Mike Musonda Kabwe v B.P Zambia Ltd (SCZ 10 of 1997) [1997] ZMSC 36 (14 July 1997)

IN THE SUPREME COURT OF ZAMBIA SCZ APPEAL No.115 OF 1996 SCZ No. 10 OF 1997 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: MIKE MUSONDA KABWE APPELLANT AND B. P. ZAMBIA LIMITED RESPONDENT Coram: Sakala, Chirwa and Muzyamba, JJS For the Appellant: W. Mubanga, Permanent Chambers* 1 For the Respondent: E. J. Shamwana, SC, appearing with A. J. Shonga, 22nd May 1997 and 14th July 1997 Shamwana & Co. JUD GMENT Muzyamba, J. S. delivered the judgment of the court. CASE REFERRED TO: 1. MARRIOTT v OXFORD ANO DISTRICT CO-OPER. ATIVE SOCIETY LIMITED (No.2) 1970 1 Q5 186 This is an appeal against a High Court decision r="-sinc to declare that the appellant was entitled to terminal benefits cased on t.'.e increased salary of '<-2,262,483 per annum and to purchase his personal to holder car at book value. There is also a cross appeal against the award :f B. P. Africa bonus or allowance ant other allowances due and payable under toe conditions of service applicable to the appellant. Briefly the facts of the case are that ths appelant -^s s"Dloyec by the respondent as a Sales Manager arc in that capacity was cart cr Manage­ ment. In 1994 there was a general increase in salaries for ail employees or the respondent. By letter earned 13th May 1994 the appellant's salary was increased to <42,252,488 per annum with effect from 1st April 1m?4, Ths increments were reversed on Sth June 1994. Then on 25t.n August I994 the eopella' offered to retire early after serving the respondent for 22 y=-r3- requested that his terminal package be worked on the oasis cf -‘e ?=rsonnel Administration Manual. This was accepted and his last working -=y 2c.:* August 1994. His terminal oene'its were then werkee out cn toe oasis or ore eld salary and was sold his personal to holder car net conk value. Tnis displeases mim. He then cock cut originating notice p- motion in toe Hign • y There are eight grounds of appeal, thrust of which is that \ J? the learned trial Judge erred in his finding that the appellant was part of the decision that reversed or led to the reversal of the salary increments and in holding that the price of the car was negotiable. As we see it the real issue is: "Did the appellant agree that his salary be reduced and if not what is the effect or consequence of an employer varying or cancelling a basic condition or basic conditions of service without the employee's consent." « Before we consider the issue and the arguments we wish to state here that although Mr. Shamwana's name appears on record as leading Counsel for respondent, he did not infact argue, the appeal. His sole purpose for appearing in court was, to use his own words, ‘to launch and let loose' Mr. Shcnga who had worked under his close supervision for a oericd of 11 years and upwards and who was appearing in the Supreme Court for the first time. We wish to commend Mr. Shamwana for this and it is our hope that ether Senior Counsel will emulate him. now turn no the issue and the arguments. Mr. Mubanga argued that toe appellant die no- agree that his annual salary ~= reduced. ’’’hat by reducing his salary witr.cut his consent the aopellant is deems. to have been declared redundant by the respondent and ought therefore to have been paid a redundancy package based an the increased salary. In support o* his argument he cited tne case or MARRIOTT (1). In response Mr. Shcnca arcusd that tne salary increments were mate by management without the aocrcval of the I respondent's Board or Cirectcrs and were never ratified;- That ths consequence or these excessive salary increments is that the respondent made a huge loss ■or K8>? million. That had the increments not been reversed the respondent would nave collapsed. That the reversal or reduction of the salaries was validly done and therefore bound all employees including the aopallant. That the appellant was not th$ only one who opted for early retirement. That Mr. Lishcmwa also retired early and was paid his terminal bene-its on tne old and net on the increased salary. To support his argument he referred one court to document 85 - ST rf the record of appeal. In replv Mr. Muber.ga said that the lack of Board atproval for the increments was not an issue in the court below and that Mr. tishemwa testified that his terminal benefits were based on the increased salary. We have caref^ny considered both documentary and oral evidence tn retort anc che argumactj py betn Counsel. It is common cause that the accs;.ant's salary was -•"cr=-'ed to kar.262,488 ter amtm -*"-'oive room 1st April 1994 and that for 3 months he was paid the increased salary. It • is also common cause that the increase was reversed on 9th June 1994 and that the appellant was paid a reduced salary in July 1994. The learned trial Judge found as a fact that since the appellant took part in management discussions to reverse the salary increments he must have consented to the reduction of his salary. 0W4, Peter Knoedel, then Managing Director of the respondent said in his evidence ‘at page 186 of the record of appeal: "In February 1994 we agreed on salary increase, to be effected on April 1st 1994. Mr. Kabwe, as Senior Manager of the Company, was a party to the negotiations •for salary increase. We agreed on an increase which was higher than what we had budgeted for. And the Company was doing badly. Later a dispute arose which 1st to an industrial action. I called for a Board Meeting in which I refused to,effect the high salary increase. The eroloyees then 'went cn strike. All phis was after the Company had paid the new salary. We subsequently reversed the implemented salaries. The reverse was made in June 1994. The Management Team and the Beard were aware of the reversal. These bodies held meetings about the reverse. We promised a new salary structure. We told all staff, both verbally and in writing about the change. Mr. Kabwe knew this reversal. He was part of the Functional Management. I am not sure if the Plaintiff got a letter about the reversal. I knew Mr. Lishomwa. He was one of cur Managers. His package was not related to that of Mr. Kabwe. The circumstances were different. I would like the Court to consider my two Affidavits." Paragraphs 7 and 8 of his affidavit Ln opposition in the supplementary record of appeal read as follows "7 That the apclleant may not have received the Respondent's Letter of 27th June 199^ but was party, as a member of the respondent's Management Team to several discussions on the subject, seme of which were concuctec i* the presence c-f the majority of. J*-/... JO uu After lengthy discussions Management was of the view that due to the seriousness of the issue at hand it would not be prudent to rush into a decision. A careful study should be carried out by HRM in line with the instructions given to him by the Managing Director in his note to him which was net copied to other members of the Management Team and instructed him and restrained him from discussing the issue with anybody else. To this end General Manager volunteered to report to the Board accordingly and also to the government and staff. GM observed that the entire Management Team over the past one month have paid no attention to the business i.e. accounts were getting cut of hand, customers were not being attended to effectively and sales were falling. It was necessary to pay very serious attention to the state cf the company because what happens to B. P. Z will have serious consequences to the economy of Zambia as a whole. He further sale chat the country will not give credit to Management if the Mines came co a grinding halt and Railways stopped operating just because Management were busy talking about salaries only. The priority is to focus on ensuring that the company gets back on track and if necessary a request to the Beard to call an emergency Beard Meeting to discuss salaries at a later data should be made. Meanwhile a detailed study on salaries should be initiated by the Human Resources Manager and completed by him as soon as possible for management discussion. The Chairman should be requested to make an announcement tc staff regarding salaries after tne Beard Meeting so as to ease the staff's anxieties over tee issue". J6 On 8th June 1994 there were three Management Meetings. The relevant the . part of the minutes or/1st Meeting read as follows:- ■ . .. , "The Chairman informed the meeting that the purpose of the meeting was to discus's the recent salary increments in BPZ which during the recent meeting of the Cabinet chaired by the President,Mr. Chiluba were viewed as excessive and should be reversed/cancelled. He further said that Government reaction to 3PZ salary increases had nothing to do with methodology, but that the increases were abnormal and would affect the dividends to be declared, and as a result the Board is requesting Manancement to come up with options. The Chairman said that he has developed a system to meet the Government's request as follows which he felt if implemented he would be able to defend with the Government: - Cost cf living increase to ba removed completely - Recently reintroduced reduced House Reno reco-ver- to be retained - Recently reintroduced Housing allowance co remai* in total - Merit increment at 10% to remain." These of the 2nd Meeting read as follows: "The Managing Director informed the meeting of the Management' decision as follows:- - Due to the differing views of management cn the proposals and the underlying fact of the repercussion of toe implementation cf such proposals Management agreed thac there should be no change to the existing salary structu but should the Soard decide otherwise, they are at liber to de sc and should explain that decision to the employe - The above decision was communicated to the Chai—.an in the presence cf Directors Samoa, Bongs, Greens,mien, and Withey - The Chairman said that since there has been nc mange c~ : eerie ore Chai'■"an wet Id request the Gears at uomorrq-..;1 J7 : Board Meeting to adapt his proposal he had made in the morning's meeting viz - complete cancellation/reversal of Cost of Living - and retention of the merit increase, housing allowance payment and recent house rent recoveries at current levels. - Mr. Sampa remarked that on our fears of l,egal implications Mr. Muscnda, the Company Secretary would advise on that, Government can not run on fears and demotivation can only he a factor if there is lack of explanation to staff. We should try to avoid news to 'creak to the public's eye about these salaries. - The Chairman said that the current salaries were too high and he saw great difficulties for the future i‘ the current pcsiticn/stance was accptec. As the Beared it has to proceed without any -ureter delays. - Mr. Grser.smitn said that several things have happened ever the last 2c hours, r.e hat been in sou;.- with Capa 7c'.'..n and the 'S' Shareholders have exs^esset great exception to this which would yield great consequences. We should make every enceavcur to resolve the issue at hand. - Since r,c solution had been found the Chair~an advised Management to meet again and reconside” th.elr stance and report their decision through the MO st the Beard Meeting scheduled for C9. C0 hours temerrow." And those of the 3rd Meeting read as follows: “MG invited views from Management. Mr. Hanakowa put a srocssa’i of leaving Housing Allowance, Rent Recovery, Merit increase at current levels but recuci*; the Cost of Living allowance to Z:h with a crpvssicn fcr review in October 1S£t cased co ccrcan.. "suits for this hal- year. The ct'er mambe-s of the Management team proposed tc ceJe' she -eetinc to tomorrow at C7.-~ 'curs, so J8 On 9th June 1994 Management held another meeting and the relevant portion of the minutes of that meeting read as follows:-* "This was the third and final meeting of this Management Team following two meetings which were chaired by Mr. Kasunga Chairman of BPZ Soard at which Management Team and Directors Sampa, Greensmith, Bonga and Withey (tine last one) were in attendance. The purpose cf the meetings as mentioned by the Chairman Mr. Kasunga was to discuss the recent increments in 3? Zambia which during the recent Cabinet Meeting chaired by the President Mr. Chi Luba were viewed to be excessive and should therefore be reversed/cancelled. This instruction was communicated to Zimco by the Cabinet, and Zimco would like 3PZ Management to come up with proposals cn hew co meet this instruction before the next Scare Meeting scheduled for 09.00 hours cn Thursday 9 June 199< Management expressed their anxiety over the short notice given in which to come up with an option that will be acceptable to staff and the Board without causing work disruptions, political repercussions, litigations etc and stand.the test or time. The final proposal was that; (a) The Board s.mould ratify the approvals made by the Chairman, the Managing Director in the presence of the Company Secretary and the Management Team. (b) If not rami’ted, the Board should decide on the new structure and hew that should be implemented, Or, (c) The Board snould give Management time to study the -steer and make proposals to the Beard after thorough consultations with the employees a.'d other relevant organs." Directors was held at which the salary increments were reversed. The relevant part of the minutes of that meeting read as follows: Meeting of the Board of "Reference Minute Mo.1528.5 of the Special Meeting of the Board of Directors of the Company held on 2nd June 1994. The Chairman reported that Management had not ' worked out the various options for reversing the excessive salary increments recently awarded to employees as directed by the Board and that no explanation had been given for the non-compliance. The Directors noted with great concern the negative attitude of senior members of manage­ ment in carrying cut the decision of the Board and stressed that the situation could not be allowed to go unabated. After due and careful ccnsiceraticn, the Beard RESOLVED (1) THAT the salary increase of 1253 effected on 1st April 1994 be revoked forthwith. (ii) THAT the salary increase of 25" comprising of 10* merit annual increment and 153 decrease in rental recoveries be awarded instead to ail categories of employees with effect from 1st July 1994- (iii) THAT no recoveries for mcnies already paid be done (iv) THAT management be and is hereby directed to inform all workers about the decision of the Board". It is guide clear from the minutes of the management meetings that management did not agree or resolve to reverse the salary increments - It is also quite clear from era minutes of the special meeting of the Board of Directors of the restendent that the Board c- Directors took it upon themselves to reverse the salary increments arter management has failed to make a decision. It took this decision cue to Government pressure anc net oecausa tea increments were wit.ncuu i -t -ccrovai. it.- ic nffite from documentary evidence on record. Cn these facts we J10 : learned trial Judge's finding that the appellant consented to the reduction of his salary. In MARRIOTT case (1), cited by Mr. Mubanga the facts are that'the appellant was employed by the respondents as Elecurical Maintenance Foreman. The respondent decided to reduce the work force in its Works Department and wrote to the appellant that because of this his status would be reduced and that his salary would be reduced by £3 a week. The appellant protested and continued working. After sometime the respondent wrote to him again that instead of reducing his wage by £3 they would .reduce it by £1. The appellant protested again and gave a week's notice tc take up another job. He claimed redundancy payment which was refused. He then took the matter to court. The trial court held that since he had continued working before taking up a new job ha had accepted the new conditions and was therefore not entitled to a redundancy packace. On appeal it was held that since the parties nad not agreed to the variation of the appellant's wages and reduction in status the contract cf employment terminated or. toe date of variation o~ the essential terms cf the contract anc that tr.e appellant was entitlec to a redundancy payment. We respectifully agree with that decision t.i^. ir employer varies a basic cr oasis tend it.or employment, witncut tee consent of the emglovee men toe concrete c~ emcloyment terminates and the employee is ceemet tc nave ceen caclarec redundant cn the date of such variation and must get a redundancy payment ir tea conditions c* service de provide for suet payment. w‘e wculc ado rare teat i- toe conditions of service provide -or early retirement anc nc. redun'.a.,^.y then toe ercloyc0 'h.ould be deemed l.c cn ~y re.ir—:.i9h i o,s : acts ■- th is case are similar to MAkRIO h case (1). ■ •i= rac w ^ha. u’n appellant continued worki.no after his salary was reduced cannot be salt that he accepted the new condition. We hold tnererc-re that one contract or employment between the parti = ~ terminated on etc uune Ik.- when one respondent reduced the appellant's salary without his consent. Although the conditions of service provide for redundancy and not early retirement the parties agreed, as a matter p- company policy that the appellant be cn early retirement. ?hs only issue between them thererore is west salary was applicable in calculaninc his benefits. Was it the increased cr reduced salary? Is was argued by Mr. Shcnca teat Mr. Lishtmwa who also retired early was paid terminal benefits on the old or reduced salary anc tnereocre teat this applied tc the appellant as well- Dccur-n_ cu railed upon by Mr. Shengs reads in cart: EARL7 RE: IREMENT 72 ' : J11 : Further to discussions in respect of the above, I new wish to confirm after consultation with both shareholders that your request for early retirement has been accepted as an exception to company policies. You will be retired from the Company and ycur last working day will be 30 June 1994. 1 In consideration of the long service you have rendered to the Company, your retirement benefits have been negotiated and will consist cf three components. 1.1 lump sum payment calculated in line with the company's policy for early retirement, based :n your Base Salary as of 31 March 1994, increased by 15% (merit) and a special payment cf 15% on one annual such Base Salary." Hr. tishemwa was :w.3 and at page 157 cf the record acce-i he said, in examination in trie": "In Vay, I also received a similar lette- -rem aha Bos'-: increasing my salary. I la'C the company on 30th June 1994, whan I left the company I was paid on the basis cf personnel Administrative Manual concents, (see MMK1(a) and 1(b). This manual contains the procedure and formula for calculating retirement bene-its. I see !lMMK1(a) and "MMK1(b). When I I*-- 3,p, 1 was paid on the increased salary and net on the ^old salary. This should have applied co everybody else whose salary was increased". In cross examination document 85 was never put across to him. Neither was the computation p- his terminal benefits put across to him nor was it produced in eviosnee by the respondent for the court r-: S5± how his demerits were related. W'e are unable therefore to accect Mr. Sheree's submission, than ,?r. Lishcmwa’s benefits were ba sac on the reduced salary- We ~ave already held that the contract employment between rm one parties terminated on 9th June 1994. when the restendent reduced the acoellant's salary without his consent. His bene-'its therefcre ought to ..c/c be-n ..cl — on tr,e increasec salary acpiicaole to him then. ire appeal cn this g-cund therefore succeeds. We now turn to the sale of the personal to holder car. Mr. Mubanga argued that the learned trial Judge erred-in law in holding that the price of the car was negotiable. That at the time the appellant retired the conditions of service relating to the sale of personal to holder cars had not been varied and therefore that the appellant was entitled to buy the car at book value. On the other hand, Mr. Shonga argued that the car was less than four years old and therefore could not be sold at book value. He referred us to the evidence of DW.3, Mr. Mumbuluma at pages 177-178 of the record of appeal who said that personal to holder cars which were four years old were sold to holders at 10% of their original value and that cars which are less than 3 years are never sold and those between 3-4 years are sold at the Managing Director's discretion. That this particular car was acquired in August 1989. Mr. Shcnga concluded by saying that on the evidence before him the learned trial Judge was right in his finding that the price of the car was negotiable. We have considered the evidence on record and the arguments oy both Counsel. The relevant condition is at page 49 cf the record of appeal ano it reads as -oilows: ''Company Car The company to provide a personal-to-holder company, car, cf not less than 2600 co, c-r in line with the existing market environment, replaced every four years. Fuel free. Option to purchase it at ICS of original Dollar price at the exchange rate ruling at the time Oi diopc^al . It is common cause that the appellant's last working day was 26th August 1594 and on the evidence on DW.3 we find that the car in question was four years old at the time the appellant retired. He was therefore entitled to buy it at buck value. We would ther~_'or= allow the appeal on this ground. We now turn co toe cross appeal. Io was argued -y Mr. Sn<,nga that the learned trial Judge erred both in law and fact in awarding the appellant s.p, Africa tonus and allowances which were not claimed because the ccnus ■■•as net oavable to employees who had la~t employm=.. and uc. i~ was never on pro rata basis. That in any event the ocrus was net cent of c~- -’'•kaoe ac^eed uccn between the parties. As r—gar WllIIrA : J13 : r other,allowances he argued that the appellant was not entitled to these since they were not pleaded. On the other hand Mr. Mubanga argued that the learned trial Judge was on firm ground'when he awarded the appellant the bonus and other allowances. That the bonus was provided for in condition 5 (d) of the conditions of service at page 49 of.the record of appeal and that it was payable without asking for it as it was not discretionary. We have considered the evidence on record and the arguments by both Counsel. Condition 5 (d) of the conditions of service provides: "BP Africa annual allowance revised yearly in line with the UK inflation rate." t ~ The fact that this allowance was payable is common ground. Wiat is in dispute is whether or not it was payable on pre rata basis even to those who had left employment. PW.3, Mr. Lishomwa who held the pcsition of General Manager before he retired said at page 163 of the record of appeal: "Yes, the Plaintiff was entitled to the "3.9. Africa Bonus". It was over 7. CC2 Pounds. This was part of the Conditions cf Service for Senior Managers. If on- left early be'ore getting fully entitled, one would receive something or the "Pre rata" basis." And at page 169 he said that he was paid the bonus on pro rata basis as part of the retirement package. He said: "Yes, there have been persons who benefited from "Africa Bonus" on pro-rata basis. I am the example myself, I benefited." And DW1, Mr. Chicalo said at page 171: "I also enjoyed the Bonus benefit, paid to Senior Staff. I had worked for 11 years in 1992 - 1993 and got less than the complete year entitlement. I got less, not ccmolete. I never experienced the payment cf Bonus on a "Pro-rata basis." Qu ice clearly, a I crouch this witness said that he never experienced payment cf the bc'us on pre race basis he conceded chat at one time, during his 11 years sec-, ice .vice the respondent he got one bonus cn pro rata basis. On chis a.icenoe .--e are cacisfied that the aopellanc was enciclac to BP Africa bonus on pro rata basis. As regards other aljowances these were not claimed and therefore not awardable. The cross appeal therefore succeeds only to the extent that the award for other allowances is set aside. We affirm the award for BP Africa bonus. The net result is that we order the respondent to pay the appellant the sum of K135,606,357-66 claimed in the amended originating notice of motion. We award interest at average short term bank deposit •rate from the date of the amended notice of motion to the date of this judgment and thereafter 6" until the judgment sum is paid. Costs in this court and in the court below to the appellant. E. L. SAKALA SUPREME COURT JUDGE —D. K. CHIRWA SUPREME COURT JUDGE MUZYAMBA SUPREME COURT JUDGE