Dynacraft Industries Sdn Bhd V Kamarudin Bin Kana Mohd Sharif &6lagi


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RAYUAN SIVIL NO: P-04-268-2006












Coram : Tengku Baharudin Shah bin Tengku Mahmud, JCA Suriyadi Halim Omar, JCA T.S. Nathan, JCA




This is an appeal against the decision of the High Court in Penang dismissing the appellant’s application for an order of certiorari to squash the Industrial Court Award dated 26.8.2004 (the 2004 Award). We heard the submissions of learned counsel and dismissed the appeal with costs. We now state our reason.


The Background


Dynacraft Sdn Bhd (DSB) was part of a U.S. based National


Semiconductor Group of Companies (the NSGC) which inter alia


manufactured component parts for computers, cars and


electronic goods in Penang. By an agreement dated 9.11.1985


(the 1985 Agreement) NSGC sold the assets and business of




Dynacraft Sdn Bhd to Malaysia Pacific Industries Bhd (MPIB) which designated its subsidiary company Exclusive Distinction Sdn Bhd to take over DSB’s business operation including the continued service of its employees, with its name on 18.12.1985 changed to Dynacraft Industries Sdn Bhd. (the appellant).


The serious economic downturn in early 1998 adversely affected the appellant’s business purportedly causing it to undertake cost cutting measures which included the retrenchment of the seven (7) respondents on 20.7.1998 with payment of their respective termination benefits.


The respondents’ claim for reinstatement under section 20 of the Industrial Relations Act 1967 (the IRA) was referred to the Industrial Court (IC) for adjudication. The learned Chairman after due enquiry and based on the evidence put before him found basis for the appellant’s reorganization of its operation but in the circumstances of the case he concluded that the respondents were dismissed without just cause or excuse as the retrenchment exercise was not conducted in compliance with the applicable principles and practice in regard to redundance and retrenchment (the LIFO principle which requires the most junior employee to be terminated before the more senior one) in that the respondents earlier service with DSB was not considered resulting in their being retrenched while their juniors were retained.




The Review


The appellant challenged the 2004 Award by way of judicial review in the High Court seeking to have it removed thereto and quashed. The learned Chairman was alleged to have made errors of law and acted in excess of his jurisdiction in failing to have regard to the fact that the LIFO principle (Last In First Out) applied strictly to actual service with the employer and did not include the respondents’ services with a separate legal entity (DSB). It was alternatively contended that the LIFO principle did not in any event apply in respect of H.K. Chow (the 2nd respondent) and Ricky Ch’ng (the 3rd respondent) as they were the only person left in their respective categories of service. The learned High Court judge however dismissed the appellant’s application. She found that the learned Chairman had carefully evaluated all the evidence before him, in particular the terms of the November 1995 Agreement, the fact that the appellant is a wholly owned subsidiary of MPIB the buyer, the appellant’s offer of benefits of continued service to the respondents and the appellant’s own documentary records acknowledging the backdated service of the respondents, in deciding that the respondents’ service with DSB should be taken into account in applying the LIFO principle and thus correctly concluding that in such circumstances the said principle demanded the period of employment with DSB be taken into consideration.


On the complaint in respect of the 2nd and 3rd respondents, the learned Judge found undisputed and unchallenged evidence




that their positions and functions subsisted even after they were retrenched and were taken over by others so that the so-called redundancy claim was illusory.


She therefore accepted the respondents’ argument that the appellant had in this case failed to show that the 2004 Award was vitiated by any illegality, irrationality, unreasonableness or procedural impropriety, so as to justify interference of the Court by way of review.


The Appeal


Before us Mr. N. Sivabala on the appellant’s behalf did not dispute that the years of respondents’ service with DSB was recognized. In response to our query whether an employer having held out and accepted an employee’s past service as continued employment can then ignore such service and retrench him ahead of his junior on the basis of LIFO principle, learned counsel submitted that LIFO principle must be applied objectively and to actual service with the employer.


In respect of the 2nd and 3rd respondents, learned counsel submitted that since there was no breach of the LIFO principle which did not apply to them, there was no basis for the learned Judge to hold that they were dismissed without just cause on excuse.




In her response Pravin Kaur for the respondents referred to the appellant’s notice of retrenchment to the respondents and the letter to the respondents offering continued employment dated 19.1.96 when taking over the business from DSB. The retrenchment notices state the date the respondents joined DSB as the date of hire instead of the date of its taking over the business. The length of their service with the appellant is also therein calculated from the earlier date which confirm its recognition of the continuation of their service. The appellant’s records and documents show the dates they were hired and length of the service which fortify the appellant’s admission and recognition of the respondent’s service as a continuation of their service with DSB. The appellant cannot come before this court and blow hot and cold.


Our Evaluation


The function of the IC is summarized by the Federal Court in Goon Kwee Phoy v. J & P Coats (M) Bhd (1981) 2 MLJ 129 at 136 thus :


“When representations are made and are referred to the Industrial Court for enquiry, it is the duty of that court to determine whether the termination or dismissal is with or without just cause or excuse. If the employer chooses to give a reason for the action taken by him, the duty of the Industrial Court will be to enquire whether that excuse or reason has or has


not been made out. If it finds as a fact that it has not




been proved, then the inevitable conclusion must be that the termination or dismissal was without just cause or excuse.”


Accordingly and more specifically if the termination is grounded on redundancy, the employer must come to court with concrete proof of redundancy as the burden is on him to prove there was actual redundancy to justify the dismissal. See Bayer (M) Sdn Bhd v. Ng Hong Pau (1999) 4 CLJ 155. In that case the Court of Appeal dismissed the appellants application to quash the award of the IC holding that the High Court was right not to interfere with the finding of fact by the IC that there was no convincing evidence produced by the appellant that the respondent’s functions were reduced to such an extent that he was considered redundant.


To satisfy its burden, the appellant must not only produce evidence to prove the existence of a redundancy situation which necessitated the retrenchment of the seven respondents but must also show that the consequent termination of service of each respondent was done in compliance with the applicable and accepted standards of procedure and practice pertaining to redundancy and retrenchment. On the evidence before it, the IC found the financial situation of the appellant warranted costcutting measures and subsequent reorganisation of its commercial undertaking but the company was not in imminent danger of closing. While the court accepted that the appellant could not in law be denied its entrepreneurial prerogative of




shedding its workforce there is no finding of fact by the IC nor evidence led to prove any reduction of workload, extinguishment of any function, or elimination of any position to justify the retrenchment of the respondents or any employee. The unchallenged testimony of the respondents show no reduction in their functions and workload which after their retrenchment were taken over by other employees. There is not a shred of evidence, documentary or otherwise, of any assessment, management discussion or decision made to justify the need to retrench any category of employee.


On the alleged misapplication of the LIFO principle the High Court is right not to interfere with finding of fact of the IC, which we agree, that on the evidence the respondents never left the service of the company that employed them from the day they were engaged until they were dismissed.


In evaluating the evidence before it the IC correctly ignored


the techincalities and acted according to equity, good conscience


and the substantial merits of the case as mandated by s. 30(5) of


the IRA. It is undisputed fact that MPIB bought DSB lock, stock


and barrel. The fact that MPIB wanted the company’s business


operation to be run and managed by it subsidiary, the appellant,


did not alter the position of its employees as only the ownership


of the company changed hands. The fact that the appellant


retained the name Dynacraft in its new name fortified the fact


that the respondent’s employer is the same company belonging


to the same person. There is no question of new legal entity




taking over DSB, it was just a change of name indicative of a new management of the same company. The legal formalities that transpired pursuant to the 1985 Agreement are nothing but technicalities to accomodate the wishes of the parties and in compliance of legal requirements. MPIB could very well take over the business of DSB without changing the company’s name.


If the respondents are members of a ship’s crew they never left the vessel. The new owner may put on board a new captain and/or crew or even change the name of the ship. But if he has to off-load some of the crew to overcome the rough seas, would it be conscionable and justified for him, applying the LIFO principle, to jettison the respondents instead of the ones who came aboard later?


As regards the second and alternative ground of appeal we agree with the learned Judge that with the evidence of the 2nd and 3rd respondents not challenged that their respective jobs and workload were taken over by two other employees and not eliminated or extinguished, redundancy was not proven as mere reorganisation is insufficient to justify their retrenchment which was correctly held to be without just cause or excuse.


In Bayer (M) Sdn Bhd v. Ng Hong Pau (1999) 4 CLJ 155 the Court of Appeal held that in redundancy matters the employee must actually prove that there is such a situation to justify dismissal. Merely to adduce evidence of a reorganisation




exercise is insufficient. In that case where the facts are similar to that of the 2nd and 3rd respondents there were no changes to the respondent’s workload even though the appellant’s sales dropped. And there was evidence that the workload was taken over by two of his colleages upon his termination. The appellant could not produce sufficient evidence to prove that the respondent’s functions were reduced to such an extent that he could be considered redundant. It was held that the High Court was correct in not interfering with the IC’s finding of wrongful dismissal.




In all the above circumstances the High Court is right not to disturb the decision of the IC upon being satisfied that the appellant failed to show any illegality, irrationality or procedural impropriety to challenge the finding of fact arrived at. As we are often reminded, it is trite that judicial review is not an appeal from the decision but a review of the manner in which the decision was made and in such review the High Court is not entitled to consider whether the decision itself, on merit of the facts, was fair and reasonable. See Harpers Trading Sdn Bhd v. National Union of Commercial Workers (1991) 2 CLJ 881, Mas Golden Boutique v. Md. Zain Abu (1999) 3 CLJ 610, Kuah Swee Khoon v. Sime Darby Bhd. (2000) 2 MLJ 600 and Kesatuan Pekerja-Pekerja Perushaan Dunlop Malaysia v. DMIB Bhd (2002) 3 CLJ 706.




We thus found no merit in the appeal and dismissed it with costs which we fixed at RM15000.








Court of Appeal.


Dated : 23.5.2011.


N. Sivabala for the Appellant – Solicitors : Tetuan Shearn Delamore & Co.


Ajit Singh Jessy (Pravin Kaur Jessy with him) for the Respondent – Solicitors : Tetuan Jessy & Associates.



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