Naomi Wasia v Michael Koisen in his Capacity as Chief Executive Officer of Teacher Savings and Loans Society Limited And Teachers Savings And Loan Society Limited (2019) N7730

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi, J
• Judgment Date: 28 February 2019
• Court: National Court
• Citation: (2019) N7730
• Docket Number: WS. NO.177 of 2016 (CC2)
• Year: 2019
• Judgement Number: N7730

Full Title: WS. NO.177 of 2016 (CC2); Naomi Wasia v Michael Koisen in his Capacity as Chief Executive Officer of Teacher Savings and Loans Society Limited And Teachers Savings And Loan Society Limited (2019) N7730

National Court: Kandakasi, J

Judgment Delivered: 28 February 2019

N7730

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS. NO.177 of 2016 (CC2)

BETWEEN

NAOMI WASIA

Plaintiff

AND

MICHAEL KOISEN in his Capacity as Chief Executive Officer of Teacher Savings and Loans Society Limited

First Defendant

AND

TEACHERS SAVINGS AND LOAN SOCIETY LIMITED

Second Defendant

Waigani: Kandakasi, J.

2016: 13th October

2018: 13th &19th December

2019: 28th February

EMPLOYMENT LAW – Contract of - Internal disciplinary process part of employment contract – Whether authorised officer took the disciplinary actions – Nature of employment setting – Object of establishing loan societies – For benefit of members - Employee accepting deposit of substantial funds from non-member - Failing to apply set process and procedure on handling such substantial sums of money – Failure to report receipt of deposit under relevant legislation - Conduct constitute serious breach of governing and or applicable legislation and employer’s policies -Termination was lawful - Part II, ss. 2 – 7, 19, 17, 28A, 28B, 60, 62 and 27 of Savings and Loan Societies Act (Chapter 141) as consolidated to No 24 of 1995 – Sections 23 and 139(1)(a) and 934) Proceeds of Crime Act 2005 as amended - Sections 39(1) Anti-Money Laundering and Counter Terrorist Financing Act 2015 – Section 27 of the Saving and Loans Society Regulations 1962Clauses 34 – 35 of Conditions of Service: Determination:2002

DISPUTE SETTLEMENT PROCESS – Legislation prescribing process for resolution of disputes – Failure to utilise prescribed process – Process before the Court barred – Sections 60 and 62 of the Savings and Loans Societies Act (Chp. 141).

Cases Cited:

Gwasamun v. Commissioner for Police (2010) N3902

Isaac Lupari v. Sir Michael Somare (2010) SC1071

Jimmy Malai v. PNG Teachers Association [1992] PNGLR 568

Joe Kala v. New Britain Palm Oil Limited (2007) N3125

Leo Nuia v. The State (2000) N1986

MVIL v. Kauna Kiangua (2015) SC1476

Mision Asiki v. Manasupe Zurenuoc (2005) SC797

Nere Talin v. PNG Waterboard [1992] PNGLR 211

New Britain Palm Oil Ltd v. Vitus Sukuramu (2008) SC946

Peter Aigilo v. Sir Mekere Morauta & Ors (2001) N2103

PNGBC v. Jeff Tole (2002) SC 694

Vagi v. NCDC [2002] PNGLR 100

Vitus Sukuramu v. New Britain Palm Oil Limited (2007) N3124

Counsel:

R.J. Lains, for the Plaintiff

M. Ai, for the Defendants

28th February, 2019

1. KANDAKASI DCJ: This case arises out of a termination of an employment contract between the parties. The parties agreed to present only the question of whether the termination of the Plaintiff (Ms Wasia) was lawful as a determinative issue. If the Court determines that the termination was lawful that will be the end of the matter. If, however, the Court determines the termination was unlawful, liability will be resolved in favour of Ms. Wasia and the issue of damages will remain to be resolved.

Relevant facts

2. The parties also agreed on the relevant facts giving rise to this proceeding. They are set out in a document headed, “Statement of Agreed Facts and Legal Issue for Hearing”. According to that statement, Ms. Wasia commenced her employment with the Second Defendant on 4th May 2009 and was terminated on 20th October 2016. Upon her being employed, she was granted membership with the Second Defendant Society (Society) and was assigned a membership number. She remained a member of the Society until 24th June 2016. At the time of her termination, she was employed as the Society’s Acting Manager, Finance and Accounting.

3. The circumstances leading to her termination was this. On 29th June 2015, a Pepa Koka credited K500,000.00 into the Society’s BSP Bank account number. Pepa Koka was not an existing member of the Society. To partly, accommodate that transaction, Ms. Wasia opened a new savings account for Pepa Koka. The opening of the new account was also to benefit from a higher interest rate of 6% on deposits. The new account was in Ms. Wasia’s name.

4. The Second Defendant accepts member deposits exceeding K10,000.00 provided the source documents verifying the legitimacy of the funds are provided and it is satisfied that the funds’ source is legitimate. This I believe is necessitated by the Society’s obligations under the Proceeds of Crime Act (POCA) and Money Laundering legislation. Upon becoming aware of the transaction, the First Defendant (CEO) by an internal memo dated 11th September 2015 suspended Ms. Wasia without pay. That memo stated: “[a] preliminary investigation has revealed your involvement in a suspicious transaction within the Society. There is sufficient evidence that warrants your suspension from duties to allow further investigation as required under the AML [anti money laundering] legislation. The funds involved will be frozen until investigations are complete and further advice is received from the FIU [Fraud Intelligence Unit]”. She was charged under the Society’s Conditions of Service: Determination 2002 which were cited as:

“(a) Section 33(1)(h) – negligent or careless in carrying out your duties;

(b) Section 33(1)(j) – disgraceful and improper conduct; and

(c) Section 33(1)(n) – commits a serious breach of these terms and conditions”.

5. The Society then requested from Ms. Wasia source documents to verify the legitimacy of the deposit of K500,000.00. From the affidavit of Russell Tato sworn and filed on 12th October 2016 for Ms. Wasia shows that the request for the source documents went to Ms. Wasia on 24th July 2015. It took her 78 days from the date of her suspension for her to furnish the required information.

6. Meanwhile, the Society referred the matter to the Financial Intelligent Unit (FIU)

Now renamed Financial Analysis and Supervision Unit under the Anti-Money Laundering and Counter Terrorist Financing Act 2015 (Money Laundering Act).

11 as part of its general reporting obligations under Section 23

Now s. 39 of the Money Laundering Act.

22 of the Proceeds of Crime Act 2005 as a cash dealer. This follows from the Second Defendant’s requirement under its’ Standard Operation Procedures Manual Clause.1.4.2 Cheque Deposit for cheque deposits over K10,000.00. On 20th October 2015, the Society terminated Ms. Wasia’s employment without waiting for the FIU’s findings. Eventually, the FIU notified the Society of its findings by a letter dated 15th February 2016. The FIU determined that: “[i]t is likely the funds are proceeds from the sale of the property and are deemed to be legitimate”.

7. Given the agreement on these facts, the parties further agreed to the trial being conducted only by way of submissions. I received the submissions and reserved a decision on the issue, which decision I have now arrived at as contained in this judgment.

The Issue – Whether the termination of Ms Wasia by the Society was lawful

8. Turning then to the issue before the Court, Ms Wasia through her learned counsel, Mr. Lains, submits her termination was unlawful for two reasons. First, the disciplinary process under Clauses 33 (1) and 34 of the Society’s own Condition of Service Determination 2002 was not followed. Secondly, there was nothing wrong in her conduct which eventually led to her termination. In response, the Society through its learned counsel Mrs. Ai, submits that Ms. Wasia’s conduct constituted serious breaches of certain provisions of the Societies Act and regulations thereunder, Teachers Savings and Loans Society Ltd Rules, Membership and Lending Policy of the Society, Teachers Savings and Loans Society Ltd – Standard Operating Procedures Manual and the Proceeds of Crime Act 2005. The Society ultimately submits that, Ms. Wasia’s conduct warranted and formed the basis for her termination and that due process was followed before her termination. Hence, the submission is, her termination was lawful.

9. All savings and loans societies (Societies) are governed by the Societies Act. It is therefore important that we start with a consideration of what the Act says. The Act clearly emphasises the point that, Societies are for and by members of whatever the Society is. Under Part II, ss. 2 to 7 of the Act, all Societies come under the oversight of the Governor of the Central Bank as the Registrar of such societies. The object of having societies according to s.9 of the Act is for the benefit of the members in terms of:

(a) promoting thrift amongst them;

(b) receiving education in financial responsibility;

(c) making financial contributions to the society which becomes the members’ savings that attract interests

See section 21 (2) of the Society Act.

33; and

(d) for members to take loans from the society for specified purposes.

10. Section 46 adds that a “society may accept money on deposit from its members.” The same provision says, subject to the Registrar of...