Macsteel Company Limited v Chakumwa (Civil Appeal 17 of 2022) [2025] MWHC 13 (4 April 2025)

IN THE HIGH COURT OF MALAWI CIVIL DIVISION PRINCIPAL REGISTRY CIVIL APPEAL NUMBER 17 OF 2022 BETWEEN MACS TEEL COMPANY LIMUTED. .. ...20s03 eves isevecaeas suvennnnge APPELLANT AND WILLEN GAA WA cco sen csv syyreesesewsunnssnenevnsmneninemenconiins RESPONDENT Before hon Justice Jack Nriva Judge For the apparent Ms I Mndolo for the defendant for the respondent Mr Mauya Msuku Court Clerk Mr Gogoda. JUDGMENT The Appeal The appellant appeals against the decision of the Industrial Relations Court on a compensation for an unfair dismissal. The respondent commenced un unfair dismissal claim in the court below on the ground on the ground of constructive dismissal. The court found in favour of the respondents and went on to order compensation for the unfair dismissal. This appeal is against the award of the compensation. Grounds of Appeal The appeal argues that the court below erred in law: The following are the grounds of appeal. The court below erred in law when it failed to apply the law and general principles applicable on assessment of compensation for unfair dismissal in coming up with its Order of 6" September 2021. The court below erred in law when it awarded the applicant employee’s pension contribution from the date of dismissal to the date of new employment The court below erred in law when it awarded the respondent car hiring costs for a Toyota Hilux and pension benefits for 62 months when the same were not pleaded in IRC Form | and was not, therefore, awarded in the judgment of the court below The court below erred in law when it awarded the Respondent severance allowance at assessment when the same was not awarded in the judgment of 29" August 2019 The award of K40,303,162.00 as compensation for unfair dismissal was glaringly excessive, punitive and unjustifiable under section 63(4) of the Employment Act as read with section 63(5) of the said Act. The first ground of appeal The initial ground of appeal contended that the court did not adhere to principles regarding the assessment of compensation. Counsel argued that the court did not follow the principles under the Employment Act in arriving at the compensation for the respondent. Counsel argued the appellant provided the court below with some precedent on the law and principles on assessment of compensation for unfair dismissal: 7Jerrastone Construction Limited v Solomon Chatuntha MSCA Civil Appeal Number 60 of 2011 (unreported) and National Bank of Malawi v Benjamin Khoswe Civil Cause Number 713 of 2012 (unreported). Counsel argued that for reasons not provided in the Order, the court below never considered those authorities or made any reference to them. Counsel argued that the law is that the approach on assessment of compensation, that followed common law and categorized compensation under different heads of damages is no longer tenable after the Employment Act of 2000.! Counsel argued that the Employment Act of 2000 introduced “a revolutionary and entirely distinct framework” for assessment of compensation for unfair dismissal. A compensation under the Employment Act, counsel argued, must be in accordance with section 63(4) and (5) of the Act. Counsel argued that this was the approach in Terrastone Construction Limited v Solomon Chatuntha MSCA Civil Appeal No. 60 of 2011; Southern Bottlers Limited v Gracian Kalengo [2013] MLR 345; Stanbic Bank v Mtukula [2008] MLLR 54; DHL International Limited v Aubrey Nkhata Civil Appeal Number 50 of 2004 (unreported); National Bank of Malawi v Benjamin Khoswe Civil Cause 718 of 2002; First Merchant Bank v Eisenhower Mkaka and Others Civil Cause Number 9 of 2016 (unreported); and Malawi Environmental Endowment Trust v Kalowekamo [2008] MLLR 237. Counsel argued that under Section 63(4) of the Act, the Court has discretion to award compensation that it considers just and equitable in the circumstances of the case: An award of compensation shall be such amount as the court considers just and equitable in the circumstances having regard to the loss sustained by the employee in consequence of the dismissal in so far as the loss is attributed to action taken by the employer and the extent, if any, to which the employee caused or contributed to the dismissal. Counsel argued that a) any judicial discretion should be exercised judiciously and in accordance with laid down guiding principles and not arbitrarily. b) The Court on appeal will interfere with the exercise of judicial discretion where such discretion has been exercised wrongly: Stanbic Bank v Mtukula (supra). c) Compensation under the Employment Act must always be grounded on section 63(4) and (5) of the Act. Whilst section 63(4) of the Employment Act gives the court wide discretion, the discretionary power should be exercised judiciously and in accordance with the guiding principles in assessment of ' Followed in Chawani v Attorney General [2008] MLLR 1; Magola v Press Corporation Limited Civil Cause Number 3719 of 1998 (unreported); Mwafulirwa v Manica Malawi Limited Matter Number IRC 34 OF 2004 (unreported) and others. compensation for unfair dismissal which is to start with section 63(5) of the Employment Act and then section 63(4) of the Act and that where the minimum is not just and equitable and has to be enhanced, reasons have to be given. d) In TYerrastone Construction Limited v Solomon Chatuntha (supra), the Supreme Court of Appeal had to determine the question of what amounts to a just and equitable compensation and how the court would apply its discretion to arrive at a just and equitable compensation. The Court laid down the guiding principle on assessing compensation which is that section 63(4) of the Employment Act should be read together with section 63(5) of the Act. The Court in that case set aside an award of damages that was equivalent to the salary the respondent earned the whole period he had worked for the appellant. Instead, the court awarded him the minimum statutory compensation in section 63(5) of the Employment Act of two weeks’ pay for each year of service. Considering section 63(4) of the Employment Act, the Court did not increase the award because the respondent was found to have contributed to his own dismissal. On page 6 of its judgment, the court stated the following: Section 63(4) is not blank cheque for the court to decide any amount to be payable. It needs to be read into section 63(5) whenever compensation is awarded. In our view, it is a guideline on how the court may give award under Subsection 5 and should not be read in isolation. This Section provides for a minimum award, but the court can award depending on the circumstances of the case as provided in Section 63 (4) of the Act. Counsel argued that the guiding principle on assessment of compensation in Terrastone case was earlier applied in Stanbic Bank Ltd v Mtukula MLLR 54 where the applicant had worked for 19 complete years. He was entitled to the statutory minimum award of one month's pay for each year of complete service and was awarded compensation at the rate of three months' pay for each year of completed service. The court considered the peculiar facts of the matter. The Supreme Court of Appeal upheld this award. g) Counsel observed that in the case of First Merchant Bank v Eisenhower Mkaka and Others Civ App 1 of 2016 (HC) Mkandawire J, as he was then, on page 4 of his judgment stated concerning Section 63: I have looked at the assessment record and the final order issued by the court. I do not find any supporting material as to how the IRC had come to the conclusion that each respondent should be awarded 4 month's salary. However imperative that justification has to be there as to why the court has awarded more than the minimum scale... The lower court without any supporting evaluation of the facts before it merely ordered that each one of them should be compensated with 4 month's salary... In assessing the compensation, the Industrial Relations Court had to stick to the spirit of section 63 of the Employment Act. Under this provision, it is the duration of service before terminations that matters a lot in the calculation of the compensation that must fall due, not the loss of salary, increments and sundry amenities from the date of dismissal to the date of judgment or the assessment of damage/compensation. In the same manner future losses do not matter therefore one cannot talk of loss of earnings up to the time the former employee should have retired. That is not the spirit of our Employment Act. As already observed, section 63 (5) sets down the minimum compensation. The court may go up depending on its evaluation of the matter. The court is not limited by the next bracket... The court enjoys wide discretion to settle for either the minimum prescribed or for any higher amounts of compensation as would fit the description of ‘just and equitable in the circumstances’ after weighing the considerations in Section 63 (4) of the Employment Act. h) Thus, counsel argued that section 63 (5) of the Employment Act provides for J) the minimum awards payable and they are based on the number of years an employee had worked at the time of his dismissal. Counsel cited the Supreme Court of Appeal in the Jerrastone and Southern Bottlers (SOBO) Ltd on the need for an assessor to give reasons for the compensation awarded. From the Southern Bottlers case, counsel quoted the following passage: Where the court wishes to exceed the minimum compensation in section 63(5) of the EA, it must give clear reasons so that the employer, employee and also the appeal or review court are enhanced. Counsel quoted DHL International Limited v Nkhata Civil Appeal Number 50 of 2004 (unreported), that where a court determines that it will award more than the minimum in Section 63(5) of the Employment Act, it must give reasons and not just decide arbitrarily. k) Counsel argued that in the matter at hand, the court below did not consider section 63 (4) and (5) of the Employment Act. She said the court referred to section 63 of the Employment Act but only quoted subsection (1) on reliefs available to an employee unfairly dismissed. 1) Counsel argued that the court proceeded to award the respondent compensation from date of dismissal to date of Employment at Intercape without considering section 63(4) referred to in Section 63 (1)(c) of the Employment Act. It quoted section 63(5) of the Employment Act on the minimum statutory compensation. m) Counsel argued that such failure to consider the relevant law was a grave error in law: The court at no point considered the general principle of just and equitable in its award. Counsel, therefore argued that it cannot, therefore, be said that the award was made in exercise of its discretion in section 63(4) of the Act. n) Counsel argued that the court ought to have first established the minimum award the respondent is entitled to under Section 63(5) of the Employment Act and then determine whether the minimum compensation would be just and equitable in the circumstances of this case per section 63(4) of the Act. If the minimum compensation was found not to be just and equitable the court would have been within its statutory powers to enhance it and provide reasons for doing so. In response counsel for the respondent referred to the provisions counsel for the appellant quoted. Counsel argued that the only two considerations the law stipulates are, first, the loss suffered by the employee in so far as the same can be attributed to the employer and secondly, whether the employee, contributed to the loss. Counsel argued that focus should be on the loss suffered by the employee, and that the court should not make an award below the minimum compensation. Counsel argued that from that, the court ought to consider the compensation to award the’ applicant. Counsel argued that even the Supreme Court of Appeal, has put a lot of emphasis on the loss suffered in line with the dictates of the statute. Counsel argued that in Stanbic Bank v Mtukula [2008] MLLR, 54 the Court stated: “(The respondent] worked faithfully for 19 years before his services were terminated by the appellant. There remained 23 years of service before he could retire at the age of 65. He lost, for the duration of that period, a salary of K103,511.22 per month, monthly allowances of K14,031 for official car, K4,865.00 as garden allowance, a night guard and security alarm system, electricity allowance, water allowance and telephone allowance. Clearly the basic salary was bound to rise. Again, the respondent was likely to receive some promotions and to rise to top positions during the remaining 23 years. Counsel argued that the decision as well as Chawani v Attorney General [2008] MLLR 1 were passed after the Employment Act was already in force and considered the Employment Act provisions. Counsel argued that the statement by the Supreme Court of Appeal confirm the statutory position that the court must start from the loss suffered. Counsel argued the appellant put weight on several Supreme Court judgements suggesting that such judgements advance the position that Section 63(5) should be the guiding provision. Counsel submitted that the appellant had misinterpreted the judgements, (7errastone Construction Limited v Solomon Chatuntha, and Southern Bottlers Limited v Gracian Kalengo). Counsel argued that Terrastone Construction Limited v Solomon Chatuntha advances the position the respondent is raising: The starting point is the loss. The court must thereafter consider the circumstances of the dismissal and consider the fair and equitable compensation in the circumstances. Counsel argued that the Supreme Court, in Zerrastone Construction Limited v Solomon Chatuntha, reduced the compensation due to the dismissed employee’s contribution to the loss. Counsel, therefore, argued that the case is advancing the position that they are pursuing. Counsel argued that Southern Bottlers Limited v Gracian Kalengo also advances the same position. Counsel argued that there is nothing in the case to suggest that the court is saying that the directing provision should be Section 63(5): all that case is saying is that the since the provision gives the court discretion, the court must as a matter of course, put on record the basis of its exercise of the discretion. Counsel argued that the Supreme Court is not saying that where no reasons are given, then the award must be set aside: the court will still look at the facts of the case to see whether the award is justifiable. Counsel’s stand is that this is exactly what happened in the 7errastone case. Both the Industrial Relations Court and the High Court did not give reasons for their award. He observed that the Supreme Court went ahead to review the award on the fact that the employee contributed to his loss in that he stole from the employer. Counsel argued further that the principles of award of compensation for unfair dismissal are the same both under the Employment Act and the common law. Ground 2: The court below erred in law when it awarded the respondent compensation from the date of dismissal to date of new employment (immediate loss). Counsel for the appellant argued that immediate loss is defined as “the period of loss from the effective date of dismissal to the date of judgment or the date that the employee secures alternative employment with comparable or better benefits, whichever comes earlier” Rachel Sophie Sikwese, Labour Law in Malawi, 4 Ed, 2022. Counsel argued that such an award is no longer supported by law. Counsel argued that in DHL International Limited v Aubrey Nkhata, the Court stated that immediate loss is not allowed under the law (Employment Act). Further, counsel argued that Manica Malawi Limited v Morton Mwafulirwa Civil Appeal Number 87 of 2004 (unreported), the court disagreed with awarding the respondent salary from date of dismissal to the date of securing new employment. Counsel argued that the award was contrary to the approach under the Employment Act. Counsel, therefore criticised the Order on assessment of compensation from the date of dismissal to date of employment at Intercape, 93 months. Counsel argued that the basis for making such an award was not provided under the law. Counsel argued that the court failed to apply the applicable law and principles on assessment of compensation for unfair dismissal which resulted in it awarding the respondent assessment for immediate loss from date of dismissal to date of employment at Intercape. In response, counsel for the respondent argued that on a scrutiny between the two approaches, there is no real difference: the same principles are presented differently. The court will first ascertain the loss to the extent that such a loss can be attributed to the employer. Having ascertained the loss, the court will then consider whether the employee contributed to the loss. Counsel argued that the court below made no refence to ‘immediate loss’. It only said from the time of dismissal to the time of securing new employment. Counsel argued that there was no suggestion that the respondent contributed to the loss. Therefore, counsel argued, that the second ground of appeal is presumptuous. Ground 3: Award of loss of motor vehicle and pension The ground was that the court below erred in law when it awarded the respondent car hiring costs for a Toyota Hilux and pension benefits for 62 months. The appellant’s argument was that the responded did not plead that claim in the IRC Form. The appellant argued that since this was not pleaded, it was not awarded in the judgment: a party cannot be awarded reliefs it did not plead for or claim. Counsel argued that the respondent only claimed damages (compensation) for constructive dismissal. Counsel argued that the respondent claimed against the conduct of the appellant such as a) demoting him to a junior position that never existed before b) withdrawal of the applicant’s benefits c) keeping him in a very unfriendly environment Further, the appellant argued that the respondent particilarised his loss as follows: a) loss of salary to the time he could have retired b) loss of other employment benefits The appellant referred to the court’s judgment making findings that the appellant had constructively dismissed the respondent. Counsel argued that the respondent did not plead loss of use of motor vehicle/ car hiring costs in his statement of claim. Counsel argued that the respondent did not also plead employer pension contribution benefits or any pension. Counsel argued that the judgment did not award him those two claims. Counsel argued that the court, on assessment, could not award the respondent car entitlement and pension when the same were neither pleaded in the statement of claim nor awarded in the judgment on liability Counsel for the respondent argued that an employee who has been unfairly dismissed is entitled to compensation for all the loss suffered. Counsel argued that the loss of motor vehicle is included in such a loss. Counsel argued that the appellants do not seem to suggest that ordinarily such a claim is not sustainable but that it was not pleaded. Counsel argued that in his statement of claim, the respondent clearly pleaded that one of the grounds on which he based his claim for constructive dismissal was that the appellants withdrew some of his benefits. Counsel, therefore, argued that the loss was clearly pleaded in paragraph 3(i) of the statement of claim. Further, in paragraph 4(i1) the applicant claims loss of employment benefits. Further, counsel argued that the respondent testified that the appellant withdrew the motor vehicle from him. Ground 4 on severance pay The appellant argued that the court below erred to award severance allowance as the respondent did not claim it. On this ground counsel, like in the previous ground referred to the principle in Attorney General v Kanjanga [2002-2003 | MLR 4 (SCA) that a court cannot grant a remedy not prayed for. In reply, counsel for the respondent argued that severance pay is an automatic remedy upon a finding of unfair dismissal. The Ground that the Award was Excessive For practical purposes, parties argued this point on the same principles they advanced in the first ground. The main argument of the appellant, under the first ground was that when it made its decision, the court misapplied the law. As a result, the court below awarded the respondent excessive compensation. Determination Wrong principles and excessive compensation On these grounds, there were several decisions of cited by counsel. Counsel suggested that the court did not refer to the law, or the decisions she cited when making its determination, the court did not consider the law and determinations on the subject. The appellant’s argument is that the court had to make minimum compensation, and for not doing so, the court had to give reasons. 10 The law is that when awarding compensation for unfair dismissal, the court must consider what is just and equitable in the circumstances. Therefore, the discretion is with the court to consider the appropriate compensation to award a dismissed employee. I do not read the provision to mean that the court must always start from the minimum compensation. It is not the case that the minimum compensation is the default position. It is one award the court may consider. It, therefore, cannot be said that the court must only give reasons where the minimum compensation is not granted. The correct position is that the court must give reasons in any event whether it gives a minimum compensation or any other compensation it considers appropriate. In our employment legal system, there is no maximum compensation for unfair dismissal. The court must consider the justice and fairness of the matter. In other jurisdictions like England and Wales, a court may make a zero award of compensation. See 7ele-Trading Ltd v Jenkins [1990] IRLR 430. As an example, where the unfair dismissal is based purely on procedural aspects and not the substantive issue. In that jurisdiction, they have a maximum compensation.’ In Malawi, the minimum compensation would apply in case where if it were in other jurisdictions, compensation would not have been payable. For that reason, I do not agree that the decisions the appellant cited’ give the position different from the suggestion that the court must give reasons for the compensation it makes. I no do not believe that the decisions suggest that the court should give reasons only where it departs from the minimum. As counsel for the appellant argued, the Court will only interfere with the exercise of discretion where such jurisdiction has been exercised wrongly. In the Terrastone v Chatuntha the Court considered minimum compensation based on the circumstances of the case. That was the reason given- the circumstances of the case. Meaning that circumstances of a case could be a reason for deciding compensation one way or the other. The court may set out the circumstances of the 2 See Bowers et al (eds) Blackstone s employment law practice 2006, London, Oxford. 3 Terrastone Construction Limited v Solomon Chatuntha, Southern Bottlers Limited vy Gracian Kalengo, Stanbic Bank v Mtukula DHL International Limited v Aubrey Nkhata, National Bank of Malawi v Benjamin Khoswe First Merchant Bank v Eisenhower Mkaka and Others Malawi Environmental Endowment Trust v Kalowekamo iM case specifically or state them generally from the facts of the case. That is what the Court did in Jerrastone v Chatuntha. The Court said that it made the decision to award the respondent minimum compensation based on the circumstances of the case. The court did not specifically state the circumstances. Any person reading the judgment would deduce that the circumstance of the matter was that the employee stole from the employer. Thereby, he contributed to his dismissal. This Court therefore does not find that the court below decided outside the law or the precedents; neither does this Court finds that the lower court exercised its discretion erroneously or unreasonably. The court considered how the appellant acted in the circumstances of the case. As to the actual award, the court below found that the respondent did not prove that he mitigated his loss until he found new employment-the court did not award him loss for the whole of that period. The court reduced the period for award. The question is whether in the circumstances, the court would have found the respondent to have contributed to his dismissal, for argument’s sake, to warrant minimum compensation. One can hardly expect minimum compensation in cases of constructive dismissal or discrimination or constitutional breaches. Constructive dismissal, discrimination or constitutional breaches are oppressive on the part of the employer with no fault on the employee. On the point that immediate loss and future loss are not grounds for awarding compensation to a dismissed employee, this Court forms the opinion that those grounds are mere elements for the courts in considering what to award a dismissed employee. Compensation covers loss by the employee. Employee suffers loss in terms of earnings or salaries. Earnings or salaries are paid periodically. Therefore, periods cannot be distanced from award of compensation for loss of employment, unless the employment is for a specific task. That is why even in minimum compensation is expressed in periods. Perhaps immediate loss and future loss may be regarded as excessive in some circumstances. There could be circumstances where losses other than minimum compensation may be lower than the minimum compensation. Take an example of an employee who has worked for an employer from the age of twenty years old and has three months to retire at the age of sixty. Assuming she is dismissed three months before the retirement. Assuming that her 12 salary is K500,000. His future loss would be K1,500,000 representing three months’ earnings. Yet the minimum compensation would be K20,000,000, i.e., KS00,000 for each of the forty completed years worked. In such a case, the court will have to award the legal minimum compensation, which will be higher than the future loss. That is an aside, but the point is that this Court does not find anything wrong in the court’s exercise of its discretion or that it departed from the principles of law in awarding compensation to an employee who has been dismissed. For that reason, this Court does not find merit in the arguments that the court did not follow legal principles in ordering the compensation or that the court was wrong to consider immediate loss in the matter. Therefore, the Court does not agree that the compensation was excessive. In any event, as a counsel for the respondent observed, the court below did not make any mention to immediate rules. Award of pension and loss of motor vehicle On the claim that motor vehicle loss and the pension were not pleaded, this Court makes the following observations. Loss of pension and motor vehicle were losses emanating from the respondent’s resignation from employment. It is worth observing that the appellant did not argue on whether these heads were proper. The argument of the appellant was that those losses were not pleaded. This Court, however, finds that those were losses that the respondent suffered because of the claim he made in this matter. Further to that, the respondent claimed the withdrawal of benefits as one of the grounds for constructive dismissal further he said that he claimed that he lost “other employment benefits” in addition to the salary. He claimed this as the loss and damages that he suffered. This Court, therefore, does not find merit in this ground. This Court finds that the respondent pleaded those losses by the standards of procedure of the Industrial Relations Court. I will later in the judgment tackle the issue of the standards of pleadings in the Industrial Relations Court later in the judgment. Severance Allowance 13 Section 35(1) of the Employment Act provides that on the termination of a contract because of redundancy or retrenchment, or due to economic difficulties of the employer, or on unfair dismissal of an employee by the employer, an employee shall be entitled to be paid by the employer at the time of termination, a severance allowance. The employer is bound to pay the employee severance allowance on the termination of an employment contract because of redundancy or retrenchment, or due to economic difficulties of the employer. The other instance is where the dismissal is found to be unfair. While the provision places the obligation to pay the severance allowance on the employer in both scenarios, payment of severance allowance pursuant to unfair dismissal would most invariably follow a finding of unfair dismissal by a court. In any event the payment of severance allowance is statutorily mandatory. My reading of the provision is that on a finding of unfair dismissal, payment of severance allowance is automatic. An applicant need not specifically claim the allowance. On the strength of that law and based on the law governing procedure and pleadings in the court below, this Court finds that the court was within his mandate to order the payment of the severance allowance. The Court dismisses this ground of appeal. More to that the rules of procedure in the Industrial Relations Court must have regard to the need for informality, economy and dispatch. The court is not required to strictly adhere to the rules of evidence and procedure in civil proceedings. Further, the Industrial Relations Court may order the production in evidence, any statement, document, information or matter which, in the opinion of the Court, may assist to deal with matters before the Court. This is regardless of whether such evidence would be admissible in a court of law. See section 71 of the Labour Relations Court Act. The import of this is that the law on pleadings may be of little significance in the Industrial Relations Court. In some instances, the court can decide an issue, notwithstanding the want of pleading. What is most important is for the parties to be aware of the issues arising in the matter. See Potani J, as he then was, in Shifa Medical Services v Mwala and others Civil Appeal 21 of 2012. The procedure in the 14 Industrial Relations Court is flexible and relaxed Chilimba Garments v Nyaika Civil Appeal No. 58 of 2003. Pleadings, evidence and procedure are flexible in labour or industrial relations courts. It is a characteristic of industrial or labour courts or tribunals to have informal procedures.* Therefore, the requirement like in Attorney General v Kanjanga that a court cannot grant remedies not pleaded, would apply with less force in the Industrial Relations Court. Attorney General v Kanjanga is an appeal based on a matter that was before the High Court. Order The Court dismisses the appeal in its entirety. The Court makes no order on costs. The parties made arguments on boosting of the compensation. I shall consider the issue separately. PRONOUNCED this 4" day of April 202 [AQ J N’RIVA JUDGE 4 Mkandawire C ‘Practice and procedure in the Industrial Relations Court’ in Nyirenda A and Zibelu Banda R (eds) Protection and promotion of labour rights: A judges” perspective (ND) Montfort Press Limbe pp 9-16 at page 10 quoting Givry J D E “Labour courts as channels for the settlement of labour challenges: All international review’ 1968 BJIR 371 15