Lagu Emmanuel & Anor v ABB Limited and ABB Limited v Lagu Emmanuel & 2 Ors (Consolidated Labor Dispute Claim 283 of 2016) [2022] UGIC 70 (29 April 2022)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA LABOUR DISPUTE CLAIM NO. 238/2016 (ARISING FROM LABOUR DISPUTE REFERENCE NO. 118/2016 FROM KCCA LABOUR OFFICE)

## CONSOLIDATED WITH

# LABOUR DISPUTE CLAIM 10/2018 (ORIGINALLY NO.9/2018) (ARISING FROM COMMERCIAL DIVISION - HIGH COURT CIVIL NO. 700 OF 2016)

## BETWEEN

# 1. LAGU EMMANUEL 2. MWESIGWA AMANYIRE MOSES CLAIMANTS

## VERSUS

ABB LIMITED RESPONDENT

### AND

ABB LIMITED COUNTER CLAIMANT

### VERSUS

| 1. | EMMANUEL LAGU | | |----|-------------------------------|-----------------------------| | 2. | MWESIGWA AMANYIRE MOSES | } COUNTER RESPONDENTS | | 3. | MUGARURA CHARLES | RESPONDENT |

### Before

1) The Hon. Head Judge, Ruhinda Asaph Ntengye

### Panelists

1. Mr. Bwire John Abraham

2. Ms. Julian Nyachwo

### 3. Mr. Katende Patrick

#### AWARD

#### Brief facts

By a memorandum of claim the claimants alleged that having been employees of the respondent for over 12 years, they were unlawfully dismissed thereby suffering damages. They contended in the memorandum of claim that the respondent on 5/4/2016 sent an email from South Africa (the Headquarters) containing salary increases and bonus calculations for the year 2015 and on perusal the 1st and 2nd claimants raised a query. On 8/4/2012 an email from South Africa approved the bonus calculation and salary increments for the year 2016.

Despite a second query by the 2nd claimant on the same date which was copied to all concerned parties, he was ordered to pay in accordance with the approved bonus/score card. Thereafter, the 1st and 2nd claimants prepared payrolls based on the approved bonus calculations and salary increments and forwarded to the Headquarters of Human Resource, South Africa for approval. On 26/4/2016 the 1st and 2nd claimants received the payroll bonus and salary increment approved by both the Human Resource manager and the CEO. Upon receiving this instruction the first claimant paid the approved structure and prepared a financial report and sent it to South Africa upon which management in South Africa alleged that there was an over payment. Several meetings were held at which the respondent demanded that all employees who had received the bonus pay it back. The claimants proposed payment schedules which were rejected and instead they were served with suspension letters and invitations to attend a disciplinary hearing.

The claimants contended in the memorandum of claim that the disciplinary hearing was prejudicial as it demanded representation to be only by fellow employees and not by persons of their choice and it was biased because those who approved the payment were part of the disciplinary panel.

The respondent filed a memorandum in reply contending that the 1st and 2nd claimants controlled and managed the respondent company in Uganda which was

was associated with ABB South Africa which had managerial aspects for all entities of the ABB group with Southern Africa including Uganda. The respondent contended that it operated an annual bonus scheme encompassing payment of bonus of 3 times monthly salary for senior managers in the category of the 1st and 2nd claimants and 2 months bonus for other staff; and the method of calculation at all material times known to the 1st and 2nd claimants.

When in April 2016 bonus calculations were prepared for Uganda, one Latchanah, the compensation and benefits manager made a grave mistake by calculating the bonus payment on the basis of **annual** salary instead of **monthly** salary.

When on 5/4/2016 a salary increase and bonus spread sheet was sent to the 1st and 2nd claimants they were instructed to verify all data so as for the compensation manager to get approval of the M. D, South Africa.

According to the respondent, the 1st and 2nd claimants realized the mistake and calculation by use of **annual** as opposed to **monthly** salary but concealed this mistake from Latchanah and therefore they did not act on the directive to verify all data before sending it back to Latchanah to obtain approval of the M. D.

According to the respondent, the compensation manager completely ignorant of the mistake, but under the assumption that the 1st and the 2nd claimants had complied with his instructions and verified the data, went ahead to seek the approval from the M. D. and sent the approved copy to Uganda for processing. The respondent alleged that the claimants, aware that they stood to benefit from the mistake, did not substantially amend the schedules and correct the method of calculation which was known to them and later on refused to acknowledge that the money belonged to their employer and to repay it after they were requested to do so and that this constituted gross misconduct warranting a summary dismissal.

In a counter claim, the respondent sought to recover money paid to the 1st and 2nd claimant and one Charles Mugarura by mistake as bonus payments. The respondent claimed that the first claimant was overpaid by net 186,532,500/= and

the 2nd claimant was overpaid by 91,346,531/= while the 3rd respondent to the counter claim was overpaid by 17,417,680/=.

#### Agreed issues

- 1. Whether the amounts of money overpaid by the respondent/counter claimant to the counter respondents were paid in error or by mistake. - 2. Whether the counter respondents should refund to the respondent/counter claimant the amounts that were over paid as follows:

| a. | Emmanuel Lagu | - | 186,532,500/= | |----|-------------------------------|---|---------------| | b. | Mwesigwa Kamanyre Moses | - | 91,346,531/= | | c. | Mugarura Charles | - | 17,414,680/= |

- 3. Whether the summary dismissal of the 1st and 2nd claimant was fair and or lawful under the circumstances? - 4. Whether there are any remedies available to the parties.

#### Representations

The claimant/counter respondents were represented by Mr. Kawuzi Peter, Ms Deborah Takora and Mr. Charles Mugalula of M/s Task Advocates and M/S Katende ,Sempebwa advocates respectively. The Respondent/counter claimant was represented by Mr. William Kasozi of FK Mpanga Advocates while the 2nd respondent (in the counter claim) one Charles Mugarura was represented by one Derick Kamanzi.

#### Evidence adduced

The claimants /counter respondents adduced evidence from the two of them to the effect that when they sought clarification about the bonus payments, the respondent/counter claimant insisted that the calculated bonuses should be paid and that it was upon this advice that they paid, only later to be asked to pay back the same without being accorded an opportunity to schedule the payment. According to them, they were subjected to a sham disciplinary hearing resulting in unlawful termination.

The second respondent, Charles Mugarura testified almost in the same terms as he insisted that the bonus was paid to him after due authorization and it would be unjust to be compelled to pay it back after spending it in good faith.

The respondent's evidence was that the bonus payment was by mistake which the claimants was well aware of and they would have avoided if it was not for taking advantage of the mistake for personal unfair gain at the prejudice of the respondent.

## **Submissions**

The time lines of the submissions given by court were breached by the claimants who filed their submissions on 28/1/2022 instead of 3rd Dec 2021. As a result, there were no submissions of the respondent on the record by the time we embarked on writing this Award. It is not clear whether the respondent was served with submissions of the claimants. We shall however proceed to evaluate the evidence and pronounce ourselves on the verdict without considering any submissions given the time constraints.

## **Decision of court**

There is no doubt on the evidence that the 1st and 2nd claimants were senior employees of the respondent stationed in Uganda. The respondent was a Limited liability company which was associated with ABB South Africa both of which were in a bigger group of ABB. As evidence shows, ABB South Africa had managerial aspects over the respondent in Uganda.

Evidence is clear that the respondent over a period of time was in the practice of offering its employees bonus payments in a year depending on the performance.

In April 2016, ABB South Africa through a one TJ Latchanah, initiated payments of bonus to the claimants and other employees and gave clear calculations and basis of the bonus. The 1st claimant being the General Manager of the respondent in Uganda and the 2nd claimant being the financial Controller in Uganda were well

aware of the usual basis of the calculation of the bonus. On receipt of the bonus calculation from TJ Latchanah from South Africa by email, they raised queries. In one of the emails they stated

**"We did not understand how exactly the multiplier works and how the bonus is...based on annual salary..."**

In another email they stated:

**"The managers (Mr. Lagu Emmanuel, Moses Kamanyire and Sarah Burangi)'s maximum bonus entitlement is three months' salary and all the other staff are entitled to two months' salary. This needs to be adjusted on the way how the excel is** prepared. **That means the 122% must be applied on the maximum bonus entitlement for all staff (managers three months and other staff two months)**..."

In the evidence of Mwesigwa Kamanyire, 2nd claimant, under paragraph 20 of his written statement, he acknowledged having received information from South Africa Country Human Resource Manager that there was an error in the bonus calculation and that those who were paid should pay back the money,

The 1st claimant, Lagu Emmanuel under paragraph 25 of his statement acknowledged having received information that the bonus payment was in error.

**It** is therefore not denied that by 12/05/2016 the claimants were aware that the bonus payment was calculated and processed in error. Both claimants attested to the fact that attempts to find a mechanism of paying back the overpaid bonus were made by both parties. It is our considered opinion that from the date that the claimant's acknowledged that they were over paid by an error, the overpaid sum became a debt owed to the respondent by the claimants because it was not a payment due to them which they were entitled to. The fact that the employer did not originally realize the error and in error approved the bonus even after the claimants had raised a query, did not entitle the same to the claimants. They owed a duty to the respondent to find ways and means to pay back since it did not belong to them. It is therefore surprising to find in the memorandum of claim under paragraph "m", the following pleading: **"That other meetings were held where the respondent put the claimants under unnecessary pressure and duress to sign documents committing themselves to pay the money that was rightfully paid to them."**

Nothing is further from the truth than a statement that money paid to someone under a mistake or error rightfully belongs to the person who is mistakenly paid. We think that the question for this court is whether the recovery mechanism used by the respondent was fair.

The claimants in the memorandum of claim pleaded that having been instructed to hand in their schedule of payment by 6/6/2016 they were asked before this date to go to South Africa for a meeting to discuss the way forward as regards the recovery process of the bonus but their proposed schedules were rejected and instead they were served with suspension letters.

In cross examination the 2nd claimant, Kamanyire, acknowledged that there were several meetings relating to recovery of money including a tele conference with one Marvin. He asserted during cross examination that he did not agree that there was an overpayment. He acknowledged receiving a demand letter (at page 31, claimants' trial bundles). The letter provided under paragraph 5

> **"Failure to pay that sum may result in disciplinary action for gross misconduct for retaining a wrongful credit; for failure to follow reasonable orders; and a breach of the obligation of mutual trust and confidence in your employment contract"**

under paragraph 7 of the same demand letter the first claimant was informed that should he need to discuss any further he ought to consult one Marvin within 7 days of the date of the letter.

The second claimant in cross examination admitted that he did not comply with the contents of the demand letter. He also confirmed having received a letter containing options of payment (page 10 of respondent/counter claimants additional trial bundle "A") and that he did not take any of the options. He emphasized that his terms of the repayment were rejected and that he spent the money in repayment of a loan of the ABSA Bank and that up to 5/05/2016 he was taking money off his account. In cross examination on his bank statement, he confirmed that on 06/05/2016 his account had 133,413,000/= and that between

06/05/2016 and 12/05/2016 his account had 118,413,000/=. He confirmed that on 16/05/2016 there was conference of staff at which he did not commit to pay the money but the same day he withdrew 16 million.

He confirmed that on 20/5/2016 he received an email asking him to pay and that at this time he had 101 million. He confirmed that on 23/05/2016 in another meeting he was asked to pay and on the same date he withdrew 25,000,000/= and later he withdrew more money.

From the evidence it seems clear to us that the 2nd claimant first of all believed that the money was rightfully paid to him and it was unjust for him to pay it back and even if he was to pay it back he would only pay it at his own pace and his own terms. Even then we have not seen the terms he proposed under which he would pay the money.

On perusal of the minutes of a meeting held on 17/05/2016 which the second claimant called to order and chaired (Annexl2 of the amended reply to memorandum of claim and counterclaim) it is clear that the second claimant, financial controller, was not in position to pay back the bonus paid in error. For example, the fourth bullet of the minutes provided **"Charles on behalf of the staff brought to their attention that most** staff had **used up the money for personal ventures and they were not ready to refund the money as a way to resolve the error since their salaries are already taking care of other liabilities with banks."**

The first claimant, Lagu Emanuel, Managing Director, in cross examination on his bank statement confirmed that on 28/4/2016 he received 236,992,000= and that on 12/03/2016 his refusal to pay (the paid bonus in error) was not because he was not capable to pay and that he continued to make withdraws until the money was over despite having been warned that failure to pay would result in a disciplinary hearing.

We have no doubt in our mind that the 1st claimant, just like the second claimant was not in positon to pay back the money because according to both of them it was by an error of the respondent which they themselves alerted the respondent about.

We have already intimated that this positon was wrong since they were under an obligation to pay back. It is our opinion that the respondent gave the claimants viable options under which they would have paid the money if they felt they were obliged to pay.

We have taken note of the consent judgements in respect to one Sarah Burangi, one Nuwagira John, one Edward Semakula and one Patrick Mugwanya (Annex 14A, 14B, 14C, 14D, 14E, respondent/counter claimant's additional trial bundle "A"). These were employees together with the claimants who, in our view, unlike the claimants, recognized and agreed that the bonus calculations were by error and therefore agreed to pay back in an arrangement agreeable to both parties. There was no justification whatsoever for the claimants to insist that the bonus payment was rightfully theirs or that if they were to pay they would pay at their own terms. The first issue in our opinion had no contestation as it is clear that the over payment was in error and by mistake.

The next question is whether the disciplinary proceedings were fair resulting in a fair dismissal.

The notice of hearing was on 10th June 2016 which at the same time effected a suspension. The hearing date in the notice was 21/6/2016. The charges were indicated in the notice (this is found at pages 33-42 of the claimants trial bundle. Both claimants offered their defenses to the charges.

The complaint of the claimants was that they were denied a representative of their choice to attend the hearing. The respondent's trial bundle filed on 21/2/2011 at page 18-26 includes proceedings of the hearing of the 1st claimant, Emmanuel Lagu and at page 27-32 are proceedings of the 2nd claimant, Moses Kamanyire.

It is noted that the Notice of hearing specifically informed the claimants to be represented by a fellow employee. We agree with the claimants that this was

restrictive as to who should have represented them and this was contrary to **Section 66 of the Employment Act** which provides for a representation of a person of the employee's choice.

Nonetheless in the circumstances of this case we do not think that this was very prejudicial to the claimants. This is because none of them during the proceedings asked the committee for an adjournment to better prepare a defense.

After carefully perusing the proceedings, we do not think the participation in the disciplinary proceedings of one of the officers who was involved in the calculation and subsequent approval of the bonus, was prejudicial to the claimants' case. This is because it was not in dispute that the calculation was by error and therefore the payment of the bonus was by error. The claimants confirmed this but their case was that it was an error that they alerted the respondent about and that therefore they were not liable to pay. This as we earlier intimated was not an acceptable submission to us. We have perused the charges and the outcomes of the hearing. We do not see any injustice in the whole process, particularly in the finding on the charge relating to theft which took into account the fact that the claimants did not make the error in the overpayment of the bonus, that they queried the bonus payment and that they were directed to pay by the Human Resource team. We agree with the committee in the finding that the claimants were aware of the manner in which bonuses were calculated and once informed of the mistake and asked to return the money, the retention and use of the money and unwillingness to return it, and claim it as their own amounted to theft (though not necessarily in the criminal law sense). The claimants were not certainly facing a criminal trial but an administrative disciplinary process.

We do not find any fault in the finding of the committee on the rest of the charges, given that we have already made a finding that the claimants owed a duty to the respondents to return what had been given to them by mistake or error. Failure to do this amounted to breach of trust and confidence as well as breach of fidelity to the employer.

Accordingly, the dismissal was not only lawful but fair. The last question is **what remedies are available.**

The respondent in the counter claim sought to recover the money paid by error to the claimants and one Charles Mugarura. In his evidence the said Mugarura informed court that 30/12/2015 was his last day of work but management asked him to stay around up to March 2015 and 6 months after he had left work he received bonus for 2015 only later to be shocked that it was by error. He was later called to attend a meeting. In cross examination, he insisted he could not pay because had already used the money believing he was entitled to it and he was emphatic that he was not willing to pay it back.

As in the case of the claimants, it is clear that Mr. Mugarura was overpaid the bonus and he knew it was by mistake or error. Accordingly the moment he was made to know of the error, he was duty bound to return the same, since it did not belong to him. The fact that he subsequently left the respondent's employment did not stop him from the obligation to pay back what did not belong to him. On perusal of his bank statement, it is clear that his account had been credited with this bonus which, as already intimated, was by mistake. His insistence that the bonus rightly belonged to him was misplaced.

In conclusion, the claimants as well as the 2nd counter respondent, Mugarura Charles, having conceded that they received the bonus, and this court having declared that the said bonus was paid by error it was recoverable from all the counter respondents.

In conclusion, the claimants have failed to prove the case of unlawful dismissal which is hereby dismissed. The respondent having proved the counter claim, it is hereby allowed with following orders/declarations:

- 1. The claimants were lawfully and fairly dismissed - 2. The overpayments were by mistake and error - 3. The claimants shall pay to the respondent the overpaid bonuses as follows: - -186,532,500/= (i) 1st claimant, Emmanuel Lagu shall pay - 91,346,531/= (ii) 2nd claimant, Mwesigwa Kamanyire shall pay

- (Hi) 2nd respondent to the counter claim, Mugarura Charles shall pay 17,417,680/= - 4. Because the claimants and the 2nd respondent to the counter claim having been aware that they had been overpaid by error or mistake, recklessly proceeded to litigation even when their colleagues owned up, putting the respondent to unnecessary litigation costs, the shall pay costs of the litigation.

## **Delivered** & **signed** by:

1) The Hon. Head Judge, Ruhinda Asaph Ntengye

## **Panelists**

- 1. Mr. Bwire John Abraham - 2. Ms. Julian Nyachwo - 3. Mr. Katende Patrick

Dated: 29/04/2022