ZESCO Ltd v Gondwe (Appeal 128 of 2016) [2019] ZMSC 312 (29 May 2019)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 128 OF 2016 JI HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: ZESCO LIMITED AND JOYCE GONDWE Coram : Mambilima CJ, Malila and Mutuna JJS. On 7th May 2019 and 29th May 2019 For the Appellant For the Respondent : : N/A Mr. B. Katuta of Loboko Chambers JUDGMENT MUTUNA JS. delivered the judgment of the Court. Cases referred to: 1) Zambia Revenue Authority v Jayesh Shah SCZ judgment No. 11 of 2) Miyanda v The Attorney General (1985) ZR 185 3) Khalid Muhammed v Attorney General (1982) ZR 49 4) National Milling Company Limited v Simataa and others (2000) ZR 5) Salim Banda and Twelve Others v ZESCO Limited Comp No. 137 of 6) Wilson Masauso Zulu v Avondale Housing Project Limited (1982) ZR J2 7) Mususu Kalenga Building Limited and another v Richman s Money Lenders Enterprises (1999) ZR 8) The Attorney General v Achiume (1983) ZR 9) Communications Authority v Vodacom Zambia Limited SCZ judgment No. 21 of 2009 Legislation referred to: 1) Local Authorities Superannuation Fund Act, Cap 284 2) Income Tax Act, Cap Works referred to: 1) Black's Law Dictionary by B. A. Garner, 7th edition. West Group, USA Introduction 1) The parties to this appeal are both dissatisfied with the decision of a High Court Judge handed down on 5th May 2016. The Appellant seeks to question the finding by the Learned High Court Judge that it had unilaterally varied the Respondent's condition of service in computing her terminal benefits. 2) The Respondent on the other hand, by her cross appeal, is unhappy with the fact that the Learned High Court Judge did not award her interest despite granting her monetaiy awards. Background 3) The Respondent was an employee of the Appellant for a period of sixteen years. On 25th November 2010 her employment was terminated by way of retirement in accordance with the provisions of Section 28 of the Local Authorities Superannuation Fund Act. 4) At the time of her separation from the Appellant, the Respondent's retirement benefits were computed in four categories being: a lump sum payment equal to twenty four months pay; two months’ pay for each year served; one month's housing allowance; and leave days. 5) There was no dispute as to the categories that were payable on retirement. The dispute was with respect to the amount designated as service allowance in computing two of the four categories of the retirement benefits. 6) The Respondent had contended that in calculating her entitlement under the category of twenty four months lump sum payment and two months' pay for each year served, the Appellant had based the computation on the J4 sum of K8,545.25 (rebased) as her service allowance instead of K9,785.76 (rebased). That the latter figure is what appeared on her pay slip as the service allowance, and as such, it should be the basis upon which the computation of her terminal benefits should be made. 7) As a consequence of using the wrong figure, the Appellant had underpaid the Respondent in the sum of K40,020.83 in the case of the twenty four months lump sum and K78,771.29 in the case of the two months pay for each year served. 8) The Appellant contended that the Respondent was entitled to a payment equal to seventy five percent of her monthly basic salary as service allowance during the period of her employment with the Appellant in accordance with her letter of confirmation. As an incentive, and in order to cushion the effect of tax on her allowance, the Appellant added the tax component to the Respondent's service allowance which brought the service allowance, as reflected on the pay slip, to ninety five percent of her basic pay. J5 9) In addition to this, the retirement benefit also took into account forty percent of the basic pay and thirty percent of the commuted car allowance. Added to these amounts were ten percent which was the tax component on the retirement benefit. 10) The crux of the dispute lay in the fact that the Appellant contended that the amounts to be used in computing the benefits were not those which appeared on the pay slips because the percentages were exaggerated on account of the fact that the allowances incorporated the tax component. The Respondent argued to the contrary and stated that the amount on the pay slips was a true reflection of her earnings. Any attempt to alter what appeared on the pay slip amounted to a unilateral variation of the conditions of employment. The evidence before the Learned High Court Judge and findings by the Judge 11) The evidence presented by the parties essentially mirrored the contentions advanced in the pleadings. For J6 this reason, we do not find it necessary to re-state or summarize it. 12) After the Learned High Court Judge considered the pleadings, evidence and the arguments presented by the parties, he identified the issue for determination as being whether the Respondent was underpaid the service allowance. In other words, was the basis upon which the retirement benefits were computed wrong. 13) In addressing the issue he found that the Respondent was confirmed in her position by the Appellant by letter dated 27th August 2010. By that letter, her salary band ranged from K10,200.00 (rebased) to KI 1,280.00 (rebased) and that she was entitled to seventy five percent, forty percent and thirty percent of her monthly basic salary as service, housing and commuted car allowances, respectively. 14) The Judge found further that the documentary evidence by way of pay slips indicated that the Respondent earned the sum of K7,977,115.38 (un-rebased) as service allowance in August 2010 and K9,785,769.23 (un­ J7 rebased) in September and October 2010. In addition, he found that in computing terminal benefits in respect of twenty four months pay, the Respondent used the sum of K8,545,250.00 (un-rebased), grossed up at ten percent and the sum of K8,095,500.00(un-rebased) in computing the benefit for the two months' pay for each year served. It is these latter two figures, the Judge found which are the basis for the Respondent's contention that she was underpaid. 15) He then turned to consider the arguments raised by the Appellant that the differences in the service allowances paid to the Respondent during the time of her employment were as a consequence of the allowance being inflated by the tax component of thirty five percent. This was so that the Appellant could bear the tax component of the allowance to enable the Respondent take home exactly seventy five percent of the basic pay as service allowance. 16) Further, at retirement, a similar formula was applied except that this time service allowance was grossed up at J8 ten percent which was the tax payable by the Respondent on her retirement benefits. The Learned High Court Judge also considered the evidence by the Respondent that the K9,785,769.23 (un-rebased) service allowance, which appeared on the pay slip, was an accrued right which she had been enjoying throughout her employment. That it would thus, be a denial of her accrued right if the allowance was changed to another figure. 17) After setting out the arguments and evidence in the preceding two paragraphs, the Learned High Court Judge defined accrued right with reference to Black’s Law Dictionary. He also referred to our decisions in the cases of Zambia Revenue Authority v Jayesh Shah1 and Miyanda v The Attorney General2 in which we addressed the issue of accrued rights and in what circumstances they are protected. As a result, he identified the issue for determination, in this regard, as being whether the amount indicated on the September J9 and October pay slips accrued to the Respondent as a right which could not be varied to her detriment. 18) In considering the issue aforestated, the Learned High Court Judge rejected the argument by the Respondent that she was always paid the sum of K9,785,767.23 (un­ rebased) as service allowance. The decision by the Judge was based on his finding that the said amount only appeared on the September and October pay slips and not on the August and December pay slips. He found further that the Respondent did not dispute the fact that the amount in issue translated to 95% of the basic pay as opposed to 75% which was the agreed percentage as reflected in the letter of confirmation. 19) In addition, and in a rather inexplicable twist in the Judge's reasoning, the Judge found that the Appellant had not produced any evidence to support its contention that the service allowance included a tax component in it. He agreed with the Respondent's contention that the evidence of the pay slips was very persuasive that the service allowance being paid to the Respondent was J10 K9,785,769.23 (un-rebased). To this end he held that the Respondent had discharged the burden placed upon her of proving her case in line with our decision in the case of Khalid Mohammed v Attorney General3. 20) Finally, the Learned High Court Judge found that the Appellant had in effect varied the Respondent's conditions of service without her consent. In doing so he quoted a passage from our decision in the case of National Milling Company Limited v Grace Simataa and Others4 as follows: "If an employer varies in an adverse way a basic condition or basic conditions of employment without the consent of the employee, then the contract of employment terminates and the employee is deemed to have been declared redundant or early retired as may be appropriate as at the date of the variation and the benefits are to be calculated on the salary applicable." 21) The Appellant is aggrieved by the decision of the Learned High Court Judge and has launched this appeal advancing one ground of appeal. The Respondent is equally aggrieved by the decision and cross appealed on two grounds. JU The grounds of appeal, cross appeal and arguments by the parties 22) The sole ground of appeal advanced by the Appellant is as follows: "The learned trial judge erred in law and in fact by holding that there was a variation of the Respondent's basic conditions of employment when there was none." 23} The Respondent's cross appeal raised two grounds as follows: 23.1 The judgment of the Court below be varied by an award of interest on the judgment sum of KI 18,792.12; 23.2 That interest having been specifically pleaded, the trial judge erred when he omitted to make a determination on it. 24) Before the hearing, counsel for the parties filed heads of argument which were relied upon at the hearing. The Appellant's heads of argument were accompanied by a list of authorities and further list of authorities to which were attached a number of authorities. 25) At the hearing, there was no representation for the Appellant while the Respondent was represented by Mr. B. Katuta. The absence of representation for the J12 Appellant was notwithstanding the fact that service of the notice of hearing was effected upon it. We nonetheless proceeded to hear the appeal because the Appellant had filed heads of argument. 26) The gist of the argument by the Appellant was that there was no variation in the terms and conditions of employment of the Respondent and as such the principle we laid down in the case of National Milling Company Limited v Simataa and others4 was not applicable. The Appellant contended that it gave a full explanation to the Learned High Court Judge through the pleadings and evidence by one of its witnesses, Mwambwa Yuyi, on the basis upon which the sums of K8,454.25 (rebased) and K8,095.50 (rebased) were used as service allowance for purposes of computing the Respondent's terminal benefits. It went on to reiterate its contention in the Court below that service allowance was calculated at seventy five percent of the Respondent's monthly basic salary in accordance with her letter of confirmation. J13 27) Further, the grossing up of the service allowance by thirty five percent (being the tax component) was for purposes of cushioning the effect of tax on the allowance. That, on retirement the percentage was reduced to ten percent because that was the percentage of tax to be applied to terminal benefits. The Appellant justified the foregoing by reference to the provisions of the Income Tax Act which set out the percentage of tax payable during employment and on leaving employment. We were also referred to the case of Salim Banda and twelve others v ZESCO Limited5 a decision of the Industrial Relation Division of the High Court (erstwhile) Industrial Relations Court). The holding in that case, which counsel contended is merely persuasive, is in line with the arguments advanced by the Appellant in both the Court below and this Court. 28) In regard to the cross appeal, the Appellant argued that it cannot be sustained in view of the fact the Respondent was not entitled to the award given by the Learned High Court Judge. 29) We were urged to allow the appeal. 30) In response, counsel for the Respondent, Mr. B. Katuta, argued that although the Appellant was attacking the findings of fact by the Learned High Court Judge it had failed to show how such findings fell into the realms of the principle we set in the case of Masauso Zulu v Avondale Housing Project Ltd6 (among other authorities). In that case we held that an appellate court will only reverse findings of fact made by a trial court if it is satisfied that the findings in question were either perverse or made in absence of any relevant evidence or upon a misapprehension of the facts. 31) According to counsel for the Respondent, the findings of fact which are contested in this appeal and cross appeal are that there was a variation in the Respondent's conditions of service by the Appellant and that the Appellant had failed to show that it was a policy in its institution for it to cushion its employees' tax liability. These findings, it was argued, were supported by the J15 evidence on record. As such, we were urged not to disturb them. 32) The other limbs of counsel's argument addressed the principle regarding the restriction on alteration of an employee's conditions of service to his detriment without his consent and the effect of accrued rights arising out of conditions of service. These arguments went into detail to discuss the evidence led in the Court below regarding the Respondent's position as to how the service allowance should be computed. We have not reproduced these arguments because they are of no real consequence to the decision we have reached in the latter parts of this judgment. 33) Lastly, counsel for the Respondent questioned the Appellant's argument's which hinged on the Income Tax Act and Practice Note No. 1 of 2010 on the grounds that the two were not in issue in the Court below as such, by raising them in this appeal, the Appellant was seeking to raise or introduce a new issue contrary to our holding in the case of Mususu Kalenga Building J16 Limited and another v Richman's Money Lendors Enterprises7. In that case we restated the fact that an Appellant cannot raise an issue on appeal which was not raised in the Court below. 34) Turning to the cross appeal, the Respondent conceded that the award of interest is in the discretion of the Court. Counsel stated that the Respondent's grievance arose from the fact that the Learned High Court Judge failed to exercise the said discretion. 35) In the Appellant's reply, it contended that its attack on the Learned High Court Judge's findings of fact stems from the fact that he made an unbalanced evaluation of the evidence. It relied on our decision in the case of The Attorney General v Achiume8. The Appellant's contention was that the Learned High Court Judge did not address his mind to the evidence on record regarding the formula used to compute the service allowance. 36) The Appellant then clarified that it faulted the decision of the Learned High Court Judge further on the ground that he misapprehended the facts. It urged us to reverse the J17 findings in accordance with our decision in the case of Communications Authority v Vodacom Zambia Limited9, In that case we restated that findings of fact by a trial court can be reversed if they are made on a misapprehension of facts. Here, counsel argued that the Learned High Court Judge misapprehended the evidence before him on treatment of tax on the Respondent's income during her employment with the Appellant and on retirement. Further that, the finding that there was a variation in the Respondent conditions of employment contradicted the evidence before the Court as revealed by the Respondent's confirmation letter which shows that service allowance was seventy five percent of her monthly basic salary 37) In addition, the Appellant contended that to hold that the conditions were varied because there was no evidence before Court of a policy by the Appellant to treat tax as alleged, was flawed. It argued that the evidence it presented shows that its treatment of tax as it did was based on the relevant pieces of legislation. There was J18 thus, no variation in the Respondent's conditions of service and as such, the arguments and authorities presented by the Respondent on this issue were not relevant. 38) As regards the contention by the Respondent that the Appellant could not rely on the Income Tax Act and Practice Note No. 1 of 2010, The Appellant argued that the matter before the Court hinged on the interpretation of these two pieces of legislation and urged us to take judicial notice of them. Further, there was reference to the two pieces of legislation in its submissions in the Court below. 39) In regard to its reliance on the Salimu Banda case, a decision of the lower Court, The Appellant clarified that the reference was for persuasive reasons only. It went on to state that we have since upheld that decision in a judgment we handed down recently which, by and large, is in agreement with the computation by the Appellant of service allowance. 40) Lastly, in response to the Respondent arguments on the cross appeal, the Appellant reiterated that the Respondent is not entitled to payment of interest because its claim cannot stand. Consideration by this Court and decision 41) Following consideration of the record of appeal, heads of argument and the judgment which is the subject of this appeal and cross appeal, we must state from the outset that most of the arguments advanced by the parties do not address the real issue in contention in this appeal and cross appeal. At the heart of the dispute which was deployed before the learned High Court Judge was the issue whether or not the tax component should be added to the service allowance for purposes of computing the Respondent's terminal benefits. That is to say, should the service allowance to be considered for purposes of computing terminal benefits be seventy five percent of the basic pay plus the tax component of thirty five percent? J20 42) The parties' advocates went to great length at arguing on accrued nights and variation of the contract, which arguments we have found to be irrelevant to the determination of the appeal and cross appeal. The facts as presented in the Court below show that the Respondent’s appointment with the Appellant was confirmed by letter dated 27th August 2010. This letter, among other things, stated that the Respondent would, along with her salary, be paid a monthly service allowance equivalent to seventy five percent of her monthly basic salary. Further, evidence at trial tendered by the Appellant revealed that the amount paid to the Respondent as service allowance included a tax component of thirty five percent. The reason for this was that the Appellant was assisting the Respondent by cushioning her tax liability. That is to say, it bore the tax liability on behalf of the Respondent whilst she was in employment. What this meant was that the Respondent took home a net amount of exactly seventy five percent of her monthly basic salary as service allowance. J21 43) The Respondent took a contrary view and stated that she was actually entitled to the service allowance grossed up with the tax component. By this she meant that the figure to be considered as service allowance in computing her terminal benefits was that which included the tax component and appeared on her pay slip. She contended that this was seventy five percent of her basic pay notwithstanding that it was clearly in excess of that percentage. To her credit, however, the Respondent confirmed under cross examination in the Court below that the figure exceeded seventy five percent of the basic salary. 44) Despite the undisputed facts we have set out in the preceding paragraphs, the Learned High Court Judge declined to accept the explanation by the Appellant that the service allowance appearing on the pay slip included a tax component because there was no such policy laid down in the Appellant institution. He went on to find that the Respondent had an accrued right in the amount she was paid as service allowance which could not be J22 divested from her. This was notwithstanding the fact that the amount obviously included a tax component. He concluded by finding that the attempt by the Appellant to compute the Respondent's terminal benefits using any amount other than the one appearing on the pay slip as service allowance was an adverse variation of her conditions of service. 45) We are of the firm view that the reasoning by the Learned High Court Judge was flawed. The letter of confirmation we have referred to shows that the service allowance was to be seventy five percent of the Respondent's monthly basic salary. Simple arithmetic reveals, and the Respondent conceded, that the amount which appeared on her pay slip was in excess of seventy five percent. The Learned High Court Judge misdirected himself by failing to consider the confirmation letter and computing the service allowance at seventy five percent of the monthly basic salary. His findings of fact are, as a result, not only perverse but also made on a misapprehension of the evidence as contended by the Appellant. J23 46) Further, the decision the Learned High Court Judge is a failure on his part to acknowledge that an employee is responsible for payment of tax on his income. If, while the employee is serving in employment, the employer opts to pay tax on behalf of the employee, as happened in this case, as a way of cushioning the employee's tax burden, it does not mean the responsibility of paying tax has shifted to the employer. 47) The sole ground of appeal advanced by the Appellant contends that the Learned High Court Judge erred in law and fact when he held that the Appellant varied the Respondents conditions of service. In light of what we have said in the preceding paragraphs, we agree entirely with the contention. We wish to take the point further by stating that since the findings of fact were perverse as per the Achiume case, they are amenable to setting aside and we so order. In doing so we hold that there is merit in the ground of appeal and allow the appeal. Consequently, the cross appeal must fail because it was predicated on the failure of the appeal. We dismiss it. Conclusion J24 48) The appeal having succeeded, we order and direct that in computing the terminal benefits of the Respondent, the Appellant must apply the figure which is seventy five percent of her basic salary as service allowance. The figure must not be grossed up with the tax component. As regards costs, we are inclined to exercise our discretion that they must lay where they fall, both in this and the Court below. I . C. MAMBILIMA CHIEF JUSTICE —M. MALILA SUPREME COURT JUDGE