Walker and Sons & Company Ltd. v Gurusinghe
WALKER AND SONS & COMPANY LTD.
SUPREME COURTSHIRANI BANDARANAYAKE, J.
SC(APPL) 61 OF 2005HCA 305/2003LT 4/G/23590/99FEBRUARY 27, 2008APRIL 2, 3, 29, 2008
Resignation – Services constructively terminated? Use of term 'resignation' byan employee – Does it by itself preclude him from claiming relief on the footingof a constructive termination? – What is constructive termination?
The employee informed the appellant employer that due to the nonavailability of the resources at the new place of work he would notbe in a position to accede to the additional duties that were assignedto him and therefore he is tendering his resignation. The appellanthad taken immediate steps to demote him to his previous position,and had also taken steps to call for explanation for his nonattendance at meetings. In conceptual terms it can be said that whenan employer breaches a fundamental obligation of the contract ofemployment, the employee is entitled to treat such a breach as a'constructive termination' by the employer, which puts an end to thecontract.
The mere use of the term resignation by an employee does not byitself preclude him from claiming relief on the footing of a'constructive termination’ by the employer.
After receiving the ‘resignation’ letter the employer appellant hadtaken steps to demote the respondent to his previous position. Theemployer appellant also took steps to call for explanation for his nonattendance at meetings – thus confirming the fact that the employerhad not accepted the resignation tendered by the employeerespondent – it is abundantly clear that the appellant’s action againstthe respondent amounts to 'constructive termination'.
38Sri Lanka Law Reports 1 Sri L.R
APPEAL from the judgment of the High Court of Matara
Wasantha Gunasekara for respondent-appellant-appellant.
Rohan Shabandu with Athula Perera for applicant- respondent-appellant.
October 19, 2008
SHIRANI BANDARANAYAKE, J.
This is an appeal from the judgment of the High Court of the 01Southern Province dated 30.03.2005. By that judgment, thelearned judge of the High Court affirmed the order of the LabourTribunal dated 04.08.2003, by which the Labour Tribunal had heldthat the services of the workman-applicant-respondent- respondent(hereinafter referred to as the respondent) had been constructivelyterminated by the respondent-employer-appellant (hereinafterreferred to as the appellant) and awarded him a sum of Rs.264,000/- as compensation for the loss of employment. Theappellant appealed to the High Court of the Southern Province, 20where special leave to appeal was granted to the Supreme Court.Since, no questions of law had been specified by the High Court,both learned Counsel had agreed on 20.02.2006 that the appealcould be argued on the following question:
"Whether the Labour Tribunal and the High Court erred inlaw in considering that there was a wrongful terminationof service by the employer, considering the documentsand the evidence that is adduced in the case”
The fact of this appeal, albeit brief are as follows:
The respondent had joined the appellant Company as a 30supervisor on 26.06.1985 (A1). In terms of the terms and conditionsof his employment, his age of retirement was 55 years. Thereafterthe respondent was promoted to the post of Training AssistantEngineer (Mechanical) with effect from 01.06.1993 (A2). Later on30.08.1995 the respondent was promoted to the position ofAssistant Engineer (A3) and by document marked A4, he waspromoted to the position of engineer of the appellant Company witheffect from 01.03.1999. Since July 1985, the respondent had been
Walker and Sons & Company Ltd. v Gurusinghe
SC(Shirani Bandaranavake, J.)
serving in the appellant Company, for a continuous period of over13 years.40
The promotion granted to the respondent in March 1999, wasconditional as he had to serve a period of six (6) months onprobation, and it was also common ground that, the appellantCompany by its letter dated 23.03.1999 (A4A), had assignedadditional duties to the respondent, which were as follows:
Continue to improve the level of activity' at the branchensuring that the turn over does not fall below the figuresover the past six (6) months;
Endeavour to re-commence revenue work for repairs toplantation machinery at a value, not less than Rs. 250,000/- soper month; and
Co-ordinate with the Branch Accountant in the collection ofdues to the Company in respect of invoices raised inpursuance of work carried out in (a) and (b) above.
During this period the respondent had to work in the office atGalle Fort, which was admittedly a large well equipped Garage.After his new appointment, the said Garage was sold and themachinery and the equipment were taken to a place at Mihiripenna.
The respondent after the receipt of the notice, assigning additionalduties (A4A), had tendered his resignation by his letter dated 6007.07.1999, to be with effect from 31.08.1999 stating that he isunable to accede to the terms and conditions of his newappointment (A6). By their letter of 09.07.1999, the appellant, whilstreverting the respondent to his former position as AssistantEngineer Galle Branch on the salary allocated to AssistantEngineer’s post, informed the respondent that they are awaiting hisconfirmation of his resignation.
The respondent by his letter dated 02.08.1999 had informedthe appellant that they have terminated his services, constructively,and that he would be instituting proceedings in the Labour Tribunal. 70
The Labour Tribunal had decided that the appellant hadterminated his services constructively and had ordered to pay himRs. 264,000/- being two years salary taking into accountRs. 11.000/- as his monthly salary, for the loss of his employment.
40Sri Lanka Law Reports(2008] 1 Sri L.R
The learned Judge of the High Court had affirmed the order of theLabour Tribunal. Accordingly, both the Labour Tribunal and the HighCourt had come to the conclusion that the respondent’semployment had been constructively terminated by the appellant.
It is not disputed that the respondent, as stated earlier, waspromoted to the post of Engineer of the Galle Branch by letter 80dated 23.03.1999 with effect from 01.03.1999. It is also notdisputed that by a further communication, the respondent wasinformed of the additional duties assigned to the respondent.
In his evidence, the respondent had stated that after he waspromoted to the post of Engineer, the Garage, which was thebiggest of that kind in the Southern Province, was sold and theestablishment was re-located at Mihiripenna. The respondent’sposition was that the new location at Mihiripenna was a smallhouse that was taken on lease and that the machinery andequipment were not re-located and installed. The new place was 90not fitted with three phase electricity, which was essential to run theheavy equipment machinery and sufficient number of workmenwere not assigned to him. In the circumstances, although theappellant Company had been manufacturing Roll Breakers, TeaRollers and all equipment necessary for the Tea trade when thegarage was located in Galle, it was not possible to manufacture anyof the above, after moving to Mihiripenna. The resulting positionwas that it was not possible to achieve the targets set out in thedocument, which listed out the additional duties (A4A) as none ofthe Estate Superintendents had given work to the appellant 100Company since they lacked the necessary infrastructure.
In fact the respondent has expressed his difficulties inachieving the expected goals due to the insufficient infrastructurefacilities. In his letter dated 07.07.1999, (A6) he had stated thus:
Notice of Resignation
"I wish to bring to your notice that I cannot accede to your
terms and conditions and the expectations of my new
appointment as a Covenanted Staff Engineer at Galle
Branch with the available Company infrastructure.110
Walker and Sons & Company Ltd. v Gurusinghe
SC(Shirani Bandaranavake. J.)!1_
The available resources for Galle Branch EngineeringDivision is not sufficient to implement any mode ofoperation and also we do not get any concession fromany other divisions which could deteriorate the presentlevel of operation, (sic)
Hence, I am compelled to notify my resignation inadvance complying with A.G.M (P & L)’s Circular No. 1/99: WMSWF : SS : MK dated 22.01.1999 to utilize my entitleleave with the appropriate condition prior to theresignation. (sic)120
I intend to resign from the services from 31.08.1999.
However the confirmation would be as per letter ofappointment.
I would like to make this opportunity to appreciatesuperiors who are devoted to develop our establishment."
In response to the respondent’s said letter of resignation (A6),the Assistant General Manager/Personnel and Legal, had informedthe respondent that since the respondent is unable to accept theterms and conditions stipulated in the letter of appointment placinghim in the new post, that the appellant has no alternative other than 130reverting the respondent to his former position. Accordingly therespondent was reverted to his former position as AssistantEngineer, Galle Branch on the salary drawn by an AssistantEngineer. The said letter had further stated that the respondent’s'intention to resign from the services of Walker Sons and Co. Ltd.’was noted and that they were awaiting his confirmation of hisresignation (A5 and A5A). The said letter (P5) was dated09.07.1999. On the same date the Assistant GeneralManager/Personnel and Legal had written to the respondent callingfor explanation to be sent within seven days from 09.07.1999 (R3). uoThe said letter was in the following terms :
"It is noted that you have failed to participate at theMonthly Management Meeting held on 06.07.99although you were informed to attend.
You were thereafter, requested to appear before themanagement at a Special Meeting held on 08.07.99 at
42Sri Lanka Law Reports(2008) 1 Sri LR
10.30 a.m. along with Mrs. Anwar – Accountant andAGM/Galle Branch.
Your failure to participate in the above Meetingsappears to be a gross violation of the disciplinary rules150
and regulations of the Company and misconduct onyour part.
Therefore please send me your explanation on orbefore the lapse of seven (07) days from today as towhy you failed to participate in the above mentioned 02meetings."
It is in this context, that we will have to examine as to whetherthe respondent had resigned from his employment or whether hisservices were constructively terminated by the appellant.
Considering the factual position, which was referred to earlier, 160it is to be borne in mind that after the receipt of the letter specifyingthe additional duties, the respondent had tendered his resignationsince it was difficult for him to fulfill those with the availableinfrastructure facilities. Thereafter the appellant had informed therespondent that he would have to confirm his resignation.Notwithstanding the above, the appellant took steps to demote therespondent and to call for explanation for his non-participation at amonthly Management Meeting held on 06.07.1999 and a SpecialManagement Meeting held on 08.07.1999. Both these action weretaken, it is to be noted well after the respondent had sent his letter 170or resignation, on 07.07.1999.
The Labour Tribunal had considered all the circumstancesreferred to above in coming to the conclusion that the appellant hadconstructively terminated the service of the respondent, whichdecision was affirmed by the learned judge of the High Court.
Describing the instances and as to what amounts toconstructive termination, would not be a simple question to give abrief answer. However, the doctrine of constructive termination, inits conceptual from has been identified in the following terms (TheContract of Employment. S. R. de Silva, The Employers' Fede- isoration of Ceylon, monograph No. 4, pg.158):
Walker and Sons & Company Ltd. v Gurusinghe
SC(Shirani Bandaranayake, J.)43_
The difficult question arises in connection with whatamounts to a constructive termination of employment…. In conceptual terms it can be said that when anemployer breaches a fundamental obligation of thecontract of employment, the employee is entitled totreat such a breach as a constructive termination bythe employer, which puts an to the contract.
In his examination of the doctrine of constructive termination, S.R.de Silva (supra) had set out examples that clearly illustrates its 190meaning. According to his examination:
If an employer refuses to pay an employee his salaryin circumstances which make such refusal illegal, theemployee can treat the employer’s refusal as aconstructive termination of the contract or again, theemployer may seek to unilaterally vary the contract ona fundamental matter, e.g. demote him. In such casesthe employee often purports to resign from the serviceof the employer for the reason that the latter hascompelled him to do so. Such a resignation is in law a200
constructive termination by the employer and does notpreclude the employee from claiming relief before aLabour Tribunal on the basis that there has been atermination by the employer. The mere use of the term'resignation' by an employee does not by itselfpreclude him from claiming relief on the footing of aconstructive termination by the employer” (emphasisadded).
When the respondent informed the appellant that due to thenon availability of the resources for the Engineering Division of the 210Galle Branch that he would not be in a position to accede to theadditional duties that were assigned to him and therefore he istendering his resignation, the appellant had taken stepsimmediately to demote the respondent to his previous position.Notwithstanding the above, as stated earlier, the appellant alsotook steps to call for explanation from the respondent for his non-attendance at meetings, thereby confirming the fact the they hadnot accepted the resignation tendered by the respondent by hisletter dated 07.07.1999 (A6).
44Sri Lanka Law Reports(2008J 1 Sri L.R
In such circumstances, on a consideration of all the material 22cadduced in this case, it is abundantly clear that the appellant’saction against the respondent amounts to constructive terminationof the respondent’s service. Accordingly, I answer the question onwhich this appeal was heard, in the negative.
For the reasons aforesaid, this appeal is dismissed and thejudgment of the High Court dated 30.03.2005 is affirmed. Theappellant will pay the respondent a sum of Rs. 25,000/- as costs.
MARSOOF, J.-I agree.
BALAPATABENDI, J. -I agree.
WALKER AND SONS & COMPANY LTD . v. GURUSINGHE