Stanbic Bank (U) Ltd v Kiyemba Mutale (Civil Appeal No. 47 of 2007) [2009] UGCA 72 (9 September 2009)

Full Case Text

## THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

### CORAM: HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA HON. JUSTICE S. G. ENGWAU, JA HON. JUSTICE A. TWINOMUJUNI, JA

### CIVIL APPEAL NO.47 OF 2007

STANBIC BANK (U) LTD....................................

### **VERSUS**

### KIYEMBA MUTALE....................................

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$10$

$15$

[Appeal from the judgment and the decision of the High Court of Uganda at Kampala (Magezi,J) dated 2nd September 2004 in HCCS No.1225 of 1999

### **JUDGMENT OF TWINOMUJUNI, JA:**

This is an appeal against the judgment and orders of the High Court of Uganda in which the respondent had sued the appellant for special and 30 general damages for wrongful dismissal.

The brief facts which were agreed upon at the scheduling conference by both counsel for the parties are as follows:

## 1. AGEED FACTS:

The respondent is a former staff of Uganda Commercial Bank (hereinafter referred to as ("UCB"). He joined the service of UCB on 3rd March, 1981.

Sometime in 1993, UCB embarked on restructuring its operations. By Circulars CMD/FIN/6.9 dated 26th April, 1993 and CMD/FIN/6.9 dated 26th April, 1994, (hereinafter referred to as "the Circulars"), UCB invited its staff who wished to voluntarily terminate their services or opt for early retirement to submit applications. The staff who successfully applied for voluntary termination of their services/early retirement were paid a compensation package as set out in the circulars.

On 22nd October 1997, the respondent's employment with UCB was terminated with immediate effect. The respondent claimed he was wrongfully dismissed and thus filed H. C. C. S. No.1225 of 1999 against UCB inter alia for recovery of terminal benefits and damages for wrongful dismissal. **UCB** denied the respondent's claims and counterclaimed for rent arrears in respect of the respondent's continued occupation of its house subsequent to the termination of his employment.

On $22^{nd}$ June 2004, the appellant applied to be substituted for 20 **UCB** as defendant in the suit. The application was allowed and an order made accordingly on 31st August, 2004.

On 2nd September 2004, Court delivered judgment in favour of the respondent. The appellant is dissatisfied with part of the said judgment of the High Court hence the present appeal."

At the said scheduling conference, the issues to be determined by this court were also agreed upon as follows:

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### "ISSUES

- 1. Whether the respondent was entitled to terminal benefits under his terms of service with Uganda Commercial Bank. - 2. If so, what is the quantum? - 3. Whether the respondent was entitled to payment under circulars CMD/FIN/6.9 dated 26th April, 19993 and CMD/FIN/6.7 dated 26th April, 1994. - 4. Whether the respondent's claim for payments between 1997 and October 1999 was legitimate."

The wrongfulness of the dismissal was not framed as an issue. This means that the matter of wrongful dismissal which was the main issue in the High Court, has been conceded by the appellant. The main remaining issue is whether the respondent is entitled to any remedies and if so, the

At the hearing of the appeal, Mr. John Kanyemebwa, learned counsel, represented the appellant and Mr. Edward Mugoya appeared for the respondent. Counsel informed us that they had filed written submissions 20 in accordance with Rule 98 of the Court of Appeal Rules and they did not wish to add to the submission. I have now considered the evidence, the law and the submission, hence this judgment.

#### **ISSUE NO.1** 25

quantum.

Whether the respondent was entitled to terminal benefits under his terms of service with Uganda Commercial Bank.

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There is no further disagreement as to which terms of employment applied to the respondent. It is those spelt out in his letter of appointment dated 30th March, 1981 and the Personnel Policies Manual [PPM]. The latter document provided in clause 8 thereof:

# **"8.00: TERMINATION OF SERVICES"**

## **Summary Dismissal**

Summary dismissal can only be taken when a serious offence is committed. This means that the employee shall leave the $10$ services of the Bank immediately without notice. The following are some of the breaches of discipline for which summary dismissal shall be the penalty:

- $15$ $(i)$ Dishonesty, embezzlement or fraud either in connection with the Bank's business or with some outside person or persons; - Conviction under law of a criminal offence or $(ii)$ unfavourable judgement in a civil action which in either case would bring the individual's and therefore, the **Bank's name into disrepute;** - Drunkenness, and being disorderly while on duty; (iii) - Causing or attempting to cause damage to the Bank's $(iv)$ property either maliciously or through will-full breach or neglect of duty; - $(v)$ **Wantonly revealing confidential information concerning** the Bank business to outside parties; - $(vi)$ Physical assault causing actual bodily harm in the Bank premises;

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### (vii) Gross misuse of authority;

## (viii) Unwarranted absenteeism from duty."

There is also no dispute that the respondent was dismissed summarily. However, this dismissal was not in accordance with clause 8.01 of the $\mathsf{S}$ PPM because the letter of dismissal never alleged that he had committed a serious crime to attract a summary dismissal nor is it being canvassed that he was dismissed under the clause. The respondent was therefore unlawfully dismissed outside the terms and conditions of his employment. There is no doubt that this unlawful $10$ dismissal was a serious breach of contract of employment for which the respondent is entitled to a remedy. Article $126(2)$ of the Constitution provides that:-

$(2)$ In adjudicating cases of both civil and criminal nature, the $15$ courts shall, subject to the law, apply the following principles:-(a) Justice shall be done to all irrespective of their social or economic status,

(b) . . . . . . . . . . . . . . . . . . .

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(d).............................. (e) ……………………………"

25 The fact that the appellant dismissed the respondent ultra vires the contract of employment makes it only difficult to determine the nature of the remedy he is entitled to receive. The terms of employment contained in the PPM provided fro terminal benefits for all the employees who left the bank without any violation against their terms

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of employment. Clause 8.02 of the PMM provides benefits for those who are dismissed from the Bank for misconduct which does not warrant summary dismissal. Clause 8.04 of the PPM provides benefits for those who have to leave the Bank when a reduction of staff becomes unavoidable and some have to be declared redundant. The PPM in Clause 8.05 provides terminal benefits for those whose services are terminated for health reasons. The respondent's dismissal does not fall among these categories. It did not make provision for employees who are dismissed without reason like the respondent. This was not a deliberate omission. It was never envisaged that the Bank would ever need to act so arbitrarily as to dismiss an employee without any hearing, notice or summarily without any misconduct. Therefore in determining whether he is entitled to terminal benefits. the court must look at the PPM and elsewhere and see how other employees leaving the Bank without any misconduct on their part are treated.

Since all employees employed on similar terms as the respondent are given terminal benefits when they leave the Bank, the respondent is no exception. He is entitled to terminal benefits. This issue is answered in the POSITITVE.

## **ISSUE NO.3.**

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Whether the respondent was entitled to payment under Circular $25$ CMD/FIN/6.9 dated 26th April, 1992 and CMD/FIN/6.7 dated 26th April 1994.

I have carefully evaluated all the evidence on record in this appeal. It is clear beyond any doubt that the terms contained in the above mentioned circulars were offered to all members of staff of the Bank who wished to retire voluntarily from the bank to facilitate privatisation of the Bank. They were to benefit all those who applied within the period stipulated in those circulars and all those who chose not to retire were not to be affected by the circulars. The respondent here never applied to retire in response to any of the circulars mentioned above. He was therefore, and still is not entitled to payment under those circulars. The answer to this issue is NEGATIVE.

## **ISSUE NO.4.**

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Whether the respondent's claim for payment between 1997 and $15$ October 1999 was legitimate.

This claim is based on the erroneous assumption that the respondent remained an employee of the Bank after the date of dismissal i.e. 17th October 1997 to October 1999, during the period the IGG intervened 20 to investigate the complaint of dismissal. The law on this matter is quite settled now. In **Barclays Bank of Uganda vs Godfrey Mubiru SCCA No.1 of 1998, the court per Kanyihamba, JSC held**

"....where any contract of employment like the present 25 stipulates that a party may terminate it by giving notice of a specified period, such contract can be terminated by giving the stipulated notice for the period. In default of such notice by the employer, the employee is entitled to receive payment in lieu of

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notice and where no period for notice is stipulated, compensation will be awarded for reasonable notice, which should have been given, depending on the nature and duration of employment. Thus, in the case of *Lees vs Arthur Greaves Ltd*, [1974] I. C. R. 501, it was held that payment in lieu of notice can be viewed as ordinary giving of notice accompanied by a waiver of service by the employer to terminate by notice. Indeed, in English case of *Rex Stewart Jeffries Parker Gins berg* Ltd vs Parker [1988] I. R. L. R. 483, at page 486, it was held that notwithstanding statutory or employment contract provisions, if the parties agree upon a payment in lieu of notice for a period shorter than stipulated, the employer is entitled to terminate the contract of employment by offering the payment in lieu of notice. The right of the employer to terminate the contract of service whether by giving notice or incurring the penalty of paying compensation in lieu of notice for the duration stipulated or implied by the contract cannot be fettered by the courts."

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- In Othieno Andrew vs National Water and Sewarage Corporation 20 CACA No.67 of 2007, The Court of Appeal per G. M. Okello, J. A. held that: - "When there has been a purported termination of a contract of service, declaration to the effect that the contract of service still 25 subsists will rarely be made. This is a consequence of the general principle of law that courts will not grant specific performance of a contract of service."

and lastly in **Barclays Bank [supra]** case, it was made very clear that where a contract of employment has been terminated whether rightly or wrongly, the employee is not entitled to any further payment of salary or allowances.

Interestingly, the respondent's pleadings seen to acknowledge that indeed his appointment was terminated on 17.10.1997. For example in paragraph 14 of the amended plaint, it states-

"The plaintiff claims interest on the terminal benefits from $10$ 17.10.1997 being the date of their termination till payment at 25% per annum." [Emphasis supplied]

In the prayer to the Amended plaint it states judgment should be entered in his favour for:

"(a) $\ldots$

(b) Interest on (a) at Commercial Bank rate at 25% p.a. from 17.10.1997 being the date of termination till payment in **full.**" [Emphasis supplied]

Clearly, the employment of the respondent ended or was terminated on 17.10.1997 and no further payment can be ordered against the appellant. The answer to this issue is NEGATIVE.

#### **ISSUE NO.2** 25

I reserved this issue to be dealt with last because issues No.3 and No.4 above raised possible alternative remedies which I wanted to dispose of first.

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$\cdot\cdot$ $\mathcal{M}_{\mathcal{A}}$ Now, I have determined in issue No.1 above that the respondent is entitled to terminal benefits. The only remaining question is how to ascertain them and how much they should be.

In his amended plaint dated 29th November 199 the respondent $\mathsf{S}$ requested in his prayer that:

### "Terminal benefits calculated in accordance with paragraphs 12 and 13 (of the plaint):" be paid to him.

- Paragraphs 12 and 13 of the amended plaint state as follows:- $10$

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- "12. The defendant shall rely on a report on Staff Benefits: Package Report dated 16th October 1997, prepared by the defendant and shall aver that they are severally entitled to full terminal benefits computed as follows: - (a) 12 months salary and allowances as retrenchment package. - (b)3 months salary and allowances in lieu of notice. - (c) 48 months basic salary as Long Service Award paid on a 20 prorata basis. - 13. Extract from the said Report are annexed hereto marked G1 and G2. For purposes of computing terminal benefits due to them, the plaintiffs shall rely on the following monthly remuneration, which is inclusive of an 8% increase affected subsequent to their termination but backdated to 1st January, 1997.

| | | 1 ST | $2^{ND}$ | |---------------|---------------------------------------------|------------------|------------------| | | | PLAINTIFF | PLAINTIFF | | a. | Basic Salary | $1,092,423/=$ | $748,289/=$ | | b. | Housing Allowance | $561,330/=$ | $426,610/=$ | | $\mathbf{C}.$ | Electricity & Water Allowance | $100,000/=$ | $100,000/=$ | | d. | NSSF Contribution of 15% of Basic salary | $163.863/=$ | $112,243/=$ | | | TOTAL | $1,917,616/=$ | $1,387,142/=$ |

$\sqrt{ }$

$\log \mathcal{R} \equiv \log \mathcal{R}$

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$10$

In response to this claim the appellant in his written statement of defence stated:-

"In reply to paragraph 13 of the plaint the defendant contends that the alleged report on staff benefits was just a proposal which was to be tabled before Ministry of Finance in view of the then envisaged retrenchment on privatisation but was never and as such was overtaken by events, hence it is of no legal efficacy to bind the defendants."

It is quite correct for the appellant to say that the Report on Staff Benefits dated 16th October1997 was not binding on them. However, to the extent that it was a proposal for terminal benefits for members of staff who $15$ would be retrenched at a future date, they are relevant as guide as to how much the appellant was worth to the Bank if he elected to be retrenched during or after 1997. The appellant who was dismissed without any misconduct would have been entitled to retrenchment benefits if he applied to do so. What he would have received, as terminal benefit is a 20

good guide as to how much he should get as terminal benefits on unlawfully being dismissed.

Another guide is the payments that were made to staff who applied for retrenchment. The terms of that retrenchment exercise were contained in a circular letter from the Chairman/Managing Director of the appellant to all members of staff dated 26th April 1993. I have already held that the appellant was not entitled to benefits under that circular as of right. However, the circulars can be taken into account when considering the quantum of his terminal benefits on being unlawfully dismissed. The circular stated in part:

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"As you may recall, a Job evaluation Study carried out in 1991 $10$ found that the bank was over staffed and recommended that staff reduction and down – sizing of Head Office were not only necessary but inevitable if the Bank was to turn around.

In the light of the foregoing, the Board has now decided to $15$ *implement a staff reduction exercise and reorganise Head Office* to ensure improved efficiency and a turn-round in profitability. No doubt this is crucial if the institution is to survive in an increasingly liberalised and competitive environment. In fact, the bank has no longer any choice in this matter if it is to survive at 20 all.

> The purpose of this memo is to inform all staff that the *restructuring program has entered the implementation phase. In* this regard I wish to invite any staff who may wish to voluntarily *terminate his/her services to the bank, or who may wish to opt for* early retirement, to apply. Under the bank's personnel policies, a staff is eligible for early retirement if he/she is 50 years and over while all staff are eligible to apply, irrespective of age or

rank, please note that acceptance of an application shall be at the discretion of the Board.

In order to facilitate the resettlement of such staff who have served the bank honestly and have elected to leave at this time, the Board has decided to pay the following compensation package according to the personnel policy currently in force:

1. $0-5$ years of service

3 months Salary + Allowances for 3 months + 3 months pay in lieu of notice $+$ Accumulated leave (in cash)

2. $6-9$ years

$\cdot \mathbf{v}$ $\mathcal{L} = \mathcal{L}$

$\mathsf{S}$

$10$

$15$

$20$

6 months Salary + Allowances for 6 months + 3 months pay in lieu of notice $+$ Accumulated leave (in cash)

3. 10 years $+$

12 months Salary + Allowances for 12 months + 3 months Salary + Allowances in lieu of notice + Accumulated leave (in cash)

In case of staff who have served 15 years and above, they will be paid a portion of their long service award on a pro rata basis. 25 Any staff who elects to retire now will receive the above benefits and continue to be eligible for the usual retirement benefits when they attain the age of 55 years."

In 1993 many members of staff applied in response to this letter and were retrenched in accordance with the terms contained therein. Unlike the contents of the Report on Staff Benefits of 16th October 1997 which could have been mere proposals, the circular letter of 25th April 1993 was implemented and payments proposed therein were effected. However, the similarity in the contents of both documents is very striking. I believe that is what the learned trial judge had in mind when he ordered that:-

- "Terminal Benefits should be paid to the plaintiff as expressed $10$ in the submission and calculated in manner and rate of benefits, which accrued to the retrenched staff members of the defendant Bank – excluding 3 months pay in lieu of notice. I would also prefer to be guided by the Staff Circular of 1993 to determine the terminal benefits the respondent is entitled to." - $15$

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The IGG who investigated this complaint on unlawful dismissal recommended that the appellant be paid full terminal benefits. M/s Sebalu & Co Advocates whose advice was sought by the appellant also recommended that full benefits be paid to the respondent. Myself and the learned trial judge accept that Circular No.3 CMD/FIN/6.9 dated 26th

April 1993 be used as a guide to calculate the respondent's benefits. Accordingly the calculation is as follows:-

(1) It is agreed that the monthly salary and allowances at the time of

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dismissal were Ug.shs.1,917,616/ $=$ .

(2) Salary of 1,917,616 x 12 months = $13,011,392/$ =.

$(3)$ No payment of salary in lieu of notice

(4) Any Accumulated leave in Cash.

- (5)48 months basic salary as a Long Service Award on a prorata basis i.e. shs.1,917,616 x 48 years = shs.92,045,568/=. [The respondent had served for 17 years.] - Payments: shs.23,011,392/ $=$ $\mathsf{S}$ $+$ shs.92,045,568=

Shs. 115,056,960/ $=$ $+$ Accumulated leave cash (if any).

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The respondent has not made out a case for special damages to be paid with interest of $25\%$ . I would order interest on this payment to be $15\%$ from the date of filing the suit till payment in full.

As I have been guided by retrenchment payments, no general damages or $15$ exemplary damages are awarded.

The respondent is awarded costs of the suit here and in the lower court to attract interest of 10% from the date of judgment till payment in full.

Dated in Kampala this....................................

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MINIMILLO Hon. Justice Amos Twinomujuni JUSTICE OF APPEAL.

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

### **CORAM: HON. LADY JUSTICE A. E. N MPAGI-BAHIGEINE, JA** HON. MR. JUSTICE S. G. ENGWAU, JA HON. JUSTICE A. TWINOMUJUNI, JA

#### CIVIL APPEAL NO. 47 OF 2007

#### STANBIC BANK (U) LTD ::::::::::::::::::::::::: APPELLANT

#### **VERSUS**

#### KIYEMBA MUTALE::::::::::::::::::::::::::::::::::::

[Appeal from the judgment and the decision of the High Court at Kampala (Magezi, J) dated 2nd September 2004 in HCCS No. 1225 of 1999

### JUDGMENT OF JUSTICE A. E. N MPAGI-BAHIGEINE, JA

I agree with the evaluation of the evidence and the findings/orders

by Twinomujuni JA.

Since Engwau JA also agrees; the appeal partially succeeds as

indicated in the lead judgment.

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Dated at Kampala this 2009

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HON. JUSTICE A. E. N. MPAGI-BAHIGEINE **JUSTICE OF APPEAL**

# THE REPUBLIC OF UGANDA

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

# CORAM: HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA HON. JUSTICE S. G. ENGWAU, JA HON. JUSTICE A. TWINOMUJUNI, JA

# **CIVIL APPEAL NO.47 OF 2007**

### **BETWEEN**

**STANBIC BANK (U) LTS ................................... APPELLANT**

### **AND**

**RESPONDENT KIYEMBA MUTALE ....................................**

[Appeal from the judgment and orders of the High Court of Uganda at Kampala (Magezi. J.) dated 2nd September 2004 in H. C. C. S No.1225 of 1999]

# **JUDGMENT OF ENGWAU, JA**

I have had the benefit of reading, in draft, the lead judgment of Hon. Twinomujuni, JA. I concur with his reasons and proposed orders. I would in the circumstances add nothing.

Dated at Kampala this $\frac{G}{2}$ day of $\frac{G}{2}$ day of ...................................

MENTENY S. G. Engwau

JUSTICE OF APPEAL