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KOBEAH AND OTHERS V. TEMA OIL REFINERY; BOATENG AND OTHERS V. TEMA OIL REFINERY

Case

by TWUM JSC, ATUGUBA JSC

Jurisdiction

Supreme Court

Judge

TWUM JSC, ATUGUBA JSC

Catalog Type

Case

Judgement Date

N/A

Summary

Employment Law — Termination of Employment — Collective Agreement — Whether Reasons are Required for Termination — Contractual Right to Terminate on Notice — Distinction Between Termination and Dismissal In these consolidated appeals, employees of the Tema Oil Refinery challenged the termination of their employment effected under Article 4(vii) of the 1987 Collective Agreement, which permits either employer or employee to terminate the employment contract by giving one month’s notice or paying salary in lieu, without reference to cause. The appellants argued that Article 4(vii) must be read together with Article 21(4)—which lists specific reasons that may justify termination or dismissal—such that the employer must show valid grounds under Article 21(4) before a termination under Article 4(vii) could be lawful. The Supreme Court rejected this argument, holding that Article 4(vii) confers a mutual, no‑fault right of termination and operates independently of Article 21(4). Article 21(4) applies only where the employer seeks to dismiss for cause; it does not restrict the separate contractual right of termination under Article 4(vii). Requiring reasons for termination under Article 4(vii) would defeat its purpose and create an illogical imbalance, as it would imply that employees too must justify their resignation under Article 21(4). The Court reaffirmed that under Ghanaian employment law, an employer is legally entitled to terminate employment for any reason or no reason at all, provided proper notice or payment in lieu is given, and is not obliged to justify or disclose the reason for termination. Held: Appeal dismissed. Terminations under Article 4(vii) were lawful; the employer was not required to provide reasons when exercising a contractual right to terminate upon notice.

Full Content

JUDGEMENT

KPEGAH JSC.

I have had the benefit of reading beforehand, the opinion to be delivered by my brother Twum JSC. I agree with him. I have nothing useful to add.

ATUGUBA JSC.

I desire to make a brief contribution to the determination of this case. The battle is pitched mainly between articles 4(vii) and 21(4) of the 1987 collective agreement between the parties. Article 4(vii) provides as follows:

“All employees who have been confirmed in their employment shall be given one month’s notice on termination or pay in lieu and vice versa on resignation. In case of summary dismissal no notice shall be given.”

Article 21(4) on the other hand provides as follows:

“(4) One of the following reasons may justify the termination of the employment or the dismissal of the employee ...”

A litany of reasons, which it is not necessary to set out, then follows.

The appellants were terminated under article 4(vii) of the collective agreement. Counsel however contends that both articles 4(vii) and 21(4) ought to be read together or else article 21(4) would be rendered otiose. Even if the two provisions are read together they would not in my view have the effect contended for by counsel, namely that reasons are required for termination of the contract of employment even under article 4(vii). It must be noticed that article 4(vii) clearly sets out to give both the employer and the employee a mutual right to terminate the contract of employment. That provision, to my mind, means that either side must either give one month’s prior notice of termination or one month’s salary in lieu thereof. If that is so, to require reasons to be given or ascertained as an additional precondition would run counter to the objective of that stipulation. If the employer is to go through disciplinary investigative procedure before he exercises his right of termination under article 4 (vii), could it reasonably be thought that the employee must likewise go through such a procedure before exercising his right of termination under that provision? What would be the grounds that the employee would have to satisfy in this regard under article 21(4) (a)-(1)? Clearly none. That being so, would the mutuality of the right of termination given to both the employer and the employee under article 4 (vii) be given effect? Clearly not. Therefore counsel’s contention would defeat the intent of the parties conveyed by article 4(vii). The intent of the parties that article 4(vii) is to be contrasted with other provisions such as article 21(4) is clearly conveyed by the stipulation in article 4(vii) that “In case of summary dismissal no notice shall be given.”

In this case the grounds for termination of the appellants’ employment were stated in their letters of termination in unvaried language as follows:

“Dear Sir/ Madam,Letter of terminationWe wish to inform you that your appointment with GHAIP has been terminated with effect from 1 November 1990.The company has decided to pay all entitlements due to you under the present conditions of service together with one month’s salary termination as provided for in article 4(vii) of the GHAIP collective bargaining agreement.In addition, you will also be paid your salary for the month of October 1990.Any loans or other financial obligation owed the company by you shall however be deductible from your entitlements before payment.You are requested to return any company property in your possession to the refinery forthwith and should you be in occupation of GHAIP owned accommodation or premises rented by the company for its staff, quit same by 30 November 1990.Be mindful of the fact that payment of your entitlements would be dependent on strict compliance with the conditions set forth in this letter.Yours faithfully,(Sgd)L PrempehDeputy Managing Director (F/A)”

Clearly, the respondent exercised its right of termination of the agreement strictly in compliance with the terms of article 4(vii) without any flirtation with article 21 of the agreement aforesaid. Had it done so, different consequences would, in my view, have ensued.

It has been held in Aryee v. State Construction Corporation [1984-86] 1 GLR 424, CA and Bannerman-Menson v. Ghana Employers’ Association [1996-97] SCGLR 417, that even where the employer gives reasons, the same would be irrelevant, if the contract of employment does give a right to terminate without any reasons. I humbly doubt whether that is not too wide a proposition. In Gunton v. London Borough of Richmond-upon-Thames [1980] 3 All ER 577, CA the plaintiff’s letter of employment gave the right to either party to terminate the contract of employment upon one month’s notice. It, however, was also subject to such regulations as the respondent council might issue from time to time. Subsequent regulations provided for certain disciplinary steps before dismissal could be effected. The council purported to dismiss the appellant without complying fully with the disciplinary procedural steps. Buckley LJ at 590 said:

“In the present case, in my view, the council could, on 13th January 1976, have determined the plaintiff’s contract of service on 14th February 1976 without assigning any reason or for any given reason other than a disciplinary reason. They did not, however, do so. It is common ground that the letter of 13th January 1976 purported to relate the plaintiff’s dismissal to disciplinary matters. Counsel for the council, as I understood his argument, submitted that that circumstance was not significant, the plaintiff received one month’s notice, which was all that he was entitled to insist on. As I have already indicated, I feel unable to accept that view because, in my opinion, the effect of the incorporation in the contract of the disciplinary regulations was to entitle the plaintiff not to be dismissed on disciplinary grounds until the disciplinary procedures prescribed by the regulations had been carried, out. Accordingly, in my judgment, the plaintiff was entitled as at 14th January 1976, when he was excluded from his employment, to insist on a right not to be dismissed on disciplinary grounds until the disciplinary procedures were recommenced and carried out in due order...”

(The emphasis is mine.)

At 593, Brightman LJ also said:

“The only problem ... which arises is that the plaintiff’s letter of appointment from the council stated that ‘your appointment will be terminable by one month’s notice on either side’, while at the same time the contract of employment incorporated ‘Regulations as to Staff Discipline’ applicable to allegations of inefficiency, misconduct or indiscipline. These regulations have the effect of defining the steps required to be taken in the interests of the employer and the employee before the head of department can recommend dismissal to the appropriate committee of the council. The result was that the council had under the contract a right to dismiss the plaintiff on one month’s notice, but that it could not lawfully act on a recommendation for dismissal on a disciplinary ground unless the disciplinary procedure had been followed; the completion of this procedure was a condition precedent to a valid recommendation for dismissal on a disciplinary ground. What then is the legal position if a notice of requisite contractual length is given to determine an employee’s contract of service, but such notice is the result of a recommendation improperly made and on which the defendant could not lawfully act? The plaintiff has suffered a wrong, and so far as damages can do so, he must be put in the same position as if the wrong had not been done. To assess the damages, the invalid notice should be disregarded. It was a nullity. It should be assumed that the council gave, as it could have done, a valid one month’s notice at the earliest permissible date. It was argued that a valid one month’s notice could have been given on the same day as the void one month’s notice, but this proposition would make a complete nonsense of the protection which purports to be afforded by the disciplinary code, and I reject the submission. The council was intending to dismiss on a disciplinary ground. It would be inconsistent with the terms of the contract for the council to be treated as entitled to give a month’s notice until the day when the disciplinary procedures could have been completed.”

(The emphasis is mine.)

At 581 Shaw LJ, dissenting, however, took a stand that supports the principle enunciated in Aryee v. State Construction Corporation (supra) and Bannerman-Menson v. Ghana Employers’ Association (supra). He said:

“For myself, I do not consider that the regulations as to staff discipline were designed to deprive the council of its contractual power to determine the contract of service by one month’s notice; nor in my view did they have that result.”

In his view, non-compliance with the disciplinary procedure did not invalidate the one month’s notice. That is the tenor of his reasoning as far as I can ascertain it.

I however support the majority reasoning of Buckley and Brightman LJJ. Following that reasoning, I do not see how non-compliance with disciplinary procedures can vitiate the ensuing termination or dismissal but that the factual non-existence of the substantive disciplinary grounds for termination or dismissal, though relied upon by the master, cannot vitiate such termination or dismissal. The appellant’s claim arose ex contractu, and pacta sunt servanda is a key principle of the law of contract. That being so, like statutory power, the contractual power of termination or dismissal must be exercised within the four corners of the terms of the contract. It cannot therefore be properly contended that even though one could properly have confined one’s action to some grounds in effecting a termination or dismissal, reference can be made to other grounds for termination or dismissal, merely as it were, ex gratia.

However, as I have already set out, ut supra, the respondent, in effecting the termination of the appellants’ employment per their identical letters of termination dated 29 October 1990, did not stray into other modes or provisions for effecting the said termination. The respondent has therefore effected the termination of the appellants’ employment within the four corners of their contract. The defence of estoppel runs counter to statutory immunities: see Hemans v. Ghana National Trading Corporation [1978] GLR 4, CA. There is no substance in the other grounds of appeal. For these reasons, I would also dismiss the appeal.

TWUM JSC.

This is an appeal from the judgment of the Court of Appeal dated 3 December 1998. It affirmed the judgment of the High Court dated 13 June 1997 dismissing the plaintiffs’ claims.

On 8 October 1993, 40 plaintiffs issued a writ of summons against the defendant, Tema Oil Refinery, claiming “jointly and severally” against that one defendant:

“(a) Declaration that the termination of their contract of employment with the defendant effected via a ‘letter of termination’ dated 29 October 1990 was absolutely wrong.(b) Recovery of accumulated salaries together with all other allowances and entitlements generally from 1 November 1990 until the date of payment.(c) Interest on their salaries, allowances and entitlements at the prevailing bank rate until the said salaries and entitlements shall be paid.(d) Damages for wrongful dismissal.”

Subsequently, suit No 906/64, entitled Akomea Boateng and Others v. Tema Oil Refinery was consolidated with the earlier suit No 238/93 bringing the total plaintiffs to 119.

All the plaintiffs (hereinafter referred to as the appellants) were members of the General Transport Petroleum and Chemical Workers Union of the Trades Union Congress, Ghana (hereinafter referred to as the union). In his evidence before the High Court for the defendant (hereinafter referred to as the respondent) Mr Robert Benforson, the Production Manager, testified that during the last week of September 1990 there were series of meetings organised by the union. They demanded a meeting with the chief executive who scheduled one for 28 September 1990. All the employees were invited. It was to be a durbar. The senior staff and the managers attended, but it was boycotted by the workers. On Monday, 1 October 1990, the workers summoned the chief executive to meet them. A lot of noise was heard in the compound. When he went out to investigate, he noticed that the workers had blocked the entrance to the administrative block, and were preventing the chief executive from entering. He continued by saying that they surrounded his office, beating drums and singing war songs. Most of the workers appeared drunk. They resolved not to allow the chief executive to work at the refinery. They locked the gate and prevented him from picking up his bag from his office. They further prevented him from entering his car. They ordered him to leave the compound. He was driven away in the car of the director of petroleum. The workers threw stones at the vehicle and broke its windscreen. The workers took over the refinery and occupied it for over a week. It was with the assistance of the security agencies that they were ousted. Within that one week, they were running the refinery. The place had clearly become ungovernable. The situation was volatile and the refinery could literally go up in flames. In these circumstances, management decided to terminate the appointment of all the workers and all their entitlements were paid to, and received by them.

Mr David Addison testified on behalf of the workers. He was the union chairman. He said on 29 October 1990 their contracts of employment were terminated. He said “no reason was assigned for the termination of our appointment. I do not know why the appointment was terminated. No committee of inquiry was set up and none of us appeared before one!”

Under cross-examination, he said he could not remember if he attended work on 26 or 27 September 1990. He said none of the workers informed him that there was trouble at the refinery in September 1990. He said he had forgotten the name of the chief executive. He denied that the workers refused to work and rather indulged in acts of hooliganism and intimidation. One more! He said he was told by the workers that they were working when the security personnel drove them out.

The quintessence of the appellants’ case was that in so far as no reason was stated in the letter terminating their appointment, the termination was wrongful and a breach of the collective agreement. The learned High Court judge noted in her judgment that:

“A fundamental principle of contract law is that when the basis and conditions of the contractual relationship had been reduced into writing, then the liability for breach must be ascertained by considering the contract document.”

That may be correct, but in this case there was no evidence that the entirety of the contract of employment had been reduced into writing. The collective agreement did not do that. After carefully reviewing the facts she held that the appellants’ employment was lawfully terminated and dismissed their action.

The appellants appealed to the Court of Appeal. The main ground of the appeal was that:

“The trial judge erred in holding that the collective agreement that regulated the terms of employment between the plaintiffs and the defendant empowered the defendant to terminate the employment of the plaintiffs without assigning any reason.”

They argued that the respondent ought to have assigned reasons for the termination and in default the same was wrongful. The Court of Appeal unanimously dismissed the appeal on 3 December 1998 and the appellants have appealed to this court. The grounds of appeal relied on by the appellants in this court are:

“(1) The judgment was against the weight of the evidence.(2) The Court of Appeal gravely erred in holding that the management of Tema Oil Refinery [the respondent] possessed the right to choose any provision in the collective agreement under which to terminate the employment of the appellants and did not need to resort to disciplinary action regardless of the turbulent background and general circumstances in which the employment of the appellants was so terminated, and this has occasioned for the appellants a substantial miscarriage of justice.”

Before I deal with the appeal on the merits it is fair to ask: who instructed counsel about “the turbulent background and the general circumstances in which the employment of the appellants was so terminated.” The second ground of appeal shows that Mr David Addison, the union chairman, was not candid with the court.

Even though the Industrial Relations Act, 1958 and the Industrial Relations Act, 1965 (Act 299) have together radically changed the way collective bargaining is conducted in this country, it does not mean that the law of contract is no longer the foundation of employment relationships. There are still many situations for which the law has not legislated, and then it is up to the law of contract to fill the gaps and supply the answers to questions such as whether there is a right to receive wages during a strike action or when absent through sickness: see Mears v. Safecar Ltd [1982] 2 All ER 865, CA. Therefore as Anderman, S D, Labour Law: Management Decisions and Workers Rights (2nd ed, 1992) at p 32 has observed:

“a thorough understanding of the characteristics of the contract of employment is a virtual precondition to an understanding of the subject of Labour Law.”

Of the many ways by which a contract of employment may be brought to an end, “termination and dismissal” have provoked the most litigation.

Termination

At common law, an employer and his employee are free and equal parties to the contract of employment. Hence, either party has the right to bring the contract to an end in accordance with its terms. Thus, an employer is legally entitled to terminate an employee whenever he wishes and for whatever reasons, provided only that he gives due notice to the employee or pay him his wages in lieu of the notice. He does not even have to reveal his reason, much less to justify the termination. Much of this is the positive application of the law of contract to employment relationships. Of course, the situation can be unsatisfactory. In practice, there is usually no comparison between the consequences for an employer if an employee terminates the contract of employment and those which will ensue for an employee if he is terminated. In reality people build much of their lives round jobs. Their incomes and prospects for the future are inevitably founded in the expectation that their jobs will continue. For workers in many situations, termination is a disaster. Older workers, for example, maybe faced with the greater difficulty in getting work at all.

Dismissal

At common law, an employer may dismiss an employee for many reasons, such as misconduct, substantial negligence, dishonesty, etc. These acts may be said to constitute such a breach of the duty by the employee as to preclude the further satisfactory continuance of the contract of employment as repudiated by the employee. If a dismissal is without just cause, the employer is deemed to have wrongfully repudiated his contractual obligations to the employee—and the dismissal is said to be wrongful. There is no fixed rule of law defining the degree of misconduct that will justify dismissal. There is also an unbroken line of authority at common law that an employee cannot lawfully be dismissed (as against terminated) without first telling him what is alleged against him and hearing his defence or explanation. This is obvious. If the dismissal is lawful, the employee loses all his entitlements. He is therefore entitled to be heard as a matter of course.

For these reasons, today, legislation and collective agreements world-wide are shifting the terminology from “termination” and “dismissal” to “unfair dismissal.” Various fact-situations are then listed as, prima facie, constituting unfair dismissal and the onus is shifted on to the employer to show that the dismissal was fair. The new Labour Bill when it finally becomes law will, it is hoped, implement this concept.

Normative value of collective agreements

As I have emphasised above, the relationship between an employer and his employees is essentially contractual. The contract may be oral or written. Casual workers who are employed at the factory gate or at the docks may be told:

“You, you, you, come in. The wage is ¢15,000 per day, payable at the end of each day’s work.”

And that may be all that there is about their contract. These persons may accept or refuse the terms and conditions of the employment being offered without communication with their fellow workers. The term “collective bargaining” is applied to those arrangements under which the terms and conditions of employment are settled by a bargain in the form of agreement between employers or association of employers and workers’ unions. Section 6(1) of Act 299 obliges both employers and certified trades union representing the workers to nominate representatives on to a standing negotiating committee:

“6. (1) Negotiations on all matters connected with the employment or non-employment or with the terms of employment or with the conditions of labour of any of the employees of the class specified in a certificate issued under section 3 (ie collective bargaining certificate) shall be conducted through the standing negotiating committee ...”

The parties are, on the one side, the employers or their association and on the other side, the workers’ trade union. By section 10(2) of Act 299 the provisions of a collective agreement concerning terms of employment and personal obligations imposed on, and rights granted to, an employee or employer shall be regarded as terms of a contract of employment between each employee to whom the provision applies and his employers. (The emphasis is mine.)

In this appeal, the appellants argued that their contract of employment was governed by both the 1984 and 1987 collective agreements. That is not correct as the Court of Appeal pointed out.

The 1984 agreement varied the contract of employment for the time being then in existence. Under section 11(3) of Act 299 the 1984 agreement lapsed when the 1987 agreement was negotiated. Under the scheme of industrial relations set up by Act 299, there cannot be two collective agreements covering the same situation. Indeed, the 1987 agreement explicitly provided that the 1984 agreement had been superseded by the 1987 agreement.

Again, the appellants took the view that the respondent ought to have assigned reasons for the termination of their employment. This they argued, the respondent failed to do and so the termination was wrongful. This view, in my opinion, was festered by a wrong understanding of the legal effect of a collective agreement. A collective agreement by itself is not legally enforceable. At common law, it would not automatically become part of the individual contracts of employment made between employers and their employees. In some countries that result may be achieved by custom, practice or by arbitration. In this country section 10(2) of Act 299 neatly solves that problem. So a collective agreement has only a normative value. In practical terms it is a record in writing of the changes which the employer and the employees have agreed to make in the contracts of employment of workers. As a further protection of employees, until a new collective agreement is negotiated by the standing negotiating committee the rights conferred on an employee by a previous collective agreement are rights which cannot be waived by the employee. Further, if there is any conflict between a term of a collective agreement and the terms of any contract not contained in such a collective agreement, then the collective agreement shall prevail, whether or not the contract was concluded before the collective agreement: see section 10(4) of Act 299. Hence, a collective agreement has effect only if the requisite terms and conditions can be incorporated into an existing contract of employment. There are some terms in a collective agreement which are inappropriate for incorporation in a contract of employment; such as trade union recognition agreement. This is obvious. It cannot be subsumed under section 10(2) of the Act.

Two important matters must be noted:

(a) What Act 299 does is to compel negotiations on the matters stipulated in section 6(1) by the standing negotiating committee. In Nartey-Tokoli v. Volta Aluminium Co Ltd [1989-90] 2 GLR 341, SC, the Supreme Court held that any attempt by an employer to engage in individual bargaining with any employee is unlawful and any resulting agreement, therefore void. But once inside the negotiating chamber, the law does not interfere with the proceedings or the agreement arrived at by the standing negotiating committee.

(b) The collective bargaining process enables the workers, in particular, to use their collective strength, in terms of finance, preparation and personnel, to secure improved terms and conditions of employment from their employers. Now, under Act 299, the employer does not have the absolute discretion to decide when those terms and conditions of employment may be re-negotiated. That is taken care of by section 6 (2) of Act 299, which states that:

“Either party represented on the said committee may give notice to the other party requiring them to enter into negotiations on any matters which may properly be dealt with by the committee and it shall be the duty of both parties to make every reasonable effort to come to an agreement on the matters to which the notice relates.”

The appellants placed heavy reliance on article 4(vii) of the 1987 agreement which stated:

“All employees who have been confirmed in their employment shall be given one month’s notice on termination or pay in lieu and vice versa, on resignation. In case of summary dismissal no notice shall be given.”

As I have pointed out above, this provision formed part of the contract of employment of each of the affected workers. Their rights were therefore contractual, not statutory, and these will have to be determined by the usual rules of construction of contracts. The appellants’ reliance on article 4(vii) is inexplicable. There is no mention of the giving of reasons for termination in that article. In my opinion, the termination of the employment of the appellants was effected in conformity with the workers’ contracts of employment. The appellants sought to show by cross-examination that in the light of the tumultuous situation leading to the collapse of law and order in the refinery, the respondent ought to have set up a committee of inquiry to identify the actual persons who had seized the refinery. It was further suggested to the respondent that not all the workers worked at the refinery and so could not have taken part in the disturbances. In my view, that is relevant only when disciplinary measures are to be applied. In any event, in Heatons Transport (St Helens) Ltd v. Transport and General Workers’ Union [1973] AC 15, HL, a contempt of court case, the House of Lords held that the union’s acts bound every member. In this case, all the workers affected were union members and it was the union officials who were spearheading the riot. A trade union is not an army and each member was liable for the acts committed by the direction of the union. If it became necessary for my decision, I would also have held that the circumstances of the takeover of the factory by the workers would most probably have justified dismissal at common law. The respondent had two options. It could institute disciplinary procedures or waive its right to discipline and take the less acrimonious step to bring normalcy to the refinery. It chose the latter, its common law right to terminate the employment by giving appropriate notice and the payment of the workers’ accrued salaries and other entitlements. In an action for breach of contract of employment, the employer is not liable for not doing that which he is not bound to do: see Abrahams v. Herbert Reiach Ltd [1922] 1 KB 477, CA. The law is concerned with legal obligations created by mutual agreement between the parties unless a statute provides otherwise.

I believe that these propositions are too inveterate to be disavowed by this court. I hold therefore that the termination of the appellants’ contracts of employment was not wrongful. In the circumstances, it is not necessary for me to decide the supplementary issue of estoppel raised by the respondent in its statement of defence. It is also not necessary that I should review the authorities ably considered with such efficiency and erudition by the Court to Appeal. The appeal is dismissed accordingly.

AKUFFO JSC.

I agree with the opinion of my learned brother Twum JSC.

KLUDZE JSC.

I also agree with the opinion of my learned brother Twum JSC and I have nothing useful to add.

KPEGAH JSC