Mukasa v Uganda Revenue Authority (HCCS No. 528 of 2005) [2007] UGHC 46 (21 August 2007)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA HCCS NO. 528 OF 2005 WILLIAM MUKASA;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;

#### **VERSUS**

## UGANDA REVENUE AUTHORITY::::::::::::::::::::::::::::::::::::

## HON LADY JUSTICE M. S ARACH-AMOKO

### JUDGEMENT

The plaintiff brought this suit against the defendant claiming under paid gratuity and NSSF contributions with interest, different pension at Civil Service rates and terms, interest on the unexpired loan period, general damages, interest on the decretal sum plus costs of the suit.

At the Scheduling Conference, the parties agreed that other suits against the defendant from similar facts be scheduled together and this file and HCCS No 530, Nakiberu Gorreti Musali -Vs-URA be used for the hearing and Court's findings/ decision be binding them. The suits are: HCCS No $484,526,527,529$ and 530 all of 2005.

Both counsel also agreed that the issue of NSSF contributions be settled amicably, since the defendant had admitted it. The

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parties met and entered a consent judgment in October 2006 as a result.

The issue of the bank loan was abandoned as the parties agreed to settle the matter with their respective banks. The remaining issues were:

1) Whether the plaintiff was entitled to gratuity computed at a rate of 15% of the gross annual salary or not.

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- 2) Whether the plaintiff has the locus standi to sue for recovery of unremitted NSSF contributions. - 3) Whether the plaintiff is entitled to pension at civil service rates and terms as alleged. - 4) Whether the plaintiffs is entitled to the reliefs sought.

The agreed facts were:

- 1) The plaintiffs were employed by the Defendant in various positions. - 2) They voluntarily retired on 15th April 2005 except Lugarama Peter-HCCS No 484 who retired on 了气的 December 2004 - 3) Some NSSF remittances were not made. The defendant agreed to make them. - 4) There were two Human Resource Management Manuals. The old one which commenced at the Defendant's inception from 1992 to 31st July 2004. ((exhibit D2) and the new one which was effective from 1st August 2004.

[Exhibit DI), hereinafter referred to as the old and new HRMM, respectively for brevity.

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5) That the plaintiffs, were public, officers.

ISSUE NO.l: Whether the plaintiff is entitled to gratuity calculated at a rate of 15% of'the gross annual salary or not.

Counsel for the plaintiff submitted that he was; whilst counsel for 'the defendant contended that he was not. They advanced several reasons to support their positions, which I have taken into consideration in reaching a decision.on this issue.

It is common ground that the defendant is a statutory body, created by URA statute (cap 196). From its inception in 1992, the terms of employment of its staff were set out in the 1992 HRMM (Exh P2). There were three levels of staff, under that manual:

- **i)** Management (Assistant Commissioner) and above, appointed on 3 year contracts. - ii) Non Management staff (below Assistant Commissioner) appointed on permanent and pensionable terms. - lii) Temporary staff.

The plaintiffs were in category (ii), namely non management staff. They were entitled to Long Sendee Award at 2.5% on leaving the defendant's employment.

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On leaving the defendant's employment or on changing contracts (they could sometimes move from one contract to another,) management staff were entitled to 12% gratuity. (see: $14.7$ ).

Later there was a policy shift intended to inter alia, convert the permanent and pensionable terms into contracts.

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The old manual consequently was revised and replaced by the new manual which came into effect on the 1st August 2004. (Exhibit D1). It introduced several changes. The changes relevant to the instant case were converting the terms of PRO and SPROS (non management staff) to contractual terms. The changes are found in clause 3 which provided that:

" $3.2(a)$ All appointments to the Authority shall be on contract.

(b) there shall be three types of contracts: management contracts staff contracts and other contracts

## 3.3.2 Staff contracts

(a) Every employee from the rank of Principal Revenue Officer and below shall be appointed on staff contracts (b) Contract period.

Staff contract, appointment shall be 4 years (48 months)

3.2.3. Other contracts.

These could be either specialized skills assignments contracts or post retirement contracts, all of which will normally be for a shorter period

$3.2.3.$ Gratuitu

(a) On completion of a contract, the employee appointed under 3.2.1 of this manual shall be eligible for a gratuity equivalent to 24% of the gross annual salary for each completed year of the contract. In any other case, the gratuity shall be 15% of the gross annual salary.

(b) If the employee leaves employment before the end of his contract he shall be paid gratuity on a pro rate basis.

The new HRMM was not however implemented immediately as it reads. The provision relating to appointment of non management staff on contract was suspended by the Board of Directors due to financial constraints. The evidence on record shows first of all that its 160th Ordinary meeting held on 28/7/2004 (exhibit D3(i)), agenda No. (5) was:

financial implications "Consideration of the of appointing staff (PRO-SPRO) on contract"

Under minute URA/58/2004 entitled:

"IMPLEMENTATION OF THE NEW HRMM" the record reads:

"The Board considered the management submission on the implementation of the new HRMM and converting terms of service of PRO and SPRO levels to contractual terms.

The Board noted the following:

1. That the Ministry of Finance did not have any objection in principle against appointing staff on contract as recommended by the Board.

$2.$ That the Ministry's interest was to ensure that the financial implications were provided for.

That appointing staff of PRO and SPRO on contract 3. would require a payment of shs $580,607,788=$ as Long Service Award payable under sec.14.7.of the current HRMM. The Board further noted that the amount had been provided for in the 2004/2005 URA budget.

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4. The Board also noted the need to implement the new HRM to remove the current uncertainty to staff arising from the existence of an old manual as well as the new one which had been adopted by the Board.

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(a) The Board decided as follows:

That the new Human Resource management manual would be implemented with effect from 1st August 2004 . subject to incorporation of the comments made by the chairman under the relevant sections. Management was requested to liase with the chairman accordingly.

That all staff should be informed of the effective date of the new manual and copies of the manual should be circulated to all staff for their information.

b) Appointment of staff on contract

The Board noted that it was important to have a $(i)$ complete URA structure presented by management and approved by the Board in order to establish the staff levels.

(ii) That it was important for the new CG to be involved in proposing the URA structure to be considered and approved by the Board.

(iii) That the appointment on contract would therefore be lo implemented after this process had been completed and

the relevant provisions in the HRMM would therefore be suspended until that time.

(iv) That at the time of implementation, the results of the ongoing appraisal process as well as interviews would be used to identify staff to be appointed on contract.

(i) Appointment of CG by 31st August 2004.

Presentation of the proposed structure to the Board (ii) by 31st October2004.

(iii) Implementation of contractual appointments for PRO $\mathcal{L}^{\mathcal{L}}$ and SPRO would start therefore and their terms of employment would be changed on their respective anniversaries starting with the current Financial year" *(underlining is for emphasis)*

The Board decision was communicated to the staff vide circular Ref: URA/HR/76 dated 4/8/07(exhibit P7). The relevant parts read:

"To: ALL STAFF FROM: AG CHR SUBJECT: CHANGES IN THE NEW HRMM. Following the approval of the new HRMM by the Board. this circular highlights the key changes that staff should take note of pending the printing and circulation of copies $f$ the new HRMM to all staff.

## 1. EFFECTIVE START DATE

The manual has been approved with effect from 1st August 2004.

2. (a) CONTRACTS: $(SEC.3.2.2)$

The Board approved the policy of appointing all staff on contract. This shall be spread out starting with PROS and SPROs. However the Board suspended the implementation and the financial implications of this policy to a later date. Therefore all staff remain on the current terms until further notice.

(b) GRATUITY: (SEE. 3.2.4)

Gratuity payable to management staff whose contracts expire after the $1$ st August 2004 is provided for at 24% of consolidated pay. For other staff (i.e. below AC) gratuity will be paid at 15% of the consolidated pay"

The circular also provided for other terms like leave allowance, 🛛 💢 special allowance, private studies, transport on leaving the Authority etc. The restructuring was done. The Board approved the new structures on the $8^{th}$ March 2005. Phase 1 of the restructuring involved interviewing and appointment of management staff. Staff were informed of phase 2 by another circular dated $17/3/2005$ (Exhibit P.8) They were told that the implications of the restructuring was that staff levels were reduced from eleven to seven and staff numbers from 2,046 to 1,804.

All posts below Assistant commissioner were to be internally advertised and competitively filled. Staff were encouraged to apply for the new positions. They were particularly advised to $\mathcal{L}^{\mathcal{L}}$ note that:

All remaining contracts below Assistant Commissioner $(a)$ positions were terminated with effect from 31st March 2005.

All acting appointments were rescinded with effect from $(b)$ 31st March 2005.

(c) staff who may wish to retire voluntarily should inform the Commissioner Legal Services and Board Affairs, in writing, not after than 31st March 2005. Those who voluntarily retire would be paid a terminal package of five (5) months salary. long service award and any outstanding leave, less any outstanding liabilities.

(d) staff that would not be absorbed under the new structure would be paid a severance package equivalent to:--Three (3) months salary severance pay.

ч.,

-two (2) months salary in lieu of notice.

-any outstanding leave

-long service award

transport less any outstanding liabilities

(e) Staff on short term employment terms were also eligible to $\mathcal{L}_{\mathcal{L}}$ apply.

This position was revised after a petition by the plaintiff to:

- Seven months salary - Long service Award - Any outstanding leave - Transport - Less any outstanding liabilities. (see letter dated 30th March 2005 Exh P5 from Commissioner Legal Services).

Also its 168th Ordinary meeting held on the 11th, 12th, 13th and 17th April 2005, (Exh D3(ii) minute URA/25/2005 page 4 under "Reactions"

Reads:

## cc(b) Staff contracts

The Board noted that although it had earlier considered putting all URA staff on contract terms of service, the necessary funding was not currently available.

The available funding could only cover voluntary retirement and termination under the new URA structure. Staff below the rank of Assistant Commissioner would therefore continue to be appointed on permanent terms"

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The plaintiffs applied for voluntary retirement in April 2005. The letter of Mr. Mukasa reads

## "RE: RETIREMENT

As per the Commissioner General's memo of 30th March 2005 advising staff who wish to retire to do so by 4th April 2005, I hereby tender in my application to be allowed to retire from the employment of URA honorably.

I have served URA since 1st April 1992 rising from the rank of Revenue Officer to Principal Revenue Officer. $To$ the best of my knowledge, I have served diligently and I leave behind a clan record of service.

I thank you for having availed me the opportunity to excel in my carrier progression.

Signed: William K. Mukasa" 00339-92

The plaintiffs were paid:

- 7 months salary - 15 days salary for April 2005 - Long service Award at 2.5% - Transport. - Leave (see Exhibit P9)

The plaintiff's complaint is that they are entitled to gratuity calculated at a rate of 15% of their gross annual salary as provided by the new manual and communicated to them in the circular of 4th August 2004.[Exh. P7]

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The Defendant's submission is on the other hand that all through the plaintiffs employment with the defendant, they were never appointment on contract and their employment was always on permanent and pensonable terms. They held appointment letters to that effect. They were entitled and were rightly paid a Long service Award of $2.5\%$ as per clause $14.7(a)$ of the old manual. Under the same document, gratuity was paid to staff on contractual terms. Such staff had been issued with appointment letters to that that effect, clearly stating that they were on contract.

Upon careful consideration of the submissions, and the evidence on record, I must say I find merit in the defendant's position.

he terms and conditions of service of an employee is contained in the appointment letter. The plaintiff's appointment letter (Exh P2) was exhibited in court. It is dated 5th May 1992. This was under the old manual. Clause 14.7 read as follows:

"14.7 BENEFITS ON LEAVING THE AUTHORITY"

## Long Service Award

(a)In addition to benefits from structured Retirement Schemes of the Authority, a staff who leaves the Authority on retirement in good grace shall be entitled to a Long Service Award (as a separation hand shake) (b) This shall be computed at 2.5% of the basic annual salary, on retirement, times the number of years served unbrokenly in the authority as long as the retire has served a minimum of three years unbroken service."

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Under the same clause, it is provided as follows:

"Gratuity payment

- (a) Grutuity shall be paid on ex gratia to staff on contract. - (b) Such staff on contract shall not be eligible for Long Service Award. - (c) Retired contract officers of URA shall be paid 12% of the staff's annual salary at the end of every year

of service, or 1% per month for each contract month (or parts thereof) if they do not complete a year or a month any time.

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(d) Other staff on contract shall be paid 1% per month served at end of each tenure as contract performance Gratuity"

Gratuity was therefore payable only to staff who were employed on contract, and not to those who were on permanent and pensionable terms.

The new manual came into effect on $1^{st}$ August 2004. Prior to that BOD noted on its $160^{\text{th}}$ meeting held on $28/7/2004$ Exh D3(i), pages 5,9 and 10 the following: $D3(i)$ , pages 5,9 and 10 the following:

$``4.$ Implementation of contractual appointments $be$ phased out progressively, therefore staff to be put on contract initially would be SPRO's and PROs.

2.that appointing staff of PRO and SPRO on contract would require a payment of shs 580,607,788 as Long Service Award payable under section 14.7 of the current HRMM.

3. $(a)$ ......... That the appointment on contract would (iii) therefore be implemented after this process has been ompleted and the relevant provisions in the HRMM herefore be suspended until that time

c)...................

(iii) Implementation of contractual appointments for PRO and SPRO would start thereafter and their terms of employment would be changed on their respective anniversaries starting with the current Financial Year"

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paragraph 3 (a) reads

"The BOD decided as follows:

That the new Human Resource Management Manual would be implemented with effect from 1st August 2004, subject to incorporation of comments from the chairman under the relevant sections.

Management was requested to liase with the Chairman accordingly.

That all staff should be informed of the effective date of the new Manual and copies of the /manual should be circulated to all staff for their information $"$

Exhibit P7 relied on by the plaintiffs to support their claim for gratuity is the result of this BOD decision. The staff were informed of the changes introduced in the new manual as well as its effective date. Regarding appointments on contract, the circular clearly stated under paragraph $2(a)$ as follows:

"2. a) CONTRACTS: (SEC 3.2.2) the Board approved the policy of appointing all staff on contract. This shall be spread out starting with PRO's and SPRO's. However, the Board suspended the implementation and financial implications of this policy to a later date. Therefore all staff remain on current terms until further notice" (underlining is for emphasis)

This paragraph is clearly in line with the paragraphs of the BOD minute reproduced above. My understanding of this paragraph read together with the Board minutes is that the plaintiffs would remain on the original terms and conditions of service which was provided under the old manual because of the financial implications of the new policy of appointing them on contract. Their 'current terms' were permanent and pensonable, and were governed by the old manual. Under that manual, they were not entitled to gratuity if they retired. They were entitled to Long Service Award at 2.5%. Paragraph $2(b)$ on which they based their claim says:

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3.2.4) Gratuitu $s_{\text{SO}}$ Gratuity (sec is payable τo management staff whose contract expire after 1st August 2004 for a 24% of the consolidated pay,

For other staff (i.e. Below AC), gratuity will be paid at 15% of the consolidated pay"

The first part of this paragraph is the source of confusion and problem, If the "all staff" remained on "current terms until *further notice*" then the management staff whose contracts expired after August 2004 but who were appointed before the new manual should have been paid gratuity under the old manual, that is 17% instead of 24%. The Defendant used the new rate for the management staff, and hence caused this confusion.

The second part of the paragraph does not however assist the plaintiffs because it could not apply to them. Gratuity was not payable to them under the old manual. They were not also appointed on contract under the new manual. Its provisions did not apply to them.

The defendant was therefore right in paying them Long Service Award in accordance with the terms under the old manual.

The suspension continued beyond 2004 because even as late as April 2005, at the time the plaintiffs applied for voluntary retirement, the Board at its 168th meeting held on 11th 12th, 13th and 17th April 2005, page 4, noted following:

## "(b) Staff contracts

The Board noted that although it had earlier considered putting all URA staff on contract terms of service, the necessary funding was not currently available. The available funding could only cover retirement and termination under the new URA structure. Staff below the rank of Assistant commissioner would therefore continue to be appointed on permanent terms"

The plaintiffs were fully aware of this and had been informed vide exh P8 dated 17th March 2004. Paragraph (c) on page two said:

"Staff who wish to retire voluntarily should inform the Commissioner Legal Services and Board Affairs in writing not later than 31st March 2005. Those who voluntarily retire will be paid a terminal benefits package of five(5) months salary, long service award and any outstanding leave, less any outstanding liabilities"

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The circular did not say 3 months salary severance pay or two months salary in lieu of notice as Counsel for the plaintiff Those were terms, offered as severance package to stated. those who would be retrenched that is "those who would not be absorbed" in the new structure.

There was also a press release by the Board Chairman dated 🥇 23rd March 2005 to that effect. (See: Exhibit P10).

t asserted in its written statement of defence and its counsel ubmitted very strongly that the only body vested in law with ocus standi is the NSSF. This averment was based on sections $11(i)$ , $12(i)$ and (6), $14(i)$ , $44(i)$ (f) and $44(3)$ or the NSSF Act, as well as the case of James Kayongo-Vs-SDV Transami(U) Ltd; HCCS No 1586 of 2000. (Unreported)

Basically, the Defendant's position is that the above provisions state that the statutory duty to deduct from the employees wages and to make such contributions to NSSF rests with the employer and not the employee. If the employer fails in that duty, like it did in this case, then it is only NSSF and not the employee who has a locus standi to sue.

Learned counsel for the Defendant however agreed that the Defendant as a contributing employer is under statutory obligation to remit to the NSSF employees contributions.

In my judgement therefore it follows that the plaintiff has locus standi to sue the Defendant if the Defendant does not comply with its statutory obligations. The plaintiff can not however sue the defendant directly in an ordinary suit such as this one. The plaintiff can and has the legal right to institute Judicial Review proceedings for the order of mandamus to command the defendant to carry out its statutory obligations

by remitting the money to NSSF for onward payment to the employee at the appropriate time. To that extent, the plaintiff has the locus standi to sue the defendant. The only difference is that NSSF will not be ordered pay the money directly to the plaintiff. The Court would order the Defendant to carry out its statutory duty by remitting the money to NSSF for onward transmission to the plaintiff otherwise it is true if the plaintiff. was allowed to sue the employer in an ordinary suit for direct payment of NSSF contributions, as was held in the case of Kayongo cited by the Defendant's counsel, "that would $\mathbb{H}^{\mathbb{C}}$ engender anarchy in industrial labour management". This issue is accordingly answered in the affirmative.

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ISSUE NO 3: whether the plaintiff is entitled to pension. The plaintiff avers and counsel for the plaintiff submitted that he is a public officer and is therefore entitled to pension at civil service rates and terms. This is because Article 254(i) of the Constitution makes it mandatory that any public officer shall on retirement receive a pension and that the plaintiff while serving the defendant was a public officer, but received no pension. A public officer is defined in Article 175 as "any person holding or acting in an office in the Public service"

Public Service:

" means service in any civil capacity of the Government the emoluments for which are payable directly from the Consolidated Fund or directly out of the moneys provided by Parliament"

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Sections (15) and (2) of the URA state provide that the funds of the Authority shall consist of:-

- a) Money appropriated by Parliament for purposes of the $\therefore$ Authority. - b) Loans or grants received by the Authority with by approval of the Minister. - c) Any other monies as may with the approval of the minister be received by or made available to the Authority for purposes of performing its functions.

(2) The expenditure of the Authority shall be a charge on the Consolidated Fund"

Counsel cited the case of R-Vs-Whitker [1914] 2 KB 1283, which defines a public officer as an officer who discharges any duty in the discharge of which the public are interested, more clearly so if he is paid out of a fund provided by the public. [See also Halsbury's Laws of England Vol 3rd edition, page . 684].

Counsel for the defendant on his part submitted that the plaintiff is a public officer but not the one defined in Article 254 of the Constitution. He is not entitled to pension.

I respectfully agree with Defendants counsel. The plaintiff's counsel quoted the said article selectively. The article reads in full as follows:

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## "254 Pension

(i)A public officer shall, on retirement, receive such pension as is commensurate with his or her rank, salary and length of service"

Article 175 of the constitution reads:

"In this chapter, unless the context otherwise requires

- (a) "Public Officer" means any person holding or acting in an office in the public service. - (b) "Public Service" means service in any civil capacity of the Government the emoluments for which are payable directly from the Consolidated Fund or directly out of monies provided by Parliament"

The chapter referred to is chapter 10 of the constitution which provides for the Public Service Commission, Education Service Commission and Health Service Commission. The definition is therefore specific to those Commissions.

In the case of URA-Vs-BONIFACE QUINTO OJOK, Civil Appeal No $3\frac{3}{95}$ , the Supreme Court settled this issue. This is what Oder JSC (RIP) observed and held in his judgment at page 281, after citing Article 175:

"In my view, this is a contextual definition of Public Officer". The definition applies to chapter ten of the Constitution and it appears to be limited to the provisions of that chapter only.

Chapter ten establishes and concerns the Public Service Commission, the Education Service Commission and the Health Service Commission. In the circumstances, I am unable to agree that the employees of URA are Public Officers under chapter ten of the Constitution, and therefore URA is a government undertaking for purposes of exemption under section 5(3) of the Decree 75. In the circumstances, I do not think that the definition of 'Public Officer' applies to public bodies or corporations such as the URA"

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This Court is bound by that Supreme Court pronouncement.

For that reason, I hold that the plaintiff is not a Public Officer purposes of pension under article 254(1) of the $\quad\text{for}\quad$ Constitution. This issue is accordingly answered in the negative.

ISSUE NO 4. Reliefs. In light of my earlier holdings, this Court finds no merit in the rest of the claim. It is accordingly dismissed. The plaintiffs

shall not pay any of the costs since they succeeded in receiving their NSSF claims and sorted out the issue of the interest on bank loans as a result of this suit.

For avoidance of doubt this judgment binds the cases mentioned earlier in the judgment as agreed by the parties.

M. S Arach-Amoko Judge

Judgment delivered in court in the presence of:

1) Nsibambi Jimmy holding brief for Mr. Barata for 10 Plaintiff.

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**FEES PAIL** RECEIPT. N For $S$

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- 2) Habib Harike for the Defendant. - 3) Plaintiff

M. S Arach-Amoko

Judge

21/8/2007

4) John Wakulira court Clerk.