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HUNTER AND COMPANY LTD.
v.
THE MINISTER OF LABOUR AND VOCATIONAL TRAININGAND OTHERS
SUPREME COURT.
DHEERARATNE, J„
ANANDACOOMARASWAMY, J. ANDDR. GUNAWARDANA, J.
S.C. APPEAL NO. 65/95S.L. SLA NO. 102/95C.A. APPLICATION NO. 157/93MARCH 14, APRIL 9, AND MAY 5, 1997.
Industrial dispute – Repudiation of a Collective Agreement under Section 8(1) ofthe Industrial Disputes Act – Whether the implied terms of the Agreementcontinue to be in force – Applicability of the doctrine of respect for acquired rights- Whether the Arbitrator's Award is Just and Equitable.
The Employers' Federation of Ceylon, acting on behalf of a number of employers,including the appellant-company, entered into'a Collective Agreement with the4th respondent Union. The Employers' Federation repudiated the said CollectiveAgreement in so far as it related to the appellant-company by Notice dated
The appellant-company itself gave notice of repudiation on
The Commissioner of Labour published a Notice in the GovernmentGazette stating that the said Collective Agreement has ceased to be of force witheffect from 1.1.1988, in so far as the appellant-company is concerned. Althoughthe said Collective Agreement was repudiated by the appellant-company witheffect from 1.1.1988, it continued to pay the NRCOLG allowance to its workmen,for a further period of 1 year 3 months i.e. till April 1989.
The appellant-company entered into a Memorandum of Settlement with theBranch Union of the 4th Respondent Union, on 28th April 1989, and thereafterdiscontinued the payment of the said NRCOLG allowance. The parent Uniondisowned the said Memorandum of Settlement by letter dated 24th November
1989.
The 1st respondent referred the dispute for arbitration to 3rd respondent in regardto the non-payment of, the said NRCOLG allowance and the terms ofremuneration of the clerical, supervisory and allied staff employed by theappellant-company.
The 3rd respondent by his Award held that the repudiation of the said CollectiveAgreement did not bring “the statutory implied terms” to an end. Further £eordered the payment of the said NRCOLG allowance, and approved the saidterms of remuneration of the said staff, as set out in the said Agreement, on thr?basis that such payments were just and equitable.
(
Held:
(Dheeraratne, J. dissenting) That there was evidence before the Arbitrator thatNRCOLG allowance was paid to the workmen for nearly 1 year and 3 months,even after the repudiation of the said Collective Agreement by the appellant-company. It was also the evidence of the appellant-company's PersonnelManager that the Company realised that, to stop the NRCOLG allowance theCompany needed to have an Agreement with employees. In the absence of anAgreement the Company continued to pay the NRCOLG allowance, till theMemorandum of Settlement was signed. Hence the workmen can be said to haveacquired a right for the continued payment of the said NRCOLG allowance.
Per Gunawardana, J. "The concept of ‘acquired rights' is based on therecognition of the sanctity of property rights under a particular municipal legalsystem. Thus the recognition of the continuation of the "Statutory implied terms",under the said Collective Agreement, will be in conformity, with the doctrine ofrespect for acquired rights."
(Unanimously) That it was just and equitable for the Arbitrator to have heldthat, the repudiation of the Collective Agreement did not bring the "Statutoryimplied" terms to an end.
(Unanimously) That the deprivation of the rights and privileges of theworkmen, was an unfair labour practice.
APPEAL from the judgment of Court of Appeal.
Faisz Musthapha, P.C. with Anil Silva and Sanjeewa Jayawardana for thepetitioner-appellant.
Gomin Dayasiri with Aravinda R.l. Athurupane for the 4th respondent-respondent.
Cur. adv. vult.
June 16, 1997.
DR. GUNAWARDANA, J.
The Employers' Federation of Ceylon acting on behalf of a numberof employers including the appellant-company, entered into aCollective Agreement (P1) with the 4th respondent Union, on 20thNovember 1981. The said Collective Agreement whilstcomprehensively covering the terms and conditions of theemployment dealt with in particular the following:-
■(a) the consolidation of salaries, (Clause 13).
•>*-('b) the payment of a non-recurring cost of living gratuity(NRCOLG) (Clause 15) and
the modalities for the revision of salaries. (Clause 13(6)).
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The Employers’ Federation repudiated the said CollectiveAgreement insofar as it related to the appellant-company by Noticedated 6.11.1987 (P3). The appellant-company itself gave notice ofthe repudiation on 13.11.1987 (P2). The Commissioner of Labourpublished a Notice in the Government Gazette stating that the saidCollective Agreement has ceased to be of force with effect from1.1.1988, insofar as the appellant-company is concerned. Althoughthe said Collective Agreement was repudiated by the appellant-company with effect from 1.1.1988, it continued to pay the NRCOLGallowance to its workmen, for a further period of 1 year and 3 monthsi.e. till April 1989.
On 28th April 1989 the appellant-company entered into aMemorandum of Settlement (P5) with the Branch Union of the 4threspondent Union, purporting to act under Section 12 of the industrialDisputes Act. It is significant to note that this Memorandum was notsigned by the office bearers of the parent Union but was signed bythree workmen of the appellant-company, purporting to act on behalfof the parent Union. The parent Union by letter dated 24th November*1989 (P6) disowned the said Memorandum of. Settlement, andinformed the appellant-company that the persons who signed thesaid Memorandum of Settlement were not authorised by the parentUnion to do so.
The 1st respondent referred the dispute for arbitration by the 3rdrespondent, at first, in the following terms. (P8).
“The matter in dispute between the aforesaid parties is whether thenon-payment of cost of living gratuity to employees who aremembers of the Ceylon Mercantile Industrial and General WorkersUnion with effect from September 1987 by the Management of M/SHunter & Co. Ltd. is justified and to what relief each of them isentitled.”
During the pendency of the said arbitration, the 1st respondent
referred, a further matter, for arbitration in the following terms. (P13).
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"(2) what should be the terms of remuneration of the clericalsupervisory and allied staff employed at M/S Hunter & Co. Ltd.”
The item (1) referred to arbitration by P13 is identical to the matterreferred for arbitration by P8. The second reference was taken up forarbitration along with the first, with the consent of the parties, and anaward was made in favour of the 4th respondent Union in respect ofboth matters referred for arbitration. The appellant-company beingaggrieved by the said award made an application for a Writ ofCertiorari, to the Court of .Appeal to have the said award quashed.The Court of Appeal by its judgment dated 13.2.1995 (P23)dismissed the application of the appellant-company. Thereafter theappellant-company made an application for Special Leave to Appealto this Court and leave to appeal was granted against the raidjudgment of the Court of Appeal.
The learned Counsel for the appellant-company pointed out thatthe Court of Appeal in its judgment has held that, "the repudiation ofthe Collective Agreement did not bring the implied contracts ofemployment that was in existence at the time the CollectiveAgreement was in force, to naught, but the conditions remained till anew contract of employment was brought into force." This conclusionhe submitted was untenable in law in view of the provisions of Section8(1) of the Industrial Disputes Act which reads as follows:-
“8 (1) Every Collective Agreement which is for the time being inforce shall, for the purposes of this Act be binding on the parties,trade Unions, employers and workmen referred to in thatagreement in accordance with the provisions of Section 5(2); andthe terms of the agreement shall be implied terms in the contractof employment between the employers and workmen bound by theagreement.”
The learned Counsel for the appellant-company further submittedthat the said conclusion reached by the Court of Appeal set atnaught, the legislative injunction that, terms of the CollectiveAgreement shall be implied terms in the contract of employment onlyso long as the Collective Agreement is, “for the time being in force”and that too in respect of workman, “bound by the agreement.” Hearcfued that in the instant case, since there is a valid repudiation of'the said Collective Agreement under Section 9 of the IndustrialDisputes Act, the implied terms of contract of employment in terms ofthe said Collective Agreement, which had been repudiated, wouldcease to have effect.
The learned Counsel for the 4th respondent submitted that thesaid Section 8(1) of the Industrial Disputes Act is'separated into twolimbs by a semicolon. The first limb of Section 8(1) accomplished twopurposes. The first limb firstly speaks as to "who" are bound by aCollective Agreement and secondly as to, "during when", they wouldbe so bound. In the first limb, only the Collective Agreement isspoken of. The words, “which is for the time being in force" occur inthe first limb which is separated by a semicolon from the secondlimb. Therefore, he argued that, those words do not apply to thesecond limb of Section 8(1). The function of those words is to specifyduring which time the Collective Agreement shall be binding on theparties to the Collective Agreement.' It is most vital to note that thewords, "Contract of Employment” do not occur in the 1st limb ofSection 8(1). He added that, the second limb of Section 8(1) speaksas to the terms of the Collective Agreement being made “statutorilyimplied terms" in the contracts of employment between the employer'and workman. The second Section 8(1) has the words, “employersand workmen bound by the agreement.” These words he submittedare there to specify or describe whose contracts of employment areaffected by the provision, and not for the purpose of limiting theapplicability of the implied terms, to any period within which theCollective Agreement itself is to be in force. Those words are onlydescriptive as to whose contracts of employment are dealt with bythe second limb of Section 8(1).
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The learned Counsel for the 4th respondent contended that if thelegislature intended to provide that once the Collective Agreement isrepudiated the, “statutory implied terms" also should cease to haveeffect, then it would have, in its wisdom, expressly stated so. It is tobe noted that Industrial Disputes Act does not expressly state so.He submitted that if the “statutorily implied terms” ceased to applywith the repudiation of the Collective Agreement, the workmen wouldbe without terms and conditions in their contracts of employment untilh fresh Collective Agreement is entered into. There is mufchsubstance in that argument of the learned Counsel for the 4tbrespondent.
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Furthermore the Court of Appeal in its judgment has referred to thepractical difficulty that would arise if the repudiation is to be treatedas abrogating “statutory implied terms". It has pointed out thataccording to Clause 13(4) of the Collective Agreement, theconsolidated salaries payable under the Agreement included theallowances received by employees prior to the said CollectiveAgreement, and it’s specifically stated in the Collective Agreementthat the allowances set out at Clause 13(4) (a) to (e) would not bepayable, after the Collective Agreement came into effect. Similarly,clause 14 of the Collective Agreement sets out the conversion scalesof the consolidated salaries. In that context, the Court of Appeal hasobserved that, “If the submission of the learned Counsel is accepted,with the repudiation of P1 then all the conditions in clause 13(4)would have to be reintroduced and all the benefits that was bestowedby one would be made nugatory, (pages 10 and 11 of P23).
In this regard it is pertinent to refer to the observation made byS.R. de Silva in his book titled, “Legal Framework of IndustrialRelations” at pages 94 which states as follows:-
“At the termination of a Collective Agreement in terms of Section 9of the Industrial Disputes Act the Agreement ceases to havestatutory effect under the first part (limb) of Section 8(1), but wouldcontinue to form part of the contract of employment of each of theworkmen who were bound by it since the provisions of theagreement have been incorporated into such contracts ofemployment by the latter part (2nd limb) of Section 8(1).”
There was evidence before the Arbitrator that, NRCOLG allowancewas paid to the workmen for nearly 1 year and 3 months, even afterthe repudiation of the said Collective Agreement by the appellant-company. It was also the evidence of the appellant-company'sPersonnel Manager that the Company realised that, to stop NRCOLGallowance the Company needed to have an agreement with theemployees. (Page 41) and that in the absence of an agreement theCompany continued to pay the NRCOLG allowance (Page 41), till theMumorandum of Settlement was signed. (Page 30). Hence theworkmen can be said to have acquired a right for the continuedpayment of the said NRCOLG allowances. In that context in my view
it is appropriate to consider this issue in light of the doctrine ofrespect for acquired rights. The doctrine of respect for “acquiredrights” or “vested rights" has gained recognition as a generalprinciple of law both in Municipal law and in International law. Inconsidering this doctrine I will first turn to the question as to what ismeant by "acquired rights”. Although there is no uniformity in variousmunicipal legal systems in regard to the character and content ofacquired rights, broadly “rights” may be divided into two categoriesviz. “property” rights and “personal” rights. “Property” rights ingeneral will not be limited to only real or movable property, but willalso include rights in rem in tangible and intangible goods andcontractual rights, whose content is economic. "Personal” rightsrelate to moral or political matters. O ’Conneil in his book InternationalLaw. Vol. 2 (Second Edition – London 1970) at Page 763 definesacquired rights as, “Acquired rights are any right, corporal orincorporal, property vested under the municipal law in a natural orjuristic person and of an assessable monetary value.” The concept of“acquired rights" is based on the recognition of the'sanctity ofproperty rights under a particular Municipal legal system. Thus the1 recognition of the continuation of the “statutory implied terms” underthe Collective Agreement, will be in conformity, with the doctrine ofrespect for acquired rights.
In view of all the matters discussed above, I hold that it was justand equitable for the Arbitrator to have held that repudiation of theCollective Agreement did not bring “the statutory implied terms” to anend, but that they continued to remain valid till a new contract ofemployment is brought into force.
The learned Counsel for the appellant-company also contendedthat the Arbitrator erred in law in holding in the Award that, therepudiation of the said Collective Agreement per se was an unfairlabour practice. The learned Counsel for the 4th respondentsubmitted that there is no such finding anywhere in the said Award(P21). The learned Counsel for the 4th respondent added that it wasthe deprivation of the rights and privileges of the workmen who were’bound by the Collective Agreement that was held to be an unfairlabour practice, and cited page 5 of the Award (P21). He pointed outthat, the Arbitrator has examined the circumstances under which the,said rights and privileges were deprived of namely, by entering into apurported memorandum of settlement by the appellant-company withtwo committee members of the 4th respondent Trade Union's Branchat the appellant's company. The Arbitrator has referred to the fact thatthe "parent Union" i.e. the 4th respondent, had not been notifiedbefore or after the said settlement was signed. It is stated in the saidAward that, the, “two signatories on behalf of the Union has beenunjustly benefitted by consenting to sign the settlement. "Theevidence of the Personnel Manager of the appellant-company ledbefore the Arbitrator show that, one Kulawansa, who was one of thesignatories to the said settlement, was given a promotion after thesaid settlement, from the Clerical Grade to the Executive Grade and asalary increase of about Rs. 1000/- to Rs. 1500/-. One Grenier, whowas another signatory to the said settlement was given an extensionof service, although he was over 60 years of age, at that time, andalso received a salary increase of about Rs. 640/-. The third signatoryto the said settlement, one Vitharana, was given a salary increase ofRs. 346/-, although he was a mental patient, and was hospitalised inthat regard. After reviewing the evidence, the Arbitrator had come tothe conclusion that, “If the company had effected this settlement withthe Branch Union behind the back of the Parent Union, the Companywill have to blame itself for this irregularity. As such it is my view thatthis memorandum of settlement should be rejecied."
The Court of Appeal after careful consideration of the facts andcircumstances of the case also came to the conclusion that the, “saidpurported settlement was an unfair labour practice adopted by thepetitioner.”
Furthermore the learned Counsel for the 4th respondent drew ourattention to the following relevant points from the evidence of the saidPersonnel Manager of the appellant’s company.
that the Employers' Federation of Ceylon, the appellant’sTrade Union, conceded that the Memorandum of Settlementwas not valid – page 68.
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that the Company realised that, to stop NRCOLG the Companyneeded to have an agreement with the employees. (Page 41).
that in the absence of such an agreement the Companycontinued to pay NRCOLG (despite the repudiation of the CollectiveAgreement). (Page 41).
that NRCOLG was being paid up to April 1989 (even after therepudiation in November 1987) and that with the said settlement theNRCOLG was stopped. (Page 30).
that the Company had declared 30% profit dividend; (Page 30).
that NRCOLG was stopped not because of financialincapacity. (Page 34).
that NRCOLG is about Rs. 300/- to Rs. 400/- per person permonth. (Page 35).
that NRCOLG is a payment made to the'workman (eachmonth) to cushion the effects of rising cost of living.(Page 36).
The learned Counsel for the 4th respondent submitted that upon aconsideration of the above items of evidence it is apparent that,Award made by the Arbitrator is just and equitable as envisagedunder the provisions of Section 17 of the Industrial Disputes Act.
In the circumstances I see no basis to interfere with finding of theArbitrator, and affirmed by the Court of Appeal, that the deprivation ofthe rights and privileges of the workmen, was an unfair labourpractice.
Accordingly, the appeal is dismissed with costs fixed at Rs. 5000/-,to beupaid to the 4th respondent.
DHEERARATNE, J.
I agree with my brother Gunawardana, J. that the order made bythe Arbitrator is just and equitable in the circumstances and that theappeal should be dismissed. However, I have my reservations on thatpart of his reasoning based on the “acquired rights’’ of workmen.
fcNANDACOOMARASWAMY, J. – I agree.
Appeal dismissed.
