Legu Vagi v National Capital District Commission (2002) N2280

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi J
• Judgment Date: 23 August 2002
• Court: National Court
• Citation: [2002] PNGLR 100
• Year: 2002
• Judgement Number: N2280

Full Title: Legu Vagi v National Capital District Commission (2002) N2280

National Court: Kandakasi J

Judgment Delivered: 23 August 2002

N2280

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 796 OF 1998

BETWEEN:

LEGU VAGI

Plaintiff

-V-

NATIONAL CAPITAL DISTRICT COMMISSION

Defendant

WAIGANI: KANDAKASI, J.

2002: 20th June

23rd August

CONTRACT OF EMPLOYMENT – Termination of written contract of employment – Suspension with pay before termination – Suspension not provided for in the written contract – Effect of – Grounds for termination on grounds of alleged misappropriation and mismanagement – Employers account in the red – Employee who is the chief financial or accounting officer unable to explain apart from merely blaming past administration – Contract of employment provides for instant dismissal for cause – Mismanagement or misappropriation amounts to cause – Termination was for cause – Judgement for the defendant.

Papua New Guinean Cases Cited:

Leo Nuia v. The State (unreported judgement delivered on 29/08/00) N1986.

Peter Aigilo v. Sir Mekere Morauta & Ors (unreported judgement delivered 09/08/01) N2103.

Curtain Bros (QLD) Pty Ltd v. The State [1993] PNGLR 285.

Steamships Trading Co. Ltd v. Joel & Ors [1991] PNGLR 133.

Jimmy Malai v. Papua New Guinea Teachers Association [1992] PNGLR 568.

Rooney v. Forest Industries Council of PNG [1990] PNGLR 407.

Nazel Wally Zanepa v. Ellison Kaivovo & Ors (29/11/99) SC623.

Ereman Ragi & The POSF Board v. Maingu (29/06/94) SC 459.

Other Cases Cited:

Bank of Australia v. Palmer [1897] AC 540 at 545.

Reliance Marine Insurance v. Duder [1913] 1 KB 265.

Tsang Chuen v. Li Po Kwai [1932] AC 715.

O'Connor v. Hume [1954] 1 WLR 824.

Counsels:

Ms. A. Tupou for the Plaintiff

Mr. J . A Jnr for the Defendant.

23rd August 2002

KANDAKASI J: This is a claim by Mr. Legu Vagi (“Mr.Vagi”) for damages allegedly for unlawful termination of his contract of employment (“the contract”) with the National Capital District Commission (“NCDC”) on the 11th of December 1998. Prior to that he was suspended with pay from the 3rd June to 12th December 1998, which Mr. Vagi says was outside and therefore in breach of his contract with the NCDC. On the other hand, the NCDC says it lawfully terminated the contract for misappropriation and mismanagement. This it submits was a termination for cause within the meaning of clause 8 of the contract.

Issues for Determination

The main issue for determination therefore is this. Did the NCDC terminate Mr. Vagi’s contract in accordance with the terms of the contract? A subsidiary issue to that is whether the suspension prior to termination amounted to a breach of the contract and if so what is the legal effect on the contract? A further issue for consideration is, if the termination is found to be unlawful what are Mr. Vagi’s damages, if any?

Evidence

The relevant evidence is in affidavit form for both parties together with some oral evidence from Mr. Vagi under cross-examination. The affidavits for Mr. Vagi are from himself sworn respectively twice on the 20th February 2002 and one on the 18th June 2002. These were admitted into evidence without any objection from the NCDC and are marked as exhibits “A”, “B” and “C”. The NCDC’s affidavits are from Mr. Bernard Kipit sworn respectively on the 11th February and 14th July 2000. These affidavits were also admitted into evidence without any objection from Mr. Vagi. They are marked as exhibits “D1” and “D2” respectively.

Facts

The facts from these evidence are straight forward and I find the relevant facts to be this. Mr. Vagi was employed as its chief executive officer by the NCDC under the title “City Manager” under a written contract. The contract commenced on the 23rd December 1997 and was to expire on the 23rd December 2000. He took up his office on the 23rd December 1997. By letter dated 2nd June 1998, Mr. Vagi was suspended allegedly for mismanagement and misappropriation of public funds resulting in the NCDC’s main operation account with the then Papua New Guinea Banking Corporation (“PNGBC”) running into a debt of K1.6 million in overdrafts. He was on full pay except for his motor vehicle and such other allowances that were rendered unnecessary by reason of the suspension from official duties.

On 12th June 1998, Mr. Vagi was served with a further suspension notice extending the period of suspension to 12th September 1998. That notice also contained formal disciplinary charges laid against him. Mr. Vagi says he responded to the charges under cover of a letter dated 12th June 1998. He does not say, how or to whom his responses were delivered. The NCDC says no responses were received from Mr. Vagi. Mr. Vagi was cross-examined but not on this aspect. The evidence for the NCDC is from Mr. Kipit in his affidavit of the 14th July 2000. He was not cross-examined in any respect. That means his evidence stands admitted or accepted by Mr. Vagi. What the NCDC says is consistent with the minutes of its Board that eventually met and resolved to terminate Mr. Vagi, on the 11th December 1998 (annexure “C”). Those minutes note that Mr. Vagi had not responded to the Governor’s letters.

In his responses Mr. Vagi took issue on the validity of the suspension and the laying of the charges against him. At the same time he blamed the officers below him for providing inaccurate information, if the NCDC found his advice to its Board was misleading. A clearer statement of that is in paragraph 7.10, 8.13 and 8.14 of his response, which reads:

“For your information which can be confirmed by the Director, Finance and Administration and the Financial Controller that any payment over K10,000.00 that came across to me for my signature I would always asked (sic) them if there were sufficient funds for such payment. Only and repeat only when these two gentlemen gave me the assurance that there was (sic) sufficient funds in the bank – then I would sign these cheques. Otherwise, without their advice I never signed the cheques until there was funds available in the banks.”

In relation to the main allegation of mismanagement and misappropriation of public funds, Mr. Vagi made reference to an earlier advice to the NCDC Board and Finance and Administration Committee and admitted to the establishment of a K2.0 million-overdraft facility with the PNGBC. Of that, K1.6 million was used up. He also spoke of K2.5 million in cheques being raised and issued to various contractors while a further K1.7 million in cheques were raised but not yet issued. He anticipated an amount of K600,000.00 being paid into the account within a day or so and further receipts income from various sources into that account between 27th April and 19th June 1998 totaling over K10.6 million by the 19th of June 1998.

Mr. Vagi does not say in his evidence nor in his reply to the NCDC Board or its Finance and Administration Committee, what steps he took to have a personal appreciation of the NCDC’s financial position. There is also no evidence of what steps he took to address the issue, particularly in terms of controlling expenditure. For example, he does not speak of what steps he took to establish or strengthen any existing and properly and strictly functioning mechanisms in place to allow only true, correct and proper payments to be made. I asked Mr. Vagi in Court, when did the overdraft facility come into existence and who was responsible for it. His answer was that, the previous administration created it but was not able to say when that was done. This to my mind clearly shows that Mr. Vagi did not personally have an appreciation of the relevant details of the overdraft facility, how it came into being, and what should be done to discharge it and avoid ever getting into it. He was instead prepared to expressly blame his subordinates for not providing the relevant information.

On the 26th August 1998, Mr. Vagi issued these proceedings claiming damages for breach of contract. He treated his suspension as termination. After filing and serving its defence, the Board of the NCDC met on the 19th December 1998 and resolved to terminate Mr. Vagi as of the 17th July 1998. He was formally informed of the Board’s decision by letter dated 17th March 1999. Dirua Lawyers were then engaged by Mr. Vagi to pursue a claim for full pay out of the balance of his contract. A claim totaling K185,957.32 was initially...