Malawi Judiciary

IN THE MALAWI SUPREME COURT OF APPEAL

SITTING AT BLANTYRE

CIVIL APPEAL CAUSE NO. 59 OF 2013

(Being High Court Civil Case No 74 of 2011)

BETWEEN:

AIRTEL MALAWI LIMITED                                                               APPELLANT

AND

EDWARD KOMIHA AND 37 OTHERS                                            RESPONDENTS

CORAM:         HONOURABLE JUSTICE E.B. TWEA, SC JA

                        HONOURABLE JUSTICE DR J.M. ANSAH, SC JA.

                        HONOURABLE JUSTICE R.R. MZIKAMANDA, SC JA.

Maliwa and Chalemba (Mrs)                            Counsel for the Appellant

Kusiwa                                                                 Counsel for the Respondent

Minikwa                                                               Recording Officer

JUDGMENT

Twea SC, JA

In this case the respondents, 38 of them, are former employees of the appellant company. The appellant underwent reorganisation. The respondents were, as the result thereof, declared redundant between April 2009 and June 2009 .

The respondents filed a case of unfair dismissal in the Industrial Relations Court, and also claimed enhanced terminal benefits. The court heard both parties. It found that the respondents were consulted about the reorganisation, that the Ministry of Labour and Vocational Training was properly notified and had no objection to the reorganisation and the processes thereof. It gave judgment in favour of the appellant.

The respondents were dissatisfied with the judgment and appealed to the Court below. The Court below found that although the notification to the Ministry of Labour and Vocational Training was procedural, the respondents were not adequately consulted and had not been given sufficient notice on the retrenchment. It therefore found that the respondents were unfairly dismissed.

The appellant now appeals to this Court against the judgment of the Court below.

The appellant filed three grounds of appeal. We reproduce them;

"1. The lower Court erred in holding that the termination of the respondents' employment amounted to unfair dismissal for want of adequate consultation by the appellant;

2.    The lower Court erred in holding that the exigencies of the Appellant's business did not justify the length of notice accorded the respondents.

3.      The lower Court erred in holding that the procedure adopted by the appellants in terminating the Respondents employment fell short of the legal requirements regarding retrenchment."

These three grounds of appeal can actually be summarised into one; that is "that the termination of the respondents did not meet the legal requirements on declaring redundancies on the grounds of inadequate consultation and notice". This therefore, is how we will approach this appeal.

It is important to mention at the outset that this appeal must succeed.

We premise our judgment on the fact that the Court below based its judgment on its analysis of the appellant' Exhibit RP 2, the so called "MBM Employee related Execution Guideline and Requirements." This is a document that was produced by the appellant in consultation with its International Group to guide the implementation of what was called the "Modular Business Model" being implemented within the group. The Judge in the Court below was ambiguous in its interpretation of this document. After his analysis of local cases on consultation: Malawi Telecommunications Ltd v Makande and Another [2008] MLLR 35 and Chikadya v Sunbird Tourism Ltd and Another IRC matter No 141 of 2001 , he said:

"it should thus be pointed out that RP 2 therefore represents an incorrect statement of the case law on employment matter in Malawi [...] the decision of the lower Court was not supported by the evidence and further that it was erroneous to conclude that the respondent adopted the correct procedure in implementing the redundancies."

However, after he discussed Articles 13 and 14 of the International Labour Organisation (ILO) Convention 158, which are embodied in the cases cited above, the Judge said:

"When viewed in light of the above provisions this court is unable to find fault with the measures taken by the Respondent to inform the responsible Ministry. The level of detail in the relevant correspondence as well as the assent of the Ministry to the process attests to the proposition that Article 14 of Convention 158 was substantially compiled with. Nonetheless it is worth highlighting that because of its own misapprehension of the nature of employee engagement required under Article 13, the respondent inadvertently misinformed the Ministry of Labour to that extent. However, in light of all the evidence on the record that oversight would not significantly diminish the overall importance the respondent clearly attached to its obligation to inform the ministry as the competent authority in this context. The second ground of appeal must therefore fail. The law does not contemplate a higher burden on the employer than the duty to inform in good time (which our law does not stipulate) of the reasons for the proposed terminations the categories of workers affected and the numbers to be terminated as well as the period of implementation".

The "MBM Guidelines and Requirements" of the appellant apparently engendered Articles 13 and 14 of the ILO Convention 158 and the requirements of Malawi labour laws in so far as the appellant could determine. It is therefore clear to us, and this is also clear from the judgment, that the Court below only found fault with the consultative process that the appellant had with the respondents. Accordingly, we will, in determining this appeal, concern ourselves only with the adequacy of the consultation and notice period. We must mention here that we are aware of the views of this Court in the case of First Merchant Bank Limited v Eisenhower Mkaka and 13 others MSCA Case 53 of 2013, which held that section 57 (2) of Employment Act does not oblige an employer to consult employees on reorganisation. We refrain from commenting on this for now.

We have taken time to examine the judgment of the Court below. We wish to acknowledge that the Judge carefully examined the submissions of counsel and took time to come out with the judgment. The Judge, as usual, was very analytical and erudite in his Judgment. However, it is our view that his analysis of the consultative process and notice were negatively affected by his default to examine the facts in the light of the nature of the appellant and the circumstances obtaining in this case.

We begin from where the Judge started to analyse the judgment of the trial court.

After the Judge had dealt with objections to the appeal, on grounds of section 65 (2) of the Labour Relations Act: that is that, the appeal to the Court below should have been dismissed because it was based on facts rather than law, the Judge said:

"Now let me address the grounds of appeal as outlined earlier. The law requires the employer to justify any dismissal (see section 61(1) of the Employment Act). In the present case it has been contended that the redundancies were necessary for economic and operational requirements of Zain (now Airtel Malawi Ltd). These requirements were outlined in the document which showed that all Zain affiliates in Africa as well as the Middle East were implementing the Modular Business Model (MBM) which necessitated a retrenchment of staff in sections which would thence forth be outsourced. Having studied the case closely, it remains my courts' firm conviction that the critical question in this appeal revolves around whether that reorganisation initiative was implemented in compliance with relevant labour laws and practices, especially as regards to the twin issues of employees consultation and notification to competent government authorities respectively''.

It is clear to us that the Judge recognised that the appellant is a multinational company. This is also confirmed by his reference to the appellant's Exhibit RP2 at page 5 of the judgment. A Multinational Company is a combination of companies of different nationality connected by means of shareholding, managerial control or contract and constituting an economic unit[1]”. The general characteristics of multinational companies are:-

"1. they extend production and marketing across national frontiers normally through foreign subsidiaries or joint ventures;

2.     . they are large in size;

3.     they tend to have centralised management and integrated production and marketing[2]".

Having acknowledged that the appellant is a multinational company, the Judge misdirected himself when he, at page 5, said:

"In essence the decision was taken to outsource certain services in order to allow Zain focus on its core business, selling of airtime. It would be stretching the truth to propose that the appellants would have had any significant influence in that policy direction of the business entity. Whatever information was shared, therefore, could not produce any significant consultation."

And again, at page 7, he found that:

"[...] at that stage the evidence shows that in fact a strategic decision had already been taken in all Zain affiliates to reorganise the business model by letting go of non-core services, which included the appellants. No amount of engagement could alter that strategic course of action."

This was stating the obvious in respect of strategic decisions of multinational companies. However, the conclusion that he came to was wrong. It is clear from Exhibit RP1 that the decision of the Zain Group to change their model of operation in Africa and the Middle East was influenced by the positive results of the "Modular Business Model" that was successfully piloted in Saudi Arabia. Be this as it may, the Modular Business Model for Malawi, Exhibit RP2, was developed locally in collaboration with the Zain Group and management of Zain operations. We are convinced that had the Judge taken time to examine RP1, he would not have come to the conclusion that all was lost for the appellant employees in Malawi. It is clear that the Zain Group made the decision to reorganise. However, how this was to be effected, in Malawi, was up to Zain Malawi as long as it followed the global MBM guidelines, within the local circumstances.

Before we go further, we think it is important to point out, from the outset, what the reorganisation was intended to achieve in so far as the Zain Group, the management of Zain operations and the Malawi office were concerned. This is contained in Exhibit RP1. The Zain Malawi Managing Director summarised it as follows:

"In summary the key elements of the Modular Business Model are:

-     Enabling the operations to focus on core customer facing and commercial activities;

-     Centralisation of capacities in order to maximise economies of scale and hence realise significant efficiencies and cost savings; and

-    Outsourcing various activities to strategic partners, providing the outsourced Zain employees with new training and development possibilities, whilst still remaining part of the larger Zain family''.

It is clear from the judgment of the Court below that outsourcing of various activities had been over emphasized at the expense of the other objectives. These objectivities were to be achieved over a period of time. It is significant to mention that the respondents did not dispute that, at the time that they received notices of redundancies, the appellant had already outsourced cleaning services. It was equally admitted and also acknowledged, by the Judge in the Court below, that the two witnesses for the respondents were employed by and were part of the strategic partners developed and trained by the appellant. It is clear that the strategy was to create, develop and capacitate autonomous partners from the pool of human resources that the appellant had. It was anticipated however, that whenever need arises the appellant could tap from their strategic partners to fill gaps. These strategic partners although autonomous, were a reservoir of skilled human resource trained and developed by the appellant and therefore a part of the "larger Zain family".

Let us now come back to the effect of the Zain Group decision to reorganise.

It is our view that the Judge correctly summarised that the reorganisation was inevitable. He stated, at page 7-8, as follows:

"If the IRC had analysed the staff comments from the meeting of 7th April, 2009 (RP3A) it should have been able to ascertain that they reflect an element of acceptance that the processes is inevitable and the people simply wish to have their fears about the implementation of MBM allayed. Put another way, the evidence established unequivocally that by the time of the purported consultation a decision had been made that "the needs of Zain as a business" could best be served by implementing that new model."

Be this as it may, the conclusion that the Judge arrived at, that those affected therefore, could not have benefited, at all, from any consultative process, cannot be supported on the facts. This is clear from the very next paragraph. He said:

"However, where redundancies are inevitable, the other purpose of consultation is to explore agreeable measures to mitigate the hardship occasioned on employees."

In the paragraph after that he highly commended the appellant for training and developing business entities for the employees that were laid off. The Judge therefore, was aware of this element of the consultative process during any reorganisation of a company which may result in some employees being declared redundant. We are further fortified in this because he referred to it in his judgment; at page 7 he said:-

"Furthermore the Chikadya (Supra) decision adopted the position enunciated in Fred-Bentall Ltd [1982] I RLR 443 EAT to the effect that 'consultation is one of the foundation stones of modern industrial relations practice. In the particular sphere of redundancy, good industrial practice in the ordinary case requires consultations with the redundant employees so that the employer may find out whether the needs of the business can be met in some other way than by dismissed and if not, what other steps the employer can take to ameliorate the blow to the employee' (emphasis supplied)."

Clearly he only put emphasis on the first limb of a consultative process. We are confident that had he addressed his mind to the second limb he would have come to a different conclusion on the facts.

It is our view that had the Judge not allowed himself to be influenced by the apparent definitions of "consultation" in the cases of MTL v Makande (Supra) and Chikadya v Sunbird Hotels Limited (Supra), he would have avoided viewing adequacy of consultation in terms of a particular time span.

It is our opinion therefore, in the circumstances, that the Judge should have equally directed his mind to the second limb of what amounts to consultation. We have in mind the case of Dr Bakili Muluzi and Another v The State and Another [2008] MLR 68 wherein Potani J cited the case of Fletcher v Minister of Town and Country Planning [1 947] 2 ALL ER 496 at page 500 where Morris J said:

"The word consultation is one that is in general use and that it is well understood. No useful purpose would, in my view, be served by formulating words of determination. Nor would it be appropriate to seek to lay down the manner in which consultation must take place. [...] If a complaint is made of failure to consult, it will be for the court to examine the facts and the circumstances of the case and to decide whether consultation was in fact held."

Potani J, also cited the case of Re Hanoman (Carl) [1999] 65 WLR 157, wherein the court said:

"However, modern trends indicate that the consultation process embraces more than just affording an opportunity to express views and receive advise. It involves meaningful participation and overall fairness and although it inevitably involves the exercise of discretion, inherent in that discretion is the obligation to act fairly and reasonably within the boundaries of the statute authorising the exercise of discretion".

In the present case, the evidence of appellant's witness, Beston Ndhlovu, was clear. The management team met in Mangochi in February, 2009. They formed a management team to look into the restructuring. It is also on record that they came up with a "JCC." What the JCC was, was not explained by either of the parties. However, it is the undisputed evidence that the JCC was mandated to explain the reorganisation to the rest of the staff. It was further not disputed that most of the consultations with the employees were done by the JCC.

The first witness for the respondents, Edward Fredrick Komiha, clearly admitted that he was informed of the redundancies through consultative meetings. This was in spite of him not attending management team consultations, because he was a mere driver. The second witness, Fanwell Mac Donald Nkomba, also told the court that his evidence was the same as that of his colleague: Komiha. However, he said he would add, in his evidence, to speak of the second phase of redundancies. Although he told the court that he got his notice of job changes on 28th June and his letter of redundancy the next day, he did not dispute that he attended consultative meetings. All in all, there is no dispute that there were consultations through the management team and the JCC. Further , it is not disputed that all members of staff , those that were declared redundant as well as others, at various levels, had chance to participate and raise questions. Yes, this Court acknowledges that the consultations were not about whether or not there should be reorganisation; this was done at Group level. The consultations were about how the reorganisation would be effected, who would be affected and what would be the future of those that would be laid off. The consultations were at sector level and also one on one. We have not found any evidence that supports the Judge's finding that the one on one consultations were a sham. It is our finding therefore, that there were adequate consultations.

The only thing left for us now, is to decide whether lack of notice was fatal.

We note that the Court below did not avail itself of the Employment Act. Notice period is a matter of contract. However, where the work relationship does not stipulate the notice period, the Employment Act, sections 28 and 29, provide the appropriate notice period and the mode of terminating the employment relationship. Further section 30 of the Employment Act, provides that an employer or employee may waive notice in lieu of payment. The Judge in the Court below did not consider this. We find no compelling reason for ignoring section 30 of the Employment Act and resorting to Article 2 of the ILO Convention 158 as the Judge did.

In the present case, the appellant declared risk of sabotage as justification for not giving the normal notice period to those that would be affected. The Ministry of Labour accepted the justification and approved the re-organisation. The approval by the Ministry of Labour was subject to payment of necessary compensation. The respondents did not dispute that they received payment in lieu of notice period upon discharge. It is our view, that they exercised their right to waive the notice period in lieu of payment in accordance with section 30 of the Employment Act. This ground of appeal must succeed. We find therefore, that non-observance of the notice period did not violate the rights of the employees in the circumstances.

In our judgment therefore, this appeal must succeed in its entirety. We hereby set aside the judgment of the Court below and re-instate the judgment of the trial court; that the termination of employment by way of redundancies was substantively and procedurally fair.

Costs are in our discretion. It is our view that had the respondents been properly advised they would not have appealed to the Court below. We order each party to bear its costs.

Pronounced in open Court this 26th day of May, 2016 at Blantyre.

Signed           _________________________________________

THE HONOURABLE JUSTICE E B TWEA, SC JA

Signed:           ________________________________________

THE HONOURABLE JUSTICE DR J M ANSAH, SC JA

Signed:        __________________________________________

THE HONOURABLE JUSTICE R R MZIKAMANDA, SC JA

[1] Farrari's Company Law 2nd ed. Butterworth, 1988, p. 650

[2] Ibid page 649