ZESCO Ltd v Lungu (Appeal 236 of 2013) [2016] ZMSC 280 (9 May 2016)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 236/2013 JI HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: ZESCO LIMITED AND APPELLANT PATRICIA KABWE LUNGU RESPONDENT Coram : Mambilima CJ, Kaoma and Mutuna, JJS on 10th May 2016 and 9th May 2016 For the Appellant : Mrs. N. C. Sikazwe, Chief Legal Officer - ZESCO. For the Respondent : Mrs. N. N. Mbao of Mesdames Nachalwe Advocates. JUDGMENT Mutuna, JS delivered the Judgment of the court Cases referred to: 1) Chilanga Cement Pic vs Kasote Singogo SCZ Judgment No. 13 of2009 2) Zambia China Mulungushi Textiles (Joint Venture) Limited vs Gabriel Mwami (2004) ZR 244 3) Zambia Consolidated Copper Mines vs Matale (1995 - 1997) ZR 144 4) Swarp Spining Mills Pic vs Sebastian Chileshe and Others (2002) ZR 23 5) National Airports Corporation Ltd vs Reggie Ephraim Zimba and Savior Konie SCZ Judgment No. 34 of 2000 6) Chintomfwa vs Ndola Lime Company Limited SCZ Judgment No. 28 of 7) The Attorney General vs Paul Mulenga Kayula (1983) ZR 7 (SC) J2 8) The Attorney General vs Musonda Samuel Mofya (1995) S. J (SC) 9) Times Newspapers Zambia Limited vs Kapwepwe (1973) ZR 292 (SC) 10) 11) Cassell vs Broome (1972) 1 ALL ER 801 The Attorney General vs D. G Mpundu (1984) ZR 6 (SC) Legislation referred to: 1) Local Authorities Superannuation Fund Act, Chapter 284 of the Laws of Zambia Other works referred to: 1) Selwyn’s Law of Employment (2010) 16th edition by Astra Emir, Oxford University; London In this appeal we have referred to the Appellant as the Defendant and Respondent as Plaintiff, which is what they were in the court below. This is an appeal by the Defendant against the judgment of the Learned High Court Judge awarding the Plaintiff twelve months salary as compensation for unlawful termination of employment. The Learned High Court Judge also awarded interest at what she termed, the single bank deposit rate from date of writ to date of judgment, and thereafter at the Bank of Zambia lending rate from date of judgment to date of payment. The undisputed facts of this case are as follows. The Plaintiff was employed by the Defendant for a continuous period of thirteen years and seven months up to 15th July J3 2008,. when her employment was terminated. Prior to the termination of her employment and on 20th November 2006, the Plaintiff was transferred from the Defendant’s Human Resources Directorate to the Directorate of Distribution and Supply, Southern Division. The transfer was in her capacity as Principal Human Resources Officer. The letter that effected the Plaintiffs transfer indicated that the Plaintiff would be based at Lusaka and that she would be reporting to the Human Resources Manager - South. It also set out the functions that the Plaintiff would perform in the said position. On 15th July 2008, the Defendant’s Director of Human Resources wrote to the Plaintiff informing her that she was being retired in accordance with the provisions of section 28 of the Local Authorities Superannuation Fund Act. Consequent upon the said retirement, the Plaintiff was paid: three months pay in lieu of notice; redundancy package of 24 months pay; plus two months pay for each completed year of service; and repatriation allowance. After the Plaintiff was retired and on 21st July 2008, the Defendant transferred one, Tina Sampa from its Corporate Services Department to the Directorate of J4 Distribution and Supply, South, in the capacity of Principal Human Resources Officer. Effectively, Tina Sampa replaced the Plaintiff. The Plaintiff was aggrieved by these actions by the Defendant and took out an action in the High Court. In the court below, the Plaintiff led evidence that revealed that she was currently employed by LAFARGE, having previously been employed by the Defendant in December 1994. The evidence also explained her employment career in the Defendant company and how in 2008, she was given a letter which indicated that she was being retired in accordance with section 28 of the Local Authority Superannuation Fund Act. The evidence revealed further that the Plaintiff’s understanding of the content of the retirement letter was that there was a restructuring exercise within the Defendant company and that some positions would be done away with. However, she was not aware of such an exercise being conducted and that in her position she would have known about such an exercise if indeed it was being undertaken. Further that prior to restructuring, a company is obliged to seek permission from the Labour J5 Commissioner and to state the number of the intended retrenchees. The evidence also revealed that after the Plaintiff received the letter, she attempted to see the Defendant’s Human Resources Director and Managing Director to seek clarification but they both denied her audience. Further that a few days after her retirement she learned that her junior had been promoted to her position and that the letter of appointment of the said junior contained the same details as regards the job description as did hers. The evidence concluded by revealing that the Plaintiff had been efficient in the discharge of her duties and that she had been sponsored by the Defendant to study for an MBA in the United Kingdom. That there was never a time when her performance was ever questioned by any of the directors. Further that she was shocked that the job description in the Defendant’s letter to Tina Sampa was exactly the same as hers. Lastly, her conclusion was that she was not retired in good faith. The Defendant’s evidence revealed that the Plaintiff was declared redundant pursuant to section 28 of the Local Authorities Superannuation Fund Act during the J6 reorganization of the Defendant for purposes of increasing its efficiency. That the exercise involved transferring staff and retiring some of them and that the exercise did not prevent the Defendant from replacing members of staff who had been retired. Consequently, the Plaintiff was replaced with Tina Sampa. Based on the foregoing evidence, the Learned High Court Judge found that the Plaintiff was not treated fairly leading up to her redundancy. The basis of the finding was that: she was not accorded an opportunity to discuss her redundancy with her superiors in accordance with the law; the record does not reveal that the Defendant consulted her or the Labour Commissioner prior to declaring her redundant; and she was not warned of her impending retirement. The Learned High Court Judge relied upon the cases of Chilanga Cement Pic vs Kasote Singogo1 and Zambia China Mulungushi Textiles (joint-venture) Limited vs Gabriel Mwami2. She went on to hold that the reasons given for the Plaintiff’s retirement were not genuine and found that this was a proper case for her to delve behind the real reason for the termination in accordance with the case of Zambia Consolidated Copper Mines vs J7 Matale3. The Learned High Court Judge accordingly ordered that the Plaintiff be paid twelve months salary as compensation for wrongful termination. The Defendant was aggrieved by the decision of the Learned High Court Judge and launched this appeal advancing one ground of appeal as follows: The Learned trial Judge erred in both law and fact by awarding excessive damages to the Respondent as follows: a) 12 months salary in a matter where the court had found that the Respondent was in fact paid her benefits in full thereby unjustly enriching her b) After having found that the redundancy was a wrongful termination, the court should not have made the award of compensation for wrongful termination as the Respondent had already been paid full benefits as at law there cannot be both a redundancy and a wrongful termination hence the Respondent is only entitled to one and not both. At the hearing, counsel for the parties relied on their heads of argument. The gist of the argument by counsel for J8 the Defendant, Mrs. N. C. Sikazwe, was that the court below ought not to have awarded damages of twelve months salary for the wrongful termination of employment in view of the fact that the Plaintiff had been paid her benefits in full, upon being retired. It was counsel’s argument that it is a general principle of contract law (which, it was argued, is applicable in this case because, employment law is concerned with a contract of employment) that the purpose of damages is to put the innocent party in the position he would have been in, in monetary terms, had the contractual obligations been performed. Counsel relied on Selwyn’s Law of Employment. It was argued further that the award by the court below contravenes the principle we have laid down in the cases of Swarp Spining Mills Pic vs Sebastian Chileshe and Others4, National Airports Corporation Limited vs Reggie Ephraim Zimba and Savior Konie5, Chilanga Cement Pic vs Kasote Singogo1 and Chintomfwa vs Ndola Lime Company6. Concluding submissions on this point, counsel argued that the award by the court below is wrong both at law and fact because: the issue of scarcity of jobs on the employment market does not arise as the Plaintiff is already in employment; the award was not based on an abrupt loss of employment; J9 and there was no evidence of harsh or inhuman treatment in the manner the termination was done. The other limb of counsel’s argument was that the court below erred in basing its award of damages on mental anguish or distress. It was argued that this was a departure from the principle we laid down in the Kasote Singogo1 case. In response counsel for the Plaintiff, Mrs. N. N. Mbao submitted that the award of damages by the courts is discretionary and is dependent upon the circumstances of each case. Counsel argued that whilst in the case of Attorney General vs Musonda Samuel Mofya8 we refused to award exemplary and punitive damages because they were not pleaded, in this case they were specifically pleaded. As such, this case is distinguishable from the case of Musonda Samuel Mofya8. She went on to rationalize the award of compensatory and punitive damages and the purpose that each of them serve by reference to the cases of Times Newspaper Zambia Ltd vs Kapwepwe9 and Cassell vs Broome10. Counsel argued further that the contention by the Defendant that there can be no award for both a J10 redundancy and wrongful termination is untenable. It was argued, in this regard, that the issue is whether or not the court can award both compensatory and punitive damages. That the case of Times Newspaper Zambia Limited vs Kapwepwe9 clearly demonstrates that an award can be made for both sets of damages and that this case was an appropriate case to make such an award. Further that the basis is that the award of punitive damages was intended to punish the Defendant and to deter it from conducting itself in a similar manner in future. It was counsel’s argument that the facts of this case show that the Defendant did not engage and prepare the Plaintiff before she was declared redundant. That she was merely ambushed, which is contrary to the principle we laid down in the case of Chilanga Cement Pic vs Kasote Singogo1, where we held inter alia, that since redundancy is a planned activity, the employee needs to be prepared for the loss of the job. As regard the award of damages for mental distress and inconvenience, counsel explained instances where such an award will be made in accordance with our decision in the case of Attorney General vs Mpundu11. It Jll was counsel’s argument that the facts of this case reveal that the Plaintiff’s redundancy was done in bad faith, which fact the Defendant has not disputed. She argued that barely a week after the Defendant declared the Plaintiff redundant, it replaced her with her junior, in the position that was supposedly done away with. This, it was argued, caused mental anguish and distress after the Plaintiff discovered and therefore justified the award of the punitive damages. Further that, it is this evidence of mala fide in the manner in which the Plaintiff’s case was handled that justified the award of damages in excess of the notice period. For this reason, it was argued, the fact that the Plaintiff had since found alternative employment did not negate the award of damages by the court below and therefore, the principle in the case of Chilanga Cement Pic vs Kasote1 is not applicable to this case. Counsel prayed that the appeal should be dismissed. We have considered the record of appeal, judgment of the court below and arguments by counsel. The determination of this appeal lies in the interpretation to be given to section 28 of the Local Authorities J12 Superannuation Fund Act, pursuant to which the Plaintiff was retired. The section states as follows: “(1) employment of a member who has had at least ten years’ continuous service is discontinued, through no fault of such member, owing to a reduction in, or reorganization of the staff of his employer, or the abolition of his office or post, or in order to facilitate improvements or efficiency or organization or to retrench generally- fa) Such member shall be granted a retirement benefit; and (b) One-third of the retirement benefit payable to such member may be commuted for a lump sum at the rate laid down for his age, at the date of the termination of his services, in the First schedule”. Our interpretation of the foregoing section is that it allows an employer to terminate the service of an employee who has served for at least ten years, on the grounds that there is a need: to reduce or reorganize the staff; to abolish an office or post; to facilitate improvements in efficiency or organization of the undertaking; to facilitate the retrenchment of staff generally. In any one such event, the J13 obligation of the employer is to pay such affected employee a retirement benefit. It is also our understanding that where the termination is prompted by the need to reduce staff, abolish the office or post, or to retrench generally, the employer would in effect be scaling down in respect of that particular position and would be declaring the affected employee or employees redundant. As such, the expectation would be that the employer would not re engage another person or other persons in that position or positions. On the other hand, where an employer is terminating the service of an employee for purposes of reorganization or in order to facilitate improvements in efficiency or organization, the view we take is that the employer can re­ employ in those positions because the positions will not have been abolished. In this case, the letter that effected the Plaintiff’s retirement is at page 40 of the record of appeal. It reads in the relevant portions as follows: J14 “The commercialization process that ZESCO has embarked on has triggered among other issues the need, for the organization to undergo ongoing restructuring exercise which as you may be aware has been an ongoing process for some time now. This process is assisting Management to improve upon our operational efficiency and gualitg of service provided to our customers”. In view of the above, I wish to inform you that Management has decided to retire you with immediate effect in accordance with section 28 of the LASF ACT”. (The underlining is ours for emphasis only) The interpretation given to these words by the Plaintiff was that she was being declared redundant and as such, the subsequent transfer of Tina Sampa to take over her position indicates that the Defendant unlawfully terminated her services by giving a reason that was not genuine. The Plaintiff also contended that she suffered mental distress and anguish as a consequence of the Defendant’s acts. The court below upheld this reasoning and it was the basis of the award of twelve months salary JIS The view we take is that the words we have underlined in the portion of the retirement letter we have quoted are the magic words which show that: the Defendant was in the process of restructuring or reorganizing; for purposes of improving on its operational efficiency. These words, in our considered view, do not suggest that there was an abolition of the Plaintiff’s post or that her duties or functions had become redundant, consequent upon which it would have been wrong for the Defendant to replace the Plaintiff with another employee. We therefore find that it was a misdirection on the part of the Learned High Court Judge to make the findings that she made of unlawful termination of employment. We also find that it was a misdirection on her part to award the twelve months salary as compensation. In arriving at the findings we have made in the preceding paragraph, we have considered the cases referred to us by counsel for both the Plaintiff and Defendant in which we have given decisions on appropriate measure of damages. In the case of Swarp Spining Pic vs Sebastian Chileshe and Others4 we held as follows: J16 “(i) the normal measure of damages applies and will usually relate to the applicable contractual length of notice or the notional reasonable notice where the contract is silent. (ii) The normal measure is departed from where the termination may have been inflicted in a traumatic fashion which causes undue distress or mental suffering”. By the foregoing decision an award of damages must be tied to the length of the notice period for termination stipulated in the contract. Where non is stipulated, it must be a reasonable period. Further, the court will be at liberty to determine reasonable notice. In this case, the provision of the section pursuant to which the Plaintiff was retired specifies the basis upon which the separation package was to be based. This is the basis upon which the Plaintiffs separation package was based. Therefore, to the extent that the twelve months pay awarded by the court was a departure from the formula prescribed by section 28 of the Local Authorities Superannuation Fund Act, it was a departure from the principle we set in the Swarp Spining Mills Pic4 case as argued by counsel for the Defendant. J17 Further, the award by the court below cannot stand as an award for mental distress because, the view we take is that, there were no exceptional circumstances that existed in the retirement of the Plaintiff to warrant the award. In the Chilang a Cement Pic vs Kasote Singogo1 case we held that damages for mental torture and distress should only be granted in exceptional cases and certainly, not in a case where more than the normal measure of common law damages have been awarded; the rationale being that the enhanced damages are meant to encompass the inconvenience and any distress suffered by the employee as a result of loss of the job. The circumstances of this case reveal that it was a term and condition of the Plaintiffs employment that her services could be terminated in the manner that there were terminated. As such, one can argue that there was an expectation on her part of her eventual fate. This is particularly the case because, as Principal Human Resources Officer the Plaintiff is taken to have known or ought to have known the conditions of service for her employment. Further, we are of the view that there was no bad faith or mala fide in the manner her retirement was effected in view of our finding that it was in accordance with section 28 of the Local Authorities J18 Superannuation Fund Act. We are therefore of the view that the Plaintiff cannot have suffered any mental torture or distress or inconvenience given the facts we have highlighted. Further, her circumstances cannot clearly be equated to the circumstances surrounding the termination of employment of the guards in the Swarp Spinning Mills Pic4 case where their services were terminated unexpectedly. The Plaintiffs predicament is compounded by the fact that the award by the court below cannot even be justified in line with our decision in the Joseph Chintomfwa vs Ndola Lime Company Limited6. In that case we awarded the Appellant damages equal to two years salary and prerequisites since his future job prospects were nil. In this case the Plaintiffs evidence shows that she has since been re-employed at management level. Therefore, the issue of her future job prospects do not arise. We therefore find that the appeal has merit and we allow it. In doing so, we set aside the award of damages by the court below. We also award the Defendant costs of this appeal and of the proceedings in the court below. J19 I. C. MAMBILIMA CHIEF JUSTICE R. M. C. KAOMA SUPREME COURT JUDGE