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Severance Payment and Three Months Salary in Lieu of Notice to the 1996 SANMA Provincial Councillors [2001] VUOM 1; 2001.04 (20 July 2001)

REPUBLIC OF VANUATU

OFFICE OF THE OMBUDSMAN

PUBLIC REPORT

ON THE

SEVERANCE PAYMENT
AND
THREE MONTHS SALARY
IN LIEU OF NOTICE
TO THE
1996 SANMA PROVINCIAL COUNCILLORS

20.07.2001

7122/2001/04

-----------------------------------------

PUBLIC REPORT
ON THE
SEVERANCE PAYMENT
AND
THREE MONTHS SALARY IN LIEU OF NOTICE TO THE
1996 SANMA PROVINCIAL COUNCILLORS

SUMMARY
During the Sanma Provincial Council sitting that took place from 21 May to 13 June 1996, the Sanma Provincial Council decided to dissolve itself and passed a motion to obtain (a) a monthly allowance; (b) severance pay and (c) 3 months payment In lieu of notice for the Councillors.

The Councillors decided to dissolve the Sanma Provincial Council without regard to section 14 of the Decentralization and Local Government Regions Act No.1 of 1994. Section 14 provides for the Minister to recommend to the Prime Minister that the Council be dissolved. The Prime Minister will then issue an order to dissolve the Council. By the decision of the Council to dissolve itself without consultation with the Minister, the Councillors may have acted in breach of section 14.

The amount of severance pay (Vt3,195,000) and three months salary in lieu of notice (Vt 2,204,616) received by the nominated and elected members amounted to a total of five million three hundred ninety nine thousand six hundred sixteen vatu (Vt 5,399,616).

The Principal Finance Officer of the Department of Provincial Affairs, Mr Martin Tete stated that they had informed the members of their entitlements during the Full Council sitting. The President, the Secretary General and the Accountant of the Provincial Government were also advised accordingly both in writing and through phone calls. In fact, the Councillors were well aware that the severance pay and the payment of three months salary in lieu of notice they were receiving was contrary to the Decentralization and Local Government Regions Act No.1 of 1994. Furthermore, despite the advice given, the councillors allegedly threatened and forced the Secretary General and the Accountant of the Sanma Province to pay them these claims.

Under the Employment Act the Councillors should not have been considered employees of the Council as they were elected or appointed members. Even if they considered themselves employees, their employment was not terminated by their employer, the Minister, as there was no formal dissolution of the Council as required under the Decentralization Act. Arguably, they were not entitled to severance pay under the Employment Act.

Section 24 of the Decentralization and Local Government Regions Act No.1 of 1994 provides that at the end of their term of office, the elected and appointed members of Local Government Councils shall receive a payment of gratuity and the rate of that gratuity shall be determined by the by-laws made by the Local Government Councils. By the Council’s decision to allocate itself severance pay and three months salary in lieu of notice, the Councillors may be in breach of section 24, which specifically provides only for a gratuity payment not exceeding 15% of all monthly allowances received by a member.

TABLE OF CONTENTS

1. JURISDICTION

1.1 The Constitution, the Ombudsman Act and the Leadership Code Act allow the Ombudsman to look into the conduct of government, related bodies, and Leaders. This includes the conduct of elected and nominated members of local government Councils. The Ombudsman can also look into defects in laws or administrative practices, including the Decentralization and Local Government Regions Act No. 1 of 1994 and the Employment Act [CAP 160].

2. PURPOSE, SCOPE OF INVESTIGATION AND METHODS USED

2.1 The purpose of this report is to present my findings as required by the Constitution and the Ombudsman Act and the Leadership Code Act.

2.2 The scope of this investigation is to establish the facts about the payments of severance allowance and three months notice to SANMA Provincial Councillors and to determine whether or not such payments were legal.

2.3 This Office collects information and documents by informal request, summons, letters, interviews and research.

3. RELEVANT LAWS, REGULATIONS AND RULES

3.1 The relevant Constitutional and statutory provisions are mentioned in Appendix M at the end of this report.

3.2 The Constitution and the Leadership Code Act provide that a leader has a duty to conduct himself in such a way both in his public and private life, so as not to demean his office or position.

3.3 The Leadership Code Act provides for a code of conduct governing the leaders of the people of Vanuatu.

3.4 The Decentralization and Local Government Regions Act No.1 of 1994 provides for the payment of gratuities to elected and appointed members of Local Government Councils.

3.5 The Employment Act provides for the payment of severance allowance.

3.6 Standing Order No.1 of 1994 SANMA Local Government Region, which is approved by SANMA Provincial Council in exercise of the powers contained in section 10(1) of the Decentralization and Local Government Regions Act No.1 of 1994, provides for a sitting allowance for every member of the Local Government Council.

4. OUTLINE OF EVENTS

4.1 On 21 May to 13 June 1996 the SANMA Provincial Councillors, both elected and nominated, passed a motion (see Appendix A: Council's minutes) to obtain their:

(a) monthly allowance (elected member Vt35,000 and Vt10,000 for nominated member);

(b) severance payment (1 year and 6 months); and

(c) 3 months payment in lieu of notice (July, August, September, 1996) (See Tables below).

SEVERANCE PAY

DECEMBER 1995 - JUNE 1996

THREE MONTHS NOTICE

JULY 1996 - SEPTEMBER 1995

The total amount of severance pay and three months salary in lieu of notice received by the nominated and elected members amounted to Vt5,399,616.00 (Appendix B: payment vouchers).

4.2 On 17 June 1996, the Secretary General, Willie Malon, wrote to the Acting Director of Provincial Affairs to say that there was a Council meeting from 21 May 1996 to 13 May 1996 during which a decision was made for the payment of severance pay and three months notice to Councillors. The Council made this decision even though they were advised that this was contrary to the Decentralization Act. Furthermore, the Office of SANMA Province had not received any letter confirming the dissolution of the Council.

Upon seeking advice from the Department of Provincial Affairs on the matter, the Department advised that the Office of SANMA Province should not execute the payment until the Council of Ministers gave its assessment of the issue (Appendix C: letter dated 30.08.96).

4.3 On 2 August 1996, the Acting Director of the Department of Provincial Affairs,
Mr Tinsley Lulu, reported to the Commissioner of Police that SANMA Councillors were paid severance pay and three months salary in lieu of notice when this was against the Decentralization Act. Mr Lulu requested that the police investigate the matter in order for the Councillors to return the money or be prosecuted.

4.4 On 9 August 1996, the Principal Finance Officer, Mr Martin Tete, lodged a complaint to the Ombudsman on the over-payment of the three months notice. These Councillors should only be paid a total amount of Vt628,500 to comply with the provisions regarding gratuities under the law. Instead they were paid a total amount of Vt5,399,616.

4.5 On 23 July 1999, the Secretary General of SANMA Province, Mr Havo Moli, informed the Ombudsman that of the elected and nominated members of the Council, Mrs Ketura Saul was the only person who had reimbursed the Council with an amount of seventeen thousand two hundred vatu (Vt17,200). In fact, this amount represented an over-payment to Mrs Ketura (Appendix D: Receipt and Table on over-payment to each Council's member).

4.6 On 11 June 2001, the Principal Finance Officer of the Department of Provincial Affairs, Mr Martin Tete, reiterated that they had informed the members of their entitlements during the Full Council sitting. The President, the Secretary General and the Accountant of the Provincial Government were also advised accordingly both in writing and by talking directly to them through phone calls. The Councillors were aware that the severance pay and the payment of three months salary in lieu of notice they were receiving was contrary to the Decentralization and Local Government Regions Act No. 1 of 1994. Despite advice to the contrary, they coerced the Secretary General and the Accountant of Sanma Province to pay them these claims. (Appendix E: letter dated 11.06.01).

5. RESPONSES FROM THOSE WHO RECEIVED A PRELIMINARY REPORT

5.1 Upon commencing this enquiry, the Ombudsman notified all people or bodies complained of and gave them the right to reply. Also a working paper was provided prior to this public report to give them another opportunity to respond. Responses were received from:

(a) Mr. John Lum, President of Sanma Provincial Government responded by telephone. Mr. Lum said the decision was made by the full Council to pay the severance pay and three months salary in lieu of notice to the 1996 Sanma Provincial Councillors.

(b) Mr. Makali Bani Baniuri acknowledged that everything mentioned in the preliminary report is true. He did receive the money in good faith. The Secretary General of the day, Mr. Willie Malon, told the Councillors that what were to be passed by the Council would be approved by the Minister concerned. Unfortunately, that was not the case and to-date, he does not understand how and why he got the money without a proper approval.

(c) Mr Turcet Samuel said that he accepted the content of the report on the unlawful payment of severance pay and three months salary in lieu of notice because it was correct.

5.2 No responses were received from:

Kalmer Voccor Peter Natu

Daniel Dick Aki Perelini

Leon Ova Kami Mita

Gilbert Ruruvari Sale Rani

Bernard Vira Keleb Ser

Christian Maliu Vuti Takasi

Remy Packet Ps Jimmy Andrew

Amos Rau Arma Rite

Steven Nakato Fr. Cyriaque Bert (deceased)

Havo Moli Mataikole Jeroline Simeon

Banibani Ua Ketura Saul

6. FINDINGS

6.1 Finding 1: The Councillors decided to dissolve the SANMA Provincial Council without due regard to section 14 of the Decentralization and Local Government Regions Act No.1 of 1994.

Section 14 provides for the Minister to recommend to the Prime Minister that the Council be dissolved. The Prime Minister will then issue an order to dissolve the Council. By the decision of the Council to dissolve itself without consultation with the Minister, the Councillors acted in breach of section 14.

6.2 Finding 2: After dissolving the Council, the Councillors decided to pass a motion to allocate themselves severance pay and three months salary in lieu of notice.

Section 24 of the Decentralization and Local Government Regions Act No.1 of 1994 provides that at the end of their term of office, the elected and appointed members of Local Government Councils shall receive a payment of gratuity and the rate of that gratuity shall be determined by the by-laws made by the Local Government Councils. By the Council's decision to award themselves severance pay and three months salary in lieu of notice, the Councillors are in breach of section 24, which specifically provides only for a gratuity payment not exceeding 15% of all monthly allowances received by a member.

In fact, pursuant to s24, the Councillors were only legally entitled to a gratuity under the Decentralization and Local Government Regions Act No.1 of 1994 and a sitting allowance as provided under section 46 of the Standing Orders No.1 of 1994 SANMA Local Government Region.

6.3 Finding 3: The Councillors were not entitled to severance pay under the Employment Act [CAP 160] as they did not fall within section 54 of that same Act.

Under the Employment Act, the Councillors could not be considered employees of the Council as they were elected and, or appointed members. Even if they considered themselves employees, their employment was not terminated by their employer, the Minister, as there was no formal dissolution of the Council as required under the Decentralization Act. Therefore, it could be argued they were legally not entitled to severance pay under the Employment Act.

7. RECOMMENDATIONS

Recommendation 1:

7.1 The Secretary General of SANMA Provincial Government should calculate the exact amount of gratuity payment that would have been paid to each Councillor. By law, that is 15% of all monthly allowances received by a member, to be deducted from the total amount of severance payment and three (3) months salary in lieu of notice. In so doing, the Secretary General of SANMA Provincial Government can find out the exact amount to be refunded by each Councillor.

7.2 The Secretary General needs to recover funds owing to the Sanma Province by vigorously pursuing each Councillor and nominated member concerned accordingly.

7.3 In the absence of any voluntary commitment to refund the difference between both the severance pay and three (3) months notice and the gratuity payment, then the Council should instigate a civil claim in order to recover the public funds being misappropriated.

7.4 The Department of Provincial Affairs should review the Provincial Council by-laws with respect to remuneration so as to limit possible abuse of such entitlements in future.

8. INDEX OF APPENDICES

A Copy of Council’s minutes for the dissolution and passing a motion for severance pay and three months notice

B Copies of payment vouchers

C Letter dated 30.08.96 from the Principal Finance Officer, Mr. Martin Tete to the Executive Officer of Sanma Province, Mr. Havo Moli.

D Copies of Mrs. Ketura ‘s receipt of reimbursement and table on the over-payment to each Council’s member.

E Copy of letter dated 11.06.01 from the Principal Finance Officer, Mr. Martin Tete.

M Relevant laws, regulations and rules

APPENDIX M
RELEVANT LAWS, REGULATIONS AND RULES

3.2 CONSTITUTION OF THE REPUBLIC OF VANUATU

CONDUCT OF LEADERS

66. (1) Any person defined as a leader in Article 67 has a duty to conduct himself in such a way, both in his public and private life, so as not to-
    

(a) place himself in a position in which he has or could have a conflict of interests or in which the fair exercise of his public or official duties might be compromised;

(b) demean his office or position;

(c) allow his integrity to be called into question; or

(d) endanger or diminish respect for and confidence in the integrity of the Government of the Republic of Vanuatu.

(2) In particular, a leader shall not use his office for personal gain or enter into any transaction or engage in any enterprise or activity that might be expected to give rise to doubt in the public mind as to whether he is carrying out or has carried out the duty imposed by subarticle (1).

DEFINITION OF A LEADER

4. For the purposes of this Chapter, a leader means the President of the Republic, the Prime Minister and other Ministers, members of Parliament, and such public servants, officers of Government agencies and other officers as may be prescribed by law.
   

4.4 LEADERSHIP CODE ACT NO.2 OF 1998

LEADERS

5. In addition to the leaders referred to in Article 67 of the Constitution, the following are declared to be leaders:
   

(b) elected and nominated members of local government councils.

DUTIES OF A LEADER

13. (1) A leader must:

(a) comply with and observe the law;

(b) comply with and observe the fundamental principles of leadership contained in Article 66 of the Constitution;

(c) comply with and observe the duties, obligations and responsibilities established by this Code or any other enactment that affects the leader; and

(d) not influence or attempt to influence or exert pressure on or threaten or abuse persons carrying out their lawful duty.

4.4 DECENTRALIZATION AND LOCAL GOVERNMENT REGIONS ACT NO.1 OF 1994

PAYMENT OF GRATUITIES

24(1) Elected and appointed members of Local Government Councils shall receive at the end of their term of office a payment of gratuity and the rate of that gratuity shall be determined by the by-laws made by the Local Government Councils.

4. The gratuity payable to each elected and appointed member under subsection (1) shall not exceed an amount equal to 15 per cent of all monthly allowances received by such member during his tern in office.
   

4.5 EMPLOYMENT (AMENDMENT) ACT NO. 8 OF 1995

SEVERANCE ALLOWANCE

54. (1) Subject to section 55, where an employee has been in the continuous employment of an employer for a period of not less than 12 months commencing before, on or after the date of commencement of this Act, and–

(a) the employer terminates his appointment; or

(b) the employee retires on or after reaching the age of 55 years; or

(c) the employer retires the employee on or after reaching the age of 55 years; or

(d) where the employee has been in continuous employment with the same employer for a continuous period of not less than 10 consecutive years, the employee resigns in good faith; or

(e) the employee ceases to be employed by reason of illness or injury is certified by a registered medical practitioner to be unfit to continue to work,

the employer shall pay severance allowance to the employee under section 56 of this Act.

4. STANDING ORDERS NO.1 OF 1994 SANMA LOCAL GOVERNMENT REGION
   

SITTING ALLOWANCE

4. (1) Every Member of the Local Government Council, and any Committee established by the Council, shall receive a sitting allowance, the amount of which shall be set by the Council within an upper limit of 2.500 Vatu per day of effective sitting.
   

(2) The Chairman and all Members of the Local Government Council, whether elected or appointed, shall receive a monthly allowance of not more than 10.000 Vatu.

(3) The Chairman of the Local Government Council shall, in addition to the allowance provided for in paragraph (2) hereinabove, receive a monthly allowance of 5.000 Vatu.

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