The case of ZURAIMY KUSHAILI v. SARAWAK ENERGY BERHAD [2021] 4 MLRA 384 centered on the interpretation of a clause in a fixed-term employment contract concerning the employee’s benefits upon non-renewal. The Court of Appeal allowed the plaintiff’s appeal, ruling that the employer had an obligation to grant one of two benefits.
Issues for Determination
The main issue was whether, under a true construction of Clause 13 of the contract, the defendant company was under an obligation, upon deciding not to renew the fixed-term contract, to grant one of two options: (a) a retirement benefit equivalent to two years of the last drawn salary, or (b) re-appointment to the pre-contract salary grade without any loss of seniority. The defendant had argued its “absolute discretion” allowed it to grant neither option.
Legal Principles and Findings
1. Literal Interpretation and Clarity of Language: The court found the language of Clause 13 to be clear, giving effect to the ordinary and natural meaning of the words used.
- Principle: Where the language and words used are clear, the court must give effect to them as reflecting the parties’ intention.
- Finding: The phrase “to offer the Incumbent either” restricted the company’s “absolute discretion” to choosing between one of the two specified options ((a) or (b)). The company could not reserve the right not to exercise either option unless a third option, “or not at all,” was explicitly spelt out.
- Court Excerpt (Para 71):“Reading English as it stands and giving the words employed in cl 13 its ordinary and natural meaning and employing the rules of grammar and interpreting the sentence in its syntax and taking into consideration the context of the whole cl 13, this court, arrives at only one possible interpretation. It is this: upon the company exercising its right not to renew the contract upon the expiry of its fixed-term, it has the right, in its absolute discretion, to exercise one of the two options. It does not have the right to take away its offer of one of the two options and to reserve for itself the right not to want to exercise either option (a) or option (b) and to allow the contract to expire without the need to pay the employee the retirement benefits in option (a).”
2. Purposive and Commercial Sense Approach: The court applied the commercial sense approach, noting that an interpretation which flouts business common sense must yield to it.
- Principle: When a clause is capable of more than one meaning, the court is entitled to select the meaning that accords with the commercial purpose of the clause and makes business sense.
- Finding: It would be commercially and commonly insensible for an employee in senior management to agree to convert a permanent contract to a fixed-term one without the safeguard of either a retirement benefit or a reversion to the previous contract.
- Court Excerpt (Para 77): “Even assuming that cl 13 was susceptible to a second meaning in that when the defendant exercised its second right it may choose between option (a) or (b) or not at all, it did not make commercial sense nor common sense, for an employee in senior management, to have agreed to convert a permanent contract of employment to that of a fixed-term without the safeguard of either a retirement benefit upon the expiry of the fixed-term, or to be placed back into the previous permanent contract with a lower salary grade but with no loss of seniority.”
- Court Excerpt (Para 81):“To say that the defendant could have a third option to neither exercise either option (a) or (b) would be repugnant to the whole scheme of conversion of the employment contract from permanent to fixed-term.”
3. Breach and DamagesL The court concluded that the defendant breached its obligation under Clause 13 by refusing to offer the plaintiff either of the two options.
- Damages: The plaintiff was entitled to the retirement benefit under option (a), as this loss naturally arose from the breach.
- Awarded Sum: The retirement benefit amounted to RM600,000.00.
- Interest: Interest at the rate of 5% per annum was ordered on the sum of RM600,000.00, starting from the date the benefit was contractually due (31 January 2014).
- Court Excerpt (Para 146-147):“In the instant case, the defendant breached its obligation under cl 13 when it informed the plaintiff that it had made a decision not to offer him either of the two options stated in cl 13 of the contract. Accordingly, the plaintiff was entitled to damages for breach on the part of the defendant of its obligation under cl 13.”
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
