IN THE HIGH COURT OF MALAWI PRINCIPAL MalawiLII by alicejenny

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									                   IN THE HIGH COURT OF MALAWI

                          PRINCIPAL REGISTRY

                     CIVIL CAUSE NO. 919 OF 2003


BETWEEN:

K. THOMSON…………………………………………………………………………………………..PLAINTIFF

            and

LEYLAND DAF (MALAWI) LIMITED…………………………………………….DEFENDANT



CORAM:      THE HON. JUSTICE F.E. KAPANDA
            Khondiwa, of Counsel for the Plaintiff
            J. Chirwa, of Counsel for the Defendant
            S.M. Selemani, Official Interpreter
            Mrs Chingota, Court Reporter

Place and Dates of hearing: Blantyre       4th November 2004 and 5th

                                           November 2004

Date of judgment :                         25th April 2005
                                   JUDGMENT



Kapanda, J:

Introduction

      The Plaintiff, Mr E.K. Thomson, is a former employee of the
Defendant Company. He was declared redundant. On 4th April 2003 he took
out an action claiming a number of terminal benefits from the Defendant.
The terminal benefits will be described in detail later in this judgment.
Suffice to say that he alleges that the benefits are payable to him pursuant
to the provisions of the Employment Act, 20001.

       The Defendant Company charges that the Plaintiff was paid all that
was due to him in terms of its contract with him. Accordingly, it has asked
this Court to dismiss the Plaintiff’s action with costs.

       The Court would like now to set out the fine points of the contention
by the Plaintiff and the response of the Defendant to the allegation being
made by the former. It is not the intention of this Court to set out in full,
in the main body of this judgment, the particulars of the allegations made by
the Plaintiff and the reply thereto by the Defendant. I will instead give a
sketch of the pleadings. However, the pleadings will appear as footnotes at
appropriate places.
       The complaint by the Plaintiff and the Defendant’s rejoinder are
contained in the pleadings that were exchanged between the parties. These
are the Amended Statement of Claim and the Amended Defence the
Plaintiff and the Defendant exchanged on 4th November 2004.

The Plaintiff’s Amended Statement of Claim2
1
    Act No. 6 of 2000
2
                    “AMENDED STATEMENT OF CLAIM



                                                                           2
       The Plaintiff alleges, which allegation is not denied by the Defendant,
that he was an employee of the Defendant from the 2nd day of April 1970
until the 24th of January 2003 when his services were terminated by the
Defendant on grounds of redundancy. He does not state what position he
held at the time he was engaged in 1970 but further asserts that in August
2002 he was promoted to be in charge of vehicle sales in the Defendant
company. Moreover, the Plaintiff states that in the same month of August

    1.   The Plaintiff was an employee of the Defendant Company from 2nd April 1970 to 24th January
         2003 when he was declared redundant by the Defendant.
    2.   The Defendant is a limited liability company engaged in the sale of vehicles (DAF trucks) in
         Malawi.
    3.   The Plaintiff states that in August 2002, he was promoted and made in charge of vehicle sales.
    4.   That in the year 2002, the shareholders of the Defendant company made an announcement to the
         managers of the various departments of the Defendant company about a huge theft that had
         apparently been committed although to the surprise of many no arrests were made.
    5.   That following the alleged theft, the Plaintiff’s benefits were drastically reduced and eventually
         some 35 employees including the Plaintiff were laid off by the Defendant company.
    6.   In or about the month of August 2002, the Plaintiff withdrew from the membership of the pension
         scheme operated by the Defendant for its members of staff.
    7.   Pursuant to the Plaintiff’s withdrawal from the said pension, the Defendant caused the sum of
         K256,443.92 to be paid to the Plaintiff on or about 9 th December 2002 which sum comprised
         pension contributions made by both the Plaintiff and the Defendant.
    8.   That on the date of termination of Plaintiff’s employment, the Plaintiff was receiving a monthly
         salary K57,620.00 and was entitled to the following benefits:

             (i)      Use of company car
             (ii)     50 litres of fuel per month

    9.  That on the termination of the Plaintiff’s employment, the Plaintiff was paid the sum of
        K143,618.98 being payment in respect of notice pay and leave pay.
    10. The Defendant wrongfully failed, refused and neglected to pay the Plaintiff upon termination of
        employment, severance allowance for the 33 years of continuous service rendered by the Plaintiff
        to the Defendant amounting to K1,901,460.00.
    11. Further, notwithstanding the Plaintiff’s entitlement to use the company car, the Defendant has
        wrongfully refused the Plaintiff use of the company car nor has he been paid the sum
        proportionate to the amount of hire charges of a comparable vehicle and fuel for the three months
        notice period.

AND the Plaintiff claims:

             (i)      The said sum of K1,901,460 being severance allowance payable to the Plaintiff by
                      the Defendant.
             (ii)     The sum of K488,250.00 representing hire charges at K34.50 per kilometer and
                      insurance of K700.00 per day of a comparable vehicle for 3 months.
             (iii)    150 litres of fuel or its equivalent value being the Plaintiff’s fuel entitlement for a
                      period of 3 months.
             (iv)     Interest on all the above sums at 1% above base bank lending rate.
             (v)      Collection fees on all sums falling due in paragraphs (i) to (iv) inclusive.
             (vi)     Costs of this action.”



                                                                                                           3
2002 he withdrew from membership of the pension scheme operated by the
Defendant for its employees. It is further alleged by the Plaintiff that on
or about the 9th of December 2002 the Defendant caused the sum of
K256,443.92 to be paid to him as his pension withdrawal benefits. This sum,
the contention goes, represented pension contributions made by both him
and his employers.

       Further, the Plaintiff avers that he was getting a monthly salary of
K57,620 and was also entitled use of company car plus fifty(50) litres of
fuel per months as fringe benefits but that on termination of his
employment the Defendant only paid him the sum K143,618.98 being notice
and leave pay. Indeed, the Plaintiff is of the view that what he was paid on
termination of his services with the Defendant Company is not adequate.
Accordingly, the Plaintiff alleges that the Defendant wrongfully failed,
refused and neglected to pay him severance allowance for the thirty-
three(33) years of continuous service he rendered to the Defendant. He
has alleged that the sum of K1,901,460 is the amount of severance allowance
he ought to have been paid. Additionally, the Plaintiff contends that
notwithstanding his entitlement to use of the company car the Defendant
neither allowed him to use the company car nor paid him a sum proportionate
to the amount of hire charges of a comparable vehicle for three months.
The three months, it would appear, is the notice period that was required if
either party wanted to terminate the contract of employment.

      It is, therefore, the prayer of the Plaintiff that this Court should
order the Defendant to give him the following:
      (a)    the sum of K1,901,460 being severance allowance
      (b)    the sum of K488,250 representing hire charges at K34.50 per
             kilometre and insurance of K700 per day of a comparable
             vehicle for three(3) months
      (c)    150 litres of fuel or its equivalent value, being his fuel
             entitlement for a period of three(3) months
      (d)    interest on all the above mentioned sums at 1% above base bank
             lending rate




                                                                          4
             (e)       collection fees on all the above sums in paragraphs (a) to (d).

The Plaintiff also claims costs of this action. I wish to point out that the
claim for interest only appears in the prayer for the relief. In point of fact
the Plaintiff has only pleaded interest in the main body of his Amended
Statement of Claim.

The Defendant Company’s Reply3 to the Plaintiff’s Claim


3
    The following is what the Defendant Company has given as its answer to the Plaintiff’s claim:

                       “AMENDED DEFENCE

       1.          The Defendant admits paragraphs 1 , 2, and 9 of the Amended Statement of Claim.
       2.          The Defendant denies paragraph 3 of the Amended Statement of Claim and contends that the
                   Plaintiff could not have been promoted when he had received warnings as regards drastic drop
                   in the sales of the spare parts of which the Plaintiff was in charge.
       3.          The Defendant denies that there was any such announcement as alleged in paragraph 4 of the
                   Amended Statement of Claim and puts the Plaintiff to strict proof thereof. The Defendant
                   states that since it was the Plaintiff who reported to the Police of a theft which had occurred in
                   his department he was and is in the premises in a better position to explain why no arrests had
                   been made by the Police.
       4.          The Defendant denies that the laying off of some of its employees was for the reason alleged
                   in paragraph 5 of the Amended Statement of Claim but contends that the same was due to the
                   fact that the sales of the spare parts and of the vehicles and the maintenance services by the
                   Defendant had become very low resulting into the low income to the Defendant.
       5.          The Defendant admits paragraph 6 of the Amended Statement of Claim but will at trial
                   contend that the withdrawal of the Plaintiff from the Pension Scheme was specifically stated
                   on the Notification of Withdrawal to Old Mutual to be on grounds of retrenchment after the
                   Defendant had intimated to its employees its intention to retrench some of its employees.
       6.          The Defendant admits paragraph 7 of the Amended Statement of Claim and States that after
                   the payment referred to therein the Plaintiff has received a further sum of K649,519.97 as
                   additional pension benefit.
       7.          The Defendant admits that at the termination of his employment the Plaintiff was in receipt of
                   a monthly salary of K57,620.00 as alleged in paragraph 8 of the Amended Statement of Claim
                   but denies that the use of a company car by the Plaintiff was part of his conditions of service
                   and puts him to strict proof thereof. In the premises the Defendant denies that the Plaintiff is
                   entitled to claim the sum K488,250.00 as hire charges.
       8.          The Defendant refers to paragraph 10 of the Amended Statement of Claim and states that in
                   terms of paragraph 2 of the Employment Act (First Schedule) (Amendment) Order, 2002 no
                   severance allowance is payable where an employee is entitled to pension, gratuity or any other
                   terminal benefits which exceed severance allowance payable under paragraph 1 of the said
                   Schedule.
       9.          The Defendant states that the pension paid to the plaintiff upon the termination of his
                   employment exceeds the severance allowance payable under paragraph 1 of the said
                   Schedule. In the premises the Defendant is not liable to pay any severance allowance to the
                   Plaintiff in terms of the said Schedule.
       10.         (a) The Defendant repeats paragraph 7 hereof and contends that albeit the Plaintiff was
                   entitled to a fuel allowance as alleged in paragraph 8 of the Amended Statement of Claim the
                   Plaintiff is not entitled to the same after the termination of his employment with the
                   Defendant.


                                                                                                                   5
       The particulars of the Defendant’s response to the Plaintiff’s claim
are in the Amended statement of Defence dated 4th November 2004. The
essence of its reply is that it does not deny that the Plaintiff was an
employee of the Defendant from 2nd April1970 until 24th January 2003 when
it terminated his services on the said grounds of redundancy. Further, the
Defendant admits that it is a limited liability company in the business of
selling vehicles in Malawi. Furthermore, the Defendant accepts that in
August 2002 the Plaintiff withdrew from the Defendant’s pension scheme
and adds that the withdrawal was as a result of the Defendant’s intention to
retrench some of its employees. Additionally, the Defendant concedes that
it caused the sum of K256,443.92 to be paid to the Plaintiff as his pension
benefits and goes on to add that the Plaintiff has since received an
additional pension benefits in the sum of K649,519.97. The Defendant also
admits that the two pension benefits which the Plaintiff received comprise
of contributions made by both the Plaintiff and the Defendant. Finally, in so
far as admissions are concerned, the Defendant does not take issue with the
Plaintiff on the monthly salary that he was receiving viz K57,620.00.

       The above notwithstanding there is a point of departure between the
Plaintiff and the Defendant. Indeed, the Defendant has joined issues with
the Plaintiff on the rest of the latter’s allegations of fact in the Amended
Statement of Claim. The long and short of it is that the Defendant denies
that the Plaintiff is entitled to any severance allowance or hire charges or
the so-called 50 litres of fuel (fuel allowance) or interest or collection fees.

              (b) Further, or in the alternative the Defendant states that the Plaintiff was entitled to the said
              fuel allowance as an employee in the service of the Defendant and in order to facilitate his
              movements in the said services.

   11.        The Defendant repeats paragraph 6, 7, 8 and 9 hereof and denies that the Plaintiff is entitled to
              the payment of any of the claims particularized in the prayer of the Amended Statement of
              Claim.
   12.        Save as hereinbefore expressly admitted the Defendant denies each and every allegation of
              fact in the Amended Statement of Claim contained as if the same were herein set out and
              traversed seriatim and prays that the action be dismissed with costs.

   Dated the 4th day of November 2004.

   (Signed)


   JOHN M. CHIRWA & PARTNERS
   Legal Practitioner for the Defendant”




                                                                                                               6
      The foregoing is a synopsis of what the pleadings are in this action.
At this point I will move on to set out the issues that arise and fall to be
decided by this Court.

Questions for Determination

      As I appreciate it, from the pleadings that were exchanged between
the Plaintiff and the Defendant, the issues that have to be determined in
this matter are, viz:

      (a)     whether the Plaintiff is entitled to payment of severance
              allowance.
      (b)     Whether, after termination of his services, the Plaintiff was
              entitled to use of company car or to be paid hire charges for
              three months.
      (c)     Whether, the Plaintiff was entitled to 150 litres of fuel or its
              equivalent after his services with the Defendant were
              terminated.
      (d)     If the answer to the above questions be in the affirmative,
              whether the Plaintiff is entitled to be paid interest on the sums
              found due to him.
      (e)     Whether any collection fees is payable in this matter.

       The above are what I understand to be the issues that have arisen
from the pleadings herein. The court will shortly proceed to decide these
issues but before that is done I will have to comment on the evidence that
was adduced by the parties in this action. Further, I wish to observe that
the Court’s determination of the issues enumerated above will be done after
I have given a narration of the facts that have come out from the evidence
that was put on record by the parties.

The Testimony and the Facts

   Evidence

      Both the Plaintiff and the Defendant offered one witness statement
each to support the assertions in their own pleadings and also to challenge



                                                                             7
the allegations of fact in the opposite party’s pleadings. Further, there was
attached to each of the said witness statements a number of exhibits. The
authors of these two written statements adopted their statements during
trial. They were each one of them cross-examined and re-examined by
Counsel for both the Defendant and the Plaintiff. As a result of this, the
evidence that was offered by these witnesses could rightly be said to have
been written, oral and documentary. It is from this type of evidence, and
the admissions in the pleadings, that the facts of this case are obtained.

Facts of the Case

      The Court shall now proceed to summarise the facts that emerged
from the evidence on record. The material facts in this matter are as
follows:
             Plaintiff’s employment
      The Plaintiff was employed by the Defendant on 2nd April 1970 as a
Storeman.     He was later discharged from the Defendant Company’s
employment. In point of fact his position was declared redundant on 24 th
January 2003. It is not clear what position he held at the time he was
discharged from employment. However, it is common cause that at the time
of his discharge he was in receipt of a salary of K57,620 per month.
Further, there is no denying of the fact that before being declared
redundant, i.e. on 3rd September 2002, the Plaintiff had been advised as
follows regarding his fringe benefits:

      “3rd September 2002

      Dear Mr Thompson,
      Reference: FRINGE BENEFITS

      With immediate effect your fringe benefits will be as follows:
      - USD20 for cell phone use
      - Company use of personal telephone will be refunded against documented
         call usage
      - A fuel allowance of (up) to a maximum of 50 litres per month will be paid
         against fuel invoices supplied .

         Yours faithfully




                                                                               8
          (Signed)
          Gordon Pickering
          DIRECTOR”

       Terminal Benefits

       At the time of his discharge the Plaintiff was advised as follows:

       “Ref. No. 006
       Mr E.K. Thomson
       C/o P.O. Box 581
       BLANTYRE

       24th January 2003                                           Tel: 01687777
                                                                   Fax: 01687325
       Dear Mr Thomson
       TERMINATION OF SERVICE
       We regret to inform you that due to circumstances beyond the Company’s
       control, it has become necessary to re-organize the functions of the Parts
       Department and others. Consequently, your position has been declared
       redundant and your services are no longer required with effect from 24th
       January 2003.

       You will be paid your final pay as follows:

              Notice Pay                             K172,860.00
              Leave Pay                              K20,952.73
              Total                                  K193,812.73
              Tax                                    K50,193.82
              Net                                    K143,618.91

Your severance allowance, if any, will be forwarded to you in due course.
We thank you for the services rendered to the Company.
Yours faithfully
For Leyland DAF (Malawi) Limited
(Signed)
S.Z. CHIKOPA
HUMAN RESOURCES MANAGER”


Accordingly, the Plaintiff was paid the total sum of K143,618.91 as his
terminal benefits .


                                                                                   9
      Pension Benefits

      The Defendant was operating a contributory pension scheme for its
employees. The Plaintiff was a member of such pension scheme. It be noted
though that there was no evidence on the percentage of contributions that
were made by either the Plaintiff or the Defendant Company. However, as
already mentioned above, the Pension Scheme that the Defendant was
operating was a contributory one.

       The Plaintiff voluntarily withdrew from the Pension Scheme. He
actually withdrew sometime in August 2002 but was given his pension
withdrawal benefits sometime on 9th December 2002. The amount of
K256,443.92 was paid to him on the said 9th of December2002. There was
then an additional payment of pension withdrawal benefits made to the
Plaintiff on 1st November 2004. The sum of K649,519.97 was the additional
pension withdrawal benefits that was paid to the Plaintiff.

      Severance Allowance

       As mentioned earlier, the Plaintiff’s services with the Defendant
Company were terminated on 24th January 2002. On termination of his
services he was paid the sum of K143,618.91 which consisted of notice and
leave pay. I reproduce hereunder the letter advising him of the termination
of services:

      “Ref. No. 006
      Mr E.K. Thomson
      C/o P.O. Box 581
      BLANTYRE
      24th January 2003                              Tel: 01687777
                                                     Fax: 01687325
      Dear Mr Thomson
      TERMINATION OF SERVICE
      We regret to inform you that due to circumstances beyond the Company’s
      control, it has become necessary to re-organize the functions of the Parts
      Department and others. Consequently, your position has been declared
      redundant and your services are no longer required with effect from 24th
      January 2003.



                                                                             10
      You will be paid your final pay as follows:

                    Notice Pay                                 K172860.00
                    Leave Pay                                  K20952.73
                    Total                                      K193812.73
                    Tax                                        K50193.82
                    Net                                        K143618.91
      Your severance allowance, if any, will be forwarded to you in due course.
      We thank you for the services rendered to the Company.
      Yours faithfully
      For Leyland DAF (Malawi) Limited
      (Signed)
      S.Z. CHIKOPA
      HUMAN RESOURCES MANAGER”


      The letter shows, inter alia, that the Plaintiff was advised that if
there was any severance allowance payable he was going to be informed of
same.

      It would appear that the Plaintiff did ask for payment of the
severance allowance. This is apparent from the letter of 12th February 2003
written by the Defendant Company to the Plaintiff. The said letter was in
the following terms:

      “Mr E.K. Thomson
      C/o Mrs M. Thomson
      A.C. Opticals
      P.O. Box 151
      BLANTYRE
      12th February 2003                                      Tel: 01687777
                                                              Fax: 01687325
      Dear Mr Thomson
      SEVERANCE ALLOWANCE
      On the assumption that you would be entitled to the payment of Severance
      Allowance, which is, however, not the case, your Severance Allowance would
      have been K271,826.00 calculated at your earnings during the years served.
      Our records show the Pension you received is K352,272.18, which is more
      than the Severance Allowance, therefore, there is no Severance Allowance
      payable to you.
      Yours faithfully
      (Signed)


                                                                                  11
      S.R. ANDREWS
      ACTING GENERAL MANAGER
             SEVERANCE ALLOWANCE – MR E.K. THOMSON
                                                 MK
                  1970                           110
                  1971                           120
                  1972                           145
                  1973                           275
                  1974                           334
                  1975                           354
                  1976                           397
                  1977                           550
                  1978                           578
                  1979                           635
                  1980                           730
                  1981                           898
                  1982                           1032
                  1983                           1109
                  1984                           1275
                  1985                           1402
                  1986                           1542
                  1987                           1850
                  1988                           2035
                  1989                           2238
                  1990                           2962
                  1991                           3275
                  1992                           3845
                  1993                           4457
                  1994                           6075
                  1995                           8980
                  1996                           13884
                  1997                           18206
                  1998                           21839
                  1999                           25052
                  2000                           40010
                  2001                           48012
                  2002                           57620   ______

                                                 MK271,826”

                  PENSION RECEIVED MK352,272.18”

      The Plaintiff was not amused with the stance taken by the Defendant.
He therefore lodged a labour complaint with the Regional Labour Officer
(South). The Regional Labour Officer (South) then wrote the Defendant
Company as follows:

      “Comp/2/1                            Regional Labour Officer (South)
                                           P.O. Box 110
                                           BLANTYRE
                                           18th February 2003


                                                                             12
      Acting General Manager
      Leyland DAF
      P.O. Box 581
      BLANTYRE
      Dear Sir
      LABOUR COMPLAINT: MR E.K. THOMSON
      Mr Thomson has lodged a complaint in this office over his entitlement to
      severance allowance following the termination of his employment contract
      with your company. He alleges that:
          • Your computation of severance allowance is faulty.
          • You included his own contribution to the pension when comparing it
             with severance allowance.
      If these allegations are true, I would like to advise as follows:
          • He is entitled to 4 weeks pay multiplied by the number of years of
             service. The pay referred to is the basic pay on the date of
             termination (S35(1) Employment Act 2000).
          • His own pension contribution should not be considered when
             comparing the allowance with pension.             Only the companies
             contribution plus interest should be subtracted from the severance.
             The balance if any, should be paid to him. (S35(1.4)).
      You are being requested to submit your comments on this case to this office
      as soon as possible.
      Yours faithfully
      (Signed)
      J.K MHONE
      FOR: REGIONAL LABOUR OFFICER (S)”


As requested, the Defendant responded in the following manner:

      “The Regional Labour Officer(S)
      P.O. Box 110
      BLANTYRE
      For the attention of Mr J.K. Mhone
      21st February 2003
      Dear Sir
      RE: LABOUR COMPLAINT BY MR E.K. THOMSON
      We wish to acknowledge receipt of your letter of the 18th of February 2003
      regarding the complaint made to your office by a Mr Thomson. We have
      obtained legal advice in the matter and, as requested, wish to comment as
      follows:




                                                                              13
      1.           At the termination of his services Mr Thomson was entitled to
                   pension, gratuity and other terminal benefits. Our records
                   clearly show that the pension which Mr Thomson received at
                   the termination of his services exceeded any severance
                   allowance which he would have been entitled to. In terms of
                   paragraph 2 of the First Schedule, to the Employment Act, as
                   amended, Mr Thomson was thus not entitled to the payment of
                   severance allowance.
      2.           According to our Rules of the Pension Fund when we talk of a
                   pension we talk of the contributions made by both the
                   employee and the employer to the Fund. Please be advised
                   that the contributions of the employer do not per se purchase
                   a pension. We, therefore, fail to appreciate your argument
                   that Mr Thomson’s contributions to the Fund should not be
                   considered when comparing the severance allowance with
                   pension. We believe that had the intended interpretation
                   been what you allude to, then the wording of the provision in
                   the Schedule should have been “the employer’s contributions
                   to pension” as opposed to “pension.”
      3.           As regards the computation of the severance allowance we
                   find no basis for your view that the terms “basic pay” refers
                   to “the basic pay” on the date of the termination of the
                   service. It is our view that Mr Thomson did no earn “the
                   basic pay at the termination of his service” throughout his
                   service with us. Like any other employee Mr Thomson’s basic
                   pay at the termination of his services had come about as a
                   result of the increments earned during his service. We would
                   add that the words “wages for each completed year of
                   continuous service” make a direct reference to the earnings
                   during each year of one’s service. In the circumstances we
                   regret to advise that we are not prepared to change our stand
                   in the matter. We would, however, be prepared to seek the
                   Court’s interpretation of the relevant statutory provisions
                   should it become necessary.
            Yours faithfully
            For LAYLAND DAF (MALAWI) LIMITED
            (signed)
            S.R. ANDREWS
            ACTING GENERAL MANAGER”

     The Regional Labour Officer (South) did not accept the Defendant
company’s explanation on why it was refusing to pay the severance allowance.


                                                                             14
There then followed a meeting between the Regional Labour officials and the
Defendant company. The Regional Labour Office thereafter advised the
Defendant company as follows:

      “Ref. No. Comp/2/1/2                      Regional Labour and Vocational
                                                Training Office
                                                P.O. Box 110
                                                Blantyre
      The Acting General Manager
      Leyland DAF Limited
      P.O. Box 681
      Blantyre

      Dear Sir
      RE: LABOUR COMPLAINT: MR E.K. THOMSON
      Refer to the discussion I had with you on 24th February 2003 in your office
      on the above referred issue.
      I have discussed the matter with other senior officials in the Ministry. The
      general conclusion is that you still have to act as per my advice both in my
      letter and orally during our discussion i.e.
             o to pay the difference between severance allowance and pension
                 (company contribution plus interest.
             o Calculate severance allowance based on basic pay at time of
                 termination.

      Note that the merit of your concerns were fully evaluated against current
      labour legislation and practices before arriving at this conclusion.
      Lastly I request you to act accordingly. This will avoid further costs on this
      matter.
      Yours faithfully
      (Signed)
      J.K. Mhone
      For: REGIONAL LABOUR AND VOCATIONAL TRAINING OFFICER(S)”

       As will have been seen from the letter above the bottom line is that
the Defendant company still did not pay the severance allowance. The
ground for refusal being that, in its view, the pension was paid to the
Plaintiff exceeded the severance allowance that would have been payable to
the plaintiff. The Plaintiff is of the contrary view that he is entitled to be
paid severance allowance.        Indeed, the Defendant’s insistence that
severance allowance is not payable did not go well with the Plaintiff. Thus,


                                                                                 15
the action herein commenced on 4th April 2003, where the Court will
principally be considering whether or not the severance allowance is payable.

Law and Consideration of the issues

        Statutory framework and legal authorities

                Severance allowance

      Payment of severance allowance in Malawi is governed by statute 4. In
particular, and for the present purposes, Section 35(1) of the Employment
Act provides that:

        “On termination of contract, by mutual agreement with the employer or
        unilaterally by the employer, an employee shall be entitled to be paid by the
        employer, at the time of termination a severance allowance to be calculated
        in accordance with the First Schedule.”


      Both parties in this matter submitted that the first schedule being
mentioned in Section 35(1) of the Employment Act is the Employment Act
(First Schedule) (Amendment) Order,5 2004.          Indeed, the Court has
observed that both Counsel have sought to rely on the amended schedule to
support their respective arguments on the issue of severance allowance.
Unfortunately, the amended First Schedule being relied on by both parties
was declared invalid and the decision of the Minister to amend the First
Schedule was quashed by this Court on the ground that the Mininster had
acted in excess of his power to amend the First Schedule 6. Consequently,
the First Schedule to be used in the calculation of severance allowance is
the one that came into operation on 1st September 2000. This is the date
when the Employment Act, 2000 became effective7.            The said First
Schedule, referred to in Section 35(1) of the Employment Act, provides that
severance allowance shall be calculated as follows:



Length of service                                  Severance Allowance Payable
4
  Section 35 of Employment Act, 2000 (Act No. 6 of 2000)
5
  Government Notice No. 24 of 3rd February 2004
6
  The State vs Attorney Genera (Minister of Labour and Vocational Training) Ex parte Mary Khawela and
Others Misc. Civil Cause No. 7 of 2004 [unreported] High Court decision of 5th November 2004
7
  Government Notice No. 47 of 17th July 2000


                                                                                                  16
Not less than one year but not Two weeks wages for each completed
exceeding four years           year of continuous service
Not less than ten year         Four    weeks    wages     for  each
                               completed year of continuous service



Terminal (other) benefits other than severance allowance

      The Employment Act, 2000 also provides for the payment of benefits
other than severance allowance on termination of employment. The provision
that immediately comes to mind is Section 30 of the said Employment Act,
2000. The stipulation that is relevant to the present proceedings is
Subsection (2) of Section 30 which states that:

      “(2) In lieu of providing notice of termination , the employer shall pay the
      employee a sum equal to the remuneration that would have been received and
      confer on the employee all other benefits due to the employee up to the
      expiration of the required period of notice.” (underlining supplied by me)


Further, Section 3 of the Employment Act, 2000 states that unless the
context otherwise requires:

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


      I must add that the requirement of the payment of a sum equal to the
remuneration that would have been received and other benefits due to the
employee up to the expiration of the required period of notice, is a new
phenomenon. Indeed, it is my understanding of the law that with effect
from 1st September 2000 the payment and conferring of these terminal
benefits up to the expiration of the required period of notice is a matter of
statutory law. Thus, any decision of the Court made before 1 st September
2000 having a hearing on these benefits must be deemed to have been
overruled by the legislature. In saying this I am alive to the fact that the
Defendant has sought to rely on some decisions of the High Court that
appear to suggest that some of the benefits that the Plaintiff is claiming



                                                                               17
are not payable. Unfortunately, the decisions in question were made prior to
the enactment of the Employment Act, 2000.

Is severance payable in the circumstance and how much, if any, is
payable?

      The Defendant company is of the view that severance allowance is not
payable to the Plaintiff. It has been submitted by the Defendant that
severance allowance is not payable since the Plaintiff was paid pension
benefits which exceed the severance allowance that would have been paid to
him. The Defendant further contends that the Plaintiff is not entitled to be
paid severance allowance over the same period that he was paid pension
benefits. The Plaintiff is of the contrary view and argues that severance
allowance is payable to him.

      It is obvious that both the Plaintiff and the Defendant base their
arguments on the Employment Act (First Schedule) (Amendment) Order,
2004. Sadly for them the said First Schedule they wish to rely on was
declared invalid and is of no effect8. Further, the Court found the following
dictum of Potani, J. instructive and adopts it in this matter:

           “It would be necessary at the juncture to set out the relevant part Section
           35 of the Employment Act 2000 and it reads:
           (i)    On termination of contract, by mutual agreement with the employer
                  or unilaterally by the employer, the employee shall be entitled to be
                  paid by the employer a severance allowance to be calculated in
                  accordance with the First Schedule.
           (ii)   The minister may, in consultation with organizations of employers and
                  organizations

           There can be no doubt from the reading of the above provisions of Section
           35 that indeed as submitted by Counsel for the applicants, Subsection(1)
           deals with eligibility to payment of severance allowance while Subsection(2)
           provides the mechanism for calculating the severance allowance payable. It
           is also very clear from the two Subsections that the power the Minister has
           is only to amend the formula or mechanism for calculating severance
           allowance payable. What is curious to note is that on a plain reading of
           Subsection(1), an employee’s entitlement to payment of pension, gratuity or
           other terminal benefits has nothing to do with his or her entitlement to
8
    See Foot Note 6 above


                                                                                    18
      severance allowance. However, the effect of the amendment by the
      Minister is to forfeit payment of severance allowance to employees who are
      entitled to payment of pension, gratuity or other terminal benefits. As
      already noted, the schedule the Minister is empowered to amend only deals
      with the calculation of severance allowance and not the conditions or
      requirements that would entitle one to payment of severance pay as those
      are already laid down in Subsection(1) of Section 35. It appears the driving
      force behind the Minister’s decision was to avoid a situation in which an
      employee whose contract has been terminated would get double payment,
      that is, pension or gratuity or other terminal benefits on the one hand and
      also severance pay on the other hand. The problem the Minister sought to
      address mainly comes about because Section 35 and indeed the Employment
      Act in its entirety does not define severance pay. It appears in the
      Minister’s view and thinking, payment of pension, gratuity or the power to
      amend conferred upon the Minister is not to amend the meaning of pension,
      gratuity or severance pay but simply to amend the mode of calculating
      severance allowance which can not be the same thing as pension or gratuity.
      Thus, much as the Minister’s intention might perfectly be right on economic
      and moral considerations, the decision made by the Minister exceeded the
      power conferred by the law. To borrow the words of Counsel for the
      applicants, the Minister sought to do something which is morally and
      economically right through the back door. This is a Court of law not one of
      morality. In the face of the law, therefore, the Minister’s acted in excess
      of the powers conferred by Section 35 of the Employment Act and indeed
      Section58(1) of the Constitution and therefore the purported amendment is
      invalid and is hereby quashed on that account. This order being of the
      nature of an order of certiorari, the Minister of Labour and Vocational
      Training is directed to reconsider the amendment and should the Minister
      still be desirous of making severance pay not payable in cases where an
      employee is entitled to gratuity, pension or other terminal benefits, such an
      amendment to the law should be properly done say for example by asking the
      legislature to give the Minister power to so amend or the legislature itself
      can do so by amending Section 35(1) of the Employment Act.”

       It follows, therefore, that the position at law is that severance
allowance would still be payable. There is nothing to stop this Court from
awarding severance allowance to the Plaintiff. Indeed, the fact that the
Plaintiff had already obtained pension benefits is no bar to this Court in
ordering that severance allowance be paid to him. It is clear from the
provisions of the relevant First Schedule to the Employment Act, 2000 that
the legislature has not said that severance allowance would not be paid


                                                                                19
where an employee’s pension benefits exceed the severance allowance.
Further, the said schedule is clear and unambiguous in that it says that
severance allowance would be paid on termination of service. It does not
give further explanation as regards to what circumstances the said
severance allowance will not be paid. Accordingly, this Court finds and
concludes that severance allowance is payable in the circumstances. The
Court has come to this conclusion upon looking at the natural and ordinary
meaning of Section 35(1) of the Employment Act, 2000 as read together
with the original First Schedule made under the said Section 35(1) of the
Employment Act.

How much severance allowance is payable to the Plaintiff?

       This Court has found that severance allowance is payable to the
Plaintiff. Additionally, I have come to the conclusion that the severance
allowance will be paid and calculated pursuant to the provisions of the First
Schedule of the Employment Act, 2000 and not the Employment Act (First
Schedule) (Amendment) Order, 2004.

       There is evidence on record to show that at the time the Plaintiff’s
employment was terminated he had worked for the Defendant company from
2nd April 1970 to 24th January 2003. This Court does not agree with the
Plaintiff when he submits that he worked with the Defendant company for
33 years. The Plaintiff, in my judgment, would have worked for 33 years if
his period of service was from 2nd April 1970 to 2nd or 3rd April 2003.
Consequently, he had worked for the Defendant company for a period of 32
years. It follows, therefore, that having worked for these numbers of years
the severance allowance payable to him would be the equivalent of “four
weeks wages for each completed year of continuous service9.”

       As regards how much is payable as severance allowance the Plaintiff’s
calculation is faulty. It is flawed in that his calculation is premised on the
last salary multiplied by the length of service. The correct approach to
determining the severance allowance payable would be for the Court to
interpret the meaning of the words “four weeks’ wages for each completed
year of conditions service.” These words have been interpreted before by


9
    First Schedule of the Employment Act, 2000


                                                                           20
our own industrial Relations Court10 and this Court concurs with the
interpretation that was given to the phrase “four weeks’ wages for each
completed year of continuous service.” The Deputy Chairperson of the
Industrial Relations Court made the following observation which this Court
adopts:

        “The phrase [four weeks’ wages for each completed year of continuous
        service] can be broken into three parts namely:

        (a)     Each completed year should be understood to mean that the employer
                must have worked for at least a year.
        (b)     Continuous service in the phrase mean without break. The employee
                must have worked without a break for a number of years up to the
                date of termination of employment.
        (c)     ‘Wages for each completed year’ must mean the wages for that
                completed year.
        The use of ‘number of years’ [of continuous service] is only for the purposes
        of ascertaining whether to award the employee two weeks or four weeks
        wages. In this Court’s view the number of years is not meant to be used as a
        multiplier. The employee must receive the aggregate of cumulative wages,
        which has accumulated over the years during his continuous service by
        adding up the wages to the point of termination --- The intention of Section
        35 was to cater for employees at termination of their employment but not to
        give them a bonus to the disadvantage of the employer--- The calculations
        contended by the applicants which are based on the last salary of the
        employee multiplied by the number of years would lead to absurd results---.11
        [underlining supplied by me]



       I hasten to add that if one were to base the calculation of severance
allowance on last salary and the number of years that would lead to unfair
labour practice12 in that employees would become instant millionaires at the
expense of employers. This Court, will not, therefore use the Plaintiff’s last
salary and multiply it by the number of years he worked with the Defendant
company. The Plaintiff wants us to multiply the number of years he served
in the Defendant company as a multiplier which comes to the sum of

10
   Phiri and Another vs Leyland DAF (MW) Ltd Matter No. IRC 128/224 of 2003
11
   Ibid PP 2-3
12
   Liquidator, Import and Export (MW) Ltd vs J.L. Kankhwangwa and Others Civil Appeal No. 52 of 2003
(unreported) High Court decision of 22nd November 2003 where the Court observed that the Court must
take into consideration that fair labour practices entails being fair to both the employer and the employee


                                                                                                        21
K1,901,460.00. As put above, the severance allowance payable to the
Plaintiff should consist of the aggregate of the cumulative wages
accumulated in the 32 years he was continuously with the Defendant
company.    The Court has observed that the Defendant company had
calculated the cumulative wages for the 32 years which came to
MK271,826.00 ( two hundred and seventy one thousand eight hundred and
twenty six kwacha. The plaintiff has not contradicted this evidence.
Accordingly, the correct amount that should be paid to the Plaintiff as his
severance allowance is the said sum of Mk 271,826. It is so ordered.

Fringe benefits

      The Plaintiff is claiming fringe benefits in the form of hire charges,
insurance cover and 150 litres of fuel. Indeed, the Plaintiff claims that he
was entitled to use a company car and draw 50 litres of fuel every month.
Thus the claim for hire charges, insurance, and fuel for three(3) months
being the required period of notice.

       The Defendant company disputes that the Plaintiff is entitled to
these fringe benefits. This Court agrees with the Defendant that the
Plaintiff can not be allowed to claim these benefits. It is well to note that it
is in evidence that on 3rd September 2002 the Plaintiff was categorically
informed that his fringe benefits included, inter alia, USD20 for cell phone
where the expense is documented and a fuel allowance of up to a maximum of
50 litres per month but only payable on production of invoices. It follows,
therefore, that the Plaintiff can not claim use of a company car or hire
charges when at the time of the termination of his contract of employment
he was not entitled to use a company car as part of his fringe benefits.
Further, and in any event, the claim for hire charges or insurance is a claim
for special damages. It is trite law that such a claim must be specifically
proved otherwise the Court will refuse to compensate a claimant13. The
Plaintiff did not adduce any evidence to prove that he hired a car and/or
that he paid insurance in respect of any hired car or at all. Accordingly, it
can not lie with him to claim the said hire charges and/or insurance. The
claim for hire charge and/or insurance is consequently dismissed. As
regards the claim for fuel allowance the terms of his contract are clear as
to when same became payable. The fuel allowance was payable on production

13
     Yanu -Yanu Company Ltd vs Mbewe and Mbewe 10 MLR 377


                                                                             22
of invoices. The Plaintiff has not produced invoices for the purchase of 150
litres of fuel he is claiming in this Court. In any event, a claim for 150 litres
of fuel or the equivalent cash thereof is a claim for special damages and
same ought to have been specifically proved14. The Plaintiff did not
specifically prove the purchase of 150 litres of fuel. The claim for 150
litres of fuel, or its equivalent in cash, must fail.

The Claim for Interest

       The Court has noted that one of the relief sought by the Plaintiff is
interest on the sums that he was claiming. Further, it is observed that this
claim of interest only appears in the prayer for the relief sought. Moreover,
the Plaintiff has indicated in his prayer that he wants this interest at 10%
above base bank lending rate. However, the Plaintiff did not plead, in the
substantive part of his statement of claim, the material facts and the basis
upon which he was seeking interest at the rate mentioned. This is contrary
to established rules as regards pleadings15.

       As I understood it, the position at law is that a claim for interest
must be pleaded not only in the particulars of relief but also in the main
body of statement of claim. The same applies with regard to the basis and
the rate at which such interest is claimed.16 The Plaintiff’s statement of
claim was not in compliance with this law.

      Further, there is a settled proposition of law that an award of
interest at a rate over and above the normal rule of interest awardable in a
judgment is done when a Court is exercising equitable jurisdiction.17
Moreover, the position at law is that unless a claimant is seeking for no more
than simple interest at a normal rate he should also put before the Court
evidence on which the Court can decide what amount (if any) to allow:
Profinance Trust SA vs Gladstone [2002]1 BCLC 141 at 152;
http://www.courtservice.gov.uk (last visited on 7th November 2003. There
was no such evidence offered to justify the award of interest at more than
the normal interest rate payable on a judgment debt. Further, having regard

14
   Yanu - Yanu Company Ltd vs Mbewe and Mbewe 10 MLR 377
15
   Zomba Municipal Assembly vs Council of the University of Malawi, Civil Cause No. 3567 of 2000
unreported (High Court)
16
   Zomba Municipal Assembly vs Council of the University of Malawi C.C. No. 3567 of 2000
17
   Wallersteiner vs Moir (No.) [1975]1 All ER 849


                                                                                                   23
to the fact that the claim for interest was not properly pleaded, the
Plaintiff’s claim for interest ought not to succeed.18 The interest that
should be awarded is the normal interest payable on a judgment debt and
the rate is 5 per centum per annum as from the date of this decision.19

      The long and short of it is that there ought not be an award of
interest on the severance allowance found due to the Plaintiff at the said
bank lending rate claimed by the Plaintiff. Instead, the normal rate of
interest on a judgment debt shall apply. It is so ordered.

Legal collection charges

      As seen earlier, the Plaintiff has claimed collection fees. The point I
wish to make is that the claim for collection fees has no basis in law. Why
does this Court say so? This is said in view of the provisions of the Legal
Practitioners (Scale and Minimum Charges) (Amendment) Rules.20            My
understanding of these rules, in particular table 6 of the First Schedule, is
that with effect from 13th March 2002 legal collection charges (collection
fees) are payable by the collecting party and not the paying party.21

      The Plaintiff’s action was commenced on 4th April 2003, well after the
Legal Practitioners (Scale and Minimum Charges) (Amendment Rules, 2002
came into force on 13th March 2002. Consequently, the collection fees
claimed by the Plaintiff are not payable by the Defendant company.

       Further, it is my understanding of the recent amendment that where
proceedings are commenced, legal practitioners may charge their clients
solicitor and own client costs (charges). In addition a claimant only gets
party and party costs from the paying party.

       In the light of the observation made above, the Plaintiff erred in
claiming legal collection charges. Actually, if the relevant law had been
18
   Zomba Municipal Assembly vs Council for the University of Malawi supra
19
   Section 65 of the Courts Act (Cap 3:02) of the Laws of Malawi
20
   Government Notice No….. of 2000 dated 13th March 2002
21
   Table 6 of the said First Schedule provides, inter alia: “nature of Work Collection of moneys, solicitor
and own client charge on collecting moneys to be charge on receipt of moneys: provided that where
proceedings are commenced the percentage may only be charged on the amount up to the date
commencement of such proceedings. Where proceedings are commenced solicitor may charge solicitor
and own client charges in addition to party and party but, subject to any special agreement between
solicitor and client on a percentage basis.”


                                                                                                              24
consulted Counsel for the Plaintiff would have noted that such legal
collection charges (collection fees) ought to have been paid by the Plaintiff
to them and not otherwise.

Conclusion

       The Plaintiff’s claim for severance allowance has succeed albeit that
the sum payable is MK271,826.00. The claims in respect of hire charges
and/or insurance, 150 litres of fuel or its equivalent value interest and
collection fees are dismissed.

       As regards the question of costs this Court makes no order as to
costs. Actually, it is the view of this Court that this matter ought to have
been taken before the Industrial Relations Court. I am of this view because
this action is an employment matter which could have been better dealt with
by the Industrial Relations Court.22 Since the Industrial Relations Court
would not have ordinarily made an order of costs23 I see no reason why this
Court should award costs to either party. The Court orders instead that
each party shall bear its own costs of, and occasioned by, these proceedings.

      Pronounced in open Court this 25th day of April 2005 at the Principal
Registry, Blantyre.



                                          F.E. Kapanda
                                             JUDGE




22
   Kamphoni vs Malawi Telecommunications Ltd Civil Cause No, 684 of 2001 (unreported) High Court
decision of 18th May 2001
23
   Section 72 of the Labour Relations Act. See also Kamphoni vs Malawi Telecommunications Ltd Ibid


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