CEYLON MEAT PRODUCTS LTD. v. MRS. C. FERNANDO

030-SLLR-SLLR-1989-V-2-CEYLON-MEAT-PRODUCTS-LTD.-v.-MRS.-C.-FERNANDO.pdf


304
Sri Lanka Law Reports
(1989) 2 Sri LR
CEYLON MEAT PRODUCTS LTD.
.v.COURT OF APPEALWIJETUNGA, J.
C.A. NO. 398/81L.T. NO. 2/11105/78JANUARY'26, 1989
Industrial Dispute – Refusal to accept variation in terms of employment – Termination
CA
Ceylon Meat Products Ltd. v. Mrs. C. Fernando
305
– Sufficiency of pleadings – Industrial Disputes Reaulations. 7958, Regulations 15 and31 – Industrial Disputes Act, s. 31B – Can a Director also serve as an employee ofthe Company?
The applicant was a founder Director of the respondent Company and also its'Prpduction Manager from 1965. On 19.10.77 she resigned from the Directorate. In herapplication she had failed to state that she had been a Founder Director of theCompany. She also failed to file a replication when served with the answer.
Held:
Regulation 15 of the Industrial Disputes Regulations, 1958 provides that everyapplication to the Labour Tribunal under section 31B shall be substantially inForm D set out in the First Schedule which requires inter alia that the "full factsof the matter to which the application relates" must be'set out. The applicant had.failed to state that she had been a Founder Director of the Company but-this isnot a suppression of facts or a failure to disclose the full fa'cts of the matter towhich the application .relates – her application being in respect of the terminationof her services as Production Manager.
Under Regulation 31 of the Industrial Disputes Regulations the applicant mustforward his replication within the period specified in the notice of the Secretary ofthe Tribunal. What the Regulation stipulates is that the applicant must forward hisreplication, if any, within the period specified in the notice. It does not mean thatwhere the employer files his answer, there should be a replication the applicant.The necessity for further pleadings after answer would depend on the facts andcircumstances of each case. This Regulation is only directory in nature and noadverse inference need be drawn by a Tribunal on the applicant’s failure to file areplication.
The facts justify the inference that the applicant was in the Company in dualcapacities: as Director and as Production Manager (not Production Director).From the former position she had resigned.
The mere fact that someone is a Director of a Company is no impediment to hisentering into a contract to serve the company; a Director can hold a salariedemployment or an office in addition to his Directorship and so be an employee orservant.
The applicant'was Production Manager and the respondent Company was notentitled to give her a fresh letter of appointment effecting changes in her status asProduction Manager. Her refusal to accept the letter was justified.
Cases referred to:
Lee v. Lee’s Air Farming Ltd. [1961] AC 12)
Ceylon Electricity Board v. De Abrew 78 NLR 97
APPEAL from Order of Labour TribunalIsidore Fernando for employer-appellantH.L. de Silva P.C., for applicant-respondent
Cur. adv. vult.
306
Sri Lanka Law Reports
11989/2 Sri LR
September 08, 1989
WIJETUNGA, J.
An application was made to the Labour Tribunal stating that –
the applicant had been a founder member of therespondent company and from about December, 1965, shehad also been employed as a Production Manager of thecompany,
in or about November, 1977, by letter dated 11.11.1977,the respondent company attempted to vary the existingterms and conditions of her employment,
she did not accept the said alteration and/or fresh terms ofemployment,
thereafter the respondent company terminated her servicesby letter dated 28.12.1977,
and (e) the said termination was wrongful, unlawful and notjustified.
She prayed inter alia for reinstatement and/or compensation in lieu
of reinstatement in a sum of Rs. 100,000/-.s
The respondent company filed answer stating that –
the applicant was a founder member of the company andwas also functioning as a Working Director of the companywith the designation of Production Director since 1965,
for reasons best knovyn to the applicant, she had by letterdated 19.10.1977 resigned from the Directorship of thecompany and its subsidiary company known as GoldiEnterprises Ltd.,
no letter of appointment had been issued to the applicanton her appointment as Production Director as she wasconsidered a Working Director and no letter of appointmentwas considered necessary,
on the applicant tendering her resignation from the post ofDirector of the company, the company gave her a letter ofappointment dated 11.11.1977, intimating to her that thecompany had decided to appoint her as an Executive ofthe company as from 19.10.1977 on an all inclusivemonthly salary of Rs. 1,100/- and stipulating the terms andconditions of employment as an Executive of the company.
and (e) on the applicant’s persistent refusal to accept the saidletter of appointment, her services were terminated on theground of gross indiscipline, with effect from 28.12.1977.
CA
Ceylon Meat Products Ltd. v. Mrs. C. Fernando (Wijetunga, J.)
307
After inquiry, the learned President made his order dated 30.7.1981holding that the termination of the applicant’s services was withoutgood cause and awarding a •sum of Rs. 75,000/- as compensation forwrongful termination of her services. It is from this order that therespondent company has appealed to this Court.
Learned Counsel for the appellant submits that –
the applicant has suppressed material facts in herapplication to the Labour Tribunal,
had failed to file a replication which is a mandatoryrequirement and Was consequently hot entitled to any relieffrom the Tribunal,
and (c) the finding of the learned President that the termination ofthe applicant’s services was without good cause isuntenable,
In regard to the submission relating to the suppression of materialfacts, reference is made to Regulation 15 of the Industrial DisputesRegulations, 19c3, which provides that every application to theLabour Tribunal under Section 31B shall be substantially in Form Dset out in the First Schedule. Form D requires the applicant to. stateinter alia ’’.the full facts of the mt..‘er to which the application relates’’.It is submitted that the applicant has failed to state in her applicationthat she was a founder Director of the company since 1965 and wasalso the Production Director from its inception, that she had resignedfrom the Directorship of the company and its subsidiary companyGoldi Enterprises Ltd. on 19.10.1977 by reason of the fact that shehad sold all her shares in both companies and that as a Director ofboth companies she had at no time received any letter ofappointment.
The position of the applicant, however, is that though she resignedfrom the Directorship of the company, she continued to be inemployment as Production Manager of the company, which post shehad held from 1965, that she had functioned in dual capacities andhad at no time resigned from the post of Production Manager.Therefore, she claims that a fresh letter of appointment wasunnessary as she continued to be an employee of the company onthe same terms- and conditions of service previously enjoyed by herand that the management could not reduce her in status or positionby imposing new conditions under a fresh letter of appointment.
It will straightaway be seen that while the company claimed that she
308
Sri Lanka Law Reports
l19B9!2SriLR
had functioned as Production Director, the applicant's position wasthat she functioned in dual capacities, as a Director and also asProduction Manager of the company. Admittedly she had resignedfrom the Directorship, but that did not affect her continuance inemployment as Production Manager. The application made to theLabour Tribunal relates to the termination of her services asProduction Manager of the company and the relief sought isreinstatement in that capacity and/or compensation in lieu ofreinstatement.
When Form D in the First Schedule to the Industrial DisputesRegulations refers to “the full facts of the matter to which theapplication relates”, it contemplates in my view only the mattersdirectly relevant to the application submitted to the Tribunal. Thepresent application being in respect of her employment as ProductionManager, she was not obliged to refer to her position as a Director ofthe company, which was an entirely different capacity. Herresignation from the Directorship would not in any way have affectedher position as Production Manager, if in fact, she had functioned indual capacities. Her resignation from the Directorship not being amatter within the purview of the Tribunal, is not, in my view,encompassed by the expression “full facts of the matter to which theapplication relates”. I am, therefore, unable to agree that there hadbeen a suppression of facts or a failure to disclose the full facts ofthe matter to which the application relates.
As to the submission that the applicant had failed to file areplication, it appears that when the inquiry commenced.before theLabour Tribunal on 29.7.1979, the learned President has made thefollowing minute: “I find that the replication of the applicant has notbeen filed. This will be done within a month with copy direct to theemployer. Subject to this, the matter shall proceed to inquiry”. Noreplication has in fact been filed thereafter.
Regulation 31 of the Industrial Disputes. Regulations, requires theSecretary to the Tribunal, on receipt of an application, by writtennotice to call upon the employer to transmit to him within the periodspecified in such notice, in duplicate, a statement setting out hisanswer in relation to the matter to which the application relates.When the statement of the employer (answer) is so received by theSecretary, be is further required to forward a copy of such statement(answer) to the applicant and call upon the applicant to transmit tohim within the period specified in such notice, in duplicate, a
CA
Ceylon Meat Products Ltd. v. Mrs. C. Fernando (Wijetunga, J.)
309
statement setting out the applicant’s answer, viz. the replication.Emphasis is laid by Counsel on the words “the applicant shalltransmit such statement in duplicate within the period specified insuch notice”.
He contends that the words of the Regulation suggest' that it is amandatory requirement and that.the applicant’s failure to comply withsuch requirement should have been taken into consideration by thelearned President before he proceeded to make the order in this caseand an adverse inference should have been drawn against theapplicant on account of such failure. I am unable to construe thisRegulation as being mandatory in nature. To my mind, what itcontemplates is that the applicant shall transmit the replication1, if any,within the period specified in such notice. I do not understand thisprovision to mean that in every application before a Labour Tribunalwhere the employer files his. answer, there should be a replication bythe applicant. The necessity for further pleadings after answer woulddepend on the facts and circumstances of each case. I am, therefore,inclined to the view that this Regulation is.only directory-in nature andno adverse inference need be drawn by a Tribunal on the applicant’sfaiiure to file a replication.1
I shall now consider the order of the learned President in the lightof the facts of this case. As was mentioned earlier, while therespondent company’s position is that the applicant was theProduction Director of the company from 1965 to 19th October, 1977, >when vhe applicant resigned from the Directorship of the company,the applicant’s position is that she served in dual capacities, as aDirector of the company as well as Production Manager of thecompany. A strenuous effort has been made by the respondentcompany to demonstrate that her designation throughout has beenProduction Director and that at no time had she been designated asProduction Manger. But, this assertion is in the teeth of the evidenceled in this case. The, letters (A1), (A5), (A6), (A7), (A8), (A9), (A10),(A11) and (A12), written by the Managing Director in her ownhandwriting, are addressed to the applicant under the designation ofProduction Manager. (A4) is a type written letter from the ManagingDirector to the applicant, where too she is designated as ProductionManager. (A13), (A14) and (A15) significantly are addressed to theDirector-Production Manager by the Managing Director. There is onlyone solitary letter dated 25.9.19.72 (A17), where the applicant had
310
Sri Lanka Law Reports
f1989j2 Sri LR
been addressed as Production Director by the Chairman andManaging Director of the company. Apart from the above letters,there are the publications in the ‘Daily News’ of 14.12.1966 (A2) andin the Sinhala journal ‘Vanitha Viththi' of 25.4.1966 (A3), where theapplicant had been prominently featured as Production Manager ofthe company. (A2), as the document itself indicates, is an advertisingsupplement of the company, which contains a message carrying thephotograph of the applicant under the caption Production Manager'smessage, alongside other messages including that of the ManagingDirector. The article in the Vanitha Viththi’ similarly makes referenceto the applicant as Production Manager of the company.
The learned President having examined the contents of some ofthese letters comments that they are mild reprimands and that theirtone suggests that the applicant as Production Manager was underthe supervision and control of the Managing Director and that thesecircumstances strongly savour of a contract of employment betweenthe applicant and the respondent company. He further holds that theevidence of the Managing Director that the applicant unilaterallychanged her designation to that of Director-Production Manager in1976 is far from the truth and on the evidence there cannot be anydoubt that the applicant was designated Production Manger, despitethe insistence of the Managing Director that she was the ProductionDirector as stated by her in evidence.
He further refers to the fact that the respondent company continuedto pay her a salary for a period of three months after her resignationfrom the Directorship, until the termination of her services, as well asthe admitted obligation to pay provident fund contributions on herbehalf as factors which further affirm the applicant's position in thismatter.
On a perusal of the order and the proceedings, I have no hesitationin accepting the correctness of the conclusions of fact reached by thelearned President, amply supported as they are by the evidence inthis case.
What has to be further examined is whether, as claimed by theapplicant, she could function in dual capacities as Director andProduction Manager. I do not see any anomaly in this situation. Legal' authority recognises the validity of such dual positions.
In Lee v. Lee's Air Farming Lfcf.(1) the defendant company was
CA
Ceylon Meat Products Ltd. v. Mrs. C. Fernando (Wijetunga, J.)
311
formed for the purpose of carrying on the business of aerialtop-dressing. Lee, a qualified pilot, held all but one of the shares inthe company and by the articles was appointed governing director ofthe company and chief pilot. Lee was- killed while piloting thecompany’s aircraft and his widow claimed compensation for his deathunder the New Zealand Workers Compensation Act, 1922. Thecompany opposed the claim on the ground that Lee was not a“worker” within the statuory definition as the same person could notbe both employer and employee. But, the Privy Council held that.there was a valid contract of service between Lee and the companyand Lee was therefore a “worker" within the meaning of the Act.
Lord Morris there expressed the view at page 25 that "it is wellestablished that the mere fact that someone is a director of acompany is no impediment to his entering into a contract to serve thecompany”.' .
Further, in Palmer’s Company Law, Vol.l, (23rd Edition, 1982), it isstated at pages 793 and 794 that “directors are not, as such,employees of the company; nor are they servants of the company, or
members of its staff A director can, however; hold a salaried
employment or an office in addition to that of his directorship whichmay, for these purposes, make him an employee or servant and insuch a case he would enjoy any rights given to employees as such;but his directorship and his rights through that directorship are quiteseparate from his rights as employee
In Ceylon Electricity Board v. de Abrew(2) Tennekoon, C.J. dealswith the question as to whether a member of the body whichconstitutes the “employer” can also be an “employee’ of that samebody and at page 103 makes reference to several authorities relevantto the matter presently under consideration, which too support thisaspect of the applicant’s case.
I am, therefore, of the view that the learned President was rightwhen he came to the conclusion that the applicant had served in dualcapacities as Director and Production Manager, which waspermissible and well recognised in law. Since- her resignation wasonly from the Directorship, consequent upon her selling her shares ofthe company which necessitated such resignation, she continued tohold the post of Production Manager up to the time of hertermination. The respondent company was, therefore, not entitled togive her a fresh letter of appointment as there had been no change
312
Sri Lanka Law Reports
l19B9l2SriLR
in her status as Production Manager. In fact, no occasion arose byvirtue of her resignation from the Directorship of the respondentcompany to issue her a new letter of appointment as she continuedas Production Manager on the same terms and conditions previouslyapplicable to that post. Her refusal to accept the fresh letter ofappointment is hence quite justified in the circumstances. Thelearned President's finding that the termination of the applicant'sservices was without good cause is, therefore, correct.
In regard to the question of quantum of compensation for wrongfultermination of her services, the learned President has considered itjust and equitable that the respondent company pay the applicant asum of Rs. 75,000/- as compensation. The applicant as ProductionManager was. entitled to a salary of Rs. 1,100/- per mensem. Shehad worked in that capacity from about December, 1965 toDecember, 1977, for a period of about 12 years. This would work outto about 6 years’ salary, which in my view is not unreasonable in allthe circumstances of this case.
For the reasons aforesaid, I would affirm the order of the learnedPresident and dismiss this appeal with costs.
Appeal dismissed.