Medical Stores Ltd v Kanyembe and Ors (Appeal 139 of 2007) [2009] ZMSC 153 (24 September 2009)

JI IN THE SUPREME COURT FOR ZAMBIA APPEAL NO. 138/2007 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: MEDICAL STORES LIMITED APPELLANT AND BRIGHT M. KANYEMBE AND 129 OTHERS RESPONDENTS Coram: Chirwa, Chibesakunda and Chibomba, JJS. On 24th September, 2009 and ......... 2013 For the Appellant : Mr. W. Mubanga of Permanent Chambers and Mr. G. D. Chibangula of GCD Chambers For the Respondents Mr. W. Charles Lisita of Central Chambers JUDGMENT Chibesakunda, Acting CJ., delivered the Judgment of the Court Cases referred to: (1) Bank of Zambia vs Chibote Meat Corporation Limited SCZ No. 14 of 1999 (Appeal No. 99 of 1998) (2) Embassy Supermarket Vs. Union Bank (in liquidation) - Appeal No. 58 of (3) Mususu Kalenga Building Limited and Another vs Richman’s Money Lenders Ent Industrial and Labour Relations Act Chapter 269 Legislation referred to:- (1) (2) Order 18 r 13 of the Rules of the Supreme Court (White Book) 1999 edition (3) Companies Act J2 The delay in delivering this judgment is deeply regretted. This was due to circumstances beyond our control. Also due to the retirement of Hon. Mr. Justice Chirwa, this judgment is a majority judgment. This is an appeal against the High Court judgment in a claim by the Respondents for:- “(i) A declaration that they are entitled to be paid retrenchment benefits calculated at 7 months salary for each year served (ii) Repatriation benefits at K5,000,000 per person (iii) Interest on (i) and (ii) above (iv) Costs (v) Any other award the court may deem equitable to give to the Plaintiff.” The High Court ruled in favour of the Respondents, hence this appeal by the Appellant to this court. The brief history of this matter is that the Respondents were employees of the Appellant employed on diversity of dates. The Respondents were all union members and as such, their conditions J3 of employment were governed by a Collective Agreement that was signed between the Appellant and the National Union of Commercial and Industrial Workers on or about 23rd September, 1996. According to this Collective Agreement under clause 6.03, the Respondents were entitled to be paid a retrenchment package of 7 months salary for each year served and also entitled to repatriation benefits. Due to circumstances beyond the Appellant’s control, the Appellant realized that this package was too heavy for them. So they summoned the Union representatives to discuss restructuring of this retrenchment package. The Respondents’ story is that clause 6.03 was amended to bring in 3 months salary in place of 7 months salary without their consent. According to the Respondents, they refused to sign that document as it was changing their conditions of service. They testified that they were forced to sign the amended Collective Agreement. The amended Collective Agreement was signed by the Board of Directors contrary to the law as they were not party to the J4 collective agreement. Also when the amended collective agreement was sent to the Ministry of Labour, this amended collective agreement was not signed by the Labour Commissioner, it was only signed by the Minister and as such, although it was signed by union officials, it was null and void as it was not approved by the Ministry of Labour. At the High Court, the evidence for the Appellant in rebuttal was that the collective agreement as amended was voluntarily signed by the Branch officials of the union and that it was subsequently approved by the Minister of Labour and the Permanent Secretary. It was also argued that the amended Collective Agreement was arrived at after negotiations. It was their testimony that in the collective agreement, there was a provision that that collective agreement could be amended by both parties’ consent. It was the Appellant’s further contention that the subsequent agreement was between branch officials and the Board of Directors of the Appellant. So the amendment of the collective agreement was legally done. J5 The Appellant’s case was that this amendment was necessitated by the realisation by the Appellant that it was not feasible for them financially to meet the bill if clause 6.03 was not amended. The bill for the retrenchment package was going to be so high that the Appellant would not be able to fund it. Their case was also that in the collective agreement, the entitlement of repatriation did not mean monetary entitlement, it was meant to be physical, transportation or actual transport to the village for each of the employees. It was meant to be transportation for a former employee to get to his or her village. The learned trial Judge, after analysing the evidence, held that according to clause 32.00 of the Collective Agreement, this agreement was to remain in force for two years from 1996 to 1st April, 1998. Salaries were to be reviewed annually. Also according to clause 32.00, for the amendment to collective agreement to be legally done, it had to be by mutual consent of both parties. The learned trial Judge held that although the amendment was signed by the Board of Directors of the Appellant, these were not parties to the agreement and as such, the amendment was not lawfully J6 carried out. He, therefore, held that the Respondents were entitled to the package which was reflected in the collective agreement before the purported amendment. This is what prompted this appeal before this court. Before this court, the Appellant raised 7 grounds of appeal:- “1. The Learned Trial Judge misdirected himself in both law and fact by holding that the signing of the amendments to Clause 6.03(a) of the Collective Agreement were null and void and of no effect whatsoever thereby failing to recognize and appreciate that the said amendments were freely and voluntarily entered into by the Parties and subsequently approved by the appropriate authority, namely, the Labour Commissioner thereby giving legal effect or force to the said amendments. 2. The Learned Trial Judge misdirected himself in both law and fact by failing to recognize and appreciate that the Appellant’s Management was also facing the impending redundancy and as such, the Appellant’s Board of Directors was managing and or running the affairs of the Company as a defacto management. 3. The Learned Trial Judge misdirected himself in both law and fact by giving an unbalanced evaluation of the evidence on record in his judgment whereby only 4. 5. J7 the evidence in favour of the Respondent’s case was highlighted and not that in favour of the Appellant. The Learned Trial Judge misdirected himself in both law and fact by awarding K5 million as repatriation for each Plaintiff without referring the matter for assessment before the Learned Deputy Registrar in order to ascertain the quantum payable to each Plaintiff considering that there was no specific figure or amount stipulated in the Collective Agreement o 23rd September, 1996 or was there any evidence before the Court in respect of repatriation benefits. The Learned Trial Judge erred in both law and fact by failing to refer the matter to assessment before the Learned Deputy Registrar for the purposes of ascertaining which Specific Individual Plaintiff qualified and was eligible to be paid the said long service bonus upon finding that some Plaintiffs qualified and were entitled to be paid long service bonus in accordance with Clause 6.06 of the said Collective Agreement. 6. The Learned Trial Judge erred in both law and fact in that the question of the total amount to be found due and payable to each Plaintiff was not referred to the Learned Deputy Registrar for assessment in order to ascertain the amount on which the interest awarded by the Court ought to have been based. J8 7. Such further grounds of appeal to be submitted upon perusal of the case record. At the hearing of the appeal, Mr. Mubanga counsel for the Appellant argued grounds 1,2 and 3 leaving the rest to be argued by Mr. Chibangula, the 2nd counsel for the Appellant. Mr. Mubanga relied on his filed heads of arguments plus the Appellant’s submissions in the court below at pages 122 to 134. In the three grounds of appeal argued by Mr. Mubanga, the common argument was that the learned trial Judge misdirected himself in holding that the amendment to clause 6.03 of the Collective Agreement was not legally and validly effected. Counsel argued that the Respondents freely and voluntarily signed the amended collective agreement. They were not forced to sign. They were given a week to consult their members. It was argued that both sides to the collective agreement realised that it was not financially feasible for the Appellant to meet the retrenchment package bill if clause 6.03 was not amended. On the question of the eligibility of the Board of Directors, counsel argued that the Board of Directors was eligible to be part of the bargaining unit and as such, it could sign the J9 amended collective agreement. Counsel argued that the learned trial Judge grossly misapprehended the law when he ruled that the Board of Directors could not sign the amendment as they were not party to the agreement. Counsel argued that the proper understanding of the law relating to corporate governance itself shows that the Board of Directors is not only eligible but is infact, the primary body that should sign collective agreements and other important agreements that generally bind the company. Counsel referred to Luke Thomas in his book entitled Corporate Secretaryship 4th Edition Published by ICSA where it says:- “The system by which companies are directed and controlled. Corporate governance is concerned with how the company is structured and controlled internally to ensure that the business is run lawfully and ethically, with due regard for its Employees and Shareholders”. Counsel submitted that the key issue in corporate governance is how to ensure that Directors act in the best interest of the beneficial owners of the company, that is, shareholders who have a superior claim and title and overriding authority over the company’s affairs and even over the wishes of the Board of J10 Directors, see Bank of Zambia vs Chibote Meat Corporation Limited1. According to counsel, the Board of Directors is not obliged at law to act in the interest of any other group including workers if those interests are detrimental to the interest of the beneficial owners of the company. Counsel in relation to the affairs of the Directors also referred to the same book referred to supra where Luke Thomas says that:- “The Directors are generally responsible for the Management of the business of the Company but the extent of authority depends on the provisions of the Articles”. See Section 215 of the Companies Act3. It was further argued that this law establishes that the Board of Directors of any company has power to make decisions that affect the welfare of the company. So the Directors of the company are the Principal Managers of the company who can legally bind the company in various agreements with employees. So it was submitted that the learned trial Judge grossly misapprehended the law when he ruled that only management was the eligible party to sign the collective agreement. So if in a collective agreement, power is given to the management, Jll that was a delegation from the Board of Directors which did not remove the power of the Board of Directors to sign the amendments to Clause 6.03. Delegation did not mean that the Board of Directors had relinquished its powers. In the alternative, counsel argued that even in the Law of Agency which is applicable to this case, the fact that the Board of Directors authorises its agent namely the management to sign a collective agreement on its behalf, that would not remove the eligibility of the Board of Directors to bind the company by signing the collective agreement. On the applicability of Section 3 of the Industrial and Labour Relations Act1 which defines a bargaining unit as:- “the management of an undertaking”; it was argued that the intention of the legislature was not to completely take away the powers of bargaining from the Board of Directors to completely place it in the management because it is the Board of Directors in which the Primary Care and control of the company is vested at law. According to counsel, Section 3 merely demonstrates an J12 understanding by the legislature that in most companies (if not all), management is vested with the power to bargain with employees. In counsel’s view, to hold that a body that delegates power cannot itself exercise power is not backed or supported by any law. In further submission, counsel argued that there was evidence that management was equally affected by redundancy exercise (see page 13 , 8th Respondents’ witness and PWl’s evidence at page 169 line 17). The Board being aware of its responsibility the law places on it to safeguard the interest of the company, took over the affairs of the company generally including the amendment of Clause 6.03. It was argued that there was no dispute that the Appellant had no financial capacity to pay the redundancy benefits at the old rate of 7 months per each year served (see page 202 lines 9 and 10) and any attempt to do that would have landed the company in liquidation. So the Board had to take over the running of the company. It was also argued by Mr. Mubanga that with all this evidence, the Appellant’s view is that the learned trial Judge did not give a balanced evaluation of the evidence before him. He highlighted evidence which was in favour of the Respondents, left J13 out evidence which was in favour of the Appellant. According to counsel, this was so because (i) Had the learned trial Judge given a balanced evaluation of evidence and taken into account the fact that the amendments were freely and voluntarily signed by both sides and that these amendments were subsequently signed by the Minister of Labour and Labour Commissioner. And had the learned trial Judge taken into account DW2’s evidence who had been a Provincial Pharmacist in Luapula Province and who took part in negotiations with union officials, doing so to represent management at the negotiations, the learned trial Judge would not have reached that conclusion which he made. (ii) Had the learned trial Judge impartially evaluated the evidence of DW2 during cross-examination when he stated that it was the Union which asked for the meeting, he would not have found that the Union did not willingly sign the amendment to the amended collective agreement. On ground 4, Mr. Chibangula legal counsel for the Appellant augmented Mr. Mubanga’s argument by arguing that the learned J14 trial Judge erred when he awarded K5 million as repatriation package. Counsel submitted that the learned trial Judge having found that the Respondents were entitled to a repatriation package should have sent the matter to the learned Deputy Registrar for assessment taking into account that the collective agreement did not specify figures of entitlement under Clause 6.09. In grounds 5 and 6, counsel argued that the learned trial Judge erred in law in finding that the Respondents were entitled to long service bonus as provided in the collective agreement and not referring the matter to the learned Deputy Registrar for proper assessment as to who exactly was entitled to such benefits. According to counsel, the matter should have been referred to the learned Deputy Registrar to ascertain who was qualified and was eligible for long term bonus. Those were the arguments for the Appellant. The Respondents in response argued that the learned trial Judge was on firm ground to have made those conclusions. On grounds 1, 2 and 3, counsel argued that Section 3(l)(b) of the J15 Industrial and Labour Relations Act Chapter 2691 defines collective agreement as:- “an agreement negotiated by an appropriate bargaining unit in which the terms and conditions affecting the employment and remuneration of employees are laid down. It also defines bargaining unit as:- “management of the undertaking and the trade union representing employees in such undertaking is where collective bargaining is at the level of an undertaking other than an industry. Counsel further pointed to section 72 of the Industrial and labour Relations Act, Chapter 2691 which states “The parties to a Collective Agreement may by agreement vary the provision of a collective agreement and the procedure set out in Section Seventy shall apply with the necessary modifications and variation”. Counsel argued that according to the evidence on record, it was the Board of Directors and the Respondents who had tried to negotiate J16 to amend the collective agreement Clause 6.03. In response to the argument that the Board of Directors was managing the company’s affairs as there was no management then, counsel argued that that was far from the truth because according to the record, the proposed amendment was arrived at in April, 1997. PWl’s evidence at page 165, is that the retrenchment exercise was put in place around December, 1998 more than a year after, which means that there was a management team in existence even at the time of the proposed amendment of the collective bargaining. So at the time of the proposed amendment, the Board of Directors was not eligible to sign the amended collective agreement as it was not part of the bargaining unit. Citing the case of Embassy Supermarkt vs. Union Bank2, the argument of the Respondents was that where the statute places a duty on an individual or officer, no other person shall perform that duty unless it is so provided for under the same law. So Counsel went on to say that looking at the judgment of the learned trial Judge, he properly evaluated the evidence before him On grounds 4, 5 and 6, counsel argued that none of these issues were dealt with at the lower court. Counsel argued that the J17 simple reason was that the parties had acknowledged the figures which were now being argued against. So it would have been easy to find out looking at that information to know who qualified for long term bonus and how much each of the former employees was entitled under retrenchment. In counsel’s view, these are the issues which could have been settled ex curia if the parties had tried hard enough. He argued that what contributed to this is that the Board of Directors wrongly usurped the powers of the management and entered into a bargaining status with the union contrary to the law. So he urged this court to dismiss the appeal. We have looked at the issues raised in this appeal. We have read the record and the submissions before us. Dealing with the argument by the Respondents relating to grounds 4,5 and 6, namely that these issues were not canvassed in the court below and as such cannot be raised in this court, we in plethora of authorities have pronounced that issues not canvassed in the court below cannot be raised in this court, see the case of Mususu Kalenga Building Limited and Another vs Richman’s J18 Money Lenders Ent3. However, in this case, we agree with the Respondents that in the statement of claim, the Respondents pleaded that they were entitled to K5 million repatriation benefits. The Appellant elected not to refute or controvert this fact in their defence. Even in their evidence, there is nowhere where issues of repatriation were traversed. In the case of Dave v New Merton Board Mills (1956) 1 W. L. R 233 (an English case), it was held that a defendant may be estopped from relying on a ground not pleaded. Order 18 rule 13 of the Rules of the Supreme Court2 also provide guidance which says:- “18(13)(1) Any allegation of fact made by a party in his pleadings is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joined of an issue under rule 14 operates as a denial of it. (2) A traverse may be either by a denial or by a statement of non-admission and either expressly or by necessary implication. (3) Every allegation of fact in a statement of claim or counter-claim which the party on whom it is served does not intend to admit must be specially traversed by him in his defence or defence to counter-claim, as the case may be; J19 and a general denial of such allegations, or a general statement of non-admission of them, is not a sufficient traverse of them.” Our view, therefore, is that it is incorrect for the Appellant to state that the issue of K5 million as an entitlement for repatriation was never raised in the court below. We entirely agree that it is rather late in the day for the Appellant to refute these issues. We, therefore, hold that the court below rightly granted the Respondents the K5 million as repatriation amount. Coming to the other issues raised in ground 5 and 6, it was argued that the learned trial Judge erred in both law and fact for failing to refer the matter for assessment to the learned Deputy Registrar for the purposes of ascertaining which specific individual Respondent qualified or was eligible to be paid long service bonus. We agree as there was no evidence to establish which of the former employees of the Appellant was entitled to long term bonus. This is a valid argument. The learned trial Judge should have sent the matter back to the Deputy Registrar for the Deputy Registrar to J20 assess as to who of the former employees was entitled to long term bonus. As regards the grounds in 1, 2 and 3, it was common ground that there was a collective agreement which was signed in April, 1996 to be effective from 15th April 1996 to September 1998. In this collective agreement, all salaries were to be reviewed annually. It was common ground that as part of this collective agreement in Clause 6.03, the Respondents were entitled to retrenchment package of 7 months salary per each year served. It was also common ground that the Appellant started experiencing financial problems. It was against that background that they summoned the Branch Officials to try and re-negotiate Clause 6.03 in the collective agreement. It is common ground that the amendments to Clause 6.03 were proposed and negotiations were carried out to reduce the retrenchment package. According to the evidence on which there is no dispute, the Union refused to sign on the proposed amendments. It was afterwards that the Board of Directors joined in the negotiations and then called the Union to sign. J21 The Appellant’s case is that the signing was voluntarily done. The Respondents’ case is that they were forced to sign the agreement. The main question before the lower court and which is now before this court is whether or not the signing of the amendments to Clause 6.03 by the Board of Directors is legally supported. The Appellant have advanced ingenuously the argument that the Board of Directors at the time of the negotiations was defacto management as management was equally affected by the redundancy exercise. We have looked at the evidence, we find that this is not the correct statement as there is evidence by DW2 that management was in existence and it was management which was negotiating with the union. What is seminal question before the court is why the Board of Directors took on the responsibility of negotiating with union and signing the amendment to the collective agreement. Section 3 of Industrial and Labour Relations Act1 defines collective agreement as:- “an agreement negotiated by an appropriate bargaining unit in which the terms and conditions affecting the employment and remuneration of employees are laid down.” The same Act defines collective bargaining as:- J22 “the carrying on of negotiations by an appropriate bargaining unit for the purposes of concluding a Collective Agreement. Further, the Act defines Bargaining Unit as:- “the management of the undertaking and the trade union representing employees in such undertaking where collective bargaining is at the level of an undertaking other than an industry.” Section 72 of the same Act states that:- “The parties to a Collective Agreement may by agreement vary the provisions of a collective agreement and the procedure set out in Section Seventy shall apply with the necessary modifications and variation.” The law only recognises parties to the collective agreement who may by agreement vary the provisions of the collective agreement by consent. Section 72 does not recognise the law of Agency. Neither does it recognise the law of corporate governance. We agree with that approach taking into account what we stated in J23 the case of Embassy Supermarket Vs. Union Bank (in liquidation)2 where we stated that:- “We entirely agree that where a statute places duty on an individual or officer no other person shall perform that duty unless it is so provided for under the same law”. In this case, the Industrial and Labour Relations Act1 has placed a duty on the bargaining unit to vary any provision in the collective agreement by consent. We, therefore, hold that the learned trial Judge was on firm ground to have rejected the arguments by the Appellant that the Board of Directors had the powers to step in the shoes of the management to sign the proposed amendments as it has not been shown that the articles of association made any provision for such arrangements. We would have easily accepted that argument if the Act had been silent as to what consists a bargaining unit. We find no merit in grounds 1,2 and 3. In sum total, we find partial merit in the appeal to the extent that we send the matter back to the Deputy Registrar to assess who was entitled to the long term bonus. We order that Respondents be J24 paid retrenchment packages reflected in the Collective Agreement before the proposed amendments. We order cost prorata for the Respondents to be agreed in default to be taxed.