Food Reserve Agency v Simate Simate and Ors (Appeal 135/2022) [2024] ZMCA 62 (28 February 2024)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT NDOLA Appeal 135/2022 (Civil Jurisdiction) BETWEEN: FOOD RESERVE AGENCY APPELLANT AND SIMATE SIMATE ALFRED MKONDA FLOYD NDABULULA 2ND RESPONDENT 3RD RESPONDENT GODFREY MURANGANWA MUNYORO 4TH RESPONDENT ERICK LUBASI MUBITA STANSLAUS MUBANGA 5TH RESPONDENT 6TH RESPONDENT Coram: Kondolo, Majula and Patel, JJA On 22nd February 2024 and 28th February, 2024 For the Appellant : Mr. P. G. Katupisha of Messrs Milner & Paul Legal Practitioners For the Respondents : Mr. M. Shamaleka with Mr. N. S. Kaulule, both of Messrs M. Munasangu & Company JUDGMENT MAJULA JA, delivered the Judgment of the Court. J2 Cases referred to: 1. Citibank Zambia Limited vs Suhayl Dudhia - SCZ Appeal No. 6 of 2022. 2. Indian Ceramic House, Agra vs Commissioner of Sales Tax Officer and Others AIR 1971 All 251 (FB). 3. Charles Mambwe and Others vs Mulungushi Investments Limited (In Liquidation) and Another - SCZ Selected Judgment No. 36 of 2016. 4. Zambia Privatisation Agency vs James Matale (1995-1997) ZR 157. 5. Kitwe City Council vs William Nguni (2005) ZR 57. 6. Husmuddin Gulamhusssein Pothiwalla Administrator, Trustee and Executor of the Estate of Gulamhussein Ebrahim Pothiswalla vs Kidogo Basi Housing Corporative Society Ltd and 31 Others Civil Appeal 330/2003. 7. Catherine Mgendi vs Utumishi Investment Limited Kenya Police Staff Sacco Society Limited Nairobi ELC Appeal No. 36/ 2015. 8. Bank of Zambia vs Kasonde (1995 - 1997) ZR 238. 9. Guardall Security Group Limited vs Reinford Kabwe CAZ Appeal No. 44 of2019 10. Goodwell Malawo Siamutwa vs Southern Province Cooperative Marketing Union Limited and Finance Bank (Z) Ltd - SCZ Appeal No.114 of 2000. 11. Sarah Aliza Vekhnik vs Casa Dei Bambini Montessori Zambia Limited CAZ Appeal 129/2017 12. National Drug Company Limited, Zambia Privatization Agency vs Mary Katongo - SCZ Appeal NO. 79/2001. 13. Colgate Palmolive (Z) Inc vs Able Shemu Chi and 110 Others - SCZ Appeal No. 181 of 2005. 14. Printing and Numerical Registered Company vs Simpson (1975) LR 19 EQ 462. 15. Husamuddin Gulamhussein Pothiwalla Administrator, Trustee and Executor of the Estate of Gulamhussein Ebrahim Pothiwalla vs Kidogo Basi Housing Corporative Society Limited and 31 Others Civil 16. National Bank of Kenya Ltd. vs Pipeplastic Samkolit & Another (2001) KLR 112. 17. Masauso Zulu vs Avondale Housing Project Limited (1982) Z. R. 172 J3 Legislation referred to: 1. Industrial and Labour Relations Court Act, Chapter 269 of the Laws of Zambia 1.0 Introduction 1.1 In this appeal we are being called upon firstly, to interrogate the effect of a mediation settlement Order. Secondly, whether or not the termination of the respondents' employment was lawfully done. Thirdly, what the role of the court is in relation to contracts that have been freely and voluntarily entered into by the parties. 2.0 Background 2 . 1 This is an employment matter which emanated from the Industrial and Labour Division of the High Court. The presiding Judge was Honourable E. Mwansa. The parties were in an employment relationship which was terminated by the appellant using the termination clause provided for in the staff conditions of service specifically clause 6.2. 2.2 The respondents, who had been employed on different dates, were aggrieved with this turn of events and proceeded to the High Court seeking various reliefs. Amongst the reliefs sought was an Order deeming them to have served the entire number of years of their contracts, payment of salaries and gratuities calculated at 35% as well as interest and costs. J4 3.0 Decision of the lower court 3.1 After having analyzed the evidence before it, the lower court granted the respondents the following relief; payment of gratuity at the rate of 35% for the duration of their contracts based on the precedent set in the Isaac Kalokoni matter. The Isaac Kalokoni settlement was arrived at a court annexed mediation and it was the Court's view that the appellant had set a precedent and therefore, "the decision of the parties having been endorsed by the Court should be considered as the Court's precedent and the court is thus obliged to follow it." 3.0 Grounds of Appeal 3.1 The appellant was disconsolate with the decision of the court below and has fronted the following grounds of appeal: "1. The court below erred in law when it rendered judgment on the 4th of February, 2022 beyond the one-year period contrary to the provisions of section 19 (3) (b) (ii) of the Industrial and Labour Relations (Amendment) Act No. 8 of 2008. 2. The court below erred in law when it held that a decision of the parties in a mediation settlement order having been endorsed by the Court should be considered as the court's precedent and the court is obliged to follow it. JS 3. The court below erred in law and fact when it held that the decision by the appellant in the Isaac Kalokoni case to pay gratuity as though he had completed serving the four year contract should be extended to the respondents notwithstanding the fact that the former case was settled through mediation. 4. The court below erred in law when its decision was in contradiction with the case of David Matongo vs Food Reserve Agency. 5. The court below erred in law and fact when it condemned the payment by the appellant to the respondents on a pro rata basis contrary to the conditions of service governing the parties." 5.0 Appellant's Arguments 5 .1 Long and detailed arguments were submitted in relation to ground 1, however, we shall not summarise the same . This is on account of the fact that it was abandoned as it has been overtaken by the case of Citibank Zambia Limited vs Suhayl Dudhia 1 • 5.2 In relation to grounds 2 and 3 which were argued together, learned Counsel for the appellant submitted that the lower court erred by relying on a mediation settlement Order to decide the matter between the appellant and the respondents. It was contended that the binding nature of a judicial precedent is the court's legal reasoning or ratio decidendi which is absent in a mediation settlement Order. J6 As authority for this proposition, the cases of Indian Ceramic House, Agra vs Commissioner of Sales Tax Officer and Others AIR2 and Charles Mambwe & 4 Others vs Mulungushi Investment Limited and Others3 were cited. 5.2 Based on the cited authorities, Counsel spiritedly argued that a court cannot rely on a decision of a mediation settlement Order as it is not a subject of appeal, interpretation or review. Counsel went on to submit that the respondent's contracts were lawfully terminated by way of notice pursuant to clause 6.2 of the staff conditions of service. To reinforce this submission, we were referred to the holding of the Supreme Court in the case of Zambia Privatisation Agency vs James Matale4. 5.3 Further, calling in aid the case of Kitwe City Council vs William Ng'uni5 , Counsel forcefully argued that a party cannot be paid for a period not worked as this would amount to unjust enrichment. In wrapping up on ground 4, Counsel asserted that by departing from the holding of the Court in the case of David Matongo vs Food Reserve Agency (supra) the lower court created uncertainty in the law by deciding otherwise. 5.4 In relation to ground 5, the learned Counsel observed that the payment of gratuity on a pro rata basis was in accordance with the staff conditions of service. This entailed that the court below was duty-bound to uphold and enforce the contract as they were entered into freely by the J7 parties. It was pointed out that the approach taken by the lower court of not upholding pro rata payment embodied in the contract amounted to rewriting the terms of the contracts between the appellant and the respondents. 5. 5 We were referred to the cases of Husmuddin Gulamhusssein Pothiwalla Administrator, Trustee and Executor of the Estate of Gulamhussein Ebrahim Pothiswalla vs Kidogo Basi Housing Corporative Society Ltd and 31 Others Civil6 as well as Catherine Mgendi vs Utumishi Investment Limited Kenya Police Staff Sacco Society Limited Nairobi ELC7 on the principle that courts should not re-write contracts between parties but must enforce the terms of the contract. 5.6 We were accordingly urged to set aside the decision of the lower court. 6.0 Respondents' Arguments 6.1 In relation to grounds 2 and 3, the respondents submitted that the court below did not rely on a mediation settlement Order in arriving at its decision but on the principle of treating similarly circumstanced individuals the same. That this can be gleaned from the judgment of the court below on page 19 of the record of appeal where the lower court cited the case of Bank of Zambia vs Kasonde8 which enjoins public institutions to adhere to principles of fair play and equal treatment of its employees. Counsel observed that the appellant in this case failed to treat the respondents as J8 equal to Isaac Kalokoni Mumba despite the latter being similarly circumstanced with the respondents . 6. 7 In relation to grounds 4 and 5, the respondent reiterated the plea that they were similarly circumstanced with Isaac Kalokoni Mumba who was , however, deemed to have served the entire duration of his 4-year contract and paid his full gratuity. This therefore means that the court below was on firm ground to find in favour of the respondents as it is called upon to ensure substantial justice is delivered to the parties. 7 .0 Hearing of the Appeal 7 .1 When the matter came up for hearing on 22 n d February 2024, learned counsel for both parties intimated that they would significantly rely on the written heads of argument and also make brief oral submissions. 7 .2 On behalf of the appellant Mr. Katupisha submitted that he was abandoning ground 1 in light of the fact that it was anchored on the Guardall Security Group Limited vs Reinford Kabwe9 which was subsequently overturned by the Supreme Court in the case of Citibank Zambia Limited vs Suhayl Dudhia (supra). 7 .3 He emphasized that the respondents cannot be said to have been similarly circumstanced with Isaac Kalokoni Mumba in that the latter was claiming damages for wrongful dismissal J9 while the respondents in casu were not even challenging the termination of their employment contract. 7.4 Counsel for the respondent, Mr. Shamaleka in augmenting the respondent's case implored the court to consider paragraphs (a) to (k) on page 16 of the record of appeal where the trial court made notable findings of fact. Thereafter the court cited the case of Bank of Zambia vs Kasonde (supra) on principles of fair play. When asked by the Court whether he had any authority for the view that a mediation settlement order could have the force of a judicial precedent, Mr. Sharrialeka conceded that he did not have any. 7.5 In reply, Mr. Katupisha vociferously submitted that a close look at the respondents' heads of arguments for grounds 4 and 5 reveals that they did not traverse the appellant's submissions. He reiterated that the appellant's argument on these two grounds was that the lower court ignored the David Matongo vs Food Reserve Agency (supra) case when determining this matter thereby creating uncertainty in the law. He further contended that the pro rata payment provided for in the con tract was not addressed by the respondent. In sum, he beseeched the court to allow the appeal with costs. 8.0 Decision of the Court 8.1 We have meticulously examined the record of appeal and the submissions of the parties. We propose to deal with grounds 2, 3 and 4 together as they are entwined. JlO 8.2 Effect of Mediation Settlement Order 8.3 The 2 nd , 3 rd and 4 th grounds of appeal in our view are hinged on the lower court's reliance on the mediation settlement Order as a basis for using it as a binding judicial precedent. The court below proceeded to use the mediation settlement Order of Isaac Kalokoni as a precedent to deem the respondents as having completed the duration of their contracts of employment. 9.2 We have reflected on what a mediation settlement order entails and its effect. A mediation settlement order is a legal document that formalizes the terms agreed upon during mediation. It outlines the resolutions and agreements reached between the parties involved in the dispute. This document is signed by the parties and submitted to the court to obtain a court order reflecting the terms of the settlement. The agreed upon terms are legally enforceable between the parties. It is important to note that it is a contract between the parties involved in the mediation. It has no binding effect on third parties. 9.3 The court of last resort had occasion to pronounce itself on the effect of a mediation settlement order in the case of Charles Mambwe and 4 Others vs Mulungushi Investments Limited (In Liquidation) and Another (supra) where it was held inter alia that: "Our discussion on the effect of a mediation settlement order reveals that such an order is final, binding and not subject to appeal, interpretation or review. The Jl 1 consent settlement order entered into by the parties in this matter being such an Order, is the ref ore, final and binding upon the parties to this dispute. The consent settlement order marked the close of the proceedings and cannot be the subject of appeal, review or interpretation by the court. This arises from the fact that a court cannot adjudicate upon a decision it has not made by way of appeal, review or interpretation." 9.4 It is abundantly clear from the foregoing that a mediation settlement order is only binding on the parties to a dispute. The nature of the settlement agreement is such that it cannot be subject to appeal, review or interpretation. 9. 5 Parties in the course of mediation reach an agreement by compromise. The parties reach a voluntary agreement. It is thus not a formal legal process where the court adjudicates over the issues and ultimately comes up with a judicial decision based on legal reasoning by the court. On account of that, one cannot in our view use a mediation settlement order as judicial precedent to bind other parties other than the parties to it. 9.7 The respondents have advanced an argument that the court below was on firm ground in having found that the respondents ought to be paid in the manner Isaac Kalokoni Mumba was paid on the basis that they were similarly circumstanced. It has been argued that to treat similarly circumstanced employees differently would amount to departing from established legal principles. J12 9.8 We wish from the onset to dispel the notion that the respondents and the said Isaac Kalokoni Mumba can be said to have been similarly circumstanced because the latter subjected himself to a mediation process and as articulated above, the agreement was only binding to those parties and could not be extended to the respondents. In mediation, it is a compromise by the parties and there may be no legal considerations. The respondents came before the courts of law and a mediation settlement order cannot be used as a court precedent. The question of the respondents and Isaac Kalokoni Mumba being similarly circumstanced is therefore misconceived. 9.9 From our perspective, it was a grave error on the part of the lower court to have used the Isaac Kalokoni Mumba matter settlement order as a precedent binding non-parties. We are sure-footed to so state on the basis of the Charles Mambwe (supra) case. The question that next arises 1s whether or not the contracts of the respondents were validly terminated. 10.0 Validity of Termination 10.1 We are compelled to look at whether or not there was valid termination of the respondents' employment. A careful perusal of the record specifically the respondents' contracts and the manner in which the con tracts were terminated J13 reveals that the appellant applied clause 6.2 of the staff conditions of service which provides as follows: «6.2 Termination Notice The Employer may terminate employment by gwzng three (3) months' notice in writing or payment of three months (3) salary in lieu of such notice," 10.2 The appellants having exercised the notice clause as a mode of termination were well within their powers. We say so because termination by notice or payment in lieu of notice was a proper and lawful way to terminate the respondents' contracts. We are fortified by the decision of Zambia Privatisation Agency vs James Matale (supra) where the Supreme Court held that: «The payment in lieu of notice was a proper and a lawful way of terminating the respondent's employment on the basis that in the absence of express stipulation, every contract of employment is determinable by reasonable notice, see Maclelland v Northern Ireland Health Services Board. In the case of Lumpa v Maamba Collieries, we said, ''It is the giving of notice or pay in lieu that terminates the employment. A reason is only necessary to justify summary dismissal without notice or pay in lieu. We agree with counsel for the appellant that the respondent's termination of services was not unlawful as he was paid in lieu of notice which is a lawful way of J14 terminating a contract of employment. This ground of appeal succeeds." 10.3 Having properly terminated the respondents and having paid them accordingly, it only stands to reason that they cannot be paid for a period not worked as it would amount to unjust enrichment. We stand guided by the cases of Kitwe City Council vs William Nguni (supra) and Goodwell Malawo Siamutwa vs Southern Province Cooperative Marketing Union Limited and Finance Bank (Z) Ltd. 10 In Kitwe City Council vs William Ng'uni (supra) it was held that: "It is unlawful to award a salary or pension for a period not worked for because such an award has not been earned and might be properly termed as unjust enrichment. " 10.4 Before we conclude on the aspect of the respondents having been properly terminated by way of notice, we wish to set the record straight on the position of the law. The James Matale case alluded to in this judgment spelt out the law on termination of an employment relationship by notice or payment in lieu of notice prior to the coming into force of the Employment Code Act, No. 3 of 2019. 10.5 Section 52 (1) and (2) of the aforecited Act changed the law as it provides that notwithstanding that an employer can terminate by way of notice or payment in lieu of notice, they must give a valid reason. We had occasion to discuss J15 the import of the prov1s10ns of section 52 of the new Employment Code Act in Sarah Aliza Vekhnik vs Casa Dei Bambini Montessori Zambia Limited11 • 10.6 Turning to the case at hand, the termination of the respondents' employment contract took place on 17th December 2012 which was prior to the enactment of the Employment Act Code. Therefore we are applying the law as it was at the time. 10. 7 Taking into account the fact that the appellant complied with the law that was applicable at the time of termination , we find there is merit in grounds 2 and 3 of the appeal . 10.8 Grounds 4 and 5 are entwined and accordingly shall be dealt with together. In ground 4, the dissatisfaction emanates from the failure of the lower court to follow the precedent set in the case of David Matongo vs Food Reserve Agency (supra). That there was a contradiction between the former and the case at hand when they were on all fours. Thus, by so doing, the court created uncertainty in both law and fact . 10.9 The frustration in ground 5 1s simply that the parties had voluntarily entered into binding contracts which should be upheld. That the lower court by ordering the appellant to pay gratuity on the deemed duration of the contract and not on a pro rata basis amounted to the court re-writing the contract. J16 10.10 From our perspective, in the above grounds , we are being called upon to examine the binding nature of contracts and how they ought to be enforced. 11.0 Enforcement of Contracts 11.1 The principle regarding contracts that have been freely and voluntarily entered into by parties is that they are bound by the terms of the contract. The court's role is to enforce the contract. This principle has been articulated in a chain of decisions. In National Drug Company Limited and Zambia Privatization Agency vs Mary Katongo 12 the distinguished law Lords eloquently stated that: "It is trite law that once the parties have voluntarily and freely entered into a legal contract, they become bound to abide by the terms of the contract and that the role of the Court is to give efficacy to the contract when one party has breached it by respecting, upholding and enforcing the contract. " 11.2 Another illuminating case is that of Colgate Palmolive (Z) Inc vs Able Shemu and 110 Others13, wherein the Supreme Court cited the case of Printing and Numerical Registered Company vs Simpson 14 which held that: " ... If there is one thing more than another which Public Policy requires, it is that men of full age and competent understanding shall have the utmost liberty in contracting and that their contract when entered into J17 freely and voluntarily shall be held sacred and shall be enforced by courts of iustice." Emphasis ours. 11.3 Our judicial colleagues in Kenya equally upheld the principle that courts cannot rewrite a contract in the case of Husamuddin Gulamhussein Pothiwalla Administrator, Trustee and Executor of the Estate of Gulamhussein Ebrahim Pothiwalla vs Kidogo Basi Housing Corporative Society Limited and 31 Others Civil 15, which cited the case of National Bank of Kenya Ltd vs Pipeplastic Samkolit & Another16 where they stated that: "A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the contract." 11.4 The Kenya Court of Appeal did not deviate from this principle in a later case of Catherine Mgendi vs Utumishi Investments Limited Kenya Police Staff Sacco Society Limited (supra), called in aid by the appellant where it was held that: "It is a recognized rnle that the court cannot rewrite the contract between parties or uphold a unilateral decision of a party to rewrite a contract after it has been signed by parties. The court must enforce the terms of the contract. " J18 11.5 We are in agreement with the solidity of the arguments advanced by Counsel for the appellant that a court's role is to enforce the agreement of the parties and not to re-write the contract. In casu, the court ordered that the respondents be paid gratuity at 35% for the deemed duration of the contract which was contrary to the provisions of their contracts which stipulated that should the contract be terminated before its successful completion, gratuity will be paid on a pro rata basis. By virtue of the court ordering full payment, it was tantamount to re-writing the contract of the parties. This was in breach of the Court's role which is to respect, uphold and enforce the contract signed by the parties. 11.6 In light of the foregoing, we find merit in grounds 4 and 5. We are compelled to set aside the judgment of the court below for being perverse on the strength of the case of Masauso Zulu vs Avondale Housing Project Limited17 which guides on instances when we as an appellate Court can interfere with a judgment of a lower court. 12.0 Conclusion 12.1 In sum, we have found the four grounds of appeal canvassed to be meritorious. For the avoidance of doubt, the judgment of the lower court is set aside. In summary: 1. Mediation settlement order cannot be used as a precedent to bind non-parties. J19 2. The termination of the respondents was lawfully done pursuant to the termination clause 6.2 of the staff conditions of service. 3. The court's duty is to enforce the contracts entered into by parties and not to re-write them. Therefore, gratuity is to be paid in accordance with the terms of the contract which is on a pro rata basis. 13.0 Costs 13.1 We note that the lower court awarded costs to the respondents but there is no evidence that the appellant breached the provisions of Rule 44(1) of the Industrial and Labour Relations Court Rules. We accordingly set aside the Order for costs that was granted in the court below. In view of the fact that this matter emanated from the Industrial and Labour Division of the High Court, each party is to bear their own costs, both in this Court and the Court below. __::==- == ~ .. ... .... ~ .................... . M. M. Kondolo, SC COURT OF APPEAL JUDGE B. M. ajula COURT OF APPEAL JUDGE ~~t~9 ................. .... ······ ,., ........... . A. N. Patel, SC COURT OF APPEAL JUDGE