PATEL
JA: This
is an appeal against a judgment of the
Labour
Court
dismissing
an
appeal
against
an
award
rendered
by
an
arbitrator.
That
arbitral
award
quantified the damages payable to the appellant pursuant to an
earlier award ordering his reinstatement into the service of the
respondent.
Background
The
respondent is a statutory body established under the Agricultural and
Rural Development Authority Act [Chapter
18:01].
The
appellant was employed by the respondent in January 2008 as its Chief
Executive Officer cum
General
Manager.
On
26 February 2009 he was sent on special leave and on 19 May 2009 he
was notified by the respondent of its decision to terminate his
employment.
The
matter was then referred to an arbitrator.
On
26 January 2010 the arbitrator found that the appellant had been
unlawfully dismissed and ordered his reinstatement
with
effect
from
the
date
of
his
purported
dismissal.
Thereafter,
negotiations
for reinstatement having failed, the matter was again referred to the
arbitrator.
On
27 October 2010 the arbitrator quantified his award for damages in
lieu of
reinstatement. He based his award on a monthly salary of US$1,009 in
accordance
with
documentary
evidence
furnished
by
the
respondent.
He
then
ordered
the
respondent
to
pay
the
following
amounts:
$
19,384
as
back-pay
and
benefits
from
the
date
of
dismissal
to
the
date
of
his
first
award;
cash
in
lieu
of
leave;
$60,540
being
sixty
months
salary
as
damages
for loss of employment; a further $60,540 being sixty months salary
as punitive damages for failure to reinstate; and interest at the
prescribed rate on all of these
amounts.
The
appellant,
being
dissatisfied
with
the
arbitrator's
award,
appealed
to
the
Labour
Court on several grounds pertaining to the question of his
reinstatement, the date of termination of his employment, his correct
monthly salary and his entitlement to contractual benefits. The
respondent in turn cross-appealed, defending the propriety of its
decision
not to reinstate the appellant, and challenged the arbitrator's
award of punitive damages
and his failure to deduct certain amounts allegedly owed by the
appellant to the respondent.
Decision
Appealed
The
court
a
quo
dismissed
the
appeal
and
partially
allowed
the
cross-appeal
for the following reasons.
It
found,
having regard to the relevant correspondence, that the possibility of
reinstatement was
not part of the arbitrator's mandate. The
effective date of termination of employment was 4 February 2010, when
the respondent opted to pay damages, and not when the Labour Court
ruled against the
appellant's reinstatement.
The court also found that the arbitrator's
reliance on a monthly salary
of $1,009 was based on irrefutable evidence and more in accordance
with reason, as compared with the figure of $5,000 claimed by the
appellant.
As
regards the
appellant's claim for contractual benefits, no
documentary or other evidence was placed before the arbitrator to
substantiate that claim.
Again,
his claim for punitive damages was neither placed before the
arbitrator nor substantiated by any supporting evidence.
Similarly,
the respondent's claim to deduct certain
amounts owed by the appellant was not raised before the arbitrator.
In
the event, the court a
quo
dismissed
the appeal and allowed the cross-appeal to the extent of setting
aside
the arbitrator's award of punitive
damages.
The
issues
raised
in
the
notice
of
appeal
herein
are
largely
identical
to
those
before the Labour Court and may be summarised as
follows:
(i)
Whether
the
question
of
reinstatement
was
an
issue
before
the
arbitrator,
in
addition
to the quantification of damages in
lieu
thereof.
(ii)
What was the effective date of termination of employment? (This issue
was not pursued by counsel for the appellant and appears to have been
abandoned).
(iii)
What was the correct amount of the appellant's monthly
salary?
(iv)
Was the appellant entitled to his claim for contractual
benefits?
(v)
Whether the claim for punitive damages was properly before the
arbitrator and correctly awarded by
him.
Reinstatement
and Quantification of
Damages
At
the
hearing
of
this
matter,
Adv.
Girach,
for
the
appellant,
largely
focused
his argument on the question of reinstatement.
He
submits that damages are only payable if
reinstatement is not tenable. This is not a matter for the employer's
election but,
as envisaged
in
sections
89(2)(c)
and
97(2)
of
the
Labour
Act
[Chapter
28:01],
a
matter
of
fact
to
be alleged and proved by the employer.
There
must first be an inquiry as to whether reinstatement
is
no
longer
tenable
and
the
employee
remains
employed
until
that
inquiry
is
finalised.
Despite
the
appellant's
submissions
on
this
point,
the
arbitrator
proceeded
on
the
basis
that he was only dealing with quantification.
Similarly,
although this was raised before the court a
quo,
it misdirected itself in not upholding this ground of appeal.
The
matter should therefore be remitted to that court to determine this
question.
Adv.
Uriri,
for the respondent, submits that section 89(2)(c) of the Act does not
give
the
Labour
Court
the
power
to
order
reinstatement
without
damages.
The
same
applies
to an arbitrator by virtue of section 98(9).
The
alternative of damages in
lieu
of
reinstatement must
be
stipulated.
This
codifies
the
common
law
position
enunciated
in
Hama
v
National
Railways of Zimbabwe
1996
(1) ZLR 664
(S).
For
the purposes of this case, it only becomes necessary to consider and
interpret the provisions of the Act adverted to by counsel, if it is
found that the question of reinstatement was properly and squarely
before the arbitrator in the first instance. If it
was
not, there would be little point in embarking on an abstract and
academic exercise of no present
significance.
In
addressing this aspect, it is necessary to consider the relevant
correspondence between the parties legal practitioners.
This
shows that on 4 February 2010 the respondent opted to pay damages in
lieu
of
reinstatement because
“reinstatement
is no longer tenable given the clear irretrievable breakdown of the
relationship between the parties”.
It
took the position that “the only course that remains open is the
quantification of
damages”.
The
appellant's
lawyers
replied
without
prejudice
on
8
February
2010.
They
did
not
challenge
the
respondent's
assertion
of
irretrievable
breakdown,
but
instead
noted
“that
your client is not willing to have ours reinstated. This then brings
us to the issue of damages”.
They
then indicated that their client's proposals on damages would be
served shortly and that, in the meantime, the respondent should pay
all of the appellant's back-pay
and
benefits
up
to
4
February
2010
“when
you
made
an
election
that
our
client
would
not be
reinstated”.
There
followed
further
correspondence
without
prejudice
between
the
legal
practitioners extending from February to May 2010.
This
evinced marked disagreement between the parties as
to the appellant's monthly
salary and, consequently, his
entitlement
to back-pay and benefits as well as the quantum
of
damages payable in
lieu
of
reinstatement.
Eventually,
by letter dated 24 May 2010, the appellant made a stark turnabout and
disagreed that reinstatement was no longer an option. In the absence
of agreement between the parties, he called for the matter to be
referred to the arbitrator for adjudication.
It
is clear from the foregoing that the appellant had initially accepted
the respondent's
election
and
taken
the
position
that
his
reinstatement
was
not
in
issue.
He
was
perfectly
happy
to
proceed
with
the
matter
on
the
basis
that
his
entitlement
to
the
payments
due be quantified, either by agreement or by arbitration.
The
fact that this position was taken
in
a
letter
written
without
prejudice
does
not
detract
from
its
significance.
The
ambit
of
protection from the admissibility of evidence conferred by the
“without prejudice” rule is
not unqualified.
Thus,
an admission made in correspondence without prejudice is admissible
where the facts sought to be established thereby do
not
relate to the substance of the negotiations contained in such
correspondence. See Naidoo
v
Marine
& Trade Insurance
Co
Ltd
1978
(3)
SA
666
(A)
at
678H-670A
and
the
authorities
there
cited.
In
the
instant case, what was being negotiated without prejudice by the
parties was not the appellant's
reinstatement but his back-pay
and benefits and the quantum
of
damages payable in
lieu
of
reinstatement.
The
appellant only resuscitated the question of reinstatement over three
months later when the negotiations between the parties failed to
produce any definitive
agreement.
There
is a further and more important aspect of this case that must be
considered
in
relation
to
the
events
preceding
the
second
arbitration.
On
14
July
2010,
both
parties
received
the
arbitrator's
notification
to
attend
arbitration
proceedings
in
“the
matter
concerning quantification of damages in lieu of reinstatement”.
On
the date scheduled for the hearing, i.e.
21
July 2010, the appellant's legal practitioners wrote to the
arbitrator seeking
a
postponement
of
the
hearing
because
the
lawyer
handling
the
matter
was
engaged
in
a
continuing
trial.
The
arbitrator
proceeded
to
hold
a
pre-arbitration
hearing
on
the
same
date and issued an interim order setting out the timelines for the
filing of submissions by the
parties
and
a
fresh
date
for
the
hearing
of
the
matter.
Paragraph
1
of
this
order
explicitly
stated that:
“the
Claimant shall file his submissions on quantification of damages in
lieu
of
reinstatement with the Arbitrator……..”.
Subsequently,
the arbitrator issued a further notification to the parties to attend
arbitration proceedings on 26 August 2010, again in “the matter
concerning quantification of damages in lieu of
reinstatement”.
As
is evident ex
facie
the
interim order, the pre-arbitration hearing was attended
by the claimant (the appellant) in person and by the respondent's
counsel and instructing
legal practitioner.
The
written order itself appears to have been acknowledged as having been
received by both parties on 23 July 2010.
It
is abundantly clear from all of the foregoing that the appellant and
his legal practitioners were fully aware of the purpose of the
arbitration proceedings in question and the sole issue for
determination by the arbitrator,
i.e.
the
quantification of damages in
lieu
of
reinstatement.
Despite
that awareness, they did nothing to disabuse the arbitrator or the
respondent of the notion that this was the sole issue for
determination. Nor did they take any steps to have the interim order
revised to incorporate the question of reinstatement.
In
these
circumstances, the arbitrator cannot be faulted for having
disregarded that question in the proceedings before him and in the
terms of the award that he rendered. By the same token, the
court
a
quo
cannot
be found to have misdirected itself in holding that the arbitrator
did not err in confining himself to the issue of quantification of
damages and that he had no mandate to consider whether or not
reinstatement was still
possible.
In
the premises, I find that the question of reinstatement was not an
issue before
the
arbitrator,
in
addition
to
the
quantification
of
damages
in
lieu
thereof.
In
the
light
of this finding, as I have already stated, it becomes unnecessary to
address the larger question as to whether the viability of
reinstatement must first be determined before proceeding to consider
the alternative of damages.
In
any
event, it follows that the first ground of appeal cannot be sustained
and must accordingly
fail.
Correct
Monthly Salary and Contractual
Benefits
In
his submissions before the arbitrator and the court a
quo
the
appellant's position
was that his salary before the termination of his employment was in
the region of US$5,000.00
per
month.
Both
the
arbitrator
and
the
court
rejected
this
position
and
adopted
the figure of US$1,009.00 as the basic monthly salary, having regard
to the documentary evidence adduced by the
respondent.
At
the hearing of this appeal, Adv. Girach
did
not, quite correctly in my
view,
pursue
the
grossly
inflated
figure
initially
contended
for
by
the
appellant.
Instead,
he
submitted that the figure that should have been used in assessing
damages is not the basic salary of US$1,009.00 but the net salary of
US$1,032.54 as appears from the monthly computation presented by the
respondent.
Adv.
Uriri
did
not challenge this position and I see no basis for disallowing the
amount of US$1,032.54 as the net monthly salary for the purpose of
calculating the terminal payments due to the
appellant.
Insofar
as concerns the contractual benefits payable to the appellant, these
appear from his letter of appointment, dated 7 November 2007,
enumerating the multifarious allowances and benefits offered to him
as part of his total remuneration package.
Adv.
Girach,
in his submissions, confined himself to the housing allowance, being
20% of basic monthly salary, and professional and club membership
allowance, being 2% of annual
salary.
Having
regard to the amounts reflected in the monthly computation that I
have alluded to above, it is clear that the housing allowance of 20%
was already factored into
the appellant's pay structure in arriving at his net monthly
salary. However,
the professional and club membership allowance was omitted and must
obviously be incorporated in calculating the contractual benefits due
to the
appellant.
In
the premises, I find that the sums payable to the appellant (in
respect of backpay and benefits, cash in
lieu
of
leave and damages for loss of employment) as quantified
by
the
arbitrator
and
endorsed
by
the
Labour
Court,
are
to
be
recalculated
on
the
basis of a monthly salary of US$1,032.54 (as opposed to US$1,009.00)
and with the addition of 2% of annual salary for the professional and
club membership
allowance.
Claim
for Punitive
Damages
The
basis for awarding punitive damages to the appellant was justified by
the
arbitrator
as
being
the
respondent's
refusal
to
reinstate
the
appellant
without
proffering
any
reason
for
its
refusal.
In
so
doing,
the
arbitrator
relied
on
the
discretion
conferred
upon
him
by
proviso
(iii)
to
section
89(2)(c)(iii)
of
the
Labour
Act.
He
accordingly
awarded
punitive
damages equivalent to 60 months salary, over and above 60 months
salary as damages in
lieu
of
reinstatement.
Adv.
Girach
submits
that the arbitrator correctly exercised his discretion in this regard
and that the court a
quo
erred
in overruling the arbitrator on the ground that the appellant had
failed to prove the exact quantum of punitive
damages.
Adv.
Uriri
counters
that the Labour Court correctly set aside the award of punitive
damages.
He
submits that punitive damages under proviso (iii) are only payable
where the order made relates solely to damages as opposed to an order
for reinstatement and damages in
lieu
of
reinstatement. In any event, a claimant for punitive damages must
substantiate such damages and the court a
quo
correctly
rejected the appellant's claim as it
had not been adequately
substantiated.
In
awarding
punitive
damages,
the
arbitrator
sought
to
reinforce
the
primacy
of
reinstatement
as
the
most
appropriate
remedy
for
unlawful
dismissal.
He
considered
that
the respondent had expressly refused to reinstate the appellant
without giving any cogent reason why reinstatement was not possible.
This stance could not be condoned and it was for that reason that he
decided to award punitive damages over and above damages in
lieu
of
reinstatement,
in
order
to
protect
the
primary
remedy
of
reinstatement
from
being
eroded
by errant employers like the respondent.
In
setting aside the award of punitive damages, the
Labour Court did not specifically address the arbitrator's
reasoning per
se
but
proceeded on the basis that the appellant had failed to adduce any
evidence to
substantiate
his claim for punitive
damages.
Section
89(2) of the Labour Act, in its relevant portions, provides as
follows:
“(2)
In the exercise of its functions, the Labour Court
may
—
(a)…………….;
(b)…………….;
(c)
in the case of an application made in terms of subparagraph (ii) of
subsection (7) of section ninety-three,
make an order for any of the following or any other appropriate
order
—
(i)
back
pay
from
the
time
when
the
dispute
or
unfair
labour
practice
arose;
(ii)
in the case of an unfair labour practice involving a failure or delay
to pay or grant anything due to an employee, the payment by the
employer concerned to the employee or someone acting on his behalf of
such amount, whether as a lump sum or by
way
of instalments, as will, in the opinion of the Labour Court,
adequately compensate the employee for any loss or prejudice suffered
as a result of the unfair labour
practice;
(iii)
reinstatement or employment in a
job:
Provided
that
—
(i)
any such determination shall specify an amount of damages to be
awarded to the employee concerned as
an
alternative to his reinstatement or
employment;
(ii)
in deciding whether to award damages or reinstatement or
employment,
onus
is
on
the
employer
to
prove
that
the
employment
relationship
is
no
longer
tenable,
taking
into
account the size of the employer, the preferences of the employee,
the situation in the labour market and any other relevant
factors;
(iii)
should damages be awarded instead of reinstatement or employment as a
result of an untenable working relationship
arising
from
unlawful
or
wrongful
dismissal
by the employer, punitive damages may be
imposed;
(iv)
insertion into a seniority list at an appropriate
point;
(v)
promotion
or,
if
no
promotion
post
exists,
pay
at
a
higher
rate pending
promotion;
(vi)
payment of legal fees and
costs;
(vii)
cessation of the unfair labour
practice;
(d)…………….;
(e)……………..”
My
reading of provisos (ii) and (iii) to section 89(2)(c)(iii) is that
different considerations apply under these provisos in determining
the untenability of the employment
relationship
in
question.
Where
the
question
to
be
decided
is
whether
to
award
damages or reinstatement, the onus is on the employer to prove such
untenability, taking into account the size of the employer, the
preferences of the employee, the situation in the labour market and
any other relevant factors.
These
criteria relate to the practicability of reinstatement and the
continuation of the employment relationship as assessed from an
objective economic or commercial standpoint.
However,
once it is decided that reinstatement is no longer feasible by dint
of any one or more of the specified factors and that damages should
be awarded instead, the sole criterion to be applied is whether the
untenable employment relationship arose from the unlawful or wrongful
dismissal of the employee by the employer.
What
is relevant at that stage
is the employer's fault in the manner
or circumstances in which he dismissed the employee and the extent of
his blameworthiness
in
causing
the
irretrievable
breakdown
of
the
employment
relationship.
It
is
only in this situation that the question of punitive damages comes
into play and where the discretion to award such damages may be
exercised in order to penalise the employer for his culpable
conduct.
Furthermore,
proviso (iii) to section 89(2)(c)(iii) does not, in my view, envisage
the award of double damages, i.e.
punitive
damages in addition to damages in
lieu
of
reinstatement.
Rather,
what may be imposed is an award of damages in
lieu
of
reinstatement that is punitive in nature and effect. In other words,
what is contemplated is a single award of punitive damages that
exceeds what would ordinarily be awarded as damages in
lieu
of
reinstatement, i.e.
in
the absence of any aggravating circumstance occasioned by the manner
in which the employer dismissed the
employee.
It
follows from the foregoing that the arbitrator in
casu
misconceived
the basis and scope of his discretion under proviso (iii) to section
89(2)(c)(iii).
He
relied upon the respondent's
refusal to reinstate the
appellant rather than the untenability of the employment relationship
arising from the dismissal of the appellant. He thereby applied the
wrong
test
and
consequently
misdirected
himself
in
that
regard.
Moreover,
he
also
erred
by awarding punitive damages in addition to damages in
lieu
of
reinstatement.
Finally,
there is the ground that was quite correctly relied upon by the court
a
quo
for
reversing the arbitrator's award of punitive damages, i.e.
the
absence of any evidence in computing those damages in the sum of
US$60,540.00 equivalent to 60 months salary.
The
arbitrator appears to have plucked this figure from the air without
relating to any evidence
adduced before him to substantiate the appellant's claim.
Although
it is trite that damages need not be quantified with mathematical
precision, there must be some evidentiary basis for calculating
damages, even if they be punitive
damages.
Thus,
in
Ruturi
v
Heritage
Clothing
(Pvt)
Ltd
1994
(2)
ZLR
374
(S),
where
no evidence was led as far as the award of damages was concerned, it
was held that it
was
necessary for the Labour Relations Tribunal to hear evidence in order
to assess the damages.
As
was aptly observed by Gubbay CJ, at
380E:
“For
these
reasons,
the
award
must
be
set
aside,
for
to
quantify
damages,
or
indeed
make any finding, on no evidence, is to err in
law.”
Disposition
In
the result, the appeal succeeds to the very limited extent that I
have indicated in relation to the monthly salary and contractual
benefits that are due to the appellant.
Consequently,
the correct net monthly salary of US$1.032.54 (instead of US$1009.00)
and an additional 2% of the basic annual salary for professional and
club membership allowance (i.e.
2%
of US$1,009.00 x 12) are to be applied in recalculating the amounts
payable to the appellant in respect of backpay and benefits, cash in
lieu
of
leave and damages for loss of employment.
I
should add that the resultant adjustments are considerably smaller
than would have been the case had the appellant succeeded in his
wholly insupportable claim to peg his salary in the region of
US$5.000.00 per
month.
In
all other respects, which constitute the bulk of the issues before
this Court, the appeal cannot be sustained and must therefore be
dismissed.
Given
the
virtually
inconsequential
extent
of
the
success
enjoyed
by
the
appellant,
it
seems
appropriate
that
he
should bear the costs of this
appeal.
It
is accordingly ordered
that:
1.
The appeal is partially allowed as regards the salary and allowance
figures to be applied in calculating the amounts payable by the
respondent to the appellant.
2.
The appeal be and is hereby dismissed in all other
respects.
3.
The appellant shall pay the costs of this
appeal.
MALABA
DCJ:
I
agree
GWAUNZA
JA:
I
agree
Mbidzo,
Muchadehama & Makoni,
appellant's legal
practitioners
Mlotshwa
& Company, respondent's legal
practitioners
