Madiu Andrew v Mineral Resources Development Company Ltd, Koiari Tarata, Chairman—Board of Directors and Sir Mekere Morauta, Kt, MP, Prime Minister (2004) N2601

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi J
• Judgment Date: 02 April 2004
• Court: National Court
• Citation: (2004) N2601
• Year: 2004
• Judgement Number: N2601

Full Title: Madiu Andrew v Mineral Resources Development Company Ltd, Koiari Tarata, Chairman—Board of Directors and Sir Mekere Morauta, Kt, MP, Prime Minister (2004) N2601

National Court: Kandakasi J

Judgment Delivered: 2 April 2004

1 EMPLOYMENT CONTRACT—Written contract of employment—Termination of—No issue on validity of termination—Only issue whether contract varied to include final payout tax free to employee—No evidence of any variation of the contract in accordance with the contract—Law requires all income earners to pay tax—If an employer is to pay its employee's tax there must be specific and clear agreement on it.

2 TAXATION—Personal income tax—Liability of employers and employees—Personal income tax a personal liability of employees—If employer is to pay such tax specific and clear agreement is required.

3 Teio Raka Ila v Wilson Kamit & Bank of Papua New Guinea (unreported judgment delivered on 11/10/02) N2291, PNGBC v Jeff Tole (unreported Judgment delivered on 27/09/02) SC694, Steven Charles Pickthall v Lae Plumbing Pty Ltd [1994] PNGLR 363, Andrew Moka v Motor Vehicles Insurance (PNG) Limited (unreported judgment delivered on 18/05/01) N2098, Arlene Pitil v Rutis Clytus & Ors (unreported judgment delivered on 01/08/03) N2422, Curtain Brothers (QLD) Pty Ltd & Kinhill Kramer Pty Ltd v The Independent State of Papua New Guinea [1993] PNGLR 285, Odata Ltd v Ambusa Copra Oil Mill Ltd (Unreported judgment delivered 06/07/01) N2106, Papua New Guinea Forest Authority v Concord Pacific Limited & Ors (No 2) (Unreported judgment delivered 12/09/03) N2465, Dan Salmon Kakaraya v The Ombudsman Commission of Papua New Guinea & Anor (Unreported judgment 24/10/03) N2478, Peter Agilo v Sir Mekere Morauta & Or (28/02/02) N2102

___________________________

N2601

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 1531 OF 2001

MADIU ANDREW

Plaintiff

AND:

MINERAL RESOURCES DEVELOPMENT COMPANY LTD

First Defendant

AND:

KOIARI TARATA, Chairman – Board of Directors

Second Defendant

AND:

SIR MEKERE MORAUTA, Kt, MP, Prime Minister

Third Defendant

WAIGANI: KANDAKASI, J.

2003: 15th December

2004: 2nd April

EMPLOYMENT CONTRACT – Written contract of employment – Termination of – No issue on validity of termination – Only issue whether contract varied to include final payout tax free to employee – No evidence of any variation of the contract in accordance with the contract – Law requires all income earners to pay tax – If an employer is to pay its employee’s tax there must be specific and clear agreement on it.

TAXATION – Personal income tax – Liability of employers and employees – Personal income tax a personal liability of employees – If employer is to pay such tax specific and clear agreement is required.

Cases Cited:

Teio Raka Ila v. Wilson Kamit & Bank of Papua New Guinea (unreported judgment delivered on 11/10/02) N2291.

PNGBC v. Jeff Tole (unreported Judgment delivered on 27/09/02) SC694.

Steven Charles Pickthall v. Lae Plumbing Pty Ltd [1994] PNGLR 363.

Andrew Moka v Motor Vehicles Insurance (PNG) Limited (unreported judgment delivered on 18/05/01) N2098.

Arlene Pitil v Rutis Clytus & Ors (unreported judgment delivered on 01/08/03) N2422.

Curtain Brothers (QLD) Pty Ltd & Kinhill Kramer Pty Ltd v. The Independent State of Papua New Guinea [1993] PNGLR 285.

Odata Ltd v. Ambusa Copra Oil Mill Ltd (Unreported judgment delivered 06/07/01) N2106.

Papua New Guinea Forest Authority v. Concord Pacific Limited & Ors (No 2) (Unreported judgment delivered 12/09/03) N2465.

Dan Salmon Kakaraya v. The Ombudsman Commission of Papua New Guinea & Anor (Unreported judgment 24/10/03) N2478.

Peter Agilo v. Sir Mekere Morauta & Or (28/02/02) N2102

Counsel:

R. Saulep for the Plaintiff.

G. Gileng for the Defendants

02nd April 2004

KANDAKASI, J.: The plaintiff is claiming damages in terms of the balance of his contract entitlement for unlawful dismissal by the defendants. Prior to his dismissal, he was the managing director of the first defendant under a written contract of employment.

The matter came before me for trial on 15th December 2003. At the commencement of the trial, the Court drew the plaintiff’s counsel’s attention to its judgment in Teio Raka Ila v. Wilson Kamit & Bank of Papua New Guinea

(unreported judgment delivered on 11/10/02 ) N2291.

1 as the circumstances in that case and the present were similar. On the plaintiff’s request, the Court granted a short adjournment for the plaintiff to consider the judgment and then decide whether to pursue his claim or not. On the return of the matter, the plaintiff informed the Court that, except for a claim for a reimbursement of income tax deducted from his final payout, he was abandoning the rest of his claim. The trial therefore, proceeded only in respect of the issue of reimbursement of income tax deducted from his final payout.

After the hearing, counsels wanted to file written submissions and asked for a short adjournment. I was initially reluctant to adjourn, but as I was soon going away on leave, I granted the application and directed the parties to file their respective submissions by 18th and any replies thereto by 19th December 2003. The Court received only the defendants’ submission.

The Relevant Fact

The relevant facts are simple and straightforward. They have agreed to the relevant facts in most respects and they are these. The first defendant employed the plaintiff under a written contract of employment dated 16th November 1999. The contract was for a period of 4 years. However, nine months prior to the agreed date of termination, the defendants on 2nd August 2001, summarily and without cause, terminated the plaintiff’s employment and his contract with payment in lieu of notice. The plaintiff received a total of K447, 444.17 upon his termination after allowing for the appropriate level of tax. The total tax deducted and paid to the Internal Revenue Commission (IRC) was K244, 599.97.

The plaintiff went into oral evidence and apart from confirming the above facts; he added that, it was an implied term of the contract that, upon termination, he was entitled to receive his final payout tax free, with the first defendant paying the Internal Revenue Commission his tax component. The defendants objected to this additional evidence on the basis that, there was no foundation in the pleadings. The Court sustained the objection on the basis of the clear law on it as represented by a number of Supreme Court judgments’ with the latest being, PNGBC v. Jeff Tole.

(Unreported Judgment delivered on 27/09/02) SC694.

2 Nevertheless the plaintiff was allowed to give his evidence to complete the trial and for parties to take up the point in their respective submissions.

Under cross-examination, the plaintiff admitted that, under clause (2) (c) of the contract, he is obliged to pay his own tax. That in practice took the form of the employer deducting and paying to the tax office the tax payable before he received his pays. This resulted in the plaintiff receiving only his net pay after allowing for the tax payable. Cross-examination of the plaintiff established that, pursuant to clause 9 of the contract, most of his allowances were subject to tax. Understandably, therefore, the contract does not provide for an exclusion of payment of any tax that is payable and due from the plaintiff to the tax office on his salary, allowances and any other benefits.

The defendants called, Mrs. Mabel Henao, who is the accounts manager for the first defendant. She confirmed the liability of all employees of the first defendant, including the plaintiff to pay their taxes to the IRC without any exception, except as the tax laws exempt. That is why; she said the contract does provide for...