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Court awards $165,000 to unfairly treated CEO

Nuku'alofa, Tonga

Former TCC CEO Rizvi Jurangpathy, in 2016. Nuku'alofa, Tonga.

Former CEO, Rizvi Jurangpathy, whose employment contract was terminated by Tonga Communications Corporation (TCC) in April 2017, was awarded $165,000 pa'anga in damages and loss of income, after the Lord Chief Justice found that he was subjected to unfair treatment by his employer, who had relied on “inaccurate and inadequate” information and breached its obligations to the plaintiff of trust, confidence and good faith.

The trial has exposed incompetent decision making by a public enterprise board and, in particular, a subcommittee that had resorted to “yelling, intimidation and belittling” the plaintiff.

Lord Chief Justice M.H. Whitten QC, delivered his detailed ruling on the civil case between the plaintiff Jurangpathy, and the defendant TCC, on December 18 at the Supreme Court in Nuku'alofa.

The plaintiff's damages were assessed at $25,000 for loss of salary, $20,000 for relocation expenses and $120,000 for reputational harm. The amount must be paid by TCC to the plaintiff.

The Court heard, the plaintiff's contract as Chief Executive Officer of TCC, a public enterprise company, was terminated by the defendant in a letter from the then TCC Board Chairman Tapu Panuve, dated April 21, 2017. The board had resolved to terminate the plaintiff's employment on a number of grounds, which, according to the defendant, constituted “gross misconduct”.

“I am not satisfied that any of the evidence either before the subcommittee, the board or at trial could be regarded as sufficient to support a finding of gross misconduct,” Lord Chief Justice Whitten ruled, yesterday.

The wrongful termination for “gross misconduct” harmed the plaintiff’s professional reputation.

Wrongful dismissal

In this civil case the plaintiff claimed damages for breach of his employment contract; alternatively wrongful dismissal.

An 89-page judgment by the Lord Chief Justice stated that perhaps “the matter of greatest concern was the plaintiff's treatment during the interviews by a subcommittee” that was tasked with investigating unproven allegations levelled against the CEO.

“I find that those aspects of the subcommittee's treatment of the plaintiff during his interviews were wholly inconsistent with modern work place orthopraxy. There is no place for behaviour like that in any commercial environment, here in Tonga or elsewhere, and especially not by directors of a public enterprise company," he stated.

The subcommittee of directors was composed of three men: chaired by 'Ahongalu Fusimalohi, with Saia Fonua and Pita Moala, who were appointed by the TCC Board to conduct the investigation.

Seeking to blame him

The Chief Justice said that, “it is the manner in which the subcommittee carried out its investigation, and in particular, its dealings and treatment of the Plaintiff during his interviews, that attracts criticism.”

The Chief Justice said, at the outset, the subcommittee did not provide the plaintiff with any or any sufficient details of the financial statements issue or the allegations that were to be levelled against him during his interviews.

“The deficiency in that regard is best reflected by the plaintiff's own statements during his interview, when he realised for the first time that he was actually being investigated and the subcommittee was seeking to blame him. In those circumstances, it was impossible for the plaintiff to have a reasonable opportunity, prior to his interviews, to consider the allegations levelled against him, let alone seek any advice on them.

“That deficiency was compounded by the subcommittee's refusal to provide the plaintiff, in advance, with all documents, which were relevant to the allegations," the Chief Justice stated.

"l did not understand the counsel for the defendant during the trial or in closing submissions to seek to defend the conduct of the subcommittee or to dispute the fact that on numerous occasions during the interviews the Chair told the plaintiff:

  • that he did not want to hear him;
  • that he was right and for the plaintiff to keep quiet;
  • that the plaintiff was arrogant and insubordinate;
  • that he did not care if the plaintiff denied the allegations; and
  • that he did not care about normal accounting practice, when the plaintiff was trying to explain it.

"Most regrettably, the Chair [Fusimalohi] and [Saia] Fonua threatened the plaintiff with violence, including ‘to throw him out the window’. I accept that those statements were probably products of frustration and that they were tempered by some laughter.”

Nonetheless, the Chief Justice found there was no place for behaviour like that.

“It follows in my view that the Plaintiff was not afforded a fair hearing.”

Accounting error

The CEO's evidence in chief during the trial elaborated upon a good deal of the reasons for the delays and the invoices and how the whole accounting error occurred, said the Chief Justice.

“...[it] is testiment to the fact that had he been given a reasonable opportunity and had the subcommittee demonstrated that they were there to actually listen to him, the plaintiff could have provided further and important information.”

Intimidation

“One cannot downplay either the effects of the yelling, intimidation and belittling on the plaintiff's mindset and ability to fully respond to the questioning.

“Not only was he not given a fair hearing, in relevant respects, he was in fact not heard.

“The unfortunate behaviour of the Chair and other subcommittee members during the interviews gave a distinct impression of bias and pre-judgment of the issues against the plaintiff.

“It was plain that the Chair, at least, did not really seem to care what the plaintiff had to say. In my view, those attitudes went on to infect the subcommittee's report to the Board.”

The Chief Justice found that the subcommittee's report was “neither accurate, in relevant respects, nor a sufficiently comprehensive account of the information gathered from other witnesses...In my view demonstrated errors, inconsistencies or omissions in the report.” He referenced numerous illustrations of how the Chair of the subcommittee failed to present to the board a fair, reasonable and accurate account.

In addition, after the draft report [of the subcommittee] was provided to the plaintiff, he wrote to the Chair of the subcommittee and sought to identify errors and inconsistencies in the contents of the report.

“There is no evidence before the Court that either the subcommittee or the Board as a whole ever actually considered the plaintiff's concerns about the draft report.

“Had they done so, it is highly likely that a different result might have obtained; or, at the very least, further enquiries would have, and should have, been undertaken,” said the Chief Justice.

The Board had decided to terminate the plaintiff's employment on a number of grounds, which, according to them constituted gross misconduct. Their letter stated their decision was based on an internal investigation alleging: incorrect overstatement declaration of net profit 2014-15 FY and other personal allegations.

Political pressure

The Chief Justice summarized that the complaints against the plaintiff arose in June 2015, when he signed a letter to a Tonga Fifita terminating his employment with TCC.

Soon after, he received a visit from a reporter at the Kele'a Newspaper asking about the dismissal and other allegations against him within the company. The plaintiff also received a telephone call from Mateni Tapueluelu, a Member of Parliament, about a certain matter about Fifita's dismissal.

In June, the plaintiff received a letter from Tapueluelu, which referred to Fifita's unfair dismissal, which contained damaging allegations against him. Mr Tapueluelu concluded in the letter “I will now take all possible means to have your decision fully investigated and if warranted, push for the TCC Board to be replaced and your contract terminated.”

This resulted in a letter from the Ministry for Public Enterprises to the plaintiff and the TCC Board seeking an explanation in relation to the allegations made by Tapueluelu.

The plaintiff responded to the allegations and denied them.

Public controversy

However, later the Kele'a Newspaper published accounts taken from Tapueluelu's letter, which created some public controversy towards the plaintiff.

“He considered the publication was deliberate and intended to create public outrage so as to create pressure to dismiss him from his employment. The plaintiff says it is no coincidence that the publisher of the newspaper was Mr Tapueluelu's wife,” said the Chief Justice. (Tapueluelu's wife was also a daughter of the late Prime Minister).

“As a result of the newspaper article, the then Prime Minister, the late Hon. 'Akilisi Pohiva wrote to the plaintiff on 13 July 2015 about the matter and recommended that the plaintiff consider tendering his resignation.”

The plaintiff sued the paper for defamation and denied the allegations made by the Prime Minister.

The Minister of Public Enterprises recommended to the TCC Board to conduct an investigation into the allegations.

“In November 2015 the TCC Board was summoned to meet with the [late] Prime Minister. He asked the Board to dismiss the plaintiff over the Tapueluelu complaints.

In July 2016 the Prime Minister advised the Board that he had received a complaint from a number of TCC employees against the CEO.

The TCC board decided to investigate.

By January 2017 the Chairman advised the Board that he had received directions from the shareholder (the government), the Minister of Public Enterprises, and the Acting Attorney General to look into certain matters involving the plaintiff, which were of concern to the company. The Board then agreed to appoint the subcommittee comprising Fusimalohi (Chair), Saia Fonua and Pita Moala.

Lord Chief Justice Whitten's judgment set out verbatim the relevant passages from the transcript of the questioning by the subcommittee in relation to the financial statements issue.

“The audio recording confirmed what the text of the transcript suggested, namely, that at times during the interview, there were heated exchanges between the Chair and the plaintiff which as set out, culminated in the Chair and another subcommittee member threatening the plaintiff with violence.”

Failure

The Chief Justice said the terms of the plaintiff's employment contract included mutual obligations of trust and confidence, and in this context, the disciplinary investigation, its resulting report and the decision whether to terminate the plaintiff's employment for gross misconduct.

He said those obligations required the defendant to provide the plaintiff natural justice and to act fairly (good faith) and reasonably.

However, the Chief Justice said the defendant failed to act fairly or reasonably in providing the plaintiff with reasonable opportunity to be heard and answer to the allegations, fairly and accurately and consider all the evidence gathered from its investigation, including all the relevant information provided by the plaintiff, before making any decision.

“The plaintiff's evidence was uncontradicted and unshaken during cross-examination. His explanations in relation to the financial statements issue were consistent throughout. My observations of the plaintiff during his evidence led me to the view that he was an honest and forthright witness, who had an almost encyclopaedic knowledge of the history of the matter and was at pains to assist both counsel and the court in identifying and understanding the substantial documentary evidence. I accept the plaintiff's evidence in full,” stated Lord Chief Justice Whitten.

The questioning of the plaintiff during his interviews, in terms of any omissions, was directed at the failure to have included four invoices in the 2014/15 accounts, which the defendant alleged had resulted in an inflated net profit leading to a a higher than otherwise dividend payment to the shareholder.

The invoices were recorded in the year they were paid (the following year) and not in the year of accrual. The plaintiff submitted he was not responsible for the invoice being forwarded late to the finance department from engineering.

“Any suggestion that the CEO ought to have been receiving and monitoring the relevant invoices to ensure they were recorded by the finance department was unrealistic and outside the scope of his duty. Others within the finance department were responsible for tracking and entry of invoices,” stated the judgment.

“For whatever reason, the defendant’s case and submissions at trial conspicuously ignored the uncontroverted evidence that the invoices did not reach finance in time for inclusion in the 14/15 accounts because engineering delayed in approving and sending them on.”

The Chief Justice found that “the delay is the only plausible explanation for why they were unable to be recorded in the 14/15 accounts.” Once the invoices were received by finance they were consistent with established accounting procedures.

The Chairman of the board Tapu Panuve (who was appointed a director of the company in October 2015) agreed that the Board had not been appraised of all the facts. He agreed that what had occurred was neither misconduct or dishonest.

Observations

On the issue of wrongful dismissal the Chief Justice made a number of observations about evidence that was not called by the defendant “and might reasonably have been expected to be called”.

One consequence from the unexplained failure of a party to call a witness, whom that party would be expected to call, might be an inference that the absent witness would not assist the case of that party.

“In his brief of evidence, Mr Panuve explained that the Chair of the subcommittee, Mr Fusimalohi, was no longer on the TCC Board as of 2017, was suffering serious health issues and was currently receiving treatment in the United States which prevented him from travelling to Tonga to attend the hearing.

“However, no similar explanations were given for the absence of evidence from [other key] people or on matters...”

These omissions included Mr Sione Veikoso, the manager of engineering at the time, who was appointed acting CEO after the plaintiff had been suspended; Mr Sitani Akolo, the project manager; other members of the finance department; and “the former Chairlady whose name featured regularly in the subcommittee's report and recommendations to the Board”; the company's internal auditor; “or external auditors such as Steve Pickering or any other expert for that matter in relation to appropriate accounting practice in respect to past period errors...”

Other omissions included actual email communications sent by Huawei to TCC in relation to the invoices, the engineering department maintenance budget for 14/15, and documented internal procedures.

“It is resonable to expect that the Defendant could have called those witnesses and presented the said documents. Were it necessary to do so in reaching the conclusions stated above, there would have been strong grounds for an inference that the evidence of the absent witnesses and other documents referred to above would not have assisted the Defendant’s case.”

Wrongfully terminated

The plaintiff had established its case on liability. The Defendant did not have reasonable grounds for forming the belief that the plaintiff was guilty of gross misconduct.

Lord Chief Justice Whitten ruled that the wrongful termination for gross misconduct harmed the plaintiff’s professional reputation.

At the time, the plaintiff had been in Tonga for nine years. Immediately on termination he was evicted from his house and security guards installed by the defendant made it difficult for him to move his belongings out. He did not apply for any other positions in Tonga and returned to Sri Lanka “under a cloud”.

He ordered judgment for the plaintiff in the sum of $165,000. Any hearing on submissions of costs and or interest will be conducted on 7 February, or final orders will be made on that date.

The plaintiff was represented by Mr William Edwards. The defendant was represented by Mrs D. Stephenson. The hearing was held November 25-29.