Chilala & Others v Petrolium Services(Mw) Ltd - Matter No. 158 of 2000 (158 of 2000) [2001] MWIRC 2 (01 January 2001);



MATTER NO. IRC 158 OF 2000







Mr. Kamala, Employers’ Panel

Mr. Manda, Employees’ Panel

Mr. Chilala, Applicants’ Representative

Mr. Gobal, Respondents’ Representative

Mr. Lora, Official Interpreter


There are eight applicants in this case who are officially represented by Mr. Goldon Allan Chilala who is also an applicant. These applicants have brought this case against Petroleum Services (Malawi) Limited who is the respondent. In their statement of claim, the applicants have disclosed that they were underpaid their terminal benefits. The relief they are seeking from this Court is that they should be paid all their terminal benefits for all the years they had worked for the respondent.

The respondent entered a defence. In their statement of defence, the respondent denied owing the applicants any money. The respondent have attached to the response a detailed statement explaining what happened plus a Memorandum written by the General Manager dated the 6th of March, 2000.

There were two witnesses for the applicants and one witness for the respondent. The Court then invited Mr. Hawken to shed more light on some of the pertinent issues. This Mr. Hawken is a former shareholder and Director of the respondent company. This will become clearer as this judgment gets older.

We shall not narrate the evidence verbatim because there are several things, which are not in dispute. It is thus imperative at this point in time that we refer to those things which are now settled as facts. Petroleum Services (Malawi) Limited was established 30 years ago. The applicants were amongst those people who had seen the respondent from birth up to where it is today. Mr. Hawken was one of the founders hence being a key shareholder as well as Director. During all those years when the applicants were working for the respondent, there were no Conditions of Service. Thus the applicants most of them having joined between the 70s and 80s were operating in the dark and depended solely on the whims of the Directors one of whom is Mr. Hawken.

In the year 1995 to be specific, the 20th of January, there came new Management. This new Management took over the Company together with the workers as from the day they got employed. This position was confirmed in writing to all the former employees on the 10th of May 1995. The letters of confirmation which are in standard form were co-issued by the former Director Mr. Hawken and a representative of new Management Mr. M.J. Kearon now deceased. Samples of these letters have been tendered as Applicant exhibit No. I. These letters simply confirmed the employment of the applicants from the date of employment. For example, Mr. Chilala was being confirmed from 15th May 1973 and Mr. Billie from 1st September 1987. These letters further disclosed that very soon, Conditions of Service were to be put in place and each employee was supposed to sign for these Conditions as applicable. In order to leave by their words, the respondent in September 1995 put in place Conditions of Service. Clause 2 of these Conditions of Service stipulates as follows:-

"These Conditions shall apply to all full time permanent staff from the effective date of their employment."

Then there is clause 15 which says:-

"Long service awards will be at the Management’s discretion."

In the year 2000, the applicants were put on retirement having reached retirement age. Thus in compliance with clause 15 of the Conditions of Service; the respondent discretioned to pay 15 days wages for each completed year of service. But the respondent paid this from 1995 when they bought the concern from previous shareholders.

It is this payment which the applicants have challenged. They say that they should have been paid from the day they got employed by virtue of the letters of confirmation App. Ex I and also pursuant to clauses 2 as read with 15 of the Conditions of Service.

On the other hand, the respondent says that payment for the period before 1995 when they took over the company was the liability of the former employer to wit Mr. Hawken. The respondent further stated that although there were these letters as well as clause 2, this was merely done to cool down the employees because they were very anxious during the take over and most of them thought that they would lose their jobs. But apart from that, there was no real commitment from the respondent. They also went on to state that even the previous shareholders had no systematic way of paying these long service awards. Other employees got away with awards whilst others went empty handed. All depended on the discretion of the shareholder and Director Mr. Hawken. The respondent further stated that the legislation in place did not even make the applicants qualify for that. The respondent tendered in court the Subsidiary Legislation on the Regulation of Minimum Wages and Conditions of Employment which were applicable at the material time in particular clause 5. This clause disqualifies those employees getting K2,000 per annum from severance pay. The respondent says that all the applicants were above the figure of K2,000 per annum.

The court also heard from Mr. Hawken one of the founders of Petroleum Services Malawi Limited. The opening remarks of Mr. Hawken were indeed very moving. He told this court that he felt sympathetic with the applicants. For 30 years he said he was very sad to leave the Company which the applicants had assisted him to build. Mr. Hawken told the court that members of staff were kept informed about the developments in relation to the selling of the Company to new Management. They were informed that as per the old Labour Law, they were entitled to be passed over to the new shareholders and that this was automatic. An official from the Labour department visited them and requested that the employees be considered for benefits for the period they worked before new Management took over.

Mr. Hawken further said that it was explained to the employees that if they received their benefits under old Labour Laws, then their services would be terminated. None of them opted. An agreement was therefore drawn by the lawyers. Mr. Hawken said that he registered a concern with them but he was overruled. Thus all the members of staff were informed that they would receive no benefits and even himself did not receive any benefits.

From the totality of the evidence on record; it is undisputed that new Management of Petroleum Services (MW) Limited took over employees from old Management. This take over was with effect from the day the employees were employed. In order to show their commitment, they even wrote all the employees as evidenced through the sample of letter tendered in this court. New Management of the respondent company also introduced Conditions of Service. In those Conditions of Service, they did incorporate in clause 2 an express provision which further confirms what they had earlier on said in their letters that the services of all the employees on permanent terms were connected from old Management to new Management. The very Conditions of Service in clause 15 clearly provided that long service awards will be at the Management’s discretion. Thus new Management had voluntarily introduced these Long Service Awards for its employees.

We looked at the reason given by the respondent’s representative as to why they had written those letters to employees. They seem to say that these letters were written for the sake of just cooling the employees who were very desperate and anxious about their jobs. This court finds such an explanation as coming from such a desperate employer who does not have the welfare of their employees at heart. How does an employer write such letters to its employees just to fool them? Employment is not such a simple thing which one can easily down play as the respondent would like to do today. By writing the employees through those letters, the respondent had created what we call Legitimate Expectations which expectations can not just be frustrated in the way the respondent would like them to be in this case. Thus we hold that all the applicants were confirmed of their services from the dates they were employed by old Management.

The next issue therefore is with regard to the long service awards. The applicants were paid long service awards from the day of take over to the day of retirements. The respondent contends that the long service awards before take over by new Management is not applicable to the applicants because the issue of terminal benefits within use of discretion by the respondent was introduced into the Conditions of Service through a Memorandum dated 6th March 2000. This was with effect from the date of new Management that is to say 20th of January 1995. Thus these Conditions as amended could not operate retrospectively. The respondent further contend that under previous Management there was no legal obligation on the part of the Company to pay anything like terminal benefits and the Conditions of Service were not there and that the Law was silent.

We have carefully looked at these issues before us. The starting point is that new Management having taken over the services of these applicants, meant that they had inherited all the liability connected thereto. In their Conditions of Service before the amendment of 20th March 2000, the respondent had the following provision on long service awards:-

"Long service awards will be at Management’s discretion."

Before we further scrutinize such clause, we take it that this condition was operated retrospectively by virtue of Section 2 of the Conditions of Service. We would however like to say that such clauses as clause 15 do lead to what one would call unfair Labour practices. It is not clear from the onset as to what criteria the respondent would use in order to exercise that discretion. Our Republican Constitution in Section 31 has provided for fair and safe labour practices. This Section says:-

"Every person shall have the right to fair and safe labour practices and to fair remuneration."

Thus where a clause leaves it to the discretion of the employer to award or not award long service awards, we take it that such a condition encourages unfair labour practices. The term unfair Labour Practices includes quite a wide range of issues. For example, unfair conduct by the employer relating to the promotion, demotion or training of an employee or the provision of benefits to an employee. It is thus even worse where the employer puts in a condition that puts everything within its discretion before any benefit can be paid out to the employee. Thus even if clause 15 of the Conditions of Service was to stand, we would have had problems with it. We further observed that the Conditions of Service as introduced in 1995 did not provide adequate social security to the employees. They had extreme unfair provisions embedded therein. For example, clause 9 on Pension Scheme provided:-

"The Company suggests that each employee attends to his/her own deeds."

We again observe that such provisions are very precarious to the welfare of an employee. Then there came the 6th of March 2000 Memorandum which introduced a very fundamental change. This amendment said that Long Service Benefit will be given to all eligible employees depending on the length of service put in by them. This amendment was with effect from the date of take over i.e. the 20th of January, 1995.

We have several observations to make in relation to this alleged amendment. It is not clear as to which clause was particularly amended because the Memorandum of 6th March, which the respondent had attached to their response is not clear on this. We were therefore left to assume that what should have been amended is clause number 15 which dealt with Long Service Awards. If that is the case, then the operational amendment of this Memorandum is in total conflict with clause 2 of the Conditions of Service which provided that these Conditions shall apply from the effective date of employment.

We have looked at the contention made by the respondent that the applicants were by the old Labour Law not entitled to any severance pay. But we take it that where the employer voluntarily introduced Conditions of Service which incorporate benefits, there is nothing wrong to have such conditions enforced. After all, this would be to the benefit of the employees who have invested a lot of labour in the employer’s institution. In this respect, we hold that the respondent herein are liable to pay benefits to the applicants from the date of employment as per their respective letters of confirmation. Such benefits to be calculated in conformity with the Memorandum of 6th of Mach 2000. That is to say, 15 days pay of last drawn wages/salary for every year of completed service. We order that the Registrar of the Industrial Relations Court should summon all the applicants together with the respondent in order to finally come up with the exact amounts for each applicant.

The respondent are at liberty to appeal to the High Court of Malawi if dissatisfied on matters of Law only.

DELIVERED this -------- day of ------------ 2001 at Blantyre-Limbe.

Signed: --------------------------------------------------------------------

M.C.C. Mkandawire

Signed: --------------------------------------------------------------------

Mr. Kamala

Signed: ---------------------------------------------------------------------

Mr. Manda