[2024] UGIC 58


# IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA LABOUR DISPUTE REFERENCE No. 187 OF 2017 (ARISING FROM KCCA/ CENTILC/048/2017) THE REPUBLIC OF UGANDA

``` MUSIMENTA MUGISHA ROGERS::: :CLAIMANT ```

V

EQUITY BANK UGANDA LIMITED: RESPONDENT

#### Before:

The Hon. Head Judge Linda Lilian Tumusime Mugisha

### Panelists:

- 1. Hon. Hariet Mugambwa Nganzi, - 2. Hon. Frankie Xavier Mubuuke & - 3. Hon. Ebyau Fidel.

## Representation:

- 1. Mr. Jonan Rwambuka Nuwandinda of M/s Rwambuka & Co. Advocates for the Claimant. - 2. Mr. Patrick Mugalula of M/s Katende Ssempebwa & Co. Advocates for the Respondent.

#### AWARD

# Background

The Claimant was employed by Centenary Rural Development Bank (Kabale Branch) from 06/11/2003 up to 2015. According to him, in 2015, he was approached by the Respondent's Managing Director, General Manager, Human Resources and the

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General Manager Credit, who convinced him to join the Respondent Bank. On 06/07/2015 the Respondent Bank appointed him Credit Manager effective from 07/08/2015, at a gross monthly pay of UGX 4,250,000/-, On 27/02/2016, he was confirmed as a permanent employee.

- (21 At the time of his employment with Centenary Rural Development Bank his former employer, he had acquired a salary loan facility, amounting to Ugx. 100,000, 000/-and its repayment was supposed to be by monthly salary deductions of Ugx.1,321,507/-, period of 120 months. On 30/09/2015, the Respondent Bank bought off the loan. - (3] On 23/01/2017, the Claimant received a phone call from the Human Resource Department inviting him for a meeting scheduled for 24/01/2017 at 10:00 am. On 24/01/2017, he was handed a letter of termination of his employment dated 23/01/2017, however, no reason was given for the termination. He filed a complaint before Mr. Mukiza Rubasha the Labour Officer KCCA, who adjudicated the matter and found that the Respondent unlawfully terminated him. The Labour officer granted him compensation of Ugx. 2,666,500/- for failure to give him a hearing, Ugx. 15,519,833 as salary arrears from the date of termination to the date of award, Ugx 3,999,750/ as severance allowance for the 1 year and 6 months, he served the Respondent. He, however, referred the question of assessment of damages, compensation for the loan and other remedies, for resolution by this court. - (4] However, before this claim for assessment of damages was filed, the Respondent filed an appeal against the decision of the Labour officer, in this Court, on 5 grounds, 4 of which were struck out by Court for being defective for bad drafting. The court resolved only 1 ground, that is: The Labour officer erred in law when he failed to properly evaluate evidence in the record and thereby came to a wrong conclusion. It upheld the Labour officer's finding that the Claimant was unlawfully and unfairly terminated, because he was not given a justifiable reason for the termination and an opportunity to be heard. The court also upheld the awards the labour Officer granted the Claimant save for the award of Ugx, 3,990,750/- for severance pay which, whose computation was contrary to the computation/ formula established by this court in Donna Kamuliv DFCU Bank, LDC No. 002 of 2015, where it was held that, where the parties had no agreed formula for calculating severance allowance, the employee in issue, would be paid 1 month's salary for every year served.

- [5] Having served the Respondent for 1 year, in accordance with section 94 of the Employment Act (currently Section 93 under the 7 editions of the revised laws of Uganda 2024), and Donna Kamuli v DFCU Bank, (supra), Court modified the Labour officer's award and awarded the Claimant Ugx. 4,250,000/- as severance pay, instead. - The Court went further to consider the reference for the computation of general damages, which the Labour oficer had no jurisdiction to consider and awarded him Ugx. 25,000,000/- as general damages for being dismissed after 1 year, without a reason and a hearing, moreover after being convinced to leave his previous employment.

He now seeks to recover special damages from the Respondent in the following terms:

- a) Loan due to the Respondent in the sum of Ugx. 91,320,359/= together with accrued interest and penalties. - b) Salary arrears from the date of illegal termination on 23/01/2017 to the date of this award at the rate of net monthly pay of Ugx. 2,660,500/=.

He also prays for an award of General damages amounting to Ugx. 50,000,000/=, Severance allowance amounting to Ugx. 50,000,00E, Punitive and aggravated damages amounting to Ugx. 150,000,000=, Payment of salary arrears from the date of unfair termination to the date of the award, Interest of 23% until ful settlement and Costs of the claim.

### Issues

- 1) Whether the Claimant should be discharged from the loan repayment obligations? - 2) Whether the Claimant is entitled to aggravated damages resulting from unlawful termination? - 3) Whether the Claimant is entitled to any other remedies?

## Submissions

- 1) Whether the Claimant should be discharged from the loan repayment obligations? - It was submitted for the Claimant that, the Claimant was headhunted from Centenary Bank where he had served for 12 years. While in the employ of Centenary Bank, he


obtained a salary loan facility amounting to Ugx. 100,000,000/- to be paid by monthly deductions of Ugx. 1,321,507/-, for 120 months. The Respondent's top management team convinced him to leave his former employer to join the Respondent as an employee which he did. After recruiting him, the Respondent Bank bought off the loan. However, after serving for only 1 year, the Respondent unlawfully terminated his employment in disregard to its own Human Resources Manual. The Claimant filed a complaint before the Labour officer Mr. Rubasha, of KCCA, who found that the Claimant was unlawfully terminated in his decision on the matter (see exhibit 11). The Respondent filed an Appeal vide LDA No. 26 of 2017, before this Court. The Court upheld the Labour Officer's decision.

However, the issue regarding liability for the loan and damages was referred to this $[8]$ court, for resolution hence this award.

Mr. Rwambuka Counsel for the Claimant cited Okello Nymlord v Rift Valley Railways (U) Ltd, HCCS No.195 of 2009, as the relevant authority to the facts of this case because, the defendant in that case guaranteed a salary loan on behalf of the plaintiff and the court having found that he was unlawfully, terminated, held the Defendant liable to pay the loan. According to Counsel, the court reasoned that since the repayment of the principal and interest were to be paid from deductions from monthly salary, based on the understanding that the plaintiff would continue working for the Defendant and the payment was frustrated by the unlawful act of the Defendant, the Defendant was liable for its repayment. He also relied on this Court's holding on the same principle in Florence Mufumbo v Uganda Development Bank LDC No. 138 of 2014, which was confirmed by the Court of Appeal in Uganda Development Bank v Florence Mufumbo, CA No.241 of 2015. He contended that, whereas the loan repayment was for a period of 10 years, the Claimant was unlawfully terminated hardly 2 years in service. Therefore, the Respondent should carry the burden of repaying the loan.

In reply Counsel for the Respondent did not dispute that the Claimant was employed [9] by the Respondent, although he contended that he applied for the job on his own volition and was not head hunted as alleged. It was his submission that the Claimant should not be discharged from the liability for the loan because he voluntarily applied for the loan, voluntarily signed the mortgage facility agreement and provided his land as security and upon his termination, he voluntarily signed the loan variation agreement which converted the loan from a staff loan to a loan at commercial rates. Therefore, he was bound by the said agreements. He relied on Francis X. Kitumba v Equity Bank Uganda Limited LDMA No.32 of 2017 arising from LDC No.295 of 2016 and Musimenta Rogers v Equity Bank Uganda Limited LDMA No. 167. Of 2018 for the legal proposition that a loan secured by a mortgage deed was not a loan recoverable only by way of salary deductions but also by realizing the mortgage.

[10] He contended further that discharging the Claimant from the repayment of the loan would disincentivize the Respondent and other institutions from offering their employees such facilities. Therefore, unlike in Nymlord(supra), given that the Claimant's loan was secured by a mortgage, he should not be discharged from repaying it.

#### Decision of Court

- [11] The Court of Appeal in Stanbic Bank (U) Limited v Okou, Civil Appeal No. 60 of 2020 [2023] when dealing with the issue relating to salary loans opined that, the contract on which the loan is based is a material consideration and there can be no blanket conclusion that there was an understanding that all loans are payable by salary deductions. The court was of the view that the provisions of the loan agreement need to be considered as opposed to considering only evidence relating to the loan repayment being from salary deductions. The court emphasized that each party has obligations under the loan agreement and even if the repayment is breached by the unlawful termination, the obligations to the Bank cannot be overlooked. The court advised that the best way to handle such a matter was to assess damages due to the Claimant and offset outstanding amounts owed to the Bank from assessed amounts. In this case, the Court of Appeal declined to award Ugx.76,000,000/- which was outstanding on a home loan account until the assessment of damages and offsetting the amount owed. - [12] In the circumstances, whereas this court in Irene Nassuna v Equity Bank Ltd, LDC No. 6 of 2014, held that once a loan is not premised solely on salary for its repayment, even where an employee is unlawfully terminated, liability for its repayment cannot be shifted to the employer,as was held in Nymlord Okello(supra). This is because each loan must be evaluated based on the loan agreement. In line with the Court of Appeal


in Okuo, however, a Claimant in such circumstances can benefit from the assessment of damages from which the outstanding balance on the loan can be offset.

- [13] We had an opportunity to scrutinize the loan agreement which was attached to the Claimants witness statement marked "C6" and established that Clause 3 thereof provides that "... the advance will be paid directy from the borrower's savings lcurrent account by 120 equal monthly instalments comprising of both principal and interest in the sum of Ugx. 1, 321,507/- each..". Clause 5 provides that; "The proposed faclity wil be secured by: plot 531 BUSIRO Block 216 SALA" The source of the said instalments was stated under ClaUse 3 of the terms and conditions "as deductions by the lender from the borrower's salary and in the event that the borrower resigns or he or she is terminated from employment the lender reserved the right to apply all dues due to the borrower including but not limited to the provident fund if any to offset the loan and if the loan was not fully offset from the said dues the borower would continue servicing the loan as a commercial loan.. - [14] It was glaringly clear from this agreement that, the Claimant's loan was secured under a mortgage deed. Therefore, even if its repayment was by way of monthly salary deductions, it was not solely based on salary for its repayment, but also by realization of the mortgage because it was a secured loan. However, it had concessional terms such as the interest rate being 10% per annum on a reducing balance as opposed to the commercial rate which the Respondent imposed on the Claimant after his termination. In our considered opinion, although it was secured, the concessional clauses indicated that it was treated as a salary loan in substance, disguised as a secured loan. This notwithstanding, the agreement clearly stated that it was secured by property, with a provision to revert to a commercial loan if the employer resigned or was terminated. - [15] The Court of Appeal in Okuo(ibid) stated that: " the underlying principle is that where a loan is secured on the salary earnings of the employer and the employer unlawfuly terminates the employment and further makes the employee liable to pay the loan from other sources not envisaged at the time of entering the loan agreement, any falure of the employee to service the loan would be foreseeable and necessary consequence the unlawful termination of his or her employment Therefore where the loan was secured, it was foreseeable that where repayment by salary deductions was frustrated by termination, the loan would be relised by the mortgage. ...

The evidence on the record clearly shoWs that when they executed the loan agreement, the parties agreed that in the event of resignation or termination, the loan would be realizable by the mortgage and or payment from the provident fund among others. Therefore, the agreement is to the effect that, even if the Claimant was unlawfully terminated by the Respondent, the liability for the repayment of the loan cannot be shifted to the Respondent.

- [16] We however do not condone the variation of the terms of the loan repayment where an employee in such circumstances was unlawfully terminated by the Respondent. We are of the considered view, that in line with the Court of Appeal's holding in Okou(supra), that where the employee took up the loan on the understanding that its repayment would be based on his or her salary earnings and based on there Concessional interest rates, even if the loan was secured by other sources, where the employee is unlawfuly terminated, and the loan is realizable by a mortgage, the terms and particularly the concessional terms on which the loan was negotiated should not be varied to commercial rates. Having deprived the employee of the means of repayment of the loan by unlawful termination, he or she should not be unfairly subjected to unjustified risk by imposing commercial rates, especially given that he or she has to seek other means to realise the loan. - [17| In the circumstances, even if the Claimant's loan was realizable by a mortgage, therefore the court has no basis to shift the liability for its repayment to the Respondent, having unlawfuly terminated him, thereby depriving him of the salary with which he was expected to service the loan, the Respondent is hereby ordered to maintain the same terms on for its repayment at the initial concessional rate at 10% per annum, as opposed to the commercial rate of 23% per annum which was imposed after his termination. - 2) Whether the Claimant is entitled to general and aggravated damages resulting from unlawful termination? - [18] Having already awarded the Claimant general damages under LDA No. 26 of 2017, there was no requirement for us to reopen discussions on the subject of general damages. We shall however consider whether the Claimant would be entitled to an award of aggravated danmages. 

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Counsel argued that Article 126 (2)(e) enjoins courts to award adequate compensation to all victims of wrongs and in the instant case, there was unilateral and wanton disregard for the procedures established under the Respondent's Human Resources Manual paragraph 17.3.1 which provides that it is essential that the termination of employees is handled carefully and fully documented and there must be good faith and no camouflaging the reason for termination. For instance, when "...the real reason for dismissing an employee; when the finding is baseless or perverse or where there is undue harshness e.g. terminating the services of an employee where a warning letter would have sufficed …".

- He contended that although the procedure to be followed is well laid down, in its $[19]$ Manual, the Respondent who had head hunted the Claimant, merely invited him for a meeting scheduled for 10.00 am and made him wait until 3.30 pm, only to be issued with a termination letter, without giving him any reason for the termination. Counsel contended that this was not only harsh and arrogant, but it was compounded by the Respondent deliberately frustrating the Claimant from getting alternative employment when it refused to give him a recommendation, moreover in the knowledge that it was hard to get a managerial job in the banking sector. - In reply Counsel, submitted the claim for aggravated damages and stated that $[20]$ Claimant did not plead any aggravating circumstances to entitle him to an award of aggravated damages. citing Uganda v Joseph Kibuuka and 4 others CACA No 281 of 2016 and Peeky Intermark v Australia Banking Group [2006] EWCA civ 386 on (contractual estoppel) he argued that in cases where parties agreed to be bound by provisions of a contract between them and in this case the parties agreed that the contract of employment could be terminated on notice by either party. They are estopped from anything to the contrary.

Counsel further contended that the cases on which the claimant relied such as $UDB v$ Florence Mufumbo, and Peter Waiswa Kityaba, dealt with unfair dismissal and not with termination and with the conduct of the Claimants yet in the instant case, the Claimant's performance and conduct are not in issue but the Respondent resolved to terminate his employment under the contract of employment.

According to Counsel, he was not treated in a despicable manner, nor was he $[21]$ defamed, he was only notified about the decision to terminate him, he was paid all his dues and he provided the Respondent with the avenues he would continue repaying

the loan. Therefore, there was no basis for paying him damages. Although he agreed with the submission that the Respondent's Human Resources Manual is the supreme instrument, based on it the termination was lawful. He refuted the assertion that the Claimant was headhunted because he applied for the job and in his view even if the Claimant did not plead aggravating circumstances, there were none to warrant an award of aggravating damages. He argued that in this case, there was no evidence of aggravating circumstances such as callousness, oppressiveness, high handedness ill will and discrimination to warrant a grant of aggravating damages.

#### **Decision of Court**

- We find that the facts of the instant case on all fours with the facts in *Bank of Uganda* [22] v Betty Tinkamanyire SCCA No. 12 of 2007, where the Respondent was dismissed in her absence and the dismissal followed a circular published to all employees of the appellant and displayed on notice boards and she received a letter terminating her services on the date the circular was published, but no reasons were stated in the termination letter. Mr. Justice Kanyeihamba (JSC) as he then was, in awarding aggravated damages, considered the conduct of the employer as being callous, lacking in compassion, indifferent and yet the Claimant had served with a clean record and zeal and her performance was exemplary. In his Lordship's view, she should have been reinstated with apologies, but the Respondent confirmed her termination instead. - $[23]$ In the instant case, the Claimant agreed to resign from his former job as Credit Administrator with Centenary Bank where he had served for 12 years, in favour of working for the Respondent. And even if he may have applied for the job, it is not in dispute that on 6/07/2015, the Respondent Bank appointed him as its Credit Manager. This was indication that he qualified for the position and probably because of his good performance at his previous employment. The Respondent however terminated him on 27/07/2017 without any reason and without a hearing. His termination letter reads in part as follows:

"...... Dear Rogers,

RE: TERMINATION OF EMPLOYMENT CONTRACT

We write in respect of your employment contract with Equity Bank Uganda Limited.

We wish to notify you that the bank has taken a decision to terminate your contract of employment with immediate effect in accordance with the terms of the said contract. As stipulated in the contract, the Bank will pay you one month's salary in lieu of notice in addition to all other benefits due to you.

We confirm that we shall issue you with a certificate of service upon requesting the Bank.

We urge you to clear your financial obligation to the bank (if any) and hand over to the HR office any Nank property in your possession including the Bank's identity card and medical cards.

We take this opportunity to thank you for your service to Equity Bank Uganda and wish you the very best for the future $\ldots$ "

- $[24]$ It is clear from this letter that the Claimant was summarily terminated, contrary to Sections 64, which provides for termination, 57 which provides for notice periods and Section 69(3) which gives grounds upon which an employee may be summarily terminated for justifiable reasons and particularly if the employer has by his or her conduct indicated that he or she has fundamentally broken his or her obligation arising under the contract. The Court of Appeal in Stanbic Bank (U) Ltd vs Constance Okuo CACA No 60 of 2020, stated that, for there to be lawful summary termination, the provisions of the Employment Act override any contractual provisions which allow payment in lieu of to notice where less notice is provided for. In view of this reasoning the Respondent's submission that, there was contractual estoppel given the provisions between the Claimant and the Respondent Bank cannot hold. - This Court is of the considered opinion that for every adverse action taken against an $[25]$ employee, the employer should meet the "just cause" standard. Every decision must be fair. We are persuaded by the South African case of National Entitled Workers' Union v Commissioner for Conciliation, Mediation and Arbitration and 6 Others Case Number JA51 /03, where it was stated that: "Protection against unfair termination of contracts of employment is based on the fact that employers enjoy greater social and economic power as compared to individual workers. The fact that the law against unfair termination is afforded an employee, but no similar protection is afforded an employer does not in any way diminish the power an employer wields in the workplace..." What is peculiar in this case is that the Claimant resigned from his former employer Centenary Bank in order to join the Respondent bank and his resignation was accepted.

- $[26]$ We respectfully do not associate ourselves with the assertion by the Respondent that it had nothing to do with the Claimant's resignation and he voluntarily applied and was given the job. This is because after confirming him, the Respondent allowed to buy off his loan from the former employer and it was the evidence of RW1, that such a loan would only be granted to a person who had served for a long time. Therefore, it is not farfetched to believe that the Claimant was given exceptional consideration because he was convinced to leave his former employment and not the former, because the loan was bought off after he was confirmed, less than a year in the Respondent's employ. The assertion by RW1 that the confirmation into employment was not strict proof of diligent performance does not hold water, because the Respondent had the power not to confirm him, or not. As already discussed, he was summarily terminated on 23/01/2017, contrary to sections 57,64 and 68 of the Employment Act cap 226. - To compound it all, according to the email trail marked "C16", attached to the $[27]$ Claimant's witness statement, showing the Claimant's efforts to secure reengagement with his former employers, where a one Edward Ocen, promised to work on it. We scrutinized the response to one of the Claimant's emails, dated 8/12/2017, at 3.31 pm regarding his request for a recommendation where he stated thus; "I am losing out on the offer. The Human Resource Meeting was on Wednesday, and I informed Hamid. I promised Centenary that today they would receive the letter. Kindly send the letter and I come on Monday for a discussion. Beyond this week it might be hard for me to be considered. Thank you." Mr. Ocen responded to it on the same date, at 3.55 pm and said; "Come tomorrow" It was evident from the emails that the Claimant went to his office, but Mr. Ocen was not in office and no evidence was laid before us to indicate that any letter was sent to Centenary Bank regarding his request or that he was given any form of recommendation or certificate of service. Whereas Courts are enjoined not to fetter with the right of an employer not to keep an employee he or she no longer wants, the employer is enjoined not to disenable such an employee from securing alternative employment. - $[28]$ We are fortified by the provisions of Section 60 of the Employment Act which require an employer to issue an employee whose contract has been terminated, with a certificate of service, that shall not contain any judgement or evaluation of the employee's work, except the employee asks for it and this will be provided in a


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separate document. We believe this section is intended to enable employee who are terminated from employment to be able secure alternative employment. It is clear from the email trail, that the Respondent in the instant case, instead of facilitating the Claimant was bent on frustrating his efforts to be re-engaged by his former employers, when it failed and or refused to issue him with a recommendation.

- (29] We find it glaring contradictory that the Respondent insisted that the Claimant's termination was not motivated by his failure to perform his duties or because of his conduct, and yet it faled and or refused to give him a badly needed recommendation to enable him secure alternative employment. We find this conduct not only malicious, degrading callous and oppressive but it also connotes ill will on the part of the Respondent, which this court does not condone. It is grossly unfair that the Claimant left his former employment of 12 years even if he may have done so voluntarily, to work for the Respondent, only to be terminated in less than 2 years , without notice without a reason and without a hearing and he was denied a recommendation/certficate of service which he desperately required to enable him secure alternative employment and in particular to enable him get re-engaged by his former employer! - [301 We are convinced that the Claimant has demonstrated aggravating circumstances for which he is entitled to an award of aggravated damages. The Court of Appeal in Okou(supra) stated that in assessing the quantum of aggravated damages court must consider among others, imponderables such as the prospects of the employee getting another employment. In Obongo v Municipal Council Kisumu [1971]EA 91, it was stated that, when damages are at large and court in making a general award, it may take into account factors such as malice or arrogance on the part of the defendant and this is regarded as increasing the injury suffered by the plaintiff as for examples, by causing humiliation or distress enhances account of such aggravation are regarded as still being essentially compensatory in nature... - [31] We have no doubt in our minds that, managers in Banks are expected to be persons of very high integrity and financial probity(see Barclays Bank v Godfrey Mubiru CA no 1 of 1998), and loss of employment in the manner in which the Claimant did without any reason and without a recommendation letter or certificate of service from the Respondent, cast doubt on his integrity and probity in the eyes of a reasonable man, and particularly as a prospective employee at the level of Manager in a Banking

institution/Financial institution, thus rendering his efforts to secure alternative employment in the banking sector very difficult and the Respondent is to blame for this.

|32) We reiterate that the acts of the Respondent were not only unlawful but were callous, degrading and oppressive which would entitle the Claimant to an award of aggravated damages in the sum of Ugx. 105,000,000/=, it is so awarded.

# Certificate of service

In accordance with Section 60 of the Employment Act, the Claimant is entitled to be given a certificate of service. We have already established that the claimant requested for a recommendation/ certificate of service which was denied. The Respondent is ordered to issue a certificate of service to the Claimant in accordance with section 61 of the Employment Act.

### Interest

The sums awarded above shall attract an interest of 10% per year from the date of this Award till payment in full.

### Costs

This Court has taken the position that, the award of costs against Labour disputes would further widen the gap between employees who have lost their employment because they would be rendered destitute and their employers who are the holders of capital with unfettered power over them. Similarly awarding costs to the employers especially after their employees have been awarded various remedies including General damages, could be detrimental to the sustenance of the employers' business and the economy as a whole. Therefore, in a bid to create equality between the parties, this court has taken the position not to award any costs, save in exceptional circumstances. See Eva Naziwa Lubowa Vs NSSF LDR No. 001/2019 & Charles Kakande Vs Motor Care U Limited LDR No. 24712019.

In the circumstances, no order as to costs is made in the instant case.

## Orders of Court

1. The Claimant is awarded aggravated damage of Ugx. 105,000,000/=.


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- 2. An awad of Interest of 10% per annum shall accrue on 1 above from the date of this Award till payment in full. - 3. No order as to costs is made.

Signed in Chambers at Kampala this 11th day of October 2024.

Hon. Justice Linda Lilian Tumusime Mugisha, Head Judge

# The Panelists Agree:

- 1. Hon. Harriet Mugambwa, - 2. Hon. Frankie Xavier Mubuuke & - 3. Hon. Ebyau Fidel.

11th October 2024 9:30 am