Lusaka Engineering Company Ltd v Kamanga and Ors (SCZ 183 of 2000) [2001] ZMSC 160 (12 September 2001)

IN THE SUPREME COURT OF ZAMBIA SCZ APPEAL NO. 183 OF 2000 HOLDEN AT KABWE AND LUSAKA (Civil Jurisdiction) LUSAKA ENGINEERING COMPANY LIMITED APPELLANT AND SAITON KAMANGA AND 84 OTHERS RESPONDENT Coram: Ngulube, C. J., Sakala and Chaila JJS. 7th August and 12th September, 2001. For the Appellant, Ms. A. Theotis of Sharpe Howard and Company. For the Respondent, Mr. M. F. Sikatana of Veritas Chambers. Sakala, JS., delivered the Judgment of the Court. JUDGMENT Cases referrred to: 1. Zambia Oxygen Limited and Zambia Privatisation Agency Vs P. Chisakula and 46 Others. SCZ Judgment No. 4 of2000. Zambia Privatisation Agency and NKwazi Manufacturing Company Limited Vs C. Haamakasu and30 Others SCZ Judgment No. 126 of 1997. Consumer Buying Corporation Limited (in Liquidation) and Zambia Privatisation Agency Vs. R. Mumba and Others SCZ Judgment No. 156 of 1997 2. 3. For convenience, we shall refer to the respondents, who were the former employees of the appellant, as the plaintiffs and the appellant as the defendant which was what they were in the action. This is an appeal against a judgment of the High Court entered in favour of the joint plaintiffs. The defendant was ordered to pay each of the plaintiffs their separation entitlement under the 1993 Z1MCO Conditions of Service with an improved formula incorporating allowances into the basic pay. The court also ordered the defendant to pay the plaintiffs their : J2 : money translated into 20% and 30% discounts on the terminal benefits. The court directed that the benefits shall be less what was already paid to the plaintiffs. The defendant was ordered to pay the costs. The judgment debt was to attract interest from the date of the writ to the date of the actual payment. The joint plaintiffs sued the defendant claiming for a total sum of K600,105,240.08. This was the balance on the terminal benefits due to the plaintiffs from the defendant after the termination of their employment upon the privatisation of the defendant. There were also other claims relating to refund of pension contributions which were agreed and settled before trial commenced. The action was tried without pleadings after the parties filed agreed facts and a statement of issues. The short facts as agreed were that, on 17th December 1992, the defendant’s Board of Directors passed a resolution at its 89th Board Meeting increasing the basic salary by 70%, revising and approving the ZIMCO Conditions of Service effective from Is' December, 1992. The ZIMCO Conditions of Service adopted as Conditions of Service for the defendant were contained in a circular letter issued by ZIMCO dated 6lb August, 1992 addressed to the Chief Executive of ZIMCO direct subsidiary and associate companies. The plaintiffs’ Conditions of Service were from that date governed by the Conditions of Service adopted by the defendant Board of Directors. On 29th November, 1996, the defendant was privatised by the Zambia Privatisation Agency. After the privatisation, the plaintiffs were paid redundancy benefits by the defendant based upon the Conditions of Service ratified by the Board of Directors on 17th December, 1992 less 20%. The agreed statement of issues was that the plaintiffs’ contended that the terminal benefits should have been based upon a circular letter dated 26th July 1993 addressed to ail Chief Executives of ZIMCO subsidiaries. The defendant contended that the terminal benefits which were paid to the plaintiffs were correctly based upon the 1992 Conditions of Service adopted by the defendant’s Board of Directors. It was also the defendant’s contention that the monies paid to the plaintiffs were discounted by 20% pursuant to an agreement between the : J3 : defendant and the ZIMCO Employees Liaison Committee on behalf of the defendant employees under the ZIMCO Conditions of Service. The plaintiffs’ contended that, they are entitled to their terminal benefits under the circular letter dated 26th July, 1993, addressed to all Chief Executives of ZIMCO subsidiary companies which had been applied to determine terminal benefits of employees in parastatals such as the Zambia Airways and United Bus Company. It was further the defendant’s contention that each plaintiff confirmed and accepted their terminal benefits based on the 1992 ZIMCO Conditions of Service and discounted as per agreement between the defendant and the ZIMCO Employees Liaison Committee on behalf of the plaintiffs under the ZIMCO Conditions of Service on each of their terminal benefits payment voucher. The plaintiffs’ contended that they never agreed to the 20% discount unlawfully deducted against their terminal benefits. It was also the plaintiffs’ contention that the balance of the terminal benefits due was in the sum of K600,105,240-08. As for a Mr. Clifford Chishala, the contention was that damages are due to him to be assessed upon entry of judgment. The learned trial judge heard evidence on behalf of the plaintiffs and the defendant which established that at the time of the plaintiffs’ retrenchments, there was infact a retrenchment package under ZIMCO Conditions of Service with effect from 1st April, 1993 in all ZIMCO subsidiary companies including the defendant. The plaintiffs were retrenched in July, 1993. They were paid a retrenchment package based on the 1992 ZIMCO Conditions of Service from which 20% discount was deducted. According to the evidence, the plaintiffs did not agree. The evidence on behalf of the plaintiffs disputed the package based on the 1992 ZIMCO Conditions of Service as well as the 20% discount. The defendant’s evidence was that the defendant’s Board of Directors did not ratify the incorporation of allowances into basic pay under the 1993 ZIMCO Conditions of Service. There was also evidence on behalf of the defendant that they were aware that ZIMCO had been paying incorporated allowances before the Board of Directors and the defendant considered those conditions. : J4 : The other evidence on behalf of the defendant was that the defendant’s Board of Directors rejected the 1993 ZIMCO Conditions of Service which revised the 1992 Conditions. According to the defendant, the 1993 ZIMCO Conditions of Service were subject to each company’s ability to pay and subject to each company’s Board of Directors’ approval. There was also evidence on behalf of the defendant that the 1993 ZIMCO Conditions of Service were approved for implementation by the defendant’s Chairman of the Board of Directors but that there was no approval by the Board. The learned trial judge accepted that the Conditions of Service applicable to the plaintiffs at the time of their separation by way of redundancy were the 1993 ZIMCO Conditions of Service effective from 1st April, 1993. These Conditions revised the 1992 ZIMCO Conditions of Service upwards. The court also accepted that by circular letter number HRA/02/3 dated 15th February 1995 ZIMCO Limited had directed all its subsidiaries to incorporate allowances into the employees’ basic pay. The court further accepted the defendant’s evidence that the plaintiffs’ housing allowances were incorporated into their salaries. The trial court accepted the principle in the case of Zambia Oxygen Limited and Zambia Privatisation Agency Vs P. Chisakula and 4 Others(l) that “Conditions of Service already being enjoyed by the employees cannot be altered to their disadvantage without their consent.” The court found no evidence that the plaintiffs consented to the less advantageous redundancy Conditions of Service of 1992, when they were separated from the defendant. The court rejected the defendant’s attempt to impute consent on the part of the plaintiffs by their having signed the payment vouchers and getting the money or by refusing to sign the payment voucher but still getting the money. The trial judge considered the question of the defendant’s Board of Director’s failure to approve the 1993 ZIMCO Conditions of Service. The court accepted that although the 1993 ZIMCO Conditions of Service were not considered by the Board of Directors they had been approved by the Board Chairman. The court found no evidence that there was an appropriate Board Meeting of the defendant which rejected the 1993 ZIMCO Conditions of Service. The court further pointed out that it would be wrong in principle for the defendant’s Board of Directors to have unilaterally altered the plaintiffs’ : 5 : Conditions of Service to their disadvantage without any due notice to them and without the express approval of ZIMCO and worse still in disagreement to the directive to all subsidiaries to effect the new separation package which included allowances. The Court found support from the cases of Zambia Privatisation Agency and NKwazi Manufacturing Company Limited Vs CHaamakasu and 30 Others(2) and Consumer Buying Corporation Limited (in Liquidation) and Zambia Privatisation Agency Vs. R. Mumba and Others(3). On behalf of the defendant, two grounds of appeal and detailed arguments were advanced. The first ground of appeal attacked the learned trial judge’s finding that the 1993 ZIMCO Conditions of Service were the Conditions applicable to the plaintiffs at the time of their being made redundant. The arguments and the submissions on this ground were that the finding was a gross misdirection because the basis of the action was as to the applicable Conditions. According to Counsel, the evidence on behalf of the defendant showed that the purchasers of the defendant, upon inquiring from Zambia Privatisation Agency as well as from the minority shareholders, they were informed that the applicable conditions were the 1992 Conditions and that the 1993 Conditions of Service had been rejected by the Board of directors as the company was not in a position to offer those packages. It was further submitted that the evidence on record established that the applicable Conditions of Service were the 1992 Conditions which were approved by the Board of Directors at the 89th Board Meeting held on the 1711’ December, 1992. It was also submitted on behalf of the defendant that the overwhelming evidence on record was that there had never been any Board approval of the 1993 Conditions of Service nor had their been any implementation of the same. Counsel invited us to distinguish the case of Zambia Privatisation Agency and Nkwazi Manufacturing Co. Ltd. V Haaniakasu and 30 Others (2) where we said that it was irrelevant whether the Board of Directors had approved the 1993 Conditions of Service as the second appellant was a subsidiary of ZIMCO and that it was ZIMCO that issued the Conditions. The submission on this argument was that ZIMCO was not the sole shareholders of the defendant as 40% of the shares was held by Intersommer Spa and Piacenza Rimock Spa. Above all, that the Articles of Association specifically : J6 : stipulated that for a resolution to be carried out the holders of at least three quarters of the shares vote in favour. Thus, it was contended that ZIMCO could not unilaterally impose its directive on the defendant for implementation of the 1993 ZIMCO Conditions without the express consent of the minority shareholders which was not given. Responding to the submissions and arguments on the first ground of appeal, Mr. Sikatana, on behalf of the plaintiffs, submitted that the appeal was frivolous and vexatious because this court has already held and decided in what has become the law regarding Conditions of Service applicable in the determination of financial benefits for employees of parastatal companies serving under ZIMCO Conditions. Counsel submitted that the instant case was no exception. By way of a short background, Counsel pointed out that the defendant is a parastatal company. In 1992 ZIMCO determined the Conditions for the plaintiffs and revised them. In 1993 ZIMCO again revised its Conditions and even started applying before privatisation In '995, the Government through ZIMCO, by way of a circular from the Minister of Finance directed all parastatals to merge the allowances with the salaries. This was all before privatisation. It was submitted that after privatisation the plaintiffs assumed that they were to serve under same Conditions. We have examined and considered the arguments and the submissions on the first ground. While we are not prepared to go so far as to call this appeal frivolous and vexatious, we find that the submissions on behalf of the defendant relating to minority shareholders and there having been no meeting by the Board to approve the 1993 ZIMCO Conditions fly in the teeth of the material facts not in dispute and the decisions of this court on the 1993 ZIMCO Conditions as applicable to all employees in the ZIMCO subsidiaries which the defendant was one of them. Whether the defendant was in a position to offer the packages under the 1993 ZIMCO Conditions of Service or not was irrelevant. The defendant was a subsidiary of ZIMCO. It was privatised only in 1996. Before then ZIMCO determined all the Conditions of Service. The trial judge was therefore on firm ground in holding that the applicable Conditions at the : J7 : time the plaintiffs were separated from the defendant by way of redundancy were the 1993 Conditions of Service effective 1st April, 1993 which revised the 1992 ZIMCO Conditions of Service upwards. The evidence on record accepted by the trial court was that although the Board did not meet to specifically approve the 1993 ZIMCO Conditions, the Chairman of the Board approved them. The principle in the Zambia Oxygen (1) case, which principle is applicable in the present case despite Ms. Theotis's spirited contrary arguments and submissions, was that Conditions of Service already being enjoyed by employees cannot be altered to their disadvantage without their consent. The evidence on record was that the plaintiffs never consented to their benefits being discounted and that they protested. Above all, the discount was not part of the Conditions of Service. The trial judge found that the plaintiffs did not consent. All the arguments and submissions on the first ground are therefore unsuccessful. The second ground of appeal already partly discussed in ground one was that it was a misdirection on the part of the trial judge to hold that the plaintiffs did not consent to the discount. The arguments and submissions on this ground were based on the purported various meetings and agreements reached by the plaintiffs’ representatives and on the fact that some of the plaintiffs signed payment vouchers and accepted the packages. As rightly pointed out by Mr. Sikatana on behalf of the plaintiffs, it is strange that an employee could agree to discount a terminal benefit earned. In the instant cases the evidence on behalf of the plaintiffs was that they did not agree with the discount. The court found on the evidence that the discounted package was received under protest. This ground, too, cannot succeed. At the end of the day, the two grounds of appeal have no merit and the appeal is dismissed with costs to the plaintiffs, the employees. M. M. S. W. Ngulube, CHIEF JUSTICE. E. L. Sakala, SUPREME COURT JUDGE. M. S. Chaila, SUPREME COURT JUDGE.