JOSEPH AGYARE & 43 ORS. V. ODART STEVEDORING CO. LTD.
Jurisdiction
High Court
Judge
N/A
Catalog Type
Case
Judgement Date
Nov 24, 2011
Summary
Labour Law — Redundancy/Severance pay — Closure of business — Entitlement of employees — Memorandum of Understanding (MOU) — Whether MOU is binding — Breach of agreement — Claim for damages and interest — Labour Act, 2003 (Act 651), s. 65. HEADNOTE The plaintiffs, former employees of the defendant company, brought an action for payment of agreed redundancy (severance) pay following the closure of the defendant’s business due to non-renewal of its operational licence. They also claimed interest on the sums due and general damages for breach of an agreement embodied in a Memorandum of Understanding (MOU) entered into between the defendant and the Maritime and Dockworkers Union acting on behalf of the plaintiffs. Under the MOU, the defendant agreed to pay redundancy benefits calculated on specified terms and in instalments. The defendant admitted the agreement and partial payments but contended that the MOU was not binding, that some plaintiffs were not parties to it, and that its financial difficulties prevented full payment. [JOSEPH AGY...judy.legal] HELD: Giving judgment for the plaintiffs (in part), the court held: 1. Where an undertaking is closed down and employees are laid off, they are entitled to severance (redundancy) pay under section 65(2) of the Labour Act, 2003 (Act 651). 2. On the evidence, the defendant’s business was shut down and the plaintiffs’ employment terminated; accordingly, the plaintiffs were entitled to severance pay. 3. Although a Memorandum of Understanding is ordinarily not binding, it becomes binding where the parties demonstrate intention to be bound and act upon it, as by agreeing on specific payment terms and implementation arrangements. 4. The defendant, having negotiated and agreed on redundancy payments and payment schedules with the union representing the plaintiffs, was bound by the terms of the MOU. 5. Employees represented by a union in negotiations may benefit from the agreement where the employer’s conduct shows acceptance of their inclusion. 6. A claimant is not entitled to general damages for breach of contract in the absence of proof of specific loss; however, an award of interest on unpaid sums may compensate for delay in payment.
Full Content
JUDGMENT
ASUMAN-ADU, J.
The Plaintiffs who were all former employees of the Defendant Company issued out a writ of summons accompanied by a statement of claim against the Defendant on 22nd December, 2010 for the following reliefs:
a. An order directed at the Defendant to pay the Plaintiffs immediately the full amounts agreed as redundancy pay for the Plaintiffs following the shut down, of the Defendant Company’s operations
b. Interest on all Payments due each Plaintiff at the Commercial Bank lending rate from the 1st day of November, 2010 up to and inclusive of the date of final payment.
c. General damages for breach of the agreement that all the payments should have been completed by the 31st day of October, 2010.
d. Costs.
The Defendant entered appearance on 5th January, 2011 and went on to file its statement of defence on 25th January, 2011 denying the claim of the Plaintiffs. On 15th March, 2011 the Plaintiffs filed a reply to the statement of defence and an application for directions. The following issues were listed in the application for directions:
a. Whether or not the Plaintiffs are entitled to severance awards from the Defendant.
b. Whether or not the Plaintiffs are entitled to an award of general damages for the Defendant’s breach of the Memorandum of Understanding.
c. Whether or not the Plaintiffs are entitled to the reliefs endorsed on the writ of summons.
d. Any other issue arising out of the pleadings.
On 24th March 2011 the Defendant filed additional issues in which the following issues were listed:
a. Whether or not the Memorandum of Understanding dated 2nd August, 2010 is binding on the parties.
b. Whether or not the 1st to 4th Plaintiffs are parties to the Memorandum of Understanding.
On 8th April, 2011, all the issues raised in the application for directions and the additional issues were set down as issues to be tried by this court.
In their statement of claim, Plaintiffs contend that they were employed by the Defendant at different dates and worked for it until 13th July, 2010, when the Defendant without any prior notice, terminated their employment with effect from the same day by a notice dated the same day. By the notice which the Defendant terminated the employment of the Plaintiffs, it gave the reason for its action that it was closing down its business since its stevedoring license had not been renewed.
The Plaintiffs aver that the Defendant went on to inform them per the notice of 13th July, 2010 that negotiations with both the Maritime and Dockworkers Union and the Local Union Executives would continue to determine the Plaintiffs’ severance packages which would be communicated to the them.
Subsequently, by a Memorandum of Understanding signed between the Defendant and the Maritime and Dockworkers Union acting for and on behalf of the Plaintiffs on 2nd August, 2010, it was agreed between the parties that the Defendant would pay to each of the Plaintiffs the following as redundancy pay:
a. Severance pay of seven (7) weeks pay multiplied by the number of years served;
b. One (1) month pay in lieu of notice;
c. Fourteen (14) working days to be paid as days worked before the circular for the shut down; and
d. Outstanding leave commuted to cash.
They also agreed in the Memorandum of Understanding that the payment of the redundancy pay would be decided on Wednesday, 4th August, 2010. Subsequently, the Maritime and Dockworkers Union acting for and on behalf of the Plaintiffs agreed with the Defendant that the redundancy payment would be made in three (3) separate installments with the first installment on August, 31, 2010, the second on September 30, 2010 and the third and last on October 31 2010.
According to the Plaintiffs, in spite of this agreement, the Defendant has refused to pay them what they are entitled to as redundancy pay and unless the Defendant is compelled by an order of this court to pay them their redundancy pay the Defendant would not pay them.
They also contend that they are entitled to be paid general damages by the Defendant for breaching the agreement between the parties concerning the time for payment. They are as a result entitled to their reliefs.
As has been stated elsewhere in this judgment, the Defendant on the other hand denies the claim of the Plaintiffs in its statement of defence. It goes on to state that, at all material times the Plaintiffs were aware of non renewal of Defendant’s stevedoring license.
It claims that the Plaintiffs do not have the same cause of action, neither are the facts and the law governing the matter common to the Plaintiffs. In a letter dated 10th January, 2011 from the Maritime and Dockworkers Union, most of the alleged Plaintiffs indicated that they were not part of the law suit. This action has, therefore, been taken in the name of most of the alleged Plaintiffs, without their authority and consent. It goes on to state that the first to fourth Plaintiffs are not members of the Union and, therefore, not party to the MOU dated 2nd August, 2010 but are rather governed by the company’s conditions of service and that the company’s conditions of service lays down the exact grievance procedure to be followed and same has not been followed by them.
The defendant goes on to contend that the Memorandum of Understanding dated 2nd August, 2010 was an expression of the intention of the parties and was not intended to be binding.
It states that the Union has at all material times been acting for and on behalf of only the members of the Union and the 1st, 2nd, 3rd and 4th Plaintiffs not being members of the Union cannot seek to benefit from any negotiations conducted between the Union and the Defendant.
According to the Defendant the withdrawal of its operational license has put the company in financial difficulty and that the Plaintiffs are not entitled to their claim at all.
In their reply filed on 15th March, 2011, the Plaintiffs aver that the non renewal of the Defendant’s license is irrelevant to the Plaintiff’s claim. They insist that, all the Plaintiffs have the same cause of action against the Defendant and the facts and the law, are the same.
The Plaintiffs insist that the MOU is binding on the parties and indeed all the Plaintiffs were covered in the negotiations and the Defendant even prepared a list of all the Plaintiffs and indicated the amount due to each Plaintiff as severance pay on that list.
The Plaintiffs aver that the Defendant has funds to pay the severance packages as it is engaged in hiring out its equipment and also has properties. It has just refused to pay so the Plaintiffs are entitled to their claim.
At the trial three of the Plaintiffs gave evidence on behalf of all the Plaintiffs and the Chief Executive Officer of the Defendant Company Kojo Arthur and one other person gave evidence for the Defendant. The evidence of the witnesses for the Plaintiffs was essentially a repetition of their pleadings. In the process they tendered in evidence the following documents in support of their case.
a. a list of the Plaintiffs as Exhibit A.
b. a circular on the shut down to the workers of the Defendant as Exhibit B.
c. a Memorandum of Understanding as Exhibit C.
d. a list of the Plaintiffs showing their final entitlements prepared by the Defendant as Exhibit D.
e. a letter from the Maritime and Dockworkers’ Union to the Defendant as Exhibit E.
The witnesses for the Defendant led by the Chief Executive of the Defendant Company confirmed in their evidence that all the Plaintiffs were former employees of the Defendant whose appointment had been terminated in view of the shutdown of the company due to non renewal of the stevedoring license of the Defendant Company.
They also corroborated the evidence of the Plaintiffs that the Maritime and Dockworkers’ Union (MDU) negotiated with the Defendant Company on behalf of the Plaintiffs in respect of payment of redundancy pay to the Plaintiffs. A Memorandum of Understanding (MOU) was as a result signed between the Defendant and the MDU.
According to the Defendant, the Plaintiffs are not entitled to be paid a total amount of GH¢262,838.00 since some of the Plaintiffs have been given part payment of what is due them. In all, it has made part payment of GH¢7,024.33 to some of the Plaintiffs. The Defendant goes on to say that it has not paid the Plaintiffs their redundancy pay because it does not have funds readily available to pay them. It is, however, working towards paying the Plaintiffs what is due them.
In support of its case payment vouchers in respect of part payment made to some selected staff were tendered in evidence by the Defendant as Exhibits 1, 1a to 1w.
Having summarized the pleadings and the evidence before the court I now proceed to evaluate the evidence on record as regard the issues that this court has been called upon to resolve or determine. In doing so, I will take the issues seriatim.
The first issue is whether or not the Plaintiffs are entitled to severance awards from the Defendant. Severance award refers to payment which an employee is entitled upon the termination of his contract of employment.
In the current case the facts before the court show that due to non renewal of the Defendant Company’s stevedoring license the company was compelled to close down its business so all its employees were laid off with immediate effect. So from Exhibit B, each of them was entitled to be paid one month salary in lieu of notice. Exhibit B goes on to state that the Defendant would negotiate with the union their severance package. This shows that, the Plaintiffs were entitled to be paid severance award. This was confirmed by the Chief Executive of the Defendant Company during cross examination. I will want to refer to that aspect of the cross examination in this judgment.
“Q. In Exhibit B you have served notice on all the workers that the company has been shut down. That is correct, with effect from July 13, 2010. That is correct?
A: Yes. That is correct.
Q: And further that their employment was terminated, that is correct?
A: Yes.
Q: And further that a severance package or redundancy pay as being involved was going to be worked out for each of the workers is that correct?
A: Yes.
Q: And further that this redundancy pay was going to be negotiated with the MDU. That is correct?
A: Yes.
Q: Show him Exhibit C. In fact pursuit to your statement in Exhibit B you entered into negotiations with Maritime and Dockworkers Union. That is correct?
A: Yes.
Q: In fact, the exhibit you wrote in exhibit c is a document executed by you on behalf of the defendant’s company and also executed by MDU. That is correct?
A: Yes.
Q: This document was a result of negotiations between the defendant company represented by you and some of your staff or officers and the MDU and the local union on the other hand in respect of the severance packages for the plaintiffs in this court?
A: Come again.
Q: That agreement you hold, Exhibit C was in reference of the respect of the severance package paid for the plaintiffs. That is correct?
A: Yes.
Q: Now, let me have the exhibits back. Now in that Exhibit C, the defendant company agreed with the MDU and the local union to pay seven weeks pay multiplying by number of years served by each of these plaintiffs. That is correct?
A: That is correct.
Q: You also agreed to pay one month pay in lieu of notice. That is correct.
A: Yes.
Q: You also agreed to pay each plaintiff the outstanding leave which was to be commuted into cash. That is correct.
A: That is correct.
Q: Following upon this agreement you agreed that is the defendant company the MDU and the local union agreed to meet on 4th August, 2010 to determine how the payment was going to be effected. That is correct.
A: That is correct.
Q: Falling upon that the defendant company went to the MDU and the local union to agreed on how the payment was going to be done.
A: Yes.
Q: And it was agreed that they pay the first installment by the 31st August, 2010. That is correct?
A: Yes.
Q: And to pay the second installments by the 30th September, 2010. That is correct?
A: Yes.
Q: And you are also to pay the third or the last installment by 31st October, 2010. That is correct?
A: Yes.”
Sammy Duodu who also testified on behalf of the Defendant also confirmed in his evidence in court that the Plaintiffs are entitled to be paid severance award. This clearly shows that the evidence of the witnesses for the Defendant rather supports the evidence of the Plaintiffs that they are entitled to be paid severance award in view of the closure of the Defendant Company. The principle on this is that the corroborated evidence ought to be accepted by the court. See the case of Asante v. Bogyabi [1966] GLR 232. So from the evidence before the court as presented by the defence, the Plaintiffs are entitled to be paid severance award.
The Labour Act, 2003 (Act 651) also provides at Section 65(2) that where an undertaking is closed down, arrangements or amalgamation and the close down, arrangement or amalgamation causes:
a. severance of the legal relationship of worker and employer as it existed immediately before the close down, arrangement or amalgamation: and
b. as a result of and in addition to the severance that worker becomes unemployed or suffers any diminution in the terms and conditions of employment, the worker is entitled to be paid by the undertaking at which that worker was immediately employed prior to the close down, arrangement or amalgamation, compensation in this section referred to as redundancy pay.
In the current case as already stated, the Defendant Company was closed down as a result of which the Plaintiffs who were all former employees of the Defendant Company had to be laid off. So from the provision as stated above, the Plaintiffs are entitled to be paid severance award. It is, therefore, the opinion of this court that in view of the closure of the Defendant Company, the Plaintiffs are entitled to be paid severance award and I so hold.
The next issue for consideration is whether or not the Memorandum of Understanding (MOU) dated 3rd August, 2010 is binding on the parties.
I agree with the Defendant that a Memorandum of Understanding is an expression of intent which is not supposed to be binding on the parties. It is a mere preliminary understanding of parties who plan to enter into an agreement. This is because it does not hinder the parties from negotiating further. However, in the current case the evidence clearly shows that a commitment has been made by the parties in respect of Exhibit C, the MOU.
In the said Memorandum of Understanding, the parties agreed that payment of the redundancy pay would be decided on Wednesday, the 14th of August, 2010. The evidence before the court shows that on 14th August, 2010, the Defendant represented by the Executive Director met the Union and agreed that the payment of the redundancy pay would be made in three installments. The first payment was to be made on 31st August, 2010, the second on 30th September, 2010 and the last on 31st October, 2010. This installment payment was confirmed by the Executive Director of the Defendant Company during cross examination as shown above. It is also observed that based upon the Memorandum of Understanding, Exhibit D which shows the entitlement of each Plaintiff was prepared by the Defendant. It is, therefore, clear from the evidence that the parties made a commitment in respect of the Memorandum of Understanding. It is, therefore, no longer an expression of intent as alleged by the Defendant but an agreement entered into by the parties. So from the evidence the parties have agreed that the Memorandum of Understanding should be binding on them. It is, therefore, the opinion of this court that the Memorandum of Understanding between the Defendant Company and the MDU is binding on the parties and I so hold.
The next issue is whether or not the 1st to 4th Plaintiffs are parties to the MOU.
According to the Defendant the Union has at all material times been acting for and on behalf of only its members and the 1st, 2nd 3rd and 4th Plaintiffs not being members of the Union cannot seek to benefit from any negotiations conducted between the Union and the Defendant. They are as a result not parties to the Memorandum of Understanding. However, the Plaintiffs state that even though those Plaintiffs are not members of the union, the Union always represents them in whatever negotiations they do. The Defendant also told the court through its Executive Director, during cross examination that, the Defendant agrees that 1st, 2nd, 3rd and 4th Plaintiffs are entitled to be paid redundancy pay. It is also observed that they were included in Exhibit D which shows the redundancy pay due the Plaintiffs. This implies that by the behavior of the Defendant itself, it agrees that those Plaintiffs are parties to the MOU. It is, therefore, my opinion that 1st to 4th Plaintiffs are parties to the MOU so they are entitled to be paid the redundancy pay and I so hold.
The next issue for consideration is whether the Plaintiffs are entitled to an award of general damages for the defendant’s breach of the Memorandum of Understanding.
According to the Plaintiffs in view of the fact that the Defendant has failed to pay the redundancy pay as agreed upon, they are entitled to be paid general damages for the said breach. However, throughout their evidence the Plaintiffs never asked nor indicate that they have a basis for asking for damages nor did they lead any evidence as to how the quantum of damages should be determined. They did not prove any damages neither did they lead evidence as to financial loss. See the case of Agyabeng v. S. G. SSS Bank Ltd [2011] 30 GMJ 92 C.A.
It is, however, observed from the evidence that truly the Defendants were expected to complete payment of the redundancy pay by 31st October, 2010 but as at today the Plaintiffs have not been paid what is due them. This explains why the plaintiffs are demanding interest on the amount due the plaintiffs from 1st November, 2010 to date of final payment. Granting that the Plaintiffs have suffered some loss as a result of the non-payment of the redundancy pay by the Defendant, the payment of the interest on the amount due will take care of it. The Plaintiffs are, therefore, not entitled to be paid damages in addition to payment of interest on the amount due and I so hold.
From the foregoing, the Plaintiffs are entitled to the reliefs endorsed on their writ of summons except payment of General Damages to them. Judgment is as a result entered for the Plaintiffs as follows:
a. it is ordered that the Defendant pays to the Plaintiffs forthwith, the full amounts agreed as redundancy pay for the Plaintiffs following the closure of the Defendant Company less whatever payments made to the Plaintiffs as stated in Exhibits 1, 1a to 1w.
b. it is further ordered that Defendant pays interest on all payments due each of the Plaintiffs at the commercial bank lending rate from the 1st day of November, 2010 to date of final payment.
c. It is ordered that the Defendant pays to all the Plaintiffs costs of GH¢25,000.00.
SGD
KWABENA ASUMAN-ADU J
JUSTICE OF THE HIGH COURT
COUNSEL
MR. ALBERT ADAARE FOR THE PLAINTIFFS
MR. KWADWO GYASI NTRAKWA FOR THE DEFENDANT.