Richard Ilunga v Geodrill Zambia Limited (APPEAL NO. 226/2022) [2023] ZMCA 328 (22 November 2023)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT NDOLA (Civil Jurisdiction) APPEAL NO. 226/2022 BETWEEN: RICHARD ILUNGA APPELLANT AND RESPONDENT CORAM: SIAVWAPA, JP, CHISHIMBA AND CHEMBE, JJA On 14th and 22nd November, 20 23 FOR THE APPELLANT: MR. FRED TEMBO OF MESSRS G. M. LEGAL PRACTIONERS FOR THE RESPONDENT: MR. K. PHIRI OF MESSRS CORPUS LEGAL PRACTITIONERS JUDGMENT SIA VW APA, JP delivered th e Judgment of t h e Court. Cases referred to: 1. 2. 3. National Drug Company Limited and Zambia Privatization Agency v Mary Katongo, Appeal No. 79/ 2001 Holmes Limited v Buildwell Construction Company Limited, (1973) ZR 97 Ndola Energy Company Limited v Lamamuda Limited, Appeal No. 62 of Legislation referred to: The Companies Act No. 10 of 2017 1.0 INTRODUCTION 1.1 This is an appeal seeking to assail the Judgment of the Hon. Mrs. Justice A. Patel, SC dated 21 st June, 2022. 1.2 By the said Judgment, the learned Judge held that the Appellant was not entitled to directors ' fees , allowances, salaries and commissions. 2.0 BACKGROUND 2.1 The Respondent employed the Appellant as Senior Logistics and Immigration Officer on 18th September, 2014. 2 .2 By resolution passed on 24th June , 2015, the Respondent's Board of Directors appointed the Appellant as "Local Director". 2.3 The Appellant served in the two positions until he tendered his resignation letter as Local Director dated 16th March, 2020. 2.4 In acceptin g the resignation, the Respondent also informed the Appellant that the employee-employer relationship had ended on 31st December, 2019, upon the Appellant's failure to report for work in 2020. 2.5 The Respondent further informed the Appellant that he was not entitled to Directors' fees as the same were not part of the appointment and company policy. J2 2.6 On 20th April, 2020, the Appellant, through his advocates, Messrs. ECB Legal Practitioners, sent a letter of demand to the Respondent. 2.7 In reply to the letter of demand, Messrs. Corpus Legal Practitioners, Advocates for the Respondent, denied owing the Appellant the demanded perquisites. 3.0 IN THE HIGH COURT 3.1 Dissatisfied with the position taken by the Respondent, the Appellant filed a writ of summons accompanied by a statement of claim in the High Court's Commercial Registry at Kitwe on 3 rd July, 2020. 3.2 The Appellant made the following claims; (i) Payment of total sum of K497 ,255.00 being accrued annual retainer fees and additional allowances as set out in paragraph 20 above. (ii) payment of the emoluments for the duties executed as Executive General Manager at the rate which the current Executive General Managers is being paid. (iii) Damages for the breach of statutory duty and failure to pay the Plaintiff the Management Information circulars and the law. (iv) Costs for this action; and (v) Any other relief the Court will deem fit. J3 4.0 DECISION OF THE HIGH COURT 4 .1 After analyzing the evidence before her, the learned Judge set forth the following as issues for her determination; (i) Whether the Plaintiff is entitled to a payment of USD497,225.00 being accrued annual retainer fees and additional allowances and emoluments for the duties executed as Executive General Manager at the rate which the current Executive General Manager is paid. (ii) Whether the Plaintiff is entitled to damages for alleged breach of any statutory duty. (iii) Whether the Plaintiff is entitled to costs or any other relief. 4.2 In dealing with the first issue , the learned Judge took the view that the dispute between the parties was contractual rather than a corporate law issue. In light of the said view, the learned Judge held that whatever roles the Appellant played as Local Director were compensated for under his contract of employment and dismissed the claim. 4.3 With regard to th e second issue, the learned Judge found no proof that the Respondent's remuneration had been altered by resolution or agreement and dismissed it. 4.4 The learned Judge also dismissed the claim for damages for breach of statutory duty, for lack of proof and awarded costs to the Respondent. J4 5.0 THE APPEAL 5.1 On 15th July, 2022, the Appellant filed his Notice and Memorandum of Appeal advancing two grounds of appeal. 5.2 The following a re th e grounds of Appeal as set out 1n the Memorandum of Appeal: 1. The learned High Court Judge erred in law and in fact when she h eld that the Appellant was not entitled to be compensated by way of a llowances, directors' fees, other salaries and commission in the same manner as his fellow directors in the Respondent Company in th e absence of an express agreement to that effect and that the Appellant was n ot privy to th e contract(s) between the other directors a nd the Respondent for him to be entitled to be remunerated in similar manner. 2. The learned High Court Judge erred in law and in fact when she held that the Appellant's appointment as Local Director was merely an additional duty assigned to him under his previous contract of employment a nd that h e was fully compensated for the alleged additional role as Local Director . 6.0 ARGUMENTS IN SUPPORT 6 .1 In arguing ground on e , th e Appellant holds that subsequent to h is appointm ent as Local Director, he secured three contracts, for the Respondent for which he was entitled to commission. JS 6.2 Further that he performed duties over and above those relating to the office of Senior Logistics Officer such as signing reports and financial statements as well as preparing Directors' Reports. 6.3 In furthering his argument, the Appellant contended that pursuant to section 3 of the Companies Act No. 10 of 2017, . which defines 'Director' and 'Board of Directors.' he automatically became a member of the Board of Directors upon his appointment as Local Director. 6.4 In view of the above, he contended that he was entitled to an annual retainer fee of USD25,000 and an additional allowance of USD 1,500 following the shareholders' resolution that Directors be paid the set amounts. 6.5 He disputed the suggestion by the learned Judge that the Directors who received the stated commissions had executed contracts that provided for payment of the said commissions. 6.6 In ground two , the gist of the argument is that the position of director cannot be placed as additional duties. This is because it is a statutory provision that a director shall be appointed by the company under Section 85 of the Companies Act. 6.7 Further that the duties of a director so appointed are not determined by a contract but by statute and in that regard JG sections 86 and 87 of the Companies Act set out the powers and functions of directors in a company. 6.8 It is also argued that Section 249 of the Companies Act empowers the Board to fix emoluments of Directors by resolutions for their services to the company. 7 .0 ARGUMENTS IN OPPOSITION 7 . 1 The Respondent filed heads of argument on or about 10th November, 2022, in which it argued the appeal in the order the grounds of appeal are presented and argued by the Appellant. 7 .2 The Respondent has largely anchored its arguments 1n opposition on the general principles of the law of contract. In that regard, the Respondent has argued that the Appellant signed a contract with the Respondent which does not provide for remuneration as a member of the Respondent's group Board of Directors. 7.3 In support of the argument the Respondent cited several cases holding that an eligible person is bound by the terms of a contract they enter into voluntarily. Among the cases cited on the principle are the following; National Drug Company Limited and Zambia Privatization Agency v Mary Katongo 1, Holmes Limited v Buildwell Construction Company Limited2, to cite but a couple. J7 7.4 The Respondent also argued that the Respondent had different levels of Directors with different conditions and that the group Directors' conditions stipulated that they were entitled to the allowances claimed by the Appellant which was not the case with the Appellant. 7 .5 The Respondent dismissed the claim based on legitimate expectation on the basis of the case of Ndola Energy Company Limited v Lamamuda Limited3, which held that the doctrine was associated with "a promise, representation, practice or policy made, adopted or announced by or on behalf of Government or a public authority. It should not be extended to private individuals to a contract as a basis for awarding damages for breach as was the case in the Court below." 7 .6 In ground two, the Respondent supported the holding by the learned Judge below that the Appellant's appointment as local director was an additional duty. It thereafter, largely repeats the argument that the Appellant did not prove that his appointment entitled him to the group directors' remuneration. 8.0 OUR ANALYSIS AND DECISION 8.1 We have carefully considered the grounds of appeal, the record and the arguments tendered by the parties. Upon our consideration as stated above, we have formed the view that the issue we are called upon to determine is whether the Appellant J8 was a member of the Respondent's Board of Directors and therefore, entitled to be remunerated as such. 8.2 It is not in dispute that the Appellant was, by resolution of the Respondent's Directors, dated 24th June, 2015, appointed as Local Director. 8.3 According to the minutes of the Meeting of the Respondent's Board of Directors dated 24th June, 2015, occurring at pages 86 and 304, volume one of the Record of Appeal, the Appellant was appointed as 'Local Zambia National Representative to replace Namukonda Suwilanji'. 8.4 This appointment was in addition to the position of Senior Logistics and Immigration Officer which the Appellant already held. 8.5 The fact that the document the Appellant relied upon to assert that he was a member of the Respondent's Board of Directors does not state to that effect raises questions in the assertion. 8.6 The Appellant has largely relied on the provisions of the law and the Articles of Association to hold that by virtue of his appointment as 'Local Director,' he became a member of the Respondent's Board of Directors. J9 8.7 We have considered the law, in particular, section 3 of the Companies Act referred to in paragraph 6.3 of this Judgment and its possible application to the circumstances of the Appellant. 8.8 After directing our minds to the definition of "Director" and "Board of Directors" in that section, our considered view is that for anyone to be a member of the Company's Board of Directors they should first of all be appointed as "a member of the Board of Directors". 8.9 In this case, as already noted in this Judgment, the Appellant was appointed as a Local Representative of the Respondent for Zambia. The said appointment does not specifically designate the Appellant as a member of the Board of Directors for the Respondent. The question then is whether, an appointment styled as such confers automatic membership to the Board of Directors of a foreign company registered in Zambia. 8.10 Additionally, we have also considered the Articles of Association of the Respondent made pursuant to the Companies Act of the Isle of Man, where the Respondent is incorporated and domiciled. Article 1.1 .6 defines Director as "Director of the Company." This is in contrast to the designated title of the Appellant as 'Local Zambia National Representative.' JlO 8 . 11 On the appointment of Directors, Article 16.1, of the Articles provide as follows; "The Directors may be appointed by a resolution of the shareholders." Article 16.2 empowers the Directors to fill a casual vacancy in their number as may arise from time to time". 8 . 12 In addition to the powers conferred by Article 16 .1, Article 16. 7 empowers the Board to appoint any person to be a Director for purposes of filling a casual vacancy or in addition to existing Directors. 8.13 What is clear from the cited prov1s10ns of the law and the Articles of Association is that in the eyes of the law for one to be recognized as a Director in a company, they must be appointed by a resolution of the shareholders to sit on the Board of Directors. 8.14 Further, the Board of Directors may by resolution make an appointment to fill a vacancy on the Board. In our considered view, this provision is necessary to avoid having a company being incapacitated when a vacancy or vacancies arise in between shareholders' meetings. 8.15 The point we take away from our earlier stated views is that the Appellant, in this case, was appointed as a Local Director or Local Zambia Representative of the Respondent. There is no evidence on record that he was appointed to the Board of Jll Directors. This therefore, confines his directorship to the local operations of the Respondent and not at its corporate level. 8.16 We have also perused the Record of a ppeal and we have not found any evidence of the Appellant's predecessor, Namukonda Suwilanji, being appointed by the shareholders as a Director. There is equally no evidence that Suwilanji sat on the Respondent's Board of Directors to give rise to a casual vacancy which can be filled by resolution of the Directors pursuant to Article 16.7. 8.17 The Appellant has argued that since he was entered in the Register at PACRA as a Director, it means that he was indeed a Director for the Respondent entitled to the Directors' emoluments. 8.18 However, being registered as a Director at PACRA is not sufficient. This is because the Respondent is a foreign compa ny registered to operate in Zambia. It follows that the Directors of the Company are those recognized as such in the country of its incorporation. 8. 19 It is noted from the print out from PACRA occurring at pages 516, volume two of the Record of Appeal, that the Respondent is registered as a foreign Company. On the n ext page, 517, under Director / Partner, there is a 'yes ' entry against the Appellant's name. J12 8.20 On the other hand, neither the Appellant nor his predecessor appears on the list of Directors for the fiscal year ending December 31 s t , 2015, as shown from page 105 to 106, volume one of the Record of Appeal. 8.21 The Record also shows that pursuant to a Notice of Annual Meeting of shareholders set to be held on 9 th May, 2016, in Toronto Canada, the names for appointment as Directors were submitted. The name of the Appellant does not appear on the list of nominees as shown at page 11 7 volume one of the Record of Appeal. 9.0 CONCLUSION 9. 1 From all the observations we have made and the views we have taken, it appears to us that the Appellant's appointment as Local Director /Representative for Zambia was confined to the Local affairs of the Company. 9.2 The Appellant was never appointed as a member of the Respondent's Board of Directors to attract the emoluments he claims. 9. 3 Based on the above analysis, we are of the considered view that the use of the term Local Director was a misnomer. 'Local/Zambian Representative appears to be the term intended by the Board of Directors when making the appointment. J13 9.4 For the above stated reasons, we find no merit in the appeal and dismiss it with costs to the Respondent to be taxed in default of agreement. M. J. SIAVWAPA JUDGE PRESIDENT F. M. CHISHIMBA COURT OF APPEAL JUDGE Y. CHEMBE COURT OF APPEAL JUDGE J14