Urgent Chamber Application
UCHENA J: The applicant is
a company duly incorporated in terms of the laws of Zimbabwe. It
carries on the business of electrical engineering. The first
respondent was its employee. He was its Chief Executive Officer. He
tendered his letter of resignation on 8 February 2010.
The second respondent is the first respondent's company duly
registered in terms of the laws of Zimbabwe. It like the applicant
carries on the business of electrical engineering.
In terms of clause 16.1 of the applicant and first respondent's
contract of employment the first respondent is restrained from
competing with the applicant. Clause 16.1 provides as follows:
“You are required to devote
your attention at work to the affairs of A C Controls. You may not be
involved either directly or indirectly, during or after business
hours in any undertaking that is adverse to, prejudicial to or
competing with the interests of A C Controls. All business interests
must be declared at commencement of this appointment, and approval
for subsequent outside business interest must be obtained from the
Chairman.”
The first respondent believing he had resigned and was no longer
bound by clause 16.1, on 8 March 2010 wrote to Netone on behalf of
second respondent seeking to be put on its contractors list.
The request was brought to the applicant's attention by Netone.
Netone is the applicant's client. The first respondent in his
capacity as the applicant's CEO used to communicate with it on the
applicant's behalf.
The applicant believing the first responded was still its employee
filed this application to stop the first and second respondents from
competing with it. It sought a provisional order on the following
terms.
“(a) That the first and second
respondents are hereby interdicted from engaging in any business in
competition with the applicant.
(b) That the first and second respondents are barred from providing
any service to Netone.”
The applicant's counsel
submitted that the second respondent though not the applicant's
employee is being sued on the understanding that it is the first
respondent's alter
ego.
The respondents opposed the applicant's application raising the
defence that the first respondent is no longer the applicant's
employee, as he resigned from its employment on 8 February 2010.
This case depends on the interpretation of clauses 16.1 and 23.4 of
the applicant and first respondent's contract of employment, and
the determination of whether or not the first respondent's letter
of resignation dated 8 February 2010 terminated the employer/employee
relation which existed between the applicant and the first
respondent.
Mr Kampira
for the applicant submitted that clause 16.1 is still binding between
the applicant and first respondent because the first respondent in
spite of the purported resignation is still the applicant's
employee. He argued that the unilateral resignation violates the
terms of clause 23.4 of the contract of employment which reads as
follows;
“Where neither party is in
breach but termination is desirable, this shall be settled by mutual
agreement.”
Mr Rubaya
for the respondents
submitted that the relationship between the applicant and the first
respondent was terminated by the first respondent's letter of
resignation. He further submitted that resignation is a unilateral
act which need not be accepted by the employer. He further submitted
that there was breach of contract which led to the first respondent's
resignation.
Clause 16.1and 16.2
Clause 16.1, clearly deals with a situation where the employee is
still in the employer's employment. It does not extend to a period
after the employee's resignation.
Once the employer/employee relationship has come to an end it ceases
to be of any effect.
Mr Kampira
sought to argue that the first respondent is a director of the
applicant and a shareholder of its subsidiary, and is therefore by
virtue of those positions still barred from competing with the
applicant.
That argument is not tenable.
It does not fall within the terms of clause 16.1 and 16.2, and the
first respondent's acceptance of those positions has not yet been
agreed.
In his letter of resignation the first respondent sought to be
informed of the terms on which he was being offered those positions.
This means there is no agreement on those positions. The applicant's
argument cannot succeed because clause 16.1 does not restrain trade
for the first respondent's directorship, or his being a shareholder
of applicant's subsidiary and the agreement between the parties on
these appointments has not yet been finalized.
Clause 23.4
The applicant's counsel submitted that this clause was not
breached, and because there was no breach therefore the applicant's
letter of resignation did not terminate the contract of employment.
Mr Rubaya
for the respondents submitted that the first respondent's letter of
resignation clearly states that there was breach of contract and
specifies the aspects of the contract which were breached. He on p1
of the letter of resignation said;
“I also indicated that the
current revenue base does not allow the company to pay for my
family's (immediate and extended) needs and basic survival. Since
October 2009 I had to liquidate family assets to survive. I should
underline that I have no ill feelings on the company for this
situation. The business environment dictated the present situation.”
The letter of resignation is complaining of the applicant's failure
to meet its contractual obligations. The fact that he says he
understands the underlying reasons for the breach does not mean that
there was no breach.
In the circumstances the applicant breached the first respondent's
conditions of service, resulting in his having to liquidate his
family assets to survive. Applicant cannot in these circumstances be
heard to say that there was no breach and the first respondent had to
resign by mutual agreement in terms of clause 23.4. The first
responded was entitled to resign in the manner he did because there
was a breach of contract by the applicant.
Notice
The first respondent resigned without giving the applicant notice. He
in para 4 of his opposing affidavit states:
“I am no longer an employee of
the applicant company since I resigned from my post as its Chief
Executive Officer on the 8th
of February 2010, and the applicant's representative had knowledge
of the resignation as from the 9th
February 2010.”
The letter of resignation in the first paragraph states:
“I hereby formally advise that
I am resigning from the position of Chief Executive of A C Controls
with effect from 8 February 2010”.
The letter is dated 5 February 2010, and the first respondent says
the applicant's representative became aware of it on 9 February
2010. There was therefore no notice at all, and this was a unilateral
termination of the contract of employment.
If a contract of employment can be terminated unilaterally the first
respondent is now free to compete with his former employer the
applicant as clause 61.1 is restricted to the period during which he
was under the applicant's employment. On the other hand if a
contract of employment cannot be terminated unilaterally then the
first respondent is still the applicant's employee and cannot
compete with his employer the applicant until the contract of
employment is properly terminated.
The resignation
Mr Rubaya
for the respondents submitted that resignation is a unilateral act,
which entitles the employee to terminate the contract of employment
without the consent of the employer. Mr Kampira
for the applicant submitted that resignation does not terminate the
contract until it is accepted by the employer.
I agree with Mr Rubaya's
submission that an employee's resignation unilaterally terminates
the contract of employment. His submission is supported by the
decision of this court in the case of Muzengi
v Standard Chartered
Bank & Anor 2000
(2) ZLR 137 (HC) were it was held that a letter of resignation
constitutes a final act of termination by an employee, the effects of
which he cannot avoid without the permission of the employer.
This means once the employee
tenders a letter of resignation to his employer, the contract of
employment is terminated as the employer cannot refuse to accept his
resignation, but can only agree to the employee's withdrawal of his
resignation if he is inclined to doing so. The employer can however
institute a claim for the damages he may suffer as a result of the
employee's resignation without giving him adequate notice. See also
the case of Mudakureva
v Grain Marketing Board
1998 (1) ZLR 145 (SC) were the Supreme Court confirmed the finality
of a letter of resignation pointing out that the employee could only
have avoided it by proving that the employer forced him to resign,
and thereby turning it into a constructive dismissal.
In the result the first respondent's unilateral resignation
terminated the contract of employment which existed between him and
the applicant.
In view of the termination of the
contract of employment the first respondent is no longer bound by
clause 16.1 of the contract of employment. It therefore follows, that
the second respondent whom the applicant sought to restrain on the
basis of its being the alter
ego
of the first respondent, cannot be bound by a contract which no
longer binds the first respondent.
The applicant's application is therefore dismissed.
The applicant shall pay the respondent's costs.
Chinamasa, Mudimu, Chinogwenya & Dondo, applicant's
legal practitioners
Nyamushaya, Kasuso & Rubaya, 1st
and 2nd respondents'
legal practitioners
