Banyankole Kweterana Co-operative Union Ltd v Mastiko (Civil Appeal No. 23 of 1999) [2000] UGCA 50 (30 May 2000)

# THE REPUBLIC OF UGANDA

# IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# CORAM: HON. MR. JUSTICE S. T. MANYINDO, DCJ.

i I

## HON. LADY JUSTICE A. E. N. MPAGI-BAHIGEINE,JA.

# HON. MR. JUSTICE J. P. BERKO, JA.

# CIVIL APPEAL NO. 23 OF 1999

### BANYANKOLE KWETERANA CO-OPERATIVE UNION LTD.... APPELLANT

#### VERSUS

### JOHN MASTIKO RESPONDENT

l0 (Appeal from the Judgment and Decree ofThe Honourable Lady Justice Byamugisha in HccS No. 36 of 1997 dated 96 March 1998.)

#### JUDGMENT OF A. E. N. MPAGl-BAHIGEINE. JA.

This appeal is only against the award of gratuity amounting to Shs. 38,400,000/= which was granted, amongst other claims, by the High Court (Byamugisha J) on 9.3.1998 in an action for wrongful dismissal.

The following is the background to the case. By a contract of employment, Ex P2, the appellant, Banyankore Kweterana Co-operative Union, engaged the respondent, John Matsik2as its General Manager, on a four year term with effect from 11211995. On 2411111996, after one year and nine months, the appellant terminated the contract without assigning any reason. They proceeded under Clause 'l 1 of the said contract, which provides:

> "11 . The Union may terminate the employment of the employee without specifying reason on payment of the salary for the unexpired period plus a sum

# representing a fair valuation of loss of contract had it

## been allowed to run it to full course."

The respondent,who was not paid as stipulated above,sued the appellant in // HCCS No. 36/97 seeking special and general damages for breach of contract. The learned trial judge entered judgment for the respondent, awarding him Shs. 13,389,500/= as salary for the unexpired contract Oeriol Shs. 5,000,000/= for loss of contract; Shs. 38,400,000/= as gratuit, which is the subject of this appeal, costs of the suit and interest at court rate.

l0 20 At the hearing of this appeal and after some argument, Mr. Gilbert Nuwagaba for the appellant abandoned the other grounds of appeal deciding to appeal only against the award of gratuity. He argued that gratuity was neither provided for nor recoverable under Clause 11 because it was already covered under the package for the unexpired period of contract and fair valuation of loss of contract. He submitted that the judge erred in awarding it since it is only payable under Clause 2 where the contract is allowed to run its full course or was terminated under the various circumstances under Clause 7. He submitted, in the alternative, that the respondent would be entitled to gratuity for the period served which would give him only Shs. 1,954,000/= and not for the whole period of 4 years as the trial judge had found. He further pointed out that the learned judge also erred when she failed to take into consideration the income tax payable by the respondent on the sums she so awarded as it was mandatory under Section 20(1)(a) lncome tax Act No. <sup>11</sup>11997 . He however resignedly abandoned this issue too.

Mr. Kenneth Kakuru learned counsel for the respondent, submitted that I Clause 11 under which the contract was terminated was not covered under

the proviso referred to in Clause 2(b) and which were covered under Clause 7(axexg); and Clause 7(b)(c)(d) and (f). He asserted that the respondent's circumstances were covered under the general rule under Clause 2(b) which is that he is entitled to gratuity at the end of the contract of a sum representing one month's package of every year of service completed, times the number of years where the number of years are squared since 1"t February '1995 till the end of the contract. He pointed out that Clause 1 1 merely allowed the appellant the option to terminate the contract without assigning any reason, and that the respondent was entitled to full benefits since no reason was given for the termination. lf it were otherwise the contract would have said so. He prayed court to dismiss the appeal.

Clause 2(b) provides:

"The Union furlher agrees to pay the employee a gratuity at the end of this contract of a sum representing one month package of every year of service completed, times No. of years where the number of years are squared since l"t February, 1995 till the end of this contract, provided always that should the employee's servrce be terminated by the Union under clause 7(a)(e) and (g) or by lhe employee under clause 7 2 then the employee shall receive this gratuity based on the period he has served but if he is dismissed under clause 7(b0, (c), (d) and (f) then the employee shall not be entitled to any gratuity in respect of the year during which the cause of the dismissal arose."

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"N.8. For purposes, of computing the package, only the basic salary, entertainment allowance and cost of living/responsibility allowance shall be calculated."

The learned trial judge held thus:

"The contract provided tor payment of gratuity to be paid at the end of the contract. This is contained in Clause 2(b). The gratuity however was not payable to the plaintiff if his contract was terminated under Clause 7(b)(c)(d) and (f) which was not the case here. Counsel for the plaintiff worked out a figure in accordance with Clause 2(b) of the conlract. The figure arrived at ... Shs. 38,000,000/=. The defence disputed this figure contending that the plaintiff was not entitled to any gratuity since he concede financial /oss to the defendant. With respect I think the plaintift was not dismissed for causing financial /oss to the defendant. There was no proot of this and the counter - claim was withdrawn with costs. The unproved allegations about financial loss cannot be used in my view to deprive the plaintiff the gratuity due to him under the contract. I thereforc accept the figure of Shs. 38,400,000/= and award it

The question turns entirely upon the construction of Clauses 2(b) and 11 of the contract, whether gratuity was to be paid in full or not. The general law governing this situation is that where a servant or employee sues for damages for breach of contract, he is entitled to recover the estimated

l0

.l

pecuniary loss resulting as a reasonable and probable consequence for the <sup>p</sup>remature determination of his contract of service. See Lake v Campbell (1862)5LT582. Theem ployee is therefore entitled to the amount of the salary which he has been prevented from earning by reason of his wrongful dismissal including the value of any other benefit to which he is entitled by virtue of his contract and of which he is deprived in consequence of its breach, or put in another way, it is the amount he would have earned under the contract for the eriod until the em lo er could lavvfull have terminated This includes any gratuity promised and payable on completion of the contractual term as part of the package. The construction I put upon Clause 11 is that the appellant was determined to break the contract and having done so, the result is that it must pay all damages legally arising from such breach. These include the gratuity expressly provrded for under Clause 2(b). The respondent is entitled to recover it since he was denied the opportunity to earn it. I entirely agree with the learned trial judge's calculations of Shs. 38,400,000/= which is the sum total for the entire remaining 27 months of the contract. Mr. Nuwagaba's figure of Shs. 1,954,000/= is quite untenable.

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The learned trial judge, when assessing damages failed to take into account the amount of income tax payable by the respondent, as damages for wrongful dismissal are liable to income tax under S 20 (1Xd) lncome Tax Act No. 1 1/1 997. Also see outhern 'hlands Tobacco <sup>n</sup>ion Limited - <sup>v</sup> \rrq-\{L I David McQueen (1960 EA 490 is aspect of the matter. as pointed out aboverwas abandoned by Mr. Nuwagaba and thus does not fall for decision by this court.

In the result I would affirm the award of Shs. $38,400,000/$ = made by the trial judge in respect of the respondent's gratuity and dismiss the appeal with costs.

<table>

Dated at Kampala this ....................................

$\mathcal{Q}$ A. E. N. Mpagi-Bahigeine **JUSTICE OF APPEAL.**

$10\\$

### THE REPUBLIC OF UGANDA

#### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### CIVIL APPEAL NO. 23 OF 1999.

#### COR. AM: HON. MR. JUSTICE S. T. MANYINDO, DCJ, HON. LADY JUSTICE A. E. N. MPAGI-BAHIGEINE, JA. HON. MR. JUSTICE J. P. BERKO, JA.

BANYANKOLE KWETERANA CO. OPERATIVE UNION LTD APPELLANT

#### VERSUS

(Appeal from the Judgment and Decree of The Honourable Lady Justice Byamugisha in Hccs No. 36 of 1997 dared 9'" March 199E.)

# DGMENT OF J. P. BER o

I have had the advantage of reading the Judgment prepared by Lady Justice Mpagi-Bahigeine, JA. in draft in which she sets out the facts and discusses fully the question of law which arise in this appeal. I agree with her that the appeal should be dismissed and lhave nothing to add with regard to the orders proposed by her.

Dated at Kampala this day of 2000

J. P. Be Jus Apireal.

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# CORAM: HON. JUSTICE S. T. MANYINDO, DCJ. HON. LADY JUSTICE A. E. N. MPAGI-BAHIGEINE, JA. HON. MR. JUSTICE J. P. BERKO, JA.

# CIVIL APPEAL NO.23 OF 1999

# BANYANKOLE KWETERANA

CO-OPERATIVE UNION LTD........... APPELLANT

## VERSUS

RESPONDENT JOHN MATSIKO

> ( Appeal from the Judgment and Decree of the Honourable Lady Justice C. K. Byamugisha in HCCS No. j6 of <sup>1999</sup> dated 9th March 1998)

# JUDGMENT OF MANYINDO. DCJ

t t

> I read the judgment of Mpagi-Bahigeine JA in draft and I agree with it. It seems clear to me that under clause 2(b) of the contract gratuity is payable for all the contract period. Only if the employment is terminated under clause 7 of the contract will the gratuity be only for a period served. If, as in this case, the contract of employment is terminated without reason, that is to say there is no alleged fault on the part of the employee, then the latter

must get the gratuity for the full contract term. The trial Judge was correct on the point.

Accordingly, I would dismiss the appeal with costs and as Berko JA also agrees, it isprdered. There will be orders in terms proposed by Mpagi-Bahigeine JA.

# S. T. MANYINDO DEPUTY CHIEF JUSTICE