Mwesigwa and Another v Uganda Consolidated Properties Ltd (Civil Appeal No. 2 of 2001) [2001] UGCA 52 (1 March 2001)

Full Case Text

### THE REPT]BLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA A-T KA]IIPALA

## CORAM: HON. JUSTICE C. M. KATO, JA. HON. JUSTICE G. M. OKELLO, JA. HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA.

CIVIL APPEAL NO.s OF 2OO1

| I | HANS MWESIGWA | | |---|----------------|-------------| | 2 | A. TI]MWESIGYE | APPELI,ANTS |

#### VERSUS

## UGANDA (]ONSOI,IDATED PROPERTIES LTD RESPONDENT

[Appeal from the DECISION OF THE High Court at Kampala belore Hon. iuitlce f .n. Katutsi dated 3d Novemtrer 2000 in High Court Civil Suit No.273 of 19991

# JTIDGEMENT OF A. E. M. BAHIGEIN E. JA

This is an appeal from adecision of the High Court, (Katutsi J), dated 3.11.2000, dismissing the appellants' claim in HCCS No.273 of 1999.

Both appellants, Hans Mwesigwa and Albert Tumwesigye were former employees of the respondent Company, Uganda Consolidated Properties Ltd., as General Manager and Accounts Assistant respectively.

The background of the matter is that the respondent Company was listed under class IV of Schedule I of The Public Enterprises Reform and Divestiture Statute, No.9 of 1993 (PERD) due to be privatised 100%. Before the privatisation and on the request of the respondent's Board of Directors, the PERD committee decided that the respondent be temporarily closed before the privatisation, so as to safeguard the Company assets during restructuring pending privatisation.

l0 The Government decision for temporary closure was communicated to the said Board, which, after the closure, decided to terminate the appellants' seryices and notified them accordingly.

> The appellants were paid their terminal benefits excluding the "savering pay." The Staff Manual, Provision XVII, Regulation 9, spelling out the terminal benefits on retirement, resignation or termination, included a "severance pay" of one year's house allowance, if the termination of employment were caused abnormally, that is to say, not by the employer or the Company itself.

> The appellants sued the respondent claiming their severance pay alleging that their services were terminated by the Govemment

and not by the respondent Company. The learned trial Judge agreed with the respondent and held that the services had been terminated by the respondent Company. He dismissed their claim. Hence this appeal.

This decision was appealed on two grounds:

- "1. The learned trial Judge erred in law by holding that the Appellants' services were terminated by the Respondent's Board of Directors and not by the Government. - l0 2. The learned trial Judge erred to hold that the Appellants were not entitled to severance allowance."

Mr. Bernard Tibesigwa, learned counsel for the appellant argued both grounds together. He asserted that the learned trial Judge erroneously relied on the literal meaning of the letter from the Ministry of Finance to the Managing Director of the respondent Company advising closure of the respondent company, ExP2 and ExP3 that of termination of services of the appellants, to mean that discontinuance was by the Board of Directors whereas it was by the Govemment. He stated that the learned trial Judge disregarded the role of the Government under the Statute whose intention was to direct and privatise the respondent company, and the role of the Board of Directors as merely the agent of the Government. He pointed out that the Board was only informed of the Minister's decision as per ExP2, which it carried out. It was in such process that the Board decided to

withhold the severance allowance. He submitted therefore that the severance allowance should have been paid because the decision to terminate the appellants' services were taken by a third party which was the Government as stipulated by Rule 3 and 6(a) of the Divestiture Rules. He prayed court to allow the appeal and confirm the award proposed by the learned trial Judge.

In reply, Mr. Birungi, learned counsel, for the respondent submitted that it was the Board of the respondent company which terminated the appellants' services, in which case the appellants were not entitled to severance allowance. Referring to the Minister's letter to the Managing Director, ExP2, he said that it was very clear the Government or the PERD committee was merely communicating or confirming the decision of the Board. The Government was only taking the decision as requested by the Board. It was the Board which "resolved" to terminate the appellants' services. The Government did not take the initiative to terminate but was acting as requested. He pointed out that by the time of the hearing of this Appeal the respondent Company had not yet been privatised. He submitted that the learned trial Judge was correct to hold that the appellants were not entitled to severance allowance. He prayed court to dismiss the appeal with costs here and below.

The learned trial Judge ruled:

"I would hold therefore that the services were terminated by the defendant. It follows therefore that by the provisions of Regulation 9 Provision XVII of the Staff Manuel - ExP4, the plaintiffs were not entitled to severance pay."

The two letters relied on by Mr. Tibesigwa are ExP2 and ExDl . ExP2. which is from the Ministry of Finance to the Managing Director of the respondent reads in part:

"This is to inform you that Government has decided to temporarily close down the offices of [ICPL to allow for a major restructuring exercise in the Company as requested by the Board. All the current personnel at the offices, including yourself, all officers and support staff have been instructed to proceed on leave with immediate effect. Personnelo whose services will be requiredo shall be informed accordingly. ."

Mr. Tibesigwa contended that the learned trial Judge erred when he interpreted this letter literally to mean that discontinuance was by the Board of Directors, whereas it was by the Govemment. The Board was merely an agent of the Government.

The wording of this paragraph clearly indicates that the Govemment's decision was at the respondent's own request. The Government was prompted by the respondent. Left to the Government, it was not yet time to take action though the respondent was on the list of those to be privatised. It merely sanctioned the request of the Board of the respondent since any action to do with a listed Company had to be monitored by the Minister responsible for privatisation. While it is indisputable that the selection of a Public Enterprise for restructuring and privatisation is determined by the Government, it is important to look at the circumstances of the respondent Company. Its background was given by Mr. Lwayo Orono, DWI, an employee in the Privatisation Unit, Ministry of Finance and a Director of the respondent Company. He stated that although the respondent Company had been listed under Class IV which meant it was for 100% privatisation, the Government had not yet taken the decision. It was the Board of Directors, which was charged with overseeing the day to day management of the Company which requested the Government to sanction the earlier closure of the Company due to the bad state it was in. This was for the purpose of safeguarding the assets during the restructuring pending privatisation. This request was premised on two grounds, namely that the Government held more than 85o% shares in the respondent Company and also because under

the PERD Statute, the Government through the Minister responsible for Privatisation, was responsible for monitoring all restructuring activities of all the listed companies due for privatisation. The Board therefore had to seek clearance of the Government. He stated that "it was not as a result of PERD but because of the decision of the Board. The Board requested."

The other letter ExDl, challenged by Mr. Tibesigwa, was from the respondent Company to the appellants terminating their services reads:

# "Re: Notice of Termination of Service

In the process of restructuring the operations of UCPL, the Board, in a meeting held on June 22n'1, 1998, has decided to terminate your services with effect from 30th June 1998."

Mr. Tibesigwa contended that this letter too was communicating the decision of Government to the appellants. It will be observed that this letter was as a result of the meeting of the Board of Directors held on 22"d June 1998. It was therefore long after the Government had sanctioned the respondent's request. It is vital to note that the responsibility of day to day management or the administration of a Company rests with its Board of Directors which reports to the Minister concerned as pointed out above. In this particular case the duties of the Board include safeguarding the assets of the Company and

consequently handling its Personnel. See Rules 3 and 6 of the Divestiture Rules Sl 1997 No.l2. The Minister, under Rule 3, monitors the process of restructuring and eventual Privatisation. Mr. Birungi informed us from the Bar that at the time of hearing of the original suit as well as this Appeal, the Company had not yet been privatised, but was undergoing restructuring pending privatisation. The Board of Directors is still in existence. It is the responsibility of the Board to hire and fire staff. In this case, it had power to select those whom to continue with until the venture had been fully privatised as scheduled in the Statute. It did so and discharged both appellants.

I am therefore, of the opinion that the learned trial Judge properly appraised the evidence and reached the correct finding. I would thus dismiss the appeal with costs.

Dated this at Kampala.. ... day of ..... ..... 2001.

. ', . l ..

A. E. N. N{PAG I-BA[I IGEINE JTISTIC]E OF APPEAL

#### THE REPUBLIC OF UGANDA

#### IN THE COURT OF APPEAL OF UGANDA

#### **AT KAMPALA**

# **CORAM: HON. JUSTICE C. M. KATO, JA** HON. JUSTICE G. M. OKELLO, JA HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA

#### CIVIL APPEAL NO. 5 OF 2001

#### **BETWEEN**

#### 1. HANS MWESIGWA ) 2. A. TUMWESIGYE ):::::::::::::::::::::::::::::::::::::

#### AND

#### <table> UGANDA CONSOLIDATED RESPONDENT **PROPERTIES LTD.**

(Appeal from the decision of the High Court (Katutsi, J) dated 3rd November, 2000 in HCCS No. 273 of 1999)

#### JUDGMENT OF G. M. OKELLO, JA

I have had the chance to read in draft the Judgment prepared by Mpagi-Bahigeine. JA and I am in full agreement with her. I have nothing useful to add

Dated at Kampala this day of 2001.

$\sim$ G. M. Okello

JUSTICE OF APPEAL.

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# CORAM: HON. JUSTICE C. M. KATO, JA. HON. JUSTICE G. M. OKELLO, JA. HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA.

# CIVIL APPEAL NO.5 OF 2OOI

#### HANS NIWESIGWA A. TUMWESIGYE APPELLANTS VERSI,IS I )

### UGANDA CONSOLIDATED PROPERTIES LTD. RESPONDENT

[Appeal from the DECISION OF THE High Court at Kampala before Hon. Justice J. B. Katutsi dated 3d November 2000 in High Court Civil Suit No.273 of 19991

#### JUDGMENT OF C. M. KATO, J. A.

- r1D

I have had the advantage ofreading the draft judgment ofmy Lord Bahigeine, JA. I agree with it and the order she has proposed.

The learned trial judge was justified in his finding that the appellants' service was terminated by the respondent's Board of Directors and therefore the appellants were not entitled to severance allowance. Severance allowance could only be paid to those persons whose service was terminated under extra ordinary or abnormal circumstances which is not the case in the present case. I would dismiss the appeal with costs.

)

As my brother Okello, JA. also agrees, the decision of this court is that the appeal is dismissed with costs to the respondent here and in the court below.

Dated at Kampala this ....................................

C. M. Kato **JUSTICE OF APPEAL**