Atlas Copco (Zambia) Ltd v Mambwe (Appeal 137 of 2001) [2003] ZMSC 100 (4 June 2003)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 137/2001 HOLDEN AT NDOLA (Civil Jurisdiction) BETWEEN: ATLAS COPCO (ZAMBIA) LIMITED Appellant AND ANDREW MAMBWE Respondent CORAM: Ngulube CJ, Sakala and Chitengi, JJS On 5th June, 2002 and 4th June, 2003 For the Appellants : Mr. C. H. J. Chileshe of Messrs Lloyd Jones & Collins For the Respondent : Mr. L. M. Matibini of Messrs L. M, Matibini & Company JUDGMENT Chitengi, JS delivered the Judgment of the Court. Authorities referred to: - 1. Zambia Consolidated Copper Mines Limited Vs Matale 1995/1997 ZR 144 2. Director of Public Prosecutions Vs Bwalya Ng’andu and Others SCZ Judgment No. 50 of 1975 (unreported) 3. Industrial and Labour Relations Act Cap 269 of the Laws of Zambia Section 85(5) 4. Cordrington Vs Cordrington (1875) LR 7 HL 854 5. Employment Act Cap 268 of the Laws of Zambia Section 26A i J 2 6. Joseph Daniel Chitomfwa Vs Ndola, Lime Company Limited SCZ Judgment No. 28 of 1999 (unreported) 7. Attorney-General V Mpundu 1984 ZR 6 8. KabweVBP (Zambia)Ltd 1995(1997) ZR 218 In this appeal and cross appeal we shall refer to the Appellant as the Respondent and the Respondent as the Complainant which is what they were in the court below. Reduced to a narrow compass for the purposes of this appeal and cross appeal the facts of this case are these: - The Complainant was employed by the Respondent on a contract of employment as Financial and Administrative Manager. But according to the Complainant he was also the Company Secretary. While the contract was executed on 29th January, 1996, its effective date was stated as 1st January, 1996. Clause 2 of the contract provided for termination by either party giving six months written notice. On 14th March, 2000 at 18:00 hours, the Complainant was handed a termination letter by the General Manager of the Respondent while the Complainant was discussing company matters with the Respondent’s General Manager and the Respondent’s Regional Manager in the office of the Respondents’ General Manager. The Regional Manager had come to Zambia. The termination was in accordance with Clause 2 of the Contract of Employment. The Complainant’s last working day was to be 31st March, 2000. According to the letter of termination the Complainant was to be paid six months salary in lieu of Notice and other terminal benefits. * J 3 Although the Respondents’ action was stimulated by some alleged incompetence by the Complainant relating to non failure to follow up what his subordinates were doing resulting in late reporting of the Respondent’s business activities, no charges of incompetence, mismanagement or irregularities were leveled against the Complainant. The Respondent just terminated the Respondent’s contract of employment under clause 2 of the contract without giving reasons. Under normal circumstances, the termination as effected by the Respondent, would not have given rise to any controversy between the parties. But in this case, the complainant believed and still believes that the notice was a mere camouflage to deceive him of the real reason for his termination. According to the Complainant, the real reason for his termination was alleged incompetence by him and his boss’ racial prejudice. To substantiate this allegation, the Complainant relied on a document marked “AM3” on page 25 of the record of appeal where his former boss, in a report to one Kare Engstroum Marketing Manager for South Africa and Southern Region under which Zambia falls, charges the Complainant with incompetence and says that with the package the Complainant was getting the Respondent could get an expatriate. In this report, sent on 1st January, 2000, the complainant’s former boss said that he had asked one Santhosh Daniel of KPMG to advertise the Complainant’s position without mentioning the Respondent and nationality of the candidates required. Some days later the Complainant got a telephone call from a friend working at Citi Bank telling the Complainant that his job was being advertised in the Times of Zambia. A colleague in the office also asked the Complainant whether the job being advertised was not his job. The J 4 Complainant’s job was advertised in the Times of Zambia on 13th, 14th and 17th January, 2000. The Complainant exhibited the advertisements as Exhibit AM4 on Page 31 of the record of Appeal. The Complainant complained to the General Manager and the Regional Managing Director about his job being advertised but he got no response. As a result, the Complainant saw his advocates. Efforts by the Complainant’s advocate to force the Respondent to redress the situation were fruitless. As a result, the Complainant commenced this action in the Industrial Relations Court Pursuant to Section 85 (4) (d) (six) of the Industrial and Labour Relations Act and Section 26A of the employment Act seeking the following reliefs:- (a) A declaration that the Respondent's termination of my services is unlawful, malicious and therefore null and void. (b) An award of damages or compensation for unlawful dismissal. (c) An award of damages for mental distress and anguish occasioned by the advertisements of 13th, 14th and 17th- January, 2000, (d) Payment of loss of pension benefits arising from the unlawful termination of employment. (e) Payment of USD 12,280 and K32,431,715.00 being sums unreasonably withheld by the Respondent. The Complainant also claimed interest and costs. The Respondent’s position was simply that the Complainant was properly terminated in accordance with the terms of his contract of employment. t J 5 The Respondent found the Complainant incompetent but could not terminate the Complainant’s services under Clause 9 of the Contract of Employment because that would have damaged the Complainant’s reputation. The Respondent found termination under Clause 2 of the Contract of Employment less damaging to the Complaint’s future. On these facts, the Court below found that although the Complainant’s services were terminated under Clause 2 of the Contract of Employment which allowed each party to give written notice, the real reason for the termination was alleged incompetence by the Complainant. Having made this finding of fact, the court below then held that the Respondent having acted on alleged incompetence by the Complainant to terminate the Complainant’s services, the Respondent should have given the Complainant the opportunity to be heard before terminating his services; that failure to afford the Complainant the opportunity to be heard amounted to a breach of the rules of natural justice, which cannot be ousted by any humane consideration a party may have; that allowing situations like the one in this case encourages employers to terminate on basis of prejudice and then hide behind the notice clause; that as Section 85 of the Industrial and Labour Relations Act allows the Industrial Relations Court to administer substantial justice, it would go behind the notice and delve into the real reasons given for termination in order to redress any injustice discovered; that in this case the termination of the Complainant’s contract of service by notice was wrongful. After holding that the Complainant’s termination was wrongful the Court below made the following awards. (1) Five months gross salary including all allowances. I t J 6 So far as we are able to understand the judgment of the Court below, this award was to cover damages for loss of employment and damages for the mental distress caused to the Complainant by the advertisements of the Complainants job in the press when the Complainant was still in the job. The court below justified this award on the ground that in this case, although the Respondent was procedurally wrong in terminating the Complainant’s services, the termination was not purely based on the employers’ whim or for no reason at all because the Respondent had on previous occasions raised concerns about the performance of the Complainant. (2) USD 12,280.00 and K32,431,715.00 holiday package, which the court found, was a condition of service but was wrongfully withhold. The Kwacha amount was to attract 20% interest to date of judgment and 6% after judgment. The dollar amount was to attract 6%. The Complainant was also awarded the cost of this action. The Respondent now appeals to this court against the finding by the court below that the termination of the Complainant was wrongful and the award of damages and holiday allowance. The Complainant cross­ appealed against the damages awarded for wrongful termination contending that having regard to the facts of this case, the amount awarded was inadequate. The Memorandum of Appeal contains six grounds of appeal, which can be summarized as follows: - J 7 1. The court below misdirected itself when it held that in the exercise of its jurisdiction under Section 85(5) of the Industrial and Labour Relations Act to do substantial justice it was obliged in every case to delve behind the notice even where there is no injustice. The power under Section 85(5) of the Act is intended to redress real injustice such as dismissal founded on the supervisor’s whim without any reason at all as this court stated in the case of Zambia Consolidated Copper Mines Limited Vs dames Matalefl). 2. The Court below misdirected itself in law when it held that because the Respondent had reasons to terminate the Complainant, namely incompetence, the Respondent was precluded from exercising any other rights it had under the contract or common law, such as giving notice. 3. The court below’s finding that Complainant’s superiors did not have a frank discussion with the Complainant about the Complainant’s continued employment or about the Complainant’s response to their concerns contradicts the court below’s own finding that the Respondent had on previous occasions raised concerns about the complainant’s performance. 4. The court below erred in finding that the purported termination of the contract of employment by notice was wrongful. 5. The court below erred in finding that the complainant was entitled to five months salary' with interest as damages for mental distress caused to the complainant by advertising of the job while the Complainant was still in office. J s 6. The court below misdirected itself in finding that holiday bonus package was made a condition of service. Holiday bonus package was awarded entirely at the discretion of the management to reward productivity and extraneous to the contract. In arguing these grounds of appeal, Mr. Chileshe, learned counsel for the Respondent relied on the Appellant’s heads of argument and also made oral submissions. In the heads of argument and his oral submissions, Mr. Chileshe referred us to numerous previous cases on employment w'hich this court has decided in the past and to some English cases. In the view we take of this appeal, it is not necessary for us to go into the details of all cases cited to us in the submissions. In sum and substance, Mr. Chileshe’s submissions amount to this:- The finding of fact by the court below that the termination of the Complainant’s contract was unlawful is not supported by evidence. In terms of this court’s decision in the case of the Director of Public Prosecutions Vs Bwatya Ng’andu and Others(2) a finding of fact not supported by evidence becomes a question of law. In this case the finding that Complainant’s contract of service by notice was wrongful being not supported by evidence becomes a question of law which this court can interfere with. In this case there was no injustice, wrongful or unwarranted termination needing redress which entitled the court below to invoke the provisions of Section 85(5) of the Act(3) relating to doing substantial justice by the court below. There was a lawful and some explicable basis which was reasonable in the circumstances for the termination, namely the deliberate election by the Respondent’s Board of Directors to invoke the notice clause in the contract after the Complainant had failed to meet the benchmarks for professional performance levels expected in his position. J 9 The Respondent having elected deliberately not to terminate the contract on ground of incompetence or conduct but instead terminated the contract by notice, the court below erred when it held that the termination of the Complainant’s contract of employment by notice was wrongful. The transaction was an ordinary contract of employment which could be terminated according to its provisions. The court below could not insinuate into the contract that it was unlawful for either party to exercise its right to terminate it by notice as expressly provided without consultation. It is trite that a contract of employment can be lawfully terminated by giving notice or payment in lieu of notice thereof. This is so particularly where the employee has suffered no prejudice, discrimination, unwarranted victimization or in excusable unfairness. To elaborate the doctrine of election, Mr. Chileshe referred us to many English cases which for the purpose of this appeal, as we have already said, it is not necessary to go into details. We only refer to a passage in the case of Cordrington Vs Cordrington(4) where Lord Chelmsford said at page 866:- “ The procedure is, that there is an implied condition that he who accepts a benefit under an instrument must adopt the whole of it conforming to all its provisions and renouncing every right inconsistent with it”. It was Mr. Chileshe’s submissions that the Complainant having approbated the benefits of emoluments under the contract, the Complainant is estopped from reprobating the notice clause under the contract. According to Mr. Chileshe, this is consisted with what this J 10 court said in Chileshe vs Zambia Consolidated Copper Mines Limited when it stated that: - “The benefit of the substantial Justice which the statutes call upon the Industrial Relations Court to dispense should ensure for the benefit of both sides to the employment contract.” Further, Mr. Chileshe argued and submitted that termination by notice and termination on grounds of conduct or competence as contemplated by Section 26A of the Employment Act Cap 268(5) are mutually exclusive. Finally, Mr. Chileshe submitted that the court below erred when it awarded the holiday package related to performance and, therefore, a conditional perquisite awarded at the discretion of the Respondents General Manager in accordance with the Respondents’ international terms and conditions of employment. On the cross appeal Mr. Chileshe repeated the arguments relating to the appeal. In arguing the appeal and cross appeal Mr. Matibini, learned counsel for the Complainant, relied on the written heads of argument and also made oral submissions. The burden of Mr. Matibini’s submissions is that the evidence of Mr. Albert Herbigneaux and Mr. Kare Engstrom shows that the Complainant’s employment was terminated for late submission of accounts and failure to supervise staff effectively. The real reason for termination of the Complainant’s services, Mr. Matibini argued, was J11 clearly related to conduct and performance. That being the case, the Court below was entitled to invoke the principle in the case of Zambia Consolidated Copper Mines Limited Vs James Matale(l). It was Mr. Matibini’s submission that, as the court below held, humane consideration by a party does not oust requirement for natural justice. He argued that where services of an employee are terminated on grounds of conduct or performance it is mandatory under Section 26A of the Employment Act(5} that the employee be given an opportunity to be heard before his services are terminated. In this case, since the real reason for terminating the Complainant’s services was conduct and performance, and the termination was without exculpatory statement from the complainant, the termination was contrary to law and, therefore, unlawful. He said the court below was on firm ground when it found in favour of the Complainant. On the cross appeal, which relates to the quantum of damages, Mr. Matibini raised a lot of issues in his heads of argument to attack the five months’ salary plus allowances award by the court below. Mr. Matibini referred us to many decisions of this court and English cases on quantum of damages. Mr. Matibini also made oral submissions. For the purpose of deciding this appeal it is not necessary for us to go into the details of all the cases cited and the oral submissions and the submissions in the heads of argument. Suffice it to say that we have anxiously considered the submissions and authorities cited to us. As we understand Mr. Matibini’s submissions on the cross appeal, the Complainant’s complaint is about the manner in which his services were terminated. Mr, Matibini submitted and argued that the termination of the Complainant’s services was done in a manner which caused embarrassment, ridicule and suspicion that the Complainant had J 12 committed a serious offence bordering on criminality or some serious civil offence. The advertisement of the Complainant’s job when the Complainant was still in it had a detrimental effect on the Complainant’s prospects for future employment. The Complainant was portrayed as incompetent and not worthy of trust. Yet the Complainant did a lot of good things when he was in employment and was awarded incentives. In conclusion, Mr. Matibini urged us to find that the termination was traumatic, vexatious, distressful and malicious and to award damages in line with the Chitomfwa case(6). We have given our anxious consideration to the arguments and submissions of counsel and the authorities cited to us and we have also considered the evidence and the judgment of the court below. As we see it, the critical issue in this appeal is whether it was procedurally wrong and against the rules of nature justice as well as the Employment Act (5) to invoke a notice clause to terminate the services of the Complainant who was considered incompetent and whose job was advertised while he was still in it. Grounds of appeal numbers 1-4 dealing with liability, though differently couched, really amount to one ground, which is that the court below erred when it held that the termination of the Complainant’s contract of employment was wrongful. Mr. Chileshe led us through authorities and arguments to show that an employer has the right to elect to terminate the services of an employee by notice as provided for by the employee’s contract of employment, or charge the employee. In this case, Mr. Chileshe argued, the Respondent deliberately elected to terminate the services of the J 13 Complainant by notice as provided for in the Complainant’s contract of service. The Respondent in evidence also said termination by notice was less damaging to the Complainant’s future. In short, the Respondent were magnanimous to the Complainant. The principles Mr. Chileshe argued before us are common law principles. At common law, an employer can lawfully terminate the services of an employee by notice. Unfortunately, in this case, there is codification of the employment law in Zambia. While in some cases an employer may terminate the services of an employee without asking the employee to be heard in that regard, in some cases an employer may not terminate the services of an employee before giving the employee an opportunity to be heard. Section 26A of the Employment Act(5) provides thus:- tt26A. An employer shall not terminate the services of an employee on grounds related to conduct or performance of an employee without affording the employee an opportunity to be heard on the charges laid against him.” Section 3 of the Employment Act defines employers as: - “Employer” means any person, or any firm, corporation or company, public authority or body of persons who or which has entered into a contract to employ any person, and includes any agent, representative, foreman or manager of such person, firm, corporation, company, public authority or J 14 body of persons who is placed in authority over such person employed; And employee is defined as:- u Employee” means any person who has entered into or works under a contract of service, whether the contract is express or implied, is oral or in writing and whether the remuneration is calculated by time or by work done or is in cash or kind but does not include a person employed under contract of apprenticeship made in accordance with Apprenticeship Act or a casual employee; Properly construed these provisions are of general application except where one is employed under a contract of apprenticeship. The arguments and submission by Mr. Chileshe that termination by notice and termination on grounds of conduct or competence as contemplated by section 26A of the employment Act mutually exclusive must, in the circumstances of this case, fail. On the evidence that was before the court below it was not in dispute that the Respondent’s real reason for terminating the complainants’ services was incompetence. As Mr. Matibini rightly submitted, and as the court below held, having decided to terminate the complainants’ services on ground of incompetence, the Respondent was by law obliged to afford the Complainant an opportunity to be heard on the charges of incompetence. Failure by the Respondent to afford the Complainant an opportunity to be heard breached not only Section 26A of the Employment Act (5) but also the rules of natural justice. The result is that the termination by notice in this case was wrongful. In the circumstances, contrary to the arguments by Mr. Chileshe, the Court J 15 below were entitled to delve behind the notice to find the real reason for the termination of the Complainant’s services. The court below had evidence that the Respondent was not satisfied with the performance of the Complainant but instead of charging the complainant with incompetence for the complainant to exculpate himself the Respondent terminated the complainant’s services by notice. Before the termination the Respondent’s General Manager instructed a firm of Accountants to advertise the Complainant’s job without mentioning the naturability of candidates required. The Respondent’s General Manager said with the package the complainant was getting the Respondent could get an expatriate. Further, the complainant’s job was advertised while the complainant was still in it. No wonder the complainant raised issues of racial prejudice by his boss issues like these are the mischief which Section 85(5) of the Industrial and Labour Relations Act(3) relating to administering of substantial justice seeks to redress. The court below cannot therefore, be faulted for invoking Section 85(5) 0 of the Industrial and Labour Relations Act(3) and the principle in Zambia Consolidating Copper Mines Limited Vs James Matalefl). As the Court below properly observed, the fact that the Respondent mercifully withheld incompetence as the real reason for terminating the services of the employment is as far as liability for wrongful termination of the Complainants’ services is concerned, neither here nor there. We now deal with the appeal and cross appeal relating to damages. Mr. Chileshe submitted that the complainant was not entitled to the award of five months salary plus allowances with interest as damages. According to Mr. Chileshe, the complainant did not suffer any prejudice as he got every penny. Further, Mr. Chileshe attacked the k I J16 award of holiday allowance because it was not a condition of service but a mere perquisite awarded at the discretion of the Respondent’s General Manager to reward productive. Mr. Matibini for the Complainant submitted and argued in the cross appeal that having regard to the manner the complainant was treated the award of five months salary and allowances was inadequate. According to Mr. Matibini, we should interfere with the award and substitute it with one in line with Chintomfwa’s case(6). In Chintomfwa case(6) we gave plus allowances and ward of 12 months salary. We have considered the submissions and arguments of counsel. We do not accept Mr. Chileshe submissions that the complainant, to use Mr. Chileshe’s language, got every penny. It is true that the complainant was paid to him what was due in lieu of notice. But that is not the issue here. The issue here is that the complainant lost his employment due to wrongful termination by the Respondent and that the common law remedy of salary in lieu of notice was not the measure of damages. The proper question to pose, therefore, is whether five months salary plus allowances was more than adequate for the loss of employment, as the Respondent would want to argue, or inadequate as the complainant argues. Having regard to the manner in which the Respondent terminated the Complainant’s services, we are unable to say that five months salary plus allowances was unjustified. The complainant held a high position in the Respondent establishment. The complainant’s job was advertised in the press while he was still in it. The complainant was given a letter of termination of employment at 18.00 hours while discussing company matters with his official superiors. * «./ J 17 Doubtless the Respondents’ action caused the complainant mental distress. As we said in Attorney-Ge neral Vs Mpundu(7) damages for mental distress may be recovered in an action for breach of contract. We hold a firm view that in this case the complainant was entitled to damages for mental distress. The court below can, therefore, not be faulted for having included a mental distress component in the award. In the circumstances of this case and for the reason we have given, we find that the complainant is entitled to the five months salary plus allowances as damages for loss of employment and that the award was not excessive. This award is in addition to the monies already paid in lieu of notice. About the holiday allowance, it has been argued before us by Mr. Chileshe that holiday allowance was a perquisite awarded at the discretion of the Respondents General Manager to reward productivity and that the court below erred when it held that holiday allowance was made a condition of the Complainant’s salary. We do not accept these submissions because they are not supported by evidence. As the court below found holiday allowance was made the complainants condition of service. There is a letter to that effect written by the Respondent General Manager to the Complainant (see page 5 and 7 record of appeal). The holiday allowance was clearly one of the complainant’s conditions of service. In Kabwe Vs BP (Zambia) Limited(8) we said that an employer cannot lawfully withhold an allowance that was payable under the conditions of service. In this case, the Respondent could not, on separation, lawfully withhold the holiday allowance payable to the complainant. The court below was on firm ground when it held that the Respondent wrongfully with held the holiday allowance and ordered the respondent to pay it the Complainant. J 18 We find no merit in the appeal and we dismiss it. We only wish to comment interest. The court below awarded interest in these firms. “We award the complainant interest at 20% to date on kwacha amounts and thereafter 6% and we award him interest on the dollar amount at 6%.” We are constrained to interfere with this order. We have repeatedly said that interest up to date of judgment should be at the average short-term deposit rate and after judgment at the average lending rate as determined by the Bank of Zambia . We according order that interest on the kwacha amounts be at the average short-term deposit from date of judgment and thereafter at the average lending rate as determined by Bank of Zambia. We shall not interfere with the interest on the dollar amount. We now deal with the cross appeal. We have considered the submissions by Mr. Matibini and the circumstances leading to the termination of the complainants contracts of employment by the Respondent and the reasons given by the court below for the award. Paraphrased, the court below’s justification for the award was that this was not an extreme case. We agree with that view. We find no basis for complainant 12 months salary plus allowances as we did in the Chintomfwa case (6). We find no merit in the cross appeal. The result of our judgment is that both the appeal and the cross appeal are unsuccessful and we dismiss them. The complainant will J 19 have his costs in the court below. Both the appeal and cross appeal being unsuccessful each party will bear his own costs in this court. M. M. S. W. NGULUBE CHIEF JUSTICE E. L. SAKALA SUPREME COURT JUDGE