043-SLLR-SLLR-1994-V2-STATE-DISTILLERIES-CORPORATION-V.-RUPASINGHE.pdf
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State Distilleries Corporation v. Rupasinghe
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STATE DISTILLERIES CORPORATIONv.
RUPASINGHESUPREME COURT.
FERNANDO, J.
DHEERARATNE, J.
GOONEWARDENA. J.
S.C. APPEAL NO. 91/93.
C.A. APPEAL NO. 482/86.
L.T. APPLICATION NO. 21/3050/86JANUARY 25.1994.
Industrial Disputes Act – Section 31 B (4) – Termination of a workmans services -Probationary period of employment – Whether confirmation is automatic at theend of probationary period – Reasons for termination – Meaning of ’probation’
The question of law involved in this appeal was whether an employee, who is notexpressly confirmed in service upon the expiry of the period of probationstipulated in his contract of employment, necessarily continues to be on probationeven if the employer does not expressly extend his probation.
Held:Employment to which the Industrial Disputes Act applies is no longer held ‘atpleasure’: and the benefit of the Act, as the definition of “workman* indicates,accrues to any person ‘who has entered into or works under a contract with anemployer in any capacity*, without any distinction as to whether he is onprobation.
The acceptance of the principle that a Labour Tribunal has jurisdiction toexamine whether a termination is mala fide, necessarily involves the corollary thatthe employer must disclose (to the tribunal) his reasons for termination; and thatmeahs that he should have had some reason for termination.
An employer who refuses to disclose his reasons for dismissal cannot be in abetter position than if he had no reason, and must also be regarded as havingacted mala fide or arbitrarily.
4. What then is the principal difference between confirmed and probationaryemployment? In the former, the burden lies on the employer to justify termination;
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and this he must do by reference to objective standards. In the latter, upon proofthat termination took place during probation the burden is on the employee toestablish unjustifiable termination, and the employee must establish at least aprima facie case of mala tides, before the employer is called upon to adduceevidence as to his reasons for dismissal; and the employer does not have to showthat the dismissal was, objectively, justified.
The concept of probation is a period of trial, at the end of which the employermust judge the performance of the probationer; there can be no proper "trial* of aprobationer unless the employer has given him (except in regard to obviousmatters) adequate information and instructions, both as to what is expected ofhim, and as to his shortcomings and how to overcome them. It would hardly bejust and equitable for an employer lo say that an employee has not provedhimself by relying on his failure to fulfil undisclosed expectations, or to remedyuncommunicated deficiencies.
At the end of the probationary period;
if the employer is bona fide not satisfied with the work and conduct of theprobationer (or perhaps even if he entertains a genuine doubt orsuspicion), he can dismiss the probationer, or extend the probationaryperiod;
If the employer is in fact satisfied with the work and conduct of theprobationer (if his opinion to the contrary is vitiated by mala tides in thewide sense), he cannot dismiss the probationer.
There is no inflexible rule providing for the automatic renewal of probation andthat an inference of renewal can only be drawn in those cases in which thecircumstances justify it.
If the contractual terms are ambiguous, or admit of more than oneinterpretation, both equity and the principles of interpretation concur in requiringthat they be interpreted 'contra proferentem', against the Employer and in favourof the Applicant.
Cases referred to:
Hettiarachchi v. Vtdyalankara University (1972) 76 N.L.R. 47.
Moosajees Lid. v. Rasiah [1986] 1 Sri L.R. 365,367,369.
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State Distilleries Corporation v. Rupasinghe (Fernando. J.)
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Bandara v. Premachandra S.C. 213/93 SCM 16.8.1993
Ceylon Cement Corporation v. Fernando [1990] 1 Sri L.R. 361,368.
Richard Peiris & Co. v. Jayatunga CA No. 404/80 CAM. 9.9.1982 1 Srikanthal.R. 17,21,22.
Ceylon Ceramics Corporation v. Premadasa [1986] 1 Sri L.R. 287,289.
Elsteel Ltd. v. Jayasena SC 20/88 SCM 6.4.1990.
APPEAL from judgment of the Court of Appeal.
Shirley Fernando PC. with Ms. V. J. Senaratne for the Employer-Appellant-Appellant.
Appiicant-Respondent-Respondent absent and unrepresented.
Cur. adv. vult.
March 02,1994.
FERNANDO, J.
The question of law involved in this appeal is whether anemployee, who is not expressly confirmed in service upon the expiryof the period of probation stipulated in his contract of employment,necessarily continues to be on probation even if the employer doesnot expressly extend his probation.
The Applicant-Respondent-Respondent (“the Applicant*) wasemployed as a labourer by the Employer-Appellant-Appellant ('theEmployer’) with effect from 1.4.80, on probation for a period of threeyears; he was interdicted on 6.9.84, upon an allegation that he had,without authority, removed even bottles of spirits from the work place;and, after inquiry, his services were terminated, admittedly on thatchajrge alone, by letter dated 13.12.85 in which the Employer madeno claim that the Applicant was yet on probation. The Court ofAppleal upheld the finding of the Labour Tribunal that the Employerhad failed to establish this charge and confirmed the order forreinstatement. It would seem from the evidence that but for theunproven allegation against him, the contention that the Applicantwas yet on probation might never have been raised.
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Both in the Tribunal and in the Court of Appeal the Employersought to justify the termination on the alternative basis that, despitethe original probationary period having lapsed long before, theApplicant was still on probation, and that he could be dismissedwithout any reason.
Although the question was not expressly determined, the LabourTribunal seems to have considered that the Applicant was not onprobation because it observed:
“On the expiry of 3 years [the period of probation] was notextended and no evidence was led to indicate any lapse on hispart.*
The Court of Appeal held that the period of probation came to anend on 1.4.83 because the Employer had neither extended theperiod of probation in terms of clause 2 of the letter of appointmentnor found the Applicant’s work or conduct unsatisfactory in terms ofclause 4, and stated:
"In my view the Applicant cannot be treated as a probationerunder any circumstances.*
Special leave to appeal was granted “on the limited questionwhether the Court of Appeal was correct to take [that] view*.
It is necessary to scrutinize several provisions of the letter ofappointment issued to the Applicant:
*2. Your appointment is subject to a probationary period ofthree years from the date of your appointment. The Board ofDirectors of the Corporation has the right to extend theprobationary period …
4. For the confirmation of your appointment, what is expected ofyou is. inter alia, passing the [prescribed] Sinhala proficiency
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test and satisfactory work and conduct during the probationaryperiod.
If during that period your work and conduct are unsatisfactory,the Corporation has the right to terminate your services withoutinforming you of any reason and without compensation in lieu ofnotice.
If you fail to pass the Sinhala proficiency test, the incrementsdue to you will be withheld until you pass the test. At the end ofthe probationary period if you have not acquired the requiredstandard of proficiency in Sinhala, your services will beterminated without any notice and without any compensation inlieu…
8. You are required to produce a certificate that you arephysically fit for service from a registered medical practitionerapproved by the Corporation. If according to such medicalcertificate you are not fit for service, your appointment will notbe operative."
Learned President s Counsel for the Appellant relied onHettiarachchi v. Vidyalankara University t'>. In that case there wasproof of such misconduct as would have justified termination; further,a request made by the workman, after the expiry of the probationaryperiod, that he be confirmed in service, did not receive a reply, andthis was regarded by Wimalaratne, J., as suggesting the inferencethat the workman himself understood that he had not beenconfirmed. It was in that context that he observed:
"… a person appointed to a post on probation cannot claimautomatic confirmation on the expiry of the period of probation,unless the letter of appointment provides that the appointershall stand confirmed in the absence of an order to the contrary.If a probationer is allowed to continue on probation after theperiod of probation has expired, he continues in service as aprobationer."
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However Counsel was compelled to concede that this was not aninflexible rule, and would not necessarily apply if, for instance, fiveyears had elapsed or if it was inconsistent with the terms of thecontract. It is therefore opportune to reconsider the principle laiddown in that case.
PROBATIONUnder the common law an employer had an absolute right toterminate the contract of employment (subject only to an obligationas to notice or payment in lieu); that rule was necessarily applicableto probation. One consequence of the Industrial Disputes Act, atleast as amended in 1957, was to abridge that right, and to confer onan employee the right to challenge an unjustified termination and toobtain reinstatement. Thus employment to which that Act applies isno longer held “at pleasure"; and the benefit of that Act, as thedefinition of “workman" indicates, accrues to any person “who hasentered into or works under a contract with an employer in anycapacity", without any distinction as to whether he is on probation.
Nevertheless, there are differences between confirmed andprobationary employment, and especially in regard to the terminationthereof. Probation, as the word implies, is a period during whichan employee is “tried' or tested", and given the opportunity of“proving" himself, in relation to his employment. As observed byMoonemalle, J., in Moosajees Ltd. v. Rasiah(21:
“The period of probation is a period of trial during which theprobationer's capacity, conduct or character is tested before heis admitted to regular employment. For the purpose ofconfirmation, the [probationer] must perform his services to thesatisfaction of his employer. The employer, therefore, is the solejudge to decide whether the services of a probationer aresatisfactory or not."
(A good example is the scheme of probation in the public service, setout in some detail in Chapter II, section 11, of the Establishments
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Code, which I had occasion to consider in Bandara v.Premachandra.<3) in relation to public office held “at pleasure*.)Probation, as Wijetunga, J., pointed out in (Ceylon CementCorporation v. Fernando(4) is:
*a fixed and limited period of time for which an organizationemploys a new employee in order to assess his aptitudes,abilities and characteristics, and the amount of interesthe shows in his job, so as to enable employer and employeealike to make a final decision on whether he is suitable andwhether there is any mutual interest in his permanentemployment."
If the employee is found wanting in respect of his work, conduct,temperament, compatibility with the organization and his fellowemployees, or any other matter relevant to his employment, theemployer is entitled to dismiss him.
However, that right is not absolute, unfettered or unreviewable.While the employer is undoubtedly the sole judge as to whether theprobationer has proved himself, yet his subjective decision is liable tolimited scrutiny and review. It has been held that “any employershould have the right to discontinue the probationer if he does notcome up to the expectations of the employer*: Richard Peiris & Co. v.Jayatunga<S), cited with approval in Moosajees Ltd. v. Rasiah m andthat "the services of a probationer can be terminated if his servicesare not considered satisfactory*: Ceylon Ceramic Corporation v.Premadasa It follows, therefore, that the condition precedent to theexercise of the right to dismiss a probationer is that the employer hasin .fact, found him not to be satisfactory or not up to expectations.This is clear from Ceylon Cement Corporation v. Fernando w:
“It is of the very essence of the concept of probation that such aperson is on trial regarding his suitability for regularemployment, and is liable to be discharged on being found tobe unsuitable for permanent absorption (p. 368)
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This is confirmed in the several observations in those decisions to theeffect that a probationer cannot be dismissed '“wantonly* (or“arbitrarily'), or through ulterior motives, such as “victimization', orfor 'irrelevant reasons’ In Richard Peiris & Co. v. Jayatunga •*> andMoosajees Ltd. v. Rasiah mand by their unequivocal recognition thatthe employer's decision can be set aside if vitiated by mala tideswhich includes arbitrariness, ulterior motives, irrelevantconsiderations and the like.
Although there are observations to the effect that the employerdoes not have to give any reasons, this only means that he need notstate any reasons (i.e. disclose any reasons) to the probationer; itdoes not mean that the employer can dismiss a probationer even ifhe does not have any reasons. The fact that in almost all those casesthe Court did examine the reasons relied on by the employer, in orderto determine whether the dismissal was mala fide, establishes notonly that there must in fact be a proper reason for termination, butthat it must be disclosed in proceedings in which the dismissal ischallenged, so as to enable a judicial determination as to whether thetermination was mala tides. The acceptance of the principle that aLabour Tribunal has jurisdiction to examine whether the termination ismala fide, necessarily involves the corollary that the employer mustdisclose (to the Tribunal) his reasons for termination; and that meansthat he should have had some reason for termination. It was held inRichard Peiris & Co. v. Jayatunga ,5’ that mala tides can be inferredfrom irrelevant reasons; if so. dismissal without any reason must alsolead to an inference of mala tides. And an employer who refuses todisclose his reasons for dismissal cannot be in a better position thanif he had no reason, and must also be regarded as having actedmala fide or arbitrarily.
What then is the principal difference between confirmed andprobationary employment? In the former, the burden lies on theemployer to justify termination; and this he must do by reference toobjective standards. In the latter, upon proof that termination tookplace during probation the burden is on the employee to establish
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unjustifiable termination, and the employee must establish at leasta prima facie case of mala fides, before the employer is calledupon to adduce evidence as to his reasons for dismissal; and theemployer does not have to show that the dismissal was, objectively,justified.
In two of the decisions cited, the view was taken that “there is norequirement under the law that an employee should be forewarnedorally, or in writing so that he may adjust himself to the requirementsof his service". However, that was no more than obiter, because inboth cases the Court did come to the conclusion, after examining theevidence, that the deficiencies of the probationer had in fact beenbrought to his notice. Besides, that view is inconsistent with theconcept of probation as being a period of trial, at the end of whichthe employer must judge the performance of the probationer. Therecan be no proper “trial" of a probationer unless the employer hasgiven him {except in regard to obvious matters) adequate informationand instructions, both as to what is expected of him, and as to hisshortcomings and how to overcome them. It would hardly be just andequitable for an employer to say that an employee has not provedhimself by relying on his failure to fulfil undisclosed expectations, orto remedy uncommunicated deficiencies.
I am therefore of the view that at the end of the probationaryperiod-
fa) if the employer is bona fide not satisfied with the workand conduct of the probationer (or perhaps even if he entertainsa genuine doubt or suspicion), he can dismiss the probationer,or extend the probationary period;
(b) if the employer is in fact satisfied with the work andconduct of the probationer (or if his opinion to the contrary isvitiated by mala fides in the wide sense), he cannot dismiss theprobationer.
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I must confess that in Elsteel Ltd. v. Jayasena m although I heldthat a dismissal during a probationary period was unjustified (on thebasis of the contractual terms), I did assume, incorrectly as it nowturns out, that these decisions recognized a somewhat broader rightof the employer in regard to the termination of probationaryemployment without having to establish good cause, as well as theextension of probation.
AUTOMATIC EXTENSION OF PROBATIONThe decision in Hettiarachchi v. Vidyalankara University(l) thatthere was an automatic renewal of probation is inconsistent with theconcept of probation which, as outlined by Moonemalle, J„ impliesthat – at least in equity – a probationer would have legitimateexpectation of confirmation if his work and conduct was to thesatisfaction of the employer. If at the end of a long probationaryperiod, an employee had not been expressly confirmed, but it isnevertheless proved, for instance, that internal performanceappraisals were uniformly favourable, that increments had regularlybeen recommended, that frequent commendations had been issued,and that there was nothing against him, how can it be said, months oryears later, that he had not duly proved himself? That would becontrary to alf notions of justice, equity and fairness betweenemployer and employee. In such circumstances the employer shouldhave confirmed the employee in service (unless there wereextraneous circumstances, such as financial incapacity, whichjustified refusal); and if he did not, equity must regard as done thatwhich ought to have been done. Where an employee had manifestlyproved himself during his probationary period, having regard to thepurpose of probation, dismissal (in the absence of exceptionalcircumstances) would be mala fide; likewise, in such a situation, anbe express extension of probation (in lieu of such dismissal) wouldbe neither just nor equitable: for if the employee has already “proved”himself, how can he be required to prove himself again? If in suchcircumstances an express extension would not be proper, it mustfollow that an extension cannot be implied.
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1 am fortified in my view that there can be no such "irrebuttablepresumption of renewal", by a consideration of the anomalousconsequences of any such presumption. Is such a renewal to bepresumed for a like term as the original, or for an indefinite period? Ifit is for a like period, can the presumption again be drawn at the endof the extended period? And yet again? Should a Tribunal, with powerto give relief against the (harsh) terms of a contract of employment,apply such a presumption merely because a contractual termprovides for a probationary period? Probation implies the need for“testing", and that is so whether it is the original or an extendedprobationary period. Hence the purpose of an extension will not beachieved unless the employee has been made aware of what isexpected of him and of his deficiencies. Where the employer has notexpressly alleged, and the circumstances do not suggest, a need forfurther “testing”, a presumption of renewal is not justified.
On the other hand, if at the end of a short period of probation ittranspires that the employee had been made aware of hisdeficiencies and faults but without avail, the circumstances wouldjustify an inference that the employer was not satisfied, and it wouldbe just and equitable to infer a renewal – but not for an indefinitelylong period. I
I am therefore of the view that there is no inflexible rule providingfor the automatic renewal of probation and that an inference ofrenewal can only be drawn in those cases in which thecircumstances justify it. There is no evidence of any deficiency on thepart of the Applicant or even of any doubt or suspicion by theEmployer, as to his work, conduct or any other relevant matter, duringthe probationary period of three years. Having regard to the nature ofhis employment it would be unreasonable to infer that the Employerwas not satisfied. Accordingly, the Applicant's probation cannot bedeemed to have been renewed on 1.4.85.
CONTRACTUAL TERMS AFFECTING EXTENSION
Employer and employee can make express provision as toprobation, and confirmation, renewal or dismissal upon the expiry of
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probation. By agreement, the rights which either party wouldotherwise have may be enlarged or restricted. Thus they may agreethat the employer has an unconditional right to extend theprobationary period or that extension can only be for reasonspreviously disclosed to the employee; that unless and until expresslyconfirmed, an employee will continue to be on probation, or that ifthe employer does not dismiss the employee or expressly extendprobation, the employee will be deemed to have been confirmed.Prima facie, such terms will be valid (subject, perhaps, to theprovisions of section 31B (4». Thus the contractual provisionsmay even confer on an employee a right to confirmationupon satisfying specified conditions (e.g. section 11 of theEstablishments Code: Bandara v. Premachandra(S); see also ElsteelLtd. v. Jayasenam).
In the case before us, the contract places two hurdles in the wayof an implied or automatic renewal:
By clause 2, the Employer expressly reserved the right toextend probation but failed to provide that the non-exercise of thatright would also result in an automatic extension. Did the contracttherefore exclude any presumption of automatic renewal?
By clause 4, the employee was given an expectation that hewould be confirmed if he satisfied certain conditions, and provisionwas made for dismissal if he did not. Did this mean that if he didsatisfy the stipulated conditions, the employee was entitled toconfirmation? Or at least that he would not be dismissed?
Some general considerations apply to the interpretation of thiscontract. It is a document prepared and tendered by the Employer tothe Applicant who had little choice in the matter; mainly because hewas not in an equal bargaining position. If its provisions are clear,however disadvantageous to the Applicant, he is contractuallybound, although a Labour Tribunal does have power under section31B (4) to give some equitable relief against harsh terms. If thecontractual terms are ambiguous, or admit of more than oneinterpretation, both equity and the principles of interpretation concur
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in requiring that they be interpreted contra proferentem, against theEmployer and in favour of the Applicant. If in respect of an eventualitywhich could and should have been anticipated, two alternativeprovisions might have been made – one favourable to the Employer,the other to the Applicant – the Court ought not imply the former;because the Employer having been in a position to do so, refrainedfrom including the provision advantageous to himself. I respectfullydisagree with the contrary approach of Wimalaratne, J., (inHettiarachchi v. Vidyalankara University at p. 48) that, because therewas no express provision in the letter of appointment to the effect thaton the expiry of the probationary period the employee shall standconfirmed, there was an automatic renewal of probation. Thatinterpretation gives the employer the benefit of the ambiguity oruncertainty arising from his own, avoidable lapse.
The contra proferentem rule must be applied to clause 2 with theresult that automatic renewal is excluded. Even otherwise, the partieshaving provided for express extension, the failure to provide forimplied extension must be treated as deliberate, for expressio uniusexclusio alterius. Further clause 4 gave the Applicant an expectationof confirmation if certain stipulated conditions were fulfilled; it wasopen to the Employer to have provided that, if not expresslyconfirmed, the Applicant would continue to be on probation. TheEmployer's omission cannot ensure to his benefit. I therefore hold thatthe contract excluded the automatic renewal of probation, so thatafter April 1983 the Applicant continued in service as a confirmedemployee, which status was unaffected by subsequent events.
Learned President’s Counsel finally contended that the Applicanthad failed to tender a medical certificate in terms of clause 8. Thiswasj not a ground relied on in the letter of termination. The firstoccasion on which this lapse was pointed out to the Applicant was bya letter dated 12.7.83 – after the initial probationary period hadexpired – and that could not give rise to a retrospective inference ofrenewal of probation. Moreover, the Employer himself did not regardthis |as a matter warranting the cessation of the employment, as bythat letter the Applicant was only informed that if he failed to furnish
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that certificate his salary would be stopped from August1983; a threat which apparently was not carried out. Even ifthe Employer might have been entitled to rely on this as a matterjustifying the extension of probation, action should have beentaken on that basis during or at the end of the probationaryperiod; failing which, that right must be deemed to have beenwaived.
The appeal is dismissed, but without costs as the Applicant wasabsent and unrepresented.
DHEERARATNE, J. – I agree.sc
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QOONEWARDENE, J.In my view this appeal as argued for the appellant turns on thequestion as to whether the respondent workman was, at the time hisservices were terminated, in permanent employment or converselyon probation prior to confirmation in employment. The decision as tothat I think must rest primarily upon a consideration of the letter ofappointment issued by the appellant Corporation to the respondentand produced marked R3 before the Tribunal. The relevant part of itreads thus:
“2. Your appointment is subject to a probationary period of three
years from your date of appointment. The Board of Directors of the
Corporation reserves the right to extend the period of probation”
The document is silent as to whether, after the expiration of theprobationary period of three years, the workman was to be notifiedthat he had'been confirmed in employment and the fact that he hadnot been so informed has not been disputed. The question then iswhether, in these circumstances the workman continued to be onprobation or whether on the other hand he had to be treated as beingin permanent employment. Since the Board of Directors of theAppellant Corporation reserved the right to extend the probationaryperiod of three years, upon the exercise of any such right, to my mindtwo things had to be done. Firstly, the Board of Directors of theCorporation should have decided that his period of probation had tobe extended and as regards that there is no material that I have beenable to see which indicates that such a decision was made.Secondly, such decision once made should have beencommunicated to the respondent, there being a duty then on theBoard to do so. No such decision had been communicated to theworkman. Thus where we are concerned with a condition containedin the letter of appointment, whatever the earlier decided cases maysay, I cannot take the view that the workman respondent continued tobe on probation by reason of his not having been informed of his
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confirmation, because to say so would be to say in effect that theBoard of Directors made such a decision in the exercise of their rightand were entitled to give effect to such a decision although notcommunicated to the workman. If such was possible, logically thereis no reason why the workman could not have been kept on probationthroughout the entirety of his career without being informed whetherhe was on probation or he had been confirmed in his employment,even if he had not been dismissed from employment as was donehere.
That being the view I take, it is not permissible for the appellantemployer to contend that at the time of termination of his employmentthe workman was on probation. I think the appeal of the employermust fail and accordingly it should be dismissed although withoutcosts.
Appeal dismissed.