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THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANDA
AT MENGO
(CORAM: ODOKI, CJ, ODER, TSEKOOKO, KAROKORA, MULENGA,
JJSC)
CIVIL APPEAL NO. 7 OF 2002
BETWEEN
1. HANS MWESIGWA } 2. A. TUMWESIGYE } APPELLANTS
AND
UGANDA CONSOLIDATED
PROPERTIES } Ltd RESPONDENT
(Appeal from the decision of the Court of Appeal at Kampala before
Hons. Kato, Okello, Mpagi-Bahigeine, JJA) dated 31st October, 2001 in
CA. No. 5 of 2001).
JUDGMENT OF KAROKORA. JSC.
This appeal arises out of the decision of the Court of Appeal which dismissed
appellants' appeal against the decision of the High
Court which had dismissed
their suit. The appellants had brought the suit in the High Court claiming
severance pay and general damages
for breach of contract.
The brief facts of the case were as follows:-
Both appellants, Hans
Mwesigwa and Albert Tumwesigye, were former employees of the respondent company,
the Uganda Consolidated Properties
Ltd, as General Manager and Accounts
Assistant respectively. The respondent Company was listed under class iv of
Schedule 1 of the
Public Enterprises Reform & Divestiture Statute No. 9 of
1993 (PERD) due to be privatised 100%. Before the privatisation and
on the
request of the respondent's Board of Directors, the PERD committee decided that
the respondent be temporarily closed before
the privatisation so as to safeguard
the company's assets during restructuring pending privatisation.
The Government decision for temporary closure was communicated to the said
Board which after the closure decided to terminate the
appellant's services and
notified them accordingly.
The appellants were paid their terminal benefits excluding the severance pay
of one year's house allowance. Regulation 9 of Provision xvii of the
respondent's Staff Manual provides as follows:-
" Terminal benefits
On retirement, resignation or
termination, the employee will be paid the following terminal
benefits.
(a)
(b) Severance pay of one years' allowance in addition to the above if
the termination of employment were caused abnormally, that is
to say, not by the
employee or the company itself."
The appellants had sued the respondent claiming their severance pay, alleging
that their services were terminated by Government and
not by the respondent
company. The learned trial Judge held that the appellants' services had been
terminated by the respondent company.
Therefore, appellants were not entitled to
severance pay. Their appeal to the Court of Appeal was dismissed hence this
appeal. As
amended, with leave of court, the following are the four grounds of
appeal:-
1. The learned Justices of Appeal erred
in law to hold that the appellants were not entitled to severance
allowance.
2. The learned Justices of Appeal erred in law to hold that the respondent's Board of Directors had powers to terminate the services of the appellants.
3. The learned Justices of Appeal erred in law to have relied on the evidence of DW1.
4. The learned Justices of Appeal erred in law to have relied on the
statement from the Bar of Counsel for the respondent.
On the first ground of appeal, Mr. Tibesigwa, counsel for appellant,
submitted that the Court of Appeal was in error when it upheld
the decision of
the trial judge to the effect that it was the respondent company which had
terminated the appellants' employment
and not the Government and that,
therefore, the appellants were not entitled to severance allowance. He further
submitted that although
the suit had been brought under both the statute and
contract, in determining the terminal benefits of its employees, the Board of
Directors of the respondent company was under a duty to comply with the
provisions of PERD statute. In the instant case, he submitted
that the decision
to close the offices of the respondent company was taken by the Government
through the Executive Director of PERD,
Mr. L. Muganwa, but not by the
respondent company. He contended that the respondent company was merely acting
as an agent of the
Government in the process of Reform & Restructuring of
Public Enterprise of which it was one.
Mr Birungi, Counsel for respondent in support of the decision of the Court of
Appeal argued both grounds 1 and 2 together, because he contended that
disposal of the first ground would dispose of the second ground, submitted that
the decision
to terminate the appellants' service was made by the Board of the
respondent company and therefore, according to Regulation 9(b)
of the Provisions
xvii of the Staff Manual, Exh P4, the appellants were not entitled to severance
pay.
Though 4 grounds of appeal were filed, the issue, in effect, is whether the
appellants were eligible to be paid severance pay when
their employment was
terminated. The appeal therefore can be determined by resolving the question of
who terminated their employment.
Was their employment terminated by the
respondent company or by the Government? According to Regulation 9(b) of
provision xvii of
the Staff Manual, the appellants would qualify for severance
pay if termination of their employment was abnormally caused, but would
not be
entitled if their employment was terminated by the respondent or if they left on
their own.
In my opinion the issue as to who terminated appellants employment has to be
determined on the basis of two documents. The first is
the letter of the
Executive Director of PERD, annexture "B" dated 12/5/98 which was
addressed to the Managing Directors of the respondent company. The second
document is the letter from the
Board of Director of the respondent company,
annexture "C" dated 30/6/98, terminating the appellants' employment vis-a-vis
the objectives
of PERD and in particular section 3 of PERD Statute.
The Executive Director of PERD's letter, annexture "B", stated in part as
follows:
“This is to inform you that Government has
decided temporarily to close down the offices of UCPL to allow for restructuring
exercise in the
company as requested by the board"
After receiving the above letter informing the respondent company the
decision of the Government, the Board of Directors of the respondent
company,
wrote the letter to the appellants, annexture "C", terminating appellants
employment. The letter stated in part as follows:-
"In the process of restructuring the operation of UCPL, the Board, in a
meeting held on June, 22nd 1998 has decided to terminate your
services w.e.f
30th June 1998".
In order to determine who then terminated appellants' employment, both
letters annexture "B" and annexture "C" have to be considered
in light of the
objectives of the Public Enterprises Reform 85 Divestiture Statute 9 of
1993 as spelt out in section 3 of the statute.
Section 3 of the statute provides that:-
(1) The main objective of this statute is to give effect
to the Government policy for public Enterprise Reform & Divestiture
published
in Gazette No. 48 of 1st November 1991 and also the Action
Plan for Public Enterprise Reform & Divestiture.
Without
prejudice to the general effect of Subsection 1 of this Section, the following
Objectives shall be deemed to fall under the
Objective specified in that
subsection.
The reduction of Government equity holding in the public enterprises
and thereby inter alia, relieving Government of the financial
drain on its
resources and the burden of their administration and raising revenue by means of
divestiture, including, where necessary,
liquidation or dissolution of public
enterprises and by the promotion, development and strengthening of the private
sector.
The promotion of institutional arrangement, policies and procedures
for:-
(i) ensuring the efficient and successful management
financial, accounting and budgetary discipline of public
enterprises.
(ii) ensuring the separation of ownership and management functions;
(iii) enabling Government to play its proper role more effectively as owner of public enterprises;
(iv) and enforcing accountability
(c) the rehabilitation and restructuring where appropriate, of public enterprises; and
(d) the promotion of local enterpreneurship.
In my view, examination of these provisions together with sections 4, 5 and
section 6 of the statute, shows clearly that the role
of the committee, which is
mainly composed of the Government officials, is to implement Government policy
on reform and divestiture
of public enterprises under the statute. Furthermore,
section 18 of the same statute makes it abundantly clear that the criteria
of
selecting public enterprises to be restructured and the individual mode of
restructuring them must be determined by Government.
Clearly, from the above provisions, when the Executive Director of PERD wrote
the letter, Annexture "B", conveying the decision of
the Government to close
down the offices of the respondent company, the respondent company had no option
but to close the company.
Consequently once the company was closed by the
Government, the respondent had no jobs for the appellants.
It must be noted that the respondent company was a public enterprise which
was under the process of Reform and Divestiture pursuant
to the Government
policy as spelt out in section 3 of the statute where the respondent company had
no control. Consequently in
my view, the submission by Mr Birungi that he had
not come across any case/section of the law which says that the Government shall
terminate services of employees of a private company, cannot stand in view of
the fact that this was not a private company but rather,
a public enterprise
which the statute defines as "an enterprise the whole or part of the
proprietary interest in which it is held by the state and which is
specified in the 1st schedule to this
statute"
Therefore the owners of the respondent company, which was the Government,
through the Executive Director closed the offices of the
respondent company
which resulted in the appellants' termination of employment. Consequently the
letter, Annexture "C", from the
Board of Directors of the respondent company
terminating appellants' employment in the respondent company was a mere
formality as
the company had already been closed by the Government.
In the result, appellants' employment was abnormally terminated by Government
which closed the respondent company. Therefore pursuant
to Regulation 9(b) of
provision xvii of the Staff Manual Annexture 4, appellants were entitled to
severance pay.
In my view, therefore, disposal of this ground, disposes of the entire
appeal.
Therefore, I would allow this appeal, set aside the decisions of the lower courts. I would order that appellants be paid their severance allowances. I would award the appellants' costs here and in the courts below.
JUDGEMENT OF MULENGA JSC
I had benefit of reading in draft the judgement prepared by my learned
brother Karokora JSC. I agree with him that the appeal ought
to be allowed with
costs to the appellants. I would only wish to add one observation for
emphasis.
It appears to me that the courts below misconstrued the stipulation that the employee would be paid severance pay only "if the termination of employment were caused abnormally, that is to say not by the employee or the company itself." Employment is a contract between the employer and the employee. It is normally terminated by either party, and strictly can not be terminated by a stranger to the contract. Clearly what is envisaged in the said stipulation is not who terminates the employment but rather "what causes termination of the employment". There can be no doubt in the instant case that the termination of the appellant's employment was caused by the Government decision to close down the respondent's offices.
The termination was therefore "caused" abnormally, even if it was "effected" normally through the letters of termination. The appellants were therefore entitled to the severance pay.
JUDGMENT OF TSEKOOKO, JSC:
I have had the benefit of reading in draft the judgment of Karokora, JSC, and I agree with his conclusions that the appeal should be allowed. I agree with the orders proposed by him.
JUDGMENT OF ODER - J.S.C.
I have had the advantage of reading in draft the judgment prepared by my learned brother Karokora, J.S.C. I agree with him that the appeal should succeed. I also agree with the orders proposed by him.
JUDGMENT OF ODOKI, CJ
I have had the advantage of reading in draft the judgment of Karokora, JSC
and I agree with him and the orders he has proposed.
As the other members of the Court also agree with the judgment and orders
proposed therein, this appeal is allowed with costs here
and in the Courts
below
Dated at Mengo this 12th day of March 2003
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