MAGPECK EXPORTS LTD., v. COMMISSIONER OF LABOUR & OTHERS

030-SLLR-SLLR-2000-V-2-MAGPECK-EXPORTS-LTD.-v.-COMMISSIONER-OF-LABOUR-OTHERS.pdf


MAGPECK EXPORTS LTD.,
v.COMMISSIONER OF LABOUR & OTHERS
COURT OF APPEAL.
DE SILVA. J.
CA. No. 141/99.
TEN/A/67/97.
04™ NOVEMBER 1999.
Writ of Certiorari – Termination of Employment Act. No. 45 of 1971. S.2(l)(4) S.6A, S.6A(1) – Establishment closed – Frustration or impossibility ofperformance ■ Closure of business – Liability of Employer ■ Compensation■ Assessment.
The Petitioner company had closed the establishment without informingthe workers in time or without obtaining prior written approval ofthe Commissioner of Labour. The Commissioner of Labour on beinginformed caused an inquiry to be held and he made order directing thePetitioner Company to pay each workman 2 months salary for each yearof service.
It was contended that due to financial constraints of the Company itwas compelled to close the Company. “It was further contended thatthere was termination by frustration or due to impossibility ofperformance;" and that in any event the compensation awarded wasexcessive.
Held ;
Doctrine of frustration has no application. Where one party and notthe other foresees the events which is said to have frustrated thecontract, that party is not entitled to plead frustration.
In the matter of the assessment of compensation and theascertainment of the quantum payable, the Commissioner of Labour hasto approach the problem before him in very much the same manner asa Labour Tribunal which is called upon to award compensation.
CAMagpeck Exports Ltd. v. Commissioner of Labour & Others309
(J. A. N. De Silva, J.)
APPLICATION for a Writ of Certiorari.
Cases referred to:
Walton Harvey Ltd., vs. Walker &Hamfrays- 1931 1 Chancery 274.
Tobacco Company vs. lUangasinghe – {1986] 1 Sri L. R 1 at 4.
Ceylon Transport Board vs. Wyeratne – 77 NLR 481.
Associated Newspapers LtcL, vs. Jayasinghe – [ 19821 2 Sri L. R 595
Jayasuriya vs. State Plantations Corporation – [1995] 2 Sri L. R379.
R K. W. Cunasekere with Ajanta A thukorala for petitioner.
Ms. Chamantha Weerakoon Unamboowa with Ayanthi Abeywickremafor 3rd Respondent.
Ms. B. J. Tilakaratna SSC for 1-2 Respondents.
Cur. adv. vulL
January 19, 2000.
J. A. N. DE SILVA, J.
The petitioner – employer – company has preferred thisapplication seeking a mandate in the nature of a writ ofcertiorari to quash the order of the first respondent dated 14thDecember 1998 which was produced marked P5. By orderdated 14.12.1998 the first respondent, the Commissioner ofLabour has directed the petitioner company to pay eachworkman two months salary for every year of service. Thepetitioner company avers that it ceased to carry out all tradingand manufacturing operations with effect from the 16th of June1997 and presently papers have been filed in the District Courtof Colombo for winding up of the company.
The petitioner company closed the establishment withoutinforming the workers in time or without obtaining priorwritten approval of the Commissioner of Labour to stop thework of employees in terms of the Termination of EmploymentAct No. 45 of 1971 as amended, before the closure of theCompany. When the workers reported for work on the 16th ofJune they found the factory closed shutting out all theemployees from employment.
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The third respondent Union made a complaint to the firstrespondent on the 29th of .August 1997 of the closure of thepetitioner company and failure to afford work for over 1200employees from the 16th of June 1997. The Commissioner ofLabour caused an inquiry to be held by the 2nd respondentand the inquiry was commenced on the 30th of September 1997and concluded on the 6lhof July 1998. One Roshan Priyantha,a workman gave evidence on behalf of the Union and oneMr. Mylwaganam the Chief Executive Officer of the companyon behalf of the company. Documents marked R-l to R-24respectively were produced by the company and both partiestendered their written submissions to the inquiring officer.The second respondent forwarded his findings of the inquiryto the Commissioner of Labour along with a report anddocuments.
The first respondent having considered the findings andrecommendations of the second respondent, documents andthe written submissions filed by both parties made his orderon the 14th of December 1997 which has been producedmarked P5. In that order the first respondent has ordered thepetitioner company to pay each workman two months of salaryfor each year of service.
The issue in this case was whether the company hasterminated the employment of some workers named in theschedule to the complaint, upon the closure of its business,in contravention of the provisions of the Termination ofEmployment of Workman (Special Provisions) Act, whethersuch persons are entitled to compensation and if so what suchcompensation should be.
It was conceded at the hearing and argument of thisapplication that the petitioners company had not made anapplication to the Commissioner of Labour seeking writtenpermission from and approval of the Commissioner to effectthe aforesaid closure. Had such an application been made
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(J. A. N. De Silva, J.)
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the Commissioner of Labour would undoubtedly have hadthe opportunity to inquire and investigate into the actualnecessity for closure and also the opportunity to regulateand supervise the process of closure according to theattendant circumstances relating to the desired closure.That opportunity was denied due to the hasty and suddendecision of the petitioner company to effect a closure withoutseeking such permission and approval. The petitionercompany in law had the right to take the aforesaid decision,but when such decision is taken, it is liable in law topay compensation in terms of the provisions of section 6 A(l)of the Termination of Employment Act No. 45 of 1971 asamended.
At the hearing of this application counsel for thepetitioner submitted that section 6 A of the Termination ofEmployment Act requires that,
termination must be by the employer,
such termination should be effected by the employer in
consequence of the closure of business by the employer.
It was submitted that this necessarily means that theclosure of the business must be effected by a conscious anddeliberate decision by the employer who had a discretion orchoice in the matter.
A termination which is “in contravention of the Act”is explained by section 2(1) read with section 2(4). Section2(1) states that “No employer shall terminate the scheduledemployment of any workman without (a) the prior consent inwriting of the workman or (b) the prior written approval of theCommissioner.
Section 2(4) states that “for the purpose of this Act, thescheduled employment of any workman shall be deemed to be
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terminated by his employer if for any reason whatsoever,otherwise than by reason of a punishment imposed by wayof disciplinary action, the services of such workman insuch employment are terminated by his employer and suchtermination shall be deemed to include
Non – employment of the workman in such employment
by his employer whether temporarily or permanently or
Non – employment of the workman in such employment
in consequence of the closure by his employer of any
trade, industry or business.”
It was conceded that there was in fact a closure ofbusiness. However such closure was not in truth or in fact avoluntary act done by the company which had no choice in thematter. It was contended that due to financial constraints ofthe company it was compelled to do so. The company was, atthe relevant time, solely and entirely dependent upon theCommercial Bank for finance to continue operations includingthe payment of salaries. The said Bank in 1997 withoutany prior notice refused to give financial assistance to thecompany and in these circumstances it became physicallyimpossible for the company to perform its fundamentalcontractual obligation of paying its employees and tocontinue its business operations. Therefore the contractsof employment of the companies employees were dischargedby frustration.
Mr. Gunasekara drew the attention of Court to apassage in S. R. De Silva’s book “the Contract of Employment”(1998 Edition at page 200) where he states thus “anothermethod by which a contract may come to an end withoutnecessity for the employer to terminate the contract is incircumstances where the law will consider the contract tohave terminated by frustration or due to impossibility ofperformance”.
CAMagpeck Exports Ltd. u. Commissioner of Labour & Others3J3
(J. A. N. De Silva, J.)
It was also contended that there was a strike by theworkers which lasted for nearly three weeks and due to thatsome foreign orders were lost to the company and thesefactors too contributed to the financial deterioration of thecompany.
Counsel for the 3rd respondent submitted that the financialposition of the company deteriorated due to the mismanagementof the company by the directors. It was pointed out that outof Rs. 280 million collected from issuing shares to publicRs. 30 million were diverted to other companies of theDirectors and not properly utilized for the upliftment of thiscompany. It is to be noted that Mr. Mylwaganam ChiefExecutive officer in his evidence has admitted the fact that atsome point of time the affairs of the company were mismanaged.It was the position of the 3rd respondent that the foreign orderswere lost due to this mismanagement by the hierarchy of thecompany and not because the workers went on strike. Counselalso submitted that the strike referred to was prolonged for 22days due to the failure on the part of the petitioner to negotiatewith the 3rd respondent on certain demands made by theworkers amongst which was a demand for recognition of the 3rdrespondent Union.
Mrs. Unamboowa contended that “doctrine of frustration”has no application in this case. She pointed out that whereone party and not the other foresees the events which issaid to have frustrated the contract, that party is not entitledto plead frustration. She referred to Weeramantry onContracts at page 794 and submitted that the position inregard to this aspect of the doctrine is clear and has beenauthoritatively laid down in Walton Harvey Ltd. vs. Walker andHamjrays"1.
In this case the owners of a hotel entered into a contractby which they allowed the plaintiffs the right to displayan advertising sign on the hotel. The hotel owners were held
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liable In damages despite the compulsory acquisition anddemolition of the hotel by a local authority acting understatutory power, for the reason that they were aware of the riskof compulsory acquisition and could therefore have providedagainst that risk.
I agree with the contention of the 3rd respondent and holdthat the Commissioner of Labour has corrrectly come to theconclusion that doctrine of frustration has no application inthe instant case and the petitioner company has acted inviolation of Section 6A(1) of the Act.
The second matter urged by the petitioner was thateven if there is liability on the part of the petitioner in thecircumstances of this case the compensation awarded wasexcessive.
In the matter of the assessment of compensation and theascertainment of the quantum of compensation payable, theCommissioner of Labour has to approach the problem beforehim in very much the same manner as a labour Tribunal whichis called upon to award compensation upon the application forunjust termination of services. In Tobacco Company vs.IUangasinghe121 at 4 Justice G. P. S. De Silva observed that “Thepowers conferred on the Commissioner of Labour under theaforesaid Act No. 45 of 1971 are very similar to the award thatcould be made by the labour Tribunal."
At the inquiry held by the Commissioner the petitionerled evidence to the effect that workmen of the companywere also liable for the pathetic financial situation of thecompany as there was unwarranted strike and due to thatseveral orders were lost to the company. As referred to earlierthe 3rd respondent dismissed this allegation summarily andsubmitted that this was a ruse to get out of the difficulties thepetitioner confronted because of the mismanagement. It was
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(J. A. N. De Silva. J.).
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also pointed out that the strike was in 1995 and thereafter thefactory continued to work until the closure of the company in1997.
Our Courts have considered in several judgments themanner in which a Tribunal should approach in awardingcompensation. Vide decisions in the following case’s.
Ceylon Transport Board vs. Wyeratnel3,
Associated Newspapers Ltd. vs. Jayasinghe14'
Jayasuriya vs. State Plantation Corporation(SI
The first respondent in his order has emphasized thatthe petitioner company has suddenly closed its businessand terminated the service of its employees without seekingprior written approval of the Commissioner and as a result ofthat sudden closure and termination the employees have beenput to considerable detriment and irretrievable loss.
The first respondent has given his mind to the allegationslevelled against the workmen and also to the assets of thecompany and given this award. I see no reason to interferewith it. Application dismissed with costs.
Application dismissed.