Norvatis Corporation (Malaysia) Sdn. Bhd. v 1. ) Mahkamah Perusahaan Malaysia (WA-25-189-04-2019)

1.

LEE LILY (No. K/P: 660717-05-5468)

LEONG CHEE KEONG RESPONDEN-RESPONDEN (No. K/P: 630226-10-7545) GROUNDS OF JUDGMENT INTRODUCTION [1] This is the Applicant’s application for judicial review which seeks inter-alia for the followings: a. An order for certiorari to quash partly of the entire decision of the Industrial Court Award Nos. 832 and 834 of 2018 (collectively “the Interpretation Awards”) which were handed down by the Industrial Court (“the 1st Respondent”) on 1.3.2019; b. All necessary and consequential order and direction to be given. 3 c. Costs of and incidental to this application to be costs in the cause. d. Further and other relief which is deemed fit and proper by the court. SALIENT FACTS [2] The substantive facts and issues pertaining to the dismissal of the 2nd and 3rd Respondents are the subject of a separate application for Judicial Review before this Court in Judicial Review Application No. WA- 25-375-12/2018. [3] The 1st Respondent had, in Award No.2195 of 2018 dated 14.9.2018, found in favour of the 2nd and 3rd Respondents in respect of their respective claims of unfair dismissal and made, inter alia, the following orders: “a) The Company shall reinstate Lee Lily (2nd Respondent) to her former position as Head of Marketing and Sales Operations. Key Account Management and Market Access or a similar or an equivalent position without loss of salary, seniority, service and benefits or otherwise. b) The Company shall reinstate Leong Chee Kong (3rd Respondent) to his former position of Chief Financial Officer or a similar or an equivalent position without loss of salary, seniority, service and benefits or otherwise. c) Both Lee Lily and Leong Chee Kong shall report back to the company for work on the 1.10.2018, failing which they shall be deemed to have left service of the Company on their accord on that date, i.e 1.10.2018. 4 d) The Company shall pay back the 1st and 2nd Claimant full back wages for the duration of the period that they were out of employment less 50% of the amount in accordance with their terms and conditions of employment. e) The Company shall give the 1st and 2nd Claimant in full all the other benefits and allowances in their terms and conditions of employment which would have accrued to them had they not been dismissed.” [4] As parties were unable to reach a common understanding in respect of on the abovementioned terms (para 3 (d) and (e) above), both the 2nd and 3rd Respondents filed applications for interpretation under Section 33(1) of the Industrial Relations Act 1967 (“IRA”), which were registered as Industrial Court Case Nos. 29/6-3112/18 and 29/6- 3081/18, respectively. [5] Both applications were heard together by the 1st Respondent on 14.2.2019 and, pursuant thereto, the 1st Respondent had thereafter issued the Interpretation Awards, both dated 1.3.2019, wherein it had held inter alia as follows: “We are of the firm view that the Second Schedule restricting back wages to 24 months is not applicable when reinstatement is ordered.” [6] The 1st Respondent had accordingly ordered back wages to the 2nd and 3rd Respondents totalling 56 months before making a deduction of 50% (28 months after 50% deduction). The 1st Respondent ordered full back wages as a result of reinstatement to be paid for the following Respondents: 5

2nd Respondent RM25,917.00 x 28 months = RM725,676.00.

(ii) 3rd Respondent RM31,086.00 x 28 months = RM870,408.00 [7] The 1st Respondent further ordered the Applicant to pay the 2nd and 3rd Respondents the sum equivalent of their full annual leave entitlement for each year from the date of their dismissal which was from 13.1.2014 until the date of their reinstatement. [8] Dissatisfied with the 1st Respondent’s decision, hence the Applicant filed this present judicial review application to challenge the said Interpretation Awards on the following grounds:

That the 1st Respondent had erred in law and reached an irrational finding in concluding that it was not bound by the statutory provisions of the Second Schedule of the Industrial Relations Act 1967, where an order for reinstatement had been made; and

That the 1st Respondent had reached a perverse and irrational finding in concluding that the 2nd and 3rd Respondents should be paid the full encashment of their annual leave for each year from their dismissal up till their reinstatement, notwithstanding the express contractual terms of their employment, which only permitted 50% of their annual leave entitlement to be brought forward each year. Decision of this Court [9] The Federal Court in Ranjit Kaur S Gopal Singh v. Hotel Excelsior (M) Sdn Bhd [2010] 8 CLJ 629 has set out the function of the 6 court in an application for Judicial Review and the correct test to be applied in reviewing findings of fact made by the Industrial Court, to be as follows: "[15]...... Historically, judicial review was only concerned with the decision making process where the impugned decision is flawed on the ground of procedural impropriety. However, over the years, our courts have made inroad into this field of administrative law. Rama Chandran is the mother of all those cases. The Federal Court in a landmark decision has held that the decision of inferior tribunal may be reviewed on the grounds of "illegality", "irrationality" and possibly "proportionality" which permits the courts to scrutinize the decision not only for process but also for substance. It allowed the courts to go into the merit of the matter. Thus, the distinction between review and appeal no longer holds. [16] The Rama Chandran decision has been regarded or interpreted as giving the reviewing court a license to review without restrain decisions for substance even when the said decision is based on finding of facts. However, post Rama Chandran cases have applied some brakes to the courts' liberal approach in Rama Chandran. The Federal Court in the case of Kumpulan Peransang Selangor Bhd v. Zaid Mohd Noh [1997] 2 CLJ 11 after affirming the Rama Chandran decision held that there may be cases in which for reason of public policy, national interest, public safety or national security the principle in Rama Chandran may be wholly inappropriate. [17] The Federal Court, in Petroliam Nasional Bhd v. Nik Ramli Nik Hassan [2003] 4 CLJ 625, again held that the reviewing court may scrutinise a decision on its merits but only in the most appropriate of cases and not every case is amenable to the Rama Chandran approach. Further, it was held that a reviewing judge ought not to disturb findings of the Industrial Court unless they were grounded on illegality or plain irrationality, even where the reviewing judge might not have come to the same conclusion. 7 [18] The Court of Appeal has in a number of cases held that where finding of facts by the Industrial Court are based on the credibility of witnesses, those findings should not be reviewed (see William Jacks & Co (M) Sdn BHd v. S Balasingam [1997] 3 CLJ 235, National Union of Plantation Workers v. Kumpulan Jerai Sdn Bhd (Rengam) [2001] 1 CLJ 681, Quah Swee Khoon v. Sime Darby Bhd [2001] 1 CLJ 9, Colgate Palmolive (M) Sdn Bhd v. Yap Kok Foong & Another [2001] 3 CLJ 9. However, there are exceptions to this restrictive principle where:

reliance upon an erroneous factual conclusion may itself offend against the principle of legality and rationality, or

there is no evidence to support the conclusion reached. (See Swedish Motor Assemblies Sdn Bhd v. Hj. Md Ison Baba [1998] 3 CLJ 288]. [19] It is clear from the above authorities that the scope and ambit of Rama Chandran had been clearly explained and clarified. Decided cases cited above have also clearly established that where the facts do not support the conclusion arrived at by the Industrial Court, or where the findings of the Industrial Court had been arrived at by taking into consideration irrelevant matters, and had failed to consider relevant matters into consideration, such findings are always amendable to judicial review".(Emphasis added) [10] Bearing in mind the above principles, the issues before the Industrial Court whether the consequential order made under Section 33(1) of the Industrial Relation Act 1967 by the 1st Respondent was right and in accordance with the law. [11] The Court refers to Section 33(1) of the Industrial Relations Act 1967 which states: 8

“Interpretation and variation of awards and agreements

If any question arises as to the interpretation of any award or collective agreement taken cognizance of by the Court, the Minister may refer the question, or any party bound by the award or agreement may apply, to the Court for a decision on the question.” [12] The main issues that are to be decided by this Court are as follows:

Whether the Industrial Court had erred in law when decided that the Second Schedule of the IRA is not applicable when deciding for reinstatement and/or back wages;

Whether the Industrial Court had erred in law when its decision was substantially reliance to the Industrial Court Practice Note No.1 of 1987 (the “Practice Note No.1 of 1987”) instead of the IRA; and

Whether the deduction of 50% back wages calculated from 24 months or 56 months. [13] Issue No. 1 The court refers to Section 30 (6) and (6A) IRA which states that: “(6) In making its award, the Court shall not be restricted to the specific relief claimed by the parties or to the demands made by the parties in the course of the trade dispute or in the matter of the reference to it under subsection 20(3) but may include in the award any matter or thing which it thinks necessary or expedient for the purpose of settling the trade dispute or the reference to it under subsection 20(3).

Notwithstanding subsection (6), the Court in making an award in relation to a reference to it under subsection 20(3) shall take into 9 consideration the factors specified in the Second Schedule.” (Emphasis added) The Second Schedule: “SECOND SCHEDULE FACTORS FOR CONSIDERATION IN MAKING AN AWARD IN RELATION TO A REFERENCE UNDER SUBSECTION 20(3) [Subsection 30(6A)]

In the event that backwages are to be given, such backwages shall not exceed twenty-four months’ backwages from the date of dismissal based on the last-drawn salary of the person who has been dismissed without just cause or excuse;

In the case of a probationer who has been dismissed without just cause or excuse, any backwages given shall not exceed twelve months’ backwages from the date of dismissal based on his last-drawn salary;

Where there is post-dismissal earnings, a percentage of such earnings, to be decided by the Court, shall be deducted from the backwages given;

Any relief given shall not include any compensation for loss of future earnings; and

Any relief given shall take into account contributory misconduct of the workman.” [14] Pursuant to section 30(6A) of the IRA above, the 1st Respondent must take into consideration the factors set out in the Second Schedule in handing down its Awards as the word mentioned in section 30(6A) is “shall” which means “mandatory”. [15] The language of the Second Schedule is unequivocal and unambiguous in limiting any award of back wages to 24 months, and there are no exclusions or exceptions to this limit, whether or not the employee is concurrently reinstated. 10 [16] In Public Prosecutor v Tan Tatt Eek & Others [2005] 1CLJ 713, FC the Federal Court stated in no uncertain terms that the primary duty of the courts to give effect to the intention of Parliament in the words used by it and it is not for the courts to go behind the words of a statute where the same are clear, plain and unambiguous. In his judgment, the learned Steve Shim CJ (Sabah & Sarawak) stated as follows: “Held: [1] The primary duty of the court is to give effect to the intention of the Legislature in the words used by it. It is a well established canon of interpretation that the intent of the legislature is to be gathered from the words used and that if the words used have not acquired any technical meaning, they should be deemed to have been used in their ordinary meaning. If the words of the statute are in themselves precise and unambiguous, then no more is necessary than to expound those words in their natural and ordinary sense. The words themselves alone in such cases best declare the intent of the law giver.” [17] The 1st Respondent, however, had proceeded to read into the provisions of the Second Schedule an exclusionary proviso, wherein it held as follows in the Interpretation Awards: “[87] …..it is our considered view that limiting back wages to 24 months is only applicable to monetary compensation when reinstatement was not ordered. In addition, as parliament had relied on Practice Note No. 1 of 1987 and the case of JT International as basis for the amendments, it is plain that parliament intended the Industrial Court to limit back wages in cases of compensation when no order for reinstatement is made. [88] Hence, we are of the considered view that a workman held to have been dismissed without just cause or excuse who is not reinstated should be awarded back wages subject to a maximum of 24 months. 11 [98] We are of the firm view that the Second Schedule restricting back wages to 24 months is not applicable when reinstatement is ordered.” [18] The words used for “back wages” in the Second Schedule is apparently clear that in the event that back wages are to be given, such back wages shall not exceed twenty-four months’ back wages from the date of dismissal based on the last-drawn salary of the person who has been dismissed without just cause or excuse. There is nothing mentioned in the Second Schedule about whether the 24 months applies to cases where reinstatement or in lieu of reinstatement is ordered. The court is of the view that it applies to both. [19] This court agreed with the Applicant’s submission that it is readily apparent on the face of the Second Schedule that no such proviso or distinction between back wages with reinstatement and back wages with compensation in lieu of reinstatement exists or was intended to exist. [20] Indeed, the very purpose of implementing the Second Schedule was addressed by the 1st Respondent in the Interpretation Awards, wherein it observed as follows: “Based on the debate, it would appear that the legislators wanted to ensure uniformity and consistency in the assessment of monetary compensation in the Industrial Relations Act 1967.” The 1st Respondent despite having made reference to the foregoing, proceeded to disregard that very purpose, and instead placed substantial reliance on Practice Note No.1 of 1987 in ultimately holding that the Second Schedule did not apply where reinstatement was ordered and proceeding to award 56 months in back wages to the 2nd and 3rd Respondents. 12 [21] Issue No. 2 Industrial Court Practice Note No.1 of 1987 For ease reference, Practice Note No.1 of 1987 is reproduced in extenso and reads as follows below:

Guidelines on Dismissal Cases Practice Note No. 2 of 1981 is replaced by this Practice Note.

If the dismissal is with “just cause or excuse” the case is dismissal without any payment of compensation or benefit.

If the dismissal is without “just cause or excuse”, the Court shall :-

Direct the employer to reinstate the workman in his former employment and to pay the workman an amount equivalent to the wages that he would have earned had he not been dismissed. OR

Direct the employer to pay such amount of wages as compensation as may be determined by the Court.

Back pay in full from date of dismissal to date of conclusion of hearing, subject to a maximum of 24 months.

Compensation in lieu of reinstatement of one month’s pay for each year of completed service subject to a maximum of 24 months.

Mitigation against loss It shall be the duty of the Claimant to mitigate against loss but the burden of proving that the Claimant has not done so lies with the Company. Such mitigation shall be against back pay only [para 4(a) above] and not compensation in lieu of reinstatement [para 4(b) above]. There has not been able to secure any employment since the date of his dismissal. If he had been able to secure employment or partial employment, then backpay can be reduced up to 50%. In any event, the Claimant may be awarded his compensation in lieu reinstatement in full, unless there is a scheme to pay such benefit to the EPF Board, in which case, the award is to be reduced accordingly. 13

Contributory conduct If the matter to which the claims relates was to any extent caused by or contributes to by any action of the Claimant, the Court may reduce the back pay [para 4(a) above] up to 50% PROVIDED that the reduction in para 4(c) and 4(d) shall not exceed 50% of the back pay payable under para 4(a).

Bonus and pay in lieu of leave not taken and other contractual payments may also be ordered to be paid.

If there are several Claimants in a case and they are unemployed for varying periods, any back pay awarded should reflect the periods of unemployment and amount of pay obtained. Examples (for guidance only): 1st Claimant – Got job immediately - 50% 2nd Claimant – Got job 6 months later - 63% 3rd Claimant – Got job 12 months later - 75% 4th Claimant – Got job 18 months later - 88% 5th Claimant – Got job 24 months later - 100% 6th Claimant – Failed to get a job - 100% Sgd. (FONG SENG YEE) President Industrial Court Kuala Lumpur 29th June, 1987. [22] The court refers to the Interpretation Awards where the 1st Respondent place significant reliance on the Practice Note No.1 of 1987 in reaching its findings that the Second Schedule did not preclude it from awarding back wages in excess of 24 months. The 1st Respondent stated as follows: 14 “[71] For purpose of clarity Practice Note No.1 of 1987 has not been expressly overruled by bringing in the Second Schedule, therefore Practice Note No.1 of 1987 is still applicable. [79] It would appear from Practice Note No.1 of 1987 that when reinstatement into former employment was not an appropriate remedy the Industrial Court had the power to award the Claimant compensation in lieu of reinstatement. The Court in such an award would limit back wages and compensation in lieu of reinstatement to 24 months. [80] Thus back wages was only limited to 24 months when compensation in lieu of reinstatement was ordered. This was not applicable when reinstatement was ordered. When reinstatement was ordered the employer was required to pay the workman “an amount equivalent to the wages he would have earned had he not been dismissed.” [23] However, in Unilever (M) Holdings Sdn Bhd v So Lai & Anor [2015] 3 CLJ 900, FC the Federal Court had definitively addressed the said Practice Note, wherein it held as follows:

The Practice Note is in reality an internal administrative circular meant to be a guideline in calculating compensation. Such circular does not have the force of law. The Practice Note cannot be construed as a statement of legal principle and it will be erroneous to do so. A careful reading of the Practice Note will reveal that it is silent on the issue of whether the worker is still eligible to be reinstated at the material time when the award is made. The Practice Note cannot be taken to be a concept stipulating that it is a carte blanche for compensation to be awarded (in all cases) in lieu of reinstatement.” (emphasis added by this court) [24] As rightly guided by the decision in Unilever case (supra) that the Practice Note is only an internal administrative circular meant to be a guideline in calculating compensation and does not have the force of law. The Practice Note cannot be construed as a statement of legal principle and it will be erroneous to do so. 15 [25] This court is of the view that it is readily apparent that the superior and apex courts have already, and without equivocation, deprecated the application of the Practice Note in industrial jurisprudence and opined that the same should not be relied upon as a statement of legal principle. [26] It is trite that the principle of stare decisis mandates that the decisions of the higher courts be adhered to and the Industrial Court is not an exception to it. As observed by the Federal Court in Dato’ Tan Heng Chew v Tan Kim Hor & Another Appeal [2006] 1 CLJ 57, FC: “[20] These judgments, being judgments of the Federal Court, are binding on the Court of Appeal. Whether the Court of Appeal agrees with them or not, it is incumbent upon it to apply the test. However, if the court thinks that it has good reasons for disagreeing with the judgments, it may, while following them, point out why they should be reviewed by this court. But the review, if it were to be done, should be done by this court. Until it is actually done by this court, they remain binding on the Court of Appeal. So, the Court of Appeal was wrong in not applying the "real danger of bias" test.” (Emphasis added) [27] Similarly observed by the Court of Appeal in Assistant Collector of Land Revenue & Ors v Alfeus Yahsu & Anor and Anor Appeal [2016] 7 CLJ 848,CA: “[18]…… In our view the pronouncement of the Federal Court is clear in terms as to the proposition in law that is propounded and we feel that it is opportune to remind the High Court and other subordinate courts of the principles of "stare decisis" which is an essential component of our jurisprudence….” (Emphasis added) [28] Applying the Practice Note No.1 of 1987, the 1st Respondent also relied on a number of cases in support of the proposition that upon reinstating an employee, back wages for full period are to be awarded. 16 Bearing in mind that cases referred by the 1st Respondent are all predate the coming into force of the Second Schedule, which imposes a clear and unequivocal 24 months limitation on any award of back wages and those cases cannot be considered to represent good law, as the principles enunciated therein have been substantively overruled by statute. [29] This court finds that the 1st Respondent had misapplied and misconstrued several key legal principles in handing down the Interpretation Awards, specifically in respect of its conclusion that it is not constrained by the provisions of the Second Schedule when ordering back wages together with reinstatement. Back wages limited to 24 months [30] Taking all the above into consideration, the court is agreed with the Applicant’s submission that it is readily apparent from the clear and unambiguous wording of the Second Schedule that back wages are statutorily capped at 24 months irrespective of any concurrent award of reinstatement, and it is likewise apparent that the 1st Respondent had erred in its reliance on the Practice Note No. 1 of 1987 and its reading of a number of cases, most of which no longer represent good law. In any event, the Second Schedule has the force of law and must be accordingly adhered to by the 1st Respondent, who has no discretion to carve out for itself exception to its clear and express provisions. [31] Issue No.3 Award of full back wages with 50% reduction The 1st Respondent in its Interpretation Awards awarded full back wages for the duration of the period that the 2nd and 3rd Respondents were out 17 of employment for 56 months with less 50% i.e 28 months. In line with the Second Schedule, the back wages of 28 months will be capped at 24 months. [32] The Applicant submits that the 1st Respondent has ordered that the back wages is to be paid after deduction of 50%. Since the maximum back wages in Second Schedule is 24 months, then it cannot exceed beyond that limit. The 1st Respondent has ordered that the back wages is to be deducted 50% and therefore back wages to be paid is 12 months and not 28 months or 24 months. [33] The 2nd and 3rd Respondents, disagree with the Applicant’s submission and submitted that having taken into account that the 1st Respondent had already discounted 56 months to 28 months, then it should be 24 months and not half of 24 months. To do so would be unconscionable. [34] This court is of the view that the 1st Respondent should not make an order that back wages to be paid is 56 months because it is against the Second Schedule. It is pertinent to observe that the 1st Respondent should confined its award of back wages to a maximum of 24 months only but since the 1st Respondent also ordered that the back wages to be reduced to 50% then it has to be 50% of 24 months i.e 12 months. [35] The Applicant is not disputing about the 50% reduction of back wages awarded by the 1st Respondent. In such circumstances, the back wages should not exceed 24 months as provided by the IRA and 50% deduction of it will be 12 months. Since the 1st Respondent had made reduction of back wages of 50%, therefore other benefits that the 2nd and 3rd Respondents are entitled to also within the reduction made by the Industrial Court. 18 CONCLUSION [36] After having considered the Applicant’s application and submissions of the parties, it is the finding of this court that the 1st Respondent had erred in applying the correct legal principles in its Interpretation Awards. It is patently clear that the Interpretation Awards contain serious infirmities of illegality and irrationality insofar as its findings that the Second Schedule does not apply to the 1st Respondent where there is an accompanying order for reinstatement. [37] This court concludes that the Interpretation Awards by the 1st Respondent suffer from infirmities of illegality and irrationality warranting the intervention of this Court. Accordingly, this Court allowed the Applicant’s application for judicial review and ordered that the costs to be borne by the parties. MARIANA BINTI HAJI YAHYA JUDGE HIGH COURT MALAYA (SPECIAL POWERS DIVISION 2) KUALA LUMPUR. Dated: 1 February 2020 Counsel for the Applicant Dato’ T. Thavalingam together with Encik David Tan Seng Keat and Cik Shivani Rachagan, Messrs. Lee Hishammuddin Allen & Gledhill, Jalan Dutamas, Kuala Lumpur. 19 Counsel for the Second Respondent Cik Han Li Meng, Messrs. Christopher & Lee Ong, Kuala Lumpur. Counsel for the Third Respondent Encik Anand Ponnudurai together with Cik Ponnie Govindasamy, Messrs. Bodipalar Ponnudurai De Silva, Jalan Dutamas, Kuala Lumpur. Case(s) referred to: [1] Ranjit Kaur S Gopal Singh v. Hotel Excelsior (M) Sdn Bhd [2010] 8 CLJ 629 [3] Public Prosecutor v Tan Tatt Eek & Others [2005] 1CLJ 713 [4] Unilever (M) Holdings Sdn Bhd v So Lai & Anor [2015] 3 CLJ 900, FC [5] Dato’ Tan Heng Chew v Tan Kim Hor & Another Appeal [2006] 1 CLJ 57, FC [6] Assistant Collector of Land Revenue & Ors v Alfeus Yahsu & Anor and Anor Appeal [2016] 7 CLJ 848, CA Legislation referred to: Industrial Relation Act 1967, ss 30(6), 30(6A), 33(1), Second Schedule Rules of Courts 2012, O.53