DHL International Ltd v Nkhata (IRC 50 of 2004) ((IRC 50 of 2004)) [2006] MWHC 136 (17 October 2006);

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IN THE HIGH COURT OF MALAWI


PRINCIPAL REGISTRY


CIVIL APPEAL NUMBER 50 OF 2004


BETWEEN:


DHL INTERNATIONAL LIMITED ………………………………… APPELLANT


AND


AUBREY NKHATA ………………………………………………… RESPONDENT



CORAM: TWEA, J

Kalua, of Counsel for the Appellant

Chipembere, of Counsel for the Respondent

Mdala, Recording Officer


JUDGMENT


This is an appeal from the assessment of compensation by the Chairperson of the Industrial Relations Court.


In this case the appellant is a former employee of the respondent. It is no record that some matters arose within the appellant company. The appellant then summoned the respondent and demanded his resignation. The respondent refused to resign on the ground that there was no issue to answer to. The appellant then wrote the respondent purporting to acknowledge his resignation and making him an offer, without prejudice, of an ex-gratia payment. It was further stipulated that the respondent must agree to certain terms, including that he must not accept employment with any of the appellants competitors for 12 months. The respondent resisted this, until he was informed that if he did not accept the terms and conditions of his purported resignation, payment of his benefits would be effected. The respondent then accepted to resign underprotest and brought this action before the Industrial Relations Court.


Suffice it to say that on the day appointed for hearing the appellant’s Counsel did not appear. The Court granted leave for the respondent to prosecute his case. The Court proceeded to deliver judgment on merit. It took into account the defence proffered by the appellant and found it wanting. Judgment was given in favour of the respondent. The appellant was adjudged guilty of unfair dismissal.


From then onwards there had been several appeals of all colour and manner. The parties appealed both to the High Court and the Industrial Relations Court. this caused a lot of confusion as the learned chairman of the Industrial Relations Court, Justice Mkandawire, as he then was, noted.


To add insult to injury, on the date appointed for assessment of the award the appellant Counsel, again, was absent. The Court assesses the award. However, the award was such that the precise calculation thereof depended on the parties. Foreseeably there was no agreement on this. As a result the appellant, justifiably there are was no agreement on this. As a result the appellant, justifiably and sometimes unjustifiably, delayed payment, tried to renegotiate the award, appeal or settle out of Court, and changed lawyers, all to the chagrin of the respondent. What is clear, however, is that the appellant was dissatisfied with the award and that this was compounded by conduct of its previous lawyers.


I must point out that in this case the appellant is a big multinational cooperation. The respondent is individual who depended on his employment. The Court should have borne this in mind when making awards. There is a big power imbalance between the parties. The multinational Cooperation or, indeed, a financially stronger party may justifiably delay payment while making comparison of awards in other jurisdictions, or unjustifiably delay, to gain time, to the detriment of the individual. Be this as it may, at the end of the day, the appellant told this Court that it will appeal against the award of compensation only. With this in mind, I dismiss all other attendant appeals and cross appeals on record.


The ground of appeal now before me allows me to holistically examine the award of compensation in the light of the Employment Act 2000 and the Labour Relations Act, 1996.


To begin with, this court takes cognisance of the rationale of the aforementioned Acts. The Employment Act is-


“An Act to establish, reinforce and regulate minimum standards of employment with the purpose of ensuring equity necessary for enhancing industrial peace, accelerated economic growth and social justice and for matters connected therewith and incidental there to.”


On the other hand, the Labour Relations Act is-


“An Act to promote sound labour relations through the protection and promotion of freedom of association, the encouragement of effective collective bargaining and the promotion of orderly and expeditions dispute settlement, conducive to social justice and economic development.”


These Acts are premised on our constitution which enshrines the Bill of Rights, and in most respects domesticates the International Labour Instruments to which Malawi is a party. In other words, they have changed the approach to labour relations. They oblige all of us to have regard to the human rights, including freedom of association, workers participation and equity. Central to this, is industrial peace, advancement of social justice and economic development. Equity entails into account. To this end the Industrial Relations Court which has been granted original jurisdiction over labour disputes; section 64 of the Labour Relations Act is mandated to conduct trial in an informal fashion and without strictly complying with rules of evidence otherwise applicable in civil cases; Section 71 of the Labour Relations Act and Rule 18 of the Industrial Relations Court (Procedure)(Rules. These provision reflect of the imbalance of power between the employer and employee which hitherto existed under the common law and from the direct application of contractual rights.


In the course of the hearing and also during arguments for and against the appeal several cases were referred to. I wish to acknowledge specifically the cases of Dr. B.S. Chawani vs The Attorney General MSCA 18 of 2000. This case was followed in Council of the University of Malawi vs. Urban Mkandawire MSCA 38 OF 2003. The case of MacPherson Nelson Magola vs Press Corporation Limited civil cause No. 3719 of 1978. which was followed by the lower court in this case and that of Malawi Review Authority vs Everton Brayor Mpaso Civil Appeal 59 of 2004. Finally the case of Ernest F. Mtingwi vs. Malawi Revenue Authority Civil Cause No. 3389 of 2004. these cases are a illuminating as they are confusing. In my assessment of the cases I find that they can all be distinguished.


The case of Chawani and those that have followed it are based on the common law approach to employment and contractual obligations. The case of Magola and Others were also based on the common law but the High Court had attempted to fuse the current Employment Act 2000 in interpreting the rights. The Court based its view on an English Act that has since been repealed. It is pertinent to note that in these cases, the Courts have not come up clearly on how or why they ignore the current Employment Act, when computing awards. Lastly in the case of Mtingwi the Court relied heavily on the interpretation of the Constitution in trying to interpret the Employment Act. The problems raised by these various cases is well articulated in the case of Mpaso. It is clear from the judgment of Chipeta, J., that the approach of the lower court leaves much to be desired, but he stopped short of interpreting or proffering a the proper approach in deciding what would be “just and equitable in the circumstances”. The case of Maso however, leaves no doubt that the applicable law as far as contracts and contracts of employment are concerned is as interpreted by the Malawi supreme Court of Appeal in the Chawani case.


This however, is as far as the case authorities go. As I said earlier I find that these cases can be distinguished. I will now attempt to shed some light on the proper approach. Before I go any further, I want to acknowledge the finding of the lower court in respect of the intent of the new law. I had mentioned earlier that the intent of the new law is to address the imbalance between the employer and employee that has existed hitherto. The lower court said: at page 3 –


“Of course the objective of such compensation is not to make the employee richer overnight or leave him or her poorer. At the same time, the court should not aim at punishing the employer. What the court will strive at is to strike a balance, which should leave both parties happy and feel that justice has been done.”


To begin with, it must, at all times, be acknowledged that the new Acts have moved away from the common law approach which is based on contractual rights. They are based on human rights and equity in employment relationship. I begin with the definition of “remuneration” and “wages” in Section 3 of the Employment Act.


“Remuneration” means the wage or salary and any additional benefits, allowances or emoluments whatsoever payable directly or indirectly, whether in cash or kind, by the employer to the employee and arising out of the employee’s employment.”


On the other hand:


“Wages means all earnings, however designated or calculated capable of being expressed in terms of money and fixed by mutual agreement or by law, which are payable by virtue of a written or unwritten contract of employment by an employer to an employee for work done or to be done or for services rendered or to be rendered.”


It should be noted that the Labour Relations Act and the Employment Act, 2000 do not define “salary” or “pay”. This notwithstanding, these words do appear now and again in the said Acts. The General Interpretation Act, too does not define “salary” or “pay”. The only conclusion that one can draw from this is that “salary and “pay” bear the extended meaning of “remuneration” and “wages” and that these words are largely. Where they are used in conjunction; for example, Section 31 (i) (e) and 34 (3) of the Employment Act, the Court must endeavour to give the intended meaning. In this respect, it is important to have regard to Section 69 of Employment Act which provides for transition. It is clear from this section that the duty to make a contract, that existed before the new Act, confirmable lies on the employer. In case of default the employer loses his or her rights, but not the employee. It was never the intent of Parliament that there be two regimes of labour laws. This is clear from Section 2 of the employment Act, which stipulates that the Act applies to the private sector and Government and any public authority or enterprise. The only exception being Police and Prison Services and the Malawi Defence Forces. The Court must therefore, harmonise the shortcomings in the new law and give effect to the intent of Parliament in order to enhance industrial peace, social justice, accelerant economic growth and development and promote orderly and expeditions settlement of disputes.


It is pertinent to note that a contract of employment may be terminated according to Section 27 by notice from either party. The notice periods are stipulated in Section 29. this notwithstanding, either party is allowed to waive the right to notice of termination under section 30 (1).


Section 35 of the employment Act stipulates that where the employment is terminated by mutual agreement or unilaterally by the employer, the employee is entitled to receive severance allowance in accordance with the First Schedule of the said Act. Under Section 35 (5) payment of severance allowance is payable notwithstanding payment of notice pay under Section 30 or compensatory or special awards under section 63 subject to subsection 6.


In the present case therefore the respondent was entitled to receive notice pay, where he did not serve any notice period, and also, he was supposed to receive severance allowance in accordance with section 35 (1). Such payments are not ex-gratia as the appellant put it. He is entitled to them according to the law.


Further, the lower court found that the appellant was liable for unfair dismissal. The Employment Act in Section 63 provides specific remedies for unfair dismissal. The said remedies may stand alone or together. These are reinstatement, reintegration or an award of compensation. Subsection 2 enjoins the Court to first consider the award of reinstatement or reintegration subject to some stated conditions before considering the award of compensation. In the present case the Court did not make any specific finding as to why the remedies were not appropriate. It should have done so.


I have considered the approach of the lower court to the award if compensation. I noted that the approach was not properly articulated. The proper approach is as espoused by this court in Mpaso’s case. Section 65 (4)requires the court to make an award of compensation that is “just and equitable in the circumstances”. When making such a decision it must take into account three factors:-


  • Loss sustained by the employee consequent upon dismissal;

  • Whether the loss can be attributed to the action of employer; and

  • The extent of the employees’ contribution to the dismissal.


Subsection 5 therefore gives the mandatory minimum that the court may award. Depending on the findings of the court in respect of the three above factors, if may adjust the scale upwards in respect subsection 5.


I bear in mind the findings of my brother Judge in Mpaso’s case where the interpretation of section 63 (5) was raised. While I agree with the Judge’s view that as long as the Curt does not make an order below what is stipulated in the said subsection, then the order is not necessarily wrong. I hasten to say, however, that whenever the Court is exercising its discretion to move away from the minimum threshold, it must give reasons. The decision of the Court should not be arbitrary at all. It is not open to the Court to award any sum as it wants. The Court must award such sums as would, by law, be allowed. It should be clear, on the record, to the employee, employers and all why the Court decided to enhance the award from the minimum stipulated in Section 65 (5).


In the present case, the lower court followed the Magola case and some English case authorities. It listed several heads under which compensation may be awarded. These included immediate loss of salary, loss of fringe benefits, house allowance, utilities, mobile phones, guard allowances, pension contributions and future earnings. From a glance, these heads reveal that the Court misled itself on this issue.


It is clear that the splitting of the head ignores the basic tenets of the definition of “remuneration” and “wages” herein before referred. Had the trial Court directed its mind to the said definitions, it would have found that such earnings or allowance are included in “remuneration” or “wages”. They should not be treated separately. The proper approach therefore is that “all earnings”, in the wider sense of the definition of “remuneration” or “wages” that accrue to the employee directly or indirectly from the employer which are, or capable of, being expressed in terms of money are calculable as “wages” in accordance to the First Schedule, and as “pay” in section 63 (5) of the Employment Act. As, I said in the case of C. Malunga vs Air Malawi Limited Civil Cause Number 1194 of 2002, the employer and employee must agree on what can be computed as cash directly or indirectly.


In the present case I have considered the circumstances of the case. I find that the respondent did not contribute to the dismissal in anyway. All he did was to insist on proper and consultative management when the company’s returns showed a decline. Further I find that the loss sustained by the respondent can all attribute to the actions of the employer. The respondent was treated in a very high handed manner, humiliated, and unjustifiably, and at no advantage to himself at all, stopped from engaging in similar employment for 12 months. It is common knowledge that the more a person stays out of employment, especially at the age of the respondent, and is forced to claim his or her rights in the court, the more difficult it is to secure alternative employment. I will, therefore, take this into account.


In the present case the respondent had been in the employ of the appellant for slightly over five years. It is my view, that unlike the requirement of the Fist Schedule, that one must have served continuously for a complete year, section 65 (5) has no such requirement. The computation of his compensation would therefore, be under section 65 (5) (b); “two weeks pay for each year of service for an employee who has served for more than five years but not more than ten year.”


Let me make two other clarifications. In this case, and others on which the award in this case was based, there was an award of “immediate loss”. In my view this is not allowed under the law as it stands. An employee is entitled, on termination, to notice pay and severance allowance, which payments are statutory and not discretionary. Such payments must be effected within seven days in accordance with section 53 (1) of the Employment Act. It is clear that the law did not intend an employee should suffer unnecessary financial hardships. An award of “immediate loss” therefore, is not part of our law. Further this court criticized award of “future earnings” in the case of Mpaso. Clearly this is not part of our law as it stands


In the final analysis therefore, I set aside the award made by the lower court. I substitute therefore the following order-

that the respondent is entitled to payment in lieu of notice. Such payment is calculable according to meaning in section 30 of the Employment Act and also as interpret in the case of C. Malunga vs Air Malawi Limited, Civil Cause Number 1194 of 2002. That if the notice pay that he received was only in respect of the pay cheque, then all other benefits capable is being expressed in cash, which were excluded, are calculable and payable.


that the respondent is entitled to severance allowance at two weeks wages each. This will be calculable according to the finding by Kapanda, J., in the case of E.K. Thomson vs Leyland Daf (Malawi) Limited, Civil Cause Number 919 of 2003. That is that he is entitled to two weeks wages for each completed year seriatim. In that case my brother Judge agreed with the Chairperson of the Industrial Relations Court that the final year is not a multiplier. Be this as it may wages must be calculable according to the definition of “wage” in the Employment Act.


that the respondent is entitled to his pension contributions plus 10% of the appellants contributions in accordance with the conditions of service: APEX 12.


That the respondent is entitled to compensation for unfair dismissal. As I said earlier, the respondent was in his sixth year of service. He is entitled to 2 week pay for each year of service in accordance with section 63 (5) (b). the pay is calculable in accordance with the definition of “remuneration” in the Employment Act. It shall, again be paid for each year seriatim. I do not find, in this respect, any reason from departing from the finding inThomson’s case (supra).


Lastly I have considered the factors that the Court has to take into account when awarding compensation. In my view, the respondent did not contribute to the dismissal and all the loss suffered was as a result of the appellant’s action. The respondent acted reasonably when he called on his superior to take a consultative or inclusive approach in combat the Company’s decline in earnings. He was victimized for that. He was treated in a high handed manner, humiliated and, at no benefit to him, forced not to take up employment of a similar nature for 12 months. The conduct of the appellant was not only oppressive but intended to frustrate and intimidate those who would wish to advocate for workers participation in improving performance in the industry. It is my view that victimizing employees for standing up to incompetent management is contrary to section 57 (3) of the Employment Act. In this respect therefore, I will make an additional award to the respondent for the 12months he was forced not to be in comparative employment in accordance with section 63 (5) of Employment Act. I award the respondent a further 2 weeks pay for each month he was kept out of employment – that is 12 months.


All monies so far paid to the respondent shall, after calculations, be deductible. The appellant and respondent should calculate and agree on the sums due within 21days of this order. Should they fail the award will be assessed by the Registrar of the High Court.


The appellant is condemned to costs.


Pronounced in Chambers this 17th day of October, 2006 at Blantyre.









E.B. Twea

JUDGE