.
The Defendant thus submitted that the Claimant does not come within the definition of employee’s entitled to severance payments.
The Defendant’s submissions to this effect cannot stand. On the evidence before the Court, the Claimant comes with the definition of an employee who is entitled to severance payments.
The Defendant says further that if its submission is wrong, the calculation is not at one month per year as calculated but at 2 weeks per year as specified in Section 56(2).
The Defendant further says that pursuant to the Contract of Employment (clause 3) which is:
“the monthly remuneration is inclusive of all salary entitlements including severance allowances.”
(a) There is nothing in the Act to prohibit an employer paying severance at any time.
(b) Under Section 57(1), the employer may deduct gratuities:-
Thus either:-
(i) All severance has been paid and nothing due is left;
(ii) The payments on a monthly basis for a gratuity such that in any event no severance is due.
The Defendant refers the Court to the case of Mouton -v- SELB [1998] VUCA 8 Civil Appeal Case No. 02 of 1998 (at page 8). The purpose of Part XI of the Employment Act [CAP. 160] is to provide security for residents of Vanuatu, where their employment relationship is secured by the employer. An employee who is dismissed by his employer is entitled to severance pay except if he is dismissed for serious misconduct.
The case of Mouton -v- SELB cannot help and assist the defendant’s case.
The Claimant is a resident of Port-Vila since 1987. The evidence as accepted by the Court is that the contract of employment of the claimant was terminated on 27 April 2003 after he had received a notice to this effect.
The Claimant worked for the Defendant Company for 16 years. There is no evidence of any serious misconduct on the part of the Claimant leading up to the notice and termination of his contract on 27 April 2003.
APPLICATION OF LAW
Applying the relevant provisions of the Employment Act [CAP. 160] to the facts before the Court, I accept the Claimant’s submissions that the Defendant’s submissions that severance does not arise at the end of a fixed term of contract is a nonsense. The contract itself acknowledges itself it is a continuation of the previous contracts and they also acknowledge that the contract was ended by mutual consent on 27 April 2003 and clearly the claimant was retiring at an age beyond 55 if one needed to fit him into a particular category under Part XI of the Employment Act.
Further as the evidence shows, after receiving the notice, his contract came to an end which constitutes a termination.
However, that is not necessary, it is quite obvious that his entitlements clearly arise under Sections 54 and 55 of the Employment Act. He has had the necessary length of service and he has not been disqualified by reason of being terminated for serious misconduct. Section 55(1) of the Act [CAP. 160] is not applicable to the situation of the Claimant as since his recruitment by the Defendant Company in 1987, he resides in Vanuatu and serves the Defendant Company for the necessary length of service. Thus the entitlement arises as does the entitlement to interest at a rate of 12% per annum from the time that the amount became payable in pursuance to Section 56(6) of the Employment Act.
The calculation of severance made by the Claimant is properly made. Section 57 of the Act [CAP. 160], deals specifically with offsets against severance allowances and it make it clear that the only deduction an employer is entitled to make is in respect of any gratuities the employer has made from any pension fund other than the Vanuatu National Provident Fund (V.N.P.F.). In the present case, there is no evidence of any such pension funds being paid to the Claimant.
I consider also that the Claimant is entitled to indemnity costs in view of the complete lack of merit in the Defendant’s case and in the manner in which it has failed to produce any evidence.
The Employment Act allows for more favourable agreements than those provided for under the Act. [Section 6]. The Act does not allow an employer to contract out of and avoid the entitlements that it must pay to its employees and former employees. The situation is the same regardless of whether we are dealing with annual leave, sick leave, notice or severance allowances.
The judgment must be entered in favour of the Claimant.
ORDER
The judgment is entered in favour of the Claimant in the sum of VT7,953,600 in severance allowance with interest at the rate of 12% per annum from 27 April 2003 until payment and costs awarded for the Claimant on an indemnity basis.
The matter is listed for Enforcement Conference on 15 September 2004 at 9.30AM.
Dated at Port-Vila this 8th day of September 2004
BY THE COURT
Vincent LUNABEK
Chief Justice
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