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Supreme Court of Vanuatu |
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IN
THE SUPREME COURT
OF
THE REPUBLIC OF
VANUATU
(Civil
Jurisdiction)
CIVIL CASE No. 110 of 2003
BETWEEN:
KEITH
MOLLOY
Claimant
AND:
AIR
VANUATU (OPERATIONS)
LTD
Defendant
Coram: Chief Justice
Vincent LUNABEK
Mr. Juris Ozols
for claimant
Mr. John Malcolm for
defendant
Hearing date: 31 August
2004
Judgment date: 8 September
2004
JUDGMENT
INTRODUCTION:
Nature of claim and brief
facts
This is a claim for
severance allowance by the Claimant against the Defendant Company, in the amount
of Vatu 15,907,200.
It transpires
that at the time of the trial and the final submissions, the claimant abandons
half of his claim which is set out as
the ‘further and alternative
claim’ at paragraphs 10 and 11 of the
claim.
It follows that the
Claimant’s claim stands in the sum of Vatu 7,953,600 against the Defendant
Company.
The Claimant is a
resident of Port-Vila since
1987.
The Defendant is a Company
incorporated in Vanuatu and operated as an airline owned wholly by the
Government of Vanuatu.
The
Claimant has been employed by the defendant from 25 April 1987. He worked
continuously for the airline until 27 April
2003.
The Claimant’s
contract of employment was renewed by the Defendant Company in 1989, 1993, 1995,
1997 and 2001.
After receiving
notice, the Claimant’s contract of employment was terminated on 27 April
2003. The Claimant had been employed
by the Defendant for 16 years and 2
days.
At the time of termination
of his contract, the Claimant was earning VT994,200 per
month.
The Claimant filed a sworn
statement of 27 August 2004 in support of his Claim. He was cross-examined on
it.
The Defendant filed a
statement of defence on 11 July 2003. It contains assertions of fact. Those
assertions must be disregarded because
they fail due to a lack of any evidence
in support of them.
In effect, the
Defendant did not give any evidence. As such, the sworn statement of Jean Paul
Virelala filed on 27 July 2004 on behalf
of the Defendant Company, must be
ignored as he was not available to be cross-examined on any of the contents.
EVIDENCE
The
only evidence before the Court is that of the Claimant, Keith Molloy in his
witness statement and his oral evidence in
Court.
The evidence of the Claimant shows
the following:-
▪ The Claimant like all of the other pilots, was paid a monthly salary calculated on his years of service and flying duties (in his case as a Boeing 737 Captain).
▪ That salary at the commencement of the contract identified as ‘KM5’ came to VT806,000 and later increased to VT828,500 per month by reason of his increased years of service.
▪ In addition to his salary (and again in accordance with annexure “B” of the Contract ‘KM5’) Mr. Molloy was paid a higher duty increment as Director of Operations and thus amounted to 20% of his salary. Therefore, when the contract ‘KM5’ started he should been paid a total of VT967,200. There is an arithmetical error in ‘KM5’ where it refers to a total salary of VT966,700 rather than VT967,200. It was agreed that by the time his contract was brought to an end some two years and two days later he was being paid a total of VT994,200 per month.
▪ The Defendant has conceded that the final salary was VT828,500 and an additional salary increment of 20% being 165,700, because of his duties as Director of Operations, giving a total of VT994,200.
▪ In paragraph 4 of the Defendant’s statement of defence, the Defendant acknowledges that the Claimant was a person ordinarily resident in Vanuatu but denies that the Claimant is a person entitled to severance and relies upon the words in paragraph 3 of the Employment Contract which states:
“The monthly remuneration is inclusive of all salary entitlements including severance allowances”.
This
constitutes the point of dispute between the two (2)
parties.
LAW
The
following are the relevant provisions of the Employment Act [CAP. 160] and the
relevant clauses of the Employment Contract (Renewal) between the Claimant and
the Defendant Company:-
Sections
6, 9, 54, 55, 56 and 57 of the Act [CAP. 160] provide:
“EFFECTS OF CUSTOM, AGREEMENT ETC.
6. Nothing in this Act shall affect the operation of any law, custom, award or agreement which ensures more favourable conditions in any respect to the employees concerned than those provided for in this Act.”
“CONTRACT OF EMPLOYMENT
FORM OF CONTRACT
9. A contract of employment may be made in any form, whether written or oral:
Provided that a contract of employment for a fixed term exceeding 6 months or making it necessary for the employee to reside away from his ordinary place of residence shall be in writing and shall state the names of the parties, the nature of employment, the amount and the mode of payment of remuneration, and, where appropriate, any other terms and conditions of employment including housing, rations, transport and repatriation.”
“PART XI
SEVERANCE ALLOWANCE
SEVERANCE ALLOWANCE
54.(1) Subject to section 55, where an employee has been in the continuous employment of an employer for a period of not less than 12 months commencing before, or after the date of commencement of this Act, and-
(a) the employer terminates his appointment; or
(b) the employee retires on or after reaching the age of 55 years; or
(c) the employer retires the employee on or after reaching the age of 55 years; or
(d) where the employee has been in continuous employment with the same employer for a continuous period of not less than 10 consecutive years, the employee resigns in good faith; or
(e) the employee ceases to be employed by reason of illness or injury and is certified by a registered medical practitioner to be unfit to continue to work,
the employer shall pay severance allowance to the employee under section 56 of this Act.
(2) For the purposes of subsection (1)-
(a) an employee who works for his employer on 4 or more days in any week shall be deemed, in respect of that week, to have been in continuous employment;
(b) no employee shall be held to have ceased to be in the continuous employment of an employer by reason of his participation in a strike which is not unlawful;
(c) where an employee ceases to be in the employment of one employer and enters the employment of another under Section 55(4), his employment by the first and second employer shall be deemed to be continuous employment.
(3) For the purposes of section 308 of the Companies Act, CAP. 191 severance pay shall be deemed to be wages.
WHEN SEVERANCE ALLOWANCE NOT DUE
55.(1) Severance allowance shall not be payable to an employee who has been recruited outside Vanuatu and is not ordinarily resident in Vanuatu.
(2) An employee shall not be entitled to severance allowance if he is dismissed for serious conduct as provided in section 50.
(3) Where-
(a) an employee dies and the employee is employed or offered employment by the personal representative of the deceased forthwith after the death;
(b) employment by a partnership ceases on the dissolution of the partnership, and the employee is employed or offered employment by a member of the dissolved partnership or a new partnership forthwith after the dissolution;
(c) employment by a body corporate ceases on the dissolution of that body and the employee is employed or offered employment by some other corporate body in accordance with enactment or a scheme of reconstruction forthwith after the dissolution; or
(d) employment ceases on the disposal of the goodwill, or of the whole or a substantial part of the business as a going concern, or of that part of the business in which the employee is employed and he is employed or offered employment by the person who acquires the goodwill or business or part of the business forthwith after the disposal,
on terms and conditions which are not less favourable than those of the former agreement, the employee shall not be entitled to severance allowance.
(4) Where an employee to whom an offer is made in any of the circumstances specified in subsection (3) accepts the offer, he shall be deemed to have entered the employment of the person by whom the offer is made forthwith upon the cessation of his employment with the first employer.
(5) Where an employee is deemed to be in continuous employment in accordance with section 54(2)and that continuous employment is terminated in circumstances in which severance allowance is payable, the employer in whose service the employee was employed immediately before the termination shall be deemed to be the employer during the whole of the period and shall be liable to pay severance allowance accordingly.
(6) An employer who is liable to pay severance allowance under subsection (5) shall-
(a) be entitled to deduct any period and to make any deduction which any previous employer would have been entitled to deduct or to make had the previous employer become liable to pay severance allowance; and
(b) be exempt from any liability to pay the allowance in respect of any period for which any previous employer was exempt from such liability.
AMOUNT OF SEVERANCE ALLOWANCE
56. (1) Subject to the provisions of this Part, the amount of severance allowance payable to an employee shall be calculated in accordance with subsection (2).
(2) Subject to subsection (4) the amount of severance allowance payable to an employee shall be-
(a) for every period of 12 months-
(i) half a month’s remuneration, where the employee is remunerated at intervals of not less than 1 month;
(ii) 15 days’ remuneration, where the employee is remunerated at intervals of less than 1 month;
(b) for every period less than 12 months, a sum equal to one-twelfth of the appropriate sum calculated under paragraph (a) multiplied by the number of months during which the employee was in continuous employment.
(3) Where remuneration is fixed at a rate calculated on work done or includes any sum paid by way of commission in return for services, the remuneration shall, for the purposes of this section, be computed in the manner best calculated to give the rate at which the employee was being remunerated over a period not exceeding 12 months prior to the termination of his employment.
(4) The court shall, where it finds that the termination of the employment of an employee was unjustified, order that he be paid a sum up to 6 times the amount of severance allowance specified in subsection (2).
(5) Any severance allowance payable under this Act shall be paid on the termination of the employment.
(6) The court may, where it thinks fit and whether or not a claim to that effect has been made, order an employer to pay interest, at a rate not exceeding 12 per cent per annum from the date of the termination of the employment to the date of payment.
(7) For the purposes of this section the remuneration which shall be taken into account in calculating the severance allowance shall be the remuneration payable to the employee at the time of the termination of his employment.”
“DEDUCTIONS FROM SEVERANCE ALLOWANCES
57. (1) An employer may deduct from any severance allowance payable-
(a) in the case of an employee who is retired on or after attaining the age of 55 years:
(i) half the amount of any gratuity due a the age of 55 years from any pension fund;
(ii) any gratuity granted at the age of 55 years by the employer;
(iii) 5 time the amount of any annual pension granted at the age of 55 years from any pension fund mentioned in paragraph (a)(i) above;
(iv) 10 times the amount of any annual pension granted at the age of 55 years by the employer;
(b) in any other case-
(i) any gratuity granted by the employer;
(ii) any contribution made to any pension fund mentioned in paragraph (a)(i) above by the employer.
(2) For the purpose of this section “pension” fund means any provident or pension fund or similar scheme (other than the Vanuatu National Provident Fund Act [CAP. 189], as amended from time to time) which fund is specifically approved by the Commissioner.”
The
relevant part and clauses of the Employment Contract provide:-
“EMPLOYMENT CONTRACT RENEWAL
BETWEEN: AIR VANUATU (OPERATIONS) LIMITED
P.O. BOX 148
PORT-VILA
AND: Keith Molloy
Born on 11th September 1936
Of P.O. Box 886
PORT-VILA
(“The Employee”)
WHEREAS the Employee was under contract with the employer as from the 25 April 1987 to 24 April 2001.
AND WEREAS the Employer has agreed to his being employed by the Employer pursuant to the conditions as set out in this Agreement and the Annexures A, B, C and D, in the position of Director of Operations.
AND WHEREAS the parties wish to record their agreement in writing.
NOW THIS AGREEMENT SAYS:
1. THE Employee is taking up this fourth extension of the original contract with the Employer under Category 7 Index 1612 of the Pilot Salary scale in the position of Director of Operations.
2. THE Employee shall continue employment with the Employer on the 25 April 2001 for a period of 2 years. Any extension of such employment shall be at the sole discretion of the Employer and will always be considered as a prolongation of the original contract.
3. THE total remuneration of the Employee shall be VT966700 per calendar month and shall be subject to review in accordance with Company policy as approved by the Board of Directors. The monthly remuneration is inclusive of all salary entitlements including severance allowance...
...
17. THIS Agreement shall be governed by the laws of the Republic of Vanuatu.
...”.
SUBMISSIONS
The
Claimant submits to the following
effect:
Clause 3 of the Employment
Contract does not operate as any waiver of the claimant’s rights under
Sections 54 and 55 of the
Employment
Act.
The Claimant says that the
entitlements of severance under Part XI of the Act arise upon the cessation of
Employment. It is not something
that can accrue during the course of employment
and it can be and is lost in the event that the employee resigns of his own
volition
or he is terminated for
misconduct.
The Claimant further
points out the entitlements to a severance allowance were changed by Parliament
in 1989 and 1995. Section 57
of the Employment Act deals specifically with
offsets against severance allowances and it makes it clear that the only
deduction an employer is entitled
to make is in respect of any gratuities the
employer has made from any pension fund other than the V.N.P.F. There is no
evidence
of any such pension funds being paid to the
Claimant.
It is then submitted for
the Claimant that the situation for the Claimant and the other pilots and indeed
all of the other employees
of Air Vanuatu is the same, there is no valid
contracting out of entitlements that they have under the Employment Act that in
certain circumstances i.e. termination of their employment by the employer,
resignation after the age of 55, or resignation
due to ill health, or
resignation by the employee after not less than 10 years of consecutive service,
the employer is obliged to
pay severance
allowance.
It is finally submitted
for the Claimant that the evidence of the Claimant in re-examination shows that
there is no increase in his
salary between the second last and last contract
(i.e. ‘KM4’ and ’KM5’) that could be the equivalent of
“severance
allowance”.
The Defendant
submits to the following
effect:
It is open to the parties
to agree to terms of a Contract in writing (Section 9 of the Employment Act
[CAP. 160].
After a probation
period and after 12 months continuous employment an employee is entitled to
severance providing he or she comes
within Section 54(1) of the Employment Act
and in particular:-
▪ [a] “the employer terminates his employment”.
The Defendant says in this case there is no termination the contract simply expired on time; or
▪ [b] “or retires him or after his reaching the age of 55”...
In this case the Defendant says it did not retire the Claimant. The contract simply expired.
The
Defendant thus submitted that the Claimant does not come within the definition
of employee’s entitled to severance
payments.
The Defendant’s
submissions to this effect cannot stand. On the evidence before the Court, the
Claimant comes with the definition
of an employee who is entitled to severance
payments.
The Defendant says
further that if its submission is wrong, the calculation is not at one month per
year as calculated but at 2 weeks
per year as specified in Section
56(2).
The Defendant further says
that pursuant to the Contract of Employment (clause 3) which is:
“the monthly remuneration is inclusive of all salary entitlements including severance allowances.”
(a) There is nothing in the Act to prohibit an employer paying severance at any time.
(b) Under Section 57(1), the employer may deduct gratuities:-
Thus
either:-
(i) All severance has been paid and nothing due is left;
(ii) The payments on a monthly basis for a gratuity such that in any event no severance is due.
The
Defendant refers the Court to the case of
Mouton -v-
SELB [1998] VUCA 8 Civil Appeal Case No.
02 of 1998 (at page 8). The purpose of Part XI of the Employment Act [CAP. 160]
is to provide security for residents of Vanuatu, where their employment
relationship is secured by the employer. An employee
who is dismissed by his
employer is entitled to severance pay except if he is dismissed for serious
misconduct.
The case of
Mouton -v-
SELB cannot help and assist the
defendant’s case.
The
Claimant is a resident of Port-Vila since 1987. The evidence as accepted by the
Court is that the contract of employment of the
claimant was terminated on 27
April 2003 after he had received a notice to this
effect.
The Claimant worked for
the Defendant Company for 16 years. There is no evidence of any serious
misconduct on the part of the Claimant
leading up to the notice and termination
of his contract on 27 April
2003.
APPLICATION
OF LAW
Applying the relevant
provisions of the Employment Act [CAP. 160] to the facts before the Court, I
accept the Claimant’s submissions that the Defendant’s submissions
that severance
does not arise at the end of a fixed term of contract is a
nonsense. The contract itself acknowledges itself it is a continuation
of the
previous contracts and they also acknowledge that the contract was ended by
mutual consent on 27 April 2003 and clearly the
claimant was retiring at an age
beyond 55 if one needed to fit him into a particular category under Part XI of
the Employment Act.
Further as the
evidence shows, after receiving the notice, his contract came to an end which
constitutes a
termination.
However, that is not
necessary, it is quite obvious that his entitlements clearly arise under
Sections 54 and 55 of the Employment Act. He has had the necessary length of
service and he has not been disqualified by reason of being terminated for
serious misconduct.
Section 55(1) of the Act [CAP. 160] is not applicable to the
situation of the Claimant as since his recruitment by the Defendant
Company in
1987, he resides in Vanuatu and serves the Defendant Company for the necessary
length of service. Thus the entitlement
arises as does the entitlement to
interest at a rate of 12% per annum from the time that the amount became payable
in pursuance to
Section 56(6) of the Employment
Act.
The calculation of severance
made by the Claimant is properly made. Section 57 of the Act [CAP. 160], deals
specifically with offsets
against severance allowances and it make it clear that
the only deduction an employer is entitled to make is in respect of any
gratuities
the employer has made from any pension fund other than the Vanuatu
National Provident Fund (V.N.P.F.). In the present case, there
is no evidence of
any such pension funds being paid to the
Claimant.
I consider also that the
Claimant is entitled to indemnity costs in view of the complete lack of merit in
the Defendant’s case
and in the manner in which it has failed to produce
any evidence.
The Employment Act
allows for more favourable agreements than those provided for under the Act.
[Section 6]. The Act does not allow an employer to contract
out of and avoid the
entitlements that it must pay to its employees and former employees. The
situation is the same regardless of
whether we are dealing with annual leave,
sick leave, notice or severance
allowances.
The judgment must be
entered in favour of the
Claimant.
ORDER
The
judgment is entered in favour of the Claimant in the sum of VT7,953,600 in
severance allowance with interest at the rate of 12%
per annum from 27 April
2003 until payment and costs awarded for the Claimant on an indemnity
basis.
The matter is listed for
Enforcement Conference on 15 September 2004 at
9.30AM.
Dated
at Port-Vila this
8th
day of September 2004
BY THE COURT
Vincent
LUNABEK
Chief
Justice
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