Zambia Telecommunications Company Ltd v Musonda and Ors (Appeal 51 of 2014) [2017] ZMSC 247 (22 February 2017)

IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: APPEAL NO. 51/2014 SCZ/8/26/2014 ZAMBIA TELECOMMUNICATIONS COMPANY LTD APPELLANT AND FELIX MUSONDA AND 29 OTHERS RESPONDENT CORAM: Mwanamwambwa, D. C. J, Malila, Mutuna, J. J. S. On the 14th July, 2016 and 22nd February, 2017 For the Appellant: For the Respondent: K. Kamfwa of Wilson and Cornhill Advocates Mando Mwitumwa of M. C Mkande and Company JUDGMENT Mwanamwambwa, DCJ, delivered the Judgment of the Court. Legislation referred to: 1. James Mankwa Zulu and others V. Chilanga Cement PLC, Appeal No. 12 of 2004 2. Maamba Collieries Ltd V. Daglus Siakalanga and others Appeal No. 51 of 2004 3. Rodgers Chama and 4 others V. Zambia State Insurance Corporation (2004) ZR 151. This appeal is from the decision of the High Court, awarding the Respondents’ claims that the allowances they were entitled to, should be included in the calculation of their retirement benefits. The brief facts of the matter are that the Respondents were employees of the Appellant. They initially served under ZIMCO conditions of service at the time when the Appellant was a subsidiary of ZIMCO. In 1994, the Appellant Company came into being and separated from ZIMCO and all the employees who moved with the Appellant Company from ZIMCO began to enjoy Zambia Telecommunications Company (Zamtel) conditions of service under the Appellant. In 1995, the then Minister of Finance, as shareholder in ZIMCO gave a directive to the ZIMCO Director General to incorporate all allowances into the basic salary so that the basic salary was enhanced. The Respondents retired on various dates upon attaining the mandatory retirement age of 55. At the time of their retirement, the Respondents enjoyed Zamtel conditions of service and not the Zimco conditions of service. On retirement, the Respondents were entitled to the following perks obtaining under the Zamtel conditions of service: 1. pension; 2. long service gratuity; 3. cash in lieu of leave days; 4. repatriation allowance of two months’ salary; and 5. housing allowance until full payment of terminal benefits. J2 The Respondents argued that they were not paid in accordance with the above conditions of service; that they were paid long service gratuity calculated using the basic salary instead of adding all the allowances to the basic salary when calculating; that since the long service gratuity was not paid in full, the conditions provided that they would continue to get housing allowance until full payment of the terminal benefits. According to the Appellant’s conditions of service, an employee who retires under normal retirement was entitled to, in addition to the retirement benefits accruing from the pension scheme, long service gratuity payment of three months’ pay for each completed year of service and pro rata for any uncompleted year served. Further, the conditions of service provided that- "in computing the long service gratuity, the last drawn monthly basic salary shall be the amount to be used." The Respondents argued that the word “pay” includes allowances. After hearing the matter, the learned trial Judge considered the issues raised. She found that at the time the Respondents retired, the Zamtel Conditions of service and not the ZIMCO J3 conditions of service applied to them. She found that the Respondents served under the Zamtel conditions of service. That they exited at various dates and were eligible upon retirement to long service gratuity. She accepted the argument that ‘salary’ includes allowances. The court also found that the Respondents retirement benefits were calculated excluding allowances. She stated that having accepted that ‘salary’ includes allowances in line with the case of James Mankwa Zulu and others V. Chilanga Cement(1), the Respondents were underpaid because the Appellant used the wrong mode of calculating their retirement benefits. The learned trial judge added that the Appellant should have included allowances in the calculation of the long service gratuity. Further, having found that the Respondents were not paid their retirement benefits in full, the court accepted the argument on behalf of the Respondents, that they were still owed retirement benefits. The court also found that the Respondents were entitled to monthly housing allowance until full payment had been made by the Appellant. Dissatisfied with the above decision, the Appellant appealed on two grounds. These are:- Ground one J4 The court below erred both in law and fact when it held that in computing the Plaintiffs long service gratuity, monthly salary was supposed to be used instead of basic salary contrary to the clear and express term in the conditions of service under which the Plaintiffs served and retired. Ground two The court below erred both in law and fact when it held that the directive of the honourable Minister of Finance at the time to ZIMCO subsidiary companies as well as the definition assigned to the word salary by the Supreme Court in the case of James Mankwa Zulu and others V. Chilanga Cement PLC were applicable to the Defendant company in the instant case. For convenience, we shall deal with both grounds of appeal at the same time. To support ground one of the appeal, counsel for the Appellant submitted that having found that the Respondents retired under the Zamtel conditions of service, the question the learned trial judge ought to have asked herself was: what did the Zamtel conditions of service say about computation of long service gratuity? It was submitted that the learned trial Judge correctly identified the clauses that provide for computation. It was counsel’s argument that the clause on computation uses the phrase ‘basic salary’. Counsel stated that the Zamtel conditions of service define basic salary as:- J5 "such annual remuneration that an employee receives as a salary according to salary scale. Such salary excludes allowances." Counsel went on to argue that the lower court went beyond the Zamtel conditions of service, when it applied a directive from the then Minister of Finance to ZIMCO subsidiaries, when the Appellant was no longer a subsidiary. He stated that by doing so, the learned trial judge was re-writing the contracts of employment between the Appellant and the Respondents. Counsel went on to cite a passage, in respect of clear and unambiguous intentions of parties to a contract, from the case of Maamba Collieries Ltd V. Douglas Siakalanga and others,(2) where we stated as follows "this court's reasoning in the case of Professor Ram Copal (Dr) V. Mopani Copper Mines Plc was that when computing terminal benefits of any employee, the existing conditions of service at the time of separation have to be used for computing such benefits. In line with that thought, in the case before us, the existing conditions of service at the time of Respondents' separation from Maamba Collieries Ltd have to be used in computing their terminal benefits. Moreover, this court in the case of Robbie Mumba and another V. ZPA and Consumer Buying Corporation has laid down the principle that in computing terminal benefits of an employee not all benefits enjoyed by an employee during his period of service must be integrated in the basic salary before computing that employee's terminal benefits except where the conditions of service state so" J6 Counsel added that the trial judge misdirected herself by accepting the Respondent’s argument that long service gratuity should be computed using a salary inclusive of allowances. He stated that this amounted to admitting parol evidence which was against the principle laid down in Rodgers Chama and 4 others V. Zambia State Insurance Corporation(3) In ground two of the appeal, counsel submitted that the directive by the then Minister of Finance was to the ZIMCO subsidiaries. It was submitted that the Appellant was not one of those subsidiaries. He added that the Respondents did not tender any evidence to show that the Appellant was a subsidiary of ZIMCO. He added that the case of James Mankwa Zulu and others V. Chilanga Cement PLC(1), was distinguishable from the case at hand. It was counsel’s argument that the word ‘salary” in that case was differently interpreted by the employer and the employees because it was neither qualified no defined in the conditions of service. He added that in the case at hand, the conditions of service clearly stated that when computing long service gratuity, basic salary should be used. That hence, it was J7 a misdirection for the learned trial judge to assign a different definition from what the parties had agreed upon. Counsel concluded by urging this court to allow this appeal. The Respondents did not file any heads of argument. We have considered the evidence on record as well as the submissions filed by the Appellant. We have also looked at the authorities cited therein. In our view, the issues for determination can broadly be stated as follows: 1. What salary should have been used to calculate the Respondents long service gratuity and what is pay under the Zamtel conditions of service. 2. Was the directive by the then Minister of Finance applicable to the Appellant? The evidence on record shows that the Respondents exited the employment of the Appellant at a time when the Zamtel conditions of service were in place. This was confirmed by the Respondents first witness who testified to the effect that upon attaining the age of fifty-five (55) years, he and his fellow plaintiffs exited under the Zamtel conditions of service on various dates. Therefore, there is no reason for us to belabour the issue J8 of whether the ZIMCO conditions of service applied or not. It is clear that the ZIMCO conditions of service did not apply, as the Appellant ceased to be a subsidiary of ZIMCO. The Appellant had its own conditions which applied. In fact, this was the same finding the learned trial Judge made. She stated that Respondents retired under the Zamtel conditions of service. The Zamtel conditions of service stated as follows: "8. LONG SERVICE GRATUITY 8.1 Eligibility Long Service Gratuity shall be payable in the following circumstances: a) Normal retirement b) Death while in service c) Retirement on medical grounds d) Voluntary or early retirement at the request of the employee 8.2 The Long Service Gratuity shall not be payable on resignation or dismissal of the employee 8.3 The level of Long Service Gratuity payment shall be three months' pay for each completed year of service and pro rata for the incomplete year. 8.4 In computing the Long Service Gratuity, the last drawn monthly basic salary shall be the amount to be used. 9. RETIREMENT (a) Normal Retirement i) An employee shall retire on the last day of the month on which he/she attains the age of fifty-five. J9 ii) An employee due for retirement will be notified to that effect at least six month in advance iii) The benefits on retirement shall be in accordance with the company's pension scheme. iv) in addition to the retirement benefits accruing from the Pension Scheme, an employee retiring from service shall be entitled to payment of three months' pay for each completed year of service and pro rata for any uncompleted year served..." The learned trial Judge found that the Respondents were entitled to be paid long service gratuity. The issue before the court below was whether the basic salary should include allowances in calculating the long service gratuity. It is clear, from the above quoted provision from the conditions of service, that the monthly basic salary was what was supposed to be used when computing the long service gratuity. This is stated in clause 8.4 above. The Zamtel condition of service defines basic salary as follows:- "such annual remuneration that an employee receives as salary according to salary scales. Such salary excludes allowances." From the above, it is clear that the basic salary that is to be used when calculating the long service gratuity does not include allowances. It follows, therefore, that the basic salary, minus allowances is what should have been used to calculate the long J10 service gratuity. We note that clause 8.3 uses the word “pay” and not “basic salary”. However, we are of the view that clause 8.3 only provides the level of long service gratuity. The fact that the conditions of service specify how the long service gratuity should be computed shows that that was the intention of the drafters, that is, that it should be the basic salary without allowances that should be used to calculate the long service gratuity. Further, what seems to be interesting is that the Respondents were claiming benefits as provided for under the Zamtel conditions of service. However, when it came to calculation of the same, they want them calculated according to ZIMCO conditions of service and not the Zamtel conditions of service. Further, we wish to state that the definition of the phrase 'basic salary’ is clear and unambiguous. There is no need for this court to resort to any canon of interpretation. We, therefore, disagree with the finding by the learned trial Judge that the word salary includes allowances. As regards the argument in ground two of the appeal, counsel submitted that the directive by the then Minister of JU Finance was to the ZIMCO subsidiaries. It was submitted that the Appellant was not one of those subsidiaries. The trial judge rightly found that the Zamtel conditions of service are what applied to the Respondents. Further, the Appellant Company was detached from ZIMCO in 1994. The directive was made in 1995. If indeed the directive by the Minister of Finance was meant to apply to the Respondents who served under the Zamtel conditions of service, it is our view that the directive would have been implemented and the conditions of service would have been drafted in such a way as to reflect the directive. This was not done. What was done was that the conditions of service stated the exact manner the terminal benefits ought to have been calculated and this was acceptable to the Respondents. As regards the case of James Mankwa Zulu and others V. Chilanga Cement PLC(1)> , we agree with the submission on behalf of the Appellant that that case is distinguishable from the case at hand. In that case, the word salary was not defined and hence the Court defined it to include allowances. The situation is different in this case because the conditions of service expressly stated that the ‘basic salary’ shall not include allowances. J12 For the reasons we have given above, we find merit in the appeal and we allow it. We order that each party bears their own costs. M. MALILA SUPREME COURT JUDGE J13