Simango v Zambia Railways Ltd (Appeal 57 of 2001) [2001] ZMSC 157 (12 September 2001)

IN THE SUPREME COURT OF ZAMBIA SCZ APPEAL NO. 57/2001 APPELLANT HOLDEN AT KABWE AND LUSAKA (Civil Jurisdiction) KENNEDY SIMANGO AND ZAMBIA RAILWAYS LIMITED Coram: Ngulube, CJ., Sakala and Chaila JJS 7th August and 12th September, 2001. For the Appellant, In Person. For the Respondent, Mr. P. C. Musonda, Legal Counsel. Sakala, JS., delivered the Judgment of the Court. JUDGMENT Case referred to:- 1. Kabwe Vs BP Zambia Limited SCZ 8/164/96 This is an appeal against a judgment of the High court dismissing the appellant’s claim for K693,288.00, a sum representing under payment of his terminal benefits. The facts of the case are that the appellant, who was employed with the respondent on 8th February 1991, was retrenched with effect from 28th February, 1995 by a letter dated 16th January, 1995. According to the letter of retrenchment, the retrenchment package was calculated on the basis of the appellant’s salary per month x number of years x factor one. This worked out to be K341,320. However, by a corrigendum letter dated 18lh May, 1995, the salary was placed at K86,660.00 per month at factor two. But the package he received was calculated at factor one. : J2 : The appellant testified that he was aware that a circular letter dated 7th April 1995 replaced the earlier circular on Conditions of Service. That the corrigendum letter adjusted his salary upwards and, that the mention of factor two in the corrigendum letter was an error on the part of the respondent. The evidence on behalf of the respondent was that, the appellant was informed of the error before he was paid on the basis of factor one. That the circular letter of 7th April 1995, affected the appellant because the exercise started in February 1995. The learned trial judge found the case to be very simple with straightforward issues, the question for determination being whether the appellant was entitled to have his terminal benefits calculated using factor two or factor one. He found as a fact that as at December 1994, the appellant’s salary was K85,330 and that the factor applicable to him before retrenchment was one. The learned trial judge observed that the bone of contention was the interpretation of the corrigendum letter dated 1st May, 1995. After reproducing the letter in full, the trial judge found that the corrigendum letter gave reasons for correcting the letter of retrenchment; this being that the salary had been increased and placed the appellant’s salary at K86,660.00. The learned trial judge noted that the corrigendum letter did not give reasons for changing the factor. The trial court concluded that the mention of factor two in the corrigendum letter was clearly a mistake and that in any event, the appellant could not claim a sum of K693,288 as he had already been paid K34l,320. This conclusion was based on the fact that the corrigendum letter made it clear that the number of years and the factor had not changed. The court rejected the appellant’s contention of being entitled to factor two as untenable. The appellant’s claim was dismissed. The court made no order as to costs. The appellant filed heads of argument based on three grounds of appeal. Before he argued his appeal, we granted him leave to adduce fresh evidence there having been no objection. The first ground of appeal was that the learned trial judge misdirected himself in holding that the mention of factor two in the corrigendum letter dated 1st May 1995 was a mistake. We heard arguments and submissions on this ground that on the evidence on record, factor two was part of the Conditions of Service between the appellant and the respondent. The appellant : J3 : submitted that the fresh evidence adduced, which is a circular letter from the Managing Director dated 28th February 1995, once read together with the document entitled retrenchment package agreed upon in 1992, provided for a new formula effective immediately. The new formula was factor two x monthly salary x number of years served The appellant submitted that the retrenchment letter of 16"’January 1995, was effective from 28lh February 1995 which was also the effective date of the Managing Director’s circular letter. The appellant submitted that in these circumstances, his retrenchment package had to be worked out on the basis of the Managing Director’s circular letter number one of 28th February, 1995. The appellant pointed out that in addition to the Managing Director’s circular letter, the respondent wrote him, by way of a corrigendum letter dated 1st May, 1995, which among other things, adjusted his rate of pay to K86,660 per month meaning that his retrenchment package was now K86,660 x four years x two bringing the retrenchment package to K693,288.99n. The appellant contended that the respondent’s letter confirmed the Managing Director’s circular letter number one of 28th February 1995. The appellant further submitted that the new retrenchment package published on 7th April, 1995did not affect him as he had already left employment with the respondent. The appellant cited the case of Mike Musonda Kabwe Vs BP Zambia Limited(l) on revising Conditions of Service where this court pointed out that fundamental Conditions of Service cannot be changed to the disadvantage of employees without their consent. The second ground was that the learned trial judge misdirected himself in holding that the number of years and the factor were not changed by the corrigendum letter. He submitted on this ground that the number of years and the factor were changed by the respondent’s Managing Director’s circular letter of 28,h February 1995, confirmed by the corrigendum letter of 1st May 1995, The third ground criticised a finding that the appellant was not entitled to a sum of K693,288 since he had already been paid K341,320.00. The submission on behalf of the respondent supported the learned trial judge’s finding that the mention of factor two in the letter of Is' May, 1995 was a mistake, that the number of years served by the appellant and factor one were not affected by the letter of 1st may, 1995, that : J4 : the learned trial judge did not misdirect himself when he held that the appellant was not entitled to K693,000.00, and that the appellant was correctly paid his retrenchment package as negotiated by the Union and contained in circular letter dated 7th April 1995. We have anxiously considered the evidence on record, the judgment of the learned trial judge and the submissions by the appellant in person and those on behalf of the respondent. In our view, the interpretation of the documentary evidence does not make this case simple and the issue is not straight forward. As we see it, the bone of contention is the interpretation of all the documents. The relevant documents for interpretation are the 1992 Conditions of Service, the letter of retrenchment dated 16th January but effective 28th February 1995, the Managing Director’s circular letter number one dated 28th February 1995, the retrenchment package circular dated 7th April, 1995 and the corrigendum letter dated 1st May, 1995 addressed to the appellant. All these documents were under the authorship of the respondent. They are not indispute. The Conditions of Service of 1992, although not produced, are alluded to in the document of 7th April 1995. It was common cause that the retrenchment package formula in the 1992 Conditions of Service for a person who had served only four years as the applicant, the applicable factor was one. The retrenchment letter of 16,b January 1995 calculated the retrenchment package as follows:- K86,330 x 4x1 which worked out to be K341,320. This, the appellant, was paid. The same letter of retrenchment indicated that the effective date was 28th February 1995. So far, no dispute arises. However, on 28th February, 1995 the respondent’s Managing Director issued a circular letter number one addressed to all employees in which a new retrenchment package formula was set out with immediate effect. The relevant part of the Managing Director’s circular reads: Management conducted a survey of packages offered by other organisations and after a careful consideration, the company opted for a package which would be both suitable and affordable while not seriously prejudicing those affected employees. The new formula is therefore as follows and is effective immediately:- 2 x Monthly Rate of Pay x No. of Years served. : J5: However, those employees affected who are of age 55 and above will he paid a normal retirement package while those who are 50 tO 54 years of age will be paid 3 x Monthly Rate of Pay x No of Years served ” The submission of the appellant was that this new formula, which was better than the 1992 formula was applicable to him. In fairness to the learned trial judge, the Managing Director’s Circular was not before him. We accept the argument by the appellant that he was covered by the new formula and therefore entitled to a retrenchment package based on the new formula. However, on 7th April, 1995, long after the appellant had been retrenched, and long after the Managing Director’s circular, another circular letter on behalf of the respondent was issued. This circular in part read as follows:- This serves to inform al! the retrenchees as well as the serving employees that negotiations between Management and the Railway workers Union of Zambia over the retrenchment package have been concluded, and an agreement has been reached over the matter. The agreed retrenchment package is effective February, 1995 and will apply to both union represented and non-represented employees and therefore superceeds the package agreed upon in 1992 as well as the one contained in the Managing Director’s circular No. 1 dated 2^h February, 1995”. This circular, which purported to have a retrospective effect, set out a RETRENCHMENT BENEFIT asfollows:- RETRENCHMENT BENEFIT “The retrenchment benefit shall be based on the length of service rendered in the company and within ZIMCO group of companies. In this regard a multiplier co­ efficient which shall be used in the computation of the package will depend on the length of service. The formula shall be as follows:- Monthly Rate of Pay x Service Period x Co-efficient factor Thefollowing Co-efficient factors will apply: (in years) SERVICE PERIOD 1-5 years of continuous service 6-14 years of continuous service 15 years and above continuous service FACTOR 2 : J6 : If this circular of 7’h April, 1995 was followed to its logical conclusion, the effect would mean that all those paid the retrenchment packages under the formula of the Managing Director’s circular number one dated 28th February 1995 had to refund the respondent the difference. This is so because the circular of 7th April reduced sonic of the packages worked out on the basis of the Managing Director’s circular. We cannot accept that that was the intention of the respondent. But in the case of the appellant, on 1st May, 1995, he received a corrigendum letter, which in part reads: “Dear Sir, Re: CORRIGENDUM Reference is made to my letter dated 7o . January, 1995 regarding your retrenchment and wish to inform you that following the scale increase effective 16'1' January, 1995 the rate of pay per month used has been adjusted to K86,660.00 and as a result your package too will be adjusted to read as below:- K86,660.00 x 4 years x 2 = K693,288.00 However, the other contents of my earlier letter remain unchanged. ” This letter adjusted the salary upwards and it also adjusted the factor upwards from one to two. The contention by the appellant is that, there is no question of mistake in these circumstances. He submitted that the circular letter of 7,h April, 1995 was issued long after he had been retrenched and when he was no longer a member of the union. It was the appellant’s submission that the applicable retrenchment package was as contained in the Managing Director’s circular. We are satisfied that by the Managing Director's circular, the appellant had accrued a right to an enhanced formula which provided for factor 2. It is too much of a coincidence that the Managing Director’s circular should give formula with factor 2 and corrigendum letter also give factor 2. The circular of 7th April 1995 reducing the formula of the retrenchment packages could not have had any retrospective effect on the employees who had since left the respondent and who had had their retrenchment packages calculated based on the 1992 and 1995 retrenchment package formula. The question of mistake in the case of the appellant did not arise. On the facts and the documentary' evidence, we are unable to uphold the learned trial judge's finding that the use of factor two in the corrigendum letter of 1st May, 1995 was a mistake. We said in the Kabwe Vs BP (Zambia ) Limited case (1) that basic Conditions of Service cannot be varied without the consent of an employee. In the instant case, the varied formula had no effect on the appellant because he had already left employment with the respondent. We allow this appeal. We award the appellant a sum based : J7 : on the adjusted rate and factor two less whatever the appellant has already been paid. The sum awarded will carry interest at average short term Bank deposit from the date of the writ to the date of this judgment. The appellant will have his costs in this court limited to his out of pocket expenses to be taxed in default of agreement. M. M. S. W. Ngulube, CHIEF JUSTICE. E. L. Sakala, SUPREME COURT JUDGE. M. S. Chaila, SUPREME COURT JUDGE.