Kamono v Cusmarcos Invest. Ltd - Matter No. 50 of 2001 (50 of 2001) [2002] MWIRC 19 (21 May 2002);

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IN THE INDUSTRIAL RELATIONS COURT OF MALAWI

MATTER NO. 50 OF 2001

BETWEEN:

M.B. KAMONO…………………………..………………….APPLICANT

-and-

CUSMARCOS INVESTMENTS LIMITED……..……..RESPONDENT

CORAM: 

HON. M.C.C. Mkandawire, Chairman

Applicant – Present (unrepresented)

Mr. Likongwe of Counsel for the Respondents

George Chapalapata – Official Interpreter

J U D G M E N T

MATTERS IN ISSUE: Claim for long service benefits from 1976-1998.

This matter has been brought by Mr. M.B. Kamono the Applicant. The Respondents are Messrs. Cusmarcos Investments Limited. In his statement of claim, the applicant claims for long service benefits from the year 1976-98. The Respondents filed in a defence. Their defence is to the effect that the Applicant is not entitled to any long service benefits.

The evidence from the Applicant is that he got employed as a painter by Lustania Limited in the year 1976. He worked as a painter very well until 1984 when something puzzled him. He told the Court that in 1984, he was amazed to see that his wages were paid by Cusmarcos Investments Limited and not Lustania Limited. Together with some other employees he went to see one of the Directors of Lustania Limited by the name of Mr. A.P.A. Dacosta. They confronted Mr. Dacosta as to what was happening. Mr. Dacosta assured all of them that Lustania Limited has just been transformed to Cusmarcos Limited but that there were no changes on their status as employees. Their services with Cusmarcos Limited remained intact and that they had not lost anything. With that assurance, the Applicant said that he continued working thinking that all was well. In the year 1998, the Applicant said that he was amazed when he got a notice that his employment was terminated. He was given K1,800 as payment for long service from 1984 to 1998. The Applicant said that he had worked for 22 years from 1976 to 1998.

The Applicant told the Court that the Respondents merely took advantage of its employees. He said that Lustania Limited and Cusmarcos Limited were and are one. To prove the point, the Applicant tendered in Court App Ex1 the headed paper for Cusmarcos Investments Limited. He said that the address is the same like that of Lustania and that the Directors are the same who are Mr. O.V. Custodio, Mr. A.P.A. Dacosta and Mrs. M.A. Dacosta. The Applicant also tendered the letter of reference, which is App Ex 2. On that letter, the names of the Directors are also the same. In conclusion, the Applicant said that he would have loved if he were considered for all the 22 years of service and not only from 1984 to 1998. He further tendered the law applicable by 1998.

The Respondents had two witnesses. The first witness was Mr. Mathews Thawe. With due respect, Mr. Thawe had nothing relevant to this case. The second witness was Mr. A.P.A. Dacosta. He told the Court that he was one of the directors of Lustania Limited together with his son in law as well as his daughter. He said that he did not know the employees by names as such, he could not tell if the Applicant was indeed one of the employees of Lustania Limited. The witness further stated that when he was a partner in Lustania Limited, he was based in Blantyre as such, he did not know those in the Lilongwe branch where his co-director Mr. Custodio was. All he recalls is that at one point, he had disagreements with Mr. Custodio and Mr. Custodio threw him out of the partnership in Lustania Limited. This therefore made him open his own company now known as Cusmarcos Investments Limited.

The witness was heavily cross-examined by the Applicant. He openly told the Court that since the change happened 18 years ago, he could not remember as to what he had told the Applicant together with other employees when they came to find out about the status of their employment. He however said that all the former employees of Lustania Limited know that Lustania had stopped existing. They were asked to find jobs and others joined his company whilst others trekked down to Blantyre to join the existing branch of Lustania in Blantyre. Mr. Dacosta further said that the names of the directors for the Respondents’ company were still the same like those of Lustania Limited because of one reason. He said that the disagreement he had with Mr. Custodio was a private dispute. It would therefore have been shameful to throw his son-in-law away because he had to act in a way that would not embarrass his daughter who is married to Mr. Custodio. In re-examination, he said that the old employees were all supposed to be paid their dues by Lustania Limited.

I have looked at the evidence of this case as a whole. It is thus settled as a fact that the Applicant’s services were terminated by the Respondents in 1998. The reason for termination in 1998 is put as "operational reorganization". This came to being as a result of fewer contracts won by the Respondents against the large labour force that they had. In other words, this was retrenchment.

In arguing their case, the Respondent’s Counsel now and again referred to the relevant law that was applicable at the time this retrenchment was done. The Respondents are saying that the termination was lawful and not only that, but that the Applicant is not entitled to any severance allowance since he was earning about K2,000 per annum which bars him from entitlement to severance allowance applicable then.

I am aware of the law on severance allowance by 1998 and I totally agree that the Applicant could not have benefited from the 1979 severance pay order as stipulated in the Minimum Wages and Conditions of Employment Order. I am also agreeable that the Applicant cannot rely on the Employment Act of 1999, which became operational in the year 2000. This Act has got no retrospective effect.

The approach I have however made in this case is to first look at our Republic Constitution. By the time the Applicant’s employment was terminated in 1998, the provisions of our 1994 Constitution were already in full force. One of the relevant provisions here is Section 31 (1) which says:

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

This provision is extremely fundamental when one is dealing with cases which occurred before the new Employment Act of 1999.

I am aware that several judicial officers have said that this Section does not offer any help as to what are fair Labour Practices. In the case of Guwende –vs- AON Ltd Misc. Civil Cause No. 25 of 2000, Chipeta J observed that both the Constitution as well as the Labour Relations Act do not offer any detailed guidance as to what fair Labour practice is or mean. Indeed, one would not expect to find all the meanings of the constitutional provisions from within the Constitution itself. In interpreting the provisions of this Constitution, Courts should pay regard to the provisions of Section 11 (2) (c) of the Constitution which says:-

"In interpreting the provisions of this Constitution a Court of Law shall –
Where applicable, have regard to current norms of public International Law and comparable foreign case law."

Again Section 2 (2) of the Labour Relations Act, 1996 provides:-

"This Act shall be interpreted so as to give effect to the Constitution and the obligations of any international treaty, including any international Labour Convention entered into or ratified by Malawi."

There are indeed so many International Labour Conventions ratified by Malawi and I shall be referring to them in due course.

Thus this case has raised more questions than were envisaged by the parties. The first issue that I have to settle is whether the action taken by the Respondents in the year 1984 could be said to be fair Labour Practice.

The Applicant’s evidence was very impressive. He was not at all challenged by the Respondents on the point that he was employed by Lustania Limited in 1976. Come 1984, the Respondent without any consultations with employees formed Cusmarcos Limited. The formation of this company was done behind their back of the employees. There is evidence that the employees confronted Mr. Dacosta. But they were told that nothing had changed in relation to their status. I believed Mr. Kamono on this point and it was very interesting to note that Mr. Dacosta could not even remember what he had told these people. I found that he was deliberately fanning forgetfulness yet he knew what the truth of the matter was. The Court therefore found that the owners of Lustania Limited were not dealing with their employees in good faith. The reason given by Mr. Dacosta that he was thrown out of the partnership in Lustania hence the opening of the new company cannot hold water here in view of the overwhelming evidence that is on record against them. Cusmarcos Investments was a mere cosmetic change. It was Lustania Limited in disguise. The address remained the same and the directors are the same. The reason that Mr. Custodio remained on paper just for maintenance of family harmony does not sound truthful in the mind of this Court. I therefore find that the Respondents acted in a very unfair manner by trying to disguise as if they had formed a new company yet they knew very well that there were people who had worked from 1976 and deliberately misled these people that their services were intact. Whilst I do agree that Cusmarcos Investments is a limited company, but I have to approach this case with the sense of equity. There is no fairness with what the Respondents did. The Industrial Relations Court stresses more on equity than legalism. Thus the opening of Cusmarcos in 1984 cannot be a shield today for those employees who were left in the cold to pursue their labour rights. The action taken by the Respondents in 1984 was a well-calculated move in order to run away from the services of the employees who had worked from 1976 to 1984. That is why they did not come up in the open to inform the employees as to what was happening.

When there are drastic changes in any institution and where these drastic changes are done in good faith and are likely to affect the rights of the employees, fair labour practice requires that the employer should act in a transparent and honest manner. What the Respondents did here amounted to unfair labour practice and it is a gross breach of the labour rights of the Applicant.

After resolved that, I next move to the issue of termination of the services of the Applicant. The reason for terminating the services of the Applicant is put as due to "operational reasons". The old Employment Act that was operational by 1998 did not capture termination on "operational reasons" precisely. The Employment Act of 1999 has however categorically captured that in Section 57 which provides:-

"(1) The employment of an employee shall not be terminated by an employer unless there is a valid reason for such termination connected with the capacity or conduct of the employee or based on the operational requirements of the undertaking."

This of course cannot operate retrospectively to the events of 1998. But one should not lose sight of the fact that by 1998, the same provision on fair labour practice in the Republic Constitution was already operational. Thus this Court has to give meaning and effect to the Constitutional provision. To that end, the Court has now and again sought the help of International Labour Conventions of the ILO which Malawi had already ratified by 1998. One such important Convention is Convention No. 158 concerning Termination of Employment at the initiative of the Employer. Malawi ratified this Convention on 1st October 1986. Such Conventions that were ratified before the coming into force of the 1994 Constitution were automatically carried forward unless inconsistent with the spirit of our Constitution. Article 4 of this Convention provides:-

"The employment of a worker shall not be terminated unless there is a valid reason for such termination concerned with the capacity or conduct of the worker or based on operational requirements of the undertaking, establishment or service."

One can therefore see that Section 57 of our Employment Act is in total conformity with the ILO Convention No. 158 Article 4 thereof.

When it comes to termination of employment on operational requirement, what usually comes to my mind is retrenchment or redundancies. I would therefore look at what fair labour practice requires an employer to do when it comes to these issues. The defence in this case disclosed that the Respondent laid off several employees as a result of operational requirement. But before an employer does that; fair labour practice requires a lot to be done. Thus in relation to this issue, the Court will have to look at issues such as:-

(a) Was there any consultation between the employer and the employee.
(b) Was there any attempt to reach a consensus.
(c) Was there any disclosure of information by the employer.
(d) Were the employees afforded an opportunity to make representations in order to mitigate the situation and did the employer respond to these representations.
(e) What was the selection criteria as regards those who were on the lay off list.

When I look at the evidence on record, I find that none of these were done. When an employer is laying off employees, it should not be done without any procedural fairness. Thus with regard the way the Applicant was laid off on operational requirement, I find that there was a lot of unfair labour practice by the Respondent. Thus the Applicant’s rights in relation to fair labour practices were fragrantly violated. The fragrant violation of Constitutional rights is enforceable pursuant to Section 46 (2) (4) of the Republic Constitution which provides:-

"(2)-Any person who claims that a fundamental right or freedom guaranteed by this Constitution has been infringed or threatened shall be entitled –
(a) to make an application to a competent court to enforce or protect such right or freedom;
(4)-A Court referred to in Subsection (2) (a) shall have the power to award compensation to any person whose rights or freedoms have been unlawfully denied or violated where it considers it to be appropriate in the circumstances of a particular case."

The Applicant in this case was claiming for adequate payment of what he called long service benefits i.e. for 22 years. It however became more clearer during the time when evidence was given by both sides that apart from the long service benefits as claimed there were other fundamental constitutional violations by the Respondents especially in relation to the right to fair labour practices. The Applicant is a mere painter and might not have been very meticulous in the way he itemized his claim. It therefore becomes the duty of this Court to invoke judicial activism in order to safeguard the constitutional rights of the citizens of this country. If courts do not employ judicial activism in matters of this nature, then the constitutional rights enshrined therein shall just be reduced to an arid parchment.

I therefore order, pursuant to Section 46 (4), that the Applicant be compensated for the violation of his rights by the Respondents. In coming up with the quantum of compensation, it has not been easy. Such compensation has got no mathematical exactitude. There are hardly any precedents available since the jurisprudence of the Industrial Court is just at an infant stage. I however find that an amount of K10,000 would be adequate compensation. I thus order that the Respondent should pay K10,000 to the Applicant as compensation. The money to be paid immediately.

I finally move to the issue of ex-gratia payment of K1,800. The Applicant was initially paid K2,000 from 1984 to 1998 which is a period of 14 years. As I have already found, the period that the Respondent took into account was wrong. They should have counted all the way from 1976 to 1998 which is 22 years. This Court does not want to be seen as setting down a formula of ex-gratia because that may lead to dangers since ex-gratia is merely a token of thanks. Legally, the Applicant did not qualify for Severance pay since he was earning more than K2,000 per annum. But even if ex-gratia is a token of thanks, it should be meaningful. In this case, since the Respondent are condemned even for the period from 1976 to 1984, I do order that they should pay another K2,000 for that period. This amount to be paid immediately. In total therefore, the Respondent should pay K12,000 to the Applicant.

DELIVERED this 21st day of March 2002 at Lilongwe Industrial Relations Court.

M.C.C. Mkandawire

CHAIRMAN