Breckwoldt & Co (New Guinea) Pty Limited v Harold Gnoyke (No 2) [1975] PNGLR 195

• Jurisdiction: Papua New Guinea
• Judge: Prentice SPJ:
• Judgment Date: 15 September 1975
• Court: Supreme Court
• Citation: [1975] PNGLR 195
• Year: 1975
• Judgement Number: FC84

Full Title: Breckwoldt & Co (New Guinea) Pty Limited v Harold Gnoyke (No 2) [1975] PNGLR 195

Full Court: Frost CJ, Prentice SPJ, Saldanha J

Judgment Delivered: 15 September 1975

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

BRECKWOLDT & CO. (N.G.) PTY. LIMITED

V

HAROLD GNOYKE (NO. 2)

Port Moresby

Frost CJ Prentice SPJ Saldanha J

26-29 May 1975

15 September 1975

MASTER AND SERVANT — Contract of service — Remuneration — Meaning of "bonus" — Construction of "Bonus Payment Sheet" — Unilateral contract — Whether incentive payment or addition to salary.

MONEY COUNTS — Money had and received — Basis of action — Principle of unjust enrichment applied.

WORDS AND PHRASES — "Bonus" — Contract of employment.

G. was employed by the appellant company under a written contract of employment as a manager for a period of 2« years commencing approximately July, 1971, in the business of import agents, wholesalers for agency lines etc. In addition to a basic monthly salary the contract of employment provided for a bonus as follows:

"The employee is also to receive the following during his period of employment: free accommodation, free use of a car, a bonus in accordance with the attached sheet."

The bonus provision was contained in a separate sheet headed "Bonus Payment Sheet" as follows:

"In accordance with para. 5 of the contract, B. herewith agrees to pay the employee a personal bonus at the following conditions for his work as a manager in Port Moresby.

1. The bonus amounts to:

(a) 5% of the indent commissions of B., Port Moresby

(b) 5% of the gross profit from the employee's own business

(c) 5% of the gross profit from the workshops in Port Moresby (typewriter & radio).

The right to receive a bonus commences upon commencement of the employee's work in Port Moresby and lapses upon termination of this work.

2. The gross profit from the employee's own business is given by the difference between purchases and sales after allowing for special items, losses (debts) and the depreciation of the stock in hand in accordance with business requirements. Entries relating solely to tax matters are not taken into account when determining the gross profit which requires a bonus payment.

3. The bonus can be cancelled completely or in part by B. if the employee is dismissed without notice in accordance with par. 13 of the contract in accordance with par. 14 of the contract.

4. The bonus is calculated by the accounting section at the head office in Rabaul. Payment of the bonus is not permitted until checked and approved."

G. was validly dismissed in accordance with par. 13 of the contract on 28th February, 1973. On 12th February, 1973, G. knowing he was about to be dismissed withdrew from the company's account without authority the sum of $9,000.00 being a sum less than the amount of the bonus for the year 1972 to which he considered he was entitled. In an action by the company for money had and received by G. to its use in which G. counterclaimed for damages for wrongful dismissal and the full amount of the bonus, the trial judge held that the bonus was not a bonus in the sense of a gratuity but was recoverable as an additional salary payable monthly as in the case of the salary under the contract, that cl. 4 of the bonus payment sheet amounted to a penalty, and that the claim for money had and received was unenforceable as an attempt to enforce such a penalty.

On appeal therefrom held that on a proper construction of the documents:

(1) The "Bonus Payment Sheet" was a unilateral contract, in which the employer's obligation to pay the bonus was subject to a condition subsequent, whereby the employer was given the option to cancel that obligation upon the event specified occurring, viz. the dismissal if justified, of the employee without notice.

United Dominions Trust (Commercial) Ltd. v. Eagle Aircraft Services Ltd. [1968] 1 W.L.R. 74 referred to.

(2) The nature or purpose of the "bonus" was clearly that of an incentive payment, being "something which an employee is entitled to on the happening of a condition precedent and is enforceable when the condition is fulfilled".

Great Western Garment Co. Ltd. v. Minister of National Revenue [1947] Ex. C.R. 458 followed.

(3) Accordingly, upon G.'s dismissal, the company was entitled to exercise its option and cancel the bonus for the year 1972 and the months of January and February, 1973.

(4) Further the withdrawal of the moneys by G., without authorisation, in circumstances where he knew he was about to be dismissed and before any payment had been approved, amounted to a receipt of a benefit, at the appellant's expense, in circumstances such that it would be unjust to allow him to retain the benefit.

Goff & Jones The Law of Restitution 1st ed. p. 14 referred to.

(5) The appellant was entitled to succeed on the action for money had and received and the appellant's counterclaim had no legal basis.

Appeal

This was an appeal in an action for money had and received in which the appellant company (plaintiff) sought to recover moneys, withdrawn without authority by the respondent employee (defendant) and in which the respondent counterclaimed for damages for wrongful dismissal and a bonus payable in respect of a contract of employment and in which the trial judge found for the respondent. Further facts and relevant argument appear in the joint reasons for judgment of Frost CJ and Saldanha J hereunder.

Counsel

D. G. McGregor Q.C. with him D. W. F. Libling, for the appellant (plaintiff).

J A. Griffin, for the respondent (defendant).

Cur. adv. vult.

15 September 1975

FROST CJ SALDANHA J: This is a case arising from a contract of employment between Breckwoldt & Co. (N.G.) Pty. Limited, a subsidiary of a German company based in Hamburg having extensive interests abroad, and Mr. Harold Gnoyke, 32 years of age, who had been employed by the German company during all his working life.

The appellant, Breckwoldt's, is a company which conducts in Port Moresby and other main centres in Papua New Guinea the business of import agents, wholesalers for agency lines, and through its subsidiary Brewo Motors Pty. Ltd., agencies for the sale of Mercedes Benz and Volkswagen motor cars.

On 5th February, 1971, the parties entered into a contract whereby Gnoyke was to be employed as the manager of the Port Moresby branch for a period of 2 1/2 years, commencing approximately in July 1971. In fact Gnoyke had been working for Breckwoldt's since early in the year, at Rabaul, and for the purposes of Gnoyke's entitlement to a bonus, which is the particular matter in dispute, his employment was regarded as extending throughout 1971.

We shall now refer to the material provisions of the contract. Clause 4, headed "General obligations" so far as is relevant provides:

"The employee has to devote his entire working capacity and all his working hours to the firm, to protecting the interests and reputation of the firm as well as he possibly can ... The employee is also obliged to absolute honesty and respectable conduct ... The employee is not permitted to conclude any business for his own account or for the account of a third party or to offer his services as an intermediary in such business either directly or indirectly. He is not permitted within the scope of his work for the firm to negotiate any benefits for himself from a third party or to accept any such benefits."

It is convenient next to refer to cl. 13 headed "Notice, dismissal, transfer", the material portion being subparagraph (a), as follows:

" (a) The contractual relation can be terminated in writing with or without notice by either of the contracting parties for any important reason. An important reason is given, for example, if one of the contracting parties neglects his obligations grossly."

Clause 14 purports to impose a liability to pay a penal sum for certain breaches of contract. It is in the following terms:

"14 Breach of contract

The employee is obliged to pay a penal sum amounting to twelve monthly salaries if, without any important reason, he does not take up his position, commences his return journey prematurely or stops his work in the country of employment prematurely. Other damages may be claimed if the law applied does not provide for a penal sum to be paid."

Provision for salary is contained in cl. 5 headed "Salary and other payments". It provided that the employee was to receive a basic salary of $500.00 per month payable at the end of each month. It also made provision for a bonus as follows:

"The employee is also to receive the following during his period of employment at the place of employment: free accommodation, free use of a car, a bonus in accordance with the attached sheet."

The bonus provision was contained in a separate document headed...