IN
THE HIGH COURT OF MALAWI

LILONGWE
DISTRICT REGISTRY

CIVIL
APPEAL CASE NO. 8 OF 2007

BETWEEN

NOEL
KABVALA & 87 OTHERS ……………..……… APPELLANTS

AND

AUCTION
HOLDINGS LTD ……………..………….. RESPONDENTS

CORAM : CHOMBO,
J.

: Salima,
Counsel for the Appellants

: Likongwe,
Counsel for the Respondents

: Mthunzi,
Court Reporter

: Msiska,
Court Interpreter

JUDGMENT

This appeal, by former employees of the respondent
company, arises after the appellants were retrenched and paid either
pension
or severance allowance (whichever was higher). The
appellants’ claim is that they are entitled to both pension and
severance
allowance and not one of the two.

The appellants sued the respondent in the Industrial
Relations Court for payment of the pension or severance allowance,
(whichever
was lower) which was not paid to them. The lower court
held that the respondent company, by that one payment, had discharged
its
legal obligations in respect of terminal benefits. The
appellants, not satisfied with that ruling now seek determination of
this
court on the matter. The respondent vehemently opposes the
appeal, contending, among other things, that section 35 of the
Employment
Act does not define “severance allowance” and that
payment of the terminal benefits made by it was inclusive of the
pension
and severance allowance. The respondent also contends that
the appellants were contented with the terminal benefits and that the

issue of unpaid benefits only raised its ugly head after the High
Court made its determination in favour of retrenched staff in
the
case of The State v Attorney General (Minister
of Labour and Vocational Training) exparte Mary Khawela and Six
Others, Civil Cause No. 7
of 2004 delivered
on 5 November 2004.

The wrangle between the appellants and the respondent
arises out of the interpretation of section 35 of the Employment Act
2000
and the Minister’s Employment Act (First schedule) (Amendment)
Order 2002. At this point it is necessary to quote the said
provision
in full. Section 35(1) 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”.
(Underlining supplied for emphasis).

There is no doubt that the legislator purposed that the
employee who finds his/her employment terminated, either by mutual
agreement,
or unilaterally, by the employer be entitled, as of right,
to severance allowance. The definition of severance allowance was
not
included in the said Act. The respondent’s contention is that
severance allowance includes pension and any other terminal benefits.

With respect I do not find this to be the case. My conviction is
strengthened on the grounds that the said section 35(1) gives

specific and particular way of calculating the said severance
allowance and provides the First Schedule as the means of calculating

it:

The First Schedule provides as follows:

Length of
Service Severance
Allowance Payable

Not
less than one year Two weeks wages for each

But
not exceeding ten completed year of continuous

Years. service.

Not
less than ten years. Four weeks wages for each

Completed
year of continuous

service.

According
to Halsbury’s Laws of England, 3^rd
edition Vol. 36 paragraph 585.

“If there is nothing to modify,
nothing to alter,
nothing to qualify the language
which a statute contains, the words and sentences must be construed
in their ordinary and natural meaning”. (Underlining
supplied for emphasis)

The words of section 35(1) as read with the words of
the First Schedule, in their natural meaning, do not say anything
about severance
allowance being an all inclusive terminal allowance.
As observed by Kamwambe, J.
in Chimpeni and Others and Chibuku
Products, Civil Cause No. 3225 of
2002.

“The import from section 35(1) is
that severance allowance is none negotiable,
it is not necessarily contractual as it will exist whether or not it
is included in the conditions of employment. It is a statutory

entitlement. Parties can choose to
provide or not for pension or gratuity in their employment contract.
This is why pension is a different animal
from severance allowance.
(Underlining supplied for emphasis).

According to the respondent,
payment of both severance allowance and pension gives unfair
advantage to employees eligible to pension
only. When this was
realized by the Minister responsible for labour issues. He sought to
normalize the situation by amending
section 35 in 2002.

The Minister, by section 35(2) of the Employment Act,
has power to effect certain amendments. The said section provides
that:

“The Minister may, in consultation with
organization of employers and organizations of employees, by notice
published in the Gazette,
amend the
first schedule” (Underlining supplied
for emphasis).

The product of the
Minister’s amendment was a second paragraph to the First Schedule
which reads as follows:

“No severance allowance shall be payable where an
employee is entitled to pension, gratuity or any other terminal
benefits which
exceeds severance allowance payable under paragraph 1
of this schedule:.

Good intentions as these were the said Minister
exceeded his powers in amending section 35(1). There is no doubt
that such an
amendment would cure a lot of ills but sad to say it was
the wrong authority to effect the amendment. The Minister’s powers
are limited to amending First Schedule only. Suffice to say that the
matter has been exhaustively dealt with in the said Khawela
case by Potani J. The
effect thereof is that section 35(1) as read with the First Schedule
still applies. I did note in Joe Ndema v
Leyland DAF (Malawi) Ltd, Civil Appeal
No. 36 of 2004 that Courts would continue to
apply the bad law until the appropriate authorities effect the
amendment.

The respondent contended that retrospective application
of section 35(1) would give rise to unfairness and injustice in that
the
respondent had, in deciding to retrench the appellants, relied on
the existing law. It must be born in mind however, that the
respondent made its decision based on a defective piece of
legislation and whichever way they argue the point the existing law
is and will continue to be section 35(1) as read with the First
Schedule until the same is effectively amended.

On a case of similar facts the Supreme Court in Leyland
DAF (Malawi) Ltd v Joe Ndema M.S.C.A.
Civil Appeal No. 3 of 2006 not only endorsed
the interpretation of section 35(1) as read with the First Schedule
in Joe Ndema v Leyland DAF (Malawi) Ltd but
went further to adopt with approval the calculation of the severance
allowance as follows:

“Secondly, it appears to us that section 35(1)
itself does profer a clue as to the determinant point in time the
salary or “four
weeks wages” must be used in calculating the
severance allowance. As we have noted the section includes the words
“at the
time of termination”. Reading the section through one
would be inclined to say that ordinarily the said words do not seem
to
add anything to the section. It is significant, however, that the
said words are there in the section and they must have been included

for a purpose; namely to indicate the salary or wages to be used in
the calculation of the severance allowance,---

We also take the view that it would be unfair and
unreasonable to base the severance allowance on past salaries or
wages considering
the steep depreciation of the Kwacha over the
years---”.

In my view all other questions raised by the respondent
have been adequately covered by the clarification herein.

In the circumstances, I find therefore that the appeal
must succeed and award costs to the appellants.

MADE in Court this 16^th
day of January, 2006.

E.J.
Chombo

J
U D G E