Bruno Denfop v Wu-Jui Mario and Gogol Reforestation Co Ltd and Jant Ltd (2013) N5442

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 13 December 2013
• Court: National Court
• Citation: (2013) N5442
• Docket Number: WS NO 282 OF 2012
• Year: 2013
• Judgement Number: N5442

Full Title: WS NO 282 OF 2012; Bruno Denfop v Wu-Jui Mario and Gogol Reforestation Co Ltd and Jant Ltd (2013) N5442

National Court: Cannings J

Judgment Delivered: 13 December 2013

N5442

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 282 OF 2012

BRUNO DENFOP

Plaintiff

V

WU-JUI MARIO

First Defendant

GOGOL REFORESTATION CO LTD

Second Defendant

JANT LTD

Third Defendant

Madang: Cannings J

2013: 16 August, 6 September, 18 October, 13 December

LAW OF EMPLOYMENT – written contract of service – extension of contract after expiry of period specified in contract: Employment Act, Section 22 (contract period)

CONTRACTS – whether a contract of employment entered into between a company and an employee is enforceable in the event that the person who signed the contract on behalf of the company was not authorised to do so – rule in Turquand’s case – principles of agency

The plaintiff was employed by the second and/or third defendants from 1991 to 2010. The second defendant is a subsidiary of the third defendant and the first defendant was a manager of the second and/or third defendants. During most of that period the plaintiff was employed pursuant to written contracts of employment. There were other periods when he was employed under oral contracts of employment and one period when he formed a company and his company was contracted to provide his services to the second and/or third defendants. In November 2010 the defendants ceased paying him any salary or payments for his services. Though no formal notice of termination of employment was given to him, that was the time his employment was in fact terminated, and it was not renewed after that. In March 2012 the plaintiff commenced proceedings against the defendants, claiming damages for breach of contract. The defendants filed a defence, denying liability, and a trial was conducted, which addressed the issue of liability. The plaintiff based his case on the alleged breach of two contracts: (1) a contract between him and the second defendant entered into on 25 May 2006, which he claims was unlawfully terminated on 31 August 2009; and (2) a contract between him and the third defendant entered into on 1 October 2010, which he claims was unlawfully terminated in November 2010. The defendants argued they did not breach either of those contracts as (1) the 25 May 2006 contract expired on 24 May 2008 and the plaintiff was paid his final entitlements under it (and later re-engaged); and (2) the 1 October 2010 contract was defective and unenforceable as it was not properly executed by all responsible persons in the third defendant.

Held:

(1) The 25 May 2006 contract was a two-year contract that was deemed under Section 22(2) of the Employment Act, upon expiry of the period specified in it, to have been extended for an unspecified period. The contract had not expired when the notice of termination was given on 31 August 2009. However, the contract provided for either party to terminate it on one month’s notice and that provision was complied with by the second defendant. There was no breach of contract.

(2) The 1 October 2010 contract was signed by a responsible officer of the third defendant on behalf of the third defendant and he was properly regarded as an agent of his principal, the third defendant, who was acting within the scope of his ostensible authority in executing the contract. Further, the rule in Turquand's case (Royal British Bank v Turquand (1856) 119 ER 886) applies, in that the plaintiff, who was acting in good faith and without reasonable grounds for suspicion that the first defendant lacked or needed further authority to enter into a binding contract, was not to be affected by any actual irregularity or impropriety in the internal regulation of the company. The contract was binding on the third defendant and enforceable by the plaintiff, who proved that the third defendant failed to terminate it in accordance with its provisions. The plaintiff proved breach of that contract.

(3) It was declared that the defendant was not in breach of the 25 May 2006 contract, but was in breach of the 1 October 2010 contract, and that the plaintiff had established, in regard to the latter contract, a cause of action in breach of contract and ordered that the question of all other relief to be granted be referred to an accredited mediator for mediation in accordance with the ADR [Alternative Dispute Resolution] Rules.

Cases cited

The following cases are cited in the judgment:

Raikos Holdings Ltd v Porche Enterprise Ltd (2012) N4776

Royal British Bank v Turquand (1856) 119 ER 886

Vulupindi v Gideon (2006) N3925

STATEMENT OF CLAIM

These were proceedings in which the plaintiff sought to establish liability in damages for breach of two contracts of employment.

Counsel

B Tabai, for the plaintiff

B B Wak, for the defendants

13th December, 2013

1. CANNINGS J: The question in this case is whether any of the defendants is liable in breach of contract to the plaintiff, Bruno Denfop.

2. Mr Denfop is a forester by profession. He was employed by the second and/or third defendants from 1991 to 2010. The second defendant is a subsidiary of the third defendant and the first defendant was a manager of the second and/or third defendants. During most of that period the plaintiff was employed pursuant to written contracts of employment. There were other periods when he was employed under oral contracts of employment and one period when he formed a company and his company was contracted to provide services to the second and/or third defendants. In November 2010 the defendants ceased paying him any salary or payments for his services. Though no formal notice of termination of employment was given to him, that was the time his employment was in fact terminated, and it was not renewed after that. In March 2012 the plaintiff commenced proceedings against the defendants, claiming damages for breach of contract. The defendants filed a defence, denying liability, and a trial was conducted, which addressed the issue of whether any of them is liable.

3. At the trial it was clarified that the plaintiff based his case on the alleged breach of two contracts:

(1) a contract between him and the second defendant entered into on 25 May 2006, which he claims was unlawfully terminated on 31 August 2009; and

(2) a contract between him and the third defendant entered into on 1 October 2010, which he claims was unlawfully terminated in November 2010.

4. The defendants argue they did not breach either of those contracts as:

(1) the 25 May 2006 contract expired on 24 May 2008 and the plaintiff was paid his final entitlements under that contract (and later re-engaged), so by 31 August 2009 all their obligations under that contract had been discharged; and

(2) the 1 October 2010 contract was defective and unenforceable as it was not properly executed by all responsible persons in the third defendant.

ISSUES

5. Three issues arise:

(1) Has the plaintiff established a cause of action regarding the 25 May 2006 contract?

(2) Has the plaintiff established a cause of action regarding the 1 October 2010 contract?

(3) What orders should the court make?

1 HAS THE PLAINTIFF ESTABLISHED A CAUSE OF ACTION REGARDING THE 25 MAY 2006 CONTRACT?

6. This contract was for a period of two years. It was to expire on 24 May 2008. The plaintiff claims that under clause 10 of the contract, the defendants were required to give him three months notice prior to the expiry of the contract if it desired to renew the employment contract. Instead he continued working for the company after the expiry of the contract. The plaintiff claims that this was a breach of clause 10 of the contract. The plaintiff further claims that the provisions of Section 22(2) (contract period) of the Employment Act 1978 applied. Section 22(2) states:

Where an employee under a contract of service made under Section 19(a) is permitted by an employer to continue his employment after the expiry of the period specified in the contract of service, the contract shall be deemed to be extended, on the same terms and conditions, for an unspecified period.

7. On 31 August 2009, the plaintiff was issued a notice of intention to terminate the contract. The notice stated “that your contract already expired but instead of renewing” the contract of employment, the company wanted to engage him as a subcontractor which will be more beneficial to him. The notice said termination would be effective from 1 November 2009.

8. I uphold Mr Tabai’s submission that the contract of employment executed on 25 May 2006 had not expired as stated in the notice. Instead it continued as provided for under Section 22(2) of the ...