Teio Raka Ila v Wilson Kamit, Governor of Bank of Papua New Guinea and Bank of Papua New Guinea (2002) N2291

• Jurisdiction: Papua New Guinea
• Court: National Court
• Citation: (2002) N2291
• Date: 11 October 2002
• Year: 2002

Full Title: Teio Raka Ila v Wilson Kamit, Governor of Bank of Papua New Guinea and Bank of Papua New Guinea (2002) N2291

National Court: Kandakasi J

Judgment Delivered: 11 October 2002

1 EMPLOYMENT CONTRACT—Employment contract with public authorities—Contract approved by relevant statutory authority on standard terms of employment—Executed Contract outside standard terms—Executed Contract void and unenforceable.

2 Employment with public authority—Specific approval of terms by Salaries and Condition Monitoring Committee required—Failure to obtain such approval amounts to void and unenforceable contract pursuant to s10(2) of Salaries and Conditions Monitoring Committee Act 1988 (SCMC Act).

3 Members of Board of public authorities determining and pay salaries and other entitlement without SCMC approval attracts personal liability—State entitled to recover from them.

4 STATUTORY INTERPRETATION—Salaries and Conditions Monitoring Committee Act 1988—Purpose of Act is to give effect to the governments' wages policy and to control public expenditure—Therefore approval by the SCMC of terms of employment by public authorities necessary and important—Failing to obtain such approval is critical—Contract of employment without SCMC approval void and unenforceable—Any payment under such contract recoverable by the State from the members of the governing body of relevant authority s10 Salaries and Conditions Monitoring Committee Act 1988.

5 DAMAGES—Unlawful dismissal—Measure of damages—Usually by reference to period of notice—Damages are payable for injury or loss actually suffered by reference to the terms of the contract—A term that in effect prevents either of the parties from their right to terminate early amounts to a threat or a penalty—Such provisions are unenforceable—Enforcement of such terms may amount to forced labour or unjust enrichment—An agreement entitling an employee for a full pay out of balance of his contract amounts to a threat and a penalty—Such a term is enforceable.

6 Present case—Plaintiff paid more than what he was legally entitled to—Further payments rejected—No damage or loss suffered—Claim dismissed.

7 COSTS—Action did not exist in law—Plaintiff warned of costs being claimed on own solicitor and client basis—Costs ordered on own Solicitor and Client basis.

8 Patterson v NCDC (2001) N2145, Panga Coffee Factory Pty Ltd v Coffee Industry Corporation Ltd [1999] PNGLR 627, Credit Suisse v Allerdale BC [1996] 4 All ER 129, Post PNG Ltd v Yama Security Services Ltd (2001) (Unreported and unnumbered judgment delivered on 26 July 2001; SCA 80 of 2000), Paul Toua v Finance Pacific Limited (2002) (Unreported and unnumbered judgment delivered on 19 July 2002; WS No 1338 of 1999) and PNGBC v Jeff Tole (2002) SC694 referred to

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Kandakasi J: This is a claim by the plaintiff (Mr Ila) for a full pay out of the balance of his contract for a sum exceeding K400,000.00 for wrongful dismissal.

Mr Ila was employed as an executive officer to the previous governor to the Bank of Papua New Guinea (the Bank), Mr Morea Vele. The Bank did not previously have the position of an executive officer to its governor. Mr Vele created the position and had it classified as a senior management position. He then had a written contract of employment signed on 19 April 1999, with effect from 1 December 1998, for four years (the executed contract) between the Bank and Mr Ila. The Bank being a public institution was required to apply for and receive an approval of the terms of the contract of employment but no specific approval was sought and obtained from the Salaries and Conditions Monitoring Committee (SCMC). The current governor, Mr Wilson Kamit abolished the position created by his predecessor and made Mr Ila redundant before the agreed end of his contract.

The Bank argues that the contract is unenforceable because no approval of it was sought and obtained from the SCMC as required under the Salaries and Conditions Monitoring Committee Act 1988 (the SCMC Act). The Bank further argues that even if the contract was approved by the SCMC, the provision in the contract allowing for a pay out of the balance of the contract is in fact a penalty provision which can not be enforced. Furthermore, the Bank argues that, Mr Ila was employed on the Banks usual terms and conditions for managers which has been approved by the SCMC and that Mr Ila has been lawfully terminated in accordance with those terms.

On 5 August 2002, I directed the parties to file an agreed and disputed statement of facts and the issues for trial. I am indebted to both counsel for having complied with that direction, resulting in the filing of a statement of agreed and disputed facts dated 26 August 2002. This as resulted in an agreement on the relevant facts and parties needing only to make submissions on the issues before me. This has considerably reduced trial time and therefore costs. I would encourage counsel in this matter and all other counsel before the courts to talk more and only allow matters that can not be resolved through negotiations and agreements of the parties to go to trial.

Issues

The agreed issues before me are these:

1. Whether or not the terms and conditions of the Executed Contract are 'conditions of employment' for the purposes of s10 of the Salaries and Conditions Monitoring Committee Act 1988?

2. If the terms of the executed contract require approval, and have not been approved, by the SCMC, are they void and unenforceable pursuant to the Salaries and Conditions Monitoring Committee Act 1988?

3. If the terms of the executed contract are void and unenforceable, what determines the terms and conditions of employment of Mr Ila?

Facts

As noted, the factual backgrounds from which these issues arise are not in issue and are simply this. The Bank is a body subject to the provisions of the Salaries and Conditions Monitoring Committee Act 1988 and the employment of Mr Ila was subject to the Salaries and Conditions Monitoring Committee Act 1988. At or about the end of 1998 the 'terms and conditions of employment' for Senior Managers employed by the Bank and approved by the SCMC was in terms of a standard contract of employment (the standard terms). A copy of that is annexure "C" to the affidavit of Mr Ila dated 15 August 2002 (Mr Ila's affidavit).

The standard terms contained provisions for termination of employment and for payment of certain monies on termination. It does not provide for a fixed term of contract. Clause 10.1(b) provides that the grounds available to the Bank to terminate the contract include redundancy. The next provision clause 10.2(b) provide that the process available to the Bank to terminate the contract include giving not less than three month's notice or payment of salary and emoluments in lieu of notice. Then clause 11.1 provides that the benefits on termination available to an employee are the greater of either an ex gratia of a maximum of 3 months base salary plus 3 months base salary and gratuity in lieu of notice, or a retrenchment benefit under the Bank's redundancy agreement.

On 21 December 1998, the SCMC approved various payment scales and other matters for the Bank (the 21/12/98 approval). That contained no reference to the grounds upon which the employment of persons subject to that approval could be terminated, and contained no provision for the payment of termination benefits to persons employed subject to that approval.

Mr Ila was employed by the then governor of the Bank on or about 25 November 1998 for the position of executive officer and classified his position as a management position. The position of executive officer was a new position created by then governor to employ Mr Ila.

By letter dated 7 April 1999 (annexure "G" to Mr Ila's affidavit) the Bank wrote to the SCMC seeking approval amongst others, the creation Mr Ila's position on the terms and conditions per the 21 December 1998 approval. No specific draft or proposed contract was enclosed with this letter or otherwise provided to the SCMC. The SCMC Chairman responded by letter dated 8 April 1999, essentially granting the approval sought. Then came the executed contract. It gave the employer certain relatively limited rights to terminate the employment, (Clause 8). More importantly, it also entitled Mr...