Victor Kampamba Mulenga v Zambia China Mulungushi Textilles Joint Venture Limited and Anor (Appeal No. 67/2010; SCZ/08/142/2009) [2013] ZMSC 66 (12 September 2013)

APPEAL No.67/2010 SCZ/08/142/2009 IN THE SUPREME COURT FOR ZAMBIA HOLDEN AT NDOLA/LUSAKA (APPELLANT JURISDICTION) BETWEEN: VICTOR KAMPAMBA MULENGA APPELLANT AND ZAMBIA CHINA MULUNGUSHI TEXTILES 1 ST RESPONDENT JOINT VENTURE LIMITED MUTEX DEVELOPMENT COMPANY 2ND RESPONDENT- CORAM: SAKALA, CJ., CHIBESAKUNDA, CHIBOMBA, JJS. ON 10TH AUGUST, 2010 AND 12TH SEPTEMBER, 2013. FOR THE APPELLANT IN PERSON FOR THE 1 sT RESPONDENT MR. J. SIKAINDE IN HOUSE COUNSEL FOR THE 2No RESPONDENT JUDGMENT Chibesakunda, Ag. CJ., delivered the Judgment of the Court. Case Referred to: 1. Stockdale v The Woodpecker in Limited and Spooner, (1967) ZR. 128. 2. Nkhata and 4 Others v Attorney-General, 1966) ZR.24. We regret the long delay in the delivery of this Judgment. This has been due to circumstances beyond our control. Also, because of the former Chief Justice Sakala's retirement, this will be a majority judgment. This is an appeal against the High Court judgment delivered on the 24th April, 2006. The claim by the Appellant against the Respondents, as his former employers, was for:- a. Damages for wrongful dismissal; b. Damages for pain and suffering; c. Terminal benefits; d . Interest on (a) (b) and (c) above; e. Any other relief which Court shall deem fit; and f. Costs. The evidence before the lower Court on which there was no dispute, was that the Appellant was employed in January, 1997. He worked for the 1st Respondent from 1997 to November 1999, when he was transferred and assigned to establish the 2 nd Respondent Company as a subsidiary company of the 1st Respondent. He was not paid his terminal benefits by the 1st Respondent. J .. i.i According to the Appellant, -the Managing Director of the t s t- - Respondent called him to his office and told him that he would be the General Manager and Chief Executive Officer of the 2 nd Respondent. He told him that the 2 nd Respondent was to have 2,000,000 shares. That it was also going to have a Board of Directors. The Court was informed that when the Appellant was appointed General Manager of the 2 nd Respondent, he was told to relinquish his position in the 1st Respondent. He handed over his duties in the 1st Respondent to his boss, Mr. Chifita, the Deputy General Manager, so that he could immediately start working on the registration and the establishment of the 2 nd Respondent. He was told that he would enjoy the same conditions as when he was working for the 1st Respondent. The 2 nd Respondent was established and the Appellant started working in the company and opened a Bank Account for the company. His evidence was that when he started developing this new company, this new company was not capitalized and none of the 2,000,000 shares was sold. That he, however, was advised by the Managing Director of the 1st Respondent to get an advance of K6 million to buy a deep freezer, musical instruments, stocks to sell and to paint the club. He did that. His other evidence, which was not disputed, was that the 2 nd Respondent, as a club, was patronized by the employees of the 1st Respondent. That when he sold the stock in this company on .. credit, recovenes were made from salaries of the employees of the 1st Respondent. That the money received from these sales was used to pay for the salaries of the 2 nd Respondent Company 's employees. That as a result of all this , he approached the Managing Director of the 1st Respondent, and explained that the 2 nd Respondent was not financially doing well. So the Managing Director gave him goods from China to sell on credit. In addition, the Managing Director also gave him ten (10) sewing machines for him to employ Taylors to make protective clothes for the 1st Respondent 's employees . He was further instructed to pay the 2 nd Respondent's employees from the proceeds of sales of Chinese goods and from the money collected from the ten (10) sewing machines. He testified that the 2 n d Respondent was not being paid for all the sales of protective clothing by the 1st Respondent. His testimony was that he operated under difficult financial circumstances. On the 28 th of January, 2002, he received a letter of suspension. The grounds of his suspension were that Auditors had discovered financial irregularities and mismanagement as per the Audit Report of November, 2001. He went on to testify that he was never charged with any offence. That, following his suspension, the Board closed the 2 nd Respondent to allow for investigations . His further evidence was that he received no feedback from the Respondents for eleven (11) months , until 10th November, 2002 , when the 1st Respondent wrote him a letter asking him to exculpate himself. He testified that the grounds given 1n 1fie-- 1etfer asking him to exculpate himself were different from those given to him in the letter of suspension. He further testified that during his suspension he received no salary at all even though in the letter of suspension he was told that he was going to be on half salary. He testified that he exculpated himself. A week later, he received, a letter from the General Manager of the 1st Respondent, inviting him for a meeting. He went for the meeting that was attended by the 1st Respondent's General Manager, the Deputy General Manager, Mr. Chifita, the Processing Engineer, Mr. Zeng; the Legal Counsel, Mr. Sikainde; the Auditor, Mr. Chivwete; and the Deputy Manager, Human Resources, Mr. Ngulube. According to him this meeting was not a disciplinary hearing because he was not charged with any offence and he was not given adequate time in which to prepare his defence. After this meeting of the 29 th January, 2003, he received a dismissal letter. He appealed against his dismissal, but his appeal was dismissed without being given a hearing through a letter written by Mr. Song, the General Manager, who was also the Acting Board Chairman for the 2 nd Respondent. He, therefore, was claiming damages for wrongful dismissal because according to him, the procedures adopted were an infringement on the rules of natural justice. He was also seeking all the reliefs stated in the Writ of Summons and the Statement of Claim. In rebuttal, the Respondent's - case was that yes, briefly, the Appellant was the Chief Executive Officer of the 2 nd Respondent. That his dismissal was based on the financial report in which it was reported that there was poor financial management of the 2 n d Respondent. According to DW 1 , the Appellant was first summoned to the office of the 1st Respondent's General Manager and cautioned about the financial management of the 2 nd Respondent. The Appellant was asked to improve on the operations of the 2 nd Respondent. He, however, did not improve on the operations of the Company. So the Board ordered another audit. When the Board realized that there was no improvement it ordered that he be on suspension. According to DWI , whilst the Appellant was on suspension, he withdrew Kl,200,000. DWI further testified that the Chinese goods which were given to the new company were not accounted for. It was further realized that the 2 nd Respondent Company hired e Machinery from Taha without proper documentation. The 1st Respondent discovered many other irregularities. All these irregularities were contained in the Auditor's Report. The Board thereafter wrote to the Appellant asking him to exculpate himself which he did. The Board was not satisfied with his response. As a result it called the Appellant for clarification following the letter of exculpation. The Board decided- thereafter to dismiss the Appellant -tlrrough a letter written by the Board Chairman. The Appellant appealed to the Board Chairman who dismissed his appeal. DW 1 further testified that the Appellant was entitled to his dues for the period he worked for 1st Respondent. That he was also entitled to his half salary during the period he was on suspension. The second witness for the Respondents, Mr. Chivweta the Auditor of the Respondent Company could not confirm whether the signature in the Audit Report was his. He testified that he did not even know the content of the Audit Report. In cross-examination, DW2 told the trial court that he was not the author of the Audit Report. This was the evidence before the Court. According to the learned trial Judge, the evidence adduced before the trial court established that the Appellant was found wanting in his performance of his duties as Chief Executive Officer of the 2 nd Respondent as per the Auditor's Report. The trial Court, therefore, e found that the Respondents were correct to dismiss him. This is what prompted the Appellant to appeal to this Court. The Appellant raised the following grounds of appeal, namely, that the lower Court erred in law and fact by: 1. Holding that the Appellant was responsible for the financial mismanagement against evidence in totality - like the withholding of funds which belonged to the 2 nd .. Respondent by the 1st Respondent · ana the Managing Director; 2. Relying on an Audit Report to conclude irregularities and financial mismanagement by the Appellant when this was not so; 3. Holding that Rules of Natural Justice were not breached; 4. Dismissing the action without awarding damages admitted as payable by the Respondents; 5. Addressing himself to irrelevant matters like the conditions of service of the 2 nd Respondent; 6. By not addressing himself to the allegations in the letter of dismissal. The Appellant, at the hearing of the Appeal, relied on the filed Heads of Argument. The gist of these arguments, in all the six grounds of Appeal, is that all the holdings of the lower court were not supported by evidence. He contended that the learned trial Judge concluded that the Appellant was lawfully dismissed because It of the financial irregularities and financial mismanagement committed by him as General Manager. He argued that the lower Court based its findings on the financial irregularities and mismanagement as reflected in the Auditor's Report. The Appellant pointed to the evidence of DW2, the Auditor himself, who did not give that evidence before the trial Court. According to him , the Auditor, in his evidence , distanced himself from the ... I' --signature on the purported Aud-itor-~s--Report and thus distanced himself from that Auditor's Report. His question was which other evidence did the learned trial judge base his conclusion other than on this purported Auditor's Report whose findings were not echoed in Court by DW2. Was there any other evidence which supported the Court's holdings? Was there any other evidence of any financial irregularities and financial mismanagement before the learned trial judge to base his conclusion on besides the one attributed to DW2? The answers, according to him, were in the It negative. He, therefore , urged this Court to uphold this appeal. The Respondents ' response was that the learned trial Judge was on firm ground to have held that the dismissal of the Appellant was lawful. According to Counsel, the Appellant himself gave evidence that there was a nominal capital for the 2 nd Respondent in the amount of 2,000 ,000 shares. The 2 n d Respondent got a loan of K6 million. The 2 n d Respondent was also advanced K60 million plus e 2001. ten (10) sewing machines . There was an Audit Report in January, This Audit Report revealed a number of irregularities (PP 245 to 253 of the record of appeal) . Following the revelation by the Audit Report, the Chairman wrote to the Appellant asking him to correct the irregularities , (PP 230 & 231). Following a Board meeting, the Chairman of the 1st Respondent wrote to the Appellant asking him to exculpate himself on the alleged mismanagement and financial irregularities (PP 160 - 161 of ' 1 • \ •· the record of appeal).- The-Appellant responded to these issue-s fgP 156 to 159 of the record of appeal). The Appellant was further invited to a hearing after finding that his explanations, in the letter of exculpation, were not satisfactory. (PP 155 of the record of appeal) This was before dismissing him. The Appellant was afforded the opportunity to appeal to the Board Chairperson of the 2 nd Respondent (PP, 151 - 152). Citing Stockdale v the Woodpecker in Limited and Spooner (1967) ZR 128 - 137 (1), Counsel argued that it was against that background that it was established that the Appellant's conduct was harmful to the 2 nd Respondent Company. Counsel further argued that the Appellant's conduct did not only amount to mismanagement and to a wrongful act inconsistent with his duties towards the 2 nd Respondent's business, but it also amounted to inconsistent conduct eroding continuation of confidence between the Appellant and the Respondent Companies. According to Counsel, the evidence revealed that not only did the Appellant get K40 million from the Police for supply of uniforms but that he also got K 16 million worth of Chinese goods and K6 million cash which was unaccounted for. That he proceeded to draw from 2 nd Respondent's Bank Account a sum of Kl ,750,000 three (3) days after receiving a letter of suspension. That knowing that he was on suspension, he also deposited KS million private money contrary to the company regulations which required the Directors authorization. That he committed the company to a debt of ..... K7 ,200 ,-eee:tte --by hiring machinery from ~ABA-- Technologies without taking into account the capacity of the company to pay for such service. It was Counsel's argument that where an employee deliberately flouts the employer's rules and confidence, it is lawful to dismiss that employee. We have considered the evidence before the lower Court; we have further considered the issues raised by both sides. First, we do not agree with the Appellant that the reasons advanced in the letter of suspension are different from the reasons used in the letter asking him to exculpate himself. The letter of exculpation reads as follows: " 10th December, 2002 Mr. K. V. Mulenga Mutex Development Company P. 0. Box 81091 KABWE Dear Sir, EXCULPATION LETTER I write with reference to the letter dated 28 t h January, 2002 in which you were suspended from duties pending investigations in the operations and management of MUTEX Development Company Limited. The Company for which you are General Manager. The Board has since carried out thorough investigations regarding the operations of the Company and we are consequently writing you to exculpate yourself as to:- - 1. Why you should not be dismissed -for failing to account for :- - K40,000,000.00 received from Zambia Police; - K16,000,000.00 for the Chinese goods given to Mutex Development Company; - K6,000,000.00 cash given to you as loan to the Company (M. D. C). 2. Why you should not be dismissed for dishonesty conduct arising from your signing of and drawing money amounting to K 1,750,000.00 three days after you had received your letter of suspension. 3. Why you should not be dismissed financial mismanagement arising from a situation whereby you had deposited KS,000,000.00 in the Company account without proper documentation, and drawing the same amount without any document of authority. for from your hire of machinery 4. Why you should not be dismissed for gross negligence ans1ng from TABA Technologies at K20,000 per hour per machine which amounted to K7.2 million without taking into account the capacity of the company to pay for such service. Your exculpation should reach me in seven days. Yours faithfully, MUTEX DEVELOPMENT COMPANY SONG PEIHUA ACTING BOARD CHAIRMAN CC: Mutex Board of Directors Looking at this letter, we do not agree that the procedure adopted by the Respondents did not afford the Appellant a chance to be heard. .. . ) .. We are, therefore, satisfied-that- the rules of natural justice weFe--net - breached. We hold that the rules of natural justice were observed . It has been argued by the Appellant that the conclusion by the learned trial Judge that, the financial mismanagement and financial irregularities were established, was a misdirection. We have noted that both the letter of exculpation of 10th December, 2002, at page 160, and the letter of dismissal, make mention of rece1v1ng of K40 million from Zambia Police and receiving Kl6 million for the Chinese goods and cash of K6 million given as a loan, the allegation of drawing rnoney amounting to Kl ,750,000.00 by the Appellant, 3 days after receiving a letter of suspension, the allegation of depositing of KS,000,000.00 in the company account without proper documentation and drawing the some without any documents and finally the allegation of mismanagement arising from the Appellant hiring machinery from TABA Technologies at K20 ,000.00 per hour per machine totaling K7.2 million. • The letter at page 160 of the record of appeal was written by the Acting Board Chairperson of the 2 nd Respondent asking the Appellant to exculpate himself in relation to the foregoing allegations . But we note that, other than these documents, which were presented before the trial court, the Appellant was not cross examined on these allegations and what is even more important to the Appelranf' scase is that DW2 , the Auditor, wh-o according to the evidence of DWI was the author of the Auditor's Report in which all these irregularities and financial mismanagement were exposed , distanced himself from the Auditor's Report. He testified that the signature on the Auditor's Report was not his and that he did not remember writing the Report in question. We , therefore , agree with t h e Appellant that according to the record, there was no evidence to support the learned trial Judge 's finding that the Appellant was responsible for the financial mismanagement. Therefore , we hold that although the rules of natural justice were observed, 1n that the Appellant was given details of all the allegations in the letter of exculpation and that of inviting him to the meeting to explain on the allegations raised in the Auditor's Report, since none of the allegations cited in the letters produced before the trial Court was put to the Appellant 1n cross • examination, and since DW2 did not testify on any of these purported irregularities and financial mismanagement, the question is which evidence supported the learned trial Judge 's conclusion that the conduct of the Appellant was wanting for him to be dismissed? The answer to this question is that there was no such evidence . --w e there fore agree with the Appellant that according to the record , there is no evidence to support the conclusion that the Appellant was lawfully dismissed. Therefore, although we see that, by inviting the Appellant to the meeting, the employers observed the rules of natural justice, we do not endorse the view by the learned trial judge that the Appellant was lawfully dismissed. We , therefore , find merit in the appeal as per case of Nkhata & 4 Others v Attorney Genera 12 • In conclusion, we find merit in the appeal. We however have to take Judicial Notice of the fact that the two Respondent Companies may no longer in existence . We do not know whether they have gone into liquidation or they have been wound up. We, therefore , order that the Appellant appear before the learned Deputy Registrar to establish whether or not he can get his damages. So we order that (i) the Appellant be paid his half salary monthly pay for the period he was on suspension, (ii) he be paid • damages for wrongful dismissal, and (iii) he be paid his terminal benefits for the period he worked for the 1s t Respondent company, as per his conditions of service up to his date of dismissal. For damages for wrongful dismissal we order that he be paid an amount equivalent to six (6) months pay. We make no orders on damages for pain and suffering. We order interest on the amount awarded at 10% from the date of writ to the date of judgment, thereafter at 16% up to tfie-aa1e- of fully liquidating the judgmen debt. We order costs for the Appellant to be agreed or to be taxed in default. • • L. P. Chibesakunda ACTING CHIEF JUSTICE H. Chibomba SUPREME COURT JUDGE 16